FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-----------------------------------------------
Commission File Number 0-2612
------
LUFKIN INDUSTRIES, INC.
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-040-4410
---------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 South Raguet, Lufkin, Texas 75901
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 409-634-2211
--------------
Indicate by check mark whether the registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the re-
gistrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
There were 6,751,383 shares of Common Stock, $1.00 par value per share,
outstanding as of March 31, 1996, not including 40,998 shares classified as
Treasury Stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEET--DECEMBER 31, 1995 AND MARCH 31, 1996
----------------------------------------------------------------
(Thousands of dollars)
ASSETS 12-31-95 3-31-96
------ --------- ---------
(Unaudited)
CURRENT ASSETS:
Cash $ 277 $ 52
Temporary investments 33,040 37,295
Receivables, net 36,204 26,199
Inventories 24,737 25,546
Deferred income tax assets 3,853 3,853
--------- ---------
Total current assets 98,111 92,945
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost 233,776 236,744
Less - Accumulated depreciation (172,953) (174,370)
--------- ---------
60,823 62,374
--------- ---------
PREPAID PENSION COSTS 20,936 21,724
OTHER ASSETS 6,426 6,534
--------- ---------
$186,296 $ 183,577
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 11,430 $ 8,376
Payrolls and benefits 5,084 4,988
Accrued warranty expenses 2,032 1,941
Taxes payable 2,849 2,713
Other accrued liabilities 1,774 1,350
-------- --------
Total current liabilities 23,169 19,368
-------- --------
DEFERRED INCOME TAX LIABILITIES 8,500 8,500
POST RETIREMENT BENEFITS LIABILITY 12,035 12,055
SHAREHOLDERS' EQUITY:
Common stock, $1 par value per share;
20,000,000 shares authorized;
6,792,381 shares issued 6,792 6,792
Capital in excess of par 15,367 15,367
Retained earnings 121,692 123,112
Treasury stock (311) (765)
Cumulative translation adjustment (948) (852)
-------- --------
Total shareholders' equity 142,592 143,654
-------- --------
$186,296 $183,577
======== ========
See accompanying notes to consolidated financial statements.
2
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Thousands of dollars, except per share data)
For the Three Months
Ended March 31
----------------------
(Unaudited)
1995 1996
---------- ----------
NET SALES $ 58,975 $ 55,930
COST OF SALES 52,243 47,154
---------- ----------
Gross profit 6,732 8,776
SELLING, GENERAL AND ADMINISTRATION
EXPENSES 5,113 5,572
---------- ----------
Operating income 1,619 3,204
OTHER INCOME, NET 809 543
---------- ----------
Earnings before income taxes 2,428 3,747
PROVISION FOR INCOME TAXES 809 1,311
---------- ----------
Net earnings $ 1,619 $ 2,436
========== ==========
EARNINGS PER SHARE $ .24 $ .36
========== ==========
DIVIDENDS PER SHARE $ .15 $ .15
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES 6,806,114 6,810,169
See accompanying notes to consolidated financial statements.
3
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
--------------------------------------------------
(Thousands of dollars)
For the Three Months
Ended March 31
-------------------------
(Unaudited)
1995 1996
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,619 $ 2,436
Adjustments to reconcile earnings (loss)
to net cash provided by operating
activities:
Depreciation 1,767 1,713
Pension income (776) (788)
Post retirement benefits 45 20
Gain on sales of property,
plant and equipment (65) (73)
Changes in assets and liabilities
Receivables 2,750 10,005
Inventories (1,017) (809)
Accounts payable 1,707 (3,054)
Accrued liabilities (632) (747)
------- -------
Net cash provided by operating activities 5,398 8,703
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment (1,536) (3,375)
Proceeds from disposition of property,
plant and equipment 205 184
Increase in other assets (160) (108)
------- -------
Net cash used by investing
activities (1,491) (3,299)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,019) (1,016)
Proceeds from exercise of stock options - 2
Purchase of treasury stock (24) (456)
------- -------
Net cash used by financing activities (1,043) (1,470)
Effect of translation on cash and temporary
investments (35) 96
------- -------
Net increase in cash and
temporary investments 2,829 4,030
Cash and temporary investments, at
beginning of period 36,923 33,317
------- -------
Cash and temporary investments, at
end of period $39,752 $37,347
======= =======
See accompanying notes to consolidated financial statements.
4
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(1) In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments, which include only
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows of Lufkin Industries, Inc. and
Subsidiaries (the "Company") for all periods presented. The consolidated
balance sheet as of December 31, 1995, was derived from the audited
consolidated balance sheet included in the Company's 1995 annual report on Form
10-K. The results of operations for the three months ended March 31, 1996, are
not necessarily indicative of the results that may be expected for the full
fiscal year.
These statements have been prepared in accordance with the
requirements for interim financial statements contained in Regulation S-X,
which do not require all the information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. Therefore, these
statements should be read in conjunction with the consolidated financial
statements and related footnotes included in the Company's annual report on
Form 10-K for the fiscal year ended December 31, 1995.
(2) Consolidated inventories consist of the following:
12-31-95 3-31-96
-------- --------
(Thousands of dollars)
Raw materials and purchased
parts $ 11,842 $11,751
Work in process 6,050 6,131
Finished goods 6,845 7,664
-------- -------
$ 24,737 $25,546
======== =======
5
Item 2. Management's Discussion and Analysis
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
-----------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(1) Changes in Financial Condition
At March 31, 1996, the Company had working capital of $73,577,000 as
compared to $74,942,000, at December 31, 1995, a decrease of $1,365,000.
Accounts receivable decreased by approximately $10,000,000 from $36,204,000 at
December 31, 1995, primarily due to the timeliness of customer payments and
decreased sales volumes for the quarter ended March 31, 1996, compared to the
quarter ended December 31, 1995.
(2) Changes in Results of Operations
Net sales for the first quarter of 1996 decreased 5% from the first quarter
of 1995. Sales by product group for the first quarter of 1995 and 1996 are as
follows:
THREE MONTHS ENDED
March 31 %
-------------------- Increase
1995 1996 (Decrease)
--------- --------- ----------
(In thousands)
Oil field pumping units $11,367 $12,824 13
Power transmission products 11,672 15,668 34
Foundry castings 8,265 8,149 (1)
Trailers 27,671 19,289 (30)
------- -------
$58,975 $55,930 (5)
======= =======
Sales volumes increased in two of the product groups, Oil field
pumping units and power transmission products while sales of foundry castings
and trailers declined. The decline in trailer revenues reflects the national
slow down of that market segment.
The gross profit for the first quarter of 1996 was 16% compared to 11%
for the first quarter of 1995, reflecting a change in the product mix from lower
margin trailers to higher margin oil field pumping units and power transmission
products.
Selling, General and Administrative expenses for the first three months
of 1996 were $5,572,000 compared to $5,113,000 for the same period in 1995, up
$459,000. The increase in these expenses primarily reflected the full quarter
impact of increased selling, engineering and administrative expenditures for the
Company's power transmission products to expand its worldwide capabilities and
presence in new markets with new product offerings.
Other income was $543,000 compared to $809,000 for the same period in
1995. The decrease of $266,000 resulted primarily from reductions in interest
earned on temporary investments.
Income tax expense increased $502,000 for the first quarter of 1996
compared to the first quarter of 1995 due to the increase in pretax earnings.
The Company reported net earnings in the first quarter 1996 of
$2,436,000 compared to $1,619,000 in the first quarter 1995.
Backlog at March 31, 1996, decreased by approximately $15,039,000 from
the backlog at December 31, 1995. Softening in the trailer and oil field
pumping unit markets contributed to the decline in backlogs.
6
Backlog by product group at December 31, 1995 and March 31, 1996 is as
follows:
December 31 March 31 %
1995 1996 Change
----------- --------- -------
(In thousands)
Oil field pumping units $ 8,103 $ 6,581 (19)
Power transmission products 36,008 37,371 4
Foundry 15,838 16,162 2
Trailers 40,151 24,947 (38)
-------- -------
$100,100 $85,061 (15)
======== =======
PART II - OTHER INFORMATION
Item 6, Exhibits and Reports Form 8-K
(A) Exhibits
27-Financial Data Schedule
(B) Reports of Form 8-K
None
7
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUFKIN INDUSTRIES, INC.
-------------------------------------
Date May 14, 1996 /s/ C. James Haley, Jr.
---------------------- -------------------------------------
C. James Haley, Jr.
Secretary-Treasurer
(Principal financial officer
and officer authorized to
sign on behalf of the
registrant)
8