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, 1997.
--------------
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 6,543,208 shares of Common Stock, $1.00 par value per share,
outstanding as of March 31, 1997, not including 249,173 shares classified as
Treasury Stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEET--DECEMBER 31, 1996 AND MARCH 31, 1997
----------------------------------------------------------------
(Thousands of dollars)
ASSETS 12-31-96 3-31-97
------ --------- ---------
(Unaudited)
CURRENT ASSETS:
Cash $ 655 $ 222
Temporary investments 30,211 17,783
Receivables, net 33,472 41,930
Inventories 21,563 25,278
Deferred income tax assets 2,132 2,132
--------- ---------
Total current assets 88,033 87,345
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost 243,014 247,790
Less - Accumulated depreciation (177,021) (177,961)
--------- ---------
65,993 69,829
--------- ---------
PREPAID PENSION COSTS 24,469 25,448
OTHER ASSETS 7,430 7,653
--------- ---------
$ 185,925 $ 190,275
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 7,035 $ 13,111
Payrolls and benefits 5,050 4,722
Accrued warranty expenses 1,329 1,141
Taxes payable 3,072 1,666
Other accrued liabilities 2,162 2,184
-------- --------
Total current liabilities 18,648 22,824
-------- --------
DEFERRED INCOME TAX LIABILITIES 10,478 10,478
POST RETIREMENT BENEFITS LIABILITY 12,192 12,224
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 15,361
Retained earnings 128,150 128,551
Treasury stock, 233,998 shares
and 249,173 shares, at cost (4,754) (5,129)
Cumulative translation adjustment (948) (826)
-------- --------
Total shareholders' equity 144,607 144,749
-------- --------
$185,925 $190,275
======== ========
See accompanying notes to consolidated financial statements.
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Thousands of dollars, except per share data)
For the Three Months
Ended March 31
----------------------
(Unaudited)
1996 1997
---------- ----------
NET SALES $ 55,930 $ 60,041
COST OF SALES 47,154 51,943
---------- ----------
Gross profit 8,776 8,098
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 5,572 6,353
---------- ----------
Operating income 3,204 1,745
OTHER INCOME, NET 543 584
---------- ----------
Earnings before income taxes 3,747 2,329
PROVISION FOR INCOME TAXES 1,311 815
---------- ----------
Net earnings $ 2,436 $ 1,514
========== ==========
EARNINGS PER SHARE $ .36 $ .23
========== ==========
DIVIDENDS PER SHARE $ .15 $ .17
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES 6,810,169 6,610,032
See accompanying notes to consolidated financial statements.
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
--------------------------------------------------
(Thousands of dollars)
For the Three Months
Ended March 31
--------------------
(Unaudited)
1996 1997
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,436 $ 1,514
Adjustments to reconcile net earnings
to net cash provided (used)by operating
activities:
Depreciation 1,713 1,770
Pension income (788) (979)
Post retirement benefits 20 32
(Gain)loss on sales of property,
plant and equipment (73) 36
Changes in:
Receivables 10,005 (8,458)
Inventories (809) (3,715)
Accounts payable (3,054) 6,076
Accrued liabilities (747) (1,900)
------- --------
Net cash provided (used)by operating activities 8,703 (5,624)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment (3,375) (5,648)
Proceeds from disposition of property,
plant and equipment 184 6
Increase in other assets (108) (223)
------- --------
Net cash used by investing
activities (3,299) (5,865)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,016) (1,113)
Proceeds from exercise of stock options 2 29
Purchase of treasury stock (456) (410)
------- --------
Net cash used by financing activities (1,470) (1,494)
Effect of translation on cash and temporary
investments 96 122
------- --------
Net increase (decrease) in cash and
temporary investments 4,030 (12,861)
Cash and temporary investments, at
beginning of period 33,317 30,866
------- --------
Cash and temporary investments, at
end of period $37,347 $ 18,005
======= ========
See accompanying notes to consolidated financial statements.
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, 1996, was derived from the audited consolidated balance sheet
included in the Company's 1996 annual report on Form 10-K. The results of
operations for the three months ended March 31, 1997, 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, 1996.
(2) Consolidated inventories consist of the following:
12-31-96 3-31-97
--------- --------
(Thousands of dollars)
Raw materials and purchased
parts $ 11,099 $ 13,405
Work in process 4,566 5,398
Finished goods 5,898 6,475
--------- --------
$ 21,563 $ 25,278
========= ========
(3) In February, 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 revises the
methodology to be used in computing earnings per share (EPS) such that
the computations required for primary and fully diluted EPS are to be
replaced with "basic" and "diluted" EPS. Basic EPS is computed by
dividing net income by the weighted average number of shares of common
stock outstanding during the year. Diluted EPS is computed in the
same manner as fully diluted EPS, except that, among other changes,
the average share price for the period is used in all cases when
applying the treasury stock method to potentially dilutive outstanding
options.
The Company will adopt SFAS No. 128 effective December 15, 1997, and
will restate EPS for all periods presented. Below is a comparison of
currently reported earnings per share to pro forma earnings per share
under SFAS No. 128:
Three Months Ended March 31
---------------------------
1996 1997
------------- ------------
APB 15
Earnings per share .36 .23
SFAS 128
Basic EPS .36 .23
Diluted EPS .36 .23
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
The Company had working capital of $64,521,000 at March 31, 1997 compared
to $69,385,000 at December 31, 1996, a decrease of $4,864,000. Accounts
receivable increased by approximately $8,458,000 to $41,930,000 at March 31,
1997 from $33,472,000 at December 31, 1996. The increase in receivables was due
primarily to customer payment practices and the increased sales in the oil field
pumping unit and trailer product groups. At March 31, 1997, inventory and
accounts payable balances were approximately $3,715,000 and $6,076,000 higher,
respectively, than their balances at December 31, 1996. The increases in
inventories and accounts payable were primarily related to the increased sales
volumes of oil field pumping units and trailers.
(2) Changes in Results of Operations
Net sales for the first quarter of 1997 increased 7% from the first
quarter of 1996. Sales by product group for the first quarter of 1996 and 1997
are as follows:
THREE MONTHS ENDED
March 31 %
------------------------- Increase
1996 1997 (Decrease)
--------------- -------- ----------
(In thousands)
Oil field pumping units $12,824 $15,590 22
Power transmission products 15,668 15,644 -
Foundry castings 8,149 8,431 3
Trailers 19,289 20,376 6
------ -------
$55,930 $60,041 7
======= ========
Sales volumes increased for oil field pumping units, foundry castings and
trailers for the three months ended March 31, 1997 versus the three months ended
March 31, 1996. Sales volumes of power transmission products remained
relatively constant.
For the first quarter of 1997, gross profit as a percentage of sales was
13% compared to 16% for the first quarter of 1996. The decrease in gross profit
reflects a deterioration of gross margins for power transmission products as a
result of product mix and increased fixed manufacturing costs for both power
transmission products and oil field pumping units.
Selling, general and administrative (SG&A) expenses were $6,353,000 for
the first three months of 1997, up $781,000 from $5,572,000 for the same period
in 1996. The increase in SG&A expenses is primarily the result of increased
selling expenses associated with the Company's efforts to expand its presence in
new markets world wide.
Other income increased modestly to $584,000 for the first quarter of 1997
compared to $543,000 for the first quarter of 1996.
For the first three months of 1997, the Company recorded income tax
expenses of $815,000, down from $1,311,000 recorded for the same period in 1996.
The decrease in income tax expenses resulted from the decrease in pretax income.
Net earnings for the first quarter of 1997 were $1,514,000 compared to
$2,436,000 for the first quarter of 1996.
At March 31, 1997, the backlog was $101,232,000 compared to $99,691,000
at December 31, 1996. Backlogs increased for oil field pumping units and power
transmission products while backlogs for foundry castings and trailers
decreased.
Backlog by product group at December 31, 1996 and March 31, 1997 was as
follows:
December 31 March 31 %
1996 1997 Change
----------- -------- -------
(In thousands)
Oil field pumping units $ 12,142 $14,578 20
Power transmission products 30,131 32,463 8
Foundry castings 17,357 15,892 (8)
Trailers 40,061 38,299 (4)
-------- -------
$ 99,691 $101,232 2
======== =======
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
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 1, 1997 /s/ C. James Haley, Jr.
--------------------- -------------------------------
C. James Haley, Jr.
Secretary-Treasurer
(Principal financial officer
and officer authorized to
sign on behalf of the
registrant)