Business News
Lufkin Industries Reports 26.8% Growth in Second Quarter 2008 Earnings From Continuing Operations to $1.42 Per Diluted Share
2008-07-16 06:00:00
Raises 2008 Guidance for Earnings from Continuing Operations to Range of
$5.50 to $5.70 per Diluted Share
LUFKIN, Texas, July 16 /EMWNews-FirstCall/ -- Lufkin Industries,
Inc. (Nasdaq: LUFK) today announced financial results for the second
quarter ended June 30, 2008. Sales increased 30.6% to $174.5 million from
$133.6 million for the second quarter of 2008. Earnings from continuing
operations were $21.2 million for the second quarter of 2008, up 24.0% from
$17.1 million for the second quarter of 2007. Earnings from continuing
operations per diluted share increased 26.8% to $1.42 for the second
quarter of 2008 from $1.12 for the second quarter last year. Results for
the second quarter of 2008 included the impact of unexpected noncash
expense related to oil field and power transmission LIFO inventory
valuation of $0.14 per diluted share, somewhat offset by a $0.06 per
diluted share benefit from a favorable resolution of an IRS tax audit.
Lufkin successfully completed the closure of its trailer business and is
now treating it as a discontinued operation.
For the first six months of 2008, sales rose 17.5% to $315.6 million
from $268.6 million for the comparable period in 2007. Earnings from
continuing operations increased to $36.8 million, or $2.47 per diluted
share, for the first half of 2008, from $34.8 million, or $2.29 per diluted
share, for the first six months of 2007.
John F. (Jay) Glick, president and chief executive officer of Lufkin,
commented, "We are very pleased with the profitable growth during the
second quarter of 2008, which exceeded our guidance for the quarter. The
fundamental demand for energy, reflected in record high prices for oil,
continued to push demand for our oil field pumping units, automation
products and field services. Demand from North America was significantly
stronger than we had seen in prior quarters. The energy sector also drove
demand for products from the power transmission division, but unlike our
oilfield products, the strongest demand was from international markets.
"Oil field sales for the second quarter of 2008 increased 35.8% to
$126.5 million from $93.2 million for the second quarter of 2007 and
increased 25.4% from $100.9 million for the first quarter 2008. The high
demand from the North American market, coupled with a change in buying
practices that resulted in larger quantity orders from U.S. customers with
staged deliveries for the balance of 2008, resulted in very strong new
orders during the quarter. This large influx of business increased the
backlog for oil field products to $170.9 million at the quarter's end, up
206.4% from the end of the second quarter of 2007 and up 76.1% from the end
of the first quarter 2008, in spite of the increase in shipments for the
first quarter. While we are pleased with the volume of new orders received
during the second quarter, we expect the pace to slow, but remain well
above last year's levels, for the balance of 2008.
"The high demand for energy continued to drive the growth in our oil
field automation and services businesses in both North American and
international markets. While demand for our oil field services has remained
consistent with long-term growth trends, interest in our automation
technology has grown significantly as our customers seek to maximize their
production and improve their operating efficiencies.
"Sales of Lufkin's power transmission products increased 18.8% for the
second quarter of 2008 to $48.0 million from the second quarter of 2007 and
increased 19.5% from the first quarter of 2008. In addition, our power
transmission backlog expanded to $138.8 million at the end of the latest
quarter, up 22.9% from the end of the second quarter of 2007 and 0.9% from
the end of the first quarter of 2008. We are encouraged that our continued
investment in people and equipment is expanding our production capacity to
keep pace with the growth in demand for our products, as evidenced by
revenue growth of nearly 20% from the first quarter. Even with the higher
volume of sales, the backlog increased for the tenth consecutive quarter.
"During the second quarter, the power transmission division saw an
increase in demand for its products from the oil and gas sector, the
petrochemical sector, and the power generation sectors, all reflecting the
strong global demand for energy. While this demand benefited both our U.S.
and European operations, the ultimate destination for most products booked
during the quarter will be for installations outside of the U.S."
Based on the Company's results for the first half of 2008, its backlog
of $309.7 million at the end of the second quarter and the outlook for its
major markets for the balance of 2008, Lufkin today raised its guidance for
earnings from continuing operations per diluted share for 2008 to a range
of $5.50 to $5.70 from the previous range of $5.10 to $5.30. Consistent
with this guidance, the Company also today established its guidance for
earnings from continuing operations per diluted share for the third quarter
of 2008 in a range of $1.55 to $1.65.
Mr. Glick concluded, "During the second quarter of 2008, global demand
for energy drove demand for all our products, particularly for our oil
field products and services in the United States. We recognize the global
economic impact of such high energy prices and their potential impact on
demand for oil and gas. In addition, the continuing increase in metals
prices, along with other commodity prices, also poses a challenge for
Lufkin and other global producers. In spite of these challenges, we intend
to meet the market demand for our products by increasing output through
continued, intelligent investment in new production technology, coupled
with lean, efficient manufacturing and outstanding customer service. The
successful execution of these strategies will position the Company for
future growth, improved market share and further expansion in shareholder
value."
Lufkin will discuss its results for the second quarter in a
teleconference call today at 9:00 a.m. (central time). To listen to the
call, participants should dial (913) 312-0726 approximately 10 minutes
prior to the start of the call. A telephonic replay will be available from
12:00 p.m. (central time) July 16, 2008 through July 23, 2008, by dialing
(719) 457-0820 and entering reservation number 2495281.
This release contains forward-looking statements and information that
are based on management's beliefs as well as assumptions made by and
information currently available to management. When used in this release,
the words "anticipate," "believe," "estimate," "expect" and similar
expressions are intended to identify forward-looking statements. Such
statements reflect the Company's current views with respect to certain
events and are subject to certain assumptions, risks and uncertainties,
many of which are outside the control of the Company. These risks and
uncertainties include, but are not limited to, (i) oil prices, (ii) capital
spending levels of oil producers, (iii) availability and prices for raw
materials and (iv) general industry and economic conditions. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, believed, estimated or expected. The Company does not intend
to update these forward-looking statements and information.
Lufkin Industries, Inc. sells and services oil field pumping units,
foundry castings and power transmission products throughout the world. The
Company has vertically integrated all vital technologies required to
design, manufacture and market its products.
LUFKIN INDUSTRIES, INC.
Financial Highlights
(In thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Sales $174,488 $133,575 $315,558 $268,559
Cost of sales 126,693 94,173 227,243 189,788
Gross profit 47,795 39,402 88,315 78,771
Selling, general and
administrative expenses 16,976 14.372 33,741 28,451
Operating income 30,819 25,030 54,574 50,320
Other income (expense), net 715 1,555 933 2,492
Earnings from continuing
operations before income
tax provision 31,534 26,585 55,507 52,812
Income tax provision 10,356 9,505 18,744 18,062
Earnings from continuing
operations 21,178 17,080 36,763 34,750
Earnings (loss) from
discontinued operations,
net of tax 55 441 99 540
Net earnings $21,233 $17,521 $36,862 $35,290
Basic earnings per share:
Earnings from continuing
operations $1.44 $1.14 $2.50 $2.32
Earnings from discontinued
operations $- $0.03 $0.01 $0.03
Net earnings $1.44 $1.17 $2.51 $2.35
Diluted earnings per share:
Earnings from continuing
operations $1.42 $1.12 $2.47 $2.29
Earnings from discontinued
operations $- $0.03 $0.01 $0.03
Net earnings $1.42 $1.15 $2.48 $2.32
Dividends per share $0.25 $0.21 $0.50 $0.42
Weighted average number of
shares outstanding:
Basic 14,772,015 15,026,974 14,707,037 14,991,428
Diluted 14,922,885 15,229,990 14,864,895 15,209,214
LUFKIN INDUSTRIES, INC.
Balance Sheet Highlights
(Thousands of dollars)
June 30, Dec. 31,
2008 2007
Current assets $333,547 $292,867
Total assets 527,025 500,656
Current liabilities 74,600 68,134
Shareholders' equity 412,292 384,653
Working capital 258,947 224,733
LUFKIN INDUSTRIES, INC.
Division Performance
(Thousands of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Sales:
Oil field $126,507 $93,173 $227,416 $194,459
Power transmission 47,981 40,402 88,142 74,100
Total $174,488 $133,575 $315,558 $268,559
June 30, March 31, June 30,
2008 2008 2007
Backlog:
Oil field $170,917 $97,066 $55,787
Power transmission 138,785 137,598 112,903
Total $309,702 $234,664 $168,690
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