Lufkin Industries Reports 26.8% Growth in Second Quarter 2008 Earnings From Continuing Operations to $1.42 Per Diluted Share

  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