Item 1. Business - -----------------
The Company was incorporated under the laws of Texas on March 4, 1902 and since that date, has maintained its principal office and manufacturing facilities in Lufkin, Texas. The Company designs, manufactures, sells, and services various types of oil field pumping units, power transmission products, foundry castings and highway trailers. Lufkin manufactures four basic types of pumping units: an air-balanced unit; a beam-balanced unit; a crank-balanced unit; and a Mark II Unitorque unit. The basic differences between the four types relate to the counterbalancing system. The depth of a well and the desired fluid production determine the type of counterbalancing configuration that is required. There are numerous sizes and combinations of Lufkin oil field pumping units within the four basic types. The Company's power transmission products (speed increasers and reducers) are designed, manufactured and sold primarily for use in industrial applications such as petrochemical, refining, rubber, plastics and steel and for use in marine propulsion applications. The Company produces numerous sizes and combinations of gears. The Company's foundry castings are primarily customer designed components manufactured by Lufkin for use in customer products. Lufkin also produces various sizes and styles of trailers, including vans, platforms, and dumps.
The Company manufactures most of the component parts used in its Machinery Division products and purchases the raw materials and outside manufactured parts from a variety of suppliers on an order basis. The Trailer Division generally assembles various component parts manufactured by others. The inventory consists primarily of raw materials and component parts which are generally assembled into finished products to fill specific customer orders. These finished products are sold primarily by the Company's own employees.
Oil field pumping units are the Company's primary products sold for export. These sales, other than to Canada, are made principally through foreign sales representatives, licensees and distributors. During 1996, foreign sales accounted for approximately 19 percent of the Company's total sales.
The Company's domestic and international markets are highly competitive with price, quality and speed of delivery being important factors. While the Company believes that it is one of the larger manufacturers of sucker rod pumping units in the United States, manufacturers of other types of units (submersibles and hydraulics) have a significant share of the total pumping unit market. The Company does not believe it has a large market share in the power transmission, castings or trailer markets.
The Company employed approximately 1,900 people at December 31, 1996, including approximately 1,340 that were paid on an hourly basis. The Company has an open shop contract, which runs to October 3, 1999, with three AFL-CIO labor unions. The Company considers its employee relations to be satisfactory.
Additional information required by Item 1 is included in the sections entitled "Management's Discussion and Analysis", "Letter to the Shareholders", and "Product Line Information" of the Annual Report, portions of which sections are incorporated herein by reference and included as part of Exhibit 13.
Item 2.
Item 2. Properties - -------------------
The Company's major manufacturing facilities are located in and near Lufkin, are owned in fee and include approximately 150 acres and a foundry, machine shop, structural shops, assembly shops and warehouses. The Company also has a plant in Nisku, Canada which produces structural parts for pumping units. These parts are then assembled with parts shipped from Lufkin and are delivered to the Company's Canadian customers.
Item 3.
Item 3. Legal Proceedings - --------------------------
None
Item 4.
Item 4. Submission of Matters to a Vote of Shareholders - --------------------------------------------------------
None
Item 4A. Executive Officers of the Registrant - ----------------------------------------------
The following information is submitted with respect to the executive officers of the Company as of March 1, 1997:
There is no significant family relationship either by blood or by marriage among the officers of the Company.
All of the executive officers of the Company, with the exception of Mr. Smith, Mr. Barber, Mr. Glick, Mr. Hoes and Mr. Perez have been employed by the Company for more than five years in the same or similar positions. Mr. Smith was first employed by the Company in January 1993 to serve as President and Chief Executive Officer. For the five year period prior to his employment with the Company, Mr. Smith was employed and served as Vice President of Manufacturing of Cooper Industries (1989-93) and as Vice President of Oil Tool Division of Cameron Iron Works (1982-89). Both companies are based in Houston, Texas. Mr. Barber was first employed by the Company in July 1990 to serve as sales manager for trailer products. Mr. Barber was previously employed by Fruehauf Trailers as Vice President of Welded Products in Detroit, Michigan. Mr. Glick was first employed by the Company in September 1994 to serve as Vice President and General Manager of the Power Transmission Division. Prior to joining the Company, Mr. Glick served as Director of Manufacturing, U.K. and Ireland, with Cooper Oil Tools and as Plant Manager of Cooper Oil Tools in Leeds, England. Mr. Hoes was first employed by the Company in May, 1996 to serve as Vice President and General Manager of the Oil Field Products Division. Prior to joining the Company, Mr. Hoes was employed as Vice President of Manufacturing for Cooper Cameron Inc. in Houston, Texas, as Vice President of Manufacturing for Cooper Oil Tool Division and as Vice President of Engineering for Cooper Oil Tool Division based in Houston, Texas. Mr. Perez was first employed by the Company in July, 1993 to serve as Director of Human Resources. Mr. Perez was previously employed by Cooper Industries as Manager of Employee Relations for the Oil Tool Division in Houston, Texas and by Cameron Iron Works as Manager of Labor Relations in Houston, Texas . The executive officers of the Company serve at the pleasure of the Board of Directors of the Company. The term of office for all officers expires at the next annual meeting of the Board of Directors of the Company.
Part II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters - --------------------------------------------------
The information required by Item 5 is included in the section entitled "Financial Review" of the Annual Report, which section is incorporated herein by reference and included as part of Exhibit 13.
Item 6.
Item 6. Selected Financial Data - --------------------------------
FIVE YEAR SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
*Includes pretax charges of $11.2 million for special inventory writedowns.
**Includes a $24.3 million restructuring charge. The Company adopted SFAS No. 109 effective January 1, 1992, but this change had no effect on the Company's financial statements. In addition, the Company adopted SFAS No. 106 effective January 1, 1992. The cumulative effect of the change in accounting for post- retirement benefits including the applicable income tax benefit was a charge to income of $7.5 million or $1.11 per share.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - -----------------------------------------------------------------
The information required by Item 7 is included in the section entitled "Management's Discussion and Analysis" of the Company's Annual Report, portions of which section are incorporated herein by reference and included as part of Exhibit 13.
Item 8.
Item 8. Financial Statements and Supplementary Data - ----------------------------------------------------
The information required by Item 8 is included in the consolidated financial statements and related notes and the "Report of Independent Public Accountants" of the Company's Annual Report, which consolidated financial statements and related notes and report of independent public accountants are incorporated herein by reference and included as part of Exhibit 13.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - ---------------------------------------------------------
None
Part III
Item 10.
Item 10. Directors and Executive Officers of the Registrant - ----------------------------------------------
The information required by Item 10 relating to the directors of the Company is included in the section entitled "Directors and Nominees for Director" on pages 2 through 5 of the definitive Proxy Statement for the annual meeting of Company shareholders on May 7, 1997 ("Proxy Statement"), which section is incorporated herein by reference and included as part of Exhibit 99. The information relating to the executive officers of the Company is provided in Item 4A of Part I of this Annual Report.
Item 11.
Item 11. Executive Compensation - --------------------------------
The information required by Item 11 is included in the section entitled "Executive Compensation" on pages 6 through 9 of the Proxy Statement, which section is incorporated herein by reference and included as part of Exhibit 99.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management - --------------------------------------------------
The information required by Item 12 is included in the sections entitled "Voting Securities" and "Election of Directors" on pages 1 through 5 of the Company's Proxy Statement, which sections are incorporated herein by reference and included as part of Exhibit 99.
Item 13.
Item 13. Certain Relationships and Related Transactions - -------------------------------------------------------
None
Part IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - --------------------------------------------------
(a) Documents filed as part of the report
1. Consolidated Financial Statements (incorporated by reference to the Annual Report)
Report of Independent Public Accountants Consolidated Balance Sheet Consolidated Statement of Earnings Consolidated Statement of Stockholders' Equity Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements
2. Financial statement schedules
Schedules Omitted--All schedules for which provision is made in the applicable regulations of the Securities and Exchange Commission have been omitted because they are not applicable or not re- quired or the required information is included in the consolidated financial statements or notes thereto.
3. Exhibits
(3) Articles of Incorporation, as amended, and Bylaws, as amended, were included as exhibit 3 to Form 10-K of the registrant for the year ended December 31, 1990, which exhibits are incorporated herein by reference.
(10.1) Shareholder Rights Agreement, dated as of May 4, 1987, was included as exhibit (1) to Form 8-A of the registrant dated May 13, 1987, which agreement is incorporated herein by reference.
(10.2)* Company's 1990 Stock Option Plan was included as Exhibit 28.1 to the Company's registration statement on Form S-8 dated September 24, 1990 (File No. 33-36976), which plan is incorporated herein by reference.
(13) Portions of the Annual Report to Shareholders for the year ended December 31, 1996 are included as an exhibit to this report for the informa- tion of the Securities and Exchange Com- mission.
(22) Schedule listing subsidiaries of the registrant
(24) Consent of Independent Public Accountants
(27) Financial Data Schedule
(99) Portions of the definitive proxy statement of Lufkin Industries, Inc., for the annual meeting of shareholders on May 7, 1997 are included as an exhibit to this report for the informa- tion of the Securities and Exchange Commission.
*Compensatory plan.
(b) Reports on Form 8-K filed during the fourth quarter of 1996
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Lufkin Industries, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 19, 1997.
LUFKIN INDUSTRIES, INC.
BY /s/ C. James Haley, Jr. ---------------------------------------------- C. James Haley, Jr., Secretary-Treasurer Principal Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on February 19, 1997, below by the following persons on behalf of Lufkin Industries, Inc. and in the capacities indicated.
By /s/ D. V. Smith ------------------------------------------------ D. V. Smith, President and Chief Executive Officer
By /s/ S. W. Henderson, III ------------------------------------------------ S. W. Henderson, III, Director
By /s/ L. R. Jalenak, Jr. ------------------------------------------------ L. R. Jalenak, Jr., Director
By /s/ H. H. King ------------------------------------------------ H. H. King, Director
By /s/ M. E. Kurth, Jr. ------------------------------------------------ M. E. Kurth, Jr., Director
By /s/ W. T. Little ------------------------------------------------ W. T. Little, Director
By /s/ B. H. O'Neal ------------------------------------------------ B. H. O'Neal, Director
By /s/ F. B. Stevenson ------------------------------------------------ F. B. Stevenson, Director
By /s/ H. J. Trout, Jr. ------------------------------------------------ H. J. Trout, Jr., Director
By /s/ W. W. Trout, Jr. ------------------------------------------------ W. W. Trout, Jr., Director
By /s/ T. E. Wiener ------------------------------------------------ T. E. Wiener, Director