Item 1. Business
The Company was incorporated under the laws of the State 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 and sells various types of oil field pumping units and related products, power transmission products 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 also transports and services pumping units through a service center network. Pumping unit automation products lower production costs and optimize well efficiency through software and instrumentation. The Company's foundry castings are primarily customer designed components manufactured by Lufkin for use in customer products. 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. In addition, the Company repairs and services not only its own products but also those of other manufacturers through a dedicated facility. Lufkin also produces various sizes and styles of highway trailers, including vans, platforms and dumps. Trailer service centers repair both Lufkin trailers and those of competitors.
The Company manufactures most of the component parts used in its oil field, foundry and power transmission 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. Inventories consist 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 2001, foreign sales accounted for approximately 30 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 or trailer markets.
The Company employed approximately 1,900 people at December 31, 2001, including approximately 1,300 that were paid on an hourly basis. The Company has an open shop contract, which runs until October 7, 2002, 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 "Lufkin at a Glance" of the Company's Annual Report to Shareholders, 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, a foundry, machine shop, structural shops, assembly shops and warehouses. The Company also has a plant in Nisku, Canada that 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. The Company also has a plant in Fougerolles, France that manufactures, assembles and sells industrial gears and power transmission products throughout Europe.
Item 3.
Item 3. Legal Proceedings
The information required by Item 3 is included in the section entitled "Management's Discussion and Analysis" of the Company's Annual Report to Shareholders under the heading "Legal Proceedings," which section is included as part of Exhibit 13 and is incorporated herein by reference.
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, 2002:
Executive Officer Name Position with Company Age Since ------ --------------------- ----- --------- D. V. Smith Chairman, President & Chief Executive Officer 59 1993 J. F. Glick Vice President 49 1994 S. H. Semlinger Vice President 48 1992 L. M. Hoes Vice President 55 1996 P. G. Perez Vice President/Secretary 56 1996 R. D. Leslie Vice President/Treasurer/CFO 56 1999
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. Leslie, have been employed by the Company for more than five years in the same or similar positions. Mr. Leslie has been employed by the Company since October 1992. Prior to becoming the Company's Treasurer, Mr. Leslie served as the Company's Controller and Chief Accounting Officer. Prior to joining the Company, Mr. Leslie was employed by Sanifill, Inc. in Houston, Texas, as Vice President of Finance and Chief Accounting Officer. The executive officers of the Company serve at the request of the Board of Directors of the Company. The term of office for all executive 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 Company's Annual Report to Shareholders, which section is included as part of Exhibit 13 and is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data
(1) Sales for prior periods have been restated to reflect the reclassification of freight charges billed to customers as revenues and the related expenses as cost of sales in accordance with the guidance specified by EITF Issue 00-10. The Company previously accounted for freight charged to customers as a reduction of cost of sales. Net earnings for these periods were not affected by this reclassification.
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 to Shareholders, which section is included as part of Exhibit 13 and is incorporated herein by reference.
Item 7a.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
The information required by Item 7a is included in the section entitled "Management's Discussion and Analysis" of the Company's Annual Report to Shareholders under the heading "Quantitative and Qualitative Disclosures about Market Risk," which section is included as part of Exhibit 13 and is incorporated herein by reference.
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 to Shareholders, which consolidated financial statements and related notes and report of independent public accountants are included as part of Exhibit 13 and are incorporated herein by reference.
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 sections entitled "Nominees for Director" on page 2 and "Information About Current and Continuing Directors" on pages 4 and 5 of the definitive Proxy Statement for the annual meeting of Company shareholders on May 1, 2002 ("Proxy Statement"), which sections are incorporated herein by reference. 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 5 through 10 of the Proxy Statement, which section is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is included in the sections entitled "Quorum and Voting Securities" on page 1 and "Security Ownership of Certain Beneficial Owners and Management" on page 12 of the Company's Proxy Statement, which sections are incorporated herein by reference.
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 to Shareholders)
Report of Independent Public Accountants Consolidated Balance Sheets Consolidated Statements of Earnings Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts
3. Exhibits
(3.1) Articles of Incorporation, as amended, included as Exhibit 3 to Form 10-K of the registrant for the year ended December 31, 1990, which exhibit is incorporated herein by reference.
(3.2) Articles of Amendment to Fourth Restated Articles of Incorporation, included as Exhibit 3.1 to Form 8-K of the registrant filed December 10, 1999, which exhibit is incorporated herein by reference.
(3.3) Restated Bylaws, included as Exhibit 3.2 to Form 8-K of the registrant filed December 10, 1999, which exhibit is 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 4.3 to the Company's registration statement on Form S-8 dated August 23, 1995(File No. 33-62021), which plan is incorporated herein by reference.
(10.3)* Company's 1996 Nonemployee Director Stock Option Plan was included as Exhibit 4.3 to the Company's registration statement on Form S-8 dated June 28, 1996 (File No. 333- 07129), which plan is incorporated herein by reference.
(13) The Annual Report to Shareholders for the year ended December 31, 2001, is included as an exhibit to this report for the information of the Securities and Exchange Commission.
(21) Schedule listing subsidiaries of the registrant
(23) Consent of Independent Public Accountants
(99) Confirmation of Receipt of Assurances from Arthur Andersen LLP
*Compensatory plan.
(b) Reports on Form 8-K filed during the fourth quarter of 2001:
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 March 25, 2002.
LUFKIN INDUSTRIES, INC.
BY /s/ R. D. Leslie ------------------------------------------------ R. D. Leslie, Vice President/Treasurer/Chief Financial Officer Principal Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 25, 2002, below by the following persons on behalf of Lufkin Industries, Inc. and in the capacities indicated.
/s/ D. V. Smith By________________________________________________ D. V. Smith, President and Chief Executive Officer
/s/ S. W. Henderson, III By________________________________________________ S. W. Henderson, III, Director
/s/ L. R. Jalenak, Jr. By________________________________________________ L. R. Jalenak, Jr., Director
/s/ H. H. King By________________________________________________ H. H. King, Director
/s/ M. E. Kurth, Jr. By________________________________________________ M. E. Kurth, Jr., Director
/s/ J. H. Lollar By________________________________________________ J. H. Lollar, Director
/s/ B. H. O'Neal By________________________________________________ B. H. O'Neal, Director
/s/ H. J. Trout, Jr. By________________________________________________ H. J. Trout, Jr., Director
/s/ W. W. Trout, Jr. By________________________________________________ W. W. Trout, Jr., Director
/s/ T. E. Wiener By________________________________________________ T. E. Wiener, Director
To the Shareholders of Lufkin Industries, Inc.
We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of Lufkin Industries, Inc. and subsidiaries included in this registration statement and have issue our report thereon dated February 8, 2002. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II, listed in the index above, is the responsibility of the company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
Houston, Texas February 8, 2002
LUFKIN INDUSTRIES, INC. SCHEDULE II - VALUATION & QUALIFYING ACCOUNTS (in thousands of dollars)
INDEX TO EXHIBITS
Exhibit Number Description - ------- -----------
(3.1) Articles of Incorporation, as amended, included as Exhibit 3 to Form 10-K of the registrant for the year ended December 31, 1990, which exhibit is incorporated herein by reference.
(3.2) Articles of Amendment to Fourth Restated Articles of Incorporation, included as Exhibit 3.1 to Form 8-K of the registrant filed December 10, 1999, which exhibit is incorporated herein by reference.
(3.3) Restated Bylaws, included as Exhibit 3.2 to Form 8-K of the registrant filed December 10, 1999, which exhibit is 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 4.3 to the Company's registration statement on Form S-8 dated August 23, 1995(File No. 33-62021), which plan is incorporated herein by reference.
(10.3)* Company's 1996 Nonemployee Director Stock Option Plan was included as Exhibit 4.3 to the Company's registration statement on Form S-8 dated June 28, 1996 (File No. 333-07129), which plan is incorporated herein by reference.
(13) The Annual Report to Shareholders for the year ended December 31, 2001, is included as an exhibit to this report for the information of the Securities and Exchange Commission.
(21) Schedule listing subsidiaries of the registrant
(23) Consent of Independent Public Accountants
(99) Confirmation of Receipt of Assurances from Arthur Andersen LLP