Despite a reduction in trailer sales resulting from its exit from the van trailer business late last year, Lufkin Industries Inc. today announced that third-quarter net earnings were $19.1 million, or $1.26 per diluted share, compared with $17.4 million, or $1.15 per diluted share, for the third quarter of 2006.
Net earnings rose to $54.4 million, or $3.58 per diluted share, for the first nine months of 2007 from $50.0 million, or $3.31 per diluted share, for the first nine months last year. Sales were $146.9 million, compared with $158.8 million for the third quarter of 2006. For the first nine months of 2007, sales were $439.5 million compared with $439.9 million for the same period in 2006.
"As expected, the performance of Lufkin's trailer business for the third quarter of 2007 primarily reflected our decision in the third quarter of 2006 to exit the van trailer business,” said Douglas V. Smith, chief executive officer of Lufkin. “In addition, national trailer demand remained sluggish. As a result, trailer sales and backlog for and at the end of the third quarter of 2007 declined 51.9% and 73.0%, respectively, on a comparable-quarter basis and 14.1% and 27.9%, respectively, on a sequential quarter basis. We expect that these issues will continue to affect the trailer business through the remainder of 2007.
"Lufkin produced solid growth in earnings per diluted share for the third quarter of 2007, with improved profit margins. Consistent with our experience for the first half of 2007, our growth was primarily driven by strong bookings and increased operating leverage for our power transmission business compared with the third quarter last year. This performance more than offset the effect of continued soft demand in North America for oil field pumping equipment and the reduction in trailer sales.Reflecting the favorable impact of high ongoing energy demand on our overall oil field and power transmission businesses, our total backlog was $192.5 million at the end of the third quarter, compared with $193.2 million at the same time in 2006 and $180.6 million at the end of the second quarter of 2007.
"Lufkin's power transmission business produced outstanding results for the third quarter, with sales rising 37.8% to $40.9 million for the latest quarter from $29.7 million for the third quarter last year and increasing 1.2% from the second quarter of 2007. As we have experienced throughout 2007, our third-quarter performance reflected strong demand in both domestic and international markets for high speed gears for applications related to the energy market, including applications in oil and gas production, refining, power generation, marine transport and petrochemical production. Due primarily to increasing operating leverage from increasing sales, the power transmission business drove the 2.2% points expansion in the company's operating income as a percentage of sales to 18.4% for the third quarter of 2007 from 16.2% for the third quarter of 2006. We also enhanced the future growth potential of the power transmission business during the third quarter by achieving the seventh consecutive quarterly increase in its backlog. At the end of the third quarter of 2007, the power transmission backlog stood at $120.3 million, up 47.0% from the end of the third quarter last year and 6.5% from the end of the second quarter of 2007.
Based on the company's backlog of $192.5 million at the end of the third quarter of 2007, its results for the quarter and the first nine months of the year and its outlook regarding industry conditions in each of its businesses, Lufkin today established guidance for earnings per diluted share for 2007 in a range of $4.70 to $4.90. Consistent with this guidance, the Company also today established its guidance for earnings per diluted share for the fourth quarter of 2007 in a range of $1.12 to $1.32.