Excluding the impact of a $1.9 million (net of tax), or $0.13 per diluted share provision related to the class-action lawsuit against the Company that was accrued at the end of the first quarter, earnings from continuing operations for the first quarter of 2009 declined to $11.0 million, or $0.74 per diluted share, compared with $15.6 million, or $1.05 per diluted share, for the first quarter of 2008. Earnings from continuing operations for the first quarter of 2009 decreased to $9.1 million, or $0.61 per diluted share. Revenues increased almost 9% to $153.1 million compared with $141.1 million for the first quarter of 2008.

"The first quarter of 2009 turned out to be one of the most challenging quarters we have faced in a number of years," said John F. "Jay" Glick, president and chief executive officer of Lufkin. "As we mentioned last quarter, we are clearly not immune to the current economic recession and to the decline in commodity prices the industry has witnessed since the second half of 2008.

"Bookings in both our Oil Field and Power Transmission divisions were down significantly both from the fourth quarter of 2008 and from the first quarter of 2008. Several international projects were reduced in size and several were postponed, which further impacted bookings during the quarter.

"Markets were soft in all geographic areas, but international markets clearly held up much better than in the United States. While the decline in North America appeared to be focused in the Bakken and Barnett shale plays, we also started to experience softening as the quarter progressed in areas that had previously seemed more stable like California and West Texas. While it is difficult to find bright spots in this environment, Brazil and North Africa were areas in which business was up significantly versus the preceding quarter and last year's first quarter.

"Our combined order backlog declined to $208.0 million in the first quarter from $234.7 million in the first quarter of last year and from $317.5 million at the end of 2008," he added.

"We expect the market to be challenging over the next several quarters, although we are hopeful that we will begin to see some signs of stabilization and recovery in demand in the second half of 2009. As a result, we have taken steps to reduce costs to improve our competitive position. We have reduced our workforce by roughly 10%, some operations were placed on short work weeks, and capital spending has been reduced. We are also working to unwind commitments made late last year in our supply chain. However, at the same time we are making sure that the right decisions are being made to provide for the longer term growth of the company.

"Our acquisition of International Lift Systems (ILS), announced in March, is an example of that longer term focus. ILS expands our footprint in the artificial lift sector by adding gas and plunger lift to our product portfolio and provides a platform for future growth, as we leverage Lufkin's global sales and service network to expand the market for ILS products and services," Glick concluded.

FIRST QUARTER RESULTS

Oil Field Division - Oil Field revenues for the first quarter of 2009 increased 11% to $111.7 million, compared to $100.9 million in the first quarter of 2008, but they fell 37% from the fourth quarter of 2008. The year-over-year increase was led by a 23% jump in new unit sales, primarily in North America. Sales from recently acquired ILS contributed $2.0 million during the first quarter of 2009. First quarter revenue was lower than forecasted due to higher than expected order cancellations and reschedules in the latter half of the quarter. Oil Field's new business bookings declined 86% from the first quarter of 2008 and 80% from the fourth quarter of 2008. Oil Field's backlog decreased to $93.3 million at the end of the first quarter from $97.1 million at the end of last year's first quarter and $188.1 million at the end of 2008. This decrease was caused primarily by lower orders for new pumping units as customers deferred or cancelled drilling programs in response to lower energy prices, and by reduced pricing. The Oil Field Division experienced approximately $25 million in cancelled orders during the first quarter as customers became more cautious and started reducing their capital spending, a process that started in November 2008.

Power Transmission Division - Sales of Lufkin's Power Transmission products increased 3% to $41.5 million compared to $40.2 million in last year's first quarter, but they fell 21% from the fourth quarter of 2008. The year-over-year increase was driven by a 5% increase in new unit sales to $33.1 million for marine units for the coastal, river and inland-waterway transportation markets. First quarter revenue was lower than forecasted due to higher than expected customer delays and reschedules in the latter half of the quarter.