<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D. C. 20549

                                   FORM 10-K

               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934



 
                          December 31,
For the fiscal year ended    1997               Commission file number  0-2612
                                                                        ------
 
                            LUFKIN INDUSTRIES, INC.
         ------------------------------------------------------------
            (Exact name of registrant as specified in its charter)
 
             Texas                                         75-0404410
------------------------------------            -------------------------------
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                          Identification No.)
 
  601 South Raguet, Lufkin, Texas                             75901
------------------------------------            ------------------------------- 
  (Address of principal executive offices)                 (Zip Code)
 
Registrant's telephone number, including area code   409/634-2211
                                                   ----------------------------

Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:


                     Common Stock, Par Value $1 Per Share
                     ------------------------------------
                               (Title of Class)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes   X   No 
                                        -----    -----     

Indicate by "X" if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein and will not be contained, to the best of
the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the Company's voting stock held by non-affiliates
as of January 31, 1998 was $178,256,000.

6,592,982 shares of the Company's Common Stock were outstanding on December 31,
1997.

                       DOCUMENTS INCORPORATED BY REFERENCE


Portions of the sections entitled "Financial Review", "Letter to the
Shareholders", "Management's Discussion and Analysis", "Product Line
Information"  and the consolidated financial statements of the Company's Annual
Report to Shareholders for the year ended December 31, 1997, are incorporated by
reference in Parts I, II and IV, hereof and are included as Exhibit 13.

The sections entitled "Voting Securities", "Directors and Nominees for Director"
and "Executive Compensation" of the Company's definitive Proxy Statement for its
annual meeting of shareholders on May 6, 1998, are incorporated by reference in
Part III hereof.
<PAGE>
 
                                    Part I


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's (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.  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 1997, 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 2,300 people at December 31, 1997,
including approximately 1,700 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.  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 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.  Legal Proceedings
--------------------------

     None

Item 4.  Submission of Matters to a Vote of Shareholders
--------------------------------------------------------

     None
<PAGE>
 
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, 1998:
                                                     Officer
Name                Position with Company       Age   Since
------------------  ---------------------       ---  -------
D. V. Smith         Chairman, President &
                     Chief Executive Officer    55     1993
J. F. Glick         Vice President              45     1994
M. A. Penn          Vice President              57     1983
E. G. Pittman       Vice President              64     1976
S. H. Semlinger     Vice President              44     1992
C. J. Haley, Jr.    Secretary-Treasurer         55     1973
L. M. Hoes          Vice President              51     1996
P. G. Perez         Vice President              52     1996

     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.
Glick, Mr. Hoes and Mr. Perez have been employed by the Company for more than
five years in the same or similar positions.  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 Cooper 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.  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 to Shareholders, which section is
incorporated herein by reference and included as part of Exhibit 13.

Item 6.  Selected Financial Data
--------------------------------


                        FIVE YEAR SUMMARY OF SELECTED 
                          CONSOLIDATED FINANCIAL DATA

(In millions, except per share data)     1997     1996     1995   1994   1993  
------------------------------------------------------------------------------
Sales                                  $287.6   $226.0   $248.9 $217.3  $202.2
Earnings (loss) from operations          14.8     10.5      8.9   (1.2)*   2.5
Earnings (loss) per share               
Basic                                     2.26     1.57     1.31   (.18)    .38
Diluted                                   2.22     1.56     1.31   (.18)    .37
Total assets                            209.8    185.9    186.3  176.8   182.5
Long term notes payable                   6.7       -        -      -        -
Cash dividends per share                   .68      .60      .60    .60     .60

*Includes pretax charges of $11.2 million for special inventory writedowns.

<PAGE>
 
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, portions of which section are incorporated herein by reference and
included as part of Exhibit 13.

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 incorporated herein by reference and included as part of Exhibit
13.

Item 9. Changes in and Disagreements with
         Accountants on Accounting and Financial Disclosure
-----------------------------------------------------------

     None

                                   Part III


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 6, 1998 ("Proxy Statement"), which
section is 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.  Executive Compensation
--------------------------------

     The information required by Item 11 is included in the section entitled
"Executive Compensation" on pages 6 through 11 of the Proxy Statement, which
section is incorporated herein by reference.

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.

Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------

     None

                                    Part IV

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 Sheet
              Consolidated Statement of Earnings
              Consolidated Statement of Shareholders'
              Equity
              Consolidated Statement of Cash Flows
              Notes to Consolidated Financial Statements
<PAGE>
 
     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 required 
           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 99.1 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, 1997 are 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

             (27)  Financial Data Schedule

     *Compensatory plan.

     (b) Reports on Form 8-K filed during the fourth quarter of 1997

         None
<PAGE>
 
                                  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
18, 1998.

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 18, 1998, 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/ J. H. Lollar
  ------------------------------------------------
 J. H. Lollar, 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