|   | (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|---------------------------------------------------------------------------------------------|

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

| TEXAS                                                          | 75-0404410                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
|                                                           |                                 |
| 601 SOUTH RAGUET, LUFKIN, TEXAS                                | 75904                                |
| (Address of principal executive offices)                       | (Zip Code)                           |

| LUFKIN INDUSTRIES, INC.                                                                                                       |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)                                                                             |   |
|                                                                                                                          |   |
| (Thousands of dollars, except share and per share data)                                                                       |   |   |   |   |   |   |
|                                                                                                                          |   | March 31, |   |   | December 31, |   |
| Assets                                                                                                                        |   | 2010 |   |   | 2009 |   |
| Current Assets:                                                                                                               |   |   |   |   |   |   |
| Cash and cash equivalents                                                                                                     |   | $ | 107,895 |   |   | $ | 100,858 |   |
| Receivables, net                                                                                                              |   |   | 92,341 |   |   |   | 92,506 |   |
| Income tax receivable                                                                                                         |   |   | 4,269 |   |   |   | 4,303 |   |
| Inventories                                                                                                                   |   |   | 114,258 |   |   |   | 110,605 |   |
| Deferred income tax assets                                                                                                    |   |   | 5,480 |   |   |   | 5,198 |   |
| Other current assets                                                                                                          |   |   | 8,252 |   |   |   | 4,351 |   |
| Current assets from discontinued operations                                                                                   |   |   | 813 |   |   |   | 811 |   |
| Total current assets                                                                                                          |   |   | 333,308 |   |   |   | 318,632 |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
| Property, plant and equipment, net                                                                                            |   |   | 160,758 |   |   |   | 159,770 |   |
| Goodwill, net                                                                                                                 |   |   | 44,881 |   |   |   | 45,001 |   |
| Other assets, net                                                                                                             |   |   | 17,862 |   |   |   | 18,187 |   |
| Long-term assets from discontinued operations                                                                                 |   |   | - |   |   |   | - |   |
| Total assets                                                                                                                  |   | $ | 556,809 |   |   | $ | 541,590 |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
| Liabilities and Shareholders' Equity                                                                                          |   |   |   |   |   |   |   |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
| Current liabilities:                                                                                                          |   |   |   |   |   |   |   |   |
| Accounts payable                                                                                                              |   | $ | 24,766 |   |   | $ | 19,993 |   |
| Current portion of long-term debt                                                                                             |   |   | 1,408 |   |   |   | 1,372 |   |
| Accrued liabilities:                                                                                                          |   |   |   |   |   |   |   |   |
| Payroll and benefits                                                                                                          |   |   | 12,791 |   |   |   | 9,568 |   |
| Warranty expenses                                                                                                             |   |   | 4,104 |   |   |   | 4,220 |   |
| Taxes payable                                                                                                                 |   |   | 5,939 |   |   |   | 4,562 |   |
| Other                                                                                                                         |   |   | 24,955 |   |   |   | 24,147 |   |
| Current liabilities from discontinued operations                                                                              |   |   | 1,002 |   |   |   | 1,026 |   |
| Total current liabilities                                                                                                     |   |   | 74,965 |   |   |   | 64,888 |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
| Long-term debt                                                                                                                |   |   | 1,146 |   |   |   | 1,516 |   |
| Deferred income tax liabilities                                                                                               |   |   | 11,370 |   |   |   | 10,950 |   |
| Postretirement benefits                                                                                                       |   |   | 7,874 |   |   |   | 7,874 |   |
| Other liabilities                                                                                                             |   |   | 20,390 |   |   |   | 20,647 |   |
| Commitments and contingencies                                                                                                 |   |   | - |   |   |   | - |   |
| Long-term liabilities from discontinued operations                                                                            |   |   | 37 |   |   |   | 37 |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
| Shareholders' equity:                                                                                                         |   |   |   |   |   |   |   |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
| Common stock, $1.00 par value per share; 60,000,000 shares authorized; 15,851,015 and 15,808,588 shares issued , respectively |   |   | 15,851 |   |   |   | 15,809 |   |
| Capital in excess par                                                                                                         |   |   | 73,623 |   |   |   | 70,508 |   |
| Retained earnings                                                                                                             |   |   | 424,168 |   |   |   | 421,908 |   |
| Treasury stock, 919,168 and 923,168 shares, respectively, at cost                                                             |   |   | (34,471 | ) |   |   | (34,621 | ) |
| Accumulated other comprehensive (loss)                                                                                        |   |   | (38,144 | ) |   |   | (37,926 | ) |
| Total shareholders' equity                                                                                                    |   |   | 441,027 |   |   |   | 435,678 |   |
| Total liabilities and shareholders' equity                                                                                    |   | $ | 556,809 |   |   | $ | 541,590 |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |

| LUFKIN INDUSTRIES, INC.                                                                     |   |
|---------------------------------------------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)                                   |   |
| (In thousands of dollars, except per share and share data)                                  |   |
|                                                                                        |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |
|                                                                                        |   | Three Months Ended |   |
|                                                                                        |   | March 31, |   |
|                                                                                        |   | 2010 |   |   | 2009 |   |
|                                                                                        |   |   |   |   |   |   |
| Sales                                                                                       |   | $ | 127,123 |   |   | $ | 153,138 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Cost of Sales                                                                               |   |   | 98,500 |   |   |   | 118,955 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Gross Profit                                                                                |   |   | 28,623 |   |   |   | 34,183 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Selling, general and administrative expenses                                                |   |   | 19,327 |   |   |   | 18,430 |   |
| Litigation reserve                                                                          |   |   | - |   |   |   | 3,000 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Operating income                                                                            |   |   | 9,296 |   |   |   | 12,753 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Interest income                                                                             |   |   | 4 |   |   |   | 860 |   |
| Interest expense                                                                            |   |   | (150 | ) |   |   | (127 | ) |
| Other income (expense), net                                                                 |   |   | 221 |   |   |   | (193 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |
| Earnings from continuing operations before income tax provision and discontinued operations |   |   | 9,371 |   |   |   | 13,293 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Income tax provision                                                                        |   |   | 3,374 |   |   |   | 4,210 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Earnings from continuing operations before discontinued operations                          |   |   | 5,997 |   |   |   | 9,083 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Loss from discontinued operations, net of tax                                               |   |   | (5 | ) |   |   | (105 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |
| Net earnings                                                                                |   | $ | 5,992 |   |   | $ | 8,978 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Basic earnings per share:                                                                   |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Earnings from continuing operations                                                         |   | $ | 0.40 |   |   | $ | 0.61 |   |
| Loss from discontinued operations                                                           |   |   | - |   |   |   | (0.01 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |
| Net earnings                                                                                |   | $ | 0.40 |   |   | $ | 0.60 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Diluted earnings per share:                                                                 |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Earnings from continuing operations                                                         |   | $ | 0.40 |   |   | $ | 0.61 |   |
| Loss from discontinued operations                                                           |   |   | - |   |   |   | (0.01 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |
| Net earnings                                                                                |   | $ | 0.40 |   |   | $ | 0.60 |   |
|                                                                                        |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |
| Dividends per share                                                                         |   | $ | 0.25 |   |   | $ | 0.25 |   |
|                                                                                        |   |   |   |   |   |   |   |   |

| LUFKIN INDUSTRIES INC.                                                          |   |
|---------------------------------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)                     |   |
| (In thousands of dollars)                                                       |   |
|                                                                            |   |   |   |   |   |   |
|                                                                            |   | Three Months Ended |   |
|                                                                            |   | March 31, |   |
|                                                                            |   | 2010 |   |   | 2009 |   |
| Cash flows from operating activities:                                           |   |   |   |   |   |   |
| Net earnings                                                                    |   | $ | 5,992 |   |   | $ | 8,978 |   |
| Adjustments to reconcile net earnings to cash provided by operating activities: |   |   |   |   |   |
| Depreciation and amortization                                                   |   |   | 5,042 |   |   |   | 3,894 |   |
| Recovery for losses on receivables                                              |   |   | (122 | ) |   |   | (115 | ) |
| LIFO expense                                                                    |   |   | - |   |   |   | 640 |   |
| Deferred income tax benefit                                                     |   |   | (290 | ) |   |   | (1,215 | ) |
| Excess tax benefit from share-based compensation                                |   |   | (309 | ) |   |   | - |   |
| Share-based compensation expense                                                |   |   | 779 |   |   |   | 347 |   |
| Pension expense                                                                 |   |   | 2,595 |   |   |   | 2,174 |   |
| Postretirement obligation                                                       |   |   | 102 |   |   |   | 77 |   |
| (Gain) loss on disposition of property, plant and equipment                     |   |   | (133 | ) |   |   | 9 |   |
| Loss from discontinued operations                                               |   |   | 5 |   |   |   | 105 |   |
| Changes in:                                                                     |   |   |   |   |   |   |   |   |
| Receivables, net                                                                |   |   | (103 | ) |   |   | 46,591 |   |
| Income tax receivable                                                           |   |   | 62 |   |   |   | (403 | ) |
| Inventories                                                                     |   |   | (4,187 | ) |   |   | (11,360 | ) |
| Other current assets                                                            |   |   | (3,057 | ) |   |   | (1,778 | ) |
| Accounts payable                                                                |   |   | 4,584 |   |   |   | (6,395 | ) |
| Accrued liabilities                                                             |   |   | 5,637 |   |   |   | 697 |   |
| Net cash provided by continuing operations                                      |   |   | 16,597 |   |   |   | 42,246 |   |
| Net cash used in discontinued operations                                        |   |   | - |   |   |   | - |   |
| Net cash provided by operating activities                                       |   |   | 16,597 |   |   |   | 42,246 |   |
|                                                                            |   |   |   |   |   |   |   |   |
| Cash flows from investing activites:                                            |   |   |   |   |   |   |   |   |
| Additions to property, plant and equipment                                      |   |   | (6,242 | ) |   |   | (6,960 | ) |
| Proceeds from disposition of property, plant and equipment                      |   |   | 238 |   |   |   | 41 |   |
| Increase in other assets                                                        |   |   | (123 | ) |   |   | (98 | ) |
| Acquisition of other companies                                                  |   |   | (1,500 | ) |   |   | (45,500 | ) |
| Net cash used in continuing operations                                          |   |   | (7,627 | ) |   |   | (52,517 | ) |
| Net cash provided by discontinued operations                                    |   |   | - |   |   |   | - |   |
| Net cash used in investing activities                                           |   |   | (7,627 | ) |   |   | (52,517 | ) |
|                                                                            |   |   |   |   |   |   |   |   |
| Cash flows from financing activites:                                            |   |   |   |   |   |   |   |   |
| Payments of notes payable                                                       |   |   | (334 | ) |   |   | (904 | ) |
| Dividends paid                                                                  |   |   | (3,733 | ) |   |   | (3,715 | ) |
| Excess tax benefit from share-based compensation                                |   |   | 309 |   |   |   | - |   |
| Proceeds from exercise of stock options                                         |   |   | 1,915 |   |   |   | - |   |
| Net cash used in financing activities                                           |   |   | (1,843 | ) |   |   | (4,619 | ) |
|                                                                            |   |   |   |   |   |   |   |   |
| Effect of translation on cash and cash equivalents                              |   |   | (90 | ) |   |   | (416 | ) |
|                                                                            |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                            |   |   | 7,037 |   |   |   | (15,306 | ) |
|                                                                            |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                                |   |   | 100,858 |   |   |   | 107,756 |   |
|                                                                            |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at end of period                                      |   | $ | 107,895 |   |   | $ | 92,450 |   |
|                                                                            |   |   |   |   |   |   |   |   |

|                                             |   | Three Months Ended |   |
|--------------------------------------------------|--------|--------------------|--------|
|                                             |   | March 31,          |   |
|                                             |   | 2010               |   |   | 2009 |   |
|                                             |   |               |   |   |   |   |
| Sales                                            |   | $                  | 1      |   |   | $ | 35 |   |
|                                             |   |               |   |   |   |   |   |   |
| Loss before income tax provision                 |   |               | (8     | ) |   |   | (187 | ) |
|                                             |   |               |   |   |   |   |   |   |
| Income tax benefit                               |   |               | 3      |   |   |   | 82 |   |
|                                             |   |               |   |   |   |   |   |   |
| Loss from discontinued operations, net of tax    |   | $                  | (5     | ) |   | $ | (105 | ) |
|                                             |   |               |   |   |   |   |   |   |
|                                             |   |               |   |   |   |   |   |   |
|                                             |   | March 31,          |   |   | December 31, |   |
|                                             |   |  2010         |   |   |  2009 |   |
|                                             |   |               |   |   |   |   |   |   |
| Receivables, net                                 |   | $                  | 17     |   |   | $ | 17 |   |
| Income tax receivable                            |   |               | 313    |   |   |   | 302 |   |
| Deferred income tax assets                       |   |               | 483    |   |   |   | 492 |   |
|                                             |   |               |   |   |   |   |   |   |
| Current assets from discontinued operations      |   |               | 813    |   |   |   | 811 |   |
|                                             |   |               |   |   |   |   |   |   |
| Total assets from discontinued operations        |   | $                  | 813    |   |   | $ | 811 |   |
|                                             |   |               |   |   |   |   |   |   |
|                                             |   |               |   |   |   |   |   |   |
| Accounts payable                                 |   | $                  | 8      |   |   | $ | 10 |   |
| Accrued liabilities:                             |   |               |   |   |   |   |   |   |
| Payroll and benefits                             |   |               | 74     |   |   |   | 70 |   |
| Warranty expenses                                |   |               | 214    |   |   |   | 240 |   |
| Other                                            |   |               | 706    |   |   |   | 706 |   |
|                                             |   |               |   |   |   |   |   |   |
| Current liabilities from discontinued operations |   |               | 1,002  |   |   |   | 1,026 |   |
|                                             |   |               |   |   |   |   |   |   |
| Long-term liabilities                            |   |               | 37     |   |   |   | 37 |   |
|                                             |   |               |   |   |   |   |   |   |
| Total liabilities from discontinued operations   |   | $                  | 1,039  |   |   | $ | 1,063 |   |
|                                             |   |               |   |   |   |   |   |   |

|                                       |   | March 31, |   |   | December 31, |   |
|--------------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                       |   | 2010      |   |   | 2009         |   |
|                                       |   |      |   |   |         |   |
| Accounts receivable                        |   | $         | 89,338 |   |         | $      | 87,497 |   |
| Notes receivable                           |   |      | 23     |   |         |   | 482 |   |
| Other receivables                          |   |      | 3,276  |   |         |   | 4,767 |   |
| Gross receivables                          |   |      | 92,637 |   |         |   | 92,746 |   |
|                                       |   |      |   |   |         |   |   |   |
| Allowance for doubtful accounts receivable |   |      | (296   | )      |         |   | (240 | ) |
| Net receivables                            |   | $         | 92,341 |   |         | $      | 92,506 |   |
|                                       |   |      |   |   |         |   |   |   |

|                                |   | March 31, |    |   | December 31, |   |
|-------------------------------------|--------|-----------|---------|--------|--------------|--------|
|                                |   | 2010      |    |   | 2009         |   |
| Gross inventories @ FIFO:           |   |      |    |   |         |   |
| Finished goods                      |   | $         | 10,365  |   |         | $      | 7,545 |   |
| Work in progress                    |   |      | 23,450  |   |         |   | 21,435 |   |
| Raw materials & component parts |   |      | 99,409  |   |         |   | 100,347 |   |
| Maintenance, tooling & supplies |   |      | 13,635  |   |         |   | 13,882 |   |
| Total gross inventories @ FIFO      |   |      | 146,859 |   |         |   | 143,209 |   |
| Less reserves:                      |   |      |    |   |         |   |   |   |
| LIFO                                |   |      | 29,961  |   |         |   | 29,961 |   |
| Valuation                           |   |      | 2,640   |   |         |   | 2,643 |   |
| Total inventories as reported       |   | $         | 114,258 |   |         | $      | 110,605 |   |
|                                |   |      |    |   |         |   |   |   |

|                                     |   | March 31, |     |   | December 31, |   |
|------------------------------------------|--------|-----------|----------|--------|--------------|--------|
|                                     |   | 2010      |     |   | 2009         |   |
|                                     |   |      |     |   |         |   |
| Land                                     |   | $         | 6,726    |   |         | $      | 6,735 |   |
| Land improvements                        |   |      | 10,242   |   |         |   | 10,146 |   |
| Buildings                                |   |      | 95,550   |   |         |   | 92,467 |   |
| Machinery and equipment                  |   |      | 267,375  |   |         |   | 265,958 |   |
| Furniture and fixtures                   |   |      | 5,922    |   |         |   | 5,985 |   |
| Computer equipment and software          |   |      | 15,313   |   |         |   | 15,388 |   |
| Total property, plant and equipment      |   |      | 401,128  |   |         |   | 396,679 |   |
| Less accumulated depreciation            |   |      | (240,370 | )      |         |   | (236,909 | ) |
| Total property, plant and equipment, net |   | $         | 160,758  |   |         | $      | 159,770 |   |
|                                     |   |      |     |   |         |   |   |   |

|                            |   |      |   |   | Power        |   |   |   |   |
|---------------------------------|--------|-----------|--------|--------|--------------|--------|--------|--------|--------|
|                            |   | Oil Field |   |   | Transmission |   |   | Total  |   |
|                            |   |      |   |   |         |   |   |   |   |
| Balance as of 12/31/09          |   | $         | 38,018 |   |         | $      | 6,983  |   |   | $ | 45,001 |   |
|                            |   |      |   |   |         |   |   |   |   |   |   |   |
| Final purchase price adjustment |   |      | 17     |   |         |   | -      |   |   |   | 17 |   |
| Foreign currency translation    |   |      | 4      |   |         |   | (141   | )      |   |   | (137 | ) |
| Balance as of 3/31/10           |   | $         | 38,039 |   |         | $      | 6,842  |   |   | $ | 44,881 |   |
|                            |   |      |   |   |         |   |   |   |   |   |   |   |

|                                  |   |           |   |   |         |   |   |   |   |   | Weighted     |   |
|---------------------------------------|--------|----------------|--------|--------|--------------|--------|--------|--------|--------|--------|--------------|--------|
|                                  |   | March 31, 2010 |   |   | Average      |   |
|                                  |   | Gross          |   |   |         |   |   |   |   |   | Amortization |   |
|                                  |   | Carrying       |   |   | Accumulated  |   |   |   |   |   | Period       |   |
|                                  |   | Amount         |   |   | Amortization |   |   | Net    |   |   | (years)      |   |
|                                  |   |           |   |   |         |   |   |   |   |   |         |   |
| Non-compete agreements and trademarks |   | $              | 2,064  |   |         | $      | 346    |   |   | $      | 1,718        |   |   |   | 7.2 |   |
| Customer relationships and contracts  |   |           | 13,216 |   |         |   | 1,373  |   |   |   | 11,843       |   |   |   | 10.0 |   |
|                                  |   |           |   |   |         |   |   |   |   |   |         |   |   |   |   |   |
|                                  |   | $              | 15,280 |   |         | $      | 1,719  |   |   | $      | 13,561       |   |   |   | 8.0 |   |
|                                  |   |           |   |   |         |   |   |   |   |   |         |   |   |   |   |   |

|                                  |   |              |   |   |         |   |   |   |   |   | Weighted     |   |
|---------------------------------------|--------|-------------------|--------|--------|--------------|--------|--------|--------|--------|--------|--------------|--------|
|                                  |   | December 31, 2009 |   |   | Average      |   |
|                                  |   | Gross             |   |   |         |   |   |   |   |   | Amortization |   |
|                                  |   | Carrying          |   |   | Accumulated  |   |   |   |   |   | Period       |   |
|                                  |   | Amount            |   |   | Amortization |   |   | Net    |   |   | (years)      |   |
|                                  |   |              |   |   |         |   |   |   |   |   |         |   |
| Non-compete agreements and trademarks |   | $                 | 2,064  |   |         | $      | 258    |   |   | $      | 1,806        |   |   |   | 7.2 |   |
| Customer relationships and contracts  |   |              | 13,216 |   |         |   | 1,043  |   |   |   | 12,173       |   |   |   | 10.0 |   |
|                                  |   |              |   |   |         |   |   |   |   |   |         |   |   |   |   |   |
|                                  |   | $                 | 15,280 |   |         | $      | 1,301  |   |   | $      | 13,979       |   |   |   | 8.0 |   |
|                                  |   |              |   |   |         |   |   |   |   |   |         |   |   |   |   |   |

| For the year ended 12/31/11 |   | $      | 1,672 |   |
|-----------------------------|--------|--------|-------|--------|
| For the year ended 12/31/12 |   |   | 1,573 |   |
| For the year ended 12/31/13 |   |   | 1,553 |   |
| For the year ended 12/31/14 |   |   | 1,441 |   |
| For the year ended 12/31/15 |   |   | 1,416 |   |
| Thereafter                  |   | $      | 4,651 |   |

|                                    |   | March 31, |   |   | December 31, |   |
|-----------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                    |   | 2010      |   |   | 2009         |   |
|                                    |   |      |   |   |         |   |
| Customer prepayments                    |   | $         | 9,176  |   |         | $      | 7,945 |   |
| Litigation reserves                     |   |      | 6,187  |   |         |   | 6,637 |   |
| Deferred compensation plans             |   |      | 5,773  |   |         |   | 5,500 |   |
| Accrued professional services           |   |      | 636    |   |         |   | 548 |   |
| Hold back consideration                 |   |      | 1,510  |   |         |   | 1,605 |   |
| Other accrued liabilities               |   |      | 1,673  |   |         |   | 1,912 |   |
| Total other current accrued liabilities |   | $         | 24,955 |   |         | $      | 24,147 |   |
|                                    |   |      |   |   |         |   |   |   |

|                                   |   | March 31, |   |   | December 31, |   |
|----------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                   |   | 2010      |   |   | 2009         |   |
|                                   |   |      |   |   |         |   |
| Long-term notes payable                |   | $         | 2,554  |   |         | $      | 2,888 |   |
|                                   |   |      |   |   |         |   |   |   |
| Less current portion of long-term debt |   |      | (1,408 | )      |         |   | (1,372 | ) |
|                                   |   |      |   |   |         |   |   |   |
| Long-term debt                         |   | $         | 1,146  |   |         | $      | 1,516 |   |
|                                   |   |      |   |   |         |   |   |   |

| 2011   |   | $      | 1,096  |   |
|--------|--------|--------|--------|--------|
| 2012   |   |   | 50     |   |
|   |   |   |   |   |
| Total  |   | $      | 1,146  |   |
|   |   |   |   |   |

|                                          |   | Pension Benefits |   |   | Other Benefits |   |
|-----------------------------------------------|--------|------------------|--------|--------|----------------|--------|
| Three Months Ended March 31,                  |   | 2010             |   |   | 2009           |   |   | 2010 |   |   | 2009 |   |
|                                          |   |             |   |   |           |   |   |   |   |   |   |   |
| Service cost                                  |   | $                | 1,589  |   |           | $      | 1,156 |   |   | $ | 49 |   |   | $ | 40 |   |
| Interest cost                                 |   |             | 2,947  |   |           |   | 2,823 |   |   |   | 108 |   |   |   | 108 |   |
| Expected return on plan assets                |   |             | (3,143 | )      |           |   | (3,111 | ) |   |   | - |   |   |   | - |   |
| Amortization of prior service cost            |   |             | 196    |   |           |   | 225 |   |   |   | 13 |   |   |   | - |   |
| Amortization of unrecognized net (gain) loss  |   |             | 1,228  |   |           |   | 1,257 |   |   |   | (35 | ) |   |   | (43 | ) |
| Amortization of unrecognized transition asset |   |             | -      |   |           |   | - |   |   |   | - |   |   |   | - |   |
| Net periodic benefit cost (income)            |   | $                | 2,817  |   |           | $      | 2,350 |   |   | $ | 135 |   |   | $ | 105 |   |
|                                          |   |             |   |   |           |   |   |   |   |   |   |   |   |   |   |   |

|                                                                        |   | Three Months Ended |   |
|-----------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                        |   | March 31           |   |
|                                                                        |   | 2010               |   |   | 2009 |   |
|                                                                        |   |               |   |   |   |   |
| Net earnings                                                                |   | $                  | 5,992  |   |   | $ | 8,978 |   |
|                                                                        |   |               |   |   |   |   |   |   |
| Other comprehensive income, before tax:                                     |   |               |   |   |   |   |   |   |
|                                                                        |   |               |   |   |   |   |   |   |
| Foreign currency translation adjustments                                    |   |               | (1,101 | ) |   |   | (1,811 | ) |
|                                                                        |   |               |   |   |   |   |   |   |
| Defined benefit pension plans:                                              |   |               |   |   |   |   |   |   |
|                                                                        |   |               |   |   |   |   |   |   |
| Amortization of prior service cost included in net periodic benefit cost    |   |               | 196    |   |   |   | 225 |   |
| Amortization of unrecognized net loss included in net periodic benefit cost |   |               | 1,228  |   |   |   | 1,257 |   |
|                                                                        |   |               |   |   |   |   |   |   |
| Total defined benefit pension plans                                         |   |               | 1,424  |   |   |   | 1,482 |   |
|                                                                        |   |               |   |   |   |   |   |   |
| Defined benefit postretirement plans:                                       |   |               |   |   |   |   |   |   |
|                                                                        |   |               |   |   |   |   |   |   |
| Amortization of prior service cost included in net periodic benefit cost    |   |               | 13     |   |   |   | - |   |
| Amortization of unrecognized net gain included in net periodic benefit cost |   |               | (35    | ) |   |   | (43 | ) |
|                                                                        |   |               |   |   |   |   |   |   |
| Total defined benefit postretirement plans                                  |   |               | (22    | ) |   |   | (43 | ) |
|                                                                        |   |               |   |   |   |   |   |   |
| Total other comprehensive income (loss), before tax                         |   |               | 301    |   |   |   | (372 | ) |
|                                                                        |   |               |   |   |   |   |   |   |
| Income tax benefit related to items of other comprehensive income           |   |               | (519   | ) |   |   | (532 | ) |
|                                                                        |   |               |   |   |   |   |   |   |
| Total other comprehensive (loss), net of tax                                |   |               | (218   | ) |   |   | (904 | ) |
|                                                                        |   |               |   |   |   |   |   |   |
| Total comprehensive income                                                  |   | $                  | 5,774  |   |   | $ | 8,074 |   |
|                                                                        |   |               |   |   |   |   |   |   |

|                    |   |        |   |   | Defined |   |    | Defined        |   |   | Accumulated   |   |
|-------------------------|--------|-------------|--------|--------|---------|--------|---------|----------------|--------|--------|---------------|--------|
|                    |   | Foreign     |   |   | Benefit |   |    | Benefit        |   |   | Other         |   |
|                    |   | Currency    |   |   | Pension |   |    | Postretirement |   |   | Comprehensive |   |
|                    |   | Translation |   |   | Plans   |   |    | Plans          |   |   | Loss          |   |
|                    |   |        |   |   |    |   |    |           |   |   |          |   |
| Balance, Dec. 31, 2009  |   | $           | 6,037  |   |    | $      | (44,928 | )              |   | $      | 965           |   |   | $ | (37,926 | ) |
|                    |   |        |   |   |    |   |    |           |   |   |          |   |   |   |   |   |
| Current-period change   |   |        | (1,101 | )      |    |   | 897     |           |   |   | (14           | )      |   |   | (218 | ) |
|                    |   |        |   |   |    |   |    |           |   |   |          |   |   |   |   |   |
| Balance, March 31, 2010 |   | $           | 4,936  |   |    | $      | (44,031 | )              |   | $      | 951           |   |   | $ | (38,144 | ) |
|                    |   |        |   |   |    |   |    |           |   |   |          |   |   |   |   |   |

|                                                                |   | Three Months Ended |       |
|---------------------------------------------------------------------|--------|--------------------|------------|
|                                                                |   | March 31,          |       |
|                                                                |   | 2010               |       |   | 2009 |   |
| Weighted average common shares outstanding for basic EPS            |   |               | 14,906,517 |   |   |   | 14,860,795 |   |
| Effect of dilutive securities: employee stock options               |   |               | 135,807    |   |   |   | 32,797 |   |
| Adjusted weighted average common shares outstanding for diluted EPS |   |               | 15,042,324 |   |   |   | 14,893,592 |   |
|                                                                |   |               |       |   |   |   |   |   |

|                                         |   | Three Months Ended |   |
|----------------------------------------------|--------|--------------------|--------|
|                                         |   | March 31,          |   |
|                                         |   | 2010               |   |   | 2009 |   |
|                                         |   |               |   |   |   |   |
| Stock-based compensation expense             |   | $                  | 779    |   |   | $ | 346 |   |
| Tax benefit                                  |   |               | (288   | ) |   |   | (128 | ) |
| Stock-based compensation expense, net of tax |   | $                  | 491    |   |   | $ | 218 |   |
|                                         |   |               |   |   |   |   |   |   |

|                                                |   | 2010        |         |   | 2009        |   |
|-----------------------------------------------------|--------|-------------|--------------|--------|-------------|--------|
|                                                |   |        |         |   |        |   |
| Expected dividend yield                             |   |        | 1.25% - 1.60 | %      |        |   | 2.8 | % |
| Expected stock price volatility                     |   |        | 51.3% - 57.0 | %      |        |   | 46.8% - 54.0 | % |
| Risk free interest rate                             |   |        | 1.37% - 2.96 | %      |        |   | 1.09% - 2.23 | % |
| Expected life options                               |   | 3 - 6 years |         |   | 3 - 7 years |   |
| Weighted-average fair value per share at grant date |   | $           | 27.79        |   |        | $      | 13.08 |   |

|                           |   |   |    |   |      |   |   | Weighted-   |   |   |      |   |
|--------------------------------|--------|--------|---------|--------|-----------|--------|--------|-------------|--------|--------|-----------|--------|
|                           |   |   |    |   | Weighted- |   |   | Average     |   |   | Aggregate |   |
|                           |   |   |    |   | Average   |   |   | Remaining   |   |   | Intrinsic |   |
|                           |   |   |    |   | Exercise  |   |   | Contractual |   |   | Value     |   |
| Options                        |   | Shares |    |   | Price     |   |   | Term        |   |   | ($000's)  |   |
|                           |   |   |    |   |      |   |   |        |   |   |      |   |
| Outstanding at January 1, 2010 |   |   | 709,015 |   |      | $      | 52.56  |        |   |   |      |   |   |   |
| Granted                        |   |   | 53,500  |   |      |   | 67.11  |        |   |   |      |   |   |   |
| Exercised                      |   |   | (46,427 | )      |      |   | 41.25  |        |   |   |      |   |   |   |
| Forfeited or expired           |   |   | (751    | )      |      |   | 59.86  |        |   |   |      |   |   |   |
| Outstanding at March 31, 2010  |   |   | 715,337 |   |      | $      | 54.38  |        |   |   | 7.9       |   |   | $ | 17,725 |   |
| Exercisable at March 31, 2010  |   |   | 364,570 |   |      | $      | 52.32  |        |   |   | 6.9       |   |   | $ | 9,781 |   |
|                           |   |   |    |   |      |   |   |        |   |   |      |   |   |   |   |   |

| (Thousands of dollars)                            |   |   |   |
|---------------------------------------------------|--------|--------|--------|
|                                              |   |   |   |
| Balance at December 31, 2009                      |   | $      | 1,509  |   |
|                                              |   |   |   |   |
| Gross increases- current year tax positions       |   |   | -      |   |
| Gross increases- tax positions from prior periods |   |   | 162    |   |
| Gross decreases- tax positions from prior periods |   |   | -      |   |
| Settlements                                       |   |   | -      |   |
|                                              |   |   |   |   |
| Balance at March 31, 2010                         |   | $      | 1,671  |   |
|                                              |   |   |   |   |

| Three Months Ended March 31, 2010                               |   |
|-----------------------------------------------------------------|--------|
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |   |   |   | Power |   |   | Corporate |   |   |   |   |
|                                                            |   | Oil Field |   |   | Transmission |   |   | & Other* |   |   | Total |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross sales                                                     |   | $ | 90,202 |   |   | $ | 37,868 |   |   | $ | - |   |   | $ | 128,070 |   |
| Inter-segment sales                                             |   |   | (281 | ) |   |   | (666 | ) |   |   | - |   |   |   | (947 | ) |
| Net sales                                                       |   | $ | 89,921 |   |   | $ | 37,202 |   |   | $ | - |   |   | $ | 127,123 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                                |   | $ | 7,031 |   |   | $ | 2,265 |   |   | $ | - |   |   | $ | 9,296 |   |
| Other income (expense), net                                     |   |   | 114 |   |   |   | 34 |   |   |   | (73 | ) |   |   | 75 |   |
| Earnings from continuing operations before income tax provision |   | $ | 7,145 |   |   | $ | 2,299 |   |   | $ | (73 | ) |   | $ | 9,371 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Three Months Ended March 31, 2009                                      |   |
|------------------------------------------------------------------------|--------|
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |   |   |   | Power |   |   | Corporate |   |   |   |   |
|                                                                   |   | Oil Field |   |   | Transmission |   |   | & Other* |   |   | Total |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross sales                                                            |   | $ | 113,014 |   |   | $ | 42,340 |   |   | $ | - |   |   | $ | 155,354 |   |
| Inter-segment sales                                                    |   |   | (1,331 | ) |   |   | (885 | ) |   |   | - |   |   |   | (2,216 | ) |
| Net sales                                                              |   | $ | 111,683 |   |   | $ | 41,455 |   |   | $ | - |   |   | $ | 153,138 |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss)                                                |   | $ | 12,111 |   |   | $ | 3,642 |   |   | $ | (3,000 | ) |   | $ | 12,753 |   |
| Other income (expense), net                                            |   |   | (295 | ) |   |   | 108 |   |   |   | 727 |   |   |   | 540 |   |
| Earnings (loss) from continuing operations before income tax provision |   | $ | 11,816 |   |   | $ | 3,750 |   |   | $ | (2,273 | ) |   | $ | 13,293 |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|               |   | Three Months Ended |    |   |      |   |    |        |   |
|--------------------|--------|--------------------|---------|--------|-----------|--------|---------|-------------|--------|
|               |   | March 31,          |    |   | Increase/ |   |    | % Increase/ |   |
|               |   | 2010               |    |   | 2009      |   |    | (Decrease)  |   |   | (Decrease) |   |
| Sales              |   |               |    |   |      |   |    |        |   |   |   |   |
| Oil Field          |   | $                  | 89,921  |   |      | $      | 111,683 |        |   | $ | (21,762 | ) |   |   | (19.5 | ) |
| Power Transmission |   |               | 37,202  |   |      |   | 41,455  |        |   |   | (4,253 | ) |   |   | (10.3 | ) |
| Total              |   | $                  | 127,123 |   |      | $      | 153,138 |        |   | $ | (26,015 | ) |   |   | (17.0 | ) |
|               |   |               |    |   |      |   |    |        |   |   |   |   |   |   |   |   |
| Gross Profit       |   |               |    |   |      |   |    |        |   |   |   |   |   |   |   |   |
| Oil Field          |   | $                  | 18,473  |   |      | $      | 23,329  |        |   | $ | (4,856 | ) |   |   | (20.8 | ) |
| Power Transmission |   |               | 10,150  |   |      |   | 10,854  |        |   |   | (704 | ) |   |   | (6.5 | ) |
| Total              |   | $                  | 28,623  |   |      | $      | 34,183  |        |   | $ | (5,560 | ) |   |   | (16.3 | ) |
|               |   |               |    |   |      |   |    |        |   |   |   |   |   |   |   |   |

| l | The customer has accepted title and risk of loss;                                                                                                                                                    |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| l | The customer has provided a written purchase order for the product;                                                                                                                                  |
| l | The customer, not the Company, requested the product to be stored and to be invoiced under a Bill-and-Hold arrangement. The customer must also provide the business purpose for the storage request; |
| l | The customer must provide a storage period and future shipping date;                                                                                                                                 |
| l | The Company must not have retained any future performance obligations on the product;                                                                                                                |
| l | The Company must segregate the stored product and not make it available to use on other orders; and                                                                                                  |
| l | The product must be completed and ready for shipment.                                                                                                                                                |

| l | oil price volatility;                                                                                                                                                                                                                                                      |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| l | declines in domestic and worldwide oil and gas drilling;                                                                                                                                                                                                                   |
| l | capital spending levels of oil producers;                                                                                                                                                                                                                                  |
| l | availability and prices for raw materials;                                                                                                                                                                                                                                 |
| l | the inherent dangers and complexities of our operations;                                                                                                                                                                                                                   |
| l | uninsured judgments or a rise in insurance premiums;                                                                                                                                                                                                                       |
| l | the inability to effectively integrate acquisitions;                                                                                                                                                                                                                       |
| l | labor disruptions and increasing labor costs;                                                                                                                                                                                                                              |
| l | the availability of qualified and skilled labor;                                                                                                                                                                                                                           |
| l | disruption of our operating facilities or management information systems;                                                                                                                                                                                                  |
| l | the impact on foreign operations of war, political disruption, civil disturbance, economic and legal sanctions and changes in global trade policies;                                                                                                                       |
| l | currency exchange rate fluctuations in the markets in which the Company operates;                                                                                                                                                                                          |
| l | changes in the laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of the Company’s products, the cost thereof or applicable tax rates; |
| l | costs related to legal and administrative proceedings, including adverse judgments against the Company if the Company fails to prevail in reversing such judgments; and                                                                                                    |
| l | general industry, political and economic conditions in the markets where the Company procures materials, components and supplies for the production of the Company’s principal products or where the Company’s products are produced, distributed or sold.     |

| ***3.1 |   | Fourth Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 4.1 to the Company's registration statement on Form S-8 filed on February 17, 2004 (SEC File No. 333-112890)). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                       |
| ***3.2 |   | Articles of Amendment to Fourth Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's current report on Form 8-K filed on December 10, 1999 (File No. 0-02612)).   |
|   |   |                                                                                                                                                                                                       |
| ***3.3 |   | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company's current report on Form 8-K filed on October 9, 2007 (File No. 0-02612)).                                            |
|   |   |                                                                                                                                                                                                       |
| *31.1  |   | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.                                                                                                                                         |
|   |   |                                                                                                                                                                                                       |
| *31.2  |   | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.                                                                                                                                         |
|   |   |                                                                                                                                                                                                       |
| **32.1 |   | Section 1350 Certification of Chief Executive Officer.                                                                                                                                                     |
|   |   |                                                                                                                                                                                                       |
| **32.2 |   | Section 1350 Certification of Chief Financial Officer.                                                                                                                                                     |

| ***3.1 |   | Fourth Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 4.1 to the Company's registration statement on Form S-8 filed on February 17, 2004 (SEC File No. 333-112890)). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                       |
| ***3.2 |   | Articles of Amendment to Fourth Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's current report on Form 8-K filed on December 10, 1999 (File No. 0-02612)).   |
|   |   |                                                                                                                                                                                                       |
| ***3.3 |   | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company's current report on Form 8-K filed on October 9, 2007 (File No. 0-02612)).                                            |
|   |   |                                                                                                                                                                                                       |
| *31.1  |   | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.                                                                                                                                         |
|   |   |                                                                                                                                                                                                       |
| *31.2  |   | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.                                                                                                                                         |
|   |   |                                                                                                                                                                                                       |
| **32.1 |   | Section 1350 Certification of Chief Executive Officer.                                                                                                                                                     |
|   |   |                                                                                                                                                                                                       |
| **32.2 |   | Section 1350 Certification of Chief Financial Officer.                                                                                                                                                     |