|   | (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)                     |   |   |   |   |   |   |
|                                                                             |   | June      30, |   |   | December      31, |   |
| Assets                                                                           |   | 2008 |   |   | 2007 |   |
| Current      Assets:                                                             |   |   |   |   |   |   |
| Cash      and cash equivalents                                                   |   | $ | 103,816 |   |   | $ | 95,748 |   |
| Receivables,      net                                                            |   |   | 101,275 |   |   |   | 90,696 |   |
| Income      tax receivable                                                       |   |   | 4,064 |   |   |   | 4,637 |   |
| Inventories                                                                      |   |   | 115,375 |   |   |   | 92,914 |   |
| Deferred      income tax assets                                                  |   |   | 1,564 |   |   |   | 888 |   |
| Other      current assets                                                        |   |   | 5,066 |   |   |   | 1,260 |   |
| Current      assets from discontinued operations                                 |   |   | 2,387 |   |   |   | 6,724 |   |
| Total      current assets                                                        |   |   | 333,547 |   |   |   | 292,867 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Property,      plant and equipment, net                                          |   |   | 122,375 |   |   |   | 117,190 |   |
| Prepaid      pension costs                                                       |   |   | 54,320 |   |   |   | 71,571 |   |
| Goodwill,      net                                                               |   |   | 12,187 |   |   |   | 11,990 |   |
| Other      assets, net                                                           |   |   | 3,230 |   |   |   | 3,394 |   |
| Long-term      assets from discontinued operations                               |   |   | 1,366 |   |   |   | 3,644 |   |
| Total      assets                                                                |   | $ | 527,025 |   |   | $ | 500,656 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Liabilities      and Shareholders' Equity                                        |   |   |   |   |   |   |   |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Current      liabilities:                                                        |   |   |   |   |   |   |   |   |
| Accounts      payable                                                            |   | $ | 34,408 |   |   | $ | 23,083 |   |
| Accrued      liabilities:                                                        |   |   |   |   |   |   |   |   |
| Payroll      and benefits                                                        |   |   | 10,510 |   |   |   | 11,085 |   |
| Warranty      expenses                                                           |   |   | 3,188 |   |   |   | 2,925 |   |
| Taxes      payable                                                               |   |   | 3,730 |   |   |   | 4,391 |   |
| Other                                                                            |   |   | 20,307 |   |   |   | 21,739 |   |
| Current      liabilities from discontinued operations                            |   |   | 2,457 |   |   |   | 4,911 |   |
| Total      current liabilities                                                   |   |   | 74,600 |   |   |   | 68,134 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Deferred      income tax liabilities                                             |   |   | 27,472 |   |   |   | 34,600 |   |
| Postretirement      benefits                                                     |   |   | 7,017 |   |   |   | 7,303 |   |
| Other      liabilities                                                           |   |   | 5,644 |   |   |   | 5,966 |   |
| Commitments      and contingencies                                               |   |   | - |   |   |   | - |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Shareholders'      equity:                                                       |   |   |   |   |   |   |   |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Common      stock, $1.00 par value per share; 60,000,000 shares      authorized; |   |   |   |   |   |   |   |   |
| 15,723,451      and 15,534,184 shares issued and outstanding, respectively       |   |   | 15,723 |   |   |   | 15,534 |   |
| Capital      in excess par                                                       |   |   | 57,735 |   |   |   | 48,315 |   |
| Retained      earnings                                                           |   |   | 370,811 |   |   |   | 341,315 |   |
| Treasury      stock, 898,278 and 895,278 shares, respectively, at cost           |   |   | (32,090 | ) |   |   | (31,580 | ) |
| Accumulated      other comprehensive income                                      |   |   | 113 |   |   |   | 11,069 |   |
| Total      shareholders' equity                                                  |   |   | 412,292 |   |   |   | 384,653 |   |
| Total      liabilities and shareholders' equity                                  |   | $ | 527,025 |   |   | $ | 500,656 |   |

| LUFKIN      INDUSTRIES, INC.                                    |   |
|-----------------------------------------------------------------|--------|
| CONDENSED      CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)  |   |
| (In      thousands of dollars, except per share and share data) |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   | Three      Months Ended |   |   | Six      Months Ended |   |
|                                                            |   | June      30, |   |   | June      30, |   |
|                                                            |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                                                           |   | $ | 174,488 |   |   | $ | 133,575 |   |   | $ | 315,558 |   |   | $ | 268,559 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of Sales                                              |   |   | 126,693 |   |   |   | 94,173 |   |   |   | 227,243 |   |   |   | 189,788 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      Profit                                               |   |   | 47,795 |   |   |   | 39,402 |   |   |   | 88,315 |   |   |   | 78,771 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expenses               |   |   | 16,976 |   |   |   | 14,372 |   |   |   | 33,741 |   |   |   | 28,451 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income                                           |   |   | 30,819 |   |   |   | 25,030 |   |   |   | 54,574 |   |   |   | 50,320 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                                            |   |   | 440 |   |   |   | 966 |   |   |   | 1,119 |   |   |   | 1,831 |   |
| Interest      expense                                           |   |   | (56 | ) |   |   | (25 | ) |   |   | (137 | ) |   |   | (58 | ) |
| Other      income (expense), net                                |   |   | 331 |   |   |   | 614 |   |   |   | (49 | ) |   |   | 719 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      from continuing operations before                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| income      tax provision and discontinued                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| operations                                                      |   |   | 31,534 |   |   |   | 26,585 |   |   |   | 55,507 |   |   |   | 52,812 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax provision                                       |   |   | 10,356 |   |   |   | 9,505 |   |   |   | 18,744 |   |   |   | 18,062 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      from continuing operations before                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| discontinued      operations                                    |   |   | 21,178 |   |   |   | 17,080 |   |   |   | 36,763 |   |   |   | 34,750 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      from discontinued operations, net of tax          |   |   | 55 |   |   |   | 441 |   |   |   | 99 |   |   |   | 540 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      earnings                                               |   | $ | 21,233 |   |   | $ | 17,521 |   |   | $ | 36,862 |   |   | $ | 35,290 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      earnings per share:                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      from continuing operations                        |   | $ | 1.44 |   |   | $ | 1.14 |   |   | $ | 2.50 |   |   | $ | 2.32 |   |
| Earnings      from discontinued operations                      |   |   | - |   |   |   | 0.03 |   |   |   | 0.01 |   |   |   | 0.03 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      earnings                                               |   | $ | 1.44 |   |   | $ | 1.17 |   |   | $ | 2.51 |   |   | $ | 2.35 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      earnings per share:                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      from continuing operations                        |   | $ | 1.42 |   |   | $ | 1.12 |   |   | $ | 2.47 |   |   | $ | 2.29 |   |
| Earnings      from discontinued operations                      |   |   | - |   |   |   | 0.03 |   |   |   | 0.01 |   |   |   | 0.03 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      earnings                                               |   | $ | 1.42 |   |   | $ | 1.15 |   |   | $ | 2.48 |   |   | $ | 2.32 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends      per share                                        |   | $ | 0.25 |   |   | $ | 0.21 |   |   | $ | 0.50 |   |   | $ | 0.42 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of shares outstanding:             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                           |   |   | 14,772,015 |   |   |   | 15,026,974 |   |   |   | 14,707,037 |   |   |   | 14,991,428 |   |
| Diluted                                                         |   |   | 14,922,885 |   |   |   | 15,229,990 |   |   |   | 14,864,895 |   |   |   | 15,209,214 |   |

| LUFKIN      INDUSTRIES INC.                                      |   |
|------------------------------------------------------------------|--------|
| CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |   |
| (In      thousands of dollars)                                   |   |
|                                                             |   |   |   |   |   |   |
|                                                             |   | Six      Months Ended |   |
|                                                             |   | June      30, |   |
|                                                             |   | 2008 |   |   | 2007 |   |
| Cash      flows from operating activities:                       |   |   |   |   |   |   |
| Net      earnings                                                |   | $ | 36,862 |   |   | $ | 35,290 |   |
| Adjustments      to reconcile net earnings to cash               |   |   |   |   |   |   |   |   |
| provided      by operating activities:                           |   |   |   |   |   |   |   |   |
| Depreciation      and amortization                               |   |   | 7,557 |   |   |   | 6,563 |   |
| Deferred      income tax benefit                                 |   |   | (236 | ) |   |   | (746 | ) |
| Excess      tax benefit from share-based compensation            |   |   | (4,215 | ) |   |   | (2,565 | ) |
| Share-based      compensation expense                            |   |   | 1,843 |   |   |   | 2,270 |   |
| Pension      income                                              |   |   | (1,058 | ) |   |   | (1,629 | ) |
| Postretirement      benefits                                     |   |   | (10 | ) |   |   | (157 | ) |
| Gain      on disposition of property, plant and equipment        |   |   | (26 | ) |   |   | (85 | ) |
| Income      from discontinued operations                         |   |   | (99 | ) |   |   | (540 | ) |
| Changes      in:                                                 |   |   |   |   |   |   |   |   |
| Receivables,      net                                            |   |   | (7,460 | ) |   |   | 6,946 |   |
| Inventories                                                      |   |   | (21,601 | ) |   |   | (16,394 | ) |
| Other      current assets                                        |   |   | (1,716 | ) |   |   | (2,032 | ) |
| Accounts      payable                                            |   |   | 12,818 |   |   |   | 2,189 |   |
| Accrued      liabilities                                         |   |   | (4,821 | ) |   |   | 1,171 |   |
| Net      cash used in continuing operations                      |   |   | 17,838 |   |   |   | 30,281 |   |
| Net      cash provided by (used in) discontinued operations      |   |   | (884 | ) |   |   | 244 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Net      cash provided by operating activities                   |   |   | 16,954 |   |   |   | 30,525 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Cash      flows from investing activites:                        |   |   |   |   |   |   |   |   |
| Additions      to property, plant and equipment                  |   |   | (10,181 | ) |   |   | (10,670 | ) |
| Proceeds      from disposition of property, plant and equipment  |   |   | 148 |   |   |   | 361 |   |
| Increase      in other assets                                    |   |   | (257 | ) |   |   | (367 | ) |
| Net      cash used in continuing operations                      |   |   | (10,290 | ) |   |   | (10,676 | ) |
| Net      cash provided by (used in) discontinued operations      |   |   | 884 |   |   |   | (243 | ) |
|                                                             |   |   |   |   |   |   |   |   |
| Net      cash used in investing activities                       |   |   | (9,406 | ) |   |   | (10,919 | ) |
|                                                             |   |   |   |   |   |   |   |   |
| Cash      flows from financing activites:                        |   |   |   |   |   |   |   |   |
| Dividends      paid                                              |   |   | (7,366 | ) |   |   | (6,304 | ) |
| Excess      tax benefit from share-based compensation            |   |   | 4,215 |   |   |   | 2,565 |   |
| Proceeds      from exercise of stock options                     |   |   | 4,222 |   |   |   | 2,682 |   |
| Purchases      of treasury stock                                 |   |   | (1,117 | ) |   |   | - |   |
| Net      cash used in financing activities                       |   |   | (46 | ) |   |   | (1,057 | ) |
|                                                             |   |   |   |   |   |   |   |   |
| Effect      of translation on cash and cash equivalents          |   |   | 566 |   |   |   | 123 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Net      increase in cash and cash equivalents                   |   |   | 8,068 |   |   |   | 18,672 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents at beginning of period            |   |   | 95,748 |   |   |   | 57,797 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents at end of period                  |   | $ | 103,816 |   |   | $ | 76,469 |   |
|                                                             |   |   |   |   |   |   |   |   |

|                                                   |   | Three      Months Ended |   |   | Six      Months Ended |   |
|--------------------------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                                   |   | June      30,           |   |   | June      30,         |   |
|                                                   |   | 2008                    |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
|                                                   |   |                    |   |   |                  |   |   |   |   |   |   |   |
| Sales                                                  |   | $                       | 561    |   |                  | $      | 10,930 |   |   | $ | 6,502 |   |   | $ | 24,026 |   |
|                                                   |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      before income tax provision              |   |                    | 16     |   |                  |   | 595 |   |   |   | 88 |   |   |   | 809 |   |
|                                                   |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax (provision) benefit                    |   |                    | 39     |   |                  |   | (154 | ) |   |   | 11 |   |   |   | (269 | ) |
|                                                   |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      from discontinued operations, net of tax |   | $                       | 55     |   |                  | $      | 441 |   |   | $ | 99 |   |   | $ | 540 |   |

|                                                  |   | June      30, |   |   | December      31, |   |
|-------------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                                  |   | 2008          |   |   | 2007              |   |
|                                                  |   |          |   |   |              |   |
| Receivables,      net                                 |   | $             | 1,255  |   |              | $      | 2,938 |   |
| Inventories                                           |   |          | 317    |   |              |   | 2,907 |   |
| Deferred      income tax assets                       |   |          | 727    |   |              |   | 728 |   |
| Other      current assets                             |   |          | 88     |   |              |   | 151 |   |
|                                                  |   |          |   |   |              |   |   |   |
| Current      assets from discontinued operations      |   |          | 2,387  |   |              |   | 6,724 |   |
|                                                  |   |          |   |   |              |   |   |   |
| Property,      plant and equipment, net               |   |          | -      |   |              |   | 2,939 |   |
| Deferred      income tax assets                       |   |          | 678    |   |              |   | 238 |   |
| Other      assets, net                                |   |          | 688    |   |              |   | 467 |   |
|                                                  |   |          |   |   |              |   |   |   |
| Long-term      assets from discontinued operations    |   |          | 1,366  |   |              |   | 3,644 |   |
|                                                  |   |          |   |   |              |   |   |   |
| Total      assets from discontinued operations        |   | $             | 3,753  |   |              | $      | 10,368 |   |
|                                                  |   |          |   |   |              |   |   |   |
|                                                  |   |          |   |   |              |   |   |   |
| Accounts      payable                                 |   | $             | 251    |   |              | $      | 894 |   |
| Accrued      liabilities:                             |   |          |   |   |              |   |   |   |
| Payroll      and benefits                             |   |          | 164    |   |              |   | 359 |   |
| Warranty      expenses                                |   |          | 575    |   |              |   | 717 |   |
| Taxes      payable                                    |   |          | 657    |   |              |   | 2,739 |   |
| Other                                                 |   |          | 810    |   |              |   | 202 |   |
|                                                  |   |          |   |   |              |   |   |   |
| Current      liabilities from discontinued operations |   |          | 2,457  |   |              |   | 4,911 |   |
|                                                  |   |          |   |   |              |   |   |   |
| Total      liabilities from discontinued operations   |   | $             | 2,457  |   |              | $      | 4,911 |   |

|                                            |   | June      30, |    |   | December      31, |   |
|-------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                            |   | 2008          |    |   | 2007              |   |
|                                            |   |          |    |   |              |   |
| Accounts      receivable                        |   | $             | 100,785 |   |              | $      | 90,383 |   |
| Other      receivables                          |   |          | 591     |   |              |   | 402 |   |
| Gross      receivables                          |   |          | 101,376 |   |              |   | 90,785 |   |
|                                            |   |          |    |   |              |   |   |   |
| Allowance      for doubtful accounts receivable |   |          | (101    | )      |              |   | (89 | ) |
| Net      receivables                            |   | $             | 101,275 |   |              | $      | 90,696 |   |
|                                            |   |          |    |   |              |   |   |   |

|                                     |   | June      30, |    |   | December      31, |   |
|------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                     |   | 2008          |    |   | 2007              |   |
| Gross      inventories @ FIFO:           |   |          |    |   |              |   |
| Finished      goods                      |   | $             | 4,382   |   |              | $      | 3,717 |   |
| Work      in progress                    |   |          | 27,956  |   |              |   | 21,150 |   |
| Raw      materials & component parts |   |          | 103,423 |   |              |   | 83,452 |   |
| Maintenance,      tooling & supplies |   |          | 11,494  |   |              |   | 11,357 |   |
| Total      gross inventories @ FIFO      |   |          | 147,255 |   |              |   | 119,676 |   |
| Less      reserves:                      |   |          |    |   |              |   |   |   |
| LIFO                                     |   |          | 30,123  |   |              |   | 25,183 |   |
| Valuation                                |   |          | 1,757   |   |              |   | 1,579 |   |
| Total      inventories as reported       |   | $             | 115,375 |   |              | $      | 92,914 |   |

|                                          |   | June      30, |     |   | December      31, |   |
|-----------------------------------------------|--------|---------------|----------|--------|-------------------|--------|
|                                          |   | 2008          |     |   | 2007              |   |
|                                          |   |          |     |   |              |   |
| Land                                          |   | $             | 5,319    |   |              | $      | 3,386 |   |
| Land      improvements                        |   |          | 9,492    |   |              |   | 8,389 |   |
| Buildings                                     |   |          | 76,317   |   |              |   | 70,281 |   |
| Machinery      and equipment                  |   |          | 234,788  |   |              |   | 227,304 |   |
| Furniture      and fixtures                   |   |          | 5,417    |   |              |   | 5,076 |   |
| Computer      equipment and software          |   |          | 14,348   |   |              |   | 14,246 |   |
| Total      property, plant and equipment      |   |          | 345,681  |   |              |   | 328,682 |   |
| Less      accumulated depreciation            |   |          | (223,306 | )      |              |   | (211,492 | ) |
| Total      property, plant and equipment, net |   | $             | 122,375  |   |              | $      | 117,190 |   |

|                              |   |           |   |   | Power        |   |   |   |   |
|-----------------------------------|--------|----------------|--------|--------|--------------|--------|--------|--------|--------|
|                              |   | Oil      Field |   |   | Transmission |   |   | Total  |   |
| Balance      as of 12/31/07       |   | $              | 9,447  |   |         | $      | 2,543  |   |   | $ | 11,990 |   |
|                              |   |           |   |   |         |   |   |   |   |   |   |   |
| Foreign      currency translation |   |           | (3     | )      |         |   | 200    |   |   |   | 197 |   |
| Balance      as of 6/30/08        |   | $              | 9,444  |   |         | $      | 2,743  |   |   | $ | 12,187 |   |

|                                            |   | June      30, |   |   | December      31, |   |
|-------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                            |   | 2008          |   |   | 2007              |   |
| Intangible      assets subject to amortization: |   |          |   |   |              |   |
| Non-compete      agreements                     |   |          |   |   |              |   |
| Original      balance                           |   | $             | 463    |   |              | $      | 463 |   |
| Foreign      currency translation               |   |          | 10     |   |              |   | 26 |   |
| Accumulated      amortization                   |   |          | (424   | )      |              |   | (378 | ) |
|                                            |   |          |   |   |              |   |   |   |
| Ending      balance                             |   | $             | 49     |   |              | $      | 111 |   |

|                                         |   | June      30, |   |   | December      31, |   |
|----------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                         |   | 2008          |   |   | 2007              |   |
| Customer      prepayments                    |   | $             | 14,008 |   |              | $      | 15,328 |   |
| Deferred      compensation plans             |   |          | 4,483  |   |              |   | 4,506 |   |
| Accrued      professional services           |   |          | 745    |   |              |   | 802 |   |
| Other      accrued liabilities               |   |          | 1,071  |   |              |   | 1,103 |   |
| Total      other current accrued liabilities |   | $             | 20,307 |   |              | $      | 21,739 |   |

|                                               |   | Pension      Benefits |   |   | Other      Benefits |   |
|----------------------------------------------------|--------|-----------------------|--------|--------|---------------------|--------|
| Three      Months Ended June 30,                   |   | 2008                  |   |   | 2007                |   |   | 2008 |   |   | 2007 |   |
|                                               |   |                  |   |   |                |   |   |   |   |   |   |   |
| Service      cost                                  |   | $                     | 1,324  |   |                | $      | 1,356 |   |   | $ | 30 |   |   | $ | 42 |   |
| Interest      cost                                 |   |                  | 2,601  |   |                |   | 2,462 |   |   |   | 118 |   |   |   | 107 |   |
| Expected      return on plan assets                |   |                  | (4,309 | )      |                |   | (4,435 | ) |   |   | - |   |   |   | - |   |
| Amortization      of prior service cost            |   |                  | 141    |   |                |   | 142 |   |   |   | - |   |   |   | - |   |
| Amortization      of unrecognized net (gain) loss  |   |                  | 69     |   |                |   | 39 |   |   |   | (63 | ) |   |   | (68 | ) |
| Amortization      of unrecognized transition asset |   |                  | (159   | )      |                |   | (231 | ) |   |   | - |   |   |   | - |   |
| Net      periodic benefit cost (income)            |   | $                     | (333   | )      |                | $      | (667 | ) |   | $ | 85 |   |   | $ | 81 |   |

|                                               |   | Pension      Benefits |   |   | Other      Benefits |   |
|----------------------------------------------------|--------|-----------------------|--------|--------|---------------------|--------|
| Six      Months Ended June 30,                     |   | 2008                  |   |   | 2007                |   |   | 2008 |   |   | 2007 |   |
|                                               |   |                  |   |   |                |   |   |   |   |   |   |   |
| Service      cost                                  |   | $                     | 2,561  |   |                | $      | 2,725 |   |   | $ | 76 |   |   | $ | 87 |   |
| Interest      cost                                 |   |                  | 5,251  |   |                |   | 4,862 |   |   |   | 227 |   |   |   | 229 |   |
| Expected      return on plan assets                |   |                  | (8,567 | )      |                |   | (8,823 | ) |   |   | - |   |   |   | - |   |
| Amortization      of prior service cost            |   |                  | 283    |   |                |   | 283 |   |   |   | - |   |   |   | - |   |
| Amortization      of unrecognized net (gain) loss  |   |                  | 90     |   |                |   | 51 |   |   |   | (109 | ) |   |   | (113 | ) |
| Amortization      of unrecognized transition asset |   |                  | (319   | )      |                |   | (463 | ) |   |   | - |   |   |   | - |   |
| Net      periodic benefit cost (income)            |   | $                     | (701   | )      |                | $      | (1,365 | ) |   | $ | 194 |   |   | $ | 203 |   |

|                                              |   | Three      Months Ended |    |   | Six      Months Ended |   |
|---------------------------------------------------|--------|-------------------------|---------|--------|-----------------------|--------|
|                                              |   | June      30,           |    |   | June      30,         |   |
|                                              |   | 2008                    |    |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |
| Net      earnings                                 |   | $                       | 21,233  |   |                  | $      | 17,521 |   |   | $ | 36,862 |   |   | $ | 35,290 |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      comprehensive income, before tax:      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Foreign      currency translation adjustments     |   |                    | 105     |   |                  |   | 1,819 |   |   |   | 997 |   |   |   | 2,188 |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Defined      benefit pension plans:               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of prior service cost included  |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| in      net periodic benefit cost                 |   |                    | 141     |   |                  |   | 142 |   |   |   | 283 |   |   |   | 283 |   |
| Amortization      of unrecognized transition      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| asset      included in net periodic benefit cost  |   |                    | (159    | )      |                  |   | (231 | ) |   |   | (319 | ) |   |   | (463 | ) |
| Amortization      of unrecognized net loss        |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| included      in net periodic benefit cost        |   |                    | 69      |   |                  |   | 39 |   |   |   | 90 |   |   |   | 51 |   |
| Net      loss arising during period               |   |                    | (19,406 | )      |                  |   | (2,354 | ) |   |   | (19,406 | ) |   |   | (2,354 | ) |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total      defined benefit pension plans          |   |                    | (19,355 | )      |                  |   | (2,404 | ) |   |   | (19,352 | ) |   |   | (2,483 | ) |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Defined      benefit postretirement plans:        |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of unrecognized net gain        |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| included      in net periodic benefit cost        |   |                    | (63     | )      |                  |   | (68 | ) |   |   | (109 | ) |   |   | (113 | ) |
| Net      gain arising during period               |   |                    | 303     |   |                  |   | 987 |   |   |   | 303 |   |   |   | 987 |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total      defined benefit postretirement plans   |   |                    | 240     |   |                  |   | 919 |   |   |   | 194 |   |   |   | 874 |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total      other comprehensive income, before tax |   |                    | (19,010 | )      |                  |   | 334 |   |   |   | (18,161 | ) |   |   | 579 |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax benefit related to items of other |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| comprehensive      income                         |   |                    | 7,189   |   |                  |   | 520 |   |   |   | 7,205 |   |   |   | 563 |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total      other comprehensive income, net of tax |   |                    | (11,821 | )      |                  |   | 854 |   |   |   | (10,956 | ) |   |   | 1,142 |   |
|                                              |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total      comprehensive income                   |   | $                       | 9,412   |   |                  | $      | 18,375 |   |   | $ | 25,906 |   |   | $ | 36,432 |   |

|                        |   |        |   |   | Defined |   |    | Defined        |   |   | Accumulated   |   |
|-----------------------------|--------|-------------|--------|--------|---------|--------|---------|----------------|--------|--------|---------------|--------|
|                        |   | Foreign     |   |   | Benefit |   |    | Benefit        |   |   | Other         |   |
|                        |   | Currency    |   |   | Pension |   |    | Postretirement |   |   | Comprehensive |   |
|                        |   | Translation |   |   | Plans   |   |    | Plans          |   |   | Loss          |   |
|                        |   |        |   |   |    |   |    |           |   |   |          |   |
| Balance,      Dec. 31, 2007 |   | $           | 8,015  |   |    | $      | 1,221   |           |   | $      | 1,833         |   |   | $ | 11,069 |   |
|                        |   |        |   |   |    |   |    |           |   |   |          |   |   |   |   |   |
| Current-period      change  |   |        | 997    |   |    |   | (12,044 | )              |   |   | 91            |   |   |   | (10,956 | ) |
|                        |   |        |   |   |    |   |    |           |   |   |          |   |   |   |   |   |
| Balance,      June 30, 2008 |   |        | 9,012  |   |    |   | (10,823 | )              |   |   | 1,924         |   |   |   | 113 |   |

|                                               |   | Three      Months Ended |       |   | Six      Months Ended |   |
|----------------------------------------------------|--------|-------------------------|------------|--------|-----------------------|--------|
|                                               |   | June      30,           |       |   | June      30,         |   |
|                                               |   | 2008                    |       |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| Weighted      average common shares outstanding    |   |                    |       |   |                  |   |   |   |   |   |   |   |
| for      basic EPS                                 |   |                    | 14,772,015 |   |                  |   | 15,026,974 |   |   |   | 14,707,037 |   |   |   | 14,991,428 |   |
| Effect      of dilutive securities: employee stock |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| options                                            |   |                    | 150,870    |   |                  |   | 203,016 |   |   |   | 157,858 |   |   |   | 217,786 |   |
| Adjusted      weighted average common shares       |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| outstanding      for diluted EPS                   |   |                    | 14,922,885 |   |                  |   | 15,229,990 |   |   |   | 14,864,895 |   |   |   | 15,209,214 |   |
|                                               |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |

|                                              |   | Three      Months Ended |   |   | Six      Months Ended |   |
|---------------------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                              |   | June      30,           |   |   | June      30,         |   |
|                                              |   | 2008                    |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
|                                              |   |                    |   |   |                  |   |   |   |   |   |   |   |
| Stock-based      compensation expense             |   | $                       | 879    |   |                  | $      | 1,275 |   |   | $ | 1,843 |   |   | $ | 2,270 |   |
| Tax      benefit                                  |   |                    | (325   | )      |                  |   | (472 | ) |   |   | (682 | ) |   |   | (840 | ) |
| Stock-based      compensation expense, net of tax |   | $                       | 554    |   |                  | $      | 803 |   |   | $ | 1,161 |   |   | $ | 1,430 |   |
|                                              |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |

|                                                     |   | 2008             |                |   | 2007             |   |
|----------------------------------------------------------|--------|------------------|---------------------|--------|------------------|--------|
|                                                     |   |             |                |   |             |   |
| Expected      dividend yield                             |   |             | 1.33%      - 1.70   | %      |             |   | 1.30%      - 1.38 | % |
| Expected      stock price volatility                     |   |             | 41.00%      - 46.00 | %      |             |   | 42.00%      - 45.00 | % |
| Risk      free interest rate                             |   |             | 1.90%      - 3.27   | %      |             |   | 4.56%      - 4.85 | % |
| Expected      life options                               |   | 2 -      6 years |                |   | 3 -      6 years |   |
| Weighted-average      fair value per share at grant date |   | $                | 19.82               |   |             | $      | 23.28 |   |

|                                |   |   |     |   |      |   |   | Weighted-   |   |   |      |   |
|-------------------------------------|--------|--------|----------|--------|-----------|--------|--------|-------------|--------|--------|-----------|--------|
|                                |   |   |     |   | Weighted- |   |   | Average     |   |   | Aggregate |   |
|                                |   |   |     |   | Average   |   |   | Remaining   |   |   | Intrinsic |   |
|                                |   |   |     |   | Exercise  |   |   | Contractual |   |   | Value     |   |
| Options                             |   | Shares |     |   | Price     |   |   | Term        |   |   | ($000's)  |   |
|                                |   |   |     |   |      |   |   |        |   |   |      |   |
| Outstanding      at January 1, 2008 |   |   | 659,143  |   |      | $      | 39.28  |        |   |   |      |   |   |   |
| Granted                             |   |   | 106,000  |   |      |   | 58.41  |        |   |   |      |   |   |   |
| Exercised                           |   |   | (206,266 | )      |      |   | 20.47  |        |   |   |      |   |   |   |
| Forfeited      or expired           |   |   | (17,725  | )      |      |   | 46.06  |        |   |   |      |   |   |   |
| Outstanding      at June 30, 2008   |   |   | 541,152  |   |      | $      | 49.98  |        |   |   | 8.0       |   |   | $ | 18,022 |   |
| Exercisable      at June 30, 2008   |   |   | 282,174  |   |      | $      | 48.09  |        |   |   | 7.4       |   |   | $ | 9,929 |   |
|                                |   |   |     |   |      |   |   |        |   |   |      |   |   |   |   |   |

| (Thousands      of dollars)                            |   | 2008   |   |
|--------------------------------------------------------|--------|--------|--------|
|                                                   |   |   |   |
| Balance      at December 31, 2007                      |   | $      | 2,742  |   |
|                                                   |   |   |   |   |
| Gross      increases- current year tax positions       |   |   | -      |   |
| Gross      increases- tax positions from prior periods |   |   | -      |   |
| Gross      decreases- tax positions from prior periods |   |   | (712   | ) |
| Settlements                                            |   |   | (888   | ) |
|                                                   |   |   |   |   |
| Balance      at June 30, 2008                          |   | $      | 1,142  |   |
|                                                   |   |   |   |   |

| Three Months Ended      June 30, 2008    |   |
|------------------------------------------|--------|
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   |   |   |   | Power |   |   |   |   |   |   |   |   |   |   |
|                                     |   | Oil      Field |   |   | Transmission |   |   | Corporate |   |   | Adjustment* |   |   | Total |   |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      sales                         |   | $ | 127,219 |   |   | $ | 48,342 |   |   | $ | - |   |   | $ | - |   |   | $ | 175,561 |   |
| Inter-segment      sales                 |   |   | (712 | ) |   |   | (361 | ) |   |   | - |   |   |   | - |   |   |   | (1,073 | ) |
| Net      sales                           |   | $ | 126,507 |   |   | $ | 47,981 |   |   | $ | - |   |   | $ | - |   |   | $ | 174,488 |   |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income                    |   | $ | 24,471 |   |   | $ | 6,348 |   |   | $ | - |   |   | $ | - |   |   | $ | 30,819 |   |
| Other      income, net                   |   |   | 52 |   |   |   | 64 |   |   |   | 599 |   |   |   | - |   |   |   | 715 |   |
| Earnings      from continuing operations |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| before      income tax provision         |   | $ | 24,523 |   |   | $ | 6,412 |   |   | $ | 599 |   |   | $ | - |   |   | $ | 31,534 |   |

| Three Months Ended      June 30, 2007           |   |
|-------------------------------------------------|--------|
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |   |   |   | Power |   |   |   |   |   |   |   |   |   |   |
|                                            |   | Oil      Field |   |   | Transmission |   |   | Corporate |   |   | Adjustment* |   |   | Total |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      sales                                |   | $ | 94,006 |   |   | $ | 41,330 |   |   | $ | - |   |   | $ | - |   |   | $ | 135,336 |   |
| Inter-segment      sales                        |   |   | (833 | ) |   |   | (928 | ) |   |   | - |   |   |   | - |   |   |   | (1,761 | ) |
| Net      sales                                  |   | $ | 93,173 |   |   | $ | 40,402 |   |   | $ | - |   |   | $ | - |   |   | $ | 133,575 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss)                    |   | $ | 18,935 |   |   | $ | 7,382 |   |   | $ | - |   |   | $ | (1,287 | ) |   | $ | 25,030 |   |
| Other      income (expense), net                |   |   | 572 |   |   |   | (29 | ) |   |   | 1,012 |   |   |   | - |   |   |   | 1,555 |   |
| Earnings      (loss) from continuing operations |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| before      income tax provision                |   | $ | 19,507 |   |   | $ | 7,353 |   |   | $ | 1,012 |   |   | $ | (1,287 | ) |   | $ | 26,585 |   |

| Six Months Ended June      30, 2008             |   |
|-------------------------------------------------|--------|
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |   |   |   | Power |   |   |   |   |   |   |   |   |   |   |
|                                            |   | Oil      Field |   |   | Transmission |   |   | Corporate |   |   | Adjustment* |   |   | Total |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      sales                                |   | $ | 228,718 |   |   | $ | 88,937 |   |   | $ | - |   |   | $ | - |   |   | $ | 317,655 |   |
| Inter-segment      sales                        |   |   | (1,302 | ) |   |   | (795 | ) |   |   | - |   |   |   | - |   |   |   | (2,097 | ) |
| Net      sales                                  |   | $ | 227,416 |   |   | $ | 88,142 |   |   | $ | - |   |   | $ | - |   |   | $ | 315,558 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss)                    |   | $ | 45,002 |   |   | $ | 11,143 |   |   | $ | - |   |   | $ | (1,571 | ) |   | $ | 54,574 |   |
| Other      income (expense), net                |   |   | (216 | ) |   |   | 3 |   |   |   | 1,146 |   |   |   | - |   |   |   | 933 |   |
| Earnings      (loss) from continuing operations |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| before      income tax provision                |   | $ | 44,786 |   |   | $ | 11,146 |   |   | $ | 1,146 |   |   | $ | (1,571 | ) |   | $ | 55,507 |   |

| Six Months Ended June      30, 2007             |   |
|-------------------------------------------------|--------|
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |   |   |   | Power |   |   |   |   |   |   |   |   |   |   |
|                                            |   | Oil      Field |   |   | Transmission |   |   | Corporate |   |   | Adjustment* |   |   | Total |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      sales                                |   | $ | 196,166 |   |   | $ | 76,386 |   |   | $ | - |   |   | $ | - |   |   | $ | 272,552 |   |
| Inter-segment      sales                        |   |   | (1,707 | ) |   |   | (2,286 | ) |   |   | - |   |   |   | - |   |   |   | (3,993 | ) |
| Net      sales                                  |   | $ | 194,459 |   |   | $ | 74,100 |   |   | $ | - |   |   | $ | - |   |   | $ | 268,559 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss)                    |   | $ | 40,371 |   |   | $ | 12,492 |   |   | $ | - |   |   | $ | (2,543 | ) |   | $ | 50,320 |   |
| Other      income, net                          |   |   | 578 |   |   |   | 64 |   |   |   | 1,850 |   |   |   | - |   |   |   | 2,492 |   |
| Earnings      (loss) from continuing operations |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| before      income tax provision                |   | $ | 40,949 |   |   | $ | 12,556 |   |   | $ | 1,850 |   |   | $ | (2,543 | ) |   | $ | 52,812 |   |

|                    |   | Three      Months Ended |    |   |      |   |    |             |   |
|-------------------------|--------|-------------------------|---------|--------|-----------|--------|---------|------------------|--------|
|                    |   | June      30,           |    |   | Increase/ |   |    | %      Increase/ |   |
|                    |   | 2008                    |    |   | 2007      |   |    | (Decrease)       |   |   | (Decrease) |   |
| Sales                   |   |                    |    |   |      |   |    |             |   |   |   |   |
| Oil      Field          |   | $                       | 126,507 |   |      | $      | 93,173  |             |   | $ | 33,334 |   |   |   | 35.8 |   |
| Power      Transmission |   |                    | 47,981  |   |      |   | 40,402  |             |   |   | 7,579 |   |   |   | 18.8 |   |
| Total                   |   | $                       | 174,488 |   |      | $      | 133,575 |             |   | $ | 40,913 |   |   |   | 30.6 |   |
|                    |   |                    |    |   |      |   |    |             |   |   |   |   |   |   |   |   |
| Gross      Profit       |   |                    |    |   |      |   |    |             |   |   |   |   |   |   |   |   |
| Oil      Field          |   | $                       | 33,026  |   |      | $      | 25,632  |             |   | $ | 7,394 |   |   |   | 28.8 |   |
| Power      Transmission |   |                    | 14,756  |   |      |   | 13,589  |             |   |   | 1,167 |   |   |   | 8.6 |   |
| Adjustment*             |   |                    | 13      |   |      |   | 181     |             |   |   | (168 | ) |   |   | (92.8 | ) |
| Total                   |   | $                       | 47,795  |   |      | $      | 39,402  |             |   | $ | 8,393 |   |   |   | 21.3 |   |

|                    |   | Six      Months Ended |    |   |      |   |    |             |   |
|-------------------------|--------|-----------------------|---------|--------|-----------|--------|---------|------------------|--------|
|                    |   | June      30,         |    |   | Increase/ |   |    | %      Increase/ |   |
|                    |   | 2008                  |    |   | 2007      |   |    | (Decrease)       |   |   | (Decrease) |   |
| Sales                   |   |                  |    |   |      |   |    |             |   |   |   |   |
| Oil      Field          |   | $                     | 227,416 |   |      | $      | 194,459 |             |   | $ | 32,957 |   |   |   | 16.9 |   |
| Power      Transmission |   |                  | 88,142  |   |      |   | 74,100  |             |   |   | 14,042 |   |   |   | 19.0 |   |
| Total                   |   | $                     | 315,558 |   |      | $      | 268,559 |             |   | $ | 46,999 |   |   |   | 17.5 |   |
|                    |   |                  |    |   |      |   |    |             |   |   |   |   |   |   |   |   |
| Gross      Profit       |   |                  |    |   |      |   |    |             |   |   |   |   |   |   |   |   |
| Oil      Field          |   | $                     | 61,257  |   |      | $      | 53,606  |             |   | $ | 7,651 |   |   |   | 14.3 |   |
| Power      Transmission |   |                  | 26,943  |   |      |   | 24,826  |             |   |   | 2,117 |   |   |   | 8.5 |   |
| Adjustment*             |   |                  | 115     |   |      |   | 339     |             |   |   | (224 | ) |   |   | (66.1 | ) |
| Total                   |   | $                     | 88,315  |   |      | $      | 78,771  |             |   | $ | 9,544 |   |   |   | 12.1 |   |
|                    |   |                  |    |   |      |   |    |             |   |   |   |   |   |   |   |   |

| ● | The      customer has accepted title and risk of loss;                                                                                                                                                              |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ● | The      customer has provided a written purchase order for the      product;                                                                                                                                       |
| ● | 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; |
| ● | The      customer must provide a storage period and future shipping      date;                                                                                                                                      |
| ● | The      Company must not have retained any future performance obligations on the      product;                                                                                                                     |
| ● | The      Company must segregate the stored product and not make it available to use      on other orders; and                                                                                                       |
| ● | The      product must be completed and ready for  shipment.                                                                                                                                                         |

| ● | oil      price volatility;                                                                                                                                                                                                                                                               |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ● | declines      in domestic and worldwide oil and gas drilling;                                                                                                                                                                                                                            |
| ● | capital      spending levels of oil producers;                                                                                                                                                                                                                                           |
| ● | availability      and prices for raw materials;                                                                                                                                                                                                                                          |
| ● | the      inherent dangers and complexities of our operations;                                                                                                                                                                                                                            |
| ● | uninsured      judgments or a rise in insurance premiums;                                                                                                                                                                                                                                |
| ● | the      inability to effectively integrate acquisitions;                                                                                                                                                                                                                                |
| ● | labor      disruptions and increasing labor costs;                                                                                                                                                                                                                                       |
| ● | the      availability of qualified and skilled labor;                                                                                                                                                                                                                                    |
| ● | disruption      of our operating facilities or management information    systems;                                                                                                                                                                                                        |
| ● | the      impact on foreign operations of war, political disruption, civil      disturbance, economic and legal sanctions and changes in global trade      policies;                                                                                                                      |
| ● | currency      exchange rate fluctuations in the markets in which the Company      operates;                                                                                                                                                                                              |
| ● | 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; |
| ● | costs      related to legal and administrative proceedings, including adverse      judgments against the Company if the Company fails to prevail in reversing      such judgments; and                                                                                                   |
| ● | general      industry, political and economic conditions in the markets where the      Company procures material, components and supplies for the production of      the Company's principal products or where the Company's products are      produced, distributed orsold.             |

|                  |   | Votes      in                      |   | Votes                                                         |   |                                                                                                                            |   | Broker      Non-                                                                                                                |
|-----------------------|--------|------------------------------------|--------|---------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|
|                  |   | Favor                              |   | Withheld                                                      |   | Abstentions                                                                                                                     |   | Votes                                                                                                                           |
|                  |   |                               |   |                                                          |   |                                                                                                                            |   |                                                                                                                            |
| H.      J. Trout      |   |     12,947,245 |   |          459,791 |   |                      - |   |                      - |
| J.      T. Jongebloed |   |     12,559,852 |   |          847,184 |   |                      - |   |                      - |
| S.      V. Baer       |   |     12,982,855 |   |          424,181 |   |                      - |   |                      - |

| **10.1 |   | Severance      Agreement, dated as of January 21, 2008, between Lufkin Industries, Inc.      and Mark E. Crews, included as Exhibit 10.1 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference.   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                       |
| **10.2 |   | Severance      Agreement, dated as of February 12, 2008, between Lufkin Industries, Inc.      and Terry L. Orr, included as Exhibit 10.2 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference.   |
|   |   |                                                                                                                                                                                                                                                       |
| **10.3 |   | Severance      Agreement, dated as of March 1, 2008, between Lufkin Industries, Inc. and      John F. Glick, included as Exhibit 10.3 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference.      |
|   |   |                                                                                                                                                                                                                                                       |
| **10.4 |   | Severance      Agreement, dated as of May 7, 2008, between Lufkin Industries, Inc. and      Christopher L. Boone, included as Exhibit 10.4 to Form 8-K filed May 13,      2008 (File No. 0-02612), which exhibit is incorporated herein by      reference. |
|   |   |                                                                                                                                                                                                                                                       |
| **10.5 |   | Form      of Employee Stock Option Agreement for the Company's 2000 Incentive Stock      Compensation Plan, included as Exhibit 10.5 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference.       |
|   |   |                                                                                                                                                                                                                                                       |
| **10.6 |   | Form      of Director Stock Option Agreement for the Company's 2000 Incentive Stock      Compensation Plan, included as Exhibit 10.5 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference.       |
|   |   |                                                                                                                                                                                                                                                       |
| *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 FinancialOfficer.                                                                                                                                                                                                 |

| Exhibit      Number |  Description |
|---------------------|-------------------|
|                |              |   |
| **10.1              |              | Severance      Agreement, dated as of January 21, 2008, between Lufkin Industries, Inc.      and Mark E. Crews, included as Exhibit 10.1 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference. |
|                |              |   |
| **10.2              |              | Severance      Agreement, dated as of February 12, 2008, between Lufkin Industries, Inc.      and Terry L. Orr, included as Exhibit 10.2 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference. |
|                |              |   |
| **10.3              |              | Severance      Agreement, dated as of March 1, 2008, between Lufkin Industries, Inc. and      John F. Glick, included as Exhibit 10.3 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference. |
|                |              |   |
| **10.4              |              | Severance      Agreement, dated as of May 7, 2008, between Lufkin Industries, Inc. and      Christopher L. Boone, included as Exhibit 10.4 to Form 8-K filed May 13,      2008 (File No. 0-02612), which exhibit is incorporated herein by      reference. |
|                |              |   |
| **10.5              |              | Form      of Employee Stock Option Agreement for the Company's 2000 Incentive Stock      Compensation Plan, included as Exhibit 10.5 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference. |
|                |              |   |
| **10.6              |              | Form      of Director Stock Option Agreement for the Company's 2000 Incentive Stock      Compensation Plan, included as Exhibit 10.5 to Form 8-K filed May 13, 2008      (File No. 0-02612), which exhibit is incorporated herein by      reference. |
|                |              |   |
| *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 FinancialOfficer. |