Is Terra Nitrogen Co. L.P. a good buy? (TNH) Message Board

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Non-Tech : Is Terra Nitrogen Co. L.P. a good buy? (TNH)

TNH 83.96

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Apr 2 5:00 PM EST

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To: william liao who wrote (6)	5/20/1997 8:38:00 PM
From: Jeff Maresh	of 91

William - I've been a TNH shareholder for quite awhile and you've got some info wrong here. >tnh is in a good and stable business, with very good growth. Stable yes, but not really a growth company. Revenues have simply gone up because they have dramatically improved management of the operation. Operating margins went from 25% in '92 to around 50% last year. They haven't added much new capacity as much as they have improved plant utilization. >It is true that we need to watch out gas price. It is up this >winter, right? Traditionally gas prices go up in the winter but gas prices are low because of the mild winter. TNH hedges by buying gas futures up to a year in advance. >I read >somewhere that tax law on some of L.P. will be changed in 1998. Currently L.P.'s >profits are not taxed. They are distributed to shareholders. This tax exempt status >will expire by the end of 1997. In 1998 L.P. must pay tax first, then distribute what >is left. >If I am not >mistaken, L.P. related with natural resources will still enjoy the "tax holiday." But I >am not sure. LPs and MLPs (Master Limited Partnerships) are different animals. LP's, of which TNH is one, will continue to be exempt unless the idiot politicians want to commit political suicide. TNH is protected under the same ag loop hole as most other agri businesses and is doubtful to change anytime soon. The law you speak of which makes distribution taxable applied to MLPs, not LPs. TNH actually qualified under the Natural Resource loop hole also. TNH tends to be cyclical based upon weather in the midwest during the summer months and is also depending upon the severity of the winter because of gas prices. Because investors don't do their homework, they panic when gas prices go up not realizing that THN hedges. IF TNH hedged on the low gas prices we've seen recently, the earnings hence distribution in then next few quarters could be very good. They have done this in the past and shareholders have been rewarded quite nicely. They typically don't pass along very much savings to their customers because they pretty much have a monopoly in their service areas. Thank you TNH! Whether or not this will happen is about as predictable as it is to predict if Greenspan is going to raise interest rates. Although distributions will continue to be good, Smith Barney opines that they will decline somewhat in the future. Regards Jeff

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