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Non-Tech : Lufkin Industries (Nasdaq: LUFK) -- Ignore unavailable to you. Want to Upgrade?

To: CuttotheCore who wrote (55)	4/6/1998 11:20:00 AM
From: Todd D. Wiener	Read Replies (1) \| Respond to of 103

Actually, LUFK isn't an oil services company (in the typical sense), and the price of oil has no direct impact on their operating results. The company makes oilfield pumping units, and it is the leader in the industry. I don't think that the Asian manufacturers of similar products hold any material market share. LUFK products are known for their quality and low price. Here's an excerpt from the 10-K to describe the small, but rapidly-growing, service segment of LUFK's business: "Aiding the strong performance of Lufkin's oil field products was the completion of two acquisitions in the third quarter of 1997. The acquisition of Fannie Lee Mitchell of Texas, Inc. expanded the range of the oil field services Lufkin provides. These new services include pumping unit deliveries, installation of old and new units, maintenance and repair of units and gear reducers, manufacture of parts and bases, and sales of used units primarily to the oil and gas industries in West Texas and New Mexico. The acquisition of the Nabla Corporation, a provider of oil field technical services including analysis for oil wells, developing software for oil field engineers to design artificial lift systems, manufacturing devices for oil field automation, and training for engineers opened new markets for Lufkin. Nabla operates throughout most oil fields in the United States, Venezuela, Canada and Colombia." What is the problem with the dividend? LUFK paid only 31% of earnings as dividends last year, compared with about 39% in 1996. This year, dividends will be about 25% of earnings. LUFK's oilfield segment should comprise more than a third of 1998 sales, while earnings contribution should be at least 70%, because the oilfield segment has operating margins in the high teens, whereas the other business lines have 2-6% operating margins. Todd