Client Profile: Hughes Tool Company;

              10
Black gold, the name given to crude oil by
petroleum industry pioneers, has taken
on prophetic overtones in the last few
years. Those early drillers laid the founda­tion
for an industry whose products
fueled America's industrial growth and
expansion, products that made practical
mass production of the internal combus­tion
engine and gave this nation a new
mobility, itself reshaping the very core of
our social structure.
Behind the drama of the wildcatter,
the oil strike, the vast fortunes
won and lost overnight, lies an
invention of one man—Howard R.
Hughes Sr. It was Hughes who, in 1909
at an oil well in Goose Creek, Texas, suc­cessfully
tested his new rotary rock bit
incorporating rolling cone cutters. His
idea was so well conceived that—with
modifications and constant research and
engineering improvements—it remains
the basic design of some of the most ad­vanced
rock bits used today. The rolling
cone cutter rock bit gave the petroleum
industry the tool it needed to bore
through thousands of feet of earth, sand
and hard rock at higher speeds and lower
costs.
After the successful test of his new rock
bit, Hughes established a corporation in
Houston and began manufacturing bits
utilizing his revolutionary design. His
son, Howard R. Hughes, Jr., became sole
owner of the Hughes Tool Company on
the death of his father in 1924 and began
a broad program of expansion and di­versification
under which the rock bit
operations became part of Hughes Tool's
Oil Tool Division. On December 14,1972,
more than sixty years after its founding,
Hughes Tool Company went public with
an offering of five million shares on the
New York Stock Exchange.
But if going public marked a major shift
in the corporate and financial structure
of the Houston-based operation, its key
position in the rock bit industry remained
unaltered. Easing the transition from
private company to public corporation
was the fact that there was no significant
change in top management. Raymond M.
Holliday and James R. Lesch, both of
whom had been heading the Oil Tool
Division, continued with Hughes Tool
Company, Mr. Holliday as chairman of
the board and chief executive officer and
Mr. Lesch as president and chief operating
officer.
According to Gene Harris, partner in
charge of the engagement since 1972,
Hughes Tool Company became an audit
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