HEROES

EXCITE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> gained $2 1/4 to $20 1/2 after announcing its free news clipping service, available at http://nt.excite.com. Users can retrieve clippings from 300 different sources as varied as the New York Times, Mother Jones, Wired, and the Economist. In addition to offering a customizable "information push" delivery that allows Excite to collect demographic information on subscribers, NewsTracker looks like a full-fledged newspaper. Some of today's upward move may also be a result of Friday's earnings announcement, where pre-charge earnings appeared to beat the consensus estimate of a loss of $0.43 per share and quarterly revenues increased more than eleven-fold. Excite gained $1 5/8 on Friday following the earnings announcement.

After being mentioned on Wall $treet Week by John Hancock Regional Bank Fund manager Jim Schmidt, CALIFORNIA STATE BANK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSTB)") else Response.Write("(Nasdaq: CSTB)") end if %> jumped $2 3/4 to $22 1/2. Though Schmidt doesn't carry the same name recognition as the Magellan fund managers, he is held in high regard among investors who pay attention to the financial companies. With an 88% increase in noninterest income, a 28% increase in net interest income, a dividend yield of 1.7%, and trading at 1.6 times book value, Schmidt's not saying that he thinks California State Bank will be taken over (though that's frequently the fate of companies he likes), just that he thinks it's a good investment. Apparently other investors agree with Schmidt after looking at the numbers of this small-cap, 18 branch bank over the weekend.

QUICK TAKES: CAD/CAM software company CIMATRON LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIMTF)") else Response.Write("(Nasdaq: CIMTF)") end if %> gained $ 1 1/4to $6 3/4 after reporting Q4 earnings per share (EPS) of $0.24, crushing estimates of $0.16... CKS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CKSG)") else Response.Write("(Nasdaq: CKSG)") end if %> gained $4 1/2 to $35 1/2 after announcing the acquisition, for $24 million in stock, of Raleigh, N.C. advertising firm McKinney & Silver... Riding the momentum of a Cowen upgrade to "strong buy" last week, APPLIED VOICE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVTC)") else Response.Write("(Nasdaq: AVTC)") end if %> gained $2 1/4 to $19... Commercial refrigeration systems company KYSOR INDUSTRIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KZ)") else Response.Write("(NYSE: KZ)") end if %> jumped $5 5/8 to $42 5/8 after receiving a $43 a share cash buyout offer from SCOTSMAN INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCT)") else Response.Write("(NYSE: SCT)") end if %>... NU SKIN ASIA PACIFIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NUS)") else Response.Write("(NYSE: NUS)") end if %> rose $2 1/8 to $28 after the consumer products network marketing company reported a 10% increase in distributorships in the fourth quarter... Israeli electronics manufacturer TADIRAN LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TAD)") else Response.Write("(NYSE: TAD)") end if %> rose $2 1/8 to $29 after this weekend's Barron's said George Soros has been buying... MCDERMOTT INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDR)") else Response.Write("(NYSE: MDR)") end if %> gained $1 1/8 to $19 1/2 as the somewhat depressed power generation machinery company named a new CEO, who will also become the company's Chair within the year... Tobacco leaf and wool dealers STANDARD COMMERCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STW)") else Response.Write("(NYSE: STW)") end if %> rose $1 to $20 5/8 after posting a strong turnaround in Q3 earnings... HERCULES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HPC)") else Response.Write("(NYSE: HPC)") end if %> gained $3 to $47 1/8 after Furman Selz added the specialty chemicals producer to its "recommended list"... Water filtration systems company CULLIGAN WATER TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CUL)") else Response.Write("(NYSE: CUL)") end if %> rose $1 7/8 to $35 1/8 after signing a marketing agreement with well-known faucet company Moen... P.H. GLATFELTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GLT)") else Response.Write("(AMEX: GLT)") end if %> rose $1 3/8 to $18 after Smith Barney upgraded the specialty paper company to "buy" from "neutral."

GOATS

TRANSOCEAN OFFSHORE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RIG)") else Response.Write("(NYSE: RIG)") end if %> lost $5 1/2 to $60 as the oil and gas driller pre-announced worse-than-expected Q4 results. Because of higher operating costs on its North Sea rigs and start-up costs on two jackup rigs (large mobile drilling platforms) in the Gulf of Mexico, the company said earnings will miss the current estimate of $0.55 per share by $0.15 to $0.20. In the worse case scenario for the quarter, the company is trading at 28 times trailing earnings with an estimated five-year annualized growth rate of 23%, while similar company GLOBAL MARINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLM)") else Response.Write("(NYSE: GLM)") end if %> is trading at 35 times trailing EPS with a lower median five-year growth estimate. According to First Call, one analyst surveyed on Global Marine put its five-year growth at 103% annually, while the high estimate on Transocean is 38%.

Offshore driller and oil services company ENSCO INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESV)") else Response.Write("(NYSE: ESV)") end if %> was taken down $4 1/8 to $51 by the Transocean news. The company trades at 35 times earnings with its highest five-year annualized growth estimate at 67%. Other companies in the sector taking hits today include BJ SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %>, down $1 7/8 to $44 3/8, and CLIFFS DRILLING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLDR)") else Response.Write("(Nasdaq: CLDR)") end if %>, down $2 7/8 to $65 3/8. BJ Services trades at 30 times earnings with a high five-year annualized growth estimate of 69%, while small cap Cliffs Drilling trades at 30 times earnings with an estimated growth rate of 117% over the coming year. These companies have historically traded on cash flow, but they've been bid up from a long cyclical trough by investors looking for earnings growth. Today's announcement from Transocean looks more company-specific, but ripples were felt throughout the sector.

Internet payment systems company CYBERCASH INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %> dropped $1 1/4 to $15 after reporting an $8.6 million quarterly operating loss last week, in addition to appearing this morning in a Washington Post article titled "A Cyberspace Full of Falling Stars: Those Upstart Start-Ups Ran Smack Into the Cold Realities of an Evolving Market." The article discusses the fluctuating market capitalizations of a number of Washington-area firms, including AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>, and paints the picture of a deflated bubble, ignoring some of the longer-term returns such stocks have racked up. Cybercash CEO William Melton was quoted as saying, "The bad news is that this is harder than a lot of people thought it was." The story makes no mention of whether any of the CEOs think their companies were worth the valuations they won so quickly after going public.

QUICK CUTS: NEW YORK BAGEL ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NYBS)") else Response.Write("(Nasdaq: NYBS)") end if %> was burned for a $2 1/8 loss to settle at $4 5/8 after pre-announcing Q4 EPS of $0.04-0.05, below the $0.08 consensus estimate from First Call... Printer consumables maker NU-KOTE HOLDING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NKOT)") else Response.Write("(Nasdaq: NKOT)") end if %> lost $2 1/2 to $6 1/4 after pre-announcing a quarterly loss due to a sequential sales slowdown... U.S. DIAGNOSTIC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USDL)") else Response.Write("(Nasdaq: USDL)") end if %> fell $2 15/16 to $9 11/16 after the company placed its Chair and CEO on administrative leave as the company is under investigation by the SEC and under fire in a class-action lawsuit alleging securities violations... After reporting Q4 EPS of $0.37, below estimates of $0.39, RIGHT MANAGEMENT CONSULTANTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMCI)") else Response.Write("(Nasdaq: RMCI)") end if %> was whacked for a $3 1/8 loss to $17 7/8... ACE*COMM CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACEC)") else Response.Write("(Nasdaq: ACEC)") end if %> ticked down $1 1/2 to $12 1/8 as investors fear insiders will dump their shares on the market when the post-IPO lockup expires... Electronics capital equipment company MICRION CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MICN)") else Response.Write("(Nasdaq: MICN)") end if %> slid $2 1/4 to $19 1/2 in the wake of last week's earnings report... PARAGON TRADE BRANDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTB)") else Response.Write("(NYSE: PTB)") end if %> fell $2 to $21 1/2 after PROCTER & GAMBLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PG)") else Response.Write("(NYSE: PG)") end if %> disclosed it is seeking more than $90 million in damages from the private-label diaper maker... Gas refiner and pipeline company VALERO ENERGY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VLO)") else Response.Write("(NYSE: VLO)") end if %> lost $2 3/4 to $31 after agreeing to merge with PACIFIC GAS & ELECTRIC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PCG)") else Response.Write("(NYSE: PCG)") end if %> and spin off its refining assets to Valero shareholders.

FOOL ON THE HILL
An Investment Opinion by MF Templar

The Wrap on R&R

Looking for a company that wants to double in size by the year 2000? Take a look at REYNOLDS & REYNOLDS  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: REY)") else Response.Write("(NYSE: REY)") end if %>. Founded in 1866 to make ledgers with removable carbons, the company has leapt into the information age as paper has been replaced by data entry and databases. The firm has diversified away from the forms business, penetrating the automotive and healthcare information systems market. Although the majority of the company's revenues are locked solidly in the paper age, the ever acquisitive Reynolds & Reynolds purchased ten companies in 1995, including Dealer Internet Services Corp.

In the company's recently reported fiscal first quarter, total revenues were a snappy $314.3 million. Information systems comprised 42.5% of sales, down from 47% in the year ago period. Reynolds still delivers the majority of its revenues from its robust business forms business, enhanced in 1996 with the acquisitions of Duplex Products and Vanier Graphics. The company's fast growing finance unit provides just a hair over 2.2% of sales. This unit finances sales of the company's hardware and software computer system combinations to its customers. (How's that for value-added?)

Reynolds has more than 90% of the car dealers in the U.S. on its system -- both positive and negative from an investment standpoint. Positive because the huge established customer base allows this business to deliver solid cash flows that can be reinvested in other places. The company recently merged its Business Systems Division's Automotive Products Group with the Automotive Systems group to reduce overhead, enhancing cash flow. Since the company also provides the printer-ready forms that go with its information systems, it has a guaranteed market for these products that it can milk for cash on a regular basis as well.

The downside is that the revenue growth potential is not much more than the car dealership business as a whole, explaining the 14% year-over-year growth the company enjoyed in its Computer Systems segment during the last quarter. Unless the company can profitably reinvest the cash flow it gets from its more mature businesses into its faster growing segments, doubling by the year 2000 might just be a pipe dream. To that end, in 1986 the company began to expand into the fast-growing medical information systems field. Dominated by HBO & CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HBOC)") else Response.Write("(Nasdaq: HBOC)") end if %>, Reynolds saw an entree due to the fact that it already sold paper forms into the same channel.

Over the past four quarters, Reynolds has racked up $1.18 billion in sales, recording trailing earnings per share (EPS) of $1.15, up 16% from the four prior quarters. Current estimates are $1.34 EPS for fiscal 1997 and $1.59 for fiscal 1998, barring any further acquisitions. The long-term growth rate has been handicapped at 17.5% per year. Operating margins in the last quarter were 14.6%, down from 16.0% last year due to the sizable printing acquisitions the company has made over the past year. The company has $178.2 million in debt and only a smidgen of cash. Reynolds also pays a dividend with a 1.04% yield at the current price. As one would expect, the company has been filing its financials on EDGAR since 1994, providing a wealth of historical information to the discriminating investor.

Reynolds currently sports a trailing price-to-earnings (P/E) ratio of 23.5. Based on estimates, the forward P/E for this year is 20.1 and for next year is 17. The company's operating margin is decent, although not the same level one sees for most information services companies. Reynolds trades at slightly below 2 times sales and slightly above 2 times enterprise value-to-sales, appearing neither cheap nor overvalued. Cash flow is more robust than earnings growth, although the company did not report its cash flow in its most recent earnings release available from the Web. Extrapolating the fourth quarter and first quarter of this year, a price-to-cash flow ratio of about 17.8 times seems accurate, slightly below the S&P 500's 20 average. While not compelling from a valuation standpoint, the company's move to information systems from business forms makes it worth watching. After all, very few U.S. companies can claim that they have been incorporated for more than 100 years.

CONFERENCE CALLS

VISX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VISX)") else Response.Write("(Nasdaq: VISX)") end if %>
(800) 633-8284 code# 2369770
Available Monday and Tuesday

US DIAGNOSTIC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USDL)") else Response.Write("(Nasdaq: USDL)") end if %>
(re: current company events)
replay available after 1:00 PM EST
(402) 220-1025 (passcode: 309956)

FIRST DATA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDC)") else Response.Write("(NYSE: FDC)") end if %>
1-800-925-0560 -- replay through 2/7

IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %>
(800) 633-8284 (reservation #2219792) -- replay

3M <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>
replay through 2/4
(800) 633-8284 (reservation # 2198620)

PRIME HOSPITALITY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PDQ)") else Response.Write("(NYSE: PDQ)") end if %>
(800) 642-1687 (access code: 199532) -- replay through 2/5

ARVIN INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARV)") else Response.Write("(NYSE: ARV)") end if %>
(800) 633-8284 (reservation # 2331673) -- replay avail thru 2/5

CONTROL DATA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CDAT)") else Response.Write("(Nasdaq: CDAT)") end if %>
(402) 220-1003 -- replay thru 2/6

ANOTHER FOOLISH THING
A Foolish Library

For a change of pace, instead of using this space to plead with you to purchase some of our modest Foolish wares, allow us to shift the spotlight to some books not written by Fools. That's right -- if you're interested in reading some other perspectives on investing, but are just not sure where to begin, or which books might be too far from your Foolish center, head on over to FoolMart (at keyword: FoolMart on AOL or at our website at ). There you'll find a dozen titles which pass Foolish muster. They're books that are found on desks and shelves around Fool HQ. We've read 'em, we like 'em, and we recommend them to you, too. Included are titles by Peter Lynch, Mary Meeker, Michael O'Higgins, David Chilton, William J. O'Neill, and Chuck Carlson. The browsing is free, and the buying is easy!

Randy Befumo (MF Templar), a Fool
Fool On the Hill

Dale Wettlaufer (MF Raleigh), another Fool
Heroes & Goats

Brian Bauer (MF Hoops), one more Fool
Editing

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