HEROES

FORT HOWARD CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORT)") else Response.Write("(Nasdaq: FORT)") end if %> moved up $6 to $42 1/2 as the management's long-term leveraged buyout strategy came to its end today by agreeing to merge with paper products company JAMES RIVER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JR)") else Response.Write("(NYSE: JR)") end if %>. The maker of low-end consumer paper products has been reporting strong earnings since coming public again in 1995. Over the last two full years, interest expense has come down 23% while operating income has shot up 72%. On top of retiring about $850 million in long-term debt over this period, the company has also bought back about $442 million in stock, putting most of Fort Howard's enterprise value in equity, which has replaced a load of debt.

Semiconductor capital equipment company NOVELLUS SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> gained another $9 3/8 to $78 3/4 after agreeing to settle an intellectual property dispute with APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %>, which is the same dispute that dragged Novellus down $22 1/4 in one ugly day in April. Though research groups such as INFRASTRUCTURE believe that the industry will transition to newer process technologies that will obviate the TEOS process that was disputed, apparently Novellus couldn't do without it in the here-and-now. Paying out almost one-third of the earnings the company has retained in its corporate lifetime is an awfully big hit, especially considering that Applied's TEOS patent wasn't even granted until 1995.

Data encryption and authentication company SECURITY DYNAMICS TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SDTI)") else Response.Write("(Nasdaq: SDTI)") end if %> gained $5 1/4 to $34 after the company's RSA Data Security subsidiary announced its SET website, a clearinghouse for developers and merchants on its Secure Electronic Transactions standard protocol. As Fool Leeza Rodriguez wrote in our 1997 Industrial Evolution, "RSA's implementation of the SET protocol is expected to accelerate the deployment of true electronic commerce over corporate intranets and the Internet." It's hard to argue with a transaction standard that has been endorsed and employed by NETSCAPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> and MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, as well as VISA and VERIFONE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VFI)") else Response.Write("(NYSE: VFI)") end if %>, a leader in transaction processing equipment. With International Data Corp. estimating web-initiated sales of $117 billion in the year 2000, investors figure Security Dynamics will do well as a major facilitator in bringing that about.

QUICK TAKES: RJR NABISCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RN)") else Response.Write("(NYSE: RN)") end if %> gained $3 1/8 to $32 5/8 after a Florida jury found the company innocent of negligence in the death of a smoker... Medical products maker, ALLEGIANCE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AEH)") else Response.Write("(NYSE: AEH)") end if %>, a former BAXTER INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAX)") else Response.Write("(NYSE: BAX)") end if %> subsidiary, moved up $3 to $26 1/4 after announcing the acquisition of 2.4 million shares by 140 different company insiders... TRANSITIONAL HOSPITALS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: THY)") else Response.Write("(NYSE: THY)") end if %>, formerly Community Psychiatric Corp., jumped $4 1/4 to $14 1/4 on agreeing to merge with Select Medical Corp. in a deal valuing the company at $14.55 per share in cash... Specialty healthcare company VIVRA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: V)") else Response.Write("(NYSE: V)") end if %> moved up $6 3/4 to $35 on striking two deals, one to sell its physician network and disease management division and one to sell the rest of the company... Defense electronics company LOGICON INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LGN)") else Response.Write("(NYSE: LGN)") end if %> gained $9 3/8 to $49 3/4 on hooking up with NORTHROP GRUMMAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOC)") else Response.Write("(NYSE: NOC)") end if %> in a merger valuing each Logicon share at no more than 0.6919 shares of Northrop... MILLER INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MLR)") else Response.Write("(NYSE: MLR)") end if %> rose $2 1/8 to $14 1/2 as the heavy equipment company said it has no idea what the hubbub is about... SWIFT ENERGY CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFY)") else Response.Write("(NYSE: SFY)") end if %> moved up $2 5/8 to $24 3/8 after announcing the drilling of a "significant horizontal gas well" in the Austin Chalk Trend... West Coast restaurant operator CKE RESTAURANTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKR)") else Response.Write("(NYSE: CKR)") end if %> tacked on $2 7/8 to $22 1/2 after last week's agreement to acquire Hardee's Food Systems... DECISIONONE HOLDINGS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DOCI)") else Response.Write("(Nasdaq: DOCI)") end if %> vaulted $5 3/8 higher to $21 7/8 after DONALDSON, LUFKIN & JENRETTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DLJ)") else Response.Write("(NYSE: DLJ)") end if %> agreed to purchase the computer services company for $23 per share in cash... Cancer care company RESPONSE ONCOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROIX)") else Response.Write("(Nasdaq: ROIX)") end if %> rose $1 3/4 to $7 1/4 on reporting Q1 earnings per share (EPS) of $0.09, up 28% year-over-year... AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> surged $4 1/4 to $51 1/2 before reporting Q3 EPS of $0.02, beating estimates, after the market close... NATURAL MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NMSS)") else Response.Write("(Nasdaq: NMSS)") end if %> added $5 1/2 to $26 3/4 after the computer telephony products company announced that NetCentric, an ISP equipment company, has selected the company's products for its FaxStorm system for faxing over the Internet... SYSTEMSOFT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYSF)") else Response.Write("(Nasdaq: SYSF)") end if %> gained $1 7/8 to $10 3/8 on announcing new SystemWizard software... Midwestern grocery store operator RISER FOODS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: RSR)") else Response.Write("(AMEX: RSR)") end if %> moved $3 1/2 higher to $41 1/8 after the company said it received a $42 per share cash offer for all of its outstanding shares.

GOATS

PHYSICIAN SALES & SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSSI)") else Response.Write("(Nasdaq: PSSI)") end if %> dropped $1 15/16 to $12 1/16 after the company pre-announced a loss of five to seven cents per share in the fourth quarter due to acquisition charges. With earnings estimates now standing at $0.15 per share for the quarter, the company's projection of operating earnings (without the charges) has it missing those estimates by as little as $0.01 per share. At best, the company's operating earnings will increase 33%, from $0.12 last year to $0.15 this year. Year-over-year revenues will increase 30%, and same-center sales have increased 18%. The company distributes medical equipment and pharmaceuticals -- not exactly the best businesses to be in over the last year, as its acquisition strategy has shown with foibles such as this.

QUICK CUTS: OPTICAL SENSORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OPSI)") else Response.Write("(Nasdaq: OPSI)") end if %> crashed $2 3/4 to $4 7/8 after the company began a voluntary recall of its SensiCath Sensors, which are used to monitor arterial blood gas levels.... Biotech company GENZYME CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %> fell $2 7/16 to $22 5/16 after an FDA panel rejected the company's application for marketing approval on its Sepracoat product... DELTA & PINE LAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DLP)") else Response.Write("(NYSE: DLP)") end if %> lost $1 1/2 to $22 1/2 on investor worries that cotton growers will be demanding less of the company's genetically engineered products this growing season... Drug company BARR LABORATORIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BRL)") else Response.Write("(AMEX: BRL)") end if %> lost $6 5/8 to $43 1/4 after the FDA rejected a marketing approval application for a conjugated estrogen product. 

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

A Corporate Makeover in Progress

Paper and pulp maker ST. JOE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SJP)") else Response.Write("(NYSE: SJP)") end if %> continues to remake itself into a diversified conglomerate with today's acquisition of FLORIDA EAST COAST INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLA)") else Response.Write("(NYSE: FLA)") end if %>. St. Joe offered to acquire the 46% of Florida East Coast that it does not already own for $102 a share, or a total value of $428.4 million. Shares of Florida East Coast rocketed ahead $19 1/8 to $107 7/8 on the news, while St. Joe Corp. climbed $8 1/2 to $81 3/4. Acquisition talks have been in the works since last year when Florida East Coast began to discuss selling the wholly owned Florida East Coast Railway Co. if it could get the right price.

St. Joe Corp. is a study in how companies once stuck in businesses that required large investments for low returns have begun to get the religion of big cash flow. Mired in corrugated cardboard and pulp mills, shareholder pressure from the Alfred I. duPont Testamentary Trust two years ago forced St. Joe to rethink its strategy of remaining in the capital intensive, low-return paper business. Given that the Trust controls more than 70% of the shares of St. Joe, once it decided that the company should find its way into businesses that offered higher returns on invested capital it was pretty much fait accompli. In a bold series of moves designed to restructure the company, St. Joe divested itself of box plants, paper mills and telephone properties to focus on cash-flow rich railroads and the more stable returns available in real estate.

The move is the first major acquisition since Peter S. Rummell took over as St. Joe's chairman and CEO. The largest private landowner in Florida, with this deal St. Joe acquires the only short-line railroad between Jacksonville and West Palm Beach and also scoops up another 19,000 acres of land in 14 Florida counties, as well as 55 buildings. St. Joe currently owns the Apalachicola Northern Railroad Co., which has track that stretches from Jacksonville to Miami. The two railroads are virtual monopolies, with only CSX competing with the company for rail traffic between West Palm Beach and Miami. St. Joe also owns 80% of International Transit, a common motor carrier providing truckload service throughout most of the southeastern U.S.

Although the merger price initially offered was set at $102 per share in cash, Wall Street apparently believes that the price for the remainder of Florida East Cost will climb higher in the coming weeks. Given that St. Joe already owns the majority of Florida East Coast, it would appear unlikely that the Florida Transportation Board or the Surface Transportation Board will step in and halt the deal. Analyst James S. Schmitt at Westcountry Financial was quoted by Dow Jones as saying that Florida East Coast could be worth as much as $120 a share to Rummell, a statement that sent shares soaring higher today. Owning more than 3% of the land in the state of Florida as well as two of the major short-haul railroads, the company now seems poised to benefit from the high growth rate the region has enjoyed for the last 20 years.

St. Joe Corp. shares are up 31.7% in the past twelve months, in line with the 29.5% gain in the S&P 500 over the same period. The company's frequent divestitures make it difficult to value the company on earnings, cash flow, or revenues in general. Investors interested in trying to value St. Joe Corp. are best advised to look at the type of real estate it owns and the going rate for the real estate, and add this to a 8 to 12 price-to-gross cash flow multiple, which is earnings from operations plus depreciation. St. Joe Corp.'s financials are available on EDGAR, including all 10-Qs and 10-Ks for the past three years.

CONFERENCE CALLS

PEPSICO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %>
(800) 577-6980 (code: 03160)

THE MONEY STORE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MONE)") else Response.Write("(Nasdaq: MONE)") end if %>
(800) 964-4236

RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %>
(402) 222-9939

MATTSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTSN)") else Response.Write("(Nasdaq: MTSN)") end if %>
(402) 220-6969 -- replay available through 5/6

MORROW SNOWBOARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRRW)") else Response.Write("(Nasdaq: MRRW)") end if %>
(402) 220-4250 -- replay through 5/6

MENTOR GRAPHICS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MENT)") else Response.Write("(Nasdaq: MENT)") end if %>
(201) 633-1010 -- replay

INFORMIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IFMX)") else Response.Write("(Nasdaq: IFMX)") end if %>
Available until 5/16
(800) 839-8790 -- replay

HSN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HSNI)") else Response.Write("(Nasdaq: HSNI)") end if %>
(800) 765-7014 (passcode: 1234) -- replay from 11:30 AM ET through 5/7 @ noon ET

THIS WEEK'S CONFERENCE CALL SYNOPSES

TIDEWATER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %> Q4 Conference Call
ATC COMMUNICATIONS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATCT)") else Response.Write("(Nasdaq: ATCT)") end if %> Q3 Conference Call

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Randy Befumo (TMF Templr), a Fool
Fool Plate Special

Dale Wettlaufer (TMF Ralegh), another Fool
Ups & Downs

Brian Bauer (TMF Hoops), Fool Three
Julia Wilson (TMF Delete), Fool Quatro
Editing