HEROES
Dental supplies distributor SULLIVAN DENTAL PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SULL)") else Response.Write("(Nasdaq: SULL)") end if %>
jumped $6 1/4 to $28 1/2 after agreeing to merge with larger competitor
HENRY SCHEIN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HSIC)") else Response.Write("(Nasdaq: HSIC)") end if %> in a stock swap valuing each Sullivan
share at 0.735 Henry Schein shares, or $28.67 as of Friday's close. Henry
Schein believes the deal will be accretive to 1998 earnings, for which the
current EPS estimate stands at $1.43. Henry Schein also announced earnings
today, reporting Q2 EPS of $0.28 (before merger expenses), up 22% over Q2
1996 pro forma EPS of $0.23.
Water treatment systems manufacturer UNITED STATES FILTER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USF)") else Response.Write("(NYSE: USF)") end if %> percolated $2 15/16 higher to $34 1/4 after reporting Q1 EPS of $0.26,
in line with estimates. The company also announced a transaction with the
Texas Bass family in which it is trading eight million shares of its stock
plus warrants for another 1.2 million shares for 50,000 acres of land and
250,000 acre feet of water rights, mostly in California's Imperial Valley.
The water rights will be used for the company's "one-stop shopping" approach
to water treatment in agriculture, which is a new market for U.S. Filter.
With these assets, the company can provide the water as well as the systems
for irrigation and treatment. The company says the transaction will be
non-dilutive because of the rental income the properties generate.
ORBOTECH LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORBKF)") else Response.Write("(Nasdaq: ORBKF)") end if %> rose $6 21/32 to $42 1/8 after the
manufacturer of optical inspection systems (OIS) reported Q2 EPS of $0.62,
smearing estimates of $0.48. Sales for systems used by manufacturers of printed
circuit boards were up 30% year-over-year, but the real growth story was
OIS sales to the flat panel display industry, which had experienced a short,
sharp correction in demand for equipment last year. In its press release,
the company said demand for flat panel display systems is accelerating as
capacity tightens, especially for larger LCD screen sizes. Revenues grew
12% sequentially and 27% year-over-year. In both periods, earnings per share
outgrew revenues by a wide margin.
QUICK TAKES: IRIDIUM WORLD COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IRIDF)") else Response.Write("(Nasdaq: IRIDF)") end if %> moved $3 1/2 higher to $28 7/8 on no news from the satellite telecom company... Wireless communications test systems manufacturer ORBIT/FR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORFR)") else Response.Write("(Nasdaq: ORFR)") end if %> picked up $2 7/8 to $17 1/8 following Friday's Q2 earnings report of $0.20 per share, which handily beat the sole estimate of $0.16... Year 2000 software company INTERSOLV <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ISLI)") else Response.Write("(Nasdaq: ISLI)") end if %> jumped $1 5/8 to $14 3/8 on announcing a Year 2000 alliance with a MCI <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %> unit... MARTEK BIOSCIENCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MATK)") else Response.Write("(Nasdaq: MATK)") end if %> rose $1 1/8 to $10 7/8 on announcing that Israel's largest maker of infant formula will use Martek's oils in its Materna Stage One formula for infants up to six months of age... NEXTEL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NXTL)") else Response.Write("(Nasdaq: NXTL)") end if %> climbed $2 13/16 to $26 11/16 on initiation of coverage by Morgan Stanley with a "strong buy" rating... PERKINS FAMILY RESTAURANTS LP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFR)") else Response.Write("(NYSE: PFR)") end if %> cooked up a little surprise for investors, gaining $2 1/8 to $13 on announcing that it has received an offer from a private restaurant company to buy out all public unit holders for $13 per share in cash. U.S. BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USB)") else Response.Write("(NYSE: USB)") end if %>, the company resulting from the combination of U.S. Bancorp and First Bank System, added $3 1/16 to $90 after Goldman Sachs moved the shares onto its recommended list and CS First Boston started coverage with a "strong buy" rating... As the SigGraph '97 trade show got underway in Los Angeles, graphics chips and workstation company SILICON GRAPHICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGI)") else Response.Write("(NYSE: SGI)") end if %> gained $2 5/16 to $27 3/8, while graphics chipset company ACCELGRAPHICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACCL)") else Response.Write("(Nasdaq: ACCL)") end if %> rose $1 to $7 3/8 on a product announcement with Mitsubishi... Aircraft parts distributor and aviation services company AVIATION SALES CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVS)") else Response.Write("(NYSE: AVS)") end if %> climbed $2 to $23 7/8 on reporting Q2 EPS of $0.43, $0.02 better than estimates... Managed health care company WELLPOINT HEALTH NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLP)") else Response.Write("(NYSE: WLP)") end if %> rose $3 7/16 to $52 on reporting Q2 EPS of $0.77, beating estimates of $0.74. Total medical membership grew 43% year-over-year... Homebuilder NVR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: NVR)") else Response.Write("(AMEX: NVR)") end if %> added $1 1/8 to $19 1/8 after Moody's raised its debt rating on the company... BEA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BEAS)") else Response.Write("(Nasdaq: BEAS)") end if %> gained $2 1/16 to $22 1/16 after the transaction software company announced that an IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> division will resell the company's "BEA TUXEDO transactional middleware software for the RS/6000 Mission Critical POWERsolution."
GOATS
HEALTHCOR HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HCOR)") else Response.Write("(Nasdaq: HCOR)") end if %> lost another $1 1/2 to $7 1/2 as
the home nursing care company's stock is still reeling from last week's Alex.
Brown downgrade, in which the firm's analyst reasoned that results will be
affected by Medicare reimbursement changes in the budget making its way through
Congress. Since the company relies heavily on Medicare billings, the
investigations currently going on at COLUMBIA/HCA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %> may
be influencing the risk components of valuations. One of the more profitable
companies in the sector, Healthcor is now valued at about 7.5 times 1998's
mean earnings estimate. By comparison, HOME HEALTH CORP. OF AMERICA
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HHCA)") else Response.Write("(Nasdaq: HHCA)") end if %> is valued at 12.8 times the June 1998 EPS estimate, while
the much larger APRIA HEALTHCARE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHG)") else Response.Write("(NYSE: AHG)") end if %> isn't gaining any
large-cap premium at 11.2 times 1998's EPS estimate.
Building products manufacturer ABT BUILDING PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABTC)") else Response.Write("(Nasdaq: ABTC)") end if %>
was bowled over for a $3 1/2 loss to $18 after Merrill Lynch lowered its
rating on the company to "neutral" from "accumulate." Wheat First Butcher
Singer cut its rating as did Dillon Read, which also lowered its rating on
insulation and siding manufacturer OWENS CORNING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OWC)") else Response.Write("(NYSE: OWC)") end if %>. Analysts
are concerned about price competition in the markets for hardboard, fiber
cement, and vinyl siding, where Owens Corning has been a consolidator. Last
quarter, Owens Corning reported on pricing pressures, but the quarter did
not include recently acquired company Fibreboard, which recorded $469 million
in sales of vinyl siding and other building products in 1996.
QUICK CUTS: ALPHA-BETA TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABTI)") else Response.Write("(Nasdaq: ABTI)") end if %> lost $4 11/16 to $6 1/8 after the company announced disappointing overall results in Phase III trials of its Betafectin post-operation infection treatment... Manufactured home company BELMONT HOMES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BHIX)") else Response.Write("(Nasdaq: BHIX)") end if %> took a $1 1/2 hit to close at $8 after announcing that it is contemplating a merger with competitor CAVALIER HOMES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAV)") else Response.Write("(NYSE: CAV)") end if %> under which Belmont shareholders would receive 0.80 shares of Cavalier stock for each Belmont share they own... ROGUE WAVE SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RWAV)") else Response.Write("(Nasdaq: RWAV)") end if %> slid $1 1/8 to $10 1/8 after the software tools developer announced a 2 million share secondary offering... Diversified insurer HARTFORD LIFE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HLI)") else Response.Write("(NYSE: HLI)") end if %> lost $2 3/8 to $39 after reporting Q2 EPS of $0.53, beating estimates of $0.51.
FOOL ON THE
HILL
An Investment Opinion by Randy
Befumo
Metals Management
What do you do when you realize that your core business sucks? Most corporations
continue on in dead-end, low-return businesses even if they know things will
never get better. Really, what choice do they have? Imagine spending nearly
a decade building a business in one particularly industry, training all the
management and employees to do specific jobs related to that business, and
building a base of shareholders who have purchased the company because they
want to own that business. How can you do anything else?
When General Parametrics faced the fact that its color thermal and dye
sublimation printer business was going nowhere fast in early 1996, the company
did a remarkable thing. Instead of continuing on, General Parametrics closed
that business down, and on April 11, 1996 changed its corporate name to
METALS MANAGEMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTLM)") else Response.Write("(Nasdaq: MTLM)") end if %> in a bid to enter an industry with
better
returns
on equity. A scrap metal recycler, Metals Management was absolutely nothing
like its forerunner General Parametrics. In fact, the only thing that the
two had in common was that some of the personnel were the same.
On April 11, European printer manufacturer Mannesmann Tally purchased General
Parametrics' Spectra*Star business for all of $1.3 million in cash plus some
future royalties. If that sounds cheap, you don't want to know about General's
sale of its VideoShow products in December of 1996 for future royalities
only -- royalties not anticipated to be substantial according to the company's
10-K. After dumping those two businesses, General Parametric started completely
fresh by merging with EMCO Recycling Corp. and going on an acquisition binge
in the scrap metal recycling business that would make Wayne Huzienga proud.
On January 1, the company acquired the MacLeod Group. On January 7, HouTex
Metals was gobbled up. Proler Southwest Inc. became a member of the club
on March 18. On May 1, Reserve Iron & Metal joined the team. On May 19,
Cozzi Iron & Metal was made part of the family. California Aluminum Processor
was assimilated on June 23, and Isaac Group and Ohio Metal Recyler both were
eaten on June 24. Finally, on August 1 the company acquired Houston Compressed
Steel and its share price jumped $2 to $19 1/4. The company is up more than
four-fold from the beginning of the year and has more than doubled since
early June. All of these deals were financed mostly with stock and done at
valuations that were extraordinarily favorable to Metals Management.
The vision that is driving Metals Management is the same vision that drove
Waste Management in its early days. With the scrap metal business mostly
owned by a number of family operators who want to exit the business and in
need of consolidation because of the high capital requirements necessary
to run the business due to environmental regulation, there is room for one
public player to make a number of acquisitions and pyramid them into the
dominant North American processor of scrap metal. The company essentially
buys, processes, and resells scrap metal of any kind to almost anyone who
uses metal.
From a standing start, the company booked $65.2 million in sales in fiscal
1997 and generated an operating loss. Based on the acquisitions made up to
August 1, the company should have annualized gross revenues north of $730
million in fiscal 1998, although it is unclear what kind of profit margin
the company can earn on these revenues. Based on the press releases, Metals
Management has about 21.5 million shares fully diluted, giving it a market
capitalization of $413.9 million. The company had about $5.2 million in long-term
debt when it last reported and an equal amount in cash. All told, this gives
the company a price/sales ratio
of about 0.57, rather low.
The key thing for investors to figure out is what kind of profit margin can
a scrap metal recycling company earn? The solid-waste processing industry
earns margins of around 1.0% to 2.0% on average. With a 1.0% profit margin
on $730 million in revenues, the company would earn around $0.34 EPS per
share. At the current price, it would seem that Metals Management would need
to do 3.0% or better margins or substantially increase revenues in order
to justify the current valuation. Given that the reorganization has effectively
created a new company that the market does not know all that much about,
it may behoove investors to take a closer look at what is going on here with
Metals Management.
CONFERENCE CALLS
TIDEWATER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %>
(800) 475-6701 (#348218) -- replay
PAPA JOHN'S PIZZA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PZZA)") else Response.Write("(Nasdaq: PZZA)") end if %>
(800) 642-1687 (ask for Papa John's Int'l conference call) -- replay
CREE RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREE)") else Response.Write("(Nasdaq: CREE)") end if %>
(800) 642-1687 (code: 523215) -- replay
(706) 645-9291 (code: 523215) -- replay for international callers
08/05/97 (Tuesday)
BA MERCHANT SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BPI)") else Response.Write("(NYSE: BPI)") end if %>
(800) 964-3941 -- replay through 8/7
(402) 344-6640 -- replay for international callers
08/05/97 (Tuesday)
AMRION INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMRI)") else Response.Write("(Nasdaq: AMRI)") end if %> and
WHOLE FOODS MARKETS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WFMI)") else Response.Write("(Nasdaq: WFMI)") end if %>
(800) 633-8284 (code: 2979188) -- replay through 8/7
08/05/97 (Tuesday)
CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>
(800) 633-8284 (code: 2875731) -- replay through 8/15
08/06/97 (Wednesday)
ECSOFT GROUP PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ECSGY)") else Response.Write("(Nasdaq: ECSGY)") end if %>
11:00 a.m. EDT
(800) 263-9150 -- live
(0500) 701 087 -- UK
+44 (0)171 335 1400 -- International
THIS WEEK'S CONFERENCE CALL SYNOPSES
NAT'L SEMI - CYRIX (Merger)
Call
ATLAS AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATLS)") else Response.Write("(Nasdaq: ATLS)") end if %> Call
WE
DELIVER - Get The Evening News delivered
to your e-mailbox every evening!
ANOTHER FOOLISH
THING
The Industry Snapshot
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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), and yet
another Fool
Editing