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HEROES

Casual dining restaurant operator and franchisor Applebee's International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APPB)") else Response.Write("(Nasdaq: APPB)") end if %> jumped $2 5/8 to $24 7/8 after reporting first quarter earnings of $0.39 a share, up from $0.34 and higher than the $0.36 predicted by analysts. The better-than-expected EPS, resulting from cuts in labor costs and other expenses, came as a surprise because the company had warned last December and again as recently as early February that higher costs associated with the rollout of new menu items would continue to hurt margins in the first half of this year. Applebee's has been phasing in "enhanced" food offerings and new plateware in its 979 Applebee's restaurants. In late December, the company and its largest franchisee, Apple South <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APSO)") else Response.Write("(Nasdaq: APSO)") end if %>, severed ties after Applebee's refused to give the franchisee more territory to build restaurants. As a result, Apple South, which had tried to acquire Applebee's in 1994, decided to sell its 264 Applebee's restaurants -- including 33 to the franchisor -- that had generated half of its revenues and focus on its other restaurants. Applebee's now says Q1 performance "gives us added confidence that we are well positioned to continue delivering improved results."

Chip-to-chip interface company Rambus Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMBS)") else Response.Write("(Nasdaq: RMBS)") end if %> gained $1 15/16 to $44 15/16 after company Chief Financial Officer Gary Harmon said at the Hambrecht & Quist Technology Conference that the company expects high-margin royalty revenues to increase to 50% of revenues by 1999, up from the latest 25% level. That's good news for the company, which was a long-awaited Silicon Valley initial public offering (IPO) in 1997. Its chip-to-chip interface is seen as a crucial element in improving the performance of PCs and other devices that are hampered by electrical connections between semiconductor devices. Those electrical connections bring the benchmark performances of devices down to their real-world performance levels. Despite the company's guidance on margins, Rambus investors want to see topline growth. At 50 times annualized revenues, last quarter's 6.8% sequential contraction in royalty revenues and 2.8% sequential increase in total revenues were paltry growth results for one of the hottest IPOs of 1997 and explain why the stock is down from a 52-week high of $86 3/4.

Seattle-based drug developer PathoGenesis Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PGNS)") else Response.Write("(Nasdaq: PGNS)") end if %> gained $1 7/8 to $39 5/8 in heavy trading after reporting its first profitable quarter, thanks to rapid acceptance by doctors and cystic fibrosis patients of its new antibiotic TOBI (tobramycin solution for inhalation) since the lung drug was launched in January. The biotechnology company reported first quarter earnings of $0.06 per share, compared with a loss of $0.43 a year earlier and the analysts' mean estimate of a loss of $0.09. Unlike many biotech companies, PathoGenesis has opted to go solo in marketing and selling its first drug, which received FDA approval in December. Investors who have plowed into the company's stock and driven it up from its IPO price of $10 in November 1995 to as high as $40 3/4 last October are confident that TOBI will be preferred over existing injection forms of tobramycin as being safer and more effective. Although the company doesn't expect sales to increase dramatically until the fourth quarter, it expects profitable quarters for the remainder of 1998 and a profitable year as a whole. PathoGenesis is also testing the use of TOBI for tuberculosis and bronchiectasis, a severe form of chronic bronchitis.

QUICK TAKES: General Electric <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> rose $2 7/8 to $85 3/16 after CBS Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBS)") else Response.Write("(NYSE: CBS)") end if %> reported strong results across the board, with radio, TV, and cable posting strong cash flow advances. With GE investors somewhat tentative about the prospects for NBC and its cable networks in advance of the end of the run for Seinfeld and the loss of the NFL, strong industry fundamentals as shown in the CBS results were encouraging. CBS added $11/16 to $35 5/8... McDonald's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %> gained $2 9/16 to $61 7/8 after the fast food giant announced that Jack Greenberg, currently company vice chairman and head of McDonald's USA, will succeed Michael Quinlan as president and CEO effective August 1. Quinlan, who has been CEO since 1987, will stay on as chairman of the Board of Directors.

Drug maker Merck <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %> charged ahead $4 1/2 to $120 1/2 after announcing that a study has shown that its Maxalt (rizatriptan benzoate) drug eliminated migraine pain significantly faster than oral sumatriptan, the leading oral migraine treatment... Banks moved up today as concerns over a potential interest rate hike eased after the employment cost index came in lower than expected. Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %> jumped $3 7/16 to $138 9/16, Citicorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %> rose $1 3/4 to $150 1/2, NationsBank <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NB)") else Response.Write("(NYSE: NB)") end if %> advanced $2 3/16 to $76, and its merger partner BankAmerica <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> tacked on $3 1/4 to $85 1/4. First Chicago NBD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FCN)") else Response.Write("(NYSE: FCN)") end if %> rose $1 15/16 to $92 7/8, and Wachovia <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WB)") else Response.Write("(NYSE: WB)") end if %> was lifted $2 1/4 to $84 15/16. Government-backed lenders also rose: Fannie Mae <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FNM)") else Response.Write("(NYSE: FNM)") end if %> added $1 7/16 to $59 7/8, and Freddie Mac <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRE)") else Response.Write("(NYSE: FRE)") end if %> gained $2 3/16 to $46 7/16.

Internet content aggregator Lycos Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> jumped $6 1/8 to $61 13/16 after announcing that it has acquired WiseWire Corp. and its proprietary technology for directory-building on the Internet for about $39.75 million in Lycos shares. The acquisition allows Lycos to integrate an automated World Wide Web directory with search results found by the Lycos Web spider. Competitor Excite Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> climbed $3 to $66 7/8, and Infoseek Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> advanced $1 5/16 to $33 5/8... The Limited <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTD)") else Response.Write("(NYSE: LTD)") end if %> rang up $1 15/16 to $33 9/16 after Merrill Lynch raised its short-term rating on the company to "accumulate" from "neutral," keeping the long-term "accumulate" rating.

Portland-based utility company PacifiCorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PPW)") else Response.Write("(NYSE: PPW)") end if %> advanced $9/16 to $23 1/8 after announcing it will not raise its revised bid to acquire U.K.'s The Energy Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TEG)") else Response.Write("(NYSE: TEG)") end if %>, which fell $1 3/4 to $56 5/16. This clears the way for rival Texas Utilities <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXU)") else Response.Write("(NYSE: TXU)") end if %>, which is urging Energy Group shareholders to accept its bid of 840 pence (about $14) per share in cash. Texas Utilities added $15/16 to $40... Pittsburgh-based H. J. Heinz Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HNZ)") else Response.Write("(NYSE: HNZ)") end if %> rose $1 3/16 to $54 1/2 after Merrill Lynch raised its rating on the food products company to a short- and long-term "buy"... Process manufacturing software company Marcam Solutions <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRCM)") else Response.Write("(Nasdaq: MRCM)") end if %> surged a second day, gaining $2 3/4 to $16 after reporting breakeven Q2 EPS compared with a pro forma loss of $1.73 a share for the prior-year period.

Information technology and staffing services provider Metamor Worldwide <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MMWW)") else Response.Write("(Nasdaq: MMWW)") end if %> leapt $4 1/4 to $38 1/4 after announcing plans to sell its staffing services business, which last year accounted for about 47% of the company's consolidated revenues and 34% of operating income. The company also reported Q1 EPS excluding discontinued operations of $0.21, up from $0.09 the year earlier... Internet solutions developer Online System Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WEBB)") else Response.Write("(Nasdaq: WEBB)") end if %> logged on $1 7/16 to $14 15/16 after announcing a partnership with privately held Phasecom Inc., which develops voice and data communications products for cable TV networks, to deliver a "total Internet solution" to cable operators across the Americas.

Neurex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NXCO)") else Response.Write("(Nasdaq: NXCO)") end if %>, which develops "pain management" drugs, gained another $1 1/2 to $29 15/16 after agreeing to merge with Irish drug developer Elan Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ELN)") else Response.Write("(NYSE: ELN)") end if %>, which rose $3 1/4 to $62 1/8... Direct marketing and customer care services company TeleSpectrum Worldwide <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLSP)") else Response.Write("(Nasdaq: TLSP)") end if %> bounced back $11/16 to $8 11/16 subsequent to slipping slightly yesterday after reporting a previously announced Q1 loss from continuing operations of $0.42 per share... Telecommunications systems and software developer Ciena Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> added another $3 5/8 to $55 3/4 after late Tuesday announcing it has won a one-year contract to supply its dense wavelength division multiplexing (DWDM) system to Hermes Europe Railtel, which will use the system to resell bandwidth along its fiber optic network in Europe. Merrill Lynch upgraded the Ciena on the news yesterday, raising its near-term rating on the company to "accumulate" from "neutral."

Bio-Technology General <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BTGC)") else Response.Write("(Nasdaq: BTGC)") end if %> jumped $1 7/32 to $8 29/32 after announcing that an oral contraceptive incorporating the biopharmaceutical company's patented dosing regimen licensed to an affiliate of Organon Inc. has received FDA marketing approval... International Home Foods <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IHF)") else Response.Write("(NYSE: IHF)") end if %> rose $2 5/16 to $30 after Merrill Lynch upgraded its short-term rating on the company to "buy" from "accumulate."

Earnings Movers

Encore Wire <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WIRE)") else Response.Write("(Nasdaq: WIRE)") end if %> up $2 1/2 to $38 3/4; Q1 EPS: $0.58 vs. $0.38 last year; Estimate: $0.57 (single analyst)

FBL Financial Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FFG)") else Response.Write("(NYSE: FFG)") end if %> up $3 3/8 to $28 3/4; Q1 EPS (adjusted): $0.34 vs. $0.29 last year; Estimate: $0.34

Haggar Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HGGR)") else Response.Write("(Nasdaq: HGGR)") end if %> up $1/2 to $14 5/8; Q2 EPS: $0.14 vs. $0.05 last year; Estimate: $0.08

Home Security International <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HSI)") else Response.Write("(AMEX: HSI)") end if %> up $2 5/8 to $13 5/8; Q3 EPS: $0.20 vs. $0.12 last year

Intelligroup Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITIG)") else Response.Write("(Nasdaq: ITIG)") end if %> up $1 3/4 to $20 1/2; Q1 EPS: $0.15 vs. $0.08 last year; Estimate: $0.13

Maximus Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMS)") else Response.Write("(NYSE: MMS)") end if %> up $3 5/8 to $31 1/2; Q2 EPS: $0.22 vs. $0.35 last year; Estimate: $0.22

Performance Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTIX)") else Response.Write("(Nasdaq: PTIX)") end if %> up $1 to $15; Q1 EPS: $0.18 vs. $0.15 last year; Estimate: $0.17

Watson Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WPI)") else Response.Write("(NYSE: WPI)") end if %> up $3 1/2 to $43 1/16; Q1 EPS: $0.34 (before charges) vs. $0.24 last year; Estimate: $0.32

GOATS

USWeb Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USWB)") else Response.Write("(Nasdaq: USWB)") end if %> dropped $2 5/8 to $22 13/16 as the provider of Internet consulting services said in a federal filing that it is expecting "substantial operating losses through at least 1998." Last week, the firm reported a Q1 net loss of $3.3 million (excluding acquisition-related charges) and 29% sequential revenue growth to $13.7 million. However, the filing stated that the revenue growth "may not be sustainable." By yesterday's close, the company's share price had risen 239% from its December initial public offering price $7.50 per share, as investors have gobbled up shares of businesses related to the Internet in anticipation of future growth. With USWeb, though, earnings are not "just around the corner." For fiscal 1998, the Street is expecting a $0.12 per share loss.

Healthcare facility REIT National Health Investors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NHI)") else Response.Write("(NYSE: NHI)") end if %> sank $2 13/16 to $33 5/8 after reporting Q1 funds from operations (FFO) of $0.76 per share versus $0.78 a year ago, missing the First Call mean estimate of $0.83. Total revenues fell 1.4% to $26.1 million in the quarter while net income slipped 0.5% to $17.8 million. More ominous, though, was a 13.4% fall in interest income from mortgages during the period to $14.2 million. The REIT attributed the drop to about $40 million in prepayments and "normal amortization" of mortgages, which reduced the value of the real estate assets carried on its balance sheet by about $28 million compared to a year ago. Additionally, an unspecified borrower repaid a $150 million mortgage in Q4, adding to the amount of funds sitting in the REIT's coffers instead of generating higher rates as loans.

QUICK CUTS: Front-office automation software developer Vantive Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VNTV)") else Response.Write("(Nasdaq: VNTV)") end if %> dropped $2 1/8 to $32 after reporting Q1 EPS of $0.14, a penny ahead of the First Call mean estimate but shy of the high-side number of $0.15... Oil and natural gas drilling services provider Patterson Energy <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTEN)") else Response.Write("(Nasdaq: PTEN)") end if %> slid $1 to $14 after its chairman said soft demand for drilling rigs is "not expected to improve without an improvement in... commodity prices"... Software developer Borland International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BORL)") else Response.Write("(Nasdaq: BORL)") end if %> fell $11/16 to $10 after the company said it would roll out several "middleware" products for companies in the next couple of months and announced it will change its name to Inprise Corp., pending approval by shareholders.

AMF Bowling <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PIN)") else Response.Write("(NYSE: PIN)") end if %>, the holding company of bowling alley operator AMF Worldwide, dropped $1 1/16 to $28 15/16 after Moody's assigned a "B3" rating to the company's offering of $200 million of zero-coupon convertible notes... Healthcare provider Concentra Managed Care <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCMC)") else Response.Write("(Nasdaq: CCMC)") end if %> lost $1 5/8 to $31 1/8 after reporting Q1 EPS of $0.22 per share (excluding acquisition-related charges), which was in line with the First Call mean estimate... Aftermarket Technology Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATAC)") else Response.Write("(Nasdaq: ATAC)") end if %> stalled $2 3/8 to $19 1/2 after the distributor of remanufactured auto engines and transmissions reported Q1 EPS of $0.30 (before $400,000 in charges), which was on target with the Street's estimate... Computer network security products developer CyberGuard Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYBG)") else Response.Write("(Nasdaq: CYBG)") end if %> slid $7/8 to $14 7/8 after reporting a fiscal Q3 operating loss of $0.20 per share, which was slightly worse than the expected loss of $0.19 per share.

Renaissance Worldwide <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: REGI)") else Response.Write("(Nasdaq: REGI)") end if %>, a provider of contract information technology consultants, fell $2 11/16 to $17 15/16 after reporting Q1 EPS of $0.15, missing the First Call mean estimate of $0.18. While both gross margins and operating margins improved, the company's topline contracted by 26%... Celeritek Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLTK)") else Response.Write("(Nasdaq: CLTK)") end if %>, which makes high-frequency radio products for cellular phones, dropped $1 1/8 to $10 1/8 after reporting Q4 EPS of $0.11, which was short of the $0.17 expected by the sole analyst surveyed by First Call. The company's president and CEO expects sequentially flat or slightly lower earnings in fiscal Q1. CIBC Oppenheimer downgraded the stock to "hold" from "strong buy."

Animal health products maker Heska Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HSKA)") else Response.Write("(Nasdaq: HSKA)") end if %> slid $5/8 to $13 after reporting a pro forma Q1 loss of $0.46 per share. The Street was expecting a loss of $0.42 per share... Basin Exploration <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BSNX)") else Response.Write("(Nasdaq: BSNX)") end if %> was drilled for $2 5/8 to $19 7/8 after the oil exploration firm was downgraded to "underperform" from "hold" at Jefferies & Co... Gold mining stocks fell today as the price of the commodity slumped to a four-week low of $307.90 per ounce on the New York Mercantile Exchange. The decline followed the release of the employment cost index, which showed little inflation in the U.S. economy. Newmont Gold Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NGC)") else Response.Write("(NYSE: NGC)") end if %> slid $1 1/4 to $32 3/8, Barrick Gold Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABX)") else Response.Write("(NYSE: ABX)") end if %> slumped $13/16 to $22 7/16, Placer Dome <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PDG)") else Response.Write("(NYSE: PDG)") end if %> slipped $1/2 to $14 3/4, and Newmont Mining Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NEM)") else Response.Write("(NYSE: NEM)") end if %> sank $11/16 to $32 3/16.

FOOL ON THE HILL
An Investment Opinion
by Alex Schay

Simula Beats Expectations

Topline growth has never been a problem at Simula Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SMU)") else Response.Write("(NYSE: SMU)") end if %>. Since 1992, the manufacturer of transportation safety and energy absorption products has managed to grow its revenue at a compound rate of 36%. Over the last year, however, as that revenue has made its descent to the bottom line, the end result has been an unpredictable affair. Today, Simula gained $11/16 to $17 7/16 after providing some hope for its investors, reporting flat first quarter 1998 EPS, compared with estimates for a loss of $0.04.

In many cases, the blame for extended variability in operating results can be laid at the feet of management. While this may be a harsh assessment, a company with proven topline growth over many years has cleared one of the most daunting hurdles in business -- demonstrating a demand for its products in the marketplace -- and stumbling on the execution end of managing that growth is almost always the fault of management.

The point here is not to play the blame game, but to realize that tremendous opportunity can exist in these situations. First, a look at Simula's products is in order. The company's business is divided into three segments, all of which have something to do with the company's core defense-era competence of designing and manufacturing safety restraints that save lives. The company makes commercial seating for airlines, rail, and other mass transit vehicles. Simula is also the world's leading supplier of energy-absorbing seating systems for military helicopters, and through its defense contracting unit produces such items as lightweight advanced armor systems, inflatable restraints for aircraft, and lightweight vacuum-packed parachutes. The company also operates an automobile safety systems arm, which makes a variety of technologically advanced airbags.

Looking at a company's numbers can be an engaging affair. Each opportunity should be looked at as a chance to understand a story. A chart of Simula's recent returns tells an intriguing tale. The company's returns cratered between the second quarter and third quarter of last year, but since then management has put the company back on course. (AOL users, please expand screen to view table.)

                   Q1'97      Q2         Q3         Q4      Q1'98
 
 Revenue (000s)   $17,826   $20,065    $23,643    $28,888   $28,004
 
 Gross Margin       28.4%    31.90%     14.33%     19.76%    25.21%
 
 Operating Margin   0.04%     6.59%    -10.31%     -3.17%     0.05%
 
 EPS              ($0.06)    $0.00     ($0.26)    ($0.14)    $0.00

CONFERENCE CALLS

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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool Editing Brian Bauer (TMF Hoops), another Fool Jennifer Silber (TMF Amused), Fool at last