DJIA 7933.25 +37.59 (+0.48%) S&P 500 1023.89 +3.80 (+0.37%) Nasdaq 1680.43 +16.66 (+1.00%) Value Line ndx 790.92 -3.06 (-0.39%) 30-Year Bond 105 24/32 +12/32 5.12% Yield
Integrated circuits developer Broadcom Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRCM)") else Response.Write("(Nasdaq: BRCM)") end if %> jumped $3 1/8 to $78 1/8 after announcing it has integrated all of the cable modem media access control (MAC) and physical layer transmission functionality into a single chip instead of three. The company said this will mean that next-generation cable modems will be smaller and cost less for consumers and will be able to deliver data, digital video, telephony, and Internet access at speeds up to 56 megabits-per-second -- 1,000 times faster than standard 56k voice-band modems. Broadcom's new chip has the circuitry for phone connections through TV cable, which would allow cable companies to offer Internet access at rates more competitive with phone companies. According to The Wall Street Journal, the new chips are expected to cost around $50 each in small allotments -- about the same as the current three-chip set -- but maybe half that or less in large orders.
Government-sanctioned satellite communications services company COMSAT Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CQ)") else Response.Write("(NYSE: CQ)") end if %> gained $1/4 to $34 3/8 after announcing that it will be acquired by aerospace and defense giant Lockheed Martin <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LMT)") else Response.Write("(NYSE: LMT)") end if %> in a two-phase deal valued at around $2.7 billion. Phase One will involve a cash tender offer for 49% of COMSAT shares for $45.50 a share, and Phase Two, contingent on pending legislation and regulatory approval, will involve a stock swap exchanging half a share of Lockheed stock for each COMSAT share. Lockheed dropped $4 7/8 to $95 1/8. The proposed merger likely will face strict scrutiny by FCC regulators. The announcement comes two months after Lockheed and defense contractor Northrop Grumman <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOC)") else Response.Write("(NYSE: NOC)") end if %> called off their proposed marriage after the Justice Department sued to block the $8.3 billion merger on antitrust grounds. Lockheed Martin itself was formed from the merger between Lockheed and Martin Marietta. Lockheed anticipates that this time around the engagement/approval process will take roughly six to nine months. For more details, see today's debut of Breakfast With the Fool.
QUICK TAKES: Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> rose $1 3/16 to $62 1/4 after announcing the availability of a universal broadband router 904 (uBR904) cable modem for accessing the Internet aimed at the small office, home office, and telecommuter markets... Software giant Microsoft Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> picked up $2 1/2 to $107 7/8 and Pentium chip maker Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> gained $1 5/8 to $84 5/8 after the two announced that Chrysler <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %> will begin adopting the Intel architecture and the Microsoft Windows NT Workstation operating system... Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> moved up $1 to $31 5/8 as it announced a marketing alliance with Eicon Technology, a provider of remote access products, by which the two will jointly promote Compaq Remote Access Servers in Europe.
3Com Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> was up $1 5/8 to $32 1/16 in advance of the computer networking company reporting fiscal first quarter earnings tomorrow... Chip maker Micron Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> gained another $2 1/8 to $32 after the company last week reportedly said at a NationsBanc Montgomery Securities conference that it's starting to charge more for some of its dynamic random access memory (DRAM) chips due to strong demand... Telecommunications powerhouse MCI WorldCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> advanced $1 to $47 5/8 after its global information technology services company MCI Systemhouse won a five-year, $38 million contract with British Energy plc.
Bristol-Myers Squibb <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BMY)") else Response.Write("(NYSE: BMY)") end if %> climbed $1 9/16 to $103 1/4 as the health and personal care company announced plans to divest three well-known but non-core consumer brands in the U.S. and Canada: Vitalis men's hair grooming products, Ammens all-family medicated powder, and Final Net women's non-aerosol hair spray... Internet search engine and portal company Infoseek Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> added $13/16 to $21 5/16 after announcing that the company and Walt Disney Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %>, which owns a 43% stake in Infoseek, will launch a new website called the "Go Network" (www.go.com), which will take over Infoseek's role as a portal service, leaving the Infoseek name on just the company's search and directory services.
Milwaukee-based diagnostic cardiology and patient monitoring devices maker Marquette Medical Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MARQ)") else Response.Write("(Nasdaq: MARQ)") end if %> powered up $15 1/8 to $42 1/2 on news that it will be acquired by GE Medical Systems, a unit of General Electric <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %>, for $45 a share in GE stock. GE Medical provides medical diagnostic imaging systems and services. GE finished up $1 3/8 to $79 1/4... Client/server enterprise resource planning software developer Platinum Software Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSQL)") else Response.Write("(Nasdaq: PSQL)") end if %> recovered $2 1/16 to $10 1/16 after saying it is "unable to explain" the roughly 37% drop in its stock price Friday. George Klaus, the company's chairman, president, and CEO, called rumors saying he was leaving the company "baseless"... Drug developer Agouron Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AGPH)") else Response.Write("(Nasdaq: AGPH)") end if %> leapt $2 5/16 to $33 13/16 after Lehman Brothers raised its rating on the company to "buy" from "outperform" and its fiscal 1999 EPS to $1.33 from $0.94.
Drug company Sepracor Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEPR)") else Response.Write("(Nasdaq: SEPR)") end if %> gained $5 3/4 to $63 1/4 as Schering-Plough <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGP)") else Response.Write("(NYSE: SGP)") end if %> entered Phase III research for desloratadine, which it licensed from Sepracor... Aerospace adhesive maker Cytec Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CYT)") else Response.Write("(NYSE: CYT)") end if %> jumped $2 1/16 to $17 15/16 on optimism that the company may soon announce a share buyback, Bloomberg reported... Harvey Entertainment Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HRVY)") else Response.Write("(Nasdaq: HRVY)") end if %>, owner of such proprietary characters as Richie Rich and Casper the Friendly Ghost, jumped $1 9/16 to $8 1/16 after announcing it has hired Donaldson, Lufkin & Jenrette to advise the company on "strategic alternatives intended to maximize shareholder value" (read: possible sale)... Diagnostic devices maker Gamma Biologicals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GBL)") else Response.Write("(NYSE: GBL)") end if %> added $2 1/8 to $5 on news that Immucor Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BLUD)") else Response.Write("(Nasdaq: BLUD)") end if %> will acquire the company through a cash tender offer of $5.40 a share.
Document management and transcription services firm MedQuist Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MEDQ)") else Response.Write("(Nasdaq: MEDQ)") end if %> gained $1 1/16 to $28 1/16 after announcing it will acquire privately held MRC Group for $229.5 million in stock... Wireless telecommunications consulting firm LCC International (Nasdaq : LCCI) picked up $2 to $9 5/8 after announcing it will exchange its test and measurement equipment business for Allen Telecom's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALN)") else Response.Write("(NYSE: ALN)") end if %> Comsearch division's engineering, software, and consulting business... Norwood Promotional Products <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NPPI)") else Response.Write("(Nasdaq: NPPI)") end if %> picked up $1 7/8 to $18 3/4 after announcing that it has been advised by FPK, LLC, which previously proposed acquiring the promotional products supplier, that it has obtained new financing for the merger, by which Norwood would be bought for $20.70 per share in cash.
Picking up where French telecommunications equipment maker Alcatel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALA)") else Response.Write("(NYSE: ALA)") end if %> left off last week, the Netherlands' Philips Electronics N.V. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PHG)") else Response.Write("(NYSE: PHG)") end if %> dropped $5 to $46 today after continuing the recent string of profit warnings from companies across the Atlantic. The electronics firm said it will report a "significant decline" in fiscal Q3 earnings, which will contribute to flat year-over-year operating income for fiscal 1998. Philips laid the blame for the underperformance at the doorstep of its Philips Consumer Communications telecom equipment joint venture with Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>, which has been bleeding more red ink this year than originally anticipated. On the other hand, the company's semiconductor business is expected to report "somewhat lower, but still very respectable margins" in Q3. That less-than-rosy forecast helped fellow European chipmaker STMicroelectronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STM)") else Response.Write("(NYSE: STM)") end if %> shed $1 1/8 today to $52 1/4.
Trane air conditioning systems, plumbing products, and automotive components manufacturer American Standard Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ASD)") else Response.Write("(NYSE: ASD)") end if %> was cracked for an $8 3/4 loss to $25 1/4 after saying its fiscal Q3 EPS will be "close" to the $0.88 per share expected by analysts. However, fiscal 1998 earnings will come in between $2.90 and $3 per share, which will miss the $3.10 per share the company said the Street had been anticipating. The company warned that "economic turmoil in Eastern Europe, Russia, and now Latin America are adding to pressures already created by the weakness in the Far East." Among these problems, the company is facing reduced demand for air conditioning systems, which has manifested itself in increased pricing pressures and customers asking to hold back on delivery of orders. Shareholders are hoping the company will act quickly to address the challenges and keep its equity holders from getting the deep freeze.
QUICK CUTS: Internet marketing firm Think New Ideas <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THNK)") else Response.Write("(Nasdaq: THNK)") end if %> went brain dead today, falling $1 3/4 to $6 3/4 after saying it will report a fiscal Q1 loss of between $0.05 and $0.09 per share, missing the First Call mean estimate for profits of $0.06 per share... United Airlines parent UAL Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %> skidded $1 1/4 to $68 1/4 after president and COO (and possible CEO successor candidate) John Edwardson resigned on Friday... Medical stent maker Arterial Vascular Engineering <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVEI)") else Response.Write("(Nasdaq: AVEI)") end if %> fell $1/2 to $43 5/8 after an analyst told the The Wall Street Journal's "Heard on the Street" column that the Street's mean fiscal 1999 earnings estimate for the firm is too high, given that the company will face increased competition in the stent market. Rival Boston Scientific <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSX)") else Response.Write("(NYSE: BSX)") end if %> fell $5 1/2 to $58 3/16.
Food storage container direct marketer Tupperware Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TUP)") else Response.Write("(NYSE: TUP)") end if %> melted $3 13/16 to $14 3/8 after saying that foreign exchange losses will reduce its fiscal Q3 EPS by $0.03 to $0.05 and will lead to a "modest loss" in the period. The First Call mean estimate for the period called for EPS of $0.09... Newspaper publisher New York Times Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NYT)") else Response.Write("(NYSE: NYT)") end if %> was shredded $1 5/16 to $27 7/8 after Salomon Smith Barney lowered its rating to "neutral" from "outperform"... Wireless handsets wholesaler and retailer CellStar Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLST)") else Response.Write("(Nasdaq: CLST)") end if %> was cut $2 11/16 to $5 after saying the economic problems in Asia and Latin America and a new accounting policy to recognize the losses from its investment in privately held Topp Telecom Inc. will result in fiscal Q3 earnings below the First Call mean estimate of $0.31 per share.
Flat rolled steel processor Steel Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STTX)") else Response.Write("(Nasdaq: STTX)") end if %> slipped $5/8 to $7 1/4 after saying this summer's strike at General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> and start-up costs for its Mi-Tech Steel joint venture will result in fiscal Q4 EPS between $0.09 and $0.10, missing the Street's mean estimate of $0.21... Drug developer Hemispherx Biopharma <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HEB)") else Response.Write("(AMEX: HEB)") end if %> fell another $3/8 to $8 after the company said on Friday that it had discovered alleged illegal short selling of its shares... Specialty chemical and minerals company Amcol International Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACOL)") else Response.Write("(Nasdaq: ACOL)") end if %> spilled $2 3/8 to $10 7/8 after saying the strong dollar and British pound caused margins for its overseas environmental businesses to fall, which will result in fiscal Q3 EPS 14% to 22% below the First Call mean estimate of $0.28.
Irrigation equipment maker Lindsay Manufacturing Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LNN)") else Response.Write("(NYSE: LNN)") end if %> was soaked $2 1/4 to $15 3/4 after saying its fiscal Q1 and Q2 earnings and revenues in fiscal 1999 will be lower than last year. On the bright side, the company said its earnings in Q4 and for fiscal 1998 "should be in line with expectations"... Copier maker Xerox Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XRX)") else Response.Write("(NYSE: XRX)") end if %> was burned $4 to $79 9/16 after Lehman Brothers cut its fiscal Q4 and 1999 earnings estimates due to fears of slowing global growth rates... Shares of industrial gas company Praxair (NYSEL: PX) evaporated $2 13/16 to $32 13/16 after the company said the strong dollar, the recent General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> strike, and unusually warm summer weather in the U.S. will result in fiscal 1998 earnings about $0.10 per share below the First Call mean estimate of $2.70 per share.
Celadon Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLDN)") else Response.Write("(Nasdaq: CLDN)") end if %>, a trucking company that specializes in hauling goods between the U.S. and Mexico, skidded $4 13/16 to $10 on concerns that a planned management-led buyout of the firm may not be able to obtain the necessary funding... Swiss implantable medical devices maker Sulzer Medica <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SM)") else Response.Write("(NYSE: SM)") end if %> skipped a beat and fell $1 to $17 7/8 after pacemaker developer Guidant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GDT)") else Response.Write("(NYSE: GDT)") end if %> agreed to buy the firm's pacemaker, defibrillators, and ablation catheters business for between $775 million and $850 million. Guidant dropped $1 3/16 to $74.
FOOL
ON THE HILL
An Investment Opinion
by
Alex Schay
Balance Sheet Basics
The balance sheet is what ultimately drives earnings performance. Novice investors often forget that changes in balance sheet accounts eventually result in earnings changes. While most investors scan the changes that occur in balance sheet numbers every quarter and take note of "large" variations in accounts, such as a big increase in shareholders' equity in tandem with a correspondingly large increase in property plant and equipment, an interesting exercise (if only to confirm that balance sheets do indeed balance) is to construct a "sources and uses" table.
This exercise will give the investor an exacting portrait of where the money came from and where it went during a defined period in the firm's operating history. Considering the fact that cash can be generated either by reducing an asset or by increasing a liability -- like selling off property or taking on more bank loans -- the opposite is true when considering the various "uses" of cash that a firm has at its disposal. So, taking a look at the most recent balance sheet of American Standard Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ASD)") else Response.Write("(NYSE: ASD)") end if %> would yield the following Sources & Uses Table for the first six months of the year (in millions):
Sources Reduction in goodwill (no cash) $1 Increase in current maturities of L.T. debt $140 Increase in accounts payable $58 Increase in accrued payrolls $28 Increase in other accrued liabilities $114 Increase in reserve for retirement benefits $18 Increase in shareholders' equity $83 (decrease in the deficit) Total Sources $442 Uses Increase in cash and cash equivalents $44 Increase in accounts receivable $160 Increase in total inventories $63 Increase in "other current assets" $18 Increase in "facilities" $31 Increase in "other assets" $53 Reduction in loans payable to banks $37 Reduction in long term debt $30 Reduction in other liabilities $6 Total Uses $442If one were to take this sources and uses statement, expand it into three categories, and then add some more details concerning inflows and outflows, one would basically have a statement of cash flows. Net of the non-cash items and indirect sources of cash, a big contributor to American Standard's pool of cash over the last six months has been equity, with a lot of working capital getting tied up in burgeoning inventory (customers holding off on orders) and receivables.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
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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
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