CONFERENCE CALLS

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FOOL PLATE SPECIAL

The Spinal-Cage Market

SPINE-TECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPYN)") else Response.Write("(Nasdaq: SPYN)") end if %> surged $1 3/4 to $25 1/2 this morning after the Food and Drug Administration (FDA) approved the firm's BAK Interbody Fusion System for use in the United States. The Minneapolis-based firm has had its BAK system approved in more than twenty countries, a key factor in the 100% increase the shares have seen over the past few months. The medical device firm has developed a patented series of implantable devices, proprietary instruments and surgical techniques designed to treat chronic lower back pain. The BAK system stabilizes vertebrae in the lumbar spine by fusing them together in order to counteract the effects of degenerative disc disease. Degenerative disc disease occurs when the cartilage that separates two vertebrae wears or dries out. Spinal fusion theoretically solves this by inserting a bone chip between the two vertebrae and causing them to grow into one unit. It does not end at the lumbar spine for Spine-Tech, though -- the company has clinical trials going for two similar systems that work on the thoracic (BAK/T) and cervical (BAK/C) spine. In this so-called spinal-cage market, Spine-Tech's only competitor is U.S. SURGICAL'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USS)") else Response.Write("(NYSE: USS)") end if %> Surgical Dynamics unit, which has a similar product called Ray awaiting FDA approval.

Spine-Tech's current valuation is not without it critics, however. Hambrecht & Quist analyst Robert Faulkner sliced his rating on Spine-Tech from strong buy to buy back on August 12th, citing its rather lofty price of $23 at the time and aggressive sales estimates from competing investment banks. Faulkner admitted in his research note that BAK/L faced imminent FDA approval and could quite possibly be the most successful orthopedic product ever, but noted that some caution was warranted. The shares traded down to $19 the day following his downgrade. Faulker estimates the total market for this procedure will be about $155 million in the year 2000, of which Spin-Tech will have a 58% market share and US Surgical will hold 38% of the market. Faulkner believes that SOFAMOR/DANEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SDG)") else Response.Write("(NYSE: SDG)") end if %> will have its own spinal cage product by then, taking up the remainder of the market. A major variable, however, is whether or not US Surgical and Sofamor/Danek have their products approved.

What is particularly noteworthy is the fact that most back operations are unsuccessful; if Spine-Tech really has something that works, it virtually operates in wide-open market. However, some physicians are openly critical of the fusion approach, citing that a high number of patients get no relief from their pain. Many who suffer from disc degeneration simply need physical rehabilitation and regular exercise, not spinal fusion. Spinal fusion rose to prominence after the development of pedicle screws for holding the bone chips in place by companies like Sofamor/Danek and privately-held ACROMED CORP. Some physicians have found that the dramatic procedures required to place the screws caused more residual pain than the actual pre-existing back pain -- a disturbing conundrum. With a market capitalization of $255 million and forward estimates of $0.57 EPS, the stock is not cheap by any stretch -- at the current quote, spinal fusion needs to become a common procedure, more successful than Faulkner's estimates, to warrant the valuation.

UPS

EXIDE ELECTRONICS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XUPS)") else Response.Write("(Nasdaq: XUPS)") end if %> was up $2 1/8 to $11 1/4 on news that it has received a contract worth $625 million from the Air Force to supply its Uninterruptible Power Systems. The system protects computers and electronic equipment against loss of electric power.

Telecommunications equipment concern TELCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TELC)") else Response.Write("(Nasdaq: TELC)") end if %> popped up $1 5/8 to $18 3/8 after an upgrade by Merrill Lynch from "neutral" to "near-term accumulate."

ARRIS PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARRS)") else Response.Write("(Nasdaq: ARRS)") end if %> was up $1 3/32 to $13 3/32 after being described as a very appealing bio-tech company in the "Up & Down Wall Street" section of this week's Barron's. The company is in the late stages of testing a promising new asthma drug.

Timeshare resort developer SIGNATURE RESORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIGR)") else Response.Write("(Nasdaq: SIGR)") end if %> zoomed up $1 1/8 to $21 3/8 after announcing that it would acquire AVCOM INTERNATIONAL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVMI)") else Response.Write("(Nasdaq: AVMI)") end if %> for $28.8 million in Signature stock. AVCOM is the parent company of All Seasons Resorts Inc., an operator of timeshare resorts in Arizona, California and Texas.

INVISION TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVN)") else Response.Write("(Nasdaq: INVN)") end if %> jumped $1 5/8 to $24 1/4, benefiting from an article on bomb detection firms in today's Wall Street Journal. The story highlighted the fact that Invision's CTX-5000 detection device was the only device mentioned by name in President Clinton's anti-terrorism proposal.

Word of a public offering had stock of VERITAS DGC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VTS)") else Response.Write("(NYSE: VTS)") end if %> up $1 1/4 to $17. The seismic data provider will offer $75 million in senior notes, proceeds of which will be used to retire outstanding debt and fund capital projects.

DOWNS

TEMPLETON RUSSIA FUND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRF)") else Response.Write("(NYSE: TRF)") end if %> dropped $1 3/8 to $21 3/8 on revelations that Russian President Yeltsin had a stroke during the elections and that he is too ill at the moment to have a planned heart transplant.

CARPENTER TECHNOLOGY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRS)") else Response.Write("(NYSE: CRS)") end if %> slid $2 5/8 to $34 7/8 on this morning's earnings warning from the company.

Declining $1 to $15 1/2, COMPUSERVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSRV)") else Response.Write("(Nasdaq: CSRV)") end if %> fell victim to offline chatter this weekend. According to Odyssey, Inc., fewer and fewer people are accessing the Internet through online services.

Oil refinery concern DIAMOND SHAMROCK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DRM)") else Response.Write("(NYSE: DRM)") end if %> fell $1 1/8 to $29 1/8 as the market adjusted to the terms of a definitive merger agreement between DRM and ULTRAMAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ULR)") else Response.Write("(NYSE: ULR)") end if %>. Each share of DRM is worth 1.02 shares of Ultramar, according to terms of the deal. ULR is trading up $3/8 at $28 7/8.

TERRA NITROGEN COMPANY LP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TNH)") else Response.Write("(NYSE: TNH)") end if %> came back down to earth a bit, falling $2 1/2 to $42 7/8. The fertilizer limited partnership, paying high double-digit yields, is a unit of TERRA INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRA)") else Response.Write("(NYSE: TRA)") end if %>.

MICROWARE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MWAR)") else Response.Write("(Nasdaq: MWAR)") end if %> is off $1 to $20 1/4 on news late Friday that its chief financial officer (CFO) resigned to take a position with a healthcare company.

SPORT SUPPLY GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GYM)") else Response.Write("(NYSE: GYM)") end if %> plunged $1 3/8 to $5 5/8 after releasing earnings on Friday night. Investors didn't like the bad earnings on continuing operations or the revelation that the company was in violation of a loan covenant, which will result in higher interest rates in the coming quarter.

FOOL PORTFOLIO STOCKS

    FOOL PORTFOLIO               BORING PORTFOLIO
AOL  down $3/8 to $33 3/4     BGP  down $1/8 to $36 5/8
CHV  unch. at $62 1/4         CSL  down $1/4 to $54 1/4
COMS  down $3/4 to $56 1/2    CSCO  down $3/4 to $60
GM  down $3/8 to $48 3/4      GNT  down $3/8 to $37
IOMG  up $1 to $18 7/8        OXHP  down $5/8 to $46 3/4
KLAC  down $1/8 to $21 1/8    PMSI  down $1/4 to $13 5/8
MMM  down $1/2 to $69 1/2     SHAW  unch. at $32
T  down $1/8 to $56 3/4       SPY  down $3/8 to $68 1/4
                              TXI  down $1/2 to $61 3/8