<THE LUNCHTIME NEWS>
Wednesday, October 28, 1998
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FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer

IJL Acquired by Wachovia

About a year after the rumors started, a deal was finally announced last night involving the acquisition of Interstate/Johnson Lane (NYSE: IJL). Winston-Salem-based Wachovia Corp. (NYSE: WB) announced after the bell last night an agreement to acquire the Charlotte-based broker/dealer and investment banker for $230 million plus $23 million in restricted Wachovia stock. Interstate/Johnson Lane shareholders will receive $32 per share in Wachovia stock. IJL officers and directors own 36% of the company, according to Hoover's.

Although at first glance the deal looks like a "take-under," the price accepted comes at premium of over 20% to the average of the last thirty closing prices in IJL's stock, making the premium pretty standard. At 2.3 times book value and 2.6 times tangible book value and just under 15 times net income minus goodwill amortization, the valuation isn't as rich as other deals that have been put together in the last year, but it represents good value on both sides of the transaction. Wachovia gets to go ahead with the near-imperative of delivering customers full-service brokerage offerings, and it does so at a price of something in the neighborhood of 1.5% of IJL's private client group assets under management (AUM). As far as a multiple to AUM goes, this is quite reasonable.

Adding in IJL's equity and fixed income underwriting, Wachovia strengthens its capital markets position, though IJL is by no means huge in this area. However, it hasn't been more than a year since First Union (NYSE: FTU) acquired Wheat First and BankAmerica's (NYSE: BAC) predecessors acquired Montgomery Securities and Robertson Stephens, and those companies now represent themselves as fully integrated equities underwriting and mergers & acquisitions concerns. So Wachovia has a base from which to build these capabilities. At the same time, its capital position and cash flow strengthens IJL's standing in the investment management and underwriting business, so the deal benefits both groups of shareholders. In a generally benign environment today for bank stocks, Wachovia added $2 3/8 to $85 1/8 and IJL came down under the deal price, falling $6 3/8 to $30 5/8 this morning.

UPS

Massachusetts-based environmental consulting firm Fluor Daniel GTI (Nasdaq: FDGT) rose $2 3/16 to $8 1/16 after agreeing to be acquired by facilities management and construction company IT Group (NYSE: ITX) for $8.25 per share in cash. IT moved ahead $3/4 to $8 1/2 on the news. Construction and engineering company Fluor Corp. (NYSE: FLR), whose Fluor Daniel subsidiary owns a 52% stake in Fluor Daniel GTI, gained $1/8 to $38 1/2.

Immunological vaccine developer Corixa Corp. (Nasdaq: CRXA) shot up $15/16 to $5 1/4 after announcing a strategic partnership with SmithKline Beecham PLC's (NYSE: SBH) vaccine division, which will give Corixa $49 million in funding over the next four years. The pact broadens a current arrangement between the companies, adding five new vaccine research programs.

Cigar distributor Holt's Cigar Holdings (Nasdaq: HOLT) smoked up $2 to $6 7/8 after Prudential Securities upgraded the company to "strong buy" from "hold."

Spartan Motors (Nasdaq: SPAR), which makes chassis for heavy-duty vehicles, drove up $1 3/16 to $6 9/16 after reporting third quarter earnings of $0.16 per share, well above last year's $0.12 per share loss and ahead of the $0.06 per share expected by the sole analyst surveyed by Zacks. Management expects growth in its school bus, motor home and bus chassis businesses over the next 12 months.

Test, measurement, and industrial automation software developer National Instruments (Nasdaq: NATI) jumped up $5 3/16 to $29 11/16 after reporting Q3 EPS of $0.27 (excluding charges), beating last year's figure by $0.02 and analysts' estimates by a penny. The company also said it plans to buy back up to 1 million of its common shares.

Hard disk drive maker Maxtor Corp. (Nasdaq: MXTR) jumped up $5/8 to $9 11/16 after reporting Q3 EPS of $0.08, beating Street estimates by $0.03. CEO Mike Cannon said inventories in the channel and industry-wide pricing pressures both appeared to ease late in the quarter.

Another disk drive maker, Quantum Corp. (Nasdaq: QNTM), added $13/16 to $17 1/16 on reports that it has agreed to cancel a joint venture with Matsushita-Kotobuki Electronics Industries for the development and fabrication of hard disk drive recording heads. Quantum Chairman and CEO Michael Brown cited the venture's "unsustainable" losses as the rationale behind the decision. Prudential Securities initiated coverage of Quantum with a "hold" rating today.

Israeli enterprise software developer Sapiens International (Nasdaq: SPNSF) rose $7/16 to $7 5/16 after reporting Q3 EPS of $0.12, which was $0.11 better than last year's mark and $0.04 above market projections. The company said it sees strong demand for its Year 2000 solutions as well as growth opportunities for its e-commerce products and outsourcing initiatives.

Earnings Movers

Actel Corp.
(Nasdaq: ACTL) up $1 15/16 to $12 7/16; Q3 EPS: $0.18 vs. $0.18 last year; Estimate: $0.16

Cotelligent Inc. (NYSE: CGZ) up $1 5/16 to $18 13/16; fiscal Q2 EPS: $0.27 vs. $0.20 last year; Estimate: $0.26

General Instrument Corp. (NYSE: GIC) up $1 to $25 1/16; Q3 EPS: $0.22 vs. $0.17 last year (pro forma); Estimate: $0.21

Jenny Craig Inc.
(NYSE: JC) up $3/8 to $5 7/8; fiscal Q1 EPS: $0.12 vs. $0.22 loss last year; Estimate: $0.11

Media Arts Group
(Nasdaq: ARTS) up $1 5/8 to $10 7/8; fiscal Q2 EPS $0.31 vs. $0.25 (after gain) last year; Estimate: $0.29

Sunrise Medical
(NYSE: SMD) up $1 3/8 to $11 1/16; fiscal Q1 EPS: $0.16 vs. $0.04 last year (including re-engineering expenses); Estimate: $0.14

Western Wireless Corp. (Nasdaq: WWCA) up $1 1/16 to $20 9/16; Q3 EPS: $0.65 loss vs. $0.95 loss last year; Estimate: $0.71 loss

DOWNS

Chemical and life sciences giant DuPont (NYSE: DD) was cut $2 1/16 to $57 1/2 after The Wall Street Journal's "Heard on the Street" column cited analysts as saying the company's outlook is "bleak" and its shares "overpriced" as the firm tries to remake itself into an agricultural biotechnology company.

Ameritrade Holding Corp. (Nasdaq: AMTD) traded down $3 1/4 to $16 5/8 after the discount broker reported fiscal Q4 EPS of $0.20, same as last year and below analysts' expectations of $0.23, though the company called the figures "strong fourth quarter results." The company spent $3.9 million on ads (you know, "I traded... for eight bucks") this quarter -- $2 million more than last year -- and that's why it's saying it achieved an "increase" in net income.

Online auctioneer eBay Inc. (Nasdaq: EBAY) came down toward Earth this morning, falling $1 1/4 to $81 1/4 after reporting Q3 EPS of $0.05 (before charges) versus $0.01 in the same year-earlier period and analysts' predictions of $0.03.

Air freight carrier and logistics services provider Kitty Hawk Inc. (Nasdaq: KTTY) nose-dived for a $3 1/2, or 24.6%, loss to $10 3/4 after warning that its Q3 earnings will come in between $0.13 and $0.15 per share, lower than the $0.38 per share expected by the Street, due to higher-than-expected costs at its American International Airways unit. Morgan Stanley Dean Witter downgraded its rating on the company's shares to "neutral" from "strong buy."

Telecommunications services company Intermedia Communications (Nasdaq: ICIX) sank $7 3/4 to $17 1/2 after reporting a wider-than-expected Q3 loss of $2.42 a share (before charges), compared with a loss of $1.62 a year ago. Analysts had predicted a per-share loss of $2.08. Goldman Sachs lowered its rating on the company to "market perform" from "recommend list" and cut its earnings estimates to a loss of $9.90 a share from a loss of $8.85 for this year and to a loss of $9.75 per share from $8.10 for 1999.

Network switching solutions company Tekelec (Nasdaq: TKLC) dropped $2 3/4 to $19 1/2 after reporting Q3 EPS of $0.18, up from $0.11 (before a gain) a year before and ahead of analysts' mean estimate of $0.15. Including the one-time tax benefit, the company earned $0.26 a share last year.

Contamination prevention products company Steris Corp. (Nasdaq: STRL) tumbled $2 1/4 to $21 1/4 after announcing fiscal Q2 EPS of $0.27, a nickel more than last year but even with analysts' projections. The company's 10.2% revenue growth for the quarter was below its annual goal, with revenues from the company's International Healthcare & Scientific Divisions down by $5.5 million on softness in overseas markets.

Internet services company Verio Inc. (Nasdaq: VRIO) lost $3 1/16 to $15 after reporting a Q3 loss of $1.03 a share, worse than analysts' expectations of a loss of $0.70 per share. Deutsche Bank Securities cut its rating on Verio to "accumulate" from "buy."

Speech technology developer Lernout & Hauspie Speech Products (Nasdaq: LHSPF) fell $4 3/4 to $40 1/2 on concern that a change in its accounting of acquisitions will hurt future earnings. The company reported Q3 EPS of $0.22 (before charges) versus $0.13 a year ago and analysts' mean estimate of $0.21.

Oil explorer and producer Snyder Oil Corp. (NYSE: SNY) was clipped $1 7/16 to $15 3/4 after warning that Q3 results will hurt by higher-than-expected exploration expenses and lower-than-expected oil and gas production volumes due to hurricane-related shut-ins.

Oil and gas exploration services company Compagnie Generale de Geophysique (NYSE: GGY) slid $2 1/2 to $13 1/2 after reporting Q3 earnings of FrF 982 million (US$164 million), in line with last year's FrF 958 million (US$158 million). Revenues from its Land Seismic and General Geophysics division were lower, while equipment sales began showing signs of a slowdown.

Equipment and truck retail consolidator RDO Equipment Co. (NYSE: RDO) shed $1 1/2 to $8 1/2 after saying it expects earnings from existing operations for the fiscal year ending January 31, 2000, "to be near" fiscal 1999 EPS, which are anticipated to be about $0.90 a share (before charges). The Street was projecting EPS of $1.16 for fiscal 1999 and $1.44 for fiscal 2000.

Earnings Movers

Budget Group (NYSE: BD) down $3 3/4 to $19 5/8; Q3 EPS: $1.38 vs. $0.99 last year; Estimate: $1.35

Guitar Center Inc. (Nasdaq: GTRC) down $1 1/8 to $19 7/8; Q3 EPS: $0.15 (pro forma) vs. $0.11 last year; Estimate: $0.15

Marcam Solutions (Nasdaq: MRCM) down $1 to $7 1/4; fiscal Q4 EPS: $0.29 loss vs. $1.12 loss last year (excluding charges)

Pittston Brink's Group (NYSE: PZB) down $4 1/2 to $29 9/16; Q3 EPS: $0.51 vs. $0.50 last year; Estimate: $0.56

Platinum Software Corp. (Nasdaq: PSQL) down $19/32 to $9 13/32; fiscal Q1 EPS: $0.16 vs. $0.05 last year; Estimate: $0.16

Plexus Corp. (Nasdaq: PLXS) down $1 5/16 to $23 1/4; fiscal Q4 EPS: $0.38 vs. $0.34 last year; Estimate: $0.35

Schlotzsky's Inc. (Nasdaq: BUNZ) down $1 to $9 3/4; Q3 EPS: $0.21 vs. $0.21 last year; Estimate: $0.24

Trico Marine Services (Nasdaq: TMAR) down $13/16 to $6 15/16; Q3 EPS: $0.13 vs. $0.58 last year; Estimate: $0.17

United Stationers (Nasdaq: USTR) down $4 to $23 1/2; Q3 EPS: $0.52 vs. $0.37 last year; Estimate: $0.47

VWR Scientific Products (Nasdaq: VWRX) down $2 1/2 to $25 1/2; Q3 EPS: $0.40 (excluding charges) vs. $0.37 last year; Estimate: $0.42

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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
Bob Bobala (TMF Bobala), a Fool's Fool
Jennifer Silber (TMF Amused), Fool at last