Motion Picture Herald (Apr-Jun 1931)

April 11, 1931 MOTION PICTURE HERALD 23 Clarke Sets New Finance Program Of Fox Company (Continued from page 9) National Bank, St. Louis. J. A. MOFFETT, vice president and director, Standard Oil Company of New Jersey. Those of the present board who are expected to be re-elected are: HARLEY L. CLARKE, president of Fox Film Corporation and of Utilities Power & Light Corporation. MATTHEW C. BRUSH, president American International Corporation. C. W. HIGLEY, president, Hanover Fire Insurance Company. WINFIELD SHEEHAN, vice president and general manager of Fox Film Corporation. WILLIAM FOX, former president of Fox Film Corporation. When these new directors are elected next week, the proposed refinancing of Fox will have been entirely completed. A syndicate headed by Chase Securities Corp. and including Dillon Read & Co., Bancamerica-Blair Corp., Harris, Forbes & "o., Chatham-Phenix Corp., Central-Illinois Co., and Havden, Stone & Co. will underwrite $30,000,000, five-year, 6% convertible debentures, to be offered to stockholders and the public. Outstanding capitalization of Fox Film upon completion of the present financing program will consist of 5 year debentures $30,000,000 Class A Common. .. .2,425,660 shares Class B Common 100,000 shares Fox subsidiaries have outstanding approximately $28,000,000 in bonds, notes, mortgages and purchase money obligations, in addition to preferred stocks of $250,000 par value. In conjunction with the $30,000,000 debenture issue, the refinancing plan provides for the sale of Fox's 660,900 shares in Loew's, Inc. to Film Securities Corporation, a new holding company organized by the Fox bankers which will pay $28,800,000 and 462,000 shares of Securities Class A stock for 660,900 shares of Loew common held by Fox. This procedure is being studied by the Department of Justice with a view of determining its possible effect upon the government's action to force Fox to divest itself of the Loew holdings. This suit is scheduled for trial in about two months in the United States district court in New York. While it is said that the sale of the stock might have some effect upon the government's suit, the trial will be held as scheduled unless a consent decree is entered prior to it. Fox has grossed $441,000,000 in the 15 years of its operation, of which $54,771,000 represents net profit, before Federal income tax. Estimated net for 1930 is $13,000,000, after Federal taxes, with the gross for the last year reaching approximately $102,000,000. Growth of Fox's assets and earnings since its organization 15 years ago is shown in the tabulation which follows : Total Gross Met Assets Income Profit* 1915 $2,420,000 $2,181,000 $523,000 1916 3,177,000 4.113,000 365,000 1917 4,023,000 6.849,000 593,000 1918 4,567,000 8,110,000 270,000 1919 6,426,000 11,266,000 2,028,000 1920 9,892,000 15.525,000 2,029,000 1921 9.739,000 17,552,000 1,946,000 1922 13,106,000 18,547.000 3,005,000 1923 14,584,000 16,966,000 2,006,000 1924 16,542,000 17,797,000 2,224,000 1925 26,642,000 22,133,000 2,835,000 1926 33,309,000 22,707,000 3,372,000 1927 36,840,000 25,543,000 3,370,000 1928 74,003,000 66,525,000 6,470,000 1929 124,244,000 83,184,000 10,735,000 1930 al92,524,313 bl02,000,000 cl3,000,000 TOTALS: $440,998,000 $54,771,000 *Before Federal income tax. a— As of June 30, 1930. b— Per statement by Fox Film. c — Estimated, after Federal income tax. Creation by Film Securities of three additional types of stock issues in addition to the Class A turned over to B^ox for the Loew holdings, will develop the financial structure of Film Securities along the following lines : Class A 462,000 shares 2 year 6% Notes $20,000,000 (Secured by 660,900 shares of Loew stock) $7 Cumulative Pfd.... 100,000 shares (With preference on liquidation of $100 oer share) Common 51,000 shares Transfer of Film Securities Class A to Fox gives Fox a 90% equity in the profits of the Loew stock. No public off'ering of any of Film Securities issues will be made, at least for a while. The syndicate of bankers has also underwritten a non-public issue of $15,000,000 2 year 6% gold notes for West Coast Theatres. These notes bear the name of Wesco, holding company of West Coast, and bring the total cash acquisition by Fox in the current refinancing program to $73,800,000 of which only $30,000,000 is available to the public. The total obtained is divided as follows : 5 year 6% Fox Debentures $30,000,000 From transfer of Loew holdings to Film Securities 28,800,000 (Plus 462,000 "A" Securities shares) 2 year 6% Notes for Wesco 15,000,000 TOTAL $73,800,000 The new 5-year debentures, redeemable at 110, are convertible at any time after October 1, 1931. into Fox Class A common, on the basis of 30 shares of Fox "A" for each $1,000 debenture. The new debentures are to be issued under an indenture to the Chase National Bank of New York as trustee. Among othei" provisions of this indenture, it is provided that the debentures will be redeemable at option of the corporation as a whole or in part at 110 per cent of the principal amount plus accrued interest. Another provision of the indenture is that the corporation will apply the net cash proceeds realized from the sale of all or any part of the stock interests in Wesco Corp. or in United American Investing Corp., including Metropolis & Bradford Trust Co., Ltd., or in Film Securities Corp., to the retirement of these debentures by purchase or redemption. Just prior to announcement of the refinancing plans, Fox Film issued a statement saying the financing program would reduce the consolidated funded debt of the corporation by more than $25,000,000 and leave it Acquires Funds To Retire Bonds Of $55,000,000 with more than $9,000,000 cash and more than $16,000,000 working capital. "The annual report will show that gross income increased about 33% during the year," the statement said. "The gain of approximately $19,000,000 in gross income was accounted tor in part by acquisition of theatres and increase in theatre income, and in part by an increase of nearly 11 per cent in domestic film rental and approximately 55 per cent, in foreign film rentals. The total of film rentals and sales for 1930 increased $4,000,000 over 1929." The Class A shares of Film Securities will participate in dividends on a share for share basis with approximately 51,0U0 shares of common to be acquired by the banking syndicate, but will be entitled to a preference over such common stock on liquidation up to $100 per share, and to participate as a class on a parity with the common stock in any distribution of assets in excess of such preferential amount. The Class A stock will have no voting rights in respect of election of directors, this right being reserved exclusively to the common stock, but it will be entitled to vote on other matters share for share with the common stock. The net earnings of Loew's, Inc., applicable to its common stock for the fiscal year ended August 31, 1930, including undistributed share of earnings of affiliated companies, as shown in the aiinual report of that company, were equivalent to $9.65 per share on the shares outstanding at the end of that period. Based on the current annual dividend payments on such stock ($3 regular and $1 extra) the 660,900 shares of stock to be owned by Film Securities would receive annual dividends of $2,643,600. This amount is substantially in excess of interest charges on the two-year notes and priority dividends on the preferred stock of Film Securities. Based on New York Stock Exchange closing quotations on April 7, 1931, the 2,425,660 shares of Class A common of Fox Film now outstanding had a market value of approximately $70,000,000. Wesco Corporation was formed in 1926 and is a wholly owned subsidiary of Fox Film. The 521 theatres owned, controlled or leased through subsidiary or associated companies, operate in California, Washington, Kansas, Colorado. Wisconsin, Illinois, Oregon and Montana. Net earnings of Wesco and its subsidiaries for the 52 weeks ended September 27, 1930, were alone more than the total annual interest requirements of Fox Film and subsidiaries. Consolidated net earnings before interest and Federal income taxes of Fox Film and wholly owned subsidiary, controlled and/or affiliated companies for the 52 weeks ended .September 27, 1930, adjusted to give effect to the elimination of all income from dividends on the common stock of Loew's, due to the sale of this common stock as part of the present financing program, were $10,203,440. The $15,000,000 of 2-year 6 per cent gold notes of Wesco Corporation representing a (Continued on page 46)