Independent Exhibitors Film Bulletin (1956)

FINANCIAL BULLETIN JANUARY 23, 1956 By Philip R. Ward LOOK AT LOEWS! For a company on the threshold of announcing its most dismal earnings report in years, the demand for Loew's Inc. shares was remarkably robust. Here was a company preparing to report that its per share earnings for the fiscal year ended August 31, 1955, had dipped from $1.28 to $1.03, Here was a company about to announce the even more funereal tiding that for the 12 week term ended November 24, 1955, its per share earnings had tumbled from 30 cents to a barely-in-the-black 5 cents. Yet, beginning January 12, only five days before Bad News Day (Jan. 17) and only three trading days before, Loew's suddenly exploded on the ticker tapes as though it had been confused with the new Ford Motor Company common. To add to the mystery is the not-too-startling revelation that no apparent fillip to Loew's film earnings is in sight beyond the normal steps that all film companies have taken to shake the current boxoffice slump. Indeed, Loew's, like most other movie shares, had passed much of late 1955 and early 1956 in a sedentary stupor. That is, until January 12. On that date, on January 13 and the following trading day, the 16th, traffic in Loew's shares totaled a prodigious 113,000 shares. All the more amazing: the stock spurted nearly two points — not bad for something selling around $20. 0 In the market very little happens without good cause. There was cause here all right, but not apparent. As it has done before, the market was playing out another of those little dramas of "tout and pray" that so often boomerang and just as often do not — the type that drive unwary brokers to their cups and wary ones to Florida for the winter. In short, somebody got the Loew-down. Loew's insiders may tell you the action is attributable to a Walter Winchell radio tip of Sunday, January 15. Acknowledging Mr. Winchell's market influence, this explanation accounts only for the 55,000 share volume of the following day. Clearly the buying tempo had been building days before. No, the answer is simply that some prize information had leaked to the street, news of such character as to defy the normal discounting practice of the market to earnings news as grim as that from Loew's. The nature of that information is not hard to guess. It deals with Loew's treatment of its assets, treatment which may well hand its shareholders a juicy plum come Divorcement Day — the time for divestiture of theatre holdings from the film company. O It seems that Loew's enjoys a veritable Comstock Lode of hidden assets, which, curiously, do not appear on its balance sheets. In the main, these assets consist of real estate (theatre) holdings. The company books show these properties at substantially less than their estimated true value, $44 million according to most recent figures. However, these properties have a gross book value of $108 million, but through the sleight-of-hand of depreciation have been pruned to the low $44 million figure. By way of documenting true values, it is well to note the amount of insurance carried on the Loew's properties. The figure is between $90 and $100 million. Therefore, it seems certain that when settlement is made on these fixed assets the amount suggested by the insurance coverage will be a more realistic one. O Under Loew's current bookkeeping, total fixed assets on a per share basis break down to about a net of $18 a share. By reckoning the higher and more reliable value of these assets, the per share value would be some 50%-60% more, or $28-$30 per share — compared to the current market price of approximately 20^. Beyond real property assessment is the potential profits stimulus projected by Loew's gold-tinged film library, one of the best in the business from a TV viewpoint. This treasure has been conservatively appraised at a minimum of $50 million. Some quarters calculate that on a per share basis this backlog alone would seem to represent some $10 per share in probable gross "first TV release" income. This estimate appears high to us, since TV's liquidity is not all it has been cracked up to be. But, nonetheless, a very solid potential may also spring from the dusty library shelves. Loew's is a hot item. We'll watch it with interest. CINEMA SHARES IN '55. Here's a quickie review of the price performance of individual film industry stocks in 1955 — in terms of their percentage gain or loss. Allied Artists +16-2/3% Republic +23% Columbia -24% 20th Fox -17% Loew's —11% Universal — 8% Paramount — 8% Warners — 5% RKO Pictures (unchgd.) (THEATRE COMPANIES) ABC-Paramount + 8% RKO + 9% National -15% Stanley Warner -12% (SPECIALTIES) Technicolor -24% Walt Disney +33-1/3% Film BULLETIN January 23, 1956 Page 9