Independent Exhibitors Film Bulletin (1956)

Movie Business On U pbeat (Continued from Page 24) versal's annual revenues to an average of $90 million. Such volume should generate earnings of $5 a share, which would justify a dividend of $2.25. Capitalized on a 6.3% yield basis and at an earnings multiple of 7.2:1, consistent with past norms adjusted for trend, such earnings and dividends would command an average price of 36. As of December 31, 1955, Decca Records, Inc., had increased its holdings of Universal's stock to 718,585 common shares — 70.2% of the voting securities Universal had outstanding in the hands of the public on that date. There have been recurrent rumors of a merger of the two companies, but officials have decided that no worthwhile advantages would result from such a combination. To consolidate earnings for tax purposes, Decca would have to own at least 80% of Universal's stock. Even if this were the case, the Treasury would impose a 2% charge on the BUSINESS: Warner Bros. Pictures produces both Class A and Class B films. Through subsidiaries operates a music publishing business and holds a 37'/2% interest in a major British theatre chain. About 40% of revenues derived in foreign markets. Payroll absorbs REPORT: Of the 15 pictures that grossed more than $5 million domestically in 1955, Warner Brothers produced five; two of them brought in as much as $8 million. Warner Brothers also had four winners out of a possible five in the film Audience Awards, voted directly by theatregoers. Since most of these "hits" were released during the early part of last year, this remarkable public endorsement of Warner's pictures was reflected in the annual report for the fiscal year ended August 31, 1955. Gross revenues rose 8% to $75.7 million, compared with $70.1 million a year earlier. The company was unable to carry this gain in revenues down to the net income level, however. Like most other film producers, it had to surrender a substantial portion of the profits it had realized from many of its top pictures to its principal actors. Because Hollywood was slow in developing new talent, many top stars took advantage of the situation and demanded, as part of their contracts, as much as 35% to 50% of profits. As a result, Warner's margin last year was badly squeezed. In the current fiscal year, Warner should be able to lift its earnings moderately. Again, it has in its backlog for future releases a list of highly promising films. Moreover, it has negotiated more favorable contracts with its actors and actresses. Its TV division is also expected to contribute substantially to overall revenues in the current fiscal year. In addition to its highly successful programs, BUSINESS: ABC-Paramount owns and operates largest motion picture theatre chain in U.S. (over 400 theatres, principally in Midwest, South and Atlantic seaboard) and third largest radio and TV network (network owns and operates 5 TV stations: have over 200 affiliated REPORT: ABC has not underestimated the power of children. In fact, it has profitably capitalized on that potential. Having enjoyed overwhelming success in its "Disneyland" and "Rin Tin Tin" presentations, the ABC television network recently introduced a new children's program, the "Mickev Mouse Club", shown daily from 5 to 6 p.m. As expected, reception of this new show has been gross consolidated earnings, which would cost Decca $150 I 000 more than it now pays in taxes on the dividends it r<J ceives from Universal. ADVICE: Universal Pictures is currently classified in Grou ' III (Fairly Priced) because its recent market price stand | exactly on its Rating, and the Rating levels off going int 1 fiscal 1957. While the current estimated yield of 6.0% t 7.0% is higher than the 5.2% average return provided b all dividend-paying stocks under review, it is roughly i line with the post-war experience for this stock. Of great* interest is this issue's superior long-term appreciation p< tentiality — 44% to the year 1959-61, as compared to 24° for the market as a whole. While unacceptable to higl grade investment accounts because of its poor price st<| bility record, its better-than-average current yield an 1 long-term appreciation prospects make this issue a sati; factory holding for risk-taking portfolios. S. P. Friedman, S. Schneider, B. Kalmenson, M. B menstock. incorporated: Delaware. Address: 321 Wt 44th Street, New York 34, N. Y. Stock traded: NYS such as "Warner Brothers Presents", it is placing four nc half-hour shows on the market. Therefore, although w expect the company to report an unfavorable earnings con parison for the November quarter (because of the ten porary lull in the motion picture business during that per od), we visualize full-year fiscal 1956 earnings at $1.70 share, compared with $1.61 reported for the 1955 fiscal yea Within the hypothesized 1959-61 economy, we proje< average annual revenues to $90 million, earnings to $2.( a share and dividends to $1.80. Capitalized on a 6.9% yiel basis and at an earnings multiple of 10.0, consistent wit industry-wide norms adjusted for the quality of this issU' such results would command an average price of 26, 37C| above the current. ADVICE: Warner Brothers is currently classified in Grou III (Fairly Priced). Although price history of the presei stock, issued in 1953, is not sufficient for us to compute Rating by multiple correlation analysis, reference to gei eral market capitalization ratios suggests that it is fair! valued. As in the past, the stock is being capitalized j rates slightly more conservative than those applied to tr; market as a whole. To the years 1959-61, the stock po sesses a normal appreciation potentiality of 37%, compart with the 24% projected for all stocks on average. Th issue therefore may be retained in risk-taking accoun' seeking better-than-average income and interesting lonj term appreciation prospects. L. H. Goldenson. V.P.'s, R. E. Kintner, R. H. O'Bric R. N. Weitman, R. H. Hinckley, Inc.: N.Y. Add: IS Bdwy., New York 34, N.Y. Stock traded: NY! excellent. Even before its initial showing on October 3r the program was completely sold out to important adve tisers on a 52-week basis. Meantime, the system has upgraded its adult progran as well. In sympathy with the growing popularity of the; TV shows, television revenues have risen sharply. For tl months of October and November alone, the netwoi WARNER BROS. about 45% of revenues. Directors own about 419,500 shares of stock 125% of total outstanding! of which the Warner family owns 413,000 shares. Company employs about 4,000; has 17,513 stockholders. Pres., H. M. Warner, V.P.'s, A. Warner, J. L. Warner, H. Starr, ABC PARAMOUNT THEATRES stations). Labor costs absorb about 40% of revenues. Dividends restricted to operating earnings of which the company pays out practically all. Directors own or control 341,232 common shares 19% of total). Employs 20,000, has 25,140 common stockholders. Pres., Page 24 Film BULLETIN February 20. 1954