Independent Exhibitors Film Bulletin (1956)

Movie Business On Upbeat showed a year to year gain in revenues of 55%, an increase >f about $4.4 million. The excellent showing of the TV network was somewhat dampened, however, by a disappointing fall season in \:he company's theatre business. Due primarily to the lack jf good pictures, theatre attendance during the AugustDecember period dropped sharply below the year earlier level. The situation was further aggravated by the fact that because there were only a limited number of films available in the market, rentals for these pictures were bid up substantially by theatre owners. Fortunately, the downtrend in theatre attendance has been halted since the turn of the year. Recent surveys indicate that theatre grosses are again showing favorable comparisons. Moreover, with producers scheduling more films this year, exhibitors will probably enjoy a more favorable bargaining position in rental negotiations. Over the longer term, we expect ABC's theatre receipts to increase moderately, in line with the steadily expanding population of the nation. A much more impressive rate of growth, however, is visualized for the company's television revenues. Within the framework of the hypothesized 1959-61 economy, we project average annual revenues to $275 million, earnings to $4 a share and dividends to $2.40. Capitalized on a 6% yield basis and at an earnings multiple of 10, consistent with past norms and adjusted to reflect the changing character of the company, such results would command an average price of 40. ADVICE: ABC-Paramount's price history is too short to enable us to evolve a rating through correlation analysis. Reference to industrywide capitalization ratios, however, suggests that at its current price, the stock warrants a Group III (Fairly Period) classification. The current yield of 5.4% is slightly higher than the average 5.2% return provided by all dividend-paying stocks under survey. Of particular interest is the stock's 3 to 5-year appreciation potentiality of 54%, which is substantially greater than the average 24% gain projected for all stocks under survey. This issue merits retention in risk taking accounts seeking better than average income and superior capital growth prospects. BUSINESS: National Theatres controls 352 operating theatres located mainly in the Pacific coast, Midwest, and Rocky Mountain area. Also owns Roxy Theatre in New York. The chain is the second largest in the U.S. Labor costs. 40% of revenues. Dividends have been NATIONAL THEATRES restricted to one-third of earnings to finance modernization of theatres internally. Directors own or control about 7 1.500 shares of stock 12. 4% of total outstanding). Employees, 7,000; stockholders, 14,100. Pres., E. C. Rhoden, V.P.'j F. H. Ricketson, Jr., J. B. Bertero, E. F. Zabel, A. May. Incorporated: Delaware. Address: 1837 South Vermont Ave., Los Angeles 4, Calif. Stock traded: NYSE. REPORT: Stockholders of National Theatres might well brace themselves for some unpleasant news. We estimate that the company will release an unfavorable report for the three months ended Dec. 31, the first quarter of the current fiscal year. Due principally to an acute shortage of quality feature film releases during the Fall season, National's profits probably plummeted sharply. Earnings for the December period, when reported, are expected to approximate only 5c a share. These poor first quarter earnings, however, should not be a cause for alarm. Theatre business has picked up strongly since the turn of the year. A recent trade survey shows that during the last few weeks, theatre grosses have been running approximately 5% ahead of the year-earlier level. Prospects for the months ahead are also bright. The company has already booked a number of highly promising pictures, a few of which will be released during the February holiday season. Revenues and earnings this year will also be enhanced by the operation of more "profitable" theatres. National has been carrying on a housecleaning program. Last year, it sold or otherwise disposed of 29 "unproductive" theatre interests and 14 non-theatre properties not needed in the business. On the other hand, having completed the divestment program required by a Consent Judgment and having subsequently obtained court approval to buy or construct additional theatres, it recently acquired seven theatres, including two drive-ins in Salt Lake City and Las Vegas, respectively. We estimate that this program of divesting closed or unprofitable theatres and acquiring or constructing new ones that have more potential will ultimately result in higher returns on the company's assets. Over the longer term, we envisage a substantial recovery in National Theatres' earnings, as we believe Americans will begin to re-acquire their theatre-going habits. On gross revenues projected to a level of $80 million annually, earnings may approach $1.65 a share and dividends could average 85c a share in the hypothesized 1959-61 economy. Capitalized on a 6.1% dividend yield basis and at an 8.4 earnings multiple, in accordance with industrywide norms, such results would command an average price of 14. ADVICE: Since trading on the present stock of National Theatres began only 3l/2 years ago, there do not exist sufficient data to enable us to compute a Value Line Rating for the stock through multiple correlation analysis. Reference to industry-wide capitalization ratios, however, indicates that it is undervalued. The current yield of 6% is well above the average return afforded by all dividendpaying stocks under survey. To the years 1959-61, the stock has an appreciation potentiality of 67%, far superior to the average of 24% projected for all stocks. While this low-quality issue (Quality Rank : C plus) may not be suitable for investment-grade portfolios, it merits the attention of risk-taking accounts seeking good income and sizable apDreciation potentiality. The stock is currently classified in Group II (Underpriced). BUSINESS: Stanley Warner controls 2?0 operating theatres located mainly in the Northeast. In 1 953 formed partnership with Cinerama Productions, Inc. to exploit Cinerama process. Now operating IS Cinerama theatres. In 1 954 acquired Inetrnational Latex Corp., STANLEY WARNER manufacturer of consumer rubber goods under Playtex label. Ordinary theatre revenues $50 million, Cinerama theatres $15 million, Playtex products $30 million. Directors own 330 204 shares of stock (15% of total) of which Pres. S. H. Fabian and Exec. V.P. S. Rosen own 328,000. Employs 4,000, has 18,000 stockholders. Incorporated: Delaware. Address: 1585 Broadway, New York 34, New York. Stock traded: NYSE. REPORT: Reflecting primarily a deficiency in the number of quality motion pictures released last Fall, Stanley War ner's earnings in the first quarter of the current fiscal year, (Continued on Page 28) Film BULLETIN February 20, 1954 Page 27