Independent Exhibitors Film Bulletin (1956)

DANGER IN LIQUIDATION for March, holding down the "number one" position for several consecutive weeks. "The Harder They Fall" has been the subject of a selective advertising campaign with the stars travelling in areas where the picture is being shown. This film should also capitalize on today's conditions in professional prize fighting as highlighted by investigations into corruption which are being held currently in various parts of the country. It is important to realize that it only takes one or two box-office smashes to bring about a successful year. Based on the premise that the second half (ending in June) will show a distinct improvement over the first, we estimate Columbia's gross revenues at about $88 million and earnings at $3.80 a share. A yearend extra dividend would then be a distinct possibility and payments might be $1.50 to $1.60 a share. Columbia is well-established in the TV field through its subsidiary, Screen Gems. Since TV films have been improved in quality, they have been used in increasing volume. This affiliate, therefore, should provide a growth factor for the parent. Revenues from the subsidiary will probably jump to about $11 million from $5 million in fiscal 1955. The future for all entertainment is very bright, and, as indicated in the industry report in this issue, the possibili BUSINESS: Loew s is the last fully integrated producer, distributor and exhibitor of motion pictures. Divestment of theatres to take place by 1957. Theatres, mainly in Northeast, presently account for about 40% of revenues. Pictures, under MGM trademark, account REPORT: After a disappointing first fiscal quarter (year ends Aug. 31st), when profits were only a nominal 5c a share, Loew's managed to boost its earnings to 31c a share in the 16 weeks ended March 15th. Although this figure represented a sharp recovery from the previous period, it was nevertheless the smallest for any second quarter in the company's history. Prospects for the balance of the current fiscal year would be rather dim, if it were not for two potential top-grossing films scheduled for release during the period. Already in circulation is "The Swan" — a slender vehicle, but one which boasts the country's most powerful drawing card in the person of its star, Grace Kelly. Of somewhat solider substance is "Lust for Life", the story of Vincent Van Gogh, starring Kirk Douglas. Favorable earnings comparisons for the company in the second half of fiscal 1956 will be largely dependent on the success of one or both of these productions. Earnings have ceased to be the dominant consideration in the evaluation of Loew's stock, however. Of increasing importance are the properties owned by the company, including its real estate and film library. There now seems to be a good chance that when the company's motion picture producing and theatre divisions are divorced, scheduled for Sept. 1st, an attempt may be made to spin off additional segments of Loew's business. At present, this appears to be the most practical method of realizing the substantial values underlying various properties owned by the company. (An evaluation of the possible worth of this ty of recovery in the revenues of the motion picture industry is also good. Columbia's competent management — with its knack for coming up with the right picture at the right time — almost assures this company a share in the improvement visualized for the industry. In the hypothesized 195961 economy characterized by a $455 billion GNP we expect Columbia's total revenues to reach $105 million. Maintenance of the present profit margin (higher admission fees are likely to be offset by rising production costs) would produce earnings of $4.70 a share from which dividends of $2.25 might be paid. Such payments, capitalized at 6.3% (to accord with past norms adjusted for trend) would command an average price of 36 (7.7 times earnings). ADVICE: At its current price of 22 the stock stands within one standard variation of its virtually level Rating and is therefore classified in Group III (Fairly Priced). In contrast to its below average record of past price growth, the issue is estimated to have a 3 to 5-year price appreciation potentiality of 64%, far above the average of all stocks under survey. The equity combines excellent possibilities for capital appreciation over the next few years with good return at present. Due to its low Stability Ranking (Index: 3) the issue should be restricted to risk portfolios. shareholders. Board Chairman, N. M. Schenck; President, A. M. Loew. Incorporated: Delaware. Address: 1540 Broadway, New York 36, New York. Stock traded: NYSE. package of properties appears in the Supplementary Report of March 19th, page 549). We estimate that gradual and systematic disposition of these assets could eventually net stockholders between $30 and $50 a share. Because divestment proceedings are not yet complete, it is still not possible to project operating results for the separate companies into the 1959-61 period. However, Loew's as presently constituted might reasonably be expected to achieve average annual revenues of $208 million and earnings of $1.75 a share, out of which dividends averaging $1.25 could be paid. While a normal capitalization of such results would indicate a price no higher than 20 (11.4 times earnings and a 6.3% yield basis) for the shares, their value could be increased to 30 or more through liquidating part of the company's properties. ADVICE: Because the market appears to be capitalizing Loew's on the basis of the potential worth of its properties, and because the nature of the company will be substantially changed when its theatre and producing properties are separated this fall, we have felt it prudent in this case to deviate from our normal valuation approach, and have not attempted to derive and project a Rating based upon the stock's past price performance in relation to earnings and dividends. The stock is clearly overvalued on the basis of prospective near-term operating results, but the possibility that a work-out value of $30 to $50 a share might eventually be realized leads us to accord the issue a compromise classification of Group III (Fairly Priced). (Continued on Page 22) LOEW'S, INC. for most of the rest. Foreign revenues about 40% of film earnings. Labor costs, over 65% of revenues. Since World War II. earnings almost completely paid out as dividends. Directors own or control 81,700 shares 11.4% of total). Has 14,000 employees, 29,640 Film BULLETIN May 14, 1956 Page 21