Independent Exhibitors Film Bulletin (1956)

DANGER IN LIQUIDATION USINESS: Technicolor controls the most widely used olor film production process and has entered related ields of 3 color lithography and amateur film processng. Labor costs absorb 39% of revenues, raw maerials 37%. Color films have eioanded their share of REPORT: We estimate earnings of $1 a share in 1956, reduced from $1.25 as published last month in Supplementary Reports. The $1 dividend will stick, we think, though barely earned. Technicolor's resourceful management has developed a new color process which gives a better, clearer picture and it has also effected notable economies in the development of its prints. First quarter earnings came to 25c a share, of which about 5c a share was from the British subsidiary. If the present volume merely holds, full year earnings, after adjustment for seasonal fluctuation would total about 90c a share. But with the newly developed operating economies and a probable increase of six or seven color movies over the eighty-odd now in hand, the second half results could carry profits up to $1 a share. The new Graphic Arts Division is expected to reach the break-even point by the end of this year and to achieve a potential gross volume of $20 million within 5 years. By the end of 1957 the profit from this division, before tax, is projected to $270,000. Since the profit margin is expected to be at least as good as in the technicolor division (about 12.5% currently), a volume of $20 million in 5 years implies profits before tax of $2.5 million from this new division alone. The new Amateur Film Developing Division appears to have just as great a potential. It is estimated to produce a volume of $2 to $4 million next year. Profit margins in this division are also expected to be as least as wide as the 12.5% in the Technicolor Division. In addition, the company's exceptionally strong cash stockholders: 7,444. President and General Manager, H. T. Kalmus, Secretary, G. F. Lewis. Treasurer D. S. Shattuck. Incorporated: Delaware. Address: 15 Broad Street, New York 5, New York. Stock traded: ASE. position points to the possibility of advantageous acquisitions. The company is believed to have some plans in this direction, which would utilize not only a portion of its cash but its technical and managerial skills as well. Taking it all in all, we believe that the downtrend in earnings is near the turning point. Looking to the hypothesized 1959-61 economy, we project average annual sales to $60 million, an increase over our previous estimate in reflection of the interesting new developments. Indeed, even this estimate may have to be revised uoward if all the new enterprises turn out as well as expected. On such a volume ($60 million) and with an improved profit margin, earnings of $2.25 a share are in sight and, on a lower pay-out ratio than in recent years, a $1.50 dividend. Reflecting the more stable sales volume once the diversification program has been carried out, the market, we judge, will capitalize the $1.50 dividend at a somewhat more bullish rate than we had previously applied (we now estimate 6.25%). Capitalized at such a rate, the $1.50 dividend would command a price of 23 (10 times earnings). ADVICE: Technicolor is currently classified in Group II (Underpriced) because it stands below its Rating which is at the point of turning upward. The estimated 8.5% yield is exceptionally generous (the average yield of all dividend-paying stocks under survey by this Service is 5.0%). The stock's hip'h yield moreover coincides with an exceptional (90%) appreciation potential over the 3 to 5-year pull. TECHNICOLOR market from 1% in 193? to more than 50% in 1955. Since World War II, dividend payout has been about 84% of earnings. Director stockholdings are not reported but it is understood that Kalmus family has a considerable interest in the stock. Employees: 2.311; ALLIED THEATRE OWNERS of NEW JERSEY, Inc. is proud to announce its 37th ANNUAL CONVENTION at the FABULOUS CONCORD HOTEL KIAMESHA LAKE, NEW YORK on SUNDAY — MONDAY — TUESDAY MAY 27 28 29 jutl Schedule ctf rfcWitieJ for Ifcu and 1(cur Witfe ' Bonus attraction: Decoration Day, May 30th. at regular convention rates, if you wish to stay on. LAST CALL FOR RESERVATIONS — Contact Allied office, LAckawanna 4-2530 Film BULLETIN May 14, 1956 Page 33