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.- Walston &Co. Inc, –….;. Members New York Stock Exchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE (Swaml,d) OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LETTER September 14,1956 BELL & HOWELL COMPANY Statistics One of the fruits of America' Current Price 42 current prosperity is that the Amer' Current Dividend 1.00 can worker at all levels is enjoyin Current Yield 2.4 an unprecedented rise in leisure ti and discretionary income, that por- Funded Debt 3,800,000 tion of his income available for 4.75 pfd. Stock 19,200 shs. spending on items other than the 4.2-5.cpfd. Stock – –.,20, .. Common Stock 521,194' shs. the fastest growing of American leisure time pursuits has been the Sales – 1956-E 45,000,000 hobby of photography. This hobby is Sales – 1955 42,100,000 now, being engaged in by millions of Americans, stimulated in part by th Earnings per Share-1956-E 4.00 growth in income and leisure time Earnings per Share-1955 3.51 mentioned above and, in part, by population statistics, which show Mkt.Range – 1956-1951 – an increasing number of babies bein born each year, thus lending impetu to the tendency to make photographi records of growing children. An active participation in the coming photo- graphy boom would seem to be provided by the common stock of Bell & Howell 'Company. Bell & Howell has, from its inception fifty years ago, enjoyed a reputation as one of the leading companies in the field of quality home movie equipment. The company manufactures a comprehensive line of amateur motion picture cameras and projectors, together with other types of amateur photographic and optical equipment. Within the past three years it has en- 1 of. via ltsModel 220 and 252 8 mm. models. These cameras, the-least expenslve of which lists for 39.95, are now being produced via assembly line methods at a record rate, and the company is now making plans to enlarge its distribution outlets and reach an even greater mass market through sales to photographic outlets such as drug stores, etc. A full line of accessories, complementing the new models, includes an inexpensive projector which may be used for the showing of home movies. A complete home movie outfit may now be purchased by the amateur for a little over 100. In addition to its less expensive model, Bell & Howell is conti- nuing to manufacture the quality products which have made it famous during the past fifty years. It is one characteristic of the photographic industry that after being broken in with a less expensive model, the photographer often wish- es to graduate to a more expensive and versatile camera. Bell & Howell's leadership in this high quality field is undisputed. Through its recently acquired TDC division, Bell & Howell makes other products which serve the amateur photography market. Among these are '35 mm. slide projectors and home stereo cameras. Over the long term these items are expected to demonstrate a growth trend approximating that of movie – – – — – – — – — ,Some 55 of Bell & Howell's products are sold to the amateur market, but the remaining lines would appear to have as interesting a growth potential. Bell & Howell's Filmosound projector is a standard fixture in almost all schools and with the hugely expanded school program and the grow- ing trend toward audio-visual methods of education, sales in this field should trend sharply upward over future years. Another product with a large potential is the microfilm field which Bell & Howell recently entered and which it shares with Eastman Kodak. In a relatively short space of time, , .. \ — -2- Bell & Howell has elevated itself to competitive status with Kodak in terms of new sales, and its new model reading-recording machine selling for approxi- mately 1800 – 2000 is expected to have growing application in offices of all sizes. Bell & Howell manufactures both micro-film and equipment which is distributed by Burroughs Corporation, thus affording outlets through an established office machines distribution setup. Another important potential for Bell & Howell products may be found in government sales which, although trending downward in recent years, may be expected to flatten out and increase as product line is revised. The Armed Forces are an important outlet for Bell & Howell sound projectors. In addition, the company manufactures gun cameras which are used extensively in jet training and is active in production of a number of guided missile parts. It is felt that military sales can increase in the future as Bell & Howell gears itself toward the new defense spending program. –'Asmay be- s-een fromthe above ,- a-g6cfd–deirl0-f-growth-po- tential in Bell & Howell products. This growth has been planned for and pro- vided for under the leadership of an unusually capable executive team. The current management has formulated a system of five-year planning under which sales, earnings, capital requirements and product introduction are charted- five years in advance. Under this system, Bell & Howell is able to make con- crete plans for expansion well into the future and is' able to introduce and formulate new products with a minimum of start-up costs. Currently, the plan calls for a continuation of the sales growth under which sales have multi- plied more than two and one half times since 1950. – Profit margins on projected increased sales will be protected by a comprehensive integration program under which Bell & Howell manufactures almost all the parts for its products, including die castings, gears, motors, lenses and even leather cases. !,S would be expected in a company of this type, new product development plays an important part in maintaining sales leadership. Among recent new products have been the revolutionary new electric-eye movie camera in which a built-in exposure meter automatically adjusts the lens opening to compensate for existing light. This is the first camera of this type whiC.!.. has ever entered commercial production and -sources as most revolutionary'developments in recent years. Under the five-year many other new products now in the development stages are charted for introduction and it is felt that these products will add considerable new volume to re-enforce the growth in other lines. An indication as to the future of Bell & Howell may be provided by a look at its past record. As mentioned above, sales have been increased from 16.8 million in 1950 to 42.1 million in 1955. Per share earnings have held down somewhat by rising costs but have still risen from 2.60 in 1951 to 3.51 last year. With averages' accruing from integration and modern plant and equipment, future profits are expected at a rate consistent with volume.Despite the fact that per share earnings were down to 911 in the first six months of 1956 from 1.11 last year on increased sales, management is estimating that per share results will be improved over last year's. Lower profit margin in the first half was due to start-up expenses incurred in introduction of new products and it is expected that these products will contribute to substantially increased Christmas volume. Earnings for 1956 should approach 4.00 per share on,possible sales of 45 million. The conservative dividend pay-out ratio (1.00 was paid in 1955) will probably remain in force as Bell & Howell follows the growth company policy of reinvesti-ng -earning-s-i-n;..the -possible-that dividend may be augmented with stock from time to time as conditions warrant. 10 stock was paid in 1955. Bell & Howell's strong fundamental position is re-enforced by an outstanding-technical pattern. A long term base built up in the 12-28 range during 1947-1955 has an indication of 95. Currently, ability to penetrate 44 would indicate an intermediate term 65. There is strong support at 41-38. The stock is herewith added to our recommended list as a long term capital appreCiation vehicle. AWTamb W. TABELL WALSTON & CO.INC.