Kushner-Locke's stock price soars on buzz about summer movie debut.

The high-flying performance of West Los Angeles-based Kushner-Locke Co.'s stock in recent months is being pushed by bullish expectations the entertainment industry and Wall Street have for a little seal named Andre.

This summer Kushner-Locke is scheduled to make its debut on the big screen. Its first-ever theatrical release is a film called "Andre the Seal," which Kushner-Locke developed in cooperation with Paramount Pictures Corp. and Turner Broadcasting System. And the early industry buzz is that "Andre" has the potential to score at the box office in the same way last summer's "Free Willy" did.

"Free Willy" is a family film about the relationship between a young boy and a killer whale. As of early June, the 1993 summer sleeper generated for Warner Bros. $78 million in domestic box-office revenues alone. "Free Willy" made an additional $67 million from foreign box-office sales and has sold 8 million home video cassettes.

According to Kushner-Locke's Chief Financial Officer Donald Kushner, test screenings of early versions of the film have generated positive audience responses.

If "Andre" is a hit this summer, Kushner-Locke executives hope the film will give the company new clout in Hollywood. When asked what the success of "Andre" would mean to the company, Kushner responded, "What did 'Nightmare on Elm Street' and 'The Turtles' mean to New Line?"

"Nightmare on Elm Street" and "Teenage Mutant Ninja Turtles" are the two films which became cash cows for New Line Cinema, first for their initial success at the box office and later, as sequels. Kushner did point out that the company is already looking at sequel possibilities for "Andre."

The movie business is not where Kushner-Locke has made its mark. The company is mainly a developer, producer and distributor of original television programming and has been in that niche since its inception in 1983. According to the company's most recent annual report, filed in September 1993, the company has produced or distributed more than 900 hours of original programming, including 14 television series, 12 TV movies, and three mini-series.

Kushner-Locke has been involved in a wide variety of television programming, including a film for The Family Channel ("Candles in the Dark"), an action adventure series for CBS ("Sweating Bullets") and a series for the Arts & Entertainment cable channel ("Biographies").

The company was responsible for producing HBO's longest-running series -- a football comedy called "1st & Ten." O.J. Simpson was one of the stars of the series and has been a member of Kushner-Locke's board of directors since 1991. Lowell said Simpson has long been a friend to the company. However, Simpson's recent arrest for two counts of first-degree murder may end that relationship.

Kushner-Locke had not decided by press time on whether to keep or remove Simpson from the board. The company's top management, its board of directors and its legal counsel are discussing the situation.

Kushner pointed out that the company has produced films for theatrical release in the past, but none delivered in the way "Andre" has the potential to deliver.

On those expectations, Kushner-Locke's stock doubled in price from 75 cents per share to $1.50 per share between Feb. 28 and May 31, 1994. That jump represented the highest gain among all Los Angeles-based small cap stocks for the spring period.

Box-office success or not, "Andre" is likely to be good for the company in the long run, said Paul Morris, a broker at RAS Securities Inc. in New York, a market maker in the stock. One fact that has raised eyebrows on Wall Street is that Kushner-Locke delivered the film under budget. Both Paramount and Turner each provided $4.4 million, for a total of nearly $9 million in financing, and Kushner-Locke managed to spend less than the total laid out by Paramount and Turner.

Morris pointed out that Kushner-Locke has none of its own money riding on this picture. "Andre" was a television script that Kushner-Locke owned and, in return for the financing, Paramount and Turner were given the domestic and international distribution rights, respectively. Kushner-Locke maintains a hold on the home video distribution rights, according to Morris.

Wall Street's excitement is clearly not about the financial success that Kushner-Locke has enjoyed recently. The company did report solid, but not staggering, earnings for its second fiscal quarter, which ended March 31. The company posted net earnings of $245,000 on revenues of $12.95 million in that period. For the like period in 1992, Kushner-Locke posted net earnings of $155,000 on revenues of $9.57 million.

For the six-month period ended March 31, 1994, the company reported significant net earnings as well. Kushner-Locke had net earnings of $859,000 on revenues of $28.97 million. That is up over the like period last year, when the company reported net earnings of $722,000 on revenues of $24.03 million.

For the fiscal year ended Sept. 31, 1993, however, the company reported a net loss of $1.83 million on revenues of $42.49 million. Morris pointed out, however, that Kushner-Locke has been profitable in 10 of the last 11 years and expects to report earnings again at the close of fiscal 1994.

Kushner-Locke also successfully raised $16.4 million through a private placement completed in mid-March of this year. Doug Lowell, a company spokesman, said the placement was good news because it will allow Kushner-Locke to carry on with its production plans for the future. "We are certainly better capitalized, which will help us to do what we want to do," said Lowell.

Specifically, the capital infusion will allow Kushner-Locke to increase the amount of television programming -- in the form of one-hour series, movies of the week and mini-series -- it provides to the major networks. To that end, the company has been expanding its roster of network-tested writers, producers and actors and acquiring literary materials and rights, according to the company's annual report.

In the company's film division, which was established in April 1993, Kushner-Locke plans to develop and produce low- and medium-budget features. The actual number of features will depend on the company's ability to obtain financing, according to the company's annual report. The low-budget features will go direct to home video and cable television distribution. The medium-budget films will be targeted for theatrical release.

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