Cannon Suffers $19.4-Million Loss in Quarter

Financially troubled Cannon Group on Tuesday reported a net loss of $19.4 million for the three months ended Oct. 3, bringing the entertainment company’s cumulative loss for a 21-month period to $101.8 million.

Cannon, headquartered in Los Angeles, said its total costs and expenses were $132.7 million, exceeding third-quarter revenue of $116.7 million. For the nine months ended Oct. 3, the company reported a loss of $41.4 million on total revenue of $322.6 million, while its costs and expenses were $360.4 million.

During the last five days of Cannon’s third quarter, the company sold two blocks of stock to European investors to raise $27.6 million--”without which, Cannon’s net worth would have been $11 million,” noted Lisbeth R. Barron, a research vice president at Balis Zorn Gerard Inc., a New York investment firm.

With a net worth of $38.6 million, the company recrossed the threshold of a $37.5-million net worth required by its agreements with banks and bondholders to avoid default, which would have accelerated payments of nearly $50 million in principal during the fourth fiscal quarter.

During the second quarter, the company’s net worth had slipped to slightly under $31 million, but the accelerated payments are triggered only if Cannon’s net worth remains below $37.5 million in two consecutive quarters, the analyst said.

Of its two movies currently in release, Cannon said “Death Wish IV” has done “moderately well,” while “Barfly” is doing “very well” in limited release.

“Death Wish IV” has grossed $5.6 million to date, while “Barfly” has grossed $872,000 at the box office, according to the trade publication Hollywood Reporter.

Cannon said it has continued to meet with representatives of Renta Inmobiliaria S.A. to complete a Sept. 29 transaction involving the sale of Cannon’s Commonwealth theater chain and certain real estate in the United States and Europe for about $300 million. Cannon said it is “not aware of any obstacles which would prevent consummation of the Renta transaction.”

Renta, a Spanish real estate development company, is controlled by Interpart, a Luxembourg company that has also acquired more than 40% of Cannon’s stock since May. In the two stock purchases that boosted Cannon’s net worth during the third quarter, Interpart bought 2 million Cannon shares, while a company that is 50% owned by Interpart bought an additional 1.45 million shares.

In its third-quarter filing with the Securities and Exchange Commission, Cannon disclosed that in mid-November it received advances totaling $68 million from “a group of companies related to Interpart,” of which $11.8 million was used to pay interest due bondholders.

“The advances are being treated by the company and the lenders as 30-day demand loans and are renewable at the option of the lenders,” Cannon said.

The company also said it has agreed to repay all of its U.S. bank debt by Jan. 31, 1988.