Lorimar Plans $37 Million in Writeoffs; Bad Debts and Syndication Problems Cited

Lorimar-Telepictures, which indicated a week ago that it was planning writeoffs because of the troubled TV syndication market, dropped another shoe Friday, and it was heavier than some had expected.

The Culver City-based TV programmer (“Dallas” and “Knot’s Landing”) said it will take charges that will reduce its third-quarter, pretax operating income by about $37 million.

The writeoffs evidently are linked to industry problems of collecting money owed by some non-network TV stations and to weakness in sales of syndicated TV shows.

Lorimar said it will increase its bad debt reserves and also “revise downward its income forecast for accounting for certain television programming.”

Lorimar declined to specify the amounts of the two types of writeoffs or say whether the company is now expecting to finish the fiscal third quarter ended Dec. 31 in the black or the red. Results of the quarter are expected in early February, spokeswoman Barbara Brogliati said.

Another major TV provider, MCA Inc., the parent of Universal Studios, startled the entertainment industry a week ago by disclosing that it would take a $50-million charge that could wipe out the operating profit for its 1986 fourth quarter ended Dec. 31.

Taking a Smaller Charge

At that time Lorimar acknowledged that it, too, planned to take a charge. An officer said it would be less than MCA’s.

Since MCA revenue last year topped $2 billion, more than four times the revenue of Lorimar, the latter’s writeoffs, dropping operating income by $37 million, might be considered relatively more weighty for the company than MCA’s are.

One factor in current industry problems was the bankruptcy filing last month by Grant Broadcasting System, a three-station independent chain that owes $200 million to program suppliers. According to industry reports, Grant owes between $17 million and $19 million to Lorimar and about $1.3 million to MCA.

Although MCA said last week that most of its charges would not be for bad debt reserves but rather for writedowns of anticipated earnings from shows that it expects to sell into syndication, Lorimar did not make a similar elaboration on the division of its charges.

Some key Lorimar executives, as well as securities analysts, were away from their desks Friday attending a convention of independent TV producers in New Orleans and could not be reached.

Stock Price Declines

Meanwhile, Lorimar’s stock dropped $1.125 Friday after the news, closing at $17.875 on the American Stock Exchange. However, the drop was less than the stock’s $1.625 rise Thursday, after a strong buy recommendation was put out by securities analyst Harold Vogel of the Wall Street firm of Merrill Lynch.

While dropping the shoe Friday concerning effects on its operating income, Lorimar sought to put its best foot forward by stating that its total cash sales of “off-network” programming to all independent TV stations will amount to less than 5% of Lorimar’s projected revenues for the fiscal year ending March 31.

It said, furthermore, that its conservative approach in taking the charges “will benefit the company in future years.”

“The current problem in the marketplace is primarily attributable to sales in prior years of off-network programming to certain independent television stations that are now experiencing financial difficulties,” Lorimar said. “Financially weak independent stations represent less than 5% of the total number of U.S. television stations.”