Will Settle Several Class-Action Suits : Cannon Sees ‘Very Substantial’ Loss for Its Final Quarter of ’87

Cannon Group, the struggling Hollywood film maker, disclosed late Friday that it expects to report a “very substantial” loss for the fourth quarter of 1987. It said its full-year loss will “substantially exceed” its 1986 “net operating loss,” but it offered no specific figures.

The company’s 1986 annual 10-K report to the Securities and Exchange Commission listed a $58.4-million “loss before provision for income taxes” and a $60.4-million net loss.

That report did not set out a figure labeled “net operating loss.”

Cannon previously has reported $41.3 million in cumulative losses for the first nine months of 1987.

The company also announced that it has signed a “memorandum of understanding” for Cannon and its insurance carrier for certain past and present officers and directors to pay $20 million in cash to settle several class-action lawsuits by company shareholders.

Cannon said it is required to pay $10 million of the total. Defendants in the suits included longtime top officers Menahem Golan and Yoram Globus.

Procedures Reviewed

Last November, the SEC accused Cannon of securities fraud in misstating pretax earnings from 1982 through the first half of 1986 and using those figures to raise $339 million from the public between October, 1983, and April, 1986.

Without admitting or denying the allegations, the company settled the case by agreeing to various steps, including a review of its accounting procedures by independent auditors.

Cannon also reported Friday that it is swapping $48 million of stock for debt in what it called “an effort to meet (its) net worth covenants in certain of its debentures.”

The company said its board last Wednesday approved issuing 9.6 million shares of a new non-voting preferred stock valued at $5 a share to a European affiliate, Renta International B.V., in exchange for canceling a debt that the company owed to Renta.

Cannon’s announcement made no mention of negotiations with its major European investor, Giancarlo Parretti, on “various equity and management proposals” that the company reported were under way last week.

Cannon said it does not expect to file its 1987 Form 10-K within the next 15 days.