Meat Industry INSIGHTS Newsletter

970756 Sizzler Reports Return to Profitability

July 22, 1997

Sizzler International Inc. reported for the fiscal year ended April 30, 1997, net earnings of 2 cents per share for the recently reorganized company vs. a net loss of $4.99 per share a year earlier.

For the quarter ended April 30, 1997, Sizzler reported net earnings of 7 cents per share vs. a net loss of $4.84 per share in the same period a year ago, of which 46 cents was due to net losses from operations and the remainder to reorganization charges.

The company said this return to profitability for the year and the quarter reflects improved results from U.S. domestic operations, steps taken during the Chapter 11 reorganization recently approved by the court, an international tax restructuring and continued earnings contributions from international operations. Financial Results

For the fiscal year, revenues were $299,928,000 vs. $436,194,000 the previous year. Net income was $565,000, or 2 cents per share, compared with a net loss of $138,458,000, or $4.99 per share, a year ago, of which 61 cents was due to net losses from operations and the remainder to reorganization charges. On the April 30, 1997, end of the fiscal year, the company or franchisees operated 461 restaurants compared with 661 at the end of the April 30, 1996, fiscal year.

For the quarter ended April 30, 1997, revenues were $59.4 million vs. $100,045,000 in the same period a year earlier. Net income was $1,974,000, or 7 cents per share, vs. a net loss of $134,493,000, or $4.84 per share, of which 46 cents was due to net losses from operations and the remainder to reorganization charges, for the same quarter a year ago. Met Expectations

Sizzler International Chairman and Chief Executive Officer James A. Collins said: "We were pleased with the results as they met our objective of returning the company to profitability by the fourth quarter. The positive results reflect the turnaround in the operating profits of our U.S. domestic restaurant business which is managed by a new executive team. The U.S. operations improved performance was due to elimination of underperforming restaurants and an improved operational execution."

For the quarter, domestic operations reported revenues of $22,633,000 vs. $57,948,000 the previous year. Domestic operations reported a net loss of $280,000 versus a net loss of $6,352,000 in the fourth quarter last year. These improved results reflect elimination of underperforming U.S. restaurants. As of April 30, 1997, the Sizzler U.S. system consisted of 268 restaurants, of which 69 are company operated and 199 franchisee operated, as compared with 434 in the previous fiscal year. Successful Reorganization

In June 1996, Sizzler filed for Chapter 11 protection to help reorganize domestic operations including closing unprofitable company-owned restaurants, relieving the burden from closed facilities and creating an environment to turn around U.S. operations. Sizzler's plan to emerge from Chapter 11 was approved by the bankruptcy court on June 2, 1997. All creditors are being repaid in full.

Christopher R. Thomas, president and chief executive officer of Sizzler U.S.A., said: "The first task was to reorganize the system of domestic restaurants. The Chapter 11 period helped us to eliminate underperforming restaurants and to focus attention on better performing restaurants in markets where we have significant market penetration.

"Our next task, which is still underway, is to reposition these restaurants back to their historic grill-based niche. We are accomplishing this by using new menu items, decor, marketing and other tools to evolve away from the buffet positioning which we believe contributed to our sales decline.

"We are also more focused on profitability as demonstrated in substantial per-store profit improvement during the fourth quarter and the establishment of profit-based restaurant manager incentive programs." International Contributions

Collins said that international operations continued to contribute to earnings. According to Kevin Perkins, president and chief executive officer Sizzler's international business: "Our KFC operations in Australia grew from 92 restaurants to 96 restaurants during the fiscal year, showing sales gains with strong profitability. The Australia Sizzlers are still experiencing a decline in sales and profitability, while our franchised Sizzler operations in Asia Pacific continue to expand and contribute to profits."

For the quarter, international operations reported revenues of $36,767,000 vs. $40,197,000 for the same period a year earlier. International operations contributed $8,817,000 to net income in the fourth quarter vs. $1,847,000 in the same quarter last year primarily due to the international tax restructuring. International Plans

Perkins said: "Growth of franchised Sizzlers in Asia Pacific is expected to continue both in existing markets and additional markets. The company will also add additional KFC restaurants in Australia, and we have plans to revitalize Sizzler's Australian operations which will be implemented this year utilizing many of the same approaches used in the U.S. improvements."

Except for historical information contained herein, the matters set forth in this news release are forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth herein in the forward-looking statements, including such factors, among others, as significant fluctuations in operating results, uncertain profitability, uncertain market acceptance of the company's product offering and intense competition.

At April 30, 1997, Sizzler International operated or licensed approximately 108 company-owned and 257 franchised Sizzler restaurants around the world. The company also operated 96 KFC restaurants in Queensland, Australia.

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