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Food Poisonings Put Dent in Sizzler's Fourth-Quarter Earnings : Financial: Los Angeles-based restaurant chain takes $137.5-million charge after quitting Chicago market.

May 25, 1994|From Bloomberg Business News

Sizzler International Inc., still hurting from an outbreak of food poisonings last year, said it will take a $137.5-million pretax restructuring charge in its fiscal fourth quarter.

About $70 million of the charge reflects the cost of exiting the Chicago market and disposing of about 50 restaurants where sales suffered because of a rash of illnesses linked to the E. coli bacteria last year, the restaurant chain said.

After taxes, the charge will reduce the steak-and-salad chain's earnings by $3.42 a share, resulting in a loss of about $3.26 a share for the year ended April 30, Sizzler said.

The Los Angeles-based company also said Richard P. Bermingham, its chief executive, will retire effective June 1. The firm said Kevin Perkins, who is president, will hold the additional title of chief executive upon Bermingham's retirement.

Sizzler's sales dropped sharply last year after several diners at three Sizzler restaurants in Washington and Oregon were struck with food poisoning caused by E. coli bacteria, which can cause severe, bloody diarrhea and abdominal cramps. All of the diners recovered.

The cases drew widespread attention in the West, where a similar case of E. coli poisonings at Jack in the Box restaurants caused two deaths and more than 600 illnesses in Washington and Nevada in January, 1993.

Sizzler has since changed its food handling procedures on the recommendations of health specialists.

Bermingham presided over the company for 14 years. Perkins is a former president of Sizzler's Asia/Pacific operations.

Chairman Jim Collins said the restructuring charge "will enable the company to maintain a tight strategic focus on developing our core businesses both in the United States and overseas."

About $35 million of the charge relates to the write-off of intangible assets from Sizzler's 1991 reacquisition of Sizzler Restaurants International and the related merger with Collins Foods International Inc., Sizzler said.

The remainder of the charge is for "liquidation of surplus property and other associated costs."

The company said Smith Barney Shearson continues to advise it on other alternatives to boost shareholder value, such as acquisitions, divestitures and joint ventures.

Sizzler also announced that its board of directors has agreed to declare a regular quarterly cash dividend of 4 cents a share, payable July 15 to shareholders on July 1.

Sizzler has 648 restaurants worldwide and plans to open between 20 and 25 new restaurants in fiscal 1995, the company said.

Sizzler shares fell 12.5 cents to $6.875 on the New York Stock Exchange Tuesday. The announcements were made after the close of business.

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