Plant closings include:
• The Smithfield Packing Co. South facility in Smithfield, Va., will be closed. Case-ready fresh pork production will be moved to the adjacent Smithfield North plant and a North Carolina facility, creating significant operating efficiencies, the company said. Of the 1,375 Smithfield South employees, 1,035 will be offered transfers; 745 of those employees will be offered transfers to move to Smithfield North, and the others will have the opportunity to move to Smithfield Packing Co. plants in North Carolina. The plant is scheduled to close in December.
• A Plant City, Fla., facility producing packaged meats will close in September, affecting 760 Smithfield Packing Co. employees. A number of salaried employees will be offered transfers.
• The Smithfield Packing Co. plant in Elon, N.C., will close late in the summer, and country ham production there will cease. About 160 employees will be affected.
• A John Morrell plant in Great Bend, Kan., with 275 employees will close in July. The plant processes fresh pork and smoked meats.
• Farmland Foods will close its New Riegel, Ohio, plant. The plant will be shifting spiral ham production to other facilities and closing in April. About 230 employees will be affected. The company will offer transfers to other facilities to some salaried employees.
• An Armour-Eckrich Meats LLC packaged meats plant in Hastings, Neb., will close in July, affecting about 370 employees.
The plan includes the following other actions at various operating units:
• Smithfield Foods will reduce the number of independent operating companies in the pork group to three from seven. Four existing independent operating companies will be combined under the various business units of the Smithfield Packing Co. Inc., John Morrell & Co. and Farmland Foods Inc.
• John Morrell and Farmland Foods will merge their respective fresh pork sales forces. The company said this consolidation will enable it to serve customers with two highly competitive sales groups, Smithfield Packing Co. in the East and Farmland Foods in the Midwest and West.
• Patrick Cudahy Inc., a producer of bacon, dry sausages, hams and other specialty packaged meats, will become part of the John Morrell Group.
• Carando Foods, a unit of Farmland Foods producing Italian deli and specialty meats, also will be combined with the John Morrell Group. The addition of Carando and Patrick Cudahy to the John Morrell Group, which includes Armour-Eckrich Meats LLC and Curly's Foods Inc., will leverage the efficiencies of the packaged meats companies' manufacturing and marketing platforms.
• Farmland Foods will strengthen its foodservice business with the assimilation of North Side Foods Corp., a large supplier to the quick-service restaurant industry.
• Cumberland Gap Provision Co., a unit of the John Morrell Group and producer of hams, sausages and other specialty packaged meats, will integrate with Smithfield Packing Co.
• The international sales organizations that are responsible for exports of several independent operating companies will be consolidated into one group to form Smithfield Foods International Group, providing one face to overseas markets and reducing selling, general and administrative expense. This consolidation already is underway and has yielded positive results, the company said.
Smithfield expects the restructuring plan will result in annual cost savings after applicable restructuring expenses of approximately $55 million in fiscal 2010 and $125 million by fiscal 2011.

In connection with the plan, the company anticipates recording a pre-tax charge, principally related to non-cash asset writedowns, of approximately $85 million in its third fiscal quarter ended Feb. 1.

In addition, Smithfield Foods expects to record one-time pre-tax charges of approximately $30 million as the plan is implemented over the next three quarters. The company estimates that $53 million in capital expenditures will be required relative to plant consolidations in the remainder of fiscal 2009 and in fiscal 2010. Total capital expenditures are expected to remain below depreciation in this fiscal year and next.

Credit amendments

Separately, President and CEO Larry Pope said Smithfield Foods has entered into amendments of its U.S. and European credit facilities.

He said that the amendments provide, among other things, for a reduction of the applicable interest coverage ratio for specified periods through the third quarter of fiscal 2010.

"These amendments are very positive developments, for they provide the company with sufficient time and financial flexibility to bridge the current hog cycle and uncertain economic environment," said Pope. "This action should remove any question about the financial strength of Smithfield Foods. We have eliminated a major distraction, allowing our management team to focus full time on the restructuring plan and running the business."

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