Tyson to Invest in Expanded Bacon Production

13/01/06 Tyson Foods, Inc. is continuing its strategy of investment and growth in the processed meats business by increasing its position as one of the nation’s leading manufacturers of bacon, company officials reported.

Tyson plans to spend more than $30 million to add bacon production at its plant in Cherokee, Iowa. Bacon operations at the facility are currently scheduled to begin by late summer 2006 and will complement production at the company’s existing bacon plants in Omaha, Nebraska and Vernon, Texas.

“We’re making this investment to help meet continued, strong demand for refrigerated and pre-cooked bacon,” said Bill Lovette, senior group vice president of Poultry and Prepared Foods. “The project is another example of the technology and food safety improvements we’ve initiated to position our processed meats business for future growth. For example, we’ve invested almost $15 million in our deli meats plant in Buffalo, New York, over the past two years.”

Because of the move to bacon production, ham operations at Cherokee will be shifted to Tyson facilities in Concordia, Missouri, and Buffalo. This will temporarily reduce Cherokee’s workforce of 650 by more than 50 positions over the next few months. However, the company expects to add approximately 70 jobs when bacon production begins later this year.

“While the changes will temporarily mean fewer jobs, our investment will restore positions and help strengthen the plant’s future,” Lovette said.

The employment status of temporarily displaced workers at Cherokee will be the subject of discussions with United Food and Commercial Workers Local 179. The company currently expects to invite them back to work after installation of the new bacon operation is completed. In addition to ham, the Cherokee plant makes deli meats, Canadian bacon and hot dogs.

Tyson’s efforts to enhance its processed meats business also include discontinuing operations at two facilities in northeast Iowa. The Independence and Oelwein plants, which produce chopped ham and sliced luncheon meats, will close effective March 17, while the company’s other processed meats operations will continue to receive the benefit of reinvestment for future growth.

“Closing the Independence and Oelwein plants is a tough decision because it affects the lives of nearly 400 Team Members and their families, as well as two great plant communities,” said Lovette. “However, given the age of these plants and capital improvements needed to supply our future product mix and customer needs, it’s economically unfeasible to keep them open.”

The Independence facility employs 300 Team Members, covers 126,000 square feet and has been in operation for more than 50 years. The Oelwein facility employs 90 Team Members, covers 43,000 square feet and has been in operation for 40 years. Equipment from the plants will be removed and either sold or used at other Tyson locations. The two plants and related property will be offered for sale.

Team Members affected by the closings will be encouraged to apply for openings at other Tyson locations, including the company’s nearby pork complex in Waterloo. Qualified workers will also have the option of accepting a severance package from the company.

“We thank our Team Members for their hard work and support of these plants,” Lovette said. “We’ll do our best to help them as they seek other employment at another Tyson location or with other employers in the area.” The company plans to host a job fair for affected workers.

The more efficient use of other processed meat facilities, including Concordia and Buffalo, together with reduced costs from the facility closures are estimated to generate annual pre-tax cost savings of approximately $15 to $20 million, a portion of which is estimated to be generated in the last six months of the current fiscal year. The facility closings are expected to result in a charge to Tyson’s second quarter earnings of approximately $16 million or $0.03 per share.

Tyson has similar processed meats operations in Concordia, Missouri; Buffalo, New York; Ponca City, Oklahoma and Houston, Texas.