000361 Fletcher's Announces $6.8M Charge

Vancouver, British Columbia - Fletcher's Fine Foods Ltd. announced that it intends to take a special restructuring charge of $6.8 million ($4.2 million after taxes) in its fourth quarter earnings. The special charge relates to a number of strategic initiatives being implemented by the Company including:

a. The shut down of its Stone Mill Salad Division's prepared salad plant in Portland, Oregon in November 1999 and the subsequent consolidation of this operation into the Division's expanded Kent, Washington plant. This project will result in significant cost savings through the elimination of plant overheads and the creation of more efficient production runs at the Kent plant. Furthermore, the consolidation will have a minimal effect on the Division's capacity due to productivity improvements being made at the Kent plant.

b. The shut down of Fletcher's US Prepared Foods Division's Tukwila, Washington and Portland, Oregon meat processing operations, which was completed earlier this month, and the subsequent consolidation of these operations into a new state of the art processing facility in Algona, Washington. This initiative will result in significant cost savings through the elimination of plant overheads. In addition, it will provide the US Prepared Foods Division with the additional capacity it needs to begin production of a new line of high quality marinated fresh pork products as well as expand its existing fresh sausage line.

c. The restructuring of the Company's Grimm's, Harvest and Canadian Prepared Foods distribution and warehousing infrastructures for Western Canada. This initiative will allow us to capture synergies by combining these divisions' warehousing and order picking functions. In addition, it will allow for the much-needed expansion of Grimm's Richmond plant through the elimination of its existing warehousing and order picking activities.

“These initiatives will significantly improve the competitiveness of our Company by consolidating our production into fewer more efficient plants and by capitalizing on synergies between our divisions,” said Mr. Fred Knoedler, President and CEO. “Furthermore, the increases in the US Prepared Foods and Grimm's divisions' capacities will enable them to continue growing their businesses,” added Mr. Knoedler.

“We have been working on these initiatives for well over a year,” said Mr. George Paleologou, VP and CFO. “Now that they are complete we should start seeing immediate pretax annual benefits in the range of $2.5 to $3 million. In addition, these benefits will be immediately accretive to our cash flow since only $500,000 of the $6.8 million charge relates to future cash outlays,” added Mr. Paleologou.

The restructuring charge represents $0.54 per share and will be reflected in the Company's fourth quarter earnings to be released on March 29, 2000.

Fletcher's has been engaged in the food processing business since 1917 and has manufacturing facilities in Alberta, British Columbia, Oregon, Saskatchewan and Washington. In addition, Fletcher's holds an interest in three manufacturing facilities located in Ontario.

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