SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
Pursuant to Section 13 or 15d of the
Securities and Exchange Act of 1934
---------------------------
Date of Report (Date of earliest
event reported) August 29, 1994
WLR Foods, Inc.
(Exact name of registrant as specified in its charter)
Virginia 0-17060 54-1295923
(State of Incorporation) (Commission File Number) (IRS Employer
Identification
No.)
P.O. Box 7000 22815
Broadway, Virginia (Zip Code)
(Address of Principal executive offices)
(703) 896-7001
(Registrant's telephone number,
including area code)
Exhibit Index is on Page 37
1
<PAGE>
Amendment No. 2
The undersigned hereby amends the following items, financial
statements, exhibits or other portions of its current report on
Form 8-K previously filed with the Commission on September 13, 1994.
Item 2. Acquisition of Assets
The Asset Purchase Agreement dated July 27, 1994 between WLR
Foods, Inc. (the Registrant), Wampler-Longacre, Inc., the Registrant's
wholly-owned subsidiary (Wampler-Longacre) (collectively, Wampler),
Cuddy Farms, Inc. (Cuddy) and Cuddy International Corporation (Cuddy
International) (collectively, the Cuddy Corporations) provided for an
audited schedule of the working capital of Cuddy's Food Division
(Cuddy Foods), and for certain post-closing adjustments that may be
necessary as a result of such audit. Following the completion of such
an audit by the Registrant's independent auditors KPMG Peat Marwick,
Wampler and Cuddy executed a First Amendment to Asset Purchase
Agreement dated October 26, 1994 (the Amendment). Pursuant to the
Amendment, the purchase price of the acquisition was adjusted downward
by $6,300,000, resulting in a final purchase price of $67 million.
Under the terms of the Asset Purchase Agreement, $2,400,000 of the
stock portion of the purchase price was withheld by Wampler pending
the completion of the working capital audit, and consequently will not
be issued. Cuddy has remitted the balance of the post-closing
adjustments to Wampler in cash.
Item 7.
(a) Financial Statements.
2
<PAGE>
CUDDY FARMS, INC.
Food Division
Audited
Financial Statements
October 30, 1993 and October 31, 1992
3
<PAGE>
CUDDY FARMS, INC.
Food Division
Audited
Financial Statements
As Of
October 30, 1993 and October 31, 1992
And
For The Years Then Ended
* * * * * * * * * *
4
<PAGE>
CONTENTS
Independent Auditors' Report . . . . . . . . . . Page 6
Financial Statements:
Balance Sheets . . . . . . . . . . . . . . . . 7 - 8
Statements Of Operations . . . . . . . . . . . 9
Statements Of Changes In Division Equity . . . 10
Statements Of Cash Flows . . . . . . . . . . . 11 - 12
Notes To Financial Statements . . . . . . . . 13 - 26
5
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Shareholders of
Cuddy Farms, Inc.
Marshville, North Carolina
We have audited the accompanying balance sheets of The Food Division
of Cuddy Farms, Inc. as of October 30, 1993 and October 31, 1992, and
the related statements of operations, changes in division equity, and
cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Food
Division of Cuddy Farms, Inc. at October 30, 1993 and October 31,
1992, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting
principles.
POTTER & COMPANY, P.A.
September 22 , 1994
Monroe, North Carolina
6
<PAGE>
<TABLE>
CUDDY FARMS, INC.
FOOD DIVISION
BALANCE SHEETS
October 30, 1993 and October 31, 1992
<CAPTION>
ASSETS 1993 1992
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,417,114 $ 838,013
Accounts receivable
(net of allowance for doubtful accounts of
$25,000 in 1993 and 1992) 14,836,908 13,130,779
Current portion of notes receivable 201,140 108,432
Inventories 26,116,778 29,417,501
Prepaid expenses 129,288 133,653
----------- ------------
42,701,228 43,628,378
------------ -----------
PROPERTY, PLANT AND EQUIPMENT
Building and land improvements 17,703,679 16,595,027
Equipment 32,537,873 30,870,700
Trucks and automobiles 2,089,837 1,983,257
Office furniture and fixtures 936,877 883,151
Leasehold improvements 38,732 34,732
Construction in progress 317,035 358,940
------------ ------------
53,624,033 50,725,807
Less accumulated depreciation 27,097,263 24,003,416
------------ ------------
26,526,770 26,722,391
Land 2,875,330 3,349,522
------------ ------------
Total Property, Plant And Equipment, Net 29,402,100 30,071,913
------------ ------------
OTHER ASSETS
Notes receivable 464,263 529,131
Investments 644,383 421,375
Deposits 199,724 -
Non-competition agreement 63,307 83,310
------------ ------------
Total Other Assets 1,371,677 1,033,816
------------ ------------
TOTAL ASSETS $ 73,475,005 $ 74,734,107
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND DIVISION EQUITY 1993 1992
--------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Bank overdraft $ 3,627,229 $ 3,758,079
Current maturities of long-term debt 1,923,000 3,958,000
Accounts payable 5,955,204 6,625,589
Amounts due affiliated companies 33,915,852 34,416,334
Amounts withheld from employees 164,346 182,820
Employee savings 66,354 78,452
Accrued expenses:
Salaries and wages 843,631 395,887
Insurance and payroll taxes 64,356 67,014
Property and other taxes 251,533 255,226
Interest 182,080 191,463
Other 83,716 110,828
---------- -----------
Total Current Liabilities 47,077,301 50,039,692
DEFERRED INCOME TAXES 6,979,134 3,524,377
LONG-TERM DEBT 21,328,000 23,251,000
----------- -----------
Total Liabilities 75,384,435 76,815,069
----------- -----------
DIVISION EQUITY (1,909,430) (2,080,962)
----------- -----------
TOTAL LIABILITIES AND
DIVISION EQUITY $ 73,475,005 $ 74,734,107
=========== ===========
</TABLE>
8
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
STATEMENTS OF OPERATIONS
For The Years Ended October 30, 1993 and October 31, 1992
<TABLE>
<CAPTION>
1993 1992
------------ -------------
<S> <C> <C>
Sales $ 163,277,281 $ 161,369,666
Cost of Goods Sold 149,307,217 145,957,748
------------- ------------
Gross Profit 13,970,064 15,411,918
Selling, General And Administrative Expenses 8,447,447 15,629,540
------------ ------------
Income (Loss) From Operations 5,522,617 (217,622)
Other Income And (Expenses) - Net 269,182 (135,442)
------------ ------------
Income (Loss) Before Interest Expense And Income Taxes 5,791,799 (353,064)
Interest Expense (3,501,151) (3,787,207)
------------ ------------
Income (Loss) Before Income Taxes 2,290,648 (4,140,271)
Provision For (Benefit From) Income Taxes 2,119,116 (1,606,947)
------------ ------------
Net Income (Loss) $ 171,532 $ (2,533,324)
============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISIONS
STATEMENTS OF CHANGES IN DIVISION EQUITY
For The Years Ended October 30, 1993 and October 31, 1992
Beginning of Year, October 26, 1991 $ 452,362
Net Income (Loss) (2,533,324)
-----------
End of Year, October 31, 1992 (2,080,962)
Net Income (Loss) 171,532
End of Year, October 30, 1993 $ (1,909,430)
===========
See Accompanying Notes To Financial Statements.
10
<PAGE>
<TABLE>
CUDDY FARMS, INC.
FOOD DIVISION
STATEMENTS OF CASH FLOWS
For The Years Ended October 30, 1993 And October 31, 1992
<CAPTION>
1993 1992
-------- --------
<S>
CASH FLOWS FROM OPERATING ACTIVITIES <C> <C>
Net Income (Loss) $ 171,532 $ (2,533,324)
Adjustments to reconcile net income (loss) to net
cash
provided by (used in) operating activities:
(Gain) Loss in disposal of fixed assets 28,202 (17,623)
Depreciation and amortization 2,917,620 2,939,363
Increase (decrease) in deferred income taxes 3,454,757 (254,277)
Equity (Gain) Loss in partnership investments (222,688) 325
----------- -----------
6,349,423 134,464
Net change in non-cash operating assets
and liabilities
Items related to affiliated companies (500,482) 6,967,473
Other items 1,302,900 (1,009,623)
------------ ------------
Net Cash Provided By Operating Activities 7,151,841 6,092,314
------------ ------------
CASH FLOWS FROM INVESTMENT ACTIVITIES
Additions to fixed assets (2,028,774) (2,271,012)
Proceeds from disposal of assets 648,477 293,473
Inter-company transfers to fixed assets (876,029) (294,762)
Decrease (Increase) in other non-current assets (199,724) (11,274)
------------- ------------
Net Cash Used In Investment Activities (2,456,050) (2,283,575)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in inter-company cash transfer account - (1,774,000)
Repayments of long-term debt (3,958,000) (2,133,000)
Collection of notes receivable 62,160 38,686
Additions to notes receivable (90,000) -
------------- ------------
Net Cash Used In Financing Activities (3,985,840) (3,868,314)
------------- ------------
NET INCREASE (DECREASE) IN CASH 709,951 (59,575)
Net Cash Position At Beginning Of Year (2,920,066) (2,860,491)
------------- ------------
Net Cash Position At End Of Year $ (2,210,115) $ (2,920,066)
============= ============
See Accompanying Notes To Financial Statements.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
CHANGES IN NON-CASH OPERATING ASSETS AND LIABILITIES
(Increase) Decrease In Current Assets
Accounts receivable - trade and other $ (1,706,129) $ (1,855,338)
Inventories 3,300,723 (2,051,810)
Prepaid expenses 4,365 124,635
------------- ------------
Total (Increase) Decrease In Non-Cash
Operating Assets 1,598,959 (3,782,513)
------------- ------------
Increase (Decrease) In Current Liabilities
Accounts payable (670,385) 3,301,022
Amounts due - affiliated companies (500,482) 6,967,473
Amounts withheld from employees (18,474) 46,270
Employee savings (12,098) 16,535
Accrued expenses 404,898 (590,937)
-------------- ------------
Total Increase (Decrease) In Non-Cash
Operating Liabilities (796,541) 9,740,363
-------------- ------------
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES $ 802,418 $ 5,957,850
======== =========
</TABLE>
12
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description Of The Business
Cuddy Farms, Inc. is a major supplier of turkey eggs
and poults. The Company has a farm division with
breeding and hatching facilities located in North
Carolina, South Carolina, Iowa, Missouri, Ohio,
Virginia and Minnesota. The food division operates
three turkey processing facilities and a feed
manufacturing facility in North Carolina.
B. Basis Of Presentation
The accompanying financial statements include the
accounts of The Food Division of Cuddy Farms, Inc.
Significant inter-company transactions and balances
have not been eliminated.
C. Inventories
Inventory values are determined using the following
policies:
1) Turkey Flocks
Live poultry flocks are valued at the accumulated
flock cost including poult and feed costs.
2) Processed Turkey Products
Processed turkey is valued at the lower of cost,
or market with cost determined on first-in, first-
out basis.
4) Supplies and Feed Ingredients
Supply and feed ingredient inventories are valued
at the lower of cost or market on a first-in,
first-out basis.
D. Accounting Period
The Company has adopted a 52-53 week fiscal year that
ends on the last Saturday in October for both financial
and tax reporting purposes.
E. Allowance For Doubtful Accounts
The allowance for doubtful accounts is based on a
historical bad debt experience and on an evaluation of
individual accounts. Accounts are charged against the
allowance when deemed uncollectible.
- - Continued - 13
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
F. Property, Plant And Equipment
Property, plant and equipment are recorded at cost.
Depreciation starts when the asset is placed in
service. For financial reporting purposes,
depreciation expense is generally provided on a
straight-line basis. Estimated useful lives are as
follows:
Category Years
Buildings and land 15 - 40
improvements 3 - 15
Equipment 3 - 5
Trucks and automobiles 5 - 10
Office furniture and 5
fixtures
Leasehold improvements
Analysis of depreciation expense:
1993 1992
------------- ------------
Charged to cost of goods sold $ 2,716,486 $ 2,841,703
Charged to general and
administrative expense 181,127 77,657
-------------- ------------
Total depreciation expense $ 2,897,613 $ 2,919,360
============== ============
Expenditures that result in the enhancement of the
assets involved are capitalized. Maintenance and
repair costs are expensed when incurred. Upon sale or
other disposition, any gain or loss is included in
income.
Equipment leased under capital leases is recorded in
property, plant and equipment, with corresponding
obligations carried in long-term debt. The amount
capitalized is the lower of the present value of
minimum lease payments or the fair market value of the
leased property. Depreciation on capital leases is
recorded on a straight-line basis, generally over the
estimated useful life of the equipment.
- - Continued - 14
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
G. Non-competition Agreement
Non-competition agreement represents the unamortized
balance of an amount paid to an individual in
connection with the purchase of the operating assets of
Stout Enterprises; the agreement amount is being
amortized over 10 years.
H. Investments
Investments include 50% ownership of Cuddy/Modern
Storage partnership. The Company accounts for
investments under the equity method, in which the
Company's share of net income or loss is directly
reflected in the financial statements and the
investment account is adjusted accordingly. (See also
Note 11).
I. Income Taxes
Deferred income taxes are provided for temporary
differences in reporting income and expenses for
financial statement and tax purposes. These
differences arise primarily from the use of accelerated
depreciation and cash basis accounting methods
previously used for tax reporting purposes. Those
differences expected to be recognized in the subsequent
year are reported as a current liability.
The Company adopted Statement of Financial Standard
(SFAS) No. 109 as a method of reporting income taxes.
SFAS 109 requires that deferred income tax liabilities
be determined using the tax rate expected to be in
effect when the taxes are actually paid. Accordingly,
income tax expense provisions will increase or decrease
in the same period in which a change in the tax rates
is enacted. Previous rules required providing deferred
taxes using rates in effect when the liability was
first recorded, without subsequent adjustment solely
for the tax rate changes.
J. Cash And Cash Equivalents
For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be
cash equivalents.
- - Continued - 15
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
K. Reclassifications
Certain items on the October 31, 1992, financial
statement have been reclassified to conform with
current year classifications and financial statement
presentations.
NOTE 2 - SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS
1993 1992
--------------- --------------
Net cash paid during the
year for:
Interest, net $ 3,510,534 $ 3,741,656
========= =========
NOTE 3 - NOTES RECEIVABLE
1993 1992
------------ ------------
Note receivable due from contract
growers at varying interest rates
and maturities $ 665,403 $ 637,563
Less portion due within one year 201,140 108,432
------- -------
Amounts Due After One Year $ 464,263 $ 529,131
======= =======
NOTE 4 - INVENTORIES
1993 1992
----------- -----------
Inventories On Hand:
Live poultry flocks $ 12,269,760 $ 13,732,807
Processed turkey products 8,404,286 10,242,851
Supplies and feed ingredients 5,442,732 5,441,843
-------------- ------------
Total Inventories $ 26,116,778 $ 29,417,501
============== ============
- - Continued - 16
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 5 - LONG-TERM DEBT
1993 1992
----------- ---------
Note payable to an insurance company,
repayment provisions provide for monthly
installments of $34,000 plus interest at
13.25%. Principal payments began October
1, 1983 and continue until August 1, 1995.
The remaining balance will be due
September 1, 1995. The loan is secured by
a renewable irrevocable letter of credit
drawn on a bank. $ 1,136,000 $ 1,544,000
Note payable to an insurance company,
repayment provisions provide for monthly
installments of $12,500 plus interest at
14.5%. The balance was paid September 1,
1993. - 1,975,000
Note payable to an unrelated individual
payable in annual installments of $15,000
plus interest at 10% on the unpaid
balance, secured by real estate. 15,000 30,000
On October 25, 1989, the Company entered
into a note agreement with a mortgage
company. Interest is payable quarterly
beginning on January 1, 1990 at 9.66%.
Semi-annual principal payments of $750,000
(Food Division portion) are due beginning
October 1, 1992 through April 1, 2004,
with the remaining principal due on
October 1,2004. The loan is secured by
all real and personal property (except
office equipment and rolling stock) held
in Union and Anson Counties, North
Carolina and Chesterfield County, South
Carolina and a third priority security
interest in accounts receivable and
inventories. The amount shown represents
only the portionallocated to the Food
Division. 22,100,000 23,660,000
----------- -----------
23,251,000 27,209,000
Less payments due within one year 1,923,000 3,958,000
----------- ----------
LONG-TERM DEBT $ 21,328,000 $ 23,251,000
========== ==========
- - Continued - 17
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 5 - LONG-TERM DEBT - Continued
Required principal payments on long-term debt are as
follows:
Year Ending Amount
----------- --------------
1994 $ 1,923,000
1995 2,228,000
1996 1,500,000
1997 1,500,000
1998 1,500,000
Subsequent to 1998 14,600,000
----------
Total Long-Term Debt $ 23,251,000
==========
Interest cost associated with notes payable and long-term
debt was $3,501,151 for 1993 and $3,787,207 for 1992.
Various loan agreements contain covenants relating to the
ownership, maintenance of net worth and tangible assets,
dividend restrictions, life insurance coverage, repair
expenditures, and others. As of October 30, 1993 and
October 31, 1992 the Company had complied with or obtained
waivers relating to the loan covenants.
NOTE 6 - COMMITMENTS
During 1993, the company bought back part of its rolling
stock from a financing company under a sale/leaseback
agreement. The payments were calculated at a 20% payoff and
totaled $270,309.
The Company is also obligated under several noncancellable
operating leases for transportation and data processing
equipment, plant facilities and store facilities that expire
over the next five years. Certain lease agreements provide
an option to purchase the property equal to 20% of their
cost.
- - Continued - 18
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 6 - COMMITMENTS - Continued
The approximate annual minimum lease payments under all
noncancellable operating leases as of October 30, 1993 are
as follows:
1994 $ 1,164,263
1995 839,504
1996 306,015
1997 137,076
1998 64,026
---------
Total $ 2,510,884
=========
Rent expense for all operating leases for the years ended
October 30, 1993 and October 31, 1992 amounted to $1,214,943
and $1,361,097, respectively.
The Company is also party to several contracts in which it
agrees to the joint investment and/or operation of growing
farms and hatcheries. Under these agreements, the Company
must make fixed payments for compensation of management
services and variable payment based on a fixed rate per unit
of production provided to Cuddy Farms, Inc.
NOTE 7 - RELATED PARTY TRANSACTIONS
Cuddy Farms, Inc. is related to several other companies;
Descriptions of the affiliations and transactions with
affiliated companies are provided below:
Cuddy Farms, Inc. is related to Cuddy International
Corporation a Canadian Corporation, by stock ownership
and common management.
Cuddy Farms, Inc. is related to several Canadian entities
owned and operated by Cuddy International Corporation
and/or the Cuddy family.
Cuddy Farms, Inc. owns all the outstanding stock of Colony
Foods,Inc.
Mr. D. Bruce Cuddy is the President of Cuddy Farms, Inc.
and a Director of Cuddy International Corporation.
Cuddy Farms, Inc. - Food Division is related to Cuddy
Farms, Inc. Farms Division.
- - Continued - 19
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 7 - RELATED PARTY TRANSACTIONS - Continued
Cuddy Farms
TRANSACTIONS D. Bruce Inc.-Farms
DURING 1993 Cuddy Division
----------- -------- ------------
Sales to $ - $ 6,981,050
Purchases from - 15,221,556
Administrative fees
paid to -
2,561,853
Amount due to -
33,915,852
Growers fees 510,991
TRANSACTIONS
DURING 1992
Sales to $ - $ 7,119,206
Purchases from - 17,087,875
Administrative fees
paid to -
2,047,475
Amount due to -
34,416,334
Grower fees 523,907
NOTE 8 - INCOME TAXES
The 1986 Tax Reform Act required substantial change to the
tax accounting methods previously adopted by the Company.
Previous tax regulations permitted family owned farming
businesses to use the cash basis of accounting for income
tax purposes. The Company had consistently followed the
cash basis of accounting for income tax purposes. Current
tax regulations disallow the cash basis of accounting for
certain agriculture companies that previously used the cash
basis of accounting. These corporations are now required to
use the accrual method of accounting for determining taxable
income.
- - Continued - 20
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 8 - INCOME TAXES - Continued
In similar accounting changes, the IRS has usually required
the taxpayer to make adjustments, over a period of time, to
report the effect of the accounting change into taxable
income. In such cases the deferred income taxes are
absorbed (timing differences reverse) over the adjustment
period required by the IRS. In the case of family owned
farming corporations there are special provisions. The
amount of the adjustment that would be required as a result
of the change from the cash to the accrual method of
accounting is not required to be reflected in taxable income
unless one of two situations occur. The tax laws refer to
this unrecognized adjustment as a "suspense account". This
suspense account will only have to be recognized as taxable
income if:
1) The corporation ceases to be a family owned farming
corporation, or
2) The gross receipts from farming activities in any year
are less than the gross receipts in the last year (base
year) the corporation was allowed to use the cash basis
of accounting, which will cause a prorata portion of
the suspense account to be recognized in taxable
income. Base year sales for this purpose are
$126,270,839.
As described in Note 13 Cuddy Farms, Inc. sold the assets of
the Food Division to WLR, Inc. on August 29, 1994. As a
result, the gross receipts of Cuddy Farms, Inc. will drop
below the base year sales of $126,270,839. Unused net
operating losses and tax credits will be used to offset the
expected tax liability. Because the gross receipts for
fiscal year 1994 will be greater than the base year sales,
the suspended taxes are not expected to come due until the
end of fiscal year 1995.
The Company has reduced deferred income taxes to the extent
that it has net operating losses and tax credit carryforward
items.
An analysis of income taxes is provided below:
1993 1992
----------- ------------
Net change in deferred income taxes $ 2,372,285 $ (254,277)
State net economic loss expiration 1,082,472 -
Net change in benefit from division
tax receivable (1,335,641) (1,352,670)
----------- -----------
Provision For (Benefit From)
Income Taxes $ 2,119,116 $(1,606,947)
=========== ============
- - Continued - 21
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 8 - INCOME TAXES - Continued
An analysis of deferred income taxes is provided below:
1993 1992
------------- ------------
Beginning of year $ 3,524,377 $ 3,778,654
Expired state operating loss
carryforward (1,082,472) -
Increase (decrease) in deferred
taxes
due to temporary differences of
determining financial basis
and tax basis income 4,537,229 (254,277)
--------- ---------
End of Year $ 6,979,134 $ 3,524,377
========== =========
Deferred income taxes consist of the following:
1993 1992
---------- ----------
Suspended deferred income taxes
relating to the past use of cash
basis accounting for tax purposes $ 12,768,375 $ 12,768,375
Deferred income taxes relating to
the use of accelerated
depreciation,
and non-capitalized interest and
leases for tax purposes 5,458,153 5,251,237
Deferred charges as a result of
unused tax credits (404,890) (275,029)
Deferred income taxes relating to
difference in valuation of
inventory for tax purposes (146,577) (137,578)
Tax effect of net operating loss
carryforward (10,829,496) (14,199,624)
Other miscellaneous amounts 133,569 116,996
------------ -----------
Deferred income taxes $ 6,979,134 $ 3,524,377
============ =============
- - Continued - 22
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 8 - INCOME TAXES - Continued
An analysis of income taxes for Cuddy Farms, Inc. as
reported in the October 30, 1993 and October 31, 1992
consolidated financial statements is provided below:
1993 1992
------------ ----------
Provision for federal and
state income taxes $ 142,045 $ -
Adjustment for under
(over) accrual 4,889 10,507
Net change in deferred
income taxes 2,474,317 131,823
Expiration of state net
economic loss carryforward 1,462,800 -
--------- -------
4,084,051 $ 142,330
========= =======
The amount of current and deferred tax expense allocated to
the Foods and Farms Divisions of Cuddy Farms, Inc. has been
computed as if each division were a separate taxpayer. The
Foods Division had tax related balances due from Cuddy
Farms, Inc. in the amounts of $3,725,550 and $2,389,909
respectively at October 30, 1993 and October 31, 1992
resulting from utilization of Foods Division's net operating
losses by Cuddy Farms, Inc.
For tax purposes as of October 30, 1993, Cuddy Farms, Inc.
has the following carryforward items to offset future
federal income tax liabilities:
Expiration
Amount Years
-------------- ------------
Net operating loss carryforward $ 30,156,833 Through 2004
Unused tax credits carryforward $ 809,780 Through 2006
The portion of the carryforward items attributable to the
Foods Division is provided below:
Expiration
Amount Years
-------------- ------------
Net operating loss carryforward $ 30,156,833 Through 2004
Unused tax credits carryforward $ 404,890 Through 2006
- - Continued - 23
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 9 - EMPLOYEE BENEFIT PLANS
The Company maintains three employee benefit plans, a 401(k)
Plan and Trust, and a Profit Sharing Plan and a non
qualified retirement/survivor benefit plan. Effective
November 1, 1992 the Profit Sharing Plan was merged into the
401(k) Plan. The 401(k) plan provides that certain hourly
and salaried employees may contribute the maximum percent of
gross earnings allowable by the IRS in any plan year. The
Company in turn will match at least 50% of the employees'
contributions up to 3% of compensation. Total contributions
for the 401(K) Plan and Trust above referenced plans for
1993 and 1992 were $193,945 and $170,842, respectively.
A Non-Qualified Retirement/Survivor Benefit Plan was adopted
January 1, 1993. The plan provides that select key
management employees may defer any amount of gross earnings,
subject to IRS regulations, in any plan year. The Company
and the employee enter into a Salary Deferral Agreement and
a Split Dollar Agreement. Under the Deferral Agreement the
employee elects to defer a certain amount of gross earnings
for a minimum period of 5 years. The Company agrees to
match employee's deferral up to a maximum of 4% of gross
earnings and to credit the account for a defined annual
interest rate throughout the life of the agreement.
Under the Survivor Benefit Plan the employee and the Company
enter into a Split Dollar Agreement whereby the Company
assists the employee in purchasing life insurance utilizing
the combined proceeds of the employee's deferral and the
Company's match. The life insurance policy is assigned to
the Company to assure the recovery of premiums paid by the
Company prior to disbursement to the employee's named
beneficiary.
Total Company contribution for 1993 was $55,356.
NOTE 10 - CONTINGENCIES
The Company has a co-insurance group hospitalization plan.
Under the plan the Company is self-insured for $60,000 per
employee. The insurance company will pay all claims over
$60,000 per individual per year not to exceed a lifetime
benefit of $1,000,000 per salaried employee or $250,000 per
hourly employee. No reasonable estimate can be made for
future losses under the co-insurance plan described above.
As of October 30, 1993, the Company had outstanding letters
of credit in the amount of $2,039,657 as collateral on
certain notes payable to an insurance company as described
in Note 5. The Food Division's allocation of this amount is
$1,136,000.
The Company is self insured for its workers' compensation.
- - Continued - 24
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 11 - INVESTMENTS
Investments consist of the following:
1993 1992
------------ -----------
Investment in Cuddy/Modern
Storage $ 644,383 $ 421,375
partnership ======= =======
On November 19, 1990, the Company entered into a general
partnership with a food storage vendor to construct and
operate a cold storage distribution facility in Marshville,
North Carolina. Construction began on the facility in
December, 1990, and operations began in March, 1992.
The partnership facility will operate under a partnership
agreement through November 1, 2005, at which time it may be
extended on an annual basis. All profits, leases and
investment requirements are to be on an equal basis.
Cuddy Farms, Inc. is listed as a guarantor of the $5,500,000
partnership note payable to a bank up to a maximum of
$2,750,000. The note payable balance as of October 30, 1993
was $4,070,044.
Significant financial items of the partnership at October
30, 1993 and October 31, 1992 are provided below:
1993 1992
--------- ---------
Total assets $ 5,441,664 $ 6,120,847
Total liabilities 4,153,089 5,278,297
Total partners' capital 1,288,575 842,500
Total revenue 2,610,514 2,025,542
Net income (loss) 446,025 (651)
- - Continued - 25
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
NOTES TO FINANCIAL STATEMENTS
October 30, 1993 and October 31, 1992
NOTE 12 - RESTATEMENT
The Foods Division of Cuddy Farms, Inc was included as
supplemental financial information in the consolidated
financial statements of Cuddy Farms, Inc. as of October 30,
1993 and October 31, 1992. Certain amounts have been
restated to more clearly reflect the deferred tax liability
and the provision for income taxes of the Foods Division. A
summary of the restatement is provided below:
1993 1992
--------- ---------
Decrease in deferred income taxes $ 4,492,198 $ 5,226,959
Increase in tax related balance
due from the Farms Division $ 3,725,550 $ 2,389,909
Increase in division equity $ 8,217,748 $ 7,616,868
NOTE 13 - SUBSEQUENT EVENTS
Cuddy Farms, Inc. sold substantially all of the assets of
the Food Division to WLR, Inc. on August 29, 1994.
26
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
BALANCE SHEET
JULY 30, 1994
(unaudited)
ASSETS
Current Assets
Cash $21,056
Accounts receivable, net of allowances
for doubtful accounts of 100,000 15,679,144
Notes receivable 84,267
Inventories (Note 2) 29,532,547
Prepaids and other current assets 3,249,085
------------
Total current assets 48,566,099
Property, plant and equipment
Land 2,875,330
Building & land improvements 17,703,679
Machinery and equipment 35,593,633
Leasehold improvements 38,732
Construction in progress 3,182,981
------------
Total property, plant and equipment 59,394,355
Less accumulated depreciation (29,193,875)
------------
Total property, plant and equipment, net 30,200,480
Investments and other assets
Other assets 513,077
Investment in partnership 597,224
------------
Total investments and other assets 1,110,301
------------
TOTAL ASSETS $79,876,880
============
27
<PAGE>
(Balance Sheet Continued)
LIABILITIES AND EQUITY
Current Liabilities
Bank overdrafts $1,697,346
Accounts payable 9,190,194
Amounts due affiliated companies 42,637,380
Current maturities of long-term debt 1,983,000
Amounts withheld from employees 725,782
Employee savings 74,794
Accrued expenses 2,877,426
------------
Total current liabilities 59,185,922
Deferred income taxes 6,979,134
Long-term debt 20,167,000
Division equity (6,455,176)
------------
Total equity (6,455,176)
------------
OTAL LIABILITIES AND EQUITY $79,876,880
============
See Accompanying Notes to the Financial Statements
28
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 30, 1994
AND JULY 31, 1993
(unaudited)
NINE MONTHS ENDED
July 30, 1994 July 31, 1994
Sales $125,962,650 $114,645,801
Cost of sales 121,437,767 104,267,996
------------- ------------
Gross profit 4,524,883 10,377,805
Selling, general and
admnistrative expenses 8,740,668 6,343,885
------------- ------------
Operating income (loss) (4,215,785) 4,033,920
Other expenses
Interest expense 2,338,252 2,668,674
Other expense (income), net 898,008 (162,815)
------------- ------------
Income (loss) before taxes (7,452,045) 1,528,061
Income tax expense (benefit) (2,906,298) 595,945
------------- ------------
Net income (loss) ($4,545,747) $932,116
============= ============
See Accompanying Notes to the Financial Statements.
29
<PAGE>
CUDDY FARMS, INC.
FOOD DIVISION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
JULY 30, 1994 AND JULY 31, 1993
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: July 30, 1994 July 31, 1993
Net earnings (loss) ($4,545,747) $932,116
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 2,096,612 2,332,218
Deferred income taxes 2,906,298 595,945
Change in operating assets and liabilities:
(Increase) decrease in accounts receivabl (725,363) 727,838
Increase in inventories (3,415,769) (891,682)
Increase in other current assets (6,026,095) (338,677)
Increase (decrease) in accounts payable 13,978,505 (110,591)
------------ -----------
Net Cash Provided by Operating Activities 4,268,441 3,247,167
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (2,894,992) (2,035,875)
Investments in other assets 261,376 217,607
------------ -------------
Net Cash Used in Investing Activities (2,633,616) (1,818,269)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (1,101,000) (1,213,500)
------------ ------------
Net Cash Used in Financing Activities (1,101,000) (1,213,500)
------------ ------------
Increase in Cash and Cash Equivalents 533,825 215,398
Net Cash Position at Beginning of Fiscal Year (2,210,115) (2,860,491)
------------ ------------
t Cash Position at End of Period ($1,676,290) ($2,645,093)
============ ============
Supplemental cash flow information:
Cash paid for:
Interest $2,338,041 $2,649,423
Income taxes - -
See Accompanying Notes to Financial Statements.
30
<PAGE>
Notes to Financial Statements
1. Accounting Policies
The financial statements presented herein include the accounts of
Cuddy Farms, Inc. Food Division. The balance sheet as of July 30,
1994, and the statements of operations and cashflows for the nine
months ended July 30, 1994 and July 31, 1993 are unaudited.
In the opinion of management, all adjustments necessary for fair
presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring accruals and the use of
estimates. Interim results are not necessarily indicative of results
for the entire fiscal year.
The financial statements and notes are presented as permitted by Form
10-Q and do not contain certain information included in the Company's
annual financial statements and notes.
The Company's unaudited interim financial statements should be read in
conjunction with the annual financial statements for the fiscal year
ended October 30, 1993 included elsewhere herein. In both, the
accounting policies and principles used are consistent in all material
respects.
2. Inventories
A summary of inventories at July 30, 1994 follows.
(unaudited)
July 30, 1994
Live poultry and breeder flocks $14,738,253
Processed poultry and meat products 9,850,656
Supplies, feed and other 4,943,638
------------
Total inventories $29,532,547
==========
3. Subsequent event
On August 29, 1994 Cuddy Farms, Inc. sold substantially all of the net
assets of the Food Division to WLR Foods, Inc. except for long-term
debt, tax liabilities and amounts due to affiliated companies.
31
<PAGE>
(b) Pro forma combined financial information.
The following sets forth the Registrant's unaudited pro
forma statements of operations for the year ended July 2, 1994
adjusted to reflect the transaction related to the acquisition of
Cuddy Foods. The Registrant issued 1,183,333 shares of common stock,
along with $38,600,000 cash in exchange for the acquired business.
Additionally, WLR Foods, Inc. paid $500,000 for the covenant of the
Cuddy Corporations, A.M.C. Family Holdings, Ltd. and A.M. Cuddy not to
compete with Wampler-Longacre for four years. The pro forma combined
financial statements reflect the acquisition of the business as of the
beginning of fiscal 1994 for the statement of operations and as of
July 2, 1994 for the combined balance sheet.
The unaudited pro forma combined statement of operations
present the results as if Cuddy Foods had been acquired as of July 4,
1993. Such unaudited pro forma combined statement of operations shows
the historical statements of the two entities combined with the
material impacts of the transaction reflected in the pro forma
adjustment column. These pro forma statements are to be used for
comparison purposes only.
The following pro forma information does not purport to be
indicative of the actual results that would have been obtained if the
transaction had occurred at the beginning of the period. Furthermore,
these statements do not represent the expected future results of the
combined company. These statements and the accompanying Notes should
be read in conjunction with the historical consolidated statements and
accompanying Notes of WLR Foods, Inc. and subsidiaries (WLR Foods) and
the historical financial statements and footnotes of Cuddy Farms, Inc.
Food Division included in this document.
For purposes of the pro forma balance sheet included herein,
the WLR Foods July 2, 1994 balance sheet is combined with the July 30,
1994 Cuddy Foods balance sheet. For the pro forma combined statement
of operations, WLR Foods' fiscal year ended July 2, 1994 is combined
with the Cuddy Farms, Inc. Food Division's 12 months of operations
ended July 30, 1994.
32
<PAGE>
<TABLE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JULY 2, 1994
In thousands, except per share data (unaudited)
<CAPTION>
WLR Foods, Inc. Cuddy Farms, Inc. Pro Forma Combined
Historical Foods Division 1 Adjustments Notes Pro Forma
<S> <C> <C> <C> <C> <C>
Net sales $727,270 $174,594 $37,600 2 $939,464
Cost of sales 632,620 166,086 20,868 2,3 819,574
-------- -------- -------- -------
Gross profit 94,650 8,508 16,732 119,890
Selling, general and
administrative expenses 63,606 11,234 14,780 2,4 89,620
-------- --------- -------- -------
Operating income 31,044 (2,726) 1,952 30,270
Other expenses:
Interest expense 4,989 3,170 (700) 5 7,459
Other expense (income), net (431) (172) 206 6 (397)
-------- --------- -------- -------
Total other expenses 4,558 2,998 (494) 7,062
-------- --------- -------- -------
Earnings before taxes
and minority interest 26,486 (5,724) 2,446 23,208
Income tax expense (benefit) 9,897 (1,383) 942 7 9,456
Minority interest 38 - 38
-------- --------- -------- -------
Net earnings (loss) $16,551 ($4,341) $1,504 $13,714
======== ========= ======== =======
Net earnings per common share $1.51 - $1.13
Average common shares outstanding 10,967 - 1,183 12,150
</TABLE>
Notes
1 Cuddy Farms, Inc., Food Division operating statement is for the
period August 1, 1993 through July 30, 1994.
2 Sales and cost of sales and selling general and administrative expenses
are adjusted to conform with WLR statement presentation and to eliminate
intercompany transactions.
3 To reflect additional depreciation expense as a result of the acquisition.
4 To reflect the elimination of administrative fees paid to related parties.
5 To reflect the lower interest rates and lower borrowing levels as a result
of the acquisition.
6 To reflect amortization of the investment in partnership over 5 years.
7 To reflect additional tax expense at 38.5%.
33
<PAGE>
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
July 2, 1994
(unaudited)
<CAPTION>
Cuddy Farms,
Inc.
WLR Foods, Inc. Food Division Pro Forma Combined
Dollars in thousands Historical Historical Adjustments Note # Pro forma
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $771 $21 $792
Accounts receivable 52,305 15,763 68,068
Inventories 83,047 29,533 112,580
Other current assets 2,270 3,249 (3,027) 1 2,492
-------- ------- ------- ---------
Total current assets 138,393 48,566 (3,027) 183,932
Investments 954 597 1,003 2 2,554
Property, plant and equipment, net 139,854 30,200 5,143 3 175,197
Other assets 3,850 513 500 4 4,863
-------- -------- -------- ---------
TOTAL ASSETS $283,051 $79,876 $3,619 $366,546
========= ======== ======= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $9,400 - 15,300 5 $24,700
Current maturities of long-term debt 6,275 1,983 1,721 6 9,979
Excess checks over bank balances 8,511 1,697 (1,697) 8 8,511
Trade accounts payable 20,937 9,191 30,128
Accrued expenses 16,103 3,678 1,026 10 20,807
Deferred income taxes 6,297 6,297
Other current liabilities 881 881
Amounts due affiliated companies - 42,636 (42,636) 9
-------- -------- -------- ---------
Total current liabilities 68,404 59,185 (26,286) 101,303
Long-term debt, excluding current maturities 46,368 20,167 1,129 7 67,664
Deferred income taxes 9,813 6,979 (6,979) 11 9,813
Minority interest in consolidated subsidiary 475 475
Other liabilities and deferred credits 1,834 900 12 2,734
Common stock subject to repurchase - 17,750 13 17,750
Shareholders' equity :
Common stock 61,416 10,650 14 72,066
Additional paid-in capital 3,253 3,253
Retained earnings 91,488 (6,455) 6,455 15 91,488
-------- -------- -------- ---------
Total shareholders' equity 156,157 (6,455) 17,105 166,807
-------- -------- -------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $283,051 $79,876 $3,619 $366,546
======== ======== ====== ========
</TABLE>
34
<PAGE>
Notes
1 Reducing current assets for items not acquired.
2 Allocation of the purchase price to the investment in partnership to
record it at fair value.
3 Allocation of the purchase price to the fixed assets to record
them at fair value net of certain fixed assets not acquired.
4 Recording of covenant not to compete to be amortized over five years.
5 Recording of borrowing $18.0 million plus costs of $1.2 million less
$3.9 million paid back by the seller following the post closing
adjustment process.
6 Recording the incremental portion of the current maturities of long-term
debt as a result of borrowing $25 million. The total current
portion is $3.7 million net of debt not assumed of $2.0 million.
7 Recording the incremental portion of long-term debt payable as a
result of borrowing $25 million. The long term portion is $21.3
million net of debt not assumed of $20.2 million.
8 Eliminating the excess checks over bank balances not assumed in the
acquisition.
9 Eliminating the intercompany payables not assumed in the acquisition.
10 Adjusting the accrued expenses to the values assumed in the acquisition.
11 Eliminating the deferred tax liabilities not assumed in the acquisition.
12 Recording long-term liabiities assumed in the acquisition.
13 Recording the common stock subject to repurchase issued to Cuddy
Farms, Inc.
14 Recording the residual value of common stock issued in excess of the
value of the common stock subject to repurchase.
15 Elimination of the division equity of the Foods Division of Cuddy
Farms, Inc.
35
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WLR Foods, Inc.
By:___/s/_Delbert L. Seitz__________
Delbert L. Seitz
Chief Financial Officer
Secretary and Treasurer
27215
36
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
Number
2.2 First Amendment to Asset Purchase Agreement 38
23 Consent of Potter & Company, P.A. 47
37
Exhibit 2.2
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amending Agreement is made and entered into this
26th day of October, 1994, by and among CUDDY FARMS, INC., a North
Carolina corporation (Cuddy), CUDDY INTERNATIONAL CORPORATION, a
corporation incorporated under the laws of Ontario and controlling
shareholders of Cuddy (Cuddy International), WLR FOODS, INC., a
Virginia corporation (WLR Foods), and WAMPLER-LONGACRE, INC., a
Virginia corporation and wholly-owned subsidiary of WLR Foods
(Wampler-Longacre) ("WLR Foods" and "Wampler-Longacre" collectively
referred to herein as "Wampler").
RECITALS
A. The parties entered into an asset purchase agreement
(the "Purchase Agreement") dated July 27, 1994 providing for the sale
by Cuddy and the purchase by Wampler of substantially all of the
assets related to the Business and certain additional assets more
particularly described in the Purchase Agreement. The expressions
used in this First Amending Agreement have the meanings ascribed to
them in the Purchase Agreement.
B. Sections 2.1(b) and 2.1(c) of the Purchase Agreement
provide for the determination of certain Post-Closing Adjustments and
for adjustment of the purchase price set forth in Section 2.1(a) of
the Purchase Agreement in accordance therewith. Section 2.1(d) of the
38
<PAGE>
Purchase Agreement provides for the making of any adjusting payments
in respect of the purchase price on the Second Closing Date.
C. Section 5.9 of the Purchase Agreement refers to an
environmental audit and provides for the allocation of cost and
responsibility for any corrective action recommended as a result
thereof.
D. The parties have today agreed to the Post-Closing
Adjustments and have agreed to amend the Purchase Agreement to fix a
new Second Closing Date and clarify the obligations of the parties
with respect to certain liabilities of the Business.
NOW THEREFORE in consideration of the premises and the
mutual covenants and agreements contained herein, the parties
represent and agree as follows:
1. Post-Closing Adjustments
For the purposes of Section 2.1(c)(i) of the Purchase
Agreement, it is agreed that the Closing Date Working Capital is
$33,486,368 as set forth in Schedule 1 and accordingly the purchase
price is decreased by $6,913,632 being the excess of $40,400,000 over
the Closing Date Working Capital. For the purposes of Section
2.1(c)(ii) of the Purchase Agreement, it is agreed that the capital
expenditure program adjustment is $613,632 and that the purchase price
is increased by said amount. The resulting price reduction of
$6,300,000, less the Stock Value of 100,000 shares of WLR Foods common
39
<PAGE>
stock ($2,400,000) is $3,900,000 which is payable by Cuddy pursuant to
Section 2.2(c) of the Purchase Agreement in cash on the Second Closing
Date.
2. Liabilities Assumed by Wampler-Longacre
2.1 It is agreed that Assumed Liabilities include, but are
not limited to, all liabilities of the nature or type reflected in the
computation of Closing Date Working Capital as set forth in
Schedule 1. For the purpose of further clarification, it is agreed
that Assumed Liabilities also include all liabilities relating to any
post-retirement health care plan adopted by Wampler to replace, if
necessary pursuant to the provisions of section 3.3 of the Purchase
Agreement, the post-retirement health care plan sponsored by Cuddy,
certain details of which are referred to in Note (3) of the Notes to
Statement of Net Assets Sold and Supplementary Information as at
August 29, 1994 as reported on by KPMG Peat Marwick LLP dated
September 28, 1994, a copy of which is attached as Schedule 2.1.
2.2. It is agreed that the trade payables totalling
$203,510.90, particulars of which have been provided by Wampler to
Cuddy, are Assumed Liabilities which were inadvertently omitted from
the financial records of Cuddy as at August 29, 1994 and which Wampler
represents have now been paid. Cuddy shall reimburse the said sum to
Wampler on the Second Closing Date. Any other unrecorded Assumed
Liabilities shall be dealt with under Section 16.1 of the Purchase
Agreement.
3. Excluded Liabilities
40
<PAGE>
3.1 It is agreed that Wampler assumes no liability to pay
any of the workers compensation claims, post retirement health
benefits, longevity pay and other debts, liabilities or obligations
relating to certain employee matters which are described in Schedule
3.1 and which, although they relate to the Business, shall remain the
responsibility of Cuddy.
3.2 The sum of $80,892.02, which Wampler-Longacre
represents it has paid since the Closing Date in respect of workers
compensation claims for which Cuddy remains responsible, particulars
of which have been provided by Wampler-Longacre to Cuddy, shall be
reimbursed to Wampler-Longacre on the Second Closing Date.
4. Environmental Audit
It is agreed that Wampler shall be responsible to perform
and carry out, at its expense, the following corrective action (much
of which is recommended by the report on environmental audit referred
to in section 5.9 of the Purchase Agreement) and shall promptly cause
such corrective action to be undertaken and completed, except as
otherwise provided below:
a. Cleanup of petroleum/oil stains on ground at the
following locations:
i. Monroe Processing Plant: behind guard shack, area
of drumsof hydraulic/lubeoil, rearof oldlive shed;
41
<PAGE>
ii. Marshville Processing Plant: two ASTs area north
of vehicle maintenance, waste oil drums area east
of plant, waste oil storage area north of plant;
iii. Wingate Feedmill: waste oil fill;
iv. Brown Creek Farm: gasoline storage tank area; and
v. Charlotte Plant: various dike and pavement stains
(clean only).
b. Drains to control runoff at the following locations:
i. Monroe Processing Plant: install collector drain
in wastewater pretreatment area, repair drain at
solid waste disposal trailer;
ii. Marshville Processing Plant: clean wastewater
pretreatment plant drain, install drains front of
truck wash, west and south sides equipment
maintenance building, vacuum pump discharge and
east side live cooling shed;
iii. Lonely Oaks farm: treat drain at truck
disinfection area; and
iv. Brown Creek Farm: treat drains at truck
disinfection area and poultry litter site.
c. Removal and replacement of two USTs by December 1998:
i. Monroe Processing Plant: 4,000 gal. gasoline UST;
ii. Wingate Feedmill: 1,000 gal. used oil UST.
42
<PAGE>
d. If requested and required by appropriate North Carolina
agency, soil testing and required remediation at locations
of the following six (6) removed USTs:
i. Monroe Processing Plant: 20,000 gal. diesel UST
reportedly removed May 1988 and 10,000 gal. diesel
UST reportedly removed July 1976.
ii. Marshville Processing Plant: 750 gal. gasoline
UST and 8,000 gal. diesel UST, both reportedly
removed September 1987; and
iii. Wingate Feedmill: 1,000 gal. fuel oil UST and 500
gal. fuel oil UST, both reportedly removed in 1986
from south side of old feedmill building.
5. Second Closing Date
It is agreed that the Second Closing Date shall be
October 26, 1994 and not as provided for in Section 2.1(d) of the
Purchase Agreement.
6. Allocation
In light of the post-closing adjustments, it is agreed
that the allocation of the purchase price contained in Section 2.3 of
the Purchase Agreement should be revised to reflect the following
allocations:
Land $ 3,491,634
Land Improvements 864,797
Buildings and related components 14,398,022
Equipment 15,574,485
----------
Total $34,328,938
Investment in Partnership $ 1,413,728
43
<PAGE>
The parties also agree to file as required Form 8594 in substantially
the form as attached hereto as Schedule 6.
7. Indemnification
For the purposes of Section 16.1(a)(iii) of the
Purchase Agreement, the liabilities and obligations specifically
assumed by Wampler-Longacre shall include all liabilities of the
nature or type described or referred to in Section 2 hereof.
8. No Default
Each party acknowledges and agrees that no party has
been or is now in default under the Purchase Agreement in the
performance of its obligations relating to the determination of Post
Closing Adjustments, Assumed Liabilities and liabilities of the
Business to be retained by Cuddy.
9. Confirmation of Purchase Agreement
The Purchase Agreement as supplemented and amended by
this First Amending Agreement is hereby confirmed and the Purchase
Agreement and this First Amending Agreement shall hereafter be read
together and shall have effect as if all the provisions thereof and
hereof were contained in one instrument. Unless the context otherwise
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<PAGE>
requires, the word "Agreement" and the expressions "herein", "hereof",
"hereunder" and similar expressions used in the Purchase Agreement
mean or refer to the Purchase Agreement as supplemented and amended by
this First Amending Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF the parties have caused this First
Amending Agreement to be executed by their respective officers
hereunto duly authorized as of the day and year first above written.
CUDDY FARMS, INC.
a North Carolina corporation
By:____/s/ Vaughn L. Correll_____________
Its Executive V.P., Sec/Treas
CUDDY INTERNATIONAL CORPORATION
an Ontario corporation
By:___/s/ Robert B. Clark_______________
Its Secretary
WAMPLER-LONGACRE, INC.
a Virginia Corporation
By:___/s/ James L. Mason_______________
Its President
WLR FOODS, INC.
a Virginia Corporation
By:__/s/ James L. Keeler________________
Its President
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EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
Board of Directors of WLR Foods, Inc.
We hereby consent to the use of our report on the Foods
Division of Cuddy Farms, Inc. dated September 22, 1994 (and all
references to our firm) included in WLR Foods, Inc.'s Form 8K/A,
Amendment No. Two to Current Report as of November 14, 1994 or
incorporated by reference in the following Registration
Statements of WLR Foods, Inc.: Form S-8 Registration Statement
as of September 28, 1994; Form S-8 Registration Statement as of
May 27, 1993; Form S-3 Registration Statement as of May 27, 1993;
Form S-3(D) Registration Statement as of November 18, 1992; Form
S-3 Registration Statement as of June 1, 1992; and Form S-8
Registration Statement as of February 13, 1989 (as amended
November 18, 1992). Potter & Company, P.A. is not associated
with the unaudited, proforma, or any other information
presented in the 8-K filing except our audit report dated
September 22, 1994.
POTTER & COMPANY, P.A.
Monroe, North Carolina
November 14, 1994
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