<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
COMMISSION FILE NUMBER 0-17060
WLR FOODS, INC.
(Exact name of Registrant as specified in its charter)
Virginia 54-1295923
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
P.O. Box 7000
Broadway, Virginia 22815
(Address including Zip Code of Registrant's principal executive offices)
(703) 896-7001
(Registrant's telephone number, including area code)
Indicate by cross mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes (X) No ()
The number of shares outstanding of Registrant's Common Stock, no par
value, at May 12, 1994 was 10,971,776 shares.
Total Number of
Sequentially Numbered
Pages is 13
<PAGE>2
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited) Thirteen Weeks Ended
Dollars in thousands, April 2, 1994 March 27, 1993
except per share data
______________________________________________________________________
Net sales $171,090 $149,575
Cost of sales 152,559 133,432
_______ _______
Gross profit 18,531 16,143
Selling, general & administrative expenses 15,360 13,262
_______ _______
Operating income 3,171 2,881
Other expense:
Interest expense 1,273 1,088
Miscellaneous expense (income) (225) (262)
_______ ______
Other expense 1,048 826
_______ ______
Earnings before income taxes and
minority interest 2,123 2,055
Income tax expense 817 781
Minority interest in net earnings (loss) 3 5
of consolidated subsidiaries _______ ______
NET EARNINGS $1,303 $1,269
LESS PREFERRED DIVIDENDS DECLARED --- 357
______ ______
NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS $1,303 $ 912
====== ======
NET EARNINGS PER COMMON SHARE $ 0.12 $ 0.10
====== ======
DIVIDENDS DECLARED PER COMMON SHARE $ .08 $ 0.08
AVERAGE COMMON SHARES OUTSTANDING 10,967,244 9,228,258
See accompanying Notes to Consolidated Financial Statements.
<PAGE>3
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited) Thirty-Nine Weeks Ended
Dollars in thousands, April 2, 1994 March 27, 1993
except per share data
_______________________________________________________________________________
Net sales $532,433 $436,942
Cost of sales 468,369 380,792
_______ _______
Gross profit 64,064 56,150
Selling, general & administrative expenses 45,699 40,377
_______ _______
Operating income 18,365 15,773
Other expense:
Interest expense 3,775 2,579
Miscellaneous expense (income) (443) (444)
_______ ______
Other expense 3,332 2,135
_______ ______
Earnings before income taxes and
minority interest 15,033 13,638
Income tax expense 5,788 5,149
Minority interest in net earnings of
consolidated subsidiary 25 18
_____ ______
NET EARNINGS $9,220 $8,471
LESS PREFERRED DIVIDENDS DECLARED --- 1,389
______ ______
NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS $9,220 $7,082
====== ======
NET EARNINGS PER COMMON SHARE $ 0.84 $ 0.81
====== ======
DIVIDENDS DECLARED PER COMMON SHARE $ 0.24 $ 0.24
AVERAGE COMMON SHARES OUTSTANDING 10,962,059 8,763,675
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WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands (unaudited)
April 2, 1994 July 3, 1993
__________________________________________________________________________
ASSETS
Current Assets
Cash and cash equivalents $ 411 $ 680
Accounts receivable, less allowance for 42,266 41,090
doubtful accounts of $367 and $363,
respectively
Inventories (Note 2) 82,905 76,728
Other current assets 10,292 1,309
_______ _______
Total current assets 135,874 119,807
Investments 1,025 720
Property, plant and equipment, net 139,892 140,540
Other assets 4,069 4,559
_______ _______
TOTAL ASSETS $280,860 $265,626
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 10,600 $ 12,900
Current maturities of long-term debt 6,275 6,381
Excess checks over bank balances 7,623 7,213
Trade accounts payable 20,396 18,451
Accrued expenses 12,891 15,687
Federal and state income taxes --- 790
Current deferred taxes 9,097 ---
Other current liabilities 878 876
______ ______
Total current liabilities 67,760 62,298
Long-term debt, excluding current maturities 51,813 52,253
Deferred income taxes 9,597 6,190
Minority interest in consolidated subsidiary 464 441
Other liabilities and deferred credits 2,015 2,189
______ ______
TOTAL LIABILITIES 131,649 123,371
Shareholders' equity:
Common stock, no par value. Authorized 60,920 60,552
100,000,000 shares; issued and outstanding
10,970,248 and 10,951,069 shares, respectively.
Additional paid-in capital 3,253 3,253
Retained earnings 85,038 78,450
_______ _______
Total shareholders' equity 149,211 142,255
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $280,860 $265,626
======= =======
See accompanying Notes to Consolidated Financial Statements.
<PAGE>5
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Thirty-nine Weeks Ended
Dollars in thousands April 2, 1994 March 27, 1993
__________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 9,220 $ 8,471
Adjustments to reconcile net earnings to
net cash Provided by operating activities:
Depreciation and amortization 15,901 12,544
Gain on sale of property, plant and equipment (46) (2)
Deferred income taxes 10,494 103
Other, net 676 166
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,176) 4,166
(Increase) in inventories (6,177) (6,488)
(Increase) in other current assets (8,983) (35)
Increase in accounts payable 1,945 142
Decrease in accrued expenses and other (2,841) (1,285)
________ _______
Net Cash Provided by Operating Activities 19,013 17,782
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (13,700) (26,701)
Proceeds from sale of property, plant and
equipment 83 80
Cash used in acquisition --- (1,214)
Investments in other assets (491) (680)
Minority interest in net earnings of
consolidated subsidiary 23 14
______ ______
Net Cash Used in Investing Activities (14,085) (28,501)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (1,044) (677)
Proceeds from long-term debt --- 10,200
Notes payable to banks (net of principal (2,300) (6,068)
payments
Increase in checks drawn not presented 410 (116)
Issuance of stock 368 41,441
Repurchase of preferred stock --- (29,507)
Dividends paid (2,631) (4,433)
_______ _______
Net Cash Provided by (Used in) Financing
Activities (5,197) 10,840
_______ _______
Increase (Decrease) in Cash and Cash
Equivalents 269 121
Cash and Cash Equivalents at Beginning of
Fiscal Year 680 361
_______ _______
Cash and Cash Equivalents at End of Period $ 411 $ 482
======= =======
<PAGE>6
Supplemental cash flow information:
Cash paid for:
Interest $ 2,907 $ 2,537
Income taxes 2,193 6,104
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
The adoption of SFAS 109 necessitated the reclassification of certain
amounts of deferred tax which had been previously netted with the
related assets and liabilities under APB Opinion 11. The following is
a summary of those reclassifications:
Fixed assets $1,589
Long-term debt 498
Current taxes payable (857)
Current deferred taxes 413
Long-term deferred taxes 1,535
These reclassifications are only reported to reconcile the Statement
of Cash Flows for the period ended April 2, 1994.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
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WLR FOODS, INC.
Notes to Consolidated Financial Statements
1. Accounting Policies
The consolidated financial statements include the accounts of WLR
Foods, Inc. and its wholly-owned and majority-owned subsidiaries. All
material intercompany balances and transactions have been eliminated
in consolidation. The consolidated balance sheet as of April 2, 1994,
the consolidated statements of earnings for the thirteen week and
thirty-nine week periods ended April 2, 1994 and March 27, 1993, and
the consolidated statements of cash flows for the thirty-nine week
periods ended April 2, 1994 and March 27, 1993 are unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such consolidated 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 consolidated financial statements and notes are presented as
permitted by Form 10Q and do not contain certain information included
in the Company's annual consolidated financial statements and notes.
The Company's unaudited interim consolidated financial statements
should be read in conjunction with the consolidated financial
statements included in the Annual Report to Shareholders for the
fiscal year ended July 3, 1993. In both, the accounting policies and
principles used are consistent in all material respects except for the
accounting change discussed in Note 3 below. Certain fiscal 1993
amounts have been reclassified to conform with fiscal 1994
presentations.
2. Inventories
A summary of inventories at April 2, 1994 and July 3, 1993 follows:
Dollars in thousands (unaudited)
April 2, 1994 July 3, 1993
____________________________
Live poultry and breeder flocks $41,339 $34,588
Processed poultry and meat products 20,411 23,057
Packaging supplies, parts and other 13,249 12,439
Feed, grain and eggs 7,906 6,644
______________________________
Total inventories $82,905 $76,728
===============================
3. Change in Accounting Principle
Effective July 4, 1993, the Company adopted Statement of Financing
Accounting Standards (SFAS) No. 109 using the cumulative effect of a
change in accounting principle. There was no cumulative effect
adjustment necessary on the consolidated statement of earnings as a
result of SFAS 109 for periods prior to July 4, 1993.
<PAGE>8
Item 2. Management's Discussion and Analysis of Financial Condition
and
Results of Operations
General Information
WLR Foods, Inc. (the Company) is a fully-integrated poultry
production, processing and marketing business with operations in
Virginia, West Virginia and Pennsylvania.
On April 29, 1994, the Company paid an $0.08 per common share dividend
to shareholders of record of April 15, 1994.
On March 9, 1994, Tyson Foods, Inc. through its wholly-owned
subsidiary, WLR Acqui-sition Corp. commenced a tender offer to
purchase all the outstanding shares of WLR Foods, Inc. for $30 per
share. The Board of Directors of WLR Foods determined that the offer
was inadequate and recommended that the Company's shareholders not
tender their shares to Tyson Foods, Inc. This position is detailed in
the Company's Schedule 14D-9 filed with the Securities and Exchange
Commission on March 14, 1994 as amended.
To further their takeover efforts, on April 14, 1994 Tyson Foods, Inc.
requested a special meeting of WLR Foods shareholders under the
Virginia Control Share Acquisition Statute. The Board of Directors
scheduled this meeting for 1:00 p.m. on May 21, 1994, at Turner Ashby
High School, 800 North Main Street, Bridgewater, Virginia. At that
time, the Company's shareholders will vote upon a proposal by Tyson
Foods, Inc. and its associates to grant them voting rights in
connection with shares of WLR Foods stock they have acquired or may
acquire in connection with their offer to buy the Company.
The Company adopted SFAS No. 109, "Accounting for Income Taxes" in the
first quarter of fiscal 1994. As noted in the financial statements
provided and the accompanying notes, there was no impact on the
statement of earnings for the cumulative effect of the accounting
change.
The table of Changes in Results of Operations shows dollars and
percentage changes in the components of operating results over the
past thirteen weeks and thirty-nine weeks compared to the
corresponding periods of the previous year.
Changes in Results of Operations
Thirteen Weeks Ended Thirty-Nine Weeks Ended
4/2/94 vs. 3/27/93 4/2/94 vs. 3/27/93
In millions except $Increase %Change $Increase %Change
per share data (Decrease) (Decrease)
______________________________________________________________________
Net sales $21.5 14.4% $95.5 21.9%
Cost of sales 19.2 14.3 87.6 23.0
---- ---- ---- ----
Gross margin 2.3 14.8 7.9 14.1
Selling, general and
administrative expenses 2.1 15.8 5.3 13.2
---- ---- ---- ----
Operating income .2 10.1 2.6 16.4
Other expense .2 26.9 1.2 56.1
---- ---- ---- ----
Earnings before income taxes
and minority interest -- -- 1.4 10.2
Income tax expense and
minority interest -- -- .6 12.5
---- ---- ---- ----
Net earnings -- -- $0.8 8.8%
Preferred dividends (.4) (100.0) (1.4) (100.0%)
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Net earnings available
to common shareholders $0.4 44.4% $2.2 31.0%
==== ======= ==== ======
Net earnings per share $0.02 20.0% $0.03 3.7%
Results of Operations for the Thirteen and Thirty-nine Weeks
Ended April 2, 1994 as Compared to the
Thirteen and Thirty-nine Weeks Ended March 27, 1993
Net sales increased $21.5 million to $171.1 million for the thirteen
weeks ended April 2, 1994 compared to $149.6 million for the same
period last year. Sales pounds increases of 11.0% and higher average
quoted market prices for whole turkeys and chickens of 4.2% and 4.8%,
respectively, were the main factors increasing sales. Sales volumes
increased 4.9% for turkeys and 16.7% for chickens, the latter increase
a result of the final volume increases at the recently-expanded
Moorefield complex. Sales for the thirty-nine weeks of fiscal 1994
were $532.4 million compared to $436.9 million for the comparable
period ended March 27, 1993. This increase of $95.5 million, or
21.9%, was the result of an increase of 21.1% in sales pounds and
higher average quoted market prices. On a year-to-date basis, turkey
sales volume was up 19.4%, primarily due to the Round Hill
acquisition. Chicken sales volume increased 22.8% during the same
period because of the Moorefield complex expansion. Additionally, on
a year-to-date basis, average quoted market prices for whole turkeys
and chickens were up 6.1% and 4.6%, respectively. Although not a
major factor impacting total net sales, the Company's Cassco
subsidiary has increased its sales over 40% for the thirteen weeks and
48% for the thirty-nine weeks over the same periods last year,
increases stemming from Cassco's late spring 1993 acquisitions.
Cost of sales increased $19.2 million, or 14.3%, for the thirteen week
period ended April 2, 1994 as higher volumes were sold and feed costs
increased. Cost of sales for the thirteen weeks ended April 2, 1994
was $152.6 million compared to $133.4 million for the same period last
year. Feed costs were up approximately 14% over the same period last
year, or approximately $7 million. During the quarter, the severe
winter weather also impacted the Company's operations. Cost of sales
was $468.4 million--up $87.6 million--or 23.0% for the thirty-nine
weeks ended April 2, 1994 compared to $380.8 million for the same
period last year. Feed costs increased approximately 8.6% over last
year's thirty-nine week costs representing approximately $12 million
of the added cost of sales during that period. Higher cost of sales
was somewhat offset by improvements in efficiency and by increased
margin associated with added volume.
As of the end of April, grain costs had moderated from mid-winter
highs. From time to time, the Company uses cash basis purchases,
forward purchasing, future contracts, and options to purchase grain
for use in feed. As of the end of April, approximately 30% of the
Company's soybean meal needs through August 1994 are forward
purchased. The Company does not have any positions in corn.
Management expects the moderation of grain prices to continue as
planting in the mid-west progresses and normal seasonal weather
patterns return. Though the feed costs will likely remain above last
year's levels until the new crop year, management expects the impact
of these costs to be offset by increased production volumes, efficient
operations, and higher commodity poultry prices.
Gross profit was $18.5 million, up 14.8%, or $2.3 million, over the
same thirteen weeks last year. For the thirty-nine weeks, gross
profit increased $7.9 million to $64.1 million. Gross margin as a
percentage of sales was 10.8% for both thirteen week periods and 12.0%
compared to 12.9% for the thirty-nine weeks ended April 2, 1994 and
March 27, 1993, respectively.
During the thirteen weeks ended April 2, 1994, selling, general and
administrative expenses increased $2.1 million over the same period
last year. Administrative expenses increased $0.9 million which
includes nearly $1.1 million of expenses
<PAGE>10
associated with the Tyson Foods' tender offer. Selling and
advertising expenses increased $0.5 million, a modest increase when
compared to the higher sales volumes. Delivery expenses for the
current quarter increased $0.7 million, or 11.8%. Total selling,
general and administrative expenses as a percent of sales for the
thirteen weeks this year were 9.0% (8.3% excluding the Tyson costs),
compared to 8.9% for the same period last year. For the thirty-nine
weeks ended April 2, 1994, selling, general and administrative
expenses increased $5.3 million compared to the same period last year.
This increase related primarily to a $3.6 million increase in delivery
costs, with only a $0.8 million increase in selling and advertising
expenses. Administrative expenses increased $0.9 million. For the
current thirty-nine week period, total selling, general and
administrative expenses were 8.6% of sales (8.4% excluding the Tyson
costs), compared to 9.2% for the same period last year. With the
merger of the Company's two poultry subsidiaries into a single entity,
management expects continued improvements in efficiency from the
consolidation of administrative functions.
The Company will continue at least through the fourth fiscal quarter
to incur costs related to the Tyson takeover attempt.
Operating income increased $0.2 million for the thirteen weeks and
$2.6 million for the thirty-nine weeks ended April 2, 1994. Higher
volumes sold for the thirteen week period generated increased
operating income. For the thirty-nine weeks, higher volumes sold and
lower selling, general and administrative expenses as a percent of
sales were the main factors producing the higher operating income.
Operating income as a percentage of sales was 1.8% for the current
period compared to 1.9% for the thirteen weeks last year, and 3.4%
compared to 3.6% for the thirty-nine week periods ended April 2, 1994
and March 27, 1993, respectively.
Other expense increased $0.2 million for the thirteen weeks and $1.2
million for the thirty-nine weeks due to higher debt levels and lower
capitalized interest. Repayment of funded debt began May 1, 1994.
Interest expense reductions from decreased borrowing may be offset by
rising interest rates.
Income tax expense remained nominally the same for the thirteen week
period compared to the same period last year. The effective rate was
38.5% compared to 38.0% last year. For the thirty-nine week
comparison, income tax expense increased $0.6 million due to increased
profits and higher federal statutory tax rates. The effective tax
rate for the thirty-nine week period ended April 2, 1994 was 38.5% and
was 37.8% for the comparable period last year.
Net earnings were $1.3 million for both thirteen week periods ended
April 2, 1994 and March 27, 1993. Net earnings available to common
shareholders increased $0.4 million, or $0.02 per share, for the
thirteen weeks ended April 2, 1994. For the thirty-nine weeks ended
April 2, 1994, net earnings increased to $9.2 million, up from $8.4
million for the same period last year. Earnings available to common
shareholders increased $2.2 million, or $0.03 per share, for the
thirty-nine weeks ended April 2, 1994, com-pared to the same period
last year.
Liquidity
The financial condition of the Company remained strong at April 2,
1994. Working capital increased to $68.1 million from $57.5 million
at July 3, 1993, and the current ratio was 2.0-to-1. The total-debt-
to-total-capitalization was 31.5% on April 2, 1994. The first
installment of $5.25 million on the long-term debt will occur in the
fourth quarter of fiscal 1994. Management believes the Company will
generate sufficient internal funds to meet current levels of dividends
and service existing debt.
The Company has available a $35 million revolving line of credit. On
April 2, 1994 the balance outstanding was $10.6 million, leaving $24.4
million available for current needs. This current line of credit
facility has been extended from its original maturity date of June 30,
1994 to March 31, 1995 upon essentially the same, or better,
<PAGE>11
terms and rates. At April 2, 1994, the Company's book value increased
to $13.60 per common share, up from $12.99 per common share at July 3,
1993.
Capital Resources and Financial Condition
Capital expenditures for the thirty-nine weeks were $13.7 million
which include equip-ment replacements and up-grades of existing
facilities along with the new Cassco cold storage warehouse.
Construction is progressing on the $4.4 million Cassco cold storage
warehouse project with completion expected by mid-summer 1994. Though
completion was somewhat delayed by the severe winter weather, the
delay will not impact total spending on the project. The original
capital budget for fiscal 1994 has been revised downward because of
winter weather delays and efforts to maximize internally-generated
funds. Total capital spending is anticipated to be approximately $22
million and depreciation expense is projected at approximately $21.6
million.
The capital budget for fiscal 1995 is expected to be approximately $15
million, a significant decrease from prior years. Capital spending
will be primarily for cost improvements, replacements and regulatory
compliance. Depreciation is expected to be approximately $22 million
for fiscal 1995. Management will continue to evaluate further
expansion and acquisition opportunities as they arise.
Two statements issued by the Financial Accounting Standards Board will
be adopted by the Company in fiscal 1995: SFAS 112, "Employers
Accounting for Post-employment Benefits," and SFAS 115, "Accounting
for Certain Investments In Debt and Equity Securities." Neither
statement is expected to materially impact the Company's financial
statements when adopted. In addition, SFAS 116, "Accounting for
Contributions Received and Contributions Made," will be adopted by the
Company no later than fiscal 1996. Again, no material effect is
expected upon the adoption of this statement.
The Company did not experience any material changes in its financial
condition from that reported as of July 3, 1993 in the Annual Report
to Shareholders.
<PAGE>12
PART II. OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed this 16th day of May, 1994 by the Registrant's
principal financial officer who is also authorized by the Registrant
to sign on its behalf.
WLR FOODS, INC.
___/s/ Delbert L. Seitz_________
Delbert L. Seitz, Chief Financial
Officer and duly authorized signator
for Registrant
<PAGE>13
EXHIBIT INDEX
Exhibit Sequentially
No. Description No. Page
