UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal year ended July 1, 1995
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 of
incorporation or organization) (I.R.S. Employer Identification
No.)
P.O. Box 7000, Broadway, Virginia 22815
(Address of principal executive offices)
Registrant's telephone number, including area code
540-896-7000
Securities registered pursuant Name of exchange on which required
to Section 12(b) of the Act:
N/A N/A
Common Stock - no par value
(Title of Class)
Indicate by check 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. (X) Yes _____ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. X
The aggregate value of the voting stock held by non-affiliates of
the registrant as of September 22, 1995 was approximately $195,035,033.
The number of shares outstanding of registrant's common stock, no par
value, as of such date was 17,216,068 shares.
Documents Incorporated by Reference
Annual Report to Shareholders for fiscal year ended
July 1, 1995 Part II
Proxy Statement for Annual Meeting of Shareholders to
be held October 28, 1995 Part III
<PAGE>
PART I
Item 1. BUSINESS.
General
WLR Foods, Inc. (WLR Foods) is a fully-integrated poultry
processing company involved in the production, further processing and
marketing of turkey and chicken products, and the distribution of
poultry and meat products. In addition, WLR manufactures ice for
retail distribution and is a provider of public refrigerated
warehousing services.
WLR Foods markets more than 250 branded, as well as private
label, commodity and value-added poultry and related products to
selected retail, food service and institutional markets, primarily in
the mid-Atlantic, northeastern, and southeastern regions of the United
States and, to a lesser extent, the upper Midwest and California. WLR
Foods exports to more than 40 countries, with particular customer
strength in the Far East, the Caribbean and United States military
installations.
WLR Foods is a combination of three poultry companies, Wampler
Foods, Inc., Horace W. Longacre, Inc. and Rockingham Poultry Marketing
Cooperative Incorporated, all of which trace their beginnings to
before 1945. The three companies combined in 1985 and 1988, and in
1992 were joined by Round Hill Foods, Inc. and its affiliates (Round
Hill) of New Oxford, Pennsylvania. Previously, WLR Foods' poultry
operations were conducted through two wholly-owned subsidiaries,
Wampler-Longacre Chicken, Inc. and Wampler-Longacre Turkey, Inc.
These subsidiaries, along with Round Hill, were merged on January 1,
1994 to form one subsidiary, Wampler-Longacre, Inc. (Wampler-
Longacre). WLR Foods expanded its operations into North Carolina in
September 1994 with the acquisition of Cuddy Farms, Inc.-USA Food
Division of Marshville, North Carolina and its turkey processing,
further processing, feedmill and distribution facilities. The Cuddy
acquisition also provided WLR Foods with an additional cold storage
facility.
In April 1990, the Company expanded into the cold storage and ice
manufacturing and distribution business with the acquisition of Cassco
Ice & Cold Storage, Inc. (Cassco). In 1992, WLR Foods acquired all
the Virginia ice business assets of Southern Ice Company, Inc., a
Norfolk-based ice manufacturing and distribution company, and in 1993,
the Company acquired the assets of two ice manufacturing and
distribution companies located in the greater Washington, D.C. area
and in Richmond, Virginia. WLR Foods acquired an additional cold
storage facility as part of the Cuddy acquisition.
The Company also owns 65% of May Supply Company, Inc., a
wholesale distributor of plumbing supplies and equipment.
<PAGE>
Poultry Production
WLR Foods controls the breeding, hatching, grow-out and
processing of its turkeys and chickens. For fiscal 1995, WLR Foods
produced approximately 574 million pounds of dressed turkey and 545
million pounds of dressed chicken.
WLR Foods purchases breeder stock turkey eggs which it hatches
and places with growers who supply labor and housing to produce
breeder flocks. These breeder flocks produce eggs that are taken to
the company-owned turkey hatchery for incubation and hatching into
poults, providing approximately 50% of the Company's poult supply.
The balance of the Company's poults are purchased from outside
sources. In its chicken operations, WLR Foods purchases breeder flock
chicks and places them with growers who supply labor and housing to
raise the birds. The birds are then moved to breeder farms where they
begin providing eggs, which are in turn transported to company-owned
hatcheries. Once hatched, day-old poults and chicks are inspected and
vaccinated against common poultry diseases. In total, WLR Foods
contracts with 149 breeder growers who grow most of WLR Foods' turkey,
and all of WLR Foods' chicken, breeder flocks.
After hatching and vaccination, poults and chicks are transported
to one of WLR Foods' approximately 820 contract growers located in
Virginia, West Virginia, Pennsylvania, Maryland, North Carolina and
South Carolina who supply labor and housing to raise the turkeys and
chickens to maturity. WLR Foods supplies feed primarily from company-
owned feed mills and provides grower support through WLR Foods'
technicians and veterinarians.
Grow-out and breeder farms provide WLR Foods with more than 54
million square feet of growing facilities. These farms typically are
grower-owned and operate under contract with WLR Foods, providing
facilities, utilities and labor. Contract growers are compensated on
a cost-based formula and several incentive-based formulas.
Approximately 90% of WLR Foods' turkeys and 100% of its chickens are
raised by contract growers, with the balance grown by independent
growers and company-owned farms. WLR Foods strives to maintain good
contract grower relationships and believes the availability of
contract growers is sufficient for anticipated needs.
An important factor in the grow-out of poultry is the rate at
which poultry converts feed into body weight. The Company purchases
its primary feed ingredients on the open market. These ingredients
consist primarily of corn and soybean meal and represent approximately
65% of WLR Foods' total cost to grow turkeys and chickens and
approximately 32% of its cost of sales for fiscal 1995. Because the
quality and composition of feed is critical to the feed conversion
rate, WLR Foods formulates and produces a majority of its own feed at
one of its four feed mills. WLR Foods has an annual feed
manufacturing capacity in excess of 1.8 million tons and anticipates
no difficulty in meeting the Company's feed requirements in the
future.
Once the turkeys and chickens reach processing weight, they are
transported in WLR Foods' trucks to one of its seven poultry
processing plants. These plants utilize modern, highly automated
equipment to process and package the turkeys and chickens for sale or
preparation for
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further processing. WLR Foods further processes bulk
poultry in its processing plants and in three additional further
processing plants by adding value beyond deboning and skinning, such
as slicing, grinding, marinating, spicing and cooking to produce
delicatessen products, frankfurters, meat salads, ground turkey and
chicken, and food service products.
Distribution, Public Refrigerated Warehousing, Ice and Other
WLR Foods' distribution business, with its warehousing and
transportation equipment, includes fresh poultry, beef, and other meat
products purchased from third parties for resale, and is conducted
within a radius of approximately 75 miles of WLR Foods' further
processing facility in Franconia, Pennsylvania. In fiscal 1995,
Cassco sold 23 million eight-pound equivalent bags of retail ice,
making it one of the largest ice manufacturers in the mid-Atlantic
region. In addition, Cassco operates public refrigerated warehouses
at five locations. WLR Foods' protein conversion plants convert the
nonedible by-products of its poultry processing plants into feed
ingredients, with the balance sold to pet food manufacturers.
The following table sets out sales revenues from WLR Foods'
products for the last three fiscal years.
Fiscal 1995 Fiscal 1994 Fiscal 1993
----------- ----------- -----------
(Dollars in Millions)
Chicken, fresh and frozen $300.8 $287.5 $238.2
Turkey, fresh and frozen 218.0 171.4 123.7
Further processed 248.8 152.1 147.7
Distribution 86.1 82.4 80.0
Other 55.1 33.9 27.1
------ ------ ------
Total Net Sales $908.8 $727.3 $616.7
====== ====== ======
Competition
Poultry production requires continuous growing and processing,
with limited storage, making the poultry industry highly competitive.
WLR Foods markets its products in competition with larger and smaller
poultry companies on the basis of price, quality and service, with WLR
Foods' greatest competition coming from four or five of the country's
larger poultry producers and processors. The pricing of poultry
products is so competitive that any company with a cost advantage is
in a favorable competitive position. Seasonal increases in production
and customer buying patterns contribute to fluctuations in prices
which are controlled more by supply and demand than by cost of
production. WLR Foods primarily markets its products in the highly
competitive northeastern, mid-Atlantic and southeastern sections of
the United States.
In June 1995 WLR Foods was ranked as the tenth largest in poultry
processing/further processing according to Meat & Poultry Magazine.
WLR Foods was the second largest American turkey producer according to
Turkey World magazine's December 1994 issue. WLR
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Foods was cited as the sixteenth largest chicken producer in the December
1994 issue of Broiler Industry magazine.
Seasonality
In general, WLR Foods consistently produces and sells its
products throughout the year. Highest demand for poultry is in May,
June, July, November and December. The early summer months have
strong demand for chicken and further processed products and November
and December are high demand months for turkey products. The highest
demand for ice is during the period from mid-May to mid-September.
Trademarks and Patents
Wampler-Longacre markets its products under the trademarks
WAMPLER LONGACRE and design, TRIM FREE and chicken in heart design,
MOUNTAIN MAID, SALADFEST, TENDERLINGS and TURKEY WITH A TWIST, all of
which are federally registered trademarks. Wampler-Longacre also
markets under the trademarks CHEF'S QUALITY and CHEF'S SELECT, which
have pending federal applications. Following the acquisition of Cuddy
Foods, Wampler-Longacre obtained the right to market products under
the CUDDY FAMILY FARMS, COLONY FARMS, FARMERS CHOICE, TOP ROUND OF
TURKEY, and DELI ROAST COLLECTION marks. Wampler-Longacre markets its
export and foreign military sales under the COLONEL ROCKINGHAM design
and ROCKINGHAM trademarks. Products are also sold under the GENUINE
SHENVALLEY VIRGINIA POULTRY mark.
Cassco distributes its products under the federally registered
trademark CASSCO.
Wampler-Longacre holds a patent for pasteurized salads.
Government Contracts
WLR Foods' government contracts are a small segment of its total
sales, consisting of bids on particular products for delivery at
specified locations. Contracts are generally bid, and the product is
delivered, within a one- to two-month period. These contracts include
both chicken and turkey products and can involve further processed
products. WLR Foods had approximately $0.9 million of governmental
contracts outstanding as of July 1, 1995, the same as at July 2, 1994.
Foreign Sales
WLR Foods' foreign sales constituted approximately 8% of its
total annual sales in fiscal 1995, compared to 7% for fiscal year 1994
and 6% for fiscal year 1993. Wampler-Longacre has a full-time staffed
foreign sales office which coordinates foreign sales efforts on behalf
of WLR Foods. Foreign sales originate from that office and use
independent brokers as needed. Sales are made in over 40 countries.
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Transportation
Transportation logistics, including the availability of
transportation equipment and the efficiency of transportation systems,
are key elements in the raising of poultry, transporting feed to the
contract growers and outside purchasers, transporting poultry to the
processing plants, and transporting products to customers. WLR Foods
has contracts with two railroad companies for the delivery of feed
ingredients to WLR Foods' feedmills.
Delivery of the Company's products are generally made by truck.
WLR Foods maintains a fleet of refrigerated trucks and uses them,
along with refrigerated common carrier and customer-owned vehicles, to
deliver its products. Export products are loaded in refrigerated
containers and shipped overseas.
Raw Materials
WLR Foods' largest cost is for basic feed ingredients, namely
corn and soybean meal. Feed costs represented approximately 32% of
the Company's total cost of sales in fiscal year ended July 1, 1995.
Feed grains are commodities subject to volatile price changes
caused by weather, size of harvest, transportation and storage cost
and the agricultural policies of the United States and foreign
governments. Although WLR Foods can, and sometimes does, purchase
grain in the forward markets, it cannot completely eliminate the
potential adverse effect of grain price increases.
Environmental and Other Regulatory Compliance
WLR Foods' facilities and operations are subject to the
regulatory jurisdiction of various federal agencies, including the
Food and Drug Administration, Department of Agriculture, Environmental
Protection Agency, Occupational Safety and Health Administration, and
of corresponding state agencies in Virginia, West Virginia, North
Carolina and Pennsylvania. All environmental permits, such as air,
water and solid waste disposal permits, are issued by appropriate
state agencies.
A total of seven environmental permits are held by Wampler-
Longacre's Virginia facilities, all of which were issued by the
Virginia Department of Environmental Quality. The Hinton turkey
processing facility holds an air permit which regulates certain
combustion equipment and a water permit which regulates the treatment
of process wastewater. The Harrisonburg turkey processing facility
holds a water permit requiring pretreatment of its process wastewater
to meet certain effluent standards before discharging into the
regional sewer system. Wampler-Longacre's Timberville chicken
processing and rendering facility holds a water permit which regulates
the discharge of process wastewater and an air permit which regulates
the operation of its protein conversion facility, as well as certain
combustion equipment. The chicken processing facility in Alma/Stanley
holds one water permit which regulates the discharge of process
wastewater.
5
<PAGE>
Finally, the Broadway feedmill holds an air permit which
was issued primarily for the control and abatement of dust. In
addition to the seven environmental permits held by Wampler-Longacre,
WLR Foods holds a Virginia Pollution Abatement permit which allows
Wampler-Longacre's Virginia facilities to apply to land in Virginia
certain wastewater biosolids generated by the facilities' wastewater
treatment systems.
In West Virginia, Wampler-Longacre's Moorefield facilities hold
four environmental permits, all of which were issued by the West
Virginia Department of Commerce, Labor & Environmental Resources. The
chicken processing and rendering facility holds a water permit which
regulates the discharge of process wastewater, an air permit which
regulates the operation of the company's protein conversion facility,
and a sludge management permit regulating the land application in West
Virginia of certain wastewater biosolids generated at the Moorefield
facilities wastewater treatment works. The Moorefield feedmill holds
one air permit which was issued primarily for the control and
abatement of dust.
Wampler-Longacre's North Carolina facilities hold a total of ten
environmental permits, all of which were issued by the North Carolina
Department of Environment, Health & Natural Resources. The Monroe
turkey processing plant holds three permits: an industrial wastewater
discharge permit which requires process wastewater to be pretreated
prior to discharge to a regional sewer system, a stormwater permit
which regulates stormwater discharges, and an air permit which
regulates boiler emissions. The Marshville turkey processing plant
and Charlotte turkey processing plant each hold an industrial
wastewater discharge permit and stormwater permit which are similar to
the counterpart permits held by the Monroe facility. In addition, the
Marshville facility holds a stormwater permit which regulates cooling
water and boiler blowdown discharges. Finally, the Wingate feedmill
holds a stormwater permit which regulates stormwater discharges and an
air permit which regulates emissions from boilers, bagfilters, and
related equipment.
Pennsylvania facilities owned by Wampler-Longacre hold a total of
six environmental permits. The Franconia turkey processing plant
holds five permits: two water permits for the treatment of process
wastewater, two air permits to regulate operation of certain
combustion and incineration equipment, and one municipal solid waste
disposal permit for the disposal of incinerator ash. The New Oxford
turkey processing facility holds one air permit which regulates
combustion equipment. All of the Pennsylvania permits were issued by
the Pennsylvania Department of Environmental Resources.
In addition to the foregoing environmental permits, and where not
otherwise addressed above, all facilities have taken steps to ensure
compliance with stormwater regulations. Where applicable, facilities
have applied for the necessary group, individual or general storm
water permit in accordance with state and federal guidelines.
Further, each facility has registered aboveground and underground
storage tanks in accordance with relevant state and federal
regulations.
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Management believes that all facilities and operations are
currently in compliance with environmental and regulatory standards.
Compliance has not had a materially adverse effect upon WLR Foods'
earnings or competitive position in the past, and it is not
anticipated to have a materially adverse effect in the future.
Employees
WLR Foods employed over 9,000 persons as of July 1, 1995, none of
whom were covered by a collective bargaining agreement.
Item 2. PROPERTIES.
WLR Foods' seven poultry processing facilities and three further
processing plants are located in Virginia, West Virginia, Pennsylvania
and North Carolina, and have a total slaughter capacity of
approximately 650,000 turkeys per week (single shift) and 3.1 million
chickens per week (double shift). WLR Foods owns and operates four
feed mills with a production capacity in excess of 1.8 million tons of
finished feed per year; a turkey hatchery with a production capacity
of approximately 335,000 poults per week and two chicken hatcheries
with a production capacity of approximately 3.2 million chicks per
week; freezer and cold storage for finished products with
approximately 5.2 million cubic feet of capacity; and two protein
conversion plants with a total production capacity of 4,500 tons of
raw product weekly. The diversity, number and geographic proximity of
its processing and support facilities provide WLR Foods with operating
flexibility and enable it to alter the size and mix of poultry
processed among the various facilities, as market conditions change.
Cassco operates public refrigerated facilities at five locations
with approximately 9.2 million cubic feet. These facilities are
located close to major food processors in Virginia, West Virginia and
North Carolina. Cassco also operates seven ice manufacturing
facilities in Virginia, West Virginia and Washington, D.C. with a
capacity of approximately 1,000 tons per day.
From fiscal 1988 through the end of fiscal 1995, WLR Foods has
spent over $169 million (excluding capital leases) for replacement and
productivity improvements, acquisitions and expansion of facilities,
and protein conversion plant construction. WLR Foods owns virtually
all of its manufacturing and production equipment which is in good
repair and is updated periodically. Replacement parts and service for
the equipment are readily available, which allows for timely
processing of the Company's products.
Item 3. LEGAL PROCEEDINGS.
On February 6, 1994, WLR Foods filed suit in the United States
District Court for the Western District of Virginia against Tyson
Foods, Inc. (Tyson), seeking, among other things, (1) a declaratory
judgment as to the validity of the Company's Shareholder Protection
Rights
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Plan, and (2) a declaratory judgment as to the
constitutionality of Article 14, Virginia Code Sections 13.1-725 et
seq. (Virginia Affiliated Transactions Statute), and Article 14.1,
Virginia Code Sections 13.1-728 et seq. (Virginia Control Share
Acquisitions Statute), of the Virginia Stock Corporation Act under the
Virginia and United States Constitutions.
In response, on February 25, 1994, Tyson, joined later by Tyson's
WLR Acquisition Corp., filed counterclaims against the Company and all
its directors, except Peter A.W. Green, seeking, among other things,
to invalidate the Company's Shareholder Protection Rights Plan and
certain severance agreements, and a declaratory judgment that the
Virginia Affiliated Transactions Statute, the Virginia Control Share
Acquisitions Statute and other Virginia statutes, facially and as
applied, are unconstitutional under the United States Constitution.
Tyson also sought a declaratory judgment that four of the Company's
directors who resigned as employees of the Company in February 1994
were not disinterested shareholders, and, therefore, were ineligible
to vote their shares at a Special Meeting of the Shareholders held on
May 21, 1994, and that the Company's directors breached their
fiduciary duties in taking certain actions described in Tyson's
counterclaims.
The United States District Court entered final judgment on
December 6, 1994, upholding the legality of the directors' actions and
the validity of Virginia's corporate laws relied upon by WLR and its
directors. Tyson appealed to the United States Court of Appeals for
the Fourth Circuit. On September 22, 1995, a three-judge panel of the
Fourth Circuit Court of Appeals ruled unanimously in favor of WLR and
its directors on all issues. Finding that Tyson's arguments lacked
merit, the Fourth Circuit affirmed the judgment of the United States
District Court.
Wampler-Longacre, Inc., is a named third-party defendant in
United States v. Keystone Sanitation Co., Inc., et al., United States
District Court for the Middle District of Pennsylvania, Civil Action
No. 1:CV-93-1482. In general, the third-party plaintiffs are seeking
to hold Wampler-Longacre jointly and severally liable under federal
and state laws for the costs of cleaning up hazardous wastes at the
Keystone Sanitation Co., Inc. ("Keystone") municipal landfill located
in Union Township, Adams County, Pennsylvania. The Keystone landfill
is on the federal government's National Priorities List of sites
eligible for cleanup under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.
(also known as the federal Superfund law). Wampler-Longacre's
predecessor, Round Hill Foods, Inc., used the Keystone landfill from
1974 to 1990.
At this time there are approximately 165 parties named in the
civil action who are potentially liable for the cleanup costs. In
addition, a fourth party action may be filed in the coming months
which will add an additional 700 to 900 parties.
In CERCLA actions, although liable parties are jointly and
severally liable for the cleanup costs, in practice a liable party's
contribution toward the cleanup costs is generally based on the
party's waste allocation. Waste allocation is determined based on the
amount of waste a party contributed to a site in proportion to all of
the other named parties. At this time, Wampler-
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Longacre's waste allocation is 1.02898%. This waste allocation
percentage presupposes the unlikely event that all of the waste
generated by the Company's predecessor was actually disposed of by
Keystone Sanitation Company, Inc. in the Keystone landfill and not
in any of the other nearby landfills. This waste allocation
percentage, moreover, does not account for 50-60% of the overall
waste in the landfill that was contributed by potential fourth-party
defendants. Thus, Wampler-Longacre's waste allocation is expected to
decrease significantly once these fourth-parties are brought into this
civil action.
Wampler-Longacre denies liability. As a food processor, only
non-hazardous trash has been deposited at the landfill by Wampler-
Longacre. Nevertheless, if Wampler-Longacre is held liable, its
liability could reach $206,000. However, current settlement
negotiations are underway which would make third-party defendants,
including WLR Foods, responsible solely for a portion of the cleanup
costs. If this settlement is reached, and provided that Wampler-
Longacre's waste allocation does not change significantly, Wampler-
Longacre's liability is expected to be approximately $50,000. Of
course, numerous factors could cause Wampler-Longacre's exposure to
increase or decrease. Nonetheless, a reasonable estimate of Wampler-
Longacre's exposure in this matter is in the range set forth above.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the shareholders of the Company
during the fourth quarter of the fiscal year ended July 1, 1995.
<TABLE>
Executive Officers of the Registrant
The following information is given regarding WLR Foods' executive officers.
<CAPTION>
______________________________________________________________________________
Name and Position Principal Occupation
with the Company Age During the Last Five Years
______________________________________________________________________________
<S> <C> <C>
James L. Keeler 60 Chief Executive Officer since February 1988
President
Chief Executive Officer
James L. Mason<F1> 46 General Manager and President of Wampler-Longacre
General Manager of Turkey since April 1990
Wampler-Longacre
V. Eugene Misner 58 Vice President of Live Production since January 1994;
Vice President of previously, General Manager and President of Wampler-Longacre
Wampler-Longacre Chicken since April 1990
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Delbert L. Seitz 53 Chief Financial Officer since November 1989;
Treasurer, Chief
Financial Officer
John J. Broaddus 45 General Manager of Cassco since April 1990;
General Manager of Cassco
Henry L. Holler 66 Vice President Sales and Marketing since October
Vice President 1993; previously, Vice President of Sales for
Sales and Marketing Wampler-Longacre Chicken
Jane T. Brookshire 50 Vice President of Human Resources since October
Vice President 1993; previously, Director of Human Resources for
Human Resources WLR Foods
________________
<FN>
<F1> James L. Mason is the son of Herman D. Mason, who is Vice Chairman of the Company's Board.
</TABLE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
Public trading of shares of WLR Foods' common stock commenced on
May 10, 1988. The stock was included in NASDAQ as of September 12,
1988, and was included in NASDAQ/National Market System as of March 7,
1989. The range of high and low bid information for the stock, as
well as information regarding dividends declared by WLR Foods, for
each full quarterly period within the two most recent fiscal years is
incorporated by reference to Note 12 to the Registrant's Consolidated
Financial Statements in the Annual Report, attached hereto as Exhibit
13.3. As of September 1, 1995, the approximate number of shareholders
of record was 3,514.
Item 6. SELECTED FINANCIAL DATA.
Selected financial data for each of the fiscal years in the
eight-year period ended July 1, 1995 is incorporated by reference to
the table entitled "Financial Highlights" in the Annual Report,
attached hereto as Exhibit 13.1. A summary of significant accounting
policies and business acquisitions and dispositions is incorporated by
reference to Notes 1 and 2 to the Registrant's Consolidated Financial
Statements in the Annual Report, attached hereto as Exhibit 13.3.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and
results of operations is incorporated by reference to that section in
the Annual Report, attached hereto as Exhibit 13.2.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item, except for the required
financial statement schedules, is incorporated by reference to the
Consolidated Financial Statements and Notes thereto into the Annual
Report, attached hereto as Exhibit 13.3. The required financial
statement schedule are included on page 19 of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There were no changes in or disagreements with accountants on
accounting and financial disclosure during WLR Foods' two most recent
fiscal years or any subsequent interim period.
PART III
Items 10 - 13 inclusive.
These items have been omitted in accordance with instructions to
Form 10-K Annual Report. The Registrant will file with the Commission
in October 1996, pursuant to Regulation 14A, a definitive proxy
statement that will involve the election of directors.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) Financial Statements, Schedules and Exhibits
Financial Statements Location
Consolidated Statements of Earnings - Fiscal years ended Exhibit 13.3
July 1, 1995, July 2, 1994 and July 3, 1993
Consolidated Balance Sheets - July 1, 1995 and July 2, 1994 Exhibit 13.3
Consolidated Statements of Shareholders' Equity - Fiscal years Exhibit 13.3
ended July 1, 1995, July 2, 1994 and July 3, 1993
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Consolidated Statements of Cash Flows - Fiscal years ended Exhibit 13.3
July 1, 1995, July 2, 1994 and July 3, 1993
Notes to Consolidated Financial Statements - Fiscal years Exhibit 13.3
ended July 1, 1995, July 2, 1994 and July 3, 1993
Financial Statement Schedules
Independent Auditors' Report on Financial Statement Schedule Page 18
Schedule II - Valuation and Qualifying Accounts Page 19
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of
fiscal 1995 that ended on July 1, 1995.
(c) Exhibits
3.1 Articles of Incorporation of the Registrant, restated
effective May 30, 1995
3.2 Bylaws of the Registrant, as amended on October 29, 1995
4.1 Specimen Stock Certificate incorporated by reference to
Exhibit 4 of Form 10-K filed with the Securities and
Exchange Commission on September 27, 1991
4.2 Note Agreement dated May 1, 1991 with Minnesota Mutual Life
Insurance Company, Inc. and others, incorporated by
reference to Exhibit 4.4 of Form 10-K filed with the
Securities and Exchange Commission on September 27, 1991
4.3 First Amendment, dated October 16, 1992, to the Note
Agreement dated May 1, 1991 with Minnesota Mutual Life
Insurance Company, Inc.
4.4 Agreement of the Company, dated September 27, 1995, to
furnish a copy of the Second Amendment, dated June 1, 1995,
to the Note Agreement dated May 1, 1991 with Minnesota
Mutual Life Insurance Company, Inc. to the Securities and
Exchange Commission upon its request
4.5 Shareholder Protection Rights Agreement, dated as of
February 4, 1994, which includes as Exhibit A the forms of
Rights Certificate and Election to Exercise and as Exhibit B
the Form of Certificate of Designation and Terms of the
Participating Preferred Stock incorporated by reference to
Exhibit 1 of Form 8-A filed with the Securities and Exchange
Commission on September 30, 1993
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4.6 Loan Agreement dated March 1, 1995 with First Union National
Bank, incorporated by reference to Exhibit 4.1 of Form 8-K
filed with the Securities and Exchange Commission on May 11,
1995
4.7 Credit Agreement dated March 1, 1995 with First Union
National Bank of Virginia and others incorporated by
reference to Exhibit 4.2 of Form 8-K filed with the
Securities and Exchange Commission on May 11, 1995
4.8 Amendment, dated as of July 1, 1995, to the Credit Agreement
dated March 1, 1995 with First Union National Bank of
Virginia and others
4.9 Agreement of the Company, dated September 27, 1995, to
furnish a copy of the Note Agreement dated June 1, 1995 with
respect to the issuance of certain long-term debt to the
Securities and Exchange Commission upon its request
9 Voting Trust Agreement dated August 29, 1994 incorporated by
reference to Exhibit 9.1 of Form 8-K filed with the
Securities and Exchange Commission on September 13, 1994
10.1 Employment Agreement dated July 4, 1993 between the
Registrant and James L. Keeler (Deferred Compensation
Agreement attached thereto as Exhibit A) incorporated by
reference to Exhibit 10.6 of Form 10-K filed with the
Securities and Exchange Commission on September 30, 1993
10.2 Executive Cash Bonus Program incorporated by reference to
Exhibit 10.7 of Form 10-K filed with the Securities and
Exchange Commission on September 30, 1993
10.3 Long-Term Incentive Plan, as amended, incorporated by
reference to Exhibit 28 of Post-Effective Amendment Number
One to Form S-8 (No. 33-27037) filed with the Securities and
Exchange Commission on November 18, 1992
10.4 Amendment to Employment Agreement dated February 4, 1994
between the Registrant and James L. Keeler incorporated by
reference to Exhibit 10.2 of Form 8-K filed with the
Securities and Exchange Commission on February 15, 1994
10.5 Amendment to Deferred Compensation Agreement dated
February 4, 1994 between the Registrant and James L. Keeler
incorporated by reference to exhibit 10.3 of the Form 8-K
filed with the Securities and Exchange Commission on
February 15, 1994
10.6 Severance Agreement dated February 4, 1994 between the
Registrant and James L. Keeler incorporated by reference to
Form 10-Q/A filed with the Securities and Exchange
Commission on February 23, 1994
13
<PAGE>
10.7 Severance Agreement dated February 4, 1994 between the
Registrant and Delbert L. Seitz incorporated by reference to
Form 10-Q/A filed with the Securities and Exchange
Commission on February 23, 1994
10.8 Severance Agreement dated February 4, 1994 between the
Registrant and James L. Mason incorporated by reference to
Form 10-Q/A filed with the Securities and Exchange
Commission on February 23, 1994
10.9 Severance Agreement dated February 4, 1994 between the
Registrant and John J. Broaddus incorporated by reference to
Form 10-Q/A filed with the Securities and Exchange
Commission on February 23, 1994
10.10 Severance Agreement dated February 4, 1994 between the
Registrant and V. Eugene Misner incorporated by
reference to Form 10-Q/A filed with the Securities and
Exchange Commission on February 23, 1994
10.11 Deferred Compensation Agreement dated February 4, 1994
between the Registrant and Charles W. Wampler, Jr.
incorporated by reference to Form 10-Q/A filed with the
Securities and Exchange Commission on February 23, 1994
10.12 Deferred Compensation Agreement dated February 4, 1994
between the Registrant and Herman D. Mason incorporated
by reference to Form 10-Q/A filed with the Securities
and Exchange Commission on February 23, 1994
10.13 Deferred Compensation Agreement dated February 4, 1994
between the Registrant and George E. Bryan incorporated
by reference to Form 10-Q/A filed with the Securities
and Exchange Commission on February 23, 1994
10.14 Deferred Compensation Agreement dated February 4, 1994
between the Registrant and William D. Wampler
incorporated by reference to Form 10-Q/A filed with the
Securities and Exchange Commission on February 23, 1994
13.1 Financial Highlights, from the Registrant's Annual Report to
Shareholders for the fiscal year ended July 1, 1995
13.2 Management's and Discussion and Analysis, from the
Registrant's Annual Report to Shareholders for the fiscal
year ended July 1, 1995
13.3 Consolidated Financial Statements and Notes to Consolidated
Financial Statements, from the Registrant's Annual Report to
Shareholders for the fiscal year ended July 1, 1995
13.4 Independent Auditors' Report on Consolidated Financial
Statements, from the Registrant's Annual Report to
Shareholders for the fiscal year ended July 1, 1995
14
<PAGE>
21 List of Subsidiaries of the Registrant
23 Consent of Independent Certified Public Accountants
24 Power of Attorney
27 Financial Data Schedule
Schedules not included in this Item have been omitted because they are
either not applicable or the information is included in the
Consolidated Financial Statements or notes thereto.
[The remainder of this page is intentionally left blank.]
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ James L. Keeler_______________
Its President & Chief Executive Officer
Date: September 27, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
____/s/ James L. Keeler______________
President & Chief Executive Officer
Date: September 27, 1995
___/s/ Delbert L. Seitz_______________
Chief Financial Officer
Date: September 27, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities on September 29, 1993.
Signature Title
______________________________ Director
George E. Bryan*
______________________________ Director
Charles L. Campbell*
______________________________ Director
Stephen W. Custer*
______________________________ Director
Calvin G. Germroth*
16
<PAGE>
______________________________ Director
William H. Groseclose*
______________________________ Director
J. Craig Hott*
___/s/ James L. Keeler________ Director
James L. Keeler
______________________________ Director
Herman D. Mason*
______________________________ Director
Charles W. Wampler, Jr.*
______________________________ Director
William D. Wampler*
*By __/S/ Delbert L. Seitz_____________
Delbert L. Seitz, attorney-in-fact
17
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Shareholders
WLR Foods, Inc.:
Under date of August 16, 1995, we reported on the consolidated balance
sheets of WLR Foods, Inc. and subsidiaries as of July 1, 1995 and July 2,
1994, and the related consolidated statements of earnings, shareholders'
equity and cash flows for each of the fiscal years in the three-year period
ended July 1, 1995, as contained in the 1995 annual report to stockholders.
These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year
1995. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedule as listed in the accompanying index. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement
schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Richmond, Virginia
August 16, 1995
18
<PAGE>
<TABLE>
WLR FOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED JULY 1, 1995, JULY 2, 1994 AND JULY 3, 1993
(in thousands)
<CAPTION>
Description Balance at Charged to Charged to Balance at
beginning cost and other end of
of period expenses accounts period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal year ended July 1, 1995
Allowance for Doubtful Accounts $360 $686 $433 $613
---- ---- ---- ----
Total $360 $686 $433 $613
==== ==== ==== ====
Fiscal year ended July 2, 1994
Allowance for Doubtful Accounts $363 $156 $159 $360
---- ---- ---- ----
Total $363 $156 $159 $360
==== ==== ==== ====
Fiscal year ended July 3, 1993
Allowance for Doubtful Accounts $372 $4 $13 $363
---- ---- ---- ----
Total $372 $4 $13 $363
==== ==== ==== ====
19
<PAGE>
20
</TABLE>
Exhibit 3.1
ARTICLES OF RESTATEMENT
OF
WLR FOODS, INC.
Pursuant to Va. Code Section 13.1-639 and Section 13.1-711, WLR
Foods, Inc. (the Corporation) amends and restates its Articles of
Incorporation as follows:
ARTICLE ONE
NAME
The name of the Corporation is WLR Foods, Inc.
ARTICLE TWO
CAPITAL STOCK
Section One. Authorized Shares. The total number of shares of
all classes of capital stock which the Corporation shall have
authority to issue is two hundred fifty million (250,000,000), divided
into fifty million (50,000,000) shares of preferred stock without par
value, one hundred million (100,000,000) shares of Class A Common
Stock, no par value (Class A Common Stock), and one hundred million
(100,000,000) shares of Class B Common Stock, no par value (Class B
Common Stock).
Upon the Articles of Amendment of the Articles of Incorporation
becoming effective pursuant to the Virginia Stock Corporation Act (the
Effective Time), and without any further action on the part of the
Corporation or its shareholders, each whole share of the Corporation's
Common Stock, no par value (the Old Common Stock), then issued
(including shares held in the treasury of the Corporation) shall
automatically be reclassified, changed and converted into one fully
paid and nonassessable share of Class A Common Stock and certificates
previously
<PAGE>
representing shares of Old Common Stock shall be deemed to represent
the same number of shares of Class A Common Stock.
(a) Class A Common Stock and Class B Common Stock.
(1) The powers, preferences and rights of the Class A
Common Stock and the Class B Common Stock, and the qualifications,
limitations or restrictions thereof, shall be in all respects
identical, except as otherwise required by law or expressly provided
in these Articles of Incorporation, as amended.
(2) (i) At each annual or special meeting of shareholders,
each holder of Class A Common Stock shall be entitled to one (1) vote
in person or by proxy for each share of Class A Common Stock standing
in his name on the stock transfer records of the Corporation in
connection with the election of directors and all other actions
submitted to a vote of shareholders. Each holder of Class B Common
Stock shall be entitled to one-tenth of one vote in person or by proxy
for each share of Class B Common Stock standing in his name on the
stock transfer records of the Corporation in connection with the
election of directors and all other actions submitted to a vote of
shareholders; except as otherwise provided by this Articles of
Incorporation, as amended, and the Virginia Stock Corporation Act.
(ii) The holders of the Class B Common Stock shall
each be entitled to vote separately as a class only with respect to
(A) proposals to change the par value of the Class B Common Stock,
(B) other amendments to these Articles of Incorporation that alter or
change the powers, preferences or special rights of the holders of
Class B Common Stock so as
2
<PAGE>
to affect them adversely, and (C) such other matters as may require
class voting under the Virginia Stock Corporation Act.
(iii) The number of authorized shares of Class B
Common Stock may be increased or decreased (but not below the number
of shares then outstanding) by the affirmative vote of the holders of
a majority of the Class A Common Stock.
(3) Dividends may be declared and paid to the holders of
the Class A Common Stock and the Class B Common Stock in cash,
property, or other securities of the Corporation out of any net
profits or net assets of the Corporation legally available therefor.
If and when dividends on the Class A Common Stock and the Class B
Common Stock are declared payable from time to time by the Board of
Directors, whether payable in cash, in property or in shares of stock
of the Corporation, the holders of the Class A Common Stock and the
holders of the Class B Common Stock shall be entitled to share
equally, on a per share basis, in such dividends, except that,
dividends or other distributions payable on the Common Stock in shares
of Common Stock shall be made to all holders of Common Stock and may
be made (i) in shares of Class B Common Stock to the record holders of
Class A Common Stock and to the record holders of Class B Common
Stock, (ii) in shares of Class A Common Stock to the record holders of
Class A Common Stock and in shares of Class B Common Stock to the
record holders of Class B Common Stock or (iii) in any other
authorized class or series of capital stock to the holders of both
classes of Common Stock.
(4) (i) All outstanding shares of Class B Common Stock may
be converted into shares of Class A Common Stock on a share-for-share
basis by the Board of Directors if,
3
<PAGE>
as a result of the existence of the Class B Common Stock, either the
Class A Common Stock or Class B Common Stock is or both are excluded
from trading on the New York Stock Exchange, the American Stock
Exchange and all other principal national securities exchanges then in
use and is also excluded from quotation on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) and any other
comparable national quotation system then in use.
(ii) All outstanding shares of Class B Common Stock
shall be converted into shares of Class A Common Stock on a share-for-
share basis if at any time the number of outstanding shares of Class A
Common Stock as reflected on the stock transfer records of the
Corporation falls below 10% of the aggregate number of outstanding
shares of Class A Common Stock and of Class B Common Stock. For
purposes of the immediately preceding sentence, any shares of Common
Stock repurchased by the Corporation shall no longer be deemed
"outstanding" from and after the date of repurchase.
(iii) In the event of any conversion of the Class B
Common Stock pursuant to subdivision (4)(i) or (4)(ii), certificates
which formerly represented outstanding shares of Class B Common Stock
will thereafter be deemed to represent a like number of shares of
Class A Common Stock and all authorized shares of Common Stock shall
consist of only Class A Common Stock.
(5) (i) If any person or group acquires beneficial
ownership of 30% or more of the then issued and outstanding shares of
Class A Common Stock after the Effective Time (other than upon
original issuance by the Corporation, by operation of law, by will or
the laws of descent and distribution, by gift or by foreclosure of a
bona fide loan), and such person
4
<PAGE>
or group (a "Related Person") does not own an equal or greater
percentage of the Class B Common Stock acquired after the record date
for the first issuance of Class B Common Stock (the "Distribution
Date"), such person or group must, within a 90-day period beginning
the day after becoming a Related Person, make a public tender offer in
compliance with all applicable laws and regulations to acquire
additional Class B Common Stock as provided in this subsection (5) of
Article Two, Section One (a "Minority Protection Transaction").
(ii) In each Minority Protection Transaction, the
Related Person must make a public tender offer to acquire that number
of shares of Class B Common Stock determined by (A) multiplying the
percentage of outstanding Class A Common Stock beneficially owned on
such date and acquired after the Effective Time by such Related Person
by the total number of shares of Class B Common Stock outstanding on
the date such person or group became a Related Person, and (B)
subtracting therefrom the total number of shares of Class B Common
Stock beneficially owned on such date and acquired after the
Distribution Date by such Related Person (including shares acquired on
such date at or prior to the time such person or group became a
Related Person). The Related Person must acquire all of such shares
validly tendered; provided, however, that if the number of shares of
Class B Common Stock tendered to the Related Person exceeds the number
of shares required to be acquired pursuant to the formula set forth in
this clause (ii), the number of shares of Class B Common Stock
acquired from each tendering holder shall be pro rata in proportion to
the total number of shares of Class B Common Stock tendered by all
tendering holders.
5
<PAGE>
(iii) The offer price for any shares of Class B
Common Stock required to be purchased by the Related Person pursuant
to this provision shall be the greater of (A) the highest price per
share paid by the Related Person for any share of Class A Common Stock
in the six-month period ending on the date such person or group became
a Related Person or (B) the highest bid price of a share of Class A
Common Stock or Class B Common Stock on the NASDAQ National Market
System (or such other exchange or quotation system as is then the
principal trading market for such shares) on the date such person or
group became a Related Person. For purposes of clause (iv) below, the
applicable date for the calculations required by the preceding
sentence shall be the date on which the Related Person becomes
required to engage in a Minority Protection Transaction. In the event
that the Related Person has acquired Class A Common Stock in the six-
month period ending on the date such person or group becomes a Related
Person for consideration other than cash, the value of such
consideration per share of Class A Common Stock shall be as determined
in good faith by the Board of Directors.
(iv) A Minority Protection Transaction shall also
be required to be effected by any Related Person that acquires
beneficial ownership of the next higher integral multiple of 5% (e.g.,
35%, 40%, 45%, etc.) of the outstanding shares of Class A Common Stock
after the Effective Time (other than upon issuance or sale by the
Corporation, by operation of law, by will or the laws of descent and
distribution, by gift, or by foreclosure of a bona fide loan) if such
Related Person does not then own an equal or greater percentage of the
shares of Class B Common Stock acquired after the Distribution Date.
Such Related Person shall be required to make a public tender offer to
acquire that number of shares of Class B Common Stock
6
<PAGE>
prescribed by the formula set forth in clause (ii) above, and must
acquire all shares validly tendered or a pro rata portion thereof, as
specified in said clause (ii), at the price determined pursuant to
clause (iii) above.
(v) If any Related Person fails to make an offer
required by this subsection (5) of Article Two, Section One, or to
purchase shares validly tendered and not withdrawn (after proration,
if any), such Related Person shall not be entitled to vote any shares
of Class A Common Stock beneficially owned by such Related Person and
acquired by such Related Person after the Effective Time unless and
until such requirements are complied with or unless and until all
shares of Class A Common Stock causing such offer requirement to be
effective are no longer beneficially owned by such Related Person.
(vi) The Minority Protection Transaction
requirement shall not apply to any increase in percentage ownership of
Class A Common Stock resulting solely from a change in the total
amount of Class A Common Stock outstanding, provided that any
acquisition after such change which results in any person or group
owning 30% or more of the Class A Common Stock excluding, in the case
of the numerator but not of the denominator of the calculation of such
percentage, shares of Class A Common Stock held by such Related Person
immediately after the Effective Time, shall be subject to any Minority
Protection Transaction requirement that would be imposed with respect
to a Related Person pursuant to this subsection (5) of Article Two,
Section One.
(vii) All calculations with respect to percentage
ownership of issued and outstanding shares of either class of Common
Stock will be based upon the numbers of issued
7
<PAGE>
and outstanding shares reported by the Corporation on the last filed
of (A) the Corporation's most recent annual report on Form 10-K, (B)
its most recent Quarterly Report on Form 10-Q, or (C) if any, its most
recent Current Report on Form 8-K.
(viii) For purposes of this subsection (5) of this
Article Two, Section One, the term "person" means a natural person,
company, government, or political subdivision, agency or
instrumentality of a government, or other entity. "Beneficial
ownership" shall be determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the 1934 Act),
or any successor regulation. The formation or existence of a "group"
shall be determined pursuant to Rule 13d-5(b) under the 1934 Act or
any successor regulation.
(6) Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the remaining net
assets of the Corporation shall be distributed pro rata to the holders
of the Class A Common Stock and the Class B Common Stock in accordance
with their respective rights and interests.
(7) In the event of a merger or consolidation of the
Corporation with or into another entity (whether or not the
Corporation is the surviving entity), the holders of Class B Common
Stock shall be entitled to receive the same per share consideration as
the per share consideration, if any, received by any holder of the
Class A Common Stock in such merger or consolidation.
(8) If the Corporation shall in any manner split,
subdivide or combine the outstanding shares of Class A Common Stock or
Class B Common Stock, the outstanding shares of the other such class
of Common Stock shall be proportionally subdivided or combined in the
8
<PAGE>
same manner and on the same basis as the outstanding shares of the
other class of Common Stock have been split, subdivided or combined.
(9) No holder of shares of Class A Common Stock or
Class B Common Stock shall, by reason of such holding, have any
preemptive right to subscribe to any additional issue of stock of any
class or series of the Corporation or to any security of the
Corporation convertible into such stock.
(10) The Board of Directors shall have the power to
issue and sell all or any part of any class of stock herein or
hereafter authorized to such persons, firms, associations or
corporations, and for such consideration as the Board of Directors
shall from time to time, in its sole discretion, determine, whether or
not greater consideration could be received upon the issue or sale of
the same number of shares of another class, and as otherwise permitted
by law.
(11) The Board of Directors shall have the power to
purchase any class of stock herein or hereafter authorized from such
persons, firms, associations or corporations, and for such
consideration as the Board of Directors shall from time to time, in
its sole discretion, determine, whether or not less consideration
could be paid upon the purchase of the same number of shares of
another class, and as otherwise permitted by law.
Section Two. Preferred Stock. The Board of Directors of the
Corporation is authorized at any time or from time to time to divide
the shares of preferred stock into classes and into series within any
class or classes of preferred stock; to determine for any such class
or series its designation, relative rights, preferences and
limitations; to determine the number of shares in any such class or
series (including a determination that such class or series shall
consist of a single
9
<PAGE>
share); to increase the number of shares of any such class or series
previously determined by it and to decrease such previously determined
number of shares to a number not less than that of the shares of such
class or series then outstanding; to change the designation or number
of shares, or the relative rights, preferences and limitations of the
shares, of any theretofor established class or series, no shares of
which have been issued; and to cause to be executed and filed without
further approval of the shareholders such amendment or amendments to
these articles of incorporation as may be required in order to
accomplish any of the foregoing. In particular, but without limiting
the generality of the foregoing, the Board of Directors is authorized
to determine with respect to the share of any class or series of
preferred stock:
(a) whether the holders thereof shall be entitled to cumulative,
non-cumulative or partially cumulative dividends or to no dividends
and, with respect to shares entitled to dividends, the dividend rate
or rates (which may be fixed or variable and may be made dependent
upon facts ascertainable outside of the articles of incorporation) and
any other terms and conditions relating to such dividends;
(b) whether the holders thereof shall be entitled to receive
dividends payable on a parity with or subordinate or in preference to
the dividends payable on any other class or series of shares of the
Corporation;
(c) whether, and if so upon what terms and conditions, the
holders thereof shall be entitled to preferential rights upon the
liquidation of, or upon any distribution of the assets of, the
Corporation;
10
<PAGE>
(d) whether, and if so upon what terms and conditions, such
shares shall be convertible into other securities;
(e) whether, and if so upon what terms and conditions, such
shares shall be redeemable;
(f) the terms and amount of any sinking fund provided for the
purchase or redemption of such shares; and
(g) the voting rights, if any, to be enjoyed by such shares and
the terms and conditions for the exercise thereof.
Section Three. Preemptive Rights. No holder of any shares of
common or preferred stock of the Corporation shall have any right as
such holder (other than such right, if any, as the Board of Directors
in its discretion may determine) to purchase, subscribe for or
otherwise acquire any unissued shares, or any option rights, or
securities having conversion or option rights, of the Corporation now
or hereafter authorized.
ARTICLE THREE
BOARD OF DIRECTORS
Section One. Term. Commencing with the election of directors at
the annual meeting of shareholders in 1990, the directors shall be
divided into three Classes, A, B, and C, as nearly equal in number as
possible following such procedure as shall be established by the Board
of Directors. The initial term of office for members of Class A shall
expire at the annual meeting of shareholders in 1991; the initial term
of office for members of Class B shall expire at the annual meeting of
shareholders in 1992; and the initial term of office for members of
Class C
11
<PAGE>
shall expire at the annual meeting of shareholders in 1993. At each
annual meeting of shareholders following such initial classification
and election, successive elections of those directors, or directors
elected to succeed those directors, shall be selected for a term of
office to expire at the third succeeding annual meeting of
shareholders after their election and shall continue to hold office
until their respective successors are elected and qualify. However,
any director named between any annual meeting of shareholders shall be
for the term ending with the next annual meeting of shareholders. If
the number of directors fixed by the bylaws increases or decreases,
all Classes of directors shall be increased or decreased as equally as
possible.
Section Two. Removal. Shareholders may remove one or more
directors only with cause, defined as willful misconduct or knowing
violation of criminal law or of any federal or state securities law.
However, shareholders may remove one or more directors with or without
cause upon a recommendation for removal without cause from the Board
of Directors passed by a two-thirds vote of the Board of Directors.
ARTICLE FOUR
AMENDMENTS
Section One. Articles of Incorporation. The Articles of
Incorporation of the Corporation shall be amended by approval of each
voting group entitled to vote on the amendment by a majority of all
votes entitled to be cast by the voting group, provided such amendment
has been recommended for approval to the shareholders of the
Corporation by a majority of the Board of Directors.
12
<PAGE>
Section Two. Bylaws The Bylaws may be amended, in whole or in
part, by a two-thirds (2/3) vote of the Board of Directors, or by the
holders of two-thirds (2/3) of all shares entitled to vote by each
voting group of the shareholders of the Corporation, at any meeting of
the Board of Directors or of the shareholders, as the case may be,
except that the shareholder vote for Bylaw amendments that have been
recommended to the shareholders by a two-thirds (2/3) vote of the
Board of Directors shall require only a majority of all votes entitled
to be cast by each voting group. Bylaws made or amended by the Board
of Directors may be altered or repealed by the shareholders according
to this Section, but shall remain in effect unless and until such
action be taken by the shareholders.
13
<PAGE>
Exhibit 3.2
BYLAWS
OF
WLR FOODS, INC.
ARTICLE I
Shareholders
Section 1. Place of Meetings. All meetings of the shareholders
shall be held at such place as may be designated in writing by the
Board of Directors.
Section 2. Voting. Shareholders shall be entitled to vote at
meetings of the shareholders in person or by proxy. If by proxy, such
proxy shall be appointed by an instrument in writing, subscribed by
the shareholder or by his duly authorized attorney. A shareholder
shall be entitled to one vote for each share of stock entitled to vote
registered in his name on the books of the Corporation.
Section 3. Quorum. Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of
those shares exists with respect to that matter. A majority of the
votes entitled to be cast on the matter by the voting group
constitutes a quorum of that voting group for action on that matter.
Section 4. Adjournment of Meetings. If less than a quorum shall
be in attendance at the shareholders' meeting, the meeting shall be
adjourned from time to time by a majority vote of the shareholders
entitled to vote present or represented by proxy until a quorum shall
attend. Any meeting at which a quorum is present may also be
adjourned in like manner for such time upon such call as may be
determined by the shareholders entitled to vote present in person or
by proxy at such meetings. At any adjourned meeting at which a quorum
is present, any business may be transacted which might have been
transacted if the meeting had been held as originally called.
Section 5. Annual Election of Directors. The annual meeting of
the shareholders for the election of directors and the transaction of
other business shall be held in October of each year, the date and
time of such meeting to be fixed from time to time by resolution of
the Board of Directors.
Section 6. Special Meetings - How Called. Special meetings of
the shareholders shall be held upon the call of the Chairman of the
Board, the President, or the Board of Directors.
Section 7. Inspectors of Election. (a) In advance of any
meeting of the shareholders of the Corporation, the Board may appoint
inspectors of election, who may be officers or employees, but not
directors, of the Company, to act at the meeting and any adjournment
thereof. If inspectors of election are not so appointed, or if any
person so appointed fails to appear or refuses to act, the chairman of
any meeting of shareholders may appoint at the meeting inspectors
<PAGE>
of election or persons to replace those who so fail or refuse to act.
The number of inspectors shall be three (3).
(b) The inspectors of election shall determine the number of
shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, and the
authenticity, validity and effect of proxies; they shall receive
votes, ballots or consents and shall hear and determine all challenges
and questions if any may arise in connection with the right to vote;
they shall count and tabulate all votes or consents, determine when
the polls shall close, and determine the result; and they shall do
such acts as may be proper to conduct the election or vote with
fairness to all shareholders.
(c) The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability, and as
expeditiously as is practical. The decision, act or certificate of a
majority of the inspectors is effective in all respects as the
decision, act or certificate of all. Any report or certificate made
by the inspectors of election is prima facie evidence of the facts
stated therein.
Section 8. Organization. The Chairman of the Board of
Directors, or such other officer or board member as the Board of
Directors may designate, shall preside at each meeting of
shareholders. The Secretary or an Assistant Secretary shall act as
secretary of the meeting and keep a record of the proceedings thereof.
The Board of Directors of the Corporation shall be entitled to make
such rules or regulations for the conduct of meetings of shareholders
as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if any, the
chairman of the meeting shall have the right and authority to
prescribe such rules, regulations and procedures, and to do all such
acts as, in the judgment of such chairman, are necessary, appropriate
or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for
the meeting, establishing rules and procedures for maintaining order
at the meeting and the safety of those present, limiting the
participation in such meeting to shareholders of record of the
Corporation and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit, restricting entry to
the meeting after the time fixed for the commencement thereof,
limiting the time allotted to questions or comments by participants,
and regulating the opening and closing of the polls for balloting on
matters which are to be voted on by ballot. Unless, and to the
extent, determined by the Board of Directors or the chairman of the
meeting, meetings of shareholders shall not be required to be held in
accordance with rules of parliamentary procedure.
Section 9. Record Date for Special Meeting. For purposes of
setting the record date for determination of the holders of common
stock of the Corporation entitled to vote at any special meeting of
shareholders called pursuant to the provisions of the Virginia Control
Share Acquisition Act (the Act), the record date shall be the date on
which the Acquiring Person (as defined by the Act) requests such
shareholders' meeting pursuant to Va. Code Section 13.1-728.5.
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ARTICLE II
Directors
Section 1. Board of Directors. The Board of Directors shall
have power to manage and administer the business and affairs of the
Corporation. Except as expressly limited by law, all corporate powers
of the Corporation shall be vested in and may be exercised by the
Board of Directors.
Section 2. Number. The Board shall consist of not less than ten
(10) nor more than twelve (12) directors, the exact number within such
minimum and maximum to be fixed and determined by the Board of
Directors or the shareholders.
Section 3. Retirement. No person shall be eligible for election
to the Board of Directors after his 72nd birthday. The provision of
this Section shall not apply to those directors on the Board of
Directors as of January 1, 1989.
Section 4. Notification of Nominations. Nominations for the
election of directors may be made by the Board of Directors or by any
shareholder entitled to vote for the election of directors. Any
shareholder entitled to vote for the election of directors at a
meeting may nominate persons for election as directors only if written
notice of such shareholder's intent to make such nomination is given,
either by personal delivery or by United States mail, postage prepaid,
to the Secretary of the Corporation not later than (i) with respect to
an election to be held at an annual meeting of shareholders, 90 days
in advance of such meeting, and (ii) with respect to an election to be
held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date
on which notice of such meeting is first given to shareholders. Each
such notice shall set forth the name and address of the shareholder
who intends to make the nomination and of the person or persons to be
nominated, a representation that such shareholder is a holder of
record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice, a description of all
arrangements or understandings between such shareholder and each
nominee and any other person or persons specified in the notice, a
description of all arrangements or understandings between such
shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or
nominations are to be made by such shareholder, such other information
regarding each nominee proposed by such shareholder as would have been
required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had each nominee
been nominated, or intended to be nominated, by the Board of
Directors, and the consent of each nominee to serve as a director of
the Corporation if so elected. The chairman of a shareholders'
meeting may refuse to acknowledge the nomination of any person not made
in compliance with the foregoing procedure.
Section 5. Regular Meeting, Election of Officers. A regular
meeting of the Board of Directors shall be held immediately following
each annual meeting of the shareholders of the Corporation at the same
place such shareholders' meeting is held. No notice thereof shall be
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required. At such meeting, the directors shall elect a President and
a Secretary and may elect a Chief Executive Officer, a Chief Operating
Officer, a Chief Financial Officer, one or more Vice Presidents, an
Assistant Secretary, a Treasurer, and such other officers as the Board
may decide, and may transact such other business as shall properly
come before the meeting, including the election of directors to
committees of the Board of Directors. Unless sooner removed, such
officers shall hold office until the next annual election of officers,
and until their successors shall have been elected and have qualified.
Section 6. Special Meetings, How Called, Notice. Special
meetings of the Board of Directors shall be held upon notice by
word-of-mouth, letter, facsimile communication, or cable delivered not
later than twenty-four (24) hours preceding the time for the meeting
upon call of the Chairman of the Board, President or Secretary, and
upon call by the Secretary upon the written request of any four (4)
directors. Notice of any such meeting may be waived in writing signed
by the persons entitled to notice whether before or after the meeting.
Neither the business to be transacted at, nor the purpose of, any
special meeting need be specified in the notice or waiver of notice of
the meeting.
Section 7. Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business.
Section 8. Consents. Any and all notices herein required,
including the time and place of the meeting and the nature of the
business to be transacted, may be waived by written instrument
executed by all the directors. Further, any action by the directors
of the Corporation may be taken without a meeting by the unanimous
written consent of all of the directors.
Section 9. Committees. The Board of Directors may, by
resolution adopted by a majority of the Board of Directors, create one
or more committees of the Board of Directors and elect members of the
Board of Directors to serve on them at the pleasure of the Board of
Directors. To the extent specified by the Board of Directors or these
Bylaws, each committee may exercise the authority of the Board of
Directors to the extent permitted by law.
Section 10. Officers of the Board. By resolution adopted by a
majority of the Board of Directors, the Board of Directors may create
such offices of the Board, including Chairman of the Board and Vice
Chairman of the Board, as it deems appropriate for the carrying out of
Board functions and assignments, to serve at the pleasure of the
Board. Such persons are not, nor shall they by virtue of their
service to the Board be deemed to be, officers of the Corporation as
defined in Section 1, Article VII herein.
Section 11. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Board of Directors, and shall
approve the minutes of all meetings at which he presides. He shall
have concurrent power, along with the President, and Chief Executive
Officer, to call or cause to be called all meetings of the Board of
Directors, and shall be an ex officio member of all committees of the
Board of Directors. He shall also serve the Corporation in an
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advisory capacity and perform such other duties as may be assigned to
him by the Board of Directors.
Section 12. Vice Chairman of the Board. The Vice Chairman of
the Board shall have concurrent power with the Chairman and shall
preside at all meetings of the Board of Directors in the absence of
the Chairman of the Board.
ARTICLE III
Executive Committee
Section 1. Qualifications, Elections. The Board of Directors
may elect from its number an Executive Committee composed entirely of
members of the Board of Directors. The Chief Executive Officer, and
the Chief Operating Officer, provided such officers are Board members,
shall be members by virtue of their office with the Corporation.
Section 2. Powers and Duties. During the intervals between the
Board of Directors' meetings, the Executive Committee shall possess,
and may exercise, all the powers of the Board of Directors in the
management of the affairs of the Corporation. The Executive Committee
shall keep minutes of the proceedings of its meetings to be submitted
to the Board of Directors for its approval.
ARTICLE IV
Audit Committee
Section 1. Qualifications, Elections. The Board of Directors
shall elect from its number an Audit Committee composed entirely of
members of the Board of Directors. A majority of the Audit Committee
shall be comprised of independent directors of the Board of Directors.
Section 2. Powers and Duties. The Audit Committee shall
recommend to the Board of Directors the independent audit firm to be
employed by the Corporation to examine and report on the financial
statements issued by the Corporation; shall meet with the independent
auditor to discuss pertinent matters including quality of management,
financial, accounting and internal audit procedures; may establish an
internal audit department and thereafter periodically review its
functions and its personnel to assure effectiveness, independence and
competence; and may direct special investigations into significant
matters brought to the Audit Committee's attention within the scope
of its duties. The Audit Committee also shall monitor the
Corporation's compliance with the applicable requirements of the
National Association of Securities Dealers, Inc. relating to
independent directors and shall conduct an appropriate review of all
related party transactions and potential conflicts of interest
relating to the directors, as required by the National Association of
Securities Dealers, Inc., on at least an annual basis, and shall
recommend to the Board of Directors such action as it deems
appropriate if it determines that an impermissible relationship or
interest exists.
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ARTICLE V
Nominating Committee
Section 1. Qualifications, Elections. The Board of Directors
may elect from its number a Nominating Committee composed entirely of
members of the Board of Directors.
Section 2. Powers and Duties. The Nominating Committee shall
propose to the Board of Directors a slate of nominees for the Board of
Directors toconsider in recommending to the Corporation's shareholders
persons to be elected at the annual meeting of shareholders to the
Board of Directors, which slate shall consist of at least two
independent directors; shall propose to the Board of Directors
nominees who meet criteria for Board membership to fill vacancies on
the Board as they occur; and shall propose to the Board of Directors
for Board approval director nominees for appointment to, and the
filling of vacancies on, committees of the Board of Directors.
ARTICLE VI
Executive Compensation Committee
Section 1. Qualifications, Elections. The Board of Directors
may elect from its number an Executive Compensation Committee composed
entirely of members of the Board of Directors.
Section 2. Powers and Duties. The Executive Compensation
Committee shall determine the annual salary, bonus and other benefits,
direct and indirect, of the Chief Executive Officer and shall make
grants pursuant to the Corporation's Long Term Incentive Plan.
ARTICLE VII
Officers
Section 1. General. The officers of the Corporation shall
consist of a President and a Secretary, and may consist of a Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer,
one or more Vice Presidents, Assistant Secretary, Treasurer, and such
other officers as the Board may decide. One person may hold more than
one office.
Section 2. President. The President of the Corporation shall
have concurrent power, along with the Chairman of the Board and Chief
Executive Officer, to call or cause to be called all meetings of the
Board of Directors. He shall be an ex officio member of all
committees of the Board of Directors. He shall also preside at all
meetings of the Board of Directors in the absence of the Chairman or
Vice Chairman of the Board. He shall make and sign contracts and
instruments in the name and on behalf of the Corporation, including
checks,drafts, notes and orders for the payment of money, subject to
the approval of the Board of Directors, make reports to the
shareholders and directors, and perform all such other duties as are
incident to his office or which may properly be required of him by the
Board of Directors.
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Section 3. Chief Executive Officer. The Chief Executive Officer
shall give counsel and advice as may be deemed essential for the best
interest of the Corporation. He shall have concurrent power, along
with the Chairman of the Board and President, to call or cause to be
called all meetings of the Board of Directors. He shall be
responsible for all administration of the business and affairs of the
Corporation. He shall make and sign contracts and instruments in the
name and on behalf of the Corporation, including checks, drafts, notes
and orders for the payment of money, subject to the approval of the
Board of Directors, make reports to the shareholders and directors,
and perform all such other duties as are incident to his office of
which may properly be required of him by the Board of Directors.
Section 4. Chief Operating Officer. The Chief Operating Officer
shall give counsel and advice as may be deemed essential for the best
interest of the Corporation. He shall effect active supervision over
the operations of the business. He shall perform all other duties as
may be assigned to him by the Board of Directors or Chief Executive
Officer.
Section 5. Chief Financial Officer. The Chief Financial Officer
shall give counsel and advice as may be deemed essential for the best
interest of the Corporation. He shall be responsible for the fair
presentation of financial statements of the Corporation. He shall
supervise the controllers of the subsidiary corporations. He shall
perform all other duties as may be assigned to him by the Board of
Directors or Chief Executive Officer.
Section 6. Vice Presidents. Each Vice President shall perform
such duties as may be assigned to him by the Board of Directors.
Section 7. Secretary. The Secretary shall give, or cause to be
given, notice of all meetings of shareholders and the Board of
Directors, and all other notices required by law or by these Bylaws,
or by the Board of Directors. He shall record the proceedings of the
meetings of the shareholders and the Board of Directors in a book to
be kept for that purpose, and shall perform such other duties as may
be assigned to him by the Board of Directors, President or Chief
Executive Officer. He shall sign the stock certificates of the
Corporation, and shall keep a current register of the names and
addresses of the shareholders. He shall be the custodian of the
corporate seal, the stock certificate book, minute book and all other
records of the Corporation, other than those hereinafter delegated to
the care and custody of the Treasurer, and shall affix and attest the
corporate seal to any certificate or writing of the Corporation
requiring the same. The Secretary may, but shall not be required to,
guarantee the signatures of endorsers of the Corporation's stock
pursuant to Va. Code Section 8.8-312(1) (Supp. 1989), as amended.
Section 8. Assistant Secretary. The Assistant Secretary shall
be vested with all of the powers and perform all of the duties of the
Secretary in the absence of the Secretary. He shall also perform
such other duties as may be prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall have the custody of,
and be responsible for, the funds and securities of the Corporation.
He shall receive and give, or cause to be given, receipts and
acquittances for monies paid to the Corporation, pay out funds of the
Corporation,
7
and keep full and accurate records and books of account showing his
transactions, which records and books of account he shall exhibit to
any shareholder or director upon request therefor. He shall also
perform such other duties as may be required of him by the Board of
Directors.
ARTICLE VIII
Capital Stock
Section 1. Issue of Certificates of Stock. The Corporation
shall cause to be issued to each shareholder one or more certificates
under the seal or its facsimile of the Corporation, signed by the
President, Chairman of the Board, Chief Executive Officer, Chief
Operating Officer, Vice Chairman of the Board or Executive Vice
President and Secretary or Assistant Secretary, which signatures may
be by facsimile, certifying the number of shares owned by the
shareholders. All references in these Bylaws to an officer's
signature of the Corporation's stock certificates shall be deemed to
permit signature by facsimile.
Section 2. Transfer of Shares. The shares of the Corporation
shall be transferable only on its books. Transfers of stock shall be
madupon the corporate records only when an old or previously issued
certificate shall have been surrendered for cancellation, whereupon it
shall be marked CANCELLED by the Secretary, with the date of such
cancellation, before a new certificate is issued therefor.
Section 3. Distributions. To the extent consistent with the
Corporation's Articles of Incorporation and these Bylaws, the
provisions of Title 13.1, Chapter 9, Article VII of the Code of
Virginia of 1950, as amended, shall apply to any distributions with
respect to the Corporation's shares, as well as any other matters
respecting such shares.
Section 4. Lost Certificates. In case any certificate for the
capital stock of the Corporation shall be lost, stolen or destroyed,
the Corporation may require such proof of the fact, such indemnity to
be given to it and to its Transfer Agent and Registrar, and payment of
reasonable fees incurred, as shall be deemed necessary or advisable by
it.
Section 5. Holder of Record. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the
holder thereof in fact and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of
any other person, whether or not it shall have express or other notice
thereof, except as otherwise expressly provided by law.
Section 6. Closing of Books. The Board of Directors may fix in
advance a date, not exceeding seventy (70) days preceding the date of
any meeting of the shareholders, or the date for payment of any
dividend or the date for allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into
effect, as a record date for the determination of the shareholders
entitled to notice of and to vote at any such meeting, or entitled to
receive payment of any such dividends, or any such allotment of
rights, or to exercise the rights in respect to any such change,
conversion or exchange of capital stock, and in such case only
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shareholders of record on the dates so fixed shall be entitled to such
notice of and to vote at such meeting, or to receive payment of such
dividend or allotment of rights, or exercise such rights, as the case
may be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as herein provided.
ARTICLE IX
Limitation of Liability and Indemnification
Section 1. Limitation or Elimination of Liability. To the full
extent that the Virginia Stock Corporation Act, as it exists on the
date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors or officers, a director or
officer of the Corporation shall not be liable to the Corporation or
its shareholders for any monetary damages in excess of one dollar.
Section 2. Indemnification. The Corporation shall indemnify a
director or officer of the Corporation who is or was a party to any
proceeding by reason of the fact that he is or was such a director or
officer or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against all liabilities and expenses incurred in
the proceeding except such liabilities and expenses as are incurred
because of his willful misconduct or knowing violation of the criminal
law.
Section 3. Determination to Indemnify. Subject to the
provisions of Section 7 of this Article, a determination to indemnify
a director or officer under Section 2 of this Article shall be made,
in the first instance, by a majority vote of a quorum of the Board of
Directors, such quorum consisting of disinterested directors. If a
quorum of disinterested directors cannot be obtained, then the
determination shall be made by majority vote of a committee designated
by the Board of Directors (in which designation interested directors
may participate), the committee to consist solely of two or more
disinterested directors. If such a committee cannot be designated,
the determination shall be made by special legal counsel selected by a
majority vote of a quorum consisting of disinterested directors, or,
if the same cannot be obtained, by the committee described above. If
neither a quorum consisting of disinterested directors or the
committee described above can be obtained, the selection of special
legal counsel shall be made by majority vote of the Board of Directors
(in which selection interested directors may participate).
Notwithstanding any other provision of this Article, in any instance,
the determination to indemnify a director or officer may be made by
vote of the shareholders, except that any shares owned, or voted under
the control of, directors or officers who are parties to the
proceeding may not be voted.
Section 4. Advances and Reimbursements of Expenses. Once a
determination to indemnify has been made pursuant to the provisions
of Section 3 of this Article, the Corporation shall make advances for
expenses of, and reimbursements for expenses incurred by, any director
or officer in any proceeding described in Section 2 of this Article,
upon receipt of an undertaking from the director or officer to repay
the same if it is ultimately determined that he is not entitled
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to indemnification. Such undertaking shall be an unlimited,
unsecured general obligation of the director or officer and shall be
accepted without reference to his ability to make repayment. The
director or officer also shall furnish the Corporation with a written
statement of his good faith belief that he has met the standard of
conduct described in Va. Code Section 13.1-697, as amended.
Section 5. Indemnification of Agents and Employees. The Board
of Directors may cause the Corporation to indemnify and make advances
and reimbursements to any person not specified in Section 2 of this
Article who was or is a party to any proceeding by reason of the fact
that he is or was an employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, to the same extent as if such person were specified as one
to whom indemnification is granted in Section 2. The provisions of
Section 2 through 4 of this Article shall be applicable to any
indemnification, determination, advancements and reimbursements
provided pursuant to this Section.
Section 6. Indemnification Insurance. The Corporation may
purchase and maintain insurance to indemnify it against the whole or
any portion of the liability assumed by it in accordance with this
Article, and also may procure insurance in such amounts as the Board
of Directors may determine on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director officer,
partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, against liability asserted against or incurred by any such
person in any such capacity or arising from his status as such,
whether or not the Corporation would have power to indemnify him
against such liability under the provisions of this Article.
Section 7. Changes in the Board Composition. In the event there
has been a change in the composition of a majority of the Board of
Directors after the date of the alleged act or omission with respect
to which indemnification is claimed, any determination as to
indemnification, advancement or reimbursement of expenses with respect
to any claim for indemnification made pursuant to Sections 2 or 5 of
this Article shall be made by special legal counsel agreed upon by the
Board of Directors and the proposed indemnitee. If the Board of
Directors and the proposed indemnitee are unable to agree upon such
special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominee shall select
such special legal counsel.
Section 8. Applicability of this Article. The provisions of
this Article shall be applicable to all actions, claims, suits or
proceedings commenced after the adoption hereof, whether arising from
any action taken or failure to act before or after such adoption. No
amendment, modification or repeals of this Article shall diminish the
rights provided hereby or diminish the right to indemnification with
respect to any claim, issue or matter in any then pending or
subsequent proceeding that is based in any material respect on any
alleged action or failure to act prior to such amendment, modification
or repeal. Reference herein to directors, officers,
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employees or agents shall include former directors, officers,
employees and agents and their respective heirs, executors and
administrators.
ARTICLE X
Redemption Rights
To the full extent permitted by the Control Share Acquisition
Act, Article 14.1 of Title 13.1 of the Code of Virginia of 1950, as
amended, the Corporation is authorized to redeem shares acquired in a
control share acquisition, as that term is defined under the Control
Share Acquisition Act.
ARTICLE XI
Fiscal Year
The Board of Directors shall have power to fix, and, from time to
time, change, the fiscal year of the Corporation. Unless otherwise
fixed by the Board, the fiscal year shall end on the Saturday closest
to June 30th.
ARTICLE XII
Amendments
These Bylaws may be amended, in whole or in part, by a two-thirds
(2/3) vote of the Board of Directors, or by the holders of two-thirds
(2/3) of all shares entitled to vote by each voting group of the
shareholders of the Corporation, at any meeting of the Board of
Directors or of the shareholders, as the case may be, except that the
shareholder vote for Bylaw amendments that have been recommended to
the shareholders by a two-thirds (2/3) vote of the Board of Directors
shall require only a majority of all votes entitled to be cast by each
voting group. Bylaws made or amended by the Board of Directors may be
altered or repealed by the shareholders, but shall remain in effect
unless and until such action be taken by the shareholders.
ARTICLE XIII
Implied Amendments
Any action taken or authorized by the shareholders or by the
Board of Directors which would be inconsistent with the Bylaws then in
effect, but which is taken or authorized by the affirmative vote of
not less than that number of shares or the number of directors that
would be required to amend these Bylaws so that the Bylaws would be
consistent with such action, shall be given the same effect as if
these Bylaws had been temporarily amended or suspended to the extent
necessary to permit the specific action so taken or authorized.
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Exhibit 4.3
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
dated as of October 16, 1992
WHEREAS, WLR Foods, Inc. and the undersigned Purchasers entered
into a Note Agreement dated as of May 1, 1991;
WHEREAS, WLR Foods, Inc. and the undersigned Purchasers desire to
amend the Note Agreement as set forth herein.
NOW, THEREFORE, WLR Foods, Inc. and the undersigned Purchasers
agree as follows:
1. Section 5.11 of the Note Agreement is hereby amended by
deleting the last paragraph of said section and replacing
with the following
The Company will not declare any dividend which constitutes
a Restricted Payment payable more than 90 days after its
date of declaration. Notwithstanding the foregoing, the
Company may not and will not declare any dividend on
preferred stock which constitutes a Restricted Payment
payable more than 180 days after its date of declaration.
2. All other terms and conditions of the Note Agreement shall
remain the same.
3. This Amendment shall be effective upon the execution of this
Agreement by the Company and the holders of 66-2/3% in
aggregate principal amount of the Notes outstanding.
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have caused
this Agreement to be executed and delivered by their respective
officer or officers thereunto duly authorized.
WLR Foods, Inc. MIMLIC FUNDING, INC.
By: /s/ Delbert L. Seitz By: MIMLIC Asset
Management Company
Title: Treasurer
By: /s/ Alan Notvik
THE MINNESOTA MUTUAL LIFE Title: Alan Notvik,
INSURANCE COMPANY Second Vice President
By: /s/ Alan Notvik NATIONWIDE LIFE INSURANCE
Title: Alan Notvik, Second Vice President COMPANY
THE RELIABLE LIFE INSURANCE By: /s/ Jeffrey G. Mulburn
COMPANY Title: Vice President
By: MIMLIC Asset Management Company EMPLOYERS LIFE INSURANCE
COMPANY OF WAUSAU
By: /s/ Alan Notvik
Title: Alan Notvik, Second Vice President By: /s/ Jeffrey G. Mulburn
Title: Vice President
MUTUAL TRUST LIFE INSURANCE COMPANY
By: MIMLIC Asset Management Company
By: /s/ Alan Notvik STAUNTON FARM CREDIT, ACA
Title: Alan Notvik, Second Vice President
By: /s/ Richard E. Reeves
FEDERATED LIFE INSURANCE COMPANY Title: President
By: MIMLIC Asset Management Company
By: /s/ Alan Notvik
Title: Alan Notvik, Second Vice President
TEXAS LIFE INSURANCE COMPANY
By: MIMLIC Asset Management Company
By: /s/ Alan Notvik
Title: Alan Notvik, Second Vice President
<PAGE>
Exhibit 4.4
AGREEMENT TO FURNISH COPY OF
SECOND AMENDMENT TO NOTE AGREEMENT
DATED SEPTEMBER 27, 1995
Pursuant to Item 601(B)(4)(3)(A) of Regulation S-K, the Company hereby
agrees to furnish to the Securities and Exchange Commission, upon
request, a copy of the Second Amendment, dated June 1, 1995, to the
Note Agreement dated May 1, 1991 with Minnesota Mutual Life Insurance
Company, Inc.
WLR FOODS, INC.
By:_/s/ Delbert L Seitz_____________________
Delbert L. Seitz, Chief Financial Officer
<PAGE>
Exhibit 4.8
AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT TO CREDIT AGREEMENT, made and entered into as of
the first day of July, 1995, by and among WLR FOODS, INC. (the
"Borrower"), WAMPLER-LONGACRE, INC., CASSCO ICE & COLD STORAGE, INC.,
FIRST UNION NATIONAL BANK OF VIRGINIA, as Agent, and FIRST UNION
NATIONAL BANK OF VIRGINIA, CORESTATES BANK, N.A., also doing business
as Philadelphia National Bank, HARRIS TRUST AND SAVINGS BANK and
CRESTAR BANK (collectively, the "Lenders");
WITNESSETH:
WHEREAS, the parties hereto have previously entered into a Credit
Agreement dated as of March 1, 1995 (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as herein
provided;
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants herein
contained, the parties agree that the Agreement is hereby amended as
follows:
1. In the first sentence of Section 2.3(c) of the Agreement,
the language "one (1) Business Day's" is changed to read
"Contemporaneous".
2. In Schedule 10.1(d) to the Agreement, "$16,000,000" is
changed to read "$22,000,000".
As consideration for the Lender's execution and delivery of this
Amendment, the Borrower shall pay each Lender the sum of $5.00 in
cash.
This Amendment may be executed in any number of counterparts,
each of which shall be an original and all of which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on their behalf by their officers duly authorized, all as of
the date first above written.
WLR FOODS, INC.
By: /s/ Delbert L. Seitz
Its: Secretary
<PAGE>
WAMPLER-LONGACRE, INC.
By: /s/ Delbert L. Seitz
Its: Secretary
CASSCO ICE & COLD STORAGE, INC.
By: /s/ Delbert L. Seitz
Its: Secretary
FIRST UNION NATIONAL BANK OF
VIRGINIA, as Agent and Lender
By: /s/ Stewart H. Manley
Its: SVP
CORESTATES BANK, N.A., also doing
business as Philadelphia National Bank
By: /s/ Christina S. Pietrangelo
Its: Commercial Officer
HARRIS TRUST AND SAVINGS BANK
By: /s/ Carl A. Blackham
Its: Vice President
CRESTAR BANK
By: /s/ Martha D. Shifflett
Its: Vice President
<PAGE>
Exhibit 4.9
AGREEMENT TO FURNISH COPY OF NOTE AGREEMENT
DATED SEPTEMBER 27, 1995
Pursuant to Item 601(B)(4)(3)(A) of Regulation S-K, the Company hereby
agrees to furnish to the Securities and Exchange Commission, upon
request, a copy of the Note Agreement dated June 1, 1995 for the
issuance of $22 million of 7.47% Senior Notes, Series B due June 1,
2007.
WLR FOODS, INC.
By:_/s/ Delbert L. Seitz_________________
Delbert L. Seitz, Chief Financial Officer
<PAGE>
Exhibit 13.1
Financial Highlights from Registrant's Annual Report to Shareholders
<TABLE>
WLR FOODS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS
Dollars in thousands, except per share data
<CAPTION>
July 1, July 2, July 3, June 27,
Fiscal year ended: 1995 1994 1993 1992
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATIONS
Net sales $908,776 $727,270 $616,702 $514,465
Cost of sales 785,085 632,620 535,014 454,331
-------- -------- -------- --------
Gross profit 123,691 94,650 81,688 60,134
Selling, general and administrative expenses 91,420 63,606 55,732 48,191
-------- -------- -------- --------
Operating income 32,271 31,044 25,956 11,943
Interest expense 6,666 4,989 3,816 2,755
Other (income) expense net (332) (431) (567) (251)
--------- -------- -------- --------
Total other 6,334 4,558 3,249 2,504
Earnings before income taxes and minority interest 25,937 26,486 22,707 9,439
Income tax expense 9,749 9,897 8,057 3,518
Minority interest 55 38 43 25
-------- --------- -------- --------
Net earnings before cumulative effect of change
in accounting 16,133 16,551 14,607 5,896
Cumulative effect on prior years of change in
accounting - - - -
-------- -------- -------- --------
Net earnings 16,133 16,551 14,607 5,896
Less preferred stock dividends - - 1,389 982
-------- -------- -------- --------
Net earnings available to common shareholders $16,133 $16,551 $13,218 $4,914
======= ======= ======= ======
PER COMMON SHARE
Net earnings before cumulative effect of change
in accounting $0.90 $1.01 $0.95 $0.35
Cumulative effect on prior years of change in
accounting - - - -
-------- -------- -------- --------
Net earnings per share (primary) $0.90 $1.01 $0.95 $0.35
Net earnings per share (fully diluted) $0.90 $1.01 $0.93 $0.35
Dividends declared (excluding Cassco pooling) 0.22 0.21 0.21 0.21
Book value 10.47 9.45 8.66 6.44
Year-end stock price 14.38 17.00 11.33 9.67
</TABLE>
1
<PAGE>
<TABLE>
WLR FOODS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS-Continued
Dollars in thousands, except per share data
<CAPTION>
July 1, July 2, July 3, June 27,
Fiscal year ended: 1995 1994 1993 1992
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common shares outstanding (in thousands):
Average for the year 17,859 16,451 15,666<F1>14,277
At year end 17,298 16,514 16,427 12,719
======== ======= ======= =======
FINANCIAL POSITION AT END OF YEAR
Working capital $120,563 $69,989 $57,509 $40,337
Property, plant and equipment, net 174,163 139,854 140,540 113,017
Total assets 372,525 283,051 265,626 207,736
Long-term debt 106,481 46,368 52,253 38,148
Common stock subject to repurchase 17,750 - - -
Preferred shareholders' equity * - - - 29,507
Common shareholders' equity 163,344 156,157 142,255 81,881
======= ======= ======= =======
ANALYTICAL & OTHER INFORMATION
Current ratio (compared to 1) 2.67 2.02 1.92 1.80
Total debt/total capitalization 44.7% 28.4% 33.5% 32.0%
Return on beginning total equity 10.3% 11.6% 13.1% 5.1%
Capital expenditures $17,251 $19,186 $31,766 $36,107
Depreciation expense 24,817 21,333 18,115 14,041
Amortization expense 598 520 445 168
Interest expense 6,666 4,989 3,816 2,755
Dividends declared: Common stock 4,073 3,513 3,124 2,854
Preferred stock - - 1,389 982
Market capitalization of common stock at year end 248,654 280,738 186,168 122,942
======= ======= ======= =======
All information reflects the three-for two stock split in the form of a 50% stock
dividend declared on February 28, 1995.
* In March 1993, the Company repurchased all the preferred stock issued in January 1992.
<FN>
<F1> Fully diluted shares
</TABLE>
2
<PAGE>
<TABLE>
WLR FOODS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS-Continued
Dollars in thousands, except per share data
June 29, June 30, July 1, July 2,
Fiscal year ended: 1991 1990 1989 1988
--------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATIONS
Net sales $502,238 $494,156 $465,951 $381,363
Cost of sales 434,509 415,803 391,640 335,855
-------- -------- -------- --------
Gross profit 67,729 78,353 74,311 45,508
Selling, general and administrative expenses 50,019 49,595 44,566 37,420
-------- -------- -------- --------
Operating income 17,710 28,758 29,745 8,088
Interest expense 928 925 2,037 1,536
Other (income) expense, net (453) (491) 166 (184)
-------- -------- -------- --------
Total other 475 434 2,203 1,352
Earnings before income taxes and minority interest 17,235 28,324 27,542 6,736
Income tax expense 6,521 10,895 10,520 2,952
Minority interest 33 34 (206) 60
-------- -------- -------- --------
Net earnings before cumulative effect of
change in accounting 10,681 17,395 17,228 3,724
Cumulative effect on prior years of change in
accounting - - - 1,112
-------- -------- -------- --------
Net earnings 10,681 17,395 17,228 4,836
Less preferred stock dividends - - - -
-------- -------- -------- --------
Net earnings available to common shareholders $10,681 $17,395 $17,228 $4,836
======== ======== ======== ========
PER COMMON SHARE
Net earnings before cumulative effect of
change in accounting $0.68 $1.11 $1.11 $0.24
Cumulative effect on prior years of change in
accounting - - - $0.07
-------- --------- -------- --------
Net earnings per share (primary) $0.68 $1.11 $1.11 $0.31
Net earnings per share (fully diluted) $0.68 $1.11 $1.11 $0.31
Dividends declared (excluding Cassco pooling) 0.21 0.19 0.18 0.21
</TABLE>
3
<PAGE>
<TABLE>
WLR FOODS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS-Continued
<CAPTION>
June 29, June 30, July 1, July 2,
Fiscal year ended: 1991 1990 1989 1988
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Book value 7.33 6.86 5.86 4.95
Year-end stock price 12.00 12.33 11.87 5.63
Common shares outstanding (in thousands):
Average for the year 15,782 15,645 15,600 15,600
At year end 15,782 15,782 15,600 15,600
======= ======= ======= =======
FINANCIAL POSITION AT END OF YEAR
Working capital $49,532 $46,039 $42,914 $35,169
Property, plant and equipment, net 88,807 71,414 59,687 53,524
Total assets 175,329 157,763 142,832 124,810
Long-term debt 18,678 6,402 7,858 8,995
Common Stock subject to repurchase - - - -
Preferred shareholders' equity * - - - -
Common shareholders' equity 115,625 108,258 91,455 77,181
======= ======= ======= =======
ANALYTICAL & OTHER INFORMATION
Current ratio (compared to 1) 2.42 2.20 2.12 2.03
Total debt/total capitalization 16.1% 8.5% 13.9% 16.0%
Return on beginning total equity 9.9% 19.0% 22.3% 6.6%
Capital expenditures $29,471 $20,360 $16,001 $8,163
Depreciation expense 11,544 9,932 8,595 7,057
Amortization expense - - - -
Interest expense 928 925 2,037 1,536
Dividends declared: Common stock 3,314 2,948 2,643 2,503
Preferred stock - - - -
Market capitalization of common stock at year end 189,378 194,638 185,432 87,880
======= ======= ======= =======
All information reflects the three-for two stock split in the form of a 50% stock dividend
declared on February 28, 1995.
* In March 1993, the Company repurchased all the preferred stock issued in
January 1992.
</TABLE>
4
<PAGE>
Exhibit 13.2
Management's Discussion and Analysis from Annual Report to Shareholders
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL INFORMATION
WLR Foods, Inc. posted record sales for the seventh consecutive year.
The Company experienced significant changes during fiscal 1995, a
result of the August 1994 acquisition of the Cuddy Farms, Inc. - USA
Food Division (Carolina Division) in North Carolina. The acquisition
moved WLR Foods to the second largest turkey processor in the nation,
and increased the Company's presence in foodservice.
The Company continued to oppose the Tyson Foods, Inc. hostile takeover
attempt through the year, although expenses have been minimal since
January 1995. At the current level of activity, management does not
anticipate the continuing costs to have a material impact on operations
in fiscal 1996. The United States Court of Appeals for the Fourth Circuit,
upheld the lower court ruling in favor of WLR Foods on September 22, 1995.
During fiscal 1995, WLR Foods expanded and renegotiated its line of
credit with several banks. The new facility is a $110 million
revolving line of credit, of which $15 million is available for
standby letters of credit. The terms of the revolver led to the
renegotiation of the financial covenants on the existing long-term
fixed rate debt. Additionally, two new debt facilities were placed
during the year: a $25 million, variable rate, seven-year term loan to
finance the Carolina acquisition and a $22 million, 12-year, fixed
rate term loan which replaced the variable rate term loan placed in
1991. This refinancing allows for greater operating flexibility for
the future.
Fiscal 1995 was a year of changes in the capital stock for WLR
Foods. The Board of Directors announced a $20 million stock repurchase
plan in February and in June authorized an additional $10 million to
be repurchased. As of September 10, 1995, 1.16 million shares of
stock have been repurchased at a cost of $17.7 million. Management
expects to continue the repurchase plan during fiscal 1996. The Board
also declared a three-for-two stock split, and a 12.5% increase in the
regular quarterly dividend. The current annual dividend is $0.24 per
share, based on the split-effected shares.
1
<PAGE>
<TABLE>
For the periods indicated, this table sets forth selected information from
WLR Foods Consolidated Statements of Earnings:
<CAPTION>
Operations as a Percentage of Net Sales Fiscal Year
--------------------------------------------
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 86.4 87.0 86.8
------ ------ ------
Gross profit margin 13.6 13.0 13.2
Selling, general and administrative expenses 10.1 8.7 9.0
------ ------ ------
Operating profit margin 3.5 4.3 4.2
Interest expense 0.7 0.7 0.6
Other income, net (0.1) (0.1) (0.1)
------ ------ ------
Earnings before income taxes and
minority interest 2.9 3.7 3.7
Income tax expense and minority interest 1.1 1.4 1.3
------ ------ ------
Net earnings margin 1.8% 2.3% 2.4%
====== ===== ======
</TABLE>
<TABLE>
The next table shows changes in the components of operating results over the past three fiscal years.
<CAPTION>
Changes In Results of Operations Fiscal Year Fiscal Year
1995 vs. 1994 1994 vs. 1993
Increase % Increase %
In millions, except per share data (Decrease) Change (Decrease) Change
------------ ------------ ---------- --------
<S> <C> <C> <C> <C>
Net sales $181.5 25.0% $110.6 17.9%
Cost of sales 152.5 24.1 97.6 18.2
------ ----- ------ ------
Gross profit 29.0 30.7 13.0 15.9
Selling, general and administrative expenses 29.6 48.9 4.8 8.6
Hostile takeover defense costs (1.8) (58.1) 3.1 -
------ ----- ------ ------
Operating profit 1.2 4.0 5.1 19.6
Interest expense 1.7 33.6 1.2 30.7
Other income, net - - (0.1) (24.0)
------ ----- ------ ------
Earnings before income taxes
and minority interest (0.5) (2.1) 3.8 16.6
Income tax expense and minority interest (0.1) (1.3) 1.9 22.7
------ ----- ------ ------
Net earnings (0.4) (2.5) 1.9 13.3
Preferred Dividends - - (1.4) (100.0)
------ ----- ------ ------
Earnings available to common shareholders $(0.4) (2.5)% $3.3 25.2%
===== ===== ====== ======
Earnings per share ($0.11) (10.9%) $0.06 6.3%
====== ====== ====== ======
</TABLE>
2
<PAGE>
RESULTS OF OPERATIONS
Fiscal 1995 Compared to Fiscal 1994
Sales increased 25% to $908.8 million in fiscal 1995, primarily the result of
the acquisition of the Carolina Division in late August 1994. Sales pounds
increased 18%, comprised of a 2% increase in chicken pounds sold, and a 40%
increase in turkey and further processed pounds sold. Average quoted
commodity prices for whole chickens and turkeys were down 8% and 1%,
respectively, compared to fiscal 1994 average prices, resulting from abundant
supplies of not only poultry but of competing meats. As export demand for
dark turkey meat dropped due to the devaluation of the Mexican peso, prices
for dark turkey meat decreased to low levels, averaging 25% lower than the
fourth quarter of fiscal 1994. In the new fiscal year, an increase in export
demand for dark turkey products is moving prices upward. Domestic demand
for whole turkeys and further processed white meat products has also increased
these commodity prices since fiscal year end.
Cost of sales increased 24%, primarily due to higher volumes sold somewhat
offset by lower average grain costs. Corn prices were down 10% and soybean
meal was 16% lower than in fiscal 1994. Corn prices have moved somewhat
higher since year end, and management anticipates the average price of corn
to be above the fiscal 1995 average. Soybean meal prices have remained stable
through the last six months, but due to weather patterns in the Midwest,
prices have moved higher since fiscal year end. Currently, WLR Foods does
not have any commitments to purchase corn or soybean meal in the future.
Overall, management anticipates corn and soybean meal costs to be in the
range of the five year average cost of both commodity grain inputs.
Operating costs remained steady, with efficiency improvements offsetting
increases in labor and packaging costs.
Disease is always a risk of raising poultry. This summer, the poultry
industry, and the Company experienced live production losses due to heat
and disease. WLR Foods most notable losses occurred in the Carolina Division
from spiking mortality of turkeys. This disease affects young turkeys during
periods of high temperatures. The impact of this situation is two-fold:
reduced numbers of live birds available for slaughter and the failure of
surviving birds to mature as uniformly as healthy flocks, thereby increasing
processing costs. Management has taken several approaches to combat the
disease with positive initial results. Extensive research supported by WLR
Foods and the industry is underway in an attempt to isolate the cause.
Gross profit margin improved as a result of lower grain prices and increased
sales of value-added products. This trend reversed in the fourth quarter as
prices dropped for dark turkey meat products and as grain prices increased.
Since fiscal year end, average quoted prices for whole turkeys and breastmeat
have increased seasonally and are expected to remain in a more normal range
through the end of calendar 1995.
Total selling, general and administrative expenses rose 43.7% because of a
significant increase in volumes sold. Selling, marketing, advertising and
delivery costs were due to the acquisition of the Carolina Division and
higher volumes sold. Higher sales volumes of further processed and foodservice
products also resulted in increased selling, marketing and advertising
expenses. Administrative costs increased only 6% over the prior year.
Fiscal 1995 includes $1.3 million in defense costs for the hostile takeover
attempt of the Company by Tyson Foods compared to $3.1 million in fiscal 1994.
3
<PAGE>
WLR Foods other expenses increased due to increases in the amounts borrowed
along with higher interest rates on the variable rate loans. Additional funds
were borrowed to finance two acquisitions, and an additional $16.3 million was
used to repurchase 1.06 million shares of the Company's common stock in fiscal
1995. The effective tax rate was 37.6%, compared to 37.4% for fiscal 1994.
Fiscal 1994 compared to Fiscal 1993.
Net sales for fiscal 1994 increased 18% over the previous year. Sales volumes
were up 15%, the result of a 14% increase in chicken pounds sold and a 19%
increase in turkey sales due to internal growth and the New Oxford acquisition.
Cassco Ice & Cold Storage's revenues rose 34% in fiscal 1994, reflecting a
full year of revenues from operations acquired in fiscal 1993. Average quoted
commodity prices were up 5% for chickens and 6% for turkeys over the previous
year. This trend continued the fiscal 1993 price movement.
Cost of sales increased 18% in fiscal 1994 with higher sales volumes and
higher feed costs. These costs reduced the gross margin to 13%. Feed costs
were up $16 million compared to fiscal 1993. Operating efficiencies continued
to improve over previous years, as higher volumes of product were processed.
Selling, general and administrative expenses were up 14% over fiscal 1993,
with nearly half, 6%, resulting from advisory fees for the hostile takeover
defense. Higher sales volumes increased delivery costs and selling expenses.
Although selling, general and administrative expenses were up in total
dollars, the percentage of net sales for these expenses fell from 9% to 8.7%.
The Company's interest expense increased in fiscal 1994 due to higher interest
rates and increased borrowings.
The effective tax rate increased from 35.5% to 37.4% as a result of lower
tax credits available to WLR Foods.
LIQUIDITY AND FINANCIAL CONDITION
The Company's working capital position improved in fiscal 1995. At year end,
working capital was $120.6 million, up from $70.0 million last year. The
increase was the result of the $110 million revolving credit facility
established in March 1995. The revolving credit facility allows WLR Foods
to borrow funds for general corporate purposes, with no repayments until
the facility matures in 1998. The change in terms on the bank facility
allowed WLR Foods to reclassify nearly all of the revolver borrowing as
long-term financing for statement purposes. Working capital changes,
in addition to the acquired businesses and refinancing were due to changes
in operating accounts of $10 million, primarily made up of increased finished
goods inventories. Since fiscal year end, finished goods inventories have
been sold down to prior year post-acquisition levels. WLR Foods current
ratio improved to 2.7-to-1 compared to 2.0-to-1 for last year. Management
anticipates the current ratio to remain strong over the next two years as
a result of the debt restructuring during fiscal 1995.
The Company refinanced two variable rate term loans, extending the scheduled
repayments into the future. The refinancing revised the financial covenants
reflecting the financial strength of WLR Foods. The revised covenants will
allow the Company more operating flexibility for the
4
<PAGE>
future. One of the loans was expanded to $22 million and fixed at a rate of
7.47% for 12 years. The second remains a variable rate note, with pricing at
one quarter of a percent lower than the facility it replaced.
As of July 1, 1995, total debt-to-total capitalization was 44.7%, up from
28.4% a year ago. The increase is the result of borrowing used for the
Carolina Division acquisition, and the repurchase of WLR Foods stock. The
common stock subject to repurchase is classified as debt for the total
debt-to-total capital calculation. Management expects this percentage to
fluctuate based on usage of the revolving line of credit, but anticipates
levels remaining below 50%.
Book value per share of common stock was $10.47 compared to $9.45 last year,
both of which reflect the three-for-two stock split. The book value per share
calculation includes as equity the $17.8 million common stock subject to
repurchase. This approach assumes the shares outstanding will become
non-contingent shares at the termination of the put-agreement in 1998 which
was part of the original purchase agreement for the Carolina Division. The
net increase in book value reflects $16.1 million in earnings and $29.1
million of additional shares issued (including stock issued for acquisitions),
less $4.1 million of dividends paid and $16.3 million to repurchase shares.
The regular quarterly dividend was increased by 12.5% to six cents per share
during the year.
CAPITAL RESOURCES
WLR Foods spent $17.3 million on capital improvements in fiscal 1995. These
include $1.8 million expended on the expansion of the Moorefield plant to add
a portion control chicken product line for foodservice customers, $1.4 million
on the completion of the Monroe turkey plant expansion, and the balance on
normal replacement and upgrades of equipment and facilities. For fiscal 1996
capital expenditures are budgeted at $30 million. Approximately $23 million
is budgeted for normal replacements and upgrades. The remainder is available
for longer term projects: renovations to the Marshville processing plant to
increase capacity and efficiency, and building an ice manufacturing facility
and installing equipment in Richmond, Virginia. The Marshville project will
be operational this fall with anticipated contributions realized for the
second half of fiscal 1996. The Richmond ice facility should be operational
by fiscal year end with contributions not realized until fiscal 1997.
Depreciation expense for the year was $24.8 million with an additional $0.6
million of amortization. For fiscal 1996, depreciation and amortization is
forecast at $25 million. Management anticipates the cash generated from
operations and the available revolving credit balance to be adequate to fund
capital spending, scheduled debt service and dividend needs for fiscal 1996,
with additional capital available to pursue acquisitions when opportunities
arise.
Management is not aware of any significant environmental, legal or accounting
issue or pronouncement that will materially impact the operations or financial
position of WLR Foods.
5
<PAGE>
Exhibit 13.3
Consolidated Financial Statements and
Notes to Consolidated Financial Statements
<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Earnings
<CAPTION>
Dollars in thousands, except per share data
Fiscal years ended July 1, 1995, July 2, 1994, and July 3, 1993 1995 1994 1993
- ---------------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Net sales (Note 11) $908,776 $727,270 $616,702
Cost of sales (Note 11) 785,085 632,620 535,014
-------- -------- --------
Gross profit 123,691 94,650 81,688
Selling, general and administrative expenses 91,420 63,606 55,732
-------- -------- --------
Operating income 32,271 31,044 25,956
Other expense:
Interest expense (Note 4) 6,666 4,989 3,816
Other income, net (332) (431) (567)
-------- -------- --------
Other expense, net 6,334 4,558 3,249
-------- -------- --------
Earnings before income taxes and minority interest 25,937 26,486 22,707
Income tax expense (Note 7) 9,749 9,897 8,057
Minority interest in net earnings of consolidated subsidiary 55 38 43
-------- -------- --------
Net Earnings 16,133 16,551 14,607
Less preferred stock dividends - - 1,389
-------- -------- --------
Net Earnings Available to Common Shareholders $16,133 $16,551 $13,218
======== ======== =======
Net Earnings Per Common Share (Primary) $0.90 $1.01 $0.95
======== ======== =======
Net Earnings Per Common Share (Fully diluted) $0.90 $1.01 $0.93
======== ======== =======
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
1
<PAGE>
<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
Dollars in thousands
July 1, 1995 and July 2, 1994 1995 1994
- --------------------------------------------------------- ----------- ---------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $706 $771
Accounts receivable, less allowance for doubtful
accounts of $613 and $360 63,194 52,305
Inventories (Note 3) 125,849 83,047
Other current assets 3,183 2,270
-------- --------
Total current assets 192,932 138,393
Investments 949 954
Property, plant and equipment, net (Note 4) 174,163 139,854
Other assets 4,481 3,850
-------- --------
Total Assets $372,525 $283,051
======== ========
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable to banks $ - $9,400
Current maturities of long-term debt (Note 5) 8,028 6,275
Excess checks over bank balances 3,948 8,511
Trade accounts payable 28,021 20,937
Accrued expenses 22,036 16,103
Deferred income taxes (Note 7) 9,299 6,297
Other current liabilities 1,038 881
-------- --------
Total current liabilities 72,370 68,404
Long-term debt, excluding current maturities (Note 5) 106,481 46,368
Deferred income taxes (Note 7) 8,730 9,813
Minority interest in consolidated subsidiary 527 475
Other liabilities and deferred credits 3,323 1,834
Commitments and other matters (Notes 6, 8, 10, 11 and 13)
Common stock subject
to repurchase (Notes 2 and 8) 17,750 -
2
<PAGE>
WLR Foods, Inc. and Subsidiaries
Consolidated Balance Sheets Continued
Shareholders' equity (Notes 8 and 9)
Common stock, no par value 56,782 61,416
Additional paid-in capital 3,014 3,253
Retained earnings 103,548 91,488
-------- --------
Total shareholders' equity 163,344 156,157
-------- --------
Total Liabilities and Shareholders' Equity $372,525 $283,051
======== ========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
Dollars and shares in thousands, except per share data
<CAPTION>
Additional
Preferred Stock Common Stock Paid-In Retained
Fiscal years ended July 1, 1995, July 2, 1994, Shares Amount Shares Amount Capital Earnings Total
and July 3, 1993
- ---------------------------------------------- ------ ------ --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 27, 1992 29.507 $29,507 12,719 $10,272 $3,253 $68,356 $111,388
Net earnings 14,607 14,607
Dividends declared:
Preferred dividends - $47.08 per share (1,389) (1,389)
Common dividends - $0.21 per share (3,124) (3,124)
Issuance of common stock for acquisition of
businesses (Note 2) 672 8,668 8,668
Issuance of common stock through public
offering 3,000 41,365 41,365
Repurchase of preferred stock (29.507) (29,507) (29,507)
Common stock issued under Stock Option Plan
including tax benefit of $167 27 130 130
Other common stock issued 9 117 117
-------- -------- ------ ------ ------ ------- -------
Balance at July 3, 1993 - - 16,427 60,552 3,253 78,450 142,255
Net earnings 16,551 16,551
Common stock dividends declared- $0.21 per share (3,513) (3,513)
Common stock issued under Stock Option Plan
including tax benefit of $423 60 450 450
Other common stock issued 27 414 414
------- -------- ----- ------- ------ ------ ------
Balance at July 2, 1994 - - 16,514 61,416 3,253 91,488 156,157
Net earnings 16,133 16,133
Common stock dividends declared-$0.22 per share (4,073) (4,073)
Issuance of common stock for acquisition of
businesses (Note 2) 1,775 10,650 10,650
Common stock issued under Stock Option Plan
including tax benefit of $182 29 173 173
Other common stock issued 38 563 563
Common stock repurchased (1,058) (16,020) (239) (16,259)
------ ------- ------- -------- ------- -------- --------
Balance at July 1, 1995 - - 17,298 $56,782 $3,014 $103,548 $163,344
====== ======= ====== ======= ======= ======== ========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Dollars in thousands
Fiscal years ended July 1, 1995, July 2, 1994, and July 3, 1993 1995 1994 1993
- ----------------------------------------------------------------- -------- -------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $16,133 $16,551 $14,607
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation 24,817 21,333 18,115
Gain on sales of property, plant and equipment (218) (12) (17)
Deferred income taxes 1,919 8,449 1,100
Other, net 498 520 445
Change in operating assets and liabilities net of acquired businesses:
(Increase) decrease in accounts receivable 4,069 (11,215) (2,380)
Increase in inventories (14,430) (6,319) (13,138)
(Increase) decrease in other current assets (878) (961) 601
Increase (decrease) in accounts payable (2,713) 2,486 509
Increase (decrease) in accrued expenses and other 3,500 (350) 99
------- ------- -------
Net cash provided by operating activities 32,697 30,482 19,941
Cash Flows From Investing Activities:
Additions to property, plant and equipment (17,251) (19,186) (31,766)
Acquisition of businesses (Note 2) (42,489) - (2,061)
Proceeds from sales of property, plant and equipment 1,505 140 132
(Additions to) proceeds from dispositions of other assets 302 (44) (1,199)
Minority interest in net earnings of consolidated subsidiary, net of dividends 52 34 39
------- ------- -------
Net cash used in investing activities (57,881) (19,056) (34,855)
Cash Flows From Financing Activities:
Net decrease in notes payable to banks (9,400) (3,500) (6,171)
Issuance of long-term debt 83,541 - 15,193
Principal payments on long-term debt (25,020) (6,489) (962)
Issuance of common stock 736 864 41,612
Repurchase of common stock (16,259) - -
Repurchase of preferred stock - - (29,507)
Increase (decrease) in excess checks over bank balances (4,563) 1,298 366
Dividends paid (3,916) (3,508) (5,298)
------- ------- -------
Net cash provided by (used in) financing activities 25,119 (11,335) 15,233
------- ------- -------
Increase (decrease) in cash and cash equivalents (65) 91 319
Cash and cash equivalents at beginning of fiscal year 771 680 361
------- ------- -------
Cash and cash equivalents at end of fiscal year $706 $771 $680
======= ======= =======
5
<PAGE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows Continued
Supplemental cash flow information:
Cash paid for:
Interest $6,555 $4,808 $4,237
Income taxes 8,418 2,039 7,958
====== ====== ======
</TABLE>
Non-cash financing activities:
In fiscal 1995: The Company issued 1,774,999 shares of WLR
Foods, Inc. common stock valued at
$28,400,000, including $17,750,000 common
stock subject to repurchase, in conjunction
with the acquisition of Cuddy Farms, Inc. -
USA Food Division. (Notes 2 and 8)
In fiscal 1993: The Company issued 176,694 shares of WLR
Foods, Inc. common stock valued at
$2,554,000 and $733,000 in notes payable
to purchase the assets of two ice
manufacturing and distribution companies.
(Note 2)
The Company issued 495,708 shares of WLR
Foods, Inc. common stock valued at
$6,114,000 and a five year promissory note
payable for $842,000 as consideration for
the acquisition of Round Hill Foods, Inc.
(Note 2)
See accompanying Notes to Consolidated Financial Statements.
6
<PAGE>
Notes to Consolidated Financial Statements
Fiscal Years 7/1/95, 7/2/94 and 7/2/93
WLR FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
Organization
WLR Foods, Inc. (the Company) is primarily engaged in fully integrated
turkey and chicken production, processing, further processing and
marketing. WLR Foods sells products through a variety of selected
national and international retail, foodservice and institutional
markets.
Fiscal year
The Company's fiscal year ends on the Saturday closest to June 30.
Fiscal years 1995, 1994 and 1993 ended on July 1, 1995, July 2, 1994
and July 3, 1993, respectively, and included 52 weeks in fiscal 1995
and fiscal 1994, and 53 weeks in fiscal 1993.
Principles of Consolidation and Presentation
The accompanying consolidated financial statements include the
accounts of WLR Foods and all of its wholly-owned and majority-owned
subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Inventories
Inventories of feed, grain, eggs, packaging supplies, processed
poultry and meat products are stated at the lower of cost or market as
determined by the first-in, first-out valuation method. Live poultry
and breeder flocks consist of poultry raised for slaughter and
breeders. Poultry raised for slaughter are stated at the lower of
average cost or market. Breeders are stated at average cost less
accumulated amortization. The costs of breeders are accumulated
during their development stage and then amortized into the cost of the
eggs produced over the egg production cycle of the breeders.
The Company has four methods of purchasing grain: cash purchasing,
forward pricing, grain options, and hedging with futures contracts.
Each purchasing method creates varying degrees of risk for WLR Foods.
During the fiscal years presented, the Company has used only cash
purchasing and forward pricing to buy its grain. As of July 1, 1995,
WLR Foods does not have any forward contractual agreements for the
purchase of grains.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the respective assets. The costs of maintenance and repairs
are charged to operations, while costs associated with renewals,
improvements and major replacements are capitalized.
Income Taxes
Effective July 4, 1993, WLR Foods adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
7
<PAGE>
consequences attributable to the differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry-
forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income for the years in
which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
The Company adopted SFAS 109 using the cumulative effect of a change
in accounting principle, although the adoption of the new statement
did not have a material effect on the consolidated statement of
earnings or the consolidated balance sheet.
Net Earnings Per Common Share
Net earnings per common share are based on the weighted average number
of common shares and common share equivalents outstanding during the
fiscal years (17,858,942 shares, 16,450,718 shares and 13,983,228
shares in 1995, 1994 and 1993, respectively). Net earnings are
reduced by the preferred stock dividend to arrive at the net earnings
available to common shareholders. Fully diluted earnings per share
assume the full conversion of the Series L Convertible Preferred Stock
during the period they were outstanding. Fully diluted earnings per
share were based on the fully diluted weighted average common shares
and common share equivalents of 15,666,522 for fiscal 1993.
Stock Split
On February 28, 1995, the Company declared a three-for-two stock split
effected in the form of a 50% stock dividend paid on May 12, 1995 to
shareholders of record on April 14, 1995. The split resulted in the
issuance of an additional 6.1 million shares of common stock. All
numbers of common shares and per share data have been restated to
reflect the stock split.
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined
by the Company using available market information. Except for debt
instruments (Note 5), the carrying amounts of all financial
instruments approximate their fair values due to their short
maturities.
Reclassifications
Certain 1994 and 1993 amounts have been reclassified to conform with
fiscal 1995 presentations.
2. BUSINESS ACQUISITIONS
Each transaction discussed below has been accounted for as a purchase,
and, accordingly, the consolidated financial statements included
herein include the net assets acquired at fair value and the results
of operations from the date of acquisition.
On April 3, 1995, the Company's wholly owned subsidiary, Cassco Ice &
Cold Storage, Inc., acquired the remaining 50% interest in a cold
storage and distribution facility in Marshville, North Carolina for
$2.3 million in cash. The business is a refrigerated distribution
center that operates as a public refrigerated warehouse, located on
approximately 15 acres. The Company acquired its initial 50% interest
in the facility as part of its purchase of Cuddy Farms, Inc.-USA Food
Division mentioned below.
8
<PAGE>
Dollars in thousands
- --------------------------------------- --------
Total assets acquired $ 5,881
Cash paid (including costs) 2,346)
--------
Total liabilities assumed $ 3,535
=======
On August 29, 1994, the Company acquired the turkey processing and
production assets of Cuddy Farms, Inc. for $39.1 million in cash and
1,774,999 shares of common stock valued at $28.4 million. The
transaction was recorded as follows:
Dollars in thousands
- -------------------------------------- --------
Accounts receivable $ 14,758
Inventories 28,372
Other current assets 30
Property, plant and equipment 36,289
Other assets 2,611
--------
Total assets acquired 82,060
Cash paid (including costs of $1,043) (40,143)
Issuance of common stock (10,650)
Common stock subject to repurchase (17,750)
--------
Total liabilities assumed $ 13,517
========
The following table shows the unaudited pro forma information as if
the transaction had been consummated at the beginning of the periods
presented. This pro forma information is not necessarily indicative of
the results which may have occurred if the transaction had been
consummated at the beginning of the periods presented.
Pro-forma Unaudited
Fiscal year ended
Dollars in thousands, except per share data July 1, 1995 July 2, 1994
- ------------------------------------------- ------------ ------------
Net sales $947,199 $939,464
Net earnings 14,774 13,713
Net earnings per common share $ 0.82 $ 0.75
In May 1993, the Company issued 176,694 shares of WLR Foods common
stock valued at $2.6 million, debt of $732,900 and cash of $806,000
for net assets of two ice manufacturing operations. In November 1992,
WLR Foods acquired Round Hill Foods, Inc. and affiliated companies for
495,708 shares of WLR Foods common stock valued at $6.1 million, $1
million in cash, $842,000 in notes and assumed $11 million in debt of
the acquired companies.
9
<PAGE>
3 INVENTORIES
A summary of inventories at July 1, 1995 and July 2, 1994 follows:
Dollars in thousands 1995 1994
- ------------------------------------- ----------- ---------
Live poultry and breeder flocks $54,487 $39,719
Processed poultry and meat products 41,262 22,969
Packaging supplies, parts and other 19,704 13,302
Feed, grain and eggs 10,396 7,057
-------- -------
Total inventories $125,849 $83,047
======== =======
4. PROPERTY, PLANT AND EQUIPMENT
WLR Foods investment in property, plant and equipment at July 1, 1995 and
July 2, 1994 was as follows:
Dollars in thousands 1995 1994
- ------------------------------- -------- --------
Land and improvements $20,361 $14,260
Buildings and improvements 109,368 82,514
Machinery and equipment 168,228 141,289
Transportation equipment 25,371 24,710
Construction in progress 3,236 6,000
-------- --------
326,564 268,773
Less accumulated depreciation 152,401 128,919
-------- --------
Property, plant and equipment, net $174,163 $139,854
======== ========
The Company capitalized interest costs with respect to certain major
construction projects of $146,000, $82,000 and $800,000 in fiscal years 1995,
1994 and 1993, respectively.
5. LONG-TERM DEBT AND BANK REVOLVING CREDIT
Long-term debt at July 1, 1995 and July 2, 1994 consisted of the following
obligations:
Dollars in thousands 1995 1994
- -------------------------------------- --------- ----------
Fixed Rate Notes:
9.41% Senior Unsecured Notes due 2001 $24,000 $27,000
7.47% Senior Unsecured Notes due 2007 22,000 -
10
<PAGE>
Variable Rate Notes:
Unsecured Bank Term Note due 2002 24,107 -
Unsecured Bank Revolving Credit due 1998 35,000 -
Unsecured Private Placement Notes due 2001 - 17,750
Other Notes:
Various notes with varying terms and rates 9,402 7,893
------- -------
Total long-term debt 114,509 52,643
Less current maturities of long-term debt 8,028 6,275
------- -------
Long-term debt, excluding current maturities $106,481 $46,368
======== =======
The 9.41% Senior Unsecured Notes have $3 million principal payments
due in May of each year through 2000. In 2001, a final balloon
payment of $9 million is due. Interest is payable semi-annually. The
7.47% Senior Unsecured Notes due 2007 were placed in June 1995. The
notes require interest payments on a semi-annual basis through
maturity. Principal payments of $4.4 million begin in 2003. The
financial covenants for both senior notes include fixed charge
coverage, debt-to-capital, tangible net worth and current ratio
requirements.
The Unsecured Bank Term Note is a seven-year fully amortizing variable
rate note, priced at London Interbank Offered Rates (LIBOR) plus 75
basis points. With initial funding in April 1995, WLR Foods made the
first payment on June 30, 1995. Principal and interest payments are
due quarterly, with repricing occurring on or about the due date of
the payment. Annual principal payments are $3,571,000.
WLR Foods has two unsecured revolving credit facilities totaling $110
million with banks. The first facility is a three-year, $100 million
syndicated facility, which matures on April 1, 1998. On July 1, 1995,
$35 million was outstanding, with $50 million available for borrowing.
The facility provides for $15 million of standby letters of credit,
including $6.5 million currently available for new standby letters of
credit. Pricing is LIBOR plus 35 basis points. The second revolving
credit facility is a $10 million facility maturing in March 1996. No
amounts were outstanding on July 1, 1995. The revolving credit and
bank term agreements contain various covenants, including maintenance
of a minimum net worth, current ratio, fixed charge coverage, and a
maximum debt-to-capitalization ratio.
The fair value of the fixed rate notes is estimated at $47.8 million
based on quoted market prices for similar issues at July 1, 1995. The
carrying value of all other debt approximates fair value at July 1,
1995.
Required annual principal repayments of long-term debt are as follows:
Dollars in thousands
- -------------------------------------------- --------
Fiscal 1996 $ 8,028
Fiscal 1997 8,027
Fiscal 1998 43,067
Fiscal 1999 7,610
Fiscal 2000 7,609
11
<PAGE>
6. EMPLOYEE BENEFITS
The Company maintains a Profit Sharing and Salary Savings Plan that is
available to substantially all employees who meet certain age and
service requirements. Most participants may elect to make
contributions of up to 15% of their salary. For each employee dollar
contributed (limited to the first 4% of an employee's compensation),
the Company is required to contribute a matching amount of 50 cents.
The Company can also make additional contributions at its discretion.
WLR Foods total contributions under this plan were approximately $2.3
million, $2.1 million, and $1.5 million, for fiscal 1995, 1994, and
1993, respectively.
7. INCOME TAXES
Effective July 4, 1993, WLR Foods, Inc. adopted SFAS 109.
See Note 1 for a discussion of the effects of the accounting change.
The provisions for income taxes from operations were as follows for fiscal
years 1995, 1994 and 1993:
Dollars in thousands 1995 1994 1993
------- ------- -------
Current:
Federal $6,211 $948 $5,985
State 1,619 500 972
------ ----- ------
7,830 1,448 6,957
Deferred:
Federal 1,638 7,477 846
State 281 972 254
------ ------ ------
1,919 8,449 1,100
------ ------ ------
Total tax provision $9,749 $9,897 $8,057
====== ====== ======
The provision for income taxes differs from the amounts resulting from
applying the federal statutory tax rates (35% for fiscal years 1995 and 1994
and 34% for 1993) to earnings before income taxes and minority interest as
follows for fiscal years 1995, 1994 and 1993:
Dollars in thousands 1995 1994 1993
- ------------------------- ------- ------- -------
Taxes computed using federal
statutory tax rates $9,078 $9,270 $7,720
State income tax expense,
net of federal tax benefit 908 957 809
Other, net (237) (330) (472)
------ ------ ------
Total tax provision $9,749 $9,897 $8,057
====== ====== ======
Effective tax rate 37.6% 37.4% 35.5%
12
<PAGE>
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and deferred tax liabilities at
July 1, 1995 and July 2, 1994 are listed below.
Dollars in thousands 1995 1994
- --------------------------------------- --------- ---------
Deferred tax liabilities:
Inventories, principally due to live inventories
accounted for on the farm price method for tax
purposes ($14,376) ($11,901)
Plant and equipment, principally due to
differences in depreciation and capitalized
interest (9,465) (10,343)
Investments in subsidiary, principally
due to undistributed net income of the
subsidiary (357) (319)
Other - (136)
-------- --------
Gross deferred tax liabilities (24,198) (22,699)
Deferred tax assets:
Insurance accruals, principally due to
the timing of payments vs. the recording of
expense $2,478 $1,599
Net operating loss carryforwards - 1,428
Deferred compensation, principally due to
accrual for financial reporting purposes 955 1,217
Alternative minimum tax credit carryforward 836 948
Compensated absences, principally due to
accrual for financial reporting purposes 970 794
Accounts receivable, principally due to
allowance for doubtful accounts 241 140
Other 689 463
-------- --------
Gross deferred tax assets 6,169 6,589
Valuation allowance on deferred tax assets - -
-------- --------
Net deferred tax liability ($18,029) ($16,110)
========= =========
13
<PAGE>
At the adoption of SFAS 109 management determined a valuation allowance was
unnecessary, and during fiscal 1995 and fiscal 1994, no valuation allowance
was recorded. Based on the Company's historical earnings, future expectations
of taxable income, the reversing of gross deferred tax liabilities and
potential net operating loss carrybacks, management believes that it is more
likely than not that the Company will realize the gross deferred tax assets.
The sources of deferred income taxes and their related tax effects are as
follows for fiscal year 1993:
Dollars in thousands 1993
------
Excess of tax over financial statement depreciation $936
Accrued expenses deductible in different periods for
financial reporting and tax purposes (586)
Difference between financial statement and tax bases of
inventories 773
Other, Net (23)
-----
Deferred tax provision $1,100
======
8. SHAREHOLDERS' EQUITY AND COMMON STOCK SUBJECT TO REPURCHASE
In February 1994, the Board of Directors approved the adoption of the
Shareholder Protection Rights Plan (the Plan) wherein one right
attaches to and trades with each share of common stock. Each right
entitles the registered holder to purchase from the Company, at an
exercise price of $45.33, the number of shares of common stock or
participating preferred stock having a market value of twice the
exercise price. Such participating preferred stock is designed to
have economic and voting terms similar to those of one share of common
stock. Rights will separate from the common stock and become
exercisable following the earlier of 1) the date a person or group
acquires 15% or more of the outstanding stock, or 2) the tenth
business day (or such later date the Board may decide) after any
person commences a tender offer that would result in such person or
group holding a total of 15% or more of the common stock.
Additionally, rights owned by the acquiring person or group would
automatically become void.
If a person or group acquires between 15% and 50% of the outstanding
common stock, the Board may, in lieu of allowing rights to be
exercised, require each outstanding right to be exchanged for one
share of common stock or participating preferred stock.
A provision in the Plan allows for rights holders to acquire stock of
the acquiring person or group, in the event a change of control of the
Company has occurred.
The rights are redeemable by the Company at $0.01 per right prior to
becoming exercisable and expire 10 years from issuance.
WLR Foods has 100,000,000 shares of common stock authorized, with
17,297,671 shares outstanding on July 1, 1995 and 16,513,992
outstanding on July 2, 1994. Additionally, there are 50,000,000 shares
of preferred stock authorized with none outstanding as of July 1, 1995
or July 2, 1994.
The Common Stock Subject to Repurchase arises from WLR Foods
commitment to repurchase
14
<PAGE>
the shares held by a trustee on behalf of Cuddy Farms, Inc. for
$17,750,000 in cash if Cuddy Farms has a payment default under its
credit facilities. The obligation is in effect until August 1998, at
which point the obligation is terminated.
9. STOCK OPTION AND STOCK PURCHASE PLANS
WLR Foods Stock Option Plan was adopted by the Board of Directors in
accordance with the Long-Term Incentive Plan which was ratified by the
shareholders of the Company on November 1, 1988. The Plan provides
for the granting of incentive or nonqualified common stock options.
The option price under the Plan shall not be less than the fair market
value of the common shares as of the date of the grant. The options
vest over a three-year period and are exercisable at varying dates not
to exceed 10 years from the grant.
The changes in the outstanding common shares under option for fiscal
1995, 1994, and 1993 are listed below:
Common shares Option
under option price
- ----------------------------- -------------- -------------
Outstanding at June 27, 1992 793,875 $8.22 to $12.33
Canceled or expired (119,250) $8.22 to $12.33
Exercised (70,875) $8.22
Granted in fiscal 1993 156,375 $14.67
-------- ----------------
Outstanding at July 3, 1993 760,125 $8.22 to $14.67
Canceled or expired (3,000) $11.92
Exercised (164,625) $8.22 to $12.33
Granted in fiscal 1994 150,375 $20.00
-------- ----------------
Outstanding at July 2, 1994 742,875 $11.92 to $20.00
Exercised (137,625) $12.33
Granted in fiscal 1995 163,000 $15.00
-------- ----------------
Outstanding at July 1, 1995 768,250 $11.92 to $20.00
======== ================
At July 1, 1995 452,875 options are exercisable.
On October 29, 1994, the shareholders of WLR Foods approved the Poultry
Producer Stock Purchase Plan and amended and restated the Employee Stock
Purchase Plan. These plans allow contract producers and employees to purchase
stock at a 10% discount off the market price. All shares must be held in the
plans for a period of two years. Upon termination of employment or contract,
participants are terminated from the respective plans.
15
<PAGE>
10. LEASES
WLR Foods has entered into various operating lease agreements for machinery
and equipment. The leases are noncancelable and expire on various dates
through 2001. Total rent expense was approximately $2.7 million, $1.4 million
and $1.2 million for fiscal 1995, 1994, and 1993, respectively. The
following schedule presents the future minimum rental payments required
under the operating leases that have initial or remaining noncancelable lease
terms in excess of one year as of July 1, 1995:
Dollars in thousands
- -----------------------------------------
Fiscal 1996 $2,168
Fiscal 1997 1,548
Fiscal 1998 1,324
Fiscal 1999 626
Fiscal 2000 460
Fiscal 2001 and thereafter 374
------
Total minimum lease payments $6,500
======
11. Related Party Transactions
Certain directors of WLR Foods are contract producers of live
poultry for the Company. In addition, a WLR Foods director is a
director/officer of a company which supplies fuel and related products
to certain locations of the Company. A second director provided consulting
services to WLR Foods during each fiscal year presented. As a result
of the August 1994 acquisition (Note 2), Cuddy Farms, Inc. became a related
party. The 1995 transactions include poult purchases and feed sales to
Cuddy Farms, Inc. at prices established when the acquisition was completed.
The contract terms are through 1998 with extensions available.
Transactions with these related parties during the past three fiscal years
are as follows:
Purchases Sales to
Dollars in thousands from related parties related parties
- ----------------------------- ------------------------- -----------------
Fiscal 1995 $21,020 $7,939
Fiscal 1994 1,522 -
Fiscal 1993 1,921 -
In management's opinion, all related party transactions are conducted under
normal business conditions, with no preferential treatment given to related
parties.
16
<PAGE>
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
The unaudited summary quarterly results for fiscal 1995 and 1994 follows:
<CAPTION>
Dollars in thousands, except per share data
Fiscal year ended July 1, 1995 First Second Third Fourth
- -------------------------------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $210,285 $247,840 $211,469 $239,182
Operating income 11,823 13,186 4,403 2,859
Net earnings 6,508 6,785 2,033 807
Per share data:
Net earnings per common share $0.38 $0.37 $0.11 $0.05
Dividends declared per common share 0.05 0.05 0.06 0.06
Market price (bid)-high 18.67 18.17 18.17 18.00
-low 13.00 15.33 16.83 12.00
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended July 2, 1994 First Second Third Fourth
- ------------------------------------------- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $179,028 $182,315 $171,090 $194,837
Operating income 7,293 7,901 3,171 12,679
Net earnings 3,784 4,133 1,303 7,331
Per share data:
Net earnings per common share $0.23 $0.25 $0.08 $0.45
Dividends declared per common share 0.05 0.05 0.05 0.05
Market price (bid)-high 13.33 12.83 20.92 21.17
-low 11.17 11.50 18.33 17.17
</TABLE>
13. SUBSEQUENT EVENT
On August 22, 1995, WLR Foods entered into an agreement to acquire the net
assets of New Hope Feeds, Inc. and Economy Truck Leasing, Inc. for $18
million, including stock and debt. The consummation of the acquisition
is contingent on several conditions including regulatory approval, and
resolution of a third party right of first refusal. Closing is anticipated
by September 30, 1995.
17
<PAGE>
Exhibit 13.4
Independents Auditors Report on Consolidated Financial Statements
Independent Auditors Report
The Board of Directors and Shareholders
WLR Foods, Inc.:
We have audited the accompanying consolidated balance sheets of WLR
Foods, Inc. and subsidiaries as of July 1, 1995 and July 2, 1994, and
the related consolidated statements of earnings, shareholders equity
and cash flows for each of the fiscal years in the three-year period
ended July 1, 1995. These consolidated financial statements are the
responsibility of the Company s management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements referred to
above represent fairly, in all material respects, the financial
position of WLR Foods, Inc. and subsidiaries as of July 1, 1995 and
July 2, 1994, and the results of their operations and their cash flows
for each of the fiscal years in the three-year period ended July 1,
1995, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Richmond, Virginia
August 16, 1995
<PAGE>
Exhibit 21
Subsidiary State of Incorporation
Wampler-Longacre, Inc. Virginia
P. O. Box 7275
Broadway, VA 22815
Cassco Ice & Cold Storage, Inc. Virginia
75 W. Bruce Street
Harrisonburg, VA 22801
May Supply Company, Inc. Virginia
P. O. Box 347
Harrisonburg, VA 22801
<PAGE>
Exhibit 23
Consent of Independent Certified Public Accountants
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
WLR Foods, Inc.:
We consent to incorporation by reference in the registration
statements on Form S-8 (No. 33-27037, No. 33-63364 and No. 33-55649)
and on Form S-3 (No. 33-48293, No. 33-54692, No. 33-63368 and No. 33-
56775) of WLR Foods, Inc. of our reports dated August 16, 1995,
relating to the consolidated balance sheets of WLR Foods, Inc. and
subsidiaries as of July 1, 1995 and July 2, 1994 and the related
consolidated statements of earnings, shareholders' equity and cash
flows and related schedule for each of the fiscal years in the three-
year period ended July 1, 1995, which reports appear or are
incorporated by reference in the July 1, 1995 annual report on Form
10-K of WLR Food, Inc.
KPMG PEAT MARWICK LLP
Richmond, Virginia
September 27, 1995
<PAGE>
Exhibit 24
SPECIAL POWER OF ATTORNEY
Each of the undersigned officers and directors of WLR Foods,
Inc. (WLR Foods), a Virginia corporation, appoints James L. Keeler and
Delbert L. Seitz, or either of them (with full power to each of them
to act alone) as his or her attorneys-in-fact and agents for him or
her in such capacity either as an officer or director, or both, of WLR
Foods, and authorizes such persons on behalf of WLR Foods, to sign and
file any and all WLR Foods' registration statements, reports,
schedules and other filings, and all amendments thereto, required or
permitted to be filed under federal or state securities laws,
including without limitation Forms 3, 4 and 5, registration
statements, Form 10-K annual reports, Form 10-Q quarterly reports and
Form 8-K current reports, with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities and
Exchange Commission, National Association of Securities Dealers, and
any regulatory authority for any U.S. state or territory, and each of
us hereby ratifies and confirms all that our attorneys-in-fact and
agents or each of them may lawfully do or cause to be done by virtue
hereof.
WITNESS the following signatures and seals.
10/28/94 /s/ John J. Broaddus (SEAL)
Date John J. Broaddus
10/28/94 /s/ Jane T. Brookshire (SEAL)
Date Jane T. Brookshire
10/28/94 /s/ George E. Bryan (SEAL)
Date George E. Bryan
10/28/94 /s/ Charles L. Campbell (SEAL)
Date Charles L. Campbell
10/28/94 /s/ Stephen W. Custer (SEAL)
Date Stephen W. Custer
10/28/94 /s/ Calvin G. Germroth (SEAL)
Date Calvin G. Germroth
10/28/94 /s/ William H. Groseclose (SEAL)
Date William H. Groseclose
10/28/94 /s/ J. Craig Hott (SEAL)
Date J. Craig Hott
10/28/94 /s/ Peter A.W. Green (SEAL)
Date Peter A.W. Green
<PAGE>
10/28/94 /s/ Herman D. Mason (SEAL)
Date Herman D. Mason
10/28/94 /s/ Charles W. Wampler, Jr. (SEAL)
Date Charles W. Wampler, Jr.
10/28/94 /s/ William D. Wampler (SEAL)
Date William D. Wampler
10/28/94 /s/ Henry L. Holler (SEAL)
Date Henry L. Holler
10/28/94 /s/ Kenneth D. Marshall (SEAL)
Date Kenneth D. Marshall
10/28/94 /s/ James L. Keeler (SEAL)
Date James L. Keeler
10/28/94 /s/ James L. Mason (SEAL)
Date James L. Mason
10/28/94 /s/ V. Eugene Misner (SEAL)
Date V. Eugene Misner
10/28/94 /s/ Delbert L. Seitz(SEAL)
Date Delbert L. Seitz
2
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> JUL-01-1995
<CASH> 706
<SECURITIES> 0
<RECEIVABLES> 63,807
<ALLOWANCES> 613
<INVENTORY> 125,849
<CURRENT-ASSETS> 192,932
<PP&E> 326,564
<DEPRECIATION> 152,401
<TOTAL-ASSETS> 372,525
<CURRENT-LIABILITIES> 72,370
<BONDS> 114,509
<COMMON> 56,782
0
0
<OTHER-SE> 106,562
<TOTAL-LIABILITY-AND-EQUITY> 372,525
<SALES> 908,776
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<CGS> 785,085
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<INCOME-TAX> 9,749
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,133
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.90
</TABLE>
