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 June 29, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-17060
WLR FOODS, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1295923
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
P.O. Box 7000, Broadway, Virginia 22815
(Address of principal executive offices)
Registrant's telephone number, including area code
540-896-7001
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. ________
The aggregate value of the voting stock held by non-affiliates of the
registrant as of September 24, 1996 was approximately $154,820,644.
The number of shares outstanding of registrant's common stock, no par
value, as of such date was 13,176,225 shares.
Documents Incorporated by Reference
Annual Report to Shareholders for fiscal year Part II
ended June 29, 1996
Proxy Statement for Annual Meeting of Shareholders Part III
to be held October 26, 1996
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PART I
Item 1. BUSINESS.
General
WLR Foods, Inc. (WLR Foods or the Company) 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 Foods
manufactures ice for retail distribution and is a provider of public
refrigerated warehousing services.
WLR Foods markets 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 50 countries, with particular customer strength in the Far
East, the Caribbean and United States military installations.
WLR Foods is the result of the 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., which on July 26, 1996 changed its name back to Wampler Foods,
Inc. (Wampler Foods).
WLR Foods expanded its operations into North Carolina with the
August 1994 acquisition of Cuddy Farms, Inc.-USA Food Division of
Marshville, North Carolina, including its turkey processing, further
processing, feedmill and distribution facilities, and the September
1995 acquisition of the chicken processing and production assets of
New Hope Feeds, Inc. of New Hope, North Carolina, including its
processing plant, hatchery, feedmill and grain storage facilities.
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.
Poultry Production
WLR Foods' operations include the breeding, hatching, grow-out
and processing of turkeys and chickens. For fiscal 1996, WLR Foods
produced approximately 599 million pounds of dressed turkey and 600
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, the most significant of which is Cuddy Farms, Inc. (not
affiliated with WLR Foods). In its chicken operations, WLR Foods
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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 172 breeder growers who
grow approximately one-half 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 928 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 feedmills and provides grower support through WLR Foods'
technicians and veterinarians.
Grow-out and breeder farms provide WLR Foods with more than 59
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. Because the quality and
composition of feed is critical to the feed conversion rate, WLR Foods
formulates and manufactures a majority of its feed at one of its five
feedmills. WLR Foods has an annual feed manufacturing capacity of
approximately 2.0 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 eight poultry
processing plants. These plants utilize modern, highly automated
equipment to process and package the turkeys and chickens for sale or
preparation for further processing. WLR Foods further processes bulk
poultry in its processing plants and in two 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 includes fresh poultry, beef,
and other meat products purchased from third parties for resale, along
with certain products produced by the company. These operations are
conducted within a radius of approximately 75 miles of WLR Foods'
further processing facility in Franconia, Pennsylvania. Cassco
manufactures and distributes ice in the mid-Atlantic region and
operates five public refrigerated warehouses in Virginia, West
Virginia and North Carolina. 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.
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Fiscal 1996 Fiscal 1995 Fiscal 1994
(Dollars in Millions) ----------- ----------- -----------
Chicken, fresh and frozen $362.9 $300.8 $287.5
Turkey, fresh and frozen 213.8 218.0 171.4
Further processed 266.1 248.8 152.1
Distribution 87.0 86.1 82.4
Ice/Warehousing 19.4 18.0 17.6
Other 48.4 37.1 16.3
------ ------ ------
Total Net Sales $997.6 $908.8 $727.3
====== ====== ======
Competition
Poultry production requires continuous growing and processing,
and with limited refrigerated storage, makes 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 July 1996, WLR Foods was ranked as the seventh largest company
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 January/February 1996 issue. WLR
Foods was cited as the thirteenth largest chicken producer in the
January 1996 issue of Broiler Industry magazine.
Seasonality
In general, WLR Foods' sales are relatively stable 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 from mid-
May to mid-September.
Trademarks and Patents
As of August 1996, Wampler Foods began marketing products under
the trademarks WAMPLER FOODS and WAMPLER FOODS and design, which have
applications for registration pending at the U.S. Patent and Trademark
Office. Wampler Foods continues to market its products under the
trademarks WAMPLER-LONGACRE and design, TRIM FREE, COLONY FARMS,
DINOSAUR WINGS, and THE DELI ROAST COLLECTION and design, all of which
are federally registered trademarks. Wampler Foods also markets
products and services under the trademarks POULTRY PARTNERS, POULTRY
PARTNERSHIP and TURKEY MIGNON, which have pending federal
applications. Products are also sold under the LEAN LITE DELI, ROUND
HILL, FARMER'S CHOICE and VALLEY PRIDE marks. Wampler Foods has
marketed products under the chicken in heart design, TENDERLINGS,
CHEF'S SELECT, CHEF'S QUALITY and MASTERPIECE trademarks, but expects
to cease packing products under those marks as of January 1, 1997.
Following the acquisition of Cuddy Foods, Wampler Foods obtained the
right to market products under various marks using the CUDDY name.
Wampler Foods expects to cease packing products under the CUDDY marks
as of January 1, 1997. Wampler Foods continues to market its export
and foreign military sales under the COLONEL ROCKINGHAM design and
ROCKINGHAM trademarks, as well as the WAMPLER FOODS trademark.
Cassco distributes its products under the federally registered
trademark CASSCO.
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Wampler Foods holds a patent for pasteurized salads and a patent
for processing turkey.
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 less than $0.1 million of governmental
contracts outstanding as of June 29, 1996, compared to approximately
$0.9 million as of July 1, 1995.
Foreign Sales
WLR Foods' export sales constituted approximately 10% of its
total annual sales in fiscal 1996, compared to 8% for fiscal year 1995
and 7% for fiscal year 1994. Wampler Foods has a full-time staffed
export sales office which coordinates export sales efforts on behalf
of WLR Foods. Export sales originate from that office and use
independent brokers as needed. Sales are made to customers in over 50
countries.
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 grains are commodities and, as such, are
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
Foods'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
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certain effluent standards before discharging into the regional sewer
system. Wampler Foods' Timberville chicken processing and protein
conversion 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.
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 Foods, WLR Foods holds a
Virginia Pollution Abatement permit which allows Wampler Foods'
Virginia facilities to apply to land in Virginia certain wastewater
biosolids generated by the facilities' wastewater treatment systems.
In West Virginia, Wampler Foods' 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 protein conversion 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 Foods' North Carolina facilities hold a total of fifteen
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. The Wingate feedmill holds a
stormwater permit which regulates stormwater discharges and an air
permit which regulates emissions from boilers, bagfilters, and related
equipment. The Goldsboro feedmill and Jones County grain elevator
each hold an air permit issued for the control and abatement of dust.
Finally, the Goldsboro chicken processing facility holds three
environmental permits, a general stormwater permit, an industrial user
pretreatment permit providing for the pretreatment of certain
wastewater before discharge to the City of Goldsboro Control
Authority, and an air permit regulating certain combustion equipment.
Pennsylvania facilities owned by Wampler Foods 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.
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'
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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 8,500 persons as of June 29, 1996, none
of whom were covered by a collective bargaining agreement.
Item 2. PROPERTIES.
WLR Foods' eight poultry processing facilities and two 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 3.3 million
chickens per week (double shift, except in the Goldsboro plant, which
runs a single shift). WLR Foods owns and operates five feedmills with
a production capacity in excess of 1.9 million tons of finished feed
per year; a turkey hatchery with a production capacity of
approximately 360,000 poults per week and three chicken hatcheries
with a production capacity of approximately 3.5 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.
The Company's assets are depreciated on a straight-line basis, based
on the following asset lives:
Land Improvements 10-20 years
Buildings & Improvements 5-20 years
Machinery & Equipment 3-17 years
Transportation Equipment 3-5 years
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 1,200 tons per day.
From fiscal 1988 through the end of fiscal 1996, WLR Foods spent
over $188 million for replacement and productivity improvements,
acquisitions and expansions 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 March 8, 1996, suit was filed against WLR Foods and its wholly
owned subsidiary, WLR Poultry Products, Inc., New Hope Feeds, Inc. and
Equipment Truck Leasing, Inc. (collectively, New Hope) and the
principal shareholders of New Hope, by Case Foods, Inc. and its wholly
owned subsidiary, Case Farms of North Carolina, Inc. (collectively,
Case). The suit, filed in the Burke County, North Carolina, General
Court of Justice, Superior Court Division, arises from the
September 29, 1995 acquisition by the Company of the chicken
processing plant, live production assets, and inventory of New Hope
(the Acquisition).
The Complaint maintains that the Acquisition was in violation of
a right of first refusal previously granted by New Hope to Case. The
suit also maintains that the Acquisition was in violation of a letter
of intent between New Hope and Case, and in contravention of certain
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oral promises and representations claimed to have been made by New
Hope. In addition to breach of contract and other claims against
Case, the claims against WLR Foods and its subsidiary include tortious
interference with contract, tortious interference with prospective
advantage, and unfair and deceptive trade practices under North
Carolina law. The Complaint seeks monetary damages of an unspecified
amount from WLR Foods and New Hope, some of which are requested to be
trebled pursuant to North Carolina law.
The Company intends to defend vigorously against the claims made
by Case, and does not expect the litigation to have a material effect
on the Company or its financial statements. Moreover, in connection
with the Acquisition, the Company entered into an Indemnification
Agreement with New Hope, secured by a Stock Escrow Agreement, pursuant
to which New Hope is obligated to defend WLR Foods, and to indemnify
WLR Foods for certain liabilities arising from the Acquisition,
specifically including liabilities arising from this litigation. The
escrow account currently holds 318,332 shares of WLR Foods Common
Stock with a market value as of September 24, 1996 of approximately
$3,740,000.
Settlement negotiations continue in the Keystone Sanitation
litigation reported in the Company's Form 10-K for the fiscal year
ended July 1, 1995. Based on current settlement proposals, the
Company reasonably believes that its exposure is now less than
$100,000 and is not expected to materially affect the Company or its
financial statements.
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 June 29, 1996.
Executive Officers of the Registrant
The following information is given regarding WLR Foods' executive officers.
______________________________________________________________________________
Name and Position Principal Occupation
with the Company Age During the Last Five Years
______________________________________________________________________________
James L. Keeler 61 Chief Executive Officer since February
President 1988
Chief Executive Officer
James L. Mason<F1> 46 President of Wampler Foods since January
Executive Vice President 1994; previously, General Manager and
President President of Wampler-Longacre Turkey, Inc.
Wampler Foods, Inc. since April 1990
V. Eugene Misner 59 Vice President of Live Production since
Vice President of January 1994; previously, General Manager
Live Production and President of Wampler-Longacre Chicken,
Wampler Foods, Inc. Inc. since April 1990
Robert T. Ritter 45 Chief Financial Officer since June 1996;
Chief Financial previously, Private Investor and
Officer Consultant; Controller and Treasurer of
Treasurer and Secretary American Cyanamid Co.
John J. Broaddus 46 Executive Vice President since June 1996;
Executive Vice President previously, Vice President of Wampler
Wampler Foods, Inc. Longacre, Inc. since 1994 and President
of Cassco since 1990
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Henry L. Holler 67 Vice President Sales and Marketing since
Vice President of January 1994; previously, Vice President
Sales and Marketing of Sales for Wampler-Longacre Chicken,
Wampler Foods Inc.
Jane T. Brookshire 50 Vice President of Human Resources since
Vice President of October 1993; previously, Director of
Human Resources Human Resources for WLR Foods
________________
[FN]
<F1> James L. Mason is the son of Herman D. Mason, who is Vice
Chairman of the Company's Board.
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, 1996, 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 June 29, 1996 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.
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 in the Annual
Report, attached hereto as Exhibit 13.3. The required financial
statement schedules are included on page 13 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.
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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 September 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 Operations Exhibit 13.3
- - Fiscal years ended June 29, 1996, July 1, 1995
and July 2, 1994
Consolidated Balance Sheets - June 29, 1996 and Exhibit 13.3
July 1, 1995
Consolidated Statements of Shareholders' Equity - Exhibit 13.3
Fiscal years ended June 29, 1996, July 1, 1995
and July 2, 1994
Consolidated Statements of Cash Flows - Fiscal years Exhibit 13.3
ended June 29, 1996, July 1, 1995 and July 2, 1994
Notes to Consolidated Financial Statements - Exhibit 13.3
Fiscal years ended June 29, 1996, July 1, 1995
and July 2, 1994
Financial Statement Schedules
Independent Auditors' Report on Schedules Page 12
Schedule II - Valuation and Qualifying Accounts Page 13
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.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of
fiscal 1996 that ended on June 29, 1996.
(c) Exhibits
See Exhibit Index.
[The remainder of this page is intentionally left blank.]
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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 _25_, 1996
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 _25_, 1996
_/s/ Robert T. Ritter_________________
Chief Financial Officer
Date: September __26_, 1996
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 _26 1996.
Signature Title
______________________________ Director
George E. Bryan*
______________________________ Director
Charles L. Campbell*
______________________________ Director
Stephen W. Custer*
______________________________ Director
Calvin G. Germroth*
______________________________ Director
William H. Groseclose*
______________________________ Director
J. Craig Hott*
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__/s/ James L. Keeler_________ Director
James L. Keeler
______________________________ Director
Herman D. Mason*
______________________________ Director
Charles W. Wampler, Jr.*
______________________________ Director
William D. Wampler*
*By /s/ Robert T.Ritter________
Robert T. Ritter, attorney-in-fact
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INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Shareholders
WLR Foods, Inc.
Under date of August 14, 1996, we reported on the consolidated balance
sheets of WLR Foods, Inc. and subsidiaries as of June 29, 1996 and
July 1, 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the fiscal years in
the three-year period ended June 29, 1996, as contained in the 1996
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 ended June 29, 1996. In
connection with out audits of the aforementioned consolidated
financial statements, we also have audited the related financial
statement schedule as listed in Item 14(a) on this Form 10-K. This
financial statement schedule is the responsibility of the Company's
management. Out 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.
/s/ KPMG PEAT MARWICK LLP
Richmond, Virginia
August 14, 1996
12
<PAGE>
<TABLE>
WLR FOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED JUNE 29, 1996, JULY 1, 1995 AND JULY 2, 1994
(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 June 29, 1996
Allowance for Doubtful Accounts $613 $297 $202 $708
Total $613 $297 $202 $708
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
</TABLE>
13
<PAGE>
EXHIBIT INDEX
3.1 Articles of Incorporation of the Registrant, restated effective
May 30, 1995, incorporated by reference to Exhibit 3.1 of Form
10-K filed with the Securities and Exchange Commission on
October 2, 1995.
3.2 Bylaws of the Registrant, as amended on November 2, 1994,
incorporated by reference to Exhibit 3.2 of Form 10-K filed
with the Securities and Exchange Commission on October 2, 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, 1990.
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., incorporated by reference to Exhibit 4.3 of Form 10-K
filed with the Securities and Exchange Commission on October 2,
1995.
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, incorporated by reference to
Exhibit 4.4 of Form 10-K filed with the Securities and Exchange
Commission on October 2, 1995.
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.
4.6 Loan Agreement, dated March 1, 1995 with First Union National
Bank, incorporated by reference to Exhibit 4.1 of Form 10-Q
filed with the Securities and Exchange Commission on May 11,
1995.
4.7 Agreement of the Company, dated September 25, 1996, to furnish
a copy of the Modification Agreement, dated April 1, 1996, to
the Loan Agreement, dated March 1, 1995 with First Union
National Bank of Virginia.
4.8 Credit Agreement, dated March 1, 1995 with First Union National
Bank of Virginia and others, incorporated by reference to
Exhibit 4.2 of Form 10-Q filed with the Securities and Exchange
Commission on May 11, 1995.
4.9 Amendment, dated as of July 1, 1995, to the Credit Agreement,
dated March 1, 1995 with First Union National Bank of Virginia
and others, incorporated by reference to Exhibit 4.8 of Form
10-K filed with the Securities and Exchange Commission on
October 2, 1995.
4.10 Agreement of the Company, dated September 25, 1996, to furnish
a copy of the Modification Agreement, dated June 1, 1996, to
the Credit Agreement, dated March 1, 1995 with First Union
National Bank of Virginia and others.
4.11 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, incorporated by reference
to Exhibit 4.9 of Form 10-K filed with the Securities and
Exchange Commission on October 2, 1995.
14
<PAGE>
9.1 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.
9.2 Voting Trust Agreement, dated September 29, 1995.
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 Amendment to Employment Agreement, dated February 4, 1994,
between the Registrant and James L. Keeler, incorporated by
reference to Exhibit 10.2 of Form 10-Q filed with the
Securities and Exchange Commission on February 15, 1994.
10.3 Amendment to Deferred Compensation Agreement, dated February 4,
1994, between the Registrant and James L. Keeler, incorporated
by reference to Exhibit 10.3 of Form 10-Q filed with the
Securities and Exchange Commission on February 15, 1994.
10.4 Amendment, dated June 27, 1995, to Employment Agreement dated
July 4, 1993, between the Registrant and James L. Keeler.
10.5 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.
10.6 Long-Term Incentive Plan, as amended, incorporated by reference
to Exhibit 28 to Post-Effective Amendment Number One to
Form S-8 (No. 33-27037), filed with the Securities and Exchange
Commission on November 18, 1992.
10.7 Severance Agreement, dated February 4, 1994 between the
Registrant and James L. Keeler, incorporated by reference to
Exhibit 10.4 of Form 10-Q filed with the Securities and
Exchange Commission on February 15, 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 June 20, 1996 between the Registrant
and John J. Broaddus.
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 Exhibit 10.9 of Form 10-Q filed with the
Securities and Exchange Commission on February 15, 1994.
10.12 Deferred Compensation Agreement, dated February 4, 1994 between
the Registrant and Herman D. Mason incorporated by reference to
Exhibit 10.10 of Form 10-Q filed with the Securities and
Exchange Commission on February 15, 1994.
10.13 Amendment to Deferred Compensation Agreement, dated July 25,
1996 between the Registrant and Herman D. Mason.
10.14 Deferred Compensation Agreement, dated February 4, 1994,
between the Registrant and George E. Bryan, incorporated by
reference to Exhibit 10.11 to Form 10-Q filed with the
Securities and Exchange Commission on February 15, 1994.
10.15 Deferred Compensation Agreement, dated February 4, 1994,
between the Registrant and William D. Wampler, incorporated by
reference to Exhibit 10.12 of Form 10-Q filed with the
Securities and Exchange Commission on February 15, 1994.
15
<PAGE>
10.16 1995 Nonqualified Deferred Compensation Plan.
10.17 Amendment No. One to 1995 Deferred Compensation Plan.
10.18 Trust Under WLR Foods, Inc. Nonqualified Deferred Compensation
Plan.
10.19 Description of Plan to Issue Stock for Director Compensation.
13.1 Financial Highlights, from the Registrant's Annual Report to
Shareholders for the fiscal year ended June 29, 1996.
13.2 Management's Discussion and Analysis, from the Registrant's
Annual Report to Shareholders for the fiscal year ended June
29, 1996.
13.3 Consolidated Financial Statements and Notes to Consolidated
Financial Statements, from the Registrant's Annual Report to
Shareholders for the fiscal year ended June 29, 1996.
13.4 Independent Auditors' Report on Consolidated Financial
Statements, from the Registrant's Annual Report to Shareholders
for the fiscal year ended June 29, 1996.
21 List of Subsidiaries of the Registrant.
23 Consent of Independent Certified Public Accountants.
24 Power of Attorney.
27 Financial Data Schedule.
16
<PAGE>
Exhibit 4.7
Agreement to Furnish Copy of Modification Agreement
September 25, 1996
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 Modification Agreement,
dated April 1, 1996, to the Loan Agreement dated March 1, 1995
with First Union National Bank of Virginia.
WLR FOODS, INC.
By: _/S/ Robert T. Ritter_________
ROBERT T. RITTER
Its: Chief Financial Officer
<PAGE>
Exhibit 4.10
Agreement to Furnish Copy of Modification Agreement
September 25, 1996
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 Modification Agreement, dated June 1,
1996, to the Credit Agreement dated March 1, 1995 with First Union
National Bank of Virginia and others.
WLR FOODS, INC.
By:__/s/ Robert T. Ritter___
ROBERT T. RITTER
Its: Chief Financial Officer
<PAGE>
Exhibit 9.2
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT ( Agreement ), dated as of September
29, 1995, is made by and among WLR FOODS, INC., a Virginia corporation
( WLR ), NEW HOPE FEEDS, INC., a North Carolina corporation ( New
Hope ), ECONOMY TRUCK LEASING, INC., a North Carolina corporation
( Economy ) (with New Hope and Economy being referred to herein,
individually, as a Seller, and together, as the Sellers ), and J.
HAROLD WEBBER, ( Webber ), JAMES H. WEBBER, JR., ROBERT L. WEBBER, and
PEGGY W. KEARNEY (with Webber and such individuals being referred to
herein, individually, as a Shareholder, and together, as the
Shareholders ), and CRESTAR BANK, Trustee, and its successors (the
Trustee ) who agree as follows. WLR, the Sellers and the
Shareholders are referred to herein as the Parties.
RECITALS
A. As of the date hereof 411,216 shares of WLR common stock
( Shares ) have been issued to the Trustee hereunder, on behalf of the
Sellers in consideration for the transfer of certain assets pursuant
to the terms of an Asset Purchase Agreement dated August 21, 1995
among WLR, WLR Poultry Products, Inc., the Sellers and the
Shareholders ( Asset Purchase Agreement ). The parties anticipate
that additional Shares may be issued to the Trustee, on behalf of the
Sellers and the Shareholders, following certain post-closing
adjustments which, when issued, shall also be considered Shares
hereunder. Certain capitalized terms used herein without definition
are used herein as defined in the Asset Purchase Agreement.
B. A condition precedent to WLR s obligation to issue the
Shares was the Sellers and the Shareholders execution of this
Agreement in order for the Transactions not to compromise the
continuity and stability of WLR s long-term business strategy and
policies as effectively confirmed by a recent vote of shareholders of
WLR and as implemented and managed by WLR s Board of Directors and
management.
C. The Trustee has consented to act under this Agreement for
the purposes hereunder.
TERMS
Now, therefore, in consideration of the premises and other good
and valuable consideration, receipt of which is hereby acknowledged,
the Parties and the Trustee agree as follows:
1. TRANSFER OF STOCK TO TRUSTEE. Concurrently with the Closing
of the above-referenced Asset Purchase Agreement, the Shares were
issued to the Trustee, on behalf of the Sellers and the Shareholders,
who shall hold the Shares subject to the terms of this Agreement and
shall issue and deliver to the Sellers and/or the Shareholders voting
trust certificates for the Shares.
2. VOTING TRUST CERTIFICATES. Each voting trust certificate
issued hereunder shall be in substantially the same form as set forth
on Exhibit A attached hereto.
3. TRANSFER OF CERTIFICATES. Unless otherwise agreed to in
writing by WLR, the voting trust certificates are not transferable
except that (a) the holder thereof, if a Seller, may transfer the
certificates to the Shareholders in connection with the dissolution
and liquidation of such Seller, or the holder thereof, if a
Shareholder, may transfer the certificates to any other Shareholder;
provided, however, that the Shareholders in whose favor such
certificates are transferred shall be bound by all of the provisions
of this Agreement as though that person were the original holder and
shall exercise the rights of the voting trust certificates only in
accordance with this Agreement; and (b) the holder thereof may
transfer the certificates to the Trustee for cancellation in any event
where the
<PAGE>
Shares or portions thereof are released from the restrictions imposed
by this Agreement as described in Section 7 below. In the event of
any permitted transfer, the certificates shall be transferable at the
Trustee s principal office in Richmond, Virginia (and at such other
office as the Trustee may designate by an instrument signed by it and
sent by telecopy to the registered holders of voting trust
certificates), on the books of the Trustee, by the registered owner
thereof, either in person or by attorney thereto duly authorized, upon
surrender thereof, according to the rules established for that purpose
by the Trustee.
4. TERM OF AGREEMENT. This Agreement shall terminate upon the
earlier of:
(a) The fourth (4th) anniversary of the date of this
Agreement;
(b) The date on which a Change of Control occurs in WLR.
For the purpose of this Agreement, a Change in Control shall mean
the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the Exchange Act )) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than thirty percent (30%) of either the then outstanding shares of
common stock of WLR or the combined voting power of the then
outstanding voting securities of WLR entitled to vote generally in
the election of directors; or
(c) The written consent of the Parties to terminate this
Agreement.
5. TERMINATION PROCEDURE.
(a) Immediately upon the termination of this Agreement as
provided in Section 4 above, the voting trust certificates shall cease
to have any effect, and their holders shall have no further rights
under this Voting Trust Agreement other than to receive certificates
for Shares or other property distributable under the terms hereof and
upon the surrender of such voting trust certificates.
(b) Immediately upon surrender of the voting trust
certificates at the Trustee s offices, the Trustee shall deliver to
the registered holders of all voting trust certificates stock
certificates for the number of shares of the WLR common stock
represented thereby.
(c) If any voting trust certificate has not been
surrendered within thirty (30) days after the termination of this
Agreement, the Trustee may deposit with WLR stock certificates
representing the number of shares of common stock represented by such
voting trust certificates then outstanding, with authority in writing
to WLR to deliver such stock certificates in exchange for voting trust
certificates representing a like number of shares of the capital stock
of WLR. Upon such deposit, all further liability of the Trustee for
the delivery of such stock certificates and the delivery or payment of
dividends upon surrender of the voting trust certificates shall cease,
and the Trustee shall not be required to take any further action
hereunder.
6. DIVIDENDS.
(a) Prior to the termination of this Agreement, and subject
to the Stock Escrow Agreement of even date herewith among the Parties,
the holder of each voting trust certificate shall be entitled to
receive payments equal to the cash dividends, if any, received by the
Trustee upon a like number and class of shares of WLR common stock as
is called for by each voting trust certificate. If any dividend in
respect of the stock deposited with the Trustee is paid, in whole or
in part, in WLR common stock, the Trustee shall hold, subject to the
terms of this Agreement, the certificates for stock which are received
by it on account of such dividend. In the event of a dividend payable
in cash or stock at the election of the holder of the voting trust
certificate, the Trustee shall make such election upon the direction
of the registered holder of the voting trust certificate, or, in the
absence of such election, shall elect a cash dividend payment. The
holder of each voting trust certificate representing stock on which
such stock dividend has been paid shall be entitled to receive a
voting trust certificate issued under this
2
<PAGE>
Agreement for the number of shares and class of stock received as such
dividend with respect to the shares represented by such voting trust
certificate. Holders entitled to receive the dividends described
above shall be those registered as such on the Trustee s transfer
books at the close of business on the day fixed by WLR for the taking
of a record to determine those holders of its stock entitled to
receive such dividends.
(b) If any dividend in respect of the stock deposited with
the Trustee is paid other than in cash or in common stock, then the
Trustee shall distribute the same among the holders of the voting
trust certificates registered as such on the Trustee s transfer books
at the close of business on the day fixed by WLR for the taking of a
record to determine those holders of its stock entitled to receive
such dividends.
(c) In lieu of receiving cash dividends upon the common
stock of WLR and paying the same to the holders of voting trust
certificates pursuant to the provisions of this Agreement, the Trustee
may instruct WLR in writing to pay such dividends to the holders of
the voting trust certificates. Upon receipt of such written
instructions, WLR shall pay such dividends directly to the holders of
the voting trust certificates. Upon such instructions being given by
the Trustee, all liability of the Trustee with respect to such
dividends shall cease. The Trustee may at any time revoke such
instructions and by written notice to WLR direct it to make dividend
payments to the Trustee.
7. PARTIAL RELEASES OF AND FIRST RIGHT OF REFUSAL WITH RESPECT
TO SHARES. At any time after the second anniversary of the date of
this Agreement, the Shareholders, acting by their unanimous written
consent, may request the Trustee, by written notice signed by all such
Shareholders sent to the Trustee, to release to them portions of the
shares being held pursuant to the terms of this Agreement, provided
that the following conditions shall apply:
(a) None of the shares so released shall, at the time of
such release, be subject to the terms of the Stock Escrow Agreement
dated as of the date of this Agreement among the parties hereto;
(b) The total value of the shares so released, determined
by reference to the average per share closing price of WLR s common
stock as quoted by NASDAQ s National Market System for the 10
consecutive trading days of WLR s common stock ending at the closing
of market 5 days prior to any release of shares hereunder, shall in no
event exceed, in any consecutive twelve (12)-month period during the
term of this Agreement, the greater of (i) $500,000, or (ii) the total
amount of the federal and state estate or inheritance taxes for which
the estate of any Shareholder becomes liable and which are directly
attributable to the inclusion of the value of the shares of the WLR
stock registered in the name of such Shareholder in the gross estate
of such Shareholder for federal estate tax purposes (and all
determinations as to the amount of such taxes shall be verified by
WLR s review of all federal and state estate or inheritance tax
returns and other documents and records deemed necessary by WLR to
make such verification of the amount of such taxes).
(c) In any and all events, no release of shares pursuant to
this Section 7 shall be permitted or deemed effective until the
provisions of this Section 7(c) shall have been complied with in full.
Upon the Trustee s receipt of any written request from the
Shareholders that any portion of the shares be released in accordance
with the provisions of this Section 7, the Trustee shall send a copy
of such request to WLR. Within thirty (30) days after WLR s receipt
of the request from the Trustee, WLR shall have the right to send a
written notice (the Purchase Notice ) to the Shareholders and the
Trustee that WLR elects to purchase and redeem from the Shareholders,
proportionately, all or any portion of the shares which are otherwise
to be released to the respective holders of the voting trust
certificates hereunder and which specifies a closing date for the
purchase no later than sixty (60) days after the date of the Purchase
Notice. In the event that WLR sends such a Purchase Notice within
such thirty (30)-day period, then on the closing date specified in the
Purchase Notice, WLR shall purchase all or such portion of the shares
to be released for a price per share equal to the average per share
closing
3
<PAGE>
price of WLR s common stock as quoted by NASDAQ s National Market
System for the 10 consecutive trading days of WLR s common stock
ending at the closing of market 5 days prior to the date of the
Purchase Notice. At the closing, WLR shall pay the purchase price for
the shares which it elects to purchase hereunder in cash to the
Shareholders in the proportions in which they would otherwise have
been entitled to received the shares if released to them, and the
Trustee shall convey, assign and release to WLR certificates
evidencing the shares so released and purchased by WLR from the
respective Shareholders.
8. RIGHTS OF TRUSTEE.
(a) Until the actual delivery to the holders of voting
trust certificates issued hereunder of stock certificates in exchange
therefor, and until the surrender of the voting trust certificates for
cancellation, the Trustee shall have the right, subject to the
provisions hereof, including, without limitation, paragraph (b) below,
to exercise, in person or by his nominees or proxies, all stockholder
voting rights and powers in respect of all stock deposited hereunder,
and to take part in or consent to any corporate or stockholder action
of any kind whatsoever. The right to vote shall include the right to
vote for the election of directors, and in favor of or against any
resolution or proposed action of any character whatsoever, which may
be presented at any meeting or require the consent of the WLR
stockholders. Without limiting such general right, it is understood
that such action or proceeding may include mortgaging, creating a
security interest in, and pledging of all or any part of the WLR
property, the lease or sale of all or any part of its property, for
cash, securities, or other property, and the dissolution of WLR, or
its consolidation, merger, reorganization, or recapitalization.
(b) In voting the stock held by it hereunder either in
person or by its nominees or proxies, the Trustee shall vote, subject
to the exceptions set forth in paragraph (c) below, in accordance with
written directions of the registered voting trust certificate holder
in connection with all matters that may be presented at any meeting or
require the consent of WLR stockholders. If the registered voting
trust certificate holder fails to provide the Trustee with voting
directions in a timely manner, the Trustee shall vote the shares held
by such certificate holder in accordance with the recommendation of
WLR s Board of Directors as it exists at the time of the vote.
(c) Notwithstanding the provisions of paragraph (b) of this
Section 8, in voting the stock held by it hereunder either in person
or by its nominees or proxies, the Trustee shall vote in accordance
with the recommendation of WLR s Board of Directors as it exists at
the time of the vote of WLR shareholders only in connection with, and
limited to the duration of, the following specific matters: (i) any
amendment to the articles of incorporation of WLR; (ii) a plan of
merger, consolidation, share exchange or dissolution or a transaction
involving the sale of all or substantially all of WLR s assets; (iii)
a proposal to grant voting rights to shares of WLR stock acquired in a
control share acquisition (as defined in section 13.1-728.1 of the
Virginia Stock Corporation Act); (iv) any matter that is the subject
of a proxy contest (as defined below); and (v) a proposal to issue
additional shares of WLR stock. For purposes of this Agreement, a
matter which is the subject of a proxy contest is a proposal or matter
being submitted for voting by WLR s shareholders and with respect to
which, in addition to the solicitation of proxies from WLR
shareholders by WLR s management or Board of Directors, a shareholder
or group of shareholders is conducting a separate, opposing proxy
solicitation seeking shareholder action on such proposal or matter
which is opposed by or contrary to the recommendation of WLR s Board
of Directors. Any dispute with respect to whether a matter shall be
voted by the Trustee in accordance with the recommendation of WLR s
Board of Directors shall be determined in the sole discretion of the
Trustee and shall be binding on the Trustee and the registered voting
trust certificate holder.
9. TRUSTEES.
(a) The Trustee (and any successor Trustee) may at any time
resign by mailing to the registered holders of voting trust
certificates a written resignation, to take effect ten (10) days
thereafter or upon its prior acceptance.
4
<PAGE>
In the event of resignation, a successor Trustee shall be mutually
acceptable to, and designated by, WLR, the Sellers and Shareholders,
and, in the absence of an agreement between the parties, designated by
an independent third party selected by them. No person or entity
shall be named as successor Trustee who is restricted from voting WLR
common stock by any other law, agreement or regulatory or judicial
order.
(b) The rights, powers, and privileges of the Trustee named
hereunder shall be possessed by the successor Trustees, with the same
effect as though such successors had originally been parties to this
Agreement. The word Trustee, as used in this Agreement, means the
Trustee or any successor Trustees acting hereunder, and shall include
both the single and the plural number.
10. COMPENSATION AND REIMBURSEMENT OF TRUSTEE. The Trustee
shall serve for an annual fee of $750.00 which shall be paid by WLR.
The Trustee shall have the right to incur and pay such reasonable
expenses and charges, to employ and pay such agents, attorneys, and
counsel as it may deem necessary and proper to effectuate this
Agreement. All such expenses or charges incurred by and due to the
Trustee shall be reimbursed by WLR.
11. INDEMNIFICATION. WLR shall indemnify and hold harmless each
of the Sellers and Shareholders and the Trustee and their respective
officers, directors, employees, shareholders, partners, agents, legal
counsel and accountants (each an Indemnitee and together the
Indemnitees ) to the fullest extent permitted by applicable law in
effect on the date hereof or as such laws may from time to time be
amended from and against any and all losses, claims, damages,
liabilities and expenses (including attorneys fees and expenses and
any and all expenses whatsoever incurred in investigating, preparing
or defending any action suit, investigation or proceeding), and
amounts paid in settlement (together, Losses ) incurred by an
Indemnitee if such Indemnitee is a party or is threatened to be made a
party to any threatened, pending or completed action, suit,
investigation or proceeding, whether civil, administrative or
investigation in nature, arising from, caused by or in connection with
the negotiation, execution, delivery and performance of this Agreement
(including any other agreements entered into in connection herewith),
other than as a result of the breach by the Indemnitee of any terms of
this Agreement or such agreements.
12. NOTICE.
(a) Unless otherwise specifically provided herein, any
notice to or communication with the holders of the voting trust
certificates hereunder shall be deemed to be sufficiently given or
made if telecopied or delivered against receipt to the party to whom
it is to be given at the following address (or such other address as
the party shall have furnished in writing in accordance with this
Section):
5
<PAGE>
To Wampler:
WLR Foods, Inc.
P.O. Box 7000
Broadway, Virginia 22815-7000
Attention: James L. Keeler, President
and CEO
Facsimile # 540-896-0498
with a copy to:
Gary D. LeClair, Esq.
LeClair Ryan, A Professional Corporation
707 E. Main Street
Eleventh Floor
Richmond, VA 23219
Facsimile # 804-783-2294
To the Sellers or the Shareholders:
c/o J. Harold Webber
761 Miller s Chapel Road
Goldsboro, North Carolina 27534
Facsimile #
with a copy to:
Tommy W. Jarrett, Esq.
Dees, Smith, Powell, Jarrett,
Dees & Jones
100 North William Street
Goldsboro, North Carolina 27530
Facsimile # 919-735-0234
6
<PAGE>
To the Trustee:
Crestar Bank
Attn: Corporate Trust Administration
919 East Main Street
10th Floor
Richmond, Virginia 23219
Phone: (804) 782-5438
Fax: (804) 782-7855
(b) All distributions of cash, securities, or other
property hereunder by the Trustee to the holders of voting trust
certificates shall be made, in the Trustee s discretion, by overnight
delivery to the addresses set forth above.
13. MODIFICATIONS AND NON-WAIVER. This Agreement may be
modified only by a written instrument executed by the Sellers, the
Shareholders and WLR and the Trustee; provided, however, that the
Trustee s consent shall not be necessary to modifications except as
they expressly relate to its fees, indemnification and right to
resign. No delay or failure by a party to exercise any right under
this Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other right, unless otherwise
expressly provided herein.
14. HEADINGS. Headings in this Agreement are for convenience
only and shall not be used to interpret or construe its provisions.
15. GOVERNING LAW; VENUE. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of Virginia
applicable to agreements made and to be performed entirely within the
Commonwealth. The Circuit Court of the County of Rockingham, Virginia
or the United States District Court for the Western District of
Virginia, Harrisonburg Division, as appropriate, shall have exclusive
jurisdiction and venue over any claims or causes of action concerning
this Agreement.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
17. BINDING EFFECT. The provisions of this Agreement shall be
binding upon and inure to the benefit of each of the parties and their
respective legal representatives, successors and assigns.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Voting Trust
Agreement to be executed by their respective officers hereunto duly
authorized as of the day and year first above written.
WLR FOODS, INC.
By: _/s/ James L. Keeler_______
Title:__President & CEO_________
NEW HOPE FEEDS, INC.
By: _/s/ J. Harold Webber ________
Title:___President_________________
ECONOMY TRUCK LEASING, INC.
By: _/s/_Robert L. Webber_________
Title:_President___________________
/s/__J. Harold Webber______________
J. HAROLD WEBBER
/s/ James H. Webber, Jr.___________
JAMES H. WEBBER, JR.
/s/___Robert L. Webber_____________
ROBERT L. WEBBER
/s/ Peggy W. Kearney_______________
PEGGY W. KEARNEY
8
<PAGE>
CRESTAR BANK, Trustee
By:__/s/_K. A. Pickerel___________
Its:___Vice-President_____________
9
<PAGE>
Exhibit A
No.__________________
Shares_____________
WLR Foods, Inc.
a Virginia corporation
Voting Trust Certificate for Common Stock
This certifies that _______________, or registered assigns, is
entitled to all benefits arising from the deposit with the Trustee
under the Voting Trust Agreement hereinafter mentioned of certificates
for shares of WLR Foods, Inc., a Virginia corporation (WLR), as
provided in such Voting Trust Agreement and subject to the terms
thereof. The registered holder hereof, or assigns, is entitled to
receive payment equal to the amount of cash dividends, if any,
received by the Trustee upon the number of shares of common stock of
WLR in respect of which this certificate is issued. Dividends
received by the Trustee in WLR common stock shall be payable in voting
trust certificates, in form similar hereto. Until the Trustee has
delivered the stock held under such Voting Trust Agreement to the
holders of the trust certificates, or to WLR, as specified in such
Voting Trust Agreement, the Trustee shall possess and be entitled to
exercise all rights and powers of an absolute owner of such stock,
including the right to vote thereon for every purpose according to and
as restricted by the terms of the Voting Trust Agreement, and to
execute consents in respect thereof for every purpose, it being
expressly stipulated that no direct voting right passes to the owner
hereof, or assigns, under this certificate or any agreement, expressed
or implied; provided that the Trustee shall vote pursuant to the
direction of the registered voting trust certificate holders or
pursuant to the recommendation of WLR s Board of Directors as is
expressly set forth in the Voting Trust Agreement.
This certificate is issued, received, and held under, and the rights
of the owner hereof are subject to, the terms of a Voting Trust
Agreement dated September 29, 1995 by and among WLR, New Hope Feeds,
Inc., Economy Truck Leasing, Inc., and others, and their successors
and assigns, and, the Trustee and its successors, a copy of which is
on file with WLR. The holder of this certificate, by acceptance
hereof, assents and is bound to all the provisions of the Voting Trust
Agreement.
In the event that the Trustee receives any dividend or distribution
other than in cash or WLR common stock, the Trustee shall distribute
the same to the registered holders of voting trust certificates
pursuant to the provisions of the Voting Trust Agreement.
The Voting Trust Agreement shall continue in full force and effect
until the earlier of [four years from Closing Date], a change of
control, and certain other events, as provided in the Voting Trust
Agreement. Stock certificates for the number of shares of common
stock then represented by this certificate, or the net proceeds in
cash or property of such shares, shall be due and deliverable
hereunder upon the termination of such Voting Trust Agreement as
provided therein.
Except as provided in the Voting Trust Agreement, this certificate is
not transferable except that the holder hereof may pledge, mortgage or
otherwise encumber the certificates; provided, however, that the
person or persons in whose favor such certificates are pledged,
mortgaged, or otherwise encumbered, shall, except as WLR and they may
otherwise agree, be bound by all of the provisions of the Voting Trust
Agreement as though they were the holder and shall exercise the rights
of this certificate only in accordance therewith. In the event of any
transfer by virtue of a pledge, mortgage or encumbrance, the
certificates shall be transferable at the Trustee s principal office
(set forth in the Voting Trust Agreement) on the books of the Trustee,
by the registered owner thereof, either in person or by attorney
thereto duly authorized, upon surrender thereof, according to the
rules established for that purpose by the Trustee.
10
<PAGE>
This certificate shall not be valid for any purpose until duly signed
by the Trustee.
The word Trustee as used in this certificate means the Trustee or
the successor trustee acting under such Voting Trust Agreement.
In witness whereof the Trustee has signed this certificate on
__________________,1995.
___________________________________
Trustee
11
<PAGE>
(Form of Assignment):
For value received __________________________ hereby assigns the
within certificate, and all rights and interests represented thereby,
to_______________________________ and appoints
________________________attorney to transfer this certificate on the
books of the Trustee mentioned therein, with full power of
substitution.
Dated: ____________________
____________________________________
______________________________(SEAL)
Witness
THIS VOTING TRUST CERTIFICATE MAY NOT BE TRANSFERRED
WITHOUT THE EXPRESS WRITTEN CONSENT OF WLR FOODS, INC.
12
<PAGE>
Exhibit 10.4
This Amendment to the Employment Agreement dated July 4,
1993 is made as of ___June 27______, 1995 by and between WLR FOODS,
INC., a Virginia corporation (WLR) and JAMES L. KEELER (Keeler) who
agree as follows:
A new Paragraph 6 is hereby inserted as follows:
6. Continuing Health Care Coverage. The Company
shall provide health care insurance coverage for
Keeler and his wife for their respective lives,
provided Keeler does not retire from the Company
prior to his reaching age 65. For purposes of
this Paragraph 6, retirement shall not include his
termination of employment due to death or
disability, or a termination following a change in
control as defined in the Severance Agreement by
and between WLR and Keeler dated February 4, 1994,
in any of which events Keeler and his wife shall
be entitled to the coverage provided herein.
Existing Paragraphs 6 through 12 are hereby renumbered as
Paragraphs 7 through 13 respectively.
WITNESS the following signature and seal; and
IN WITNESS WHEREOF, WLR Foods, Inc. has caused this writing
to be signed in its name and on its behalf as thereunto duly
authorized.
____/S/ James L. Keeler______________________
JAMES L. KEELER
WLR FOODS, INC.
By:__/s/ Herman D. Mason_____________________
Herman D. Mason
By:__/S/ Chas. Wampler, Jr.__________________
Charles W. Wampler, Jr.
By:___/s/ Charles L. Campbell________________
Charles L. Campbell
Members of the Executive Compensation Committee
By:___/s/ Chas. Wampler, Jr._________________
Charles W. Wampler, Jr.
Chairman of the Board
PCSjr/mc/50080-28/52912
<PAGE>
Exhibit 10.9
[WLR Letterhead]
June 20, 1996
Mr. John J. Broaddus
Executive Vice President of
Wampler-Longacre, Inc.
Post Office Box 7275
Broadway, Virginia 22815-7275
Dear Mr. Broaddus:
WLR Foods, Inc., a Virginia corporation (the "Company"),
considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best
interests of the Company and its shareholders. In this connection,
the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control (as defined
herein) may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of
the Company and its shareholders. Accordingly, the Board of Directors
of the Company (the "Board") has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management to their assigned
duties without distraction in circumstances arising from the
possibility of a Change in Control of the Company. In particular, the
Board believes it important, should the Company or its shareholders
receive a proposal for transfer of control of the Company, that you be
able to assess and advise the Board whether such proposal would be in
the best interests of the Company and its shareholders and to take
such other action regarding such proposal as the Board might determine
to be appropriate, without being influenced by the uncertainties of
your own situation.
In order to induce you to remain in the employ of the Company,
this letter agreement ("Agreement"), which has been approved by the
Board, sets forth the severance benefits which the Company agrees will
be provided to you in the event your employment with the Company is
terminated subsequent to a Change in Control of the Company under the
circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
(i) Except as otherwise provided in paragraph (ii) below,
the Company or you may terminate your employment at any time following
a Change in Control as defined herein, subject to the Company's
providing the benefits hereinafter specified in accordance with the
terms hereof.
(ii) In the event a Person (as hereinafter defined) makes an
offer which, if accepted by the Company and subsequently consummated,
would constitute a Change in Control, you agree that you will not
leave the employ of the Company (other than as a result of Disability
or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement
until such Change in Control offer has been abandoned or terminated or
a Change in Control has occurred. For the purposes of this Agreement,
Retirement shall mean a termination of your employment by you on or
after you have reached age sixty-five (65) and have completed at least
five (5) years of service for the Company (including any service for a
predecessor of the Company where such prior service is recognized by
the Company for
<PAGE>
Mr. John J. Broaddus
Juen 20, 1996
Page 2
the purpose of awarding other benefits). For purposes of this Section
1, "years of service" shall be defined as in the WLR Profit Sharing
and Salary Savings Plan.
2. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until December 31, 1996;
provided, however, that commencing on January 1, 1997 and each January
1 thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year unless at least ninety (90) days
prior to such January 1st date, the Company or you shall have given
notice that this Agreement shall not be extended; and provided,
further, that, notwithstanding the delivery of any such notice, this
Agreement shall continue in effect for a period of thirty-six (36)
months after a Change in Control, if such Change in Control shall have
occurred while this Agreement is in effect. Notwithstanding anything
in this Section 2 to the contrary, this Agreement shall terminate if
you or the Company terminate your employment prior to a Change in
Control of the Company.
3. Change in Control. For the purpose of this Agreement, a
"Change in Control" shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13 (d) (3) or 14 (d) (2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or more of
either the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that in no event may the
following acquisitions constitute a Change in Control: (a) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (b) any acquisition
by the Company, (c) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (d) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the conditions
described in clauses (a), (b) and (c) of paragraph (iii) of this
Section 3 are satisfied, or (e) any sale or other disposition of all
or substantially all of the assets of the Company, if , following such
sale or other disposition, the conditions described in (1), (2) and
(3) of paragraph (iv) of this Section 3 are satisfied; or
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least seventy-five percent (75%) of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, unless, in each case
following such reorganization, merger or consolidation, (a) more than
sixty percent (60%) of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 3
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (b) no Person (excluding the Company,
any employee benefit plan (or related trust) of the Company or a
corporation resulting from such reorganization, merger or
consolidation) beneficially owns, directly or indirectly, thirty-nine
percent (39%) or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors, and (c) at least a majority of
the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(iv) Approval by the shareholders of the Company of (a) a
complete liquidation or dissolution of the Company or (b) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation with respect to which following
such sale or other disposition, (1) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (2) no Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or such corporation)
beneficially owns, directly or indirectly, thirty-nine percent (39%)
or more of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (3) at least a majority of
the members of the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other
disposition of assets of the Company.
(v) Notwithstanding anything in the paragraphs (i) - (iv)
of this Section 3 to the contrary, no Change in Control shall be
deemed to have occurred for purposes of this Agreement by virtue of
any transaction which results in you, or a group of Persons which
includes you, acquiring, directly or indirectly, twenty percent (20%)
or more of the combined voting power of the Company's Voting
Securities.
4. Termination Following Change in Control. If any of the
events described in Section 3 hereof constituting a Change in Control
of the Company shall have occurred, you shall be entitled to the
benefits provided in Section 5 hereof upon the termination of your
employment with the Company within thirty-six (36) months after such
Change in Control, unless such termination is (a) because of your
death, (b) by the Company for Cause or Disability or (c) by you other
than for Good Reason (as all such capitalized terms are hereinafter
defined).
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 4
(i) Disability. Termination by the Company of your
employment based on "Disability" shall mean termination because of
your absence from your duties with the Company on a full time basis
for one hundred eighty (180) consecutive days as a result of your
incapacity due to physical or mental illness, unless within thirty
(30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence, you shall have returned to the
full time performance of your duties.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (a) the willful and continued
failure by you to perform substantially your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to you by the Chairman of the Board or
President of the Company which specifically identifies the manner(s)
in which such executive believes that you have not substantially
performed your duties, or (b) the willful engaging by you in illegal
conduct which is materially and demonstrably injurious to the Company.
For purposes of this paragraph (ii), no act, or failure to act, on
your part shall be considered "willful" unless done, or failed to be
done, by you in bad faith and without reasonable belief that your
action or omission was in, or not opposed to, the best interests of
the Company. Any act or failure to act based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by you in good faith and in the best
interests of the Company. It is also expressly understood that your
attention to matters not directly related to the business of the
Company shall not provide a basis for termination for Cause so long as
the Board has approved your engagement in such activities.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered
to you a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at
a meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the good
faith opinion of the Board you were guilty of the conduct set forth
above in clauses (a) or (b) of this paragraph (ii) and specifying the
particulars thereof in detail.
(iii) Good Reason. Termination by you of your
employment for "Good Reason" shall mean termination based on:
(A) a determination by you, in your reasonable
judgment, that there has been an adverse change in your status or
position(s) as an executive officer of the Company as in effect
immediately prior to the Change in Control, including, without
limitation, any adverse change in your status or position as a result
of a diminution in your duties or responsibilities (other than, if
applicable, any such change directly attributable to the fact that the
Company is no longer publicly owned) or the assignment to you of any
duties or responsibilities which are inconsistent with such status or
position(s), or any removal of you from, or any failure to reappoint
or reelect you to, such positions(s) (except in connection with the
termination of your employment for Cause or Disability or as a result
of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as
in effect immediately prior to the Change in Control;
(C) the failure by the Company to continue in effect
any Plan (as hereinafter defined) in which you are participating at
the time of the Change in Control of the Company (or Plans providing
you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with
its terms as in
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 5
effect at the time of the Change in Control, or the taking of any
action, or the failure to act, by the Company which would adversely
affect your continued participation in any of such Plans on at least
as favorable a basis to you as is the case on the date of the Change
in Control or which would materially reduce your benefits in the
future under any of such Plans or deprive you of any material benefit
enjoyed by you at the time of the Change in Control;
(D) the failure by the Company to provide and credit
you with the number of paid vacation days to which you are then
entitled in accordance with the Company's normal vacation policy as in
effect immediately prior to the Change in Control;
(E) the Company's requiring you to be based at any
office that is greater than thirty (30) miles from where your office
is located immediately prior to the Change in Control except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which you undertook on
behalf of the Company prior to the Change in Control;
(F) the failure by the Company to obtain from any
Successor (as hereinafter defined) the assent to this Agreement
contemplated by Section 6 hereof;
(G) any purported termination by the Company of your
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (iv) below (and, if
applicable, paragraph (ii) above); and for purposes of this Agreement,
no such purported termination shall be effective; or
(H) any refusal by the Company to continue to allow
you to attend to matters or engage in activities not directly related
to the business of the Company which, prior to the Change in Control,
you were permitted by the Board to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any
compensation plan such as the Company Incentive Bonus Plan or any
employee benefit plan such as a thrift, pension, profit sharing,
medical, disability, accident, life insurance plan or a relocation
plan or policy or any other plan, program or policy of the Company
intended to benefit employees, except for the Company Restated Long-
Term Incentive Plan.
(iv) Notice of Termination. Any purported termination by
the Company or by you following a Change in Control shall be
communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon.
(v) Date of Termination. "Date of Termination" following a
Change in Control shall mean (a) if your employment is to be
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty
(30) day period), (b) if your employment is to be terminated by the
Company for Cause or by you pursuant to Sections 4(iii)(F) or 6 hereof
or for any other Good Reason, the date specified in the Notice of
Termination, (c) if your employment is to be terminated by the Company
for any reason other than Cause, the date specified in the Notice of
Termination, which in no event shall be a date earlier than ninety
(90) days after the date on which a Notice of Termination is given,
unless an earlier date has been expressly agreed to by you in writing
either in advance of, or after, receiving such Notice of Termination,
or (d) if your employment is terminated on
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 6
account of your death, the day after your death. In the case of
termination of your employment by the Company for Cause, if you have
not previously expressly agreed in writing to the termination, then
within thirty (30) days after receipt by you of the Notice of
Termination with respect thereto, you may notify the Company that a
dispute exists concerning the termination, in which event the Date of
Termination shall be the date set either by mutual written agreement
of the parties or by such court having the matter before it. During
the pendency of any such dispute, the Company will continue to pay you
your full compensation in effect just prior to the time the Notice of
Termination is given and until the dispute is resolved. However, if
such court issues a final and non-appealable order finding that the
Company had Cause to terminate you then you must return all
compensation paid to you after the Date of Termination specified in
the Notice of Termination previously received by you.
5. Compensation Upon Termination or During Disability; Other
Agreements.
(i) During any period following a Change in Control of the
Company that you fail to perform your duties as a result of incapacity
due to physical or mental illness, you shall continue to receive your
base salary at the rate then in effect and any benefits or awards
under any Plans shall continue to accrue during such period, to the
extent not inconsistent with such Plans, until your employment is
terminated pursuant to and in accordance with paragraphs 4(iv) - 4(v)
hereof. Thereafter, your benefits shall be determined in accordance
with the Plans then in effect.
(ii) If your employment is terminated for Cause following a
Change in Control of the Company, the Company shall pay to you your
base salary through the Date of Termination at the rate in effect just
prior to the time a Notice of Termination is given plus any benefits
or awards (including both the cash and stock components) which
pursuant to the terms of any Plans have been earned or become payable,
but which have not yet been paid to you. Thereupon the Company shall
have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within thirty-six
(36) months after a Change in Control of the Company has occurred,
your employment by the Company is terminated other than on account of
your death and is terminated (a) by the Company other than for Cause
or Disability or (b) by you for Good Reason, then the Company shall
pay to you, no later than the fifth (5th) day following the Date of
Termination, without regard to any contrary provisions of any Plan,
the following:
(A) your base salary through the Date of Termination
at the rate in effect just prior to the time a Notice of Termination
is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been
earned or become payable, but which have not yet been paid to you
(including amounts which previously had been deferred at your
request);
(B) an amount in cash equal to three times the sum of
(i) the higher of (a) your annual base salary on the Date of
Termination or (b) your annual base salary in effect immediately prior
to the Change in Control plus (ii) an amount equal to the average of
the bonuses awarded to you in each of the three previous years.
For the purposes of this Agreement, the term "base salary"
shall include any amounts deducted by the Company with respect to you
or for your account pursuant to Sections 125 and 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 7
(iv) If, within thirty-six (36) months after a Change in
Control of the Company has occurred, your employment by the Company is
terminated for any reason other than retirement, the Company shall pay
to you, on the date specified below, an amount ("Spread") in cash
equal to the Termination Fair Market Value (as hereinafter defined)
less the exercise price of all options which were granted to you
pursuant to the Company's Restated Long-Term Incentive Plan or any
Plan succeeding thereto, and which shall not become exercisable prior
to (a) the end of the one (1) year period immediately following the
Date of Termination if your employment is terminated on account of
your death, or (b) the end of the third (3rd) month following the Date
of Termination if your employment is terminated for any reason other
than death. The Company shall make such payment upon the fifth (5th)
day following such Date of Termination.
For the purposes of this Agreement, the "Termination Fair
Market Value" shall be the higher of (a) the highest price of the
Company's stock as quoted on the NASDAQ, or any other exchange
complying with the requirements of the Securities and Exchange Act of
1934, as amended, within the period beginning ninety (90) days prior
to the Date of Termination and ending upon such Date of Termination,
and (b) the highest price of the Company's stock as quoted on the
NASDAQ, or any other exchange complying with the requirements of the
Securities and Exchange Act of 1934, as amended, within the period
beginning ninety (90) days prior to a Change of Control and ending
upon the date of a Change of Control.
(v) If, within thirty-six (36) months after a Change in
Control of the Company has occurred, your employment by the Company is
terminated (a) by the Company other than for Cause or Disability, or
(b) by you for Good Reason, then the Company shall maintain in full
force and effect, for the continued benefit of you and your dependents
for a period terminating on the earliest of (a) three (3) years after
the Date of Termination or (b) the commencement date of equivalent
benefits from a new employer, insured and self-insured employee
welfare benefit Plans in which you were entitled to participate
immediately prior to the Date of Termination, provided that your
continued participation is possible under the general terms and
provisions of such Plans (and any applicable funding media) and you
continue to pay an amount equal to your regular contribution under
such Plans for such participation. If three (3) years after the Date
of Termination you have not previously received, nor are then
receiving, equivalent benefits from a new employer, the Company shall
offer you continuation coverage under COBRA as prescribed under
Section 4980B of the Code. At the expiration of such continuation
coverage (or, if COBRA continuation coverage is not applicable to the
Plan, then upon the expiration of the three (3) year period beginning
on the Termination Date), the Company shall arrange, at its sole cost
and expense, to enable you to convert you and your dependents'
coverage under such plans to individual policies and programs upon the
same terms as employees of the Company may apply for such conversions.
In the event that your participation in any such Plan is barred, the
Company, at its sole cost and expense, shall arrange to have issued
for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax
basis) to those which you otherwise would have been entitled to
receive under such Plans pursuant to this paragraph (v) or, if such
insurance is not available at a reasonable cost to the Company, the
Company shall otherwise provide you and your dependents with
equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater
than that which you would have paid in order to participate in such
Plans.
(vi) Except as specifically provided in paragraph (v) above,
the amount of any payment provided for in this Section 5 shall not be
reduced, offset or subject to recovery by the Company by reason of any
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 8
compensation earned by you as the result of employment by another
employer after the Date of Termination, or otherwise.
(vii) In the event that you become entitled to the
payments provided by paragraphs (iii) and (iv) of Section 5(iii)
hereof (the "Agreement Payments"), if any of the Agreement Payments
will be subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code (or any similar tax that may hereafter be imposed), the
Company shall pay to you at the time specified in paragraph (viii)
below an additional amount (the "Gross-up Payment") such that the net
amount retained by you, after deduction of any Excise Tax on the Total
Payments (as hereinafter defined) and any federal, state and local
income tax and Excise Tax upon the Gross-up Payment provided for by
this paragraph (vii), but before deduction for any federal, state or
local income tax on the Agreement Payments, shall be equal to the sum
of (a) the Total Payments and (b) an amount equal to the product of
any deductions disallowed because of the inclusion of the Gross-up
Payment in your adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in
which the Gross-up Payment is to be made.
For purposes of determining whether any of the Agreement
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (a) any other payments or benefits received or to be
received by you in connection with a Change in Control of the Company
or your termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in a Change in Control of the
Company or any person affiliated with the Company or such person)
(which, together with the Agreement Payments, shall constitute the
"Total Payments") shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Company's independent auditors such other
payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code, or
are otherwise not subject to the Excise Tax; (b) the amount of the
Total Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (1) the total amount of the Total
Payments or (2) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying clause (a),
above); and (c) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of Sections 280G(d)(3) and
(4) of the Code.
For purposes of determining the amount of the Gross-up
Payment, you shall be deemed to (a) pay federal income taxes at the
highest marginal rate of federal income taxation for the calendar year
in which the Gross-up Payment is to be made, (b) pay the applicable
state and local income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-up Payment is to be made, net
of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes (determined
without regard to limitations on deductions based upon the amount of
your adjusted gross income), and (c) have otherwise allowable
deductions for federal income tax purposes at least equal to those
disallowed because of the inclusion of the Gross-up Payment in your
adjusted gross income. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, you shall repay to
the Company at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up
Payment attributable to the Excise Tax and federal state and
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 9
local income tax imposed on the portion of the Gross-up Payment being
repaid by you if such repayment results in a reduction in Excise Tax
and/or a federal and state and local income tax deduction), plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the
time the Gross-up Payment is made (including by reason of any payment
the existence or amount of which cannot be determined at the time of
the Gross-up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest payable with
respect to such excess at the rate provided in Section 1274(b)(2)(B)
of the Code) at the time that the amount of such excess is finally
determined.
(viii) The Gross-up Payment or portion thereof provided
for in paragraph (vii) above shall be paid not later than the
thirtieth (30th) day following payment of any amounts under paragraphs
(iii) and (iv) of Section 5; provided, however, that if the amount of
such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to you on such day an
estimate, as determined in good faith by the Company, of the minimum
amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined, but in
no event later than the forty-fifth (45th) day after payment of any
amounts under paragraphs (iii) and (iv) of Section 5. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Company to you, payable on the fifth (5th) day after
demand by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
6. Successors; Binding Agreement.
(i) The Company will seek, by written request at least five
(5) business days prior to the time a Person becomes a Successor (as
hereinafter defined), to have such Person, by agreement in form and
substance satisfactory to you, assent to the fulfillment of the
Company's obligations under this Agreement. Failure of such Person to
furnish such assent by the later of (a) three (3) business days prior
to the time such Person becomes a Successor or (b) two (2) business
days after such Person receives a written request to so assent shall
constitute Good Reason for termination by you of your employment if a
Change in Control of the Company occurs or has occurred. For purposes
of this Agreement, "Successor" shall mean any Person that succeeds to,
or has the practical ability to control (either immediately or with
the passage of time), the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's Voting
Securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable
to you hereunder if you had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or,
if no such designee exists, to your estate.
(iii) For purposes of this Agreement, the "Company"
shall include any subsidiaries of the Company and any corporation or
other entity which is the surviving or continuing entity in respect of
any merger, consolidation or form of business combination in which the
Company ceases to exist; provided, however, for purposes of
determining whether a Change in Control has occurred herein, the term
"Company" shall refer to WLR Foods, , Inc. or its successor(s).
7. Fees and Expenses; Mitigation.
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 10
(i) The Company shall reimburse you, on a current basis,
for all reasonable legal fees and related expenses incurred by you in
connection with the Agreement following a Change in Control of the
Company, including without limitation, (a) all such fees and expenses,
if any, incurred in contesting or disputing any termination of your
employment or incurred by you in seeking advice with respect to the
matters set forth in Section 8 hereof or (b) your seeking to obtain or
enforce any right or benefit provided by this Agreement, in each case,
regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to
repay any such amounts to the Company to the extent that a court
issues a final and non-appealable order setting forth the
determination that the position taken by you was frivolous or advanced
by you in bad faith.
(ii) You shall not be required to mitigate the amount of any
payment the Company becomes obligated to make to you in connection
with this Agreement, by seeking other employment or otherwise.
8. Taxes. Subject to the provisions of Section 5(vii), all
payments to be made to you under this Agreement will be subject to
required withholding of federal, state and local income and employment
taxes.
9. Survival. The respective obligations of, and benefits
afforded to, the Company and you as provided in Sections 5, 6(ii), 7,
8, 12 and 14 of this Agreement shall survive termination of this
Agreement.
10. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt requested, postage
prepaid and addressed, in the case of the Company, to the address set
forth on the first page of this Agreement or, in the case of the
undersigned employee, to the address set forth below his signature,
provided that all notices to the Company shall be directed to the
attention of the Chairman of the Board or President of the Company,
with a copy to the Secretary of the Company, or to such other address
as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or
discharge is agreed to in a writing signed by you and the Chairman of
the Board or President of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or of
compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this
Agreement.
12. Governing Law and Venue. The validity, interpretation,
construction and performance of this Agreement shall be governed by
the laws of the Commonwealth of Virginia. Venue for any proceeding
related to the performance or interpretation of this Agreement, or in
any way arising out of this Agreement, shall be either the Circuit
Court of Rockingham County, Virginia, or the United States District
Court for the Western District of Virginia, Harrisonburg Division.
13. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
<PAGE>
Mr. John J. Broaddus
June 20, 1996
Page 11
14. Employee's Commitment. You agree that subsequent to your
period of employment with the Company, you will not at any time
communicate or disclose to any unauthorized person, without the
written consent of the Company, any proprietary processes of the
Company or other confidential information concerning its business,
affairs, products, suppliers or customers which, if disclosed, would
have a material adverse effect upon the business or operations of the
Company, taken as a whole; it being understood, however, that the
obligations under this Section 14 shall not apply to the extent that
the aforesaid matters (a) are disclosed in circumstances where you are
legally required to do so or (b) become generally known to, and
available for use by, the public otherwise than by your wrongful act
or omission.
15. Related Agreements. To the extent that any provision of any
other agreement between the Company and you shall limit, qualify or be
inconsistent with any provision of this Agreement, then for purposes
of this Agreement, while the same shall remain in force, the provision
of such other agreement shall be deemed to have been superseded, and
to be of no force or effect, as if such other agreement had been
formally amended to the extent necessary to accomplish such purpose.
Notwithstanding the effect of the preceding sentence, the conditional
Employment Agreement, renewed on June 26, 1992 between the Company and
you is hereby cancelled and shall be of no force or effect.
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to the Company the
enclosed copy of this letter which will then constitute our agreement
on this subject.
Sincerely,
WLR Foods, Inc.
By_____/s/ Herman D. Mason___________
Herman D. Mason, Chair
Executive Compensation Committee
WLR Foods, Inc.
Agreed to this _28_ day of June, 1996.
________/s/ John J. Broaddus__________
John J. Broaddus
______________________________________
______________________________________
Exhibit 10.13
AMENDMENT TO
SUPPLEMENTAL DEFERRED COMPENSATION AGREEMENT
The Supplemental Deferred Compensation Agreement dated
November 1, 1994, by and between WLR Foods, Inc., a Virginia
corporation (WLR) and Herman D. Mason (Mason) is hereby amended,
effective July 25, 1996, as follows:
Section 2 is hereby deleted, and the following substituted in
lieu thereof:
2. Deferred Compensation. WLR shall pay to Mason as
deferred compensation Fourteen Thousand Seven Hundred Fifty
Dollars ($14,750.00) on each August 1, November 1,
February 1 and May 1 commencing August 1, 1996, for the rest
of his life. Upon his death this provision shall terminate.
IN WITNESS WHEREOF, WLR has caused this Amendment to Supplemental
Deferred Compensation Agreement to be signed in its name and on its
behalf as thereunto duly authorized; and
WITNESS the following signature and seal.
WLR FOODS, INC.
By___/s/ James L. Keeler______________
Its__Pres. & CEO_______________________
_____/s/ Herman D. Mason_________(SEAL)
Herman D. Mason
JWF/kh
50080/28/77580<PAGE>
<PAGE>
Exhibit 10.13
1995 NONQUALIFIED DEFERRED COMPENSATION PLAN
Effective the 1st day of October, 1995, WLR FOODS, INC.
(WLR), a Virginia corporation, hereby establishes the 1995
Nonqualified Deferred Compensation Plan (the Plan).
1. Eligibility.
(a) Any employee of WLR or any of its subsidiaries who
is expected to receive compensation of $70,000 per year or more
(Executive) shall be eligible to participate in the Plan; provided,
however, that before enrolling in the Plan, an Executive must have
enrolled in the Company's Profit Sharing and Salary Savings Plan and
Trust (Profit Sharing Plan), and must have elected under the Profit
Sharing Plan to defer the maximum amount of compensation permitted
under such Plan. For purposes of determining eligibility,
compensation shall be limited to base salary and bonus.
(b) The level of compensation considered in
determining eligibility pursuant to this Section 1 shall be adjusted
from time to time, and shall continue to be at least $4,000 above the
highly compensated employee compensation level set forth in
Section 414(q)(1)(C) of the Internal Revenue Code of 1986, as amended
(the Code). Once an employee becomes a participant in the Plan, he or
she shall continue to be eligible to participate regardless of his or
her level of compensation.
2. Deferred Compensation Account.
(a) WLR shall credit to a book reserve account (the
Deferred Compensation Account) such portion of a participating
Executive's compensation, including salary and/or bonus, as the
Executive shall elect in writing. An Executive may make a General
Deferral Election at least one (1) month before the beginning of any
calendar quarter, and may change his or her General Deferral Election
at any time at least one (1) month prior to the beginning of any
subsequent quarter. Notwithstanding the foregoing, an Executive may
suspend deferrals at any time, to be effective as of the next pay
period, but may not change his or her General Deferral Election to a
level other than 0% except quarterly. An Executive may also make a
Special Deferral Election, applicable to bonus only, prior to June 1
of each year. In the absence of a Special Deferral Election, the
General Deferral Election shall apply to both base salary and bonus.
Deferral elections may be made on forms provided by WLR, and shall be
in whole percents, but in no event less than 1%.
(b) In addition to the Deferral Election, an Executive
may make a Distribution Election to have his or her Deferred
Compensation Account balance distributed upon Retirement (as
hereinafter defined) or other termination according to such
distribution options as WLR may permit. A participant may make
separate Distribution Elections applicable to Retirement and other
terminations. An executive may change his or her Distribution
Elections at any time by making a new Distribution Election; provided,
however, that any Distribution Election made after an Executive's
initial Distribution Election shall not be effective until six (6)
months following receipt by WLR. In the absence of a Distribution
Election, an Executive's Deferred Compensation Account balance shall
be paid in twenty (20) quarterly installments, commencing on the first
day of the first calendar quarter following the Executive's Retirement
or termination, or as soon thereafter as benefits can be determined.
Unless an Executive makes one or more Distribution Elections upon his
or her initial enrollment in the Plan, the Executive's initial
Distribution Election will be deemed to be twenty (20) quarterly
installments, and any subsequent Distribution Election shall not be
effective until six (6) months following receipt by WLR.
(c) The Deferred Compensation Account shall accrue
interest at a rate to be determined by the Chief Financial Officer
based on WLR's average cost of funds for permanent financing. The
interest rate shall be determined annually as of the end of the fiscal
<PAGE>
year ending nearest the beginning of the Plan Year. Interest shall be
credited to the Executive's Deferred Compensation Account on a
quarterly basis, and shall be calculated as (1) the Deferred
Compensation Account balance at the beginning of the quarter plus
(2) one-half of all contributions made during the quarter, less
(3) any distributions made during the quarter, multiplied by (4) one-
fourth of the annual interest rate.
(d) In the event that an employee's election to defer
a portion of his or her compensation under the Plan results in a
reduction in his or her compensation for purposes of the Company's
Profit Sharing and Salary Savings Plan and Trust and the Company's
contribution made by the Company on the Executive's behalf, the
Company shall credit an additional amount to the Executive's Deferred
Compensation Account equal to the difference between the amount of the
contribution actually made by the Company and the amount the Company
would have contributed had the Executive not elected to defer a
portion of his or her compensation under the Plan.
(e) Any funds so credited to the Deferred Compensation
Account may be kept in cash or invested and reinvested in mutual
funds, stocks, bonds, securities or any other assets as may be
selected by WLR in its discretion. In the exercise of the foregoing
discretionary investment powers, WLR may engage investment counsel
and, if it so desires, may delegate to such counsel full or limited
authority to select the assets in which the funds are to be invested.
(f) Title to and beneficial ownership of any assets,
whether cash or investments, which WLR may earmark to pay the deferred
compensation hereunder, shall at all times remain in WLR, and the
Executive and his designated beneficiary shall have no property
interest whatsoever in any specific assets of WLR.
3. Retirement. For purposes of the Plan, Retirement
shall mean the termination of employment on or after attaining age
sixty-five (65), or on or after attaining age fifty-five (55) and ten
(10) full years of service with WLR or any of its subsidiaries.
4. Distributions. Deferred compensation benefits shall be
paid as follows:
(a) Upon Retirement or other termination of
employment, the balance of an Executive's Account shall be paid to the
Executive in accordance with the Distribution Election filed with the
Company. In the absence of an election to the contrary, such payment
shall be made according to the most recent Distribution Election
applicable to distributions upon Retirement. If an Executive should
die before the Executive's entire Deferred Compensation Account
balance has been distributed, the unpaid balance will continue to be
paid in accordance with the applicable election to the Executive's
designated beneficiary.
(b) If both the Executive and the Executive's
designated beneficiary should die before the Executive's Deferred
Compensation Account has been fully distributed, the remaining balance
of the Deferred Compensation Account shall be determined as of the
date of the death of the designated beneficiary and shall be paid as
promptly as possible in one lump sum to the estate of such designated
beneficiary.
(c) The beneficiary referred to in this Section 4 may
be designated or changed by the Executive (without the consent of any
prior beneficiary) on a form provided by WLR and delivered to WLR
before the Executive's death. If no such beneficiary shall have been
designated, or if no designated beneficiary shall survive the
Executive, distributions shall be made to the Executive's estate.
2
<PAGE>
(d) Distributions under the Plan shall commence on the
first day of the first quarter following the date of Retirement or
termination, or as soon thereafter as benefits may reasonably be
determined.
(e) WLR may, in its sole and absolute discretion, make
such early distributions and in such amounts as it deems appropriate.
5. Funding. Nothing contained in this Plan and no action
taken pursuant to the provisions of this Plan shall create or be
construed to create a trust of any kind, or a fiduciary relationship
between WLR and any Executive, his designated beneficiary or any other
person. Any funds which may be invested under the provisions of this
Plan shall continue for all purposes to be a part of the general funds
of WLR and no person other than WLR shall by virtue of the provisions
of this Plan have any interest in such funds. To the extent that any
person acquires a right to receive payments from WLR under this Plan,
such right shall be no greater than the right of any unsecured general
creditor of WLR.
6. Plan Year. The Plan Year shall be July 1-June 30.
7. Non-Assignability. The right of an Executive or any
other person to the payment of deferred compensation or other benefits
under this Plan shall not be assigned, transferred, pledged or
encumbered except by will or by the laws of descent and distribution.
8. Interpretation. WLR shall have full power and
authority to interpret, construe, and administer this Plan and WLR's
interpretations and construction thereof, and actions thereunder,
including any valuation of the Deferred Compensation Account, or the
amount or recipient of the payment to be made therefrom, shall be
binding and conclusive on all persons for all purposes. No director,
officer or employee of WLR shall be liable to any person for any
action taken or omitted in connection with the interpretation and
administration of this Plan unless attributable to his own willful
misconduct or lack of good faith.
9. Amendment and Termination. WLR may amend or terminate
this Plan at any time; provided, however, that no amendment or
revocation shall reduce the amount credited to any Executive's
Deferred Compensation Account before the date of such amendment or
revocation.
10. Choice of Law. This Plan shall be construed in
accordance with and governed by the laws of the Commonwealth of
Virginia.
IN WITNESS WHEREOF, WLR Foods, Inc. has caused this Plan to
be signed on its behalf by its duly authorized officer.
WLR FOODS, INC.
___/s/ Delbert L. Seitz____
Secretary by:_/s/ James L. Keeler__________
Its:___Pres & CEO________________
PCSjr/mc/50080-28/46960
3
<PAGE>
Exhibit 10.17
AMENDMENT NO. ONE TO
1995 NONQUALIFIED DEFERRED COMPENSATION PLAN
Effective this 20th day of June, 1996, WLR Foods, Inc. (WLR), a
Virginia corporation, hereby amends the 1995 Nonqualified Deferred
Compensation Plan dated October 1, 1995 (the Plan), pursuant to
Section 9 of the Plan.
Section 1(a) of the Plan is hereby restated in its entirety to
read as follows:
1. Eligibility.
(a) Any employee of WLR or any of its
subsidiaries who is expected to receive
compensation of $70,000 per year or more
(Executive) shall be eligible to participate in
the Plan; provided, however, that before enrolling
in the Plan, an Executive who is eligible to
participate in the Company's Profit Sharing and
Salary Savings Plan and Trust (Profit Sharing
Plan) must have enrolled in the Profit Sharing
Plan, and must have elected under the Profit
Sharing plan to defer the maximum amount of
compensation permitted under such Plan. For
purposes of determining eligibility, compensation
shall be limited to base salary and bonus.
All other terms, conditions and provisions of the Plan, as
amended, shall remain the same.
IN WITNESS WHEREOF, WLR Foods, Inc. has caused this Amendment No.
One to be signed on its behalf by its duly authorized officer.
WLR FOODS, INC.
/S/ Robert T. Ritter___ By:__/s/ James L. Keeler_____________
Secretary
Its:__President & Chief Executive Officer_
PCSjr/kh
50080/28/74438
<PAGE>
Exhibit 10.18
TRUST UNDER WLR FOODS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
THIS AGREEMENT is made as of this 1st day of October, 1995, by
and between WLR FOODS, INC., a Virginia corporation (the Company), and
FIRST UNION NATIONAL BANK OF VIRGINIA (Trustee).
RECITALS
A. The Company has adopted the 1995 Nonqualified Deferred
Compensation Plan and a Deferred Compensation Agreement dated July 4,
1993 by and between James L. Keeler and the Company (collectively, the
Plan).
B. The Company wishes to establish a trust (the Trust) and to
contribute to the Trust assets that shall be held therein, subject to
claims of the Company's creditors in the event of the Company's
insolvency, as herein defined, until paid to Plan participants and
their beneficiaries in such manner and at such times as specified in
the Plan;
C. The parties intend that this Trust shall constitute an
unfunded arrangement and shall not affect the status of the Plan as an
unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees for purposes of Title I of the Employee Retirement Income
Security Act of 1974;
D. The Company intends to make contributions to the Trust to
provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan.
NOW, THEREFORE, the parties hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
1. Establishment of Trust.
(a) The Company hereby deposits with the Trustee in trust
One Dollar ($1.00) which shall become the principal of the Trust to be
held, administered and disposed of by Trustee as provided in this
Trust Agreement.
(b) The Trust hereby established is revocable by the
Company. It shall become irrevocable upon a Change of Control as
defined in Section 13(d).
(c) The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
<PAGE>
1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust and any earnings thereon
shall be held separate and apart from other funds of the Company and
shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred claim on,
or any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Plan and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their
beneficiaries against the Company. Any assets held by the Trust will
be subject to the claims of the Company's general creditors under
federal and state law in the event of insolvency, as defined in
Section 3(a) herein.
(e) Upon a Change of Control, the Company shall, as soon as
possible, but in no event later than thirty (30) days following the
Change of Control, make an irrevocable contribution to the Trust in an
amount that is sufficient to pay each Plan participant or beneficiary
the benefits to which Plan participants or their beneficiaries would
be entitled pursuant to the terms of the Plan as of the date on which
the Change of Control occurred.
(f) Within 60 days following the end of the Company's
fiscal year ending after the Trust has become irrevocable pursuant to
Section 1(b) hereof, the Company shall be required to irrevocably
deposit additional cash or other property to the Trust in an amount
sufficient to pay each Plan participant or beneficiary the benefits
payable pursuant to the terms of the Plan as of the close of the
Company's fiscal year.
2. Payments to Plan Participants and Their Beneficiaries.
(a) The Company shall deliver to the Trustee a schedule
(the Payment Schedule) that indicates the amounts payable to each Plan
participant (and his or her beneficiaries), the form in which such
amount is to be paid (as provided for or available under the Plan),
and the time of commencement for payment of such amounts. The Payment
Schedule shall also provide a formula or other instructions acceptable
to the Trustee for determining the amounts so payable. Except as
2
<PAGE>
otherwise provided herein, the Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such Payment
Schedule. The Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be required
to be withheld with respect to the payment of benefits pursuant to the
terms of the Plan and shall pay amounts withheld to the appropriate
taxing authorities or determine that such amounts have been reported,
withheld and paid by the Company.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by such
party as designated under the Plan, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the
Plan.
(c) The Company may make payments of benefits directly to
Plan participants or their beneficiaries as they become due under the
terms of the Plan. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time
amounts become payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are
not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Company shall make the balance of each such
payment as it becomes due. The Trustee shall notify the Company where
principal and earnings are not sufficient.
3. Trustee Responsibility Regarding Payments to Trust
Beneficiary When the Company is Insolvent.
(a) The Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is insolvent. The
Company shall be considered "insolvent" for purposes of this Trust
Agreement if (i) the Company is unable to pay its debts as they become
due, or (ii) the Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the Trust
shall be subject to claims of general creditors of the Company under
3
<PAGE>
federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of the Company shall have the duty to inform the Trustee in
writing of the Company's insolvency. If a person claiming to be a
creditor of the Company alleges in writing to the Trustee that the
Company has become insolvent, the Trustee shall determine whether the
Company is insolvent and, pending such determination, the Trustee
shall discontinue payments of benefits to Plan participants or their
beneficiaries.
(2) Unless the Trustee has actual knowledge of the
Company's insolvency, or has received notice from the Company or a
person claiming to be a creditor alleging that the Company is
insolvent, Trustee shall have no duty to inquire whether the Company
is insolvent. Trustee may in all events rely on such evidence
concerning the Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(3) If at any time Trustee has determined that the
Company is insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets of the
Trust for the benefit of the Company's general creditors. Nothing in
this Trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of the Company with respect to benefits due under the Plan
or otherwise.
(4) The Trustee shall resume the payment of benefits
to Plan participants or their beneficiaries in accordance with Section
2 of this Trust Agreement only after the Trustee has determined that
the Company is not insolvent (or is no longer insolvent).
(c) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust pursuant
to Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or their
4
<PAGE>
beneficiaries under the terms of the Plan for the period of such
discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by the Company in lieu of the
payments provided for hereunder during any such period of
discontinuance. If, at such time as the Trustee resumes the payment
of benefits following a discontinuance pursuant to this Section 3(c),
the assets of the Trust are insufficient to pay fully the benefits to
which all participants are entitled under the Plan, the benefits to be
paid to each participant from the assets of the Trust shall be reduced
proportionately. Notwithstanding the foregoing, such reduction shall
not reduce the benefits due to participants pursuant to the Plan, and
the Company shall remain obligated for any deficiency.
Section 4. Payments to Company.
Except as provided in Section 3 above, after the Trust has
become irrevocable, the Company shall have no right or power to direct
the Trustee to return to the Company or to divert to others any of the
Trust assets before all payments of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of the
Plan.
Section 5. Investment Authority.
The Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by the Company. All
rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Plan participants.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be allocated to Plan
participants and distributed as provided in Section 2. Undistributed
income shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
5
<PAGE>
agreed upon in writing between the Company and the Trustee. Within
sixty (60) days following the close of each calendar year and within
sixty (60) days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its
administration of the Trust during such year or during the period from
the close of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts, disbursements
and other transactions effected by it, including a description of all
securities and investments purchased and sold with the cost or net
proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash, securities
and other property held in the Trust at the end of such year or as of
the date of such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee.
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like
aims, provided, however, that the Trustee shall incur no liability to
any person for any action taken pursuant to a direction, request or
approval given by the Company which is contemplated by, and in
conformity with, the terms of the Plan or this Trust and is given in
writing by the Company. In the event of a dispute between the Company
and a party, or the Company and the Trustee, the Trustee may apply to
a court of competent jurisdiction to resolve the dispute.
(b) The Trustee may consult with legal counsel with respect
to any of its duties or obligations hereunder.
(c) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to
assist it in performing any of its duties or obligations hereunder.
(d) The Trustee shall have, without exclusion unless
expressly provided otherwise herein, all of the powers and authority
enumerated in Section 64.1-57 of the Code of Virginia, as amended,
which is expressly incorporated herein by reference; provided,
however, that if an insurance policy is held as an asset of the Trust,
6
<PAGE>
Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of
the policy to a different form) other than to a successor Trustee, or
to loan to any person the proceeds of any borrowing against such
policy.
(e) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the Trustee
shall not have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within the
meaning of Section 301.7701-2 of the Procedure and Administrative
Regulations promulgated pursuant to the Internal Revenue Code.
Section 9. Compensation and Expenses of Trustee.
Company shall pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid from
the Trust.
Section 10. Resignation and Removal of Trustee.
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective sixty (60) days after receipt of
such notice unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company upon sixty
(60) days notice or upon shorter notice accepted by the Trustee;
provided, however, upon a Change of Control, the Trustee may not be
removed by the Company for five years from the date of the Change of
Control.
(c) If the Trustee resigns or is removed within ten years
of a Change of Control, the Trustee shall select a successor Trustee
in accordance with the provisions of Section 11 hereof prior to the
effective date of the Trustee's resignation or removal.
(d) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed
within sixty (60) days after receipt of notice of resignation, removal
or transfer, unless the Company extends the time limit.
7
<PAGE>
(e) If the Trustee resigns or is removed, a successor shall
be appointed, in accordance with Section 11 hereof, by the effective
date of resignation or removal under paragraph 10 of this section. If
no such appointment has been made, the Trustee may apply to a court of
competent jurisdiction for appointment of a successor or for
instructions. All expenses of the Trustee in connection with the
proceeding shall be allowed as administrative expenses of the Trust.
Section 11. Appointment of Successor.
If the Trustee resigns or is removed pursuant to the
provisions of Section 10 above and selects a successor Trustee, the
Trustee may appoint any third party such as a bank trust department or
other party that may be granted corporate trustee powers under state
law. The appointment of a successor Trustee shall be effective when
accepted in writing by the new Trustee. The new Trustee shall have
all the rights and powers of the former Trustee, including ownership
rights in Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by the successor Trustee
to evidence the transfer.
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company. Notwithstanding
the foregoing, no such amendment shall conflict with the terms of the
Plan or shall make the Trust revocable after it has become irrevocable
in accordance with Section 1(b) hereof.
(b) Upon a Change of Control, the Trust shall not terminate
until the date on which Plan participants and their beneficiaries are
no longer entitled to benefits pursuant to the terms of the Plan.
Upon termination of the Trust, any assets remaining in the Trust shall
be returned to the Company.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
8
<PAGE>
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered
or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
(c) This Trust Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia.
Jurisdiction and venue for any legal action arising from the terms of
this Trust Agreement shall be proper in the Circuit Court for
Rockingham County, Virginia or the District Court for the Western
District of Virginia, Harrisonburg Division, as appropriate.
(d) For purposes of this Trust, Change of Control shall
mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more of either the
then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that in no event may the
following acquisitions constitute a Change in Control: (a) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (b) any acquisition
by the Company, (c) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (d) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the conditions
described in clauses (a), (b) and (c) of paragraph (iii) of this
Section 13(d) are satisfied, or (e) any sale or other disposition of
all or substantially all of the assets of the Company, if, following
such sale or other disposition, the conditions described in (1), (2)
and (3) of paragraph (iv) of this Section 13(d) are satisfied; or
9
<PAGE>
(ii) The cessation for any reason of the individuals who, as
of the date hereof, constitute the Board (the "Incumbent Board") to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders,
was approved by a vote of at least seventy-five percent (75%) of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(iii) The Approval by the shareholders of the Company of
a reorganization, merger or consolidation, unless, in each case
following such reorganization, merger or consolidation, (a) more than
sixty percent (60%) of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (b) no Person (excluding the Company,
any employee benefit plan (or related trust) of the Company or a
corporation resulting from such reorganization, merger or
consolidation) beneficially owns, directly or indirectly, thirty-nine
percent (39%) or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
10
<PAGE>
generally in the election of directors, and (c) at least a majority of
the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(iv) The Approval by the shareholders of the Company of (a)
a complete liquidation or dissolution of the Company or (b) the sale
or other disposition of all or substantially all of the assets of the
Company, other than to a corporation with respect to which following
such sale or other disposition, (1) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (2) no Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or such corporation)
beneficially owns, directly or indirectly, thirty-nine percent (39%)
or more of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (3) at least a majority of
the members of the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other
disposition of assets of the Company.
(v) Notwithstanding anything in paragraphs (i) - (iv) of
this Section 13(d) to the contrary, no Change in Control shall be
11
<PAGE>
deemed to have occurred for purposes of this Agreement by virtue of
any transaction which results in some or all Plan participants
acquiring, directly or indirectly, twenty percent (20%) or more of the
combined voting power of the Company's Voting Securities.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be October
1, 1995.
IN WITNESS WHEREOF, the parties hereto have caused this writing
to be signed in their names and on their behalves as thereunto duly
authorized. WLR FOODS, INC.
By______/s/ James L. Keeler________
Its____Pres & CEO___________________
_/s/__Lisa J. Tilly, CPA, AVP_______
Trustee
46939
<PAGE>
Exhibit 10.19
Description of Plan to Issue Stock for Director Compensation
On August 20, 1996, the Board of Directors of the Company
approved the issuance of stock to the registrant for the payment
of the nonemployee directors' $13,000 annual retainer. The number
of shares to be issued will be based on the market value of the
registrant's stock on the last trading day prior to its issuance.
79804
<PAGE>
<TABLE>
Exhibit 13.1
Financial Highlights from Registrant's Annual Report to Shareholders
WLR FOODS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS
Dollars in thousands, except
per share data
<CAPTION>
June 29, July 1, July 2, July 3,
Fiscal year ended: 1996 1995 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATIONS
Net sales $997,632 $908,776 $727,270 $616,702
Cost of sales 897,892 785,085 632,620 535,014
-------- -------- -------- --------
Gross profit 99,740 123,691 94,650 81,688
Selling, general and
administrative expenses 97,324 91,420 63,606 55,732
-------- -------- -------- --------
Operating income 2,416 32,271 31,044 25,956
Interest expense 9,359 6,666 4,989 3,816
Other (income) expense, net 321 (332) (431) (567)
-------- -------- -------- --------
Total other expense, net 9,680 6,334 4,558 3,249
Earnings (loss) before income
taxes and minority interest (7,264) 25,937 26,486 22,707
Income tax expense (benefit) (2,610) 9,749 9,897 8,057
Minority interest 32 55 38 43
-------- -------- -------- --------
Net earnings (loss) before
cumulative effect of change in
accounting (4,686) 16,133 16,551 14,607
Cumulative effect on prior
years of change in accounting - - - -
-------- -------- -------- --------
Net earnings (loss) (4,686) 16,133 16,551 14,607
Less preferred stock dividends - - - 1,389
-------- -------- -------- --------
Net earnings (loss) available
to common shareholders $(4,686) $16,133 $16,551 $13,218
======== ======== ======== ========
PER COMMON SHARE
Net earnings (loss) before
cumulative effect of change in
accounting $(0.27) $0.90 $1.01 $0.95
Cumulative effect on prior
years of change in accounting - - - -
-------- -------- -------- --------
Net earnings (loss) per share
(primary) $(0.27) $0.90 $1.01 $0.95
Net earnings (loss) per share
(fully diluted) (0.27) 0.90 1.01 0.93
Dividends declared (excluding
Cassco pooling) 0.24 0.22 0.21 0.21
Book value 10.00 10.47 9.45 8.66
Year-end stock price 14.00 14.38 17.00 11.33
Common shares outstanding
(in thousands):
Average for the year 17,528 17,859 16,451 15,667<F1>
At year end 17,682 17,298 16,514 16,427
</TABLE>
<PAGE>
<TABLE>
WLR FOODS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS-Continued
Dollars in thousands, except
per share data
<CAPTION>
June 29, July 1, July 2, July 3,
Fiscal year ended: 1996 1995 1994 1993
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
FINANCIAL POSITION AT END OF YEAR
Working capital $144,621 $120,562 $69,989 $57,509
Property, plant and equipment,
net 176,691 174,163 139,854 140,540
Total assets 451,121 372,525 283,051 265,626
Long-term debt 138,510 106,481 46,368 52,253
Common stock subject to
repurchase 17,750 17,750 - -
Preferred shareholders'
equity <F2> - - - -
Common shareholders' equity $159,010 $163,344 $156,157 $142,255
======== ======== ======== ========
ANALYTICAL & OTHER INFORMATION
Current ratio (compared to 1) 2.18 2.67 2.02 1.92
Total debt/total
capitalization <F3> 55.1% 44.7% 28.4% 33.5%
Return on beginning total
equity NMF 10.3% 11.6% 13.1%
Capital expenditures $18,771 $17,251 $19,186 $31,766
Depreciation expense 28,243 24,817 21,333 18,115
Amortization expense 742 598 520 445
Interest expense 9,359 6,666 4,989 3,816
Dividends declared:
Common stock 4,233 4,073 3,513 3,124
Preferred stock - - - 1,389
Market capitalization of common
stock at year end $247,547 $248,654 $280,738 $186,168
======== ======== ======== ========
</TABLE>
All information reflects the three-for-two stock split in the
form of a 50% stock dividend declared on February 28, 1995.
[FN]
<F1> Fully diluted shares
<F2> In March 1993, the Company repurchased all the preferred stock
issued in January 1992.
<F3> Common stock subject to repurchase classified as debt.
WLR Foods, Inc. common stock was first publicly traded in 1988.
2
<PAGE>
<TABLE>
WLR FOODS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS-Continued
Dollars in thousands, except
per share data
<CAPTION>
June 27, June 29, June 30, July 1, July 2,
Fiscal year ended: 1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $514,465 $502,238 $494,156 $465,951 $381,363
Cost of sales 454,331 434,509 415,803 391,640 335,855
-------- -------- -------- -------- --------
Gross profit 60,134 67,729 78,353 74,311 45,508
Selling, general and
administrative expenses 48,191 50,019 49,595 44,566 37,420
-------- -------- -------- -------- --------
Operating income 11,943 17,710 28,758 29,745 8,088
Interest expense 2,755 928 925 2,037 1,536
Other (income) expense, net (251) (453) (491) 166 (184)
-------- -------- -------- -------- --------
Total other expense, net 2,504 475 434 2,203 1,352
Earnings (loss) before income
taxes and minority interest 9,439 17,235 28,324 27,542 6,736
Income tax expense (benefit) 3,518 6,521 10,895 10,520 2,952
Minority interest 25 33 34 (206) 60
-------- -------- -------- -------- --------
Net earnings (loss) before
cumulative effect of change
in accounting 5,896 10,681 17,395 17,228 3,724
Cumulative effect on prior
years of change in accounting - - - - 1,112
-------- -------- -------- -------- --------
Net earnings (loss) 5,896 10,681 17,395 17,228 4,836
Less preferred stock dividends 982 - - - -
-------- -------- -------- -------- --------
Net earnings (loss) available
to common shareholders $4,914 $10,681 $17,395 $17,228 $4,836
======= ======== ======== ======== ========
PER COMMON SHARE
Net earnings (loss) before
cumulative effect of change
in accounting $0.35 $0.68 $1.11 $1.11 $0.24
Cumulative effect on prior
years of change in accounting - - - - 0.07
-------- -------- -------- -------- --------
Net earnings (loss) per share
(primary) $0.35 $0.68 $1.11 $1.11 $0.31
Net earnings (loss) per share
(fully diluted) 0.35 0.68 1.11 1.11 0.31
Dividends declared (excluding
Cassco pooling) 0.21 0.21 0.19 0.18 0.21
Book value 6.44 7.33 6.86 5.86 4.95
Year-end stock price 9.67 12.00 12.33 11.87 5.63
Common shares outstanding
(in thousands):
Average for the year 14,277 15,782 15,645 15,600 15,600
At year end 12,719 15,782 15,782 15,600 15,600
</TABLE>
3
<PAGE>
<TABLE>
WLR FOODS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS-Continued
Dollars in thousands, except
per share data
<CAPTION>
June 27, June 29, June 30, July 1, July 2,
Fiscal year ended: 1992 1991 1990 1989 1988
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION AT END OF YEAR
Working capital $40,337 $49,532 $46,039 $42,914 $35,169
Property, plant and equipment,
net 113,017 88,807 71,414 59,687 53,524
Total assets 207,736 175,329 157,763 142,832 124,810
Long-term debt 38,148 18,678 6,402 7,858 8,995
Common Stock subject to
repurchase - - - - -
Preferred shareholders'
equity <F2> 29,507 - - - -
Common shareholders' equity $81,881 $115,625 $108,258 $91,455 $77,181
======= ======== ======== ======= =======
ANALYTICAL & OTHER INFORMATION
Current ratio (compared to 1) 1.80 2.42 2.20 2.12 2.03
Total debt/total
capitalization <F3> 32.0% 16.1% 8.5% 13.9% 16.0%
Return on beginning total
equity 5.1% 9.9% 19.0% 22.3% 6.6%
Capital expenditures $36,107 $29,471 $20,360 $16,001 $8,163
Depreciation expense 14,041 11,544 9,932 8,595 7,057
Amortization expense 168 - - - -
Interest expense 2,755 928 925 2,037 1,536
Dividends declared:
Common stock 2,854 3,314 2,948 2,643 2,503
Preferred stock 982 - - - -
Market capitalization of
common stock at year end $122,942 $189,378 $194,638 $185,432 $87,880
======== ======== ======== ======== =======
</TABLE>
All information reflects the three-for-two stock split in the form of
a 50% stock dividend declared on February 28, 1995.
[FN]
<F1> Fully Diluted Shares
<F2> In March 1993, the Company repurchased all the preferred stock
issued in January 1992.
<F3> Common Stock subject to repurchase classified as debt.
WLR Foods, Inc. common stock was first publicly traded in 1988.
4
<PAGE>
Exhibit 13.2
MANAGEMENT'S DISCUSSION AND ANALYSIS, FROM THE REGISTRANT'S ANNUAL
REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED JUNE 29, 1996.
What is WLR Foods and where are its operations located?
WLR Foods, Inc. (WLR Foods or the company) is a fully-integrated
poultry production, processing and marketing business with operations
in Virginia, West Virginia, Pennsylvania and North Carolina.
Fiscal 1996 is the only year WLR Foods has ever reported a net loss.
What caused this?
Several extreme industry conditions adversely affected fiscal 1996
results. Most important were: record high grain costs during the
second half of the fiscal year; excess supplies of poultry and meats
which prevented the company from increasing prices to offset rising
grain costs; and disease in turkey flocks in North Carolina. In
addition, severe weather in the mid-Atlantic region adversely affected
operations throughout fiscal 1996.
How did the operating results of fiscal 1996 compare to fiscal 1995?
Fiscal 1996 had record sales of $997.6 million, up $88.9 million or
9.8% from last year. Sales volumes increased 6.4%. Chicken sales
volume grew 16.3%, with nearly 70% of the chicken volume increase
resulting from the acquisition of the Goldsboro chicken complex in
September 1995. The Goldsboro acquisition accounted for approximately
$30 million of the change in net sales. Turkey sales volumes decreased
1.7% even though 52 weeks of sales from the Carolina division were
included in fiscal 1996, versus 44 weeks for the previous year.
Compared to fiscal 1995, fiscal 1996 average quoted commodity prices
for whole turkeys and chickens were up 6% and 13%, respectively, but,
because of excess poultry and meat supplies, were far below those
needed to offset the increased grain cost.
Rather than accept uneconomic prices, management elected to build
turkey finished goods inventories during the third and fourth
quarters. This resulted in higher than usual inventory volumes at
fiscal year end. Since then, finished goods inventory levels have been
brought down by over 20% and are anticipated to be further reduced to
near normal levels by calendar year end.
Cost of sales increased $112.8 million or 14.4%, because of higher
volumes sold and high grain costs. Higher corn and soybean costs in
fiscal 1996 caused approximately $58 million of the increase in cost
of sales. The average price paid for corn was 46% higher, while
soybean meal was 23% higher than last year. Grain futures prices have
moved modestly lower since the end of the fiscal year, but still
remain higher on an annual average than last year. Management expects
that grain prices will remain high at least until the harvest is
completed. Due to the production cycle of poultry, it takes up to
three months for the impact of a price change in grains to change
product costs.
The company has various ways to purchase grain. These include cash
purchasing, forward pricing, grain futures and options. During fiscal
1996, the company only used cash purchasing and continues to do so.
Production volumes were reduced by decreasing chicken placements by 5%
and turkey live weights by 10% during the third and fourth quarters.
As a result, producer payments were affected since, with less
production, many received less pay. These reductions will be adjusted
as industry conditions warrant.
During the second half of fiscal 1996, management concentrated its
efforts on reducing costs throughout the company. Cost cuts included
centralizing purchasing, staff reductions and changing the North
Carolina turkey processing operation to a single shift, without
reducing production levels. Cost reductions throughout the
2
<PAGE>
company will generate at least $20 million of savings annually, but
only a portion of these savings were reflected in fiscal 1996
operating results.
Disease is a risk the company faces while growing poultry. In fiscal
1996, the company was once again adversely affected by Poult Enteritis
Mortality Syndrome (PEMS, commonly referred to as spiking mortality)
in its North Carolina turkey operations. Although excessive mortality
and poor feed conversion caused by the disease combined to increase
product costs over those of unaffected flocks, the financial impact of
the disease in fiscal 1996 was comparable to fiscal 1995.
The drug introduced last fall to combat the disease showed favorable
results in certain flocks this summer. The more seriously affected
flocks that did not respond to the medication were depopulated to
minimize ongoing costs. The company also initiated changes in flock
management practices to reduce the effects of the disease while
industry research for a cure or better containment continues.
Gross profit decreased $24.0 million or 19% to $99.7 million.
The gross profit margin decreased to 10.0% from 13.6% last year.
Selling, general and administrative expenses increased $5.9 million,
or 6.5% because of the incremental expenses of the North Carolina
turkey operation (52 weeks this year, 44 weeks last year) and
increases in freight and other sales related expenses of $3.4 million
and $3.9 million, respectively. Selling and freight expenses increased
with higher volumes sold, somewhat offset by operational efficiencies.
These higher expenses were also partially offset by a decrease in
administrative costs from company-wide centralization of
administration, cost reductions and no bonuses earned during fiscal
1996.
Operating income decreased $29.9 million to $2.4 million. Other
expense totaled $9.7 million, an increase of $3.4 million, primarily
because of interest on increased borrowings to cover higher inventory
levels and other operating needs.
The effective tax benefit was 35.9% due to limitations on the use of
operating losses in some states.
Net income decreased $20.8 million, resulting in a net loss of $4.7
million. On a per share basis, the company s loss was $0.27 for fiscal
1996 compared to a profit of $0.90 last year.
In comparing fiscal 1995 to fiscal 1994, what factors caused operating
result changes?
Overall, fiscal 1995 and 1994 had similar operating results, with
profits of $16.1 million and $16.6 million, respectively. There were
various factors that contributed to the similar net income results.
Fiscal 1995 sales increased 25% over 1994 primarily as a result of the
acquisition of the Carolina Division in August 1994. Sales pounds
increased 18% overall, with chicken sales up 2% and turkey and further
processed sales up 40% over the prior year. Average quoted commodity
prices for whole chickens and turkeys were down 8% and 1%,
respectively, because of abundant supplies of not only poultry but all
competing meats. Sales of dark turkey meat decreased significantly in
the fourth quarter, as export demand waned with the devaluation of the
Mexican peso.
Cost of sales increased 24%, primarily due to increased volumes sold,
somewhat offset by lower grain costs. Average corn prices were down
10% and soybean meal was 16% lower than in fiscal 1994. Operating
costs remained steady, with efficiency improvements offsetting
increases in labor and packaging costs.
3
<PAGE>
Gross profit margin improved for fiscal 1995, but this trend reversed
in the fourth quarter as dark meat turkey prices dropped and grain
prices increased.
Selling, general and administrative expenses rose 43.7% because of
increased sales volumes. Selling, marketing, advertising and delivery
costs were up due to the acquisition of the Carolina Division and the
change in volumes sold. Increased 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 included $1.3 million in defense costs for
the hostile takeover attempt of the company by Tyson Foods, Inc.
Other expenses increased due to interest on higher borrowing and
higher interest rates on 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% from the prior
year. Net income was $16.1 million, down $0.5 million from fiscal
1994.
How has the company s liquidity and financial condition changed during
fiscal 1996?
The company s year-end net working capital grew to $144.6 million, up
from $120.6 million last year. The current ratio was 2.2-to-1, down
from 2.7-to-1, a result of a $30 million unsecured loan funded in June
1996 to provide greater liquidity. Capital spending was reduced to
$18.8 million to conserve cash, down from the originally budgeted
amount of $30 million. Certain projects were delayed including a new
Goldsboro hatchery originally planned for fiscal 1996.
Management is negotiating with its lenders to waive and or modify
certain financial covenants of the company s existing debt agreements
and believes such requests will be granted. Under the existing
agreements, projections show one of the covenants could be violated in
fiscal 1997 at current earnings levels.
During the first half of the year, the company repurchased 0.2 million
shares of stock for $2.8 million. Because of industry conditions, no
repurchases of stock were made during the second half of the fiscal
year. In fiscal 1995, the Board of Directors authorized $30 million of
stock repurchases, of which $19.1 million has been expended to date to
acquire 1.3 million shares. No further repurchases of shares are
anticipated until industry conditions improve significantly.
Total debt to total capital was 55.1% compared to 44.7% last year.
This calculation reflects the common stock subject to repurchase as
debt. The increase came from higher borrowings to fund the acquisition
of the Goldsboro chicken complex, higher inventories and receivables,
and the repurchases of stock. Until grain costs decrease to more
normal levels and inventories are reduced, this ratio will likely
remain above the company s target range of 40% to 45%.
What resources did the company invest in its operations in fiscal
1996?
The company spent $18.8 million for capital items along with
$16.6 million in cash and stock disbursed for the Goldsboro chicken
complex. The capital projects generally were for normal replacements
and upgrades of existing assets, but included $2.4 million for a new
ice plant near Richmond, Virginia. Lease financing totaled $1.1
million for equipment, vehicles and computer equipment, all operating
leases.
Capital expenditures of $15 million are projected for fiscal 1997, but
may be increased to cover the Goldsboro hatchery, delayed in fiscal
1996. Strategic projects will be evaluated individually, based on
industry conditions and the company s position in the marketplace.
3
In fiscal 1996, the company disbursed $4.2 million for dividends and
received $1.3 million from employees, producers and shareholders for
purchases of stock.
Regulatory items
The company is in material compliance with all regulatory requirements
at the present time.
The company will adopt SFAS No. 123, Accounting for Stock-Based
Compensation in fiscal 1997. The company will elect the disclosure
provisions of the statement and continue to account for stock-based
compensation in accordance with APB Opinion No. 25. SFAS No. 121
Accounting for Long-Lived Assets and Long-Lived Assets to be Disposed
of will be adopted in fiscal 1997. These accounting standards are not
anticipated to materially impact the financial position of the company
or results of operations at the time of adoption.
What are the risks of the poultry industry?
Risks include weather conditions impacting grain production, and live
growout of poultry; disease in poultry; feed supplies and prices;
supplies and selling prices of poultry and competing meats; consumer
preferences; governmental and regulatory intervention in the
export/import of poultry; and changes in regulations governing
production processes.
Company performance expectations, or "forward looking statements"
expressed from time to time are always subject to the possible
material impact of any risks identified above. The company hopes that
1996 will remain the best, if not only, example of the adverse impact
that can result when almost all such risks present themselves in a
single year.
<PAGE>
Exhibit 13.3
Consolidated Financial Statements and Notes to Consolidated Financial Statements
<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
Dollars in thousands, except per share data
Fiscal years ended June 29, 1996, July 1, 1995
and July 2, 1994 1996 1995 1994
- ---------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Net sales (Note 11) $997,632 $908,776 $727,270
Cost of sales (Note 11) 897,892 785,085 632,620
-------- -------- --------
Gross profit 99,740 123,691 94,650
Selling, general and administrative expenses 97,324 91,420 63,606
-------- -------- --------
Operating income 2,416 32,271 31,044
Other expense:
Interest expense (Note 4) 9,359 6,666 4,989
Other expense (income), net 321 (332) (431)
-------- -------- --------
Other expense, net 9,680 6,334 4,558
-------- -------- --------
Earnings (loss) before income taxes and
minority interest (7,264) 25,937 26,486
Income tax expense (benefit) (Note 7) (2,610) 9,749 9,897
Minority interest in net earnings of
consolidated subsidiary 32 55 38
-------- -------- --------
Net Earnings (loss) (4,686) 16,133 16,551
======== ======== ========
Net Earnings (loss) per common share $(0.27) $0.90 $1.01
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
Dollars in thousands
June 29, 1996 and July 1, 1995 1996 1995
- ------------------------------------------------- --------- ---------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $724 $706
Accounts receivable, less allowance for doubtful 79,932 63,194
accounts of $708 and $613
Inventories (Note 3) 171,946 125,849
Income tax receivable 10,802 1,828
Other current assets 4,275 1,355
-------- --------
Total current assets 267,679 192,932
Investments 745 949
Property, plant and equipment, net (Note 4) 176,691 174,163
Other assets 6,006 4,481
-------- --------
Total Assets $451,121 $372,525
======== ========
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable to banks (Note 5) $30,776 $ -
Current maturities of long-term debt (Note 5) 7,983 8,028
Excess checks over bank balances 14,788 3,948
Trade accounts payable 31,989 28,021
Accrued expenses 23,887 22,036
Deferred income taxes (Note 7) 12,574 9,299
Other current liabilities 1,061 1,038
-------- --------
Total current liabilities 123,058 72,370
Long-term debt, excluding current maturities (Note 5) 138,510 106,481
Deferred income taxes (Note 7) 8,849 8,730
Minority interest in consolidated subsidiary 552 527
Other liabilities and deferred credits 3,392 3,323
Commitments and other matters (Notes 6, 8, 10 and 11)
Common stock subject
to repurchase (Notes 2 and 8) 17,750 17,750
Shareholders' equity (Notes 8 and 9)
Common stock, no par value 61,407 56,782
Additional paid-in capital 2,974 3,014
Retained earnings 94,629 103,548
-------- --------
Total shareholders' equity 159,010 163,344
-------- --------
Total Liabilities and Shareholders' Equity $451,121 $372,525
======== ========
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Shareholders' Equity
</TABLE>
2
<PAGE>
<TABLE>
Dollars and shares in thousands, except per share data
<CAPTION>
Fiscal years ended June 29, Additional
1996, July 1, 1995 and July 2, Common Stock Paid-In Retained
1994 Shares Amount Capital Earnings Total
- ------------------------------ -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
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
Net loss (4,686) (4,686)
Common stock dividends declared
- $0.24 per share (4,233) (4,233)
Issuance of common stock
for acquisition of
businesses (Note 2) 457 6,028 6,028
Common stock issued under Stock
Option Plan including tax
benefit of $104 20 78 78
Other common stock issued 102 1,298 1,298
Common stock repurchased (195) (2,779) (40) (2,819)
------ ------- ------ ------- --------
Balance at June 29, 1996 17,682 $61,407 $2,974 $94,629 $159,010
====== ======= ====== ======= ========
</TABLE>
3
<PAGE>
<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Dollars in thousands
Fiscal years ended June 29, 1996, July 1, 1995
and July 2, 1994 1996 1995 1994
- ------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) $(4,686) $16,133 $16,551
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation 28,243 24,817 21,333
(Gain) loss on sales of property, plant and equipment 67 (218) (12)
Deferred income taxes 2,339 1,919 8,449
Other, net 395 498 520
Change in operating assets and liabilities net of
acquired businesses:
(Increase) decrease in accounts receivable (16,583) 4,069 (11,215)
Increase in inventories (43,233) (14,430) (6,319)
Increase in other current assets (11,766) (878) (961)
Increase (decrease) in accounts payable 3,298 (2,713) 2,486
Increase (decrease) in accrued expenses and other 1,656 3,500 (350)
------- ------- -------
Net cash provided by (used in) operating activities (40,270) 32,697 30,482
Cash Flows From Investing Activities:
Additions to property, plant and equipment (18,771) (17,251) (19,186)
Acquisition of businesses (Note 2) (10,565) (42,489) -
Proceeds from sales of property, plant and equipment 833 1,505 140
(Additions to) proceeds from dispositions of other
assets 819 302 (44)
Minority interest in net earnings of consolidated
subsidiary, net of dividends 25 52 34
------- ------- -------
Net cash used in investing activities (27,659) (57,881) (19,056)
Cash Flows From Financing Activities:
Net increase (decrease) in notes payable to banks
and revolver debt 70,776 25,600 (3,500)
Issuance of long-term debt 48,541 -
Principal payments on long-term debt (8,016) (25,020) (6,489)
Issuance of common stock 1,376 736 864
Repurchase of common stock (2,819) (16,259) -
Increase (decrease) in excess checks over bank balances 10,840 (4,563) 1,298
Dividends paid (4,210) (3,916) (3,508)
------ ------- -------
Net cash provided by (used in) financing activities 67,947 25,119 (11,335)
------ ------- -------
Increase (decrease) in cash and cash equivalents 18 (65) 91
Cash and cash equivalents at beginning of fiscal year 706 771 680
------ ------- -------
Cash and cash equivalents at end of fiscal year $724 $706 $771
====== ====== ======
4
<PAGE>
WLR Foods, Inc. and Subsidiaries
<CAPTION>
Consolidated Statements of Cash Flows Continued
Supplemental cash flow information:
Cash paid for:
Interest $8,906 $6,555 $4,808
Income taxes 3,213 8,418 2,039
====== ====== ======
</TABLE>
Non-cash financing activities:
In fiscal 1996: The Company issued 456,936 shares of WLR Foods, Inc.
common stock valued at $6.0 million for the acquisition
of New Hope Feeds, Inc. and a related company. (Note 2)
In fiscal 1995: The Company issued 1,774,999 shares of WLR Foods, Inc.
common stock valued at $28.4 million including $17.8
million of common stock subject to repurchase, in
conjunction with the acquisition of Cuddy Farms, Inc.
- USA Food Division. (Notes 2 and 8)
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
WLR FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
Organization
WLR Foods, Inc. and Subsidiaries (WLR Foods, or the Company) are
primarily engaged in fully integrated turkey and chicken production,
processing, further processing and marketing. The Company's operations
are predominately located in the mid-Atlantic region of the United
States. WLR Foods sells products through a variety of selected
national and international retail, food service and institutional
markets.
Fiscal year
The Company's fiscal year ends on the Saturday closest to June 30.
Fiscal years 1996, 1995 and 1994 ended on June 29, 1996, July 1, 1995
and July 2, 1994, respectively, and included 52 weeks in each year.
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 June 29, 1996,
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
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
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. 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.
Net Earnings Per Common Share
Net earnings per common share are based on the weighted average number
6
<PAGE>
of common shares and common share equivalents outstanding during the
fiscal years (17,527,876 shares, 17,858,942 shares and 16,450,718
shares in 1996, 1995, and 1994, respectively).
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.
Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires the Company to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Reclassification
Certain 1995 and 1994 amounts have been reclassified to conform with
fiscal 1996 presentations.
2. Business Acquisitions
Each transaction discussed here has been accounted for as a purchase,
and, accordingly, the financial statements herein include the net
assets acquired at fair value and the results of operations of the
acquired businesses from the date of acquisition.
On September 29, 1995 the Company acquired substantially all of the
assets of New Hope Feeds, Inc. and an affiliated company for $10.6
million in cash, including costs, and $6.0 million in stock. The
assets included a new chicken processing facility, a feedmill, a
hatchery, and related operating equipment. The transaction was
recorded as follows:
Dollars in thousands
Inventories $2,864
Other current assets 283
Property, plant and equipment 12,900
Other assets 2,537
------
Total assets acquired 18,584
Cash paid (including costs) 10,565
Issuance of common stock 6,028
------
Total liabilities assumed $1,991
======
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.
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.- USA Food Division for $39.1
million in cash and 1,774,999 shares of common stock valued at $28.4
million.
7
<PAGE>
The transaction was recorded as follows:
Dollars in thousands
Accounts receivable $14,758
Inventories 28,372
Other current assets 30
Property, plant and equipment, net 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.
Dollars in thousands, except per share data Pro-forma unaudited
Fiscal year ended
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
3. Inventories
A summary of inventories at June 29, 1996 and July 1, 1995 follows:
Dollars in thousands 1996 1995
------- -------
Live poultry and breeder flocks $71,263 $54,487
Processed poultry and meat products 66,895 41,262
Packaging supplies, parts and other 18,046 19,704
Feed, grain and eggs 15,742 10,396
-------- --------
Total inventories $171,946 $125,849
======== ========
4. Property, Plant and Equipment
WLR Foods investment in property, plant and equipment at June 29, 1996
and July 1, 1995 was as follows:
Dollars in thousands 1996 1995
------- -------
Land and improvements $21,348 $20,361
Buildings and improvements 116,006 109,368
Machinery and equipment 172,280 168,228
Transportation equipment 28,871 25,371
Construction in progress 5,764 3,236
------- -------
344,269 326,564
Less accumulated depreciation 167,578 152,401
------- -------
Property, plant and equipment, net $176,691 $174,163
======== ========
The Company capitalized interest costs with respect to certain major
construction projects of $91,000, $146,000, and $82,000 in fiscal
years 1996, 1995 and 1994, respectively.
8
<PAGE>
5. Long-Term Debt and Bank Revolving Credits
Long-term debt and other credit facilities at June 29, 1996
and July 1, 1995 consisted of the following obligations:
Dollars in thousands 1996 1995
------- -------
Fixed Rate Notes:
9.41% Senior Unsecured Notes due 2001 $21,000 $24,000
7.47% Senior Unsecured Notes due 2007 22,000 22,000
Variable Rate Notes:
Unsecured Bank Term Note due 2002 20,536 24,107
Unsecured Bank Term Note due 1997 30,000 -
Revolving Credit Notes:
Unsecured Bank Revolving Credit Note due 1997 776 -
Unsecured Bank Revolving Credit Note due 1998 75,000 35,000
Other Notes:
Other notes with various terms and rates 7,957 9,402
-------- --------
Total long term debt 177,269 114,509
Less revolving debt maturing in less than 1 year 776 -
Less term note maturing in less than 1 year 30,000 -
Less current maturities of long-term debt 7,983 8,028
-------- --------
Long-term debt and revolving debt,
excluding current maturities $138,510 $106,481
======== ========
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 semiannual basis through
maturity. Annual 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 a
spread of 60 to 100 basis points, depending on the Company's total
debt-to-capitalization ratio. 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 $3.6 million.
The $30 million Unsecured Bank Term Note is a 9 month facility
executed in June 1996. The note matures March 31, 1997 with the same
interest rate as the Unsecured Bank Term Note.
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 June 29, 1996,
$75 million was outstanding, with $10 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 based on the Company's capital ratio with a range
between LIBOR plus 35 basis points and LIBOR plus 75 basis points. The
second revolving credit facility is a $10 million facility maturing in
March 1997. At June 29, 1996, $0.8 million was outstanding. 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 terms of the Company's borrowing agreements with several lenders
contain restrictive financial covenants which include the maintenance
of minimum tangible net worth, as defined, and certain financial
ratio's. The Company complied with all covenants at June 29, 1996.
The Company has assessed through projections, it is probable that it
will not meet certain financial covenants during fiscal 1997. The
Company is in the process of negotiating with its lenders to modify
the covenants or restructure its debt. Management expects to resolve
this issue in the near future without a material impact on the
financial position or results of operations of the Company.
9
<PAGE>
The fair value of the fixed rate notes is estimated at $44 million
based on quoted market prices for similar issues at June 29, 1996. The
carrying value of all other debt approximates fair value at June 29,
1996.
Required annual principal repayments of long-term debt and revolving
credits with original maturities of greater than one year are as
follows:
Dollars in thousands
Fiscal 1997 $ 7,983
Fiscal 1998 83,024
Fiscal 1999 7,566
Fiscal 2000 7,566
Fiscal 2001 13,581
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 $1.7
million, $2.3 million and $2.1 million, for fiscal 1996, 1995 and
1994, respectively.
7. Income Taxes
The provision for income taxes from operations was as follows for
fiscal years 1996, 1995 and 1994:
Dollars in thousands 1996 1995 1994
------- ------ -----
Current:
Federal $(4,092) $6,211 $948
State (857) 1,619 500
------- ----- -----
(4,949) 7,830 1,448
Deferred:
Federal 1,788 1,638 7,477
State 551 281 972
----- ----- -----
2,339 1,919 8,449
----- ----- -----
Total tax provision (benefit) $(2,610) $9,749 $9,897
======= ====== ======
The provision for income taxes differs from the amounts resulting from
applying the federal statutory tax rates (35%) to earnings before
income taxes and minority interest as follows for fiscal years 1996,
1995 and 1994:
Dollars in thousands 1996 1995 1994
------ ------ ------
Taxes computed using federal statutory
tax rates $(2,542) $9,078 $9,270
State income tax expense, net of
federal tax effect (199) 908 957
Other, net 131 (237) (330)
------- ------ -----
Total tax provision $(2,610) $9,749 $9,897
======= ====== ======
Effective tax rate 35.9% 37.6% 37.4%
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at June
29, 1996 and July 1, 1995 are listed below.
10
<PAGE>
Dollars in thousands 1996 1995
------- ------
Deferred tax liabilities:
Inventories, principally due to the accounting
for live inventories on the farm price method
for tax purposes $(18,152) $(14,376)
Plant and equipment, principally due to
differences in depreciation and capitalized
interest (9,485) (9,465)
Investments in subsidiary companies, principally
due to undistributed net income of the subsidiary (375) (357)
-------- --------
Gross deferred tax liabilities (28,012) (24,198)
Deferred tax assets:
Insurance accruals, principally due to
the timing of payments verses the recording
of expense $3,281 $2,478
Net operating loss carryforwards 465 -
Deferred compensation, principally due to
accrual for financial reporting purposes 945 955
Alternative minimum tax credit carryforward 836 836
Compensated absences, principally due to
accrual for financial reporting purposes 970 970
Accounts receivable, principally due to
allowance for doubtful accounts 276 241
Other 281 689
-------- --------
Gross deferred tax assets 7,054 6,169
Valuation allowance on deferred tax assets (465) -
----- -----
Net deferred tax liability $(21,423) $(18,029)
======== ========
The valuation allowance for deferred tax assets was $465,000 at June
29, 1996 (none at July 1, 1995). In assessing the recoverability of
deferred tax assets, management considers whether it is reasonably
probable that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of the deferred tax assets is
dependent on the generation of future taxable income, during the
periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based on the level of
historical operating results, future expectation of taxable income and
reversal of deferred tax liabilities, management believes it is more
likely than not the company will realize the benefits of these
deductible differences, net of the existing valuation allowance at
June 29, 1996. The valuation allowance is a result of limitations on
the use of operating losses in some states where the Company does
business.
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
11
<PAGE>
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, in either case, 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
17,681,893 outstanding on June 29, 1996, and 17,297,671 outstanding on
July 1, 1995. Additionally, there are 50,000,000 shares of preferred
stock authorized with none outstanding as of June 29, 1996 or July 1,
1995.
The Common Stock subject to Repurchase arises due to WLR Foods
commitment to repurchase 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 non-qualified 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 date of the grant.
The changes in the outstanding common shares under option for fiscal
1996, 1995, and 1994 are listed below:
Common shares Option
under option price
------------ -----
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
Canceled or expired (110,120) $11.92 to $20.00
Exercised (148,255) $11.92
Granted in fiscal 1996 190,500 $14.13
-------- ------
Outstanding at June 29, 1996 700,375 $11.92 to $20.00
======= ================
At June 29, 1996 there were 376,333 shares exercisable under options.
12
<PAGE>
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.
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 2002. Total rent expense was approximately $3.5
million, $2.7 million, and $1.4 million for fiscal 1996, 1995, and
1994, 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
June 29, 1996:
Dollars in thousands
Fiscal 1997 $1,962
Fiscal 1998 1,383
Fiscal 1999 1,084
Fiscal 2000 686
Fiscal 2001 476
Fiscal 2002 and thereafter 323
------
Total minimum lease payments $5,914
======
11. Related Party Transactions
Certain directors of WLR Foods are contract growers 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.
(as an affiliate of Cuddy International) became a related party. The
1996 and 1995 transactions include poult purchases and feed sales to
Cuddy Farms based on pricing formulas 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
from related Sales to
Dollars in thousands parties related parties
---------- ---------------
Fiscal 1996 $25,433 $10,237
Fiscal 1995 21,020 7,939
Fiscal 1994 1,522 -
In management's opinion, all related party transactions are conducted
under normal business conditions, with no preferential treatment given
to related parties.
13
<PAGE>
12. Selected Quarterly Financial Data (Unaudited)
The unaudited summary of quarterly results for fiscal 1996 and 1995
follows:
Dollars in thousands, except per share data
Fiscal year ended June 29, 1996 First Second Third Fourth
-------- -------- -------- --------
Net sales $250,798 $267,795 $216,263 $262,776
Operating income (loss) 8,947 9,919 (9,274) (7,176)
Net earnings (loss) 4,296 4,843 (7,062) (6,763)
Per share data:
Net earnings (loss) per common
share $0.25 $0.28 $(0.40) $(0.38)
Dividends declared per common
share $0.06 $0.06 $0.06 $0.06
Market price (bid)-high 14.50 16.50 16.25 14.00
-low 12.75 13.25 12.50 11.75
Fiscal year ended July 1, 1995 First Second Third Fourth
-------- -------- -------- --------
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
Per share calculations are based on each stand alone period presented;
therefore, the annual per share results may not be the sum of the four
quarters.
14
<PAGE>
[KPMG PEAT MARWICK LETTERHEAD]
Exhibit 13.4
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 June 29, 1996 and July 1, 1995
and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the fiscal years in the three-year
period ended June 29, 1996. 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 June 29, 1996 and
July 1, 1995 and the results of their operations and their cash flows
for each of the fiscal years in the three-year period ended July 29,
1996, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Richmond, Virginia
August 14, 1996
<PAGE>
Exhibit 21
Subsidiary State of Incorporation
Wampler Foods, 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
23668
<PAGE>
Exhibit 23
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),
on Form S-3 (No. 33-48293, No. 33-63368 and No. 33-56775) and on Form
S-3(D) (No. 33-54692) of WLR Foods, Inc. of our reports dated August
14, 1996, relating to the consolidated balance sheets of WLR Foods,
Inc. and subsidiaries as of June 29, 1996 and July 1, 1995 and the
related consolidated statement of operations, shareholders' equity and
cash flows for each of the fiscal years in the three-year period ended
June 29, 1996 and the related schedule which reports appear or are
incorporated by reference in the June 29, 1996 annual report on Form
10-K of WLR Foods, Inc.
KPMG PEAT MARWICK LLP
Richmond, Virginia
September 26, 1996
<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
Robert T. Ritter, 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.
_8/20/96____ /s/ John J. Broaddus________________(SEAL)
Date John J. Broaddus
_8/20/96____ /s/ Jane T. Brookshire______________(SEAL)
Date Jane T. Brookshire
_8/20/96____ /s/ George E. Bryan_________________(SEAL)
Date George E. Bryan
_8/20/96____ /s/ Charles L. Campbell_____________(SEAL)
Date Charles L. Campbell
_8/20/96____ /s/ Stephen W. Custer_______________(SEAL)
Date Stephen W. Custer
_8/20/96____ /s/ Calvin G. Germroth______________(SEAL)
Date Calvin G. Germroth
_8/20/96____ /s/ William H. Groseclose___________(SEAL)
Date William H. Groseclose
_8/20/96____ /s/ J. Craig Hott___________________(SEAL)
Date J. Craig Hott
_8/20/96____ /s/ Herman D. Mason_________________(SEAL)
Date Herman D. Mason
_8/20/96____ /s/ Chas. Wampler, Jr.______________(SEAL)
Date Charles W. Wampler, Jr.
_8/20/96____ /s/ William D. Wampler______________(SEAL)
Date William D. Wampler
_8/21/96____ /s/ Henry L. Holler_________________(SEAL)
Date Henry L. Holler
_8/21/96____ /s/ James L. Keeler_________________(SEAL)
Date James L. Keeler
_8/20/96____ /s/ James L. Mason__________________(SEAL)
Date James L. Mason
_8/20/96____ /s/ V. Eugene Misner________________(SEAL)
Date V. Eugene Misner
_8/20/96____ /s/ Robert T. Ritter________________(SEAL)
Date Robert T. Ritter
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760775
<NAME> GAYLE S PAYNE
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> JUN-29-1996
<CASH> 724
<SECURITIES> 0
<RECEIVABLES> 80,640
<ALLOWANCES> 708
<INVENTORY> 171,946
<CURRENT-ASSETS> 267,679
<PP&E> 344,269
<DEPRECIATION> 167,578
<TOTAL-ASSETS> 451,121
<CURRENT-LIABILITIES> 123,058
<BONDS> 138,510
0
0
<COMMON> 61,407
<OTHER-SE> 97,603
<TOTAL-LIABILITY-AND-EQUITY> 451,121
<SALES> 997,632
<TOTAL-REVENUES> 997,632
<CGS> 897,892
<TOTAL-COSTS> 897,892
<OTHER-EXPENSES> 97,324
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,359
<INCOME-PRETAX> (7,264)
<INCOME-TAX> (2,610)
<INCOME-CONTINUING> (4,686)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,686)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> 0
</TABLE>
