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 28, 1997, June 29, 1996
 and July 1, 1995                                      1997        1996        1995
-----------------------------------------------       -------     -------     -------  
<S>                                                  <C>          <C>         <C>
Net sales (Note 11)                                  $1,013,777   $997,632    $908,776 
Cost of sales (Note 11)                                 956,948    897,892     785,085 
                                                     ----------   --------    -------- 
    Gross profit                                         56,829     99,740     123,691 
Selling, general and administrative expenses             95,728     97,324      91,420 
                                                     ----------   --------    -------- 
    Operating income (loss)                             (38,899)     2,416      32,271 
Other expense:
    Interest expense (Note 4)                            13,143      9,359       6,666 
    Other expense (income), net                          (1,646)       321        (332)
                                                     ----------   --------    -------- 
    Other expense, net                                   11,497      9,680       6,334 
Earnings (loss) before income taxes and minority
 interest                                               (50,396)    (7,264)     25,937 
Income tax expense (benefit)(Note 7)                    (18,260)    (2,610)      9,749 
Minority interest in net earnings of consolidated
 subsidiary                                                  47         32          55 
                                                     ----------   --------    -------- 
Net Earnings (loss)                                  $  (32,183)  $ (4,686)   $ 16,133 
                                                     ----------   --------    -------- 
Net Earnings (loss) per common share                 $    (1.86)  $  (0.27)   $   0.90 
                                                     ==========   ========    ======== 

See accompanying Notes to Consolidated Financial Statements.
</TABLE>
                                          1
<PAGE>

<TABLE>

WLR Foods, Inc. and Subsidiaries
Consolidated Balance Sheets

<CAPTION>
Dollars in thousands, 
June 28, 1997 and June 29, 1996                                        1997        1996 
-------------------------------                                       ------      ------
<S>                                                                 <C>        <C>
Assets
Current Assets                                                                
    Cash and cash equivalents                                       $    283   $    724 
    Accounts receivable, less allowance for doubtful accounts of
     $1,550 and $708                                                  72,462     79,932 
    Inventories (Note 3)                                             165,551    171,946 
    Income taxes receivable                                            4,567     10,802 
    Other current assets                                               2,301      4,275 
                                                                    --------   -------- 
       Total current assets                                          245,164    267,679 
Property, plant and equipment, net (Note 4)                          159,426    176,691 
Deferred income taxes (Note 7)                                         4,996          - 
Other assets                                                           7,142      6,751 
                                                                    --------   -------- 
Total Assets                                                        $416,728   $451,121 
                                                                    ========   ======== 
Liabilities and Shareholders' Equity
Current Liabilities
    Notes payable to banks (Note 5)                                 $  4,031   $ 30,776 
    Current maturities of long-term debt (Note 5)                    186,391      7,983 
    Excess checks over bank balances                                  12,118     14,788 
    Trade accounts payable                                            35,005     31,989 
    Accrued expenses                                                  26,657     23,887 
    Deferred income taxes (Note 7)                                    12,359     12,574 
    Other current liabilities                                              -      1,061 
                                                                    --------   -------- 
       Total current liabilities                                     276,561    123,058 
Long-term debt, excluding current maturities (Note 5)                  5,040    138,510 
Deferred income taxes (Note 7)                                             -      8,849 
Minority interest in consolidated subsidiary                             592        552 
Other liabilities and deferred credits                                 3,539      3,392 
Commitments and other matters (Notes 6, 8, 10, and 11)
Common stock subject to repurchase (Note 8)                            4,438     17,750 
Shareholders' equity (Notes 8 and 9) 
    Common stock, no par value                                        64,206     61,407 
    Additional paid-in capital                                         2,974      2,974 
    Retained earnings                                                 59,378     94,629 
                                                                    --------   -------- 
       Total shareholders' equity                                    126,558    159,010 
                                                                    --------   -------- 
Total Liabilities and Shareholders' Equity                          $416,728   $451,121 
                                                                    ========   ======== 



See accompanying Notes to Consolidated Financial Statements.
</TABLE>

                                          2

<PAGE>

<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<CAPTION>


Dollars and shares in thousands,
 except per share data                                        Additional
Fiscal years ended June 28, 1997,               Common Stock   Paid In    Retained
 June 29, 1996 and July 1, 1995                Shares   Amount Capital    Earnings   Total
-------------------------------------------  -------   -------  ------     -------  ------- 
<S>                                           <C>     <C>       <C>        <C>     <C>
Balance at July 2, 1994                       16,514  $ 61,416  $3,253     $91,488 $156,157
Net Earnings                                                                16,133   16,133 
Cash dividends declared-$0.22 per share                                     (4,073)  (4,073)
Issuance of common stock for acquisition
 of businesses                                 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)
Cash 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 
Net loss                                                                   (32,183) (32,183)
Cash dividends declared-$0.12 per share                                     (2,078)  (2,078)
Stock dividend                                    85       976                (990)     (14)
Other common stock issued                        161     1,823                        1,823 
Common stock repurchased (Note 8)             (1,331)        -                            - 
                                              ------    ------  ------     -------  ------- 
Balance at June 28, 1997                      16,597  $ 64,206  $2,974     $59,378 $126,558 
                                              ======   =======  ======     ======= ======== 


See accompanying Notes to Consolidated Financial Statements.
</TABLE>
                                          3

<PAGE>

<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows


<CAPTION>
Dollars in thousands
Fiscal years ended June 28, 1997, June 29, 1996
 and July 1, 1995                                               1997      1996      1995
-----------------------------------------------                -------   -------   ------ 
<S>                                                           <C>        <C>      <C>
Cash Flows From Operating Activities:
Net earnings (loss)                                           $(32,183)  $(4,686) $16,133 
Adjustments to reconcile net earnings (loss) to net cash
 provided by (used in) operating activities:
Depreciation                                                    28,088    28,243   24,817 
(Gain) loss on sales of property, plant and equipment              772        67     (218)
Deferred income taxes                                          (14,060)    2,339    1,919 
Other, net                                                         286       395      498 
Change in operating assets and liabilities net of
 acquired businesses:
    (Increase) decrease in accounts receivable                   7,470   (16,583)   4,069 
    (Increase) decrease in inventories                           6,395   (43,233) (14,430)
    (Increase) decrease in other current assets                  8,209   (11,766)    (878)
    Increase (decrease) in accounts payable                      3,016     3,298   (2,713)
    Increase in accrued expenses and other                       2,917     1,656    3,500 
                                                               -------   -------  ------- 
Net cash provided by (used in ) operating activities            10,910   (40,270)  32,697 

Cash Flows From Investing Activities:
Additions to property, plant and equipment                     (11,245)  (18,771) (17,251)
Acquisition of businesses                                         (200)  (10,565) (42,489)
Proceeds from sales of property, plant and equipment               424       833    1,505 
(Additions to) proceeds from dispositions of other assets         (677)      819      302 
Minority interest in net earnings of consolidated subsidiary,
 net of dividends                                                   40        25       52 
                                                               -------   -------  ------- 
Net cash used in investing activities                          (11,658)  (27,659) (57,881)

Cash Flows From Financing Activities:
Issuance of long-term and revolver debt                         74,031    70,776   74,141 
Reduction of long-term debt                                    (55,838)   (8,016) (25,020)
Issuance of common stock                                         1,235     1,376      736 
Repurchase of common stock                                     (13,312)   (2,819) (16,259)
Increase (decrease) in excess checks over bank balances         (2,670)   10,840   (4,563)
Dividends paid                                                  (3,139)   (4,210)  (3,916)
                                                               -------   -------  ------- 
Net cash provided by financing activities                          307    67,947   25,119 
                                                               -------   -------  -------
Increase (decrease) in cash and cash equivalents                  (441)       18      (65)
Cash and cash equivalents at beginning of fiscal year              724       706      771 
                                                               -------   -------  ------- 
Cash and cash equivalents at end of fiscal year               $    283   $   724  $   706 
                                                               =======   =======  ======= 

                              4
</TABLE> 
<PAGE>

<TABLE>
WLR Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows Continued

<CAPTION>

<S>                                                            <C>        <C>
Supplemental cash flow information:
Cash paid (received) for:
    Interest                                                   $12,297    $8,906   $6,555 
    Income taxes                                               (10,608)    3,213    8,418 
                                                               =======   =======  ======= 
</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. (Note 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 predominantly 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 1997, 1996 and 1995 ended on June 28, June 29 and July
1, 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 cost 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.
The Company uses futures contracts and forward purchases to hedge the
risk of fluctuating grain prices.  The results of closed hedging
transactions become part of the cost of the related inventory items,
and gains and losses in the market value of open hedging contracts are
reported as an adjustment to the carrying amount of the hedged item.

Property, Plant and Equipment
Property, plant and equipment are stated at cost.  Depreciation is
computed using the straight-line method over the useful lives of the
respective assets.  In general, the estimated useful lives for
computing depreciation are: 15 to 20 years for buildings; 3 to 5 years
for machinery and equipment; and 4 to 6 years for transportation
equipment.  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
carryforwards.  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
of common shares and common share equivalents outstanding during the
fiscal years (17,276,274 shares, 17,527,876 shares and 17,858,942
shares in 1997, 1996 and 1995, respectively).

                                   6

<PAGE>

Financial Instruments
The estimated fair value of financial instruments has been determined
by the Company using available market information.  Except for
financial instruments used for hedging and debt instruments (Notes 3
and 5), the carrying amounts of all financial instruments approximate
their fair values due to their short maturities.  

Accounting Change
In fiscal year 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.  SFAS
No. 121 requires companies to review assets for impairment whenever
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of this statement did not have an impact on
the Company s consolidated financial statements.  

Stock-Based Compensation
In fiscal year 1997, the Company also adopted Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock Based
Compensation.  As permitted under SFAS No. 123, the Company continues to
account for employee stock option plans using the intrinsic value
method of accounting (Note 9).

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 at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during
the reporting periods.  Actual results could differ from those
estimates.

Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform with
fiscal 1997 presentations.

2.  Business Acquisitions

The transaction discussed here has been accounted for as a purchase,
and, accordingly, the consolidated financial statements herein include
the net assets acquired at fair value and the results of operations of
the acquired business 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
                                   =======
3. Inventories

A summary of inventories at June 28, 1997 and June 29, 1996 follows:

Dollars in thousands                      1997        1996 
                                        --------     --------
Live poultry and breeder flocks         $ 74,984     $ 71,263 
Processed poultry and meat products       53,981       66,895 
Packaging supplies, parts and other       17,188       18,046 
Feed, grain and eggs                      19,398       15,742 
                                        --------     --------
Total inventories                       $165,551     $171,946 
                                        ========     ========

                                   7

<PAGE>

The notional amounts of grain futures contracts were $21.2 million at
June 28, 1997.  The fair value of all derivative instruments used in
hedging at June 28, 1997 was $19.3 million.  There were no outstanding
amounts at June 27, 1996.

4. Property, Plant and Equipment

WLR Foods' investment in property, plant and equipment at June 28,
1997 and June 29, 1996 was as follows:

Dollars in thousands                 1997           1996 
                                   --------       --------
Land and improvements             $  22,161      $  21,348 
Buildings and improvements          119,190        116,006 
Machinery and equipment             179,243        172,280 
Transportation equipment             26,720         28,871 
Construction in progress              2,443          5,764 
                                   --------       --------
                                    349,757        344,269 
Less accumulated depreciation       190,331        167,578 
                                   --------       --------
Property, plant and equipment, net  159,426        176,691 
                                   ========       ========

The company capitalized interest costs with respect to certain major
construction projects of $91,000, and $146,000 in fiscal years 1996
and 1995, respectively.  The Company did not have any capitalized
interest costs in fiscal year 1997.

5.  Long-Term Debt and Bank Revolving Credits

Long-term debt and other credit facilities at June 28, 1997 and June
29, 1996 consisted of the following obligations:

<TABLE>

Dollars in thousands                             1997         1996 

<CAPTION>
<S>                                             <C>        <C>
                                                -------     -------
Fixed Rate Notes:
  9.41% Senior Unsecured Notes due 2001         $18,000    $ 21,000 
  7.47% Senior Unsecured Notes due 2007          22,000      22,000 
Variable Rate Notes:
  Unsecured Bank Term Note due 2002                   -      20,536 
  Unsecured Bank Term Note due 1997                   -      30,000 
Revolving Credit Notes:
  Unsecured Bank Revolving Credit Note
   due 1998 and 1997, respectively                4,031         776 
  Unsecured Bank Revolving Credit Note                        
   due 1998                                           -      75,000 
  Unsecured Bank Revolving Credit Note 
   due 2000                                     145,000           - 
Other Notes:
Notes with various terms and rates                6,431       7,957 
                                                -------     -------
Total debt                                      195,462     177,269 
Less debt reclassed as current due to the
 Company failing to meet certain covenants      182,000           -          
Less revolving debt maturing in less 
 than 1 year                                      4,031         776 
Less term note maturing in less than 
 1 year                                               -      30,000 
Less current maturities of long term debt         4,391       7,983 
                                                -------     -------
Long-term debt and revolving debt,
 excluding current maturities                   $ 5,040    $138,510 
                                                =======     =======
</TABLE>

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 semiannually.

The 7.47% Senior Unsecured Notes due 2007 were placed in June 1995.  

                                   8

<PAGE>

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 Company refinanced its bank debt in February of 1997. The new
facility is a three year $160 million revolver.  The new facility
replaces the credit note and two bank term notes.  The debt is
unsecured with an interest rate based on the London Inter-Bank
Offering Rate (LIBOR) plus a spread determined by  the Company s debt to
capital ratio, calculated on a quarterly basis (7.19% at June 28,
1997).  The loan matures in February 2000.  On June 28, 1997, $145
million was outstanding, with $11 million available for borrowing. 
The facility provides for up to $10 million of standby letters of
credit, including $4 million currently available for new standby
letters of credit.  The second revolving credit facility is a $10
million facility.  At June 28, 1997, $4 million was outstanding.

The revolving credit agreements contain various covenants, including
maintenance of a minimum tangible net worth, current ratio, fixed
charge coverage and a maximum debt-to-capital ratio.  The Company also
modified its fixed rate senior notes to conform to financial covenants
under the revolving credit note.  As of January 1, 1997, interest
payments on the fixed rate senior notes were increased by 1% over the
stated rates of the notes but may be returned to original levels under
the conditions as defined in the revised agreements.

The fair value of the fixed rate notes is estimated at $40.2 million based
on quoted market prices for similar issues at June 28, 1997.  The carrying
value of all other debt approximates fair value at June 28, 1997.

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 1998                    $  8,423
Fiscal 1999                       3,930  
Fiscal 2000                     148,924
Fiscal 2001                       9,948
Fiscal 2002                         858

The Company s credit agreements with its lenders contain restrictive
covenants which include the maintenance of minimum tangible net worth,
as defined, and certain other financial ratios.  As of June 28, 1997,
the Company was not in compliance with the minimum tangible net worth 
and the current ratio provisions set forth in its credit agreements. 
In August 1997, the Company secured waivers from its lenders covering
both provisions as of June 28, 1997.  The Company has reclassified
$182 million of the debt under these agreements as current liabilities
since the waivers only grant the Company relief for the year ended
June 28, 1997.   

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 $1.6
million, $1.7 million and $2.3 million, for fiscal 1997, 1996 and
1995, respectively.

7. Income Taxes

The provision for income taxes from operations was
as follows for fiscal years 1997, 1996 and 1995:

Dollars in thousands                        1997      1996       1995 
--------------------                       -----      -----      -----
Current:                                            
  Federal                                 $ (4,120)   $(4,092)    $6,211 
  State                                        (80)      (857)     1,619 
                                           -------    -------    ------- 
                                            (4,200)    (4,949)     7,830 
                                    9
<PAGE>
Deferred:
  Federal                                  (12,129)     1,788      1,638 
  State                                     (1,931)       551        281 
                                           --------  --------   -------- 

                                           (14,060)     2,339      1,919 
                                          --------   --------   -------- 
Total tax provision (benefit)             $(18,260)   $(2,610)    $9,749 
                                          ========   ========   ======== 

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 1997, 1996 and
1995:

Dollars in thousands                       1997       1996       1995 
-----------------------------------        -----      -----      -----
Taxes computed using federal
  statutory tax rates                     $(17,639)   $(2,542)    $9,078 
State income taxes,
  net of federal tax effect                 (1,307)      (199)       908 
Other, net                                     686        131       (237)
                                          --------    -------     ------ 
Total tax provision                       $(18,260)   $(2,610)    $9,749 
                                          ========    =======      ======
Effective tax rate                            36.2%      35.9%      37.6%

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at June 28,
1997 and June 29, 1996 are listed below:

Dollars in thousands                                  1997       1996 
---------------------------------------               -----      -----
Deferred tax liabilities:
Inventories, principally due to the                            
  accounting for live inventories on the farm                  
  price method for tax purposes                      $(18,525)  $(18,152)
Plant and equipment, principally
  due to differences in depreciation 
  and capitalized interest                             (7,718)    (9,485)
Investments in subsidiary companies,
  principally due to undistributed net
  income of the subsidiary                               (406)      (375)
Other                                                     (17)         - 
                                                      -------    ------- 
Gross deferred tax liabilities                        (26,666)   (28,012)
Deferred tax assets:
Net operating loss carryforwards                       10,000          - 
Insurance accruals, principally due to
  timing of payments versus the 
  recording of expenses                                 2,763      3,281 
Deferred compensation, principally due
  to accrual for financial reporting purposes           1,008        945 
Tax credits                                             3,079        836 
Compensated absences, principally due
  to accrual for financial reporting purposes           1,053        970 
Accounts receivable, principally due to
  allowance for doubtful accounts                         605        276 
Other                                                     795        281 
                                                      -------   -------- 
Gross deferred tax assets                              19,303      6,589 
                                                      -------   -------- 
Net deferred tax liability                           $ (7,363)  $(21,423)
                                                     ========   ======== 
                                       10
<PAGE>
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 that the Company will realize the benefits of these
deductible differences as reflected at June 28, 1997 and June 29, 1996.

8.  Shareholders  Equity and Common Stock Subject to Repurchase

In February 1994, the Board of Directors approved the adoption of the
Shareholder Protection Rights Plan (the Plan) wherein one right
attaches to and trades with each share of common stock.  Each right
entitles the registered holder to purchase from the Company at an
exercise price of $45.33, the number of shares of common stock or
participating preferred stock having a market value of twice the
exercise price.  Such participating preferred stock is designed to
have economic and voting terms similar to those of one share of common
stock.  Rights will separate from the common stock and become
exercisable following the earlier of 1) the date a person or group
acquires 15% or more of  the outstanding stock, or 2) the tenth
business day (or such later date the Board may decide) after any
person commences a tender offer that would result in such person or
group holding a total of 15% or more of the common stock.
Additionally, in either case, rights owned by the acquiring person or
group would automatically become void.

If a person 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 in 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 16,597,114
outstanding on June 28, 1997, and 17,681,893 outstanding on June 29,
1996.  Additionally, there are 50,000,000 shares of preferred stock
authorized with none outstanding as of June 28, 1997 or June 29, 1996.

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.  In January 1997, the Company entered into an
agreement to repurchase the 1,774,999 shares (approximately 10% of the
outstanding shares of its common stock) from Cuddy Farms, Inc. at $10
per share, in a private transaction.  Fifty percent of the shares were
repurchased in January 1997, 25% were repurchased in March 1997, and
the final 25% will be repurchased early in fiscal year 1998.

9. Stock Option and Stock Purchase Plans

Stock Option Plans

WLR Foods Stock Option Plan was adopted by the Board of
Directors in accordance with the Long-Term Incentive Plan which
was ratified by the shareholders of the Company on November 1,
1988.  The Plan provides for the granting of incentive or
nonqualified common stock options.  The option price under the
Plan shall not be less than the fair market value of the common
shares as of the date of the grant. The options vest after three
years, with one-third vesting each year after the date of grant. 
The options are exercisable at varying dates not to exceed 10
years from the date of grant.

                               11

<PAGE>

The changes in the outstanding common shares under option for
fiscal 1997, 1996, and 1995 are listed below:

                                     Common shares   Weighted Average
                                     under option     Exercise Price
-------------------------------      -------------  -------------
Outstanding at July 2, 1994               742,875        $14.21 
Exercised                                (137,625)       $12.33 
Granted in fiscal 1995                    163,000        $15.00 
                                         --------        ------ 
Outstanding at July 1, 1995               768,250        $14.71 
Canceled or expired                      (110,120)       $13.59 
Exercised                                (148,255)       $11.92 
Granted in fiscal 1996                    190,500        $14.13 
                                         --------        ------ 
Outstanding at June 29, 1996              700,375        $15.08 
Canceled or expired                      (159,125)       $11.92 
Granted in fiscal 1997                    178,750         $8.31 
                                         --------        ------ 
Outstanding at June 28, 1997              720,000        $13.85 
                                         ========        ====== 
There were 385,247, 376,333 and 452,875 shares exercisable under
option with weighted average exercise prices of $16.21, $14.99
and $15.31 at fiscal 1997, 1996 and 1995 respectively.  The
following table summarizes information about stock options
outstanding as of June 28, 1997:

Stock Options                                Stock
                                             Options
Outstanding:                                 Exercisable:
---------------------    --------------------------------
                                 Weighted
                                  Average
                             Remaining Contractual
Exercise Price       Shares    Life (Years)      Shares
--------------    ----------  --------------     -------- 
$8.310               178,750      10.0                  - 
14.125               171,250       9.0             57,080 
14.666               128,625       1.0            128,625 
15.000               129,250       7.9             87,417 
20.000               112,125       1.7            112,125 
                     -------                      ------- 
Total                720,000                      385,247 
                     =======                      ======= 

Accounting for Stock Option Plans

The Company has elected to account for its employee stock option plans
using the intrinsic value method of accounting.  Accordingly, no
compensation cost has been recognized in the accompanying financial
statements because the exercise price of the stock options equals the
market price of the underlying stock on the date of grant.

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123.  Assuming the Company accounted for its
employee stock options using the fair value method, the Company's net
income and earnings per share would approximate the pro forma amounts
indicated below:

Fiscal years ended
Dollars in thousands      June 28, 1997    June 29, 1996
--------------------      ---------------   -------------              

Net loss 
    As Reported              $(32,183)     $(4,686)
    Pro Forma                 (32,398)      (4,686)
Net loss per common share
    As Reported                $(1.86)      $(0.27)
    Pro Forma                   (1.88)       (0.27)


Note: The pro forma disclosures shown may not be representative of the
effects on reported net income in future years.

                                  12

<PAGE>

The fair value of each stock option grant used to compute pro forma
net income and net income per share disclosures is estimated at the
time of the grant using the Black-Scholes option-pricing model.  The
weighted-average assumptions used in the model are as follows:

                                1997                  1996
                                ----                  ----
Expected dividend yield           1.1%                1.7%
Expected volatility                43%                  3% 
Risk-free interest rate           6.8%                6.6% 
Expected term (in years)           10                   10

Using these assumptions in the Black-Scholes model, the weighted
average fair value of options granted during 1997 and 1996 is $0.6
million and $1.1 million, respectively. 

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 from 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 2004.  Total rent expense was approximately $5.7
million, $3.5 million and $2.7 million for fiscal 1997, 1996, and
1995, 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 28, 1997:

Dollars in thousands
--------------------
Fiscal 1998                                $2,025 
Fiscal 1999                                 1,719 
Fiscal 2000                                 1,290 
Fiscal 2001                                 1,028 
Fiscal 2002                                   807

Fiscal 2003 and thereafter                    697 
                                           ------ 
Total minimum lease payments               $7,566 
                                           ======
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 an August 1994 acquisition, Cuddy Farms, Inc. (as an
affiliate of Cuddy International) became a related party.  The
transactions include poultry purchases and feed sales to Cuddy Farms
at 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 (Dollars in thousands):

                         Purchases from        Sales to
                       related parties      related parties
                        ---------------      ---------------
Fiscal 1997                $23,381           $ 8,998 
Fiscal 1996                 25,433            10,237 
Fiscal 1995                 21,020             7,939 

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)

<TABLE>
The unaudited summary of quarterly results for fiscal 1997 and 1996
follows:

<CAPTION>
Dollars in thousands except 
per share data
Fiscal year ended June 28, 1997                First        Second        Third    Fourth
-------------------------------               -------       -------      -------  -------
<S>                                          <C>           <C>          <C>       <C>
Net sales                                    $272,135      $264,424     $222,225  $254,993
Operating loss                                 (9,621)       (6,225)     (12,010)  (11,043)
Net loss                                       (8,095)       (5,368)      (9,637)   (9,083)
Per share data:
   Net loss per common share                 $  (0.46)     $  (0.30)    $  (0.56) $  (0.55)
   Cash dividends declared per
    common share                             $      -      $   0.12     $      -  $      - 
   Stock dividend declared per
    common share(in shares)                         -             -      0.00525   0.00640 
   Market price(bid) - high                     13.50         13.50        12.88     10.13 
                     - low                      11.13         11.38         9.50      8.13 


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)
   Cash 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 

</TABLE>
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>