UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**FORM 10-K**
(X)    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT          OF 1934          For the fiscal year ended July1, 2000

OR

          TRANSITION REPORT PURSUANTTO 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. Employerof incorporation or organization)                                                      Identification No.)**P.O. Box 7000Broadway, Virginia 22815(Address of principal executive offices)**540-896-7001Registrant's telephone number, including area code
          Securities registered pursuant                                                                                              Name of exchange on which          to Section 12(b) of the Act:                                                                                                    registered                             N/A                                                                                                                                                 N/A

Securities registered pursuant to Section 12(g) of the Act:

Common Stock - no par value(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to filesuch 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 ofRegulation S-K (Section 229.405 of this chapter) is not contained herein, and will not becontained to the best of registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K.          X    

The aggregate value of the voting stock held by non-affiliates of the registrant as ofSeptember 1, 2000 was approximately $69,827,246. As of that date 16,194,081 shares of theregistrant's common stock were issued and outstanding.

 
**PART I

Item 1.      BUSINESS.
*GeneralWLR Foods, Inc. (with its subsidiaries, "WLR" or the"Company") was incorporated in the Commonwealth of Virginia in 1984. WLR is aleading producer, processor and marketer of poultry-based products, including fresh,frozen and further processed chicken and turkey. The Company markets products under itsWampler Foods(R) brand trademark and under various private labels to customers in theretail, foodservice and institutional markets, as well as to export customers in more than60 countries. In 2000, WLR was ranked the fourth largest turkey producer by Turkey Worldmagazine, the twelfthlargestchicken producer by Broiler Industry magazine, and the seventh largest poultry company byPoultry magazine. Company sales for fiscal 2000 were $833 million, including approximately$403 million of chicken segment sales and $422 million of turkey segment sales, andrepresenting approximately 584 million pounds and 436 million pounds of poultry productsin the chicken and turkey segments, respectively. Remaining sales were comprised ofrevenues from the Company's protein conversion plants.

The Company markets a full line of chicken and turkey products, including individuallypackaged fresh and frozen whole birds, fresh and frozen bulk parts, fresh and frozen traypacks of individual parts and a large assortment of further processed products. Byoffering a broad array of products, the Company is able to shift production among wholebirds, parts and further processed products in response to changes in customer demands andproduct prices. WLR is also actively expanding its offering of further processed products,which offers consumers added convenience and taste while generating higher margins forWLR, and for which grain costs represent a smaller percentage of overall production cost.Further processed products include a variety of salads, turkey burgers and sausage, groundturkey and chicken and various fully cooked breast products.

WLR markets branded and private label poultry products to retail, fast food,foodservice and institutional customers throughout the United States with an emphasis onthe East Coast. The Company is positioning itself as a full-service supplier to thesecustomers for poultry-based products, offering a broad assortment of branded and privatelabel products across multiple price points. In addition, WLR continues to expand itsexport sales, which have grown from approximately 4% of total Company sales in 1990 toapproximately 10% of sales in 2000.

The Company is vertically integrated and controls the growing of its poultry, and theprocessing, preparation, packaging and marketing of its products. Such integration enablesWLR to ensure a consistently high degree of product quality, and to adjust its product mixto changes in the prices of products, changes in customer requirements and to geographicimbalances in supply. As an integrated producer, the Company also is able to reduceoperating costs, improve operating efficiency and deliver a higher yield of harvestablebirds to its processing plants through improvements in processing facilities, automationand the active monitoring and management of its breeder stock, hatching and growingconditions and feed components.

Through July 1998, the Company operated a cold storage and ice manufacturing anddistribution business through its Cassco Ice and Cold Storage, Inc. (Cassco) operatingsubsidiary. In July 1998, the Company sold its Cassco subsidiary. The Company also soldits Goldsboro, North Carolina chicken complex in August 1998. The volume produced at theGoldsboro complex was replaced by the conversion of the Marshville, North Carolina turkeycomplex to chicken processing, which was completed in the first fiscal quarter of 1999.

On September 27, 2000, the Company entered into an Agreement and Plan of Merger withPilgrim's Pride Corporation ("Pilgrim's") whereby the Company will become awholly-owned subsidiary of Pilgrim's and the Company's shareholders will receive $14.25 cash for each share of Company common stock owned by them atthe effective time of the merger. The Company's Board of Directors has unanimouslyapproved the agreement. The agreement is subject to regulatory and shareholder approvalsand other customary closing conditions. The merger is expected to be completed as soon aspracticable thereafter.
***Poultry ProductionWLR Foods' primary operations include the breeding, hatching, grow-out andprocessing of turkeys and chickens. For fiscal 2000, WLR Foods produced approximately 442million pounds of dressed turkey and 723 million pounds of dressed chicken.

WLR Foods purchases breeder stock turkey eggs which it hatches and places with growerswho supply labor and housing to produce breeder flocks. These breeder flocks produce eggsthat are taken to the company-owned turkey hatchery for incubation and hatching intopoults, providing approximately 69% of the Company's poult supply. The balance of theCompany's poults are purchased from a third party. In its chicken operations, WLR Foodspurchases breeder flock chicks and places them with growers who supply labor and housingto raise the birds. The birds are then moved to breeder farms where they begin providingeggs, which are in turn transported to company-owned hatcheries. Once hatched, day-oldpoults and chicks are inspected and vaccinated against common poultry diseases. In total,WLR Foods contracts with 173 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 900 contract growers located in Virginia, West Virginia, Pennsylvania,Maryland, North Carolina and South Carolina who supply labor and housing to raise theturkeys and chickens to maturity. WLR Foods supplies feed primarily from company-ownedfeedmills and provides grower support through WLR Foods' technicians and veterinarians.

Grow-out and breeder farms provide WLR Foods with approximately 53 million square feetof growing facilities. These farms typically are grower-owned and operate under contractwith WLR Foods, providing facilities, utilities and labor. Contract growers arecompensated on a cost-based formula and several incentive-based formulas. Approximately97% of WLR Foods' turkeys and 100% of its chickens are raised by contract growers, withthe balance grown by independent growers and company-owned farms. WLR Foods strives tomaintain good contract grower relationships and believes the availability of contractgrowers is sufficient for anticipated needs.

An important factor in the grow-out of poultry is the rate at which poultry convertsfeed into body weight. The Company purchases it primary feed ingredients on the openmarket. These ingredients consist primarily of corn and soybean meal. Because the qualityand composition of feed is critical to the feed conversion rate, WLR Foods formulates andmanufactures a majority of its feed at one of its four feedmills. WLR Foods has an annualfeed manufacturing capacity of approximately 2 million tons and anticipates no difficultyin meeting the Company's feed requirements in the future.

Once the turkeys and chickens reach marketable weight, they are transported to one ofthe Company's seven poultry processing plants. These plants utilize modern, highlyautomated equipment to process and package the turkeys and chickens for sale orpreparation for further processing. Some further processing, such as deboning, skinningand ground turkey is also conducted in a number of these processing plants. Additionalfurther processing, including grinding, marinating, spicing and cooking to producedelicatessen products, frankfurters, meat salads and foodservice products is conducted atthe Company's further processing plant.
***Processing and OtherThe non-edible by-products of WLR Foods' poultry processing plants are sent toeither of its two protein conversion plants, except for by-products from the Marshville,North Carolina processing plant, which are sold to a third party vendor. The Company's twoprotein****conversion plants convert the non-edible by-products into feed ingredientsfor use in its own operations or for sale to pet food manufacturers.

The following table shows approximate sales revenues by operating segment from WLRFoods' products for the last three fiscal years.
(Dollars in Millions)
Fiscal 2000
Fiscal 1999
Fiscal 1998Chicken segment
$ 403
$ 453
$ 389Turkey segment
422
428
546Other
8
7
11Total Net Sales
$ 833
$ 888
$ 946***CompetitionThe poultry industry is highly competitive. WLR Foods markets its products incompetition with both larger and smaller poultry companies on the basis of price, qualityand service, with WLR Foods' greatest competition coming from four or five of thecountry's larger poultry producers and processors. The pricing of poultry products is socompetitive that any company with a cost advantage is in a favorable competitive position.Seasonal increases in production and customer buying patterns contribute to fluctuationsin prices which are controlled more by supply and demand than by cost of production. WLRFoods primarily markets its chicken and turkey products in the highly competitive easternsections of the United States.
***SeasonalityIn general, the Company's sales are relatively stable throughout the year.However, demand for chicken and further processed products is typically strongest in Maythrough August while demand for turkey products is typically strongest in Septemberthrough December. Management responds to this seasonality by attempting to manageoperating volumes and inventory levels, and the associated working capital requirements,to meet expected demand. As a consequence, the Company's short-term borrowings typicallypeak in the third and fourth quarters of each fiscal year, reflecting the buildup ofturkey product inventories.
***Trademarks and PatentsThe Company's Wampler Foods subsidiary markets products under the trademarksWAMPLER FOODS and WAMPLER FOODS and design, both of which are registered with the U.S.Patent and Trademark Office. Wampler Foods continues to market its products under thetrademarks TRIM FREE and THE DELI ROAST COLLECTION and design, both of which are federallyregistered trademarks. Products are also sold under the ROUND HILL, FARMER'S CHOICE, EASYCARVERS and WAMPLER, IT'S REALLY THAT GOOD ... FOR YOUR BUSINESS trademarks. Wampler Foodsmarkets its export and foreign military sales under the COLONEL ROCKINGHAM design,ROCKINGHAM and SHENVALLEY trademarks, as well as the WAMPLER FOODS trademark. 
***Government ContractsWLR Foods' government contracts are a small percent of its total sales, consistingof bids on particular products for delivery at specified locations. Contracts aregenerally bid, and the product delivered, within a one to two month period. Thesecontracts include both chicken and turkey products and can involve further processedproducts. WLR Foods had $0.8 million of governmental contracts outstanding as ofJuly 1, 2000, compared to approximately $0.2 million as of July 3, 1999.
***Foreign Sales WLR Foods' export sales constituted approximately 10% of its total annual sales ineach of fiscal 2000, 1999 and 1998. Wampler Foods has a full-time staffed export salesoffice which coordinates export sales efforts on behalf of WLR Foods. Export salesoriginate from that office and use independent brokers as needed. Sales are made tocustomers in over 60 countries.
***TransportationTransportation logistics, including the availability of transportation equipmentand the efficiency of transportation systems, are key elements in the raising of poultry,transporting feed to the contract growers, transporting poultry to the processing plants,and transporting products to customers. Delivery of the Company's products to itscustomers is generally performed by third party refrigerated trucking companies. WLR Foodshas contracts with two railroad companies for the delivery of feed ingredients to WLRFoods' feedmills.
***Raw MaterialsWLR Foods' largest cost is for basic feed ingredients, namely corn and soybeanmeal. Feed grains are commodities and, as such, are subject to volatile price changescaused by weather, size of harvest, changes in demand, transportation and storage costsand the agricultural policies of the United States and foreign governments. Although WLRFoods can, and sometimes does, purchase grain in the forward markets, it cannot completelyeliminate the potential adverse effect of grain price increases. The Company uses futurescontracts, grain options and forward purchases to hedge the risk of fluctuating grainprices. The gains and losses from hedging transactions become part of the cost of therelated inventory items, and are expensed during the time period for which the hedge wasintended.
***Environmental and Other Regulatory ComplianceWLR Foods' facilities and operations are subject to the regulatory jurisdiction ofvarious federal agencies, including the Food and Drug Administration, Department ofAgriculture, Environmental Protection Agency, Occupational Safety and HealthAdministration, and of corresponding state agencies in Virginia, West Virginia, NorthCarolina and Pennsylvania. All environmental permits, such as air, water and solid wastedisposal permits, are issued by appropriate state agencies.

A total of thirteen environmental permits or registrations are held by Wampler Foods'Virginia facilities, all but one of which were issued by the Virginia Department ofEnvironmental Quality. The Hinton turkey processing facility holds an air permit whichregulates certain combustion equipment and a water permit which regulates the treatment ofprocess wastewater and stormwater. The Harrisonburg turkey processing facility holds anair permit which regulates certain combustion equipment and a water permit issued by theHarrisonburg Regional Sewer Authority requiring pretreatment of its process wastewater tomeet certain effluent standards. Additionally, it has a general permit for stormwater.Wampler Foods' Timberville chicken processing and protein conversion facility holds awater permit which regulates the discharge of process wastewater and the disposition ofstormwater, and an air permit which regulates the operation of its protein conversionfacility, as well as certain combustion equipment. Wampler's recent connection to aprivate wastewater treatment system effectively ends the requirement for a waste permit atits Timberville facility, other than the one addressing stormwater. The chicken processingfacility in Alma/Stanley holds a registration certificate for its combustion equipment anda water permit which regulates the discharge of process wastewater and stormwater.Finally, the Broadway and Harrisonburg feedmills hold air permits which were issuedprimarily for the control and abatement of dust, as well as general permits forstormwater. In addition to the thirteen environmental permits held by Wampler Foods, WLRFoods holds a Virginia Pollution Abatement permit which allows Wampler Foods' Virginiafacilities to land apply 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 awater permit which regulates the discharge of process wastewater and an air permit whichregulates the operation of the Company's protein conversion facility. The Moorefieldfeedmill holds one air permit which was issued primarily for the control and abatement ofdust.  The Moorefield hatchery and truck garage has a permit for stormwater.

Wampler Foods' North Carolina facilities hold a total of six environmental permits, allof which were issued by the North Carolina Department of Environment, Health & NaturalResources. The Marshville processing plant holds an industrial wastewater discharge permitwhich requires processed wastewater to be pretreated prior to discharge to a regionalsewer system, and a stormwater permit which regulates stormwater discharges. In addition,the Marshville facility holds a stormwater permit which regulates cooling water and boilerblowdown discharges and a land application permit for food processing biosolids. TheWingate feedmill holds a stormwater permit which regulates stormwater discharges and anair permit which regulates emissions from boilers, bagfilters, and related equipment.

Pennsylvania facilities owned by Wampler Foods hold a total of four environmentalpermits. The Franconia further processing plant holds two permits: a water permit for thetreatment of process wastewater, and an air permit to regulate operation of certaincombustion equipment.  The New Oxford turkey processing facility holds two airpermits which regulate combustion equipment. All of the Pennsylvania permits were issuedby the Pennsylvania Department of Environmental Resources.

In addition to the foregoing environmental permits, and where not otherwise addressedabove, all facilities have taken steps to ensure compliance with stormwater regulations.Where applicable, facilities have applied for the necessary group, individual or generalstorm water permit in accordance with state and federal guidelines. Further, each facilityhas registered aboveground and underground storage tanks in accordance with relevant stateand federal regulations.

Management believes that all facilities and operations are currently in compliance withenvironmental and regulatory standards. Compliance has not had a materially adverse effectupon WLR Foods' earnings or competitive position in the past, and it is not anticipated tohave a materially adverse effect in the future.
***EmployeesWLR Foods employed approximately 7,000 persons as of July 1, 2000, none of whomwere covered by a collective bargaining agreement.
***Cautionary Statement Concerning Forward Looking InformationThis report contains certain forward-looking statements which are based onmanagement's current views and assumptions, and involve risks and uncertainties that couldsignificantly affect expected results. WLR Foods' actual results may differ materiallyfrom those in the forward-looking statements. For example, operating results may beaffected by external factors such as: actions of competitors, changes in laws andregulations, including changes in governmental interpretations of existing regulations andchanges in accounting standards, customer demand and fluctuations in cost and availabilityof feed ingredients. 
**Item 2.      PROPERTIES.**
WLR Foods' seven poultry processing facilities and one further processing plant arelocated in Virginia, West Virginia, Pennsylvania and North Carolina. The processingfacilities consist of three turkey facilities and four chicken facilities having a totalslaughter capacity of approximately 450,000 turkeys per week (single shift) and 3.65million chickens per week (double shift). WLR Foods owns and operates four feedmills witha total production capacity of approximately 2 million tons of finished feed per year; aturkey hatchery with a production capacity of approximately 350,000 poults per week andthree chicken hatcheries with a total production capacity of approximately 4.0 millionchicks per week; and two protein conversion plants with a total production capacity of5,500 tons of raw product weekly. The diversity, number and geographic proximity of itsprocessing and support facilities provide WLR Foods with operating flexibility and enableit to alter the size and mix of poultry processed among the various facilities as marketconditions change. The Company's assets are depreciated on a straight-line basis, based onthe following asset lives:

Land Improvements                  10-20 yearsBuildings & Improvements       15-20 yearsMachinery & Equipment             3-8 yearsTransportation Equipment           3-5 years

**Item 3.      LEGAL PROCEEDINGS.**

As previously reported, in February 1999, the Attorney General of the State of WestVirginia filed suit against WLR Foods and its Wampler Foods, Inc. subsidiary in theCircuit Court of Hardy County, West Virginia. The Second Amended Complaint and Motion forPreliminary Injunction alleged that Wampler provided substandard chicks and feed tobroiler growers who raise chicks for Wampler, in violation of the West Virginia ConsumerCredit and Protection Act; and that Wampler exercised monopoly control over the market forbroiler growers' services in several West Virginia counties, in violation of the WestVirginia Antitrust Act. Beyond seeking injunction relief, the suit requests treble damagesand a $100,000 civil penalty for alleged violations of the West Virginia Antitrust Act,civil penalties of $5,000 for each alleged violation of the West Virginia Consumer Creditand Protection Act, and other unspecified damages.

On February 14, 2000, the Circuit Court dismissed the suit, ruling that the WestVirginia Consumer Credit and Protection Act did not apply and that the claimed violationsof the West Virginia Antitrust Act lacked essential elements as a matter of law. The WestVirginia Attorney General has filed a petition for appeal with the West Virginia SupremeCourt, and the Company has filed its brief in opposition to the appeal. A decision as towhether an appeal will be granted is not expected before late October or November.

The lawsuit is not expected to have a material effect on the Company’s financialstatements. The Company continues to believe the suit is without merit, and intends tocontinue defending it vigorously.

On August 7, 2000, five employees of Wampler Foods, Inc. filed a collective actionagainst Wampler Foods in the United States District Court for the Northern District ofWest Virginia, Elkins Division, under the federal Fair Labor Standards Act of 1938 (FLSA).The complaint alleges that Wampler Foods permitted plaintiffs and others similarlysituated to work "off the clock" without credit or compensation. The suit seeksdamages of an unspecified amount, including hourly and overtime compensation forunrecorded work time.

The Company believes the FLSA suit is without merit, and intends to defend itvigorously. The suit is not expected to have a material effect on the Company’sfinancial statements. 

There were no other material pending legal proceedings during the fiscal year endedJuly 1, 2000, other than ordinary routine litigation incidental to the Company’sbusiness.
**Item 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.**
No matters were submitted to the shareholders of the Company during the fourth quarterof the fiscal year ended July 1, 2000.

 
**PART II

Item 5.      MARKET FOR REGISTRANT'S COMMON STOCK AND RELATEDSTOCKHOLDER MATTERS.

Public trading of shares of WLR Foods' common stock commenced on May 10, 1988. Thestock was included in NASDAQ as of September 12, 1988, and was included in NASDAQ/NationalMarket System as of March 7, 1989. 

The following table sets forth the range of high and low bid information for the stock,as well as information regarding dividends declared by WLR Foods, for each full quarterlyperiod within the two most recent fiscal years:
**2000**High**LowFirst Quarter
$8.25
$6.63Second Quarter
7.13
5.50Third Quarter
6.22
5.25Fourth Quarter
5.63
3.63**1999First Quarter
$9.13
$6.25Second Quarter
9.13
7.25Third Quarter
9.63
7.25Fourth Quarter
8.38
6.50
The Company paid no cash dividends to its shareholders during the last two fiscalyears. The Company’s current credit facility restricts the payment of dividends. Inview of such restriction, and other relevant factors, it is unlikely that the Company willpay a dividend in the foreseeable future.

As of September 1, 2000, the approximate number of shareholders of record was 3,820.
**Item 6.      SELECTED FINANCIAL DATA.****WLR Foods, Inc. and    Subsidiaries Financial Highlights**Dollars in thousands, except    per share data**July 1,
July 3,
June 27,
June 28,
June 29,
July 1,Fiscal year ended:**2000
1999
1998
1997
1996
1995**OPERATIONS**Net sales**$ 832,728**$ 888,086 $ 945,967 $ 994,591 $ 978,258 $ 890,815 Cost of sales**  726,253**750,942 876,287 948,060 889,904 776,945 Gross profit**106,475**137,144 69,680 46,531 88,354 113,870 Selling, general and    administrative expenses**99,958**98,478 91,745 89,657 91,167 84,877 Operating income (loss)**6,517**38,666 (22,065)(43,126)(2,813)28,993 Interest expense**4,968**10,931 22,539 12,804 8,922 6,386 Other (income) expense, net**(1,280)(8,214)(106)(1,792)129 (311) Total other (income) expense, net**3,688**2,717 22,433 11,012 9,051 6,075 Earnings (loss) before income    taxes and minority interest**2,829**35,949 (44,498)(54,138)(11,864)22,918 Income tax expense (benefit)**596**13,211 (16,352)(19,577)(4,381)8,614 Minority interest**-**- 66 47 32 55 Net earnings (loss) from    continuing operations**2,233**22,738 (28,212)(34,608)(7,515)14,249 Earnings from discontinued    operations, net of tax**-**664 2,858 2,425 2,829 1,884 Gain on disposal of discontinued    operations, net of tax**-**17,927 - - - - Total earnings from discontinued    operations**-**18,591 2,858 2,425 2,829 1,884 Extraordinary charge on early    extinguishment of debt, net of tax**-**(2,559)- - - - Net earnings (loss)**2,233**38,770 (25,354)(32,183)(4,686)16,133 Less preferred stock dividends**-**- - - - - Net earnings (loss) available toCommon shareholders**$ 2,233**$ 38,770 $ (25,354)$ (32,183)$ (4,686)$ 16,133 **PER COMMON SHARE**Basic earnings (loss), continuing    operations**$ 0.13**$ 1.35 $ (1.72)$ (1.99)$ (0.42)$ 0.79 Basic earnings, discontinued    operations**-**1.11 0.17 0.14 0.16 0.10 Basic loss, extraordinary charge**-**(0.15)- - - - Total basic earnings (loss) per    common share**0.13**2.31 (1.55)(1.85)(0.26)0.89 Diluted earnings (loss),    continuing operations**0.13**1.34 (1.72)(1.99)(0.42)0.79 Diluted earnings, discontinued    operations**-**1.10 0.17 0.14 0.16 0.10 Diluted loss, extraordinary charge**-**(0.15)- - - - Total diluted earnings (loss) per    common share**$ 0.13**$ 2.29 $ (1.55)$ (1.85)$ (0.26)$ 0.89 Cash dividends declared **-**- - 0.12 0.24 0.22 Book value (based on actual shares    outstanding)**8.90**8.70 6.33 7.89 10.00 10.47 Year-end stock price**4.63**8.19 7.00 8.50 14.00 14.38 **FINANCIAL POSITION    AT END OF YEAR**Working capital (deficit)**$ 92,413**$ 84,016 $ 118,695 $ (31,397)$ 144,621 $ 120,562 Property, plant and equipment, net**102,070**107,945 153,702 159,426 176,691 174,163 Total assets**283,515**289,097 381,742 416,728 451,121 372,525 Long-term debt, excluding current    maturities**51,036**48,845 189,225 5,040 138,510 106,481 Common stock subject to repurchase**-**- - 4,438 17,750 17,750 Preferred shareholders' equity(1)**-**- - - - - Common shareholders' equity**$ 144,004**$ 143,935 $ 103,891 $ 126,558 $ 159,010 $ 163,344 **ANALYTICAL &    OTHER INFORMATION**Current ratio ( compared to 1)**2.14**1.95 2.40 0.89 2.18 2.67 Total debt/total capitalization(2)**28.4%**27.2%65.0%61.2%55.1%44.7%Return on beginning total equity    (3)**1.6%**21.9%NMFNMFNMF10.3%Capital expenditures**$ 12,225**$ 22,072 $ 22,149 $ 11,245 $ 18,771 $ 17,251 Depreciation expense**17,844**19,653 25,901 28,088 28,243 24,817 Amortization expense**830**2,102 2,420 500 742 598 Interest expense**4,968**10,931 22,635 13,143 9,359 6,666 Cash dividends declared: Common    stock**-**- - 2,078 4,233 4,073 Preferred stock**-**- - - - - Market capitalization of common    stock at year end**$ 74,878**$ 135,435 $ 114,800 $ 141,075 $ 247,547 $ 248,654 
**Financial Highlights - Continued**
Dollars in thousands, except    per share data
July 2,
July 3,
June 27,
June 29,Fiscal year ended:
1994
1993
1992
1991**OPERATIONS**Net sales$ 709,703 $ 603,634 $ 503,877 $ 491,618 Cost of sales625,180 529,791 449,785 429,430 Gross profit84,523 73,843 54,092 62,188 Selling, general and    administrative expenses57,373 51,141 44,794 46,733 Operating income (loss)27,150 22,702 9,298 15,455 Interest expense4,816 3,660 2,523 619 Other (income) expense, net(342)(494)(142)(347)Total other (income) expense, net4,474 3,166 2,381 272 Earnings (loss) before income    taxes and minority interest22,67619,536 6,917 15,183 Income tax expense (benefit)8,446 6,850 2,587 5,741 Minority interest38 43 25 33 Net earnings (loss) from    continuing operations14,192 12,643 4,305 9,409 Earnings from discontinued    operations, net of tax2,359 1,964 1,591 1,272 Gain on disposal of discontinued    operations, net of tax- - - - Total earnings from discontinued    operations2,359 1,964 1,591 1,272 Extraordinary charge on early    extinguishment of debt, net of tax- - - - Net earnings (loss)16,551 14,607 5,896 10,681 Less preferred stock dividends- 1,389 982 - Net earnings (loss) available to    common shareholders$ 16,551$ 13,218$ 4,914 $ 10,681 **PER COMMON SHARE**Basic earnings (loss), continuing    operations$ 0.85 $ 0.79 $ 0.23 $ 0.59 Basic earnings, discontinued    operations0.14 0.14 0.11 0.08 Basic loss, extraordinary charge- - - - Total basic earnings (loss) per    common share0.99 0.93 0.34 0.67 Diluted earnings (loss),    continuing operations0.85 0.78 0.23 0.59 Diluted earnings, discontinued    operations0.14 0.14 0.11 0.08 Diluted loss, extraordinary charge- - - - Total diluted earnings (loss) per    common share$ 0.99 $ 0.92 $ 0.34 $ 0.67 Cash dividends declared 0.21 0.21 0.21 0.21 Book value (based on actual shares    outstanding)9.45 8.66 6.44 7.33 Year-end stock price17.00 11.33 9.67 12.00 **FINANCIAL POSITION    AT END OF YEAR**Working capital (deficit)$ 69,989 $ 57,509 $ 40,337 $ 49,532 Property, plant and equipment, net139,854 140,540 113,017 88,807 Total assets283,051 265,626 207,736 175,329 Long-term debt, excluding current    maturities46,368 52,253 38,148 18,678 Common stock subject to repurchase- - - - Preferred shareholders' equity(1)- - 29,507 - Common shareholders' equity$ 156,157 $ 142,255 $ 81,881 $ 115,625 **ANALYTICAL &    OTHER INFORMATION**Current ratio ( compared to 1)2.02 1.92 1.80 2.42 Total debt/total capitalization(2)28.4%33.5%32.0%16.1%Return on beginning total equity    (3)11.6%13.1%5.1%9.9%Capital expenditures$ 19,186 $ 31,766 $ 36,107 $ 29,471 Depreciation expense21,333 18,115 14,041 11,544 Amortization expense520 445 168 - Interest expense4,989 3,816 2,755 928 Cash dividends declared: Common    stock3,513 3,124 2,854 3,314 Preferred stock- 1,389 982 - Market capitalization of common    stock at year end$ 280,738 $ 186,168 $ 122,942 $ 189,378 
All information reflects the stock dividends issued in May 1997 and August 1997, andthe three-for-two stock split in the form of a 50% stock dividend declared on February 28,1995.

(1) In March 1993, the Company repurchased all the preferred stock issued in January1992.(2) Common stock subject to repurchase classified as debt.(3) For 1999, return on beginning total equity is based on net earnings from continuingoperations.
**Item 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS. 

General
WLR Foods, Inc. (WLR Foods or the Company) is a fully integrated processor of chickenand turkey products, controlling all aspects of production from the hatching of eggs andlive bird grow-out, through processing, sales and distribution. Consistent with otherpoultry processors, the Company is subject to fluctuations in commodity prices for chickenand turkey products, as well as for corn and soybean meal, the primary grain ingredientsin the feed for its birds.

Chicken pricing during fiscal 2000 was among the lowest on record, with pricing for theyear ended July 1, 2000 down 11.7%, or approximately $51 million, from the levels seen inthe prior fiscal year. The industry suffered throughout the year from excess suppliesdriven by increased production within the industry that began in the latter part of fiscal1999. Fiscal 1999 chicken segment pricing was 1.6% below fiscal 1998.

Turkey pricing during fiscal 2000 continued to increase modestly over the prior fiscalyear levels, with pricing increasing 1.6%, or approximately $7 million, when compared tofiscal 1999. Fiscal 1999 pricing increased 2.0% when compared to fiscal 1998, when priceswere very unfavorable by historical standards.

Grain prices continued to be favorable in fiscal 2000, with declines in corn costs morethan offsetting increases in the cost of soybean meal, resulting in a net savings to theCompany of approximately $2 million when compared to the prior fiscal year. In fiscal1999, corn and soybean meal costs declined considerably from fiscal 1998, saving thecompany approximately $50 million in feed costs. The fiscal 1998 grain pricing was thelast of three continuous years of very high grain costs.
***Pending Transaction*On September 27, 2000, the Company entered into an Agreement and Plan of Merger withPilgrim's Pride Corporation ("Pilgrim's") whereby the Company will become awholly-owned subsidiary of Pilgrim's and the Company's shareholders will receive $14.25cashfor each share of Company common stock owned by them at the effective time of the merger.The Company's Board of Directors has unanimously approved the agreement. The agreement issubject to regulatory and shareholder approvals and other customary closing conditions.The merger is expected to be completed as soon as practicable thereafter.**RESULTS OF OPERATIONS

The Company’s results are reported on a consolidated basis. Portions of thefollowing discussions of operating results pertain to the chicken and turkey segments,which account for over 98% of the Company’s revenues. Any revenues and expenses notincluded in the chicken and turkey segments are reported in the Company’s othersegment for purposes of segment reporting.
***Fiscal 2000 Compared to Fiscal 1999Net sales from continuing operations were $832.7 million, a decrease of $55.4million, or 6.2% from fiscal 1999. The decrease is from lower chicken and turkey segmentsales of $49.5 million and $6.0 million, respectively, offset slightly by an increase inother segment sales of $0.1 million.

The chicken segment net sales decline of $49.5 million, or 10.9%, to $403.1 million forfiscal 2000 is primarily due to decreased poultry product sales of $50.6 million,partially offset by an increase in other sales, primarily outside feed sales, ofapproximately $1.1 million. The $50.6 million decrease, or 11.6%, in poultry productsales, primarily chicken, was the result of price decreases of 11.7%, offset partially byincreases in volume of 0.1%.

The turkey segment net sales decline of $6.0 million, or 1.4%, to $421.6 million infiscal 2000 is the result of lower poultry product sales of $4.4 million, combined with adecrease in other sales of $1.6 million. The $4.4 million decrease, or 1.0%, in poultryproduct sales, primarily turkey, was the result of lower volumes of 2.6%, offset partiallyby increased pricing of 1.6%. The $1.6 million decline in other sales is primarily theresult of the discontinuation of the Company’s Pennsylvania distribution business, anon-core poultry business, in the prior fiscal year. 

Cost of sales on continuing operations was $726.3 million, a decrease of $24.7 million,or 3.3% from fiscal 1999. Cost of sales in the chicken segment decreased 1.4%, or $5.3million, to $377.8 million in fiscal 2000. This decrease is primarily due to improvementsin processing costs at the Marshville facility, which was converted from turkey processingto chicken processing during fiscal 1999. In the turkey segment, cost of sales decreased5.4%, or $19.5 million, to $344.4 million in fiscal 2000. This decrease is primarily theresult of improved operating costs at the Franconia further processing facility ofapproximately $5 million and improved grain costs of approximately $2 million, coupledwith decreased volumes in poultry product sales of approximately 2.6% from the prior year.Partially offsetting the decreases in chicken and turkey segment cost of sales is a $0.1million increase in other segment cost of sales.

Gross profits on continuing operations were $106.5 million, a decrease of $30.7million, or 22.4% from fiscal 1999. The net effect of product pricing was a decline ofapproximately $44.2 million for the year, with lower chicken pricing of $51.0 millionpartially offset by improved turkey prices of $6.8 million. Lower grain costs for corn andsoybean meal contributed approximately $2.3 million of improvements. Other improvements ofapproximately $11.2 million in gross profits were primarily the result of lower plantcosts at the Franconia and Marshville facilities.

Selling, general and administrative expenses on continuing operations for fiscal 2000were $100.0 million, an increase of $1.5 million, or 1.5%, when compared to the prioryear. The increase is primarily the result of increased promotional spending of $7.6million, partially offset by lower delivery expenses of approximately $2.0 million, lowerbonus incentives of approximately $2.0 million, and one-time charges in the prior fiscalyear of approximately $2.1 million, primarily for the write-down of assets at theCompany’s Monroe facility that was sold during the year.

Interest expense from continuing operations was $5.0 million for fiscal 2000, adecrease of $6.0 million, or 54.6%, when compared to fiscal 1999. The decrease is theresult of substantially lower debt levels and lower interest rates.

In the prior year, other income included the gain on the sale of the Goldsboro, NorthCarolina complex. The Goldsboro complex, consisting of a chicken processing plant, feedmill and hatchery, was sold on August 14, 1998, for approximately $38 million in netproceeds, which were used to reduce long- term debt. The pre-tax gain on the sale wasapproximately $8 million.

The effective tax rates for continuing operations for fiscal 2000 and fiscal 1999 were21.1% and 36.7%, respectively. The decrease is the result of changes in job tax credits,prior year adjustments, and a lower federal statutory rate.

Net earnings from continuing operations were $2.2 million (or $0.13 per diluted share)for fiscal 2000, a decrease of $20.5 million as compared to the net earnings fromcontinuing operations of $22.7 million (or $1.34 per diluted share) for fiscal 1999.Chicken net earnings were $33.3 million lower than fiscal 1999, offset partially by anincrease in turkey net earnings of $12.4 million. The remaining $0.4 million increase innet earnings was in the Company’s other segment. 
***Fiscal 1999 Compared to Fiscal 1998Net sales from continuing operations were $888.1 million, a decrease of $57.9million, or 6.1% from fiscal 1998. The decrease is from lower turkey segment and othersegment sales of $118.6 million and $3.3 million, respectively, partially offset by anincrease in chicken segment sales of $64.0 million.

The turkey segment net sales decline of $118.6 million, or 21.7%, to $427.6 million insales for fiscal 1999 is the result of the discontinuation of the distribution business,which reduced sales approximately $40 million, a decrease in outside feed sales ofapproximately $24 million at the Marshville plant, which was converted to chickenprocessing, with the balance primarily from reduced volumes in turkey production. Poultryproducts, primarily turkey, are the largest component of turkey segment revenues. Poultryproduct sales in the turkey segment decreased 10.9%, or $51.5 million, to $422.4 millionin fiscal 1999. The 10.9% decrease is a result of decreased volumes of 12.9%, primarilythe result of planned cutbacks at the Marshville facility, offset by increased prices of2.0%. 

In the chicken segment, the increase in net sales of $64.0 million, or 16.5%, to $452.5million in fiscal 1999 is due to increased poultry product sales of approximately $54million and increased outside feed sales of approximately $11 million. The $54 millionincrease, or 14.0%, in net sales of poultry products, primarily chicken, resulted infiscal 1999 poultry product sales of $437.6 million. The 14.0% increase was the result ofa volume increase of 15.6%, offset by a 1.6% decrease in pricing. 

Cost of sales on continuing operations was $750.9 million, a decrease of $125.4million, or 14.3% from fiscal 1998. Cost of sales in the turkey segment decreased 30.8%,or $161.7 million, to $363.9 million in fiscal 1999. This decrease is primarily the resultof planned decreases in production and sales volumes in turkey products, coupled with theclosing of the distribution business. Lower costs of corn and soybean meal also loweredcosts by approximately $20 million, as the average delivered cost of corn and soybean mealdeclined approximately 16% and 34%, respectively, over fiscal 1998. In the chickensegment, cost of sales increased 12.3%, or $41.9 million, to $383.1 million in fiscal1999. This increase is primarily attributable to increased poultry pounds sold andadditional outside feed sales, partially offset by lower costs of corn and soybean meal,which reduced cost of sales in the chicken segment approximately $30 million. 

Gross profits on continuing operations were $137.1 million, an increase of $67.5million, or 96.8% from fiscal 1998. Lower grain costs for corn and soybean mealcontributed approximately $50 million of the improvement. Improved live performance inboth turkey and chicken improved gross profits by over $10 million during the year. Thenet effect of product pricing was an improvement of $3.5 million for the year, with higherturkey pricing of $9.6 million more than offsetting lower chicken prices of $6.1 million. 

Selling, general and administrative expenses on continuing operations for fiscal 1999were $98.5 million, an increase of $6.7 million, or 7.3%. The increase includes twoone-time charges: a non-cash charge of $1.5 million during the first quarter for assets,primarily at the Monroe facility, that could not be utilized in the Company’s turkeyoperations, and $0.6 million for one time deferred compensation accruals. Additionally,employee incentives based upon profitability resulted in an additional $2.0 million inexpense during the year. There were no employee incentives in fiscal 1998.

Interest expense from continuing operations was $10.9 million for fiscal 1999, adecrease of $11.6 million when compared to fiscal 1998. The decrease is the result ofsubstantially lower debt levels and lower interest rates resulting from a new creditfacility in November 1998. 

The gain on the sale of the Goldsboro complex resulted from the Company’s sale, onAugust 14, 1998, of its Goldsboro, North Carolina chicken processing plant, feed mill andhatchery for approximately $38 million in net proceeds, which were used to reduce longterm debt. The pre-tax gain on the sale was approximately $8 million. 

The effective tax rate for continuing operations was 36.7% for both fiscal 1999 and1998.

Net earnings on continuing operations were $22.7 million (or $1.34 per diluted share)for fiscal 1999, an increase of $50.9 million as compared to the net loss of $28.2 million(or $1.72 per diluted share) for fiscal 1998. Turkey and chicken segment net incomeimproved $33.1 million and $16.1 million, respectively.

On July 31, 1998 the Company sold its Cassco Ice and Cold Storage, Inc. subsidiary forapproximately $55 million in net proceeds. The net proceeds from the sale were used toreduce long-term debt. The after-tax Cassco income from discontinued operations was $0.7million in fiscal 1999 compared to $2.9 million for fiscal 1998. During the first quarterof fiscal 1999, the Company recorded a $15.5 million after-tax gain on the sale.Additional consideration was received in the third and fourth quarters of fiscal 1999; thefinal after-tax gain for the Cassco sale was $17.9 million. 

During fiscal 1999, the Company recorded extraordinary after-tax charges of $2.6million for the early extinguishment of debt, with $1.6 million of the charge in the firstquarter and $1.0 million in the second quarter of the year. In the first quarter, thepermanent reduction in long-term debt resulting from the sale of the Cassco subsidiary andthe Goldsboro complex resulted in an extraordinary after-tax charge of $1.6 million towrite-off capitalized debt costs. In conjunction with the November 20, 1998 debtrefinancing during the second quarter, the Company recorded an extraordinary after-taxcharge of $1.0 million to write off the remaining capitalized debt costs pertaining to therefinanced credit facility.

Net earnings for fiscal 1999 were $38.8 million, or $2.29 per diluted share, andincluded: after-tax income of $0.7 million, or $0.04 per diluted share from theCompany’s Cassco Ice & Cold Storage subsidiary; an after-tax gain of $17.9million or $1.06 per diluted share on the sale of Cassco; and an after-tax, non-cashwrite-off totaling $2.6 million, or $0.15 per diluted share, on early extinguishment ofdebt. The net loss for fiscal 1998 was $25.4 million, or $1.55 per diluted share, andincluded after-tax income of $2.9 million, or $0.17 per diluted share from the Casscosubsidiary.
***Financial Condition and LiquidityThe Company’s capital resources historically have included funds fromoperations, the public offering of common stock, bank lines of credit and otherborrowings. The primary uses of cash have been to provide funds for operations, makeexpenditures for capital improvements, equipment and facilities, repay indebtedness,repurchase shares of common stock, and make acquisitions.

On July 1, 2000, the Company had net working capital of $92.4 million, compared to networking capital of $84.0 million on July 3, 1999. Accounts receivable and total inventory,on July 1, 2000, were $0.5 million and $4.3 million higher, respectively, when compared tothe end of fiscal year 1999. Live inventories increased $3.0 million and feed inventoriesincreased $2.4 million, both primarily attributable to increased feed costs at the end ofthe fiscal year. Processed and supply inventories decreased $0.9 million and $0.2 million,respectively. 

Operating activities generated cash of $6.3 million in fiscal 2000, $71.1 million infiscal 1999, and $30.1 million in fiscal 1998. The decrease in cash generated in fiscal2000 as compared to fiscal 1999 is primarily due to decreased earnings, coupled withincreased inventory levels, lower deferred income taxes, increased accounts receivables,and decreased accrued expenses. The increase in cash generated in fiscal 1999 as comparedto fiscal 1998 resulted primarily from increased earnings. 

Capital expenditures were $12.2 million in fiscal 2000. The Company also leasedequipment totaling $2.7 million using operating leases. Capital expenditures in fiscal1999 totaled $22.1 million and operating lease payments totaled $2.3 million. Capitalexpenditures in fiscal years 2000 and 1999 were generally for normal replacements andupgrades of existing assets, except for $9.7 million in fiscal 1999 in expenditures toconvert the Marshville turkey complex to chicken processing. The Company expects capitalexpenditures in fiscal 2001 to range from $12 to $15 million to cover normal replacementand upgrades of existing facilities. 

Total debt to total capital at July 1, 2000 was 28.4%, a slight increase from 27.2% atJuly 3, 1999. Debt levels increased during fiscal 2000, from $53.9 million at fiscal 1999year-end to $57.1 million on July 1, 2000. The increase of $3.2 million is the result of$12.2 million in capital expenditures, $2.7 million for repurchase of company stock,offset partially by $0.9 million of proceeds from the sale of property, plant andequipment and $3.7 million collected on notes receivable, with the remaining $7.1 millionprimarily the result of cash flow from continuing operations.
***Accounting MattersThe Financial Accounting Standards Board issued Statement No. 133,"Accounting for Derivative instruments and Hedging Activities" in June 1998. Thestatement establishes accounting and reporting standards for derivative instruments andhedging activities and requires, among other things, that an entity recognize allderivatives as either assets or liabilities in the balance sheet and measure thoseinstruments at fair value. The Company anticipates that the adoption of this statement,which will occur in fiscal 2001, will result primarily in quarterly fluctuations toaccumulated other comprehensive income, which is a component of shareholder’s equity,but will not have a significant impact on the Company’s consolidated statements ofoperations. The Company anticipates that the implementation of this statement on July 2,2000 will result in a charge of approximately $3.3 million to accumulated othercomprehensive income, representing the deferred losses on grain options and futurescontracts at July 1, 2000.
**Item 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**
Market risks relating to the Company's operations result primarily from changes ininterest rates and commodity prices. To address these risks, the Company enters intovarious hedging transactions as described below. The Company does not use financialinstruments for trading purposes and is not party to any leveraged derivatives.
***Interest Rate SensitivityThe Company may hedge exposures to changes in interest rates on certain of itsfinancial instruments by entering into interest rate cap agreements to effectively limitthe Company's exposure to increases in interest rates. As of July 1, 2000, there were nooutstanding interest rate cap agreements.

The table below provides information about the Company's derivative financialinstruments and other financial instruments that are sensitive to changes in interestrates. For debt obligations, the table presents principal cash flows and related weightedaverage interest rates by expected maturity dates. 

Expected    Maturity DateLiabilities:
FairDollars in thousands
2001
2002
2003
2004
2005
Total
ValueLiabilities:Long-term debt, including Current    PortionFixed Rate
$ 202 
$ 214 
$ 89 
$ 95 
$ 50 
$ 650 
$ 650 Average interest rate
6.00%
6.00%
6.00%
6.00%
6.00%
6.00%Variable Rate
$ 5,850 
$ 50,588 
$ 0 
$ 0 
$ 0 
$ 56,438 
$ 56,438 Average interest rate
8.07%
8.09%
0
0
0
8.09%***Commodity Price SensitivityThe Company is a purchaser of certain commodities, primarily corn and soybeanmeal. The Company uses commodity futures contracts, grain options and forward purchasingfor hedging purposes to reduce the effect of changing commodity prices on a portion of itscommodity purchases. The contracts that effectively meet risk reduction and correlationcriteria are recorded using hedge accounting. Gains and losses on hedge transactions arerecorded as a component of the underlying inventory purchase and are expensed during thetime period for which the hedge was intended.

The following table provides information about the Company's corn, soybean meal, otherfeed ingredient inventory option contracts and futures contracts that are sensitive tochanges in commodity prices. For inventory, the table presents the carrying amount andfair value at July 1, 2000. For the futures contracts the table presents the notionalamounts in bushels, the weighted average contract prices, and the total dollar contractamount by expected maturity dates, the latest of which occurs in December 2000. Contractamounts are used to calculate the contractual payments and quantity of corn and soybeanmeal to be exchanged under the futures contracts. There were no outstanding soybean mealpositions on July 1, 2000.  For option contracts, the table presents the notional andfair value in dollars. There were no outstanding option contracts on July 3, 1999.
On Balance Sheet Commodity    Positionand Related Derivatives
2000
1999
Carrying
Fair
Carrying
FairDollars in thousands
Amount
Value
Amount
ValueCorn, Soybean Meal and Other FeedIngredient Inventory$ 13,249$ 13,249$ 11,050$ 11,050
Contractual
Fair
Contractual
FairRelated Derivatives
Amount
Value
Amount
ValueCorn Futures ContractsContract Volumes (100,000 bushels)3100Weighted Average Price (per    bushel)$ 2.08$ 2.53$ 2.31$ 2.06Contract Amount (dollars in    thousands)55067123,19420,679Corn Option ContractsContract Amount (dollars in    thousands)$ 1,095$(2,340)--**Item 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Consolidated Financial Statements and Notes to Consolidated Financial StatementsWLR Foods, Inc. and Subsidiaries Consolidated Statements of Operations**Dollars in thousands, except per    share dataFiscal years ended July 1, 2000, July 3, 1999, and June 27, 1998 **2000
1999
1998Net sales**$ 832,728**$ 888,086 $ 945,967 Cost of sales**726,253**750,942 876,287 Gross profit**106,475**137,144 69,680 Selling, general and    administrative expenses**99,958**98,478 91,745 Operating income (loss)**6,517**38,666 (22,065)Other (income) expense:Interest expense (Note 4)**4,968**10,931 22,539 Gain on sale of Goldsboro complex    (Note 13)**-**(7,699)- Other income, net**(1,280)**(515)(106)Other expense, net**3,688**2,717 22,433 Earnings (loss) before income    taxes and minority interest**2,829**35,949 (44,498)Income tax expense (benefit) (Note    6)**596**13,211 (16,352)Minority interest in net earnings    of consolidated subsidiary**-**- 66 Net earnings (loss) from    continuing operations **$ 2,233**$ 22,738 $ (28,212)Earnings from discontinued    operations, net of tax (Note 12)**-**664 2,858 Gain on disposal of discontinued    operations, net of tax (Note 12)**-**17,927 - Total earnings from discontinued    operations**-**18,591 2,858 Extraordinary charge on early    extinguishment of debt, net of tax (Note 4)**-**(2,559)- Net earnings (loss)**$ 2,233**$ 38,770 $ (25,354)Basic net earnings (loss) per    common share, continuing operations**$ 0.13**$ 1.35 $ (1.72)Basic earnings per common share,    discontinued operations**-**1.11 0.17 Basic loss per common share,    extinguishment of debt**-**(0.15)- Total basic earnings (loss) per    common share**$ 0.13**$ 2.31 $ (1.55)Diluted net earnings (loss) per    common share, continuing operations**$ 0.13**$ 1.34 $ (1.72)Diluted earnings per common share,    discontinued operations**-**1.10 0.17 Diluted loss per common share,    extinguishment of debt**-**(0.15)- Total diluted earnings (loss) per    common share**$ 0.13**$ 2.29 $ (1.55)See accompanying Notes to    Consolidated Financial Statements.**WLR Foods, Inc. and Subsidiaries Consolidated Balance Sheets**Dollars in thousands July 1, 2000 and July 3, 1999**2000
1999**Assets**Current AssetsCash and cash equivalents**$ 85**$ 210 Accounts receivable, less    allowance for doubtful accounts of $1,628 and $1,909**59,541**59,026 Inventories (Note 2)**110,980**106,679 Income taxes receivable**323**355 Prepaid expenses**2,670**2,574 Other current assets**39**3,853 Total current assets**173,638**172,697 Property, plant and equipment, net    (Note 3)**102,070**107,945 Deferred income taxes (Note 6)**2,910**3,009 Other assets**4,897**5,446 Total Assets**$ 283,515**$ 289,097 **Liabilities and Shareholders'    Equity**Current LiabilitiesCurrent maturities of long-term    debt (Note 4)**$ 6,052**$ 5,046 Excess checks over bank balances**14,014**13,912 Trade accounts payable**24,627**26,500 Accrued payroll and related    benefits**15,148**24,729 Other accrued expenses**12,659**8,677 Deferred income taxes (Note 6)**8,725**9,817 Total current liabilities**81,225**88,681 Long-term debt, excluding current    maturities (Note 4)**51,036**48,845 Other liabilities **7,250**7,636 Commitments and other matters    (Notes 9, 14 and 17)**Shareholders' Equity (Notes 7    and 8)**Common stock, no par value    (authorized 100,000,000 shares, issued and outstanding 16,172,410 and 16,541,691 shares)**        66,961**69,125 Additional paid-in capital**2,974**2,974 Retained earnings**74,069**71,836 Total shareholders' equity**144,004**143,935 Total Liabilities and    Shareholders' Equity**$ 283,515**$ 289,097 See accompanying Notes to    Consolidated Financial Statements.**WLR Foods, Inc. and Subsidiaries Consolidated Statements of Shareholders' Equity**
AdditionalDollars in thousands
Common    Stock
Paid-In
RetainedFiscal years ended July 1, 2000, July 3, 1999, and June 27, 1998 
Shares
Amount
Capital
Earnings
Total**Balance at June 28, 1997****16,597****$ 64,206****$ 2,974****$ 59,378****$ 126,558**Net loss- - - (25,354)(25,354)Stock dividend102 958 - (958)- Common stock issued147 2,710 - - 2,710 Common stock repurchased(446)(23)- - (23)Balance at June 27, 1998**16,400****67,851****2,974****33,066****103,891**Net earnings- - - 38,770 38,770 Common stock repurchased(17)(152)- - (152)Common stock issued159 1,426 - - 1,426 **Balance at July 3, 1999****16,542****69,125****2,974****71,836****143,935**Net earnings- - - 2,233 2,233 Common stock repurchased(470)(2,719)- - (2,719)Common stock issued100 555 - - 555 **Balance at July 1, 2000****16,172****$ 66,961****$ 2,974****$ 74,069****$ 144,004**
See accompanying Notes to Consolidated Financial Statements**WLR Foods, Inc. and Subsidiaries Consolidated Statements of Cash Flows**Dollars in thousandsFiscal years ended July 1, 2000, July 3, 1999, and June 27, 1998**2000
1999
1998**Cash Flows from Operating    Activities:**Net earnings (loss)**$ 2,233**$ 38,770 $ (25,354)Adjustments to    reconcile net earnings (loss) to net cash providedby operating activities:Extraordinary loss on early    extinguishment of debt, net of tax**-**2,559 - Depreciation and amortization**18,674**21,755 28,321 (Gain) loss on sales of property,    plant and equipment**(631)**1,159 916 Gain on sale of Goldsboro complex**-**(7,699)- Gain on sale of discontinued    operation**-**(28,187)- Deferred income taxes**(993)**14,419 (14,974)Other, net**-**107 (592)Change in operating assets and    liabilities:(Increase) decrease in accounts    receivable**(515)**8,355 5 (Increase) decrease in inventories**(4,301)**12,234 37,520 (Increase) decrease in prepaid    expenses**(96)**(704)341 Decrease in other current assets**96**106 3,655 (Increase) decrease in long-term    assets**(281)**(170)815 Decrease in accounts payable**(1,873)**(655)(6,263)Increase (decrease) in accrued    expenses and other**(5,985)**9,042 5,675 Net cash provided by operating    activities**6,328**71,091 30,065 **Cash Flows from Investing    Activities:**Additions to property, plant and    equipment**(12,225)**(22,072)(22,149)Acquisition of businesses **-**- (650)Proceeds from notes receivable**3,750**- - Proceeds from sale of Goldsboro    complex**-**37,582 - Proceeds from sale of discontinued    operation**-**55,068 - Proceeds from sales of property,    plant and equipment**887**1,245 1,706 Net cash provided by (used in)    investing activities**(7,588)**71,823 (21,093)**Cash Flows from Financing    Activities:**Proceeds from issuance of revolver    and long-term debt**730,430**634,724 41,485 Payments on revolver and long-term    debt**(727,233)**(780,482)(35,234)Financing costs paid**-**(1,969)(5,401)Notes payable to banks**-**- (4,031)Issuance of common stock**555**701 892 Repurchase of common stock**(2,719)**- (4,438)Increase (decrease) in excess    checks over bank balances**102**3,987 (2,193)Net cash provided by (used in)    financing activities**1,135**(143,039)(8,920)Increase (decrease) in cash and    cash equivalents**(125)**(125)52 Cash and cash equivalents at    beginning of fiscal year**210**335 283 Cash and cash equivalents at end    of fiscal year**$ 85**$ 210 $ 335 Supplemental cash flow    information:Cash paid (received) for:Interest**$ 4,403**$ 13,366 $ 15,365 Income taxes**2,404**6,204 (3,139)***Non-cash financing activities:**

**In fiscal 1999:**The Company recorded 142,384 stock warrants at a value of $904,136 which related to theFebruary 1998 debt refinancing.

The Company had 28,180 stock warrants expire at a value of $178,943 when a portion ofthe February 1998 debt was repaid in the first quarter.*
*The Company incurred an extraordinary charge on early extinguishment of debt in theamount of $4.1 million.
The Company recorded a note receivable in the amount of $3,750,000 for the sale of itsMonroe division, due in fiscal year 2000.

**In fiscal 1998:**The Company issued 102,296 shares as a stock dividend in the first quarter.

The Company issued 889,898 stock warrants in the third quarter relating to the debtrefinancing; of these 266,969 were immediately exercisable and were recorded at a value of$1,695,256.*
See accompanying Notes to Consolidated Financial Statements.
**WLR Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements 

1.      Summary of Significant Accounting Policies and OtherInformation
*OrganizationWLR Foods, Inc. and subsidiaries (WLR Foods or the Company) are primarily engagedin fully integrated turkey and chicken production, processing, further processing andmarketing. The Company’s operations are predominantly located in the mid-Atlanticregion of the United States. WLR Foods sells products through a variety of selectednational and international retail, foodservice and institutional markets.
***Fiscal YearThe Company’s fiscal year ends on the Saturday closest to June 30. Fiscalyears 2000, 1999 and 1998 ended on July 1, July 3, and June 27, respectively, and included52 weeks in fiscal year 2000, 53 weeks in fiscal year 1999 and 52 weeks in fiscal year1998.
***Principles of Consolidation and PresentationThe accompanying consolidated financial statements include the accounts of WLRFoods and all of its wholly-owned subsidiaries. All significant intercompany accounts andtransactions have been eliminated in consolidation. 
***Cash and Cash EquivalentsFor purposes of the consolidated statements of cash flows, the Company considersall highly liquid investments purchased with an original maturity of three months or lessto be cash equivalents.
***InventoriesInventories of feed, grain, eggs, packaging supplies, processed poultry and meatproducts 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 forslaughter and breeders. Poultry raised for slaughter are stated at the lower of averagecost or market. Breeders are stated at average cost less accumulated amortization. Thecost of breeders is accumulated during their development stage and then amortized into thecost of the eggs produced over the egg production cycle of the breeders. The Company hasfour methods of purchasing grain: cash purchasing, forward purchasing, grain options, andhedging with futures contracts. Each purchasing method creates varying degrees of risk forWLR Foods. The Company uses futures contracts, grain options and forward purchases tohedge the risk of fluctuating grain prices. The gains or losses from hedging transactionsbecome part of the cost of the related inventory items and are expensed during the timeperiod for which the hedge was intended.
***Property, Plant and EquipmentProperty, plant and equipment are stated at cost. Depreciation is computed usingthe straight-line method over the useful lives of the respective assets. In general, theestimated useful lives for computing depreciation are: 15 to 20 years for buildings andimprovements; 3 to 8 years for machinery and equipment; and 3 to 5 years fortransportation equipment. The costs of maintenance and repairs are charged to operations,while costs associated with renewals, improvements and major replacements are capitalized.
***Income TaxesIncome taxes are accounted for under the asset and liability method. Deferred taxassets and liabilities are recognized for the future tax consequences attributable to thedifferences between the financial statement carrying amounts of existing assets andliabilities and their respective tax bases and operating loss and tax creditcarryforwards. Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply to taxable income for the years in which those temporary differences areexpected to be recovered or settled. The effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that includes the enactmentdate.
***Advertising and Promotion ExpensesAdvertising and promotion expenses are charged to operations in the periodincurred.
***Financial InstrumentsThe estimated fair value of financial instruments has been determined by theCompany using available market information. Except for financial instruments used forhedging and debt instruments (Notes 2 and 4), the carrying amounts of all other financialinstruments approximate their fair values due to their short maturities. 
***Stock-Based CompensationAs permitted under SFAS No. 123, Accounting*for Stock-Based Compensation,*theCompany continues to account for employee stock option plans using the intrinsic valuemethod of accounting and provides the pro-forma disclosures of SFAS No. 123.
***Use of EstimatesThe preparation of the consolidated financial statements in conformity withgenerally accepted accounting principles requires the Company to make estimates andassumptions that affect the reported amounts of assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenues and expenses duringthe reporting periods. Actual results could differ from those estimates.
***Recently Issued Accounting StandardsIn June 1998, SFAS No. 133, *Accounting for Derivative Instruments and HedgingActivities,*was issued. The Company adopted SFAS 133 on July 2, 2000. The Companyanticipates that the adoption of this statement, which will occur in fiscal 2001, willresult primarily in quarterly fluctuations to accumulated other comprehensive income,which is a component of shareholder’s equity, but will not have a significant impacton the Company’s consolidated statements of operations. The Company anticipates thatthe implementation of this statement on July 2, 2000 will result in a charge ofapproximately $3.3 million to accumulated other comprehensive income, representing thedeferred losses on grain options and futures contracts on July 1, 2000.
**2.      Inventories**A summary of inventories at July    1, 2000 and July 3, 1999 follows:Dollars in thousands**2000
1999Live poultry and breeder flocks**$ 51,283 
$ 48,275 Processed poultry and meat    products**30,655 
31,510 Packaging supplies, parts and    other**12,654 
12,859 Feed, grain and eggs**16,388 
14,035 Total inventories**$ 110,980 
$ 106,679 
The cost of grain, the principal feed ingredient for live birds, is subject to pricechanges caused by weather, size of harvest, changes in demand, transportation and storagecosts. To reduce the risks of price fluctuations, the Company has entered into grainoption and futures contracts. As of July 1, 2000, the Company had $3.4 million of deferredlosses on option contracts. There were no deferred amounts relating to options for fiscalyear 1999. The notional amount of grain futures contracts at July 1, 2000 and July 3, 1999was $0.5 million and $23.2 million, respectively. The fair value of grain futurescontracts used in hedging at July 1, 2000 and July 3, 1999 was $0.6 million and $20.6million, respectively. The Company had $0.1 million of deferred gains on futures contractsat July 1, 2000 and $2.6 million of deferred losses on futures contracts at July 3, 1999.The notional amount and fair value of open grain options at July 1, 2000 was $1.1 millionand ($2.3) million, respectively. There were no open grain option contracts at July 3,1999.
**3.      Property, Plant and Equipment**
WLR Foods' investment in property, plant and equipment at July 1, 2000 and July 3, 1999was as follows:
Dollars in thousands**2000
1999Land and improvements**$ 18,520 
$ 18,198 Buildings and improvements**98,531 
97,670 Machinery and equipment**162,993 
156,281 Transportation equipment**18,518 
22,020 Construction in progress**3,846 
2,382 **302,408 
296,551 Less accumulated depreciation**200,338 
188,606 Property, plant and equipment, net**$ 102,070 
$ 107,945 **4.      Long-Term Debt and Bank Revolving Credits**
Long-term debt and other credit facilities at July 1, 2000 andJuly 3, 1999 consisted of the following obligations:
Dollars in thousands**2000
1999**Variable Rate Note:**Secured Bank Term Note due 2001**$ 40,435 
$ 49,000 **Revolving Credit Note:**Secured Bank Revolving Credit Note    due 2001**15,811 
3,753 **Other Notes:**Notes with various terms and rates**842 
1,138 Total long-term debt**57,088 
53,891 Less current maturities of    long-term debt**6,052 
5,046 Long-term debt, excluding current    maturities**$ 51,036 
$ 48,845 
The Company refinanced certain term notes and revolving credit notes due in 2000 as ofNovember 20, 1998. The new facility is a three-year financing agreement that provides atotal borrowing capacity of $150 million. The agreement includes a $50 million term loanand $100 million revolving credit facility. Both facilities have a maturity date ofNovember 20, 2001 and are secured by virtually all of the Company’s assets. Thecarrying value of all debt approximates fair value at July 1, 2000, based on quoted marketprices for similar issues.

At July 1, 2000, borrowings on the term loan, which had $40.4 millionoutstanding, were based on LIBOR of 6.68% plus the applicable margin of 140 basis pointsfor a total rate of 8.08%. Revolving credit borrowings totaled $15.8 million as of July 1,2000, with $15.0 million tied to LIBOR of 6.66% plus the 140 basis point applicable marginfor a total rate of 8.06%. The remaining $0.8 million in revolving credit borrowings wasbased on the prime rate of 9.5%. At the end of each quarter, the applicable margin isadjusted based upon certain Company performance metrics.

Principal payments of $1.25 to $1.5 million are required at the end ofeach fiscal quarter, and began with the fourth quarter of fiscal 1999 for the term loanportion of the credit facility. Additionally, principal payments are required from theproceeds of asset sales in excess of $1.0 million annually and for substantial newissuances of common stock.

During the first quarter of fiscal year 1999, the Company recorded anextraordinary charge of $2.6 million ($1.6 million after tax) for the early extinguishmentof debt resulting from the permanent reduction of its prior credit facility due to thesale of its Cassco Ice & Cold Storage, Inc. subsidiary and its Goldsboro, NorthCarolina chicken complex. The Company also recorded an extraordinary non-cash charge towrite off the remaining unamortized debt issue costs of the prior credit facility duringthe second quarter of fiscal 1999 of $1.5 million ($1.0 million after tax). This charge isalso shown as an extraordinary item for the early extinguishment of debt. Total chargesfor the early extinguishment of debt during fiscal 1999 were $4.1 million ($2.6 millionafter tax).

The Company incurred approximately $2.0 million in costs to establishthe new credit facility. These costs have been capitalized, included in other assets, andare being amortized to interest expense over the life of the new facility.

In relation to the debt refinancing in fiscal year 1998, warrantstotaling 320,363 are outstanding and exercisable with an exercise price of $0.01.

In connection with the refinancing, an interest rate swap and aninterest rate cap that were required under the prior credit facility were assigned fromFirst Union National Bank to the Bank of Montreal. Accordingly, the swap was marked tomarket as of November 20, 1998, with a non-cash charge of $0.6 million recorded asinterest expense. As of July 1, 2000, the interest rate swap and the interest rate capwere no longer outstanding.

The Company’s credit agreement with its lenders containsrestrictive covenants. As of July 1, 2000, the Company was in compliance with allcovenants.

Required annual principal repayments of long-term debt with originalmaturities of greater than one year are as follows:

Dollars in thousandsFiscal 2001     $ 6,052Fiscal 2002      50,802Fiscal 2003             89Fiscal 2004             95Fiscal 2005             50Total            $57,088**5.      Employee Benefits**
The Company maintains a Profit Sharing and Salary Savings Plan that is available tosubstantially all employees who meet certain age and service requirements. In fiscal year1998, most participants could contribute up to 15% of their salary. Under the Company'srestated plan, most participants could contribute up to 20% of their salary for fiscalyears 1999 and 2000. For each employee dollar contributed (limited to the first 4% of anemployee's compensation), the Company contributes a matching amount of 50 cents. TheCompany can also make additional contributions at its discretion. WLR Foods' totalcontributions under this plan were approximately $1.4 million, $2.4 million and $1.6million, for fiscal 2000, 1999 and 1998, respectively.
**6.      Income Taxes**
The provision for income taxes for continuing operations was as follows for fiscalyears 2000, 1999 and 1998:
Dollars in thousands**2000
1999
1998Current:Federal**$ 1,373**
$    3,908 $ - State**216**
2,178 166 **1,589**
6,086    166 Deferred:Federal **(866)**
6,664    (14,625)State**(127)**
461 (1,893)**(993)**
7,125    (16,518)Total tax expense (benefit)**$ 596**
$ 13,211 $ (16,352)
The provision for income taxes for continuing operations differsfrom the amounts resulting from applying the federal statutory tax rates (34% for fiscal2000, and 35% for fiscal 1999 and 1998) to earnings (loss) before income taxes andminority interest as follows for fiscal years 2000, 1999 and 1998:Dollars in thousands**2000
1999
1998Taxes computed using    federalstatutory tax rates**$ 962**$ 12,582 $ (15,574)State income taxes,net of federal tax effect**59**1,715 (1,123)Work opportunity tax credit**(218)**(293)(97)Foreign sales corporation**(153)**(344)(221)Other, net**(54)**(449)663 Total tax expense (benefit)**$ 596**$ 13,211 $ (16,352)Effective tax rate**21.1%**36.7%36.7%
Income tax expense (benefit) is included in the financialstatements as follows for fiscal years 2000, 1999 and 1998:
Dollars in thousands**2000
1999
1998Continuing operations**$ 596**$ 13,211 $ (16,352)Discontinued operations**-**10,667 1,671 Extraordinary charge**-**(1,569)- **$ 596**$ 22,309 $ (14,681)
The tax effects of temporary differences that give rise tosignificant portions of deferred tax assets and deferred tax liabilities at July 1, 2000and July 3, 1999 are listed below:Dollars in thousands**2000
1999Deferred tax liabilities:Inventories, principally due to    theAccounting for live inventories on the farm price method fortax purposes**$ (13,357)**$ (13,577)Plant and equipment, principallydue to differences in depreciation    and capitalized interest**(1,963)**(2,854)Employee benefit deduction**(497)**(1,326)Gross deferred tax liabilities**(15,817)**(17,757)Deferred tax assets:Net operating loss carryforwards**$ 1,217**$ 1,230 Insurance accruals,    principally due toTiming of payments versus the Recording of expenses**2,768**3,085 Deferred compensation,    principally dueto accrual for financial reporting    purposes**1,362**1,356 Tax credits**2,269**2,544 Financing costs, principally due    toAccrual for financial purposes**642**642 Compensated absences,    principally dueto accrual for financial reporting    purposes**1,000**972 Accounts receivable,    principally due toAllowance for doubtful accounts**635**745 Other**109**375 Gross deferred tax assets**10,002**10,949 Net deferred tax (liability) asset**$ (5,815)**$ (6,808)
In assessing the recoverability of deferred tax assets, management considers whether itis reasonably probable that some portion or all of the deferred tax assets will not berealized. The ultimate realization of the deferred tax assets is dependent on thegeneration of future taxable income, during the periods in which those temporarydifferences become deductible. Management considers the scheduled reversal of deferred taxliabilities, projected future taxable income and tax planning strategies in making thisassessment. Based on the future expectation of taxable income and reversal of deferred taxliabilities, management believes it is more likely than not that the Company will realizethe benefits of these deductible differences as reflected at July 1, 2000 and July 3,1999.
**7.      Shareholders’ Equity**
In February 1994, the Board of Directors approved the adoption of the ShareholderProtection Rights Plan (the Plan) wherein one right attaches to and trades with each shareof 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 participatingpreferred stock having a market value of twice the exercise price. Such participatingpreferred stock is designed to have economic and voting terms similar to those of oneshare of common stock. Rights will separate from the common stock and become exercisablefollowing the earlier of 1) the date a person or group acquires 15% or more of theoutstanding stock, or 2) the 10th business day (or such later date the Boardmay decide) after any person commences a tender offer that would result in such person orgroup 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 Boardmay, in lieu of allowing rights to be exercised, require each outstanding right to beexchanged for one share of common stock or participating preferred stock. A provision inthe Plan allows for rights holders to acquire stock of the acquiring person or group, inthe event a change in control of the Company has occurred.

The rights are redeemable by the Company at $0.01 per right prior to becomingexercisable and expire 10 years from issuance. WLR Foods has 100,000,000 shares of commonstock authorized, with 16,172,410 outstanding on July 1, 2000 and 16,541,691 outstandingon July 3, 1999. Additionally, there are 50,000,000 shares of preferred stock authorizedwith none outstanding as of July 1, 2000 or July 3, 1999.
**8.      Stock Option and Stock Purchase Plans
*Stock Option PlanWLR Foods Stock Option Plan was adopted by the Board of Directors in accordancewith the Long-Term Incentive Plan which was ratified by the shareholders of the Company onOctober 31, 1998. The Plan provides for the granting of incentive or nonqualified commonstock options. The option price under the Plan shall not be less than the fair marketvalue of the common shares as of the date of the grant. The options vest after threeyears, with one-third vesting each year after the date of grant. The options areexercisable at varying dates not to exceed 10 years from the date of grant. The changes inthe outstanding common shares under option for fiscal 2000, 1999 and 1998 are listedbelow:

Common shares
Weighted Average
under option
Exercise PriceOutstanding at June 28, 1997
710,666 
$13.85 Canceled or expired
(226,041)
$14.29 Granted in fiscal 1998
158,750 
$ 6.88 Outstanding at June 27, 1998
643,375 
$11.98 Canceled or expired
(262,126)
$13.85 Exercised
(5,833)
$ 8.31 Granted in fiscal 1999
144,000 
$ 8.34 Outstanding at July 3, 1999
519,416 
$10.07 Canceled or expired
(27,000)
$ 8.96 Granted in fiscal 2000
215,250 
$ 5.05 Outstanding at July 1, 2000
707,666 
$ 8.58 
There were 327,497, 270,416, and 343,374 shares exercisable under option with weightedaverage exercise prices of $11.17, $12.06, and $15.08 at fiscal year end 2000, 1999 and1998, respectively. The following table summarizes information about stock optionsoutstanding as of July 1, 2000:
**Stock Options Outstanding:****Stock Options Exercisable:**
Weighted Average
Remaining    ContractualExercise Price
Shares
Life (Years)
Shares$ 5.047
213,000 
9.8- 6.875
105,000 
8.069,998 8.281
126,500 
9.0- 8.310
88,500 
7.088,500 9.219
8,500 
8.42,833 14.125
88,666 
5.588,666 15.000
77,500 
4.677,500 
Total
707,666 327,497 ***Accounting for Stock Option PlanThe Company has elected to account for its employee stock option plan using theintrinsic value method of accounting. Accordingly, no compensation cost has beenrecognized in the accompanying consolidated financial statements because the exerciseprice of the stock options equals the market price of the underlying stock on the date ofgrant. Pro forma information regarding net earnings (loss) and net earnings (loss) pershare is required by SFAS No. 123. Assuming the Company accounted for its employee stockoptions using the fair value method, the Company's net earnings (loss) and net earnings(loss) per share from continuing operations would approximate the pro forma amountsindicated below:

Fiscal    years endedDollars in thousands, except per share data
July 1, 2000
July 3, 1999
June 27, 1998**Net earnings (loss)    from continuing operations**As Reported$ 2,233 $ 22,738 $ (28,212)Pro Forma$ 1,838 $ 22,292 $ (28,537)**Net earnings (loss)    per common share from continuing operations**As Reported, basic $ 0.13 $ 1.35 $ (1.72)As Reported, diluted$ 0.13 $ 1.34 $ (1.72)Pro Forma, basic$ 0.11 $ 1.33 $ (1.74)Pro Forma, diluted$ 0.11 $ 1.32 $ (1.74)*Note: The pro forma disclosures shown may not be representative of the effects onreported net earnings in future years.*
The fair value of each stock option grant used to compute pro forma net earnings (loss)and net earnings (loss) per share disclosures is estimated at the time of the grant usingthe Black-Scholes option-pricing model. The weighted-average assumptions used in the modelare as follows:

2000
1999
1998Expected dividend yield
0.0%
0.0%
0.0%Expected volatility
54%
55%
31%Risk-free interest rate
6.5%
5.5%
5.7%Expected term (in years)
10
10
10
Using these assumptions in the Black-Scholes model, the weighted average fair value ofoptions granted was $0.7 million, $0.8 million, and $0.6 million in fiscal years 2000,1999 and 1998, respectively. On October 29, 1994, the shareholders of WLR Foods approvedthe Poultry Producer Stock Purchase Plan and amended and restated the Employee StockPurchase Plan. These plans allow contract producers and employees to purchase stock at a10% discount from the market price. All shares must be held in the plans for a period oftwo years. Upon termination of employment or contract, participants are terminated fromthe respective plans.
**9.      Leases**
WLR Foods has entered into various operating lease agreements for machinery andequipment. The leases are noncancelable and expire on various dates through 2006. Totalrent expense was approximately $3.4 million, $3.4 million, and $5.1 million for fiscal2000, 1999 and 1998, respectively. The following schedule presents the future minimumrental payments required under the operating leases that have initial or remainingnoncancelable lease terms in excess of one year as of July 1, 2000:
Dollars in thousandsFiscal 2001
$ 2,399Fiscal 2002 
1,347Fiscal 2003 
623Fiscal 2004 
150Fiscal 2005 
36Fiscal 2006 
12Total minimum lease payments
$ 4,567**10.      Related Party Transactions**
Certain directors of WLR Foods are contract growers of live poultry for the Company. Inaddition, a WLR Foods director is a director/officer of a company which supplies fuel andrelated products to certain locations of the Company. 

Transactions with these related parties during the past three fiscal years are asfollows:
(Dollars in thousands)
Purchases from Related partiesFiscal 2000
$ 700 Fiscal 1999
967 Fiscal 1998
1,381 
In management's opinion, all related party transactions are conducted under normalbusiness conditions, with no preferential treatment given to related parties.
**11.      Earnings Per Share**
The following is a reconciliation between the calculation of basic and diluted netearnings (loss) per share:
*Dollars in thousands***2000
1999
1998**Numerator:**Net earnings (loss) from continuing operations**$ 2,233**$ 22,738 $ (28,212)**Denominator:**Weighted average commonshares outstanding**16,419**16,479 16,315 Effect of outstanding stock    warrants **320**300 88 Basic weighted average common shares    outstanding**16,739**16,77916,403Basic net earnings (loss) from    continuing operations per common share**$ 0.13**$ 1.35 $ (1.72)**Numerator:**Net earnings (loss) fromcontinuing operations**$ 2,233**$ 22,738 $ (28,212)**Denominator:**Weighted average commonshares outstanding**16,419**16,479 16,315 Effect of outstanding stock    options**22**11- Effect of outstanding stock    warrants **320**407 88 Diluted weighted average common    shares outstanding**16,761**16,89716,403Diluted net earnings (loss) from    continuing operations per common share**$ 0.13**$ 1.34 $ (1.72)
Options to purchase 707,666, 519,416 and 643,375 shares of common stock, at pricesbetween $5.05 and $15.00, $6.88 and $15.00, and $6.88 and $20.00 per share wereoutstanding in 2000, 1999, and 1998, respectively. The outstanding options were notincluded in the computation of diluted earnings per share for fiscal year 1998 because theeffect of including these options would have been anti-dilutive.
**12.      Discontinued Operations**
During fiscal year 1998, the Company's Board of Directors adopted a plan to discontinueoperations of its subsidiary, Cassco Ice & Cold Storage. The transaction involved thesale of the division and was completed on July 31, 1998. Net proceeds of approximately $55million were received, resulting in a gain of approximately $28 million ($18 million aftertax). Earnings from discontinued operations in fiscal year 1999 were approximately $1million ($0.7 million after tax). Accordingly, the operating results of the Cassco Iceoperations have been segregated from continuing operations and reported as separate lineitems on the consolidated statement of operations. 

Operating results of discontinued operations were as follows:
*Dollars in thousands***2000 
1999 
1998 Net sales**$ - 
$ 4,641 
$ 22,063 Income before tax**- 
1,071 
4,529 Income tax expense**- 
407 
1,671 Net earnings**$ - 
$ 664 
$ 2,858 **13.      Sale of Assets**
On August 14, 1998, the Company completed the sale of its Goldsboro, North Carolinachicken complex. Net proceeds of approximately $38 million were received in exchange forassets totaling approximately $30 million. The gain of approximately $8 million ($5million after tax) is included in the results of operations for fiscal year 1999. TheCompany also completed the sale of its Monroe, North Carolina processing plant in fiscalyear 1999. The sale resulted in a loss of approximately $1.5 million ($0.9 million aftertax).
**14.      Contingencies**
The Company is a defendant in a pending litigation proceeding in the state of WestVirginia alleging violations of the West Virginia Consumer Credit Protection Act and WestVirginia Antitrust Law. The suit alleges, among other things, that the Company providedsubstandard chicks and feed to growers who raise chickens for the Company in WestVirginia. The suit was dismissed by the Hardy County Circuit Court and is currently beingappealed before the West Virginia Supreme Court. While any potential damages in the suitcannot be determined, the lawsuit is not expected to have a material effect on theCompany’s consolidated financial statements. The Company believes the suit is withoutmerit and intends to defend it vigorously.
**15.      Segment, Geographic, and Major Customer Information**
In fiscal year 1999, the Company adopted SFAS No. 131, "Disclosures about Segmentsof an Enterprise and Related Information." This statement requires companies toreport certain information about operating segments in their financial statements andestablishes standards for related disclosures about products and services, geographicareas and major customers. 

The Company has two reportable segments: Chicken and Turkey. The third segment, Other,includes revenues from the Company's protein conversion plants, unallocatedcorporate-related items and other miscellaneous items. Chicken segment revenues areprimarily sales of chicken-related products, such as retail traypack items, whole birdscut up for fast-food restaurants and portion-controlled products for foodservicedistributors. Turkey segment revenues are primarily sales of turkey-related products andfurther processed products, including both turkey and chicken items, produced at theCompany's further processing plants. These items include fresh and frozen whole birds andparts, including retail traypack items, turkey burgers and a full line of furtherprocessed products, including deli meats, frankfurters and salads. To better utilize itsfeed manufacturing capabilities, the Company sells feed to other users, primarily from itsMarshville, North Carolina feedmill. Sales from this mill were included in Turkey segmentsales through the first quarter of fiscal 1999, when the complex was converted to chickenprocessing. Each segment is evaluated by management based on operating profit (loss) andnet earnings (loss).

The following tables set forth specific operating information about each segment asreviewed by the Company's management. Net earnings (loss) for segment reporting ispresented on the same basis as that used for consolidated net earnings (loss). Theaccounting policies of the segments are the same as those described in the summary ofsignificant accounting policies. Administrative services provided by the corporate officesare primarily allocated to the individual segments based on levels of inventories andproperty, plant and equipment. Due to certain assets which are shared between segments,management evaluates assets and capital expenditures on a consolidated basis; therefore,such information is not presented on a segment basis.
Dollars    in thousands**Chicken**Turkey**Other**Elimina-**Total***Year ended July 1, 2000*****tionsExternal segment revenues$ 403,060 $ 421,616 $ 8,052 $ - $ 832,728Intersegment revenues--12,655(12,655)-Total revenues403,060 421,616 20,707 (12,655)832,728Interest expense2,520 2,549 - (101)4,968Interest income- 205 145 (101)249 Income taxes (benefit)(6,718)5,675 1,639 - 596 Net earnings (loss) from    continuing operations(11,078)9,360 3,951 - 2,233 Depreciation expense9,852 6,678 1,314 - 17,844 ***Year ended July 3, 1999***External segment revenues$ 452,513 $ 427,637 $ 7,936 $ - $ 888,086 Intersegment revenues- - 12,882 (12,882)- Total revenues452,513 427,637 20,818 (12,882)888,086 Interest expense4,974 6,060 - (103)10,931 Gain on sale of Goldsboro complex7,699 - - - 7,699 Interest income1 103 299 (103)300 Income taxes (benefit)13,561 (1,861)1,511 - 13,211 Net earnings (loss) from    continuing operations22,193 (3,046)3,591 - 22,738 Extraordinary charge- - (2,559)- (2,559)Depreciation expense9,754 8,218 1,408 - 19,380 ***Year ended June 27, 1998***External segment revenues$ 388,559 $ 546,256 $ 11,152 $ - $ 945,967 Intersegment revenues22,912 - 13,460 (36,372)- Total revenues411,471 546,256 24,612 (36,372)945,967 Interest expense8,239 14,376 13 (89)22,539 Interest income70 6 88 (89)75 Income taxes (benefit)3,277 (20,563)934 - (16,352)Net earnings (loss) from    continuing operations6,085 (36,158)1,927 (66)(28,212)Depreciation expense9,432 11,169 2,242 - 22,843 
 

A reconciliation of total segment earnings (loss) to consolidated net earnings (loss)is as follows:

July 1, 2000
July 3, 1999
June 27, 1998Segment earnings (loss)$ 2,233 $ 22,738 $ (28,212)Unallocated:Earnings from discontinued    operations, net of tax-6642,858Gain on sale of discontinued    operations, net of tax- 17,927 - Extraordinary charge on early    extinguishment of debt, net of tax- (2,559)- Net earnings (loss)$ 2,233 $ 38,770 $ (25,354)***Geographic Information.No individual foreign country accounts for 10% or more of sales to externalcustomers.
***Major Customers.Revenues from one customer represented approximately $129 million and $113million, or 16% and 13%, of total Company net sales in fiscal years 2000 and 1999,respectively. No customer represented 10% or more of total Company's net sales in fiscalyear 1998.
**16.      Selected Quarterly Financial Data (Unaudited)**
The unaudited summary of quarterly results of continuing operations for fiscal 2000 and1999 follows:
Dollars in thousands, except per    share dataFiscal year ended July 1, 2000
First
Second
Third
FourthNet sales$ 202,007 $ 218,803 $ 199,182 $ 212,736 Operating income (loss) 4,946 8,233 (6,961)299 Net earnings (loss) from    continuing operations2,543 4,784 (4,970)(124)Per share data:Diluted earnings (loss) from    continuing operations per common share$ 0.15 $ 0.28 $ (0.30)$ (0.01)Fiscal year ended July 3, 1999
First
Second
Third
FourthNet sales$ 237,941 $ 229,276 $ 192,881 $ 227,988 Operating income15,889 15,094 759 6,924 Net earnings (loss) from    continuing operations11,717 7,222 (127)3,926 Per share data:Diluted earnings (loss) from    continuing operations per common share$ 0.70 $ 0.43 $ (0.01)$ 0.23 
Per share calculations are based on each stand alone period presented; therefore, theannual per share results may not be the sum of the four quarters.
**17.      Subsequent Event**
On September 27, 2000, the Company entered into an Agreement and Plan of Merger withPilgrim's Pride Corporation ("Pilgrim's") whereby the Company will become awholly-owned subsidiary of Pilgrim's and the Company's shareholders will receive $14.25cash for each share of Company common stock owned by them at the effective timeof the merger. The Company's Board of Directors has unanimously approved the agreement.The agreement is subject to regulatory and shareholder approvals and other customaryclosing conditions. The merger is expected to be completed as soon as practicablethereafter.**Independent Auditors’ Report**
The Board of Directors and ShareholdersWLR Foods, Inc.:

We have audited the accompanying consolidated balance sheets of WLR Foods, Inc. andsubsidiaries as of July 1, 2000 and July 3, 1999 and the related consolidated statementsof operations, shareholders’ equity and cash flows for each of the fiscal years inthe three-year period ended July 1, 2000. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in theUnited States of America. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly,in all material respects, the financial position of WLR Foods, Inc. and subsidiaries as ofJuly 1, 2000 and July 3, 1999 and the results of their operations and their cash flows foreach of the fiscal years in the three-year period ended July 1, 2000, in conformity withaccounting principles generally accepted in the United States of America.

KPMG LLPRichmond, VirginiaAugust 11, 2000, except as to Note 17, which is as of September 27, 2000

**INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE**

The Board of Directors and ShareholdersWLR Foods, Inc.:

Under date of August 11, 2000, except as to Note 17, which is as ofSeptember 27, 2000, we reported on the consolidated balance sheets of WLR Foods, Inc. andsubsidiaries as of July 1, 2000 and July 3, 1999, and the related consolidated statementsof operations, shareholders' equity and cash flows for each of the fiscal years in thethree-year period ended July 1, 2000.  These consolidated financial statements andour report thereon are included in the July 1, 2000 annual report on Form 10-K of WLRFoods, Inc.  In connection with our audits of the aforementioned consolidatedfinancial statements, we also audited the related financial statement schedule as listedin Item 14(a) of this Form 10-K.  This financial statement schedule is theresponsibility of the Company's management.  Our responsibility is to express anopinion on this financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered inrelation to the basic consolidated financial statements taken as a whole, presents fairly,in all material respects, the information set forth therein.

KPMG LLP

Richmond, VirginiaAugust 11, 2000

**WLR FOODS,    INC.    SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS    FOR FISCAL YEARS ENDED JULY 1, 2000, JULY 3, 1999 AND JUNE 27, 1998    (in thousands)**
Charged to
Balance at
cost and
Balance
Beginning
other
Charged to
at end of 
Description
of period
expenses
accounts
periodFiscal year ended July 1, 2000Allowance for Doubtful Accounts
$1,909
$1,060
$1,341
$1,628
Total
$1,909
$1,060
$1,341
$1,628Fiscal year ended July 3, 1999Allowance for Doubtful Accounts
$1,515
$1,056
$662
$1,909
Total
$1,515
$1,056
$662
$1,909Fiscal year ended June 27, 1998Allowance for Doubtful Accounts
$1,550
$828
$863
$1,515
Total
$1,550
$828
$863
$1,515
Schedules not included in this Item have been omitted because they are either notapplicable or the information is included in the Consolidated Financial Statements ornotes thereto.
**Item 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE.**
There were no changes in or disagreements with accountants on accounting and financialdisclosure during WLR Foods' two most recent fiscal years or any subsequent interimperiod.
**PART III

Item 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT.
*Directors of the CompanyThe following information is given regarding WLR Foods’ Directors.

Name and Position
Director
Principal Occupation
with the Company
Age
Since 
During the Last 5 Years**Class A    Directors
(to serve until    the 2000 annual meeting of shareholders)J. Craig Hott
47
1988Vice President of Hott's Farming,    Inc. and Hott's Ag-Services, Inc.Marie C. Johns
48
2000President of Verizon -    Washington DC Inc. Previously, President and Chief Executive Officer of Bell Atlantic -    Washington, D.C., Inc.; and Vice President, External Affairs for Bell Atlantic-Washington.Phillip C. Stone
58
1999President of Bridgewater College,    Bridgewater, Virginia since 1994**Class B    Directors
(to serve until    the 2001 annual meeting of shareholders)Katherine K. Clark
43
1998Founder and Chief    Executive Officer of Landmark Systems CorporationStephen W. Custer
58
1984President of Custer Associates,    Inc. (consulting firm)James L. Keeler
65
1988Chief Executive Officer of the    company since February 1988President**Class C    Directors
(to serve until    the 2002 annual meeting of shareholders)Charles L. Campbell
52
1988Commissioner of Revenue for Page    County, Virginia; broiler producerWilliam H. Groseclose, Jr.
69
1993Chairman of    Harrisonburg Regional Board and Winchester Regional Board of First Union National Bank;    previously Chief Executive Officer of Shenandoah Valley region of Dominion BankWilliam D. Wampler
72
1984Poultry and livestock farmer***Executive Officers of the CompanyThe following information is given regarding WLR Foods’ Executive Officers.
Name and Position
Principal Occupationwith the Company
Age
During the Last 5 YearsJames L. Keeler                         President, Chief Executive Officer
65Chief Executive Officer since    February 1988Jane T. Brookshire                             Vice President of Administration, Secretary
54Vice President of    Administration since November 1998, previously Vice President of Human Resources from 1993    to 1998.Dale S. Lam                                      Chief Financial Officer, Vice President of Finance, Treasurer
37Chief Financial    Officer since November 1998, Vice President of Finance and Treasurer since August 1988,    previously Controller. Co-owner and Treasurer of Office Products, Inc. from 1989 to 1997.Ronald E. Morris                                Vice President of Turkey Operations for Wampler Foods, Inc.
47Vice President of    Turkey Operations for Wampler Foods, Inc. since November 1997; previously, Complex manager    for Marshville, North Carolina Turkey Complex for Wampler Foods, Inc. from 1996 to 1997    and Complex Manager for Butterball from 1994 to 1996.Walter F. Shaffer, III                          Vice President of Chicken Operations for Wampler Foods, Inc.
42Vice President of    Chicken Operations for Wampler Foods, Inc. since 1997; previously, Director of Chicken    Operations for Wampler Foods, Inc. from 1996 to 1997, Director of Chicken Processing for    Wampler Foods, Inc. from 1995 to 1996, and Plant Manager of Moorefield Chicken operations    for Wampler Foods, Inc. from 1991 to 1995.John A. Turner                                  Vice President of Sales and Marketing for Wampler Foods, Inc.
49Vice President of    Sales and Marketing for Wampler Foods, Inc. since June, 1999; previously, Vice President    of Sales and Marketing for Hatfield Quality Meats from 1996 to 1998, and President,    Consumer Consumer Products Division of Rich Products Corporation from 1990 to 1996.**Item 11. EXECUTIVE COMPENSATION.

REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
*Compensation PhilosophyThe Executive Compensation Committee of the Company's Board of Directorsestablishes the annual salary, bonus and other benefits of the Company's Chief ExecutiveOfficer and makes decisions relating to stock option awards to executive officers andother key personnel pursuant to the Company's Long-Term Incentive Plan. The Company'soverall goals regarding executive compensation include providing competitive compensationpackages that attract and retain qualified executives, and rewarding its executives forfinancial and operating results, both annual and long-term, which enhance the value ofshareholders' investment in the Company. 
**Base SalaryExecutive Officers’ salaries are determined by evaluating the responsibilities oftheir positions and their performance, and by reference to salaries paid in thecompetitive marketplace for comparable executive ability and experience. Companiesconsidered in determining executive compensation are not the same as the peer groupreflected in the stock price performance graph due to the Committee’s belief that,unlike the performance of stock traded on a national market, executive compensation shouldbe evaluated in comparison with similar companies in the same geographic area. Individualsalary increases, which are considered annually, are based on evaluations of past andcurrent performance, market conditions and company performance. Based on availablefigures, the Company Executives’ base salaries are generally more conservative thansalaries of executives in other companies within Virginia and the industry.

With respect to the Chief Executive Officer, the Committee believes that a significantportion of annual compensation should be tied directly to Company performance, and thatadjustments to base salary should be consistent with Company wide salary adjustments. Thisphilosophy was evident in prior years when, because of challenges presented by industryconditions, executive base salaries remained constant except for changes resulting frompromotions.
***Cash BonusThe Company's Incentive Bonus Program focuses on the second goal of the Company'scompensation philosophy, that of rewarding financial and operating results on an annualbasis. The Company developed the Incentive Bonus Program in 1988 with the assistance ofindependent executive compensation consultants, and the Program has been administeredsince then by the Company's Human Resources Department for the benefit of executiveofficers and other key personnel. The bonus pool is determined annually by reference tothe Company's operating return on equity (ROE), and each individual's specific bonusallocation is calculated by multiplying ROE (adjusted for accrued incentive pay and taxes)by his or her base salary and by a bonus factor which is based on his or her positionwithin the Company. Thus, bonuses comprise a significant part of management compensationthat is "at risk" based on the Company's annual performance. As borne out inmore recent years, for years in which the Company did not have a strong return on equity,a significant portion of management's annual compensation was reduced.
***Long-Term Incentive PlanThe Company’s Long-Term Incentive Plan, a stock option plan approved by theCompany's shareholders at the 1998 annual meeting, rewards Company executives on along-term basis and provides an incentive for executive officers to maximize long-termshareholder value. By encouraging management investment in Company stock, the Plan alignsmanagement's interests with those of the shareholders: namely, to enjoy long-termappreciation in the value of the Company's common stock.

The Company has, twice during the past several years, engaged independent executivecompensation consulting firms to review the Company's compensation package, including itsLong-Term Incentive Plan. Since the inception of the first Long-Term Incentive Plan in1988, the Company has consistently awarded options at levels below those recommended bythe consultants. In 1995, the consultants made several recommendations regarding the levelof options granted, the term of the options and whether the Company should grant incentivestock options (ISOS) or non-qualified options as in the past. The granting of ISOS permitsexecutives to defer the income tax consequences of their options with no impact on theCompany's earnings. The consultants also recommended that the Company implement asupplemental employee retirement plan (SERP) in order for executive compensation to bemore competitive with companies of similar size.

In fiscal year 1995, the Company began granting options with a term of 10 years ratherthan 5 years as in the past, and began granting ISOS to the extent permitted by thecurrent Internal Revenue Code, neither of which affect the Company's earnings. While theCompany deferred implementation of the SERP recommended by the consultants, the Companydid establish the 1995 Nonqualified Deferred Compensation Plan. See "DeferredCompensation" below.
***Deferred CompensationThe final significant component of the Chief Executive Officer's compensation isdeferred compensation, providing a competitive compensation package and rewardingoperating results. Mr. Keeler's deferred compensation is essentially a retirement planwith payouts beginning the year after Mr. Keeler retires as Chief Executive Officer, butpayouts are calculated by reference to the increase in the Company's book value due toearnings over the term of Mr. Keeler's service. Specifically, 1.5% of the annual increasein the Company's book value is allocated to a deferred compensation account which,together with accrued interest, is payable to him in one or more installments beginning inthe year after his retirement.

In 1995, the Company established the 1995 Nonqualified Deferred Compensation Plan(Nonqualified Plan). The purpose of this nonqualified, unfunded plan is to permit certainmembers of management and other employees to supplement their retirement savings beyondthe limits imposed by federal tax law on the Company's Profit Sharing and Salary SavingsPlan and Trust (Profit Sharing Plan). Pursuant to the Nonqualified Plan, employees mayelect to defer a portion of their salary and bonus until their retirement or othertermination. The Company does not contribute to the Plan. However, to the extent thatdeferrals under the Nonqualified Plan reduce a participant's compensation base forpurposes of the Company's contribution to the Profit Sharing Plan, the Company will creditto the participant's Nonqualified Plan account an amount equal to the difference betweenthe Company's actual contribution to the Profit Sharing Plan and the amount which theCompany would have contributed had the participant not elected to defer an additionalamount under the Nonqualified Plan.
***Chief Executive Officer CompensationMr. Keeler’s base salary for the current fiscal year is $310,790.This base salary is competitive with chief executive positions within the state andindustry. Like all Company executives, Mr. Keeler’s bonus is a function of theCompany’s ROE, and his bonus factor has remained at 4.0 for the past 5 years. Mr.Keeler’s deferred compensation allocation is singularly a function of an increase inthe Company’s book value. The number of stock options, thebenefit of which is tied solely to Company performance, awarded to Mr. Keeler under theLong-Term Incentive Plan increased proportionately with the increase in the number ofoptions granted to all members of management, reflecting a systematic effort to enhancemanagement's personal financial interest in Company proformance.
***Limitation on Deductibility of Certain Compensation for Federal Income Tax PurposesSection 162(m) of the Internal Revenue Code, enacted as part of the Omnibus BudgetReconciliation Act of 1993, limits the annual compensation deduction, for federal incometax purposes, of publicly held companies such as WLR Foods, Inc. to $1 million forcompensation paid to each of its chief executive officer and its four highest compensatedexecutive officers other than the chief executive officer. However, this limit does notapply to "performance-based" compensation as defined in that section and theregulations thereunder.

The Company does not anticipate that the total annual compensation paid to anyexecutive, including the Chief Executive Officer, will exceed the $1 million limit.Moreover, options granted pursuant to the 1998 Long-Term Incentive Plan qualify asperformance-based compensation, and will therefore not be subject to the limitation.Accordingly, Section 162(m) is expected to have no impact on the Company during thecurrent fiscal year.

              William H. Groseclose, Jr.              Katherine K. Clark              Phillip C. Stone              Executive Compensation Committee Members
***SUMMARY COMPENSATIONThe Summary Compensation Table below contains information concerning annual andlong-term compensation provided to the Company's Chief Executive Officer, and the fiveother most highly compensated executive officers of the Company, for all services renderedto the Company and its subsidiaries for the fiscal years ending July 1, 2000, July 3,1999 and June 27, 1998.
**SUMMARY    COMPENSATION TABLE
Long-Term
Other
Annual    Compensation
Compensation
Compensation (2)
Name and
Other Annual
Principal Position
Year
Salary($)1
Bonus($)
Compensation ($)
Options
($)James L. Keeler
99-00
301,738
0
0
90,000
29,498  (3)Chief Executive
98-99
297,868
325,201
0
60,000
258,635Officer & President
97-98
267,248
0
0
60,000
3,595Dale S. Lam
99-00
175,000
0
0
15,000
3,200Chief Financial
98-99
143,779
85,960
0
18,500
2,683Officer, TreasurerJane T. Brookshire
99-00
175,000
0
0
15,000
3,200Vice President 
98-99
150,887
61,785
0
10,000
4,099Administration, 
97-98
131,115
0
0
10,000
2,570SecretaryRonald E. Morris
99-00
180,000
0
0
15,000
3,200Vice President
98-99
168,187
91,663
0
10,000
4,589Turkey Operations
97-98
139,039
0
0
10,000
1,500Wampler Foods, Inc.Walter F. Shafer, III
99-00
180,000
0
0
15,000
3,200Vice President
98-99
168,187
91,663
0
10,000
4,578Chicken Operations
97-98
138,654
0
0
10,000
2,715Wampler Foods, Inc.John A. Turner
99-00
220,000
0
0
15,000
3,200Vice President
98-99
20,000
10,200
0
10,000
0Sales and MarketingWampler Foods, Inc.
1   Includes 53 weeks for the fiscal year ending July 3, 1999, and 52 weeksfor fiscal years ending July 1, 2000 and June 27, 1998.

2   Includes Company contributions made to the Company's Profit Sharing andSalary Savings Plan of $3,200 for each of Messrs. Keeler, Lam, Morris, Shafer and Turner,and Ms. Brookshire. 

3   Includes $26,298 of deferred compensation which is based on increases inthe Company’s book value due to earnings.
**OPTION GRANTS    IN LAST FISCAL YEAR
% of Total
Options
Exercise
Granted to
or Base
Options
Employee in
Price
Expiration
Grant Date
Name
Granted
Fiscal Year
Share ($)
Date
Present Value ($)1James L. Keeler
90,000
67.2
5.0469
4/24/10
295,870Dale S. Lam
15,000
11.2
5.0469
4/24/10
49,312Jane T. Brookshire
15,000
11.2
5.0469
4/24/10
49,312Ronald E. Morris
15,000
11.2
5.0469
4/24/10
49,312Walter F. Shafer, III
15,000
11.2
5.0469
4/24/10
49,312John A. Turner
15,000
11.2
5.0469
4/24/10
49,312
1 The values shown reflect a standard application of the Black-Scholes Option PricingModel, assuming a risk-free rate of return of 6.5% and an annualized volatility factor of54%. Values shown do not take into account risk factors such as nontransferability andrestrictions on exercisability. The Black-Scholes Model is a commonly utilized model forvaluing options which assumes that the possibilities of future stock returns (dividendsplus stock value appreciation) resemble a bell shaped curve. The model applies astatistical analysis to the Company's historical data to project the value of the options.
**AGGREGATED    OPTION EXERCISES IN LAST FISCAL YEAR    AND FISCAL YEAR-END OPTION VALUES
Value of 
Number of
Unexercised
Unexercised
In-The-Money
Options at
Options at 
Fiscal (1)
Fiscal
Shares
Year-End
Year-End
Acquired
Value
Exercisable/
Exercisable/Name
On Exercise
Realized ($)
Unexercisable
UnexercisableJames L. Keeler
0
0
220,000/170,000
$0/0Dale S. Lam
0
0
3,833/31,167
0/0Jane T. Brookshire
0
0
36,666/28,334
0/0Ronald E. Morris
0
0
9,666/28,334
0/0Walter F. Shafer, III
0
0
16,666/28,334
0/0John A. Turner
0
0
0/25,000
0/0
(1) Adjusted to give effect to the May 12, 1995 3-for-2 stock split.
***EXECUTIVE AGREEMENTSIn 1998 the Company entered into a three-year employment agreement with the ChiefExecutive Officer, which expires at the end of Fiscal Year 2001. The agreement governs Mr.Keeler's compensation, specifically his base salary, bonus, perquisites and benefits. 

Mr. Keeler's deferred compensation allocation will be calculated at 1.5% of theincrease in the Company's book value over each preceding year, as explained previouslyunder "Deferred Compensation." The Company has also agreed to provide grouphealth insurance coverage to Mr. Keeler and his wife for the remainder of theirlives, provided he does not retire before age 65. Mr. Keeler's perquisites andbenefits are consistent with those provided to the Company's senior management.

Under the terms of the 1998 Employment Agreement, Mr. Keeler served as President andChief Executive Officer of the Company for the first two years of the contract. The thirdyear is anticipated to be a transition year, and the position and duties may be adjustedby the Board of Directors. Under the Agreement, Mr. Keeler agrees to work with the Boardof Directors in identifying a successor, but also agrees to give serious consideration toan extension of the Employment Agreement if the Board requests additional time to identifya successor.

The Company has entered into severance agreements with each of the executive officersnamed in the above Summary Compensation Table (the Severance Agreements).  Pursuantto the Severance Agreements, each of these individuals is entitled to certain payments(described below) if the Company terminates his or her employment during a specifiedperiod following a "Change in Control" of the Company.

For purposes of the Severance Agreements, a "Change inControl" occurs (A) when an individual, entity or group acquires beneficial ownershipof 20% or more of the combined voting power of the Company's outstanding stock, subject tocertain exceptions set forth in the executive's Severance Agreement, (B) when individualswho, as of February 4, 1994, constituted the Board of Directors (the "IncumbentBoard") and individuals whose election, or nomination for election by theshareholders of the Company, was approved by a vote of at least seventy-five percent ofthe directors then comprising the Incumbent Board (who shall after election be consideredmembers of the Incumbent Board unless such election occurs as a result of an actual orthreatened election contest or other actual or threatened solicitation of proxies orconsents by or on behalf of a person other than the Company's Board of Directors) shallcease to constitute a majority of the Company's Board of Directors, (C) upon the approvalby the shareholders of the Company of a reorganization, merger or consolidation except incertain instances set forth in the executive's Severance Agreement, or (D) upon approvalby the shareholders of the Company of the complete liquidation or dissolution of theCompany or the sale or other disposition of all or substantially all of the assets of theCompany, except in certain instances set forth in the Severance Agreements.

The Severance Agreements provide that if theCompany terminates an executive officer’s employment during the three year periodfollowing a Change in Control of the Company, other than for death, Cause (willful andcontinued failure to perform duties or willfully engaging in illegal conduct, defined morespecifically in the Severance Agreements) or Disability (as defined in the SeveranceAgreement), or if he or she resigns for Good Reason (includes an adverse change in statusor position, a reduction in base salary or benefits, or relocation, defined morespecifically in the Severance Agreements) during such three year period, he or she isentitled to receive an amount in cash (the Severance Payment) equal to three times his orher total annual compensation, which includes: (A) the higher of (x) his or her annualbase salary on the date of termination or (y) his or her annual base salary in effectimmediately prior to the Change in Control and (B) an amount equal to the average of thebonuses awarded to him or her in each of the three previous years, including, in the caseof Mr. Keeler, any bonuses awarded pursuant to any deferred compensation arrangements. Inthe event that such payments become subject to an excise tax imposed by Section 4999 ofthe Internal Revenue Code (or any similar tax), the executive shall be entitled to receivea "gross-up" payment in respect of such taxes and in respect of any taxes onsuch gross-up payment as specified in the Severance Agreement. These Severance Agreementsalso provide for the payment in cash of the difference between the Termination Fair MarketValue (as defined in the Severance Agreements) and the exercise price, of all unvestedstock options, and for the continuation of employee welfare benefits (such as healthinsurance) for three years after termination if his or her employment is terminated duringsuch three year period. In addition, Mr. Keeler will be entitled to receive the SeverancePayment and other severance benefits if he resigns for any reason during the 30-day periodimmediately following the first anniversary of a Change in Control.
The Company has also entered into Termination of Severance Agreements with Messrs.Keeler and Lam in connection with the pending merger with Pilgrim's Pride, which wouldprovide Messrs. Keeler and Lam with lump sum severance payments of $900,000 and $447,750,respectively, upon completion of the merger. The Termination Agreements, which areconditional upon consumation of the merger, would replace the Severance Agreementsdescribed above with respect to those two executives, and would significantly reduce thecost to the Company of their severance benefits.

**STOCK PRICE PERFORMANCE TABLE**

The graph on this page presents a comparison of five-year cumulative total shareholderreturns for WLR Foods, Inc., the S&P 500 Index and a Peer Group Index. The graphreflects the annual return from the Company's five previous fiscal years-end, developedwith a monthly index, assuming dividends are reinvested monthly. The graph also assumes aninitial investment of $100 on July 1, 1995. The Peer Group Index consists of Cagles, Inc.,Pilgrims Pride Corporation and Sanderson Farms, Inc., companies within the same industryand with similar equity market capitalization.
***COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNSAmong WLR Foods, Comparable Companies, and the S & P 500
**Jun-95**Jun-96**Jun-97**Jun-98**Jun-99**Jun-00**Composite**
100
111.26
143.94
177.06
227.6
97.735**S&P 500**
100
126.01
169.74
220.94
271.21
290.88**WLR Foods**
100
99.112
58.664
48.142
59.042
33.609
**Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT.**
***PRINCIPAL STOCKHOLDERS AND SHARE OWNERSHIP OF MANAGEMENTThe following table sets forth the number and percentage of shares of Company common stockheld as of July 1, 2000 (i) by each of the Company's directors, (ii) by the executiveofficers named in the Summary Compensation Table, and (iii) by all directors and executiveofficers as a group.

Number
Percent
Name 
Beneficially Owned
of Class (1)Jane T. Brookshire
51,300 (2)
* Charles L. Campbell
19,137 (3)
* Katherine K. Clark
3,663 (3)
* Stephen W. Custer
40,201 (4)
* William H. Groseclose, Jr.
13,771 (4)
* J. Craig Hott
111,106 (5)
* Marie C. Johns
662 (3)
* James L. Keeler
320,379 (6)
1.95Dale S. Lam
12,748 (7)
* Ronald E. Morris
18,369 (8)
* Walter F. Shafer, III
34,222 (9)
* Phillip C. Stone
107,799 (10)
* John A. Turner
6,116 (11)
* William D. Wampler
765,937 (12)
4.73All directors and executive
1,505,410 (13)
9.12officers as a group(consisting of 14 persons)
(*)     Denotes percent ownership not exceeding 1%of the class of common stock. 

(1)      Based on 16,176,910 shares outstandingas of July 1, 2000 plus shares which members of management have the option to purchasewithin 60 days of July 1, 2000. 

(2)     Includes 9,867 owned directly, through theWLR Foods, Inc. Employee Stock Purchase Plan and her retirement accounts, 1 share owned  jointly with her husband, 1,433 shares held by her husband through hisself-directed retirement account, and 39,999 shares which Ms. Brookshire has the right topurchase within 60 days of July 1, 2000 through the exercise of options. Ms. Brookshiredisclaims beneficial interest in the shares held by her husband. 

(3)     All shares owned directly. 

(4)     All shares owned directly and through hisself-directed retirement account. 

(5)     Includes 105,992 shares owned by E. E. Hott,Inc., of which Mr. Hott is an officer and director, 4,964 shares owned jointly with hiswife,   and 150 shares held by his wife as custodian for Mr. Hott's son. Mr.Hott disclaims beneficial interest in the shares held by his wife as custodian. 

(6)     Includes 56,457 shares owned directly andthrough the Employee Stock Purchase Plan and his retirement accounts, 23,922 shares owned  by his wife directly and through her self-directed retirement account, and 240,000shares which Mr. Keeler has the right to purchase within  60 days of July 1, 2000through the exercise of options. Mr. Keeler disclaims beneficial interest in the sharesowned by his wife. 

(7)     Includes 5,347 shares owned directly,through the WLR Foods, Inc. Employee Stock Purchase Plan or through his self-directedretirement   accounts, 235 shares held by his wife through her self-directedretirement account, and 7,166 shares which Mr. Lam has the right to purchase within 60days of July 1, 2000 through the exercise of options. Mr. Lam disclaims beneficialinterest in the shares held by his wife. 

(8)     Includes 370 shares owned through the WLRFoods, Inc. Employee Stock Purchase Plan, 5,000 shares owned by his wife, and 12,999        shares which Mr. Morris has the right topurchase within 60 days of July 1, 2000 through the exercise of options. Mr. Morrisdisclaims beneficial interest in the shares held by his wife. 

(9)     Includes 14,223 shares owned directly andthrough the WLR Foods, Inc. Employee Stock Purchase Plan and 19,999 shares which Mr. Shafer has the right to purchase within 60 days of July 1, 2000 through the exerciseof options. 

(10)   Includes 2,302 shares owned directly and 105,497 sharesowned by Bridgewater College, of which Mr. Stone is president. Mr. Stone disclaimsbeneficial interest in the shares owned by Bridgewater College. 

(11)    Includes 179 shares owned directly, 2,604 sharesowned jointly with his wife and 3,333 shares which Mr. Turner has the right to purchase within 60 days of July 1, 2000 through the exercise of options. 

(13)    Includes 258,155 shares owned directly and asgeneral partner of Wampler Land, 204,260 shares owned by his wife, 28,517 shares owned by May Meadows Farms, Inc., of which Mr. Wampler is an officer and director, 194,469shares held as trustee of the Charles W. Wampler, Sr. Family Trust, and 80,536 shares heldas trustee of the Charles W. Wampler, Sr. Charitable Annuity Trust. Mr. Wampler disclaimsbeneficial interest in the shares owned by his wife or held by the Trusts. 

(14)    Includes 323,496 shares which the group has theright to purchase within 60 days of July 1, 2000 through the exercise of options.**Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

***CERTAIN TRANSACTIONS***The Company's directors and officers are actively involved in, andknowledgeable about, the Company's businesses. This is largely a result of therelationship between the Company and certain of its directors and their families. 

The following table identifies (i) amounts in excess of $60,000 paid bythe Company to each of the directors and executive officers, members of their immediatefamily, and entities related to the directors and executive officers who were contractgrowers with the Company during the fiscal year ended July 1, 2000, and (ii) amounts paidto entities related to directors and executive officers which were contract growers ifsuch payments exceeded five percent of such entities' gross revenues for such activityduring the fiscal year ended July 1, 2000. All such transactions were on the same basesand terms as transactions with unrelated parties.

Directors and
Total Amount    Received from the
Executive Officers
Company and its SubsidiariesCharles L. Campbell, Director
$82,959 Timothy Campbell, his son
$71,264J. Craig Hott, DirectorHott's Farming, Inc.
$234,440 James L. Keeler, President, Chief Executive Officer and DirectorGregory Keeler, his son
$165,085 William D. Wampler, DirectorC. W. Wampler & Sons
$146,469 
**SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**

Under Section 16 of the Securities Exchange Act of 1934,the Company's directors, executive officers and beneficial owners of more than 10% of theoutstanding common stock are required to file reports with the Securities and ExchangeCommission concerning their ownership of and transactions in common stock. Based on copiesof those reports and related information furnished to the Company, the Company believesthat all such filing requirements were complied with in a timely manner for the fiscalyear ended July 1, 2000.

**PART IV**

**Item 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES,AND REPORTS ON FORM 8-K.**

(a)   Financial Statements, Financial Statement Schedule andExhibits 

Financial Statements 

Consolidated Statements of Operations - Fiscal years ended July 1, 2000,July 3, 1999 and June 27, 1998 

Consolidated Balance Sheets - July 1, 2000 and July 3, 1999 

Consolidated Statements of Shareholders' Equity - Fiscal years endedJuly 1, 2000, July 3, 1999 and June 27, 1998 

Consolidated Statements of Cash Flows - Fiscal years ended July 1, 2000,July 3, 1999 and June 27, 1998 

Notes to Consolidated Financial Statements - Fiscal years ended July 1,2000, July 3, 1999 and June 27, 1998 

Independent Auditors' Report 

Financial Statement Schedule 

Independent Auditors' Report on Schedule 

Schedule II - Valuation and Qualifying Accounts 

Schedules not included in this Item have been omitted because they areeither not applicable or the information is included in the Consolidated FinancialStatements or notes thereto. 

(b) Reports on Form 8-K 

None 

(c) Exhibits 

See Exhibit Index.***SIGNATURES***Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized. 

          WLR Foods, Inc.          By:____/s/ James L.Keeler_____________                     Its President & Chief Executive Officer                      Date: September 29, 2000

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 andin the capacities and on the dates indicated.               ____/s/ James L. Keeler___________                     President & Chief Executive Officer                              Date: September 29, 2000           ____/s/ DaleS. Lam________________                     Chief Financial Officer and Treasurer                              Date: September 29, 2000Pursuant to the requirements of the Securities Exchange Act of 1934, thisreport has been signed below by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated. 

***Signature                                                                   Title***___________________________                     Director          Charles L. Campbell*___________________________                     Director          Katherine K. Clark*___________________________                     Director          Stephen W. Custer*___________________________                     Director         William H. Groseclose, Jr.*___________________________                     Director         J. Craig Hott*___________________________                     Director         Marie C. Johns*___________________________                     Director         James L. Keeler___________________________                     Director        Phillip C. Stone*___________________________                     Director        William D. Wampler*

*By ___/s/ Dale S. Lam_________           Dale S. Lam, attorney-in-fact

**EXHIBIT INDEX**

2           Agreement and Plan ofMerger dated September 27, 2000

3.1       Articles of Incorporation of theRegistrant, restated effective May 30, 1995, incorporated by reference to Exhibit 3.1 ofForm 10-K filed with the Securities and Exchange Commission on October 2, 1995. 

3.2       Bylaws of the Registrant, asamended on November 2,1994, incorporated by reference to Exhibit 3.2 of Form 10-K filedwith the Securities     and Exchange Commission on October 2, 1995. 

4.1       Specimen Stock Certificateincorporated by reference to Exhibit 4 of Form 10-K filed with the Securities and ExchangeCommission on September 27, 1990. 

4.2       Shareholder Protection RightsAgreement, dated as of February 4, 1994, which includes as Exhibit A the forms of RightsCertificate and Election to Exercise and as Exhibit B the Form of Certificate ofDesignation and Terms of the Participating Preferred Stock incorporated by reference toExhibit 1 of Form 8-A filed with the Securities and Exchange Commission on September 30,1993. 

4.3       Warrant Holders RightsAgreement, dated as of February 25, 1998, incorporated by reference to Exhibit 2.5 of Form10-Q, filed with the Securities and Exchange Commission on May 11, 1998. 

4.4       Form of Warrant to PurchaseCommon Stock at $0.1 Per Share, incorporated by reference to Exhibit 2.6 of Form 10-Q,filed with the securities and Exchange Commission on May 11, 1998. 

4.5       Credit Agreement, dated as ofNovember 20, 1998, incorporated by reference to Exhibit 2.1 of Form 10-Q filed with theSecurities and Exchange Commission on February 9, 1999. 

4.6       Form of Revolving Credit Note,dated as of November 20, 1998, incorporated by reference to Exhibit 2.2 of Form 10-Q filedwith the securities and Exchange Commission on February 9, 1999. 

4.7       Form of Term Credit Note, datedas of November 20, 1998, incorporated by reference to Exhibit 2.3 of Form 10-Q filed withthe Securities and Exchange Commission on February 9, 1999. 

4.8       First Amendment, dated as ofFebruary 25, 1999, to the Credit Agreement dated as of November 20, 1998, incorporated byreference to Exhibit 4.8 of Form 10-K filed with the Securities and Exchange Commission onSeptember 29, 1999. 

4.9       Second Amendment, dated as ofJuly 1, 1999, to the Credit Agreement dated as of November 20, 1998, incorporated byreference to Exhibit 4.9 to 10-K filed with the Securities and Exchange Commission onSeptember 29, 1999. 

4.10     Third Amendment, dated as of September 14,1999, to the Credit Agreement dated as of November 20, 1998, incorporated by reference toExhibit 4.10 to 10-K filed with the Securities and Exchange Commission on September 29,1999. 

4.11     Fourth Amendment, dated as of May _____,2000, to the Credit Agreement dated as of November 20, 1998. 

10.1     Employment Agreement, dated June 23, 1998between the Registrant and James L. Keeler (Deferred Compensation Agreement attachedthereto as Exhibit A), incorporated by reference to Exhibit 10.1 of Form 10-K filed withthe Securities and Exchange Commission on  September 25, 1998. 

10.2     Executive Cash Bonus Program, incorporatedby reference to Exhibit 10.7 of Form 10-K filed with the Securities and ExchangeCommission on September 30, 1993. 

10.3     1998 Long-Term Incentive Plan, incorporatedby reference to Appendix A to the Company's definitive proxy statement (Schedule 14A),filed with the Securities and Exchange Commission on September 30, 1998. 

10.4     Severance Agreement, dated February 4, 1994between the Registrant and James L. Keeler, incorporated by reference to Exhibit 10.4 ofForm 10-Q filed with the Securities and Exchange Commission on February 15, 1994. 

10.5     Severance Agreement, dated May 13, 1997between the Registrant and Jane T. Brookshire, incorporated by reference to Exhibit 10.18of Form 10-K filed with the Securities and Exchange Commission on September 26, 1997. 

10.6     Severance Agreement, dated November 2, 1998between the Registrant and Dale S. Lam, incorporated by reference to Exhibit 10.6 of Form10-K filed with the Securities and Exchange Commission on September 29, 1999. 

10.7     Severance Agreement, dated February 6, 1998between the Registrant and Ronald E. Morris, incorporated by reference to Exhibit 10.8 ofform 10-K filed with the Securities and Exchange Commission on September 25, 1998. 

10.8     Severance Agreement, dated February 6, 1998between the Registrant and Walter F. Shafer, III, incorporated by reference to Exhibit10.9 of Form 10-K filed with the Securities and Exchange Commission on September 25, 1998.

10.9     Severance Agreement, dated June 1, 1999between the Registrant and John A. Turner, incorporated by reference to Exhibit 10.9 toForm 10-K filed with the Securities and Exchange Commission on September 29, 1999. 

10.10   Deferred Compensation Agreement, dated February 4,1994, between the Registrant and William D. Wampler, incorporated by reference to Exhibit10.12 of Form 10-Q filed with the Securities and Exchange Commission on February 15, 1994.

10.11   1995 Nonqualified Deferred Compensation Plan,incorporated by reference to Exhibit 10.16 of Form 10-K filed with the SEC on September29, 1996. 

10.12    Amendment No. One to 1995 Deferred CompensationPlan, incorporated by reference to Exhibit 10.17 of Form 10-K filed with the SEC onSeptember 29, 1996. 

10.13    Trust Under WLR Foods, Inc. NonqualifiedDeferred Compensation Plan, incorporated by reference to Exhibit 10.18 of Form 10-K filedwith the SEC on September 29, 1996. 

10.14    Description of Plan to Issue Stock for DirectorCompensation, incorporated by reference to Exhibit 10.19 of Form 10-K filed with the SECon September 29, 1996. 

10.15    Termination of Severance Agreement, dated September 27, 2000,between the registrant and James L. Keeler

10.16   Termination of Severance Agreement, dated September 27, 2000, betweenthe registrant and Dale S. Lam

21        List of Subsidiaries of theRegistrant. 

23        Consent of IndependentCertified Public Accountants. 

24.1     Power of Attorney, incorporated byreference to Exhibit 24.1 to Form 10-K, filed with the Securities and Exchange Commissionon September 25, 1998. 

24.2     Power of Attorney of Phillip C. Stone,incorporated by reference to Exhibit 24.3 of Form 10-K filed with the Securities andExchange   Commission on September 29, 1999. 

24.3     Power of Attorney of Marie C. Johns. 

27        Financial Data Schedule.*************************************************************************************************************************************************************************************************************************************************************************************