ITEM 1: BUSINESS
GENERAL
HBO & Company (the Company or HBOC), a Delaware corporation incorporated in 1974, is a healthcare information solutions company that provides a comprehensive range of computer-based information systems and services to healthcare enterprises - hospitals, integrated delivery networks and managed care organizations. The Company designs, sells and services information systems for a variety of applications within healthcare organizations. It also sells, installs and services local, metropolitan and wide area networks (LANs, MANs and WANs) and provides a range of value-added services through network communications technology. In addition, HBOC provides outsourcing services under contract management agreements whereby it staffs, manages and operates data centers, information systems organizations and even business offices of healthcare institutions of all sizes and structures.
The Company's primary market for its products and services consists of approximately 3,000 acute-care hospitals (and affiliated organizations) in the above-100 bed range in the United States. Through hospital affiliates, HBOC is marketing new products to the total healthcare enterprise including ambulatory care, physician offices and managed care providers. Through its subsidiary HBO & Company Canada Ltd., HBOC provides products and services in Canada, where there are approximately 500 hospitals having 100 or more beds. Through its subsidiary HBO & Company (UK) Limited, the Company services the United Kingdom, where there are approximately 300 hospitals having 100 or more beds. Experts estimate that in 1994 the industry spent more than $4 billion in the United States and more than $.5 billion in Canada and the United Kingdom on information systems, services and computer hardware. HBOC products are sold in other parts of the world through agreements with third parties.
HBOC's products and services are offered through a companywide sales organization and business units that have responsibility for research and development and customer services. These business units include Pathways 2000, STAR, Series 3000/4000, HealthQuest/Series 5000, Outsourcing Services Group, Connect Technology Group, Amherst Product Group, Serving Software Group and, as of February 1995, Advanced Laboratory Group.
In June 1994, HBOC acquired IBAX Healthcare Systems (IBAX), a partnership of subsidiaries of Baxter Healthcare Corporation (Baxter) and International Business Machines Corporation (IBM). With this acquisition, HBOC added the Series 3000, 4000 and 5000 lines of "core" hospital transaction systems. Series 3000 and 4000 run on IBM AS/400 hardware, and the Series 5000 line runs on IBM mainframe equipment.
The Serving Software Group was formed with the September 1994 acquisition of Serving Software, Inc., a Minneapolis-based provider of resource scheduling and management software. Serving Software's newest product, which is client/server-based, has become a member of HBOC's Pathways 2000 family of enterprisewide information systems solutions.
In December 1994, HBOC acquired Care 2000, Inc., a small Atlanta-based firm specializing in case management methodologies.
Subsequent to year-end 1994 and prior to the filing of this form 10-K, HBOC acquired Advanced Laboratory Systems, Inc., a Eugene, Oregon-based developer of laboratory software for the healthcare and commercial marketplace.
HBOC's RISC/UNIX-based STAR family of products and the Series 3000 and 4000 products serve organizations ranging in size from 100-bed institutions to those with multiple facilities that generally prefer to keep in-house data processing staff to a minimum. Customers of IBM mainframe-based
HealthQuest and Series 5000 software and services are primarily large, complex healthcare organizations with in-house data processing departments staffed with their own systems professionals. In addition, throughout 1994 HBOC continued development and rollout of its Pathways 2000 family of products, which serves the needs of today's burgeoning healthcare alliances.
To support the connectivity needs of hospitals and their affiliates, the Connect Technology Group (CTG) provides total network installation and support. In addition, CTG offers comprehensive value-added network information services that extend local and metropolitan area networks outside of the hospital to include payers, vendors, financial institutions and Internet. All together, HBOC's networking solutions provide customers with a complete network solution for electronic access throughout a provider enterprise.
HBOC's Amherst Product Group (APG) provides its industry-leading decision support products to many healthcare settings, including multifacility, corporate and university environments. APG also offers an enterprise information system to assist healthcare executives in critical strategic decision-making. Both APG systems are being transitioned to an open systems, client/server-based architecture.
The Outsourcing Services Group provides resources for formulating and delivering complete solutions for information technology and business office management. In June 1994, HBOC signed an agreement with Unisys Corporation that allowed HBOC to acquire the Unisys PRN (Professional Resource Network) product line and related Charlotte, North Carolina operations. The Charlotte office, which is managed by the Outsourcing Services Group, provides ongoing customer service and support for some 60 PRN customers in the United States and Canada.
HBO & Company also provides a host of software and networking products and services to the global healthcare marketplace outside the United States. In 1994, HBOC increased its presence in the United Kingdom when it contracted with the North East Thames Regional Health Authority to transfer the assets and 90-person staff of a full-service computer center to HBOC. The initial contract brought in 37 outsourcing agreements.
As of December 31, 1994, the Company and its subsidiaries had 2,383 employees.
TECHNOLOGY STRATEGY
HBO & Company's product technology strategy reflects the needs of community-based health networks that are emerging as a result of the healthcare reform movement. In particular, these networks will require information systems that are highly flexible and quickly adaptable and that can serve the information access needs of a broad range of users.
The Company's strategy also builds on the direction proposed in the 1992 report from the Institute of Medicine (IOM) for developing the computer-based patient record. This strategy, which consists of the following six major components, guides HBOC's product development direction.
Foundation Products -- Many of HBO & Company's products are portable to a variety of hardware platforms to protect a healthcare organization's hardware investments and enable it to benefit from price/performance advances. For example, HBOC offers a full range of its products on RISC (Reduced Instruction Set Computing) hardware using the UNIX operating system, which has very attractive price/performance characteristics.
Workstations -- Workstation technology, via PCs, provides enhanced productivity and appeal for system users by giving them access to graphics, image processing, voice processing, multiple technologies and sophisticated user interfaces.
Specialized Processors -- Specialized processors, utilizing client/server technology, provide organizations with improved processing and storage for large volumes of data and specific applications, including imaging and document processing.
Networks -- LANs, MANs and WANs provide faster and more effective pathways to distribute the wider variety of data, images and recorded voice needed by image processing and client/server applications.
Technology Standards -- HBO & Company products can be interconnected with other vendors' products through the use of industry-accepted standards for hardware connectivity and communications protocols, including Health Level Seven (HL7). These standards speed the healthcare organization's assimilation of new technologies and advanced third-party products, while insulating the Company's products from obsolescence.
Software Engineering -- HBOC's product developers use state-of-the-art application development tools, such as program generators, artificial intelligence and expert systems, which decrease development time and lower the cost of new products.
PRODUCT PORTFOLIO
HBO & Company's offering of products and services is based on a strategic mix of applications and technologies that support today's dramatic restructuring of the healthcare delivery system, backed by implementation, support and outsourcing services. This "portfolio" of products is organized into three areas: infrastructure, enterprise management and improved clinical practice, as reflected in the following table. - --------------------------------------------------------------------------------
Product Portfolio - --------------------------------------------------------------------------------
INFRASTRUCTURE
-Pathways Interface Manager
-Pathways Health Network Server
-Pathways Health Network Management
-Network technologies and services
ENTERPRISE MANAGEMENT
-Pathways Healthcare Scheduling
-Pathways Managed Care
-Pathways Contract Management
-QUANTUM enterprise information system
IMPROVED CLINICAL PRACTICE
-STAR hospital information systems
-Series hospital information systems
-HealthQuest hospital information systems
-TRENDSTAR decision support
-Pathways Care Manager
-Pathways Clinical Workstation - --------------------------------------------------------------------------------
In addition to the above applications, HBO & Company offers software manufactured by a host of industry-leading business partners. Among these is Software Technologies Corporation (STC) of Arcadia, California, which had been an IBAX Healthcare Systems partner. Under the terms of a new partnership agreement entered into in the third quarter of 1994, HBOC is licensing STC's Datagate interface engine for use in its Pathways Interface Manager product.
Just after the close of the third quarter, HBOC announced the formation of a strategic alliance with Scientific Data Management, Inc. (SDM), a Detroit-area physician practice management company. This alliance, which gives HBOC the exclusive right to market the SDM product to its customer and prospect base, is a first step toward building a comprehensive ambulatory care offering.
Installation and implementation services are provided for purchasers of all HBOC software products to assist with the smooth introduction of or transition to those products. HBOC also provides software maintenance and enhancement services, as well as custom programming and system modifications to meet special client requirements. Equipment maintenance services are provided through HBOC's various hardware partners.
As of December 31, 1994, the Company had 590 active users of patient care systems, 600 active users of clinical/departmental systems, 837 active users of financial systems, 639 active users of decision support systems and 55 active users of enterprise information systems. In addition, as of December 31, 1994, HBOC had 129 LAN, MAN and WAN customers.
INFRASTRUCTURE
HBOC's wide array of networking and database applications provides the key elements for integrating and uniting providers across the continuum of care. In bringing the enterprise together, these solutions establish the basis for a lifelong patient record.
PATHWAYS INTERFACE MANAGER
Pathways Interface Manager, which is offered with Pathways Health Network Server or as a separate product, reduces the burden of maintaining the large number of interfaces needed to consolidate disparate organizational systems. Pathways Interface Manager provides a mechanism that converts data from one application to a format that is readable by many other applications. It also manages and consolidates traffic on the network and maintains a repository of information about network transactions and performance.
PATHWAYS HEALTH NETWORK SERVER
HBO & Company's Pathways Health Network Server (HNS) is a relational database that functions as a central repository for patient transactions by integrating diverse clinical, financial and administrative data elements into meaningful and accessible information on patient episodes. Other Company products, such as Pathways Clinical Workstation, Pathways Health Network Management and Pathways Managed Care, build on top of HNS to provide business functionality that spans the healthcare enterprise.
PATHWAYS HEALTH NETWORK MANAGEMENT
The Pathways Health Network Management system supports the current trend toward health delivery networks. These networks encompass all providers of healthcare and wellness services, as well as an enrolled population that may or may not actually be patients. The product is a common, enterprisewide (and potentially communitywide) patient/customer/enrollee management system that allows organizations to collect and disseminate information about individuals to and from diverse providers over time.
NETWORK TECHNOLOGIES AND SERVICES
The Connect Technology Group offers full design, installation, consulting, and hardware and software support capabilities for local, metropolitan and wide area networks, as well as value-added network services. These services are provided to a wide range of HBOC customers, from large multifacility healthcare groups to small community hospitals. These organizations may have any number of other Company products -- on both minicomputer and mainframe platforms -- or none at all.
LANs, MANs and WANs provide connectivity from terminals and PCs to multiple host processors and shared resources. LANs and MANs are data communications networks spanning a limited geographical area, while WANs may span several cities, states or even countries. Communication
networking through the use of LANs, MANs and WANs assists hospitals in maximizing existing investments in products and services while integrating new and emerging technologies that guarantee a path for multimedia and multifacility expansion.
HBOC's Value-Added Network (VAN) helps customers reduce networking costs, improve customer support, and enhance productivity, end-user services and physician access. Specific services offered through the VAN include electronic data interchange, Internet, electronic funds transfer, payer access and electronic customer support.
ENTERPRISE MANAGEMENT
HBOC's scheduling system, managed care solutions and QUANTUM enterprise information system provide the critical business functionality necessary to manage today's emerging health networks.
PATHWAYS HEALTHCARE SCHEDULING
HBOC's newest client/server-based Pathways 2000 product provides caregivers with a tool that assists them in delivering high-quality patient care while managing costs by optimizing resource utilization and increasing productivity. Pathways Healthcare Scheduling is a patient-focused scheduling and resource management system that enables caregivers to transform an assortment of procedures into a coordinated treatment plan and then assign the appropriate resources for just the amount of time needed to carry out that plan.
PATHWAYS MANAGED CARE
Pathways Managed Care helps organizations manage the variety of contractual arrangements that exist among providers, payers and patients. It also assists in performing related business activities such as tracking membership and processing encounters, in performing such clinical managed care activities as utilization management, and in managing benefit plans and the business activities that support benefits services such as premium billing and claims adjudication. These applications are designed to meet the information needs of a full range of managed care players -- providers, insurers, government agencies, employers, administrators, Health Maintenance Organizations and the like --and can be combined or changed to create "new" functionality that quickly delivers solutions to changing business needs.
PATHWAYS CONTRACT MANAGEMENT
For some organizations, the first step toward managing care is managing the many and varied contracts they hold with payers. Pathways Contract Management offers a focused range of applications that monitor and manage multiple varied contracts for providers with significant managed care volumes. The product is interfaced to HBOC's patient accounting systems and the TRENDSTAR decision support system to provide a functionally rich set of contract management tools.
QUANTUM
HBOC's Amherst Product Group also offers the QUANTUM enterprise information system for both the minicomputer and mainframe markets. QUANTUM presents data collected from transaction and decision support systems in graphical formats and at a level of detail required to assist executives in their critical decision-making. The system offers a broad, encompassing view of the healthcare enterprise, one that spans organizational and system boundaries.
IMPROVED CLINICAL PRACTICE
HBO & Company's hospital-based "core" transaction and decision support systems, along with its new client/server, clinician-focused tools, help streamline care to elevate the health status of patients over the continuum of care.
STAR, SERIES AND HEALTHQUEST
HBOC offers its core hospital information systems on a variety of hardware platforms. The STAR family of products operates with open systems architecture on RISC-based hardware from Data
General Corporation, Hewlett-Packard Company, Digital Equipment Corporation and IBM Corporation. Series 3000 products operate on IBM AS/400 and RISC System/6000 hardware, and Series 4000 runs on the IBM AS/400. The HealthQuest and Series 5000 products are IBM mainframe-based.
Patient Care -- Patient care information systems are offered through HBOC's STAR, HealthQuest and Series patient care applications. Using these systems, vital patient information is entered, maintained, tracked and disseminated throughout the healthcare institution. The systems include applications for patient processing, patient and resource scheduling, order management and medical records.
Clinical/Departmental -- HBOC markets departmental information systems for laboratory, radiology and pharmacy departments. These individual application systems may be sold separately or as a part of the comprehensive STAR or Series product families.
Laboratory -- Laboratory applications are offered through HBOC's STAR Laboratory system, which interconnects all areas of the hospital laboratory. When interfaced with a patient care information system (such as STAR Patient Care), patient data inquiry is available and redundant data entry is eliminated. Subdepartments such as chemistry, hematology and microbiology are offered as lab-specific modules.
Radiology -- HBOC's STAR and Series 4000 and 5000 radiology management systems allow for the scheduling of patients, procedures and radiology resources. Radiological results are reported back into the system and communicated to the appropriate area. Film history, film tracking and film indexing are also provided.
Pharmacy -- Pharmacy applications are available through STAR and all the Series product lines. These applications provide for the administrative and clinical needs of the hospital pharmacy by capturing information for the filling, refilling, distribution and administration of medications.
Financial -- HBOC offers a comprehensive set of patient accounting and general accounting applications through all its core product lines. These integrated, flexible applications retain extensive account detail online for the entire life of an account, accumulating data on inpatient, outpatient and physician activity regardless of account status. In addition, the HealthQuest Receivables Workstation is available to HealthQuest Patient Accounting customers to enhance their collections productivity via online workfiles and to improve the look and feel of the system by capitalizing on PC technology. HBOC is also developing a receivables workstation in conjunction with a future release of STAR Financials. The workstation will provide enhanced navigation, expanded access and improved productivity.
TRENDSTAR
HBOC is the market leader in decision support information systems for healthcare organizations. While offered on a minicomputer platform, the TRENDSTAR decision support products provided by the Amherst Product Group are sold into both the minicomputer and mainframe markets -- as part of the Company's network of products or as a stand-alone system.
Traditionally, most decision support system users have been chief financial, operations and information officers. However, there is a growing emphasis on improving clinical processes and achieving the optimal application of medical resources. Increasingly, managed care, medicine, nursing, quality improvement and department managers are finding TRENDSTAR's wide range of clinical management tools critical to optimizing the quality, appropriateness and cost-effectiveness of patient care.
TRENDSTAR helps an organization implement programs for clinical practice evaluation, clinical pathways development, outcomes analysis and benchmarking. By bringing clinical and financial information together, the system provides the means for understanding the financial impact of clinical decisions. The TRENDSTAR family also includes the Marketing Systems Library (MSL), which helps hospitals in market analysis and strategic planning.
The TRENDSTAR Contract Payment Advisor product provides a tool for dealing with a number of managed care issues through contract modeling and claims payment monitoring capabilities.
PATHWAYS CARE MANAGER
As HBOC's single product solution for caregivers, Pathways Care Manager is the result of a partnership with CliniCom Inc., a leading provider of clinical information systems. Through that alliance, HBOC has integrated its patient care products with core application software from CliniCom to provide a multidisciplinary system for clinicians that provides comprehensive care planning, flowsheet charting and case management functions at either the nursing station or the point of care.
PATHWAYS CLINICAL WORKSTATION
HBOC's Pathways Clinical Workstation provides the clinical solution necessary for managing today's emerging population-based health delivery networks. Using HBOC's central data repository (Pathways Health Network Server), Pathways Clinical Workstation provides the integrated clinical information necessary for the computer-based patient record. Pathways Clinical Workstation assimilates clinical data into meaningful information for multiple user communities, including clinicians, healthcare managers, case managers, and physicians and other caregivers. HBOC is developing the workstation in phases, building toward the complete capabilities of a multimedia workstation.
INTERNATIONAL OFFERINGS
Most of the Pathways 2000, STAR and TRENDSTAR products in HBOC's product portfolio are offered internationally, and Series 4000 products are also sold in Canada. In addition, products added to the HBOC product line with the acquisition of Data-Med Computer Services in December 1993 are available in the United Kingdom. In most cases, the applications offered internationally have been customized or developed to meet the particular needs of the country in which they are implemented.
OUTSOURCING SERVICES GROUP
HBOC has been in the outsourcing business in the United States for more than 20 years and now offers outsourcing services in the United Kingdom as well. With the change and uncertainty engendered by healthcare reform and the resulting economic pressures, information systems outsourcing is becoming increasingly popular in the United States. Outsourcing services go beyond managing hospital data processing operations (traditionally known as facilities management) to encompass strategic management services in information systems planning, receivables management, business office administration and major system conversions.
SOURCES OF REVENUE
Information regarding sources of revenue is included in the table "Revenue from Continuing Operations by Business Unit" on page 17 of the Company's Annual Report to Stockholders for the year ended December 31, 1994 (the Annual Report), and under the caption "Revenue Recognition" in Note 1 of "Notes to Consolidated Financial Statements" on page 23 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference.
BACKLOG
Information regarding backlog as of December 31, 1994, is included in the "Financial Review" section under the caption "Results of Operations" on pages 14 and 15 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference.
RESEARCH AND DEVELOPMENT
The Company's product development effort applies advanced computer technology and installation methodologies to specific information processing needs of hospitals. The Company believes a substantial and sustained commitment to such research and development is important to the long-term success of the business.
Investment in software development, including both research and development expense as well as capitalized software, has increased as the Company has addressed new software applications and
enhanced existing products for installed systems. The Company expensed $28,928,000 (9% of revenue) for research and development activities during 1994, as compared to $23,428,000 (9% of revenue) and $20,096,000 (9% of revenue) during 1993 and 1992. The Company capitalized 25%, 24% and 23% of its research and development expenditures in 1994, 1993 and 1992.
Information regarding research and development is included in the table "Research and Development Summary" on page 15 of the Annual Report, in the "Financial Review" section under the caption "Results of Operations" on pages 14 and 15 of the Annual Report and under the caption "Capitalized Software" in Note 1 of "Notes to Consolidated Financial Statements" on pages 23 and 24 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference.
The technical concepts and codes embodied in the Company's computer programs and program documentation are not protected by patents or copyrights but constitute trade secrets that are proprietary to the Company. The Company and its subsidiaries are the owners of various trademarks and service marks, including the federally registered trademarks or service marks "MEDPRO," "IFAS," "CLINPRO," "MEDIPAC," "CML," "COSTREP," "TRENDSTAR," "TRENDSERVE," "TRENDPAC I," "BUDGET+," "CLINIPAC," "CLINSTAR," "HOSTS," "HSL," "PARAGON," "HEALTHQUEST," "QUANTUM," "ERS" and the triangular design that forms the Company logo, but such registration provides limited protection as to the trademark or service mark.
COMPETITION
HBO & Company experiences substantial competition from many firms, including other computer services firms, consulting firms, shared service vendors, certain hospitals and hospital groups, and hardware vendors. Competition varies in size from small to large companies, in geographical coverage, and in scope and breadth of products and services offered.
Although some of the Company's competitors are larger than the Company, the Company believes that few competitors offer a comparable range of healthcare information systems and services that compare favorably with respect to all of the competitive criteria.
ITEM 2:

ITEM 2: PROPERTIES
The Company's principal administrative and research offices are located at 301 and 303 Perimeter Center North, Atlanta, Georgia. The offices consist of approximately 226,000 square feet of space under a lease which expires in 1999. The rental expense for these offices totaled approximately $3,939,000 for 1994.
The Company also owns three buildings and leases space in 30 buildings throughout the United States, Canada and the United Kingdom primarily for sales and customer service offices. Information regarding the Company's leases is included in Note 2 of "Notes to Consolidated Financial Statements" on page 24 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference.
Information regarding the Company's principal offices is included on the back cover of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference.
ITEM 3:

ITEM 3: LEGAL PROCEEDINGS
Information regarding Legal Proceedings is included in Note 9 of "Notes to Consolidated Financial Statements" on page 27 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K and is incorporated herein by reference.
ITEM 4:

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 31, 1994, there were no matters submitted to a vote of security holders.
PART II
ITEM 5:

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on The Nasdaq Stock Market's National Market under the symbol HBOC. Information regarding the high and low closing prices, the number of holders of the Company's common stock and dividends is presented under the caption "Common Stock Data" on page 27 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K, and is incorporated herein by reference.
ITEM 6:

ITEM 6: SELECTED FINANCIAL DATA
The information included under the caption "Five-Year Selected Financial Information" on page 13 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K, is incorporated herein by reference.
ITEM 7:

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information included in the "Financial Review" and "Revenue from Continuing Operations by Business Unit" sections on pages 14 through 17 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K, is incorporated herein by reference.
ITEM 8:

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information included on pages 18 through 27 of the Annual Report, a copy of which is included as an exhibit to this Form 10-K, under the captions "Condensed Consolidated Quarterly Statements of Income," "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements" is incorporated herein by reference.
ITEM 9:

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
The Company has neither changed its independent public accountants nor had any disagreements on accounting and financial disclosures with such accountants.
PART III
ITEM 10:

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive officers of the Company as of March 1, 1995. Additional information regarding the Board of Directors is included in the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 1995, under the caption "Election of Directors," which is incorporated herein by reference.
Charles W. McCall has served as a Director, President and Chief Executive Officer of the Company since 1991. Prior to joining the Company, he served as President and Chief Executive Officer of CompuServe, Inc., a wholly owned subsidiary of H&R Block, from 1985 to 1991. Mr. McCall is also a Director of SYMIX Systems, Inc., EIS International, Inc., West Point Stevens Inc. and XcelleNet, Inc.
Michael W. McCarty has served as Executive Vice President - Sales since 1992. Prior to joining the Company, Mr. McCarty served as Executive Vice President of Sales and Marketing for Liebert Corporation from 1985 through 1992.
James A. Gilbert has served as Vice President and General Counsel since joining the Company in 1988. He has served as Secretary since 1992.
Jay P. Gilbertson has served as Vice President - Finance, Chief Financial Officer, Treasurer, Chief Accounting Officer and Assistant Secretary since 1993. In 1992, Mr. Gilbertson served as Vice President - Controller and Chief Accounting Officer. From 1988 through 1991, he served in a financial management capacity at Medical Systems Support, Inc., HBOC's hardware maintenance subsidiary sold in 1991.
Michael L. Kappel has served as Vice President - Pathways 2000 since 1994. During 1993 and 1994, he served as Vice President - Research and Development. From 1991 through 1993, Mr. Kappel served as Vice President - Product Planning and Development. From 1989 through 1991, he served as Executive Director - Research and Technology for the Company.
Russell G. Overton has served as Senior Vice President - Business Development since 1992. From 1989 through 1991, he served as Vice President - Business Development for HealthQuest Ltd. (a wholly owned subsidiary of HBO & Company).
Glenn N. Rosenkoetter has served as Senior Vice President since 1992. Mr. Rosenkoetter is responsible for the Amherst Product Group, Serving Software Group and HBO & Company (UK) operations. During 1991 and 1992, Mr. Rosenkoetter served as Senior Vice President - Marketing and Business Development for HBO & Company of Georgia (a wholly owned subsidiary of HBO & Company). Prior to 1991, he served as Vice President - National Sales for HBO & Company of Georgia.
David A. Schenk has served as Senior Vice President - Connect Technology Group and Outsourcing Services Group since 1994. From 1990 to 1994, he served as Vice President of the Connect Technology Group.
ITEM 11:

ITEM 11: EXECUTIVE COMPENSATION
The Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 1995, contains under the captions "Compensation of Directors," "Executive Compensation," and "Approval of the HBO & Company Chief Executive Officer Incentive Plan," information relating to executive compensation for the year ended December 31, 1994, all of which are incorporated herein by reference.
ITEM 12:

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 1995, contains under the caption "Security Ownership of Certain Beneficial Owners and Management" information relating to security ownership of beneficial owners and management, which is incorporated herein by reference.
ITEM 13:

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 1995, under the caption "Certain Relationships and Related Transactions" is incorporated herein by reference.
PART IV
ITEM 14:

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) 1. Financial Statements
The Annual Report contains the following information on pages 18 through 27: "Condensed Consolidated Quarterly Statements of Income," "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements." The report of Arthur Andersen LLP on these financial statements is on page 28 of the Annual Report. These financial statements and the report of Arthur Andersen LLP are incorporated herein by reference.
(a) 2. Financial Statement Schedules
Schedules not listed have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.
(a) 3. Exhibits
The following exhibits filed with the Securities and Exchange Commission are incorporated by reference as shown below. Items marked with an asterisk, "*," relate to management contracts or compensatory plans or arrangements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HBO & COMPANY
By: /s/ CHARLES W. MCCALL -------------------------------------- Charles W. McCall PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: March 16, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
INDEX TO EXHIBITS


Item 1. BUSINESS.
General
WLR Foods, Inc. (WLR Foods or the Company) is a fully-integrated poultry processing company involved in the production, further processing and marketing of turkey and chicken products, and the distribution of poultry and meat products. In addition, WLR Foods manufactures ice for retail distribution and is a provider of public refrigerated warehousing services.
WLR Foods markets more than 250 branded, as well as private label, commodity and value-added poultry and related products to selected retail, food service and institutional markets, primarily in the mid-Atlantic and northeastern regions of the United States and, to a lesser extent, the upper Midwest and California. WLR Foods exports to more than 40 countries, with particular customer strength in the Far East, the Caribbean and United States military installations.
WLR Foods is the combination of three poultry companies, Wampler Foods, Inc., Horace W. Longacre, Inc. and Rockingham Poultry Marketing Cooperative Incorporated, all of which had their beginnings prior to 1945. Wampler Foods, Inc. and Horace W. Longacre, Inc. were combined in 1985, and Rockingham Poultry Marketing Cooperative Incorporated was acquired in 1988. Prior to their consolidation on December 31, 1993, the Company operated its poultry business through two major subsidiaries, Wampler- Longacre Turkey, Inc. (Wampler-Longacre Turkey) and Wampler- Longacre Chicken, Inc. (Wampler-Longacre Chicken).
In April 1990, the Company acquired Cassco Ice & Cold Storage, Inc. (Cassco), a public refrigerated warehouse and ice manufacturing and distribution business. WLR Foods also owns 65% of May Supply Company, Inc. (May Supply), a wholesale distributor of plumbing supplies and equipment. In May 1993, WLR Foods acquired assets of two ice manufacturing and distribution companies located in the greater Washington, D.C. area and in Richmond, Virginia. These two operations have been integrated into Cassco.
On November 27, 1992, WLR Foods acquired Round Hill Foods, Inc. and affiliated companies (Round Hill), located in New Oxford, Pennsylvania. Round Hill is engaged in turkey production, processing and marketing.
On January 1, 1994, Wampler-Longacre Turkey and Wampler-Longacre Chicken were merged into a single poultry company under the name Wampler-Longacre, Inc. (Wampler-Longacre). As a part of this consolidation, Round Hill was also merged into Wampler-Longacre.
Poultry Production
WLR Foods controls the breeding, hatching, grow-out and processing of its turkeys and chickens. For fiscal 1994, WLR Foods produced approximately 386 million pounds of dressed turkey and 517 million pounds of dressed chicken.
WLR Foods purchases breeder stock turkey eggs which it hatches and places with growers who supply labor and housing to produce breeder flocks. These breeder flocks produce eggs that are taken to the company-owned turkey hatchery for incubation and hatching into poults. In its chicken operations, WLR Foods purchases breeder flock chicks and places them with growers who supply labor and housing to raise the birds. The birds are then moved to breeder farms where they begin providing eggs. When laid, eggs are transported to company-owned hatcheries. Once hatched, day-old poults and chicks are inspected and vaccinated against common poultry diseases. In total, WLR Foods contracts with 146 breeder growers who grow most of WLR Foods' turkey, and all of WLR Foods' chicken, breeder flocks.
After hatching and vaccination, poults and chicks are transported to one of WLR Foods' approximately 630 contract growers located in Virginia, West Virginia, Pennsylvania and Maryland who supply labor and housing to raise the turkeys and chickens to maturity. WLR Foods supplies feed primarily from company-owned feed mills and provides grower support through WLR Foods' technicians and veterinarians.
Grow-out and breeder farms provide WLR Foods with more than 38 million square feet of growing facilities. These farms typically are grower-owned, operate under contract with WLR Foods, and provide facilities, utilities and labor. Contract growers are compensated on a cost-based formula and several incentive-based formulas. Approximately 80% of WLR Foods' turkeys and 100% of its chickens are raised by contract growers, with the balance grown by independent growers and company-owned farms. WLR Foods strives to maintain good contract grower relationships and believes the availability of contract growers is sufficient for anticipated needs.
An important factor in the grow-out of poultry is the rate at which poultry converts feed into body weight. The Company purchases its primary feed ingredients on the open market. These ingredients consist primarily of corn and soybean meal and represent approximately 66% of WLR Foods' total cost to grow turkeys and chickens and approximately 32% of its cost of sales for fiscal 1994. Because the quality and composition of feed is critical to the feed conversion rate, WLR Foods formulates and produces a majority of its own feed at one of its three feed mills. WLR Foods has annual feed manufacturing capacity in excess of 1 million tons and anticipates no difficulty in meeting the Company's feed requirements in the future.
Once the turkeys and chickens reach processing weight, they are transported in WLR Foods' trucks to one of its six processing plants. These plants utilize modern, highly automated equipment to process and package the turkeys and chickens for sale or preparation for further processing. WLR Foods further processes bulk poultry by adding value beyond deponing and skinning, such
as slicing, grinding, marinating, spicing and cooking to produce delicatessen products, frankfurters, meat salads, ground turkey and chicken and food service products.
Distribution, Public Refrigerated Warehousing, Ice and Other
WLR Foods' distribution business, with its warehousing and transportation equipment, includes fresh poultry, beef, and other meat products purchased from third parties for resale and is conducted within a radius of approximately 75 miles of WLR Foods' further processing facility in Franconia, Pennsylvania. In fiscal 1994, Cassco sold 21.8 million eight-pound equivalent bags of retail ice, making it one of the largest ice manufacturers in the mid-Atlantic region. In addition, Cassco operates public refrigerated warehouses at four locations. WLR Foods' protein conversion plants convert the nonedible by-products of its poultry processing plants into feed ingredients, with the balance sold to pet food manufacturers.
The following table sets out sales revenues from WLR Foods' products for the last three fiscal years.
Fiscal 1994 Fiscal 1993 Fiscal 1992 (Dollars in Millions)
Chicken, fresh and frozen $287.5 $238.2 $202.8 Turkey, fresh and frozen 171.4 123.7 90.9 Further processed 152.1 147.7 123.4 Distribution 82.4 80.0 73.7 Other 33.9 27.1 23.7 Total Net Sales $727.3 $616.7 $514.5
Competition
Poultry production requires continuous growing and processing, with limited storage, making the poultry industry highly competitive. WLR Foods markets its products in competition with larger and smaller poultry companies on the basis of price, quality and service, with WLR Foods' greatest competition coming from four or five of the country's larger poultry producers and processors. The pricing of poultry products is so competitive that any company with a cost advantage is in a favorable competitive position. Seasonal increases in production and customer buying patterns contribute to fluctuations in prices which are controlled more by supply and demand than by cost of production. WLR Foods primarily markets its products in the highly competitive northeastern section of the United States.
In June 1994 WLR Foods was ranked as the ninth largest in poultry processing/further processing according to Meat & Poultry Magazine. WLR Foods was the fourth largest American turkey producer according to Turkey World magazine's December 1993 issue. WLR Foods was cited as the 14th largest chicken producer in the December 1993 issue of Broiler Industry magazine.
Seasonality
In general, WLR Foods consistently produces and sells its products throughout the year. Highest demand for poultry is in May, June, July, November and December. The early summer months have strong demand for chicken and further processed products and November and December are high demand months for turkey products. The highest demand for ice is during the period from mid-May to mid-September.
Trademarks and Patents
Wampler-Longacre markets its products under the trademarks WAMPLER LONGACRE and design, LONGACRE FAMILY and design, TRIM FREE and chicken in heart design, MOUNTAIN MAID, SALADFEST, SALT WATCHERS, TENDERLINGS and TURKEY WITH A TWIST, all of which are federally registered trademarks. Wampler-Longacre also markets under the trademark CHEF'S QUALITY, which has a pending federal application. Wampler-Longacre markets its export and foreign military sales under the ROCKINGHAM trademark. Products are also sold under the GENUINE SHENVALLEY VIRGINIA POULTRY mark.
Cassco distributes its products under the federally registered trademark CASSCO.
Wampler-Longacre holds a patent for pasteurized salads.
Government Contracts
WLR Foods' government contracts are a small segment of its total sales, consisting of bids on particular products for delivery at specified locations. Contracts are generally bid, and the product is delivered, within a one- to two-month period. These contracts include both chicken and turkey products and can involve further processed products. WLR Foods had approximately $0.9 million of governmental contracts outstanding as of July 2, 1994, compared to approximately $1.8 million outstanding as of July 3, 1993.
Foreign Sales
WLR Foods' foreign sales constituted approximately 7% of its total annual sales in fiscal 1994, compared to 6% for fiscal year 1993 and 5% for fiscal year 1992. Wampler-Longacre has a full- time staffed foreign sales office which coordinates foreign sales efforts on behalf of WLR Foods. Foreign sales originate from that office and use independent brokers as needed. Sales are made in over 40 countries.
Transportation
Transportation logistics, including the availability of transportation equipment and the efficiency of transportation systems, are key elements in the raising of poultry, transporting feed to the contract growers and outside purchasers, transporting
poultry to the processing plants, and transporting products to customers. WLR Foods has contracts with two railroad companies for the delivery of feed ingredients to WLR Foods' feedmills.
WLR Foods' primary marketing area is the northeastern, central and eastern United States, and delivery of the Company's products are generally made by truck. WLR Foods maintains a fleet of refrigerated trucks and uses them, along with refrigerated common carrier and customer-owned vehicles, to deliver its product. Export products are loaded in refrigerated containers and shipped overseas.
Raw Materials
WLR Foods' largest cost is for basic feed ingredients, namely corn and soybean meal. Feed costs represented approximately 32% of the Company's total cost of sales in fiscal year ended July 2, 1994.
Feed grains are commodities subject to volatile price changes caused by weather, size of harvest, transportation and storage cost and the agricultural policies of the United States and foreign governments. Although WLR Foods can, and sometimes does, purchase grain in the forward markets, it cannot completely eliminate the potential adverse effect of grain price increases.
Environmental and Other Regulatory Compliance
WLR Foods' facilities and operations are subject to the regulatory jurisdiction of various federal agencies, including the federal Food and Drug Administration, Department of Agriculture, Environmental Protection Agency, Occupational Safety and Health Administration, and corresponding state agencies in Virginia, West Virginia and Pennsylvania.
Wampler-Longacre currently holds two environmental permits for its Hinton turkey processing facility: an air permit which regulates certain combustion equipment to comply with the Clean Air Act and a water permit which regulates the treatment of processing wastewater to comply with the Clean Water Act. Wampler-Longacre has one environmental permit for its Harrisonburg turkey processing facility which requires it to pre- treat its processing wastewater to meet certain effluent standards before discharging it into the regional sewer. Wampler-Longacre currently has six environmental permits for its Franconia turkey processing facility: two water permits, issued by the Pennsylvania Department of Environmental Resources, for the treatment of processing wastewater to comply with the Clean Water Act, three air permits to regulate the operation of certain combustion and incineration equipment, and one municipal waste permit for the disposal of incinerator ash. Wampler-Longacre's turkey processing facility in New Oxford, Pennsylvania, holds one environmental permit (air permit) which regulates combustion equipment. Wampler-Longacre also holds one environmental permit (air permit) for its Harrisonburg feedmill issued primarily for the control and abatement of dust.
Wampler-Longacre holds two permits for its Timberville chicken processing and rendering facility: a water permit to regulate the discharge of processing wastewater and an air permit to regulate the operation of its new protein conversion facility, as well as certain combustion equipment. Wampler-Longacre has one permit for its Alma/Stanley chicken processing facility: a water permit to regulate the discharge of processing wastewater to meet the standards of the Clean Water Act. Additionally, there are three permits for Wampler-Longacre's chicken processing and rendering facility in Moorefield, West Virginia: a water permit to regulate the discharge of processing wastewater, an air permit to regulate the operation of the company's new protein conversion facility, and a sludge management permit regulating the land application in West Virginia of certain wastewater biosolids generated at the Moorefield wastewater treatment works. Finally, Wampler-Longacre holds one environmental permit (air permit) for its Broadway and Moorefield feedmills which were issued primarily for the control and abatement of dust.
WLR Foods, on behalf of its Virginia chicken and turkey processing facilities, filed for issuance of a Virginia Pollution Abatement (VPA) permit regulating the land application in Virginia of certain wastewater biosolids generated by the facilities' Virginia wastewater treatment systems. The VPA permit will replace Wampler-Longacre's No-Discharge certificate which formerly regulated the land application of the facilities' wastewater sludges in Virginia and will supersede an Interim Sludge Management Plan under which Wampler-Longacre has managed certain wastewater biosolids generated from its Virginia facilities.
Management has taken steps to ensure that those facilities regulated by new stormwater regulations have made the necessary group, individual, or general permit applications in accordance with the federal deadlines.
Management believes that all facilities and operations are currently in compliance with environmental and regulatory standards. Compliance has not had a materially adverse effect upon WLR Foods' earnings or competitive position in the past, and it is not anticipated to have a material adverse effect in the future.
Employees
WLR Foods employed approximately 6,800 persons as of July 2, 1994, none of whom were covered by a collective bargaining agreement.
Item 2.

Item 2. PROPERTIES.
WLR Foods' six poultry processing facilities and one further processing plant are located in Virginia, West Virginia and Pennsylvania and have a total slaughter capacity of approximately 460,000 turkeys per week and 3.1 million chickens per week. WLR Foods owns and operates three feed mills with a production capacity in excess of one million tons of finished feed per year; a turkey hatchery with a production capacity of approximately 335,000 poults per week and two chicken hatcheries with a
production capacity of approximately 3.2 million chicks per week; freezer and cold storage for finished products with approximately 5.2 million cubic feet of capacity; and two protein conversion plants with a total production capacity of 4,500 tons of raw product weekly. The diversity, number and geographic proximity of its processing and support facilities provide WLR Foods with operating flexibility and enable it to alter the size and mix of poultry processed among the various facilities, as market conditions change.
Cassco operates public refrigerated facilities at four locations with approximately 7.0 million cubic feet. These facilities are located close to major food processors in the mid- Atlantic region, as well as WLR Foods' own processing plants. Cassco also operates six ice manufacturing facilities in Virginia and West Virginia with a capacity of approximately 1,000 tons per day.
From fiscal 1988 through the end of fiscal 1994, WLR Foods has spent over $152 million (excluding capital leases) for replacement and productivity improvements, acquisitions and expansion of facilities and protein conversion plant construction. WLR Foods owns virtually all of its manufacturing and production equipment which is in good repair and is updated periodically. Replacement parts and service for the equipment are readily available, which allows for timely processing of the Company's products.
Item 3.

Item 3. LEGAL PROCEEDINGS.
On February 6, 1994, WLR Foods filed suit in the United States District Court for the Western District of Virginia against Tyson Foods, Inc. (Tyson), seeking, among other things, (1) a declaratory judgment as to the validity of the Company's Shareholder Protection Rights Plan, and (2) a declaratory judgment as to the constitutionality of Article 14, Virginia Code Sections 13.1-725 et seq. (Virginia Affiliated Transactions Statute), and Article 14.1, Virginia Code Sections 13.1-728 et seq. (Virginia Control Share Acquisitions Statute), of the Virginia Stock Corporation Act under the Virginia and United States Constitutions.
In response, on February 25, 1994, Tyson, joined later by its wholly-owned subsidiary WLR Acquisition Corp., filed counterclaims against the Company and all its directors, except Peter A.W. Green, seeking, among other things, to invalidate the Company's Shareholder Protection Rights Plan and certain severance agreements, and a declaratory judgment that the Virginia Affiliated Transactions Statute, the Virginia Control Share Acquisitions Statute and other Virginia statutes, facially and as applied, are unconstitutional under the United States Constitution.
Tyson's counterclaims also sought a declaratory judgment that four of the Company's directors who resigned as employees of the Company in February 1994 were not disinterested shareholders, and therefore were ineligible to vote their shares at a Special Meeting of the Shareholders held on May 21, 1994, and that the Company's directors breached their fiduciary duties in taking certain actions described in Tyson's counterclaims. Tyson filed motions for preliminary relief as to the directors' eligibility to vote and as to the constitutionality of the several Virginia statutes, which motions for relief were denied by the District Court on June 22, 1994 and August 7, 1994, respectively.
Trial for any remaining issues was scheduled for September 12-15, 1994; however, those trial dates have been released. The District Court will issue a final judgment in the litigation based on the written record, as supplemented.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On March 9, 1994, Tyson Foods, Inc., through its wholly- owned subsidiary, WLR Acquisition Corp., commenced a tender offer to purchase all the outstanding shares of WLR Foods for $30 per share. The Board of Directors of WLR Foods determined that the offer was inadequate and recommended that the Company's shareholders not tender their shares to Tyson Foods, Inc. This position is detailed in the Company's Schedule 14d-9 filed with the Securities and Exchange Commission on March 14, 1994, as amended.
To further their takeover efforts, on April 14, 1994 Tyson Foods, Inc. requested a special meeting of WLR Foods' shareholders under the Virginia Control Share Acquisitions Statute.
A special meeting of the Company's shareholders was held on May 21, 1994 for the sole purpose of considering a proposal of Tyson to grant it and its associates voting rights for shares of the Company's stock they have acquired or may acquire in connection with their offer to buy the Company.
On March 9, 1994, Tyson commenced an unsolicited public tender offer to purchase all outstanding shares of the Company's stock for $30 per share. Among the conditions of Tyson's offer was a requirement that it receive voting rights under Virginia's Control Share Acquisitions Statute for all shares acquired by Tyson and its affiliates. Under the Control Share Statute, any shares acquired in a control share acquisition or prior to a control share acquisition and pursuant to a plan to make a control share acquisition, have no voting rights unless voting rights are granted by a resolution approved by a majority of disinterested shares. A control share acquisition is the direct or indirect acquisition (other than certain excepted acquisitions which are not relevant here) of shares of the Company that, when added to all other shares beneficially owned by the acquiror, would entitle the acquiror to vote 20% or more of the Company's shares.
At the May 21, 1994 special meeting, the Company's shareholders defeated Tyson's proposal to grant it voting rights for its control share acquisition. At the meeting, 3,152,830 votes were cast in favor of Tyson's proposal, and 5,977,118 votes were cast against the proposal. There were 53,547 abstentions, and 1,603,800 votes were either withheld or were broker non- votes.
Tyson Foods, Inc. terminated its tender offer on August 5, 1994.
Executive Officers of the Registrant
The following information is given regarding WLR Foods' executive officers.
PART II
Item 5.

Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Public trading of shares of WLR Foods' common stock commenced on May 10, 1988. The stock was included in NASDAQ as of September 12, 1988, and was included in NASDAQ/National Market System as of March 7, 1989. The range of high and low bid information for the stock, as well as information regarding dividends declared by WLR Foods, for each full quarterly period within the two most recent fiscal years is incorporated by reference to Note 13 to the Registrant's Consolidated Financial Statements in the Annual Report, attached hereto as Exhibit 13.3. As of September 27, 1994, the approximate number of shareholders of record was 2,461.
Item 6.

Item 6. SELECTED FINANCIAL DATA.
Selected financial data for each of the fiscal years in the five- year period ended July 2, 1994 is incorporated by reference to the table entitled "Five Year Financial Highlights" in the Annual Report, attached hereto as Exhibit 13.1. A summary of significant accounting policies and business acquisitions and dispositions is incorporated by reference to Notes 1 and 2 to the Registrant's Consolidated Financial Statements in the Annual Report, attached hereto as Exhibit 13.3.
Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of operations is incorporated by reference to that section in the Annual Report, attached hereto as Exhibit 13.2.
Item 8.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item, except for the required financial statement schedules, is incorporated by reference to the Consolidated Financial Statements and Notes thereto into the Annual Report, attached hereto as Exhibit 13.3. The required financial statement schedules are included on pages 19-22 of this report.
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There were no changes in or disagreements with accountants on accounting and financial disclosure during WLR Foods' two most recent fiscal years or any subsequent interim period.
PART III
Item 10.

Item 10. DIRECTORS OF THE REGISTRANT.
Information concerning WLR Foods' directors is incorporated by reference to the Proxy Statement.
Item 11.

Item 11. EXECUTIVE COMPENSATION.
Information concerning executive compensation is incorporated by reference to the Proxy Statement.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN PERSONS.
The information required by this Item is incorporated by reference to the Proxy Statement.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information concerning certain relationships and related transactions is incorporated by reference to the Proxy Statement.
PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements, Schedules and Exhibits (AR designates Annual Report)
Financial Statements Location
Consolidated Statements of Earnings - Fiscal years ended AR July 2, 1994, July 3, 1993 and June 27, 1992
Consolidated Balance Sheets - July 2, 1994 and July 3, 1993 AR
Consolidated Statements of Shareholders' Equity - Fiscal years AR ended July 2, 1994, July 3, 1993 and June 27, 1992
Consolidated Statements of Cash Flows - Fiscal years ended AR July 2, 1994, July 3, 1993 and June 27, 1992
Notes to Consolidated Financial Statements - Fiscal years AR ended July 2, 1994, July 3, 1993 and June 27, 1992
Independent Auditors Report AR
Financial Statement Schedules
Independent Auditors' Report on Schedules Page 18
Schedule V - Property, Plant and Equipment Page 19
Schedule VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment Page 20
Schedule VIII - Valuation and Qualifying Accounts Page 21
Schedule X - Supplementary Income Statement Information Page 22
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of fiscal 1994 that ended on July 2, 1994.
(c) Exhibits
3.1 Articles of Incorporation of the Registrant incorporated by reference to Exhibit 3 on Form 8-K filed with the Securities and Exchange Commission on January 31, 1992
3.2 Bylaws of the Registrant incorporated by reference to Exhibit 3 of Form 8-K filed with the Securities and Exchange Commission on February 15, 1994
4.1 Specimen Stock Certificate incorporated by reference to Exhibit 4 of Form 10-K filed with the Securities and Exchange Commission on September 27, 1990
4.2 Loan Agreement incorporated by reference to Exhibit 4.2 of Form 10-K filed with the Securities and Exchange Commission on September 27, 1991
4.3 Floating Rate Note incorporated by reference to Exhibit 4.3 of Form 10-K filed with the Securities and Exchange Commission on September 27, 1991
4.4 Note Agreement incorporated by reference to Exhibit 4.4 of Form 10-K filed with the Securities and Exchange Commission on September 27, 1991
4.5 Loan Agreement dated June 1, 1994
4.6 Promissory Note dated July 20, 1994
4.7 Shareholder Protection Rights Agreement, dated as of February 4, 1994, which includes as Exhibit A the forms of Rights Certificate and Election to Exercise and as Exhibit B the Form of Certificate of Designation and Terms of the Participating Preferred Stock incorporated by reference to Exhibit 1 of Form 8-A filed with the Securities and Exchange Commission on September 30,
10.1 Employment Agreement dated July 4, 1993 between the Registrant and James L. Keeler (Deferred Compensation Agreement attached thereto as Exhibit A) incorporated by reference to Exhibit 10.6 of Form 10-K filed with the Securities and Exchange Commission on September 30,
10.2 Executive Cash Bonus Program incorporated by reference to Exhibit 10.7 of Form 10-K filed with the Securities and Exchange Commission on September 30, 1993
10.3 Long-Term Incentive Plan, as amended, incorporated by reference to Exhibit 28 of Post-Effective Amendment Number One to Form S-8 (No. 33-27037) filed with the Securities and Exchange Commission on November 18, 1992
10.4 Amendment to Employment Agreement dated February 4, 1994 between the Registrant and James L. Keeler incorporated by reference to Exhibit 10.2 of Form 8-K filed with the Securities and Exchange Commission on February 15, 1994
10.5 Amendment to Deferred Compensation Agreement dated February 4, 1994 between the Registrant and James L. Keeler incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission on February 15, 1994
10.6 Severance Agreement dated February 4, 1994 between the Registrant and James L. Keeler incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
10.7 Severance Agreement dated February 4, 1994 between the Registrant and Delbert L. Seitz incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
10.8 Severance Agreement dated February 4, 1994 between the Registrant and James L. Mason incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
10.9 Severance Agreement dated February 4, 1994 between the Registrant and John J. Broaddus incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
10.10 Severance Agreement dated February 4, 1994 between the Registrant and V. Eugene Misner incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
10.11 Deferred Compensation Agreement dated February 4, 1994 between the Registrant and Charles W. Wampler, Jr. incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
10.12 Deferred Compensation Agreement dated February 4, 1994 between the Registrant and Herman D. Mason incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
10.13 Deferred Compensation Agreement dated February 4, 1994 between the Registrant and George E. Bryan incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
10.14 Deferred Compensation Agreement dated February 4, 1994 between the Registrant and William D. Wampler incorporated by reference to Form 10-Q/A filed with the Securities and Exchange Commission on February 23, 1994
13.1 Financial Highlights, from the Registrant's Annual Report to Shareholders for the fiscal year ended July 2, 1994
13.2 Management's Discussion and Analysis, from the Registrant's Annual Report to Shareholders for the fiscal year ended July 2, 1994
13.3 Consolidated Financial Statements and Notes to Consolidated Financial Statements, from the Registrant's Annual Report to Shareholders for the fiscal year ended July 2, 1994
13.4 Independent Auditors' Report on Consolidated Financial Statements, from the Registrant's Annual Report to Shareholders for the fiscal year ended July 2, 1994
21 List of Subsidiaries of the Registrant
22 Excerpts from the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 1994
23 Consent of Independent Certified Public Accountants
24 Power of Attorney
27 Financial Data Schedule
Schedules not included in this Item have been omitted because they are either not applicable or the information is included in the Consolidated Financial Statements or notes thereto.
[The remainder of this page is intentionally left blank.]
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WLR Foods, Inc.
By:__/s/ James L. Keeler______________ Its President & Chief Executive Officer
Date: September _30_, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
____/s/ James L. Keeler____________ President & Chief Executive Officer
Date: September _30_, 1994
__/s/ Delbert L. Seitz___________ Chief Financial Officer
Date: September 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on September 30, 1993.
Signature Title
______________________________ Director George E. Bryan*
______________________________ Director Charles L. Campbell*
______________________________ Director Stephen W. Custer*
______________________________ Director Calvin G. Germroth*
______________________________ Director William H. Groseclose*
______________________________ Director J. Craig Hott*
______________________________ Director James L. Keeler
______________________________ Director Herman D. Mason*
______________________________ Director Charles W. Wampler, Jr.*
______________________________ Director William D. Wampler*
______________________________ Director Peter A.W. Green*
*By _/s/ Delbert L. Seitz______________ Delbert L. Seitz, attorney-in-fact
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Shareholders WLR Foods, Inc.:
Under date of August 17, 1994, except Note 14 which is as of August 29, 1994, we reported on the consolidated balance sheets of WLR Foods, Inc. and subsidiaries as of July 2, 1994 and July 3, 1993, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the fiscal years in the three-year period ended July 2, 1994, as contained in the 1994 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Richmond, Virginia August 17, 1994