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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended______MARCH 30, 2002___________________________or
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to _________________
COMMISSION FILE NUMBER:____1-7138_________________________________________
________________________________CAGLE'S, INC.__________________________________
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
___________GEORGIA_____________________________________58-0625713______________
(STATE OF INCORPORATION) I.R.S EMPLOYER IDENTIFICATION NO.
_______2000 HILLS AVE., NW, ATLANTA, GA.______________________30318____________
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: ___(404) 355-2820__________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of exchange on which registered
________CLASS A COMMON STOCK___________________AMERICAN STOCK EXCHANGE_________
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
________________none___________________________________________________________
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. _X_ YES ___ NO
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF
THE REGISTRANT. (THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.)
__$_16,850,746(based_on__$9.60_per_share_closing_price_on_May 7, 2002)____
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE (APPLICABLE ONLY TO
CORPORATE REGISTRANTS.)
__Class_A_Common_Stock_at_$1.00_par_value______________________________________
__4,747,280_shares_at_$1.00_par_value__________________________________________
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT
IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS; (2) ANY PROXY OR
INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424(b) OR
(c) UNDER THE SECURITIES ACT OF 1933. (THE LISTED DOCUMENTS SHOULD BE CLEARLY
DESCRIBED FOR IDENTIFICATION PURPOSES.)
Parts of the following documents are incorporated by reference in Parts II,
III, and IV of this form 10-K report: 1) registrant's annual report to
shareholders for fiscal year ended March 30, 2002 - Items 5, 6, 7, 8 and 14;
2) registrant's annual report to shareholders for fiscal year ended March 31,
2001 - Items 6, 8 and 14; 3) registrant's annual report to shareholders for
fiscal year ended April 1, 2000 - Items 6, 8 and 14; 4) registrant's annual
report to shareholders for fiscal year ended April 3, 1999 - Item 6; 5)
registrant's annual report to shareholders for fiscal year ended March 28,
1998 - Item 6; and 6) Proxy statements for registrant's 2002 annual meeting
of shareholders- Items 10, 11, 12, and 13.
CAGLE'S, INC.
PART I
Item 1: General Business
Cagle's, Inc. (the "Company"), which began business in 1945 and was first
incorporated in Georgia in 1953, and its wholly owned subsidiary (Cagle's
Farms, Inc., formerly Strain Poultry Farms, Inc.) produce, market, and
distribute a variety of fresh and frozen poultry products. The vertically
integrated operations of the Company consist of breeding, hatching, and
growing of chickens; feed milling; processing; further processing; and
marketing. The Company's products are sold to national and regional
independent and chain supermarkets, food distributors, food processing
companies, national fast-food chains, and institutional users, such as
restaurants, schools, and distributors, by the Company's sales staff located
in Atlanta, Georgia, and through brokers selected by the Company.
Narrative Description of Business
Food Processing
All of the Company's business activities are conducted on a vertically
integrated basis within one industry segment, poultry products. The Company's
various poultry products are closely related, have similar purposes and uses,
and, except for product sold under cost-plus arrangements, are similar in terms
of profitability and types and degrees of risks. In addition, the production
processes are similar to the extent that (a) production facilities are shared
or are interchangeable and (b) the same types of raw materials, labor, and
capital are used. Markets and marketing methods are comparable for all
products (except cost-plus products) to the extent that they are generally sold
to the same types of customers by a common sales force and are sensitive to
changes in economic conditions to the same degree.
The Company currently processes approximately 3,185,000 birds per week in its
three processing plants, including three plants which operate with two full
shifts. Of the Company's total production, approximately 1,450,000 head per
week are deboned.
The complete cycle for growing broilers begins with the placement on a farm of
a day-old breeder chick. This bird is reared for 25 weeks, at which time it
begins to produce hatching eggs. The breeder produces eggs for approximately
40 weeks. These eggs are set in one of the Company's two hatcheries, and in
three weeks, a baby chick is hatched.
The day-old broiler chick is placed on a farm where it will grow for six to
eight weeks depending upon the size of bird desired, at which time it is
transported to the processing plant for slaughter. To produce uniform size for
customer demands, the Company grows the males and females separately. This is
necessary because males and females grow at different rates and have different
nutritional requirements for cost-effective growth. A significant investment
in field inventories is required to support the Company's operating cycle.
All feed for all flocks is produced in feed mills owned by the Company.
The Company's goal is to add value to all of its birds, and the Company
currently is accomplishing this on approximately 85% of all head slaughtered.
This value-added product takes the form of deboned breast and thigh meat,
cut-up marinated raw breaded chicken (including barbecue), government school
lunch product, fast-food cuts, IQF (individually quick frozen) products, and
mechanically deboned chicken meat.
Raw Materials
The primary raw materials used by the Company are corn, soybean meal, and other
ingredients; packaging materials; cryogenic materials; and breeder chicks. The
Company believes that sources of supply for these materials are adequate and
does not expect significant difficulty in acquiring required supplies. The
major source of supply is the midwestern grain belt of the United States,
although local supplies are utilized when available. Prices for the feed
ingredients are sensitive to supply fluctuations worldwide, and weather
conditions, especially drought, can cause significant price volatility. Since
feed is the most significant factor in the cost of producing a broiler chicken,
those fluctuations can have significant effects on margins. The Company also
purchases product outside for further processing requirements.
Research and Development
The Company has made no material expenditures for research and development
during the last three years.
Employees and Labor Relations
The Company employs approximately 3,900 persons of whom approximately 28% are
covered by collective bargaining agreements which expire at various dates over
the next three years. The Company believes its relationship with the
bargaining groups and other employees is good.
Seasonal Variations in Business
The seasonal demand for the Company's products is highest during the late
spring and summer months and is normally lowest during the winter months.
Major Customers
Sales to the Company's two largest customers represent 16.9%, 28%, and 43%
of net sales during fiscal 2002, 2001, and 2000, respectively. Additionally,
a major portion of the joint venture's sales is to one of the Company's
largest customers.
Backlog
The Company had no material backlog of orders existing as of March 30, 2002.
Competition
The Company is a leading regional integrated poultry processor, ranking
eighth nationally in pounds produced. The Company's products compete in the
marketplace with comparable products of approximately ten national and regional
producers in the areas of quality, service, and price. The Company believes
its flexibility and accessibility are positive factors enhancing the Company's
competitive position.
Regulation
The Company's facilities and operations are subject to regulation by various
federal and state agencies, including, but not limited to, the Federal Food
and Drug Administration ("FDA"), the United States Department of Agriculture
("USDA"), the Environmental Protection Agency, the Occupational Safety and
Health Administration, and the corresponding state agencies. The Company's
processing plants are subject to continuous on-site inspection by the USDA,
and the FDA inspects the production of the Company's feed mill.
Management believes that the Company is in substantial compliance with
applicable laws and regulations relating to the operation of its facilities.
Item 2: Properties
Production and Facilities
Breeding and Hatching
The Company supplies its broiler chicks by producing all of its own hatching
eggs from breeder flocks owned by the Company. These breeder flocks are
maintained on 54 contract grower farms. In addition, the replacement breeder
pullets are maintained on 23 contract grower farms where the breeders are
reared from one day old to approximately 18 weeks old and then moved to the
breeder farm where they begin to produce eggs at about 25 weeks of age.
These farms are located in north Georgia.
The Company owns two hatcheries located in Dalton, Georgia, and Forsyth,
Georgia, at which eggs are incubated and hatched. This is a continuous
process and requires 21 days to complete. After the chicks are removed
from the incubator, they are separated by sex, vaccinated against disease,
and moved by a special-purpose vehicle, Chick Bus, to the Company's grow-out
farms. The two hatcheries have an aggregate capacity of 3,000,000 chicks per
week. Both of the hatcheries are company-owned.
Grow-Out
The Company places its broiler chicks on approximately 275 contract grower
farms. The birds are grown separately by sex to provide the exact size
requirement of the Company's customers.
The independent contract growers provide the housing, equipment, utilities,
and labor to grow the baby chicks to market age, which varies from six to
eight weeks, depending on the market for which they are intended. The Company
supplies the baby chicks, the feed, and all veterinary and technical services.
Title to the birds remains with the Company at all times. The contract
growers are paid on live weight and are guaranteed a minimum rate with
various incentives based upon a grower's performance as compared to other
growers whose birds are marketed during the same week. These contract
farms are located in Georgia, Tennessee, and Alabama.
Feed Mills
The Company owns three feed mills. The feed mill in Forsyth, Georgia, has the
capacity to produce approximately 9,000 tons per week. A new feed mill in
Rockmart, Georgia has production capacity of over 12,000 tons per week which
can be increased to 20,000 tons per week by adding additional equipment. A
mill in Dalton, Georgia with 10,000 tons per week capacity is currently idle.
Processing
As the broilers reach the desired processing weight, they are removed from the
houses and transported by company trucks to a processing plant.
The processing plants are located in Pine Mountain, Georgia; Perry, Georgia;
and Collinsville, Alabama. The Collinsville plant can process up to 12,600
birds per hour. The Pine Mountain plant has the capacity to process 10,800
birds per hour. The Perry plant has the capacity to process 15,625 per hour.
Each plants operate two full shifts plus a sanitation shift.
Further Processing and Deboning
The Company has a stated goal of marketing the majority of its product as
value-added product. This is accomplished by cutting the product into parts
or fast-food cuts, deboning, marinating and breading, and converting into
other convenience-type products.
Currently, further processing and deboning are conducted at the Collinsville,
Alabama, plant (cutting, marinating, and breading) and the Pine Mountain and
plant (deboning) and the Perry, Ga. plant, (deboning, IQF and marinating and
breading). In addition, the Atlanta, Georgia, facilty is totally devoted to
further processing. The operations of the Lovejoy facility have been moved
to Perry, Georgia, and the facility is currently idle and offered for sale.
Freezer Storage
The Company's facilities located in Atlanta, Georgia; Collinsville, Alabama;
Pine Mountain, Georgia; and Perry, Georgia, have freezer storage facilities
with aggregate capacity of approximately 25,800,000 pounds of frozen product.
The Company utilizes outside storage services as needed to supplement its own
freezer capacity.
Local Distribution
As an extension of the company sales division, local distribution is operated
from separate refrigerated warehouse facilities in Atlanta, Georgia. This
unit has sales representatives located in Macon, Georgia, as well as Atlanta
and Collinsville, Alabama, and are designed to provide storage and delivery
service for those customers. A new branch was opened during the 4th quarter
of the year in Mobile, Alabama. This branch is in leased space.
Significant Unconsolidated Subsidiaries
The Company owns a 50% interest in a joint venture, which is a fully integrated
poultry company located in Camilla, Georgia. The joint venture is growing and
processing approximately 1,300,000 birds per week in a processing plant that is
capable of processing up to 1,400,000 broilers per week. The Company also owns
a minority interest in a poultry by-product company. In November 1997, a Joint
Venture poultry company was formed in Kentucky and the company became a
minority member. In December 1995, the Company acquired a 1/3 interest in a
grower housing financing company. During fiscal year 2000 the Kentucky joint
venture purchased a 1/4 interest in this venture, which diluted the Company's
ownership to 1/4. The financing company finances poultry houses for growers
who are contract growers for the joint venture companies. The Company
subsequent to March 30, 2002 sold its interest in the Camilla, JV and the
credit company for $50 Million.
Executive Offices
The Company's executive offices are located in a renovated two-story
(22,000-square-foot) building at 2000 Hills Avenue, NW, Atlanta, Georgia.
The building is owned by the Company.
All of the properties described above are in good condition and are adequate
for their stated uses.
Item 3: Legal Proceedings
Suit was filed against Cagle's Farms, Inc. on December 18, 1998 in U. S.
District Court for the Northern District of Georgia by terminated contract
broiler growers. Cagle's, Inc. was subsequently added as a party. These
former growers sought unspecified damages and alleged, among other things,
that their birds were misweighed on numerous occasions and that they were
terminated as growers because of their involvement in a poultry growers
association. Cagle's, Inc. and Cagle's Farms, Inc. denied all allegations.
Subsequent to the end of the fiscal year, this case was settled.
In addition to the above mentioned case, a suit was brought against Cagle's,
Inc., Cagle's Farms, Inc., Cagle Foods JV, LLC and Cagle Keystone Food JV, LLC
on May 12, 1999 in U. S. District Court for the Northern District of Georgia
by three contract broiler growers. This suit alleged certain discrepancies in
weighing live poultry as it is received at the processing plant and seek
unspecified damages. This suit sought class action status, which was denied by
the Court. Subsequently, on July 2, 2001, a number of individual contract
broiler growers filed suit in U. S. District Court for the Northern District of
Georgia, also alleging certain discrepancies in weighing and seeking
unspecified damages. Cagle's, Inc. and Cagle's Farms, Inc. denied all
allegations. Subsequent to the end of the fiscal year, a preliminary settlement
agreement was reached in each of these cases and the parties are currently in
the process of finalizing these settlements.
Also, suit was filed on May 19, 1999 against Cagle's, Inc., Cagle's Farms,
Inc., Cagle Foods JV, LLC, Cagle Foods Credit LLC and Cagle's Keystone Foods,
LLC in the District Court for the Middle District of Georgia. Two additional
suits were filed in this same Court on June 15, 2001 and June 22, 2001 against
Cagle's, Inc., Cagle's Farms, Inc., Cagle Foods JV LLC d/b/a Cagle-Keystone
Foods. All three separate suits were brought by different contract growers
seeking unspecified damages and alleging the defendants misrepresented certain
facts regarding profitability and cash flow as an inducement to their becoming
contract producers. The Company and other defendants deny all allegations are
vigorously defending against these actions and expect to be vindicated.
Other than those actions listed above, the Company is routinely involved in
various lawsuits and legal matters on an ongoing basis as a result of day to
day operations; however, the Company does not believe that the ultimate
resolution of these matters will have a material adverse effect on the Company
or its business.
Item 4: Submission of Matters to a Vote of Security Holders
No matters were submitted to security holders for a vote during the fourth
quarter of fiscal 2002.
PART II
Item 5: Market for Registrant's Common Equity
and Related Stockholder Matters
The information required by this item is included in the Company's Annual
Report to Stockholders for the year ended March 30, 2002 and is incorporated
herein by reference.
Item 6: Selected Financial Data
The information required by this item is included in the Company's Annual
Report to Stockholders for the Fiscal Year ended March 30, 2002 and is
incorporated herein by reference. This Annual Report also contains in
relevant part summary columnar information from financial statements audited
by Arthur Andersen LLP("Andersen") for Cagle's, Inc.'s Fiscal Years ended March
28, 1998 ("Fiscal Year 1998"), April 3, 1999 ("Fiscal Year 1999"), April 1,
2000 ("Fiscal Year 2000"), and March 31, 2001 ("Fiscal Year 2001") which was
included in Cagle's, Inc.'s Annual Reports for these Fiscal Years. The
financial statements audited by Andersen for each of these Fiscal Years were
also accompanied by Andersen's accountants' reports which satisfied the
requirements of 17 CFR Part 210.2-02(a) when originally issued. Pursuant to
amendment (e) to 17 CFR Part 210, which is included SEC Release No. 33-870,
Cagle's, Inc. hereby certifies that, after reasonable efforts, it is unable
to obtain consent from Andersen to reissue the financial statements for Fiscal
Years 1998, 1999, 2000, and 2001 along with the accompanying accountants'
reports. Cagle's, Inc. further certifies that the relevant portions of the
Annual Reports for Fiscal Years 1998, 1999, 2000, and 2001, which are
incorporated herein by reference, are not reissues but are true and correct
copies of the latest financial statements and the accompanying signed and
dated Andersen accountants' reports for these Fiscal Years.
Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations
The information required by this item is included in the Company's Annual
Report to Stockholders for the year ended March 30, 2002 and is incorporated
herein by reference.
Item 8: Financial Statements and Supplementary Data
The information required by this item is included in the Company's Annual
Report to Stockholders for the Fiscal Year ended March 30, 2002 and is
incorporated herein by reference. This annual report in relevant part also
contains summary information from financial statements audited by Arthur
Andersen LLP ("Andersen") for Cagle's, Inc.'s Fiscal Years ended April 1, 2000
("Fiscal Year 2000") and March 31, 2001 ("Fiscal Year 2001") which was
included in Cagle's, Inc.'s Annual Reports for these Fiscal Years. The
financial statements audited by Andersen for each of these Fiscal Years were
also accompanied by Andersen's accountants' reports which satisfied the of
requirements of 17 CFR Part 210.2-02(a) when originally issued. Pursuant to
amendment (e) to 17 CFR Part 210, which is included SEC Release No. 33-870,
Cagle's, Inc. hereby certifies that, after reasonable efforts, it is unable
to obtain consent from Andersen to reissue the financial statements for
Fiscal Years 2000 and 2001 along with the accompanying accountants' reports.
Cagle's, Inc. further certifies that the relevant portions of the Annual
Reports for Fiscal Years 2000 and 2001, which are incorporated herein by
reference, are not reissues but are true and correct copies of the latest
financial statements and the accompanying signed and dated Andersen
accountants' reports for these Fiscal Years.
Item 9: Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
In April 2002, the Company dismissed Arthur Andersen LLP as its auditor and
retained the firm of Moore Stevens Frost PLC as its auditors for the fiscal
year ended March 30, 2002, reference Form 8-k filed April 10, 2002 and amended
April 17, 2002.
PART III
Item 10: Directors and Executive Officers of the Registrant
The information required by this item is included in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held July 12, 2002 and
is incorporated herein by reference.
Item 11: Executive Compensation
The information required by this item is included in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held July 12, 2002
and is incorporated herein by reference.
Item 12: Security Ownership of Certain Beneficial Owners and Management
The information required by this item is included in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held July 12, 2002
and is incorporated herein by reference.
Item 13: Certain Relationships and Related Transactions
The information required by this item is included in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held July 12, 2002
and is incorporated herein by reference.
PART IV
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 Company's 2002 Annual Report to Stockholders contains the consolidated
balance sheets as of March 30, 2002 and March 31, 2001, the related statements
of income, stockholders' equity, and cash flows for the three years in the
period ended March 30, 2002 and the related accountants' report of Moore
Stevens Frost PLC ("MSF") for the year ended March 30, 2002. These financial
statements and the report of MSF are incorporated herein by reference. Arthur
Andersen ("Andersen") audited the financial statements for the relevant years
prior to and ended on on March 31, 2001 and incorporation of these statements
herein does not constitute a reissue of these statements (see Item 8 above).
The financial statements, incorporated by reference, include the following:
Consolidated Balance Sheets - March 30, 2002 (MSF) and March 31, 2001
(Andersen)
Consolidated Statements of Income for the Years Ended March 30, 2002
(MSF), March 31, 2001 (Andersen), and April 1, 2000 (Andersen)
Consolidated Statements of Cash Flows for the Years Ended March 30, 2002
(MSF), March 31, 2001 (Andersen), and April 1, 2000 (Andersen)
Notes to Consolidated Financial Statements - March 30, 2002 (MSF), March
31, 2001 (Andersen), and April 1, 2000 (Andersen)
(a)2. Financial Statement Schedules
The financial statement schedules 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
8.1 consent of independent accountants, Moore Stephens Frost, PLC and letter
regarding request from independent accountants Arthur Andersen LLP.
8.2 Cagle's, Inc. annual report for the year ended March 30, 2002.
8.3 Cagle's, Inc. Proxy statements for registrant's 2002 annual meeting of
shareholders.
8.4 audited financial statements of unconsolidated affiliates: Cagle's
Keystone Foods, L.L.C. and Cagle Foods JV, L.L.C.audited financial
statements of unconsolidated affiliate.
Reports on Form 8-K
A report on Form 8-k was filed in April 2002, amended April 2002. Reporting
a change of auditors.
A report on Form 8-k was filed in May 2002, amended June 2002. Reporting the
sale of Cagle Foods JV, L.L.C.
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.
Cagle's, Inc.
BY: /s/ J. Douglas Cagle
J. Do
uglas Cagle
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the registrant
and in capacities and on the date indicated:
/s/ J.Douglas Cagle Chairman and Director and Chief Executive Officer
/s/ Kenneth R. Barkley Senior Vice President Finance/Treasurer/Chief
Financial Officer/Director/Principle Financial
and Accounting Officer
/s/ G. Bland Byrne Director
/s/ George Douglas Cagle Vice President, New Product Development
and Director
/s/ John J. Bruno Senior Vice President Sales Marketing and Director
/s/ James David Cagle Vice President, New Product Sales and Director
/s/ Jerry D. Gattis President, Chief Operating Officer and Director
/s/ Mark M. Ham IV Vice President, Information Systems and Director
/s/ Candace Chapman Director
/s/ Panos J. Kanes Director