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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Security Exchange
Act of 1934 For the Quarterly period ended June 28, 2003
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition period from ______ to _______
Commission File Number 1-7138
CAGLE'S, INC.
GEORGIA 58-0625713
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2000 Hills Avenue, N. W. Atlanta, Georgia 30318
(Address of Principal Executive Offices and Zip Code)
(404) 355-2820
(Registrant's Telephone Number, Including Area Code)
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.
Yes __x__ No ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date
Class Outstanding June 28, 2003
- -------------------------------------- -----------------------------
Class A Common Stock, $1.00 Par Value 4,747,280 Issued
PART 1. FINANCIAL INFORMATION
Cagle's, Inc. And Subsidiary Consolidated Balance Sheets
June 28, 2003 and March 29, 2003
(In Thousands, Except Par Value)
(Period 6/28/03 Unaudited)
06/28/03 03/29/03
------------ -------------
Assets -----------------------------------------
CURRENT ASSETS
Cash $ 20 $ 100
Accounts receivable, net of allowance for
doubtful accounts of $883 and $692 at
June 28, 2003 and March 29, 2003,
respectively 15,585 13,276
Inventories 27,352 27,487
Income Tax Refund Receivable 1,137 1,137
Other current assets 832 576
------------ ------------
Total Current Assets 44,926 42,576
------------ ------------
Investments in unconsolidated affiliates 4,260 4,179
Assets held for sale 6,887 6,738
Property, Plant, and Equipment 197,313 197,312
Less accumulated depreciation (89,593) (86,334)
------------ ------------
Property, plant, and equipment, net 107,720 110,978
------------ ------------
Other Assets:
Long term refundable taxes 3,122 3,389
Intangible assets 178 370
Other misc. assets 3,547 3,547
------------ ------------
Total Other Assets 6,847 7,306
------------ ------------
TOTAL ASSETS $ 170,640 $ 171,777
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY---------------
CURRENT LIABILITIES
Current maturities of long term debt $ 63,378 $ 61,994
Accounts payable 22,608 20,280
Accrued expenses 9,985 9,537
------------ ------------
Total Current Liabilities 95,971 91,811
------------ ------------
Long Term Debt (net of current maturities) 23,476 23,479
Deferred Income Tax Liabilities 1,432 3,336
Other Noncurrent Liabilities 1,159 1,159
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; authorized 4,748
shares, 4,748 shares issued at June 28, 2003
and March 29, 2003, respectively 4,748 4,748
Capital in excess of par value 4,198 4,198
Treasury stock held for options, at cost (84) (84)
Retained earnings 39,740 43,130
------------ ------------
Total Stockholders' Equity 48,602 51,992
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 170,640 $ 171,777
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Cagle's, Inc. & Subsidiary
Consolidated Statements of Income
For the 13 weeks ended June 28, 2003
and the 13 weeks ended June 29, 2002
(Amounts in thousands, except per share data)
(Unaudited)
13 wks 13 wks
ended ended
06/28/03 06/29/02
-------- --------
Net Sales $72,450 $84,758
Costs and Expenses:
Cost of Sales 72,587 84,909
Selling and Delivery 2,024 2,291
General and Administrative 2,088 2,583
-------- --------
Total costs and expenses 76,699 89,783
Loss From Operations (4,249) (5,025)
Other Income(Expense):
Interest expense (1,778) (1,718)
Other Income, Net 2 10,959
-------- --------
Earnings or (Loss) Before equity in
earnings of unconsolidated affiliates
and income taxes (6,025) 4,216
Equity in earnings of unconsolidated
affiliates 733 1,563
-------- --------
Income(Loss) before income taxes (5,292) 5,779
Income Taxes Provision (Benefit) (1,903) 2,069
-------- --------
Net Income(Loss) $ (3,389) $ 3,710
======== ========
Weighted Average Shares Outstanding
-Basic 4,745 4,742
-Diluted 4,745 4,742
======== ========
Net Income (Loss) Per Common Share
-Basic $ (.71) $ .78
-Diluted $ (.71) $ .78
Dividends Per Common Share $ .00 $ .00
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
Cagle's, Inc. & Subsidiary
Consolidated Statements of Cash Flows
For the 13 weeks ended June 28, 2003 and June 29, 2002
(In Thousands) (unaudited)
June 28, 2003 June 29, 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (3,389) $ 3,710
Adjustments to reconcile net income to net cash
Used in operating activities:
Depreciation and amortization 3,246 4,303
Gain on sale of joint venture 0 (11,959)
Changes in assets and liabilities:
Accounts receivables, net (2,309) (1,307)
Income Tax Receivables 0 37
Inventories 134 1,381
Other current assets (256) (1,389)
Changes in investment in unconsolidated affiliates (81) (316)
Accounts payable 2,328 (1,879)
Accrued expenses 448 (964)
Deferred Income Taxes (1,905) 2,070
------------- -------------
Total Adjustments 1,607 (10,023)
------------- -------------
Net cash produced(used) in operating activities (1,782) (6,313)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (58) (384)
(Increase) decrease in Other Assets 379 (177)
Change in assets held for sale 0 (149)
Proceeds from sale of joint venture 0 50,000
------------- -------------
Net cash used in investing activities 321 49,290
------------- -------------
Cash Flows from financing activities:
Payments of long-term debt and capital
lease obligations (1,533) (42,980)
Proceeds from issuance of long-term debt 2,914 0
Dividends Paid 0 0
Proceeds from exercise of options 0 12
------------- -------------
Net cash provided (used) by financing activities 1,381 (42,968)
------------- -------------
NET INCREASE (DECREASE) IN CASH (80) 9
CASH AT BEGINNING OF PERIOD 100 91
------------- -------------
CASH AT END OF PERIOD $ 20 $ 100
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest(including capitalized interest
of $3,124 in 2001) $ 1,704 $ 1,827
============= =============
Income Taxes (Refunded), Paid $ 0 $ 0
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
Cagle's, Inc. & Subsidiary
Notes to Consolidated Condensed Financial Statements
June 28, 2003
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments which are of a normal and
recurring nature necessary to present fairly the consolidated financial
position of Cagle's, Inc. and Subsidiary (the "Company") as of June 28,
2003 and March 29, 2003 and the results of their operations for the 13
weeks ended June 28, 2003 and the 13 weeks ended June 29, 2002.
2. The results of operations for the 13 weeks ended June 28, 2003 and June 29,
2002 are not necessarily indicative of the results expected for the full
year.
3. Inventories consisted of the following:
(In Thousands)
June 28, 2003 March 29, 2003
Finished Product $ 7,083 $ 6,078
Field Inventory and Breeders 16,002 16,216
Feed, Eggs, and Medication 2,858 3,710
Supplies 1,409 1,483
---------------- --------------
$27,352 $27,487
4. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results may vary from those estimates.
5. Investments in Unconsolidated Affiliates
The Company accounts for its investments in its unconsolidated affiliates
using the equity method. The Company's share of earnings from these
affiliates totaled $733,000 for the 13 weeks ended June 28, 2003, and
$1,563,000 for the 13 weeks ended June 29, 2002.
6. Other Non-Recurring Activities
During the 13 weeks ended June 28, 2003 the Company received $1,815,714
as recovery in a lawsuit involving vitamin manufacturers and a class action
settlement involving methionine manufactures. This represents recovery of
overcharges for ingredients of poultry feed and as such was recorded as a
credit to cost of sales. During the 13 weeks ended June 29, 2002 the
company received $1,671,000 as partial settlement in the vitamin lawsuit.
7. Certain prior year amounts have been re-classified for consistency with
current period presentation.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
June 28, 2003
Financial Condition
The Company's liquidity continues to be very tight during the quarter ended
June 28, 2003 even as performance was improving as the quarter progressed.
The month of April was the most disappointing with results improving in May
and June. The curtailment of a shift at the Pine Mountain Plant provided some
liquidity, however, placement of additional volume for the Collinsville plant
offset any field inventory reduction generated by the shift elimination at
Pine Mountain Valley. In addition finished product inventories increased
early in the quarter to service customer demand as we moved into the peak
summer demand period and has substantially been reduced as product has moved
to customers.
The company continues to seek replacement financing for the existing bank
facility as well as looking at potential asset sales that would enhance the
ability to refinance.
Results of Operations
A significant improvement in market prices during the 13 weeks ended June 28,
2003 as compared to a year ago helped improve the operating results as
compared to a year ago. Market prices were significantly improved but CUL
not
realized until late in the quarter due to pre-selling and longer term
contract prices. An example of specific prices are boneless breast filet
without tender attached $1.60 per pound average compared to $1.40 per pound
average a year ago. Breast tender $1.46 per pound verses $1.19 a year ago,
wings $.69 verses $.53 a year ago and leg quarters $.21 verses $.18 a year
ago. The major portion of the leg quarter sales are export and are an example
of sales price lagging behind the market quote as these sales are made well
in advance of shipment date.
Feed ingredient prices averaged 20% higher during the quarter as compared to
a year ago levels and the company continued its efforts to improve the product
mix at the Perry operation thereby allowing it to be more cost effective.
Selling, Delivery and Administrative Expenses
As a group these expenses decreased by over 15% with reduction being legal
and bank fees.
Interest Expense
Interest expense for the thirteen weeks ended June 28, 2003 increased by
$60,000 or 3.5% over the same period of a year ago and represents a higher
average borrowing level than a year ago at higher interest rates.
Other Income
Other income declined by $10,957,000 from the same period of a year ago as
year ago results included a gain on disposition of the Company's interest in
a joint venture.
Equity in Earnings of Unconsolidated Affiliates
The Company's interest in earnings of unconsolidated affiliates declined by
53.1% due to the absence of income from the three joint ventures which were
sold during the past year.
Income Taxes
The provision for income taxes reflects the Company's estimated liability for
income taxes net of any credits to which the Company may be entitled. The
benefit reflected represents the company's expectation of carrying current
losses forward to reduce the tax liability on future earnings.
Part II Other Information
Item 1 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. 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 sought 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.
These three cases were settled during fiscal 2003 and were
dismissed with prejudice by the Court during the last quarter.
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 U.S. District Court for the Middle District of Georgia. This suit
was brought by 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. During the last quarter, the Court entered
Summary Judgment in favor of all defendants. The Plaintiffs
are appealing this ruling. Cagle's, Inc. and Cagle's Farms, Inc. are
vigorously defending the appeal, and if the summary judgment ruling is
overturned, the Company will vigorously defend against these actions and
expects to be vindicated.
Item 9 Exhibits and Reports on Form 8-K
a. Not applicable
b. No reports on 8-K were filed during the quarter ended June 28, 2003.
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 11, 2003 /s/ J. Douglas Cagle
Chairman and C.E.O.
Date: August 11, 2003 /s/ Kenneth R. Barkley
Sr. VP Finance/Treas/CFO
Certifications
I, J. Douglas Cagle, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cagle's, Inc. and
subsidiary;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: 08/11/03
/s/ J. Douglas Cagle
Chairman and Chief Executive Officer
I, Kenneth R. Barkley, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cagle's, Inc. and
subsidiary;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: 08/11/03
/s/ Kenneth R. Barkley
Senior Vice President Finance/Treasurer/Chief
Financial Officer/Director/Principle Financial
and Accounting Officer