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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 September 27, 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 September 27, 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
September 27, 2003 and March 29, 2003
(In Thousands, Except Par Value)
(Period 9/27/03 Unaudited)
09/27/03 03/29/03
------------ -------------
Assets -----------------------------------------
CURRENT ASSETS
Cash $ 395 $ 100
Accounts receivable, net of allowance for
doubtful accounts of $823 and $692 at
September 27, 2003 and March 29, 2003,
respectively 15,825 13,276
Inventories 26,369 27,487
Income Tax Refund Receivable 1,137 1,137
Other current assets 2,746 576
------------ ------------
Total Current Assets 46,472 42,576
------------ ------------
Investments in unconsolidated affiliates 4,370 4,179
Assets held for sale 6,887 6,738
Property, Plant, and Equipment 197,523 197,312
Less accumulated depreciation (92,747) (86,334)
------------ ------------
Property, plant, and equipment, net 104,776 110,978
------------ ------------
Other Assets:
Long term refundable taxes 2,851 3,389
Intangible assets 172 370
Other misc. assets 3,547 3,547
------------ ------------
Total Other Assets 6,570 7,306
------------ ------------
TOTAL ASSETS $ 169,075 $ 171,777
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY---------------
CURRENT LIABILITIES
Current maturities of long term debt $ 63,175 $ 61,994
Accounts payable 20,392 20,280
Accrued expenses 11,092 9,537
------------ ------------
Total Current Liabilities 94,659 91,811
------------ ------------
Long Term Debt (net of current maturities) 23,473 23,479
Deferred Income Tax Liabilities 1,175 3,336
Other Noncurrent Liabilities 1,409 1,159
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; authorized 4,748
shares, 4,748 shares issued at September 27, 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 39,497 43,130
------------ ------------
Total Stockholders' Equity 48,359 51,992
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 169,075 $ 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 and 26 weeks ended September 27, 2003
and the 13 weeks and 26 weeks ended September 28, 2002
(Amounts in thousands, except per share data)
(Unaudited)
13 wks 13 wks 26 wks 26 wks
ended ended ended ended
09/27/03 09/28/02 09/27/03 09/28/02
-------- -------- --------- ---------
Net Sales $85,332 $81,369 $157,782 $166,127
Costs and Expenses:
Cost of Sales 79,515 83,715 152,102 168,624
Selling and Delivery 2,286 2,820 4,310 5,111
General and Administrative 2,643 2,652 4,731 5,235
-------- -------- --------- ---------
Total costs and expenses 84,444 79,187 161,143 178,970
Operating income (loss) 887 (7,818) (3,362) (12,843)
Other Income(Expense):
Interest expense (2,063) (1,603) (3,841) (3,321)
Other Income, Net (8) (296) (6) 10,663
-------- -------- --------- ---------
Earnings or (Loss) Before
equity in
earnings of unconsolidated
affiliates and income taxes (1,184) (9,917) (7,209) (5,501)
Equity in earnings of
unconsolidated affiliates 823 1,128 1,556 2,691
-------- -------- --------- ---------
Income(Loss) before
income taxes (361) (8,589) (5,653) (2,810)
Income Taxes Provision(Benefit) (117) (3,097) (2,020) (1,028)
-------- -------- --------- ---------
Net Income(Loss) $ (244) $(5,492) (3,633) (1,782)
======== ======== ========= =========
Weighted Average Shares
Outstanding
-Basic 4,747 4,746 4,746 4,745
-Diluted 4,747 4,746 4,746 4,745
======== ======== ========= =========
Net Income(Loss) Per Common Share
-Basic $ (.05) $ (1.16) (.77) (.38)
-Diluted $ (.05) $ (1.16) (.77) (.38)
Dividends Per Common Share $ .00 $ .00 .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 26 weeks ended September 27, 2003 and June 29, 2002
(In Thousands) (unaudited)
09/27/03 09/28/02
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (3,633) $ (1,782)
Adjustments to reconcile net income to net cash
Used in operating activities:
Depreciation and amortization 6,321 8,406
Gain on sale of joint venture 0 (11,959)
Changes in assets and liabilities:
Accounts receivables, net (2,549) 2,084
Income Tax Receivables 0 5,683
Inventories 1,118 926
Other current assets (2,170) (1,025)
Changes in investment in unconsolidated affiliates (191) (1,420)
Accounts payable 112 (4,885)
Accrued expenses 1,805 (1,111)
Deferred Income Taxes (2,161) (1,003)
------------- -------------
Total Adjustments 2,285 (4,304)
------------- -------------
Net cash produced(used) in operating activities (1,348) (6,086)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net additions to property, plant, and equipment (268) (478)
(Increase) decrease in Other Assets 736 (598)
Proceeds from sale of joint venture 0 50,000
------------- -------------
Net cash used in investing activities 468 48,924
------------- -------------
Cash Flows from financing activities:
Payments of long-term debt and capital
lease obligations (3,492) (42,834)
Proceeds from issuance of long-term debt 4,667 0
Dividends Paid 0 0
Proceeds from exercise of options 0 12
------------- -------------
Net cash provided (used) by financing activities 1,175 (42,822)
------------- -------------
NET INCREASE (DECREASE) IN CASH 295 16
CASH AT BEGINNING OF PERIOD 100 91
------------- -------------
CASH AT END OF PERIOD $ 395 $ 107
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,368 $ 5,007
============= =============
Income Taxes (Refunded), Paid $ 0 $ (5,678)
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
Cagle's, Inc. & Subsidiary
Notes to Consolidated Condensed Financial Statements
September 27, 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 September 27,
2003 and March 29, 2003 and the results of their operations for the 13 weeks
and 26 weeks ended September 27, 2003 and September 28, 2002.
2. The results of operations for the 13 weeks and 26 weeks ended September
27, 2003 and September 28, 2002 are not necessarily indicative of the
results expected for the full year.
3. Inventories consisted of the following:
(In Thousands)
September 27, 2003 March 29, 2003
Finished Product $ 5,294 $ 6,078
Field Inventory and Breeders 15,928 16,216
Feed, Eggs, and Medication 3,772 3,710
Supplies 1,375 1,483
---------------- --------------
$26,369 $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 $815,000 for the 13 weeks ended September 27, 2003 as
compared to $1,128,000 for the 13 weeks ended September 28, 2002. The
Company's share of earnings from these affiliates for the 26 weeks ended
September 27, 2003 was $1,128,000 as compared to $2,691,000 for the 26
weeks ended September 28, 2002.
6. Other Non-Recurring Activities
Included in the results for the 26 weeks ended September 27, 2003 was
$1,815,714 a recovery from a lawsuit involving vitamin manufacturers and
a class action settlement involving methionine manufactures. During the 26
weeks ended September 28, 2002 the company received $1,874,000 from the
lawsuit involving the vitamin manufacturers.
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
September 27, 2003
Financial Condition
While the Company is reporting a loss for the quarter, the months of August
and September were both profitable. Liquidity continues to be very tight
since a portion of the improved cash flow has been required by the bank group
as a pay down of debt; in addition to imposing fees and requiring a number of
consultants, as well as increased legal and professional fees required by
numerous amendments to loan agreements. Agreement to deferral of principle
payments on a term loan has been a benefit to efforts to improve liquidity.
The loan agreement with the bank group expires on April 10, 2004, however
there are covenants and payments that must be met or the loan will become
due immediately unless waived.
The company subsequent to the end of the quarter (09/27/03) has signed a
letter of intent to sell its Perry, Georgia complex, consisting of a
processing plant, a feed mill and a hatchery and grow-out operation which
along with an anticipated working capital revolving loan will pay off the
existing bank group loans. The letter of intent projects a closing of no
later than January 31, 2004, with both parties committed to make every
effort to complete the sale by December 31, 2003.
These actions are expected to substantially de-leverage the company and
provide liquidity.
Results of Operations
Market prices continued the improved movement begun last quarter and were a
major component of the improved performance as compared to the 13 weeks and
26 weeks of a year ago.
Revenues were 4.9% higher for the 13 weeks ended September 27, 2003 as
compared to the same period of a year ago due primarily to the substantially
improved market prices. Revenues for the twenty six week period were 5% lower
than a year ago for the same period. The lower revenue was the result of less
production and a full shift reduction at one processing plant; this was
lessened somewhat by a smaller increase at another plant and the higher
market prices.
Selling, Delivery and Administrative Expenses
As a group these expenses were reduced by 9.9% for the quarter and 12.6% for
the twenty six weeks as compared against a year ago and reflect the results of
cost reduction efforts which were offset to some extent by bank fees,
professional fees and legal expenses associated with efforts to secure new
financing and to comply with existing lending requirements.
Interest Expense
Interest expense increased by 28.7% for the thirteen weeks ended September
27, 2003 as compared to the 13 weeks ended September 28, 2002. The twenty
six weeks period ended September 27, 2003 reflects an increase of 15.7% as
compared to the corresponding period of a year ago. The increase reflects
higher rates and borrowing levels.
Other Income
Year ago results reflects gain from the sale of the Companies interest in two
joint ventures as well as the effect of settlements of several lawsuits.
Equity in Earnings of Unconsolidated Affiliates
The reduced earnings in this classification reflects the absence of earnings
from the absence of income from the joint ventures which were sold in the
previous 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 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 denied all allegations. During the last quarter, the Court
entered Summary Judgment in favor of all defendants. The plaintiffs appealed
and while the appeal was pending, the parties settled the case and the case
was dismissed with prejudice by the Court of Appeals during the last quarter.
Item 6 Exhibits and Reports on Form 8-K
a. Exhibits required by Item 601 of Regulation S-K
-Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
-Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, 18 U.S.C. Section 1350.
b. No reports on 8-K were filed during the quarter ended September 27,
2003. Subsequent to the end of the reporting period the Company
filed a report on Form 8-K to announce the signing of a letter of
intent to sell the Perry complex.
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: November 10, 2003 /s/ J. Douglas Cagle
Chairman and C.E.O.
Date: November 10, 2003 /s/ Kenneth R. Barkley
Sr. VP Finance/Treas/CFO