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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 January 03, 2004
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 January 03, 2004
- -------------------------------------- -----------------------------
Class A Common Stock, $1.00 Par Value 4,747,280
PART 1. FINANCIAL INFORMATION
Cagle's, Inc. And Subsidiary Consolidated Balance Sheets
January 03, 2004 and March 29, 2003
(In Thousands, Except Par Value)
(Period 01/03/04 Unaudited)
01/03/04 03/29/03
------------ -----------
Assets -----------------------------------------
CURRENT ASSETS
Cash $ 15 $ 100
Accounts receivable, net of allowance for
doubtful accounts of $601 and $692 at
January 03, 2004 and March 29, 2003,
respectively 14,621 13,276
Inventories 26,679 27,487
Current Refundable Income Taxes 854 1,137
Other current assets 1,902 576
------------ ------------
Total current assets 44,071 42,576
------------ ------------
Investments in and receivables from
unconsolidated affiliates 4,835 4,179
Assets held for sale 49,887 6,738
PROPERTY, PLANT, AND EQUIPMENT 94,878 197,312
Less accumulated depreciation (54,885) (86,334)
------------ ------------
Property, plant, and equipment, net 39,993 110,978
OTHER ASSETS:
Long Term Refundable Taxes 2,851 3,389
Intangible Assets 166 370
Other Assets 3,547 3,547
------------ ------------
Total Other Assets 6,564 7,306
------------ ------------
TOTAL ASSETS $ 145,350 $ 171,777
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY---------------
CURRENT LIABILITIES
Current maturities of long term debt $ 63,007 $ 61,994
Accounts payable 20,918 20,280
Accrued expenses 13,887 9,537
------------ ------------
Total current liabilities 97,812 91,811
------------ ------------
LONG TERM DEBT (net of current maturities) 23,112 23,479
NONCURRENT DEFERRED INCOME TAXES 16 3,336
OTHER NONCURRENT LIABILITIES 1,000 1,159
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; authorized 9,000
Shares and 4,748 issued 4,748 4,748
Additional paid in Capital 4,198 4,198
Treasury stock (82) (84)
Retained earnings 14,546 43,130
------------ ------------
Total stockholders' equity 23,410 51,992
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 145,350 $ 171,777
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Cagle's, Inc., & Subsidiary
Consolidated Statements of Operations
For the 14 weeks and 40 weeks ended January 03, 2004
and the 13 weeks and 39 weeks ended December 28, 2002
(Amounts in thousands, except per share data)
(Unaudited)
14 wks 13 wks 40wks 39wks
ended ended ended ended
01/03/04 12/28/02 01/03/04 12/28/02
-------- -------- -------- --------
Net Sales $ 82,648 $ 72,550 $240,430 $238,677
Costs and Expenses:
Cost of Sales 98,132 81,636 250,233 250,260
Selling and Delivery 2,333 2,419 6,643 7,530
General and Administrative 3,093 2,414 7,825 7,648
------- -------- -------- --------
Total costs and expenses 103,558 86,469 264,701 265,438
Loss From Operations (20,910) (13,919) (24,271) (26,761)
Other Income(Expense):
Interest expense (2,213) (2,171) (6,054) (5,492)
Other (expense)income, net (3,801) 848 (3,807) 11,511
Earnings or (Loss) Before equity in
earnings of unconsolidated affiliates
and income taxes (26,924) (15,242) (34,132) (20,742)
Equity in earnings of unconsolidated
affiliates 816 930 2,371 3,622
-------- -------- -------- --------
Loss Before Income Taxes (26,108) (14,312) (31,761) (17,120)
Provision (Benefit) For Income Taxes (1,159) (5,066) (3,179) (6,093)
-------- -------- -------- --------
Net Loss $(24,949) (9,246) (28,582) (11,027)
======== ======== ======== ========
Weighted Average Shares Outstanding
-Basic 4,747 4,746 4,747 4,745
-Diluted 4,747 4,746 4,747 4,745
======== ======== ======== ========
Net Loss Per Common Share
-Basic $ (5.26) $ (1.95) $ (6.02) $ (2.32)
-Diluted $ (5.26) $ (1.95) $ (6.02) $ (2.32)
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 40 weeks ended January 03, 2004
and the 39 weeks ended December 28, 2002
(In Thousands) (unaudited)
01/03/04 12/28/02
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ (28,582) $ (11,027)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,768 11,543
Gain on disposal of property, plant and equipment (2) (27)
Gain on sales of joint ventures 0 (12,914)
Impairment of fixed assets held for sale 18,528 0
Changes in investment in and receivables from
unconsolidated affiliates (656) (2,388)
Deferred Income Taxes (3,320) (5,111)
Changes in assets and liabilities:
Accounts receivables, net (1,345) 3,743
Income Tax Refund Receivable 821 4,731
Inventories 808 3,654
Other current assets (1,326) (330)
Accounts payable 638 (902)
Accrued expenses 4,350 1,348
Other non-current liability (159) (3,424)
------------- -------------
Total Adjustments 28,105 (77)
------------- -------------
Net cash provided by operating activities (477) (11,104)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (257) (918)
Proceeds from the sale of property, plant, equip 3 27
Proceeds from sales of joint ventures 0 56,736
------------- -------------
Net cash used in investing activities (254) 55,845
------------- -------------
Cash Flows from financing activities:
Payments of long-term debt and capital
lease obligations 0 (44,830)
Proceeds from issuance of long-term debt 646 0
Proceeds from exercise of Stock Options 0 12
------------- -------------
Net cash provided or (used) by financing activities 646 (44,818)
------------- -------------
NET INCREASE (DECREASE) IN CASH (85) (77)
CASH AT BEGINNING OF PERIOD 100 91
------------- -------------
CASH AT END OF PERIOD $ 15 $ 14
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest $ 5,459 $ 4,867
============= =============
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
January 03, 2004
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 January 03,
2004 and March 29, 2003 and the results of their operations for the 14
weeks and 40 weeks ended January 03, 2004 and for the 13 weeks and 39
weeks ended December 28,2002.
2. The results of operations for the 14 weeks and 40 weeks ended January 03,
2004 and for the 13 weeks and 39 weeks ended December 28, 2002 are not
necessarily indicative of the results expected for the full year.
3. Inventories consisted of the following:
(In Thousands)
January 03, 2004 March 29, 2003
Finished Product $ 4,655 $ 6,078
Field Inventory and Breeders 16,998 16,216
Feed, Eggs, and Medication 3,795 3,710
Supplies 1,231 1,483
---------------- --------------
$26,679 $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, and 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 $816,000 and $2,371,000, respectively, for the 14 weeks
and 40 weeks ended January 03, 2004 and $930,000 and $3,622,000,
respectively, for the 13 weeks and 39 weeks ended December 28, 2002.
6. Other Non-recurring Activities
Included in the 40 weeks ended January 03, 2004 results is $1,815,714,
which represents recovery from partial settlement in lawsuits involving
vitamin manufacturers and a class action settlement involving methionine
manufacturers. During the comparable 39 week period ended December 28,
2002, the company reported $2,384,814 as recoveries from vitamin lawsuits.
7. Subsequent Events
During the quarter, the Company signed a letter of intent to sell the
Perry, Georgia complex consisting of a processing plant in Perry, Georgia,
and a feed mill and hatchery in Forsyth, Georgia for $45,000,000; the
sale was closed on January 30, 2004. As a result, the company, is
reporting a $18,528,000 charge for asset impairment in the current quarter.
Additionally, $3,797,000 of expenses related to the transaction have been
accrued and reported in the current quarter.
The Company also closed a $20 million credit facility on January 30, 2004;
this combined with proceeds of the sale enabled the Company to pay off the
existing bank group credit facility.
The Company issued a press release on February 6, 2004 disclosing a
restructuring of Corporate level staffing.
Management's Discussion and Analysis of Financial
Condition and Results of Operation
January 30, 2004
Financial Condition
Improved market conditions helped the Company's strained liquidity through
the quarter ended January 03, 2004. Reduced production and consequently sales
through the holiday period adversely affected cash flow even as we experienced
improved prices during the quarter. The Company signed a letter of intent to
sell its Perry, Georgia complex and subsequently did so in January. The sale
of this complex and simultaneous refinancing is expected to provide extra
liquidity to supplement the expected improvement in operating cash flow
without the burden of the Perry complex. These transactions resulted in a
charge of $22,325,000 in the current quarter.
Results of Operations
Net Revenues for the quarter ended January 3, 2004 increased by 13.9% as
compared to the quarter ended December 28, 2002 and .7% for the 40-week
period ended January 3, 2004 as compared to the 39-week period ended
December 28, 2002.
Revenue for the quarters was improved by approximately 7.5% due to the extra
Week, with the remains due to improved market conditions. An example of
improved pricing for the quarter and year to date are line run breast 16.8%
and 24.9% quarter and year to date, respectively; Boneless/skinless thigh meat
19.3% and 39.8%, respectively; Boneless Breast 19.7% and 20.6%, respectively;
Breast tenders 30.4% and 36.4%, respectively; wings 52% and 97.1%, respectively
and leg quarters 49.2% and 64.7%, respectively. The production increase during
the quarter and 9-month period was 3.6% and 8.9%. Cost of sales for the quarter
ended January 3, 2004 was 20.2% higher than for the comparable quarter and
virtually the same for the nine month period with the primary cause being the
impairment charge resulting from the agreement to sell its Perry, Georgia
Complex and this was offset, dollar wise by less production volume
respectively due to a shift reduction at a large bird deboning plant offset
slightly by increased slaughter at a small bird Food Service/ Fast Food
Facility.
Selling Delivery and Administrative Expenses
This category of expense was 12.3% higher for the quarter ended January 3,
2004 with the major increase due to legal and consulting fees associated
with efforts to sell a major asset (the Perry complex) and responding to
requirements set forth by lenders. This category of expense was 4.7% lower
for the 9 month period than for the comparable period of a year ago due to
reductions in outside selling costs.
Interest Expenses
Interest expenses for the quarter ended January 3,2004 was 1.9% higher and the
nine month ended the same date was 10.2% higher than for the comparable period
of a year ago. This increase reflects the extra week in the period and various
penalty rates charged by lenders during the period through waived fees, service
fees, and the unfavorable impact of some interest rate swaps as interest rates
declined.
Other Income (Expenses)
The extreme variance in this classification reflects the effects of major asset
sales reported in the year-ago results, both for the quarter and 9-month
results. The current quarter and year to date results includes $3,797,000 of
expenses attributed to the sale of the Perry complex.
Equity in Earnings of Unconsolidated Affiliates
The reduced earnings as compared to a year ago reflect the absence of earnings
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 its ability to
carry current loss forward to reduce tax liability on future earnings.
Part II Other Information
Item 1 Legal Proceedings
No material developments.
Item 9 Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 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 v.s.c. Section 1350
(b) Report on Form 8-K were filed during the quarter reporting the
withdrawal of one letter of intent to sell its Perry Complex and a 8-K
announcing the signing a letter of intent to sell the Perry Complex to
a different purchaser. Subsequent to the end of the quarter the company
(January 30, 2004) the company filed an 8-K to disclose the closing of
the sale of the Perry Complex; an subsequent 8-K (February 6, 2004)
disclosed a restructuring of Corporate level staffing.
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.
/s/ J. Douglas Cagle
Chairman and C.E.O.
Date: February 11, 2004
Certifications
I, J. Douglas Cagle, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cagle's, Inc.
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
issuer 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 we have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the issuer, including its consolidated subsidiaries,
is made known to them by others within those entities, particularly during
the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the issuer's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report ("Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on their evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
their most recent evaluation, to the issuer's auditors and the audit committee
of the board of directors:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to record, process,
summarize and report financial data and have identified for the issuer'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 issuer's internal controls; and
6. The registrant's other certifying officers and I have indicated in the
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of their most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ J. Douglas Cagle
Chief Executive Officer
Date: February 11, 2004
I, George L. Pitts, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cagle's, Inc.
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
issuer 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 we have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the issuer, including its consolidated subsidiaries,
is made known to them by others within those entities, particularly during
the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the issuer's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report ("Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on their evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
their most recent evaluation, to the issuer's auditors and the audit committee
of the board of directors:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to record, process,
summarize and report financial data and have identified for the issuer'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 issuer's internal controls; and
6. The registrant's other certifying officers and I have indicated in the
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of their most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ George L. Pitts
Secretary (cfo)
Date: February 11, 2004