Item 1: 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 operations. 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.
Dispositions
The company sold its 30% interest in an unconsolidated affiliate for $28 million on August 15, 2006 and recorded a gain of $18.3 million as other income.
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 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 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 2.2 million birds per week in its two processing plants. Of the Company's total production, approximately 600,000 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 the Company's hatchery, and in three weeks, a baby chick is hatched.
The day-old broiler chick is placed on a farm where it will grow for five to six weeks depending upon the size of bird desired, at which time it is transported to the processing plant for slaughter. A significant investment in field inventories is required to support the Company's operating cycle.
All feed for all flocks is produced in a feed mill owned by the Company. The Company's goal is to add value to all of its birds. This value-added product can take the form of seasoned deli products, deboned breast and thigh meat, cut-up marinated raw breaded chicken, 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 1,794 persons of whom approximately 32% are covered by a collective bargaining agreement. 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 largest customer represented 12%, 12%, and 14%, of net sales during fiscal 2008, 2007, and 2006, respectively. The Company also had sales in 2008 to another customer which represented 5% of net sales. The Company also had sales in 2007 to another customer which represented 6% of net sales.
Backlog
The Company had no material backlog of orders existing as of March 29, 2008.
Competition
The Company is a leading regional integrated poultry processor. 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 small bird focus, 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 1A:
Item 1A: Risk Factors
Risk Factors: Industry cyclicality can affect our earnings, especially due to fluctuations in commodity prices of feed ingredients and chicken. Profitability in the chicken industry is materially affected by the commodity prices of chicken and feed ingredients, which are determined by supply and demand factors, which result in cyclical earnings fluctuations. The production of feed ingredients is positively or negatively affected primarily by weather patterns throughout the world, the global level of supply inventories and demand for feed ingredients, and the agricultural policies of the United States and foreign governments. In particular, weather patterns often change agricultural conditions in an unpredictable manner. A sudden and significant change in weather patterns could affect supplies of feed ingredients, as well as both the industry’s and our ability to obtain feed ingredients, grow chickens and deliver product. High feed ingredient prices have had a material adverse effect on our operating results in the past. We periodically seek, to the extent available, to enter into advance purchase commitments for the purchase of feed ingredients and enter into futures contracts, in an effort to manage our feed ingredient costs. The use of such instruments may not be successful.
Feed Ingredients: Feed ingredient cost increased 31.5% for fiscal 2008 reflected as a $23.5 million increase in cost of sales as compared to the previous year. The Company’s cost to acquire feed ingredients may continue to increase. However, in the long term, the protein sector of the food industry will be forced to pass the cost of our raw materials to the final consumer increasing our sales price per pound and related revenue as well as our operating margins. We expect the increased cost of ingredients, principally corn, to continue and will utilize substitute ingredients as available and as determined through feed optimization programs to mitigate the impact of the increased corn cost.
The Company may choose to utilize derivatives as offered on the Chicago Board of Trade for the purpose of protecting the feed cost for fixed price sales commitments negotiated with our customers. The Company’s two primary feed ingredients are corn and soybean meal. A $.10 per bushel price change in corn or a $10 per ton price change in soybean meal impacts our cost of sales $1 million dollars per year.
Leverage. Our indebtedness could adversely affect our financial condition. We presently have, and expect to continue to have, an amount of indebtedness. Our indebtedness could have important consequences to stockholders. For example, it could: increase our vulnerability to general adverse economic conditions; require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and for other general corporate purposes; limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; place us at a competitive disadvantage compared to our competitors that have less debt; and limit, along with the financial and other restrictive covenants in our indebtedness, our ability to borrow additional funds, and failure to comply with those covenants could result in an event of default or require redemption of indebtedness. Any of these events could have a material adverse effect on us. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future, which is dependent on various factors. These factors include the commodity prices of feed ingredients and chicken and general economic, financial, competition, legislative, regulatory and other factors that are beyond our control.
Additional Borrowings Available. Despite our indebtedness, we are not prohibited from incurring additional indebtedness in the future.
Interest Rates. We currently have a term note with no exposure to interest rate fluctuations, as our existing indebtedness carries a fixed interest rate. We have a revolving credit facility which carries a variable interest rate equal to the 90-day LIBOR rate published by the Wall Street Journal, plus 2.5%.
The Company had variable interest rate exposure at March 29, 2008. The Company's theoretical interest rate exposure on variable rate borrowings at March 29, 2008, would be, with a one percentage point increase in average interest rates on the Company's borrowings would increase future interest expense by $833 dollars per month and a point five percentage point increase would increase future interest expense by $416 dollars per month. The Company determined these amounts based on $1 million of theoretical variable rate borrowings at March 29, 2008, multiplied by 1.0% and .5%, respectively, and divided by twelve. The Company is currently not using any interest rate collars, hedges or other derivative financial instruments to manage or reduce interest rate risk. As a result, any increase in interest rates on the Company's variable rate borrowings would increase interest expense and reduce net income.
Contamination of Products. If our products become contaminated, we may be subject to product liability claims and product recalls.
Livestock and Poultry Disease. Outbreaks of livestock diseases in general and poultry disease in particular, which are beyond our control, can significantly restrict our ability to conduct our operations. We take all reasonable precautions to ensure that our flocks are healthy and that our processing plants and other facilities operate in a sanitary and environmentally sound manner. However, an outbreak of disease could result in governmental restrictions on the import and export of our fresh chicken, to or from our suppliers, facilities or customers, or require us to destroy one or more of our flocks. This could result in the cancellation of orders by our customers and create negative publicity that may have a material adverse effect on our ability to market our products successfully and on our business, reputation and prospects.
Insurance. We are exposed to risks relating to product liability, product recall, property damage and injuries to persons for which insurance coverage is expensive, limited and potentially inadequate.
Significant Competition. Competition in the chicken industry with other vertically integrated poultry companies could adversely affect our business. The Company produces a smaller bird which differentiates it from the majority of its competitors.
Government Regulation. Regulation, present and future, is a constant factor affecting our business. The chicken industry is subject to federal, state and local governmental regulation, including health and environmental areas. We anticipate increased regulation by various agencies concerning food safety, the use of medication in feed formulations and the disposal of poultry by-products and wastewater discharges. Unknown matters, new laws and regulations, or stricter interpretations of existing laws or regulations may materially affect our business or operations in the future.
Cautionary Statements Relevant To Forward-Looking Information For The Purpose Of "Safe Harbor" Provisions Of The Private Securities Litigation Reform Act Of 1995
The Company and its representatives may from time to time make written or oral forward-looking statements, including forward-looking statements made in this report, with respect to their current views and estimates of future economic circumstances, industry conditions, Company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company's actual results and experiences to differ materially from the anticipated results and expectations, expressed in such forward-looking statements. The Company wishes to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Among the factors that may affect the operating results of the Company are the following: (1) fluctuations in the cost and availability of raw materials, such as feed grain costs; (2) changes in the availability and relative costs of labor and contract growers; (3) operating efficiencies of facilities; (4) market conditions for finished products, including the supply and pricing of alternative proteins; (5) effectiveness of marketing programs and advertising; (6) risks associated with leverage, including cost increases due to rising interest rates; (7) risks associated with effectively evaluating derivatives and hedging activities; (8) changes in regulations and laws, including changes in accounting standards, environmental laws and occupational, health and safety laws; (9) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (10) adverse results from on-going litigation; (11) access to foreign markets together with foreign economic conditions, including currency fluctuations and import/export restrictions; (12) the effect of, or changes in, general economic conditions; and (13) financial risk management . We undertake no obligation to revise or update any forward-looking statements for any reason.
Item 1B.
Item 1B.Unresolved Staff Comments
Not applicable.
Item 2:
Item 2: Properties
Production and Facilities
Breeding and Hatching
The Company supplies its broiler chicks by producing hatching eggs from breeder flocks owned by the Company. These breeder flocks are maintained on 44 contract grower farms. In addition, the replacement breeder pullets are maintained on 16 contract grower farms where the breeders are reared from one day old to approximately 21 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 and Tennessee.
The Company owns a hatchery located in Dalton, 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 vaccinated against disease and moved by an environmentally controlled vehicle, to the Company's grow-out farms.
The hatchery has an aggregate capacity of 2,921,832 eggs per week.
Grow-Out
The Company places its broiler chicks on approximately 150 contract grower farms.
The independent contract growers provide the housing, equipment, utilities, and labor to grow the baby chicks to market age, which varies from five to six 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 and Alabama.
Feed Mill
The Company owns a feed mill in Rockmart, Georgia which has production capacity of over 15,000 tons per week which can be increased to 20,000 tons per week with additional equipment.
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 Valley, Georgia; and Collinsville, Alabama. The Collinsville plant can process up to 21,000 birds per hour. The Pine Mountain plant has the capacity to process 10,800 birds per hour.
Further Processing and Deboning
The Company has a stated goal of marketing the majority of its product as value-added product consisting of marinated rotisserie deli, fast-food cuts, boneless portioned breast, marinating and breading parts, individual quick frozen parts, and other convenience-type products. Further processing is conducted at the Collinsville, Alabama, and Pine Mountain Valley, Georgia plants.
Freezer Storage
The Company's facilities located in Atlanta, Georgia; Collinsville, Alabama; and Pine Mountain Valley, Georgia; have freezer storage facilities with aggregate capacity of approximately 14,000,000 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’s sales division, local distribution is operated from warehouse facilities in Atlanta, Georgia and Collinsville, Alabama, and are designed to provide storage and delivery service for those customers.
Executive Offices
The Company's executive offices are located in a company owned facility at 2000 Hills Avenue, NW, Atlanta, Georgia.
All of the properties described above are in good condition and are adequate for their stated uses.
Item 3:
Item 3: Legal Proceedings
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:
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 2008.
Item 4A: 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 11, 2008 and is incorporated herein by reference.
PART II
Item 5:
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is listed and principally traded on the American Stock Exchange, ticker symbol CGLA. As of March 29, 2008, there were 132 stockholders of record of the Company’s Class A common stock. Under current loan agreements, issuance of dividends must be consented to by debt holders.
Quarterly dividend data and market highs and lows for the past two years were:
Item 6:
Item 6: Selected Consolidated Financial Data
Notes to selected financial data:
Fiscal year 2008
Revenues increased by 21.2% as compared to 2007. This increase can be attributed to two factors. A 3.2% increase in production tonnage as compared to 2007 and an increase in our average selling price of .075 cents per pound as compared to 2007.
Debt increased by $4.6 million in 2008, as compared to 2007. This was due to borrowings in the fourth quarter, caused by increases in grain and energy costs. Interest expense was reduced by 27.8% as compared to 2007, the result of reduced borrowings for the first three quarters of 2008.
Cost of sales increased 15.4% as compared to 2007, and can be attributed to increased grain and energy costs.
Selling, general and administrative costs were $15.0 million for the year as compared to $14.3 million in fiscal 2007 representing an increase of 5.0%. The increase is the result of increased energy costs, higher professional fees incurred in complying with Section 404(a) of the Sarbanes-Oxley Act of 2002 and outside storage costs experienced as one of our freezers was being reworked.
Fiscal year 2007
Debt was reduced by $10.9 million in 2007. Interest expense was reduced by 14.7% as compared to 2006, the result of reduced borrowings.
Revenues declined by 1.4% as compared to 2006. This decrease can be attributed to two factors. A 3.9% decrease in production tonnage as compared to 2006 and an increase in our average selling price of .026 cents per pound as compared to 2006.
Cost of sales increased 2.3% as compared to 2006, due to a $2.13 million asset valuation adjustment to an inactive facility (noted in the Company’s second quarter 10Q). When adjusted for the inactive facility charge, cost of sales increased 1.3% versus the same period last year and can be attributed to increased grain costs.
Selling, general and administrative costs were $14.3 million for the year as compared to $12.8 million in fiscal 2006 representing an increase of 10.9%. Of the increase experienced in fiscal 2007, bad debt expense was responsible for 4.1%, salaries and benefits for 3.3% and a decrease of fees earned thorough outside accounting services had an impact of 3.2%.
The Company’s share of earnings in the unconsolidated affiliate decreased by 66.7%. This is the result of the sale of the affiliate on August 1, 2006. Other income reflects a gain of $18.3 million on the sale.
Fiscal year 2006
Revenues declined by 3.7% as compared to 2005. This decrease can be attributed to two factors. A decrease in our average selling price of 18.7% for the twelve months of 2006; quoted market prices declined approximately 20% for the same period; and a 4% increase in production tonnage for 2006 compared to 2005; this increase was impacted by a 3.6% decrease in production tonnage for the fourth quarter of 2006.
Debt was reduced by $.5 million in 2006. Interest expense was reduced in 2006 by 9% as compared to the same period a year ago.
Selling and delivery expenses increased by 13%. This increase reflects increases in fuel costs, utilities and commission expenses.
General and administrative expenses decreased by 6.54%. This decrease reflects reductions in payroll costs, legal fees, rental equipment and professional expenses.
The Company’s share of earnings of unconsolidated affiliates decreased by 4% due to the affiliates’ decreases in volumes processed.
Fiscal year 2005
Revenues declined by 19% as compared to 2004, but increased 29% when adjusting 2004 for the sale of the Perry complex. This increase can be attributed to an increase in tonnage at our remaining facilities and higher market prices in the first half of 2005.
Debt was reduced by $7.5 million in 2005, this with the reduction of $48 million in debt in the fourth quarter of 2004, reduced interest expense by $4.4 million for the year.
Selling and delivery expenses decreased by 20%, or 6% when adjusting 2004 for the sale of the Perry complex. This decrease reflects reductions in payroll costs, rental expenses, outside storage cost and commission expenses, which overshadowed increases in freight and fuel costs.
General and administrative expenses decreased by 31%, or 23% when adjusting 2004 for the sale of the Perry complex. This decrease reflects reductions in payroll costs, legal fees, and professional expenses.
The Company’s share of earnings of unconsolidated affiliates increased by 22% due to the affiliates’ increases in volumes processed.
Fiscal year 2004
Revenues declined by 3.0% as compared to 2003 and can be attributed to lower tonnage sold because of the sale of the Perry plant and the closing of a shift at another processing plant.
The Company’s share of earnings of unconsolidated affiliates declined by $1.1 million as a result of the closure and sale of assets of Franklin Poultry Equipment, LLC in October 2003. The Company’s share of earnings was reported in this classification until the month of sale.
The Company acquired a new $20 million credit facility in fiscal 2004, and in the process retired $60 million of short term debt.
The Company’s working capital increased primarily because of the retirement of short-term debt.
Item 7:
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand Cagle’s Inc., our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes (“Notes”).
General
We are in a highly stratified industry with the top five producers accounting for 63 percent of poultry production in this country and the next fifteen accounting for 30 percent. Our company currently produces ready to cook product of 6.7 million pounds per week, placing it in the top twenty integrated broiler companies ranked by ready to cook pounds. Cagle’s produces a product which differentiates itself from the average broiler company; as industry live weights approach 6 pounds per head, and our birds weigh approximately 4 pounds per head. While this difference impacts the fixed cost per unit of our operations, we believe it serves our company by allowing us to compete for a value added customer profile namely the fast-food, institutional, and deli markets. We believe this is a market segment that we excel in and can provide our customers with distinctive, quality product to fit their needs at margins necessary to offset the higher cost per unit brought about by the smaller live weight.
For the fiscal year ending 2008 the Company reported a loss of ($0.77) million or ($0.17) per diluted share compared to a profit of $.56 million or $0.12 per diluted share for fiscal 2007.
Net sales for fiscal 2008 were $283.6 million as compared to $233.9 for fiscal 2007. Poultry sales pounds for the year increased 5.94% coupled with an average price per pound increase of 11.2% when compared to fiscal 2007. Fiscal 2008 market prices compared to fiscal 2007 for boneless breast, leg quarters, wings, and boneless thighs were +12.8%, +36.5%,+22.0%, +29.3% respectively. As a company we continue to focus on niche markets where we can react to our customer needs in a quick and efficient manner. Given our bird size and production facilities we continue to exploit our expertise in the deli/fast food arena.
Cost of production for fiscal 2008 was $268.9 million compared to $232.3 million in fiscal 2007 an increase of 15.8%. Feed prices which account for approximately 36.5% of our total cost increased 31.5% for the year reflected as a $23.5 increase in cost of sales. In general a $.10 per bushel price change in corn or a $10 per ton price change in soybean meal impacts our cost of sales by $1 million dollars per year. Our workforce is made up of 1,794 dedicated employees who are encouraged to freely share suggestions to improve all phases of our operations. We stress safety in our operations as reflected by current results of 3.7 million man hours without a lost time accident in our Alabama facility and over 3.5 million miles driven by our transportation group without a preventable DOT chargeable accident. Our injury and illness rates are consistently 20% to 30% below industry averages.
Selling, general and administrative costs were $15.0 million for the year as compared to $14.3 million in fiscal 2007 representing an increase of 5.0%. The increase is the result of increased energy costs, higher professional fees incurred in complying with Section 404(a) of the Sarbanes-Oxley Act of 2002 and outside storage costs experienced as one of our freezers was being reworked.
Interest expense of $1.5 million reflects a 27.8% decline in fiscal 2008 as a result of lower debt obligations.
Financially our company remains strong. At the end of our fiscal year our stockholder’s equity was $44.8 million with a net working capital of $20.2 million. Total debt of $23.2 million reflected an increase of 24.7% or $4.6 million this fiscal year to support higher inventory values brought about by increased feed ingredient costs. Our Company and the protein industry in general will continue to be challenged to increase market prices at a pace equal to, or greater than, our cost of feed and as a result we no longer offer flat price sales contracts that can not be price-protected for grain cost increases. We continue to explore capital opportunities that will improve operational efficiencies and product quality to insure our ability to provide excellent service to our customers at a competitive price. It is our expectation that capital expenditures will be funded by cash on hand and cash generated through operations.
Year 2008 compared to 2007
The Company had available $3.3 million (unused) in established lines of credit as of March 29, 2008 and $10 million (unused) in availability as of March 31, 2007. Interest expense was reduced in 2008 by $429 thousand, a 21% reduction, as compared to the same period a year ago.
Poultry pounds produced for the 2008 were 3% greater than 2007, pounds marketed increased by 5.9% and sales revenue increased 21%.
Cost of sales increased 15.8% as compared to 2007, after adjusting 2007 for an asset valuation adjustment to an inactive facility, cost of sales increased 16.8%.
Selling, general and administrative costs compared to 2007 increased by 5%. This increase is the result of increased energy costs, higher professional fees incurred in complying with Section 404(a) of the Sarbanes-Oxley Act of 2002 and outside storage costs experienced as one of our freezers was being reworked.
Year 2007 compared to 2006
The Company had available $10 million (unused) in established lines of credit as of March 31, 2007 and $10 million (unused) in availability as of April 1, 2006. Interest expense was reduced in 2007 by $353 thousand, a 14.7% reduction, as compared to the same period a year ago.
Poultry sales for the year were basically unchanged correlated to a reduction in pounds marketed of 3.9% and an increase in average market price of 4.1%.
Cost of sales increased 2.3% as compared to 2006, due to a $2.13 million asset valuation adjustment to an inactive facility (noted in the Company’s second quarter 2007 10Q). When adjusted for the inactive facility charge, cost of sales remained relatively flat with an increase of 1.3% versus the same period last year.
Selling, general and administrative costs were $14.3 million for the year as compared to $12.8 million in fiscal 2006 representing an increase of 10.9%. Of the increase experienced in fiscal 2007 bad debt expense was responsible for 4.1%, salaries and benefits for 3.3% and a decrease of fees earned thorough outside accounting services had an impact of 3.2%.
The Company’s share of earnings in the unconsolidated affiliate decreased by 66.7% (due to the sale of the affiliate on August 1, 2006).
Income taxes were adjusted as a result of the sale of the unconsolidated affiliate. This transaction changed the income tax position of the Company. As a result of the loss of the continuing income from the subsidiary, certain recoverable state tax assets which could expire before being realized were adjusted.
Year 2006 compared to 2005
The Company had available $10 million (unused) in established lines of credit as of April 1, 2006 versus $14 million (unused) in availability as of April 2, 2005. Interest expense was reduced in 2006 by $242 thousand, a 9% reduction, as compared to the same period a year ago.
Revenues declined by 3.7% as compared to 2005. This decrease can be attributed to two factors. A decrease in our average selling price of 18.7% for the twelve months of 2006; quoted market prices declined approximately 20% for the same period; and a 4% increase in production tonnage for 2006 compared to 2005. This increase was impacted by a 3.6% decrease in production tonnage for the fourth quarter of 2006.
Gross margins were 4.3% for 2006 as compared to 11.9% for 2005. Fiscal 2005 gross margins were impacted by settlements received by the Company as a result of litigation involving manufacturers of vitamins utilized in the feeding of our live birds in the amount of $43 thousand. When this settlement is removed, the gross margin was 11.9% for 2005. The deterioration from 2006 to 2005 is due primarily to market price pressures caused by overproduction by the industry and the impact of avian influenza on export markets. This caused the lowest breast market pricing in recent history and created an abundance of freezer stocks; at the same time energy costs experienced recent historical highs. Freight costs also rose dramatically toward the end of the year.
The Company has increased the capacity of its hatchery, through an addition to the existing building. During the year ended April 1, 2006, $700 thousand, funded through cash flow; was expended on this construction. This addition increased our hatchery capacity by 26%.
Finished feed costs averaged 9.89% lower than the previous year.
Selling and delivery expenses increased by 13%, as compared to 2005. This reflects increases in fuel costs, payroll costs, and commission expenses.
General and administrative expenses decreased by 6%, as compared to 2005. This decrease reflects reductions in payroll costs and professional expenses.
Other general expense is primarily from the gain on sale of fixed assets and increased by 62% as compared to 2005.
Interest expense for 2006 was 9% lower than for 2005, resulting from lower debt levels throughout the year.
Other Income/Expense is primarily from interest earned on excess cash, and increased by 16% as compared to 2005.
The Company’s share of earnings of unconsolidated affiliates decreased by 4% as compared to 2005, due to the affiliates’ decreases in volumes processed.
The Company records deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Effective in fiscal 1989, the Revenue Act of 1987 rescinded the cash-basis method of accounting for tax purposes previously used for the Company’s farming operations. Previously recorded income tax liabilities of $3.3 million were indefinitely deferred. Under tax laws enacted in 1997, such liabilities are required to be amortized into taxable income over a 20-year period. The Company has federal and state tax credit carryforwards of $10.9 million, which are available to reduce income taxes through 2015. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Due to the significant amount of income that would be needed to fully utilize the credits available, the Company has recorded a valuation allowance for a significant portion of the deferred tax asset associated with the tax credit carryforwards.
Financial condition & liquidity
Analysis of cash flows
We expect that cash flow from operations and cash on hand will be sufficient to fund operations, to make all payments of principal and interest when due, and to fund capital expenditures for at least the next twelve months.
For the year ended March 29, 2008, the Company used cash in its operating activities of $3.2 million, due primarily to the increase in inventories , which resulted from increases in grain costs. Cash was used in investing activities, in the amount of $3.5 million, to purchase property, plant and equipment. Cash was provided by financing activities by drawing on lines of credit in the amount of $4.4 million.
For the year ended March 31, 2007, the Company used cash in its operating activities of $12.2 million, due primarily to the operating loss during the year. Cash was provided from investing activities, in the amount of $26 million, due primarily from the cash received from the sale of an affiliate. Cash flow used in financing activities of $11.4 million reflects the retirement of long-term debt.
For the year ended April 1, 2006, the Company provided cash from operating activities of $2.7 million, due primarily to a reduction in accounts payables and to non-cash charges of depreciation and amortization. Cash used in investing activities of $2.0 million is primarily due to the acquisition of property, plant and equipment. Cash flow used in financing activities of $.5 million reflects the retirement of long-term debt.
Tabular disclosure of contractual obligations
Contractual obligations at March 29, 2008 were as follows: (In Thousands)
Critical accounting policies and estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. The following accounting policies involve “critical accounting estimates” because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. In addition, while we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used in the current period, or changes in the accounting estimates we used are reasonably likely to occur from period to period which may have a material impact on the presentation of our financial condition and results of operations. We review these estimates and assumptions periodically and reflect the effects of revisions in the period that they are determined to be necessary. We believe the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue recognition
The Company recognizes revenue upon product shipment and transfer of title and risk of loss to the customer. Revenue is recorded net of any discounts, allowances or promotions. Estimates for any special pricing arrangements, promotions or other volume-based incentives are recorded upon shipment of the product in accordance with the terms of the promotion, allowance or pricing arrangements. Shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations.
Allowance for Doubtful Accounts.
We maintain allowances for doubtful accounts reflecting estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on management’s review of the overall condition of accounts receivable balances and review of significant past due accounts. If the financial condition of our customers was to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Due to the nature of the industry and the short-term nature of these accounts, there have not been material revisions in these estimates of management.
Inventories.
Live bird and hatching egg inventories are stated at cost and breeder hens are stated at cost, less accumulated amortization, consistent with industry standards. The costs associated with breeder hens are accumulated up to the production stage and amortized over the productive lives using the unit-of-production method. Finished poultry products, feed, and other inventories are stated at the lower of cost or market. We record valuations and adjustments for our inventories and for estimated obsolescence at or equal to the difference between the cost of the inventories and the estimated market value based upon known conditions affecting the inventories’ obsolescence, including significantly aged products, discontinued product lines, or damaged or obsolete products. We allocate meat costs between our various finished poultry products based on a by-product costing technique that reduces the cost of the whole bird by estimated yields and amounts to be recovered for certain by-product parts, which are carried in inventories at the estimated recovery amounts, with the remaining amount being reflected at cost or market, whichever is lower. For inventory valuation purposes, costs include live production costs (principally feed, chick cost, medications and other raw materials), labor and production overhead. Not all broilers and breeders survive to maturity or disposition; normal losses are not expensed directly because total costs of the project are assigned to the survivors. The Company would record adjustments to reduce the values of processed poultry and feed inventories to fair market values if market prices for poultry or feed grains moved substantially lower, this would increase our cost of sales. The Company has not experienced material revisions to its inventory costs.
Property, Plant and Equipment.
The Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The impairment charge is determined based upon the amount the net book value of the assets exceeds their fair market value. In making these determinations, the Company utilizes certain assumptions, including, but not limited to: (i) future cash flows estimates expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service the asset will be used in the Company’s operations, and estimated salvage values, and (ii) estimated fair market value of the assets.
Contingent liabilities.
The Company is subject to lawsuits, investigations and other claims related to wage and hour/labor, securities, environmental, product and other matters, and is required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after considerable analysis of each individual issue. These reserves may change in the future due to changes in the Company’s assumptions, the effectiveness of strategies, or other factors beyond the Company’s control.
Accrued Self Insurance.
Insurance expense for casualty claims and employee-related health care benefits is estimated using historical experience and actuarial estimates. Stop-loss coverage is maintained with third party insurers to limit the Company’s total exposure. Certain categories of claim liabilities are actuarially determined. The assumptions used to arrive at periodic expenses are reviewed regularly by management. However, actual expenses could differ from these estimates and could result in adjustments to be recognized.
Income Taxes.
We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires that deferred tax assets and liabilities be recognized for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. We review the recoverability of any tax assets recorded on the balance sheet, primarily operating loss carry forwards, based on both historical and anticipated earnings levels of operations and provide a valuation allowance when it is more likely than not that amounts will not be recovered.
In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. The Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109,” on April 1, 2007. FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax provision is required to meet before being recognized in the consolidated financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, disclosure and transition. The Company had no significant unrecognized tax benefits at the date of adoption or at March 29, 2008. Accordingly, the Company does not have any interest or penalties related to uncertain tax positions. However, if interest or penalties were to be incurred related to uncertain tax positions, such amounts would be recognized in income tax expense.
New Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” - an amendment of Accounting Research Bulletin (“ARB”) No. 51. This statement amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year ends). Earlier adoption is prohibited. The Company’s management does not anticipate that this pronouncement will have a significant impact on the consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” - an amendment of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 161 is intended to improve financial reporting transparency regarding derivative instruments and hedging activities by providing investors with a better understanding of their effects on financial position, financial performance and cash flows. SFAS No. 161 applies to all entities and is effective for consolidated financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early adoption encouraged. The Company’s management does not anticipate that this pronouncement will have a significant impact on the consolidated financial statements.
Item 7A:
Item 7A: Quantitative and Qualitative Disclosures about Market Risk
Risk Factors
Industry cyclicality can affect our earnings, especially due to fluctuations in commodity prices of feed ingredients and chicken.
Profitability in the chicken industry is materially affected by the commodity prices of chicken and feed ingredients, which are determined by supply and demand factors, which result in cyclical earnings fluctuations. The production of feed ingredients is positively or negatively affected primarily by weather patterns throughout the world, the global level of supply inventories and demand for feed ingredients, and the agricultural policies of the United States and foreign governments. In particular, weather patterns often change agricultural conditions in an unpredictable manner. A sudden and significant change in weather patterns could affect supplies of feed ingredients, as well as both the industry’s and our ability to obtain feed ingredients, grow chickens, and deliver products. High feed ingredient prices have had a material adverse effect on our operating results in the past. We periodically seek, to the extent available, to enter into advance purchase commitments for the purchase of feed ingredients in an effort to manage our feed costs. The use of such instruments may not be successful.
Leverage.
Our indebtedness could adversely affect our financial condition. We presently have, and expect to continue to have, an amount of indebtedness. Our indebtedness could have important consequences to stockholders. For example, it could: increase our vulnerability to general adverse economic conditions; require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and for other general corporate purposes; limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; place us at a competitive disadvantage compared to our competitors that have less debt; limit, along with the financial and other restrictive covenants in our indebtedness, our ability to borrow additional funds, and failing to comply with those covenants could result
in an event of default or require redemption of indebtedness. Either of these events could have a material adverse effect on us. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future, which is dependent on various factors. These factors include the commodity prices of feed ingredients and chicken and general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.
Additional Borrowings Available.
Despite our indebtedness, we are not prohibited from incurring additional indebtedness in the future.
Contamination of Products.
If our products become contaminated, we may be subject to product liability claims and product recalls.
Livestock and Poultry Disease.
Outbreaks of livestock diseases, in general, and poultry disease, in particular, can significantly restrict our ability to conduct our operations. We take all reasonable precautions to ensure that our flocks are healthy and that our processing plants and other facilities operate in a sanitary and environmentally sound manner. However, events beyond our control, such as the outbreak of disease, could significantly restrict our ability to conduct our operations. Furthermore, an outbreak of disease could result in governmental restrictions on the import and export of our fresh chicken, to or from our suppliers, facilities, or customers, or require us to destroy one or more of our flocks. This could result in the cancellation of orders by our customers and create adverse publicity that may have a material adverse effect on our ability to market our products successfully and on our business, reputation, and prospects.
Insurance.
We are exposed to risks relating to product liability, product recall, property damage, and injuries to persons for which insurance coverage is expensive, limited, and potentially inadequate.
Market-Sensitive Derivatives and Financial Instruments
Commodity futures and swap contracts are used to manage cost exposures on certain raw material purchases resulting in relatively stable costs for these commodities. The Company does not consider commodity price risk to be material to consolidated financial position, results of operations or cash flows.
Significant Competition.
Competition in the chicken industry with other vertically integrated poultry companies could adversely affect our business.
Government Regulation.
Regulation, present and future, is a constant factor affecting our business. The chicken industry is subject to federal, state, and local governmental regulation, including health and environmental areas. We anticipate increased regulation by various agencies concerning food safety, the use of medication in feed formulations, and the disposal of poultry by-products and wastewater discharges. Unknown matters, new laws and regulations, or stricter interpretations of existing laws or regulations may materially affect our business or operations in the future.
Forward-Looking Statements
This Annual Report, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. These statements are based on current expectations, estimates, forecasts, and projections about the industry in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Readers are referred to risks and uncertainties identified above, under “Risk Factors,” and elsewhere herein. We undertake no obligation to revise or update any forward-looking statements for any reason.
Item 8:
Item 8: Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Board of Directors
Cagle’s, Inc. and Subsidiary
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of Cagle’s, Inc. (a Georgia corporation) and Subsidiary as of March 29, 2008 and March 31, 2007, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended March 29, 2008, March 31, 2007 and April 1, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cagle’s, Inc. and Subsidiary as of March 29, 2008 and March 31, 2007, and the consolidated results of their operations and their cash flows for the years ended March 29, 2008, March 31, 2007 and April 1, 2006 in conformity with accounting principles generally accepted in the United States of America.
Independent Registered Public Accounting Firm
Moore, Stephens Frost
Little Rock, Arkansas
May 30, 2008
CAGLE’S, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 29, 2008 and March 31, 2007
(In Thousands, Except Par Values)
CAGLE’S, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Years Ended March 29, 2008, March 31, 2007 and April 1, 2006
(In Thousands, Except Per Share Data)
CAGLE’S, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders’ Equity
For the Years Ended March 29, 2008, March 31, 2007 and April 1, 2006
(In Thousands)
CAGLE’S, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Years Ended March 29, 2008, March 31, 2007 and April 1, 2006
(In Thousands)
CAGLE’S, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 29, 2008, March 31, 2007 and April 1, 2006
(In Thousands)
1. Summary of Significant Accounting Policies
a. Principles of consolidation - The consolidated financial statements include the accounts of Cagle’s, Inc. and its wholly-owned subsidiary Cagle Farms, Inc. (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated. Investments in unconsolidated affiliates have historically been accounted for under the equity method.
b. Nature of operations - The Company operates as a vertically integrated poultry processor with operations located in the southeastern United States, consisting of breeding, hatching and growing chickens; feedmill; processing; further processing and marketing operations. The Company’s products are primarily sold in the United States to supermarkets, food distributors, food processing companies, national fast-food chains and institutional users.
Integrated poultry processors operate in an environment wherein the commodity nature of both their products for sale and their primary raw materials causes sales prices and purchase costs to fluctuate, often on a short-term basis, due to the worldwide supply and demand situation for those commodities. The supply and demand factors for their products for sale and the supply and demand factors for their primary raw materials correlate to a degree, but are not the same, thereby causing margins between sales price and production costs to increase, to decrease, or to invert, often on a short-term basis.
The Company operates in one segment, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosure About Segments of an Enterprise and Related Information.”
c. Revenue recognition - The Company recognizes revenue upon product shipment and transfer of title and risk of loss to the customer. Revenue is recorded net of any discounts, allowances or promotions. Estimates for any special pricing arrangements, promotions or other volume-based incentives are recorded upon shipment of the product in accordance with the terms of the promotion, allowance or pricing arrangements.
d. Cash equivalents - For the purposes of the consolidated statements of cash flows, the Company considers all highly liquid cash investments purchased with an original maturity of three months or less to be cash equivalents.
e. Accounts and note receivable - In the normal course of business, the Company extends credit to its customers on a short-term basis. Although credit risks associated with its customers are considered minimal, the Company routinely reviews its accounts receivable balances and makes provisions for probable doubtful accounts. Past due status is determined based upon contractual terms. In circumstances where management is aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve is recorded to reduce the receivable to the amount expected to be collected. Amounts that are determined to be uncollectible are written off against this allowance when collection attempts on the accounts have been exhausted. Management uses significant judgment in estimating uncollectible accounts. In estimating uncollectible amounts, management considers factors such as current overall economic conditions, industry-specific economic conditions and historical customer performance. While management believes the Company’s processes effectively address its exposure to doubtful accounts, changes in economic, industry or specific customer conditions may require adjustment to the allowance recorded by the Company.
In connection with certain transactions in the normal course of business, the Company has extended credit in the form of notes receivable. Interest income is recognized as earned only on notes when collectibility is reasonably assured. Generally, there are no fees or costs associated with such notes. Management utilizes the same factors in determining uncollectible amounts for notes and accounts receivable. Past due status is based upon contractual terms.
f. Inventories - Live bird and hatching egg inventories are stated at cost and breeder hens are stated at cost, less accumulated amortization, consistent with industry standards. The costs associated with breeder hens are accumulated up to the production stage and amortized over the productive lives using the unit-of-production method. Finished poultry products, feed, and other inventories are stated at the lower of cost or market. The Company records valuations and adjustments for its inventories and for estimated obsolescence at or equal to the difference between the cost of the inventories and the estimated market value based upon known conditions affecting the inventories’ obsolescence, including significantly aged products, discontinued product lines, or damaged or obsolete products. The Company allocates meat costs between its various finished poultry products based on a by-product costing technique that reduces the cost of the whole bird by estimated yields and amounts to be recovered for certain by-product parts, which are carried in inventories at the estimated recovery amounts, with the remaining amount being reflected at cost or market, whichever is lower. For inventory valuation purposes, costs include live production costs (principally feed, chick cost, medications and other raw materials), labor and production overhead. Not all broilers and breeders survive to maturity or disposition; normal losses are not expensed directly because total costs of the project are assigned to the survivors. The Company would record adjustments to reduce the values of processed poultry and feed inventories to fair market values if market prices for
poultry or feed grains moved substantially lower, this would increase the Company’s cost of sales. The Company did not experience material revisions to its inventory costs during 2008, 2007 or 2006. Inventories at March 29, 2008 and March 31, 2007 consist of the following:
g. Property, plant and equipment - Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the following lives:
Maintenance and repairs are charged to expense as incurred. Major additions and improvements of existing facilities are capitalized. For retirements or sales of property, the Company removes the original cost and the related accumulated depreciation from the accounts and the resulting gain or loss is reflected in other income (expense), net in the accompanying consolidated statements of operations.
h. Deferred financing costs - Deferred financing costs are amortized over ten years. Deferred financing costs are shown net of accumulated amortization on the accompanying consolidated balance sheets.
i. Employee insurance claims - The Company is self-funded under a minimum premium arrangement for the majority of employee claims under its group health plan. From May 1992, the union employees of the Company were covered for health insurance under a union health plan. Starting in January 2003, these employees began receiving health insurance coverage under the Company-sponsored plan. The Company is self-insured for the majority of its workers’ compensation risks. The Company’s insurance programs are administered by risk management specialists. Insurance coverage is obtained for catastrophic workers’ compensation and group health exposures, as well as those risks required to be insured by certain state laws. The Company’s accrual for group health and workers’ compensation liabilities of $1,229 and $1,437 as of March 29, 2008 and March 31, 2007, respectively, is included in accrued expenses in the accompanying consolidated balance sheets. These accruals are estimated using historical experience and actuarial estimates. No post-employment benefits are provided under the Company’s group health plan.
j. Operating leases - The Company accounts for operating lease agreements in accordance with SFAS No. 13, “Accounting for Leases,” and Financial Accounting Standards Board (“FASB”) Technical Bulletin No. 85-3, “Accounting for Operating Leases with Scheduled Rent Increases.” Currently, the Company has not entered into any operating lease agreements which contain escalating rent provisions. Accordingly, rent expense is recognized on a straight-line basis. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the lease term, including renewal option periods that are reasonably assured.
k. Income taxes - The Company utilizes the liability method of accounting for deferred income taxes. The liability method provides deferred taxes on the consolidated balance sheet for the temporary differences between financial statement and income tax return basis of assets and liabilities as of the fiscal year-end date at the presently enacted tax rates.
l. Earnings per share - Net income amounts presented in the accompanying consolidated statements of operations represent amounts available to common stockholders. The following table reconciles the denominator of the basic and diluted earnings per share computations:
m.Fiscal year - The Company’s fiscal year closing date is the Saturday nearest March 31. The years ended March 29, 2008, March
31, 2007 and April 1, 2006 include operations for 52-week periods.
n. Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
o. Fair value of financial instruments - The book values of cash, trade accounts receivable, accounts payable and other financial instruments approximate their fair values principally because of the short-term maturities of these instruments. The fair value of the Company’s long-term debt is estimated based on current rates offered to the Company for debt of similar terms and maturities. Under this method, the Company’s fair value of long-term debt was not significantly different from the stated value at March 29, 2008 or March 31, 2007.
p. Accounting for the impairment of long-lived assets - SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which superseded and amended SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever triggering events or changes in circumstances indicate that the carrying amounts of any asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount the carrying amount of the assets exceeds the fair value of the assets.
Based on management’s assessment of the impairment indicators, there was one asset group which was determined to be impaired during 2007. The impairment resulted from a significant change in the physical condition and market value of the Macon facility. Consequently, the Company recognized an impairment loss in its second quarter of 2007 totaling $2,128, which represents the excess of the carrying values of the assets over their fair values, less cost to sell. The impairment loss was recorded as a component of cost of sales in the accompanying consolidated statements of operations for the year ended March 31, 2007. Based upon management’s assessment of the impairment indicators for the remaining assets, management determined that upon testing the expected future net cash flows to be generated from these assets, no other impairment losses had occurred in the fiscal years ended 2008, 2007 or 2006.
q. Shipping and handling costs - Shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations and totaled $12,811, $12,078 and $9,651 in fiscal years 2008, 2007 and 2006, respectively.
r. Financial instruments - The Company is a purchaser of certain commodities, such as corn and soybean meal in the course of normal operations. The Company uses derivative financial instruments to reduce its exposure to various market risks. Generally, contract terms of a hedge instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are designated and highly effective at meeting the risk reduction and correlation criteria are recorded using hedge accounting, as defined by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. If a derivative instrument is a hedge, as defined by SFAS No. 133, depending on the nature of the hedge, changes in the fair value of the instrument will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings, or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of an instrument's change in fair value will be immediately recognized in earnings as a component of cost of sales. Instruments the Company holds as part of its risk management activities that do not meet the criteria for hedge accounting, as defined by SFAS No. 133, as amended, are marked to fair value with unrealized gains or losses reported currently in earnings.
Derivative products related to grain procurement such as futures and option contracts that meet the criteria for SFAS No. 133 hedge accounting, are considered cash flow hedges, as they hedge against changes in the amount of future cash flows related to commodities sales and procurement. The Company does not purchase derivative products related to grain procurement or in excess of its physical grain consumption requirements and poultry sale expectations. The Company expects that gains totaling $430 recorded in other comprehensive income (loss) at March 29, 2008, related to cash flow hedges, will be generally recognized within the next 12 months. The Company generally does not hedge cash flows related to commodities beyond 12 months.
2. Deferred Financing Costs
3. Long-Term Debt
During 2005, the Company secured new financing through a new term loan and a revolving line of credit through a financial institution. The proceeds obtained through this financing were used to pay off previous debt obligations. During 2007, the Company entered into a new financing agreement, in which the term loan was paid off and terminated, the revolving line of credit and related interest rate were reduced, the maturity date was extended through January 24, 2010, and the restrictive covenants were relaxed. These covenants along with covenants already in place require that the Company maintain (1) a minimum fixed charge coverage ratio, as defined in the debt agreement; (2) a maximum leverage ratio; (3) an adjusted EBITDA above a specified amount; (4) capital expenditures not to exceed certain limits; (5) an actual net worth above a specified amount; and (6) a current ratio, as defined in the debt agreement. The Company was in compliance with these covenants at March 29, 2008.
In addition to the covenants described above, the Company must also comply with certain restrictive covenants associated with the term note payable. These covenants require the Company to maintain (1) a maximum leverage ratio (2) minimum fixed charge coverage ratio (3) minimum adjusted EBITDA and (4) capital expenditures not to exceed certain limits. The Company was not in compliance with these covenants at March 29, 2008, but had obtained waivers through March 31, 2009.
4. Income Taxes
The Company records deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts.
Effective in fiscal 1989, the Revenue Act of 1987 rescinded the cash-basis method of accounting for tax purposes previously used for the Company’s farming operations. Previously recorded income tax liabilities of $3,389 were indefinitely deferred. Under tax laws enacted in 1997, such liabilities are required to be amortized into taxable income over a 20-year period.
Income tax provision (benefit) is reflected in the consolidated statements of operations as follows:
A reconciliation between income taxes computed at the federal statutory rate and the Company’s income tax rate is as follows:
Components of the net deferred income tax asset (liability) at March 29, 2008 and March 31, 2007 relate to the following:
The Company has federal and state tax credit carryforwards of $10,871, which are available to reduce income taxes through 2015. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Due to the significant amount of income that would be needed to fully utilize the credits available, the Company has recorded a valuation allowance for a significant portion of the deferred tax asset associated with the tax credit carryforwards.
The Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109,” on April 1, 2007. FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax provision is required to meet before being recognized in the consolidated financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, disclosure and transition. The Company had no significant unrecognized tax benefits at the date of adoption or at March 29, 2008. Accordingly, the Company does not have any interest or penalties related to uncertain tax positions. However, if interest or penalties were to be incurred related to uncertain tax positions, such amounts would be recognized in income tax expense. Tax periods for all years after 2004 remain open to examination by federal and state jurisdictions to which it is subject.
5. Stockholders’ Equity
Beginning in 1990, the Board of Directors (the “Board”) authorized the purchase of up to $2.5 million of the Company’s stock on the open market. In February 2000, the Board increased the authorized amount to $15.0 million. Through March 29, 2008, 770,290 shares had been repurchased by the Company at a total cost of $10.1 million. The Company has accounted for these shares using the retirement method.
6. Investments in Unconsolidated Affiliates
On November 14, 1997, the Company acquired a 30% equity interest in a joint venture with its joint venture partner in Cagle Foods. During 1998, the Company contributed certain property, plant and equipment and other assets in exchange for its equity interest in the new joint venture, Cagle’s - Keystone Foods, LLC. This joint venture constructed a processing facility in Albany, Kentucky, which began limited operations in November 1998.
On August 15, 2006, the Company sold its 30% interest in Cagle’s - Keystone Foods, LLC to its joint venture partner for $28,000. This sale resulted in a gain of $18.3 million, which is recorded as other income in the accompanying consolidated statements of operations.
The Company occasionally sold eggs and broilers to and purchased processed products from unconsolidated affiliates. In addition, the Company performed certain management and administrative services for unconsolidated affiliates. Sales to, purchases from, accounts payable to and receivable from, and service fees charged to unconsolidated affiliates are summarized as follows:
The Company accounted for its investments in affiliates using the equity method. The Company’s share of affiliates’ earnings was $1.3 million and $4.0 million for fiscal years 2007 and 2006, respectively. The Company’s share of the affiliates’ earnings were based on the audited results for the period ended August 15, 2006 and the year ended December 31, 2005, adjusted for the unaudited results for interim periods.
Summarized combined unaudited balance sheet information for unconsolidated affiliates as of April 1, 2006 is as follows:
Summarized combined unaudited statements of operations information for unconsolidated affiliates for the period ended August 15, 2006 and the fiscal year 2006 is as follows:
7. Related Parties
The firm of Byrne, Davis & Hicks, P.C. in which G. Bland Byrne III, a director of the Company, is a principal, received $260, $246 and $303 during the fiscal years 2008, 2007 and 2006, respectively. The payments received are for fees incurred for legal services rendered to the Company and its subsidiaries.
8. Major Customers
The Company had sales to one individual customer, which exceeded 10% of total sales for fiscal years 2008, 2007 and 2006. Accounts receivable and sales from this customer for the years ended March 29, 2008, March 31, 2007 and April 1, 2006 were as follows:
9. Benefit Plans
Under a collective bargaining agreement, the Company contributes to a multi-employer pension plan for the benefit of certain employees who are union members. A separate actuarial valuation for this plan is not made for the Company. Accordingly, information with respect to accumulated plan benefits and net assets available for benefits is not available. Under the Employee Retirement Income Security Act of 1974, as amended in 1980, an employer, upon withdrawal from a multi-employer plan, is required, in certain cases, to continue funding its proportionate share of the plan’s unfunded vested benefits. The Company’s contribution rate is a fixed-dollar amount per eligible employee. The Company made total contributions to the union plan of $109, $119 and $134 in fiscal years 2008, 2007 and 2006, respectively.
The Company has a 401(k) retirement plan for employees not covered by a collective bargaining agreement. Under the plan, the Company matches contributions up to two percent of participating employees’ salaries. Additional contributions may be made at the discretion of the Company’s Board. The Company made matching contributions of $190, $131 and $205 in fiscal years 2008, 2007 and 2006, respectively. No discretionary Company contributions have been made to this plan.
The Company does not provide post-retirement medical or other benefits to employees.
10. Commitments and Contingencies
The Company leases certain of its buildings, equipment and vehicles under non-cancelable operating leases. The consolidated statements of operations include rental expense relating to these operating leases of $870, $1,048 and $1,052 in fiscal years 2008, 2007 and 2006, respectively.
At March 29, 2008, future minimum payments under non-cancelable operating leases were as follows:
In previous years, the Company was involved in purported class action litigation brought on by several independent growers. As of March 29, 2008, the Company continues to vigorously defend the two remaining grower lawsuits, both of which are pending on appeal, after summary judgment was granted in favor of the Company. The Company has not accrued any losses in connection with the remaining lawsuits.
The Company is involved in various legal actions arising in the normal course of business. In the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
At March 29, 2008, the Company had a total of 1,794 employees. Of this total, 1,612 are hourly workers and 182 are salaried. Approximately 32% of the Company’s hourly employees are represented by a union. None of the Company’s salaried employees are represented by a union. The existing union agreement will expire in November 2008.
11. Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade receivables or other financial instruments with a variety of customers and cash and cash investments deposited with financial institutions.
Concentrations of credit risk, with respect to accounts receivable and other financial instruments, are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading its credit risk. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs ongoing credit evaluations of its customers, but generally does not require collateral to support accounts receivable.
The Company, at various times throughout the years, maintained cash balances with certain financial institutions in excess of Federal Deposit Insurance Corporation insured limits. As of March 29, 2008 and March 31, 2007, the Company had $1,044 and $856, respectively, in financial institutions in excess of federally insured amounts.
12. Quarterly Financial Data (Unaudited)
Quarterly financial data is as follows (in thousands, except per share data):
13. New Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” - an amendment of Accounting Research Bulletin (“ARB”) No. 51. This statement amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting non-controlling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year ends). Earlier adoption is prohibited. The Company’s management does not anticipate that this pronouncement will have a significant impact on the consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” - an amendment of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 161 is intended to improve financial reporting transparency regarding derivative instruments and hedging activities by providing investors with a better understanding of their effects on financial position, financial performance and cash flows. SFAS No. 161 applies to all entities and is effective for consolidated financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early adoption encouraged. The Company’s management does not anticipate that this pronouncement will have a significant impact on the consolidated financial statements.
14. Subsequent Event
On April 30, 2008, the Company amended its revolving line of credit agreement. The amended agreement increased the facility to $17,500 and the interest rate to a variable rate equal to 3.5% over the 90-day LIBOR rate. The collateral for the facility now includes the Company’s real estate located in Atlanta, Georgia. In addition, the maturity date of the agreement is now March 31, 2011.
SCHEDULE II - Valuation and Qualifying Accounts
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in accountants and no disagreements with accountants on accounting or financial disclosure matters.
Item 9A.
Item 9A. Controls and Procedures
The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer maintains a system of internal controls and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Board of Directors, operating through its Audit Committee, which is composed entirely of independent outside directors, provides oversight to the financial reporting process.
In order to help assess the effectiveness of the Company’s internal control over financial reporting as of the end of the most recent fiscal year, management retained a Sarbanes-Oxley consultant to test the system. A number of material weaknesses were identified. Most of the weaknesses were the result of insufficient documentation of existing systems and controls related to these systems. In addition, one capital purchase which was partly paid for by an outside party was not approved through the required process, and in one case, blank check stock (prior to being imprinted with account numbers) was not properly secured. Management verified that none of the specific issues discovered affected the Company’s financial statements.
In response to these issues, senior management dedicated additional resources and took additional steps to strengthen its control processes and procedures to ensure that these internal control deficiencies do not result in a material misstatement of the Consolidated Financial Statements. Specifically, management implemented the following corrective actions as well as additional procedures:
• Revised standard policies, procedures, and controls in order to ensure that all are fully documented
• Reviewed capital purchase procedures with appropriate staff, emphasizing that there are no exceptions
• Reviewed procedures for securing bank stock with appropriate staff to insure future compliance
Management will continue to evaluate the effectiveness of the Company’s internal controls and procedures on an ongoing basis and implement actions to enhance resources and training in the area of financial reporting responsibilities and to review such actions with the Audit Committee. Management has discussed its corrective actions and plans with the Audit Committee as of the date of this report, and believes the actions outlined have corrected or will correct the deficiencies in internal controls noted above.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
May 30, 2008
/s/ J. Douglas Cagle /S/ Mark M. Ham IV
J. DOUGLAS CAGLE MARK M. HAM IV
Chairman and Chief Executive Officer Executive Vice President & CFO
Report of the Audit Committee
The Audit Committee reviewed with management and the Company’s independent auditors overall audit scopes and plans, the results of internal and external audit examinations, evaluations by the auditors of the Company’s internal controls and the quality of the Company’s financial reporting. The Committee also discussed with the independent auditors other matters required to be discussed by the auditors with the Committee under Statement on Auditing Standards No. 61 (communication with audit committees). The Committee received from the auditors their annual written report on their independence from the Company and its management, which is made under Independence Standards Board Standard No. 1 (independence discussions with audit committees). The Committee also engaged in substantive discussions with the auditors regarding their independence from the Company. In performing all of these functions, the Audit Committee acts only in an oversight capacity, and, in its oversight role, the Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and reports, and of the independent auditors, who, in their report, express an opinion on the conformity of the Company’s annual financial statements to generally accepted accounting principles. In reliance on these reviews and discussions and on the report of the independent auditors, the Audit Committee has recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended March 29, 2008, for filing with the Securities and Exchange Commission.
The Board of Directors has adopted a resolution requiring the Company’s Audit Committee to engage the independent auditor. For each fiscal year and until such time different procedures are adopted, prior to the engagement of the auditor, the Audit Committee will pre-approve the auditor and the services to be provided by the auditor.
Item 9B.
Item 9B. Other Information
None
PART III
Item 10:
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 11, 2008 and is incorporated herein by reference. The Company has adopted a Code of Ethics, which applies to the Chief Executive Officer and Chief Financial Officer. The full text of the Code of Ethics was included as an exhibit with the 2004 annual report.
Item 11:
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 11, 2008 and is incorporated herein by reference.
Item 12:
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is included in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held July 11, 2008 and is incorporated herein by reference.
Item 13:
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 11, 2008 and is incorporated herein by reference.
Item 14.
Item 14. Principal Accountant Fees and Services.
The information required by this item is included in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on July 11, 2008 and is incorporated herein by reference.
PART IV
Item 15:
Item 15: 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 following consolidated financial statements of Cagle’s, Inc. and subsidiary are filed as part of this report:
Consolidated Balance Sheets as of March 29, 2008 and March 31, 2007
Consolidated Statements of Operations for the Years Ended March 29, 2008, March 31, 2007 and April 01,
Consolidated Statements of Stockholder’s Equity for the Years Ended March 29, 2008, March 31, 2007 and April 01, 2006
Consolidated Statements of Cash Flows for the Years Ended March 29, 2008 March 31, 2007 and April 01, 2006
Notes to Consolidated Financial Statements for the years ended, March 29, 2008, March 31, 2007 and April 01,
(a)2. Financial Statement Schedules
The following financial statement schedules are filed as part of this report:
Report of Independent Registered Public Accounting Firm
Schedule II - Valuation and Qualifying Accounts
(a)3. Exhibits
3.1 Articles of Incorporation of the Registrant. (4)
3.2 Bylaws of the Registrant. (2)
13.2 Cagle's, Inc. Proxy statements for Registrant's 2008 annual meeting of shareholders. (1)
14.1 Code of Ethics. (3)
23.1 Consent of independent registered public accounting firm, Moore Stephens Frost, PLC. (1)
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a). (1)
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a). (1)
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. (1)
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. (1)
99.1 Audited financial statements of unconsolidated affiliates: Cagle's Keystone Foods, L.L.C. for 08/15/06.
(Moore Stephens Frost, PLC) (5)
99.2 Audited financial statements of unconsolidated affiliates: Cagle's Keystone Foods, L.L.C. for 12/31/05 and 1/1/05.
(Ernst & Young LLP) (5)
-------------
(1) Filed herewith.
(2) Previously filed and incorporated by reference herein from the Registrant’s Form 10-Q for the quarter ended October 2, 2004.
(3) Previously filed and incorporated by reference herein from the Registrant’s Form 10-K for the year ended April 3, 2004.
(4) Previously filed and incorporated by reference herein from the Registrant’s Form 10-K for the year ended April 2, 2005.
(5) Previously filed and incorporated by reference herein from the Registrant’s Form 10-K for the year ended March 31, 2007.
(b) Reports on Form 8-K
1. The Company filed an 8-K on August 02, 2007, to furnish a press release announcing its results of operations for the first quarter of 2008.
2. The Company filed an 8-K on November 01, 2007, to furnish a press release announcing its results of operations for the second quarter of 2008.
3. The Company filed an 8-K on November 13, 2007, to furnish a press release announcing an offer by the Cagle family group to acquire all stock of the company.
4. The Company filed an 8-K on January 31, 2008, to furnish a press release announcing its results of operations for the third quarter of 2008.
5. The Company filed an 8-K on February 21, 2008, to announce an amendment to its bylaws.
6. The Company filed an 8-K on November 13, 2007, to furnish a press release announcing that the Cagle family had withdrawn its offer to acquire the company’s stock.
7. The Company filed an 8-K on April 11, 2008, to announce a 4% reduction in production.
8. The Company filed an 8-K on May 02, 2008, announcing the signing of an Amended and Restated Revolving Line of Credit and Security Agreement, effective as of April 30, 2008.
9. The Company filed an 8-K on June 6, 2008, to furnish a press release announcing its results of operations for the fourth quarter of 2008.
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
Chairman and Chief Executive Officer & President
June 06, 2008
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 the capacities indicated and on June 06, 2008:
/s/ J. Douglas Cagle
Director and Chairman and Chief Executive Officer & President
/s/ G. Bland Byrne
Director
/s/ Candace Chapman Director
/s/ Panos J. Kanes
Director
/s/ Edward J. Rutkowski Director
/s/ Mark M. Ham IV
Director and Executive Vice President & CFO
/s/ James David Cagle
Director and Vice President
/s/ George Douglas Cagle
Director and Vice President
MooreStephens Frost
A Professional Association
Certified Public Accountants
425 West Capitol, Suite 3300
Little Rock, Arkansas 72201
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Cagle’s, Inc. and Subsidiary
Atlanta, Georgia
We consent to the inclusion of our report dated May 30, 2008, with respect to the consolidated balance sheets of Cagle’s, Inc. and Subsidiary as of March 29, 2008 and March 31, 2007, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended March 29, 2008, March 31, 2007 and April 1, 2006, which report has been included in the Annual Report to Stockholders and in the Form 10-K Annual Report of Cagle’s, Inc. and Subsidiary.
/s/ Moore Stephens Frost, PLC
MooreStephens Frost, PLC
Little Rock, Arkansas
May 30, 2008
Officers and Directors
Cagle’s, Inc.
Officers
J. DOUGLAS CAGLE
Chairman, Chief Executive Officer
& President
MARK M. HAM IV
Executive Vice President & CFO
A. BRAD HARP
Vice President of Live Operations
RORY M. MORRIS
Vice President of Plant Operations
TROY DALE TOLBERT
Vice President of Sales and Marketing
GEORGE L. PITTS
Corporate Secretary & Treasurer
Vice President of Accounting
JAMES DAVID CAGLE
Vice President
GEORGE DOUGLAS CAGLE
Vice President
Board of Directors
J. DOUGLAS CAGLE
Chairman, Chief Executive Officer
& President, Cagle’s, Inc.
GEORGE DOUGLAS CAGLE
Vice President, Cagle’s, Inc.
JAMES DAVID CAGLE
Vice President, Cagle’s, Inc.
CANDACE CHAPMAN
Director of Marketing, Real Estate Management Services, LLC
MARK M. HAM IV
Executive Vice President & CFO, Cagle’s, Inc.
PANOS KANES
Partner Kanes & Benator, Attorneys at Law, LLC
Partner Kanes, Benator & Company, LLC - CPAs
G. BLAND BYRNE
Principal, Byrne, Davis & Hicks, P.C.
EDWARD J. RUTKOWSKI
Managing Director, I-ASSURANCE
President of Database Georgia, Inc.
Audit Committee
CANDACE CHAPMAN, Chair
PANOS KANES
EDWARD J. RUTKOWSKI
Subsidiary
Cagle Farms, Inc.
Officers
J. DOUGLAS CAGLE
Chairman, Chief Executive Officer
& President
A. BRAD HARP
Vice President of Live Operations
MARK M. HAM IV
Executive Vice President & CFO
GEORGE L. PITTS
Corporate Secretary and Treasurer
Vice President of Accounting
Board of Directors
J. DOUGLAS CAGLE
Chairman, Chief Executive Officer
& President, Cagle’s, Inc./
Cagle Farms, Inc.
MARK M. HAM IV
Executive Vice President & CFO
Cagle’s, Inc./Cagle Farms, Inc.
GEORGE DOUGLAS CAGLE
Vice President
Annual Stockholders’ Meeting
The Annual Stockholders’ Meeting will be conducted at the Corporate Headquarters, 2000 Hills Avenue, N.W., Atlanta, Georgia, at 11:00 A.M. on Friday, July 11 2008.
______________________________________________________________
Form 10-K
The Form 10-K Annual Report for 2008, as filed by the Company with the Securities and Exchange Commission, is available to Cagle’s, Inc. stockholders after June 12, 2008 on our website cagles.net or request in writing to, MARK M. HAM IV, Executive Vice President And CFO, Cagle’s, Inc., 2000 Hills Ave., N.W., Atlanta, Georgia 30318
______________________________________________________________
General Information
Registrar and Transfer Agent
Computershare Investor Services, LLC
Chicago, Ill.
Legal Counsel
BYRNE, DAVIS & HICKS, P.C.
Atlanta, Georgia
Independent Registered Public Accounting Firm
MOORESTEPHENS FROST, PLC
Little Rock, Arkansas
______________________________________________________________
Facilities
Corporate Headquarters
2000 Hills Ave., N.W.
Atlanta, Georgia30318
COLLINSVILLE, Alabama
Processing, Further Processing, Distribution & Cold Storage Facility
ATLANTA, Georgia
Distribution, Further Processing & Cold Storage Facility
DALTON, Georgia
Hatchery & Growout
PINE MOUNTAIN VALLEY, Georgia
Processing, Further Processing & Cold Storage Facility
ROCKMART, Georgia
Feed Mill
For current financial and company information, visit our website at www.cagles.net