SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended______APRIL 1, 1995___________________________or
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to _________________
COMMISSION FILE NUMBER:____1-7138_________________________________________
________________________________CAGLE'S, INC.__________________________________
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
___________GEORGIA_____________________________________58-0625713______________
(STATE OF INCORPORATION) I.R.S EMPLOYER IDENTIFICATION NO.
_______2000 HILLS AVE., NW, ATLANTA, GA.______________________30318____________
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: ___(404) 355-2820__________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of exchange on which registered
________CLASS A COMMON STOCK___________________AMERICAN STOCK EXCHANGE_________
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
________________none___________________________________________________________
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. _X_ YES ___ NO
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF
THE REGISTRANT. (THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.)
__$42,014,102_(based_on_20.75_per_share_closing_price_on_May_16,_1995)_________
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE (APPLICABLE ONLY TO
CORPORATE REGISTRANTS.)
__Class_A_Common_Stock_at_$1.00_par_value______________________________________
__5,034,182_shares_at_$1.00_par_value__________________________________________
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT
IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS; (2) ANY PROXY OR
INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424(b) OR
(c) UNDER THE SECURITIES ACT OF 1933. (THE LISTED DOCUMENTS SHOULD BE CLEARLY
DESCRIBED FOR IDENTIFICATION PURPOSES.)
Parts of the following documents are incorporated by reference in Parts II,
III, and IV of this Form 10-K report; 1) registrant's annual report to
shareholders for fiscal year ended April 1, 1995 - Items 5, 6, 7, 8, and 14.
2) Proxy statements for registrant's 1995 annual meeting of shareholders-
Items 10, 11, 12, and 13.
<PAGE>
CAGLE'S, INC.
PART I
Item 1: General Business
Cagle's, Inc. (the "Company"), which began business in 1945 and was first
incorporated in Georgia in 1953, and its wholly owned subsidiary (Cagle's Farms
,Inc., formerly Strain Poultry Farms, Inc.) produce, market, and distribute a
variety of fresh and frozen poultry products. The vertically integrated
operations of the Company consist of breeding, hatching, and growing of
chickens; feed milling; processing; further processing; and marketing. The
Company's products are sold to national and regional independent and chain
supermarkets, food distributors, food processing companies, national fast-food
chains, and institutional users, such as restaurants, schools, and
distributors, by the Company's sales staff located in Atlanta, Georgia, and
through brokers selected by the Company.
Narrative Description of Business
Food Processing
All of the Company's business activities are conducted on a vertically
integrated basis within one industry segment, poultry products. The Company's
various poultry products are closely related, have similar purposes and uses,
and, except for product sold under cost-plus arrangements, are similar in terms
of profitability and types and degrees of risks. In addition, the production
processes are similar to the extent that (a) production facilities are shared
or are interchangeable and (b) the same types of raw materials, labor, and
capital are used. Markets and marketing methods are comparable for all
products (except cost-plus products) to the extent that they are generally sold
to the same types of customers by a common sales force and are sensitive to
changes in economic conditions to the same degree.
The Company currently processes approximately 2,035,000 birds per week in its
three processing plants, including two plants which operate with two full
shifts. Of the Company's total production, approximately 1,000,000 head per
week are deboned. In March 1993, the Company placed one of its processing
plants into a joint venture with a major customer, reducing the total company
volume by 365,000 birds per week.
The complete cycle for growing broilers begins with the placement on a farm of
a day-old breeder chick. This bird is reared for 25 weeks, at which time it
begins to produce hatching eggs. The breeder produces eggs for approximately
40 weeks. These eggs are set in one of the Company's two hatcheries, and in
three weeks, a baby chick is hatched.
The day-old broiler chick is placed on a farm where it will grow for six to
eight weeks depending upon the size of bird desired, at which time it is
transported to the processing plant for slaughter. To produce uniform size for
customer demands, the Company grows the males and females separately. This is
necessary because males and females grow at different rates and have different
nutritional requirements for cost-effective growth. A significant investment
in field inventories is required to support the Company's operating cycle.
<PAGE>
All feed for all flocks is produced in feed mills owned by the Company.
The Company's goal is to add value to all of its birds, and the Company
currently is accomplishing this on approximately 85% of all head slaughtered.
This value-added product takes the form of deboned breast and thigh meat,
cut-up marinated raw breaded chicken (including barbecue), government school
lunch product, fast-food cuts, IQF (individually quick frozen) products, and
mechanically deboned chicken meat.
Raw Materials
The primary raw materials used by the Company are corn, soybean meal, and other
ingredients; packaging materials; cryogenic materials; and breeder chicks. The
Company believes that sources of supply for these materials are adequate and
does not expect significant difficulty in acquiring required supplies. The
major source of supply is the midwestern grain belt of the United States,
although local supplies are utilized when available. Prices for the feed
ingredients are sensitive to supply fluctuations worldwide, and weather
conditions, especially drought, can cause significant price volatility. Since
feed is the most significant factor in the cost of producing a broiler chicken,
those fluctuations can have significant effects on margins. The Company also
purchases product outside for further processing requirements.
Research and Development
The Company has made no material expenditures for research and development
during the last three years.
Employees and Labor Relations
The Company employs approximately 3,250 persons of whom approximately 49% are
covered by collective bargaining agreements which expire at various dates over
the next three years. The Company believes its relationship with the
bargaining groups and other employees is good.
Seasonal Variations in Business
The seasonal demand for the Company's products is highest during the late
spring and summer months and is normally lowest during the winter months.
Customers
Equity Foods ("Equity") accounted for approximately 37% of the Company's sales
for the year ended April 1, 1995. The Company has an agreement with Equity to
supply chicken under a cost-plus arrangement, and approximately 50% of the
Company's production is committed to Equity. Under the arrangement, production
in excess of Equity's demands and by-products are sold to other customers and
are credited against the cost-plus arrangement. The Company generally receives
full margin on processed pounds regardless of the final customer.
<PAGE>
Backlog
The Company had no material backlog of orders existing as of April 1, 1995.
Competition
The Company is a leading regional integrated poultry processor, ranking
eleventh nationally in pounds produced. The Company's products compete in the
marketplace with comparable products of approximately ten national and regional
producers in the areas of quality, service, and price. The Company believes
its flexibility and accessibility are positive factors enhancing the Company's
competitive position.
Regulation
The Company's facilities and operations are subject to regulation by various
federal and state agencies, including, but not limited to, the federal Food
and Drug Administration ("FDA"), the United States Department of Agriculture
("USDA"), the Environmental Protection Agency, the Occupational Safety and
Health Administration, and the corresponding state agencies. The Company's
processing plants are subject to continuous on-site inspection by the USDA,
and the FDA inspects the production of the Company's feed mill.
Management believes that the Company is in substantial compliance with
applicable laws and regulations relating to the operation of its facilities.
Item 2: Properties
Production and Facilities
Breeding and Hatching
The Company supplies its broiler chicks by producing all of its own hatching
eggs from breeder flocks owned by the Company. These breeder flocks are
maintained on 61 contract grower farms. In addition, the replacement breeder
pullets are maintained on 32 contract grower farms where the breeders are
reared from one day old to approximately 18 weeks old and then moved to the
breeder farm where they begin to produce eggs at about 25 weeks of age.
These farms are located in north Georgia.
The Company owns two hatcheries located in Dalton, Georgia, and Forsyth,
Georgia, at which eggs are incubated and hatched. This is a continuous
process and requires 21 days to complete. After the chicks are removed
from the incubator, they are separated by sex, vaccinated against disease,
and moved by a special-purpose vehicle, Chick Bus, to the Company's grow-out
farms. The two hatcheries have an aggregate capacity of 2,100,000 chicks per
week. Both of the hatcheries are company-owned.
<PAGE>
Grow-Out
The Company places its broiler chicks on approximately 283 contract grower
farms. The birds are grown separately by sex to provide the exact size
requirement of the Company's customers.
The independent contract growers provide the housing, equipment, utilities,
and labor to grow the baby chicks to market age, which varies from six to
eight weeks, depending on the market for which they are intended. The Company
supplies the baby chicks, the feed, and all veterinary and technical services.
Title to the birds remains with the Company at all times. The contract
growers are paid on live weight and are guaranteed a minimum rate with
various incentives based upon a grower's performance as compared to other
growers whose birds are marketed during the same week. These contract
farms are located in Georgia, Tennessee, and Alabama.
Feed Mills
The Company owns one feed mill with a production capacity of approximately
520,000 tons per year. The mill is located in Dalton, Georgia. An
additional feed mill in Camilla, Georgia, was completed in 1993 and
contributed to Cagle's Foods in March 1993. A new feed mill is nearing
completion in Forsyth, Georgia, which will have the capacity to produce
approximately 300,000 tons annually.
Processing
As the broilers reach the desired processing weight, they are removed from the
houses and transported by company trucks to a processing plant.
The processing plants are located in Pine Mountain, Georgia; Macon, Georgia;
and Collinsville, Alabama. The Pine Mountain and Macon, Georgia, plants have
the capacity to process 8,400 birds per hour, and the Collinsville plant can
process up to 12,600 birds per hour. The Macon, Georgia, and Collinsville,
Alabama, plants operate two full shifts.
Further Processing and Deboning
The Company has a stated goal of marketing the majority of its product as
value-added product. This is accomplished by cutting the product into parts
or fast-food cuts, deboning, marinating and breading, and converting into
other convenience-type products.
Currently, further processing and deboning are conducted at the Collinsville,
Alabama, plant (cutting, marinating, and breading) and the Pine Mountain and
Macon, Georgia, plants (deboning). In addition, the Atlanta, Georgia,
facility and the Lovejoy, Georgia, facility are totally devoted to further
processing.
<PAGE>
Freezer Storage
The Company's facilities located in Atlanta, Georgia; Collinsville, Alabama;
Pine Mountain, Georgia; and Lovejoy, Georgia, have freezer storage facilities
with aggregate capacity of approximately 3,000,000 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 sales division, two local distribution divisions
are operated from separate refrigerated warehouse facilities in Atlanta,
Georgia, and Birmingham, Alabama. These units have sales representatives
located in Macon, Georgia, as well as Atlanta, and are designed to provide
storage and delivery service for those customers in their operating areas.
Significant Unconsolidated Subsidiaries
The Company owns a 50% interest in a joint venture, which is a fully integrated
poultry company located in Camilla, Georgia. This company was created in March
1993 from the contributed assets of the Company's former south Georgia and
north Florida operations. The joint venture is growing and processing
approximately 525,000 birds per week in a processing plant that is capable of
processing up to 1,400,000 broilers per week. A new hatchery was placed into
service on March 28, 1994, and a new processing plant began operations in April
1995. The Company acquired a minority interest in a poultry by-product company
in November 1994.
Executive Offices
The Company's executive offices are located in a renovated two-story
(22,000-square-foot) building at 2000 Hills Avenue, NW, Atlanta, Georgia.
The building is owned by the Company.
Substantially all of the Company's property, plant, and equipment are
encumbered to secure long-term debt of the Company.
All of the properties described above are in good condition and are adequate
for their stated uses.
Item 3: Legal Proceedings
The Company is involved in various lawsuits and legal matters on an ongoing
basis as a result of its 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.
<PAGE>
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 1995.
PART II
Item 5: Market for Registrant's Common Equity
and Related Stockholder Matters
The information required by this item is included in the Company's Annual
Report to Stockholders for the year ended April 1, 1995 and is incorporated
herein by reference.
Item 6: Selected Financial Data
The information required by this item is included in the Company's Annual
Report to Stockholders for the year ended April 1, 1995 and is incorporated
herein by reference.
Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations
The information required by this item is included in the Company's Annual
Report to Stockholders for the year ended April 1, 1995 and is incorporated
herein by reference.
Item 8: Financial Statements and Supplementary Data
The information required by this item is included in the Company's Annual
Report to Stockholders for the year ended April 1, 1995 and is incorporated
herein by reference.
Item 9: Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 10: Directors and Executive Officers of the Registrant
The information required by this item is included in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held July 14, 1995 and
is incorporated herein by reference.
Item 11: Executive Compensation
The information required by this item is included in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held July 14, 1995 and
is incorporated herein by reference.
Item 12: Security Ownership of Certain Beneficial Owners and Management
The information required by this item is included in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held July 14, 1995 and
is incorporated herein by reference.
Item 13: Certain Relationships and Related Transactions
The information required by this item is included in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held July 14, 1995 and
is incorporated herein by reference.
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following documents are filed as part of this report:
(a)1. Financial Statements
<PAGE>
The Company's 1995 Annual Report to Stockholders contains the consolidated
balance sheets as of April 1, 1995 and April 2, 1994, the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended April 1, 1995, and the related report of
Arthur Andersen LLP as to these financial statements. These financial
statements and the report of Arthur Andersen LLP are incorporated herein by
reference.
The financial statements, incorporated by reference, include the following:
Consolidated Balance Sheets--April 1, 1995 and April 2, 1994
Consolidated Statements of Income for the Years Ended April 1, 1995,
April 2, 1994, and April 3, 1993
Consolidated Statements of Stockholders' Equity for the Years Ended
April 1, 1995, April 2, 1994, and April 3, 1993
Consolidated Statements of Cash Flows for the Years Ended April 1,
1995, April 2, 1994, and April 3, 1993
Notes to Consolidated Financial Statements--April 1, 1995, April 2,
1994, and April 3, 1993
(a)2. Financial Statement Schedules
The financial statement schedules have been omitted because they are not
applicable or the required information is included in the consolidated
financial statements or notes thereto. Reports on Form 8-KA report on Form 8-K
was filed in April 1995 to disclose the Company's new unsecured revolving
credit agreement.
Reports on Form 8-K
A report on Form 8-k was filed in April 1995 to disclose the Company's new
unsecured revolving credit agreement.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Cagle's, Inc.
BY: /s/ J. Douglas Cagle
J. Douglas Cagle
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the registrant and in
capacities and on the date indicated:
/s/ J.Douglas Cagle Chairman and Director and Chief Executive Officer
/s/ Kenneth R. Barkley Senior Vice President Finance/Treasurer/Chief
Financial Officer/Director/ Principle Financial
and Accounting Officer
/s/ Warner S. Currie Director
/s/ George Douglas Cagle Vice President, New Product Development
and Director
/s/ John J. Bruno Senior Vice President Sales Marketing and Director
/s/ James David Cagle Vice President, New Product Sales and Director
/s/ Jerry D. Gattis President, Chief Operating Officer and Director
/s/ Mark M. Ham IV Vice President, Information Systems and Director
/s/ Candace Chapman Director
<PAGE>
CAGLE'S, INC. & SUBSIDARY
1995 ANNUAL REPORT
Contents
Chairman's Letter ....................................... 1
Management's Discussion ............................. 2 & 3
Five-Year Selected Financial Data ....................... 4
50th Anniversary Supplement ........................ Insert
Management's Responsibility and Auditor's Opinion ....... 5
Consolidated Balance Sheets ............................. 6
Consolidated Statements of Income ....................... 7
Consolidated Statements of Stockholders' Equity ......... 8
Consolidated Statements of Cash Flows ................... 9
Notes ............................................... 10-14
Corporate Data ...................................... 15-16
<PAGE>
CAGLE'S, INC. & SUBSIDIARY
Chief Executive Officer's Letter
To Our Stockholders:
We're 50 years young and just beginning. It gives me great pleasure to
report record earnings and revenues on our 50th Anniversary.
Fiscal 1995 has been an eventful year for your Company as we progressed to
new records.
We announced an ambitious expansion into Kentucky in May 1994 and have spent
a tremendous amount of time and effort toward that end. It now appears that
construction will be getting underway this fall.
During the Summer of 1994 we were faced with the effects of the catastrophic
flooding in Middle and South Georgia that closed one plant for 2-1/2 weeks --
for lack of water, no less. The city's water treatment facilities were
completely submerged. It is the ability to take temporary setbacks such as this
that has enabled the Company to achieve what few companies ever do, and that is
a 50 year anniversary.
As we pause for a moment to reflect on the past 50 years, we have much to be
grateful for, among them the dream of my father who started the business in
1945 and never waivered from his goal of building a successful company. He was
able to instill that dedication into his employees over the years and the
Company continues to enjoy the benefits of loyal, dedicated employees who have
been a key part of the success of Cagle's. Add to this list the support of
stockholders and an outstanding group of contract growers and you begin to
realize what has enabled the Company to reach this milestone.
But, I reiterate, we are just beginning. With the Kentucky expansion getting
underway and the opportunities for growth that it entails and the challenges of
growth in our joint venture companies, we are starting our second 50 years with
as much excitement and enthusiasm as my father enjoyed at the start.
As we celebrate the accomplishments of the past 50 years and the record
performance of the most recent year, I would be remiss if I failed to discuss
the reality of the immediate future in which we expect to see margins squeezed
by market prices which are showing the effects of abundant meat protein
supplies. 1995 will be the second consecutive year of growth in domestic meat
availability across all major categories.
We have continued to execute our plans to increase stockholder value during
the past years by stock repurchase, a stock split and increasing dividends --
all of which have paid-off for stockholders.
Your support over these many years is sincerely appreciated.
Sincerely,
J. Douglas Cagle
Chairman and C.E.O
1
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company again posted record sales and earnings with substantial increases
over the record amounts reported in 1994. This was possible despite lower
trending market prices in the later half of the year and the difficulties
caused by flooding in our Mid-Georgia operational area during the summer of
1994. Improved performances from our further processing operations and
unconsolidated affiliates were factors in the overall results.
1995 Compared to 1994
Sales increased by 11.9% in fiscal 1995 as compared to fiscal 1994. This
continued upward trend is primarily the result of increasing sales of added
value processed products. Processed pounds of poultry through the Company's
slaughter plants also increased by 5.8% and reflects heavier slaughter weight
of the birds.
Although the Georgia Dock price for broilers was 4.6% lower in 1995 than
1994, gross margins improved by 1.2%, from 8.5% in fiscal 1994 to 9.7% in
fiscal 1995, due to lower feed costs and changing sales mix towards higher
margin items.
Selling and delivery expenses increased by 22.7% over fiscal 1994 levels,
continuing the trend from 1994 and 1993. The increase resulted from higher
commission and storage expense associated with expanded sales.
General and administrative expenses were 5% higher for fiscal 1995 as
ompared to fiscal 1994 and essentially reflect increases in personnel related
expenses.
Although total debt has increased since fiscal 1994, interest expense
declined by 20% in 1995 compared to 1994 as interest of $169,000 was capitalized
in connection with the construction of a new feed mill in Forsyth, Georgia.
The provision for income taxes is computed at statutory rates adjusted for
various tax credits available to the Company resulting in a net effective rate
of 33%.
1994 Compared to 1993
Compared to 1993, sales increased by 13.8%, after adjusting 1993 to a 52-week
year basis. Considering that the Camilla, Georgia, complex was consolidated in
1993 and was not in 1994, due to contributions to the joint venture company,
the increase is approximately 24.0%. The increase in sales is due primarily to
increased sales of higher-price items from further processing. These products
are produced from outside purchases of chicken parts, deboned breast fillet,
etc. In addition, the market price for broilers averaged 6.7% above 1993 levels
to account for a portion of the increase.
The gross margin percentage increased by .6%, from 7.9% to 8.5%, although
costs were higher throughout the year. The increased gross margin resulted from
higher selling prices due to a change in sales mix toward higher-margin items.
2
<PAGE>
Selling and delivery expenses increased by 22.4% over 1993, continuing the
trend from 1993 and 1992. The increase resulted from selling more value-added
products in 1994 requiring higher commission expense and advertising and
promotional expenses not normally incurred with commodity sales. Storage
expenses also increased as the Company attempted to maintain sufficient
inventories to meet customer requirements.
General and administrative expenses were 6.7% lower in 1994 as compared to
1993. This decline is due partly to the elimination of the expenses associated
with the Camilla joint-venture, which is not consolidated in 1994.
Interest expense declined by 9.1% as a result of decreased borrowing levels.
The provision for income taxes is computed at statutory rates adjusted for
the effect of various credits earned by the Company.
Financial Condition and Liquidity
With a strong earnings and cash position, the Company was able to continue
its stock repurchase program established in fiscal year 1989 and fund its
capital requirements for the year, including the acquisition of a minority
interest in a poultry by-products company. A $5 million tax-free revenue bond
was used to help finance construction of the new feed mill in Forsyth, Georgia,
which began production in April, 1995.
On March 31, 1995, the Company replaced its existing $12 million revolving
credit facility with a $20 million unsecured credit facility available for
general operations. Except for $250,000 reserved for a stand-by letter of
credit to secure the Company's self-insured workers' compensation plan the
entire facility was available as of year-end.
During the first quarter of fiscal 1995 the Company announced its plans to
build a broiler complex in Kentucky. It is estimated that this facility will be
completed in late 1997 or early 1998. It is expected that this project will
require a total investment of approximately $50 million, including working
capital. The project is expected to be partially funded by federal and state
incentives available for creation of new jobs in the area. We believe that
sufficient funds will be available to fund this project and we are currently
exploring available sources.
The earnings outlook for the industry and the Company for the next year is
uncertain at best. An over abundance of meat protein and unpredictable export
markets currently temper our expectations for the foreseeable future. Grain
prices which have been lower for the past year continue to be very sensitive to
weather and global demand. This volatility can have a significant impact on the
Company's earnings. Until the 1995 crop is harvested, the grain markets will
fluctuate with each major change in weather in the grain belt or major export
commitment.
3
<PAGE>
Five-Year Selected Financial Data
52 Weeks 52 Weeks 53 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended Ended
April 1, April 2, April 3, March 28, March 30,
1995 1994 1993 1992 1991
OPERATING RESULTS:
Net sales..... $349,770 $312,696 $280,105 $208,775 $192,703
Operating expenses.. 331,140 299,425 270,486 204,195 188,535
Operating income..... 18,630 13,271 9,619 4,580 4,168
Interest expense..... (1,072) (1,336) (1,469) (1,507) (1,405)
Other income, net..... 3,085 1,516 198 63 162
Income before income taxes
and accounting change..... 20,643 13,451 8,348 3,136 2,925
Provision for income taxes.... 6,881 4,799 3,142 1,194 1,112
Income before accounting
change........ $13,762 $8,652 $5,206 $1,942 $1,813
FINANCIAL POSITION:
Working capital..... $17,592 $19,741 $19,068 $13,548 $13,912
Total assets..... 88,771 69,220 65,006 59,537 50,870
Long-term debt..... 15,233 11,819 17,591 16,531 13,581
Stockholders' equity..... 44,371 34,268 26,728 21,392 20,165
PERFORMANCE PER COMMON SHARE:*
Income before accounting
change.................. $2.67 $1.66 $0.99 $0.36 $0.32
Net income................. $2.67 $1.66 $1.08 $0.36 $0.32
Dividends.................. $0.105 $0.085 $0.06 $ -- $ --
Book value at the end of
the year ............... $8.81 $6.58 $5.07 $4.05 $3.58
Average number of common shares
outstanding*............. 5,152 5,224 5,272 5,368 5,552
* Restated to reflect the 25% stock dividend issued to stockholders of record
on January 3, 1994 and the two-for-one stock split issued to stockholders of
record on January 3, 1995.
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Dividend Policy
The Board of Directors considers dividends in light of operating results,
current earnings trends, and prevailing economic conditions.
The Company's arrangement with one of its lenders contains certain
restrictions on dividends.
Stockholders
As of April 1, 1995, there were 351 stockholders of record of the Company's
Class A common stock.
Market Price of Common Stock
The Company's common stock is listed and principally traded on the American
Stock Exchange, Ticker Symbol CGL. Quarterly dividend data and market highs
and lows for the past two years as adjusted for the 25% stock dividend issued
to stockholders of record on January 3, 1994 and the two-for-one stock split
issued to stockholders of record on January 3, 1995 were:
1995 1994
---------------------------- -----------------------------
Dividend High Low Dividend High Low
-------- --------- ------- -------- --------- -------
Quarter:
First $0.025 $12-15/16 $10-7/8 $0.020 $11-13/16 $ 9-1/4
Second 0.025 15-1/2 10-3/4 0.020 10-11/16 8-5/16
Third 0.025 22-5/8 14-1/8 0.020 11-7/8 10-5/16
Fourth 0.030 24-5/8 17-7/8 0.025 11-5/8 11
4
<PAGE>
Management's Responsibility for Financial Statements
- ------------------------------------------------------------------------------
The management of Cagle's, Inc. and its subsidiary has the responsibility for
preparing the accompanying financial statements and for their integrity and
objectivity. The statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis. In the preparation of the
financial statements, it is necessary to make informed estimates and judgments
based on currently available information as to the effect of certain events and
transactions. Management also prepared the other information in the Annual
Report and is responsible for its accuracy and consistency with the financial
statements.
Cagle's, Inc. and its subsidiary maintain accounting and other controls which
management believes provide reasonable assurance that financial records are
reliable, assets are safeguarded, and transactions are properly recorded in
accordance with management's authorization. However, limitations exist in any
system of internal control based upon the recognition that the cost of that
system should not exceed the benefits derived.
Cagle's, Inc.'s independent auditors, Arthur Andersen LLP, are engaged to
audit the financial statements of Cagle's, Inc. and subsidiary and to express
an opinion thereon. Their audit is conducted in accordance with generally
accepted auditing standards to enable them to report whether the financial
statements present fairly, in all material respects, the financial position and
the results of operations and cash flows of Cagle's, Inc. and subsidiary in
conformity with generally accepted accounting principles.
/s/ J. Douglas Cagle
J. Douglas Cagle
Chairman and Chief Executive Officer
/s/ Kenneth R. Barkley
Kenneth R. Barkley
Senior Vice President Finance,
Treasurer and Chief Financial Officer
May 5, 1995
- -------------------------------------------------------------------------------
Report of Independent Public Accountants
To the Board of Directors and
Stockholders of Cagle's, Inc.:
We have audited the consolidated balance sheets of CAGLE'S, INC. (a Georgia
corporation) AND SUBSIDIARY as of April 1, 1995 and April 2, 1994 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended April 1, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cagle's, Inc. and subsidiary
as of April 1, 1995 and April 2, 1994 and the results of their operations and
their cash flows for each of the three years in the period ended April 1, 1995
in conformity with generally accepted accounting principles.
As explained in Note 3 to the financial statements, effective March 29, 1992,
the Company changed its method of accounting for income taxes.
/s/ Arthur Anderson LLP
Atlanta, Georgia
May 5, 1995
5
<PAGE>
Consolidated Balance Sheets
- -----------------------------------------------------------------------------
April 1, 1995 and April 2, 1994
(In Thousands, Except Par Values) 1995 1994
--------- ---------
ASSETS
CURRENT ASSETS:
Cash................................... $ 462 $ 875
Trade accounts receivable, less
allowance for doubtful accounts
of $141 and $729 in 1995 and
1994, respectively.................. 15,013 13,392
Inventories............................ 25,282 22,779
Other current assets................... 1,538 1,146
--------- ---------
Total current assets............. 42,295 38,192
--------- ---------
INVESTMENTS IN AND RECEIVABLE
FROM UNCONSOLIDATED AFFILIATES............ 11,697 7,286
--------- ---------
OTHER ASSETS.............................. 550 341
--------- ---------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land................................... 1,280 915
Buildings and improvements............. 26,549 23,635
Machinery, furniture, and equipment.... 24,226 22,203
Vehicles............................... 3,254 2,807
Construction in progress............... 11,588 3,038
--------- ---------
66,897 52,598
Less accumulated depreciation.......... (32,668) (29,197)
--------- ---------
34,229 23,401
--------- ---------
$ 88,771 $ 69,220
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt
and capital lease obligations......... $ 1,572 $ 1,239
Accounts payable........................ 13,550 9,572
Accrued expenses........................ 7,900 6,455
Income taxes payable.................... 967 848
Deferred income tax liabilities......... 714 337
--------- ---------
Total current liabilities......... 24,703 18,451
--------- ---------
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS........................ 15,233 11,819
--------- ---------
DEFERRED INCOME TAX LIABILITIES............ 4,464 4,682
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value;
1,000 shares authorized, none issued... -0- -0-
Common stock, $1 par value;
9,000 shares authorized, 5,034
and 2,602 shares outstanding
in 1995 and 1994, respectively......... 5,034 2,602
Additional paid-in capital.............. 8,366 13,919
Retained earnings....................... 30,971 17,747
--------- ---------
44,371 34,268
--------- ---------
$88,771 $69,220
The accompanying notes are an integral part of these consolidated balance
sheets.
6
<PAGE>
Consolidated Statements of Income
For the Years Ended April 1, 1995, April 2, 1994, and April 3, 1993
(In Thousands, Except Per Share Data) 1995 1994 1993
-------- -------- --------
NET SALES.................................. $349,770 $312,696 $280,105
-------- -------- --------
COSTS AND EXPENSES:
Cost of sales............................ 315,882 286,131 258,086
Selling and delivery..................... 8,918 7,269 5,941
General and administrative............... 6,340 6,025 6,459
-------- -------- --------
331,140 299,425 270,486
-------- -------- --------
OPERATING INCOME............................ 18,630 13,271 9,619
OTHER INCOME (EXPENSE):
Interest................................. (1,072) (1,336) (1,469)
Other income, net........................ 3,085 1,516 198
-------- -------- --------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
PRIOR YEARS' EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE..................... 20,643 13,451 8,348
PROVISION FOR INCOME TAXES.................. 6,881 4,799 3,142
-------- -------- --------
INCOME BEFORE CUMULATIVE PRIOR YEARS'
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE................................ 13,762 8,652 5,206
CUMULATIVE PRIOR YEARS' EFFECT
OF CHANGE IN ACCOUNTING FOR
INCOME TAXES (Note 3).................... -- -- 490
-------- -------- --------
NET INCOME.................................. $13,762 $8,652 $5,696
======== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING.............................. 5,152 5,224 5,272
======== ======== ========
PER COMMON SHARE:
Income before cumulative prior years' effect
of change in accounting principle..... $2.67 $1.66 $0.99
Cumulative prior years' effect of change
in accounting for income taxes........ -- -- 0.09
-------- -------- --------
Net income................................ $2.67 $1.66 $1.08
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
7
<PAGE>
Consolidated Statements of Stockholders' Equity
For the Years Ended April 1, 1995, April 2, 1994, and April 3, 1993
(In Thousands, Except Per Share Data)
Common Stock Additional
----------------- Paid-In Retained
Shares Amount Capital Earnings
------ -------- ------- --------
BALANCE, March 28, 1992............. 2,114 $ 2,114 $ 410 $ 18,868
Repurchase of common stock........ (5) (5) (35) --
Net income........................ -- -- -- 5,696
Cash dividends paid ($.06
per share)...................... -- -- -- (320)
------ -------- ------- --------
BALANCE, April 3, 1993.............. 2,109 2,109 375 24,244
Repurchase of common stock........ (28) (28) (636) --
Net income........................ -- -- -- 8,652
Stock dividend of 25%............. 521 521 14,180 (14,701)
Cash dividends paid
($.085 per share)............ -- -- -- (448)
------ -------- ------- --------
BALANCE, April 2, 1994.............. 2,602 2,602 13,919 17,747
Repurchase of common stock........ (103) (103) (3,018) --
Net income........................ -- -- -- 13,762
Two-for-one stock split........... 2,535 2,535 (2,535) --
Cash dividends paid
($.105 per share)............ -- -- -- (538)
------ -------- ------- --------
BALANCE, April 1, 1995...... 5,034 $5,034 $8,366 $30,971
====== ======== ======= ========
The accompanying notes are an integral part of these consolidated statements.
8
<PAGE>
Consolidated Statements of Cash Flows
For the Years Ended April 1, 1995, April 2, 1994, and April 3, 1993
(In Thousands) 1995 1994 1993
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $13,762 $ 8,652 $ 5,696
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization.......... 4,495 4,899 4,882
(Gain) loss on disposal of property,
plant, and equipment.................. (18) 668 28
Income from unconsolidated
affiliates, net...................... (1,411) (752) --
Cumulative effect of change in
accounting principle.................... -- -- (490)
Changes in assets and liabilities:
Accounts receivable, net............. (1,621) (1,630) (1,039)
Inventories.......................... (2,503) (2,487) (4,375)
Other current assets................. (392) 551 1,213
Accounts payable..................... 3,978 967 (1,536)
Accrued expenses..................... 1,445 663 450
Income taxes payable................. 119 45 803
Deferred income tax liabilities...... 159 743 458
------- ------- -------
Total adjustments.................. 4,251 3,667 394
------- ------- -------
Net cash provided by operating
activities........................ 18,013 12,319 6,090
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant,
and equipment........................... (15,362) (6,412) (7,068)
Additions to investments in
unconsolidated affiliates............... (3,000) -- --
(Increase) decrease in other assets...... (258) 17 (46)
Proceeds from sale of property,
plant, and equipment.................... 106 79 189
------- ------- -------
Net cash used by investing
activities...................... (18,514) (6,316) (6,925)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt and capital
lease obligations...................... (1,253) (5,744) (12,552)
Repurchase of common stock............... (3,121) (664) (40)
Proceeds from issuance of
long-term debt.......................... 5,000 -- 15,000
Cash dividends paid...................... (538) (448) (320)
------- ------- -------
Net cash provided (used) by
financing activities............. 88 (6,856) 2,088
------- ------- -------
NET (DECREASE) INCREASE IN CASH............ (413) (853) 1,253
CASH AT BEGINNING OF YEAR.................. 875 1,728 475
------- ------- -------
CASH AT END OF YEAR........................ $ 462 $ 875 $ 1,728
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................ $ 1,241 $ 1,343 $ 1,631
======= ======= =======
Income taxes paid........................ $ 6,603 $ 4,011 $ 1,881
======= ======= =======
NONCASH INVESTING ACTIVITIES:
Net assets contributed to an
unconsolidated affiliate............... -- -- $ 8,454
======= ======= =======
The accompanying notes are an integral part of these consolidated statements.
9
<PAGE>
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
April 1, 1995, April 2, 1994, and April 3, 1993
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------
Principles of Consolidation
The consolidated financial statements include the accounts of Cagle's, Inc.
and its wholly owned subsidiary (the "Company"). All significant intercompany
accounts and transactions have been eliminated. Investments in unconsolidated
affiliates are accounted for under the equity method (Note 6).
Inventories
Live field inventories of broilers are stated at the lower of cost or
market, and breeders are stated at cost, less accumulated amortization.
Breeder costs are accumulated up to the production stage and amortized into
broiler costs over the estimated production lives based on monthly egg
production. Finished products; feed, eggs, and medication; and supplies are
stated at the lower of cost (first-in, first-out method) or market.
Inventories at April 1, 1995 and April 2, 1994 consist of the following
(in thousands):
1995 1994
-------- --------
Finished products................ $ 7,813 $ 5,301
Field inventory and breeders..... 13,742 14,049
Feed, eggs, and medication....... 2,243 2,223
Supplies......................... 1,484 1,206
-------- --------
$ 25,282 $ 22,779
======== ========
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following lives:
Buildings and improvements.............. 3-30 years
Machinery, furniture, and equipment..... 3-17 years
Vehicles................................ 3-8 years
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.
Insurance
The Company is self-funded under a minimum premium arrangement for the
majority of employee claims under its group health plan. Since May 1992, the
union employees of the Company have been covered for health insurance under a
union health plan. The Company is self-insured for the majority of its workers'
compensation risks. The Company's insurance programs are administered by
professional 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. Provisions for claims under
the insurance programs are based on estimates of the aggregate outstanding
liability for claims incurred provided by the plan administrators. The
Company's accrual for group health and workers' compensation liabilities of
$2,282,000 and $1,761,000 as of April 1, 1995 and April 2, 1994, respectively,
are included in accrued expenses in the accompanying balance sheets.
Earnings Per Share
All 1994 and 1993 earnings and cash dividends per share information have
been restated to reflect the two-for-one stock split issued to stockholders of
record on January 3, 1995. All 1993 earnings and cash dividends per share
information have been restated to reflect the 25% stock dividend issued to
stockholders of record on January 3, 1994.
Fiscal Year
The Company's fiscal year closing date is the Saturday nearest March 31.
The fiscal year includes operations for a 52-week period in 1995 and 1994 and
a 53-week period in 1993.
10
<PAGE>
2 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
---------------------------------------------------------
Long-term debt and capital lease obligations at April 1, 1995 and April 2,
1994 consist of the following (in thousands):
1995 1994
-------- --------
Term note payable to an insurance company,
maturing on July 1, 2002; secured by
certain property, plant, and equipment........ $ 10,800 $ 12,000
Industrial development revenue bonds payable
to a financial institution, variable
interest rate (4.35% at April 1, 1995),
principal payable in full by June 1, 2009,
secured by certain property, plant,
and equipment................................ 5,000 --
Capital lease obligations....................... 714 752
Other notes payable at varying interest rates
and maturities............................... 291 306
-------- --------
16,805 13,058
Less current maturities......................... (1,572) (1,239)
-------- --------
$15,233 $11,819
======== ========
The Company has a revolving bank credit agreement maturing March 31, 1998
that provides for unsecured borrowings up to $20,000,000. Under this agreement,
$5,000,000 of the $20,000,000 may be used for letters of credit. As of April 1,
1995, a $250,000 letter of credit associated with the Company's insurance
program (Note 1) was outstanding, and $19,750,000 was available under the line
of credit.
The term note bears interest at a fixed rate of 8.6% through July 1, 1997 at
which time the rate is subject to adjustment. Principal payments plus interest
commenced July 1, 1993 and continue until the note matures on July 1, 2002. The
Company has the option to prepay the note within 90 days after July 1, 1997,
the interest rate adjustment date.
The Company's debt agreements contain certain restrictive covenants which
require, among other things, that the Company maintain (1) a current ratio of
at least 1.5:1; (2) a ratio of total debt to capital, as defined, of not more
than .55:1; and (3) tangible net worth, as defined, of at least $35,000,000.
At April 1, 1995, the Company was in compliance with all debt covenants.
The Company has also leased property, plant, and equipment under a capital
lease with an initial term of 120 months. The net book value of assets under
the capital lease at April 1, 1995 and April 2, 1994 was $756,000 and $798,000,
respectively.
Aggregate maturities of long-term debt and capital lease obligations during
the years subsequent to April 1, 1995 are as follows (in thousands):
1996.............. $ 1,572
1997.............. 1,558
1998.............. 1,564
1999.............. 1,570
2000.............. 1,574
Thereafter........ 8,967
--------
$ 16,805
========
3 INCOME TAXES
---------------------------------------------------------
Effective March 29, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." Under
SFAS 109, deferred income taxes are provided at enacted marginal regular tax
rates on the difference between the financial statement and income tax bases of
assets and liabilities. The cumulative prior years' effect of this change in
accounting principle was a credit of $490,000, or $.09 per share.
The Revenue Act of 1987 rescinded the cash-basis method of accounting for
tax purposes, effective in fiscal 1989, previously used for the Company's
farming operations. Approximately $2,772,000 of previously recorded income tax
liabilities was indefinitely deferred. Under current tax law, such liabilities
will continue to be deferred as long as the Company maintains compliance with
certain revenue and ownership criteria.
Income tax provisions are reflected in the statements of income as follows
(in thousands):
1995 1994 1993
-------- -------- --------
Currently payable......... $ 6,722 $ 4,056 $ 2,684
Deferred......... 159 743 458
-------- -------- --------
$ 6,881 $ 4,799 $ 3,142
======== ======== ========
11
<PAGE>
A reconciliation between income taxes computed at the federal statutory
rate and the Company's provision for income taxes is as follows (in thousands):
1995 1994 1993
-------- -------- --------
Federal statutory rate......... 35% 34% 34%
Federal income taxes at
statutory rate............... $ 7,225 $ 4,573 $ 2,838
State income taxes, net
of federal benefit........... 826 538 304
Jobs tax credits............... (1,170) (312) --
-------- -------- --------
$ 6,881 $ 4,799 $ 3,142
Components of the net deferred income tax liability at April 1, 1995 and
April 2, 1994 relate to the following (in thousands):
1995 1994
-------- --------
Deferred income tax liabilities:
Family farm cash-basis deferral......... $ 2,772 $ 2,772
Inventories............................. 1,464 1,130
Property and depreciation............... 934 356
Other................................... 1,428 2,091
-------- --------
6,598 6,349
-------- --------
Deferred income tax assets:
Tax credit carryforwards................ -- 133
Accrued expenses........................ 1,088 856
Other................................... 332 341
-------- --------
1,420 1,330
-------- --------
Net deferred income tax liability......... $ 5,178 $ 5,019
4 STOCKHOLDERS' EQUITY
---------------------------------------------------------
In November 1994, the board of directors approved a two-for-one split of the
Company's common stock in the form of a 100% stock dividend for shareholders of
record as of January 3, 1995. Par value remains $1 per share. A total of
2,535,000 shares of common stock were issued in connection with the split.
In November 1993, the board of directors approved a 25% stock dividend in
the form of a five-for-four stock split. As a result, one new share of the
Company's $1 par value common stock was issued for each four existing shares
(including shares available under option).
Beginning in 1990, the board of directors authorized the purchase of up to
$2,500,000 of the Company's stock on the open market. In November 1994, the
board increased the authorized amount to $7,500,000. As of April 1, 1995,
347,000 shares had been repurchased by the Company at a total cost of
$5,402,000.
5 STOCK OPTION PLAN
---------------------------------------------------------
In May 1993, the board of directors approved an incentive stock option plan
(the "Plan"). Under the provisions of the Plan, options to purchase a maximum
of 125,000 shares may be granted through 2003. The administrator of the Plan,
appointed by the board of directors, determines the grantee, vesting period,
exercise date, and expiration dates for all options granted. In addition, the
Plan provides for the issuance of options at prices not less than market value
at the date of grant. During May 1993, the Company granted 31,250 options with
an exercise price of $9.30 under the Plan. No options have been exercised.
6 INVESTMENTS IN UNCONSOLIDATED AFFILIATES
---------------------------------------------------------
On March 26, 1993 (the "effective date"), the Company acquired a 50% equity
interest in a joint venture formed with an unrelated party to own and operate
the Company's processing facility at Camilla, Georgia.
<PAGE>
On the effective date, the Company contributed the following assets and
liabilities to the joint venture (in thousands):
Inventory...................................... $ 3,003
Investment in unconsolidated affiliate......... 895
Property, plant, and equipment................. 6,556
-------
Total assets................................ 10,454
-------
Term note payable.............................. 2,000
-------
Net assets contributed......................... $ 8,454
The Company received the following assets as consideration for the net
assets contributed to the joint venture (in thousands):
Short-Term receivable.......................... $ 2,054
Note receivable................................ 1,400
Equity interest in joint venture............... 5,000
-------
$ 8,454
As of April 1, 1995, the short-term receivable has been paid in full, and
the note receivable balance was $1,400,000.
The Company sells eggs and broilers to the joint venture and purchases feed
from the joint venture. In addition, the Company performs certain
administrative services for the joint venture. Sales to, purchases from,
accounts payable and receivable from, and service fees charged to the joint
venture are based on terms consistent with those of unrelated parties and are
summarized as follows (in thousands):
1995 1994
-------- --------
Sales.......................... $ 1,963 $ 635
Purchases...................... 20,898 9,313
Accounts receivable............ 60 315
Accounts payable............... 1,563 252
Administrative service fees.... 548 371
In October 1994, the Company acquired a minority interest in a poultry
by-products company for $3,000,000.
The Company accounts for its investments in affiliates using the equity
method. The Company's share of affiliates' earnings is included in other income
in the accompanying statements of income. At April 1, 1995, undistributed
retained earnings from affiliates were approximately $4,300,000.
Summarized, combined balance sheet information for unconsolidated affiliates
as of April 1, 1995 is as follows (in thousands) (unaudited):
Current assets................................. $ 16,143
Noncurrent assets.............................. 51,734
--------
Total assets................................... $ 67,877
========
Current liabilities............................ $ 8,430
Noncurrent liabilities......................... 27,003
Owners' equity................................. 32,444
--------
Total liabilities and owners' equity......... $ 67,877
========
Summarized, combined statement of income information for all unconsolidated
affiliates for the year ended April 1, 1995 is as follows (in thousands)
(unaudited):
Net sales.............. $ 113,904
Gross profit........... 13,958
Operating income....... 11,893
Income before taxes.... 10,123
7 MAJOR CUSTOMER
---------------------------------------------------------
Sales to the Company's largest customer represented 37%, 39%, and 39% of net
sales during fiscal 1995, 1994, and 1993, respectively. Additionally, a major
portion of the joint venture's sales (Note 6) are to the same customer. The
Company has an agreement with this customer to supply chicken under a cost-plus
arrangement, and approximately 50% of the Company's production is committed to
the customer. Under the arrangement, production in excess of the customer's
demands and by-products are sold to other customers.
13
<PAGE>
8 BENEFIT PLANS
---------------------------------------------------------
Under a collective bargaining agreement, the Company contributes to a
multiemployer pension plan for the benefit of certain of its 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 multiemployer 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 $179,000, $144,000, and
$133,000 in 1995, 1994, and 1993, 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 2% of participating employees' salaries; additional
contributions may be made at the discretion of the Company's board of
directors.
The Company made matching contributions of $232,000, $228,000, and $232,000 in
1995, 1994, and 1993, respectively. No discretionary company contributions have
been made to this plan.
The Company does not provide postretirement medical or other benefits to
employees.
9 COMMITMENTS AND CONTINGENCIES
---------------------------------------------------------
The Company leases certain of its buildings, equipment, and vehicles under
operating leases. The statements of income include rental expense relating to
operating leases of $3,045,000 in 1995, $2,565,000 in 1994, and $3,475,000 in
1993.
At April 1, 1995, future minimum payments under operating leases were as
follows (in thousands):
1996......... $ 1,269
1997......... 670
1998......... 300
1999......... 212
-------
Total......... $ 2,451
The Company enters into contracts for the purchase of grain and other feed
ingredients. These contracts specify the quantity to be purchased, and the cost
is determined upon delivery using current market prices. The Company estimates
its purchase commitments under these contracts to be approximately $5,700,000
at April 1, 1995.
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.
10 QUARTERLY FINANCIAL DATA (UNAUDITED)
---------------------------------------------------------
Quarterly financial data is as follows (in thousands, except per share
data):
Net Operating Net Earnings
Sales Income Income Per Share*
-------- --------- ------- ----------
Fiscal year 1995 quarter ended:
July 2, 1994......... $ 87,972 $ 5,317 $ 3,438 $ 0.66
October 1, 1994...... 89,227 4,834 3,472 0.67
December 31, 1994...... 83,640 4,958 3,601 0.70
April 1, 1995......... 88,931 3,521 3,251 0.64
Fiscal year 1994 quarter ended:
July 3, 1993......... $ 75,828 $ 3,318 $ 2,130 $ 0.40
October 2, 1993........ 81,827 3,261 2,112 0.41
January 1, 1994........ 73,334 3,073 2,053 0.40
April 2, 1994......... 81,707 3,619 2,357 0.45
*Earnings per share amounts have been restated to reflect the two-for-one stock
split to stockholders of record on January 3, 1995 and the 25% stock dividend
to stockholders of record on January 3, 1994.
14
<PAGE>
Corporate Data
---------------------------------------------------------
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 14, 1995.
Form 10-K
The Form 10-K Annual Report for 1995, as filed by the Company
with the Securities and Exchange Commission, is available to
Cagle's, Inc. stockholders after June 30, 1995 on request and
without charge.
Write:
KENNETH R. BARKLEY
SENIOR VICE PRESIDENT FINANCE/
TREASURER/CFO
Cagle's, Inc.
2000 Hills Ave., N.W.
Atlanta, Georgia 30318
------------------------------------------------
General Information
Registrar and Transfer Agent
TRUST COMPANY BANK
Atlanta, Georgia
Legal Counsel
BYRNE, ELDRIDGE, MOORE & DAVIS P.C.
Atlanta, Georgia
Auditors
ARTHUR ANDERSEN LLP
Atlanta, Georgia
15
<PAGE>
Officers and Directors
Cagle's, Inc.
Officers
- -------------------------------------------------
J. DOUGLAS CAGLE
Chairman and Chief Executive Officer
KENNETH R. BARKLEY
Senior Vice President Finance/
Treasurer/CFO
JERRY D. GATTIS
President and Chief Operating Officer
JOHN BRUNO
Senior Vice President, Sales and Marketing
MARK M. HAM IV
Vice President Management Information Systems
GEORGE L. PITTS
Corporate Secretary
JAMES DAVID CAGLE
Vice President New Product Sales
GEORGE DOUGLAS CAGLE
Vice President New Product Development
Board of Directors
- -------------------------------------------------
J. DOUGLAS CAGLE
Chairman, Cagle's, Inc.
KENNETH R. BARKLEY
Senior Vice President Finance/Treasurer/CFO
Cagle's, Inc.
WARNER S. CURRIE
Of Counsel, Swift, Currie, McGhee & Hiers
Attorneys at Law
GEORGE DOUGLAS CAGLE
Vice President New Product Development
Cagle's Inc.
JAMES DAVID CAGLE
Vice President New Product Sales
Cagle's, Inc.
JERRY D. GATTIS
President and Chief Operating Officer
Cagles, Inc.
CANDACE CHAPMAN
Wyatt Investment Consultants, Inc.
Consultant/Director of Marketing
MARK M. HAM IV
Vice President Management Information Systems
Cagle's, Inc.
JOHN J. BRUNO
Senior Vice President Sales and Marketing
Cagle's, Inc.
Audit Committee
- -------------------------------------------------
CANDACE CHAPMAN, Chairperson
WARNER S. CURRIE
GEORGE DOUGLAS CAGLE
- -------------------------------------------------
CORPORATE HEADQUARTERS
2000 Hills Ave., N.W.
Atlanta, Georgia 30318
COLLINSVILLE, Alabama
Processing & Further Processing
ATLANTA, Georgia
Distribution & Further Processing
LOVEJOY, Georgia
Further Processing
DALTON, Georgia
Feed Mill, Hatchery & Growout
PINE MOUNTAIN VALLEY, Georgia
Processing & Deboning
FORSYTH, Georgia
Hatchery, Growout & Feed Mill
MACON, Georgia
Processing Deboning
BIRMINGHAM, Alabama
Distribution, Freezer Warehouse
- -------------------------------------------------
Subsidiary
Cagle's Farms Inc.
Officers
J. DOUGLAS CAGLE
Chairman and Chief Executive Officer
JERRY D. GATTIS
President and Chief Operating Officer
KENNETH R. BARKLEY
Senior Vice President Finance/
Treasurer/CFO
MARK M. HAM, IV
Vice President Management Information Systems
GEORGE L. PITTS
Corporate Secretary
- -------------------------------------------------
Board of Directors
J. DOUGLAS CAGLE
Chairman and Chief Executive Officer,
Cagle's, Inc./Cagle's Farms Inc.
JERRY D. GATTIS
President and Chief Operating Officer
Cagle's, Inc./Cagle's Farms, Inc.
KENNETH R. BARKLEY
Senior Vice President Finance/Treasurer/CFO
Cagle's, Inc./Cagle's Farms, Inc.
MARK M. HAM, IV
Vice President Management Information Systems
Cagle's, Inc./Cagle's Farms Inc.
16
<PAGE>
CAGLE'S, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JULY 14, 1995
TO THE HOLDERS OF CLASS A COMMON STOCK:
Notice is hereby given that the Annual Meeting of Shareholders of Cagle's,
Inc. (the "Company"), will be held at the Company's offices located at 2000
Hills Avenue, Atlanta, Georgia, on the 14th day of July, 1995, at 11:00 A.M.
Eastern Daylight Time, for the following purposes:
(1) To fix the number of members of the Board of Directors at nine, and to
elect the members thereof; and
(2) To transact any other business that may properly come before the
meeting or any adjournments thereof; all as set forth in the Proxy Statement
accompanying this notice.
Only holders of record of Class A Common Stock on May 27, 1995, will be
entitled to vote at the meeting. The transfer books will not be closed.
By order of the Board of Directors.
George L. Pitts, Secretary
Atlanta, Georgia
June 12, 1995
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, PLEASE SIGN,
DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED BUSINESS REPLY
ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU WISH, WITHDRAW YOUR
PROXY AND VOTE IN PERSON.
CAGLE'S, INC.
2000 HILLS AVENUE, N.W. ATLANTA, GEORGIA 30318
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 14, 1995
The enclosed proxy is solicited by the Board of Directors of Cagle's, Inc.
(the ``Company") for use at the Annual Meeting of Shareholders to be held on
July 14, 1995, and at any adjournment thereof, and is revocable by written
notice to the Secretary of the Company at any time before its exercise. Unless
revoked, proxies in the form enclosed, properly executed and received by the
Secretary of the Company prior to the Annual Meeting, will be voted at the
meeting as specified by the shareholder in the proxy or, except with respect
to broker non-votes, if no specification is made in the proxy, then the
persons designated as proxies shall vote FOR each of the proposals set forth in
the accompanying Notice of Annual Meeting of Shareholders, and according
to their discretion upon all other matters which may properly come before the
meeting. Broker non-votes will not be included in vote totals and will have no
effect on the outcome of the vote. Abstentions will not be counted either as a
vote FOR or a vote AGAINST a proposal and will have no effect on the outcome of
the vote.
An annual report to the shareholders, including financial statements for
the year ended April 1, 1995, is enclosed herewith. The approximate date of
mailing this proxy statement and the form of proxy is June 12, 1995.
On May 27, 1995, the Company had outstanding and entitled to vote at the
Annual Meeting 5,034,182 shares of Class A Common Stock. With regard to any
matter to be considered, each share of Class A Common Stock is entitled to one
vote. If a quorum is present, directors will be elected by the affirmative vote
of a majority of the shares represented at the meeting in person or by proxy.
A quorum consists of shareholders owning 50% of the Class A Common Stock plus
one share. Only shareholders of record on May 27, 1995, are entitled to vote
at the meeting.
The enclosed proxy will be voted to fix the number of members of the Board
of Directors at nine and elect the nine nominees named in the proxy. Each
director shall hold office for a term of one year and thereafter until his or
her successor shall have been duly elected and qualified. In the event that
any of the nominees is unable to serve (which is not anticipated), the persons
designated as proxies will cast votes for the remaining nominees and for such
other persons as they may select. Eight of the nominees are presently
directors, whose one year terms of office will expire at the Annual Meeting.
DIRECTORS AND EXECUTIVE OFFICERS
The following persons are presently directors of the Company and have been
nominated to stand for re-election:
J. Douglas Cagle, 64, has been a director of the Company since 1953, and
has been Chief Executive Officer of the Company since 1970 and Chairman of
the Board of the Company since July, 1993. Mr. Cagle served as President of
the Company from 1970 to July, 1993. He is expected to be reelected to the
offices of Chief Executive Officer and Chairman of the Board when his one year
term expires at the next annual meeting of the Board, which is scheduled for
July 14, 1995, immediately following the Annual Meeting of Shareholders. Under
rules promulgated by the Securities and Exchange Commission, Mr. Cagle is a
``control person" of the Company due to his stock holdings and those of his
relatives. Mr. Cagle is the father of George Douglas Cagle and James David
Cagle, who are also directors of the Company.
George Douglas Cagle, 42, has been a director of the Company since July,
1976. Mr. Cagle has been employed in the corporate sales department of the
Company since the end of 1977, and he has been Vice President -- New Product
Development since July, 1993, an office to which he is expected to be
reelected at the next annual meeting of the Board. Mr. Cagle is the son of J.
Douglas Cagle and the brother of James David Cagle, who are also directors of
the Company.
Kenneth R. Barkley, 54, has been a director of the Company since July,
1977, and has been Treasurer and Chief Financial Officer of the Company since
July, 1977 and Senior Vice President -- Finance of the Company since July,
1993. Mr. Barkley served as Secretary of the Company from July, 1977 to July,
1993. He is expected to be reelected to the offices of Treasurer, Chief
Financial Officer and Senior Vice President -- Finance at the next annual
meeting of the Board.
James David Cagle, 41, has been a director since July, 1987. He has been
employed in the corporate sales department of the Company since 1982, and he
has been Vice President -- New Product Sales since July, 1993, an office to
which he is expected to be reelected at the next annual meeting of the Board.
Mr. Cagle is the son of J. Douglas Cagle and the brother of George Douglas
Cagle, who are also directors of the Company.
Jerry Don Gattis, 46, has been a director since July, 1989, and has been
President and Chief Operating Officer of the Company since July, 1993, offices
to which he is expected to be reelected at the next annual meeting of the
Board. Mr. Gattis joined the Company in April, 1987 as Vice President - Sales
and Marketing, which office he held until February, 1989. He served as Senior
Vice President of the Company from February, 1989 to July, 1993. Before
becoming employed by the Company, Mr. Gattis was Director of Sales and
Distribution for Pilgrim's Pride and had held this position since 1981. Mr.
Gattis previously had been associated with Mountaire Corporation, which
Pilgrim's Pride acquired in 1981. While with Mountaire, Mr. Gattis served as
Sales Manager and later as General Manager of Processing and Sales.
Mark M. Ham IV, 40, has been a director since July, 1993. Mr. Ham has been
Assistant Secretary of the Company since July, 1987 and Vice President --
Information Systems since July, 1993, offices to which he is expected to be
reelected at the next annual meeting of the Board. Mr. Ham has been associated
with the Company since 1977, during which time he has been responsible for the
Company's cost accounting and special accounting projects and matters involving
data processing and telecommunication.
John J. Bruno, Jr., 51 has been a director since July, 1993. Mr. Bruno
joined the Company in October, 1988 as director of sales and marketing and has
been Senior Vice President -- Sales and Marketing of the Company since July,
1993, an office to which he is expected to be reelected at the next annual
meeting of the Board. Mr. Bruno served as Vice President -- Sales and Marketing
from February, 1989 to July, 1993. Before becoming employed by the Company, Mr.
Bruno was Director of Sales and Marketing for Marshall Durbin Company and had
held that position since 1980.
Candace Chapman, 38, has been a director since July, 1993. Ms. Chapman is a
Consultant/Director of Marketing at Wyatt Investment Consulting, Inc. Ms.
Chapman previously was a Vice President at Atlanta Capital Management Company
from 1991 to October, 1994, and worked in the trust investment division of
SouthTrust Bank, from 1987 to 1991, where she developed business opportunities
for the bank. Ms. Chapman is a Certified Public Accountant and also holds
Series 7 and Series 63 investment licenses.
The following person is not presently a director of the Company and has
been nominated to stand for election to the Board of Directors:
G. Bland Byrne III, 43, is a principal in the law firm of Byrne, Eldridge,
Moore & Davis, P.C. Mr. Byrne previously was a partner in the law firm of
Swift, Currie, McGhee & Hiers, from January, 1984 to April, 1994.
The foregoing list of nominees includes several persons who also may be
considered executive officers of the Company: namely, J. Douglas Cagle, George
Douglas Cagle, Kenneth R. Barkley, James David Cagle, Jerry Don Gattis, Mark M.
Ham IV, and John J. Bruno, Jr. In addition, the following individual is
expected to be reelected as an executive officer immediately following the
Annual Meeting:
George L. Pitts III, 46, has been Secretary of the Company since July,
1993, an office to which he is expected to be reelected at the next annual
meeting of the Board. Mr. Pitts has been employed in the corporate accounting
department of the company since 1974, holding the position of Corporate
Accounting Manager.
Warner S. Currie, 74, a director since 1963, intends to retire when his
term expires at the Annual Meeting.
OWNERSHIP OF VOTING SHARES BY OFFICERS, DIRECTORS AND OTHERS
The following table sets forth the stock ownership in the Company, as of
May 1, 1995, of each director and nominee for director and of each executive
officer named in the Summary Compensation Table on page 5 hereof. All share
numbers have been adjusted for the 2-for-1 stock dividend that occurred on
January 16, 1995.
Name Amount and Nature of Percent of
Beneficial Ownership of Class A
Class A Common Stock Common Stock
J. Douglas Cagle ..... 2,147,964(a) 42.7%
Warner S. Currie ..... -0- (b) _
George Douglas Cagle ... 429,628(c) 8.5%
Kenneth R. Barkley ..... 2,750(d) *
James David Cagle ..... 429,626(e) 8.5%
Jerry Don Gattis ..... 11,492(f) *
Mark M. Ham IV ..... 2,600(g) *
John J. Bruno, Jr. ..... 3,500(h) *
Candace Chapman ..... 494 *
G. Bland Byrne III ..... 2,000 *
All Directors and
Executive Officers as a
group (10) persons .... 3,030,054(i) 60.2%
*Less than 1% of issued and outstanding shares of Class A Common Stock of the
Company.
(a) This amount includes 970,652 shares owned by Mr. Cagle as trustee of a
trust established under the will of his father.
(b) This amount does not include 2,000 shares of Class A Common Stock owned by
the law firm of Swift, Currie, McGhee & Hiers, in which Mr. Currie is of
counsel. Mr. Currie disclaims any beneficial ownership of such shares.
(c) This amount includes 97,634 shares held as custodian for Mr. Cagle's
children.
(d) This amount includes 2,500 shares which may be acquired upon the exercise
of options which are presently exercisable.
(e) This amount includes 97,634 shares held as custodian for Mr. Cagle's
children.
(f) This amount includes 5,000 shares which may be acquired upon the exercise
of options which are presently exercisable.
(g) This amount includes 2,500 shares which may be acquired upon the exercise
of options which are presently exercisable.
(h) This amount includes 2,500 shares which may be acquired upon the exercise
of options which are presently exercisable.
(i) This amount includes 12,500 shares which may be acquired upon the exercise
of options which are presently exercisable.
The following table sets forth each person known to management to be the
beneficial owner of more than five percent of the voting securities of the
Company as of May 1, 1995:
Amount and Nature
Title of Name and Address of of Beneficial Percent of
Class Beneficial Owner Ownership (a) Class
Class A J. Douglas Cagle ..... 2,147,964 (b) 42.7%
Common Stock 2000 Hills Avenue, N.W.
Atlanta, Georgia 30318
Class A George Douglas Cagle ... 429,628 (c) 8.5%
Common Stock 2000 Hills Avenue, N.W.
Atlanta, Georgia 30318
Class A James David Cagle ..... 429,626 (d) 8.5%
Common Stock 2000 Hills Avenue, N.W.
Atlanta, Georgia 30318
Class A Dimensional Fund
Common Stock Advisors, Inc. ..... 344,600 (e) 6.8%
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401
(a) Of the shares shown in this column, management knows of no shares with
respect to which such listed beneficial owners have the right to acquire
beneficial ownership as specified in regulations of the Securities and Exchange
Commission.
(b) This amount includes 970,652 shares owned by Mr. Cagle as trustee of a
trust established under the will of his father.
(c) This amount includes 97,634 shares held as custodian for Mr. Cagle's
children.
(d) This amount includes 97,634 shares held as custodian for Mr. Cagle's
children.
(e) Dimensional Fund Advisors, Inc. (``Dimensional''), a registered investment
advisor, is deemed to have beneficial ownership of 344,600 shares all of which
are held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in a series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee benefit
plans, for all of which Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
Securities and Exchange Commission ("SEC") regulations, the Company's
directors, certain officers, and greater than ten percent shareholders are
required to file reports of ownership and changes in ownership with the SEC and
the American Stock Exchange and to furnish the Company with copies of all such
reports they file. Based solely on its review of such reports from certain
reporting persons, the Company believes that all filing requirements applicable
to its directors, officers and ten percent shareholders were satisfied during
the Company's last fiscal year.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
AND COMPENSATION OF DIRECTORS
The Board of Directors established an Audit Committee in February, 1981.
This committee reviews the work of the Company's independent public
accountants, management, and internal accounting staff to ensure that each is
properly discharging its responsibilities in the area of financial control and
reporting. The committee is presently composed of George Douglas Cagle, Warner
S. Currie, and Candace Chapman. The Board shall appoint a new member of the
Audit Committee to replace Mr. Currie at the next annual meeting of the Board.
The Company does not have nominating or compensation committees of the Board of
Directors. During the last fiscal year, there were five meetings of the Board
of Directors, and the Audit Committee met one time. Each of the incumbent
directors during the last fiscal year attended at least 75% of the aggregate of
the number of meetings of the Board of Directors and the number of meetings of
the Audit Committee held during any period during which he was a director or
member of the Audit Committee, respectively.
During the Company's last fiscal year, each director who was not also an
officer or full time employee of the Company, received an annual director's fee
in the amount of $15,000. Directors who were officers or full time employees of
the Company received an annual director's fee of $10,000.
EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation paid in
the Company's fiscal year ended April 1, 1995, and the two prior fiscal years
to the Company's Chief Executive Officer and the Company's four other most
highly compensated executive officers.
Summary Compensation Table
Long Term
Annual Compensation
------------------------- ------------
Securities
Name & Principal Underlying All Other
Position Year 1 Salary Bonus(2) Options(#) Compensation 3
- ------------------------ ------ --------- --------- ---------- --------------
J. Douglas Cagle 1995 $262,315 $132,000 -0- $18,400
Chairman of the Board & 1994 248,796 122,200 -0- 12,213
Chief Executive Officer 1993 243,141 117,500 -0- 6,712
Jerry Don Gattis 1995 243,639 123,500 -0- 9,676
President & 1994 226,361 112,294 12,500(4) 9,559
Chief Operating Officer 1993 198,415 97,975 -0- 8,886
John J. Bruno 1995 151,289 75,000 -0- 4,247
Senior Vice President- 1994 138,746 67,695 6,250(4) 4,614
Sales and Marketing 1993 116,843 48,072 -0- 2,886
Kenneth R. Barkley 1995 117,577 56,275 -0- 8,370
Senior Vice President- 1994 110,280 52,140 6,250(4) 7,728
Finance, Treasurer & Chief 1993 97,682 36,080 -0- 4,699
Financial Officer
Mark M. Ham IV 1995 92,775 43,300 -0- 10,571
Vice President- 1994 84,807 40,092 6,250(4) 5,829
Information Systems & 1993 64,503 26,840 -0- 7,379
Assistant Secretary
1 The year designated in this column refers to the Company's fiscal year
which ended in such year, which for 1995 was April 1, 1995.
2 The amounts in this column present the bonuses paid to the named individuals
pursuant to the Company's Executive Bonus Plan.
3 This column includes contributions or payments to, or for the account of,
the named individuals pursuant to the Company's Cash or Deferred Profit-
Sharing Plan (the "401(k) Plan") and medical reimbursement plan. The medical
reimbursement plan covers directors who are also employees and officers.
Medical expenses of the covered individuals and their dependents which are not
otherwise covered by insurance are paid under this plan upon the filing of a
proof of claim by the covered individual with the Company's insurance carrier.
4 Adjusted, as necessary for the 2-for-1 stock dividend that occurred on
January 16, 1995.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at Year End
Shares Acquired Year End (#) ($)
on Exercise Value Exercisable/ Exercisable/
Name (#) Realized Unexercisable Unexercisable
- ------------------ --------------- ---------- ------------- ----------------
J. Douglas Cagle _ _ _ _
Jerry D. Gattis _ _ 5,000/7,500 $44,750/$67,125
John J. Bruno _ _ 2,500/3,750 $22,375/$33,563
Kenneth R. Barkley _ _ 2,500/3,750 $22,375/$33,563
Mark M. Ham IV _ _ 2,500/3,750 $22,375/$33,563
Compensation Committee Interlocks and Insider Participation
The Board of Directors of the Company does not have a standing compensation
committee. The entire Board determines the compensation of the Chief Executive
Officer, and the Chief Executive Officer determines the compensation of the
remaining executive officers of the Company and its wholly-owned subsidiary.
The following members of the Board of Directors also were executive officers of
the Company and its subsidiary during the last fiscal year: J. Douglas Cagle,
Jerry Don Gattis, Kenneth R. Barkley, John J. Bruno, Jr., Mark M. Ham IV,
George Douglas Cagle and James David Cagle.
Board Report on Executive Compensation
The components of the annual compensation paid to the Chief Executive
Officer and the other executive officers of the Company are (i) base salary;
(ii) a bonus calculated pursuant to the provisions of the Company's Executive
Bonus Plan; (iii) allocation of contributions made by the Company to the
respective accounts of such executive officers under the Company's 401(k) Plan;
and (iv) payments made pursuant to the Company's medical reimbursement plan.
All executive officers other than the Chief Executive Officer are also eligible
to participate in the Company's 1993 Stock Option Plan.
The base salaries of the Chief Executive Officer and of the other executive
officers are not directly related to factors such as the Company's
profitability, sales growth, return on equity or market share, except to the
extent that such factors impact the Company's overall ability to satisfy its
compensation obligations to all employees. The base salaries for the Chief
Executive Officer and other executive officers of the Company are determined
primarily by a comparison of similarly situated officers of other companies in
the poultry industry. Years of service, responsibilities, company growth,
future plans and the Company's current ability to pay are also taken into
account in determining such base salaries.
The Chief Executive Officer and certain other executive officers are
participants in the Company's Executive Bonus Plan. The amount of the bonuses
payable are based upon the Company's after tax return on shareholder equity.
Such return is calculated before the accrual of any bonus payable pursuant to
the plan. Pursuant to the plan, each participant receives a bonus in an amount
equal to: fifty percent (50%) of such participant's base salary for a return on
shareholders equity of twenty percent (20%) or more, thirty percent (30%) of
base salary for a return of 15% to 19.99%, twenty percent (20%) of base salary
for a return of 10% to 14.99%, with no bonus payable if the return is less than
ten percent (10%).
The stock options granted under the 1993 Stock Option Plan (approved by the
shareholders in July, 1993) provide an incentive for executive officers to
manage the Company with a view to maximization of long-term shareholder value.
Stock options to purchase Class A Common Stock may be granted by the Plan
Administrator to executive officers at an option price of 100% of the market
value on the date of the grant, with a maximum term of 10 years. The Plan
Administrator has sole discretion in determining the amount of shares covered
by each option and the vesting thereof.
This report was prepared by the entire Board of Directors of the Company.
Performance Graph
The following graph presents a comparison of five year cumulative total
shareholder returns among Cagle's, Inc., the S&P 500 Index and a Peer Group
Index. This information provides the annual return from the beginning of the
previous fiscal year assuming dividends are reinvested monthly. The graph
assumes an initial investment of $100 in March 1990. The Peer Group Index
consists of the following companies: Golden Poultry, Inc., Hudson Foods, Inc.,
Pilgrams Pride Corporation, Sanderson Farms, Inc., Tyson Foods, Inc., and WLR
Foods, Inc.
March 31, 1990 = $100.00
Base
Year March March March March March
Company/Index 1990 1991 1992 1993 1994 1995
CAGLE'S, INC. -CL A 100 90 102 378 363 593
S&P 500 INDEX 100 114 127 146 149 172
PEER GROUP INDEX
AVERAGE 100 120 103 148 134 157
MATERIAL INTERESTS AND MATERIAL TRANSACTIONS
Certain directors or nominees for director are affiliated with entities
that have transacted a material amount of business with the Company during the
Company's last fiscal year or that propose to do so during the Company's
current fiscal year. These business relationships are as follows:
The firm of Swift, Currie, McGhee & Hiers, in which Mr. Warner S. Currie, a
director of the Company, is of counsel, and in which Mr. G. Bland Byrne III, a
nominee for director of the Company, was a partner for one month during the
last fiscal year of the Company, received $197,021 during the last fiscal year
of the Company as fees for legal services rendered to the Company and its
subsidiaries. The firm of Byrne, Eldridge, Moore & Davis, P.C. in which Mr. G.
Bland Byrne III, a nominee for director of the Company, is a principal,
received $189,886 during the last fiscal year of the Company as fees for legal
services rendered to the Company and its subsidiaries.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation of shareholders of record by mail, telephone or personal contact,
arrangements will be made with brokerage houses to furnish proxy materials to
their principals, and the Company will reimburse them for mailing expenses.
Custodians and fiduciaries will be supplied with proxy materials to forward to
beneficial owners of stock.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP to serve as
independent accountants of the Company for the current fiscal year. Arthur
Andersen LLP has served as the Company's independent accountants<JU>since 1984.
Representatives of Arthur Andersen LLP are expected to be present at the
shareholders' meeting, will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
PROPOSALS OF SECURITY HOLDERS FOR 1996 ANNUAL MEETING
The deadline for receipt of shareholder proposals for inclusion in the
Company's proxy statement and form of proxy for presentation at the 1996 annual
meeting is February 13, 1996.
OTHER MATTERS
Management does not know of any matter to be brought before the meeting
other than those referred to above. If any other matters properly come before
the meeting, the persons designated as proxies will vote thereon in accordance
with their best judgment.
Whether or not you expect to be present at the meeting in person, please
sign, date and return the enclosed proxy promptly in the enclosed business
reply envelope. No postage is necessary if mailed in the United States.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS HEREBY
SOLICITED, ON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 13a-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE COMPANY'S MOST RECENT FISCAL YEAR. REQUESTS SHOULD BE ADDRESSED TO MR.
GEORGE PITTS, SECRETARY, CAGLE'S, INC., POST OFFICE BOX 4664, ATLANTA, GEORGIA
30302. IF THE PERSON REQUESTING THE REPORT WAS NOT A SHAREHOLDER OF RECORD ON
MAY 27, 1995, THE REQUEST MUST INCLUDE A REPRESENTATION THAT HE WAS A
BENEFICIAL OWNER OF THE COMMON STOCK ON THAT DATE.
By order of the Board of Directors.
George L. Pitts, Secretary
Atlanta, Georgia
June 12, 1995
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