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______MARCH 30, 1996___________________________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.)
__$30,573,618_(based_on_15.375_per_share_closing_price_on_May_21,_1996)___
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______________________________________
__5,006,282_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 March 30, 1996 - Items 5, 6, 7, 8, and 14.
2) Proxy statements for registrant's 1996 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 2,100,000 birds per week in its
three processing plants, including two plants which operate with two full
shifts. Of the Company's total production, approximately 1,150,000 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 at that time.
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 3,500 persons of whom approximately 53% 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 22% of the Company's sales
for the year ended March 30, 1996. The Company has an agreement with Equity to
supply chicken under a cost-plus arrangement, and approximately 24% 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.
Backlog
The Company had no material backlog of orders existing as of March 30, 1996.
<PAGE>
Competition
The Company is a leading regional integrated poultry processor, ranking
ninth 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.
Subsequent to March 30, 1996 the Company was cited by OSHA for several
violations at its Macon, Georgia plant and assessed a fine of $88,000. The
Company has paid the fine in full settlement of the citation.
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.
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
<PAGE>
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 in Forsyth,
Georgia, has 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 Macon, Georgia, plant has the capacity to
process 8,400 birds per hour, and the Collinsville plant can process up to
12,600 birds per hour. The Pine Mountain plant which was destroyed by
fire in June 1995 but has since been rebuilt now has the capacity to produce
10,800 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.
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 6,800,000 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 joint venture was created in
March, 1993 from the contributed assets of the Company's former south Georgia
<PAGE>
and north Florida operations. The joint venture is growing and processing
approximately 950,000 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. In December 1995, the Company acquired a 1/3 interest in a
grower housing financing company. The company finances poultry houses for
growers in the South Georgia area who are contract growers for the joint
venture company.
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.
Some 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.
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 1996.
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 March 30, 1996 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 March 30, 1996 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 March 30, 1996 and is incorporated
herein by reference.
<PAGE>
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 March 30, 1996 and is incorporated
herein by reference.
Item 9: Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
None.
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 12, 1996 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 12, 1996 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 12, 1996 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 12, 1996 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
The Company's 1996 Annual Report to Stockholders contains the consolidated
balance sheets as of March 30, 1996 and April 1, 1995, the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended March 30, 1996, 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--March 30, 1996 and April 1, 1995
<PAGE>
Consolidated Statements of Income for the Years Ended March 30, 1996,
April 1, 1995, and April 2, 1994
Consolidated Statements of Stockholders' Equity for the Years Ended
March 30, 1996, April 1, 1995, and April 2, 1994
Consolidated Statements of Cash Flows for the Years Ended March 30,
1996, April 1, 1995, and April 2, 1994
Notes to Consolidated Financial Statements--March 30, 1996, April 1, 1995,
and April 2, 1994
(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-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/ G. Bland Byrne 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.
ANNUAL REPORT FOR THE FISCAL YEAR ENDED 1996
Contents
Chairman's Letter ..........................................1
Management's Discussion ................................2 & 3
Five-Year Selected Financial Data ..........................4
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 ...................................................10-15
Corporate Data .......................................16 & IBC
<PAGE>
CAGLE'S, INC. & SUBSIDIARY
Chief Executive Officer's Letter
To Our Stockholders:
Resilience best describes both the future and past for Cagle's. Many of our
challenges are unpredictable,however, we continue to meet them with focus,
confidence and determination.
This past year has been no exception. Cagle's lost a key facility to fire in
Pine Mountain Valley, Georgia, but with enthusiasm and dedication, rebuilt it
in record breaking time protecting both the employee and customer. The new
facility is state of the art and is twice the size of the old facility,
capable of producing double the volume.
The unexpected has effected our earnings and caused our debt level to be higher
than anticipated, however, our joint venture operations have provided steady
earnings.
Further expansion plans have been temporarily delayed while we deal with higher
grain prices, abundance of meat protein, and higher debt level. Our top
priority will be to strengthen Cagle's position in the market place.
With all sincerity, my thanks to our employees, customers, and vendors for also
being resilient, hardworking, dedicated and committed to help us through a
difficult period of the fire and rebuilding of Pine Mountain Plant. To our
stockholders, Thank you, for having faith in our company.
Sincerely,
/s/ J. Douglas Cagle
J. Douglas Cagle
Chairman and C.E.O
1
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
A devastating fire at one of the Company's processing plants during the first
quarter and feed prices which had escalated to unprecedented levels by year-end
coupled with the uncertainties inflicted upon the export markets late in the
year all caused a significant impact on operating earnings for the year.
The gain resulting from the difference between the book value and insurance
proceeds received for the destroyed plant and stronger earnings and fees
generated from the Company's unconsolidated affiliates offset to some degree by
an increased interest expense, accounted for the majority of the Company's
earnings in 1996.
1996 Compared to 1995
Net sales in 1996 dropped by 11.7% ($41 million) as compared to 1995. This
reduction is primarily due to the production lost at the plant destroyed by
fire from the time of the fire in June 1995 to start-up in late November 1995
and ultimately not attaining pre-fire production until the fourth quarter. The
reduction in sales due to the fire was somewhat offset by higher market prices
during 1996. Georgia Dock Market prices averaged $.0197 per lb. higher in 1996
which was 3.6% higher than 1995.
Although market prices were higher in 1996, margins were adversely impacted
by feed prices which increased rapidly during the year as a result of a
diminished crop due to poor weather and also due to escalating exports of US
grain coupled with growing domestic consumption as the entire meat complex
continued to expand. Feed costs were 14.8% higher in 1996 compared to 1995 and
are currently at record high levels. These costs levels are expected to
continue into fiscal 1997.
Margins were also negatively impacted in 1996 by the conversion of the
Company's Macon, Georgia plant from a fresh bulk deboning facility to an IQF
(Individual Quick Frozen) facility to support the Company's growing consumer
market for this product which had previously been produced only at the
Company's Atlanta, Georgia further processing plant. The conversion and
inefficiencies associated with producing an entirely new product line at this
facility severely impacted operating margins during the last half of 1996.
However, margins at Macon are improving and will prove to be a valuable
addition in providing a more diverse marketing program.
Other income in 1996 increased by $11.4 million over 1995 primarily due to a
gain of $8.9 million resulting from the difference between book value and
proceeds from insurance on the assets lost to fire. The balance of the increase
primarily represents increased earnings and management fees from the Company's
unconsolidated affiliates which experienced increased production and profits
during the year. Earnings and management fees from affiliates were $4,940,000
in 1996 compared to $4,297,000 in 1995. These affiliates help to further
integrate the Company's operations by complementing our marketing efforts or
supplying us with essential materials or services.
Selling, delivery and general and administrative expenses increased by 3.1%
as a group from 1995 levels primarily due to increases in personnel related
costs during the year and some additional costs associated with filing the
insurance claim resulting from the fire.
2
<PAGE>
Interest expense increased by $1.4 million in 1996 as compared to 1995 due to
funds borrowed to rebuild the processing plant and finance the increased
working capital needs resulting from the fire. Construction was well under way
before the first advances were made by the insurance carrier and the cost of
the new plant ultimately exceeded the property insurance proceeds by
approximately $16 million. In addition, receipt of business interruption
insurance proceeds has been slow thereby resulting in increased borrowing to
support operations.
The provision for income taxes is computed at statutory rates allowing for
various tax credits available to the Company resulting in a net effective rate
of 36%.
1995 Compared to 1994
Sales increased by 11.9% in 1995 as compared to 1994. This increase was
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%, reflecting 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 1994 to 9.7% in 1995, due
to lower feed costs and changing sales mix towards higher margin items.
Selling and delivery expenses increased by 22.7% over 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 in 1995 as compared to
1994 and essentially reflect increases in personnel related expenses.
Although total debt increased since 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%.
Financial Condition and Liquidity
Heavy borrowing to finance reconstruction of the Pine Mountain Valley Plant
and the extra cost associated with the fire loss until the insurance claim is
fully adjusted and proceeds received have resulted in a heavier debt load than
normal for the Company. Existing credit facilities were utilized for this
purpose and the Company expects to replace some of the construction related
debt with permanent debt in the first quarter of fiscal 1997. As of March 30,
1996, the Company has $19 million outstanding on a $20 million unsecured
revolving credit facility and $26 million borrowed from a $40 million unsecured
term loan facility. The Company believes availability under existing and
anticipated facilities to be adequate to meet future requirements.
The earnings outlook for the Company during fiscal 1997 is not encouraging
due to the run-up in feed prices during recent weeks and the expectation of
continued price pressure on grain for the foreseeable future as domestic and
export demand increases. The current year's crop harvest will be critical to
earnings this year. However, a return to perceived normal price levels will
also require some restraint in expansion by the meat industry.
3
<PAGE>
Five-Year Selected Financial Data
52 Weeks 52 Weeks 52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended Ended
March 30, April 1, April 2, April 3, March 28,
1996 1995 1994 1993 1992
--------- -------- -------- -------- ---------
OPERATING RESULTS:
Net sales................. $308,749 $349,770 $312,696 $280,105 $208,775
Operating expenses........ 307,105 331,140 299,425 270,486 204,195
--------- -------- -------- -------- --------
Operating income.......... 1,644 18,630 13,271 9,619 4,580
Interest expense.......... (2,499) (1,072) (1,336) (1,469) (1,507)
Other income, net......... 14,448 3,085 1,516 198 63
--------- -------- -------- -------- --------
Income before income taxes
and accounting change... 13,593 20,643 13,451 8,348 3,136
Provision for income taxes. 4,893 6,881 4,799 3,142 1,194
--------- -------- -------- -------- --------
Income before accounting
change................. $8,700 $13,762 $8,652 $5,206 $1,942
========= ======== ======== ======== ========
FINANCIAL POSITION:
Working capital..... $ 40,510 $17,592 $19,741 $19,068 $13,548
Total assets..... 142,687 88,771 69,220 65,006 59,537
Long-term debt..... 58,508 15,233 11,819 17,591 16,531
Stockholders' equity..... 52,021 44,371 34,268 26,728 21,392
PERFORMANCE PER COMMON SHARE:*
Income before accounting
change.................. $1.73 $2.67 $1.66 $0.99 $0.36
Net income................. 1.73 2.67 1.66 1.08 0.36
Dividends.................. 0.12 0.105 0.085 0.06 --
Book value at the end of
the year ............... 10.39 8.81 6.58 5.07 4.05
Average number of common shares
outstanding*............. 5,018 5,152 5,224 5,272 5,368
* 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.
- ------------------------------------------------------------------------------
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 March 30, 1996, 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 two-for-one stock split
issued to stockholders of record on January 3, 1995 were:
1996 1995
---------------------------- -----------------------------
Dividend High Low Dividend High Low
-------- --------- ------- -------- --------- -------
Quarter:
First $0.030 $23-7/8 $16 $0.025 $12-15/16 $10-7/8
Second 0.030 17-3/4 13-3/4 0.025 15-1/2 10-3/4
Third 0.030 17-7/8 14 0.025 22-5/8 14-1/8
Fourth 0.030 18-1/2 14-1/8 0.030 24-5/8 17-7/8
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 reason able 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 /s/ Kenneth R. Barkley
J. Douglas Cagle Kenneth R. Barkley
Chairman and Chief Executive Officer Senior Vice President Finance,
Treasurer and Chief Financial Officer
May 10, 1996
- --------------------------------------------------------------------------
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 March 30, 1996 and April 1, 1995 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended March 30, 1996. 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 March 30, 1996 and April 1, 1995 and the results of their operations and
their cash flows for each of the three years in the period ended March 30, 1996
in conformity with generally accepted accounting principles.
/s/ Arthur Anderson L.L.P.
Atlanta, Georgia
May 10, 1996
5
<PAGE>
Consolidated Balance Sheets
- -----------------------------------------------------------------------------
March 30, 1996 and April 1, 1995
(In Thousands, Except Par Values) 1996 1995
--------- ---------
ASSETS
CURRENT ASSETS:
Cash................................... $ 326 $ 462
Trade accounts receivable, less
allowance for doubtful accounts
of $315 and $141 in 1996 and
1995, respectively.................. 18,631 15,013
Inventories............................ 32,908 25,282
Insurance proceeds receivable(Note2)... 9,183 --
Other current assets................... 2,481 1,538
--------- ---------
Total current assets............. 63,529 42,295
--------- ---------
INVESTMENTS IN AND RECEIVABLES
FROM UNCONSOLIDATED AFFILIATES............ 14,675 11,697
--------- ---------
OTHER ASSETS.............................. 1,038 550
--------- ---------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land................................... 2,037 1,280
Buildings and improvements............. 47,146 26,549
Machinery, furniture, and equipment.... 41,315 24,226
Vehicles............................... 3,996 3,254
Construction in progress............... 44 11,588
--------- ---------
94,538 66,897
Less accumulated depreciation.......... (31,093) (32,668)
--------- ---------
63,445 34,229
--------- ---------
$142,687 $ 88,771
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt
and capital lease obligations......... $ 1,570 $ 1,572
Accounts payable........................ 13,489 13,550
Accrued expenses........................ 7,776 8,867
Deferred income tax liabilities......... 184 714
--------- ---------
Total current liabilities......... 23,019 24,703
--------- ---------
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS........................ 58,508 15,233
--------- ---------
DEFERRED INCOME TAX LIABILITIES............ 9,139 4,464
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value;
1,000 shares authorized, none issued... -0- -0-
Common stock, $1 par value;
9,000 shares authorized, 5,006
and 5,034 shares outstanding
in 1996 and 1995, respectively......... 5,006 5,034
Additional paid-in capital.............. 7,946 8,366
Retained earnings....................... 39,069 30,971
--------- ---------
52,021 44,371
--------- ---------
$142,687 $88,771
The accompanying notes are an integral part of these consolidated balance
sheets.
6
<PAGE>
Consolidated Statements of Income
For the Years Ended March 30, 1996, April 1, 1995, and April 2, 1994
(In Thousands, Except Per Share Data) 1996 1995 1994
-------- -------- --------
NET SALES.................................. $308,749 $349,770 $312,696
-------- -------- --------
COSTS AND EXPENSES:
Cost of sales............................ 291,378 315,882 286,131
Selling and delivery..................... 9,512 8,918 7,269
General and administrative............... 6,215 6,340 6,025
-------- -------- --------
307,105 331,140 299,425
-------- -------- --------
OPERATING INCOME............................ 1,644 18,630 13,271
OTHER INCOME (EXPENSE):
Interest................................. (2,499) (1,072) (1,336)
Other income, net........................ 14,448 3,085 1,516
-------- -------- --------
INCOME BEFORE INCOME TAXES ................ 13,593 20,643 13,451
PROVISION FOR INCOME TAXES.................. 4,893 6,881 4,799
-------- -------- --------
NET INCOME.................................. $8,700 $13,762 $8,652
======== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING.............................. 5,018 5,152 5,224
======== ======== ========
PER COMMON SHARE:
Net income................................ $1.73 $2.67 $1.66
======== ======== ========
Dividends................................. $0.12 $0.105 $0.085
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
7
<PAGE>
Consolidated Statements of Stockholders' Equity
For the Years Ended March 30, 1996, April 1, 1995, and April 2, 1994
(In Thousands)
Common Stock Additional
----------------- Paid-In Retained
Shares Amount Capital Earnings
------ -------- ------- --------
BALANCE, April 3, 1993........... 2,109 2,109 375 24,244
Repurchase of common stock..... (28) (28) (636) --
Net income..................... -- -- -- 8,652
Stock dividend of 25%.......... 521 521 14,180 (14,701)
Cash dividends paid............ -- -- -- (448)
------ -------- ------- --------
BALANCE, April 2, 1994........... 2,602 2,602 13,919 17,747
Repurchase of common stock..... (103) (103) (3,018) --
Net income..................... -- -- -- 13,762
Two-for-one stock split........ 2,535 2,535 (2,535) --
Cash dividends paid............ -- -- -- (538)
------ -------- ------- --------
BALANCE, April 1, 1995........... 5,034 5,034 8,366 30,971
Repurchase of common stock..... (28) (28) (420) --
Net income..................... -- -- -- 8,700
Cash dividends paid............ -- -- -- (602)
------ -------- ------- --------
BALANCE, March 30, 1996..........$ 5,006 $5,006 $7,946 $39,069
====== ======== ======= ========
The accompanying notes are an integral part of these consolidated statements.
8
<PAGE>
Consolidated Statements of Cash Flows
For the Years Ended March 30, 1996, April 1, 1995, and April 2, 1994
(In Thousands) 1996 1995 1994
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 8,700 $13,762 $ 8,652
Adjustments to reconcile net income
to net cash (used) provided by
operating activities:
Depreciation and amortization.......... 5,289 4,495 4,899
(Gain) loss on disposal of property,
plant, and equipment.................. (107) (18) 668
Gain from insurance proceeds
received for prorerty destroyed
by fire (Note 2)................... (8,902) -- --
Income from unconsolidated
affiliates, net of distributions..... (2,878) (1,411) (752)
Changes in assets and liabilities:
Accounts receivable, net............. (3,618) (1,621) (1,630)
Inventories.......................... (7,626) (2,503) (2,487)
Insurance proceeds receivable........ (4,636) -- --
Other current assets................. (943) (392) 551
Accounts payable..................... (61) 3,978 967
Accrued expenses..................... (1,091) 1,564 708
Deferred income tax liabilities...... 4,145 159 743
------- ------- -------
Total adjustments.................. (20,428) 4,251 3,667
------- ------- -------
Net cash (used) provided by operating
activities........................ (11,728) 18,013 12,319
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant,
and equipment........................... (35,598) (15,362) (6,412)
Additions to property, plant,
and equipment, to be funded
by insurance proceeds (note 2).......... (4,547) -- --
Additions to investments in
unconsolidated affiliates............... (100) (3,000) --
(Increase) decrease in other assets...... (488) (258) 17
Proceeds from sale of property,
plant, and equipment.................... 122 106 79
Insurance proceeds for property
destroyed by fire, net of costs (Note2). 9,980 -- --
------- ------- -------
Net cash provided by (used) investing
activities...................... (30,631) (18,514) (6,316)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
long-term debt.......................... 45,000 5,000 --
Payments of long-term debt and capital
lease obligations...................... (1,727) (1,253) (5,744)
Repurchase of common stock............... (448) (3,121) (664)
Cash dividends paid...................... (602) (538) (448)
------- ------- -------
Net cash provided by (used)
financing activities............. 42,223 88 (6,856)
------- ------- -------
NET DECREASE IN CASH....................... (136) (413) (853)
CASH AT BEGINNING OF YEAR.................. 462 875 1,728
------- ------- -------
CASH AT END OF YEAR........................ $ 326 $ 462 $ 875
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................ $ 2,290 $ 1,241 $ 1,343
======= ======= =======
Income taxes paid........................ $ 2,755 $ 6,603 $ 4,011
======= ======= =======
The accompanying notes are an integral part of these consolidated statements.
9
<PAGE>
Notes to Consolidated Financial Statements
March 30, 1996, April 1, 1995, and April 2, 1994
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 7).
Nature of Operations
The Company's operations, which are located in the Southeast of the United
States, consist of breeding, hatching and growing chickens; feedmills;
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.
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 March 30, 1996 and April 1, 1995 consist of the following
(in thousands):
1996 1995
Finished products ............................ $ 10,640 $ 7,813
Field inventory and breeders ................. 17,630 13,742
Feed, eggs, and medication ................... 3,000 2,243
Supplies .................................... 1,638 1,484
---------- ---------
$32,908 $25,282
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 to 30 years
Machinery, furniture, and equipment.... 3 to 17 years
Vehicles............................... 3 to 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.
Employee Insurance Claims
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
$2,300,000 and $2,268,000 as of March 30, 1996 and April 1, 1995, respectively,
is included in accrued expenses in the accompanying balance sheets.
Earnings Per Share
1994 earnings and dividends per share information have been restated to
reflect the two-for-one stock split issued to stockholders of record on
January 3, 1995.
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 1996, 1995 and 1994.
10
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The book values of cash, trade accounts receivable, trade 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 than the
stated value at March 30, 1996 and April 1, 1995.
Accounting for the Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment Of Long-Lived Assets and for Long Lived Assets to Be Disposed Of.
" The Company will be required to adopt SFAS 121 in fiscal 1997. The Company
does not believe the adoption of SFAS 121 will have a material impact on its
financial statements.
2 PINE MOUNTAIN VALLEY FIRE
----------------------------------------------------------------------
On June 24, 1995, the Company's plant in Pine Mountain Valley, Georgia was
destroyed by fire. The Company has rebuilt the plant on the site, started
processing on a limited scale in November 1995, and reached prefire capacity
in January 1996. As of March 30, 1996, the Company has received $9,980,000,
net of costs, from its insurance carrier in connection with assets destroyed
by the fire. The excess of the net property proceeds over the book value of
the property of $8,902,000, has been recorded in other income.<QL><EM>The
Company is currently in the process of finalizing its insurance claims relating
to business interruption costs and lost profits due to the fire. The Company
has recognized $10,928,000 relating to total proceeds expected to be received
under this claim as a reduction in cost of sales in 1996. Proceeds not yet
received under this claim as of March 30, 1996 of $4,636,000 are included in
insurance proceeds receivable in the accompanying balance sheet.
The Company has recognized $904,000 related to proceeds received in
connection with inventory and spare parts destroyed by the fire as a reduction
of cost of sales in the accompanying statement of income.
The Company is also in the process of finalizing its insurance claim relating
to costs incurred in expediting the reconstruction of the plant. As of March
30, 1996, the Company has accrued for the receipt of $4,547,000 under this
claim and has recognized those proceeds as a reduction in property, plant and
equipment.
3 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
----------------------------------------------------------------------
Long-term debt and capital lease obligations at March 30, 1996 and April 1,
1995 consist of the following (in thousands):
1996 1995
---------- ----------
Term note payable to a financial institution,
variable interest rates (ranging from 6.31% to
8.25% at March 30, 1996), principal payable in
full by May 31, 2000; unsecured ................ $ 26,000 $ --
Revolving credit agreement with banks,
maturing on March 31, 1998, variable
interest rates (ranging from 6.06% to 8.5% at
March 30, 1996); unsecured ...................... 19,000 --
Term note payable to an insurance company,
maturing on July 1, 2002; secured by certain
property, plant, and equipment ................... 9,600 10,800
Industrial development revenue bonds payable
to a financial institution, variable interest
rate (3.55% at March 30, 1996), principal
payable in full by June 1, 2009; secured by
certain property, plant, and equipment .......... 4,700 5,000
Capital lease obligations ....................... 504 714
Other notes payable at varying interest
rates and maturities ............................ 274 291
--------- ---------
60,078 16,805
Less current maturities ......................... (1,570) (1,572)
--------- ---------
$ 58,508 $15,233
11
<PAGE>
Notes to Consolidated Financial Statements, continued
The term note payable to a financial institution provides for unsecured
borrowings up to $40,000,000 through November 30, 1998, at which time the
amount outstanding becomes payable in installments and is payable in full by
May 31, 2000.
The revolving credit agreement with banks 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 March 30, 1996, a $250,000 letter of credit
associated with the Company's insurance program (Note 1) was outstanding, and
$750,000 was available under the revolving credit agreement.
The term note payable to an insurance company 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 that the Company maintain certain financial ratios, as defined in the
debt agreements, and capital expenditures not exceed certain limits, as defined
in the debt agreements. At March 30, 1996, the Company was in compliance with
all covenants except the covenant relating to capital expenditures. The Company
obtained a waiver from the appropriate financial institution relating to this
noncompliance.
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 March 30, 1996 and April 1, 1995 was $591,000 and
$756,000, respectively.
Aggregate maturities of long-term debt and capital lease obligations during
the years subsequent to March 30, 1996 are as follows (in thousands):
1997 ...................... $ 1,570
1998 ..................... 1,564
1999 ...................... 21,570
2000 ..................... 3,576
2001 ...................... 24,582
Thereafter ............... 7,216
-----------
$60,078
===========
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.
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 $2,845,000 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):
1996 1995 1994
--------- --------- ---------
Currently payable ................. $ 748 $ 6,722 $ 4,056
Deferred payable .................. 4,145 159 743
--------- --------- ----------
$4,893 $6,881 $4,799
========= ========= =========
A reconciliation between income taxes computed at the federal statutory rate
and the Company's provision for income taxes is as follows (in thousands):
1996 1995 1994
--------- -------- --------
Federal statutory rate ........................ 35% 35% 34%
Federal income taxes at statutory rate ........ $4,758 $7,225 $4,573
State income taxes, net of federal benefit .... 537 826 538
Jobs tax credits .............................. (402) (1,170) (312)
--------- -------- --------
$4,893 $6,881 $4,799
========= ======== ========
12
<PAGE>
Components of the net deferred income tax liability at March 30, 1996 and
April 1, 1995 relate to the following (in thousands):
1996 1995
--------- ---------
Deferred income tax liabilities:
Family farm cash-basis deferral .... $ 2,845 $ 2,845
Inventories ......................... 1,569 1,464
Property and depreciation .......... 3,874 934
Other ............................... 3,098 1,355
--------- ---------
11,386 6,598
--------- ---------
Deferred income tax assets:
Accrued expenses ................ 1,097 1,088
Other ........................... 966 332
--------- ---------
2,063 1,420
--------- ---------
Net deferred income tax liability .. $9,323 $5,178
========= =========
5 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 March 30, 1996,
376,000 shares had been repurchased by the Company at a total cost of
$5,851,000.
6 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.
7 INVESTMENTS IN AND RECEIVABLES FROM UNCONSOLIDATED AFFILIATES
----------------------------------------------------------------------
On March 26, 1993, 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.
The Company occasionally sells eggs and broilers to the joint venture and
purchases feed from the joint venture. In addition, the Company performs
certain management and administrative services for the joint venture. The
Company receives a fee for its management services based on production volumes
of 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):
1996 1995 1994
-------- -------- --------
Sales ......................... $ 4,095 $ 1,963 $ 635
Purchases ..................... 18,557 20,898 9,313
Accounts receivable ........... 20 60 315
Accounts payable .............. 138 1,563 252
Administrative service fees ... 902 548 371
13
<PAGE>
Notes to Consolidated Financial Statements, continued
The Company accounts for its investments in three affiliates using the equity
method. The Company's share of affiliates' earnings and management fees was
$4,940,000 and $4,297,000 for the years ended March 30, 1996 and April 1, 1995,
respectively, and is included in other income in the accompanying statements of
income. At March 30, 1996, undistributed retained earnings of affiliates was
approximately $6,108,000.
Summarized combined balance sheet information for unconsolidated affiliates
as of March 30, 1996 and April 1, 1995 is as follows (in thousands) (unaudited):
1996 1995
---------- ----------
Current assets .......................... $ 24,772 $ 16,143
Noncurrent assets ....................... 64,398 51,734
---------- ----------
Total assets ........................... $ 89,170 $ 67,877
Current liabilities ..................... $ 11,713 $ 8,430
Noncurrent liabilities .................. 34,452 27,003
Owners' equity .......................... 43,005 32,444
---------- ----------
Total liabilities and owners' equity .... $ 89,170 $ 67,877
========== ==========
Summarized, combined statement of income information for all unconsolidated
affiliates for the years ended March 30, 1996 and April 1, 1995 is as follows
(in thousands) (unaudited):
1996 1995
--------- ---------
Net sales ................. $ 128,184 $ 113,904
Gross profit .............. 19,571 13,958
Operating income .......... 15,232 11,893
Income before taxes ....... 10,990 10,123
8 MAJOR CUSTOMER
--------------------------------------------------------------------
Sales to the Company's two largest customers represented 33%, 45%, and 47% of
net sales during fiscal 1996, 1995, and 1994, respectively. Additionally, a
major portion of the joint venture's sales (Note 7) are to the Company's
largest customer. The Company has an agreement with this customer to supply
chicken under a cost-plus arrangement, and approximately 24% 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.
9 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 $168,000, $179,000, and
$144,000 in 1996, 1995, and 1994, 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 $295,000, $232,000, and
$228,000 in 1996, 1995, and 1994, respectively. No discretionary company
contributions have been made to this plan.
The Company does not provide postretirement medical or other benefits to
employees.
14
<PAGE>
10 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 $2,763,000 in 1996, $3,045,000 in 1995, and $2,565,000 in
1994.
At March 30, 1996, future minimum payments under operating leases were as
follows (in thousands):
1997 ................................... $ 1,430
1998 ................................... 914
1999 ................................... 272
2000 ................................... 24
----------
Total ................................... $ 2,640
==========
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 $28,400,000 at March 30, 1996.
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.
11 QUARTERLY FINANCIAL DATA (UNAUDITED)
---------------------------------------------------------------------
Quarterly financial data is as follows (in thousands, except per share data):
Operating
Net Income Net Earnings
Sales (Loss) Income** Per Share*
-------- ------- ------- ---------
Fiscal year 1996 quarter ended:
July 1, 1995 ................. $ 89,421 $ 1,592 $ 1,596 $ 0.32
September 30, 1995 ........... 77,243 (1,246) 2,912 0.58
December 30, 1995 ............ 64,439 (360) 2,429 0.48
March 30, 1996 ............... 77,646 1,658 1,763 0.35
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
*Earnings per share amounts have been restated to reflect the two-for-one
stock split to stockholders of record on January 3, 1995.
**Net income for the quarters ended September 30, 1995, December 30,
1995, and March 30, 1996 includes pre-tax income of $4,587,000,
$3,792,000, and $523,000 respectively relating to the excess of net
property insurance proceeds received over the book value of the
Company's Pine Mountain Valley plant which was destroyed by fire
(Note 2).
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.
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
Principal
C2 Associates, Ltd.
MARK M. HAM IV
Vice President Management Information Systems
Cagle's, Inc.
JOHN J. BRUNO
Senior Vice President Sales and Marketing
Cagle's, Inc.
G. BLAND BYRNE
Partner
Byrne, Eldridge, Moore & Davis
Audit Committee
CANDACE CHAPMAN, Chairperson
G. BLAND BYRNE
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>
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 12, 1996.
- --------------------------------------------------------------------------
Form 10-K
The Form 10-K Annual Report for 1996, as filed by the Company with the
Securities and Exchange Commission, is available to Cagle's, Inc. stockholders
after June 30, 1996 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
SUNTRUST BANK
Atlanta, Georgia
Legal Counsel
BYRNE, ELDRIDGE, MOORE & DAVIS P.C.
Atlanta, Georgia
Auditors
ARTHUR ANDERSEN LLP
Atlanta, Georgia
17
<PAGE>
PROXY STATEMENT
CAGLE'S, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JULY 12, 1996
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 12th day of July, 1996, 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 25, 1996, 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 10, 1996
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.
<PAGE>
CAGLE'S, INC.
2000 HILLS AVENUE, N.W. ATLANTA, GEORGIA 30318
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 12, 1996
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 12, 1996, 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 March 30, 1996, is enclosed herewith. The approximate date of mailing
this proxy statement and the form of proxy is June 10, 1996.
On May 25, 1996, the Company had outstanding and entitled to vote at the
Annual Meeting 5,006,263 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 25, 1996, 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. All nine 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, 65, 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
12, 1996, 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.
1
<PAGE>
George Douglas Cagle, 43, 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, 55, has been employed by the Company since April, 1974,
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, 42, 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, 47, 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, 41, 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., 52, 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, 39, has been a director since July, 1993. Ms. Chapman is a
principal in C2 Associates, Ltd. Prior to forming C2 Associates, Ltd., Ms.
Chapman was 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.
G. Bland Byrne III, 44, has been a director since July, 1995. Mr. Byrne 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.
2
<PAGE>
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, 47, 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.
OWNERSHIP OF VOTING SHARES BY OFFICERS, DIRECTORS AND OTHERS
The following table sets forth the stock ownership in the Company, as of May 1,
1996, of each director and nominee for director and of each executive officer
named in the Summary Compensation Table on page 5 hereof.
Amount and Nature of Percent of
Beneficial Ownership of Class A
Name Class A Common Stock Common Stock
J. Douglas Cagle.............. 2,124,556 (a) 42.4%
George Douglas Cagle.......... 439,484 (b) 8.8%
Kenneth R. Barkley............ 4,000 (c) *
James David Cagle............. 443,178 (d) 8.9%
Jerry Don Gattis.............. 14,192 (e) *
Mark M. Ham IV................ 3,850 (f) *
John J. Bruno, Jr............. 4,750 (g) *
Candace Chapman............... 494 *
G. Bland Byrne III............ 2,000 *
All Directors and
Executive Officers
as a group (10) persons....... 3,036,504 (h) 60.4%
- --------------
*Less than 1% of issued and outstanding shares of Class A Common Stock of
the Company.
(a) This amount includes 962,028 shares owned by Mr. Cagle as trustee of a
trust established under the will of his father.
(b) This amount includes 105,026 shares held as custodian for Mr. Cagle's
children.
(c) This amount includes 3,750 shares which may be acquired upon the exercise
of options which are presently exercisable.
(d) This amount includes 108,722 shares held as custodian for Mr. Cagle's
children.
(e) This amount includes 7,500 shares which may be acquired upon the exercise
of options which are presently exercisable.
(f) This amount includes 3,750 shares which may be acquired upon the exercise
of options which are presently exercisable.
(g) This amount includes 3,750 shares which may be acquired upon the exercise
of options which are presently exercisable.
(h) This amount includes 18,750 shares which may be acquired upon the exercise
of options which are presently exercisable.
3
<PAGE>
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, 1996:
Amount and Nature
Title of Name and Address of of Beneficial Percent of
Class Beneficial Owner Owenership (a) Class
Class A J. Douglas Cagle .............. 2,124,556 (b) 42.4%
Common Stock 2000 Hills Avenue, N.W.
Atlanta, Georgia 30318
Class A George Douglas Cagle .......... 439,484 (c) 8.8%
Common Stock 2000 Hills Avenue, N.W.
Atlanta, Georgia 30318
Class A James David Cagle.............. 443,178 (d) 8.9%
Common Stock 2000 Hills Avenue, N.W.
Atlanta, Georgia 30318
Class A Dimensional Fund Advisors, Inc. 306,000 (e) 6.1%
Common Stock 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 962,028 shares owned by Mr. Cagle as trustee of a
trust established under the will of his father.
(c) This amount includes 105,026 shares held as custodian for Mr. Cagle's
children.
(d) This amount includes 108,722 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 306,000 shares as of
December 31, 1995, 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, G.
Bland Byrne III, and Candace Chapman. The Company does not have
4
<PAGE>
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 March 30, 1996, 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
Compensation
------------
Annual Securities
Name and Principal -------------------------- Underlying All Other
Position Year(1 Salary Bonus (2 Options(#) Compensation(3
- ------------------------- ---- -------- -------- ---------- --------------
J. Douglas Cagle 1996 $277,198 $135,960 -0- $26,018 (4
Chairman of the Board & 1995 262,315 132,000 -0- 18,400
Chief Executive Officer 1994 248,796 122,200 -0- 12,213
Jerry Don Gattis 1996 266,880 128,440 -0- 8,451
President & 1995 243,639 123,500 -0- 9,676
Chief Operating Officer 1994 226,361 112,294 12,500 9,559
John J. Bruno 1996 166,058 82,500 -0- 3,046
Senior Vice President 1995 151,289 75,000 -0- 4,247
Sales and Marketing 1994 138,746 67,695 6,250 4,614
Kenneth R. Barkley 1996 124,368 58,526 -0- 5,701
Senior Vice President 1995 117,577 56,275 -0- 8,370
Finance,Treasurer & 1994 110,280 52,140 6,250 7,728
Chief Financial Officer
Mark M. Ham IV 1996 97,998 45,032 -0- 11,408
Vice Pres. Information 1995 92,775 43,300 -0- 10,571
Systems & Asst. Secretary 1994 84,807 40,092 6,250 5,829
(1 The year designated in this column refers to the Company's fiscal year
which ended in such year, which for 1996 was March 30, 1996.
(2 The amounts in this column represent 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 to the Company's 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 This amount includes $20,400 representing the portion of the premiums paid
with respect to the split dollar life insurance policies described in
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION below, which
portion is considered income for purposes of taxation.
5
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at Year End
Shares Acquired Year End (#) ($)
on Exercise Value Exercisable/ Exercisable/
Name (#) Realized Unexercisable Unexercisable
- ------------------ --------------- ---------- ------------- ----------------
J. Douglas Cagle _ _ _ _
Jerry D. Gattis _ _ 7,500/5,000 $42,750/$28,500
John J. Bruno _ _ 3,750/2,500 $21,375/$14,250
Kenneth R. Barkley _ _ 3,750/2,500 $21,375/$14,250
Mark M. Ham IV _ _ 3,750/2,500 $21,375/$14,250
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.
Two irrevocable trusts hold two cash value life insurance policies on the lives
of J. Douglas Cagle and his wife, the aggregate face value of which is
$20,000,000. The Company is a party to a split dollar agreement with each trust
pursuant to which the Company has agreed to make all of the payments on the
policies which are not paid by the trusts until the death of both J. Douglas
Cagle and his wife or, if earlier, the termination of the agreements by the
trusts, at which time the trusts shall repay to the Company all amounts paid
by the Company on such policies. The premiums paid by the Company on these
policies during its last fiscal year totaled $289,755.28.
6
<PAGE>
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, which plan was
approved by the shareholders in July, 1993, provide an incentive for executive
officers to manage the Company with a view toward 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 1991. The Peer Group Index
consists of the following companies: Golden Poultry, Inc., Hudson Foods, Inc.,
Pilgrim's Pride Corporation, Sanderson Farms, Inc., Tyson Foods, Inc., and
WLR Foods, Inc.
7
<PAGE>
March 31, 1991 = $100.00
Base
Year March March March March March
Company/Index 1991 1992 1993 1994 1995 1996
---- ----- ----- ----- ----- -----
CAGLE'S, INC. -CL A 100 112 418 402 656 543
S&P 500 INDEX 100 111 128 130 150 198
PEER GROUP INDEX
AVERAGE 100 86 123 111 131 122
8
<PAGE>
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, who
was a director of the Company during the first three months of the last fiscal
year of the Company, is of counsel, received $138,296.10 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 director of the Company, is a principal, received
$202,289.00 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 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 1997 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 1997 annual
meeting of shareholders is February 12, 1997.
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.
9
<PAGE>
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 25, 1996, 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 10, 1996
10
<PAGE>
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<ARTICLE> 5
<CIK> 0000016104
<NAME> CAGLE'S, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-START> APR-02-1995
<PERIOD-END> MAR-30-1996
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<RECEIVABLES> 18946
<ALLOWANCES> 315
<INVENTORY> 32908
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<COMMON> 5006
0
0
<OTHER-SE> 47015
<TOTAL-LIABILITY-AND-EQUITY> 142687
<SALES> 308749
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<CGS> 291378
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<OTHER-EXPENSES> (14448)
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</TABLE>
