SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Security Exchange
Act of 1934 For the Quarterly period ended October 3, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition period from ______ to _______
Commission File Number 1-7138
CAGLE'S, INC.
GEORGIA 58-0625713
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2000 Hills Avenue, N. W. Atlanta, Georgia 30318
(Address of Principal Executive Offices and Zip Code)
(404) 355-2820
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __x__ No ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date
Class Outstanding October 3, 1998
- -------------------------------------- -----------------------------
Class A Common Stock, $1.00 Par Value 4,784,532
PART 1. FINANCIAL INFORMATION
Cagle's, Inc. And Subsidiary
Consolidated Balance Sheets
October 3, 1998 and March 28, 1998
(In Thousands, Except Par Value)
(Period 10/03/98 Unaudited)
10/03/98 03/28/98
------------ -------------
Assets -----------------------------------------
CURRENT ASSETS
Cash $ 379 $ 226
Accounts receivable, net of allowance for
doubtful accounts of $972 and $752 at
October 3, 1998 and March 28, 1998,
respectively 19,084 17,269
Inventories 29,613 32,567
Other current assets 868 1,907
------------ ------------
Total current assets 49,944 51,969
------------ ------------
INVESTMENTS IN AND RECEIVABLES FROM
UNCONSOLIDATED AFFILIATES 28,032 27,069
OTHER ASSETS 694 694
PROPERTY, PLANT, AND EQUIPMENT 106,974 102,495
Less accumulated depreciation (46,501) (42,808)
------------ ------------
Property, plant, and equipment, net 60,473 59,687
------------ ------------
TOTAL ASSETS $ 139,143 $ 139,419
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY---------------
CURRENT LIABILITIES
Current Maturities of Long Term Debt $ 2,795 $ 2,795
Income Taxes Payable 1,024 0
Accounts payable 11,956 9,886
Accrued expenses 11,899 11,007
------------ ------------
Total Current Liabilities 27,674 23,688
------------ ------------
LONG TERM DEBT (net of current maturities) 36,278 48,366
NONCURRENT DEFERRED INCOME TAXES 12,223 12,223
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; authorized 9,000
shares and 4784 and 5006 shares issued
respectively 4,784 5,006
Capital in excess of par value 5,224 7,946
Treasury Stock (298) (354)
Retained earnings 53,258 42,544
------------ ------------
Total stockholders' equity 62,968 55,142
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 139,143 $ 139,419
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Cagle's, Inc., & Subsidiary
Consolidated Statements of Income
For the 14 and 27 weeks ended October 3, 1998
and the 13 and 26 weeks ended September 27, 1997
(Amounts in thousands, except per share data)
(Unaudited)
14 wks 13 wks 27 wks 26 wks
ended ended ended ended
10/03/98 09/27/97 10/03/98 09/27/97
-------- -------- -------- --------
Net Sales $ 92,802 $ 96,687 $175,676 $183,454
Costs and Expenses:
Cost of Sales 77,826 93,343 151,690 174,988
Selling and Delivery 2,812 2,717 5,408 5,575
General and Administrative 1,889 1,544 3,580 3,160
------- -------- -------- --------
Total costs and expenses 82,527 97,604 160,678 183,723
------- -------- -------- --------
Income (Loss) From Operations 10,275 (917) 14,998 (269)
Other Income(Expense):
Interest expense (792) (908) (1,638) (1,885)
Income from unconsolidated
affiliates and other
income, net 1,849 2,227 3,720 4,429
-------- -------- -------- --------
Income Before Income Taxes 11,332 402 17,080 2,275
(Provision) For Income Taxes (3,996) (143) (6,066) (842)
-------- -------- -------- --------
Net Income $ 7,336 $ 259 $ 11,014 $ 1,433
======== ======== ======== ========
Weighted Average Shares Outstanding
-Basic 4,929 5,006 4,967 5,006
-Diluted 4,929 5,006 4,967 5,006
======== ======== ======== ========
Net Income Per Common Share
-Basic $ 1.49 $ 0.05 $ 2.22 $ 0.29
-Diluted $ 1.49 $ 0.05 $ 2.22 $ 0.29
Dividends Per Common Share $ .03 $ .03 $ .06 $ .06
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
Cagle's, Inc & Subsidiary Consolidated Statements of Cash Flows
For the 27 weeks ended October 3, 1998 and 26 weeks ended September 27, 1997
(In Thousands) (unaudited)
Oct. 03, 1998 Sept 27, 1997
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 11,014 $ 1,433
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,174 3,887
loss (gain) on disposal of property, plant and equip 19 (17)
Changes in investment in and receivables from
unconsolidated affiliates (963) (2,705)
Changes in assets and liabilities:
Accounts receivables, net (1,815) (4,214)
Inventories 2,954 3,247
Insurance Proceeds Receivable 0 3,054
Deferred Income Taxes asset 0 114
Other current assets 1,039 618
Accounts payable 2,070 1,136
Accrued expenses 892 1,699
Income taxes payable 1,024 0
Deferred income taxes payable 0 (296)
------------- -----------
Total Adjustments 9,394 6,523
------------- -----------
Net cash provided by operating activities 20,408 7,956
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (5,041) (975)
(increase) decrease in other assets 0 (16)
Proceeds from the sale of property, plant, and equip. 63 0
------------- -----------
Net cash used in investing activities (4,978) (966)
------------- -----------
Cash Flows from financing activities:
Payments of long-term debt and capital
lease obligations (12,088) (6,258)
Dividends Paid (299) (300)
Repurchase of Common Stock (2,949) (222)
Proceeds from exercise of Stock Options 59 0
------------- -----------
Net cash used by financing activities (15,277) (6,780)
------------- -----------
NET INCREASE IN CASH 153 211
CASH AT BEGINNING OF PERIOD 226 94
------------- -----------
CASH AT END OF PERIOD $ 379 $ 305
============= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,795 $ 1,142
============= ===========
Income Taxes $ 3,768 $ 752
============= ===========
The accompanying notes are an integral part of these consolidated financial
statements.
Cagle's, Inc. & Subsidiary
Notes to Consolidated Condensed Financial Statements
October 3, 1998
1. In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments which are of normal and
recurring nature, necessary to present fairly the consolidated financial
position of Cagle's, Inc. and Subsidiary (the "Company") as of October 3,
1998 and March 28, 1998 and the results of their operations and their
cash flows for the 14 weeks and 27 weeks ended October 3, 1998 and the
13 weeks and 26 weeks ended September 27, 1997.
2. The results of operations for the 14 weeks and 27 weeks ended October 3,
1998 and the 13 weeks and 26 weeks ended September 27, 1997 are not
necessarily indicative of the results expected for the full year.
3. Inventories consisted of the following: (In Thousands)
October 3, 1998 March 28, 1998
Finished Product $11,949 $14,295
Field Inventory and Breeders 14,059 14,036
Feed, Eggs, and Medication 2,276 2,582
Supplies 1,329 1,654
---------------- --------------
$29,613 $32,567
4. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results may vary from those
estimates.
5. Investments in and Receivables from Unconsolidated Affiliates.
The Company accounts for its investments in (5) five unconsolidated
affiliates using the equity method. The Company's share of earnings from
from these affiliates totaled $1,769,000 and $3,671,000 for the 14 weeks
and 27 weeks ended October 3, 1998. The earnings reported for the 3
unconsolidated affiliates existing during the 13 and 26 weeks ended
September 27, 1997 were $2,165,000 and $3,547,000 respectively.
6. Year 2000 Compliance
The Company is fully aware of the potential problems presented by the Year
2000 as it relates to many systems throughout the company and with vendors
and customers. The Company has implemented a formal plan to address these
issues. Progress is monitored regularly with status reports to management
and the Board of Directors. The Company expects to be fully compliant by
the end of the fiscal year on April 3, 1999. The total cost of this
program is not expected to materially affect earnings.
Management's Discussion and Analysis of Financial
Condition and Results of Operation
October 3, 1998
Financial Condition
The Company utilized strong earnings and cash flow to further reduce debt
($12,088,000 since March 28, 1998) while extending its stock repurchase
program, and re-purchasing 199,500 shares of stock during the second quarter.
As of October 3, 1998 the Company had $15,561,800 available for borrowing under
unsecured lines of credit and believes this to be adequate for anticipated
requirements.
Results of Operations
Sales for the 14 week period ended October 3, 1998 declined by 10.87%. When the
quarter's revenue are adjusted to 13 weeks and the 27 weeks sales adjusted for
the extra week sales are 7.79% lower. The reduced revenues are attributed to
6.5% less production when 27 week period is adjusted to comparable 26 week.
Total pounds produced for the quarter ended October 3, 1998, adjusted to 13
weeks, was 5.12% greater than for the same quarter of a year ago. An additional
factor contributing to lower revenues is that the purchase of product outside
for re-sale and for further processing was drastically reduced during the
period. The Ga. Dock quoted market price was on the average slightly higher
than a year ago for the same 6 month period. The Ga. Dock Price for the
quarter was approximately $.0627 per pound higher. While white meat prices
trended higher than a year ago, dark meat, which is predominantly an export
item, has been severely depressed, consequently pulling down the revenues for
the total company.
Gross margins for the quarter and 27 week period exceeded year ago levels by
12.68% and 9.04% respectively and is due mainly to feed cost which averaged
21.6% lower for the 6 months as compared to the same period of a year ago and
22.4% lower for the quarter ended October 3, 1998 as compared to the same
period of a year ago.
Selling, Delivery and Administrative Expenses
Selling, Delivery and Administrative Expenses increased by 10.3% and 2.9% for
the quarter and 6 months, respectively, ended October 3, 1998 as compared to
comparable periods ended September 27, 1997. These increases are mainly
personnel related.
Interest Expense
Interest expense for the quarter declined by 12.8% and for the 6 months by 13.1%
as compared to the same periods of a year ago. The reduction is attributable to
reduced borrowing during the periods.
Other Income
Other income declined by 16.8% and 16.01% for the quarter and 6 months
respectively as compared to the comparable periods of a year ago and reflects
the impact of start-up cost in the two Kentucky Joint Ventures which are
recorded via the equity method and are consequently netted against the recorded
earnings of the 3 other joint venture companies.
Income Taxes
The provision for income taxes reflects taxes at statutory rates adjusted for
available tax credits to which the company is entitled.
General
On July 27, 1998 the Company filed a report on Form 8-k disclosing the
discovery of an act of employee dishonesty. The Company continues to make
progress on its legal actions to seize and convert to cash assets belonging to
the perpetrator. Although the final outcome will not be know until all known
assets are sold the Company believes the outlook is good for the recovery of
a substantial portion of the loss with no significant impact on earnings.
Part II
Other Information
Item 9 Exhibits and Reports on Form 8-K
a. Not applicable
b. A report on Form 8-k was filed on July 22, 1998 to disclose discovery
of an event of employee dishonesty.
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 6, 1998 /s/ J. Douglas Cagle
Date: November 6, 1998 /s/ Kenneth R. Barkley
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