10-Q 1 a10q-1200.txt DEC,2000 10Q 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 December 30, 2000 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 December 30, 2000 -------------------------------------- ----------------------------- Class A Common Stock, $1.00 Par Value 4,747,280 PART 1. FINANCIAL INFORMATION Cagle's, Inc. And Subsidiary Consolidated Balance Sheets December 30, 2000 and April 1, 2000 (In Thousands, Except Par Value) (Period 12/30/00 Unaudited) 12/30/00 04/01/00 ------------ ------------- Assets ----------------------------------------- CURRENT ASSETS Cash $ 1,086 $ 9,526 Accounts receivable, net of allowance for doubtful accounts of $1,058 and $905 at December 30, 2000 and April 1, 2000, respectively 9,105 15,261 Inventories 32,827 31,112 Notes receivable 1,400 Other current assets 3,582 2,965 ------------ ------------ Total current assets 46,600 60,264 ------------ ------------ INVESTMENTS IN AND RECEIVABLES FROM UNCONSOLIDATED AFFILIATES 38,287 34,634 OTHER ASSETS 1,433 1,069 PROPERTY, PLANT, AND EQUIPMENT 211,264 153,644 Less accumulated depreciation (63,803) (57,141) ------------ ------------ Property, plant, and equipment, net 147,461 96,503 ------------ ------------ TOTAL ASSETS $ 233,781 $ 192,470 ============ ============ LIABILITIES & STOCKHOLDERS' EQUITY--------------- CURRENT LIABILITIES Current maturities of long term debt $ 8,506 $ 6,384 Accounts payable 12,146 10,753 Accrued expenses 9,390 10,642 ------------ ------------ Total current liabilities 30,042 27,779 ------------ ------------ LONG TERM DEBT (net of current maturities) 109,946 66,570 NONCURRENT DEFERRED INCOME TAXES 11,868 12,787 OTHER NONCURRENT LIABILITIES 5,355 3,655 ------------ ------------ STOCKHOLDERS' EQUITY: Common stock, $1 par value; authorized 4,748 shares, 4748 shares issued at December 30, 2000 and April 1, 2000, respectively 4,748 4,748 Capital in excess of par value 4,198 4,198 Treasury stock held for options (106) (106) Retained earnings 67,730 72,839 ------------ ------------ Total stockholders' equity 76,570 81,679 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 233,781 $ 192,470 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. Cagle's, Inc., & Subsidiary Consolidated Statements of Income For the 13 and 39 weeks ended December 30, 2000 and the 13 and 39 weeks ended January 1, 2000 (Amounts in thousands, except per share data) (Period 12/30/00 Unaudited) 13 wks 13 wks 39 wks 39 wks ended ended ended ended 12/30/00 01/01/00 12/30/00 01/01/00 -------- -------- -------- -------- Net Sales $ 59,407 77,270 $201,181 246,674 Costs and Expenses: Cost of Sales 63,728 70,660 200,849 220,677 Selling and Delivery 2,201 2,609 6,914 7,834 General and Administrative 2,778 2,387 7,040 7,052 ------- -------- ------- -------- Total costs and expenses 68,707 75,656 214,803 235,563 ------- -------- ------- -------- Income From Operations (9,300) 1,614 (13,622) 11,111 Other Income(Expense): Interest expense (1,823) (550) (2,811) (1,580) Income from unconsolidated affiliates and other income, net 3,181 2,599 9,118 4,625 -------- -------- -------- -------- Income Before Income Taxes (7,942) 3,663 (7,315) 14,156 (Provision) Benefit For Income Taxes 2,860 (1,329) 2,634 (5,198) -------- -------- -------- -------- Net Income $ (5,082) $ 2,334 $ (4,681) $ 8,958 ======== ======== ======== ======== Weighted Average Shares Outstanding -Basic 4,748 4,747 4,748 4,756 -Diluted 4,742 4,753 4,742 4,760 ======== ======== ======== ======== Net Income Per Common Share -Basic $ (1.07) $ .49 $ (.99) $ 1.88 -Diluted $ (1.07) $ .49 $ (.99) $ 1.88 Dividends Per Common Share $ .03 $ .03 $ .09 $ .09 ======== ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. Cagle's, Inc & Subsidiary Consolidated Statements of Cash Flows For the 39 weeks ended December 30, 2000 and January 1, 2000 (In Thousands) (unaudited) December 30, 2000 January 1, 2000 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ (4,681) $ 8,958 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,662 6,052 loss on disposal of property, plant and equipment 0 (29) Changes in investment in and receivables from unconsolidated affiliates (3,653) (3,853) Changes in assets and liabilities: Accounts receivables, net 6,156 8,317 Inventories (1,715) (309) Notes Receivables 1,400 0 Other current assets (617) 595 Accounts payable 1,393 (1,330) Accrued expenses (1,252) 17 Deferred Income Taxes (920) (632) Other Non Current Liabilities 1,700 0 ------------- ------------- Total Adjustments 9,154 8,828 ------------- ------------- Net cash provided by operating activities 4,473 17,786 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment (57,620) (22,940) (increase) in other assets (364) (395) Proceeds from the sale of property, plant, and equip. 0 46 ------------- ------------- Net cash used in investing activities (57,984) (23,298) ------------- ------------- Cash Flows from financing activities: Payments of long-term debt and capital lease obligations (4,271) (39,453) Proceeds from issuance of long-term debt 49,769 48,055 Dividends Paid (427) (428) Repurchase of Common Stock 0 (894) Proceeds from exercise of Stock Options 0 23 ------------- ------------- Net cash provided or (used) by financing activities 45,071 7,303 ------------- ------------- NET INCREASE (DECREASE) IN CASH (8,440) 1,800 CASH AT BEGINNING OF PERIOD 9,526 97 ------------- ------------- CASH AT END OF PERIOD $ 1,086 $ 1,897 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest(including capitalized interest of $3,124,000) $ 6,037 $ 2,246 ============= ============= Income Taxes $ 112 $ 5,286 ============= ============= The accompanying notes are an integral part of these consolidated financial statements. Cagle's, Inc. & Subsidiary Notes to Consolidated Condensed Financial Statements December 30, 2000 1. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments which are of a normal and recurring nature necessary to present fairly the consolidated financial position of Cagle's, Inc. and Subsidiary (the "Company") as of December 30, 2000 and April 1, 2000 and the results of their operations for the 13 weeks and 39 weeks ended December 30, 2000 and January 1, 2000. 2. The results of operations for the 13 weeks and 39 weeks ended December 30, 2000 and January 1, 2000 are not necessarily indicative of the results expected for the full year. 3. Inventories consisted of the following: (In Thousands) December 30, 2000 April 1 2000 Finished Product $15,250 $13,174 Field Inventory and Breeders 13,433 13,683 Feed, Eggs, and Medication 2,757 2,914 Supplies 1,387 1,341 ---------------- -------------- $32,827 $31,112 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 its unconsolidated affiliates using the equity method. The Company's share of earnings from these affiliates totaled $3,067,000 and $2,535,427 respectively for the 13 weeks ended December 30, 2000 and January 1, 2000 and $8,870,000 and $4,479,000 respectively for the 39 weeks ended December 30, 2000 and January 1, 2000. 6. Certain prior year amounts have been re-classified for consistency with current period presentation. Management's Discussion and Analysis of Financial Condition and Results of Operation December 30, 2000 Financial Condition Further deterioration in market prices during the quarter just ended combined with the start-up of the new processing plant in Perry, GA. and the inherent cost and inefficiencies associated with a start-up operation were the major factors contributing to the loss experienced this period. These losses caused the company to draw heavily on its revolving loan temporarily expanded to $60,000,000.00 by the Company's bank lenders pending additional permanent financing. As of December 30, 2000, $52,000,000.00 of the $60,000,000.00 facility was being utilized. Results of Operations Sales for the 13 week and 39 week ended December 30, 2000 were 23.1% and 18.4% lower respectively when compared to the same periods of a year ago. The lower revenue is mainly the results of 7.2% less pounds produced for the 13 week period as compared to a year ago and 4.7% less production lbs. For the 39 weeks ended December 30, 2000 as compared to year ago levels. In addition, market prices averaged 12.25% lower during the quarter ended December 30, 2000 than in the comparable period of a year ago. The average quarter market price for boneless skinless breast meat averaged 14.22% lower for the 39 week period ended December 30, 2000 than for the comparable 39 week period ended January 1, 2000. Gross margins as a percent of sales for the respective 13 weeks and 39 weeks ended December 30, 2000 were (7.27%) and .2% compared to 8.6% and 10.5% for the 13 weeks and 39 weeks ended January 1, 2000. The major factors in this severe reversal is the depressed prices in the market place, a 6% increase in feed grain pricing and the losses created by the start-up of the Perry plant which will not reach full capacity until late summer, early fall of 2001. The impact of the Perry start-up on gross margin for the 13 weeks and 39 weeks ended December 30, 2000 was $3.8 million and $4.9 million respectively, which had the effect of lowering gross margin percentage by 6.4% and 2.4% respectively. Selling, Delivery and Administrative Expenses This category of expense for the 13 week period decreased by .3% over the prior year comparable period. This is due to sharply lower sales commissions and outside storage expenses and executive bonuses, offset by the increased professional fees incurred during the period. Interest Expense Interest expense increased significantly due to increased borrowing levels and higher rates. In addition, with the start of production in the Perry plant interest that was capitalized during construction is now current interest expense. Year to date $3,124,000 has been capitalized as construction interest. Other Income Other income increased by 22.4% for the 13 week period ended December 30, 2000 as compared to the same period of a year ago and 97.15% for the 39 week period as of the same date. The increase is the result of increased volume profitable levels produced by an unconsolidated affiliate as compared to losses for that affiliate for the 39 week period and a minimal profit for the 13 week period ended January 1, 2000. Income Taxes The provision for income taxes reflects taxes calculated at statutory rates adjusted for available tax credits to which the company is entitled. The loss that the Company has experienced for the 39 week period produces a tax benefit that is expected to be refunded to the Company. Part II Other Information Item 9 Exhibits and Reports on Form 8-K a. Not applicable b. A report or Form 8-K was filed during the quarter. 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: February 9, 2001 /s/ J. Douglas Cagle Chairman and C.E.O. Date: February 9, 2001 /s/ Kenneth R. Barkley Sr. VP Finance/Treas/CFO