10-K/A

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended                   April 01, 2006                 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.

 (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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.         Yes        X   No   

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.           Yes        X   No

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 l934 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

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of regulation s-k (§ 229.405 of this chapter)  is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in part iii of this form 10-k or any amendment to this FORM 10-K.          .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act”.  

Large accelerated filer   _____                                       Accelerated filer   _____                                             Non-accelerated filer    X         .

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes        X   No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.      $   18,202,625.43    (based on $10.39 per share closing price on October 01, 2005)    .

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

   Class A Common Stock at $1.00 par value                   4,742,998 shares at $1.00 par value   .

DOCUMENTS INCORPORATED BY REFERENCE:  

  Parts of the following documents are incorporated by reference in Part III of this form 10-K report:

  1) proxy statements for registrant's 2006 annual meeting of shareholders-      Items 10, 11, 12, 13, and 14.

       Page 1  of 3

The purpose of the amended filing is to restate Item 15 and furnish Exhibits 99.1 and 99.2 for Form 10-K for the fiscal year ended April 1, 2006.  The joint ventures majority member refused to consent to the publication of these financial statements in the 10-K filed June 15, 2006. The majority member has now granted consent to publish these financial statements.

Item 15:  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

The following documents are filed as part of this report:

(a)1.   Financial Statements

The following consolidated financial statements of Cagle’s, Inc. and subsidiary are filed as part of this report:

Consolidated Balance Sheets as of April 01, 2006 and April 02, 2005

Consolidated Statements of Operations for the Years Ended April 01, 2006, April 02, 2005, and April 03, 2004

Consolidated Statements of Stockholder’s Equity for the Years Ended April 01, 2006, April 02, 2005, and April 03, 2004

Consolidated Statements of Cash Flows for the Years Ended April 01, 2006, April 02, 2005, and April 03, 2004

Notes to Consolidated Financial Statements as of and for the years ended, April 01, 2006, April 02, 2005, and April 03, 2004

(a)2.   Financial Statement Schedules

The following financial statement schedules are filed as part of this report:

Report of Independent Registered Public Accounting Firm

Schedule II – Valuation and Qualifying Accounts

(a)3

  Exhibits

  3.1 Articles of Incorporation of the Registrant. (4)

  3.2 Bylaws of the Registrant. (2)

13.2 Cagle's, Inc. Proxy statements for Registrant's 2006 annual meeting of shareholders. (1)

14.1 Code of Ethics. (3)

23.1 Consent of independent registered public accounting firm, Moore Stephens Frost, PLC. (1)

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a).  (1)

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a).  (1)

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.  (1)

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.  (1)

99.1 Audited financial statements of unconsolidated affiliates:  Cagle's Keystone Foods, L.L.C. for 12/31/05 and 1/1/05.   (1)

99.2 Unaudited financial statements of unconsolidated affiliates:  Cagle's Keystone Foods, L.L.C. for 12/27/03.  (1)

99.3 Audited financial statements of unconsolidated affiliates:  Cagle's Keystone Foods, L.L.C. for 12/27/03 and 12/28/02.    (4)

-------------

(1) Filed herewith.

(2) Previously filed and incorporated by reference herein from the Registrant’s Form 10-Q for the quarter ended October 2, 2004.

(3) Previously filed and incorporated by reference herein from the Registrant’s Form 10-K for the year ended April 3, 2004.

(4) Previously filed and incorporated by reference herein from the Registrant’s Form 10-K for the year ended April 2, 2005.

(b) Reports on Form 8-K

   1. The Company filed an 8-K on August 4, 2005, to furnish a press release announcing its results of operations for the first quarter of 2006.

   2. The Company filed an 8-K on November 03, 2005, to furnish a press release announcing its results of operations for the second quarter of 2006.

   3. The Company filed an 8-K on February 2, 2006, to furnish a press release announcing its results of operations for the third quarter of 2006.

   4. The Company filed an 8-K on June 9, 2006, to furnish a press release announcing its results of operations for the fourth quarter of 2006.

       Page 2  of 3

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Cagle's, Inc.

BY:   /s/  J. Douglas Cagle

               Chairman and Chief Executive Officer & President

               August 4, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the registrant and in the capacities indicated and on February 21, 2006:

/s/ J. Douglas Cagle    

Director and Chairman and Chief Executive Officer & President

/s/ G. Bland Byrne         

Director

/s/ Candace Chapman                      Director

/s/ Panos J. Kanes         

Director

/s/ Edward J Rutkowski     

Director

/s/ Mark M. Ham IV         

Director and Executive Vice President & CFO

/s/ James David Cagle      

Director and Vice President

/s/ George Douglas Cagle                

Director and Vice President

       Page 3  of 3

EX-31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J. Douglas Cagle, Chairman and Chief Executive Officer of Cagle’s, Inc., certify that:

1. I have reviewed this annual report on Form 10-K/A of Cagle’s, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 4, 2006          

By: /s/ J. Douglas Cagle

      J. Douglas Cagle

      Chief Executive Officer

EX-31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark M. Ham IV, Chief Financial Officer of Cagle’s, Inc., certify that:

1. I have reviewed this annual report on Form 10-K/A of Cagle’s, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 4, 2006          

By: /s/ Mark M. Ham IV

      Mark M. Ham IV

      Chief Financial Officer

EX-32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K/A of Cagle’s, Inc. for the year ended April 1, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Douglas Cagle, Chief Executive Officer of Cagle’s, Inc., certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Form 10-K/A fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, and

2. The information contained in the Form 10-K/A fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 4, 2006          

By: /s/ J. Douglas Cagle

      J. Douglas Cagle

      Chief Executive Officer

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K/A of Cagle’s, Inc. for the year ended April 1, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Douglas Cagle, Chief Executive Officer of Cagle’s, Inc., certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Form 10-K/A fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, and

2. The information contained in the Form 10-K/A fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 4, 2006          

By: /s/ Mark M. Ham IV

      Mark M. Ham IV

      Chief Financial Officer

EX-99

Cagle’s-Keystone Foods LLC

Financial Statements

Year ended December 31, 2005 and
53-week period ended January 1, 2005 with Report of Independent Auditors

Cagle’s-Keystone Foods LLC

Financial Statements

Year ended December 31, 2005 and
53-week period ended January 1, 2005

Contents

Audited Financial Statements

1

Report of Independent Auditors

To the Members

Cagle’s-Keystone Foods LLC

We have audited the accompanying balance sheets of Cagle’s-Keystone Foods LLC (the Company), a subsidiary of Grow-Out Holdings LLC, as defined in Note 1 to the financial statements, as of December 31, 2005 and January 1, 2005, and the related statements of operations, changes in owners’ equity, and cash flows for the respective year and 53-week period then ended. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant est imates made by management, and 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 the Company at December 31, 2005 and January 1, 2005, and the results of its operations and its cash flows for the respective year and 53-week period then ended, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

March 15, 2006

Philadelphia, Pennsylvania

Cagle’s-Keystone Foods LLC

Balance Sheets

(In Thousands)

	December 31 2005	January 1 2005
Assets
Current assets:
Accounts receivable	$ 5,871	$ 7,867
Receivables from affiliates	3,957	4,580
Inventories	19,878	20,479
Prepaid expenses and other current assets	278	274
Total current assets	29,984	33,200
Investments in and advances to affiliated entities	864	719
Other assets	32	35
Property, plant, and equipment:
Land	2,359	2,359
Buildings and improvements	61,066	61,202
Machinery and equipment	30,563	31,580
Construction in progress	137	–
	94,125	95,141
Accumulated depreciation	(42,625)	(36,911)
	51,500	58,230
Total assets	$ 82,380	$ 92,184
Liabilities and owners’ equity
Current liabilities:
Current portion of long-term debt	$ 71	$ 66
Accounts payable	8,598	5,655
Accrued employee expenses	2,660	3,457
Accrued grower expenses	62	723
Accrued other expenses	301	604
Total current liabilities	11,692	10,505
Long-term debt, less current portion	356	425
Net advances from affiliated entities	41,275	60,559
Other long-term liabilities	2,054	2,439
	55,377	73,928
Owners’ equity	27,003	18,256
Total liabilities and owners’ equity	$ 82,380	$ 92,184

See accompanying notes.

Cagle’s-Keystone Foods LLC

Statements of Operations

(In Thousands)

	Year ended December 31 2005	53-week period ended January 1 2005
Net sales	$ 248,572	$ 327,267
Cost of products sold	215,873	292,701
Selling, general, and administrative	9,251	7,960
Depreciation and amortization	6,443	10,343
Operating income	17,005	16,263
Other (expense) income:
Interest, net of interest income of $0 and $9 for 2005 and 2004, respectively	(3,971)	(2,858)
Equity in income of affiliate	145	187
Other, net	18	172
Net income	$ 13,197	$ 13,764

See accompanying notes.

Cagle’s-Keystone Foods LLC

Statements of Changes in Owners’ Equity

(In Thousands)

	Grow-Out Holdings LLC	Cagle’s, Inc.	Total
Balance at December 27, 2003	$ 7,716	$ 3,307	$ 11,023
Net income	9,635	4,129	13,764
Other comprehensive income:
Net change in fair value of:
Interest rate hedge of Cagle Foods Credit, L.L.C.—equity method investee	104	45	149
Comprehensive income	9,739	4,174	13,913
Distributions	(4,676)	(2,004)	(6,680)
Balance at January 1, 2005	12,779	5,477	18,256
Net income	9,238	3,959	13,197
Distributions	(3,115)	(1,335)	(4,450)
Balance at December 31, 2005	$ 18,902	$ 8,101	$ 27,003

See accompanying notes.

Cagle’s-Keystone Foods LLC

Statements of Cash Flows

(In Thousands)

	Year ended December 31 2005	53-week period ended January 1 2005
Operating activities
Net income	$ 13,197	$ 13,764
Items not affecting cash:
Depreciation and amortization	6,443	10,343
Loss (gain) on sale of equipment	20	(39)
Loss on disposition of company farm	112	82
Equity in income of affiliate	(145)	(187)
Dividends received from affiliate	–	81
Changes in operating assets and liabilities:
Accounts receivable, net	2,619	409
Inventories	601	(2,523)
Accounts payable and accrued liabilities	1,182	(2,168)
Other, principally prepaid expenses and other	(390)	(281)
Net cash provided by operating activities	23,639	19,481
Investing activities
Purchases of property, plant, and equipment	(1,148)	(1,230)
Proceeds from sale of property, plant, and equipment	933	112
Other	–	119
Net cash used in investing activities	(215)	(999)
Financing activities
Principal payments on long-term debt	(64)	(54,563)
Proceeds from the issuance of long-term debt	–	491
Advances from affiliated entities, net	(18,910)	38,873
Distributions paid to owners	(4,450)	(6,680)
Net cash used in financing activities	(23,424)	(21,879)
Net decrease in cash	–	(3,397)
Cash at beginning of period	–	3,397
Cash at end of period	$ –	$ –

See accompanying notes.

Cagle’s-Keystone Foods LLC

Notes to Financial Statements

December 31, 2005

(In Thousands)

1.

Reporting Basis and Organization

Cagle’s-Keystone Foods LLC (the Company) was established as a limited liability company on October 31, 1997 and is a joint venture between Grow-Out Holdings LLC (GHLLC) (70%) and Cagle’s, Inc. (30%). GHLLC is a wholly owned subsidiary of Keystone Foods Holdings LLC (Holdings). The Company’s operations are located in Albany and Franklin, Kentucky. The latest date at which the limited liability company is to dissolve is December 31, 2022. The Company is engaged in the production and sale of processed chicken. A significant portion of all of the Company’s sales is made to affiliated entities (see Note 6).

On June 16, 2004, the owners of GHLLC and various entities affiliated through common ownership (Companies) consummated an agreement (the Transaction) with a private equity investment fund. Under the agreement, the Companies were merged though a series of transactions into one entity, Keystone Foods Holdings LLC (Holdings), and the private equity investment fund obtained a controlling equity interest in that entity. GHLLC continues as the owner of a 70% interest in the Company.

In connection with the Transaction, the Company’s net property, plant, and equipment and advances from affiliated entities were increased $5,287. The transaction also resulted in the elimination of $1,395 of the Company’s deferred financing costs on the pre-Transaction GHLLC debt facility.

2.

Significant Accounting Policies

Reporting Period

References to 2005 and 2004 are for the year ended December 31, 2005 and 53-week period ended January 1, 2005, respectively. The Company’s tax reporting year begins on the Sunday closest to December 31, which for the prior year was January 4, 2004. For the purposes of these financial statements, the Company has elected to use the 53-week period December 28, 2004 to January 1, 2005. The Company’s tax reporting year ends on the Saturday closest to December 31.

7

Cagle’s-Keystone Foods LLC

Notes to Financial Statements (continued)

(In Thousands)

2.

Significant Accounting Policies (continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to prior-year amounts to conform to the current-year presentation.

Inventories

Live field inventories 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. Such costs are amortized into hatching egg costs over the estimated production lives based on monthly egg production. Finished products, feed, medication, and supplies are stated at the lower of cost or market determined by the first-in, first-out method. Inventories consist of the following:

	December 31 2005	January 1 2005
Finished products	$ 3,635	$ 5,896
Raw materials	134	–
Field inventory, breeders, and eggs	11,023	10,728
Feed, ingredients, and medication	1,956	1,086
Packaging and supplies	3,130	2,769
	$ 19,878	$ 20,479

8

Cagle’s-Keystone Foods LLC

Notes to Financial Statements (continued)

(In Thousands)

2.

Significant Accounting Policies (continued)

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation is computed principally by the straight-line method over the following periods:

Buildings and improvements	3-30 years
Machinery and equipment	3-17 years
Land improvements	7 years

The Company evaluates the estimated useful lives and the carrying value of assets on a periodic basis to determine whether events or circumstances warrant revised estimated useful lives or whether any impairment exists. Management believes that no impairment existed at December 31, 2005.

Revenue Recognition

The Company records revenue at the time product is shipped or services are provided.

Investments in Affiliates

Investments in unconsolidated affiliates are accounted for using the equity method based on the percentage ownership.

Fair Value of Financial Instruments

The following assumptions and methods were used to estimate fair value disclosures for financial instruments.

Accounts receivable: The carrying amounts reported in the balance sheets for cash and accounts receivable approximate fair value.

Long-term and short-term debt: Based on prevailing interest rates, the fair value of long-term and short-term debt, in the aggregate, approximates the carrying value.

Derivative instruments: Derivatives are reported in the balance sheets at fair value. If the derivative is a hedge, changes in the fair value of derivatives are recognized in income when the hedged item (or changes in its value) is recognized in income.

2.

Significant Accounting Policies (continued)

Income Taxes

The Company is classified as a partnership for US tax purposes. In accordance with applicable regulations, taxable income or loss of the Company is required to be reported in the tax return of the Company’s partners in accordance with the Limited Liability Company Agreement. Accordingly, the Company is not subject to federal income taxes. A similar election has been made for those states which permit this election.

Derivative Instruments and Hedging Activities

The Company accounts for derivative instruments and hedging activities in accordance with Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which amended SFAS No. 133. SFAS No. 133 requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting.

The Company had entered into interest-rate swap and collar agreements, which are described in Note 3. The swap agreements were designated as cash flow hedges and their fair values were recognized in the balance sheet as assets or liabilities and in other comprehensive income in owners’ equity. Changes in the fair value of the collar agreements were recognized in income.

Recent Accounting Pronouncements

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. This interpretation addresses consolidation by business enterprises of certain variable interest entities. This interpretation applies immediately to variable interest entities created after December 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year beginning after December 15, 2004, to variable interest entities in which an enterprise holds a variable interest that it acquired before December 31, 2003. Adoption of FIN 46 had no impact on the Company’s financial statements for entities created before or after January 1, 2004.

2.

Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an Amendment of ARB No. 43, Chapter 4. SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, handling costs and wasted material (spoilage). Among other provisions, the new rule requires that such items be recognized as current-period charges, regardless of whether they meet the criterion of “so abnormal” as stated in ARB No. 43. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. The Company does not expect that adoption of SFAS No. 151 will have a material effect on its financial position, results of operations, or liquidity.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

3.

Debt

	December 31 2005	January 1 2005
Note payable to Farm Credit Services of Mid America, FLCA, 6.5% fixed interest rate, maturing on December 31, 2010	$ 427	$ 491
Less current portion	71	66
Noncurrent portion of debt	$ 356	$ 425

On June 16, 2004, in connection with the Transaction (see Note 1), Holdings refinanced certain of the Company’s credit facilities with proceeds from a new credit agreement, which is a liability of Holdings and not the Company and is guaranteed by the domestic subsidiaries of Holdings, including the Company. Substantially all of the Company’s assets are pledged as collateral for the credit agreement. The agreements also place restrictions and limitations on the sale of assets, capital expenditures, additional

3.

Debt (continued)

borrowings, investments, dividends, and mergers. At December 31, 2005 and January 1, 2005, the amount outstanding under the term loan facilities was $221,776 and $262,729, respectively. No amounts were drawn on the revolver and standby letters of credit totaling $15,149 and $3,226 were issued as of December 31, 2005 and January 1, 2005, respectively.

GA/KY Fundco LLC (Fundco) was established in 1997 as a 50%-owned subsidiary of both the Company and Equity Group – Georgia Division LLC (Equity GA), a company affiliated through common ownership, for borrowing funds from a group of banks to fund the capital needs of the Company and Equity GA. In connection with the Transaction, Fundco’s debt obligations to third-party lenders were refinanced with affiliate obligations.

On January 15, 2003, Fundco entered into two interest rate collars on behalf of the Company and Equity GA. The collars allowed the Company to incur a floating rate of interest on the outstanding notional amount within a specified range. The collar swapped floating three-month LIBOR for fixed rates whenever the floating rate exceeds the cap rate (4%) or falls below the floor rate (1.5%). Each contract originated with a notional amount of $28,350. The collars were assigned to Holdings in October 2004.

Aggregate maturities of short-term and long-term debt are as follows: 2006 – $71; 2007 – $76; 2008 – $81; 2009 – $87; 2010 – $93; thereafter – $19.

In 2005 and 2004, the Company paid $28 and $1,318, respectively, in interest expense.

4.

Pension Plans and Postretirement Benefits

The Company has several defined contribution plans for employees. For employees covered by collective bargaining agreements, contributions are made at the rates required by such agreements. In the case of certain employees not covered by collective bargaining agreements, contributions are made on the basis of a percentage of each employee’s salary. Pension expense for 2005 and 2004 was $471 and $432, respectively.

In addition to providing pension benefits, the Company provides certain health care benefits for retired employees. Substantially all of the Company’s employees may become eligible for varying levels of benefits if they reach normal retirement age while working for the Company.

4.

Pension Plans and Postretirement Benefits (continued)

The Company’s accumulated postretirement benefit obligation, which is unfunded, is $430 and $313 at December 31, 2005 and January 1, 2005, respectively. The accrued postretirement benefit cost recognized in the balance sheet was $295 and $197 at December 31, 2005 and January 1, 2005, respectively. Retiree benefit payments were $6 and $0 for 2005 and 2004, respectively.

Actuarial assumptions used to determine the liability for postretirement plans other than pensions included a discount rate of 5.40% at December 31, 2005 and 5.65% at January 1, 2005.

For measurement purposes, a 9.0% annual increase in the per capita cost of covered health care benefits was assumed for 2006. The rate is assumed to decline gradually, thereafter, to 5.5% in 2010.

The net periodic postretirement benefit costs were $98 and $84 for 2005 and 2004, respectively.

5.

Rental Expenses, Commitments, and Contingencies

The Company leases machinery and equipment under operating leases. Rent expense was $2,436 and $2,823 for 2005 and 2004, respectively.

Future minimum payments under noncancelable operating leases with terms in excess of one year were as follows:

2006	$ 2,569
2007	2,017
2008	1,021
2009	509
2010	140
Thereafter	183
	$ 6,439

The Company has outstanding purchase commitments as of December 31, 2005 and January 1, 2005 of $17,325 and $11,678, respectively, for feed inventory, in the ordinary course of business.

9

Cagle’s-Keystone Foods LLC

Notes to Financial Statements (continued)

(In Thousands)

5.

Rental Expenses, Commitments, and Contingencies (continued)

In 2003, the Company entered into an agreement with an electric cooperative (Co-op), whereby the Co-op constructed various power and backup power facilities at a cost of $1,126 to be used solely by the Company. The Company will reimburse the Co-op for such costs through utility billings and direct payments over a five-year period.

The Company is a defendant in various litigations. In the opinion of management, based upon the advice of counsel, the aggregate liability, if any, arising from such litigation will not have a material adverse effect on the Company’s financial condition, operating results, or liquidity.

6.

Related Party Transactions

Sales to related parties represented 69% and 77% of net sales for 2005 and 2004, respectively.

Administrative fees, sales, expenses, and balances with related parties, which are affiliated by common ownership except for Cagle’s, Inc., for 2005 and 2004 are summarized as follows:

	Keystone Foods Intermediate LLC	Keystone Foods LLC	Equity Group – Georgia Division LLC	Cagle Foods Credit, L.L.C.	Equity Group Eufaula Division LLC	Grow-Out Holdings LLC	Cagle’s, Inc.
Year ended December 31, 2005
Net sales	$ –	$ 168,670	$ 153	$ –	$ 376	$ –	$ –
Purchases	–	–	495	–	21,610	–	–
Administrative fees	–	2,240	–	–	–	1,932	828
Interest expense	3,921	–	–	22	–	–	–
Balance at year end:
Net A/R, (A/P)	–	4,018	–	–	9	–	(71)
Advances from (to) affiliated entities	68,194	(43,483)	186	298	16,080	–	–
53-week period ended January 1, 2005
Net sales	$ –	$ 240,904	$ –	$ –	$ –	$ –	$ –
Further processing charges	–	10,250	–	–	–	–	–
Purchases	–	–	5,111	–	28,934	–	12,142
Administrative fees	–	703	–	–	–	1,887	809
Interest expense	1,750	–	86	95	–	–	–
Balance at year end:
Net A/R, (A/P)	–	4,833	(58)	(4)	(122)	–	(69)
Advances from (to) affiliated entities	68,894	(8,633)	–	298	–	–	–

6.

Related Party Transactions (continued)

The Companies transact business primarily with a single customer. While the Companies’ management believes its relationship with this customer is good, the loss of this customer would have a severe impact on the financial condition of the Companies.

In 2003, Cagle Foods Credit, L.L.C. (Credit) (see Note 7) transferred to the Company a foreclosed consumer loan and the related real estate that collateralized the loan. The Company acquired this real estate from Credit for the book value, which approximates fair market value, of the loans and issued notes payable as consideration. The balance of the note payable at December 31, 2005 and January 1, 2005 was $298 (6.5% fixed rate interest) for both years.

In 2005, Credit sold a $590 consumer loan to the Company which was part of a group of loans for which a 70% participation interest was sold to an unrelated financial institution in 2004. The Company paid $112 to Credit for this loan, which was the remaining principal on Credit’s retained portion from the 70% participation interest sold in 2004. The Company subsequently wrote this loan off in 2005 due to collection issues.

7.

Investment in Affiliate

The Company owns 25% of Credit along with Equity GA (25%) and GHLLC (50%). Credit was formed for the purpose of financing the facilities of the Company’s and Equity GA’s contract growers. The investment is being accounted for under the equity method. The undistributed income from this affiliate allocated to the Company was $145 and $187 for 2005 and 2004, respectively.

Credit has consumer loans receivable of approximately $5,800 and $8,800 at December 31, 2005 and January 1, 2005, respectively. Credit has total assets of approximately $7,700 and $10,000 and total liabilities of approximately $4,300 and $7,100 as of December 31, 2005 and January 1, 2005, respectively, and net income of $579 and $750 for 2005 and 2004, respectively.

10

EX-99

Cagle's-Keystone Foods LLC

Financial Statements

for the 52-Week Period Ended December 27, 2003

Unaudited

CAGLE'S-KEYSTONE FOODS LLC
BALANCE SHEETS - Unaudited
(Dollars in thousands)
	December 27, 2003
ASSETS
CURRENT ASSETS:
Cash	$          3,397
Accounts receivable	8,423
Receivables-related party	4,677
Inventory	17,956
Prepaid and other current assets	212
	-----------------
Total current assets	34,665
INVESTMENTS IN AND ADVANCES
TO AFFILIATED ENTITIES	464
PROPERTY, PLANT, AND EQUIPMENT:
Land	2,199
Buildings and improvements	57,397
Machinery and equipment	27,211
Furniture and fixtures	1,005
Construction in progress	289
	-----------------
	88,101
Less accumulated depreciation	-28,375
	-----------------
Property, plant, and equipment net	59,726
OTHER ASSETS	3,107
	-----------------
TOTAL	$        97,962
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Current portion of long term debt	$          7,500
Debt-related party	16,976
Accounts payable	7,881
Accounts payable-related party	244
Accrued expenses	4,726
	-----------------
Total current liabilities	37,327
LONG-TERM DEBT	47,063
OTHER LONG-TERM LIABILITIES	2,549
	-----------------
Total liabilities	86,939
MEMBERS' EQUITY	11,023
	-----------------
TOTAL	$        97,962
See notes to financial statements.

STATEMENTS OF OPERATIONS- Unaudited
(Dollars in thousands)
	52-Week Period Ended
	December 27, 2003
NET SALES	$                  218,038
TOTAL COST OF PRODUCT SOLD	189,124
SELLING, GENERAL, AND ADMINISTRATIVE	7,338
DEPRECIATION AND AMORTIZATION	9,154
	------------
OPERATING INCOME	12,422
OTHER INCOME (EXPENSES):
Interest-net of interest income	(2,198)
Interest-related party	(377)
Other-net	(61)
Equity in income of affiliates	269
	------------
NET INCOME	$                   10,055
See notes to financial statements.

CAGLE'S-KEYSTONE FOODS LLC
STATEMENTS OF MEMBERS' EQUITY
(Dollars in thousands) - Unaudited
	Executive	Cagle's,
	Holdings L.P.	Inc.	Total
BALANCE-December 28, 2002	$          4,636	$      1,986	$      6,622
Net income	7,039	3,016	10,055
Other comprehensive income:
Net change in fair value of:
Interest rate hedge of company-
GA/KY Fundco LLC	5	3	8
Interest rate hedge of Cagle Foods
Credit, L.L.C.-   equity method
investment	41	18	59
Total comprehensive income	7,085	3,037	10,122
Distributions to members	(4,005)	(1,716)	(5,721)
BALANCE-December 27, 2003	7,716	3,307	11,023
See notes to financial statements.

CAGLE'S-KEYSTONE FOODS LLC
STATEMENTS OF CASH FLOWS - Unaudited
(Dollars in thousands)
	52-Week Period Ended
	December 27, 2003
OPERATING ACTIVITIES:
Net income	$                        10,055
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization	9,154
Loss on sale of equipment	39
Equity in income of affiliates	(269)
Dividends received from affiliates	118
Changes in operating assets and liabilities:
Accounts receivable-net	6,173
Inventories	(5,985)
Accounts payable and accrued liabilities	(2,289)
Other	2,585
Net cash provided by operating activities	19,581
INVESTING ACTIVITIES:
Investments in and advances to affiliates	523
Purchases of property, plant, and equipment	(2,464)
Proceeds from sale of property, plant, and equipment	83
Other assets and liabilities	(4)
Net cash used in investing activities	(1,862)
FINANCING ACTIVITIES:
Net payments under revolving lines of credit	(12,000)
Principal payments on long-term debt	(8,817)
Loan fees	(245)
Debt-related party	11,510
Distributions to members	(5,721)
Net cash used in financing activities	(15,273)
NET INCREASE (DECREASE) IN CASH	2,446
CASH-Beginning of period	951
CASH-End of period	$                          3,397
See notes to financial statements.

CAGLE'S-KEYSTONE FOODS LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE 52-WEEK PERIOD ENDED DECEMBER 27, 2003

(Dollars in thousands)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business-Cagle's-Keystone Foods LLC (the "Company") was

established as a limited liability company on October 31, 1997 and is a joint

venture between Cagle's, Inc. (30%) and Executive Holdings L.P. (70%). The

Company's operations are located in Albany and Franklin, Kentucky. The latest

date at which the limited liability company is to dissolve is December 31,

2022. The Company is engaged in the production and sale of processed chicken.

A significant portion of all of the Company's sales are made to the joint

venture partners (see Note 3).

Revenue Recognition-The Company recognizes revenue when the product is

shipped to customers, an exchange has taken place, and the applicable

provisions of Statement of Financial Accounting Standards ("SFAS") No. 48,

Revenue Recognition When Right of Return Exists, have been made.

Inventories-Live field inventories 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. Such costs are

amortized into hatching egg costs over the estimated production lives

based on monthly egg production. Finished products, feed, medication, and

supplies are stated at the lower of cost or market determined by the

first-in, first-out method.

Inventories at December 27, 2003 consist of the following:

                                                   2003            

Finished products                               $  3,954        

Field inventory, breeders, and eggs               10,145        

Feed, ingredients, and medication                  1,529       

Supply inventory                                   2,328       

                                                --------       

                                                $ 17,956   

Property, Plant, and Equipment-Property, plant, and equipment are stated at

cost. Depreciation is computed principally by the straight-line method for

financial reporting purposes over the following periods:

                 Buildings and improvements          3-30 years

                 Machinery, furniture, and equipment 3-17 years

                 Land improvements                      7 years

The Company evaluates the estimated useful lives and the carrying value of

assets on a periodic basis to determine whether events or circumstances

warrant revised estimated useful lives or whether any impairment exists.

Management believes that no impairment existed at December 27, 2003.

Investment in Unconsolidated Affiliates-The equity method of accounting

is used to account for the Company's investment in unconsolidated

affiliates because of the Company's ability to exercise significant

influence.

Fair Value of Financial Instruments-The carrying amounts of cash,

accounts receivable, and accounts payable reflected in the financial

statements approximate fair values because of the short-term nature of

these instruments. Based on the borrowing rates currently available to

the Company for bank loans with similar terms and maturities, the Company

estimates that the carrying value of its long-term debt approximates fair

value. The fair value of the interest rate swaps (see Note 2) is the

amount the Company would receive or pay to terminate the swap agreements.

Use of Estimates-The preparation of financial statements in conformity

with accounting principles generally accepted in the United States of

America requires management to make estimates and assumptions that affect

reported amounts of assets and liabilities and 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.

Reporting Period-The Company's tax reporting year ends on the Saturday

closest to December 31, which for the current year was January 3, 2004.

For purposes of these financial statements, the Company has elected to

use the 52-week period ended December 27, 2003.

Income Taxes-The Company is a limited liability company and has received

a ruling from the Internal Revenue Service, which allows the Company to be

treated as a partnership for income tax purposes. As a partnership, it is

not subject to income taxes and the partners report their proportionate

share of the income on their tax returns.

Accumulated Other Comprehensive Loss-Included in members' equity is

accumulated other comprehensive loss related to interest rate swaps

(see Note 2) of $149 as of December 27, 2003.

Derivative Instruments and Hedging Activities-On December 31, 2000, the

Company adopted SFAS No. 133, Accounting for Derivative Instruments and

Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative

Instruments and Certain Hedging Activities, which amended SFAS No. 133.

These standards require companies to record derivatives on the balance

sheet as assets or liabilities, measured at fair value. Gains or losses

resulting from changes in the values of those derivatives would be

accounted for depending on the use of the derivative and whether it

qualifies for hedge accounting.

Interest Rate Swap Agreements-These agreements involve the receipt of a

floating rate of interest on long-term debt in exchange for a fixed-rate

of interest over the life of the agreements without an exchange of the

underlying debt principal amount. These swap agreements have been

designated as cash flow hedges and their fair values are recognized as

an asset or liability in the financial statements with a corresponding

gain or lose recognized, in accumulated other comprehensive (loss) income

in members' equity.

Interest Rate Collar Agreements-These agreements involve the receipt of

a floating rate of interest above a certain cap or below a certain floor

on long-term debt in exchange for the cap or the floor over the life of

the agreements without an exchange of the underlying debt principal amount.

These agreements did not qualify as hedges under SFAS No. 133. The fair

values of the collars are recognized as an asset or liability in the

financial statements with a corresponding gain or loss recognized as

income or expense.

New Accounting Pronouncements-

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable

Interest Entities-an Interpretation of Accounting Research Bulletin No.

51. FIN 46 addresses consolidation by business enterprises where equity

investors do not bear the residual economic risks and rewards. The

underlying principle behind FIN 46 is that if a business enterprise has

the majority financial interest in an entity, which is defined in FIN 46

as a variable interest entity, the assets, liabilities and results of the

activities of the variable interest entity should be included in

consolidated financial statements with those of the business enterprise.

In December 2003, the FASB issued Revised FIN 46 ("FIN 46R") to clarify

certain aspects of FIN 46 including the determination of who is the

primary beneficiary of a variable interest entity. FIN 46R postponed the

effective date as to when companies are required to apply the provisions

of FIN 46 prospectively for all variable interest entities in existence

prior to January 31, 2003 until the first financial reporting period that

ends after March 15, 2004. However, for entities that are considered to

be special purpose entities, the effective date of FIN 46 is financial

reporting periods after December 15, 2003. The Company is evaluating the

impact of FIN 46 to determine the effect, if any, the pronouncement will

have on its financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133

on Derivative Instruments and Hedging Activities. SFAS No. 149 amends

and clarifies accounting for derivative instruments, including certain

derivative instruments embedded in other contracts, and for hedging

activities under SFAS No. 133. In particular, this statement clarifies

under what circumstances a contract with an initial net investment meets

the characteristic of a derivative and when a derivative contains a

financing component that warrants special reporting in the statement of

cash flows. This statement is effective for contracts entered into or

modified after June 30, 2003. Adoption of the pronouncement did not have

a significant impact on the Company's financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain

Financial Instruments With Characteristics of Both Liabilities and

Equity. SFAS No. 150 establishes how an issuer classifies and measures

certain financial instruments with characteristics of both liabilities

and equity. This statement is effective for instruments entered into or

modified after May 31, 2003 and otherwise is effective at the beginning

of the first interim period beginning after June 15, 2003. As a result

of concerns over implementation and measurement issues, the FASB

unanimously decided on October 29, 2003 to defer the application of SFAS

No. 150 to certain noncontrolling interests of limited-life entities that

are consolidated in the financial statements. Adoption of the

pronouncement did not have a significant impact on the Company's

financial statements.

On January 12, 2004, the FASB issued FASB Staff Position No. FAS 106-1,

Accounting and Disclosure Requirements Related to the Medicare

Prescription Drug, Improvement and Modernization Act of 2003 ("FSP 106-1").

FSP 106-1 permits employers that sponsor postretirement benefit plans that

provide prescription drug benefits to retirees to make a one-time election

to defer accounting impact, if any, of the Medicare Prescription Drug,

Improvement, and Modernization Act of 2003 (the "Act"), which was enacted

into law on December 8, 2003. The Company has elected to defer recognition

of the provisions of the Act as permitted by FSP 106-1 due to uncertainties

regarding some of the new Medicare provisions and a lack of authoritative

accounting guidance regarding certain matters. Changes to previously

reported information may be required depending on the transition guidance

issued in future authoritative guidance.

2. LONG-TERM DEBT

Long-term debt at December 27, 2003 consists of the following:

Notes payable to GA/KY Fundco LLC under a term loan

 agreement, variable interest rate (2.92% at December

27, 2003) commencing  April 30, 2002, maturing on

April 19, 2007.

                                     $ 54,563     

Note payable to Equity Group-Georgia Division LLC, a

 related party, variable interest rate (2.89% at

 December 27, 2003),  due on demand.                     15,500      

Note payable to Cagle Foods Credit, L.L.C., a

 related party,  6.5% fixed interest rate, due

 on demand.                                                 875       

Note payable to Cagle Foods Credit, L.L.C., a

related party,  9.25 % fixed interest rate, due

on demand.                                                  601       

                                                       --------    

Total                                                    71,539     

Current portion of long-term debt                         7,500

Related party debt-due on demand                         16,976     

                                                       --------        

Total long-term debt                              $      47,063    

Fundco was established in 1997 as a 50%-owned subsidiary of both the Company

and Equity GA. Fundco is a special purpose entity set up for borrowing of

funds from a group of banks to fund the capital needs of the Company and

Equity GA. All borrowing terms entered into by Fundco are the same borrowing

terms passed down to the Company and Equity GA. Fundco has no other

operations. At December 27, 2003, Equity GA had $22.9 million outstanding

for the term loan facility and none for the revolving loan facility. The

debt is secured by substantially all of the Company's' assets.

Aggregate maturities of long-term debt during the years subsequent to

December 27, 2003 are as follows:

            For the fiscal year

            2004    $ 24,476

            2005       8,000  

            2006       8,000

            2007      31,063

                    --------

                    $ 71,539

The Company incurred approximately $2,207 in loan origination costs

related to the term loan and revolver, which is being amortized on a

straight-line basis over the term of the loan, five years. Amortization

expense related to the loan origination costs was $462 in 2003.

In 2003 the Company paid approximately $2,750 in interest expense.

On January 15, 2003, Fundco entered two new interest rate collars on

behalf of the Company and Equity GA. The collars allow Fundco to incur a

floating rate of interest on the outstanding notional amount between a

specified range. The collar swaps floating three-month LIBOR for fixed

rates whenever the floating rate exceeds the cap rate (4%) or falls below

the floor rate (1.5%). Each contract originated with a notional amount of

$28,350. The notional amounts amortize over a three-year term in

proportion to the underlying Fundco term loan. The collars differ in that

one has a conventional cap which may trigger payments on a period-by-period

basis, while the other has a cumulative cap which will only trigger payments

when the sum of all floating rate payments exceed interest at the cap rate

over the life of the contract. As of the date of this report it is highly

probable that the underlying loan for which these derivative contracts were

entered will be terminated in the near term. For this reason, the collars

are not given hedge accounting and changes in their market values are

reflected in other income and expenses of the Company in the amount of $97.

At December 27, 2003 Fundco had an unused standby letter of credit

available to the Company amounting to $4,760.

3. RELATED PARTY TRANSACTIONS

Sales to the Company's owners (Executive Holdings L.P. through its common

ownership affiliate Keystone Foods LLC and Cagle's, Inc.) represented 80%

of net sales during 2003. The Company currently sells deboned chicken at

cost plus $.03 per eviscerated pound.

Executive Holdings L.P. and Cagle's Inc. both charge the Company

administrative fees based on the Company's volume of production. These

fees totaled $2,430 in 2003.

Sales, expenses, and balances with related parties for 2003 summarized as follows:

	Executive
	Holdings	Franklin			Cagle's,
	L.P.	Equipment	Equity GA	Credit	Inc.
2003
Net sales	$ 172,580	$             -	$      561	$           -	$        21
Purchases			5,973
Interest income (expense)		14	(300)	(91)
Balance at year-end:
Net A/R, (A/P)	4,547		(58)		(56)
Notes receivable
Notes payable			15,500	1,476

In 2003, Cagle Foods Credit, L.L.C. ("Credit"), a related party,

transferred two foreclosed consumer loans and the related real estate that

collateralized the loans to the Company. The Company acquired this real

estate from Credit for the book value and issued notes payable as

consideration for this acquisition. The real estate collateral is recorded

in other assets at the loan values which approximate fair market value and

are held for resale. The balance of the notes payable at December 27, 2003

were $875 (6.5% fixed rate interest) and $601 (9.25% fixed rate interest).

4. COMMITMENTS

In 2003, the Company entered into a five year industrial power agreement

with South Kentucky Rural Electric Cooperative Corporation (the "Co-op").

Under the terms of this agreement, the Co-op has agreed to provide the

substation and other facilities costing approximately $518 to supply the

Company with its power requirements. The cost of these facilities will be

recovered through rates over the life of the contract.

Additionally in 2003, the Company entered into a five year emergency backup

service agreement with the Co-op. Under the terms of this agreement, the

Co-op has agreed to provide the backup generators and associated equipment

and facilities costing approximately $608 to provide backup electric to the

Company in the event of a power interruption. The Company has agreed to pay

an annual facilities charge of $114 for the availability of this service.

The Company leases machinery and equipment under operating leases. Rent

expense was $2,649 in 2003.

Future minimum payments under noncancelable operating leases with initial

terms of one year or more consisted of the following at December 27, 2003:

For the fiscal year

2004         $ 2,855

2005           2,855

2006           2,733

2007           1,720

2008             843

Thereafter       318

            --------

            $ 11,324

5. INVESTMENT IN UNCONSOLIDATED AFFILIATE

Effective December 1995, Cagle's, Inc., Executive Holdings L.P., and Equity

GA formed Credit. Each Company made capital contributions of $3. Effective

July 1, 1998, the Company became a member of Credit, at which time the

Company made a capital contribution of $14. Currently, the Company owns 25%

of Credit along with Equity GA (25%) and Executive Holdings L.P. (50%).

Credit was formed for the purpose of financing the facilities of the

Company's and Equity GA's contract growers. The investment is being

accounted for under the equity method. The undistributed income from this

affiliate allocated to the Company was $269 in 2003. The Company received distributions of $118 in 2003.

On April 30, 2002, Credit executed a loan agreement for a $25.3 million

revolving loan facility at variable interest rates. The Company and Equity

GA have guaranteed the borrowings under the loan agreement. Credit has

received advances of approximately $21.7 million on the revolving loan

facilities as of December 27, 2003. The revolving loan facility is due

in monthly installments. Credit is required to make a final balloon

payment in April 2007.

Credit has consumer loans receivable of approximately $20.8 million at December 27, 2003. Credit has total assets of approximately $24.4 million and total liabilities of approximately $22.6 million as of December 27, 2003 and net income of approximately $1,076 for 2003.

6. BENEFIT PLANS

The Company contributes to a 401(k) retirement plan for employees who meet

the eligibility requirements. Under the plan, the Company contributes up

to 2% of participating employees' salaries. Amounts contributed by the

Company to the 401(k) plan totaled $95 in 2003. During 2003, the Company introduced a defined contribution plan for certain employees not covered by collective bargaining agreements. Contributions are made on the basis of a percentage of each employee's salary and pension expense for 2003 was $227.

The Companies' accumulated postretirement benefit obligation, which is

unfunded, is $328 at December 27, 2003. The accrued postretirement benefit

cost recognized in the accompanying balance sheets is $113 at December 27,

2003. No retiree benefit payments were paid in 2003.

Actuarial assumptions used to determine the liability for postretirement

plans other than pensions included a discount rate of 6.25% at December

27, 2003.

For measurement purposes, an average 5.5% annual increase in the per capita

cost of covered health care benefits was assumed for 2003.

The net periodic postretirement benefit costs were $93 for 2003.

7. CONTINGENCIES

The Company is a party to various lawsuits in the ordinary course of doing

business. The Company intends to defend these matters vigorously. The

outcome of such lawsuits cannot presently be determined, but in the opinion

of management, the aggregate liability, if any, arising from such

litigation will not have a material adverse effect on the accompanying

financial statements.

8. SUBSEQUENT EVENT

As described in Note 1, the Company is owned 70% by Executive Holdings

L.P., which is affiliated with Keystone Foods LLC and various other

entities through common ownership. On April 2, 2004, the Company became

subject to an agreement under which the Company and various other entities

affiliated by common ownership with Keystone Food LLC would be merged into

one entity and an unrelated third party would obtain a controlling equity

interest in that entity. The agreement is subject to regulatory approval

and satisfaction of the conditions agreed to by the parties. Following

that merger, it is likely that borrowing agreements outstanding at December

27, 2003 would be replaced by new agreements entered into by the postmerger

entity. The accompanying financial statements do not reflect any adjustments

that might result from the merger or repayment of debt.