SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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(Mark One)

(x)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended July 02, 2005



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



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CAGLES, INC.

(Exact name of Registrant as specified in its charter)

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GEORGIA                                                           58-0625713

(State or other jurisdiction of                                                           (I.R.S. employer

incorporation or organization)                                                          identification no.)





2000 Hills Ave., Atlanta, Ga,                                               30318

(Address of principal executive offices)                                  (Zip code)



Registrants telephone number, including area code: (404) 355-2820

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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 by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b - 2).    Yes (  )    No  (x)



The Registrant had 4,742,998 shares of Class A Common Stock, outstanding as of July 02, 2005.

























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PART 1.  FINANCIAL INFORMATION



Item1. Financial Statements



|Cagle's, Inc. & Subsidiary Consolidated Balance Sheets                                  |                           |  |                          
|--------------------------------------------------------------------------------------- | ------------------------- |  | -------------------------
|July 2, 2005 and April 2, 2005                                                          |                           |  |                          
|(In Thousands, Except Par Values)                                                       |                           |  |                          
|(Period 7/2/05 Unaudited)                                                               |                           |  |                          
|ASSETS                                                                                  | July 2, 2005              |  | April 2, 2005            
|Current assets                                                                          |                           |  |                          
|Cash and cash equivalents                                                               | $                     299 |  | $                     877
|Trade accounts receivable, less allowance for doubtful accounts                         | 11,695                    |  | 11,370                   
|Inventories                                                                             | 19,801                    |  | 19,042                   
|Note receivable                                                                         | 250                       |  | 250                      
|Refundable income taxes, current portion                                                | 608                       |  | 559                      
|Other current assets                                                                    | 928                       |  | 589                      
|Total current assets                                                                    | 33,581                    |  | 32,687                   
|                                                                                        |                           |  |                          
|Investments in and receivables from unconsolidated affiliates                           | 6,781                     |  | 6,105                    
|Property, plant and equipment, at cost                                                  |                           |  |                          
|Land                                                                                    | 1,976                     |  | 1,976                    
|Buildings and improvements                                                              | 56,103                    |  | 56,103                   
|Machinery, furniture and equipment                                                      | 35,897                    |  | 35,400                   
|Vehicles                                                                                | 4,482                     |  | 4,480                    
|Construction in progress                                                                | 4,176                     |  | 3,381                    
|                                                                                        | 102,634                   |  | 101,340                  
|Less accumulated depreciation                                                           | 57,627                    |  | 56,840                   
|Property, plant and equipment, net                                                      | 45,007                    |  | 44,500                   
|                                                                                        |                           |  |                          
|Other assets                                                                            |                           |  |                          
|Long-term refundable income taxes                                                       | 2,027                     |  | 2,251                    
|Deferred financing costs, net                                                           | 600                       |  | 687                      
|Deferred income taxes                                                                   | 4,194                     |  | 5,003                    
|Other assets                                                                            | 2,696                     |  | 3,059                    
|Total other assets                                                                      | 9,517                     |  | 11,000                   
|Total assets                                                                            | $               94,886    |  | $               94,292   
|                                                                                        |                           |  |                          
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                    |                           |  |                          
|Current liabilities                                                                     |                           |  |                          
|Current maturities of long-term debt                                                    | $                  3,476  |  | $                  3,476 
|Accounts payable                                                                        | 11,060                    |  | 11,563                   
|Accrued expenses                                                                        | 4,055                     |  | 4,668                    
|Deferred income taxes                                                                   | 1,770                     |  | 1,770                    
|Total current liabilities                                                               | 20,361                    |  | 21,477                   
|                                                                                        |                           |  |                          
|Long-term debt                                                                          | 27,280                    |  | 26,534                   
|Other noncurrent liabilities                                                            | -                         |  | 475                      
|                                                                                        |                           |  |                          
|STOCKHOLDERS' EQUITY                                                                    |                           |  |                          
|Preferred stock, $1 par value; 1,000 shares authorized, none issued                     | -                         |  | -                        
|Common stock, $1 par value; 9,000 shares authorized, 4,744                              |                           |  |                          
|shares issued and 4,743 outstanding                                                     | 4,744                     |  | 4,744                    
|Treasury stock, at cost                                                                 | (80)                      |  | (80)                     
|Additional paid-in capital                                                              | 4,198                     |  | 4,198                    
|Retained earnings                                                                       | 38,383                    |  | 36,944                   
|Total stockholders' equity                                                              | 47,245                    |  | 45,806                   
|Total liabilities and stockholders' equity                                              | $               94,886    |  | $               94,292   
|The accompanying notes are an integral part of these consolidated financial statements. |                           | 



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|Cagle's, Inc. & Subsidiary                                                              |                        |  |                       
|--------------------------------------------------------------------------------------- | ---------------------- |  | ----------------------
|Consolidated Statements of Income                                                       |                        |  |                       
|For the 13 weeks ended July 2, 2005 and July 3, 2004                                    |                        |  |                       
|(In Thousands, except per share data)                                                   |                        |  |                       
|(Unaudited)                                                                             |                        |  |                       
|                                                                                        |                        |  |                       
|                                                                                        | 7/2/2005               |  | 7/3/2004              
|                                                                                        |                        |  |                       
|Net Sales                                                                               | $          61,593      |  | $         67,152      
|Costs and Expenses:                                                                     |                        |  |                       
|Cost of Sales                                                                           | 56,981                 |  | 55,055                
|Selling and Delivery                                                                    | 1,602                  |  | 1,566                 
|General and Administrative                                                              | 1,638                  |  | 1,355                 
|Total costs and expenses                                                                | 60,221                 |  | 57,976                
|                                                                                        |                        |  |                       
|Income From Operations                                                                  | 1,372                  |  | 9,176                 
|                                                                                        |                        |  |                       
|Other Income (Expense):                                                                 |                        |  |                       
|Interest expense                                                                        | (624)                  |  | (701)                 
|Other Income (Expense), Net                                                             | 525                    |  | 13                    
|                                                                                        |                        |  |                       
|Earnings Before equity in earnings of                                                   |                        |  |                       
|unconsolidated affiliates and income taxes                                              | 1,273                  |  | 8,488                 
|                                                                                        |                        |  |                       
|Equity in earnings of unconsolidated affiliates                                         | 975                    |  | 1,116                 
|Income before income taxes                                                              | 2,248                  |  | 9,604                 
|                                                                                        |                        |  |                       
|Income Taxes Provision                                                                  | 809                    |  | 3,442                 
|Net Income                                                                              | $            1,439     |  | $           6,162     
|                                                                                        |                        |  |                       
|Weighted Average Shares Outstanding                                                     |                        |  |                       
|-Basic                                                                                  | 4,743                  |  | 4,743                 
|-Diluted                                                                                | 4,743                  |  | 4,743                 
|                                                                                        |                        |  |                       
|Net Income Per Common Share                                                             |                        |  |                       
|-Basic                                                                                  | $              0.30    |  | $              1.30   
|-Diluted                                                                                | $              0.30    |  | $              1.30   
|Dividends Per Common Share                                                              | $                    - |  | $                    -
|                                                                                        |                        |  |                       
|The accompanying notes are an integral part of these consolidated financial statements.











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|Cagle's, Inc. & Subsidiary                                                              |                     |  |                    
|--------------------------------------------------------------------------------------- | ------------------- |  | -------------------
|Consolidated Statements of Cash Flows                                                   |                     |  |                    
|For the 13 weeks ended July 2, 2005 and July 3, 2004                                    |                     |  |                    
|(In Thousands) (Unaudited)                                                              |                     |  |                    
|                                                                                        |                     |  |                    
|                                                                                        | 7/2/2005            |  | 7/3/2004           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                   |                     |  |                    
|Net Income                                                                              | $         1,439     |  | $         6,162    
|                                                                                        |                     |  |                    
|Adjustments to reconcile net income to net cash provided                                |                     | 
|(used) by operating activities:                                                         |                     |  |                    
|Depreciation and amortization                                                           | 993                 |  | 962                
|Gain on sales of property, plant & equip.                                               | (513)               |  | (10)               
|Deferred income taxes                                                                   | 809                 |  | 3,442              
|Income from unconsolidated affiliates, net of distributions                             | (676)               |  | (1,051)            
|Changes in operating assets and liabilities:                                            |                     |  |                    
|Accounts receivables, net                                                               | (325)               |  | (665)              
|Income tax receivables                                                                  | 175                 |  | 195                
|Inventories                                                                             | (759)               |  | (2,055)            
|Note receivable                                                                         | 0                   |  | 333                
|Other current assets                                                                    | (339)               |  | (7)                
|Accounts payable                                                                        | (503)               |  | (4,548)            
|Accrued expenses                                                                        | (613)               |  | (64)               
|Total Adjustments                                                                       | (1,751)             |  | (3,468)            
|Net cash provided (used) by operating activities                                        | (312)               |  | 2,694              
|                                                                                        |                     |  |                    
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                   |                     |  |                    
|Purchases of property, plant, and equipment                                             | (1,413)             |  | (220)              
|Payment received on note receivable                                                     | 475                 |  | -                  
|Proceeds from sales of property, plant and equipment                                    | 38                  |  | -                  
|(Increase) decrease in other assets                                                     | (112)               |  | 39                 
|Net cash provided (used) by investing activities                                        | (1,012)             |  | (181)              
|                                                                                        |                     |  |                    
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                   |                     |  |                    
|Payments of long-term debt and capital lease obligations                                | (854)               |  | (2,510)            
|Net increase in long-term revolving line of credit                                      | 1,600               |  | -                  
|Net cash provided (used) by financing activities                                        | 746                 |  | (2,510)            
|NET INCREASE (DECREASE) IN CASH                                                         | (578)               |  | 3                  
|                                                                                        |                     |  |                    
|CASH AT BEGINNING OF PERIOD                                                             | 877                 |  | 11                 
|CASH AT END OF PERIOD                                                                   | $            299    |  | $              14  
|                                                                                        |                     |  |                    
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                      |                     |  |                    
|Cash paid during the period for: Interest                                               | $            610    |  | $            699   
|Income Taxes                                                                            | $                 - |  | $                 -
|                                                                                        |                     |  |                    
|The accompanying notes are an integral part of these consolidated financial statements.





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Cagle's, Inc. & Subsidiary

Notes to Consolidated Condensed Financial Statements

July 2, 2005



1. Basis of Presentation



Interim Period Accounting Policies

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 its wholly owned subsidiary  Cagle Farms, Inc. (collectively, the "Company") as of July 2, 2005 and the results of their operations for the 13 weeks ended July 2, 2005 and the 13 weeks ended July 3, 2004. Results of operations for the 13 weeks ended July 2, 2005 are not necessarily indicative of results to be expected for the full fiscal year ending April 1, 2006.



The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements. Although the Company believes that the disclosures in these unaudited consolidated financial statements are adequate to make the  information presented for the interim periods not misleading, certain information and footnote information normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and these financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's annual report to shareholders for the fiscal year ended April 2, 2005.



2.  Computation of net income per share



The following table sets forth the computation of basic and diluted earnings per share:



|                                    | 13 wks ended         |  | 13 wks ended         
|----------------------------------- | -------------------- |  | ---------------------
|                                    | 7/2/2005             |  | 7/3/2004             
|Net Income as reported              | $           1,439    |  | $            6,162   
|                                    |                      |  |                      
|Weighted Average Shares Outstanding |                      | 
|-Basic                              | 4,743                |  | 4,743                
|-Diluted                            | 4,743                |  | 4,743                
|                                    |                      |  |                      
|Net Income Per Common Share         |                      |  |                      
|-Basic                              | $              .30   |  | $             1.30   
|-Diluted                            | $              .30   |  | $             1.30   
|Dividends Per Common Share          | $                  - |  | $                   -





3.  Investments in 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 $975 for the 13 weeks ended July 2, 2005, and $1,116 for the 13 weeks ended July 3, 2004.



4.  Other Non-Recurring Activities



During the 13 weeks ended July 2, 2005 and the 13 weeks ended July 3, 2004 the Company had no non-recurring activity.



5. Inventories consisted of the following:

(In Thousands)

|                             | July 2, 2005 |  | July 3, 2004
|---------------------------- | ------------ |  | ------------
|                             |              |  |             
|Finished Product             | 4,474        |  | 3,586       
|Field Inventory and Breeders | 11,073       |  | 13,490      
|Feed, Eggs, and Medication   | 3,272        |  | 3,522       
|Supplies                     | 982          |  | 786         
|                             | $     19,801 |  | $     21,384









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6.  Major accounting policies



Refer to the companys 2005 annual report on Form 10-K for a description of major accounting policies. There have been no material changes to these accounting policies.



7.  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 and 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.









Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

July 2, 2005



The disclosures in this quarterly report are complementary to those made in the companys 2005 annual report on Form 10-K.



Results of Operations



Net sales for the first quarter of fiscal 2006 were $61.6 million compared with $67.2 million for the same period a year ago, a decrease of 8%. For the quarter, net income was $1.4 million or $.30 per diluted share as compared to $6.2 million or $1.30 per diluted share for the first quarter of fiscal 2005. Tonnage sold increased by 17% for the first quarter 2006 as compared with the first quarter 2005, as we continue to move towards full capacity at our processing facilities. Our plants are currently operating at 94% of capacity and expect to return to full capacity in August of this year.



Overall revenue per pound for the Companys product for the first quarter of fiscal 2006 was $.74 as compared to $.89 for the same period of fiscal 2005. The market price for boneless breast for the first quarter of fiscal 2006 averaged $1.45 as compared with the first quarter of 2005 average of $2.39 per pound.



Cost of sales for the first quarter of fiscal 2006 increased 3.5% as compared with the same period last year, from $55.1 million to $57 million. Feed ingredient prices for broilers processed decreased 23% in the first quarter of 2006 as compared to the first quarter of 2005. Total processing costs increased by 3.5% in the first quarter of 2006 as compared to the first quarter of 2005, this was due to an increase in tonnage processed of 17%.



Current feed prices are fluctuating as our countrys farmers are at a crucial point in the development of new crop corn and soy beans.  For the next several months, weather will dominate feed ingredient markets. Your management team has determined that with ending stocks from old crops and projected production we are currently best positioned by not entering the Company into long term commitments for feed ingredients but staying within short term purchases of less than one month.



Market prices for boneless meat continue to be depressed while somewhat offset by excellent dark meat demand with leg quarter prices 12% higher than this time last year. For the first quarter of fiscal 2006, our sales dollars in our target small bird product group increased by 30% as compared with the same period last year reflecting our transitioning out of the commodity boneless breast market. While this product mix change from boneless commodity to small bird products is in process and supportive of the Companys margins, it will take an extended period to complete this transition as we continue to invest capital and sales staff to the task.





Selling, Delivery and Administrative Expenses



As a group these expenses increased $319 thousand or 11% for the 13 weeks ended July 2, 2005 versus the 13 weeks ended July 3, 2004; this increase is representative of increases in amortizations, insurance and payroll costs.



Interest Expense



Interest expense for the thirteen weeks ended July 2, 2005 decreased by $77 thousand or 11% over the same period of a year ago. This is reflective of decreased borrowings.



Other Income



Other income of $525 thousand during the 13 weeks ended July 2, 2005 represents income from payments received in the quarter for sales of assets in previous years, for which the income was deferred until received. During the 13 weeks ended July 3, 2004, the Company had other income of $13 thousand from equipment sales.





Equity in Earnings of Unconsolidated Affiliates



The Company's interest in earnings of unconsolidated affiliates decreased by $141 or 12.6% due to affiliates change in volume.



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Income Taxes



The provision for income taxes reflects the Company's estimated liability for income taxes net of any credits to which the Company may be entitled. The Company has classified the income tax benefit as a non-current tax asset in anticipation of application of loss carry forwards in future periods.



Financial Condition



The Company's liquidity continues to be strong; earnings, an available credit facility, favorable grain prices and marketing changes have allowed a continuing improvement of the Companys financial condition. We believe that our cash flow provided by operations will be adequate to cover our fiscal 2006 working capital needs, debt service requirements and planned capital expenditures to the extent such items are known or are reasonably determinable based on current business and market conditions.  However, we may elect to finance certain of our capital expenditure requirements through borrowings under our credit facilities or operating leases.



Critical accounting policies and estimates

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. The following accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. In addition, while we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used in the current period, or changes in the accounting estimates we used are reasonably likely to occur from period to period which may have a material impact on the presentation of our financial condition and results of operations. We review these estimates and assumptions periodically and reflect the effects of revisions in the period that they are determined to be necessary. We believe the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements.



Revenue Recognition.

The Company recognizes revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have been rendered, the Companys price to the buyer is fixed and determinable, and collectibility is reasonably assured. Revisions to these estimates are charged to income in the period in which the revision becomes known, and historically have not been material.



Allowance for Doubtful Accounts.

We maintain allowances for doubtful accounts reflecting estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on managements review of the overall condition of accounts receivable balances and review of significant past due accounts. If the financial condition of our customers was to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Due to the nature of the industry and the short-term nature of these accounts, there have not been material revisions in these estimates of management.



Inventories.

Live bird and hatching egg inventories are stated at cost and breeder hens are stated at cost, less accumulated amortization, consistent with industry standards. The costs associated with breeder hens are accumulated up to the production stage and amortized over the productive lives using the unit-of-production method. Finished poultry products, feed, and other inventories are stated at the lower of cost or market. We record valuations and adjustments for our inventories and for estimated obsolescence at or equal to the difference between the cost of the inventories and the estimated market value based upon known conditions affecting the inventories obsolescence, including significantly aged products, discontinued product lines, or damaged or obsolete products. We allocate meat costs between our various finished poultry products based on a by-product costing technique that reduces the cost of the whole bird by estimated yields and amounts to be recovered for certain by-product parts, which are carried in inventories at the estimated recovery amounts, with the remaining amount being reflected at cost or market, whichever is lower. Management monitors markets and the industry to ensure that its live inventory and finished inventory cost estimates are properly reflected. The Company has not experienced material revisions to its inventory costs.



Property, Plant and Equipment.

In fiscal 2003, the Company adopted Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 144). As a result, the Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The impairment charge is determined based upon the amount the net book value of the assets exceeds their fair market value. In making these determinations, the Company utilizes certain assumptions, including, but not limited to: (i) future cash flows estimates expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service the asset will be used in the Companys operations, and estimated salvage values, and (ii) estimated fair market value of the assets. The adoption of SFAS 144 did not have a material effect on the consolidated financial statements.



Contingent liabilities.

The Company is subject to lawsuits, investigations and other claims related to wage and hour/labor, securities, environmental, product and other matters, and is required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after



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considerable analysis of each individual issue. These reserves may change in the future due to changes in the Companys assumptions, the effectiveness of strategies, or other factors beyond the Companys control.



Accrued Self Insurance.

Insurance expense for casualty claims and employee-related health care benefits is estimated using historical experience and actuarial estimates. Stop-loss coverage is maintained with third party insurers to limit the Companys total exposure. Certain categories of claim liabilities are actuarially determined. The assumptions used to arrive at periodic expenses is reviewed regularly by management. However, actual expenses could differ from these estimates and could result in adjustments to be recognized.



Income Taxes.

We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires that deferred tax assets and liabilities be recognized for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. We review the recoverability of any tax assets recorded on the balance sheet, primarily operating loss carry forwards, based on both historical and anticipated earnings levels of operations and provide a valuation allowance when it is more likely than not that amounts will not be recovered.





Item 3: Quantitative and Qualitative Disclosures about Market Risk



Risk Factors



Industry cyclicality can affect our earnings, especially due to fluctuations in commodity prices of feed ingredients and chicken. Profitability in the chicken industry is materially affected by the commodity prices of chicken and feed ingredients, which are determined by supply and demand factors, which result in cyclical earnings fluctuations. The production of feed ingredients is positively or negatively affected primarily by weather patterns throughout the world, the global level of supply inventories and demand for feed ingredients, and the agricultural policies of the United States and foreign governments. In particular, weather patterns often change agricultural conditions in an unpredictable manner. A sudden and significant change in weather patterns could affect supplies of feed ingredients, as well as both the industrys and our ability to obtain feed ingredients, grow chickens and deliver products. High feed ingredient prices have had a material adverse effect on our operating results in the past. We periodically seek, to the extent available, to enter into advance purchase commitments for the purchase of feed ingredients in an effort to manage our feed ingredient costs. The use of such instruments may not be successful.



Leverage. Our indebtedness could adversely affect our financial condition. We presently have, and expect to continue to have, an amount of indebtedness. Our indebtedness could have important consequences to stockholders. For example, it could: increase our vulnerability to general adverse economic conditions; require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and for other general corporate purposes; limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; place us at a competitive disadvantage compared to our competitors that have less debt; limit, along with the financial and other restrictive covenants in our indebtedness, our ability to borrow additional funds, and failing to comply with those covenants could result in an event of default or require redemption of indebtedness. Either of these events could have a material adverse effect on us. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future, which is dependent on various factors. These factors include the commodity prices of feed ingredients and chicken and general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.



Additional Borrowings Available. Despite our indebtedness, we are not prohibited from incurring additional indebtedness in the future.



Contamination of Products. If our products become contaminated, we may be subject to product liability claims and product recalls.



Livestock and Poultry Disease. Outbreaks of livestock diseases in general and poultry disease in particular, can significantly restrict our ability to conduct our operations. We take all reasonable precautions to ensure that our flocks are healthy and that our processing plants and other facilities operate in a sanitary and environmentally sound manner. However, events beyond our control, such as the outbreak of disease, could significantly restrict our ability to conduct our operations. Furthermore, an outbreak of disease could result in governmental restrictions on the import and export of our fresh chicken, to or from our suppliers, facilities or customers, or require us to destroy one or more of our flocks. This could result in the cancellation of orders by our customers and create adverse publicity that may have a material adverse effect on our ability to market our products successfully and on our business, reputation and prospects.



Insurance. We are exposed to risks relating to product liability, product recall, property damage and injuries to persons for which insurance coverage is expensive, limited and potentially inadequate.



Significant Competition. Competition in the chicken industry with other vertically integrated poultry companies could adversely affect our business.



Government Regulation. Regulation, present and future, is a constant factor affecting our business. The chicken industry is subject to federal, state and local governmental regulation, including health and environmental areas. We anticipate increased regulation by various agencies concerning food safety, the use of medication in feed formulations and the disposal of poultry by-products and wastewater discharges. Unknown matters, new laws and regulations, or stricter interpretations of existing laws or regulations may materially affect our business or operations in the future.





8







Cautionary Statements Relevant To Forward-Looking Information For The Purpose Of "Safe Harbor" Provisions Of The Private Securities Litigation Reform Act Of 1995



The Company and its representatives may from time to time make written or oral forward-looking statements, including forward-looking statements made in this report, with respect to their current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company's actual results and experiences to differ materially from the anticipated results and expectations, expressed in such forward-looking statements. The Company wishes to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Among the factors that may affect the operating results of the Company are the following: (1) fluctuations in the cost and availability of raw materials, such as feed grain costs; (2) changes in the availability and relative costs of labor and contract growers; (3) operating efficiencies of facilities; (4) market conditions for finished products, including the supply and pricing of alternative proteins; (5) effectiveness of marketing programs and advertising; (6) risks associated with leverage, including cost increases due to rising interest rates; (7) risks associated with effectively evaluating derivatives and hedging activities; (8) changes in regulations and laws, including changes in accounting standards, environmental laws and occupational, health and safety laws; (9) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (10) adverse results from on-going litigation; (11) access to foreign markets together with foreign economic conditions, including currency fluctuations and import/export restrictions; and (12) the effect of, or changes in, general economic conditions. We undertake no obligation to revise or update any forward-looking statements for any reason.



Item 4. Controls and Procedures.



Evaluation of disclosure controls and procedures.



The term disclosure controls and procedures (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported within required time periods. The Companys management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this quarterly report (the Evaluation Date).   Based on that evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were effective.



Changes in internal controls.



The term internal control over financial reporting (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed 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.  The Companys management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated any changes in the Companys internal control over financial reporting that occurred during the period covered by this quarterly report, and they have concluded that there was no change to the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



Part II

Other Information



Item 1.  Legal Proceedings



Two suits were filed in the U.S. District Court for the Middle district of Georgia on June 15, 2001 and June 22, 2001 against Cagle's, Inc., Cagle's Farms, Inc., Cagle Foods JV LLC d/b/a Cagle-Keystone Foods. These two suits were brought by different contract growers seeking unspecified damages and alleging the defendants misrepresented certain facts regarding profitability and cash flow as an inducement to their becoming contract producers.  During fiscal year 2004, Summary Judgment was granted in both cases in favor of all defendants.  Both cases were appealed.  The appeal in one case was dismissed on April 5, 2005 and the grower's petition for reconsideration was denied on June 1, 2005, thus resulting in the judgment in favor of all defendants being upheld.  The other appeal was resolved in favor of all defendants on July 13, 2005, again resulting in the judgment in favor of all defendants being upheld.



Other than those actions listed above, the Company is routinely involved in various lawsuits and legal matters on an ongoing basis as a result of 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 2.  Changes in Securities and Use of Proceeds

None.







Item 3.  Defaults upon Senior Securities

None.





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Item 4.  Submission of Matters to a Vote of Security Holders



On July 08, 2005, the Company held its Annual Meeting of Shareholders.  The following item was submitted to a vote of shareholders through the solicitation of proxies:    Election of Directors



The following persons were elected to serve as directors on the Companys Board of Directors until the 2006 Annual Meeting of Shareholders or until their successors have been duly elected and qualified or until the earlier of their resignation or removal.  Voting results were as follows:



|                     | For       |  | Against (1)
|-------------------- | --------- |  | -----------
|J. DOUGLAS CAGLE     | 4,635,721 |  | 26,050     
|PANOS KANES          | 4,658,971 |  | 2,800      
|G. BLAND BYRNE III   | 4,636,421 |  | 25,350     
|CANDACE CHAPMAN      | 4,636,300 |  | 25,471     
|EDWARD J. RUTKOWSKI  | 4,656,921 |  | 4,850      
|MARK M. HAM IV       | 4,613,650 |  | 48,121     
|GEORGE DOUGLAS CAGLE | 4,636,221 |  | 25,550     
|JAMES DAVID CAGLE    | 4,636,221 |  | 25,550     





(1)   In determining the results of voting, abstentions or authorizations withheld and broker nonvotes have the same effect as a vote against the nominated director.



Item 5. Other Information

None.



Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

3.1 Articles of Incorporation of the Registrant. (2)

3.2 Bylaws of the Registrant. (2)

14.1 Code of Ethics (3)

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  (1)

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  (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)





(b) Reports on Form 8-K

1. The Company filed an 8-K on June 1, 2005, to furnish a press release announcing its results of operations for the fiscal

year ended April 2, 2005.

2. The Company filed an DEF-14a on June 8, 2005, to furnish a definitive proxy statement.

3. The Company filed an ARS on June 8, 2005, to furnish an Annual Report to Security Holders.

4. The Company filed an DEFA-14a on June 10, 2005, to furnish a definitive proxy statement.

5. The Company filed an 10-K on June 30, 2005, to furnish an Annual report [Section 13 and 15(d), not S-K Item 405].

6. The Company filed an 8-K on August 04, 2005, to furnish a press release announcing its results of operations for the

first quarter of 2006.

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

(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.





No other reports on Form 8-K were filed during the first quarter of 2006 or in the subsequent interim period between July 2, 2005 and the date of this filing.



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:  08/05/05



/s/   J. Douglas Cagle                   /s/ Mark M. Ham IV

Chairman and C.E.O.                      Chief Financial Officer











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