Unknown;

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 January 01, 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 January 01, 2005.

























11



PART 1.  FINANCIAL INFORMATION



Item1. Financial Statements



Cagle's, Inc. & Subsidiary Consolidated Balance Sheets

January 1, 2005 and April 3, 2004

(In Thousands, Except Par Value)

(Period 1/1/05 Unaudited)

|                                                                              | 01/01/05                | 04/03/04              
|----------------------------------------------------------------------------- | ----------------------- | ----------------------
|ASSETS ---------------------------------------------------------------------- |                         |                       
|CURRENT ASSETS:                                                               |                         |                       
|Cash and cash equivalents                                                     | $                 3,790 | $                   11
|Trade accounts receivable, less allowance for doubtful accounts               | 10,638                  | 11,662                
|Inventories                                                                   | 19,664                  | 19,329                
|Note receivable                                                               | 250                     | 1,000                 
|Refundable income taxes, current portion                                      | 558                     | 1,068                 
|Other current assets                                                          | 889                     | 657                   
|Total current assets                                                          | 35,789                  | 33,727                
|                                                                              |                         |                       
|Investments in and receivables from unconsolidated affiliates                 | 5,536                   | 4,041                 
|Property, Plant And Equipment, at cost:                                       |                         |                       
|Land                                                                          | 1,976                   | 1,976                 
|Buildings, machinery and equipment                                            | 98,848                  | 101,466               
|Autos & trucks                                                                | 4,599                   | 4,639                 
|                                                                              | 105,423                 | 108,081               
|Less accumulated depreciation                                                 | (62,347)                | (63,857)              
|Property, plant and equipment, net                                            | 43,076                  | 44,224                
|                                                                              |                         |                       
|OTHER ASSETS                                                                  |                         |                       
|Long-term refundable income taxes                                             | 2,390                   | 2,390                 
|Intangible assets, net                                                        | 775                     | 169                   
|Deferred income taxes                                                         | 6,866                   | 11,892                
|Other assets                                                                  | 3,209                   | 3,576                 
|Total other assets                                                            | 13,240                  | 18,027                
|TOTAL ASSETS                                                                  | $               97,641  | $           100,019   
|                                                                              |                         |                       
|LIABILITIES AND STOCKHOLDERS' EQUITY ---------------------------              |                         |                       
|CURRENT LIABILITIES:                                                          |                         |                       
|Current maturities of long-term debt                                          | $                 3,451 | $               2,921 
|Accounts payable                                                              | 11,439                  | 18,367                
|Accrued expenses                                                              | 4,413                   | 6,675                 
|Deferred income taxes                                                         | 2,237                   | 2,237                 
|Total Current Liabilities                                                     | 21,540                  | 30,200                
|                                                                              |                         |                       
|Long-Term Debt                                                                | 32,194                  | 34,552                
|Other Noncurrent Liabilities                                                  | 645                     | 1,000                 
|                                                                              |                         |                       
|STOCKHOLDERS' EQUITY:                                                         |                         |                       
|Common stock, $1 par value; 9,000 shares authorized, 4,744 shares             |                         |                       
|issued and 4,744 shares outstanding                                           | 4,744                   | 4,744                 
|Treasury stock, at cost                                                       | (80)                    | (80)                  
|Capital in excess of par value                                                | 4,198                   | 4,198                 
|Retained earnings                                                             | 34,400                  | 25,405                
|Total Stockholders' Equity                                                    | 43,262                  | 34,267                
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    | $               97,641  | $           100,019   



The accompanying notes are an integral part of these consolidated financial statements.





Cagle's, Inc. & Subsidiary

Consolidated Statements of Income

For the 13 weeks and 39 weeks ended January 1, 2005

and the 14 weeks and 40 weeks ended January 3, 2004

(In Thousands, except per share data)

(Unaudited)

|                           | 13 Weeks    |  | 14 Weeks     |  | 39 Weeks   |  | 40 Weeks  
|-------------------------- | ----------- |  | ------------ |  | ---------- |  | ----------
|                           | ended       |  | ended        |  | ended      |  | ended     
|                           | 01/01/2005  |  | 01/03/2004   |  | 01/01/2005 |  | 01/03/2004
|                           |             |  |              |  |            |  |           
|Net Sales                  | $    54,594 |  | $     82,648 |  | $  185,767 |  | $  240,430
|Costs and Expenses:        |             |  |              |  |            |  |           
|Cost of Sales              | 51,715      |  | 98,132       |  | 164,412    |  | 250,233   
|Selling and Delivery       | 1,550       |  | 2,333        |  | 4,760      |  | 6,643     
|General and Administrative | 1,503       |  | 3,093        |  | 4,469      |  | 7,825     
|Total costs and expenses   | 54,768      |  | 103,558      |  | 173,641    |  | 264,701   
|                           |             |  |              |  |            |  |           
|Operating income (loss)    | (174)       |  | (20,910)     |  | 12,126     |  | (24,271)  
|                           |             |  |              |  |            |  |           
|Other Income(Expense):     |             |  |              |  |            |  |           
|Interest expense           | (653)       |  | (2,213)      |  | (2,004)    |  | (6,054)   
|Other Income, Net          | 65          |  | (3,801)      |  | 736        |  | (3,807)   
|                           |             |  |              |  |            |  |           

|Earnings or (Loss) Before equity in earnings of |  |  |  |  |  | 
|----------------------------------------------- |  |  |  |  |  | 

|unconsolidated affiliates and income taxes      | (762)         |  | (26,924)       |  | 10,858         |  | (34,132)       
|----------------------------------------------- | ------------- |  | -------------- |  | -------------- |  | ---------------
|                                                |               |  |                |  |                |  |                
|Equity in earnings of unconsolidated affiliates | 941           |  | 816            |  | 3,173          |  | 2,371          
|Income(Loss) before income taxes                | 179           |  | (26,108)       |  | 14,031         |  | (31,761)       
|                                                |               |  |                |  |                |  |                
|Income Taxes Provision(Benefit)                 | 64            |  | (1,159)        |  | 5,036          |  | (3,179)        
|Net Income(Loss)                                | $        115  |  | $   (24,949)   |  | $    8,995     |  | $ (28,582)     
|                                                |               |  |                |  |                |  |                
|Weighted Average Shares Outstanding             |               |  |                |  |                |  |                
|-Basic                                          | 4,743         |  | 4,747          |  | 4,743          |  | 4,747          
|-Diluted                                        | 4,743         |  | 4,747          |  | 4,743          |  | 4,747          
|                                                |               |  |                |  |                |  |                
|Net Income(Loss) Per Common Share               |               |  |                |  |                |  |                
|-Basic                                          | $     0.02    |  | $    (5.26)    |  | $      1.90    |  | $     (6.02)   
|-Diluted                                        | $     0.02    |  | $    (5.26)    |  | $      1.90    |  | $     (6.02)   
|Dividends Per Common Share                      | $           - |  | $            - |  | $            - |  | $             -



The accompanying notes are an integral part of these consolidated financial statements.



















11



Cagle's, Inc. & Subsidiary

Consolidated Statements of Cash Flows

For the 39 weeks ended January 01, 2005 and the 40 weeks ended January 3, 2004

(In Thousands) (Unaudited)

|                                      | 01/01/2005  |  | 01/03/2004    
|------------------------------------- | ----------- |  | --------------
|CASH FLOWS FROM OPERATING ACTIVITIES: |             |  |               
|Net Income (Loss)                     | $     8,995 |  | $     (28,582)
|                                      |             |  |               

|Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
|-----------------------------------------------------------------------------------------------

|Depreciation and amortization                               | 2,921          |  | 9,768            
|----------------------------------------------------------- | -------------- |  | -----------------
|Gain on sales of property, plant & equip.                   | (727)          |  | (2)              
|Impairment of fixed assets held for sale                    | 0              |  | 18,528           
|Changes in operating assets and liabilities:                |                |  |                  
|Income from unconsolidated affiliates, net of distributions | (1,495)        |  | (656)            
|Deferred Income Taxes (Benefit)                             | 5,026          |  | (3,320)          
|Accounts receivables, net                                   | 1,024          |  | (1,345)          
|Income Tax Receivables                                      | 510            |  | 821              
|Inventories                                                 | (335)          |  | 808              
|Note receivable                                             | 750            |  | 0                
|Other current assets                                        | (232)          |  | (1,326)          
|Accounts payable                                            | (6,928)        |  | 638              
|Accrued expenses                                            | (2,262)        |  | 4,350            
|Other non-current liability                                 | (355)          |  | (159)            
|Total Adjustments                                           | (2,103)        |  | 28,105           
|Net cash provided (used) by operating activities            | 6,892          |  | (477)            
|                                                            |                |  |                  
|CASH FLOWS FROM INVESTING ACTIVITIES:                       |                |  |                  
|Proceeds from sale of property, plant & equipment           | 728            |  | 3                
|Additions to property, plant, and equipment                 | (1,728)        |  | (257)            
|(Increase) decrease in Other Assets                         | 367            |  | 0                
|Net cash provided (used) by investing activities            | $        (633) |  | $         (254)  
|                                                            |                |  |                  
|CASH FLOWS FROM FINANCING ACTIVITIES:                       |                |  |                  
|Payments of long-term debt and capital lease obligations    | (13,644)       |  | 0                
|Proceeds from issuance of long-term debt                    | 11,816         |  | 646              
|Payment of deferred financing costs                         | (652)          |  | 0                
|Net cash provided (used) by financing activities            | (2,480)        |  | 646              
|NET INCREASE (DECREASE) IN CASH                             | $        3,779 |  | $            (85)
|                                                            |                |  |                  
|CASH AT BEGINNING OF PERIOD                                 | 11             |  | 100              
|CASH AT END OF PERIOD                                       | $        3,790 |  | $              15
|                                                            |                |  |                  

|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |  | 
|-------------------------------------------------- |  | 

|Cash paid during the period for: |       |  |      
|-------------------------------- | ----- |  | -----
|Interest                         | 2,019 |  | 5,459
|Income Taxes (Refunded), Paid    | 255   |  | 0    



The accompanying notes are an integral part of these consolidated financial statements.



11



Cagle's, Inc. & Subsidiary

Notes to Consolidated Condensed Financial Statements

January 01, 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 Subsidiary (the "Company") as of January 01, 2005 and April 3, 2004 and the results of their operations for the 13 and 39 weeks ended January 01, 2005 and the 14 and 40 weeks ended January 3, 2004. Results of operations for the 13 and 39 weeks ended January 01, 2005 are not necessarily indicative of results to be expected for the full fiscal year ending April 2, 2005.



The accompanying unaudited condensed 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 condensed 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 3, 2004.



2.  Computation of net income per share



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

|                                    | 13 Weeks         |  | 14 Weeks         |  | 39 Weeks          |  | 40 Weeks         
|----------------------------------- | ---------------- |  | ---------------- |  | ----------------- |  | -----------------
|                                    | ended            |  | ended            |  | ended             |  | Ended            
|                                    | 01/01/2005       |  | 01/03/2004       |  | 01/01/2005        |  | 01/03/2004       
|Net Income(Loss)                    | $         115    |  | $   (24,949)     |  | $      8,995      |  | $    (28,582)    
|                                    |                  |  |                  |  |                   |  |                  
|Weighted Average Shares Outstanding |                  |  |                  |  |                   |  |                  
|-Basic                              | 4,743            |  | 4,747            |  | 4,743             |  | 4,747            
|-Diluted                            | 4,743            |  | 4,747            |  | 4,743             |  | 4,747            
|                                    |                  |  |                  |  |                   |  |                  
|Net Income(Loss) Per Common Share   |                  |  |                  |  |                   |  |                  
|-Basic                              | $        0.02    |  | $      (5.26)    |  | $         1.90    |  | $       (6.02)   
|-Diluted                            | $        0.02    |  | $      (5.26)    |  | $         1.90    |  | $       (6.02)   
|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 $941 for the 13 weeks ended January 01, 2005, and $816 for the 14 weeks ended January 3, 2004. The Company's share of earnings from these affiliates totaled $3,173 for the 39 weeks ended January 01, 2005, and $2,371 for the 40 weeks ended January 3, 2004.



4.  Other Non-Recurring Activities



During the 39 weeks ended January 01, 2005 the Company received $12 thousand as recovery in a lawsuit involving vitamin manufacturers and a class action settlement involving methionine manufactures. During the 40 weeks ended January 3, 2004 the Company received $1.8 million as recovery in a lawsuit involving vitamin manufacturers and a class action settlement involving methionine manufactures. This represents recovery of overcharges for ingredients of poultry feed and as such was recorded as a credit to cost of sales.



11



5. Inventories consisted of the following:

(In Thousands)

|                                 | January 01, 2005      |  | April 3, 2004      
|-------------------------------- | --------------------- |  | -------------------
|Processed Poultry                | $               4,256 |  | $             2,918
|Live Poultry–Broilers & Breeders | 11,659                |  | 12,762             
|Feed, Eggs, and Medication       | 2,790                 |  | 2,881              
|Supplies                         | 959                   |  | 768                
|                                 | $             19,664  |  | $           19,329 





6. Discontinued operations



The following table details effects of discontinued operations on the previous period’s Income Statement as adjusted to remove effects of discontinued operations.

|                                                | As Reported            |  | As Adjusted          |  | As Reported          |  | As Adjusted         
|----------------------------------------------- | ---------------------- |  | -------------------- |  | -------------------- |  | --------------------
|                                                | 14 wks ended           |  | 14 wks ended         |  | 40 wks ended         |  | 40 wks ended        
|                                                | 01/03/2004             |  | 01/03/2004           |  | 01/03/2004           |  | 01/03/2004          
|Net Sales                                       | $          82,648      |  | $         53,072     |  | $      240,430       |  | $      153,286      
|Costs and Expenses:                             |                        |  |                      |  |                      |  |                     
|Cost of Sales                                   | 98,132                 |  | 50,817               |  | 250,233              |  | 139,978             
|Selling and Delivery                            | 2,333                  |  | 1,903                |  | 6,643                |  | 5,604               
|General and Administrative                      | 3,093                  |  | 2,274                |  | 7,825                |  | 6,284               
|Total costs and expenses                        | 103,558                |  | 54,994               |  | 264,701              |  | 151,866             
|                                                |                        |  |                      |  |                      |  |                     
|Income or (Loss) From Operations                | (20,910)               |  | (1,922)              |  | (24,271)             |  | 1,420               
|                                                |                        |  |                      |  |                      |  |                     
|Other Income(Expense):                          |                        |  |                      |  |                      |  |                     
|Interest expense                                | (2,213)                |  | (822)                |  | (6,054)              |  | (1,890)             
|Other Income, Net                               | (3,801)                |  | (453)                |  | (3,807)              |  | (460)               
|                                                |                        |  |                      |  |                      |  |                     
|Earnings or (Loss) Before equity in earnings of |                        |  |                      |  |                      |  |                     
|unconsolidated affiliates and income taxes      | (26,924)               |  | (3,197)              |  | (34,132)             |  | (930)               
|                                                |                        |  |                      |  |                      |  |                     
|Equity in earnings of unconsolidated affiliates | 816                    |  | 816                  |  | 2,371                |  | 2,371               
|Income(Loss) before income taxes                | (26,108)               |  | (2,381)              |  | (31,761)             |  | 1,441               
|                                                |                        |  |                      |  |                      |  |                     
|Income Taxes Provision (Benefit)                | (1,159)                |  | (857)                |  | (3,179)              |  | 519                 
|Net Income(Loss)                                | $        (24,949)      |  | $        (1,524)     |  | $      (28,582)      |  | $             922   
|                                                |                        |  |                      |  |                      |  |                     
|Weighted Average Shares Outstanding             |                        |  |                      |  |                      |  |                     
|-Basic                                          | 4,747                  |  | 4,747                |  | 4,747                |  | 4,747               
|-Diluted                                        | 4,747                  |  | 4,747                |  | 4,747                |  | 4,747               
|                                                |                        |  |                      |  |                      |  |                     
|Net Income (Loss) Per Common Share              |                        |  |                      |  |                      |  |                     
|-Basic                                          | $            (5.26)    |  | $          (0.32)    |  | $          (6.02)    |  | $            0.19   
|-Diluted                                        | $            (5.26)    |  | $          (0.32)    |  | $          (6.02)    |  | $            0.19   
|Dividends Per Common Share                      | $                    - |  | $                  - |  | $                  - |  | $                  -





7.  Major accounting policies



Refer to the company’s 2004 annual report on Form 10-K for a description of major accounting policies. There have been no material changes to these accounting policies.



8.  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.











11



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

January 01, 2005



The disclosures in this quarterly report are complementary to those made in the company’s 2004 annual report on Form 10-K.



Results of Operations



Reference below recap of key statistical variances, where the as reported columns recap results for the current 13 week period and 39 week period ended January 01, 2005 as compared to reported results for the 13 week and 40 week period ended January 3, 2004. The as adjusted columns remove from the as reported, the effect of the sale of the Perry, Ga. complex and compare the same quarterly and year to date periods.



|                         | As Reported    |  | As Adjusted    |  | As Reported |  | As Adjusted
|------------------------ | -------------- |  | -------------- |  | ----------- |  | -----------
|                         | a year ago     |  | a year ago     |  | a year ago  |  | a year ago 
|                         | compared to    |  | compared to    |  | compared to |  | compared to
|                         | current period |  | current period |  | YTD  period |  | YTD period 
|                         | % Change       |  | % Change       |  | % Change    |  | % Change   
|Sales Tonnage            | (31)%          |  | 5%             |  | (34)%       |  | 1%         
|Sales Dollars            | (34)%          |  | 3%             |  | (23)%       |  | 21%        
|Total Costs and Expenses | (47)%          |  | (0.4)%         |  | (34)%       |  | 14%        



(As Adjusted column numbers are adjusted to eliminate from As Reported column the effect of the sale of a complex in the previous year)



Net sales for the third quarter of fiscal 2005 were $54.6 million compared with $53.0 million for the same period, as adjusted a year ago, an increase of 3%. For the quarter, net income improved to $.12 million or $.02 per diluted share as compared to a loss of $1.5 million or $(.32) per diluted share for the third quarter of fiscal 2004, as adjusted a year ago. Tonnage sold increased by 5% for the third quarter 2005 as compared with the adjusted third quarter 2004, as we continue to move towards full capacity of our processing facilities. Our facilities are currently operating at 94.5% of capacity.



Net sales for the 39 weeks ended January 1, 2005 were $185.8 million compared with $153.3 million for the 40 weeks, as adjusted, ended January 3, 2004. Net income for the 39 weeks ended January 1, 2005 totaled $8.99 million or $1.90 per diluted share as compared to $.92 million or $.19 per diluted share as adjusted for the 40 weeks ended January 3, 2004.



Market prices for poultry products reached record levels during the first quarter of fiscal 2005 but have since fallen dramatically. The market price for boneless breast for the third quarter of fiscal 2005 averaged $1.34 as compared with  the first six months of 2005 average of $2.12 per pound. Overall revenue per pound for the Company’s product for the third quarter of fiscal 2005 was $.67 as compared to $.65 for the same period of fiscal 2004. Revenue per pound for the first nine months of fiscal 2005 was $.76 compared to $.65 for the same period of fiscal 2004. Current markets have risen  with boneless breast averaging $1.66 and the Companies average revenue per pound is in the mid $.70’s level.



Cost of sales for the 13 weeks ended January 1, 2005 increased 2% as compared with the adjusted 14 weeks ended January 3, 2004, from $50.8 million to $51.7 million. For the 39 weeks ended January 1, 2005, cost of sales increased to $164.4 million, or 17%, from $139.9 million for the 40 weeks ended January 3, 2004. Feed ingredient prices for broilers processed the 39 weeks ended January 1, 2005 increased 16% compared to the 40 weeks ended January 3, 2004. Current feed prices are down 4% from the third quarter of 2004 and are expected to remain low for the remainder of this fiscal year. In addition, during the 13 weeks and 40 weeks ended January 1, 2005 the Company received $12 thousand as recovery in a lawsuit involving vitamin manufacturers and a class action settlement involving methionine manufacturers. During the 13 weeks ended January 3, 2004 the Company received $1.81 million as recovery in a lawsuit involving vitamin manufacturers and a class action settlement involving methionine manufacturers. During the 40 weeks ended January 3, 2004, the Company received $1.87 million as recovery in a lawsuit involving vitamin manufacturers and a class action settlement involving methionine manufacturers.





Financial Condition



As of January 01, 2005, the Company's working capital was $14.2 million and its current ratio was 1.66 to 1. The Company’s working capital at April 03, 2004 was $3.5 million and its current ratio was 1.12 to 1. The Company has spent $1.7 million on capital projects in the first nine months of fiscal 2005. We believe that our cash flow provided by operations will be adequate to cover our fiscal 2005 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.



On December 20, 2004, Cagle’s, Inc. and its wholly owned subsidiary Cagle Farms, Inc. (the "Company") refinanced certain existing loans by entering into a Syndicated Line of Credit, Term Loan and Security Agreement (the "Agreement") with an agricultural credit association (the Association"), and a bank, establishing a $7 million two-year term loan (Term Loan) and a $15 million two-year revolving credit facility (the "Facility").  The amount that may be borrowed from time to time under the Facility is further restricted to certain percentages of the value of certain inventory and receivables of the Company.



Under the terms of the Term Loan, the Company will make monthly installment payments of $116.7 thousand with a balloon payment, representing the Term Loan balance, due on the maturity date. The outstanding principal balance under the Term Loan shall bear interest at the 90-day LIBOR rate published by The Wall Street Journal plus 4.5%. The outstanding principal balance must be paid in full twenty four months after the closing date of the Term Loan, but the Company may request a twelve month extension of the maturity date after the end of each fiscal year.



Under the terms of the facility, the Company may request advances or make payments of principal from time to time in increments of $50 thousand to finance working capital needs and stand-by and documentary letters of credit. The outstanding principal balance under the Facility shall bear interest at the 90-day LIBOR rate published by The Wall Street Journal plus 4.0%. The outstanding principal balance must be paid in full twenty four months after the closing date of the Facility, but the Company may request a twelve month extension of the maturity date after the end of each fiscal year. The Company's obligations under the Agreement are secured by liens on substantially all the Company's assets.



The Agreement contains customary conditions precedent to any draw down under the Facility and customary covenants, including minimum tangible net worth and maximum leverage ratios. The Company's obligations under the Credit Agreement may be accelerated upon the occurrence of customary events of default, including, among others, failure to make payments of principal or interest or other fees and expenses due under the Facility; failure to comply with covenants and conditions contained in the Credit Agreement; breaches or defaults under any other document or agreement entered into in connection with the Facility; defaults under certain other indebtedness or certain bankruptcy-related events of default. The Agreement prohibits the Company from paying dividends in cash or property (other than stock in the Company).





Selling, Delivery and Administrative Expenses



As a group, these expenses decreased 44% for the 13 weeks, and 36% for the 39 weeks, ended January 1, 2005 versus actual reported numbers for the 13 and 40 weeks ended January 3, 2004; after adjusting the 13 and 40 weeks ended January 3, 2004 for the complex disposition these expenses decreased 27% for the 13 weeks and 22% for the 40 weeks. Major reductions were generated by reductions in payroll, commissions, professional and bank fees.



Interest Expense



Interest expense decreased 70% for the 13  weeks, and 67% for the 39 weeks, ended January 1, 2005 versus the 13 and 40 weeks ended January 3, 2004. This is reflective of decreased borrowings and lower interest rates than a year ago.



Other Income



During the 13 weeks and 39 weeks ended January 1, 2005, the Company had no non-recurring activity. During the 13 ended January 3, 2004 the Company received $1,816 as recovery in a lawsuit involving vitamin manufacturers and a class action settlement involving methionine manufacturers. During the 40 ended January 3, 2004 the Company received $1,874 as recovery in a lawsuit involving vitamin manufacturers and a class action settlement involving methionine manufacturers.







Equity in Earnings of Unconsolidated Affiliates



The Company's interest in earnings of unconsolidated affiliates was $941 for the 13 weeks and $3,173 for the 39 weeks ended January 1, 2005. These earnings reflect a 15% increase for the 13 weeks and a 34% increase for the 39 weeks as compared to the 40 weeks of January 3, 2004. These increases resulted from a greater volume of production and related sales by the Company’s joint venture.



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 net operating loss carryforwards which have resulted in a net deferred tax asset. The Company has classified this income tax benefit as a non-current tax asset in anticipation of application of loss carry forwards in future periods.



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.





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.



For the June 22, 2001 suit, Summary Judgment was granted in favor all defendants during Fiscal Year 2004 and the Plaintiff appealed the summary judgment ruling.  Subsequent to the end of Fiscal 2004, the Court of appeals dismissed the Plaintiff's appeal as lacking jurisdiction because final judgment had not been rendered by the trial court.  After this dismissal, the trial court subsequently entered final judgment and the Plaintiff filed a new appeal, but that appeal was dismissed when Plaintiff's original appeal was reinstated by the Court of Appeals.  The Company intends to vigorously defend the reinstated appeal.



With regard to the case filed on June 15, 2001, summary judgment was entered in favor of Cagle's, Inc. and Cagle's Farms, Inc. during fiscal year 2004.  Subsequent to the end of Fiscal 2004, summary judgment in the case was ultimately entered in favor of all defendants and the Plaintiff filed a notice of appeal.  The Company intends to vigorously defend this appeal.



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.



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

None



Item 5. Other Information

None.



Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

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

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

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



(b) Reports on Form 8-K filed during the three months ended January 01, 2005

1. The Company filed an 8-K on November 4, 2004, to furnish a press release announcing its results of operations for the second quarter of 2005.

2. The Company filed an 8-K on December 21, 2004, to furnish details of a new loan facility.

No other reports on Form 8-K were filed during the third quarter of ended January 01, 2005.



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:  02/11/05



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

Chairman and C.E.O.                      Chief Financial Officer

































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