Cagle's-Keystone Foods LLC  

Financial Statements  
for the 52-Week Periods Ended  
December 27, 2003 and December 28, 2002  
and Independent Auditors' Report  

INDEPENDENT AUDITORS' REPORT  

Steering Committee of Cagle's-Keystone Foods LLC:  

We have audited the accompanying balance sheets of Cagle's-Keystone Foods LLC  
(the "Company"), which is owned 70% by Executive Holdings L.P. and 30% by  
Cagle's Inc., as of December 27, 2003 and December 28, 2002 and the related  
statements of operations, members' equity, and cash flows for the 52-week  
periods then ended. These financial statements are the responsibility of the  
Company's management. Our responsibility is to express an opinion on these  
financial statements based on our audits.  

We conducted our audits in accordance with auditing standards generally  
accepted in the United States of America. Those standards require that we  
plan and perform the audit to obtain reasonable assurance about whether the  
financial statements are free of material misstatement. An audit includes  
examining, on a test basis, evidence supporting the amounts and disclosures  
in the financial statements. An audit also includes assessing the accounting  
principles used and significant estimates made by management, as well as  
evaluating the overall financial statement presentation. We believe that our 
audits provide a reasonable basis for our opinion.  

In our opinion, the financial statements referred to above present fairly, in  
all material respects, the financial position of the Company at December 27,  
2003 and December 28, 2002 and the results of its operations and its cash  
flows for the 52-week periods then ended in conformity with accounting  
principles generally accepted in the United States of America.  

/s/ Deloitte & Touche LLP  
April 9, 2004  

CAGLE'S-KEYSTONE FOODS LLC  
BALANCE SHEETS  
(Dollars in thousands)  

                                   December 27, 2003        December 28, 2002 
ASSETS  
CURRENT ASSETS:  
  Cash                             $           3,397        $             951 
  Accounts receivable                          8,423                    5,971 
  Receivables-related party                    4,677                   13,302 
  Inventory                                   17,956                   11,971 
  Notes receivable-related party                                          523   
Prepaid and other current assets                 212                      248 
                                   -----------------        ----------------- 
  Total current assets                        34,665                   32,966 

INVESTMENTS IN AND ADVANCES  
TO AFFILIATED ENTITIES                           464                      254 
PROPERTY, PLANT, AND EQUIPMENT:  
  Land                                         2,199                    2,206 
  Buildings and improvements                  57,397                   53,224 
  Machinery and equipment                     27,211                   25,258 
  Furniture and fixtures                       1,005                      865 
  Construction in progress                       289                    4,424 
                                   -----------------        ----------------- 
                                              88,101                   85,977 
  Less accumulated depreciation              (28,375)                  
(20,238) 
                                   -----------------        ----------------- 
   Property, plant, and  
    equipment-net                             59,726                   65,739 

OTHER ASSETS                                   3,107                    2,191 
                                   -----------------        ----------------- 
TOTAL                              $          97,962        $         101,150 

See notes to financial statements.  

LIABILITIES AND MEMBERS' EQUITY  
CURRENT LIABILITIES:  
 Current portion of long term debt $           7,500        $           7,500 
  Debt-related party                          16,976                    4,000 
  Accounts payable                             7,881                   11,481 
  Accounts payable-related party                 244                      530 
  Accrued expenses                             4,726                    3,137 
                                   -----------------       ------------------ 
       Total current liabilities              37,327                   26,648 

LONG-TERM DEBT                                47,063                   67,880 
OTHER LONG-TERM LIABILITIES                    2,549                        0 
                                   -----------------       ------------------ 
       Total liabilities                      86,939                   94,528 

MEMBERS' EQUITY                               11,023                    6,622 
                                   -----------------       ------------------ 
TOTAL                              $          97,962       $          101,150 

See notes to financial statements.  

CAGLE'S-KEYSTONE FOODS LLC  
STATEMENTS OF OPERATIONS  
(Dollars in thousands)  
                                              52-Week Periods Ended  
                                       December 27,          December 28,  
                                            2003                  2002  
                                       ------------          ------------  
NET SALES                              $    215,443          $    175,104  
TOTAL COST OF PRODUCT SOLD                  186,529               146,854  
SELLING, GENERAL, AND ADMINISTRATIVE          7,338                 6,208  
DEPRECIATION AND AMORTIZATION                 9,154                 9,077 
                                       ------------          ------------  
OPERATING INCOME                             12,422                12,965 

OTHER INCOME (EXPENSES):  
  Interest-net of interest income            (2,198)               (4,145) 
  Interest-related party                       (377)                  (56) 
  Other-net                                     (61)                  (94)  
  Equity in income of affiliates                269                   306  
                                       ------------          ------------  
NET INCOME                             $     10,055          $      8,976  

See notes to financial statements.  

CAGLE'S-KEYSTONE FOODS LLC  
STATEMENTS OF MEMBERS' EQUITY  
(Dollars in thousands)  
                                        Executive      Cagle's, 
                                        Holdings L.P.    Inc.      Total 
BALANCE-December 29, 2001 (deficit)     $       (405)  $  (174)  $  (579)  

Net income                                     6,283     2,693     8,976  

Other comprehensive income:  
 Net change in fair value of:  
  Interest rate hedge of company- 
    GA/KY Fundco LLC                           1,192       510     1,702  
 Interest rate hedge of Cagle Foods  
  Credit, L.L.C.-   equity method  
  investment                                     (91)      (39)     (130) 
      Total comprehensive income               7,384     3,164    10,548 

Distributions to members                      (2,343)   (1,004)   (3,347) 

BALANCE-December 28, 2002                      4,636     1,986     6,622 

Net income                                     7,039     3,016    10,055  
Other comprehensive income:  
  Net change in fair value of:  
   Interest rate hedge of company- 
    GA/KY Fundco LLC                               5         3         8  
 Interest rate hedge of Cagle Foods  
  Credit, L.L.C.-   equity method  
  investment                                     41         18        59 

Total comprehensive income                    7,085      3,037    10,122 

Distributions to members                     (4,005)    (1,716)   (5,721) 

BALANCE-December 27, 2003               $     7,716   $  3,307   $11,023  

See notes to financial statements.  

CAGLE'S-KEYSTONE FOODS LLC  
STATEMENTS OF CASH FLOWS  
(Dollars in thousands)  
                                                     52-Week Periods Ended  
                                                  December 27,  December 28, 
                                                      2003          2002  
OPERATING ACTIVITIES:  
 Net income                                       $    10,055   $     8,976  
Adjustments to reconcile net income to net cash  
provided by operating activities: 
Depreciation and amortization                           9,154         9,077 
Loss on sale of equipment                                  39            67 
Equity in income of affiliates                           (269)         (306) 
Dividends received from affiliates                        118           155 
Changes in operating assets and liabilities: 
  Accounts receivable-net                               6,173        (8,982) 
  Inventories                                          (5,985)       (2,201)  
  Accounts payable and accrued liabilities             (2,289)        8,658  
  Other                                                 2,585           496  
     Net cash provided by operating activities         19,581        15,940  

INVESTING ACTIVITIES:  
Investments in and advances to affiliates                 523            47  
Purchases of property, plant, and equipment            (2,464)       (5,536)  
Proceeds from sale of property, plant, and equipment       83             5  
Other assets and liabilities                               (4)         (202) 
Net cash used in investing activities                  (1,862)       (5,686)  

FINANCING ACTIVITIES:  
Net payments under revolving lines of credit          (12,000)       (3,000)  
Principal payments on long-term debt                   (8,817)      (56,507)  
Proceeds from the issuance of long-term debt                         67,880  
Loan fees                                                (245)       (2,207)  
Debt-related party                                     11,510       (13,193)  
Distributions to members                               (5,721)       (3,347) 
Net cash used in financing activities                 (15,273)      (10,374)  

NET INCREASE (DECREASE) IN CASH                         2,446          (120)  

CASH-Beginning of period                                  951         1,071  

CASH-End of period                                $     3,397   $       951  
See notes to financial statements.  

CAGLE'S-KEYSTONE FOODS LLC  
NOTES TO FINANCIAL STATEMENTS  
FOR THE 52-WEEK PERIODS ENDED DECEMBER 27, 2003 AND  
DECEMBER 28, 2002  
(Dollars in thousands)  

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Description of Business-Cagle's-Keystone Foods LLC (the "Company") was  
established as a limited liability company on October 31, 1997 and is a joint  
venture between Cagle's, Inc. (30%) and Executive Holdings L.P. (70%). The  
Company's operations are located in Albany and Franklin, Kentucky. The latest 
date at which the limited liability company is to dissolve is December 31,  
2022. The Company is engaged in the production and sale of processed chicken. 
A significant portion of all of the Company's sales are made to the joint  
venture partners (see Note 3).  

Revenue Recognition-The Company recognizes revenue when the product is 
shipped to customers, an exchange has taken place, and the applicable  
provisions of Statement of Financial Accounting Standards ("SFAS") No. 48,  
Revenue Recognition When Right of Return Exists, have been made.  

Inventories-Live field inventories are stated at the lower of cost or  
market and breeders are stated at cost, less accumulated amortization.  
Breeder costs are accumulated up to the production stage. Such costs are  
amortized into hatching egg costs over the estimated production lives  
based on monthly egg production. Finished products, feed, medication, and  
supplies are stated at the lower of cost or market determined by the  
first-in, first-out method.  
Inventories at December 27, 2003 and December 28, 2002 consist of the  
following:  

                                                   2003           2002  
Finished products                               $  3,954        $ 1,320  
Field inventory, breeders, and eggs               10,145          7,869  
Feed, ingredients, and medication                  1,529          1,200  
Supply inventory                                   2,328          1,582  
                                                --------       -------- 
                                                $ 17,956       $ 11,971  

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

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

On January 1, 2002, the Company adopted SFAS No. 144, Accounting for the  
Impairment or Disposal of Long-Lived Assets, which superceded SFAS No. 121,  
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to  
be Disposed Of. SFAS No. 144 establishes a single accounting model for  
long-lived assets to be disposed of by sale and resolves several  
implementation issues arising from SFAS No. 121. The effect of adopting  
SFAS No. 144 was not material to the results of operations or financial  
condition of the Company.  

The Company evaluates the estimated useful lives and the carrying value of 
assets on a periodic basis to determine whether events or circumstances  
warrant revised estimated useful lives or whether any impairment exists. 
Management believes that no impairment existed at December 27, 2003.  

Investment in Unconsolidated Affiliates-The equity method of accounting  
is used to account for the Company's investment in unconsolidated  
affiliates because of the Company's ability to exercise significant  
influence.  

Fair Value of Financial Instruments-The carrying amounts of cash,  
accounts receivable, and accounts payable reflected in the financial  
statements approximate fair values because of the short-term nature of  
these instruments. Based on the borrowing rates currently available to  
the Company for bank loans with similar terms and maturities, the Company  
estimates that the carrying value of its long-term debt approximates fair  
value. The fair value of the interest rate swaps (see Note 2) is the  
amount the Company would receive or pay to terminate the swap agreements. 

Use of Estimates-The preparation of financial statements in conformity  
with accounting principles generally accepted in the United States of  
America requires management to make estimates and assumptions that affect  
reported amounts of assets and liabilities and disclosure of contingent  
assets and liabilities at the date of the financial statements and the  
reported amounts of revenues and expenses during the reporting period.  
Actual results could differ from those estimates.  
Reporting Period-The Company's tax reporting year ends on the Saturday  
closest to December 31, which for the current year was January 3, 2004.  
For purposes of these financial statements, the Company has elected to  
use the 52-week periods ended December 27, 2003 and December 28, 2002.  

Income Taxes-The Company is a limited liability company and has received  
a ruling from the Internal Revenue Service, which allows the Company to be  
treated as a partnership for income tax purposes. As a partnership, it is  
not subject to income taxes and the partners report their proportionate  
share of the income on their tax returns.  

Accumulated Other Comprehensive Loss-Included in members' equity is  
accumulated other comprehensive loss related to interest rate swaps  
(see Note 2) of $149 and $216 as of December 27, 2003 and December 28,  
2002, respectively.  

Derivative Instruments and Hedging Activities-On December 31, 2000, the  
Company adopted SFAS No. 133, Accounting for Derivative Instruments and  
Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative  
Instruments and Certain Hedging Activities, which amended SFAS No. 133.  
These standards require companies to record derivatives on the balance  
sheet as assets or liabilities, measured at fair value. Gains or losses  
resulting from changes in the values of those derivatives would be  
accounted for depending on the use of the derivative and whether it  
qualifies for hedge accounting.  

Interest Rate Swap Agreements-These agreements involve the receipt of a  
floating rate of interest on long-term debt in exchange for a fixed-rate  
of interest over the life of the agreements without an exchange of the  
underlying debt principal amount. These swap agreements have been  
designated as cash flow hedges and their fair values are recognized as  
an asset or liability in the financial statements with a corresponding  
gain or lose recognized, in accumulated other comprehensive (loss) income  
in members' equity.  

Interest Rate Collar Agreements-These agreements involve the receipt of  
a floating rate of interest above a certain cap or below a certain floor  
on long-term debt in exchange for the cap or the floor over the life of  
the agreements without an exchange of the underlying debt principal amount. 
These agreements did not qualify as hedges under SFAS No. 133. The fair  
values of the collars are recognized as an asset or liability in the  
financial statements with a corresponding gain or loss recognized as  
income or expense.  

New Accounting Pronouncements-In November 2002, the Financial Accounting  
Standards Board ("FASB") issued Interpretation No. ("FIN") 45,  
Guarantor's Accounting and Disclosure Requirements for Guarantees,  
Including Indirect Guarantees of Indebtedness of Others, an Interpretation  
of FASB Statement Nos. 5, 57, and 107 and Rescission of FASB Interpretation 
No. 34. The interpretation requires that upon issuance of a guarantee, the  
entity must recognize a liability for the fair value of the obligation it  
assumes under that obligation. This interpretation is intended to improve  
the comparability of financial reporting by requiring identical accounting 
for guarantees issued with separately identified consideration and  
guarantees issued without separately identified consideration. The  
disclosure provisions of FIN 45 are effective for the Company as of  
December 28, 2002. The initial recognition and measurement provisions of  
FIN 45 are applicable to guarantees issued or modified after December 28,  
2002. Adoption of the accounting recognition provisions of FIN 45 did not  
have a significant impact on the Company's financial statements.  

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable  
Interest Entities-an Interpretation of Accounting Research Bulletin No.  
51. FIN 46 addresses consolidation by business enterprises where equity  
investors do not bear the residual economic risks and rewards. The  
underlying principle behind FIN 46 is that if a business enterprise has  
the majority financial interest in an entity, which is defined in FIN 46  
as a variable interest entity, the assets, liabilities and results of the  
activities of the variable interest entity should be included in  
consolidated financial statements with those of the business enterprise.  
In December 2003, the FASB issued Revised FIN 46 ("FIN 46R") to clarify  
certain aspects of FIN 46 including the determination of who is the  
primary beneficiary of a variable interest entity. FIN 46R postponed the  
effective date as to when companies are required to apply the provisions  
of FIN 46 prospectively for all variable interest entities in existence  
prior to January 31, 2003 until the first financial reporting period that  
ends after March 15, 2004. However, for entities that are considered to  
be special purpose entities, the effective date of FIN 46 is financial  
reporting periods after December 15, 2003. The Company is evaluating the 
impact of FIN 46 to determine the effect, if any, the pronouncement will  
have on its financial position or results of operations.  

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133  
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends  
and clarifies accounting for derivative instruments, including certain  
derivative instruments embedded in other contracts, and for hedging  
activities under SFAS No. 133. In particular, this statement clarifies  
under what circumstances a contract with an initial net investment meets  
the characteristic of a derivative and when a derivative contains a  
financing component that warrants special reporting in the statement of  
cash flows. This statement is effective for contracts entered into or  
modified after June 30, 2003. Adoption of the pronouncement did not have  
a significant impact on the Company's financial statements.  

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain  
Financial Instruments With Characteristics of Both Liabilities and  
Equity. SFAS No. 150 establishes how an issuer classifies and measures  
certain financial instruments with characteristics of both liabilities  
and equity. This statement is effective for instruments entered into or  
modified after May 31, 2003 and otherwise is effective at the beginning  
of the first interim period beginning after June 15, 2003. As a result  
of concerns over implementation and measurement issues, the FASB  
unanimously decided on October 29, 2003 to defer the application of SFAS  
No. 150 to certain noncontrolling interests of limited-life entities that  
are consolidated in the financial statements. Adoption of the  
pronouncement did not have a significant impact on the Company's  
financial statements.  

On January 12, 2004, the FASB issued FASB Staff Position No. FAS 106-1,  
Accounting and Disclosure Requirements Related to the Medicare  
Prescription Drug, Improvement and Modernization Act of 2003 ("FSP 106-1"). 
FSP 106-1 permits employers that sponsor postretirement benefit plans that  
provide prescription drug benefits to retirees to make a one-time election  
to defer accounting impact, if any, of the Medicare Prescription Drug,  
Improvement, and Modernization Act of 2003 (the "Act"), which was enacted 
into law on December 8, 2003. The Company has elected to defer recognition  
of the provisions of the Act as permitted by FSP 106-1 due to uncertainties  
regarding some of the new Medicare provisions and a lack of authoritative  
accounting guidance regarding certain matters. Changes to previously  
reported information may be required depending on the transition guidance  
issued in future authoritative guidance.  

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

2. LONG-TERM DEBT  
Long-term debt at December 27, 2003 and December 28, 2002 consists of the  
following:  

                                                          2003       2002  

Notes payable to GA/KY Fundco LLC under a term loan  
 agreement, variable interest rate (2.92% at December 
 27, 2003 and 3.69% at December 28, 2002) commencing  
 April 30, 2002, maturing on April 19, 2007.         $ 54,563    $ 63,380  

Note payable to GA/KY Fundco LLC under a revolving  
 Credit  agreement, variable interest rate (2.92% at  
 December 27, 2003  and 3.36% at December 28, 2002)  
 commencing April 30, 2002, maturing on April 30, 2007        0      12,000 

Note payable to Equity Group-Georgia Division LLC, a  
 related party, variable interest rate (2.89% at  
 December 27, 2003  and 3.36% at December 28, 2002),  
 due on demand.                                          15,500       4,000  

Note payable to Cagle Foods Credit, L.L.C., a  
 related party,  6.5% fixed interest rate, due  
 on demand.                                                 875           0 

Note payable to Cagle Foods Credit, L.L.C., a  
related party,  9.25 % fixed interest rate, due  
on demand.                                                  601           0 
                                                       --------    -------- 
Total                                                    71,539      79,380  

Current portion of long-term debt  
Related party debt-due on demand                          7,500       7,500 
                                                         16,976       4,000 
                                                       --------    --------     
Total long-term debt                              $      47,063    $ 67,880 

On April 30, 2002, GA/KY Fundco LLC ("Fundco") (a 50%-owned subsidiary) 
executed a loan agreement for a $105 million term loan facility and a $30  
million revolving loan facility at variable interest rates on behalf of the 
Company and Equity Group-Georgia Division LLC ("Equity GA"), formerly Cagle  
Foods JV, L.L.C., a related party. This loan is guaranteed by the Company  
and Equity GA. The proceeds were used to repay the Company's and Equity  
GA's existing term loan of $53.7 million and revolving loans of $17 million  
and purchase all of the Cagle's, Inc. joint venture interests in Equity GA.  
Fundco was established in 1997 as a 50%-owned subsidiary of both the Company 
and Equity GA. Fundco is a special purpose entity set up for borrowing of  
funds from a group of banks to fund the capital needs of the Company and  
Equity GA. All borrowing terms entered into by Fundco are the same borrowing  
terms passed down to the Company and Equity GA. Fundco has no other  
operations. At December 27, 2003, Equity GA had $22.9 million outstanding  
for the term loan facility and none for the revolving loan facility. The  
debt is secured by substantially all of the Company's' assets.  

Aggregate maturities of long-term debt during the years subsequent to  
December 27, 2003 are as follows: 
            For the fiscal year      
            2004    $ 24,476      
            2005       8,000   
            2006       8,000  
            2007      31,063 
                    -------- 
                    $ 71,539    

The Company incurred approximately $2,207 in loan origination costs  
related to the term loan and revolver, which is being amortized on a  
straight-line basis over the term of the loan, five years. Amortization 
expense related to the loan origination costs was $462 in 2003.  

In 2003 and 2002, the Company paid approximately $2,750 and $4,324 in  
interest expense, respectively.  

On December 31, 1997, Fundco, on behalf of the Company and Equity GA,  
entered into two interest rate swap agreements, which matured December 31,  
2002. The swaps effectively fixed the rate on original notional amounts of  
$58.5 million at rates of 5.98% and 6%, plus a spread based on the  
Company's debt-to-cash-flow ratio. These notional amounts changed based  
on amounts outstanding under the Company's term and revolving loan  
agreements. Under the terms of the agreements, the Company made payments  
at fixed rates and receives payments at variable rates based on the three- 
month London InterBank Offered Rate ("LIBOR"). Approximately $12 in  
unrealized losses exist on these agreements at December 28, 2002, the  
Company's share of which is $8 and Equity GA's share is $4.  

On January 15, 2003, Fundco entered two new interest rate collars on  
behalf of the Company and Equity GA. The collars allow Fundco to incur a  
floating rate of interest on the outstanding notional amount between a  
specified range. The collar swaps floating three-month LIBOR for fixed  
rates whenever the floating rate exceeds the cap rate (4%) or falls below  
the floor rate (1.5%). Each contract originated with a notional amount of  
$28,350. The notional amounts amortize over a three-year term in  
proportion to the underlying Fundco term loan. The collars differ in that  
one has a conventional cap which may trigger payments on a period-by-period  
basis, while the other has a cumulative cap which will only trigger payments 
when the sum of all floating rate payments exceed interest at the cap rate  
over the life of the contract. As of the date of this report it is highly  
probable that the underlying loan for which these derivative contracts were 
entered will be terminated in the near term. For this reason, the collars  
are not given hedge accounting and changes in their market values are  
reflected in other income and expenses of the Company in the amount of $97. 

At December 27, 2003 Fundco had an unused standby letter of credit  
available to the Company amounting to $4,760.  

3. RELATED PARTY TRANSACTIONS  

Sales to the Company's owners (Executive Holdings L.P. through its common  
ownership affiliate Keystone Foods LLC and Cagle's, Inc.) represented 80%  
and 89% of net sales during 2003 and 2002, respectively. The Company  
currently sells deboned chicken at cost plus $.03 per eviscerated pound.  

Executive Holdings L.P. and Cagle's Inc. both charge the Company  
administrative fees based on the Company's volume of production. These  
fees totaled $2,430 and $2,264 in 2003 and 2002, respectively.  

Sales, expenses, and balances with related parties for 2003 and 2002 are  
summarized as follows:  
                              Executive     
                               Holdings Franklin                   Cagle's,  
                                L.P.    Equipment Equity GA Credit   Inc.  
2003  
Net sales                     $ 172,580 $       - $     561 $    - $     21  
Purchases                                             5,973  
Interest income (expense)                      14      (300)   (91)      
Balance at year-end:  
  Net A/R, (A/P)                  4,547                 (58)            (56) 
  Notes receivable 
  Notes payable                                      15,500  1,476  

                              Executive     
                               Holdings Franklin                   Cagle's,  
                                L.P.    Equipment Equity GA Credit   Inc.  
2002  
Net sales                  $    153,866 $       - $   1,388 $    - $      - 
Purchases                                               494  
Interest income (expense)                      37       (93)  
Balance at year-end: 
Net A/R, (A/P)                   13,353         2       (54)  (522)      (7)  
Notes receivable                              523 
Notes payable                                         4,000  

The Company entered into a loan agreement with Franklin Poultry Equipment  
LLC ("Franklin Equipment") to advance $1.6 million in funds to finance  
operations. Franklin Equipment is a joint venture between Cagle's, Inc.  
and Executive Holdings L.P., whose primary purpose is to supply independent  
farmers equipment necessary for production of chickens owned by the Company. 
This loan bears interest at a rate of 7% per annum. The balance at December  
28, 2002 was $523 and the loan was repaid in February and October 2003.  

In 2003, Cagle Foods Credit, L.L.C. ("Credit"), a related party,  
transferred two foreclosed consumer loans and the related real estate that  
collateralized the loans to the Company. The Company acquired this real  
estate from Credit for the book value and issued notes payable as  
consideration for this acquisition. The real estate collateral is recorded  
in other assets at the loan values which approximate fair market value and  
are held for resale. The balance of the notes payable at December 27, 2003  
were $875 (6.5% fixed rate interest) and $601 (9.25% fixed rate interest).  

4. COMMITMENTS  

In 2003, the Company entered into a five year industrial power agreement  
with South Kentucky Rural Electric Cooperative Corporation (the "Co-op").  
Under the terms of this agreement, the Co-op has agreed to provide the  
substation and other facilities costing approximately $518 to supply the 
Company with its power requirements. The cost of these facilities will be  
recovered through rates over the life of the contract.  

Additionally in 2003, the Company entered into a five year emergency backup 
service agreement with the Co-op. Under the terms of this agreement, the  
Co-op has agreed to provide the backup generators and associated equipment  
and facilities costing approximately $608 to provide backup electric to the 
Company in the event of a power interruption. The Company has agreed to pay  
an annual facilities charge of $114 for the availability of this service.  

The Company leases machinery and equipment under operating leases. Rent  
expense was $2,649 and $1,635 in 2003 and 2002, respectively.  

Future minimum payments under noncancelable operating leases with initial 
terms of one year or more consisted of the following at December 27, 2003:  

For the fiscal year      
2004         $ 2,855      
2005           2,855      
2006           2,733      
2007           1,720      
2008             843      
Thereafter       318    
            -------- 
            $ 11,324 

5. INVESTMENT IN UNCONSOLIDATED AFFILIATE  

Effective December 1995, Cagle's, Inc., Executive Holdings L.P., and Equity 
GA formed Credit. Each Company made capital contributions of $3. Effective  
July 1, 1998, the Company became a member of Credit, at which time the  
Company made a capital contribution of $14. Currently, the Company owns 25%  
of Credit along with Equity GA (25%) and Executive Holdings L.P. (50%).  
Credit was formed for the purpose of financing the facilities of the  
Company's and Equity GA's contract growers. The investment is being  
accounted for under the equity method. The undistributed income from this  
affiliate allocated to the Company was $269 and $306 in 2003 and 2002,  
respectively. The Company received distributions of $118 and $155 in 2003  
and 2002, respectively.  

On April 30, 2002, Credit executed a loan agreement for a $25.3 million  
revolving loan facility at variable interest rates. The Company and Equity  
GA have guaranteed the borrowings under the loan agreement. Credit has  
received advances of approximately $21.7 million on the revolving loan  
facilities as of December 27, 2003. The revolving loan facility is due  
in monthly installments. Credit is required to make a final balloon  
payment in April 2007.  

Credit has consumer loans receivable of approximately $20.8 million and  
$25.1 million at December 27, 2003 and December 28, 2002, respectively.  
Credit has total assets of approximately $24.4 million and $26.0 million  
and total liabilities of approximately $22.6 million and $25.0 million as  
of December 27, 2003 and December 28, 2002, respectively, and net income  
of approximately $1,076 and $1,225 for 2003 and 2002, respectively.  

6. BENEFIT PLANS  

The Company contributes to a 401(k) retirement plan for employees who meet  
the eligibility requirements. Under the plan, the Company contributes up  
to 2% of participating employees' salaries. Amounts contributed by the  
Company to the 401(k) plan totaled $95 in 2003 and $89 in 2002. During  
2003, the Company introduced a defined contribution plan for certain  
employees not covered by collective bargaining agreements. Contributions  
are made on the basis of a percentage of each employee's salary and  
pension expense for 2003 was $227.  

In November 2002, the Company revised its benefits program to provide  
certain health care benefits for retired employees. Substantially, all of  
the Companies' domestic employees may become eligible for varying levels of  
benefits if they reach normal retirement age while working for the Company.  

The Companies' accumulated postretirement benefit obligation, which is  
unfunded, is $328 and $212 at December 27, 2003 and December 28, 2002,  
respectively. The accrued postretirement benefit cost recognized in the  
accompanying balance sheets is $113 and $20 at December 27, 2003 and  
December 28, 2002, respectively. No retiree benefit payments were paid,  
2003 or 2002.  

Actuarial assumptions used to determine the liability for postretirement  
plans other than pensions included a discount rate of 6.25% at December  
27, 2003 and 6.75% at December 28, 2002.  

For measurement purposes, an average 5.5% annual increase in the per capita  
cost of covered health care benefits was assumed for 2003.  

The net periodic postretirement benefit costs were $93 and $20 for 2003  
and 2002, respectively.  

7. CONTINGENCIES  

The Company is a party to various lawsuits in the ordinary course of doing  
business. The Company intends to defend these matters vigorously. The  
outcome of such lawsuits cannot presently be determined, but in the opinion  
of management, the aggregate liability, if any, arising from such  
litigation will not have a material adverse effect on the accompanying  
financial statements.  

8. SUBSEQUENT EVENT  

As described in Note 1, the Company is owned 70% by Executive Holdings  
L.P., which is affiliated with Keystone Foods LLC and various other  
entities through common ownership. On April 2, 2004, the Company became  
subject to an agreement under which the Company and various other entities  
affiliated by common ownership with Keystone Food LLC would be merged into  
one entity and an unrelated third party would obtain a controlling equity  
interest in that entity. The agreement is subject to regulatory approval  
and satisfaction of the conditions agreed to by the parties. Following  
that merger, it is likely that borrowing agreements outstanding at December  
27, 2003 would be replaced by new agreements entered into by the postmerger  
entity. The accompanying financial statements do not reflect any adjustments 
that might result from the merger or repayment of debt.