SECURITIES AND EXCHANGE COMMISSION 
                          WASHINGTON, D.C. 20549 
                                FORM 10-K 

_X_  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) 
     For the fiscal year ended______April 03, 2004________________________or 

___  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 
     For the transition period from _______________ to _________________ 

     COMMISSION FILE NUMBER:____1-7138_________________________________________ 
________________________________CAGLE'S, INC.__________________________________ 
           (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)  

___________GEORGIA_____________________________________58-0625713____________ 
     (STATE OF INCORPORATION)               I.R.S EMPLOYER IDENTIFICATION NO.   

_______2000 HILLS AVE., NW, ATLANTA, GA.______________________30318____________ 
     (address of principal executive offices)               (zip code) 

Registrant's telephone number, including area code: ___(404) 355-2820__________ 

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: 
       Title of each class             Name of exchange on which registered 

________CLASS A COMMON STOCK_________________AMERICAN STOCK EXCHANGE__ 

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:    
________________none_________________________________________________________ 

INDICATE BY CHECK MARK 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.         _X_ YES    ___ NO 

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT’S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K.  _*X*_  

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12B-2).   _X_ YES ___ NO 

STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON EQUITY (STOCK) HELD BY NONAFFILIATES OF THE REGISTRANT.  (THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE COMMON EQUITY (STOCK) WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF SUCH COMMON EQUITY (STOCK), AS OF THE LAST BUSINESS DAY OF THE REGISTRANT’S MOST RECENTLY COMPLETED SECOND FISCAL QUARTER.) 

_$_ 14,979,061.__(based_on__$8.55_per_share_closing_price_on_Sept. 26, 2004)_ 

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE (APPLICABLE ONLY TO CORPORATE REGISTRANTS.) 

__Class_A_Common_Stock_at_$1.00_par_value______________________________________ 
__4,742,998_shares_at_$1.00_par_value__________________________________________ 

DOCUMENTS INCORPORATED BY REFERENCE:  LIST THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED:  (1) ANY ANNUAL REPORT TO SECURITY HOLDERS;  (2) ANY PROXY OR INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424(b) OR (c) UNDER THE SECURITIES ACT OF 1933.  (THE LISTED DOCUMENTS SHOULD BE CLEARLY DESCRIBED FOR IDENTIFICATION PURPOSES.) 
  Parts of the following documents are incorporated by reference in Part III of   this form 10-K report:  
  1) proxy statements for registrant's 2004 annual meeting of shareholders-  
     Items 10, 11, 12, 13, and 14. 

                                CAGLE'S, INC. 

                                   PART I 

                         Item 1:  General Business 

Cagle's, Inc. (the "Company"), which began business in 1945 and was first incorporated in Georgia in 1953, and its wholly owned subsidiary (Cagle's Farms, Inc., formerly Strain Poultry Farms, Inc.) produce, market, and distribute a variety of fresh and frozen poultry products.  The vertically integrated operations of the Company consist of breeding, hatching, and growing of chickens; feed milling; processing; further processing; and marketing.  The Company's products are sold to national and regional independent and chain supermarkets, food distributors, food processing companies, national fast-food chains, and institutional users, such as restaurants, schools, and distributors, by the Company's sales staff located in Atlanta, Georgia, and through brokers selected by the Company. 

Dispositions 

On January 30, 2004 the Company completed the sale of the “Perry Complex”, which  consisted of a poultry processing plant in Perry, Georgia, a feed mill and hatchery in Forsyth, Georgia, and related assets and inventories, to Perdue Farms, Inc. for $45,000,000 for the property, plant and equipment and $6,725,000 for certain inventories. The purchase price was paid in the form of $50,725,000 in cash and $1,000,000 in a note receivable due upon completion of certain post-closing projects.  

                       Narrative Description of Business 

Food Processing 

All of the Company's business activities are conducted on a vertically integrated basis within one industry segment, poultry products.  The Company's various poultry products are closely related, have similar purposes and uses, and, except for product sold under cost-plus arrangements, are similar in terms of profitability and types and degrees of risks.  In addition, the production processes are similar to the extent that (a) production facilities are shared or are interchangeable and (b) the same types of raw materials, labor, and capital are used.  Markets and marketing methods are comparable for all products (except cost-plus products) to the extent that they are generally sold to the same types of customers by a common sales force and are sensitive to changes in economic conditions to the same degree. 

The Company currently processes approximately 1,820,000 birds per week in its two processing plants. Of the Company's total production, approximately 950,000 head per week are deboned.   

The complete cycle for growing broilers begins with the placement on a farm of a day-old breeder chick.  This bird is reared for 25 weeks, at which time it begins to produce hatching eggs.  The breeder produces eggs for approximately 40 weeks.  These eggs are set in the Company's two hatcheries, and in three weeks, a baby chick is hatched. 

The day-old broiler chick is placed on a farm where it will grow for six to eight weeks depending upon the size of bird desired, at which time it is transported to the processing plant for slaughter.  A significant investment in field inventories is required to support the Company's operating cycle. 

All feed for all flocks is produced in a feed mill owned by the Company. The Company's goal is to add value to all of its birds. This value-added product can take the form of deboned breast and thigh meat, cut-up marinated raw breaded chicken (including barbecue), fast-food cuts, IQF (individually quick frozen) products, and mechanically deboned chicken meat. 

Raw Materials 

The primary raw materials used by the Company are corn, soybean meal, and other ingredients; packaging materials; cryogenic materials; and breeder chicks.  The Company believes that sources of supply for these materials are adequate and does not expect significant difficulty in acquiring required supplies.  The major source of supply is the midwestern grain belt of the United States, although local supplies are utilized when available.  Prices for the feed ingredients are sensitive to supply fluctuations worldwide, and weather conditions, especially drought, can cause significant price volatility.  Since feed is the most significant factor in the cost of producing a broiler chicken, those fluctuations can have significant effects on margins.  The Company also purchases product outside for further processing requirements. 

Research and Development 

The Company has made no material expenditures for research and development during the last three years. 

Employees and Labor Relations 

The Company employs approximately 2,010 persons of whom approximately 43% are covered by a collective bargaining agreement which will expire within two years.  The Company believes its relationship with the bargaining groups and other employees is good. 

Seasonal Variations in Business 

The seasonal demand for the Company's products is highest during the late spring and summer months and is normally lowest during the winter months. 

Major Customers 

Sales to the Company's largest customers represent 13.5%, 16.7%, and 16.3%, of net sales during fiscal 2004, 2003, and 2002, respectively.  

Backlog 

The Company had no material backlog of orders existing as of April 03, 2004. 

Competition 

The Company is a leading regional integrated poultry processor, ranking ninth nationally in pounds produced.  The Company's products compete in the marketplace with comparable products of approximately ten national and regional producers in the areas of quality, service, and price.  The Company believes its flexibility and accessibility are positive factors enhancing the Company's competitive position. 

Regulation 

The Company's facilities and operations are subject to regulation by various federal and state agencies, including, but not limited to, the Federal Food and Drug Administration ("FDA"), the United States Department of Agriculture ("USDA"), the Environmental Protection Agency, the Occupational Safety and Health Administration, and the corresponding state agencies.  The Company's processing plants are subject to continuous on-site inspection by the USDA, and the FDA inspects the production of the Company's feed mill. Management believes that the Company is in substantial compliance with applicable laws and regulations relating to the operation of its facilities. 

                           Item 2:  Properties 

Production and Facilities 

Breeding and Hatching 

The Company supplies its broiler chicks by producing all of its own hatching eggs from breeder flocks owned by the Company.  These breeder flocks are maintained on 43 contract grower farms.  In addition, the replacement breeder pullets are maintained on 19 contract grower farms where the breeders are reared from one day old to approximately 18 weeks old and then moved to the breeder farm where they begin to produce eggs at about 25 weeks of age.  These farms are located in north Georgia and Tennessee. 

The Company owns a hatchery located in Dalton, Georgia, at which eggs are incubated and hatched.  This is a continuous process and requires 21 days to complete.  After the chicks are removed from the incubator, they are vaccinated against disease and moved by a special-purpose vehicle, Chick Bus, to the Company's grow-out farms.  The hatchery has an aggregate capacity of 2,300,000 chicks per week.  

Grow-Out 

The Company places its broiler chicks on approximately 168 contract grower farms.   

The independent contract growers provide the housing, equipment, utilities, and labor to grow the baby chicks to market age, which varies from six to eight weeks, depending on the market for which they are intended.  The Company supplies the baby chicks, the feed, and all veterinary and technical services. Title to the birds remains with the Company at all times.  The contract growers are paid on live weight and are guaranteed a minimum rate with various incentives based upon a grower's performance as compared to other growers whose birds are marketed during the same week.  These contract farms are located in Georgia and Alabama. 

Feed Mills 

The Company owns two feed mills. The feed mill in Rockmart, Georgia has production capacity of over 12,000 tons per week which can be increased to 20,000 tons per week with additional equipment.  A mill in Dalton, Georgia is currently idle. 

Processing 

As the broilers reach the desired processing weight, they are removed from the houses and transported by Company trucks to a processing plant. 

The processing plants are located in Pine Mountain, Georgia; and Collinsville, Alabama.  The Collinsville plant can process up to 12,600 birds per hour.  The Pine Mountain plant has the capacity to process 10,800 birds per hour.  

Further Processing and Deboning 

The Company has a stated goal of marketing the majority of its product as value-added product.  This is accomplished by cutting the product into parts or fast-food cuts, deboning, marinating and breading, and converting into other convenience-type products. 
Currently, further processing and deboning are conducted at the Collinsville, Alabama, plant (cutting, marinating, and breading) and the Pine Mountain plant (deboning).  

Freezer Storage 

The Company's facilities located in Atlanta, Georgia; Collinsville, Alabama; and Pine Mountain, Georgia; have freezer storage facilities with aggregate capacity of approximately 14,000,000 pounds of frozen product. The Company utilizes outside storage services as needed to supplement its own freezer capacity. 

Local Distribution 

As an extension of the Company’s sales division, local distribution is operated from warehouse facilities in Atlanta, Georgia and Collinsville, Alabama, and are designed to provide storage and delivery service for those customers.   

Significant Unconsolidated Subsidiaries 

In November 1997, a poultry company was formed as a joint venture in Kentucky by the Company and an unrelated third party, with the Company owning a minority membership interest.  On April 30, 2002, the Company sold its interest in a joint venture in Camilla, Georgia and its interest in a grower financing credit company for $50,000,000, and in December, 2002 sold its interest in a rendering company for $6,736,642. 

Executive Offices 

The Company's executive offices are located in a (22,000-square-foot) building at 2000 Hills Avenue, NW, Atlanta, Georgia.  The building is owned by the Company. 

All of the properties described above are in good condition and are adequate for their stated uses. 

                        Item 3:  Legal Proceedings 

Item 3: Legal Proceedings  
 Suit was filed against Cagle's Farms, Inc. on December 18, 1998 in U.S. District Court for the Northern District of Georgia by terminated contract broiler growers. Cagle's, Inc. was subsequently added as a party. These former growers sought unspecified damages and alleged, among other things, that their birds were misweighed on numerous occasions and that they were terminated as growers because of their involvement in a poultry grower's association. Cagle's, Inc. and Cagle's Farms, Inc. denied all  allegations. During the fiscal year 2003 the case settled and fiscal year 2004, the case was dismissed with prejudice. In addition to the above mentioned case, a suit was brought against Cagle's, Inc., Cagle's Farms, Inc., Cagle Foods JV, LLC and Cagle Keystone Foods JV, LLC on May 12, 1999 in U.S. District Court for the Northern District of Georgia by three contract broiler growers. This suit alleged certain discrepancies in weighing live poultry and sought unspecified damages. The Company and other defendants denied all allegations. This suit sought class action status, which was denied by the Court. Subsequently, on July 2, 2001, a number of individual contract growers filed suit against Cagle's, Inc. and Cagle's Farms, Inc. in U.S. District Court for the Northern District of Georgia, also alleging certain discrepancies in weighing and seeking unspecified damages. Cagle's, Inc. and Cagle's Farms, Inc. denied all allegations. During the fiscal year 2003, both cases settled and, in fiscal year 2004, both of these cases were dismissed with prejudice.  

Also, suit was filed on May 19, 1999 against Cagle's, Inc., Cagle's Farms, Inc., Cagle Foods JV, LLC, Cagle Foods Credit LLC and Cagle's Keystone Foods, LLC in the U.S. District Court for the Middle District of Georgia. This suit was brought by 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. The Company and other defendants deny all allegations. In fiscal year 2004, the Court entered Summary Judgment in favor of the Company and all other defendants and the Plaintiffs appealed the ruling. Subsequently in fiscal year 2004, the parties settled and the Plaintiffs dismissed their appeal. 

Two additional 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 all defendants.  During fiscal year 2004, in the case filed on June 22, 2001, the Plaintiff appealed the summary judgment ruling and subsequent to the end of the fiscal year, the Court of appeals dismissed the appeal as lacking in jurisdiction.  The Company anticipates that the Plaintiffs will attempt another appeal and the Company intends to vigourously defend this appeal.  With regard to the case filed on June 15, 2001, the Company anticipates that the Plaintiff will appeal the summary judgment ruling in favor of all defendants.  If such appeal occurs, the Company intends to vigorously defend the 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 4:  Submission of Matters to a Vote of Security Holders 

No matters were submitted to security holders for a vote during the fourth quarter of fiscal 2004. 

                                     PART II 

               Item 5:  Market for Registrant's Common Equity 
                        and Related Stockholder Matters 

The Company’s common stock is listed and principally traded on the American Stock Exchange, ticker symbol CGLA. As of April 3, 2004, there were 192 stockholders of record of the Company’s Class A common stock. Under current loan agreements, issuance of dividends must be consented to by debt holders.  
Quarterly dividend data and market highs and lows for the past two years were:  

Fiscal 2004 
Fiscal 2004 
Fiscal 2004 
Fiscal 2003
Fiscal 2003
Fiscal 2003

Dividend
High
Low
Dividend
High
Low
Quarter: 

First 
$0  
5.99 
4.51 
$0 
10.80 
9.85 
Second 
0 
8.55 
4.25 
0
10.05 
9.80 
Third 
0 
8.92 
6.20 
0
8.30 
6.10 
Fourth 
0 
10.10 
7.43 
0
8.10 
5.75 

                       Item 6:  Selected Financial Data 

Five Year Selected Financial Data
(In Thousands, Except Per Share Data)  

**53 Weeks Ended**
52 Weeks Ended 
52 Weeks Ended 
52 Weeks Ended 
53 Weeks Ended 

**April 3, 2004**
March 29, 2003 
March 30, 2002 
March 31, 2001 
April 1, 2000 
**------------------------------------- 
-------------- 
--------------
**--------------
**--------------
**--------------
**OPERATING RESULTS:**

Net sales ......................****
. **$ 304,507
$ 313,800 
$ 353,792 
$ 279,671  
$  331,852 
Costs & expenses .......  
**327,712 
344,297 
375,557 
303,819  
321,908 
Operating (loss) income .  
**(23,205) 
(30,497) 
(21,765) 
(24,148)  
9,944 
Interest expense ............  
**(7,018) 
(8,156) 
(9,852) 
(5,624)  
(2,077) 
Other income, net .........  
**(544) 
       16,323 
      12,171 
      12,232 
        7,671 

(Loss) income before income taxes ..  
**(30,767) 
(22,330) 
(19,446) 
(17,540)  
15,538 
(Benefit) provision  

for income taxes ........  
**(13,042) 
       (9,058) 
    (12,485) 
     (8,491) 
        5,594 
Net (loss) income ..........  
**$  (17,725)
$   (13,272) 
$    (6,961) 
$    (9,049)  
$        9,944
**FINANCIAL POSITION:**

Working capital ......... ****
**$      3,527 
$   (49,235)
$    14,324 
$     21,705  
$    28,830 
Total assets .................  
**100,019 
171,777 
239,951 
245,502  
192,470 
Long-term debt and  

capital lease  

obligations ..................  
**34,552 
23,479 
114,885 
115,429  
66,570 
Stockholders’ equity......  
**34,267 
51,992 
64,397 
72,203  
81,679 
**PERFORMANCE**

**PER COMMON SHARE:**

Net (loss) income:  

Basic .............................****
**$       (3.74)
(2.80)  
$      (1.47) 
$       (1.91)  
$      2.09 
Diluted ..........................  
**(3.74) 
(2.80) 
(1.47) 
(1.91)  
2.09 
Dividends ......................  
– 
– 
– 
0.09  
0.12 
Book value at the end of the year.. 
**7.22 
10.96 
13.58 
15.23  
17.19 
Average number of common shares 

     outstanding:  

Basic .....................  
**4,743 
4,743 
4,741 
4,742  
4,752 
Diluted ..................  
**4,743 
4,743 
4,741 
4,742  
4,755 

Notes to selected financial data: 

Fiscal year 2004 
Revenues declined by 3.0% as compared to 2003 and can be attributed to lower tonnage sold because of the sale of the Perry plant and the closing of a shift at another processing plant. 

The Company’s share of earnings of unconsolidated affiliates declined by $1.1 million and results from the closure and sale of assets by Franklin Poultry Equipment, LLC in October 2003. The Company’s share of earnings was reported in this classification until the month of sale. 

Retired short term debt in the amount $60 million  

Acquired a new $20 million credit facility in fiscal 2004. 

Reduced inventories and accounts receivables by $10 million in fiscal 2004. 

Incorporate by reference an 8-K filed on March 18, 2004, to furnish pro forma financial information as if the disposition the Perry, Georgia complex had occurred on January 3, 2004. 

Fiscal Year 2003  

Revenues declined by 11.3% as compared to 2002 and can be attributed to $9 million of outside feed sales that were included in 2002 (non-recurring), market prices that averaged 3.9% higher but still remained at historic low averages: boneless thigh meat was 24.8% lower, wings were 38.75% lower, boneless skinless breast was lower than a year ago and 2% less tonnage was sold as production was reduced due to the depressed market situation in the industry. 

Gross margins were a negative 4.0% for 2003 as compared to negative .89% in 2002.  2003 gross margin is impacted by $6.7 million recovery in a lawsuit involving a vitamin manufacturer and adjusted for this recovery, gross margin would have been negative 6.1%. 

Selling, delivery and general administrative expenses as a group decreased by 3.6% and as a category general administrative expenses decreased by 1.8% and is due to increases in the cash surrender values of life insurance policies.  These increases are offset by fees charged by the bank group for extension of credit facilities and consulting fees for monitoring services required by the banks and for services exploring replacement financing.  Legal and professional expenses were also a major factor in 2003. 

Fiscal Year 2002  

The Company’s net revenues increased by 26.5% in 2002 as compared to 2001.  The increase is attributed to a total production increase of 24.9%  as the new processing plant reached full slaughter capacity.  Part of the increased revenues is attributed to approximately $9 million of finished feed sales, which is non-recurring. 

While volume increased, market prices continued to be challenging, especially boneless, skinless breast meat items that comprise a large percentage of the Company’s product mix and in most cases were selling substantially lower than quoted market prices.  This situation deteriorated further late in the fourth quarter when a ban on the purchase of US 
poultry was put into place by Russia.  This has caused the price of dark meat, for which Russia is the largest export customer, to plummet from already low prices.  This has had an effect on other items’ prices, as well as cheap leg quarters displacing other items in the market place domestically. 

Gross margins were a negative .89% as compared to a negative 1.7% in 2001.  This improvement, while still negative, reflects the move toward full production in the new processing facility, somewhat lower energy prices countered by slightly higher feed cost (1.88%).  Market prices were better on average while still depressed. 

Selling, delivery and general administrative expenses as a group declined by 4% as compared to 2001; however, there was some shifting of expenses within the categories as selling expenses increased and general and administrative expenses declined.  Increases were mainly payroll related as sales staffing was increased and commissions, which increased by 71%.  Legal expenses were lower by 12.2% as the litigation in which the Company is involved began to reach more mature stages. 

Fiscal Year 2001  

Net sales declined by 15.72% as compared to 2000 and is the result of lower average market prices, 2% less production and approximately $20 million less product purchased outside for further processing and sale. 

Gross margins were a negative 1.7%  and reflect the lower selling prices throughout the year and the impact of the high cost and minimum production associated with the start-up of the Perry processing plant and utilities (energy) cost that was 37% higher than the previous year.  Grain prices were relatively stable throughout the year. 

Selling, delivery and general administrative expense as a group declined by 1.8%.  Lower storage and commissions combined to offset the higher legal expense associated with on-going litigation. 

Income taxes are computed at statutory rates in conjunction with various tax credits that are available to the Company.  The Company expects to receive a refund of income taxes for this reporting year. 

Interest expense increased 170% as a result of the significant increase in borrowing throughout the year and will continue to be a significant cost for the foreseeable future. 

Fiscal Year 2000  

Net sales declined by 8.5% as compared to 1999 and is attributed to significantly lower average market prices and the fact the fiscal 2000 was a 52-week year versus 53 weeks in 1999. 

Gross margins reflected the lower market prices as they declined by 4.7% when compared to fiscal 1999.  Boneless skinless breast prices averaged $.32 or 18% lb. less in 2000 than 1999 while export prices for leg quarters remained at depressed levels.  Grain prices, the major cost component, remained stable at favorable levels throughout the year. 

Selling and delivery and general administrative expenses increased by 10% as compared to the previous year with legal expenses associated with the company’s on going litigation accounting for the major portion of the increase.  Other increases were personnel related as management and sales and marketing staff is being added in preparation for the increased production scheduled from the new Perry facility.   

            Item 7:  Management's Discussion and Analysis of 
                     Financial Condition and Results of Operations 
General  
Our Company generated positive earnings in both February and March 2004 allowing it to report its second quarter of operating profit for this fiscal year. Continued profits and corresponding cash flows in the new year have improved the liquidity of the Company as we have resolved the remaining obligations of the Perry divestiture.  Poultry markets continue to be very strong and are expected to remain so through the remainder of this calendar year. The Company’s marketing department is focusing on a product mix concentrated in further processed, value-added product which will provide margin stability versus typical commodity ice pack products. Grain costs continue to be volatile and will impact earnings as they fluctuate. Our remaining slaughter facilities, which ran below capacities in fiscal year 2004, will return to full capacity by the second quarter of fiscal 2005 allowing for increased efficiencies throughout the Company.  

To recap management’s thoughts and outlook on the future, the Company is currently generating healthy profits, has a good relationship with its lenders, and is improving its sales mix and customer base. In addition, the Company’s processing plants are operating efficiently and the Company’s live operations are continuously improving. From all indications, the Company should see an appreciable improvement in the upcoming year with grain price volatility the only expected cloud on the horizon.  

Through our quarterly reporting, we have discussed our difficulty with liquidity, profits and burgeoning debt, all principally brought about by poor market prices and our Company’s difficulty in marketing product from our Perry operation outside of low commodity venues. Management concluded that to return the Company to health, a necessary step was to reduce our production of commodity product by selling the Perry operation and using the proceeds to reduce our debt obligations. As was disclosed in our third quarter report, the sale of our Perry Complex was completed in January 2004 with a simultaneous payoff of our syndicated debt and issuance of new term and revolving facilities with a single new lender. Following the completion of the Perry sale, the Company restructured its management team, recognizing both the size and changing needs of our organization, resulting in reduced corporate overhead. The current management team is poised to take the Company forward as directed by our Chairman, Doug Cagle, to focus on relationships and paying attention to details that reflect our values of integrity, quality and respect for the individual.   

Year 2004 compared to 2003  
Revenues declined by 3.0% as compared to 2004 and can be attributed to lower tonnage sold because of the sale of the Perry plant and the closing of a shift at another processing plant. The Company’s selling price averaged 12.25% higher for 2004.  

Gross margins were (1.7%) for 2004 as compared to (4.0%) in 2003. Fiscal 2004 and 2003 gross margins were both impacted by settlements received by the Company as a result of litigation involving manufacturers of vitamins utilized in the feeding of our live birds in the amounts of $2.2 and $6.7 million, respectively. When these settlements are removed, the gross margins are (2.4%) for 2004 and (6.1%) for 2003. The improvement from 2003 to 2004 is due primarily to the increase in the Company’s average selling price as mentioned in the above paragraph.  

Selling and delivery expenses decreased by 16.8% due almost entirely to a reduction in brokerage commissions paid. General and administrative expenses showed an increase of 22%, which was due to increases in the cash surrender values of life insurance policies in 2003. Legal and professional fees, along with bank and loan fees, continued to burden the Company in 2004, accounting for 40% of the total general and administrative fees. 

Interest Expense  
Interest expense for 2004 was 14.0% lower than for 2003 resulting from lower debt levels throughout the year. Interest rates, however, were higher due to increased rates imposed by lenders during the credit facility extension periods.   

Other Income/Expense  
Other income/expense is comprised of expenses incurred on the disposal of the Company’s interest in its property in Perry, Georgia and Forsyth, Georgia.   

Equity in earnings of unconsolidated affiliates  
The Company’s share of earnings of unconsolidated affiliates declined by $1.1 million and results from the closure and sale of assets by Franklin Poultry Equipment, LLC in October 2003. The Company’s share of earnings was reported in this classification until the month of sale. The previous year also had reportable earnings from two unconsolidated affiliates, which were sold in that year, for a portion of the year.   

Income taxes  
The Company has classified the income tax benefit as a non-current tax asset in anticipation of application of loss carryforwards in future periods.   

Year 2003 compared to 2002  
Revenues declined by 11.3% as compared to 2002 and can be attributed to $9 million of outside feed sales that were included in 2002 (non-recurring), market prices that averaged 3.9% higher but still remained at historic low averages: boneless thigh meat was 24.8% lower, wings were 38.75% lower, boneless skinless breast was lower than a year ago and 2% less tonnage was sold as production was reduced due to the depressed market situation in the  
industry.  

Gross margins were a negative 4.0% for 2003 as compared to negative .89% in 2002. Gross margin for 2003 was impacted by $6.7 million recovery in a lawsuit involving a vitamin manufacturer and adjusted for this recovery, gross margin would have been negative 6.1%. Selling, delivery and general administrative expenses as a group decreased by 3.6% and as a category general and administrative expenses decreased by 1.8% and is due to increases in the cash surrender values of life insurance policies. These increases are offset by fees charged by the bank group for extension of credit facilities and consulting fees for monitoring services required by the banks and for services exploring replacement financing. Legal and professional expenses were also a major factor in 2003.   

Interest Expense  
Interest expense for 2003 was 17.2% lower than for 2002 resulting from lower debt levels throughout the year. Interest rates, however, were higher due to increased rates imposed by lenders during the credit facility extension periods.   

Other Income  
Other income is comprised of gains on disposal of the Company’s interest in joint ventures and its property in Lovejoy, Georgia, the Talmadge Farms facility. This income is offset by settlements of several lawsuits involving independent growers.  

Equity in earnings of unconsolidated affiliates  
The Company’s share of earnings of unconsolidated affiliates declined by $6.5 million and results from the Company’s sale of its interest in Cagle Foods JV, LLC and Cagle Foods Credit LLC on April 30, 2002 and its minority interest in a rendering company in December 2002. The Company’s share of earnings was reported in this classification until the month of sale.  

Income taxes  
The Company has classified the income tax benefit as a reduction of its non-current tax liability in anticipation of application of loss carryforwards in future periods.   

Financial condition & liquidity  
The retirement of $60 million in short term debt, the acquisition of a new $20 million credit facility and the reduction of inventories and accounts receivables by $10 million has greatly increased the Company’s liquidity during 2004. This plus the Company’s return to profitably and positive cash flows paint a brighter new year. Market conditions have grown stronger during the fourth quarter and show signs of continuing.   

Analysis of cash flows  
For the year ended April 3, 2004, the Company provided cash from operating activities of $4,642. For the years ended March 29, 2003 and March 30, 2002, the Company used cash in operating activities of $10,727 and $1,032, respectively. For the year ended April 3, 2004, the net loss of $17,725 was affected by non cash charges of depreciation, amortization and impairment loss associated with the Perry plant totaling $29,238. Additionally, deferred income taxes, gains on sale of equipment and income from unconsolidated affiliates impacted the effects of net loss on cash flows by ($12,855). Working capital changes from 2003 to 2004 were $5,984. For the year ended March 29, 2003, non-cash gains of ($8,841) impacted the net loss of ($13,272), primarily due to a gain on the sale of an unconsolidated affiliate.  For the year ended March 30, 2002, non-cash charges of $6,516 impacted the net loss of ($6,961) primarily due to depreciation charges.   

Cash flows provided by (used in) investing activities were $43,321, $50,273 and ($878) for the fiscal years 2004, 2003 and 2002, respectively. The decrease in cash provided in investing activities for fiscal 2004 is reflective of the sale of property, plant and equipment, when compared to the increase in fiscal 2003, which reflects the proceeds from the sale of unconsolidated affiliates. The increase in cash provided in investing activities for fiscal 2003, when compared to fiscal 2002, is primarily due to the proceeds from the sale of unconsolidated affiliates in fiscal 2003.  

Cash flows (used in) provided by financing activities were ($48,052), ($39,537) and $888 for the fiscal years 2004, 2003 and 2002, respectively. The increase in cash used in financing activities for fiscal 2004, when compared to fiscal 2003, reflects the retirement of long-term debt. The increase in cash used in financing activities for fiscal 2003, when compared to fiscal 2002, is primarily due to borrowings in fiscal 2002.   

Tabular disclosure of contractual obligations  
Contractual obligations at April 3, 2004 were as follows: 

      Payments Due by Period  

Less than 
1-3 
3-5 
More than 
Contractual Obligations 
Total
1 Year
Years
Years
5 Years
…………………………………………….. 
………………. 
……………… 
…………….
……………. 
………………. 
Long Term Debt Obligations 
$37,473 
$2,921 
$15,385 
$4,993  
$14,174 
Capital Lease Obligations 
–
–
–
– 
–
Operating Lease Obligations 
1,724 
1,300 
424
– 
–
Purchase Obligations 
1,654 
1,654 
–
– 
–
Other Long-Term Liabilities 
            –
            –
            –
            –
            –
Total 
$40,851 
$5,875 
$15,809******************************************