Tableof Contents

 

 

 

**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**                                                                                                                           |
|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                          |
|       |       | **For the fiscal year ended March 28, 2009**                                                                                                                                                                             |
|       |       | ** **                                                                                                                                                                                                                    |
|       |       | **or**                                                                                                                                                                                                                        |
|       |       |                                                                                                                                                                                                                          |
| **o**      | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE  ACT OF 1934**                                                                                                                      |
| ** ** | ** ** | ** **                                                                                                                                                                                                                    |
| ** ** | ** ** | **For the transition period from                 to                  ** |

 

**COMMISSION FILE NUMBER: 1-7138.**

 

**CAGLE’S, INC.**

 (Exact Name Of Registrant As Specified In ItsCharter)

 

| **GEORGIA**                              | ** ** | **58-0625713**                      |
|------------------------------------------|------------|-------------------------------------|
| (State Of Incorporation)                 |       | (I.R.S Employer Identification No.) |
|                                     |       |                                |
| **1385 COLLIER ROAD NW, ATLANTA, GA**    | ** ** | **30318**                           |
| (Address Of Principal Executive Offices) |       | (Zip Code)                          |

 

Registrant’stelephone number, including area code:  **(404) 355-2820.**

 

SECURITIESREGISTERED 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.                  |       |

 

SECURITIESREGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: **None.**

 

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct.  o  Yes   x No

 

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) of theExchange Act. o Yes  x No

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of l934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90days.    x Yes    o No

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§ 229.405 of this chapter) during the preceeding 12 months(or for such shorter period that the registrant was required to submit and postsuch files).  Yes x No o

 

Indicateby check mark if disclosure of delinquent filers pursuant to item 405 ofregulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in part III of this form 10-K or any amendment tothis FORM 10-K. o.

 

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

 

| Large accelerated filer o |   | Accelerated filer o          |
|---------------------------|--------|------------------------------|
|                      |   |                         |
| Non-accelerated filer o   |   | Smaller reporting company x. |

 

Indicate by check mark if the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act). oYes     x  No

 

State the aggregate market value of the votingand non-voting common equity held by non-affiliates computed by reference tothe price at which the common equity was last sold, or the average bid andasked prices of such common equity, as of the last business day of theregistrant’s most recently completed second fiscal quarter.

 

$7,616,240 (based on $4.55 per share closing price on September 27, 2008).

 

Indicate the number of shares outstandingof each of the registrant’s classes of common stock, as of the latestpracticable date.

 
| Class A Common  Stock at $1.00 par value |   | 4,637,355 shares at  $1.00 par value. |
|-----------------------------------------------|--------|---------------------------------------|

 

**DOCUMENTS INCORPORATED BYREFERENCE:**

 

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

1) proxy statements for registrant’s 2009annual meeting of shareholders-     Items 10, 11, 12, 13, and 14.

 

 

 

----

Table of Contents

 

***Cagle’s, Inc. and Subsidiary***

***A LETTER FROM THE CEO***

 

To Our Stockholders:

 

For fiscal 2009 our operating loss was $15.7million, a decline of $15.8 million from fiscal 2008.  This downturn occurred during a time ofstruggling poultry markets made even more challenging as cost of salescontinued to escalate throughout the year due to rising feed ingredient andenergy prices.

 

Revenues for fiscal 2009 were $292.6 millionreflecting a 3.2% increase when compared to fiscal 2008 with poultry pricesincreasing $0.024 per pound sold.  Quoted market prices for the year 2009versus 2008 reflect a reduction in boneless breast - 13.6%, breast tenders -7.2%, wings - 9.2% and leg quarters - 3.4%.

 

Cost of production for fiscal 2009 increased9.2% to $293.2.  Feed prices account forapproximately 36.0% of our total cost and increased 23.5% for the yearreflected as a $20.3 million increase in cost of sales.  As feed ingredients continue to be utilizedfor energy production and the weak dollar supports export of corn and soybeanmeal, we expect our cost to produce a pound of chicken to remain high.

 

Selling, general and administrative costsremained at $15.0 million as the company continues to incur higher professionalfees associated with efforts to comply with Section 404(a) of theSarbanes-Oxley Act of 2002 which we expect to continue into fiscal 2010 as thecompany works diligently to meet SEC and Public Company Accounting OversightBoard requirements.

 

During these challenging times, Cagle’smanagement team continues to focus on improved efficiency throughout ourorganization while maintaining the highest quality standards for ourproducts.  Our fourth quarter operatingincome approached the breakeven mark as revenue per pound improved by over 3%and cost of sales fell 1.6%.  As we beginfiscal 2010, demand for the cost effective protein offered by our products isimproving and our markets are reacting favorably which we anticipate willreturn our company to positive margins in the first quarter.  I appreciate the continued support of ourstakeholders including our shareholders, employees, contract growers, vendorsand our valued customers.

 

 
|   | Sincerely,                                       |
|--------|--------------------------------------------------|
|   |                                             |
|   | /s/  J. DOUGLAS CAGLE                            |
|   |                                             |
|   | J.  DOUGLAS CAGLE                                |
|   | Chairman,  Chief Executive Officer and President |

 

----

Table ofContents

 

**FORM 10-K**

**March 28,2009**

 

**TABLE OF CONTENTS**

 
| ** ** | ** **                                                                                                              | **Page**   |
|------------|-------------------------------------------------------------------------------------------------------------------------|------------|
| ** ** | **PART I**                                                                                                         | ** ** |
|       |                                                                                                                    |       |
| Item 1.    | Business                                                                                                                | 1          |
| Item 1A.   | Risk Factors                                                                                                            | 2          |
| Item 1B.   | Unresolved Staff Comments                                                                                               | 4          |
| Item 2.    | Properties                                                                                                              | 4          |
| Item 3.    | Legal Proceedings                                                                                                       | 5          |
| Item 4.    | Submission of Matters to a  Vote of Security Holders                                                                    | 5          |
| Item 4A.   | Executive Officers of the  Registrant                                                                                   | 5          |
|       |                                                                                                                    |       |
| ** ** | **PART II**                                                                                                        | ** ** |
|       |                                                                                                                    |       |
| Item 5.    | Market for  the Registrant’s Common Equity, Related Stockholder Matters and Issuer  Purchases of Equity Securities | 6          |
| Item 6.    | Selected  Consolidated Financial Data                                                                                   | 7          |
| Item 7.    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                             | 9          |
| Item 7A.   | Quantitative  and Qualitative Disclosures About Market Risk                                                             | 14         |
| Item 8.    | Consolidated  Financial Statements and Supplementary Data                                                               | 16         |
| Item 9.    | Changes in  and Disagreements with Accountants on Accounting and Financial Disclosure                                   | 39         |
| Item 9A.   | Controls and  Procedures                                                                                                | 39         |
| Item 9B.   | Other Information                                                                                                       | 40         |
|       |                                                                                                                    |       |
| ** ** | **PART III**                                                                                                       | ** ** |
|       |                                                                                                                    |       |
| Item 10.   | Directors,  Executive Officers and Code of Ethics                                                                       | 41         |
| Item 11.   | Executive  Compensation                                                                                                 | 41         |
| Item 12.   | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                        | 41         |
| Item 13.   | Certain  Relationships and Related Transactions                                                                         | 41         |
| Item 14.   | Principal  Accountant Fees and Services                                                                                 | 41         |
|       |                                                                                                                    |       |
| ** ** | **PART IV**                                                                                                        | ** ** |
|       |                                                                                                                    |       |
| Item 15.   | Exhibits  and Financial Statement Schedules                                                                             | 42         |
|       | Signatures                                                                                                              | 43         |
|       | Consent of Independent  Registered Public Accounting Firm                                                               |       |
|       | Certifications                                                                                                          |       |

 

----

Table of Contents

 

**PART I**

 

**Item 1:  Business**

 

Cagle’s, Inc.(the “Company”), which began business in 1945 and was first incorporated inGeorgia in 1953, and its wholly owned subsidiary (Cagle’s Farms, Inc.,formerly Strain Poultry Farms, Inc.) produce, market, and distribute avariety 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 operations.  The Company’sproducts are sold to national and regional independent and chain supermarkets,food distributors, food processing companies, national fast-food chains, andinstitutional users, such as restaurants, schools, and distributors, by theCompany’s sales staff located in Georgia, Alabama, New York, Arizona andthrough brokers selected by the Company.

 

*Dispositions*

 

TheCompany sold its 30% interest in an unconsolidated affiliate for $28,000 on August 15,2006 and recorded a gain of $18,323 as other income.

 

**NarrativeDescription of Business**

 

*FoodProcessing*

 

Allof the Company’s business activities are conducted on a vertically integratedbasis within one industry segment, poultry products.  The Company’s various poultry products areclosely related, have similar purposes and uses, and are similar in terms ofprofitability and types and degrees of risks. In addition, the production processes are similar to the extent that (a) productionfacilities are shared or are interchangeable and (b) the same types of rawmaterials, labor, and capital are used. Markets and marketing methods are comparable for all products to theextent that they are generally sold to the same types of customers by a commonsales force and are sensitive to changes in economic conditions to the samedegree.

 

TheCompany currently processes approximately 2.3 million birds per week in its twoprocessing plants.  Of the Company’stotal production, approximately 400,000 head per week are deboned.

 

Thecomplete cycle for growing broilers begins with the placement on a farm of aday-old breeder chick.  This bird isreared for 25 weeks, at which time it begins to produce hatching eggs.  The breeder produces eggs for approximately40 weeks.  These eggs are set in theCompany’s hatchery, and in three weeks, a baby chick is hatched.

 

Theday-old broiler chick is placed on a farm where it will grow for five to sixweeks depending upon the size of bird desired, at which time it is transportedto the processing plant for slaughter.  Asignificant investment in field inventories is required to support the Company’soperating cycle.

 

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

 

*RawMaterials*

 

Theprimary raw materials used by the Company are corn, soybean meal, and otheringredients; packaging materials; cryogenic materials; and breeder chicks.  The Company believes the sources of supplyfor these materials are adequate and does not expect significant difficulty inacquiring required supplies.  The majorsource of supply is the midwestern grain belt of the United States, althoughlocal supplies are utilized when available. Prices for the feed ingredients are sensitive to supply fluctuationsworldwide, and weather conditions, especially drought, can cause significantprice volatility.  Since feed is the mostsignificant factor in the cost of producing a broiler chicken, thosefluctuations can have significant effects on margins.  The Company also purchases product outsidefor further processing requirements.

 

*Researchand Development*

 

TheCompany has made no material expenditures for research and development duringthe last three years.

 

*Employeesand Labor Relations*

 

TheCompany employs approximately 1,865 persons, 1,672 hourly and 193 salaried,with approximately 34% of the hourly covered by a collective bargainingagreement.  The Company believes itsrelationship with the bargaining groups and other employees is good.

 

*SeasonalVariations in Business*

 

Theseasonal demand for the Company’s products is highest during the late spring andsummer months and is normally lowest during the winter months.

 

1

----

Table of Contents

 

*MajorCustomers*

 

Salesto the Company’s largest customer represent 16%, 12%, and 12%, of net salesduring fiscal 2009, 2008, and 2007, respectively.

 

*MajorSuppliers*

 

Purchasesby the Company from its largest supplier represent 14%, 12%, and 7%, of cost ofsales during fiscal 2009, 2008, and 2007, respectively.

 

*Backlog*

 

TheCompany had no material backlog of orders existing as of March 28, 2009.

 

*Competition*

 

TheCompany is a leading regional integrated poultry processor.  The Company’s products compete in themarketplace with comparable products of approximately ten national and regionalproducers in the areas of quality, service, and price.  The Company believes its small bird focus,flexibility, and accessibility are positive factors enhancing the Company’scompetitive position.

 

*Regulation*

 

TheCompany’s facilities and operations are subject to regulation by variousfederal and state agencies, including, but not limited to, the Federal Food andDrug Administration (“FDA”), the United States Department of Agriculture (“USDA”),the Environmental Protection Agency (“EPA”), the Occupational Safety and HealthAdministration (“OSHA”), and the corresponding state agencies.  The Company’s processing plants are subjectto continuous on-site inspection by the USDA, and the FDA inspects theproduction of the Company’s feed mill. Management believes the Company is in substantial compliance withapplicable laws and regulations relating to the operation of its facilities.

 

*Availability of Securities and Exchange Commission filings on CorporateWebsite*

 

We maintain aninternet website for investors at www.cagles.net.  On this website, we make available, free ofcharge, annual reports on Form 10-K, quarterly reports on Form 10-Q,current reports on Form 8-K, and all amendments to any of those reports,as soon as reasonably practicable after we electronically file such reportswith, or furnish to, the Securities and Exchange Commission.

 

**Item 1A: ****Risk Factors**

 

**Risk Factors**:  Industry cyclicality can affect our earnings,especially due to fluctuations in commodity prices of feed ingredients andchicken.  Profitability in the chickenindustry is materially affected by the commodity prices of chicken and feedingredients, which are determined by supply and demand factors, which result incyclical earnings fluctuations.  Theproduction of feed ingredients is positively or negatively affected primarilyby weather patterns throughout the world, the global level of supplyinventories and demand for feed ingredients, and the agricultural policies ofthe United States and foreign governments. In particular, weather patterns often change agricultural conditions inan unpredictable manner.  A sudden andsignificant change in weather patterns could affect supplies of feedingredients, as well as both the industry’s and our ability to obtain feedingredients, grow chickens and deliver products.  High feed ingredient prices have had amaterial adverse effect on our operating results in the past.  We periodically seek, to the extentavailable, to enter into advance purchase commitments for the purchase of feedingredients and enter into futures contracts, in an effort to manage our feedingredient costs.  The use of suchinstruments may not be successful.

 

**Feed Ingredients**: Feedingredient costs increased 23.5% for fiscal 2009 reflected as a $20.3 millionincrease of the $24.7 million total increase in cost of sales as compared tothe previous year.  The Company’s cost toacquire feed ingredients may continue to increase.  However, in the long term, the protein sectorof the food industry will be forced to pass the cost of our raw materials tothe final consumer increasing our sales price per pound and related revenue, aswell as our operating margins.  We expectthe increased cost of ingredients, principally corn, to continue and willutilize substitute ingredients as available and as determined through feedoptimization programs to mitigate the impact of the increased corn cost.

 

TheCompany may choose to utilize derivatives as offered on the Chicago Board ofTrade for the purpose of protecting the feed cost for fixed price salescommitments negotiated with our customers. The Company’s two primary feed ingredients are corn and soybeanmeal.  A $0.10 per bushel price change incorn or a $10 per ton price change in soybean meal impacts our cost of sales$0.75 million dollars per year.

 

**Leverage**:  Our indebtedness could adversely affect ourfinancial condition.  We presently have,and expect to continue to have, an amount of indebtedness.  Our indebtedness could have importantconsequences to stockholders.  Forexample, it could: increase our vulnerability to general adverse economicconditions; require us to dedicate a substantial portion of our cash flow fromoperations to payments on our indebtedness, thereby reducing the availability ofour cash flow to fund working capital, capital expenditures and for othergeneral corporate purposes; limit our flexibility in planning for, or reactingto, changes in our business and the industry in which we operate; place us at acompetitive disadvantage compared to our competitors that have less debt; andlimit, along with the financial and other restrictive covenants in ourindebtedness, our ability to borrow additional funds, and failure to 

 

2

----

Table of Contents

 

complywith those covenants could result in an event of default or require redemptionof indebtedness.  Any of these eventscould have a material adverse effect on us.  Our ability to make payments on and torefinance our indebtedness will depend on our ability to generate cash in thefuture, which is dependent on various factors. These factors include the commodity prices of feed ingredients andchicken and general economic, financial, competition, legislative, regulatory,and other factors that are beyond our control.

 

**Additional Borrowings Available**:  Despite our indebtedness, we are notprohibited from incurring additional indebtedness in the future.

 

**Interest Rates**: We currently have a term note payablewith no exposure to interest rate fluctuations, as our existing indebtednesscarries a fixed interest rate.  We have arevolving credit facility which carries a variable interest rate equal to the90-day LIBOR rate published by the Wall Street Journal, plus 3.5%.  Reference our 8-K filed on January 29,2009.

 

The Company had variableinterest rate exposure on the revolving credit facility at March 28,2009.  The Company’s theoretical interestrate exposure on variable rate borrowings at March 28, 2009, would be,with a one percentage point increase in average interest rates on the Company’sborrowings would increase future interest expense by $14.4 thousand per monthand a two percentage point increase would increase future interest expense by$28.8 thousand per month.  The Companydetermined these amounts based on $17.3 million of variable rate borrowings at March 28,2009, multiplied by 1.0% and 2.0%, respectively, and divided by twelve.  The Company is currently not using anyinterest rate collars, hedges, or other derivative financial instruments tomanage or reduce interest rate risk.  Asa result, any increase in interest rates on the Company’s variable rateborrowings would increase interest expense and reduce net income.

 

**Contamination of Products**:  If our products become contaminated, we maybe subject to product liability claims and product recalls.

 

**Livestock and Poultry Disease**:  Outbreaks of livestock diseases in generaland poultry disease in particular, which are beyond our control, cansignificantly restrict our ability to conduct our operations.  We take all reasonable precautions to ensurethat our flocks are healthy and that our processing plants and other facilitiesoperate in a sanitary and environmentally sound manner.  However, an outbreak of disease could resultin governmental restrictions on the import and export of our fresh chicken, toor from our suppliers, facilities or customers, or require us to destroy one ormore of our flocks.  This could result inthe cancellation of orders by our customers and create negative publicity thatmay have a material adverse effect on our ability to market our productssuccessfully and on our business, reputation, and prospects.

 

**Insurance**:  We are exposed to risks relating to productliability, product recall, property damage and injuries to persons for whichinsurance coverage is expensive, limited and potentially inadequate.

 

**Significant Competition**:  Competition in the chicken industry withother vertically integrated poultry companies could adversely affect ourbusiness.  The Company produces a smallerbird which differentiates it from the majority of its competitors.

 

**Government Regulation**:  Regulation, present and future, is a constantfactor affecting our business.  Thechicken industry is subject to federal, state, and local governmentalregulation, including health and environmental areas.  We anticipate increased regulation by variousagencies concerning food safety, the use of medication in feed formulations andthe disposal of poultry by-products and wastewater discharges.  Unknown matters, new laws and regulations, orstricter interpretations of existing laws or regulations may materially affectour business or operations in the future.

 

**Deteriorationof Economic Conditions**:  Our business may be adversely affected bychanges in national or global economic conditions, including inflation,interest rates, availability of capital markets, consumer spending rates,energy availability and costs (including fuel surcharges) and the effects ofgovernmental initiatives to manage economic conditions.  Any such changes could adversely affect thedemand for our poultry products, or the cost and availability of our needed rawmaterials and packaging materials, thereby negatively affecting our financialresults.

 

The recentdisruptions in credit and other financial markets and deterioration of nationaland global economic conditions, could, among other things:

 
| · | make it more difficult  or costly for us to obtain financing for our operations or investments or to  refinance our debt in the future;                                                                                          |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | cause our lenders to  depart from prior credit industry practice and make more difficult or  expensive the granting of any technical or other waivers under our credit  agreements to the extent we may seek them in the future; |
| · | impair the financial  condition of some of our customers and suppliers thereby increasing customer  bad debts or non-performance by suppliers;                                                                                   |
| · | negatively impact demand for protein  products, which could result in a reduction of sales, operating income and  cash flows.                                                                                                    |

 

3

----

Table ofContents

 

**Changesin Consumer Preference**:  The foodindustry in general is subject to changing consumer trends, demands, andpreferences.  Trends within the foodindustry change often, and failure to identify and react to changes in thesetrends could lead to, among other things, reduced demand and price reductionsfor our products, and could have an adverse effect on our financial results.

 

**TheLoss of One or More of Our Largest Customers**:  Our business could suffer significant set backs insales and operating income if our customers’ plans and/or markets should changesignificantly, or if we lost one or more of our largest customers.   Many of our agreements with our customersare generally short-term, primarily due to the nature of our products, industrypractice, and the fluctuation in demand and price for our products.

 

**Membersof the Cagle’s Family can Exercise Significant Control**:  Members of the Cagle’s family beneficiallyown, in the aggregate, 64.24% of our outstanding common stock, giving themcontrol of approximately 64% of the total voting power of our outstandingvoting stock.  In addition, three membersof the Cagle’s family serve on our Board of Directors.  As a result, members of the Cagle’s familyhave the ability to exert substantial influence or actual control over ourmanagement and affairs and over substantially all matters requiring action byour stockholders, including amendments to our certificate of incorporation andby-laws, the election and removal of directors, any proposed merger,consolidation or sale of all or substantially all of our assets, and othercorporate transactions.  Thisconcentration of ownership may also delay or prevent a change in controlotherwise favored by our other stockholders and could depress our stock price.

 

CautionaryStatements Relevant To Forward-Looking Information For The Purpose Of “SafeHarbor” Provisions Of The Private Securities Litigation Reform Act Of 1995

 

TheCompany and its representatives may from time to time make written or oralforward-looking statements, including forward-looking statements made in thisreport, with respect to their current views and estimates of future economiccircumstances, industry conditions, Company performance and financialresults.  These forward-lookingstatements are subject to a number of factors and uncertainties which couldcause the Company’s actual results and experiences to differ materially fromthe anticipated results and expectations, expressed in such forward-lookingstatements.  The Company wishes tocaution 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 Companyare the following: (1) fluctuations in the cost and availability of rawmaterials, such as feed grain costs; (2) changes in the availability andrelative costs of labor and contract growers; (3) operating efficienciesof facilities; (4) market conditions for finished products, including thesupply and pricing of alternative proteins; (5) effectiveness of marketingprograms and advertising; (6) risks associated with leverage, includingcost increases due to rising interest rates; (7) risks associated witheffectively evaluating derivatives and hedging activities; (8) changes inregulations and laws, including changes in accounting standards, environmentallaws and occupational, health and safety laws; (9) issues related to foodsafety, including costs resulting from product recalls, regulatory compliance,and any related claims or litigation; (10) adverse results from on-goinglitigation; (11) access to foreign markets together with foreign economicconditions, including currency fluctuations and import/export restrictions;(12) the effect of, or changes in, general economic conditions; and (13)financial risk management.  We undertake noobligation to revise or update any forward-looking statements for any reason.

 

**Item 1B:**  **Unresolved Staff Comments**

 

Not applicable.

 

**Item 2:  Properties**

 

**Productionand Facilities**

 

*Breedingand Hatching*

 

TheCompany supplies its broiler chicks by producing hatching eggs from breederflocks owned by the Company.  Thesebreeder flocks are maintained on 41 contract grower farms.  In addition, the replacement breeder pulletsare maintained on 16 contract grower farms where the breeders are reared fromone day old to approximately 21 weeks old and then moved to the breeder farmwhere they begin to produce eggs at about 25 weeks of age.  These farms are located in north Georgia andTennessee.

 

TheCompany owns a hatchery located in Dalton, Georgia, at which eggs are incubatedand hatched.  This is a continuousprocess and requires 21 days to complete. After the chicks are removed from the incubator, they are vaccinatedagainst disease and moved by an environmentally controlled vehicle, to theCompany’s grow-out farms.  The hatcheryhas an aggregate capacity of 2,921,760 eggs per week.

 

*Grow-Out*

 

TheCompany places its broiler chicks on approximately 145 contract grower farms.

 

4

----

Table of Contents

 

Theindependent contract growers provide the housing, equipment, utilities, andlabor to grow the baby chicks to market age, which varies from five to sixweeks, depending on the market for which they are intended.  The Company supplies the baby chicks, thefeed, and all veterinary and technical services.  Title to the birds remains with the Companyat all times.  The contract growers arepaid on live weight and are guaranteed a minimum rate with various incentivesbased upon a grower’s performance as compared to other growers whose birds aremarketed during the same week.  Thesecontract farms are located in Georgia and Alabama.

 

*FeedMill*

 

TheCompany owns a feed mill in Rockmart, Georgia, which has production capacity ofover 15,000 tons per week which can be increased to 20,000 tons per week withadditional equipment.

 

*Processing*

 

Asthe broilers reach the desired processing weight, they are removed from thehouses and transported by Company trucks to a processing plant.  The processing plants are located in PineMountain Valley, Georgia; and Collinsville, Alabama.  The Collinsville plant can process up to21,000 birds per hour.  The Pine Mountainplant has the capacity to process 10,800 birds per hour.

 

*FurtherProcessing and Deboning*

 

TheCompany has a stated goal of marketing the majority of its product asvalue-added product consisting of marinated rotisserie deli, fast-food cuts,boneless portioned breast, marinated and breaded parts, individual quick frozenparts, and other convenience-type products. Further processing is conducted at the Collinsville, Alabama, and PineMountain Valley, Georgia, plants.

 

*FreezerStorage*

 

TheCompany’s facilities located in Atlanta, Georgia; Collinsville, Alabama; andPine Mountain Valley, Georgia; have freezer storage facilities with aggregatecapacity of approximately 14,000,000 pounds of frozen product.  The Company utilizes outside storage servicesas needed to supplement its own freezer capacity.

 

*LocalDistribution*

 

Asan extension of the Company’s sales division, local distribution is operatedfrom warehouse facilities in Atlanta, Georgia, and Collinsville, Alabama, andare designed to provide storage and delivery service for those customers.

 

*ExecutiveOffices*

 

TheCompany’s executive offices are located in a company owned facility at 1385Collier Road NW, Atlanta, Georgia.

 

Allof the properties described above are in good condition and are adequate fortheir stated uses.

 

**Item 3:  LegalProceedings**

 

The Company is routinelyinvolved in various lawsuits and legal matters on an ongoing basis as a resultof day-to-day operations; however, the Company does not believe the ultimateresolution of these matters will have a material adverse effect on the Companyor its business.

 

**Item 4:  Submission ofMatters to a Vote of Security Holders**

 

Ashareholder proposal was submitted regarding greenhouse gas emissions duringthe fourth quarter of fiscal 2009.  Theinformation required by this item is included in the Company’s Proxy Statementfor the Annual Meeting of Stockholders to be held July 17, 2009 and isincorporated herein by reference.

 

**Item 4A: ****Executive Officers of the Registrant**

 

Theinformation required by this item is included in the Company’s Proxy Statementfor the Annual Meeting of Stockholders to be held July 17, 2009 and isincorporated herein by reference.

 

5

----

Table of Contents

** **

**PART II**

 

**Item 5: ****Market for Registrant’s Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities**

 

TheCompany’s common stock is listed and principally traded on the American StockExchange, ticker symbol CGLA.  As of March 28,2009, there were 116 stockholders of record of the Company’s Class Acommon stock.  Under current loanagreements, issuance of dividends must be consented to by debt holders.

 

Quarterlydividend data and market highs and lows for the past two years were:

** **
| ** **   | ** ** | **Fiscal 2009** | ** ** | **Fiscal 2008** | ** ** |
|--------------|------------|-----------------|------------|-----------------|------------|
| ** **   | ** ** | **Dividend**    | ** ** | **High**        | ** ** | **Low** | ** ** | **Dividend** | ** ** | **High** | ** ** | **Low** | ** ** |
| **Quarter:** | ** ** | ** **      | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **First**    | ** ** | **$**           | **—** | ** **      | **$**      | **6.25** | ** ** | **$** | **5.25** | ** ** | **$** | **—** | ** ** | **$** | **8.85** | ** ** | **$** | **7.30** | ** ** |
| **Second**   | ** ** | **—**      | ** ** | **5.71**        | ** ** | **3.85** | ** ** | **—** | ** ** | **10.40** | ** ** | **7.80** | ** ** |
| **Third**    | ** ** | **—**      | ** ** | **4.35**        | ** ** | **1.55** | ** ** | **—** | ** ** | **12.35** | ** ** | **7.17** | ** ** |
| **Fourth**   | ** ** | **—**      | ** ** | **2.36**        | ** ** | **1.32** | ** ** | **—** | ** ** | **9.72** | ** ** | **5.50** | ** ** |
|              |            |                 |            |                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Issuer Purchases of Equity Securities**

 

The table below provides information regarding ourpurchases of common stock during the periods indicated.

 
| ** **                                          | ** ** | **Total Number of** | ** ** | **Average Price**       | ** ** | **Approximate Dollar Value of**                    | ** ** |
|-----------------------------------------------------|------------|-------------------------------|------------|------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                          | ** ** | **Shares Purchased**     | ** ** | **Paid per Share** | ** ** | **Shares that May Yet Be Purchased (1)** | ** ** |
| **March 30, 2008 —  March 28, 2009** | ** ** | **26,843**                    | ** ** | **$**                        | **2.13**   | ** **                                                        | **$**      | **4,841,638** | ** ** |
| **April 1, 2007 —  March 29, 2008**  | ** ** | **78,800**                    | ** ** | **7.74**                     | ** ** | **4,898,693**                                                     | ** ** |
| **April 2,  2006 — March 31, 2007**  | ** ** | **55,250**                    | ** ** | **7.92**                     | ** ** | **5,508,320**                                                     | ** ** |
|                                                     |            |                               |            |                              |            |                                                                   |            |  |  |

 

----

**(1)****        ****In 1990, the Board ofDirectors authorized the purchase of up to $2,500,000 which was subsequentlyincreased to $15,000,000 in February 2000.**

 

6

----

Table of Contents

 

**Item 6:  SelectedConsolidated Financial Data**

** **

Five Year SelectedFinancial Data

(In Thousands, Except PerShare Data)

 
| ** **                                    | ** ** | **52 Weeks  Ended**      | ** ** | **52 Weeks  Ended**      | ** ** | **52 Weeks  Ended**      | ** ** | **52 Weeks  Ended**     | ** ** | **52 Weeks  Ended**     | ** ** |
|-----------------------------------------------|------------|--------------------------|------------|--------------------------|------------|--------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                    | ** ** | **March 28,  2009** | ** ** | **March 29,  2008** | ** ** | **March 31,  2007** | ** ** | **April 1,  2006** | ** ** | **April 2,  2005** | ** ** |
| **OPERATING RESULTS:**                        |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| Net  sales                                    |       | $                        | 292,585    |                     | $          | 283,649                  |       | $                       | 233,936    |                    | $          | 237,266 |   | $ | 246,343 |   |
| Costs  and expenses                           |       | 308,262                  |       | 283,514                  |       | 246,548                  |       | 239,989                 |       | 229,795                 |       |
| Operating  (loss) income                      |       | (15,677                  | )          | 135                      |       | (12,612                  | )          | (2,723                  | )          | 16,548                  |       |
|                                          |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| Interest  expense                             |       | (2,163                   | )          | (1,483                   | )          | (2,054                   | )          | (2,407                  | )          | (2,649                  | )          |
| Other  income (expense), net                  |       | (40                      | )          | 190                      |       | 19,998                   |       | 4,266                   |       | 4,107                   |       |
|                                          |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| (Loss)  income before income taxes            |       | (17,880                  | )          | (1,158                   | )          | 5,332                    |       | (864                    | )          | 18,006                  |       |
|                                          |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| (Benefit)  expense for income taxes           |       | (6,386                   | )          | (385                     | )          | 4,773                    |       | (290                    | )          | 6,467                   |       |
| Net  (loss) income                            |       | $                        | (11,494    | )                        | $          | (773                     | )          | $                       | 559        |                    | $          | (574 | ) | $ | 11,539 |   |
|                                          |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| **FINANCIAL POSITION:**                       |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| Working  capital                              |       | $                        | 12,679     |                     | $          | 20,197                   |       | $                       | 18,941     |                    | $          | 9,416 |   | $ | 11,210 |   |
| Total  assets                                 |       | 91,152                   |       | 91,974                   |       | 84,019                   |       | 95,204                  |       | 94,720                  |       |
| Long-term  debt and capital lease obligations |       | 29,049                   |       | 20,924                   |       | 16,467                   |       | 25,869                  |       | 26,534                  |       |
| Stockholders’  equity                    |       | 31,984                   |       | 44,827                   |       | 45,354                   |       | 45,232                  |       | 45,806                  |       |
|                                          |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| **PERFORMANCE PER COMMON SHARE:**             |       |                     |       |                     |       |                     |       |
| Net  (loss) income:                           |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| Basic                                         |       | $                        | (2.48      | )                        | $          | (0.17                    | )          | $                       | 0.12       |                    | $          | (0.12 | ) | $ | 2.43 |   |
| Diluted                                       |       | $                        | (2.48      | )                        | $          | (0.17                    | )          | $                       | 0.12       |                    | $          | (0.12 | ) | $ | 2.43 |   |
| Dividends                                     |       | —                   |       | —                   |       | —                   |       | —                  |       | —                  |       |
| Book  value at the end of the year            |       | 6.90                     |       | 9.61                     |       | 9.60                     |       | 9.54                    |       | 9.66                    |       |
| Average  number of common shares outstanding: |       |                     |       |                     |       |                     |       |                    |       |                    |       |
| Basic                                         |       | 4,638                    |       | 4,665                    |       | 4,724                    |       | 4,743                   |       | 4,743                   |       |
| Diluted                                       |       | 4,638                    |       | 4,665                    |       | 4,724                    |       | 4,743                   |       | 4,743                   |       |

 

The accompanyingnotes are an integral part of the selected consolidated financial data.

 

**Notesto Selected Consolidated Financial Data:**

 

*FiscalYear 2009*

 

Revenuesincreased by 3.2% as compared to 2008. This increase can be attributed to a 1.9% increase in sales tonnage andan increase in our average selling price of 2.4 cents per pound as compared to2008.

 

Debtincreased by $8.3 million in 2009, as compared to 2008.  This was primarily due to borrowings in thesecond and third quarters, caused by historically high feed and energy costs.  Interest expense was increased by 45.9% ascompared to 2008, the result of additional borrowings for the first threequarters of 2009.

 

Costof sales increased 9.2% as compared to 2008, and can be attributed to increasedgrain and energy costs.

 

7

----

Table of Contents

 

Selling,general and administrative costs were stable at $15.0 million from 2008 to 2009with general and administrative down 2.6% and selling up a like amount.

 

*FiscalYear 2008*

 

Revenuesincreased by 21.3% as compared to 2007. This increase can be attributed to two factors.  A 3.2% increase in production tonnage ascompared to 2007 and an increase in our average selling price of 7.5 cents perpound as compared to 2007.

 

Debtincreased by $4.6 million in 2008, as compared to 2007.  This was due to borrowings in the fourthquarter, caused by increases in grain and energy costs.  Interest expense was reduced by 27.8% ascompared to 2007, the result of reduced borrowings for the first three quartersof 2008.

 

Costof sales increased 15.6% as compared to 2007, and can be attributed toincreased grain and energy costs.

 

Selling,general and administrative costs were $15.0 million for the year as compared to$14.3 million in fiscal 2007 representing an increase of 5.0%.  The increase is the result of increasedenergy costs, higher professional fees incurred in complying with Section 404(a) ofthe Sarbanes-Oxley Act of 2002, and outside storage costs experienced as one ofour freezers was being reworked.

 

*FiscalYear 2007*

 

Debtwas reduced by $10.9 million in 2007. Interest expense was reduced by 14.7% as compared to 2006, the result ofreduced borrowings.

 

Revenuesdeclined by 1.4% as compared to 2006. This decrease can be attributed to two factors.  A 3.9% decrease in production tonnage ascompared to 2006 and an increase in our average selling price of 2.6 cents perpound as compared to 2006.

 

Costof sales increased 2.2% as compared to 2006, due to a $2.13 million assetvaluation adjustment to an inactive facility (noted in the Company’s secondquarter 10-Q).  When adjusted for theinactive facility charge, cost of sales increased 1.3% versus the same periodlast year and can be attributed to increased grain costs.

 

Selling,general and administrative costs were $14.3 million for the year as compared to$12.8 million in fiscal 2006 representing an increase of 11.7%.  Of the increase experienced in fiscal 2007,bad debt expense was responsible for 4.1%, salaries and benefits for 3.3%, anda decrease of fees earned thorough outside accounting services had an impact of3.2%.

 

TheCompany’s share of earnings in the unconsolidated affiliate decreased by66.7%.  This is the result of the sale ofthe affiliate on August 1, 2006. Other income reflects a gain of $18.3 million on the sale.

 

*FiscalYear 2006*

 

Revenuesdeclined by 3.7% as compared to 2005. This decrease can be attributed to two factors.  A decrease in our average selling price of18.7% for the twelve months of 2006; quoted market prices declinedapproximately 20% for the same period; and a 4% increase in production tonnagefor 2006 compared to 2005; this increase was impacted by a 3.6% decrease inproduction tonnage for the fourth quarter of 2006.

 

Debtwas reduced by $0.5 million in 2006. Interest expense was reduced in 2006 by 9.1% as compared to the sameperiod a year ago.

 

Sellingand delivery expenses increased by 13%. This increase reflects increases in fuel costs, utilities and commissionexpenses.

 

Generaland administrative expenses decreased by 6.54%. This decrease reflects reductions in payroll costs, legal fees, rentalequipment, and professional expenses.

 

TheCompany’s share of earnings of unconsolidated affiliates decreased by 4% due tothe affiliates’ decreases in volumes processed.

 

*FiscalYear 2005*

 

Revenuesdeclined by 19% as compared to 2004, but increased 29% when adjusting 2004 forthe sale of the Perry complex.  Thisincrease can be attributed to an increase in tonnage at our remainingfacilities and higher market prices in the first half of 2005.

 

Debtwas reduced by $7.5 million in 2005, this with the reduction of $48 million indebt in the fourth quarter of 2004, reduced interest expense by $4.4 millionfor the year.

 

8

----

Table of Contents

 

Sellingand delivery expenses decreased by 20%, or 6% when adjusting 2004 for the saleof the Perry complex.  This decreasereflects reductions in payroll costs, rental expenses, outside storage cost andcommission expenses, which overshadowed increases in freight and fuel costs.

 

Generaland administrative expenses decreased by 31%, or 23% when adjusting 2004 forthe sale of the Perry complex.  Thisdecrease reflects reductions in payroll costs, legal fees, and professionalexpenses.

 

TheCompany’s share of earnings of unconsolidated affiliates increased by 22% dueto the affiliates’ increases in volumes processed.

 

**Item 7:  Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

*Overview*

 

Thefollowing Management’s Discussion and Analysis of Financial Condition andResults of Operations (MD&A) is intended to help the reader understandCagle’s Inc., our operations and our present business environment.  MD&A is provided as a supplement to, andshould be read in conjunction with, our consolidated financial statements andthe accompanying notes (“Notes”).

 

*General*

 

Weare in a highly stratified industry with the top five producers accounting for60 percent of poultry production in this country and the next fifteenaccounting for 33 percent.  Our companycurrently produces ready to cook product of 7.15 million pounds per week,placing it as the twenty-first integrated broiler company ranked by ready tocook pounds.  Cagle’s produces a productwhich differentiates itself from the average broiler company; as industry liveweights approach 6.0 pounds per head, and our birds weigh approximately 3.9pounds per head.  While this differenceimpacts the fixed cost per unit of our operations, we believe it serves ourcompany by allowing us to compete for a value added customer profile namely thefast-food, institutional, and deli markets. We believe this is a market segment that we excel in and can provide ourcustomers with distinctive, quality product to fit their needs at marginsnecessary to offset the higher cost per unit brought about by the smaller liveweight.

 

Forthe fiscal year ending 2009, the Company reported a loss of ($11.5) million or($2.48) per diluted share compared to a loss of ($0.77) million or ($0.17) perdiluted share for fiscal 2008.

 

Netsales for fiscal 2009 were $292.6 million as compared to $283.6 for fiscal2008.  Poultry sales pounds for the yearincreased 1.91% reflecting an increase in further processed, breaded productscoupled with an average price per pound increase of 6.2% when compared tofiscal 2008.  Head processed for thecompany were 2.9% less in 2009 than 2008 reflecting cut backs in place duringour third and fourth quarters of 2009. Fiscal 2009 market prices compared to fiscal 2008 for boneless breast,leg quarters, wings, and boneless thighs were -13.6%, -3.4%, -9.2%, +3.0%respectively.  As a company we continueto focus on niche markets where we can react to our customer needs in a quickand efficient manner.  Given our birdsize and production facilities we continue to exploit our expertise in thedeli/fast food arena.

 

Costof production for fiscal 2009 was $293.2 million compared to $268.5 million infiscal 2008 for an increase of 9.2%. Feed cost, which account for approximately36% of our total cost, increased 23.5% for the year reflected as a $20.3increase in cost of sales. In general a $0.10 per bushel price change in cornor a $10 per ton price change in soybean meal impacts our cost of sales by$0.75 million dollars per year.  Ourworkforce is made up of 1,865 dedicated employees who are encouraged to freelyshare suggestions to improve all phases of our operations.

 

Selling,general and administrative costs were $15.0 million for both 2009 and 2008.

 

Interestexpense of $2.2 million increased by 45.9% as compared to 2008 the result ofadditional borrowings for the first three quarters of 2009.

 

Atthe end of our fiscal year, our stockholder’s equity was $32.0 million with anet working capital of $12.7 million. Total debt of $31.5 million reflected an increase of 36.0% or $8.3million this fiscal year.  As we beginfiscal 2010 demand for the cost effective protein offered by our products isimproving and our markets are reacting in a positive manner which we anticipatewill return our company to positive margin in the first quarter.  It is our expectation that capitalexpenditures will be funded by cash on hand and cash generated throughoperations.

 

*Year2009 compared to 2008*

 

TheCompany had available $7.35 million (unused) in established lines of credit asof March 28, 2009 and $3.30 million (unused) in availability as of March 29,2008.  Interest expense increased in 2009by $680 thousand, a 46% increase, as compared to the same period a year ago.

 

9

----

Table of Contents

 

Poultrypounds produced for 2009 were 2.9% less than 2008, pounds marketed increased by1.9% and sales revenue increased 3.2%.

 

Costof sales increased 9.2% as compared to 2008, primarily due to increased grainand energy costs.

 

Selling,general and administrative costs remained at $15.0 million when compared to2008.

 

*Year2008 compared to 2007*

 

TheCompany had available $3.3 million (unused) in established lines of credit asof March 29, 2008 and $10 million (unused) in availability as of March 31,2007.  Interest expense was reduced in2008 by $571 thousand, a 28% reduction, as compared to the same period a yearago.

 

Poultrypounds produced for 2008 were 3% greater than 2007, pounds marketed increasedby 5.9% and sales revenue increased 21%.

 

Costof sales increased 15.6% as compared to 2007 and, after adjusting 2007 for anasset valuation adjustment to an inactive facility, cost of sales increased16.8%.

 

Selling,general and administrative costs compared to 2007 increased by 5%.  This increase is the result of increasedenergy costs, higher professional fees incurred in complying with Section 404(a) ofthe Sarbanes-Oxley Act of 2002 and outside storage costs experienced as one ofour freezers was being reworked.

 

*Year2007 compared to 2006*

 

TheCompany had available $10 million (unused) in established lines of credit as ofMarch 31, 2007 and $10 million (unused) in availability as of April 1,2006.  Interest expense was reduced in2007 by $353 thousand, a 14.7% reduction, as compared to the same period a yearago.

 

Poultrysales for the year were basically unchanged correlated to a reduction in poundsmarketed of 3.9% and an increase in average market price of 4.1%.

 

Costof sales increased 2.2% as compared to 2006, due to a $2.13 million assetvaluation adjustment to an inactive facility (noted in the Company’s secondquarter 2007 10-Q).  When adjusted forthe inactive facility charge, cost of sales remained relatively flat with anincrease of 1.3% versus the same period last year.

 

Selling,general and administrative costs were $14.3 million for the year as compared to$12.8 million in fiscal 2006 representing an increase of 11.7%.  Of the increase experienced in fiscal 2007bad debt expense was responsible for 4.1%, salaries and benefits for 3.3% and adecrease of fees for professional services had an impact of 3.2%.

 

TheCompany’s share of earnings in the unconsolidated affiliate decreased by 66.7%(due to the sale of the affiliate on August 1, 2006).

 

Incometaxes were adjusted as a result of the sale of the unconsolidatedaffiliate.  This transaction changed theincome tax position of the Company.  As aresult of the loss of the continuing income from the subsidiary, certainrecoverable state tax assets which could expire before being realized wereadjusted.

 

**Financial Condition & Liquidity**

 

*Analysisof Cash Flows*

 

Weexpect that cash flow from operations and cash on hand should be sufficient tofund operations, to make all payments of principal and interest when due, andto fund capital expenditures for at least the next twelve months.

 

Wehad available $7.35 million (unused) in our long-term revolving line of creditas of March 28, 2009.  This creditagreement matures on March 31, 2011. The Company has received a temporary modification to the long-termrevolving line of credit whereby the tangible net worth requirement has beenlowered from $35 million to $30 million through January 2, 2010.

 

Forthe year ended March 28, 2009, the Company used cash in its operatingactivities of $7,544, due primarily to the operating loss during the year.  Cash used in investing activities was $89,with purchases of property, plant and equipment of $1,523 partially offset byproceeds from reduction of life insurance paid-up values.  $7,600 cash was provided by net financingactivities, with $8,270 from the net long-term debt increase.

 

10

----

Table of Contents

 

Forthe year ended March 29, 2008, the Company used cash in its operatingactivities of $2,092, due primarily to the increase in inventories, whichresulted from increases in grain costs. Cash was used in investing activities, in the amount of $3,485, topurchase property, plant and equipment. Cash was provided by financing activities by drawing on lines of creditin the amount of $3,357.

 

Forthe year ended March 31, 2007, the Company used cash in its operatingactivities of $12,150, due primarily to the operating loss during the year.  Cash was provided from investing activities,in the amount of $25,994, due primarily from the cash received from the sale ofan affiliate.  Cash flow used infinancing activities of $11,423, reflects the retirement of long-term debt.

 

**TabularDisclosure of Contractual Obligations**

 

Contractualobligations at March 28, 2009 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  |       | $          | 31,499     |                        | $          | 2,453 |   | $ | 29,046 |   | $ | — |   | $ | — |   |
|                         |       |       |       |                        |       |   |   |   |   |   |   |
| Capital  Lease Obligations   |       | 38         |       | 35                          |       | 3 |   | — |   | — |   |
|                         |       |       |       |                        |       |   |   |   |   |   |   |
| Operating  Lease Obligations |       | 4,778      |       | 1,464                       |       | 2,435 |   | 879 |   | — |   |
|                         |       |       |       |                        |       |   |   |   |   |   |   |
| Purchase  Obligations        |       | —     |       | —                      |       | — |   | — |   | — |   |
|                         |       |       |       |                        |       |   |   |   |   |   |   |
| Other  Long-Term Liabilities |       | —     |       | —                      |       | — |   | — |   | — |   |
|                         |       |       |       |                        |       |   |   |   |   |   |   |
| Total                        |       | $          | 36,315     |                        | $          | 3,952 |   | $ | 31,484 |   | $ | 879 |   | $ | — |   |

 

*CriticalAccounting Policies and Estimates*

 

Thepreparation of consolidated financial statements and related disclosures inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, and the disclosure ofcontingent assets and liabilities at the date of the consolidated financialstatements and revenues and expenses during the periods reported.  The following accounting policies involve “criticalaccounting estimates” because they are particularly dependent on estimates andassumptions made by management about matters that are highly uncertain at thetime the accounting estimates are made. In addition, while we have used our best estimates based on facts andcircumstances available to us at the time, different estimates reasonably couldhave been used in the current period, or changes in the accounting estimates weused are reasonably likely to occur from period to period which may have amaterial impact on the presentation of our financial condition and results ofoperations.  We review these estimatesand assumptions periodically and reflect the effects of revisions in the periodthat they are determined to be necessary. We believe the following critical accounting policies reflect our moresignificant judgments and estimates used in the preparation of our consolidatedfinancial statements.

 

*Revenue Recognition*

 

The Company recognizesrevenue upon product shipment and transfer of title and risk of loss to thecustomer.  Revenue is recorded net of anydiscounts, allowances or promotions. Estimates for any special pricing arrangements, promotions or othervolume-based incentives are recorded upon shipment of the product in accordancewith the terms of the promotion, allowance or pricing arrangements.  Shipping and handling costs are included incost of sales in the accompanying consolidated statements of operations.

 

*Allowancefor Doubtful Accounts*

 

Wemaintain allowances for doubtful accounts reflecting estimated losses resultingfrom the inability of our customers to make required payments.  The allowance for doubtful accounts is basedon management’s review of the overall condition of accounts receivable balancesand review of significant past due accounts. If the financial condition of our customers was to deteriorate,resulting in an impairment of their ability to make payments, additionalallowances may be required.  Due to thenature of the industry and the short-term nature of these accounts, there havenot been material revisions in these estimates of management.

 

*Inventories*

 

Livebird and hatching egg inventories are stated at cost and breeder hens arestated at cost, less accumulated amortization, consistent with industrystandards.  The costs associated withbreeder hens are accumulated up to the production stage and amortized over aforty (40) week period.  Finished poultryproducts, feed, and other inventories are stated at the lower of cost ormarket.  We 

 

11

----

Table of Contents

 

recordvaluations and adjustments for our inventories and for estimated obsolescenceat or equal to the difference between the cost of the inventories and theestimated market value based upon known conditions affecting the inventories’obsolescence, including significantly aged products, discontinued productlines, or damaged or obsolete products. We allocate meat costs between our various finished poultry productsbased on a by-product costing technique that reduces the cost of the whole birdby estimated yields and amounts to be recovered for certain by-product parts,which are carried in inventories at the estimated recovery amounts, with theremaining amount being reflected at cost or market, whichever is lower.  For inventory valuation purposes costsinclude live production costs (principally feed, chick cost, medications andother raw materials), labor and production overhead.  Not all broilers and breeders survive tomaturity or disposition; normal losses are not expensed directly because totalcosts of the project are assigned to the survivors.  The Company would record adjustments toreduce the values of processed poultry and feed inventories to fair marketvalues if market prices for poultry or feed grains moved substantially lower,this would increase our cost of sales. The Company has not experienced material revisions to its inventorycosts.

 

*Property,Plant and Equipment*

 

TheCompany records impairment charges on long-lived assets used in operations whenevents and circumstances indicate that the assets may be impaired and theundiscounted cash flows estimated to be generated by those assets are less thanthe carrying amount of those assets.  Theimpairment charge is determined based upon the amount the net book value of theassets exceeds their fair market value. In making these determinations, the Company utilizes certainassumptions, including, but not limited to: (i) future cash flowsestimates expected to be generated by these assets, which are based onadditional assumptions such as asset utilization, length of service the assetwill be used in the Company’s operations, and estimated salvage values, and (ii) estimatedfair market value of the assets.

 

*ContingentLiabilities*

 

TheCompany is subject to lawsuits, investigations and other claims related to wageand hour/labor, securities, environmental, product and other matters, and arerequired to assess the likelihood of any adverse judgments or outcomes to thesematters, as well as potential ranges of probable losses.  A determination of the amount of reservesrequired, if any, for these contingencies is made after considerable analysisof each individual issue.  These reservesmay change in the future due to changes in the Company’s assumptions, theeffectiveness of strategies, or other factors beyond the Company’s control.

 

*AccruedSelf-Insurance*

 

Insuranceexpense and liabilities for employee-related health care benefits and casualtyclaims is estimated using historical experience, insurance and actuarialprojections.  Stop-loss coverage ismaintained with third party insurers to limit the Company’s totalexposure.  The assumptions used to arriveat periodic expenses are reviewed regularly by management.  However, actual liabilities and expensescould differ from these estimates and could result in adjustments to be recognized.

 

*IncomeTaxes*

 

Weaccount for income taxes in accordance with Statement of Financial AccountingStandards (“SFAS”) No. 109, “Accounting for Income Taxes, “which requiresthat deferred tax assets and liabilities be recognized for the effect of temporarydifferences between the book and tax bases of recorded assets andliabilities.  SFAS No. 109 alsorequires that deferred tax assets be reduced by a valuation allowance if it ismore likely than not that some portion or all of the deferred tax asset willnot be realized.  We review therecoverability of any tax assets recorded on the balance sheet, primarilyoperating loss carry forwards, based on both historical and anticipatedearnings levels of operations and provide a valuation allowance when it is morelikely than not that amounts will not be recovered.

 

In June 2006,the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48,“Accounting for Uncertainty in Income Taxes — an interpretation of FASBStatement No. 109” (“FIN 48”), which clarifies the accounting foruncertainty in income tax positions.  TheCompany adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting forUncertainty in Income Taxes - an Interpretation of FASB Statement No. 109,”on April 1, 2007.  FIN 48 clarifiesthe accounting for income taxes by prescribing the minimum recognitionthreshold a tax provision is required to meet before being recognized in theconsolidated financial statements.  FIN48 also provides guidance on derecognition, measurement, classification,interest and penalties, disclosure and transition.  The Company had no significant unrecognizedtax benefits at the date of adoption or at March 28, 2009.  Accordingly, the Company does not have anyinterest or penalties related to uncertain tax positions.  However, if interest or penalties were to beincurred related to uncertain tax positions, such amounts would be recognizedin income tax expense.

 

The Company hasfederal and state net operating loss carryforwards of $24,436 and $21,656, respectively.  The Company also has federal and state taxcredit carryforwards of $10,731.  The netoperating loss and tax credit carryforwards are available to reduce incometaxes through 2028.  Realization of thesefuture tax benefits is dependent on the Company’s ability to generatesufficient taxable income within the carryforward period.  Due to the significant amount of income thatwould be needed to fully utilize the credits available, the Company hasrecorded a valuation allowance for a significant portion of the deferred taxasset associated with the tax credit carryforwards.  The Company expects to fully utilize thefederal and state net operating loss carryforwards and accordingly there is novaluation allowance associated with the net operating loss carryforwards.

 

12

----

**Table of Contents**

** **

***New and Recent Accounting Pronouncements***

** **

In September 2006,the FASB issued SFAS No. 157, “Fair Value Measurements.”  SFAS No. 157 provides guidance for usingfair value to measure assets and liabilities. This standard also responds to investors’ requests for expandedinformation about the extent to which companies measure assets and liabilitiesat fair value, the information used to measure fair value and the effect offair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit)assets or liabilities to be measured at fair value.  Beginning September 28, 2008, theCompany partially applied SFAS No. 157 as allowed by FASB Staff Position (“FSP”)SFAS No. 157-2, which delayed the effective date of SFAS No. 157 fornonfinancial assets and liabilities.  Asof September 28, 2008, the Company applied the provisions of SFAS No. 157to the financial instruments and the impact was not material.  Under FSP SFAS No. 157-2, the Companywill be required to apply SFAS No. 157 to the nonfinancial assets andliabilities at the beginning of fiscal 2010. The Company is currently reviewing the applicability of SFAS No. 157to the nonfinancial assets and liabilities, as well as the potential impact onthe consolidated financial statements.

 

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assetsand Financial Liabilities, including an amendment of SFAS No. 115.”  This statement provides companies with anoption to report selected financial assets and liabilities firm commitments,and nonfinancial warranty and insurance contracts at fair value on acontract-by-contract basis, with changes in fair value recognized in earningseach reporting period.  At September 28,2008, the Company did not elect the fair value option under SFAS No. 159and, therefore, there was no impact to the consolidated financial statements.

 

In December 2007,the FASB issued SFAS No. 141R, “Business Combinations.”  SFAS No. 141R establishes principles andrequirements for how an acquirer in a business combination: 1) recognizes andmeasures in its financial statements identifiable assets acquired, liabilitiesassumed, and any noncontrolling interest in the acquiree; 2) recognizes andmeasures goodwill acquired in a business combination or a gain from a bargainpurchase; and 3) determines what information to disclose to enable users of thefinancial statements to evaluate the nature and financial effects of a businesscombination.  SFAS No. 141R iseffective for business combinations for which the acquisition date is on orafter the beginning of the first annual reporting period beginning on or after December 15,2008; therefore, the Company expects to adopt SFAS No. 141R for anybusiness combinations entered into beginning in fiscal 2010.

 

In December 2007,the FASB issued SFAS No. 160, “Noncontrolling Interests in ConsolidatedFinancial Statements” — an amendment of Accounting Research Bulletin (“ARB”) No. 51.  This statement amends ARB No. 51 toestablish accounting and reporting standards for the noncontrolling interest ina subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a noncontrolling interestin a subsidiary is an ownership interest in the consolidated entity that shouldbe reported as equity in the consolidated financial statements.  Before this statement was issued, limitedguidance existed for reporting noncontrolling interests.  As a result, considerable diversity inpractice existed.  So-called minorityinterests were reported in the consolidated statement of financial position asliabilities or in the mezzanine section between liabilities and equity.  This statement improves comparability byeliminating that diversity.  Thisstatement is effective for fiscal years, and interim periods within thosefiscal years, beginning on or after December 15, 2008 (that is, January 1,2009, for entities with calendar year ends). Earlier adoption is prohibited. The Company’s management does not anticipate this pronouncement willhave a significant impact on the consolidated financial statements.

 

In March 2008,the FASB issued SFAS No. 161, “Disclosures about Derivative Instrumentsand Hedging Activities” — an amendment of SFAS No. 133, “Accounting forDerivative Instruments and Hedging Activities.” SFAS No. 161 is intended to improve financial reportingtransparency regarding derivative instruments and hedging activities byproviding investors with a better understanding of their effects on financialposition, financial performance and cash flows. SFAS No. 161 applies to all entities and is effective forconsolidated financial statements issued for fiscal years and interim periodsbeginning after November 15, 2008 with early adoption encouraged.  The Company’s management does not anticipatethis pronouncement will have a significant impact on the consolidated financialstatements.

 

In April 2008, the FASB issued FSP SFAS No. 142-3, “Determinationof the Useful Life of Intangible Assets.” FSP SFAS No. 142-3 requires companies estimating the useful life ofa recognized intangible asset to consider their historical experience inrenewing or extending similar arrangements or, in the absence of historicalexperience, to consider assumptions that market participants would use aboutrenewal or extension as adjusted for SFAS No. 142, “Goodwill and OtherIntangible Assets,” entity-specific factors. FSP SFAS No. 142-3 is effective for fiscal years beginning after December 15,2008 (fiscal 2010 for the Company).  TheCompany’s management does not anticipate this pronouncement will have asignificant impact on the consolidated financial statements.

 

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy ofGenerally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles andthe framework for selecting the principles used in the preparation of financialstatements of nongovernmental entities that are presented in conformity withgenerally accepted accounting principles (the “GAAP hierarchy”).  SFAS No. 162 will become effective 60days following the Securities and Exchange Commission’s approval of the PublicCompany Accounting Oversight Board amendments to AU Section 411, TheMeaning of “Present Fairly in Conformity With 

 

13

----

Table of Contents

 

Generally Accepted Accounting Principles.”  The Company does not expect the adoption ofSFAS No. 162 to have a material effect on its results of operations andfinancial position.

 

In April 2009,the FASB issued FSP SFAS No. 107-1 and Accounting Principles Board (“APB”)No. 28-1, “Interim Disclosures About Fair Value of Financial Instruments,”(FSP SFAS No. 107-1).  FSP SFAS No. 107-1amends SFAS No. 107, “Disclosures about Fair Values of FinancialInstruments,” and APB Opinion No. 28, “Interim Financial Reporting,” to requiredisclosures about fair value of financial instruments in interim financialstatements.  FSP SFAS No. 107-1 iseffective for interim periods ending after June 15, 2009, with earlyadoption permitted for periods ending after March 15, 2009.  The Company’smanagement does not anticipate this pronouncement will have a significantimpact on the consolidated financial statements.

 

**Item 7A:  Quantitativeand Qualitative Disclosures about Market Risk**

 

*RiskFactors*

 

Industrycyclicality can affect our earnings, especially due to fluctuations in thecommodity prices of feed ingredients and chicken.

 

Profitabilityin the chicken industry is materially affected by the commodity prices ofchicken 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 affectedprimarily by weather patterns throughout the world, the global level of supplyinventories and demand for feed ingredients, and the agricultural policies ofthe United States and foreign governments. In particular, weather patterns often change agricultural conditions inan unpredictable manner.  A sudden andsignificant change in weather patterns could affect supplies of feed ingredients,as well as both the industry’s and our ability to obtain feed ingredients, growchickens, and deliver products.  Highfeed ingredient prices have had a material adverse effect on our operatingresults in the past. We periodically seek, to the extent available, to enterinto advance purchase commitments for the purchase of feed ingredients in aneffort to manage our feed ingredient costs. The use of such instruments may not be successful.

 

*Leverage*

 

Ourindebtedness could adversely affect our financial condition.  We presently have, and expect to continue tohave, an amount of indebtedness.  Ourindebtedness could have important consequences to stockholders.  For example, it could: increase ourvulnerability to general adverse economic conditions; require us to dedicate asubstantial portion of our cash flow from operations to payments on ourindebtedness, thereby reducing the availability of our cash flow to fundworking capital, capital expenditures and for other general corporate purposes;limit our flexibility in planning for, or reacting to, changes in our businessand the industry in which we operate; place us at a competitive disadvantagecompared to our competitors that have less debt; limit, along with thefinancial and other restrictive covenants in our indebtedness, our ability toborrow additional funds, and failing to comply with those covenants couldresult in an event of default or require redemption of indebtedness.  Either of these events could have a materialadverse effect on us.  Our ability tomake payments on and to refinance our indebtedness will depend on our abilityto generate cash in the future, which is dependent on various factors.  These factors include the commodity prices offeed ingredients and chicken and general economic, financial, competitive,legislative, regulatory, and other factors that are beyond our control.

 

*AdditionalBorrowings Available*

 

Despiteour indebtedness, we are not prohibited from incurring additional indebtednessin the future.

 

*Contaminationof Products*

 

Ifour products become contaminated, we may be subject to product liability claimsand product recalls.

 

*Livestockand Poultry Disease*

 

Outbreaksof livestock diseases, in general, and poultry disease, in particular, cansignificantly restrict our ability to conduct our operations.  We take all reasonable precautions to ensurethat our flocks are healthy and that our processing plants and other facilitiesoperate in a sanitary and environmentally sound manner.  However, events beyond our control, such asthe outbreak of disease, could significantly restrict our ability to conductour operations.  Furthermore, an outbreakof disease could result in governmental restrictions on the import and exportof our fresh chicken, to or from our suppliers, facilities, or customers, orrequire us to destroy one or more of our flocks.  This could result in the cancellation oforders by our customers and create adverse publicity that may have a materialadverse effect on our ability to market our products successfully and on ourbusiness, reputation, and prospects.

 

*Insurance*

 

Weare exposed to risks relating to product liability, product recall, propertydamage, and injuries to persons for which insurance coverage is expensive,limited, and potentially inadequate.

 

*SignificantCompetition*

 

Competitionin the chicken industry with other vertically integrated poultry companiescould adversely affect our business.

 

14

----

Table of Contents

 

*GovernmentRegulation*

 

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 environmentalareas.  We anticipate increasedregulation by various agencies concerning food safety, the use of medication infeed formulations, and the disposal of poultry by-products and wastewaterdischarges. Unknown matters, new laws and regulations, or stricterinterpretations of existing laws or regulations may materially affect ourbusiness or operations in the future.

 

*Forward-LookingStatements*

 

This Annual Report,including this Management’s Discussion and Analysis of Financial Condition andResults of Operations, contains forward-looking statements regarding futureevents and our future results that are subject to the safe harbors createdunder the Securities Act of 1933 and the Securities Exchange Act of 1934.  These statements are based on current expectations,estimates, forecasts, and projections about the industry in which we operateand the beliefs and assumptions of our management.  Words such as “expects,” “anticipates,” “targets,”“goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,”“may,” variations of such words, and similar expressions are intended toidentify such forward-looking statements. In addition, any statements that refer to projections of our futurefinancial performance, our anticipated growth and trends in our business, andother characterizations of future events or circumstances are forward-lookingstatements.  Readers are cautioned thatthese forward-looking statements are only predictions and are subject to risks,uncertainties, and assumptions that are difficult to predict.  Therefore, actual results may differmaterially and adversely from those expressed in any forward-lookingstatements.  Readers are referred to risksand uncertainties identified above, under “Risk Factors,” and elsewhere herein.  We undertake no obligation to revise orupdate any forward-looking statements for any reason.

 

15

----

Table of Contents

** **

**Item 8:  Consolidated Financial Statements andSupplementary Data**

 

# **Report of Independent Registered Public Accounting Firm**

#  

Boardof Directors

Cagle’s, Inc.and Subsidiary

Atlanta,Georgia

 

We have audited theaccompanying consolidated balance sheets of Cagle’s, Inc. (a Georgiacorporation) and Subsidiary as of March 28,2009 and March 29, 2008,and the related consolidated statements of operations, stockholders’ equity andcash flows for the years ended March 28,2009, March 29, 2008and March 31, 2007.  Our audits also included the financialstatement schedule listed in the Index at Item 15.  These consolidated financial statements arethe responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits.

 

We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board(United States).  Those standards requirethat we plan and perform the audits to obtain reasonable assurance aboutwhether the consolidated financial statements are free of materialmisstatement.  The Company has determinedthat it is not required to have, nor were we engaged to perform, an audit ofits internal control over financial reporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purposes of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the consolidated financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall consolidated financial statementpresentation.  We believe our auditsprovide a reasonable basis for our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Cagle’s, Inc.and Subsidiary as of March 28,2009 and March 29, 2008,and the consolidated results of their operations and their cash flows for theyears ended March 28, 2009,March 29, 2008 and March 31, 2007 in conformity withaccounting principles generally accepted in the United States of America.  Also, in our opinion, the relatedconsolidated financial statement schedule, when considered in relation to thebasic consolidated financial statements taken as a whole, presents fairly inall respects the information set forth therein.

 

/s/FROST, PLLC

 

LittleRock, Arkansas

June 5,2009

 

16

----

Table ofContents

 

**CAGLE’S,INC. AND SUBSIDIARY**

** **

**Consolidated Balance Sheets**

 

**March 28, 2009****and****March 29,2008**

 

**(In Thousands, Except Par Values)**

 
| ** **                                                                                                       | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Assets                                                                                                           |       |     |       |     |       |
|                                                                                                             |       |     |       |     |       |
| Current assets                                                                                                   |       |     |       |     |       |
| Cash and cash equivalents                                                                                        |       | $        | 1,246      |     | $          | 1,279 |   |
| Trade accounts receivable, less allowance for doubtful accounts of  $186 and $637 in 2009 and 2008, respectively |       | 14,170   |       | 14,015   |       |
| Inventories                                                                                                      |       | 27,181   |       | 30,728   |       |
| Other current assets                                                                                             |       | 201      |       | 398      |       |
| Total current assets                                                                                             |       | 42,798   |       | 46,420   |       |
|                                                                                                             |       |     |       |     |       |
| Property, plant and equipment, at cost                                                                           |       |     |       |     |       |
| Land                                                                                                             |       | 1,976    |       | 1,976    |       |
| Buildings and improvements                                                                                       |       | 59,686   |       | 59,199   |       |
| Machinery, furniture and equipment                                                                               |       | 41,034   |       | 40,682   |       |
| Vehicles                                                                                                         |       | 4,691    |       | 4,656    |       |
| Construction in progress                                                                                         |       | 645      |       | 1,310    |       |
|                                                                                                             |       | 108,032  |       | 107,823  |       |
| Less accumulated depreciation                                                                                    |       | 71,249   |       | 68,563   |       |
| Property, plant and equipment, net                                                                               |       | 36,783   |       | 39,260   |       |
|                                                                                                             |       |     |       |     |       |
| Other assets                                                                                                     |       |     |       |     |       |
| Deferred financing costs, net                                                                                    |       | 103      |       | 41       |       |
| Deferred income taxes                                                                                            |       | 9,775    |       | 3,134    |       |
| Other assets                                                                                                     |       | 1,693    |       | 3,119    |       |
| Total other assets                                                                                               |       | 11,571   |       | 6,294    |       |
|                                                                                                             |       |     |       |     |       |
| Total assets                                                                                                     |       | $        | 91,152     |     | $          | 91,974 |   |

 

17

----

Table ofContents

 
| ** **                                                                                                                                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Liabilities and  Stockholders’ Equity                                                                                                                 |       |     |       |     |       |
|                                                                                                                                                       |       |     |       |     |       |
| Current liabilities                                                                                                                                        |       |     |       |     |       |
| Current maturities of long-term debt                                                                                                                       |       | $        | 2,488      |     | $          | 2,269 |   |
| Accounts payable                                                                                                                                           |       | 19,989   |       | 16,025   |       |
| Accrued expenses                                                                                                                                           |       | 4,462    |       | 4,618    |       |
| Deferred income taxes                                                                                                                                      |       | 3,180    |       | 3,311    |       |
| Total current liabilities                                                                                                                                  |       | 30,119   |       | 26,223   |       |
|                                                                                                                                                       |       |     |       |     |       |
| Long-term debt, less current maturities                                                                                                                    |       | 29,049   |       | 20,924   |       |
|                                                                                                                                                       |       |     |       |     |       |
| Commitments and contingencies (Note 10)                                                                                                                    |       |     |       |     |       |
|                                                                                                                                                       |       |     |       |     |       |
| Stockholders’ equity                                                                                                                                  |       |     |       |     |       |
| Preferred stock, $1 par value; 1,000 shares authorized, none issued                                                                                        |       | —   |       | —   |       |
| Common stock, $1 par value; 9,000 shares authorized, 4,638 and 4,665  shares issued and 4,637 and 4,664 shares outstanding in 2009 and 2008,  respectively |       | 4,637    |       | 4,664    |       |
| Treasury stock, at cost                                                                                                                                    |       | (80      | )          | (80      | )          |
| Additional paid-in capital                                                                                                                                 |       | 3,627    |       | 3,657    |       |
| Retained earnings                                                                                                                                          |       | 24,662   |       | 36,156   |       |
| Accumulated other comprehensive income (loss)                                                                                                              |       | (862     | )          | 430      |       |
| Total stockholders’ equity                                                                                                                            |       | 31,984   |       | 44,827   |       |
|                                                                                                                                                       |       |     |       |     |       |
| Total liabilities and stockholders’ equity                                                                                                            |       | $        | 91,152     |     | $          | 91,974 |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

18

----

Table of Contents

** **

**CAGLE’S,INC. AND SUBSIDIARY**

 

**Consolidated Statements of Operations**

 

**For the Years Ended March 28, 2009, March 29, 2008 and March 31,2007**

 

**(In Thousands, Except Per Share Data)**

 
| ** **                                                                             | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                   |       |     |       |     |       |     |       |
| Net sales                                                                              |       | $        | 292,585    |     | $          | 283,649  |       | $ | 233,936 |   |
|                                                                                   |       |     |       |     |       |     |       |
| Costs and expenses                                                                     |       |     |       |     |       |     |       |
| Cost of sales                                                                          |       | 293,216  |       | 268,477  |       | 232,290  |       |
| Selling and delivery                                                                   |       | 8,753    |       | 8,579    |       | 8,667    |       |
| General and administrative                                                             |       | 6,293    |       | 6,458    |       | 5,654    |       |
| Other general expenses                                                                 |       | —   |       | —   |       | (63      | )          |
| Total costs and expenses                                                               |       | 308,262  |       | 283,514  |       | 246,548  |       |
|                                                                                   |       |     |       |     |       |     |       |
| Operating income (loss)                                                                |       | (15,677  | )          | 135      |       | (12,612  | )          |
|                                                                                   |       |     |       |     |       |     |       |
| Other income (expense)                                                                 |       |     |       |     |       |     |       |
| Gain on sale of unconsolidated affiliates                                              |       | —   |       | —   |       | 18,323   |       |
| Interest expense                                                                       |       | (2,163   | )          | (1,483   | )          | (2,054   | )          |
| Other income (expense), net                                                            |       | (40      | )          | 190      |       | 358      |       |
| Total other income (expense), net                                                      |       | (2,203   | )          | (1,293   | )          | 16,627   |       |
|                                                                                   |       |     |       |     |       |     |       |
| Income (loss) before equity in earnings of unconsolidated affiliates  and income taxes |       | (17,880  | )          | (1,158   | )          | 4,015    |       |
|                                                                                   |       |     |       |     |       |     |       |
| Equity in earnings of unconsolidated affiliates                                        |       | —   |       | —   |       | 1,317    |       |
|                                                                                   |       |     |       |     |       |     |       |
| Income (loss) before income taxes                                                      |       | (17,880  | )          | (1,158   | )          | 5,332    |       |
|                                                                                   |       |     |       |     |       |     |       |
| Income tax provision (benefit)                                                         |       | (6,386   | )          | (385     | )          | 4,773    |       |
|                                                                                   |       |     |       |     |       |     |       |
| Net income (loss)                                                                      |       | $        | (11,494    | )        | $          | (773     | )          | $ | 559 |   |
|                                                                                   |       |     |       |     |       |     |       |
| Weighted-average common shares outstanding                                             |       |     |       |     |       |     |       |
| Basic                                                                                  |       | 4,638    |       | 4,665    |       | 4,724    |       |
| Diluted                                                                                |       | 4,638    |       | 4,665    |       | 4,724    |       |
|                                                                                   |       |     |       |     |       |     |       |
| Per common share                                                                       |       |     |       |     |       |     |       |
| Net income (loss)                                                                      |       |     |       |     |       |     |       |
| Basic                                                                                  |       | $        | (2.48      | )        | $          | (0.17    | )          | $ | 0.12 |   |
| Diluted                                                                                |       | $        | (2.48      | )        | $          | (0.17    | )          | $ | 0.12 |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

19

----

Table ofContents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Consolidated Statements of Stockholders’ Equity**

** **

**For the Years Ended March 28, 2009, March 29, 2008 and March 31, 2007**

** **

**(In Thousands)**

 
| ** **                                                                                                                    | ** ** | ** **        | ** ** | ** **          | ** ** | ** **  | ** ** | ** **   | ** ** | ** **        | ** ** | ** **   | ** ** | **Accumulated**    | ** ** | ** ** | ** ** | ** **        | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|---------------------|------------|-------------|------------|--------------|------------|-------------------|------------|--------------|------------|--------------------|------------|------------|------------|-------------------|------------|
| ** **                                                                                                                    | ** ** | ** **        | ** ** | ** **          | ** ** | ** **  | ** ** | ** **   | ** ** | **Additional**    | ** ** | ** **   | ** ** | **Other**          | ** ** | ** ** | ** ** | **Comprehensive** | ** ** |
| ** **                                                                                                                    | ** ** | **Common  Stock** | ** ** | **Treasury  Stock** | ** ** | **Paid-in** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | ** **   | ** ** | **Income**         | ** ** |
| ** **                                                                                                                    | ** ** | **Shares**        | ** ** | **Amount**          | ** ** | **Shares**  | ** ** | **Amount**   | ** ** | **Capital**       | ** ** | **Earnings** | ** ** | **Income  (Loss)** | ** ** | **Total**  | ** ** | **(Loss)**        | ** ** |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Balance - April  2, 2006                                                                                                      |       | 4,744             |       | $                   | 4,744      |        | (1         | )            | $          | (80               | )          | $            | 4,198      |               | $          | 36,370     |       | $                 | —     |   | $ | 45,232 |   |   |   |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Purchase of  treasury stock                                                                                                   |       | (55               | )          | (55                 | )          | —      |       | —       |       | (382              | )          | —       |       | —             |       | (437       | )          |              |       |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Net income                                                                                                                    |       | —            |       | —              |       | —      |       | —       |       | —            |       | 559          |       | —             |       | 559        |       | $                 | 559        |   |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Balance - March  31, 2007                                                                                                     |       | 4,689             |       | 4,689               |       | (1          | )          | (80          | )          | 3,816             |       | 36,929       |       | —             |       | 45,354     |       | $                 | 559        |   |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Purchase of  treasury stock                                                                                                   |       | (25               | )          | (25                 | )          | —      |       | —       |       | (159              | )          | —       |       | —             |       | (184       | )          |              |       |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Net loss                                                                                                                      |       | —            |       | —              |       | —      |       | —       |       | —            |       | (773         | )          | —             |       | (773       | )          | $                 | (773       | ) |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Unrealized gain  on hedging instruments, net of reclassification adjustment gain of $833 (net  of income tax expense of $468) |       | —            |       | —              |       | —      |       | —       |       | —            |       | —       |       | 430                |       | 430        |       | 430               |       |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Balance - March  29, 2008                                                                                                     |       | 4,664             |       | 4,664               |       | (1          | )          | (80          | )          | 3,657             |       | 36,156       |       | 430                |       | 44,827     |       | $                 | (343       | ) |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Purchase of  treasury stock                                                                                                   |       | (27               | )          | (27                 | )          | —      |       | —       |       | (30               | )          | —       |       | —             |       | (57        | )          |              |       |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Net loss                                                                                                                      |       | —            |       | —              |       | —      |       | —       |       | —            |       | (11,494      | )          | —             |       | (11,494    | )          | $                 | (11,494    | ) |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Unrealized loss  on hedging instruments, net of reclassification adjustment loss of $386 (net  of income tax benefit of $727) |       | —            |       | —              |       | —      |       | —       |       | —            |       | —       |       | (1,292             | )          | (1,292     | )          | (1,292            | )          |
|                                                                                                                          |       |              |       |                |       |        |       |         |       |              |       |         |       |               |       |       |       |              |       |
| Balance - March  28, 2009                                                                                                     |       | 4,637             |       | $                   | 4,637      |        | (1         | )            | $          | (80               | )          | $            | 3,627      |               | $          | 24,662     |       | $                 | (862       | ) | $ | 31,984 |   | $ | (12,786 | ) |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

20

----

Table ofContents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Consolidated Statements of Cash Flows**

** **

**For the Years Ended March 28, 2009, March 29, 2008 and March 31, 2007**

** **

**(In Thousands)**

 
| ** **                                                                                         | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash flows from operating activities                                                               |       |     |       |     |       |     |       |
| Net income (loss)                                                                                  |       | $        | (11,494    | )        | $          | (773     | )          | $ | 559 |   |
| Adjustments to reconcile net income (loss) to net cash provided by  (used in) operating activities |       |     |       |     |       |     |       |
| Depreciation                                                                                       |       | 4,063    |       | 3,782    |       | 3,780    |       |
| Impairment loss                                                                                    |       | —   |       | —   |       | 2,128    |       |
| Amortization                                                                                       |       | 88       |       | 12       |       | 306      |       |
| (Gain) loss on sale of property, plant and equipment                                               |       | 3        |       | (41      | )          | (63      | )          |
| (Gain) on sale of unconsolidated affiliates                                                        |       | —   |       | —   |       | (18,323  | )          |
| Income from unconsolidated affiliates, net of distributions                                        |       | —   |       | —   |       | (943     | )          |
| Deferred income tax expense (benefit)                                                              |       | (6,045   | )          | (385     | )          | 4,576    |       |
| Changes in operating assets and liabilities                                                        |       |     |       |     |       |     |       |
| Trade accounts receivable, net                                                                     |       | (155     | )          | (278     | )          | (2,283   | )          |
| Inventories                                                                                        |       | 3,547    |       | (7,785   | )          | (3,103   | )          |
| Refundable income taxes                                                                            |       | —   |       | 492      |       | 1,149    |       |
| Other current assets                                                                               |       | 197      |       | 70       |       | (134     | )          |
| Accounts payable                                                                                   |       | 4,427    |       | 3,531    |       | (898     | )          |
| Accrued expenses                                                                                   |       | (2,175   | )          | (717     | )          | 1,099    |       |
| Net cash provided by (used in) operating activities                                                |       | (7,544   | )          | (2,092   | )          | (12,150  | )          |
|                                                                                               |       |     |       |     |       |     |       |
| Cash flows from investing activities                                                               |       |     |       |     |       |     |       |
| Purchases of property, plant and equipment                                                         |       | (1,523   | )          | (3,774   | )          | (1,732   | )          |
| Proceeds from sale of property, plant and equipment                                                |       | 8        |       | 46       |       | 66       |       |
| Proceeds from sale of unconsolidated affiliates                                                    |       | —   |       | —   |       | 28,000   |       |
| Proceeds from redemption of life insurance                                                         |       | 1,241    |       | —   |       | —   |       |
| (Increase) decrease in other assets                                                                |       | 185      |       | 243      |       | (340     | )          |
| Net cash provided by (used in) investing activities                                                |       | (89      | )          | (3,485   | )          | 25,994   |       |
|                                                                                               |       |     |       |     |       |     |       |
| Cash flows from financing activities                                                               |       |     |       |     |       |     |       |
| Proceeds on revolving line of credit                                                               |       | 85,150   |       | 21,050   |       | 23,625   |       |
| Payments on revolving line of credit                                                               |       | (74,575  | )          | (14,325  | )          | (26,605  | )          |
| Payments of long-term debt                                                                         |       | (2,305   | )          | (2,097   | )          | (7,969   | )          |
| Decrease in negative book cash balances                                                            |       | (463     | )          | (1,087   | )          | (37      | )          |
| Payments of deferred financing costs                                                               |       | (150     | )          | —   |       | —   |       |
| Repurchase of stock                                                                                |       | (57      | )          | (184     | )          | (437     | )          |
| Net cash provided by (used in) financing activities                                                |       | 7,600    |       | 3,357    |       | (11,423  | )          |
|                                                                                               |       |     |       |     |       |     |       |
| Net increase (decrease) in cash and cash equivalents                                               |       | $        | (33        | )        | $          | (2,220   | )          | $ | 2,421 |   |
|                                                                                               |       |     |       |     |       |     |       |
| Cash and cash equivalents - beginning of year                                                      |       | 1,279    |       | 3,499    |       | 1,078    |       |
|                                                                                               |       |     |       |     |       |     |       |
| Cash and cash equivalents - end of year                                                            |       | $        | 1,246      |     | $          | 1,279    |       | $ | 3,499 |   |
|                                                                                               |       |     |       |     |       |     |       |
| Supplementary disclosures of cash flow information                                                 |       |     |       |     |       |     |       |
| Cash paid (received) during the year for                                                           |       |     |       |     |       |     |       |
| Interest                                                                                           |       | $        | 2,193      |     | $          | 1,460    |       | $ | 2,063 |   |
| Income taxes, net                                                                                  |       | (109     | )          | 162      |       | 185      |       |
|                                                                                               |       |     |       |     |       |     |       |
| Supplementary disclosures of noncash transactions                                                  |       |     |       |     |       |     |       |
| Net unrealized gain (loss) on hedging activities                                                   |       | $        | (1,292     | )        | $          | 430      |       | $ | — |   |
| Assets acquired pursuant to capital lease obligations                                              |       | 74       |       | —   |       | —   |       |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

21

----

**Table of Contents**

** **

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

** **

1.**              ****Summaryof Significant Accounting Policies**

** **

a.               **Principlesof consolidation** — The consolidated financial statements include theaccounts of Cagle’s, Inc. and its wholly-owned subsidiary Cagle Farms, Inc.(collectively, the “Company”).  Allsignificant intercompany accounts and transactions have been eliminated.  Investments in unconsolidated affiliates havehistorically been accounted for under the equity method.

 

b.              **Nature ofoperations** — The Company operates as a vertically integratedpoultry processor with operations located in the southeastern United States,consisting of breeding, hatching and growing chickens; feed mill; processing;further processing and marketing operations. The Company’s products are primarily sold in the United States tosupermarkets, food distributors, food processing companies, national fast-foodchains and institutional users.

 

Integratedpoultry processors operate in an environment wherein the commodity nature ofboth their products for sale and their primary raw materials causes salesprices and purchase costs to fluctuate, often on a short-term basis, due to theworldwide supply and demand situation for those commodities.  The supply and demand factors for theirproducts for sale and the supply and demand factors for their primary rawmaterials correlate to a degree, but are not the same, thereby causing marginsbetween sales price and production costs to increase, to decrease, or toinvert, often on a short-term basis.

 

TheCompany operates in one segment, as defined by Statement of Financial AccountingStandards (“SFAS”) No. 131, “Disclosure About Segments of an Enterpriseand Related Information.”

 

c.               **Fiscal year** — The Company’sfiscal year closing date is the Saturday nearest March 31.  The years ended March 28, 2009, March 29,2008 and March 31, 2007include operations for 52-week periods.

 

d.              **Revenuerecognition** — The Company recognizes revenue upon productshipment and transfer of title and risk of loss to the customer.  Revenue is recorded net of any discounts,allowances or promotions.  Estimates forany special pricing arrangements, promotions or other volume-based incentivesare recorded upon shipment of the product in accordance with the terms of thepromotion, allowance or pricing arrangements.

 

e.              **Cash andcash equivalents** — The Company considers all highly liquidinvestments with original maturities of three months or less to be cashequivalents.  The Company’s cashmanagement system allows the Company to fund outstanding checks when presentedto the financial institution for payment resulting in book overdrafts.  Book overdrafts are recorded in accountspayable in the consolidated balance sheets and changes are reflected as afinancing activity in the consolidated statements of cash flows.  As of March 28,2009 and March 29, 2008,the Company had book overdrafts of $4,962 and $5,425, respectively.

 

22

----

Table ofContents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

1.               **Summary of Significant Accounting Policies****(cont.)**

 

f.                 **Accountsand note receivable**— In the normal course of business, the Companyextends credit to its customers on a short-term basis.  Although credit risks associated with itscustomers are considered minimal, the Company routinely reviews its accountsreceivable balances and makes provisions for probable doubtful accounts.  Past due status is determined based uponcontractual terms.  In circumstanceswhere management is aware of a specific customer’s inability to meet itsfinancial obligations to the Company, a specific reserve is recorded to reducethe receivable to the amount expected to be collected.  Amounts that are determined to beuncollectible are written off against this allowance when collection attemptson the accounts have been exhausted. Management uses significant judgment in estimating uncollectibleaccounts.  In estimating uncollectible amounts,management considers factors such as current overall economic conditions,industry-specific economic conditions and historical customer performance.  While management believes the Company’sprocesses effectively address its exposure to doubtful accounts, changes ineconomic, industry or specific customer conditions may require adjustment tothe allowance recorded by the Company.

 

g.             **Inventories** — Live birdand hatching egg inventories are stated at cost and breeder hens are stated atcost, less accumulated amortization, consistent with industry standards.  The costs associated with breeder hens areaccumulated up to the production stage and amortized over a 40-weekperiod.  Finished poultry products, feed,and other inventories are stated at the lower of cost or market.  The Company records valuations andadjustments for its inventories and for estimated obsolescence at or equal tothe difference between the cost of the inventories and the estimated marketvalue based upon known conditions affecting the inventories’ obsolescence,including significantly aged products, discontinued product lines, or damagedor obsolete products.  The Companyallocates meat costs between its various finished poultry products based on aby-product costing technique that reduces the cost of the whole bird byestimated yields and amounts to be recovered for certain by-product parts,which are carried in inventories at the estimated recovery amounts, with theremaining amount being reflected at cost or market, whichever is lower.  For inventory valuation purposes, costsinclude live production costs (principally feed, chick cost, medications andother raw materials), labor and production overhead.  Not all broilers and breeders survive tomaturity or disposition; normal losses are not expensed directly because totalcosts of the project are assigned to the survivors.  The Company would record adjustments toreduce the values of processed poultry and feed inventories to fair marketvalues if market prices for poultry or feed grains moved substantially lower,this would increase the Company’s cost of sales.  The Company has not experienced materialrevisions to its inventory costs during 2009, 2008 and 2007.  Inventories at March 28, 2009 and March 29,2008 consist of the following:

 
| ** **                   | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
|                         |       |     |       |     |       |
| Finished products            |       | $        | 5,692      |     | $          | 5,987 |   |
| Field inventory and breeders |       | 15,509   |       | 17,489   |       |
| Feed, eggs and medication    |       | 4,659    |       | 5,923    |       |
| Supplies                     |       | 1,321    |       | 1,329    |       |
|                         |       |     |       |     |       |
|                         |       | $        | 27,181     |     | $          | 30,728 |   |

 

23

----

Table ofContents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

1.               **Summary of Significant Accounting Policies****(cont.)**

 

h.              **Property,plant and equipment** — Property, plant and equipment are stated atcost.  Depreciation is provided using thestraight-line method over the following lives:

 
| Buildings and improvements          |   | 3  to 32 years |   |
|-------------------------------------|--------|----------------|--------|
| Machinery, furniture and  equipment |   | 3  to 17 years |   |
| Vehicles                            |   | 2  to 7 years  |   |

 

Maintenanceand repairs are charged to expense as incurred. Major additions and improvements of existing facilities arecapitalized.  For retirements or sales ofproperty, the Company removes the original cost and the related accumulateddepreciation from the accounts and the resulting gain or loss is reflected inother income (expense), net in the accompanying consolidated statements ofoperations.

 

i.                  **Deferredfinancing costs** — Deferred financing costs are amortized over thelife of the related credit agreement. Deferred financing costs are shown net of accumulated amortization onthe accompanying consolidated balance sheets.

 

j.                  **Employeeinsurance claims** — The Company is self-funded under a minimumpremium arrangement for the majority of employee claims under its group healthplan.  From May 1992, the unionemployees of the Company were covered for health insurance under a union healthplan.  Starting in January 2003,these employees began receiving health insurance coverage under the Companysponsored plan.  The Company isself-insured for the majority of its workers’ compensation risks.  The Company’s insurance programs areadministered by risk management specialists. Insurance coverage is obtained for catastrophic workers’ compensationand group health exposures, as well as those risks required to be insured bycertain state laws.  The Company’saccrual for group health and workers’ compensation liabilities of $1,294 and$1,229 as of March 28, 2009and March 29, 2008,respectively, is included in accrued expenses in the accompanying consolidatedbalance sheets.  These accruals areestimated using historical experience and actuarial estimates.  No postemployment benefits are provided underthe Company’s group health plan.

 

k.               **Operatingleases** — The Company accounts for operating lease agreements in accordancewith SFAS No. 13, “Accounting for Leases,” and Financial AccountingStandards Board (“FASB”) Technical Bulletin No. 85-3, “Accounting forOperating Leases with Scheduled Rent Increases.”  Currently, the Company has not entered intoany operating lease agreements which contain escalating rent provisions.  Accordingly, rent expense is recognized on astraight-line basis.  Leaseholdimprovements are amortized over the shorter of the estimated useful life of theasset or the lease term, including renewal option periods that are reasonablyassured.

 

24

----

Table ofContents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

1.               **Summary of Significant Accounting Policies****(cont.)**

 

l.                 **Incometaxes** — The Company accounts for income taxes in accordance with SFAS No. 109,“Accounting for Income Taxes,” which requires that deferred tax assets andliabilities be recognized for the effect of temporary differences between thebook and tax bases of recorded assets and liabilities.  SFAS No. 109 also requires that deferredtax assets be reduced by a valuation allowance if it is more likely than notthat some portion or all of the deferred tax asset will not be realized.  We review the recoverability of any taxassets recorded on the consolidated balance sheets, primarily operating losscarryforwards, based on both historical and anticipated earnings levels ofoperations and provide a valuation allowance when it is more likely than notthat amounts will not be recovered.

 

m.            **Net income(loss) per common share** — Basic earnings (loss) per share iscalculated by dividing net income (loss) by the weighted-average number ofshares of common stock outstanding during the period.  Diluted earnings (loss) per share assumes theconversion of all potentially dilutive securities (stock options and restrictedstock awards) and is calculated by dividing net income (loss) by the sum of theweighted-average number of shares of common stock outstanding plus potentiallydilutive securities under the treasury stock method.  For the years ended March 28, 2009, March 29,2008 and March 31, 2007, there were no potentially dilutive securitiesoutstanding.

 

n.              **Estimates** — Thepreparation of consolidated financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and the disclosure of contingent assets and liabilitiesat the date of the consolidated financial statements, and the reported amountsof revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

o.              **Fair valueof financial instruments** — The book values of cash, trade accountsreceivable, accounts payable and other financial instruments approximate theirfair values principally because of the short-term maturities of theseinstruments.  The fair value of theCompany’s long-term debt is estimated based on current rates offered to theCompany for debt of similar terms and maturities.  Under this method, the Company’s fair valueof long-term debt was not significantly different from the stated value at March 28, 2009 or March 29, 2008.

 

p.              **Accountingfor the impairment of long-lived assets** — SFAS No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets,” which superseded andamended SFAS No. 121, “Accounting for the Impairment of Long-Lived Assetsand for Long-Lived Assets to be Disposed of,” requires that long-lived assetsand certain identifiable intangibles be reviewed for impairment whenevertriggering events or changes in circumstances indicate that the carryingamounts of any asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparisonof the carrying amount of an asset to future net cash flows expected to begenerated by the asset.  If such assetsare considered to be impaired, the impairment to be recognized is measured bythe amount the carrying amount of the assets exceeds the fair value of theassets.

 

25

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

1.               **Summary of Significant Accounting Policies****(cont.)**

 

Basedon management’s assessment of the impairment indicators, there was one assetgroup which was determined to be impaired during 2007.  The impairment resulted from a significantchange in the physical condition and market value of the Macon facility.  Consequently, the Company recognized an impairmentloss in its second quarter of 2007 totaling $2,128, which represents the excessof the carrying values of the assets over their fair values, less costs tosell.  The impairment loss was recordedas a component of cost of sales in the accompanying consolidated statements ofoperations for the year ended March 31, 2007.  Based upon management’s assessment of theimpairment indicators for the remaining assets, management determined that upontesting the expected future net cash flows to be generated from these assets,no other impairment losses had occurred in the fiscal years ended 2009, 2008 or2007.

 

q.              **Shippingand handling costs** — Shipping and handling costs are included in costof sales in the accompanying consolidated statements of operations and totaled$14,712, $12,811 and $12,078 in fiscal years 2009, 2008 and 2007, respectively.

 

r.                 **Financialinstruments** — The Company is a purchaser of certaincommodities, such as corn and soybean meal in the course of normaloperations.  The Company has usedderivative financial instruments to reduce its exposure to various market risks.  Generally, contract terms of a hedgeinstrument closely mirror those of the hedged item, providing a high degree ofrisk reduction and correlation. Contracts that are designated and highly effective at meeting the riskreduction and correlation criteria are recorded using hedge accounting, asdefined by SFAS No. 133, “Accounting for Derivative Instruments andHedging Activities,” as amended.  If aderivative instrument is a hedge, as defined by SFAS No. 133, depending onthe nature of the hedge, changes in the fair value of the instrument willeither be offset against the change in fair value of the hedged assets,liabilities or firm commitments through earnings, or recognized in othercomprehensive income (loss) until the hedged item is recognized inearnings.  The ineffective portion of aninstrument’s change in fair value will be immediately recognized in earnings asa component of cost of sales. Instruments the Company holds as part of its risk management activitiesthat do not meet the criteria for hedge accounting, as defined by SFAS No. 133,as amended, are marked to fair value with unrealized gains or losses reportedcurrently in earnings.

 

s.               **Advertisingexpenses** — Advertising expenses are expensed as incurred andare included in selling and delivery, and general and administrative expensesin the accompanying consolidated statements of operations and totaled $571,$122 and $98 in the fiscal years 2009, 2008 and 2007, respectively.

 

t.                 **Accruedcompensation expenses —**Accrued compensation expenses of $2,253 and$2,074 are included in accrued expenses in the accompanying consolidatedbalance sheets for the fiscal years 2009and 2008, respectively.

 

u.              **Reclassifications** — Certainreclassifications have been made to the 2008 and 2007 balances in order forthem to conform to the 2009 presentation.

 

26

----

**Tableof Contents**

** **

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

** **

2.**              ****DeferredFinancing Costs**

** **

Deferredfinancing costs consist of the following at March 28, 2009 and March 29,2008:

 
| ** **                   | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
|                         |       |     |       |     |       |
| Deferred financing costs     |       | $        | 283        |     | $          | 133 |   |
| Accumulated amortization     |       | (180     | )          | (92      | )          |
|                         |       |     |       |     |       |
| Net deferred financing costs |       | $        | 103        |     | $          | 41 |   |

 

Futuredeferred financing amortization expense will be as follows:

 
| 2010   |   | $      | 89     |   |
|--------|--------|--------|--------|--------|
| 2011   |   | 13     |   |
| 2012   |   | 1      |   |
|   |   |   |   |
|   |   | $      | 103    |   |

 

3.     **Long-TermDebt**

** **

Long-termdebt consists of the following at March 28,2009 and March 29, 2008:

 
| ** **                                                                                                                                                                                                                             | ** ** | **2009** | ** ** | **2008** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Long-term revolving line of credit, maturing March 31, 2011, interest  payable monthly, variable interest rate of LIBOR plus 3.50%; secured by  accounts receivable, inventories and the Atlanta and Pine Mountain Valley  facilities. |       | $        | 17,300     |     | $          | 6,725 |   |
|                                                                                                                                                                                                                                   |       |     |       |     |       |
| Term note payable; fixed interest rate of 7.86%, principal and  interest payable monthly of $290, through maturity on April 1, 2011; secured  by the Collinsville plant, Dalton hatchery and Rockmart feedmill.                        |       | 14,199   |       | 16,468   |       |
|                                                                                                                                                                                                                                   |       |     |       |     |       |
| Capital lease payable, fixed interest at 6.86%, principal and  interest payable monthly of $3, through maturity on March 14, 2010; secured  by certain equipment.                                                                      |       | 38       |       | —   |       |
|                                                                                                                                                                                                                                   |       | 31,537   |       | 23,193   |       |
| Less current maturities                                                                                                                                                                                                                |       | 2,488    |       | 2,269    |       |
|                                                                                                                                                                                                                                   |       |     |       |     |       |
| Long-term debt, less current maturities                                                                                                                                                                                                |       | $        | 29,049     |     | $          | 20,924 |   |

 

27

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

3.**            ****Long-Term Debt****(cont.)**

** **

During2007, the Company entered into a new financing agreement, in which the termloan was paid off and terminated, the long-term revolving line of credit andrelated interest rate were reduced, the maturity date was extended through January 24,2010, and the restrictive covenants were relaxed.

 

OnApril 30, 2008, the Company amended its long-term revolving line of creditagreement.  The amended agreementincreased the facility to $17,500 and the interest rate to a variable rateequal to 3.50% over the 90-day London InterBank Offered Rate (“LIBOR”).  The collateral for the facility now includesthe Company’s real estate located in Atlanta, Georgia.  In addition, the maturity date of theagreement is now March 31, 2011.

 

The Company completed a new long-termrevolving line of credit agreement on September 5, 2008.  There were three primary changes to theprevious agreement:  (1) An increasein the capacity of the revolving credit facility to $21 million.  (2) The covenant concerning theborrowers’ minimum tangible net worth was reduced from $40 million to $35million.  (3) The advance rate withrespect to eligible receivables was increased from 60% to 70%.  The maturity date of the new agreementremained March 31, 2011.

 

On November 3, 2008, the Company enteredinto an amended long-term revolving line of credit agreement retroactive to September 27,2008, which temporarily lowered the tangible net worth requirement from $35million to $30 million through the first quarter of fiscal 2010 (quarter endingJune 27, 2009).  This was extendedon June 5, 2009, through January 2, 2010.

 

On January 29, 2009, the Companyentered into an amended long-term revolving line of credit agreement, effectiveas of that date.  There are eight primarychanges to the existing Agreement between the parties:  (1) An increase in the capacity of therevolving credit facility to $25,150.  (2) Thecreation of a supplemental revolving master note in the principal amount of$4,150 and maturing on October 31, 2009. (3) The addition of the right to obtain letters of credit issued bylender in favor of third persons in face principal amounts not exceeding $1,000at any time outstanding.  (4) Thelimiting of borrowers’ rights to obtain letters of credit issued by lender onlypursuant to such supplemental revolving master note and only when borrowershave available revolving credit (which will be determined by including in thedefinition thereof both the unpaid principal amount of all unpaid revolvingloans and also the aggregate face principal amount of all outstanding lettersof credit).  (5) Additions of thelimitations of the borrowers’ rights to obtain revolving loans pursuant to thesupplemental revolving master note only when lender has fully advanced theentire $21,000 principal amount of the primary revolving master note andborrowers also still have available revolving credit.  (6) The addition of the collateralconsisting of Cagle’s processing plant located in Pine Mountain Valley,Georgia.  (7) The advance rate withrespect to eligible inventories is being increased from 40% to 60% and theadvance rate with respect to eligible receivables is being increased from 70%to 80%.  (8) The interest rates weremodified by the following provisions: (a) Interest will accrue on theunpaid principal balance of the revolving loans, from time to time outstanding,evidenced by the primary revolving master note at the LIBOR variable rate plus3.50% (350 basis points), (b) Interest will accrue on the unpaid principalbalance of the revolving loans, from time to time outstanding, evidenced by thesupplemental revolving master note at the LIBOR variable rate plus 5.00% (500basis points).  As of March 28,2009, the Company is in compliance with the revolving line of credit agreement’scovenants.

 

28

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

3.             **Long-TermDebt****(cont.)**

** **

In addition to the covenants describedabove, the Company must also comply with certain restrictive covenantsassociated with the term note payable. These covenants require the Company to maintain (1) a maximumleverage ratio (2) minimum fixed charge coverage ratio (3) minimumadjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) and (4) capital expenditures not to exceed certainlimits.  The Company is not in compliancewith the term note payable debt covenants, but has waivers through April 5,2010.

 

TheCompany has available borrowings of $7,350 on the revolving line of credit asof March 28, 2009.

 

Aggregatematurities of long-term debt during the years subsequent to March 28, 2009are as follows:

 

| 2010   |   | $      | 2,488  |   |
|--------|--------|--------|--------|--------|
| 2011   |   | 29,049 |   |
|   |   |   |   |
|   |   | $      | 31,537 |   |

 

Asof March 28, 2009, and inaccordance with the amended revolving line of credit agreement, the lender hasissued a $500 letter of credit in favor of a third party related to the Company’sself-insurance workers’ compensation liabilities.

 

4.             **Income Taxes**

** **

TheCompany records deferred income taxes using enacted tax laws and rates for theyears in which the taxes are expected to be paid.  Deferred income taxes reflect the tax consequenceson future years of differences between the tax bases of assets and liabilitiesand their financial reporting amounts.

 

Effectivein fiscal 1989, the Revenue Act of 1987 rescinded the cash-basis method ofaccounting for tax purposes previously used for the Company’s farmingoperations.  Previously recorded incometax liabilities of $3,389 were indefinitely deferred.  Under tax laws enacted in 1997, suchliabilities are required to be amortized into taxable income over a 20-yearperiod.

 

Incometax expense (benefit) is reflected in the consolidated statements of operationsas follows:

 
| ** **                               | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                     |       |     |       |     |       |     |       |
| Current income tax expense (benefit)     |       | $        | —     |     | $          | —   |       | $ | (349 | ) |
| Change in valuation allowance            |       | 545      |       | 186      |       | 546      |       |
|                                     |       | 545      |       | 186      |       | 197      |       |
| Change in deferred tax expense (benefit) |       | (6,931   | )          | (571     | )          | 4,576    |       |
|                                     |       |     |       |     |       |     |       |
| Income tax expense (benefit)             |       | $        | (6,386     | )        | $          | (385     | )          | $ | 4,773 |   |
|                                          |            |          |            |          |            |          |            |  |  |  |  |

 

29

----

Tableof Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

4.             **IncomeTaxes****(cont.)**

 

Areconciliation between income tax expense (benefit) computed at the federal statutoryrate and the Company’s income tax rate is as follows:

 
| ** **                                       | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                             |       |     |       |     |       |     |       |
| Federal income taxes (benefit) at statutory rate |       | $        | (6,079     | )        | $          | —   |       | $ | 1,813 |   |
| State income taxes (benefit)                     |       | (715     | )          | —   |       | 107      |       |
| Change in valuation allowance                    |       | 545      |       | 186      |       | 546      |       |
| Jobs and investment tax credits                  |       | (98      | )          | (98      | )          | (823     | )          |
| Write-off of jobs and investment tax credits     |       | —   |       | —   |       | 3,206    |       |
| Accounting method change                         |       | —   |       | —   |       | 1,631    |       |
| Other                                            |       | (39      | )          | (473     | )          | (1,707   | )          |
|                                             |       |     |       |     |       |     |       |
|                                             |       | $        | (6,386     | )        | $          | (385     | )          | $ | 4,773 |   |

 

Componentsof the net deferred income tax asset (liability) at March 28, 2009 and March 29,2008 relate to the following:

 
| ** **                                | ** ** | **2009** | ** ** | **2008** | ** ** |
|-------------------------------------------|------------|----------|------------|----------|------------|
| Deferred income tax assets                |       |     |       |     |       |
| Tax credit carryforwards                  |       | $        | 10,731     |     | $          | 10,871 |   |
| Net operating loss carryforwards          |       | 10,136   |       | 4,365    |       |
| Accrued expenses                          |       | 393      |       | 468      |       |
| Other                                     |       | 80       |       | 157      |       |
|                                      |       | 21,340   |       | 15,861   |       |
| Less valuation allowance                  |       | (4,434   | )          | (4,979   | )          |
|                                      |       | 16,906   |       | 10,882   |       |
| Deferred income tax liabilities           |       |     |       |     |       |
| Family farm cash-basis deferral           |       | (1,546   | )          | (1,874   | )          |
| Inventories                               |       | (3,308   | )          | (4,687   | )          |
| Property and depreciation                 |       | (5,265   | )          | (4,206   | )          |
| Other                                     |       | (192     | )          | (292     | )          |
|                                      |       | (10,311  | )          | (11,059  | )          |
|                                      |       |     |       |     |       |
| Net deferred income tax asset (liability) |       | $        | 6,595      |     | $          | (177 | ) |

 

30

----

Table ofContents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

4.             **IncomeTaxes****(cont.)**

 

TheCompany has federal and state net operating loss carryforwards of $24,436 and$21,656, respectively.  The Company alsohas federal and state tax credit carryforwards of $10,731.  The net operating loss and tax creditcarryforwards are available to reduce income taxes through 2028.  Realization of these future tax benefits isdependent on the Company’s ability to generate sufficient taxable income withinthe carryforward period.  Due to thesignificant amount of income that would be needed to fully utilize the creditsavailable, the Company has recorded a valuation allowance for a significantportion of the deferred tax asset associated with the tax creditcarryforwards.  The Company expects tofully utilize the federal and state net operating loss carryforwards and, accordingly,there is no valuation allowance associated with the net operating losscarryforwards.

 

TheCompany adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting forUncertainty in Income Taxes,” effective April 1, 2007.  FIN 48 clarifies the accounting for incometaxes by prescribing the minimum recognition threshold a tax position isrequired to meet before being recognized in the consolidated financialstatements.  FIN 48 also providesguidance on derecognition, measurement, classification, interest and penalties,accounting in interim periods, disclosure and transition.  The Company had no significant unrecognizedtax benefits at the date of adoption or at March 28, 2009. Accordingly, the Company does not have any interest or penalties relatedto uncertain tax positions.  However, ifinterest or penalties were to be incurred related to uncertain tax positions,such amounts would be recognized in income tax expense.  Tax periods for all years after 2004 remainopen to examination by the federal and state taxing jurisdictions to which itis subject.

 

5.             **Stockholders’ Equity**

** **

Beginningin 1990, the Board of Directors (the “Board”) authorized the purchase of up to$2,500 of the Company’s stock on the open market.  In February 2000, the Board increasedthe authorized amount to $15,000.  TheCompany purchased 27 shares for $57 during 2009.  Through March 28, 2009, 797 shares hadbeen repurchased by the Company at a total cost of $10,158.  The Company has accounted for these sharesusing the retirement method.

 

6.             **Investment in UnconsolidatedAffiliate**

** **

OnNovember 14, 1997, the Company acquired a 30% equity interest in a jointventure with its joint venture partner in Cagle Foods.  During 1998, the Company contributed certainproperty, plant and equipment and other assets in exchange for its equityinterest in the new joint venture, Cagle’s – Keystone Foods, LLC.  This joint venture constructed a processingfacility in Albany, Kentucky, which began limited operations in November 1998.

 

OnAugust 15, 2006, the Company sold its 30% interest in Cagle’s – KeystoneFoods, LLC to its joint venture partner for $28,000.  This sale resulted in a gain of $18,323,which is recorded as other income in the accompanying consolidated statementsof operations.

 

31

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

6.             **Investment in Unconsolidated Affiliate****(cont.)**

 

TheCompany accounted for its investment in affiliate using the equity method.  The Company’s share of affiliate’s earningswas $1,317 for the fiscal year ended March 31, 2007.  Additionally, the Company earned $357 inadministrative service fees charged to the affiliate for the year ended March 31,2007.

 

7.             **Related Parties**

** **

Thefirm of Byrne, Davis & Hicks, P.C. in which G. Bland Byrne III, adirector of the Company, is a principal, received $216, $260 and $246 duringthe fiscal years 2009, 2008 and 2007, respectively.  The payments received are for fees incurredfor legal services rendered to the Company and its subsidiaries.

 

Includedin other assets at March 28, 2009and March 29, 2008 is areceivable of $1,242 due to the company from two related party life insuranceirrevocable trusts.

 

8.             **Major Customers**

** **

TheCompany had sales to one individual customer, which exceeded 10% of total salesfor fiscal years 2009, 2008 and 2007. Accounts receivable and sales from this customer as of and for the yearsended March 28, 2009, March 29, 2008 and March 31, 2007 was as follows:

 

| ** **      | ** ** | **Sales**  | ** ** | **Accounts Receivable** | ** ** |
|-----------------|------------|------------|------------|-------------------------|------------|
| **Fiscal Year** | ** ** | **Amount** | ** ** | **Percentage**          | ** ** | **Amount** | ** ** | **Percentage** | ** ** |
|            |       |       |       |                    |       |   |   |   |   |
| 2009            |       | $          | 48,316     |                    | 17         | % | $ | 2,046 |   | 14 | % |
| 2008            |       | 33,679     |       | 12                      | %          | 2,074 |   | 15 | % |
| 2007            |       | 29,461     |       | 13                      | %          | 1,521 |   | 11 | % |
|                 |            |            |            |                         |            |  |  |  |  |  |  |

 

9.             **Benefit Plans**

** **

Undera collective bargaining agreement, the Company contributes to a multi-employerpension plan for the benefit of certain employees who are union members.  A separate actuarial valuation for this planis not made for the Company. Accordingly, information with respect to accumulated plan benefits andnet assets available for benefits is not available.  Under the Employee Retirement Income SecurityAct of 1974, as amended in 1980, an employer, upon withdrawal from amulti-employer plan, is required, in certain cases, to continue funding itsproportionate share of the plan’s unfunded vested benefits.  The Company’s contribution rate is afixed-dollar amount per eligible employee. The Company made total contributions to the union plan of $103, $109 and$119 in fiscal years 2009, 2008 and 2007, respectively.

 

32

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

9.             **Benefit Plans****(cont.)**

 

TheCompany has an elective 401(k) retirement plan for employees not coveredby a collective bargaining agreement. Under the plan, the Company matches 50% of each participating employee’scontributions.  The Company’scontribution is limited to 2% of the participating employee’s salary.  Additional contributions may be made at thediscretion of the Company’s Board.  TheCompany made matching contributions of $195, $191 and $131 in fiscal years2009, 2008 and 2007, respectively.  Nodiscretionary Company contributions have been made to this plan.

 

TheCompany does not provide postretirement medical or other benefits to employees.

 

10.       **Commitments and Contingencies**

** **

TheCompany leases certain of its buildings, equipment and vehicles undernon-cancelable operating leases.  Theconsolidated statements of operations include rental expense relating to theseoperating leases of $1,429, $870 and $1,048 in fiscal years 2009, 2008 and2007, respectively.

 

AtMarch 28, 2009, futureminimum payments under noncancelable operating leases were as follows:

 
| 2010   |   | $      | 1,464  |   |
|--------|--------|--------|--------|--------|
| 2011   |   | 1,282  |   |
| 2012   |   | 1,153  |   |
| 2013   |   | 780    |   |
| 2014   |   | 99     |   |
|   |   |   |   |
|   |   | $      | 4,778  |   |

 

Inprevious years, the Company was involved in purported class action litigationbrought on by several independent growers. As of March 28, 2009, theCompany continues to vigorously defend the two remaining grower lawsuits, both ofwhich are pending on appeals by the growers, after summary judgment was grantedin favor of the Company.  The Company hasnot accrued any losses in connection with the remaining lawsuits.

 

TheCompany is involved in various legal actions arising in the normal course ofbusiness.  In the opinion of management,the ultimate resolution of these matters will not have a material adverseeffect on the Company’s financial position or results of operations.

 

AtMarch 28, 2009, the Company had a total of 1,865 employees.  Of this total, 1,672 are hourly workers and193 are salaried.  Approximately 34% ofthe Company’s hourly employees are represented by a union.  None of the Company’s salaried employees arerepresented by a union.  The laboragreement has been in existence for over 20 years.  A renewal was renegotiated for the previousagreement which had expired on October 31, 2008.  The new agreement was ratified by the unionon February 7, 2009, and it will expire on October 31, 2011.

 

33

----

**Table of Contents**

** **

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

11.**      ****Concentrations of Credit Risk**

** **

Financialinstruments which potentially subject the Company to concentrations of creditrisk consist primarily of trade receivables or other financial instruments witha variety of customers and cash and cash investment deposited with financialinstitutions.

 

Concentrationsof credit risk, with respect to accounts receivable and other financialinstruments, are limited because a large number of geographically diversecustomers make up the Company’s customer base, thus spreading the trade creditrisk.  The Company controls credit riskthrough credit approvals, credit limits and monitoring procedures.  The Company performs ongoing creditevaluations of its customers, but generally does not require collateral tosupport accounts receivable.

 

TheCompany, at various times through the years, maintained cash balances withcertain financial institutions in excess of Federal Deposit InsuranceCorporation insured limits.  As of March 28, 2009, and March 29, 2008, the Company had$996 and $1,044, respectively, in financial institutions in excess of federallyinsured amounts.

 

12.       **CapitalResources**

** **

TheCompany sustained a loss of $17,880 before income taxes during the most recentyear and has had negative cash flows from operations during each of the last threeyears.  In addition, the Company hasreceived modifications to certain debt covenants.  At March 28, 2009, the Company had cashand cash equivalents of $1,246, stockholders equity of $31,984, and availableborrowings under their line of credit agreement of $7,350.  The Company believes cash flows fromoperations and financing commitments will be sufficient to meet its capitalresources and liquidity needs over the next year.  Management has also developed plans toimprove plant operating results and efficiency in order to increase overallmargins.

 

34

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

13.       **Comprehensive Income**

** **

Comprehensiveincome includes net earnings and all other changes in equity during a periodexcept those resulting from investments by or distributions tostockholders.  Other comprehensive incomefor all periods presented consists of fair value adjustments associated withcash flow hedges pursuant to SFAS No. 133, “Accounting for DerivativeInstruments and Hedging Activities.”

 
| ** **                        | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                              |       |     |       |     |       |     |       |
| Net income (loss)                 |       | $        | (11,494    | )        | $          | (773     | )          | $ | 559 |   |
| Cash flow hedges                  |       | (1,633   | )          | 65       |       | —   |       |
| Reclassification to net earnings  |       | (386     | )          | 833      |       | —   |       |
| Tax (expense) benefit             |       | 727      |       | (468     | )          | —   |       |
|                              |       |     |       |     |       |     |       |
| Total comprehensive income (loss) |       | $        | (12,786    | )        | $          | (343     | )          | $ | 559 |   |

 

Priorto the end of the second quarter of 2009, the Company held commodity futurescontracts which were designated as a cash flow hedges, whereby the contractswere recorded at fair value on the consolidated balance sheets as either anasset or liability with any changes in fair value recorded in accumulated othercomprehensive income (loss).  In a cashflow hedge, a futures contract would exactly match the pricing date of therelevant anticipated inventory purchases. Through the end of the second quarter 2009, the Company continued to beable to match the futures contract with the anticipated inventory purchases,therefore, entering into an effective hedge transaction.  However, due to the volatility of the grainmarkets, the Company concluded it was no longer practical to keep the futures.

 

Asa result, the Company voluntarily discontinued hedge accounting in the secondquarter of 2009 by de-designating the previously defined hedgerelationship.  The de-designation of thecash flow hedge was done in accordance with Derivatives Implementation Group (“DIG”)Issue Nos. G3, G17, G18 and G20, which generally require that the netderivative gain or loss related to the discontinued cash flow hedge shouldcontinue to be reported in accumulated other comprehensive income (loss),unless it is probable that the forecasted transaction will not occur by the endof the originally specified time period or within an additional two-monthperiod of time thereafter.  As such theCompany continues to hold inventory purchase agreements in excess of futurescontracts and have no indication that the futures commitment on the hedgedinventory purchases is in jeopardy of discontinuing.  Therefore, the deferred losses related to thederivative that were de-designated were not recognized immediately and areexpected to be reclassified into earnings during the contractual terms of theinventory purchases.  The Company expectspretax losses totaling $1,347, recorded as accumulated other comprehensive income(loss) at March 28, 2009 related to cash flow hedges, will be recognizedwithin the next 12 months.  The Companygenerally has no hedge cash flows related to commodities beyond 12 months.

 

35

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

14.       **Quarterly Financial Data(Unaudited)**

** **

Quarterlyfinancial data is as follows (in thousands, except per share data):

 
| ** **                      | ** ** | ** **    | ** ** | ** **    | ** ** | ** ** | ** ** | **Earnings (Loss)** | ** ** |
|---------------------------------|------------|---------------|------------|---------------|------------|------------|------------|---------------------|------------|
| ** **                      | ** ** | ** **    | ** ** | **Operating** | ** ** | **Net**    | ** ** | **Per Share**       | ** ** |
| ** **                      | ** ** | ** **    | ** ** | **Income**    | ** ** | **Income** | ** ** | **(Basic and**      | ** ** |
| ** **                      | ** ** | **Net Sales** | ** ** | **(Loss)**    | ** ** | **(Loss)** | ** ** | **Diluted)**        | ** ** |
| Fiscal year 2009 quarter ended: |       |          |       |          |       |       |       |                |       |
| June 28, 2008              |       | $             | 76,921     |          | $          | (4,179     | )          | $                   | (2,996     | ) | $ | (0.65 | ) |
| September 28, 2008         |       | 75,632        |       | (7,956        | )          | (5,483     | )          | (1.18               | )          |
| January 3, 2009            |       | 73,525        |       | (3,253        | )          | (2,520     | )          | (0.54               | )          |
| March 28, 2009             |       | 66,507        |       | (289          | )          | (495       | )          | (0.11               | )          |
|                            |       |          |       |          |       |       |       |                |       |
| Fiscal year 2008 quarter ended: |       |          |       |          |       |       |       |                |       |
| June 30, 2007              |       | $             | 71,862     |          | $          | 2,744      |       | $                   | 1,536      |   | $ | 0.33 |   |
| September 29, 2007         |       | 76,067        |       | 2,499         |       | 1,375      |       | 0.29                |       |
| December 29, 2007          |       | 66,920        |       | (2,485        | )          | (1,769     | )          | (0.38               | )          |
| March 29, 2008             |       | 68,800        |       | (2,623        | )          | (1,915     | )          | (0.41               | )          |
|                            |       |          |       |          |       |       |       |                |       |
| Fiscal year 2007 quarter ended: |       |          |       |          |       |       |       |                |       |
| July 1, 2006               |       | $             | 54,277     |          | $          | (3,120     | )          | $                   | (1,762     | ) | $ | (0.37 | ) |
| September 30, 2006         |       | 62,017        |       | (3,609        | )          | 6,499      |       | 1.37                |       |
| December 30, 2006          |       | 56,374        |       | (4,673        | )          | (3,157     | )          | (0.67               | )          |
| March 31, 2007             |       | 61,268        |       | (1,210        | )          | (1,021     | )          | (0.21               |       |

 

15.       **New Accounting Pronouncements**

** **

InSeptember 2006, the FASB issued SFAS No. 157, “Fair ValueMeasurements.”  SFAS No. 157provides guidance for using fair value to measure assets and liabilities.  This standard also responds to investors’requests for expanded information about the extent to which companies measureassets and liabilities at fair value, the information used to measure fairvalue and the effect of fair value measurements on earnings.  SFAS No. 157 applies whenever otherstandards require (or permit) assets or liabilities to be measured at fairvalue.  Beginning September 28,2008, the Company partially applied SFAS No. 157 as allowed by FASB StaffPosition (“FSP”) SFAS No. 157-2, which delayed the effective date of SFAS No. 157for nonfinancial assets and liabilities. As of September 28, 2008, the Company applied the provisions ofSFAS No. 157 to the financial instruments and the impact was notmaterial.  Under FSP SFAS No. 157-2,the Company will be required to apply SFAS No. 157 to the nonfinancialassets and liabilities at the beginning of fiscal 2010.  The Company is currently reviewing theapplicability of SFAS No. 157 to the nonfinancial assets and liabilities,as well as the potential impact on the consolidated financial statements.

 

36

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

15.       **NewAccounting Pronouncements****(cont.)**

 

InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Optionfor Financial Assets and Financial Liabilities, including an amendment of SFAS No. 115.”  This statement provides companies with anoption to report selected financial assets and liabilities firm commitments,and nonfinancial warranty and insurance contracts at fair value on acontract-by-contract basis, with changes in fair value recognized in earningseach reporting period.  At September 28,2008, the Company did not elect the fair value option under SFAS No. 159and, therefore, there was no impact to the consolidated financial statements.

 

InDecember 2007, the FASB issued SFAS No. 141R, “Business Combinations.”  SFAS No. 141R establishes principles andrequirements for how an acquirer in a business combination: 1) recognizes andmeasures in its financial statements identifiable assets acquired, liabilitiesassumed, and any noncontrolling interest in the acquiree; 2) recognizes andmeasures goodwill acquired in a business combination or a gain from a bargainpurchase; and 3) determines what information to disclose to enable users of thefinancial statements to evaluate the nature and financial effects of a businesscombination.  SFAS No. 141R iseffective for business combinations for which the acquisition date is on orafter the beginning of the first annual reporting period beginning on or after December 15,2008; therefore, the Company expects to adopt SFAS No. 141R for anybusiness combinations entered into beginning in fiscal 2010.

 

InDecember 2007, the FASB issued SFAS No. 160, “NoncontrollingInterests in Consolidated Financial Statements” — an amendment of AccountingResearch Bulletin (“ARB”) No. 51. This statement amends ARB No. 51 to establish accounting andreporting standards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary.  Itclarifies that a noncontrolling interest in a subsidiary is an ownershipinterest in the consolidated entity that should be reported as equity in theconsolidated financial statements. Before this statement was issued, limited guidance existed for reportingnoncontrolling interests.  As a result,considerable diversity in practice existed. So-called minority interests were reported in the consolidated statementof financial position as liabilities or in the mezzanine section betweenliabilities and equity.  This statementimproves comparability by eliminating that diversity.  This statement is effective for fiscal years,and interim periods within those fiscal years, beginning on or after December 15,2008 (that is, January 1, 2009, for entities with calendar yearends).  Earlier adoption isprohibited.  The Company’s managementdoes not anticipate this pronouncement will have a significant impact on theconsolidated financial statements.

 

InMarch 2008, the FASB issued SFAS No. 161, “Disclosures aboutDerivative Instruments and Hedging Activities” — an amendment of SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities.”  SFAS No. 161 is intended to improvefinancial reporting transparency regarding derivative instruments and hedgingactivities by providing investors with a better understanding of their effectson financial position, financial performance and cash flows.  SFAS No. 161 applies to all entities andis effective for consolidated financial statements issued for fiscal years andinterim periods beginning after November 15, 2008 with early adoptionencouraged.  The Company’s managementdoes not anticipate this pronouncement will have a significant impact on theconsolidated financial statements.

 

37

----

Table of Contents

 

**CAGLE’S, INC. AND SUBSIDIARY**

** **

**Notes to Consolidated Financial Statements**

 

**March 28, 2009, March 29, 2008 and****March 31, 2007**

 

**(In Thousands)**

 

15.       **NewAccounting Pronouncements****(cont.)**

 

InApril 2008, the FASB issued FSP SFAS No. 142-3, “Determination of theUseful Life of Intangible Assets.”  FSPSFAS No. 142-3 requires companies estimating the useful life of arecognized intangible asset to consider their historical experience in renewingor extending similar arrangements or, in the absence of historical experience,to consider assumptions that market participants would use about renewal orextension as adjusted for SFAS No. 142, “Goodwill and Other IntangibleAssets,” entity-specific factors.  FSPSFAS No. 142-3 is effective for fiscal years beginning after December 15,2008 (fiscal 2010 for the Company).  TheCompany’s management does not anticipate this pronouncement will have asignificant impact on the consolidated financial statements.

 

InMay 2008, the FASB issued SFAS No. 162, “The Hierarchy of GenerallyAccepted Accounting Principles.”  SFAS No. 162identifies the sources of accounting principles and the framework for selectingthe principles used in the preparation of financial statements ofnongovernmental entities that are presented in conformity with generallyaccepted accounting principles (the “GAAP hierarchy”).  SFAS No. 162 will become effective 60days following the Securities and Exchange Commission’s approval of the PublicCompany Accounting Oversight Board amendments to AU Section 411, TheMeaning of “Present Fairly in Conformity With Generally Accepted AccountingPrinciples.”  The Company does not expectthe adoption of SFAS No. 162 to have a material effect on its results ofoperations and financial position.

 

38

----

Table of Contents

 

**SCHEDULE II — Valuation and Qualifying Accounts**

** **
| **Col A**                                              | ** ** | **Col B**        | ** ** | **Col C**      | ** ** | **Col D**    | ** ** | **Col E**      | ** ** |
|--------------------------------------------------------|------------|------------------|------------|----------------|------------|--------------|------------|----------------|------------|
| ** **                                             | ** ** | ** **       | ** ** | **ADDITIONS**  | ** ** | ** **   | ** ** | ** **     | ** ** |
| ** **                                             | ** ** | **Balance at**   | ** ** | **Charged to** | ** ** | **Charged**  | ** ** | ** **     | ** ** | **Balance** | ** ** |
| ** **                                             | ** ** | **Beginning of** | ** ** | **Costs and**  | ** ** | **to Other** | ** ** | ** **     | ** ** | **at end** | ** ** |
| **DESCRIPTION**                                        | ** ** | **Period**       | ** ** | **Expenses**   | ** ** | **Accounts** | ** ** | **Deductions** | ** ** | **of Period** | ** ** |
| Year  ended March 28, 2009                        |       |             |       |           |       |         |       |           |       |   |   |
| Reserves  and Allowances deducted from asset accounts: |       |             |       |           |       |         |       |           |       |   |   |
| Allowance  for doubtful accounts                       |       | $                | 637        |           | $          | —       |       | $              | —     |   | $ | 451 |   | $ | 186 |   |
| Year  ended March 29, 2008                        |       |             |       |           |       |         |       |           |       |   |   |
| Reserves  and Allowances deducted from asset accounts: |       |             |       |           |       |         |       |           |       |   |   |
| Allowance  for doubtful accounts                       |       | $                | 662        |           | $          | —       |       | $              | —     |   | $ | 25 |   | $ | 637 |   |
| Year  ended March 31, 2007                        |       |             |       |           |       |         |       |           |       |   |   |
| Reserves  and Allowances deducted from asset accounts: |       |             |       |           |       |         |       |           |       |   |   |
| Allowance  for doubtful accounts                       |       | $                | 320        |           | $          | 517          |       | $              | —     |   | $ | 175 |   | $ | 662 |   |

 

**Item 9:  Changes in andDisagreements with Accountants on Accounting and Financial Disclosure**

 

There have been no changes in accountantsand no disagreements with accountants on accounting or financial disclosurematters.

 

**Item 9A:  Controls andProcedures**

 

**(a)****                               ****Evaluation of DisclosureControls and Procedures**

 

The Company’smanagement, with the participation of the Company’s President and ChiefExecutive Officer and Chief Financial Officer, evaluated the effectiveness ofthe Company’s disclosure controls and procedures (as defined in SecuritiesExchange Act of 1934 (“Exchange Act”) Rules 13a-15(e) or 15d-15(e))as of the end of the period covered by this report as required by paragraph (b) ofExchange Act Rules 13a-15 or 15d-15. Based upon that evaluation, the President and Chief Executive Officerand Chief Financial Officer concluded that the Company’s disclosure controlsand procedures are effective in providing reasonable assurance that informationrequired to be disclosed by the Company in reports that it files or submitsunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in the Securities and Exchange Commission’s rules andprocedures.

 

**(b)****                               ****Management’s Report onInternal Control over Financial Reporting**

 

Management isresponsible for establishing and maintaining adequate internal control overfinancial reporting of the Company. Internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith accounting principles generally accepted in the United States of America.

 

The Company’sinternal control over financial reporting includes those policies andprocedures that (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the Company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with accounting principles generallyaccepted in the United States of America, and that receipts and expenditures ofthe Company are being made only in accordance with authorizations of managementand directors of the Company; and (iii) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use ordisposition of the Company’s assets that could have a material effect on thefinancial statements.

 

Because of itsinherent limitations, internal control over financial reporting may not preventor detect misstatements. Also, projections of any evaluation of effectivenessto future periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

 

Managementconducted an evaluation of the effectiveness of internal control over financialreporting based on the framework in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the TreadwayCommission.  Based on this evaluation,management concluded that the Company’s internal control over financialreporting was effective as of March 28, 2009.

 

39

----

Table of Contents

 

**(c)****                               ****Changes in InternalControl over Financial Reporting**

 

There was nochange in the Company’s internal control over financial reporting that occurredduring the fourth quarter of fiscal year 2009 that has materially affected, oris reasonably likely to materially affect, the Company’s internal control overfinancial reporting.  During the fiscalyear ended March 28, 2009, management implemented several controlsregarding financial reporting in response to material weaknesses that wereidentified during the prior year.

 

**(d)****                               ****Integrated Audit ofFinancial Statements**

 

Thisannual report does not include an attestation report of the Company’sregistered public accounting firm regarding internal control over financialreporting.  The Company’s registeredpublic accounting firm will perform an audit of internal control over financialreporting that is integrated with the audit of financial statements of and forthe fiscal year ended April 3, 2010.

 

**Item 9B:  OtherInformation**

 

None

 

40

----

Table of Contents

** **

**PART III**

 

**Item 10:  Directors,Executive Officers and Code of Ethics**

 

Theinformation required by this item is included in the Company’s Proxy Statementfor the Annual Meeting of Stockholders to be held July 17, 2009 and isincorporated herein by reference.  TheCompany has adopted a Code of Ethics, which applies to the Chief ExecutiveOfficer, Chief Financial Officer and Principal Accounting Officer.  The full text of the Code of Ethics wasincluded as an exhibit with the 2004 annual report.

 

**Item 11:  ExecutiveCompensation**

 

Theinformation required by this item is included in the Company’s Proxy Statementfor the Annual Meeting of Stockholders to be held July 17, 2009 and isincorporated herein by reference.

 

**Item 12:  SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters**

 

Theinformation required by this item is included in the Company’s Proxy Statementfor the Annual Meeting of Stockholders to be held July 17, 2009 and isincorporated herein by reference.

 

**Item 13:  CertainRelationships and Related Transactions**

 

Theinformation required by this item is included in the Company’s Proxy Statementfor the Annual Meeting of Stockholders to be held July 17, 2009 and isincorporated herein by reference.

 

**Item 14.  PrincipalAccountant Fees and Services.**

 

Theinformation required by this item is included in the Company’s Proxy Statementfor the Annual Meeting of Stockholders to be held on July 17, 2009 and isincorporated herein by reference.

 

41

----

Table of Contents

 

**PART IV**

 

**Item 15:  Exhibits andFinancial Statement Schedules**

 

Thefollowing documents are filed as part of this report:

 

**(a)1.****                     ****Financial Statements**

 

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

 

ConsolidatedBalance Sheets as of March 28, 2009 and March 29, 2008

 

ConsolidatedStatements of Operations for the Years Ended March 28, 2009, March 29,2008 and March 31, 2007

 

ConsolidatedStatements of Stockholder’s Equity for the Years Ended March 28, 2009, March 29,2008 and March 31, 2007

 

ConsolidatedStatements of Cash Flows for the Years Ended March 28, 2009, March 29,2008 and March 31, 2007

 

Notesto Consolidated Financial Statements as of and for the Years Ended March 28,2009, March 29, 2008 and March 31, 2007

 

**(a)2.****                     ****Financial Statement Schedules**

 

The following financial statement schedules arefiled as part of this report:

Report of Independent Registered PublicAccounting Firm

Schedule II — Valuation and Qualifying Accounts

 

**(a)3.****                     ****Exhibits**

 

3.1 Articlesof Incorporation of the Registrant. (4)

3.2 Bylawsof the Registrant. (2)

13.2 Cagle’s, Inc. Proxy statements forRegistrant’s 2009 annual meeting of shareholders. (1)

14.1 Code of Ethics. (3)

23.1 Consent of independent registered publicaccounting firm, FROST, PLLC. (1)

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

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

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

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

99.1 Audited financial statements ofunconsolidated affiliates: Cagle’s Keystone Foods, L.L.C. for 08/15/06.

(FROST, PLLC, formerly Moore Stephens Frost, PLC)  (5)

 

----

(1) Filed herewith.

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

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

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

(5) Previously filed and incorporated by reference herein from the Registrant’s Form 10-Kfor the year ended March 31, 2007.

 

42

----

Table of Contents

 

**Signatures**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 

Cagle’s, Inc.

 
| BY:    | /s/  J. Douglas Cagle                           |   |
|--------|-------------------------------------------------|--------|
|   | Chairman, Chief Executive Officer and President |   |
|   | June 11, 2009                              |   |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report issigned below by the following persons on behalf of the registrant and in thecapacities indicated and on June 11, 2009:

 
| /s/  J. Douglas Cagle    |   | Director  and Chairman, Chief Executive Officer and President      |
|--------------------------|--------|--------------------------------------------------------------------|
| /s/  G. Bland Byrne      |   | Director                                                           |
| /s/  Candace Chapman     |   | Director                                                           |
| /s/  Panos J. Kanes      |   | Director                                                           |
| /s/  Edward J Rutkowski  |   | Director                                                           |
| /s/  Mark M. Ham IV      |   | Director  and Executive Vice President and Chief Financial Officer |
| /s/  James David Cagle   |   | Director  and Vice President                                       |
| /s/ George Douglas Cagle |   | Director and Vice  President                                       |

 

43

----

Table of Contents

 
| ***Officers and  Directors***                                | *** ***                                    |
|--------------------------------------------------------------|-------------------------------------------------|
|                                                         |                                            |
| **Cagle’s, Inc.**                                  | ** **                                      |
| **Officers**                                                 | ** **                                      |
|                                                         |                                            |
| **J. DOUGLAS  CAGLE**                                        | ** **                                      |
| Chairman, Chief Executive  Officer                           |                                            |
| and President                                                |                                            |
|                                                         |                                            |
| **MARK M.  HAM IV**                                          | **Subsidiary**                                  |
| Executive Vice President  and CFO                            | Cagle Farms, Inc.                          |
|                                                         |                                            |
| **A. BRAD  HARP**                                            | **Officers**                                    |
| Vice President of Live  Operations                           | **J. DOUGLAS  CAGLE**                           |
|                                                         | Chairman, Chief Executive  Officer              |
| **RORY M.  MORRIS**                                          | and President                                   |
| Vice President of Plant  Operations                          |                                            |
|                                                         | **A. BRAD  HARP**                               |
| **TROY DALE  TOLBERT**                                       | Vice President of Live  Operations              |
| Vice President of Sales and  Marketing                       |                                            |
|                                                         | **MARK M.  HAM IV**                             |
| **GEORGE L.  PITTS**                                         | Executive Vice  President & CFO        |
| Corporate Secretary and  Treasurer                           |                                            |
| Vice President of  Accounting                                | **GEORGE L.  PITTS**                            |
|                                                         | Corporate Secretary and  Treasurer              |
| **JAMES  DAVID CAGLE**                                       | Vice President of  Accounting                   |
| Vice President                                               |                                            |
|                                                         | **Board of  Directors**                         |
| **GEORGE  DOUGLAS CAGLE**                                    | ** **                                      |
| Vice President                                               | **J. DOUGLAS  CAGLE**                           |
|                                                         | Chairman, Chief Executive  Officer              |
| **Board of  Directors**                                      | and President,  Cagle’s, Inc./        |
|                                                         | Cagle Farms, Inc.                          |
| **J. DOUGLAS  CAGLE**                                        | ** **                                      |
| Chairman, Chief Executive  Officer                           | **MARK M.  HAM IV**                             |
| and President,  Cagle’s, Inc.                      | Executive Vice President &  CFO        |
|                                                         | Cagle’s, Inc./Cagle  Farms, Inc. |
| **GEORGE  DOUGLAS CAGLE**                                    | ** **                                      |
| Vice President,  Cagle’s, Inc.                     | **GEORGE  DOUGLAS CAGLE**                       |
| ** **                                                   | Vice President                                  |
| **JAMES  DAVID CAGLE**                                       | ** **                                      |
| Vice President,  Cagle’s, Inc.                     |                                            |
|                                                         |                                            |
| **CANDACE  CHAPMAN**                                         | ** **                                      |
| Director of Marketing, Real  Estate Management Services, LLC |                                            |
|                                                         |                                            |
| **MARK M.  HAM IV**                                          | ** **                                      |
| Executive Vice President  and CFO, Cagle’s, Inc.   |                                            |
|                                                         |                                            |
| **PANOS  KANES**                                             | ** **                                      |
| Partner Kanes &  Benator, Attorneys at Law, LLC     |                                            |
| Partner Kanes,  Benator & Company, LLC - CPAs       |                                            |
|                                                         |                                            |
| **G. BLAND  BYRNE**                                          | ** **                                      |
| Principal, Byrne,  Davis & Hicks, P.C.              |                                            |
|                                                         |                                            |
| **EDWARD J.  RUTKOWSKI**                                     | ** **                                      |
| Managing Director,  I-ASSURANCE                              |                                            |
| President of Database  Georgia, Inc.                    |                                            |
|                                                         |                                            |
| **Audit  Committee**                                         | ** **                                      |
|                                                         |                                            |
| **CANDACE  CHAPMAN,**Chair                                   | ** **                                      |
| **PANOS  KANES**                                             | ** **                                      |
| **EDWARD J.  RUTKOWSKI**                                     | ** **                                      |

 

----

Table of Contents

 

**Annual Stockholders’ Meeting**

 

The Annual Stockholders’ Meeting will be conducted atthe Corporate Headquarters, 1385 Collier Road NW, Atlanta, Georgia, at 11:00 A.M.on Friday, July 17, 2009.

 

**Form 10-K**

 

The Form 10-K Annual Report for 2009, as filed bythe Company with the Securities and Exchange Commission, is available toCagle’s, Inc. stockholders after June 17, 2009 on our website www.cagles.net or request in writing to, MARK M. HAM IV, Executive Vice President andCFO, Cagle’s, Inc., 1385 Collier Road NW, Atlanta, Georgia 30318

 

**General Information**

 

Registrar and Transfer Agent

Computershare InvestorServices, LLC

Golden, CO

 

Legal Counsel

Byrne, Davis &Hicks, P.C.

Atlanta, GA

 

Independent Registered Public Accounting Firm

Frost, PLLC

Little Rock, AR

 

**Facilities**

 

Corporate Headquarters

1385 Collier Road NW

Atlanta, Georgia 30318

 

COLLINSVILLE, Alabama

Processing, Further Processing, Distribution &Cold Storage Facility

 

ATLANTA, Georgia

Distribution, Further Processing & ColdStorage Facility

 

DALTON, Georgia

Hatchery & Growout

 

PINE MOUNTAIN VALLEY,Georgia

Processing, Further Processing & Cold StorageFacility

 

ROCKMART, Georgia

Feed Mill

 

For current financial andcompany information, visit our website at www.cagles.net

 

----