Edgar Filing: CAGLES INC

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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(Mark One)

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

For the quarterly period ended December 29, 2007

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

For the transition period from to

Commission file number 1-7138

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CAGLES, INC.

(Exact name of Registrant as specified in its charter)

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GEORGIA 58-0625713

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

incorporation or organization) identification no.)

2000 Hills Ave., Atlanta, Ga, 30318

(Address of principal executive offices) (Zip code)

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

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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. X Yes ____ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.. (Check one):

Large accelerated filer _____ Accelerated filer _____ Non-accelerated filer X .

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes X No

The Registrant had 4,664,198 shares of Class A Common Stock, outstanding as of December 29, 2007.

PART 1. FINANCIAL INFORMATION

Item1. Financial Statements

Cagle's, Inc. & Subsidiary
Condensed Consolidated Balance Sheets
December 29, 2007 and March 31, 2007
(In Thousands, Except Par Value) (Unaudited)

		December 29, 2007	March 31, 2007
Assets
Current assets
	Cash and cash equivalents	$ 2,481	$ 3,499
	Trade accounts receivable, less allowance for doubtful accounts
	of $649 and $662 in 2007 and 2006, respectively	14,037	13,737
	Inventories	25,408	22,943
	Refundable income taxes, current portion	109	492
	Other current assets	590	468
Total current assets		42,625	41,139

Property, plant and equipment, at cost:
	Land	1,976	1,976
	Buildings and improvements	59,067	59,067
	Machinery, furniture and equipment	39,575	38,773
	Vehicles	4,614	4,491
	Construction in progress	1,761	441
		106,993	104,748
	Less accumulated depreciation	67,838	65,475
Property, plant and equipment, net		39,155	39,273

Other assets
	Deferred income taxes	528	622
	Deferred financing costs, net	43	53
	Other assets	3,334	2,932
	Total other assets	3,905	3,607
Total assets		$ 85,685	$ 84,019

Liabilities and stockholders' equity
Current liabilities:
	Current maturities of long-term debt	$ 2,225	$ 2,098
	Accounts payable	14,762	13,581
	Accrued expenses	5,846	5,335
	Deferred income taxes	1,757	1,184
Total current liabilities		24,590	22,198

Long-term debt, less current maturties		14,783	16,467

Stockholders' equity:
	Preferred stock, $1 par value; 1,000 shares authorized, none issued	-	-
	Common stock, $1 par value; 9,000 shares authorized, 4,665 and 4,689
	shares issued at 12/29/2007 and 3/31/2007, respectively, and 4,664 and
	4,688 shares outstanding in 12/29/2007 and 3/31/2007, respectively	4,664	4,689
	Treasury stock, at cost	(80)	(80)
	Additional paid-in capital	3,658	3,816
	Retained earnings	38,070	36,929
Total stockholders' equity		46,312	45,354
Total liabilities and stockholders' equity		$ 85,685	$ 84,019

Cagle's, Inc. & Subsidiary
Condensed Consolidated Statements of Income
For the 13 and 39 weeks ended December 29, 2007
For the 13 and 39 weeks ended December 30, 2006
(In Thousands, except per share data)
(Unaudited)

	13 wks ended		13 wks ended		39 Weeks		39 Weeks
	12/29/2007		12/30/2006		12/29/2007		12/30/2006

Net sales	$	66,920	$	56,374	$	214,849	$	172,669
Costs and expenses:
Cost of sales		65,774		57,454		200,961		173,560
Selling and delivery		2,169		2,031		6,574		6,537
General and administrative		1,481		1,564		4,598		3,985
Other general expenses		(19)		(2)		(41)		(65)
Total costs and expenses		69,405		61,047		212,092		184,017

Income (loss) from operations		(2,485)		(4,673)		2,757		(11,348)

Other income (expense):
Interest expense		(346)		(408)		(1,069)		(1,675)
Other income, net		41		148		122		18,634

Earnings (loss) before equity in earnings of
unconsolidated affiliates and income taxes		(2,790)		(4,933)		1,810		5,611

Equity in earnings of unconsolidated affiliates		0		0		0		1,317
Income (loss) before income taxes		(2,790)		(4,933)		1,810		6,928

Income taxes provision (benefit)		(1,021)		(1,776)		668		5,348
Net income (loss)	$	(1,769)	$	(3,157)	$	1,142	$	1,580

Weighted average shares outstanding
-Basic		4,664		4,708		4,664		4,708
-Diluted		4,664		4,708		4,664		4,708

Net income (loss) per common share
-Basic	$	(0.38)	$	(0.67)	$	0.24	$	0.34
-Diluted	$	(0.38)	$	(0.67)	$	0.24	$	0.34
Dividends per common share	$	0.00	$	0.00	$	0.00	$	0.00

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

Cagle's, Inc. & Subsidiary
Condensed Consolidated Statements of Cash Flows
For the 39 weeks ended December 29, 2007 and December 30, 2006
(In Thousands) (Unaudited)

			12/29/2007		12/30/2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	1,141	$	1,580

	Depreciation		2,843		5,047
	Amortization		10		227
Gain on sale of property, plant and equipment			(41)		(65)
Gain on sale of unconsolidated affiliates			-		(18,323)
Income from unconsolidated affiliates, net of distributions			-		(943)
Deferred income taxes expense			-		5,378
Changes in operating assets and liabilities
	Trade accounts receivable, net		(300)		(137)
	Inventories		(2,465)		(2,501)
	Income taxes		1,050		1,021
	Other current assets		(524)		(731)
	Accounts payable		1,181		(1,931)
	Accrued expenses		511		545
Net cash provided (used) by operating activities			3,406		(10,833)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment			(2,731)		(335)
Proceeds from sale of property, plant and equipment			47		65
Proceeds from sale of unconsolidated affiliates			-		28,000
Repurchase of Stock			(183)		(283)
Increase in other assets			-		(277)
Net cash provided by (used in) investing activities			(2,867)		27,170

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt			(1,557)		(10,450)
Net cash used in financing activities			(1,557)		(10,450)
Net increase (decrease) in cash and cash equivalents			(1,018)		5,887
Cash and cash equivalents at beginning of period			3,499		1,078
Cash and cash equivalents at end of period		$	2,481	$	6,965
Supplementary disclosures of cash flow information
Cash paid during the period for interest		$	1,069	$	1,675

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

Cagle's, Inc. & Subsidiary

Notes to Condensed Consolidated Financial Statements

December 29, 2007

1. Basis of Presentation

Interim Period Accounting Policies

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments which are of a normal and recurring nature necessary to present fairly the consolidated financial position of Cagle's, Inc. and its wholly owned subsidiary Cagle Farms, Inc. (collectively, the "Company") as of December 29, 2007, and the results of their operations for the 13 and 39 weeks ended December 29, 2007 and the 13 and 39 weeks ended December 30, 2006. Results of operations for the 13 and 39 weeks ended December 29, 2007 are not necessarily indicative of results to be expected for the full fiscal year ending March 29, 2008.

The accompanying condensed consolidated balance sheet as of March 31, 2007, which has been derived from audited consolidated financial statements, and the unaudited interim condensed consolidated financial statements at December 29, 2007, and for the 13 and 39 weeks ended December 29, 2007 and December 30, 2006 of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements. Although the Company believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented for the interim periods not misleading, certain information and footnote information normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and these financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's annual report to shareholders for the fiscal year ended March 29, 2008.

The Company adopted the provisions of FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109,” on April 1, 2007. This Interpretation requires the Company to recognize in the consolidated financial statements only those tax positions determined to be “more likely than not” of being sustained upon examination based on the technical merits of the positions. The Company has not recorded a liability for unrecognized tax benefits as a result of the adoption of FIN 48 and there have been no changes in unrecognized tax benefits as of December 29, 2007. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has not recorded interest and penalties for unrecognized tax benefits as a result of the adoption of FIN 48 and there have been no changes as of December 29, 2007. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company’s federal income tax returns for 1997 through the current period remain subject to examination and the relevant state statutes vary. There are no current tax examinations in progress where the Company expects the assessment of any significant additional tax.

2. Computation of net income per share

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

	13 Weeks		13 Weeks		39 Weeks		39 Weeks
	ended		Ended		ended		ended
	12/29/2007		12/30/2006		12/29/2007		12/30/2006
Net Income as reported	$	(1,769)	$	(3,157)	$	1,141	$	1,580

Weighted Average Shares Outstanding
-Basic		4,664		4,708		4,664		4,708
-Diluted		4,664		4,708		4,664		4,708

Net Income Per Common Share
-Basic	$	(0.38)	$	(0.67)	$	0.24	$	.34
-Diluted	$	(0.38)	$	(0.67)	$	0.24	$	.34
Dividends Per Common Share	$	-	$	-	$	-	$	-

3. Investments in Unconsolidated Affiliates

The Company accounted for its investments in its unconsolidated affiliates using the equity method. The Company sold its affiliate on August 15, 2006.

	13 Weeks		13 Weeks		39 Weeks		39 Weeks
	12/29/2007		12/30/2006		12/29/2007		12/30/2006
Net sales	$	-	$	-	$	-	$	116,741
Gross profit		-		-		-		13,959
Operating income		-		-		-		7,558
Income before taxes		-		-		-		5,515
Net income	$	-	$	-	$	-	$	5,515

4. Inventories consisted of the following:

(In Thousands)

	December 29, 2007		March 31, 2007
Finished Product	$	5,500	$	4,485
Field Inventory and Breeders		13,764		12,860
Feed, Eggs, and Medication		4,850		4,450
Supplies		1,294		1,148
	$	25,408	$	22,943

5. Major accounting policies

Refer to the Company’s 2007 annual report on Form 10-K for a description of major accounting policies. There have been no material changes to these accounting policies.

6. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may vary from those estimates.

7. Treasury Stock

Beginning in 1990, the Board of Directors (the “Board”) authorized the purchase of up to $2.5 million of the Company’s stock on the open market. In February 2000, the Board increased the authorized amount to $15 million. During the 13 weeks ended December 29, 2007 no stock was purchased. During the 39 weeks ended December 29, 2007, the Company purchased 23,550 shares of its common stock under this program for an aggregate purchase price of $184 thousand. There remains $5.3 million authorized for purchase of the Company’s stock. The Company has accounted for these shares as being retired.

8. New Accounting Standards

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. This Interpretation requires that the Company recognize in the consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The Company adopted the provisions of FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109,” on April 1, 2007. This Interpretation requires the Company to recognize in the consolidated financial statements only those tax positions determined to be “more likely than not” of being sustained upon examination based on the technical merits of the positions. The Company has not recorded a liability for unrecognized tax benefits as a result of the adoption of FIN 48 and there have been no changes in unrecognized tax benefits as of December 29, 2007. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has not recorded interest and penalties for unrecognized tax benefits as a result of the adoption of FIN 48 and there have been no changes as of December 29, 2007. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company’s federal income tax returns for 1997 through the current period remain subject to examination and the relevant state statutes vary. There are no current tax examinations in progress where the Company expects the assessment of any significant additional tax.

In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements (“FAS 157”). FAS 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and expands on required disclosures about fair value measurement. FAS 157 is effective for the Company on April 1, 2008 and will be applied prospectively. The provisions of FAS 157 are not expected to have a material impact on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities–Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits companies to choose, at specified election dates, to measure eligible financial instruments and other financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected should be reported in earnings at each subsequent reporting date. The fair value option is applied instrument by instrument, is irrevocable and is applied only to entire instruments and not to portions of instruments. SFAS No. 159 is effective for the Company’s fiscal year beginning March 30, 2008, with early adoption permitted. The Company is in the process of evaluating the impact of adoption of SFAS No. 159.

9. Offer To Acquire The Publicly Held Shares Of The Company

On November 12, 2007 the Company received an acquisition proposal from a group consisting of James Douglas Cagle, the Company’s President and Chief Executive Officer, his two sons, who are both Vice Presidents of the company, and a limited liability company controlled by members of the Cagle family. The Cagle family group currently owns approximately 64% of the company's stock, and, pursuant to the proposal, the Cagle family group would acquire all of the other stock of the company, for $9.00 per share in cash. The company’s Board of Directors appointed a Special Committee of its independent directors to review the proposed transaction on behalf of the company’s minority shareholders. No assurance was given that any transaction would take place on these or any terms.

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

For the 13 and 39 weeks ended December 29, 2007

The disclosures in this quarterly report are complementary to those made in the company’s 2007 annual report on Form 10-K.

Results of Operations

Net sales for the third quarter of fiscal 2008 were $67 million compared with $56 million for the same period a year ago, an increase of 19%. For the quarter ended December 29, 2007 the Company’s net loss was ($1.8) million, or ($.38) per diluted share, as compared to ($3.2) million, or ($.67) per diluted share, for the third quarter of fiscal 2007, which ended December 30, 2006. Tonnage sold increased by 11% for the third quarter of 2008 as compared with the third quarter of 2007.

Net sales for the first nine months of fiscal 2008 were $215 million compared with $173 million for the same period a year ago, a increase of 24%. For the nine month period, net income was $1.1 million, or $.24 per diluted share, as compared to $1.6 million, or $.34 per diluted share, for the like period of fiscal 2007. Ready to cook pounds produced increased by 8% for the first nine months of 2008 as compared with the same period of 2007. Tonnage sold increased by 6% for the first nine months of 2008 as compared with the same period of 2007.

Overall revenue per pound for the Company’s poultry products for the third quarter of fiscal 2008 was $.67 as compared to $.65 for the same period of fiscal 2007. Market prices for the third quarter of fiscal 2008 versus the second quarter of fiscal 2008 were down with decreases of, (20%) for boneless breast, (21%) for breast tenders, (14%) for wings, (17%) for drums, and (12%) for leg quarters. Market prices for the third quarter of fiscal 2008 versus the same period last year were up with increases of, 15% for boneless breast, 17% for breast tenders, 18% for wings, 81% for drums, and 39% for leg quarters. Market prices for all products for the first nine months of fiscal 2008 versus the same period last year were up with increases of, 23% for boneless breast, 31% for breast tenders, 37% for wings, 32% for drums, and 48% for leg quarters.

For our third quarter, Cagle’s cost of sales increased 14.5% as compared to the same period last year. This is primarily due to a 23% increase in feed costs. For the nine month period, cost of sales increased 15.8%. This is primarily due to a 30% increase in feed costs.

Selling, Delivery and Administrative Expenses

As a group these expenses increased 1.5% and 6.2%, for the 13 and 39 weeks ended December 29, 2007 versus the 13 and 39 weeks ended December 30, 2006; the increases are primarily due to professional fees incurred for Sarbanes Oxley compliance and FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes” preparation.

Other General Expenses

As a group, these expenses decreased 583%, for the 13 weeks and decreased 37% for the 39 weeks ended December 29, 2007, versus the 13 and 39 weeks ended December 30, 2006. These changes are reflective of the sporadic occurrence of disposing of obsolete or unused fixed assets.

Interest Expense

Interest expense for the 13 and 39 weeks ended December 29, 2007 decreased by 15% and 36% over the same period of a year ago. This is reflective of decreased borrowings.

Other Income

Other income of $40 thousand during the 13 weeks and $148 thousand for the 39 weeks ended December 29, 2007 represents interest income. The sale of the Company’s minority interest in a joint venture was completed in the prior years second quarter generating a pretax profit of $18 million.

Equity in Earnings of Unconsolidated Affiliates

The Company had no earnings from unconsolidated affiliates in the 13 or 39 weeks ended December 29, 2007. On August 15, 2006, the Company sold the Company’s 30% interest in Cagle’s-Keystone, LLC for $28 million in cash to Grow-Out Holdings, LLC. Grow-Out Holdings, LLC owned the other 70% of Cagle’s-Keystone, LLC. The Company had no income from affiliates in the 13 week period ended December 30, 2006 and $1.3 million income from affiliates in the 39 week period ended December 30, 2006.

Income Taxes

The provision for income taxes reflects the Company's estimated liability for income taxes, net of any credits to which the Company may be entitled. The Company adopted the provisions of FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109,” on April 1, 2007. This Interpretation requires the Company to recognize in the consolidated financial statements only those tax positions determined to be “more likely than not” of being sustained upon examination based on the technical merits of the positions. The Company did not record a liability for unrecognized tax benefits as a result of the adoption of FIN 48 and there have been no changes in unrecognized tax benefits as of December 29, 2007. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has not recorded interest and penalties for unrecognized tax benefits as a result of the adoption of FIN 48 and there have been no changes as of December 29, 2007. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company’s federal income tax returns for 1997 through the current period remain subject to examination and the relevant state statutes vary. There are no current tax examinations in progress where the Company expects the assessment of any significant additional tax.

Financial Condition

As of December 29, 2007, the Company's working capital was $18 million and its current ratio was 1.73. The Company’s working capital at March 31, 2007 was $19 million and its current ratio was 1.85. The Company has reduced long term debt by $.5 million during the 13 weeks and by 1.6 million during the 39 weeks ended December 29, 2007. The Company has spent $.5 million in the 13 weeks and $2.7 million in the 39 weeks ended December 29, 2007 on capital projects. This has been funded through normal cash flow. The Company has an existing $10 million revolving credit facility which was untapped as of December 29, 2007.

We believe that our cash flow provided by operations will be adequate to cover our fiscal 2008 working capital needs, debt service requirements and planned capital expenditures to the extent such items are known or are reasonably determinable based on current business and market conditions. However, we may elect to finance certain of our capital expenditure requirements through borrowings under our credit facilities or operating leases.

Critical Accounting Policies and Estimates

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

Revenue Recognition.

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

Allowance for Doubtful Accounts.

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

Inventories.

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

Property, Plant and Equipment.

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

Contingent Liabilities.

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

Accrued Self Insurance.

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

Income Taxes.

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

Item 3: Quantitative and Qualitative Disclosures about Market Risk

Risk Factors

Industry cyclicality can affect our earnings, especially due to fluctuations in commodity prices of feed ingredients and chicken.

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

Leverage.

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

Additional Borrowings Available.

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

Contamination of Products.

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

Livestock and Poultry Disease.

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

Insurance.

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

Significant Competition.

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

Government Regulation.

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

new laws and regulations, or stricter interpretations of existing laws or regulations may materially affect our business or operations in the future.

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

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

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures.

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

Changes in internal controls.

The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated any changes in the Company’s internal control over financial reporting that occurred during the period covered by this quarterly report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II

Other Information

Item 1. Legal Proceedings

The Company is routinely involved in various lawsuits and legal matters on an ongoing basis as a result of day to day operations; however, the Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Company or its business.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

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

None

Item 5. Other Information

None.

Item 6. Exhibits

(a)The following exhibits are filed with this report.

3.1 Articles of Incorporation of the Registrant. (2)

3.2 Bylaws of the Registrant. (2)

14.1 Code of Ethics (3)

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

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)

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

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

(b) Reports on Form 8-K filed during the three months ended December 29, 2007

1. The Company filed an 8-K on November 01, 2007, to furnish a press release announcing its results of operations for the second

quarter of 2008.

2. The Company filed an 8-K on November 13, 2007, to announce receipt of an acquisition proposal from a group consisting of James Douglas Cagle, the company’s President and Chief Executive Officer, his two sons, who are both Vice Presidents of the company, and a limited liability company controlled by members of the Cagle family.

No other reports on Form 8-K were filed during the third quarter of ended December 29, 2007.

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(1) Filed herewith.

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

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

Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: 02/07/2008

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

Chairman and C.E.O. Chief Financial Officer