Cagle's files for Chapter 11
Oct. 20, 2011
by Eric Schroeder
ATLANTA — Cagle’s, Inc., a mid-size chicken processor, announced that it and its wholly-owned subsidiary Cagle’s Farms, Inc. have filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Georgia in Atlanta. In addition to the filing, the company said it expects to receive court approval for a debtor-in-possession financing facility from AgSouth Farm Credit, ACA.
Cagle’s said normal operations and customer service will continue without disruption, including sales, order processing and delivery.
In announcing the filing, Cagle’s cited severe stress in the poultry industry over the past few years, as historically high corn and soybean meal prices coupled with sagging chicken prices caused by an oversupply of broilers adversely have affected earnings. As a result, Cagle’s said it has incurred significant operating losses that have depleted its liquidity and working capital position.
The company’s working capital as of the year ended April 2, 2011, was $10.3 million, which compared with working capital of $16.1 million in the year ended April 3, 2010.
In the first quarter ended July 2, Cagle’s sustained a loss of $5,735,000, which compared with net income of $3,478,000 in the first quarter of fiscal 2011. The company also suffered an operating loss during the period of $8,537,000, which compared with operating income of $5,811,000 in the same period a year ago. Net sales were $81,873,000, up 4% from $78,571,000.
“After careful consideration we concluded that a Chapter 11 restructuring represents the best long-term solution for Cagle’s, Inc. and Cagle’s Farms, Inc.,” said J. Douglas Cagle, chairman, president and chief executive officer. “It is our goal to reach an agreement with our creditors in a quick and efficient manner, allowing us to restructure our debt with minimal disruption to our operations.”
The company has not set a target date for emergence from Chapter 11, but Mr. Cagle stressed that the company’s strategy is to move quickly.
“There is much work ahead,” he said, “but time and time again, our employees have proven their ability to face significant challenges and handle change. By working together, we can preserve Cagle’s and its future.”