DESCRIPTION OF BUSINESS
Bridgford Foods Corporation and its subsidiaries manufacture and/or
distribute refrigerated, frozen and snack food products. The Company
markets its products throughout the United States. The Company sells its
products through wholesale outlets, restaurants and institutions. The
products are sold by the Company’s own sales force, brokers, cooperatives,
wholesalers and independent distributors. Products are currently sold
through approximately 25,700 retail food stores in forty-eight states within
the continental United States, Hawaii and Canada that are serviced by Company-owned service routes.
Company products are also sold throughout the country to approximately another 18,000 retail outlets and
19,000 restaurants and institutions.
The following summary represents the approximate percentage of net sales by class of product for each of the
last five fiscal years:
Products manufactured or processed by the
Company
Products manufactured or processed by others
Total
1997 1996 1995 1994 1993
82
18
83
17
85
15
87
13
89
11
100
100
100
100
100
COMMON STOCK AND DIVIDEND DATA
The common stock of the Company is traded in the national over-the-counter market and is authorized for
quotation on The Nasdaq National Market under the symbol “BRID”. The following table reflects the high
and low closing prices and cash dividends paid as quoted by Nasdaq for each of the last eight fiscal quarters
adjusted for the 10% stock dividend declared November 10, 1997.
----- Prices -----
Fiscal Quarter Ended
$High
$Low
Cash Dividends Paid
February 2, 1996
9 & 3/4 7 & 3/4
May 3, 1996
10 & 1/4 7 & 1/2
August 2, 1996
8 & 7/8 5 & 7/8
November 1, 1996
8 & 1/8 6 & 1/8
Jaunary 31, 1997
8 & 1/8 6 & 1/8
May 2, 1997
8 & 7/8 6 & 7/8
August 1, 1997
9 & 3/8 8 & 1/8
October 31, 1997
12 & 7/8 9 & 1/8
$.055
$.055
$.055
$.055
$.055
$.055
$.055
$.055
ANNUAL SHAREHOLDERS MEETING
The 1998 annual shareholders meeting will be held at the Four Points Sheraton (formerly Days Inn), 1500
South Raymond Avenue, Fullerton, California at 10:00 a.m. on Wednesday, March 11, 1998.
RECENT HISTORICAL TRENDS
TO OUR SHAREHOLDERS:
Bridgford Foods Corporation’s sales and earnings set new records in our 1997 fiscal year, the fifty-two weeks
ended October 31,1997. New efficiencies and increased productivity resulting from our capital expenditures
for plant and equipment in 1995 and 1996 enabled us to earn $6.6 million in 1997, an all-time high.
SALES, EARNINGS AND DIVIDENDS
Our 1997 fiscal year sales reached $127,859,491, eight percent greater than sales in 1996 and a historical high.
Strong sales gains were experienced in our frozen food, dry sausage and delicatessen foods divisions.
Warehouse club sandwich sales have also experienced positive expansion. On the cover of this report are
pictures of some of our sandwich products, including our two newest items: “Lower Fat” Turkey Breast &
Swiss Cheese and our new Breakfast Croissant with Egg, Ham and Cheese. We are also excited about the
potential of another new item, Bridgford “Bake-Off Biscuits.” They only require a small amount of cooking
by the end user for a perfect product every time.
Our dry sausage and meat snack businesses expanded significantly in 1997. We strengthened our national
position in both categories with Bridgford six-ounce pillow-pack sliced pepperoni gaining substantial market
share.
Net income in 1997 reached $6,605,354, seventeen percent more than 1996 earnings. We experienced some
relief from high raw material costs in the fourth quarter and expect this trend to continue in 1998. However,
heavy competition in all of our product sales areas required us to offer strong promotional programs and
forego price increases during 1997.
Cash dividends of twenty-four cents per share were paid in 1997. On November 10, 1997 your Board of
Directors authorized a ten- percent stock dividend and a regular quarterly cash dividend to be paid on all
shares outstanding after the stock dividend. The financial statements reflect historical earnings and dividends
based on the new number of shares outstanding.
FINANCIAL CONDITION
At the end of fiscal 1997, Shareholders’ Equity in Bridgford Foods Corporation had reached $44,605,782, a
gain of $4,350,091 over the prior year. Working capital increased by $5,435,968 to $29,682,086 during 1997.
Our current asset to current liability ratio improved to 3.6 to 1. The Company remained debt-free for the
eleventh consecutive year while $1,949,100 in capital improvements were made with internally generated
funds.
We continue to maintain a $2,000,000 line of credit with a major bank. These funds are available for possible
future business opportunities.
OPERATIONS
During 1997 we fully integrated our new North Carolina plant and our new automated Dallas freezer and
distribution facility into our national production and distribution system. This resulted in substantial
improvements in efficiency and productivity. Lower raw material costs in our bakery and meat operations
helped us to maintain operating margins, especially in the fourth quarter. We expect these trends to continue in
1998 as supplies of grain and meat become more abundant.
SUMMARY
We were honored in October of 1997 to have our Company receive the American Meat Institute Edward C.
Jones Community Service Award in recognition of the time and funds expended on community service
projects over the years. We feel a deep commitment to the communities where we work.
We believe 1998 will be another good year for our Company. We are positioned to increase our sales and
profits in all divisions of the business, and we have the modern facilities and good people to carry out this
plan.
We thank our directors, customers, suppliers, associates and shareholders for a record 1997.
Respectfully submitted,
Allan L. Bridgford
Chairman
Robert E. Schulze
President
BRIDGFORD FOODS CORPORATION FINANCIAL SUMMARY
Fiscal Year Ended
October 31
1997
November 1
1996
%
Change
Net sales
Income before taxes
Net income
Net income per share
Cash dividends per share
Working capital
Total assets
Shareholders' equity
Return on average equity
$127,859,491
10,654,354
6,605,354
.64
.22
29,682,086
65,663,892
44,605,782
15.57%
$118,316,470
9,116,383
5,651,383
.55
.22
24,246,118
58,277,948
40,255,691
14.66%
8.1
16.9
16.9
16.9
-
22.4
12.7
10.8
http://www.bridgford.com/investor/1997/page02.htm[8/19/2015 12:01:04 PM]
SELECTED FINANCIAL DATA
November 1
1996
October 31
1997
November 3
1995*
October 28
1994
October 29
1993
Net Sales
Net Income
Net Income Per Share **
Current Assets ***
Current Liabilities ***
Working Capital ***
Property, Plant and Equip., Net
Deferred Taxes on Income *** 3,102,479
Total Assets
Shareholders' Equity
Cash Dividends Per Share **
65,663,892
44,605,782
.22
$127,859,491 $118,316,470 $112,497,590 $108,883,562 $105,146,822
5,576,332
.54
29,936,737
7,131,343
22,805,394
6,754,042
6,141,726
.59
35,285,042
8,697,371
26,587,671
7,559,382
6,605,354
.64
41,136,786
11,454,700
29,682,086
16,853,248
5,651,383
.55
33,871,431
9,625,313
24,246,118
17,854,524
3,008,911
58,277,948
40,255,691
.22
6,590,855
.64
32,946,552
8,484,009
24,462,543
14,364,995
2,353,377
52,623,417
36,859,572
.21
1,742,430
46,986,561
32,430,012
.18
1,099,329
39,475,107
28,167,671
.15f
* 53 weeks
** Recalculated to give effect to a 10% stock dividend declared November 10, 1997.
*** Certain financial statement reclassifications have been recorded in years prior to 1997 to conform to the
current year presentation.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES
Certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and elsewhere in this report constitute “forward-looking statements” within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward looking statements involve
known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or
achievements of Bridgford Foods Corporation to be materially different from any future results, performance
or achievements expressed or implied by such forward looking statements. Such factors include, among
others, the following; general economic and business conditions; the impact of competitive products and
pricing; success of operating initiatives; development and operating costs; advertising and promotional efforts;
adverse publicity; acceptance of new product offerings; consumer trial and frequency; changes in business
strategy or development plans; availability, terms and deployment of capital; availability of qualified
personnel; commodity, labor, and employee benefit costs; changes in, or failure to comply with, government
regulations; weather conditions; construction schedules; and other factors referenced in this report.
The Company’s operating results are heavily dependent upon the prices paid for raw materials. The marketing
of the company’s value-added products does not lend itself to instantaneous changes in selling prices. Changes
in selling prices are relatively infrequent and do not compare with the volatility of commodity markets. The
impact of inflation on the Company’s financial position and results of operations has not been significant
during the last three years. Management is of the opinion that the Company’s strong financial position and its
capital resources are sufficient to provide for its operating needs and capital expenditures.
Favorable operating results over the past several years have continued to provide significant liquidity to the
Company. Net cash provided by operating activities was $10,189,000 in the 1997 fiscal year compared to
$7,162,000 in 1996 and $5,580,000 in 1995. Accounts receivable balances increased $1,367,000 in
1997(13%) due to record fourth quarter sales, decreased by $185,000 in 1996 (2%) due to strong collections,
and increased $769,000 (8%) in 1995 due to the continued expansion of the business and changing nature of
the customer base. Inventories increased $1,754,000 (13%) in 1996 and $1,790,000 (15%) in 1995 due to
continued business expansion, higher storage capacities, higher raw materials costs and increased distribution
of the Company’s products. Non-current assets increased $1,122,000 (17.1%), $1,240,000 (23.3%), and
$1,170,000 (28.2%) in 1997, 1996, and 1995 due primarily to the increased cash surrender value of life-
insurance polices and increases in deferred income tax benefits due primarily to increases in non-funded
employee benefits. Accounts payable and accrued expenses increased $1,759,000 (18.5%) in 1997, due to
higher purchasing activity to support record fourth quarter sales volume, and increased product promotion and
bonus accruals. In 1996 the $1,083,000 (12.8%) increase was primarily a result of increases in accrued
advertising.
The Company’s capital improvement expenditures decreased in 1997 compared to recent years. Cash used for
additions to property, plant and equipment decreased $4,039,000 (67%) in 1997 and by $2,787,000 (32%) in
1996. Significant projects were completed at all locations in 1996, primarily the Dallas freezer expansion at a
total cost of $6,005,000 and the North Carolina plant at a total cost of $5,070,000. Capital expenditures for
these projects totaled approximately $4.0 and $6.3 million in fiscal years 1996 and 1995, respectively. These
investments are expected to yield higher production capacities, improved plant utilization and realize cost
savings in future years.
Cash and cash equivalents increased $6,035,000 (95%) in 1997 primarily as a result of lower capital
expenditures, improved profitability and significant increases in non-funded employee benefits. Cash and cash
equivalents decreased $1,023,000 (14%) in 1996 and $5,282,000 (42%) in 1995 due primarily to significant
investments made in property, plant and equipment and an increase in cash dividends paid. The Company has
remained free of interest-bearing debt for eleven consecutive years. Working capital increased $5,436,000
(22.4%) in 1997. The increase in working capital reflects lower capital spending, improved profitability and
significant increases in non-funded employee benefits. The Company maintains a line of credit with Bank of
America that expires April 30, 1999. There were no borrowings under this line of credit during 1997.
Certain reclassification entries have been recorded in prior year balance sheets to conform to the fiscal 1997
year balance sheet presentation. These reclassifications increased working capital balances in all years
presented.
RESULTS OF OPERATIONS
1997 compared to 1996
Sales in fiscal year 1997 increased $9,543,000 (8.1%) when compared to sales of the prior year, primarily as a
result of increased sales volume.
Cost of products sold increased by $4,747,000 (6.3%) when compared to the prior year. The gross margin was
approximately 36.9% in 1997 and 35.9% 1996. Costs for pork commodity products remained at historically
high levels while flour costs became more favorable in 1997 compared to the prior year. Improved sales of
higher margin products and lower flour costs resulted in a slight improvement in the gross margin.
Selling, general and administrative expenses increased $2,801,000 (9.1%) when compared to the prior year.
This increase was generally consistent with the overall increase in sales. Advertising expenses continued to
outpace the increase in sales as a result of aggressive promotional programs to increase sales of the
Company’s products and to maintain current distribution channels. The Company has and will continue to
make certain investments in its software systems and applications to ensure year 2000 compliance. The
financial impact to the Company has not been and is not anticipated to be material to its financial position or
results of operations in any given year.
Depreciation expense increased $457,000 (18%) when compared to the prior year. The Company completed
significant expansion projects to existing facilities located in Texas and a food processing facility in North
Carolina. Second year (half-year convention) depreciation related to these projects totaled approximately
$980,000. The Company expects to continue the growth and modernization of facilities and equipment used in
the business and, after experiencing lower capital expenditures in 1997, anticipates increased capital
investments in future years. The effective tax rate remained consistent with the prior year at 38%.
1996 (52 weeks) compared to 1995 (53 weeks)
Sales in fiscal year 1996 increased $5,819,000 (5.2%) when compared to sales of the prior year. After
considering the 53-week year, sales volume increased approximately 7.2% when compared to the prior year.
Cost of products sold increased by $4,020,000 (5.6%) when compared to the prior year. The gross margin was
approximately 36% in 1996 and 1995 compared to 35% for 1994. Costs for commodity products were less
favorable in 1996 compared to prior years. However, a changing sales mix and increased selling prices helped
mitigate the impact of these increased costs.
Selling, general and administrative expenses increased $2,784,000 (9.9%) when compared to the prior year.
This increase was generally consistent with the overall increase in sales. Advertising expenses outpaced the
increase in sales as a result of aggressive promotional allowances to promote the Company’s products and to
maintain current distribution channels.
Depreciation expense increased $530,000 (27%) when compared to the prior year. The Company completed
significant expansion projects to existing facilities located in Texas and a food processing facility in North
Carolina. First year (half-year convention) depreciation from these projects totaled approximately $490,000.
The Company expects to continue the growth and modernization of facilities and equipment used in the
business. The effective tax rate remained consistent with the prior year at 38%.
1995 compared to 1994 (53 versus 52 weeks)
Sales in fiscal year 1995 increased $3,614,000 (3%) when compared to sales of the prior year. After
considering the 53-week year, sales volume increased slightly more than 1% when compared to the prior year.
Cost of products sold increased by $1,274,000 (2%) when compared to the prior year. The gross margin
increased to 36% in 1995 compared to 35% for 1994 and 1993. Commodity costs for meat products were
more favorable in 1995 compared to prior years and this trend helped improve margins in 1995 despite the
small increase in sales.
Selling, general and administrative expenses increased $1,523,000 (6%) when compared to the prior year. This
increase was generally consistent with the overall increase in sales. Increased advertising expenses slightly
outpaced the increase in sales as a result of efforts to more heavily promote the Company’s products and to
continue to expand distribution channels.
Depreciation expense increased $93,000 (5%) when compared to the prior year. The Company continued to
expand its vehicle fleet in 1995 and this contributed to the increase. Several projects that were in process in
the prior year were placed in service during 1995 which also contributed to the overall increase in
depreciation. The Company expects to continue the growth and modernization of facilities and equipment
used in the business. The effective tax rate remained consistent with the prior year at 38%.
Consolidated Balance Sheets
October 31
1997
November 1
1996
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of
$12,377,932 $6,343,022
$577,156 and $503,584
Inventories
Prepaid expenses
Deferred income tax benefits
Total current assets
11,374,263
10,007,141
15,556,750 15,603,912
343,846
1,573,510
137,747
1,690,094
41,136,786 33,871,431
Property, plant and equipment, net of accumulated depreciation of
$27,894,827 and $25,432,473
Other non-current assets
Deferred income tax benefits
16,853,248 17,854,524
3,543,082
3,008,911
4,571,379
3,102,479
$65,663,892 $58,277,948
October
31
1997
November 1
1996
$5,343,687 $4,464,855
5,927,156
5,047,140
183,857
113,318
11,454,700
9,603,410
9,625,313
8,396,944
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued payroll and other expenses
Income taxes payable
Total current liabilities
Non-current liabilities
Contingencies and commitments (Note 6) Shareholders'
equity:
Preferred stock, without par value
Authorized - 1,000,000 shares
Issued and outstand - none
Common stock, $1.00 par value
Authorized - 20,000,000 shares
Issued and outstand - 10,336,415 and 9,396,933 shares
(Note 7)
Capital in excess of par value
Retained earnings
9,453,816
10,393,298
13,946,359
3,024,881
20,266,125 27,776,994
44,605,782 40,255,691
$65,663,892 $58,277,948
Consolidated Statements of Income
Fiscal year ended
(52 weeks)
October 31
1997
(52 weeks)
November 1
1996
(53 weeks)
November 3
1995
Net sales
$127,859,491 $118,316,70 $112,497,590
Cost of products sold, excluding depreciation
Selling, general and administrative expenses
Depreciation
80,621,498 75,874,768
33,633,263 30,832,011
2,493,308
2,950,376
71,854,739
28,048,294
1,963,702
117,205,137 109,200,087 101,866,735
Income before taxes
Provision for taxes on income
10,654,354
4,049,000
9,116,383
3,465,000
10,630,855
4,040,000
Net income
Net income per share
$6,605,354 $5,651,383
$6,590,855
$0.64
$0.55
$0.64
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NOTE 7)
Balance, October 28, 1994
- Net income
- Cash dividends paid* ($.21
per share)
Balance, November 3, 1995
- Net income
- Cash dividends paid ($.22 per
share)
Balance, November 1, 1996
- Net income
- Cash dividends paid* ($.22
per share)
Common stock
Shares
Amount
$9,396,933
$9,453,816
Capital in
excess of par
Retained
earnings
Total
shareholder's
equity
$3,024,881 $19,951,315 $32,430,012
6,590,855
6,590,855
(2,161,295)
9,396,933
9,453,816
9,396,933
9,453,816
3,024,881
5,651,383
3,024,881
6,605,354
24,380,875
5,651,383
(2,255,264)
27,776,994
6,605,354
(2,255,265)
(2,161,295)
36,859,572
(2,255,264)
40,255,691
(2,255,265)
Balance, October 31, 1997
10,336,415
10,393,298
13,946,359
20,266,125
44,605,782
* Per share amounts give effect to 10% stock dividends declared November 10, 1997.
Consolidated Statements of Cash Flows
Fiscal year ended
(52 weeks)
October 31
1997
(52 weeks)
November
1
1996
(53 weeks)
November
3
1995
$6,605,354 $5,651,383 $6,590,855
2,950,376 2,493,308
139,150
(52,729)
149,150
(50,129)
1,963,702
138,650
(68,153)
(1,516,171)
45,388
(908,128)
47,162 (1,753,965) (1,789,927)
206,099
90,281
(290,486)
(210,152) (1,124,607)
(859,636)
(584,589)
(1,028,297)
(558,786)
1,758,848 1,082,903
41,553
58,401
(254,915)
1,206,466 1,117,108
1,420,658
70,539
Cash flows from operating activities:
Net income
Income charges not affecting cash:
Depreciation
Provision for losses on accounts receivable
Gain on sale of assets
Effect on cash of changes in assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses
Deferred income tax benefits
Other non-current assets
Accounts payable and accrued expenses
Income taxes payable
Non-current liabilities
Net cash provided by operating activities
10,189,145 7,162,032
5,580,451
Cash used in investing activities:
Proceeds from sale of assets
Additions to property, plant and equipment
50,129
73,454
(1,949,100) (5,987,709) (8,774,616)
57,601
Net cash used in investing activities
(1,898,971) (5,930,108) (8,701,162)
Cash used in financing activities:
Cash dividends paid
(2,255,264) (2,255,264) (2,161,295)
Net increase (decrease) in cash and cash
equivalents
6,034,910 (1,023,340) (5,282,006)
Cash and cash equivalents at beginning of year
6,343,022 7,366,362 12,648,368
Cash and cash equivalents at end of year
$12,377,932 $6,343,022 $7,366,362
Cash paid for income taxes
$4,022,000 $3,955,717 $5,003,099
Notes to Consolidated Financial Statements
NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which
are wholly owned. All intercompany transactions have been eliminated. The carrying amount of cash and cash
equivalents, accounts and other receivables, accounts payable and accrued liabilities approximate fair market
value due to the short maturity of these instruments.
Business segment
The Company and its subsidiaries operate in one business segment - the manufacturing and/or distributing of
refrigerated, frozen and snack food products.
Fiscal year
The Company maintains its accounting records on a 52-53 week fiscal basis. Fiscal years 1997 and 1996
include 52 weeks each. Fiscal year 1995 includes 53 weeks.
Revenues
Revenues are recognized upon product shipment or delivery to customers.
Cash equivalents
The Company considers all investments with original maturities of three months or less to be cash equivalents.
Cash equivalents include treasury bills of $10,990,000 at October 31, 1997 and $5,194,000 at November 1,
1996.
Inventories
Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation. Major renewals and
betterments are charged to the asset accounts while the cost of maintenance and repairs is charged to income
as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed
from the respective accounts and the resulting gain or loss is credited or charged to income. Depreciation is
computed on the straight-line basis over 10 to 20 years for buildings and improvements, 5 to 10 years for
machinery and equipment and 3 to 5 years for transportation equipment.
Income taxes
Deferred taxes are provided for items whose financial and tax bases differ.
Earnings per share
Net income and cash dividends per share are calculated based on the weighted average number of shares
outstanding, 10,336,415 for all periods presented, after giving effect to a 10% stock dividend declared
November 10, 1997.
Reclassifications
Certain reclassifications have been made in prior years to conform to the current year presentation.
NOTE 2 - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:
Property, plant and equipment:
Land
Buildings and improvements
Machinery and equipment
Transportation equipment
Accumulated depreciation
Inventories:
Meat, ingredients and supplies
Work in progress
Finished goods
Accrued payroll and other expenses:
Payroll, vacation and payroll taxes
Property taxes
Other
1997 (in thousands)
1996 (in thousands)
$1,083
10,736
24,889
5,577
42,285
25,432
$16,853
$4,453
1,357
9,747
$15,557
$4,581
265
1,081
$5,927
$1,083
10,683
23,672
5,055
40,493
22,638
$17,855
$4,320
1,501
9,783
$15,604
$3,660
228
1,159
$5,047
Notes to Consolidated Financial Statements
NOTE 3 - RETIREMENT AND BENEFITS PLANS:
The Company has noncontributory trusteed defined benefit retirement plans for sales, administrative,
supervisory and certain other employees. The benefits under these plans are primarily based on years of
service and compensation levels. The Company’s funding policy is to contribute annually the maximum
amount deductible for federal income tax purposes.
Net pension cost consisted of the following (in thousands):
Cost of benefits earned during the year
Interest cost on projected benefit obligation
Actual return on plan assets
Deferral of unrecognized gain (loss) on plan assets
Amortization of unrecognized gain
Amortization of transition asset
Amortization of unrecognized prior service costs
Net pension cost
1997
1996
1995
$485
810
(1,602)
931
(38)
(76)
34
$611
689
(1,238)
679
$568
585
(1,123)
638
(76)
34
(76)
34
$544
$699
$615
The transition asset is being amortized using the straight-line method over 16.42 years, the average remaining
service periods of active plan participants. The discount rate and expected long-term rate of return used in
determining the projected benefit obligation for fiscal years 1997 and 1996 was 7.75%. The assumed rate of
future compensation increases was 6%.
Plan assets are primarily invested in marketable equity securities, corporate and government debt securities and
real estate and are administered by a life insurance company.
The funded status of the plan is as follows (in thousands):
Plan assets at fair market value
Actuarial present value of benefit obligations:
&mbsp;Accumulated benefits based on current salary levels,
including vested benefits of $8,927, $7,324 and $6,823
&mbsp;Additional benefits based on estimated future salary
levels
&mbsp;Projected benefit obligation
Projected benefit obligation in excess of plan assets
Unrecognized prior service costs
Unrecognized gain on plan assets
Unrecognized net transition asset
Accrued pension cost
1997
1996
1995
$10,081 $8,657 $7,554
9,415
1,152
10,567
(486)
9,186
7,208
1,978
7,917
2,044
9,961
(1,304) (1,632)
235
(479)
(671)
(596)
281
315
(3,065) (1,661)
(520)
$(3,790) $(3,246) $(2,547)
In fiscal year 1991, the Company adopted a non-qualified supplemental retirement plan for certain key
employees. Benefits provided under the plan are equal to 60% of the employee’s final average earnings, less
amounts provided by the Company’s defined benefit pension plan and amounts available through Social
Security. Total annual benefits are limited to $120,000 for each participant in the plan. Effective January 1,
1991 the Company adopted a deferred compensation savings plan for certain key employees. Under this
arrangement, selected employees contribute a portion of their annual compensation to the plan. The Company
contributes an amount to each participant’s account by computing an investment return equal to Moody’s
Average Seasoned Bond Rate plus 2%. Employees receive vested amounts upon death, termination or
retirement. Total benefit expense recorded under these plans for fiscal years 1997, 1996 and 1995 was
$348,000, $405,000 and $470,000, respectively. Benefits payable related to these plans and included in other
non-current liabilities the accompanying financial statements were $2,988,000 and $2,480,000 at October 31,
1997 and November 1, 1996, respectively. In connection with this arrangement the Company is the
beneficiary of life insurance policies on the lives of certain key employees. The aggregate cash surrender
value of these policies, included in non-current assets was $4,359,000 and $3,341,000 at October 31, 1997 and
November 1, 1996, respectively.
The Company provides a deferred compensation plan for certain key executives, which is based upon the
Company’s pretax income and return on shareholders’ equity. The payment of these bonuses is generally
deferred over a five-year period. The total amount payable related to this arrangement was $3,574,000 and
$3,387,000 at October 31, 1997 and November 1, 1996, respectively. Future payments are approximately
$1,089,000, $992,000, $722,000, $487,000 and $284,000 for fiscal years 1998 through 2002, respectively.
Postretirement health care benefits in the approximate amount of $340,000 and $322,000 are included in non-
current liabilities at October 31, 1997 and November 1,1996, respectively.
Notes to Consolidated Financial Statements
NOTE 4 - INCOME TAXES:
The provision for taxes on income includes the following (in thousands):
Current:
Federal
State
Deferred:
Federal
State
1997
1996
1995
$3,602
658
$4,039
551
4,260
4,590
(99)
(112)
(211)
(933)
(192)
(1,125)
$4,102
643
4,745
(609)
(96)
(705)
$4,049
$3,465
$4,040
The total tax provision differs from the amount computed by applying the statutory federal income tax rate to
income before income taxes as follows (in thousands):
Provision for federal income taxes at the
applicable statutory rate
Increase in provision resulting from: State
income taxes, net of federal income tax benefit
Other, net
1997
1996
1995
$3,622 $3,100 $3,614
416
11
397
29
$4,049 $3,465 $4,040
335
30
Deferred income taxes result from differences in the bases of assets and
liabilities for tax and accounting purposes.
Deferred income taxes result from differences in the bases of assets and liabilities for tax and accounting
purposes.
Deferred tax assets (liabilities) are comprised of the following (in thousands):
Receivables allowance
Inventory capitalization
Deferred compensation
Franchise tax
Employee benefits
Other
Current tax assets
Deferred compensation
Pension and health care benefits
Depreciation
Non-current taz assets, net
1997
1996
$233
290
385
107
631
44
$1,690
$1,001
2,870
(769)
3,102
$199
297
406
93
592
(13)
$1,574
$929
2,392
(313)
3,008
No valuation allowance was provided against deferred tax assets in the
accompanying statements.
Notes to Consolidated Financial Statements
NOTE 5 - LINE OF CREDIT:
Under the terms of a revolving line of credit with Bank of America, the Company may borrow up to
$2,000,000 through April 30, 1999. At any time prior to May 1999, the Company may convert borrowings, if
any, into a three-year term loan with principal and interest payable monthly commencing May 31, 1999. The
interest rate is at the bank’s reference rate unless the Company elects an optional interest rate. The borrowing
agreement contains various covenants, the more significant of which require the Company to maintain certain
levels of shareholders’ equity and working capital. The Company was in compliance with all provisions of the
agreement during the year. There were no borrowings under this line of credit during the year.
NOTE 6 - CONTINGENCIES AND COMMITMENTS:
The preparation of financial statements in conformity with generally accepted accounting principles, requires
management to make certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported revenues and expenses during the respective reporting periods. Actual results could differ from those
estimates.
The Company leases certain transportation equipment under an operating lease expiring in 1999. The terms of
the lease provide for annual renewal options and contingent rental payments based upon mileage and
adjustments of rental payments based on the Consumer Price Index. Minimum rental payments were
$255,000, $263,000 and $272,000 in fiscal years 1997, 1996 and 1995, respectively. Contingent payments
were $98,000 in 1997 and $95,000 in 1996 and 1995. Future minimum lease payments are approximately
$260,000 in 1998, and $130,000 in 1999. The Company also leases certain other properties which do not
result in material commitments.
The Company has and will continue to make certain investments in its software systems and applications to
ensure year 2000 compliance. The financial impact to the Company has not been and is not anticipated to be
material to its financial position or results of operations in any given year.
NOTE 7 – COMMON STOCK AND PER SHARE DATA:
In November 1997, the Board of Directors declared a 10% stock dividend. Net income and cash dividends per
share are calculated based on the weighted average number of shares after giving retroactive effect to the stock
dividend. The weighted average shares used for computing earnings per share in the accompanying statements
of income was 10,336,415 for all periods presented.
Report of Independent Accountants
Price Waterhouse LLP
To the Board of Directors and Shareholders of Bridgford Foods Corporation
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of
Bridgford Foods Corporation and its subsidiaries at October 31, 1997 and November 1, 1996, and the results
of their operations and their cash flows for each of the three years in the period ended October 31, 1997, in
conformity with generally accepted accounting principles. These financial statements are the responsibility of
the Company’s management; our responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed above.
Costa Mesa, California
December 19, 1997