FOODS CORPORATION T O O U R S H A R E H O L D E R S
Bridgford Foods Corporation made substantial
improvements in operations and financial results during
the 2006 fiscal year. Despite continuing increases in the
costs of raw materials, energy and all other services
purchased by the Company, increased selling prices and
the introduction and development of new products
resulted in improved operating margins and a profitable
bottom line. The promotions of William L. Bridgford to
Chairman of the Board of Directors and John V. Simmons
to President were announced in March of 2006.
SALES & EARNINGS
Sales in the 53 week 2006 fiscal year were
$134,264,000 after deductions for promotional costs,
an increase of $3,419,000, or 2.6%, over sales recorded
in the previous 52 week fiscal year. The Company
recorded a net profit of $1,240,000 in fiscal 2006, an
improvement of $2,183,000 over the net loss sustained
in fiscal year 2005. During the year we continued
to focus on the sale of higher margin products.
New products developed in 2006 included Bridgford
Party Trays, as shown on the cover of this report.
The continued popularity of Bridgford Cinnamon
Monkey Bread, introduced in 2005, led to the
development and introduction of microwavable frozen
Bridgford Garlic Parmesan Monkey Bread in late 2006,
another product we believe has great potential for
the future. We have continued to consolidate our
administrative and accounting functions at our Anaheim
headquarters, resulting in improved efficiency and
better management control. Raymond Lancy,
Executive Vice President and Chief Financial Officer,
and Cindy Matthews-Morales, Corporate Secretary,
have done a superb job of streamlining these functions
to reduce cost.
OPERATIONS
Our Superior Foods division in Dallas, which manufactures
Bridgford Monkey Bread, has operated at full capacity
virtually the entire year, under the direction of Division
President Blaine Bridgford. Alternatives to expand that
capacity are currently being evaluated. The Frozen-Rite
division, also in Dallas, has purchased new fabrication
equipment for the frozen dough roll line, which will
improve product yields and consistency. Vice President
of Manufacturing Joe deAlcuaz has contributed greatly
to operations at all of the Company’s locations,
including the ongoing refinement of the beef jerky
processing operation being developed at our Chicago
meat snack division. The Anaheim bakery operation
completed a successful transition to a new management
team during the year.
FINANCIAL MATTERS
Working capital at November 3, 2006 totaled
$31,682,000, $215,000 (0.7%) lower than at the
beginning of the fiscal year. The decrease was primarily
the result of an increase in the anticipated contribution
to the defined benefit pension plan of $1,674,000
offset by higher earnings. The Company purchased
28,000 shares of common stock at a cost of $187,000
($6.68 average cost per share) during the fiscal year.
Capital expenditures during the fiscal year totaled
$2,330,000. The working capital ratio decreased to 3.2
to 1 at November 3, 2006 compared to 3.7 to 1 at
October 28, 2005. The Company has remained free of
interest bearing debt for twenty consecutive years.
Shareholders’ equity totaled $50,186,000, an increase
of $1,924,000 (4.0%) compared to the end of the prior
year. The increase principally relates to higher net
income and a decrease in the minimum pension liability,
which is recorded in the Consolidated Statement of
Shareholders’ Equity and Comprehensive Income under
the “Accumulated other comprehensive income (loss)”
column. The decrease in this liability resulted primarily
from the freezing of benefit accruals under the
Company’s defined benefit pension plan effective May
12, 2006. No cash dividends were paid during the 2006
fiscal year as the Board of Directors suspended the cash
dividend at its May 2004 meeting in recognition of
lower profitability levels in recent years. Approximately
588,000 shares remain available for repurchase under
the 2.0 million share repurchase plan previously authorized
by the Board of Directors. Shareholders’ equity per share
was $5.04 at November 3, 2006 compared to $4.83 at
the end of fiscal 2005, an increase of 4.3%.
SUMMARY
In many ways 2006 was a year of transition for Bridgford
Foods. Reorganization of administrative duties, new
management personnel and renewed focus on core
products all contributed to improved results. While meat
raw material costs provided some modest relief during the
year, they were partially offset by higher costs for flour
and sugar. We believe that these trends will continue in
2007, and we have taken steps to improve our operating
margins, including price increases, personnel reductions
and productivity increases. Conversion of the Company’s
defined benefit pension plan for sales and administrative
employees during the year to a 401(k) plan will also have
a long-lasting favorable financial impact.
We thank our employees, directors, shareholders,
customers and suppliers for their support during 2006.
Bridgford Foods Corporation proudly celebrates
the 75th anniversary of its founding in 1932 by
Hugh H. Bridgford.
Respectfully submitted,
January 18, 2007
William L. Bridgford
Chairman
John V. Simmons
President
EXPLANATORY NOTE
Bridgford Foods Corporation is filing this Amendment on Form 10-K/A which constitutes Amendment No.
1 to its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 1, 2007. This
filing amends and restates our previously reported Consolidated Balance Sheets as of November 3, 2006 and
October 28, 2005 and the Consolidated Statements of Cash Flows for the years ended November 3, 2006 and
October 28, 2005 only as well as the corresponding disclosures to restate auction rate securities (“ARS”) from cash
and cash equivalents to trading securities. This restatement had no impact on the Company’s reported results of
operations.
In light of views expressed by the Securities and Exchange Commission with respect to accounting for
ARS, the Company restated the accompanying November 3, 2006 and October 28, 2005 consolidated balance sheets
to no longer report ARS as cash equivalents. The Company reports such investments as trading securities under
SFAS 115, Accounting for Certain Investments in Debt and Equity Securities. In completing this restatement, ARS
amounts totaling $12,200 as of November 3, 2006 and $4,500 as of October 28, 2005 of cash and cash equivalents
were restated to reclassify such amounts to trading securities. The Company also restated net cash used for operating
activities with the consolidated statement of cash flow for each applicable year.
INDEX TO FORM 10K
2
PART I ................................................................................................................................................................................................
Item 1. Business................................................................................................................................................................
2
Item 1A. Risk Factors ................................................................................................................................................................
5
Item 1B. Unresolved Staff Comments ................................................................................................................................
6
6
Item 2. Properties................................................................................................................................................................
Item 3. Legal Proceedings .........................................................................................................................................................
6
7
Item 4. Submission of Matters to a Vote of Security Holders ................................................................................................
8
PART II...............................................................................................................................................................................................
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities...............................................................................................................................................................................
8
Item 6. Selected Financial Data .................................................................................................................................................
9
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ................................
9
14
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .....................................................................................
Item 8. Consolidated Financial Statements and Supplementary Data .......................................................................................
14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................................ 14
Item 9A. Controls and Procedures.............................................................................................................................................
15
16
Item 9B. Other Information .......................................................................................................................................................
PART III .............................................................................................................................................................................................
17
Item 10. Directors and Executive Officers of the Registrant ................................................................................................ 17
Item 11. Executive Compensation .............................................................................................................................................
17
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ....................
17
Item 13. Certain Relationships and Related Transactions ................................................................................................ 17
18
Item 14. Principal Accountant Fees and Services......................................................................................................................
PART IV .............................................................................................................................................................................................
19
19
Item 15. Exhibits and Financial Statement Schedules ...............................................................................................................
SIGNATURES ................................................................................................................................................................ 20
1
Item 1.
Business
PART I
This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements include, but are
not limited to, statements regarding the following: general economic and business conditions; the impact of competitive
product 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 forward-looking statements included herein are based on current expectations that involve a number of risks and
uncertainties. These forward-looking statements are based on assumptions regarding the Company’s business, which involve
judgments with respect to, among other things, future economic and competitive conditions, and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company.
Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, actual
results may differ materially from those set forth in the forward-looking statements. In light of the significant uncertainties
inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as
representation by the Company or any other person that the objectives or plans of the Company will be achieved. The
forward-looking statements contained herein speak as of the date of this Report and the Company undertakes no obligation
to update such statements after the date hereof.
Background of Business
Bridgford Foods Corporation, a California corporation (collectively with its subsidiaries, the “Company”), was
organized in 1952. The Company originally began its operations in 1932 as a retail meat market in San Diego, California, and
evolved into a meat wholesaler for hotels and restaurants, a distributor of frozen food products, a processor and packer of
meat and a manufacturer and distributor of frozen food products for sale on a retail and wholesale basis. For more than the
past five years, the Company and its subsidiaries have been primarily engaged in the manufacturing, marketing and
distribution of an extensive line of frozen, refrigerated and snack food products throughout the United States. The Company
has not been involved in any bankruptcy, receivership or similar proceedings, nor has it been party to any merger,
acquisition, etc. or acquired or disposed of any material amounts of assets during the past five years. Substantially all of the
assets of the Company have been acquired in the ordinary course of business. The Company had no significant change in the
type of products produced or distributed, nor in the markets or methods of distribution since the beginning of the fiscal year.
Description of Business
The Company operates in two business segments – the processing and distribution of frozen products and the
processing and distribution of refrigerated and snack food products. For information regarding the separate financial
performance of the business segments refer to Note 7 of the Notes to the Consolidated Financial Statements included in this
Annual Report on Form 10-K. The products manufactured and distributed by the Company consist of an extensive line of
food products, including biscuits, bread dough items, roll dough items, dry sausage products and a variety of sandwiches and
sliced luncheon meats. The products purchased by the Company for resale include a variety of jerky, cheeses, salads, party
dips, Mexican foods, nuts and other delicatessen type food products.
2006
2005
2004
Products manufactured or processed by the Company .................................................................
Items manufactured or processed by third parties for distribution................................................
71%
29%
69%
31%
100% 100% 100%
70%
30%
Although the Company has recently introduced several new products, most of these products have not contributed
significantly to the Company’s revenue growth for the fiscal year. However, Bridgford Monkey Bread, introduced in 2005,
continues to grow in popularity. The Company’s sales are not subject to material seasonal variations. Historically the
Company has been able to respond quickly to the receipt of orders and, accordingly, the Company does not maintain a
significant sales backlog. The Company and its industry generally have no unusual demands or restrictions on working
2
capital items. During the last fiscal year the Company did not enter into any new markets or any significant contractual or
other material relationships.
The Company has two classes of similar food products, each of which has accounted for 10% or more of consolidated
sales in the prior three fiscal years listed below. The following table shows sales, as a percentage of consolidated sales, for
each of these two classes of similar products for each of the last three fiscal years:
2006
2005
2004
Frozen Food Products ...................................................................................................................
Refrigerated and Snack Food Products.........................................................................................
38%
62%
32%
68%
100% 100% 100%
36%
64%
To date, federal, state and local environmental laws and regulations, including those relating to the discharge of
materials into the environment, have not had a material effect on the Company’s business.
Major Product Classes
Frozen Food Products
The Company’s frozen food division serves both food service and retail customers. The Company sells approximately
200 unique frozen food products through wholesalers, cooperatives and distributors to approximately 21,000 retail outlets
and 22,000 restaurants and institutions.
Frozen Food Products – Food Service Customers
The food service industry is composed of establishments that serve food outside the home and includes restaurants, the
food operations of health care providers, schools, hotels, resorts, corporations, and other traditional and non-traditional food
service outlets. Growth in this industry has been driven by the increase in away-from-home meal preparation, which has
accompanied the expanding number of both dual income and single-parent households. Another trend within the food service
industry is the growth in the number of non-traditional food service outlets such as convenience stores, retail stores and
supermarkets. These non-traditional locations often lack extensive cooking, storage or preparation facilities, resulting in a
need for pre-cooked and prepared foods similar to those provided by the Company. The expansion in the food service
industry has also been accompanied by the continued consolidation and growth of broadline and specialty food service
distributors, many of which are long-standing customers of the Company.
The Company supplies its food service customers generally through distributors that take title to the product and resell
it. Among the Company’s customers are many of the country’s largest broadline and specialty food service distributors. For
these and other large end purchasers, the Company’s products occasionally go through extensive qualification procedures and
its manufacturing capabilities are subjected to thorough review by the end purchasers prior to the Company’s approval as a
vendor. Large end purchasers typically select suppliers that can consistently meet increased volume requirements on a
national basis during peak promotional periods. The Company believes that its manufacturing flexibility, national presence
and long-standing customer relationships should pose barriers to entry for other manufacturers seeking to provide similar
products to the Company’s current large food service end purchasers, although no assurances can be given.
Frozen Food Products – Retail Customers
The majority of the Company’s existing and targeted retail customers are involved in the resale of branded and private
label packaged foods. The same trends which have contributed to the increase in away-from-home meal preparation have also
fueled the growth in easy to prepare, microwaveable frozen and refrigerated convenience foods. Among the fastest growing
segments is the frozen and refrigerated hand-held foods market. This growth has been driven by improved product quality
and variety and the increasing need for inexpensive and healthy food items that require minimal preparation. Despite rapid
growth, many categories of frozen and refrigerated hand-held foods have achieved minimal household penetration. The
Company believes it has been successful in establishing and maintaining supply relationships with certain selected leading
retailers in this market.
Frozen Food Products – Sales and Marketing
The Company’s frozen food business covers the United States and Canada. In addition to regional sales managers, the
Company maintains a network of independent food service and retail brokers covering most of the states as well as Canada.
Brokers are compensated on a commission basis. The Company believes that its broker relationships, in close cooperation
3
with the regional sales managers, are a valuable asset providing significant new product and customer opportunities. The
regional sales managers perform several significant functions for the Company, including identifying and developing new
business opportunities and providing customer service and support to the Company’s distributors and end purchasers through
the effective use of the Company’s broker network.
The Company’s annual advertising expenditures are directed towards retail and institutional customers. These
customers participate in various special promotional and marketing programs and direct advertising allowances sponsored by
the Company. The Company also invests in general consumer advertising in various newspapers and periodicals. The
Company directs advertising at food service customers with campaigns in major industry publications and through Company
participation in trade shows throughout the United States.
Refrigerated and Snack Food Products – Customers
The Company’s refrigerated and snack food products division sells approximately 270 different items through a direct
store delivery network serving approximately 36,000 supermarkets, mass merchandise and convenience retail stores located
in 49 states and Canada.
These customers are comprised of large retail chains and smaller “independent” operators. This part of the Company’s
business is highly competitive. Proper placement of the Company’s product lines is critical to selling success since most
items could be considered “impulse” items which are often consumed shortly after purchase. The Company’s ability to sell
successfully to this distribution channel depends on aggressive marketing and maintaining relationships with key buyers.
Refrigerated and Snack Food Products – Sales and Marketing
The Company’s direct store delivery network consists of two separate divisions, refrigerated and non-refrigerated
snack food products. Refrigerated snack food products are distributed through five different regions located in the southwest,
primarily operating in California, Arizona and Nevada. Non-refrigerated snack food products are distributed in seventeen
geographic regions across the United States and Canada, each managed by regional sales managers. The regional sales
managers perform several significant functions for the Company including identifying and developing new business
opportunities and providing customer service and support to the Company’s customers. The Company also utilizes the
services of brokers where appropriate to support efficient product distribution and customer satisfaction.
Product Planning and Research and Development
The Company continually monitors the consumer acceptance of each product within its extensive product line.
Individual products are regularly added to and deleted from the Company’s product line. The addition or deletion of any
product has not had a material effect on the Company’s operations in the current fiscal year. The Company believes that a
key factor in the success of its products is its system of carefully targeted research and testing of its products to ensure high
quality and that each product matches an identified market opportunity. The emphasis in new product introductions in the
past several years has been in single service items. The Company is constantly searching to develop new products to
complement its existing product line and improved processing techniques and formulas for its existing product line. The
Company utilizes in-house test kitchens to research and experiment with unique food preparation methods, improve quality
control and analyze new ingredient mixtures. The Company’s refrigerated and snack food products segment has continued to
refine development of a new major manufacturing line that was originally scheduled for completion in the fourth quarter of
fiscal year 2005. The Company has been field testing this product with consumers since early November 2006. Further
testing will commence upon completion of final modifications to the product line. The Company does not expect to begin
production for at least another 60 days after new modifications are complete. While management believes that the line, once
complete, will be profitable, no absolute assurance can be given. At November 3, 2006, the total investment in this line was
$1,747, including $281 in soft development costs. The Company does not anticipate any significant change in product-mix
as a result of its current research and development efforts.
Competition
The products of the Company are sold under highly competitive conditions. All food products can be considered
competitive with other food products, but the Company considers its principal competitors to include national, regional and
local producers and distributors of refrigerated, frozen and snack food products. Several of the Company’s competitors
include large companies with substantially greater financial and marketing resources than those of the Company. Existing
competitors may broaden their product lines and potential competitors may enter or increase their focus on the Company’s
market, resulting in greater competition for the Company. The Company believes that its products compete favorably with
those of the Company’s competitors. Such competitors’ products compete against those of the Company for retail shelf
space, institutional distribution and customer preference.
4
Importance of Key Customers
Sales to Wal-Mart® comprised 15.0% of revenues in fiscal year 2006 and 13.3% of accounts receivable was due from
Wal-Mart® at November 3, 2006. Sales to Wal-Mart® comprised 13.8% of revenues in fiscal year 2005 and 13.6% of
accounts receivable was due from Wal-Mart® at October 28, 2005. Sales to Wal-Mart® comprised 14.6% of revenues in
fiscal year 2004.
Employees
The Company has approximately 684 employees, approximately 43% of whose employment relationship is governed
by collective bargaining agreements. These agreements currently expire or expired between March 2004 and March 2008. A
contract with UFCW Meat Cutters Local # 324, covering 69 employees, expired October 3, 2006. The agreement was
extended without modification for six months to March 31, 2007. Negotiations have not yet resumed on a further extension
and/or renewal. The Company believes that its relationship with employees is favorable.
Executive Officers of the Registrant
The names, ages and positions of all the executive officers of the Company as of January 1, 2007 are listed below.
Messrs. Hugh Wm. Bridgford and Allan L. Bridgford are brothers. William L. Bridgford is the son of Hugh Wm. Bridgford
and the nephew of Allan L. Bridgford. Officers are normally appointed annually by the board of directors at their meeting
immediately following the annual meeting of shareholders. All executive officers are full-time employees of the Company,
except for Allan L. Bridgford, who works 60% of full-time effective March 2005.
Name
Age
Allan L. Bridgford ................................................................
Hugh Wm. Bridgford............................................................
William L. Bridgford ............................................................
John V. Simmons................................................................
Raymond F. Lancy ...............................................................
Position(s) with the Company
71 Senior Chairman and member of the Executive Committee
75 Vice President and Chairman of the Executive Committee
52 Chairman and member of the Executive Committee
51 President and member of the Executive Committee
53 Chief Financial Officer, Executive Vice President, Treasurer and member of
Item 1A.
Risk Factors
the Executive Committee
In addition to the other matters set forth in this Annual Report on Form 10-K, the continuing operations and the price of
the Company’s common stock are subject to the following risks, each of which could materially adversely affect the business,
financial condition and results of operations.
General Risks of Food Industry
The food industry, and the markets within the food industry in which the Company competes, are subject to various
risks, including: adverse changes in general economic conditions, evolving consumer preferences, nutritional and health-
related concerns, federal, state and local food inspection and processing controls, consumer product liability claims, risks of
product tampering, and the availability and expense of liability insurance. The meat and poultry industries have recently been
subject to increasing scrutiny due to the association of meat and poultry products with recent outbreaks of illness, and on rare
occasions even death, caused by food borne pathogens. Product recalls are sometimes required in the food industries to
withdraw contaminated or mislabeled products from the market.
Risks Relating to Suppliers and Raw Materials
The Company purchases large quantities of commodity pork, beef and flour. Historically, market prices for products
processed by the Company have fluctuated in response to a number of factors, including changes in the United States
government farm support programs, changes in international agricultural and trading policies, weather and other conditions
during the growing and harvesting seasons.
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 general price inflation on
the Company’s financial position and results of operations has not been significant during the last three years.
5
Risks Relating to Government Regulation
The operations of the Company are subject to extensive inspection and regulation by the United States Department of
Agriculture (the “USDA”), the Food and Drug Administration (the “FDA”) and by other federal, state and local authorities,
regarding the processing, packaging, storage, transportation, distribution and labeling of products that are manufactured,
produced and processed by the Company. The Company’s processing facilities and products are subject to continuous
inspection by USDA and/or other federal, state and local authorities. On July 25, 1996, the USDA issued strict new policies
concerning contamination by food borne pathogens such as E. coli, Listeria Monocytogenes and Salmonella, and established
a new system of regulation known as the Hazard Analysis Critical Control Points (“HACCP”) program. The HACCP
program requires all meat and poultry processing plants to develop and implement sanitary operating procedures and other
program requirements on or before January 26, 1998. The Company believes that it is currently in compliance with all
material governmental laws and regulations (including the January 1998 HACCP requirements), and that it maintains all
material permits and licenses relating to its operations.
On October 6, 2003, new USDA regulations regarding the control of Listeria Monocytogenes in Ready-To-Eat Meat
and Poultry Products took effect. These regulations require environmental and/or finished product testing for harmful bacteria
that may be present. This testing could result in products being retained, recalled or destroyed if Listeria Monocytogenes is
detected. The Company believes that it is in full compliance with these regulations.
Risks Relating to Dependence on Key Management
The Company’s executive officers and certain other key employees have been primarily responsible for the
development and expansion of the Company’s business, and the loss of the services of one or more of these individuals could
have an adverse effect on the Company. The Company’s success will be dependent in part upon its continued ability to
recruit, motivate and retain qualified personnel. There can be no assurance that the Company will be successful in this regard.
The Company has no employment or non-competition agreements with key personnel.
Item 1B.
Unresolved Staff Comments
Not applicable.
Item 2.
Properties
The Company owns the following facilities:
Property Location
Anaheim, California .......................................................................................................
Modesto, California ........................................................................................................
Dallas, Texas ..................................................................................................................
Dallas, Texas ..................................................................................................................
Dallas, Texas ..................................................................................................................
Dallas, Texas ..................................................................................................................
Statesville, North Carolina..............................................................................................
Chicago, Illinois..............................................................................................................
Building
Square
Footage
100,000
2,500
94,000
30,000
16,000
3,200
42,000
156,000
Acreage
5.0
0.3
4.0
2.0
1.0
1.5
8.0
1.5
The foregoing plants are, in general, fully utilized by the Company for processing, warehousing, distributing and
administrative purposes. The Company also leases warehouse and/or office facilities throughout the United States and
Canada. The Company believes that its properties are generally adequate to satisfy its foreseeable needs. Additional
properties may be acquired and/or plants expanded if favorable opportunities and conditions arise.
Item 3.
Legal Proceedings
No material legal proceedings were pending at November 3, 2006 or currently against the Company. The Company is
likely to be subject to claims arising from time to time in the ordinary course of its business. In certain of such actions,
plaintiffs may request punitive or other damages that may not be covered by insurance and, accordingly, no assurance can be
given with respect to the ultimate outcome of any such possible future claims or litigation or their effect on the Company.
6
Item 4.
Submission of Matters to a Vote of Security Holders
Annual Meeting of Shareholders
The 2007 annual meeting of shareholders will be held at the Four Points Sheraton, 1500 South Raymond Avenue,
Fullerton, California at 10:00 a.m. on Wednesday, March 14, 2007.
No matters were submitted by the Company’s shareholders during the fourth quarter of the fiscal year ended November
3, 2006.
7
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
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 Global 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.
Fiscal Year 2006
High
Low
Cash
Dividends
Paid
First Quarter .........................................................................................................................
Second Quarter.....................................................................................................................
Third Quarter........................................................................................................................
Fourth Quarter......................................................................................................................
$
$
$
$
7.90 $ 6.50 $
6.50 $ 5.80 $
6.80 $ 5.99 $
6.40 $ 5.57 $
0.00
0.00
0.00
0.00
Fiscal Year 2005
High
Low
Cash
Dividends
Paid
First Quarter.......................................................................................................................... $
Second Quarter ..................................................................................................................... $
Third Quarter ........................................................................................................................ $
Fourth Quarter ...................................................................................................................... $
9.24 $ 8.01 $
9.15 $ 8.20 $
9.19 $ 6.46 $
8.18 $ 6.05 $
0.00
0.00
0.00
0.00
The payment of any future dividends will be at the discretion of the Company’s Board of Directors and will depend
upon future earnings, financial requirements and other factors. The Company repurchased 28,000 shares of common stock in
the amount of $187,000 in fiscal year 2006 under the 2.0 million share repurchase plan previously authorized by the Board of
Directors.
Unregistered Sales of Equity Securities
During the period covered by this Report the Company did not sell or issue any equity securities that were not
registered under the Securities Act of 1933, as amended.
Purchases of Equity Securities by the Issuer
The following table provides information regarding repurchases by the Company of its common stock, for each of the four
periods included in the interim seventeen-week period ended November 3, 2006.
Period (1)
July 8, 2006 – August 4, 2006 (4 weeks)
August 5, 2006 – September 1, 2006 (4 weeks)
September 2, 2006 – September 29, 2006 (4 weeks)
September 30, 2006 – November 3, 2006 (5 weeks)
Total
Total Number of
Shares Purchased
Average Price Paid
Per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (2)
Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans or Programs
(2)
100
725
4,835
5,660
$6.53
$6.24
$6.15
$6.17
100
725
4,835
5,660
593,985
593,985
593,260
588,425
(1)
(2)
Period information is presented by reference to the Company’s fiscal period ends during the seventeen-week period ended November 3, 2006.
All repurchases reflected in the foregoing table were made on the open market. The Company’s stock repurchase program was approved by the
Board of Directors in November 1999 (1,500,000 shares authorized, disclosed in a Form 10-K filed on January 26, 2000) and was expanded in
June 2005 (500,000 additional shares authorized, disclosed in a press release and Form 8-K filed on June 17, 2005). Under the stock repurchase
program, the Company is authorized, at the discretion of management and the Board of Directors, to purchase up to an aggregate of 2,000,000
shares of the Company’s common stock on the open market. On September 15, 2006, the Company adopted 10b5-1 Stock Purchase between
Citigroup Global Markets Inc. (“CGM”) and the Company for the purchase of shares of common stock (“Stock”) issued by the Company that
complies with the requirements of Rule 10b5-1 (“Rule”) under the Securities Exchange Act of 1934 (“Exchange Act”). This Purchase Plan
8
supplements any purchases by the Company “outside” of this Purchase Plan from time to time of shares of Stock in open market transactions
pursuant to Rule 10b-18 of the Exchange Act (“Non-Plan Purchases”). The purchase period covers each trading day commencing October 2,
2006 through and including September 15, 2007.The daily purchase quantity is defined as a number of shares up to, but not to exceed, each day's
applicable SEC Rule 10b-18 maximum volume limit (i.e. 25% of the prior four calendar weeks' average daily trading volume); however, once per
week a block of stock may be purchased that exceeds the SEC Rule 10b-18 25% average daily trading volume condition, provided that no other
Plan purchases are made on any day on which such a block is purchased. The total maximum number of shares that may be purchased under the
plan is 594,000 at a total maximum dollar amount (exclusive of commission) of $5,940,000.
Item 6.
Selected Financial Data
The following selected consolidated financial data as of and for the years ended November 3, 2006, October 28, 2005,
October 29, 2004, October 31, 2003 and November 1, 2002 has been derived from the Company’s audited consolidated
financial statements. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the Company’s Consolidated Financial Statements and the Notes thereto
included elsewhere in this Annual Report on Form 10-K.
Net Sales .......................................................... $ 134,264
Gross Margin Percent ......................................
Net Income (Loss) ..........................................
Basic Earnings (Loss) Per Share......................
Current Assets..................................................
Current Liabilities ............................................
Working Capital...............................................
Property, Plant and
1,240
0.13
45,913
14,231
31,682
36.6%
Equipment, Net ...........................................
Total Assets .....................................................
Shareholders’ Equity .......................................
Cash Dividends Per Share................................
13,041
72,931
50,186
0.00
Nov. 3,
2006 *
Oct. 28,
2005
$ 130,845
Oct. 29,
2004
$ 137,865
Oct. 31,
2003
$ 136,251
34.7%
(943)
(0.09)
43,738
11,841
31,897
34.5%
24
—
44,401
12,665
31,736
Nov. 1,
2002
$ 139,202
36.5%
1,138
0.11
46,413
11,800
34,613
36.7%
1,210
0.12
45,686
12,489
33,197
14,519
72,963
48,262
0.00
16,755
74,942
48,664
0.05
17,735
75,927
52,333
0.16
19,030
77,182
54,390
0.26
(In thousands, except percent and per share amounts)
* - 53 weeks.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
Results of Operations (in thousands)
Fiscal Year Ended November 3, 2006 (53 weeks) Compared to Fiscal Year Ended October 28, 2005 (52 weeks)
Sales
Sales in fiscal 2006 increased $3,419 (2.6%) when compared to the prior year. After considering the additional week in
2006, a 53 week year, sales were essentially flat compared to the prior year. Sales in the Company’s frozen food segment
increased $3,638 (7.7%), as a result of increased average unit selling prices and higher unit volume primarily due to the
introduction of a successful new product. Promotional spending as a percentage of sales increased to 8.4% compared to 8.0%
in the prior year partially off-setting the sales increase in the frozen food division. Sales in the Company’s refrigerated and
snack food products segment decreased $219 (0.3%) primarily as result of lower unit sales volume. Higher unit selling prices
helped mitigate the decrease.
9
Gross Margin
The gross margin increased to 36.6% compared the prior year at 34.7%. This improvement resulted from higher unit
selling prices and lower commodity costs. Meat ingredient costs declined significantly in the fiscal year helping to increase
the gross margin. Flour commodities increased significantly in 2006 partially off-setting the meat commodity cost declines.
When combining all divisions, net-selling prices increased approximately 5.4% on a unit volume decline of approximately
2.6 % compared to the prior fiscal year.
Selling, General and Administrative
Selling, general and administrative expenses increased $464 (1.1%) when compared to the prior year. After considering
the additional week in 2006, a 53 week year, average weekly expenses were slightly lower as compared to the prior year.
Within this category costs for fuel, vehicle repairs, consulting and travel expenses outpaced sales growth. Off-setting these
increases were higher interest income on investments and lower pension, advertising and telephone expenses.
Gain on Sale of Equity Securities
The Company sold 5,028 shares of stock received as a result of the bankruptcy of a significant customer on February
22, 2006. This transaction resulted in a pre-tax gain of $106.
Income Taxes
The effective income tax rate was 17.2% and (58.2)% in fiscal years 2005 and 2006, respectively. In fiscal year 2005,
the effective income tax rate differed from the applicable mixed statutory rate of approximately 38.0% primarily due to the
Company's current year claim for research and development tax credits related to prior year activities. In fiscal year 2006,
the effective income tax rate differed from the applicable mixed statutory rate of approximately 38.0% primarily due to a
reduction in recorded income tax reserves.
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). This Statement addresses
uncertainty in tax positions recognized in a company’s financial statements and stipulates a recognition threshold and
measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will apply to the Company’s fiscal year
beginning November 3, 2007, with earlier adoption permitted. The Company does not expect this interpretation will have a
material impact on the Company’s results of operations or financial position.
Fiscal Year Ended October 28, 2005 Compared to Fiscal Year Ended October 29, 2004
Sales
Sales in fiscal 2005 decreased $7,020 (5.1%) when compared to the prior year. Sales in the Company’s frozen food
segment increased 6.6%, as a result of increased average unit selling prices offset by slightly lower unit volume. Promotional
spending as a percentage of sales decreased to 8.0% compared to 8.6% in the prior year contributing to the sales increase in
the frozen food division. Sales in the Company’s refrigerated and snack food products segment decreased 10.1% primarily as
result of lower unit sales volume.
Gross Margin
The gross margin increased to 34.7% compared the prior year at 34.5%. Continued high meat ingredient costs were
offset by higher unit selling prices resulting in a consistent gross margin percentage. When combining all divisions, net-
selling prices increased approximately 4.8% on a unit volume decline of approximately 12.7 % compared to the prior fiscal
year.
Selling, General and Administrative
Selling, general and administrative expenses decreased $335 (0.8%) when compared to the prior year. Costs for
marketing programs, product display racks and fuel increased significantly. Offsetting these increases were a significant
reduction in the provision for doubtful accounts receivable, gains related to increased cash surrender values on life insurance
policies and higher investment income. Cost control programs instituted by management also helped control this expense
category.
10
Income Taxes
The effective income tax rate was 58.2%. The increase in effective rate relates to the reduction of tax reserves in the current fiscal
year and significant non-taxable gains on life insurance policies. The Company released a portion of tax reserves for state tax estimates
during fiscal 2005 as the amount is no longer probable or reasonably estimated in accordance with Statement of Financial Accounting
Standards (SFAS No. 5), “Accounting for Contingencies”. The Company provides tax reserves for federal, state, local and international
exposures relating to audit results, tax planning initiatives and compliance responsibilities. The development of these reserves requires
judgments about tax issues, potential outcomes and timing, and is a subjective estimate. Although the outcome of these tax audits is
uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities emanating from these
reviews. Actual outcomes may differ materially from these estimates.
Fiscal Year ended October 29, 2004 compared to Fiscal Year Ended October 31, 2003
Sales
Sales in fiscal 2004 increased $1,614 (1.2%) when compared to the prior year. Sales in the Company’s frozen food segment
declined 3.3%, as a result of lower unit volume partially offset by increased average unit selling prices. Promotional spending as a
percentage of sales increased to 8.6% compared to 7.2% in the prior year contributing to the sales decline in the frozen food division. Sales
in the Company’s refrigerated and snack food products segment increased 3.5% primarily as a result of higher unit selling prices on level
unit volumes.
Gross Margin
The gross margin declined to 34.5% compared to the prior year at 36.7%. Increased meat ingredient costs were the principal
reason for this decline. When combining all divisions, net-selling prices increased approximately 5% on a unit volume decline of
approximately 1.1 % compared to the prior fiscal year.
Selling, General and Administrative
Selling, general and administrative expenses decreased $48 (0.1%) when compared to the prior year. Rising payroll, workers’
compensation insurance, fuel and finished goods storage costs were offset by a significant reduction in the provision for doubtful accounts
receivable and the combined impact of aggressive cost control programs instituted by management. The Company recorded an asset
impairment reserve against the net book value of machinery and equipment of $54 in fiscal year 2004 and no asset impairment reserve in
the prior year.
Gain on Sale of Equity Securities
The Company sold 14,014 shares of stock received as a result of the bankruptcy of a significant customer on July 26, 2004. This
transaction resulted in a pre-tax gain of $553.
Income Taxes
The effective income tax rate was 38% in 2004, consistent with the prior year.
Liquidity and Capital Resources (in thousands except per share amounts)
Net cash used by operating activities was $2,826 in fiscal year 2006. Net cash provided by operating activities was $15 in fiscal
year 2005. Gross accounts receivable balances increased $436 in 2006 and decreased $2,243 in 2005. The balance in 2006 increased
slightly due to strong sales in the fourth quarter of the fiscal year in the frozen food segment offset by lower unit sales volume in the
refrigerated and snack food segment in the same period. The balance in 2005 decreased due to lower overall sales levels in the fourth
quarter and improved collection trends compared to the prior year. The Company purchased $7,700 and $4,500 in auction rate securities in
the fiscal years ended November 3, 2006 and October 28, 2005, respectively. Inventories decreased $1,780 in fiscal year 2006 primarily
due to the sale of ingredient inventories not immediately required for a significant production line under development but not complete at
the end of the fiscal year and a slight decline in overall commodity costs. The Company’s refrigerated and snack food products segment has
continued development of a new major production line that was originally scheduled for completion in the fourth quarter of fiscal year
2005. A successful production run was completed in October 2006 and this product was test marketed to consumers on a limited basis in
November 2006. To date this product has been well received however field testing continues. Early production runs have confirmed the
need for additional heating capacity in the oven in order to attain desired rates of production. This expected project completion date has
been moved forward into fiscal year 2008 until satisfactory results are achieved. Inventories increased $4,445 in fiscal year 2004 due to
significant beef
11
ingredient inventories being stored in anticipation of the start up of the new production line in the first half of fiscal year 2005
and higher valuations due to commodity cost increases. Accounts payable balances were consistent with the current business
cycle. Accrued payroll, advertising and other expenses increased $714 in 2006 primarily as a result of the funding pattern of
self-insured workers’ compensation claims. The current portion of non-current liabilities increased $1,558 and decreased
$553 in 2006 and 2005, respectively. The increases in both 2006 and 2005 were due to a higher anticipated funding of the
pension liability in 2006 and 2007. Included in the current portion of non-current liabilities is $3,476 related to the
anticipated contribution required in fiscal years 2007. The minimum pension liability related to the Company’s defined
benefit pension plan decreased to $1,926 at November 3, 2006 compared to $3,458 at October 28, 2005. In the third quarter
of fiscal 2006, the Company froze the defined benefit pension plan accrued benefits for members employed by the Company
within administration, sales or supervisory job classification or within a non-bargaining class (the Corporate Group)
contributing to the decrease in the minimum pension liability. This action is defined as a curtailment under SFAS No. 88
"Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits"
and, therefore, the Company recognized a curtailment loss of approximately $8. As a result of this action, net pension costs
were reduced in the last fiscal quarter by approximately $667 as compared to the same quarter last year and will be reduced
in future periods. The net tax effected amount of this liability is included in shareholders’ equity as an “accumulated
comprehensive loss” in the Statement of Shareholders’ Equity and Other Comprehensive Income (Loss).
The Company’s capital improvement expenditures increased $298 in 2006 and decreased $1,412 in 2005 compared to
the prior year. Overall capital spending has declined in recent years and significant capital expenditures related to the Dallas
high rise freezer and the new Statesville bread plant reached the end of their depreciation periods on certain major equipment.
As a result, depreciation expense declined in the current year. Cash and cash equivalents increased $3,025 in 2006 and
decreased $2,383 in 2005. Net cash flow improved in 2006 and 2005 primarily as a result of lower inventory requirements,
lower expenditures for property, plant and equipment and lower income tax payments.
Working capital decreased $215 in 2006 and increased $161 in 2005. Working capital decreased in 2006 primarily as
the result of a significant increase pension contributions required for the Company’s defined benefit pension plans, with
current funding requirements increasing by $1,674 compared to the prior year. Off-setting this working capital decrease
decrease were higher earnings levels compared to the prior year. Working capital increased in 2005 primarily as a result of
lower inventory requirements, lower expenditures for property, plant and equipment and an increase in refundable income
taxes. The Company has remained free of interest-bearing debt for twenty consecutive years. The Company maintains a line
of credit with Bank of America that expires April 30, 2008. Under the terms of this line of credit, the Company may borrow
up to $2,000 at an interest rate equal to 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 2006 fiscal year and there were no borrowings under this line of credit during such period. 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 for fiscal 2008.
Off-Balance Sheet Arrangements
The Company does not currently have any off balance sheet arrangements within the meaning of Item 303(a)(4) of
Regulation S-K.
Contractual Obligations (in thousands)
The Company has remained free of interest bearing long-term debt for twenty consecutive years and had no other long-
term debt or other contractual obligations except for leases. The Company leases certain transportation equipment under
operating leases. Future minimum lease payments are approximately (in thousands):
Net Lease Commitments................................................................................................
$
2007
415 $
2008
415 $
2009
415
2010
2011
$
415 $
395
Critical Accounting Policies
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. Amounts estimated related to
liabilities for self-insured workers’ compensation, employee healthcare and pension benefits are especially subject to inherent
uncertainties and these estimated liabilities may ultimately settle at amounts not originally estimated. The Company records
12
promotional and returns allowances based on recent and historical trends. Management believes its current estimates are reasonable and
based on the best information available at the time.
The Company’s credit risk is diversified across a broad range of customers and geographic regions. Losses due to credit risk have
recently been immaterial although losses in fiscal year 2002 were significant due to a bankruptcy of a significant customer. The provision
for doubtful accounts receivable is based on historical trends and current collectibility risk. The Company has significant amounts
receivable with a few large, well known customers which, although historically secure, could be subject to material risk should these
customers’ operations suddenly deteriorate. The Company monitors these customers closely to minimize the risk of loss. Sales to Wal-
Mart® comprised 15.0% of revenues in fiscal year 2006 and 13.3% of accounts receivable was due from Wal-Mart® at November 3, 2006.
Sales to Wal-Mart® comprised 13.8% of revenues in fiscal year 2005 and 13.6% of accounts receivable was due from Wal-Mart® at
October 28, 2005. Sales to Wal-Mart® comprised 14.6% of revenues in fiscal year 2004.
Revenues are recognized upon passage of title to the customer, typically upon product pick-up, shipment or delivery to
customers. Products are delivered to customers primarily through its own long-haul fleet or through a company owned direct store delivery
system.
The Company records the cash surrender or contract value for life insurance policies as an adjustment of premiums paid in
determining the expense or income to be recognized under the contract for the period.
Amounts estimated related to liabilities for pension benefits are especially subject to inherent uncertainties and these estimated
liabilities may ultimately settle at amounts not originally estimated. Management believes its current estimates are reasonable and based on
the best information available at the time.
Deferred taxes are provided for items whose financial and tax bases differ. A valuation allowance is provided against deferred tax
assets when it is expected that it is more likely than not that the related asset will not be fully realized.
The Company provides tax reserves for federal, state, local and international exposures relating to audit results, tax planning
initiatives and compliance responsibilities. The development of these reserves requires judgments about tax issues, potential outcomes and
timing, and is a subjective estimate. Although the outcome of these tax audits is uncertain, in management’s opinion adequate provisions
for income taxes have been made for potential liabilities emanating from these reviews. Actual outcomes may differ materially from these
estimates.
The Company assesses the recoverability of its long-lived assets on an annual basis or whenever adverse events or changes in
circumstances or business climate indicate that expected undiscounted future cash flows related to such long-lived assets may not be
sufficient to support the net book value of such assets. If undiscounted cash flows are not sufficient to support the recorded assets, the
Company recognizes an impairment to reduce the carrying value of the applicable long-lived assets to their estimated fair value.
Restatement
Certain restatements have been made to move auction rate securities from cash and cash equivalents to trading securities. Such
restatements did not affect common measures of financial statements including working capital and the current ratio. The abovementioned
restatement had no impact on the Company's reported results of operations.
Recently Issued Accounting Pronouncements and Regulations
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). This Statement addresses uncertainty in tax positions recognized
in a company’s financial statements and stipulates a recognition threshold and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 will apply to the Company’s fiscal year beginning November 4, 2007, with earlier adoption permitted. The
Company does not expect this interpretation will have a material impact on the Company’s results of operations or financial position.
In September 2006, the Securities and Exchange Commission issued SAB No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements”. SAB No. 108 provides guidance on how prior year
misstatements should be considered when quantifying misstatements in current year financial statements for purposes of determining
whether the current year’s financial statements are materially misstated. SAB No. 108 is effective for fiscal years ending after November
15, 2006. Although the Company will continue to evaluate the application of SAB No. 108, management does not currently believe
adoption will have a material impact on the Company’s results of operations or financial position
In September 2006, the FASB issued Statement of Accounting Standards No. 157, “Fair Value Measurements” (SFAS No. 157).
This Statement defines fair value, provides a framework for measuring fair value, and expands the disclosures required for fair value
measurements. SFAS No. 157 applies to other accounting pronouncements that require fair value
13
promotional and returns allowances based on recent and historical trends. Management believes its current estimates are
reasonable and based on the best information available at the time.
The Company’s credit risk is diversified across a broad range of customers and geographic regions. Losses due to
credit risk have recently been immaterial although losses in fiscal year 2002 were significant due to a bankruptcy of a
significant customer. The provision for doubtful accounts receivable is based on historical trends and current collectibility
risk. The Company has significant amounts receivable with a few large, well known customers which, although historically
secure, could be subject to material risk should these customers’ operations suddenly deteriorate. The Company monitors
these customers closely to minimize the risk of loss. Sales to Wal-Mart® comprised 15.0% of revenues in fiscal year 2006
and 13.3% of accounts receivable was due from Wal-Mart® at November 3, 2006. Sales to Wal-Mart® comprised 13.8% of
revenues in fiscal year 2005 and 13.6% of accounts receivable was due from Wal-Mart® at October 28, 2005. Sales to Wal-
Mart® comprised 14.6% of revenues in fiscal year 2004.
Revenues are recognized upon passage of title to the customer, typically upon product pick-up, shipment or delivery to
customers. Products are delivered to customers primarily through its own long-haul fleet or through a company owned direct
store delivery system.
The Company records the cash surrender or contract value for life insurance policies as an adjustment of premiums
paid in determining the expense or income to be recognized under the contract for the period.
Amounts estimated related to liabilities for pension benefits are especially subject to inherent uncertainties and these
estimated liabilities may ultimately settle at amounts not originally estimated. Management believes its current estimates are
reasonable and based on the best information available at the time.
Deferred taxes are provided for items whose financial and tax bases differ. A valuation allowance is provided against
deferred tax assets when it is expected that it is more likely than not that the related asset will not be fully realized.
The Company provides tax reserves for federal, state, local and international exposures relating to audit results, tax
planning initiatives and compliance responsibilities. The development of these reserves requires judgments about tax issues,
potential outcomes and timing, and is a subjective estimate. Although the outcome of these tax audits is uncertain, in
management’s opinion adequate provisions for income taxes have been made for potential liabilities emanating from these
reviews. Actual outcomes may differ materially from these estimates.
The Company assesses the recoverability of its long-lived assets on an annual basis or whenever adverse events or
changes in circumstances or business climate indicate that expected undiscounted future cash flows related to such long-lived
assets may not be sufficient to support the net book value of such assets. If undiscounted cash flows are not sufficient to
support the recorded assets, the Company recognizes an impairment to reduce the carrying value of the applicable long-lived
assets to their estimated fair value.
Recently Issued Accounting Pronouncements and Regulations
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). This Statement addresses
uncertainty in tax positions recognized in a company’s financial statements and stipulates a recognition threshold and
measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will apply to the Company’s fiscal year
beginning November 4, 2007, with earlier adoption permitted. The Company does not expect this interpretation will have a
material impact on the Company’s results of operations or financial position.
In September 2006, the Securities and Exchange Commission issued SAB No. 108, “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”. SAB No. 108 provides
guidance on how prior year misstatements should be considered when quantifying misstatements in current year financial
statements for purposes of determining whether the current year’s financial statements are materially misstated. SAB No. 108
is effective for fiscal years ending after November 15, 2006. Although the Company will continue to evaluate the application
of SAB No. 108, management does not currently believe adoption will have a material impact on the Company’s results of
operations or financial position.
In September 2006, the FASB issued Statement of Accounting Standards No. 157, “Fair Value Measurements” (SFAS
No. 157). This Statement defines fair value, provides a framework for measuring fair value, and expands the disclosures
required for fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require fair value
13
measurements; it does not require any new fair value measurements. SFAS No. 157 is effective for financial statements for
fiscal years beginning after November 15, 2007, the Company’s first quarter of the 2009 fiscal year, and interim periods
within those years. The Company does not expect this statement will have a material impact on the Company’s results of
operations or financial position.
In September 2006, the Financial Accounting Standards Board issued FAS 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. FAS
158 requires employers to recognize the over- or under-funded status of defined benefit plans and other postretirement plans
in the statement of financial position and to recognize changes in the funded status in the year in which the changes occur
through comprehensive income. In addition, FAS 158 requires employers to measure the funded status of plans as of the date
of the year-end statement of financial position. The recognition and disclosure provisions of FAS 158 are effective for fiscal
years ending after December 15, 2006 (effective for the Company’s fiscal year ending November 2, 2007), while the
requirement to measure plan assets and benefit obligations as of a company’s year-end date is effective for fiscal years ending
after December 15, 2008 (effective for the Company’s fiscal year ending October 30, 2009). The Company expects the
adoption of this statement will materially affect other comprehensive income, long-term liabilities and shareholders equity.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
The Company did not have significant overall currency exposure at November 3, 2006. The Company’s financial
instruments consist of cash and cash equivalents and life insurance policies at November 3, 2006 and the carrying value of
the Company’s financial instruments approximated their fair market values based on current market prices and rates. It is not
the Company’s policy to enter into derivative financial instruments. The Company does not currently have any significant
foreign currency exposure. The Company does not engage in buying or selling spot or futures commodity contracts. The
Company’s investment portfolio is not subject to significant market risk or interest rate fluctuations.
Item 8.
Consolidated Financial Statements and Supplementary Data
Unaudited Interim Financial Information (in thousands, except per share amounts)
2006
Net sales................................................................................................ $
Income (loss) before taxes ....................................................................
Net income (loss) ..................................................................................
Basic earnings (loss) per share.............................................................. $
Net sales................................................................................................ $
Income (loss) before taxes ....................................................................
Net income (loss) ..................................................................................
Basic earnings (loss) per share.............................................................. $
Net sales................................................................................................ $
Income (loss) before taxes ....................................................................
Net income (loss) ..................................................................................
Basic earnings (loss) per share.............................................................. $
January 20
(12 weeks)
April 14
(12 weeks)
July 7
(12 weeks)
34,575 $
(240)
(137)
(0.01) $
28,305 $
168
72
0.01 $
28,169 $
234
224
0.02 $
November 3
(17 weeks)
43,215
1,335
1,081
0.11
2005
January 21
(12 weeks)
April 15
(12 weeks)
July 8
(12 weeks)
33,591 $
(316)
(196)
(0.02) $
27,714 $
(1,049)
(650)
(0.07) $
27,656 $
66
243
0.03 $
October 28
(16 weeks)
41,884
(955)
(340)
(0.03)
2004
January 23
(12 weeks)
April 16
(12 weeks)
July 9
(12 weeks)
35,322 $
(222)
(138)
(0.01) $
30,541 $
(336)
(209)
(0.02) $
29,756 $
(1,005)
(623)
(0.06) $
October 29
(16 weeks)
42,246
1,602
994
0.10
See Item 15(a) below and the index therein for a listing of the consolidated financial statements and supplementary data
filed as a part of this report.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On December 13, 2004,
the Company dismissed
PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm. PricewaterhouseCoopers
14
the Board of Directors of
the Audit Committee of
LLP completed the audit of the Company’s financial statements for the year ended October 29, 2004 on January 27, 2005
completely terminating PricewaterhouseCoopers LLP’s appointment as the independent registered public accounting firm for
the Company. The decision to change principal accountants was approved by the Audit Committee and the Board of
Directors of the Company.
The reports of PricewaterhouseCoopers LLP on the consolidated financial statements of Bridgford Foods Corporation
for the year ended October 29, 2004, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope, or accounting principle.
During the year ended October 29, 2004, and through January 27, 2005, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would have
caused it to make reference thereto in its reports on the financial statements for such years.
On December 14, 2004, the Audit Committee of the Board of Directors of the Company appointed Haskell & White
LLP as its new independent registered public accounting firm as of December 13, 2004 for the fiscal year beginning October
30, 2004 and ending October 28, 2005.
During the Company’s fiscal year ended November 3, 2006 and through the subsequent interim period ended February
1, 2007, neither the Company nor anyone on its behalf consulted Haskell & White LLP regarding any of the matters or events
set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
During the years ended November 3, 2006, October 28, 2005, and October 29, 2004, and through February 1, 2007,
there have been no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).
Item 9A.
Controls and Procedures
Management of the Company, with the participation and under the supervision of the Company’s Chairman and Chief
Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report. Based on this evaluation the Chairman and
Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of the end of
the period covered by this Report to provide reasonable assurance that material information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified by the Securities and Exchange Commission’s rules and forms. There has been no change in
the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during
the period covered by this Report that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
The Company’s management, including its Chairman and Chief Financial Officer, does not expect that the Company’s
disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the control.
The design of any system of controls is also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.
The Company maintains and evaluates a system of internal accounting controls, and a program of internal auditing
designed to provide reasonable assurance that the Company’s assets are protected and that transactions are performed in
accordance with proper authorization, and are properly recorded. This system of internal accounting controls is continually
reviewed and modified in response to evolving business conditions and operations and to recommendations made by the
independent registered public accounting firm and internal auditor. The Company has an established a code of conduct. The
15
management of the Company believes that the accounting and internal control systems provide reasonable assurance that
assets are safeguarded and financial information is reliable.
The Audit Committee of the Board of Directors meets regularly with the Company’s financial management and
counsel, and with the independent registered public accounting firm engaged by the Company. Internal accounting controls
and the quality of financial reporting are discussed during these meetings. The Audit Committee has discussed with the
independent registered public accounting firm matters required to be discussed by Statement of Auditing Standards No. 61
(Communication with Audit Committees). In addition, the independent registered public accounting firm’s independence
from the Company and its management, including the matters in the written disclosures required by the Independence
Standards Board Standards No. 1 (Independence Discussions with Audit Committees), has been discussed by the Committee
and the independent registered public accounting firm.
Section 404 of the Sarbanes-Oxley Act of 2002
In order to comply with the Sarbanes-Oxley Act of 2002 (the “Act”), the Company has undertaken and continues a
comprehensive effort, which includes the documentation and review of its internal controls. In order to comply with the Act,
the Company is in the process of centralizing most accounting and many administrative functions at its corporate
headquarters in an effort to control the cost of maintaining its control systems. On July 11, 2006, The Committee of
Sponsoring Organizations (“COSO”) issued guidance on how small companies should implement an effective internal
control framework over financial reporting and other risks. This guidance is considered a key tool to help smaller public
companies to confront the challenges of the Act. As a result, the Company may incur substantial additional expenses and
diversion of management’s time. During the course of these activities, the Company may identify certain internal control
issues which management believes should be improved. These improvements, if necessary, will likely include further
formalization of policies and procedures, improved segregation of duties, additional information technology system controls
and additional monitoring controls. Although management does not believe that any of these matters will result in material
weaknesses being identified in the Company’s internal controls as defined by the Public Company Accounting Oversight
Board Auditing Standard No. 2, no assurances can be given regarding the outcome of these efforts. Additionally, control
weaknesses may not be identified in a timely enough manner to allow remediation prior to the issuance of the auditor’s report
on internal controls over financial reporting. Any failure to adequately comply could result in sanctions or investigations by
regulatory authorities, which could harm the Company’s business or investors’ confidence in the Company.
The Securities and Exchange Commission, on December 15, 2006, adopted new measures to grant relief to smaller
public companies by extending the date of compliance with Section 404 of the Act. Under these new measures, the Company
will be required to comply with the Act in two phases. The first phase will be effective for the Company's fiscal year ending
October 31, 2008 and will require the Company to issue a management report on internal control over financial reporting.
The second phase will require the Company to provide an auditor’s attestation report on internal control over financial
reporting beginning with the Company’s fiscal year ending October 30, 2009.
In December 2006, the Public Company Accounting Oversight Board voted to propose a new standard for auditing
internal controls over financial reporting available for comment by the public. The proposed standard will replace the
Board’s current Auditing Standard No. 2. The new standard proposes to remove unnecessary audit requirements while
maintaining adequate internal control, provide direction on how to scale the audit for smaller and less complex companies,
and reduce and simplify the text of the standard. The Board plans to determine whether to adopt the final standard after close
of the comment period and consent by the Securities and Exchange Commission after February 2007.
Item 9B.
Other Information
Not applicable.
16
Item 10.
Directors and Executive Officers of the Registrant
PART III
Information set forth in the sections entitled “Election of Directors” and “Section 16(a) Beneficial Ownership
Reporting Compliance” contained in the Company’s definitive proxy statement for the Annual Meeting of Shareholders to be
held on March 14, 2007 is incorporated herein by reference. Information concerning the executive officers of the Company is
set forth in Part I hereof under the heading “Executive Officers of the Registrant”.
The Company adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 during the first
quarter of 2004, which applies to the Company’s principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions and other designated officers and employees. The Code of
Ethics appears on the Company’s website at www.bridgford.com. Any amendment or waiver of the Code of Ethics that
applies to the Company’s directors or executive officers will be posted on its website or in a report on Form 8-K filed with
the Securities and Exchange Commission.
The Company is considered a “controlled company” within the meaning of Rule 4350(c)(5) of the National Association
of Securities Dealers (“NASD”) and is therefore exempted from various NASD rules pertaining to certain “independence”
requirements of its directors. Nevertheless, the Board of Directors has determined that Messrs. Andrews, Foster, Scott and
Zippwald are all “independent directors” within the meaning of Rule 4200 of the Nasdaq Marketplace Rules. The Audit
Committee has been established in accordance with Securities and Exchange Commission rules and regulations, and each of
the members of the Audit Committee is an independent director as defined under the NASD’s listing standards. The Board of
Directors believes that Messrs. Andrews and Scott qualify as “financial experts” as such term is used in the rules and
regulations of the Securities and Exchange Commission.
Item 11.
Executive Compensation
Information set forth in the sections entitled “Proposal 1 – Election of Directors” and “Compensation of Executive
Officers” contained in the Company’s definitive proxy statement for the 2007 Annual Meeting of Shareholders to be held on
March 14, 2007 is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information set forth in the section entitled “Principal Shareholders and Management” contained in the Company’s
definitive proxy statement for the 2007 Annual Meeting of Shareholders to be held on March 14, 2007 is incorporated herein
by reference.
Equity Compensation Plan Information
The following table sets forth information regarding outstanding options, warrants and rights and shares reserved for
future issuance under the Company’s existing compensation plans as of November 3, 2006. The Company’s sole shareholder
approved equity compensation plan is the 1999 Stock Incentive Plan. The Company does not have any non-stockholder
approved equity compensation plans.
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights as of
November 3, 2006
(a)
Weighted-average exercise
price of outstanding
options, warrants and rights
(b)
Number of securities remaining
available for future issuance under
equity compensation plans as of
November 3, 2006 (excluding securities
reflected in column (a))
(c)
250,000 $
—
250,000 $
10.00
—
10.00
650,000
—
650,000
Item 13. Certain Relationships and Related Transactions
Information set forth in the section entitled “Certain Relationships and Related Party Transactions” contained in the
Company’s definitive proxy statement for the 2007 Annual Meeting of Shareholders to be held on March 14, 2007 is
incorporated herein by reference.
17
Item 14.
Principal Accountant Fees and Services
Information set forth in the section entitled “Principal Accountant Fees and Services” contained in the Company’s
definitive proxy statement for the Annual Meeting of Shareholders to be held on March 14, 2007 is incorporated herein by
reference.
18
Item 15.
Exhibits and Financial Statement Schedules
(a)(1) Financial Statements. The following documents are filed as a part of this report:
PART IV
Report of Independent Registered Public Accounting Firm ...............................................................................................................
Consolidated Balance Sheets as of November 3, 2006 and October 28, 2005....................................................................................
Consolidated Statements of Operations for years ended November 3, 2006, October 28, 2005 and October 29, 2004......................
Consolidated Statements of Shareholder’s Equity and Comprehensive Income for years ended November 3, 2006, October 28,
2005 and October 29, 2004 ...........................................................................................................................................................
Consolidated Statement of Cash Flows for years ended November 3, 2006, October 28, 2005 and October 29, 2004......................
Notes to Consolidated Financial Statements.......................................................................................................................................
Page
21
22
23
23
24
25
(2) Financial Statement Schedule
The following financial statement is filed herewith.
Report of Independent Registered Public Accounting Firm on Financial Statement Schedule ..........................................................
Schedule II - Valuation and Qualifying Accounts ..............................................................................................................................
38
39
(3) Exhibits
(a) The exhibits below are filed or incorporated herein by reference.
Exhibit
Number
3.5
Description
Restated Articles of Incorporation, dated December 29, 1989 (filed as Exhibit 3.5 to Form 10-K on January 28, 1993 and
incorporated herein by reference).
3.6
Amendment to Articles of Incorporation, dated July 27, 1990 (filed as Exhibit 3.6 to Form 10-K on January 28, 1993 and
incorporated herein by reference).
3.7
By-laws, as amended (filed as Exhibit 2 to Form 10-K on January 28,1993 and incorporated herein by reference).
10.1
10.2
10.3
10.4
21.1
23.1
23.2
24.1
31.1
31.2
32.1
32.2
Bridgford Foods Corporation Defined Benefit Pension Plan (filed as Exhibit10.1 to Form 10-K on January 28, 1993 and
incorporated herein by reference).*
Bridgford Foods Corporation Supplemental Executive Retirement Plan (filed as Exhibit 10.2 to Form 10-K on January 28, 1993
and incorporated herein by reference).*
Bridgford Foods Corporation Deferred Compensation Savings Plan (filed as Exhibit 10.3 to Form 10-K on January 28, 1993 and
incorporated herein by reference).*
Bridgford Foods Corporation 1999 Stock Incentive Plan and Form of Stock Option Agreement (filed as Exhibit 4.1 to Form S-8
on May 28, 1999 and incorporated herein by reference).*
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (included as part of the signature page)
Certification of Principal Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to Principal Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (Principal Executive Officer).
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (Principal Financial Officer).
* Each of these Exhibits constitutes a management contract, compensatory plan or arrangement.
19
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
BRIDGFORD FOODS CORPORATION
Registrant
By: /s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman
Date: March 26, 2007
POWER OF ATTORNEY
We, the undersigned directors and officers of Bridgford Foods Corporation do hereby constitute and appoint William L. Bridgford and
Raymond F. Lancy, or either of them, with full power of substitution and resubstitution, our true and lawful attorneys and agents,
to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, or their substitutes, may deem
necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in connection with this Annual Report on Form 10-K/A,
including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated
below, any and all amendments; and we do hereby ratify and confirm all that the said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated
Signature
Title
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman
(Principal Executive Officer)
Date
March 26, 2007
/s/ ALLAN L. BRIDGFORD
Allan L. Bridgford
/s/ HUGH WM. BRIDGFORD
Hugh Wm. Bridgford
/ s/ JOHN V. SIMMONS
John V. Simmons
/s/ RAYMOND F. LANCY
Raymond F. Lancy
/ s/ TODD C. ANDREWS
Todd C. Andrews
/s/ RICHARD A. FOSTER
Richard A. Foster
/s/ ROBERT E. SCHULZE
Robert E. Schulze
/s/ D. GREGORY SCOTT
D. Gregory Scott
/s/ PAUL R. ZIPPWALD
Paul R. Zippwald
Senior Chairman
March 26, 2007
Vice President and Director
March 26, 2007
President
March 26, 2007
March 26, 2007
March 26, 2007
March 26, 2007
March 26, 2007
March 26, 2007
March 26, 2007
Chief Financial Officer
(Principal Financial Officer)
Director
Director
Director
Director
Director
20
Report Of Independent Registered Public Accounting Firm
Haskell & White LLP
To the Board of Directors and Shareholders
Bridgford Foods Corporation
We have audited the accompanying consolidated balance sheets of Bridgford Foods Corporation (the “Company”) as of November 3,
2006 and October 28, 2005 and the related consolidated statements of operations, shareholders’ equity and comprehensive income and cash
flows for the fiscal years ended November 3, 2006 and October 28, 2005. In connection with our audits of the consolidated financial
statements, we also have audited the supplementary information included in Schedule II. These consolidated financial statements and the
financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness 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 financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of the Company as of November 3, 2006 and October 28, 2005, and the consolidated results of its operations and its cash flows for
the fiscal years ended November 3, 2006 and October 28, 2005 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 1, the consolidated balance sheets as of November 3, 2006 and October 28, 2005 and the consolidated statements of
cash flows for the fiscal years ended November 3, 2006 and October 28, 2005 have been restated to reclassify auction rate securities out of
cash and cash equivalents and into trading securities.
/s/ Haskell & White LLP
Irvine, California
January 12, 2007, except for the
section titled “Restatement/
Trading Securities” in Note 1
as to which the date is March 22, 2007.
PricewaterhouseCoopers LLP
To the Board of Directors and Shareholders of Bridgford Foods Corporation
In our opinion, the accompanying consolidated statements of operations, shareholders’ equity and comprehensive income and cash flows
present fairly, in all material respects, the results of operations and cash flows of Bridgford Foods Corporation and its subsidiaries (the
“Company”) for the year ended October 29, 2004, in conformity with accounting principles generally accepted in the United States of
America. 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 audit. We conducted our audit of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards 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 audit provides a reasonable basis for our
opinion.
/s/ PricewaterhouseCoopers LLP
Orange County, California
January 27, 2005
21
BRIDGFORD FOODS CORPORATION
CONSOLIDATED BALANCE SHEETS
November 03, 2006 and October 28, 2005
(in thousands, except per share amounts)
ASSETES
Current assets:
Cash and cash equivalents
$ 1,180
$ 5,855
2006
(as restated)
2005
(as restated)
Trading securities
Accounts receivable, less allowance for doubtful accounts of $524 and $468,
respectively and promotional allowances of $2,170 and $2,092,
respectively
Inventories
Prepaid expenses
Refundable income taxes
Deferred income taxes
Total current assets
Property, plant and equipment, net of accumulated depreciation of $53,941 and
$50,731, respectively
Other non-current assets
Deferred income taxes
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued payroll, advertising and other expenses
Current portion of non-current liabilities
Total current liabilities
Non-current liabilities
Contingencies and commitments (Notes 3,5 and 6)
Shareholders’ equity:
Preferred stock, without par value
12,200
10,222
19,544
291
655
1,821
45,913
10,620
3,357
4,500
9,508
21,324
401
552
1,598
43,738
10,239
4,467
$ 72,931
$ 72,963
$ 3,923
$ 3,806
6,029
4,279
14,231
8,514
5,314
2,721
11,841
12,860
Authorized – 1,000 shares Issued and outstanding – none
--
--
Common stock, $1.00 par value
Authorized – 20,000 shares Issued and outstanding – 9,958 in 2006 and 9,986
in 2005
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
10,015
14,235
27,129
(1,193)
50,186
10,043
14,394
25,889
(2,064)
48,262
$ 72,931
$ 72,963
See accompanying notes to consolidated financial statements.
22
BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended November 3, 2006, October 28, 2005, and October 29, 2004
(in thousands, except share and per share amounts)
2006
2005
2004
Net sales .................................................................................................................. $
134,264 $
130,845 $
137,865
Cost of products sold, excluding depreciation .........................................................
Selling, general and administrative expenses...........................................................
Depreciation ............................................................................................................
Gain on sale of equity securities ..............................................................................
85,133
43,963
3,777
(106)
132,767
Income (loss) before taxes .......................................................................................
Provision (benefit) for taxes on income ...................................................................
1,497
257
85,455
43,393
4,251
—
133,099
(2,254)
(1,311)
Net income (loss)..................................................................................................... $
1,240 $
(943) $
90,306
43,728
4,345
(553)
137,826
39
15
24
Basic earnings (loss) per share................................................................................. $
0.13
$
(0.09) $
—
Shares used to compute basic earnings (loss) per share...........................................
9,966,483
9,994,816
10,131,570
Diluted earnings (loss) per share.............................................................................. $
0.13
$
(0.09) $
—
Shares used to compute diluted earnings (loss) per share ........................................
9,966,483
9,994,816
10,131,570
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
For the years ended November 3, 2006, October 28, 2005, and October 29, 2004
(in thousands, except per share amounts)
Balance, October 31, 2003...........................
Shares repurchased and retired..........
Cash dividends paid ($.05 per share)
Net income ........................................
Other comprehensive net income (loss):
Unrealized gain on investment ..........
Minimum pension liability................
Comprehensive income ...............................
Balance, October 29, 2004...........................
Shares repurchased and retired..........
Net loss .............................................
Other comprehensive net income (loss):
Unrealized gain on investment ..........
Minimum pension liability................
Comprehensive loss .....................................
Balance, October 28, 2005...........................
Shares repurchased and retired..........
Net income ........................................
Other comprehensive net income (loss):
Unrealized loss on investment...........
Minimum pension liability................
Comprehensive loss .....................................
Shares
10,276 $
(274)
Amount
Capital in
excess of
par value
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
shareholders’
equity
10,333 $
(274)
16,340 $
(1,834)
27,321 $
(1,661) $
(513)
24
25
(1,097)
10,002
(16)
10,059
(16)
14,506
(112)
26,832
(2,733)
(943)
30
639
9,986
(28)
10,043
(28)
14,394
(159)
25,889
(2,064)
1,240
(55)
926
52,333
(2,108)
(513)
24
25
(1,097)
(1,048)
48,664
(128)
(943)
30
639
(274)
48,262
(187)
1,240
(55)
926
2,111
50,186
Balance, November 3, 2006.........................
9,958 $
10,015 $
14,235 $
27,129 $
(1,193) $
See accompanying notes to consolidated financial statements.
23
Merrill Corporation 07-8641-1 Thu Mar 22 12:53:02 2007 (V 2.247w--P66559CHE)
10-K/A Bridgford Foods Corporation - edoc
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Chksum: 1035192 Cycle 3.0
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BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended November 3, 2006, October 28, 2005, and October 29, 2004
(in thousands)
Cash flows from operating activities:
Net income (loss)
2006
(as restated)
2005
(as restated)
2004
$
1,240 $
(943 ) $
24
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation
(Recovery) on losses on accounts receivable
(Gain) on sale of property, plant and equipment
(Gain) on sale of equity securities
Provision for asset impairment
Deferred income taxes, net
Changes in operating assets and liabilities:
Trading securities
Accounts receivable
Inventories
Prepaid expenses
Income taxes receivable
Other non-current assets
Accounts payable
Accrued payroll, advertising and other expenses
Income taxes payable
Current portion of non-current liabilities
Non-current liabilities
Net cash (used) provided by operating activities
Cash used in investing activities:
Proceeds from sale of property, plant and equipment
Proceeds from sale of equity securities
Additions to property, plant and equipment
Net cash used in investing activities
Cash used in financing activities:
Shares repurchased
Cash dividends paid
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
3,777
(277)
(31)
(106)
—
1,111
(7,700)
(436)
1,780
52
(327)
(1,484)
117
714
—
1,558
(2,814)
(2,826)
62
606
(2,330)
(1,662)
(187)
—
(187)
(4,675)
4,251
(578 )
(11 )
—
—
(571 )
(4,500 )
2,243
1,154
78
179
(761 )
69
(533 )
(913 )
553
298
15
28
—
(2,032 )
(2,004 )
(128 )
—
(128 )
(2,117 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash paid for income taxes
$
$
5,855
1,180
26
$
$
7,972
5,855
687
$
$
See accompanying notes to consolidated financial statements.
23
4,345
(246)
(11)
(553)
54
(601)
—
1,346
(4,445)
(619)
732
(74)
(968)
930
913
(699)
780
908
35
898
(3,444)
(2,511)
(2,108)
(513)
(2,621)
(4,224)
12,196
7,972
39
BRIDGFORD FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share amounts, per share amounts and percentages)
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.
Use of estimates and assumptions
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, as well as the reported revenues and
expenses during the respective reporting periods. Actual results could differ from those estimates. Amounts estimated related
to liabilities for self-insured workers’ compensation, employee healthcare and pension benefits are especially subject to
inherent uncertainties and these estimated liabilities may ultimately settle at amounts not originally estimated. Management
believes its current estimates are reasonable and based on the best information available at the time.
Under the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, (“FAS 144”), the Company is required to test long-lived assets for recoverability whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. If a impairment is indicated,
the Company must measure the fair value of assets in accordance with FAS 144 to determine if and when adjustments are to
be recorded.
Concentrations of credit risk
The Company’s credit risk is diversified across a broad range of customers and geographic regions. Losses due to
credit risk have recently been immaterial, although losses in fiscal year 2002 were significant due to a bankruptcy of a
significant customer. The carrying amount of cash equivalents, accounts and other receivables, accounts payable and accrued
liabilities approximate fair market value due to the short maturity of these instruments. The Company maintains cash
balances at financial institutions, which may at times, exceed the amounts insured by the Federal Deposit Insurance
Corporation of $100 per institution. However, management does not believe there is significant credit risk associated with
these financial institutions. The provision for doubtful accounts receivable is based on historical trends and current
collectibility risk. The Company has significant amounts receivable with a few large, well known customers which, although
historically secure, could be subject to material risk should these customers’ operations suddenly deteriorate. Sales to Wal-
Mart® comprised 15.0% of revenues in fiscal year 2006 and 13.3% of accounts receivable was due from Wal-Mart® at
November 3, 2006. Sales to Wal-Mart® comprised 13.8% of revenues in fiscal year 2005 and 13.6% of accounts receivable
was due from Wal-Mart® at October 28, 2005. Sales to Wal-Mart® comprised 14.6% of revenues in fiscal year 2004.
Business segments
The Company and its subsidiaries operate in two business segments - the processing and distribution of frozen foods,
and the processing and distribution of refrigerated and snack food products.
Fiscal year
The Company maintains its accounting records on a 52-53 week fiscal basis. Fiscal years 2004 and 2005 include 52
weeks each and fiscal year 2006 included 53 weeks.
Revenues
Revenues are recognized upon passage of title to the customer, typically upon product pick-up, shipment or delivery to
customers. Products are primarily delivered to customers through the Company’s own fleet or through a Company owned
direct store delivery system. These costs, $6,375, $6,382 and $6,514 for 2006, 2005 and 2004, respectively, are included in
selling, general and administrative expenses in the accompanying consolidated financial statements. The Company records
promotional and returns allowances based on recent and historical trends.
25
Cash equivalents
The Company considers all investments with original maturities of three months or less to be cash
equivalents. Cash equivalents include money market funds and treasury bills of $1,180 at November 3, 2006 and
$5,855 at October 28, 2005.
Restatement / Trading Securities
At November 3, 2006 and October 28, 2005, the Company held $12,200 and $4,500, respectively, of
auction rate securities, which are now shown as a separately stated current asset in the accompanying financial
statements. Previously, auction rate securities were part of cash and cash equivalents and are now classified as
trading securities in the consolidated balance sheet. Auction rate securities are variable-rate bonds tied to short-term
interest rates with maturities on the face of the securities in excess of 90 days. The Company's investments in these
auction rate securities are accounted for under SFAS 115, Accounting for Certain Investments in Debt and Equity
Securities. The securities are recorded at cost, which approximates fair market value because of their variable
interest rates, which typically reset every 7 to 35 days. Despite the long-term nature of their stated contractual
maturities, the Company has the intent and ability to quickly liquidate these securities; therefore, the Company has
no cumulative gross unrealized holding gains or losses, or gross unrealized gains or losses from these investments.
All income generated from these investments was recorded as interest income.
At November 3, 2006 and October 28, 2005, the Company held $12,200 and $4,500, respectively, of
auction rate securities, which are now shown as a separately stated current asset in the accompanying financial
statements. The consolidated balance sheets as of November 3, 2006 and October 28, 2005, have been restated to
move auction rate securities out of cash and cash equivalents to trading securities.
The restated sections of the consolidated balance sheet can be summarized as follows:
Original:
Net cash provided by operating activities
Trading securities
As restated:
Cash and cash equivalents
Trading securities
2006
$4,874
--
2005
$4,515
--
1,180
12,200
5,855
4,500
The consolidated statements of cash flow for years ended November 3, 2006 and October 28, 2005 have been
restated to give effect of auction rate securities activity classified as trading securities.
The restated sections of the consolidated statements of cash flows can be summarized as follows:
Original:
Net cash provided by operating activities
2006
$4,874
2005
$4,515
As restated:
Net cash (used) provided by operating activities
(2,826)
15
Inventories
Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market.
26A
Property, plant and equipment
Property, plant and equipment are 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 expense 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 a 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. A valuation allowance is provided
against deferred tax assets when it is expected that it is more likely than not that the related asset will not be fully
realized.
The Company provides tax reserves for federal, state, local and international exposures relating to audit results, tax
planning initiatives and compliance responsibilities. The development of these reserves requires judgments about tax
issues, potential outcomes and timing, and is a subjective estimate. Although the outcome of these tax audits is
uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities
emanating from these reviews. If actual outcomes differ materially from these estimates, they could have a material
impact on our results of operations.
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). This Statement addresses
uncertainty in tax positions recognized in a company’s financial statements and stipulates a recognition threshold
and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will apply to the Company’s
fiscal year beginning November 3, 2007, with earlier adoption permitted. The Company does not expect this
interpretation will have a material impact on the Company’s results of operations or financial position.
Stock-based compensation
In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-
Based Payment”. SFAS No. 123R requires public companies to measure and recognize compensation expense for all
share-based payments to employees, including grants of employee stock options, in the financial statements based
on the fair value at the date of the grant.
The Statement also clarifies and expands SFAS No. 123’s guidance in several areas, including measuring fair value,
classifying an award as equity or as a liability, and attributing compensation cost to reporting periods. SFAS No.
123R became effective for the Company’s fiscal year ending November 3, 2006. The Company has not issued,
awarded, granted or entered into any stock-based payment agreements since April 29, 1999. The modified
prospective adoption of SFAS No. 123R did not have any impact on the Company’s financial condition or results of
operations for fiscal year ended November 3, 2006.
Prior to adoption of SFAS No. 123R, the Company adopted SFAS No. 123 ‘“Accounting for Stock-Based
Compensation” which allowed the Company to apply the provisions of Accounting Principles Board (“APB”)
Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for stock-
based compensation and, therefore, no compensation expense was recognized for its fixed stock option plans as
options are generally granted at fair market value based upon the closing price on the date immediately preceding
the grant date. On December 31, 2002 the FASB issued SFAS No. 148, “Accounting for Stock Based
Compensation- Transition and Disclosure”, which amended SFAS No. 123. SFAS No. 148 requires more prominent
and frequent disclosures about the effects of stock-based compensation. Accordingly, if compensation expense for
the Company’s stock options had been recognized, based upon the fair value of awards granted, there would have
been no impact on the Company’s net income and earnings per share for fiscal year ended November 3, 2006.
26B
Had compensation cost for the Company’s Stock Option Plan been determined based on the fair value of the options
consistent with FAS 123, during the fiscal years ended October 28, 2005 and October 29, 2004, the Company’s net income
and earnings per share would have been reduced to the pro forma amounts indicated below:
Net income (loss) as reported ..................................................................... $
Deduct: Pro forma compensation expense, net of tax ................................
Pro forma net income (loss) ...................................................................... $
Basic and diluted earnings (loss) per share as reported .............................. $
Pro forma basic and diluted (loss) earning per share.................................. $
Weighted average shares outstanding, basic ..............................................
Weighted average shares outstanding, diluted............................................
For the year ended
October 28,
2005
October 29,
2004
(943) $
—
(943) $
(0.09) $
(0.09) $
9,994,816
9,994,816
24
—
24
—
—
10,131,570
10,131,570
The fair value of compensatory stock options was estimated using the Black-Scholes option-pricing model using the
following weighted average assumptions at the date of issuance:
Risk-free interest rate...................................................................................................
Expected years until exercise.......................................................................................
Expected stock volatility..............................................................................................
Expected dividends ......................................................................................................
5.34%
6.0 years
40.00%
2.20%
The following balances are reflected as of November 3, 2006:
Options Outstanding
Exercise price
$
Shares
10 250,000 2.5
Weighted average
remaining life (years)
Options Exercisable
Weighted average
exercise price
10
$
Shares
250,000 $
10
Weighted average exercise price
The following balances are reflected as of October 28, 2005:
Options Outstanding
Exercise price
$
The following balances are reflected as of October 29, 2004:
Options Exercisable
Weighted average
exercise price
10
$
Weighted average
remaining life (years)
10 250,000 3.5
Shares
Shares
250,000 $
Weighted average exercise price
Options Outstanding
Exercise price
$
Shares
10 250,000 4.5
Weighted average
remaining life (years)
Options Exercisable
Weighted average
exercise price
10
$
Shares
250,000 $
Weighted average exercise price
10
10
Basic and diluted earnings per share
Basic earnings per share is calculated based on the weighted average number of shares outstanding for all periods
presented. Diluted earnings per share is calculated based on the weighted average number of shares outstanding plus shares
issuable on conversion or exercise of all potentially dilutive securities (stock options).
Foreign currency transactions
The Company’s foreign branch located in Canada enters into transactions that are denominated in a foreign currency.
The related transaction gains and losses arising from changes in exchange rates are not material and are included in selling,
general and administrative expenses in the consolidated statement of operations in the period the transaction occurred.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during the period
from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) consists of net
income (loss), the additional minimum pension liability adjustment and unrealized gains on equity securities. The Company’s
cost basis in the stock is equal to the fair market value at the date of issuance. During fiscal years 2006, 2005 and 2004 the
27
Company recognized a minimum pension liability in accordance with the provisions of SFAS No. 87 “Employers’
Accounting for Pensions”. The impact of this transaction has been recorded as a component of shareholders’ equity, net of
tax. No effect has been given to these transactions in the consolidated statement of cash flows.
Critical accounting policies
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. Amounts estimated related to
liabilities for pension costs, self-insured workers’ compensation and employee healthcare are especially subject to inherent
uncertainties and these estimated liabilities may ultimately settle at amounts not originally estimated. Management believes
its current estimates are reasonable and based on the best information available at the time.
Under the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, (“FAS 144”), the Company is required to test long-lived assets for recoverability whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. If a impairment is indicated,
the Company must measure the fair value of assets in accordance with FAS 144 to determine if and when adjustments are to
be recorded.
The Company’s credit risk is diversified across a broad range of customers and geographic regions. Losses due to
credit risk have recently been immaterial although losses in fiscal year 2002 were significant. The provision for doubtful
accounts receivable is based on historical trends and current collectibility risk. The Company has significant amounts
receivable with a few large, well known customers which, although historically secure, could be subject to material risk
should these customers’ operations suddenly deteriorate. The Company monitors these customers closely to minimize the risk
of loss. Sales to Wal-Mart® comprised 15.0% of revenues in fiscal year 2006 and 13.3% of accounts receivable was due
from Wal-Mart® at November 3, 2006. Sales to Wal-Mart® comprised 14.6% of revenues in fiscal year 2004.
Revenues are recognized upon passage of title to the customer upon product pick-up, shipment or delivery to customers
as determined by applicable contracts. Products are delivered to customers through the Company’s own fleet or through a
Company-owned direct store delivery system.
The Company records the cash surrender or contract value for life insurance policies as an adjustment of premiums
paid in determining the expense or income to be recognized under the contract for the period.
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 above listing is not intended to be a comprehensive list of all the Company’s accounting policies. In many cases,
the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the
United States, with no need for management’s judgment in their application. There are also areas in which management’s
judgment in selecting any available alternative would not produce a materially different result.
Recently issued accounting pronouncements and regulations
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). This Statement addresses
uncertainty in tax positions recognized in a company’s financial statements and stipulates a recognition threshold and
measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will apply to the Company’s fiscal year
beginning November 3, 2007, with earlier adoption permitted. The Company does not expect this interpretation will have a
material impact on the Company’s results of operations or financial position.
In September 2006, the Securities and Exchange Commission issued SAB No. 108, “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”. SAB No. 108 provides
guidance on how prior year misstatements should be considered when quantifying misstatements in current year financial
statements for purposes of determining whether the current year’s financial statements are materially misstated. SAB No. 108
is effective for fiscal years ending after November 15, 2006. Although the Company will continue to evaluate the application
28
of SAB No. 108, management does not currently believe adoption will have a material impact on the Company’s results of
operations or financial position.
In September 2006, the FASB issued Statement of Accounting Standards No. 157, “Fair Value Measurements” (SFAS
No. 157). This Statement defines fair value, provides a framework for measuring fair value, and expands the disclosures
required for fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require fair value
measurements; it does not require any new fair value measurements. SFAS No. 157 is effective for financial statements for
fiscal years beginning after November 15, 2007, the Company’s first quarter of the 2009 fiscal year, and interim periods
within those years. The Company does not expect this statement will have a material impact on the Company’s results of
operations or financial position.
In September 2006, the Financial Accounting Standards Board issued FAS 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. FAS
158 requires employers to recognize the over- or under-funded status of defined benefit plans and other postretirement plans
in the statement of financial position and to recognize changes in the funded status in the year in which the changes occur
through comprehensive income. In addition, FAS 158 requires employers to measure the funded status of plans as of the date
of the year-end statement of financial position. The recognition and disclosure provisions of FAS 158 are effective for fiscal
years ending after December 15, 2006 (effective for the Company’s fiscal year ending November 2, 2007), while the
requirement to measure plan assets and benefit obligations as of a company’s year-end date is effective for fiscal years ending
after December 15, 2008 (effective for the Company’s fiscal year ending October 30, 2009). The Company expects the
adoption of this statement will materially affect other comprehensive income, long-term liabilities and shareholders equity.
NOTE 2- Composition of Certain Financial Statement Captions:
Inventories:
Meat, ingredients and supplies.................................................................................. $
Work in process ........................................................................................................
Finished goods ..........................................................................................................
$
Property, plant and equipment:
Land .......................................................................................................................... $
Buildings and improvements ....................................................................................
Machinery and equipment ........................................................................................
Asset impairment reserve..........................................................................................
Transportation equipment .........................................................................................
Construction in process.............................................................................................
Accumulated depreciation ........................................................................................
$
Other non-current assets:
Cash surrender value benefits ................................................................................... $
Intangible asset .........................................................................................................
$
Accrued payroll, advertising and other expenses:
Payroll, vacation, payroll taxes and employee benefits ............................................ $
Accrued advertising and broker commissions ..........................................................
Property taxes ...........................................................................................................
Others........................................................................................................................
$
Current portion of non-current liabilities:
Incentive compensation ............................................................................................ $
Accrued pension .......................................................................................................
Other accrued retirement plans .................................................................................
Post retirement healthcare.........................................................................................
29
2006
2005
3,748 $
2,228
13,568
19,544 $
1,840 $
13,233
39,640
(54)
10,130
2,193
66,982
(53,941)
13,041 $
6,433
2,293
12,598
21,324
1,840
13,137
38,318
(54)
9,996
2,013
65,250
(50,731)
14,519
10,561 $
59
10,620 $
10,142
97
10,239
4,297 $
681
439
612
6,029 $
217 $
3,476
510
76
3,526
621
477
690
5,314
414
1,800
507
—
Non-current liabilities:
Incentive compensation ............................................................................................ $
Accrued pension .......................................................................................................
Other accrued retirement plans .................................................................................
Post retirement healthcare.........................................................................................
$
340 $
3,732
3,929
513
8,514 $
395
7,984
4,042
439
12,860
$
4,279 $
2,721
NOTE 3- Retirement and Other Benefit Plans:
Noncontributory-Trusteed Defined Benefit Retirement Plans for Sales, Administrative, Supervisory and Certain
Other Employees
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,
without regard to the plans’ unfunded current liability. The measurement date for the plan is the Company’s fiscal year end.
Net pension cost consisted of the following:
2006
2005
2004
Service cost........................................................................................................................ $ 1,160 $ 1,680 $ 1,435
1,704
Interest cost........................................................................................................................
(1,295)
Expected return on plan assets...........................................................................................
300
Amortization of unrecognized loss ....................................................................................
(68)
Amortization of transition asset (15.2 years) .....................................................................
41
Amortization of unrecognized prior service costs .............................................................
Net pension cost................................................................................................................. $ 1,712 $ 2,489 $ 2,117
1,922
(1,592)
191
—
31
370
—
42
1,803
(1,406)
In the third quarter of fiscal 2006, the Company froze the defined benefit pension plan accrued benefits for
members employed by the Company within administration, sales or supervisory job classification or within a non-bargaining
class (the Corporate Group). This action is defined as a curtailment under SFAS No. 88 "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" and, therefore, the Company
recognized a curtailment loss of approximately $8. As a result of this action, net pension costs were reduced in the last fiscal
quarter by approximately $667 as compared to the same quarter last year and will be reduced in future periods.
Net pension cost is determined using assumptions as of the beginning of each fiscal year. Weighted average assumptions for
the fiscal years are as follows:
2005
Discount rate.................................................................................................................................... 6.00% 6.00%
3.75%
Rate of increase in salary levels....................................................................................................... N/A
Expected return on plan assets......................................................................................................... 8.00% 8.00%
2006
2004
6.25%
3.75%
8.00%
The benefit obligation, plan assets, and funded status of these plans as of the fiscal years ended are as follows:
Change in benefit obligations:
Benefit Obligations - beginning of year ................................................................ $
Service Cost ..........................................................................................................
Interest Cost ..........................................................................................................
Actuarial (Gain) Loss ............................................................................................
Benefits Paid .........................................................................................................
Curtailments ..........................................................................................................
Plan Amendments ................................................................................................
Benefit Obligations - end of year ..........................................................................
30
2006
2005
33,215 $
1,160
1,922
348
(965)
(5,211)
0
30,469
33,151
1,680
1,803
(2,865)
(574)
—
20
33,215
Change in plan assets:
Fair value of plan assets - end of year ...................................................................
Fair value of plan assets - beginning of year .........................................................
Employer Contributions ........................................................................................
Actual return on plan assets ..................................................................................
Benefits Paid .........................................................................................................
17,721
991
1,303
(574)
19,441
(13,774)
97
7,351
—
(3,458)
Accrued pension cost ...................................................................................................... $ (7,208) $ (9,784)
Funded Status of the plans ..............................................................................................
Unrecognized prior service costs ....................................................................................
Unrecognized net actuarial loss ......................................................................................
Unrecognized net transition asset ...................................................................................
Additional accrued minimum liability ............................................................................
23,261
(7,208)
59
1,867
—
(1,926)
19,440
2,757
2,029
(965)
The accumulated benefit obligation is $30,469 and $29,225 at November 3, 2006 and October 28, 2005, respectively.
The benefit obligation is determined using assumptions as of the end of each fiscal year. Weighted average
assumptions as of the fiscal years ended are as follows:
Discount rate.........................................................................................................................
Rate of increase in salary levels............................................................................................ N/A
2006
6.00%
2005
6.00%
3.75%
The discount rate used to value the projected benefit obligation was 6.00%, equal to the prior year. SFAS No. 87
“Employers’ Accounting for Pensions” generally requires that the discount rate used in the liability measurement reflect the
economic environment in which the liability can be settled as of the measurement date. The discount rates were based on
available corporate bond yields as of the measurement date to take into account the economic environment at the time.
Higher funding levels, improved investment returns and the freezing of pension benefits helped to reduce the minimum
liability compared to the prior year.
Plan assets are primarily invested in marketable equity securities, corporate and government debt securities and are
administered by an investment management company. The plans’ long-term return on assets is based on the weighted-
average of the plans’ investment allocation as of the measurement date and the published historical returns for those types of
asset categories, taking into consideration inflation rate forecasts. The compensation increase assumption is based upon
historical patterns of salary increases and management’s expectation of future salary increases for plan participants. The
expected Company contribution to the plan in fiscal year 2007 is $3,476.
The actual allocations as of the fiscal years ended and target allocation for plan assets are as follows:
Asset Class
2006
Large Cap Equities ............................................................................................................ 72.16%
0.0%
Mid Cap Equities ...............................................................................................................
0.0%
Small Cap Equities ............................................................................................................
0.0%
International.......................................................................................................................
Fixed Income ..................................................................................................................... 27.44%
0.40%
Cash ................................................................................................................................
Total................................................................................................................................ 100.0%
2005
66.0%
0.0%
0.0%
0.0%
29.8%
4.2%
100.0%
Target
Asset
Allocation
45.0%
7.5%
5.0%
7.5%
35.0%
0.0%
100.0%
31
Expected payments for the pension benefits are as follows:
Pension
Benefits
Other
Postretirement
Benefits
Fiscal 2007................................................................................................................ $
Fiscal 2008................................................................................................................ $
Fiscal 2009................................................................................................................ $
Fiscal 2010................................................................................................................ $
Fiscal 2011................................................................................................................ $
Fiscal 2012-2016 ...................................................................................................... $
958 $
1,057 $
1,122 $
1,168 $
1,233 $
8,069 $
512
513
513
513
513
4,166
Net amounts recognized as of the end of each fiscal year are as follows:
Accrued benefit cost ....................................................................................................... $
Intangible asset ...............................................................................................................
Accumulated other comprehensive income ....................................................................
$
2006
(7,208) $
59
1,867
(5,282) $
2005
(9,784)
96
3,361
(6,327)
Non-Qualified Supplemental Retirement Plan for Certain Key Employees
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. 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 attainment of retirement age. Total benefit expense recorded
under these plans for fiscal years 2006, 2005 and 2004 was $0, $9, and $0, respectively. Benefits payable related to these
plans and included in other non-current liabilities in the accompanying financial statements were $3,929 and $4,042 at
November 3, 2006 and October 28, 2005, 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 $10,561 and $10,142 at November 3, 2006 and October 28, 2005, respectively.
Incentive Compensation Plan for Certain Key Executives
The Company provides an incentive compensation plan for certain key executives, which is based upon the Company’s
pretax income and return on shareholders’ equity. The payment of these amounts is generally deferred over a five-year
period. The total amount payable related to this arrangement was $557 and $809 at November 3, 2006 and October 28, 2005,
respectively. Future payments are approximately $217, $173, $82, $52 and $32 for fiscal years 2007 through 2011,
respectively.
Postretirement Health Care Benefits for Selected Executive Employees
The Company provides postretirement health care benefits for selected executive employees. The approximate amounts
for postretirement health care benefits are $513 and $439 are included in non-current liabilities at November 3, 2006 and
October 28, 2005, respectively. On January 12, 2004, the Financial Accounting Standards Board issued a Staff Position
which allows employers to recognize or defer the effect of the new Medicare Act on their financial statements. The
Company has deferred the recognition of the subsidy and will reflect it in future OPEB calculations.
Net periodic postretirement benefit cost consisted of the following:
Service cost........................................................................................................................ $
Interest cost........................................................................................................................
Return on plan assets .........................................................................................................
Amortization of unrecognized loss ....................................................................................
32
2006
2005
$
14
66
0
0
14
63
0
0
Amortization of prior service cost .....................................................................................
Amortization of actuarial (gain) / loss ...............................................................................
Net periodic postretirement benefit cost ............................................................................ $
75
11
166
$
75
15
167
Net periodic postretirement benefit cost is determined using assumptions as of the beginning of each fiscal year.
Weighted average assumptions for the fiscal year ended November 3, 2006 are as follows:
2006
Discount rate.................................................................................................................................... 6.00%
Medical trend rate next year ............................................................................................................ 10.0%
Ultimate trend rate ........................................................................................................................... 5.00%
Year ultimate trend rate is achieved ................................................................................................ 2011
2005
6.00%
11.0%
5.00%
2011
Effect of a 1% increase in health care cost trend rate on:
2006
2005
Interest cost plus service cost ........................................................................................................... $
Accumulated postretirement benefit obligation ............................................................................... $
10 $
120 $
100
1210
Effect of a 1% decrease in health care cost trend rate on:
Interest cost plus service cost ...........................................................................................................$
Accumulated postretirement benefit obligation ...............................................................................$
2006
2005
(9) $
(113) $
(8)
(101)
The benefit obligation and funded status of this plan as of the fiscal year ended November 3, 2006 is as follows:
2006
2005
Change in accumulated postretirement benefit obligation:
Benefit Obligations - beginning of year ................................................................$ 1,143
14
Service Cost ..........................................................................................................
66
Interest Cost ..........................................................................................................
(48)
Actuarial (Gain) Loss ............................................................................................
(16)
Benefits Paid .........................................................................................................
0
Plan Amendments .................................................................................................
1,159
1,159
(372)
(198)
—
589
Funded Status of the plans ..............................................................................................
Unrecognized prior service costs ....................................................................................
Unrecognized net actuarial loss ......................................................................................
Unrecognized net transition asset ...................................................................................
Accrued postretirement benefit cost ...............................................................................$
Benefit Obligations - end of year ..........................................................................
$ 1,164
14
63
(61)
(37)
0
1,143
1,143
(447)
(257)
—
439
$
Expected payments for the postretirement benefits are as follows:
Fiscal 2007................................................................................................................ $
Fiscal 2008................................................................................................................ $
Fiscal 2009................................................................................................................ $
Fiscal 2010................................................................................................................ $
Fiscal 2011-2015....................................................................................................... $
79
81
83
84
402
Postretirement
Benefits
Stock Incentive Plan
The Company’s 1999 Stock Incentive Plan (“the Plan”) was approved by the Board of Directors on January 11, 1999
and 275,000 options were granted on April 29, 1999. During fiscal year 2000, 25,000 options were canceled. Under the Plan,
33
the maximum aggregate number of shares which may be optioned and sold is 900,000 shares of common stock, subject to
adjustment upon changes in capitalization or merger. Generally, options granted under the plan vest in annual installments
over four years following the date of grant (as determined by the Board of Directors) subject to the optionee’s continuous
service. Options expire ten years from the date of grant with the exception of an incentive stock option granted to an optionee
who owns stock representing more than 10% of the voting power of all classes of stock of the Company, in which case the
term of the option is five years. Options generally terminate three months after termination of employment or one year after
termination due to permanent disability or death. Options are generally granted at a fair market value determined by the
Board of Directors subject to the following:
a.) With respect to options granted to an employee or service provider who, at the time of grant owns stock
representing more than 10% of the voting power of all classes of stock of the Company; the per share exercise
price shall be no less than 110% of the fair market value on the date of grant.
b.) With respect to options granted to an employee or service provider other than described in the preceding
paragraph, the exercise price shall be no less than 100% for incentive stock options and 85% for non-statutory
stock options of the fair market value on the date of grant.
No options have been granted, exercised, canceled or forfeited for the last four fiscal years.
As of November 3, 2006, 250,000 options were outstanding at an exercise price of $10.00 per share.
401(K) Plan for Sales, Administrative, Supervisory and Certain Other Employees
During the fiscal year ended November 3, 2006, the Company implemented a qualified 401(K) retirement plan (the
“Plan”) for its sales, administrative, supervisory and certain other employees. During fiscal year 2006, the Company made
total contributions to the Plan as of $229,000.
NOTE 4- Income Taxes:
The provision (benefit) for taxes on income includes the following:
Current:
Federal.........................................................................................................................$
State.............................................................................................................................
Deferred:
Federal.........................................................................................................................
State.............................................................................................................................
$
2006
2005
2004
28
(171) $ (1,262) $ 1,174
99
(208)
1,273
(1,470)
(143)
357
43
400
257 $ (1,311) $
318
(159)
159
(1,358)
100
(1,258)
15
The total tax provision (benefit) differs from the amount computed by applying the
statutory federal income tax rate to income (loss) before income taxes as follows:
(Benefit) provision for federal income taxes at the applicable statutory rate........................$
(Decrease) increase in provision resulting from state income taxes, net of federal
income tax benefit............................................................................................................
Tax reserve release ...............................................................................................................
Research & development tax credit .....................................................................................
Non-taxable life insurance gain ............................................................................................
Other, net ..............................................................................................................................
$
2006
2005
2004
509 $
(766) $
13
44
—
(154)
(142)
—
257 $ (1,311) $
(90)
(330)
—
(202)
77
1
—
—
—
1
15
Deferred income taxes result from differences in the bases of assets and liabilities for
34
tax and accounting purposes.
Receivables allowance..........................................................................................................
Inventory capitalization ........................................................................................................
Incentive compensation ........................................................................................................
Franchise tax.........................................................................................................................
Employee benefits ................................................................................................................
Other .....................................................................................................................................
Current tax assets, net................................................................................................
Incentive compensation ........................................................................................................
Pension and health care benefits ...........................................................................................
Depreciation..........................................................................................................................
Net operating loss carry-forward ..........................................................................................
Non-current tax assets, net ..........................................................................................
2006
2005
$
209 $
381
74
2
1,332
(177)
187
343
158
2
1,098
(190)
$ 1,821 $ 1,598
158
4,834
(835)
310
$ 3,357 $ 4,467
3,666
(445)
—
136 $
$
The Company has determined, based on available evidence, that it is more likely than not that the deferred tax assets
will be realized. No valuation allowance was provided against deferred tax assets in the accompanying consolidated financial
statements. The Company recognized a net operating loss carry-forward (before tax effect) in the fiscal year ended October
28, 2005 in the amount of $912 which was fully utilized in the fiscal year ended November 3, 2006.
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 through
April 30, 2008. 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 Company leases certain transportation and computer equipment under operating leases. The terms of the
transportation leases 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 $395 in fiscal year 2006, $330 in
fiscal year 2005 and $379 in fiscal year 2004. Contingent payments were approximately $108 in fiscal year 2006, $132 in
fiscal year 2005 and $153 in fiscal year 2004. Future minimum lease payments are approximately $415 in the each of the
years 2006 through 2009 and $395 in 2010.
NOTE 7- Segment Information:
The Company has two reportable operating segments, Frozen Food Products (the processing and distribution of frozen
products), and Refrigerated and Snack Food Products (the processing and distribution of refrigerated meat and other
convenience foods).
The Company evaluates each segment’s performance based on revenues and operating income. Selling and general
administrative expenses include corporate accounting, information systems, human resource and marketing management at
the corporate level. These activities are allocated to each operating segment based on revenues and/or actual usage.
35
The following segment information is for the years ended November 3, 2006, October 28, 2005, and October 29, 2004:
2006
Sales .........................................................................$
Intersegment sales ....................................................
Net sales ................................................................
Cost of products sold, excluding depreciation .........
Selling, general and administrative expenses...........
Depreciation .............................................................
Gain on sale of equity securities...............................
Income before taxes .................................................
Provision for taxes on income ................................
Net income (loss) .....................................................
$
Total assets ...............................................................
$
Additions to property, plant and equipment .............$
Frozen Food
Products
50,806
—
50,806
30,023
14,189
1,398
—
45,610
5,196
1,872
3,324
12,194
314
2005
Sales .........................................................................$
Intersegment sales ....................................................
Net sales ................................................................
Cost of products sold, excluding depreciation .........
Selling, general and administrative expenses...........
Depreciation .............................................................
Income before taxes .................................................
Provision for taxes on income ................................
Net income (loss) .....................................................$
Total assets...............................................................$
Additions to property, plant and equipment .............$
Frozen Food
Products
47,168
—
47,168
26,479
13,160
1,865
41,504
5,664
2,004
3,660
12,394
549
2004
Sales .........................................................................$
Intersegment sales ....................................................
Net sales ................................................................
Cost of products sold, excluding depreciation .........
Selling, general and administrative expenses...........
Depreciation .............................................................
Gain on sale of equity securities...............................
Income before taxes .................................................
Provision for taxes on income ................................
Net income (loss) .....................................................
$
Total assets...............................................................$
Additions to property, plant and equipment .............$
Frozen Food
Products
44,240
—
44,240
25,644
13,541
1,967
—
41,152
3,088
1,173
1,915
12,943
211
Refrigerated
and Snack Food
Products
83,458
2,285
85,743
57,395
29,774
2,379
(106)
89,442
(3,699)
(1,615)
(2,084)
30,612
1,705
Refrigerated
and Snack Food
Products
83,677
4,038
87,715
63,014
30,233
2,386
95,633
(7,918)
(3,315)
(4,603)
32,747
1,419
Refrigerated
and Snack Food
Products
93,625
3,943
97,568
68,605
30,187
2,378
(553)
100,617
(3,049)
(1,158)
(1,891)
36,433
3,149
$
$
$
$
$
$
$
$
$
$
$
$
36
$
Other
—
—
—
—
—
—
—
—
—
—
— $
$
$ 30,125
311
$
$
$
$
$
$
Other
—
—
—
—
—
—
—
—
—
— $
$
$ 27,822
64
$
$
Other
—
—
—
—
—
—
—
—
—
—
—
$
$ 25,566
84
$
$
$
$
$
$
$
Elimination
—
(2,285)
(2,285)
(2,285)
—
—
—
(2,285)
—
—
—
—
—
Elimination
—
(4,038)
(4,038)
(4,038)
—
—
(4,038)
—
—
—
—
—
Elimination
—
(3,943)
(3,943)
(3,943)
—
—
—
(3,943)
—
—
—
—
—
Totals
$ 134,264
—
134,264
85,133
43,963
3,777
(106)
132,767
1,497
257
$ 1,240
72,931
2,330
$
$
Totals
$ 130,845
—
130,845
85,455
43,393
4,251
133,099
(2,254)
(1,311)
$ (943)
72,963
2,032
$
$
Totals
$ 137,865
—
137,865
90,306
43,728
4,345
(553)
137,826
39
15
24
74,942
3,444
$
$
$
NOTE 8- Unaudited Interim Financial Information
2006
January 20
(12 weeks)
April 14
(12 weeks)
July 7
(12 weeks)
34,575 $
(240)
(137)
(0.01) $
28,305 $
168
72
0.01 $
28,169 $
234
224
0.02 $
November 3
(17 weeks)
43,215
1,335
1,081
0.11
2005
January 21
(12 weeks)
April 15
(12 weeks)
July 8
(12 weeks)
33,591 $
(316)
(196)
(0.02) $
27,714 $
(1,049)
(650)
(0.07) $
27,656 $
66
243
0.03 $
October 28
(16 weeks)
41,884
(955)
(340)
(0.03)
2004
January 23
(12 weeks)
April 16
(12 weeks)
July 9
(12 weeks)
35,322 $
(222)
(138)
(0.01) $
30,541 $
(336)
(209)
(0.02) $
29,756 $
(1,005)
(623)
(0.06) $
October 29
(16 weeks)
42,246
1,602
994
0.10
Net sales................................................................................................ $
Income (loss) before taxes ....................................................................
Net income (loss) ..................................................................................
Basic earnings (loss) per share.............................................................. $
Net sales................................................................................................ $
Income (loss) before taxes ....................................................................
Net income (loss) ..................................................................................
Basic earnings (loss) per share.............................................................. $
Net sales................................................................................................ $
Income (loss) before taxes ....................................................................
Net income (loss) ..................................................................................
Basic earnings (loss) per share.............................................................. $
37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT
SCHEDULE
To the Board of Directors and Shareholders of Bridgford Foods Corporation
Our audit of the consolidated financial statements referred to in our report dated January 27, 2005 also included an audit of
the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Orange County, California
January 27, 2005
38
BRIDGFORD FOODS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Allowance for Doubtful Accounts
Changes in
Provisions for
Doubtful Accounts
Receivable
Accounts
Written Off Less
Recoveries
Balance
at Close of
Period
Balance at
Beginning
of year
Year ended November 3, 2006 ............................................ $
Year ended October 28, 2005 .............................................. $
Year ended October 29, 2004 .............................................. $
468 $
1,118 $
1,429 $
(277) $
(578) $
(246) $
(333) $
72 $
65 $
524
468
1,118
Year ended November 3, 2006 ............................................ $
Year ended October 28, 2005 .............................................. $
Year ended October 29, 2004 .............................................. $
2,092 $
2,368 $
1,847 $
5,918 $
5,260 $
6,140 $
5,840 $
5,536 $
5,619 $
2,170
2,092
2,368
Promotional Allowances
Balance at
Beginning
of year
Allowance
for Accruals
Promotions
Incurred
Balance
at Close of
Period
39
BRIDGFORD FOODS CORPORATION
SUBSIDIARIES OF REGISTRANT
Name of Subsidiary
Bridgford Marketing Company
Bridgford Meat Company
Bridgford Food Processing Corporation
Bridgford Food Processing of Texas, L.P.**
A.S.I. Corporation
Bridgford Distributing Company of Delaware (inactive)
American Ham Processors, Inc.*
Bert Packing Company (inactive)
Moriarty Meat Company (inactive)
* - No shares have been issued.
** - Limited Partnership.
Exhibit 21.1
State in which Incorporated
California
California
California
Texas
California
Delaware
Delaware
Illinois
Illinois
40
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (No. 333 79547) on Form S-8 of
Bridgford Foods Corporation of our report dated January 12, 2007, except for the section titled Restatement/Trading
Securities” in Note 1 as to which the date is March 22, 2007, with respect to the consolidated balance sheets of
Bridgford Foods Corporation as of November 3, 2006 and October 28, 2005, and the related statements of
operations, shareholders’ equity and comprehensive income and cash flows for the fiscal years ended November 3,
2006 and October 28, 2005, and the related financial statement schedule, which report appears in the November 3,
2006 annual report on Form 10-K/A of Bridgford Foods Corporation.
/s/ Haskell & White LLP
Irvine, California
March 22, 2007
41
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-79547) of
Bridgford Foods Corporation of our report dated January 27, 2005 relating to the consolidated financial statements,
which appears in the Annual Report to Shareholders, which is incorporated in this Amended Annual Report on Form
10-K/A. We also consent to the incorporation by reference of our report dated January 27, 2005 relating to the
consolidated financial statement schedule, which appears in this Form 10-K/A.
Exhibit 23.2
/s/ PricewaterhouseCoopers LLP
Orange County, California
March 22, 2007
42
I, William L. Bridgford, certify that:
1. I have reviewed this annual report on Form 10-K/A of Bridgford Foods Corporation;
Exhibit 31.1
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
[Paragraph omitted pursuant to SEC Release Nos 33-8238 and 34-47986];
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
b.
Dated: March 26, 2007
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford, Chairman
(Principal Executive Officer)
43
I, Raymond F. Lancy, certify that:
1. I have reviewed this annual report on Form 10-K/A of Bridgford Foods Corporation;
Exhibit 31.2
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b.
[Paragraph omitted pursuant to SEC Release Nos 33-8238 and 34-47986];
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: March 26, 2007
/s/ RAYMOND F. LANCY
Raymond F. Lancy
(Principal Financial and Accounting Officer)
44
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, William L. Bridgford, Chairman of the Board of Bridgford Foods Corporation (the “Company”), certify, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1)
the Annual Report on Form 10-K/A of the Company for the fiscal year ended November 3, 2006 (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 780 (d)); and
2)
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: March 26, 2007
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford,
Chairman of the Board
(Principal Executive Officer)
45
Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Raymond F. Lancy, Chief Financial Officer, Vice President, Treasurer and Assistant Secretary of Bridgford Foods
Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350, that:
1)
the Annual Report on Form 10-K/A of the Company for the fiscal year ended November 3, 2006 (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 780 (d)); and
2)
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: March 26, 2007
/s/ RAYMOND F. LANCY
Raymond F. Lancy
Chief Financial Officer, Vice President
Treasurer and Assistant Secretary
(Principal Financial and Accounting Officer)
46
DIRECTORS
Allan L. Bridgford
Senior Chairman
Hugh Wm. Bridgford
Vice President
William L. Bridgford
Chairman
Richard A. Foster
Retired (formerly
President, Interstate
Electronics Corporation)
Robert E. Schulze
Retired (formerly President
and member of the Executive Committee,
Bridgford Foods Corporation)
Paul R. Zippwald
Retired (formerly Regional Vice President,
Bank of America)
Todd C. Andrews
Vice President and Controller,
Public Storage, Inc.
D. Gregory Scott
Managing Director, Peak Holdings, LLC
OFFICERS
Allan L. Bridgford
Senior Chairman, Board of Directors
and member of the Executive Committee
Hugh Wm. Bridgford
Chairman, Executive Committee
and Vice President
William L. Bridgford
Chairman, and member
of the Executive Committee
Raymond F. Lancy
Executive Vice President, Chief Financial Officer,
Treasurer, and member of the Executive Committee
John V. Simmons
President and member of the Executive Committee
Bruce Bridgford
President, Bridgford Foods of California
Joe deAlcuaz
Vice President Manufacturing
Daniel R. Yost
Senior Vice President
Chris Cole
Vice President
Cindy Matthews–Morales
Corporate Secretary
Michael Bridgford
Assistant Secretary
New Bridgford Trans fat free,
high fiber, whole wheat rolls.
G e n e r a l O f f i c e s
Bridgford Foods Corporation
1308 North Patt Street
P.O. Box 3773
Anaheim, California 92803
Phone (714) 526-5533
www.bridgford.com
Major Operating Facilities
Chicago, Illinois
Dallas, Texas
Statesville, North Carolina
–––––––––
Transfer Agent and Registrar
Mellon Investor Services LLC
Newport Office Center VII
480 Washington Boulevard
Jersey City, NJ 07310
1-800-710-0926
Independent Accountants
Haskell & White LLP
Irvine, California