FOODS CORPORATION
2 0 0 7 A N N U A L R E P O R T
Notice of 2008 Annual Meeting and Proxy Statement
T O O U R S H A R E H O L D E R S
2007 was a year of excellent progress for Bridgford Foods
Corporation in spite of historic increases in grain prices,
petroleum, and virtually every expense we incur in the
course of our business. Sales in our 52 week 2007 fiscal year
were $125,091,000, a decline of 6.8% from sales of
$134,264,000 in our 53 week 2006 fiscal year. Many
unprofitable products and territories were discontinued.
Due to the severity of cost increases the Company recorded a
net loss of $292,000 in 2007, equal to ($0.03) cents per share.
SALES AND MARKETING
Bridgford Monkey Bread, manufactured at our Superior
Foods plant in Dallas under the direction of President Blaine
Bridgford, continues to be a star performer, with a 14%
sales increase in 2007. During the year, we continued to
successfully develop sales of our second Monkey Bread variety,
Garlic Parmesan flavor. The Company has streamlined the
Anaheim deli production operations, eliminating unprofitable
processing operations and focusing on value-added
sandwiches and meal kits. Our Chicago based direct route
sales distribution system for dry sausage products is being
reorganized for higher sales per route per week with an
emphasis on manufactured products. Meat snack package
sizes have been reduced to conform with ecological
standards of our large customers. In December, 2007,
Bridgford Foods announced an agreement with DOT Foods,
a major national re-distributor, to sell the Company’s frozen
food products through DOT, providing a major new avenue
of distribution for those products.
OPERATIONS
Major achievements include the development and successful
introduction of new products and new technologies. In the
fourth quarter, we began a major shift toward the sale of
manufactured items on our Chicago direct store delivery
routes. New and improved products include new styles and
flavors of frozen bread dough and rolls for our food service
customers, as well as beef
jerky manufactured and
packaged in our Chicago meat processing plant. Many of
our new bread products follow recent trends toward whole
grain ingredients utilizing cracked wheat and entire wheat
flour, and ethnic styles such as sopapilla bites and tortilla
balls. Our new jerky production system utilizes techniques
for rapid processing that are very unique. Depending on
commodity market conditions, we are free to utilize our
entire system or purchase pre-processed products from
overseas, made to our specifications, which can be integrated
into our packaging system. Both methods are being actively
used. All Jerky operations will eventually be performed in
Chicago, directed by Baron R.H. Bridgford, President of our
division, Bridgford Foods of Illinois. During 2007, we
completed development work and preparations for the
production of “First Strike” rations for the U.S. military
forces. These very unique sandwich products utilize our
production facilities in Chicago and Statesville, North
Carolina. The British Army purchased a good quantity of
these products in 2007 and shipped them directly to Iraq
and Afghanistan from the U.S.
FINANCIAL MATTERS
Working capital at November 2, 2007 totaled $29,453,000,
$2,229,000 (7.0%) lower than at the beginning of the
fiscal year. The working capital ratio improved to 3.5 to 1 at
November 2, 2007 compared to 3.2 to 1 at November 3,
2006. The Company anticipates significant
funding of
its frozen defined benefit pension plan in fiscal year 2008
as required by the Pension Protection Act. Projected
contributions for fiscal year 2008,
in the amount of
$2,877,000, were recorded as a current liability at the end
of the 2007 fiscal year, which significantly reduced working
capital and non-current liabilities. During the fiscal year the
Company purchased 69,000 shares of common stock at
a cost of $515,000 ($7.46 average cost per share) and
capital expenditures totaled $1,587,000. The Company has
remained free of interest bearing debt for twenty-one
consecutive years.
Shareholders’ equity totaled $49,969,000, a decrease of
$217,000 (0.4%) compared to the end of the prior year.
The decrease principally relates to lower net income offset
by a decrease in the minimum pension liability, which is
recorded in the Consolidated Statements of Shareholders’
Equity and Comprehensive Income under the “Accumulated
other comprehensive income (loss)” column. The decrease
in this liability resulted from the Company’s adoption of
Statement of Financial Accounting Standards No. 158 (SFAS
No. 158) on November 2, 2007. Liabilities related to the
Company’s postretirement healthcare and supplemental
executive retirement plans also decreased shareholders’
equity when the Company adopted SFAS No. 158. No cash
dividends were paid during the 2007 fiscal year. The Board
of Directors suspended the cash dividend at its May, 2004
meeting in recognition of lower profitability levels in recent
years. Approximately 519,000 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 $5.05 at November 2,
2007 compared with $5.04 at November 3, 2006.
SUMMARY
Despite the challenges of 2007 and the continuing escalation
of our raw material and operating costs, your Company
refuses to compromise the quality of our products or the
service we provide to our customers. We are forging ahead,
making improvements in every area, seeking economies in
every expense category, and making innovative changes to
manufacturing operations and distribution methods.
On behalf of all of our directors and officers, we thank our
shareholders, customers and suppliers for their support during
2007 and look forward to reporting better results in 2008.
Respectfully submitted,
January 31, 2008
William L. Bridgford
Chairman
John V. Simmons
President
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 2, 2007
Commission file number: 0-2396
BRIDGFORD FOODS CORPORATION
(Exact name of Registrant as specified in its charter)
California
(State of incorporation)
95-1778176
(I.R.S. Employer
Identification No.)
1308 North Patt Street
Anaheim, California 92801
(Address of principal executive offices)
(714) 526-5533
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $1.00 per share, the NASDAQ Stock Market
LLC.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes (cid:134) No ⌧
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:134) No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer (cid:134)
Accelerated filer (cid:134)
Non-accelerated filer ⌧
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes (cid:134) No ⌧
The aggregate market value of voting stock held by non-affiliates of the registrant on April 20, 2007 was $16,285,000.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
9,867,328 shares as of January 21, 2008.
Portions of the registrant’s Proxy Statement for the registrant’s Annual Meeting of Shareholders to be held March 19, 2008 are
incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.
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INDEX TO FORM 10K
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Consolidated Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
SIGNATURES
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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. Readers are cautioned that such statements, which may be identified by
words including ‘‘anticipates,’’ ‘‘believes,’’ ‘‘intends,’’ ‘‘estimates,’’ ‘‘expects,’’ and similar expressions, are only predictions or
estimations and are subject to known and unknown risks and uncertainties. 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,” “we,” “our”), 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, beef jerky 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.
Products manufactured or processed by the Company
Items manufactured or processed by third parties for distribution
2007
73%
27%
100%
2006
2005
71%
29%
100%
70%
30%
100%
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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. 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 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:
Frozen Food Products
Refrigerated and Snack Food Products
2007
39%
61%
100%
2006
2005
38%
62%
100%
36%
64%
100%
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.
Availability of SEC Filings and Code of Conduct on Internet Website
The Company maintains an Internet website at http://www.bridgford.com. Available on this website, free of charge, are annual
reports on Form 10-K and quarterly reports on Form 10-Q which the Company files with the Securities and Exchange Commission.
The Company’s Code of Conduct is also available on the website.
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 allow us to compete effectively with other manufacturers seeking to provide similar products to the Company’s
current large food service end purchasers, although no assurances can be given.
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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 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
toward 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 260 different items through a direct store
delivery network serving approximately 35,000 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
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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 put into service in the fourth quarter of fiscal year 2007. The Company does not expect to begin
significant production until the second quarter of 2008 on this line. Management believes that the line will be profitable and improve
margins on existing product lines. During 2007, the Company completed development work and preparations for production of “First
Strike” rations for the U.S. military forces. Potential orders for this item are expected to be substantial. Other than “First Strike”
rations, 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.
Importance of Key Customers
Sales to Wal-Mart® comprised 14.6% of revenues in fiscal year 2007 and 12.4 % of accounts receivable was due from Wal-
Mart® at November 2, 2007. 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.
Employees
The Company has approximately 660 employees, approximately 41% of whose employment relationship is governed by
collective bargaining agreements. These agreements currently expire or expired between March 2007 and March 2012. A contract
with UFCW Meat Cutters Local 324, covering 58 employees, expired October 3, 2007. As of January, 2008, a new agreement is
currently in the process of ratification. A contract with Teamsters Locals 87, 150, 386 and 431, covering 10 employees, expired on
March 31, 2007. As of January, 2008, a new agreement is in the process of ratification. 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, 2008 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.
Age
Name
Allan L. Bridgford
72 Senior Chairman and member of the Executive Committee
Hugh Wm. Bridgford 76 Vice President and Chairman of the Executive Committee
William L. Bridgford 53 Chairman and member of the Executive Committee
52 President and member of the Executive Committee
John V. Simmons
54 Chief Financial Officer, Executive Vice President, Treasurer and member of the Executive Committee
Raymond F. Lancy
Position(s) with the Company
Item 1A. Risk Factors
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. The risks described below are not the only risks faced by the Company. The
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risks described below are only the risks that the Company currently believes are material to its business. However, additional risks not
presently known, or risks that are currently believed to be immaterial, may also impair business 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 the following: 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 are subject to 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. These and other risks, if realized by the Company, could have an adverse affect on our operating results and financial
position.
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. While fluctuations in significant components of our cost structure,
such as commodities and fuel prices, have had a significant impact upon our profitability over the last three years, 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. However, future volatility of general price inflation and raw material cost and availability could adversely affect the Company’s
financial results.
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 governmental laws and regulations (including the January 1998 HACCP
requirements), and that it maintains necessary permits and licenses relating to its meat 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 is in full compliance with these regulations.
A failure to obtain or a loss of necessary permits and licenses could delay or prevent us from meeting current product demand
and could adversely affect operating performance. Furthermore, the Company is routinely subject to new or modified laws,
regulations and accounting standards. If found to be out of compliance with applicable laws and regulations in these or other areas,
the Company could be subject to civil remedies, including fines, injunctions, recalls or asset seizures, as well as potential criminal
sanctions, any of which could have a significant adverse effect on the Company’s financial results.
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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.
Risks Relating to Changes in Consumer Preference and Economic Conditions
The food industry in general is subject to changing consumer trends, demands and preferences. Failure to identify and react
appropriately to changes in these factors could lead to, among other things, reduced demand and price reduction for the Company’s
products and could have an adverse effect on financial results. Furthermore, the Company may be adversely affected by changes in
domestic or foreign economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates,
and energy availability and costs (including fuel surcharges). Any such changes could have a significant adverse effect on demand for
our products, as well as the costs and availability of raw materials, ingredients and packaging materials, thereby negatively affecting
financial results.
Risks Relating to Loss of Major Customers
The Company could suffer significant reductions in revenues and operating income if we lost one or more of our largest
customers, including, for example, Wal-Mart Stores, Inc., which accounted for 14.6% of revenues in fiscal year 2007. Many of our
customers, such as supermarkets, warehouse clubs and food distributors, have consolidated in recent years. Such consolidation has
produced large, sophisticated customers with increased buying power who are more capable of operating with reduced inventories
while demanding lower pricing and increased promotional programs. These customers also may use their shelf space for their own
private label products. Failure to respond to these trends could reduce our volume and cause us to lower prices or increase
promotional spending for our product lines which could adversely affect our profitability.
Members of the Bridgford Family Can Exercise Significant Control
Members of the Bridgford family beneficially own, in the aggregate, approximately 77% of the outstanding stock of the
Company. In addition, three members of the Bridgford family serve on the Board of Directors. As a result, members of the Bridgford
family have the ability to exert substantial influence or actual control over our management and affairs and over substantially all
matters requiring action by our shareholders, including amendments to by-laws, election and removal of directors, any proposed
merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. This concentration of ownership
may also delay or prevent a change in control otherwise favored by our other shareholders and could depress the Company’s stock
price. Additionally, as a result of the Bridgford family’s significant ownership of the outstanding voting stock, we have relied on the
“controlled company” exemption from certain corporate governance requirements of the NASDAQ stock market; therefore, we have
elected not to implement the rule that provides for a nominating committee to identify and recommend nominees to the Board of
Directors. Pursuant to these exemptions, our compensation committee, which is made up of independent directors, does not have sole
authority to determine the compensation of our executive officers, including our Chairman.
Item 1B. Unresolved Staff Comments
Not applicable.
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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
Acreage
100,000
0
94,000
30,000
16,000
3,200
42,000
156,000
5.0
0.3
4.0
2.0
1.0
1.5
8.0
1.5
* - property used by Frozen Food Products Segment
** - property used by Refrigerated and Snack Food Segment
***- property used by both Frozen Food Products Segment and Refrigerated and Snack Food Segment
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 against the Company at November 2, 2007 or as of the date of filing of this Annual
Report on Form 10-K. 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. The outcome of litigation cannot be predicted with certainty and adverse litigation trends and outcomes could significantly
and adversely affect the financial results of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting of Shareholders
The 2008 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 19, 2008.
No matters were submitted by the Company’s shareholders during the fourth quarter of the fiscal year ended November 2, 2007.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Set forth below is a line graph comparing the cumulative stockholder return on the Company’s common stock with the
cumulative total return of the Standard & Poor’s 500 Stock Index and an industry peer group identified by the Company (the “Peer
Group Index”). The Peer Group Index consists of Bob Evans Farms, Inc.; Cagle’s, Inc.; Hormel Foods Corporation; Pilgrims Pride
Corporation; Sanderson Farms Inc.; Seaboard Corp.; Tyson Foods, Inc.; and United Heritage Corporation. The Peer Group Index
return consists of the weighted returns of each component issuer according to such issuer’s respective stock market capitalization at
the beginning of each period for which a return is indicated. The performance shown is not necessarily an indicator of future price
performance.
Notwithstanding anything to the contrary set forth in the Company’s previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this Annual Report on Form 10-K,
in whole or in part, the Stock Performance Graph shall not be incorporated by reference into any such filings.
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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 2007
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year 2006
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
8.08 $
7.95 $
7.70 $
7.83 $
High
7.90 $
6.50 $
6.80 $
6.40 $
Low
6.01
7.02
7.23
6.45
Low
6.50
5.80
5.99
5.57
$
$
$
$
$
$
$
$
Cash
Dividends
Paid
0.00
0.00
0.00
0.00
Cash
Dividends
Paid
0.00
0.00
0.00
0.00
$
$
$
$
$
$
$
$
On January 24, 2008, the closing sale price for the Company’s common stock on the Nasdaq Global Market was $6.93 per
share. As of January 24, 2008, there were 333 stockholders of record of the Company’s common stock.
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.
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.
Repurchases of Equity Securities by the Issuer
During fiscal year 2007, the Company repurchased an aggregate of 69,000 shares of its common stock for $515,000 pursuant to
its repurchase plan previously authorized by the Board of Directors. The following table provides information regarding the
Company’s repurchases of its common stock in each of the four periods comprising the fourth quarter of fiscal year 2007.
Period (1)
July 14, 2007 — August 10, 2007 (4 weeks)
August 11, 2007 — September 7, 2007
(4 weeks)
September 8, 2007 — October
5, 2007 (4 weeks)
October 6, 2007 — November
2, 2007 (4 weeks)
Total
Total Number of
Shares Purchased
5,568
Average Price Paid
Per Share
7.65
7.52
7.35
6.94
7.29
$
$
$
$
$
3,373
4,703
8,583
22,227
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)
5,568
3,373
4,703
8,583
22,227
535,417
532,044
527,341
518,758
(1) The periods shown are the Company’s fiscal periods during the sixteen-week quarter ending November 2, 2007.
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(2) 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. The Company’s Stock Purchase Plan (“Purchase Plan”) is administered by Citigroup Global Markets
Inc. (“CGM”) for purchase of shares of common stock (“Stock”) issued by the Company in compliance with the
requirements of Rule 10b5-1 under the Securities Exchange Act of 1934 (“Exchange Act”). Commencing on September 16,
2007 and continuing through and including September 15, 2008, CGM shall act as the Company’s exclusive agent to
purchase Stock under the Purchase Plan. This Purchase Plan supplements any purchases of stock by the Company “outside”
of the Purchase Plan, which may occur from time to time, in open market transactions pursuant to Rule 10b-18 of the
Exchange Act. The daily purchase quantity is defined as a number of shares up to, but not to exceed, each day’s applicable
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 Rule 10b-18 average daily trading volume condition,
provided that no other Purchase Plan purchases are made on any day on which such a block is purchased. As of November 2,
2007, the total maximum number of shares that may be purchased under the Purchase Plan is 518,758 at a total maximum
aggregate price (exclusive of commission) of $5,187,580.
Item 6. Selected Financial Data
The following selected consolidated financial data as of and for the last five fiscal years have 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
Gross Margin Percent
Net Income (Loss)
Basic Earnings (Loss) Per Share
Current Assets
Current Liabilities
Working Capital
Property, Plant and Equipment, Net
Total Assets
Shareholders’ Equity
Cash Dividends Per Share
(In thousands, except percent and per share amounts)
* - 53 weeks.
Nov. 2,
2007
125,091
$
35.1%
(292)
(0.03)
41,355
11,902
29,453
11,221
67,647
49,969
0.00
$
Nov. 3,
2006 *
$
134,264
$
36.6%
1,240
0.13
45,913
14,231
31,682
13,041
72,931
50,186
0.00
$
$
Oct. 28,
2005
130,845 $
34.7%
(943)
(0.09)
43,738
11,841
31,897
14,519
72,963
48,262
0.00 $
Oct. 29,
2004
137,865
Oct. 31,
2003
136,251
$
34.5%
24
—
44,401
12,665
31,736
16,755
74,942
48,664
0.05
$
36.7%
1,210
0.12
45,686
12,489
33,197
17,735
75,927
52,333
0.16
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.
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Results of Operations (in thousands except percentages)
Fiscal Year Ended November 2, 2007 (52 weeks) Compared to Fiscal Year Ended November 3, 2006 (53 weeks)
Net Sales-Consolidated
Net sales in fiscal 2007 decreased $9,173 (6.8%) when compared to the prior year. After considering the additional week in
fiscal 2006, a 53 week year, sales decreased $6,640 (5.0%) compared to the prior year. The primary reason for the decrease was lower
unit volume (8.3%). Increased selling prices (1.9%) partially offset the unit volume decline. Promotional allowances as a percentage
of consolidated sales increased 1.1% which also contributed to the net sales decrease.
Net Sales-Frozen Food Products Segment
Net sales in the Frozen Food Products segment decreased $1,405 (2.8%) compared to the prior year. After considering the
additional week in fiscal 2006, sales decreased $446 (0.9%). Unit volume decreases of 5.4% were partially offset by unit price
increases of 4.5%. Promotional allowances were higher compared to the prior year which also contributed to the slight net sales
decline.
Net Sales-Refrigerated and Snack Food Segment
Net sales in the Refrigerated and Snack Food Products segment decreased $7,768 (9.3%) compared to the prior year. After
considering the additional week in fiscal 2006, sales decreased $6,194 (7.6%). Unit volume decreased 9.3% in fiscal 2007. The
impact of price increases was negligible. Promotional allowances were higher compared to the prior year which also contributed to
the sales decline.
Cost of Products Sold-Consolidated
Cost of products sold decreased $4,007 (4.7%) compared to the prior year primarily due to lower unit sales volumes.
Cost of Products Sold–Frozen Food Products Segment
Cost of products sold in the Frozen Food Products segment increased $146 (0.5%) compared to the prior year. Higher flour
commodity costs in fiscal 2007 were the primary contributing factor causing this increase.
Cost of Products Sold–Refrigerated and Snack Food Segment
Cost of products sold in the Refrigerated and Snack Food Products segment decreased $4,605 (8.0%) compared to the prior
year. Lower unit volumes partially offset by higher meat commodity costs in fiscal 2007 were the primary factors causing this change.
Gross Margin-Consolidated
The gross margin before depreciation decreased from 36.6% to 35.1%, in fiscal 2007, primarily due to higher flour and meat
commodity costs when compared to the prior fiscal year. Higher promotional allowances also reduced net selling prices contributing
to the gross margin decline.
Gross Margin–Frozen Food Products Segment
The gross margin before depreciation decreased from 40.9% to 38.9%, in fiscal 2007, primarily due to higher flour commodity
costs when compared to the prior fiscal year. Higher promotional allowances also reduced net selling prices contributing to the gross
margin decline. Increased selling prices were insufficient to overcome increased commodity costs.
Gross Margin–Refrigerated and Snack Food Segment
The gross margin before depreciation decreased from 31.2% to 30.3%, in fiscal 2007, primarily due to higher meat commodity
costs and lower unit volumes when compared to the prior fiscal year. The impact of price increases was negligible. Promotional
allowances were higher compared to the prior year which also contributed to the slight gross margin decline.
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Selling, General and Administrative Expenses-Consolidated
Selling, general and administrative expenses decreased $2,714 (6.2%) when compared to the prior year. After considering the
additional week in fiscal 2006, average weekly expenses were lower compared to the prior year. Within this category costs for
advertising and outsourced computer network security and support outpaced sales growth. Offsetting these increases were lower
employee benefit expenses (pension, healthcare, workers’ compensation and vacation pay), increased gains on life insurance policies
and reduced staff costs related to computer network outsourcing.
Selling, General and Administrative Expenses-Frozen Food Products Segment
Selling, general and administrative expenses in the Frozen Food Products segment increased by $382 (2.7%) compared to the
prior year. Higher advertising costs were partially offset by lower employee benefit expenses when compared to the prior year.
Selling, General and Administrative Expenses-Refrigerated and Snack Food Segment
Selling, general and administrative expenses in the Refrigerated and Snack Food Segment decreased $3,095 (10.4%) compared
to the prior year. This decrease was primarily caused by lower unit sales volume. Lower employee benefit expenses outpaced the
impact of the sales decline.
Depreciation Expense-Consolidated
Depreciation expense decreased by $388 (10.3%) compared to the prior year. The decrease in depreciation expense reflects
lower capital expenditure levels in recent years and certain significant assets becoming fully depreciated in the 2007 fiscal year.
Offsetting these decreases was the addition of a new major manufacturing line put into service in the last quarter of the 2007 fiscal
year.
Depreciation Expense-Frozen Food Products Segment
Depreciation expense in the Frozen Food Products segment decreased by $390 (27.9%) compared to the prior year. The
decrease in depreciation expense reflects lower capital expenditure levels in recent years and certain significant assets becoming fully
depreciated in the 2007 fiscal year.
Depreciation Expense- Refrigerated and Snack Food Segment
Depreciation expense in the Refrigerated and Snack Food Segment was essentially equal as compared to the prior year. Recent
lower capital expenditure levels were off-set by the addition of a new major manufacturing line put into service in the last quarter of
the 2007 fiscal year.
Gain on Sale of Equity Securities
The Company did not engage in the sale of equity securities during fiscal year 2007 and recorded a pre-tax gain of $106 in fiscal
2006.
Income Taxes
The effective income tax rate was (56.6)% and 17.2% in fiscal years 2007 and 2006, respectively. In fiscal year 2007, the
effective income tax rate differed from the applicable mixed statutory rate of approximately 38% primarily due to the Company’s
current year claim for research and development tax credits and non-taxable life insurance. In fiscal year 2006, the effective income
tax rate differed from the applicable mixed statutory rate of approximately 38% primarily due to the Company’s current year claim for
research and development tax credits related to prior year activities.
Fiscal Year Ended November 3, 2006 (53 weeks) Compared to Fiscal Year Ended October 28, 2005 (52 weeks)
Net Sales - Consolidated
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
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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 offsetting 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.
Gross Margin - Consolidated
The gross margin increased to 36.6% compared to 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 offsetting 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 - Consolidated
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. Offsetting 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 2006 and 2005, respectively. In fiscal year 2006, 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 2005, 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.
Fiscal Year Ended October 28, 2005 Compared to Fiscal Year Ended October 29, 2004
Net Sales – Consolidated
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 - Consolidated
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.
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Selling, General and Administrative - Consolidated
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.
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.
Liquidity and Capital Resources (in thousands except share amounts)
The Company’s need for operations growth, capital expenses and share repurchases are expected to be met with cash flows provided
by operating activities.
Cash flows from operating activities:
Net income (loss)
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
Deferred income taxes, net
Changes in working capital
Net cash (used) provided by operating activities
2007
2006
(as restated)
2005
(as restated)
$
(292) $
1,240 $
(943)
3,389
(245)
(8)
—
(523)
9,911
12,232 $
3,777
(277)
(31)
(106)
1,111
(8,540)
(2,826) $
4,251
(578)
(11)
—
(571)
(2,133)
15
$
Over the past three years, cash provided by operating activities was approximately $9,421, which enabled the Company to fund
additions to property, plant and equipment in the amount of $5,227 and share repurchases of $830.
Significant changes in working capital are as follows:
2007 – Operating cash flows increased due to the sale of trading securities and reductions in accounts receivable and inventories offset
by increases in prepaid expenses and other non-current assets. Significant reductions in accounts payable, accrued payroll, advertising
and other expenses and the current and non-current portion of long-term liabilities offset cash flow increases during 2007. During the
year the Company funded $3,290 toward its defined benefit pension plan.
2006- Operating cash flows decreased due to the purchase of trading securities, increases in other non-current assets and decreases in
non-current liabilities. Significant inventory reductions offset these cash flow decreases. During the year the Company funded $2,557
toward its defined benefit pension plan.
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2005- Operating cash flows increased slightly. Significant reductions in accounts receivable and inventories were offset by the
purchase of trading securities. During the year the Company funded $991 toward its defined benefit pension plan.
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
2007
2006
2005
$
$
26 $
—
(1,587)
(1,561) $
62 $
606
(2,330)
(1,662) $
28
—
(2,032)
(2,004)
Expenditures for property, plant and equipment include the acquisition of new equipment, upgrading of facilities to maintain
operating efficiency and investments in cost effective technologies to lower costs. Overall capital spending has declined in recent
years as the Company carefully scrutinizes capital investments for short term pay-back of investment. A new major manufacturing
line in the amount of $1,914 was put into service in the last quarter of fiscal year 2007.
Cash used in financing activities:
Shares repurchased
Cash dividends paid
Net cash used in financing activities
2007
2006
2005
$
$
(515) $
—
(515) $
(187) $
—
(187) $
(128)
—
(128)
The Company’s stock repurchase program was approved by the Board of Directors in November 1999 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. As of November 2, 2007, up to 518,758 shares
were still authorized for repurchase under the program.
The Company has remained free of interest-bearing debt for twenty-one consecutive years. The Company maintains a line of
credit with Bank of America that expires April 30, 2008. [The Company expects to renew this line of credit with Bank of America
prior to its expiration.] 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 2007 fiscal year and there were no borrowings under this line of
credit during such period. Management believes 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 debt for twenty-one consecutive years and had no other debt or other
contractual obligations except for leases existing at November 2, 2007. The Company leases certain transportation equipment under
operating leases. Future minimum lease payments are approximately (in thousands):
Net Lease Commitments
2008
2009
2010
$
415
$
415
$
415 $
2011
17
2012
and
there-
after
415
$
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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 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. The provision for doubtful accounts receivable is based on historical trends and current collection 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 14.6% of revenues in fiscal year 2007 and 12.4% of accounts receivable was
due from Wal-Mart® at November 2, 2007. 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.
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 the Company’s 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.
Estimated amounts related to liabilities for pension benefits are especially subject to inherent uncertainties and these 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 were made in fiscal year 2006 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
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the current ratio. The above-mentioned restatement had no impact on the Company’s reported results of operations. The Company
held no auction rate securities as of November 2, 2007.
Recently Issued Accounting Pronouncements and Regulations
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement of Accounting Standards No. 109, “Accounting for
Income Taxes” (“SFAS 109”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial
statements in accordance with SFAS 109. This Interpretation prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the provisions of FIN 48 and the
impact on our consolidated financial position and results of operations. The Company adopted FIN 48 on November 3, 2007.
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 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 108 is effective
for fiscal years ending after November 15, 2006. The adoption of SAB 108 did not have a material impact on the Company’s results of
operations or financial position in fiscal year 2007.
In September 2006, the FASB issued Statement of Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”).
This Statement defines fair value, provides a framework for measuring fair value, and expands the disclosures required for fair value
measurements. SFAS 157 applies to other accounting pronouncements that require fair value measurements; it does not require any
new fair value measurements. SFAS 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 upon adoption.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans–an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS 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, SFAS 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 SFAS 158 became 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 impact of the Company’s initial adoption
of SFAS 158 is disclosed in Note 3 to the Consolidated Financial Statements.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 expands opportunities to use fair value measurement in financial reporting
and permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement is effective
for fiscal years beginning after November 15, 2007, or the Company’s fiscal year ending October 30, 2009. The Company does not
expect this statement will have a material impact on its results of operations or financial position.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company did not have significant overall currency exposure at November 2, 2007. The Company’s financial instruments
consist of cash and cash equivalents and life insurance policies at November 2, 2007 and the carrying value of the Company’s
financial instruments approximated their fair market values based on current market prices and rates. A hypothetical 10% adverse
move in interest rates along the entire interest rate yield curve would not materially affect the fair
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market value of the Company’s interest sensitive financial investments. Declines in interest rates over time will, however, reduce the
Company’s investment income, while increases in interest rates over time will increase the Company’s interest expense. 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)
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 26
(12 weeks)
April 20
(12 weeks)
2007
July 13
(12 weeks)
November 2
(16 weeks)
32,314
55
40
0.00
$
$
27,894 $
(356)
(273)
(0.03) $
26,686
79
33
0.00
$
$
38,197
(451)
(92)
0.00
January 20
(12 weeks)
April 14
(12 weeks)
2006
July 7
(12 weeks)
November 3
(17 weeks)
$
34,575
(240)
(137)
(0.01) $
28,305 $
168
72
0.01 $
28,169
234
224
0.02
January 21
(12 weeks)
April 15
(12 weeks)
2005
July 8
(12 weeks)
$
33,591
(316)
(196)
(0.02) $
27,714 $
(1,049)
(650)
(0.07) $
27,656
66
243
0.03
$
$
$
$
43,215
1,335
1,081
0.11
October 28
(16 weeks)
41,884
(955)
(340)
(0.03)
$
$
$
$
$
$
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
Not applicable.
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
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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 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. 5, 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.
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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.
Item 9B. Other Information
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information set forth in the sections entitled “Proposal 1 – 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 19, 2008 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, who together
comprise the Audit Committee, are all “independent directors” within the meaning of Rule 4200 of the Nasdaq Marketplace Rules.
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”, “Compensation of Executive Officers”, and
“Compensation Committee Interlocks and Insider Participation” contained in the Company’s definitive proxy statement for the 2008
Annual Meeting of Shareholders to be held on March 19, 2008 is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information set forth in the sections entitled “Principal Shareholders and Management” and “Proposal 1 – Election of Directors”
contained in the Company’s definitive proxy statement for the 2008 Annual Meeting of Shareholders to be held on March 19, 2008 is
incorporated herein by reference.
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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 2, 2007. 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 2, 2007
(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 2, 2007 (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, and Director Independence
Information set forth in the section entitled “Certain Relationships and Related Party Transactions” contained in the Company’s
definitive proxy statement for the 2008 Annual Meeting of Shareholders to be held on March 19, 2008 is incorporated herein by
reference.
Item 14. Principal Accountant Fees and Services
Information set forth in the sections entitled “Principal Accountant Fees and Services” and “Policy on Audit Committee Pre-
Approval of Audit Services And Permissible Non-Audit Services of Independent Accountants” contained in the Company’s definitive
proxy statement for the Annual Meeting of Shareholders to be held on March 19, 2008 is incorporated herein by reference.
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 2, 2007 and November 3, 2006
Consolidated Statements of Operations for years ended November 2, 2007, November 3, 2006, and October 28, 2005
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for years ended November 2, 2007,
November 3, 2006, and October 28, 2005
Consolidated Statements of Cash Flows for years ended November 2, 2007, November 3, 2006, and October 28, 2005
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule
The following financial statement is filed herewith:
Schedule II - Valuation and Qualifying Accounts
23
Page
26
27
28
29
30
31
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(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
3.7
3.8
10.1
10.2
10.3
10.4
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).
By-laws, as amended (filed as Exhibit 2 to Form 10-K on January 28,1993 and incorporated herein by reference).
Certificate of Amendment to By-laws (filed as Exhibit 99.1 to Form 8-K on October 10, 2007 and incorporated herein by
reference).
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).*
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Registered Public Accounting Firm.
24.1 Power of Attorney (included as part of the signature page)
31.1 Certification of Principal Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
32.2
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.
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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: January 31, 2008
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, 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
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
/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
Title
Date
Chairman
(Principal Executive Officer)
January 31, 2008
Senior Chairman
January 31, 2008
Vice President and Director
January 31, 2008
President
January 31, 2008
Chief Financial Officer
(Principal Financial Officer)
Director
Director
Director
Director
Director
25
January 31, 2008
January 31, 2008
January 31, 2008
January 31, 2008
January 31, 2008
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Report Of Independent Registered Public Accounting Firm
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 2,
2007 and November 3, 2006 and the related consolidated statements of operations, shareholders’ equity and comprehensive income
and cash flows for the fiscal years ended November 2, 2007, 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 2, 2007 and November 3, 2006, and the consolidated results of its operations and its cash
flows for the fiscal years ended November 2, 2007, 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 to the consolidated financial statements, the consolidated balance sheet as of November 3, 2006 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.
As discussed in Note 1 to the consolidated financial statements, effective November 2, 2007, the Company adopted Statement of
Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an
amendment of FASB Statements No. 87, 88, 106 and 132(R).”
/s/ HASKELL & WHITE LLP
Irvine, California
January 30, 2008
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BRIDGFORD FOODS CORPORATION
CONSOLIDATED BALANCE SHEETS
November 2, 2007 and November 3, 2006
(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Trading securities
Accounts receivable, less allowance for doubtful accounts of $482 and $524, respectively
and promotional allowances of $1,980 and $2,170, respectively
Inventories
Prepaid expenses
Refundable income taxes
Deferred income taxes
Total current assets
Property, plant and equipment, net of accumulated depreciation of $53,840 and $53,941,
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
Authorized - 1,000 shares Issued and outstanding – none
Common stock, $1.00 par value
Authorized - 20,000 shares. Issued and outstanding - 9,889 in 2007 and 9,958 in 2006
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
See accompanying notes to consolidated financial statements.
27
2007
2006
(as restated)
$
11,336
—
$
8,563
18,332
1,137
497
1,490
41,355
11,221
11,191
3,880
67,647
2,978
5,253
3,671
11,902
5,776
—
9,946
13,789
26,837
(603)
49,969
67,647
$
$
$
$
$
$
1,180
12,200
10,222
19,544
291
655
1,821
45,913
13,041
10,620
3,357
72,931
3,923
6,029
4,279
14,231
8,514
—
10,015
14,235
27,129
(1,193)
50,186
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BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended November 2, 2007, November 3, 2006, and October 28, 2005,
(in thousands, except share and per share amounts)
Net sales
Cost of products sold, excluding depreciation
Selling, general and administrative expenses
Depreciation
Gain on sale of equity securities
Income (loss) before taxes
Provision (benefit) for taxes on income
Net income (loss)
Basic earnings (loss) per share
Shares used to compute basic earnings (loss) per share
Diluted earnings (loss) per share
Shares used to compute diluted earnings (loss) per share
$
$
$
$
2007
125,091 $
81,126
41,249
3,389
—
125,764
(673)
(381)
(292) $
(0.03) $
9,928,107
(0.03) $
9,928,107
2006
134,264
85,133
43,963
3,777
(106)
132,767
1,497
257
1,240
0.13
9,966,483
0.13
9,966,483
$
$
$
$
2005
130,845
85,455
43,393
4,251
—
133,099
(2,254)
(1,311)
(943)
(0.09)
9,994,816
(0.09)
9,994,816
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
For the years ended November 2, 2007, November 3, 2006, and October 28, 2005
(in thousands)
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
Balance, November 3, 2006
Shares repurchased and retired
Net loss
Other comprehensive net income (loss):
Unrealized loss on investment
Net Change in pension liability prior
to SFAS 158 adoption
SFAS 158 adoption
Comprehensive income
Balance, November 2, 2007
Shares
Amount
Capital in
excess of
par value
10,002 $
(16)
10,059 $
(16)
14,506 $
(112)
9,986
(28)
10,043
(28)
14,394
(159)
9,958
(69)
10,015
(69)
14,235
(446)
(943)
25,889
1,240
27,129
(292)
Accumulated
other
comprehensive
income (loss)
Total
shareholders’
equity
Retained
earnings
26,832 $
(2,733) $
30
639
(2,064)
(55)
926
(1,193)
(6)
1,163
(567)
48,664
(128)
(943)
30
639
(274)
48,262
(187)
1,240
(55)
926
2,111
50,186
(515)
(292)
(6)
1,163
(567)
298
49,969
9,889
$
9,946
$
13,789
$
26,837
$
(603) $
See accompanying notes to consolidated financial statements.
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BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended November 2, 2007, November 3, 2006, and October 28, 2005
(in thousands)
Cash flows from operating activities:
Net income (loss)
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
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
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flow information:
Cash paid for income taxes
2007
2006
(as restated)
2005
(as restated)
$
(292) $
1,240 $
(943)
3,389
(245)
(8)
—
(523)
12,200
1,905
1,211
(887)
489
(951)
(945)
(775)
—
(597)
(1,739)
12,232
26
—
(1,587)
(1,561)
(515)
—
(515)
10,156
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)
1,180
11,336
$
5,855
1,180
$
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)
7,972
5,855
8
$
26
$
687
$
$
See accompanying notes to consolidated financial statements.
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BRIDGFORD FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share amounts, per share amounts, time periods 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 inter-company 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” (“SFAS 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 SFAS 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. 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 14.6% of revenues in fiscal year 2007 and
12.4% of accounts receivable was due from Wal-Mart® at November 2, 2007. 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.
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 year 2007 included 52 weeks, fiscal year
2006 included 53 weeks, and fiscal year 2005 included 52 weeks.
Revenues
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 the Company’s own long-haul fleet or through a Company owned
direct store delivery system. These delivery costs, $6,171, $6,375, and $6,382 for 2007, 2006, and 2005, respectively,
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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.
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 $11,336 at November 2, 2007 and $1,180 at November 3, 2006.
Restatement / Trading Securities
At November 3, the Company held $12,200 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.
The consolidated balance sheet at November 3, 2006 has 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:
Cash and cash equivalents
Trading securities
As restated:
Cash and cash equivalents
Trading securities
2006
$
13,380
—
1,180
12,200
The consolidated statements of cash flow for years ended November 3, 2006 and October 28, 2005 have been restated to
show the 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
As restated:
Net cash (used) provided by operating activities
Inventories
2006
2005
$
4,874 $
4,515
$
(2,826) $
15
Inventories are valued at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market. Costs
related to warehousing, transportation and distribution to customers are considered when computing market value. Inventories include
the cost of raw materials, labor and manufacturing overhead. The Company regularly reviews inventory
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quantities on hand and writes down any excess or obsolete inventories to net realizable value. An inventory reserve is created when
potentially slow-moving or obsolete inventories are identified in order to reflect the appropriate inventory value. Changes in
economic conditions, production requirements, and lower than expected customer demand could result in additional obsolete or slow-
moving inventory that cannot be sold or must be sold at reduced prices and could result in additional reserve provisions.
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 the Company’s results of operations.
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 2, 2007.
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Had compensation cost for the Company’s Stock Option Plan been determined based on the fair value of the options consistent
with SFAS 123, during the fiscal year ended October 28, 2005, the Company’s net income and earnings per share would have
remained unchanged as 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
$
$
$
$
(943)
—
(943)
(0.09)
(0.09)
9,994,816
9,994,816
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
The following balances are reflected as of November 2, 2007:
5.34%
6.0 years
40.00%
2.20%
Options Outstanding
Exercise price
$
Shares
10 250,000
Weighted average
remaining life (years)
Options Exercisable
Weighted average
exercise price
1.5 $
10
Shares
250,000 $
Weighted average exercise price
10
The following balances are reflected as of November 3, 2006:
Options Outstanding
Exercise price
$
Shares
10 250,000
Weighted average
remaining life (years)
Options Exercisable
Weighted average
exercise price
2.5 $
10
Shares
250,000 $
Weighted average exercise price
10
The following balances are reflected as of October 28, 2005:
Options Outstanding
Exercise price
$
Shares
10 250,000
Weighted average
remaining life (years)
3.5 $
Basic and diluted earnings per share
Options Exercisable
Weighted average
exercise price
Shares
10 250,000 $
Weighted average exercise price
10
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
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cost basis in the stock is equal to the fair market value at the date of issuance. During fiscal years 2006 and 2005 the Company
recognized a minimum pension liability in accordance with the provisions of SFAS No. 87 “Employers’ Accounting for Pensions”.
This impact was recorded as a component of shareholders’ equity, net of tax. During fiscal year 2007, the Company recognized the net
change in the minimum pension liability prior to the adoption of SFAS 158 as well as the impact of SFAS 158 adoption on the
Company’s defined benefit pension plan and post retirement healthcare plan. 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” (“SFAS 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 SFAS 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. 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 14.6% of revenues in fiscal year 2007 and 12.4 % of accounts
receivable was due from Wal-Mart® at November 2, 2007. 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.
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 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 July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement of Accounting Standards No. 109, “Accounting for
Income Taxes” (“SFAS 109”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial
statements in accordance with SFAS 109. This Interpretation prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the provisions of FIN 48 and the
impact on our consolidated financial position and results of operations. The Company adopted FIN 48 on November 3, 2007.
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In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 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 108 is effective
for fiscal years ending after November 15, 2006. The adoption of SAB 108 did not have a material impact on the Company’s results of
operations or financial position in fiscal year 2007.
In September 2006, the FASB issued Statement of Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”).
This Statement defines fair value, provides a framework for measuring fair value, and expands the disclosures required for fair value
measurements. SFAS 157 applies to other accounting pronouncements that require fair value measurements; it does not require any
new fair value measurements. SFAS 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 upon adoption.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans–an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS 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, SFAS 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 SFAS 158 became 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 impact of the Company’s initial adoption
of SFAS 158 is disclosed in Note 3 to the Consolidated Financial Statements.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 expands opportunities to use fair value measurement in financial reporting
and permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement is effective
for fiscal years beginning after November 15, 2007, or the Company’s fiscal year ending October 30, 2009. The Company does not
expect this statement will have a material impact on its results of operations or financial position.
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
2007
2006
$
$
$
$
$
$
3,726
1,360
13,246
18,332
1,840
13,496
42,025
(54)
7,650
104
65,061
(53,840)
11,221
11,181
10
11,191
$
$
$
$
$
$
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
10,561
59
10,620
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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 cost
Other accrued retirement plans
Post retirement healthcare
Non-current liabilities:
Incentive compensation
Accrued pension cost
Other accrued retirement plans
Post retirement healthcare
NOTE 3- Retirement and Other Benefit Plans:
Adoption of SFAS No. 158
$
$
$
$
$
$
3,396
929
363
565
5,253
203
2,877
506
85
3,671
285
688
3,692
1,111
5,776
$
$
$
$
$
$
4,297
681
439
612
6,029
217
3,476
510
76
4,279
340
3,732
3,929
513
8,514
Effective November 2, 2007, the Company adopted SFAS 158, which requires the recognition in pension obligations and
accumulated other comprehensive income of actuarial gains or losses, prior service costs or credits and transition assets or obligations
previously deferred under the reporting requirements of SFAS 87, SFAS 106 and SFAS 132(R). The following table reflects the
effects of initial adoption of SFAS 158 on the Consolidated Balance Sheet as of November 2, 2007.
Deferred income taxes current
Deferred income taxes
Total assets
Current liabilities
Non-current liabilities
Accumulated other comprehensive income/(loss)
Total shareholders’ equity
Total liabilities and shareholders’ equity
Before
Application of
SFAS No. 158
$
Adjustments
(4) $
1,494 $
3,524
67,299
11,913
4,850
(36)
50,536
67,299 $
$
After
Application of
SFAS No. 158
1,490
3,880
67,647
11,902
5,776
(603)
49,969
67,647
$
356
348
(11)
926
(567)
(567)
348
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.
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Net pension cost consisted of the following:
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized loss
Amortization of transition asset (15.2 years)
Amortization of unrecognized prior service costs
Net pension cost
$
$
2007
170 $
1,856
(1,892)
—
0
2
$
136
2006
2005
1,160
1,922
(1,592)
191
—
31
1,712
$
$
1,680
1,803
(1,406)
370
—
42
2,489
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 . 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 in fiscal year 2006.
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:
Discount rate
Rate of increase in salary levels
Expected return on plan assets
2007
6.25%
N/A
8.25%
2006
2005
6.00%
N/A
8.00%
6.00%
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
Change in plan assets:
Fair value of plan assets - beginning of year
Employer Contributions
Actual return on plan assets
Benefits Paid
Fair value of plan assets - end of year
Funded Status of the plans
Unrecognized prior service costs
Unrecognized net actuarial loss
Unrecognized net transition asset
Additional accrued minimum liability
Accrued pension cost
2007
2006
$
$
30,469 $
170
1,856
(245)
(879)
0
0
31,371
23,279
2,439
2,967
(879)
27,806
(3,565)
10
576
—
0
(2,979) $
33,215
1,160
1,922
348
(965)
(5,211)
0
30,469
19,440
2,757
2,029
(965)
23,261
(7,208)
59
1,867
—
(1,926)
(7,208)
The accumulated benefit obligation is $31,371 and $30,469 at November 2, 2007 and November 3, 2006, 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
2007
2006
6.25%
N/A
6.00%
N/A
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The discount rate used to value the projected benefit obligation was 6.25% for fiscal year 2007. 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 Citigroup Pension Discount Curve,
which has become an industry benchmark. 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 2008 is $2,877.
The actual allocations as of the fiscal years ended and target allocation for plan assets are as follows:
Asset Class
Large Cap Equities
Mid Cap Equities
Small Cap Equities
International (including Non-U.S. Fixed Income)
Fixed Income
Other (Government/Corporate, Bonds)
Cash
Total
Expected payments for the pension benefits are as follows:
Target
Asset
Allocation
2007
40.6%
9.6%
4.3%
21.2%
0.0%
24.2%
0.1%
100.0%
40.0%
10.0%
5.0%
20.0%
0.0%
25.0%
0.0%
100.0%
2006
72.16%
0.0%
0.0%
0.0%
27.44%
0.0%
0.4%
100.0%
Target
Asset
Allocation
45.0%
7.5%
5.0%
7.5%
35.0%
0.0%
0.0%
100.0%
Fiscal 2008
Fiscal 2009
Fiscal 2010
Fiscal 2011
Fiscal 2012
Fiscal 2013-2017
Net amounts recognized as of the end of each fiscal year are as follows:
Accrued benefit cost
Intangible asset
Accumulated other comprehensive income
Pension
Benefits
Other
Postretirement
Benefits
1,034 $
1,107 $
1,148 $
1,204 $
1,303 $
8,305 $
513
513
513
513
513
3,821
2007
(3,565) $
10
576
(2,979) $
2006
(7,208)
59
1,867
(5,282)
$
$
$
$
$
$
$
$
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 2007, 2006, and 2005 was $0, $0, and $9,
respectively. Benefits payable related to these
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plans and included in other non-current liabilities in the accompanying financial statements were $3,692 and $3,929 at November 2,
2007 and November 3, 2006, 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 $11,181 and $10,561 at November 2, 2007 and November 3, 2006, 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. The payment of these amounts is generally deferred over a five-year period. The total amount payable related to this
arrangement was $488 and $557 at November 2, 2007 and November 3, 2006, respectively. Future payments are approximately $203,
$112, $82, $62 and $30 for fiscal years 2008 through 2012, respectively.
Postretirement Health Care Benefits for Selected Executive Employees
The Company provides postretirement health care benefits for selected executive employees. Net periodic postretirement
benefit cost is determined using assumptions as of the beginning of each fiscal year.
Net periodic postretirement benefit cost consisted of the following:
Service cost
Interest cost
Return on plan assets
Amortization of unrecognized loss
Amortization of prior service cost
Amortization of actuarial (gain) / loss
Net periodic postretirement benefit cost
Weighted average assumptions for the fiscal year ended November 2, 2007 are as follows:
Discount rate
Medical trend rate next year
Ultimate trend rate
Year ultimate trend rate is achieved
2007
2006
$
$
15 $
70
0
0
75
10
170
$
14
66
0
0
75
11
166
2007
6.25%
9.00%
5.00%
2011
2006
6.00%
10.0%
5.00%
2011
The table below shows the estimated effect of a 1% increase in health care cost trend rate on the following:
Interest cost plus service cost
Accumulated postretirement benefit obligation
2007
2006
$
$
10 $
111 $
10
120
The table below shows the estimated effect of a 1% decrease in health care cost trend rate on the following:
Interest cost plus service cost
Accumulated postretirement benefit obligation
40
2007
(9) $
(94) $
2006
(9)
(113)
$
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The benefit obligation and funded status of this plan as of the fiscal year ended November 2, 2007 is as follows:
Change in accumulated postretirement benefit obligation:
Benefit Obligations - beginning of year
Service Cost
Interest Cost
Actuarial (Gain) Loss
Benefits Paid
Plan Amendments
Benefit Obligations - end of year
Funded Status of the plans
Unrecognized prior service costs
Unrecognized net actuarial loss
Unrecognized net transition asset
Accrued postretirement benefit cost
Transitional Adjustment to Other Comprehensive Income (SFAS 158)
Postretirement benefit liability
Expected payments for the postretirement benefits are as follows:
Fiscal 2008
Fiscal 2009
Fiscal 2010
Fiscal 2011
Fiscal 2012
Fiscal 2013-2017
Stock Incentive Plan
2007
2006
$
$
$
$
$
1,159
15
70
(44)
(4)
0
1,196
1,196
(298)
(144)
—
N/A
442
1,196
1,143
14
66
(48)
(16)
0
1,159
1,159
(372)
(198)
—
589
Postretirement
Benefits
$
$
$
$
$
$
85
88
89
90
90
422
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, 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 five fiscal years.
As of November 2, 2007, 250,000 options were outstanding at an exercise price of $10.00 per share.
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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 years 2007 and 2006, the Company made total
contributions to the Plan in the amounts of $470 and $229, respectively.
NOTE 4- Income Taxes:
The provision (benefit) for taxes on income includes the following:
Current:
Federal
State
Deferred:
Federal
State
2007
2006
2005
37 $
136
173
(171) $ (1,262)
(208)
(1,470)
28
(143)
(432)
(122)
(554)
(381) $
357
43
400
257
318
(159)
159
$ (1,311)
$
$
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
2007
(229) $
$
2006
2005
509
$
(766)
(47)
—
(25)
(211)
131
(381) $
44
—
(154)
(142)
—
257
(90)
(330)
—
(202)
77
$ (1,311)
$
Deferred income taxes result from differences in the bases of assets and liabilities for tax and accounting purposes.
Receivables allowance
Inventory capitalization
Incentive compensation
State taxes
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
2007
2006
$
193
364
69
(241)
1,051
54
$ 1,490
$
114
2,306
(274)
1,734
$ 3,880
$
$
$
$
209
381
74
(200)
1,332
25
1,821
136
3,666
(445)
—
3,357
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
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statements. As of November 2, 2007, the Company had net operating loss carryforwards of approximately $3,986 and $4,949 for
federal and state purposes, respectively. These loss carryforwards will expire at various dates from 2011 through 2026.
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 $415 in fiscal year 2007, $395 in fiscal year 2006, and $330 in
fiscal year 2005. Contingent payments were approximately $120 in fiscal year 2007, $108 in fiscal year 2006, and $132 in fiscal year
2005. Future minimum lease payments are approximately $415 in the each of the years 2008 through 2011 and $395 in 2012 and
thereafter.
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.
The following segment information is for the years ended November 2, 2007, November 3, 2006, and October 28, 2005:
2007
Sales
Intersegment sales
Net sales
Cost of products sold, excluding depreciation
Selling, general and administrative expenses
Depreciation
Gain on sale of equity securities
Income (loss) before taxes
Provision (benefit) for taxes on income
Net income (loss)
Total assets
Additions to property, plant and equipment
Frozen Food
Products
Refrigerated
and Snack Food
Products
Other
Elimination
$
$
$
$
$
$
$
$
49,401
—
49,401
30,169
14,571
1,008
—
45,748
3,653
1,347
2,306
12,003
274
43
$
75,690
1,834
77,524
52,791
26,678
2,381
—
81,850
(4,326)
(1,728)
(2,598) $
$
26,348
$
1,247
— $
—
—
—
—
—
—
—
—
—
$
—
29,296 $
66 $
$
—
(1,834)
(1,834)
(1,834)
—
—
—
(1,834)
—
—
—
— $
$
—
Totals
125,091
—
125,091
81,126
41,249
3,389
—
125,764
(673)
(381)
(292)
67,647
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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 (loss) before taxes
Provision (benefit) for taxes on income
Net income (loss)
Total assets
Additions to property, plant and equipment
2005
Sales
Intersegment sales
Net sales
Cost of products sold, excluding depreciation
Selling, general and administrative expenses
Depreciation
Income (loss) before taxes
Provision (benefit) for taxes on income
Net income (loss)
Total assets
Additions to property, plant and equipment
$
$
$
$
$
$
$
$
Frozen Food
Products
Refrigerated
and Snack Food
Products
Other
Elimination
— $
—
—
—
—
—
—
—
—
—
$
—
30,125 $
311 $
— $
—
—
—
—
—
(2,285)
(2,285)
(2,285)
—
—
—
(2,285)
—
—
—
—
—
—
(4,038)
(4,038)
(4,038)
—
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
$
$
$
$
$
$
$
$
2,386
95,633
(7,918)
(3,315)
(4,603) $
$
32,747
$
1,419
—
—
—
—
$
—
27,822 $
64 $
—
(4,038)
—
—
—
—
—
50,806
—
50,806
30,023
14,189
1,398
—
45,610
5,196
1,872
3,324
12,194
314
$
$
$
$
$
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
83,677
4,038
87,715
63,014
30,233
$
$
$
$
47,168
—
47,168
26,479
13,160
1,865
41,504
5,664
2,004
3,660
12,394
549
44
Frozen Food
Products
Refrigerated
and Snack Food
Products
Other
$
Elimination
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NOTE 8- Unaudited Interim Financial Information
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 26
(12 weeks)
32,314
55
40
0.00
$
$
January 20
(12 weeks)
$
34,575
(240)
(137)
(0.01) $
January 21
(12 weeks)
$
33,591
(316)
(196)
(0.02) $
$
$
$
$
$
$
45
2007
April 20
(12 weeks)
April 14
(12 weeks)
27,894 $
(356)
(273)
(0.03) $
2006
28,305 $
168
72
0.01 $
2005
27,714 $
(1,049)
(650)
(0.07) $
July 13
(12 weeks)
November 2
(16 weeks)
26,686
79
33
0.00
$
$
38,197
(451)
(92)
0.00
July 7
(12 weeks)
November 3
(17 weeks)
28,169
234
224
0.02
$
$
43,215
1,335
1,081
0.11
April 15
(12 weeks)
July 8
(12 weeks)
October 28
(16 weeks)
27,656
66
243
0.03
$
$
41,884
(955)
(340)
(0.03)
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BRIDGFORD FOODS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Year ended November 2, 2007
Year ended November 3, 2006
Year ended October 28, 2005
Year ended November 2, 2007
Year ended November 3, 2006
Year ended October 28, 2005
$
$
$
$
$
$
Allowance for Doubtful Accounts
Changes in
Provisions for
Doubtful Accounts
Receivable
Accounts
Written Off Less
Recoveries
Balance at
Beginning
of year
Balance
at Close of
Period
524
468
1,118
$
$
$
(245) $
(277) $
(578) $
(203) $
(333) $
$
72
482
524
468
Promotional Allowances
Balance at
Beginning
of year
Allowance
for Accruals
2,170
2,092
2,368
$
$
$
6,856
5,918
5,260
$
$
$
Promotions
Incurred
Balance
at Close of
Period
7,046
5,840
5,536
$
$
$
1,980
2,170
2,092
46
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Exhibit 21.1
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.
State in which Incorporated
California
California
California
Texas
California
Delaware
Delaware
Illinois
Illinois
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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 30, 2008, with respect to the consolidated balance sheets of Bridgford Foods Corporation as
of November 2, 2007 and November 3, 2006, and the related statements of operations, shareholders’ equity and comprehensive
income and cash flows for the fiscal years ended November 2, 2007, November 3, 2006 and October 28, 2005, and the related
financial statement schedule, which report appears in the November 2, 2007 annual report on Form 10-K of Bridgford Foods
Corporation.
/s/ HASKELL & WHITE LLP
Irvine, California
January 30, 2008
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Exhibit 31.1
I, William L. Bridgford, certify that:
1. I have reviewed this annual report on Form 10-K of Bridgford Foods Corporation;
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 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: January 31, 2008
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford, Chairman
(Principal Executive Officer)
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Exhibit 31.2
I, Raymond F. Lancy, certify that:
1. I have reviewed this annual report on Form 10-K of Bridgford Foods Corporation;
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 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: January 31, 2008
/s/ RAYMOND F. LANCY
Raymond F. Lancy
(Principal Financial and Accounting Officer)
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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 of the Company for the fiscal year ended November 2, 2007 (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: January 31, 2008
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford,
Chairman of the Board
(Principal Executive Officer)
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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 of the Company for the fiscal year ended November 2, 2007 (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: January 31, 2008
/s/ RAYMOND F. LANCY
Raymond F. Lancy
Chief Financial Officer, Vice President
Treasurer and Assistant Secretary
(Principal Financial and Accounting Officer)
D I R E C T O R S
O F F I C E R S
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
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 and Controller
Michael Bridgford
Assistant Secretary
Bridgford Deli Sandwiches are vacuum packaged to maintain quality and freshness.
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
Continental Stock Transfer & Trust Company
17 Battery Place, 8th Floor
New York, NY 10004
1-800-509-5586
Independent Accountants
Haskell & White LLP
Irvine, California
Winner of the 2007 American
Culinary ChefsBest Award