048-1041 Annual Report 03_Layout 1 1/26/11 2:32 PM Page 1
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
Squar, Milner, Peterson, Miranda & Williamson, LLP
Newport Beach, California
©2010 Bridgford Foods. YW 048-1041
ANNUAL
REPORT
2010
Notice of 2011 Annual Meeting
and Proxy Statement
048-1041 Annual Report 03_Layout 1 1/26/11 2:32 PM Page 3
TO OUR SHAREHOLDERS
Despite dramatic increases in the costs of key commodities, Bridgford
Foods Corporation again achieved solid profitability in the 2010 fiscal
year. Higher prices for grains, meats and petroleum products were offset
by lower operating costs resulting from strategic changes implemented
in recent years. Sales during our 2010 fiscal year were $117,655,000,
a decrease of 4.1% from sales of $122,665,000 in 2009. The Company
recorded a net profit of $4,319,000 in 2010, equal to $.46 per share.
A one-time cash dividend of $.10 per share was declared by the Board
of Directors on November 8, 2010.
SALES AND MARKETING HIGHLIGHTS
The refinement of our Chicago based direct route sales distribution
system for dry sausage products and meat snacks continued during the
year. Vice President Chris Cole guided the increased emphasis on sales
of products manufactured by the Company. During 2010, Bridgford
Foods entered into an agreement with Golden Flake Snack Foods to sell
and distribute the Company’s dry sausage and meat snack products in
the Southeast United States. This arrangement supplements the Company’s
own direct-store delivery routes and existing relationships with other
regional distributors.
Bridgford Monkey Bread, manufactured at our Superior Foods plant
in Dallas under the direction of Division President Blaine Bridgford,
continues to be a great success. During the year, we developed a
single-serve version of this product, which is currently being test-marketed
in several venues.
In our North Carolina plant, emphasis continued on the development
and marketing of shelf-stable sandwich and bakery products. These
items are now offered for sale in a variety of retail and on-line outlets,
complementing existing business with domestic and overseas military
entities. We also believe these items have great potential in the disaster
relief/emergency preparedness markets.
OPERATIONS
Commodity costs during 2010 were unfavorable when compared with
those experienced in 2009, with generally higher expenses for bakery
flour, meat, gasoline and diesel fuel. In 2010, the costs for these key
components exceeded those experienced in 2009 by almost $3.9 million.
The Company continued its emphasis on producing, rather than purchasing,
the products sold in the Chicago division, and we currently produce more
than 98% of the products marketed through the distribution channels
serviced by this operation. Our unique beef jerky production system is
now producing 100% of the Company’s jerky requirements. Under the
direction of Baron R.H. Bridgford, President of Bridgford Foods of Illinois,
we introduced several new items during the year, including Beef Stick
and Pepperoni Stick Value Packs, and Turkey Party Bites.
All of the Company’s manufacturing facilities passed multiple food safety
inspections during the fiscal year, conducted by various third-party,
military and government agencies. In the frozen food division, new food
service products introduced during the year included Sweet Yeast Roll
Dough, Sub & Hoagie Roll Dough, Whole Grain Roll Dough and White
Whole Wheat Roll Dough.
Under the direction of Plant Manager Monty Griffith, our Statesville,
North Carolina division implemented new packaging technology for our
shelf-stable products, increasing efficiency and reducing material costs.
Vice President of Manufacturing Joe deAlcuaz has contributed greatly
to the progress we have made this year in improving our operations in
Dallas, Chicago and Statesville. We also took steps to bolster the
management teams in Chicago and Statesville with an eye toward
continued progress and increased capacity in those operations.
FINANCIAL MATTERS
Our working capital totaled $29,836,000 at October 29, 2010,
$3,037,000 (11.3%) higher than at the beginning of the fiscal year,
and our working capital ratio increased to 3.6 to 1 at October 29, 2010,
compared to 3.0 to 1 at October 30, 2009. The increase in working
capital and improvement in working capital ratio resulted from net income
of $4,319,000 and lower levels of capital spending in recent years.
We repurchased 27,000 shares of the Company’s common stock in the
amount of $277,000 ($10.26 average price paid per share) during 2010.
Projected contributions of $1,175,000 were recorded as a current
liability related to our defined benefit pension plan at October 29, 2010,
and we contributed a total of $1,943,000 towards this plan during the
2010 fiscal year. The defined benefit plan was frozen in the 3rd
quarter of 2006 and replaced with a 401(k) defined contribution plan.
The Company has been free of interest bearing debt for twenty-four
consecutive years and we maintain a line of credit with Wells Fargo Bank
in the amount of $2,000,000 which expires December 15, 2012. We are
currently in compliance with all affirmative covenants required under the
line of credit agreement.
Shareholders’ equity totaled $36,200,000, an increase of $3,777,000
(11.6%) compared to the end of the prior year. Net income increased
shareholders’ equity by $4,319,000 and cash dividends of $933,000
were paid during the 2010 fiscal year, as the Board of Directors declared
a cash dividend in November 2009 in recognition of the positive operating
results achieved during the 2009 fiscal year. The Board of Directors
declared a ten cent per share cash dividend in November 2010 which
will be recorded in the first quarter of fiscal year 2011. Approximately
371,000 shares remain available for repurchase under the 2 million
share repurchase plan previously authorized by the Board of Directors.
Shareholders’ equity per share was $3.88 at October 29, 2010 compared
to $3.45 at October 30, 2009.
The Company successfully completed the third year of its Sarbanes-Oxley
Section 404 (a) compliance program. Management assessed the
effectiveness of the Company’s internal control over financial reporting
for the fiscal year ended October 29, 2010 and believes our control
systems are effective. Management’s Report on Internal Controls over
Financial Reporting is included in the Form 10-K report. No significant
weaknesses in internal accounting control, to the extent identified, were
unresolved at the conclusion of the 2010 fiscal year. The Dodd-Frank
Wall Street Reform and Consumer Protection Act, signed into law by the
President on July 21, 2010, permanently exempted the Company from
the requirement to obtain an external audit on the effectiveness of
internal financial reporting controls provided in Section 404 (b) of the
Sarbanes-Oxley Act of 2002.
SUMMARY
Some of the factors that contributed to our strong performance in 2009
moderated in 2010, but your Company was able to sustain its positive
momentum during the year. In light of the increased commodity
costs noted earlier, our results in 2010 constituted a solid financial
performance for Bridgford Foods. The outlook for commodity costs in
2011 is uncertain, as our domestic markets are increasingly affected by
global factors in addition to the normal influences of supply and demand.
As always, we will strive for improvement in every facet of our business,
and will always make our business decisions with the best long-term
interests of all of our stakeholders as our main concern. Primary to that
goal, we will never compromise the quality of our products or the
service we provide to our customers. We again appreciate the loyalty
and hard work of our associates, and are gratified to see that effort
produce positive results in the 2010 fiscal year.
On behalf of all of our directors and officers, we thank our shareholders,
customers and suppliers for their support during 2010, and we look forward
to reporting positive results in 2011.
Respectfully submitted,
January 14, 2011
William L. Bridgford
Chairman
John V. Simmons
President
Raymond F. Lancy
Chief Financial Officer
DIRECTORS
OFFICERS
DIVISION MANAGERS
Allan L. Bridgford
Jeffrey D. Robinson
Senior Chairman, Board of Directors
Bakery Manager
Allan L. Bridgford
Senior Chairman
Bruce H. 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
Bank of America)
Todd C. Andrews
D. Gregory Scott
Managing Director,
Peak Holdings, LLC
(formerly Regional Vice President,
John V. Simmons
Vice President and Controller,
Joe deAlcuaz
Public Storage, Inc.
Vice President Manufacturing
Chairman, Executive Committee
Baron R. H. Bridgford
Anaheim- Bread Division
Bruce H. Bridgford
Chairman & President,
Bridgford Foods of California
Anaheim- Deli Division
President, Bridgford Processing
Company of Illinois
Bridgford Foods of Illinois
Joseph deAlcuaz
Vice President
Dallas- Frozen-Rite Division
Blaine K. Bridgford
President
Dallas- Superior Foods Division
Monty Griffith
Vice President
Bridgford Foods of North Carolina
and member of
the Executive Committee
Bruce H. Bridgford
Vice President
Hugh Wm. Bridgford
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
President and member of
the Executive Committee
Daniel R. Yost
Senior Vice President
Chris Cole
Vice President
Bob Delong
Vice President,
Information Technologies
Cindy Matthews–Morales
Corporate Secretary and Controller
Michael Bridgford
Assistant Secretary
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 October 29, 2010
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 (cid:95)
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 (cid:95)
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 (cid:95) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files. Yes (cid:134) 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. (cid:95)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer (cid:134)
Non-accelerated filer (cid:134) (Do not check if a smaller reporting company) Smaller reporting company (cid:95)
Accelerated filer (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes (cid:134) No (cid:95)
The aggregate market value of voting stock held by non-affiliates of the registrant on April 16, 2010 was $22,201,000.
As of January 12, 2011, there were 9,322,778 shares of common stock outstanding.
Portions of the registrant’s Proxy Statement for the registrant’s Annual Meeting of Shareholders to be held March 23, 2011 are incorporated
by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.
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. Reserved
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 Bridgford Foods Corporation 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 our 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 our control. Although we believe 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 us or any other person that the objectives or plans of our company will be achieved. The
forward-looking statements contained herein speak as of the date of this Report and we undertake no obligation to update such
statements after the date hereof.
Background of Business
Bridgford Foods Corporation (collectively with its subsidiaries, “Bridgford”, the “Company”, “We” or “Our”) is a California
corporation and was organized in 1952. We originally began 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 the past five years we and our
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. We have not been involved in any bankruptcy, receivership, or similar
proceedings since inception nor have we 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 our assets have been acquired in the ordinary course of business. We have had no
significant change in the type of products produced or distributed, nor in the markets we serve. Independent distributors now serve
approximately 2,300 stores of all types in areas impractical to serve by our Company-owned vehicles.
Description of Business
Bridgford Foods Corporation operates in two business segments - the processing and distribution of frozen food 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 following table shows sales, as a percentage of consolidated sales, for each of these segments during each of the last two
fiscal years:
Frozen Food Products
Refrigerated and Snack Food Products
2010
2009
46%
54%
100%
45 %
55 %
100 %
We manufacture and distribute 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 we purchase for resale include a
variety of jerky, cheeses, salads, party dips, Mexican foods, nuts, and other delicatessen type food products.
Products manufactured, processed or packaged by Bridgford
Products manufactured or processed by third parties for
distribution
2010
2009
86%
14%
100%
83 %
17 %
100 %
3
Although we have recently introduced several new products, most of these products have not contributed significantly to our
revenue growth for the fiscal year. Our sales are not subject to material seasonal variations. Historically we have been able to respond
quickly to the receipt of orders and, accordingly, do not maintain a significant sales backlog. Bridgford Foods Corporation and its
industry generally have no unusual demands or restrictions on working capital items. During the last fiscal year we did not enter into
any new markets or any significant contractual or other material relationships.
Major Product Classes
Frozen Food Products
Our frozen food division serves both food service and retail customers. Approximately 150 unique frozen food products are
sold through wholesalers, cooperatives, and distributors to approximately 21,000 retail outlets and 22,000 restaurants and institutions.
Frozen Food Products – Food Service
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
we provide. 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.
We supply our food service customers generally through distributors that take title to the product and resell it. Among our
customers are many of the country’s largest broadline and specialty food service distributors. These and other large end purchasers
occasionally go through extensive qualification procedures and their manufacturing capabilities are subjected to thorough review by
the end purchasers prior to our 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. We believe that manufacturing flexibility,
national presence, and long-standing customer relationships should allow us to compete effectively with other manufacturers seeking
to provide similar products to our current large food service end purchasers, although no assurances can be given.
Frozen Food Products – Retail Customers
The majority of our 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. We believe we have been successful in establishing and maintaining
supply relationships with certain selected leading retailers in this market.
Frozen Food Products – Sales and Marketing
Our frozen food business covers the United States and Canada. In addition to regional sales managers, we maintain 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. We believe that our 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
us, including identifying and developing new business opportunities and providing customer service and support to our distributors
and end purchasers through the effective use of our broker network.
Our annual advertising expenditures are directed towards retail and institutional customers. These customers participate in
various special promotional and marketing programs and direct advertising allowances we sponsor. We also invest in general
consumer advertising in various newspapers and periodicals including free standing inserts and coupons to advertise in major markets.
We direct advertising toward food service customers with campaigns in major industry publications and through our participation in
trade shows throughout the United States.
Refrigerated and Snack Food Products
Our refrigerated and snack food products division sells approximately 220 different items through a direct store delivery
network serving approximately 28,000 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 our business is highly
competitive. Proper placement of our product lines is critical to selling success since most items could be considered “impulse” items
which are often consumed shortly after purchase. Our ability to sell successfully to this distribution channel depends on aggressive
marketing and maintaining relationships with key buyers.
4
Refrigerated and Snack Food Products — Sales and Marketing
Our direct store delivery network consists of two separate divisions, refrigerated and non-refrigerated snack food products.
Refrigerated snack food products are distributed through eight different regions located in the southwest, primarily operating in
California, Arizona, and Nevada. Non-refrigerated snack food products are distributed across the United States and Canada. Our
regional sales managers perform several significant functions for us including identifying and developing new business opportunities
and providing customer service and support to our customers. We also utilize the services of brokers, where appropriate, to support
efficient product distribution and customer satisfaction. Independent distributors now serve approximately 2,300 customers of all
types in areas impractical to serve by our Company-owned vehicles.
Product Planning and Research and Development
We continually monitor the consumer acceptance of each product within our extensive product line. Individual products are
regularly added to and deleted from our product line. The addition or deletion of any individual product has not had a material effect
on our operations in the current fiscal year. We believe that a key factor in the success of our products is our system of carefully
targeted research and testing of our 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. We are constantly searching to
develop new products to complement our existing product line and improved processing techniques and formulas for our existing
product line. We utilize in-house test kitchens to research and experiment with unique food preparation methods, to improve quality
control and to analyze new ingredient mixtures. We also retain consultants to assist us in these efforts.
Competition
Our products are sold under highly competitive conditions. All food products can be considered competitive with other food
products, but we consider our principal competitors to include national, regional and local producers and distributors of refrigerated,
frozen and snack food products. Several of our competitors include large companies with substantially greater financial and marketing
resources than ours. Existing competitors may broaden their product lines and potential competitors may enter or increase their focus
on our market, resulting in greater competition for us. We believe that our products compete favorably with those of our competitors.
Such competitors’ products compete against ours for retail shelf space, institutional distribution and customer preference.
Effect of Government Regulations
Our operations 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 we manufacture, produce and process. Our processing
facilities and products are subject to continuous inspection by the USDA and/or other federal, state, and local authorities. The USDA
has issued strict policies concerning the control of listeria monocytogenes in ready-to-eat meat and poultry products and
contamination by food borne pathogens such as E. coli 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. We believe that we are currently in
compliance with governmental laws and regulations and that we maintain the necessary permits and licenses relating to our
operations. 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 our business.
Importance of Key Customers
Sales to Wal-Mart® comprised 10.1% and 11.4% of revenues for fiscal years 2010 and 2009, respectively. Accounts
receivable from Wal-Mart® was 9.4% and 13.3% of total accounts receivable at October 29, 2010 and October 30, 2009, respectively.
Sources and Availability of Raw Materials
We purchase large quantities of pork, beef, and flour. These ingredients are generally available from a number of different
suppliers although the availability of these ingredients is subject to seasonal variation. We build ingredient inventories to take
advantage of downward trends in seasonal prices or anticipated supply limitations.
Employees
We had 530 employees at October 29, 2010 approximately 47% of whose employment relationship is governed by collective
bargaining agreements. Most agreements expire between February 2011 and December 2012. We believe that our relationship with all
of our employees is favorable.
Executive Officers of the Registrant
The names, ages, and positions of all our executive officers as of January 1, 2011 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 it's meeting immediately following the annual
5
meeting of shareholders. All executive officers are full-time employees of our company, except for Allan L. Bridgford, who works
60% of full-time effective March 2005.
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Age
75
79
56
55
57
Position(s) with our company
Senior Chairman and member of the Executive Committee
Vice President and Chairman of the Executive Committee
Chairman and member of the Executive Committee
President and member of the Executive Committee
Chief Financial Officer, Executive Vice President, Treasurer and member of the
Executive Committee
Availability of SEC Filings and Code of Conduct on Internet Website
We maintain an Internet website at http://www.bridgford.com. Available on this website, free of charge, are annual reports on
Form 10-K, quarterly reports on Form 10-Q, and reports filed under Section 16 of the Securities Exchange Act of 1934 which we file
with the Securities and Exchange Commission. Our Code of Conduct is also available on the website.
Item 1A.
Risk Factors
In addition to the other risks described in this Annual Report on Form 10-K, the continuing operations and the price of our
common stock are subject to the following risks, each of which could materially adversely affect our business, financial condition, and
results of operations. The risks described below are only the risks that we currently believe are material to our business. Additional
risks not presently known, or risks that are currently believed to be immaterial, may also impair our business operations.
We are subject to general risks in the food industry, including risks relating to changes in consumer preference and
economic conditions, any of which risks, if realized, could negatively impact our operating results and financial position.
The food industry, and the markets within the food industry in which we compete, are subject to various risks, including the
following: 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 industry to withdraw contaminated or mislabeled products from the market. Additionally, the failure to identify and react
appropriately to changes in consumer trends, demands and preferences could lead to, among other things, reduced demand and price
reduction for our products. Further, we may be adversely affected by changes in domestic or foreign economic conditions, including
inflation or deflation, interest rates, availability of capital markets, consumer spending rates, and energy availability and costs
(including fuel surcharges). These and other general risks related to the food industry, if realized by us, could have a significant
adverse affect on demand for our products, as well as the costs and availability of raw materials, ingredients and packaging materials,
thereby negatively affecting our operating results and financial position.
Fluctuations in the prices that we pay for raw materials could negatively impact our financial results.
We purchase large quantities of commodity pork, beef, and flour. Historically, market prices for products we process 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.
Our operating results are heavily dependent upon the prices paid for raw materials. The marketing of our 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 cost structure components, such as ingredient
commodities and fuel prices, have had a significant impact on profitability over the last two years, the impact of general price inflation
on our financial position and results of operations has not been significant. Future volatility of general price inflation or deflation and
raw material cost and availability could adversely affect our financial results.
We are subject to extensive government regulations and a failure to comply with such regulations could negatively
impact our financial results.
Our operations 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 us. Our
processing facilities and products are subject to continuous inspection by the USDA and/or other federal, state, and local authorities.
The USDA has issued strict policies concerning the control of listeria monocytogenes in ready-to-eat meat and poultry products and
contamination by food borne pathogens such as E. coli 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. We believe that we are currently in compliance
with governmental laws and regulations and that we maintain all necessary permits and licenses relating to our operations.
6
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 our operating performance. Furthermore, we are 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, we 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 our financial results.
We depend on our key management, the loss of which could negatively impact our operations.
Our executive officers and certain other key employees have been primarily responsible for the development and expansion of
our business, and the loss of the services of one or more of these individuals could adversely effect us. Our success will be dependent
in part upon our continued ability to recruit, motivate, and retain qualified personnel. We can not assure you that we will be successful
in this regard. We have no employment or non-competition agreements with key personnel.
We depend on our major customers and any loss of such customers could have a negative impact on our profitability.
We could suffer significant reductions in revenues and operating income if we lost one or more of our largest customers,
including, Wal-Mart®, which accounted for 10.1% of revenues in fiscal year 2010. 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.
With more than 80% concentration of beneficial ownership of our stock held by the Bridgford family, there are risks
that they can exert significant influence or control over our corporate matters.
Members of the Bridgford family beneficially own, in the aggregate, approximately 81% of our outstanding stock. 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 our 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, LLC and have elected to have the full Board of Directors
perform the functions of the Nominating Committee.
Item 1B.
Unresolved Staff Comments
Not applicable for smaller reporting companies.
Item 2.
Properties
We own the following properties:
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 and Refrigerated and Snack Food Segments
7
We generally fully utilize the foregoing properties for processing, warehousing, distributing and administrative purposes. The
Company also leases warehouse and/or office facilities throughout the United States and Canada through month-to-month rental
agreements. We believe that our properties are generally adequate to satisfy our 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 us at October 29, 2010 or as of the date of filing of this Annual Report on
Form 10-K. We are likely to be subject to claims arising from time to time in the ordinary course of our 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 us. Any adverse litigation
trends and outcomes could significantly and negatively affect our financial results.
Item 4.
Reserved
8
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock and Dividend Data
Our common stock is traded on the Nasdaq Global Market under the symbol “BRID”. The following table reflects the high and low
closing sale prices reported by Nasdaq as well as cash dividends paid for each of the last eight fiscal quarters.
Fiscal Year 2010
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year 2009
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$
$
$
$
High
$
$
$
$
Low
11.41 $
13.02 $
16.84 $
15.63 $
Low
4.88 $
4.55 $
9.32 $
9.79 $
Cash
Dividends
Paid
7.27 $
9.77 $
11.48 $
11.54 $
Cash
Dividends
Paid
3.71 $
2.53 $
4.31 $
6.91 $
0.10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
On November 10, 2010, Bridgford Foods Corporation issued a press release announcing that its Board of Directors had approved a
one-time cash dividend of $0.10 per share of common stock which was distributed on December 20, 2010 to shareholders of record on
November 23, 2010.
On January 12, 2011, the closing sale price for our common stock on the Nasdaq Global Market was $12.04 per share. As of
January 12, 2011, there were 292 shareholders of record in our common stock.
The payment of any future dividends will be at the discretion of our 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 we 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 2010, we repurchased an aggregate of 26,902 shares of our common stock for $277,000 pursuant to our
repurchase plan previously authorized by the Board of Directors. The following table provides information regarding our repurchases
of common stock in each of the four periods comprising the fourth quarter of fiscal year 2010.
9
Total Number of
Shares
Purchased
Average Price Paid
Per Share
Total Number of
Shares Purchased
As
Part of Publicly
Announced Plans
or
Programs (2)
Maximum Number of
Shares that May Yet
Be Purchased
Under the Plans
or
Programs (2)
0 $
13 $
1,323 $
689 $
2,025 $
0.00
11.69
11.90
12.00
11.93
0
13
1,323
689
2,025
373,168
373,155
371,832
371,143
Period (1)
July 10, 2010 - August 6, 2010
(4 weeks)
August 7, 2010 - September 3, 2010
(4 weeks)
September 4, 2010 - October 1, 2010
(4 weeks)
October 2, 2010 - October 29, 2010
(4 weeks)
Total
(1)
(2)
The periods shown are our fiscal periods during the sixteen-week quarter fiscal ended October 29, 2010.
All repurchases reflected in the foregoing table were made on the open market. Our 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, we are authorized, at the discretion of management and the Board of
Directors, to purchase up to an aggregate of 2,000,000 shares of our common stock on the open market. We have established
a stock purchase plan (“Purchase Plan”) that is administered by Citigroup Global Markets Inc. (“CGM”) for purchase of
shares of our common stock in the market. The Purchase Plan complies with the requirements of Rule 10b5-1 under the
Securities Exchange Act of 1934 (“Exchange Act”). Commencing on October 14, 2010 and continuing through and including
October 13, 2011, CGM shall act as our exclusive agent to purchase Stock under the Purchase Plan. This Purchase Plan
supplements any purchases of stock by us “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 October 29, 2010, the total maximum number of shares that may be purchased under the
Purchase Plan is 371,143 at a purchase price not to exceed $12.00 per share for a total maximum aggregate price (exclusive of
commission) of $4,453,716.
Equity Compensation Plan Information
Our only shareholder approved equity compensation plan expired by its terms on April 29, 2009. No further stock options or
rights are available for grant under this plan and all previously outstanding options and rights have also expired by their terms. No
stock options, warrants or rights were granted during the fiscal years ended October 29, 2010 and October 30, 2009 and none were
outstanding as of October 29, 2010.
Item 6.
Selected Financial Data
Not applicable to smaller reporting company.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For a complete understanding, this Management's Discussion and Analysis of Financial Condition and Results of Operations
should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements
contained in this Report.
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
10
capital; availability of qualified personnel; commodity, labor, and employee benefit costs; changes in, or failure to comply with,
government regulations; weather conditions; construction schedules; and other factors referenced in this Report.
Results of Operations (in thousands except percentages)
Fiscal Year Ended October 29, 2010 (52 weeks) Compared to Fiscal Year Ended October 30, 2009 (52 weeks)
Net Sales-Consolidated
Net sales in fiscal 2010 decreased $5,010 (4.1%) when compared to the prior year. The changes in net sales were comprised as
follows:
Impact on Net Sales - Consolidated
Selling price per pound
Unit volume in pounds
Promotional activity
Returns activity
Increase (decrease) in net sales
Net Sales-Frozen Food Products Segment
-7.0% $
3.3%
-0.6%
0.2%
-4.1% $
(9,477)
4,489
(409)
387
(5,010)
Net sales in the Frozen Food Products segment in fiscal 2010 decreased $725 (1.3%) compared to the prior year. The changes
in net sales were comprised as follows:
Impact on Net Sales - Frozen Food Products Segment
Selling price per pound
Unit volume in pounds
Promotional activity
Returns activity
Increase (decrease) in net sales
Net Sales-Refrigerated and Snack Food Products Segment
-6.2% $
5.0%
-0.5%
0.4%
-1.3% $
(3,766)
3,023
(193)
211
(725)
Net sales in the Refrigerated and Snack Food Products segment in fiscal 2010 decreased $4,285 (6.3%) compared to the prior
year. The changes in net sales were comprised as follows:
Impact on Net Sales - Refrigerated and Snack Food Products
Segment
Selling price per pound
Unit volume
Promotional activity
Returns activity
Increase (decrease) in net sales
Cost of Products Sold and Gross Margin-Consolidated
-7.7% $
2.0%
-0.6%
-0.1%
-6.4% $
(5,711)
1,466
(216)
176
(4,285)
Cost of products sold in fiscal 2010 decreased $2,509 (3.4%) compared to the prior year. Favorable changes in product mix
primarily contributed to the decline in cost of sales. The gross margin decreased from 40.4% in fiscal 2009, to 40.0%, in fiscal 2010.
Higher costs for major commodities ($827) and employee benefits ($849) were partially off-set by lower depreciation ($271) on plant
equipment and higher unit volumes lowered per unit overhead costs. The realignment of the Company’s distribution system to remote
geographic areas significantly lowered freight costs ($405).
Cost of Products Sold and Gross Margin–Frozen Food Products Segment
Cost of products sold in the Frozen Food Products segment in fiscal 2010 decreased $54 (0.2%) compared to the prior year.
Lower flour commodity costs in fiscal 2010 were the primary contributing factor causing this decrease. Favorable changes in
product mix also contributed to the decline in cost of sales. The gross margin in the Frozen Food Products segment decreased from
42.0% in fiscal 2009 to 41.3% in fiscal 2010. The cost of purchased flour declined approximately $381 in fiscal 2010 compared to the
prior year, partially off-setting the overhead cost increases related primarily to employee benefits.
Cost of Products Sold and Gross Margin–Refrigerated and Snack Food Products Segment
Cost of products sold in the Refrigerated and Snack Food Products segment in fiscal 2010 decreased $2,129 (5.0%) compared
to the prior year. Lower sales of Refrigerated and Snack Food products was the primary factor causing this change. Freight costs
11
decreased significantly compared to the prior fiscal year. The gross margin in the Refrigerated and Snack Food Products segment
decreased from 39.1% in fiscal 2009 to 38.9% in fiscal 2010. The cost of major meat commodities increased approximately $1,208 in
fiscal 2010 compared to the prior year. Higher costs for employee benefits were more than off-set by lower depreciation on plant
equipment and higher unit volumes lowered per unit overhead costs significantly.
Selling, General and Administrative Expenses-Consolidated
Selling, general and administrative expenses in fiscal 2010 decreased $982 (2.3%) when compared to the prior year. The
decrease in this category did not directly correspond to the change in sales.
The table below summarizes the primary expense variances in this category:
Wages and bonus
Benefits-healthcare
Fuel
Bad debts
Depreciation
Cash surrender value (gain)
Outside consultants
Loss on sale investment
Other
Total
52 Weeks Ended
October 29,
2010
October 30,
2009
Expense/Loss
Increase
(Decrease)
17,780 (1,327)
16,453
877
1,997
2,874
528
4,809
5,337
(429)
78
(351)
(293)
831
538
(235)
(558)
(323)
186
1,459 1,273
(159)
159
(130)
15,947
(982)
42,551
—
15,817
41,569
Employee headcount declined in the 2010 fiscal year compared to the prior year which decreased wages. Lower profitability
levels decreased profit sharing expenses. The Company’s self-insured healthcare benefit expense was negatively impacted in the
period due to adverse plan experience resulting in higher claim payments. Headcount decreases were insufficient to overcome
negative trends in healthcare plan experience. The increase in fuel expense was driven by per gallon fuel price increases compared to
the prior year as a result of negative trends in petroleum markets. The Company released a significant portion of the allowance for
doubtful accounts during the fourth quarter of fiscal 2010 due to favorable trends in the accounts receivable aging. The gain in cash
surrender value resulted from changes in the underlying markets that support them. The increase in outside consultants resulted from
increased investment in information system data management. Depreciation and overall capital spending has declined in recent years
as we carefully scrutinize capital investments for short term pay-back.
Selling, General and Administrative Expenses-Frozen Food Products Segment
Selling, general and administrative expenses in the Frozen Food Products segment in fiscal 2010 remained essentially flat
compared to the prior year. Increases in this category were as a result of increased profit sharing expenses as a result of higher
segment profitability. The allocation of corporate support costs also increased due to higher segment revenues. Expenses related to
advertising decreased compared to the prior year. In addition, a significant portion of the bad debt reserve was released and helped to
offset increases in this category.
Selling, General and Administrative Expenses-Refrigerated and Snack Food Products Segment
Selling, general and administrative expenses in the Refrigerated and Snack Food segment in fiscal 2010 decreased $941 (3.7%)
compared to the prior year. This decrease was primarily caused by lower sales and a significant reduction in the bad debt reserve.
Income Taxes
The effective income tax rate was 21.8% and 3.6% in fiscal years 2010 and 2009, respectively. In fiscal year 2010, the
effective income tax rate differed from the applicable mixed statutory rate of approximately 39.6% primarily due to recording a full
valuation allowance on our deferred tax assets of $8,049 (Refer to Note 4). The 2010 provision for taxes on income of $1,204 consists
of minimum federal and state income taxes. In fiscal year 2009, the effective income tax rate differed from the applicable mixed
statutory rate of approximately 38.0% primarily due to recording a full valuation allowance on our deferred tax assets. The 2009
provision for taxes on income of $255 consists of minimum federal and state income taxes.
12
Liquidity and Capital Resources (in thousands except share and per share amounts)
Our 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
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
Provision (recovery) for losses on accounts receivable
Gain on sale of property, plant and equipment
Loss on sale of equity securities
Deferred income taxes, net
Tax valuation allowance
Changes in operating working capital
Net cash provided by operating activities
2010
2009
$
4,319 $
6,787
2,168
(351 )
(31 )
-
395
(395 )
(1,391 )
4,714 $
2,733
78
(11)
159
171
(171)
(310)
9,436
$
For fiscal year 2010, net cash provided by operating activities was $4,714. We funded additions to property, plant and equipment in
the amount of $1,769 and share repurchases of $277 from cash balances. For fiscal year 2009, net cash provided by operating
activities was $9,436, which enabled us to fund additions to property, plant and equipment in the amount of $1,303 and share
repurchases of $638. The available cash balance increased by $1,775 during the 2010 fiscal year compared to an increase of $7,819
during the 2010 firscal year. In November 2009, we declared a one-time cash dividend of $0.10 per share of common stock for
shareholders of record on December 8, 2009, payable on January 4, 2010, based on operations for fiscal year 2009. On November 10,
2010, we declared a noe-time cash dividend of $0.10 per share of common stock payable on December 20, 2010 to shareholders of
record on November 23, 2010, based on operations for fiscal 2010.
Significant changes in operating working capital are as follows:
2010 – Operating cash flows increased primarily due to net income of $4,319 and a decrease in accounts receivable of
$2,460. Operating cash flow was increased by a reduction in accounts receivable, a decrease in prepaids and an increase in accrued
payroll, advertising and other expenses. An increase in inventory, a decrease in refundable income taxes, and a decrease in the current
portion of non-current liabilities partially offset the cash flow increases during 2010. During the 2010 fiscal year we funded $1,943
toward our defined benefit pension plan.
2009 – Operating cash flows increased primarily due to net income of $6,787 and non-cash depreciation expense of
$2,733. Operating cash flow was increased by a reduction in inventories, increase in accounts payable and increase in the current
portion of non-current liabilities. Significant increases in accounts receivable and other non-current assets and decreases in accrued
payroll, advertising and other expenses offset the cash flow increases during 2009. During the 2009 fiscal year we funded $989
toward our defined benefit pension plan.
Cash used in investing activities:
Proceeds from sale of property, plant and equipment
Proceeds from sale of investments
Additions to property, plant and equipment
Net cash used in investing activities
2010
2009
40 $
-
(1,769 )
(1,729 ) $
56
268
(1,303)
(979)
$
$
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 we carefully scrutinize capital investments for short term pay-back. In general, we capitalize the cost of additions and
improvements and expense the cost for repairs and maintenance. The Company may also capitalize costs related to improvements that
extend the life, increase the capacity, or improve the efficiency of existing machinery and equipment. Specifically, capitalization of
upgrades of facilities to maintain operating efficiency includes acquisitions of machinery and equipment used on packaging lines and
refrigeration equipment used to process food products.
13
The table below highlights the additions to property, plant and equipment for the fifty-two weeks ended:
Processing equipment
Computer software and hardware
Delivery vehicles
Quality control
Office and building improvements
Temperature control
Packaging lines
Projects in process
$
Additions to property, plant and equipment
$
Cash used in financing activities:
October
29, 2010
998
150
125
75
62
76
65
218
1,769
Shares repurchased
Dividends paid
Net cash used in financing activities
2010
2009
$
$
(277) $
(933)
(1,210) $
(638 )
-
(638 )
During fiscal year 2010, we repurchased an aggregate of 26,902 shares of our common stock for $277 pursuant to our
repurchase plan previously authorized by the Board of Directors.
We have remained free of interest-bearing debt for twenty-four consecutive years. We maintain a line of credit with Bank of
America that expires on April 30, 2011. Under the terms of this line of credit, we may borrow up to $2,000 at an interest rate equal to
the bank’s prime rate, unless we elect an optional interest rate. The borrowing agreement contains various covenants, the more
significant of which require us to maintain certain levels of shareholders’ equity and working capital. We are currently in compliance
with all provisions of the agreement. There were no borrowings under this line of credit during the 2010 fiscal year. Management
believes that our strong financial position and our capital resources are sufficient to provide for our operating needs and capital
expenditures for fiscal 2011.
Impact of Inflation
Our operating results are heavily dependent upon the prices paid for raw materials. The marketing of our 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 cost structure components, such as ingredient commodities
and fuel prices, have had a significant impact on profitability over the last two fiscal years, the impact of general price inflation on our
financial position and results of operations has not been significant. However, future volatility of general price inflation or deflation
and raw material cost and availability could adversely affect our financial results.
Off-Balance Sheet Arrangements
We do not currently have any off balance sheet arrangements within the meaning of Item 303(a)(4) of Regulation S-K.
Contractual Obligations (in thousands)
We have remained free of interest bearing debt for twenty-four consecutive years and had no other debt or other contractual
obligations except for leases existing at October 30, 2010. We lease certain transportation equipment under operating leases through
2011.
Future minimum lease payments are approximately (in thousands):
Net Lease Commitments
2011
$
382
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
14
settle at amounts not originally estimated. We record promotional and returns allowances and bad debt allowances based on recent
and historical trends. Management believes its current estimates are reasonable and based on the best information available at the time.
Disclosure concerning our policies on credit risk, revenue recognition, cash surrender or contract value for life insurance
policies, deferred income tax and the recoverability of our long-lived assets are provided in Notes 1 and 4 to the Consolidated
Financial Statements.
Recently Issued Accounting Pronouncements and Regulations
Various accounting standard-setting bodies have been active in soliciting comments and issuing statements, interpretations and
exposure drafts. For information on new accounting pronouncements and the impact, if any, on our financial position or results of
operations, see Note 1 of the Notes to the Consolidated Financial Statements.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Not applicable for smaller reporting company.
Item 8.
Consolidated Financial Statements and Supplementary Data
The consolidated financial statements and supplementary data required by this Item are set forth under Item 15.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation and under the supervision of our principal executive officer and principal financial
officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-
15(e)) as of the end of the period covered by this Report. Based on this evaluation the principal executive officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this Report in
their design and operation to provide reasonable assurance that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported
within the time periods specified by the Securities and Exchange Commission’s rules and forms.
Our management, including our principal executive officer and principal financial officer, does not expect that our 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 our 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.
We maintain and evaluate a system of internal accounting controls, and a program of internal auditing designed to provide
reasonable assurance that our 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. We have established a code of conduct. Our management 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 our financial management and counsel, and with the
independent registered public accounting firm engaged by us. 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. 114 (Communication with Audit Committees). In addition, the Audit
Committee and the independent registered public accounting firm have discussed the independent registered public accounting firm’s
independence from the Company and its management, including the matters in the written disclosures required by Public Company
Accounting Oversight Board Rule 3526 “Communicating with Audit Committees Concerning Independence”.
15
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of
its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting for our fiscal year ended October 29,
2010. In making this assessment, it used the criteria set forth in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on management’s assessment and those criteria, management believes
that the internal control over financial reporting for our fiscal year ending October 29, 2010 was effective.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by the President on July 21, 2010,
permanently exempts "smaller reporting companies" from the requirement to obtain an external audit on the effectiveness of internal
financial reporting controls provided in Section 404(b) of the Sarbanes-Oxley Act of 2002. As a result, an attestation report on internal
controls over financial reporting by an independent registered public accounting firm is not included in this Annual Report on Form
10-K.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the fiscal quarter ended October 29, 2010
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Other Information
Not applicable.
Item 10.
Directors, Executive Officers and Corporate Governance
PART III
The other information required by this Item is incorporated herein by reference to our definitive proxy statement, which will be
filed within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K, and will be delivered to shareholders
in connection with our 2011 Annual Meeting of Shareholders.
Item 11.
Executive Compensation
The information required by this Item is incorporated herein by reference to our definitive proxy statement, which will be filed
within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K, and will be delivered to shareholders in
connection with our 2011 Annual Meeting of Shareholders.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information concerning our equity compensation plans is set forth in Part I, Item 5, hereof under the heading "Equity
Compensation Plan Information." The other information required by this Item is incorporated herein by reference to our definitive
proxy statement, which will be filed within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K, and
will be delivered to shareholders in connection with our 2011 Annual Meeting of Shareholders.
Item 13.
Certain Relationships and Related Transactions, and Director Independence (not in thousands)
The information required by this Item is incorporated herein by reference to our definitive proxy statement, which will be filed
within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K, and will be delivered to shareholders in
connection with our 2011 Annual Meeting of Shareholders.
Our general legal counsel is the son of the senior chairman of the board of directors. For these services, he currently is paid a
fee of one thousand five hundred dollars for each meeting attended. Total fees paid for fiscal year 2010 were $16. In addition, legal
services are performed on our behalf and filled by a firm in which he is partner. Total fees billed under this arrangement for fiscal
year 2010 were approximately $70.
Item 14.
Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference to our definitive proxy statement, which will be
filed within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K, and will be delivered to shareholders
in connection with our 2011 Annual Meeting of Shareholders.
16
PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a)(1) Financial Statements . The following documents are filed as a part of this report:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of October 29, 2010 and October 30, 2009
Consolidated Statements of Operations for years ended October 29, 2010 and October 30, 2009
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for years October 29, 2010 and October 30, 2009
Consolidated Statements of Cash Flows for years ended October 29, 2010 and October 30, 2009
Notes to Consolidated Financial
Statements
Page
19
20
21
22
23
24
(2) Financial Statement Schedule
The following financial statement is filed herewith:
Schedule II - Valuation and Qualifying
Accounts
(3) Exhibits
(a) The exhibits below are filed or incorporated herein by reference .
Exhibit
Number
3.5
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).
Description
3.6
Amendment to Articles of Incorporation, dated July 27, 1990 (filed as Exhibit 3.6 to Form 10-K on January 28, 1993 and
incorporated herein by reference).
3.7
By-laws, as amended (filed as Exhibit 2 to Form 10-K on January 28, 1993 and incorporated herein by reference).
3.8
10.1
10.2
10.3
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).*
21.1
Subsidiaries of the Registrant.
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.
17
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
By:
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman of the Board
Date: January 14, 2011
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
Title
Date
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman of the Board
(Principal Executive Officer)
January 14, 2011
/s/ ALLAN L. BRIDGFORD
Allan L. Bridgford
/s/ BRUCE H. BRIDGFORD
Bruce H. Bridgford
/s/ JOHN V. SIMMONS
John V. Simmons
/s/ RAYMOND F. LANCY
Raymond F. Lancy
/s/ TODD C. ANDREWS
Todd C. Andrews
/s/ RICHARD A. FOSTER
Richard A. Foster
/s/ ROBERT E. SCHULZE
Robert E. Schulze
/s/ D. GREGORY SCOTT
D. Gregory Scott
/s/ PAUL R. ZIPPWALD
Paul R. Zippwald
Senior Chairman
January 14, 2011
Director
President
Chief Financial Officer, Vice President,
Treasurer and Assistant Secretary
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
18
January 14, 2011
January 14, 2011
January 14, 2011
January 14, 2011
January 14, 2011
January 14, 2011
January 14, 2011
January 14, 2011
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 October 29,
2010 and October 30, 2009 and the related consolidated statements of operations, shareholders’ equity and comprehensive income
(loss) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements and 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 audits to obtain reasonable assurance about whether the 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 audits 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 also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Bridgford Foods Corporation as of October 29, 2010 and October 30, 2009 and the results of its consolidated operations and its cash
flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP
Newport Beach, California
January 14, 2011
19
BRIDGFORD FOODS CORPORATION
CONSOLIDATED BALANCE SHEETS
October 29, 2010 and October 30, 2009
(in thousands, except per share amounts)
Current assets:
ASSETS
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $80 and $404,
respectively and promotional allowances of $1,932 and $1,962, respectively
Inventories, less inventory reserves of $166 and $101, respectively
Prepaid expenses
Refundable income taxes
Deferred income taxes, less valuation allowance of $2,478 and $1,852, respectively
Total current assets
Property, plant and equipment, net of accumulated depreciation of $56,007 and $55,362,
respectively
Other non-current assets
Deferred income taxes, less valuation allowance of $5,571 and $6,592, respectively
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
Total 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 – 9,328 and 9,355 in 2010 and
2009, respectively
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
2010
2009
$
15,686 $
13,911
7,609
16,307
291
1,594
—
41,487
7,892
11,144
—
60,523 $
3,364 $
5,532
2,755
11,651
12,672
24,323
—
—
9,385
10,396
24,471
(8,052 )
36,200
60,523 $
9,718
15,595
621
168
—
40,013
8,300
10,586
—
58,899
4,227
5,320
3,667
13,214
13,262
26,476
—
—
9,412
10,646
21,085
(8,720)
32,423
58,899
$
$
$
See accompanying notes to consolidated financial statements.
20
BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 29, 2010 and October 30, 2009
(in thousands, except share and per share amounts)
Net sales
Cost of products sold
Gross margin
Selling, general and administrative expenses
Income before taxes
Provision for income taxes
Net income
Basic earnings per share
2010
2009
$
117,655 $
122,665
70,563
73,072
47,092
49,593
41,569
42,551
5,523
7,042
1,204
255
4,319 $
6,787
0.46 $
0.72
$
$
Shares used to compute basic earnings per common share
9,334,004
9,411,181
See accompanying notes to consolidated financial statements
21
BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME (LOSS)
For the years ended October 29, 2010 and October 30, 2009
(in thousands)
Balance, October 31, 2008
Shares repurchased and retired
Net income
Other comprehensive net income (loss):
Unrealized gain on investment (Note 1)
Net change in defined benefit plans
Net change in other benefit plans
Comprehensive income
Balance, October 30, 2009
Shares repurchased and retired
Cash dividends paid
Net income
Other comprehensive net income:
Net change in defined benefit plans
Net change in other benefit plans
Comprehensive income
Balance, October 29, 2010
Capital in
excess of
par value
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
shareholders’
equity
Shares Amount
9,435 $
(80)
9,492 $
(80)
11,204 $ 14,298 $
(2,459 ) $
(558)
6,787
180
(6,247 )
(194 )
9,355
(27)
9,412
(27)
10,646
21,085
(8,720 )
(250)
(933)
4,319
589
79
9,328 $
9,385 $
10,396 $ 24,471 $
(8,052 ) $
32,535
(638)
6,787
180
(6,247)
(194)
526
32,423
(277)
(933)
4,319
589
79
4,987
36,200
See accompanying notes to consolidated financial statements.
22
BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 29, 2010 and October 30, 2009
(in thousands)
2010
2009
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
4,319 $
2,168
(351 )
(31 )
---
395
(395 )
2,460
(712 )
330
(1,426 )
(527 )
(863 )
212
(885 )
20
4,714
---
40
(1,769 )
(1,729 )
(277 )
(933 )
(1,210 )
1,775
13,911
15,686 $
6,787
2,733
78
(11)
159
171
(171)
(929)
457
1
296
(750)
1,154
(1,525)
2,071
(1,085)
9,436
268
56
(1,303)
(979)
(638)
---
(638)
7,819
6,092
13,911
2,710 $
318
Depreciation
Provision (recovery) for losses on accounts receivable
Gain on sale of property, plant and equipment
Loss on sale of equity securities
Deferred income taxes, net
Tax valuation allowance
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses
Refundable income taxes
Other non-current assets
Accounts payable
Accrued payroll, advertising and other expenses
Current portion of non-current liabilities
Non-current liabilities
Net cash provided by operating activities
Cash used in investing activities:
Proceeds from sale of equity investments
Proceeds from sale of property, plant and equipment
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 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
$
$
See accompanying notes to consolidated financial statements.
23
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 our 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 and impairment of deferred tax assets are especially subject to inherent
uncertainties and these estimated liabilities may ultimately settle at amounts which may vary from current estimates. Other areas with
underlying estimates include cash surrender or contract value for life insurance policies, promotional allowances, the allowance for
doubtful accounts, and inventory reserves. Management believes its current estimates are reasonable and based on the best
information available at the time.
We are required to test long-lived assets for recoverability whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If an impairment is indicated, we must measure the fair value of assets to determine if and
when adjustments are to be recorded.
Subsequent events
On November 10, 2010, we issued a press release announcing that our Board of Directors approved a cash dividend of $0.10
per share on common stock which was distributed on December 20, 2010 to shareholders of record on November 23, 2010.
Concentrations of credit risk
Our 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. We maintain cash balances at financial institutions,
which may at times exceed the amounts insured by the Federal Deposit Insurance Corporation of (currently $250 per institution
through December 31, 2013). 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. We have
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 10.1% of revenues in fiscal year
2010 and 9.4% of accounts receivable was due from Wal-Mart® at October 29, 2010. Sales to Wal-Mart® comprised 11.4% of
revenues in fiscal year 2009 and 13.3% of accounts receivable was due from Wal-Mart® at October 30, 2009.
Business segments
Our 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. See Note 7 to the financial statements for further information.
Fiscal year
We maintain our accounting records on a 52-53 week fiscal basis. Fiscal years 2010 and 2009 included 52 weeks.
Reclassification
The Company has changed the presentation of the Consolidated Statements of Operations to present a gross margin line
item. As a result, depreciation previously presented separately is now part of cost of products sold and selling, general and
administrative expenses. Prior year amounts have been reclassified to give effect to this presentation.
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 our own long-haul fleet or through a Company owned direct store
delivery system. These delivery costs, $5,315 and $5,248 for 2010 and 2009, respectively, are included in selling, general and
administrative expenses in the accompanying consolidated financial statements. The Company also uses independent distributors to
deliver products in remote geographic areas of the country. Revenues are recognized upon shipment to the distributor, net of return
allowances. Historically, returns from distributors have been minimal. The distributor pays for these products in full, typically within
24
15 days, and such payment is not contingent upon payment from the large chain stores. As a convenience to certain large chain stores,
we bill these customers on behalf of the distributor.
We record promotional and returns allowances based on recent and historical trends. Revenue is recognized as the net amount
estimated to be received after deducting estimated amounts for discounts, trade allowances and product terms. Promotional
allowances, including customer incentive and trade promotion activities, are recorded as a reduction to sales based on amounts
estimated being due to customers, based primarily on historical utilization and redemption rates. Promotional allowances deducted
from sales for fiscal years 2010 and 2009 were $7,629 and $7,147, respectively.
Advertising expenses
Advertising and other promotional expenses are recorded as selling, general and administrative expenses. Advertising
expenses for fiscal years 2010 and 2009 were $3,530 and $3,602, respectively.
Cash and cash equivalents
We consider all investments with original maturities of three months or less to be cash equivalents. Cash equivalents include
money market funds and treasury bills. We had cash and cash equivalents of $15,686 at October 29, 2010 and $13,911 at October 30,
2009.
Investments
We routinely classify certain equity securities as available for sale and measure them at market value (fair value). All equity
securities were sold in October 2009. Changes in unrealized gains or losses are recorded in other comprehensive income as a
component of shareholders' equity. We did not hold any equity securities in fiscal 2010.
Fair value measurements:
We classify levels of inputs to measure the fair value of financial assets:
(cid:121) Level 1 inputs: Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that are accessible at the
measurement date.
(cid:121) Level 2 inputs: Level 2 inputs are from other than quoted market prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly.
(cid:121) Level 3 inputs: Level 3 inputs are unobservable and should be used to measure fair value to the extent that observable inputs are
not available.
The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available,
when determining fair value.
Financial assets carried at fair value as of October 29, 2010 are classified below:
2010
Money market funds
Total
Inventories
Level 1
Level 2
Level 3
Total
$
$
6,042 $
6,042 $
— $
— $
— $
— $
6,042
6,042
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. We regularly review inventory quantities on hand and write 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 improvements 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
25
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.
Life insurance policies
We record the cash surrender value 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.
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. During the fourth quarter of
fiscal 2008, management recorded a full valuation allowance with respect to its deferred tax assets. The determination as to whether
or not a deferred tax asset can be fully realized is subject to a significant degree of judgment, based at least partially upon a projection
of future taxable income, which takes into consideration past and future trends in profitability, customer demand, supply costs, and
multiple other factors, none of which are predictable. The Company's policy outlines measurable objective criteria that must be met
before a release of the valuation allowance will occur. Due to the degree of judgment involved, actual taxable income could differ
materially from management's estimates, or the timing of taxable income could be such that the net operating losses could expire prior
to their utilization. Management could determine in the future that the deferred tax assets are realizable, materially increasing net
income in one or many periods. Following recognition, management could again change its determination in the future, materially
decreasing income.
We provide 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.
(See Note 4 to the financial statements). Although the outcome of these tax audits is uncertain, in management’s opinion adequate
provisions for income taxes have been made for potential liabilities emanating from these reviews. If actual outcomes differ materially
from these estimates, they could have a material impact on our results of operations.
Foreign currency transactions
Our 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) consists of net income (loss), additional minimum pension liability adjustments and unrealized
gains and losses on equity securities.
Recently issued accounting pronouncements and regulations
In December 2008, the FASB issued additional guidance on an employers' disclosures about plan assets of a defined benefit
pension or other postretirement plan. This interpretation is effective for financial statements issued for fiscal years ending after
December 15, 2009. We adopted this interpretation in fiscal 2010. The adoption of this interpretation increased disclosures in the
financial statements related to the assets of our defined benefit pension plan.
26
NOTE 2- Composition of Certain Financial Statement Captions:
2010
2009
Inventories:
Meat, ingredients and supplies
Work in process
Finished goods
Property, plant and equipment:
Land
Buildings and improvements
Machinery and equipment
Asset impairment
Transportation equipment
Construction in process
Accumulated depreciation
Other non-current assets:
Cash surrender value benefits
Intangible asset
Accrued payroll, advertising and other expenses:
Payroll, vacation, payroll taxes and employee benefits
Accrued advertising and broker commissions
Property taxes
Others
Current portion of non-current liabilities:
Incentive compensation
Defined benefit retirement plan
Other accrued retirement plans
Post retirement healthcare
Non-current liabilities:
Incentive compensation
Defined benefit retirement plan
Other accrued retirement plans
Post retirement healthcare
$
$
$
$
$
$
$
$
$
$
$
$
3,155 $
1,192
11,960
16,307 $
1,807 $
13,558
41,821
(233 )
6,516
430
63,899
(56,007 )
7,892 $
11,134 $
10
11,144 $
3,603 $
1,182
322
425
5,532 $
1,023 $
1,175
500
57
2,755 $
1,424 $
6,878
3,482
888
12,672 $
4,488
1,647
9,460
15,595
1,807
13,476
41,412
(176)
6,931
212
63,662
(55,362)
8,300
10,576
10
10,586
3,596
1,012
372
340
5,320
661
2,394
544
68
3,667
1,224
7,647
3,394
997
13,262
27
NOTE 3- Retirement and Other Benefit Plans:
Noncontributory-Trusteed Defined Benefit Retirement Plans for Sales, Administrative, Supervisory and Certain Other
Employees
We have noncontributory-trusteed defined benefit retirement plans for sales, administrative, supervisory and certain other
employees. In the third quarter of fiscal 2006, we froze future benefit accruals under this plan for employees classified within the
administrative, sales or supervisory job classifications or within any non-bargaining class. The benefits under these plans are primarily
based on years of service and compensation levels. The funding policy of the plan is to make contributions which are at least equal to
the minimum required contributions needed to avoid a funding deficiency. The measurement date for the plan is our fiscal year end.
Net pension cost consisted of the following:
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized loss
Amortization of unrecognized prior service costs
Net pension cost
Years Ended
2010
2009
125 $
1,959
(1,995 )
428
1
518 $
102
2,023
(1,702)
89
1
513
$
$
Net pension costs and benefit obligations are determined using assumptions as of the beginning of each fiscal year. Weighted
average assumptions for each fiscal year are as follows:
Discount rate
Rate of increase in salary levels
Expected return on plan assets
2010
2009
5.45%
N/A
8.00%
5.75 %
N/A
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 loss
Benefits paid
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
Net amount recognized
2010
2009
35,042 $
125
1,959
1,171
(1,007 )
37,290
25,001
1,943
3,300
(1,007 )
29,237
(8,053 )
7
9,641
1,595 $
25,819
102
2,023
8,062
(964)
35,042
21,548
989
3,428
(964)
25,001
(10,041)
7
10,202
168
$
$
Current accounting principles require that an internal rate of return analysis be included in the discount rate selection
process. The discount rates were based on Citigroup Pension Liability Index as of October 29, 2010 and October 30, 2009,
respectively.
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. Our expected employer contribution to the plan in fiscal year 2011 is $1,175.
28
The actual 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
2010
Target
Asset
Allocation
2009
Target
Asset
Allocation
37.4 %
0.0 %
3.5 %
22.2%
27.3 %
2.0 %
7.6 %
100.0 %
40.0 %
0.0 %
5.0 %
25.0 %
26.0 %
2.0 %
2.0 %
100.0 %
32.7 %
6.7 %
4.2 %
18.3 %
30.0 %
0.0 %
8.1 %
100.0 %
40.0 %
10.0 %
5.0 %
20.0 %
0.0 %
25.0 %
0.0 %
100.0 %
The fair value of our pension plan assets and the Level under which fair values were determined, using the hierarchy
described in Note 1, is as follows:
Level 1
Level 2
Level 3
Total
Year Ended 2010
Total plan assets
29,237
29,237
Expected payments for the pension benefits are as follows:
Fiscal Years
2011
2012
2013
2014
2015
2016-2020
Pension
Benefits
$
$
$
$
$
$
1,161
1,246
1,402
1,505
1,640
9,888
Non-Qualified Supplemental Retirement Plan for Certain Key Employees
In fiscal year 1991, we 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 our defined benefit pension plan
and amounts available through Social Security. Effective January 1, 1991 we 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. We
contribute 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. No benefit expense was recorded
under these plans for fiscal years 2010 and 2009. Benefits payable related to these plans and included in other non-current liabilities in
the accompanying financial statements were $3,482 and $3,394 at October 29, 2010 and October 30, 2009, respectively. In connection
with this arrangement we are the beneficiary of life insurance policies on the lives of certain key employees and retirees. The
aggregate cash surrender value of these policies, included in non-current assets, was $11,134 and $10,576 at October 29, 2010 and
October 30, 2009, respectively.
Expected payments for other postretirement benefits are as follows:
Fiscal Years
2011
2012
2013
2014
2015
2016-2020
Other
Postretirement
Benefits
$
$
$
$
$
$
507
507
507
517
451
1,146
29
Incentive Compensation Plan for Certain Key Executives
We provide an incentive compensation plan for certain key executives, which is based upon our pretax income. The payment
of these amounts is generally deferred over three or five-year periods. The total amount payable related to this arrangement was
$2,447 and $1,885 at October 29, 2010 and October 30, 2009, respectively. Future payments are approximately $1,023, $851, $445,
$88 and $40 for fiscal years 2011 through 2015, respectively.
Postretirement Healthcare Benefits for Selected Executive Employees
We provide postretirement health care benefits for selected executive employees. Net periodic postretirement healthcare cost
is determined using assumptions as of the beginning of each fiscal year, except for the total actual benefit payments and the discount
rate used to develop the net periodic postretirement benefit expense, which is determined at the end of the fiscal year.
Net periodic postretirement healthcare cost consisted of the following:
Service cost
Interest cost
Amortization of prior service cost
Amortization of actuarial loss
Net periodic postretirement healthcare cost
Years Ended
2010
2009
18 $
82
75
(20 )
155 $
11
62
75
(23)
125
$
$
Weighted average assumptions for the fiscal years ended October 29, 2010 and October 30, 2009 are as follows:
Discount rate
Medical trend rate next year
Ultimate trend rate
Year ultimate trend rate is achieved
2010
2009
5.45%
9.50%
5.00%
2020
5.75 %
8.50 %
5.00 %
2016
The table below shows the estimated effect of a 1% increase in healthcare cost trend rate on the following:
Interest cost plus service cost
Accumulated postretirement healthcare obligation
2010
2009
$
$
8 $
91 $
7
106
The table below shows the estimated effect of a 1% decrease in healthcare cost trend rate on the following:
Interest cost plus service cost
Accumulated postretirement healthcare obligation
2010
2009
$
$
(6 ) $
(76 ) $
(6)
(89)
The healthcare obligation and funded status of this plan as of the fiscal years ended are as follows:
Change in accumulated postretirement healthcare obligation:
Healthcare obligations - beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Healthcare obligations - end of year
Funded status of the plans
Unrecognized prior service costs
Unrecognized net actuarial loss
Unrecognized amounts recorded in other comprehensive income
Postretirement healthcare liability
2010
2009
1,066 $
18
82
(201 )
(20 )
945 $
945
(75 )
265
(190 )
945 $
806
11
63
216
(30)
1,066
1,066
(149)
84
65
1,066
$
$
$
30
Expected payments for the postretirement benefits are as follows:
Fiscal Years
2011
2012
2013
2014 -2018
Postretirement
Heathcare
Benefits
$
$
$
$
57
57
55
371
401(K) Plan for Sales, Administrative, Supervisory and Certain Other Employees
During the fiscal year ended November 3, 2006, we implemented a qualified 401(K) retirement plan (the “Plan”) for our
sales, administrative, supervisory and certain other employees. During fiscal years 2010 and 2009, we made total contributions to the
Plan in the amounts of $421 and $409, respectively.
NOTE 4- Income Taxes:
The provision for taxes on income includes the following:
Current:
Federal
State
Deferred:
Federal
State
2010
2009
$
$
749 $
455
1,204
—
—
—
1,204 $
25
230
255
—
—
—
255
The total tax provision differs from the amount computed by applying the statutory federal income tax rate to income before
income taxes as follows:
Provision for federal income taxes at the applicable statutory rate
Increase in provision resulting from state income taxes, net of
federal income tax benefit
Research & development tax credit
Non-taxable life insurance gain
Change in valuation allowance
Other, net
2010
2009
$
1,878 $
2,394
65
(4 )
(190 )
(595 )
50
1,204 $
521
(16)
(110)
(2,551)
17
255
$
31
Deferred income taxes result from differences in the bases of assets and liabilities for tax and accounting purposes.
Receivables allowance
Returns allowance
Inventory packaging reserve
Inventory capitalization
Incentive compensation
State taxes
Employee benefits
Other
Valuation allowance
Current tax assets, net
State Taxes
Incentive compensation
Pension and health care benefits
Depreciation
Net operating loss carry-forward and credits
Valuation allowance
Non-current tax assets, net
2010
2009
34 $
217
61
333
275
143
1,371
44
(2,478 )
— $
280
609 $
4,705
(210 )
187
(5,571 )
— $
161
189
26
236
39
78
1,045
78
(1,852)
—
—
489
4,598
47
1,458
(6,592)
—
$
$
$
$
Management is required to evaluate whether a valuation allowance should be established against its deferred tax assets based
on the consideration of all available evidence using a "more likely than not" standard. Realization of deferred tax assets is dependent
upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversals of existing
taxable temporary differences. Forming a conclusion that a valuation allowance is not needed is difficult when there is negative
evidence such as cumulative losses in recent years or losses expected in early future years. At the end of 2008, poor economic
conditions included decreases in building and real estate values and a sharp decline in the stock market. Management concluded at the
end of 2008 that it was more likely than not that deferred tax assets would not be realized and recorded a full valuation allowance on
all deferred tax assets during the fourth quarter of fiscal 2008.
Management reevaluated the need for a full valuation allowance at the end of 2010. Management evaluated both positive and
negative evidence. Although operating results improved significantly compared to the 2008 fiscal year, the weight of negative factors
and level of economic uncertainty in our current business continued to support the conclusion that the realization of the
Company's deferred tax assets does not meet the more likely than not standard. Therefore, a full valuation allowance remained against
the net deferred tax assets as of October 29, 2010. However, management will continue to periodically reevaluate the necessity of such
valuation allowance and, to the extent that conditions change in a manner that would make it more likely than not that the Company
can realize its deferred tax assets, some or all of such valuation allowance could be reversed in future periods.
As of October 29, 2010, the Company had federal and state net operating loss carryforwards of approximately $0 and $2,219
respectively. These loss carryforwards will expire at various dates from 2012 through 2028.
In July 2006, the FASB issued guidance to clarify the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements. This interpretation prescribed 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. The guidance also discussed
derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The cumulative effect, if
any, of applying this guidance is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption.
As of October 29, 2010, we have provided a liability of $95 for unrecognized tax benefits related to various federal and state
income tax matters. This entire amount would reduce our effective income tax rate if the asset is recognized in future reporting
periods. We have not identified any new unrecognized tax benefits.
As of October 30, 2009, we have provided a liability of $103 for unrecognized tax benefits related to various federal and state
income tax matters. This entire amount would reduce our effective income tax rate if the asset is recognized in future reporting
periods. We have not identified any new unrecognized tax benefits.
32
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
Balance at beginning of year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at end of year
$
$
2010
103 $
15
14
(2 )
(35 )
95 $
2009
97
5
1
---
---
103
We recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of
October 29, 2010, we had approximately $1 in accrued interest and penalties which is included as a component of the $95
unrecognized tax benefit noted above.
During the year ended October 29, 2010, the Internal Revenue Service settled its audit of our U.S. federal income tax returns
for fiscal years ended November 1, 2002, October 31, 2003, November 3, 2006 and November 2, 2007. This settlement resulted in the
reversal of $35 of unrecognized tax benefits associated with R&D credits we reported, which increased our tax expense by $5. Our
federal income tax returns are open to audit under the statute of limitations for fiscal years 2008 and 2009.
We are subject to income tax in California and various other state taxing jurisdictions. Our state income tax returns are open to
audit under the statute of limitations for the fiscal years ended October 30, 2006 through 2009.
We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.
NOTE 5- Line of Credit:
Under the terms of a revolving line of credit with Bank of America, we may borrow up to $2,000 through April 30, 2011. The
interest rate is at the bank’s reference rate unless we elect an optional interest rate. The borrowing agreement contains various
covenants, the more significant of which require us to maintain certain levels of shareholders’ equity and working capital. We are
currently in compliance with all provisions of the agreement. There were no borrowings under this line of credit during the years
ended October 29, 2010 or October 30, 2009.
NOTE 6- Contingencies and Commitments:
We lease certain transportation under operating leases through fiscal year 2011. 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. The Company also leases warehouse and/or office facilities throughout the United States and Canada through
month-to-month rental agreements. Minimum rental payments were $382 in fiscal year 2010 and $425 in fiscal year 2009. Contingent
payments were approximately $124 in fiscal year 2010 and $56 in fiscal year 2009. Future minimum lease payments are
approximately $382 in fiscal year 2011.
NOTE 7- Segment Information:
We have 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).
We evaluate 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.
33
The following segment information is for the years ended October 29, 2010 and October 30, 2009:
2010
Sales
Intersegment sales
Net sales
Cost of products sold
Gross margin
Selling, general and administrative
expenses
Income (loss) before taxes
Provision for income taxes
Net income (loss)
Total assets
Additions to property, plant and
equipment
2009
Sales
Intersegment sales
Net sales
Cost of products sold
Gross margin
Selling, general and administrative
expenses
Income (loss) before taxes
Provision for income taxes
Net income (loss)
Total assets
Additions to property, plant and
equipment
Frozen Food
Products
Refrigerated
and Snack Food
Products
Other
54,015 $
---
54,015
31,682
22,333
16,769
5,564
1,205
4,359 $
63,640 $
1,228
64,868
40,109
24,759
24,666
93
(1)
94 $
Elimination
--- $
$
(1,228)
(1,228)
(1,228)
134
(134)
---
(134)
---
---
--- $
Totals
117,655
---
117,655
70,563
47,092
41,569
5,523
1,204
4,319
11,668 $
20,937 $
27,918 $
--- $
60,523
805 $
954 $
10 $
--- $
1,769
Frozen Food
Products
Refrigerated
and Snack Food
Products
Other
54,740 $
—
54,740
31,736
23,004
16,774
6,230
224
6,006 $
67,925 $
902
68,827
42,238
26,589
25,607
982
31
951 $
— $
Elimination
— $
(902)
(902)
(902)
170
(170)
—
(170)
—
—
— $
Totals
122,665
—
122,665
73,072
49,593
42,551
7,042
255
6,787
11,416 $
22,520 $
24,963 $
— $
58,899
730 $
283 $
290 $
— $
1,303
$
$
$
$
$
$
$
$
NOTE 8- Unaudited Interim Financial Information
Not applicable to smaller reporting company.
34
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
* - No shares have been issued.
** - Limited Partnership.
Exhibit 21.1
State in which Incorporated
California
California
California
Texas
California
Delaware
Delaware
Illinois
Illinois
35
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;
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)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
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;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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
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.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: January 14, 2011
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford, Chairman of the Board
(Principal Executive Officer)
36
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;
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)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
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;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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
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.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: January 14, 2011
/s/ RAYMOND F. LANCY
Raymond F. Lancy
Chief Financial Officer, Vice President,
Treasurer and Assistant Secretary
(Principal Financial and Accounting Officer)
37
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1
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 October 29, 2010 (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 14, 2011
This certification accompanies the Annual Report on Form 10-K pursuant to Section 13(a) and Section 15(d) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934.
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman of the Board
(Principal Executive Officer)
38
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2
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 October 29, 2010 (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 14, 2011
/s/ RAYMOND F. LANCY
Raymond F. Lancy
Chief Financial Officer, Vice President
Treasurer and Assistant Secretary
(Principal Financial and Accounting Officer)
This certification accompanies the Annual Report on Form 10-K pursuant to Section 13(a) and Section 15(d) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934.
39
BRIDGFORD FOODS CORPORATION
_________________________________
NOTICE OF 2011 ANNUAL MEETING OF SHAREHOLDERS
March 23, 2011
10:00 a.m. Pacific Time
_________________________________
To the Shareholders of BRIDGFORD FOODS CORPORATION:
The annual meeting of the shareholders of Bridgford Foods Corporation, a California corporation, will be held at the offices
of Bridgford Foods Corporation, 1308 North Patt Street, Anaheim, California 92801, on Wednesday, March 23, 2011 at 10:00 a.m.
Pacific Time, for the following purposes:
(1) To elect eight directors to hold office for one year or until their successors are elected and qualified.
(2) To ratify the appointment of Squar, Milner, Peterson, Miranda & Williamson, LLP as the Company's independent
public accountants for the fiscal year ending on October 28, 2011.
(3) To hold an advisory vote on executive compensation.
(4) To hold an advisory vote on the frequency of holding an advisory vote on executive compensation.
(5) To transact such other business as may properly come before the meeting, or any postponements or adjournments
thereof.
The Board of Directors recommends that you vote “FOR” each of the eight director nominees referenced in Proposal 1,
“FOR” Proposals 2 and 3, and for a “THREE YEAR” frequency with respect to Proposal 4. Each of the Proposals are described in
greater detail in the proxy statement accompanying this notice.
Only shareholders of record at the close of business on February 4, 2011 are entitled to notice of and to vote at the meeting or
any adjournment thereof.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held
on March 23, 2011.
Pursuant to the rules of the Securities and Exchange Commission, or the SEC, the Company has elected to provide access to
its proxy materials both by sending you a full set of proxy materials, including this notice of meeting, the accompanying proxy
statement and proxy card, and the 2010 Annual Report to Shareholders, and by notifying you of the availability of the proxy materials
on the Internet. The notice of annual meeting, proxy statement, proxy card and 2010 Annual Report to Shareholders are
available at https://materials.proxyvote.com/108763.
All shareholders are cordially invited to attend the annual meeting. HOWEVER, TO ENSURE YOUR
REPRESENTATION AT THE MEETING, THE BOARD OF DIRECTORS RESPECTFULLY URGES YOU TO SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. If you attend the meeting in person, you may withdraw your proxy and vote your shares. Shareholders
attending the meeting whose shares are held in the name of a broker or other nominee who desire to vote their shares at the
meeting should bring with them a proxy or letter from that firm confirming their ownership of shares. The meeting will be
held at the principal offices of Bridgford Foods Corporation, which are located at 1308 North Patt Street, Anaheim, California
92801, one block east of Lemon St. and just south of the 91 Freeway in the city of Anaheim, California. Driving directions
may be obtained by contacting the office manager at 714-526-5533.
Your vote is extremely important. Please vote as soon as possible to ensure that your vote is recorded promptly even
if you plan to attend the annual meeting.
Anaheim, California
February 18, 2011
By order of the Board of Directors
/s/ Cindy Matthews-Morales
Cindy Matthews-Morales
Secretary
BRIDGFORD FOODS CORPORATION
1308 North Patt Street, Anaheim, California 92801
_________________________________
PROXY STATEMENT
_________________________________
Annual Meeting of Shareholders to be held March 23, 2011
The enclosed proxy is solicited by the Board of Directors of Bridgford Foods Corporation, a California corporation (the
“Company”), for use at the annual meeting of shareholders of the Company (the “Annual Meeting”) to be held at the offices of the
Company, which are located at 1308 North Patt Street, Anaheim, California 92801, on Wednesday, March 23, 2011 at 10:00 a.m.
Pacific Standard Time, and at any adjournment thereof. All shareholders of record at the close of business on February 4, 2011 are
entitled to notice of and to vote at such meeting. This Proxy Statement and the accompanying proxy are being mailed on or about
February 18, 2011.
The persons named as proxies were designated by the Board of Directors and are officers and directors of the Company. Any
proxy may be revoked or superseded by executing a later proxy or by giving notice of revocation in writing prior to, or at, the Annual
Meeting, or by attending the Annual Meeting, withdrawing the proxy and voting in person. Attendance at the Annual Meeting will
not in and of itself constitute revocation of the proxy.
All proxies, which are properly completed, signed and returned to the Company prior to the Annual Meeting, and not
revoked, will be voted in accordance with the instructions given in the proxy. If a choice is not specified in the proxy, the proxy will
be voted “FOR” election of each of the eight director nominees proposed by the Board of Directors, “FOR” ratification of the
Company’s appointment of Squar, Milner, Peterson, Miranda & Williamson, LLP as independent public accountants for the
Company, “FOR” the approval, on an advisory basis, of the compensation of the Company's named executive officers, and for the
approval, on an advisory basis, of a resolution to hold an advisory vote on executive compensation every “THREE
YEARS.” Management does not know of any matters which will be brought before the Annual Meeting other than those specifically
set forth in the notice hereof. However, if any other matter properly comes before the Annual Meeting, it is intended that the proxies,
or their substitutes, will vote on such matters in accordance with their best judgment.
Solicitation of proxies will be primarily by mail, although some of the officers, directors and employees of the Company may
solicit proxies personally or by telephone, facsimile or electronic mail. All expenses incurred in connection with this solicitation will
be borne by the Company. The Company will reimburse brokers and others who incur costs to send proxy materials to beneficial
owners of stock in the name of a broker or nominee.
On February 4, 2011, there were 9,322,150 shares of common stock of the Company outstanding. The presence at the
meeting of a majority of the outstanding shares, in person or by proxy relating to any matter to be acted upon at the meeting, is
necessary to constitute a quorum for the meeting.
Each share of common stock entitles the holder thereof to one vote on each matter to be voted upon by such shareholders
and, upon prior notice, to cumulate votes for the election of directors. For purposes of the quorum and the discussion below regarding
the vote necessary to take shareholder action, shareholders of record who are present at the meeting in person or by proxy and who
abstain or withhold their vote, including brokers holding customers’ shares of record who cause abstentions to be recorded at the
meeting, are considered shareholders who are present and entitled to vote and count toward the quorum. Brokers holding shares of
record for customers generally are not entitled to vote on certain matters unless they receive voting instructions from their
customers. As used herein, “uninstructed shares” means shares held by a broker who has not received instructions from its customers
on such matters and the broker has so notified the Company on a proxy form in accordance with industry practice or has otherwise
advised the Company that it lacks voting authority. As used herein, “broker non-vote” means the votes that could have been cast on
the matter in question by brokers with respect to uninstructed shares if the brokers had received their customers’ instructions. The
effect of proxies marked “withheld” as to any director nominee or “abstain” as to any other Proposal, and the effect of broker non-
votes on each of the Proposals, is discussed in each Proposal below.
1
PROPOSAL 1
ELECTION OF DIRECTORS
The directors of the Company are elected annually to serve until the next annual meeting of the shareholders or until their
respective successors are elected and duly qualified. At the Annual Meeting, eight directors are to be elected. The election of
directors shall be by the affirmative vote of the holders of a plurality of the shares voting in person or by proxy at the Annual
Meeting. Every shareholder, or his proxy, entitled to vote upon the election of directors may cumulate his or her votes and give one
candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which his or her shares
are entitled, or distribute his or her votes on the same principle among as many candidates as he or she thinks fit. No shareholder or
proxy, however, shall be entitled to cumulate votes unless such candidate or candidates have been nominated prior to the voting and
the shareholder has given notice at the meeting, prior to the voting, of the shareholder’s intention to cumulate such shareholder’s
votes. If any one shareholder gives such notice, all shareholders may cumulate their votes for candidates in nomination. Each of these
individuals has served as a director since the last annual meeting. All current directorships are being filled.
Unless otherwise instructed, shares represented by the proxies will be voted “FOR” the election of each of the nominees
listed below. Broker non-votes and proxies marked “withheld” as to one or more of the nominees will result in the respective
nominees receiving fewer votes. However, the number of votes otherwise received by the nominee will not be reduced by such
action.
Each nominee has indicated that he is willing and able to serve as director if elected. In the event that any of such nominees
shall become unavailable for any reason, an event which management does not anticipate, it is intended that proxies will be voted for
substitute nominees designated by management.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE
DIRECTOR NOMINEES NAMED BELOW.
The following table and biographical summaries set forth, with respect to each nominee for director, his age, the positions he
holds in the Company and the year in which he first became a director of the Company. Data with respect to the number of shares of
the Company’s common stock beneficially owned by each of such directors as of February 4, 2011 appears under the caption
“PRINCIPAL SHAREHOLDERS AND MANAGEMENT” below.
Name
Allan L. Bridgford
William L. Bridgford
Bruce H. Bridgford
Robert E. Schulze
Todd C. Andrews
D. Gregory Scott
Richard A. Foster
Paul R. Zippwald
Current Position at the Company
Age
75 Senior Chairman of the Board and Member of the Executive Committee (1)(4)
56 Chairman of the Board and Member of the Executive Committee (1)(4)
58 Director (1)(4)
76 Director (2)(3)(4)
45 Director (2)(3)(4)
54 Director, Audit Committee and Compensation Committee Chairman (2)(3)(4)
75 Director (2)(3)(4)
73 Director (2)(3)(4)
(1) William L. Bridgford and Bruce H. Bridgford are cousins and are also each nephews of Allan L. Bridgford.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
(4) Member of the Nominating Committee.
Directors
Allan L. Bridgford
Year First
Became
Director
1952
2004
2009
1980
2004
2006
2001
1992
Allan L. Bridgford has served as Senior Chairman of the Board since March of 2006. From March of 1995 through March of
2006, Mr. Bridgford served as Chairman of the Board. He has been an employee of the Company since 1957, and reduced his work
schedule to 80% in March of 2000 and 60% in March of 2005. Mr. Bridgford’s base compensation was reduced by the same
percentage as his work schedule reduction. Mr. Bridgford has also served as a member of the Executive Committee since 1972. He is
a graduate of Stanford University with a degree in Economics.
Mr. Bridgford has extensive knowledge of the Company’s business and experience in the food industry developed during his
54 year tenure with the Company. He is one of the principal owners of Bridgford Industries Inc., the majority stockholder of
Bridgford Foods Corporation. The Board believes he is qualified to serve as a director based on these experiences as well as his other
valuable attributes and skills.
2
William L. Bridgford
William L. Bridgford has served as Chairman of the Board since March of 2006. He previously served as President of the
Company from June of 2004 until March of 2006, and Secretary of the Company for more than five years. Mr. Bridgford has been a
full-time employee of the Company since 1981. Mr. Bridgford has also served as a member of the Executive Committee since
2004. Mr. Bridgford is a graduate of California State University of Fullerton with a degree in Business Management.
Mr. Bridgford brings to the Board extensive experience in the operations of the Company and provides strong leadership
skills that provide strategic business guidance to the Company. He is one of the principal owners of Bridgford Industries Inc., the
majority stockholder of Bridgford Foods Corporation. The Board believes his executive managerial experience and Company
knowledge base combined with his understanding of corporate values and culture qualify him to serve as a member of the Board.
Bruce H. Bridgford
Bruce H. Bridgford has served as President of Bridgford Foods of California, a division of the Company, since March of
1999. Mr. Bridgford has been a full time employee of the Company since 1977 and earned a B.S. degree in Business concentration in
finance and marketing from the University of Southern California.
Mr. Bridgford provides key insight into the direct store delivery operations of the Company as well as strategic direction for
the sales management and marketing functions of the Company. He is one of the principal owners of Bridgford Industries Inc., the
majority stockholder of Bridgford Foods Corporation. The Board believes these skills and experiences qualify him to serve as a
member of the Board.
Robert E. Schulze
Robert E. Schulze is a Certified Public Accountant (inactive) and previously served the Company in several capacities
including President, Executive Vice President, Principal Financial Officer, Secretary and Treasurer. Mr. Schulze retired as an
employee effective as of June 30, 2004. He attended Saint Louis University and the University of California at Los Angeles, and
holds a B.S. degree in Accounting from the California State University at Long Beach.
Mr. Schulze brings to the Board extensive experience with the operations and management of the Company developed during
his tenure with the Company serving in various leadership positions over a period of more than 40 years. He provides an essential link
between management and the Board of Directors and enables the Board to provide oversight with the benefit of management’s
perspective of the business. Mr. Schulze has over five years experience in public accounting with PricewaterhouseCoopers. In
addition, due to his financial and accounting experience, Mr. Schulze qualifies as an audit committee financial expert and is
financially sophisticated within the applicable NASDAQ rules. The Board believes that his Company experience combined with his
financial and accounting experience qualify him to serve as a member of the Board.
Todd C. Andrews
Todd C. Andrews is a Certified Public Accountant (inactive) and presently serves as Vice President and Controller of Public
Storage, a member of the S&P 500, headquartered in Glendale, California. Mr. Andrews has been employed by Public Storage since
1997. Mr. Andrews graduated cum laude with a Bachelor of Science degree in Business Administration in 1988 with an emphasis in
accounting and finance from California State University, Northridge.
Mr. Andrews is qualified to be a director due to his extensive experience in multiple accounting and finance roles over a
period of more than 20 years. In particular, Mr. Andrews is experienced in the areas of financial reporting and analysis, treasury
management, SEC reporting, internal controls and operational analysis. In addition, Mr. Andrews brings a diverse set of perspectives
to the Board from serving in positions in multiple industries, including public accounting, entertainment, and real estate. Mr. Andrews
qualifies as an audit committee financial expert and is financially sophisticated within the meaning of the NASDAQ rules.
D. Gregory Scott
D. Gregory Scott is a Certified Public Accountant (inactive) and currently serves as the Managing Director of Peak Holdings,
LLC, an investment management company, based in Beverly Hills, California. Mr. Scott has been with Peak Holdings, LLC for more
than the past five years. Peak Holdings, LLC and its affiliates own and manage in excess of three million square feet of office, retail
and warehouse space throughout the United States.
Mr. Scott qualifies as an audit committee financial expert and is financially sophisticated within the meaning of the
NASDAQ rules. Mr. Scott brings to the Board extensive financial and managerial experience which qualify him to serve as a member
of the Board.
Richard A. Foster
Richard A. Foster was the President of Interstate Electronics Corporation, a wholly owned subsidiary of Figgie International,
Inc., from 1979 until his retirement in 1991. Mr. Foster also served as Vice President of Figgie International, Inc. from 1986 to
1991. He holds a B.S. degree from Stanford University and an M.S. degree from the University of California at Los Angeles.
3
Mr. Foster has significant experience and background in corporate operations and has provided many years of service to the
Company as a member of the Board. The Board believes that Mr. Foster is qualified to serve as a director of the Company due to his
extensive business and managerial expertise.
Paul R. Zippwald
Paul R. Zippwald was Regional Vice President and Head of Commercial Banking for Bank of America NT&SA, North
Orange County, California, for more than five years prior to his retirement in July 1992. Mr. Zippwald is currently retired. He is a
graduate of the Graduate School of Credit and Financial Management at the Amos Tuck School of Business Administration of
Dartmouth College, and also holds a graduate degree from the American Institute of Banking.
Mr. Zippwald brings to the Board a background and expertise in banking and investment advisory services. He has provided
many years of service to the Company as a member of the Board. We believe that Mr. Zippwald is qualified to serve as a director of
the Company due to his business expertise and executive managerial experience.
Public Company Directorships
Except as indicated above, none of the directors has been a director at any other public company in the past five years.
Board Meetings
During fiscal year 2010, the Company’s Board of Directors held twelve regular monthly meetings. Each of the nominees
holding office during this period attended at least 75% of the aggregate number of monthly meetings of the Board of Directors and
meetings of committees upon which he served. Non-employee directors were paid $1,350 for each of the first three Board meetings
held in fiscal year 2010 and $1,500 for each subsequent Board meeting in fiscal year 2010. Employee directors received no additional
compensation for attending the meetings.
Arrangements or Understandings with Directors
There are no agreements or understandings pursuant to which any of the directors was selected to serve as a director.
Controlled Company Status
The Company is considered a “controlled company” within the meaning of Rule 5615(c)(1) of the NASDAQ Listing Rules
based on the approximate 77% ownership of the Company by Bridgford Industries Incorporated and is therefore exempted from
various rules pertaining to certain “independence” requirements of its directors and certain requirements with respect to the
committees of the Board. Nevertheless, the Board of Directors has determined that Messrs. Andrews, Foster, Schulze, Scott and
Zippwald, constituting a majority of the Board, are all “independent directors” within the meaning of Rule 5605 of the NASDAQ
Listing Rules.
Board Committees
The Board of Directors maintains three committees, the Compensation Committee, the Audit Committee and the Nominating
Committee.
Compensation Committee
The Compensation Committee for fiscal year 2010 and as of the date of mailing of this proxy statement consists of Messrs.
Andrews, Foster, Schulze, Scott and Zippwald. Each of the members of the Compensation Committee is a non-employee director and
is independent as defined in Rule 5605(a)(2) of the NASDAQ Listing Rules. The Compensation Committee is responsible for
establishing and administering the Company’s compensation arrangements for all executive officers.
The Compensation Committee meets no less frequently than annually as circumstances dictate to discuss and determine
executive officer and director compensation. The Compensation Committee does not generally retain the services of any
compensation consultants. However, from time to time it utilizes compensation data from companies that the Compensation
Committee deems to be competitive with the Company in connection with its annual review. The Compensation Committee has the
power to form and delegate authority to subcommittees when appropriate, provided that such subcommittees are composed entirely of
directors who would qualify for membership on the Compensation Committee. See “Compensation Discussion and Analysis” and
“Director Compensation.”
The Compensation Committee held one meeting during fiscal year 2010, which was attended by all committee members. No
additional compensation is paid to directors for participation on the Compensation Committee. The Compensation Committee
operates under a written charter, which was adopted on October 11, 2010 and is attached as Exhibit A to this proxy statement. The
charter is not available on the Company’s website.
4
Audit Committee
The Audit Committee for fiscal year 2010 and as of the date of mailing of this proxy statement consists of Messrs. Andrews,
Foster, Schulze, Scott and Zippwald. The Audit Committee has been established in accordance with the rules and regulations of the
Securities and Exchange Commission (the “SEC”) and each of the members of the Audit Committee is an “independent director” as
defined in Rule 5605(c)(2) of the NASDAQ Listing Rules. In addition, the Board has determined that Messrs. Andrews, Schulze and
Scott qualify as “audit committee financial experts” as such term is used in the rules and regulations of the SEC.
The Audit Committee meets periodically with the Company’s independent registered public accountants and reviews the
Company’s accounting policies and internal controls. It also reviews the scope and adequacy of the independent registered public
accountants’ examination of the Company’s annual financial statements. In addition, the Audit Committee selects the firm of
independent registered public accountants to be retained by the Company, subject to shareholder approval, pre-approves services
rendered by its independent registered public accountants and pre-approves all related-party transactions.
The Audit Committee held 12 meetings during fiscal year 2010. Each of the members of the Audit Committee receive $300
or $500 per meeting depending on the length of each meeting attended. In addition, the Audit Committee holds a pre-earnings release
conference with the Company’s independent registered public accountants on a quarterly basis. The Audit Committee operates under
an Amended and Restated Audit Committee Charter, which was approved on November 8, 2010 and is attached as Exhibit B to this
proxy statement. The charter is not available on the Company’s website.
Nominating Committee
The Board of Directors has decided that the full Board should perform the functions of a Nominating Committee for the
Company. It made that decision because the Board believes that selecting new Board nominees is one of the most important
responsibilities the Board members have to the Company’s shareholders and, for that reason, all of the members of the Board should
have the right and responsibility to participate in the selection process. Because of its status as a “controlled company” within the
meaning of Rule 5615(c)(1) of the NASDAQ Listing Rules, the Company is not required to have a Nominating Committee comprised
solely of independent directors.
In its role as Nominating Committee, the full Board identifies and screens new candidates for Board
membership. Nevertheless, actions of the Board, in its role as Nominating Committee, can be taken only with the affirmative vote of a
majority of the independent directors on the Board, as defined by the NASDAQ Listing Rules. The Board last met in its role as
Nominating Committee in August 2008 to approve the appointment of one new director. The Nominating Committee does not act
pursuant to a written charter.
Director Nomination Process
In identifying new Board candidates, the Board will seek recommendations from existing Board members and executive
officers. In addition, the Board will consider any candidates that may have been recommended by any of the Company’s shareholders
who have made those recommendations in accordance with the shareholder nomination procedures described below. The Board, in its
capacity as Nominating Committee, does not evaluate nominees recommended by shareholders differently from its evaluation of other
director nominees. The Board also has the authority to engage an executive search firm and other advisors as it deems appropriate to
assist in identifying qualified candidates for the Board.
In assessing and selecting Board candidates, the Board will consider such factors, among others, as the candidate’s
independence, experience, knowledge, skills and expertise, as demonstrated by past employment and board experience; the
candidate’s reputation for integrity; and the candidate’s participation in local community and local, state, regional or national
charitable organizations. When selecting a nominee from among candidates considered by the Board, it will conduct background
inquiries of and interviews with the candidates the Board members believe are best qualified to serve as directors. The Board
members will consider a number of factors in making their selection of a nominee from among those candidates, including, among
others, whether the candidate has the ability, willingness and enthusiasm to devote the time and effort required of members of the
Board; whether the candidate has any conflicts of interest or commitments that would interfere with the candidate’s ability to fulfill
the responsibilities of directors of the Company, including membership on Board committees; whether the candidate’s skills and
experience would add to the overall competencies of the Board; and whether the candidate has any special background or experience
relevant to the Company’s business.
Board Consideration of Diversity
The Board believes that differences in experience, knowledge, skills and expertise enhance the performance of the
Board. Accordingly, the Board, in its capacity as Nominating Committee, considers such diversity in selecting and evaluating
proposed Board nominees. However, the Board has not implemented a formal policy with respect to the consideration of diversity for
the composition of the Board.
Shareholder Recommendation of Board Candidates
Any shareholder desiring to submit a recommendation for consideration by the Board of a candidate that the shareholder
believes is qualified to be a Board nominee at any upcoming shareholders meeting may do so by submitting that recommendation in
writing to the Board not later than 120 days prior to the first anniversary of the date on which the proxy materials for the prior year’s
5
annual meeting were first sent to shareholders. However, if the date of the upcoming annual meeting has been changed by more than
30 days from the date of the prior year’s meeting, the recommendation must be received within a reasonable time before the Company
begins to print and mail its proxy materials for the upcoming annual meeting. In addition, the recommendation should be
accompanied by the following information: (i) the name and address of the nominating shareholder and of the person or persons being
recommended for consideration as a candidate for Board membership; (ii) the number of shares of voting stock of the Company that
are owned by the nominating shareholder, his or her recommended candidate and any other shareholders known by the nominating
shareholder to be supporting the candidate’s nomination; (iii) a description of any arrangements or understandings, that relate to the
election of directors of the Company, between the nominating shareholder, or any person that (directly or indirectly through one or
more intermediaries) controls, or is controlled by, or is under common control with, such shareholder and any other person or persons
(naming such other person or persons); (iv) such other information regarding each such recommended candidate as would be required
to be included in a proxy statement filed pursuant to the proxy rules of the SEC; and (v) the written consent of each such
recommended candidate to be named as a nominee and, if nominated and elected, to serve as a director. No director nominations by
shareholders have been received as of the filing of this Proxy Statement.
Board Leadership Structure and the Role of the Board in Risk Management Oversight
Board Leadership Structure.
The Board is comprised of a total of eight directors. One of those directors, Allan L. Bridgford, serves as the Senior
Chairman of the Board. In this capacity, he is principally charged with fulfilling the following duties:
• Presiding as the Chairman of the meetings of the Board where the Chairman is not present;
• Serving as a conduit of information between the independent directors and members of management;
• Together with the Chairman of the Board, preparing agendas and schedules for Board meetings;
• Providing advisory services to the Board;
• Providing mentoring services to the Chairman of the Board;
• Such other responsibilities and duties as the Board of Directors shall designate.
Another one of those directors, William L. Bridgford, serves as the Chairman of the Board. In this role he is responsible for
fulfilling the following duties:
• Presiding as the Chairman of the meetings of the Board of Directors;
• Serving as a conduit of information between the independent directors and members of management;
• Approving Board of Director meeting agendas and schedules;
• Calling executive session meetings of the Independent Directors, as needed;
• Reviewing information sent to the Board of Directors;
• Working with the Chief Financial Officer and Corporate Secretary to ensure the Board has adequate resources to
support its decision-making obligations;
• Meeting with shareholders as appropriate; and
• Such other responsibilities and duties as the Board of Directors shall designate.
The Company has not appointed a Chief Executive Officer. Instead, the Company has historically utilized a five-member
Executive Committee to serve in the capacity of Chief Executive Officer. The Board believes that the Executive Committee structure
is appropriate for the Company because it requires a full committee of officers, each of whom bring their own experiences and
perspectives to bear on their decision making, to discuss and vote on important decisions affecting the Company. The Company has
utilized an Executive Committee in lieu of appointing a Chief Executive Officer for more than twenty years. See "Executive Officers"
for further discussion about the role and membership of the Executive Committee.
The Chairman of the Board and Senior Chairman of the Board each serve on the Executive Committee. Thus, the roles of
Chairman of the Board and Chief Executive Officer are intertwined to some extent. However, the Senior Chairman of the Board and
Chairman of the Board represent only two of the five members of the Executive Committee and no other directors serve on the
Executive Committee. Accordingly, three members of the Executive Committee, comprising a majority of the voting power on the
Executive Committee, are not directors of the Company. The Board believes that this structure properly maintains the independence
of the Board as a whole, and of the Chairman of the Board, from the management team.
The Board’s Role in Risk Oversight.
The responsibility for the day-to-day management of risk lies with the Executive Committee. Risk management is not
viewed by the Executive Committee as a separate function, but rather is viewed as part of the day-to-day process of running the
Company. It is the Board’s responsibility to oversee the Executive Committee with respect to its risk management function and to
ensure that the Company’s risk management system is well-functioning and consistent with the Company’s overall corporate strategy
and financial goals. In fulfilling that oversight role, the Board focuses on the adequacy of the Company's overall risk management
system. The Board believes that an effective risk management system will adequately identify the material risks to the Company’s
business, monitor the effectiveness of the risk mitigating policies and procedures, and provide the Executive Committee with input
with respect to the risk management process.
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Code of Ethics
The Company adopted a code of ethics that is applicable to, among other individuals, its principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions, and posted the code of ethics on
its website at http://www.bridgford.com (and designated therein as the Code of Conduct). Any amendment or waiver to the
Company’s code of ethics that applies to its directors or executive officers will be posted on its website or in a report filed with the
SEC on Form 8-K.
Communications with the Board
Shareholders may communicate with the Board or any of the directors by sending written communications addressed to the
Board of Directors generally, or to any director(s), to Bridgford Foods Corporation, 1308 North Patt Street, Anaheim, California
92801, Attention: Corporate Secretary. All communications are compiled by the Corporate Secretary and forwarded to the Board or
the individual director(s) accordingly.
Director Attendance at Annual Meetings
The Company does not currently have a specific policy regarding director attendance at annual shareholder
meetings. However, directors are strongly encouraged to attend annual shareholder meetings. All eight directors attended the 2010
annual meeting of the Company’s shareholders.
Executive Officers
Members of the Company’s Executive Committee, comprised of the five executive officers named below, act in the capacity
of Chief Executive Officer of the Company. The following five executive officers are elected annually to serve on the Executive
Committee at the pleasure of the Board of Directors:
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Senior Chairman of the Board and Member of the Executive Committee (1)
Vice President and Chairman of the Executive Committee (1)
Chairman of the Board and Member of the Executive Committee (1)
President and Member of the Executive Committee
Chief Financial Officer, Vice President, Treasurer and Member of the Executive Committee
(1) William L. Bridgford is the son of Hugh Wm. Bridgford, the nephew of Allan L. Bridgford and the cousin of Bruce H.
Bridgford. Hugh Wm. Bridgford and Allan L. Bridgford are brothers.
A biographical summary regarding Messrs. Allan L. Bridgford and William L. Bridgford is set forth above under the caption
“Directors.” Biographical information with respect to the Company’s other executive officers is set forth below:
Hugh Wm. Bridgford, age 79, has served as Vice President of the Company and Chairman of the Executive Committee since
March of 1995. He previously served as Chairman of the Board of Directors of the Company for more than five years and has been a
full time employee of the Company since 1955 and has served as a member of the Executive Committee since 1972. He is a graduate
of Stanford University with a degree in Economics and completed the Executive Program at the University of California at Los
Angeles Graduate School of Business.
John V. Simmons, age 55, has served as President of the Company and member of the Executive Committee since 2006. He
previously served as Vice President of the Company for more than the five years. Mr. Simmons earned a B.A. degree in Psychology
from the University of Wisconsin.
Raymond F. Lancy, age 57, has served as Treasurer of the Company for more than the past five years. He has also served as
a member of the Executive Committee since 2001, Vice President since 2001 and Chief Financial Officer since 2003. Mr. Lancy is a
Certified Public Accountant (inactive) and worked ten years as an auditor at PricewaterhouseCoopers. He earned a Bachelor of
Science degree with a major in Administration with high honors from the California State University at San Bernardino.
There are no agreements or understandings pursuant to which any of the executive officers was selected to serve as an
executive officer.
7
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information known to the Company with respect to the beneficial ownership of the
Company’s common stock as of February 4, 2011 by each shareholder known by the Company to be the beneficial owner of more
than 5% of the Company’s common stock, by each director and nominee for director, by each executive officer named in the
Summary Compensation Table and by all executive officers and directors as a group. The information as to each person or entity has
been furnished by such person or group.
Name and Address
of Beneficial Owner(1)
Bridgford Industries Incorporated
1707 Good-Latimer Expressway
Dallas, TX 75226
Hugh Wm. Bridgford
Allan L. Bridgford
Bruce H. Bridgford
Baron R.H. Bridgford
170 North Green St.
Chicago, IL 60607
Robert E. Schulze
William L. Bridgford
John V. Simmons
1707 Good-Latimer Expressway
Dallas, TX 75226
Todd C. Andrews
Richard A. Foster
D. Gregory Scott
Paul R. Zippwald
All directors and executive officers
as a group (12 persons)
Amount and Nature of Shares Beneficially Owned
Sole Voting and
Investment Power
Shared Voting and
Investment Power(2)
Total
Beneficially
Owned(3)
Percentage of
Outstanding Shares
Beneficially
Owned(3)
7,156,396
47,917
155,882
7,986
1,654
167,870
6,175
363
200
2,234
8,550
1,452
—
7,156,396
7,156,396
7,156,396
7,156,396
—
7,156,396
—
—
—
7,156,396
7,204,313
7,312,278
7,164,382
7,158,050
167,870
7,162,571
363
200
2,234
8,550
1,452
7,556,679
7,156,396
7,556,679
76.8
77.3
78.4
76.9
76.8
1.8
76.8
*
*
*
0.1
*
81.1
* Represents ownership of less than one percent (1%) of the outstanding shares.
(1) Unless otherwise indicated, the address of such beneficial owner is the Company’s principal executive offices, which are located
at 1308 North Patt Street, Anaheim, California 92801.
(2) Represents shares beneficially owned by Bridgford Industries Incorporated, a Delaware corporation (“BII”) as reported on
Schedule 13D filed with the SEC on April 5, 2010. Other than ownership of these shares, BII does not presently have any
significant business or assets. Allan L. Bridgford, Hugh Wm. Bridgford, William L. Bridgford, Bruce H. Bridgford and Baron
R.H. Bridgford presently own 16.49%, 10.82%, 7.68%, 10.56% and 9.83%, respectively, of the outstanding voting capital stock of
BII. The remaining percentage of BII stock is owned of record, or beneficially, by 32 additional members of the Bridgford
family. The officers of BII jointly vote all of the Company’s shares held by BII.
(3) Applicable percentage of ownership as of February 4, 2011 is based upon 9,322,150 shares of common stock
outstanding. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment
power with respect to shares shown as beneficially owned. Except as otherwise indicated, and subject to community property
laws where applicable, to the knowledge of the Company the persons listed above have sole voting and investment power with
respect to all shares shown as beneficially owned by them.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers, and
holders of more than 10% of the Company’s common stock, to file with the SEC initial reports of ownership and reports of changes in
ownership of common stock of the Company. Officers, directors and 10% shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on the review of copies of such
reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended
October 29, 2010, all of the Company’s officers, directors and 10% shareholders complied with all applicable Section 16(a) filing
requirements.
8
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion and Analysis
Compensation Overview
This Compensation Discussion and Analysis provides information regarding the compensation paid to the Company’s
“named executive officers” or “NEOs,” all of whom are members of the Executive Committee. The Company has historically been
and continues to be principally managed by the Executive Committee. The Executive Committee, as a unit, serves as the Company’s
“Chief Executive Officer.” The Executive Committee currently consists of the following five members:
• Hugh Wm. Bridgford, Vice President and Chairman of the Executive Committee
• Allan L. Bridgford, Senior Chairman of the Board
• William L. Bridgford, Chairman of the Board and Principal Executive Officer
•
• Raymond F. Lancy, Chief Financial Officer, Vice President, Treasurer and Principal Financial Officer
John V. Simmons, President
The Company’s executive compensation program is overseen by the Compensation Committee (the “Committee”), which is
comprised of certain non-employee members of the Board. The basic responsibility of the Committee is to review the performance of
the officers and key employees toward achieving the Company’s strategic goals and to help ensure that the Company is able to attract
and retain individuals who can lead the Company to achieve those goals. Each member of the Committee is an independent director
as defined in Rule 5605(a)(2) of the NASDAQ Listing Rules.
One of the Company’s primary strategic goals is to increase shareholder value while meeting its objectives for customer
satisfaction, improved sales and financial performance, sound corporate governance, and competitive advantage. The Company’s
current emphases on controlling costs and improving profit margins on a consistent basis are also important factors which affect the
Company’s compensation decisions. The Committee’s goal is to work with management to balance the Company’s financial goals
and circumstances with the need to attract, motivate and retain the fully qualified and capable individuals the Company needs to meet
and surpass its customers’ and shareholders’ expectations in a highly-competitive industry.
Compensation Philosophy and Objectives
The core of the Company’s executive compensation philosophy is to pay for performance. To that end, incentive bonus
targets are set each year to reward excellent executive performance based upon the achievement of profit objectives by business unit
and the Company’s overall profitability based on pretax income, thus stimulating all executives to assume broad responsibility for the
Company’s overall financial welfare and financial performance.
The Committee’s guiding principles are as follows:
• Work with management to provide a compensation program that recognizes individual contributions as well as the
Company’s overall business results;
• Provide reasonable levels of total compensation which will enable the Company to attract and retain qualified and
capable executive talent within its industry while also considering the Company’s current goals of controlling costs and
effecting consistent improvements in its overall financial condition;
• Motivate executive officers to deliver optimum individual and departmental performance;
• Develop and reward a leadership team that is capable of successfully operating and growing an increasingly competitive
and complex business in a rapidly changing industry;
• Ensure that executive compensation-related disclosures are made to the public on a timely basis.
Role of the Compensation Committee
The Compensation Committee sets and approves the NEO’s total compensation. The compensation of all NEO’s is
recommended by the Executive Committee and, after review and analysis, approved by the Compensation Committee. The
Compensation Committee met one time during fiscal year 2010. The responsibilities of the Compensation Committee are as follows:
• Review and approve, on an annual basis, the total compensation and compensation structure for the Executive
Committee, including base salary, benefits, bonuses and equity compensation (if any). The Board’s evaluation of the
Executive Committee’s performance is considered in setting incentives. The Committee seeks to maintain an appropriate
balance, in light of overall Company performance and profitability, between the compensation of the Executive
Committee and the compensation of other officers and employees generally. The Committee may also make any interim
adjustments in any such compensation or plan as the Committee may deem appropriate, or as may be requested by the
Board or the Compensation Committee.
• Provide consultation and oversight of senior management’s decisions concerning the compensation of management,
including evaluation procedures for Company officers and other executives deemed eligible for bonuses or equity
compensation.
• Review and approve compensation packages for new executives and, as needed, termination packages for departing
officers or other executives.
• Review and, as deemed necessary or desirable, oversee the administration of the Company’s stock incentive and stock
purchase plans, if any.
9
• Assist the Board of Directors and management in developing and evaluating potential candidates for executive positions.
• Advise the Board of Directors in its succession-planning initiatives for the Company’s executive officers and other senior
officers.
• Oversee preparation of a report on executive compensation as required for inclusion in the Company’s annual proxy
statement.
Role of Management in the Compensation Determination Process
The Company’s senior management team, primarily the Senior Chairman and the Chairman of the Executive Committee,
support the Committee in the executive compensation decision-making process. At the request of the Compensation Committee, the
Senior Chairman presents his performance assessment and recommendations to the Committee regarding base salaries, bonus
payments, incentive plan structure and other compensation-related matters for the Company’s executives (other than with respect to
his own compensation).
Role of Compensation Consultant
The Compensation Committee has decided not to utilize the services of a paid compensation consultant after concluding that
such a consultant would provide insufficient value compared to the cost.
Total Compensation for Executive Officers
The compensation packages offered to the Company’s executive officers are comprised of one or more of the following
elements:
• Base salary;
• Discretionary cash bonuses;
• Post retirement healthcare and pension benefits.
The Company does not have any formal policies which dictate the amount to be paid with respect to each element, nor does it
have any policies which dictate the relative proportion of the various elements. The Company also does not have any formal policies
for allocating between cash and non-cash compensation or short-term and long-term compensation. Instead, the Company relies on
the judgment of the Compensation Committee and input and feedback from the management team, including in particular the Senior
Chairman of the Board and the Chairman of the Executive Committee. The Committee has no plans to adopt any such formulas,
ratios or other such targets that might artificially dilute the Company’s effectiveness in achieving its overall profit objectives. In fact,
all of the Company’s compensation policy decisions are made in the context of its current financial position and are subordinated to
the Company’s current goal of achieving overall profitability on an annual basis. Each of the compensation components is described
in more detail below.
Base Salary
The Company provides executive officers and other employees with base salary to compensate them for services rendered
during the fiscal year. The purpose of base salary is to reward effective fulfillment of the assigned job responsibilities, and to reflect
the position’s relative value to the Company and competitiveness of the executive job market. Base salaries for executive officers are
determined based on the nature and responsibility of the position, salary norms for comparable positions, the expertise and
effectiveness of the individual executive, and the competitiveness of the market for the executive officer’s services.
The Company has successfully held most base salaries at the low end of the competitive range in order to reduce its overall
cost structure and to achieve systematic improvement in the financial performance of the business without incurring a large turnover
in executive talent and leadership.
Any “merit increases” for the Company’s executive officers are subject to the same budgetary constraints that apply to all
other employees. Executive officer salaries are evaluated as part of the Company’s annual review process and may be adjusted where
justified in the context of the Company’s current focus on profitability and controlling expenses.
For fiscal year 2010, the Compensation Committee set a base salary of $4,345 per week for each Executive Committee
member, reduced on a pro-rata basis for any member working less than a full time schedule. This change represented an approximate
3% increase in the base salary compared to fiscal year 2009, which was derived from management’s assessment of the increase in the
cost of living. The same percentage increase was applied to all non-executive, non-union team members when evaluating salary
changes.
Discretionary Cash Bonuses
The Company’s policy is to make a significant portion of each executive’s total compensation contingent upon the
Company’s financial performance. The Compensation Committee believes that the payment of cash bonuses allows the Company to
offer a competitive total compensation package despite relatively lower base salaries, while aligning a portion of the executive
compensation with the achievement of positive Company financial results. However, while the payment of these cash bonuses to the
executives is generally correlated with the achievement of positive Company financial results, there are no specific performance
targets communicated to the executives, and the bonuses are ultimately paid at the discretion of the Compensation Committee after
receiving input from the Chairman of the Board. For fiscal year 2010, bonuses were accrued to members of the Executive Committee
10
in the amounts set forth in the column titled “Bonus” in the caption “Summary Compensation Table” below. The bonus amounts
reflected for fiscal year 2010 were calculated based on 3% of the Company’s pre-tax income (before bonus), and were pro-rated for
part-time employment.
Long-Term Equity-Based Incentive Compensation
The Compensation Committee has concluded that long-term stock-related compensation has very limited if any value as an
employee incentive or retention tool. Historically, the Company’s equity-based incentive awards have proved to have little or no
value to the recipient.
Beginning in 2005, U.S. accounting rules required the Company to expense any stock option awards according to a formula
which could impose a costly charge on the Company’s income statements, thereby burdening or erasing its profit margins. Because of
these factors, the Company has not granted stock options and awards to avoid the adverse effects of such expenses.
Instead, the Compensation Committee aims to align the interests of the executive officers with those of the Company's
shareholders by creating a link between the payment of executive compensation and the achievement of Company financial goals as
described above.
Stock Options. In fiscal year 2010, the Company did not award any stock options to the named executive officers or any of
its other employees or directors. Historically, the number of stock options granted to an executive officer is based upon the executive
officer’s position and level of responsibility. The Company does not issue discounted stock options or permit the re-pricing or reissue
of previously issued options.
Restricted Stock. In fiscal year 2010, the Company did not award any shares of restricted common stock to the named
executive officers or to any of its other employees or directors. As with stock options, the number of shares of restricted stock that
may be awarded to a named executive officer in the future, if any, will be based upon the executive’s position and level of
responsibility.
The Company’s 1999 Stock Incentive Plan expired by its own terms on April 29, 2009 and no additional stock options or
restricted stock may be granted thereunder.
Non-Qualified Deferred Compensation
Effective January 1, 1991 the Company adopted a deferred compensation savings plan for certain key employees. Under this
arrangement, selected employees contributed a portion of their annual compensation to the plan. The Company contributed an amount
to each participant’s account by computing an investment return equal to Moody’s Average Seasoned Bond Rate plus 2%. The
purpose of the plan was to provide tax planning and supplemental funds upon retirement or death for certain selected employees and
to aid in retaining and attracting employees of exceptional ability. Separate accounts are maintained for each participant to properly
reflect his or her total vested account balance.
Pension and Retirement Benefits
Retirement Plan for Employees of Bridgford Foods Corporation for Administrative and Sales Employees. The Company has
a defined benefit plan (the “Primary Benefit Plan”) for certain of its employees not covered by collective bargaining agreements. The
Primary Benefit Plan, administered by a major life insurance company, presently provides that participants receive an annual benefit
on retirement equal to 1.5% of their total compensation from the Company during their period of participation from 1958. Benefits
are not reduced by Social Security payments or by payments from other sources and are payable in the form of fully-insured monthly
lifetime annuity contracts commencing at age 65 or the participant’s date of retirement, whichever is later. Effective May 12, 2006,
future benefit accruals under the Primary Benefit Plan were frozen.
Supplemental Executive Retirement Plan. Retirement benefits otherwise available to certain key executives under the
Primary Benefit Plan have been limited by the effects of the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) and the
Tax Reform Act of 1986 (“TRA”). To offset the loss of retirement benefits associated with TEFRA and TRA, the Company has
adopted a non-qualified “makeup” benefit plan (the “Supplemental Executive Retirement Plan”). Benefits will be provided under the
Supplemental Executive Retirement Plan in an amount equal to 60% of their final average earnings minus any pension benefits and
primary insurance amounts available to them under Social Security. However, in all cases the benefits are capped at $120,000 per
year for Allan L. Bridgford and Hugh Wm. Bridgford. Benefits provided under this plan for William L. Bridgford and Raymond F.
Lancy are calculated at 50% of final average earnings, capped at $200,000 per year, without offsets for other pension or Social
Security benefits.
Bridgford Foods Retirement Savings 401(k) Plan. The Company implemented a 401(k) plan effective May 13, 2006. The
Company makes a matching contribution to each employee’s account based on pretax contributions in an amount equal to 100% of the
first 3% of compensation and 50% of the next 2% of compensation contributed to the Plan. No amounts are contributed by the
Company unless the employee elects to make a pretax contribution to the plan.
Perquisites and Other Benefits
The Company provides its executive officers with various health and welfare programs and other employee benefits which
are generally available on the same cost-sharing basis to all of its employees. However, in keeping with the Company’s policy of
11
controlling costs in connection with its profitability objectives, it does not provide any significant perquisites or other special benefits
to its executive officers including, but not limited to, payment of club memberships, fees associated with financial planning, executive
dining rooms or special transportation rights. The Company does not own an airplane and does not provide aircraft for executives for
business or personal purposes.
The Company provides post-retirement healthcare for certain executives and their spouses (who are within fifteen years of
age of the employee) who have reached normal retirement age. This coverage is secondary to Medicare. Coverage for spouses
continues upon the death of the employee. The maximum benefit under the plan is $100,000 per year per retiree. The plan is subject
to annual renewal by the Board of Directors and may be discontinued at the Board’s discretion. The plan was renewed for one year at
the Board of Directors meeting held in December 2010. The combined cost of this plan during fiscal year 2010 was $155,000 for all
active and retired participants.
The Company pays life and disability insurance premiums on policies under which the Company’s President is the named
owner and beneficiary.
Employment Agreements
The Company currently does not have any employment, severance, change of control or similar agreements with any of its
NEOs. Refer to the compensation discussion below for information on pension, deferred compensation, and benefit-related payments
payable in the event of a qualifying event such as employment termination, disability, death, or sale/merger/acquisition.
Tax and Accounting Implications
The Compensation Committee is responsible for considering the deductibility of executive compensation under
Section 162(m) of the Internal Revenue Code, which provides that it may not deduct non-performance-based compensation of more
than $1,000,000 that is paid to its executive officers. The Company believes that the compensation paid under the current
management incentive programs is fully deductible for federal income tax purposes. In certain situations, the Committee may approve
compensation that will not meet the requirements for deductibility in order to ensure competitive levels of compensation for its
executives and to meet its obligations under the terms of various incentive programs. However, the issue of deductibility has not
come before the Committee in recent years and is not expected to be a concern for the foreseeable future.
Summary Compensation Table
The table below provides summary information concerning cash and certain other compensation paid to or accrued for the
Company’s NEOs during fiscal years 2008, 2009 and 2010, respectively. Each of the NEOs named below are also members of the
Executive Committee, which acts in the capacity of Chief Executive Officer of the Company. See “Compensation Discussion and
Analysis” for further discussion of compensation arrangements pursuant to which the amounts listed in the table below were paid or
awarded and the criteria for such payment or award.
Name and Principal
Position
Allan L. Bridgford
Senior Chairman of the
Board
Hugh Wm. Bridgford
Vice President and
Chairman of the
Executive Committee
William L. Bridgford
Chairman of the Board
(Principal Executive
Officer)
John V. Simmons
President
Raymond F. Lancy
Chief Financial Officer,
Vice President and
Treasurer
(Principal Financial
Officer)
Base
Salary
135,557
131,609
126,547
225,929
219,348
210,912
Bonus
(1)
115,338
147,042
—
192,230
245,070
—
Year
2010
2009
2008
2010
2009
2008
2010
2009
2008
225,929
219,348
210,912
192,230
245,070
—
2010
2009
2008
2010
2009
2008
225,929
219,348
210,912
225,929
219,348
210,912
192,230
245,070
—
192,230
245,070
—
Stock
Awards
(2)
Option
Awards
(3)
Non-Equity
Incentive Plan
Compensation
(4)
Change in
Pension
Value and Non-
Qualified
Deferred
Compensation
Earnings
(5)
All Other
Compensation
(6)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0
0
137,271
0
0
142,529
98,762
162,676
12,357
12,404
96,549
12,357
98,959
131,463
0
0
0
1,713
10,130
9,799
11,275
12,305
8,774
8,545
34,601
33,150
7,454
10,219
8,559
8,436
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12
Total
250,895
278,651
265,531
428,289
474,217
364,716
529,226
635,868
231,814
465,164
594,117
230,723
527,337
604,440
219,348
(1) These amounts reflect the discretionary cash bonuses earned by each of the NEOs in fiscal year 2010. These bonuses are being
paid in three equal annual installments beginning in January 2011.
(2) The Company did not grant any stock awards to any of the NEOs during fiscal years 2008, 2009 or 2010.
(3) The Company did not grant any option awards to any of the NEOs during fiscal years 2008, 2009 or 2010.
(4) The Company did not utilize any non-equity incentive plans in order to pay compensation to its NEOs in fiscal year 2010. While
it is the Company’s policy to pay cash bonuses to the NEO’s that are correlated with the Company’s financial performance, the
payment of the bonuses is ultimately subject to the discretion of the Compensation Committee. See “Compensation Discussion
and Analysis – Total Compensation for Executive Officers – Discretionary Cash Bonuses.”
(5) Includes the change in present value of each of the non-qualified deferred compensation plan and pension and retirement benefits
described in the Compensation Discussion and Analysis above. In accordance with SEC rules, to the extent the change in present
value for a particular fiscal year would have been a negative amount, the amount has instead been reported as $0 and the
aggregate compensation for the named executive officer in the “Total” column has not been adjusted to reflect the negative
amount. The aggregate negative change in the present value of the non-qualified deferred compensation plan and pension and
retirement benefits for certain NEOs in certain fiscal years was as follows: (i) fiscal year 2010 (Allan L. Bridgford, ($107,334))
and (Hugh Wm. Bridgford, ($118,466)), (ii) fiscal year 2009 (Allan L. Bridgford, ($20,322)) and (Hugh Wm. Bridgford,
($18,663)), and (iii) fiscal year 2008 (Raymond F. Lancy, ($36)).
(6) Includes matching contributions to the Bridgford Foods Retirement Savings 401(k) plan made by the Company on behalf of each
of the NEOs. In addition, the amount for Mr. Simmons includes premiums in the amount of $24,376 for life and disability
insurance policies issued for the benefit of Mr. Simmons and his designees. The amounts disclosed in this column for fiscal year
2009 have been adjusted from the disclosure in the prior year’s proxy statement to remove the previously included amount that
reflected the change in market value of healthcare benefits plans accrued to the NEOs in fiscal year 2009 because the Company
did not incur any incremental cost with respect to those plans in fiscal year 2009.
Narrative to Summary Compensation Table
See “Compensation Discussion and Analysis” for further discussion of compensation arrangements pursuant to which the
amounts listed under the Summary Compensation Table were paid or awarded and the criteria for such payment or award.
Grants of Plan-Based Awards
There were no stock options, restricted stock, restricted stock units or equity or non-equity-based performance awards
granted to the Company’s NEOs during fiscal years 2010, 2009 or 2008.
Outstanding Equity Awards at Fiscal Year-End
There were no outstanding option or stock awards held by any NEO as of October 29, 2010.
Option Exercises and Stock Vested
There were no shares acquired upon the exercise of stock options or vesting of stock awards during fiscal years 2008, 2009 or
2010 by any NEO.
Pension Benefits
The tables below provide information concerning retirement plan benefits for each NEO and payments due upon certain
termination scenarios.
Retirement Plan for Employees of Bridgford Foods Corporation for Administrative and Sales Employees
Normal Retirement: Benefits commence upon reaching the” Normal Retirement Date”, which is the first day of the month on
or after attainment of age 65. Pension benefit payments begin at normal retirement date and continue until death.
Early Retirement: A participant may choose to retire up to ten years before the normal retirement date. If a participant retires
early, the accrued pension will be reduced by a percentage to reflect the longer period over which pension benefits will be received. If
a participant is married for at least one year and dies before retirement, a pension benefit will be payable to the surviving spouse for
his or her life; provided certain eligibility requirements have been met.
Death Benefits: Payments to a surviving spouse will begin on the first day of the month following a participant’s death but
not sooner than the earliest date a participant could have elected to retire.
Disability Benefits: A disability benefit is the accrued pension credited to a participant as of the date of disability. A
disability is defined as a physical or mental condition which has existed continually for not less than six months and which renders a
13
participant incapable of any employment and which does not result from military service, any felonious activity, use of narcotics,
habitual drunkenness, or is intentionally inflicted.
The years of credited service, present value of accumulated plan benefits and payments made during the fiscal year were as
follows:
For the Fiscal Year ended October 29, 2010:
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Number of
Years
Credited
Service
52
54
37
31
18
Present
Value
of
Accumulated
Benefit (1)
$
$
$
$
$
799,767 $
671,917 $
374,466 $
297,051 $
276,074 $
Payments
During
Fiscal Year
71,419
51,403
—
—
—
(1) The assumed discount rate used was 5.45% to compute the present value of the accumulated benefit. The RP-2000 Combined
Mortality Table was used and an expected return on assets of 8.0% was assumed.
For the Fiscal Year ended October 30, 2009:
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Number of
Years
Credited
Service
51
53
36
30
17
Present
Value
of
Accumulated
Benefit (1)
$
$
$
$
$
835,956 $
713,754 $
358,735 $
284,647 $
260,146 $
Payments
During
Fiscal Year
71,989
51,808
—
—
—
(1) The assumed discount rate used was 5.75% to compute the present value of the accumulated benefit. The RP-2000 Combined
Mortality Table was used and an expected return on assets of 8.00% was assumed.
For the Fiscal Year ended October 30, 2008:
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Number of
Years
Credited
Service
50
52
35
29
16
Present
Value
of
Accumulated
Benefit (1)
$
$
$
$
$
777,405 $
647,922 $
241,188 $
188,098 $
173,912 $
Payments
During
Fiscal Year
69,342
49,909
—
—
—
(1) The assumed discount rate used was 8.00% to compute the present value of the accumulated benefit. The 1983 Group Annuity
Mortality Table was used and an expected return on assets of 8.00% was assumed.
Supplemental Executive Retirement Plan (SERP)
Payment of Retirement Benefit: All retirement, disability and death benefits shall be paid in monthly installments beginning
on the Commencement Date following the participant’s retirement, disability or death and shall continue for a period of fifteen years.
Normal Retirement: Benefits commence upon reaching the” Normal Retirement Date”, which means the date on which the
participant has both attained age 65 and completed at least ten years of participation. SERP benefit payments begin at normal
retirement date and continue until death.
Early Retirement: A participant may choose to retire up to ten years before the normal retirement date if the participant has
completed at least five years of participation. If a participant retires early, the SERP benefit will be determined based on the vested
percentage attained as the time of retirement.
14
Death Benefits: If a participant dies prior to having commenced receipt of benefits and is eligible for benefits hereunder, the
participant’s beneficiary shall be entitled to receive an annual death benefit equal to the Normal Retirement Benefit determined as if
the participant attained Normal Retirement Age on the date of his death, or, if after the Participant’s Normal Retirement Date, equal to
the Late Retirement Benefit. If a participant dies after having commenced receipt of benefits, benefits shall continue to be paid but to
the Participant’s Beneficiary at the same time and in the same form as the benefits would have been payable to the participant. No
benefit will be payable to a participant’s beneficiary if the participant terminates employment with the Company before he is eligible
for a retirement benefit and thereafter dies.
Disability Benefits: A disability benefit is the vested percentage of SERP benefit credited to a participant as of the date of
disability. A disability is defined as a physical or mental condition which has existed continually for not less than twelve months and
which renders a participant incapable of any employment and which does not result from military service, any felonious activity, use
of narcotics, habitual drunkenness, or is intentionally inflicted.
The present value of accumulated plan benefits and payments made during the fiscal year were as follows:
For the Fiscal Year ended October 29, 2010:
Present
Value
of
Accumulated
Benefit (1)
Payments
During
Last Fiscal
Year
$
$
$
$
$
247,763 $
293,688 $
1,080,124 $
— $
1,080,124 $
51,528
61,080
—
—
—
Present
Value
of
Accumulated
Benefit (1)
Payments
During
Last Fiscal
Year
$
$
$
$
$
277,293 $
328,692 $
997,093 $
— $
997,093 $
51,528
61,080
—
—
—
Present
Value
of
Accumulated
Benefit (1)
Payments
During
Last Fiscal
Year
$
$
$
$
$
306,820 $
363,840 $
951,864 $
— $
951,864 $
51,528
61,080
—
—
—
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
(1) A 6.25% discount rate was used to compute the present values.
For the Fiscal Year ended October 30, 2009:
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
(1) A 7.00% discount rate was used to compute the present values.
For the Fiscal Year ended October 30, 2008:
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
(1) A 7.00% discount rate was used to compute the present values.
15
The following table estimates the present value of SERP benefits under different employment termination scenarios as of
October 29, 2010:
Present
Value
of Benefits
Upon
Voluntary
Termination
of
Employment
(1)
247,763 $
293,688 $
460,895 $
— $
460,865 $
$
$
$
$
$
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford (2)
John V. Simmons
Raymond F. Lancy (2)
Present
Value
of
Involuntary
Termination
of
Employment
Due to
Sale/Merger/
Acquisition
(1)
247,763
293,688
1,080,124
—
1,080,124
Present
Value
of Benefits
if Disabled
(1)
247,763 $
293,688 $
1,080,124 $
— $
1,080,124 $
Present
Value
of Benefit
Upon Death
(1)
247,763 $
293,688 $
1,080,124 $
— $
1,080,124 $
(1) In each scenario above, the benefit amount shown is calculated at October 29, 2010. A 6.25% discount rate was used to compute
the present values. In the case of a voluntary termination, the participant shall be entitled to the vested portion of any such early
retirement benefit but shall not commence receipt of such early retirement benefit until the commencement date following the date
the participant would have attained the early retirement date had the participant remained employed by the Company. Upon a
finding that the participant (or, after the participant’s death, a beneficiary) has suffered an unforeseeable emergency, the
Committee may at the request of the participant or beneficiary, and subject to compliance with Internal Revenue Code
Section 409A, accelerate distribution of benefits under the SERP in the amount reasonably necessary to alleviate such
unforeseeable emergency.
(2) Death benefits for William L. Bridgford and Raymond F. Lancy are payable as a lump sum payment. All other benefits are paid
in the form of a monthly annuity. The actual payment amount for William L. Bridgford and Raymond F. Lancy would be
determined using a discount rate similar to the rate required for qualified plans. The rate assumed for these estimates is 6.25%.
The following table estimates future SERP payments under different termination scenarios as of October 29, 2010:
Name
Allan L. Bridgford
Hugh Wm. Bridgford
Payment Upon
Voluntary
Termination
of Employment
Payment if
Disabled (1)
Death Benefit
from Plan (2)
Continues to receive
$4,294 for another
68 months
Continues to receive
$5,090 for another
68 months
Continues to receive
$4,294 for another
68 months
Continues to receive
$5,090 for another
68 months
Continues to receive
$4,294 for another
68 months
Continues to receive
$5,090 for another
68 months
William L. Bridgford
$3,889 per month for
$9,114 per month for
$9,114 per month for
John V. Simmons
Raymond F. Lancy
180
months beginning on
10/29/2010
—
180
months commencing
after disability
—
180
months beginning
just after death
—
$3,889 per month for
$9,114 per month for
$9,114 per month for
180
months beginning on
10/29/2010
180
months commencing
after disability
180
months beginning
just after death
Involuntary
Termination of
Employment Due
to Sale/Merger/
Acquisition
Continues to receive
$4,294 for another
68 months
Continues to receive
$5,090 for another
68 months
Lump Sum payment due at
termination of $1,080,124
—
Lump Sum payment due at
termination of $1,080,124
(1) Disability amount is decreased by any Company paid disability insurance policies, Social Security disability benefits, or other
Federal or State disability programs. In the case of a voluntary termination, the participant shall be entitled to the vested portion
of any such early retirement benefit but shall not commence receipt of such early retirement benefit until the commencement date
following the date the participant would have attained the early retirement date had the participant remained employed by the
Company. Upon a finding that the participant (or, after the participant’s death, a beneficiary) has suffered an unforeseeable
emergency, the Committee may at the request of the participant or beneficiary, and subject to compliance with Internal Revenue
16
Code Section 409A, accelerate distribution of benefits under the SERP in the amount reasonably necessary to alleviate such
unforeseeable emergency.
(2) Assumes death on October 29, 2010. The discount rate used to calculate the lump sum amount is 6.25%.
See “Compensation Discussion and Analysis – Total Compensation for Executive Officers -- Pension and Retirement
Benefits” for further discussion of the pension benefits contained in the tables above.
Non-Qualified Deferred Compensation
The table below provides information concerning deferred compensation plan benefits for each NEO during the fiscal year
ended October 29, 2010.
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Executive
Contributions
in
Fiscal Year
Company
Contributions
in
Fiscal Year
Aggregate
Earnings in
Fiscal Year
Aggregate
Withdrawals/
Distributions
$
$
$
$
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
76,161 $
76,161 $
— $
— $
— $
Aggregate
Balance at
Fiscal Year
End
351,071
351,071
—
—
—
The table below provides information concerning deferred compensation plan benefits for each NEO during the fiscal year
ended October 30, 2009.
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Executive
Contributions
in
Fiscal Year
Company
Contributions
in
Fiscal Year
Aggregate
Earnings in
Fiscal Year
Aggregate
Withdrawals/
Distributions
$
$
$
$
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
77,081 $
77,081 $
— $
— $
— $
Aggregate
Balance at
Fiscal Year
End
398,696
398,696
—
—
—
The table below provides information concerning deferred compensation plan benefits for each NEO during the fiscal year
ended October 31, 2008.
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Executive
Contributions
in
Fiscal Year
Company
Contributions
in
Fiscal Year
Aggregate
Earnings in
Fiscal Year
Aggregate
Withdrawals/
Distributions
Aggregate
Balance at
Fiscal Year
End
448,043
448,043
—
—
—
76,632 $
76,632 $
— $
— $
— $
$
$
$
$
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
17
The following table estimates the present value of benefits under different employment termination scenarios as of October
29, 2010:
Present
Value
of Benefit at
Termination
of
Employment
Present
Value
of Benefit in
the Event of
Disability,
$
$
$
$
$
357,071 $
357,071 $
— $
— $
— $
357,071 $
357,071 $
— $
— $
— $
Present
Value
of Benefit
Upon Death
357,071 $
357,071 $
— $
— $
— $
Present
Value
of Benefit
Upon
Involuntary
Termination
of
Employment
Due to
Sale/Merger/
Acquisition
357,071
357,071
—
—
—
Name
Allan L. Bridgford
Hugh Wm. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Allan L. Bridgford and Hugh Wm. Bridgford each currently receive a monthly deferred compensation payment of
$6,330. As of October 29, 2010, sixty eight (68) such monthly payments are remaining for each recipient.
The deferred compensation amounts are calculated using a crediting rate equal to Moody’s Average Seasoned Bond Rate,
plus 2%. This rate is subject to fluctuation. Upon death, the deferred compensation benefits are paid in a lump sum equal to the
individual’s remaining account balance.
See “Compensation Discussion and Analysis – Total Compensation for Executive Officers – Non-Qualified Deferred
Compensation” for further discussion of the non-qualified deferred compensation benefits contained in the tables above.
Director Compensation
The table below summarizes the total compensation paid by the Company to directors who were not NEOs during fiscal year
2010. Directors who were NEOs did not receive any additional compensation for their services as directors.
Name
Richard A. Foster
Robert E. Schulze
Paul R. Zippwald
Todd C. Andrews
D. Gregory Scott
Fees
Earned
or Paid
Cash
$
$
$
$
$
18,850 $
20,650 $
22,150 $
22,150 $
17,150 $
Stock
awards
Option
awards
Non-Equity
Incentive Plan
Compensation
Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
All Other
Compensation
Total
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
18,850
20,650
22,150
22,150
17,150
(1) The amount reflected above includes the change in present value of the defined benefit pension plan, assuming a discount rate of
5.75%, and the SERP and Non-Qualified Deferred Compensation Plan, assuming a discount rate of 7.00%. Mr. Schulze received
contributions to such plans as an employee of the Company prior to his retirement on June 30, 2004.
The Company uses cash compensation to attract and retain qualified candidates to serve on its Board of Directors. In setting
director compensation, the Company considers the demands that have been placed and will continue to be placed on the directors and
the skill-level required by its directors. In addition, as with the Company’s executive officers, compensation decisions for directors
are made in the context of the Company’s focus on controlling costs and increased profitability.
The directors are not paid an annual retainer for their service on the Board. Instead, each non-employee director was paid
$1,350 for each of the first three Board meetings attended during fiscal year 2010 and $1,500 for each subsequent Board meeting
attended in fiscal year 2010. Members of the Audit Committee were paid $300 or $500 for each Audit Committee meeting attended
depending on the length of the meeting. The members of the Compensation Committee were not paid any additional compensation
for their service.
18
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company's general legal counsel is the son of the Senior Chairman of the Board of Directors. For these services, he
currently is paid a fee of $1,600 for each Board of Directors meeting attended. Total fees paid under this arrangement were $16,050 in
fiscal year 2010 and $16,200 in fiscal year 2009. In addition, legal services are performed on behalf of the Company and billed by a
firm in which he is a partner. Total fees billed under this arrangement for each of fiscal years 2010 and 2009 were approximately
$70,000. Other than the relationship noted above, the Company is not aware of any related party transactions that would require
disclosure as a related party transaction under SEC rules.
The Company’s executive officers, directors, nominees for directors and principal shareholders, including their immediate
family members and affiliates, are prohibited from entering into a related party transaction with the Company that would be reportable
under Item 404 of Regulation S-K without the prior approval of its Audit Committee (or other independent committee of the Board of
Directors in cases where it is inappropriate for the Audit Committee to review such transaction due to a conflict of interest). Any
request for the Company to enter into a transaction with an executive officer, director, or nominee for director, principal shareholder
or any of such persons’ immediate family members or affiliates that would be reportable under Item 404 of Regulation S-K must first
be presented to the Audit Committee for review, consideration and approval. In approving or rejecting the proposed agreement, the
Audit Committee will consider the relevant facts and circumstances available and deemed relevant, including but not limited to, the
risks, costs, and benefits to the Company, the terms of the transactions, the availability of other sources for comparable services or
products, and, if applicable, the impact on director independence. The Audit Committee shall only approve those agreements that, in
light of known circumstances, are in or are not inconsistent with, the Company’s best interests, as determined in good faith by the
Audit Committee (or other independent committee, as applicable). The requirement for the Audit Committee to review related-party
transactions is set forth in the Amended and Restated Audit Committee Charter, which was approved on November 8, 2010 and is
attached as Exhibit A to this proxy statement.
19
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
PROPOSAL 2
The Audit Committee of the Board of Directors has, subject to ratification by the shareholders, appointed Squar, Milner,
Peterson, Miranda & Williamson, LLP as the Company’s independent registered public accounting firm for the fiscal year ending
October 28, 2011.
The affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on
the matter is required to ratify the appointment of Squar, Milner, Peterson, Miranda and Williamson, LLP. Abstentions will have the
same effect as votes against the Proposal. Brokers have discretion to vote uninstructed shares with respect to this
Proposal. Accordingly, broker non-votes will not occur with respect to this Proposal.
Proxies received in response to this solicitation will be voted “FOR” the approval of such firm unless otherwise specified in
the proxy In the event of a negative vote on such ratification, the Audit Committee of the Board of Directors will reconsider its
selection. Representatives of Squar, Milner, Peterson, Miranda & Williamson, LLP will be present at the meeting and available for
questions. They will have the opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE
APPOINTMENT OF SQUAR, MILNER, PETERSON, MIRANDA & WILLIAMSON, LLP AS THE COMPANY’S
INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR 2011.
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Haskell & White LLP completed the audit of the Company's financial statements for the year ended October 31, 2008 on
January 28, 2009. On January 22, 2009, we dismissed Haskell & White LLP as our independent public accounting firm. The decision
to dismiss Haskell & White LLP was made by the Audit Committee of the Board of Directors.
The reports of Haskell & White LLP on the consolidated financial statements of the Company for the years ended
October 31, 2008 and November 2, 2007, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope, or accounting principle. In addition, during the fiscal years ended October 31, 2008 and
November 2, 2007, and through the subsequent interim period ended January 28, 2009, there were no disagreements with Haskell &
White LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Haskell & White LLP, would have caused it to make reference thereto in its
reports on the financial statements for such years.
On January 22, 2009, the Audit Committee of the Board of Directors appointed Squar, Milner, Peterson, Miranda &
Williamson, LLP as the Company's new independent registered public accounting firm.
Audit Fees
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees billed by Squar, Milner, Peterson, Miranda & Williamson, LLP for the audit and review of the Company’s annual
financial statements and quarterly reports on Form 10-Q for fiscal year 2010 totaled $151,200. Fees billed by Squar, Milner, Peterson,
Miranda & Williamson, LLP for the audit and review of the Company’s annual financial statements and quarterly reports on Form 10-
Q for fiscal year 2009 totaled $148,000.
Audit-Related Fees
Audit-related fees typically consist of fees billed for assurance and related services that are reasonably related to the
performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.”
These services may include consultations related to the Sarbanes-Oxley Act and consultations concerning financial accounting and
reporting standards. Fees billed by Squar, Milner, Peterson, Miranda & Williamson, LLP during fiscal year 2010 for these types of
services totaled $5,500. There were no audit-related fees billed by Squar, Milner, Peterson, Miranda & Williamson, LLP for fiscal
year 2009.
Tax Fees
Tax fees are comprised of services that include assistance related to state tax compliance services and consultations regarding
federal and state research and development tax credits. There were no tax fees billed by Squar, Milner, Peterson, Miranda &
Williamson, LLP for fiscal years 2010 or fiscal year 2009.
All Other Fees
All other fees are comprised of fees for initial planning for certification of internal controls over financial reporting. No such
fees were billed by Squar, Milner, Peterson, Miranda & Williamson, LLP in fiscal year 2010 or fiscal year 2009. In addition, the
Company incurred fees to Haskell & White LLP for fiscal year 2009 in the amount of $15,000 for the provision of consents relating to
the preparation and filing of the Company’s annual report in that year.
20
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT SERVICES AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT ACCOUNTANTS
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services performed by the independent
accountants. These services may include audit services, audit-related services, tax services and other services. During fiscal years
2010 and 2009, the Audit Committee approved all such services rendered by its independent accountants. For audit services, the
independent accountant provides the Audit Committee with an audit plan including proposed fees in advance of the annual audit. The
Audit Committee approves the plan and fees for the audit.
For non-audit services, the Company’s senior management will submit from time to time to the Audit Committee for
approval non-audit services that it recommends the Audit Committee engage the independent accountant to provide during the fiscal
year. The Company’s senior management and the independent accountant will each confirm to the Audit Committee that each non-
audit service is permissible under all applicable legal requirements. A budget, estimating non-audit service spending for the fiscal
year, will be provided to the Audit Committee along with the request. The Audit Committee must approve both permissible non-audit
services and the budget for such services.
REPORT OF THE AUDIT COMMITTEE
Pursuant to a meeting of the Audit Committee on January 10, 2011, the Audit Committee reports that it has: (i) reviewed and
discussed the Company’s audited financial statements with management; (ii) discussed with the independent registered public
accountants the matters (such as the quality of the Company’s accounting principles and internal controls) required to be discussed by
Statement on Auditing Standards No. 61, as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and
(iii) received written confirmation from Squar, Milner, Peterson, Miranda & Williamson, LLP that it is independent and written
disclosures regarding such independence as required by Independence Standards Board Standard No. 1, as adopted by the Public
Company Accounting Oversight Board in Rule 3600T, and discussed with the independent registered public accountants the
accountants’ independence. Based on the review and discussions referred to in items (i) through (iii) above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be included in the Company’s annual report for the
Company’s fiscal year ended October 29, 2010.
AUDIT COMMITTEE
Todd C. Andrews, Chairman
Richard A. Foster
D. Gregory Scott
Robert E. Schulze
Paul R. Zippwald
The foregoing Audit Committee Report shall not be deemed soliciting material, shall not be deemed filed with the SEC and
shall not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation
language in any such filing.
21
PROPOSAL 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), enables
the Company's shareholders to vote to approve, on an advisory (nonbinding) basis, the compensation of the Company's named
executive officers as disclosed in this proxy statement in accordance with the SEC’s rules.
The Company is asking its shareholders to indicate their support for its named executive officer compensation as described in
this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company's shareholders the opportunity
to express their views on the compensation paid to the Company's named executive officers. This vote is not intended to address any
specific item of compensation, but rather the overall compensation of the Company's named executive officers and the philosophy,
policies and practices described in this proxy statement. Accordingly, the Company is asking its shareholders to vote “FOR” the
following resolution at the Annual Meeting:
“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive
officers, as disclosed in the Company’s proxy statement for the 2011 Annual Meeting of Shareholders pursuant to the compensation
disclosure rules of the Securities and Exchange Commission."
Adoption of the resolution will require the affirmative vote of a majority of the shares present or represented by proxy at the
Annual Meeting and entitled to vote on the matter. Abstentions will have the same effect as votes against the Proposal. Brokers do
not have discretion to vote uninstructed shares with respect to this Proposal. Accordingly, if brokers do not receive voting instructions
from beneficial owners of the shares, they will not be able to vote the shares and broker non-votes may occur with respect to this
Proposal. However, broker non-votes will not affect the outcome of the voting on the Proposal because it requires the majority of the
shares present or represented by proxy at the Annual Meeting (as opposed to a majority of the shares outstanding).
The "say-on-pay" vote is advisory, and therefore is not binding on the Company, the Compensation Committee or the Board
of Directors. However, the Board and the Compensation Committee value the opinions of the shareholders and, to the extent there is
any significant vote against the named executive officer compensation as disclosed in this proxy statement, will consider the
shareholders’ concerns and the Board and Compensation Committee will evaluate whether any actions are necessary to address those
concerns.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE
COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY
STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.
22
PROPOSAL 4
ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act also enables the Company's shareholders to indicate how frequently the Company should seek an
advisory vote (non-binding) on the compensation of its named executive officers, as disclosed pursuant to the SEC’s compensation
disclosure rules. By voting on this Proposal, shareholders may indicate whether they would prefer an advisory vote on the
compensation paid to the Company's named executive officers once every one year, two years, or three years.
After careful consideration of this Proposal, the Board of Directors has determined that an advisory vote on executive
compensation that occurs every three years is the most appropriate alternative. Shareholders who have concerns about executive
compensation during the interval between "say on pay" votes are welcome to bring their specific concerns to the attention of the
Board. Please see the disclosure under the heading "Communications with the Board." The Board understands that the Company's
shareholders may have different views as to what is the best approach for the Company and looks forward to hearing from
shareholders on this Proposal.
The proxy card provides the Company's shareholders with the opportunity to choose among four alternatives with respect to
this Proposal (holding the vote every one, two or three years, or abstaining) and, therefore, shareholders will not be simply voting to
approve or disapprove the Board's recommendation.
The alternative that receives the greatest number of votes (holding the vote every one, two or three years) will be the
frequency that shareholders choose. Abstentions will not be taken into account in determining the outcome of the vote. Brokers do
not have discretion to vote uninstructed shares with respect to this Proposal. Accordingly, if brokers do not receive voting instructions
from beneficial owners of the shares, they will not be able to vote the shares and broker non-votes may occur with respect to this
Proposal. However, broker non-votes will not affect the outcome of the vote.
Although the vote on the frequency of the "say on pay" vote is nonbinding, the Board and the Compensation Committee will
take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE OPTION OF ONCE EVERY
"THREE YEARS" AS THE FREQUENCY WITH WHICH SHAREHOLDERS ARE PROVIDED AN ADVISORY VOTE
ON EXECUTIVE COMPENSATION, AS DISCLOSED PURSUANT TO THE COMPENSATION DISCLOSURE RULES
OF THE SEC.
23
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2012 Annual Meeting of Shareholders must be received at the
Company’s principal office no later than October 14, 2011 in order to be considered for inclusion in the proxy statement and form of
proxy relating to that meeting. Matters pertaining to such proposals, including the number and length thereof, eligibility of persons
entitled to have such proposals included and other aspects are regulated by the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission.
Additionally, if the Company is not provided notice of a shareholder proposal, which the shareholder has not previously
sought to include in the Company’s proxy statement, by December 28, 2011, the Company will be allowed to use its discretionary
voting authority when the proposal is raised at the meeting, without any discussion of the matter in the proxy statement.
HOUSEHOLDING; SHAREHOLDERS SHARING THE SAME ADDRESS
The SEC rules permit brokers and other persons who hold the Company's shares for beneficial owners, to participate in a
practice known as “householding,” which means that only one copy of the proxy statement and annual report will be sent to multiple
shareholders who share the same address unless other instructions are provided to us. Householding is designed to reduce printing and
postage costs and, therefore, results in cost savings for the Company. If you receive a household mailing this year and would like to
have additional copies of this proxy statement and/or the 2010 Annual Report mailed to you, or if you would like to opt out of this
practice for future mailings, please contact your broker or other nominee record holder, or submit your request to Bridgford
Foods Corporation, 1308 North Patt Street, Anaheim, California 92801, Attention: Corporate Secretary. Upon receipt of any such
request, the Company agrees to promptly deliver a copy of this proxy statement and/or the 2010 Annual Report to you. In addition, if
you are currently a shareholder sharing an address with another shareholder and wish to receive only one copy of future proxy
materials for your household, please contact us using the contact information set forth above.
The Board of Directors is not aware of any matters to be acted upon at the meeting other than the Proposals described in this
proxy statement. If, however, any other matter shall properly come before the meeting, the persons named in the proxy accompanying
this statement will have discretionary authority to vote all proxies with respect thereto in accordance with their best judgment.
OTHER MATTERS
FORM 10-K
The Corporation will furnish without charge to each person whose proxy is being solicited, upon request of any such person,
a copy of the Annual Report of the Corporation on Form 10-K for the fiscal year ended October 29, 2010, as such was filed with the
SEC, including financial statements and associated schedules. Such report was filed with the SEC on January 14, 2011 and is
available on the SEC’s website, www.sec.gov , as well as the Company’s website, http:// www.bridgford.com. Requests for copies of
such report should be directed to Bridgford Foods Corporation, 1308 North Patt Street, Anaheim, California 92801, Attention:
Corporate Secretary.
24
EXHIBIT A
BRIDGFORD FOODS CORPORATION
COMPENSATION COMMITTEE CHARTER
(Effective October 11, 2010)
Introduction
The Compensation Committee (the “Committee”) of the Board of Directors of Bridgford Foods Corporation, a California
corporation (the “Company”), shall have the purposes, responsibilities and authority described below. This Charter is intended to
comply with applicable rules of The NASDAQ Stock Market, Inc. (“NASDAQ”) and to provide the Committee with direction in
performing its responsibilities on behalf of the Company’s Board of Directors. This Charter has been approved by the Company’s
Board of Directors (the “Board”).
The Purpose of the Compensation Committee
The purpose of the Committee is to assist the Board in meeting its responsibilities with regard to oversight and determination
of executive compensation. Among other things, the Committee (a) reviews the performance of the members of the Executive
Committee (who collectively serve as the Company’s Chief Executive Officer), (b) reviews, recommends and approves the
Company’s compensation arrangements, including arrangements with executive officers and directors, (c) publishes a report to be
included in the Company’s annual proxy statement, and (d) administers the Company’s equity incentive plans (including reviewing,
recommending and approving stock option and other equity incentive grants to executive officers and directors).
Membership and Structure
The Committee shall be comprised of at least three (3) directors, each of whom must (i) meet the director independence
requirements set forth in the listing rules of The NASDAQ Stock Market, Inc. and (ii) be “Non-Employee Directors” under Rule 16b-
3 promulgated under the Securities Exchange Act of 1934, as amended. In addition, at least two (2) directors serving on the
Committee must be qualified “outside directors” under Section 162(m) of the Internal Revenue Code, as amended, and related
regulations. Each of the foregoing shall be determined by the Board. Appointment to the Committee, including the designation of the
Chair of the Committee, shall be made by the full Board annually. Each member of the Committee shall serve at the pleasure of the
Board and the Board has the authority to remove members from the Committee in its sole discretion.
Meetings of the Committee shall be held at such times and places as circumstances dictate (but no less frequently than
annually), including by written consent. Meetings may be called by the Chair of the Committee or upon the request of any two of its
members. The Chair of the Committee shall determine the time, place and method for holding and the agenda for all Committee
meetings and, when present, shall preside over all Committee meetings. A majority of the members present at any meeting at which a
quorum is present may act on behalf of the Committee.
When necessary, the Committee shall meet in executive session outside of the presence of any executive officer of the
Company. The Chair of the Committee (or his or her designee) shall keep record of the Committee’s meetings and report on activities
of the Committee to the full Board. In fulfilling its responsibilities, the Committee shall have authority to delegate its authority to
subcommittees composed entirely of directors who would otherwise qualify for membership on the Committee, in each case to the
extent permitted by applicable law.
Primary Responsibilities and Duties
In carrying out its purpose, the Committee shall have direct authority to perform the following responsibilities and duties (it
being understood that the Committee may condition its approval of any compensation on Board ratification to the extent so required to
comply with applicable tax law):
• determine the compensation of the members of the Executive Committee, after taking into account the Board’s
assessment of the performance of the Executive Committee, as well as any other executive officers of the Company.
• determine the compensation of the Chairman of the Board and the other directors of the Company.
• assess the performance of the executive officers of the Company other than the members of the Executive
Committee (whose performance is assessed by the Board).
• review and make recommendations to the Board regarding the Company’s compensation policies and philosophy.
• review and make recommendations to the Board with respect to the employment agreements, severance agreements,
change of control agreements and other similar agreements between the Company and its executive officers.
25
• administer the Company’s equity incentive plans, including the review and grant of stock option and other equity
incentive grants.
• review and discuss the Compensation Discussion and Analysis (“CD&A”) section of the Company’s annual proxy
statement with management, and recommend to the Board that the CD&A be included in the Company’s proxy
statement as required.
• produce an annual report on executive compensation for inclusion in the Company’s proxy statement.
• as requested by Company management, review, consult and make recommendations and/or determinations
regarding employee compensation and benefit plans and programs generally, including employee bonus and
retirement plans and programs.
• assist the Board and management in developing and evaluating potential candidates for executive officer positions.
• advise the Board in its succession-planning initiatives for the Company’s executive officers and other senior
officers.
Additional Powers and Responsibilities
In addition to the specific responsibilities set forth above, the Committee will:
• engage in an annual self-assessment with the goal of continuing improvement.
• annually review and reassess the adequacy of this Charter, and recommend any changes to the full Board.
• have the authority to engage independent legal, accounting and other advisers, as it determines necessary to carry
out its duties, and to discuss matters with such advisers as the members of the Committee deem necessary or
appropriate. The Committee shall have sole authority to approve the fees and retention terms of any such advisers.
• have sole authority to approve the ordinary administrative expenses of the Committee that are necessary or
appropriate for carrying out its duties.
In addition to the powers and responsibilities expressly delegated to the Committee in this Charter, the Committee may exercise any
other powers and carry out any other responsibilities delegated to it by the Board from time to time consistent with the Company’s
bylaws. The powers and responsibilities delegated by the Board to the Committee in this Charter or otherwise shall be exercised and
carried out by the Committee as it deems appropriate without requirement of Board approval, and any decision made by the
Committee shall be at the Committee’s sole discretion.
26
EXHIBIT B
BRIDGFORD FOODS CORPORATION
AMENDED AND RESTATED AUDIT COMMITTEE CHARTER
(As Adopted November 8, 2010)
One committee of the board of directors will be known as the audit committee and will be comprised of at least three members of the
board. Committee members will be appointed by the board annually to serve until their successors are elected. Unless a chairperson
is elected by the full board, the members of the audit committee may designate a chairperson by majority vote.
Only independent directors, as determined by the board, will serve on the audit committee. An independent director is free of any
relationship that could influence his or her judgment as a committee member. An independent director may not be associated with a
major vendor to, or customer of, the Company. When there is some doubt about independence, as when a member of the committee
has a short-term consulting contract with a major customer, the director should excuse himself or herself from any decision that might
be influenced by that relationship.
Apart from his or her capacity as a member of the board or any committee of the board, no audit committee member shall be an
affiliated person of the Company or any Company subsidiary as required under applicable SEC and NASDAQ Marketplace
Rules. Each member of the audit committee shall (i) be an independent director, as defined in NASDAQ Marketplace Rule 5605(a)(2)
and the rules of the SEC (including, without limitation, Rule 10A-3 under the Securities Exchange Act of 1934), (ii) not have
participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during
the past three (3) years, and (iii) be able to read and understand fundamental financial statements at the time of appointment, in
accordance with the requirements set forth in NASDAQ Marketplace Rule 5605(c)(2)(A). In addition, at least one member must have
past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable
experience or background which results in the individual’s financial sophistication, including being or having been a chief executive
officer, chief financial officer, or other senior officer with financial oversight responsibilities in accordance with NASDAQ
Marketplace Rule 5605(c)(2)(A). Further, at least one member must qualify as an “audit committee financial expert” within the
meaning of Item 407(d)(5) of Regulation S-K.
As part of the commitment of the Company and board of directors to good governance practices, the audit committee regularly
reviews its charter and recommends to the board changes to the charter. The board adopted this amended and restated charter on
November 8, 2010.
The primary function of the audit committee is to assist the board in fulfilling its oversight responsibilities by reviewing (i) the
financial information that will be provided to the shareholders and others, (ii) the systems of disclosure controls and internal controls
management that the board of directors has established, (iii) the Company’s compliance with legal and regulatory requirements, and
(iv) all audit processes, including, but not limited to, the independent accountant’s qualifications, independence, and performance.
GENERAL RESPONSIBILITIES
1.
2.
3.
4.
5.
6.
The audit committee provides open avenues of communication among the internal auditors, the independent
accountant, and the board of directors.
The audit committee must report committee actions to the full board of directors and may make appropriate
recommendations.
The audit committee has the power to conduct or authorize investigations into matters within the committee’s scope of
responsibilities with full access to all books, records, facilities, and personnel of the Company. The committee is
authorized to retain independent counsel, accountants, or others it needs to carry out its responsibilities, including, but
not limited to, any specific investigation.
The committee will meet at least four times each year or more frequently if circumstances make that preferable. The
audit committee chairperson has the power to call a committee meeting whenever he or she thinks there is a need. The
audit committee chairperson will provide the agenda for the committee’s meetings and any member may suggest items
for consideration. Briefing materials will be provided to the committee as far in advance of meetings as practicable. An
audit committee member should not vote on any matter in which he or she is not independent. The committee may ask
members of management or others to attend the meeting and is authorized to requisition all pertinent information from
management. At the option of the audit committee chairperson, a meeting may conclude with an executive session of
the committee absent members of management.
The audit committee shall establish and maintain procedures for receiving, retaining, and treating complaints received
by the Company regarding accounting, internal accounting controls, or auditing matters including procedures for the
confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
The audit committee shall establish procedures for the hiring of employees and former employees of the independent
accountant.
27
7.
The audit committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the
meetings of the board.
8.
The committee will do whatever else the law, the Company’s charter or bylaws, or the board of directors require.
RESPONSIBILITIES FOR ENGAGING INDEPENDENT ACCOUNTANTS
1.
2.
3.
4.
5.
6.
7.
8.
The audit committee will select (and recommend that the board submit for shareholder ratification, if applicable) the
independent accountants for Company audits. The audit committee also will review and set any fees paid to the
independent accountants, both for audit and lawfully permitted non-audit services, and review and approve dismissal of
the independent accountants. The audit committee shall have the sole authority to approve the hiring and firing of the
independent accountants and all compensation and retention terms with respect to any engagement of the independent
accountants. The independent accountants shall report directly to the audit committee.
The audit committee shall review and evaluate the performance of the independent accountants and ascertain that the
lead (or concurring) audit partner from any public accounting firms performing audit services, serves in that capacity
for no more than five fiscal years of the Company.
The audit committee will approve in advance the retention of the independent accountants for the performance of all
audit and lawfully permitted non-audit services and the fees for such services (provided that pre-approval of non-audit
services will not be required in those circumstances where a subsequent approval is permissible under applicable SEC
and NASDAQ rules).
The audit committee will confirm and assure the independence of the independent accountant, including a review of
management consulting services provided by the independent accountant and the fees paid for them. To facilitate this
confirmation, the audit committee shall obtain on a periodic basis a formal written statement from the independent
accountant regarding relationships and services with the Company which may impact independence and present this
statement to the board of directors and to the extent there are such relationships, monitor and investigate them.
The audit committee shall, at least annually, obtain and review a report by the independent accountants
describing: (i) the accounting firm’s internal quality-control procedures; and (ii) any material issues raised by the most
recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or
professional authorities or a private sector regulatory board, within the preceding five years, respecting one or more
independent audits performed by the firm, and any steps taken to deal with any such issues.
The audit committee will consider, in consultation with the independent accountant, the audit scope and procedural
plans made by the independent accountant.
The audit committee will oversee the resolution of disagreements between management and the independent
accountant, if they arise.
The audit committee will listen to management and the primary independent accountant if either believes there might
be a need to engage additional auditors. The audit committee will decide whether to engage an additional firm and, if
so, which one.
RESPONSIBILITIES FOR REVIEWING THE ANNUAL EXTERNAL AUDIT AND THE REVIEW OF QUARTERLY AND
ANNUAL FINANCIAL STATEMENTS
1.
2.
The audit committee will confirm that the independent accountant (i) views the committee as its client, (ii) will be
available to the full board of directors at least annually, and (iii) provides the committee with a timely analysis of
significant financial reporting issues.
The audit committee will review significant risks and exposures with management and the independent accountant and
will assess management’s steps to minimize them.
3.
The audit committee will review the following with the independent accountant and management:
(a) The adequacy and effectiveness of the Company’s disclosure controls and procedures and the Company’s
internal controls, including computerized information system controls and security.
(b) Any significant finding and recommendations made by the independent accountant together with
management’s responses to them.
4.
Shortly after the annual examination is completed, and prior to filing with the SEC, the audit committee will review the
following with management and the independent account:
(a) The Company’s annual financial statements and related footnotes.
(b) The independent accountant’s audit of and report on the financial statements.
28
(c) The effect of regulatory and accounting initiatives, as well as off-balance sheet structures on the Company’s
financial statements, if any.
(d) The independent accountant’s qualitative judgments about the appropriateness, not just the acceptability, of
accounting principles and financial disclosures and how aggressive (or conservative) the accounting principles
and underlying estimates are.
(e) Any difficulties or disputes encountered during the course of the audit, including any restrictions on the scope
of his or her work or access to required information.
(f) The Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” including, without limitation, all critical accounting policies and practices used by the
Company.
(g) All alternative treatments of financial information within GAAP that have been discussed with management,
the ramifications of each alternative, and the treatment preferred by the Company.
(h) Anything else about the audit procedures or findings that GAAP requires the auditors to discuss with the
committee.
5.
6.
7.
8.
The audit committee will review all material written communications between the independent accountant and
management.
The audit committee will review annual filings with the SEC and other published documents containing the Company’s
financial statements, including but not limited to earnings press releases, and will consider whether the information in
the filings is consistent with the information in the financial statements. The audit committee will pay particular
attention to any pro forma or adjusted non-GAAP financial information.
The audit committee will review and discuss the interim financial reports, including the Company’s disclosures under
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” with management and the
independent accountant(s) before those interim results are released to the public in an earnings release or filed with the
SEC or other regulators. The audit committee shall direct the Company’s independent accountants to review such
interim financial statements using professional standards and procedures for such reviews.
The audit committee will prepare a letter for inclusion in the annual report that describes the committee’s composition
and responsibilities and how the responsibilities were fulfilled. The committee will also prepare a report for the
Company’s proxy statement in accordance with the requirements of Item 407(d)(3) of Regulation S-K and any other
item required for inclusion in this proxy statement.
9.
In connection with each periodic report of the Company, the audit committee will review:
(a) management’s disclosure to the committee under Section 302 of the Sarbanes-Oxley Act of 2002.
(b) the contents of the chief executive officer and the chief financial officer certificates to be filed under Sections
302 and 906 of the Sarbanes-Oxley Act of 2002.
OVERSIGHT OF INTERNAL AUDIT
1.
2.
3.
4.
5.
The audit committee shall oversee the Company’s establishment and maintenance of an appropriate control process for
reviewing and approving its internal transactions and accounting, whether such process is implemented through an
internal audit department of the Company, through outsourcing or otherwise (the “internal audit function”).
When the internal audit function is established, the audit committee shall oversee the activities, organizational structure
and qualifications of the internal audit function.
The audit committee shall discuss with the internal audit function any changes to, and the implementation of, the
internal audit plan and any special projects and discuss with the internal audit function the results of the internal audits
and special projects.
The audit committee shall review the regular internal reports to management (or summaries thereof) prepared by the
internal audit function, as well as management’s response.
The audit committee shall discuss with the internal audit function any audit problems or difficulties, including any
restrictions on the scope of the internal audit function’s activities or on access to requested information, and
management’s response to same and any other matters required to be brought to its attention.
6.
The audit committee shall review the effectiveness of the internal audit function.
29
PERIODIC RESPONSIBILITIES
1.
2.
3.
4.
5.
6.
7.
8.
9.
The audit committee shall review and update its charter at least annually and recommend to the board of directors any
necessary amendments.
The audit committee shall review polices and procedures covering officers’ expense accounts and perquisites, including
their use of corporate assets, and consider the results of any review of those areas by the independent accountant.
The audit committee shall review, approve, and monitor with the independent accountant, the Company’s code of
conduct and such other codes of business conduct that the Company may adopt from time to time pertaining to its
directors, officers, or employees, as well as the Company’s system to monitor compliance with the same.
The audit committee shall review, in conjunction with counsel at the discretion of the audit committee, legal and
regulatory matters that may have a material effect on the organization’s financial statements, compliance policies and
programs, and reports from regulators.
The audit committee shall provide oversight and review of the Company’s risk management policies, including an
annual review of the Company’s investment policies and performance for cash and short-term investments.
The audit committee shall meet with the independent accountants and management in separate executive sessions to
discuss matters the committee or these groups believe should be discussed privately with the audit committee. The
audit committee will meet separately with the Company’s chief executive officer and chief financial officer at least
annually to review the financial affairs of the Company, including a review of the Company’s internal controls. The
audit committee will meet separately with the independent accountants of the Company at such times as it deems
appropriate to review the independent accountant’s examination and management report.
In consultation with the independent accountants and the internal audit function (if applicable), the audit committee
shall review the integrity of the Company’s financial reporting processes (both internal and external).
As the audit committee deems appropriate, it shall obtain advice and assistance from outside legal, accounting, or other
advisors; in this regard, the audit committee shall have the authority to engage, oversee, and require funding for outside
legal, accounting, or other advisors.
The audit committee shall review and approve in advance all related party transactions (defined as those transactions
required to be disclosed under Item 404 of Regulation S-K) for potential conflict of interest.
10.
The audit committee shall conduct an annual performance assessment relative to the audit committee’s purpose, duties,
and responsibilities outlined herein.
COMPENSATION
1.
2.
The Company shall provide appropriate funding, as determined by the audit committee, in its capacity as a committee
of the board, for the payment of: (i) compensation to any registered public accounting firm engaged for the purpose of
preparing or issuing an audit report or performing other audit, review, or attest services for the Company; (ii)
compensation to any advisors employed by the audit committee pursuant to the terms of this charter; and (iii) ordinary
administrative expenses of the audit committee that are necessary or appropriate in carrying out its duties.
Members of the audit committee shall receive such fees, if any, for their service as audit committee members as may be
determined by the board of directors in its sole discretion. Such fees may include retainers or per meeting fees. Fees
may be paid in such form of consideration as is determined by the board of directors. Members of the audit committee
may not receive any compensation from the Company except fees that they receive for service as a member of the
board of directors or any committee thereof and reasonable expense reimbursement.
30
048-1041 Annual Report 03_Layout 1 1/26/11 2:32 PM Page 3
TO OUR SHAREHOLDERS
DIRECTORS
OFFICERS
DIVISION MANAGERS
Jeffrey D. Robinson
Bakery Manager
Anaheim- Bread Division
Bruce H. Bridgford
Chairman & President,
Bridgford Foods of California
Anaheim- Deli Division
Baron R. H. Bridgford
President, Bridgford Processing
Company of Illinois
Bridgford Foods of Illinois
Joseph deAlcuaz
Vice President
Dallas- Frozen-Rite Division
Blaine K. Bridgford
President
Dallas- Superior Foods Division
Monty Griffith
Vice President
Bridgford Foods of North Carolina
Allan L. Bridgford
Senior Chairman
Bruce H. 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
Bruce H. Bridgford
Vice President
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
Joe deAlcuaz
Vice President Manufacturing
Daniel R. Yost
Senior Vice President
Chris Cole
Vice President
Bob Delong
Vice President,
Information Technologies
Cindy Matthews–Morales
Corporate Secretary and Controller
Michael Bridgford
Assistant Secretary
FINANCIAL MATTERS
Despite dramatic increases in the costs of key commodities, Bridgford
Our working capital totaled $29,836,000 at October 29, 2010,
Foods Corporation again achieved solid profitability in the 2010 fiscal
$3,037,000 (11.3%) higher than at the beginning of the fiscal year,
year. Higher prices for grains, meats and petroleum products were offset
and our working capital ratio increased to 3.6 to 1 at October 29, 2010,
by lower operating costs resulting from strategic changes implemented
compared to 3.0 to 1 at October 30, 2009. The increase in working
in recent years. Sales during our 2010 fiscal year were $117,655,000,
capital and improvement in working capital ratio resulted from net income
a decrease of 4.1% from sales of $122,665,000 in 2009. The Company
of $4,319,000 and lower levels of capital spending in recent years.
recorded a net profit of $4,319,000 in 2010, equal to $.46 per share.
We repurchased 27,000 shares of the Company’s common stock in the
A one-time cash dividend of $.10 per share was declared by the Board
of Directors on November 8, 2010.
SALES AND MARKETING HIGHLIGHTS
amount of $277,000 ($10.26 average price paid per share) during 2010.
Projected contributions of $1,175,000 were recorded as a current
liability related to our defined benefit pension plan at October 29, 2010,
and we contributed a total of $1,943,000 towards this plan during the
The refinement of our Chicago based direct route sales distribution
2010 fiscal year. The defined benefit plan was frozen in the 3rd
system for dry sausage products and meat snacks continued during the
quarter of 2006 and replaced with a 401(k) defined contribution plan.
year. Vice President Chris Cole guided the increased emphasis on sales
of products manufactured by the Company. During 2010, Bridgford
Foods entered into an agreement with Golden Flake Snack Foods to sell
and distribute the Company’s dry sausage and meat snack products in
the Southeast United States. This arrangement supplements the Company’s
own direct-store delivery routes and existing relationships with other
regional distributors.
Bridgford Monkey Bread, manufactured at our Superior Foods plant
in Dallas under the direction of Division President Blaine Bridgford,
continues to be a great success. During the year, we developed a
single-serve version of this product, which is currently being test-marketed
in several venues.
In our North Carolina plant, emphasis continued on the development
and marketing of shelf-stable sandwich and bakery products. These
items are now offered for sale in a variety of retail and on-line outlets,
complementing existing business with domestic and overseas military
entities. We also believe these items have great potential in the disaster
relief/emergency preparedness markets.
OPERATIONS
Commodity costs during 2010 were unfavorable when compared with
those experienced in 2009, with generally higher expenses for bakery
flour, meat, gasoline and diesel fuel. In 2010, the costs for these key
components exceeded those experienced in 2009 by almost $3.9 million.
The Company continued its emphasis on producing, rather than purchasing,
the products sold in the Chicago division, and we currently produce more
than 98% of the products marketed through the distribution channels
serviced by this operation. Our unique beef jerky production system is
now producing 100% of the Company’s jerky requirements. Under the
direction of Baron R.H. Bridgford, President of Bridgford Foods of Illinois,
we introduced several new items during the year, including Beef Stick
and Pepperoni Stick Value Packs, and Turkey Party Bites.
All of the Company’s manufacturing facilities passed multiple food safety
inspections during the fiscal year, conducted by various third-party,
military and government agencies. In the frozen food division, new food
service products introduced during the year included Sweet Yeast Roll
Dough, Sub & Hoagie Roll Dough, Whole Grain Roll Dough and White
Whole Wheat Roll Dough.
Under the direction of Plant Manager Monty Griffith, our Statesville,
North Carolina division implemented new packaging technology for our
shelf-stable products, increasing efficiency and reducing material costs.
Vice President of Manufacturing Joe deAlcuaz has contributed greatly
to the progress we have made this year in improving our operations in
The Company has been free of interest bearing debt for twenty-four
consecutive years and we maintain a line of credit with Wells Fargo Bank
in the amount of $2,000,000 which expires December 15, 2012. We are
currently in compliance with all affirmative covenants required under the
line of credit agreement.
Shareholders’ equity totaled $36,200,000, an increase of $3,777,000
(11.6%) compared to the end of the prior year. Net income increased
shareholders’ equity by $4,319,000 and cash dividends of $933,000
were paid during the 2010 fiscal year, as the Board of Directors declared
a cash dividend in November 2009 in recognition of the positive operating
results achieved during the 2009 fiscal year. The Board of Directors
declared a ten cent per share cash dividend in November 2010 which
will be recorded in the first quarter of fiscal year 2011. Approximately
371,000 shares remain available for repurchase under the 2 million
share repurchase plan previously authorized by the Board of Directors.
Shareholders’ equity per share was $3.88 at October 29, 2010 compared
to $3.45 at October 30, 2009.
The Company successfully completed the third year of its Sarbanes-Oxley
Section 404 (a) compliance program. Management assessed the
effectiveness of the Company’s internal control over financial reporting
for the fiscal year ended October 29, 2010 and believes our control
systems are effective. Management’s Report on Internal Controls over
Financial Reporting is included in the Form 10-K report. No significant
weaknesses in internal accounting control, to the extent identified, were
unresolved at the conclusion of the 2010 fiscal year. The Dodd-Frank
Wall Street Reform and Consumer Protection Act, signed into law by the
President on July 21, 2010, permanently exempted the Company from
the requirement to obtain an external audit on the effectiveness of
internal financial reporting controls provided in Section 404 (b) of the
Sarbanes-Oxley Act of 2002.
SUMMARY
Some of the factors that contributed to our strong performance in 2009
moderated in 2010, but your Company was able to sustain its positive
momentum during the year. In light of the increased commodity
costs noted earlier, our results in 2010 constituted a solid financial
performance for Bridgford Foods. The outlook for commodity costs in
2011 is uncertain, as our domestic markets are increasingly affected by
global factors in addition to the normal influences of supply and demand.
As always, we will strive for improvement in every facet of our business,
and will always make our business decisions with the best long-term
interests of all of our stakeholders as our main concern. Primary to that
goal, we will never compromise the quality of our products or the
service we provide to our customers. We again appreciate the loyalty
and hard work of our associates, and are gratified to see that effort
produce positive results in the 2010 fiscal year.
Dallas, Chicago and Statesville. We also took steps to bolster the
On behalf of all of our directors and officers, we thank our shareholders,
management teams in Chicago and Statesville with an eye toward
customers and suppliers for their support during 2010, and we look forward
continued progress and increased capacity in those operations.
to reporting positive results in 2011.
Respectfully submitted,
January 14, 2011
William L. Bridgford
Chairman
John V. Simmons
President
Raymond F. Lancy
Chief Financial Officer
048-1041 Annual Report 03_Layout 1 1/26/11 2:32 PM Page 1
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
Squar, Milner, Peterson, Miranda & Williamson, LLP
Newport Beach, California
©2010 Bridgford Foods. YW 048-1041
ANNUAL
REPORT
2010
Notice of 2011 Annual Meeting
and Proxy Statement