UNITED STATES
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 30, 2020
Commission file number: 000-02396
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:
Title of each class
Common Stock
Trading Symbol(s)
BRID
Name of each exchange on which registered
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Non-accelerated filer [X]
Accelerated filer [ ]
Smaller reporting company [X]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
Indicate by check mark whether the registrant has filed a report on and attestation of the effectiveness of its internal control over financial
reporting under Section 404(b) of Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by registered public accounting firm that prepared or issued its audit
report [ ]
The aggregate market value of voting stock held by non-affiliates of the registrant on April 17, 2020 was $30,843,000.
As of January 15, 2021, there were 9,076,832 shares of common stock outstanding.
Portions of the registrant’s Proxy Statement for the registrant’s Annual Meeting of Shareholders to be held March 10, 2021 (the “Proxy
Statement”) 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. Mine Safety Disclosures
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
Item 16. Form 10-K Summary
SIGNATURES
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Item 1. Business (dollars in thousands)
PART I
This Annual Report on Form 10-K (this “Report”) 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 products and pricing; success of operating initiatives;
development and operating costs; advertising and promotional efforts; adverse publicity; acceptance of new product offerings; consumer trial
and frequency; changes in business strategy or development plans; availability, terms and deployment of capital; availability of qualified
personnel; commodity, labor, and employee benefit costs; changes in, or failure to comply with, government regulations; weather conditions;
construction schedules; relationships with customers and suppliers; statements regarding the anticipated impact of the COVID-19 pandemic;
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.
COVID-19
We are monitoring and responding to the evolving nature of state and local government actions related to the global novel coronavirus (“COVID-
19”) pandemic and its impact on each of our production plant locations as well as our customer base. We coordinate with our local managers for
the primary purpose of protecting the health and safety of our team members, ensuring our ability to operate our processing facilities and
maintaining the liquidity of our business. We are experiencing multiple challenges related to the pandemic. These challenges increased our
operating costs and negatively impacted our volumes during fiscal year 2020 and may continue to do so into fiscal year 2021.
Operationally, we have faced temporary idling of production facilities to ensure team member safety. As a result, we have experienced lower
levels of productivity and higher costs of production. This will likely continue at least for the short term until the effects of the pandemic diminish.
Both of our business segments have experienced a shift in demand from foodservice to retail. In our Frozen Food Products segment, the volume
increases in retail have not been sufficient to offset the losses in foodservice and as a result, we expect continued decreased volume into fiscal
year 2021 in this segment. Our Snack Food Products segment has experienced significant volume increases in the short-term.
● Team Members – The health and safety of our team members is our top priority. To protect our team members, we have implemented
safety measures recommended by the Centers for Disease Control and Prevention (“CDC”) and the Occupational Safety and Health
Administration (“OSHA”) in our facilities and have employed social distancing, temperature checks of team members, increased efforts to deep
clean and sanitize facilities, the use of protective face coverings in certain environments and making protective face coverings and other protective
equipment available to team members. We encourage team members who feel sick to stay at home and provide relaxed attendance policies in
some instances. We continue to explore and implement additional ways to promote social distancing in our production facilities by creating
additional breakroom space and allowing extra time between shifts to reduce interaction of team members, as well as erecting dividers between
workstations or increasing the space between workers on the production floor.
● Customers and Production – The most significant impact from business shutdowns relates to channel shifts and lower production in
our Frozen Food Products segment. We are committed to doing our best to ensure the continuity of our business and the availability of our
products to customers. We have seen a shift in demand from our foodservice to our retail sales channels as schools and in-dining restaurants have
closed across the country. Our production capabilities, including our large scale and geographic proximities, allow us to adapt some of our
facilities to the changing demand by shifting certain amounts of production from foodservice to retail. Not all of our facilities can be modified
and as a result we expect a net negative impact on our foodservice volumes into fiscal year 2021. In addition, our production facilities are
experiencing varying levels of production impacts, including reduced volumes, worker absenteeism and temporary COVID-19-related closures
at some of our production facilities. Additionally, we are anticipating the temporary idling of certain production lines that service the foodservice
channel as we balance the shifting demand between foodservice and retail sales channels.
● Supply Chain – Our supply chain has stayed largely intact. Although we have experienced some minor disruptions, these events have
not significantly impacted our production to date. We have experienced volatility in commodity inputs, in part due to impacts caused by COVID-
19 related business disruptions, and we expect this volatility to continue, which may impact our future input costs.
On April 28, 2020, President Trump issued an Executive Order stating the importance of the continued operation of meat and poultry
processing facilities and directing the Secretary of Agriculture to issue rules and orders to ensure the continued supply of meat and poultry,
consistent with the guidance for the operations of meat and poultry processing facilities jointly issued by the CDC and OSHA.
3
● Insurance and CARES Act – Although we maintain insurance policies for various risks, we believe most COVID-19 impacts will not
be covered by these policies. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the
“CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of the employer
portion of social security payments, and expanded income tax net operating loss carryback provisions. While we continue to examine the potential
impacts of these actions, we anticipate new regulations related to federal income tax will have a significant impact on our financial statements
and cash flow. Late in the second quarter of fiscal 2020 we began implementing the deferral of the employer portion of social security payments
and intend to continue this deferral for the duration of its availability which will have a favorable impact on short-term liquidity. The deferral
amount as of October 30, 2020 will be approximately $1,103. We did not utilize the refundable payroll tax credit provision.
● Liquidity – Operations provided $9,914 in operating cash flows during the fifty-two weeks ended October 30, 2020. As of that date
we had approximately $42,774 of net working capital, which included availability under our revolving line of credit and $4,302 of cash and cash
equivalents. We have $4,430 of current debt. Combined with the cash expected to be generated from the Company’s operations, income tax
refunds and deferral of social security taxes, we anticipate that we will maintain sufficient liquidity to operate our business into fiscal year 2021
and for completion of the major plant expansion in Chicago, Illinois. We will continue to monitor the impact of COVID-19 on our liquidity and,
if necessary, take action to preserve liquidity and ensure that our business can operate during these uncertain times.
Background of Business
Bridgford Foods Corporation (collectively with its subsidiaries, “Bridgford”, the “Company”, “we”, “our”), a California corporation, 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. Currently, we are primarily engaged in the manufacturing, marketing and distribution of an
extensive line of frozen 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 other than those discussed in Item 7 of this Report. Substantially all of our assets have been acquired in the
ordinary course of business.
Description of Business
Bridgford currently operates in two business segments - the processing and distribution of frozen food products and the processing and
distribution of snack food products. For information regarding the separate financial performance of the business segments refer to Note 7 of the
Notes to Consolidated Financial Statements included in this Report.
The following table shows sales, as a percentage of consolidated sales, for each business segment during the last two fiscal years:
Frozen Food Products
Snack Food Products
2020
2019
21%
79%
100%
27%
73%
100%
We manufacture nearly all of our food products and distribute an extensive line of biscuits, bread dough items, roll dough items, dry
sausage products and beef jerky. Our direct store delivery network consists of non-refrigerated snack food products. Our frozen food products
division serves both food service and retail customers.
Although we have recently introduced several new products, most of these products have not contributed significantly to our revenue
growth for fiscal year 2020 with the exception of smokehouse sausage sticks introduced in the second quarter of fiscal year 2018. 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. Neither Bridgford nor its industry generally has 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 other than the
March 16, 2020 Purchase and Sale Agreement with CRG Acquisition, LLC (“CRG”) and amendments thereto on each of April 10, 2020, June
1, 2020 and November 2, 2020. Refer to Note 1 – Subsequent Events of Notes to Consolidated Financial Statements included in this Report for
further information.
Availability of SEC Filings and Code of Conduct on Internet Website
We maintain an Internet website at www.bridgford.com. Available on this website, free of charge, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto as well as, and reports filed under Section 16 of the
Securities Exchange Act of 1934 filed with the Securities and Exchange Commission. Our Code of Conduct is also available on the website.
4
Product Distribution Methods
Our products are delivered to customers using several distinct distribution channels. The distribution channel utilized is dependent upon
the needs of our customers, the most efficient proximity to the delivery point, trade customs, and operating segment as well as product type, life
and stability. 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 our 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 our 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.
The factors that contribute to higher or lower margins generated from each method of distribution depend upon the accepted selling price,
level of involvement by our employees in setting up and maintaining displays, distance traveled, and fuel consumed by our company-owned fleet
as well as freight and shipping costs depending on the distance the product travels to the delivery point. Management is continually evaluating
the profitability of product delivery methods, analyzing alternate methods and weighing economic inputs to determine the most efficient and
cost-effective method of delivery to fulfill the needs of our customers.
Major Product Classes
Frozen Food Products
Our frozen food products division serves both food service and retail customers. We sell approximately 140 unique frozen food products
through approximately 1,100 wholesalers, cooperatives and distributors.
Frozen Food Products – Food Service Customers
The food service industry is composed of establishments that serve food outside the home and includes restaurants, the food operations of
health care providers, schools, hotels, resorts, corporations, and other traditional and non-traditional food service outlets. Growth in this industry
has been driven by the increase in away-from-home meal preparation, which has accompanied the expanding number of both dual income and
single-parent households. Another trend within the food service industry is the growth in the number of non-traditional food service outlets such
as convenience stores, retail stores and supermarkets. These non-traditional locations often lack extensive cooking, storage, or preparation
facilities resulting in a need for pre-cooked and prepared foods similar to those 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. Orders from food service customers have decreased as schools and in-dining restaurants have closed across the United States
in response to the COVID-19 pandemic.
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. Demand from retail customers has increased as consumers opt to buy food from retail establishments for home consumption in
response to the COVID-19 pandemic.
Frozen Food Products – Sales and Marketing
Our frozen food business covers the United States. Products produced by the Frozen Food Products segment are generally supplied to food
service and retail distributors who take title to the product upon shipment receipt through company leased long-haul vehicles. In addition to
regional sales managers, we maintain a network of independent food service and retail brokers covering most of the United States. Brokers are
compensated on a commission basis. We believe that our broker relationships, in close cooperation with our regional sales managers, are a
valuable asset providing significant new product and customer opportunities. 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, periodicals 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. Our advertising strategy includes our
presence on social media and online distribution of promotional material.
5
Snack Food Products
During fiscal year 2020, our snack food products division sold approximately 130 different items through customer-owned distribution
centers and a direct-store-delivery network serving approximately 17,000 supermarkets, mass merchandise and convenience retail stores located
in 49 states.
Products produced or distributed by the Snack Food Products segment are supplied to customers through either direct delivery to customer
warehouses or direct-store-delivery to retail locations. We utilize customer managed warehouse distribution centers to lower distribution cost.
Product delivered to the customer’s warehouse is then distributed to the store where it is resold to the end consumer. Our direct-store-delivery
system focus emphasizes high quality service of our premium branded product to our customers. We also provide the service of setting up and
maintaining the display and restocking our products.
Snack Food Products — Customers
Our 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.
Snack Food Products — Sales and Marketing
Snack food products are distributed across the United States. Regional sales managers perform several significant functions 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. We sponsor a fishing team which participates
at the highest levels of both the FLW and B.A.S.S. tours.
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. Historically, the addition or deletion of any individual product has not had a material effect on our
operations in such 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-serve items. We are constantly searching to develop new products to complement our existing product
lines and improve processing techniques and formulas. We utilize an in-house test kitchen and consultants to research and experiment with unique
food preparation methods, improve quality control and analyze new ingredient mixtures.
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 non-refrigerated
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 markets, 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 regulations 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 implemented a 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.
The U.S. Occupational Safety and Health Administration (“OSHA”) oversees safety compliance and establishes certain employer responsibilities
to help “assure safe and healthful working conditions” and keep the workplace free of recognized hazards or practices likely to cause death or
serious injury. 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.
6
Importance of Key Customers
Sales to Wal-Mart® comprised 36.9% of revenues in fiscal year 2020 and 19.8% of total accounts receivable was due from Wal-Mart®
as of October 30, 2020. Sales to Wal-Mart® comprised 35.7% of revenues in fiscal year 2019 and 31.9% of total accounts receivable was due
from Wal-Mart® as of November 1, 2019. Sales to Dollar General® comprised 13.6% of revenues in fiscal year 2020 and 31.1% of total accounts
receivable was due from Dollar General® as of October 30, 2020. Sales to Dollar General® comprised 11.1% of revenues in fiscal year 2019
and 21.7% of total accounts receivable was due from Dollar General® as of November 1, 2019.
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.
Most flour purchases are made at market price without contracts. We also purchase bulk flour under short-term fixed price contracts at
current market prices. The contracts are usually effective for a month or less and are not material to our operations. These contracts are settled
within a month’s time and no significant contracts remain open at the close of the reporting period. We monitor and manage our ingredient costs
to help negate volatile daily swings in market prices when possible. We do not participate in the commodity futures market or hedging to limit
commodity exposure.
We continue to monitor the development of the COVID-19 pandemic and its impact on our operations including our supply chain and
labor force. The pandemic could potentially cause disruptions to our supply chain. Global supply may be restricted causing price pressure on
certain ingredients and raw materials used in our products which could disrupt our operations. We are unable to accurately predict the uncertainties
related to the future course of the COVID-19 pandemic including overall economic stability, the spread, length and severity of the virus and any
future governmental actions.
Employees
We had 563 employees as of October 30, 2020, approximately 35% of whose employment relationship is governed by collective bargaining
agreements. These agreements currently expire between March 2022 and February 2024. We believe that our relationship with all of our
employees is favorable and that contracts will be settled favorably.
Executive Officers of the Registrant
The names, ages, and positions of all our executive officers as of January 15, 2021 are listed below. William L. Bridgford is the nephew
of Allan L. Bridgford. Officers are normally appointed annually by the Board of Directors at their meeting immediately following the annual
meeting of shareholders. Three executive officers are full-time employees of our company. Allan L. Bridgford worked 50% of full time during
fiscal year 2020. There are no agreements or understandings pursuant to which any of the executive officers was or is selected to serve as an
executive officer.
Name
Allan L. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Item 1A. Risk Factors
Age
85
66
65
67
Position(s) with our company
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
In addition to the other matters set forth in this Report, 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. However, 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, among other things, risk relating to changes in consumer
preferences and product contamination as well as general 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 effect 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.
7
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 three 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 USDA, 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 regulations 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 implemented a system of regulation known as the HACCP program.
The HACCP program requires all meat and poultry processing plants to develop and implement sanitary operating procedures and other program
requirements. OSHA oversees safety compliance and establishes certain employer responsibilities to help “assure safe and healthful working
conditions” and keep the workplace free of recognized hazards or practices likely to cause death or serious injury. We believe that we are currently
in compliance with governmental laws and regulations and that we maintain necessary permits and licenses relating to our operations.
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 affect us. Our success will be dependent in part upon our continued
ability to recruit, motivate, and retain qualified personnel. We cannot assure that we will be successful in this regard. We have no employment
or non-competition agreements with key personnel except for a consulting agreement with Allan L. Bridgford that is effective after his retirement
from employment with our company.
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® and Dollar General®, which accounted for 36.9% and 13.6%, respectively, of sales in fiscal year 2020. 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% of our stock beneficially owned 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, more than 80% of our outstanding stock. In addition, two members
of the Bridgford family currently 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.
Therefore, among other things, we have elected not to implement the rule that provides for a nominating committee to identify and recommend
nominees to the Board of Directors and have instead elected to have the full Board of Directors perform such function. Additionally, pursuant to
this exemption, our compensation committee, which is made up of independent directors, does not have sole authority to determine the
compensation of our executive officers, including our Chairman of the Board.
8
We participate in Multiemployer Pension Plans which could negatively impact our operations and profitability.
We participate in “multiemployer” pension plans administered by labor unions on behalf of their employees. We make monthly
contributions for healthcare and pension benefit obligations. The contribution amount may change depending upon the ability of participating
companies to fund these pension liabilities as well as the actual and expected returns on pension plan assets. Should we withdraw from the union
and cease participation in a union plan, federal law could impose a penalty for additional contributions to the plan. The penalty would be recorded
as an expense in the consolidated statement of operations. The ultimate amount of the withdrawal liability is dependent upon several factors
including the funded status of the plan and contributions made by other participating companies. We continue to participate in other
multiemployer union plans. In the event of a full or partial withdrawal from these plans, the impact to our financial statements could be material.
Eminent domain and land risk regulations could negatively impact our financial results and financial position.
We own real property on which we operate our processing and/or our distribution operations. As is the case with any owner of real property,
we may be subject to eminent domain proceedings that can impact the value of investments we have made in real property as well as potentially
disrupt our business operations. If subject to eminent domain proceedings or other government takings, we may not be adequately compensated.
The COVID-19 pandemic could negatively impact our operations and financial condition.
We have considered the impact of federal, state and local government actions related to the global novel coronavirus pandemic (“COVID-
19” or “pandemic”) on our condensed consolidated financial statements. The business disruptions associated with the pandemic had a significant
negative impact on our consolidated condensed financial statements for the fiscal year ended October 30, 2020. We expect these events to have
future business impacts, the extent of which is uncertain and largely subject to whether the severity worsens, or the duration of current business
shutdowns continue. These impacts could include but may not be limited to risks and uncertainty related to shifts in demand between sales
channels, market volatility, constraints in our supply chain, our ability to operate production facilities and worker availability. These unknowns
may subject the Company to future risks related to long-lived asset impairments, increased reserves for uncollectible accounts, price and
availability of ingredients and raw materials used in our products and adjustments to reflect the market value of our inventory.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
We own the following properties:
Property Location
Anaheim, California *
Dallas, Texas *
Dallas, Texas *
Dallas, Texas *
Dallas, Texas *
Statesville, North Carolina *
Chicago, Illinois ** (1)
Chicago, Illinois **
Building
Square
Footage
Acreage
100,000
94,000
30,000
16,000
3,200
42,000
156,000
177,000
5.0
4.0
2.0
1.0
1.5
8.0
1.5
8.0
*
- property used by Frozen Food Products Segment.
** - property used by Snack Food Products Segment.
(1) - sale pending.
We utilize the foregoing properties for processing, warehousing, distributing and administrative purposes. We also lease warehouse and/or
office facilities throughout the United States 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.
9
Item 3. Legal Proceedings
No material legal proceedings were pending against us as of October 30, 2020 or as of the date of filing of this Report. 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. Mine Safety Disclosures
Not applicable.
10
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
PART II
Common Stock and Dividend Data
Our common stock is traded on the Nasdaq Global Market under the symbol “BRID”.
As of January 12, 2021, there were 718 shareholders of record in our common stock.
The payment of future dividends, if any, 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 2020, we did not repurchase any shares of our common stock pursuant to our stock repurchase program 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 2020.
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)
120,113
120,113
120,113
120,113
Total
Number of
Shares
Purchased
Average
Price Paid
Per Share
- $
-
-
-
- $
Period (1)
July 11, 2020 – August 7, 2020
August 8, 2020 – September 4, 2020
September 5, 2020 – October 2, 2020
October 3, 2020 – October 30, 2020
Total
(1)
(2)
The periods shown are our fiscal periods during the sixteen-week quarter ended October 30, 2020.
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. Such purchases of common stock 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. As of October 30, 2020, the total maximum number of shares that may be purchased under the Purchase Plan is
120,113 at a purchase price not to exceed $10.00 per share for a total maximum aggregate price (exclusive of commission) of $1,201,130.
However, our agreement with Citigroup lapsed on its own (by its terms) on October 14, 2019.
Item 6. Selected Financial Data
Not applicable for a smaller reporting company.
11
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
(refer to Part I., Item 1. Business for more information).
Results of Operations (in thousands except percentages)
Fiscal Year Ended October 30, 2020 (52 weeks) Compared to Fiscal Year Ended November 1, 2019 (52 weeks)
Net Sales-Consolidated
Net sales in fiscal year 2020 increased $9,185 (4.9%) when compared to the prior fiscal year. The changes in net sales were comprised as follows:
Impact on Net Sales-Consolidated
Selling price per pound
Unit sales volume in pounds
Returns activity
Promotional activity
Increase in net sales
Net Sales-Frozen Food Products Segment
%
$
-1.0
5.3
0.5
0.1
4.9
(2,068)
10,697
883
(327)
9,185
Net sales in the Frozen Food Products segment in fiscal year 2020 decreased $9,993 (19.5%) compared to the prior fiscal year. The changes in
net sales were comprised as follows:
Impact on Net Sales-Frozen Food Products
Selling price per pound
Unit sales volume in pounds
Returns activity
Promotional activity
Decrease in net sales
%
$
2.8
-23.5
-0.1
1.3
-19.5
1,604
(13,524)
10
1,917
(9,993)
The decrease in net sales in fiscal year 2020 was attributable to lower unit sales volume partially offset by a higher selling price per pound. The
decrease in net sales was primarily driven by a significant decrease in volume in our shelf-stable sandwich business to institutional customers
partially offset by an increase in selling prices implemented in the first quarter of fiscal year 2019. Other institutional Frozen Food Product sales,
including sheet dough and rolls, decreased 29% by volume while retail sales volume increased 38%. During fiscal year 2020, demand shifted
from foodservice to retail sales channels as schools and in-dining restaurants closed across the United States in response to the COVID-19
pandemic. Returns activity increased compared to the prior fiscal year. Promotional activity decreased due to lower bid price reductions, rebates
and menu allowances as a percentage of sales.
Net Sales-Snack Food Products Segment
Net sales in the Snack Food Products segment in fiscal year 2020 increased $19,178 (13.9%) compared to the prior fiscal year. The changes in
net sales were comprised as follows:
Impact on Net Sales-Snack Food Products
Selling price per pound
Unit sales volume in pounds
Returns activity
Promotional activity
Increase in net sales
%
$
-2.5
16.6
0.8
-1.0
13.9
(3,671)
24,222
873
(2,246)
19,178
The increase in net sales in fiscal year 2020 was attributable to higher sales through our direct store delivery distribution channel. The weighted
average selling price per pound decreased due to significant volume increases in high volume, low margin accounts. Promotional offers increased
due to higher sales to high-volume, high-promotion customers. Returns activity decreased slightly compared to the 2019 fiscal year.
12
Cost of Products Sold and Gross Margin-Consolidated
Cost of products sold from continuing operations increased by $11,331 (8.9%) compared to the prior fiscal year. Higher unit sales volume in the
Snack Food Products segment was the primary contributing factor to the increase in cost of products sold. Gross overhead spending decreased
but was offset by significant increases in commodity costs, higher production labor and higher inbound freight costs. Costs related to an additional
production facility completed at the end of fiscal year 2020 also increased overhead expenses. An increase in commodity costs during fiscal year
2020 contributed to the increase in cost of goods sold. The gross margin decreased from 32.7% to 30.1% during fiscal year 2020 compared to
the prior fiscal year.
Change in Cost of Products Sold by Segment
Frozen Food Products Segment
Snack Food Products Segment
Total
$
%
(5,757)
17,088
11,331
Commodity $
Increase
70
3,815
3,885
-4.5
13.4
8.9
Cost of Products Sold and Gross Margin–Frozen Food Products Segment
Cost of products sold in the Frozen Food Products segment decreased by $5,757 (17.2%) in fiscal year 2020 compared to the prior fiscal year.
Decreased volume and changes in product mix were the primary contributing factors to the decrease. Higher flour commodity costs of
approximately $70 partially offset the decrease in costs of goods sold. The gross margin percentage decreased from 34.7% to 32.9% during fiscal
year 2020 compared to the prior fiscal year.
Cost of Products Sold and Gross Margin–Snack Food Products Segment
Cost of products sold in the Snack Food Products segment increased by $17,088 (18.2%) compared to the prior fiscal year due primarily to a
substantial increase in sales volume. Meat commodity costs increased during fiscal year 2020 adding to the increase in cost of products sold. The
cost of meat commodities increased approximately $3,815 during fiscal year 2020 compared to the prior fiscal year. Higher depreciation on
processing equipment impacted the cost of products sold. The gross margin earned in this segment decreased from 31.9% to 29.3% during fiscal
year 2020 primarily as a result of higher commodity costs.
Selling, General and Administrative Expenses-Consolidated
Selling, general and administrative expenses (“SG&A”) in fiscal year 2020 increased $1,609 (3.0%) when compared to the prior fiscal year. The
increase in this category did not directly correspond to the change in sales.
The table below summarizes the primary expense variances in this category:
Healthcare costs
Pension costs
Travel
Wages and bonus
Outside consulting
Product advertising
Outside storage
Cash surrender value gains
Vehicle repairs
Other SG&A
Total - SG&A
$
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
Expense Increase
(Decrease)
1,949 $
1,333
1,649
24,079
2,369
6,714
431
(906)
1,018
15,810
54,446
3,091 $
232
2,397
23,399
1,785
6,303
133
(666)
795
15,368
52,837
(1,142)
1,101
(748)
680
584
411
298
(240)
223
442
1,609
Healthcare benefit expense has decreased due to recent favorable claim activity compared to fiscal year 2019. The increase in pension expense
was due to a higher unrecognized net loss compared to the prior year. Travel expenses decreased due to travel restrictions and stay-at-home
orders in response to the COVID-19 pandemic. Higher labor commissions on increased sales resulted in higher wages and bonus expense in fiscal
year 2020 compared to the prior year. Outside consulting costs increased due to higher real estate advisory services and other related legal fees.
Costs for product advertising increased mainly as a result of higher payments under brand licensing agreements in the Snack Food Products
segment during fiscal year 2020. Outside storage costs increased due to limited space at the new facility being used to warehouse products prior
to shipment. The gain on cash surrender value of life insurance policies increased substantially due to higher stock market gains compared to
fiscal year 2019. Vehicle repairs increased in the Snack Food Products segment. The major components comprising the increase of “Other
SG&A” expenses were computer maintenance and utilities.
Selling, General and Administrative Expenses-Frozen Food Products Segment
SG&A expenses in the Frozen Food Products segment decreased by $2,301 (15.5%) to $12,566 during fiscal year 2020 compared to the prior
fiscal year. The overall decrease in SG&A expenses was due to lower unit sales volume, profit-sharing accruals and product advertising.
13
Selling, General and Administrative Expenses-Refrigerated and Snack Food Products Segment
SG&A expenses in the Snack Food Products segment increased by $3,910 (10.3%) to $41,880 during fiscal year 2020 compared to the prior
fiscal year. Most of the increase was due to higher unit sales volume partially offset by an allocated gain on cash surrender value of life insurance
policies.
Gain or Loss on Sale of Property, Plant and Equipment
The gain or loss during fiscal years 2020 and 2019 was due to ordinary gain or loss on disposal of assets.
Income Taxes
The Company’s effective income tax rate was -42.7% and 24.0% in fiscal years 2020 and 2019, respectively. The effective income tax rate
differed from the applicable mixed statutory rate of approximately 26.4% due to the rate differential on our net operating loss carryback available
under the CARES Act, non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes.
(Refer to Note 4 of Notes to the Consolidated Financial Statements for more information).
Liquidity and Capital Resources (in thousands except share amounts, percentages and ratios)
The principal source of our operating cash flow is cash receipts from the sale of our products, net of costs to manufacture, store, market and
deliver such products. We normally fund our operations from cash balances and cash flow generated from operations. We borrowed $15,000
during fiscal year 2019 and $18,450 during the first half of fiscal year 2020 to purchase specific equipment for our new Chicago processing
facility. In addition, we borrowed $4,500 under our line of credit with Wells Fargo Bank, N.A. during the first quarter of fiscal year 2020 to fund
operations which was repaid in the third quarter of fiscal 2020. We borrowed $2,000 under the line of credit subsequent to the end of fiscal year
2020 on December 2, 2020.
On March 16, 2020, we entered into a Purchase and Sale Agreement with CRG Acquisition, LLC (“CRG”) as amended, pursuant to which we
agreed to sell to CRG a parcel of land including an approximate 156,000 square foot four-story industrial food processing building located at 170
N. Green Street in Chicago, Illinois (the “Property”). Proceeds from the purchase price for the Property of $60,000 are anticipated subject to a
due diligence period and certain closing adjustments and prorations, and is conditioned upon, among other customary closing conditions, CRG
receiving zoning and other governmental approvals necessary for the construction and development of a mixed use project on the Property in
accordance with certain development plans to be approved by the City of Chicago. The cost basis of the Property was immaterial. The escrow
account for the transaction has received $1,350 in earnest money through October 30, 2020. We have received a total of $225 which is non-
refundable earnest money and thus not part of restricted cash.
Historically, we expect positive operating and cash flows in the first quarter of our fiscal year from the liquidation of inventory and accounts
receivable balances related to holiday season sales. Anticipated commodity price trends may affect future cash balances. Certain commodities
may be purchased in advance of our immediate needs to lower the ultimate cost of processing.
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
Depreciation
(Recovery of) provision for losses on accounts receivable
Reduction in promotional allowances
Loss (Gain) on sale of property, plant and equipment
Deferred income taxes, net
Changes in operating working capital
Net cash provided by operating activities
$
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
7,323 $
5,514
(8)
(423)
(58)
6,385
(8,816)
9,917 $
6,484
4,153
44
(852)
290
1,889
(4,761)
7,247
For the fifty-two weeks ended October 30, 2020, net cash provided by operating activities was $9,917, an increase of $2,670 compared to the
fifty-two weeks ended November 1, 2019. The net increase in cash provided by operating activities primarily related to higher net income of
$7,323, deferred income taxes of $6,045 and higher accounts payable of $2,509 partially offset by an increase in inventory of $2,929 and an
increase in accounts receivable of $1,512. During fiscal year 2020, we did not contribute towards our defined benefit pension plan. Plan funding
strategies may be adjusted depending upon economic conditions, investment options, tax deductibility, or legislative changes in funding
requirements.
14
Our cash conversion cycle (defined as days of inventory and trade receivables less days of trade payables outstanding) was equal to 66 days for
the fifty-two weeks ended October 30, 2020 and 67 days for the fifty-two weeks ended November 1, 2019.
For the fifty-two weeks ended November 1, 2019, net cash provided by operating activities was $7,247. The result was primarily related to lower
net income, an increase in inventory and deferred income taxes. During fiscal year 2019, we funded $875 towards our defined benefit pension
plan.
Cash used in investing activities:
Proceeds from sale of property, plant and equipment
Proceeds from deposits in escrow
Additions to property, plant and equipment
Net cash used in investing activities
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
$
$
39 $
1,125
(24,482)
(23,318) $
61
-
(25,739)
(25,678)
Expenditures for property, plant and equipment include the acquisition of equipment, upgrading of facilities to maintain operating efficiency and
investments in cost effective technologies to lower costs. In general, we capitalize the cost of additions and improvements and expense the cost
of repairs and maintenance. We 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 include
acquisitions of machinery and equipment used on packaging lines and refrigeration equipment used to process food products. Proceeds from
deposits in escrow of $1,125 relate to the pending sale of a parcel of land including an approximate 156,000 square foot four-story industrial food
processing building located at 170 N. Green Street in Chicago, Illinois. Refer to Note 1 – Subsequent Events for more information. We have
received a total of $1,350 in deposits in escrow less $225 received as non-refundable earnest money.
The table below highlights the additions to property, plant and equipment for the fifty-two weeks ended:
Land
Building
Building improvements
Furniture and fixture
Temperature control
Processing equipment
Packaging lines
Vehicles for sales and/or delivery
Quality control and communication systems
Computer software and hardware
Forklifts
Change in projects in process
Additions to property, plant and equipment
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
$
$
- $
-
4,669
208
446
29,466
324
704
24
96
-
(11,455)
24,482 $
-
-
10,103
-
3,285
2,019
2,641
1,585
156
861
57
5,032
25,739
Expenditures for additions to property, plant and equipment during the fifty-two weeks ended October 30, 2020 include projects in process of
$1,090 related to the new facility in Chicago.
Cash provided by financing activities:
Payments of capital lease obligations
Proceeds from bank borrowings
Repayments of bank borrowings
Net cash provided by financing activities
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
$
$
(24) $
18,450
(3,076)
15,350 $
(17)
17,000
(3,253)
13,730
Our stock repurchase program was approved by the Board of Directors in November 1999 and was expanded in June 2005. Under the stock
repurchase program, we were 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. As of the end of fiscal year 2020, 120,113 shares remained authorized for repurchase under the
program.
The Company leases three long-haul trucks received during fiscal year 2019. The six-year leases for these trucks expire in 2025. Amortization
of equipment under capital lease was $71 in 2020. The Company leased one long-haul truck for $40 during fiscal year 2020, and that lease term
is two years.
15
We maintain a line of credit with Wells Fargo Bank, N.A. that extends through March 1, 2022. Under the terms of this line of credit, we may
borrow up to $7,500 at an interest rate equal to the bank’s prime rate or LIBOR plus 1.5%. We borrowed $2,000 under this line of credit on
November 24, 2019 and $2,500 on January 24, 2020 for a combined total of $4,500. We repaid the balance on this line of credit with Wells Fargo
Bank, N.A. on May 13, 2020 of $4,500 with the proceeds from the fifth borrowing of $7,200 under the master collateral loan and security
agreement with Wells Fargo Bank, N.A. described below. The Company was in compliance with all covenants as of October 30, 2020. Subsequent
to October 30, 2020, we borrowed $2,000 under the line of credit on December 2, 2020.
On December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A. (the “Original Wells Fargo
Loan Agreement”) for up to $15,000 in equipment financing as amended to expand facility. Pursuant to the Original Wells Fargo Loan
Agreement, we borrowed the following amounts.
Type and Number (1)
Equipment Loan No. 01
Equipment Loan No. 02
Equipment Loan No. 03
Equipment Loan No. 04
Equipment Loan No. 05
Total
Date Funds
Received
12/26/18
04/23/19
12/23/19
03/06/20
04/17/20
Rate
Amount
Interest
Amount and
Date
4.13 % $
3.98 %
3.70 %
3.29 %
3.68 %
$
7,500 $
7,500
3,750
7,500
7,200
33,450 $
103 01/31/19
102 05/31/19
54 02/03/20
100 03/13/20
97 05/15/20
456
(1) Term: 7 years for 84 installment payments.
The Wells Fargo Loan Agreement as amended and line of credit, contain various affirmative and negative covenants that limit the use of funds
and define other provisions of the loan. The main financial covenants are listed below:
● Total Liabilities divided by Tangible Net Worth not greater than 2.5 to 1.0 at each fiscal quarter,
● Quick Ratio not less than 1.0 to 1.0 at each fiscal quarter end, and
● Fixed Charge Coverage Ratio not less than 1.25 to 1.0 as of each fiscal quarter end, determined on a trailing 4-quarter basis.
Aggregate contractual maturities of debt in future fiscal years are as follows:
Fiscal Years
2021
2022
2023
2024
2025
2026-2027
Debt Payable
4,429
4,599
4,775
4,958
5,148
5,213
$
$
$
$
$
$
The Company was in compliance with all covenants under the Wells Fargo Loan Agreement and line of credit as of October 30, 2020.
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.
Management is of the opinion that our strong financial position and our capital resources are sufficient to provide for our operating needs and
capital expenditures for fiscal year 2021.
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
Except as described above, we had no other debt or other contractual obligations within the meaning of Item 303(a)(5) of Regulation S-K, as of
October 30, 2020.
16
Our expected future liability related to construction of the new Chicago processing facility is approximately $3,006 as of October 30, 2020.
Critical Accounting Policies
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported revenues and expenses during the respective reporting periods. Actual results could differ from those
estimates. Amounts estimated related to liabilities for self-insured workers’ compensation, employee healthcare and pension benefits are
especially subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts not originally estimated. We record
promotions, returns allowances, bad debt and inventory 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 of the Notes 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 a smaller reporting company.
Item 8. Consolidated Financial Statements and Supplementary Data
The consolidated financial statements required by this Item are set forth in Part IV, Item 15 of this Report.
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 Chairman and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this
Report. Based on this evaluation, the Chairman and Chief Financial Officer have concluded that 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, including
our principal executive officer and principal financial officer, and recorded, processed, summarized and reported within the time periods specified
by the Securities and Exchange Commission’s rules and forms to allow timely decisions regarding required disclosures.
Our management, including our Chairman and Chief 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 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 our independent registered public accounting firm. 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.
17
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. 16 (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 our 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”.
Changes in Internal Control over Financial Reports
There has been no change in our internal control over financial reporting during the last fiscal quarter covered by this Report that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Section 404 of the Sarbanes-Oxley Act of 2002
In order to comply with the Sarbanes-Oxley Act of 2002, we have undertaken and continue a comprehensive effort, which includes the
documentation and review of our internal controls. In order to comply with the Sarbanes-Oxley Act, we centralized most accounting and many
administrative functions at our corporate headquarters in an effort to control the cost of maintaining our control systems.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by the President on July 21, 2010, permanently
exempts small public companies with less than $75 million in public float, such as 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. As a result, an attestation
report on internal controls over financial reporting by an independent registered public accounting firm has not been presented. Section 404(a) is
still effective for smaller public companies and requires the disclosure of management attestations on internal controls over financial reporting.
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.
Management conducted an evaluation of the effectiveness of the internal controls over financial reporting based on the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) Internal Control-Integrated Framework (2013) and related illustrative
documents as an update to Internal Control-Integrated Framework (1992). Management determined that the 17 principles were present and
functioning during its assessment of the effectiveness of our internal controls. 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 30, 2020. Based
on management’s assessment and the above-referenced criteria, management believes that the internal control over financial reporting for our
fiscal year ended October 30, 2020 was effective.
Item 9B. Other Information
Not applicable.
18
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item will be included in the Proxy Statement, which will be filed with the Securities and Exchange
Commission not later than 120 days after the end of our fiscal year ended October 30, 2020 and is incorporated herein by reference. Information
concerning our executive officers is set forth in Part I, Item 1 of this Report under the heading “Executive Officers of the Registrant”.
Item 11. Executive Compensation
The information required by this item will be included in the Proxy Statement, which will be filed with the Securities and Exchange
Commission not later than 120 days after the end of our fiscal year ended October 30, 2020 and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included in the Proxy Statement, which will be filed with the Securities and Exchange
Commission not later than 120 days after the end of our fiscal year ended October 30, 2020 and is incorporated herein by reference.
Equity Compensation Plan Information
Not applicable, as we do not have any compensation plans under which our equity securities are authorized for issuance.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in the Proxy Statement, which will be filed with the Securities and Exchange
Commission not later than 120 days after the end of our fiscal year ended October 30, 2020 and is incorporated herein by reference.
We are considered a “controlled company” within the meaning of Rule 5615(c)(1) of the NASDAQ Listing Rules based on the approximate
80% beneficial ownership of our outstanding common stock by Bridgford Industries Incorporated and are therefore exempted from various
NASDAQ Listing Rules pertaining to certain “independence” requirements of our directors. Nevertheless, the Board of Directors has determined
that Messrs. Andrews and Scott and Ms. Schott who together comprise the Audit Committee and the Compensation Committee, are all
“independent directors” within the meaning of Rule 5605 of the NASDAQ Listing Rules.
Our general legal counsel is the son of the former senior chairman of the Board of Directors. As legal counsel to the Board and the
Compensation Committee, he currently is paid a fee of $2,480 for each meeting attended. Total fees paid under this arrangement for fiscal year
2020 were approximately $24,600. Legal services are performed on our behalf and billed by a firm in which he is a partner. Total fees billed
under this arrangement for fiscal year 2020 were approximately $292,700.
Former director Allan Bridgford Jr., son of the former senior chairman of the Board of Directors, is providing consulting services to the
Chicago plant and management. The contract on behalf of the Company with Allan Bridgford Jr. is for consulting services at $1,200 per day.
Total fees billed under this arrangement for fiscal year 2020 were approximately $169,000. As a member of the Board of Directors, he was paid
a fee of $2,480 for each meeting attended during fiscal year 2020. Total fees paid under this arrangement for fiscal year 2020 were $22,220.
Under an arrangement with Allan Bridgford Jr., we accrued approximately $279,400 of profit sharing based on fiscal year 2020 profitability to
be paid out in three installments equally over the next three years.
Director Keith Ross currently provides real estate consulting services to the Board and management. He was paid a fee of $2,480 for each
Board meeting attended and was paid an aggregate of $24,600 for meetings attended during fiscal year 2020. Fees of approximately $37,780
were paid during fiscal year 2020 for consulting services.
Item 14. Principal Accountant Fees and Services
The information required by this item will be included in the Proxy Statement, which will be filed with the Securities and Exchange
Commission not later than 120 days after the end of our fiscal year ended October 30, 2020 and is incorporated herein by reference.
19
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements. The following documents are filed as a part of this Report:
PART IV
Management’s Annual Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of October 30, 2020 and November 1, 2019
Consolidated Statements of Operations for years ended October 30, 2020 and November 1, 2019
Consolidated Statements of Comprehensive Income for years ended October 30, 2020 and November 1, 2019
Consolidated Statements of Shareholders’ Equity for years ended October 30, 2020 and November 1, 2019
Consolidated Statements of Cash Flows for years ended October 30, 2020 and November 1, 2019
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Not applicable for a smaller reporting company.
(3) Exhibits
Page
22
23
24
25
26
27
28
(a) The exhibits below are filed or incorporated herein by reference.
Exhibit
Number
Exhibit Description
Form File No.
Exhibit
Filing
Date
Filed
Herewith
Incorporated by Reference
3.1
3.2
Restated Articles of Incorporation, as amended.
Amended and Restated Bylaws.
10-K 000-02396
000-02396
10-
K/A
3.4
3.7
01/18/19
02/09/18
4.1
10.1*
10.2*
10.3*
10.4*
10-K 000-02396
Description of Capital Stock of the Registrant
Bridgford Foods Corporation Defined Benefit Pension Plan.
10-K 000-02396
Bridgford Foods Corporation Supplemental Executive Retirement Plan. 10-K 000-02396
10-K 000-02396
Bridgford Foods Corporation Deferred Compensation Savings Plan.
000-02396
8-K
Consulting Agreement, dated August 12, 2019, between the Registrant
4.1
10.1
10.2
10.3
10.1
01/24/20
01/18/19
01/18/19
01/18/19
08/16/19
and Allan L. Bridgford Sr.
10.5
Purchase and Sale Agreement dated March 16, 2020 between Bridgford
8-K 000-02396 10.1 03/19/20
10-K 000-02396 21.1 01/24/20
Foods Processing Company and CRG Acquisition, LLC.
21.1
24.1
31.1
Subsidiaries of the Registrant.
Power of Attorney (included as part of the signature page).
Certification of Principal Executive Officer, Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
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).
101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
X
X
X
X
X
X
X
X
X
X
X
X
X
*
Each of these Exhibits constitutes a management contract, compensatory plan or arrangement.
Item 16. Form 10-K Summary
Not applicable.
20
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 15, 2021
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
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman of the Board
(Principal Executive Officer)
Date
January 15, 2021
/s/ JOHN V. SIMMONS
John V. Simmons
/s/ RAYMOND F. LANCY
Raymond F. Lancy
/s/ ALLAN L. BRIDGFORD SR.
Allan L. Bridgford Sr.
/s/ TODD C. ANDREWS
Todd C. Andrews
/s/ D. GREGORY SCOTT
D. Gregory Scott
/s/ KEITH A. ROSS
Keith A. Ross
/s/ MARY SCHOTT
Mary Schott
President and Director
January 15, 2021
January 15, 2021
January 15, 2021
January 15, 2021
January 15, 2021
January 15, 2021
January 15, 2021
Chief Financial Officer, Executive Vice President,
Treasurer, Assistant Secretary and Director
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
21
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Bridgford Foods Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Bridgford Foods Corporation and its subsidiaries (the Company) as of October
30, 2020 and November 1, 2019, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows
for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of October 30, 2020 and November 1, 2019,
and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is
not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/ Baker Tilly US, LLP
We have served as the Company’s auditor since 2009.
Irvine, California
January 15, 2021
22
BRIDGFORD FOODS CORPORATION
CONSOLIDATED BALANCE SHEETS
October 30, 2020 and November 1, 2019
(in thousands, except per share amounts)
2020
2019
Current assets:
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, less allowance for doubtful accounts of $16 and $31, respectively
and promotional allowances of $2,550 and $2,974, respectively
Inventories, net
Refundable income taxes
Prepaid expenses
Total current assets
Property, plant and equipment, net of accumulated depreciation and amortization of
$58,686 and $54,015, respectively
Other non-current assets
Deferred income taxes
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
$
4,302 $
1,125
23,818
29,296
9,517
692
68,750
73,332
13,201
-
$
155,283 $
$
Current liabilities:
Accounts payable
Accrued payroll, advertising and other expenses
Income taxes payable
Current notes payable – equipment (Note 5)
Current portion of non-current liabilities
Total current liabilities
Long-term notes payable – equipment (Note 5)
Deferred income taxes
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 –
9,076
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
See accompanying notes to consolidated financial statements.
10,502 $
5,981
94
4,430
5,196
26,203
24,692
2,338
30,804
84,037
-
9,134
8,298
79,755
(25,941)
71,246
155,283 $
3,478
-
21,875
26,367
-
1,048
52,768
54,346
12,295
4,047
123,456
7,993
5,480
90
1,943
4,434
19,940
11,804
-
25,228
56,972
-
9,134
8,298
72,432
(23,380)
66,484
123,456
23
BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal years ended October 30, 2020 and November 1, 2019
(in thousands, except share and per share amounts)
Net sales
Cost of products sold
Gross margin
Selling, general and administrative expenses
(Gain) loss on sale of property, plant and equipment
Income before taxes
(Benefit on) provision for income taxes
Net income
Basic earnings per share
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
$
197,970 $
138,452
59,518
54,446
(58)
5,130
(2,193)
$
$
7,323 $
0.81 $
188,785
127,121
61,664
52,837
290
8,537
2,053
6,484
0.71
Shares used to compute basic earnings per share
9,076,832
9,076,832
See accompanying notes to consolidated financial statements.
24
BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the fiscal years ended October 30, 2020 and November 1, 2019
(in thousands)
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
Net income
Other comprehensive loss from defined benefit plans
Other postretirement benefit plans:
Actuarial gain (loss)
Prior service cost
Other comprehensive income (loss) from other postretirement benefit plans, net
Other comprehensive loss, before taxes
Tax benefit on other comprehensive loss
Change in other comprehensive (loss), net of tax
$
7,323 $
(3,920)
556
-
556
(3,364)
803
(2,561)
Comprehensive income, net of tax
$
4,762 $
See accompanying notes to consolidated financial statements.
6,484
(6,632)
(790)
(50)
(840)
(7,472)
1,792
(5,680)
804
25
BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the fiscal years ended October 30, 2020 and November 1, 2019
(in thousands)
Balance, November 2, 2018
Net income
Net change in defined benefit plans and other
benefit plans, net of tax
Balance, November 1, 2019
Net income
Net change in defined benefit plans and other
benefit plans, net of tax
Balance, October 30, 2020
Shares
Amount
9,134 $
9,076 $
Capital in
excess of
par value
Accumulated
other
comprehensive
loss
Retained
earnings
Total
shareholders’
equity
8,298 $ 65,948 $
6,484
(17,700) $
9,076 $
9,134 $
8,298 $ 72,432 $
7,323
9,076 $
9,134 $
8,298 $ 79,755 $
(5,680)
(23,380) $
(2,561)
(25,941) $
65,680
6,484
(5,680)
66,484
7,323
(2,561)
71,246
See accompanying notes to consolidated financial statements.
26
BRIDGFORD FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal years ended October 30, 2020 and November 1, 2019
(in thousands)
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
7,323 $
Depreciation
(Recovery of) provision for losses on accounts receivable
Reduction in promotional allowances
(Gain) loss on sale of property, plant and equipment
Deferred income taxes, net
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
Income taxes payable
Current portion of non-current liabilities
Non-current liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment
Proceeds from sale of assets in escrow
Additions to property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities:
Payment of capital lease obligations
Proceeds from bank borrowings
Repayments of bank borrowings
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of year
Cash and cash equivalents and restricted cash at end of year
Supplemental disclosure of cash flow information:
Cash paid for income taxes
Cash paid for interest
Transportation equipment financed by lease obligations
$
$
$
$
See accompanying notes to consolidated financial statements.
5,514
(8)
(423)
(58)
6,385
(1,512)
(2,929)
(75)
(9,086)
(102)
2,509
501
4
(412)
2,286
9,917
39
1,125
(24,482)
(23,318)
(24)
18,450
(3,076)
15,350
1,949
3,478
5,427 $
336 $
828
40
6,484
4,153
44
(852)
290
1,889
(774)
(2,954)
283
-
(663)
338
903
(65)
(1,643)
(184)
7,249
61
-
(25,739)
(25,678)
(17)
17,000
(3,253)
13,730
(4,699)
8,179
3,478
697
403
473
27
BRIDGFORD FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except share and per share amounts, time periods, ratios and percentages)
NOTE 1 - The Company and Summary of Significant Accounting Policies:
Bridgford Foods Corporation 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. We, including our subsidiaries, are primarily
engaged in the manufacturing, marketing and distribution of an extensive line of frozen, refrigerated, and snack food products throughout the
United States.
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All inter-
company transactions have been eliminated.
Use of estimates and assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported revenues and expenses during the respective reporting periods. Actual results could differ from
those estimates. Amounts estimated related to liabilities for pension benefits, self-insured workers’ compensation and employee healthcare
benefits are 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 realization of deferred tax assets, cash surrender or contract value of life insurance
policies, promotional allowances and 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 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 measure the fair value of assets to determine if and when adjustments are recorded.
Subsequent events
Management has evaluated events subsequent to October 30, 2020 through the date the accompanying consolidated financial statements
were filed with the Securities and Exchange Commission for transactions and other events that may require adjustment of and/or disclosure in
such financial statements. The Company maintains a line of credit with Wells Fargo Bank, N.A. that expires on March 1, 2022. Under the terms
of this line of credit, we may borrow up to $7,500 at an interest rate equal to the bank’s prime rate or LIBOR plus 1.5%. The Company borrowed
an additional $2,000 under the line of credit on December 2, 2020.
Effective November 3, 2020, Allan Bridgford Jr. resigned as a member of the Board of Directors of Bridgford Foods Corporation. The
resignation was not the result of a disagreement with management regarding operations, policies or practices of the Company. Mr. Bridgford will
continue to serve as a consultant to the Company.
As previously reported, on March 16, 2020, Bridgford Food Processing Corporation (“BFPC”), a wholly-owned subsidiary of the
Company, entered into a Purchase and Sale Agreement (the “CRG Purchase Agreement”) with CRG Acquisition, LLC (“CRG”), pursuant to
which BFPC agreed to sell to CRG, pursuant to the terms and conditions set forth in the CRG Purchase Agreement, a parcel of land including an
approximate 156,000 square foot four-story industrial food processing building located at 170 N. Green Street in Chicago, Illinois (the
“Property”). The purchase price for the Property is $60,000 subject to a due diligence period and certain closing adjustments and prorations, and
is conditioned upon, among other customary closing conditions, CRG receiving zoning and other governmental approvals necessary for the
construction and development of a mixed use project on the Property in accordance with certain development plans to be approved by the City
of Chicago. The cost basis of the Property was immaterial.
On November 2, 2020, the Company executed a fourth amendment to the CRG Purchase Agreement. Under the original terms and
conditions of the CRG Purchase Agreement, the closing of the sale of the Property to CRG would occur on the date that is thirty (30) days after
CRG’s receipt of the necessary zoning approvals, but in any event no earlier than October 31, 2020 and no later than March 31, 2021. The first
amendment dated as of April 10, 2020 extended the inspection period to June 1, 2020. The second amendment dated as of June 1, 2020 extended
the inspection period to July 31, 2020, zoning period to February 1, 2021 and closing date to February 5, 2021. The third amendment dated July
31, 2020 extended the inspection period to October 31, 2020, zoning period to April 30, 2021 and closing date to May 6, 2021. The fourth
amendment dated November 2, 2020 further extended the inspection period to February 1, 2021, the zoning period to August 2, 2021 and closing
date to August 31, 2021. The escrow account has received $1,350 in earnest money through October 30, 2020. We have received a total of $225
which is non-refundable earnest money and thus not part of restricted cash.
Based on management’s review, no other material subsequent events were identified that require adjustment to the financial statements or
additional disclosure.
28
Accounts Receivable
Accounts receivable are recorded at net realizable value. The value is presented net of allowance for doubtful accounts and promotional
incentives. Our accounts receivable consists mainly of trade receivables from customer sales. We evaluate the collectability of our accounts
receivable based on several factors. The provision for doubtful accounts receivable is based on historical trends and current collectability risk.
Our provision for doubtful accounts was $16 and $31 as of October 30, 2020 and November 1, 2019, respectively.
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. Management does not believe there is significant credit risk associated with these
financial institutions.
Sales to Wal-Mart® comprised 36.9% of revenues in fiscal year 2020 and 19.8% of total accounts receivable was due from Wal-Mart®
as of October 30, 2020. Sales to Wal-Mart® comprised 35.7% of revenues in fiscal year 2019 and 31.9% of total accounts receivable was due
from Wal-Mart® as of November 1, 2019. Sales to Dollar General® comprised 13.6% of revenues in fiscal year 2020 and 31.1% of total accounts
receivable was due from Dollar General® as of October 30, 2020. Sales to Dollar General® comprised 11.1% of revenues in fiscal year 2019
and 21.7% of total accounts receivable was due from Dollar General® as of November 1, 2019.
COVID-19 pandemic
We have considered the impact of federal, state and local government actions related to the global novel coronavirus pandemic (“COVID-19” or
“pandemic”) on our consolidated financial statements. The business disruptions associated with the pandemic had a significant negative impact
on our consolidated financial statements for the fifty-two week period ended October 30, 2020. We expect these events to have future business
impact, the extent of which is uncertain and largely subject to whether the severity worsens, or the duration of current business shutdowns
continue. These impacts could include but may not be limited to risks and uncertainty related to shifts in demand between sales channels, market
volatility, constraints in our supply chain, our ability to operate production facilities and worker availability. These unknowns may subject the
Company to future risks related to long-lived asset impairments, increased reserves for uncollectible accounts, price and availability of ingredients
and raw materials used in our products and adjustments to reflect the market value of our inventory.
Business segments
The Company and subsidiaries operate in two business segments - the processing and distribution of frozen foods products, and the
processing and distribution of snack food products. See Note 7 for further information.
Fiscal year
We maintain our accounting records on a 52-53-week fiscal basis ending on the Friday closest to October 31. As part of the regular
accounting cycle, fiscal years 2020 and 2019 included 52 weeks.
Revenues
The Company recognizes revenue for the sale of the product at the point in time when our performance obligation has been satisfied and
control of the product has transferred to our customer, which generally occurs upon shipment, pickup or delivery to a customer based on terms
of the sale. Contracts with customers are typically short-term in nature with completion of a single performance obligation. Product is sold to
foodservice, retail, institutional and other distribution channels. Products are delivered to customers primarily through our own long-haul fleet,
common carrier or through a Company owned direct store delivery system. These delivery costs, $4,537 and $5,012 for fiscal years 2020 and
2019, respectively, are included in selling, general and administrative expenses in the accompanying consolidated financial statements. Shipping
and handling that occurs after the customer has obtained control of the product is recorded as a fulfillment cost rather than an additional assured
service. Costs paid to third party brokers to obtain contracts are recognized as part of selling expenses. Other sundry items in context of the
contract are also recognized as selling expense. Any taxes collected on behalf of the government are excluded from net revenue.
We record revenue at the transaction price which is measured as the amount of consideration we anticipate to receive in exchange for
providing product to our customers. Revenue is recognized as the net amount estimated to be received after deducting estimated or known
amounts including variable consideration for discounts, trade allowances, consumer incentives, coupons, volume-based incentives, cooperative
advertising, product returns and other such programs. 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. Estimates are reviewed regularly until incentives or product returns are realized and the result of any such adjustments are known.
Promotional allowances deducted from sales for fiscal years 2020 and 2019 were $11,418 and $11,105, respectively.
29
Advertising expenses
Advertising and other promotional expenses are recorded as selling, general and administrative expenses. Advertising expenses for fiscal
years 2020 and 2019 were $2,246 and $2,574, 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. Cash equivalents totaled $4,302 as of October 30, 2020 and $3,478 as of November 1, 2019. All material cash and cash
equivalents as of October 30, 2020 were held at Wells Fargo Bank N.A.
Restricted cash
Proceeds from deposits in escrow of $1,125 as of October 30, 2020 relate to the pending sale of a parcel of land including an approximate
156,000 square foot four-story industrial food processing building located at 170 N. Green Street in Chicago, Illinois. Refer to Note 1 –
Subsequent Events for more information.
Fair value measurements
We classify levels of inputs to measure the fair value of financial assets as follows:
● 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.
● 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.
● 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.
The Company does not have any assets or liabilities measured at fair value on a recurring or non-recurring basis for the fiscal years ended
October 30, 2020 and November 1, 2019.
Inventories
Inventories are valued at the lower of cost (which approximates actual cost on a first-in, first-out basis) or net realizable 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 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. We built a processing plant from the ground up and as such have attributed long useful lives accordingly to
these types of assets employed at the new facility in Chicago. The Company incurred interest costs of $879 for fiscal year 2020, all of which was
capitalized in relation to the construction of the new facility in Chicago.
30
Leases
Leases are recognized in accordance with Accounting Standards Update (“ASU”) 2016-02 Leases (ASC 842) which requires a lessee to
recognize assets and liabilities with lease terms of more than 12 months. We lease or rent property for such operations as storing inventory,
packaging or processing product, equipment and parking vehicles. We analyze our agreements to evaluate whether or not a lease exists by
determining what assets exist for which we control usage for a period of time in exchange for consideration. In the event a lease exists, we classify
it as a finance or operating lease and record a right-of-use (“ROU”) asset and the corresponding lease liability at the inception of the lease. In the
case of month-to-month lease or rental agreements with terms of 12 months or less, we made an accounting policy election to not recognize lease
assets and liabilities and record them on a straight-line basis over the lease term. The storage units rented for use by our Snack Food Product
Segment direct store delivery route system are not costly to relocate, contain no significant leasehold improvements, no degree of integration
over leased assets, orders can be fulfilled by another route storage unit interchangeably, no specialized assets exist, market price is paid for storage
units and there is no guarantee of debt.
Finance lease assets are recorded within property, plant and equipment, net of accumulated depreciation and amortization. The Company’s
leases of long-haul trucks used in its Frozen Food Products Segment qualify as finance leases. Finance lease liabilities are recorded as a separate
line item on the consolidated balance sheets reflecting both the current and long-term obligation. The classification as a finance or operating lease
determines whether the recognition, measurement and presentation of expenses and cash flows are considered operating or financing.
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. The cash surrender value is included in other non-current assets in the
accompanying Consolidated Balance Sheets.
Income taxes
Deferred taxes are provided for items whose financial and tax bases differ. A valuation allowance is provided against deferred tax assets
when it is expected that it is more likely than not that the related asset will not be fully realized. The 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, which are
inherently difficult to predict.
We provide tax accruals for federal, state and local exposures relating to audit results, tax planning initiatives and compliance
responsibilities. The development of these accruals requires judgments about tax issues, potential outcomes and timing. (See Note 4 for further
information). 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.
Stock-based compensation
We measure and recognize compensation expense for all share-based payments to employees, including grants of employee stock options,
in the financial statements based on the fair value at the date of the grant. We have not issued, awarded, granted or entered into any stock-based
payment agreements since April 29, 1999, and no such expense was recognized in fiscal years 2020 and 2019.
Comprehensive income or loss
Comprehensive income or loss consists of net income and additional minimum pension liability adjustments.
Recently issued accounting pronouncements and regulations
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09 “Revenue from Contracts with Customers” to
supersede previous revenue recognition guidance under current U.S. GAAP. The guidance presents a single five-step model for comprehensive
revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Two options are available for
implementation of the standard which are either the retrospective approach or cumulative effect adjustment approach. The guidance became
effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early
adoption permitted. The Company adopted the modified retrospective transition method beginning with the first quarter of fiscal 2019. The
adoption did not have a material impact on our consolidated financial statements. For further information please refer to Revenues above.
Disaggregated revenue is disclosed in Note 7 - Segment Information.
31
In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” that requires
most equity investments to be measured at fair value and subsequent changes in fair value to be recognized in net income. The guidance covers
presentation and disclosure requirements of financial liabilities and the classification and measurement of financial instruments. The guidance is
effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017. We adopted
this guidance in the first quarter of fiscal 2019. The adoption did not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires a lessee to recognize assets and liabilities with lease terms of more
than 12 months. Both capital and operating leases are to be recognized on the balance sheet. The guidance is effective for annual reporting periods
beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019 which is our first quarter of fiscal
2020. We have analyzed all lease transactions during fiscal year 2019 and 2020 to date. The Company elected not to reassess expired contracts
or adjust comparative periods. The Company determined that no change to current accounting treatment is warranted for most transactions due
to the underlying nature of our leases. In the case of month-to-month lease or rental agreements with terms of 12 months or less, the Company
made an accounting policy election to not recognize lease assets and liabilities. The Company performed a detailed analysis and determined that
the only indication of a long-term lease was Hogshed Ventures, LLC. The accounting treatment of this lease for warehouse storage included
establishing a right-of-use asset and corresponding liability was recorded for Hogshed Ventures, LLC for 40th Street in Chicago during the fourth
quarter of fiscal 2020. The application of this pronouncement resulted in additional disclosures detailing our lease arrangements. The Company
adopted this guidance during the first quarter of fiscal 2020 and it did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes – Classification of Certain Cash Receipts and Cash Payments”. The guidance
involves eight specific cash flow issues and aims to unify accounting for these transactions. The guidance became effective for annual reporting
periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this guidance during the first quarter of fiscal
2019 and it did not have a material impact on our consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits”. The guidance separates service cost from other pension
cost components changing the presentation of net periodic benefit cost related to company sponsored defined benefit or other postretirement
benefits. The guidance became effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption
permitted. Additional disclosure reconciling net periodic benefit cost is detailed in Note 3 - Retirement and Other Benefit Plans. The Company
adopted this guidance during the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes – Simplifying the Accounting for Income Taxes”. The guidance removes
exceptions to the general principles in Topic 740 for allocating tax expense between financial statement components, accounting basis differences
stemming from an ownership change in foreign investments and interim period income tax accounting for year-to-date losses that exceed
projected losses. The guidance becomes effective for annual reporting periods beginning after December 15, 2020 and interim periods within
those fiscal years with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated
financial statements.
32
NOTE 2 - Composition of Certain Financial Statement Captions:
2020
2019
Inventories, net:
Meat, ingredients and supplies
Work in process
Finished goods
Property, plant and equipment, net:
Land
Buildings and improvements
Machinery and equipment
Capital leased trucks
Transportation equipment
Right of use assets
Construction in process
Accumulated depreciation and amortization
Other non-current assets:
Cash surrender value benefits
Other
Accrued payroll, advertising and other expenses:
Payroll, vacation, payroll taxes and employee benefits
Accrued advertising and broker commissions
Property taxes
Other
Current portion of non-current liabilities (Notes 3 and 6):
Defined benefit retirement plan
Executive retirement plans
Incentive compensation
Capital lease obligation
Escrow and customer deposits
Right-of-use leases
Postretirement healthcare benefits
Non-current liabilities (Note 3):
Defined benefit retirement plan
Executive retirement plans
Incentive compensation
Capital lease obligation
Right-of-use leases
Deferred payroll taxes
Postretirement healthcare benefits
NOTE 3 - Retirement and Other Benefit Plans:
$
$
$
$
$
$
$
$
$
$
$
$
6,439 $
1,860
20,997
29,296 $
3,908 $
27,518
88,785
513
8,846
1,090
1,358
132,018
(58,686)
73,332 $
13,195 $
6
13,201 $
4,287 $
863
566
265
5,981 $
- $
163
3,074
144
1,360
372
83
5,196 $
18,678 $
6,380
2,996
289
719
1,103
639
30,804 $
5,283
1,562
19,522
26,367
3,908
21,044
60,617
473
8,391
-
13,928
108,361
(54,015)
54,346
12,289
6
12,295
4,063
648
520
249
5,480
-
10
4,264
95
10
-
55
4,434
14,130
6,418
3,655
360
-
-
665
25,228
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 year 2006, we froze future benefit accruals under these plans 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 plans requires contributions which are at least equal to the minimum required contributions
needed to avoid a funding deficiency. The measurement date for the plans is our fiscal year end.
33
Net pension cost consisted of the following:
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized loss
Net pension cost
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
$
$
127 $
2,025
(3,688)
2,163
627 $
103
2,396
(3,414)
1,236
321
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
2020
2019
2.45%
N/A
7.00%
3.00%
N/A
7.00%
The benefit obligation, plan assets, and funded status of these plans as of the fiscal years ended are as follows:
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
Change in benefit obligations:
Benefit obligations - beginning of year
Service cost
Interest cost
Actuarial gain (loss)
Benefits paid
Benefit obligations - end of year
Funded status of the plans
Unrecognized prior service costs
Unrecognized net actuarial loss
Net amount recognized
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
$
$
$
$
53,892 $
-
2,189
(1,965)
54,116 $
68,022 $
127
2,025
4,585
(1,965)
72,794
(19,965)
-
27,373
7,408 $
49,434
875
5,402
(1,819)
53,892
57,487
103
2,396
9,856
(1,820)
68,022
(14,130)
-
23,453
9,323
We perform an internal rate of return analysis when making the discount rate selection. The discount rates were based on FTSE Pension
Liability Index (formerly Citibank) as of October 31, 2020 and November 1, 2019, 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.
No expected employer contribution to the plans in fiscal year 2021 is planned.
For fiscal year 2020, our actuary updated mortality tables from the RP-2014 Total Dataset Mortality Table with Scaling to Pri-2012 Total
Dataset Mortality Table with MP-2020 Scaling. The expected rate of return on plan assets remained the same at 7.00% effective for fiscal years
2020 and 2019, respectively.
34
The actual and target allocation for plan assets are as follows:
Asset Class
Large Cap Equities
Mid Cap Equities
Small Cap Equities
International (equities only)
Fixed Income
Cash
Total
Target
Asset
Allocation
22.0 %
0.0 %
12.0 %
26.0 %
39.0 %
1.0 %
100.0 %
2020
21.5%
0.0%
13.5%
25.7%
37.5%
1.8%
100.0%
Target
Asset
Allocation
22.0%
0.0%
12.0%
26.0%
39.0%
1.0%
100.0%
2019
21.8 %
0.0 %
13.8 %
25.2 %
37.6 %
1.6 %
100.0 %
The fair value of our pension plan assets as of October 30, 2020 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
2020
Total plan assets
$
54,116
-
- $
54,116
Expected payments for the pension benefits are as follows:
Fiscal Years
2021
2022
2023
2024
2025
2026-2030
Executive Retirement Plans
Non-Qualified Deferred Compensation
Pension Benefits
$
$
$
$
$
$
2,627
2,770
2,936
3,091
3,303
17,625
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 this plan for fiscal years 2020 and 2019.
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 each participant’s 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. 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.
35
Benefits payable related to these plans and included in the accompanying consolidated financial statements were $6,544 and $6,428 as of
October 30, 2020 and November 1, 2019, respectively. In connection with these arrangements 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
$13,195 and $12,289 as of October 30, 2020 and November 1, 2019, respectively.
Expected payments for executive postretirement benefits are as follows:
Fiscal Years
2021
2022
2023
2024
2025
2026-2030
Executive
Postretirement
Benefits
$
$
$
$
$
$
499
533
533
533
533
2,642
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 $6,070 and $7,919 as of
October 30, 2020 and November 1, 2019, respectively. Future payments are approximately $3,074, $1,996, $877, $87 and $36 for fiscal years
2021 through 2025, respectively.
Postretirement Healthcare Benefits for Selected Executive Employees
We provide postretirement health care benefits for selected executive employees. Net periodic postretirement healthcare (benefit) 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 (benefit) consisted of the following:
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
Service cost
Interest cost
Amortization of prior service cost
Amortization of actuarial gain
Net periodic postretirement healthcare cost (benefit)
$
$
3 $
16
-
-
19 $
Weighted average assumptions for the fiscal years ended October 30, 2020 and November 1, 2019 are as follows:
Discount rate
Medical trend rate next year
Ultimate trend rate
Year ultimate trend rate is achieved
2020
2019
2.43%
8.00%
5.00%
2026
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
2020
2019
$
$
2 $
59 $
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
2020
2019
$
$
(2) $
(50) $
9
22
(44)
(7)
(20)
2.92%
7.50%
5.00%
2025
3
64
(3)
(53)
36
The healthcare obligation and funded status of this plan as of the fiscal years ended are as follows:
2020
2019
Change in accumulated postretirement healthcare obligation:
Healthcare obligation - beginning of year
Service cost
Interest cost
Actuarial gain
Benefits paid
Healthcare obligation – end of year
Funded status of the plans
Unrecognized prior service costs
Unrecognized net actuarial gain
Unrecognized amounts recorded in other comprehensive income
Postretirement healthcare liability
Expected payments for the postretirement benefits are as follows:
$
$
$
Fiscal Years
2021
2022
2023
2024
2025-2029
586 $
3
16
(8)
(9)
588 $
588
-
(66)
66
588 $
517
9
22
44
(6)
586
586
-
(58)
58
586
Postretirement
Healthcare
Benefits
$
$
$
$
$
66
46
21
22
108
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 “401K Plan”) for our sales,
administrative, supervisory and certain other employees. During fiscal years 2020 and 2019, we made total employer contributions to the 401K
Plan in the amounts of $754 and $722, respectively.
NOTE 4 - Income Taxes:
The benefit on or provision for income taxes includes the following:
Current:
Federal
State
Deferred:
Federal
State
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
$
$
(9,517) $
135
(9,382)
7,097
92
7,189
(2,193) $
(177)
342
165
1,667
221
1,888
2,053
37
The total tax (benefit) provision differs from the expected amount computed by applying the statutory federal income tax rate to income
before income taxes as follows:
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
Provision for federal income taxes at the applicable statutory rate
Increase in provision resulting from state income taxes, net of federal income tax
benefit
Change in federal rate – NOL carryback
Research and development tax credit
Non-taxable life insurance gain
Other, net
$
1,052 $
179
(2,868)
(358)
(190)
(8)
(2,193) $
$
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 overhead capitalization
Employee benefits
Deferred payroll tax
Other
State taxes
Incentive compensation
Pension and health care benefits
Depreciation
Net operating loss carry-forward and credits
Valuation allowance established against state NOL
Deferred income tax assets, net
2020
2019
$
$
4 $
70
33
427
525
290
120
(182)
1,387
6,752
(12,944)
1,273
(77)
(2,322) $
1,790
445
-
-
(140)
(42)
2,053
8
160
90
394
467
-
25
(281)
1,794
5,604
(6,310)
2,173
(77)
4,047
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.
As of October 30, 2020, the Company did not have any valuation allowance against its federal net deferred tax assets.
Management reevaluated the need for a valuation allowance at the end of fiscal 2020 and 2019 and determined that some of its California net
operating loss (“NOL”) may not be utilized. Therefore, a valuation allowance of $77 has been retained for such portion of California NOL.
As of October 30, 2020, the Company had NOL carryforwards of approximately $2,934 for federal and $4,233 for state purposes. The federal
loss will be carried forward indefinitely until it can be utilized against future taxable income. The state loss carryforwards will expire at various
dates from 2023 through 2040.
As of October 30, 2020, we have provided a liability of $169 for unrecognized tax benefits related to various federal and state income tax matters.
None of this liability will 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 November 1, 2019, we have provided a liability of $90 for unrecognized tax benefits related to various federal and state income tax matters.
None of this liability will reduce our effective income tax rate if the asset is recognized in future reporting periods. We have not identified any
new unrecognized tax benefits.
38
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
October 30, 2020
(52 Weeks)
November 1, 2019
(52 Weeks)
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
$
90 $
-
-
79
-
Balance at end of year
$
169 $
155
-
-
(65)
-
90
We recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of October 30, 2020, we
had approximately $21 in accrued interest and penalties which is included as a component of the $169 unrecognized tax benefit noted above.
Our federal income tax returns are open to audit under the statute of limitations for the fiscal years 2017 through 2019.
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 2017 through 2019.
We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19
pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years
beginning before January 01, 2021. In addition, the CARES Act allows NOLs incurred in taxable years beginning after December 31, 2017 and
before January 01, 2021 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The
Company is currently evaluating the impact of various provisions of the CARES Act, but at present, expects that the NOL carryback provision
of the CARES Act would result in a material cash benefit to us. The Company has filed a federal income tax return for tax year 2019 (fiscal year
2020) and carried back a taxable loss of $9,900 to tax years 2014 (fiscal year 2015) and 2015 (fiscal year 2016). Furthermore, the Company
estimates additional taxable loss for tax year 2020 (current fiscal year 2021) which can be carried back to remaining taxable income of tax year
2015 (fiscal year 2016) and taxable income of tax years 2016 (fiscal year 2017) and 2018 (fiscal year 2019).
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”). Among other significant changes, the Tax
Act reduced the corporate federal income tax rate from 35% to 21%. The carryback of NOLs from tax years 2019 and 2020 under the CARES
Act to pre- Tax Act years will generate an income tax benefit due to the differential in income tax rates.
Under U.S. GAAP, specifically ASC Topic 740, Income Taxes, the tax effects of changes in tax laws must be recognized in the period in which
the law is enacted, or March 27, 2020, for the CARES Act. Thus, at the date of enactment, in the second quarter, the Company recorded an
income tax benefit of $1,100 which represented the impact of the carryback of NOL related to tax year 2019 (fiscal year 2020) which could be
estimated with reasonable certainty at that time. The tax benefit on account of the current year NOL carryback is recorded as a component of the
annual effective tax rate per guidance provided in ASC Topic 740.
The effective tax rate was -47.2% and 24.0% for fiscal years 2020 and 2019, respectively. The effective tax rate for fiscal year 2020 was impacted
by the rate differential on NOL carryback available under the CARES Act discussed in the paragraphs above. In addition, the effective tax rates
for fiscal years 2020 and 2019 were impacted by such items as non-deductible meals and entertainment, non-taxable gains and losses on life
insurance policies and state income taxes.
39
NOTE 5 - Line of Credit and Borrowing Agreement:
The Company maintains a line of credit with Wells Fargo Bank, N.A. that extends through March 1, 2022. Under the terms of this line of credit,
we may borrow up to $7,500 at an interest rate equal to the bank’s prime rate or LIBOR plus 1.5%. We borrowed $2,000 under this line of credit
on November 24, 2019 and $2,500 on January 24, 2020 for a combined total of $4,500. We repaid the balance on this line of credit with Wells
Fargo Bank, N.A. on May 13, 2020 of $4,500 with the proceeds from the fifth borrowing of $7,200 under the master collateral loan and security
agreement with Wells Fargo Bank, N.A. described below. The line of credit contains various covenants, the more significant of which require us
to maintain a minimum tangible net worth, a minimum quick ratio, a minimum net income after tax and total capital expenditures less than
$7,500. The Company was in compliance with all covenants as of October 30, 2020. Subsequent to October 30, 2020, we borrowed $2,000 under
the line of credit on December 2, 2020.
On December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A. (the “Original Wells Fargo
Loan Agreement”) for up to $15,000 in equipment financing. Pursuant to the Wells Fargo Loan Agreement, we borrowed the following amounts.
Type and Number (1)
Equipment Loan No. 01
Equipment Loan No. 02
Equipment Loan No. 03
Equipment Loan No. 04
Equipment Loan No. 05
Total
Date Funds
Received
12/26/18
04/23/19
12/23/19
03/06/20
04/17/20
Rate
Amount
Payment
Amount and
Date
4.13 % $
3.98 %
3.70 %
3.29 %
3.68 %
$
7,500 $
7,500
3,750
7,500
7,200
33,450 $
103 01/31/19
102 05/31/19
54 02/03/20
100 03/13/20
97 05/15/20
456
(1) Term: 7 years for 84 installment payments.
Secured equipment notes payable to Wells Fargo Bank, N.A. collateralized by
equipment for the new Chicago processing facility.
Less current portion of notes payable
Total long-term notes payable
$
$
29,122 $
(4,430)
24,692 $
13,747
(1,943)
11,804
October 30, 2020
November 1, 2019
The Wells Fargo Loan Agreement as amended, contains various affirmative and negative covenants that limit the use of funds and define other
provisions of the loan. The main financial covenants are listed below:
● Total Liabilities divided by Tangible Net Worth not greater than 2.5 to 1.0 at each fiscal quarter,
● Quick Ratio not less than 1.0 to 1.0 at each fiscal quarter end, and
● Fixed Charge Coverage Ratio not less than 1.25 to 1.0 as of each fiscal quarter end, determined on a trailing 4-quarter basis.
Aggregate contractual maturities of debt in future fiscal years are as follows:
Fiscal Years
2021
2022
2023
2024
2025
2026-2027
Debt Payable
4,429
4,599
4,775
4,958
5,148
5,213
$
$
$
$
$
$
The Company was in compliance with all covenants under the Wells Fargo Loan Agreement as of October 30, 2020.
NOTE 6- Contingencies and Commitments:
The Company leases warehouse and/or office facilities throughout the United States through month-to-month rental agreements. In the
case of month-to-month lease or rental agreements with terms of 12 months or less, the Company made an accounting policy election to not
recognize lease assets and liabilities and record them on a straight-line basis over the lease term. For further information regarding our lease
accounting policy, please refer to Note 1 – Summary of Significant Accounting Policies, Leases.
40
The Company leases three long-haul trucks received during fiscal year 2019. The six-year leases for these trucks expire in 2025.
Amortization of equipment under capital lease was $71 in 2020. The Company leased one long-haul truck for $40 received during fiscal year
2020, and that lease term is two years.
The Company performed a detailed analysis and determined that the only indication of a long-term lease was Hogshed Ventures, LLC. A
right-of-use asset and corresponding liability for warehouse storage space was recorded for $1,091 for Hogshed Ventures, LLC for 40th Street
as of October 30, 2020. We lease this space under a non-cancelable operating lease. This lease does not have significant rent escalation holidays,
concessions, leasehold improvement incentives or other build-out clauses. Further this lease does not contain contingent rent provisions. This
lease terminates on June 30, 2023. This lease includes both lease (e.g., fixed rent) and non-lease components (e.g., real estate taxes, insurance,
common-area and other maintenance costs). The non-lease components are deemed to be executory costs and are included in the minimum lease
payments used to determine the present value of the operating lease obligation and related right-of-use asset.
This lease does not provide an implicit rate and we estimated our incremental interest rate to be approximately 1.6%. We used our
estimated incremental borrowing rate and other information available at the lease commencement date in determining the present value of the
lease payments.
The following is a schedule by years of future minimum lease payments for transportation leases and right-of-use assets:
Fiscal Year
2022
2023
2024
2025
2026
Later Years
Total minimum lease payments(a)
Less: Amount representing executory costs
Less: Amount representing interest(b)
Present value of future minimum lease payments(c)
Financing
Obligations
504
550
405
102
59
-
1,620
(82)
(14)
1,524
$
$
$
(a) Minimum payments exclude contingent rentals based on actual mileage and adjustments of rental payments based on the Consumer Price
Index.
(b) Amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate at the
inception of the leases.
(c) Reflected in Note 2, as current and noncurrent obligations under capital leases of $144 and $289, respectively and right-of-use assets of $372
and $719, respectively.
41
NOTE 7 - Segment Information:
We have two reportable operating segments, Frozen Food Products (the processing and distribution of frozen products) and Snack Food
Products (the processing and distribution of meat and other convenience foods).
We evaluate each segment’s performance based on revenues and operating income. Selling, general and administrative expenses include
corporate accounting, information systems, human resource and marketing management at the corporate level. These activities are allocated to
each operating segment based on revenues and/or actual usage.
The following segment information is for the fiscal years ended October 30, 2020 (52 weeks) and November 1, 2019 (52 weeks):
2020
Net sales
Cost of products sold
Gross margin
SG&A
(Gain) on sale of property, plant and equipment
Income before taxes
Total assets
Additions to PP&E
2019
Net sales
Cost of products sold
Gross margin
SG&A
(Gain) loss on sale of property, plant and equipment
Income before taxes
Total assets
Additions to PP&E
Segment Information
Frozen Food
Products
Snack Food
Products
41,241 $
27,687
13,554
12,566
-
988 $
156,729 $
110,765
45,964
41,880
(58)
4,142 $
Other
Totals
- $
-
-
-
-
- $
197,970
138,452
59,518
54,446
(58)
5,130
11,490 $
284 $
115,657 $
24,198 $
28,136 $
- $
155,283
24,482
Segment Information
Frozen Food
Products
Snack Food
Products
51,234 $
33,444
17,790
14,867
(4)
2,927 $
137,551 $
93,677
43,874
37,970
294
5,610 $
Other
Totals
- $
-
-
-
-
- $
188,785
127,121
61,664
52,837
290
8,537
12,198 $
654 $
90,221 $
25,085 $
21,037 $
- $
123,456
25,739
$
$
$
$
$
$
$
$
The following information further disaggregates our sales to customers by major distribution channel and customer type for the fiscal years ended
October 30, 2020 and November 1, 2019, respectively.
2020
Distribution Channel
Direct store delivery
Direct customer warehouse
Total Snack Food Products
Distributors
Total Frozen Food Products
Retail (a)
Foodservice (b)
Totals
$
117,386 $
39,343
156,729
- $
-
-
9,639
9,639
31,602
31,602
117,386
39,343
156,729
41,241
41,241
Total Net Sales
$
166,368 $
31,602 $
197,970
(a) Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.
(b) Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools,
convenience stores, healthcare facilities and the military.
42
2019
Distribution Channel
Direct store delivery
Direct customer warehouse
Total Snack Food Products
Distributors
Total Frozen Food Products
Retail (a)
Foodservice (b)
Totals
$
100,936 $
36,615
137,551
- $
-
-
6,915
6,915
44,319
44,319
100,936
36,615
137,551
51,234
51,234
Total Net Sales
$
144,466 $
44,319 $
188,785
(a) Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.
(b) Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools,
convenience stores, healthcare facilities and the military.
NOTE 8 - Unaudited Interim Financial Information:
Not applicable for a smaller reporting company.
43
DESCRIPTION OF CAPITAL STOCK OF THE REGISTRANT
As of October 30, 2020, Bridgford Foods Corporation (the “Company”) had one class of securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended: Common Stock, par value $1.00 per share, which is listed on the Nasdaq Global Market.
The following is a description of the rights of the Company’s capital stock and related provisions of (i) the Company’s Restated Articles
of Incorporation, as amended (the “Articles”), (ii) the Company’s Amended and Restated Bylaws (the “Bylaws”), and (iii) applicable California
law. This description is qualified in its entirety by, and should be read in conjunction with, the Articles, the Bylaws and applicable California
law.
Authorized Capital Stock
Pursuant to the Articles, the Company is authorized to issue two classes of shares designated “Preferred” and “Common.” The total
number of shares that the Company has authority to issue is 21,000,000, consisting of 20,000,000 Common shares, par value $1.00 per share,
and 1,000,000 Preferred shares, without par value.
Common Stock
Exhibit 4.1
Fully Paid and Nonassessable
All of the outstanding Common shares are fully paid and non-assessable.
Voting Rights
The holders of Common shares are entitled to one vote per share on all matters to be voted on by such holders; provided, however, that
holders of Common shares may have cumulative voting rights in the election of directors if the candidates’ names have been placed in nomination
prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder’s intention to
cumulate votes.
Dividends
The holders of Common shares are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s
Board of Directors in its discretion from funds legally available therefor.
Right to Receive Liquidation Distributions
Upon liquidation, dissolution or winding-up, the holders of Common shares are entitled to receive pro rata all assets remaining available
for distribution to holders of such shares.
No Preemptive or Similar Rights
Common shares have no preemptive or other subscription rights, and there are no conversion rights or redemption or sinking fund
provisions with respect to such Common shares.
Preferred Stock
Designation of Series of Preferred Stock.
Pursuant to the Articles, without further action by the Company’s stockholders, the Company’s Board of Directors is authorized (i) to
provide for the issuance of Preferred shares in one or more series; (ii) to fix or alter the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any
wholly unissued series of Preferred shares, and the number of shares constituting any such series and the designation thereof, or any of them; and
(iii) to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares
of such series then outstanding.
Anti-Takeover Provisions of the Articles, Bylaws and California Law
Provisions of the Articles and Bylaws may delay or discourage transactions involving an actual or potential change in control of the
Company or change in its management, including transactions in which shareholders might otherwise receive a premium for their shares, or
transactions that its shareholders might otherwise deem to be in their best interests. Among other things, the Articles and Bylaws:
●
provide that, except for a vacancy caused by the removal of a director as provided in the Bylaws, a vacancy on the Company’s Board of
Directors may be filled by approval of the Company’s Board of Directors, or if the number of directors then in office is less than a
quorum by (i) the unanimous written consent of the directors then in office, (ii) the affirmative vote of a majority of the directors then
in office at a meeting held pursuant to notice or waivers of notice complying with Section 307 of the California Corporations Code, or
(iii) a sole remaining director;
provide that shareholders seeking to present proposals before a meeting of shareholders or to nominate candidates for election as
directors at a meeting of shareholders must provide notice in writing in a timely manner, and also specify requirements as to the form
and content of a shareholder’s notice; and
provide that, at a shareholders’ meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes unless
the candidates’ names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder’s intention to cumulate votes.
●
●
In addition, as a California corporation, the Company is subject to the provisions of Section 1203 of the California General Corporation
Law, which requires it to provide a fairness opinion to its shareholders in connection with their consideration of any proposed “interested party”
reorganization transaction.
Listing
The Company’s Common shares are listed on the Nasdaq Global Market under the trading symbol “BRID.”
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
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. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. 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;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Dated: January 15, 2021
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford, Chairman of the Board
(Principal Executive Officer)
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. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. 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;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Dated: January 15, 2021
/s/ RAYMOND F. LANCY
Raymond F. Lancy
Chief Financial Officer, Executive Vice President,
Treasurer and Assistant Secretary
(Principal Financial and Accounting Officer)
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, William L. Bridgford, Chairman of the Board of Bridgford Foods Corporation (the “Company”), certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the fiscal year ended October 30, 2020 (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
Exhibit 32.1
Company.
Dated: January 15, 2021
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman of the Board
(Principal Executive 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.
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Raymond F. Lancy, Chief Financial Officer, Executive 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 30, 2020 (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
Exhibit 32.2
Company.
Dated: January 15, 2021
/s/ RAYMOND F. LANCY
Raymond F. Lancy
Chief Financial Officer, Executive 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.
This page intentionally left blank.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 30, 2020
Commission file number: 000-02396
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:
Title of each class
Common Stock
Trading Symbol(s)
BRID
Name of each exchange on which registered
Nasdaq Global Market
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 [ ] No [X]
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 [ ] No
[X]
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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Non-accelerated filer [X]
Accelerated filer [ ]
Smaller reporting company [X]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
Indicate by check mark whether the registrant has filed a report on and attestation of the effectiveness of its internal control over financial
reporting under Section 404(b) of Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by registered public accounting firm that prepared or issued its audit
report [ ]
The aggregate market value of voting stock held by non-affiliates of the registrant on April 17, 2020 was $30,843,000.
As of January 15, 2021, there were 9,076,832 shares of common stock outstanding.
EXPLANATORY NOTE
On January 15, 2021, Bridgford Foods Corporation (the “Company”) filed its Annual Report on Form 10-K for the year ended October 30, 2020
(the “Form 10-K”), with the Securities and Exchange Commission (the “SEC”). Because the Company has determined that it will not file its
definitive proxy statement within 120 days following the last day of its last fiscal year, the Company is providing Items 10, 11, 12, 13 and 14 of
Part III in this Form 10-K/A filing. This Form 10-K/A hereby amends and restates in their entirety the Form 10-K cover page and Items 10
through 14 of Part III.
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Form 10-K/A also contains new certifications by the
principal executive officer and the principal financial officer as required by Section 302 of the Sarbanes-Oxley Act of 2002. Accordingly, Item
15(a)(3) of Part IV is amended to include the currently dated certifications as exhibits. Because no financial statements have been included in
this Form 10-K/A and this Form 10-K/A does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K,
paragraphs 3, 4, and 5 of the certifications have been omitted.
Except as expressly noted in this Form 10-K/A, this Form 10-K/A does not reflect events occurring after the original filing of the Form 10-K or
modify or update in any way any of the other disclosures contained in the Form 10-K including, without limitation, the financial statements.
Accordingly, this Form 10-K/A should be read in conjunction with the Company’s Form 10-K and the Company’s other filings with the SEC.
Capitalized terms used herein, but not defined, shall have the meaning ascribed in the Company’s Form 10-K..
2
TABLE OF CONTENTS
EXPLANATORY NOTE
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
EXHIBIT 31.3
EXHIBIT 31.4
Page
4
4
7
17
18
18
19
19
20
3
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Identification of Directors
PART III
The following table and biographical summaries set forth, with respect to each director, his or her age, his or her principal occupation and the
year in which he or she first became a director of the Company. 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.
Name
William L. Bridgford
Allan L. Bridgford, Sr.
Todd C. Andrews
Raymond F. Lancy
Age
Principal Occupation
66 Chairman of the Board and Member of the Executive Committee of the Company (1)(4)
85 Vice President and Chairman of the Executive Committee of the Company (1)(4)
55 Vice President and Controller of Public Storage (2)(3)(4)
67 Chief Financial Officer, Vice President, Treasurer and Member of the Executive Committee of
the Company (4)
Keith A. Ross
Mary Schott
D. Gregory Scott
John V. Simmons
58 President of KR6, Inc. and Real Estate Consultant (4)
59 Chief Financial Officer of CSuite Financial Partners (2)(3)(4)
64 Managing Director of Peak Holdings, LLC (2)(3)(4)
65 President and Member of the Executive Committee of the Company (4)
Year
First
Became
Director
2004
1952
2004
2013
2016
2019
2006
2011
(1) William L. Bridgford is the nephew of Allan L. Bridgford, Sr.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
(4) Member of the Nominating Committee.
Directors
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. He has also served as a member of the Executive Committee since 2004. Mr. Bridgford is a graduate of California State
University, Fullerton with a degree in Business Management.
Mr. Bridgford is one of the principal owners of Bridgford Industries Incorporated, the Company’s majority shareholder. He 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. 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.
Allan L. Bridgford, Sr.
Allan L. Bridgford, Sr. has served as Vice President and Chairman of the Executive Committee since 2011. Mr. Bridgford retired from the Board
in October 2011 and was reappointed to the Board in August 2019. He previously served as Senior Chairman of the Board from March of 2006
to October of 2011. 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, 60% in March of 2005 and 50% in November 2014. Mr.
Bridgford’s base compensation was reduced by the same percentage as his regular 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 is one of the principal owners of Bridgford Industries Inc., the Company’s majority shareholder. He has extensive knowledge of
the Company’s business and experience in the food industry developed during his long tenure with the Company. The Board believes he is
qualified to serve as a director based on these experiences as well as his other valuable attributes and skills.
John V. Simmons
John V. Simmons 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 five years. Mr. Simmons earned a B.A. degree in Psychology from the University of Wisconsin.
Mr. Simmons has extensive knowledge and experience in the areas of marketing, product research and development, trade relations and operations
developed as an employee of the Company since 1979. The Board believes these skills and experiences qualify him to serve as a member of the
Board.
4
Todd C. Andrews
Todd C. Andrews is a Certified Public Accountant (inactive) and presently serves as Senior 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 with an emphasis in accounting and finance from California
State University, Northridge, and received an Elijah Watt Sells award with high distinction on the November 1988 CPA exam.
Mr. Andrews has over 30 years of experience with responsibilities including financial reporting, strategic financial planning and analysis, capital
markets, treasury operations, SEC reporting, Sarbanes Oxley internal controls and procedures, operational analysis, operational control design,
real estate acquisition and development underwriting, and system design and implementation. In addition, Mr. Andrews brings a diverse set of
perspectives to the Board from serving in positions in multiple industries, including public accounting, entertainment, retail, and real estate. The
Board believes his skills and extensive experience qualify him to serve as a member of the Board. Mr. Andrews also qualifies as an audit
committee financial expert and is financially sophisticated within the meaning of the NASDAQ Listing Rules.
Mary Schott
Mary Schott is currently working for CSuite Financial Partners, a professional services organization, as a contract Chief Financial Officer in the
Ecommerce consumer products industry. Previously, she was Chief Financial Officer and Corporate Secretary of California Commerce Club,
Inc., a privately held gaming and hospitality company, for which she had served from March 2014 through January 2020. Prior to California
Commerce Club, Ms. Schott served as Chief Financial Officer of San Manuel Band of Mission Indians, a sovereign tribal nation, and Chief
Accounting Officer of First American Title Insurance Company, a publicly traded financial services company. Ms. Schott holds an EMBA from
Claremont Graduate University and a bachelor’s degree in Accounting from Cal Poly Pomona University. She is also a Certified Public
Accountant and a member of the California Society of Certified Public Accountants and the American Institute of Certified Public Accountants.
Ms. Schott possesses leadership skills and a vast knowledge base on finance, accounting, strategic planning, risk management as well as decision
support for portfolio development, acquisitions, divestures, and establishing governance protocols. The Board believes that these skills and
experiences qualify her to serve as a member of the Board. Ms. Schott also qualifies as an audit committee financial expert and has financial
sophistication as described in the NASDAQ Listing 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 has extensive financial and managerial experience, which the Board believes qualifies him to serve as a member of the Board. Mr.
Scott also qualifies as an audit committee financial expert and has financial sophistication as described in the NASDAQ Listing Rules.
Raymond F. Lancy
Raymond F. Lancy 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 for ten years as an auditor at PricewaterhouseCoopers LLP. He earned a Bachelor of Science degree with a major in Administration
with high honors from California State University, San Bernardino.
Mr. Lancy has extensive knowledge and experience in the areas of finance and management developed at PricewaterhouseCoopers LLP and as
an employee of the Company since July of 1992 and as Chief Financial Officer since 2003. The Board believes these skills and experiences
qualify him to serve as a member of the Board.
Keith A. Ross
Keith A. Ross is President of KR6, Inc., a commercial real estate consultant and continues as founder/principal of Centra Realty Corporation
(discussed below). From August 2013 to 2018, Mr. Ross served as Executive Vice President of CT Realty, or CTR, a real estate investment,
development and management company based in Newport Beach, California. At CTR, Mr. Ross oversaw all development and was responsible
for sourcing, evaluating, and closing on all commercial development opportunities. In addition, Mr. Ross served on CTR’s Executive Committee
and Investment Committee. CTR was founded in 1994 and together with its affiliates and principals have developed, acquired and managed over
$8 billion in industrial and office properties. Prior to joining CTR, from June 2009 to January 2014, Mr. Ross was Founder, President and CEO
of Peligroso Spirits which sold to Diageo in London (the world’s largest spirits company). From 2001 to present, Mr. Ross acts as Founder and
Principal of Centra Realty Corporation, ranked as one of the most active real estate development companies in Orange County, California, where
he oversaw the company’s land acquisitions, capital raises of both equity and debt, architectural design, engineering, construction and
sales/leasing efforts.
5
Mr. Ross began his professional career at the Koll Company and was with Koll for over a decade and served in various roles from project manager
to marketing before leading the real estate development efforts of the company in Southern California. He currently serves on the Board of
Directors and is a Co-Founder of Miocean, a nonprofit foundation that applies proven business approaches to curb the harmful effects of urban
run-off pollution to the Ocean. Mr. Ross attended San Diego State University.
Mr. Ross has extensive real estate acquisition and development experience as well as project management and marketing expertise, which the
Board believes qualifies him to serve as a member of the Bridgford Foods Board. In addition to his service on the Board, Mr. Ross continues to
provide real estate consulting services to the Company.
Public Company Directorships
None of the directors have been a director of any other public company in the past five years.
Involvement in Certain Legal Proceedings
None of the directors have been involved in any legal events reportable under Item 401(f) of Regulation S-K during the last ten years.
Arrangements or Understandings with Directors
There are no arrangements or understandings pursuant to which any of the directors was or is to be elected to serve as a director or nominee.
Further, none of our directors have arrangements or understandings with any person or entity, other than the Company, relating to compensation
or other payments in connection with such director’s service to the Company.
Identification of Executive Officers
Our executive officers are set forth in the table above and include Allan L. Bridgford, Sr., William L. Bridgford, Raymond F. Lancy and John V.
Simmons, each of whom also serves as a member of and collectively constitute the Company’s Executive Committee. The Executive Committee
acts in the capacity of “Chief Executive Officer” of the Company. For information relating to the age, term of office, periods of service, family
relationships and any arrangements or understandings for each executive officer, see the section entitled “Executive Officers of the Registrant”
in PART I, ITEM 1 of this Annual Report on Form 10-K. A biographical summary regarding each of our executive officers is set forth above
under the caption “Directors.” None of the executive officers have been involved in any legal events reportable under Item 401(f) of Regulation
S-K during the last ten years.
Audit Committee
The Audit Committee currently consists of three members, including Ms. Schott (Chairman) and Messrs. Andrews and Scott. The Audit
Committee has been established in accordance with the rules and regulations of the SEC and each of the current 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 each of
Messrs. Andrews and Scott, and Ms. Schott qualify as “audit committee financial experts” as such term is used in the rules and regulations of the
SEC.
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
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.
6
ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Overview
This section 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 four members:
● Allan L. Bridgford, Sr., Vice President and Chairman of the Executive Committee
● William L. Bridgford, Chairman of the Board (Principal Executive Officer)
●
● Raymond F. Lancy, Chief Financial Officer, Executive Vice President and Treasurer (Principal Financial Officer)
John V. Simmons, President
The Company’s executive compensation program is overseen by the Compensation Committee, which is comprised of certain non-employee
members of the Board and, notwithstanding that the Company is a “controlled company” within the meaning of the NASDAQ Listing Rules,
each member is independent as defined in Rule 5605(a)(2) of the NASDAQ Listing Rules. The basic responsibility of the Compensation
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.
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
Compensation 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 units 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 Compensation 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 business unit performance;
● Develop and retain a leadership team that is capable of successfully operating and growing an increasingly competitive and complex
business in a rapidly changing industry; and
● Ensure that executive compensation-related disclosures are made to the public on a timely basis.
Role of the Compensation Committee
The compensation of all NEOs and other executive officers is determined by the Compensation Committee. The Compensation Committee met
one time during fiscal year 2020. The primary responsibilities of the Compensation Committee include, without limitation, the following:
● 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.
● Administer the Company’s equity incentive plans, including the review and grant of stock option and other equity incentive grants.
7
● 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.
Role of Management in the Compensation Determination Process
The Company’s senior management team, particularly the Chairman of the Board and the Chairman of the Executive Committee, support the
Compensation Committee in the executive compensation decision-making process. At the request of the Compensation Committee, one or more
members of the Executive Committee may present a performance assessment and recommendations to the Compensation Committee regarding
base salaries, bonus payments, incentive plan structure and other compensation-related matters for the Company’s executive officers (other than
with respect to their 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; and
● 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 and 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 members of the Executive Committee. The Compensation
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 an executive’s 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 at similar companies, 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 2020, the Compensation Committee set a base salary of $5,713 per week from $5,520 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 a 3.3% increase in the base
salary compared to fiscal year 2019, which was derived from management’s assessment of the increase in cost of living.
8
Discretionary Cash Bonuses
The Company’s policy is to make a significant portion of each NEO’s total compensation contingent upon the Company’s financial performance.
The Compensation Committee believes that the payment of cash bonuses based on the Company’s financial success allows the Company to offer
a competitive total compensation package despite relatively lower base salaries, while aligning a significant portion of executive compensation
with the achievement of positive Company financial results. However, while the payment of these cash bonuses to the NEOs is generally
correlated with the achievement of positive Company financial results, there are no specific performance targets communicated to the NEOs in
advance, and the bonuses are ultimately paid at the discretion of the Compensation Committee after receiving input from the Chairman of the
Board. For the fiscal year ended October 30, 2020, discretionary bonuses were awarded to the members of the Company’s Executive Committee
as disclosed in detail in the Summary Compensation Table.
Long-Term Equity-Based Incentive Compensation
The Compensation Committee has concluded that long-term stock-related compensation has very limited value as an employee incentive or
retention tool because the Company’s equity-based incentive awards have historically provided little or no value to the recipient. In addition,
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 or restricted stock awards for many years. Instead, the Compensation Committee aims to align the interests of the NEOs
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. 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.
Pension and Retirement Benefits
Retirement Plan for Administrative and Sales Employees of Bridgford Foods Corporation. 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 a monthly lifetime annuity 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 each participant’s 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. 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. Certain limitations on optional pre-tax contributions to the plan are imposed
pursuant to the Internal Revenue Code of 1986, as amended. No amounts are contributed by the Company unless the employee elects to make a
pretax contribution to the Plan.
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. No
contributions or salary deferrals have been made in the past ten years.
9
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 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 benefits 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 combined loss on this plan during fiscal year 2020 was
$19,000 for all active and retired participants.
The Company paid life and disability insurance premiums on policies for the Company’s President under which he is the named owner and
beneficiary. No further premiums are due on these policies.
Employment Agreements
The Company currently does not have any employment agreements with any of its NEOs. However, on August 12, 2019, the Company entered
into a consulting agreement with Allan L. Bridgford, Sr., pursuant to which the Company will engage Mr. Bridgford to provide consulting
services to the Company, commencing after his retirement from employment with the Company (including, without limitation, his position as
Vice President and Chairman of the Executive Committee of the Company). Under the terms of the consulting agreement, Mr. Bridgford will
provide to the Company consulting services, including, but not limited to, business development and strategic partnering, commencing on the
date of his retirement and until such agreement is terminated by either party upon at least thirty (30) days’ notice to the other party. Mr. Bridgford
will be compensated at a rate of $20,833.33 per month and will be reimbursed for all reasonable out of pocket expenses incurred in rendering
such services.
Payments Upon Termination of Employment or Change in Control
The Company currently does not have any 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 in fiscal year 2020 provided that it could not deduct compensation of more than $1,000,000 that is paid to its executive
officers. The Company believes that the compensation paid under the current management incentive programs is fully deductible for federal
income tax purposes. In certain situations, the Compensation Committee may approve compensation that will not meet the requirements for
deductibility in order to ensure competitive levels of compensation for its executives and to meet its obligations under the terms of various
incentive programs. However, the issue of deductibility has not come before the Compensation Committee in recent years and is not expected to
be a concern for the foreseeable future.
10
Summary Compensation Table
The table below provides summary information concerning cash and certain other compensation paid to or accrued for the Company’s NEOs
during fiscal years 2020 and 2019, respectively. Each of the NEOs named below were also members of the Executive Committee during the
referenced periods, which Committee acts in the capacity of Chief Executive Officer of the Company. See “Compensation Discussion and
Analysis” for further discussion of compensation arrangements pursuant to which the amounts listed in the table below were paid or awarded and
the criteria for such payment or award.
Change in
Pension
Value and
Non-
Qualified
Deferred
Compensation
Earnings($)(5)
Non-Equity
Incentive Plan
Compensation($)(4)
All
Other
Compensation($)(6) Total($)
Stock
Awards($)(2)
Option
Awards($)(3)
Name and
Principal
Position
Allan L.
Bridgford, Sr. 2020
Vice President 2019
Year
Base
Salary($)(1) Bonus($)
148,525 97,440
143,507 147,810
—
—
—
—
—
—
0
36,278
8,000 253,965
8,000 335,595
William L.
Bridgford
Chairman of
the Board
John V.
Simmons
President
Raymond F.
Lancy
Chief
Financial
Officer
2020
297,050 194,877
—
—
—
156,829
19,600 668,356
2019
287,014 295,620
—
—
—
346,911
19,400 948,945
2020
2019
297,050 194,877
287,014 295,620
—
—
—
—
—
—
55,343
127,392
19,600 566,870
43,776 753,802
2020
297,050 194,877
—
—
—
93,052
19,600 604,579
2019
287,014 295,620
—
—
—
299,731
19,400 901,765
(1) Fiscal years 2020 and 2019 were each 52 weeks.
(2) The Company did not grant any stock awards to any of the NEOs during fiscal years 2020 or 2019.
(3) The Company did not grant any option awards to any of the NEOs during fiscal years 2020 or 2019.
(4) The Company did not utilize any non-equity incentive plans in order to pay compensation to its NEOs in fiscal years 2019 or 2020. While it
is the Company’s policy to provide each of the NEOs with an opportunity to earn cash bonuses that are correlated with the Company’s
financial performance, the payment of the bonuses are ultimately subject to the discretion of the Compensation Committee. See
“Compensation Discussion and Analysis – Total Compensation for Executive Officers – Discretionary Cash Bonuses.”
(5) This column includes the aggregate positive change in actuarial present value of each NEO’s accumulated benefit under all defined benefit
and supplemental pension plans. In accordance with SEC rules, to the extent the aggregate change in present value of all defined benefit and
supplemental pension plans 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 NEO in the “Total” column has not been adjusted to reflect the negative amount. In addition, to the extent
that the change in present value of any particular defined benefit or supplemental pension plan for a particular year was a negative amount,
the negative amount has not been used to offset the positive change in present value associated with the other applicable defined benefit or
supplemental pension plans. The aggregate change in the present value of the non-qualified deferred compensation plan and pension and
retirement benefits for the NEOs in fiscal years 2020 and 2019 was as follows: (i) for fiscal year 2020, Allan L. Bridgford, Sr. (-$54,499),
William L. Bridgford ($64,770), John V. Simmons ($55,343), and Raymond F. Lancy ($993), and (ii) for fiscal year 2019, Allan L. Bridgford,
Sr. ($36,278), William L. Bridgford ($148,846), John V. Simmons ($127,392), and Raymond F. Lancy ($101,666).
(6) Consists of matching contributions to the Bridgford Foods Retirement Savings 401(k) plan made by the Company on behalf of each of the
NEOs, except Allan L. Bridgford, Sr., and an $8,000 payment to offset the negative impacts arising from the cancellation of supplemental
executive health benefits. In addition in fiscal year 2019, 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. No premiums were due or paid in fiscal year 2020.
11
Narrative to Summary Compensation Table
See “Compensation Discussion and Analysis” for further discussion of compensation arrangements pursuant to which 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 2020 or 2019. 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.
Outstanding Equity Awards at Fiscal Year-End
There were no outstanding options or stock awards held by any NEOs as of October 30, 2020.
Option Exercises and Stock Vested
There were no shares acquired upon the exercise of stock options or vesting of stock awards by any NEOs during fiscal years 2020 or 2019.
Pension Benefits
The tables below provide information concerning retirement plan benefits for each NEO and payments due upon certain termination scenarios.
Retirement Plan for Administrative and Sales Employees of Bridgford Foods Corporation
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 on the 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.
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 30, 2020:
Name
Allan L. Bridgford, Sr.
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Number of Years
Credited Service
Present Value
of Accumulated
Benefit (1)
Payments During
Fiscal Year
52 $
47 $
41 $
28 $
790,774 $
943,829 $
768,068 $
636,791 $
83,991
—
—
—
(1) The assumed discount rate used was 2.45% to compute the present value of the accumulated benefit. The Pri-2012 Total Dataset Mortality
Table with MP-2020 Scaling was used and an expected return on assets of 7.00% was assumed.
12
For the Fiscal Year ended November 1, 2019:
Name
Allan L. Bridgford, Sr.
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Number of Years
Credited Service
Present Value
of Accumulated
Benefit (1)
Payments During
Fiscal Year
52 $
46 $
40 $
27 $
845,273 $
879,059 $
712,725 $
635,798 $
82,750
—
—
—
(1) The assumed discount rate used was 3.00% to compute the present value of the accumulated benefit. The SOA RP-2014 Mortality Total
Dataset, adjusted to 2006 with Scale MP-2018 was used and an expected return on assets of 7.00% 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 the normal retirement date or later depending
on the election of the participant.
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.
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.
The present value of accumulated plan benefits and payments made during the fiscal year were as follows:
For the Fiscal Year ended October 30, 2020:
Name
Allan L. Bridgford, Sr.
William L. Bridgford
John V. Simmons
Raymond F. Lancy
(1) A 2.45% discount rate was used to compute the present values.
Present
Value
of
Accumulated
Benefit (1)
Payments
During
Last Fiscal
Year
$
$
$
$
— $
2,518,270 $
— $
2,518,270 $
—
—
—
—
13
For the Fiscal Year ended November 1, 2019:
Name
Allan L. Bridgford, Sr.
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Present
Value
of
Accumulated
Benefit (1)
Payments
During
Last Fiscal
Year
$
$
$
$
— $
2,426,211 $
— $
2,426,211 $
—
—
—
—
(1) A 3.00% discount rate was used to compute the present values.
The following table estimates the present value of SERP benefits under different employment termination scenarios as of October 30, 2020:
Present Value
of Benefit
Upon
Voluntary
Termination
of Employment
(1)
Present Value
of Benefit
if Disabled
(1)
Present Value
of Benefit
Upon Death (1)
Present Value
of Benefit
Upon Involuntary
Termination of
Employment due to
Sale/Merger/
Acquisition
(1)
$
$
$
$
— $
2,518,270 $
— $
2,518,270 $
— $
2,518,270 $
— $
2,518,270 $
— $
2,518,270 $
— $
2,518,270 $
—
2,518,270
—
2,518,270
Name
Allan L. Bridgford, Sr.
William L. Bridgford (2)
John V. Simmons
Raymond F. Lancy (2)
(1) In each scenario above, the benefit amount shown is calculated at October 30, 2020. A 2.45% 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 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 2.45%.
14
The following table estimates future SERP payments under different termination scenarios as of October 30, 2020:
Name
Allan L. Bridgford, Sr.
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Payment Upon
Voluntary
Termination
of Employment
—
Payment if
Disabled (1)
—
Death Benefit
from Plan (2)
—
$16,666.67 per month
for 180 months
beginning on 10/30/20
$16,666.67 per month
for 180 months
commencing after
disability
$16,666.67 per month
for 180 months
beginning just after
death
Involuntary
Termination of
Employment Due
to Sale/Merger/
Acquisition
—
Lump Sum payment
due at termination of
$2,518,270
—
—
—
—
$16,666.67 per month
for 180 months
beginning on 10/30/20
$16,666.67 per month
for 180 months
commencing after
disability
$16,666.67 per month
for 180 months
beginning just after
death
Lump Sum payment
due at termination of
$2,518,270
(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 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 30, 2020. The discount rate used to calculate the lump sum amount is 2.45%.
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 30,
2020.
Name
Allan L. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Executive
Contributions
in
Company
Contributions
in
Fiscal Year
Fiscal Year
Aggregate
Earnings in
Fiscal Year
Aggregate
Withdrawals/
Distributions
Aggregate
Balance at
Fiscal Year
End
$
$
$
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
—
—
—
—
The table below provides information concerning deferred compensation plan benefits for each NEO during the fiscal year ended November 1,
2019.
Name
Allan L. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
Executive
Contributions
in
Company
Contributions
in
Fiscal Year
Fiscal Year
Aggregate
Earnings in
Fiscal Year
Aggregate
Withdrawals/
Distributions
Aggregate
Balance at
Fiscal Year
End
$
$
$
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
—
—
—
—
15
The following table estimates the present value of non-qualified deferred compensation benefits under different employment termination
scenarios as of October 30, 2020:
Present
Value
of Benefit at
Termination
of
Employment
Present
Value
of Benefit if
Disabled
Present
Value
of Benefit
Upon Death
Present Value
of Benefit Upon
Involuntary
Termination of
Employment Due to
Sale/Merger/
Acquisition
$
$
$
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
—
—
—
—
Name
Allan L. Bridgford
William L. Bridgford
John V. Simmons
Raymond F. Lancy
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 on the next page summarizes the total compensation paid by the Company to directors who were not employees during fiscal year
2020. Directors who were employees did not receive any additional compensation for their services as directors.
Name
Todd C. Andrews
Allan L. Bridgford, Jr.
Keith A. Ross
D. Gregory Scott
Mary Schott
Fees
Earned
or Paid
in Cash
$ 24,070 $
$ 22,220 $
$ 24,600 $
$ 21,590 $
$ 27,100 $
Stock
Awards
— $
— $
— $
— $
— $
Option
Awards
Non-Equity
Incentive Plan
Compensation
Non-Qualified
Deferred
Compensation
Earnings
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
All Other
Compensation
—
Total
$ 24,070
447,406(1) $ 712,124
75,500(2) $ 100,100
$ 21,590
$ 27,100
—
—
(1) Effective November 3, 2020, Allan L. Bridgford, Jr. resigned as a member of the Board of Directors. Consists of (i) $168,000 paid and
(ii) $279,406 to be paid over 3 years in equal annual installments to Allan L. Bridgford, Jr. for consulting services rendered to the
Company. See ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR
INDEPENDENCE for further details.
(2) Consists of $75,500 paid to Keith A. Ross for consulting services rendered to the Company. See ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE for further details.
Narrative to Director Compensation Table
The Company uses cash compensation to attract and retain qualified candidates to serve on its Board of Directors. In setting director
compensation, the Compensation Committee 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 increasing profitability.
The directors are not paid an annual retainer for their service on the Board. Instead, each non-employee director was paid $2,380 for each of the
first two Board meetings attended during fiscal year 2020 and $2,480 for each subsequent Board meeting attended in fiscal year 2020. Members
of the Audit Committee were paid $350 to $550 for each Audit Committee meeting attended in fiscal year 2020 depending on the length of the
meeting. Directors were not paid any additional compensation for their service on the Nominating Committee in fiscal year 2020.
16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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 January 15, 2021 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
Allan L. Bridgford, Sr.
Bruce H. Bridgford
Baron R.H. Bridgford
170 North Green St.
Chicago, IL 60607
William L. Bridgford
Allan L. Bridgford, Jr.
Raymond F. Lancy
John V. Simmons
1707 Good-Latimer Expressway
Dallas, TX 75226
Todd C. Andrews
D. Gregory Scott
Keith A. Ross
Mary Schott
All directors and executive officers
as a group (8 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
155,882
—
1,654
7,461
20,000
242
363
200
8,550
—
—
—
7,156,396
7,156,396
7,156,396
7,156,396
7,156,396
—
—
—
—
—
—
7,156,396
7,312,278
7,156,396
7,158,050
7,163,857
7,176,396
242
363
200
8,550
—
—
78.8%
80.6%
78.8%
78.9%
78.9%
79.1%
*
*
*
*
*
*
7,350,748
7,156,396
7,350,748
81.0%
* 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 Amendment No.
1 to Schedule 13D filed with the SEC on February 7, 2017. Other than ownership of these shares, BII does not presently have any significant
business or assets. Allan L. Bridgford, Sr. William L. Bridgford, Bruce H. Bridgford, Baron R.H. Bridgford and Allan L. Bridgford, Jr.
presently own 18.47%, 7.77%, 9.99%, 9.34% and 4.18%, respectively, of the outstanding voting capital stock of BII. The remaining shares
of BII capital stock are 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 January 15, 2021 is based upon 9,076,832 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.
Equity Compensation Plan Information
Not applicable, as we do not have any compensation plans under which our equity securities are authorized for issuance.
17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Transactions
The Company’s general legal counsel is the son of Allan L. Bridgford, Sr. For his legal counsel, he currently is paid a fee of $2,480 for each
Board of Directors meeting attended. Total fees paid for attending Board of Directors meetings were $24,600 in fiscal year 2020 and $23,640 in
fiscal year 2019. 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 for legal services under this arrangement for each of fiscal years 2020 and 2019 were approximately $293,000 and $75,000, respectively.
Former director Allan L. Bridgford, Jr., son of Allan L. Bridgford, Sr., is providing business consulting services to the Company. The arrangement
currently provides for business consulting services at $1,200 per day. Total fees billed under this arrangement were approximately $168,000 in
fiscal year 2020 and $207,000 in fiscal year 2019. In addition, under a separate consulting arrangement for 2019, we accrued approximately
$279,000 of profit sharing based on fiscal year 2020 profitability to be paid out in equal installments over the next three years.
Director Keith A. Ross provides real-estate consulting services to the Company. The arrangement currently provides for consulting services at
$250 per hour. Total fees paid for consulting services were $75,500 in fiscal year 2020 and zero during fiscal year 2019.
Other than the relationships noted above, the Company is not aware of any related party transactions that would require disclosure as a related
party transaction under SEC rules.
Review, Approval or Ratification of Transactions With Related Persons
The Company’s executive officers, directors, nominees for directors and principal shareholders, including their immediate family members and
affiliates, are prohibited from entering into related party transactions 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 (defined as those transactions required to be disclosed under Item 404 of Regulation S-K) is set forth in the Amended and Restated
Audit Committee Charter, which was approved on November 8, 2010.
Director Independence
The Company is considered a “controlled company” within the meaning of Rule 5615(c)(1) of the NASDAQ Listing Rules based on the
approximate 80% beneficial ownership of its outstanding common stock by Bridgford Industries Incorporated and are therefore exempted from
various NASDAQ Listing Rules pertaining to certain “independence” requirements of its directors. Nevertheless, the Board of Directors has
determined that Messrs. Andrews and Scott, and Ms. Schott who together comprise the Audit Committee and the Compensation Committee, are
all “independent directors” within the meaning of Rule 5605 of the NASDAQ Listing Rules. Additionally, based on its status as a “controlled
company,” the Company is not required to have a Nominating Committee comprised solely of independent directors. Rather, the full Board
fulfills the role of Nominating Committee and 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.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
On November 1, 2020, the Company was notified that the audit practice of the Squar Milner LLP (“Squar Milner”), an independent registered
public accounting firm, was combined with Baker Tilly US, LLP (“Baker Tilly”) in a transaction pursuant to which Squar Milner combined its
operations with Baker Tilly and certain of the professional staff and partners of Squar Milner joined Baker Tilly either as employees or partners
of Baker Tilly. On November 1, 2020, Squar Milner resigned as the auditors of the Company and with the approval of the Audit Committee of
the Company’s Board of Directors, Baker Tilly was engaged as its independent registered public accounting firm.
Audit Fees
Fees charged by Baker Tilly for the audit of the Company’s annual financial statements and the review of the financial statements included in
the Company’s quarterly reports on Form 10-Q for fiscal year 2020 were approximately $179,000. Fees charged by Squar Milner for the audit
of the Company’s annual financial statements and the review of the financial statements included in the Company’s quarterly reports on Form
10-Q for fiscal year 2019 were approximately $175,000.
18
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. There were no audit-related fees
billed by Baker Tilly or Squar Milner for fiscal year 2020 or fiscal year 2019.
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. No fees were billed by Baker Tilly or Squar Milner for tax consulting during fiscal year 2020 or fiscal year
2019.
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
Baker Tilly or Squar Milner for fiscal year 2020 or fiscal year 2019.
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 registered public
accountants. These services may include audit services, audit-related services, tax services and other services. During fiscal years 2020 and 2019,
the Audit Committee approved all such services rendered by its independent registered public accountants. For audit services, the independent
registered public accountants provide 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 registered public accountants to provide during the fiscal year. The Company’s
senior management and the independent registered public accountants 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.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
(a)(3) Exhibits
The following are exhibits filed with this report.
EXHIBIT INDEX
Exhibit
Number
31.3+
Description of Exhibit
Certification Pursuant to Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by William
L. Bridgford.
31.4+
Certification Pursuant to Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Raymond F. Lancy.
+ Filed Herewith.
19
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No.
1 on Form 10-K/A 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: March 1, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Amendment has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman of the Board
(Principal Executive Officer)
Date
March 1, 2021
March 1, 2021
/s/ RAYMOND F. LANCY
Raymond F. Lancy
*
John V. Simmons
*
Allan L. Bridgford, Sr.
*
Todd C. Andrews
*
D. Gregory Scott
*
Keith A. Ross
*
Mary Schott
*By: /s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Attorney-in-Fact
Chief Financial Officer, Executive Vice President,
Treasurer, Assistant Secretary and Director
(Principal Financial and Accounting Officer)
President and Director
March 1, 2021
Director
Director
Director
Director
Director
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
20
I, William L. Bridgford, certify that:
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
1.
I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of Bridgford Foods Corporation; and
2. Based on my knowledge, this Amendment No. 1 to 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 Amendment No. 1 to Annual Report.
EXHIBIT 31.3
Date: March 1, 2021
/s/ WILLIAM L. BRIDGFORD
William L. Bridgford
Chairman of the Board
(Principal Executive Officer)
I, Raymond F. Lancy, certify that:
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
1.
I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of Bridgford Foods Corporation; and
2. Based on my knowledge, this Amendment No. 1 to 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 Amendment No. 1 to Annual Report.
EXHIBIT 31.4
Date: March 1, 2021
/s/ RAYMOND F. LANCY
Raymond F. Lancy
Chief Financial Officer, Executive Vice President, Treasurer
& Assistant Secretary
(Principal Financial and Accounting Officer)