<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 1, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
Commission file number: 0-2396
BRIDGFORD FOODS CORPORATION
(Exact name of Registrant as specified in its charter)
California 95-1778176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1308 North Patt Street, Anaheim, California 92801
(Address of principal executive offices) (Zip code)
(714) 526-5533
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
(Title of class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. _X_
The aggregate market value of voting stock held by non-affiliates of the
registrant on January 21, 1997 was $26,166,000.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 9,396,933 shares of Common
Stock, par value of $1.00 per share, as of January 21, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Items 5, 6, 7 and 8 of Part II are incorporated by reference from the
registrant's Annual Report to Shareholders for the fiscal year ended November 1,
1996. Items 10, 11, 12 and 13 of Part III are incorporated by reference from the
registrant's Proxy Statement for the Annual Meeting of Shareholders to be held
March 12, 1997.
<PAGE> 2
PART I
ITEM 1. BUSINESS
Background of Business
Bridgford Foods Corporation, a California corporation (collectively with
its subsidiaries, the "Company"), was organized in 1952. The Company originally
began its operations as a retail meat market in San Diego, California, and
evolved into a meat wholesaler for hotels and restaurants, a distributor of
frozen food products, a processor and packer of meat and a manufacturer and
distributor of frozen food products for sale on a retail and wholesale basis.
For more than the past five years, the Company and its subsidiaries have been
primarily engaged in the manufacturing, marketing and distribution of an
extensive line of frozen, refrigerated and snack food products throughout the
United States. The Company has not been involved in any bankruptcy, receivership
or similar proceedings, nor has it been party to any merger, acquisition, etc.
or acquired or disposed of any material amounts of assets during the past five
years. Substantially all of the assets of the Company have been acquired in the
ordinary course of business. The Company had no significant change in the type
of products produced or distributed, nor in the markets or methods of
distribution since the beginning of the fiscal year.
Certain statements in this report constitute "forward-looking statements" within
the meaning of the Securities Act of 1933 and the Securities Exchange Act of
1934. Such forward looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of Bridgford Foods Corporation to be materially
different from any future results, performance or achievements expressed or
implied by such forward looking statements. Such factors include, among others,
the following: general economic and business conditions; the impact of
competitive products and pricing; success of operating initiatives; development
and operating costs; advertising and promotional efforts; adverse publicity;
acceptance of new product offerings; consumer trial and frequency; changes in
business strategy or development plans; availability, terms and deployment of
capital; availability of qualified personnel; commodity, labor, and employee
benefit costs; changes in, or failure to comply with, government regulations;
weather conditions; construction schedules; and other factors referenced in this
report.
Description of Business
The Company operates in one business segment - the manufacture and
distribution of frozen, refrigerated and snack food products. The products
manufactured and distributed by the Company consist of an extensive line of food
products, including a variety of sliced luncheon meats and cheeses, wieners,
bacon, sandwiches, dry sausages, biscuits, bread dough items and roll dough
items. The products purchased by the Company for resale include a variety of
jerky, cheeses, salads, party dips, Mexican foods, nuts and other delicatessen
type food products. In the aggregate, the Company manufactures or distributes a
product line consisting of a total of approximately 450 food products. For
fiscal year 1996, products manufactured or processed by the Company
represented approximately 83% of the Company's consolidated sales and items
manufactured or processed by third parties for distribution represented
approximately 17% of consolidated sales. For fiscal year 1995, products
manufactured or processed by the Company represented approximately 85% of
the Company's consolidated sales and items manufactured or processed by third
parties for distribution represented approximately 15% of consolidated sales.
For fiscal year 1994, products manufactured or processed by the Company
represented approximately 87% of the Company's consolidated sales and items
manufactured or processed by third parties for distribution represented
approximately 13% of consolidated sales. For fiscal years 1992
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<PAGE> 3
through 1993, the products manufactured or processed by the Company represented
approximately 89% of the Company's consolidated sales, and the products
manufactured or processed by third parties for distribution by the Company were
approximately 11% of the Company's consolidated sales. Although the Company has
recently introduced several new products, none of these products have
contributed significantly to the Company's revenue growth for the fiscal year.
The Company's sales are not subject to material seasonal variations.
Historically the Company has been able to respond quickly to the receipt of
orders and, accordingly, the Company does not maintain a significant sales
backlog. The Company and its industry generally have no unusual demands or
restrictions on working capital items. The Company is not dependent upon a
single customer, or a few customers, the loss of which would have a material
adverse effect on the Company's results of operations. During the last fiscal
year the Company did not enter into any new markets or any significant
contractual or other material relationships.
The Company has two classes of similar food products, each of which has
accounted for 10% or more of consolidated sales in the prior three fiscal years
listed below. The following table shows sales, as a percentage of consolidated
sales, for each of these two classes of similar products for each of the last
three fiscal years:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Frozen Food Products 44% 46% 46%
Refrigerated and Snack Food Products 56% 54% 54%
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
To date, federal, state and local environmental laws and regulations,
including those relating to the discharge of materials into the environment,
have not had a material effect on the Company's business.
Product Planning and Research and Development
The Company continually monitors the consumer acceptance of each product
within its extensive product line. Individual products are regularly added to
and deleted from the Company's product line. The addition or deletion of any
product has not had a material effect on the Company's operations. The Company
believes that a key factor in the success of its products is its system of
carefully targeted research and testing of its products to ensure high quality
and that each product matches an identified market opportunity. The emphasis in
new product introductions in the past few years has been in microwaveable,
single service items. The Company is constantly searching to develop new
products to complement its existing product line and improved processing
techniques and formulas for its existing product line. The Company utilizes an
in-house test kitchen to research and experiment with unique food preparation
methods, improve quality control and analyze new ingredient mixtures. The
Company does not anticipate any significant change in product-mix as a result of
its research and development efforts.
Marketing, Sales and Distribution
The Company markets and sells its products with its own sales force,
brokers, cooperatives, wholesalers and independent distributors. Currently,
products are sold by the Company's own sales force to approximately 25,000
retail food stores located in 49 states and Canada. In addition, the Company
sells its products through wholesalers, cooperatives and distributors to
approximately an additional 17,500 retail outlets and 19,000 restaurants and
institutions.
3 of 15 Pages
<PAGE> 4
The Company's annual advertising expenditures are directed towards retail
and institutional customers. These customers participate in various special
promotional programs including "slotting" and direct advertising allowances
sponsored by the Company. The Company also invests in general consumer
advertising in various newspapers and periodicals. The Company directs
advertising at food service customers with campaigns in major industry
publications and through Company participation in trade shows throughout the
United States.
Competition
The products of the Company are sold under highly competitive conditions.
All food products can be considered competitive with other food products, but
the Company regards its principal competitors to include national, regional and
local producers and distributors of refrigerated, frozen and snack food
products. Several of the Company's competitors include large companies with
substantially greater financial and marketing resources than those of the
Company. Existing competitors may broaden their product lines and potential
competitors may enter or increase their focus on the Company's market, resulting
in greater competition for the Company. The Company believes that its products
compete favorably with those of the Company's competitors. Such competitors'
products compete against those of the Company for retail shelf space,
institutional distribution and customer preference.
Employees
At the end of fiscal 1996, the Company had approximately 650 employees,
approximately one-half of whose employment relationship with the Company was
governed by collective bargaining agreements. Certain agreements were extended
during fiscal year 1996 and these agreements currently expire between February
1998 and March 2000. The Company believes that its relationship with its
employees is good. There are currently no significant ongoing negotiations with
its employees.
Raw Materials
Although the Company has numerous sources of raw materials, the
availability of raw materials is subject to some volatility. From time to time
drought or flood conditions affect the cost of grain products adversely in the
short run, and costs of meat products in the subsequent two to five year cycle.
Similarly, periods of surplus grain products, usually occasioned by favorable
growing weather and adequate moisture, result in an increased supply and
lowering of grain costs in ensuing seasons. Government commodity programs and
export enhancement programs can also have material effects on commodity prices.
These programs are generally not predictable beyond published information.
ITEM 2. PROPERTIES
The Company owns its headquarters and plant located in Anaheim,
California, a 100,000 square-foot processing facility located on five acres of
land. The Company also owns a 146,000 square-foot processing facility on 1-1/2
acres of land in Chicago, Illinois, a 91,000 square-foot food processing
facility on 3-3/4 acres of land, a 4,000 square foot warehouse facility on 1.5
acres of land and a 28,000 square foot food processing facility on 1-3/4 acres
of land in Dallas, Texas. The foregoing plants are, in general, fully utilized
by the Company for processing, warehousing, distributing and administrative
purposes. In addition, the Company owns an unoccupied 2,500 square-foot
warehouse on 1/3 acre of land in Modesto, California. The Company also owns
1/4 acre of land in San Diego, California. This land is
4 of 15 Pages
<PAGE> 5
currently being leased to a third party. The Company leases warehouse and/or
office space in Oakland, California, Phoenix and Tucson, Arizona. The Company's
properties are adequate to satisfy its foreseeable needs. Additional properties
may be acquired and/or plants expanded if favorable opportunities and conditions
arise. The Company's capital improvement programs continued into 1996.
Significant projects were completed at all locations, primarily for new 14,000
square foot additions and modernization of our Frozen-Rite plant in Dallas,
Texas at a total cost of $6,005,000 ($1,820,000 for fiscal year 1996) and the
construction and equipping of our new 42,000 square foot, state-of-the-art
frozen food plant at a total cost of $5,070,000 ($2,177,000 for fiscal year
1996) on approximately eight acres of land in North Carolina. These factories
are now running efficiently. The balance of projects in process at
November 1, 1996 was $167,000.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceeding was pending at November 1, 1996 against the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's shareholders during the fourth
quarter of the fiscal year ended November 1, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of all the executive officers of the
Company as of January 1, 1997 are listed below. All executive officers are
full-time employees of the Company. Messrs. Hugh Wm. Bridgford and Allan L.
Bridgford are brothers. Officers are normally appointed annually by the
board of directors at their meeting immediately following the annual meeting
of shareholders.
<TABLE>
<CAPTION>
Name Age Position(s) with the Company
- ---- --- ----------------------------
<S> <C> <C>
Allan L. Bridgford 61 Chairman and member of the Executive Committee
Robert E. Schulze 62 President and member of the Executive Committee
Hugh Wm. Bridgford 65 Vice President and Chairman of the Executive Committee
Salvatore F. DeGeorge 65 Senior Vice President
Lawrence D. English 65 Vice President
</TABLE>
5 of 15 Pages
<PAGE> 6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock, par value $1.00 per share (the "Common
Stock"), is traded in the over-the-counter market and prices are quoted on The
Nasdaq National Market under the symbol "BRID." As of January 1, 1997, there
were 616 holders of record of the Company's Common Stock. The market price and
dividend information with respect to the Company's Common Stock are set forth on
the inside cover of the Company's 1996 Annual Report to Shareholders
incorporated herein by reference. Future dividends will be dependent upon future
earnings, financial requirements and other factors.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth on page 4 of the Company's 1996 Annual Report
to Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth on pages 4 and 5 of the Company's 1996 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth on pages 6 through 11 of the Company's 1996
Annual Report to Shareholders in the sections thereof entitled "Consolidated
Balance Sheets", "Consolidated Statements of Income", "Consolidated Statements
of Shareholders' Equity", "Consolidated Statements of Cash Flows", "Notes to
Consolidated Financial Statements" and "Report of Independent Accountants" is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
6 of 15 Pages
<PAGE> 7
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information set forth in the Company's definitive proxy statement for the
1997 Annual Meeting of Shareholders to be held on March 12, 1997 is incorporated
herein by reference. Information concerning the executive officers of the
Company is set forth in Part I hereof under the heading "Executive Officers of
the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information set forth in the Company's definitive proxy statement for the
1997 Annual Meeting of Shareholders to be held on March 12, 1997 is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information set forth in the Company's definitive proxy statement for the
1997 Annual Meeting of Shareholders to be held on March 12, 1997 is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information set forth in the Company's definitive proxy statement for the
1997 Annual Meeting of Shareholders to be held on March 12, 1997 is incorporated
herein by reference.
7 of 15 Pages
<PAGE> 8
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements. See "Index to Consolidated Financial
Statements" included in this report.
(2) Financial Statement Schedules. See "Index to Consolidated
Financial Statements" included in this report.
(3) Exhibits. The exhibits filed as a part of this report are
listed in the accompanying "Index to Exhibits".
(b) Report on Form 8-K. The Company did not file a Current Report on
Form 8-K during the quarter ended November 1, 1996.
8 of 15 Pages
<PAGE> 9
SIGNATURES
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.
BRIDGFORD FOODS CORPORATION
By: /s/ Allan L. Bridgford
--------------------------
Allan L. Bridgford, Chairman
Date: January 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Allan L. Bridgford Chairman January 24, 1997
- ----------------------
Allan L. Bridgford
/s/ Robert E. Schulze President January 24, 1997
- ---------------------
Robert E. Schulze
/s/ Hugh Wm. Bridgford Vice President January 24, 1997
- ----------------------
Hugh Wm. Bridgford
/s/ Paul A. Gilbert Director January 24, 1997
- -------------------
Paul A. Gilbert
/s/ John W. McNevin Director January 24, 1997
- -------------------
John W. McNevin
/s/ Steven H. Price Director January 24, 1997
- -------------------
Steven H. Price
/s/ Norman V. Wagner II Director January 24, 1997
- -----------------------
Norman V. Wagner II
/s/ Paul R. Zippwald Director January 24, 1997
- --------------------
Paul R. Zippwald
9 of 15 Pages
<PAGE> 10
BRIDGFORD FOODS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Registrant and its
subsidiaries, including the report thereon of Price Waterhouse LLP dated
December 24, 1996, appearing on pages 6 through 11 of the accompanying 1996
Annual Report to Shareholders are incorporated by reference in this Annual
Report on Form 10-K. With the exception of the aforementioned information and
the information incorporated in Items 5, 6, 7 and 8, the 1996 Annual Report to
Shareholders is not to be deemed filed as part of this Annual Report on Form
10-K. The following Financial Statement Schedules should be read in conjunction
with the financial statements in such 1996 Annual Report to Shareholders.
Financial Statement Schedules not included with this Annual Report on Form 10-K
have been omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants on Financial
Statement Schedules F-2
Financial Statement Schedules for the three years ended November 1, 1996:
Schedule VIII - Valuation and Qualifying Accounts
Accounts F-3
Schedule X - Supplementary Income Statement Information F-4
</TABLE>
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<PAGE> 11
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
F-2
To the Board of Directors of
Bridgford Foods Corporation
Our audits of the consolidated financial statements referred to in our report
dated December 24, 1996 appearing on page 11 of the 1996 Annual Report to
Shareholders of Bridgford Foods Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedules listed in Item
14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.
/s/Price Waterhouse LLP
Costa Mesa, California
December 24, 1996
11 of 15 Pages
<PAGE> 12
BRIDGFORD FOODS CORPORATION
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
F-3
<TABLE>
<CAPTION>
Provision for Accounts Balance at
Balance at losses on written off close
beginning Accounts less of
of period Receivable Recoveries period
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
October 28, 1994
----------------
Allowance for
doubtful
accounts $435,972 $64,545 $29,935 $470,582
======== ======= ======= ========
November 3, 1995
----------------
Allowance for
doubtful
accounts $470,582 $138,650 $103,609 $505,623
======== ======== ======== ========
November 1, 1996
----------------
Allowance for
doubtful
accounts $505,623 $139,150 $141,188 $503,585
======== ======== ======== ========
</TABLE>
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<PAGE> 13
BRIDGFORD FOODS CORPORATION
SCHEDULE VIII
SUPPLEMENTARY INCOME STATEMENT INFORMATION
F-4
Fiscal Years Ended
<TABLE>
<CAPTION>
November 1, November 3, October 28,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Maintenance
and repairs $3,220,610 $3,170,683 $3,416,409
========== ========== ==========
Advertising
costs $6,184,915 $5,530,868 $4,658,477
========== ========== ==========
</TABLE>
Taxes other than payroll and income taxes, are less than 1% of total sales as
reported in the related income statements.
13 of 15 Pages
<PAGE> 14
BRIDGFORD FOODS CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Page No.
- ------- --------
<S> <C> <C>
3.1 Articles of Incorporation (filed as Exhibit 1 to Form 10 and incorporated herein by NA
reference).
3.2 Amendment to Articles of Incorporation dated June 24, 1954 (filed as Exhibit 1-a to NA
Form 10 and incorporated herein by reference).
3.3 Amendment to Articles of Incorporation dated September 30, 1955 (filed as Exhibit 1-c NA
to Form 10 and incorporated herein by reference).
3.4 Amendment to Articles of Incorporation dated April 3, 1963 (filed as Exhibit 1-c to NA
Form 10 and incorporated herein by reference).
3.5 Restated Articles of Incorporation, dated December 29, 1989 (filed as NA
Exhibit 3.5 to Form 10 on January 28, 1993 and incorporated herein
by reference).
3.6 Amendment to Articles of Incorporation, dated July 27, 1990 (filed as Exhibit 3.6 to NA
Form 10 on January 28, 1993 and incorporated herein by reference).
3.7 By-laws, as amended (filed as Exhibit 2 to Form 10 and incorporated herein by NA
reference).
10.1 Bridgford Foods Corporation Defined Benefit Pension Plan (filed as
Exhibit 10.1 to Form 10 on January 28, 1993 and incorporated
herein by reference). NA
10.2 Bridgford Foods Corporation Supplemental Executive Retirement Plan (filed as Exhibit NA
10.2 to Form 10 January 28, 1993 and incorporated herein by reference).
10.3 Bridgford Foods Corporation Deferred Compensation Savings Plan. (filed as Exhibit 10.3 NA
to Form 10 January 28, 1993 and incorporated herein by reference).
13.1 1996 Annual Report to Shareholders. --
22.1 Subsidiaries of the Registrant. 15
27.1 Financial Data Schedule for the fiscal year ended November 1, 1996, submitted to the
Securities Exchange Commission in electronic format (for SEC information only).
</TABLE>
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<PAGE> 1
EXHIBIT 13.1
DESCRIPTION OF BUSINESS
Bridgford Foods Corporation and its subsidiaries manufacture and/or
distribute refrigerated, frozen and snack food products. The Company markets its
products throughout the United States. The Company sells its products through
wholesale outlets, restaurants and institutions. The products are sold by the
Company's own sales force, brokers, cooperatives, wholesalers and independent
distributors. Products are currently sold through approximately 25,000 retail
food stores in forty-eight states within the continental United States, Hawaii
and Canada that are serviced by Company-owned service routes. Company products
are also sold throughout the country to approximately another 17,500 retail
outlets and 19,000 restaurants and institutions.
The following summary represents the approximate percentage of net sales by
class of product for each of the last five fiscal years:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Products manufactured
or processed by
the Company ................ 83 85 87 89 89
Products manufactured
or processed
by others .................. 17 15 13 11 11
---- ---- ---- ---- ----
Total ........................ 100 100 100 100 100
==== ==== ==== ==== ====
</TABLE>
COMMON STOCK AND DIVIDEND DATA
The common stock of the Company is traded in the national over-the-counter
market and is authorized for quotation on The Nasdaq National Market under the
symbol "BRID". The following table reflects the high and low closing prices and
cash dividends paid as quoted by Nasdaq for each of the last eight fiscal
quarters.
<TABLE>
<CAPTION>
Prices
Fiscal -------------------- Cash Dividends
Quarter Ended $High $Low Paid
- ------------- ------ ------ --------------
<S> <C> <C> <C>
January 27, 1995 10 3/4 9 $.08 **
April 28, 1995 13 1/2 9 1/4 $.05
July 28, 1995 14 10 5/8 $.05
November 3, 1995 12 9 3/4 $.05
February 2, 1996 10 3/4 8 1/2 $.06
May 3, 1996 11 1/4 8 1/4 $.06
August 2, 1996 9 3/4 6 1/2 $.06
November 1, 1996 9 7 $.06
</TABLE>
** Includes $.03 per share extra cash dividend.
ANNUAL SHAREHOLDERS MEETING
The 1997 annual shareholders meeting will be held at the Holiday Inn, 222 W.
Houston Avenue, Fullerton, California at 10:00 a.m. on Wednesday, March 12,
1997.
[BAR GRAPHS]
BRIDGFORD FOODS CORPORATION
HISTORICAL TRENDS
<TABLE>
<CAPTION>
YEARS SALES NET INCOME CASH DIVIDENDS WORKING CAPITAL EQUITY
<S> <C> <C> <C> <C> <C>
88 60,180,365 2,654,207 373,135 6,424,429 8,149,454
89 72,623,078 3,495,373 559,086 9,329,724 13,366,813
90 84,334,434 3,916,985 840,167 11,618,627 16,443,631
91 92,866,266 4,489,995 1,006,277 14,221,096 19,927,349
92 100,113,269 5,298,407 1,130,908 17,214,946 24,094,848
93 105,146,822 5,576,332 1,503,509 21,413,629 28,167,671
94 108,883,562 6,141,726 1,879,385 24,870,630 32,430,012
95 112,497,590 6,590,855 2,161,295 22,494,577 36,859,572
96 118,316,470 5,651,383 2,255,264 22,401,167 40,255,691
</TABLE>
<PAGE> 2
TO OUR SHAREHOLDERS:
Sales set a new record for the eleventh consecutive year in 1996. Dividends were
increased for the tenth year in a row. Three major capital improvement projects
begun in our 1995 fiscal year, including the two largest in the Company's 64
year history, were completed with a total capitalized cost of $12,000,000. Net
income for 1996 was $5.7 million, which reflects a decrease from 1995 due to
extremely high raw material costs in both our meat and bakery divisions.
SALES, EARNINGS AND DIVIDENDS
Sales in our 52 week 1996 fiscal year increased to $118,316,470, a 5.2% gain
over sales in the 53 week 1995 fiscal year. Most of our sales gains are
attributable to increases in our number of direct store distribution customers
and strong sales of our meat snack products such as pepperoni and beef jerky. We
also added exciting new Focaccia Club and Focaccia Chicken sandwiches to our
Bridgford Micro-Ready(TM) product line and developed new biscuit products for
our foodservice customers.
Net income was $5,651,383 or sixty cents per share in 1996, 14.3% less than 1995
net income. During 1996 costs of pork raw materials required in our meat
business and wheat flour used in our bakery operations unexpectedly reached
extraordinarily high levels. Where possible, price increases to pass on these
higher costs have been implemented. Bakery costs have stabilized somewhat during
the first quarter of fiscal 1997. Costs of pork raw materials will remain
relatively high during 1997.
Cash dividends in 1996 were paid at a record level of twenty four cents per
share. Cash dividends totaling $2,255,000 were paid to shareholders in the 1996
fiscal year. Your board of directors has maintained the rate of six cents in the
first quarter of 1997 based on our strong financial condition and positive
business outlook.
FINANCIAL CONDITION
Bridgford Foods Corporation concluded 1996 with shareholder's equity of
$40,255,691, a gain of $3,396,119 or 9% over the prior year end. Working capital
remained strong at $22,401,167 and our current asset to current liability ratio
was maintained at a 2.2 to 1 level. Our excellent financial condition was
sustained while we invested $5,988,000 in capital improvements during 1996. All
improvements were financed internally and the company remained debt-free for the
tenth consecutive year. A $2,000,000 line of credit with a major bank is
available in the event it is needed for business opportunities.
<PAGE> 3
OPERATIONS
A major portion of our capital expenditures were made to complete construction
and equipping of our new state-of-the-art North Carolina frozen food plant and
for new additions and modernization of our Frozen-Rite plant in Dallas, Texas.
These factories are now running efficiently. We also renovated and enlarged the
manufacturing facilities at our Chicago meat processing plant and equipped it
with new processing machinery which will increase our capacity to produce dry
sausage products. Substantial savings in production, storage and distribution
costs will result from these investments.
SUMMARY
We expect 1997 to be a good year for Bridgford Foods Corporation. The
modernization and expansion of our manufacturing facilities, increased sales
volume, new product development and more stable raw material costs are expected
to produce improved operating results.
We thank our directors, customers, suppliers, coworkers and shareholders for
their support and confidence during 1996.
Respectfully submitted,
Allan L. Bridgford Robert E. Schulze
Chairman President
January 16, 1997
BRIDGFORD FOODS CORPORATION
FINANCIAL SUMMARY
Fiscal Year Ended
<TABLE>
<CAPTION>
November 1 November 3 %
1996 1995 Change
------------ ------------ ------
<S> <C> <C> <C>
Net sales ...................... $118,316,470 $112,497,590 5
Income before taxes ............ 9,116,383 10,630,855 (14)
Net income ..................... 5,651,383 6,590,855 (14)
Net income per share ........... .60 .70 (14)
Cash dividends per share ....... .24 .23 4
Working capital ................ 22,401,167 22,494,577 --
Total assets ................... 58,277,948 52,623,417 11
Shareholders' equity ........... 40,255,691 36,859,572 9
Return on average
equity .................... 14.66% 19.02%
</TABLE>
<PAGE> 4
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
November 1 November 3 October 28 October 29 October 30
1996 1995** 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Sales .................... $118,316,470 $112,497,590 $108,883,562 $105,146,822 $100,113,269
Net Income ................... 5,651,383 6,590,855 6,141,726 5,576,332 5,298,407
Net Income Per Share ......... .60 .70 .65 .59 .56
Current Assets ............... 40,423,424 38,258,422 39,427,179 32,721,065 28,652,723
Current Liabilities .......... 18,022,257 15,763,845 14,556,549 11,307,436 11,437,777
Working Capital .............. 22,401,167 22,494,577 24,870,630 21,413,629 17,214,946
Property, Plant and Equip.,Net 17,854,524 14,364,995 7,559,382 6,754,042 6,879,902
Total Assets ................. 58,277,948 52,623,417 46,986,561 39,475,107 35,532,625
Long-term Debt ............... -- -- -- -- --
Deferred Taxes on Income ..... -- -- -- -- --
Shareholders' Equity ......... 40,255,691 36,859,572 32,430,012 28,167,671 24,094,848
Cash Dividends Per Share ..... .24 .23 .20 .16 .12
</TABLE>
**53 weeks
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS LIQUIDITY AND CAPITAL RESOURCES
Certain statements under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report constitute
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934. Such forward looking statements involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance, or achievements of Bridgford Foods Corporation to
be materially different from any future results, performance or achievements
expressed or implied by such forward looking statements. Such factors include,
among others, the following; general economic and business conditions; the
impact of competitive products and pricing; success of operating initiatives;
development and operating costs; advertising and promotional efforts; adverse
publicity; acceptance of new product offerings; consumer trial and frequency;
changes in business strategy or development plans; availability, terms and
deployment of capital; availability of qualified personnel; commodity, labor,
and employee benefit costs; changes in, or failure to comply with, government
regulations; weather conditions; construction schedules; and other factors
referenced in this report.
The Company's operating results are heavily dependent upon the prices paid
for raw materials. The marketing of the company's value-added products does not
lend itself to instantaneous changes in selling prices. Changes in selling
prices are relatively infrequent and do not compare with the volatility of
commodity markets. Higher flour and pork prices were experienced during fiscal
1996 compared to prior fiscal years. Management anticipates that these costs
will continue to stabilize into fiscal year 1997 although no assurances can be
given. Costs of flour have declined in the 10 to 20% range since the close of
the third quarter of 1996 while pork prices have remained at historically high
levels.
The impact of inflation on the Company's financial position and results of
operations has not been significant during the last three years. Management is
of the opinion that the Company's strong financial position and its capital
resources are sufficient to provide for its operating needs and capital
expenditures.
Favorable operating results over the past several years have continued to
provide significant liquidity to the Company. Net cash provided by operating
activities was $7,162,000 in the 1996 fiscal year compared to $5,580,000 in 1995
and $9,902,000 in 1994. Accounts receivable balances decreased by $185,000 in
1996 (2%) due to strong collections, and increased $769,000 (8%) in 1995 and
$794,000 (9%) in 1994 due to the continued expansion of the business and
changing nature of the customer base. Inventories increased $1,754,000 (13%) in
1996 and $1,790,000 (15%) in 1995 due to continued business expansion, higher
storage capacities, higher raw materials costs and increased distribution of the
Company's products. Prepaid expenses increased $494,000 (15%), $849,000
(33%),and $256,000 (11%) in 1996, 1995 and 1994 due primarily to the increased
cash surrender value of life-insurance polices. The Company also recorded income
taxes receivable in prepaid expenses of $287,000 in 1995. Accounts payable and
accrued expenses increased $2,200,000 (14%) in 1996 and $1,462,000 (10%) in 1995
due primarily to increases in non-funded employee benefits and accrued
advertising.
The Company's capital improvement programs continued into 1996. Cash used
for additions to property, plant and equipment decreased $2,787,000 (32%).
Significant projects were completed at all locations, primarily the Dallas
Freezer expansion at a total cost of $6,005,000 ($1,820,000 for fiscal year
1996) and the North Carolina plant at a total cost of $5,070,000 ($2,177,000 for
fiscal year 1996). The balance of projects in process at November 1, 1996 was
$167,000. Capital expenditures in fiscal year 1995 for these projects totaled
approximately $6.3 million. These investments are expected to yield higher
production capacities, improved plant utilization and realize cost savings in
future years. Although annual depreciation expense will increase as a result of
these additions, such increase is not expected to have a material adverse impact
on the operating results of the Company. Cash used for additions to property,
plant and equipment increased $993,000 (57%) in 1994 compared to the prior year.
Expenditures consisted primarily of additions of delivery vehicles, machinery
and
4
<PAGE> 5
equipment and $1,554,000 in construction projects.
Cash flows used to pay cash dividends increased $94,000 (4%) in 1996,
$282,000 (15%) in 1995 and $376,000 (25%) in 1994, when compared to the prior
year, in recognition of the continuing success of the Company.
Cash and cash equivalents decreased $1,023,000 (14%) in 1996 and $5,282,000
(42%) in 1995 due primarily to significant investments made in property, plant
and equipment and an increase in cash dividends paid. Cash and cash equivalents
increased in 1994 $5,375,000 (74%) due to the continued operating success of the
Company and significant increases in non-funded employee benefits. The Company
has remained free of interest-bearing debt for ten consecutive years. Working
capital decreased by $93,000 (1%) in 1996 and $2,376,000 (10%) in 1995 after
reaching a record high of $24,871,000 in 1994. The decrease in working capital
is directly attributable to significant investments made by the Company in
projects in-process during the 1996 and 1995 fiscal years. The Company maintains
a $2,000,000 revolving line of credit with Bank of America that expires April
30, 1998. There were no borrowings under this line of credit during 1996.
RESULTS OF OPERATIONS
1996 (52 WEEKS) COMPARED TO 1995 (53 WEEKS)
Sales in fiscal year 1996 increased $5,819,000 (5.2%) when compared to sales
of the prior year. After considering the 53 week year, sales volume increased
approximately 7.2% when compared to the prior year.
Cost of products sold increased by $4,020,000 (5.6%) when compared to the
prior year. The gross margin was approximately 36% in 1996 and 1995 compared to
35% for 1994. Costs for commodity products were less favorable in 1996 compared
to prior years. However, a changing sales mix and increased selling prices
helped mitigate the impact of these increased costs.
Selling, general and administrative expenses increased $2,784,000 (9.9%) when
compared to the prior year. This increase was generally consistent with the
overall increase in sales. Advertising expenses outpaced the increase in sales
as a result of aggressive promotional allowances to promote the Company's
products and to maintain current distribution channels.
Depreciation expense increased $530,000 (27%) when compared to the prior
year. The Company completed significant expansion projects to existing
facilities located in Texas and a food processing facility in North Carolina.
First year (half-year convention) depreciation from these projects totaled
approximately $490,000. The Company expects to continue the growth and
modernization of facilities and equipment used in the business. The effective
tax rate remained consistent with the prior year at 38%.
1995 COMPARED TO 1994 (53 VERSUS 52 WEEKS)
Sales in fiscal year 1995 increased $3,614,000 (3%)
when compared to sales of the prior year. After considering the 53 week year,
sales volume increased slightly more than 1% when compared to the prior year.
Cost of products sold increased by $1,274,000 (2%) when compared to the prior
year. The gross margin increased to 36% in 1995 compared to 35% for 1994 and
1993. Commodity costs for meat products were more favorable in 1995 compared to
prior years and this trend helped improve margins in 1995 despite the small
increase in sales.
Selling, general and administrative expenses increased $1,523,000 (6%) when
compared to the prior year. This increase was generally consistent with the
overall increase in sales. Increased advertising expenses slightly outpaced the
increase in sales as a result of efforts to more heavily promote the Company's
products and to continue to expand distribution channels.
Depreciation expense increased $93,000 (5%) when compared to the prior year.
The Company continued to expand its vehicle fleet in 1995 and this contributed
to the increase. Several projects which were in process in the prior year were
placed in service during 1995 which also contributed to the overall increase in
depreciation. The Company expects to continue the growth and modernization of
facilities and equipment used in the business. The effective tax rate remained
consistent with the prior year at 38%.
1994 COMPARED TO 1993
Sales in fiscal year 1994 increased $3,737,000 (4%) when compared to sales of
the prior year. Added unit sales volume was the principal reason for the
increase while price increases had a minor influence on the overall sales gain.
The closing of Bridgford Meat Company, the Company's San Diego based fresh meat
business, offset the increase in sales by $2,665,000 in 1994.
Cost of products sold increased by $1,816,000 (3%) as compared to the prior
fiscal year due to higher unit sales volume. The gross profit margin remained
consistent at 35% for 1994 and 1993.
Selling, General and administrative expenses increased $987,000 (4%) during
fiscal 1994. The bulk of the increase was concentrated in the Company's
advertising programs. Advertising expenditures increased by approximately
$700,000 during 1994 as compared to the prior year. Increased salaries and wages
also contributed to higher costs.
Depreciation expense increased $36,000 (2%) in 1994 compared to 1993. The
continued expansion of the Company's business requires the addition and
replacement of facilities and equipment related to manufacturing and sales
activities. The effective tax rate was 38% for 1994 and 1993.
Effective for fiscal year 1994, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." Adoption of this statement did not materially impact the
Company's consolidated financial statements.
5
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
November 1 November 3
1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................... $ 6,343,022 $ 7,366,362
Accounts receivable, less allowance for doubtful
accounts of $503,584 and $505,623 ............ 10,007,141 10,191,679
Inventories .................................... 15,603,912 13,849,947
Prepaid expenses ............................... 3,886,928 3,392,620
Deferred income tax benefits ................... 4,582,421 3,457,814
----------- -----------
Total current assets .................... 40,423,424 38,258,422
Property, plant and equipment, net of
accumulated depreciation of $22,637,673
and $21,065,322 .............................. 17,854,524 14,364,995
----------- -----------
$58,277,948 $52,623,417
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................... $ 4,464,855 $ 4,662,825
Accrued payroll and other expenses ............. 13,444,084 11,046,103
Income taxes payable ........................... 113,318 54,917
----------- -----------
Total current liabilities ............... 18,022,257 15,763,845
----------- -----------
Contingencies and Commitments (Note 6)
Shareholders' equity:
Preferred stock, without par value
Authorized - 1,000,000 shares
Issued and outstanding - none
Common stock, $1.00 par value
Authorized - 20,000,000 shares
Issued and outstanding - 9,396,933 shares .... 9,453,816 9,453,816
Capital in excess of par value ................. 3,024,881 3,024,881
Retained earnings .............................. 27,776,994 24,380,875
----------- -----------
40,255,691 36,859,572
----------- -----------
$58,277,948 $52,623,417
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Fiscal year ended
--------------------------------------------
(52 weeks) (53 weeks) (52 weeks)
November 1 November 3 October 28
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net sales ................... $118,316,470 $112,497,590 $108,883,562
------------ ------------ ------------
Cost of products sold,
excluding depreciation .... 75,874,768 71,854,739 70,580,426
Selling, general and
administrative expenses ... 30,832,011 28,048,294 26,525,652
Depreciation ................ 2,493,308 1,963,702 1,870,758
------------ ------------ ------------
109,200,087 101,866,735 98,976,836
------------ ------------ ------------
Income before taxes ......... 9,116,383 10,630,855 9,906,726
Provision for taxes on income 3,465,000 4,040,000 3,765,000
------------ ------------ ------------
Net income .................. $ 5,651,383 $ 6,590,855 $ 6,141,726
============ ============ ============
Net income per share ........ $ .60 $ .70 $ .65
============ ============ ============
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock Capital Total
------------------------- in excess Retained shareholder's
Shares Amount of par earnings equity
---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, October 29, 1993............. 9,396,933 $ 9,453,816 $ 3,024,881 $15,688,974 $ 28,167,671
Net income......................... 6,141,726 6,141,726
Cash dividends paid ($.20 per share) (1,879,385) (1,879,385)
---------- ----------- ------------ ----------- ------------
Balance, October 28, 1994............. 9,396,933 9,453,816 3,024,881 19,951,315 32,430,012
Net income.......................... 6,590,855 6,590,855
Cash dividends paid ($.23 per share) (2,161,295) (2,161,295)
---------- ----------- ------------ ----------- ------------
Balance, November 3, 1995............. 9,396,933 9,453,816 3,024,881 24,380,875 36,859,572
Net income.......................... 5,651,383 5,651,383
Cash dividends paid ($.24 per share) (2,255,264) (2,255,264)
---------- ----------- ------------ ----------- ------------
Balance, November 1, 1996............. 9,396,933 $ 9,453,816 $ 3,024,881 $27,776,994 $ 40,255,691
========== =========== ============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal year ended
---------------------------------------------
November 1 November 3 October 28
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................ $ 5,651,383 $ 6,590,855 $ 6,141,726
Income charges not affecting cash:
Depreciation .................................... 2,493,308 1,963,702 1,870,758
Provision for losses on accounts receivable ..... 139,150 138,650 64,545
Gain on sale of assets .......................... (52,729) (68,153) (29,387)
Effect on cash of changes in assets and liabilities:
Accounts receivable ............................. 45,388 (908,128) (858,465)
Inventories ..................................... (1,753,965) (1,789,927) 473,457
Prepaid expenses ................................ (494,308) (849,272) (255,920)
Deferred income tax benefits .................... (1,124,607) (704,572) (754,275)
Accounts payable and accrued expenses ........... 2,200,011 1,462,211 2,939,281
Income taxes payable ............................ 58,401 (254,915) 309,832
----------- ------------ ------------
Net cash provided by operating activities ...... 7,162,032 5,580,451 9,901,552
----------- ------------ ------------
Cash used in investing activities:
Proceeds from sale of assets .................... 57,601 73,454 73,847
Additions to property, plant and equipment ...... (5,987,709) (8,774,616) (2,720,558)
----------- ------------ ------------
Net cash used in investing activities .......... (5,930,108) (8,701,162) (2,646,711)
----------- ------------ ------------
Cash used for financing activities:
Cash dividends paid ............................. (2,255,264) (2,161,295) (1,879,385)
----------- ------------ ------------
Net (decrease) increase in cash and cash equivalents (1,023,340) (5,282,006) 5,375,456
Cash and cash equivalents at beginning of year ..... 7,366,362 12,648,368 7,272,912
----------- ------------ ------------
Cash and cash equivalents at end of year ........... $ 6,343,022 $ 7,366,362 $ 12,648,368
=========== ============ ============
Cash paid for income taxes ......................... $ 3,955,717 $ 5,003,099 $ 4,021,490
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. All intercompany transactions
have been eliminated. The carrying amount of cash and cash equivalents, accounts
and other receivables, accounts payable and accrued liabilities approximate fair
market value due to the short maturity of these instruments.
Business segment
The Company and its subsidiaries operate in one business segment - the
manufacturing and/or distributing of refrigerated, frozen and snack food
products.
Fiscal year
The Company maintains its accounting records on a 52-53 week fiscal basis.
Fiscal years 1996 and 1994 include 52 weeks each. Fiscal year 1995 includes 53
weeks.
Revenues
Revenues are recognized upon product shipment or delivery to customers.
Cash equivalents
The Company considers all investments with original maturities of three
months or less to be cash equivalents. Cash equivalents include treasury bills
of $5,194,000 at November 1, 1996 and $6,987,000 at November 3, 1995.
Inventories
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated
depreciation. Major renewals and betterments are charged to the asset accounts
while the cost of maintenance and repairs is charged to income as incurred. When
assets are sold or otherwise disposed of, the cost and accumulated depreciation
are removed from the respective accounts and the resulting gain or loss is
credited or charged to income. Depreciation is computed on the straight-line
basis over 10 to 20 years for buildings and improvements, 5 to 10 years for
machinery and equipment and 3 to 5 years for transportation equipment.
Income taxes
Deferred taxes are provided for items whose financial and tax bases differ.
Earnings per share
Net income and cash dividends per share are calculated based on the weighted
average number of shares outstanding, 9,396,933, for all periods presented.
NOTE 2 - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:
<TABLE>
<CAPTION>
(in thousands)
1996 1995
------- -------
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT:
Land ............................................. $ 1,083 $ 598
Buildings and improvements ....................... 10,683 7,083
Machinery and equipment .......................... 23,672 15,186
Transportation equipment ......................... 5,055 5,140
Construction in-progress ......................... 7,423
------- -------
40,493 35,430
Accumulated depreciation ......................... 22,638 21,065
------- -------
$17,855 $14,365
======= =======
INVENTORIES:
Meat, ingredients
and supplies ................................... $ 4,320 $ 3,552
Work in progress ................................. 1,501 1,862
Finished goods ................................... 9,783 8,436
------- -------
$15,604 $13,850
======= =======
ACCRUED PAYROLL AND OTHER EXPENSES:
Payroll, vacation and
payroll taxes .................................. $12,057 $10,365
Property taxes ................................... 228 208
Other ............................................ 1,159 473
------- -------
$13,444 $11,046
======= =======
</TABLE>
NOTE 3 - RETIREMENT AND BENEFIT PLANS:
The Company has noncontributory trusteed defined
benefit retirement plans for sales, administrative, supervisory and certain
other employees. The benefits under these plans are primarily based on years of
service and compensation levels. The Company's funding policy is to contribute
annually the maximum amount deductible for federal income tax purposes.
Net pension cost consisted of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Cost of benefits earned
during the year ....................... $ 611 $ 568 $ 547
Interest cost on projected
benefit obligation .................... 689 585 532
Actual return on plan assets ............ 120 152 85
Deferral of unrecognized
gain on plan assets .................... (679) (638) (585)
Amortization of transition
asset ................................. (76) (76) (76)
Amortization of unrecognized
prior service costs ................... 34 24 23
----- ----- -----
Net pension cost ........................ $ 699 $ 615 $ 526
===== ===== =====
</TABLE>
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The transition asset is being amortized using the straight-line method over
17.63 years, the average remaining service periods of active plan participants.
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation were
7.5% and 6%, respectively. The expected long-term rate of return on assets for
all fiscal years was 7.5%.
Plan assets are primarily invested in marketable equity securities, corporate
and government debt securities and real estate and are administered by a life
insurance company.
The funded status of the plan is as follows:
<TABLE>
<CAPTION>
(in thousands):
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Plan assets at fair
market value ............................. $ 8,657 $ 7,554 $ 6,538
------- ------- -------
Actuarial present value of
benefit obligations:
Accumulated benefits
based on current salary
levels, including vested
benefits of $7,324
$6,823 and $5,841 ..................... 7,917 7,208 6,214
Additional benefits based
on estimated future salary levels .... 2,044 1,978 1,902
------- ------- -------
Projected benefit obligation ......... 9,961 9,186 8,116
------- ------- -------
Projected benefit obligation
in excess of
plan assets .............................. (1,304) (1,632) (1,578)
Unrecognized prior service
costs ................................... 315 235 236
Unrecognized loss (gain) on
plan assets ............................. (1,661) (479) 156
Unrecognized net transition
asset ................................... (596) (671) (747)
------- ------- -------
Accrued pension cost ....................... $(3,246) $(2,547) $(1,933)
======= ======= =======
</TABLE>
In fiscal year 1991, the Company adopted a non-qualified supplemental
retirement plan for certain key employees. Benefits provided under the plan are
equal to 60% of the employee's final average earnings, less amounts provided by
the Company's defined benefit pension plan and amounts available through Social
Security. Total annual benefits are limited to $120,000 for each participant in
the plan. Effective January 1, 1991 the Company adopted a deferred compensation
savings plan for certain key employees. Under this arrangement, selected
employees contribute a portion of their annual compensation to the plan. The
Company contributes an amount to each participant's account by computing an
investment return equal to Moody's Average Seasoned Bond Rate plus 2%. Employees
receive vested amounts upon death, termination or retirement. Total benefit
expense recorded under these plans for fiscal years 1996, 1995 and 1994 was
$405,000, $470,000 and $358,000, respectively. Benefits payable related to these
plans and included in accrued payroll in the accompanying financial statements
were $2,480,000 and $1,872,000 at November 1, 1996 and November 3, 1995,
respectively. In connection with this arrangement the Company is the beneficiary
of life insurance policies on the lives of certain key employees. The aggregate
cash surrender value of these policies, included in prepaid expenses, was
$3,341,000 and $2,763,000 at November 1, 1996 and November 3, 1995,
respectively. The total (income) expense recorded related to these policies was
approximately ($46,000), ($20,000) and $6,000 for fiscal years 1996, 1995 and
1994, respectively.
Effective for fiscal year 1994, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." This statement focuses principally on postretirement
health care benefits and requires accrual of the expected cost of providing
those benefits over the service lives of the employees. Adoption of this
statement did not materially impact the Company's consolidated financial
statements.
NOTE 4 - INCOME TAXES:
The provision for taxes on income includes the following:
<TABLE>
<CAPTION>
(in thousands)
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current:
Federal ................ $ 4,039 $ 4,102 $ 3,844
State .................. 551 643 675
------- ------- -------
4,590 4,745 4,519
------- ------- -------
Deferred:
Federal ................ (933) (609) (657)
State .................. (192) (96) (97)
------- ------- -------
(1,125) (705) (754)
------- ------- -------
$ 3,465 $ 4,040 $ 3,765
======= ======= =======
</TABLE>
The total tax provision differs from the amount computed by applying the
statutory federal income tax rate to income before income taxes as follows:
<TABLE>
<CAPTION>
(in thousands)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Provision for federal
income taxes at
the applicable
statutory rate ........................... $3,100 $3,614 $3,368
Increase in provision resulting from:
State income taxes,
net of federal income
tax benefit .......................... 335 397 391
Other, net ............................. 30 29 6
------ ------ ------
$3,465 $4,040 $3,765
====== ====== ======
</TABLE>
Deferred income taxes result from differences in the bases of assets and
liabilities for tax and accounting purposes.
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
(in thousands)
1996 1995
------- -------
<S> <C> <C>
Receivables allowance ...................... $ 199 $ 167
Inventory capitalization ................... 297 218
Deferred compensation ...................... 1,335 1,092
Franchise tax .............................. 93 100
Vacation benefits .......................... 407 321
Pension and
health care benefits ..................... 2,638 1,676
Depreciation ............................... (313) (54)
Other ...................................... (74) (62)
------- -------
$ 4,582 $ 3,458
======= =======
</TABLE>
No valuation allowance was provided against deferred tax assets in the
accompanying statements.
NOTE 5 - LINE OF CREDIT:
Under the terms of a revolving line of credit with Bank of America, the
Company may borrow up to $2,000,000 through April 30, 1998. At any time prior to
May 1998, the Company may convert borrowings, if any, into a three-year term
loan with principal and interest payable monthly commencing May 31, 1998. The
interest rate is at the bank's reference rate unless the Company elects an
optional interest rate. The borrowing agreement contains various covenants, the
more significant of which require the Company to maintain certain levels of
shareholders' equity and working capital. The Company was in compliance with all
provisions of the agreement during the year. There were no borrowings under this
line of credit during the year.
NOTE 6 - CONTINGENCIES AND COMMITMENTS:
The preparation of financial statements in conformity
with generally accepted accounting principles, requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported revenues and expenses during the
respective reporting periods. Actual results could differ from those estimates.
The Company leases certain transportation equipment under an operating lease
expiring in 1999. The terms of the lease provide for annual renewal options and
contingent rental payments based upon mileage and adjustments of rental payments
based on the Consumer Price Index. Minimum rental payments were $263,000,
$272,000 and $290,000 in fiscal years 1996,1995 and 1994, respectively.
Contingent payments were $95,000 in 1996 and 1995, and $92,000 in 1994. Future
minimum lease payments are approximately $257,000 per year from 1996 through
1998, and $130,000 in 1999. The Company also leases certain other properties
which do not result in material commitments.
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
To the Board of Directors and Shareholders of Bridgford Foods Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Bridgford Foods
Corporation and its subsidiaries at November 1, 1996 and November 3, 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended November 1, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Costa Mesa, California
December 24, 1996
11
<PAGE> 12
DIRECTORS
Allan L. Bridgford
Chairman
Hugh Wm. Bridgford
Paul A. Gilbert
Senior Vice President,
Smith Barney, Inc.
John W. McNevin
Consultant
(Formerly Vice President
Eastman/Office Depot, Inc.)
Steven H. Price
Property Management
Robert E. Schulze
Norman V. Wagner II
Retired (formerly President,
Signal Landmar
Paul R. Zippwald
Retired (former
President, Bank of America)
OFFICERS
Allan L. Bridgford
Chairman, Board of Directors
Robert E. Schulze
President
Hugh Wm. Bridgford
Chairman, Executive Committee
and Vice President
Salvatore F. DeGeorge
Senior Vice President
Lawrence D. English
Vice President
William L. Bridgford
Secretary
Raymond F. Lancy
Treasurer
GENERAL OFFICES
Bridgford Foods Corporation
1308 North Patt Street
P.O. Box 3773
Anaheim, California 92803
Phone (714) 526-5533
BRANCH OPERATIONS
Phoenix, Arizona
Fresno, California
Modesto, California
Oakland, California
Sacramento, California
Chicago, Illinois
Statesville, North Carolina
Dallas, Texas
TRANSFER AGENT AND REGISTRAR
Chase Mellon Shareholder Services
450 West 33rd Street
8th Floor
New York, NY 10001
P.O. Box 24935
Church Street Station
New York, NY 10249
Phone (800) 356-2017
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
Costa Mesa, California
<PAGE> 1
BRIDGFORD FOODS CORPORATION
EXHIBIT 22.1
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
Name of Subsidiary State in which Incorporated
------------------ ---------------------------
<S> <C>
Bridgford Distributing Company California
Bridgford Meat Company California
Bridgford Foods of Illinois, Inc. California
A.S.I. Corporation California
Bridgford Distributing Company of
Delaware (inactive) Delaware
American Ham Processors, Inc.*
(inactive) Delaware
Bert Packing Company (inactive) Illinois
Moriarty Meat Company (inactive) Illinois
</TABLE>
* No shares have been issued.
Page 15 of 15 Pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BRIDGFORD FOODS CORPORATION FOR THE FIFTY-TWO WEEKS
ENDED NOVEMBER 1, 1996 AS SET FORTH IN ITS 10-K FOR SUCH FISCAL YEAR AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-01-1996
<PERIOD-END> NOV-01-1996
<EXCHANGE-RATE> 1
<CASH> 6,343,022
<SECURITIES> 0
<RECEIVABLES> 10,510,725
<ALLOWANCES> 503,584
<INVENTORY> 15,603,912
<CURRENT-ASSETS> 40,423,424
<PP&E> 40,492,197
<DEPRECIATION> 22,637,673
<TOTAL-ASSETS> 58,277,948
<CURRENT-LIABILITIES> 18,022,257
<BONDS> 0
0
0
<COMMON> 9,453,816
<OTHER-SE> 30,801,875
<TOTAL-LIABILITY-AND-EQUITY> 58,277,948
<SALES> 118,316,470
<TOTAL-REVENUES> 118,316,470
<CGS> 75,874,768
<TOTAL-COSTS> 75,874,768
<OTHER-EXPENSES> 33,325,319
<LOSS-PROVISION> 139,150
<INTEREST-EXPENSE> 224,391
<INCOME-PRETAX> 9,116,383
<INCOME-TAX> 3,465,000
<INCOME-CONTINUING> 5,651,383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,651,383
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
