<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 OCTOBER 31, 1997
[ ] 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 12, 1998 was $48,045,000.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 10,336,415 shares of Common
Stock, par value of $1.00 per share, as of January 12, 1998.
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 October 31,
1997. 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 11, 1998.
<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.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Products manufactured or processed by the Company 82% 83% 85%
Items manufactured or processed by third parties for
distribution 18% 17% 15%
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
1
<PAGE> 3
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>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Frozen Food Products 44% 44% 46%
Refrigerated and Snack Food Products 56% 56% 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 25,200
retail food stores located in 49 states and Canada. In addition, the Company
sells its products through wholesalers, cooperatives and
2
<PAGE> 4
distributors to approximately an additional 18,000 retail outlets and 19,000
restaurants and institutions.
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 1997, the Company had approximately 640 employees,
approximately one-half of whose employment relationship with the Company was
governed by collective bargaining agreements. These agreements currently expire
between February 1998 and March 2000. The Company believes that its relationship
with its employees is good. A significant agreement , which expires in February
1998, is currently being renegotiated. There are no other significant ongoing
negotiations with union 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 owns a 146,000 square-foot processing facility on 1-1/2 acres
of land in Chicago, Illinois. In Dallas, Texas, facilities include 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 Statesville, North Carolina, a new 42,000
square foot, state of
3
<PAGE> 5
the art frozen food plant was completed in April 1996. 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 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.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceeding was pending at October 31, 1997 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 October 31, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of all the executive officers of the
Company as of January 1, 1998 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.
Name Age Position(s) with the Company
- ---- --- ----------------------------
Allan L. Bridgford 62 Chairman and member of the Executive Committee
Robert E. Schulze 63 President and member of the Executive Committee
Hugh Wm. Bridgford 66 Vice President and Chairman of the Executive
Committee
Salvatore F. DeGeorge 66 Senior Vice President
Lawrence D. English 66 Vice President
4
<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, 1998, there
were 566 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 1997 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 1997 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 1997 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 1997
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.
5
<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 1998 Annual Meeting of Shareholders to be held on March 11, 1998 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 1998 Annual Meeting of Shareholders to be held on March 11, 1998 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 1998 Annual Meeting of Shareholders to be held on March 11, 1998 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information set forth in the Company's definitive proxy statement for
the 1998 Annual Meeting of Shareholders to be held on March 11, 1998 is
incorporated herein by reference.
6
<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 October 31, 1997.
7
<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 23, 1998
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Allan L. Bridgford Chairman January 23, 1998
-------------------------
Allan L. Bridgford
/s/ Robert E. Schulze President January 23, 1998
-------------------------
Robert E. Schulze
/s/ Hugh Wm. Bridgford Vice President January 23, 1998
-------------------------
Hugh Wm. Bridgford
/s/ Paul A. Gilbert Director January 23, 1998
-------------------------
Paul A. Gilbert
/s/ John W. McNevin Director January 23, 1998
-------------------------
John W. McNevin
/s/ Steven H. Price Director January 23, 1998
-------------------------
Steven H. Price
/s/ Norman V. Wagner II Director January 23, 1998
-------------------------
Norman V. Wagner II
/s/ Paul R. Zippwald Director January 23, 1998
-------------------------
Paul R. Zippwald
</TABLE>
8
<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 19, 1997, appearing on pages 6 through 11 of the accompanying 1997
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 1997 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 1997 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.
Page
----
Report of Independent Accountants on Financial
Statement Schedules F-1
Financial Statement Schedules for the three years
ended October 31, 1997:
Schedule VIII - Valuation and Qualifying Accounts
Accounts F-2
Schedule X - Supplementary Income Statement Information F-3
9
<PAGE> 11
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
F-1
To the Board of Directors of
Bridgford Foods Corporation
Our audits of the consolidated financial statements referred to in our report
dated December 19, 1997 appearing on page 11 of the 1997 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 19, 1997
<PAGE> 12
BRIDGFORD FOODS CORPORATION
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
F-2
<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>
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
======== ======== ======== ========
October 31, 1997
----------------
Allowance for
doubtful
accounts $503,585 $149,150 $75,579 $577,156
======== ======== ======= ========
</TABLE>
<PAGE> 13
BRIDGFORD FOODS CORPORATION
SCHEDULE VIII
SUPPLEMENTARY INCOME STATEMENT INFORMATION
------------------------------------------
F-3
Fiscal Years Ended
------------------
<TABLE>
<CAPTION>
October 31, November 1, November 3,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Maintenance
and repairs $3,271,143 $3,220,610 $3,170,683
========== ========== ==========
Advertising
costs $7,491,989 $6,184,915 $5,530,868
========== ========== ==========
</TABLE>
Taxes other than payroll and income taxes, are less than 1% of total sales as
reported in the related income statements.
<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 reference). NA
3.2 Amendment to Articles of Incorporation dated June 24, 1954 (filed as Exhibit 1-a to Form 10 and NA
incorporated herein by reference).
3.3 Amendment to Articles of Incorporation dated September 30, 1955 (filed as Exhibit 1-c to Form 10 NA
and incorporated herein by reference).
3.4 Amendment to Articles of Incorporation dated April 3, 1963 (filed as Exhibit 1-c to Form 10 and NA
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 Form 10 on NA
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 reference). NA
10.1 Bridgford Foods Corporation Defined Benefit Pension Plan (filed as
Exhibit NA 10.1 to Form 10 on January 28, 1993 and incorporated herein by
reference).
10.2 Bridgford Foods Corporation Supplemental Executive Retirement Plan (filed as Exhibit 10.2 to Form NA
10 January 28, 1993 and incorporated herein by reference).
10.3 Bridgford Foods Corporation Deferred Compensation Savings Plan. (filed as Exhibit 10.3 to Form 10 NA
January 28, 1993 and incorporated herein by reference).
13.1 1997 Annual Report to Shareholders. --
22.1 Subsidiaries of the Registrant. 15
27.1 Financial Data Schedule for the fiscal year ended October 31, 1997
submitted to the Securities Exchange Commission in electronic format (for
SEC information only).
</TABLE>
<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 25,700 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 18,000 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>
1997 1996 1995 1994 1993
----------------------------------
<S> <C> <C> <C> <C> <C>
Products manufactured
or processed by
the Company 82 83 85 87 89
Products manufactured
or processed
by others 18 17 15 13 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 adjusted for the 10% stock dividend declared November 10,
1997.
<TABLE>
<CAPTION>
Fiscal Cash Dividends
Quarter Ended $High $Low Paid
- ---------------------------------------------------------------
<S> <C> <C> <C>
February 2, 1996 9-3/4 7-3/4 $.055
May 3, 1996 10-1/4 7-1/2 $.055
August 2, 1996 8-7/8 5-7/8 $.055
November 1, 1996 8-1/8 6-3/8 $.055
January 31, 1997 8-1/8 6-1/8 $.055
May 2, 1997 8-7/8 6-7/8 $.055
August 1, 1997 9-3/8 8-1/8 $.055
October 31, 1997 12-7/8 9-1/8 $.055
</TABLE>
ANNUAL SHAREHOLDERS MEETING
The 1998 annual shareholders meeting will be held at the Four Points
Sheraton (formerly Days Inn), 1500 South Raymond Avenue, Fullerton, California
at 10:00 a.m. on Wednesday, March 11, 1998.
BRIDGFORD FOODS CORPORATION
HISTORICAL TRENDS
<TABLE>
<CAPTION>
NET CASH WORKING
YEARS SALES INCOME DIVIDENDS CAPITAL EQUITY
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1990 84,334,434 3,916,985 840,167 13,071,655 16,443,631
1991 92,866,266 4,489,995 1,006,277 15,129,768 19,927,349
1992 100,113,269 5,298,407 1,130,908 18,787,529 24,094,848
1993 105,146,822 5,576,332 1,503,509 22,805,394 28,167,671
1994 108,883,562 6,141,726 1,879,385 26,587,671 32,430,012
1995 112,497,590 6,590,855 2,161,295 24,462,543 36,859,572
1996 118,316,470 5,651,383 2,255,264 24,246,118 40,255,691
1997 127,859,491 6,605,354 2,255,264 29,682,086 44,605,782
</TABLE>
<PAGE> 2
TO OUR SHAREHOLDERS:
Bridgford Foods Corporation's sales and earnings set new records in our
1997 fiscal year, the fifty-two weeks ended October 31,1997. New efficiencies
and increased productivity resulting from our capital expenditures for plant and
equipment in 1995 and 1996 enabled us to earn $6.6 million in 1997, an all-time
high.
SALES, EARNINGS AND DIVIDENDS
Our 1997 fiscal year sales reached $127,859,491, eight percent greater
than sales in 1996 and a historical high. Strong sales gains were experienced in
our frozen food, dry sausage and delicatessen foods divisions. Warehouse club
sandwich sales have also experienced positive expansion. On the cover of this
report are pictures of some of our sandwich products, including our two newest
items: "Lower Fat" Turkey Breast & Swiss Cheese and our new Breakfast Croissant
with Egg, Ham and Cheese. We are also excited about the potential of another new
item, Bridgford "Bake-Off Biscuits." They only require a small amount of cooking
by the end user for a perfect product every time.
Our dry sausage and meat snack businesses expanded significantly in
1997. We strengthened our national position in both categories with Bridgford
six-ounce pillow-pack sliced pepperoni, gaining substantial market share.
Net income in 1997 reached $6,605,354, seventeen percent more than 1996
earnings. We experienced some relief from high raw material costs in the fourth
quarter and expect this trend to continue in 1998. However, heavy competition in
all of our product sales areas required us to offer strong promotional programs
and forego price increases during 1997.
Cash dividends of twenty-four cents per share were paid in 1997. On
November 10, 1997 your Board of Directors authorized a ten-percent stock
dividend and a regular quarterly cash dividend to be paid on all shares
outstanding after the stock dividend. The financial statements reflect
historical earnings and dividends based on the new number of shares outstanding.
FINANCIAL CONDITION
At the end of fiscal 1997, Shareholders' Equity in Bridgford Foods
Corporation had reached $44,605,782, a gain of $4,350,091 over the prior year.
Working capital increased by $5,435,968 to $29,682,086 during 1997. Our current
asset to current liability ratio improved to 3.6 to 1. The company remained
debt-free for the eleventh consecutive year while $1,949,100 in capital
improvements were made with internally generated funds.
We continue to maintain a $2,000,000 line of credit with a major bank.
These funds are available for possible future business opportunities.
<PAGE> 3
OPERATIONS
During 1997 we fully integrated our new North Carolina plant and our
new automated Dallas freezer and distribution facility into our national
production and distribution system. This resulted in substantial improvements in
efficiency and productivity. Lower raw material costs in our bakery and meat
operations helped us to maintain operating margins, especially in the fourth
quarter. We expect these trends to continue in 1998 as supplies of grain and
meat become more abundant.
SUMMARY
We were honored in October of 1997 to have our Company receive the
American Meat Institute Edward C. Jones Community Service Award in recognition
of the time and funds expended on community service projects over the years. We
feel a deep commitment to the communities where we work.
We believe 1998 will be another good year for our company. We are
positioned to increase our sales and profits in all divisions of the business,
and we have the modern facilities and good people to carry out this plan.
We thank our directors, customers, suppliers, associates and
shareholders for a record 1997.
Respectfully submitted,
Allan L. Bridgford Robert E. Schulze
Chairman President
January 19, 1998
BRIDGFORD FOODS CORPORATION
FINANCIAL SUMMARY
Fiscal Year Ended
<TABLE>
<CAPTION>
October 31 November 1 %
1997 1996 Change
---- ---- ------
<S> <C> <C> <C>
Net sales $127,859,491 118,316,470 8.1
Income before taxes 10,654,354 9,116,383 16.9
Net income 6,605,354 5,651,383 16.9
Net income per share .64 .55 16.9
Cash dividends per share .22 .22 -
Working capital 29,682,086 24,246,118 22.4
Total assets 65,663,892 58,277,948 12.7
Shareholders' equity 44,605,782 40,255,691 10.8
Return on average equity 15.57% 14.66%
</TABLE>
<PAGE> 4
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
October 31 November 1 November 3 October 28 October 29
1997 1996 1995* 1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales............................... $127,859,491 $118,316,470 $112,497,590 $108,883,562 $105,146,822
----------------------------------------------------------------------------------------
Net Income.............................. 6,605,354 5,651,383 6,590,855 6,141,726 5,576,332
----------------------------------------------------------------------------------------
Net Income Per Share**.................. .64 .55 .64 .59 .54
----------------------------------------------------------------------------------------
Current Assets***....................... 41,136,786 33,871,431 32,946,552 35,285,042 29,936,737
----------------------------------------------------------------------------------------
Current Liabilities***.................. 11,454,700 9,625,313 8,484,009 8,697,371 7,131,343
----------------------------------------------------------------------------------------
Working Capital***...................... 29,682,086 24,246,118 24,462,543 26,587,671 22,805,394
----------------------------------------------------------------------------------------
Property, Plant and Equipment, Net...... 16,853,248 17,854,524 14,364,995 7,559,382 6,754,042
----------------------------------------------------------------------------------------
Deferred Taxes on Income***............. 3,102,479 3,008,911 2,353,377 1,742,430 1,099,329
----------------------------------------------------------------------------------------
Total Assets............................ 65,663,892 58,277,948 52,623,417 46,986,561 39,475,107
----------------------------------------------------------------------------------------
Shareholders' Equity.................... 44,605,782 40,255,691 36,859,572 32,430,012 28,167,671
----------------------------------------------------------------------------------------
Cash Dividends Per Share**.............. .22 .22 .21 .18 .15
----------------------------------------------------------------------------------------
</TABLE>
* 53 weeks
** Recalculated to give effect to a 10% stock dividend declared November 10,
1997.
*** Certain financial statement reclassifications have been recorded in years
prior to 1997 to conform to the current year presentation.
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. 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 $10,189,000 in the 1997 fiscal year compared to $7,162,000 in
1996 and $5,580,000 in 1995. Accounts receivable balances increased $1,367,000
in 1997(13%) due to record fourth quarter sales, decreased by $185,000 in 1996
(2%) due to strong collections, and increased $769,000 (8%) in 1995 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. Non-current assets
increased $1,122,000 (17.1%), $1,240,000 (23.3%), and $1,170,000 (28.2%) in
1997, 1996, and 1995 due primarily to the increased cash surrender value of
life-insurance polices and increases in deferred income tax benefits due
primarily to increases in non-funded employee benefits. Accounts payable and
accrued expenses increased $1,759,000 (18.5%) in 1997, due to higher purchasing
activity to support record fourth quarter sales volume, and increased product
promotion and bonus accruals. In 1996 the $1,083,000 (12.8%) increase was
primarily a result of increases in accrued advertising.
The Company's capital improvement expenditures decreased in 1997
compared to recent years. Cash used for additions to property, plant and
equipment decreased $4,039,000 (67%) in 1997 and by $2,787,000 (32%) in 1996.
Significant projects were completed at all locations in 1996, primarily the
Dallas freezer expansion at a total cost of $6,005,000 and the North Carolina
plant at a total cost of $5,070,000. Capital expenditures for these projects
totaled approximately $4.0 and $6.3 million in fiscal years 1996 and 1995,
respectively. These investments are expected to yield higher production
capacities, improved plant utilization and realize cost savings in future years.
Cash and cash equivalents increased $6,035,000 (95%) in 1997 primarily
as a result of lower capital expenditures, improved profitability and
significant increases in non-funded employee benefits. 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. The Company has remained free
<PAGE> 5
of interest-bearing debt for eleven consecutive years. Working capital increased
$5,436,000 (22.4%) in 1997. The increase in working capital reflects lower
capital spending, improved profitability and significant increases in non-funded
employee benefits. The Company maintains a line of credit with Bank of America
that expires April 30, 1999. There were no borrowings under this line of credit
during 1997.
Certain reclassification entries have been recorded in prior year
balance sheets to conform to the fiscal 1997 year balance sheet presentation.
These reclassifications increased working capital balances in all years
presented.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Sales in fiscal year 1997 increased $9,543,000 (8.1%) when compared to
sales of the prior year, primarily as a result of increased sales volume.
Cost of products sold increased by $4,747,000 (6.3%) when compared to
the prior year. The gross margin was approximately 36.9% in 1997 and 35.9% 1996.
Costs for pork commodity products remained at historically high levels while
flour costs became more favorable in 1997 compared to the prior year. Improved
sales of higher margin products and lower flour costs result in a slight
improvement in the gross margin.
Selling, general and administrative expenses increased $2,801,000
(9.1%) when compared to the prior year. This increase was generally consistent
with the overall increase in sales. Advertising expenses continued to outpace
the increase in sales as a result of aggressive promotional programs to increase
sales of the Company's products and to maintain current distribution channels.
The Company has and will continue to make certain investments in its software
systems and applications to ensure year 2000 compliance. The financial impact to
the Company has not been and is not anticipated to be material to its financial
position or results of operations in any given year.
Depreciation expense increased $457,000 (18%) 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.
Second year (half-year convention) depreciation related to these projects
totaled approximately $980,000. The Company expects to continue the growth and
modernization of facilities and equipment used in the business and, after
experiencing lower capital expenditures in 1997, anticipates increased capital
investments in future years. The effective tax rate remained consistent with the
prior year at 38%.
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 that 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%.
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
===============================================================================
ASSETS
<TABLE>
<CAPTION>
October 31 November 1
1997 1996
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $12,377,932 $ 6,343,022
Accounts receivable, less allowance for doubtful
accounts of $577,156 and $503,584 11,374,263 10,007,141
Inventories 15,556,750 15,603,912
Prepaid expenses 137,747 343,846
Deferred income tax benefits 1,690,094 1,573,510
----------- -----------
Total current assets 41,136,786 33,871,431
Property, plant and equipment, net of
Accumulated depreciation of $25,432,473
and $22,637,673 16,853,248 17,854,524
Other non-current assets 4,571,379 3,543,082
Deferred income tax benefits 3,102,479 3,008,911
----------- -----------
$65,663,892 $58,277,948
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,343,687 $ 4,464,855
Accrued payroll and other expenses 5,927,156 5,047,140
Income taxes payable 183,857 113,318
----------- -----------
Total current liabilities 11,454,700 9,625,313
----------- -----------
Non-current liabilities 9,603,410 8,396,944
----------- -----------
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 - 10,336,415 and
9,396,933 shares (Note 7) 10,393,298 9,453,816
Capital in excess of par value 13,946,359 3,024,881
Retained earnings 20,266,125 27,776,994
----------- -----------
Total shareholders' equity 44,605,782 40,255,691
----------- -----------
$65,663,892 $58,277,948
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME
===============================================================================
<TABLE>
<CAPTION>
Fiscal year ended
(52 weeks) (52 weeks) (53 weeks)
October 31 November 1 November 3
---------- ---------- ----------
1997 1996 1995
---- ----- ----
<S> <C> <C> <C>
Net sales $127,859,491 $118,316,470 $112,497,590
------------ ------------ ------------
Cost of products sold,
excluding depreciation 80,621,498 75,874,768 71,854,739
Selling, general and
administrative expenses 33,633,263 30,832,011 28,048,294
Depreciation 2,950,376 2,493,308 1,963,702
------------ ------------ ------------
117,205,137 109,200,087 101,866,735
------------ ------------ ------------
Income before taxes 10,654,354 9,116,383 10,630,855
Provision for taxes on income 4,049,000 3,465,000 4,040,000
------------ ------------ ------------
Net income $ 6,605,354 $ 5,651,383 $ 6,590,855
============ ============ ============
Net income per share (Note 7) $ .64 $ .55 $ .64
============ ============ ============
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NOTE 7)
===============================================================================
<TABLE>
<CAPTION>
COMMON STOCK Capital Total
In excess of Retained shareholders
Shares Amount par earnings equity
------ ------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Balance, October 28, 1994 9,396,933 $ 9,453,816 $ 3,024,881 $19,951,315 $32,430,012
Net income 6,590,855 6,590,855
Cash dividends paid* ($.21 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* ($.22 per share) (2,255,264) (2,255,264)
Balance, November 1, 1996 9,396,933 9,453,816 3,024,881 27,776,994 40,255,691
Net income 6,605,354 6,605,354
Cash dividends paid* ($.22 per share) (2,255,265) (2,255,265)
10 % Stock Dividend, November 10, 1997 939,482 939,482 10,921,478 (11,860,960) --
---------- ----------- ----------- ----------- -----------
Balance, October 31, 1997 10,336,415 $10,393,298 $13,946,359 $20,266,125 $44,605,782
========== =========== =========== =========== ===========
</TABLE>
* Per share amounts give effect to a 10% stock dividend
declared November 10, 1997.
See accompanying notes to consolidated financial statements.
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
===============================================================================
<TABLE>
<CAPTION>
Fiscal year ended
(52 weeks) (52 weeks) (53 weeks)
October 31 November 1 November 3
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,605,354 $ 5,651,383 $ 6,590,855
Income charges not affecting cash:
Depreciation 2,950,376 2,493,308 1,963,702
Provision for losses on accounts receivable 149,050 139,150 138,650
Gain on sale of assets (50,129) (52,729) (68,153)
Effect on cash of changes in assets and liabilities:
Accounts receivable (1,516,171) 45,388 (908,128)
Inventories 47,162 (1,753,965) (1,789,927)
Prepaid expenses 206,099 90,281 (290,486)
Deferred income tax benefits, net (210,152) (1,124,607) (704,572)
Other non-current assets (1,028,297) (584,589) (558,786)
Accounts payable and accrued expenses 1,758,848 1,082,903 41,553
Income taxes payable 70,539 58,401 (254,915)
Non-current liabilities 1,206,466 1,117,108 1,420,658
----------- ----------- -----------
Net cash provided by operating activities 10,189,145 7,162,032 5,580,451
----------- ----------- -----------
Cash used in investing activities:
Proceeds from sale of assets 50,129 57,601 73,454
Additions to property, plant and equipment (1,949,100) (5,987,709) (8,774,616)
----------- ----------- -----------
Net cash used in investing activities (1,898,971) (5,930,108) (8,701,162)
----------- ----------- -----------
Cash used in financing activities:
Cash dividends paid (2,255,264) (2,255,264) (2,161,295)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 6,034,910 (1,023,340) (5,282,006)
Cash and cash equivalents at beginning of year 6,343,022 7,366,362 12,648,368
----------- ----------- -----------
Cash and cash equivalents at end of year $12,377,932 $ 6,343,022 $ 7,366,362
=========== =========== ===========
Cash paid for income taxes $ 4,022,000 $ 3,955,717 $ 5,003,099
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
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 1997 and 1996 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 $10,990,000 at October 31, 1997 and $5,194,000 at November 1, 1996.
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, 10,336,415 for all periods
presented, after giving effect to a 10% stock dividend declared November 10,
1997.
Reclassifications
Certain reclassifications have been made in prior years to conform to
the current year presentation.
NOTE 2 - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
(in thousands)
1997 1996
------- -------
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT:
Land $ 1,083 $ 1,083
Buildings and improvements 10,736 10,683
Machinery and equipment 24,889 23,672
Transportation equipment 5,577 5,055
------- -------
42,285 40,493
Accumulated depreciation 25,432 22,638
------- -------
$16,853 $17,855
======= =======
INVENTORIES:
Meat, ingredients and supplies $ 4,453 $ 4,320
Work in progress 1,357 1,501
Finished goods 9,747 9,783
------- -------
$15,557 $15,604
======= =======
ACCRUED PAYROLL AND OTHER EXPENSES:
Payroll, vacation
and payroll taxes $ 4,581 $ 3,660
Property taxes 265 228
Other 1,081 1,159
------- -------
$ 5,927 $ 5,047
======= =======
</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>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cost of benefits earned
during the year $ 485 $ 611 $ 568
Interest cost on
projected benefit obligation 810 689 585
Actual return on plan assets (1,602) (1,238) (1,123)
Deferral of
unrecognized gain on plan assets 931 679 638
Amortization of unrecognized
gain (38)
Amortization of
transition asset (76) (76) (76)
Amortization of
unrecognized prior
service costs 34 34 23
----- ----- -----
Net pension cost $ 544 $ 699 $ 615
===== ===== =====
</TABLE>
<PAGE> 10
The transition asset is being amortized using the straight-line method over
16.42 years, the average remaining service periods of active plan participants.
The discount rate and expected long-term rate of return used in determining the
projected benefit obligation for fiscal years 1997 and 1996 was 7.75%. The
assumed rate of future compensation increases was 6%.
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)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Plan assets at
fair market value $10,081 $ 8,657 $ 7,554
------- ------- -------
Actuarial present value
of benefit obligations:
Accumulated benefits
based on current salary
levels, including
vested benefits of
$8,927, $7,324 and $6,823 9,415 7,917 7,208
Additional benefits based
on estimated future
salary levels 1,152 2,044 1,978
------- ------- -------
Projected benefit obligation 10,567 9,961 9,186
------- ------- -------
Projected benefit
obligation in
excess of plan assets (486) (1,304) (1,632)
Unrecognized prior
service costs 281 315 235
Unrecognized gain on
plan assets (3,065) (1,661) (479)
Unrecognized net
transition asset (520) (596) (671)
------- ------- -------
Accrued pension cost $(3,790) $(3,246) $(2,547)
======= ======= =======
</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 1997, 1996 and 1995 was
$348,000, $405,000 and $470,000, respectively. Benefits payable related to these
plans and included in other non-current liabilities the accompanying financial
statements were $2,988,000 and $2,480,000 at October 31, 1997 and November 1,
1996, respectively. In connection with this arrangement the Company is the
beneficiary of life insurance policies on the lives of certain key employees.
The aggregate cash surrender value of these policies, included in non-current
assets was $4,359,000 and $3,341,000 at October 31, 1997 and November 1, 1996,
respectively.
The Company provides a deferred compensation plan for certain key
executives, which is based upon the Company's pretax income and return on
shareholders' equity. The payment of these bonuses is generally deferred over a
five-year period. The total amount payable related to this arrangement was
$3,574,000 and $3,387,000 at October 31, 1997 and November 1, 1996,
respectively. Future payments are approximately $1,089,000, $992,000, $722,000,
$487,000 and $284,000 for fiscal years 1998 through 2002, respectively.
Postretirement health care benefits in the approximate amount of
$340,000 and $322,000 are included in non-current liabilities at October 31,
1997 and November 1,1996, respectively.
NOTE 4 - INCOME TAXES:
The provision for taxes on income includes the following:
<TABLE>
<CAPTION>
(in thousands)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 3,602 $ 4,039 $4,102
State 658 551 643
------- ------- ------
4,260 4,590 4,745
------- ------- ------
Deferred:
Federal (99) (933) (609)
State (112) (192) (96)
------- ------- ------
(211) (1,125) (705)
------- ------- ------
$ 4,049 $ 3,465 $4,040
======= ======= ======
</TABLE>
<PAGE> 11
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)
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Provision for federal
Income taxes at
The applicable
Statutory rate $3,622 $3,100 $3,614
Increase in
Provision resulting from:
State income taxes,
net of federal income
tax benefit 416 335 397
Other, net 11 30 29
------ ------ ------
$4,049 $3,465 $4,040
====== ====== ======
</TABLE>
Deferred income taxes result from differences in the bases of assets
and liabilities for tax and accounting purposes.
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
(in thousands)
1997 1996
------ ------
<S> <C> <C>
Receivables allowance $ 233 $ 199
Inventory capitalization 290 297
Deferred compensation 385 406
Franchise tax 107 93
Employee benefits 631 592
Other 44 (13)
------ ------
Current tax assets 1,690 $1,574
====== ======
Deferred compensation 1,001 929
Pension and health care benefits 2,870 2,392
Depreciation (769) (313)
------ ------
Non-current tax assets, net $3,102 $3,008
====== ======
</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, 1999. At any time prior to
May 1999, the Company may convert borrowings, if any, into a three-year term
loan with principal and interest payable monthly commencing May 31, 1999. 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
$255,000, $263,000 and $272,000 in fiscal years 1997, 1996 and 1995,
respectively. Contingent payments were $98,000 in 1997 and $95,000 in 1996 and
1995. Future minimum lease payments are approximately $260,000 in 1998, and
$130,000 in 1999. The Company also leases certain other properties which do not
result in material commitments.
The Company has and will continue to make certain investments in its
software systems and applications to ensure year 2000 compliance. The financial
impact to the Company has not been and is not anticipated to be material to its
financial position or results of operations in any given year.
NOTE 7 - COMMON STOCK AND PER SHARE DATA:
In November 1997, the Board of directors declared a 10% stock dividend.
Net income and cash dividends per share are calculated based on the weighted
average number of shares after giving retroactive effect to the stock dividend.
The weighted average shares used for computing earnings per share in the
accompanying statements of income was 10,336,415 for all periods presented.
<PAGE> 12
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 October 31, 1997 and November 1, 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended October 31, 1997, 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 19, 1997
<PAGE> 13
<TABLE>
<CAPTION>
DIRECTORS OFFICERS GENERAL OFFICES
<S> <C> <C>
Allan L. Bridgford Allan L. Bridgford BRIDGFORD FOODS CORPORATION
Chairman Chairman, Board of 1308 North Patt Street
Directors P.O. Box 3773
Hugh Wm. Bridgford Anaheim, California 92803
Robert E. Schulze Phone (714) 526-5533
President bridgford.com
Paul A. Gilbert
Senior Vice President, BRANCH OPERATIONS
Smith Barney, Inc. Hugh Wm. Bridgford Phoenix, Arizona
Chairman, Executive Fresno, California
John W. McNevin Committee Modesto, California
Consultant and Vice President Oakland, California
(Formerly Vice President Sacramento, California
Eastman/Office Depot, Salvatore F. DeGeorge Chicago, Illinois
Inc.) Senior Vice President Statesville, North Carolina
Dallas, Texas
Steven H. Price Lawrence D. English
Property Management Vice President
Robert E. Schulze William L. Bridgford TRANSFER AGENT AND REGISTRAR
Secretary CHASEMELLON SHAREHOLDER
Norman V. Wagner II SERVICES, L.L.C.
Retired (formerly Raymond F. Lancy P.O. Box 3315
President, Signal Treasurer South Hackensack, NJ 07606
Landmark Properties, Phone (800) 356-2017
Inc.)
Paul R. Zippwald
Retired (formerly INDEPENDENT ACCOUNTANTS
Regional Vice President, PRICE WATERHOUSE LLP
Bank of America) Costa Mesa, California
</TABLE>
<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.
<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 OCTOBER 31, 1997 AS SET FORTH IN ITS 10-K FOR SUCH FISCAL YEAR AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 12,377,932
<SECURITIES> 0
<RECEIVABLES> 11,951,419
<ALLOWANCES> 577,156
<INVENTORY> 15,556,750
<CURRENT-ASSETS> 41,136,786
<PP&E> 42,285,721
<DEPRECIATION> 25,432,473
<TOTAL-ASSETS> 65,663,892
<CURRENT-LIABILITIES> 11,454,700
<BONDS> 0
0
0
<COMMON> 10,393,298
<OTHER-SE> 34,212,484
<TOTAL-LIABILITY-AND-EQUITY> 65,663,892
<SALES> 127,859,491
<TOTAL-REVENUES> 127,859,491
<CGS> 80,621,498
<TOTAL-COSTS> 80,621,498
<OTHER-EXPENSES> 36,583,639
<LOSS-PROVISION> 149,050
<INTEREST-EXPENSE> 235,231
<INCOME-PRETAX> 10,654,354
<INCOME-TAX> 4,049,000
<INCOME-CONTINUING> 6,605,354
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,605,354
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
