<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 29, 1999
[ ] 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 19, 2000 was $33,530,000.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 11,369,812 shares of Common
Stock, par value of $1.00 per share, as of January 19, 2000.
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 29,
1999. 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 15, 2000.
<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 490 food products.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Products manufactured or processed by the Company 69% 78% 82%
Items manufactured or processed by third parties for distribution
31% 22% 18%
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
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
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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>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Frozen Food Products 38% 41% 44%
Refrigerated and Snack Food Products 62% 59% 56%
--- --- ---
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 29,000
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 19,000 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
-----------
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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 1999, the Company had approximately 670 employees,
approximately one-half of whose employment relationship with the Company was
governed by collective bargaining agreements. These agreements currently expire
between March 2000 and August 2002. The Company believes that its relationship
with its employees is good.
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.
Year 2000
---------
The Year 2000 problem concerns the inability of information systems to
properly recognize and process date-sensitive information on and beyond January
1, 2000. The Company's information, financial and administrative, process
control and manufacturing operating systems and related software are all Year
2000 compliant.
The Company relies on third party suppliers for raw materials, water, utilities,
transportation and other key services. Interruption of supplier operations due
to Year 2000 issues could affect Company operations. Management has and will
continue to evaluate the status of suppliers' efforts to determine alternatives
and contingency plan requirements. While approaches to reducing risks of
interruption due to supplier failures will vary by business and facility,
options include the identification of alternative suppliers and accumulation of
inventory to assure production capacity where feasible or warranted. These
activities are intended to provide a means of managing risk, but cannot
eliminate the potential disruption due to third party failure.
The Company is also dependent upon customers for sales and cash flow. Year 2000
interruptions in the Company's customers' operations could result in reduced
sales, increased inventory or receivable levels and cash flow reductions. While
these events are possible, the Company's customer base is generally broad enough
to minimize the affects of a single occurrence. Management has monitored and
will continue to monitor the status of customers as a means of determining risks
to our business.
The Company's manufacturing facilities rely on control systems, which include
production monitoring, power, emissions and safety. These systems have been
evaluated and while all risks cannot be
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eliminated, management believes the risk of interruption to these systems
causing a material business failure to be insignificant. While comparable
control systems are used at all facilities, any system failure would be isolated
to the affected facility.
Recovery under existing insurance policies may be available depending upon the
circumstances of a Year 2000 related event and the type of facility involved.
Generally, no recovery would be available in the event of an orderly shutdown,
which does not result in damage to a facility. Potential recoveries in the event
of facility damage, including business interruption, would be subject to
deductibles under policies in force at the time.
The Company relies on various administrative and financial applications (e.g.,
order processing and collection systems) that require correction to handle Year
2000 dates. In the event one of these systems was not corrected, the Company's
ability to capture, schedule and fulfill customer demands could be impaired.
Likewise, if a collection processing system failed, we may, in the short run, be
unable too properly apply payments to customer balances or correctly determine
cash balances. Alternative methods of maintaining such information could be
developed in a timely manner if required, although management does not believe
that these systems will fail on or before the Year 2000. The Company accepts
purchase orders, invoices and account remittances using Electronic Data
Interchange (EDI). The Company is currently accepting transactions using a Year
2000 compliant standard (Uniform Communications Standard version 4010). The
Company will also support prior versions for those customers unable to move to
version 4010.
The total costs that the Company incurs in connection with the Year 2000 problem
will be influenced by management's ability to accurately identify Year 2000
systems' flaws, the nature and amount of programming required to fix affected
programs, the related labor and or consulting costs for such remediation and the
ability of third parties with whom we have business relationships to
successfully address their own Year 2000 concerns. These and other unforeseen
factors could have a material adverse affect on the Company's results of
operations and financial condition. Nevertheless, management believes the
estimated cost of these programs are and will be immaterial to the Company and
are not expected to exceed $100,000. Management estimates costs to date to be in
the range of $50,000.
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 156,000 square-foot processing facility on 1-1/2 acres of land in
Chicago, Illinois. In Dallas, Texas, facilities include a 92,000 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 the art frozen food plant on 7 acres of land 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. At October 29, 1999, the Company also owned land
in San Diego, California. In November 1999 the Company sold this land as a
result of eminent domain proceedings and recognized a pre-tax gain of
approximately $675,000.
The Company leases small warehouse and/or office facilities through the
United States and Canada. The Company believes that its properties are adequate
to satisfy its foreseeable needs. Additional properties may be acquired and/or
plants expanded if favorable opportunities and conditions arise.
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<PAGE> 6
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings were pending at October 29, 1999 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 29, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of all the executive officers of the
Company as of January 1, 2000 are listed below. 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. All executive officers are full-time employees of the Company,
except for Hugh Wm. Bridgford, who works 80% of full-time.
<TABLE>
<CAPTION>
Name Age Position(s) with the Company
- ---- --- ----------------------------
<S> <C> <C>
Allan L. Bridgford 64 Chairman and member of the Executive Committee
Robert E. Schulze 65 President and member of the Executive Committee
Hugh Wm. Bridgford 68 Vice President and Chairman of the Executive Committee
Salvatore F. DeGeorge 68 Senior Vice President
Lawrence D. English 68 Vice President
</TABLE>
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, 2000, there
were 535 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 1999 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 1999 Annual Report
to Shareholders is incorporated herein by reference.
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<PAGE> 7
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 1999 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have significant overall currency exposure at October
29,1999. The Company's financial instruments consist of cash and cash
equivalents and life insurance policies at October 29,1999 and the carrying
value of the Company's financial instruments approximated their fair market
values based on current market prices and rates. It is not the Company's policy
to enter into derivative financial instruments. The Company does not currently
have any significant foreign currency exposure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth on pages 6 through 11 of the Company's 1999
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.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information set forth in the Company's definitive proxy statement for
the 2000 Annual Meeting of Shareholders to be held on March 15, 2000 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 2000 Annual Meeting of Shareholders to be held on March 15, 2000 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 2000 Annual Meeting of Shareholders to be held on March 15, 2000 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information set forth in the Company's definitive proxy statement for
the 1999 Annual Meeting of Shareholders to be held on March 15, 2000 is
incorporated herein by reference.
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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 29, 1999.
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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 21, 2000
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 21, 2000
- ----------------------
Allan L. Bridgford
/s/ Robert E. Schulze President January 21, 2000
- ---------------------
Robert E. Schulze
/s/ Hugh Wm. Bridgford Vice President January 21, 2000
- ----------------------
Hugh Wm. Bridgford
/s/ Paul A. Gilbert Director January 10, 2000
- -------------------
Paul A. Gilbert
/s/ John W. McNevin Director January 10, 2000
- -------------------
John W. McNevin
/s/ Steven H. Price Director January 10, 2000
- -------------------
Steven H. Price
/s/ Norman V. Wagner II Director January 10, 2000
- -----------------------
Norman V. Wagner II
/s/ Paul R. Zippwald Director January 10, 2000
- --------------------
Paul R. Zippwald
</TABLE>
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BRIDGFORD FOODS CORPORATION
---------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
The consolidated financial statements of the Registrant and its
subsidiaries, including the report thereon of PricewaterhouseCoopers LLP dated
December 10, 1999, appearing on pages 6 through 11 of the accompanying 1999
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 1999 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 1999 Annual Report to Shareholders.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants on Financial
Statement Schedules F-1
Financial Statement Schedules for the three years
ended October 29, 1999:
Schedule II - Valuation and Qualifying Accounts
Accounts F-2
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
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REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
To the Board of Directors of
Bridgford Foods Corporation
Our audits of the consolidated financial statements referred to in our report
dated December 10, 1999 appearing on page 11 of the 1999 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)(2) 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/ PricewaterhouseCoopers LLP
Costa Mesa, California
December 10, 1999
F-1
<PAGE> 13
BRIDGFORD FOODS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<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 31, 1997
----------------
Allowance for
doubtful
accounts $503,585 $149,150 $75,579 $577,156
======== ======== ======= ========
October 30, 1998
----------------
Allowance for
doubtful
accounts $577,156 $254,150 $248,519 $582,787
======== ======== ======== ========
October 29, 1999
----------------
Allowance for
doubtful
accounts $582,787 $221,650 $157,218 $647,219
======== ======== ======== ========
</TABLE>
F-2
<PAGE> 14
BRIDGFORD FOODS CORPORATION
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
No. Page No.
- ------- --------
<C> <S> <C>
3.1 Articles of Incorporation (filed as Exhibit 1 to Form 10 on January 28,1993 and incorporated NA
herein by reference).
3.2 Amendment to Articles of Incorporation dated June 24, 1954 (filed as Exhibit 1-a to Form 10 on NA
January 28,1993 and incorporated herein by reference).
3.3 Amendment to Articles of Incorporation dated September 30, 1955 (filed as Exhibit 1-c to Form 10 NA
on January 28,1993 and incorporated herein by reference).
3.4 Amendment to Articles of Incorporation dated April 3, 1963 (filed as Exhibit 1-c to Form 10 on NA
January 28,1993 and incorporated herein by reference).
3.5 Restated Articles of Incorporation, dated December 29, 1989 (filed as Exhibit 3.5 to Form 10 on NA
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 on January 28,1993 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 1999 Annual Report to Shareholders. -
21.1 Subsidiaries of the Registrant. -
27.1 Financial Data Schedule for the fiscal year ended October 29, 1999 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 and Canada. 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
29,000 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
19,000 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>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Products manufactured
or processed by the Company 69 78 82 83 85
Products manufactured
or processed by others 31 22 18 17 15
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>
Cash
Fiscal Quarter Ended $High $Low Dividends Paid
<S> <C> <C> <C>
January 30, 1998 13 7/8 10 3/8 $.055
May 1, 1998 12 3/4 9 1/2 $.055
July 31, 1998 12 3/8 11 1/8 $.055
October 30, 1998 11 7/8 10 1/4 $.055
January 29, 1999 12 1/2 12 1/2 $.06
April 30, 1999 10 1/4 10 $.06
July 30, 1999 10 7/8 10 3/4 $.06
October 29, 1999 9 15/16 9 7/8 $.06
</TABLE>
ANNUAL SHAREHOLDERS MEETING
The 2000 annual shareholders meeting will be held at the Four Points
Sheraton, 1500 South Raymond Avenue, Anaheim, California at 10:00 a.m. on
Wednesday March 15, 2000.
<PAGE> 2
TO OUR SHAREHOLDERS:
It is a great pleasure to report that 1999 was a banner year for
Bridgford Foods Corporation. New all-time record highs were attained in sales,
earnings, dividends and capital. Net profits exceeded ten million dollars for
the first time in our sixty-seven year history.
SALES, EARNINGS AND DIVIDENDS
Sales in fiscal 1999 reached $138,786,260, a record high by 3%. It was
our fourteenth consecutive annual sales gain. Our meat snack division, Bridgford
Foods of Illinois, again recorded outstanding sales volume increases as we added
a variety of new flavors, sizes and improved packaging graphics to our meat
snack line. Especially successful are our new 8-ounce packages of natural beef
jerky. Bridgford's 4-ounce natural beef jerky continued to maintain the number
one sales ranking for a meat snack product in American supermarkets and mass
merchandising stores in 1999.
During the year, hundreds of new customers have been added to our
direct distribution deli and meat snack systems. Two new frozen retail-pack
par-baked roll items were successfully tested during the fall of 1999. We expect
to bring these new items to market in the year 2000. Also, our new french dip
sandwiches, as well as our sausage, cheese and egg breakfast sandwiches, have
shown excellent sales gains during 1999.
Net income in 1999 reached a record high of $10,024,505. This
represents a 15% gain over 1998 income. Bridgford has now set earnings records
for three consecutive years and in 12 of the last 13 years. We experienced
favorable flour costs in 1999. Meat costs increased substantially in the second
half of 1999 when compared with costs in the first half of the year.
Cash dividends of twenty-four cents per share were paid in 1999 on the
11,369,812 shares outstanding. At the November 1999 Board of Directors meeting,
the quarterly cash dividend rate was raised to 7 cents per share, a 17%
increase.
FINANCIAL MATTERS
Shareholders equity increased more than 14% to $58,134,865 during 1999,
a gain of $7,292,617. Working capital was $43,760,200 at year-end, more than 17%
higher than at the end of fiscal 1998.
Our working capital ratio was a very strong 4.2 to 1 at year-end. We
continued to be debt-free for the 13th consecutive year while investing
$4,901,936 in property, plant and equipment. A $2,000,000 bank line of credit
remains available to us for new business opportunities.
Employee stock options were authorized and issued to members of the
Corporate Operating Committee during 1999. Options for shares were issued at a
price of $10.00 per share. Members of the current Executive Committee are
excluded from receiving options.
During November of 1999 the Board authorized the Company to repurchase
up to 1,000,000 shares of its common stock on the open market. The Company
believed that the stock was undervalued at the time and that the repurchase
program is a good investment of available
<PAGE> 3
funds. The investment firm of Salomon Smith Barney was engaged to manage the
repurchase program.
OPERATIONS
During 1999 we completed a new 27,000 square foot addition to our
Chicago meat snack foods plant and warehouse. We also finished a 6,000 square
foot freezer addition at our Dallas, Texas sandwich manufacturing plant. Plans
for our 2000 fiscal year include expansion of the freezer at the
Bridgford-Superior bakery and frozen dough plant in Dallas. We have offered to
purchase property adjacent to both our Frozen-Rite and Superior plants in Dallas
to facilitate future growth. The Company is adding substantial amounts of new
modern equipment to its Chicago and Dallas facilities for expanded production of
current and new products. We are experiencing higher meat raw material costs in
the first quarter of 2000. It appears that grain supplies are plentiful and we
do not expect higher costs for our basic bakery raw materials.
SUMMARY
Thank you to our customers, shareholders, directors, officers,
associates and suppliers for enabling us to experience an extraordinarily
successful year in 1999.
We are poised to continue our progress in the year 2000.
Respectfully submitted,
Allan L. Bridgford Robert E. Schulze
Chairman President
January 19, 2000
BRIDGFORD FOODS CORPORATION
FINANCIAL SUMMARY
Fiscal Year Ended
<TABLE>
<CAPTION>
October 29 October 30 %
1999 1998 Change
<S> <C> <C> <C>
Net sales $138,786,260 $134,815,787 2.95
Income before taxes 16,169,505 14,065,430 14.95
Net income 10,024,505 8,720,430 14.94
Net income per share .88 .77 14.29
Cash dividends per share .24 .22 9.09
Working capital 43,760,200 37,251,202 17.47
Total assets 85,469,476 75,792,941 12.77
Shareholders' equity 58,134,865 50,842,248 14.34
Return on average equity 18.40% 18.27% -
</TABLE>
<PAGE> 4
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
October 29 October 30 November 1 November 1 November 3
1999 1998 1997 1996 1995*
<S> <C> <C> <C> <C> <C>
Net Sales $138,786,260 $134,815,787 $127,859,491 $118,316,470 $112,497,590
Net Income 10,024,505 8,720,430 6,605,354 5,651,383 6,590,855
Basic Earnings Per Share .88 .77 .58 .50 .58
Current Assets** 57,236,926 50,558,938 41,136,786 33,871,431 32,946,552
Current Liabilities** 13,476,726 13,307,736 11,454,700 9,625,313 8,484,009
Working Capital** 43,760,200 37,251,202 29,682,086 24,246,118 24,462,543
Property, Plant and Equip., Net 17,764,652 16,197,108 16,853,248 17,854,524 14,364,995
Deferred Taxes on Income 4,605,530 3,738,976 3,102,479 3,008,911 2,353,377
Total Assets 85,469,476 75,792,941 65,663,892 58,277,948 52,623,417
Shareholders' Equity 58,134,865 50,842,248 44,605,782 40,255,691 36,859,572
Cash Dividends Per Share .24 .22 .20 .20 .19
</TABLE>
* 53 weeks
** 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
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.
RESULTS OF OPERATIONS
1999 compared to 1998
<PAGE> 5
Sales in fiscal year 1999 increased $3,970,000 (2.9%) when compared to sales of
the prior year, primarily as a result of increased sales volume.
Cost of products sold decreased by $332,000 when compared to the prior
year. The gross margin was approximately 42% in 1999, 40% in 1998 and 36.9%
1997. Costs for pork commodity products remained at historically low levels and
flour costs continued to be favorable in 1999 and 1998.
Selling, general and administrative expenses increased $1,844,000
(5.0%) when compared to the prior year. This increase was generally consistent
with the overall increase in sales. Selling expenses slightly outpaced sales
growth due to an increased sales force and higher performance bonuses due to
record profitability.
The Company's capital expansion projects increased compared to recent
years. 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%.
1998 compared to 1997
Sales in fiscal year 1998 increased $6,956,000 (5.4%) when compared to
sales of the prior year, primarily as a result of increased sales volume.
Cost of products sold increased by only $255,000 when compared to the
prior year. The gross margin was approximately 40% in 1998, 36.9% in 1997 and
35.9% 1996. Costs for pork commodity products reached historically low levels
and flour costs continued to be favorable in 1998 and 1997 compared to the prior
years.
Selling, general and administrative expenses increased $3,303,000
(9.8%) when compared to the prior year. This increase was generally consistent
with the overall increase in sales. Selling expenses outpaced sales growth due
to an increased sales force and higher performance bonuses due to record
profitability.
The effective tax rate remained consistent with the prior year at 38%.
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.
LIQUIDITY AND CAPITAL RESOURCES
Favorable operating results over the past several years have continued
to provide significant liquidity to the Company. Net cash provided by operating
activities was $9,635,000 in the 1999 fiscal year compared to $14,579,000 in
1998 and $10,189,000 in 1997. Accounts receivable balances increased $1,617,000
(13%) in 1999, $699,000 (6%) in 1998 and $1,367,000 (13%) in 1997 due to higher
sales and slower collections. Inventories increased in 1999 $2,083,000 due to
higher unit quantities and decreased $1,490,000 in fiscal 1998 due primarily to
significantly lower commodity costs and lower quantities compared to the prior
fiscal year. Non-current assets increased $1,431,000 (16%), $1,363,000 (18%),
and $1,122,000 (17%) in 1999, 1998, and 1997, respectively, due primarily to the
increased cash surrender value of life-insurance policies 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 (19%) in
1997, due to higher purchasing activity to support record fourth quarter sales
volume, and increased product promotion and bonus accruals.
<PAGE> 6
The Company's capital improvement expenditures increased in 1999
compared to recent years. Cash used for additions to property, plant and
equipment increased $2,617,000 (114%) compared to fiscal year 1998. Significant
projects were completed in 1999, primarily the Dallas Sandwich Freezer expansion
at a total cost of $966,000 and the shipping dock expansion of the Chicago plant
at a total cost of $1,541,000. Cash and cash equivalents increased $2,749,000 in
1999 (12.3%). The increase was lower than in recent years due to higher tax
payments, increased capital expenditures and higher accounts receivable and
inventory balances. Cash and cash equivalents increased $9,894,000 in 1998 and
$6,035,000 (95%) in 1997 primarily as a result of lower capital expenditures,
improved profitability and significant increases in non-funded employee
benefits. The Company has remained free of interest-bearing debt for twelve
consecutive years. Working capital increased $6,509,000 (17.5%) and $7,569,000
(25.5%) in 1999 and 1998. The increases in working capital reflect lower capital
spending in 1998, 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, 2001. There were no borrowings under this line of credit
during 1999.
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. Detail disclosure
regarding the Company's year 2000 plan and discussion of risk factors is
continued under Item 1., "Business" in Form 10-K for the fiscal year ended
October 29, 1999.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
October 29 October 30
1999 1998
<S> <C> <C>
Current assets:
Cash and cash equivalents $25,020,839 $22,272,141
Accounts receivable, less allowance for doubtful
accounts of $647,219 and $582,787 13,689,463 12,072,818
Inventories 16,149,918 14,066,898
Prepaid expenses 268,892 233,848
Deferred income tax benefits 2,107,814 1,913,233
Total current assets 57,236,926 50,558,938
Property, plant and equipment, net of
accumulated depreciation of $30,533,865
and $27,894,827 17,764,652 16,197,108
Other non-current assets 5,862,368 5,297,919
Deferred income tax benefits 4,605,530 3,738,976
$85,469,476 $75,792,941
</TABLE>
<PAGE> 7
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Accounts payable $ 5,849,237 $ 5,343,725
Accrued payroll and other expenses 6,759,979 6,373,886
Income taxes payable 867,510 1,590,125
Total current liabilities 13,476,726 13,307,736
Non-current liabilities 13,857,885 11,642,957
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 - 11,369,812 11,426,695 11,426,695
Capital in excess of par value 26,347,123 26,347,123
Retained earnings 20,361,047 13,068,430
Total shareholders' equity 58,134,865 50,842,248
$85,469,476 $75,792,941
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Fiscal year ended
October 29 October 30 October 31
1999 1998 1997
<S> <C> <C> <C>
Net sales $ 138,786,260 $ 134,815,787 $ 127,859,491
Cost of products sold
excluding depreciation 80,544,109 80,876,022 80,621,498
Selling, general and
administrative expenses 38,780,300 36,935,860 33,633,263
Depreciation 3,292,346 2,938,475 2,950,376
122,616,755 120,750,357 117,205,137
Income before taxes 16,169,505 14,065,430 10,654,354
Provision for taxes on income 6,145,000 5,345,000 4,049,000
Net income $ 10,024,505 $ 8,720,430 $ 6,605,354
Basic earnings per share $ .88 $ .77 $ .58
Shares used to compute basic
earnings per share 11,369,812
Diluted earnings per share $ .87
Shares used to compute diluted
earnings per share 11,509,949
</TABLE>
<PAGE> 8
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock Capital Total
in excess Retained shareholders'
Shares Amount of par earnings equity
<S> <C> <C> <C> <C> <C>
Balance, November 1, 1996 9,396,933 $ 9,453,816 $ 3,024,881 $27,776,994 $40,255,691
Net income 6,605,354 6,605,354
Cash dividends paid ($.20 per share) (2,263,265) (2,255,265)
10% stock dividends, 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
Net income 8,720,430 8,720,430
Cash dividends paid ($.22 per share) (2,483,964) (2,483,964)
10% stock dividends, November 16, 1998 1,033,397 1,033,397 12,400,764 (13,434,161)
Balance, October 30, 1998 11,369,812 11,426,695 26,347,123 13,068,430 50,842,248
Net income 10,024,505 10,024,505
Cash dividends paid ($.24 per share) (2,731,888) (2,731,888)
Balance, October 29, 1999 11,369,812 $11,426,695 $26,347,123 $20,361,047 $58,134,865
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal year ended
October 29 October 30 October 31
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $10,024,505 $ 8,720,430 $ 6,605,354
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,292,346 2,938,475 2,950,376
Provision for losses on accounts receivable 221,650 254,150 149,050
Gain on sale of assets (705,288) (81,941) (50,129)
Changes in operating assets and liabilities:
Accounts receivable (1,838,295) (952,705) (1,516,171)
Inventories (2,083,020) 1,489,852 47,162
Prepaid expenses (35,044) (96,101) 206,099
Deferred income tax benefits, net (1,061,135) (859,636) (210,152)
Other non-current assets (564,449) (726,540) (1,028,297)
Accounts payable and accrued expenses 891,605 446,768 1,758,848
Income taxes payable (722,615) 1,406,268 70,539
Non-current liabilities 2,214,928 2,039,547 1,206,466
Net cash provided by operating activities 9,635,188 14,578,567 10,189,145
Cash used in investing activities:
Proceeds from sale of assets 747,334 84,941 50,129
Additions to property, plant and equipment (4,901,936) (2,285,335) (1,949,100)
Net cash used in investing activities (4,154,602) (2,200,394) (1,898,971)
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Cash used in financing activities:
Cash dividends paid (2,731,888) (2,483,964) (2,255,264)
Net increase in cash and cash equivalents 2,748,698 9,894,209 6,034,910
Cash and cash equivalents at beginning of year 22,272,141 12,377,932 6,343,022
Cash and cash equivalents at end of year $25,020,839 $22,272,141 $12,377,932
Cash paid for income taxes $ 7,837,000 $ 4,891,000 $ 4,022,000
</TABLE>
See accompanying notes to consolidated financial statements.
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 1999, 1998 and 1997 include 52 weeks each.
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 $24,980,000 at October 29, 1999 and $20,985,000 at October 30, 1998.
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
<PAGE> 10
Deferred taxes are provided for items whose financial and tax bases
differ.
Stock-based compensation
Statement of Financial Accounting Standards (SFAS No. 123), "Accounting
for Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans based on
the fair market value of options granted. The Company has chosen to account for
stock based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, compensation for stock
options is measured as the excess, if any, of the fair market value of the
Company's stock price at the date of grant as determined by the Board of
Directors over the amount an employee must pay to acquire the stock.
Basic and diluted earnings per share
Basic earnings and cash dividends per share are calculated based on the
weighted average number of shares outstanding, 11,369,812 for all periods
presented. Diluted earnings per share is calculated based on the weighted
average number of shares outstanding plus shares issuable on conversion or
exercise of all potentially dilutive securities.
NOTE 2 - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
<S> <C> <C>
Property, plant and equipment:
Land $ 1,087 $ 1,083
Buildings and improvements 12,511 11,310
Machinery and equipment 27,761 25,616
Transportation equipment 6,940 6,083
48,299 44,092
Accumulated depreciation (30,534) (27,895)
$ 17,765 $ 16,197
Inventories:
Meat, ingredients and supplies $ 3,288 $ 3,695
Work in progress 1,837 1,353
Finished goods 11,025 9,019
$ 16,150 $ 14,067
Accrued payroll and other expenses:
Payroll, vacation and payroll taxes $ 6,051 $ 5,533
Property taxes 263 263
Other 446 578
$ 6,760 $ 6,374
</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.
<PAGE> 11
Net pension cost consisted of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cost of benefits earned during the year $ 646 $ 568 $ 485
Interest cost on projected benefit obligation 958 907 810
Actual return on plan assets (990) (748) (1,602)
Deferral of unrecognized (loss) gain on plan assets 138 (34) 931
Amortization of unrecognized gain (68) (83) (38)
Amortization of transition asset (76) (76) (76)
Amortization of unrecognized prior service costs 36 34 34
Net pension cost $ 644 $ 568 $ 544
</TABLE>
The transition asset is being amortized using the straight-line method
over 15.02 years, the average remaining service period of active plan
participants. The discount rate and expected long-term rate of return used in
determining the projected benefit obligation for fiscal years 1999, 1998 and
1997 was 7.75%. The assumed rate of future compensation increases for fiscal
years 1999 and 1998 was 4% and for fiscal year 1997 was 6%.
Plan assets are primarily invested in marketable equity securities,
corporate and government debt securities and real estate and are administered by
an investment management company.
The funded status of the plan is as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
<S> <C> <C> <C>
Plan assets at fair market value $ 11,455 $ 10,622 $ 10,081
Actuarial present value of benefit obligations:
Accumulated benefits based
on current salary levels,
including vested benefits of
$12,162, $9,974 and $8,927 12,970 10,502 9,415
Additional benefits based on
estimated future salary levels 946 817 1,152
Projected benefit obligation 13,916 11,319 10,567
Projected benefit obligation
in excess of plan assets (2,461) (697) (486)
Unrecognized prior service costs 233 247 281
Unrecognized gain on Plan assets (2,404) (3,463) (3,065)
Unrecognized net transition asset (369) (445) (520)
Accrued pension cost $ (5,001) $ (4,358) $ (3,790)
</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 1999, 1998 and 1997 was
$320,000, $303,000 and $348,000, respectively. Benefits payable related to
<PAGE> 12
these plans and included in other non-current liabilities in the accompanying
financial statements were $4,384,000 and $3,594,000 at October 29, 1999 and
October 30, 1998, 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 $5,862,000 and $5,298,000 at October 29, 1999 and
October 30, 1998, 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
$5,823,000 and $4,598,000 at October 29, 1999 and October 30, 1998,
respectively. Future payments are approximately $1,700,000, $1,434,000,
$1,226,000, $942,000 and $521,000 for fiscal years 2000 through 2004,
respectively.
Postretirement health care benefits in the approximate amount of
$350,000 and $345,000 are included in non-current liabilities at October 29,
1999 and October 30, 1998, respectively.
The Company's 1999 Stock Incentive Plan ("the Plan") was approved by
the Board of Directors on January 11, 1999 and 275,000 shares were granted on
April 29, 1999. Under the Plan, the maximum aggregate number of shares which may
be optioned and sold is 900,000 shares of common stock, subject to adjustment
upon changes in capitalization or merger. Generally, options granted under the
plan vest in annual installments over four years following the date of grant (as
determined by the Board of Directors) subject to the optionee's continuous
service. Options expire ten years from the date of grant with the exception of
an incentive stock option granted to an optionee who owns stock representing
more than 10% of the voting power of all classes of stock of the Company, in
which case the term of the option is five years. Options generally terminate
three months after termination of employment or one year after termination due
to permanent disability or death. Options are generally granted at a fair market
value determined by the Board of Directors subject to the following:
a.) With respect to options granted to an employee or service provider who, at
the time of grant owns stock representing more than 10% of the voting power of
all classes of stock of the Company, the per share exercise price shall be no
less than 110% of the fair market value on the date of grant.
b.) With respect to options granted to an employee or service provider other
than described in the preceding paragraph, the exercise price shall be no less
than 100% for incentive stock options and 85% for non-statutory stock options of
the fair market value on the date of grant. Stock option activity under the plan
was as follows:
<TABLE>
<CAPTION>
Options Exercise Price
Outstanding Per Share
<S> <C> <C>
Granted 900,000 $ 10.00
Cancelled - -
Exercised - -
Balance at October 29, 1999 900,000 $ 10.00
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
average Weighted Weighted
remaining average average
Exercise life exercise exercise
price Shares (years) price Shares price
<S> <C> <C> <C> <C> <C>
$10 900,000 9.2 $10 0 $10
</TABLE>
<PAGE> 13
The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123 ("FAS 123"). As permitted by FAS 123, the Company
measures compensation cost in accordance with APB 25. Therefore, the adoption of
FAS 123 had no impact on the Company's financial condition or results of
operations. Had compensation cost for the Company's Stock Option Plan been
determined based on the fair value of the options consistent with FAS 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
October 29,1999
<S> <C> <C>
Net Income As reported $10,024,505
Pro forma $ 9,845,208
Basic Earning Per Share As reported $.88
Pro forma $.87
</TABLE>
The fair value of compensatory stock options was estimated using the
Black-Scholes option pricing model using the following weighted average
assumptions:
<TABLE>
<CAPTION>
October 29, 1999
<S> <C>
Risk-free interest rate 5.34%
Expected years until exercise 6.0 years
Expected stock volatility 40.0%
Expected dividends 2.20%
</TABLE>
NOTE 4 - INCOME TAXES:
The provision for taxes on income includes the following:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
Current:
<S> <C> <C> <C>
Federal $ 6,034 $ 5,241 $ 3,602
State 1,172 964 658
7,206 6,205 4,260
Deferred:
Federal (867) (735) (99)
State (194) (125) (112)
(1,061) (860) (211)
$ 6,145 $ 5,345 $ 4,049
</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)
1999 1998 1997
<S> <C> <C> <C>
Provision for federal income
taxes at the applicable statutory rate $ 5,498 $ 4,782 $ 3,622
Increase in provision resulting from:
state income taxes,
net of federal income tax benefit 596 518 416
Other, net 51 45 11
$ 6,145 $ 5,345 $ 4,049
</TABLE>
<PAGE> 14
Deferred income taxes result from differences in the bases of assets
and liabilities for tax and accounting purposes.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Receivables allowance $ 263 $ 235 $ 233
Inventory capitalization 367 329 290
Deferred compensation 478 382 385
Franchise tax 183 154 107
Employee benefits 853 842 631
Other (36) (29) 44
Current tax assets, net $ 2,108 $ 1,913 $ 1,690
Deferred compensation $ 1,673 $ 1,348 $ 1,001
Pension and health care
benefits 3,951 3,343 2,870
Depreciation (1,018) (952) (769)
Non-current tax assets, net $ 4,606 $ 3,739 $ 3,102
</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, 2001. At any time prior to
May, 2001, the Company may convert borrowings, if any, into a three-year term
loan with principal and interest payable monthly commencing May 31, 2001. 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 operating
leases expiring in 2005. 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
$320,000, $316,000, and $255,000 in fiscal years 1999, 1998, and 1997,
respectively. Contingent payments were $102,000, $105,000 and $98,000 in 1999,
1998 and 1997, respectively. Future minimum lease payments are approximately
$320,000 in the years 2000 through 2004 and $240,000 in 2005.
NOTE 7 - SUBSEQUENT EVENTS:
In November 1999 the City of San Diego redevelopment agency acquired,
under eminent domain proceedings, land owned by the Company and a pretax gain of
$675,000 was recognized.
<PAGE> 15
In November 1999 the Board of Directors approved the repurchase of up
to 1,000,000 shares of common stock. These repurchases will be made on the open
market at prevailing market prices or in negotiated transactions off the market.
REPORT OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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 29, 1999 and October 30, 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended October 29, 1999, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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 10, 1999
DIRECTORS
Allan L. Bridgford
Chairman
Hugh Wm. Bridgford
Paul A. Gilbert
Senior Vice President, Salomon Smith Barney, Inc.
John W. McNevin
Consultant (formerly Vice President Eastman/Office Depot, Inc.)
Steven H. Price
Property Management
Robert E. Schulze
<PAGE> 16
Norman V. Wagner II
Retired (formerly President, Signal Landmark Properties, Inc.)
Paul R. Zippwald
Retired (formerly Regional Vice 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
Assistant Secretary
GENERAL OFFICES
Bridgford Foods Corporation
1308 North Patt Street
P.O. Box 3773
Anaheim, California 92803
Phone (714) 526-5533
www.bridgford.com
Branch Operations
Phoenix, Arizona
Fresno, California
Modesto, California
Oakland, California
Sacramento, California
Chicago, Illinois
Statesville, North Carolina
Dallas, Texas
<PAGE> 17
Transfer Agent and Registrar
ChaseMellon Shareholder
Services, L.L.C.
85 Challenger Road
Ridgefieldpark, NJ 07760
Phone (800) 356-2017
www.chasemellon.com
Independent Accountants
PricewaterhouseCoopers LLP
Costa Mesa, California
<PAGE> 1
EXHIBIT 21.1
BRIDGFORD FOODS CORPORATION
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 29, 1999 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-29-1999
<PERIOD-END> OCT-29-1999
<CASH> 25,020,839
<SECURITIES> 0
<RECEIVABLES> 14,336,682
<ALLOWANCES> 647,219
<INVENTORY> 16,149,918
<CURRENT-ASSETS> 57,236,926
<PP&E> 48,298,517
<DEPRECIATION> 30,533,865
<TOTAL-ASSETS> 85,469,476
<CURRENT-LIABILITIES> 13,476,726
<BONDS> 0
0
0
<COMMON> 11,426,695
<OTHER-SE> 46,708,170
<TOTAL-LIABILITY-AND-EQUITY> 85,469,476
<SALES> 138,786,260
<TOTAL-REVENUES> 138,786,260
<CGS> 80,544,109
<TOTAL-COSTS> 80,544,109
<OTHER-EXPENSES> 42,072,646
<LOSS-PROVISION> 221,650
<INTEREST-EXPENSE> 369,316
<INCOME-PRETAX> 16,169,505
<INCOME-TAX> 6,145,000
<INCOME-CONTINUING> 10,024,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,024,505
<EPS-BASIC> .88
<EPS-DILUTED> .87
</TABLE>
