Attached files
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended October 30, 2009
Commission
file number: 0-2396
BRIDGFORD
FOODS CORPORATION
(Exact
name of Registrant as specified in its charter)
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California
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95-1778176
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(State
of incorporation)
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(I.R.S.
Employer
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Identification
No.)
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1308
North Patt Street
Anaheim,
California 92801
(Address
of principal executive offices)
(714)
526-5533
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act: Common Stock, par
value $1.00 per share, the NASDAQ Stock Market LLC.
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark whether the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files. Yes o No o
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
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o (Do not check if
a smaller reporting company)
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Smaller
reporting company x
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Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act. Yes o No x
The
aggregate market value of voting stock held by non-affiliates of the registrant
on April 17, 2009 was $7,315,000.
As of
January 15, 2010, there were 9,338,840 shares of common stock
outstanding.
Portions
of the registrant’s Proxy Statement for the registrant’s Annual Meeting of
Shareholders to be held March 17, 2010 are incorporated by reference into
Part III, Items 10-14 of this Annual Report on Form 10-K.
INDEX TO
FORM 10K
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Page
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PART I
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3
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Item
1.
Business
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3
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Item
1A. Risk
Factors
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6
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Item
1B. Unresolved Staff
Comments
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8
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Item
2.
Properties
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8
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Item
3. Legal
Proceedings
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9
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Item
4. Submission of Matters to a Vote of Security
Holders
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9
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PART II
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9
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Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
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10
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Item
6. Selected Financial
Data
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11
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Item
7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
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11
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Item
7A. Quantitative and Qualitative Disclosures about Market
Risk
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16
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Item
8. Consolidated Financial Statements and Supplementary
Data
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16
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Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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16
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Item
9A. Controls and
Procedures
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16
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Item
9B. Other
Information
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18
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PART III
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18
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Item
10. Directors, Executive Officers and Corporate
Governance
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18
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Item
11. Executive
Compensation
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18
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Item
12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
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18
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Item
13. Certain Relationships and Related Transactions, and Director
Independence
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18
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Item
14. Principal Accountant Fees and
Services
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19
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PART IV
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19
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Item
15. Exhibits and Financial Statement
Schedules
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19
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SIGNATURES
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21
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2
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Item 1.
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Business
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This
Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and Bridgford Foods
Corporation intends that such forward-looking statements be subject to the safe
harbors created thereby. Readers are cautioned that such statements, which may
be identified by words including ‘‘anticipates,’’ ‘‘believes,’’ ‘‘intends,’’
‘‘estimates,’’ ‘‘expects,’’ and similar expressions, are only predictions or
estimations and are subject to known and unknown risks and uncertainties. These
forward-looking statements include, but are not limited to, statements regarding
the following: general economic and business conditions; the impact of
competitive product and pricing; success of operating initiatives; development
and operating costs; advertising and promotional efforts; adverse publicity;
acceptance of new product offerings; consumer trial and frequency; changes in
business strategy or development plans; availability, terms and deployment of
capital; availability of qualified personnel; commodity, labor, and employee
benefit costs; changes in, or failure to comply with, government regulations;
weather conditions; construction schedules; and other factors referenced in this
Report.
The
forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking
statements are based on assumptions regarding our business, which involve
judgments with respect to, among other things, future economic and competitive
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Although we believe that the assumptions underlying the forward-looking
statements are reasonable, actual results may differ materially from those set
forth in the forward-looking statements. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as representation by us or
any other person that the objectives or plans of our company will be achieved.
The forward-looking statements contained herein speak as of the date of this
Report and we undertake no obligation to update such statements after the date
hereof.
Background
of Business
Bridgford
Foods Corporation (collectively with its subsidiaries, “Bridgford”, the
“Company”, “We”, “Our”), a California corporation was organized in 1952. We
originally began operations in 1932 as a retail meat market in San Diego,
California and evolved into a meat wholesaler for hotels and restaurants, a
distributor of frozen food products, a processor and packer of meat, and a
manufacturer and distributor of frozen food products for sale on a retail and
wholesale basis. For more than the past five years we and our subsidiaries have
been primarily engaged in the manufacturing, marketing and distribution of an
extensive line of frozen, refrigerated, and snack food products throughout the
United States. We have not been involved in any bankruptcy, receivership, or
similar proceedings since inception nor have we been party to any merger,
acquisition, etc. or acquired or disposed of any material amounts of assets
during the past five years. Substantially all of our assets have been acquired
in the ordinary course of business. We have had no significant change in the
type of products produced or distributed, nor in the markets we serve.
Independent distributors now serve approximately 2,400 stores of all types in
areas impractical to serve by our Company-owned vehicles.
Description
of Business
Bridgford
Foods Corporation operates in two business segments - the processing and
distribution of frozen products and the processing and distribution of
refrigerated and snack food products. For information regarding the
separate financial performance of the business segments refer to Note 7 of the
Notes to the Consolidated Financial Statements included in this Annual Report on
Form 10-K.
The
following table shows sales, as a percentage of consolidated sales, for each of
these segments for each of the last two fiscal years:
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2009
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2008
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Frozen
Food Products
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45 | % | 44 | % | ||||
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Refrigerated
and Snack Food Products
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55 | % | 56 | % | ||||
| 100 | % | 100 | % | |||||
We
manufacture and distribute an extensive line of food products, including
biscuits, bread dough items, roll dough items, dry sausage products, beef jerky,
and a variety of sandwiches and sliced luncheon meats. The products we purchase
for resale include a variety of jerky, cheeses, salads, party dips, Mexican
foods, nuts, and other delicatessen type food products.
3
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2009
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2008
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Products
manufactured, processed or packaged by Bridgford
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83 | % | 82 | % | ||||
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Products
manufactured or processed by third parties for
distribution
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17 | % | 18 | % | ||||
| 100 | % | 100 | % | |||||
Although
we have recently introduced several new products, most of these products have
not contributed significantly to our revenue growth for the fiscal year. Our
sales are not subject to material seasonal variations. Historically we have been
able to respond quickly to the receipt of orders and, accordingly, do not
maintain a significant sales backlog. Bridgford Foods Corporation and its
industry generally have no unusual demands or restrictions on working capital
items. During the last fiscal year we did not enter into any new markets or any
significant contractual or other material relationships.
To date,
federal, state, and local environmental laws and regulations, including those
relating to the discharge of materials into the environment, have not had a
material effect on our business.
Availability
of SEC Filings and Code of Conduct on Internet Website
We
maintain an Internet website at http://www.bridgford.com. Available
on this website, free of charge, are annual reports on Form 10-K, quarterly
reports on Form 10-Q, and reports filed under Section 16 of the Securities
Exchange Act of 1934 which we file with the Securities and Exchange
Commission. Our Code of Conduct is also available on the
website.
Major Product
Classes
Frozen
Food Products
Our
frozen food division serves both food service and retail customers. We sell
approximately 170 unique frozen food products through wholesalers, cooperatives,
and distributors to approximately 21,000 retail outlets and 22,000 restaurants
and institutions.
Frozen
Food Products – Food Service
The food
service industry is composed of establishments that serve food outside the home
and includes restaurants, the food operations of health care providers, schools,
hotels, resorts, corporations, and other traditional and non-traditional food
service outlets. Growth in this industry has been driven by the increase in
away-from-home meal preparation, which has accompanied the expanding number of
both dual income and single-parent households. Another trend within the food
service industry is the growth in the number of non-traditional food service
outlets such as convenience stores, retail stores, and supermarkets. These
non-traditional locations often lack extensive cooking, storage, or preparation
facilities resulting in a need for pre-cooked and prepared foods similar to
those we provide. The expansion in the food service industry has also been
accompanied by the continued consolidation and growth of broadline and specialty
food service distributors, many of which are long-standing
customers.
We supply
our food service customers generally through distributors that take title to the
product and resell it. Among our customers are many of the country’s largest
broadline and specialty food service distributors. These and other large end
purchasers occasionally go through extensive qualification procedures and their
manufacturing capabilities are subjected to thorough review by the end
purchasers prior to our approval as a vendor. Large end purchasers typically
select suppliers that can consistently meet increased volume requirements on a
national basis during peak promotional periods. We believe that manufacturing
flexibility, national presence, and long-standing customer relationships should
allow us to compete effectively with other manufacturers seeking to provide
similar products to our current large food service end purchasers, although no
assurances can be given.
Frozen
Food Products – Retail Customers
The
majority of our existing and targeted retail customers are involved in the
resale of branded and private label packaged foods. The same trends which have
contributed to the increase in away-from-home meal preparation have also fueled
the growth in easy to prepare, microwaveable frozen and refrigerated convenience
foods. Among the fastest growing segments is the frozen and refrigerated
hand-held foods market. This growth has been driven by improved product quality
and variety and the increasing need for inexpensive and healthy food items that
require minimal preparation. Despite rapid growth, many categories of frozen and
refrigerated hand-held foods have achieved minimal household
penetration. We believe we have been successful in establishing and
maintaining supply relationships with certain selected leading retailers in this
market.
4
Frozen
Food Products – Sales and Marketing
Our
frozen food business covers the United States and Canada. In addition to
regional sales managers, we maintain a network of independent food service and
retail brokers covering most of the states as well as Canada. Brokers are
compensated on a commission basis. We believe that our broker relationships, in
close cooperation with the regional sales managers, are a valuable asset
providing significant new product and customer opportunities. The regional sales
managers perform several significant functions for us, including identifying and
developing new business opportunities and providing customer service and support
to our distributors and end purchasers through the effective use of our broker
network.
Our
annual advertising expenditures are directed towards retail and institutional
customers. These customers participate in various special promotional and
marketing programs and direct advertising allowances we sponsor. We also invest
in general consumer advertising in various newspapers and periodicals including
free standing inserts and coupons to advertise in major markets. We direct
advertising toward food service customers with campaigns in major industry
publications and through our participation in trade shows throughout the United
States.
Refrigerated
and Snack Food Products – Customers
Our
refrigerated and snack food products division sells approximately 240 different
items through a direct store delivery network serving approximately 31,000
supermarkets, mass merchandise and convenience retail stores located in 49
states and Canada.
These
customers are comprised of large retail chains and smaller “independent”
operators. This part of our business is highly competitive. Proper placement of
our product lines is critical to selling success since most items could be
considered “impulse” items which are often consumed shortly after purchase. Our
ability to sell successfully to this distribution channel depends on aggressive
marketing and maintaining relationships with key buyers.
Refrigerated
and Snack Food Products — Sales and Marketing
Our
direct store delivery network consists of two separate divisions, refrigerated
and non-refrigerated snack food products. Refrigerated snack food products are
distributed through six different regions located in the southwest, primarily
operating in California, Arizona, and Nevada. Non-refrigerated snack food
products are distributed across the United States and Canada. The regional sales
managers perform several significant functions for us including identifying and
developing new business opportunities and providing customer service and support
to our customers. We also utilize the services of brokers, where appropriate, to
support efficient product distribution and customer satisfaction. Independent
distributors now serve approximately 2,400 customers of all types in areas
impractical to serve by our Company-owned vehicles.
Product
Planning and Research and Development
We
continually monitor the consumer acceptance of each product within our extensive
product line. Individual products are regularly added to and deleted from the
our product line. The addition or deletion of any individual product has not had
a material effect on our operations in the current fiscal year. We believe that
a key factor in the success of our products is our system of carefully targeted
research and testing of our products to ensure high quality and that each
product matches an identified market opportunity. The emphasis in new product
introductions in the past several years has been in single service items. We are
constantly searching to develop new products to complement our existing product
line and improved processing techniques and formulas for our existing product
line. We utilize in-house test kitchen to research and experiment and
consultants with unique food preparation methods, improve quality control and
analyze new ingredient mixtures.
Competition
Our
products are sold under highly competitive conditions. All food products can be
considered competitive with other food products, but we consider our principal
competitors to include national, regional and local producers and distributors
of refrigerated, frozen and snack food products. Several of our competitors
include large companies with substantially greater financial and marketing
resources than ours. Existing competitors may broaden their product lines and
potential competitors may enter or increase their focus on our market, resulting
in greater competition for us. We believe that our products compete favorably
with those of our competitors. Such competitors’ products compete against ours
for retail shelf space, institutional distribution and customer
preference.
5
Effect
of Government Regulations
Our
operations are subject to extensive inspection and regulation by the United
States Department of Agriculture (the “USDA”), the Food and Drug Administration
(the “FDA”), and by other federal, state, and local authorities regarding the
processing, packaging, storage, transportation, distribution, and labeling of
products that we manufacture, produce and process. Our processing
facilities and products are subject to continuous inspection by the USDA and/or
other federal, state, and local authorities. The USDA has issued
strict policies concerning the control of listeria monocytogenes in ready-to-eat
meat and poultry products and contamination by food borne pathogens such as E.
coli and salmonella, and established a new system of regulation known as the
Hazard Analysis Critical Control Points (“HACCP”) program. The HACCP program
requires all meat and poultry processing plants to develop and implement
sanitary operating procedures and other program requirements. We
believe that we are currently in compliance with governmental laws and
regulations and that we maintain the necessary permits and licenses relating to
our meat operations.
Importance
of Key Customers
Sales to
Wal-Mart® comprised 11.4% and 10.2% of revenues for fiscal years 2009 and 2008,
respectively. Accounts receivable from Wal-Mart® was 13.3% and 14.2% of total
accounts receivable at October 30, 2009 and October 31, 2008,
respectively.
Sources
and Availability of Raw Materials
We
purchase large quantities of pork, beef, and flour. These ingredients
are generally available from a number of different suppliers although the
availability of these ingredients is subject to seasonal
variation. We build ingredient inventories to take advantage of
downward trends in seasonal prices or anticipated supply
limitations.
Employees
We had
586 employees at October 30, 2009, approximately 43% of whose employment
relationship is governed by collective bargaining agreements. Most agreements
expire between January 2011 and March 2012. A contract with Teamsters
Locals 87, 150, 386 and 431, covering 16 employees, expired on March 31,
2007. As of January 2010, a new agreement is in the process of
ratification. We believe that our relationship with all of our
employees is favorable.
Executive
Officers of the Registrant
The
names, ages, and positions of all our executive officers as of January 1,
2010 are listed below. Messrs. Hugh Wm. Bridgford and Allan L. Bridgford
are brothers. William L. Bridgford is the son of Hugh Wm. Bridgford and the
nephew of Allan L. Bridgford. Officers are normally appointed annually by the
board of directors at their meeting immediately following the annual meeting of
shareholders. All executive officers are full-time employees of our company,
except for Allan L. Bridgford, who works 60% of full-time effective March,
2005.
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Name
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Age
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Position(s) with our
company
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Allan
L. Bridgford
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74
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Senior
Chairman and member of the Executive Committee
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Hugh
Wm. Bridgford
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78
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Vice
President and Chairman of the Executive Committee
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William
L. Bridgford
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55
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Chairman
and member of the Executive Committee
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John
V. Simmons
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54
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President
and member of the Executive Committee
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Raymond
F. Lancy
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56
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Chief
Financial Officer, Executive Vice President, Treasurer and member of the
Executive Committee
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Item 1A.
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Risk
Factors
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In
addition to the other matters set forth in this Annual Report on Form 10-K,
the continuing operations and the price of our common stock are subject to the
following risks, each of which could materially adversely affect our business,
financial condition, and results of operations. The risks described below are
not the only risks faced by us. The risks described below are only
the risks that we currently believe are material to our
business. However, additional risks not presently known, or risks
that are currently believed to be immaterial, may also impair our business
operations.
6
We
are subject to general risks in the food industry, including risks relating to
changes in consumer preference and economic conditions, any of which risks, if
realized, could negatively impact our operating results and financial
position.
The food
industry, and the markets within the food industry in which we compete, are
subject to various risks, including the following: evolving consumer
preferences, nutritional and health-related concerns, federal, state and local
food inspection and processing controls, consumer product liability claims,
risks of product tampering, and the availability and expense of liability
insurance. The meat and poultry industries are subject to scrutiny due to the
association of meat and poultry products with recent outbreaks of illness, and
on rare occasions even death, caused by food borne pathogens. Product recalls
are sometimes required in the food industry to withdraw contaminated or
mislabeled products from the market. Additionally, the failure to
identify and react appropriately to changes in consumer trends, demands and
preferences could lead to, among other things, reduced demand and price
reduction for our products. Further, we may be adversely affected by
changes in domestic or foreign economic conditions, including inflation or
deflation, interest rates, availability of capital markets, consumer spending
rates, and energy availability and costs (including fuel
surcharges). These and other general risks related to the food
industry, if realized by us, could have a significant adverse affect on demand
for our products, as well as the costs and availability of raw materials,
ingredients and packaging materials, thereby negatively affecting our operating
results and financial position.
Fluctuations
in the prices that we pay for raw materials could negatively impact our
financial results.
We
purchase large quantities of commodity pork, beef, and flour. Historically,
market prices for products we process have fluctuated in response to a number of
factors, including changes in the United States government farm support
programs, changes in international agricultural and trading policies, weather,
and other conditions during the growing and harvesting seasons.
Our
operating results are heavily dependent upon the prices paid for raw materials.
The marketing of our value-added products does not lend itself to instantaneous
changes in selling prices. Changes in selling prices are relatively infrequent
and do not compare with the volatility of commodity
markets. While fluctuations in significant cost structure
components, such as ingredient commodities and fuel prices, have had a
significant impact on profitability over the last two years, the impact of
general price inflation on our financial position and results of operations has
not been significant. Future volatility of general price inflation or deflation
and raw material cost and availability could adversely affect our financial
results.
We
are subject to extensive government regulations and a failure to comply with
such regulations could negatively impact our financial results.
Our
operations are subject to extensive inspection and regulation by the United
States Department of Agriculture (the “USDA”), the Food and Drug Administration
(the “FDA”), and by other federal, state, and local authorities regarding the
processing, packaging, storage, transportation, distribution, and labeling of
products that are manufactured, produced and processed by us. Our processing
facilities and products are subject to continuous inspection by the USDA and/or
other federal, state, and local authorities. The USDA has issued strict policies
concerning the control of listeria monocytogenes in ready-to-eat meat and
poultry products and contamination by food borne pathogens such as E. coli and
salmonella, and established a new system of regulation known as the Hazard
Analysis Critical Control Points (“HACCP”) program. The HACCP program requires
all meat and poultry processing plants to develop and implement sanitary
operating procedures and other program requirements. We believe that we are
currently in compliance with governmental laws and regulations and that we
maintain necessary permits and licenses relating to our meat
operations.
A failure
to obtain or a loss of necessary permits and licenses could delay or prevent us
from meeting current product demand and could adversely affect our operating
performance. Furthermore, we are routinely subject to new or modified
laws, regulations and accounting standards. If found to be out of
compliance with applicable laws and regulations in these or other areas, we
could be subject to civil remedies, including fines, injunctions, recalls, or
asset seizures, as well as potential criminal sanctions, any of which could have
a significant adverse effect on our financial results.
We
depend on our key management, the loss of which could negatively impact our
operations.
Our
executive officers and certain other key employees have been primarily
responsible for the development and expansion of our business, and the loss of
the services of one or more of these individuals could adversely effect
us. Our success will be dependent in part upon our continued ability
to recruit, motivate, and retain qualified personnel. We can not assure you that
we will be successful in this regard. We have no employment or non-competition
agreements with key personnel.
7
We
depend on our major customers and any loss of such customers could have a
negative impact on our profitability.
We could
suffer significant reductions in revenues and operating income if we lost one or
more of our largest customers, including, for example, Wal-Mart®, which
accounted for 11.4% of revenues in fiscal year 2009. Many of our
customers, such as supermarkets, warehouse clubs, and food distributors have
consolidated in recent years. Such consolidation has produced large,
sophisticated customers with increased buying power who are more capable of
operating with reduced inventories while demanding lower pricing and increased
promotional programs. These customers also may use their shelf space for their
own private label products. Failure to respond to these trends could
reduce our volume and cause us to lower prices or increase promotional spending
for our product lines which could adversely affect our
profitability.
With
more than 80% concentration of beneficial ownership of our stock held by the
Bridgford family, there are risks that they can exert significant influence or
control over our corporate matters.
Members
of the Bridgford family beneficially own, in the aggregate, approximately 81% of
our outstanding stock. In addition, three members of the Bridgford family serve
on the Board of Directors. As a result, members of the Bridgford
family have the ability to exert substantial influence or actual control over
our management and affairs and over substantially all matters requiring action
by our shareholders, including amendments to by-laws, election and removal of
directors, any proposed merger, consolidation or sale of all or substantially
all of our assets and other corporate transactions. This
concentration of ownership may also delay or prevent a change in control
otherwise favored by our other shareholders and could depress our stock price.
Additionally, as a result of the Bridgford family’s significant ownership of the
outstanding voting stock, we have relied on the “controlled company” exemption
from certain corporate governance requirements of the NASDAQ stock market;
therefore, we have elected not to implement the rule that provides for a
nominating committee to identify and recommend nominees to the Board of
Directors. Pursuant to this exemption, our compensation committee,
which is made up of independent directors, does not have sole authority to
determine the compensation of our executive officers, including our Chairman of
the Board.
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Item 1B.
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Unresolved
Staff Comments
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Not
applicable.
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Item 2.
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Properties
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We own
the following properties:
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Property Location
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Building
Square
Footage
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Acreage
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||||||
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Anaheim,
California ***
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100,000 | 5.0 | ||||||
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Modesto,
California **
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0 | 0.3 | ||||||
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Dallas,
Texas *
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94,000 | 4.0 | ||||||
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Dallas,
Texas *
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30,000 | 2.0 | ||||||
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Dallas,
Texas *
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16,000 | 1.0 | ||||||
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Dallas,
Texas *
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3,200 | 1.5 | ||||||
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Statesville,
North Carolina *
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42,000 | 8.0 | ||||||
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Chicago,
Illinois **
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156,000 | 1.5 | ||||||
* -
property used by Frozen Food Products Segment
** -
property used by Refrigerated and Snack Food Segment
***-
property used by both Frozen Food Products and Refrigerated and Snack Food
Segments
We
generally fully utilize the foregoing properties for processing, warehousing,
distributing and administrative purposes. We also lease warehouse and/or office
facilities throughout the United States and Canada. We believe that our
properties are generally adequate to satisfy our foreseeable needs. Additional
properties may be acquired and/or plants expanded if favorable opportunities and
conditions arise.
8
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Item 3.
|
Legal
Proceedings
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No
material legal proceedings were pending against us at October 30, 2009 or
as of the date of filing of this Annual Report on Form 10-K. We are likely
to be subject to claims arising from time to time in the ordinary course of our
business. In certain of such actions, plaintiffs may request punitive or other
damages that may not be covered by insurance and, accordingly, no assurance can
be given with respect to the ultimate outcome of any such possible future claims
or litigation or their effect on us. Any adverse litigation trends and outcomes
could significantly and negatively affect our financial results.
|
Item 4.
|
Submission
of Matters to a Vote of Security
Holders
|
Annual
Meeting of Shareholders
The 2010
Annual Meeting of Shareholders will be held at the offices of Bridgford Foods
Corporation, 1308 North Patt Street, Anaheim, California at 10:00 a.m. on
Wednesday, March 17, 2010.
No
matters were submitted to our shareholders during the fourth quarter of the
fiscal year ended October 30, 2009.
9
Item 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Common
Stock and Dividend Data
Our
common stock is traded in the national over-the-counter market and is authorized
for quotation on the Nasdaq Global Market under the symbol “BRID”. The following
table reflects the high and low closing sale prices reported by Nasdaq as well
as cash dividends paid for each of the last eight fiscal quarters.
|
Fiscal Year 2009
|
High
|
Low
|
Cash
Dividends
Paid
|
|||||||
|
First
Quarter
|
$
|
4.88
|
$
|
3.71
|
$
|
0.00
|
||||
|
Second
Quarter
|
$
|
4.55
|
$
|
2.53
|
$
|
0.00
|
||||
|
Third
Quarter
|
$
|
9.32
|
$
|
4.31
|
$
|
0.00
|
||||
|
Fourth
Quarter
|
$
|
9.79
|
$
|
6.91
|
$
|
0.00
|
||||
|
Fiscal Year 2008
|
High
|
Low
|
Cash
Dividends
Paid
|
|||||||
|
First
Quarter
|
$
|
7.45
|
$
|
6.07
|
$
|
0.00
|
||||
|
Second
Quarter
|
$
|
6.94
|
$
|
5.32
|
$
|
0.00
|
||||
|
Third
Quarter
|
$
|
6.77
|
$
|
5.40
|
$
|
0.00
|
||||
|
Fourth
Quarter
|
$
|
6.43
|
$
|
4.26
|
$
|
0.00
|
||||
On
November 12, 2009, Bridgford Foods Corporation issued a press release announcing
that its Board of Directors had approved a cash dividend of $0.10 per share of
common stock to be distributed on January 4, 2010 to shareholders of record on
December 8, 2009.
On
January 15, 2010, the closing sale price for our common stock on the Nasdaq
Global Market was $11.41 per share. As of January 15, 2010, there were 303
shareholders of record of our common stock.
The
payment of any future dividends will be at the discretion of
our Board of Directors and will depend upon future earnings,
financial requirements, and other factors.
Unregistered
Sales of Equity Securities
During
the period covered by this Report we did not sell or issue any equity securities
that were not registered under the Securities Act of 1933, as
amended.
Repurchases
of Equity Securities by the Issuer
During
fiscal year 2009, we repurchased an aggregate of 79,713 shares of our common
stock for $637,955 pursuant to our repurchase plan previously authorized by the
Board of Directors. The following table provides information
regarding our repurchases of common stock in each of the four periods comprising
the fourth quarter of fiscal year 2009.
10
|
Total Number of
|
Total Number of
Shares Purchased
As
Part of Publicly
Announced Plans
|
Maximum Number of
Shares that May Yet
Be Purchased
Under
the Plans
|
||||||||
|
Period (1)
|
Shares
Purchased
|
Average Price Paid
Per Share
|
or
Programs (2)
|
or
Programs (2)
|
||||||
|
July
11, 2009 - August 7, 2009 (4 weeks)
|
15,345
|
$
|
$8.94
|
15,345
|
423,573
|
|||||
|
August
8, 2009 - September 4, 2009 (4 weeks)
|
8,522
|
$
|
$9.01
|
8,522
|
415,051
|
|||||
|
September
5, 2009 - October 2, 2009 (4 weeks)
|
9,123
|
$
|
$8.91
|
9,123
|
405,928
|
|||||
|
October
3, 2009 - October 30, 2009 (4 weeks)
|
7,883
|
$
|
$9.23
|
7,883
|
398,045
|
|||||
|
Total
|
40,873
|
$
|
$9.00
|
40,873
|
||||||
|
(1)
|
The
periods shown are our fiscal periods during the sixteen-week quarter ended
October 30, 2009.
|
|
(2)
|
All
repurchases reflected in the foregoing table were made on the open
market. Our stock repurchase program was approved by the Board
of Directors in November 1999 (1,500,000 shares authorized, disclosed
in a Form 10-K filed on January 26, 2000) and was expanded in
June 2005 (500,000 additional shares authorized, disclosed in a press
release and Form 8-K filed on June 17, 2005). Under
the stock repurchase program, we are authorized, at the discretion of
management and the Board of Directors, to purchase up to an aggregate of
2,000,000 shares of the our common stock on the open
market. Our Stock Purchase Plan (“Purchase Plan”) is
administered by Citigroup Global Markets Inc. (“CGM”) for purchase of
shares of common stock (“Stock”) issued by us in compliance with the
requirements of Rule 10b5-1 under the Securities Exchange Act of 1934
(“Exchange Act”). Commencing on October 14, 2009 and continuing
through and including October 13, 2010, CGM shall act as our exclusive
agent to purchase Stock under the Purchase Plan. This Purchase
Plan supplements any purchases of stock by us “outside” of the Purchase
Plan, which may occur from time to time, in open market transactions
pursuant to Rule 10b-18 of the Exchange Act. The daily purchase
quantity is defined as a number of shares up to, but not to exceed, each
day’s applicable Rule 10b-18 maximum volume limit (i.e. 25% of the
prior four calendar weeks’ average daily trading volume); however, once
per week a block of stock may be purchased that exceeds the
Rule 10b-18 average daily trading volume condition,
provided that no other Purchase Plan purchases are made on any day on
which such a block is purchased. As of October 30, 2009, the
total maximum number of shares that may be purchased under the Purchase
Plan is 398,045 at a purchase price not to exceed $10.00 per share for a
total maximum aggregate price (exclusive of commission) of
$3,980,450.
|
|
Item 6.
|
Selected
Financial Data
|
Not
applicable to smaller reporting company.
For a
complete understanding, this Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
Consolidated Financial Statements and Notes to the Consolidated Financial
Statements contained in this Report.
Certain
statements under “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and elsewhere in this report constitute
“forward-looking statements” within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934. Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of Bridgford Foods Corporation to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; the
impact of competitive products and pricing; success of operating initiatives;
development and operating costs; advertising and promotional efforts; adverse
publicity; acceptance of new product offerings; consumer trial and frequency;
changes in business strategy or development plans; availability, terms and
deployment of 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.
11
Results
of Operations (in thousands except percentages)
Fiscal
Year Ended October 30, 2009 (52 weeks) Compared to Fiscal Year Ended October 31,
2008 (52 weeks)
Net
Sales-Consolidated
Net sales
in fiscal 2009 increased $1,675 (1.4%) when compared to the prior
year. The primary reason for the increase was higher unit volume. The
impact of selling price changes was insignificant. Promotional
allowances as a percentage of consolidated sales decreased 0.1%.
Net Sales-Frozen Food
Products Segment
Net sales
in the Frozen Food Products segment in fiscal 2009 increased $1,872 (3.5%)
compared to the prior year. A unit volume decrease of 5.1% was offset
by price increases of 8.6% contributing to the change. Promotional
allowances were unchanged compared to the prior year.
Net Sales-Refrigerated and
Snack Food Products Segment
Net sales
in the Refrigerated and Snack Food Products segment in fiscal 2009 decreased
$197 (0.3%) compared to the prior year. Unit volume increases of 3.9% in fiscal
2009 were more than off-set by selling price decreases.
Cost of Products
Sold-Consolidated
Cost of
products sold in fiscal 2009 decreased $9,153 (11.4%) compared to the prior year
primarily due to lower flour and meat commodity costs. Utilities,
employee benefit costs and operating supplies decreased significantly compared
to the prior fiscal year. Favorable changes in product mix also contributed to
the decline in cost of sales.
Cost of Products Sold–Frozen
Food Products Segment
Cost of
products sold in the Frozen Food Products segment in fiscal 2009 decreased
$3,911 (11.2%) compared to the prior year. Lower flour commodity
costs in fiscal 2009 were the primary contributing factor causing this
decrease. Utilities and employee benefit costs decreased
significantly compared to the prior fiscal year. Favorable changes in product
mix also contributed to the decline in cost of sales.
Cost of Products
Sold–Refrigerated and Snack Food Products Segment
Cost of
products sold in the Refrigerated and Snack Food Products segment in fiscal 2009
decreased $5,827 (12.4%) compared to the prior year. Lower meat commodity costs
and producing products previously purchased from outside suppliers in fiscal
2009 were the primary factors causing this change. Utilities,
employee benefit costs, property taxes and operating supplies decreased
significantly compared to the prior fiscal year.
Gross
Margin-Consolidated
The gross
margin before depreciation increased from 33.6% to 42.0%, in fiscal 2009,
primarily due to lower flour and meat commodity costs when compared to the prior
fiscal year. Promotional allowances declined 0.1% as a percentage of
consolidated sales and had no measurable impact on the gross
margin.
Gross Margin–Frozen Food
Products Segment
The gross
margin before depreciation in the Frozen Food Products segment in fiscal 2009
increased from 33.8% to 43.2%, in fiscal 2009, primarily due to lower flour
commodity costs when compared to the prior fiscal year. Lower
promotional allowances also increased net selling prices contributing to the
gross margin increase. Favorable changes in product mix also
contributed to the improvement in gross margin.
12
Gross Margin–Refrigerated
and Snack Food Products Segment
The gross
margin before depreciation in the Refrigerated and Snack Food Products segment
in fiscal 2009 increased from 31.3% to 39.6%, in fiscal 2009, primarily due to
lower meat commodity costs and lower delivery costs when compared to the prior
fiscal year. Increased in-sourcing of major product lines reduced
overhead costs per unit. Cost decreases related to utilities, employee benefits,
property taxes and operating supplies also favorably impacted our gross margin
in this segment.
Selling, General and
Administrative Expenses-Consolidated
Selling,
general and administrative expenses in fiscal 2009 decreased $1,532 (3.5%) when
compared to the prior year. The decrease in this category did not
directly correspond to the change in sales.
The table
below summarizes the primary expense variances:
|
52
Weeks Ended
|
Expense/Loss
|
|||||||||||
| October 30, 2009 | October 31, 2008 | Increase (Decrease) | ||||||||||
|
Fuel
|
$2,369 | $4,158 | $(1,789 | ) | ||||||||
|
Cash
surrender value (gain) / loss
|
(323 | ) | 928 | (1,251 | ) | |||||||
|
Wages
and bonus
|
17,369 | 16,070 | 1,299 | |||||||||
|
Benefits-health/life
|
1,997 | 2,895 | (898 | ) | ||||||||
|
Benefits-workers
compensation
|
700 | 1,073 | (373 | ) | ||||||||
|
Bad
debt provision (recovery)
|
78 | (194 | ) | 272 | ||||||||
|
Interest
income
|
(32 | ) | (272 | ) | 240 | |||||||
|
Other
|
19,562 | 18,594 | 968 | |||||||||
|
Total
|
$41,720 | $43,252 | $(1,532 | ) | ||||||||
Selling, General and
Administrative Expenses-Frozen Food Products Segment
Selling,
general and administrative expenses in the Frozen Food Products segment in
fiscal 2009 increased by $1,007 (6.4%) compared to the prior
year. This category increased primarily as a result of increased
profit sharing expenses as a result of higher segment
profitability. The allocation of corporate support changes also
increased due to higher segment revenues. Expenses related to advertising also
increased compared to the prior year.
Selling, General and
Administrative Expenses-Refrigerated and Snack Food Products
Segment
Selling,
general and administrative expenses in the Refrigerated and Snack Food segment
in fiscal 2009 decreased $2,539 (9.2%) compared to the prior
year. This decrease was primarily caused by lower fuel, healthcare
and workers’ compensation expenses. Outside storage expense also
declined compared to the prior fiscal year.
Depreciation
Expense-Consolidated
Depreciation
expense in fiscal 2009 decreased by $550 (16.8%) compared to the prior
year. The decrease in depreciation expense reflects lower capital
expenditure levels in recent years and certain significant assets becoming fully
depreciated in the 2009 fiscal year.
Depreciation Expense-Frozen
Food Products Segment
Depreciation
expense in the Frozen Food Products segment in fiscal 2009 decreased by $80
(10.2%) compared to the prior year. The decrease in depreciation expense
reflects lower capital expenditure levels in recent years and certain
significant assets becoming fully depreciated in the 2009 fiscal
year.
Depreciation Expense-
Refrigerated and Snack Food Products Segment
Depreciation
expense in the Refrigerated and Snack Food segment in fiscal 2009 decreased by
$333 (15.2%) compared to the prior year. This decline reflects lower capital
expenditure levels in recent years.
13
Income
Taxes
The
effective income tax rate was 3.6% and (112.1)% in fiscal years 2009 and 2008,
respectively. In fiscal year 2009, the effective income tax rate differed from
the applicable mixed statutory rate of approximately 38% primarily due to
recording a full valuation allowance on our deferred tax assets of $8,443 in
fiscal year 2008 (Refer to Note 4). The 2009 provision for taxes on
income of $255 consists of minimum federal and state income taxes. In
fiscal year 2008 the effective income tax rate differed from the applicable
mixed statutory rate of approximately 38% primarily due to recording a full
valuation allowance on our deferred tax assets of $8,615 (Refer to Note 4) and
our current year claim for research and development tax credits and non-taxable
life insurance.
Liquidity
and Capital Resources (in thousands except share amounts)
Our need
for operations growth, capital expenses and share repurchases are expected to be
met with cash flows provided by operating activities.
Cash
flows from operating activities:
|
2009
|
2008
|
|||||||
|
Net
income (loss)
|
$ | 6,787 | $ | (12,447 | ) | |||
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
||||||||
|
Depreciation
|
2,733 | 3,283 | ||||||
|
Provision
(recovery) on losses on accounts receivable
|
78 | (194 | ) | |||||
|
(Gain)
on sale of property, plant and equipment
|
(11 | ) | (27 | ) | ||||
|
Loss
on sale of equity securities
|
159 | — | ||||||
|
Deferred
income taxes, net
|
171 | (2,107 | ) | |||||
|
Tax
valuation allowance
|
(171 | ) | 8,615 | |||||
|
Changes
in operating working capital
|
(310 | ) | 2,483 | |||||
|
Net
cash provided by (used in) operating activities
|
$ | 9,436 | $ | (394 | ) | |||
For
fiscal year 2009, net cash provided by operating activities was $9,436, which
enabled us to fund additions to property, plant and equipment in the amount of
$1,303 and share repurchases of $638. The available cash balance
increased by $7,819 during the fiscal year. In November 2009, we
declared a one-time cash dividend of $0.10 per share of common stock for
shareholders of record on December 8, 2009, payable on January 4, 2010, based on
operations for fiscal year 2009. For fiscal year 2008, net cash
used in operating activities was $394. We funded additions to
property, plant and equipment in the amount of $1,880 and share repurchases of
$3,039 from cash balances.
Significant
changes in operating working capital are as follows:
2009 –
Operating cash flows increased primarily due to net income of $6,787 and
non-cash depreciation expense of $2,733. Operating cash flows was
increased by a reduction in inventories, increase in accounts payable and the
current portion of non-current liabilities. Significant increases in accounts
receivable and other non-current assets and decreases in accrued payroll,
advertising and other expenses offset the cash flow increases during
2009. During the 2009 fiscal year we funded $989 toward our defined
benefit pension plan.
2008 –
Operating cash flows decreased primarily due to reductions in other non-current
assets and the current portion of non-current liabilities offset by decreases in
inventories, prepaid expenses and accrued payroll, advertising and other
expenses. During the year we funded $2,467 toward our defined benefit pension
plan.
Cash
used in investing activities:
|
2009
|
2008
|
|||||||
|
Proceeds
from sale of property, plant and equipment
|
$ | 56 | $ | 69 | ||||
|
Proceeds
from sale of equity securities
|
268 | — | ||||||
|
Additions
to property, plant and equipment
|
(1,303 | ) | (1,880 | ) | ||||
|
Net
cash used in investing activities
|
$ | (979 | ) | $ | (1,811 | ) | ||
Expenditures
for property, plant and equipment include the acquisition of new equipment,
upgrading of facilities to maintain operating efficiency and investments in cost
effective technologies to lower costs. Overall capital spending has declined in
recent years as we carefully scrutinize capital investments for short term
pay-back of our investments.
14
Cash
used in financing activities:
|
2009
|
2008
|
|||||||
|
Shares
repurchased
|
$ | (638 | ) | $ | (3,039 | ) | ||
|
Net
cash used in financing activities
|
$ | (638 | ) | $ | (3,039 | ) | ||
During
fiscal year 2009, we repurchased an aggregate of 79,713 shares of our common
stock for $637,955 pursuant to our repurchase plan previously authorized by the
Board of Directors.
We have
remained free of interest-bearing debt for twenty-three consecutive years. We
maintain a line of credit with Bank of America that expires April 30, 2010.
Under the terms of this line of credit, we may borrow up to $2,000 at an
interest rate equal to the bank’s Prime rate, unless we elect an optional
interest rate. The borrowing agreement contains various covenants, the more
significant of which require us to maintain certain levels of shareholders’
equity and working capital. We are currently in compliance with all
provisions of the agreement. There were no borrowings under this line
of credit during the 2009 fiscal year. Management believes that our
strong financial position and our capital resources are sufficient to provide
for our operating needs and capital expenditures for fiscal 2010.
Impact
of Inflation
Our
operating results are heavily dependent upon the prices paid for raw
materials. The marketing of our value-added products does not lend
itself to instantaneous changes in selling prices. Changes in selling
prices are relatively infrequent and do not compare with the volatility of
commodity markets. While fluctuations in significant cost structure
components, such as ingredient commodities and fuel prices, have had a
significant impact on profitability over the last two fiscal years, the impact
of general price inflation on our financial position and results of operations
has not been significant. However, future volatility of general price
inflation or deflation and raw material cost and availability could adversely
affect our financial results.
Off-Balance
Sheet Arrangements
We do not
currently have any off balance sheet arrangements within the meaning of Item
303(a)(4) of Regulation S-K.
Contractual
Obligations (in thousands)
We have
remained free of interest bearing debt for twenty-three consecutive years and
had no other debt or other contractual obligations except for leases existing at
October 30, 2009. We lease certain transportation equipment
under operating leases through 2011.
Future
minimum lease payments are approximately (in thousands):
|
2010
|
2011
|
|||||||
|
Net
Lease Commitments
|
$ | 425 | $ | 425 | ||||
Critical
Accounting Policies
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported revenues and expenses during the respective
reporting periods. Actual results could differ from those estimates. Amounts
estimated related to liabilities for self-insured workers’ compensation,
employee healthcare and pension benefits are especially subject to inherent
uncertainties and these estimated liabilities may ultimately settle at amounts
not originally estimated. We record promotional and returns
allowances and bad debt allowances based on recent and historical trends.
Management believes its current estimates are reasonable and based on the best
information available at the time.
15
Disclosure
concerning our policies on credit risk, revenue recognition, cash surrender or
contract value for life insurance policies, deferred income tax and the
recoverability of our long-lived assets are provided in Notes 1 and 4 to the
Consolidated Financial Statements.
Recently Issued Accounting
Pronouncements and Regulations
Various
accounting standard-setting bodies have been active in soliciting comments and
issuing statements, interpretations and exposure drafts. For information on new
accounting pronouncements and the impact, if any, on our financial position or
results of operations, see Note 1 of the Notes to the Consolidated Financial
Statements.
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market
Risk
|
Not
applicable for smaller reporting company.
|
Item 8.
|
Consolidated
Financial Statements and Supplementary
Data
|
Not
applicable for smaller reporting company.
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
On
January 22, 2009, our Audit Committee of the Board of Directors of the Company
dismissed Haskell & White LLP as our independent registered public
accounting firm. Haskell & White LLP completed the audit of our financial
statements for the year ended October 31, 2008 on January 28, 2009 completely
terminating Haskell & White LLP's appointment as our independent registered
public accounting firm for the Company. The decision to change principal
accountants was approved by our Audit Committee and our Board of
Directors.
The
reports of Haskell & White LLP on the consolidated financial statements of
Bridgford Foods Corporation for the years ended October 31, 2008 and November 2,
2007, did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting
principle.
During
the years ended October 31, 2008 and November 2, 2007, and through the
subsequent interim period ended January 28, 2009, there were no disagreements
with Haskell & White LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Haskell & White LLP,
would have caused it to make reference thereto in its reports on the financial
statements for such years.
During
the years ended October 31, 2008, and November 2, 2007, and through the
subsequent interim period ended January 28, 2009, there have been no “reportable
events” (as defined in Item 304(a)(1)(v) of Regulation S-K).
On
January 22, 2009, our Audit Committee and our Board of Directors appointed
Squar, Milner, Peterson, Miranda & Williamson, LLP as its new independent
registered public accounting firm as of January 22, 2009 for the fiscal year
beginning November 1, 2008 and ending October 30, 2009.
During
the Company’s two most recent fiscal years ended October 31, 2008 and November
2, 2007, and through the subsequent interim period ended January 28, 2010,
neither the Company nor anyone on its behalf consulted Squar, Milner, Peterson,
Miranda & Williamson, LLP regarding any of the matters or events set forth
in Item 304(a)(2)(i) and (ii) of Regulation S-K.
|
Item 9A.
|
Controls
and Procedures
|
Evaluation of disclosure
controls and procedures
Our
management, with the participation and under the supervision of our Chairman and
Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as defined in Exchange Act
Rule 13a-15(e)) as of the end of the period covered by this
Report. Based on this evaluation the Chairman and Chief Financial Officer have
concluded that our disclosure controls and procedures are effective as of the
end of the period covered by this Report in their design and
operation to provide reasonable assurance that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to management and recorded, processed,
summarized and reported within the time periods specified by the Securities and
Exchange Commission’s rules and forms.
16
Our
management, including our Chairman and Chief Financial Officer, does not expect
that our disclosure controls and internal controls will prevent all error and
all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control.
The
design of any system of controls is also based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving our stated goals under all potential future
conditions; over time, a control may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
We
maintain and evaluate a system of internal accounting controls, and a program of
internal auditing designed to provide reasonable assurance that our assets are
protected and that transactions are performed in accordance with proper
authorization, and are properly recorded. This system of internal accounting
controls is continually reviewed and modified in response to evolving business
conditions and operations and to recommendations made by the independent
registered public accounting firm and internal auditor. We have
established a code of conduct. Our management believes that the
accounting and internal control systems provide reasonable assurance that assets
are safeguarded and financial information is reliable.
The Audit
Committee of the Board of Directors meets regularly with our financial
management and counsel, and with the independent registered public accounting
firm engaged by us. Internal accounting controls and the quality of
financial reporting are discussed during these meetings. The Audit Committee has
discussed with the independent registered public accounting firm matters
required to be discussed by Statement of Auditing Standards No. 114
(Communication with Audit Committees). In addition, the Audit Committee and the
independent registered public account firm have discussed the independent
registered public accounting firm’s independence from our Company and its
management, including the matters in the written disclosures required by Public
Company Accounting Oversight Board Rule 3526 “Communicating with Audit
Committees Concerning Independence”.
Section 404 of the
Sarbanes-Oxley Act of 2002
In order
to comply with the Sarbanes-Oxley Act of 2002 (the “Act”), we have undertaken
and continue a comprehensive effort, which includes the documentation and review
of our internal controls. In order to comply with the Act, we centralized most
accounting and many administrative functions at our corporate headquarters in an
effort to control the cost of maintaining our control systems.
The
Securities and Exchange Commission, on December 15, 2006, adopted new
measures to grant relief to smaller public companies by extending the date of
compliance with Section 404 of the Act. Under these new
measures, we will be required to comply with the Act in two
phases. The first phase was completed by us commencing with the
fiscal year ending October 31, 2008 and requires us to issue a management
report on internal control over financial reporting with each Annual Report on
Form 10-K thereafter. The second phase will require us to provide an auditor’s
attestation report on our internal control over financial reporting beginning
with our fiscal year ending October 30, 2010.
Management’s Annual Report
on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles.
Management
conducted an evaluation of the effectiveness of the internal controls over
financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
17
Management
assessed the effectiveness of our internal control over financial reporting for
our fiscal year ended October 30, 2009. Based on management’s
assessment and those criteria, management believes that the internal control
over financial reporting for our fiscal year ending October 30, 2009 was
effective.
This
Report does not include an attestation report of our independent registered
public accounting firm regarding internal control over financial
reporting. Management’s internal control report was not subject to
attestation by our independent registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit us to
provide only management’s report in this Report.
There has
been no change in our internal control over financial reporting during the last
fiscal quarter covered by this Report that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
Not
applicable.
|
Item 10.
|
Directors,
Executive Officers and Corporate
Governance
|
Information
set forth in the sections entitled “Proposal 1 – Election of Directors” and
“Section 16(a) Beneficial Ownership Reporting Compliance” contained in
our definitive proxy statement for the 2010 Annual Meeting of Shareholders to be
held on March 17, 2010 is incorporated herein by reference. Information
concerning our executive officers is set forth in Part I, Item 1, hereof
under the heading “Executive Officers of the Registrant”.
|
Item 11.
|
Executive
Compensation
|
Information
set forth in the sections entitled “Proposal 1 – Election of Directors” and
“Compensation of Executive Officers” contained in our definitive proxy statement
for the 2010 Annual Meeting of Shareholders to be held on March 17, 2010 is
incorporated herein by reference.
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
Information
set forth in the sections entitled “Principal Shareholders and Management” and
“Proposal 1 – Election of Directors” contained in our definitive proxy statement
for the 2010 Annual Meeting of Shareholders to be held on March 17, 2010 is
incorporated herein by reference.
Equity
Compensation Plan Information
Our only
shareholder approved equity compensation plan expired by its terms on April 29,
2009. No further stock options or rights are available for grant under this plan
and all previously outstanding options and rights have also expired by their
terms. No stock options, warrants or rights were granted during the
fiscal years ended October 30, 2009 and October 31, 2008 and none were
outstanding as of October 30, 2009.
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director Independence (not in
thousands)
|
Information
set forth in the sections entitled “Proposal 1 – Election of Directors” and
“Certain Relationships and Related Party Transactions” contained in our
definitive proxy statement for the 2010 Annual Meeting of Shareholders to be
held on March 17, 2010 is incorporated herein by reference.
We are
considered a “controlled company” within the meaning of Rule 5615(c)(1) of the
National Association of Securities Dealers (“NASD”) based on the approximate 80%
beneficial ownership of our outstanding common stock by Bridgford
Industries Incorporated and are therefore exempted from various NASD rules
pertaining to certain “independence” requirements of our directors.
Nevertheless, the Board of Directors has determined that Messrs. Andrews,
Foster, Schulze, Scott and Zippwald, who together comprise the Audit Committee,
are all “independent directors” within the meaning of Rule 5605 of the Nasdaq
Marketplace Rules.
18
Our
general legal counsel is the son of the senior chairman of the board of
directors. For these services, he currently is paid a fee of $1.35
for each meeting attended. Total fees paid under this arrangement for fiscal
year 2009 were $16.2 In addition, legal services are performed on our behalf and
billed by a firm in which he is a partner. Total fees billed under
this arrangement for fiscal year 2009 were approximately $70.
|
Item 14.
|
Principal
Accountant Fees and Services
|
Information
set forth in the sections entitled “Principal Accountant Fees and Services” and
“Policy on Audit Committee Pre-Approval of Audit Services And Permissible
Non-Audit Services of Independent Accountants” contained in our
definitive proxy statement for the 2010 Annual Meeting of Shareholders to be
held on March 17, 2010 is incorporated herein by reference.
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a)(1) Financial Statements. The
following documents are filed as a part of this report:
|
Page
|
|
|
Management’s
Report on Internal Control Over Financial Reporting
|
17
|
|
Reports
of Independent Registered Public Accounting Firms
|
22-23
|
|
Consolidated
Balance Sheets as of October 30, 2009 and October 31, 2008
|
24
|
|
Consolidated
Statements of Operations for years ended October 30, 2009 and October 31,
2008
|
25
|
|
Consolidated
Statements of Shareholders’ Equity and Comprehensive Income for years
October 30, 2009 and October 31, 2008
|
25
|
|
Consolidated
Statements of Cash Flows for years ended October 30, 2009 and October 31,
2008
|
26
|
|
Notes
to Consolidated Financial
Statements
|
27
|
(2) Financial Statement
Schedule
The
following financial statement is filed herewith:
|
Schedule
II - Valuation and Qualifying
Accounts
|
39
|
19
(3) Exhibits
(a) The exhibits below are filed or
incorporated herein by reference.
|
Exhibit
Number
|
Description
|
|
|
3.5
|
Restated
Articles of Incorporation, dated December 29, 1989 (filed as
Exhibit 3.5 to Form 10-K on January 28, 1993 and
incorporated herein by reference).
|
|
|
3.6
|
Amendment
to Articles of Incorporation, dated July 27, 1990 (filed as
Exhibit 3.6 to Form 10-K on January 28, 1993 and
incorporated herein by reference).
|
|
|
3.7
|
By-laws,
as amended (filed as Exhibit 2 to Form 10-K on
January 28,1993 and incorporated herein by
reference).
|
|
|
3.8
|
Certificate
of Amendment to By-laws (filed as Exhibit 99.1 to Form 8-K on
October 10, 2007 and incorporated herein by
reference).
|
|
|
10.1
|
Bridgford
Foods Corporation Defined Benefit Pension Plan (filed as Exhibit10.1 to
Form 10-K 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 10-K on 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-K on January 28, 1993 and
incorporated herein by reference).*
|
|
|
10.4
|
Bridgford
Foods Corporation 1999 Stock Incentive Plan and Form of Stock Option
Agreement (filed as Exhibit 4.1 to Form S-8 on May 28, 1999
and incorporated herein by reference).*
|
|
|
21.1
|
Subsidiaries
of the Registrant.
|
|
|
24.1
|
Power
of Attorney (included as part of the signature page)
|
|
|
31.1
|
Certification
of Principal Executive Officer, Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification
of Principal Financial Officer, Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Executive
Officer).
|
|
|
32.2
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Financial
Officer).
|
* Each of these Exhibits constitutes a management contract, compensatory plan or arrangement.
20
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BRIDGFORD
FOODS CORPORATION
Registrant
|
By:
|
/s/
WILLIAM L. BRIDGFORD
|
|
|
William
L. Bridgford
|
||
|
Chairman
|
Date:
January 28, 2010
POWER OF
ATTORNEY
We, the
undersigned directors and officers of Bridgford Foods Corporation, do hereby
constitute and appoint William L. Bridgford and Raymond F. Lancy, or either of
them, with full power of substitution and resubstitution, our true and lawful
attorneys and agents, to do any and all acts and things in our name and behalf
in our capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated below, which
said attorneys and agents, or either of them, or their substitutes, may deem
necessary or advisable to enable said corporation to comply with the Securities
Exchange Act of 1934, as amended, and any rules, regulations and requirements of
the Securities and Exchange Commission in connection with this Annual Report on
Form 10-K, including specifically, but without limitation, power and
authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments; and we do hereby ratify and confirm all
that the said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated
|
Signature
|
Title
|
Date
|
||
|
/s/ WILLIAM
L. BRIDGFORD
|
Chairman
|
January
28, 2010
|
||
|
William
L. Bridgford
|
(Principal
Executive Officer)
|
|||
|
/s/ ALLAN
L. BRIDGFORD
|
Senior
Chairman
|
January
28, 2010
|
||
|
Allan
L. Bridgford
|
||||
|
/s/ BRUCE
H. BRIDGFORD
|
Director
|
January
28, 2010
|
||
|
Bruce
H. Bridgford
|
||||
|
/s/ JOHN
V. SIMMONS
|
President
|
January
28, 2010
|
||
|
John
V. Simmons
|
||||
|
/s/ RAYMOND
F. LANCY
|
Chief
Financial Officer
|
January
28, 2010
|
||
|
Raymond
F. Lancy
|
(Principal
Financial Officer)
|
|||
|
/s/ TODD
C. ANDREWS
|
Director
|
January
28, 2010
|
||
|
Todd
C. Andrews
|
||||
|
/s/ RICHARD
A. FOSTER
|
Director
|
January
28, 2010
|
||
|
Richard
A. Foster
|
||||
|
/s/ ROBERT
E. SCHULZE
|
Director
|
January
28, 2010
|
||
|
Robert
E. Schulze
|
||||
|
/s/ D.
GREGORY SCOTT
|
Director
|
January
28, 2010
|
||
|
D.
Gregory Scott
|
||||
|
/s/ PAUL
R. ZIPPWALD
|
Director
|
January
28, 2010
|
||
|
Paul
R. Zippwald
|
21
To the
Board of Directors and Shareholders
Bridgford
Foods Corporation
We have
audited the accompanying consolidated balance sheet of Bridgford Foods
Corporation (the Company) as of October 30, 2009 and the related consolidated
statements of operations, shareholders’ equity and comprehensive income (loss)
and cash flows for the year then ended. Our audit also included the
financial statement Schedule II of the Company. These financial
statements and financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Bridgford Foods
Corporation and the results of its consolidated operations and its cash flows
for the year then ended, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
We were
not engaged to examine management’s assessment of the effectiveness of Bridgford
Foods Corporation’s internal control over financial reporting as of October 30,
2009 included in the accompanying Management’s Annual Report on Internal Control
Over Financial Reporting under Item 9A and, accordingly, we do not express an
opinion thereon.
/s/
Squar, Milner, Peterson, Miranda & Williamson, LLP
Newport
Beach, California
January
27, 2010
22
Report
Of Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders
Bridgford
Foods Corporation
We have
audited the accompanying consolidated balance sheet of Bridgford Foods
Corporation (the “Company”) as of October 31, 2008 and the related consolidated
statements of operations, shareholders’ equity and comprehensive income and cash
flows for the fiscal year then ended. In connection with our audit of
the consolidated financial statements, we also have audited the supplementary
information included in Schedule II. These consolidated financial
statements and the financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on
these consolidated financial statements and the financial statement schedule
based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provided a reasonable basis
for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of October 31, 2008, and the consolidated results of its operations and its cash
flows for the fiscal year then ended, in conformity with accounting principles
generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/
Haskell & White LLP
Irvine,
California
January
28, 2009
23
BRIDGFORD
FOODS CORPORATION
CONSOLIDATED
BALANCE SHEETS
October
30, 2009 and October 31, 2008
|
2009
|
2008
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 13,911 | $ | 6,092 | ||||
|
Accounts
receivable, less allowance for doubtful accounts of $404 and $397,
respectively and promotional allowances of $1,962 and $2,015,
respectively
|
9,718 | 8,867 | ||||||
|
Inventories
|
15,595 | 16,052 | ||||||
|
Prepaid
expenses
|
621 | 442 | ||||||
|
Refundable
income taxes
|
168 | 464 | ||||||
|
Deferred
income taxes, less valuation allowance of $1,852 and $2,422,
respectively
|
— | — | ||||||
|
Total
current assets
|
40,013 | 31,917 | ||||||
|
Property,
plant and equipment, net of accumulated depreciation of $55,362 and
$53,740, respectively
|
8,300 | 9,775 | ||||||
|
Other
non-current assets
|
10,586 | 10,263 | ||||||
|
Deferred
income taxes, less valuation allowance of $6,592 and $6,193,
respectively
|
— | — | ||||||
|
Total
assets
|
$ | 58,899 | $ | 51,955 | ||||
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 4,227 | $ | 3,072 | ||||
|
Accrued
payroll, advertising and other expenses
|
5,320 | 6,850 | ||||||
|
Current
portion of non-current liabilities
|
3,667 | 1,555 | ||||||
|
Total
current liabilities
|
13,214 | 11,477 | ||||||
|
Non-current
liabilities
|
13,262 | 7,943 | ||||||
|
Total
liabilities
|
26,476 | 19,420 | ||||||
|
Contingencies
and commitments (Notes 3, 5 and 6)
|
— | — | ||||||
|
Shareholders’
equity:
|
||||||||
|
Authorized
- 1,000 shares; issued and outstanding – none
|
— | — | ||||||
|
Common
stock, $1.00 par value
|
||||||||
|
Authorized
- 20,000 shares; issued and outstanding – 9,355 and 9,435 in 2009 and
2008, respectively
|
9,412 | 9,492 | ||||||
|
Capital
in excess of par value
|
10,646 | 11,204 | ||||||
|
Retained
earnings
|
21,085 | 14,298 | ||||||
|
Accumulated
other comprehensive loss
|
(8,720 | ) | (2,459 | ) | ||||
|
Total
shareholders’ equity
|
32,423 | 32,535 | ||||||
| $ | 58,899 | $ | 51,955 | |||||
See
accompanying notes to consolidated financial statements.
24
BRIDGFORD
FOODS CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
the years ended October 30, 2009 and October 31, 2008
|
2009
|
2008
|
|||||||
|
Net
sales
|
$ | 122,665 | $ | 120,990 | ||||
|
Cost
of products sold, excluding depreciation
|
71,170 | 80,323 | ||||||
|
Selling,
general and administrative expenses
|
41,720 | 43,252 | ||||||
|
Depreciation
|
2,733 | 3,283 | ||||||
| 115,623 | 126,858 | |||||||
|
Income
(loss) before taxes
|
7,042 | (5,868 | ) | |||||
|
Provision
for income taxes
|
255 | 6,579 | ||||||
|
Net
income (loss)
|
$ | 6,787 | $ | (12,447 | ) | |||
|
Basic
earnings (loss) per share
|
$ | 0.72 | $ | (1.30 | ) | |||
|
Shares
used to compute basic earnings (loss) per common share
|
9,411,181 | 9,577,286 | ||||||
|
Diluted
earnings (loss) per share
|
$ | 0.72 | $ | (1.30 | ) | |||
|
Shares
used to compute diluted earnings (loss) per common share
|
9,411,181 | 9,577,286 | ||||||
25
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
AND
COMPREHENSIVE INCOME (LOSS)
For
the years ended October 30, 2009 and October 31, 2008
|
Shares
|
Amount
|
Capital in
excess of
par value
|
Retained
earnings
|
Accumulated
other
comprehensive
income (loss)
|
Total
shareholders’
equity
|
|||||||||||||||||||
|
Balance,
November 2, 2007
|
9,889 | $ | 9,946 | $ | 13,789 | $ | 26,837 | $ | (603 | ) | $ | 49,969 | ||||||||||||
|
Adoption
of ASC 740-10
(Note
4)
|
(92 | ) | (92 | ) | ||||||||||||||||||||
|
Shares
repurchased and retired
|
(454 | ) | (454 | ) | (2,585 | ) | (3,039 | ) | ||||||||||||||||
|
Net
loss
|
(12,447 | ) | (12,447 | ) | ||||||||||||||||||||
|
Other
comprehensive net income (loss):
|
||||||||||||||||||||||||
|
Unrealized
loss on investment (Note 1)
|
(106 | ) | (106 | ) | ||||||||||||||||||||
|
Net
change in defined benefit plans
|
(2,093 | ) | (2,093 | ) | ||||||||||||||||||||
|
Net
change in other benefit plans
|
343 | 343 | ||||||||||||||||||||||
|
Comprehensive
loss
|
(14,303 | ) | ||||||||||||||||||||||
|
Balance,
October 31, 2008
|
9,435 | 9,492 | 11,204 | 14,298 | (2,459 | ) | 32,535 | |||||||||||||||||
|
Shares
repurchased and retired
|
(80 | ) | (80 | ) | (558 | ) | (638 | ) | ||||||||||||||||
|
Net
income
|
6,787 | 6,787 | ||||||||||||||||||||||
|
Other
comprehensive net income (loss):
|
||||||||||||||||||||||||
|
Unrealized
gain on investment (Note 1)
|
180 | 180 | ||||||||||||||||||||||
|
Net
change in defined benefit plans
|
(6,247 | ) | (6,247 | ) | ||||||||||||||||||||
|
Net
change in other benefit plans
|
(194 | ) | (194 | ) | ||||||||||||||||||||
|
Comprehensive
income
|
526 | |||||||||||||||||||||||
|
Balance,
October 30, 2009
|
9,355 | $ | 9,412 | $ | 10,646 | $ | 21,085 | $ | (8,720 | ) | $ | 32,423 | ||||||||||||
See
accompanying notes to consolidated financial statements.
26
BRIDGFORD
FOODS CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For
the years ended October 30, 2009 and October 31, 2008
|
2009
|
2008
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
income (loss)
|
$ | 6,787 | $ | (12,447 | ) | |||
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
||||||||
|
Depreciation
|
2,733 | 3,283 | ||||||
|
Provision
(recovery) on losses on accounts receivable
|
78 | (194 | ) | |||||
|
(Gain)
on sale of property, plant and equipment
|
(11 | ) | (27 | ) | ||||
|
Loss
on sale of equity securities
|
159 | — | ||||||
|
Deferred
income taxes, net
|
171 | (2,107 | ) | |||||
|
Tax
valuation allowance
|
(171 | ) | 8,615 | |||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(929 | ) | (111 | ) | ||||
|
Inventories
|
457 | 2,281 | ||||||
|
Prepaid
expenses
|
1 | 524 | ||||||
|
Refundable
income taxes
|
296 | 33 | ||||||
|
Other
non-current assets
|
(750 | ) | 928 | |||||
|
Accounts
payable
|
1,154 | 96 | ||||||
|
Accrued
payroll, advertising and other expenses
|
(1,525 | ) | 1,504 | |||||
|
Current
portion of non-current liabilities
|
2,071 | (2,116 | ) | |||||
|
Non-current
liabilities
|
(1,085 | ) | (656 | ) | ||||
|
Net
cash provided by (used in) operating activities
|
9,436 | (394 | ) | |||||
|
Cash
used in investing activities:
|
||||||||
|
Proceeds
from sale of equity securities
|
268 | — | ||||||
|
Proceeds
from sale of property, plant and equipment
|
56 | 69 | ||||||
|
Additions
to property, plant and equipment
|
(1,303 | ) | (1,880 | ) | ||||
|
Net
cash used in investing activities
|
(979 | ) | (1,811 | ) | ||||
|
Cash
used in financing activities:
|
||||||||
|
Shares
repurchased
|
(638 | ) | (3,039 | ) | ||||
|
Net
cash used in financing activities
|
(638 | ) | (3,039 | ) | ||||
|
Net
increase (decrease) in cash and cash equivalents
|
7,819 | (5,244 | ) | |||||
|
Cash
and cash equivalents at beginning of year
|
6,092 | 11,336 | ||||||
|
Cash
and cash equivalents at end of year
|
$ | 13,911 | $ | 6,092 | ||||
|
Suppllemental
disclosure of cash flow information:
|
||||||||
|
Cash
paid for income taxes
|
$ | 318 | $ | — | ||||
See
accompanying notes to consolidated financial statements.
27
BRIDGFORD
FOODS CORPORATION
(amounts
in thousands except share amounts, per share amounts, time periods and
percentages)
NOTE
1- The Company and Summary of
Significant Accounting Policies:
The
consolidated financial statements include the accounts of our company and its
subsidiaries, all of which are wholly-owned. All inter-company transactions have
been eliminated.
Use
of estimates and assumptions
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported revenues and expenses during the respective
reporting periods. Actual results could differ from those estimates. Amounts
estimated related to liabilities for self-insured workers’ compensation,
employee healthcare and pension benefits and impairment of deferred tax assets
are especially subject to inherent uncertainties and these estimated liabilities
may ultimately settle at amounts which may vary from current estimates. Other
areas with underlying estimates include cash surrender or contract value for
life insurance policies, promotional allowances and the allowance for doubtful
accounts. Management believes its current estimates are reasonable
and based on the best information available at the time.
We are
required to test long-lived assets for recoverability whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. If an
impairment is indicated, we must measure the fair value of assets to determine
if and when adjustments are to be recorded.
Subsequent
events
We have
evaluated the effects of subsequent events through January 27, 2010 that may
cause the financial statements to be misleading. Based on our review, no
material events were identified that require adjustment to the financial
statements or additional disclosure. On November 12, 2009, we issued
a press release announcing that our Board of Directors approved a cash dividend
of $0.10 per share on common stock which was distributed on January 4, 2010 to
shareholders of record on December 8, 2009.
Concentrations
of credit risk
Our
credit risk is diversified across a broad range of customers and geographic
regions. Losses due to credit risk have recently been immaterial. The carrying
amount of cash equivalents, accounts and other receivables, accounts payable and
accrued liabilities approximate fair market value due to the short maturity of
these instruments. We maintain cash balances at financial institutions, which
may at times exceed the amounts insured by the Federal Deposit Insurance
Corporation of $250 per institution through December 31, 2013. However,
management does not believe there is significant credit risk associated with
these financial institutions. The provision for doubtful accounts receivable is
based on historical trends and current collectibility risk. We have significant
amounts receivable with a few large, well known customers which, although
historically secure, could be subject to material risk should these customers’
operations suddenly deteriorate. Sales to Wal-Mart® comprised 11.4% of revenues
in fiscal year 2009 and 13.3% of accounts receivable was due from Wal-Mart® at
October 30, 2009. Sales to Wal-Mart® comprised 10.2% of revenues in fiscal year
2008 and 14.2% of accounts receivable was due from Wal-Mart® at October 31,
2008.
Business
segments
Our
Company and its subsidiaries operate in two business segments - the processing
and distribution of frozen foods, and the processing and distribution of
refrigerated and snack food products. See Note 7 to the financial
statements for further information.
Fiscal
year
We
maintain our accounting records on a 52-53 week fiscal basis. Fiscal years 2009
and 2008 included 52 weeks.
28
Revenues
Revenues
are recognized upon passage of title to the customer, typically upon product
pick-up, shipment or delivery to customers. Products are delivered to customers
primarily through our own long-haul fleet or through a Company owned direct
store delivery system. These delivery costs, $5,248 and $6,915 for 2009 and
2008, respectively, are included in selling, general and administrative expenses
in the accompanying consolidated financial statements. We record promotional and
returns allowances based on recent and historical trends. Revenue is
recognized as the net amount estimated to be received after deducting estimated
amounts for discounts, trade allowances and product
terms. Promotional allowances, including customer incentive and trade
promotion activities, are recorded as a reduction to sales based on amounts
estimated being due to customers, based primarily on historical utilization and
redemption rates. Promotional allowances deducted from sales for
fiscal years 2009 and 2008 were $7,147 and $6,909, respectively.
Advertising
expenses
Advertising
and other promotional expenses are recorded as selling, general and
administrative expenses. Advertising expenses for fiscal years 2009
and 2008 were $3,602 and $3,508, respectively.
Cash
equivalents
We
consider all investments with original maturities of three months or less to be
cash equivalents. Cash equivalents include money market funds and treasury
bills. We had cash equivalents of $13,911 at October 30, 2009 and $6,092 at
October 31, 2008.
Investments
We
routinely classify certain equity securities as available for sale and measure
them at market value (fair value). All equity securities were sold in
October 2009. Equity securities received from customers as part of bankruptcy
settlements are classified as available for sale and deemed Level 1 as described
below under “Fair value meansurements”. Changes in unrealized gains
or losses are recorded in other comprehensive income as a component of
stockholders' equity.
|
Available
for sale securities as of October 31, 2008:
|
||||
|
Market
value of investment in securities
|
$
|
250
|
||
|
Acquisition
value of investments in securities
|
430
|
|||
|
Unrealized
(loss) on investment
|
$
|
(180
|
)
|
|
Fair
value measurements:
Effective
November 1, 2008, we adopted guidance from the Financial Accounting Standards
Board (“FASB”). The purpose of this guidance is to define fair value, establish
a framework for measuring fair value and enhance disclosures about fair value
measurements. The standard describes three levels of inputs that may be used to
measure fair value:
|
—
|
Level
1 inputs: Level 1 inputs are quoted market prices in active markets for
identical assets or liabilities that are accessible at the measurement
date.
|
|
—
|
Level
2 inputs: Level 2 inputs are from other than quoted market prices included
in Level 1 that are observable for the asset or liability, either directly
or indirectly.
|
|
—
|
Level
3 inputs: Level 3 inputs are unobservable and should be used to measure
fair value to the extent that observable inputs are not
available.
|
The
hierarchy noted above requires us to minimize the use of unobservable inputs and
to use observable market data, if available, when determining fair
value.
Financial
assets carried at fair value as of October 30, 2009 are classified
below:
|
2009
|
Level
1
|
Level
2
|
Level
3
|
Total
|
||||||||||||
|
Money
market funds
|
$ | 6,038 | $ | — | $ | — | $ | 6,038 | ||||||||
|
Total
|
$ | 6,038 | $ | — | $ | — | $ | 6,038 | ||||||||
29
Inventories
Inventories
are valued at the lower of cost (which approximates actual cost on a first-in,
first-out basis) or market. Costs related to warehousing,
transportation and distribution to customers are considered when computing
market value. Inventories include the cost of raw materials, labor
and manufacturing overhead. We regularly review inventory quantities
on hand and write down any excess or obsolete inventories to net realizable
value. An inventory reserve is created when potentially slow-moving
or obsolete inventories are identified in order to reflect the appropriate
inventory value. Changes in economic conditions, production
requirements, and lower than expected customer demand could result in additional
obsolete or slow-moving inventory that cannot be sold or must be sold at reduced
prices and could result in additional reserve provisions.
Property,
plant and equipment
Property,
plant and equipment are carried at cost less accumulated depreciation. Major
renewals and improvements are charged to the asset accounts while the cost of
maintenance and repairs is charged to expense as incurred. When assets are sold
or otherwise disposed of, the cost and accumulated depreciation are removed from
the respective accounts and the resulting gain or loss is credited or charged to
income. Depreciation is computed on a straight-line basis over 10 to 20 years
for buildings and improvements, 5 to 10 years for machinery and equipment, and 3
to 5 years for transportation equipment.
Insurance
policies
We record
the cash surrender value or contract value for life insurance policies as an
adjustment of premiums paid in determining the expense or income to be
recognized under the contract for the period.
Income
taxes
Deferred
taxes are provided for items whose financial and tax bases differ. A valuation
allowance is provided against deferred tax assets when it is expected that it is
more likely than not that the related asset will not be fully
realized.
We
provide tax reserves for federal, state, local and international exposures
relating to audit results, tax planning initiatives and compliance
responsibilities. The development of these reserves requires judgments about tax
issues, potential outcomes and timing. (See Note 4 to the financial statements).
Although the outcome of these tax audits is uncertain, in management’s opinion
adequate provisions for income taxes have been made for potential liabilities
emanating from these reviews. If actual outcomes differ materially from these
estimates, they could have a material impact on our results of
operations.
Stock-based
compensation
We
measure and recognize compensation expense for all share-based payments to
employees, including grants of employee stock options, in the financial
statements based on the fair value at the date of the grant. We have
not issued, awarded, granted or entered into any stock-based payment agreements
since April 29, 1999.
Basic
and diluted earnings per share
Basic
earnings per share is calculated based on the weighted average number of common
shares outstanding for all periods presented. Diluted earnings per share is
calculated based on the weighted average number of common shares outstanding
plus shares issuable on conversion or exercise of all potentially dilutive
securities (stock options). There were no potentially dilutive
securities during the fiscal years ended October 30, 2009 and October 31,
2008.
Foreign
currency transactions
Our
foreign branch located in Canada enters into transactions that are denominated
in a foreign currency. The related transaction gains and losses arising from
changes in exchange rates are not material and are included in selling, general
and administrative expenses in the consolidated statement of operations in the
period the transaction occurred.
30
Comprehensive
income (loss)
Comprehensive
income (loss) is defined as the change in equity (net assets) of a business
enterprise during the period from transactions and other events and
circumstances from non-owner sources. Comprehensive income (loss) consists of
net income (loss), additional minimum pension liability adjustments and
unrealized gains and losses on equity securities.
Recently
issued accounting pronouncements and regulations
In
December 2007, the FASB issued guidance establishing principles and requirements
for how an acquirer in a business combination: 1) recognizes and measures in its
financial statements identifiable assets acquired, liabilities assumed, and any
noncontrolling interest in the acquiree; 2) recognizes and measures goodwill
acquired in a business combination or a gain from a bargain purchase; and 3)
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of a business
combination. This guidance is effective for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Therefore, we expect to adopt
this guidance for any business combinations entered into beginning in fiscal
2010, if any.
In
December 2008, the FASB issued additional guidance on an employers' disclosures
about plan assets of a defined benefit pension or other postretirement plan.
This interpretation is effective for financial statements issued for fiscal
years ending after December 15, 2009. We plan to adopt this interpretation in
fiscal 2010. The adoption of this interpretation will increase the disclosures
in the financial statements related to the assets of our defined benefit pension
plans.
In April
2009, the FASB issued guidance about disclosures about Fair Value of Financial
Instruments, to require disclosure of the carrying amount and the fair value of
all financial instruments for interim reporting periods and annual financial
statements of publicly traded companies (even if the financial instrument is not
recognized in the balance sheet), including the methods and significant
assumptions used to estimate the fair values and any changes in such methods and
assumptions. This guidance requires disclosures in summarized
financial information at interim reporting periods. The guidance is
effective for interim reporting periods ending after June 15, 2009, with early
adoption permitted for periods ended after March 15, 2009. The
adoption of this standard did not have a significant impact on our consolidated
financial statements.
In April
2009, the FASB also issued guidance which generally applies to all assets and
liabilities within the scope of any accounting pronouncements that require or
permit fair value measurements. This guidance does not change
previously issued guidance regarding Level 1 inputs, requires the entity to (i)
evaluate certain factors to determine whether there has been a significant
decrease in the volume and level of activity for the asset or liability when
compared with normal market activity, (ii) consider whether the preceding
indicates that transactions or quoted prices are not determinative of fair value
and, if so, whether a significant adjustment thereof is necessary to estimate
fair value, and (iii) ignore the intent to hold the asset or liability when
estimating fair value. Guidance was also provided to consider in
determining whether a transaction is orderly (or not orderly) when there has
been a significant decrease in the volume and level of activity for the asset or
liability, based on the weight of available evidence. This guidance
is effective for interim and annual reporting periods ending after June 15,
2009, and shall be applied prospectively. The adoption of this
standard did not have a significant impact on our consolidated financial
statements.
In June
2009, the FASB issued SFAS guidance on “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles.”
This guidance designates the FASB Accounting Standards Codification, officially
launched July 1, 2009, as the authoritative source of generally accepted
accounting principles in the United States. Rules and interpretive releases of
the Securities and Exchange Commission (the “SEC”) under federal securities laws
are also sources of authoritative GAAP for SEC registrants. This guidance is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. Adoption of this guidance did not have a material
impact on our consolidated financial position, results of operations or cash
flows.
31
NOTE
2- Composition of Certain
Financial Statement Captions:
|
2009
|
2008
|
|||||||
|
Inventories:
|
||||||||
|
Meat,
ingredients and supplies
|
$ | 4,488 | $ | 4,086 | ||||
|
Work
in process
|
1,647 | 2,322 | ||||||
|
Finished
goods
|
9,460 | 9,644 | ||||||
| $ | 15,595 | $ | 16,052 | |||||
|
Property,
plant and equipment:
|
||||||||
|
Land
|
$ | 1,807 | $ | 1,840 | ||||
|
Buildings
and improvements
|
13,476 | 13,440 | ||||||
|
Machinery
and equipment
|
41,412 | 40,796 | ||||||
|
Asset
impairment
|
(176 | ) | (176 | ) | ||||
|
Transportation
equipment
|
6,931 | 7,368 | ||||||
|
Construction
in process
|
212 | 247 | ||||||
| 63,662 | 63,515 | |||||||
|
Accumulated
depreciation
|
(55,362 | ) | (53,740 | ) | ||||
| $ | 8,300 | $ | 9,775 | |||||
|
Other
non-current assets:
|
||||||||
|
Cash
surrender value benefits
|
$ | 10,576 | $ | 10,253 | ||||
|
Intangible
asset
|
10 | 10 | ||||||
| $ | 10,586 | $ | 10,263 | |||||
|
Accrued
payroll, advertising and other expenses:
|
||||||||
|
Payroll,
vacation, payroll taxes and employee benefits
|
$ | 3,596 | $ | 4,793 | ||||
|
Accrued
advertising and broker commissions
|
1,012 | 1,031 | ||||||
|
Property
taxes
|
372 | 356 | ||||||
|
Others
|
340 | 670 | ||||||
| $ | 5,320 | $ | 6,850 | |||||
|
Current
portion of non-current liabilities:
|
||||||||
|
Incentive
compensation
|
$ | 661 | $ | 129 | ||||
|
Defined
benefit retirement plan
|
2,394 | 916 | ||||||
|
Other
accrued retirement plans
|
544 | 510 | ||||||
|
Post
retirement healthcare
|
68 | — | ||||||
| $ | 3,667 | $ | 1,555 | |||||
|
Non-current
liabilities:
|
||||||||
|
Incentive
compensation
|
$ | 1,224 | $ | 241 | ||||
|
Defined
benefit retirement plan
|
7,647 | 3,354 | ||||||
|
Other
accrued retirement plans
|
3,394 | 3,542 | ||||||
|
Post
retirement healthcare
|
997 | 806 | ||||||
| $ | 13,262 | $ | 7,943 | |||||
NOTE
3- Retirement and Other
Benefit Plans:
Noncontributory-Trusteed
Defined Benefit Retirement Plans for Sales, Administrative, Supervisory and
Certain Other Employees
We have
noncontributory-trusteed defined benefit retirement plans for sales,
administrative, supervisory and certain other employees. In the third quarter of
fiscal 2006, we froze future benefit accruals under this plan for employees
classified within the administrative, sales or supervisory job classifications
or within any non-bargaining class. The benefits under these plans are primarily
based on years of service and compensation levels. The funding policy of the
plan is to make contributions which are at least equal to the minimum required
contributions needed to avoid a funding deficiency. The measurement date for the
plan is our fiscal year end.
Net
pension cost consisted of the following:
|
Years
Ended
|
||||||||
|
2009
|
2008
|
|||||||
|
Service
cost
|
$ | 102 | $ | 148 | ||||
|
Interest
cost
|
2,023 | 1,948 | ||||||
|
Expected
return on plan assets
|
(1,702 | ) | (2,300 | ) | ||||
|
Amortization
of unrecognized loss
|
89 | — | ||||||
|
Amortization
of unrecognized prior service costs
|
1 | 1 | ||||||
|
Net
pension cost (income)
|
$ | 513 | $ | (203 | ) | |||
32
Net
pension cost and benefit obligation are determined using assumptions as of the
beginning of each fiscal year. Weighted average assumptions for the fiscal years
are as follows:
|
2009
|
2008
|
|||||||
|
Discount
rate
|
5.75 | % | 8.00 | % | ||||
|
Rate
of increase in salary levels
|
N/A | N/A | ||||||
|
Expected
return on plan assets
|
8.00 | % | 8.00 | % | ||||
The
benefit obligation, plan assets, and funded status of these plans as of the
fiscal years ended are as follows:
|
2009
|
2008
|
|||||||
|
Change
in benefit obligations:
|
||||||||
|
Benefit
obligations - beginning of year
|
$ | 25,819 | $ | 31,371 | ||||
|
Service
cost
|
102 | 148 | ||||||
|
Interest
cost
|
2,023 | 1,948 | ||||||
|
Actuarial
(gain) loss
|
8,062 | (6,807 | ) | |||||
|
Benefits
paid
|
(964 | ) | (841 | ) | ||||
|
Benefit
obligations - end of year
|
35,042 | 25,819 | ||||||
|
Change
in plan assets:
|
||||||||
|
Fair
value of plan assets - beginning of year
|
21,548 | 27,806 | ||||||
|
Employer
contributions
|
989 | 2,467 | ||||||
|
Actual
return on plan assets
|
3,428 | (7,884 | ) | |||||
|
Benefits
paid
|
(964 | ) | (841 | ) | ||||
|
Fair
value of plan assets - end of year
|
25,001 | 21,548 | ||||||
|
Funded
status of the plans
|
(10,041 | ) | (4,271 | ) | ||||
|
Unrecognized
prior service costs
|
7 | 8 | ||||||
|
Unrecognized
net actuarial loss
|
10,202 | 3,954 | ||||||
|
Accrued
pension cost
|
$ | 168 | $ | (309 | ) | |||
Current
accounting principles require that an internal rate of return analysis be
included in the discount rate selection process. The discount rates
were based on Citigroup Pension Liability Index as of October 30, 2009 and
October 31, 2008.
Plan
assets are primarily invested in marketable equity securities, corporate and
government debt securities and are administered by an investment management
company. The plans’ long-term return on assets is based on the weighted-average
of the plans’ investment allocation as of the measurement date and the published
historical returns for those types of asset categories, taking into
consideration inflation rate forecasts. Our expected employer contribution to
the plan in fiscal year 2010 is $2,394.
The
actual allocations as of the fiscal years ended and target allocation for plan
assets are as follows:
|
Asset Class
|
2009
|
Target
Asset
Allocation
|
2008
|
Target
Asset
Allocation
|
|||||
|
Large
Cap Equities
|
32.7
|
%
|
40.0
|
%
|
34.7
|
%
|
40.0
|
%
|
|
|
Mid
Cap Equities
|
6.7
|
%
|
10.0
|
%
|
6.5
|
%
|
10.0
|
%
|
|
|
Small
Cap Equities
|
4.2
|
%
|
5.0
|
%
|
3.8
|
%
|
5.0
|
%
|
|
|
International
(including Non-U.S. Fixed Income)
|
18.3
|
%
|
20.0
|
%
|
10.8
|
%
|
20.0
|
%
|
|
|
Fixed
Income
|
30.0
|
%
|
0.0
|
%
|
6.2
|
%
|
0.0
|
%
|
|
|
Other
(Government/Corporate, Bonds)
|
0.0
|
%
|
25.0
|
%
|
29.0
|
%
|
25.0
|
%
|
|
|
Cash
|
8.1
|
%
|
0.0
|
%
|
9.0
|
%
|
0.0
|
%
|
|
|
Total
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
33
Expected
payments for the pension benefits are as follows:
|
Fiscal
Years
|
Pension
Benefits
|
|||
|
2010
|
$
|
1,187
|
||
|
2011
|
$
|
1,275
|
||
|
2012
|
$
|
1,419
|
||
|
2013
|
$
|
1,538
|
||
|
2014
|
$
|
1,661
|
||
|
2015-2019
|
$
|
9,924
|
||
Non-Qualified
Supplemental Retirement Plan for Certain Key Employees
In fiscal
year 1991, we adopted a non-qualified supplemental retirement plan for certain
key employees. Benefits provided under the plan are equal to 60% of the
employee’s final average earnings, less amounts provided by our defined benefit
pension plan and amounts available through Social Security. Effective
January 1, 1991 we adopted a deferred compensation savings plan for certain
key employees. Under this arrangement, selected employees contribute a portion
of their annual compensation to the plan. We contribute an amount to each
participant’s account by computing an investment return equal to Moody’s Average
Seasoned Bond Rate plus 2%. Employees receive vested amounts upon death,
termination or attainment of retirement age. No benefit expense was recorded
under these plans for fiscal years 2009 and 2008. Benefits payable related to
these plans and included in other non-current liabilities in the accompanying
financial statements were $3,394 and $3,541 at October 30, 2009 and October 31,
2008, respectively. In connection with this arrangement we are the beneficiary
of life insurance policies on the lives of certain key employees and retirees.
The aggregate cash surrender value of these policies, included in non-current
assets, was $10,576 and $10,254 at October 30, 2009 and October 31, 2008,
respectively.
Expected
payments for other postretirement benefits are as follows:
|
Fiscal
Years
|
Other
Postretirement
Benefits
|
|||
|
2010
|
$
|
512
|
||
|
2011
|
$
|
511
|
||
|
2012
|
$
|
511
|
||
|
2013
|
$
|
511
|
||
|
2014
|
$
|
521
|
||
|
2015-2019
|
$
|
1,178
|
||
Incentive
Compensation Plan for Certain Key Executives
We
provide an incentive compensation plan for certain key executives, which is
based upon our pretax income. The payment of these amounts is generally deferred
over three or five-year periods. The total amount payable related to this
arrangement was $1,885 and $369 at October 30, 2009 and October 31, 2008,
respectively. Future payments are approximately $661, $642, $470, $64 and $48
for fiscal years 2010 through 2014, respectively.
Postretirement
Healthcare Benefits for Selected Executive Employees
We
provide postretirement health care benefits for selected executive
employees. Net periodic postretirement healthcare cost is
determined using assumptions as of the beginning of each fiscal year, except for
the total actual benefit payments and the discount rate used to develop the net
periodic postretirement benefit expense.
34
Net
periodic postretirement healthcare cost consisted of the following:
|
Years
Ended
|
||||||||
|
2009
|
2008
|
|||||||
|
Service
cost
|
$ | 11 | $ | 15 | ||||
|
Interest
cost
|
62 | 72 | ||||||
|
Amortization
of prior service cost
|
75 | 75 | ||||||
|
Amortization
of actuarial loss
|
(23 | ) | 2 | |||||
|
Net
periodic postretirement healthcare cost
|
$ | 125 | $ | 164 | ||||
Weighted
average assumptions for the fiscal years ended October 30, 2009 and
October 31, 2008 are as follows:
|
2009
|
2008
|
|||||||
|
Discount
rate
|
5.75 | % | 8.00 | % | ||||
|
Medical
trend rate next year
|
8.50 | % | 9.00 | % | ||||
|
Ultimate
trend rate
|
5.00 | % | 5.00 | % | ||||
|
Year
ultimate trend rate is achieved
|
2016 | 2016 | ||||||
The table
below shows the estimated effect of a 1% increase in healthcare cost trend rate
on the following:
|
2009
|
2008
|
|||||||
|
Interest
cost plus service cost
|
$ | 7 | $ | 10 | ||||
|
Accumulated
postretirement healthcare obligation
|
$ | 106 | $ | 67 | ||||
The table
below shows the estimated effect of a 1% decrease in healthcare cost trend rate
on the following:
|
2009
|
2008
|
|||||||
|
Interest
cost plus service cost
|
$ | (6 | ) | $ | (8 | ) | ||
|
Accumulated
postretirement healthcare obligation
|
$ | (89 | ) | $ | (57 | ) | ||
The
healthcare obligation and funded status of this plan as of the fiscal years
ended are as follows:
|
2009
|
2008
|
|||||||
|
Change
in accumulated postretirement healthcare obligation:
|
||||||||
|
Healthcare
obligations - beginning of year
|
$ | 806 | $ | 1,196 | ||||
|
Service
cost
|
11 | 15 | ||||||
|
Interest
cost
|
63 | 72 | ||||||
|
Actuarial
loss (gain)
|
216 | (465 | ) | |||||
|
Benefits
paid
|
(30 | ) | (12 | ) | ||||
|
Healthcare
obligations - end of year
|
$ | 1,066 | $ | 806 | ||||
|
Funded
status of the plans
|
1,066 | 806 | ||||||
|
Unrecognized
prior service costs
|
(149 | ) | (224 | ) | ||||
|
Unrecognized
net actuarial loss
|
84 | 324 | ||||||
|
Accrued
postretirement healthcare cost
|
N/A | N/A | ||||||
|
Unrecognized
amounts recorded in other comprehensive income
|
65 | (100 | ) | |||||
|
Postretirement
healthcare liability
|
$ | 1,066 | $ | 806 | ||||
Expected
payments for the postretirement benefits are as follows:
|
Fiscal
Years
|
Postretirement
Heathcare
Benefits
|
|||
|
2010
|
$
|
68
|
||
|
2011
|
$
|
68
|
||
|
2012
|
$
|
68
|
||
|
2013
|
$
|
67
|
||
|
2014
|
$
|
66
|
||
|
2015-2019
|
$
|
351
|
||
35
Stock
Incentive Plan
Our sole
stock option plan expired by its terms on April 29, 2009 and no further stock
options or rights are available for grant under the plan. We had 250,000
employee stock options outstanding during the year ended October 31, 2008 and
until April 29, 2009, when all outstanding options under the plan terminated as
well. The effect of the employee stock options outstanding for the years ended
October 30, 2009 and October 31, 2008 were not included in the calculation of
diluted shares and diluted earnings per share as to do so would be
anti-dilutive. No stock options or rights were granted during the
years ended October 30, 2009 and October 31, 2008. As of April 29,
2009, there were no stock options or rights to purchase shares of our common
stock outstanding.
401(K) Plan
for Sales, Administrative, Supervisory and Certain Other Employees
During
the fiscal year ended November 3, 2006, we implemented a qualified
401(K) retirement plan (the “Plan”) for our sales, administrative,
supervisory and certain other employees. During fiscal years 2009 and 2008, we
made total contributions to the Plan in the amounts of $409 and $414,
respectively.
NOTE
4- Income
Taxes:
The
provision (benefit) for taxes on income includes the following:
|
2009
|
2008
|
|||||||
|
Current:
|
||||||||
|
Federal
|
$ | 25 | $ | 1 | ||||
|
State
|
230 | 70 | ||||||
| 255 | 71 | |||||||
|
Deferred:
|
||||||||
|
Federal
|
— | 5,557 | ||||||
|
State
|
— | 951 | ||||||
| — | 6,508 | |||||||
| $ | 255 | $ | 6,579 | |||||
The total
tax provision (benefit) differs from the amount computed by applying the
statutory federal income tax rate to income (loss) before income taxes as
follows:
|
2009
|
2008
|
|||||||
|
Provision
(benefit) for federal income taxes at the applicable statutory
rate
|
$ | 2,394 | $ | (1,995 | ) | |||
|
(Decrease)
increase in provision resulting from state income taxes, net of federal
income tax
benefit
|
521 | (372 | ) | |||||
|
Research &
development tax credit
|
(16 | ) | (15 | ) | ||||
|
Non-taxable
life insurance gain
|
(110 | ) | 315 | |||||
|
Change
in valuation allowance
|
(2,551 | ) | 8,615 | |||||
|
Other,
net
|
17 | 31 | ||||||
| $ | 255 | $ | 6,579 | |||||
Deferred
income taxes result from differences in the bases of assets and liabilities for
tax and accounting purposes.
|
2009
|
2008
|
|||||||
|
Receivables
allowance
|
$ | 161 | $ | 158 | ||||
|
Returns
allowance
|
189 | 202 | ||||||
|
Inventory
packaging reserve
|
26 | 209 | ||||||
|
Inventory
capitalization
|
236 | 242 | ||||||
|
Incentive
compensation
|
39 | 45 | ||||||
|
State
taxes
|
78 | 24 | ||||||
|
Employee
benefits
|
1,045 | 1,479 | ||||||
|
Other
|
78 | 63 | ||||||
|
Valuation
allowance
|
(1,852 | ) | (2,422 | ) | ||||
|
Current
tax assets, net
|
$ | — | $ | — | ||||
|
Incentive
compensation
|
$ | 489 | $ | 96 | ||||
|
Pension
and health care benefits
|
4,598 | 2,983 | ||||||
|
Depreciation
|
47 | (125 | ) | |||||
|
Net
operating loss carry-forward
|
1,458 | 3,239 | ||||||
|
Valuation
allowance
|
(6,592 | ) | (6,193 | ) | ||||
|
Non-current
tax assets, net
|
$ | — | $ | — | ||||
36
Management is
required to evaluate whether a valuation allowance should be established against
its deferred tax assets based on the consideration of all available evidence
using a "more likely than not" standard. Realization of deferred tax assets is
dependent upon taxable income in prior carryback years, estimates of future
taxable income, tax planning strategies, and reversals of existing taxable
temporary differences. Forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years or losses expected in early future years. At
the end of 2008, poor economic conditions included decreases in building and
real estate values and a sharp decline in the stock
market. Management concluded at the end of 2008 that it was more
likely than not that deferred tax assets would not be realized and recorded a
full valuation allowance on all deferred tax assets during the fourth quarter of
fiscal 2008.
Management
reevaluated the need for a full valuation allowance at the end of
2009. Management evaluated both positive and negative
evidence. Although operating results improved significantly compared
to the prior year, the weight of negative factors and level of
economic uncertainty in our current business continued to support the conclusion
that the realization of its deferred tax assets does not meet the more likely
than not standard. Therefore, a full valuation allowance will remain
against the net deferred tax assets.
As
of October 30, 2009, we had net operating loss carryforwards of
approximately $3,347 and $2,624 for federal and state purposes,
respectively. These loss carryforwards will expire at various dates
from 2012 through 2028.
In July
2006, the FASB issued guidance to clarify the accounting for uncertainty in
income taxes recognized in an enterprise’s financial statements. This
interpretation prescribed a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The guidance also discussed derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The cumulative effect, if any, of applying this
guidance is to be reported as an adjustment to the opening balance of retained
earnings in the year of adoption. The provisions of this guidance
have been incorporated into ASC 740-10.
As of
October 30, 2009, we have provided a liability of $103 for unrecognized tax
benefits related to various federal and state income tax
matters. This entire amount would generally reduce our effective
income tax rate if recognized in future reporting periods. However,
due to the valuation allowance against its deferred tax assets, the unrecognized
tax benefit would not have an effect on the Company’s effective income tax rate
if recognized in future periods. We have not identified any new
unrecognized tax benefits.
As of
October 31, 2008, we have provided a liability of $97 for unrecognized tax
benefits related to various federal and state income tax matters. This entire
amount would reduce our effective income tax rate if the asset is recognized in
future reporting periods. We have not identified any new unrecognized
tax benefits.
A
reconciliation of the beginning and ending amounts of unrecognized tax benefits
is as follows:
|
2009
|
2008
|
|||||||
|
Balance
at beginning of year
|
$ | 97 | 92 | |||||
|
Additions
based on tax positions related to the current year
|
5 | — | ||||||
|
Additions
for tax positions of prior years
|
1 | 5 | ||||||
|
Balance
at end of year
|
$ | 103 | $ | 97 | ||||
We
recognize any future accrued interest and penalties related to unrecognized tax
benefits in income tax expense. As of October 30, 2009, we had
approximately $5 in accrued interest and penalties which is included as a
component of the $103 unrecognized tax benefit noted above.
We are
subject to U.S. federal income tax, and are currently under audit by the
Internal Revenue Service for the fiscal years ended November 1, 2002 and October
31, 2003 and November 3, 2006 and November 2, 2007. Our federal income tax
returns are open to audit under the statute of limitations for the years ended
October 31, 2006 through 2009. Our statute of limitations for our
fiscal years ended November 1, 2002 and October 31, 2003 have been
extended to October 31, 2010. We believe the appropriate provisions
for all outstanding issues have been made for all years under
audit.
37
We are
subject to income tax in California and various other state taxing
jurisdictions. Our state income tax returns are open to audit under the statute
of limitations for the fiscal years ended October 31, 2005 through
2009.
We do not
anticipate a significant change to the total amount of unrecognized tax benefits
within the next 12 months.
NOTE
5- Line of
Credit:
Under the
terms of a revolving line of credit with Bank of America, we may borrow up to
$2,000 through April 30, 2010. The interest rate is at the bank’s reference
rate unless we elect an optional interest rate. The borrowing agreement contains
various covenants, the more significant of which require us to maintain certain
levels of shareholders’ equity and working capital. We are currently in
compliance with all provisions of the agreement. There were no
borrowings under this line of credit during the years ended October 30, 2009 or
October 31, 2008.
NOTE
6- Contingencies and
Commitments:
We lease
certain transportation under operating leases through 2011. The terms of the
transportation leases provide for annual renewal options and contingent rental
payments based upon mileage and adjustments of rental payments based on the
Consumer Price Index. Minimum rental payments were $425 in fiscal year 2009 and
$425 in fiscal year 2008. Contingent payments were approximately
$56 in fiscal year 2009 and $124 in fiscal year 2008. Future minimum
lease payments are approximately $425 in the each of the years 2010 through
2011.
NOTE
7- Segment
Information:
We have
two reportable operating segments, Frozen Food Products (the processing and
distribution of frozen products), and Refrigerated and Snack Food Products (the
processing and distribution of refrigerated meat and other convenience
foods).
We
evaluate each segment’s performance based on revenues and operating income.
Selling and general administrative expenses include corporate accounting,
information systems, human resource and marketing management at the corporate
level. These activities are allocated to each operating segment based on
revenues and/or actual usage.
The
following segment information is for the years ended October 30, 2009 and
October 31, 2008:
|
2009
|
Frozen Food
Products
|
Refrigerated
and Snack Food
Products
|
Other
|
Elimination
|
Totals
|
||||||||||||
|
Sales
|
$
|
54,740
|
$
|
67,925
|
$
|
$
|
$
|
122,665
|
|||||||||
|
Intersegment
sales
|
902
|
(902
|
)
|
—
|
|||||||||||||
|
Net
sales
|
54,740
|
68,827
|
(902
|
)
|
122,665
|
||||||||||||
|
Cost
of products sold, excluding depreciation
|
31,079
|
40,993
|
(902
|
)
|
71,170
|
||||||||||||
|
Selling,
general and administrative expenses
|
16,727
|
24,993
|
41,720
|
||||||||||||||
|
Depreciation
|
704
|
1,859
|
170
|
2,733
|
|||||||||||||
|
48,510
|
67,845
|
170
|
(902
|
)
|
115,623
|
||||||||||||
|
Income
(loss) before taxes
|
6,230
|
982
|
(170
|
)
|
7,042
|
||||||||||||
|
Provision
for taxes on income
|
224
|
31
|
255
|
||||||||||||||
|
Net
income (loss)
|
$
|
6,006
|
$
|
951
|
$
|
(170
|
)
|
$
|
$
|
6,787
|
|||||||
|
Total
assets
|
$
|
11,416
|
$
|
22,520
|
$
|
24,963
|
$
|
—
|
$
|
58,899
|
|||||||
|
Additions
to property, plant and equipment
|
$
|
730
|
$
|
283
|
$
|
290
|
$
|
—
|
$
|
1,303
|
|||||||
38
|
2008
|
Frozen Food
Products
|
Refrigerated
and Snack Food
Products
|
Other
|
Elimination
|
Totals
|
||||||||||||
|
Sales
|
$
|
52,868
|
$
|
68,122
|
$
|
—
|
$
|
—
|
$
|
120,990
|
|||||||
|
Intersegment
sales
|
—
|
1,487
|
—
|
(1,487
|
)
|
—
|
|||||||||||
|
Net
sales
|
52,868
|
69,609
|
—
|
(1,487
|
)
|
120,990
|
|||||||||||
|
Cost
of products sold, excluding depreciation
|
34,990
|
46,820
|
—
|
(1,487
|
)
|
80,323
|
|||||||||||
|
Selling,
general and administrative expenses
|
15,720
|
27,532
|
—
|
—
|
43,252
|
||||||||||||
|
Depreciation
|
784
|
2,192
|
307
|
—
|
3,283
|
||||||||||||
|
51,494
|
76,544
|
307
|
(1,487
|
)
|
126,858
|
||||||||||||
|
Income
(loss) before taxes
|
1,374
|
(6,935
|
)
|
(307
|
)
|
—
|
(5,868
|
)
|
|||||||||
|
Provision
(benefit) for taxes on income
|
141
|
(1,319
|
)
|
7,757
|
—
|
6,579
|
|||||||||||
|
Net
income (loss)
|
$
|
1,233
|
$
|
(5,616
|
)
|
$
|
(8,064
|
)
|
$
|
—
|
$
|
(12,447
|
)
|
||||
|
Total
assets
|
$
|
11,657
|
$
|
23,400
|
$
|
16,898
|
$
|
—
|
$
|
51,955
|
|||||||
|
Additions
to property, plant and equipment
|
$
|
255
|
$
|
1,505
|
$
|
120
|
$
|
—
|
$
|
1,880
|
|||||||
NOTE
8- Unaudited Interim Financial
Information
Not
applicable to smaller reporting company.
39
BRIDGFORD
FOODS CORPORATION
SCHEDULE
II
VALUATION
AND QUALIFYING ACCOUNTS
|
Allowance for Doubtful Accounts
|
||||||||||||||||
|
Balance at
Beginning
of year
|
Changes in/
Provisions
for
Doubtful Accounts
Receivable
|
Accounts
Written Off Less
Recoveries
|
Balance
at Close of
Period
|
|||||||||||||
|
Year
ended October 30, 2009
|
$ | 397 | $ | 78 | $ | 71 | $ | 404 | ||||||||
|
Year
ended October 31, 2008
|
$ | 482 | $ | (194 | ) | $ | (109 | ) | $ | 397 | ||||||
|
Promotional Allowances
|
||||||||||||||||
|
Balance at
Beginning
of year
|
Allowance
for Accruals
|
Promotions
Incurred
|
Balance
at Close of
Period
|
|||||||||||||
|
Year
ended October 30, 2009
|
$ | 2,015 | $ | 7,147 | $ | 7,200 | $ | 1,962 | ||||||||
|
Year
ended October 31, 2008
|
$ | 1,980 | $ | 6,909 | $ | 6,874 | $ | 2,015 | ||||||||
|
Tax Valuation
Allowance
|
||||||||||||||||
|
Balance at
Beginning
of year
|
Valuation
Allowance
Provision
|
Valuation
Allowance Reversal
|
Balance
at Close of
Period
|
|||||||||||||
|
Year
ended October 30, 2009
|
$ | 8,615 | $ | — | $ | 171 | $ | 8,444 | ||||||||
|
Year
ended October 31, 2008
|
$ | — | $ | 8,615 | $ | — | $ | 8,615 | ||||||||
40