(Page 2)

Sales set a new record for the eleventh consecutive year in 1996. Dividends were increased for the tenth year in a row. Three major capital improvement projects begun in our 1995 fiscal year, including the two largest in the Company’s 64 year history, were completed with a total capitalized cost of $12,000,000. Net income for 1996 was $5.7 million, which reflects a decrease from 1995 due to extremely high raw material costs in both our meat and bakery divisions.

SALES, EARNINGS AND DIVIDENDS

Sales in our 52 week 1996 fiscal year increased to $118,316,470, a 5.2% gain over sales in the 53 week 1995 fiscal year. Most of our sales gains are attributed to increases In our number of direct store distribution customers and strong sales of our meat snack products such as pepperoni and beef jerky. We also added exciting new Focaccia Club and Focaccia Chicken sandwiches to our Bridgford Micro-Ready product line and developed new biscuit products for our foodservice customers.

Net income was $5,651,383 or sixty cents per share in 1996, 14.3% less than 1995 net income. During 1996 costs of pork raw materials required in our meat business and wheat flour used in our bakery operations unexpectedly reached extraordinary high levels. Where possible, price increases to pass on these higher costs have been implemented. Bakery costs have stabilized somewhat during the first quarter of fiscal 1997. Costs of pork raw materials will remain relatively high during 1997.

Cash dividends in 1996 were paid at a record level of twenty four cents per share. Cash dividends totaling $2,255,000 were paid to shareholders in the 1996 fiscal year. Your board of directors maintained the rate of six cents in the first quarter of 1997 based on our strong financial condition and positive business outlook.

FINANCIAL CONDITION

Bridgford Foods Corporation concluded 1996 with shareholders equity of $40,255,691, a gain of $3,396,119 or 9% over the prior year end. Working capital remained strong at $22,401,167 and our current asset to current liability ratio was maintained at a 2.2 to 1 level. Our excellent financial condition was sustained while we invested $5,988,000 in capital improvements during 1996. All improvements were financed internally and the company remained debt-free for the tenth consecutive year. A $2,000,000 line of credit with a major bank is available in the event it is needed for business opportunities.

OPERATIONS

A major portion of our expenditures were made to complete construction and equipping of our new state-of-the-art North Carolina frozen food plant and for the additions and modernization of our Frozen-Rite plant in Dallas, Texas. These factories are now running efficiently. We also renovated and enlarged the manufacturing facilities at our Chicago meat processing plant and equipped it with new processing machinery which will increase our capability to produce dry sausage products. Substantial savings in production, storage and distribution costs will result from these investments.

SUMMARY

We expect 1997 to be a good year for Bridgford Foods Corporation. The modernization and expansion of our manufacturing facilities, increased sales volume, new product development and more stable raw material costs are expected to produce improved operating results.

We thank our directors, customers, suppliers, coworkers and shareholders for their support and confidence during 1996.

Respectfully submitted,

Allan L. Bridgford Chairman

Robert E. Schulze President