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Bridgford Foods Corporation’s sales and earnings set new records in our 1997 fiscal year, the fifty-two weeks ended October 31,1997. New efficiencies and increased productivity resulting from our capital expenditures for plant and equipment in 1995 and 1996 enabled us to earn $6.6 million in 1997, an all-time high.

SALES, EARNINGS AND DIVIDENDS

Our 1997 fiscal year sales reached $127,859,491, eight percent greater than sales in 1996 and a historical high. Strong sales gains were experienced in our frozen food, dry sausage and delicatessen foods divisions. Warehouse club sandwich sales have also experienced positive expansion. On the cover of this report are pictures of some of our sandwich products, including our two newest items: “Lower Fat” Turkey Breast & Swiss Cheese and our new Breakfast Croissant with Egg, Ham and Cheese. We are also excited about the potential of another new item, Bridgford “Bake-Off Biscuits.” They only require a small amount of cooking by the end user for a perfect product every time.

Our dry sausage and meat snack businesses expanded significantly in 1997. We strengthened our national position in both categories with Bridgford six-ounce pillow-pack sliced pepperoni gaining substantial market share.

Net income in 1997 reached $6,605,354, seventeen percent more than 1996 earnings. We experienced some relief from high raw material costs in the fourth quarter and expect this trend to continue in 1998. However, heavy competition in all of our product sales areas required us to offer strong promotional programs and forego price increases during 1997.

Cash dividends of twenty-four cents per share were paid in 1997. On November 10, 1997 your Board of Directors authorized a ten- percent stock dividend and a regular quarterly cash dividend to be paid on all shares outstanding after the stock dividend. The financial statements reflect historical earnings and dividends based on the new number of shares outstanding.

FINANCIAL CONDITION

At the end of fiscal 1997, Shareholders’ Equity in Bridgford Foods Corporation had reached $44,605,782, a gain of $4,350,091 over the prior year. Working capital increased by $5,435,968 to $29,682,086 during 1997. Our current asset to current liability ratio improved to 3.6 to 1. The Company remained debt-free for the eleventh consecutive year while $1,949,100 in capital improvements were made with internally generated funds.

We continue to maintain a $2,000,000 line of credit with a major bank. These funds are available for possible future business opportunities.

OPERATIONS

During 1997 we fully integrated our new North Carolina plant and our new automated Dallas freezer and distribution facility into our national production and distribution system. This resulted in substantial improvements in efficiency and productivity. Lower raw material costs in our bakery and meat operations helped us to maintain operating margins, especially in the fourth quarter. We expect these trends to continue in 1998 as supplies of grain and meat become more abundant.

SUMMARY

We were honored in October of 1997 to have our Company receive the American Meat Institute Edward C. Jones Community Service Award in recognition of the time and funds expended on community service projects over the years. We feel a deep commitment to the communities where we work.

We believe 1998 will be another good year for our Company. We are positioned to increase our sales and profits in all divisions of the business, and we have the modern facilities and good people to carry out this plan.

We thank our directors, customers, suppliers, associates and shareholders for a record 1997.

Respectfully submitted,

Allan L. Bridgford Chairman

Robert E. Schulze President