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1998 was an outstanding year for Bridgford Foods Corporation. All-time highs were established for sales, earnings and equity. Favorable commodity costs, manufacturing efficiencies, tight cost controls and strong marketing programs all contributed to the greatest one year success in company history.

SALES, EARNINGS AND DIVIDENDS

Sales in the fiscal year ended October 30, 1998 were $134,815,787, a 5.4% gain over sales in 1997. Fiscal 1998 was our 13th consecutive year of sales increases. Excellent sales gains were experienced in our dry sausage, meat snack and delicatessen sales divisions. Bridgford Four Ounce Beef Jerky, pictured on the cover of this report, became the number one selling meat snack item in Supermarkets and Warehouse Stores in the U.S. during 1998.

Frozen sandwich sales increased in both the retail and food service divisions during 1998. Sales of our new four pack sandwiches to supermarkets for their “large pack” sections have met with good success.

Net income for 1998 was $8,720,430, a 32% gain over 1997 income. Low pork costs during all of 1998 and favorable flour prices, combined with increased sales and efficiencies, made these gains possible.

Cash dividends of twenty-four cents per share were paid in 1998 on the 10,336,415 shares then outstanding.

On November 16,1998 your Board of Directors authorized a ten percent stock dividend for the second consecutive year and a regular six cent cash dividend to be paid on the 11,369,812 shares outstanding after the stock dividend. The financial statements reflect historical earnings and dividends based on the new number of shares outstanding.

Your company remained debt-free in 1998 while investing $2,285,000 in capital improvements and paying $2,484,000 in cash dividends. We continue to maintain a $2,000,000 bank line of credit that is available for future expansion.

FINANCIAL CONDITION

Shareholders’ equity exceeded $50,000,000 for the first time in 1998, reaching $50,842,000. This is 14% more than the record equity reached in 1997. Working capital reached $37,251,000 in 1998, a 25% gain over the prior year. Our working capital ratio was 3.8 to 1 at October 30,1998.

OPERATIONS

During 1998 we broke ground on a $1,500,000 addition to our Chicago meat processing plant which will enable us to greatly improve our warehouse and distribution functions by the second half of 1999. We will also build an $800,000 freezer addition at our Dallas, Texas sandwich manufacturing plant during 1999. We have upgraded our biscuit production line in Dallas to increase line speeds by 50% with no increase in labor cost. These and other plant improvements will enable us to continue increasing our production efficiency in 1999.

We expect raw material costs to increase during the second half of 1999. Supplies of pork are projected to decrease. We anticipate increased grain prices during the same period.

SUMMARY

1998 was a record shattering year for Bridgford Foods. We have excellent people, facilities and equipment in place and are positioned to have another good year in 1999. We thank our directors, officers, customers, suppliers, associates and shareholders for helping us set all-time financial records in 1998.

Respectfully submitted,

Allan L. Bridgford Chairman

Robert E. Schulze President