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2001 was a challenging year for Bridgford Foods. Our business was adversely affected by the recession and the tragic events of September 11. Sales reached a record level in 2001, but profits were down substantially compared to the prior year. Meat raw materials, energy and fuel costs were higher than anticipated for most of fiscal 2001, while competition was especially strong in the food service area and the meat snack business.

SALES AND EARNINGS

Sales totaled $156,361,000 in the 52 week 2001 fiscal year, a slight gain over sales in the 53 week 2000 year. This was our sixteenth consecutive year of record high sales.

Beef Jerky sales continued strong while new single – serve portions of Kippered Beef Steaks, Beef & Cheese Sticks, Spicy Beef Sticks, and Red Hot Pickled Sausages were added to our meat snack line. New “Club Pack Biscuits” and “Club Pack Bake & Serve Rolls” were added to our frozen bakery products group in 2001.

Our direct store distribution system continued to expand in the 2001 year. We now operate 256 company owned routes in 49 states. Net income in 2001 was $6,244,000, a 29% decline from income in the 2000 fiscal year. Contributing to our income decline were: lower operating margins in our processed meat business due to higher raw material costs; higher energy and fuel costs during the first three quarters; one less week of operations than in the 53 week 2000 year; and high costs related to development of our new computer system. Also, the year 2000 had a non-recurring gain of $675,000 from the sale of land in San Diego.

OPERATIONS

We recently completed the new freezer expansion project at our Superior Foods plant in Dallas, Texas. This adds 750 pallet spaces to our frozen warehouse capacity. We are installing a new specialty dough product line at our North Carolina bakery. Packaging capacity at our Chicago meat processing facility was increased and improved in 2001. An additional high-speed packaging line will be installed during 2002 to accommodate increased demand for Bridgford dry sausage products. The more than $4,000,000 computer hardware and software project approved last year is now on-line at our Anaheim headquarters.

State of the art financial, cost accounting and route accounting systems should be installed during the first half of 2002. This will provide outstanding management information systems throughout the Company.

FINANCIAL MATTERS

The Company purchased 167,041 shares of its outstanding common stock on the open market during the 2001 fiscal year at an average cost of $12.88 per share. Since the inception of the stock repurchase plan in 1999,the Company has acquired a total of 921,541 shares at an average cost of $10.63 per share. In 2001, the Board of Directors increased the number of shares authorized to be purchased under the plan from 1,000,000 to 1,500,000.

The annual cash dividend rate of $ .28 per share remained the same during the year, but total cash dividends paid during 2001 were $108,000 less than the prior year due to fewer shares of common stock outstanding.

Working capital at November 2, 2001 totaled $38,025,000, a 1.2% decrease for the year. The change in working capital primarily relates to the $4,590,000 invested in additions to property, and equipment during the year.

Shareholders’ equity increased $1,139,000 (2.0%) during the year to $57,335,000 and shareholders’ equity per share increased 3.7% to $5.49 per share during the same period.

SUMMARY

Thank you to our officers, directors and fellow employees for their sincere and dedicated efforts in 2001. Also, thank you to our customers and suppliers for their contributions during the 2001 year. We anticipate improvements in sales volume and profits during 2002.

Allan L. Bridgford Chairman

Robert E. Schulze President