TO OUR SHAREHOLDERS:

2002 was a difficult year for Bridgford Foods. The bankruptcy of a major customer, higher pension costs, higher bakery commodity costs and extreme price competition, as well as a soft economy, all contributed to lower sales and earnings. Also, the implementation of our new computer system resulted in approximately $685,000 in non-recurring expenses during fiscal year 2002.

Sales and Earnings

Net sales, after reductions for marketing promotions, were $139,202,000 in 2002, an 8.7% decline from same period sales of $152,464,000 in 2001.

We were gratified by excellent sales of our new Teriyaki and Original Steak Bites, shown on the back cover of this report. Our Chicago division is also launching a new sliced Italian Salami product as a companion to our popular sliced pepperoni. This product enjoys good sales in the markets where it has been introduced.

In our frozen food division, Bakery Style Heat & Serve Rolls have been well received by the restaurant and institutional trade. This delicious product is available in white, honey wheat, bavarian and herb & garlic flavors.

Net income in 2002 was $1,138,000, an 81.8% decline from 2001. Earnings were negatively impacted by lower sales volume, reduced margins and higher bakery ingredient costs. Increased costs for property and liability insurance, employee health care, workers’ compensation claims and pension obligations also contributed to our lower earnings.

Operations

The 2002 year saw the completion of a new specialty dough product processing line at our North Carolina plant. This will improve service to our East Coast customers. We are presently completing installation of a highly efficient and automated frozen roll dough line at the Dallas Frozen-Rite plant. This will greatly increase our roll manufacturing capacity.

To date, more than $5,000,000 has been invested in our new management information system hardware and software. We continue to refine this system and add important capabilities to it.

Financial Matters

Working capital at November 1, 2002 totaled $34,613,000, $3,412,000 (9.0%) less than at the beginning of the year. The decrease relates primarily to investments in property, plant and equipment ($3,767,000) and cash dividend payments ($2,717,000). The working capital ratio at November 1, 2002 was 3.93 to 1 compared to 4.09 to 1 a year earlier. The Company remained free of interest bearing debt for the sixteenth consecutive year. The Company had $9,287,000 invested in interest bearing securities at November 1, 2002 compared to $12,303,000 invested at November 2, 2001.

Shareholders’ equity totaled $54,390,000 at November 1, 2002. This represents a decrease of $2,945,000 (5.1%) compared to the prior fiscal year end. The decrease in shareholders’ equity relates to the $2,717,000 paid during the year for cash dividends and the net accumulated comprehensive charge of $1,366,000 for pension plan obligations (see Liquidity and Capital Resources in the Management’s Discussion section). The Company did not repurchase any of its common stock during the year. Approximately 578,000 shares of stock remain available for purchase as part of the 1.5 million shares previously authorized by the Board of Directors. Shareholders’ equity per share was $5.21 at November 1, 2002, down 5.1% from the end of the prior fiscal year.

Summary

2002 was a trying year with many unanticipated charges. The first quarter of 2003 will also be a difficult period when compared to the first quarter of 2002. Sales comparisons will be difficult when the higher first quarter 2002 sales to our bankrupt customer are considered. We appreciate the support of our shareholders, directors, employees, customers and suppliers as we plan a more successful 2003.

Respectfully submitted,

Allan L. Bridgford Chairman

Robert E. Schulze President

January 17, 2003

(page 3)