TO OUR SHAREHOLDERS:

Bridgford Foods continued to face many challenges in 2003. Higher raw materials costs and strong competition in both the meat and bakery segments of our business reduced our gross operating margins. Higher workmen's compensation insurance costs, employee pension and medical charges, in addition to higher fuel and utility costs, added to our overall expense increases.

Sales and Earnings

After reductions for promotional costs, net sales in 2003 were $136,251,000, a 2.1% decline from sales in 2002. This small decline can be attributed to a continuing soft economy and strong competition during our 2003 fiscal year. Our new pepperoni and sausage party bites, as shown on page 3 of this report, have experienced excellent sales results in mass merchandise stores, supermarket and convenience stores during 2003. Delicious new retail heat and serve “Steakhouse Style Bavarian Rolls”, as displayed on the front cover of this report, have also shown good sales potential in supermarkets. Offerings of new “Sub Roll Dough” have met with enthusiastic support in the frozen foodservice business. Also, we are now completing our new route sales hand-held billing and inventory control system that will greatly improve our route sales operating efficiency and information reporting.

Operations

In 2003 we increased our capacity to manufacture products. Equipment was added to our Statesville , North Carolina plant which enables us to better serve our East Coast frozen food customers. Our Superior Foods division in Dallas , Texas upgraded its manufacturing capacity to make more specialty dough products. Our Frozen-Rite Foods division, also located in Dallas , completed installation of its new automated frozen roll dough line. Our Chicago , Illinois dry sausage factory added a new slicing and packaging line and mechanized its product and equipment washing systems.

Financial Matters

Working capital at October 31, 2003 totaled $33,197,000, $1,416,000 (4.1%) less than at the beginning of the year. The decrease relates primarily to investments in property, plant and equipment ($3,092,000), cash dividend payments ($1,665,000) and treasury stock purchases ($1,307,000). The working capital ratio at October 31, 2003 was 3.66 to 1 compared to 3.93 to 1 a year earlier. The Company remained free of interest bearing debt for the seventeenth consecutive year. The Company had $10,193,000 invested in interest bearing securities at October 31, 2003, an increase of $906,000 (9.8%) compared to the amount invested as of the beginning of the fiscal year.

Shareholders' equity totaled $52,333,000 at October 31, 2003. This represents a decrease of $2,057,000 (3.8%) compared to the end of the prior fiscal year. The decrease in shareholders' equity primarily relates to the $1,665,000 paid for cash dividends and to the $1,307,000 paid for treasury stock purchases during the year. The Board of Directors reduced the rate of the quarterly cash dividend from five cents to three cents per share beginning in the third quarter of 2003 in recognition of the lower levels of profitability in recent periods. The Company purchased 172,442 shares of its common stock on the open market during the 2003 fiscal year at an average cost of $7.58 per share. Approximately 400,000 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 at October 31, 2003 was $5.09, down 2.3% from the end of the prior fiscal year.

Summary

We improved processing and distribution efficiencies in 2003. Our management information reporting was greatly enhanced by the new computer system developed in 2002 and 2003. It was also another difficult year for the economy. We believe Bridgford Foods Corporation is poised for improved sales and profit opportunities in 2004. Thank you to our shareholders, directors, employees, customers and suppliers for their continuing support.

Respectfully submitted,

Allan L. Bridgford Chairman

Robert E. Schulze President

January 17, 2004

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