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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (con't)

The total tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes as follows:

		(in thousands)
		2003		2002		2001
Provision for federal income taxes at the applicable statutory rate		$663		$772		$3,424
State income taxes, net of federal income tax benefit		52		60		376
Effect of change in state statutory rate		-		270		-
Other, net		26		31		28
		$741		$1,133		$3,828

Deferred income taxes result from differences in the bases of assets and liabilities for tax and accounting purposes.

		(in thousands)
		2003		2002
Receivables allowance		$543		$1,679
Inventory capitalization		388		307
Deferred compensation		436		574
Franchise tax		(7)		97
Employee benefits		929		1,417
Other		(53)		(75)
Current tax assets, net		$2,236		$3,999
Incentive compensation		$477		$775
Pension and health care benefits		3,683		3,440
Depreciation		(1,429)		(1,216)
Non-current tax assets, net		$2,731		$2,999

No valuation allowance was provided against deferred tax assets in the accompanying statements.

NOTE 5 - LINE OF CREDIT (in thousands):
Under the terms of a revolving line of credit with Bank of America, the Company may borrow up to $2,000 through April 30, 2004. The interest rate is at the bank's reference rate unless the Company elects an optional interest rate. The borrowing agreement contains various covenants, the more significant of which require the Company to maintain certain levels of shareholders' equity and working capital. The Company was in compliance with all provisions of the agreement during the year. There were no borrowings under this line of credit during the year.

NOTE 6 - CONTINGENCIES AND COMMITMENTS (in thousands):
The Company leases certain transportation and computer equipment under operating leases expiring in 2006. The terms of the transportation lease provide for annual renewal options and contingent rental payments based upon mileage and adjustments of rental payments based on the Consumer Price Index. Minimum rental payments were $400 in fiscal year 2003, $358 in fiscal year 2002 and $340 in fiscal year 2001. Contingent payments were $168 in fiscal year 2003, $130 in fiscal year 2002 and $110 in fiscal years 2001. Future minimum lease payments are approximately $379 in the years 2004, $304 in 2005 and $28 in 2006.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Bridgford Foods Corporation

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity and cash flows present fairly, in all material respects, the financial position of Bridgford Foods Corporation and its subsidiaries at October 31, 2003 and November 1, 2002, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America , which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

Orange County, California
December 19, 2003