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BRIDGFORD FOODS CORPORATION NOTE 1- The Company and Summary of Significant Accounting Policies: The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany transactions have been eliminated. Use of estimates and assumptions The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the respective reporting periods. Actual results could differ from those estimates. Amounts estimated related to liabilities for self-insured workers’ compensation, employee healthcare and pension benefits are especially subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts not originally estimated. Management believes its current estimates are reasonable and based on the best information available at the time. Concentrations of credit risk The Company’s credit risk is diversified across a broad range of customers and geographic regions. Losses due to credit risk have recently been immaterial, although losses in fiscal year 2002 were significant due to a bankruptcy of a significant customer. The carrying amount of cash equivalents, accounts and other receivables, accounts payable and accrued liabilities approximate fair market value due to the short maturity of these instruments. The Company maintains cash balances at financial institutions, which may at times, exceed the amounts insured by the Federal Deposit Insurance Corporation of $100,000 per institution. However, management does not believe there is significant credit risk associated with these financial institutions. The provision for doubtful accounts receivable is based on historical trends and current collectibility risk. The Company has significant amounts receivable with a few large, well known customers which, although historically secure, could be subject to material risk should these customers’ operations suddenly deteriorate. The Company monitors these customers closely to minimize the risk of loss. Sales to Wal-Mart ® comprised 13.8% of revenues in fiscal year 2005 and 13.6% of accounts receivable is due from Wal-Mart ® at October 28, 2005. Sales to Wal-Mart ® comprised 14.6% of revenues in fiscal year 2004. Business segments The Company and its subsidiaries operate in two business segments – the processing and distribution of frozen foods, and the processing and distribution of refrigerated and snack food products. Fiscal year The Company maintains its accounting records on a 52-53 week fiscal basis. Fiscal years 2003, 2004 and 2005 include 52 weeks each. Revenues Revenues are recognized upon passage of title to the customer, typically upon product pick-up, shipment or delivery to customers. Products are primarily delivered to customers through the Company’s own fleet or through a Company owned direct store delivery system. These costs, $6,382, $6,514 and $6,877 for 2005, 2004 and 2003, respectively, are included in selling, general and administrative expenses in the accompanying statements. The Company records promotional and returns allowances based on recent and historical trends. Cash equivalents The Company considers all investments with original maturities of three months or less to be cash equivalents. Cash equivalents include short-term taxable auction rate securities, money market funds, and treasury bills of $10,856 at October 28, 2005 and $7,215 at October 29, 2004. |
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