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Risks Relating to Dependence on Key Management The Company’s executive officers and certain other key employees have been primarily responsible for the development and expansion of the Company’s business, and the loss of the services of one or more of these individuals could have an adverse effect on the Company. The Company’s success will be dependent in part upon its continued ability to recruit, motivate and retain qualified personnel. There can be no assurance that the Company will be successful in this regard. The Company has no employment or non-competition agreements with key personnel. Risks Relating to Changes in Consumer Preference and Economic Conditions The food industry in general is subject to changing consumer trends, demands and preferences. Failure to identify and react appropriately to changes in these factors could lead to, among other things, reduced demand and price reduction for the Company’s products and could have an adverse effect on financial results. Furthermore, the Company may be adversely affected by changes in domestic or foreign economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates, and energy availability and costs (including fuel surcharges). Any such changes could have a significant adverse effect on demand for our products, as well as the costs and availability of raw materials, ingredients and packaging materials, thereby negatively affecting financial results. Risks Relating to Loss of Major Customers The Company could suffer significant reductions in revenues and operating income if we lost one or more of our largest customers, including, for example, Wal-Mart Stores, Inc., which accounted for 14.6% of revenues in fiscal year 2007. Many of our customers, such as supermarkets, warehouse clubs and food distributors, have consolidated in recent years. Such consolidation has produced large, sophisticated customers with increased buying power who are more capable of operating with reduced inventories while demanding lower pricing and increased promotional programs. These customers also may use their shelf space for their own private label products. Failure to respond to these trends could reduce our volume and cause us to lower prices or increase promotional spending for our product lines which could adversely affect our profitability. Members of the Bridgford Family Can Exercise Significant Control Members of the Bridgford family beneficially own, in the aggregate, approximately 77% of the outstanding stock of the Company. In addition, three members of the Bridgford family serve on the Board of Directors. As a result, members of the Bridgford family have the ability to exert substantial influence or actual control over our management and affairs and over substantially all matters requiring action by our shareholders, including amendments to by-laws, election and removal of directors, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. This concentration of ownership may also delay or prevent a change in control otherwise favored by our other shareholders and could depress the Company’s stock price. Additionally, as a result of the Bridgford family’s significant ownership of the outstanding voting stock, we have relied on the “controlled company” exemption from certain corporate governance requirements of the NASDAQ stock market; therefore, we have elected not to implement the rule that provides for a nominating committee to identify and recommend nominees to the Board of Directors. Pursuant to these exemptions, our compensation committee, which is made up of independent directors, does not have sole authority to determine the compensation of our executive officers, including our Chairman. Item 1B. Unresolved Staff Comments Not applicable. |
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