SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark one)

 

For the transition period from               

Commission file number                    0-2396                    

BRIDGFORD FOODS CORPORATION

(Exact name of Registrant as specified in its charter)

 

1308 N. Patt Street, Anaheim, CA  92801

(Address of principal executive offices-Zip code)

714-526-5533

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months ( or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x                    No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  o                       Accelerated Filer  o                       Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   o                 No   x

As of June 4, 2007 the registrant had 9,931,000 shares of common stock outstanding.

BRIDGFORD FOODS CORPORATION

FORM 10-Q QUARTERLY REPORT

INDEX

References to “Bridgford Foods” or the “Company” contained in this Quarterly Report on Form 10-Q refer to Bridgford Foods Corporation.

Part I. Financial Information
Item 1. Financial Statements
a. Consolidated Condensed Balance Sheets at April 20, 2007 (unaudited) and November 3, 2006
b. Consolidated Condensed Statements of Operations for the twelve and twenty-four weeks ended April 20, 2007 and April 14, 2006 (unaudited)
c. Consolidated Condensed Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the twenty-four weeks ended April 20, 2007 (unaudited)
d. Consolidated Condensed Statements of Cash Flows for the twenty-four weeks ended April 20, 2007 and April 14, 2006 (unaudited)
e. Notes to Consolidated Condensed Financial Statements (unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Submission of Matters to Vote of Security Holders
Item 6. Exhibits
Signatures

 

Items 3 and 5 of Part II. have been omitted because they are not applicable with respect to the current reporting period.

2

Part I.  Financial Information

Item 1. a.

BRIDGFORD FOODS CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except per share amounts)

		April 20			November 3
		2007			2006
		(Unaudited)			As restated (Note 2)
ASSETS
Current assets:
Cash and cash equivalents		$	15,618		$	1,180
Trading Securities		—			12,200
Accounts receivable, less allowance for doubtful accounts of $476 and $524, respectively, and promotional allowances of $2,279 and $2,170, respectively		7,890			10,222
Inventories (Note 3)		16,364			19,544
Prepaid expenses and other current assets		3,498			2,767
Total current assets		43,370			45,913
Property, plant and equipment, less  accumulated depreciation of $55,140  and $53,941, respectively		12,313			13,041
Other non-current assets		13,939			13,977
		$	69,622		$	72,931
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	3,248		$	3,923
Accrued payroll, advertising and other expenses		8,444			10,308
Total current liabilities		11,692			14,231
Non-current liabilities		7,465			8,514
Commitments (Note 6)
Shareholders’ equity:
Preferred stock, without par value
Authorized - 1,000 shares
Issued and outstanding - none		—			—
Common stock, $1.00 par value
Authorized - 20,000 shares
Issued and outstanding - 9,934 and 9,958 shares		9,991			10,015
Capital in excess of par value		14,083			14,235
Retained earnings		26,897			27,129
Accumulated other comprehensive loss		(506		)	(1,193		)
		50,465			50,186
		$	69,622		$	72,931

 

See accompanying notes to consolidated condensed financial statements.

3

---

Item 1. b.

BRIDGFORD FOODS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		(in thousands, except per share amounts)						(in thousands, except per share amounts)
		12 weeks ended			12 weeks ended			24 weeks ended			24 weeks ended
		April 20			April 14			April 20			April 14
		2007			2006			2007			2006
Net sales		$	27,894		$	28,305		$	60,207		$	62,880
Cost of products sold, excluding depreciation		17,944			17,510			39,500			41,063
Selling, general and administrative expenses		9,524			9,841			19,444			20,211
Depreciation		782			892			1,563			1,784
Gain on sale of equity securities		—			(106		)	—			(106		)
		28,250			28,137			60,507			62,952
Income (loss) before taxes		(356		)	168			(300		)	(72		)
Income tax provision (benefit)		(83		)	96			(68		)	(7		)
Net income (loss)		$	(273	)	$	72		$	(232	)	$	(65	)
Basic and diluted income (loss) per share (Note 4)		$	(.03	)	$	.01		$	(.02	)	$	(.01	)
Basic and diluted shares computed		9,940			9,966			9,948			9,970

 

Item 1. c.

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

													Accumulated
							Capital						other
		Common Stock					in excess			Retained			comprehensive
		Shares		Amount			of par			earnings			income (loss)			Total
November 3, 2006		9,958		$	10,015		$	14,235		$	27,129		$	(1,193	)	$	50,186
Shares repurchased		(24	)	(24		)	(152		)							(176		)
Net loss										(232		)				(232		)
Other comprehensive income:
Unrealized income on investments													24			24
Minimum pension liability													663			663
Comprehensive income																455
April 20, 2007		9,934		$	9,991		$	14,083		$	26,897		$	(506	)	$	50,465

 

See accompanying notes to consolidated condensed financial statements.

4

---

Item 1. d.

BRIDGFORD FOODS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

		24 weeks ended			24 weeks ended
		April 20			April 14
		2007			2006
		(in thousands)			As restated (Note 2)
					(in thousands)
Cash flows from operating activities:
Net loss		$	(232	)	$	(65	)
Income charges not affecting cash:
Depreciation		1,563			1,784
Recovery on losses on accounts receivable		(329		)	(339		)
Gain on sale of property, plant and equipment		(5		)	—
Effect on cash of changes in assets and liabilities:
Trading securities		12,200			1,300
Accounts receivable, net		2,661			1,866
Inventories		3,180			5,234
Prepaid expenses and other current assets		(707		)	(98		)
Other non-current assets		(359		)	(355		)
Accounts payable		(675		)	(744		)
Accrued payroll, advertising and other expenses		(1,864		)	290
Non-current liabilities		11			800
Net cash provided by operating activities		15,446			9,673
Cash used in investing activities:
Proceeds from sale of property, plant and equipment		5			—
Additions to property, plant and equipment		(835		)	(1,015		)
Net cash used in investing activities		(830		)	(1,015		)
Cash used in financing activities:
Shares repurchased		(176		)	(146		)
Net cash used in financing activities		(176		)	(146		)
Net increase in cash and cash equivalents		14,438			8,512
Cash and cash equivalents at beginning of period		1,180			5,855
Cash and cash equivalents at end of period		$	15,618		$	14,367
Cash paid for income taxes		$	0		$	22

 

See accompanying notes to consolidated condensed financial statements.

5

Item 1. e.

BRIDGFORD FOODS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except share and per share amounts)

Note 1 - The Company and Summary of Significant Accounting Policies:

The unaudited consolidated condensed financial statements of Bridgford Foods Corporation (the “Company”) for the twelve and twenty-four weeks ended April 20, 2007 and April 14, 2006 have been prepared in conformity with the accounting principles described in the Company’s Annual Report on Form 10-K/A for the fiscal year ended November 3, 2006 (the “Annual Report”) and include all adjustments considered necessary by management for a fair statement of the interim periods.  Such adjustments consist only of normal recurring items.  This report should be read in conjunction with the Annual Report.  Due to seasonality and other factors, interim results are not necessarily indicative of the results to be expected for the full year.  New accounting pronouncements and their affect on the Company are included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q.

Note 2 - Trading Securities

At April 20, 2007 the Company held no auction rate securities.  The Company elected to sell all auction rate securities during the second quarter of fiscal 2007 and invest in 90-day treasury bills which are classified as cash and cash equivalents on the accompanying consolidated condensed balance sheet.

At November 3, 2006 the Company held $12,200 of auction rate securities, which are shown as a separately stated current asset in the accompanying consolidated condensed balance sheet in accordance with SFAS 115, “Accounting for Certain Debt and Equity Securities.”  The auction rate securities as of November 3, 2006 have been reclassified from that which was originally presented in the Company’s Annual Report on Form 10-K.  Auction rate securities are variable-rate bonds tied to short-term interest rates with maturities on the face of the securities in excess of 90 days.  The Company’s investments in these auction rate securities are classified as trading securities under SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities”.  The securities are recorded at cost, which approximates fair market value because of their variable interest rates, which typically resets every 7 to 35 days.  Despite the long-term nature of their stated contractual maturities, the Company has the intent and ability to quickly liquidate these securities; therefore, the Company has no cumulative gross unrealized holding gains or losses, or gross unrealized gains or losses from these investments.  All income generated from these investments was recorded as interest income.

The consolidated condensed statement of cash flow for the twenty-four weeks ended April 14, 2006 has been reclassified to give effect to auction rate securities activity classified as trading securities.

Note 3 - Inventories:

Inventories are comprised as follows at the respective periods:

		April 20			November 3
		2007			2006
Meat, ingredients and supplies		$	4,726		$	3,748
Work in progress		1,734			2,228
Finished goods		9,904			13,568
		$	16,364		$	19,544

 

Inventories are valued at the lower of cost (at standard cost, which approximates actual cost on a first-in, first-out basis) or market.  Costs related to warehousing, transportation and distribution to customers are considered when computing market value.  Inventories include the cost of raw materials, labor and manufacturing overhead.  The Company regularly reviews inventory quantities on hand and writes down any excess or obsolete inventories to net realizable value.  An inventory reserve is created when potentially slow-moving or obsolete inventories are identified in order to reflect the appropriate inventory value.  Changes in economic conditions, production requirements, and lower than expected customer demand could result in additional obsolete or slow-moving inventory that cannot be sold or can be sold at reduced prices and could result in additional reserve provisions.

6

---

Note 4 - Basic and diluted earnings per share:

The Company had 250,000 employee stock options outstanding during the twenty-four week periods ended April 20, 2007 and April 14, 2006.  The effect of the employee stock options outstanding for the twenty-four weeks ended April 20, 2007 and April 14, 2006 was not included in the calculation of diluted shares and diluted earnings per share as to do so would be anti-dilutive.  No options were granted during the first twenty-four weeks of the fiscal year ending November 2, 2007.

Note 5 - Retirement and Other Benefit Plans:

The Company has noncontributory-trusteed defined benefit retirement plans for sales, administrative, supervisory and certain other employees. The benefits under these plans are primarily based on years of service and compensation levels. The Company’s funding policy is to contribute annually the maximum amount deductible for federal income tax purposes, without regard to the plans’ unfunded current liability. The measurement date for the plans is the Company’s fiscal year end.

Net pension cost consisted of the following:

		24 weeks ended			24 weeks ended
		April 20			April 14
		2007			2006
Service cost		$	120		$	811
Interest cost		842			896
Expected return on plan assets		(908		)	(720		)
Amortization of net loss from earlier periods		—			123
Amortization of unrecognized prior service cost		1			16
Curtailment Cost		47			—
Net pension cost		$	102		$	1,126

 

The expected Company contribution to the plans in fiscal year 2007 is $3,476. The Company has funded the plans in the amount of $1,833 through the second quarter of fiscal 2007.

In the third quarter of fiscal 2006, the Company froze the defined benefit pension plan accrued benefits for members employed by the Company with administration, sales or supervisory job classification or within a non- bargaining class.  This action was defined as a curtailment under SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits” and, therefore, the Company recognized a curtailment loss of approximately $8

In the fourth quarter of fiscal 2006, the Company froze the defined pension benefits for employees classified in the “Dallas Union Group” effective January 1, 2007. This action is defined as a curtailment under SFAS No. 88 and, therefore, the Company recognized a curtailment loss of approximately $47. As a result of these actions, net pension costs will be reduced in future periods.

Note 6 - Commitments:

The Company leases certain transportation and computer equipment under operating leases.  The terms of the transportation leases provide for annual renewal options and contingent rental payments based upon mileage and adjustments of rental payments based on the Consumer Price Index.   No material changes have been made to these contracts during the first twenty-four weeks of fiscal 2007.

Note 7 - Segment Information:

The Company has two reportable operating segments, Frozen Food Products (the processing and distribution of frozen products) and Refrigerated and Snack Food Products (the processing and distribution of refrigerated meat and other convenience foods).

The Company evaluates each segment’s performance based on revenues and operating income. Selling, general and administrative expenses include corporate accounting, information systems, human resource management and marketing, which are managed at the corporate level. These activities are allocated to each operating segment based on revenues and/or actual usage.

7

---

The following segment information is presented for the twelve and twenty-four week periods ended April 20, 2007 and April 14, 2006.

					Refrigerated
					and
Twelve Weeks Ended		Frozen Food			Snack Food
April 20, 2007		Products			Products			Other			Elimination			Totals
Sales from external customers		$	11,506		$	16,388		$	—		$	—		$	27,894
Intersegment sales		—			276			—			276			—
Net sales		11,506			16,664			—			276			27,894
Cost of products sold, excluding depreciation		6,955			11,265			—			276			17,944
Selling, general and administrative expenses		3,591			5,933			—			—			9,524
Depreciation		203			484			95			—			782
		10,749			17,682			95			276			28,250
Income (loss) before taxes		757			(1,018		)	(95		)	—			(356		)
Income tax provision (benefit)		292			(375		)	—			—			(83		)
Net income (loss)		$	465		$	(643	)	$	(95	)	$	—		$	(273	)
Total assets		$	11,021		$	25,998		$	32,603		$	—		$	69,622
Additions to property, plant and equipment		$	73		$	398		$	18		$	—		$	489

 

					Refrigerated
					and
Twelve Weeks Ended		Frozen Food			Snack Food
April 14, 2006		Products			Products			Other			Elimination			Totals
Sales from external customers		$	11,994		$	16,311		$	—		$	—		$	28,305
Intersegment sales		—			484			—			484			—
Net sales		11,994			16,795			—			484			28,305
Cost of products sold, excluding depreciation		6,570			11,424			—			484			17,510
Selling, general and administrative expenses		3,349			6,492			—			—			9,841
Depreciation		291			502			99			—			892
Gain on sale of equity securities		—			(106		)	—			—			(106		)
		10,210			18,312			99			484			28,137
Income (loss) before taxes		1,784			(1,517		)	(99		)	—			168
Income tax provision (benefit)		676			(580		)	—			—			96
Net income (loss)		$	1,108		$	(937	)	$	(99	)	$	—		$	72
Total assets		$	11,757		$	26,226		$	34,725		$	—		$	72,708
Additions to property, plant and equipment		$	178		$	266		$	52		$	—		$	496

 

					Refrigerated
					and
Twenty-Four Weeks Ended		Frozen Food			Snack Food
April 20, 2007		Products			Products			Other			Elimination			Totals
Sales from external customers		$	23,424		$	36,783		$	—		$	—		$	60,207
Intersegment sales		—			575			—			575			—
Net sales		23,424			37,358			—			575			60,207
Cost of products sold, excluding depreciation		14,417			25,658			—			575			39,500
Selling, general and administrative expenses		7,029			12,415			—			—			19,444
Depreciation		406			966			191			—			1,563
		21,852			39,039			191			575			60,507
Income (loss) before taxes		1,572			(1,681		)	(191		)	—			(300		)
Income tax provision (benefit)		588			(656		)	—			—			(68		)
Net income (loss)		$	984		$	(1,025	)	$	(191	)	$	—		$	(232	)