SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended July 13, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

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 August 24, 2007 the registrant had 9,903,000 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 July 13, 2007 (unaudited) and November 3, 2006
	b.	Consolidated Condensed Statements of Operations for the twelve and thirty-six weeks ended July 13, 2007 and July 7, 2006 (unaudited)
	c.	Consolidated Condensed Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the thirty-six weeks ended July 13, 2007 (unaudited)
	d.	Consolidated Condensed Statements of Cash Flows for the thirty-six weeks ended July 13, 2007 and July 7, 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 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
Signatures.
Items 1 and 3-5 of Part II. have been omitted because they are not applicable with respect to the current reporting period.

 

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Part I.  Financial Information

Item 1. a.

BRIDGFORD FOODS CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except per share amounts)

		July 13			November 3
		2007			2006
		(Unaudited)			As restated (Note 2)
ASSETS
Current assets:
Cash and cash equivalents		$	13,002		$	1,180
Trading securities		—			12,200
Accounts receivable, less allowance for doubtful accounts of $363 and $524, respectively, and promotional allowances of $2,143 and $2,170, respectively		7,506			10,222
Inventories (Note 3)		18,798			19,544
Prepaid expenses and other current assets		3,382			2,767
Total current assets		42,688			45,913
Property, plant and equipment, less  accumulated depreciation of $55,686  and $53,941, respectively		11,817			13,041
Other non-current assets		14,312			13,977
		$	68,817		$	72,931
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	2,845		$	3,923
Accrued payroll, advertising and other expenses		8,453			10,308
Total current liabilities		11,298			14,231
Non-current liabilities		7,431			8,514
Commitments (Notes 5 and 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 - 9,911 and 9,958 shares		9,968			10,015
Capital in excess of par value		13,929			14,235
Retained earnings		26,930			27,129
Accumulated other comprehensive loss		(739		)	(1,193		)
		50,088			50,186
		$	68,817		$	72,931

 

See accompanying notes to consolidated condensed financial statements.

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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			36 weeks ended			36 weeks ended
		July 13			July 7			July 13			July 7
		2007			2006			2007			2006
Net sales		$	26,686		$	28,169		$	86,893		$	91,049
Cost of products sold, excluding depreciation		16,954			17,024			56,454			58,087
Selling, general and administrative expenses		8,936			10,019			28,380			30,230
Depreciation		717			892			2,280			2,676
Gain on sale of equity securities		—			—			—			(106		)
		26,607			27,935			87,114			90,887
Income (loss) before taxes		79			234			(221		)	162
Income tax provision (benefit)		46			10			(22		)	4
Net income (loss)		$	33		$	224		$	(199	)	$	158
Basic and diluted income (loss) per share (Note 4)		$	.00		$	.02		$	(.02	)	$	.02
Basic and diluted shares computed		9,924			9,964			9,940			9,968

 

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		(47	)	(47		)	(306		)							(353		)
Net loss										(199		)				(199		)
Other comprehensive income:
Unrealized income on investments													53			53
Minimum pension liability													401			401
Comprehensive income																255
July 13, 2007		9,911		$	9,968		$	13,929		$	26,930		$	(739	)	$	50,088

 

See accompanying notes to consolidated condensed financial statements.

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Item 1. d.

BRIDGFORD FOODS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

		36 weeks ended			36 weeks ended
		July 13			July 7
		2007			2006
		(in thousands)			As restated (Note 2)
					(in thousands)
Cash flows from operating activities:
Net (loss) income		$	(199	)	$	158
Income charges not affecting cash:
Depreciation		2,280			2,676
Recovery on losses on accounts receivable		(488		)	(324		)
Gain on sale of property, plant and equipment		(11		)	—
Effect on cash of changes in assets and liabilities:
Trading securities		12,200			(8,700		)
Accounts receivable, net		3,204			785
Inventories		746			3,805
Prepaid expenses and other current assets		(561		)	(12		)
Other non-current assets		(572		)	(301		)
Accounts payable		(1,078		)	(1,866		)
Accrued payroll, advertising and other expenses		(1,855		)	593
Non-current liabilities		(446		)	1,261
Net cash provided (used) by operating activities		13,220			(1,925		)
Cash used in investing activities:
Proceeds from sale of property, plant and equipment		11			—
Additions to property, plant and equipment		(1,056		)	(1,454		)
Net cash used in investing activities		(1,045		)	(1,454		)
Cash used in financing activities:
Shares repurchased		(353		)	(152		)
Net cash used in financing activities		(353		)	(152		)
Net increase (decrease) in cash and cash equivalents		11,822			(3,531		)
Cash and cash equivalents at beginning of period		1,180			5,855
Cash and cash equivalents at end of period		$	13,002		$	2,324
Cash paid for income taxes		$	0		$	26

 

See accompanying notes to consolidated condensed financial statements.

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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 thirty-six weeks ended July 13, 2007 and July 7, 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 July 13, 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 flows for the thirty-six weeks ended July 7, 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:

		July 13 2007			November 3 2006
Meat, ingredients  and supplies		$	5,126		$	3,748
Work in progress		2,029			2,228
Finished goods		11,643			13,568
		$	18,798		$	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.

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Note 4 - Basic and diluted earnings per share:

The Company had 250,000 employee stock options outstanding during the thirty-six week periods ended July 13, 2007 and July 7, 2006.  The effect of the employee stock options outstanding for the thirty-six weeks ended July 13, 2007 and July 7, 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 thirty-six 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:

		36 weeks ended July 13 2007			36 weeks ended July 7 2006
Service cost		$	119		$	1,082
Interest cost		1,297			1,355
Expected return on plan assets		(1,355		)	(1,064		)
Amortization of net loss from earlier periods		—			191
Amortization of unrecognized prior service cost		1			22
Curtailment cost		47			8
Net pension cost		$	109		$	1,594

 

The expected Company contribution to the plans in fiscal year 2007 is $3,476. The Company has funded the plans in the amount of $2,333 through the third 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 thirty-six 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.

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The following segment information is presented for the twelve and thirty-six week periods ended July 13, 2007 and July 7, 2006.

 

Twelve Weeks Ended July 13, 2007		Frozen Food Products			Refrigerated and Snack Food Products			Other			Elimination			Totals
Sales from external customers		$	9,903		$	16,783		$	—		$	—		$	26,686
Intersegment sales		—			741			—			741			—
Net sales		9,903			17,524			—			741			26,686
Cost of products sold, excluding depreciation		6,159			11,536			—			741			16,954
Selling, general and administrative expenses		3,146			5,790			—			—			8,936
Depreciation		203			418			96			—			717
		9,508			17,744			96			741			26,607
Income (loss) before taxes		395			(220)			(96)			—			79
Income tax provision (benefit)		145			(99)			—			—			46
Net income (loss)		$	250		$	(121)		$	(96)		$	—		$	33
Total assets		$	10,124		$	28,307		$	30,386		$	—		$	68,817
Additions to property, plant and equipment		$	22		$	162		$	37		$	—		$	221

 

Twelve Weeks Ended July 7, 2006		Frozen Food Products			Refrigerated and Snack Food Products			Other			Elimination			Totals
Sales from external customers		$	10,183		$	17,986		$	—		$	—		$	28,169
Intersegment sales		—			596			—			596			—
Net sales		10,183			18,582			—			596			28,169
Cost of products sold, excluding depreciation		6,065			11,555			—			596			17,024
Selling, general and administrative expenses		3,139			6,880			—			—			10,019
Depreciation		290			504			98			—			892
Gain on sale of equity securities		—			—			—			—			—
		9,494			18,939			98			596			27,935
Income (loss) before taxes		689			(357		)	(98		)	—			234
Income tax provision (benefit)		224			(214		)	—			—			10
Net income (loss)		$	465		$	(143	)	$	(98	)	$	—		$	224
Total assets		$	11,133		$	28,626		$	31,872		$	—		$	71,631
Additions to property, plant and equipment		$	(94	)	$	505		$	28		$	—		$	439

 

Thirty-Six Weeks Ended July 13, 2007		Frozen Food Products			Refrigerated and Snack Food Products			Other			Elimination			Totals
Sales from external customers		$	33,327		$	53,566		$	—		$	—		$	86,893
Intersegment sales		—			1,316			—			1,316			—
Net sales		33,327			54,882			—			1,316			86,893
Cost of products sold, excluding depreciation		20,576			37,194			—			1,316			56,454
Selling, general and administrative expenses		10,174			18,206			—			—			28,380
Depreciation		609			1,384			287			—			2,280
		31,359			56,784			287			1,316			87,114
Income (loss) before taxes		1,968			(1,902		)	(287		)	—			(221		)
Income tax provision (benefit)		732			(754		)	—			—			(22		)
Net income (loss)		$	1,236		$	(1,148	)	$	(287	)	$	—		$	(199	)
Total assets		$	10,124		$	28,307		$	30,386		$	—		$	68,817
Additions to property, plant and equipment		$	159		$	850		$	47		$	—		$	1,056

 

Thirty-Six Weeks Ended July 7, 2006		Frozen Food Products			Refrigerated and Snack Food Products			Other			Elimination			Totals
Sales from external customers		$	34,281		$	56,768		$	—		$	—		$	91,049
Intersegment sales		—			1,797			—			1,797			—
Net sales		34,281			58,565			—			1,797			91,049
Cost of products sold, excluding depreciation		20,265			39,619			—			1,797			58,087
Selling, general and administrative expenses		10,009			20,221			—			—			30,230
Depreciation		871			1,509			296			—			2,676
Gain on sale of equity securities		—			(106		)	—			—			(106		)
		31,145			61,243			296			1,797			90,887
Income (loss) before taxes		3,136			(2,678		)	(296		)	—			162
Income tax provision (benefit)		1,136			(1,132		)	—			—			4
Net income (loss)		$	2,000		$	(1,546	)	$	(296	)	$	—		$	158