10-K
1
form10-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended October 30, 2020
Commission
file number: 000-02396
BRIDGFORD
FOODS CORPORATION
(Exact
name of Registrant as specified in its charter)
(State of incorporation) (I.R.S. Employer Identification No.)
1308
North Patt Street
Anaheim,
California 92801
(Address
of principal executive offices)
(714)
526-5533
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock BRID Nasdaq Global Market
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No
[X]
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 [ ]
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [X] Smaller reporting company [X]
Emerging growth company [ ]
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
Indicate
by check mark whether the registrant has filed a report on and attestation of the effectiveness of its internal control over financial
reporting under Section 404(b) of Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by registered public accounting firm that prepared or
issued its audit report [ ]
The
aggregate market value of voting stock held by non-affiliates of the registrant on April 17, 2020 was $30,843,000.
As
of January 15, 2021, there were 9,076,832 shares of common stock outstanding.
Portions
of the registrant’s Proxy Statement for the registrant’s Annual Meeting of Shareholders to be held March 10, 2021
(the “Proxy Statement”) are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.
INDEX
TO FORM 10K
Page
PART I 3
Item 1. Business 3
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 9
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Mine Safety Disclosures 10
Item 6. Selected Financial Data 11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 17
Item 8. Consolidated Financial Statements and Supplementary Data 17
Item 9A. Controls and Procedures 17
Item 9B. Other Information 18
PART III 19
Item 10. Directors, Executive Officers and Corporate Governance 19
Item 11. Executive Compensation 19
Item 14. Principal Accountant Fees and Services 19
Item 15. Exhibits and Financial Statement Schedules 20
SIGNATURES 21
PART
I
Item
1. Business (dollars in thousands)
This
Annual Report on Form 10-K (this “Report”) contains certain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and Bridgford Foods Corporation intends
that such forward-looking statements be subject to the safe harbors created thereby. Readers are cautioned that such statements,
which may be identified by words including “anticipates,” “believes,” “intends,” “estimates,”
“expects,” and similar expressions, are only predictions or estimations and are subject to known and unknown risks
and uncertainties. These forward-looking statements include, but are not limited to, statements regarding the following: general
economic and business conditions; the impact of competitive products and pricing; success of operating initiatives; development
and operating costs; advertising and promotional efforts; adverse publicity; acceptance of new product offerings; consumer trial
and frequency; changes in business strategy or development plans; availability, terms and deployment of capital; availability
of qualified personnel; commodity, labor, and employee benefit costs; changes in, or failure to comply with, government regulations;
weather conditions; construction schedules; relationships with customers and suppliers; statements regarding the anticipated impact
of the COVID-19 pandemic; and other factors referenced in this Report.
The
forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties.
These forward-looking statements are based on assumptions regarding our business, which involve judgments with respect to, among
other things, future economic and competitive conditions, and future business decisions, all of which are difficult or impossible
to predict accurately and many of which are beyond our control. Although we believe that the assumptions underlying the forward-looking
statements are reasonable, actual results may differ materially from those set forth in the forward-looking statements. In light
of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information
should not be regarded as representation by us or any other person that the objectives or plans of our company will be achieved.
The forward-looking statements contained herein speak as of the date of this Report and we undertake no obligation to update such
statements after the date hereof.
COVID-19
We
are monitoring and responding to the evolving nature of state and local government actions related to the global novel coronavirus
(“COVID-19”) pandemic and its impact on each of our production plant locations as well as our customer base. We coordinate
with our local managers for the primary purpose of protecting the health and safety of our team members, ensuring our ability
to operate our processing facilities and maintaining the liquidity of our business. We are experiencing multiple challenges related
to the pandemic. These challenges increased our operating costs and negatively impacted our volumes during fiscal year 2020 and
may continue to do so into fiscal year 2021.
Operationally,
we have faced temporary idling of production facilities to ensure team member safety. As a result, we have experienced lower levels
of productivity and higher costs of production. This will likely continue at least for the short term until the effects of the
pandemic diminish. Both of our business segments have experienced a shift in demand from foodservice to retail. In our Frozen
Food Products segment, the volume increases in retail have not been sufficient to offset the losses in foodservice and as a result,
we expect continued decreased volume into fiscal year 2021 in this segment. Our Snack Food Products segment has experienced significant
volume increases in the short-term.
●
Team Members – The health and safety of our team members is our top priority. To protect our team members, we have implemented
safety measures recommended by the Centers for Disease Control and Prevention (“CDC”) and the Occupational Safety
and Health Administration (“OSHA”) in our facilities and have employed social distancing, temperature checks of team
members, increased efforts to deep clean and sanitize facilities, the use of protective face coverings in certain environments
and making protective face coverings and other protective equipment available to team members. We encourage team members who feel
sick to stay at home and provide relaxed attendance policies in some instances. We continue to explore and implement additional
ways to promote social distancing in our production facilities by creating additional breakroom space and allowing extra time
between shifts to reduce interaction of team members, as well as erecting dividers between workstations or increasing the space
between workers on the production floor.
●
Customers and Production – The most significant impact from business shutdowns relates to channel shifts and lower production
in our Frozen Food Products segment. We are committed to doing our best to ensure the continuity of our business and the availability
of our products to customers. We have seen a shift in demand from our foodservice to our retail sales channels as schools and
in-dining restaurants have closed across the country. Our production capabilities, including our large scale and geographic proximities,
allow us to adapt some of our facilities to the changing demand by shifting certain amounts of production from foodservice to
retail. Not all of our facilities can be modified and as a result we expect a net negative impact on our foodservice volumes into
fiscal year 2021. In addition, our production facilities are experiencing varying levels of production impacts, including reduced
volumes, worker absenteeism and temporary COVID-19-related closures at some of our production facilities. Additionally, we are
anticipating the temporary idling of certain production lines that service the foodservice channel as we balance the shifting
demand between foodservice and retail sales channels.
●
Supply Chain – Our supply chain has stayed largely intact. Although we have experienced some minor disruptions, these events
have not significantly impacted our production to date. We have experienced volatility in commodity inputs, in part due to impacts
caused by COVID-19 related business disruptions, and we expect this volatility to continue, which may impact our future input
costs.
On
April 28, 2020, President Trump issued an Executive Order stating the importance of the continued operation of meat and poultry
processing facilities and directing the Secretary of Agriculture to issue rules and orders to ensure the continued supply of meat
and poultry, consistent with the guidance for the operations of meat and poultry processing facilities jointly issued by the CDC
and OSHA.
●
Insurance and CARES Act – Although we maintain insurance policies for various risks, we believe most COVID-19 impacts will
not be covered by these policies. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic
Security Act (the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll
tax credits, deferral of the employer portion of social security payments, and expanded income tax net operating loss carryback
provisions. While we continue to examine the potential impacts of these actions, we anticipate new regulations related to federal
income tax will have a significant impact on our financial statements and cash flow. Late in the second quarter of fiscal 2020
we began implementing the deferral of the employer portion of social security payments and intend to continue this deferral for
the duration of its availability which will have a favorable impact on short-term liquidity. The deferral amount as of October
30, 2020 will be approximately $1,103. We did not utilize the refundable payroll tax credit provision.
●
Liquidity – Operations provided $9,914 in operating cash flows during the fifty-two weeks ended October 30, 2020. As of
that date we had approximately $42,774 of net working capital, which included availability under our revolving line of credit
and $4,302 of cash and cash equivalents. We have $4,430 of current debt. Combined with the cash expected to be generated from
the Company’s operations, income tax refunds and deferral of social security taxes, we anticipate that we will maintain
sufficient liquidity to operate our business into fiscal year 2021 and for completion of the major plant expansion in Chicago,
Illinois. We will continue to monitor the impact of COVID-19 on our liquidity and, if necessary, take action to preserve liquidity
and ensure that our business can operate during these uncertain times.
Background
of Business
Bridgford
Foods Corporation (collectively with its subsidiaries, “Bridgford”, the “Company”, “we”, “our”),
a California corporation, was organized in 1952. We originally began operations in 1932 as a retail meat market in San Diego,
California and evolved into a meat wholesaler for hotels and restaurants, a distributor of frozen food products, a processor and
packer of meat, and a manufacturer and distributor of frozen food products for sale on a retail and wholesale basis. Currently,
we are primarily engaged in the manufacturing, marketing and distribution of an extensive line of frozen and snack food products
throughout the United States. We have not been involved in any bankruptcy, receivership, or similar proceedings since inception
nor have we been party to any merger, acquisition, etc. or acquired or disposed of any material amounts of assets during the past
five years other than those discussed in Item 7 of this Report. Substantially all of our assets have been acquired in the ordinary
course of business.
Description
of Business
Bridgford
currently operates in two business segments - the processing and distribution of frozen food products and the processing and distribution
of snack food products. For information regarding the separate financial performance of the business segments refer to Note 7
of the Notes to Consolidated Financial Statements included in this Report.
The
following table shows sales, as a percentage of consolidated sales, for each business segment during the last two fiscal years:
Frozen Food Products 21 % 27 %
Snack Food Products 79 % 73 %
We
manufacture nearly all of our food products and distribute an extensive line of biscuits, bread dough items, roll dough items,
dry sausage products and beef jerky. Our direct store delivery network consists of non-refrigerated snack food products. Our frozen
food products division serves both food service and retail customers.
Although
we have recently introduced several new products, most of these products have not contributed significantly to our revenue growth
for fiscal year 2020 with the exception of smokehouse sausage sticks introduced in the second quarter of fiscal year 2018. Our
sales are not subject to material seasonal variations. Historically we have been able to respond quickly to the receipt of orders
and, accordingly, do not maintain a significant sales backlog. Neither Bridgford nor its industry generally has unusual demands
or restrictions on working capital items. During the last fiscal year, we did not enter into any new markets or any significant
contractual or other material relationships other than the March 16, 2020 Purchase and Sale Agreement with CRG Acquisition, LLC
(“CRG”) and amendments thereto on each of April 10, 2020, June 1, 2020 and November 2, 2020. Refer to Note 1 –
Subsequent Events of Notes to Consolidated Financial Statements included in this Report for further information.
Availability
of SEC Filings and Code of Conduct on Internet Website
We
maintain an Internet website at www.bridgford.com. Available on this website, free of charge, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto as well as, and reports filed under Section
16 of the Securities Exchange Act of 1934 filed with the Securities and Exchange Commission. Our Code of Conduct is also available
on the website.
Product
Distribution Methods
Our
products are delivered to customers using several distinct distribution channels. The distribution channel utilized is dependent
upon the needs of our customers, the most efficient proximity to the delivery point, trade customs, and operating segment as well
as product type, life and stability. Among our customers are many of the country’s largest broadline and specialty food
service distributors. These and other large end purchasers occasionally go through extensive qualification procedures and our
manufacturing capabilities are subjected to thorough review by the end purchasers prior to our approval as a vendor. Large end
purchasers typically select suppliers that can consistently meet increased volume requirements on a national basis during peak
promotional periods. We believe that our manufacturing flexibility, national presence, and long-standing customer relationships
should allow us to compete effectively with other manufacturers seeking to provide similar products to our current large food
service end purchasers, although no assurances can be given.
The
factors that contribute to higher or lower margins generated from each method of distribution depend upon the accepted selling
price, level of involvement by our employees in setting up and maintaining displays, distance traveled, and fuel consumed by our
company-owned fleet as well as freight and shipping costs depending on the distance the product travels to the delivery point.
Management is continually evaluating the profitability of product delivery methods, analyzing alternate methods and weighing economic
inputs to determine the most efficient and cost-effective method of delivery to fulfill the needs of our customers.
Major
Product Classes
Frozen
Food Products
Our
frozen food products division serves both food service and retail customers. We sell approximately 140 unique frozen food products
through approximately 1,100 wholesalers, cooperatives and distributors.
Frozen
Food Products – Food Service Customers
The
food service industry is composed of establishments that serve food outside the home and includes restaurants, the food operations
of health care providers, schools, hotels, resorts, corporations, and other traditional and non-traditional food service outlets.
Growth in this industry has been driven by the increase in away-from-home meal preparation, which has accompanied the expanding
number of both dual income and single-parent households. Another trend within the food service industry is the growth in the number
of non-traditional food service outlets such as convenience stores, retail stores and supermarkets. These non-traditional locations
often lack extensive cooking, storage, or preparation facilities resulting in a need for pre-cooked and prepared foods similar
to those we provide. The expansion in the food service industry has also been accompanied by the continued consolidation and growth
of broadline and specialty food service distributors, many of which are long-standing customers. Orders from food service customers
have decreased as schools and in-dining restaurants have closed across the United States in response to the COVID-19 pandemic.
Frozen
Food Products – Retail Customers
The
majority of our existing and targeted retail customers are involved in the resale of branded and private label packaged foods.
The same trends which have contributed to the increase in away-from-home meal preparation have also fueled the growth in easy
to prepare, microwaveable frozen and refrigerated convenience foods. Among the fastest growing segments is the frozen and refrigerated
hand-held foods market. This growth has been driven by improved product quality and variety and the increasing need for inexpensive
and healthy food items that require minimal preparation. Despite rapid growth, many categories of frozen and refrigerated hand-held
foods have achieved minimal household penetration. We believe we have been successful in establishing and maintaining supply relationships
with certain selected leading retailers in this market. Demand from retail customers has increased as consumers opt to buy food
from retail establishments for home consumption in response to the COVID-19 pandemic.
Frozen
Food Products – Sales and Marketing
Our
frozen food business covers the United States. Products produced by the Frozen Food Products segment are generally supplied to
food service and retail distributors who take title to the product upon shipment receipt through company leased long-haul vehicles.
In addition to regional sales managers, we maintain a network of independent food service and retail brokers covering most of
the United States. Brokers are compensated on a commission basis. We believe that our broker relationships, in close cooperation
with our regional sales managers, are a valuable asset providing significant new product and customer opportunities. Regional
sales managers perform several significant functions for us, including identifying and developing new business opportunities and
providing customer service and support to our distributors and end purchasers through the effective use of our broker network.
Our
annual advertising expenditures are directed towards retail and institutional customers. These customers participate in various
special promotional and marketing programs and direct advertising allowances we sponsor. We also invest in general consumer advertising
in various newspapers, periodicals and coupons to advertise in major markets. We direct advertising toward food service customers
with campaigns in major industry publications and through our participation in trade shows throughout the United States. Our advertising
strategy includes our presence on social media and online distribution of promotional material.
Snack
Food Products
During
fiscal year 2020, our snack food products division sold approximately 130 different items through customer-owned distribution
centers and a direct-store-delivery network serving approximately 17,000 supermarkets, mass merchandise and convenience retail
stores located in 49 states.
Products
produced or distributed by the Snack Food Products segment are supplied to customers through either direct delivery to customer
warehouses or direct-store-delivery to retail locations. We utilize customer managed warehouse distribution centers to lower distribution
cost. Product delivered to the customer’s warehouse is then distributed to the store where it is resold to the end consumer.
Our direct-store-delivery system focus emphasizes high quality service of our premium branded product to our customers. We also
provide the service of setting up and maintaining the display and restocking our products.
Snack
Food Products — Customers
Our
customers are comprised of large retail chains and smaller “independent” operators. This part of our business is highly
competitive. Proper placement of our product lines is critical to selling success since most items could be considered “impulse”
items which are often consumed shortly after purchase. Our ability to sell successfully to this distribution channel depends on
aggressive marketing and maintaining relationships with key buyers.
Snack
Food Products — Sales and Marketing
Snack
food products are distributed across the United States. Regional sales managers perform several significant functions including
identifying and developing new business opportunities and providing customer service and support to our customers. We also utilize
the services of brokers, where appropriate, to support efficient product distribution and customer satisfaction. We sponsor a
fishing team which participates at the highest levels of both the FLW and B.A.S.S. tours.
Product
Planning and Research and Development
We
continually monitor the consumer acceptance of each product within our extensive product line. Individual products are regularly
added to and deleted from our product line. Historically, the addition or deletion of any individual product has not had a material
effect on our operations in such fiscal year. We believe that a key factor in the success of our products is our system of carefully
targeted research and testing of our products to ensure high quality and that each product matches an identified market opportunity.
The emphasis in new product introductions in the past several years has been in single-serve items. We are constantly searching
to develop new products to complement our existing product lines and improve processing techniques and formulas. We utilize an
in-house test kitchen and consultants to research and experiment with unique food preparation methods, improve quality control
and analyze new ingredient mixtures.
Competition
Our
products are sold under highly competitive conditions. All food products can be considered competitive with other food products,
but we consider our principal competitors to include national, regional and local producers and distributors of refrigerated,
frozen and non-refrigerated snack food products. Several of our competitors include large companies with substantially greater
financial and marketing resources than ours. Existing competitors may broaden their product lines and potential competitors may
enter or increase their focus on our markets, resulting in greater competition for us. We believe that our products compete favorably
with those of our competitors. Such competitors’ products compete against ours for retail shelf space, institutional distribution
and customer preference.
Effect
of Government Regulations
Our
operations are subject to extensive inspection and regulation by the United States Department of Agriculture (the “USDA”),
the Food and Drug Administration (the “FDA”), and by other federal, state, and local authorities regarding the processing,
packaging, storage, transportation, distribution, and labeling of products that we manufacture, produce and process. Our processing
facilities and products are subject to continuous inspection by the USDA and/or other federal, state, and local authorities. The
USDA has issued strict regulations concerning the control of listeria monocytogenes in ready-to-eat meat and poultry products
and contamination by food borne pathogens such as E. coli and salmonella and implemented a system of regulation known as the Hazard
Analysis Critical Control Points (“HACCP”) program. The HACCP program requires all meat and poultry processing plants
to develop and implement sanitary operating procedures and other program requirements. The U.S. Occupational Safety and Health
Administration (“OSHA”) oversees safety compliance and establishes certain employer responsibilities to help “assure
safe and healthful working conditions” and keep the workplace free of recognized hazards or practices likely to cause death
or serious injury. We believe that we are currently in compliance with governmental laws and regulations and that we maintain
the necessary permits and licenses relating to our operations.
To
date, federal, state, and local environmental laws and regulations, including those relating to the discharge of materials into
the environment, have not had a material effect on our business.
Importance
of Key Customers
Sales
to Wal-Mart® comprised 36.9% of revenues in fiscal year 2020 and 19.8% of total accounts receivable was due from Wal-Mart®
as of October 30, 2020. Sales to Wal-Mart® comprised 35.7% of revenues in fiscal year 2019 and 31.9% of total accounts receivable
was due from Wal-Mart® as of November 1, 2019. Sales to Dollar General® comprised 13.6% of revenues in fiscal year 2020
and 31.1% of total accounts receivable was due from Dollar General® as of October 30, 2020. Sales to Dollar General® comprised
11.1% of revenues in fiscal year 2019 and 21.7% of total accounts receivable was due from Dollar General® as of November 1,
2019.
Sources
and Availability of Raw Materials
We
purchase large quantities of pork, beef, and flour. These ingredients are generally available from a number of different suppliers
although the availability of these ingredients is subject to seasonal variation. We build ingredient inventories to take advantage
of downward trends in seasonal prices or anticipated supply limitations.
Most
flour purchases are made at market price without contracts. We also purchase bulk flour under short-term fixed price contracts
at current market prices. The contracts are usually effective for a month or less and are not material to our operations. These
contracts are settled within a month’s time and no significant contracts remain open at the close of the reporting period.
We monitor and manage our ingredient costs to help negate volatile daily swings in market prices when possible. We do not participate
in the commodity futures market or hedging to limit commodity exposure.
We
continue to monitor the development of the COVID-19 pandemic and its impact on our operations including our supply chain and labor
force. The pandemic could potentially cause disruptions to our supply chain. Global supply may be restricted causing price pressure
on certain ingredients and raw materials used in our products which could disrupt our operations. We are unable to accurately
predict the uncertainties related to the future course of the COVID-19 pandemic including overall economic stability, the spread,
length and severity of the virus and any future governmental actions.
Employees
We
had 563 employees as of October 30, 2020, approximately 35% of whose employment relationship is governed by collective bargaining
agreements. These agreements currently expire between March 2022 and February 2024. We believe that our relationship with all
of our employees is favorable and that contracts will be settled favorably.
Executive
Officers of the Registrant
The
names, ages, and positions of all our executive officers as of January 15, 2021 are listed below. William L. Bridgford
is the nephew of Allan L. Bridgford. Officers are normally appointed annually by the Board of Directors at their meeting immediately
following the annual meeting of shareholders. Three executive officers are full-time employees of our company. Allan L. Bridgford
worked 50% of full time during fiscal year 2020. There are no agreements or understandings pursuant to which any of the executive
officers was or is selected to serve as an executive officer.
Name Age Position(s) with our company
Allan L. Bridgford 85 Vice President and Chairman of the Executive Committee
William L. Bridgford 66 Chairman and member of the Executive Committee
John V. Simmons 65 President and member of the Executive Committee
Item
1A. Risk Factors
In
addition to the other matters set forth in this Report, the continuing operations and the price of our common stock are subject
to the following risks, each of which could materially adversely affect our business, financial condition, and results of operations.
The risks described below are only the risks that we currently believe are material to our business. However, additional risks
not presently known, or risks that are currently believed to be immaterial, may also impair our business operations.
We
are subject to general risks in the food industry, including, among other things, risk relating to changes in consumer preferences
and product contamination as well as general economic conditions, any of which risks, if realized, could negatively impact our
operating results and financial position.
The
food industry, and the markets within the food industry in which we compete, are subject to various risks, including the
following: evolving consumer preferences, nutritional and health-related concerns, federal, state and local food inspection
and processing controls, consumer product liability claims, risks of product tampering, and the availability and expense of
liability insurance. The meat and poultry industries are subject to scrutiny due to the association of meat and poultry
products with recent outbreaks of illness, and on rare occasions even death, caused by food borne pathogens. Product recalls
are sometimes required in the food industry to withdraw contaminated or mislabeled products from the market. Additionally,
the failure to identify and react appropriately to changes in consumer trends, demands and preferences could lead to, among
other things, reduced demand and price reduction for our products. Further, we may be adversely affected by changes in
domestic or foreign economic conditions, including inflation or deflation, interest rates, availability of capital markets,
consumer spending rates, and energy availability and costs (including fuel surcharges). These and other general risks related
to the food industry, if realized by us, 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 our operating
results and financial position.
Fluctuations
in the prices that we pay for raw materials could negatively impact our financial results.
We
purchase large quantities of commodity pork, beef and flour. Historically, market prices for products we process have fluctuated
in response to a number of factors, including changes in the United States government farm support programs, changes in international
agricultural and trading policies, weather, and other conditions during the growing and harvesting seasons. Our operating results
are heavily dependent upon the prices paid for raw materials. The marketing of our value-added products does not lend itself to
instantaneous changes in selling prices. Changes in selling prices are relatively infrequent and do not compare with the volatility
of commodity markets. While fluctuations in significant cost structure components, such as ingredient commodities and fuel prices,
have had a significant impact on profitability over the last three years, the impact of general price inflation on our financial
position and results of operations has not been significant. Future volatility of general price inflation or deflation and raw
material cost and availability could adversely affect our financial results.
We
are subject to extensive government regulations and a failure to comply with such regulations could negatively impact our financial
results.
Our
operations are subject to extensive inspection and regulation by the USDA, FDA and by other federal, state, and local authorities
regarding the processing, packaging, storage, transportation, distribution, and labeling of products that are manufactured, produced
and processed by us. Our processing facilities and products are subject to continuous inspection by the USDA and/or other federal,
state, and local authorities. The USDA has issued strict regulations concerning the control of listeria monocytogenes in ready-to-eat
meat and poultry products and contamination by food borne pathogens such as E. coli and salmonella and implemented a system of
regulation known as the HACCP program. The HACCP program requires all meat and poultry processing plants to develop and implement
sanitary operating procedures and other program requirements. OSHA oversees safety compliance and establishes certain employer
responsibilities to help “assure safe and healthful working conditions” and keep the workplace free of recognized
hazards or practices likely to cause death or serious injury. We believe that we are currently in compliance with governmental
laws and regulations and that we maintain necessary permits and licenses relating to our operations.
A
failure to obtain or a loss of necessary permits and licenses could delay or prevent us from meeting current product demand and
could adversely affect our operating performance. Furthermore, we are routinely subject to new or modified laws, regulations and
accounting standards. If found to be out of compliance with applicable laws and regulations in these or other areas, we could
be subject to civil remedies, including fines, injunctions, recalls, or asset seizures, as well as potential criminal sanctions,
any of which could have a significant adverse effect on our financial results.
We
depend on our key management, the loss of which could negatively impact our operations.
Our
executive officers and certain other key employees have been primarily responsible for the development and expansion of our business,
and the loss of the services of one or more of these individuals could adversely affect us. Our success will be dependent in part
upon our continued ability to recruit, motivate, and retain qualified personnel. We cannot assure that we will be successful in
this regard. We have no employment or non-competition agreements with key personnel except for a consulting agreement with Allan
L. Bridgford that is effective after his retirement from employment with our company.
We
depend on our major customers and any loss of such customers could have a negative impact on our profitability.
We
could suffer significant reductions in revenues and operating income if we lost one or more of our largest customers, including
Wal-Mart® and Dollar General®, which accounted for 36.9% and 13.6%, respectively, of sales in fiscal year 2020. 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.
With
more than 80% of our stock beneficially owned by the Bridgford family, there are risks that they can exert significant influence
or control over our corporate matters.
Members
of the Bridgford family beneficially own, in the aggregate, more than 80% of our outstanding stock. In addition, two members of
the Bridgford family currently 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 our 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, among other things,
we have elected not to implement the rule that provides for a nominating committee to identify and recommend nominees to the Board
of Directors and have instead elected to have the full Board of Directors perform such function. Additionally, pursuant to this
exemption, 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 of the Board.
We
participate in Multiemployer Pension Plans which could negatively impact our operations and profitability.
We
participate in “multiemployer” pension plans administered by labor unions on behalf of their employees. We make monthly
contributions for healthcare and pension benefit obligations. The contribution amount may change depending upon the ability of
participating companies to fund these pension liabilities as well as the actual and expected returns on pension plan assets. Should
we withdraw from the union and cease participation in a union plan, federal law could impose a penalty for additional contributions
to the plan. The penalty would be recorded as an expense in the consolidated statement of operations. The ultimate amount of the
withdrawal liability is dependent upon several factors including the funded status of the plan and contributions made by other
participating companies. We continue to participate in other multiemployer union plans. In the event of a full or partial withdrawal
from these plans, the impact to our financial statements could be material.
Eminent
domain and land risk regulations could negatively impact our financial results and financial position.
We
own real property on which we operate our processing and/or our distribution operations. As is the case with any owner of real
property, we may be subject to eminent domain proceedings that can impact the value of investments we have made in real property
as well as potentially disrupt our business operations. If subject to eminent domain proceedings or other government takings,
we may not be adequately compensated.
The
COVID-19 pandemic could negatively impact our operations and financial condition.
We
have considered the impact of federal, state and local government actions related to the global novel coronavirus pandemic (“COVID-19”
or “pandemic”) on our condensed consolidated financial statements. The business disruptions associated with the pandemic
had a significant negative impact on our consolidated condensed financial statements for the fiscal year ended October 30, 2020.
We expect these events to have future business impacts, the extent of which is uncertain and largely subject to whether the severity
worsens, or the duration of current business shutdowns continue. These impacts could include but may not be limited to risks and
uncertainty related to shifts in demand between sales channels, market volatility, constraints in our supply chain, our ability
to operate production facilities and worker availability. These unknowns may subject the Company to future risks related to long-lived
asset impairments, increased reserves for uncollectible accounts, price and availability of ingredients and raw materials used
in our products and adjustments to reflect the market value of our inventory.
Item
1B. Unresolved Staff Comments
Not
applicable.
Item
2. Properties
We
own the following properties:
Property Location Building Square Footage Acreage
Statesville, North Carolina * 42,000 8.0
* - property used by Frozen Food Products Segment.
** - property used by Snack Food Products Segment.
(1) - sale pending.
We
utilize the foregoing properties for processing, warehousing, distributing and administrative purposes. We also lease warehouse
and/or office facilities throughout the United States through month-to-month rental agreements. We believe that our properties
are generally adequate to satisfy our foreseeable needs. Additional properties may be acquired and/or plants expanded if favorable
opportunities and conditions arise.
Item
3. Legal Proceedings
No
material legal proceedings were pending against us as of October 30, 2020 or as of the date of filing of this Report. We are likely
to be subject to claims arising from time to time in the ordinary course of our business. In certain of such actions, plaintiffs
may request punitive or other damages that may not be covered by insurance and, accordingly, no assurance can be given with respect
to the ultimate outcome of any such possible future claims or litigation or their effect on us. Any adverse litigation trends
and outcomes could significantly and negatively affect our financial results.
Item
4. Mine Safety Disclosures
Not
applicable.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common
Stock and Dividend Data
Our
common stock is traded on the Nasdaq Global Market under the symbol “BRID”.
As
of January 12, 2021, there were 718 shareholders of record in our common stock.
The
payment of future dividends, if any, will be at the discretion of our Board of Directors and will depend upon future earnings,
financial requirements, and other factors.
Unregistered
Sales of Equity Securities
During
the period covered by this Report, we did not sell or issue any equity securities that were not registered under the Securities
Act of 1933, as amended.
Repurchases
of Equity Securities by the Issuer
During
fiscal year 2020, we did not repurchase any shares of our common stock pursuant to our stock repurchase program previously authorized
by the Board of Directors. The following table provides information regarding our repurchases of common stock in each of the four
periods comprising the fourth quarter of fiscal year 2020.
Total - $ - -
Item
6. Selected Financial Data
Not
applicable for a smaller reporting company.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
For
a complete understanding, this Management’s Discussion and Analysis of Financial Condition and Results of Operations should
be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements contained
in this Report.
Certain
statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
elsewhere in this Report constitute “forward-looking statements” within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934 (refer to Part I., Item 1. Business for more information).
Results
of Operations (in thousands except percentages)
Fiscal
Year Ended October 30, 2020 (52 weeks) Compared to Fiscal Year Ended November 1, 2019 (52 weeks)
Net
Sales-Consolidated
Net
sales in fiscal year 2020 increased $9,185 (4.9%) when compared to the prior fiscal year. The changes in net sales were comprised
as follows:
Impact on Net Sales-Consolidated % $