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 November 3, 2023
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.)
1707
South Good-Latimer Expressway
Dallas,
Texas75226
(Address
of principal executive offices)
(214)428-1535
(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 ☒
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 ☒
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 ☒ 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 ☒ 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:
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recover period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The
aggregate market value of voting stock held by non-affiliates of the registrant on April 14, 2023, was $21,180,000.
As
of January 26, 2024, there were 9,076,832 shares of common stock outstanding.
Portions
of the registrant’s definitive proxy statement on Schedule 14A relating to the registrant’s 2024 annual meeting of stockholders,
to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Annual Report
on Form 10-K, are incorporated by reference in Part III, Items 10-14, within this Annual Report on Form 10-K.
INDEX
TO FORM 10-K
Page
PART I 3
Item 1. Business 3
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments 9
Item 1C. Cybersecurity 9
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Mine Safety Disclosures 9
Item 6. [Reserved] 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 17
Item 8. Financial Statements and Supplementary Data 17
Item 9A. Controls and Procedures 17
Item 9B. Other Information 19
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 19
PART III 20
Item 10. Directors, Executive Officers and Corporate Governance 20
Item 11. Executive Compensation 20
Item 14. Principal Accountant Fees and Services 20
Item 15. Exhibits and Financial Statement Schedules 21
SIGNATURES 22
PART
I
Item
1. Business
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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
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; supply chain constraints and resulting cost pressures; changes in, or failure
to comply with, government regulations; weather conditions; construction schedules; relationships with customers and suppliers; 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.
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 23 % 21 %
Snack Food Products 77 % 79 %
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 2023. 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.
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 780 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.
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.
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. The Company plans
to shift away from Company-leased long-haul vehicles toward less costly transportation methods such as common carriers. 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
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 2023, our snack food products division sold approximately 160 different items through customer-owned distribution centers
and a direct-store-delivery network serving approximately 20,000 supermarkets, mass merchandise and convenience retail stores located
in 50 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 and supply of our premium branded products 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. Bridgford is the primary sponsor for
several professional anglers that compete at the highest level of competitive bass fishing.
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 at the end of the 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 on single-serve items. We are constantly striving 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. 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 29.1% of revenues in fiscal year 2023 and 26.5% of total accounts receivable was due from Wal-Mart® as
of November 3, 2023. Sales to Wal-Mart® comprised 29.8% of revenues in fiscal year 2022 and 26.1% of total accounts receivable was
due from Wal-Mart® as of October 28, 2022. Sales to Dollar General® comprised 16.3% of revenues in fiscal year 2023 and 20.5%
of total accounts receivable was due from Dollar General® as of November 3, 2023. Sales to Dollar General® comprised 16.9% of
revenues in fiscal year 2022 and 19.9% of total accounts receivable was due from Dollar General® as of October 28, 2022.
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.
We
purchase bulk flour under short-term fixed price contracts at current market prices. The contracts are usually effective for and settle
within three months or less. 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.
Employees
We
had 688 employees (671 full-time employees) as of November 3, 2023, approximately 44% of whose employment relationship is governed by
collective bargaining agreements. These agreements either “are currently”, “have expired” or “will expire”
between September 2023 and March 2027. We believe that our relationship with all of our employees is favorable and that any pending contracts
will be settled favorably.
Availability
of SEC Filings and Code of Conduct on Internet Website
We
maintain a website at www.bridgford.com. Available through the “Investors” link on this website, free of charge, are our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto, and reports filed under
Section 16 of the Securities Exchange Act, filed with the Securities and Exchange Commission. Our Code of Conduct is also available on
the website through the “Governance” link.
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.
Climate change and related climate change regulations, including with
respect to greenhouse gas effects, may negatively affect our results of operations.
Climate
change and rising global temperatures may contribute to changing weather patterns, droughts, heavier or more frequent storms and wildfires,
and increased frequency and severity of natural disasters. If such climate change has a negative impact on agricultural productivity,
we may have decreased availability or less favorable pricing for the raw materials necessary for our operations. Increased frequency
or duration of extreme weather conditions could cause disruptions in our operations and supply chain, or impact demand for our products.
Increasing
concern over climate change also may result in additional legal or regulatory requirements designed to manage greenhouse gas emissions,
climate risks, and resulting environmental impacts. If such requirements are enacted, we could experience significant cost increases
in our operations and supply chain.
Further,
such requirements may obligate us to make certain climate-related disclosures and set goals for reducing our carbon footprint.
While we are committed to mitigating our impact on the environment and to manage greenhouse gas emissions, there can be no assurance
that we will accomplish such goals. If we fail to achieve any such goals related to climate change or the related expectations
from stakeholders and consumers are not met, the resulting negative publicity could adversely impact our results of operations in part
as a consequence of changes in consumer preferences for our products.
Fluctuations
in commodity prices and the availability of 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, as well as the available supply of commodities. Commodity costs have and may continue to fluctuate
due to political and economic conditions, including the ongoing conflict between Ukraine and Russia. The marketing of our value-added
products does not lend itself to instantaneous changes in selling prices. In addition, if we increase prices to offset higher costs,
we could experience lower demand for our products and sales volumes. Conversely, decreases in our commodity and other input costs may
create pressure on us to decrease our prices. Changes in selling prices are relatively infrequent and do not compare with the volatility
of commodity markets. Production and pricing of commodities, on the other hand, are determined by constantly changing market forces of
supply and demand over which we have limited or no control. Such factors include, among other things, weather patterns throughout the
world, outbreaks of disease, the global level of supply inventories and demand for grains and other feed ingredients, as well as agricultural
and energy policies of domestic and foreign governments. 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. However, current inflationary market conditions may have
a negative impact on future earnings. 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. However, we have consulting agreements with each of (1) our former
Vice President and current director Allan L. Bridgford Sr., (2) our former Chief Financial Officer and current director Raymond F. Lancy,
(3) our former director and President of Bridgford Food Processing Corporation Allan Bridgford Jr.
Labor
shortages and increased turnover or increases in employee and employee-related costs could have adverse effects on our profitability.
We
have recently experienced increased labor shortages at some of our production facilities and other locations. We have historically experienced
some level of ordinary course of business turnover of employees. A number of factors have had and may continue to have adverse effects
on the labor force available to us, including reduced employment pools, federal unemployment subsidies, and other government regulations,
which include laws and regulations related to workers’ health and safety, wage and hour practices and immigration. Labor shortages
and increased turnover rates within our team members have led to and could in the future lead to increased costs, such as increased overtime
to meet demand and increased wage rates to attract and retain employees and could negatively affect our ability to efficiently operate
our production facilities or otherwise operate at full capacity. An overall or prolonged labor shortage, lack of skilled labor, increased
turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity, or cash flows.
We
depend on our major customers and any loss of such customers could have a negative impact on our profitability.
Sales
to Wal-Mart® comprised 29.1% of revenues in fiscal year 2023 and 26.5% of total accounts receivable was due from Wal-Mart® as
of November 3, 2023. Sales to Dollar General® comprised 16.3% of revenues in fiscal year 2023 and 20.5% of total accounts receivable
was due from Dollar General® as of November 3, 2023. 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
approximately 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, approximately 80% of our outstanding stock. In addition, two members of the
Bridgford family currently serve on the Board of Directors and two members of the Bridgford family serve on the Executive Committee.
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. However, we have not elected to rely on the exemption with respect to our
compensation committee, which is made up entirely of independent directors and has 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. Volatility in the capital markets
or interest rates can impact the market value of plan assets and cause volatility in the net periodic benefit cost and our future funding
requirements. The exact amount of cash contributions made to the pension plans in any year is dependent upon a number of factors, including
minimum funding requirements. In addition, 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.
Item
1B. Unresolved Staff Comments
None.
Item
1C. Cybersecurity
Not
applicable.
Item
2. Properties
We
own the following properties as of November 3, 2023:
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.
We
utilize each of 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 November 3, 2023, 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 11, 2024, there were 969 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
Our
stock repurchase program was approved by our Board of Directors in November 1999 and was expanded in June 2005. Under the stock repurchase
program, we are authorized, at the discretion of management and our Board of Directors, to purchase up to an aggregate of 2,000,000 shares
of our common stock on the open market. During fiscal years 2023 and 2022, we did not repurchase any shares of our common stock pursuant
to our stock repurchase program previously authorized by the Board of Directors. As of November 3, 2023, 120,113 shares remained authorized
for repurchase under the program.
Item
6. [Reserved]
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 (dollars in thousands)
Fiscal
Year Ended November 3, 2023 (53 weeks) Compared to Fiscal Year Ended October 28, 2022 (52 weeks)
Net
Sales-Consolidated
Net
sales in fiscal year 2023 decreased $14,262 (5.4%) when compared to the prior fiscal year. The changes in net sales were comprised as
follows:
Impact on Net Sales-Consolidated % $
Selling price per pound 1.5 4,218
Unit sales volume in pounds -5.4 (15,410 )
Promotional activity -0.7 (1,318 )
Decrease in net sales -5.4 (14,262 )
Net
Sales-Frozen Food Products Segment
Net
sales in the Frozen Food Products segment in fiscal year 2023 increased $1,384 (2.5%) compared to the prior fiscal year. The changes
in net sales were comprised as follows:
Impact on Net Sales-Frozen Food Products % $
Selling price per pound 5.3 3,345
Unit sales volume in pounds -1.6 (994 )
Returns activity -0.2 (123 )
Promotional activity -1.0 (844 )
Increase in net sales 2.5 1,384
The
increase in net sales for fiscal year 2023 primarily relates to higher selling prices per pound partially offset by lower unit sales
volume in pounds. The increase in net sales was primarily driven by a significant increase in volume to institutional customers and an
increase in selling price per pound due to price increases implemented during the fourth quarter of fiscal year 2023. Other institutional
Frozen Food Products sales, including sheet dough and rolls, increased 8% by volume and retail sales volume increased 2%. Returns activity
increased compared to the 2022 fiscal year. Promotional activity was higher in fiscal year 2023 as a percentage of sales due to increased
sales to high promotion customers.
Net
Sales-Snack Food Products Segment
Net
sales in the Snack Food Products segment in fiscal year 2023 decreased $15,646 (7.5%) compared to the prior fiscal year. The changes
in net sales were comprised as follows:
Impact on Net Sales-Snack Food Products % $
Selling price per pound 0.4 873
Unit sales volume in pounds -6.5 (14,416 )
Promotional activity -0.4 (474 )
Decrease in net sales -7.5 (15,646 )
Net
sales of Snack Food Products decreased due to lower sales through our direct-store-delivery distribution channel during the fiscal year
2023. The weighted average selling price per pound increased compared to fiscal year 2022 due to price increases implemented in response
to increased meat commodity input costs experienced in fiscal year 2022. Unit sales volume in pounds was lower as compared to the prior
fiscal year. We believe demand decreased primarily due to inflationary pressure on consumer spending habits as consumers have pulled
back on meat product purchases. Returns activity was higher compared to the 2022 fiscal year. Promotional offers increased slightly compared
to fiscal year 2022.
Cost
of Products Sold and Gross Margin-Consolidated
Cost
of products sold from continuing operations decreased by $12,558 (6.5%) during fiscal year 2023 compared to the prior fiscal year. The
gross margin increased from 27.1% to 28.0% during fiscal year 2023 compared to the prior fiscal year.
Change in Cost of Products Sold by Segment $ Consolidated % Commodity $ Decrease
Cost
of Products Sold and Gross Margin–Frozen Food Products Segment
Cost
of products sold in the Frozen Food Products segment increased by $2,080 (5.1%) in fiscal year 2023 compared to the prior fiscal year.
Increased volume and changes in the product mix were the primary contributing factors to this increase. The cost of purchased flour decreased
approximately $164, which partially offset the increase in costs of goods sold. The gross margin percentage decreased from 26.9% to 25.1%
during fiscal year 2023 compared to the prior fiscal year.
Cost
of Products Sold and Gross Margin–Snack Food Products Segment
Cost
of products sold in the Snack Food Products segment decreased by $14,638 (9.6%) during fiscal year 2023 compared to the prior fiscal
year due primarily to lower unit sales volume in our direct-store-delivery distribution channel. The cost of meat commodities decreased
approximately $7,737 during fiscal year 2023 compared to the prior fiscal year due to favorable fluctuations in commodity markets. We
increased our net realizable value reserve by $161 during fiscal year 2023 after determining that the market value on some meat products
was less than the costs associated with production and sale of the product. We maintained a net realizable reserve of $513 on products
as of November 3, 2023. The gross margin earned in this segment increased from 27.1% to 28.8% during fiscal year 2023.
Selling,
General and Administrative Expenses-Consolidated
Selling,
general and administrative expenses (“SG&A”) in fiscal year 2023 increased $332 (0.5%) when compared to the prior fiscal
year. The increase in this category did not directly correspond to the change in sales.
The
table below summarizes the primary expense variances in this category:
Lower