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BRIDGFORD FOODS CORP - Quarter Report: 2004 July (Form 10-Q)

Form 10-Q for Bridgford Foods Corporation
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

 

For the quarterly period ended July 09, 2004

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from

 

Commission file number 0-2396

 


 

BRIDGFORD FOODS CORPORATION

(Exact name of Registrant as specified in its charter)

 

California   95-1778176

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

identification number)

 

1308 N. Patt Street, Anaheim, CA 92801

(Address of principal executive offices-Zip code)

 

714-526-5533

(Registrant’s telephone number, including area code)

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months ( or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

As of August 16, 2004 the registrant had 10,007,000 shares of common stock outstanding.

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of The Exchange Act).    Yes  ¨    No  x

 


 

Page 1 of 12 pages


Table of Contents

BRIDGFORD FOODS CORPORATION

FORM 10-Q QUARTERLY REPORT

INDEX

 

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

 

     Page

Part I. Financial Information

    

Item 1. Financial Statements

    

a. Consolidated Condensed Balance Sheets at July 9, 2004 (unaudited) and October 31, 2003

   3

b. Consolidated Condensed Statements of Operations for the twelve and thirty-six weeks ended July 9, 2004 and July 11, 2003 (unaudited)

   4

c. Consolidated Condensed Statements of Shareholders’ Equity for the thirty-six weeks ended July 9, 2004 and July 11, 2003 (unaudited)

   4

d. Consolidated Condensed Statements of Cash Flows for the thirty-six weeks ended July 9, 2004 and July 11, 2003 (unaudited)

   5

e. Notes to Consolidated Condensed Financial Statements (unaudited)

   6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

   8

Item 3. Quantitative and Qualitative Disclosures about Market Risk

   10

Item 4. Controls and Procedures

   10

Part II. Other Information

    

Item 6. Exhibit and Reports on Form 8-K

   11

Signatures

   12

Items 1-5 of Part II. have been omitted because they are not applicable with respect to the current reporting period.

 

Page 2 of 12 pages


Table of Contents

Part I. Financial Information

 

Item 1. a.

 

BRIDGFORD FOODS CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except per share amounts)

 

    

July 9

2004


    October 31
2003


 
     (Unaudited)        
ASSETS                 

Current assets:

                

Cash and cash equivalents

   $ 8,948     $ 12,196  

Accounts receivable, less allowance for doubtful accounts of $1,553 and $1,429

     10,242       12,273  

Inventories (Note 2)

     20,714       18,033  

Prepaid expenses and other current assets

     4,294       3,184  
    


 


Total current assets

     44,198       45,686  

Property, plant and equipment, less accumulated depreciation of $46,111 and $43,084

     17,583       17,735  

Other non-current assets

     12,057       12,506  
    


 


     $ 73,838     $ 75,927  
    


 


LIABILITIES AND SHAREHOLDERS’ EQUITY                 

Current liabilities:

                

Accounts payable

   $ 3,568     $ 4,705  

Accrued payroll and other expenses

     9,196       7,784  
    


 


Total current liabilities

     12,764       12,489  
    


 


Non-current liabilities

     11,759       11,105  
    


 


Contingencies and commitments (Note 5)

                

Shareholders’ equity:

                

Preferred stock, without par value Authorized—1,000 shares Issued and outstanding—none

                

Common stock, $1.00 par value Authorized—20,000 shares Issued and outstanding—10,015 and 10,276 shares

     10,072       10,333  

Capital in excess of par value

     14,605       16,340  

Retained earnings

     25,839       27,321  

Accumulated other comprehensive loss

     (1,201 )     (1,661 )
    


 


       49,315       52,333  
    


 


     $ 73,838     $ 75,927  
    


 


 

See accompanying notes to consolidated condensed financial statements.

 

Page 3 of 12 pages


Table of Contents

Item 1. b.

 

BRIDGFORD FOODS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

     (in thousands, except
per share amounts)


   (in thousands, except
per share amounts)


     12 weeks
ended


    12 weeks
ended


   36 weeks
ended


    36 weeks
ended


     July 9
2004


    July 11
2003


   July 9
2004


    July 11
2003


Net sales

   $ 29,756     $ 29,977    $ 95,619     $ 91,496
    


 

  


 

Cost of products sold, excluding depreciation

     19,655       18,482      62,880       57,564

Selling, general and administrative expenses

     10,096       9,839      31,272       30,366

Depreciation

     1,010       991      3,030       2,973
    


 

  


 

       30,761       29,312      97,182       90,903
    


 

  


 

(Loss) income before taxes

     (1,005 )     665      (1,563 )     593

Income tax (benefit) provision

     (382 )     253      (594 )     225
    


 

  


 

Net (loss) income

   $ (623 )   $ 412    $ (969 )   $ 368
    


 

  


 

Basic (loss) Income per share

   $ (.06 )   $ .04    $ (.10 )   $ .04
    


 

  


 

Basic shares computed

     10,054       10,375      10,179       10,421
    


 

  


 

Diluted (loss) income per share

   $ (.06 )   $ .04    $ (.10 )   $ .04
    


 

  


 

Diluted shares computed

     10,054       10,375      10,179       10,421
    


 

  


 

Cash dividends paid per share

   $ .0     $ .03    $ .05     $ .13
    


 

  


 

 

Item 1. c.

 

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(in thousands, except per share amounts)

 

     Common Stock

    Capital
in excess
of par


    Retained
earnings


    Accumulated
other
comprehensive
income (loss)


    Total

 
     Shares

    Amount

         

November 1, 2002

   10,448     $ 10,505     $ 17,475     $ 27,776     $ (1,366 )   $ 54,390  

Shares repurchased

   (129 )     (129 )     (838 )                     (967 )

Cash dividends ($.13 per share)

                           (1,356 )             (1,356 )

Net Income

                           368               368  
                                          


Comprehensive income

                                           368  
    

 


 


 


 


 


July 11, 2003

   10,319     $ 10,376     $ 16,637     $ 26,788     $ (1,366 )   $ 52,435  
    

 


 


 


 


 


October 31, 2003

   10,276     $ 10,333     $ 16,340     $ 27,321     $ (1,661 )   $ 52,333  

Shares repurchased

   (261 )     (261 )     (1,735 )                     (1,996 )

Cash dividends ($.05 per share)

                           (513 )             (513 )

Net loss

                           (969 )             (969 )

Other comprehensive income (loss):

                                              

Unrealized gain on investment (Note 6)

                                   460       460  
                                          


Comprehensive (loss)

                                           (509 )
    

 


 


 


 


 


July 9, 2004

   10,015     $ 10,072     $ 14,605     $ 25,839     $ (1,201 )   $ 49,315  
    

 


 


 


 


 


 

See accompanying notes to consolidated condensed financial statements.

 

Page 4 of 12 pages


Table of Contents

Item 1.d.

 

BRIDGFORD FOODS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     36 weeks ended

    36 weeks ended

 
    

July 9

2004


   

July 11

2003


 
     (in thousands)     (in thousands)  

Cash flows from operating activities:

                

Net loss

   $ (969 )   $ 368  

Income charges not affecting cash:

                

Depreciation

     3,030       2,973  

Provision for losses on accounts receivable

     174       628  

Effect on cash of changes in assets and liabilities:

                

Accounts receivable

     1,857       1,604  

Inventories

     (2,681 )     692  

Prepaid expenses and other current assets

     (649 )     581  

Other non-current assets

     449       (300 )

Accounts payable

     (1,137 )     350  

Accrued payroll and other expenses

     1,412       983  

Non-current liabilities

     654       (286 )
    


 


Net cash provided by operating activities

     2,140       7,593  
    


 


Cash used in investing activities:

                

Additions to property, plant and equipment

     (2,879 )     (2,038 )
    


 


Cash used in financing activities:

                

Shares repurchased

     (1,996 )     (967 )

Cash dividends paid

     (513 )     (1,356 )
    


 


Net cash used in financing activities

     (2,509 )     (2,323 )
    


 


Net (decrease) increase in cash and cash equivalents

     (3,248 )     3,232  

Cash and cash equivalents at beginning of period

     12,196       10,305  
    


 


Cash and cash equivalents at end of period

   $ 8,948     $ 13,537  
    


 


 

See accompanying notes to consolidated condensed financial statements.

 

Page 5 of 12 pages


Table of Contents

Item 1.e.

 

BRIDGFORD FOODS CORPORATION

 

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

 

Note 1—General Comments

 

The unaudited consolidated condensed financial statements of Bridgford Foods Corporation (the “Company”) for the thirty-six weeks ended July 9, 2004 and July 11, 2003 have been prepared in conformity with the accounting principles described in the Company’s 2003 Annual Report to Shareholders (the “Annual Report”) and include all adjustments considered necessary by management for a fair statement of the interim periods. Such adjustments consist only of normal recurring items. This report should be read in conjunction with the Annual Report.

 

Note 2—Inventories

 

Inventories are comprised as follows at the respective periods:

 

    

July 9

2004


   October 31
2003


     (in thousands)    (in thousands)

Meat, ingredients and supplies

   $ 6,697    $ 3,229

Work in progress

     2,707      1,850

Finished goods

     11,310      12,954
    

  

     $ 20,714    $ 18,033
    

  

 

Note 3—Basic and diluted earnings per share

 

The Company had employee stock options outstanding totaling 250,000 at the thirty-six week period ended July 9, 2004 and July 11, 2003. The effect of the employee stock options outstanding for the thirty-six weeks ended July 9, 2004 and July 11, 2003 was not included in the calculation of diluted shares and diluted earnings per share as to do so would be anti- dilutive.

 

Note 4—Stock-Based Compensation

 

The Company has adopted Statement of Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation” which allows the Company to apply the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for stock-based compensation; therefore, no compensation expense has been recognized for its fixed stock option plans as options generally are granted at fair market value based upon the closing price on the date immediately preceding the grant date. On December 31, 2002 the FASB issued SFAS No. 148, Accounting for Stock Based Compensation-Transition and Disclosure, which amends SFAS No. 123. SFAS No. 148 requires more prominent and frequent disclosures about the effects of stock-based compensation. Accordingly, if compensation expense for the Company’s stock options had been recognized, based upon the fair value of awards granted, the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:

 

     (in thousands, except per
share amounts)


 
     12 weeks
ended


    12 weeks
ended


 
     July 9
2004


    July 11
2003


 

Net (loss) income, as reported

   $ (623 )   $ 412  

Proforma adjustment

     0       (18 )
    


 


Proforma net (loss) income

   $ (623 )   $ 394  
    


 


 

Page 6 of 12 pages


Table of Contents
     (in thousands, except per
share amounts)


 
     12 weeks
ended


    12 weeks
ended


 
     July 9
2004


    July 11
2003


 

Net (loss) income per share:

                

Basic—as reported

   $ (0.06 )   $ 0.04  
    


 


Basic—proforma

   $ (0.06 )   $ 0.04  
    


 


Diluted—as reported

   $ (0.06 )   $ 0.04  
    


 


Diluted—proforma

   $ (0.06 )   $ 0.04  
    


 


Weighted average shares

                

shares outstanding:

                

Basic

     10,054       10,375  
    


 


Diluted

     10,054       10,375  
    


 


     (in thousands, except per
share amounts)


 
     36 weeks
ended


    36 weeks
ended


 
     July 9
2004


    July 11
2003


 

Net (loss) income, as reported

   $ (969 )   $ 368  

Proforma adjustment

     0       (55 )
    


 


Proforma net (loss) income

   $ (969 )   $ 313  
    


 


Net (loss) income per share:

                

Basic—as reported

   $ (0.10 )   $ 0.04  
    


 


Basic—proforma

   $ (0.10 )   $ 0.03  
    


 


Diluted—as reported

   $ (0.10 )   $ 0.04  
    


 


Diluted—proforma

   $ (0.10 )   $ 0.03  
    


 


Weighted average shares

                

shares outstanding:

                

Basic

     10,179       10,421  
    


 


Diluted

     10,179       10,421  
    


 


 

The pro forma amounts were estimated using the Black-Scholes option-pricing model. No options were granted during the first thirty-six weeks of the fiscal year ending October 29, 2004.

 

Note 5—Contingencies and Commitments (in thousands):

 

The Company leases certain transportation and computer equipment under operating leases expiring in 2006. The terms of the transportation lease provide for annual renewal options and contingent rental payments based upon mileage and adjustments of rental payments based on the Consumer Price Index. Minimum rental payments were $400 in fiscal year 2003, $358 in fiscal year 2002 and $340 in fiscal year 2001. Contingent payments were $168 in fiscal year 2003, $130 in fiscal year 2002 and $110 in fiscal years 2001. Future minimum lease payments are approximately $379 in the years 2004, $304 in 2005 and $28 in 2006. No changes have been made to these contracts during the first thirty-six weeks of fiscal 2004.

 

Note 6—Subsequent Event

 

The Company sold an investment in shares of stock, received as a result of the bankruptcy of a significant customer, on July 26, 2004. The Company sold 14,022 shares of this investment in stock realizing net proceeds of approximately $898,000. The resulting pre-tax gain of $553,000 will be recognized in the fourth quarter of fiscal year 2004.

 

Page 7 of 12 pages


Table of Contents

Item 2.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements in this Form 10-Q under Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. In addition, the Company may from time to time make oral forward-looking statements. Such forward looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Bridgford Foods Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, among others, 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; and other factors referenced in this Form 10-Q and in Bridgford Foods’ Annual Report on Form 10-K for the fiscal year ended October 31, 2003. Because of these and other factors that may affect the Company’s operating results, past financial performance should not be considered an indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the respective reporting periods. Actual results could differ from those estimates. Amounts estimated related to liabilities for pension costs, self-insured workers’ compensation and employee healthcare are especially subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts not originally estimated. Management believes its current estimates are reasonable and based on the best information available at the time.

 

The Company’s credit risk is diversified across a broad range of customers and geographic regions. Losses due to credit risk have historically been immaterial although losses in fiscal year 2002 were significant. In fiscal year 2002, the provision for losses on accounts receivable was increased by $3,750,000 due to the bankruptcy of a significant customer and collectibility issues related to other significant accounts. The provision for losses on accounts receivable is based on historical trends and current collectibility risk. The Company has significant amounts receivable with a few large, well known customers which, although historically collectible, could be subject to material risk should these customers’ operations suddenly deteriorate. The Company monitors these customers closely to minimize the risk of loss. One customer comprised 14.8% of revenues and 17.5% of accounts receivable in the third quarter of fiscal year 2004.

 

Revenues are recognized upon passage of title to the customer upon product shipment or delivery to customers as determined by applicable contracts. Products are delivered to customers through the Company’s own fleet or through a Company-owned direct store delivery system.

 

The Company’s operating results are heavily dependent upon the prices paid for raw materials. The marketing of the Company’s 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.

 

Results of Operations for the Twelve Weeks ended July 9, 2004 and Twelve Weeks ended July 11, 2003.

 

Net sales decreased by $221,000 (0.7%) to $29,756,000 in the third twelve-weeks of the 2004 fiscal year compared to the same twelve-week period last year. The primary reason for the decrease was lower unit sales volume between comparative quarters. An increase in returns as a percentage of sales (0.5%) also contributed to the slight decline in net sales. Higher unit selling prices offset lower unit sales somewhat. Average unit selling prices were approximately 3% higher than the comparative period in the prior year.

 

Page 8 of 12 pages


Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

Net sales decreased $785,000 (2.6%) for the third twelve weeks of the 2004 fiscal year when compared to the prior twelve-week period ended April 16, 2004 (not shown). This decrease in net sales occurred primarily due to lower unit sales volume. This change reflects expected seasonal trends.

 

Cost of products sold increased by $1,173,000 (6.4%) to $19,655,000 in the third twelve weeks of the 2004 fiscal year to $19,655,000 compared to the twelve-week period in 2003. The gross margin decreased on a comparative basis due primarily to higher meat commodity costs compared to the comparative period. Flour commodity costs remained essentially flat when evaluated against the comparison period. Lower facility utilization also adversely affected unit costs in the quarter. Compared to the prior twelve-week period (not shown), the cost of products sold increased $296,000 (1.5%) for the third twelve weeks of fiscal year 2004. This increase is consistent with the higher meat commodity costs over comparative periods.

 

Selling, general and administrative expenses increased by $257,000 (2.6%) to $10,096,000 in the third twelve weeks of 2004 compared to the twelve-week period last year. As a percentage of sales, this category increased at a greater rate than the sales. Increased costs for fuel, outside storage, pension expenses and workers’ compensation outpaced sales trends. These increases were partially offset by continued cost cutting efforts instituted by management. In addition, the provision for losses on accounts receivable was also reduced due to lower exposure to collection losses. Compared to the prior twelve-week period (not shown), selling, general and administrative expenses decreased by $416,000 (4.0%). The decrease in selling, general and administrative expenses relates primarily to the sales decrease between quarters.

 

Depreciation expense increased by $19,000 (1.9%) to $1,010,000 in the third twelve weeks of the 2004 fiscal year compared to the twelve-week period in 2003. The changes in depreciation expense were insignificant to the results of the quarter. Depreciation expense decreased $4,000 (0.4%) for the third twelve weeks of fiscal 2004 compared to the prior twelve-week period (not shown). The effective income tax rate was 38.0% in the third twelve weeks of fiscal 2004, consistent with the prior fiscal year and the prior twelve-week period.

 

Results of Operations for the Thirty-Six Weeks ended July 9, 2004 and July 11, 2003

 

Net sales for the first thirty-six weeks of fiscal year 2004 increased by $4,123,000 (4.5%) to $95,619,000 compared to the thirty-six week period of fiscal year 2003. The increase in net sales is primarily driven by higher unit sales volume. Approximately 1% of the increase relates to higher unit selling prices.

 

Cost of sales increased in the first thirty-six weeks of fiscal year 2004 by $5,316,000 (9.2%) to $62,880,000 compared to the thirty-six week period of fiscal year 2003. Cost of sales in the first thirty-six weeks increased primarily as a result of higher unit sales volume. Although flour costs remained flat, meat commodities rose significantly compared to the prior thirty-six weeks adversely affecting the gross margin.

 

Selling, general and administrative expenses increased by $906,000 (3.0%) to $31,272,000 in the first thirty-six weeks of fiscal 2004. The increase primarily relates to higher payroll and commissions paid on increased sales. As a percentage of sales, this category increased at a lower rate than the sales increase, despite increased costs for fuel, outside storage, pension expenses and workers’ compensation. These increases were offset by continued cost cutting efforts instituted by management and a reduced provision for collection losses.

 

Depreciation expense increased $57,000 (1.9%) to $3,030,000 in the first thirty-six weeks of fiscal 2004 compared to the prior fiscal thirty-six week period. The changes in depreciation expense were insignificant to the year-to-date results. The effective income tax rate was 38.0% in the third thirty-six weeks of fiscal 2004, consistent with the prior fiscal year and the prior thirty-six week period.

 

Liquidity and Capital Resources

 

Net cash from operating activities was $2,140,000 for the first thirty-six weeks of the 2004 fiscal year. The operating loss of $969,000 was offset principally by accounts receivable collections and an increase in accrued payroll and other expenses. The Company utilized cash flow for additions to property, plant and equipment, share repurchases, and cash dividends. The Company also increased inventory substantially to prepare for the upcoming holiday season. The net effect of these events resulted in a cash and cash equivalents decrease of $3,248,000 (26.6%) to $8,948,000. The additions to property, plant and equipment reflect the Company’s continued investment in processing, transportation and information technology equipment.

 

Page 9 of 12 pages


Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

Cash dividends paid in the first thirty-six weeks of the 2004 fiscal year declined from the comparable period in the prior year from $1,356,000 to $513,000. The decline reflects the decrease in cash dividends paid from $0.13 to $0.05 per share. Payment of dividends has been suspended in the third quarter of fiscal year 2004. The Company also repurchased 260,662 shares of its common stock for $1,996,000 during the first thirty-six weeks of 2004. The average price per share of such repurchased shares was $7.66.

 

The Company remained free of interest bearing debt during the first thirty-six weeks of 2004. The Company’s revolving line of credit with Bank of America expires April 30, 2006 and provides for borrowings up to $2,000,000. The Company has not borrowed under this line for more than seventeen consecutive years.

 

The impact of inflation on the Company’s financial position and results of operations has not been significant. Management is of the opinion that the Company’s financial position and its capital resources are sufficient to provide for its operating needs and capital expenditures.

 

The Company sold an investment in shares of stock, received as a result of the bankruptcy of a significant customer, on July 26, 2004. The Company sold 14,022 shares of this investment in stock realizing net proceeds of approximately $898,000. The resulting pre-tax gain of $553,000 will be recognized in the fourth quarter of fiscal year 2004.

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

The Company does not have significant foreign currency exposure at July 9, 2004. The Company’s financial instruments generally consist of cash and cash equivalents and life insurance policies at July 9, 2004. The Company also has an investment in shares of stock as a result of the bankruptcy of a significant customer. Unrealized gains and losses from this investment are recorded as “other comprehensive income (loss)” in the accompanying statements. Realized gains and losses upon the sale of this investment are recognized in the consolidated condensed statements of operations. The carrying value of the Company’s financial instruments approximated their fair market values based on current market prices and rates. It is not the Company’s policy to enter into derivative financial instruments.

 

The Company purchases bulk flour under short-term fixed price contracts during the normal course of business. Under these arrangements, the Company is obligated to purchase specific quantities at fixed prices, within the specified contract period. These contracts provide for automatic price increases if agreed quantities are not delivered. No significant contracts remained unfulfilled at July 9, 2004.

 

Item 4.

 

Controls and Procedures

 

An evaluation as of the end of the period covered by this report was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chairman and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures,” as such term is defined under Rules 13a-15(e) and 15d -15(e) promulgated under the Securities Exchange Act of 1934. During the course of this evaluation the Company identified a deficiency in internal controls related to the recording of market value changes in equity trading securities. The Company has developed and implemented procedures to ensure that changes in market value are recorded in a timely manner in the statement of Other Comprehensive Income (loss) in the third quarter of 2004. Based upon that evaluation, and taking into account the deficiency discussed in the preceding sentence and the mitigating controls that have been implemented, the Company’s Chairman and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

 

The Company’s management, including the Company’s Chairman and Chief Financial Officer, have evaluated any changes in the Company’s internal control over financial reporting that occurred during quarter ended July 9, 2004, and other than the internal controls improvements noted above, have concluded that there was no change in such reporting period that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Page 10 of 12 pages


Table of Contents

Part II. Other Information

 

Item 6.

 

Exhibits and Reports on Form 8-K

 

  (a) Exhibits.

 

Exhibit No.

 

Description


31.1   Certification of Chairman (Principal Executive Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certification of Chief Financial Officer (Principal Financial Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certification of Chairman (Principal Executive Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2   Certification of Chief Financial Officer (Principal Financial Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.

 

  (b) Reports on Form 8-K.

 

On June 1, 2004, the Company furnished a current report on Form 8-K containing its earnings release for the second quarter 2004.

 

Page 11 of 12 pages


Table of Contents

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

BRIDGFORD FOODS CORPORATION

       

        (Registrant)

    By:  

/s/ Raymond F. Lancy


August 23, 2004

     

Raymond F. Lancy

Date

     

Principal Financial Officer

 

Page 12 of 12 pages