BRIDGFORD FOODS CORP

Previous wording

Fiscal Year Ended November 3, 2023 (53 weeks) Compared to Fiscal Year Ended October 28, 2022 (52 weeks)

Current wording

Fiscal Year Ended November 1, 2024 (52 weeks) Compared to Fiscal Year Ended November 3, 2023 (53 weeks)

Previous wording

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:

Current wording

Net sales in fiscal year 2024 decreased $27,991 (11.1%) when compared to the prior fiscal year. The changes in net sales were comprised as follows:

Previous wording

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:

Current wording

Net sales in the Frozen Food Products segment in fiscal year 2024 increased $770 (1.3%) compared to the prior fiscal year. The changes in net sales were comprised as follows:

Previous wording

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.

Current wording

The increase in net sales for fiscal year 2024 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 decreased 8%. Returns activity decreased compared to the 2023 fiscal year. Promotional activity was higher in fiscal year 2024 as a percentage of sales due to increased sales to high promotion customers.

Previous wording

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:

Current wording

Net sales in the Snack Food Products segment in fiscal year 2024 decreased $28,761 (14.8%) compared to the prior fiscal year. The changes in net sales were comprised as follows:

Previous wording

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.

Current wording

Net sales of Snack Food Products decreased due to lower sales through our direct-store-delivery distribution channel during the fiscal year 2024. The weighted average selling price per pound decreased compared to fiscal year 2023 due to changes in product mix. Unit sales volume in pounds was lower 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 lower in dollars but higher as a percentage of sales compared to the 2023 fiscal year. Promotional offers increased due to higher promotional deductions and billbacks by customers compared to fiscal year 2023.

Previous wording

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.

Current wording

Cost of products sold from continuing operations decreased on a consolidated basis by $13,962 (7.7%) during fiscal year 2024 compared to the prior fiscal year. The gross margin decreased from 28.0% to 25.2% during fiscal year 2024 compared to the prior fiscal year.

Previous wording

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.

Current wording

Cost of products sold in the Frozen Food Products segment decreased by $776 (1.8%) in fiscal year 2024 compared to the prior fiscal year. Lower unit sales volume in pounds and changes in the product mix were the primary contributing factors to this decrease. The cost of purchased flour decreased approximately $522 contributing to the decrease in costs of goods sold. The gross margin percentage increased from 25.1% to 27.4% during fiscal year 2024 compared to the prior fiscal year.

Previous wording

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.

Current wording

Cost of products sold in the Snack Food Products segment decreased by $13,186 (9.5%) during fiscal year 2024 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 increased approximately $4,900 during fiscal year 2024 compared to the prior fiscal year due to unfavorable fluctuations in commodity markets. We increased our net realizable value reserve by $1,174 during fiscal year 2024 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 $1,467 on products as of November 1, 2024. The gross margin earned in this segment decreased from 28.8% to 24.4% during fiscal year 2024.

Previous wording

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.

Current wording

Selling, general and administrative expenses (“SG&A”) in fiscal year 2024 decreased $3,118 (4.8%) when compared to the prior fiscal year. The decrease in this category did not directly correspond to the change in sales.

Previous wording

Lower sales commissions resulted in lower wages and bonus expenses in the 2023 fiscal year compared to the 2022 fiscal year. Outside storage increased primarily as a result of the need for additional warehouse capacity to store products. The increase in insurance expenses was driven by higher premiums on property insurance and increased reserves on aged claims. Healthcare costs have decreased due to favorable claim trends. Travel expenses increased due to participation in food shows and in-person business meetings. The decrease in fuel expense was driven by per gallon fuel price decreases compared to the prior year as a result of lower cost trends in petroleum markets and to a lesser extent due to a reduction in the number of company-owned long-haul trucks. The decrease in pension cost was a result of an increase in pension plan assets caused by the performance of the underlying markets that support them as well as higher pension discount rates resulting in lower liability. Postage expenses have decreased due to partnering with outside distributors and carriers to transport products to minimize postage expenses. Rent for storage units that house inventory increased due to inflationary price pressure. Vehicle repairs and maintenance on vehicles have increased compared to the prior year period mainly due to an aging fleet. None of the changes individually or as a group of expenses in “Other SG&A” were significant enough to merit separate disclosure. The major components comprising the increase of “Other SG&A” expenses were higher product advertising expenses, sales taxes, office supplies and professional fees.

Current wording

Lower sales commissions paid on reduced sales resulted in lower wages and bonus expenses in the 2024 fiscal year compared to the 2023 fiscal year. The increase in pension cost was a result of lower values in pension plan assets caused by the performance of the underlying markets that support them as well as lower pension discount rates resulting in higher liability. Costs for product advertising decreased mainly as a result of lower payments under brand licensing agreements in the Snack Food Products segment during fiscal year 2024. Healthcare costs have increased due to unfavorable claim trends. Outside consulting costs increased due to higher legal fees, advisory services, inspection and product testing fees. Vehicle repairs and maintenance on vehicles have increased compared to the prior fiscal year period mainly due to an aging fleet. None of the changes individually or as a group of expenses in “Other SG&A” were significant enough to merit separate disclosure. The major components comprising the decrease of “Other SG&A” expenses were lower provision for doubtful accounts, lower postage and insurance expenses and higher rental income partially offset by higher travel and business expense.

Previous wording

SG&A expenses in the Frozen Food Products segment decreased by $171 (1.2%) during fiscal year 2023 compared to the prior fiscal year. The overall decrease in SG&A expenses was due to lower unit sales volume and lower fuel expenses related to a reduction in the number of company-owned long-haul trucks partially offset by an increase in insurance expenses and broker commissions.

Current wording

SG&A expenses in the Frozen Food Products segment decreased by $241 (1.7%) during fiscal year 2024 compared to the prior fiscal year. The overall decrease in SG&A expenses was due to lower unit sales volume in pounds, lower equipment rental and lower fuel expenses related to a reduction in the number of company-owned long-haul trucks partially offset by an increase in insurance expenses and broker commissions.

Previous wording

Loss (Gain) on Sale of Property, Plant and Equipment

Current wording

Loss on Sale of Property, Plant and Equipment

Previous wording

We recorded a tax provision of $1,021 and $16,341, for fiscal years 2023 and 2022, respectively, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective tax rate was 22.7% and 26.6% for fiscal years 2023 and 2022, respectively. In addition, the effective tax rates for fiscal years 2023 and 2022 were impacted by such items as non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes. (Refer to Note 4 of Notes to Consolidated Financial Statements for more information).

Current wording

We recorded a tax benefit of $1,311 and tax provision of $1,021, for fiscal years 2024 and 2023, respectively, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective tax rate was 27.9% and 22.7% for fiscal years 2024 and 2023, respectively. In addition, the effective tax rates for fiscal years 2024 and 2023 were impacted by such items as non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes. (Refer to Note 4 of Notes to Consolidated Financial Statements included within this Report for more information).

Previous wording

On November 30, 2023, we entered into a fifth amendment to the credit agreement with Wells Fargo Bank, N.A., and also executed a new revolving line of credit note pursuant to the amendment. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $7,500 from time to time up to November 30, 2024. As of November 3, 2023, we had $1,045 of current debt on equipment loans, $69,496 of net working capital and $7,500 available under our revolving line of credit with Wells Fargo Bank, N.A. Refer to the Notes to the Condensed Consolidated Financial Statements included within this Report for further information. The Company was in compliance with all loan covenants as of November 3, 2023.

Current wording

The principal source of operating cash flows is cash receipts from the sale of our products, net of costs to manufacture, store, market and deliver such products. We normally fund our operations from cash balances and cash flow generated from operations. Additionally, we have maintained a revolving line of credit with Wells Fargo Bank, N.A. pursuant to the terms of the credit agreement dated March 1, 2018, as amended to date. On November 30, 2024, we entered into a sixth amendment to the credit agreement with Wells Fargo Bank, N.A., and also executed a new revolving line of credit note pursuant to the amendment. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $7,500 from time to time up to November 30, 2025. As of November 1, 2024, we had $1,084 of current debt on equipment loans, $61,536 of net working capital and $7,500 available under our revolving line of credit with Wells Fargo Bank, N.A. Refer to Note 5 to the Consolidated Financial Statements and the “Revolving Credit Facility” and “Loan Covenants” included within this Report for further information. The Company was in compliance with all loan covenants as of November 1, 2024.

Previous wording

Despite higher commodity costs like we experienced in fiscal year 2022, we may not be able to increase our product prices in a timely manner or sufficiently to offset such increased commodity costs due to consumer price sensitivity, pricing in relation to competitors and the reluctance of retailers to accept the price increase. Instances of higher interest rates, labor shortages or supply chain issues could result in material changes in the Company’s liquidity. Higher product prices could potentially lower demand for our product and decrease volume. Management believes there are various options available to generate additional liquidity to repay debt or fund operations such as mortgaging real estate, should that be necessary. Our ability to increase liquidity will depend upon, among other things, our business plans and the performance of operating divisions and economic conditions of capital markets. If we are unable to increase liquidity through mortgaging real estate or additional borrowing, or generate positive cash flow necessary to fund operations, we may not be able to compete successfully, which could negatively impact our business, operations, and financial condition. With the cash expected to be generated from the Company’s operations, we anticipate that we will maintain sufficient liquidity to operate our business for at least the next twelve months. We will continue to monitor the impact of inflation and interest rate volatility on our liquidity and, if necessary, take action to preserve liquidity and ensure that our business can operate during these uncertain times.

Current wording

All of our operating segments have been impacted by inflation, including higher costs for labor, freight and specific materials related to product manufacturing and delivery through fiscal year 2024. Additionally, commodity costs, including meat and flour costs, have and may continue to fluctuate due to both political and economic conditions, including the ongoing conflict between Ukraine and Russia. Despite higher commodity costs like we experienced in fiscal year 2024, we may not be able to increase our product prices in a timely manner or sufficiently to offset such increased commodity or other costs due to consumer price sensitivity, pricing in relation to competitors and the reluctance of retailers to accept a price increase. Instances of higher interest rates, general price inflation or deflation, raw materials costs, labor shortages or supply chain issues could adversely affect the Company’s financial results and its liquidity. Higher product prices and promotions could potentially lower demand for our product and decrease volume. Management believes there are various options available to generate additional liquidity to repay debt or fund operations such as mortgaging real estate, should that be necessary. Our ability to increase liquidity will depend upon, among other things, our business plans and the performance of operating divisions and economic conditions of capital markets. If we are unable to increase liquidity through mortgaging real estate or additional borrowing, or generate positive cash flow necessary to fund operations, we may not be able to compete successfully, which could negatively impact our business, operations, and financial condition. With the cash expected to be generated from the Company’s operations, we anticipate that we will maintain sufficient liquidity or exercise a portion of the line of credit to operate our business for at least the next twelve months. We will continue to monitor the impact of inflation and interest rate volatility on our liquidity and, if necessary, take action to preserve liquidity and ensure that our business can operate during these uncertain times.

Previous wording

Cash flows (used in) provided by investing activities:

Current wording

Cash flows (used in) provided by operating activities:

Previous wording

For the fifty-three weeks ended November 3, 2023, net cash provided by operating activities was $3,985, an increase of $11,815 compared to the fifty-two weeks ended October 28, 2022. The increase in net cash provided by operating activities primarily relates to net income of $3,474 and a reduction in accounts receivable of $6,480, partially offset by a decrease in accounts payable of $6,457 and lower non-current liabilities of $1,836. During fiscal year 2023, we did not contribute towards our defined benefit pension plan. Plan funding strategies may be adjusted depending upon economic conditions, investment options, tax deductibility, or legislative changes in funding requirements.

Current wording

For the fifty-two weeks ended November 1, 2024, net cash used in operating activities was $497, a decrease of $4,482 in cash flows compared to the fifty-three weeks ended November 3, 2023. The decrease in net cash provided by operating activities primarily relates to a net loss of $3,381, an increase in refundable income taxes of $1,240 and an increase of other non-current assets of $3,320, partially offset by a decrease in inventory of $7,235 due to selling down inventory finished goods to adjust to lower consumer demand. During fiscal year 2024, we did not contribute towards our defined benefit pension plan. Plan funding strategies may be adjusted depending upon economic conditions, investment options, tax deductibility, or legislative changes in funding requirements.

Previous wording

Our cash conversion cycle (defined as days of inventory and trade receivables less days of trade payables outstanding) was equal to 83 days for the fifty-three weeks ended November 3, 2023, and 83 days for the fifty-two weeks ended October 28, 2022.

Current wording

Our cash conversion cycle (defined as days of inventory and trade receivables less days of trade payables outstanding) was equal to 84 days for the fifty-two weeks ended November 1, 2024, and 83 days for the fifty-three weeks ended November 3, 2023.

Previous wording

For the fifty-two weeks ended October 28, 2022, net cash used in operating activities was $7,830. The result was primarily related to a gain on sale of property, plant, and equipment of $57,745, an increase in accounts receivable of $10,116 and an increase in inventory of $3,762, partially offset by a decrease in refundable income taxes of $4,955 and an increase in deferred taxes of $5,070. During fiscal year 2022, we did not contribute towards our defined benefit pension plan.

Current wording

For the fifty-three weeks ended November 3, 2023, net cash provided by operating activities was $3,985. The result was primarily related to net income of $3,474 and a reduction in accounts receivable of $6,480, partially offset by a decrease in accounts payable of $6,457 and lower non-current liabilities of $1,836. During fiscal year 2023, we did not contribute towards our defined benefit pension plan.

Previous wording

Expenditures for property, plant and equipment include the acquisition of equipment, upgrading of facilities to maintain operating efficiency and investments in cost effective technologies to lower costs. In general, we capitalize the cost of additions and improvements and expense the cost for repairs and maintenance. We received $60,000 in gross sales proceeds on June 1, 2022, from the closing of the real estate transaction for the real property located at 170 N. Green Street, pursuant to the terms of the CRG Purchase Agreement. We may also capitalize costs related to improvements that extend the life, increase the capacity, or improve the efficiency of existing machinery and equipment. Specifically, capitalization of upgrades of facilities to maintain operating efficiency include acquisitions of machinery and equipment used on packaging lines and refrigeration equipment used to process food products.

Current wording

Additions to property, plant and equipment include the acquisition of equipment, upgrading of facilities to maintain operating efficiency and investments in cost effective technologies to lower costs. In general, we capitalize the cost of additions and improvements and expense the cost for repairs and maintenance. We may also capitalize costs related to improvements that extend the life, increase the capacity, or improve the efficiency of existing machinery and equipment. Specifically, capitalization of upgrades of facilities to maintain operating efficiency include acquisitions of machinery and equipment used on packaging lines and refrigeration equipment used to process food products.

Previous wording

The table below highlights the additions to property, plant and equipment for the fifty-three and fifty-two weeks ended:

Current wording

The table below highlights the additions to property, plant and equipment for the fifty-two and fifty-three weeks ended:

Previous wording

Expenditures for additions to property, plant and equipment during the fifty-three weeks ended November 3, 2023, include projects in process of $837 related to the production facility in Chicago.

Current wording

Expenditures for additions to property, plant and equipment during the fifty-two weeks ended November 1, 2024, include projects in process of $755 related to the production facilities in Chicago and Statesville.

Previous wording

On November 30, 2023, we entered into a fifth amendment to the credit agreement with Wells Fargo Bank, N.A. dated March 1, 2018, as amended, and also executed a revolving line of credit note pursuant to the amendment. The revolving line of credit note replaces the existing note that expired by its terms on November 30, 2023. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $7,500 from time to time up to November 30, 2024, at an interest rate equal to (a) the daily simple secured overnight financing rate plus 2.0%, or if unavailable, (b) the prime rate, in each case as determined by the bank. The line of credit has an unused commitment fee of 0.35% of the available loan amount, payable on a quarterly basis. Amounts may be repaid and reborrowed during the term of the note. Accrued interest is payable on the first day of each month and the outstanding principal balance and remaining interest are due and payable on November 30, 2024.

Current wording

On November 30, 2023, we entered into a fifth amendment to the credit agreement with Wells Fargo Bank, N.A. dated March 1, 2018, as amended, and also executed a revolving line of credit note pursuant to the amendment. The revolving line of credit note replaces the existing note that expired by its terms on November 30, 2023. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $7,500 from time to time up to November 30, 2024, at an interest rate equal to (a) the daily simple secured overnight financing rate plus 2.0%, or if unavailable, (b) the prime rate, in each case as determined by the bank. The line of credit has an unused commitment fee of 0.35% of the available loan amount, payable on a quarterly basis. Amounts may be repaid and reborrowed during the term of the note. Accrued interest is payable on the first day of each month and the outstanding principal balance and remaining interest are due and payable on November 30, 2024. Refer to Subsequent Events under Note 1 to the Consolidated Financial Statements included within this Report for further information.

Previous wording

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 self-insured workers’ compensation, employee healthcare and pension benefits are especially subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts not originally estimated. We record promotions, returns allowances, bad debt and inventory allowances based on recent and historical trends. Management believes its current estimates are reasonable and based on the best information available at the time.

Current wording

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 self-insured workers’ compensation, employee healthcare and pension benefits are especially subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts not originally estimated. We record promotions, returns allowances, bad debt and inventory allowances based on recent and historical trends. Management believes its current estimates are reasonable and based on the best information available at the time. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected.

Previous wording

Disclosure concerning our policies on credit risk, revenue recognition, cash surrender or contract value for life insurance policies, deferred income tax and the recoverability of our long-lived assets are provided in Notes 1 and 4 of the Notes to the Consolidated Financial Statements.

Current wording

Disclosure concerning our policies on credit risk, revenue recognition, cash surrender or contract value for life insurance policies, deferred income tax and the recoverability of our long-lived assets are provided in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in this Report.

Previous wording

Various accounting standard-setting bodies have been active in soliciting comments and issuing statements, interpretations, and exposure drafts. For information on new accounting pronouncements and the impact, if any, on our financial position or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements.

Current wording

Various accounting standard-setting bodies have been active in soliciting comments and issuing statements, interpretations, and exposure drafts. For information on new accounting pronouncements and the impact, if any, on our financial position or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements included within this Report.