Bridgford Foods Corporation experienced extraordinarily high raw material, fuel, utility and pension costs during the 2005 fiscal year. Despite price increases to our customers for the products we sell and excellent new product development accomplishments, we were unable to report a profit for the year. However, we did experience positive cash flow and an increase in working capital.
SALES & EARNINGS
Sales in 2005 were $130,845,000 after deductions for promotional costs. Net sales were 5.1% less than in the prior fiscal year. During 2005 we declined to accept a substantial number of low margin sales in the meat division because of exceptionally high raw material costs. Exciting new product developments in 2005 included microwavable frozen Bridgford Monkey Bread, as shown on the cover of this report. We also developed and began producing an exciting new line of shelf stable long life non-refrigerated sandwiches for military and consumer use. Both of these new product lines are already showing positive sales trends. Sales of Bridgford Pepperoni, an American Taste Award winner, continued to increase at a very favorable rate. We experienced a net loss of $943,000 in fiscal 2005 resulting from the higher costs mentioned above. We believe 2006 should result in substantially better results. Many new regulations were imposed on all publicly traded corporations during the past two years resulting in large additional accounting expenses. Raymond Lancy, our Chief Financial Officer, and Assistant Corporate Secretary, Cindy Matthews, have done a magnificent job of conforming our corporate accounting to the many new rules and regulations.
OPERATIONS
Our Superior Foods division in Dallas, under the outstanding direction of its President, Blaine Bridgford, tripled its capacity to make "Monkey Bread" during 2005 and is planning further expansion during 2006. The Stateville, North Carolina plant, under the fine leadership of general manager Monty Griffith, was approved for U.S. Department of Agriculture meat inspection during 2005 and added sandwich making equipment and production capacity to produce and bake long-life sandwich products. Frozen-Rite Foods, under the mangerment of President Joseph deAlcuaz, added sophisticated new scaling and measuring equipment to its high-speed roll making line that has increased accuracy and efficiency. Bridgford Foods of Illinois continued to improve its cooking and packaging capacity for meat snack items. Exciting new mini-sub sandwiches were developed at the Anaheim, California plant for sale and distribution to convenience store customers.
FINANCIAL MATTERS
Working capital at October 28, 2005 totaled $31,897,000, $161,000 (0.5%) more than at the beginning of the fiscal year. The increase was primarily a result of lower inventory requirements, lower expenditures for property, plant and equipment and an increase in refundable income taxes. The Company purchased 16,000 shares of common stock at a cost of $128,000 ($8.00 average cost per share). Capital expenditures totaled $2,032,000. The working capital ratio increased slightly to 3.7 to 1 at October 28, 2005 compared to 3.5 to 1 a year earlier. The Company has remained free of interest bearing debt for nineteen consecutive years. Shareholders' equity totaled $48,262,000 a decrease of $402,000 (0.8%) compared to the end of the prior year. The slight decrease principally relates to the net loss and common stock purchases noted previously, offset by a decrease in the minimum pension libility, which is recorded in the Statement of Shareholders' Equity under the "Accumulated other comprehensive income (loss)" column. The decrease in this liability results from the application of a higher discount rate used to measure the accumulated pension benefit obligation and more favorable investment results in recent years. No cash dividends were paid during the 2005 fiscal year as the Board of Directors suspended the cash dividend at its May 2004 meeting in recognition of lower profitability levels. Approximately 598,000 shares remain available for purchase under the 2.0 million share repurchase plan previously authorized by the Board of Directors. This includes an additional 500,000 shares authorized for repurchase by the Board of Directors in June 2005. Shareholders' equity per share was $4.83 at October 28, 2005 compared to $4.87, a decrease of 0.8% compared to the prior fiscal year end.
SUMMARY
2005 was a year of high commodity and other costs that were difficult to control. We believe that some of these expenses will moderate in 2006, and we have taken steps to improve our operating margins. Price increases, aggressive expense reductions in personnel and other majoy categories plus improved productivity in sales, operations and administrative areas have been implemented. The new products we developed in 2005 appear to have a bright future. Thank you to our employees, directors, shareholders, customers and suppliers for their support during 2005.
Respectfully submitted,
Allan L. Bridgford, Chairman
William L. Bridgford, President
January 18, 2006 |
