10-Q

UNITED STATES

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 EXCHANGE ACT OF 1934

For the quarterly period ended July 12, 2019

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ____ .

Commission file number 000-02396

  

BRIDGFORD FOODS CORPORATION

(Exact name of registrant as specified in its charter)

California	95-1778176
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	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)

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [X]	Smaller reporting company [X]
	Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of August 23, 2019, the registrant had 9,076,832 shares of common stock outstanding.

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 (this “Report”) refer to Bridgford Foods Corporation.

	Page
Part I. Financial Information	3
Item 1. Financial Statements	3
a. Condensed Consolidated Balance Sheets at July 12, 2019 (unaudited) and November 2, 2018	3
b. Condensed Consolidated Statements of Operations for the twelve and thirty-six weeks ended July 12, 2019 and July 13, 2018 (unaudited)	4
c. Condensed Consolidated Statements of Shareholders’ Equity for the twelve and thirty-six weeks ended July 12, 2019 and July 13, 2018 (unaudited)	5
d. Condensed Consolidated Statements of Cash Flows for the thirty-six weeks ended July 12, 2019 and July 13, 2018 (unaudited)	6
e. Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures about Market Risk	22
Item 4. Controls and Procedures	22
Part II. Other Information	22
Item 1A. Risk Factors	22
Item 6. Exhibits	23
Signatures	24

Items 1 through 5 of Part II have been omitted because they are not applicable with respect to the Company and/or the current reporting period.

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Part I. Financial Information

Item 1. a.

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	July 12, 2019			November 2, 2018
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	7,817		$	8,179
Accounts receivable, less allowance for doubtful accounts of $37 and $33, respectively, and promotional allowances of $3,446 and $2,122, respectively		21,831			20,293
Inventories, net		24,043			23,413
Prepaid expenses and other current assets		545			1,331
Total current assets		54,236			53,216
Property, plant and equipment, net of accumulated depreciation and amortization of $69,092 and $66,337, respectively		49,644			32,638
Other non-current assets		12,344			11,630
Deferred income taxes (Note 5)		4,010			4,010
Total assets	$	120,234		$	101,494
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,767		$	7,655
Accrued payroll, advertising and other expenses		4,731			4,577
Income taxes payable		1,163			155
Current notes payable - equipment		1,918			-
Current portion of non-current liabilities		5,309			5,980
Total current liabilities		20,888			18,367
Long-term notes payable - equipment		12,460			-
Non-current liabilities		16,005			17,447
Total liabilities		49,353			35,814
Contingencies and commitments (Note 3)
Shareholders’ equity:
Preferred stock, without par value; authorized – 1,000,000 shares; issued and outstanding – none		-			-
Common stock, $1.00 par value; authorized – 20,000,000 shares; issued and outstanding – 9,076,832 and 9,076,832 shares, respectively		9,134			9,134
Capital in excess of par value		8,298			8,298
Retained earnings		71,149			65,948
Accumulated other comprehensive loss		(17,700	)		(17,700	)
Total shareholders’ equity		70,881			65,680
Total liabilities and shareholders’ equity	$	120,234		$	101,494

See accompanying notes to condensed consolidated financial statements.

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Item 1. b.

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

	12 weeks ended					36 weeks ended
	July 12, 2019			July 13, 2018		July 12, 2019			July 13, 2018
Net sales	$	42,837		$	38,468	$	129,321		$	117,560
Cost of products sold		29,422			26,034		85,851			79,107
Gross margin		13,415			12,434		43,470			38,453
Selling, general and administrative expenses		11,819			10,730		36,514			34,214
Gain on sale of property, plant and equipment		(9	)		-		(9	)		(6,002	)
Income before taxes		1,605			1,704		6,965			10,241
Provision for income taxes		500			256		1,764			5,786
Net income	$	1,105		$	1,448	$	5,201		$	4,455
Basic earnings per share	$	0.12		$	0.16	$	0.57		$	0.49
Shares used to compute basic earnings per share		9,076,832			9,076,832		9,076,832			9,076,832

See accompanying notes to condensed consolidated financial statements.

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Item 1. c.

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

36 weeks ended July 13, 2018 and July 12, 2019

(unaudited)

(in thousands)

	Shares		Amount		Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity
Balance, November 3, 2017		9,076	$	9,134	$	8,298	$	56,902	$	(18,296	)	$	56,038
Net income		-		-		-		4,455		-			4,455
Reclassification upon early adoption of ASU 2018-02		-		-		-		2,529		(2,529	)		-
Balance, July 13, 2018		9,076	$	9,134	$	8,298	$	63,886	$	(20,825	)	$	60,493

	Shares		Amount		Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity
Balance, November 2, 2018		9,076	$	9,134	$	8,298	$	65,948	$	(17,700	)	$	65,680
Net income		-		-		-		5,201		-			5,201
Balance, July 12, 2019		9,076	$	9,134	$	8,298	$	71,149	$	(17,700	)	$	70,881

12 weeks ended July 13, 2018 and July 12, 2019

(unaudited)

(in thousands)

	Shares		Amount		Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity
Balance, April 20, 2018		9,076	$	9,134	$	8,298	$	62,438	$	(20,825	)	$	59,045
Net income		-		-		-		1,448		-			1,448
Balance, July 13, 2018		9,076	$	9,134	$	8,298	$	63,886	$	(20,825	)	$	60,493

	Shares		Amount		Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity
Balance, April 19, 2019		9,076	$	9,134	$	8,298	$	70,044	$	(17,700	)	$	69,776
Net income		-		-		-		1,105		-			1,105
Balance, July 12, 2019		9,076	$	9,134	$	8,298	$	71,149	$	(17,700	)	$	70,881

See accompanying notes to condensed consolidated financial statements.

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Item 1. d.

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	36 weeks ended
	July 12, 2019			July 13, 2018
Cash flows from operating activities:
Net income	$	5,201		$	4,455
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		2,785			2,598
Provision for losses on accounts receivable		35			5
(Reduction in) provision for promotional allowances		(914	)		499
Gain on sale of property, plant and equipment		(9	)		(6,002	)
Deferred income taxes, net		-			3,200
Changes in operating assets and liabilities:
Accounts receivable		(659	)		850
Inventories		(630	)		(1,677	)
Prepaid expenses and other current assets		786			1,438
Other non-current assets		(714	)		1,210
Accounts payable		112			1,354
Accrued payroll, advertising and other expenses		(517	)		248
Income taxes payable		1,008			813
Non-current liabilities		(1,442	)		(3,991	)
Net cash provided by operating activities		5,042			5,000
Cash (used in) investing activities:
Proceeds from sale of property, plant and equipment		9			6,002
Additions to property, plant and equipment		(19,791	)		(9,704	)
Net cash used in investing activities		(19,782	)		(3,702	)
Cash provided by used in financing activities:
Payment of capital lease obligations		-			(82	)
Proceeds from bank borrowings		17,000			-
Repayments of bank borrowings		(2,622	)		-
Net cash provided by financing activities		14,378			(82	)
Net (decrease) increase in cash and cash equivalents		(362	)		1,216
Cash and cash equivalents at beginning of period		8,179			12,109
Cash and cash equivalents at end of period	$	7,817		$	13,325
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	564		$	1,407
Cash paid for interest	$	183			-

See accompanying notes to condensed consolidated financial statements.

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Item 1. e.

BRIDGFORD FOODS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(in thousands, except percentages, time periods, share and per share amounts)

Note 1 – Summary of Significant Accounting Policies:

The unaudited condensed consolidated financial statements of Bridgford Foods Corporation (the “Company”, “we”, “our”, “us”) for the twelve and thirty-six weeks ended July 12, 2019 and July 13, 2018 have been prepared in conformity with the accounting principles described in the Company’s Annual Report on Form 10-K for the fiscal year ended November 2, 2018 (the “Annual Report”) and include all adjustments considered necessary by management for a fair presentation of the interim periods. This Report should be read in conjunction with the Annual Report. Due to seasonality and other factors, interim results are not necessarily indicative of the results for the full year. Recent accounting pronouncements and their effect on the Company are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Report.

The November 2, 2018 balance sheet amounts within these interim condensed consolidated financial statements were derived from the audited fiscal year 2018 financial statements.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported revenues and expenses during the reporting periods. Some of the estimates needed to be made by management include the allowance for doubtful accounts, promotional and returns allowances, inventory reserves, the estimated useful lives of property, plant and equipment, and the valuation allowance for the Company’s deferred tax assets. Actual results could materially differ from these 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 which vary from our current estimates. Market conditions and the volatility in stock markets may cause significant changes in the measurement of our pension fund liabilities and the performance of our life insurance policies in future periods.

Certain items in fiscal year 2018 have been reclassified to conform to the fiscal year 2019 presentation.

Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued payroll, advertising and other expenses and notes payable. The carrying amount of these instruments approximate fair market value due to their short-term maturity. As of July 12, 2019, the Company had accounts in excess of the Federal Deposit Insurance Corporation insurance coverage limit. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk with regard to its cash and cash equivalents. The Company grants payment terms to a significant number of customers that are diversified over a wide geographic area. The Company monitors the payment histories of its customers and maintains an allowance for doubtful accounts which is reviewed for adequacy on a quarterly basis. The Company does not require collateral from its customers.

The table below shows customers that accounted for more than 20% of consolidated accounts receivable (“AR”) or 10% of consolidated sales for the thirty-six weeks ended July 12, 2019 and July 13, 2018, respectively.

Customer Concentration > 20% of AR or 10% of Sales *

	Wal-Mart						Dollar General
	Sales			AR			Sales			AR
July 12, 2019		35.9	%		33.3	%		10.7	%		25.1	%
July 13, 2018		36.6	%		34.4	%		9.1	%		23.9	%

* = No other customer accounted for more than 20% of consolidated accounts receivable or 10% of consolidated sales for the thirty-six weeks ended July 12, 2019 or the thirty-six weeks ended July 13, 2018.

Revenue recognition

Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) 606 – Contracts with Customers upon passage of title to the customer, typically upon product pick-up, shipment or delivery to customers. Products are delivered to customers primarily through our own long-haul fleet or through a Company owned direct store delivery system.

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We recognize revenue mainly through retail and foodservice distribution channels. Our revenues primarily result from contracts with customers and are generally short term in nature with the delivery of product as the single performance obligation. We recognize revenue for the sale of the product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale. We elected to account for shipping and handling activities that occur after the customer has obtained control of the product as a fulfillment cost rather than an additional promised service. Our contracts are generally less than one year, and therefore we recognize costs paid to third party brokers to obtain contracts as expenses. Additionally, items that are not material in the context of the contract are recognized as expense.

Revenue is measured by the transaction price, which is defined as the amount of consideration we expect to receive in exchange for providing goods to customers. The transaction price is adjusted for estimates of known or expected variable consideration, which includes consumer incentives, trade promotions, and allowances, such as coupons, discounts, rebates, volume-based incentives, cooperative advertising, and other programs. Variable consideration related to these programs is recorded as a reduction to revenue based on amounts we expect to pay. We base these estimates on current performance, historical utilization, and projected redemption rates of each program. We review and update these estimates regularly until the incentives or product returns are realized and the impact of any adjustments are recognized in the period the adjustments are identified. In many cases, key sales terms such as pricing and quantities ordered are established on a regular basis such that most customer arrangements and related incentives have a duration of less than one year. Amounts billed and due from customers are short term in nature and are classified as receivables since payments are unconditional and only the passage of time is required before payments are due. Additionally, we do not grant payment financing terms greater than one year.

Subsequent events

Management has evaluated events subsequent to July 12, 2019 through the date that the accompanying condensed consolidated financial statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustments of and/or disclosure in such financial statements and has determined that no such transactions or other events occurred.

Basic earnings per share

Basic earnings per share are calculated based on the weighted average number of shares outstanding for all periods presented. No stock options, warrants, or convertible securities were outstanding as of July 12, 2019 or July 13, 2018.

Note 2 – Inventories:

Inventories are comprised of the following at the respective period ends:

	(unaudited)
	July 12, 2019		November 2, 2018
Meat, ingredients and supplies	$	6,791	$	6,455
Work in progress		2,427		1,415
Finished goods		14,825		15,543
	$	24,043	$	23,413

Inventories are valued at the lower of cost (which approximates actual cost on a first-in, first-out basis) or net realizable value. Costs related to warehousing, transportation and distribution to customers are considered when computing net realizable value. Inventories include the cost of ingredients, labor and manufacturing overhead. We regularly review inventory quantities on hand and write down any excess or obsolete inventories to estimated net realizable value. An inventory reserve is created when potentially slow-moving or obsolete inventories are identified in order to reflect the appropriate inventory value. Changes in economic conditions, production requirements, and lower than expected customer demand could result in additional obsolete or slow-moving inventory that cannot be sold or may need to be sold at reduced prices and could result in additional reserve provisions.

Note 3 – Contingencies and Commitments:

We continue to rent OTR (over-the-road) tractors on a month-to-month basis. We plan to invest in new capital lease arrangements later in fiscal year 2019.

The Company also leases warehouse and/or office facilities throughout the United States through month-to-month rental agreements. No material changes have been made to these agreements during the thirty-six weeks ended July 12, 2019.

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The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

Most flour purchases are made at market price with contracts. However, the Company may purchase bulk flour at current market prices under short-term (30 - 120 days) 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 potential price increases if agreed quantities are not purchased within the specified contract period. The contracts are not material. These contracts are typically settled within a month’s time and no significant contracts remain open at the close of the quarterly or annual reporting period. No significant contracts remained unfulfilled at July 12, 2019. The Company does not participate in the commodity futures market or hedging to limit commodity exposure.

Note 4 – Segment Information:

The Company has two reportable operating segments: Frozen Food Products (the processing and distribution of frozen food products) and Snack Food Products (the processing and distribution of meat and other convenience foods).

We evaluate each segment’s performance based on revenues and operating income. Selling, general and administrative (“SG&A”) expenses include corporate accounting, information systems, human resource management and marketing, which are managed at the corporate level. These activities are allocated to each operating segment based on revenues and/or actual usage. Assets managed at the corporate level have been included as “other” in the accompanying segment information.

The following segment information is presented for the twelve weeks ended July 12, 2019 and July 13, 2018.

Segment Information
Twelve weeks Ended July 12, 2019	Frozen Food Products			Snack Food Products		Other		Totals
Sales	$	11,273		$	31,564	$	-	$	42,837
Cost of products sold		7,486			21,936		-		29,422
Gross margin		3,787			9,628		-		13,415
SG&A		3,434			8,385		-		11,819
Gain on sale of property, plant and equipment		(9	)		-		-		(9	)
Income before taxes		362			1,243		-		1,605
Total assets	$	11,350		$	83,478	$	25,406	$	120,234
Additions to PP&E	$	198		$	5,475	$	-	$	5,673

Twelve weeks Ended July 13, 2018	Frozen Food Products		Snack Food Products		Other		Totals
Sales	$	9,574	$	28,894	$	-	$	38,468
Cost of products sold		6,474		19,560		-		26,034
Gross margin		3,100		9,334		-		12,434
SG&A		3,004		7,726		-		10,730
Gain on sale of property, plant and equipment		-		-		-		-
Income before taxes		96		1,608		-		1,704
Total assets	$	10,532	$	57,529	$	32,280	$	100,341
Additions to PP&E	$	251	$	4,642	$	-	$	4,893

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The following segment information is presented for the thirty-six weeks ended July 12, 2019 and July 13, 2018.

Thirty-six weeks Ended July 12, 2019	Frozen Food Products			Snack Food Products		Other		Totals
Sales	$	34,691		$	94,630	$	-	$	129,321
Cost of products sold		22,800			63,051		-		85,851
Gross margin		11,891			31,579		-		43,470
SG&A		10,325			26,189		-		36,514
Gain on sale of property, plant and equipment		(9	)		-		-		(9	)
Income before taxes		1,575			5,390		-		6,965
Total assets	$	11,350		$	83,478	$	25,406	$	120,234
Additions to PP&E	$	476		$	19,315	$	-	$	19,791

Thirty-six weeks Ended July 13, 2018	Frozen Food Products			Snack Food Products			Other			Totals
Sales	$	31,175		$	86,385		$	-		$	117,560
Cost of products sold		20,612			58,495			-			79,107
Gross margin		10,563			27,890			-			38,453
SG&A		9,761			24,453			-			34,214
Gain on sale of property, plant and equipment		(6	)		(19	)		(5,977	)		(6,002	)
Income before taxes		808			3,456			5,977			10,241
Total assets	$	10,532		$	57,529		$	32,280		$	100,341
Additions to PP&E	$	552		$	9,152		$	-		$	9,704

The following information further disaggregates our sales to customers by major distribution channel and customer type for the twelve and thirty-six weeks ended July 12, 2019.

Twelve weeks Ended July 12, 2019 Distribution Channel	Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	23,046	$	-	$	23,046
Direct customer warehouse		8,518		-		8,518
Total Snack Food Products		31,564		-		31,564
Distributors		1,009		10,264		11,273
Total Frozen Food Products		1,009		10,264		11,273
Totals	$	32,573	$	10,264	$	42,837

Thirty-six weeks Ended July 12, 2019 Distribution Channel	Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	69,270	$	-	$	69,270
Direct customer warehouse		25,360		-		25,360
Total Snack Food Products		94,630		-		94,630
Distributors		4,648		30,043		34,691
Total Frozen Food Products		4,648		30,043		34,691
Totals	$	99,278	$	30,043	$	129,321

(a) Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.

(b) Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities and the military.

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Note 5 – Income Taxes:

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. tax code that affect the Company including, but not limited to, (1) reducing the corporate federal income tax rate from 35% to 21%, (2) bonus depreciation that allows for full expensing of qualified property in the year placed in service, and (3) the repeal of the domestic production activity deduction beginning with our fiscal year 2020.

Under U.S. GAAP, specifically ASC Topic 740, Income Taxes, the tax effects of changes in tax laws must be recognized in the period in which the law is enacted, or December 22, 2017, for the Tax Act. ASC Topic 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Company’s deferred taxes were re-measured based upon the new tax rates. The change in deferred taxes is recorded as an adjustment to our deferred tax provision for the thirty-six weeks ended July 12, 2018.

The Tax Act reduced the corporate tax rate from 35% to 21%, effective January 1, 2018. This results in a blended corporate tax rate of 25.3% in fiscal year 2018 and 21% in fiscal year 2019 and thereafter. We analyzed our deferred tax balances to estimate which of those balances are expected to reverse in fiscal 2018 or thereafter, and we re-measured the deferred taxes at 23.07% or 21% accordingly. The change in deferred taxes was recorded as an adjustment to our income tax provision which resulted in a charge totaling $3,059 in fiscal year 2018.

The effective tax rate was 23.6% and 56.5% for the third quarter of fiscal 2019 and 2018, respectively. The remeasurement of deferred income taxes at newly enacted tax rates resulted in a $3,200 income tax expense or a 37.5% impact on the effective tax rate for the third quarter of fiscal year 2018, and a blended 23.07% statutory federal income tax rate for fiscal 2018. The effective tax rate for the third quarter of fiscal 2018 also reflects the impact of $1,640 of income tax expense or 19.2% related to tax on the gain on the sale of a land parcel in Chicago, Illinois. Additionally, the effective tax rates for the third quarter of fiscal years 2019 and 2018 were impacted by such items as the domestic production deduction, non-taxable gains and losses on life insurance policies and state income taxes.

As of July 12, 2019, the Company did not have any outstanding federal or state, other than California, net operating loss carryforwards.

Our federal income tax returns are open to audit under the statute of limitations for the fiscal years ended on or about October 31, 2015 through 2017. We are subject to income tax in California and various other state taxing jurisdictions. Our California state income tax returns are open to audit under the statute of limitations for the fiscal years ended on or about October 31, 2014 through 2017.

Note 6 – Equipment Note Payable and Financial Arrangements

On December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A for up to $15,000 in equipment financing. Pursuant to the loan agreement, we borrowed $15,000, two separate receipts of $7,500 each, to purchase specific equipment for our new Chicago processing facility at a fixed rate of 4.13% and 3.98%, respectively, per annum. The loan terms are seven years and are secured by the purchased equipment. The first funding of $7,500 was received on December 28, 2018. The second funding was received on April 23, 2019. The master collateral loan and security agreement with Wells Fargo Bank, N.A. contains various affirmative and negative covenants that limit the use of funds and define other provisions of the loan. The Company was in compliance with all covenants under the master collateral loan and security agreement as of July 12, 2019.

The first secured equipment note payable is due with monthly principal and interest payments of $103 commencing on January 31, 2019 for 84 monthly installments including interest of 4.13% per annum. The second secured equipment note payable is due with monthly principal and interest payments of $102 commencing on May 31, 2019 for 84 monthly installments including interest of 3.98% per annum.

	(unaudited)			(unaudited)
	July 12, 2019			July 13, 2018
Secured equipment notes payable to Wells Fargo Bank, N.A. collateralized by equipment for the new Chicago processing facility.	$	14,378		$	-
Less current portion of notes payable		(1,918	)		-
Total long-term notes payable	$	12,460		$	-

We maintain a line of credit with Wells Fargo Bank, N.A. that expires on March 1, 2020. Under the terms of this line of credit, we may borrow up to $7,500 at an interest rate equal to the bank’s prime rate or LIBOR plus 1.5%. The borrowing agreement contains various covenants, the more significant of which require us to maintain a minimum tangible net worth, a minimum quick ratio, a minimum net income after tax and total capital expenditures less than $5,000. The Company was in violation of the capital expenditure covenant which was subsequently waived (per letter dated August 19, 2019). The Company borrowed $2,000 under this line of credit on April 15, 2019, which was repaid on April 25, 2019.

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

(dollars in thousands)

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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 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”). 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 Report. Assumptions relating to budgeting, marketing, and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our marketing, capital expenditure or other budgets, which may in turn affect our business, financial position, results of operations and cash flows. The reader is therefore cautioned not to place undue reliance on forward-looking statements contained herein and to consider other risks detailed more fully in our Annual Report on Form 10-K for the fiscal year ended November 2, 2018 (the “Annual Report”). We undertake no obligation to publicly release the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

Critical Accounting Policies and Management Estimates

The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States of America 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. Some of the estimates needed to be made by management include the allowance for doubtful accounts, promotional and returns allowances, inventory reserves, the estimated useful lives of property and equipment, and the valuation allowance for the Company’s deferred tax assets. Actual results could materially differ from these estimates. We determine the amounts to record based on historical experience and various other assumptions that we view as reasonable under the circumstances and consider all relevant available information. The results of this analysis form the basis for our conclusion as to the value of assets and liabilities that are not readily available from other independent sources. 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 which vary from our current estimates.

Current accounting principles require that our pension benefit obligation be measured using an internal rate of return (“IRR”) analysis to be included in the discount rate selection process. The IRR calculation for the Retirement Plan for Employees of Bridgford Foods Corporation is measured annually and based on the Citigroup Pension Discount Rate. The Citigroup Pension Discount Rate as of July 31, 2019 was 3.44% as compared to 4.30% as of November 2, 2018. The discount rate applied can significantly affect the value of the projected benefit obligation as well as the net periodic benefit cost.

Our credit risk is diversified across a broad range of customers and geographic regions. Losses due to credit risk have recently been immaterial. The provision for doubtful accounts receivable is based on historical trends and current collection risk. We have significant receivables with a few large, well known customers which, although historically secure, could be subject to material risk should these customers’ operations suddenly deteriorate. We monitor these customers closely to minimize the risk of loss.

The table below shows customers that accounted for more than 20% of consolidated accounts receivable (“AR”) or 10% of consolidated sales for the twelve weeks ended July 12, 2019 and July 13, 2018, respectively.

Customer Concentration > 20% of AR or 10% of Sales *

	Wal-Mart						Dollar General
	Sales			AR			Sales			AR
July 12, 2019		35.9	%		33.3	%		10.7	%		25.1	%
July 13, 2018		36.6	%		34.4	%		9.1	%		23.9	%

* = No other customer accounted for more than 20% of consolidated accounts receivable or 10% of consolidated sales for the thirty-six weeks ended July 12, 2019 or the thirty-six weeks ended July 13, 2018.

Sales are recognized upon passage of title to the customer, typically upon product pick-up, shipment or delivery to customers. Products are delivered to customers primarily through our own long-haul fleet or through our own direct store delivery system.

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We record the cash surrender or contract value for life insurance policies as an adjustment of premiums paid in determining the expense or income to be recognized under the contract for the period.

We provide tax reserves for federal, state, local and international exposures relating to audit results, tax planning initiatives and compliance responsibilities. The development of these reserves requires judgments about tax issues, potential outcomes and timing, and is a subjective estimate. Although the outcome of these tax audits is uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities, if any, resulting from these reviews. Actual outcomes may differ materially from these estimates.

We assess the recoverability of our long-lived assets on a quarterly basis or whenever adverse events or changes in circumstances or business climate indicate that expected undiscounted future cash flows related to such long-lived assets may not be sufficient to support the net book value of such assets. If undiscounted cash flows are not sufficient to support the recorded assets, we recognize an impairment to reduce the carrying value of the applicable long-lived assets to their estimated fair value.

We participate in “multiemployer” pension plans administered by labor unions on behalf of their employees. We pay monthly contributions to union trust funds, a portion of which is used to fund pension benefit obligations to plan participants. The contribution amount may change depending upon the ability of participating companies to fund these pension liabilities as well as the actual and expected returns on pension plan assets. Should we withdraw from the union and cease participation in a union plan, federal law could impose a penalty for additional contributions to the plan. The penalty would be recorded as an expense in the consolidated statement of operations. The ultimate amount of the withdrawal liability is dependent upon several factors including the funded status of the plan and contributions made by other participating companies.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “PPACA”), was signed into law. Requirements of the law include the removal of the lifetime limits on active and retiree medical coverage, expanding dependent coverage to age 26 and the elimination of pre-existing conditions that may impact other postretirement benefits costs. In addition, the PPACA includes potential excise tax on the value of benefits that exceed a pre-defined limit which may require changes in benefit plan levels in order to minimize this additional cost. Finally, the PPACA includes provisions that require employers to offer health benefits to all full-time employees (defined as 30 hours per week). The health coverage must meet minimum standards for the actuarial value of the benefits offered and employee affordability. Both the administration and congress have made recent attempts to replace the PPACA with an alternative system. However, we do not anticipate significant changes in the rules that compel an employer such as Bridgford Foods to offer affordable coverage to all of its employees. The recent tax law changes removed the individual mandate provision that is included in the PPACA and requires all individuals to have health insurance or pay a penalty. Despite this change, the recent tax changes did not adjust or remove the employer mandate. We cannot anticipate further changes at this point in time. We believe that our current plans meet the existing requirements. We will continue to assess the accounting implications of the PPACA and its impact on our financial position and results of operations as more legislative and interpretive guidance becomes available. The potential future effects and cost of complying with the provisions of the PPACA are not determinable at this time

Overview of Reporting Segments

We operate in two business segments – the processing and distribution of frozen food products (the Frozen Food Products segment), and the processing and distribution of snack food products (the Snack Food Products segment). For information regarding the separate financial performance of the business segments refer to Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this Report. We manufacture and distribute an extensive line of food products, including biscuits, bread dough items, roll dough items, dry sausage products and beef jerky.

Frozen Food Products Segment

Our Frozen Food Products segment primarily manufactures and distributes biscuits, bread dough items, roll dough items and shelf stable sandwiches. All items within this segment are considered similar products and have been aggregated at this level. Our frozen food business covers the United States. Products produced by the Frozen Food Products segment are generally supplied to food service and retail distributors who take title to the product upon shipment receipt through company leased long-haul vehicles. In addition to regional sales managers, we maintain a network of independent food service and retail brokers covering most of the United States. Brokers are compensated on a commission basis. We believe that our broker relationships, in close cooperation with our regional sales managers, are a valuable asset providing significant new product and customer opportunities. Regional sales managers perform several significant functions for us, including identifying and developing new business opportunities and providing customer service and support to our distributors and end purchasers through the effective use of our broker network.

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Snack Food Products Segment

Our Snack Food Products segment primarily distributes products manufactured by us. All items within this segment are considered similar products and have been aggregated at this level. The dry sausage division includes products such as jerky, meat snacks, sausage and pepperoni products. Our Snack Food Products segment sells approximately 120 different items through a direct store delivery network serving approximately 17,000 supermarkets, mass merchandise and convenience retail stores located in 48 states. These customers are comprised of large retail chains and smaller “independent” operators.

Products produced or distributed by the Snack Food Products segment are supplied to customers through either direct-store-delivery or direct delivery to customer warehouses. Product delivered using the company-owned fleet direct to the store is considered a direct-store-delivery. In this case, we provide the service of setting up and maintaining the display and stocking our products. Products delivered to customer warehouses are distributed to the retail store and stocked by the customer where it is then resold to the end consumer.

Results of Operations for the Twelve-Weeks Ended July 12, 2019 and July 13, 2018

Net Sales-Consolidated

Net sales increased by $4,369 (11.4%) to $42,837 in the third twelve-week period of the 2019 fiscal year compared to the same twelve-week period in fiscal year 2018. The changes in net sales were comprised as follows:

Impact on Net Sales-Consolidated	%		$
Selling price per pound		2.1		853
Unit sales volume in pounds		11.1		4,528
Returns activity		-0.4		(220	)
Promotional activity		-1.4		(792	)
Increase in net sales		11.4		4,369

Net Sales-Frozen Food Products Segment

Net sales in the Frozen Food Products segment increased by $1,699 (17.7%) to $11,273 in the third twelve-week period of the 2019 fiscal year compared to the same twelve-week period in fiscal year 2018. The changes in net sales were comprised as follows:

Impact on Net Sales-Frozen Food Products	%		$
Selling price per pound		7.0		744
Unit sales volume in pounds		11.3		1,205
Returns activity		-0.2		(29	)
Promotional activity		-0.4		(221	)
Increase in net sales		17.7		1,699

The increase in net sales for the twelve-week period ended July 12, 2019 primarily relates to higher unit sales volume and higher selling price per pound. The increase in net sales was primarily driven by a significant increase in volume for our shelf-stable sandwich business to institutional and retail customers coupled with an increase in selling prices implemented in the second quarter of fiscal year 2019. Other institutional Frozen Food Product sales, including sheet dough and rolls, increased 5% by volume while retail sales volume decreased 2%. Promotional activity increased due to higher bid price reductions, rebates and menu allowances as a percent of sales. Returns activity increased slightly compared to the same twelve-week period in the 2018 fiscal year.

Net Sales-Snack Food Products Segment

Net sales in the Snack Food Products segment increased by $2,670 (9.2%) to $31,564 in the third twelve-week period of the 2019 fiscal year compared to the same twelve-week period in fiscal year 2018. The changes in net sales were comprised as follows:

Impact on Net Sales-Snack Food Products	%		$
Selling price per pound		0.4		109
Unit sales volume in pounds		11.0		3,323
Returns activity		-0.4		(191	)
Promotional activity		-1.8		(571	)
Increase in net sales		9.2		2,670

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Net sales of Snack Food Products increased significantly due to our new product offerings including smokehouse sausage sticks introduced during the second quarter of fiscal year 2018. The increase in net sales occurred mainly in our direct store delivery distribution channel while warehouse shipments decreased. The weighted average selling price per pound increased compared to the same twelve-week period in the prior fiscal year due to higher per pound selling prices for new items. Promotional offers increased due to the timing of programs with significant customers. Returns activity was higher compared to the same twelve-week period in the 2018 fiscal year.

Cost of Products Sold and Gross Margin-Consolidated

Cost of products sold increased by $3,388 (13.0%) to $29,422 in the third twelve-week period of the 2019 fiscal year compared to the same twelve-week period in fiscal year 2018. The gross margin decreased from 32.3% to 31.3% during the 2019 period.

Change in Cost of Products Sold by Segment	$		%		Commodity $ Decrease
Frozen Food Products Segment		1,012		3.9		(29	)
Snack Food Products Segment		2,376		9.1		(555	)
Total		3,388		13.0		(584	)

Cost of Products Sold-Frozen Food Products Segment

Cost of products sold in the Frozen Food Products segment increased by $1,012 (15.6%) to $7,486 in the third twelve-week period of the 2019 fiscal year compared to the same twelve-week period in fiscal year 2018. Increased volume and changes in product mix were the primary contributing factors to this increase. The cost of purchased flour decreased approximately $29 in the third twelve-week period of fiscal year 2019 compared to the same twelve-week period in fiscal year 2018.

Cost of Products Sold-Snack Food Products Segment

Cost of products sold in the Snack Food Products segment increased by $2,376 (12.1%) to $21,936 in the third twelve-week period of the 2019 fiscal year compared to the same twelve-week period in fiscal year 2018 due to a substantial increase in sales volume. Meat commodity costs started to drop during the 2019 period partially offsetting the increase in cost of products sold. Higher hourly wages including increased production labor impacted the cost of products sold. The cost of significant meat commodities decreased approximately $555 in the third twelve-week period of fiscal year 2019 compared to the same period in fiscal year 2018.

Selling, General and Administrative Expenses-Consolidated

Selling, general and administrative expenses increased by $1,089 (10.1%) to $11,819 in the third twelve-week period of fiscal year 2019 compared to the same twelve-week period in the prior fiscal year. The table below summarizes the significant expense increases (decreases) included in this category:

	12 Weeks Ended						Expense
	July 12, 2019			July 13, 2018			Increase (Decrease)
Cash surrender value	$	(285	)	$	(721	)	$	436
Healthcare costs		780			457			322
Wages and bonus		5,351			5,061			290
Pension expense		72			284			(212	)
Other SG&A		5,901			5,649			252
Total - SG&A	$	11,819		$	10,730		$	1,089

The gain on cash surrender value of life insurance policies decreased substantially due to lower stock market gains compared to the same twelve-week period in fiscal year 2018. Healthcare costs have increased due to recent unfavorable claim activity. Higher profit-sharing accruals resulted in higher wages and bonus expense in the third twelve weeks of the 2019 fiscal year compared to the same period in the prior year. The decrease in pension expense was due to higher pension discount rates being used to compute the future liability estimate. 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 less favorable change in the provision for doubtful accounts, higher insurance expense and higher workers’ compensation cost partially offset by lower repairs and maintenance expense related to compliance with Food Safety Certification requirements of the SQF Institute.

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Selling, General and Administrative Expenses-Frozen Food Products Segment

SG&A expenses in the Frozen Food Products segment increased by $430 (14.3%) to $3,434 in the third twelve-week period of fiscal year 2019 compared to the same twelve-week period in the prior fiscal year. The overall increase in SG&A expenses was due to higher sales unit volume and to a lesser extent increases in selling prices. The increases in unit sales volume were partially offset by higher promotional and return activity corresponding to the increase in sales unit volume.

Selling, General and Administrative Expenses-Snack Food Products Segment

SG&A expenses in the Snack Food Products segment increased by $659 (8.5%) to $8,385 in the third twelve-week period of fiscal year 2019 compared to the same twelve-week period in the prior fiscal year. Most of the increase was due to higher unit sales volume and higher expenses related to wages and bonus including an increase in sales commissions partially offset by a pension expense decrease.

Income Taxes-Consolidated

Income tax for the twelve weeks ended July 12, 2019 and July 13, 2018, respectively, was as follows:

	July 12, 2019			July 13, 2018
Provision for income taxes	$	500		$	256
Effective tax rate		31.2	%		15.0	%

We recorded a tax provision of $500 for the twelve-week period ended July 12, 2019, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective income tax rate differed from the applicable mixed statutory rate of approximately 26.4% due to non-taxable gains and losses on life insurance policies.

Net Income Consolidated

The net income of $1,105 in the twelve-week period ended July 12, 2019 includes a non-taxable gain on life insurance policies in the amount of $285. The net income of $1,448 in the twelve-weeks ended July 13, 2018 includes a non-taxable gain on life insurance policies in the amount of $721. Gains and losses on life insurance policies are dependent upon the performance of the underlying equities that support policy values and future results may vary considerably.

Results of Operations for the Thirty-Six Weeks Ended July 12, 2019 and July 13, 2018

Net Sales-Consolidated

Net sales increased by $11,761 (10.0%) to $129,321 in the thirty-six-week period ended July 12, 2019 compared to the same thirty-six-week period in fiscal year 2018. The changes in net sales were comprised as follows:

Impact on Net Sales-Consolidated	%		$
Selling price per pound		2.5		3,178
Unit sales volume in pounds		8.7		10,906
Returns activity		-0.1		(385	)
Promotional activity		-1.1		(1,938	)
Increase in net sales		10.0		11,761

Net Sales-Frozen Food Products Segment

Net sales in the Frozen Food Products segment increased by $3,516 (11.3%) to $34,691 in the thirty-six-week period ended July 12, 2019 compared to the same thirty-six-week period in fiscal year 2018. The changes in net sales were comprised as follows:

Impact on Net Sales-Frozen Food Products	%		$
Selling price per pound		4.6		1,610
Unit sales volume in pounds		7.6		2,662
Returns activity		-0.2		(81	)
Promotional activity		-0.7		(675	)
Increase in net sales		11.3		3,516

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The increase in net sales for the thirty-six-week period ended July 12, 2019 primarily relates to higher unit sales volume and higher selling price per pound. The increase in net sales was primarily driven by a significant increase in volume for our shelf-stable sandwich business to institutional and retail customers. Other institutional Frozen Food Product sales, including sheet dough and rolls, increased 2% by volume while retail sales volume decreased 8%. Changes in returns were insignificant compared to the same twelve-week period in the prior fiscal year. Promotional activity increased due to higher bid price reductions, rebates and menu allowances as a percentage of sales.

Net Sales-Snack Food Products Segment

Net sales in the Snack Food Products segment increased by $8,245 (9.5%) to $94,630 in the thirty-six-week period ended July 12, 2019 compared to the same thirty-six-week period in fiscal year 2018. The changes in net sales were comprised as follows:

Impact on Net Sales-Snack Food Products	%		$
Selling price per pound		1.7		1,568
Unit sales volume in pounds		9.1		8,244
Returns activity		-0.1		(304	)
Promotional activity		-1.2		(1,263	)
Increase in net sales		9.5		8,245

Net sales of Snack Food Products increased significantly due to our new product offerings including smokehouse sausage sticks introduced during the second quarter of fiscal year 2018. The increase in net sales occurred mainly in our direct store delivery distribution channel while warehouse shipments decreased. The weighted average selling price per pound increased compared to the same thirty-six-week period in the prior fiscal year due to higher per pound selling prices for new items. Promotional offers increased corresponding to the increase in unit sales volume. Returns activity increased slightly compared to the same thirty-six-week period in the 2018 fiscal year.

Cost of Products Sold and Gross Margin-Consolidated

Cost of products sold increased by $6,744 (8.5%) to $85,851 in the thirty-six-week period ended July 12, 2019 year compared to the same thirty-six-week period in fiscal year 2018. The gross margin increased from 32.7% to 33.6% during the 2019 period.

Change in Cost of Products Sold by Segment	$		%		Commodity $ Decrease
Frozen Food Products Segment		2,188		2.7		(66	)
Snack Food Products Segment		4,556		5.8		(2,125	)
Total		6,744		8.5		(2,191	)

Cost of Products Sold-Frozen Food Products Segment

Cost of products sold in the Frozen Food Products segment increased by $2,188 (10.6%) to $22,800 in the thirty-six-week period ended July 12, 2019 compared to the same thirty-six-week period in fiscal year 2018. Increased volume and changes in product mix were the primary contributing factors to this increase. The cost of purchased flour decreased approximately $66 in the thirty-six-week period of fiscal year 2019 compared to the same thirty-six-week period in fiscal year 2018.

Cost of Products Sold-Snack Food Products Segment

Cost of products sold in the Snack Food Products segment increased by $4,556 (7.8%) to $63,051 in the thirty-six-week period ended July 12, 2019 compared to the same thirty-six-week period in fiscal year 2018 due to a substantial increase in sales volume. Meat commodity costs started to drop during the 2019 period partially offsetting the increase in cost of products sold. Higher hourly wages including increased production labor impacted the cost of products sold. The cost of significant meat commodities decreased approximately $2,125 in the thirty-six-week period ended July 12, 2019 compared to the same period in fiscal year 2018.

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Selling, General and Administrative Expenses-Consolidated

Selling, general and administrative expenses increased by $2,300 (6.7%) to $36,514 in the thirty-six-week period ended July 12, 2019 compared to the same thirty-six-week period in the prior fiscal year. The table below summarizes the significant expense increases (decreases) included in this category:

	36 Weeks Ended						Expense
	July 12, 2019			July 13, 2018			Increase (Decrease)
Wages and bonus	$	16,705		$	14,392		$	2,313
Pension expense		211			852			(641	)
Repairs and maintenance “SQF” expense		25			555			(530	)
Cash surrender value		(714	)		(1,088	)		374
Healthcare costs		2,175			1,794			381
Product advertising		4,245			4,049			196
Other SG&A		13,867			13,660			207
Total - SG&A	$	36,514		$	34,214		$	2,300

Higher profit-sharing accruals resulted in higher wages and bonus expense in the thirty-six weeks ended July 12, 2019 compared to the same period in the prior year. The decrease in pension expense was due to higher pension discount rates being used to compute the future liability estimate. Repairs and maintenance expense decreased as the Company geared up its Chicago facility in the same thirty-six-week period in fiscal year 2018 to comply with Food Safety Certification requirements created and managed by the SQF Institute. The gain on cash surrender value of life insurance policies decreased substantially due to lower stock market gains compared to the same thirty-six-week period in fiscal year 2018. Healthcare costs have increased due to recent unfavorable claim activity. Costs for product advertising increased mainly as a result of higher payments under brand licensing agreements in the Snack Food Products segment during the thirty-six weeks ended July 12, 2019. 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 travel expenses and higher insurance costs.

Selling, General and Administrative Expenses-Frozen Food Products Segment

SG&A expenses in the Frozen Food Products segment increased by $564 (5.8%) to $10,325 in the thirty-six-week period ended July 12, 2019 compared to the same thirty-six-week period in the prior fiscal year. The overall increase in SG&A expenses was due to higher unit sales volume, higher profit-sharing accruals and higher product advertising.

Selling, General and Administrative Expenses-Snack Food Products Segment

SG&A expenses in the Snack Food Products segment increased by $1,736 (7.1%) to $26,189 in the thirty-six-week period ended July 12, 2019 compared to the same thirty-six-week period in the prior fiscal year. Most of the increase was due to higher unit sales volume and higher expenses related to wages and bonuses including an increase in sales commissions partially offset by lower pension expense.

Income Taxes-Consolidated

Income tax for the thirty-six-weeks ended July 12, 2019 and July 13, 2018, respectively, was as follows:

	July 12, 2019			July 13, 2018
Provision for income taxes	$	1,764		$	5,786
Effective tax rate		25.3	%		56.5	%

We recorded a tax provision of $1,764 for the thirty-six-week period ended July 12, 2019, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective income tax rate differed from the applicable mixed statutory rate of approximately 26.4% also due to non-taxable gains and losses on life insurance policies.

We recorded a tax provision of $5,786 for the thirty-six-week period ended July 13, 2018, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective tax rate for the third quarter of 2018 reflects impacts of the Tax Cuts and Jobs Act signed into law on December 22, 2017. These impacts include a $3,200 expense related to the remeasurement of deferred taxes, as well as a blended 23.07% statutory federal income tax rate for fiscal 2018 compared to the 35% statutory federal income tax rate effective for the prior year. The rate also reflects impact of $1,640 million of expense related to tax on the gain on the sale of a land parcel in Chicago, Illinois discussed in Note 5 Part I, Item 1(e), - Income Taxes of the Notes to Condensed Consolidated Financial Statements. Additionally, the effective income tax rate also differed from the applicable mixed statutory rate of approximately 27.55% due to non- taxable gains and losses on life insurance policies and domestic production activities deductions under Internal Revenue Code Section 199.

Net Income Consolidated

The net income of $5,201 in the thirty-six-weeks period ended July 12, 2019 includes a non-taxable gain on life insurance policies in the amount of $714. The net income of $4,455 in the thirty-six-week period ended July 13, 2018 includes a non-recurring gain on the sale of real property for $5,977 (before taxes) and a non-taxable gain on life insurance policies in the amount of $1,088. Gains and losses on life insurance policies are dependent upon the performance of the underlying equities that support policy values and future results may vary considerably.

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Liquidity and Capital Resources

The principal source of our operating cash flow is cash receipts from the sale of our products, net of costs to manufacture, store, market and deliver such products. We have remained free of interest-bearing debt (excluding capital leases and equipment financing) for twenty-nine of the last thirty years (with fiscal years 2014 and 2019 being the only exceptions) and we normally fund our operations from cash balances and cash flow generated from operations. We borrowed $7,500 during the first quarter of fiscal year 2019 to purchase specific equipment for our new Chicago processing facility. We borrowed a second $7,500 subsequent to the end of the second quarter of fiscal year 2019. Historically, we expect positive operating cash flows in the first quarter of our fiscal year from the liquidation of inventory and accounts receivable balances related to holiday season sales. Anticipated commodity price trends may affect future cash balances. Certain commodities may be purchased in advance of our immediate needs to lower the ultimate cost of processing.

Cash flows from operating activities for the thirty-six weeks ended:

	July 12, 2019			July 13, 2018
Net income	$	5,201		$	4,455
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		2,785			2,598
Provision for losses on accounts receivable		35			5
(Reduction in) provision for promotional allowances		(914	)		499
Gain on sale of property, plant and equipment		(9	)		(6,002	)
Deferred income taxes, net		-			3,200
Changes in operating working capital		(2,056	)		245
Net cash provided by operating activities	$	5,042		$	5,000

For the thirty-six weeks ended July 12, 2019, net cash provided by operating activities was $5,042, $42 more cash provided than during the same period in fiscal year 2018. The net increase in cash provided by operating activities primarily related to higher net income of $5,297 partially offset by an increase in inventory of $630 and a increase in accounts receivable of $659 as well as payments for estimated income taxes of $564. During the thirty-six-week period ended July 12, 2019, we contributed $601 towards our defined benefit pension plan. Plan funding strategies may be adjusted depending upon economic conditions, investment options, tax deductibility, or recent legislative changes in funding requirements. The Company borrowed $2,000 under its line of credit with Wells Fargo Bank N.A. on April 15, 2019, which was repaid on April 25, 2019.

Our cash conversion cycle (defined as days of inventory and trade receivables less days of trade payables outstanding) was equal to 60 days for the thirty-six-week period ended July 12, 2019. The cash conversion cycle was 63 days for the thirty-six-week period ended July 13, 2018.

For the thirty-six weeks ended July 13, 2018, net cash provided by operating activities was $5,000 primarily due to a net income of $4,455 and deferred income taxes of $3,200 partially offset by a decrease in non-current liabilities of $3,991 and payments of estimated taxes of $1,407. During the thirty-six-week period ended July 13, 2018 we funded $2,601 towards our defined benefit pension plan.

Cash used in investing activities for the thirty-six weeks ended:

	July 12, 2019			July 13, 2018
Proceeds from sale of property, plant and equipment	$	9		$	6,002
Additions to property, plant and equipment		(19,791	)		(9,704	)
Net cash used in investing activities	$	(19,782	)	$	(3,702	)

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In general, we capitalize the cost of additions and improvements and expense the cost for repairs and maintenance. The Company 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.

The table below highlights additions to property, plant and equipment for the thirty-six weeks ended:

	July 12, 2019		July 13, 2018
Changes in projects in process	$	3,743	$	7,148
Building improvements		6,940		492
Direct store delivery and sales vehicles		618		736
Packaging lines		2,343		140
Computer software and hardware		861		18
Processing equipment		1,878		758
Land		-		55
Building		-		107
Forklifts		12		206
Quality control		118		35
Temperature control		3,278		9
Additions to property, plant and equipment	$	19,791	$	9,704

Cash provided by (used in) financing activities for the thirty-six weeks ended:

	July 12, 2019			July 13, 2018
Payment of capital lease obligations		-			(82	)
Proceeds from bank borrowings		17,000			-
Repayments of bank borrowings		(2,622	)		-
Net cash provided by (used in) financing activities	$	14,378		$	(82	)

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. As of July 12, 2019, 120,113 shares were authorized for repurchase under the program.

On December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A for up to $15,000 in equipment financing. Pursuant to the loan agreement, we borrowed $15,000, two separate receipts of $7,500 each, to purchase specific equipment for our new Chicago processing facility at a fixed rate of 4.13% and 3.98%, respectively, per annum. The loan terms are seven years and are secured by the purchased equipment. The first funding of $7,500 was received on December 28, 2018. The second funding was received on April 23, 2019. The master collateral loan and security agreement with Wells Fargo Bank, N.A. contains various affirmative and negative covenants that limit the use of funds and define other provisions of the loan. The main financial covenants are listed below:

● Total Liabilities divided by Tangible Net Worth not greater than 2.5 to 1.0 at each fiscal quarter,

● Quick Ratio not less than 1.0 to 1.0 at each fiscal quarter end, and

● Net income after taxes not less than one dollar on a quarterly basis, determined as of each fiscal quarter end.

The Company was in compliance with all covenants under the master collateral loan and security agreement as of July 12, 2019.

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 for the remainder of fiscal year 2019.

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Recent Accounting Pronouncements

In May 2014, the FASB issued guidance that changes the criteria for recognizing revenue. The guidance provides for a single five-step model to be applied to all revenue contracts with customers. The standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts, including disaggregated revenue disclosures. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. This guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal year 2019. We adopted this guidance in the first quarter of fiscal year 2019 using the modified retrospective transition method. Prior periods were not adjusted and, based on our implementation assessment, no cumulative-effect adjustment was made to the opening balance of retained earnings. The adoption of this standard did not have a material impact on our consolidated financial statements. For further description of our revenue recognition policy refer to the Revenue Recognition section above and for disaggregated revenue information refer to Part I, Item 1 (e), Notes to the Condensed Consolidated Financial Statements, Note 4: Segment Information.

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory”. The guidance is part of the “Simplification Initiative” to identify and re-evaluate areas where the generally accepted accounting principles may be complex and cumbersome to apply. The guidance will require that inventory be stated at the lower of cost and net realizable value as opposed to the lower of cost or market. Net realizable value is the estimated selling price for the inventory less completion, disposal and transportation costs. The guidance is effective for fiscal years beginning after December 15, 2016. Adoption of this guidance did not have a material impact on the Company’s results of operations or financial position.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” that requires most equity investments to be measured at fair value and subsequent changes in fair value to be recognized in net income. The guidance covers presentation and disclosure requirements of financial liabilities and the classification and measurement of financial instruments. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017. Adoption of this guidance did not have a material impact on the Company’s results of operations or financial position.

In February 2016, the FASB issued ASU 2016-02, “Leases”, which will require a lessee to recognize assets and liabilities with lease terms of more than 12 months. Both capital and operating leases will need to be recognized on the balance sheet. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. The Company is currently evaluating this statement and its impact on its results of operations or financial position.

In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation” which simplifies various aspects of the accounting for employee share-based payment transactions, including the accounting for income tax consequences, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The guidance is effective for annual and interim reporting periods beginning after December 15, 2016 with early adoption permitted. Adoption of this guidance did not have a material impact on the Company’s results of operations or financial position.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses”, which requires a financial asset to be presented at the net carrying value which is the amount expected to be collected net of expected credit losses. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019 with early adoption permitted. The Company is currently evaluating this statement and its impact on its results of operations or financial position.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes – Classification of Certain Cash Receipts and Cash Payments”. The guidance involves eight specific cash flow issues and aims to unify accounting for these transactions. The guidance is effective for annual reporting periods beginning after December 15, 2017 with early adoption permitted. Adoption of this guidance did not have a material impact on the Company’s results of operations or financial position.

In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits”. The guidance separates service cost from other pension cost components changing the presentation of net periodic benefit cost related to company sponsored defined benefit or other postretirement benefits. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. Adoption of this guidance did not have a material impact on the Company’s results of operations or financial position.

In February 2018, the FASB issued ASU 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The guidance allows reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the application of the U.S. Tax Cuts and Jobs Act. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018 with early adoption permitted. The Company elected to early adopt this guidance during the quarter ended January 26, 2018. Adoption of this guidance had a material impact on Retained Earnings and Other Comprehensive Income (see Item 1.c. of this Report).

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Off-Balance Sheet Arrangements

We are not engaged in any “off-balance sheet arrangements” within the meaning of Item 303(a)(4)(ii) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable to a smaller reporting company.

Item 4. Controls and Procedures

Our management, with the participation and under the supervision of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this Report in their design and operation to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms and were accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

We maintain and evaluate a system of internal accounting controls, and a program of internal auditing designed to provide reasonable assurance that our assets are protected and that transactions are performed in accordance with proper authorization and are properly recorded. This system of internal accounting controls is continually reviewed and modified in response to evolving business conditions and operations and to recommendations made by the independent registered public accounting firm. On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) published Internal Control-Integrated Framework (2013) (the “2013 Framework”) and related illustrative documents as an update to Internal Control-Integrated Framework (1992) (the “1992 Framework”). The Company has adopted the 2013 Framework this fiscal year and has determined that the 17 principles are present and functioning during our assessment of the effectiveness of internal controls. We have established a code of conduct. Our management believes that the accounting and internal control systems provide reasonable assurance that assets are safeguarded, and financial information is reliable.

The Audit Committee of the Board of Directors meets regularly with our financial management and counsel, and with the independent registered public accounting firm engaged by us. Internal accounting controls and the quality of financial reporting are discussed during these meetings. The Audit Committee has discussed with the independent registered public accounting firm matters required to be discussed by the auditing standards adopted or established by the Public Company Accounting Oversight Board. In addition, the Audit Committee and the independent registered public accounting firm have discussed the independent registered public accounting firm’s independence from the Company and its management, including the matters in the written disclosures required by Public Company Accounting Oversight Board Rule 3526 “Communicating with Audit Committees Concerning Independence”.

There have been no changes in our internal controls over financial reporting that occurred during the fiscal quarter ended July 12, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Part II. Other Information

Item 1A. Risk Factors

The risk factors listed in Part I “Item 1A. Risk Factors” in the Annual Report should be considered with the information provided elsewhere in this Report, which could materially adversely affect our business, financial condition or results of operations. There have been no material changes to the risk factors as previously disclosed in the Annual Report.

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Item 6. Exhibits

Exhibit No.	Description
31.1	Certification of Chairman of the Board (Principal Executive Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer (Principal Financial and Accounting Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chairman of the Board (Principal Executive Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer (Principal Financial and Accounting Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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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)
Dated: August 23, 2019	By:	/s/ Raymond F. Lancy
		Raymond F. Lancy
		Chief Financial Officer
		(Duly Authorized Officer, Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, William L. Bridgford, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Bridgford Foods Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 23, 2019	/s/ William L. Bridgford
	William L. Bridgford, Chairman of the Board
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Raymond F. Lancy, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Bridgford Foods Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 23, 2019	/s/ Raymond F. Lancy
	Raymond F. Lancy, Chief Financial Officer, Executive Vice President, Treasurer and Assistant Secretary
	(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, William L. Bridgford, Chairman of the Board of Bridgford Foods Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1.	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended July 12, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)); and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 23, 2019	/s/ William L. Bridgford
	William L. Bridgford, Chairman of the Board
	(Principal Executive Officer)

This certification accompanies the Quarterly Report on Form 10-Q pursuant to Section 13(a) and 15(d) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Raymond F. Lancy, Chief Financial Officer, Executive Vice President, Treasurer and Assistant Secretary of Bridgford Foods Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1.	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended July 12, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)); and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 23, 2019	/s/ Raymond F. Lancy
	Raymond F. Lancy, Chief Financial Officer, Executive Vice President, Treasurer and Assistant Secretary
	(Principal Financial and Accounting Officer)

This certification accompanies the Quarterly Report on Form 10-Q pursuant to Section 13(a) and 15(d) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.

XML

Document and Entity Information - shares	8 Months Ended
	Jul. 12, 2019	Aug. 23, 2019
Deferred Tax [Member]
Entity Registrant Name	BRIDGFORD FOODS CORP
Entity Central Index Key	0000014177
Document Type	10-Q
Document Period End Date	Jul. 12, 2019
Amendment Flag	false
Current Fiscal Year End Date	--11-01
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,076,832
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 12, 2019	Nov. 02, 2018
Current assets:
Cash and cash equivalents	$ 7,817	$ 8,179
Accounts receivable, less allowance for doubtful accounts of $37 and $33, respectively, and promotional allowances of $3,446 and $2,122, respectively	21,831	20,293
Inventories, net	24,043	23,413
Prepaid expenses and other current assets	545	1,331
Total current assets	54,236	53,216
Property, plant and equipment, net of accumulated depreciation and amortization of $69,092 and $66,337, respectively	49,644	32,638
Other non-current assets	12,344	11,630
Deferred income taxes (Note 5)	4,010	4,010
Total assets	120,234	101,494
Current liabilities:
Accounts payable	7,767	7,655
Accrued payroll, advertising and other expenses	4,731	4,577
Income taxes payable	1,163	155
Current notes payable - equipment	1,918
Current portion of non-current liabilities	5,309	5,980
Total current liabilities	20,888	18,367
Long-term notes payable - equipment	12,460
Non-current liabilities	16,005	17,447
Total liabilities	49,353	35,814
Contingencies and commitments (Note 3)
Shareholders' equity:
Preferred stock, without par value; authorized - 1,000,000 shares; issued and outstanding - none
Common stock, $1.00 par value; authorized - 20,000,000 shares; issued and outstanding - 9,076,832 and 9,076,832 shares, respectively	9,134	9,134
Capital in excess of par value	8,298	8,298
Retained earnings	71,149	65,948
Accumulated other comprehensive loss	(17,700)	(17,700)
Total shareholders' equity	70,881	65,680
Total liabilities and shareholders' equity	$ 120,234	$ 101,494

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jul. 12, 2019	Nov. 02, 2018
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 37	$ 33
Accounts receivable, allowance for promotional allowances	3,446	2,122
Property, plant and equipment, accumulated depreciation	$ 69,092	$ 66,337
Preferred stock, par value
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 1.00	$ 1.00
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	9,076,832	9,076,832
Common stock, shares outstanding	9,076,832	9,076,832

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		8 Months Ended
	Jul. 12, 2019	Jul. 13, 2018	Jul. 12, 2019	Jul. 13, 2018
Income Statement [Abstract]
Net sales	$ 42,837	$ 38,468	$ 129,321	$ 117,560
Cost of products sold	29,422	26,034	85,851	79,107
Gross margin	13,415	12,434	43,470	38,453
Selling, general and administrative expenses	11,819	10,730	36,514	34,214
Gain on sale of property, plant and equipment	(9)		(9)	(6,002)
Income before taxes	1,605	1,704	6,965	10,241
Provision for income taxes	500	256	1,764	5,786
Net income	$ 1,105	$ 1,448	$ 5,201	$ 4,455
Basic earnings per share	$ 0.12	$ 0.16	$ 0.57	$ 0.49
Shares used to compute basic earnings per share	9,076,832	9,076,832	9,076,832	9,076,832

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Capital in Excess of Par Value [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at Nov. 03, 2017	$ 9,134	$ 8,298	$ 56,902	$ (18,296)	$ 56,038
Balance, shares at Nov. 03, 2017	9,076,000
Net income			4,455		4,455
Reclassification upon early adoption of ASU 2018-02			2,529	(2,529)
Balance at Jul. 13, 2018	$ 9,134	8,298	63,886	(20,825)	60,493
Balance, shares at Jul. 13, 2018	9,076,000
Balance at Apr. 20, 2018	$ 9,134	8,298	62,438	(20,825)	59,045
Balance, shares at Apr. 20, 2018	9,076,000
Net income			1,448		1,448
Balance at Jul. 13, 2018	$ 9,134	8,298	63,886	(20,825)	60,493
Balance, shares at Jul. 13, 2018	9,076,000
Balance at Nov. 02, 2018	$ 9,134	8,298	65,948	(17,700)	65,680
Balance, shares at Nov. 02, 2018	9,076,000
Net income			5,201		5,201
Balance at Jul. 12, 2019	$ 9,134	8,298	71,149	(17,700)	70,881
Balance, shares at Jul. 12, 2019	9,076,000
Balance at Apr. 19, 2019	$ 9,134	8,298	70,044	(17,700)	69,776
Balance, shares at Apr. 19, 2019	9,076,000
Net income			1,105		1,105
Balance at Jul. 12, 2019	$ 9,134	$ 8,298	$ 71,149	$ (17,700)	$ 70,881
Balance, shares at Jul. 12, 2019	9,076,000

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	8 Months Ended
	Jul. 12, 2019	Jul. 13, 2018
Cash flows from operating activities:
Net income	$ 5,201	$ 4,455
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation	2,785	2,598
Provision for losses on accounts receivable	35	5
(Reduction in) provision for promotional allowances	(914)	499
Gain on sale of property, plant and equipment	(9)	(6,002)
Deferred income taxes, net		3,200
Changes in operating assets and liabilities:
Accounts receivable	(659)	850
Inventories	(630)	(1,677)
Prepaid expenses and other current assets	786	1,438
Other non-current assets	(714)	1,210
Accounts payable	112	1,354
Accrued payroll, advertising and other expenses	(517)	248
Income taxes payable	1,008	813
Non-current liabilities	(1,442)	(3,991)
Net cash provided by operating activities	5,042	5,000
Cash (used in) investing activities:
Proceeds from sale of property, plant and equipment	9	6,002
Additions to property, plant and equipment	(19,791)	(9,704)
Net cash used in investing activities	(19,782)	(3,702)
Cash provided by used in financing activities:
Payment of capital lease obligations		(82)
Proceeds from bank borrowings	17,000
Repayments of bank borrowings	(2,622)
Net cash provided by financing activities	14,378	(82)
Net (decrease) increase in cash and cash equivalents	(362)	1,216
Cash and cash equivalents at beginning of period	8,179	12,109
Cash and cash equivalents at end of period	7,817	13,325
Supplemental disclosure of cash flow information:
Cash paid for income taxes	564	1,407
Cash paid for interest	$ 183

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Summary of Significant Accounting Policies

8 Months Ended

Jul. 12, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1 – Summary of Significant Accounting Policies:

The unaudited condensed consolidated financial statements of Bridgford Foods Corporation (the “Company”, “we”, “our”, “us”) for the twelve and thirty-six weeks ended July 12, 2019 and July 13, 2018 have been prepared in conformity with the accounting principles described in the Company’s Annual Report on Form 10-K for the fiscal year ended November 2, 2018 (the “Annual Report”) and include all adjustments considered necessary by management for a fair presentation of the interim periods. This Report should be read in conjunction with the Annual Report. Due to seasonality and other factors, interim results are not necessarily indicative of the results for the full year. Recent accounting pronouncements and their effect on the Company are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Report.

The November 2, 2018 balance sheet amounts within these interim condensed consolidated financial statements were derived from the audited fiscal year 2018 financial statements.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported revenues and expenses during the reporting periods. Some of the estimates needed to be made by management include the allowance for doubtful accounts, promotional and returns allowances, inventory reserves, the estimated useful lives of property, plant and equipment, and the valuation allowance for the Company’s deferred tax assets. Actual results could materially differ from these 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 which vary from our current estimates. Market conditions and the volatility in stock markets may cause significant changes in the measurement of our pension fund liabilities and the performance of our life insurance policies in future periods.

Certain items in fiscal year 2018 have been reclassified to conform to the fiscal year 2019 presentation.

Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued payroll, advertising and other expenses and notes payable. The carrying amount of these instruments approximate fair market value due to their short-term maturity. As of July 12, 2019, the Company had accounts in excess of the Federal Deposit Insurance Corporation insurance coverage limit. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk with regard to its cash and cash equivalents. The Company grants payment terms to a significant number of customers that are diversified over a wide geographic area. The Company monitors the payment histories of its customers and maintains an allowance for doubtful accounts which is reviewed for adequacy on a quarterly basis. The Company does not require collateral from its customers.

The table below shows customers that accounted for more than 20% of consolidated accounts receivable (“AR”) or 10% of consolidated sales for the thirty-six weeks ended July 12, 2019 and July 13, 2018, respectively.

Customer Concentration > 20% of AR or 10% of Sales *

	Wal-Mart						Dollar General
	Sales			AR			Sales			AR
July 12, 2019		35.9	%		33.3	%		10.7	%		25.1	%
July 13, 2018		36.6	%		34.4	%		9.1	%		23.9	%

* = No other customer accounted for more than 20% of consolidated accounts receivable or 10% of consolidated sales for the thirty-six weeks ended July 12, 2019 or the thirty-six weeks ended July 13, 2018.

Revenue recognition

Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) 606 – Contracts with Customers upon passage of title to the customer, typically upon product pick-up, shipment or delivery to customers. Products are delivered to customers primarily through our own long-haul fleet or through a Company owned direct store delivery system.

We recognize revenue mainly through retail and foodservice distribution channels. Our revenues primarily result from contracts with customers and are generally short term in nature with the delivery of product as the single performance obligation. We recognize revenue for the sale of the product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale. We elected to account for shipping and handling activities that occur after the customer has obtained control of the product as a fulfillment cost rather than an additional promised service. Our contracts are generally less than one year, and therefore we recognize costs paid to third party brokers to obtain contracts as expenses. Additionally, items that are not material in the context of the contract are recognized as expense.

Revenue is measured by the transaction price, which is defined as the amount of consideration we expect to receive in exchange for providing goods to customers. The transaction price is adjusted for estimates of known or expected variable consideration, which includes consumer incentives, trade promotions, and allowances, such as coupons, discounts, rebates, volume-based incentives, cooperative advertising, and other programs. Variable consideration related to these programs is recorded as a reduction to revenue based on amounts we expect to pay. We base these estimates on current performance, historical utilization, and projected redemption rates of each program. We review and update these estimates regularly until the incentives or product returns are realized and the impact of any adjustments are recognized in the period the adjustments are identified. In many cases, key sales terms such as pricing and quantities ordered are established on a regular basis such that most customer arrangements and related incentives have a duration of less than one year. Amounts billed and due from customers are short term in nature and are classified as receivables since payments are unconditional and only the passage of time is required before payments are due. Additionally, we do not grant payment financing terms greater than one year.

Subsequent events

Management has evaluated events subsequent to July 12, 2019 through the date that the accompanying condensed consolidated financial statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustments of and/or disclosure in such financial statements and has determined that no such transactions or other events occurred.

Basic earnings per share

Basic earnings per share are calculated based on the weighted average number of shares outstanding for all periods presented. No stock options, warrants, or convertible securities were outstanding as of July 12, 2019 or July 13, 2018.

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Inventories

8 Months Ended

Jul. 12, 2019

Inventory Disclosure [Abstract]

Inventories

Note 2 – Inventories:

Inventories are comprised of the following at the respective period ends:

	(unaudited)
	July 12, 2019		November 2, 2018
Meat, ingredients and supplies	$	6,791	$	6,455
Work in progress		2,427		1,415
Finished goods		14,825		15,543
	$	24,043	$	23,413

Inventories are valued at the lower of cost (which approximates actual cost on a first-in, first-out basis) or net realizable value. Costs related to warehousing, transportation and distribution to customers are considered when computing net realizable value. Inventories include the cost of ingredients, labor and manufacturing overhead. We regularly review inventory quantities on hand and write down any excess or obsolete inventories to estimated net realizable value. An inventory reserve is created when potentially slow-moving or obsolete inventories are identified in order to reflect the appropriate inventory value. Changes in economic conditions, production requirements, and lower than expected customer demand could result in additional obsolete or slow-moving inventory that cannot be sold or may need to be sold at reduced prices and could result in additional reserve provisions.

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Contingencies and Commitments

8 Months Ended

Jul. 12, 2019

Commitments and Contingencies Disclosure [Abstract]

Contingencies and Commitments

Note 3 – Contingencies and Commitments:

We continue to rent OTR (over-the-road) tractors on a month-to-month basis. We plan to invest in new capital lease arrangements later in fiscal year 2019.

The Company also leases warehouse and/or office facilities throughout the United States through month-to-month rental agreements. No material changes have been made to these agreements during the thirty-six weeks ended July 12, 2019.

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

Most flour purchases are made at market price with contracts. However, the Company may purchase bulk flour at current market prices under short-term (30 - 120 days) 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 potential price increases if agreed quantities are not purchased within the specified contract period. The contracts are not material. These contracts are typically settled within a month’s time and no significant contracts remain open at the close of the quarterly or annual reporting period. No significant contracts remained unfulfilled at July 12, 2019. The Company does not participate in the commodity futures market or hedging to limit commodity exposure.

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Segment Information

8 Months Ended

Jul. 12, 2019

Segment Reporting [Abstract]

Segment Information

Note 4 – Segment Information:

The Company has two reportable operating segments: Frozen Food Products (the processing and distribution of frozen food products) and Snack Food Products (the processing and distribution of meat and other convenience foods).

We evaluate each segment’s performance based on revenues and operating income. Selling, general and administrative (“SG&A”) expenses include corporate accounting, information systems, human resource management and marketing, which are managed at the corporate level. These activities are allocated to each operating segment based on revenues and/or actual usage. Assets managed at the corporate level have been included as “other” in the accompanying segment information.

The following segment information is presented for the twelve weeks ended July 12, 2019 and July 13, 2018.

Segment Information
Twelve weeks Ended July 12, 2019	Frozen Food Products			Snack Food Products		Other		Totals
Sales	$	11,273		$	31,564	$	-	$	42,837
Cost of products sold		7,486			21,936		-		29,422
Gross margin		3,787			9,628		-		13,415
SG&A		3,434			8,385		-		11,819
Gain on sale of property, plant and equipment		(9	)		-		-		(9	)
Income before taxes		362			1,243		-		1,605
Total assets	$	11,350		$	83,478	$	25,406	$	120,234
Additions to PP&E	$	198		$	5,475	$	-	$	5,673

Twelve weeks Ended July 13, 2018	Frozen Food Products		Snack Food Products		Other		Totals
Sales	$	9,574	$	28,894	$	-	$	38,468
Cost of products sold		6,474		19,560		-		26,034
Gross margin		3,100		9,334		-		12,434
SG&A		3,004		7,726		-		10,730
Gain on sale of property, plant and equipment		-		-		-		-
Income before taxes		96		1,608		-		1,704
Total assets	$	10,532	$	57,529	$	32,280	$	100,341
Additions to PP&E	$	251	$	4,642	$	-	$	4,893

The following segment information is presented for the thirty-six weeks ended July 12, 2019 and July 13, 2018.

Thirty-six weeks Ended July 12, 2019	Frozen Food Products			Snack Food Products		Other		Totals
Sales	$	34,691		$	94,630	$	-	$	129,321
Cost of products sold		22,800			63,051		-		85,851
Gross margin		11,891			31,579		-		43,470
SG&A		10,325			26,189		-		36,514
Gain on sale of property, plant and equipment		(9	)		-		-		(9	)
Income before taxes		1,575			5,390		-		6,965
Total assets	$	11,350		$	83,478	$	25,406	$	120,234
Additions to PP&E	$	476		$	19,315	$	-	$	19,791

Thirty-six weeks Ended July 13, 2018	Frozen Food Products			Snack Food Products			Other			Totals
Sales	$	31,175		$	86,385		$	-		$	117,560
Cost of products sold		20,612			58,495			-			79,107
Gross margin		10,563			27,890			-			38,453
SG&A		9,761			24,453			-			34,214
Gain on sale of property, plant and equipment		(6	)		(19	)		(5,977	)		(6,002	)
Income before taxes		808			3,456			5,977			10,241
Total assets	$	10,532		$	57,529		$	32,280		$	100,341
Additions to PP&E	$	552		$	9,152		$	-		$	9,704

The following information further disaggregates our sales to customers by major distribution channel and customer type for the twelve and thirty-six weeks ended July 12, 2019.

Twelve weeks Ended July 12, 2019 Distribution Channel	Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	23,046	$	-	$	23,046
Direct customer warehouse		8,518		-		8,518
Total Snack Food Products		31,564		-		31,564
Distributors		1,009		10,264		11,273
Total Frozen Food Products		1,009		10,264		11,273
Totals	$	32,573	$	10,264	$	42,837

Thirty-six weeks Ended July 12, 2019 Distribution Channel	Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	69,270	$	-	$	69,270
Direct customer warehouse		25,360		-		25,360
Total Snack Food Products		94,630		-		94,630
Distributors		4,648		30,043		34,691
Total Frozen Food Products		4,648		30,043		34,691
Totals	$	99,278	$	30,043	$	129,321

(a) Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.

(b) Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities and the military.

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Income Taxes

8 Months Ended

Jul. 12, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 5 – Income Taxes:

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. tax code that affect the Company including, but not limited to, (1) reducing the corporate federal income tax rate from 35% to 21%, (2) bonus depreciation that allows for full expensing of qualified property in the year placed in service, and (3) the repeal of the domestic production activity deduction beginning with our fiscal year 2020.

Under U.S. GAAP, specifically ASC Topic 740, Income Taxes, the tax effects of changes in tax laws must be recognized in the period in which the law is enacted, or December 22, 2017, for the Tax Act. ASC Topic 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Company’s deferred taxes were re-measured based upon the new tax rates. The change in deferred taxes is recorded as an adjustment to our deferred tax provision for the thirty-six weeks ended July 12, 2018.

The Tax Act reduced the corporate tax rate from 35% to 21%, effective January 1, 2018. This results in a blended corporate tax rate of 25.3% in fiscal year 2018 and 21% in fiscal year 2019 and thereafter. We analyzed our deferred tax balances to estimate which of those balances are expected to reverse in fiscal 2018 or thereafter, and we re-measured the deferred taxes at 23.07% or 21% accordingly. The change in deferred taxes was recorded as an adjustment to our income tax provision which resulted in a charge totaling $3,059 in fiscal year 2018.

The effective tax rate was 23.6% and 56.5% for the third quarter of fiscal 2019 and 2018, respectively. The remeasurement of deferred income taxes at newly enacted tax rates resulted in a $3,200 income tax expense or a 37.5% impact on the effective tax rate for the third quarter of fiscal year 2018, and a blended 23.07% statutory federal income tax rate for fiscal 2018. The effective tax rate for the third quarter of fiscal 2018 also reflects the impact of $1,640 of income tax expense or 19.2% related to tax on the gain on the sale of a land parcel in Chicago, Illinois. Additionally, the effective tax rates for the third quarter of fiscal years 2019 and 2018 were impacted by such items as the domestic production deduction, non-taxable gains and losses on life insurance policies and state income taxes.

As of July 12, 2019, the Company did not have any outstanding federal or state, other than California, net operating loss carryforwards.

Our federal income tax returns are open to audit under the statute of limitations for the fiscal years ended on or about October 31, 2015 through 2017. We are subject to income tax in California and various other state taxing jurisdictions. Our California state income tax returns are open to audit under the statute of limitations for the fiscal years ended on or about October 31, 2014 through 2017.

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Equipment Note Payable and Financial Arrangements

8 Months Ended

Jul. 12, 2019

Debt Disclosure [Abstract]

Equipment Note Payable and Financial Arrangements

Note 6 – Equipment Note Payable and Financial Arrangements

On December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A for up to $15,000 in equipment financing. Pursuant to the loan agreement, we borrowed $15,000, two separate receipts of $7,500 each, to purchase specific equipment for our new Chicago processing facility at a fixed rate of 4.13% and 3.98%, respectively, per annum. The loan terms are seven years and are secured by the purchased equipment. The first funding of $7,500 was received on December 28, 2018. The second funding was received on April 23, 2019. The master collateral loan and security agreement with Wells Fargo Bank, N.A. contains various affirmative and negative covenants that limit the use of funds and define other provisions of the loan. The Company was in compliance with all covenants under the master collateral loan and security agreement as of July 12, 2019.

The first secured equipment note payable is due with monthly principal and interest payments of $103 commencing on January 31, 2019 for 84 monthly installments including interest of 4.13% per annum. The second secured equipment note payable is due with monthly principal and interest payments of $102 commencing on May 31, 2019 for 84 monthly installments including interest of 3.98% per annum.

	(unaudited)			(unaudited)
	July 12, 2019			July 13, 2018
Secured equipment notes payable to Wells Fargo Bank, N.A. collateralized by equipment for the new Chicago processing facility.	$	14,378		$	-
Less current portion of notes payable		(1,918	)		-
Total long-term notes payable	$	12,460		$	-

We maintain a line of credit with Wells Fargo Bank, N.A. that expires on March 1, 2020. Under the terms of this line of credit, we may borrow up to $7,500 at an interest rate equal to the bank’s prime rate or LIBOR plus 1.5%. The borrowing agreement contains various covenants, the more significant of which require us to maintain a minimum tangible net worth, a minimum quick ratio, a minimum net income after tax and total capital expenditures less than $5,000. The Company was in violation of the capital expenditure covenant which was subsequently waived (per letter dated August 19, 2019). The Company borrowed $2,000 under this line of credit on April 15, 2019, which was repaid on April 25, 2019.

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Summary of Significant Accounting Policies (Policies)

8 Months Ended

Jul. 12, 2019

Accounting Policies [Abstract]

Revenue Recognition

Revenue recognition

Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) 606 – Contracts with Customers upon passage of title to the customer, typically upon product pick-up, shipment or delivery to customers. Products are delivered to customers primarily through our own long-haul fleet or through a Company owned direct store delivery system.

We recognize revenue mainly through retail and foodservice distribution channels. Our revenues primarily result from contracts with customers and are generally short term in nature with the delivery of product as the single performance obligation. We recognize revenue for the sale of the product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale. We elected to account for shipping and handling activities that occur after the customer has obtained control of the product as a fulfillment cost rather than an additional promised service. Our contracts are generally less than one year, and therefore we recognize costs paid to third party brokers to obtain contracts as expenses. Additionally, items that are not material in the context of the contract are recognized as expense.

Revenue is measured by the transaction price, which is defined as the amount of consideration we expect to receive in exchange for providing goods to customers. The transaction price is adjusted for estimates of known or expected variable consideration, which includes consumer incentives, trade promotions, and allowances, such as coupons, discounts, rebates, volume-based incentives, cooperative advertising, and other programs. Variable consideration related to these programs is recorded as a reduction to revenue based on amounts we expect to pay. We base these estimates on current performance, historical utilization, and projected redemption rates of each program. We review and update these estimates regularly until the incentives or product returns are realized and the impact of any adjustments are recognized in the period the adjustments are identified. In many cases, key sales terms such as pricing and quantities ordered are established on a regular basis such that most customer arrangements and related incentives have a duration of less than one year. Amounts billed and due from customers are short term in nature and are classified as receivables since payments are unconditional and only the passage of time is required before payments are due. Additionally, we do not grant payment financing terms greater than one year.

Subsequent Events

Subsequent events

Management has evaluated events subsequent to July 12, 2019 through the date that the accompanying condensed consolidated financial statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustments of and/or disclosure in such financial statements and has determined that no such transactions or other events occurred.

Basic Earnings Per Share

Basic earnings per share

Basic earnings per share are calculated based on the weighted average number of shares outstanding for all periods presented. No stock options, warrants, or convertible securities were outstanding as of July 12, 2019 or July 13, 2018.

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Summary of Significant Accounting Policies (Tables)

8 Months Ended

Jul. 12, 2019

Accounting Policies [Abstract]

Schedule of Customer Concentration

Customer Concentration > 20% of AR or 10% of Sales *

	Wal-Mart						Dollar General
	Sales			AR			Sales			AR
July 12, 2019		35.9	%		33.3	%		10.7	%		25.1	%
July 13, 2018		36.6	%		34.4	%		9.1	%		23.9	%

* = No other customer accounted for more than 20% of consolidated accounts receivable or 10% of consolidated sales for the thirty-six weeks ended July 12, 2019 or the thirty-six weeks ended July 13, 2018.

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Inventories (Tables)

8 Months Ended

Jul. 12, 2019

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories are comprised of the following at the respective period ends:

	(unaudited)
	July 12, 2019		November 2, 2018
Meat, ingredients and supplies	$	6,791	$	6,455
Work in progress		2,427		1,415
Finished goods		14,825		15,543
	$	24,043	$	23,413

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Segment Information (Tables)

8 Months Ended

Jul. 12, 2019

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The following segment information is presented for the twelve weeks ended July 12, 2019 and July 13, 2018.

Segment Information
Twelve weeks Ended July 12, 2019	Frozen Food Products			Snack Food Products		Other		Totals
Sales	$	11,273		$	31,564	$	-	$	42,837
Cost of products sold		7,486			21,936		-		29,422
Gross margin		3,787			9,628		-		13,415
SG&A		3,434			8,385		-		11,819
Gain on sale of property, plant and equipment		(9	)		-		-		(9	)
Income before taxes		362			1,243		-		1,605
Total assets	$	11,350		$	83,478	$	25,406	$	120,234
Additions to PP&E	$	198		$	5,475	$	-	$	5,673

Twelve weeks Ended July 13, 2018	Frozen Food Products		Snack Food Products		Other		Totals
Sales	$	9,574	$	28,894	$	-	$	38,468
Cost of products sold		6,474		19,560		-		26,034
Gross margin		3,100		9,334		-		12,434
SG&A		3,004		7,726		-		10,730
Gain on sale of property, plant and equipment		-		-		-		-
Income before taxes		96		1,608		-		1,704
Total assets	$	10,532	$	57,529	$	32,280	$	100,341
Additions to PP&E	$	251	$	4,642	$	-	$	4,893

The following segment information is presented for the thirty-six weeks ended July 12, 2019 and July 13, 2018.

Thirty-six weeks Ended July 12, 2019	Frozen Food Products			Snack Food Products		Other		Totals
Sales	$	34,691		$	94,630	$	-	$	129,321
Cost of products sold		22,800			63,051		-		85,851
Gross margin		11,891			31,579		-		43,470
SG&A		10,325			26,189		-		36,514
Gain on sale of property, plant and equipment		(9	)		-		-		(9	)
Income before taxes		1,575			5,390		-		6,965
Total assets	$	11,350		$	83,478	$	25,406	$	120,234
Additions to PP&E	$	476		$	19,315	$	-	$	19,791

Thirty-six weeks Ended July 13, 2018	Frozen Food Products			Snack Food Products			Other			Totals
Sales	$	31,175		$	86,385		$	-		$	117,560
Cost of products sold		20,612			58,495			-			79,107
Gross margin		10,563			27,890			-			38,453
SG&A		9,761			24,453			-			34,214
Gain on sale of property, plant and equipment		(6	)		(19	)		(5,977	)		(6,002	)
Income before taxes		808			3,456			5,977			10,241
Total assets	$	10,532		$	57,529		$	32,280		$	100,341
Additions to PP&E	$	552		$	9,152		$	-		$	9,704

Schedule of Disaggregates Our Sales to Customer

The following information further disaggregates our sales to customers by major distribution channel and customer type for the twelve and thirty-six weeks ended July 12, 2019.

Twelve weeks Ended July 12, 2019 Distribution Channel	Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	23,046	$	-	$	23,046
Direct customer warehouse		8,518		-		8,518
Total Snack Food Products		31,564		-		31,564
Distributors		1,009		10,264		11,273
Total Frozen Food Products		1,009		10,264		11,273
Totals	$	32,573	$	10,264	$	42,837

Thirty-six weeks Ended July 12, 2019 Distribution Channel	Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	69,270	$	-	$	69,270
Direct customer warehouse		25,360		-		25,360
Total Snack Food Products		94,630		-		94,630
Distributors		4,648		30,043		34,691
Total Frozen Food Products		4,648		30,043		34,691
Totals	$	99,278	$	30,043	$	129,321

(a) Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.

(b) Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities and the military.

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Equipment Note Payable and Financial Arrangements (Tables)

8 Months Ended

Jul. 12, 2019

Debt Disclosure [Abstract]

Schedule of Long Term Notes Payable

	(unaudited)			(unaudited)
	July 12, 2019			July 13, 2018
Secured equipment notes payable to Wells Fargo Bank, N.A. collateralized by equipment for the new Chicago processing facility.	$	14,378		$	-
Less current portion of notes payable		(1,918	)		-
Total long-term notes payable	$	12,460		$	-

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Summary of Significant Accounting Policies (Details Narrative)	8 Months Ended
	Jul. 12, 2019	Jul. 13, 2018
Accounts Receivable [Member]
Concentration risk, percentage	20.00%	20.00%
Sales Revenue, Net [Member]
Concentration risk, percentage	10.00%	10.00%

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Summary of Significant Accounting Policies - Schedule of Customer Concentration (Details)		8 Months Ended
		Jul. 12, 2019	Jul. 13, 2018
Sales Revenue, Net [Member]
Concentration risk, percentage		10.00%	10.00%
Accounts Receivable [Member]
Concentration risk, percentage		20.00%	20.00%
Wal-Mart [Member] | Sales Revenue, Net [Member]
Concentration risk, percentage	[1]	35.90%	36.60%
Wal-Mart [Member] | Accounts Receivable [Member]
Concentration risk, percentage	[1]	33.30%	34.40%
Dollar General [Member] | Sales Revenue, Net [Member]
Concentration risk, percentage	[1]	10.70%	9.10%
Dollar General [Member] | Accounts Receivable [Member]
Concentration risk, percentage	[1]	25.10%	23.90%

[1] No other customer accounted for more than 20% of consolidated accounts receivable or 10% of consolidated sales for the thirty-six weeks ended July 12, 2019 or the thirty-six weeks ended July 13, 2018.

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Summary of Significant Accounting Policies - Schedule of Customer Concentration (Details) (Parenthetical)	8 Months Ended
	Jul. 12, 2019	Jul. 13, 2018
Accounts Receivable [Member]
Concentration risk, percentage	20.00%	20.00%
Sales Revenue, Net [Member]
Concentration risk, percentage	10.00%	10.00%

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Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands	Jul. 12, 2019	Nov. 02, 2018
Inventory Disclosure [Abstract]
Meat, ingredients and supplies	$ 6,791	$ 6,455
Work in progress	2,427	1,415
Finished goods	14,825	15,543
Inventories, net	$ 24,043	$ 23,413

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Segment Information (Details Narrative)	8 Months Ended
	Jul. 12, 2019 Segment
Segment Reporting [Abstract]
Number of operating segments	2

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Segment Information - Schedule of Segment Reporting Information, by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		8 Months Ended
	Jul. 12, 2019	Jul. 13, 2018	Jul. 12, 2019	Jul. 13, 2018	Nov. 02, 2018
Sales	$ 42,837	$ 38,468	$ 129,321	$ 117,560
Cost of products sold	29,422	26,034	85,851	79,107
Gross margin	13,415	12,434	43,470	38,453
SG&A	11,819	10,730	36,514	34,214
Gain on sale of property, plant and equipment	(9)		(9)	(6,002)
Income before taxes	1,605	1,704	6,965	10,241
Total assets	120,234	100,341	120,234	100,341	$ 101,494
Additions to PP&E	5,673	4,893	19,791	9,704
Frozen Food Products [Member]
Sales	11,273	9,574	34,691	31,175
Cost of products sold	7,486	6,474	22,800	20,612
Gross margin	3,787	3,100	11,891	10,563
SG&A	3,434	3,004	10,325	9,761
Gain on sale of property, plant and equipment	(9)		(9)	(6)
Income before taxes	362	96	1,575	808
Total assets	11,350	10,532	11,350	10,532
Additions to PP&E	198	251	476	552
Snack Food Products [Member]
Sales	31,564	28,894	94,630	86,385
Cost of products sold	21,936	19,560	63,051	58,495
Gross margin	9,628	9,334	31,579	27,890
SG&A	8,385	7,726	26,189	24,453
Gain on sale of property, plant and equipment				(19)
Income before taxes	1,243	1,608	5,390	3,456
Total assets	83,478	57,529	83,478	57,529
Additions to PP&E	5,475	4,642	19,315	9,152
Other [Member]
Sales
Cost of products sold
Gross margin
SG&A
Gain on sale of property, plant and equipment				(5,977)
Income before taxes				5,977
Total assets	25,406	32,280	25,406	32,280
Additions to PP&E

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Segment Information - Schedule of Disaggregates Our Sales to Customer (Details) - USD ($) $ in Thousands		3 Months Ended		8 Months Ended
		Jul. 12, 2019	Jul. 13, 2018	Jul. 12, 2019	Jul. 13, 2018
Direct store delivery		$ 23,046		$ 69,270
Direct customer warehouse		8,518		25,360
Total Snack Food Products		31,564		94,630
Distributors		11,273		34,691
Total Frozen Food Products		11,273		34,691
Totals		42,837	$ 38,468	129,321	$ 117,560
Retail [Member]
Direct store delivery	[1]	23,046		69,270
Direct customer warehouse	[1]	8,518		25,360
Total Snack Food Products	[1]	31,564		94,630
Distributors	[1]	1,009		4,648
Total Frozen Food Products	[1]	1,009		4,648
Totals	[1]	32,573		99,278
Foodservice [Member]
Direct store delivery	[2]
Direct customer warehouse	[2]
Total Snack Food Products	[2]
Distributors	[2]	10,264		30,043
Total Frozen Food Products	[2]	10,264		30,043
Totals	[2]	$ 10,264		$ 30,043

[1] Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.

[2] Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities and the military.

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Income Taxes (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		8 Months Ended	12 Months Ended
	Jul. 12, 2019	Jul. 13, 2018	Jul. 12, 2019	Nov. 02, 2018
Income Tax Disclosure [Abstract]
Income tax rate reconciliation description			On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act includes significant changes to the U.S. tax code that will affect our fiscal year ending November 1, 2019, and future periods, including, but not limited to, (1) reducing the corporate federal income tax rate from 35% to 21%,
Federal income tax rate			21.00%
Blended corporate tax rate before and after the Tax Act				25.30%
Re-measured deferred taxes description			We analyzed our deferred tax balances to estimate which of those balances are expected to reverse in fiscal 2018 or thereafter, and we re-measured the deferred taxes at 23.07% or 21% accordingly.
Adjustment to income tax provision				$ 3,059
Effective income tax rate	23.60%	56.50%
Deferred tax assets, reclassified from other comprehensive income to retained earnings	$ 3,200		$ 3,200
Deferred income taxes, description			The remeasurement of deferred income taxes at newly enacted tax rates resulted in a $3,200 income tax expense or a 37.5% impact on the effective tax rate for the third quarter of fiscal year 2018, and a blended 23.07% statutory federal income tax rate for fiscal 2018.
Impact on income tax expenses		$ 1,640
Impact on income tax, percent		19.20%

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Equipment Note Payable and Financial Arrangements (Details Narrative) - USD ($) $ in Thousands	May 31, 2019	Apr. 25, 2019	Apr. 23, 2019	Jan. 31, 2019	Dec. 28, 2018	Dec. 26, 2018	Apr. 15, 2019
Wells Fargo Bank N.A [Member]
Line of credit facility, expiration date						Mar. 01, 2020
Line of credit facility, maximum borrowing capacity						$ 7,500
Line of credit facility, covenant terms						The borrowing agreement contains various covenants, the more significant of which require us to maintain a minimum tangible net worth, a minimum quick ratio, a minimum net income after tax and total capital expenditures less than $5,000. The Company was in violation of the capital expenditure covenant which was subsequently waived (per letter dated August 19, 2019).
Minimum tangible net worth and capital expenditure						$ 5,000
Line of credit							$ 2,000
Repayments of line of credit		$ 2,000
Wells Fargo Bank N.A [Member] | LIBOR [Member]
Line of credit facility, interest rate						1.50%
First Secured Equipment Notes Payable [Member]
Facility fixed rate percentage				4.13%
Debt monthly principal and interest payments				$ 103
Debt monthly term				84 months
Second Secured Equipment Notes Payable [Member]
Facility fixed rate percentage	3.98%
Debt monthly principal and interest payments	$ 102
Debt monthly term	84 months
Loan Agreement [Member]
Debt term						The loan terms are seven years and are secured by the purchased equipment.
Proceeds from funds			$ 7,500		$ 7,500
Loan Agreement [Member] | Receipt 1 [Member]
Purchase specific equipment amount						$ 7,500
Facility fixed rate percentage						4.13%
Loan Agreement [Member] | Receipt 2 [Member]
Purchase specific equipment amount						$ 7,500
Facility fixed rate percentage						3.98%
Maximum [Member]
Equipment financing amount						$ 15,000

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Equipment Note Payable and Financial Arrangements - Schedule of Long Term Notes Payable (Details) - USD ($) $ in Thousands	Jul. 13, 2019	Jul. 12, 2019	Nov. 02, 2018
Debt Disclosure [Abstract]
Secured equipment notes payable to Wells Fargo Bank, N.A. collateralized by equipment for the new Chicago processing facility.		$ 14,378
Less current portion of notes payable		(1,918)
Total long-term notes payable		$ 12,460