Business Context and Reporting Period
Company: Bridgford Foods Corporation
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: 13 weeks ended January 31, 1997
Business Overview: The company manufactures value-added food products. Operations are heavily dependent on raw material prices, specifically flour and pork, which are subject to market volatility.
Key Financial Metrics
| Metric | 13 Weeks Ended Jan 31, 1997 | 13 Weeks Ended Feb 2, 1996 |
|---|---|---|
| Net Sales | $31,669,311 | $29,873,247 |
| Net Income | $1,079,118 | $938,869 |
| Net Income Per Share | $0.11 | $0.10 |
| Cash Flow from Operations | $6,083,034 | $2,235,575 |
| Cash and Equivalents (Ending) | $11,220,277 | $6,029,489 |
| Interest-Bearing Debt | $0 | $0 |
| Effective Tax Rate | 38.0% | 38.0% |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased by $1.796 million (6.0%) year-over-year, driven by higher unit sales volume, product mix changes, and increased selling prices.
- Profitability: Net income rose by $140,249 (15.0%) compared to the prior year period.
- Cost Structure: Cost of products sold increased 3.9% year-over-year due to volume and mix. Selling, general, and administrative (SG&A) expenses rose 8.1%, primarily due to higher sales volume.
- Depreciation: Depreciation expense increased 28.2% to $783,250, attributed to significant facility expansion projects completed in Texas and North Carolina during the prior fiscal year.
- Liquidity: Cash and cash equivalents increased by $4.877 million (76.9%) to $11.22 million. This was driven by strong operating cash flow ($6.08 million) and reductions in accounts receivable ($1.41 million) and inventory ($3.71 million).
Outlook, Risks, and Management Commentary
- Commodity Risks: Management notes that while flour costs have declined from fiscal 1996 levels, pork prices remain at historically high levels. The company cannot instantly adjust selling prices to match commodity volatility.
- Capital Expenditures: Capital spending decreased to $641,963 for the quarter as significant construction projects were completed. Future depreciation is expected to remain elevated due to these new assets.
- Debt and Liquidity: The company remains free of interest-bearing debt. It maintains a $2.0 million revolving line of credit with Bank of America (expiring April 30, 1998), which has not been utilized for over ten years.
- Forward-Looking Risks: Potential risks include general economic conditions, competitive pricing, adverse publicity, changes in government regulations, and weather conditions affecting commodity costs.
Investor Verification Checklist
- Verify the sustainability of the 6.0% sales growth given the high cost of pork commodities.
- Confirm the timeline for potential selling price adjustments to offset raw material inflation.
- Review the impact of the completed Texas and North Carolina facility expansions on future depreciation and capacity utilization.
- Monitor the company's ability to maintain inventory reductions while meeting demand.
- Check the status of the $2.0 million revolving credit line and any potential need for utilization if commodity costs rise further.