Bridgford Foods Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended October 28, 2022 (52 weeks), compared with the 52 weeks ended October 29, 2021. Although the request references 2022 Q4, this filing reports annual results; it does not provide a clear standalone fourth-quarter income statement. Amounts below are in millions of dollars unless stated otherwise.
Business context and results
Bridgford manufactures and distributes frozen and snack foods in the United States. Snack Food Products generated 79% of FY2022 sales and Frozen Food Products 21%. Consolidated sales increased 10.6%, driven by higher selling prices and increased frozen-food volume as foodservice demand recovered. Snack-food volume declined amid inflationary pressure on consumer spending.
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $265.9 | $240.4 |
| Gross profit / margin | $72.1 / 27.1% | $51.4 / 21.4% |
| Operating income (loss) | $64.6 | $(8.2) |
| Net income (loss) | $45.1 | $(5.5) |
| Basic earnings (loss) per share | $4.96 | $(0.61) |
| Cash used in operating activities | $(7.8) | $(6.0) |
| Capital expenditures | $3.8 | $6.2 |
Financial position, cash flow and debt
- Year-end cash and cash equivalents were $16.3; working capital was $66.1. Total assets were $176.3 and total liabilities $50.0.
- Total debt was $4.9, including $1.1 current and $3.8 long-term equipment debt, down from $37.1 a year earlier. The company reported $15.0 available under its revolving credit facility, which ran through March 1, 2023. It reported compliance with loan covenants.
- Operating cash outflow was $7.8 despite reported net income, reflecting, among other items, the noncash adjustment for the property-sale gain and increases in receivables and inventory. The cash conversion cycle lengthened to 83 days from 74 days.
- Investing activities provided $56.3, principally reflecting $60.1 of proceeds from the Chicago property sale. Financing activities used $32.6, primarily for repayment of borrowings.
Material changes and unusual items
- On June 1, 2022, the company sold its 170 N. Green Street Chicago property for a stated purchase price of $60.0 million, subject to adjustments. It recorded a $57.7 million gain. The gain was the principal reason for the reported $64.6 million operating income and materially boosted net income; operating income excluding the gain was approximately $6.8 million.
- Frozen-food sales rose 35.5% to $56.3 million, mainly on 28.1% higher unit volume and higher prices. Segment gross margin declined to 26.9% from 28.8%.
- Snack-food sales rose 5.4% to $209.6 million, as pricing more than offset a 2.6% decline in unit volume. Segment gross margin improved to 27.1% from 19.8%, while meat commodity costs increased approximately $7.9 million.
- Consolidated commodity costs increased approximately $9.8 million, including approximately $7.9 million for meat and $1.8 million for flour. Selling, general and administrative expenses increased 8.5% to $65.2 million.
- The company recorded income tax expense of $16.3 million, including a significant tax charge related to the property gain. FY2021 included a $1.8 million tax benefit.
Outlook, risks and controls
- Management expected inflationary pressures, including higher labor, freight and material costs, to continue through FY2023. It anticipated adequate liquidity for operations and capital expenditures during FY2023 and sufficient liquidity for at least the next 12 months, based on expected operating cash generation.
- Management warned that it may not be able to raise prices quickly or sufficiently to offset input-cost increases; higher prices could also reduce demand. Commodity volatility, labor availability and costs, supply-chain disruptions, and pandemic-related demand shifts remain risks.
- Customer concentration is substantial: Walmart represented 29.8% of FY2022 sales and Dollar General 16.9%. The filing also identifies customer bargaining power and loss of major customers as risks.
- Management reported ineffective internal control over financial reporting at year-end due to a material weakness: a lease-term change was not timely reported to accounting. Management said it implemented remediation and believed the issue was remediated by the filing date; the related misstatements were corrected. The independent auditor issued an unqualified opinion on the financial statements but did not opine on internal-control effectiveness.
- No material legal proceedings were pending. The filing identifies potential multiemployer pension withdrawal liabilities and food-safety, regulatory, and product-liability exposures. No specific material contingency amount was provided for these risks.
Key facts for investors to verify
- How much of FY2022 earnings reflects the one-time property-sale gain, and what were recurring operating results and cash generation?
- Whether the company renewed or replaced the revolving credit facility that was scheduled to mature March 1, 2023, and the resulting liquidity and borrowing terms.
- Whether operating cash flow improved, receivables and inventory were converted to cash, and the 83-day cash conversion cycle shortened.
- Whether pricing can offset continued commodity, labor and freight inflation without further volume erosion, particularly in snack foods.
- Whether the lease-accounting control remediation proved effective in subsequent reporting periods, and whether major-customer concentration or pension exposures changed.