**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

**FORM10-Q**

**(Markone)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF1934

**Forthe quarterly period ended July 07, 2006**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition period from**

**Commissionfile number          0-2396**

**BRIDGFORD FOODS CORPORATION**

(Exact name of Registrantas specified in its charter)

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

 

**1308 N. Patt Street,Anaheim, CA  92801**

(Address of principalexecutive offices-Zip code)

**714-526-5533**

(Registrant’s telephonenumber, including area code)

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months ( or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes  x             No  o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer.  See definitionof “accelerated filer and large accelerated filer” in Rule 12b-2 of theExchange Act. (Check one):

Large accelerated filer o            AcceleratedFiler o            Non-acceleratedfiler x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes  o             No  x

As of August 21, 2006 the registrant had 9,964,000shares of common stock outstanding.

 

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**BRIDGFORDFOODS CORPORATION**

FORM 10-Q QUARTERLY REPORT

INDEX

 

References to “Bridgford Foods” or the “Company” contained in thisQuarterly Report on Form 10-Q refer to

Bridgford Foods Corporation.

 
|                                                                                                                                                             | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| Part I. Financial Information                                                                                                                               |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Item 1. Financial Statements                                                                                                                                |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| a. Consolidated Condensed  Balance Sheets at July 7, 2006 (unaudited) and October 28, 2005                                                                  |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| b. Consolidated Condensed  Statements of Operations for the twelve and thirty-six weeks ended July 7,  2006 and July 8, 2005 (unaudited)                    |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| c. Consolidated Condensed  Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the  thirty-six weeks ended July 7, 2006 (unaudited) |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| d. Consolidated Condensed  Statements of Cash Flows for the thirty-six weeks ended July 7, 2006 and July  8, 2005 (unaudited)                               |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| e. Notes to  Consolidated Condensed Financial Statements (unaudited)                                                                                        |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of  Operations                                                        |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                                                                         |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Item 4.  Controls and Procedures                                                                                                                            |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Part II. Other  Information                                                                                                                                 |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                                                                        |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Item 6.  Exhibits                                                                                                                                           |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Signatures                                                                                                                                                  |       |       |   |   |
|                                                                                                                                                        |       |       |   |   |
| Items 1, 1A and  3-5 of Part II. have been omitted because they are not applicable with  respect to the current reporting period.                           |       |       |   |   |

 

2

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**Part I.  FinancialInformation**

Item 1.a.

**BRIDGFORD FOODS CORPORATION**

**CONSOLIDATED CONDENSED BALANCE SHEETS**

(inthousands, except per share amounts)

 
| ** **                                                                                                                                                | ** ** | **July 7** | ** ** | **October 28** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|------------|---------------------|------------|
| ** **                                                                                                                                                | ** ** | **2006**        | ** ** | **2005**            | ** ** |
| ** **                                                                                                                                                | ** ** | **(Unaudited)** | ** ** | ** **          | ** ** |
| **ASSETS**                                                                                                                                                | ** ** | ** **      | ** ** | ** **          | ** ** |
|                                                                                                                                                      |       |            |       |                |       |
| Current assets:                                                                                                                                           |       |            |       |                |       |
|                                                                                                                                                      |       |            |       |                |       |
| Cash and cash  equivalents                                                                                                                                |       | $               | 15,524     |                | $          | 10,355 |   |
| Accounts  receivable, less allowance for doubtful accounts of $491 and $468,  respectively, and promotional allowances of $1,688 and $2,092, respectively |       | 9,047           |       | 9,508               |       |
| Inventories  (Note 2)                                                                                                                                     |       | 17,519          |       | 21,324              |       |
| Prepaid expenses  and other current assets                                                                                                                |       | 2,505           |       | 2,551               |       |
|                                                                                                                                                      |       |            |       |                |       |
| Total current  assets                                                                                                                                     |       | 44,595          |       | 43,738              |       |
|                                                                                                                                                      |       |            |       |                |       |
| Property, plant and  equipment, less accumulated depreciation of $53,417 and $50,731, respectively                                                        |       | 13,297          |       | 14,519              |       |
|                                                                                                                                                      |       |            |       |                |       |
| Other non-current  assets                                                                                                                                 |       | 13,739          |       | 14,706              |       |
|                                                                                                                                                      |       | $               | 71,631     |                | $          | 72,963 |   |
|                                                                                                                                                      |       |            |       |                |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                            | ** ** | ** **      | ** ** | ** **          | ** ** |
|                                                                                                                                                      |       |            |       |                |       |
| Current liabilities:                                                                                                                                      |       |            |       |                |       |
|                                                                                                                                                      |       |            |       |                |       |
| Accounts payable                                                                                                                                          |       | $               | 1,940      |                | $          | 3,806 |   |
| Accrued payroll,  advertising and other expenses                                                                                                          |       | 8,628           |       | 8,035               |       |
|                                                                                                                                                      |       |            |       |                |       |
| Total current  liabilities                                                                                                                                |       | 10,568          |       | 11,841              |       |
|                                                                                                                                                      |       |            |       |                |       |
| Non-current liabilities                                                                                                                                   |       | 10,827          |       | 12,860              |       |
|                                                                                                                                                      |       |            |       |                |       |
| Commitments (Note 6)                                                                                                                                      |       |            |       |                |       |
|                                                                                                                                                      |       |            |       |                |       |
| Shareholders’ equity:                                                                                                                                |       |            |       |                |       |
| Preferred stock,  without par value   Authorized - 1,000 shares   Issued and outstanding - none                                                           |       | —          |       | —              |       |
|                                                                                                                                                      |       |            |       |                |       |
| Common stock,  $1.00 par value   Authorized - 20,000 shares   Issued and outstanding - 9,965 and 9,986 shares                                        |       | 10,022          |       | 10,043              |       |
| Capital in  excess of par value                                                                                                                           |       | 14,263          |       | 14,394              |       |
| Retained earnings                                                                                                                                         |       | 26,047          |       | 25,889              |       |
| Accumulated  other comprehensive loss                                                                                                                     |       | (96             | )          | (2,064              |       |
|                                                                                                                                                      |       | 50,236          |       | 48,262              |       |
|                                                                                                                                                      |       | $               | 71,631     |                | $          | 72,963 |   |

 

Seeaccompanying notes to consolidated condensed financial statements.

 

3

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Item 1.b.

**BRIDGFORDFOODS CORPORATION**

**CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                     | ** ** | **12 weeks ended**                                          | ** ** | **12 weeks ended**                                          | ** ** | **36 weeks ended** | ** ** | **36 weeks ended** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                     | ** ** | **July 7**                                                       | ** ** | **July 8**                                                       | ** ** | **July 7**              | ** ** | **July 8**              | ** ** |
| ** **                                     | ** ** | **2006**                                                              | ** ** | **2005**                                                              | ** ** | **2006**                     | ** ** | **2005**                     | ** ** |
| ** **                                     | ** ** | **(in thousands, except per share amounts)** | ** ** | **(in thousands, except per share amounts)** | ** ** |
|                                           |       |                                                                  |       |                                                                  |       |                         |       |                         |       |
| Net sales                                      |       | $                                                                     | 28,169     |                                                                  | $          | 27,656                       |       | $                            | 91,049     |   | $ | 88,961 |   |
|                                           |       |                                                                  |       |                                                                  |       |                         |       |                         |       |
| Cost of products sold,  excluding depreciation |       | 17,024                                                                |       | 17,241                                                                |       | 58,087                       |       | 57,672                       |       |
|                                           |       |                                                                  |       |                                                                  |       |                         |       |                         |       |
| Selling, general and  administrative expenses  |       | 10,019                                                                |       | 9,321                                                                 |       | 30,230                       |       | 29,503                       |       |
| Depreciation                                   |       | 892                                                                   |       | 1,028                                                                 |       | 2,676                        |       | 3,085                        |       |
| Gain on sale of equity  securities             |       | —                                                                |       | —                                                                |       | (106                         | )          | —                       |       |
|                                           |       | 27,935                                                                |       | 27,590                                                                |       | 90,887                       |       | 90,260                       |       |
|                                           |       |                                                                  |       |                                                                  |       |                         |       |                         |       |
| Income (loss) before  taxes                    |       | 234                                                                   |       | 66                                                                    |       | 162                          |       | (1,299                       | )          |
|                                           |       |                                                                  |       |                                                                  |       |                         |       |                         |       |
| Income tax provision  (benefit)                |       | 10                                                                    |       | (177                                                                  | )          | 4                            |       | (696                         | )          |
|                                           |       |                                                                  |       |                                                                  |       |                         |       |                         |       |
| Net income (loss)                              |       | $                                                                     | 224        |                                                                  | $          | 243                          |       | $                            | 158        |   | $ | (603 | ) |
|                                           |       |                                                                  |       |                                                                  |       |                         |       |                         |       |
| Basic and diluted  income (loss) per share     |       | $                                                                     | .02        |                                                                  | $          | .03                          |       | $                            | .02        |   | $ | (.06 | ) |
|                                           |       |                                                                  |       |                                                                  |       |                         |       |                         |       |
| Basic and diluted  shares computed             |       | 9,964                                                                 |       | 9,994                                                                 |       | 9,968                        |       | 9,998                        |       |

 

Item 1.c.

**CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY ANDCOMPREHENSIVE INCOME (LOSS)**

**(Unaudited)**

(inthousands)

 
| ** **                                                   | ** ** | ** **            | ** ** | ** **         | ** ** | ** **      | ** ** | ** **        | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
|--------------------------------------------------------------|------------|-----------------------|------------|--------------------|------------|-----------------|------------|-------------------|------------|------------------------|------------|------------|------------|
| ** **                                                   | ** ** | ** **            | ** ** | ** **         | ** ** | **Capital**     | ** ** | ** **        | ** ** | **other**              | ** ** | ** ** | ** ** |
| ** **                                                   | ** ** | **Common Stock** | ** ** | **in excess** | ** ** | **Retained**    | ** ** | **comprehensive** | ** ** | ** **             | ** ** |
| ** **                                                   | ** ** | **Shares**            | ** ** | **Amount**         | ** ** | **of par** | ** ** | **earnings**      | ** ** | **income (loss)** | ** ** | **Total**  | ** ** |
| October 28, 2005                                             |       | 9,986                 |       | $                  | 10,043     |            | $          | 14,394            |       | $                      | 25,889     |       | $          | (2,064 | ) | $ | 48,262 |   |
| Shares  repurchased                                          |       | (21                   | )          | (21                | )          | (131            | )          |              |       |                   |       | (152       | )          |
| Net income                                                   |       |                  |       |               |       |            |       | 158               |       |                   |       | 158        |       |
| Other  comprehensive income (loss):                          |       |                  |       |               |       |            |       |              |       |                   |       |       |       |
| Reclassification  adjustment for gain included in net income |       |                  |       |               |       |            |       |              |       | (56                    | )          | (56        | )          |
| Minimum pension liability                                    |       |                  |       |               |       |            |       |              |       | 2,024                  |       | 2,024      |       |
| Comprehensive  income                                        |       |                  |       |               |       |            |       |              |       |                   |       | 2,126      |       |
| July 7, 2006                                                 |       | 9,965                 |       | $                  | 10,022     |            | $          | 14,263            |       | $                      | 26,047     |       | $          | (96 | ) | $ | 50,236 |   |

 

Seeaccompanying notes to consolidated condensed financial statements.

 

4

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Item 1.d.

**BRIDGFORD FOODS CORPORATION**

**CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                            | ** ** | **36 weeks ended** | ** ** | **36 weeks ended** | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                            | ** ** | **July 7**              | ** ** | **July 8**              | ** ** |
| ** **                                            | ** ** | **2006**                     | ** ** | **2005**                     | ** ** |
| ** **                                            | ** ** | **(in thousands)**      | ** ** | **(in thousands)**      | ** ** |
|                                                  |       |                         |       |                         |       |
| Cash flows from  operating activities:                |       |                         |       |                         |       |
|                                                  |       |                         |       |                         |       |
| Net income  (loss)                                    |       | $                            | 158        |                         | $          | (603 | ) |
|                                                  |       |                         |       |                         |       |
| Income charges  not affecting cash:                   |       |                         |       |                         |       |
| Depreciation                                          |       | 2,676                        |       | 3,085                        |       |
| Recovery on  losses on accounts receivable            |       | (324                         | )          | (192                         | )          |
| Effect on cash  of changes in assets and liabilities: |       |                         |       |                         |       |
| Accounts receivable,  net                             |       | 785                          |       | 2,447                        |       |
| Inventories                                           |       | 3,805                        |       | 2,503                        |       |
| Prepaid expenses  and other current assets            |       | (12                          | )          | (706                         | )          |
| Other  non-current assets                             |       | (301                         | )          | (374                         | )          |
| Accounts payable                                      |       | (1,866                       | )          | 535                          |       |
| Accrued payroll,  advertising and other expenses      |       | 593                          |       | (704                         | )          |
| Income taxes  payable                                 |       | —                       |       | (913                         | )          |
| Non-current  liabilities                              |       | 1,261                        |       | 1,180                        |       |
|                                                  |       |                         |       |                         |       |
| Net cash  provided by operating activities            |       | 6,775                        |       | 6,258                        |       |
|                                                  |       |                         |       |                         |       |
| Cash used in investing  activities:                   |       |                         |       |                         |       |
| Additions to  property, plant and equipment           |       | (1,454                       | )          | (1,134                       | )          |
|                                                  |       |                         |       |                         |       |
| Net cash used in  investing activities                |       | (1,454                       | )          | (1,134                       | )          |
|                                                  |       |                         |       |                         |       |
| Cash used in financing  activities:                   |       |                         |       |                         |       |
| Shares  repurchased                                   |       | (152                         | )          | (98                          | )          |
|                                                  |       |                         |       |                         |       |
| Net cash used in  financing activities                |       | (152                         | )          | (98                          | )          |
|                                                  |       |                         |       |                         |       |
| Net increase in cash  and cash equivalents            |       | 5,169                        |       | 5,026                        |       |
|                                                  |       |                         |       |                         |       |
| Cash and cash  equivalents at beginning of period     |       | 10,355                       |       | 7,972                        |       |
|                                                  |       |                         |       |                         |       |
| Cash and cash  equivalents at end of period           |       | $                            | 15,524     |                         | $          | 12,998 |   |
|                                                  |       |                         |       |                         |       |
| Cash paid for income taxes                            |       | $                            | 26         |                         | $          | 684 |   |

 

See accompanyingnotes to consolidated condensed financial statements.

5

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Item 1. e.

**BRIDGFORD FOODS CORPORATION**

**NOTES TO CONSOLIDATED CONDENSED FINANCIALSTATEMENTS (Unaudited)**

(in thousands, except share and per share amounts)

Note 1 - The Company and Summary of SignificantAccounting Policies:

The unauditedconsolidated condensed financial statements of Bridgford Foods Corporation (the“Company”) for the twelve and thirty-six weeks ended July 7, 2006 and July 8,2005 have been prepared in conformity with the accounting principles describedin the Company’s Annual Report on Form 10-K for the fiscal year ended October28, 2005 (the “Annual Report”) and include all adjustments considered necessaryby management for a fair statement of the interim periods.  Such adjustments consist only of normalrecurring items.  This report should beread in conjunction with the Annual Report. Due to seasonality and other factors, interim results are not necessarilyindicative of the results to be expected for the full year.

On February 22, 2006 theCompany sold 5,028 shares of common stock of Sears Holdings Corporationreceived as the result of the bankruptcy of a significant customer. Thistransaction resulted in a pre-tax gain of $106 and a reduction in other comprehensive income of$67.

Note 2 - Inventories:

Inventories are comprisedas follows at the respective periods:
|                                 | ** ** | **July 7  2006** | ** ** | **October 28  2005** | ** ** |
|---------------------------------|------------|-----------------------|------------|---------------------------|------------|
|                            |       |                  |       |                      |       |
| Meat,  ingredients and supplies |       | $                     | 4,727      |                      | $          | 6,433 |   |
| Work in progress                |       | 1,357                 |       | 2,293                     |       |
| Finished goods                  |       | 11,435                |       | 12,598                    |       |
|                            |       | $                     | 17,519     |                      | $          | 21,324 |   |

 

InNovember 2004, the FASBissued Statement of Financial Accounting Standards No. 151, “Inventory Costs”. TheStatement requires abnormal amounts of inventory costs related to amounts ofidle freight, handling costs and spoilage be recognized as current periodexpenses.  The standard is effective forfiscal years beginning after June 15, 2005 with early applicationpermitted.  The Company’s policy hasalways been to handle inventory costs in a manner consistent with theprovisions of this Statement, and, therefore, the adoption had no impact. 

Note 3 - Basic and diluted earnings per share:

The Company had 250,000employee stock options outstanding during the twelve and thirty-six weekperiods ended July 7, 2006 and July 8, 2005. The effect of the employee stock options outstanding for the twelve and thirty-sixweeks ended July 7, 2006 and July 8, 2005 was not included in the calculationof diluted shares and diluted earnings per share as to do so would beanti-dilutive. 

6

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Note 4 - Retirement and Other Benefit Plans:

The Company has noncontributory-trusteed definedbenefit retirement plans for sales, administrative, supervisory andcertain other employees. The benefits under these plans are primarily based onyears of service and compensation levels. The Company’s fundingpolicy is to contribute annually the maximum amount deductible forfederal income tax purposes, without regard to the plans’ unfunded currentliability. The measurement date for the plans is the Company’sfiscal year end. 

Netpension cost consisted of the following: 
|                                                               | ** ** | **36 weeks ended** | ** ** | **36 weeks ended** | ** ** |
|---------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                    | ** ** | **July 7  2006**        | ** ** | **July 8  2005**        | ** ** |
| ** **                                                    | ** ** | ** **                   | ** ** | ** **                   | ** ** |
| Service cost                                                  |       | $                            | 1,082      |                         | $          | 1,151 |   |
| Interest cost                                                 |       | 1,355                        |       | 1,235                        |       |
| Expected return  on plan assets                               |       | (1,064                       | )          | (963                         | )          |
| Amortization of  unrecognized transition liability or (asset) |       | —                       |       | —                       |       |
| Amortization of  net loss from earlier periods                |       | 191                          |       | —                       |       |
| Amortization of  transition asset (15.2 years)                |       | —                       |       | 253                          |       |
| Amortization of  unrecognized prior service cost              |       | 22                           |       | 29                           |       |
| Curtailment Cost                                              |       | 8                            |       | —                       |       |
| Net pension cost                                              |       | $                            | 1,594      |                         | $          | 1,705 |   |

 

The Company funded its annual contribution of $1,800to the plans during July of 2006.

In the third quarter of fiscal 2006, the Companyfroze the defined benefit pension plan accrued benefits for membersemployed by the Company within administration, sales or supervisory jobclassification or within a non- bargaining class (the Corporate Group).  This action is defined as a curtailment underSFAS No. 88 “Employers’ Accounting for Settlements and Curtailmentsof Defined Benefit Pension Plans and for Termination Benefits” and, therefore,the Company recognized a curtailment loss of approximately $8. As a result ofthis action, net pension costs will be reduced in future periods. 

Note 5 - Stock-Based Compensation:

In December 2004, the FASB issued Statement ofFinancial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment”. SFASNo. 123R requires public companies to measure and recognize compensation expensefor all share-based payments to employees, including grants of employee stockoptions, in the financial statements based on the fair value at the date of thegrant.  The Statement also clarifies andexpands SFAS No. 123’s guidance in several areas, including measuring fairvalue, classifying an award as equity or as a liability, and attributing compensationcost to reporting periods.  SFAS No. 123Rbecame effective for the Company’s fiscal year ending November 3, 2006. TheCompany has not issued, awarded, granted or entered into any stock-basedpayment agreements since April 29, 1999. The modified prospective adoption ofSFAS No. 123R did not have any impact on the Company’s financial condition orresults of operations for the first thirty-six weeks ended July 7, 2006.

Prior to adoption of SFAS No. 123R, the Companyadopted SFAS No. 123 ‘“Accounting for Stock-Based Compensation” which allowedthe Company to apply the provisions of Accounting Principles Board (“APB”)Opinion No. 25, “Accounting for Stock Issued to Employees,” and relatedinterpretations in accounting for stock-based compensation and, therefore, nocompensation expense was recognized for its fixed stock option plans as optionsare generally granted at fair market value based upon the closing price on thedate immediately preceding the grant date. On December 31, 2002 the FASB issued SFAS No. 148, “Accounting for StockBased Compensation- Transition and Disclosure”, which amended SFAS No.123.  SFAS No. 148 requires moreprominent and frequent disclosures about the effects of stock-basedcompensation.  Accordingly, ifcompensation expense for the Company’s stock options had been recognized, basedupon the fair value of awards granted, there would have been no impact on theCompany’s net income and earnings per share for the first thirty-six weeksending July 8, 2005.

No options were granted during the first thirty-sixweeks of the fiscal year ending November 3, 2006 and during the firstthirty-six weeks of the fiscal year ended October 28, 2005.

Note 6 - Commitments:

TheCompany leases certain transportation and computer equipment under operatingleases.  The terms of the transportationleases provide for annual renewal options and contingent rental payments basedupon mileage and adjustments of rental payments based on the Consumer PriceIndex.   No material changes have beenmade to these contracts during the first thirty-six weeks of fiscal 2006.

7

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Note 7 - Segment Information:

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

The Company evaluates each segment’s performancebased on revenues and operating income. Selling, general and administrativeexpenses include corporate accounting, information systems, human resourcemanagement and marketing, which are managed at the corporate level. Theseactivities are allocated to each operating segment based on revenues and/oractual usage.

The following segment information is presented forthe twelve and thirty-six week periods ended July 7, 2006 and July 8, 2005.
| **Twelve Weeks Ended  July 7, 2006** | ** ** | **Frozen Food  Products** | ** ** | **Refrigerated  and  Snack Food  Products** | ** ** | **Other** | ** ** | **Elimination** | ** ** | **Totals** | ** ** |
|----------------------------------------------------------|------------|--------------------------------|------------|--------------------------------------------------|------------|-----------|------------|-----------------|------------|------------|------------|
| Sales                                                    |       | $                              | 10,183     |                                             | $          | 17,986    |       | $               | —     |       | $          | — |   | $ | 28,169 |   |
| Intersegment sales                                       |       | —                         |       | 596                                              |       | —    |       | 596             |       | —     |       |
| Net sales                                                |       | 10,183                         |       | 18,582                                           |       | —    |       | 596             |       | 28,169     |       |
| Cost of products sold,  excluding depreciation           |       | 6,065                          |       | 11,555                                           |       | —    |       | 596             |       | 17,024     |       |
| Selling, general and  administrative expenses            |       | 3,139                          |       | 6,880                                            |       | —    |       | —          |       | 10,019     |       |
| Depreciation                                             |       | 290                            |       | 504                                              |       | 98        |       | —          |       | 892        |       |
| Gain on sale of equity  securities                       |       | —                         |       | —                                           |       | —    |       | —          |       | —     |       |
|                                                     |       | 9,494                          |       | 18,939                                           |       | 98        |       | 596             |       | 27,935     |       |
| Income (loss) before  taxes                              |       | 689                            |       | (357                                             | )          | (98       | )          | —          |       | 234        |       |
| Income tax provision  (benefit)                          |       | 224                            |       | (214                                             | )          | —    |       | —          |       | 10         |       |
| Net income (loss)                                        |       | $                              | 465        |                                             | $          | (143      | )          | $               | (98        | )          | $          | — |   | $ | 224 |   |
|                                                     |       |                           |       |                                             |       |      |       |            |       |       |       |
| Total assets                                             |       | $                              | 11,133     |                                             | $          | 28,626    |       | $               | 31,872     |       | $          | — |   | $ | 71,631 |   |
| Additions to property, plant and equipment               |       | $                              | (94        | )                                                | $          | 505       |       | $               | 28         |       | $          | — |   | $ | 439 |   |

 
| **Twelve Weeks Ended  July 8, 2005** | ** ** | **Frozen Food  Products** | ** ** | **Refrigerated  and  Snack Food  Products** | ** ** | **Other** | ** ** | **Elimination** | ** ** | **Totals** | ** ** |
|----------------------------------------------------------|------------|--------------------------------|------------|--------------------------------------------------|------------|-----------|------------|-----------------|------------|------------|------------|
| Sales                                                    |       | $                              | 9,570      |                                             | $          | 18,086    |       | $               | —     |       | $          | — |   | $ | 27,656 |   |
| Intersegment sales                                       |       | —                         |       | 904                                              |       | —    |       | 904             |       | —     |       |
| Net sales                                                |       | 9,570                          |       | 18,990                                           |       | —    |       | 904             |       | 27,656     |       |
| Cost of products sold,  excluding depreciation           |       | 5,145                          |       | 13,000                                           |       | —    |       | 904             |       | 17,241     |       |
| Selling, general and  administrative expenses            |       | 2,917                          |       | 6,404                                            |       | —    |       | —          |       | 9,321      |       |
| Depreciation                                             |       | 398                            |       | 527                                              |       | 103       |       | —          |       | 1,028      |       |
|                                                     |       | 8,460                          |       | 19,931                                           |       | 103       |       | 904             |       | 27,590     |       |
| Income (loss) before  taxes                              |       | 1,110                          |       | (941                                             | )          | (103      | )          | —          |       | 66         |       |
| Income tax provision  (benefit)                          |       | 274                            |       | (451                                             | )          | —    |       | —          |       | (177       | )          |
| Net income (loss)                                        |       | $                              | 836        |                                             | $          | (490      | )          | $               | (103       | )          | $          | — |   | $ | 243 |   |
|                                                     |       |                           |       |                                             |       |      |       |            |       |       |       |
| Total assets                                             |       | $                              | 11,157     |                                             | $          | 31,765    |       | $               | 31,474     |       | $          | — |   | $ | 74,396 |   |
| Additions to property, plant and equipment               |       | $                              | 132        |                                             | $          | 309       |       | $               | (2         | )          | $          | — |   | $ | 439 |   |

 

8

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| **Thirty-Six Weeks Ended  July 7, 2006** | ** ** | **Frozen Food  Products** | ** ** | **Refrigerated  and  Snack Food  Products** | ** ** | **Other** | ** ** | **Elimination** | ** ** | **Totals** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------|------------|--------------------------------------------------|------------|-----------|------------|-----------------|------------|------------|------------|
| Sales                                                        |       | $                              | 34,281     |                                             | $          | 56,768    |       | $               | —     |       | $          | — |   | $ | 91,049 |   |
| Intersegment sales                                           |       | —                         |       | 1,797                                            |       | —    |       | 1,797           |       | —     |       |
| Net sales                                                    |       | 34,281                         |       | 58,565                                           |       | —    |       | 1,797           |       | 91,049     |       |
| Cost of products sold,  excluding depreciation               |       | 20,265                         |       | 39,619                                           |       | —    |       | 1,797           |       | 58,087     |       |
| Selling, general and  administrative expenses                |       | 10,009                         |       | 20,221                                           |       | —    |       | —          |       | 30,230     |       |
| Depreciation                                                 |       | 871                            |       | 1,509                                            |       | 296       |       | —          |       | 2,676      |       |
| Gain on sale of equity  securities                           |       | —                         |       | (106                                             | )          | —    |       | —          |       | (106       | )          |
|                                                         |       | 31,145                         |       | 61,243                                           |       | 296       |       | 1,797           |       | 90,887     |       |
| Income (loss) before  taxes                                  |       | 3,136                          |       | (2,678                                           | )          | (296      | )          | —          |       | 162        |       |
| Income tax provision  (benefit)                              |       | 1,136                          |       | (1,132                                           | )          | —    |       | —          |       | 4          |       |
| Net income (loss)                                            |       | $                              | 2,000      |                                             | $          | (1,546    | )          | $               | (296       | )          | $          | — |   | $ | 158 |   |
|                                                         |       |                           |       |                                             |       |      |       |            |       |       |       |
| Total assets                                                 |       | $                              | 11,133     |                                             | $          | 28,626    |       | $               | 31,872     |       | $          | — |   | $ | 71,631 |   |
| Additions to property,  plant and equipment                  |       | $                              | 156        |                                             | $          | 1,197     |       | $               | 101        |       | $          | — |   | $ | 1,454 |   |

 
| **Thirty-Six Weeks Ended  July 8, 2005** | ** ** | **Frozen Food  Products** | ** ** | **Refrigerated  and  Snack Food  Products** | ** ** | **Other** | ** ** | **Elimination** | ** ** | **Totals** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------|------------|--------------------------------------------------|------------|-----------|------------|-----------------|------------|------------|------------|
| Sales                                                        |       | $                              | 30,915     |                                             | $          | 58,046    |       | $               | —     |       | $          | — |   | $ | 88,961 |   |
| Intersegment sales                                           |       | —                         |       | 2,289                                            |       | —    |       | 2,289           |       | —     |       |
| Net sales                                                    |       | 30,915                         |       | 60,335                                           |       | —    |       | 2,289           |       | 88,961     |       |
| Cost of products sold,  excluding depreciation               |       | 17,225                         |       | 42,736                                           |       | —    |       | 2,289           |       | 57,672     |       |
| Selling, general and  administrative expenses                |       | 8,905                          |       | 20,598                                           |       | —    |       | —          |       | 29,503     |       |
| Depreciation                                                 |       | 1,192                          |       | 1,585                                            |       | 308       |       | —          |       | 3,085      |       |
|                                                         |       | 27,322                         |       | 64,919                                           |       | 308       |       | 2,289           |       | 90,260     |       |
| Income (loss) before  taxes                                  |       | 3,593                          |       | (4,584                                           | )          | (308      | )          | —          |       | (1,299     | )          |
| Income tax provision  (benefit)                              |       | 1,192                          |       | (1,888                                           | )          | —    |       | —          |       | (696       | )          |
| Net income (loss)                                            |       | $                              | 2,401      |                                             | $          | (2,696    | )          | $               | (308       | )          | $          | — |   | $ | (603 | ) |
|                                                         |       |                           |       |                                             |       |      |       |            |       |       |       |
| Total assets                                                 |       | $                              | 11,157     |                                             | $          | 31,765    |       | $               | 31,474     |       | $          | — |   | $ | 74,396 |   |
| Additions to property,  plant and equipment                  |       | $                              | 271        |                                             | $          | 787       |       | $               | 76         |       | $          | — |   | $ | 1,134 |   |

 

Note 8 - Subsequent Events:

On July 10, 2006, the Company froze defined pensionbenefits for employees classified in the “Dallas Union Group” effective January2, 2007.  This action had no impact onearnings in the first thirty-six weeks of fiscal year 2006.

EffectiveAugust 1, 2006, the Company’s Board of Directors approved the recommendationsof the Benefits Committee and adopted a new 401(k) profit sharing plan.

9

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**Item 2.**

**SPECIALNOTE REGARDING FORWARD-LOOKING STATEMENTS**

Certainstatements in this Form 10-Q under Item 2 “Management’s Discussion and Analysisof Financial Condition and Results of Operations” and elsewhere constitute “forward-lookingstatements” within the meaning of the Securities Act of 1933 and the SecuritiesExchange Act of 1934 (the “Exchange Act”). In addition, the Company may fromtime to time make oral forward-looking statements. Words such as “may”, “will”,“should”, “could”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”,“potential” or “contribute” or similar words are intended to identifyforward-looking statements, although not all forward-looking statements containthese words. Such forward-looking statements involve known and unknown risks,uncertainties, and other factors which may cause the actual results,performance, or achievements of the Company to be materially different from anyfuture results, performance or achievements expressed or implied by suchforward-looking statements. Such factors include, among others, the following:general economic and business conditions; the impact of competitive productsand pricing; success of operating initiatives; development and operating costs;advertising and promotional efforts; adverse publicity; acceptance of newproduct offerings; consumer trial and frequency; changes in business strategyor development plans; availability, terms and deployment of capital;availability of qualified personnel; commodity, labor, and employee benefitcosts; changes in, or failure to comply with, government regulations; weatherconditions; construction schedules; and other factors referenced in this Form10-Q and in Bridgford Foods’ Annual Report on Form 10-K for the fiscal yearended October 28, 2005. Because of these and other factors that may affect theCompany’s operating results, past financial performance should not beconsidered an indicator of future performance, and investors should not usehistorical trends to anticipate results or trends in future periods. TheCompany expressly disclaims any intent or obligation to publicly release theresults of any revisions to these forward-looking statements that may be madeto reflect events or circumstances after the date hereof, or to reflect theoccurrence of unanticipated events.

**Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

###### **CriticalAccounting Policies, Management Estimates and Risk Factors**

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make certain estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported revenues and expenses during the respectivereporting periods. Actual results could differ from those estimates. Amountsestimated related to liabilities for pension costs, self-insured workers’compensation and employee healthcare are especially subject to inherentuncertainties and these estimated liabilities may ultimately settle at amountsnot originally estimated. An actuary updates the pension and post-retirementhealthcare data on a quarterly basis. Management believes its current estimatesare reasonable and based on the best information available at the time.

TheCompany’s credit risk is diversified across a broad range of customers andgeographic regions. Losses due to credit risk have recently been immaterialalthough losses in fiscal year 2002 were significant. The Company recorded thefinal payment recovery related to its fiscal year 2002 loss in its firstquarter of fiscal year 2006, receiving 2,939 shares of stock of Sears HoldingsCorporation valued at $344,000. On February 22, 2006, during the second quarterof fiscal year 2006, the Company sold 5,028 shares of common stock of SearsHoldings Corporation received as the result of a bankruptcy distribution. Thistransaction resulted in a pre-tax gain of $106,000 and a reduction in othercomprehensive income of $67,000. As a result of this transaction, the Companyno longer holds shares in Sears Holdings Corporation. The provision fordoubtful accounts receivable is based on historical trends and currentcollectibility risk. The Company has significant amounts receivable with a fewlarge, well known customers which, although historically secure, could besubject to material risk should these customers’ operations suddenlydeteriorate. The Company monitors these customers closely to minimize the riskof loss. Wal-Mart® comprised 14.5% of revenues for the first thirty-six weeksof fiscal year 2006 and 18.8% of accounts receivable at the end of the thirdquarter of fiscal year 2006. Wal-Mart® comprised 14.3% of revenues for thefirst thirty-six weeks of fiscal year 2005 and 20.0% of accounts receivable atthe end of the third quarter of fiscal year 2005.

Revenues are recognizedupon passage of title to the customer upon product pick-up, shipment ordelivery to customers as determined by applicable contracts. Products aredelivered to customers through the Company’s own fleet or through aCompany-owned direct store delivery system.

10

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TheCompany records the cash surrender or contract value for life insurancepolicies as an adjustment of premiums paid in determining the expense or incometo be recognized under the contract for the period.

TheCompany’s operating results are heavily dependent upon the prices paid for rawmaterials. Other significant factors that influence operating results include transportationand energy costs. The marketing of the Company’s value-added products does notlend itself to instantaneous changes in selling prices. Changes in sellingprices are relatively infrequent and do not compare with the volatility ofcommodity markets, transportation costs and energy prices.

Theabove listing is not intended to be a comprehensive list of all the Company’saccounting policies. In many cases, the accounting treatment of a particulartransaction is specifically dictated by accounting principles generallyaccepted in the United States, with no need for management’s judgment in theirapplication. There are also areas in which management’s judgment in selectingany available alternative would not produce a materially different result.

**Results of Operations for the Twelve Weeks ended July 7, 2006and Twelve Weeks ended July 8, 2005.**

**Net Sales**

Netsales increased by $513,000 (1.9%) to $28,169,000 in the third twelve weeks ofthe 2006 fiscal year compared to the same twelve-week period last year. Theprimary reason for the increase was higher unit selling prices betweencomparative periods. Average unit selling prices were approximately 5.5% higherthan the comparative period in the prior fiscal year. Lower unit volume ofapproximately 3.2% offset the higher unit prices obtained. Product returnlevels also decreased against the comparative prior period.

Comparedto the prior twelve-week period ended April 14, 2006 (not shown), salesdecreased $136,000 (0.5%). The decrease relates to seasonally lower unit salesvolume in the twelve-week period ended July 7, 2006. Average unit sellingprices increased slightly compared to the prior twelve-week period.

**Cost of Products Sold**

Costof products sold decreased by $217,000 (1.3%) to $17,024,000 in the thirdtwelve weeks of the 2006 fiscal year compared to the same twelve-week period infiscal 2005. The decrease in cost of products sold and increase in gross marginon a comparative basis was due primarily to lower meat commodity costs in theperiod and higher unit selling prices. Although flour commodity costsincreased, this trend had minimal impact on the gross margin.

Compared to the priortwelve-week period ended April 14, 2006 (not shown), the cost of products solddecreased $486,000 (2.8%). This decrease is primarily a result of seasonallylower unit sales volume and improved facility utilization.

###### **Selling,General and Administrative Expenses**

Selling, general andadministrative expenses increased by $698,000 (7.5%) to $10,019,000 in thethird twelve weeks of fiscal year 2006 compared to the same twelve-week periodin the prior fiscal year. The change in this category for the twelve-weekperiod ended July 7, 2006 did not correspond to the sales increase. Thecomparative value change in cash surrender value of life insurance policiesdecreased by $297,000 compared to the same twelve-week period in the priorfiscal year. Costs related to fuel and health benefits also rose at a higherrate as a percentage of sales than the prior fiscal year. Reductions in advertisingexpense and higher investment income helped offset these increases.

Compared to the prior twelve-week period ended April 14, 2006 (notshown), selling, general and administrative expenses increased by $178,000(1.8%). The increase was primarily caused by a growth in fuel, health care, baddebt and outside storage expenses compared to the prior 12-week period. Thecomparative value change in cash surrender value of life insurance policiesdecreased by $199,000 compared to the prior period which also increased thiscategory compared to the prior period.

11

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**Depreciation Expense**

Depreciationexpense decreased by $136,000 (13.2%) to $892,000 in the third twelve weeks ofthe 2006 fiscal year compared to the same twelve-week period in fiscal year2005. The decrease in depreciation expense was due to lower capitalexpenditures in recent periods and significant assets becoming fullydepreciated in the 2006 fiscal year.

Comparedto the prior twelve-week period ended April 14, 2006 (not shown), depreciationremained constant at $892,000 during the third twelve weeks of fiscal 2006.

**Income Taxes**

TheCompany recorded an income tax provision based on an estimated annual effectivetax rate of 54.04% in the third twelve weeks of fiscal 2006 as compared to –268.2%in the prior fiscal year and 57.1% for the prior twelve-week period. The incometax provision recorded is different from what would result by applying thisrate, due to certain adjustments that affected the provision for income taxes.The discrete item included a one-time benefit for R&D tax credits recordedin the period. The change in the effective income tax rate also relates tosignificant non-taxable gains on life insurance policies and revisions to theCompany’s projected tax rates related to updated estimates.

**Net Income (Loss)**

Netincome in the twelve weeks ended July 7, 2006 was affected by non-taxable losson life insurance policies in the amount of $53,000. Gains and losses on lifeinsurance policies are dependent upon the performance of the underlyingequities and future results may produce losses of equal magnitude. Taxableinvestment income also increased on a comparative basis during the third twelveweeks of fiscal 2006 in the amount of $125,000 due to higher cash balances andan increase in short-term interest rates. After considering the effect of thesetransactions, the Company’s results were as follows:
| ** **                                                                        | ** ** | **12 Weeks Ended  July 7, 2006** | ** ** | **12 Weeks Ended  July 8, 2005** | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
| Net income  (loss) before taxes, life insurance gain (loss) and investment income |       | $                                                    | 89,000     |                                                 | $          | (251,000 | ) |
| Life insurance  gain (loss) and investment income                                 |       | 145,000                                              |       | 317,000                                              |       |
| Income before  taxes                                                              |       | 234,000                                              |       | 66,000                                               |       |
| Income tax  provision (benefit)                                                   |       | 10,000                                               |       | (177,000                                             | )          |
| Net income                                                                        |       | $                                                    | 224,000    |                                                 | $          | 243,000 |   |

 

TheCompany presents net income or loss before taxes, life insurance gain or lossand investment income because the Company believes it is an important measurefor investors to use in understanding the Company’s underlying operations.

**Results of Operations for the Thirty-Six Weeks ended July 7,2006 and Thirty-Six Weeks ended July 8, 2005.**

**Net Sales**

Netsales increased by $2,088,000 (2.3%) to $91,049,000 in the first thirty-sixweeks of the 2006 fiscal year compared to the same thirty-six-week period lastyear. The primary reason for the increase was higher unit selling pricesbetween comparative periods. Average unit selling prices were approximately5.5% higher than the comparative period in the prior fiscal year. Lower unitvolume partially offset the higher unit prices obtained.

**Cost of Products Sold**

Cost of products soldincreased by $415,000 (0.7%) to $58,087,000 in the first thirty-six weeks ofthe 2006 fiscal

12

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yearcompared to the same thirty-six-week period in fiscal 2005. The increase incost of products sold is primarily related to lower facility utilizationrelated to lower unit volumes and significant maintenance projects completed onthe Company’s facilities in the first thirty-six weeks of the 2006 fiscal year.Also contributing to the increase were higher facility repairs, energy anddelivery costs. Significant declines in meat commodity costs helped offsetthese higher costs. The gross margin increased slightly on a comparative basisdue primarily to higher selling prices and lower commodity prices. Flourcommodity costs increased during the first thirty-six weeks of the 2006 fiscalyear when evaluated against the comparison period while pork and beefcommodities declined significantly.

 

###### **Selling,General and Administrative Expenses**

Selling, general andadministrative expenses increased by $727,000 (2.5%) to $30,230,000 in thefirst thirty-six weeks of fiscal year 2006 compared to the same thirty-six-weekperiod in the prior fiscal year. The rate of increase in this categorygenerally corresponds to the sales increase. Costs related to fuel and vehiclerepairs increased when compared to the fiscal year 2005 thirty-six week period,while favorable trends in bad debt expenses and higher investment income offsetthese increases.

**Depreciation Expense**

Depreciationexpense decreased by $409,000 (13.3%) to $2,676,000 in the first thirty-sixweeks of the 2006 fiscal year compared to the same thirty-six-week period infiscal year 2005. The decrease in depreciation expense was due to lower capitalexpenditures in recent years and significant assets becoming fully depreciatedin the 2006 fiscal year.

**Income Taxes**

TheCompany recorded an income tax provision in the first thirty-six weeks offiscal 2006, based on an estimated annual effective tax rate of 54.04% ascompared to 53.6% in the prior fiscal year. The income tax provision recordedfor the first thirty-six weeks of fiscal 2006 is different from what wouldresult by applying this rate, due to certain adjustments that affect incometaxes. These discrete items include a one-time benefit for R&D creditsrecorded in the period, and an income tax adjustment resulting from a state taxauthority audit. The change in the effective income tax rate also relates tosignificant non-taxable gains on life insurance policies and revisions to theCompany’s projected tax rates related to updated estimates between comparisonperiods.

**Net Income (Loss)**

Netincome in the thirty-six weeks ended July 7, 2006 was significantly affected bygains related to the sale of equity securities in the amount of $106,000 andnon-taxable gains on life insurance policies in the amount of $303,000. Gainsand losses on life insurance policies are dependent upon the performance of theunderlying equities and future results may produce losses of equal magnitude.Taxable investment income also increased on a comparative basis during thefirst thirty-six weeks of fiscal 2006 in the amount of $238,000 due to highercash balances and an increase in short-term interest rates. After consideringthe effect of these transactions, the Company’s results were as follows:
| ** **                                                                                            | ** ** | **36 Weeks Ended  July 7, 2006** | ** ** | **36 Weeks Ended  July 8, 2005** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
| Net loss before  taxes, gain on sale of equity securities, life insurance gain and investment  income |       | $                                                    | (636,000   | )                                                    | $          | (1,824,000 | ) |
| Gain on sale of  equity securities                                                                    |       | 106,000                                              |       | —                                               |       |
| Life insurance  gain (loss) and investment income                                                     |       | 692,000                                              |       | 525,000                                              |       |
| Income (loss)  before taxes                                                                           |       | 162,000                                              |       | (1,299,000                                           | )          |
| Income tax  provision (benefit)                                                                       |       | 4,000                                                |       | (696,000                                             | )          |
| Net income (loss)                                                                                     |       | $                                                    | 158,000    |                                                 | $          | (603,000 | ) |

 

The Company recorded a significantrecovery related to a bad debt previously written off which contributed to anet favorable reduction in the allowance for doubtful accounts of $324,000 inthe first thirty-six weeks of fiscal

13

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year2006. The net favorable reduction recorded in the prior year period was$192,000. The Company presents net income or loss before taxes, gain or loss onsale of equity securities, life insurance gain or loss and investment incomebecause the Company believes it is an important measure for investors to use inunderstanding the Company’s underlying operations. The gain on sale is relatedto securities that the Company sold during the second twelve weeks of fiscalyear 2006.

**Liquidity and Capital Resources**

Netcash from operating activities was $6,776,000 for the first thirty-six weeks ofthe 2006 fiscal year. Operating cash was generated principally by net incomeand reductions in inventory. The substantial reduction in inventory in thefirst thirty-six weeks of fiscal 2006 is consistent with normal seasonal trendsand a planned seasonal reduction in field inventories. The Company utilizedcash flow for additions to property, plant and equipment and share repurchases.The net effect of these events resulted in a cash and cash equivalents increaseduring the first thirty-six weeks of fiscal 2006 of $5,169,000 (49.9%) to$15,524,000. The additions to property, plant and equipment reflect the Company’scontinued investment in processing, transportation and information technologyequipment.

Nocash dividends were paid during the first thirty-six weeks of the 2006 fiscalyear, as was the case during the first 36 weeks of the 2005 fiscal year, as theBoard of Directors suspended the quarterly cash dividend at its May 2004meeting in recognition of lower profitability levels in recent quarters.

The Company remained freeof interest bearing debt during the first thirty-six weeks of fiscal year 2006.The Company’s revolving line of credit with Bank of America expires April 30,2008 and provides for borrowings up to $2,000,000. The Company has not borrowedunder this line for more than nineteen consecutive years.

Theimpact of inflation on the Company’s financial position and results ofoperations has not been significant. Management is of the opinion that theCompany’s financial position and its capital resources are sufficient toprovide for its near term operating needs and capital expenditures.

**Recently Issued Accounting Interpretations**

InJune 2006, the Financial Accounting Standards Board (“FASB”) issued InterpretationNo. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASBStatement No. 109” (“ FIN 48 “). This Statement addresses uncertainty in taxpositions recognized in a company’s financial statements and stipulates arecognition threshold and measurement of a tax position taken or expected to betaken in a tax return. FIN 48 will apply to the Company’s fiscal year beginningNovember 3, 2007, with earlier adoption permitted. The Company does not expectthis interpretation will have a material impact on the Company’s results ofoperations or financial position.

**Off-Balance Sheet Arrangements**

TheCompany is not engaged in any “off-balance sheet arrangements” within themeaning of Item 303(a)(4)(ii) of Regulation S-K.

# **Item 3.**

# **Quantitative and Qualitative Disclosures aboutMarket Risk**

TheCompany does not have significant foreign currency exposure at July 7, 2006.The Company’s financial instruments generally consist of cash and cashequivalents and life insurance policies at July 7, 2006. The Company sold theshares of stock of Sears Holdings Corporation previously received as a resultof the bankruptcy of a significant customer. Realized gains and losses upon thesale of this investment are recognized in the consolidated condensed statementsof operations. These shares were soldon February 22, 2006 for $606,000. The Company recognized a gain on this salein the amount of $106,000 in the consolidated condensed statements ofoperations in the second twelve-week period of fiscal year 2006 ended April 14,2006. The carrying value of the Company’s financial instrumentsapproximated their fair market values based on current market prices and rates.It is not the Company’s policy to enter into derivative financial instruments.

14

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TheCompany purchases bulk flour under short-term fixed price contracts during thenormal course of business. Under these arrangements, the Company is obligatedto purchase specific quantities at fixed prices, within the specified contractperiod. These contracts provide for automatic price increases if agreedquantities are not purchased within the specified contract period. Nosignificant contracts remained unfulfilled at July 7, 2006.

# **Item 4.**

# **Controls and Procedures**

Managementof the Company, with the participation and under the supervision of the Company’sChairman and Chief Financial Officer, has evaluated the effectiveness of theCompany’s disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterlyreport. Based on this evaluation, the Chairman and Chief Financial Officer haveconcluded that the Company’s disclosure controls and procedures are effectiveas of the end of the period covered by this report to provide reasonableassurance that material information required to be disclosed by the Company inthe reports that it files or submits under the Exchange Act is recorded,processed, summarized and reported within the time periods specified by theSecurities and Exchange Commission’s rules and forms. There has been no changein the Company’s internal control over financial reporting (as defined inExchange Act Rules 13a-15(f) and 15d-15(f)) during the period covered by thisreport that has materially affected, or is reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

TheCompany’s management, including its Chairman and Chief Financial Officer, doesnot expect that the Company’s disclosure controls and internal controls willprevent all error and all fraud. A control system, no matter how well conceivedand operated, can provide only reasonable, not absolute, assurance that theobjectives of the control system are met. Further, the design of a controlsystem must reflect the fact that there are resource constraints, and thebenefits of controls must be considered relative to their costs. Because ofinherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, if any,within the Company have been detected. These inherent limitations include therealities that judgments in decision-making can be faulty, and that breakdownscan occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of the control.

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

**Section 404 Sarbanes-Oxley Act of 2002**

TheSecurities and Exchange Commission, based on press release 2006-136 dated August9, 2006, is proposing to grant relief to smaller public companies by extendingthe date of compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Act”).Under these proposals, the Company may be required to comply with the Act intwo phases. The first phase would be effective for the Company’s fiscal yearending October 31, 2008 and would require the Company to issue a managementreport on internal control over financial reporting. The second phase wouldrequire the Company to provide an auditor’s attestation report on internalcontrol over financial reporting beginning with the Company’s fiscal yearending October 30, 2009. Under current requirements, the Company would berequired to comply with the Act in fiscal year ending November 2, 2007.

Inorder to comply with the Act, the Company is in the process of centralizingmost accounting and many administrative functions at its corporate headquartersin an effort to control the cost of maintaining its control systems. On July11, 2006, The Committee of Sponsoring Organizations (“COSO”) issued guidance onhow small companies should implement an effective internal control frameworkover financial reporting and other risks. This guidance is considered a keytool to help smaller public companies to confront the challenges ofSarbanes-Oxley. When these requirements are implemented by management, theCompany will likely incur substantial additional expenses and diversion ofmanagement’s time. During the course of these activities, the Company may identifycertain internal control issues which management believes should be improved.These improvements, if necessary, will likely include further formalization ofpolicies and procedures, improved segregation of duties, additional informationtechnology

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systemcontrols and additional monitoring controls. Although management does notbelieve that any of these matters will result in material weaknesses beingidentified in the Company’s internal controls as defined by the Public CompanyAccounting Oversight Board, no assurances can be given regarding the outcome ofthese efforts. Additionally, control weaknesses may not be identified in atimely enough manner to allow remediation prior to the issuance of the auditor’sreport on internal controls over financial reporting. Any failure to adequatelycomply could result in sanctions or investigations by regulatory authorities,which could harm the Company’s business or investors’ confidence in theCompany.

 

**PartII. Other Information**

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds**

Thefollowing table provides information regarding repurchases by the Company ofits common stock, for each of the three four-week periods included in theinterim twelve-week period ended July 7, 2006.

**ISSUERPURCHASES OF EQUITY SECURITIES**
| **Period (1)**                | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid Per Share** | ** ** | **Total Number  of Shares  Purchased as  Part of Publicly  Announced  Plans or  Programs (2)** | ** ** | **Maximum  Number of  Shares that May  Yet Be  Purchased  Under the Plans  or Programs (2)** | ** ** |
|------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------|------------|
| April 15, 2006 – May 12, 2006 |       | 449                                              |       | $                                                | 6.54       |                                                                                                                              | 449        |                                                                                                                                 | 594,517    |   |
| May 13, 2006 – June 9, 2006   |       | 432                                              |       | $                                                | 6.28       |                                                                                                                              | 432        |                                                                                                                                 | 594,085    |   |
| June 10, 2006 – July 7, 2006  |       | —                                           |       | —                                           |       | —                                                                                                                            |       | 594,085                                                                                                                              |       |
| Total                              |       | 881                                              |       | $                                                | 6.41       |                                                                                                                              | 881        |                                                                                                                                 |       |   |

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(1)             Periodinformation is presented by reference to the Company’s fiscal period endsduring the twelve-week period ended July 7, 2006.

(2)             All repurchasesreflected in the foregoing table were made on the open market. The Company’sstock repurchase program was approved by the Board of Directors in November1999 (1,000,000 shares authorized, disclosed in a Form 10-K filed on January26, 2000) and was expanded in June 2005 (500,000 additional shares authorized,disclosed in a press release and Form 8-K filed on June 17, 2005). Under thestock repurchase program, the Company is authorized, at the discretion ofmanagement and the Board of Directors, to purchase up to an aggregate of1,500,000 shares of the Company’s common stock on the open market.

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**Item 6.**

##### **Exhibits**

| Exhibit No. | ** ** | **Description**                                                                                                                         |
|-------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------|
| 31.1        |       | Certification of Chairman (Principal Executive  Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.                 |
|        |       |                                                                                                                                    |
| 31.2        |       | Certification of Chief Financial Officer (Principal  Financial Officer), as required by Section 302 of the Sarbanes-Oxley Act of  2002. |
|        |       |                                                                                                                                    |
| 32.1        |       | Certification of Chairman (Principal Executive  Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.                 |
|        |       |                                                                                                                                    |
| 32.2        |       | Certification of Chief Financial Officer (Principal  Financial Officer), as required by Section 906 of the Sarbanes-Oxley Act of  2002. |

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|                 |   | BRIDGFORD FOODS CORPORATION |                                                       |
|-----------------|--------|-----------------------------|------------------------------------------------------------|
|            |   | (Registrant)                |
|            |   |                        |
|            |   | By:                         | /s/ Raymond F. Lancy                                       |   |
| August 21, 2006 |   |                        | Raymond F. Lancy                                           |
| Date            |   |                        | Chief Financial Officer                                    |
|            |   |                        | (Duly Authorized Officer and Principal Financial  Officer) |
|                 |        |                             |                                                            |  |  |

 

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