| Small & micro cap project

Bridgford Foods: Owner-operator

by | Jan 3, 2020

Owner-operators

Bridgford Industries owns roughly 79% of the o/s common shares. The principal owners of Bridgford Industries hold several key positions in the company.

  • William L. Bridgford – chairman of the board
  • Allan L. Bridgford, Jr. – president
  • Bruce H. Bridgford – president, Bridgford Foods of California

Executive committee – instead of CEO

The company has not appointed a CEO, but instead has historically utilized an executive committee to serve in the capacity of CEO. The committee is currently comprised of the four executive officers – Allan L. Bridgford, William L. Bridgford, John V. Simmons and Raymond F. Lancy.

Family relationship

William L. Bridgford is the nephew of Allan L. Bridgford. Allan L. Bridgford is the father of Allan L. Bridgford, Jr., who serves on the company’s board of directors.

I. Good/okay

Compensation structure

  • Given the company’s financials, compensation does not seem out of line.
  • The Company has not granted any stock or option awards to NEOs for more than 12 years. (We manually checked the past DEF14s).

 II. CONCERN

1. Lack of explanation – SG&A 

This argument is not related to the “proxy” statement, but rather, this pertains to the break-up of expenses provided in the 10-K.

It is really weird that the company provided a detailed break-up for a few thousand dollars, but bundled a large expense under “Other SG&A”.

Let me explain; for example, the company reported $31,000 for “Repairs & Maintenance”, and $3,000 for “other expenses”. At the same time, it bundled a large expense under the category “Other SG&A”, which was a whopping $16.9 million. The “Other SG&A” expenses were outside consulting fees, utilities and property taxes. It is strange that the company made an effort to explain an expense of a few thousand dollars, but bundled a $16.9 million expense without explanation.

2. Plenty of family members on the company’s board, management and operation

Directors

  • Bruce H. Bridgford, vice president
  • William L. Bridgford, chairman
  • Allan L. Bridgford Jr., consultant.

Officers

  • Allan L. Bridgford, chairman of the executive committee and vice president
  • Bruce H. Bridgford, vice president;
  • Michael Bridgford, vice president and assistant secretary
  • William L. Bridgford, chairman and member of the executive committee.

Division manager

  • Baron R. H. Bridgford, president, Bridgford Processing Company of Illinois,
  • Blaine K. Bridgford, president, Dallas – Superior Foods Division
  • Bruce H. Bridgford, chairman and president.

3. Related party transaction 

(a) Consulting services/profit sharing with Allan Bridgford Jr.

Consulting services:

Director Allan Bridgford Jr., son of the former senior chairman of the board of directors, is providing consulting services to the Chicago plant and management. The contract is for consulting services at $1,200 per day. Total fees billed under this arrangement for fiscal year 2019 were approximately $207,000.  

  • FY 2019 – $0.481 million: Under an arrangement with Allan Bridgford Jr., the company accrued approximately $481,500 of profit sharing based on profitability in fiscal year 2019, to be paid out in three instalments equally over the next three years.
  • FY 2018: $0.42 million: The company accrued approximately $420,700 of profit sharing based on profitability in fiscal year 2018, to be paid out in three instalments equally over the next three years.
  • FY 2017 – $1.033 million: The company accrued approximately $1,033,000 of profit sharing based on profitability in fiscal year 2017, to be paid out in three instalments equally over the next three years.

(b) Legal service

The company’s general legal counsel is the son of the former senior chairman of the board of directors. As legal counsel to the board and the compensation committee, he is currently paid a fee of $2,380 for each meeting attended. Total fees paid under this arrangement for fiscal year 2019 was approximately $22,600. Legal services are billed by a firm in which he is a partner. The total fees billed under this arrangement for fiscal year 2019 was approximately $74,500.

(c) Real estate consulting in 2018

Director Keith A. Ross provides real-estate consulting services to the company. The arrangement currently provides for consulting services at $250 per hour. Total fees paid as a consultant were $51,285 during fiscal year 2018.

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