SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number 0-25294
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RIVIANA FOODS INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0177572
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or ogranization)
2777 ALLEN PARKWAY
HOUSTON, TX 77019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 529-3251
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock of the Registrant, par value $1.00
per share, outstanding at October 27, 1997 was 15,760,700.
1
<PAGE>
RIVIANA FOODS INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 28, 1997
INDEX
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at September 28, 1997
and June 29, 1997 ..........................................1
Consolidated Statements of Income for the Quarters
Ended September 28, 1997 and September 29, 1996 ............2
Consolidated Statements of Cash Flows for the Quarters Ended
September 28, 1997 and September 29, 1996 ..................3
Notes to Consolidated Financial Statements ....................4
Item 2 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations .............................................5
Part II -- Other Information
Item 6 -- Exhibits and Reports on Form 8-K ............................8
Signature......................................................................9
Exhibit Index.................................................................10
2
<PAGE>
Part I -- Financial Information
Item 1 -- Financial Statements
RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
September 28, June 29,
1997 1997
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ........................................................ $ 5,050 $ 4,562
Cash equivalents ............................................ 7,291 2,478
Marketable securities ....................................... 3,964 4,405
Accounts receivable, less allowance for
doubtful accounts of $537 and $529 ....................... 42,004 43,493
Inventories ................................................. 51,352 48,454
Prepaid expenses ............................................ 2,957 2,295
--------- ---------
Total current assets ................................ 112,618 105,687
PROPERTY, PLANT AND EQUIPMENT:
Land ........................................................ 3,543 3,550
Buildings ................................................... 22,134 21,848
Machinery and equipment ..................................... 83,109 81,830
--------- ---------
Property, plant and equipment - gross ................... 108,786 107,228
Less - Accumulated depreciation ............................. (38,899) (38,065)
--------- ---------
Property, plant and equipment - net ..................... 69,887 69,163
INVESTMENTS IN UNCONSOLIDATED AFFILIATES ...................... 11,539 11,471
OTHER ASSETS .................................................. 5,342 5,568
--------- ---------
Total assets .................................... $ 199,386 $ 191,889
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt ............................................. $ 3,372 $ 5,011
Current maturities of long-term debt ........................ 1,581 1,863
Accounts payable ............................................ 27,880 20,629
Accrued liabilities ......................................... 13,999 13,940
Income taxes payable ........................................ 6,542 5,382
--------- ---------
Total current liabilities ............................... 53,374 46,825
LONG-TERM DEBT, net of current maturities ..................... 2,378 2,619
DUE TO AFFILIATES ............................................. 420 135
DEFERRED INCOME TAXES ......................................... 5,766 5,884
OTHER NONCURRENT LIABILITIES .................................. 3,047 2,995
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS ............................................ 6,174 6,355
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par, 5,000 shares authorized, none issued
Common stock, $1 par, 24,000 shares authorized, 15,883 issued 15,883 15,883
Paid-in capital ............................................. 6,225 6,215
Retained earnings ........................................... 112,175 109,851
Unrealized gains on marketable securities, net of taxes ..... 2,062 2,273
Cumulative foreign currency translation adjustment .......... (6,072) (5,059)
Treasury stock, at cost, 127 and 130 shares ................. (2,046) (2,087)
--------- ---------
Total stockholders' equity .......................... 128,227 127,076
--------- ---------
Total liabilities and stockholders' equity .......... $ 199,386 $ 191,889
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
---------------------
September 28, September 29,
1997 1996
--------- ---------
NET SALES ....................................... $ 108,014 $ 105,005
COST OF SALES ................................... 80,656 78,441
--------- ---------
Gross profit ................................ 27,358 26,564
--------- ---------
COSTS AND EXPENSES:
Advertising, selling and warehousing .......... 16,820 16,651
Administrative and general .................... 5,256 4,782
--------- ---------
Total costs and expenses .................... 22,076 21,433
--------- ---------
Income from operations ...................... 5,282 5,131
OTHER INCOME (EXPENSE):
Gain on sale of marketable securities ......... 1,065 359
Interest income ............................... 227 97
Interest expense .............................. (289) (560)
Equity in earnings of unconsolidated affiliates 196 230
Other income (expense) - net .................. (337) (261)
--------- ---------
Total other income (expense) ................ 862 (135)
--------- ---------
Income before income taxes and
minority interests ....................... 6,144 4,996
INCOME TAX EXPENSE .............................. 2,127 1,686
MINORITY INTERESTS IN EARNINGS OF
CONSOLIDATED SUBSIDIARIES ................... 93 70
--------- ---------
Net income .................................. $ 3,924 $ 3,240
========= =========
Earnings per share .......................... $ 0.25 $ 0.20
========= =========
Weighted average common shares
outstanding .............................. 15,753 15,856
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
September 28, September 29,
1997 1996
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 3,924 $ 3,240
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ....................... 1,124 1,298
Gain on disposition of assets ....................... (1,065) (270)
Equity in earnings of unconsolidated affiliates ..... (196) (230)
Change in assets and liabilities:
Accounts receivable, net ......................... 716 1,797
Inventories ...................................... (3,389) (3,252)
Prepaid expenses ................................. (702) (957)
Other assets ..................................... 142 295
Accounts payable and accrued liabilities ......... 8,048 5,900
Income taxes payable ............................. 1,020 807
Other noncurrent liabilities ..................... 91 (41)
Minority interests ............................... (161) (30)
--------- --------
Net cash provided by operating activities ..... 9,552 8,557
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment .............. (2,118) (3,945)
Proceeds from disposals of property, plant and equipment 15
Investment by joint venture partner ..................... 457
Proceeds from sale of marketable securities ............. 1,183 390
Collection of notes receivable .......................... 9 13
Due (from) to affiliates ................................ 280 (527)
Increase in marketable securities ....................... (1) (25)
--------- --------
Net cash used in investing activities ......... (647) (3,622)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short-term debt ............................. (1,535) (6,757)
Additions to long-term debt ............................. 192 157
Repayments of long-term debt ............................ (581) (945)
Dividends paid .......................................... (1,575) (1,428)
Repurchases of common stock ............................. (71) (570)
Sales of common stock ................................... 97 19
--------- --------
Net cash used in financing activities ......... (3,473) (9,524)
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (131) (5)
--------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........... 5,301 (4,594)
CASH AND CASH EQUIVALENTS, beginning of period ............. 7,040 7,390
--------- --------
CASH AND CASH EQUIVALENTS, end of period ................... $ 12,341 $ 2,796
========= ========
CASH PAID DURING THE PERIOD FOR:
Interest ................................................ $ 310 $ 577
Income taxes ............................................ 529 455
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
RIVIANA FOODS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in thousands, except per share amounts)
(Unaudited)
1. Basis for Preparation of the Consolidated Financial Statements
The consolidated financial statements have been prepared by Riviana
Foods Inc. and subsidiaries ("the Company"), without audit, with the exception
of the June 29, 1997, consolidated balance sheet. The financial statements
include consolidated balance sheets, consolidated statements of income and
consolidated statements of cash flows. Certain amounts in the prior year have
been reclassified to conform to the current year presentation. In the opinion of
management, all adjustments, which consist of normal recurring adjustments,
necessary to present fairly the financial position, results of operations and
cash flows for all periods presented have been made.
The financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended June 29, 1997.
2. Earnings per Share
Earnings per share is computed by dividing net income by the weighted
average number of common equivalent shares outstanding. There is no significant
difference between earnings per share on a primary and a fully diluted basis.
3. Inventories
Inventories were composed of the following:
SEPTEMBER 28, JUNE 29,
1997 1997
------- -------
Raw materials ................................ $15,087 $ 8,555
Work in process .............................. 40 31
Finished goods ............................... 29,881 33,130
Packaging supplies ........................... 6,344 6,738
------- -------
Total ...................... $51,352 $48,454
======= =======
4. Recently Issued Accounting Standards
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share," was issued in February 1997. The Company will adopt SFAS No. 128 in
the second quarter of Fiscal 1998 and restatement of all prior periods is
required. Had the Company adopted it in the current quarter, earnings per share
would have been as follows:
THREE MONTHS ENDED
------------------
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
-------- --------
Basic earnings per share ......................... $ 0.25 $ 0.20
Diluted earnings per share ....................... $ 0.25 $ 0.20
SFAS No. 130, "Reporting Comprehensive Income," was issued in
June 1997. The Company will adopt SFAS No. 130 in the first quarter of Fiscal
1999. Had SFAS No. 130 been adopted as of September 28, 1997, net income, as
reported, would have been adjusted by changes during the reporting period in
unrealized gains on marketable securities, net of taxes, and cumulative foreign
currency translation adjustment.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 29,1996
RESULTS OF OPERATIONS
For the three months ended September 28, 1997, sales increased $3.0
million or 2.9% to $108.0 million from $105.0 million recorded for the same
period last year. Volume gains accounted for $2.8 million of the consolidated
increase in sales. A combination of price and product mix increased sales a
further $0.3 million while unfavorable foreign currency translation reduced
sales by $0.1 million. Domestic sales of $63.4 million increased $4.1 million or
6.9% from the prior year sales of $59.3 million. In the prior fiscal year, the
Company entered into a joint venture with a major rice milling company in
Arkansas, which began operations in the last fiscal quarter. The joint venture
is involved in the cogeneration of steam and electricity using rice hulls as
fuel. This venture added $0.4 million to sales in the current year. In the
domestic rice business, the retail sector recorded a $0.4 million or 0.8%
increase in sales. Within the retail sector, sales of regular rice increased by
$1.9 million or 9.1%. Due to competitive market conditions, sales of value-added
products declined by $1.3 million and sales of brown rice declined by $0.2
million. In the non-retail sector, sales increased by $3.3 million or 23.9%.
Higher sales were recorded in the foodservice ($0.1 million) and the
export/commodity ($3.1 million) categories. Sales also increased $0.1 million or
5.3% in the industrial products sector. Sales in Central America increased $1.8
million or 10.7% to $18.9 million compared to $17.1 million in the prior year.
Higher volumes were recorded in fruit nectar and juice product sales and more
than offset lower sales in the cookie and cracker product lines. In total,
higher volumes increased sales by $1.3 million. Higher prices, particularly in
the cookie and cracker product lines, increased sales by $1.6 million and
unfavorable currency translation reduced sales by $1.1 million. In Europe, sales
declined by $2.9 million or 10.2% to $25.7 million from $28.6 million last year.
Lower unit volumes decreased sales by $3.2 million as the Company continued to
eliminate sales of certain lower margin products. A combination of price and
product mix reduced sales by $0.9 million and favorable currency translation
increased sales by $1.1 million.
Gross profit increased $0.8 million or 3.0% to $27.4 million from $26.6
million a year ago. Gross profit as a percentage of sales was even with last
year at 25.3%. In the domestic rice business gross profit declined by $0.7
million or 3.6 % to $19.1 million. As a percentage of sales gross margin
declined to 30.4% from 33.4% last year. The major factor impacting gross profit
was the sales mix where lower volumes were reported in the value-added products.
In Central America, gross profit increased $1.2 million or 26.4% to $5.8
million. The increase in gross profit was related to the increase in sales
7
<PAGE>
volumes and operating efficiencies. The gross profit in Europe increased by $0.3
million or 14.3% to $2.5 million. As a percentage of sales, gross profit
increased to 9.6% from 7.5% in the same period last year. Gross profit improved
due to improved margins in the rice business and the reduction in sales of
certain lower margin products.
Operating income increased $0.2 million or 2.9% to $5.3 million from
$5.1 million for the same period last year. As a percentage of sales, operating
income was 4.9%, the same as last year. In the domestic segment, operating
income decreased by $0.6 million to $2.2 million from $2.8 million last year.
The decrease in operating income in the domestic segment was a result of lower
gross profit resulting from the reduced sales of value-added products. In
Central America, operating income increased by $0.5 million or 24.8% to $2.4
million. The improvement in operating income resulted from the improved gross
profit offset partially by higher advertising, selling and warehousing expenses
of $0.6 million. In Europe, operating profit increased by $0.3 million or 80.5%
to $0.7 million as a result of the improved margins in the rice business and the
elimination of certain lower margin products.
Interest expense declined significantly from the prior year as a result
of lower borrowings in both the domestic and international segments and lower
international interest rates. Borrowings were reduced due to improved cash flow.
Other income, excluding interest, increased from the previous year by
$0.6 million to $0.9 million from $0.3 million. Gains on sales of marketable
securities increased by $0.7 million while other miscellaneous expenses
increased by $0.1 million.
Net income for the current quarter increased $0.7 million or 21.1% to
$3.9 million from $3.2 million in the same period last year. Earnings per share
were $0.25 compared to $0.20.
The Company periodically reviews estimated useful lives of property,
plant and equipment. Based on the most recent review, the Company determined
that actual lives for certain machinery and equipment were generally longer than
the useful lives for depreciation purposes. Therefore the Company extended the
estimated useful lives of those assets from 10 to 15 years, effective June 30,
1997. This change in estimate reduced depreciation expense for the three months
ended September 28, 1997 by $0.4 million and increased net income by $0.3
million, or $0.02 per share.
LIQUIDITY AND FINANCIAL POSITION
Cash provided by operating activities increased by $1.0 million to $9.6
million for the quarter ended September 28, 1997. The increase in cash provided
by operations was primarily related to a reduction in the level of working
capital employed in the business in the current year.
8
<PAGE>
Cash used in investing activities decreased by $3.0 million to $0.6
million as compared to cash used in investing activities in the prior year of
$3.6 million. Additions to property, plant and equipment in the current quarter
totaled $2.1 million, a decrease of $1.8 million from the comparable period last
year. There was also an increase in amounts due to affiliates of $0.8 million.
Proceeds from the sale of marketable securities were $1.2 million, which was an
increase of $0.8 million from the prior year.
Cash used in financing activities decreased by $6.1 million in the
quarter ended September 28, 1997 to $3.5 million. In the current year the
Company had a net reduction in short and long-term debt of $1.9 million compared
to a net reduction of $7.5 million in the same period last year. Funds used for
dividend payments increased by $0.1 million and, during the quarter ended
September 28, 1997, 4,000 shares of the Company's common stock were repurchased
at a cost of $0.1 million.
On October 22, 1997 the Company's board of directors raised the
quarterly dividend on the Company's common stock to $0.11 per share from $0.10
per share, for an indicated annual rate of $0.44 per share.
The Company's financial position remains strong and the Company believes
that the combination of its working capital, unused and available short-term
credit facilities and cash flow from operations will provide the capital
resources and liquidity to meet its needs.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 15, Letters from Arthur Andersen LLP dated October 15,
1997, regarding unaudited financial statements.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
10
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
RIVIANA FOODS INC.
Dated: November 4, 1997 By: /S/E. WAYNE RAY, JR.
E. Wayne Ray, Jr.
Vice President,
Chief Financial Officer and
Chief Accounting Officer
11
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EXHIBIT INDEX
SEQUENTIAL
NO. DESCRIPTION PAGE NUMBER
- - --- -------------------------------------------------------- -----------
15 Letters from Arthur Andersen LLP dated October 15, 1997, 11
regarding unaudited financial statements
12
<PAGE>
EXHIBIT 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Riviana Foods Inc.:
We have reviewed the accompanying consolidated balance sheet of Riviana
Foods Inc. (a Delaware corporation) and subsidiaries as of September 28, 1997,
and the related consolidated statements of income and cash flows for the
three-month periods ended September 28, 1997, and September 29, 1996. These
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
October 15, 1997
13
<PAGE>
October 15, 1997
Riviana Foods Inc.:
We are aware that Riviana Foods Inc. has incorporated by reference in its Form
S-8 Registration Statement covering the 1994 Stock Option Plan, its Form S-8
Registration Statement covering the Amended and Restated 1995 Non-Employee
Director Stock Option Plan, and its Form S-3 Registration Statement, its
Form 10-Q for the quarter ended September 28, 1997, which includes our report
dated October 15, 1997, covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of 1933, that
report is not considered a part of the registration statements prepared or
certified by our firm or a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM RIVIANA FOODS INC.'S FIRST QUARTER FORM 10-Q FOR FISCAL 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1998
<PERIOD-END> SEP-28-1997
<CASH> 5,050
<SECURITIES> 3,964
<RECEIVABLES> 42,004
<ALLOWANCES> 537
<INVENTORY> 51,352
<CURRENT-ASSETS> 112,618
<PP&E> 108,786
<DEPRECIATION> 38,899
<TOTAL-ASSETS> 199,386
<CURRENT-LIABILITIES> 53,374
<BONDS> 0
0
0
<COMMON> 15,883
<OTHER-SE> 112,344
<TOTAL-LIABILITY-AND-EQUITY> 199,386
<SALES> 108,014
<TOTAL-REVENUES> 108,014
<CGS> 80,656
<TOTAL-COSTS> 22,076
<OTHER-EXPENSES> 862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (289)
<INCOME-PRETAX> 6,144
<INCOME-TAX> 2,127
<INCOME-CONTINUING> 3,924
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,924
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
