SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
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 March 29, 1998
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
______________
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 April 29, 1998 was 15,683,820.
<PAGE>
RIVIANA FOODS INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1998
INDEX
PAGE
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at March 29, 1998 and June 29, 1997..1
Consolidated Statements of Income for the Three Months and
Nine Months Ended March 29, 1998 and March 30, 1997...........2
Consolidated Statements of Cash Flows for the Nine Months Ended
March 29, 1998 and March 30, 1997.............................3
Notes to Consolidated Financial Statements.......................4
Item 2 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................6
Part II -- Other Information
Item 6 -- Exhibits and Reports on Form 8-K............................10
Signature...................................................................11
Exhibit Index...............................................................12
<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>
March 29, June 29,
1998 1997
--------- ---------
<S> <C> <C>
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash ........................................................................... $ 6,758 $ 4,562
Cash equivalents ............................................................... 6,504 2,478
Marketable securities .......................................................... 5,078 4,405
Accounts receivable, less allowance for doubtful accounts of $681 and $529 ..... 40,653 43,493
Inventories .................................................................... 52,677 48,454
Prepaid expenses ............................................................... 1,774 2,295
--------- ---------
Total current assets ................................................... 113,444 105,687
PROPERTY, PLANT AND EQUIPMENT:
Land ........................................................................... 3,534 3,550
Buildings ...................................................................... 23,745 21,848
Machinery and equipment ........................................................ 85,857 81,830
--------- ---------
Property, plant and equipment - gross ...................................... 113,136 107,228
Less - Accumulated depreciation ................................................ (40,425) (38,065)
--------- ---------
Property, plant and equipment - net ........................................ 72,711 69,163
INVESTMENTS IN UNCONSOLIDATED AFFILIATES ......................................... 10,359 11,471
OTHER ASSETS ..................................................................... 5,345 5,568
--------- ---------
Total assets ....................................................... $ 201,859 $ 191,889
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt ................................................................ $ 1,317 $ 5,011
Current maturities of long-term debt ........................................... 1,320 1,863
Accounts payable ............................................................... 22,259 20,629
Accrued liabilities ............................................................ 16,033 13,940
Income taxes payable ........................................................... 6,459 5,382
--------- ---------
Total current liabilities .................................................. 47,388 46,825
LONG-TERM DEBT, net of current maturities ........................................ 1,924 2,619
DUE TO AFFILIATES ................................................................ 1,080 135
DEFERRED INCOME TAXES ............................................................ 5,481 5,884
OTHER NONCURRENT LIABILITIES ..................................................... 3,402 2,995
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS ............................................................... 6,377 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 ................................................................ 6,302 6,215
Retained earnings .............................................................. 120,881 109,851
Unrealized gains on marketable securities, net of taxes ........................ 3,125 2,273
Cumulative foreign currency translation adjustment ............................. (6,903) (5,059)
Treasury stock, at cost, 167 and 130 shares .................................... (3,081) (2,087)
--------- ---------
Total stockholders' equity ............................................. 136,207 127,076
--------- ---------
Total liabilities and stockholders' equity ............................. $ 201,859 $ 191,889
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
<PAGE>
RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ----------------------
March 29, March 30, March 29, March 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES ....................................... $ 114,068 $ 119,022 $ 343,554 $ 342,818
COST OF SALES ................................... 81,607 85,966 246,724 249,592
--------- --------- --------- ---------
Gross profit ................................ 32,461 33,056 96,830 93,226
--------- --------- --------- ---------
COSTS AND EXPENSES:
Advertising, selling and warehousing .......... 19,388 19,990 59,653 57,171
Administrative and general .................... 4,855 5,335 14,935 14,871
--------- --------- --------- ---------
Total costs and expenses .................... 24,243 25,325 74,588 72,042
--------- --------- --------- ---------
Income from operations ...................... 8,218 7,731 22,242 21,184
OTHER INCOME (EXPENSE):
Gain on sale of marketable securities ......... 29 1,065 1,141
Interest income ............................... 287 158 801 381
Interest expense .............................. (490) (533) (1,504)
Equity in earnings of unconsolidated affiliates 138 543 971 1,159
Other expense - net ........................... (422) (266) (909) (975)
--------- --------- --------- ---------
Total other income (expense) ................ 3 (26) 1,395 202
--------- --------- --------- ---------
Income before income taxes and
minority interests ....................... 8,221 7,705 23,637 21,386
INCOME TAX EXPENSE .............................. 2,270 2,439 7,182 6,952
MINORITY INTERESTS IN EARNINGS OF
CONSOLIDATED SUBSIDIARIES ................... 83 82 255 232
--------- --------- --------- ---------
Net income .................................. $ 5,868 $ 5,184 $ 16,200 $ 14,202
========= ========= ========= =========
Earnings per share:
Basic ................................... $ 0.37 $ 0.33 $ 1.03 $ 0.90
Diluted ................................. 0.37 0.33 1.02 0.89
Weighted average common shares outstanding:
Basic .................................. 15,730 15,808 15,744 15,829
Diluted ................................ 15,952 15,934 15,938 15,931
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
March 29, March 30,
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 16,200 $ 14,202
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ............................... 3,269 3,739
Deferred income taxes ....................................... (322) (683)
Gain on disposition of assets ............................... (1,082) (1,061)
Equity in earnings of unconsolidated affiliates ............. (971) (1,159)
Change in assets and liabilities:
Accounts receivable, net ................................ 2,325 (855)
Inventories ............................................. (4,878) (6,982)
Prepaid expenses ........................................ 467 (658)
Other assets ............................................ 1,960 390
Accounts payable and accrued liabilities ................ 3,850 (2,832)
Income taxes payable .................................... 1,149 1,194
Other noncurrent liabilities ............................ 15 (69)
Minority interests ...................................... 8 134
-------- --------
Net cash provided by operating activities ............ 21,990 5,360
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment ....................... (7,449) (17,236)
Proceeds from disposals of property, plant and equipment ......... 68 52
Investment by joint venture partner .............................. 75 4,481
Proceeds from sale of marketable securities ...................... 1,183 3,650
Collection of notes receivable ................................... 27 40
Due to affiliates ................................................ 923 (114)
Cash received from a previously unconsolidated affiliate ......... 57
Increase in marketable securities ................................ (3) (94)
-------- --------
Net cash used in investing activities ................ (5,176) (9,164)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt ........................... (3,560) 5,723
Additions to long-term debt ...................................... 677 823
Repayments of long-term debt ..................................... (1,643) (2,670)
Dividends paid ................................................... (4,884) (4,436)
Repurchases of common stock ...................................... (1,684) (1,225)
Sales of common stock ............................................ 556 183
Collection of employee discount on stock ......................... 87 23
-------- --------
Net cash used in financing activities ................ (10,451) (1,579)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ........ (141) (123)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................... 6,222 (5,506)
CASH AND CASH EQUIVALENTS, beginning of period ...................... 7,040 7,390
-------- --------
CASH AND CASH EQUIVALENTS, end of period ............................ $ 13,262 $ 1,884
======== ========
CASH PAID DURING THE PERIOD FOR:
Interest ......................................................... $ 748 $ 1,489
======== ========
Income taxes ..................................................... $ 5,828 $ 6,446
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
RIVIANA FOODS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(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
Basic and diluted earnings per share are computed by dividing net
income by the respective number of weighted average common shares outstanding.
The reconciliation of weighted average common shares outstanding used in
computing basic and diluted earnings per share is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ---------------------
MARCH 29, MARCH 30, MARCH 29, MARCH 30,
1998 1997 1998 1997
------ ------ ------ ------
Average Shares Outstanding:
Basic ...................... 15,730 15,808 15,744 15,829
Stock Options .............. 222 126 194 102
------ ------ ------ ------
Diluted .................... 15,952 15,934 15,938 15,931
====== ====== ====== ======
3. Inventories
Inventories were composed of the following:
MARCH 29, 1998 JUNE 29, 1997
------------ ------------
Raw materials ............................ $ 13,309 $ 8,555
Work in process .......................... 47 31
Finished goods ........................... 32,827 33,130
Packaging supplies ....................... 6,494 6,738
------------ ------------
Total ........................ $ 52,677 $ 48,454
============ ============
4. Recently Issued Accounting Standards
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," was issued in June 1997. The Company will
4
<PAGE>
adopt SFAS No. 130 in the first quarter of Fiscal 1999. Had SFAS No. 130 been
adopted as of March 29, 1998, 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.
In March 1998, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." The SOP
provides guidance with respect to accounting for the various types of costs
incurred for computer software developed or obtained for the Company's use. The
Company is required to and will adopt SOP 98-1 by the first quarter of Fiscal
2000 and believes that adoption will not have a significant effect on its
consolidated financial statements.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." At adoption, SOP 98-5 requires the Company to write-off
any unamortized start-up costs as a cumulative change in accounting principle
and, going forward, expense all start-up activity costs as they are incurred.
The Company is required to and will adopt SOP 98-5 by the first quarter of
Fiscal 2000 and believes that adoption will not have a significant effect on its
consolidated financial statements.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
THREE MONTHS ENDED MARCH 29, 1998 COMPARED TO THREE MONTHS ENDED MARCH 30, 1997
For the three months ended March 29, 1998, sales declined $4.9 million, or 4.2%,
to $114.1 million from $119.0 million recorded for the same period last year.
Lower volumes accounted for $2.3 million of the consolidated decrease in sales.
A combination of price and product mix decreased sales $1.9 million and
unfavorable foreign currency translation reduced sales by $0.7 million. Domestic
sales of $71.4 million decreased $1.6 million, or 2.1%, from the prior year
sales of $73.0 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 of the prior year. The joint venture is
involved in the cogeneration of steam and electricity using rice hulls as fuel.
This venture added $0.8 million to sales in the current year. In the domestic
rice business, the retail sector recorded a $3.0 million, or 5.4%, decrease in
sales. Within the retail sector, sales of regular rice decreased by $2.9
million, or 10.6%, due primarily to a volume decline of 9.1%. Sales of
value-added products decreased by $0.1 million and sales of brown rice were even
with the prior year. In the non-retail sector, sales increased $0.6 million, or
3.4%. Sales decreased $0.4 million, or 3.0%, in the export/commodity category,
whereas higher sales were recorded in the foodservice ($0.7 million) and the
industrial ($0.4 million) categories. Sales in Central America decreased $0.3
million, or 1.5%, to $18.9 million compared to $19.2 million in the prior year.
Higher volumes were recorded in the cookie and cracker product lines and offset
marginally lower volumes of fruit juice and nectar products. In total, higher
volumes increased sales by $0.1 million. Higher prices, particularly in the
cookie and cracker product lines, increased sales by $0.9 million and
unfavorable currency translation reduced sales by $1.3 million. In Europe, sales
declined by $3.0 million, or 11.5%, to $23.8 million from $26.8 million last
year. Lower unit volumes decreased sales by $2.5 million as the Company
continued to eliminate sales of certain lower margin products. A combination of
price and product mix reduced sales by $1.1 million and favorable currency
translation increased sales by $0.6 million.
Gross profit decreased by $0.6 million, or 1.8%, to $32.5 million from $33.1
million a year ago but increased as a percentage of sales to 28.5% from 27.8%
due to higher percentage margins in Central America and Europe. Gross profit on
the sale of cookie and cracker products increased over the prior year due mostly
to the higher volumes in the home market, which carry higher margin than export
sales. Margins in the Company's fruit juice and nectar products were up
reflecting improvements in operating efficiencies. Gross profit in Central
America improved by $0.2 million, or 3.7%, to $6.1 million. In the domestic
sector gross profit decreased $1.0 million, or 4.2%, to $23.8 million from $24.8
million in the same period last year. Gross profit decreased primarily as a
result of the decrease in sales. In the domestic rice business, gross profit as
a percentage of sales declined to 33.7% from 34.0% as a result of the change in
sales mix. In Europe gross profit increased by $0.2 million, or 9.3%, to $2.6
million and increased as a percentage of sales to 10.8% from 8.8% last year. The
increase in gross margin was due to improved margins on the ethnic rice business
and the elimination of lower margin products.
Operating income increased $0.5 million, or 6.3%, to $8.2 million from $7.7
million in the same period last year. As a percentage of sales, operating income
increased to 7.2% from 6.5% in the prior period. The increase in operating
income was principally due to the improved results in European operations and
lower domestic administrative expenses. The decrease in administrative expenses
($0.5 million) was essentially timing related as year-to-date expenses were even
with the prior year. The improvement in European operations was related to the
improved gross profit as discussed previously. Operating income in the domestic
business was even with the prior year at $7.2 million, but increased as a
percentage of sales to 10.2% from 9.9% last year. Reduced advertising and
promotional spending was the main contributor to
6
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the improved performance relative to sales. In Central America, operating income
declined slightly ($0.1 million) due to increased selling and distribution
expenses related primarily to expanded distribution.
Other income/(expense) was essentially unchanged from the same quarter last
year. Net interest income of $0.3 million for the current period improved by
$0.6 million from the prior period's net interest expense of $0.3 million.
Improved cash flow, declining international interest rates and capitalization of
interest expense of $0.2 million related to capital expenditures in Central
America were the main factors affecting this item. Equity in the earnings of
unconsolidated affiliates of $0.1 million was $0.4 million lower than the same
period last year. Also, commercial storage income was $0.1 million lower than
the same period last year as a result of lower volumes.
Tax expense of $2.3 million reflected a decrease of $0.2 million from the same
period last year and the effective rate decreased to 27.6% from 31.7%. This
decrease in the rate reflected energy tax credits related to the Company's
cogeneration joint venture and Central American investment tax credits.
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 March
29, 1998 by $0.4 million and increased net income by $0.3 million, and diluted
earnings per share by $0.02.
Net income for the current quarter increased $0.7 million, or 13.2%, to $5.9
million from $5.2 million in the third quarter last year. Diluted earnings per
share were $0.37 up from $0.33 in the prior period.
NINE MONTHS ENDED MARCH 29, 1998 COMPARED TO NINE MONTHS ENDED MARCH 30, 1997
Sales increased $0.7 million, or 0.2%, to $343.5 million in the nine-month
period ended March 29, 1998 versus $342.8 million for the same period of the
previous year. Domestic sales increased by $7.0 million, or 3.4%, to $210.7
million while sales from international operations decreased by $6.3 million to
$132.8 million. Increased volumes added $6.5 million to sales while a
combination of price and sales mix decreased sales by $3.6 million. Unfavorable
currency translation reduced sales by $2.2 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 $1.9 million to sales in the current year. In the
domestic rice business, sales in the retail category increased by $2.5 million,
or 1.7%. Unit volume sales of the higher-margin instant and prepared rice mixes
increased by 1.8%. Of the total $2.5 million increase in sales in the retail
category, $3.9 million was related to increased volumes and a combination of
product mix and selling price reduced sales $1.4 million. In the non-retail
category that includes the lower-margin regular rice sales to the foodservice,
industrial and export sectors, sales increased by $2.6 million. Increased
volumes accounted for $4.7 million and lower pricing and product mix reduced
sales $2.1 million. Sales by the Company's Central American operations increased
$2.5 million, or 4.4%, to $58.4 million. Increased sales volumes in both cookie
and cracker products and fruit juice and nectar products added $2.5 million to
sales. Higher prices added $3.9 million to sales and unfavorable currency
translation reduced sales by $3.9 million. Sales by the Company's European
operations decreased $8.8 million, or 10.5%, to $74.4 million. Volumes were
affected by product line rationalization and decreased sales by $6.5 million.
Lower prices reduced sales by $4.0 million and favorable foreign currency
exchange increased sales $1.7 million.
Gross profit increased by $3.6 million, or 3.9%, to $96.8 million for the nine
months ended March 29, 1998 from $93.2 million in the same period last year. As
a percentage of sales, gross profit increased to 28.2% from 27.2% last year. In
the domestic rice business, gross profit increased $0.2 million as a result
7
<PAGE>
of increased sales. In Central America, gross profit increased by $2.6 million,
or 16.2%, to $18.6 million from $16.0 million last year. The improvement in
gross profit was the result of increased sales and improved operating
efficiencies in fruit juice and nectar products. In Europe, gross profits
increased $1.0 million, or 13.9%, to $7.9 million and improved as a percentage
of sales to 10.7% from 8.4%. The improvement is attributable to the
rationalization of the product line as discussed previously and improved
operating margins in ethnic rice products.
Operating income increased by 5.0% to $22.2 million from $21.2 million in the
same period last year. As a percentage of sales, operating income increased to
6.5% from 6.2% primarily due to improved results in Europe and Central America.
In the domestic business operating income decreased 4.7% to $18.7 million from
$19.7 million due to an increase of $1.0 million in advertising and promotion
expenses resulting from competitive market conditions. In Central America
operating income increased $1.1 million due to the increased gross margins of
$2.6 million offset by higher selling and distribution expenses of $1.4 million.
In Europe, operating income increased by $0.9 million, or 55.9%, and was
directly related to the increase in gross profit.
Other income increased $1.2 million to $1.4 million in the current period from
$0.2 million in the same period last year. Net interest income of $0.3 million
increased by $1.4 million from the prior year when the Company recorded net
interest expense of $1.1 million. Improved cash flow, declining international
interest rates and capitalization of interest expense of $0.2 million related to
capital expenditures in Central America were the main factors affecting net
interest income/ (expense).
Tax expense increased $0.2 million to $7.2 million in the current year. The
increase is related to the increase in pretax earnings. The effective rate for
the current period was 30.4% compared to 32.5% in the same period last year.
This decrease in the rate reflected energy tax credits related to the Company's
cogeneration joint venture and Central American investment tax credits.
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 nine months ended March
29, 1998 by $1.3 million and increased net income by $0.8 million, and diluted
earnings per share by $0.05
Net income for the nine-month period was $16.2 million, up 14.1%, compared to
$14.2 million for the same period in the prior year. Diluted earnings per share
were $1.02 versus $0.89 last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $22.0 million for the nine months
ended March 29, 1998 compared to cash provided by operating activities of $5.4
million last year. The increase in cash provided by operations was for the most
part related to the increase in earnings and reduced working capital needs.
Cash used in investing activities decreased to $5.2 million from $9.2 million in
the same period last year. Additions to property, plant and equipment net of
investment by joint venture partner were lower by $5.4 million in the current
year. In the prior year additions to property, plant and equipment were higher
as the Company's Arkansas joint venture was constructing two energy cogeneration
facilities. Proceeds from the sale of marketable securities were $2.5 million
lower in the current year. Additionally, amounts due to affiliated companies
increased by $1.0 million.
Cash used by financing activities increased to $10.5 million for the nine months
ended March 29, 1998 from $1.6 million in the comparable period last year. In
the current period, short and long-term debt was
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reduced by $4.5 million while in the prior year short and long term debt
increased by $3.9 million. Dividend payments in the period ended March 29, 1998
were $4.9 million up from $4.4 million paid in the same period last year.
Through the end of the third quarter the Company purchased 81,700 shares of the
Company's common stock pursuant to a stock repurchase plan announced in August
1995. The cost of the shares repurchased was $1.7 million.
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 sufficient capital
resources and liquidity to meet its needs.
OTHER MATTERS - IMPACT OF THE YEAR 2000 ISSUE
The Company is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive data by the Company's computerized
information systems. The year 2000 is critical to these systems as many computer
programs are written using two digits rather than four to define the applicable
year. As a result, any of the Company's computer applications that have
date-sensitive programs may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculation
causing disruptions including but not limited to a temporary inability to
process transactions, issue invoices, communicate with customers and financial
institutions and update internal accounting systems. If not corrected, such
disruptions could have a significant impact on the Company's operations.
The Company has initiated a Company-wide program to prepare the Company's
computer systems and applications for the year 2000. Based on present
information, the Company believes that it will be able to achieve year 2000
compliance through modification of some existing programs and the replacement of
other programs with new programs that are already year 2000 compliant. The
Company will utilize both internal and external resources to reprogram, or
replace, and test software for year 2000 compliance. The Company plans to
complete the year 2000 conversion project by July 1, 1999. The total project
costs are presently estimated not to exceed $1.0 million and will be expensed as
incurred, unless new software is purchased which costs will be capitalized.
The Company is taking steps to resolve year 2000 compliance issues that may be
created by customers, suppliers and financial institutions with whom the Company
communicates electronically. However, there can be no guarantee that the systems
of other companies will be converted timely. A failure to convert by another
company could have a significant adverse effect on the Company.
The costs of the year 2000 conversion project and the date on which the Company
plans to complete the project are based on management's best estimates, which
were derived using numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. There can be no guarantee that these estimates will be achieved and
actual results could vary significantly from current estimates.
FORWARD LOOKING STATEMENTS
The statements contained in this Form 10-Q include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Act of 1934, as amended. Although the Company
believes that the expectations reflected in such forward looking statements are
based on reasonable assumptions, the Company can give no assurance that these
expectations will be achieved.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 15, Letters from Arthur Andersen LLP dated April 21,
1998, regarding unaudited financial statements.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
10
<PAGE>
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: May 6, 1998 By:/s/E. WAYNE RAY, JR.
E. Wayne Ray, Jr.
Vice President, Chief Financial
Officer and Chief Accounting
Officer
11
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
NO. DESCRIPTION PAGE NUMBER
15 Letters from Arthur Andersen LLP dated April 21, 1998, regarding 13
unaudited financial statements
12
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 March 29, 1998, and the
related consolidated statements of income for the three-month periods ended
March 29, 1998, and March 30, 1997, and the related consolidated statements of
income and cash flows for the nine-month periods ended March 29, 1998 and March
30, 1997. 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
April 21, 1998
13
<PAGE>
April 21, 1998
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, its Form S-8 Registration Statement covering the
1997 Stock Option Plan and the Riviana Foods Inc. Savings Plan and its Form S-3
Registration Statement, its Form 10-Q for the quarter ended March 29, 1998,
which includes our report dated April 21, 1998, 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 Third Quarter Form 10Q for Fiscal 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1998
<PERIOD-END> MAR-29-1998
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<ALLOWANCES> 681
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<PP&E> 113,136
<DEPRECIATION> 40,425
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0
0
<COMMON> 15,883
<OTHER-SE> 120,324
<TOTAL-LIABILITY-AND-EQUITY> 201,859
<SALES> 343,554
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<TOTAL-COSTS> 74,588
<OTHER-EXPENSES> 1,395
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<INTEREST-EXPENSE> (533)
<INCOME-PRETAX> 23,637
<INCOME-TAX> 7,182
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<EPS-PRIMARY> 1.03
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