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 March 28, 1999
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 organization)
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 26, 1999 was 14,745,474.
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<PAGE>
RIVIANA FOODS INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 28, 1999
INDEX
PAGE
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at March 28, 1999 and June 28, 1998..1
Consolidated Statements of Income for the Three Months and
Nine Months Ended March 28, 1999 and March 29, 1998...........2
Consolidated Statements of Cash Flows for the Nine Months Ended
March 28, 1999 and March 29, 1998.............................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.............................11
Signature....................................................................12
Exhibit Index................................................................13
<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 28, 1999 June 28, 1998
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(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ......................................................................... $ 2,975 $ 7,609
Cash equivalents ............................................................. 6,940 9,588
Marketable securities ........................................................ 3,406 4,328
Accounts receivable, less allowance for doubtful accounts of $1,355 and $1,265 43,200 40,514
Inventories .................................................................. 52,456 49,566
Prepaid expenses ............................................................. 2,266 2,008
------------- -------------
Total current assets ................................................. 111,243 113,613
PROPERTY, PLANT AND EQUIPMENT:
Land ......................................................................... 3,511 3,530
Buildings .................................................................... 26,070 25,271
Machinery and equipment ...................................................... 90,267 87,668
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Property, plant and equipment, gross ..................................... 119,848 116,469
Less accumulated depreciation ................................................ (43,588) (41,241)
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Property, plant and equipment, net ....................................... 76,260 75,228
INVESTMENTS IN UNCONSOLIDATED AFFILIATES ....................................... 10,530 10,745
OTHER ASSETS ................................................................... 6,416 5,742
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Total assets ..................................................... $ 204,449 $ 205,328
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt .............................................................. $ 8,635 $ 1,280
Current maturities of long-term debt ......................................... 1,136 1,425
Accounts payable ............................................................. 22,386 23,988
Accrued liabilities .......................................................... 17,540 14,894
Income taxes payable ......................................................... 7,899 6,255
------------- -------------
Total current liabilities ................................................ 57,596 47,842
LONG-TERM DEBT, net of current maturities ...................................... 1,423 1,861
DUE TO AFFILIATES .............................................................. 176 1,347
DEFERRED INCOME TAXES .......................................................... 4,900 6,805
OTHER NONCURRENT LIABILITIES ................................................... 2,995 3,246
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS ............................................................. 6,335 6,483
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 .............................................................. 6,468 6,455
Retained earnings ............................................................ 137,786 125,503
Accumulated other comprehensive income ....................................... (8,195) (4,964)
Treasury stock, at cost, 1,044 and 254 shares ................................ (20,918) (5,133)
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Total stockholders' equity ........................................... 131,024 137,744
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Total liabilities and stockholders' equity ........................... $ 204,449 $ 205,328
============= =============
</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 28, 1999 March 29, 1998 March 28, 1999 March 29, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES ................................................. $ 118,487 $ 114,068 $ 348,293 $ 343,554
COST OF SALES ............................................. 83,602 81,607 247,706 246,724
-------------- -------------- -------------- --------------
Gross profit .......................................... 34,885 32,461 100,587 96,830
-------------- -------------- -------------- --------------
COSTS AND EXPENSES:
Advertising, selling and warehousing .................... 21,303 19,388 61,369 59,653
Administrative and general .............................. 5,039 4,855 15,672 14,935
-------------- -------------- -------------- --------------
Total costs and expenses .............................. 26,342 24,243 77,041 74,588
-------------- -------------- -------------- --------------
Income from operations ................................ 8,543 8,218 23,546 22,242
OTHER INCOME (EXPENSE):
Gain on sale of marketable securities ................... 553 1,208 1,065
Interest income ......................................... 368 287 947 801
Interest expense ........................................ (337) (739) (533)
Equity in earnings of unconsolidated affiliates ......... 228 138 565 971
Other income (expense), net ............................. (301) (422) 148 (909)
-------------- -------------- -------------- --------------
Total other income .................................... 511 3 2,129 1,395
-------------- -------------- -------------- --------------
Income before income taxes and
minority interests ................................. 9,054 8,221 25,675 23,637
INCOME TAX EXPENSE ........................................ 2,718 2,270 7,729 7,182
MINORITY INTERESTS IN EARNINGS OF
CONSOLIDATED SUBSIDIARIES ............................. 18 83 198 255
-------------- -------------- -------------- --------------
Net income ............................................ $ 6,318 $ 5,868 $ 17,748 $ 16,200
============== ============== ============== ==============
Earnings per share:
Basic ............................................. $ 0.43 $ 0.37 $ 1.18 $ 1.03
Diluted ........................................... 0.42 0.37 1.16 1.02
Weighted average common shares outstanding:
Basic ............................................ 14,849 15,730 15,081 15,744
Diluted .......................................... 15,079 15,952 15,291 15,938
</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)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------
MARCH 28, 1999 MARCH 29, 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income ...................................................... $ 17,748 $ 16,200
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ............................ 4,306 3,269
Deferred income taxes .................................... (1,623) (322)
Gain on disposition of assets ............................ (1,152) (1,082)
Equity in earnings of unconsolidated affiliates .......... (565) (971)
Change in assets and liabilities:
Accounts receivable, net .......................... (3,617) 2,325
Inventories ....................................... (4,307) (4,878)
Prepaid expenses .................................. (329) 467
Other assets ...................................... (183) 1,960
Accounts payable and accrued liabilities .......... 1,615 3,850
Income taxes payable .............................. 1,755 1,149
Other noncurrent liabilities ...................... (138) 15
Minority interests ................................ (58) 8
-------------- --------------
Net cash provided by operating activities ..... 13,452 21,990
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment ...................... (6,601) (7,449)
Proceeds from disposals of property, plant and equipment ........ 111 68
Investment by joint venture partner ............................. 75
Proceeds from sale of marketable securities ..................... 1,332 1,183
Collection of notes receivable .................................. 30 27
Due to affiliates ............................................... (1,029) 923
Increase in marketable securities ............................... (3)
-------------- --------------
Net cash used in investing activities ......... (6,157) (5,176)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt .......................... 7,477 (3,560)
Additions to long-term debt ..................................... 1,195 677
Repayments of long-term debt .................................... (1,647) (1,643)
Dividends paid .................................................. (5,280) (4,884)
Repurchases of common stock ..................................... (16,114) (1,684)
Sales of common stock ........................................... 279 556
Collection of employee discount on stock ........................ 13 87
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Net cash used in financing activities ......... (14,077) (10,451)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS ................................................ (500) (141)
-------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................... (7,282) 6,222
CASH AND CASH EQUIVALENTS, beginning of period ....................... 17,197 7,040
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period ............................. $ 9,915 $ 13,262
============== ==============
CASH PAID DURING THE PERIOD FOR:
Interest ........................................................ $ 713 $ 748
Income taxes .................................................... 7,363 5,828
</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 28, 1998, 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 28, 1998.
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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- -------------------------------
MARCH 28, 1999 MARCH 29, 1998 MARCH 28, 1999 MARCH 29, 1998
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<S> <C> <C> <C> <C>
Weighted average common shares outstanding:
Basic ........................................................ 14,849 15,730 15,081 15,744
Stock options ................................................ 230 222 210 194
-------------- -------------- -------------- --------------
Diluted ...................................................... 15,079 15,952 15,291 15,938
============== ============== ============== ==============
</TABLE>
In the calculation of diluted shares, 8 anti-dilutive stock option shares
have been excluded for the three months and nine months ended March 28, 1999.
3. Inventories
Inventories were composed of the following:
MARCH 28, 1999 JUNE 28, 1998
-------------- --------------
Raw materials ................................ $ 14,160 $ 9,390
Work in process .............................. 26 23
Finished goods ............................... 32,073 34,007
Packaging supplies ........................... 6,197 6,146
-------------- --------------
Total ................... $ 52,456 $ 49,566
============== ==============
4
<PAGE>
4. Comprehensive Income
Effective June 29, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". The
adoption of this statement had no impact on net income or stockholders' equity.
SFAS No. 130 requires the reporting of comprehensive income, which includes net
income plus other comprehensive income, net of taxes. Other comprehensive income
includes unrealized gains (losses) on marketable securities, net of tax, and
foreign currency translation adjustment. The components of comprehensive income
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- --------------------------------
MARCH 28, 1999 MARCH 29, 1998 MARCH 28, 1999 MARCH 29, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income ................................................. $ 6,318 $ 5,868 $ 17,748 $ 16,200
Other comprehensive income:
Unrealized gains on
marketable securities,
net of tax:
Realized (gains) reclassified
to net income ......................................... (359) (785) (692)
Unrealized gains
(losses) .............................................. (37) 742 266 1,544
Foreign currency
translation
adjustment ............................................. (1,788) (638) (2,712) (1,844)
-------------- -------------- -------------- --------------
Total comprehensive
income ................................................... $ 4,134 $ 5,972 $ 14,517 $ 15,208
============== ============== ============== ==============
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED MARCH 28, 1999 COMPARED TO THREE MONTHS ENDED MARCH 29, 1998
For the three months ended March 28, 1999, sales increased $4.4 million or 3.9%
to $118.5 million from $114.1 million recorded for the same period last year.
Volume gains accounted for $8.4 million of the consolidated increase in sales. A
combination of price and product mix decreased sales $1.3 million and
unfavorable foreign currency translation reduced sales by $2.7 million. Domestic
rice sales of $75.7 million increased $5.1 million or 7.2% from the prior year
sales of $70.6 million. In the domestic rice business, the retail sector
recorded a $4.2 million or 8.0% increase in sales. Within the retail sector,
sales of regular rice increased by $3.5 million or 14.2% primarily due to a unit
volume increase of 15.5%. Sales of value-added products increased by $0.3
million and sales of brown rice increased by $0.4 million. In the non-retail
sector, sales increased $0.9 million or 4.9%. Sales in the export/commodity
category increased by $0.4 million or 2.8% primarily due to a 10.2% increase in
unit volume sales. Sales in the foodservice category were about even with the
past year. Industrial and by-product sales increased $0.5 million from the prior
year due to increased unit volumes. Sales from the Company's energy cogeneration
joint venture increased by $0.1 million due to higher volumes. Sales in Central
America increased $1.2 million or 6.5% to $20.1 million compared to $18.9
million in the prior year. Higher volumes were recorded in both the fruit nectar
and juice products and cookie and cracker product lines. In total, higher
volumes increased sales by $2.3 million. Higher prices increased sales by $1.2
million and unfavorable currency translation reduced sales by $2.3 million. In
Europe, sales declined by $2.0 million or 8.4% to $21.7 million from $23.7
million last year. Lower unit volumes decreased sales by $1.1 million and a
combination of lower selling prices and product mix reduced sales by $0.4
million. Unfavorable currency translation decreased sales by $0.5 million.
Gross profit increased $2.4 million or 7.5% to $34.9 million from $32.5 million
a year ago. As a percentage of sales, gross profit increased to 29.4% from
28.5%. In the domestic rice business, gross profit increased by $2.3 million
and, as a percentage of sales, to 34.5% from 33.7% primarily as a result of
increased unit volume sales and lower rice costs. In Central America gross
profit increased $0.4 million or 6.1% to $6.5 million as a result of higher
sales. Gross profit as a percentage of sales in Central America remained even
with last year at 32.1%. In Europe, gross profit declined by $0.2 million or
7.5%. Increased competition in the ethnic rice market reduced retail prices and
the accompanying gross profit.
Advertising, selling and warehousing expenses increased by $1.9 million to $21.3
million from $19.4 million in the same period last year. The increase in this
expense category came primarily in the media advertising and promotional
programs in the domestic rice business and was due to competitive market
activity in the prepared mix category.
Income from operations increased $0.3 million or 4.0% to $8.5 million from $8.2
million in the same period last year. As a percentage of sales, operating income
remained at 7.2%, the same as in the prior period. The increase in operating
income was principally due to improved results in domestic rice operations.
Operating income increased by $0.6 million or 7.7% to $7.8 million in the
domestic rice business due to the increase in gross profit discussed above
partially offset by higher advertising, selling and warehousing expenses. In
Central America, operating income was even with last year at $2.4 million. The
increase in gross profit of $0.4 million was offset by $0.4 million in higher
advertising, selling and warehousing expenses related to expanding distribution.
Operating income for European operations decreased by $0.3 million. In addition
to the lower gross profit discussed previously, administrative and general
expenses increased by $0.1 million.
Total other income increased $0.5 million. Gains from the sale of marketable
securities increased $0.6 million while equity in earnings of unconsolidated
affiliates increased by $0.1 million and net interest income decreased by $0.3
million. Miscellaneous other expenses declined by $0.1 million.
6
<PAGE>
The effective tax rate of 30% increased from 28% in the same period last year.
In the prior year, the Company benefited from investment tax credits applicable
to its Central American operations. The rate in the current year is below the
statutory rate primarily due to energy tax credits related to the cogeneration
operations.
Net income for the current quarter was $6.3 million compared to $5.9 million for
the same quarter last year and diluted earnings per share were $0.42, up from
$0.37.
NINE MONTHS ENDED MARCH 28, 1999 COMPARED TO NINE MONTHS ENDED
MARCH 29, 1998
Sales increased $4.7 million or 1.4% to $348.3 million in the nine-month period
ended March 28, 1999 versus $343.6 million for the same period of the previous
year. Domestic sales increased by $6.0 million or 2.9% to $216.8 million while
sales from international operations decreased by $1.3 million to $131.5 million.
Increased volumes added $15.4 million to sales while a combination of price and
sales mix decreased sales by $5.0 million. Unfavorable currency translation
reduced sales by $5.7 million. In the domestic rice business, sales in the
retail category increased by $3.0 million or 2.0% primarily due to higher unit
volume sales of regular rice products. Unit volume sales of regular rice
products increased by 6.2%. Of the total $3.0 million increase in sales in the
retail category, higher volumes increased sales $4.2 million and a combination
of product mix and selling price reduced sales $1.2 million. In the non-retail
category that includes regular rice sales to the foodservice, industrial and
export sectors, sales increased by $2.5 million. Increased volumes accounted for
$6.1 million and lower pricing and product mix reduced sales $3.6 million. Sales
from the Company's energy cogeneration joint venture increased by $0.5 million
due to higher volumes. Sales by the Company's Central American operations
increased $3.4 million or 5.8% to $61.8 million. Increased sales volumes in both
cookie and cracker products and fruit nectar and juice products added $5.5
million to sales. Higher prices added $3.8 million to sales and unfavorable
currency translation reduced sales by $5.9 million. Sales by the Company's
European operations decreased $4.7 million or 6.3% to $69.7 million. Lower
volumes decreased sales by $1.6 million. Lower prices due to more competitive
markets reduced sales by $3.3 million and favorable foreign currency exchange
increased sales $0.2 million.
Gross profit increased by $3.8 million or 3.9% to $100.6 million in the
nine-month period from $96.8 million in the same period of the previous year. As
a percentage of sales, gross profit increased to 28.9% of sales in the current
period versus 28.2% of sales last year. Of the total $3.8 million increase in
gross profit, $2.9 million came from domestic operations and $0.9 million came
from international operations. Domestic gross profit increased primarily due to
increased unit volumes and lower rice costs. In Central America, gross profit
increased by $1.3 million due to the increased sales and improved margins on
cookies and crackers. As a percentage of sales, gross profit in Central America
increased to 32.2% from 31.8%. Gross profit decreased by $0.4 million in Europe
due to lower sales and competitive conditions in the ethnic rice market.
Advertising, selling and warehousing expenses increased by $1.7 million to $61.4
million from $59.7 million in the same period last year. The increase in this
expense category came primarily in the media advertising and promotional
programs in the domestic rice business due to competitive market activity in the
prepared mix category and in Central America due to higher costs associated with
expanding and improving the distribution system in the region.
Administrative and general expenses increased by $0.8 million or 4.9% to $15.7
million primarily due to increased spending related to conversion of the
Company's computer systems to accommodate the year 2000.
7
<PAGE>
Income from operations increased by 5.9% to $23.5 million from $22.2 million
last year. As a percentage of sales, operating income increased to 6.8% from
6.5%. In the domestic rice business, operating income increased $1.9 million or
10.2% to $20.7 million. This increase was due to $2.8 million in higher gross
profit partially offset by an increase of $0.8 million in advertising, selling
and warehousing expenses connected with the increased competitive activity in
the prepared rice mix category. In Central America operating income was about
even with the prior year at $7.9 million. Increased advertising, selling and
warehousing expenses related to expanding and improving distribution in the
region offset the increase in gross profit in Central America of $1.3 million.
In Europe, operating profit declined $0.2 million or 9.5% as a result of the
lower sales volumes. Corporate administrative and general expenses increased by
$0.3 million primarily due to spending related to preparing the Company's
computer systems for the year 2000.
Total other income increased $0.7 million to $2.1 million from $1.4 million in
the prior year. Net interest income was $0.1 million lower in the current year
primarily due to increased open market purchases of the Company's common stock
under its announced repurchase program. Equity in earnings of unconsolidated
affiliates decreased by $0.4 million to $0.6 million. Gains from the sale of
marketable securities increased by $0.1 million to $1.2 million from $1.1
million in the same period last year. Other miscellaneous income increased by
$1.1 million primarily due to the settlement of litigation.
Tax expense increased $0.5 million to $7.7 million in the current year. The
effective tax rate was 30.1% in the current period as compared to 30.4% in the
same period last year. The rate in the current year is below the statutory rate
primarily due to energy tax credits related to the energy cogeneration
operations. In the prior year the rate was below the statutory rate due to
investment tax credits in Central America and a lesser amount of energy
cogeneration tax credits.
Net income for the nine-month period was $17.7 million up 9.6% compared to $16.2
million for the comparable period last year. Diluted earnings per share were
$1.16 versus $1.02 last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $13.5 million for the nine months
ended March 28, 1999, which was a decrease of $8.5 million from the same period
last year. The decrease in cash provided by operations was due to the increase
in net working capital requirements of $7.8 million and in other assets of $2.2
million and the decrease in deferred taxes of $1.3 million. This was partially
offset by the increase in net income of $1.5 million and the increase in
depreciation and amortization charges of $1.0 million. The change in other
assets is primarily due to a $1.3 million decline in dividends from an equity
investment.
Cash used in investing activities increased to $6.2 million from $5.2 million in
the same period in the prior year. Purchases of property, plant and equipment
totaled $6.6 million, which was $0.8 million less than purchases in the same
period last year. Cash outflows related to amounts due to affiliates were $1.0
million during the period compared to cash inflows of $0.9 million in the prior
year. Proceeds from the sale of marketable securities increased by $0.1 million.
Cash used in financing activities totaled $14.1 million in the nine months ended
March 28, 1999, which was $3.6 million more than last year. During this period
the Company repurchased 0.8 million shares of its common stock paying $16.1
million. In the prior year the Company repurchased 81.7 thousand shares at a
cost of $1.7 million. In the current period $7.0 million was provided by
additional net borrowings whereas in the prior year $4.5 million was used to
repay debt. Dividend payments in the period ended March 28, 1999 were $5.3
million, up from $4.9 million paid in the same period last year.
On October 21, 1998, the Company's board of directors raised the quarterly
dividend on the Company's common stock to $0.125 per share from $0.11 per share,
for an indicated annual rate of $0.50 per share.
8
<PAGE>
The Company's financial position continues to remain 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
does business. However, there can be no guarantee that the systems of other
entities will be converted timely. A failure to convert by another entity 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.
The Company does not have a written contingency plan to address the issues that
could arise should the Company or any of its suppliers or customers not be
prepared to accommodate year 2000 issues timely. The Company believes that in an
emergency it could revert to the use of manual systems that do not rely on
computers and could perform the minimum functions required to maintain the flow
of goods and provide information reporting to maintain satisfactory control of
the business. Should the Company have to utilize manual systems, it is uncertain
that it could maintain the same level of operations and this could have a
material adverse impact on the business. The Company intends to maintain
constant surveillance on this situation and will develop such contingency plans
as are required by the changing environment.
EURO CONVERSION
The Company operates in Europe through a subsidiary and two joint ventures in
the United Kingdom and Belgium. On January 1, 1999 many of the member countries
of the European Union established fixed conversion rates between the existing
sovereign currencies and the euro. At this time, the United Kingdom is not
participating in this change. However, the Company's European operations do
conduct business in certain of the participating member countries. The Company
has taken the necessary steps to
9
<PAGE>
accommodate this change and does not believe the euro conversion will have a
significant impact on its operations.
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.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 15, Letters from Arthur Andersen LLP dated April 20,
1999, regarding unaudited financial statements.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
11
<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 5, 1999 By:/s/E. WAYNE RAY, JR.
E. Wayne Ray, Jr.
Vice President, Chief Financial Officer
and Chief Accounting Officer
12
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
NO. DESCRIPTION PAGE NUMBER
15 Letters from Arthur Andersen LLP dated April 20, 1999, regarding 14
unaudited financial statements
13
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 28, 1999, and the
related consolidated statements of income for the three-month and nine-month
periods ended March 28, 1999 and March 29, 1998, and cash flows for the
nine-month periods ended March 28, 1999 and March 29, 1998. 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 20, 1999
<PAGE>
April 20, 1999
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 28, 1999,
which includes our report dated April 20, 1999, 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
<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 1999 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-27-1999
<PERIOD-END> MAR-28-1999
<CASH> 2,975
<SECURITIES> 3,406
<RECEIVABLES> 43,200
<ALLOWANCES> 1,355
<INVENTORY> 52,456
<CURRENT-ASSETS> 111,243
<PP&E> 119,848
<DEPRECIATION> 43,588
<TOTAL-ASSETS> 204,449
<CURRENT-LIABILITIES> 57,596
<BONDS> 0
0
0
<COMMON> 15,883
<OTHER-SE> 115,141
<TOTAL-LIABILITY-AND-EQUITY> 204,449
<SALES> 348,293
<TOTAL-REVENUES> 348,293
<CGS> 247,706
<TOTAL-COSTS> 77,041
<OTHER-EXPENSES> 2,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (739)
<INCOME-PRETAX> 25,675
<INCOME-TAX> 7,729
<INCOME-CONTINUING> 17,748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,748
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.16
</TABLE>
