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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 December 27, 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
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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 January 25, 1999 was 14,855,164.
<PAGE>
RIVIANA FOODS INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 27, 1998
INDEX
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PAGE
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Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at December 27, 1998 and June 28, 1998....... 1
Consolidated Statements of Income for the Three Months and Six Months
Ended December 27, 1998 and December 28, 1997......................... 2
Consolidated Statements of Cash Flows for the Six Months Ended
December 27, 1998 and December 28, 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..................................... 11
Signature............................................................................ 12
Exhibit Index........................................................................ 13
</TABLE>
<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>
December 27, 1998 June 28, 1998
----------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ......................................................................... $ 1,375 $ 7,609
Cash equivalents ............................................................. 4,438 9,588
Marketable securities ........................................................ 4,071 4,328
Accounts receivable, less allowance for doubtful accounts of $1,297 and $1,265 45,447 40,514
Inventories .................................................................. 51,530 49,566
Prepaid expenses ............................................................. 3,086 2,008
----------------- -------------
Total current assets ................................................. 109,947 113,613
PROPERTY, PLANT AND EQUIPMENT:
Land ......................................................................... 3,517 3,530
Buildings .................................................................... 25,615 25,271
Machinery and equipment ...................................................... 89,558 87,668
----------------- -------------
Property, plant and equipment, gross ..................................... 118,690 116,469
Less accumulated depreciation ................................................ (42,727) (41,241)
----------------- -------------
Property, plant and equipment, net ....................................... 75,963 75,228
INVESTMENTS IN UNCONSOLIDATED AFFILIATES ....................................... 11,077 10,745
OTHER ASSETS ................................................................... 6,102 5,742
================= =============
Total assets ..................................................... $ 203,089 $ 205,328
================= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt .............................................................. $ 3,259 $ 1,280
Current maturities of long-term debt ......................................... 1,411 1,425
Accounts payable ............................................................. 27,918 23,988
Accrued liabilities .......................................................... 16,670 14,894
Income taxes payable ......................................................... 7,239 6,255
----------------- -------------
Total current liabilities ................................................ 56,497 47,842
LONG-TERM DEBT, net of current maturities ...................................... 1,480 1,861
DUE TO AFFILIATES .............................................................. 731 1,347
DEFERRED INCOME TAXES .......................................................... 5,687 6,805
OTHER NONCURRENT LIABILITIES ................................................... 3,300 3,246
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS ............................................................. 6,345 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 .............................................................. 6,462 6,455
Retained earnings ............................................................ 133,337 125,503
Accumulated other comprehensive income ....................................... (6,011) (4,964)
Treasury stock, at cost, 1,031 and 254 shares ................................ (20,622) (5,133)
----------------- -------------
Total stockholders' equity ........................................... 129,049 137,744
----------------- -------------
Total liabilities and stockholders' equity ........................... $ 203,089 $ 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 Six Months Ended
-------------------------------------- --------------------------------------
December 27, 1998 December 28, 1997 December 27, 1998 December 28, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NET SALES ....................................... $ 122,484 $ 121,472 $ 229,806 $ 229,486
COST OF SALES ................................... 84,671 84,461 164,104 165,117
----------------- ----------------- ----------------- -----------------
Gross profit ................................ 37,813 37,011 65,702 64,369
----------------- ----------------- ----------------- -----------------
COSTS AND EXPENSES:
Advertising, selling and warehousing .......... 23,097 23,445 40,066 40,265
Administrative and general .................... 5,322 4,824 10,633 10,080
----------------- ----------------- ----------------- -----------------
Total costs and expenses .................... 28,419 28,269 50,699 50,345
----------------- ----------------- ----------------- -----------------
Income from operations ...................... 9,394 8,742 15,003 14,024
OTHER INCOME (EXPENSE):
Gain on sale of marketable securities ......... 655 0 655 1,065
Interest income ............................... 230 287 579 514
Interest expense .............................. (210) (244) (402) (533)
Equity in earnings of unconsolidated affiliates 216 637 337 833
Other income (expense), net ................... (124) (150) 449 (487)
----------------- ----------------- ----------------- -----------------
Total other income .......................... 767 530 1,618 1,392
----------------- ----------------- ----------------- -----------------
Income before income taxes and
minority interests ....................... 10,161 9,272 16,621 15,416
INCOME TAX EXPENSE .............................. 3,056 2,785 5,011 4,912
MINORITY INTERESTS IN EARNINGS OF
CONSOLIDATED SUBSIDIARIES ................... 76 79 180 172
================= ================= ================= =================
Net income .................................. $ 7,029 $ 6,408 $ 11,430 $ 10,332
================= ================= ================= =================
Earnings per share:
Basic ................................... $ 0.47 $ 0.41 $ 0.75 $ 0.66
Diluted ................................. 0.47 0.40 0.74 0.65
Weighted average common shares outstanding:
Basic .................................. 14,899 15,751 15,196 15,752
Diluted ................................ 15,080 15,961 15,397 15,947
</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)
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Six Months Ended
--------------------------------------
December 27, 1998 December 28, 1997
----------------- -----------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 11,430 $ 10,332
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ........................ 2,889 2,323
Deferred income taxes ................................ (898) (572)
Gain on disposition of assets ........................ (610) (1,067)
Equity in earnings of unconsolidated affiliates ...... (337) (833)
Change in assets and liabilities:
Accounts receivable, net ......................... (5,453) (585)
Inventories ...................................... (2,825) (5,326)
Prepaid expenses ................................. (1,116) 93
Other assets ..................................... 73 399
Accounts payable and accrued liabilities ......... 5,946 8,445
Income taxes payable ............................. 878 618
Other noncurrent liabilities ..................... 116 (65)
Minority interests ............................... (78) (79)
----------------- -----------------
Net cash provided by operating activities ...... 10,015 13,683
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment ................ (4,487) (4,759)
Proceeds from disposals of property, plant and equipment .. 104 53
Proceeds from sale of marketable securities ............... 723 1,183
Collection of notes receivable ............................ 19 18
Due to affiliates ......................................... (505) 594
Increase in marketable securities ......................... (2)
----------------- -----------------
Net cash used in investing activities .......... (4,146) (2,913)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt .................... 2,063 (2,279)
Additions to long-term debt ............................... 696 412
Repayments of long-term debt .............................. (907) (894)
Dividends paid ............................................ (3,422) (3,150)
Repurchases of common stock ............................... (15,692) (415)
Sales of common stock ..................................... 174 185
----------------- -----------------
Net cash used in financing activities .......... (17,088) (6,141)
----------------- -----------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS . (165) (109)
----------------- -----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............. (11,384) 4,520
CASH AND CASH EQUIVALENTS, beginning of period ............... 17,197 7,040
----------------- -----------------
CASH AND CASH EQUIVALENTS, end of period ..................... $ 5,813 $ 11,560
================= =================
CASH PAID DURING THE PERIOD FOR:
Interest .................................................. $ 402 $ 541
Income taxes .............................................. 5,059 4,330
</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 SIX MONTHS ENDED
------------------------------------- -------------------------------------
DECEMBER 27, 1998 DECEMBER 28, 1997 DECEMBER 27, 1998 DECEMBER 28, 1997
----------------- ----------------- ----------------- -----------------
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Weighted average common shares outstanding:
Basic ................................... 14,899 15,751 15,196 15,752
Stock options ........................... 181 210 201 195
----------------- ----------------- ----------------- -----------------
Diluted ................................. 15,080 15,961 15,397 15,947
================= ================= ================= =================
</TABLE>
3. Inventories
Inventories were composed of the following:
DECEMBER 27, 1998 JUNE 28, 1998
----------------- -----------------
Raw materials .......................... $ 13,202 $ 9,390
Work in process ........................ 17 23
Finished goods ......................... 32,320 34,007
Packaging supplies ..................... 5,991 6,146
----------------- -----------------
Total ...................... $ 51,530 $ 49,566
================= =================
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
4
<PAGE>
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 SIX MONTHS ENDED
-------------------------------------- --------------------------------------
DECEMBER 27, 1998 DECEMBER 28, 1997 DECEMBER 27, 1998 DECEMBER 28, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net income ..................... $ 7,029 $ 6,408 $ 11,430 $ 10,332
Other comprehensive income:
Unrealized gains on
marketable securities,
net of tax:
Realized (gains) reclassified
to net income ............. (426) -- (426) (692)
Unrealized gains ............ 399 321 303 802
Foreign currency
translation
adjustment ................. (1,011) (193) (924) (1,206)
----------------- ----------------- ----------------- -----------------
Total comprehensive
income ....................... $ 5,991 $ 6,536 $ 10,383 $ 9,236
================= ================= ================= =================
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 27, 1998 COMPARED TO THREE MONTHS ENDED
DECEMBER 28, 1997
For the three months ended December 27, 1998, sales increased $1.0 million, or
0.8%, to $122.5 million from $121.5 million recorded for the same period last
year. In fiscal 1997, the Company entered into a joint venture with a major rice
milling company in Arkansas, which is involved in the cogeneration of steam and
electricity using rice hulls as fuel. This unit added $0.9 million to sales in
the current quarter. Excluding the effect of the cogeneration business, sales
for the period ended December 27, 1998 increased by $0.8 million or 0.7% to
$121.6 million from $120.8 million last year. Volume gains accounted for $3.8
million of the consolidated increase in sales. A combination of price and
product mix decreased sales $1.1 million and unfavorable foreign currency
translation reduced sales by $1.9 million. Domestic rice sales of $75.3 million
increased $0.1 million or 0.1% from the prior year sales of $75.2 million. In
the domestic rice business, the retail sector recorded a $1.1 million or 1.9%
decrease in sales. Within the retail sector, sales of regular rice increased by
$0.6 million or 2.1% due primarily to a unit volume increase of 3.1%. Sales of
value-added products decreased by $1.6 million and sales of brown rice decreased
by $0.1 million. In the non-retail sector, sales increased $1.2 million or 6.4%.
Sales increased $1.7 million or 13.7% in the export/commodity category due
primarily to an 19.5% increase in unit volume sales. Sales in the foodservice
category were about even with the past year despite a 16.1% increase in volumes
due to the product mix sold. Industrial and by product sales decreased $0.5
million from the prior year due to reduced selling prices. Sales in Central
America increased $1.2 million or 5.7% to $21.8 million compared to $20.6
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 $1.3 million. Higher prices, particularly in the
cookie and cracker product lines, increased sales by $1.8 million and
unfavorable currency translation reduced sales by $1.9 million. In Europe, sales
declined by $0.5 million or 1.7% to $24.5 million from $25.0 million last year.
Higher unit volumes increased sales by $1.1 million and a combination of lower
selling prices and product mix reduced sales by $1.7 million and favorable
currency translation increased sales by $0.1 million.
Gross profit increased $0.8 million or 2.2% to $37.8 million from $37.0 million
a year ago. As a percentage of sales, gross profit increased to 30.9% from
30.5%. In the domestic rice business, gross profit increased by $0.3 million
and, as a percentage of sales, to 36.9% from 36.5% primarily as a result of
lower rice costs. In Central America gross profit increased $0.7 million or
11.0% to $7.4 million as a result of higher margins in the cookie and cracker
product lines. Gross profit as a percentage of sales in Central America
increased to 34.2% from 32.5% last year. In Europe, gross profit declined by
$0.2 million or 8.9%. Increased competition in the ethnic rice market reduced
retail prices and the accompanying gross profit.
Advertising, selling and warehousing expenses declined by $0.3 million to $23.1
million from $23.4 million in the same period last year. This expense reduction
came primarily in the media advertising and promotional programs in the domestic
rice business and was due to lower unit volume sales in the prepared mix
category.
Administrative and general expenses increased by $0.4 million or 10.3% to $5.3
million primarily due to increased spending related to conversion of the
Company's computer systems to accommodate the year 2000.
Income from operations increased $0.7 million or 7.5% to $9.4 million from $8.7
million in the same period last year. As a percentage of sales, operating income
increased to 7.7% from 7.2% in the prior period. The increase in operating
income was principally due to improved results in both domestic rice operations
and Central America. Operating income increased by $1.0 million or 15.0% to $7.7
million in
6
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the domestic rice business due to reductions in advertising and promotional
spending of $0.7 million and the increase in gross profit discussed above. In
Central America, operating income increased by $0.2 million or 5.9% to $3.3
million. The increase in gross profit of $0.7 million was partially offset by
$0.4 million in higher advertising, selling and warehousing expenses related to
expanding distribution. Operating income for European operations was essentially
even with last year at $1.1 million. The lower gross profit discussed previously
was offset by reduced administrative and general expenses.
Other income increased $0.2 million to $0.8 million. Gains from the sale of
marketable securities increased $0.7 million. Equity in earnings of
unconsolidated affiliates decreased by $0.4 million.
The effective tax rate of 30% was unchanged from the same period last year. The
rate is below the statutory rate primarily due to energy tax credits related to
the cogeneration operations.
Net income for the current quarter was $7.0 million compared to $6.4 million for
the same quarter last year and diluted earnings per share were $0.47, up from
$0.40.
SIX MONTHS ENDED DECEMBER 27, 1998 COMPARED TO SIX MONTHS ENDED
DECEMBER 28, 1997
Sales increased $0.3 million or 0.1% to $229.8 million in the six-month period
ended December 27,1998 versus $229.5 million for the same period of the previous
year. Domestic sales increased by $0.8 million or 0.6% to $140.1 million while
sales from international operations decreased by $0.5 million to $89.7 million.
Increased volumes added $7.0 million to sales while a combination of price and
sales mix decreased sales by $3.7 million. Unfavorable currency translation
reduced sales by $3.0 million. In fiscal 1997, 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 $1.5 million
to sales in the current year. In the domestic rice business, sales in the retail
category decreased by $1.1 million or 1.1% due primarily to lower unit sales of
prepared rice mix products. Unit volume sales of prepared rice mixes decreased
by 6.1%. Of the total $1.1 million decrease in sales in the retail category,
$0.3 million was related to lower volumes and a combination of product mix and
selling price reduced sales $0.8 million. In the non-retail category that
includes regular rice sales to the foodservice, industrial and export sectors,
sales increased by $1.5 million. Increased volumes accounted for $4.1 million
and lower pricing and product mix reduced sales $2.6 million. Sales by the
Company's Central American operations increased $2.2 million or 5.5% to $41.7
million. Increased sales volumes in both cookie and cracker products and fruit
nectar and juice products added $3.2 million to sales. Higher prices added $2.6
million to sales and unfavorable currency translation reduced sales by $3.6
million. Sales by the Company's European operations decreased $2.7 million or
5.3% to $48.0 million. Volumes were affected by product line rationalization and
lower unit volumes on continuing product lines which decreased sales by $0.4
million. Lower prices due to more competitive markets reduced sales by $2.9
million and favorable foreign currency exchange increased sales $0.6 million.
Gross profit increased by $1.3 million or 2.1% to $65.7 million in the six-month
period from $64.4 million in the same period of the previous year. As a
percentage of sales, gross profit increased to 28.6% of sales in the current
period versus 28.0% of sales last year. Of the total $1.3 million increase in
gross profit, $0.6 million came from domestic operations and $0.7 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 $0.9 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 31.6%. Gross profit decreased by $0.2 million in Europe
due to lower sales resulting from the elimination of certain lower margin
products and increased competitive pressure in the ethnic rice market.
7
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Administrative and general expenses increased by $0.6 million or 5.5% to $10.6
million due primarily to increased spending related to conversion of the
Company's computer systems to accommodate the year 2000.
Income from operations increased by 7.0% to $15.0 million from $14.0 million
last year. As a percentage of sales, operating income increased to 6.5% from
6.1%. In the domestic rice business, operating income increased $1.4 million or
11.8% to $12.9 million. This increase was due to $0.5 million in higher gross
profit and a $0.9 million decrease in advertising, selling and warehousing
expenses. The decrease in advertising, selling and warehousing expense was
primarily due to the timing of certain advertising and promotional programs. In
Central America operating income decreased $0.1 million. The increase in gross
profit in Central America of $0.9 million was offset by $0.8 million in
increased advertising, selling and warehousing expenses related to establishing
a new distribution system in El Salvador and expanding the Company's
distribution system in Guatemala. In addition, administrative and general
expenses related to the expanded distribution increased by $0.2 million. In
Europe, operating income was even with last year.
Other income increased $0.2 million to $1.6 million from $1.4 million in the
prior year. Net interest income was $0.2 million higher in the current year.
Decreased working capital requirements, primarily in Central America, reduced
borrowings and interest rates were lower. Equity in earnings of unconsolidated
affiliates decreased by $0.5 million to $0.3 million. Gains from the sale of
marketable securities decreased by $0.4 million to $0.7 million from $1.1
million in the same period last year. Other miscellaneous income increased by
$0.9 million primarily due to the settlement of litigation.
Tax expense increased $0.1 million to $5.0 million in the current year. The
effective tax rate was 30.1% in the current period as compared to 31.9% in the
same period last year. The lower rate in the current period results from the
utilization of investment tax credits and energy tax credits from the Company's
energy cogeneration joint venture.
Net income for the six-month period was $11.4 million up 10.6% compared to $10.3
million for the comparable period last year. Diluted earnings per share were
$0.74 versus $0.65 last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $10.0 million for the six months
ended December 27, 1998, which was a decrease of $3.7 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 $5.8 million partially offset by
the increase in net income of $1.1 million and the increase in depreciation and
amortization charges of $0.6 million. Deferred income taxes decreased by $0.9
million in the current period which was an increase of $0.3 million from the
prior year.
Cash used in investing activities increased to $4.1 million from $2.9 million in
the same period in the prior year. Purchases of property, plant and equipment
totaled $4.5 million, which was $0.3 million less than purchases in the same
period last year. Cash flow related to amounts due to affiliates decreased $0.5
million during the period while it increased by $0.6 million in the prior year.
Proceeds from the sale of marketable securities decreased by $0.5 million.
Cash used in financing activities totaled $17.1 million in the six months ended
December 27, 1998, which was $10.9 million more than last year. During this
period the Company repurchased 0.8 million shares of its common stock paying
$15.7 million. In the prior year the Company repurchased 21.7 thousand shares at
a cost of $0.4 million. In the current period $1.9 million was provided by
additional net borrowings whereas in the prior year $2.8 million was used to
repay debt. Dividend payments in the period ended December 27, 1998 were $3.4
million, up from $3.2 million paid in the same period last year.
8
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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.
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.
9
<PAGE>
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
believes it is taking the necessary steps to 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 January 21,
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: February 1, 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 January 21, 1999, regarding 14
unaudited financial statements
13
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 December 27, 1998, and the
related consolidated statements of income for the three-month and six-month
periods ended December 27, 1998 and December 28, 1997, and cash flows for the
three-month periods ended December 27, 1998 and December 28, 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
January 21, 1999
<PAGE>
January 21, 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 December 27, 1998,
which includes our report dated January 21, 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 SECOND 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> 6-MOS
<FISCAL-YEAR-END> JUN-27-1999
<PERIOD-END> DEC-27-1998
<CASH> 1,375
<SECURITIES> 4,071
<RECEIVABLES> 45,447
<ALLOWANCES> 1,297
<INVENTORY> 51,530
<CURRENT-ASSETS> 109,947
<PP&E> 118,690
<DEPRECIATION> 42,727
<TOTAL-ASSETS> 203,089
<CURRENT-LIABILITIES> 56,497
<BONDS> 0
0
0
<COMMON> 15,883
<OTHER-SE> 113,166
<TOTAL-LIABILITY-AND-EQUITY> 203,089
<SALES> 229,806
<TOTAL-REVENUES> 229,806
<CGS> 165,117
<TOTAL-COSTS> 50,699
<OTHER-EXPENSES> 1,618
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (402)
<INCOME-PRETAX> 16,621
<INCOME-TAX> 5,011
<INCOME-CONTINUING> 11,430
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,430
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.74
</TABLE>
