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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 April 2, 2000
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
incorporation or organization) Identification No.)
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 May 5, 2000, was 14,179,074.
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<PAGE>
RIVIANA FOODS INC.
FORM 10-Q FOR THE QUARTER ENDED APRIL 2, 2000
INDEX
PAGE
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at April 2, 2000 and June 27, 1999...1
Consolidated Statements of Income for the Three Months and Nine
Months Ended April 2, 2000 and March 28, 1999.................2
Consolidated Statements of Cash Flows for the Nine Months Ended
April 2, 2000 and March 28, 1999..............................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>
APRIL 2, 2000 JUNE 27, 1999
--------------- ---------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash .................................................................................... $ 4,247 $ 5,605
Cash equivalents ........................................................................ 6,667 5,729
Marketable securities ................................................................... 1,988 3,366
Accounts receivable, less allowance for doubtful accounts of $1,455 and $1,386 .......... 36,462 42,079
Inventories ............................................................................. 50,204 46,570
Prepaid expenses ........................................................................ 2,878 2,247
--------------- ---------------
Total current assets ............................................................ 102,446 105,596
PROPERTY, PLANT AND EQUIPMENT:
Land .................................................................................... 3,595 3,504
Buildings ............................................................................... 28,142 26,853
Machinery and equipment ................................................................. 98,792 91,557
--------------- ---------------
Property, plant and equipment, gross ................................................ 130,529 121,914
Less accumulated depreciation ........................................................... (48,024) (44,579)
--------------- ---------------
Property, plant and equipment, net .................................................. 82,505 77,335
INVESTMENTS IN UNCONSOLIDATED AFFILIATES .................................................. 9,556 9,958
OTHER ASSETS .............................................................................. 7,305 7,315
--------------- ---------------
Total assets ................................................................ $ 201,812 $ 200,204
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt ......................................................................... $ 6,095 $ 970
Current maturities of long-term debt .................................................... 802 1,003
Accounts payable ........................................................................ 20,782 24,893
Accrued liabilities ..................................................................... 18,416 18,870
Income taxes payable .................................................................... 7,224 6,938
--------------- ---------------
Total current liabilities ........................................................... 53,319 52,674
LONG-TERM DEBT, net of current maturities ................................................. 1,145 1,390
DUE TO AFFILIATES ......................................................................... 565 506
DEFERRED INCOME TAXES ..................................................................... 4,731 5,809
OTHER NONCURRENT LIABILITIES .............................................................. 2,720 2,964
COMMITMENTS AND CONTINGENCIES .............................................................
MINORITY INTERESTS ........................................................................ 6,346 6,484
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 ......................................................................... 6,547 6,519
Retained earnings ....................................................................... 155,374 142,424
Accumulated other comprehensive income .................................................. (12,553) (9,606)
Treasury stock, at cost, 1,661 and 1,237 shares ......................................... (32,265) (24,843)
--------------- ---------------
Total stockholders' equity ...................................................... 132,986 130,377
--------------- ---------------
Total liabilities and stockholders' equity ...................................... $ 201,812 $ 200,204
=============== ===============
</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
----------------------------------- -----------------------------------
APRIL 2, 2000 MARCH 28, 1999 APRIL 2, 2000 MARCH 28, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET SALES ............................................ $ 108,245 $ 118,487 $ 333,867 $ 348,293
COST OF SALES ........................................ 70,447 83,602 225,619 247,706
--------------- --------------- --------------- ---------------
Gross profit ..................................... 37,798 34,885 108,248 100,587
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Advertising, selling and warehousing ............... 23,921 21,303 66,832 61,369
Administrative and general ......................... 5,487 5,039 16,342 15,672
--------------- --------------- --------------- ---------------
Total costs and expenses ......................... 29,408 26,342 83,174 77,041
--------------- --------------- --------------- ---------------
Income from operations ........................... 8,390 8,543 25,074 23,546
OTHER INCOME (EXPENSE):
Gain on sale of marketable securities .............. 792 553 1,197 1,208
Interest income .................................... 347 368 1,045 947
Interest expense ................................... (302) (337) (735) (739)
Equity in earnings of unconsolidated affiliates .... 626 228 1,154 565
Other income (expense), net ........................ (263) (301) (548) 148
--------------- --------------- --------------- ---------------
Total other income ............................... 1,200 511 2,113 2,129
--------------- --------------- --------------- ---------------
Income before income taxes and
minority interests ............................ 9,590 9,054 27,187 25,675
INCOME TAX EXPENSE ................................... 2,877 2,718 8,140 7,729
MINORITY INTERESTS IN EARNINGS OF
CONSOLIDATED SUBSIDIARIES ........................ 89 18 192 198
--------------- --------------- --------------- ---------------
NET INCOME ....................................... $ 6,624 $ 6,318 $ 18,855 $ 17,748
=============== =============== =============== ===============
Earnings per share:
Basic ........................................ $ 0.46 $ 0.43 $ 1.30 $ 1.18
Diluted ...................................... 0.46 0.42 1.29 1.16
Weighted average common shares outstanding:
Basic ....................................... 14,366 14,849 14,521 15,081
Diluted ..................................... 14,439 15,079 14,640 15,291
</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
-----------------------------------
APRIL 2, 2000 MARCH 28, 1999
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................................ $ 18,855 $ 17,748
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ..................................................... 4,496 4,306
Deferred income taxes ............................................................. (628) (1,623)
Gain on disposition of assets ..................................................... (1,176) (1,152)
Equity in earnings of unconsolidated affiliates ................................... (1,154) (565)
Change in assets and liabilities, excluding effects of acquisition:
Accounts receivable, net ...................................................... 6,555 (3,617)
Inventories ................................................................... 1,508 (4,307)
Prepaid expenses .............................................................. (653) (329)
Other assets .................................................................. 517 (183)
Accounts payable and accrued liabilities ...................................... (7,535) 1,615
Income taxes payable .......................................................... 356 1,755
Other noncurrent liabilities .................................................. (194) (138)
Minority interests ............................................................ (77) (58)
--------------- ---------------
Net cash provided by operating activities ................................... 20,870 13,452
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment ............................................ (9,697) (6,601)
Proceeds from disposals of property, plant and equipment .............................. 316 111
Proceeds from sale of marketable securities ........................................... 1,289 1,332
Increase (decrease) in due to affiliates .............................................. 55 (1,029)
Cash paid for business and certain assets, net of cash received ....................... (4,519)
Other ................................................................................. 37 30
--------------- ---------------
Net cash used in investing activities ....................................... (12,519) (6,157)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt ................................................ 5,236 7,477
Additions to long-term debt ........................................................... 1,895 1,195
Repayments of long-term debt .......................................................... (2,274) (1,647)
Dividends paid ........................................................................ (5,696) (5,280)
Repurchases of common stock ........................................................... (7,662) (16,114)
Sales of common stock ................................................................. 205 279
Collection of employee discount on stock .............................................. 28 13
--------------- ---------------
Net cash used in financing activities ....................................... (8,268) (14,077)
--------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS ...................................................................... (503) (500)
--------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......................................... (420) (7,282)
CASH AND CASH EQUIVALENTS, beginning of period ............................................ 11,334 17,197
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period .................................................. $ 10,914 $ 9,915
=============== ===============
CASH PAID DURING THE PERIOD FOR:
Interest .............................................................................. $ 696 $ 713
Income taxes .......................................................................... 8,745 7,363
</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 27, 1999, 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 27, 1999.
The Company's fiscal year is based on the 52/53-week period ending
on the Sunday closest to June 30th of each year. For fiscal 2000, the Company's
fiscal year will be a 53-week period. The additional week was included in the
second fiscal quarter of fiscal 2000 and, accordingly, the results of operations
for the nine months ended April 2, 2000 covers a 40-week period whereas the
prior year included the results of operations for a 39-week period.
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
---------------------------------- ----------------------------------
APRIL 2, 2000 MARCH 28, 1999 APRIL 2, 2000 MARCH 28, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Basic ................ 14,366 14,849 14,521 15,081
Stock options ........ 73 230 119 210
--------------- --------------- --------------- ---------------
Diluted .............. 14,439 15,079 14,640 15,291
=============== =============== =============== ===============
</TABLE>
4
<PAGE>
3. Inventories
Inventories were composed of the following:
APRIL 2, 2000 JUNE 27, 1999
--------------- ---------------
Raw materials ............................ $ 10,939 $ 8,994
Work in process .......................... 35 29
Finished goods ........................... 33,095 31,785
Packaging supplies ....................... 6,135 5,762
--------------- ---------------
Total ........................ $ 50,204 $ 46,570
=============== ===============
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
----------------------------------- -----------------------------------
APRIL 2, 2000 MARCH 28, 1999 APRIL 2, 2000 MARCH 28, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net income ............................................. $ 6,624 $ 6,318 $ 18,855 $ 17,748
Other comprehensive income:
Unrealized gains on marketable securities, net of tax:
Realized (gains) reclassified
to net income ..................................... (515) (359) (778) (785)
Unrealized gains (losses) ........................... (229) (37) (58) 266
Foreign currency translation
Adjustment ......................................... (780) (1,788) (2,111) (2,712)
--------------- --------------- --------------- ---------------
Total comprehensive income ............................. $ 5,100 $ 4,134 $ 15,908 $ 14,517
=============== =============== =============== ===============
</TABLE>
5. Segment Information
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------- -----------------------------------
Net sales: APRIL 2, 2000 MARCH 28, 1999 APRIL 2, 2000 MARCH 28, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Domestic ......................................... $ 70,962 $ 76,638 $ 214,979 $ 216,745
Europe ........................................... 16,756 21,734 57,804 69,716
Central America .................................. 20,527 20,115 61,084 61,832
--------------- --------------- --------------- ---------------
Total consolidated ........................... $ 108,245 $ 118,487 $ 333,867 $ 348,293
=============== =============== =============== ===============
Income:
Operating income
Domestic ....................................... $ 8,276 $ 7,693 $ 23,844 $ 20,585
Europe ......................................... 269 511 1,477 2,267
Central America ................................ 2,425 2,429 7,488 7,907
--------------- --------------- --------------- ---------------
Total operating income ....................... 10,970 10,633 32,809 30,759
General corporate expenses ..................... (2,580) (2,090) (7,735) (7,213)
--------------- --------------- --------------- ---------------
Income from operations ....................... 8,390 8,543 25,074 23,546
Interest expense ................................. (302) (337) (735) (739)
Equity in earnings of
unconsolidated affiliates ...................... 626 228 1,154 565
Other income, net ................................ 876 620 1,694 2,303
--------------- --------------- --------------- ---------------
Income before income taxes and
Minority interests ........................... $ 9,590 $ 9,054 $ 27,187 $ 25,675
=============== =============== =============== ===============
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's fiscal year is based on the 52/53-week period ending
on the Sunday closest to June 30th of each year . For fiscal 2000, the Company's
fiscal year will be a 53-week period. The additional week was included in the
second fiscal quarter of fiscal 2000 and, accordingly, the results of operations
for the nine months ended April 2, 2000 cover a 40-week period whereas the prior
year included the results of operations for a 39-week period.
THREE MONTHS ENDED APRIL 2, 2000
COMPARED TO THREE MONTHS ENDED MARCH 28, 1999
For the three months ended April 2, 2000, sales decreased $10.3
million or 8.6% to $108.2 million from $118.5 million recorded for the same
period last year. Volume declines decreased sales by $3.3 million. A combination
of price and product mix decreased sales $4.5 million and unfavorable foreign
currency translation negatively impacted sales by $2.5 million. Domestic rice
sales of $70.0 million decreased $5.7 million or 7.6% from the prior year sales
of $75.7 million. In the domestic rice business, the retail sector recorded a
$4.4 million or 7.9% decrease in sales. Unit volume sales declined in every
category within the retail sector due to category weakness in the total retail
segment and trade reduction in inventory levels. Within the retail sector, sales
of regular rice decreased $2.1 million or 7.4% primarily due to a unit volume
decrease of 3.8% and an increase in the sale of larger pack sizes, which carry a
lower average selling price. Sales of value-added products decreased $1.9
million and sales of brown rice decreased by $0.4 million due to lower unit
volumes. In the non-retail sector, sales decreased $1.3 million or 6.8%. Sales
in the foodservice category increased 31.0%, or $0.7 million on a unit volume
increase of 30.0%. Sales in the export/commodity category decreased $1.8 million
or 14.6% due to a 13.2% decrease in unit volume sales. Industrial sales
increased $0.4 million from the prior year due to increased industrial unit
volumes. Sales from the Company's energy cogeneration joint venture increased
slightly due to higher prices. Sales in Central America increased $0.4 million
or 2.0% to $20.5 million compared to $20.1 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 increased sales by $1.3 million and unfavorable currency
translation reduced sales by $2.2 million. In Europe, sales declined by $5.0
million or 22.9% to $16.8 million from $21.8 million last year. Lower unit
volumes decreased sales by $3.0 million and a combination of lower selling
prices and product mix reduced sales by $1.7 million. Unfavorable currency
translation decreased sales by $0.3 million. Volumes were down in virtually all
product categories reflecting continuing soft retail trading conditions,
competitive pressures and the loss of representation of a dried fruit brand.
Gross profit increased $2.9 million or 8.4% to $37.8 million from
$34.9 million a year ago. As a percentage of sales, gross profit increased to
34.9% from 29.4%. In the domestic rice business, gross profit increased by $2.7
million and, as a percentage of sales, to 41.3% from 34.5% primarily as a result
of lower rice costs. In Central America gross profit increased $0.4 million or
5.7% to $6.8 million as a result of higher margins in cookie and cracker product
products. Gross profit as a percentage of sales in Central America increased to
33.2% from 32.1% in the same period last year. In Europe, gross profit declined
by $0.4 million or 14.7%. due to the lower sales volume.
Advertising, selling and warehousing expenses increased by $2.6
million to $23.9 million from $21.3 million in the same period last year. The
increase in this expense category came primarily in
6
<PAGE>
the media advertising and promotional programs in the domestic rice business and
was due to competitive market activity. In addition a $0.4 million expense was
incurred in connection with the write-off of an account receivable due from
AmeriServe Food Distribution, Inc., which filed for bankruptcy during the period
Administrative and general expenses increased $0.4 million or 8.8%
to $5.5 million. The increase was primarily related to domestic operations and
resulted from normal inflationary increases as well as timing-related items,
which operated to reduce the prior year expense.
Income from operations decreased $0.1 million or 1.8% to $8.4
million from $8.5 million in the same period last year. As a percentage of
sales, operating income increased to 7.8% from 7.2% in the prior year. The
increase in gross profit of $2.9 million was offset by $2.6 million increase in
advertising, selling and warehousing expenses and $0.4 million increase in
administrative and general expenses. Operating income increased by $0.4 million
or 5.5% to $8.2 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
$0.2 million due to the decline in gross profit discussed above partially offset
by $0.2 million in lower administrative expenses.
Total other income increased $0.7 million. Gains from the sale of
marketable securities increased $0.2 million while equity in earnings of
unconsolidated affiliates increased by $0.4 million and miscellaneous other
expenses declined by $0.1 million. Rivland, the Company's rice flour joint
venture, reported a record volume quarter and the Company recorded for the first
time income attributable to Euryza GmbH, a German rice company recently acquired
by the Company's Belgian affiliate.
The effective tax rate of 30% was equal to the rate of last year.
The rate in the current year is below the statutory rate primarily due to energy
tax credits related to the cogeneration operations and lower effective tax rates
applicable to certain foreign operations.
Net income for the current quarter was $6.6 million compared to $6.3
million for the same quarter last year and diluted earnings per share were
$0.46, up from $0.42.
NINE MONTHS ENDED APRIL 2, 2000
COMPARED TO NINE MONTHS ENDED MARCH 28, 1999
Sales decreased $14.4 million or 4.1% to $333.9 million in the
nine-month period ended April 2, 2000 versus $348.3 million for the same period
of the previous year. Domestic sales decreased by $1.8 million or 0.8% to $215.0
million while sales from international operations decreased by $12.6 million to
$118.9 million. Increased volumes added $4.0 million to sales while a
combination of price and sales mix decreased sales by $8.9 million. Unfavorable
currency translation reduced sales by $9.5 million. In the domestic rice
business, sales in the retail category decreased $0.6 million or 0.4% primarily
due to higher unit volume sales of regular rice products offset by lower unit
volume sales in the other categories
7
<PAGE>
and further decreased by sales mix. During the current year more large pack
sizes were sold and those are sold at a lower unit volume price. Of the total
$0.6 million decrease in sales in the retail category, higher volumes increased
sales $3.3 million and a combination of product mix and selling price reduced
sales $3.9 million. In the non-retail category that includes regular rice sales
to the foodservice, industrial and export sectors, sales decreased by $1.5
million. Increased volumes accounted for an increase of $4.7 million and lower
pricing and product mix reduced sales $6.2 million. Sales from the Company's
energy cogeneration joint venture increased by $0.3 million. Higher volumes
added $0.1 million and higher prices $0.2 million. Sales by the Company's
Central American operations decreased $0.7 million or 1.2% to $61.1 million.
Increased sales volumes in both cookie and cracker products and fruit nectar and
juice products added $3.0 million to sales. Higher prices added $4.2 million to
sales and unfavorable currency translation reduced sales by $7.9 million. Sales
by the Company's European operations decreased $11.9 million or 17.1% to $57.8
million. Lower volumes decreased sales by $7.0 million. Lower prices due to more
competitive markets reduced sales by $3.3 million and unfavorable foreign
currency exchange decreased sales $1.6 million.
Gross profit increased by $7.7 million or 7.6% to $108.2 million in
the nine-month period from $100.5 million in the same period of the previous
year. As a percentage of sales, gross profit increased to 32.4% of sales in the
current period versus 28.9% of sales last year. In the domestic rice business
gross profit increased $8.1 million or 11.1% to $81.4 million primarily due to
increased unit volumes and lower rice costs. As a percentage of sales gross
profit increased to 38.4% in the current year versus 34.2% in the prior year. In
Central America, gross profit increased by $0.3 million due to improved margins
on cookies and crackers and fruit nectars and juices and vegetable products. The
margin improvement was related to improved operating efficiencies. As a
percentage of sales, gross profit in Central America increased to 33.1% from
32.2%. Gross profit decreased by $0.7 million in Europe due to lower sales. As a
percentage of sales gross profit improved to 11.7% in the current year compared
to 10.8% in the previous period.
Advertising, selling and warehousing expenses increased by $5.4
million to $66.8 million from $61.4 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 due to competitive market
activity and in Central America due to higher costs associated with expanding
and improving the distribution system in the region. In addition a $0.4 million
expense was incurred in connection with the write-off of an account receivable
due from AmeriServe Food Distribution, Inc., which filed for bankruptcy during
the period.
Administrative and general expenses increased by $0.7 million or
4.3% to $16.3 million. The increased was primarily related to domestic
operations and resulted from normal inflationary increases as well as
timing-related items, which operated to reduce the prior year expense.
Income from operations increased by 6.5% to $25.1 million from $23.5
million last year. As a percentage of sales, operating income increased to 7.5%
from 6.8%. In the domestic rice business, operating income increased $3.3
million or 16.0% to $24.0 million. This increase was due to $8.1 million in
higher gross profit partially offset by an increase of $4.6 million in
advertising, selling and warehousing expenses connected with increased
competitive market conditions. In Central America operating income decreased
$0.4 million to $7.5 million. Increased advertising, selling and warehousing
expenses of $0.9 million related to expanding and improving distribution in the
region offset the increase in gross profit in Central America of $0.3 million.
In Europe, operating profit declined $0.8 million or 34.9% as a result of the
lower sales volumes.
8
<PAGE>
Total other income of $2.1 million was even with the prior year. Net
interest income was $0.1 million higher in the current year due to improved cash
flow. Equity in earnings of unconsolidated affiliates increased by $0.6 million
to $1.2 million. Rivland, the Company's rice flour joint venture, reported a
record volume quarter and the Company recorded for the first time income
attributable to Euryza GmbH, a German rice company recently acquired by the
Company's Belgian affiliate. Other miscellaneous expense increased by $0.7
million. In the prior year the Company received income from the settlement of
litigation, which did not recur in the current period.
Tax expense increased $0.4 million to $8.1 million in the current
year. The effective tax rate was 29.9% in the current period as compared to
30.1% 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 and lower effective tax rates in certain foreign
operations.
Net income for the nine-month period was $18.9 million up 6.2%
compared to $17.7 million for the comparable period last year. Diluted earnings
per share were $1.29 versus $1.16 last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $20.9 million for the
nine months ended April 2, 2000, which was an increase of $7.4 million from the
same period last year. The increase in cash provided by operations was due to an
increase in net income of $1.1 million and $0.2 million in depreciation and
amortization expense. Also, net working capital declined by $5.1 million due
mainly to lower rice inventory costs and deferred taxes increased by $1.0
million.
Cash used in investing activities increased to $12.5 million from
$6.2 million in the same period in the prior year. Purchases of property, plant
and equipment totaled $9.7 million, which were $3.1 million more than purchases
in the same period last year. Cash of $4.5 million was used to purchase certain
assets of the wild rice business acquired from Bush Agricultural Resources, Inc.
and cash due from affiliates increased by $1.1 million.
Cash used in financing activities totaled $8.3 million in the nine
months ended April 2, 2000, which was $5.8 million less than last year. During
this period the Company repurchased 0.4 million shares of its common stock
paying $7.7 million. In the prior year the Company repurchased 0.8 million
shares at a cost of $16.1 million. In the current period $4.9 million was
provided by additional net borrowings whereas in the prior year $7.0 million was
provided by additional loans. Dividend payments in the period ended April 2,
2000 were $5.7 million, up from $5.3 million paid in the same period last year.
On October 21, 1999, the Company's board of directors raised the
quarterly dividend on the Company's common stock to $0.14 per share from $0.125
per share, for an indicated annual rate of $0.56 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.
9
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
From time to time, the Company utilizes derivative financial
instruments as hedges to manage a portion of its exposure to fluctuations in
rice costs, packaging material costs and exchange rates related to inventory
purchases denominated in foreign currencies. These instruments qualify for hedge
accounting treatment and, accordingly, gains and losses on these instruments are
deferred and included in the basis of the inventory hedged. The Company utilizes
rough rice futures contracts, packaging material swap contracts and forward
currency exchange contracts to hedge specific purchase commitments. The
contracts have varying maturities with none exceeding twenty-four months. As a
matter of policy, the Company does not engage in speculative activity and does
not hedge to protect the translated results of foreign operations or other
speculative activity or other economic exposures for which speculative
accounting treatment of the hedging instrument would be required. Derivative
financial instruments are not material as of April 2, 2000.
OTHER MATTERS - IMPACT OF THE YEAR 2000 ISSUE
All of the Company's computerized systems successfully made the
transition to the Year 2000 without any significant interruptions in business.
Likewise, the Company did not experience any interruption in its ability to
maintain electronic data interchange with its suppliers, customers and financial
institutions. The Company does not expect any material interruption in its
business related to Year 2000 issues in the future.
Sales volumes were not significantly impacted by customers placing
abnormal orders in anticipation of shortages due to Year 2000 computer problems.
Direct costs incurred in converting all systems to accommodate the
Year 2000 issue totaled $0.8 million. Of this total, $0.2 million was
capitalized and $0.6 was expensed as incurred. The $0.2 million capitalized was
primarily costs for the purchase of new personal computers to replace units for
which it was not economical or practical to convert to be Year 2000 compliant.
The Company deferred certain information technology projects due to
the effort required to convert existing systems to be Year 2000 compliant. The
Company expects to resume its normal development and maintenance operations in
the current year, but does not believe the past deferral of certain projects to
have adversely effected 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 27,
2000, 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, 2000 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 27, 2000,
regarding unaudited financial statements................. 14
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 April 2, 2000, and the
related consolidated statements of income for the three-month and nine-month
periods ended April 2, 2000 and March 28, 1999, and cash flows for the
nine-month periods ended April 2, 2000 and March 28, 1999. 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 accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
April 27, 2000
14
<PAGE>
April 27, 2000
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 April 2, 2000, which
includes our report dated April 27, 2000, 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
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM RIVIANA FOODS INC.'S THIRD QUARTER FORM 10 Q FOR FISCAL 2000 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> JUL-02-2000
<PERIOD-END> APR-02-2000
<CASH> 4,247
<SECURITIES> 1,988
<RECEIVABLES> 36,462
<ALLOWANCES> 1,455
<INVENTORY> 50,204
<CURRENT-ASSETS> 102,446
<PP&E> 130,529
<DEPRECIATION> 48,024
<TOTAL-ASSETS> 201,812
<CURRENT-LIABILITIES> 53,319
<BONDS> 0
0
0
<COMMON> 15,883
<OTHER-SE> 117,103
<TOTAL-LIABILITY-AND-EQUITY> 201,812
<SALES> 333,867
<TOTAL-REVENUES> 333,867
<CGS> 225,619
<TOTAL-COSTS> 83,174
<OTHER-EXPENSES> 2,113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (735)
<INCOME-PRETAX> 27,187
<INCOME-TAX> 8,140
<INCOME-CONTINUING> 18,855
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,855
<EPS-BASIC> 1.30
<EPS-DILUTED> 1.29
</TABLE>
