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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 January 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 February 8, 2000, was 14,409,349.
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<PAGE>
RIVIANA FOODS INC.
FORM 10-Q FOR THE QUARTER ENDED JANUARY 2, 2000
INDEX
PAGE
----
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at January 2, 2000
and June 27, 1999..............................................1
Consolidated Statements of Income for the Three Months
and Six Months Ended January 2, 2000 and December 27, 1998.....2
Consolidated Statements of Cash Flows for the Six Months Ended
January 2, 2000 and December 27, 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>
JANUARY 2, JUNE 27,
2000 1999
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ....................................................................... $ 6,898 $ 5,605
Cash equivalents ........................................................... 4,670 5,729
Marketable securities ...................................................... 3,192 3,366
Accounts receivable, less allowance for doubtful accounts of $957 and $1,386 43,008 42,079
Inventories ................................................................ 49,280 46,570
Prepaid expenses ........................................................... 3,355 2,247
--------- ---------
Total current assets ............................................... 110,403 105,596
PROPERTY, PLANT AND EQUIPMENT:
Land ....................................................................... 3,433 3,504
Buildings .................................................................. 27,636 26,853
Machinery and equipment .................................................... 96,401 91,557
--------- ---------
Property, plant and equipment, gross ................................... 127,470 121,914
Less accumulated depreciation .............................................. (46,865) (44,579)
--------- ---------
Property, plant and equipment, net ..................................... 80,605 77,335
INVESTMENTS IN UNCONSOLIDATED AFFILIATES ..................................... 9,914 9,958
OTHER ASSETS ................................................................. 7,791 7,315
--------- ---------
Total assets ................................................... $ 208,713 $ 200,204
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt ............................................................ $ 6,118 $ 970
Current maturities of long-term debt ....................................... 834 1,003
Accounts payable ........................................................... 24,868 24,893
Accrued liabilities ........................................................ 18,129 18,870
Income taxes payable ....................................................... 6,849 6,938
--------- ---------
Total current liabilities .............................................. 56,798 52,674
LONG-TERM DEBT, net of current maturities .................................... 1,549 1,390
DUE TO AFFILIATES ............................................................ 715 506
DEFERRED INCOME TAXES ........................................................ 5,432 5,809
OTHER NONCURRENT LIABILITIES ................................................. 2,709 2,964
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS ........................................................... 6,277 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 .......................................................... 150,760 142,424
Accumulated other comprehensive income ..................................... (11,029) (9,606)
Treasury stock, at cost, 1,344 and 1,237 shares ............................ (26,928) (24,843)
--------- ---------
Total stockholders' equity ......................................... 135,233 130,377
--------- ---------
Total liabilities and stockholders' equity ......................... $ 208,713 $ 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 SIX MONTHS ENDED
----------------------- -----------------------
JANUARY 2, DECEMBER 27, JANUARY 2, DECEMBER 27,
2000 1998 2000 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES ....................................... $ 120,015 $ 122,484 $ 225,622 $ 229,806
COST OF SALES ................................... 80,173 84,671 155,172 164,104
--------- --------- --------- ---------
Gross profit ................................ 39,842 37,813 70,450 65,702
--------- --------- --------- ---------
COSTS AND EXPENSES:
Advertising, selling and warehousing .......... 24,005 23,097 42,911 40,066
Administrative and general .................... 5,369 5,322 10,855 10,633
--------- --------- --------- ---------
Total costs and expenses .................... 29,374 28,419 53,766 50,699
--------- --------- --------- ---------
Income from operations ...................... 10,468 9,394 16,684 15,003
OTHER INCOME (EXPENSE):
Gain on sale of marketable securities ......... 655 405 655
Interest income ............................... 331 230 698 579
Interest expense .............................. (230) (210) (433) (402)
Equity in earnings of unconsolidated affiliates 325 216 528 337
Other income (expense), net ................... (8) (124) (285) 449
--------- --------- --------- ---------
Total other income .......................... 418 767 913 1,618
--------- --------- --------- ---------
Income before income taxes and
minority interests ....................... 10,886 10,161 17,597 16,621
INCOME TAX EXPENSE .............................. 3,250 3,056 5,263 5,011
MINORITY INTERESTS IN EARNINGS OF
CONSOLIDATED SUBSIDIARIES ................... 49 76 103 180
--------- --------- --------- ---------
NET INCOME .................................. $ 7,587 $ 7,029 $ 12,231 $ 11,430
========= ========= ========= =========
Earnings per share:
Basic ................................... $ 0.52 $ 0.47 $ 0.84 $ 0.75
Diluted ................................. 0.52 0.47 0.83 0.74
Weighted average common shares outstanding:
Basic .................................. 14,567 14,899 14,596 15,196
Diluted ................................ 14,697 15,080 14,738 15,397
</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>
SIX MONTHS ENDED
-----------------------
JANUARY 2, DECEMBER 27,
2000 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $ 12,231 $ 11,430
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ..................................... 3,018 2,889
Deferred income taxes ............................................. (328) (898)
Gain on disposition of assets ..................................... (310) (610)
Equity in earnings of unconsolidated affiliates ................... (528) (337)
Change in assets and liabilities, excluding effects of acquisition:
Accounts receivable, net ...................................... 16 (5,453)
Inventories ................................................... 2,537 (2,825)
Prepaid expenses .............................................. (1,122) (1,116)
Other assets .................................................. (317) 73
Accounts payable and accrued liabilities ...................... (3,980) 5,946
Income taxes payable .......................................... (46) 878
Other noncurrent liabilities .................................. (206) 116
Minority interests ............................................ (165) (78)
---------- ----------
Net cash provided by operating activities ................... 10,800 10,015
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment ............................ (6,152) (4,487)
Proceeds from disposals of property, plant and equipment .............. 181 104
Proceeds from sale of marketable securities ........................... 438 723
Increase (decrease) in due to affiliates .............................. 193 (505)
Cash paid for business and certain assets, net of cash received ....... (4,519) --
Other ................................................................. 22 19
---------- ----------
Net cash used in investing activities ....................... (9,837) (4,146)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt ........................................... 5,252 2,063
Additions to long-term debt ........................................... 1,298 696
Repayments of long-term debt .......................................... (1,270) (907)
Dividends paid ........................................................ (3,656) (3,422)
Repurchases of common stock ........................................... (2,302) (15,692)
Sales of common stock ................................................. 188 167
Collection of employee discount on stock .............................. 28 7
---------- ----------
Net cash used in financing activities ....................... (462) (17,088)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS ...................................................... (267) (165)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......................... 234 (11,384)
CASH AND CASH EQUIVALENTS, beginning of period ............................ 11,334 17,197
---------- ----------
CASH AND CASH EQUIVALENTS, end of period .................................. $ 11,568 $ 5,813
========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest .............................................................. $ 420 $ 402
Income taxes .......................................................... 6,034 5,059
</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, this quarter includes the
results of operations for a 14-week period whereas the second quarter of fiscal
1999 covered 13 weeks of operations. Likewise, the results of operations for the
six months ended January 2, 2000 covers a 27-week period whereas the prior year
included the results of operations for a 26-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:
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- ---------------------------
JANUARY 2, DECEMBER 27, JANUARY 2, DECEMBER 27,
2000 1998 2000 1998
------ ------ ------ ------
Basic 14,567 14,899 14,596 15,196
Stock options 130 181 142 201
------ ------ ------ ------
Diluted 14,697 15,080 14,738 15,397
====== ====== ====== ======
4
<PAGE>
3. Inventories
Inventories were composed of the following:
JANUARY 2, 2000 JUNE 27, 1999
--------------- -------------
Raw materials $ 9,575 $ 8,994
Work in process 20 29
Finished goods 32,439 31,785
Packaging supplies 7,246 5,762
------- -------
Total $49,280 $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 SIX MONTHS ENDED
------------------------ ------------------------
JANUARY 2, DECEMBER 27, JANUARY 2, DECEMBER 27,
--------- ----------- --------- -----------
2000 1998 2000 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income ................... $ 7,587 $ 7,029 $ 12,231 $ 11,430
Other comprehensive income:
Unrealized gains on
marketable Securities,
net of tax:
Realized(gains)reclassified
to net income ............ (426) (263) (426)
Unrealized gains ........... 181 399 171 303
Foreign currency translation
Adjustment ............... (649) (1,011) (1,331) (924)
-------- -------- -------- --------
Total comprehensive income ... $ 7,119 $ 5,991 $ 10,808 $ 10,383
======== ======== ======== ========
</TABLE>
5. Segment Information
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
JANUARY 2, DECEMBER 27, JANUARY 2, DECEMBER 27,
--------- ----------- --------- -----------
2000 1998 2000 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales:
Domestic .................... $ 78,493 $ 76,209 $ 144,017 $ 140,107
Europe ...................... 20,024 24,531 41,048 47,982
Central America ............. 21,498 21,744 40,557 41,717
--------- --------- --------- ---------
Total consolidated ...... $ 120,015 $ 122,484 $ 225,622 $ 229,806
========= ========= ========= =========
Income:
Operating income
Domestic .................. $ 9,385 $ 7,638 $ 15,568 $ 12,892
Europe .................... 685 1,066 1,208 1,756
Central America ........... 2,958 3,320 5,063 5,478
--------- --------- --------- ---------
Total operating income .. 13,028 12,024 21,839 20,126
General corporate expenses (2,560) (2,630) (5,155) (5,123)
--------- --------- --------- ---------
Income from operations .. 10,468 9,394 16,684 15,003
Interest expense ............ (230) (210) (433) (402)
Equity in earnings of
Unconsolidated affiliates . 325 216 528 337
Other income, net ........... 323 761 818 1,683
--------- --------- --------- ---------
Income before income taxes
and Minority interests .. $ 10,886 $ 10,161 $ 17,597 $ 16,621
========= ========= ========= =========
</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, this quarter includes the results of
operations for a 14-week period whereas the second quarter of fiscal 1999
covered 13-weeks of operations. Likewise, the results of operations for the six
months ended January 2, 2000 covers a 27-week period whereas the prior year
included the results of operations for a 26-week period.
THREE MONTHS ENDED JANUARY 2, 2000
COMPARED TO THREE MONTHS ENDED DECEMBER 27, 1998
For the three months ended January 2, 2000, sales decreased $2.5 million or 2.0%
to $120.0 million from $122.5 million recorded for the same period last year.
Volume gains added $4.5 million to sales. A combination of price and product mix
decreased sales $3.5 million and unfavorable foreign currency translation
reduced sales by $3.5 million. Domestic rice sales of $77.6 million increased
$2.3 million or 3.1% from the prior year sales of $75.3 million. In the domestic
rice business, the retail sector recorded a $1.9 million or 3.3% increase in
sales. Within the retail sector, sales of regular rice increased by $1.0 million
or 3.6% primarily due to a unit volume increase of 7.3%. Sales of value-added
products increased by $0.9 million and sales of brown rice were even with the
prior year. In the non-retail sector, sales increased $0.4 million or 2.5%.
Sales in the export/commodity category decreased $1.2 million or 10.9% primarily
due to a 9.1% decrease in unit volume sales. Sales declined in this category
primarily due to the unavailability of parboil brown rice for export. Sales in
the foodservice category increased $0.7 million or 30.8% due to an increase of
26.8% in volumes. Industrial and by-product sales increased $1.5 million from
the prior year due to increased unit volumes. Sales from the Company's energy
cogeneration joint venture were even with the prior year. Sales in Central
America decreased $0.2 million or 1.1% to $21.5 million compared to $21.7
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 $1.5 million. Higher prices increased sales by $1.2
million and unfavorable currency translation reduced sales by $2.9 million. In
Europe, sales declined by $4.5 million or 18.4% to $20.0 million from $24.5
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 $0.8
million. Unfavorable currency translation decreased sales by $0.7 million.
Volumes were off in virtually all product categories reflecting soft retail
trading conditions, competitive pressures and the loss of representation of a
dried fruit product line.
Gross profit increased $2.0 million or 5.4% to $39.8 million from $37.8 million
a year ago. As a percentage of sales, gross profit increased to 33.2% from
30.9%. In the domestic rice business, gross profit increased by $2.7 million
and, as a percentage of sales, to 39.3% from 36.9% primarily as a result of
lower rice costs. In Central America gross profit decreased $0.3 million or 3.7%
to $7.2 million as a result of lower margins in the cookie and cracker product
lines. Gross profit as a percentage of sales in Central America decreased to
33.3% from 34.2% last year. In Europe, gross profit declined by $0.3 million or
11.8%, but increased as a percentage of sales to 11.7% from 10.8% last year. The
reduced gross margin was directly related to lower sales.
Advertising, selling and warehousing expenses increased by $0.9 million to $24.0
million from $23.1 million in the same period last year. The increase in these
expenses came primarily in the media advertising and promotional programs in the
domestic rice business and was due to higher volume of sales.
6
<PAGE>
Administrative and general expenses increased by $0.1 million or 0.9% to $5.4
million from $5.3 million in the prior year due to normal inflationary
increases.
Income from operations increased $1.1 million or 11.4% to $10.5 million from
$9.4 million in the same period last year. As a percentage of sales, operating
income increased to 8.7% from 7.7% in the prior period. The increase in
operating income resulted from improved results in domestic rice operations.
Operating income in the domestic rice business increased by $1.8 million or
23.5% to $9.5 million due to the increase in sales and lower rice costs as
reflected in the gross profit offset partially by $0.8 million in higher
advertising, selling and warehousing expenses. In Central America, operating
income decreased by $0.4 million or 10.9% to $3.0 million. This decrease was
related to the lower gross margin and $0.2 million in higher advertising,
selling and warehousing expenses related to expanding distribution. Operating
income for European operations decreased $0.4 million in line with reduced gross
profit.
Other income decreased $0.3 million to $0.4 million. In the prior year the
Company recorded $0.7 million in gains from the sale of marketable securities
and no similar gains were recorded in the current period. Partially offsetting
this decline in income from the sale of securities, net interest income
increased by $0.1 million due to favorable cash flow and equity in the earnings
of affiliates increased by $0.1 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 $7.6 million compared to $7.0 million for
the same quarter last year and diluted earnings per share were $0.52, up from
$0.47.
SIX MONTHS ENDED JANUARY 2, 2000
COMPARED TO SIX MONTHS ENDED DECEMBER 27, 1998
Sales decreased $4.2 million or 1.8% to $225.6 million in the six-month period
ended January 2, 2000 versus $229.8 million for the same period of the previous
year. Domestic sales increased by $3.9 million or 2.8% to $144.0 million while
sales from international operations decreased by $8.1 million to $81.6 million.
Increased volumes added $7.3 million to sales while a combination of price and
sales mix decreased sales by $4.4 million. Unfavorable currency translation
reduced sales by $7.1 million. In the domestic rice business, sales in the
retail category increased by $3.8 million or 3.7% primarily due to a 7.5%
increase in unit volume sales. Of the total $3.8 million increase in sales in
the retail category, higher volumes increased sales $6.1 million and a
combination of product mix and selling price reduced sales $2.3 million. Within
the retail sector, sales of regular rice increased $3.0 million or 5.8% due to a
9.2% unit volume increase. Sales of value added products increased $0.7 million
and sales of brown rice were up $0.1 million. In the non-retail category that
includes regular rice sales to the foodservice, industrial and export sectors,
sales were $0.1 million below the prior year. While sales increased $1.1 million
in the foodservice sector, $1.5 million in the industrial sector, and $0.8
million in the export sector, sales in the lower margin commodity sector
declined by $3.4 million. Increased volumes accounted for $3.4 million and lower
pricing and product mix reduced sales $3.5 million. Sales from the Company's
energy cogeneration joint venture increased by $0.2 million due to higher
volumes. Sales by the Company's Central American operations decreased $1.2
million or 2.8% to $40.6 million. Increased sales volumes in both cookie and
cracker products and fruit nectar and juice products added $1.7 million to
sales. Higher prices added $2.9 million to sales and unfavorable currency
translation reduced sales by $5.8 million. Sales by the Company's European
operations decreased $6.9 million or 14.5% to $41.0 million. Lower volumes
decreased sales by $4.0 million. Lower prices due to more competitive markets
reduced sales by $1.7 million and unfavorable foreign currency exchange
decreased sales $1.2 million.
7
<PAGE>
Gross profit increased by $4.7 million or 7.2% to $70.4 million in the six-month
period from $65.7 million in the same period of the previous year. As a
percentage of sales, gross profit increased to 31.2% of sales in the current
period versus 28.6% of sales last year. Of the total $4.7 million increase in
gross profit, $5.1 million came from domestic operations while gross profit from
international operations decreased by $0.4 million. Domestic gross profit
increased primarily due to increased unit volumes and lower rice costs. In
Central America, gross profit was even with the prior year. As a percentage of
sales, gross profit in Central America increased to 33.0% from 32.2%. Gross
profit decreased by $0.4 million in Europe. Volumes were off in virtually all
product categories reflecting soft retail trading conditions, competitive
pressures and the loss of representation of a dried fruit brand. As a percentage
of sales, international gross profit increased to 11.6% from 10.7%.
Advertising, selling and warehousing expenses increased $2.8 million to $42.9
million from $40.1 million in the prior year. The increase in these expenses
came primarily in promotional programs in the domestic rice business due to
higher volumes.
Administrative and general expenses increased by $0.2 million or 2.1% to $10.9
million due to general inflationary increases.
Income from operations increased by 11.2% to $16.7 million from $15.0 million
last year. As a percentage of sales, operating income increased to 7.4% from
6.5%. In the domestic rice business, operating income increased $2.9 million or
22.3% to $15.8 million. This increase was due to $5.4 million in higher gross
profit partially offset by a $2.4 million increase in advertising, selling and
warehousing expenses. In Central America operating income decreased $0.4
million. While the gross profit in Central America was even with the prior year
advertising, selling and warehousing expenses increased by $0.5 million related
expanding distribution and new product introductions. In Europe, operating
income decreased $0.5 million due primarily to the reduction in gross profit.
Other income decreased $0.7 million to $0.9 million from $1.6 million in the
prior year. Net interest income was $0.1 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 increased by $0.2 million to $0.5 million. Gains from the sale of
marketable securities decreased by $0.3 million to $0.4 million from $0.7
million in the same period last year. Other miscellaneous income decreased by
$0.7 million. In the prior year the Company received $0.8 million from the
settlement of litigation, which did not recur in the current period.
Tax expense increased $0.3 million to $5.3 million in the current year. The
effective tax rate was 29.9% in the current period as compared to 30.2% in the
same period last year. The lower rate in the current period results from energy
tax credits from the Company's energy cogeneration joint venture.
Net income for the six-month period was $12.2 million up 7.0% compared to $11.4
million for the comparable period last year. Diluted earnings per share were
$0.83 versus $0.74 last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $10.8 million for the six months
ended January 2, 2000, which was an increase of $0.8 million from the same
period last year. The increase in cash provided by operations was due primarily
to a $0.8 million increase in net income and an increase in depreciation and
amortization charges of $0.1 million. Deferred income taxes decreased by $0.3
million in the current period, which was a decrease of $0.6 million from the
prior year. Net cash employed in working capital was even with the prior year as
the decrease in inventories and accounts receivable was offset by a
corresponding decrease in accounts payable and accrued liabilities and income
taxes payable. Equity in
8
<PAGE>
earnings of unconsolidated affiliates increased by $0.2 million and gains from
the disposition of assets decreased by $0.3 million.
Cash used in investing activities increased to $9.8 million from $4.1 million in
the same period in the prior year. Purchases of property, plant and equipment
totaled $6.2 million, which were $1.7 million more than purchases in the same
period last year. Cash flow related to amounts due to affiliates increased $0.7
million. Cash paid for the acquisition of assets related to a new business
totaled $4.5 million. Proceeds from the sale of marketable securities decreased
by $0.3 million.
Cash used in financing activities totaled $0.5 million in the six months ended
January 2, 2000, which was $16.6 million less than last year. During this period
the Company repurchased 121.2 thousand shares of its common stock paying $2.3
million. In the prior year the Company repurchased 789.0 thousand shares at a
cost of $15.7 million. In the current period $5.3 million was provided by
additional net borrowings whereas in the prior year $1.9 million was provided by
net borrowings. Dividend payments in the period ended January 2, 2000 were $3.7
million, up from $3.4 million paid in the same period last year.
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.
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 January 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
million 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
9
<PAGE>
maintenance operations in the current year, but does not expect the return to
normal operating conditions to adversely effect 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 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: February 9, 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 January 27, 2000,
regarding unaudited financial statements............. 14
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 January 2, 2000, and the
related consolidated statements of income for the three-month and six-month
periods ended January 2, 2000 and December 27, 1998, and cash flows for the
six-month periods ended January 2, 2000 and December 27, 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
January 27, 2000
14
<PAGE>
January 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 January 2, 2000,
which includes our report dated January 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 SECOND 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> 6-MOS
<FISCAL-YEAR-END> JUL-02-2000
<PERIOD-END> JAN-02-2000
<CASH> 6,898
<SECURITIES> 3,192
<RECEIVABLES> 43,008
<ALLOWANCES> 957
<INVENTORY> 49,280
<CURRENT-ASSETS> 110,403
<PP&E> 127,470
<DEPRECIATION> 46,865
<TOTAL-ASSETS> 208,713
<CURRENT-LIABILITIES> 56,798
<BONDS> 0
0
0
<COMMON> 15,883
<OTHER-SE> 119,350
<TOTAL-LIABILITY-AND-EQUITY> 208,713
<SALES> 225,622
<TOTAL-REVENUES> 225,622
<CGS> 155,172
<TOTAL-COSTS> 53,766
<OTHER-EXPENSES> 913
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (433)
<INCOME-PRETAX> 17,597
<INCOME-TAX> 5,263
<INCOME-CONTINUING> 12,231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,231
<EPS-BASIC> 0.84
<EPS-DILUTED> 0.83
</TABLE>
