RIVIANA FOODS INC /DE/ - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-25294
RIVIANA FOODS INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 76-0177572
(State of Incorporation) (I.R.S. Employer Identification No.)

2777 ALLEN PARKWAY
HOUSTON, TEXAS 77019-2141
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(713) 529-3251

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS)

Indicate by check mark whether 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 Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of August 29, 2002 the aggregate market value of Registrant's voting
stock held by non-affiliates of Registrant was approximately $145,687,000.

The number of shares of Common Stock of Registrant, par value $1.00 per
share, outstanding at August 29, 2002 was 14,184,656.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's definitive Proxy Statement for the 2002 Annual
Meeting of Stockholders to be held October 16, 2002 (the "Proxy Statement") are
incorporated by reference into Part III, Items 10, 11, 12 and 13.
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PART I

ITEM 1. BUSINESS

Riviana Foods Inc. ("Riviana", the "Company", or the "Registrant") was
incorporated on January 31, 1986. The Company's predecessors date back to 1911
when Frank A. Godchaux began the amalgamation of 25 rice mills in southwest
Louisiana.

Riviana processes, markets and distributes rice products in the United
States, cookies, crackers, fruit juices, nectars and drinks, and processed
fruits and vegetables in Central America, and rice and other food products in
Europe. For fiscal 2002, the Company's domestic operations accounted for
approximately 65% and 73% of net sales and operating income before general
corporate expenses, respectively, and operations in Central America and Europe
accounted for approximately 22% and 13% of net sales and 23% and 4% of operating
income before general corporate expenses, respectively.

Riviana's domestic operations consist primarily of sales of retail branded
and private label rice products, sales of rice products to retail food service
chains and to major food processors, sales of rice by-products to industrial
users and exports of branded and value-added rice products to Puerto Rico and a
number of international markets.

By volume, Riviana is the largest seller of retail branded and private
label rice products in the United States, offering a variety of products in each
of the retail rice industry's four categories: dried rice (milled white and
parboiled rice), instant rice (rice that cooks in 10 minutes or less),
easy-to-prepare, flavored rice mixes (specialty mixes) and brown rice.

The Company's domestic sales by hundredweight ("cwt") of retail rice
products have grown at a compound annual rate of 2% from fiscal 1998 to 2002.
The Company believes its consistent growth has resulted from its longstanding
national presence and reputation for quality, and its ability to develop and
market easy-to-prepare, value-added instant and specialty mix products.

The Company markets its branded products under a number of nationally
recognized brand names including:

MAHATMA(R) -- the best selling brand of packaged long grain rice in the
U.S. for ten years.

SUCCESS(R) -- the leading brand of instant boil-in-bag rice and the
second leading brand of instant rice in the U.S.

CAROLINA(R) -- one of the leading brands of packaged long grain rice in
the northeastern and mid-Atlantic U.S.

WATERMAID(R) -- the leading brand of medium grain rice in the south and
southeastern U.S.

RIVER(R) -- the top-selling brand of packaged medium grain rice in
several northeastern and mid-Atlantic U.S. markets.

S&W(R) -- the best selling brand of packaged long grain rice in the
Pacific northwest.

GOURMET HOUSE(R) -- one of the leading brands of packaged wild rice in the
U.S.

Riviana also markets a variety of easy-to-prepare, flavored rice mixes
under the Mahatma(R), Carolina(R) and Success(R) brand names, including
Mahatma(R) brand Saffron Yellow Rice, Red Beans & Rice, Spanish Rice, Black
Beans & Rice, Spicy Saffron Yellow Rice, Nacho Cheese Rice, Long Grain & Wild
Rice, Broccoli & Cheese Rice and Beef Rice, Carolina(R) brand Saffron Yellow
Rice, Black Beans & Rice, Pilaf Rice, Long Grain & Wild Rice, Chicken Rice and
Spanish Rice and Success(R) brand Saffron Yellow Rice, Brown & Wild Rice,
Broccoli & Cheese Rice, Red Beans & Rice, Grilled Chicken & Broccoli Rice and
Cheesy Rice.

In addition to its branded products, the Company supplies a full range of
private label rice products -- dried rice, instant rice, rice mixes and brown
rice -- to numerous food retailers, including 42 of the top 50 retailers in the
United States. In July 1998, the Company also began marketing and distributing
retail rice products in the United States, the Bahamas and U.S. military
commissaries for Riceland Foods, Inc., with whom it also participates in rice
flour milling and co-generation projects.

The Company supplies parboiled and instant rice in bulk to a number of the
nation's major food processors for use as an ingredient in other food products.
The Company markets a range of foodservice products, principally instant rice,
parboiled rice, and rice mixes, to several of the top restaurant chains and
foodservice companies in the United States. Additionally, the Company sells bulk
rice and rice by-products to industrial users.

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Riviana exports brand name and value-added rice products to Puerto Rico and
a number of foreign countries. The Company's Puerto Rican brands, El Mago(R),
Sello Rojo(R) and Mahatma(R), represent approximately 22% of the total Puerto
Rican retail rice market, where per capita rice consumption is approximately
five times the United States level. The Company also exports brand name and
private label rice products to Canada, Mexico, Central America and countries in
the Caribbean, Europe, Africa and the Middle East.

In Central America, the Company operates as one of the largest
manufacturers of cookies and crackers and one of the largest processors of
fruits and vegetables through Pozuelo, S.A. ("Pozuelo") and Alimentos Kern de
Guatemala, S.A. ("Kern"). In cookies and crackers, Costa Rica is the largest
market, followed by Guatemala and El Salvador. In processed fruits and
vegetables, the Company produces a wide variety of products, including fruit
nectars and juices, fruit drinks, tomato products and refried beans. These
products are sold principally in Central America with the largest markets being
Guatemala, Costa Rica and El Salvador. Exports, including refried beans exported
to the United States, represent a part of the Central American business. Many of
the Company's primary brand name products are market leaders in Central America
in their respective categories.

The Central American segment accounted for approximately 22% of net sales
and 23% of operating income before general corporate expenses in fiscal 2002.

In Europe, the Company is a distributor of rice and other food products
through its subsidiary, Stevens & Brotherton Ltd. ("S&B") and a major rice
miller, marketer and distributor of rice products through its subsidiary, N & C
Boost N.V. ("N&C"). S&B, a United Kingdom subsidiary, distributes a variety of
brand name and private label products including rice and canned fruits and
vegetables to retail, wholesale, foodservice and industrial customers. The
products distributed by S&B are all produced by other manufacturers and generate
a lower gross profit margin than other Riviana operations.

N&C, a Belgian subsidiary, competes in the continental European rice market
through its management of Boost Nutrition C.V. in Belgium and its subsidiary,
Euryza Reis GmbH in Germany, (collectively "Boost"). Boost is accounted for as
an unconsolidated affiliate and is jointly owned by N&C and the Herba Rice
Division of Ebro Puleva, S.A. ("Herba"). The Boost joint ownership agreement
provides that each party has certain rights to buy the other's interest or
require the other to buy its interest. N&C and Herba also each own a one-third
interest in Herto N.V., a major European rice cake manufacturer.

The Company's European operations accounted for approximately 13% of net
sales and 4% of operating income before general corporate expenses in fiscal
2002.

Financial segment information by geographic area for the most recent three
fiscal years is set forth in Item 8, Note 13, "Segment information."

The Company is exposed to certain political, economic and other risks
inherent in doing business abroad, including exposure to currency exchange rate
fluctuations, currency exchange restrictions, potentially unfavorable changes in
tax or other laws, partial or total expropriation, and the risks of war,
terrorism and other civil disturbances. Additional information related to this
matter is set forth in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company's strategies for
minimizing the effect of currency rate fluctuations are to borrow in local
currencies, denominate accounts receivable in local currencies and hedge certain
short-term foreign product procurement commitments with specific currency
exchange contracts. Currency rate fluctuations have not materially impacted the
historical results of operations. The functional currencies of the Company's
foreign subsidiaries are the local currency of each subsidiary.

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The Company has a large customer base that includes retail supermarket
chains, wholesalers, industrial ingredient users, restaurant chains, breweries
and other food processors. No customer, domestic or international, accounted for
more than 4% of the Company's consolidated revenues in fiscal 2002.

In the United States, the Company supports its branded business primarily
with regional media advertising and trade and consumer promotions, including
significant coupon and product tie-in programs. These programs are coordinated
by the Company's marketing and sales departments through seven regional managers
and a national network of food brokers.

The Company's sales of retail rice products are executed on a purchase
order basis, although the Company does have some contracts under which it
supplies rice products to industrial and international customers. The Company's
sales of retail rice products are conducted through independent food brokers,
who are coordinated by the Company's regional sales managers. Products are
distributed through a nationwide network of Company and public warehouses.

The Company buys and mills rough rice from a variety of farm sources,
primarily in Arkansas and Louisiana. No single source accounts for more than 9%
of rough rice purchases. In addition to milling rice in its own facilities, the
Company purchases approximately 33% of its rice requirements from companies
primarily in the United States that mill the rice to the Company's
specifications. In fiscal 2002, 85% of the Company's milled rice purchases were
from one supplier, Riceland Foods, Inc. ("Riceland"), an unrelated third party.
In addition to these rice purchases, the Company is a joint venture partner with
Riceland in rice flour processing and co-generation of power from the
gasification of rice hulls. See Notes to Consolidated Financial Statements, Note
1, "Organization and nature of business." The Company believes adequate
alternative sources of supply are readily available, and all purchase
transactions are compared to published market price data and competitive quotes
from more than one supplier before entering into a purchase contract.

The Company's competitive position depends largely on continued consumer
brand loyalty and its ability to introduce and gain customer acceptance for new
products. The Company competes with three major industry leaders and with
several regional competitors on the basis of price, quality, brand name
recognition, availability of products and product innovation.

The Company is the industry leader in sales of branded rice measured by
volume. The Quaker Oats Company is the largest seller of branded rice in the
industry measured in dollars with its rice brands, Rice-A-Roni and Near East.
Mars, Incorporated, through its subsidiary, Uncle Ben's, Inc., is the largest
seller of parboiled rice. Kraft Foods Inc. produces the leading brand of instant
rice, Minute.

The Company's Central American subsidiaries have local competitors, some of
which are affiliated with multinational companies. New competition has come from
an influx of international brands imported from the United States, Mexico and
South America attributable largely to declining import duties in Central
America.

In Belgium and Germany, Boost competes with branded products from
Masterfoods (a division of Mars, Incorporated) and Kraft Foods Inc. as well as
branded products packaged by other European millers and processors. In the
United Kingdom, S&B competes with European rice millers, including mills in the
United Kingdom, from which it also purchases rice, for its share of the rice
market. In the private label market for products other than rice, S&B competes
with importers representing worldwide manufacturing operations that process
fruits, vegetables and other food products.

Although the Company is not involved in rice farming, certain government
regulations affecting United States rice farmers have an impact on the Company's
cost of raw materials. Substantially all rice grown in the United States is
influenced by government programs.

In May 2002, the Farm Security and Rural Investment Act of 2002 (the "2002
Farm Bill") was enacted to replace the Federal Agriculture Improvement and
Reform Act of 1996. The 2002 Farm Bill provides for the continuation of direct
decoupled payments for the 2002 through 2007 crop years. The payment base
remains at 85 percent of contract acreage, and the direct decoupled payment for
rice is set at $2.35 per cwt. Producers may elect to update base acres and
yields. The 2002 Farm Bill maintains the marketing loan and loan deficiency
structure with the use of generic certificates, contains a new counter-cyclical
program, and maintains planting flexibility, enabling farmers to plant different
crops other than rice as market conditions warrant. The 2002 Farm Bill sets
payment limitations at $40,000 for direct decoupled payments, $65,000 for
counter-cyclical payments, and $75,000 for marketing loan gains. Current
provisions regarding husband and wife and the three entity rule are retained and
a new means test provision will become effective for the 2003 crop. The 2002
Farm Bill currently complies with the World Trade Organization commitments, but
gives the Secretary of Agriculture the authority to scale back payments if the
United States gets close to the $19.1 billion cap for trade-distorting payments.

3

The Company is subject to various federal, state and local environmental
laws and regulations concerning air quality, water quality, and the generation,
use and disposal of materials relating to plant operations and to the processing
of rice. The Company procures and maintains the necessary environmental permits
and licenses in order to operate its facilities and considers itself to be in
compliance in all material respects with those environmental laws and
regulations currently applicable to its business and operations. Such compliance
has not materially affected the Company's business, financial condition or
results of operations.

The manufacture and marketing of the Company's products are subject to
regulation in the United States by federal regulatory agencies including the
Environmental Protection Agency, the Occupational Safety and Health
Administration, the Food and Drug Administration ("FDA"), and by various state
and local authorities. The FDA also regulates the labeling of the Company's
products. The Company's operations outside the United States are subject to
similar regulation in a number of countries. Compliance with existing
requirements of such governmental bodies has not materially affected the
Company's capital expenditures, earnings or competitive position.

The Company's brands are protected by numerous trademark registrations in
the United States and foreign jurisdictions. The Company believes that its
registered trademarks have significant value, and are adequate to protect the
brand names significant to its business.

As of August 15, 2002, the Company employed approximately 2,864 employees,
22% of whom were covered by collective bargaining agreements. In Houston, Texas,
the Company is a party to collective bargaining agreements with General Drivers,
Warehousemen and Helpers Teamsters Local Union No. 968, covering 270 employees.
In Memphis, Tennessee, the Company is a party to a collective bargaining
agreement with Teamsters Local Union No. 1196 covering 100 employees. In
Guatemala, Kern is a party to a collective bargaining agreement with a local
union covering 253 employees. The Company believes its labor relations are good.

ITEM 2. PROPERTIES

The following table lists the Company's principal properties, all of which
are owned unless otherwise indicated.

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(1) Leased facility.

(2) Contracted space and services.

In addition to the properties listed in the table, the Company owns seven
drying and storage facilities strategically located in the rice growing region
of the southeastern United States, and leases warehouse facilities in Houston
and Memphis.

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ITEM 3. LEGAL PROCEEDINGS

The Company is from time to time subject to claims and suits arising in the
ordinary course of business. The Company is not currently a party to any
proceeding which, in management's opinion, would have a material adverse effect
on the Company's financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the fiscal year ended June 30, 2002, no matter
was submitted to a vote of the stockholders.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Information relating to the Company's common stock is set forth in Item 8,
Note 11, "Capital stock", and Note 14, "Unaudited quarterly financial data."

On August 23, 2002, the Board of Directors declared a quarterly cash
dividend of $0.165 per common share payable October 8, 2002 to stockholders of
record on September 10, 2002.

The Company has a continuing stock repurchase program. The program
authorizes the repurchase of up to 3,000,000 shares of the Company's common
stock from time to time. As of August 30, 2002, the Company had repurchased
2,022,246 shares. The Company expects to finance any future repurchases from
working capital, unused short-term credit lines and cash flow from operations.

ITEM 6. SELECTED FINANCIAL DATA

The following table represents selected consolidated financial data for the
Company and its subsidiaries for each of the five fiscal years 1998 through
2002. Net sales for fiscal years 1998 through 2000 have been restated to reflect
the adoption as of July 1, 2001, of the Financial Accounting Standards Board's
Emerging Issues Task Force (EITF) Issue Nos. 00-14 and 00-25. See Item 8,
Footnote 2, "Summary of significant accounting policies: Changes in accounting
principles" for additional information. All amounts are in thousands except per
share data.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the related notes.

GENERAL

The Company operates on a 52/53-week fiscal year ending on the Sunday
closest to June 30th. This period is utilized because it closely coincides with
the rice crop year in the southern United States and rice is the largest
component of the Company's business. Both fiscal 2002 and fiscal 2001 covered 52
weeks of operations whereas fiscal 2000 covered 53 weeks of operations.

The Company operates in various foreign countries and is therefore subject
to currency fluctuations. Changes in the value of the United States dollar
against these currencies will affect the Company's results of operations and
financial position. When the United States dollar strengthens compared to other
local

5

currencies, the operating results of the Company's foreign units translate into
fewer United States dollars, thus decreasing the revenues and expenses of the
Company on a consolidated basis. If the United States dollar weakens against the
other relevant currencies, the opposite occurs. The Company's foreign units
attempt to minimize the effects of currency risk by borrowing externally in the
local currency and by hedging their purchases made in foreign currencies when
that option is available. As a matter of policy, the Company does not engage in
currency speculation. Changes in exchange rates historically have not materially
impacted the Company's net sales, costs or business practices and management
expects this to continue.

Inflationary conditions in the United States and Europe have been moderate
and have not had a material impact on the Company's results of operations or
financial position for the three fiscal years ended June 30, 2002. Despite
higher inflationary rates in Central America, inflation has not had a material
impact on the results of operations or financial position of the Company's units
located in that region because the Company has generally been able to pass on
cost increases to its customers.

The Company includes in domestic operations all export sales originating
from the United States and sales in Puerto Rico.

ACCOUNTING POLICIES

The following accounting policies are integral to understanding the
financial statements contained herein reporting the operating results and
financial position of the Company for the year ended June 30, 2002 with
comparative results for the previous year. For additional accounting policies,
see Item 8, Note 2, "Summary of significant accounting policies."

ACCOUNTING ESTIMATES AND ASSUMPTIONS

Certain estimates and assumptions are used in preparing the financial
statements presented herein and affect the reported amounts and disclosures.
Estimates are used when accounting for certain consumer and trade promotions,
depreciation and amortization, employee benefits contingencies and asset
valuation allowances. For example, in determining the expense related to
consumer coupons, the Company estimates the percentage of coupons that will be
redeemed based on historical results for similar items. The Company is also
subject to risks and uncertainties that could cause actual results to be
different from estimated results such as changes in market conditions,
competition, foreign exchange rates, legislation, accounting rules and
litigation. Actual results could differ from those estimates. Those items are
discussed in more detail in the section entitled "Forward Looking Information
and Factors that May Affect Future Results."

REVENUE RECOGNITION

Sales are recognized at the time the risk of ownership passes to the
customer. Generally this occurs when products are shipped to trade customers. On
sales where the risk of ownership transfers upon delivery to the customer, sales
are recorded when delivery occurs.

SALES INCENTIVES

Certain sales incentives such as coupons, rebates and free products which
are offered to either the retail trade or the consumer are recorded as a
reduction in sales revenue in accordance with recent accounting pronouncements
at the later of either the date the related revenue is recorded or the date at
which the sales incentive is offered.

CASH DISCOUNTS

An estimate of cash discounts offered to customers for early payment of
sales invoices is recorded in the same period the related sales are recorded.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

In the normal course of business the Company extends credit to its
customers. The Company regularly reviews these accounts and makes a provision
for amounts that may become uncollectible. The Company regularly evaluates
accounts receivable and the allowance for doubtful accounts based on historical
loss experience, specific problem accounts and general economic conditions in
its geographic markets, and adjustments to the allowance are charged or credited
to income. Although the Company believes the allowance is adequate to provide
for potential uncollectible accounts at June 30, 2002, there is a possibility
that actual losses will differ from the amount estimated.

CONTINGENCIES

The Company is subject to certain contingencies including but not limited
to legal issues, and claims covering product liability, environmental, tax and
employment matters. The Company records accruals for such contingencies based on
its assessment of the probability of occurrence and an estimate of the potential

6

liability. In arriving at the liability to be recorded, it considers past
history, where applicable, and the available facts surrounding each issue.
Reserves are provided if the Company thinks it likely that a taxing authority
may take a sustainable position on a matter contrary to the position taken by
the Company or one of its subsidiaries. See Item 8, Note 10, "Commitments and
contingencies".

FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS

The Securities and Exchange Commission encourages the disclosure of
forward-looking information in order for investors to better understand the
Company and enable more informed investment decisions. From time-to-time the
Company does make oral and written statements that contain forward-looking
statements. The Company tries to identify such statements with the use of words
such as "estimate", "expect", "project", "intend", "plan", "believe", and other
similar terms.

Factors that could cause actual results to differ materially are the
following:

- Changes in business, political and worldwide economic conditions

- Competitive market activity

- Change in product mix sold

- Trade buying patterns

- Litigation

- Interest rate and foreign currency exchange rate fluctuations

- Governmental laws and regulations including tax laws

- Change in generally accepted accounting policies

- Acts of God affecting manufacturing and distribution channels

- Acquisitions, divestitures and restructurings

The Company cannot guarantee that any forward-looking statement will be
realized, but makes every effort to be prudent in its plans and assumptions.
Should known or unknown risks materialize, or should underlying assumptions be
inaccurate, actual results may vary materially from those estimated or
projected.

The Company does not undertake to publicly update forward-looking
statements as a result of new information, future events or otherwise.

This discussion of factors that could affect future results is not meant to
be complete but instead is designed to highlight important factors that may
impact the Company's future results.

RESULTS OF OPERATIONS

FISCAL 2002 COMPARED TO FISCAL 2001

For the fiscal year ended June 30, 2002 sales decreased $6.9 million or
1.8% to $375.1 million from $382.0 million for the previous fiscal year. Higher
unit volumes increased sales $3.6 million while the combined effect of price and
sales mix decreased sales by $6.2 million. Unfavorable currency translation
reduced sales a further $4.3 million. In the domestic rice business sales of
$239.7 million increased $0.5 million or 0.2% from the prior year sales of
$239.2 million. Higher volumes were recorded across all sectors in the domestic
rice business with the exception of the low-margin export/commodity and
by-products sectors. In total, the increased volumes added $4.0 million in
sales. Sales in the domestic rice business were negatively affected $3.5 million
due to a combination of sales mix and pricing reflecting the competitive market
conditions. Total retail unit volumes increased by 1.1% and non-retail unit
volumes declined by 1.9% primarily due to competitive market conditions. Sales
by the Company's energy co-generation joint venture decreased by $1.1 million
due primarily to lower energy prices. Lower gas prices decreased sales $2.1
million and higher volumes increased sales by $1.0 million. Sales in Central
America decreased $0.2 million or 0.2% to $83.8 million compared to $84.0
million in the prior year. Higher volumes were recorded in both fruit nectar and
juice products and cookie and cracker product lines. In total, the increase in
volumes added $2.8 million to sales. Price increases, primarily in cookie and
cracker products increased sales by $1.2 million and unfavorable currency
translation reduced sales by $4.2 million. In Europe, sales declined by $6.1
million or 11.6% to $46.9 million from $53.0 million in the prior year. Lower
unit volumes decreased sales by $4.2 million. A combination of price and product
mix reduced sales by $1.9 million and unfavorable currency translation decreased
sales by $0.1 million.

Gross profit increased $5.4 million or 5.3% to $107.9 million from $102.5
million a year earlier and increased as a percentage of sales to 28.8% from
26.8%. In the domestic rice business, gross profit increased $5.3 million or
7.6% to $75.8 million from $70.5 million in the same period in the prior year
and increased as a

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percentage of sales to 31.7% from 29.5%. Gross profit increased primarily as a
result of lower rice and energy costs. The domestic energy co-generation
operations reported a loss at the gross profit level of $0.2 million versus a
profit of $0.5 million in the prior year. The decline in gross profit resulted
from the decline in sales related to lower gas prices. Gross profit in Central
America improved by $1.3 million or 5.1% to $27.1 million and increased as a
percentage of sales to 32.3% from 30.7% in the prior year. The increase in gross
profit was due to product mix and lower production costs. In Europe gross profit
decreased by $0.5 million or 10.1% to $5.2 million, but increased slightly as a
percentage of sales to 11.0% from 10.8% in the prior year. The decrease in gross
profit was due to lower sales volumes.

Advertising, selling and warehousing expenses of $52.7 million were down
$0.9 million from the prior year. A decrease of $1.3 million in the domestic
rice business and $1.0 million in Europe was offset by an increase of $1.4
million in Central America. Expenses in Central America increased due to market
conditions and increased costs of expanding distribution. In the domestic rice
business, these costs were reduced primarily due to a lower spending level in
promotional programs and media advertising. Selling expenses were also reduced
by a lower level of bad debt expense. In Europe, the reduction in these expenses
reflects the lower sales volumes of the restructured operations.

Administrative and general expenses increased by $0.4 million or 1.6% to
$21.7 million from $21.3 million in the prior period. An increase in general
corporate expense of $0.8 million was offset by a reduction of $0.7 million in
European operations. Administrative expenses were reduced in Europe as a result
of the restructuring undertaken in the third fiscal quarter of the previous
year. The restructuring was initiated to adjust for a reduction in business
resulting from the loss of two product line distributorships. In Central
America, administrative and general expenses increased by $0.2 million. This
increase reflects normal inflationary increases.

During the third quarter of fiscal 2001, the Company recorded a pre-tax
charge of $1.4 million in continuing operations for restructuring and other
charges related to its European operations in the United Kingdom. The charges
were for activities related to work-force reductions and downsizing operations.
The charges include $0.4 million for redundancy payments for employee
termination benefits, $0.6 million for excess facility costs and $0.4 million
for equipment and other asset write-downs. The $1.4 million liability originally
recorded in accrued expenses has been reduced to $0.4 million as of June 30,
2002. The remaining liability primarily relates to long-term office and
equipment leases.

Operating income increased $7.4 million or 28.5% to $33.6 million from
$26.2 million in the same period in the prior year. As a percentage of sales,
operating income increased to 9.0% from 6.9% in the prior period. Operating
income in the domestic rice business increased by $6.5 million or 25.3% to $32.7
million. The increase in operating profit resulted primarily from the $5.3
million increase in gross profit and lower advertising, selling and warehousing
expenses of $1.3 million as discussed above and a small increase in general and
administrative expense. In Central America, operating income decreased $0.3
million or 2.7% to $10.0 million. Higher advertising, selling and warehousing
expenses of $1.4 million and a $0.2 million increase in administrative expenses
more than offset the $1.3 million increase in gross profit. Operating income in
Europe increased $2.6 million from the prior year's loss of $0.9 million to $1.7
million. The prior year was negatively impacted by the recording of a $1.4
million restructuring charge in the third fiscal quarter. Net of the
restructuring charge, operating income increased by $1.2 million.
Administrative, selling and warehousing expenses were lower in the current year
by $1.0 million and administrative expenses were lower by $0.7 million as a
result of the restructuring. Combined, these expense reductions more than offset
the $0.5 million reduction in gross profit.

Other income of $1.4 million decreased by $0.4 million from the prior year.
In fiscal 2002 the Company recorded net interest income of $0.6 million as
compared to net interest expense of $0.1 million in the prior year. The increase
in interest income was primarily related to improved cash flow associated with
the higher level of operating profit. Equity in the earnings of unconsolidated
affiliates of $2.8 million was $0.6 million higher than the same period in the
prior year due to record volumes at the Company's rice flour joint venture
operation and earnings from its affiliate, Boost Nutrition. In the current
period the Company recorded no gain from the sale of marketable securities while
in the prior year $1.4 million was recorded. Other miscellaneous expenses
increased by $0.3 million to $2.0 million.

Income tax expense of $9.6 million reflected an increase of $1.2 million
from the same period in the prior year due to the increase in income before tax.
The effective rate decreased to 27.3% from 29.9% in the same period last year.
The effective tax rate is less than the U.S. statutory rate primarily as a
result of foreign earnings which are subject to tax rates that are lower than
the U.S. statutory rate, the utilization of energy tax

8

credits related to the Company's co-generation joint venture and the resolution
of a foreign tax matter in the second fiscal quarter which resulted in reducing
taxes by $0.9 million.

Net income for fiscal 2002 increased $6.0 million or 31.2% to $25.2 million
from $19.2 million in the prior fiscal year. Diluted earnings per share were
$1.77, up from $1.36 in the prior period.

FISCAL 2001 COMPARED TO FISCAL 2000

Effective July 1, 2001 the Company adopted the Financial Accounting
Standards Board's Emerging Issues Task Force (EITF) Issue No. 00-14, "Accounting
for Certain Sales Incentives", and EITF Issue No. 00-25, "Vendor Income
Statement Characterization of Consideration Paid to a Reseller of the Vendor's
Products". These issues address the recognition, measurement and income
statement classification of various types of sales incentives including
discounts, coupons, rebates, free products and payments to retailers to obtain
shelf space for products of the Company. The effect of these issues
significantly impacted revenue and expense classifications but did not change
reported operating income, net income or earnings per share. Accordingly, all
periods presented have been restated to reflect this adoption.

The following table summarizes the impact of this change in the method of
accounting for sales incentives and other payments covered by the EITF Issues
No. 00-14 and No. 00-25.

For the fiscal year ended July 1, 2001 sales decreased $21.0 million or
5.2% to $382.0 million from $403.0 million for the previous fiscal year. Lower
volumes reduced sales $9.1 million and the combined effect of price and sales
mix decreased sales by $3.7 million. Unfavorable currency translation reduced
sales a further $8.2 million. In the domestic rice business sales of $239.2
million decreased $6.8 million or 2.8% from the prior year sales of $246.0
million. Lower unit volumes were recorded across all sectors in the domestic
rice business with the exception of foodservice which increased by 12.7% and the
low-margin by-products which increased by 21.8%. In total, lower unit volumes
accounted for $1.9 million of the total $6.8 million decrease in sales. Total
retail volumes declined by 1.2% and non-retail volumes declined by 2.5%
primarily due to competitive market conditions. Sales in the domestic rice
business were also negatively affected $4.9 million due to a combination of
sales mix and pricing reflecting the competitive market conditions. The
Company's energy co-generation joint venture increased sales $1.9 million due
primarily to higher energy prices. Higher gas prices added $2.6 million to sales
and lower volumes reduced sales by $0.7 million. Volumes declined from the prior
year as a facility was out of service for approximately one and one-half months
for repairs and upgrading. Sales in Central America increased $4.5 million or
5.6% to $84.0 million compared to $79.5 million in the prior year. Higher
volumes were recorded in fruit nectar and juice products while volumes in the
cookie and cracker product lines were even with the prior year. In total, higher
volumes increased sales by $7.4 million. Higher prices increased sales by $0.1
million and unfavorable currency translation reduced sales by $3.0 million. In
Europe, sales declined by $20.6 million or 27.9% to $53.0 million from $73.6
million in the prior year. Lower unit volumes decreased sales by $13.9 million
as the Company continued to eliminate sales of certain lower margin products and
distributorships for two product lines were cancelled. A combination of price
and product mix reduced sales by $1.5 million and unfavorable currency
translation decreased sales by $5.2 million.

Gross profit decreased by $7.6 million or 6.9% to $102.5 million from
$110.1 million a year earlier and decreased as a percentage of sales to 26.8%
from 27.3%. In the domestic rice business, gross profit decreased $5.9 million
or 7.8% to $70.5 million from $76.4 million in the same period in the prior
year. Gross profit decreased primarily as a result of lower sales but was also
impacted by higher costs which reduced the gross

9

profit as a percentage of sales. Most of the higher costs were related to the
sharply higher energy costs incurred in fiscal 2001. In the domestic rice
business, gross profit as a percentage of sales decreased to 29.5% from 31.1%.
The domestic energy co-generation operations reported gross profit of $0.5
million versus a loss of $0.1 million in the prior year. The improvement
resulted from higher energy prices. Gross profit in Central America improved by
$0.6 million or 2.4% to $25.8 million but decreased as a percentage of sales to
30.7% from 31.6% in the prior year. The gross profit increase was due to
increased sales. In Europe gross profit decreased by $2.9 million or 32.8% to
$5.7 million, and decreased as a percentage of sales to 10.8% from 11.6% in the
prior year. The decrease in gross profit was due to lower sales volumes.

During the third quarter of fiscal 2001, the Company recorded a pre-tax
charge of $1.4 million in continuing operations for restructuring and other
charges related to its European operations in the United Kingdom. The charges
were for activities related to work-force reductions and downsizing operations.
The charges included $0.4 million for redundancy payments for employee
termination benefits, $0.6 million for excess facility costs and $0.4 million
for equipment and other asset write-downs. The $1.4 million liability originally
recorded in accrued expenses has been reduced to $0.6 million as of July 1,
2001.

Operating income decreased $7.7 million or 23.0% to $26.2 million from
$33.9 million in the same period in the prior year. As a percentage of sales,
operating income decreased to 6.8% from 8.4% in the prior period. The decrease
in operating income was principally due to reduced operating profit in the
domestic rice business and Europe after the charges for restructuring and other
items. Operating income in the domestic rice business decreased by $6.3 million
or 19.4% to $26.1 million. The decrease in operating profit resulted primarily
from the $5.9 million reduction in gross profit as discussed above and higher
administrative expenses of $0.3 million. In Central America, operating income
increased $0.7 million or 7.3% to $10.3 million. Lower advertising, selling and
warehousing expenses of $0.3 million offset by higher administrative expenses of
$0.2 million added to the $0.6 million improvement in gross profit. Operating
income in Europe after the restructuring and other charges of $1.4 million
declined $2.9 million from the prior year and Europe reported a loss of $0.9
million in operating profit. The lower gross profit of $2.9 million as discussed
above was partially offset by a $0.9 million reduction in advertising, selling
and warehousing expenses and a reduction of $0.5 million in administrative
expenses.

Other income of $1.8 million decreased by $0.5 million from the prior year.
In fiscal 2001 the Company recorded net interest expense of $0.1 million as
compared to net interest income of $0.3 million in the prior year. The increase
in interest expense was primarily related to higher domestic borrowings due to
reduced cash flow associated with the lower level of operating profit. Equity in
the earnings of unconsolidated affiliates of $2.2 million was $0.5 million
higher than the same period in the prior year due to record volumes at the
Company's rice flour joint venture operation and earnings from its affiliate,
Euryza GmbH, in Germany. Gain from the sale of marketable securities of $1.4
million was even with the previous year. Other miscellaneous expenses increased
by $0.6 million to $1.7 million.

Income tax expense of $8.4 million reflected a decrease of $2.5 million
from the same period in the prior year due to the reduction in income before
tax. The effective rate for both periods was 29.9%. The effective tax rate is
less than the U.S. statutory rate primarily as a result of foreign earnings
which are subject to tax rates that are lower than the U.S. statutory rate and
the utilization of energy tax credits related to the Company's co-generation
joint venture.

Net income for fiscal 2001 decreased $5.9 million or 23.3% to $19.2 million
from $25.1 million in the prior fiscal year. Diluted earnings per share were
$1.36, down from $1.73 in the prior period.

LIQUIDITY AND CAPITAL RESOURCES

The financial condition of the Company remained strong during fiscal 2002.
The Company requires liquidity and capital primarily to provide the working
capital and plant and equipment to support its operations and growth. The
Company's primary sources of liquidity are cash provided by operating activities
and external borrowing. A strong working capital position and continued
profitable operations are the key factors that allow the Company to satisfy most
of its capital requirements internally.

The Company's total of cash, cash equivalents and marketable securities at
June 30, 2002 exceeded total debt by $19.2 million. The ratio of debt to total
capitalization (total debt plus stockholders' equity) decreased to 1.5% at the
end of fiscal 2002 from 4.3% the previous year. The current ratio increased to
2.5 in fiscal 2002 from 2.0 at the end of the prior year.

Consistent with historical results, operations provided a strong, positive
cash flow in fiscal 2002, which resulted in net cash provided by operations of
$27.7 million. This was an increase of $5.0 million from the preceding year. Net
income increased by $6.0 million or 31.2% to $25.2 million and non-cash
depreciation and

10

amortization charges increased by $0.6 million. Equity in the earnings of
unconsolidated affiliates increased by $0.6 million. Based on the Consolidated
Statements of Cash Flows which eliminate the effect of fluctuations in foreign
currency translation rates, working capital requirements increased $3.5 million
compared to the prior year when working capital requirements increased by $2.9
million. In fiscal 2002, excluding the effect of exchange rate changes,
inventory increased by $3.2 million whereas in the prior year inventory
decreased by $3.4 million. Accounts receivable in the current year decreased
$4.1 million while in the prior year accounts receivable decreased $0.1 million.
Accounts payable and accrued liabilities decreased by $3.0 million in the
current year compared to a decrease of $6.0 million in the previous year. For
the three year period ended June 30, 2002, net cash provided by operations has
exceeded capital expenditures and dividend requirements by $20.4 million.

Cash used in investing activities totaled $9.9 million. Purchases of
property, plant and equipment totaled $9.8 million, which was $2.2 million less
than last year. Cash outflows related to amounts due from affiliates was $0.2
million more than the prior year. Proceeds from the sale of marketable
securities were $1.8 million less than in the prior year.

Cash used in financing activities totaled $10.7 million for the current
year, which was $0.2 million less than the prior year. In the prior year the
Company repurchased 114.2 thousand shares at a cost of $2.0 million. In the
current period, the Company applied $3.7 million to reduce debt while in the
prior year net borrowings declined by $1.0 million. Dividend payments during the
current year were $9.1 million, up $0.6 million from $8.5 million paid last
year. Dividends paid per share of common stock increased 8.3% to $0.65 in fiscal
2002.

During the current fiscal year, the Company became a co-guarantor of a term
loan made to its unconsolidated affiliate, Herto N.V., a Belgian company engaged
in the manufacture and sale of rice cakes, by a foreign bank. The terms of the
loan agreement provide for a maximum credit available to Herto N.V. of E7.5
million (or $7.5 million) reducing over the term with a final maturity in 2008.
The Company has provided the bank with an unconditional guarantee for an amount
not to exceed 50% of the maximum credit facility of E7.5 million. The Company
has an indemnity agreement from one of the other three shareholders of Herto
N.V. which provides that the Company would be reimbursed for 33 1/3% of any
payment it was required to make under the terms of the guarantee.

Also, the Company and Kennedy Rice Dryers, Inc., a corporation of which Mr.
Elton Kennedy, a director of the Company, is the principal stockholder and a
director and officer, each owns a 50% interest in South LaFourche Farm
Partnership. The Company and Mr. Kennedy are each contingently liable on a $1.9
million promissory note payable by the Partnership.

The board of directors of the Company has authorized the open-market
repurchase, from time to time, of up to 3.0 million shares of the Company's
common stock. The repurchased stock will be used for general corporate purposes
including issuance of stock under employee stock option plans. During fiscal
2002 the Company did not repurchase any shares. Through the end of fiscal 2002,
the Company has repurchased a total of 2.0 million shares and 310 thousand
shares have been reissued upon exercise of employee stock options.

The Company has a $20.0 million domestic, short-term, unsecured revolving
credit facility with one bank. Under the terms of this facility, the Company has
the option of borrowing at the bank's prime rate or at the Libor rate plus
0.625%. At June 30, 2002, the Company had no outstanding loans and $2.0 million
in letters of credit outstanding under this credit facility. This facility will
expire in fiscal 2003 and the Company expects to renew the facility for another
one-year period. The agreement contains limited financial covenants and the
Company is currently in compliance with all of these covenants.

The Company's international operations are financed internally or through
borrowings in local currency without the benefit of parent Company guarantees.
The Company's foreign subsidiaries have a total of $10.5 million in short-term
credit lines from local sources and at June 30, 2002 no amounts are borrowed.

The Company holds a portfolio of marketable securities with a market value
of $0.1 million at June 30, 2002 which is available to provide additional
liquidity.

The Company believes that the combination of its working capital, unused
and available short-term credit lines and cash flow from operations will provide
it with sufficient capital resources and liquidity to meet its foreseeable
needs.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company utilizes derivative financial instruments as hedges to manage a
portion of its exposure to fluctuations in 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
forward currency exchange
11

contracts to hedge specific purchase commitments. The contracts have varying
maturities with none exceeding twenty-four months and are settled at maturity,
based on prices agreed to at the inception of the contracts. At June 30, 2002,
the Company had established bank lines available to purchase forward currency
exchange contracts in the amount of $46.5 million of which $6.5 million was
outstanding. Net losses deferred in outstanding instruments at June 30, 2002
were $0.2 million. 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 economic exposures for which speculative accounting
treatment of the hedging instrument would be required.

The Company from time to time utilizes rough rice futures contracts to
hedge specific purchase commitments. The contracts have varying maturities with
none exceeding twelve months and are settled at maturity, based on prices agreed
to at the inception of the contracts. At June 30, 2002, the Company had no
outstanding futures contracts.

FOREIGN EXCHANGE RISK

A material amount of the Company's total sales and earnings are exposed to
changes in foreign exchange rates. The Company seeks to manage this risk in part
through operational means, including managing local currency revenues in
relation to local currency costs and local currency assets in relation to local
currency liabilities. The Company does not engage in any type of forward foreign
currency speculation to hedge its investment in foreign subsidiaries and
affiliates.

Forward foreign currency contracts are utilized by our European operations
to cover specific inventory purchases that are denominated in a foreign
currency. See discussion in "Quantitative and Qualitative Disclosure About
Market Risk" above.

INTEREST RATE RISK

The Company's U.S. dollar interest-bearing investments and loans are
subject to interest rate risk. The Company invests and borrows primarily on a
short-term or variable-rate basis and does not employ any techniques to hedge
this risk.

The Company's foreign subsidiaries and affiliates invest and borrow in
their functional currency on both a short-term and long-term basis and are
subject to interest rate risk on these assets and liabilities. The Company does
not employ any techniques to hedge this risk.

LEGAL MATTERS

Various actions and claims, which arose in the ordinary course of business,
are pending against the Company. In the opinion of management, the ultimate
liability, if any, which may result from these actions and claims will not
materially affect the financial position or future results of operations of the
Company.

RISK RELATING TO ARTHUR ANDERSEN LLP'S LACK OF CONSENT

REPRESENTATIVES OF ARTHUR ANDERSEN LLP ARE NOT AVAILABLE TO CONSENT TO THE
INCLUSION OF THEIR REPORT ON THE FINANCIAL STATEMENTS OF RIVIANA FOODS INC. IN
THIS ANNUAL REPORT, AND THE READER WILL NOT BE ABLE TO RECOVER AGAINST ARTHUR
ANDERSEN LLP UNDER SECTION 11 OF THE SECURITIES ACT OF 1933, AS AMENDED.

Arthur Andersen LLP were previously the independent accountants for Riviana
Foods Inc. until May 24, 2002. Representatives of Arthur Andersen LLP are not
available to provide the consent required for the inclusion of their report on
the financial statements of Riviana Foods Inc. incorporated in this annual
report, and we have dispensed with the requirement to file their consent in
reliance upon rule 437a of the Securities Act of 1933, as amended. Because
Arthur Andersen LLP have not consented to the inclusion of their report in this
annual report, the reader will not be able to recover against Arthur Andersen
LLP under Section 11 of the Securities Act of 1933, as amended for any untrue
statements of a material fact contained in the financial statements audited by
Arthur Andersen LLP that are incorporated by reference or any omissions to state
a material fact required to be stated therein.

12

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS

13

INDEPENDENT AUDITORS' REPORT

The Shareholders and the Board of Directors
Riviana Foods Inc.:

We have audited the accompanying consolidated balance sheet of Riviana
Foods Inc. and subsidiaries as of June 30, 2002, and the related consolidated
statements of income, capital accounts and retained earnings, comprehensive
income and accumulated other comprehensive loss and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Riviana
Foods Inc. and subsidiaries as of June 30, 2002, and the results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.

KPMG LLP

Houston, Texas
August 12, 2002

14

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Riviana Foods Inc.:

We have audited the accompanying consolidated balance sheets of Riviana
Foods Inc. (a Delaware corporation) and subsidiaries as of July 1, 2001 and July
2, 2000, and the related consolidated statements of income, capital accounts and
retained earnings, comprehensive income and accumulated other comprehensive
income, and cash flows for each of the three fiscal years in the period ended
July 1, 2001. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Riviana
Foods Inc. and subsidiaries as of July 1, 2001 and July 2, 2000, and the results
of their operations and their cash flows for each of the three fiscal years in
the period ended July 1, 2001, in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Houston, Texas
August 13, 2001

THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS SIGNED BY ARTHUR ANDERSEN LLP
AND DATED AUGUST 13, 2001 IS REPRINTED IN ITS ENTIRETY EXACTLY AS IT WAS PRINTED
IN THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED JULY 1, 2001. THIS REPORT
HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP. THE REPORT REFERS TO CERTAIN
FINANCIAL STATEMENTS AS OF AND FOR THE FISCAL YEARS ENDED JULY 2, 2000 AND JUNE
27, 1999. THE CONSOLIDATED BALANCE SHEET OF RIVIANA FOODS INC. AND SUBSIDIARIES
AS OF JULY 2, 2000, AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME, CAPITAL
ACCOUNTS AND RETAINED EARNINGS, COMPREHENSIVE INCOME AND ACCUMULATED OTHER
COMPREHENSIVE INCOME AND CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 27, 1999, ARE
NOT INCLUDED HEREIN.

ARTHUR ANDERSEN LLP WERE PREVIOUSLY THE INDEPENDENT ACCOUNTANTS FOR RIVIANA
FOODS INC. UNTIL MAY 24, 2002. REPRESENTATIVES OF ARTHUR ANDERSEN LLP ARE NOT
AVAILABLE TO PROVIDE THE CONSENT REQUIRED FOR THE INCLUSION OF THEIR REPORT ON
THE FINANCIAL STATEMENTS OF RIVIANA FOODS INC. INCORPORATED IN THIS ANNUAL
REPORT. BECAUSE ARTHUR ANDERSEN LLP HAVE NOT CONSENTED TO THE INCLUSION OF THEIR
REPORT IN THIS ANNUAL REPORT, THE READER WILL NOT BE ABLE TO RECOVER AGAINST
ARTHUR ANDERSEN LLP UNDER SECTION 11 OF THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY UNTRUE STATEMENTS OF A MATERIAL FACT CONTAINED IN THE FINANCIAL
STATEMENTS AUDITED BY ARTHUR ANDERSEN LLP OR ANY OMISSIONS TO STATE A MATERIAL
FACT REQUIRED TO BE STATED THEREIN.

15

RIVIANA FOODS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The accompanying notes are an integral part of these consolidated financial
statements.
16

RIVIANA FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The accompanying notes are an integral part of these consolidated financial
statements.
17

RIVIANA FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CAPITAL ACCOUNTS AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
AND ACCUMULATED OTHER COMPREHENSIVE LOSS
(IN THOUSANDS)

The accompanying notes are an integral part of these consolidated financial
statements.
18

RIVIANA FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

The accompanying notes are an integral part of these consolidated financial
statements.
19

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002, JULY 1, 2001 AND JULY 2, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(1) ORGANIZATION AND NATURE OF BUSINESS

Riviana Foods Inc. (Riviana) and subsidiaries (collectively, Company) are
primarily engaged in the processing, marketing and distributing of rice and
other food products. The Company has rice operations in the United States and in
Belgium and Germany through unconsolidated affiliates, Boost Nutrition C.V.
(Boost) and Herto N.V. (Herto), food operations in Central America through
Alimentos Kern de Guatemala, S.A. (Kern) and Pozuelo, S.A. (Pozuelo) in Costa
Rica, and a food distribution operation in the United Kingdom, Stevens &
Brotherton Ltd. (S&B).

In the United States, the Company processes, markets and distributes
branded and private-label rice products to the retail grocery trade and food
service industry, rice and rice by-products to industrial customers and branded
products to Puerto Rico and international markets. Riviana's primary domestic
brand names are Success(R), Mahatma(R), Carolina(R), River(R), WaterMaid(R),
S&W(R), Gourmet House(R), Sello Rojo(R) and El Mago(R).

In Central America, Kern produces and markets a wide range of processed
fruits and vegetables under the Kern's(R), Ducal(R), Koolfrut(R) and Fun-C(R)
brands. Pozuelo produces and markets cookies and crackers under the Riviana
Pozuelo(R) brand. Both Kern's and Pozuelo's products are sold primarily in
Central America through similar distribution channels with some products under
the Ducal(R) and Riviana Pozuelo(R) brands exported to certain United States
markets.

In Europe, S&B distributes rice under the Phoenix(R) brand and private
labels as well as dried fruits, processed meats and other food products to
retail, wholesale, food service and industrial customers. Through unconsolidated
affiliates Boost and Herto, the Company processes and sells packaged rice
products under the Bosto(R) brand within Belgium, the Oryza(R) brand within
Germany, private-label packaged rice products to major retailers in the European
Union and both bulk and branded rice products to Eastern Europe and other export
markets.

In addition to the U.S. operations above, the Company is a partner with
Riceland Foods, Inc. (Riceland) in joint ventures in Arkansas in rice flour
processing and co-generation of power from the gasification of rice hulls. The
rice flour processing operation is a 50/50 joint venture with Riceland in which
each partner shares equally in profits and in any future capital contributions.
The venture has no debt. The Company accounts for the joint venture using the
equity method of accounting and its results are included in Note 2, "Summary of
significant accounting policies, Investments in unconsolidated affiliates."

The Company is a partner with Riceland in two joint ventures to co-generate
power from the gasification of rice hulls. Riceland is the ultimate purchaser of
the energy output from these ventures. The Company's ownership in the two
ventures is 51% and 49% with the remaining equity of 49% and 51% owned by
Riceland. The results of both are included in the consolidated results of the
Company. Notwithstanding the 49% ownership, the Company consolidates the entire
operation at this venture since it controls the operation, and is the 100% owner
of the gasifier assets that are utilized to provide the gasification of rice
hulls that in turn is the heat source for the production of energy. The
consolidated financial statements fully reflect all obligations of both of these
joint ventures.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL REPORTING PERIODS

The Company operates on a 52/53-week fiscal year ending on the Sunday
closest to June 30. This period is utilized as it is a natural business year
closely coinciding with the rice crop year in the southern United States, rice
being the largest component of the Company's sales. The fiscal years ended June
30, 2002 and July 1, 2001 were 52-week fiscal years. The fiscal year ended July
2, 2000 was a 53-week fiscal year.

20

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATION

The consolidated financial statements include the accounts of Riviana and
its majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company has equity investments in certain food processing, marketing
and distribution companies, which are accounted for utilizing the equity method
of accounting. Ownership interests range from 33 to 50 percent in these
unconsolidated affiliates.

The following represents summarized financial information with respect to
the assets, liabilities and results of operations of the unconsolidated
affiliates.

CHANGES IN ACCOUNTING PRINCIPLES

Effective January 2, 2000, the Company adopted the American Institute of
Certified Public Accountants' Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use", and SOP
98-5, "Reporting on the Costs of Start-Up Activities". These statements had no
material impact on the Company's results of operations or financial position.

Effective July 3, 2000, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities", SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133"
and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities". The effect of adopting these statements had no material
impact on the Company's results of operations or financial position.

Effective July 1, 2001, the Company adopted the Financial Accounting
Standards Board's Emerging Issues Task Force (EITF) Issue No. 00-14, "Accounting
for Certain Sales Incentives", and EITF Issue No. 00-25, "Vendor Income
Statement Characterization of Consideration Paid to a Reseller of the Vendor's
Products". These issues address the recognition, measurement and income
statement classification for various types of sales incentives including
discounts, coupons, rebates, free products and payments to retailers to obtain
shelf space for products of the Company. The effect of these issues
significantly impacted revenue and expense classifications but did not change
reported net income. Accordingly, all periods presented have been restated to
reflect this adoption.

21

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following summarizes the impact of this change in method of accounting
for sales incentives on net sales, cost of sales, gross profit and advertising,
selling and warehousing. This change did not change reported net income or
earnings per share.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, SFAS No. 141, "Business Combinations", and SFAS No. 142,
"Goodwill and Other Intangible Assets", were issued. In addition to requiring
the use of the purchase method for all business combinations, SFAS No. 141
requires intangible assets that meet certain criteria to be recognized as assets
apart from goodwill. SFAS No. 142 addresses accounting and reporting standards
for acquired goodwill and other intangible assets, and generally requires that
goodwill and indefinite life intangible assets no longer be amortized but be
tested for impairment annually. Finite life intangible assets will continue to
be amortized over their useful lives. These statements are effective for fiscal
years beginning after December 15, 2001. The Company will adopt these statements
in the first quarter of 2003 and does not expect adoption to have a material
impact on the Company's results of operations or financial position.

SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued June
2001. SFAS No. 143 addresses accounting and reporting for legal obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This statement is effective for fiscal years beginning
after June 15, 2002. The Company will adopt this statement in the first quarter
of 2003 and does not expect adoption to have a material impact on the Company's
results of operations or financial position.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" was issued in August 2001 and SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" was issued in June 2002. These
pronouncements establish the methods of accounting for the impairment or
disposal of long-lived assets by sale or otherwise, broadening the presentation
of discontinued operations to include more disposal transactions and
restructurings planned and controlled by management that materially change the
scope of the business or the manner in which that business is conducted. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001 and will
be adopted by the Company in the first quarter of 2003. SFAS No. 146 is
effective for business exit or disposal activities initiated after December 31,
2002 and will be adopted by the Company in the third quarter of 2003. The
Company does not expect adoption of either statement to have a material impact
on the Company's results of operations or financial position.

ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent gains and losses at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated balance sheets and the consolidated
statements of cash flows, the Company considers all investments with original
maturities of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

In the normal course of business, the Company extends credit to its
customers. The Company regularly reviews the accounts and makes adequate
provision for any potentially uncollectible balances. Management believes that
the Company has no significant concentrations of credit risk.

22

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined
on the first-in, first-out (FIFO) method. Inventories were composed of the
following:

PROPERTY, PLANT AND EQUIPMENT

Land, buildings, machinery and equipment are stated at cost. Depreciation
is provided for financial reporting purposes on the straight-line basis over the
following estimated useful lives:

Buildings................................................... 30 to 40 years
Machinery and equipment..................................... 3 to 29 years

Maintenance, repairs and minor replacements are charged against income as
incurred; major replacements and betterments are capitalized. The cost of assets
sold or retired and the related accumulated depreciation is removed from the
accounts at the time of disposition, and any resulting gain or loss is reflected
as other income or expense for the period.

OTHER NONCURRENT LIABILITIES

Other noncurrent liabilities are composed primarily of certain
postretirement benefits and staff termination indemnities.

REVENUE RECOGNITION

Sales are recognized at the time risk of ownership passes to the customer.
Generally this occurs when products are shipped to customers. On sales where
risk of ownership transfers upon delivery to customers, sales are recorded when
delivery occurs.

SALES INCENTIVES

Certain sales incentives such as coupons, rebates and free products which
are offered to either the retail trade or the consumer are recorded as a
reduction in sales revenue in accordance with recent accounting pronouncements
at the later of either the date the related revenue is recorded or the date at
which the sales incentive is offered.

CASH DISCOUNTS

An estimate of cash discounts offered to customers for early payment of
sales invoices is recorded in the same period the related sales are recorded.

ADVERTISING

The costs of advertising, promotion and marketing programs are charged to
operations in the period incurred.

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:

23

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In the calculation of the effect of dilutive stock options, 418, 463 and 475
anti-dilutive stock option shares have been excluded for 2002, 2001 and 2000.

TRANSLATION OF FOREIGN CURRENCIES

The assets and liabilities of consolidated foreign subsidiaries are
translated into United States dollars at exchange rates in effect at the date of
the financial statements. Revenues and expenses are translated at the average
rates during the reporting periods. Resulting translation gains and losses are
accumulated as a separate component of accumulated other comprehensive loss in
stockholders' equity. Because the Company follows the policy of not providing
taxes on unremitted foreign earnings as discussed in Note 7, "Income taxes",
such translation gains and losses are not tax effected.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments other than derivative financial
instruments consist primarily of cash, cash equivalents, trade receivables,
trade payables and debt instruments. The Company periodically reviews these
instruments for impairment of value and records a provision for any impairment
identified. The book values of these instruments are considered to be
representative of their respective fair values.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes derivative financial instruments as hedges to manage a
portion of its exposure to fluctuations in 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
forward currency exchange contracts to hedge specific purchase commitments. The
contracts have varying maturities with none exceeding 24 months and are settled
at maturity, based on rates agreed to at the inception of the contracts. At June
30, 2002, the Company had established bank lines available to purchase forward
exchange contracts in the amount of $46,516, of which $6,475 was outstanding.
Gains and losses deferred in outstanding instruments at June 30, 2002 were $44
and $204.

The Company from time to time utilizes rough rice futures contracts to
hedge specific purchase commitments. The contracts have varying maturities with
none exceeding twelve months and are settled at maturity, based on prices agreed
to at the inception of the contracts. At June 30, 2002, the Company had no
outstanding rough rice futures contracts.

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 economic exposures for which speculative accounting treatment of the
hedging instrument would be required.

RECLASSIFICATION

Certain prior-year balances have been reclassified to conform to the
current-year presentation.

(3) RESTRUCTURING AND OTHER CHARGES

During the third quarter of 2001, the Company recorded restructuring and
other charges at Stevens & Brotherton, the Company's United Kingdom subsidiary.
The charges consisted of redundancy payments ($388) for employee termination
benefits for 16 employees, excess facility costs ($553) and equipment and other
asset write-downs ($494). The $1,435 liability originally recorded in accrued
liabilities has been reduced to $390 at June 30, 2002. The remaining liability
primarily relates to long-term office and equipment leases.

(4) MARKETABLE SECURITIES

Investments in debt and equity securities are recorded as required by SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The
Company's marketable securities consist of high-grade equity securities that are
all considered available for sale. Available-for-sale securities, securities
that the Company purchased without any specific intent to sell in the near term,
are carried at fair value with

24

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

unrealized gains and losses included directly in stockholders' equity, net of
applicable deferred income taxes. The basis upon which costs were determined in
computing realized gains and losses was specific identification.

(5) ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

(6) BORROWING ARRANGEMENTS

Interest rates related to short-term debt vary according to the country in
which the funds are borrowed, but generally approximate the market rate of
interest. At June 30, 2002, no short-term debt was outstanding. The weighted
average interest rate at July 1, 2001 was 5.7%. In the United States, the
Company has an unused line of credit of $17,971, net of $2,029 in letters of
credit. The Company is subject to limited financial covenants and is in
compliance with all of these covenants. Internationally, the Company has unused
lines of credit totaling about $10,491, with no amounts borrowed at June 30,
2002.

Long-term debt consisted of the following:

25

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total long-term debt at June 30, 2002 matures as follows:

2003........................................................ $ 859
2004........................................................ 256
2005........................................................ 256
2006........................................................ 256
2007........................................................ 256
Thereafter.................................................. 513
------
Total....................................................... $2,396
======

Total interest paid was $615, $1,309, and $1,028, for 2002, 2001, and 2000.

(7) INCOME TAXES

The provision for income taxes consisted of the following:

The difference between the statutory United States federal income tax rate
and the Company's global effective tax rate as reflected in the consolidated
statements of income was as follows:

26

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of deferred taxes were as follows:

Income before income taxes and minority interests of foreign subsidiaries
was $13,334, $10,603 and $12,525 for 2002, 2001 and 2000.

The Company does not provide deferred income taxes on unremitted earnings
of foreign subsidiaries, since such earnings are considered to be permanently
invested. Cumulative unremitted earnings of foreign subsidiaries were $58,492,
$48,251 and $45,460 as of June 30, 2002, July 1, 2001 and July 2, 2000.

27

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Riviana has defined benefit plans covering substantially all United States
and certain international employees. The benefits are based on years of service
and the employee's compensation. The Company's funding policy is to contribute
annually at least the minimum amounts actuarially necessary to provide for
retirement benefits.

The following sets forth summarized information regarding the Company's
defined benefit retirement plans:

28

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Components of net periodic pension costs:

Riviana provides death and additional retirement benefits to certain key
employees. These plans are funded through Company-owned life insurance. The net
cash surrender value of the insurance policies is recorded as a noncurrent asset
in the accompanying consolidated balance sheets. The actuarially computed
present value of the retirement benefits is recorded as an other noncurrent
liability in the accompanying consolidated balance sheets. As of June 30, 2002
and July 1, 2001, the Company had recorded net cash surrender value of $3,127
and $2,813 and present value of retirement benefit obligations of $2,633 and
$2,346. The Company recorded expense of $169, $192 and $109 related to these
plans for 2002, 2001 and 2000.

Riviana has a defined contribution plan which covers substantially all
United States employees. The Company contributes an amount equal to a percentage
of employee contributions. Total expense related to this plan was $643, $717 and
$624 during 2002, 2001 and 2000.

(9) RELATED PARTY TRANSACTIONS

The Company paid $1,072, $2,083 and $800 in 2002, 2001 and 2000 to W. Elton
Kennedy, a director of the Company, or entities controlled by him for rice
purchases at market prices. Also, the Company and Kennedy Rice Dryers, Inc., a
corporation of which Mr. Kennedy is the principal stockholder and a director and
officer, each owns a 50% interest in South LaFourche Farm Partnership. The
Company and Mr. Kennedy are each contingently liable on a $1,937 promissory note
payable by the Partnership. The Company has also executed transactions with
other companies owned by certain directors which were not material to the
Company's results of operations or financial position. Management of the Company
believes that the foregoing transactions were on terms no less favorable to the
Company than could normally be obtained from unaffiliated parties.

(10) COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

At June 30, 2002, future minimum lease payments and sublease rentals under
long-term operating lease obligations amounted to:

Rent expense net of rental income was $3,733, $3,560 and $3,503 for 2002,
2001 and 2000.

29

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LITIGATION

Various actions and claims, which arose in the ordinary course of business,
are pending against the Company. In the opinion of management, the ultimate
liability, if any, which may result from these actions and claims will not
materially affect the financial position or future results of operations of the
Company.

BUY-SELL AGREEMENT

As of June 30, 2002, the Company had a $7,806 investment in Boost which
represents a 49% ownership interest. The Boost stockholder agreement provides
that either stockholder has the right to purchase the other's interest. The
initial bid price offered by one stockholder to the other, if not accepted,
would require the rejecting stockholder to counteroffer the initial bid price
plus five percent. Each rejection thereafter would also require a five percent
premium over the prior offer until one stockholder accepts.

LOAN GUARANTEE

As of June 30, 2002, the Company co-guaranteed a term loan made to its
unconsolidated affiliate, Herto N.V., a Belgian company engaged in the
manufacture and sale of rice cakes, by a foreign bank. The terms of the loan
agreement provide for a maximum credit available to Herto N.V. of E7.5 million
(or $7.5 million) reducing over the term with a final maturity in 2008. The
Company has provided the bank with an unconditional guarantee for an amount not
to exceed 50% of the maximum credit facility of E7.5 million. The Company has an
indemnity agreement from one of the other three shareholders of Herto N.V. that
provides the Company would be reimbursed for 33 1/3% of any payment it was
required to make under the terms of the guarantee.

(11) CAPITAL STOCK

COMMON STOCK

At June 30, 2002, the Company had outstanding 1,664 shares of common stock
sold before the Company's 1995 initial public offering to directors, officers
and key employees of the Company or Boost at a discount of $1,727. The amount of
discount was determined by the Board of Directors and represents a percentage
reduction of about 50% from the formula based estimate of fair value at the time
of sale. A majority of the shares discounted were sold as an inducement for
predecessor management to continue employment and to participate in the initial
capitalization of the Company in 1986. The discount is recorded in the
accompanying consolidated financial statements as a reduction of stockholders'
equity. Under a contractual agreement with the stockholders, the discount must
be repaid when the shares are sold.

The Company's common stock trades on The Nasdaq Stock Market (trading
symbol "RVFD").

PREFERRED STOCK

At June 30, 2002, 5,000 shares of $1.00 per share par value preferred stock
are authorized. No shares of preferred stock have been issued.

(12) STOCK OPTION PLANS

On December 28, 1994, and October 22, 1997, the Company's stockholders
adopted incentive stock option plans (1994 Plan and 1997 Plan). On October 11,
1995, the Company's stockholders adopted a non-employee directors stock option
plan (1995 NEDSOP) which was retroactively effective May 17, 1995. Collectively,
these are the "Plans".

Under the 1994 Plan and 1997 Plan, a total of 795 and 1,000 shares of
common stock have been reserved for issuance pursuant to options that may be
granted by a committee of the Board of Directors to eligible employees of the
Company or Boost, including officers. Options granted allow the holders of the
options to purchase shares of common stock at the fair market value on the date
of the grant for a period of ten years. No options will become exercisable
sooner than one year after the date of the grant.

The 1995 NEDSOP, as amended, permits the issuance of options to purchase up
to 250 shares of common stock to directors who are not employees of the Company
and who beneficially own less than 2% of the outstanding common stock of the
Company. Such directors receive options to purchase 2 shares annually on May 17.
Options granted allow holders of the options to purchase shares of common stock
at the fair market value on the date of the grant for a period of ten years. No
options will become exercisable sooner than one year after the date of the
grant.

30

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Plans' activity is summarized below:

Options outstanding at June 30, 2002 have a weighted average remaining
contractual life of 6.5 years.

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for options granted under
the Plans. Accordingly, no expense has been recognized for stock option grants.
Had expense been determined based on the Black-Scholes option pricing model at
the grant date for awards in 2002, 2001 and 2000 consistent with the provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation", the Company's net
income and earnings per share would have been as follows:

The SFAS No. 123 method of accounting has not been applied to options granted
prior to July 3, 1995 and the resulting pro forma compensation expense may not
be indicative of pro forma expense in future years.

The Black-Scholes option pricing model was used to value the grants issued
in 2002, 2001 and 2000. The weighted average value and the assumptions used were
as follows:

(13) SEGMENT INFORMATION

INDUSTRY SEGMENTS

The Company operates in one dominant industry segment which involves the
processing, marketing and distribution of food products.

31

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GEOGRAPHIC SEGMENTS

The Company classifies its business into three reportable segments:
Domestic (includes the United States and Puerto Rico), Europe (includes the
United Kingdom and Belgium) and Central America (includes Guatemala and Costa
Rica). The Company's operations have been aggregated into these reportable
segments based on similar economic characteristics and operations which are
similar in nature as to products and production processes, types of customers
and distribution methods.

The Company's export sales, other than those intercompany sales reported
below as sales between geographic areas, are not significant. Sales between
geographic areas consist of sales of raw materials and finished food products
which are sold at adjusted market prices. Corporate assets consist primarily of
cash, cash equivalents, marketable securities, investments in unconsolidated
affiliates and other assets.

The Company's geographic area data are as follows:

32

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

33

RIVIANA FOODS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) UNAUDITED QUARTERLY FINANCIAL DATA

Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not equal
the annual earnings per share.

Net income for the quarter ended March 2001 was impacted by the recording
of restructuring and other charges at Stevens & Brotherton, the Company's United
Kingdom subsidiary. See Note 3, "Restructuring and other charges."

34

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

See Form 8-K dated May 24, 2002 and filed May 31, 2002.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information relating to the Directors of the Company is set forth under the
captions "General" and "The Company recommends voting "FOR" the nominees" in the
Proxy Statement and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information relating to executive compensation is set forth under the
captions "Compensation Tables," "Retirement Plan" and "Equity Compensation Plan
Information" in the Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information relating to the ownership of equity securities of the Company
by certain beneficial owners and management is set forth under the caption
"Common Stock Outstanding and Principal Holders Thereof" in the Proxy Statement
and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information relating to certain relationships with a beneficial stockholder
and certain related transactions is set forth under the captions "Compensation
and Stock Option Committee Interlock and Insider Participation" and "Certain
Transactions" in the Proxy Statement and is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) Consolidated Financial Statements -- See Index to Consolidated
Financial Statements in Part II, Item 8, Financial Statements and Supplementary
Data.

(2) Consolidated Financial Statement Schedules -- None.

(3) Exhibits -- required to be filed by Item 601 of Regulation S-K are
listed below and are filed as a part hereof. Documents not designated as being
incorporated herein by reference are filed herewith. The paragraph numbers
correspond to the exhibit numbers designated in Item 601 of Regulation S-K.

3.1 The Company's Restated Certificate of Incorporation dated
December 28, 1994, is incorporated herein by reference to
Exhibit 3.01 to the Company's Registration Statement on Form
S-1, NO. 33-87838 under the Securities Act of 1933, as
amended (the "Registration Statement")
3.2 The Company's By-laws, as amended effective February 21,
2002
10.1 Amendment to Consulting Agreement dated January 1, 1996
between Riviana Foods Inc. and Frank A. Godchaux III dated
February 1, 2001
*10.2 Amendment to Consulting Agreement dated July 1, 1994 between
Riviana Foods Inc. and Charles R. Godchaux dated February 1,
2001
*10.3 Benefit Restoration Plan is incorporated herein by reference
to Exhibit 10.03 to the Registration Statement
*10.4 Management Security Agreement between the Registrant and
Joseph A. Hafner, Jr. dated July 17, 1989, is incorporated
herein by reference to Exhibit 10.04 to the Registration
Statement
10.5 Shareholders Agreement between Sun-Land Products of
California and Stevens & Brotherton Ltd. dated March 24,
1994, is incorporated herein by reference to Exhibit 10.05
to the Registration Statement

35

10.6 Shareholder Agreement among N&C Boost N.V., Arrocerias
Herba, S.A. and Ricegrowers' Co-Operative Limited dated
January 29, 1992, is incorporated herein by reference to
Exhibit 10.06 to the Registration Statement
10.7 Stock Purchase Agreement by and among N&C Boost N.V.,
Riceherba International Inc. and Ricegrowers' Co-Operative
Limited dated as of January 29, 1992, is incorporated herein
by reference to Exhibit 10.07 to the Registration Statement
10.8 Shareholder Agreement among N&C Boost N.V., Arrocerias
Herba, S.A. and Herto B.V.B.A. dated January 1, 1991, as
amended, is incorporated herein by reference to Exhibit
10.08 to the Registration Statement
10.9 Agreement of Partnership between Riviana Foods Inc. and
Kennedy Rice Dryers, Inc. dated February 12, 1990, is
incorporated herein by reference to Exhibit 10.09 to the
Registration Statement
10.10 Partnership Agreement between Riviana Foods Inc. and
Riceland Foods Inc. dated March 22, 1989, is incorporated
herein by reference to Exhibit 10.10 to the Registration
Statement
*10.11 1994 Stock Option Plan is incorporated herein by reference
to Exhibit 10.11 to the Registration Statement
*10.12 Amendment and Restatement of Executive Officer's Stock
Purchase Agreement between Riviana Foods Inc. and W. David
Hanks dated December 15, 1994, is incorporated herein by
reference to Exhibit 10.12 to the Registration Statement
*10.13 Amendment and Restatement of Executive Officer's Stock
Purchase Agreement between Riviana Foods Inc. and Jack M.
Nolingberg dated December 15, 1994, is incorporated herein
by reference to Exhibit 10.13 to the Registration Statement
*10.14 Amendment and Restatement of Executive Officer's Stock
Purchase Agreement between Riviana Foods Inc. and Robert D.
Watts dated December 15, 1994, as amended, is incorporated
herein by reference to Exhibit 10.14 to the Registration
Statement
*10.15 Director's Stock Purchase Agreement between Riviana Foods
Inc. and W. Elton Kennedy dated March 27, 1986, is
incorporated herein by reference to Exhibit 10.15 to the
Registration Statement
*10.16 Amended and Restated 1995 Non-Employee Director Stock Option
Plan dated May 17, 1996, is incorporated herein by reference
to Exhibit 10(xvi) to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1996
*10.17 Amendment of Amendment and Restatement of Executive
Officer's Stock Purchase Agreement dated December 15, 1994,
between Riviana Foods Inc. and W. David Hanks dated November
8, 1996
*10.18 Amendment of Amendment and Restatement of Executive
Officer's Stock Purchase Agreement dated December 15, 1994,
between Riviana Foods Inc. and Jack M. Nolingberg dated
November 8, 1996
*10.19 1997 Stock Option Plan dated September 1, 1997, is
incorporated herein by reference to Exhibit 10(xviv) to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 28, 1998
21. A list of the subsidiaries of the Registrant is incorporated
herein by reference to Exhibit 21.01 to the Registration
Statement
23. The following Exhibit is filed by incorporation by reference
to Item 14(a)(2) of this Report: (a) Consent of KPMG LLP
24. Powers of Attorney of the Company's directors
99.1 Certification of the Chief Executive Officer pursuant to 18
U.S.C., Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
99.2 Certification of the Chief Financial Officer pursuant to 18
U.S.C., Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002

- ---------------

* A management contract, compensatory plan or arrangement

(b) Reports on Form 8-K -- Form 8-K dated May 24, 2002 and filed on May 31,
2002, announced the engagement of KPMG LLP as the Company's independent public
accountants for its fiscal year ended June 30, 2002

36

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on September 16, 2002.

RIVIANA FOODS INC.
(REGISTRANT)

By /s/ JOSEPH A. HAFNER, JR.
------------------------------------
Joseph A. Hafner, Jr.
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on September 16, 2002.

37

CERTIFICATIONS

I, Joseph A. Hafner, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Riviana Foods
Inc.;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report; and

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report.

/s/ JOSEPH A. HAFNER, JR.
--------------------------------------
Joseph A. Hafner, Jr.
Chief Executive Officer

Date: September 16, 2002

I, E. Wayne Ray, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Riviana Foods
Inc.;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report; and

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report.

/s/ E. WAYNE RAY, JR.
--------------------------------------
E. Wayne Ray, Jr.
Chief Financial Officer

Date: September 16, 2002

38

EXHIBIT INDEX

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* A management contract, compensatory plan or arrangement