Back to GetFilings.com
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2777 ALLEN PARKWAY
HOUSTON, TX 77019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 529-3251
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
-------- ---------
The number of shares of Common Stock of the Registrant, par value $1.00
per share, outstanding at October 30, 2002, was 14,210,416.
================================================================================
RIVIANA FOODS INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 29, 2002
INDEX
Page
----
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at September 29, 2002 and June 30, 2002................. 1
Consolidated Statements of Income for the Three Months
Ended September 29, 2002 and September 30, 2001.................................. 2
Consolidated Statements of Cash Flows for the Three Months Ended
September 29, 2002 and September 30, 2001........................................ 3
Notes to Consolidated Financial Statements.......................................... 4
Item 2 -- Management's Discussion and Analysis of Financial Condition and Results
of Operations................................................................. 8
Item 3 -- Quantitative and Qualitative Disclosure about Market Risk..........................12
Item 4 -- Controls and Procedures............................................................13
Part II -- Other Information
Item 4 -- Submission of Matters to a Vote of Security Holders................................14
Item 6 -- Exhibits and Reports on Form 8-K...................................................14
Signature.............................................................................................15
Exhibit Index.........................................................................................18
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SEPTEMBER 29, 2002 JUNE 30, 2002
------------------ -------------
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS:
Cash ......................................................... $ 6,921 $ 11,569
Cash equivalents ............................................. 9,497 9,931
Marketable securities ........................................ 66 65
Accounts receivable, less allowance for doubtful
accounts of $1,339 and $1,245 ............................ 40,669 35,748
Inventories .................................................. 54,643 48,133
Prepaid expenses ............................................. 4,388 3,212
--------- ---------
Total current assets ................................. 116,184 108,658
PROPERTY, PLANT AND EQUIPMENT:
Land ......................................................... 3,634 3,576
Buildings .................................................... 33,865 33,831
Machinery and equipment ...................................... 123,210 120,790
--------- ---------
Property, plant and equipment, gross ..................... 160,709 158,197
Less accumulated depreciation ................................ (67,922) (66,051)
--------- ---------
Property, plant and equipment, net ....................... 92,787 92,146
INVESTMENTS IN UNCONSOLIDATED AFFILIATES ....................... 11,718 11,345
OTHER ASSETS ................................................... 15,821 10,565
--------- ---------
Total assets ..................................... $ 236,510 $ 222,714
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ......................... $ 845 $ 859
Accounts payable ............................................. 26,217 19,598
Accrued liabilities .......................................... 19,167 18,204
Income taxes payable ......................................... 4,873 4,582
--------- ---------
Total current liabilities ................................ 51,102 43,243
LONG-TERM DEBT, net of current maturities ...................... 1,638 1,537
DUE TO AFFILIATES .............................................. 566 507
DEFERRED INCOME TAXES .......................................... 9,635 8,095
OTHER NONCURRENT LIABILITIES ................................... 3,869 3,814
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS ............................................. 6,298 6,488
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par, 5,000 shares authorized, none issued
Common stock, $1 par, 24,000 shares authorized, 15,883 issued 15,883 15,883
Paid-in capital .............................................. 7,075 7,044
Retained earnings ............................................ 188,772 184,997
Accumulated other comprehensive loss ......................... (16,499) (16,452)
Treasury stock, at cost, 1,684 and 1,712 shares .............. (31,829) (32,442)
--------- ---------
Total stockholders' equity ........................... 163,402 159,030
--------- ---------
Total liabilities and stockholders' equity ........... $ 236,510 $ 222,714
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
1
RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
----------------------------------------
SEPTEMBER 29, 2002 SEPTEMBER 30, 2001
------------------ ------------------
NET SALES ........................................... $ 95,214 $ 93,153
COST OF SALES ....................................... 68,395 68,272
-------- --------
Gross profit .................................... 26,819 24,881
-------- --------
COSTS AND EXPENSES:
Advertising, selling and warehousing .............. 12,029 13,002
Administrative and general ........................ 6,022 5,384
-------- --------
Total costs and expenses ........................ 18,051 18,386
-------- --------
Income from operations .......................... 8,768 6,495
OTHER INCOME (EXPENSE):
Interest income ................................... 415 267
Interest expense .................................. (134) (160)
Equity in earnings of unconsolidated affiliates ... 470 464
Other (expense), net .............................. (475) (389)
-------- --------
Total other income .............................. 276 182
-------- --------
Income before income taxes and
minority interests ........................... 9,044 6,677
INCOME TAX EXPENSE .................................. 2,585 1,983
MINORITY INTERESTS IN EARNINGS OF
CONSOLIDATED SUBSIDIARIES ....................... 141 86
-------- --------
NET INCOME ...................................... $ 6,318 $ 4,608
======== ========
Earnings per share:
Basic ....................................... $ 0.45 $ 0.33
Diluted ..................................... 0.44 0.33
Weighted average common shares outstanding:
Basic ...................................... 14,184 14,044
Diluted .................................... 14,420 14,131
The accompanying notes are an integral part of these
consolidated financial statements.
2
RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
---------------------------------------
SEPTEMBER 29, 2002 SEPTEMBER 30, 2001
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 6,318 $ 4,608
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization ................................ 1,938 1,814
Deferred income taxes ........................................ 1,540 (115)
Gain on disposition of assets ................................ (6) (27)
Equity in earnings of unconsolidated affiliates .............. (470) (464)
Change in assets and liabilities:
Accounts receivable, net .............................. (4,744) (245)
Inventories ........................................... (6,324) (6,173)
Prepaid expenses ...................................... (1,143) (737)
Other assets .......................................... (5,266) 632
Accounts payable and accrued liabilities .............. 7,426 4,728
Income taxes payable .................................. 293 1,347
Other noncurrent liabilities .......................... 44 40
Minority interests .................................... (158) (231)
-------- --------
Net cash provided by (used in) operating
activities .................................... (552) 5,177
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment .......................... (2,632) (1,867)
Proceeds from disposals of property, plant and equipment ............ 9 38
Increase (decrease) in due to affiliates ............................ 47 (106)
-------- --------
Net cash used in investing activities ............. (2,576) (1,935)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short-term debt ......................................... (4,000)
Additions to long-term debt ......................................... 270 531
Repayments of long-term debt ........................................ (126) (201)
Dividends paid ...................................................... (2,338) (2,247)
Sales of common stock ............................................... 412 83
Collection of employee discount on stock ............................ 31
-------- --------
Net cash used in financing activities ............. (1,751) (5,834)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS .................................................... (203) 9
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS .................................... (5,082) (2,583)
CASH AND CASH EQUIVALENTS, beginning of period ........................... 21,500 14,990
-------- --------
CASH AND CASH EQUIVALENTS, end of period ................................. $ 16,418 $ 12,407
======== ========
CASH PAID DURING THE PERIOD FOR:
Interest ............................................................ $ 123 $ 249
Income taxes ........................................................ 819 899
The accompanying notes are an integral part of these
consolidated financial statements.
3
RIVIANA FOODS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. Basis for Preparation of the Consolidated Financial Statements
The consolidated financial statements have been prepared by Riviana
Foods Inc. and subsidiaries ("the Company"), without audit, with the exception
of the June 30, 2002, consolidated balance sheet. The financial statements
include consolidated balance sheets, consolidated statements of income and
consolidated statements of cash flows. Certain amounts in the prior year have
been reclassified to conform to the current year presentation. In the opinion of
management, all adjustments, which consist of normal recurring adjustments,
necessary to present fairly the financial position, results of operations and
cash flows for all periods presented have been made.
The financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended June 30, 2002.
The Company's fiscal year is based on the 52/53-week period ending on
the Sunday closest to June 30th of each year. Both fiscal 2002 and 2003 are
52-week periods.
2. Earnings per Share
Basic and diluted earnings per share are computed by dividing net
income by the respective number of weighted average common shares outstanding.
The reconciliation of weighted average common shares outstanding used in
computing basic and diluted earnings per share is as follows:
THREE MONTHS ENDED
-----------------------------------------
SEPTEMBER 29, 2002 SEPTEMBER 30, 2001
------------------ ------------------
Basic 14,184 14,044
Effect of dilutive stock options 236 87
------ ------
Diluted 14,420 14,131
====== ======
Anti-dilutive stock
stock options excluded in the
above calculation 210 555
====== ======
4
3. Inventories
Inventories were composed of the following:
SEPTEMBER 29, 2002 JUNE 30, 2002
------------------ -------------
Raw materials $11,783 $ 8,301
Work in process 88 75
Finished goods 35,926 33,600
Packaging supplies 6,846 6,157
------- -------
Total $54,643 $48,133
======= =======
4. Comprehensive Income
The components of comprehensive income were as follows:
THREE MONTHS ENDED
-------------------------------------------
SEPTEMBER 29, 2002 SEPTEMBER 30, 2001
------------------ ------------------
Net income $6,318 $4,608
Other comprehensive income:
Unrealized gains on marketable
securities, net of tax:
Realized (gains) reclassified
to net income
Unrealized gains 1 1
Unrealized gains (losses) on
derivative financial
instruments (32)
Foreign currency translation
adjustment (48) (56)
------ ------
Total comprehensive income $6,271 $4,521
====== ======
5. Segment Information
THREE MONTHS ENDED
-------------------------------------------
SEPTEMBER 29, 2002 SEPTEMBER 30, 2001
------------------ ------------------
Net sales:
Domestic $ 60,223 $ 60,526
Europe 13,272 12,212
Central America 21,719 20,415
-------- --------
Total consolidated $ 95,214 $ 93,153
======== ========
5
THREE MONTHS ENDED
-------------------------------------------
SEPTEMBER 29, 2002 SEPTEMBER 30, 2001
------------------ ------------------
Income:
Operating income
Domestic $ 9,447 $ 6,556
Europe 233 308
Central America 2,114 2,197
-------- --------
Total operating income 11,794 9,061
General corporate expense (3,026) (2,566)
-------- --------
Income from operations 8,768 6,495
Interest expense (134) (160)
Equity in earnings of
unconsolidated affiliates 470 464
Other income (expense), net (60) (122)
-------- --------
Income before income taxes
and minority interests $ 9,044 $ 6,677
======== ========
6. Changes in Accounting Principles
Effective July 1, 2002, the Company adopted the Statement of Financial
Accounting Standards (SFAS) No. 141, "Business Combinations", and SFAS No. 142,
"Goodwill and Other Intangible Assets". 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. As of July 1, 2002, the Company completed the required
impairment tests of goodwill and other intangible assets with indefinite lives
and, based on the results of the tests, determined no impairment to the carrying
values of these assets was needed. In accordance with SFAS No. 142, prior period
amounts were not restated. For the three months ended September 30, 2001,
amortization net of taxes of indefinite life intangibles was $12. Had the prior
period been restated, the effect of adopting this statement would have had no
material effect on the Company's results of operations or financial position.
The net carrying value of indefinite life intangibles as of September 29, 2002
was $1,604.
Effective July 1, 2002, the Company adopted SFAS No. 143 "Accounting
for Asset Retirement Obligations". 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. The effect of
adopting this statement had no material impact on the Company's results of
operations or financial position.
Effective July 1, 2002, the Company adopted SFAS No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets". This pronouncement
establishes the methods of accounting for the impairment or disposal of long-
6
lived assets by sale or otherwise. The effect of adopting this statement had no
material impact on the Company's results of operations or financial position.
7. Recently Issued Accounting Standards
SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal
Activities" was issued in June 2002. This statement broadens 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. This statement 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 this statement to have a material impact on
the Company's results of operations or financial position.
7
ITEM 2. 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 three-month periods ended September
29, 2002 and September 30, 2001 covered 13 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 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. 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 three months ended September 29, 2002
with comparative results for the previous year.
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."
8
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 September 29, 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 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.
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:
o Changes in business, political and worldwide economic conditions
o Competitive market activity
o Change in product mix sold
o Trade buying patterns
o Litigation
o Interest rate and foreign currency exchange rate fluctuations
o Governmental laws and regulations including tax laws
o Change in generally accepted accounting policies
o Acts of God affecting manufacturing and distribution channels
o Acquisitions, divestitures and restructurings
9
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
THREE MONTHS ENDED SEPTEMBER 29, 2002 AND SEPTEMBER 30, 2001
For the three months ended September 29, 2002 sales increased $2.1
million or 2.2% to $95.2 million from $93.1 million for the previous fiscal
year. Higher unit volumes increased sales $4.9 million while the combined effect
of price and sales mix decreased sales by $2.8 million. Net foreign currency
translation did not materially impact sales. In the domestic rice business sales
of $59.4 million decreased $0.3 million or 0.5% from the prior year sales of
$59.7 million. In total, volume increases added $1.6 million in sales. Sales in
the domestic rice business were negatively affected $1.9 million due to a
combination of sales mix and pricing reflecting the competitive market
conditions. Sales by the Company's energy co-generation joint venture were even
with the prior year at $0.8 million. Lower gas prices decreased sales $0.3
million and higher volumes increased sales by $0.3 million. Sales in Central
America increased $1.3 million or 6.4% to $21.7 million compared to $20.4
million in the prior year. Higher volumes were recorded in both fruit juice and
nectar products and cookie and cracker product lines. In total, the increase in
volumes added $2.4 million to sales. A combination of price and product mix
reduced sales $0.2 million and unfavorable currency translation reduced sales by
$0.9 million. In Europe, sales increased $1.1 million or 8.7% to $13.3 million
from $12.2 million in the prior year. Higher unit volumes increased sales by
$0.6 million. A combination of price and product mix reduced sales by $0.4
million and favorable currency translation increased sales by $0.9 million.
Gross profit increased $1.9 million or 7.8% to $26.8 million from $24.9
million a year earlier and increased as a percentage of sales to 28.2% from
26.7%. In the domestic rice business, gross profit increased $1.8 million or
10.3% to $18.8 million from $17.0 million in the same period in the prior year
and increased as a percentage of sales to 31.6% from 28.5%. Gross profit
increased primarily as a result of a favorable sales mix which included higher
sales of value-added products and lower rice and energy costs. The domestic
energy co-generation operations reported gross profit of $0.1 million which was
even with the prior year. Gross profit in Central America improved by $0.1
million or 2.4% to $6.5 million and decreased as a percentage of sales to 30.2%
from 31.3% in the prior year. The increase in gross profit was related to the
sales increase while the decline in gross profit as a percentage of sales was
related to additional promotional expenses due to competitive markets. In Europe
gross profit was even with the prior year at $1.4 million but declined as a
percentage of sales to 10.4% from 11.2% in the prior period as a result of
product mix.
Administrative and general expenses increased by $0.6 million or 11.9%
to $6.0 million from $5.4 million in the prior period. Administrative and
general expenses increased at all the operating segments albeit these increases
were small and generally reflected normal inflationary increases. In total,
administrative and general expenses increased by $0.2 million at the operating
segments. General corporate administrative expenses increased by $0.4 million
due to normal inflationary increases and additional expenses related to pensions
and incentive compensation plans.
Operating income increased $2.3 million or 35.0% to $8.8 million from
$6.5 million in the same period in the prior year. As a percentage of sales,
operating income increased to 9.2% from 7.0% in the prior period. Operating
income in the domestic rice business increased by $2.9 million or 44.4% to $9.3
10
million. In Central America, operating income decreased $0.1 million or 3.8% to
$2.1 million. Higher advertising, selling and warehousing expenses of $0.2
million and a slight increase in administrative expenses offset the $0.1 million
increase in gross profit. Operating income in Europe decreased $0.1 million from
the prior year's operating income of $0.3 million to $0.2 million.
Other income of $0.3 million increased by $0.1 million from the prior
year. For the quarter ending September 29, 2002 the Company recorded net
interest income of $0.3 million, an increase of $0.2 million over 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 $0.5 million was even with the
corresponding period last year. Other miscellaneous expenses increased by $0.1
million to $0.5 million.
Income tax expense of $2.6 million reflected an increase of $0.6
million from the same period in the prior year due to the increase in income
before tax. The effective rate decreased slightly to 28.6% from 29.7% 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 and the utilization of energy tax
credits related to the Company's co-generation joint venture.
Net income for the quarter ending September 29, 2002 increased $1.7
million or 37.1% to $6.3 million from $4.6 million in the prior fiscal year.
Diluted earnings per share were $0.44, up from $0.33 in the prior period.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended September 29, 2002 cash of $0.6 million was used
by operating activities. In the prior year cash of $5.2 million was provided by
operating activities. The increase in net income and non-cash charges for
depreciation and amortization provided an additional $1.8 million as compared to
results for the prior year. Cash was provided by an increase in the provision
for deferred income taxes of $1.5 million while in the prior period cash was
used to reduce deferred income taxes by $0.1 million. Cash was used to increase
working capital by $4.5 million while in the prior year $1.1 million was used to
increase working capital. Other assets increased by $5.3 million in the current
year as compared to a decrease of $0.6 million in the prior year. The increase
was primarily related to a cash contribution to the Company's defined benefit
pension plan.
Cash used in investing activities increased $0.7 million to $2.6
million as compared to cash used in investing activities in the prior year of
$1.9 million. Additions to property, plant and equipment in the current quarter
totaled $2.6 million, an increase of $0.8 million from the comparable period
last year. There was also an increase in amounts due from affiliates of $0.1
million.
Cash used in financing activities decreased by $4.1 million in the
quarter ended September 29, 2002 to $1.7 million. In the current year a net
increase in short and long-term debt of $0.1 million provided cash while in the
prior year the Company used $3.7 million to decrease net debt. Funds used for
dividend payments increased by $0.1 million during the quarter ended September
29, 2002. Cash provided from sale of common stock through the exercise of
employee stock options increased to $0.4 million from $0.1 million in the same
period last year.
On October 16, 2002 the Company's board of directors raised the
quarterly dividend on the Company's common stock to $0.17 per share from $0.165
per share, for an indicated annual rate of $0.68 per share.
As of September 29, 2002, the board of directors of the Company had
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. For the three months ended September 29, 2002, the Company did not
repurchase any
11
shares. Through September 29, 2002, the Company has repurchased a total of 2.0
million shares and 338.0 thousand shares have been reissued upon exercise of
employee stock options.
During the prior 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
Euro7.5 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 Euro7.5 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 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 September 29, 2002, the Company had no outstanding loans
and $1.9 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 holds a portfolio of marketable securities with a market
value of $0.1 million at September 29, 2002 which is available to provide
additional liquidity.
The Company's financial position remains strong and 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.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As of September 29, 2002 there have been no material changes in the
Company's market risk exposure as described in Management's Discussion and
Analysis contained in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2002.
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.
12
Forward foreign currency contracts are utilized by our European
operations to cover specific inventory purchases that are denominated in a
foreign currency.
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.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
Within 90 days prior to the date of this report, the Company carried
out an evaluation under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic SEC filings.
(b) Changes in internal controls
Not applicable.
13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on October 16,
2002. The matters voted on were as follows:
(a) Proposal for the election of eleven directors for one year terms:
Nominee Votes For Votes Withheld
------- --------- --------------
Frank A. Godchaux III 12,766,811 242,280
Charler R. Godchaux 12,766,611 242,480
Frank K. Godchaux 12,856,117 152,974
Joseph A. Hafner, Jr. 12,243,752 765,339
W. David Hanks 12,243,552 765,539
E. Wayne Ray, Jr 12,243,502 765,589
W. Elton Kennedy 12,768,211 240,880
E. James Lowrey 12,864,217 144,874
Theresa G. Payne 12,868,517 140,574
Patrick W. Rose 12,867,017 142,074
Thomas B. Walker, Jr. 12,865,117 143,974
(b) Proposal to approve and ratify the appointment of KPMG LLP as the
Company's independent public accountants for the fiscal year
ending June 29, 2003:
Votes for 12,998,580
Votes against 8,908
Abstain 1,603
(c) Proposal to approve and ratify the First Amendment of the 1997
Stock Option Plan:
Votes for 11,550,333
Votes against 452,412
Abstain 260,685
Non-Votes 745,661
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 10.20 Amendment to the 1997 Stock Option Plan dated October 16,
2002.
15 Letters from KPMG LLP dated October 14, 2002, regarding
unaudited financial statements.
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.
14
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.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RIVIANA FOODS INC.
(Registrant)
November 1, 2002 /s/ Joseph A. Hafner, Jr.
-------------------------------------
Joseph A. Hafner, Jr.
Chief Executive Officer, President and
Director
(Principal Executive Officer)
November 1, 2002 /s/ E. Wayne Ray, Jr.
-----------------------
E. Wayne Ray, Jr.
Vice President, Chief Financial Officer,
Treasurer and Director
(Principal Financial and Accounting Officer)
15
CERTIFICATION
I, Joseph A. Hafner, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Riviana Foods Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 pays prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (of persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 1, 2002 /s/ Joseph A. Hafner, Jr.
----------------------------------
Joseph A. Hafner, Jr.
Chief Executive Officer
16
CERTIFICATION
I, E. Wayne Ray, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Riviana Foods Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
d) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
e) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 pays prior to the filing date of
this quarterly report (the "Evaluation Date"); and
f) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (of persons performing the equivalent
function):
c) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
d) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 1, 2002 /s/ E. Wayne Ray, Jr.
-----------------------------------
E. Wayne Ray, Jr.
Vice President, Chief Financial
Officer and Treasurer
17
EXHIBIT INDEX
Sequential
No. Description Page Number
- --- ----------------------------------------------------------------------- -----------
10.20 Amendment to the 1997 Stock Option Plan dated October 16, 2002 19
15 Letters from KPMG LLP dated October 14, 2002, regarding unaudited 20
financial statements
99.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C., Section 22
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 23
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
18