RIVIANA FOODS INC /DE/ - 10-Q Quarterly Report

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 December 28, 2003

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 Identification No.)
incorporation or organization)


2777 Allen Parkway
Houston, TX		77019
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (713) 529-3251

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ ü ] No [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes [ ü ] No [ ]

The number of shares of Common Stock of the Registrant, par value $1.00 per share, outstanding at January 27, 2004, was 14,482,131.

TABLE OF CONTENTS


Part I. Financial Information
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		Notes to Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure about Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT INDEX
Letter from KPMG LLP
Letter from KPMG LLP
Section 302 Certification of PEO
Section 302 Certification of PFO
Section 906 Certification of PEO
Section 906 Certification of PFO

RIVIANA FOODS INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 28, 2003

INDEX


			Page

Part I - Financial Information
	Item 1 - Financial Statements
		Consolidated Balance Sheets at December 28, 2003 and June 29, 2003		1
		Consolidated Statements of Income for the Three Months and Six Months Ended December 28, 2003 and December 29, 2002		2
		Consolidated Statements of Cash Flows for the Six Months Ended December 28, 2003 and December 29, 2002		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			18
	Item 4 - Controls and Procedures			19
Part II - Other Information
	Item 4 - Submission of Matters to a Vote of Security Holders			20
	Item 6 - Exhibits and Reports on Form 8-K			20
Signature				21
Exhibit Index				22

Part I. Financial Information

Item 1. Financial Statements

RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)


					December 28, 2003			June 29, 2003

					(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS:
	Cash				$	7,382		$	9,937
	Cash equivalents					6,134			12,649

		Total cash and cash equivalents				13,516			22,586
	Marketable securities					255			219
	Accounts receivable, less allowance for doubtful accounts of $1,382 and $1,268					50,437			42,900
	Inventories					60,911			54,800
	Prepaid expenses					5,345			5,710

				Total current assets		130,464			126,215
PROPERTY, PLANT AND EQUIPMENT:
	Land					3,809			3,813
	Buildings					39,968			39,921
	Machinery and equipment					142,123			137,916

			Property, plant and equipment, gross			185,900			181,650
	Less accumulated depreciation					(77,766	)		(73,626	)

			Property, plant and equipment, net			108,134			108,024
INVESTMENTS IN UNCONSOLIDATED AFFILIATES						14,537			12,797
GOODWILL						9,585			9,585
OTHER ASSETS						20,355			17,329

				Total assets	$	283,075		$	273,950

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Short-term debt				$	21,346		$	24,160
	Current maturities of long-term debt					22			22
	Accounts payable					26,871			21,887
	Accrued liabilities					17,318			18,567
	Income taxes payable					3,894			3,945

			Total current liabilities			69,451			68,581
LONG-TERM DEBT, net of current maturities						55			65
DUE TO AFFILIATES						17			740
DEFERRED INCOME TAXES						13,776			12,512
OTHER NONCURRENT LIABILITIES						4,631			4,498
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS						6,394			6,504
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					7,502			7,339
	Retained earnings					207,405			203,308
	Accumulated other comprehensive loss					(15,725	)		(16,380	)
	Treasury stock, at cost, 1,413 and 1,552 shares					(26,314	)		(29,100	)

				Total stockholders’ equity		188,751			181,050

				Total liabilities and stockholders’ equity	$	283,075		$	273,950

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

RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)


				Three Months Ended						Six Months Ended

				December 28, 2003			December 29, 2002			December 28, 2003			December 29, 2002

NET SALES				$	110,035		$	98,229		$	214,441		$	193,443
COST OF SALES					83,659			69,809			162,029			138,204

		Gross profit			26,376			28,420			52,412			55,239

COSTS AND EXPENSES:
	Advertising, selling and warehousing				12,644			13,281			24,864			25,310
	Administrative and general				6,051			5,967			11,982			11,989

		Total costs and expenses			18,695			19,248			36,846			37,299

		Income from operations			7,681			9,172			15,566			17,940
OTHER INCOME (EXPENSE):
	Interest income				760			380			1,150			795
	Interest expense				(238	)		(146	)		(464	)		(280	)
	Equity in earnings of unconsolidated affiliates				1,068			607			1,762			1,077
	Other (expense), net				(330	)		(233	)		(906	)		(708	)

		Total other income			1,260			608			1,542			884

		Income before income taxes and minority interests			8,941			9,780			17,108			18,824
INCOME TAX EXPENSE					2,928			1,223			5,126			3,808
MINORITY INTERESTS IN EARNINGS OF CONSOLIDATED SUBSIDIARIES					136			70			246			211

		NET INCOME		$	5,877		$	8,487		$	11,736		$	14,805

		Earnings per share:
			Basic	$	0.41		$	0.60		$	0.82		$	1.04
			Diluted		0.40			0.58			0.79			1.02
		Weighted average common shares outstanding:
			Basic		14,409			14,235			14,373			14,209
			Diluted		14,815			14,583			14,788			14,546

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

RIVIANA FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)


					Six Months Ended

					December 28, 2003			December 29, 2002

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	11,736		$	14,805
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				4,780			4,088
		Deferred income taxes				1,302			992
		Loss (gain) on disposition of assets				102			(7	)
		Equity in earnings of unconsolidated affiliates				(1,762	)		(1,077	)
		Change in assets and liabilities, excluding effects of acquisition:
			Accounts receivable, net			(7,212	)		(6,771	)
			Inventories			(6,160	)		(5,581	)
			Prepaid expenses			406			(1,720	)
			Other assets			(2,089	)		(4,441	)
			Accounts payable and accrued liabilities			2,172			2,920
			Income taxes payable			(22	)		1,177
			Other noncurrent liabilities			154			215
			Minority interests			(54	)		(87	)

				Net cash provided by operating activities		3,353			4,513

CASH FLOWS FROM INVESTING ACTIVITIES:
	Additions to property, plant and equipment					(5,535	)		(5,576	)
	Proceeds from disposals of property, plant and equipment					227			51
	Increase (decrease) in due to affiliates					(758	)		435

				Net cash used in investing activities		(6,066	)		(5,090	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Increase (decrease) in short-term debt					(2,700	)		344
	Additions to long-term debt								101
	Repayments of long-term debt					(10	)		(119	)
	Dividends paid					(6,017	)		(4,679	)
	Sales of common stock					2,347			1,565
	Collection of employee discount on stock					90			48

				Net cash used in financing activities		(6,290	)		(2,740	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS						(67	)		(446	)

DECREASE IN CASH AND CASH EQUIVALENTS						(9,070	)		(3,763	)
CASH AND CASH EQUIVALENTS, beginning of period						22,586			21,500

CASH AND CASH EQUIVALENTS, end of period					$	13,516		$	17,737

CASH PAID DURING THE PERIOD FOR:
	Interest				$	489		$	280
	Income taxes					2,647			2,175

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

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 29, 2003, 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 29, 2003.

The Company’s fiscal year is based on the 52/53-week period ending on the Sunday closest to June 30^th of each year. Both fiscal 2004 and 2003 are 52-week periods. The three-month and six-month periods ended December 28, 2003 and December 29, 2002 each covered 13 and 26 weeks of operation.

2. Earnings per Share and Stock-Based Compensation

Basic and diluted earnings per share are computed by dividing net income by the respective number of weighted average common shares outstanding. The reconciliation of weighted average common shares outstanding used in computing basic and diluted earnings per share is as follows:


	Three Months Ended				Six Months Ended

	December 28, 2003		December 29, 2002		December 28, 2003		December 29, 2002

Basic		14,409		14,235		14,373		14,209
Stock options		406		348		415		337

Diluted		14,815		14,583		14,788		14,546

Anti-dilutive stock option shares excluded in the above calculation		252		0		183		157

The Company has elected to follow the intrinsic value method in accounting for its employee stock options in accordance with APB 25, “Accounting for Stock Issued to Employees”. Accordingly, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

Had expense been determined based on the Black-Scholes option pricing model at the grant date for awards in 2004 and 2003 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:


		Three Months Ended					Six Months Ended

		December 28, 2003			December 29, 2002		December 28, 2003		December 29, 2002

Net income:
	As reported	$	5,877		$	8,487	$	11,736	$	14,805
	Pro forma stock-based compensation expense, net of tax		(287	)		(278


	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 [ ü ] No [ ]