-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ww45AQzaxHCuj6JTSTiFrpeRiJvfgRwGpxbQ06Nz35Ws/ccwg0GpMr09o72gzvsg +TQma/eyAipRN1h8kXPtHw== 0000890566-97-002117.txt : 19970926 0000890566-97-002117.hdr.sgml : 19970926 ACCESSION NUMBER: 0000890566-97-002117 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970629 FILED AS OF DATE: 19970925 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVIANA FOODS INC /DE/ CENTRAL INDEX KEY: 0000934650 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 760177572 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-25294 FILM NUMBER: 97685158 BUSINESS ADDRESS: STREET 1: P O BOX 2636 CITY: HOUSON STATE: TX ZIP: 77252-2636 BUSINESS PHONE: 7135293251 MAIL ADDRESS: STREET 1: PO BOX 2636 CITY: HOUSTON STATE: TX ZIP: 77252-2636 10-K 1 ================================================================================ 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 29, 1997 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, TX (ADDRESS OF PRINCIPAL EXECUTIVE 77019-2141 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 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 [_] 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 the 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 September 8, 1997 the aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant was approximately $133,352,000. The number of shares of Common Stock of the Registrant, par value $1.00 per share, outstanding at September 8, 1997 was 15,750,500. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's definitive Proxy Statement for the 1997 Annual Meeting of Stockholders to be held October 22, 1997 (the "Proxy Statement") are incorporated by reference into Part III, Items 10, 11, 12 and 13. ================================================================================ 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 primarily 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 1997, the Company's domestic operations accounted for approximately 60% and 69% of net sales and operating income before general corporate expenses, respectively, and international operations accounted for approximately 40% and 31% of net sales and operating income before general corporate expenses, respectively. Financial segment information by geographic area for the most recent three fiscal years is set forth in Item 8, Note 12, "Segment information." Riviana's domestic rice operations consist of sales of retail branded and private-label rice products, sales of rice products to retail food service chains, sales of rice and rice by-products to major food processors and other industrial users and exports of branded and value-added bulk rice products to Puerto Rico and a number of international markets. Sales of retail branded and private-label rice products represent the most significant component of the Company's domestic operations, accounting for approximately 44% of the Company's total net sales during fiscal 1997. 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), prepared rice (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 6% from fiscal 1993 to 1997. 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. Sales of instant and specialty mixes have enjoyed particularly strong growth, increasing at a compound annual rate of 8% from fiscal 1993 to 1997. The Company believes its strong growth in the instant and specialty categories stems in part from a shift in consumer preferences toward more healthful, flavorful, easy-to-prepare food products. The Company markets its branded products under a number of nationally recognized brand names including: Mahatma(Registered Trademark) -- the volume leader of packaged long grain rice sold in the retail grocery trade. Success(Registered Trademark) -- the leading brand of instant boil-in-bag rice and the second leading brand of instant rice in the U.S. Carolina(Registered Trademark) -- the second leading brand of packaged long grain rice in the northeastern U.S. WaterMaid(Registered Trademark) -- the leading brand of medium grain rice in the southeastern U.S. River(Registered Trademark) -- the second leading brand of packaged medium grain rice in the northeastern U.S. Riviana also markets a variety of easy-to-prepare, flavored rice mixes under the Mahatma(Registered Trademark), Carolina(Registered Trademark) and Success(Registered Trademark) brand names, including Mahatma(Registered Trademark) brand Yellow Rice, Red Beans & Rice and Black Beans & Rice, Carolina(Registered Trademark) brand Pilaf, and Success(Registered Trademark) brand Brown & Wild Rice, Broccoli & Cheese Rice and Red Beans & Rice. 1 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 19 of the top 20 supermarket chains in the United States. 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 also markets a range of food service products, principally instant rice, parboiled rice, and rice mixes, to several of the top restaurant chains and food service companies in the United States, and sells bulk rice and rice by-products to industrial users. Riviana exports brand name and value-added bulk rice products to Puerto Rico and a number of foreign countries. The Company's Puerto Rican brands, El Mago(Registered Trademark), Sello Rojo(Registered Trademark) and Mahatma(Registered Trademark), represent approximately 20% 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 and countries in the Caribbean, Europe, Africa and the Middle East. The Company's Costa Rican subsidiary, Pozuelo, S.A. ("Pozuelo"), is one of the largest manufacturers of cookies and crackers in Central America. Costa Rica is Pozuelo's largest market, followed by Guatemala and El Salvador. The Company has committed significant resources to Pozuelo in the past five years to modernize its facilities and convert it into a modern, efficient baking operation. Pozuelo's principal brands are Riviana Pozuelo(Registered Trademark) soda crackers and saltines, Bokitas(Registered Trademark) oil sprayed crackers, Familia(Registered Trademark) assortments of sweet biscuits, and Chiky(Registered Trademark), which is a chocolate-enrobed sweet biscuit. Its newest products are Mantequilla (butter) cookies and Juveniles(Registered Trademark) flavored creme-filled sandwich cookies. Many of these products are market leaders in Central America. Pozuelo's sales, expressed in dollars, have grown at a compound annual rate of 8.4% for the past five fiscal years. The Company's Guatemalan subsidiary, Alimentos Kern de Guatemala, S.A. ("Kern"), is one of the largest fruit and vegetable processing operations in Central America. Kern produces a wide variety of products, including fruit juices and nectars, fruit drinks, tomato products (sauces, ketchup and paste), canned vegetables and refried beans under the Kern's(Registered Trademark), Ducal(Registered Trademark) and Fun-C(Registered Trademark) brands. Kern's products are sold principally in Central America with its largest markets being Guatemala, Costa Rica and El Salvador. Its newest product is a line of light nectar drinks under the Koolfrut(Registered Trademark) label. Exports, including refried beans exported to the United States, represent a growing part of Kern's business. Many of Kern's primary brand name products are market leaders in Central America in their respective categories. Kern's sales, expressed in dollars, have grown at a compound annual rate of 6.2% for the past five fiscal years. The Company's subsidiaries in Central America accounted for approximately 16% of net sales and 25% of operating income before general corporate expenses in fiscal 1997. The Company's Belgian subsidiary, N & C Boost N.V. ("N&C"), competes in the continental European rice market through its management of Boost Distribution C.V. ("Boost"). Boost is accounted for as an unconsolidated affiliate and is jointly owned by N&C and Arrocerias Herba, S.A., a major European rice miller and marketer. Boost buys parboiled and regular brown rice in bulk, which it then mills, packages and markets under its own and private-label brand names and in bulk. Boost markets its own brand name, Bosto(Registered Trademark), which is the leading brand of consumer packaged rice in Belgium. Boost's Boss(Registered Trademark) brand canned cream rice is the leading canned creamed rice in Belgium. Boost also distributes bulk and private-label packaged rice to major retailers in Europe. The Boost joint ownership agreement provides that after January 1, 1997, each party has certain rights to buy the other's interest or require the other to buy its interest. N&C also owns a one-third interest in Herto N.V., a major European rice cake manufacturer. Stevens & Brotherton Ltd. ("S&B"), the Company's United Kingdom subsidiary, is a distribution company that distributes a variety of brand name and private-label products including packaged rice, and canned fruits, vegetables, meats and fish to retail, wholesale, food service and industrial customers in the United Kingdom. S&B also sells branded dried fruits and nuts from Sun-Diamond Growers of California. The products distributed by S&B are all produced by other manufacturers and generate a lower gross profit margin than other Riviana operations. 2 The Company's European operations accounted for approximately 24% of net sales and 6% of operating income before general corporate expenses in fiscal 1997. Financial segment information by geographic area for the most recent three fiscal years is set forth in Item 8, Note 12, "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", under the caption "General." 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 as follows: United Kingdom -- pound sterling, Belgium -- Belgian franc, Costa Rica -- colon, and Guatemala -- quetzal. 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 5% of the Company's consolidated revenues in fiscal 1997. 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 nine 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 a limited number of short-term (one year or less) contracts under which it supplies rice products to industrial 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 rough rice from a variety of farm sources, primarily in Arkansas and Louisiana. No single source accounts for more than 10% of rough rice purchases. In addition to milling rice in its own facilities, the Company purchases significant amounts of rice milled to the Company's specifications from a number of the leading rice milling companies in the United States. In fiscal 1997, of the milled rice purchased by the Company, 60% was purchased from three suppliers. The Company believes adequate alternative sources of supply are readily available. 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. Mars, Inc., through its subsidiary Uncle Ben's, Inc., is the largest seller of branded rice in the industry measured in dollars. The Company is the industry leader in sales of branded rice measured by volume. Kraft General Foods, Inc., a subsidiary of Philip Morris Companies, Inc., produces the leading brand of instant rice (Minute), and The Quaker Oats Company produces the leading brand of rice mixes (Rice-A-Roni). 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, Boost competes with branded products from Master Foods (a subsidiary of Mars, 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 3 rice, for its share of the rice market. In the private-label market for products other than rice, S&B competes with importers representing world-wide 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 April 1996, the Federal Agriculture Improvement and Reform Act ("1996 Farm Bill") was enacted to replace the 1990 predecessor, the Food, Agriculture, Conservation and Trade Act of 1990 ("1990 Farm Bill"). The 1996 Farm Bill provides marketing loans and agricultural marketing transition payments (as defined) to qualifying farmers for seven years beginning with the 1996 crop. The agricultural market transition payments range on a declining scale from $2.75 per cwt for the 1996 crop to $2.03 per cwt in 2002 and replace similar payments of the 1990 Farm Bill. Unlike the payments under the 1990 Farm Bill, the agricultural market transition payments are fixed without reference to price levels. Other important provisions of the 1996 Farm Bill include the elimination of acreage reduction incentives and increased flexibility of farmers to plant crops other than rice as market conditions warrant. The changes introduced by the 1996 Farm Bill may have a significant impact on the supply and price level of rice grown in the United States. 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 rice 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 31, 1997, the Company employed approximately 2,751 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 a total of 216 employees. In Memphis, Tennessee, the Company is a party to a collective bargaining agreement with Teamsters Local Union No. 1196 covering 104 employees. In Guatemala, Kern is a party to a collective bargaining agreement with a local union covering 276 employees. The Company believes its labor relations are good. 4 ITEM 2. PROPERTIES. The following table lists the Company's principal properties, all of which are owned unless otherwise indicated. LOCATION NATURE OF FACILITY SQUARE FOOTAGE - --------------------------- ---------------------------------- -------------- Houston, Texas............. Processing, packaging, technical 170,600 center, warehouse Houston, Texas(1).......... Corporate headquarters 52,100 Abbeville, Louisiana....... Processing, packaging, warehouse 137,200 Memphis, Tennessee......... Packaging, warehouse 99,700 Carlisle, Arkansas......... Processing 47,500 Edison, New Jersey(1)...... Warehouse 94,500 Orpington, England(1)...... Trading office 11,100 Bristol, England(2)........ Distribution 210,000 San Jose, Costa Rica....... Production, packaging, warehouse 257,000 Guatemala City, Guatemala.. Production, packaging, warehouse 267,000 - ------------ (1) Leased facility. (2) Contracted space and services. In addition to the properties listed in the table, the Company owns six drying and storage facilities strategically located in the rice growing region of the southeastern United States, and leases warehouse facilities in Houston and Memphis. 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 29, 1997, 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 10, "Capital stock", and Note 13, "Selected quarterly financial data (unaudited)." On August 21, 1997, the Board of Directors declared a quarterly cash dividend of $.10 per common share payable October 13, 1997 to stockholders of record on September 10, 1997. The Company has a continuing stock repurchase program which it announced on August 21, 1995. The program authorizes the repurchase of up to 500,000 shares of the Company's common stock from time to time. The Company has repurchased 168,800 shares as of September 8, 1997. The Company expects to finance any future repurchases from working capital, unused short-term credit lines and cash flow from operations. 5 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 1993 through 1997. All amounts are in thousands except per share data.
1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- INCOME STATEMENT DATA: Net sales.......................... $ 460,183 $ 440,492 $ 427,229 $ 419,143 $ 378,730 Income before extraordinary item... 20,025 18,342 14,931 17,480 13,176 Net income......................... 20,025 18,342 14,931 16,443 13,176 Earnings per share: Income before extraordinary item....................... 1.27 1.16 0.96 1.14 0.86 Net income.................... 1.27 1.16 0.96 1.07 0.86 BALANCE SHEET DATA (AT END OF YEAR): Total assets....................... $ 191,889 $ 182,504 $ 175,683 $ 175,635 $ 162,886 Short-term debt and Current maturities of long-term debt..... 6,874 13,031 13,276 31,597 19,023 Long-term debt, net of current maturities....................... 2,619 3,644 2,372 2,432 25,592 Total debt......................... 9,493 16,675 15,648 34,029 44,615 Stockholders' equity............... 127,076 116,506 106,795 90,654 74,449 Dividends paid per share........... 0.3800 0.3466 0.2499 0.2000 0.1830
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 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. The Company utilizes derivative financial instruments as hedges to manage a portion of its exposure to currency fluctuations related to inventory purchases. 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 enters into forward exchange contracts to hedge specific product commitments. The contracts have varying maturities with none exceeding twelve months and are settled at maturity based on rates agreed to at the inception of the contracts. At June 29, 1997 the Company had established bank lines available to purchase forward exchange contracts in the amount of $41.6 million, of which $14.7 million was outstanding. Gains and losses deferred in outstanding instruments at year end were immaterial. As a matter of policy, the Company does not engage in foreign currency speculation 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 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 6 attempt to minimize the effects of currency risk by borrowing externally in the local currency and by hedging their limited 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 results of operations or financial position for the three years ended June 29, 1997. Despite higher inflationary rates in Central America, inflation has not had a material impact on the results of operations 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. FISCAL 1997 COMPARED TO FISCAL 1996 Sales in fiscal 1997 advanced to $460.2 million, which is an increase of $19.7 million or 4.5% over sales of $440.5 million in fiscal 1996. Domestic sales increased 8.9% or $22.6 million to $277.0 million in fiscal 1997 from $254.4 million last year. During the year the Company entered into a joint venture with a major rice milling company in Arkansas. The joint venture is involved in the cogeneration of steam and electricity using rice hulls as fuel. This venture added $0.7 million to domestic sales in the current year. In the domestic rice business, unit volumes increased by 9.5% accounting for $14.6 million of the increase in sales. A combination of product mix and higher prices added $7.3 million to sales. Sales increases were recorded in all sectors of the domestic rice business with the exception of the industrial sector where strong competition limited growth and volumes declined from the previous year. The retail sector recorded strong unit volume growth of 11.6% and sales increased by $13.4 million with $11.9 million of that increase related to the higher volumes. The export and commodity sectors also recorded good growth with sales increasing by $6.2 million and $5.7 million, respectively. Of the total increase of $11.9 million in these two sectors, $5.8 million was volume related and $6.1 million was related to product mix and higher prices. In the industrial sector sales declined by $4.2 million with $4.0 million related to lower volumes. In the foodservice sector, sales increased by $0.8 million. Increased volumes added $0.9 million to sales and a combination of price and product mix reduced sales by $0.1 million. In Central America, sales increased by $5.1 million or 7.4% to $74.8 million in fiscal 1997. Increased volumes added $3.0 million and higher prices added an additional $7.2 million, while unfavorable currency translation reduced sales by $5.1 million. Healthy volume gains were recorded in cookies and crackers, nectars and fruit juices and bean products. In Europe, sales declined by $8.0 million to $108.4 million primarily due to lower volumes as the Company discontinued certain lower margin products. Lower volumes reduced sales by $14.0 million and a combination of product mix and higher prices added $1.1 million to sales. Favorable currency translation added $4.9 million to sales. Gross profit increased 1.4% or $1.7 million to $125.3 million in fiscal 1997 from $123.6 million in fiscal 1996. As a percentage of sales, gross profit declined to 27.2% from 28.1% in the previous year. The major factor contributing to the reduced gross profit percentage was a reduction in gross profit both in absolute terms and as a percentage of sales in the domestic rice business. Gross profit in the domestic rice business was $93.4 million, which was $2.6 million or 2.7% below the gross profit in the prior year. Despite increased sales in this segment, gross profit declined as a result of the change in sales mix. Gross profit as a percentage of sales in the domestic rice business declined to 33.8% in fiscal 1997 from 37.8% in the same period last year. In fiscal 1997, a greater proportion of sales were in the regular white rice category which earns a lower gross profit than the value added rice products. Sales of value added rice products were negatively impacted by extremely competitive market conditions in the category. Lower advertising and promotional spending offset the reduction in gross profit as noted below. The gross profit for the Central American business increased by $3.5 million or 18.4% to $22.3 million in fiscal 1997. This increase in gross profit was the result of increased sales, improved operating efficiencies and better economic conditions in the region aided by the peace accord signed in December in Guatemala. Gross profit as a 7 percentage of sales increased significantly to 29.7% in fiscal 1997 from 27.0% last year. In Europe, gross profit increased by $0.8 million or 9.9% to $9.6 million in the current year from $8.8 million in the prior year. Also, as a percentage of sales, gross profit increased to 8.9% from 7.5% last year. This improvement resulted primarily from discontinuation of sales of certain lower margin products. Spending for advertising, selling and warehousing expenses declined $2.6 million in fiscal 1997 to $75.8 million from $78.5 million last year. As a percentage of sales these expenses declined to 16.5% from 17.8% in the same period of the previous year. Spending in this category was approximately the same as last year for both the Central American and European businesses with the primary decline coming in the domestic rice business due to a reduction in spending for introductory and other promotional programs. Administrative and general expenses increased by $0.1 million to $19.4 million in fiscal 1997 from $19.3 million in the prior year. As a percentage of sales, this expense category declined to 4.2% from 4.4% last year. Most of the increase was related to normal inflationary increases. Income from operations increased $4.3 million or 16.4% to $30.1 million from $25.8 million in the previous year. As a percentage of sales, income from operations increased to 6.5% from 5.9%. Domestic operating income increased by $0.2 million to $17.7 million. This increase was primarily related to the decrease in advertising, selling and warehousing expenses as noted above. In Central America, operating income increased $3.2 million or 46.2% to $9.9 million from $6.7 million last year. The increase in operating income was directly related to the increase in gross profit as discussed above. In Europe, income from operations increased by $0.9 million or 49.8% to $2.5 million from $1.6 million in the same period last year. This increase, also, was directly related to the improved gross profit previously discussed. Other income decreased by $0.8 million. The Company recorded an asset impairment charge of $0.8 million related to the planned disposition of its equity method investment in a European joint venture operation. Gains from the sale of marketable securities increased by $0.7 million and interest income increased by $0.1 million in the current year. Interest expense was reduced primarily in Central America and Europe by $0.8 million due to reduced financing requirements for working capital. Miscellaneous other expenses increased by a net $1.4 million. Dividend income was reduced by $0.3 million due to the sale of marketable securities. Commercial grain storage income was $0.2 million lower. Also, the Company recorded a $0.1 million loss on the sale of assets while in the prior year a gain of $0.1 million was recognized. Income from a former business venture was $0.5 million lower and other miscellaneous expenses increased by $0.2 million. Income tax expense increased to $9.6 million from $7.8 million recorded in the previous year. As a percentage of income before income taxes, tax expense increased to 31.9% from 29.4% last year. In the prior year, income tax expense was favorably impacted by a favorable opinion received by the Company in Costa Rica regarding previously applied for investment tax credits. In Guatemala, the authorities passed an extraordinary tax that partially offset the benefit received in Costa Rica. The net effect was a reduction in income tax expense and excluding this benefit the effective tax rate would have been 31.2%. FISCAL 1996 COMPARED TO FISCAL 1995 Sales in fiscal 1996 totaled $440.5 million, an increase of $13.3 million or 3.1% from fiscal 1995 sales, which were $427.2 million. Domestic sales increased 5.4% or $12.9 million to $254.4 million from $241.5 million in the prior year. A unit volume increase of 3.2% added $7.6 million to sales and a combination of product mix and higher prices added an additional $5.3 million. Sales increases were recorded in all sectors of the domestic rice business with the exception of the foodservice sector where strong competition limited growth and volumes were essentially flat. The retail sector accounted for 74.4% of total domestic sales which was up from 73.7% in the prior year. Within this sector, sales of value-added instant rice and prepared rice mixes increased unit volumes by 8.6% and sales by $8.7 million or 10.6%. Of the $8.7 million increase in sales for these value-added products, increased volumes accounted for $7.1 million of the increase and sales mix contributed an additional $1.6 million. Sales to industrial customers increased $0.7 million or 5.4% on a 6.4% increase in unit volumes. Sales in the export/commodity area increased $2.9 million or 6.9% to $45.8 million. In Central America, sales increased $1.1 million or 1.6% to $69.7 million 8 from $68.6 million in the previous year. Volume gains added $1.4 million and higher prices added an additional $7.6 million while unfavorable currency translation reduced sales by $7.9 million. A difficult economic environment in Guatemala as well as strong competition from lower cost goods smuggled in from Mexico and local competitors combined to reduce sales of the Company's fruit nectar and juice products. Unit case volumes were down 3.5% and dollar sales were down 7.1%. Strong gains were recorded by the cookie and cracker business in Central America. Unit volumes increased 7.9% and dollar volume increased by 11.1%. New products were responsible for the majority of the sales increase. In Europe, sales declined by $0.8 million to $116.4 million in fiscal 1996 from $117.2 million in the prior year. Increased volumes, principally in dried fruit and packaged meat products, added $2.4 million to sales while a change in product mix reduced sales by $0.3 million and unfavorable currency translation reduced sales an additional $2.9 million. Gross profit increased $0.8 million or 0.6% to $123.6 million in fiscal 1996 from $122.8 million in the previous year. As a percentage of sales, gross profit declined slightly to 28.1% from 28.8% in the prior year. In the domestic rice business gross profit increased by $1.9 million to $96.0 million from $94.1 million in the prior year. The increase in gross profit was directly related to the increase in sales volume. As a percentage of sales, gross profit in the domestic business declined to 37.8% from 39.0%. The decline in gross profit as a percentage of sales was due to increased rice costs. However, as noted below, market conditions allowed for a reduction in promotional spending which more than recovered the reduction in the gross profit percentage. The gross profit for the Central American business decreased by $0.8 million to $18.8 million and also declined as a percentage of sales to 27.0% from 28.5% in fiscal 1995. The reduced margin for this segment was a result of the competitive market for fruit nectar and juice products. In Europe, gross margin declined by $0.4 million as a result of increased costs associated with certain canned tomato products. Advertising, selling and warehousing expenses of $78.4 million were $2.7 million or 3.3% less than the $81.1 million recorded in fiscal 1995. As a percentage of sales this expense was 17.8% in fiscal 1996 versus 19.0% in the prior year. In the domestic business, these expenses were $3.4 million less than the prior year and were 25.3% of sales compared to 28.0% in fiscal 1995. The reduced expenses were primarily in marketing and promotional spending. In fiscal 1996 rice costs were escalating over the prior year's costs which reduced the need for competitive promotional spending. In Central America, selling and promotional spending increased by $0.9 million. The increase was about evenly divided between the cookie and cracker product lines where the increased spending was related to the volume increase and the fruit nectar and juice business where the increased spending was to counter competitive market conditions. Administrative and general expenses decreased by $0.1 million to $19.3 million in fiscal 1996. These expenses declined as a result of improved cost control and lower legal expenses. As a percentage of sales, this expense category declined to 4.4% from 4.5% in fiscal 1995. Income from operations increased $3.5 million or 15.7% to $25.8 million from $22.3 million in the previous year. Domestic operating income increased $5.7 million or 47.7% to $17.4 million. This increase resulted from the gross profit increase and the reduction in advertising, selling and warehousing costs. In Central America, income from operations declined by $1.8 million to $6.7 million from $8.5 million in fiscal 1995. This decline in operating income is directly attributable to the significant operating difficulties encountered by the fruit nectar and juice business as discussed above. Gross profit was reduced because of lower volumes and additional funds were committed to promotional campaigns to counter the competitive pressure. Operating income in Europe declined by $0.4 million to $1.6 million. This decline was directly related to the lower gross profit. Other income increased by $0.8 million to $0.6 million from an expense of $0.2 million in fiscal 1995. Gains from the sale of marketable securities increased $0.2 million to $1.0 million in fiscal 1996. Interest expense decreased by $0.3 million. Interest expense was lower for the domestic operations by $0.4 million and for the European operations by $0.2 million due to lower working capital requirements. In Central America, interest expense was higher than last year by $0.3 million. The increase in expense was related to 9 the unexpected decline in fruit nectar and juice sales and the resulting higher level of working capital. Equity in the earnings of affiliates increased by $0.2 million to $1.8 million in the prior year. While income tax expense increased $0.8 million to $7.8 million from $7.0 million last year, as a percentage of income before income taxes, taxes decreased to 29.4% from 31.4% last year. The lower rate is the result of two unusual events in Central America. In Costa Rica, the Company received a favorable court opinion regarding previously applied for tax credits that reduced tax expense. Offsetting this favorable event, the government in Guatemala passed an extraordinary tax in the final quarter of the year, which increased tax expense. Excluding these unusual items, the effective tax rate would have been 31.2% LIQUIDITY AND CAPITAL RESOURCES The financial condition of the Company remained strong during fiscal 1997. 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 generate most of its capital requirements internally. The Company's total of cash and marketable securities at June 29, 1997 exceeded total debt by $2.0 million. The ratio of debt to total capitalization (total debt plus stockholders' equity) decreased to 7.0% at the end of fiscal 1997 from 12.5% the previous year. The current ratio increased to 2.3 in fiscal 1997 from 2.2 at the end of the prior year. Consistent with historical results, operations provided a strong, positive cash flow in fiscal 1997, which resulted in net cash provided by operations of $27.8 million. This represented an increase of $15.1 million from the prior year. Net income increased by $1.7 million or 9.2% to $20.0 million and non-cash depreciation and amortization charges increased by $0.9 million. Based on the Consolidated Statement of Cash Flows which eliminates the effect of fluctuations in foreign currency translation rates, working capital requirements were reduced and cash of $5.1 million was provided compared to the prior year when working capital requirements increased and used $11.5 million. The largest change was in inventory levels. In fiscal 1997, inventories decreased by $5.2 million whereas in the prior year inventories increased by $4.2 million. In fiscal 1996, other assets were reduced by $3.5 million due principally to a dividend received from a joint venture, which was not repeated in fiscal 1997. For the three year period ended June 29, 1997, net cash provided by operations has exceeded capital expenditures by $21.0 million. The capital spending program in fiscal 1997 was focused on expanding capacity and cost reduction projects in the domestic rice business and also included a $10.9 million investment in an energy cogeneration joint venture project with a major rice milling company in Arkansas. The Company's net investment in this cogeneration project was $6.0 million after deducting $4.9 million contributed by the other joint venture partner. Dividends paid per share of common stock increased 9.6% to $0.38 in fiscal 1997. In fiscal 1996, the board of directors of the Company authorized the open-market repurchase, from time to time, of up to 500 thousand 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 1997 the Company spent $2.2 million to repurchase 136.8 thousand shares at an average price of $16.10 per share. Through the end of fiscal 1997, the Company has repurchased a total of 164.8 thousand shares and 35.1 thousand shares have been reissued upon exercise of employee stock options. The Company has an aggregate of $45.0 million in domestic, short-term, unsecured revolving credit facilities with two banks. Under the terms of these facilities, the Company has the option of borrowing at the bank's prime rate or at the Eurodollar rate plus 3/8%. At June 29, 1997, the Company had $2.0 million in loans and $1.7 million in letters of credit outstanding under these credit facilities. One of these facilities will expire in fiscal 1998 and the Company expects to renew the facility for another one-year period. One of the agreements contains limited financial covenants and the Company is currently in compliance with all of these covenants. 10 The Company's international operations are financed internally or through borrowings in local currency without the benefit of parent Company guarantees, with the exception of the Company's United Kingdom operations, for which the Company provides a guarantee for a 5/84.0 million revolving short-term credit facility. This facility expires in February 1998 and at June 29, 1997 no loans were outstanding under this facility. The Company's foreign subsidiaries have a total of $17.0 million in short-term credit lines from local sources and at June 29, 1997, the subsidiaries have borrowed a total of $3.0 million. The Company holds a portfolio of marketable securities with a market value of $4.4 million at June 29, 1997, 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. FORWARD LOOKING STATEMENTS The statements contained in this Form 10-K include forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. Although the Company believes that the expectations reflected in such forward looking statements are based upon reasonable assumptions, the Company can give no assurance that these expectations will be achieved. 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- Consolidated Financial Statements: Report of Independent Public Accountants ............................. 12 Consolidated Balance Sheets as of June 29, 1997, and June 30, 1996 ... 13 Consolidated Statements of Income for the fiscal years ended June 29, 1997, June 30, 1996, and July 2, 1995 ..................... 14 Consolidated Statements of Capital Accounts and Retained Earnings for the fiscal years ended June 29, 1997, June 30, 1996, and July 2, 1995 ....................................................... 15 Consolidated Statements of Other Equity Accounts for the fiscal years ended June 29, 1997, June 30, 1996, and July 2, 1995 ......... 15 Consolidated Statements of Cash Flows for the fiscal years ended June 29, 1997, June 30, 1996, and July 2, 1995 ..................... 16 Notes to Consolidated Financial Statements ........................... 17 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Riviana Foods Inc.: We have audited the accompanying consolidated balance sheets of Riviana Foods Inc. (a Delaware corporation) and subsidiaries as of June 29, 1997, and June 30, 1996, and the related consolidated statements of income, capital accounts and retained earnings, other equity accounts and cash flows for each of the three fiscal years in the period ended June 29, 1997. 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 generally accepted auditing standards. 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 June 29, 1997, and June 30, 1996, and the results of their operations and their cash flows for each of the three fiscal years in the period ended June 29, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas August 12, 1997 12 RIVIANA FOODS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) JUNE 29, 1997 JUNE 30, 1996 ------------- ------------- ASSETS CURRENT ASSETS: Cash............................... $ 4,562 $ 7,086 Cash equivalents................... 2,478 304 Marketable securities.............. 4,405 8,244 Accounts receivable, less allowance for doubtful accounts of $529 and $419.............................. 43,493 42,109 Inventories........................ 48,454 52,884 Prepaid expenses................... 2,295 1,987 ------------- ------------- Total current assets.......... 105,687 112,614 PROPERTY, PLANT AND EQUIPMENT: Land............................... 3,550 3,466 Buildings.......................... 21,848 20,334 Machinery and equipment............ 81,830 62,468 ------------- ------------- Property, plant and equipment -- gross.............. 107,228 86,268 Less -- Accumulated depreciation... (38,065) (33,921) ------------- ------------- Property, plant and equipment -- net................ 69,163 52,347 DUE FROM AFFILIATES..................... 55 INVESTMENTS IN UNCONSOLIDATED AFFILIATES............................ 11,471 12,176 OTHER ASSETS............................ 5,568 5,312 ------------- ------------- Total assets.................. $ 191,889 $ 182,504 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt.................... $ 5,011 $ 10,770 Current maturities of long-term debt.............................. 1,863 2,261 Accounts payable................... 20,629 22,204 Accrued liabilities................ 13,940 12,418 Income taxes payable............... 5,382 3,968 ------------- ------------- Total current liabilities..... 46,825 51,621 LONG-TERM DEBT, net of current maturities............................ 2,619 3,644 DUE TO AFFILIATES....................... 135 DEFERRED INCOME TAXES................... 5,884 6,348 OTHER NONCURRENT LIABILITIES............ 2,995 2,970 COMMITMENTS AND CONTINGENCIES........... MINORITY INTERESTS...................... 6,355 1,415 STOCKHOLDERS' EQUITY: Preferred stock, $1 par, 5,000 shares authorized, none issued.... Common stock, $1 par, 24,000 shares authorized, 15,883 issued......... 15,883 15,883 Paid-in capital.................... 6,215 6,067 Retained earnings.................. 109,851 96,036 Unrealized gains on marketable securities, net of taxes.......... 2,273 2,364 Cumulative foreign currency translation adjustment............ (5,059) (3,636) Treasury stock, at cost, 130 and 16 shares............................ (2,087) (208) ------------- ------------- Total stockholders' equity.... 127,076 116,506 ------------- ------------- Total liabilities and stockholders' equity...... $ 191,889 $ 182,504 ============= ============= The accompanying notes are an integral part of these consolidated financial statements. 13 RIVIANA FOODS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED ---------------------------------------------- JUNE 29, 1997 JUNE 30, 1996 JULY 2, 1995 ------------- ------------- ------------ NET SALES............................... $ 460,183 $ 440,492 $427,229 COST OF SALES........................... 334,837 316,913 304,381 ------------- ------------- ------------ Gross profit....................... 125,346 123,579 122,848 ------------- ------------- ------------ COSTS AND EXPENSES: Advertising, selling and warehousing...................... 75,879 78,445 81,102 Administrative and general......... 19,413 19,311 19,429 ------------- ------------- ------------ Total costs and expenses...... 95,292 97,756 100,531 ------------- ------------- ------------ Income from operations........ 30,054 25,823 22,317 OTHER INCOME (EXPENSE): Gain on sale of marketable securities....................... 1,676 977 753 Interest income.................... 587 465 403 Interest expense................... (2,002) (2,814) (3,089) Equity in earnings of unconsolidated affiliates........ 796 1,819 1,665 Other income (expense)............. (1,189) 176 99 ------------- ------------- ------------ Total other income (expense).................. (132) 623 (169) ------------- ------------- ------------ Income before income taxes and minority interests......... 29,922 26,446 22,148 INCOME TAX EXPENSE...................... 9,559 7,770 6,963 MINORITY INTERESTS IN EARNINGS OF CONSOLIDATED SUBSIDIARIES............. 338 334 254 ------------- ------------- ------------ Net income......................... $ 20,025 $ 18,342 $ 14,931 ============= ============= ============ Earnings per share................. $ 1.27 $ 1.16 $ 0.96 ============= ============= ============ Weighted average common shares outstanding...................... 15,814 15,873 15,534 ============= ============= ============
The accompanying notes are an integral part of these consolidated financial statements. 14 RIVIANA FOODS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CAPITAL ACCOUNTS AND RETAINED EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COMMON STOCK TREASURY STOCK ----------------- PAID-IN RETAINED ----------------- SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL ------ ------- ------- -------- ------ ------- --------- BALANCE, July 3, 1994.... 15,378 $15,378 $1,021 $ 73,565 $ 89,964 Net income........... 14,931 14,931 Sales of common stock, net of initial public offering expenses of $1,040.......... 511 511 4,103 4,614 Dividends declared ($.3333 per share)............. (5,167) (5,167) Repurchase of common stock.............. (6) (6) (5) (15) (26) Collection of employee discount on stock........... 941 941 ------ ------- ------- -------- --------- BALANCE, July 2, 1995.... 15,883 15,883 6,060 83,314 105,257 Net income........... 18,342 18,342 Sales of common stock.............. (12) 12 $ 158 146 Dividends declared ($.3533 per share)............. (5,608) (5,608) Repurchases of common stock.............. 7 (28) (366) (359) ------ ------- ------- -------- ------ ------- --------- BALANCE, June 30, 1996... 15,883 15,883 6,067 96,036 (16) (208) 117,778 Net income........... 20,025 20,025 Sales of common stock.............. (47) 23 323 276 Dividends declared ($.39 per share)... (6,163) (6,163) Repurchases of common stock.............. (137) (2,202) (2,202) Collection of employee discount on stock........... 117 117 Tax credit for disqualifying dispositions of stock.............. 31 31 ------ ------- ------- -------- ------ ------- --------- BALANCE, June 29, 1997... 15,883 $15,883 $6,215 $109,851 (130) $(2,087) $ 129,862 ====== ======= ======= ======== ====== ======= =========
CONSOLIDATED STATEMENTS OF OTHER EQUITY ACCOUNTS (IN THOUSANDS) UNREALIZED CUMULATIVE GAINS ON FOREIGN MARKETABLE CURRENCY SECURITIES, TRANSLATION NET OF TAXES ADJUSTMENT ------------ ----------- BALANCE, July 3, 1994................... $2,125 $(1,435) Marketable securities, net of taxes: Realized (gains)............... (490) Unrealized gains............... 405 Effect of balance sheet translations....................... 933 ------------ ----------- BALANCE, July 2, 1995................... 2,040 (502) Marketable securities, net of taxes: Realized (gains)............... (634) Unrealized gains............... 958 Effect of balance sheet translations....................... (3,134) ------------ ----------- BALANCE, June 30, 1996.................. 2,364 (3,636) Marketable securities, net of taxes: Realized (gains)............... (1,161) Unrealized gains............... 1,070 Effect of balance sheet translations....................... (1,423) ------------ ----------- BALANCE, June 29, 1997.................. $2,273 $(5,059) ============ =========== The accompanying notes are an integral part of these consolidated financial statements. 15 RIVIANA FOODS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED -------------------------------------------- JUNE 29, 1997 JUNE 30, 1996 JULY 2, 1995 ------------- ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income......................... $ 20,025 $ 18,342 $ 14,931 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............... 5,228 4,328 5,190 Deferred income taxes......... (413) 551 (357) Gain on disposition of assets..................... (1,566) (1,068) (911) Equity in earnings of unconsolidated affiliates................. (796) (1,819) (1,665) Change in assets and liabilities: Accounts receivable, net................... (187) (3,012) 1,391 Inventories.............. 5,193 (4,167) 2,185 Prepaid expenses......... (177) (415) (439) Other assets............. (18) 3,452 827 Accounts payable and accrued liabilities... (1,224) (3,898) 4,059 Income taxes payable..... 1,448 (33) (2,827) Other noncurrent liabilities........... 67 172 263 Minority interests....... 242 249 166 ------------- ------------- ------------ Net cash provided by operating activities....... 27,822 12,682 22,813 ------------- ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment........................ (22,031) (11,041) (9,275) Proceeds from disposals of property, plant and equipment.... 63 432 243 Investment by joint venture partner.......................... 4,759 749 Proceeds from sale of marketable securities....................... 5,503 3,594 1,056 Due from (to) affiliates........... (707) 593 (1,489) Increase in marketable securities....................... (95) (335) (228) Other.............................. 52 14 59 ------------- ------------- ------------ Net cash used in investing activities....... (12,456) (5,994) (9,634) ------------- ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in short-term debt........ (5,903) (560) (18,266) Additions to long-term debt........ 763 5,835 2,238 Repayments of long-term debt....... (2,440) (3,753) (2,368) Dividends paid..................... (6,017) (5,504) (3,844) Repurchases of common stock........ (2,202) (359) (26) Sales of common stock, net of initial public offering expenses in 1995.......................... 276 146 4,614 Collection of employee discount on stock............................ 117 941 ------------- ------------- ------------ Net cash used in financing activities....... (15,406) (4,195) (16,711) ------------- ------------- ------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS.................. (310) (245) (18) ------------- ------------- ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................... (350) 2,248 (3,550) CASH AND CASH EQUIVALENTS, beginning of period................................ 7,390 5,142 8,692 ------------- ------------- ------------ CASH AND CASH EQUIVALENTS, end of period................................ $ 7,040 $ 7,390 $ 5,142 ============= ============= ============
The accompanying notes are an integral part of these consolidated financial statements. 16 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 29, 1997, JUNE 30, 1996, AND JULY 2, 1995 (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 through unconsolidated affiliates, Boost Distribution C.V. (Boost) and Herto N.V. (Herto), food operations in Guatemala and Costa Rica, Alimentos Kern de Guatemala, S.A., (Kern) and Pozuelo, S.A., (Pozuelo) 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(Registered Trademark), Mahatma(Registered Trademark), Carolina(Registered Trademark), River(Registered Trademark), Watermaid(Registered Trademark), Sello Rojo(Registered Trademark) and El Mago(Registered Trademark). Through unconsolidated affiliates Boost and Herto, the Company processes and sells packaged rice products under the Bosto(Registered Trademark) brand within Belgium, 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 Central America, Kern produces and markets a wide range of processed fruits and vegetables under the Kern's(Registered Trademark), Ducal(Registered Trademark), Koolfrut(Registered Trademark) and Fun-C(Registered Trademark) brands. Pozuelo produces and markets cookies and crackers under the Pozuelo(Registered Trademark) brand. Both Kern's and Pozuelo's products are sold primarily in Central America with some products under the Ducal(Registered Trademark) and Pozuelo(Registered Trademark) brands exported to certain United States markets. S&B distributes rice under the Phoenix brand and private labels as well as other food products in the United Kingdom to retail, wholesale, food service and industrial customers. (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. All fiscal years presented are 52-week fiscal years. 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. 17 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following represents summarized financial information with respect to the assets, liabilities and results of operations of the unconsolidated affiliates. BALANCE SHEET DATA JUNE 29, 1997 JUNE 30, 1996 - ---------------------------------------- ------------- ------------- Current assets.......................... $28,809 $33,685 Noncurrent assets....................... 15,866 16,965 ------------- ------------- Total assets....................... $44,675 $50,650 ============= ============= Current liabilities..................... $12,981 $21,728 Noncurrent liabilities.................. 8,365 4,807 Common equity: Riviana............................... 10,986 11,400 Other................................. 12,343 12,715 ------------- ------------- Total liabilities and equity....... $44,675 $50,650 ============= ============= INCOME STATEMENT DATA 1997 1996 1995 - ---------------------------------------- ---------- ---------- ---------- Net sales............................... $ 122,734 $ 129,620 $ 112,488 Gross profit............................ 16,496 16,467 16,405 Income before income taxes.............. 4,311 5,845 4,742 Net income.............................. 3,042 3,846 3,444 Equity in earnings of unconsolidated affiliates............................ 796 1,819 1,665 CHANGES IN ACCOUNTING PRINCIPLES Effective July 3, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Effective July 1, 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and SFAS No. 123, "Accounting for Stock-Based Compensation". As allowed by SFAS No. 123, the Company elected to continue to account for stock option grants in accordance with Accounting Principles Board (APB) Opinion No. 25, and, accordingly, will recognize no compensation expense for stock options granted, as all option plans require that the option exercise price be equal to the fair value of the common stock at the date of grant. See Note 11 for the pro forma impact of adoption of SFAS No. 123. Effective January 1, 1997, the Company adopted SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". The effect of adopting these statements had no material impact on the results of operations. The initial effect of adopting SFAS No. 115 was recorded as an increase in stockholders' equity of $2,125, net of taxes. RECENTLY ISSUED ACCOUNTING STANDARDS SFAS No. 128, "Earnings per Share", was issued in February 1997. The Company will adopt SFAS No. 128 in the second quarter of 1998. When adopted, SFAS No. 128 requires the retroactive restatement of all earnings per share reported. Had the Company adopted the statement in the current year, earnings per share would have been as follows: 1997 1996 1995 --------- --------- ----- Basic................................... $ 1.27 $ 1.16 $ .96 Diluted................................. 1.26 1.15 .96 SFAS No. 130, "Reporting Comprehensive Income", was issued in June 1997. The Company will adopt SFAS No. 130 in the first quarter of 1999. Had SFAS No. 130 been adopted as of June 29, 1997, net income, as reported, would have been adjusted by changes in unrealized gains on marketable securities, net of taxes, and cumulative foreign currency translation adjustment. 18 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles 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 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 and has incurred no impairments in the carrying values of its accounts receivable, other than that for which provision has been made. 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: JUNE 29, 1997 JUNE 30, 1996 ------------- ------------- Raw materials........................... $ 8,555 $10,697 Work in process......................... 31 34 Finished goods.......................... 33,130 34,959 Packaging supplies...................... 6,738 7,194 ------------- ------------- Total.............................. $48,454 $52,884 ============= ============= 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 15 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 when products are shipped. ADVERTISING The costs of advertising, promotion and marketing programs are charged to operations in the period incurred. 19 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 stockholders' equity. Because the Company follows the policy of not providing taxes on unremitted foreign earnings as discussed in Note 6, such translation gains and losses are not tax effected. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist primarily of cash, cash equivalents, trade receivables, trade payables and debt instruments. The Company periodically reviews these instruments for any 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 currency fluctuations related to inventory purchases. 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 enters into forward exchange contracts to hedge specific product commitments. The contracts have varying maturities with none exceeding twelve months and are settled at maturity, based on rates agreed to at the inception of the contracts. At June 29, 1997, the Company had established bank lines available to purchase forward exchange contracts in the amount of $41,645, of which $14,724 was outstanding. Gains and losses deferred in outstanding instruments at year end were immaterial. As a matter of policy, the Company does not engage in foreign currency speculation 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 with the current-year presentation. (3) 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 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 was specific identification. JUNE 29, 1997 JUNE 30, 1996 ------------- ------------- Aggregate fair value.................... $ 4,405 $ 8,244 Cost basis.............................. 908 4,608 ------------- ------------- Unrealized net gain before taxes... 3,497 3,636 Income taxes............................ 1,224 1,272 ------------- ------------- Unrealized gain, net of taxes...... $ 2,273 $ 2,364 ============= ============= Unrealized gains........................ $ 3,503 $ 3,696 Unrealized losses....................... (6) (60) ------------- ------------- Unrealized net gain before taxes... $ 3,497 $ 3,636 ============= ============= 20 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1997 1996 1995 --------- --------- --------- Proceeds from sales of marketable securities............................ $ 5,503 $ 3,594 $ 1,056 Realized gross gains.................... 1,681 992 753 Realized gross losses................... (5) (15) (4) ACCRUED LIABILITIES: Accrued liabilities consisted of the following: JUNE 29, 1997 JUNE 30, 1996 ------------- ------------- Payroll, commissions and bonuses........ $ 7,508 $ 5,936 Coupon redemption and advertising....... 2,185 2,386 Taxes, other than income taxes.......... 1,132 1,425 Other................................... 3,115 2,671 ------------- ------------- Total......................... $13,940 $12,418 ============= ============= (5) 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. The weighted average interest rate at June 29, 1997, and June 30, 1996, was 14.5% and 9.4%. A portion of the short-term debt at June 29, 1997, and June 30, 1996, is secured by certain assets of the foreign subsidiaries. The Company has unused lines of credit totaling about $55,205 at June 29, 1997, net of borrowings and $1,740 in letters of credit. Long-term debt consisted of the following: JUNE 29, 1997 JUNE 30, 1996 ------------- ------------- Total long-term debt.................... $ 4,482 $ 5,905 Less -- Current maturities.............. 1,863 2,261 ------------- ------------- Long-term debt, net of current maturities....................... $ 2,619 $ 3,644 ============= ============= Total long-term debt at June 29, 1997, matures as follows: 1998.................................... $ 1,863 1999.................................... 1,124 2000.................................... 803 2001.................................... 211 2002.................................... 160 Thereafter.............................. 321 --------- Total......................... $ 4,482 ========= Total interest paid was $2,025, $2,862 and $3,063 for 1997, 1996 and 1995. 21 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (6) INCOME TAXES: The provision for income taxes consisted of the following: 1997 1996 1995 --------- --------- --------- Federal................................. $ 6,432 $ 2,140 $ 4,506 State................................... 556 523 532 Foreign................................. 3,035 1,805 2,322 --------- --------- --------- Total current provision............ 10,023 4,468 7,360 --------- --------- --------- Federal................................. (443) 3,316 (396) Foreign................................. (21) (14) (1) --------- --------- --------- Total deferred provision (benefit)........................ (464) 3,302 (397) --------- --------- --------- Income tax expense................. $ 9,559 $ 7,770 $ 6,963 ========= ========= ========= Total income taxes paid................. $ 8,396 $ 7,807 $ 10,356 ========= ========= ========= 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:
1997 1996 1995 -------------------- -------------------- -------------------- PERCENT PERCENT PERCENT TAX OF TAX OF TAX OF EXPENSE PRETAX EXPENSE PRETAX EXPENSE PRETAX (BENEFIT) INCOME (BENEFIT) INCOME (BENEFIT) INCOME ---------- ------- ---------- ------- ---------- ------- Taxes at U.S. federal statutory rate.............. $ 10,473 35.0% $ 9,256 35.0% $ 7,752 35.0% Resolution of issues at less than estimate previously provided.................... (2,032) (7.7) Foreign earnings subject to tax rates that are different than the U.S. federal statutory rate.............. (923) (3.1) (443) (1.7) (1,082) (4.9) State taxes, net of federal benefit..................... 362 1.2 340 1.3 346 1.6 Taxes on dividends received from foreign subsidiaries... 211 0.7 495 1.9 318 1.4 Other......................... (564) (1.9) 154 .6 (371) (1.7) ---------- ------- ---------- ------- ---------- ------- Income tax expense / effective rate................... $ 9,559 31.9% $ 7,770 29.4% $ 6,963 31.4% ========== ======= ========== ======= ========== =======
22 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of deferred taxes were as follows: JUNE 29, 1997 JUNE 30, 1996 ------------- ------------- Staff termination indemnities........... $ 328 $ 705 Accrued employee benefits............... 948 691 State taxes............................. 823 770 Accrued liabilities..................... 1,214 1,361 Allowance for doubtful accounts......... 160 129 Other................................... 33 54 ------------- ------------- Total deferred tax assets.......... 3,506 3,710 ------------- ------------- Property, plant and equipment and other................................. 6,626 6,696 Inventory............................... 1,540 2,041 Marketable securities................... 1,224 1,321 ------------- ------------- Total deferred tax liabilities..... 9,390 10,058 ------------- ------------- Net deferred tax liabilities................ $ 5,884 $ 6,348 ============= ============= Income before income taxes, minority interest and extraordinary item of foreign subsidiaries was $10,959, $6,878 and $9,384 for 1997, 1996 and 1995. 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 $32,967, $30,274 and $27,843 as of June 29, 1997, June 30, 1996, and July 2, 1995. (7) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS: Riviana has a defined benefit plan covering substantially all United States 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 amount actuarially necessary to provide for retirement benefits. The following table sets forth the plan's funded status and amounts recognized in the Company's consolidated balance sheets: JUNE 29, 1997 JUNE 30, 1996 ------------- ------------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $12,799 and $11,040................ $14,901 $12,802 ============= ============= Projected benefit obligation for service rendered through fiscal year end........................... $17,717 $15,010 Plan assets at fair value, primarily listed stocks, short-term cash investments, and government securities............................ 17,453 14,401 ------------- ------------- Plan assets below projected benefit obligation............................ (264) (609) Unrecognized net asset at June 29, 1987, net of amortization, arising from the initial application of SFAS No. 87 being recognized over nine years...... (3) Unrecognized net (gain) loss from experience different from that assumed............................... (97) 728 Unrecognized prior service costs........ 400 275 ------------- ------------- Prepaid pension cost included in accrued liabilities..... $ 39 $ 391 ============= ============= 23 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Net pension costs included the following components: 1997 1996 1995 --------- --------- --------- Service cost-benefits earned during the year.................................. $ 1,719 $ 1,588 $ 1,408 Interest cost on projected benefit obligation............................ 1,185 1,005 858 Actual return on plan assets............ (3,254) (2,421) (1,822) Net amortization and deferral........... 1,900 1,428 1,111 --------- --------- --------- Net pension cost................... $ 1,550 $ 1,600 $ 1,555 ========= ========= ========= Significant assumptions: Weighted average discount rate..... 7.25% 7.0% 7.5% Rate of increase in compensation levels........................... 4.5 5.0 5.0 Long-term rate of return on plan assets........................... 9.0 9.0 8.0 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 $547, $403 and $476 during 1997, 1996 and 1995. 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 consolidated balance sheets. The Company recorded expense of $204, $175 and $149 related to these plans for 1997, 1996 and 1995. (8) RELATED PARTY TRANSACTIONS: The Company paid $1,318, $2,234 and $1,144 for 1997, 1996 and 1995, 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 $2,143 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. 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. (9) COMMITMENTS AND CONTINGENCIES: LEASE COMMITMENTS At June 29, 1997, future minimum lease payments and sublease rentals under long-term operating lease obligations amounted to: GROSS SUBLEASE LEASE RENTAL NET LEASE PAYMENTS INCOME PAYMENTS -------- -------- --------- 1998.................................... $ 2,954 $ 519 $ 2,435 1999.................................... 2,568 442 2,126 2000.................................... 1,898 297 1,601 2001.................................... 1,184 110 1,074 2002.................................... 1,019 111 908 Thereafter.............................. 3,684 84 3,600 -------- -------- --------- Total.............................. $ 13,307 $1,563 $11,744 ======== ======== ========= Rent expense net of rental income was $2,777, $3,252 and $3,250 for 1997, 1996 and 1995. 24 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 29, 1997, the Company had an $8,216 investment in Boost which represents a 49% ownership interest. The Boost stockholder agreement provides, effective in 1997, 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. (10) CAPITAL STOCK: COMMON STOCK At June 29, 1997, the Company has outstanding 2,068 shares of common stock sold before the initial public offering to directors, officers and key employees of the Company or Boost at a discount of $2,171. 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. The 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. There were no sales of common stock at a discount in 1997 or 1996. In 1995, 5 shares of common stock were sold for the formula based estimate of fair value of $33 less a discount of $16. On December 28, 1994, the stockholders of the Company approved a twelve-for-one split of common stock and an increase in par value from $.01 per share before the split to $1.00 per share after the split. Accordingly, all common share references in the financial statements have been restated to reflect the split, unless otherwise indicated. The Company's common stock trades on The Nasdaq Stock Market (trading symbol RVFD). PREFERRED STOCK At June 29, 1997, 5,000 shares of $1.00 per share par value preferred stock are authorized. No shares of preferred stock have been issued. (11) STOCK OPTION PLANS: On December 28, 1994, the Company's stockholders adopted an incentive stock option plan (1994 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, a total of 795 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. 25 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Plans' activity is summarized below:
1997 1996 1995 ----------------------- ----------------------- ------------------------ WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ -------------- ------ -------------- ------ --------------- Options outstanding, beginning of year.................................. 403 $12.21 418 $12.08 Granted................................. 209 16.40 8 18.50 420 $12.08 Exercised............................... (23) 12.00 (12) 12.00 Canceled................................ (31) 13.13 (11) 12.00 (2) 12.00 ------ ------ ------ End of year: Options outstanding................ 558 13.74 403 12.21 418 12.08 ====== ====== ====== Options exercisable................ 129 12.23 70 12.12 ====== ====== Options outstanding price range.... $12.00-$18.50 $12.00-$18.50 $12.00-$13.625
All options outstanding at June 29, 1997, have a weighted average remaining contractual life in years of 8.3 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 compensation expense has been recognized. Had compensation expense been determined based on the Black-Scholes option pricing model value at the grant date for awards in 1997 and 1996 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: 1997 1996 --------- --------- Net income: As reported........................ $ 20,025 $ 18,342 Pro forma.......................... 19,469 18,338 Earnings per share: As reported........................ $1.27 $1.16 Pro forma.......................... 1.23 1.16 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 1997 and 1996. The weighted average value and the assumptions used were as follows: 1997 1996 ----- --------- Weighted average value per share........ $6.92 $ 7.92 Option term until exercised (years)..... 7 7 Risk-free interest rate................. 6.5% 6.7% Expected dividend yield................. 2.5% 2.6% Volatility.............................. 0.37 0.39 (12) SEGMENT INFORMATION: INDUSTRY SEGMENTS The Company operates in one dominant industry segment which involves the processing, marketing and distribution of food products. GEOGRAPHIC SEGMENTS 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 26 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) finished food products which are sold at adjusted market prices. The Company does not derive more than 10% of its revenue from any single customer. 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: 1997 1996 1995 ---------- ---------- ---------- Sales to unaffiliated customers: Domestic.............................. $ 277,019 $ 254,403 $ 241,461 Europe................................ 108,315 116,384 117,180 Central America....................... 74,849 69,705 68,588 ---------- ---------- ---------- Total consolidated............ $ 460,183 $ 440,492 $ 427,229 ========== ========== ========== Sales between geographic areas: Domestic.............................. $ 1,552 $ 1,717 $ 2,209 Central America....................... 9,384 11,041 9,636 Eliminations.......................... (10,936) (12,758) (11,845) ---------- ---------- ---------- Total consolidated............ $ 0 $ 0 $ 0 ========== ========== ========== Income: Operating income: Domestic........................... $ 27,140 $ 26,509 $ 20,832 Europe............................. 2,455 1,639 2,013 Central America.................... 9,865 6,746 8,496 ---------- ---------- ---------- Total operating income........ 39,460 34,894 31,341 Equity in earnings of unconsolidated affiliates......................... 796 1,819 1,665 General corporate expenses............ (9,406) (9,071) (9,024) Interest expense...................... (2,002) (2,814) (3,089) Other income (expense), net........... 1,074 1,618 1,255 ---------- ---------- ---------- Income before income taxes, minority interest and extraordinary item............... $ 29,922 $ 26,446 $ 22,148 ========== ========== ========== Identifiable assets at end of year: Domestic.............................. $ 112,017 $ 96,381 $ 85,642 Europe................................ 31,131 39,619 40,441 Central America....................... 36,687 31,108 32,891 ---------- ---------- ---------- Total identifiable assets..... 179,835 167,108 158,974 Corporate assets...................... 12,054 15,396 16,709 ---------- ---------- ---------- Total assets.................. $ 191,889 $ 182,504 $ 175,683 ========== ========== ========== 27 RIVIANA FOODS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (13) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
QUARTERS ENDED ---------------------------------------------- SEPTEMBER DECEMBER MARCH JUNE YEAR --------- -------- ---------- ---------- ---------- 1997 Net sales................ $ 105,005 $118,791 $ 119,022 $ 117,365 $ 460,183 Gross profit............. 26,564 33,606 33,056 32,120 125,346 Income before income taxes and minority interests.............. 4,996 8,685 7,705 8,536 29,922 Net income............... 3,240 5,778 5,184 5,823 20,025 Per share: Earnings............... .20 .37 .33 .37 1.27 Cash dividends paid.... .09 .09 .10 .10 .38 Market price: High............. 17.000 18.500 18.500 19.500 19.500 Low.............. 14.500 14.875 16.750 15.250 14.500 1996 Net sales................ $ 101,856 $112,923 $ 114,650 $ 111,063 $ 440,492 Gross profit............. 27,996 33,888 30,842 30,853 123,579 Income before income taxes and minority interest............... 4,639 8,215 6,639 6,953 26,446 Net income............... 3,015 5,345 4,752 5,230 18,342 Per share: Earnings............... .19 .34 .30 .33 1.16 Cash dividends paid.... .0833 .0833 .0900 .0900 .3466 Market price: High............. 14.125 14.000 15.000 19.000 19.000 Low.............. 11.625 12.250 12.750 14.375 11.625
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. 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There is nothing to be reported under this item. 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" and "Retirement Plan" 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 Interlocks 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: Report of Independent Public Accountants Consolidated Balance Sheets as of June 29, 1997 and June 30, 1996 Consolidated Statements of Income for the fiscal years ended June 29, 1997, June 30, 1996, and July 2, 1995 Consolidated Statements of Capital Accounts and Retained Earnings for the fiscal years ended June 29, 1997, June 30, 1996, and July 2, 1995 Consolidated Statements of Other Equity Accounts for the fiscal years ended June 29, 1997, June 30, 1996, and July 2, 1995 Consolidated Statements of Cash Flows for the fiscal years ended June 29, 1997, June 30, 1996, and July 2, 1995 Notes to Consolidated Financial Statements (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(i) 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(ii) The Company's By-laws, as amended effective May 17, 1995, is incorporated herein by reference to Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended July 2, 1995 *10(i) Consulting Agreement between Riviana Foods Inc. and Frank A. Godchaux III dated January 1, 1996 is incorporated herein by reference to Exhibit 10.1 to the Company's Annual Report on From 10-K for the fiscal year ended June 30, 1996. *10(ii) Consulting Agreement between Riviana Foods Inc. and Charles R. Godchaux dated July 1, 1994 is incorporated herein by reference to Exhibit 10.02 to the Registration Statement *10(iii) Benefit Restoration Plan is incorporated herein by reference to Exhibit 10.03 to the Registration Statement *10(iv) 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(v) 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 10(vi) Shareholder Agreement among N&C Boost N.V., Arrocerias Herba, S.A. and Ricegrowers' CoOperative Limited dated January 29, 1992 is incorporated herein by reference to Exhibit 10.06 to the Registration Statement 10(vii) 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(viii) 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(ix) 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(x) 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(xi) 1994 Stock Option Plan is incorporated herein by reference to Exhibit 10.11 to the Registration Statement *10(xii) 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(xiii) 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(xiv) 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(xv) 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(xvi) Amended and Restated 1995 Non-Employee Director Stock Option Plan dated May 17, 1996 is incorporated herein by reference to Exhibit 10.1 to the Company's Annual Report on From 10-K for the fiscal year ended June 30, 1996. *10(xvii) 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(xviii)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. 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 Arthur Andersen LLP 24 Powers of Attorney of the Company's directors (b) None - ---------------------- * A management contract, compensatory plan or arrangement 29 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 25, 1997. 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 25, 1997. SIGNATURE CAPACITY - --------------------------- --------------------------------------------------- /s/ JOSEPH A. HAFNER, JR. Chief Executive Officer, President and Director JOSEPH A. HAFNER, JR. (Principal Executive Officer) /s/ W. DAVID HANKS Executive Vice President and Director W. DAVID HANKS /s/ E. WAYNE RAY, JR. Vice President, Chief Financial Officer, Treasurer E. WAYNE RAY, JR. and Director (Principal Financial and Accounting Officer) *FRANK A. GODCHAUX III Chairman of the Board *CHARLES R. GODCHAUX Vice Chairman of the Board *THERESA G. PAYNE Director *MARY G. WIECK Director *W. ELTON KENNEDY Director *E. JAMES LOWREY Director *PATRICK W. ROSE Director *THOMAS B. WALKER, JR. Director *By /s/ ELIZABETH B. WOODARD ELIZABETH B. WOODARD (AS ATTORNEY-IN-FACT FOR EACH OF THE PERSONS INDICATED) 30 EX-10.XVII 2 November 8, 1996 Mr. W. David Hanks Riviana Foods Inc. P. O. Box 2636 Houston, TX 77252 Re: Amendment of Stock Purchase Agreement Dated December 15, 1994 Dear Dave: You are either (1) a party to an agreement with Riviana Foods Inc. (the "Company") entitled Amendment and Restatement of Executive Officer's Stock Purchase Agreement, dated December 15, 1994 (the "Agreement"), or (2) the donee of a party to the Agreement who has agreed in writing to be bound by its terms. The Agreement imposes restrictions on certain shares of the $1 (formerly $.01) par value Common Stock of the Company owned by you (the "Shares") that were purchased from the Company by you (or by your donor) more than three years ago at a discounted price. The Agreement is one of several substantially identical agreements entered into by the Company with a number of its executive employees and those of its subsidiaries prior to the initial public offering of Company stock in 1995. The Agreement in effect prohibits you from selling any of the Shares at a time when you (or, in case you are a donee, your donor) are employed by the Company. For that reason, the Company believes the Agreement is unduly restrictive in view of the Company's initial public offering last year. Accordingly, the Company believes it is in both your and its best interests that the Agreement be amended to permit you to sell at your option from time to time some or all of the Shares under certain circumstances during the term of your (or your donor's) employment by the Company. The purpose of this letter is to set forth the terms (1) of an amendment (the "Amendment") to the Agreement (and, if you are a donee of the Shares, a corresponding amendment of your separate agreement with the Company to hold the Shares subject to the Company's Agreement with your donor), and (2) under which you may at your option elect to sell part or all of the Shares pursuant to the Amendment. Amendment of Stock Purchase Agreement Page 2 1. AMENDMENT OF AGREEMENT. Subject to your acceptance of this letter, the Agreement shall be and it is hereby amended so as to add thereto a new Section 16 reading as follows: 16. Anything to the contrary in Sections 2 and 7 of this Agreement notwithstanding, Employee (or the Donee, as to Shares owned by a donee) shall have the right, at any time while Employee is employed by Riviana, to (a) sell all or a portion of the Shares (i) pursuant to and in compliance with Rule 144 of the General Rules and Regulations under the 1933 Act, (ii) pursuant to an effective registration statement under the 1933 Act in which the Shares have, at the option of Riviana and under conditions specified by it, been included, or (iii) in any other manner as to which Riviana has received the written opinion of counsel reasonably satisfactory to it that such sale is exempt from registration under the Act and under any applicable state securities laws, or (b) donate all or a portion of the Shares to one or more nonprofit organizations, provided Employee makes arrangements reasonably satisfactory to Riviana to remit to it, at the time of such sale or donation, the amount in cash referred to above in Section 4. 2. SALE UNDER RULE 144. If circumstances had been such that you (or your donor, as the case may be) were not obligated by the terms of the Agreement to repay the discount allowed with respect to the purchase of the Shares from the Company (as described in Sections 2, 3, and 4 of the Agreement and referred to below as the "Discount"), then you would be eligible under the Amendment to sell any or all of the Shares from time to time in brokers' transactions pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Act"), without the necessity of registration of such sales under the Act (subject to existing Company policies of general application to all sales of Company stock by employees). The Company has been advised by counsel that so long as the Discount remains unpaid, however, a question might be raised as to the availability of Rule 144 for brokerage sales by you of the Shares because of the requirement in paragraph (d)(1) of Amendment of Stock Purchase Agreement Page 3 Rule 144 that the full purchase price of securities sold in reliance on the rule must have been paid at least two years before the sale. Although counsel is of the opinion, based on so-called "no action" letters that have been issued in the past by the staff of the Securities and Exchange Commission ("SEC") in similar cases, that Rule 144 is available for sales of the Shares by you pursuant to the Amendment notwithstanding Rule 144(d)(1), counsel has recommended that the Company seek a confirmatory "no action" letter from the staff of the SEC before facilitating sales of Shares by you under Rule 144. The process of obtaining such confirmation could require several months. Because of the delay in the availability to you of Rule 144 for making sales of Shares, the Company is prepared to file a so-called shelf registration statement on Form S-3 under the Act with the SEC (the "Registration Statement") at its expense covering such brokerage sales of the Shares as you and other employee-stockholders who have purchased Company stock under similar agreements may wish to make from time to time. (The Registration Statement will be filed, however, only if a sufficient number of employee-stockholders to justify the expense wish to avail themselves of the opportunity to have their shares registered for potential sale.) If the SEC staff issues a favorable no-action letter in response to the Company's request, then the Shares, and similarly restricted stock owned by others covered by the Registration Statement, will be deregistered and you may rely thereafter on Rule 144 as a means of selling Shares from time to time. If the SEC staff does NOT issue a favorable determination letter with respect to the availability of Rule 144, the Company presently anticipates that it will file and continue to maintain the effectiveness of the Registration Statement in order to permit you to sell Shares from time to time. No assurance can be given in that regard, however, and if the Registration Statement is filed with the SEC, the Company reserves the right to withdraw it at any time, after appropriate notice to you. 3. THE REGISTRATION STATEMENT. You are not required to authorize the Company to include your Shares in the Registration Statement. A blank is provided at the end of this letter where you may indicate whether you wish your Shares to be so included or not. If you check the "No" box below, then neither this Section 3 nor Section 4 will apply to you. If on the other hand you check the "Yes" box below and sign your name beneath it, that will constitute an authorization by you to the Company: Amendment of Stock Purchase Agreement Page 4 (a) to include your Shares in the Registration Statement until the earliest of (i) the disposition by you of all your Shares, (ii) the withdrawal by the Company of the Registration Statement, (iii) written instruction to the Company by you or your legal representative to withdraw your Shares from the Registration Statement, or (iv) your death, (b) to name you as a selling shareholder in the Registration Statement and to provide therein such information concerning you as is required from time to time by applicable SEC rules, as supplied by you, and (c) to file such amendments of the Registration Statement with the SEC from time to time as the Company considers appropriate. In addition, if you check the "Yes" box below and sign your name beneath it, you thereby agree: (i) to complete accurately the enclosed questionnaire; to return it to W. David Hanks at the Company no later than November 18, 1996; and to notify the Company immediately in writing of any change in the information supplied in the questionnaire for so long as the Shares are covered by the Registration Statement, (ii) to indemnify the Company, to the extent provided in Section 4 below, against certain liabilities under the securities laws with respect to information supplied by you for inclusion in the Registration Statement, as described below, (iii) to notify the Company immediately of all sales of Shares pursuant to the Registration Statement, (iv) to pay out of the proceeds of any sale of Shares pursuant to the Registration Statement: (A) to the Company, the Discount allocable to the Shares sold, (B) any underwriting discount or commission due with respect to such sale, and (C) your pro rata share of the fee for filing the Registration Statement with the SEC, and Amendment of Stock Purchase Agreement Page 5 (v) to continue to comply with Company policies relating generally to transactions by employees in Company securities, as they presently exist and may be amended from time to time, to the extent such policies are applicable to Shares covered by the Registration Statement. YOU ARE NOT REQUIRED TO SELL ANY SHARES BY REASON OF YOUR ELECTION TO INCLUDE THEM IN THE REGISTRATION STATEMENT. The Registration Statement merely affords an optional means by which you may, if you wish, sell any or all of the Shares from time to time, one or more times, when and as determined by you. You may include the Shares in the Registration Statement and still elect not to sell them. If you elect to sell Shares under the Registration Statement, you may be deemed to be a statutory underwriter for purposes of the Act, which means you could under certain circumstances be liable to purchasers of the Shares for any decline in their value during a period of not less than one year following your sale, if the Registration Statement is found to contain an untrue statement of a material fact or to have omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Because the Company believes it is in its best interests as well as yours that you have an opportunity to sell the Shares while you (or your donor) are employed by the Company, and in consideration of your agreement to indemnify the Company against liability under the Act to the extent provided in Section 4 below with respect to information supplied by you, the Company agrees to indemnify you against liability under the Act to the extent provided in Section 4 below with respect to information supplied by it for inclusion in the Registration Statement. In the opinion of the SEC, however, the Company's foregoing agreement to indemnify (other than for expenses or attorneys fees incurred in the successful defense of a lawsuit) against liability under the Act incurred by a DIRECTOR, OFFICER, OR CONTROLLING PERSON OF THE COMPANY who sells stock under the Registration Statement is unenforceable. Accordingly, the Company will not indemnify a director, officer, or controlling person of the Company against liability under the Act unless in the opinion of its counsel the matter has been settled by controlling precedent, absent an adjudication by a court of appropriate jurisdiction that such indemnification is not against public policy as expressed in the Act. Amendment of Stock Purchase Agreement Page 6 As indicated previously, the Company will not file the Registration Statement unless a sufficient number of employee-stockholders check the "Yes" box below, and timely return the enclosed questionnaire properly completed, to justify the expense and administrative burden associated with the filing. In the event you check the "Yes" box and timely return the questionnaire, but the Company elects for any reason not to file the Registration Statement, or to withdraw it after it is filed, then you will be notified promptly. 4. INDEMNIFICATION AND CONTRIBUTION. (a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless you and each person, if any, who controls you within the meaning of Section 15 of the Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to which you or such controlling person may become subject under the Act or otherwise (A) that arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (B) that arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in any prospectus included in the Registration Statement or any amendment or supplement thereto ("Prospectus"), or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or alleged Amendment of Stock Purchase Agreement Page 7 untrue statement or any omission or alleged omission, if such settlement is effected with the written consent of the Company; and (iii) subject to the limitations set forth in Section 4(c), against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or alleged untrue statement or omission or alleged omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 4(a) shall not apply (x) with respect to any loss, liability, claim, damage or expense that arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by you expressly for use in the Registration Statement or any amendment thereto or the Prospectus or any amendment or supplement thereto, or (y) to the extent expressly limited by Section 3 in the case of directors, officers, and controlling persons of the Company. (b) INDEMNIFICATION BY YOU. You agree to indemnify and hold harmless the Company and each of its directors and officers (including each director and officer of the Company who signed the Registration Statement), and each person, if any, who controls the Company within the meaning of Section 15 of the Act, to the same extent as the indemnity contained in Section 4(a) hereof, but only insofar as such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or any amendment thereto, the Prospectus or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by you expressly for use therein. (c). CONDUCT OF INDEMNIFICATION PROCEEDINGS. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure Amendment of Stock Purchase Agreement Page 8 to so notify an indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 4(a) or (b) above, unless and then only to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party materially prejudices the indemnifying party or results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided under Section 4(a) or (b) above. After receipt of such notice, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, jointly with any other indemnifying party so notified, to assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by such indemnifying party and approved by the indemnified party, which approval shall not be unreasonably withheld; PROVIDED, HOWEVER, that, if the defendants in any such action or proceeding include both the indemnified party and the indemnifying party and the indemnified party reasonably determines, upon advice of counsel, that a conflict of interest exists or that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, then the indemnified party shall be entitled to one separate counsel, the reasonable fees and expenses of which shall be paid by the indemnifying party. If the indemnifying party does not assume the defense of any such action or proceeding, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party will pay the reasonable fees and expenses of counsel (which shall be limited to a single law firm) for the indemnified party. In such event, however, the indemnifying party will not be liable for any settlement effected without the written consent of such indemnifying party. If the indemnifying party assumes the defense of any such action or proceeding in accordance with this paragraph, such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified party incurred thereafter in connection with such action or proceeding, except as set forth in the proviso in the second sentence of this Section 4(c). (d) CONTRIBUTION. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section 4 is for any reason held to be unenforceable although applicable in accordance with its terms, the Company and you shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and you, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and you on the other (in such proportions that you and other Amendment of Stock Purchase Agreement Page 9 sellers under the Registration Statement are severally, not jointly, responsible for the balance), in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified parties shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or the indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The parties hereto agree that it would not be just or equitable if contributions pursuant to this Section 4(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 4(d), you shall not be required to contribute any amount in excess of the amount, if any, by which the total price at which Shares were sold to the public exceeds the amount of any damages that you would otherwise have been required to pay by reason of such untrue statement or omission. Notwithstanding the foregoing, no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(d), each person, if any, who controls you within the meaning of Section 15 of the Act shall have the same rights to contribution as you, and any director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Act shall have the same rights to contribution as the Company. (e) In the event any sale pursuant to the Registration Statement is effected as an underwritten offering, then the Company agrees to indemnify and hold harmless each underwriter of Shares to the same extent and on substantially similar terms as the Company's indemnification of you as set forth in Section 4(a) above. Amendment of Stock Purchase Agreement Page 10 5. PROCEDURES FOR SALE. (a) ALL SALES. In the event you elect to sell any Shares pursuant to Section 16 of the Agreement, the following procedures must be followed: (i) The stock certificates representing the Shares bear a restrictive legend referring to the Agreement. For that reason, the certificates are not negotiable until the legend has been removed. Accordingly, you should not initiate any steps to sell Shares without first reporting your intentions to the General Counsel at the Company. Upon receipt of your notification, the Company will advise you promptly: (A) if , under Company policy of general application to employee transactions in Company securities, a sale of Shares would be inappropriate at that time, and (B) if so, the earliest probable time when such a sale would not be inappropriate. (ii) Assuming a sale would not be inappropriate under Section 5(a)(i), the Company will make suitable arrangements to facilitate your surrender to the Company's transfer agent of stock certificates representing the Shares you intend to sell in exchange for new unlegended certificates in deliverable form, which the Company's transfer agent will make available to you, subject to your repayment to the Company of the Discount out of the proceeds of the sale of the Shares. In that connection, the Company may at its option require payment of the Discount as a condition of its releasing stock certificates in deliverable form covering the Shares to be sold. (iii) In the event you expect to sell any Shares pursuant to Section 16 of the Agreement OTHERWISE THAN PURSUANT TO RULE 144 OR THE REGISTRATION STATEMENT, you should make suitable arrangements for the Company to receive and approve a legal opinion of the kind referred to in Section 16 before proceeding with the sale. (iv) You must notify the Company in writing immediately after your completion of any such sale. Amendment of Stock Purchase Agreement Page 11 (b) SALES UNDER THE REGISTRATION STATEMENT ONLY. In addition to the procedures set forth above in Section 5(a), the following procedures must be followed with respect to all sales of Shares under the Registration Statement: (i) The manner in which sales of Shares are made shall be limited to (A) "brokers' transactions" (within the meaning of Section 4(4) of the Act), or (B) transactions directly with a "market maker" (as defined in Section 3(a)(38) of the Securities Exchange Act of 1934). (ii) No sale shall be made until you shall have notified the Company in writing of the jurisdictions in the United States in which you expect to sell the Shares, and the Company shall have thereafter advised you that your proposed sale has been appropriately qualified or registered under the state securities or blue sky laws applicable thereto or is exempt therefrom. (iii) No sale shall be made until you have received copies from the Company (which the Company will use reasonable efforts to provide to you on a timely basis) of the Prospectus included in the Registration Statement, as then supplemented or amended, and until you have delivered at least one copy to the broker or market maker through whom you sell the Shares. * * * * * * * * If the terms set forth above are satisfactory to you, please sign one copy of this letter at the place indicated below and return it as soon as possible. Amendment of Stock Purchase Agreement Page 12 Please also check the appropriate box below to indicate whether you wish to have the Shares included in the Registration Statement and, if you wish them included, sign your name again below the "Yes" box. Sincerely, RIVIANA FOODS INC. By: /s/ JOSEPH A. HAFNER, JR. Joseph A. Hafner, Jr. Accepted and agreed to this 18th day of November, 1996. /s/ W. DAVID HANKS W. David Hanks Please include my shares in the Registration Statement. Yes [X] No [ ] /s/ W. DAVID HANKS W. David Hanks EX-10.XVIII 3 EXHIBIT 10.18 November 8, 1996 Mr. Jack M. Nolingberg Vice President Riviana Foods Inc. P. O. Box 2636 Houston, TX 77252 Re: Amendment of Stock Purchase Agreement Dated December 15, 1994 Dear Jack: You are either (1) a party to an agreement with Riviana Foods Inc. (the "Company") entitled Amendment and Restatement of Executive Officer's Stock Purchase Agreement, dated December 15, 1994 (the "Agreement"), or (2) the donee of a party to the Agreement who has agreed in writing to be bound by its terms. The Agreement imposes restrictions on certain shares of the $1 (formerly $.01) par value Common Stock of the Company owned by you (the "Shares") that were purchased from the Company by you (or by your donor) more than three years ago at a discounted price. The Agreement is one of several substantially identical agreements entered into by the Company with a number of its executive employees and those of its subsidiaries prior to the initial public offering of Company stock in 1995. The Agreement in effect prohibits you from selling any of the Shares at a time when you (or, in case you are a donee, your donor) are employed by the Company. For that reason, the Company believes the Agreement is unduly restrictive in view of the Company's initial public offering last year. Accordingly, the Company believes it is in both your and its best interests that the Agreement be amended to permit you to sell at your option from time to time some or all of the Shares under certain circumstances during the term of your (or your donor's) employment by the Company. The purpose of this letter is to set forth the terms (1) of an amendment (the "Amendment") to the Agreement (and, if you are a donee of the Shares, a corresponding amendment of your separate agreement with the Company to hold the Shares subject to the Company's Agreement with your donor), and (2) under which you may at your option elect to sell part or all of the Shares pursuant to the Amendment. Amendment of Stock Purchase Agreement Page 2 1. AMENDMENT OF AGREEMENT. Subject to your acceptance of this letter, the Agreement shall be and it is hereby amended so as to add thereto a new Section 16 reading as follows: 16. Anything to the contrary in Sections 2 and 7 of this Agreement notwithstanding, Employee (or the Donee, as to Shares owned by a donee) shall have the right, at any time while Employee is employed by Riviana, to sell all or a portion of the Shares (a) pursuant to and in compliance with Rule 144 of the General Rules and Regulations under the 1933 Act, (b) pursuant to an effective registration statement under the 1933 Act in which the Shares have, at the option of Riviana and under conditions specified by it, been included, or (c) in any other manner as to which Riviana has received the written opinion of counsel reasonably satisfactory to it that such sale is exempt from registration under the Act and under any applicable state securities laws, provided Employee makes arrangements reasonably satisfactory to Riviana to remit to it, at the time of such sale, the amount in cash referred to above in Section 4. 2. SALE UNDER RULE 144. If circumstances had been such that you (or your donor, as the case may be) were not obligated by the terms of the Agreement to repay the discount allowed with respect to the purchase of the Shares from the Company (as described in Sections 2, 3, and 4 of the Agreement and referred to below as the "Discount"), then you would be eligible under the Amendment to sell any or all of the Shares from time to time in brokers' transactions pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Act"), without the necessity of registration of such sales under the Act (subject to existing Company policies of general application to all sales of Company stock by employees). The Company has been advised by counsel that so long as the Discount remains unpaid, however, a question might be raised as to the availability of Rule 144 for brokerage sales by you of the Shares because of the requirement in paragraph (d)(1) of Rule 144 that the full purchase price of securities sold in reliance on the rule must have been paid at least two years before the sale. Although counsel is of the opinion, based on Amendment of Stock Purchase Agreement Page 3 so-called "no action" letters that have been issued in the past by the staff of the Securities and Exchange Commission ("SEC") in similar cases, that Rule 144 is available for sales of the Shares by you pursuant to the Amendment notwithstanding Rule 144(d)(1), counsel has recommended that the Company seek a confirmatory "no action" letter from the staff of the SEC before facilitating sales of Shares by you under Rule 144. The process of obtaining such confirmation could require several months. Because of the delay in the availability to you of Rule 144 for making sales of Shares, the Company is prepared to file a so-called shelf registration statement on Form S-3 under the Act with the SEC (the "Registration Statement") at its expense covering such brokerage sales of the Shares as you and other employee-stockholders who have purchased Company stock under similar agreements may wish to make from time to time. (The Registration Statement will be filed, however, only if a sufficient number of employee-stockholders to justify the expense wish to avail themselves of the opportunity to have their shares registered for potential sale.) If the SEC staff issues a favorable no- action letter in response to the Company's request, then the Shares, and similarly restricted stock owned by others covered by the Registration Statement, will be deregistered and you may rely thereafter on Rule 144 as a means of selling Shares from time to time. If the SEC staff does NOT issue a favorable determination letter with respect to the availability of Rule 144, the Company presently anticipates that it will file and continue to maintain the effectiveness of the Registration Statement in order to permit you to sell Shares from time to time. No assurance can be given in that regard, however, and if the Registration Statement is filed with the SEC, the Company reserves the right to withdraw it at any time, after appropriate notice to you. 3. THE REGISTRATION STATEMENT. You are not required to authorize the Company to include your Shares in the Registration Statement. A blank is provided at the end of this letter where you may indicate whether you wish your Shares to be so included or not. If you check the "No" box below, then neither this Section 3 nor Section 4 will apply to you. If on the other hand you check the "Yes" box below and sign your name beneath it, that will constitute an authorization by you to the Company: (a) to include your Shares in the Registration Statement until the earliest of (i) the disposition by you of all your Shares, (ii) the withdrawal by the Company of the Amendment of Stock Purchase Agreement Page 4 Registration Statement, (iii) written instruction to the Company by you or your legal representative to withdraw your Shares from the Registration Statement, or (iv) your death, (b) to name you as a selling shareholder in the Registration Statement and to provide therein such information concerning you as is required from time to time by applicable SEC rules, as supplied by you, and (c) to file such amendments of the Registration Statement with the SEC from time to time as the Company considers appropriate. In addition, if you check the "Yes" box below and sign your name beneath it, you thereby agree: (i) to complete accurately the enclosed questionnaire; to return it to W. David Hanks at the Company no later than November 18, 1996; and to notify the Company immediately in writing of any change in the information supplied in the questionnaire for so long as the Shares are covered by the Registration Statement, (ii) to indemnify the Company, to the extent provided in Section 4 below, against certain liabilities under the securities laws with respect to information supplied by you for inclusion in the Registration Statement, as described below, (iii) to notify the Company immediately of all sales of Shares pursuant to the Registration Statement, (iv) to pay out of the proceeds of any sale of Shares pursuant to the Registration Statement: (A) to the Company, the Discount allocable to the Shares sold, (B) any underwriting discount or commission due with respect to such sale, and (C) your pro rata share of the fee for filing the Registration Statement with the SEC, and (v) to continue to comply with Company policies relating generally to transactions by employees in Company securities, as they presently Amendment of Stock Purchase Agreement Page 5 exist and may be amended from time to time, to the extent such policies are applicable to Shares covered by the Registration Statement. YOU ARE NOT REQUIRED TO SELL ANY SHARES BY REASON OF YOUR ELECTION TO INCLUDE THEM IN THE REGISTRATION STATEMENT. The Registration Statement merely affords an optional means by which you may, if you wish, sell any or all of the Shares from time to time, one or more times, when and as determined by you. You may include the Shares in the Registration Statement and still elect not to sell them. If you elect to sell Shares under the Registration Statement, you may be deemed to be a statutory underwriter for purposes of the Act, which means you could under certain circumstances be liable to purchasers of the Shares for any decline in their value during a period of not less than one year following your sale, if the Registration Statement is found to contain an untrue statement of a material fact or to have omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Because the Company believes it is in its best interests as well as yours that you have an opportunity to sell the Shares while you (or your donor) are employed by the Company, and in consideration of your agreement to indemnify the Company against liability under the Act to the extent provided in Section 4 below with respect to information supplied by you, the Company agrees to indemnify you against liability under the Act to the extent provided in Section 4 below with respect to information supplied by it for inclusion in the Registration Statement. In the opinion of the SEC, however, the Company's foregoing agreement to indemnify (other than for expenses or attorneys fees incurred in the successful defense of a lawsuit) against liability under the Act incurred by a DIRECTOR, OFFICER, OR CONTROLLING PERSON OF THE COMPANY who sells stock under the Registration Statement is unenforceable. Accordingly, the Company will not indemnify a director, officer, or controlling person of the Company against liability under the Act unless in the opinion of its counsel the matter has been settled by controlling precedent, absent an adjudication by a court of appropriate jurisdiction that such indemnification is not against public policy as expressed in the Act. As indicated previously, the Company will not file the Registration Statement unless a sufficient number of employee-stockholders check the "Yes" box below, and Amendment of Stock Purchase Agreement Page 6 timely return the enclosed questionnaire properly completed, to justify the expense and administrative burden associated with the filing. In the event you check the "Yes" box and timely return the questionnaire, but the Company elects for any reason not to file the Registration Statement, or to withdraw it after it is filed, then you will be notified promptly. 4. INDEMNIFICATION AND CONTRIBUTION. (a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless you and each person, if any, who controls you within the meaning of Section 15 of the Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to which you or such controlling person may become subject under the Act or otherwise (A) that arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (B) that arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in any prospectus included in the Registration Statement or any amendment or supplement thereto ("Prospectus"), or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or alleged untrue statement or any omission or alleged omission, if such settlement is effected with the written consent of the Company; and Amendment of Stock Purchase Agreement Page 7 (iii) subject to the limitations set forth in Section 4(c), against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or alleged untrue statement or omission or alleged omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 4(a) shall not apply (x) with respect to any loss, liability, claim, damage or expense that arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by you expressly for use in the Registration Statement or any amendment thereto or the Prospectus or any amendment or supplement thereto, or (y) to the extent expressly limited by Section 3 in the case of directors, officers, and controlling persons of the Company. (b) INDEMNIFICATION BY YOU. You agree to indemnify and hold harmless the Company and each of its directors and officers (including each director and officer of the Company who signed the Registration Statement), and each person, if any, who controls the Company within the meaning of Section 15 of the Act, to the same extent as the indemnity contained in Section 4(a) hereof, but only insofar as such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or any amendment thereto, the Prospectus or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by you expressly for use therein. (c). CONDUCT OF INDEMNIFICATION PROCEEDINGS. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 4(a) or (b) above, unless and then only to the extent it did not otherwise learn of such action and the lack of notice by Amendment of Stock Purchase Agreement Page 8 the indemnified party materially prejudices the indemnifying party or results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided under Section 4(a) or (b) above. After receipt of such notice, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, jointly with any other indemnifying party so notified, to assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by such indemnifying party and approved by the indemnified party, which approval shall not be unreasonably withheld; PROVIDED, HOWEVER, that, if the defendants in any such action or proceeding include both the indemnified party and the indemnifying party and the indemnified party reasonably determines, upon advice of counsel, that a conflict of interest exists or that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, then the indemnified party shall be entitled to one separate counsel, the reasonable fees and expenses of which shall be paid by the indemnifying party. If the indemnifying party does not assume the defense of any such action or proceeding, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party will pay the reasonable fees and expenses of counsel (which shall be limited to a single law firm) for the indemnified party. In such event, however, the indemnifying party will not be liable for any settlement effected without the written consent of such indemnifying party. If the indemnifying party assumes the defense of any such action or proceeding in accordance with this paragraph, such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified party incurred thereafter in connection with such action or proceeding, except as set forth in the proviso in the second sentence of this Section 4(c). (d) CONTRIBUTION. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section 4 is for any reason held to be unenforceable although applicable in accordance with its terms, the Company and you shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and you, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and you on the other (in such proportions that you and other sellers under the Registration Statement are severally, not jointly, responsible for the balance), in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable Amendment of Stock Purchase Agreement Page 9 considerations. The relative fault of the indemnifying party and indemnified parties shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or the indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The parties hereto agree that it would not be just or equitable if contributions pursuant to this Section 4(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 4(d), you shall not be required to contribute any amount in excess of the amount, if any, by which the total price at which Shares were sold to the public exceeds the amount of any damages that you would otherwise have been required to pay by reason of such untrue statement or omission. Notwithstanding the foregoing, no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(d), each person, if any, who controls you within the meaning of Section 15 of the Act shall have the same rights to contribution as you, and any director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Act shall have the same rights to contribution as the Company. (e) In the event any sale pursuant to the Registration Statement is effected as an underwritten offering, then the Company agrees to indemnify and hold harmless each underwriter of Shares to the same extent and on substantially similar terms as the Company's indemnification of you as set forth in Section 4(a) above. 5. PROCEDURES FOR SALE. (a) ALL SALES. In the event you elect to sell any Shares pursuant to Section 16 of the Agreement, the following procedures must be followed: Amendment of Stock Purchase Agreement Page 10 (i) The stock certificates representing the Shares bear a restrictive legend referring to the Agreement. For that reason, the certificates are not negotiable until the legend has been removed. Accordingly, you should not initiate any steps to sell Shares without first reporting your intentions to the General Counsel at the Company. Upon receipt of your notification, the Company will advise you promptly: (A) if , under Company policy of general application to employee transactions in Company securities, a sale of Shares would be inappropriate at that time, and (B) if so, the earliest probable time when such a sale would not be inappropriate. (ii) Assuming a sale would not be inappropriate under Section 5(a)(i), the Company will make suitable arrangements to facilitate your surrender to the Company's transfer agent of stock certificates representing the Shares you intend to sell in exchange for new unlegended certificates in deliverable form, which the Company's transfer agent will make available to you, subject to your repayment to the Company of the Discount out of the proceeds of the sale of the Shares. In that connection, the Company may at its option require payment of the Discount as a condition of its releasing stock certificates in deliverable form covering the Shares to be sold. (iii) In the event you expect to sell any Shares pursuant to Section 16 of the Agreement OTHERWISE THAN PURSUANT TO RULE 144 OR THE REGISTRATION STATEMENT, you should make suitable arrangements for the Company to receive and approve a legal opinion of the kind referred to in Section 16 before proceeding with the sale. (iv) You must notify the Company in writing immediately after your completion of any such sale. (b) SALES UNDER THE REGISTRATION STATEMENT ONLY. In addition to the procedures set forth above in Section 5(a), the following procedures must be followed with respect to all sales of Shares under the Registration Statement: Amendment of Stock Purchase Agreement Page 11 (i) The manner in which sales of Shares are made shall be limited to (A) "brokers' transactions" (within the meaning of Section 4(4) of the Act), or (B) transactions directly with a "market maker" (as defined in Section 3(a)(38) of the Securities Exchange Act of 1934). (ii) No sale shall be made until you shall have notified the Company in writing of the jurisdictions in the United States in which you expect to sell the Shares, and the Company shall have thereafter advised you that your proposed sale has been appropriately qualified or registered under the state securities or blue sky laws applicable thereto or is exempt therefrom. (iii) No sale shall be made until you have received copies from the Company (which the Company will use reasonable efforts to provide to you on a timely basis) of the Prospectus included in the Registration Statement, as then supplemented or amended, and until you have delivered at least one copy to the broker or market maker through whom you sell the Shares. * * * * * * * * If the terms set forth above are satisfactory to you, please sign one copy of this letter at the place indicated below and return it as soon as possible. Amendment of Stock Purchase Agreement Page 12 Please also check the appropriate box below to indicate whether you wish to have the Shares included in the Registration Statement and, if you wish them included, sign your name again below the "Yes" box. Sincerely, RIVIANA FOODS INC. By: /s/ W. DAVID HANKS W. David Hanks Accepted and agreed to this 18th day of November, 1996. /s/ JACK M. NOLINGBERG Jack M. Nolingberg Please include my shares in the Registration Statement. Yes |X| No o /s/ JACK M. NOLINGBERG Jack M. Nolingberg EX-23.A 4 EXHIBIT 23 CONSENT OF ARTHUR ANDERSEN LLP As independent public accountants, we hereby consent to the incorporation of our report in this Form 10-K into the Company's previously filed Registration Statement File Nos. 33302484, 33315843 and 33317901. ARTHUR ANDERSEN LLP Houston, Texas September 25, 1997 EX-24 5 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Riviana Foods Inc. (the "Company") hereby constitutes and appoints Elizabeth B. Woodard as Attorney-in-Fact in his name, place and stead to execute the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997, together with any and all subsequent amendments thereof, in his capacity as Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. September 25, 1997 /s/ FRANK A. GODCHAUX III Frank A. Godchaux III, Chairman of the Board of Directors POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Riviana Foods Inc. (the "Company") hereby constitutes and appoints Elizabeth B. Woodard as Attorney-in-Fact in his name, place and stead to execute the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997, together with any and all subsequent amendments thereof, in his capacity as Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. September 25, 1997 /s/ CHARLES R. GODCHAUX Charles R. Godchaux, Vice Chairman of the Board of Directors POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Riviana Foods Inc. (the "Company") hereby constitutes and appoints Elizabeth B. Woodard as Attorney-in-Fact in her name, place and stead to execute the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997, together with any and all subsequent amendments thereof, in her capacity as Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. September 25, 1997 /s/ MARY G. WIECK Mary G. Wieck, Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Riviana Foods Inc. (the "Company") hereby constitutes and appoints Elizabeth B. Woodard as Attorney-in-Fact in her name, place and stead to execute the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997, together with any and all subsequent amendments thereof, in her capacity as Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. September 25, 1997 /s/ THERESA G. PAYNE Theresa G. Payne, Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Riviana Foods Inc. (the "Company") hereby constitutes and appoints Elizabeth B. Woodard as Attorney-in-Fact in his name, place and stead to execute the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997, together with any and all subsequent amendments thereof, in his capacity as Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. September 25, 1997 /s/ W. ELTON KENNEDY W. Elton Kennedy, Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Riviana Foods Inc. (the "Company") hereby constitutes and appoints Elizabeth B. Woodard as Attorney-in-Fact in his name, place and stead to execute the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997, together with any and all subsequent amendments thereof, in his capacity as Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. September 25, 1997 /s/ E. JAMES LOWREY E. James Lowrey, Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Riviana Foods Inc. (the "Company") hereby constitutes and appoints Elizabeth B. Woodard as Attorney-in-Fact in his name, place and stead to execute the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997, together with any and all subsequent amendments thereof, in his capacity as Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. September 25, 1997 /s/ THOMAS B. WALKER, JR. Thomas B. Walker, Jr., Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Riviana Foods Inc. (the "Company") hereby constitutes and appoints Elizabeth B. Woodard as Attorney-in-Fact in his name, place and stead to execute the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997, together with any and all subsequent amendments thereof, in his capacity as Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. September 25, 1997 /s/ PATRICK W. ROSE Patrick W. Rose, Director EX-27 6
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RIVIANA FOODS INC.'S ANNUAL REPORT FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS JUN-29-1997 JUN-29-1997 4,562 4,405 43,493 529 48,454 105,687 107,228 38,065 191,889 46,825 0 0 0 15,883 111,193 191,889 460,183 460,183 334,837 95,292 (132) 0 (2,002) 29,922 9,559 20,025 0 0 0 20,025 1.27 1.26
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