FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended August 31, 2003
Commission File Number 2-85538
CCA INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2795439
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
200 Murray Hill Parkway
East Rutherford, NJ 07073
(Address of principal executive offices) (Zip Code)
(201) 330-1400
Registrant's telephone number, including area code
Not applicable
Former name, former address and former fiscal year, if changed since last
report.
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
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.01 Par Value - 6,318,614 shares as of August 31, 2003
Class A Common Stock, $.01 Par Value - 958,230 shares as of
August 31, 2003
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
August 31, 2003 and November 30, 2002. . . . . . . . . . . . 1-2
Consolidated Statements of Operations
for the three months and nine months ended
August 31, 2003 and 2002 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Comprehensive Income
for the three months and nine months ended
August 31, 2003 and 2002 . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the nine months ended August 31, 2003
and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6
Notes to Consolidated Financial Statements . . . . . . . . .7-17
Management's Discussion and Analysis of
Results of Operations and Financial
Condition . . . . . . . . . . . . . . . . . . . . . . . . 18-19
PART II OTHER INFORMATION AND REPORTS ON FORM 8-K. . . . . . . 20-21
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER PURSUANT TO 18, UNITED STATES
CODE, SECTION 1350, AS ADOPTED PURSUANT TO SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002 . . . . . . . . . . . . . .23
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER PURSUANT TO 18, UNITED STATES
CODE, SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002 . . . . . . . . . . . . . .24
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
August 31, November 30,
2003 2002
Current Assets
Cash and cash equivalents $ 3,677,532 $ 1,585,647
Short-term investments and marketable
securities 3,281,204 3,479,544
Accounts receivable, net of allowances of
$1,239,409 and $1,222,408, respectively 6,890,495 6,265,955
Inventories 5,791,287 3,743,131
Prepaid expenses and sundry receivables 438,731 363,457
Deferred income taxes 1,167,258 1,287,568
Prepaid income taxes and refunds due - 1,703
Deferred advertising 1,253,588 -
Total Current Assets 22,500,095 16,727,005
Property and Equipment, net of accumulated
depreciation and amortization 774,705 720,739
Intangible Assets, net of accumulated
amortization of $215,151 at August 31, 2003
and $179,134 at November 30, 2002 544,243 577,414
Other Assets
Marketable securities 7,180,453 6,723,518
Other 46,488 56,388
Total Other Assets 7,226,941 6,779,906
Total Assets $31,045,984 $24,805,064
See Notes Consolidated to Financial Statements.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, November 30,
2003 2002
Current Liabilities
Accounts payable and accrued liabilities $ 6,372,225 $ 5,284,109
Income taxes payable 1,353,704 178,690
Total Current Liabilities 7,725,929 5,462,799
Subordinated Debentures 497,656 501,656
Deferred Income Taxes 11,500 5,186
Shareholders' Equity
Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued
Common stock, $.01 par; authorized
15,000,000 shares; issued 6,592,669 and
6,440,523 shares, respectively 65,927 64,405
Class A common stock, $.01 par; authorized
5,000,000 shares; 958,230 and 973,230
shares issued and outstanding, respectively 9,582 9,732
Additional paid-in capital 3,831,424 3,832,796
Retained earnings 19,463,373 15,389,415
Unrealized (losses) on marketable
securities ( 200,701) ( 107,990)
23,169,605 19,188,358
Less: Treasury Stock (274,055 and
271,155 shares at August 31,
2003 and November 30,
2002, respectively) 358,706 352,935
Total Shareholders' Equity 22,810,899 18,835,423
Total Liabilities and Shareholders' Equity $31,045,984 $24,805,064
See Notes to Consolidated Financial Statements.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
August 31, August 31,
2003 2002 2003 2002
Revenues
Sales of Health and
Beauty Aid
Products - Net $12,739,346 $11,391,258 $42,541,384 $34,763,488
Other income 113,191 120,056 437,185 307,367
12,852,537 11,511,314 42,978,569 35,070,855
Costs and Expenses
Costs of sales 4,030,837 3,559,990 13,793,977 11,724,634
Selling, general and
administrative expenses 4,195,547 4,039,125 13,232,809 11,640,576
Advertising, cooperative
and promotions 2,404,560 2,536,666 7,760,818 7,658,588
Research and development 229,477 184,203 661,250 412,264
Provision for doubtful
accounts ( 16,394) 6,287 216,499 ( 139,874)
Interest expense 8,010 8,688 23,808 25,923
10,852,037 10,334,959 35,689,161 31,322,111
Income before Provision
for Income Taxes 2,000,500 1,176,355 7,289,408 3,748,744
Provision for Income
Taxes 713,375 453,533 2,844,562 1,507,873
Net Income $ 1,287,125 $ 722,822 $ 4,444,846 $ 2,240,871
Earnings per Share
Basic $.18 $.10 $.61 $.32
Diluted $.17 $.10 $.59 $.30
See Notes to Consolidated Financial Statements.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
August 31, August 31,
2003 2002 2003 2002
Net Income $1,287,125 $ 722,822 $4,444,846 $2,240,871
Other Comprehensive Income
Unrealized holding gains
(loss) on investments ( 109,960) 46,326 ( 92,711) 37,877
Provision (Benefit) for
Taxes ( 39,212) 18,591 ( 36,179) 15,229
Other Comprehensive Income
- Net ( 70,748) 27,735 ( 56,532) 22,648
Comprehensive Income $1,216,377 $ 750,557 $4,388,314 $2,263,519
Earnings Per Share:
Basic $.17 $.11 $.61 $.32
Diluted $.16 $.10 $.58 $.30
See Notes to Consolidated Financial Statements.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
August 31, August 31,
2003 2002
Cash Flows from Operating Activities:
Net income $4,444,846 $2,240,871
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 275,301 275,175
(Gain) loss on sale of marketable securities
and repurchase of debentures ( 22,758) 437
Decrease in deferred income taxes 126,624 126,650
(Increase) in accounts receivable - Net ( 624,540) ( 1,401,060)
(Increase) decrease in inventory ( 2,048,156) 241,152
(Increase) decrease in prepaid expenses
and miscellaneous receivables ( 75,274) 130,086
(Increase) in deferred advertising ( 1,253,588) ( 944,111)
Increase in accounts payable and
accrued liabilities 1,088,116 2,425,044
Increase in taxes payable 1,175,014 342,124
Decrease in other assets 9,900 -
Decrease in prepaid income
taxes and refunds due 1,703 220,286
Net Cash Provided by Operating Activities 3,097,188 3,656,654
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment ( 293,250) ( 442,160)
Acquisition of intangible assets ( 2,846) ( 2,946)
Proceeds of money due from officers - 2,070
Purchase of marketable securities ( 5,888,340) ( 4,997,568)
Proceeds from sale and maturity of
investments 5,555,792 1,329,413
Net Cash (Used in) Investing Activities ( 628,644) ( 4,111,191)
Cash Flows from Financing Activities:
Purchase of treasury stock ( 5,771) ( 87,960)
Repurchase of outstanding debentures - ( 6,000)
Dividends paid ( 370,888) -
Net Cash (Used in) Financing Activities ( 376,659) ( 93,960)
Net Increase (Decrease) in Cash 2,091,885 ( 548,497)
Cash at Beginning of Period 1,585,647 2,555,938
Cash at End of Period $3,677,532 $2,007,441
See Notes to Consolidated Financial Statements.
-5-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Nine Months Nine Months
Ended Ended
August 31, August 31,
2003 2002
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 31,441 $ 33,628
Income taxes 1,537,051 913,748
See Notes to Consolidated Financial Statements.
-6-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial state-
ments have been prepared in accordance with generally accepted ac-
counting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accord-
ingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the nine
month period ended August 31, 2003 are not necessarily indicative of
the results that may be expected for the year ended November 30,
2003. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended November 30, 2002.
NOTE 2 - ORGANIZATION AND DESCRIPTION OF BUSINESS
CCA Industries, Inc. ("CCA") was incorporated in the State of Dela-
ware on March 25, 1983.
CCA manufactures and distributes health and beauty aid products.
CCA has several wholly-owned subsidiaries (CCA Cosmetics, Inc., CCA
Labs, Inc., Berdell, Inc., Nutra Care Corporation, and CCA Online
Industries, Inc.) and CCA Industries Canada (2003) Inc. (incorporated
February 25, 2003), all of which are currently inactive.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of CCA and
its wholly-owned subsidiaries (collectively the "Company").
-7-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates:
The consolidated financial statements include the use of estimates,
which management believes are reasonable. The process of preparing
financial statements in conformity with generally accepted accounting
principles requires the use of estimates and assumptions regarding
certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of
the date of the financial statements. Accordingly, upon settlement,
actual results may differ from estimated amounts.
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist of corporate
and government bonds and equity securities. The Company has classi-
fied its investments as Available-for-Sale securities. Accordingly,
such investments are reported at fair market value, with the resul
tant unrealized gains and losses reported as a separate component of
shareholders' equity.
Statements of Cash Flows Disclosure:
For purposes of the statement of cash flows, the Company considers
all highly liquid instruments purchased with an original maturity of
less than three months to be cash equivalents.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Product returns are recorded in inventory when they are received at
the lower of their original cost or market, as appropriate. Obsolete
inventory is written off and its value is removed from inventory at
the time its obsolescence is determined.
-8-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company charges to
expense repairs and maintenance items, while major improvements and
betterments are capitalized. When the Company sells or otherwise
disposes of property and equipment items, the cost and related
accumulated depreciation are removed from the respective accounts and
any gain or loss is included in earnings.
Depreciation and amortization are provided on the straight-line
method over the following estimated useful lives or lease terms of
the assets:
Machinery and equipment 7-10 Years
Furniture and fixtures 5-7 Years
Tools, dies and masters 2-7 Years
Transportation equipment 7 Years
Leasehold improvements 7-10 Years or life
of lease, whichever is
shorter
Intangible Assets:
Intangible assets are stated at cost. Patents and trademarks are
amortized on the straight-line method over a period of 17 years.
Financial Instruments:
The carrying value of assets and liabilities considered financial
instruments approximate their respective fair value.
Income Taxes:
Income tax expense includes federal and state taxes currently payable
and deferred taxes arising from temporary differences between income
for financial reporting and income tax purposes.
Tax Credits:
Tax credits, when present, are accounted for using the flow-through
method as a reduction of income taxes in the years utilized.
-9-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share:
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" in 1998. Basic earnings per
share is calculated using the average number of shares of common
stock outstanding during the year. Diluted earnings per share is
computed on the basis of the average number of common shares out
standing plus the effect of outstanding stock options using the
"treasury stock method" and convertible debentures using the "if-
converted" method. Common stock equivalents consist of stock op-
tions.
Revenue Recognition:
The Company recognizes net sales upon shipment of merchandise. Net
sales comprise gross revenues less expected returns, trade discounts,
customer allowances and various sales incentives. Although no legal
right of return exists between the customer and the Company, it is an
industry-wide practice to accept returns from customers. The Com-
pany, therefore, records a reserve for returns equal to its gross
profit on its historical percentage of returns on its last five
months sales.
Accounts Receivable:
Accounts receivable with credit balances have been included as a
current liability in "Accounts payable and accrued liabilities" in
the accompanying balance sheet.
The Company uses the allowance method to account for uncollectible
accounts receivable. Accounts receivable are presented net of an
allowance for doubtful accounts of $750,180 and $695,824 as of August
31, 2003 and November 30, 2002, respectively.
Shipping and Handling Costs:
The Company presents shipping and handling costs as part of Selling,
general and administrative expense and not as part of Cost of sales.
Freight costs were $2,302,746 and $1,605,771 for the nine months
ended August 31, 2003 and 2002, respectively.
Comprehensive Income:
The Company adopted SFAS #130, Comprehensive Income, which considers
the Company's financial performance in that it includes all changes
in equity during the period from transactions and events from non-
owner sources.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
2003 presentation.
-10-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
August 31, November 30,
2003 2002
Raw materials $3,728,163 $3,031,400
Finished goods 2,063,124 711,731
$5,791,287 $3,743,131
At August 31, 2003 and November 30, 2002, the Company had a reserve
for obsolescence of $997,950 and $976,788, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the following:
August 31, November 30,
2003 2002
Machinery and equipment $ 104,718 $ 97,003
Furniture and equipment 665,554 552,615
Transportation equipment 10,918 10,918
Tools, dies, and masters 329,064 213,188
Leasehold improvements 279,366 222,646
1,389,620 1,096,370
Less: Accumulated depreciation
and amortization 614,915 375,631
Property and Equipment - Net $ 774,705 $ 720,739
Depreciation expense for the nine months ended August 31, 2003 and
2002 amounted to $239,284 and $239,331, respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
August 31, November 30,
2003 2002
Patents and trademarks $759,394 $756,548
Less: Accumulated amortization 215,151 179,134
Intangible Assets - Net $544,243 $577,414
Amortization expense for the nine months ended August 31, 2003 and
2002 amounted to $36,017 and $35,844, respectively.
-11-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - DEFERRED ADVERTISING
In accordance with APB 28 Interim Financial Reporting the Company
expenses its advertising and related costs proportionately over the
interim periods based on its total expected costs per its various
advertising programs. Consequently a deferral of $1,253,588 is
accordingly reflected in the balance sheet for the interim period.
This deferral is the result of the Company's $8,000,000 media budget
and $5,000,000 for the year which contemplates lower spending in the
4th quarter than in the other three quarters.
The table below sets forth the calculation:
August August
2003 2002
(In Millions) (In Millions)
Media advertising budget for the fiscal year $8.00 $7.50
Pro-rata portion for nine months $6.00 $5.63
Media advertising spent 6.70 6.40
Accrual (deferral) ($0.70) ($0.77)
Anticipated Co-op advertising commitments $5.00 $4.00
Pro-rata portion for nine months 3.75 $3.00
Co-op advertising spent 4.30 3.17
Accrual (deferral) ($ .55) ($0.17)
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following items which exceeded 5% of total current liabilities
are included in accounts payable and accrued liabilities as of:
August 31, November 30,
2003 2002
(In Thousands) (In Thousands)
a) Media advertising $ 1,053 $ *
b) Coop advertising 925 804
c) Accrued returns 1,101 878
d) Accrued bonuses 717 467
e) Vacation accrual * 320
* under 5% $3,796 $2,469
All other liabilities were for trade payables or individually did not
exceed 5% of total current liabilities.
-12-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - OTHER INCOME
Other income consists of the following at August 31:
2003 2002
Interest and dividend
income $352,572 $265,399
Royalty income 58,699 41,821
Miscellaneous 22,914 147
$434,185 $307,367
NOTE 10 - SUBORDINATED DEBENTURES
On August 1, 2000, the Company repurchased (pursuant to a tender
offer) 278,328 shares of its outstanding common stock by issuing
subordinated debentures equal to $2 per share, which accrue interest
at 6% and are due to mature on August 1, 2005. The interest is
payable semi-annually.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Litigation
The Company has been named as a defendant in 10 lawsuits alleging
that the plaintiffs were injured as a result of their purchasing and
ingesting a diet suppressant containing phenylpropanolamine (PPA),
which the Company utilized as its active ingredient in its products
prior to November 2000. The lawsuits brought against the Company are
for unspecified amounts of compensatory and exemplary damages.
The Company is insured for three of the 10 cases. CCA has not
renewed the product liability policy covering possible additional
lawsuits that might commence against the Company in connection with
PPA. Outside counsel has advised CCA that as a general matter the
PPA cases are defensible, and the Company plans to vigorously defend
its positions. However, there can be no assurances the current PPA
litigations will not have a material adverse effect on the Company's
operations.
Dividends
In January 2003, the Company announced its first dividend of $0.12
per share payable to all holders of the Company's common stock, $0.06
payable to shareholders of record on April 1, 2003 and $0.06 payable
to shareholders of record on November 1, 2003.
-13-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments and marketable securities, which consist of
stock and various corporate and government obligations, are stated at
market value. The Company has classified its investments as
Available-for-Sale securities and considers as current assets those
investments which will mature or are likely to be sold in the next
fiscal year. The remaining investments are considered non-current
assets. The cost and market values of the investments at August 31,
2003 and November 30, 2002 were as follows:
August 31, November 30,
2003 2002
Current: COST MARKET COST MARKET
Corporate
obligations $ 1,527,900 $ 1,532,368 $ 2,066,040 $ 2,071,603
Government obligations
(including mortgage
backed securities) 1,287,751 1,237,278 1,330,345 1,314,604
Common stock 304,379 287,638 - -
Mutual funds 176,961 113,220 169,589 93,337
Other equity
investments 111,750 110,700 - -
Total 3,408,741 3,281,204 3,565,974 3,479,544
Non-Current:
Corporate
obligations 2,525,000 2,509,028 1,025,806 1,016,715
Government obli-
gations 3,399,122 3,342,737 4,867,627 4,848,293
Preferred stock 1,229,495 1,228,688 751,645 758,510
Other equity
investments 100,000 100,000 100,000 100,000
Total 7,253,617 7,180,453 6,745,078 6,723,518
Total $10,662,358 $10,461,657 $10,311,052 $10,203,062
-14-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at August 31, 2003 was $10,462,657 as compared to $10,203,062 at November 30,
2002. The gross unrealized gains and losses were $43,968 and $244,669 for August 31, 2003 and
$58,411 and ($166,401) for November 30, 2002. The cost and market values of the investments at
August 31, 2003 were as follows:
COL. A COL. B COL. C COL.D COL.E
Amount at Which
Each Portfolio
Number of Market Of Equity Security
Units-Principal Value of Issues and Each
Amount of Each Issue Other Security
Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
CORPORATE OBLIGATIONS:
GMAC Smartnotes 10/15/03 4.600% 250,000 $ 250,000 $ 250,708 $ 250,708
GMAC Smartnotes 10/15/03 4.750 325,000 325,000 325,959 325,959
GMAC Smartnotes 5/15/04 4.250 250,000 250,000 252,165 252,165
GMAC Smartnotes 5/15/05 5.000 175,000 175,000 177,048 177,048
GMAC Smartnotes 8/15/04 2.650 250,000 250,000 248,053 248,053
GMAC Smartnotes 6/15/05 3.550 200,000 200,000 198,532 198,532
GMAC Smartnotes 5/15/06 4.050 400,000 400,000 395,788 395,788
Household Finance Corp.
Internotes 5/15/04 4.250 250,000 250,000 254,273 254,273
International Business
Machines 9/22/03 5.370 100,000 102,040 100,209 100,209
Colgate-Palmolive 12/1/03 5.270 100,000 100,860 101,001 101,001
Ford Motor Credit 5/22/06 4.750 250,000 250,000 248,890 248,890
CIT Group Inc. 1/15/06 4.000 200,000 200,000 202,158 202,158
CIT Group Inc. 3/15/05 3.200 100,000 100,000 100,799 100,799
CIT Group Inc. 7/15/05 2.000 100,000 100,000 98,741 98,741
GE Capital Group Internotes 2/15/06 2.450 250,000 250,000 247,660 247,660
GE Capital Group Internotes 7/15/06 2.150 200,000 200,000 195,132 195,132
Sears Roebuck Acceptance
Corp. 5/15/06 3.500 250,000 250,000 249,078 249,078
American General Fin. Corp. 8/15/05 2.050 200,000 200,000 198,520 198,520
John Hancock Life Ins. Co. 7/15/06 2.250 200,000 200,000 196,682 196,682
4,052,900 4,041,396 4,041,396
-15-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL. D COL. E
Amount at Which
Each Portfolio
Number of Market Of Equity Security
Units-Principal Value of Issues and Each
Amount of Each Issue Other Security
Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
GOVERNMENT OBLIGATIONS:
US Treasury Note 7/31/05 1.500% 250,000 $ 249,531 $ 248,203 $ 248,203
Federal Home Loan Bank 8/21/06 2.590 200,000 200,000 198,812 198,812
Federal Home Loan Bank 7/24/06 2.125 100,000 100,000 96,750 96,750
FNMA 5/15/06 2.250 200,000 198,772 198,062 198,062
FHLB 9/15/03 5.125 255,000 266,200 255,398 255,398
FHLMC 2/27/07 2.000 100,000 100,000 100,344 100,344
FHLMC 11/15/17 4.250 200,000 200,000 193,938 193,938
FHLMC 2/27/12 4.000 225,000 225,000 227,180 227,180
FHLMC 10/15/09 3.000 250,000 250,000 246,720 246,720
FHLMC 11/15/09 3.000 250,000 250,000 240,455 240,455
FNMA 8/15/12 4.000 250,000 250,000 249,688 249,688
FHLMC 1/30/06 2.000 250,000 250,000 250,625 250,625
Tennessee Valley Authority
Power Bonds 5/1/29 6.500 26,000 688,530 692,380 692,380
Tobacco Settlement Fin
Corp. N 6/1/15 5.000 200,000 198,500 166,498 166,498
NJ EDA Trans Sublease RV
Lightrail 199A FSA 5/1/04 5.000 300,000 317,444 308,082 308,082
Port Authority NY & NJ
Cons 88th SR BE 10/1/04 4.500 225,000 238,789 233,082 233,082
CLOSED END MUNICIPAL BONDS/MUTUAL FUNDS:
Muniyield New Jersey Insd Frd Inc. 6,500 96,905 90,935 90,935
Muniholdings New Jersey Insd FD Inc. 6,900 94,549 94,116 94,116
Nuveen New Jersey Invt Quality Municipal Fund 6,200 95,162 92,194 92,194
Nuveen New Jersey Prem Inc Municipal Fund 5,200 78,639 79,300 79,300
Van Kamp Amer Cap Inv Gr NJ 4,800 80,502 78,528 78,528
Blackrock New Jersey Municipal Inc. 6,000 87,989 80,520 80,520
Eaton Vance New Jersey Municipal Inc. 5,600 85,506 78,120 78,120
Nuveen New Jersey Dividend Advantage 5,700 84,855 80,085 80,085
4,686,873 4,580,015 4,580,015
-16-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL.D COL.E
Amount at Which
Each Portfolio
Number of Market Of Equity Security
Units-Principal Value of Issues and Each
Amount of Each Issue Other Security
Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
EQUITY:
Preferred Stock:
Public Income NTS
General Electric Cap Corp. 11/15/32 6.100% 14,800 $ 379,495 $ 375,328 $ 375,328
Merrill Lynch Trust 9/30/08 7.280 6,000 150,000 159,000 159,000
Corporate Backed Trust
Certificates For AIG
Sun America 5/17/07 6.700 6,000 150,000 154,800 154,800
Corporate Backed Trust
Certificates For Bristol
Myers Squibb 5/23/07 6.800 6,000 150,000 155,460 155,460
Morgan Stanley Cap Tr 7/15/33 5.750 4,000 100,000 93,360 93,360
ABN AMRO Cap Fund 7/3/08 5.900 2,000 50,000 47,880 47,880
JP Morgan Chase Cap IX 6/15/33 5.875 2,000 50,000 47,500 47,500
Wells Fargo Cap Tr VIII 8/1/33 5.625 8,000 200,000 195,360 195,360
1,229,495 1,228,688 1,228,688
Common Stock:
DTE Energy Co. 1,200 51,649 41,892 41,892
Consolidated Edison Inc. 3,800 153,485 150,214 150,214
Progress Energy Inc. 1,000 48,000 40,490 40,490
Public Service Enterprise Group 1,300 51,245 55,042 55,042
304,379 287,638 287,638
Mutual Funds:
Dreyfus Premier Limited
Term High Income CL B 15,968.952 176,961 113,220 113,220
Other Equity Investments:
Aberdeen Asia Pacific
Income Fund 100,000 100,000 100,000
Enterprise Production Partners LP 5,000 111,750 110,700 110,700
211,750 210,700 210,700
$10,662,358 $10,461,657 $10,461,657
-17-
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the three month period ended August 31, 2003, the Company had
revenues of $12,852,537 and net income of $1,287,125 after a provision for
taxes of $713,375. Last year, for the August 31 quarter, the Company had
$11,511,314 of revenue and net income of $722,822. This represents a 12% and
78% improvement in revenues and net income, respectively Gross margins
decreased slightly from 68.7% to 68.4%. Selling, general and administrative
(SG&A) expenses increased to $4,195,547 from $4,039,125, as a result of an
increase in staff and sales commissions.
For the three month period ending August 2003, advertising, cooperative
and promotional allowance expenditures were $2.40 million. Last year, for the
same three-month period ending August 31, 2002, they were $2.54 million.
Advertising expenditures were 18.9% of sales compared to 22.3% last year.
Since both co-op advertising and promotions have a material effect on the
Company's operation, the Company attempts to anticipate its advertising and
promotional commitments as a percent of gross sales in order to control its
effect on its net income. In accordance with APB No. 28, Interim Financial
Reporting, the Company expenses its advertising and related costs proportion
ately over the interim periods based on its total expected costs per its
various advertising programs. Consequently, a deferral of $.7 million for
media expense and $.55 million for co-op expenditures for the nine month
period is reflected in the balance sheet. The Company deferred $.770 million
of media costs in the prior year for the nine-month period. The deferral is
the result of the Company's current $8.0 million media budget for the entire
year, which is predicated on substantially lower spending in the third and
fourth quarters. Co-op expenditures are budgeted at $5.0 million for the
year. Specifically, the Company spent $6.7 million for media advertising in
the nine months and $4.3 million for co-op advertising. The difference
between the actual expense and the budgeted expense is deferred or accrued
over the subsequent three month period, and by the end of the year will be
fully expensed.
For the nine month period ended August 31, 2003, the Company had revenue
of $42,978,569 and a net income of $4,444,846 after a provision for income
taxes of $2,844,562. In the prior year's period, the Company had revenues of
$35,070,855 and net income of $2,240,871 after a provision for income taxes
of $1,507,873. Gross profit margins for the nine-month period ending August
31, 2003 increased from 66.3% in the prior year to 67.6%.
For the nine month period ended August 2003, advertising, cooperative and
promotional allowance expenditures were $7,760,818 as compared to $7,658,588
for the nine-month period ending August 31, 2002. The company budgeted a
national advertising expenditure for the current year at 8 million up from 7.5
million and budgeted co-op and promotions from 4 million to 5 million allo
cated over the current fiscal year. The co-op and promotions allowances
increase were partially reversed by co-op advertising credits previously
accrued in the prior year not taken by our customers, because the proposed
promotion did not consummate. The reversed credits were allocated over the
current fiscal year. Advertising expenditures were 18.2% of sales vs 22% last
year.
-18-
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the nine-month period ending August 31, 2003, research and develop
ment expenses were $661,250 compared to $412,264 last year.
The Company's financial position as of August 31, 2003 consists of
current assets of $22,500,095 and current liabilities of $7,725,929. In
addition, shareholders' equity increased from $18,835,423 at November 30, 2002
to $22,810,899 at August 31,2003 primarily due to net income earned during the
period.
The Company generated $3,097,188 in cash from operations primarily due to
the nine month net income of $4.44 million, and an increase in taxes payable
and decrease in deferred taxes of $1.3 million, partially reversed by a $2.04
million seasonal increase in deferred costs and accounts receivable of
$625,000.
The $3.1 million cash generated by operations, however, was partially
used to pay dividends of $371,000, acquisition of fixed assets of $293,000 and
net purchases of marketable securities of $332,548.
-19-
PART II, ITEM 6. (Continued)
EXHIBIT 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended Nine Months Ended
August 31, August 31,
2003 2002 2003 2002
Item 6.
Weighted average shares
outstanding - Basic 7,276,844 7,018,192 7,211,350 7,036,369
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 397,390 566,851 382,246 525,643
Weighted average shares
outstanding - Diluted 7,674,234 7,585,043 7,593,596 7,562,012
Net income $1,287,125$ 722,822 $4,444,846 $2,240,871
Per share amount
Basic $.18 $.10 $.61 $.32
Diluted $.17 $.10 $.59 $.30
-20-
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
Additional Exhibits
Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to Title 18, United States Code, Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
All other information pertaining to Part II is omitted pursuant to the
instructions pertaining to that part.
The Company did not file any reports on Form 8-K during the nine months ended
August 31, 2003.
-21-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: October 7, 2003
CCA INDUSTRIES, INC.
By:
Dunnan Edell, President
By:
Ira W. Berman, Secretary
-22-
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
David Edell, Chief Executive Officer of CCA Industries, Inc. and John Bingman,
Chief Financial Officer of CCA Industries, Inc., each hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, that the quarterly report of CCA Industries, Inc.
on Form 10-Q for the fiscal quarter ended August 31, 2003 (the "Quarterly
Report") fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, and that based on the officers'
knowledge the financial statements contain no material misstatements, and the
statements fairly present the Company's financial position and results of
operations, and have evaluated the effectiveness of the internal controls
within 90 days prior to the report and indicated if there were any significant
changes in internal controls.
Date: October 7, 2003
/s/
------------------------------------
David Edell
Chief Executive Officer
Date: October 7, 2003
/s/
------------------------------------
John Bingman
Chief Financial Officer
-23-
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
David Edell, Chief Executive Officer of CCA Industries, Inc. and John Bingman,
Chief Financial Officer of CCA Industries, Inc., each hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the quarterly report of CCA Industries, Inc.
on Form 10-Q for the fiscal quarter ended August 31, 2003 (the "Quarterly
Report") fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, and that information contained in
the Quarterly Report fairly presents, in all material respects, the financial
condition and results of operations of CCA Industries, Inc.
Date: October 7, 2003
/s/
-------------------------
David Edell
Chief Executive Officer
Date: October 7, 2003
/s/
--------------------------
John Bingman
Chief Financial Officer
-24-