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, 2001 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 re- quired 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 - 5,824,627 shares as of August 31, 2001 Class A Common Stock, $.01 Par Value - 1,020,930 shares as of August 31, 2001 CCA INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page Number PART I FINANCIAL INFORMATION: Consolidated Balance Sheets as of August 31, 2001 and November 30, 2000. . . . . . . . . . . . 1-2 Consolidated Statements of Operations for the three months and nine months ended August 31, 2001 and 2000 . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Comprehensive Income for the three months and nine months ended August 31, 2001 and 2000 . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows for the nine months ended August 31, 2001 and 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6 Notes to Consolidated Financial Statements . . . . . . . . .7-16 Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . 17-18 PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . 19-20 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS A S S E T S
August 31, November 30, 2001 2000 Current Assets Cash and cash equivalents $ 2,756,097 $ 804,508 Short-term investments and marketable securities 1,036,978 2,536,344 Accounts receivable, net of allowances of $2,411,122 and $1,379,424, respectively 5,575,826 6,329,755 Inventories 5,637,942 5,735,427 Prepaid expenses and sundry receivables 215,286 324,980 Deferred income taxes 1,526,688 1,529,522 Prepaid income taxes and refunds due 89,935 777,691 Deferred advertising 734,110 - Total Current Assets 17,572,862 18,038,227 Property and Equipment, net of accumulated depreciation and amortization 446,149 675,790 Intangible Assets, net of accumulated amortization of $119,415 at August 31, 2001 and $96,920 at November 30, 2000 630,171 641,410 Other Assets Marketable securities 2,802,177 845,101 Due from officers - Non-current 21,218 21,485 Deferred income taxes 39,635 34,517 Other 56,747 55,526 Total Other Assets 2,919,777 956,629 Total Assets $21,568,959 $20,312,056
See Notes Consolidated to Financial Statements. -1- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, November 30, 2001 2000 Current Liabilities Notes payable $ - $ 1,500,000 Accounts payable and accrued liabilities 5,269,798 4,288,852 Income taxes payable 76,096 - Total Current Liabilities 5,345,894 5,788,852 Subordinated Debentures (due August 1, 2005) 510,656 556,656 Shareholders' Equity Common stock, $.01 par; authorized 15,000,000 shares; issued 6,042,823 shares, respectively 60,428 60,428 Class A common stock, $.01 par; authorized 5,000,000 shares; issued and outstanding 1,020,930 shares, respectively 10,209 10,209 Additional paid-in capital 3,836,296 3,836,296 Retained earnings 12,079,444 10,300,693 Unrealized gains (losses) on marketable securities ( 26,763) ( 64,846) 15,959,614 14,142,780 Less: Treasury Stock (218,196 and 107,496 shares at August 31, 2001 and November 30, 2000, respectively) 247,205 176,232 Total Shareholders' Equity 15,712,409 13,966,548 Total Liabilities and Shareholders' Equity $21,568,959 $20,312,056
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, 2001 2000 2001 2000 Revenues Sales of Health and Beauty Aid Products - Net $10,518,794 $9,905,804 $34,064,161 $30,411,579 Other income 89,322 86,208 247,483 219,032 10,608,116 9,992,012 34,311,644 30,630,611 Costs and Expenses Costs of sales 3,368,589 3,493,222 11,984,999 11,381,811 Selling, general and administrative expenses 3,515,497 3,595,388 10,416,917 10,309,788 Advertising, cooperative and promotions 2,974,468 2,478,780 8,249,321 7,165,084 Research and development 238,498 105,879 578,718 388,741 Provision for doubtful accounts ( 25,982) 10,272 88,691 144,583 Interest expense 11,715 45,992 62,916 97,447 10,082,785 9,729,533 31,381,562 29,487,454 Income before Provision for Income Taxes 525,331 262,479 2,930,082 1,143,157 Provision for Income Taxes 221,206 123,710 1,151,331 432,141 Income From Continuing Operations 304,125 138,769 1,778,751 711,016 Income (Loss) From Discontinued Operations - ( 79,735) - ( 107,298) Net Income $ 304,125 $ 59,034 $ 1,778,751 $ 603,718 Basic Diluted Basic Diluted Basic Diluted Basic Diluted Earnings per Share Continuing Operations $.04 $.04 $.02 $.02 $.26 $.24 $.10 $.09 Discontinued Operations $ - $ - ($.01) ($.01) $ - $ - ($.01) ($.01) Net Income (Loss) $.04 $.04 $.01 $.01 $.26 $.24 $.08 $.08
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, 2001 2000 2001 2000 Net Income $ 304,125 $ 59,034 $1,778,751 $603,718 Other Comprehensive Income Unrealized holding gains (loss) on investments 3,248 26,674 38,083 ( 24,630) Provision (Benefit) for Taxes 1,367 10,185 14,963 ( 9,311) Other Comprehensive Income (Loss) - Net 1,881 16,489 23,120 ( 15,319) Comprehensive Income $ 306,006 $ 75,523 $1,801,871 $588,399 Earnings Per Share: Basic $.04 $.01 $.26 $.08 Diluted $.04 $.01 $.24 $.08
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, 2001 2000 Cash Flows from Operating Activities: Net income $1,778,751 $ 603,718 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 289,201 286,175 (Gain) loss on sale of marketable securities 5,792 ( 4,956) (Increase) in deferred income taxes ( 2,284) ( 151,748) Decrease (increase) in accounts receivable - Net 753,929 ( 1,040,284) Decrease in inventory 97,485 902,795 Decrease in prepaid expenses and miscellaneous receivables 109,694 385,913 (Increase) in deferred advertising ( 734,110) ( 1,286,557) Increase (decrease) in accounts payable and accrued liabilities 980,946 ( 1,536,934) Increase in taxes payable 76,096 - (Increase) decrease in security deposits ( 1,221) 343 Decrease in prepaid income taxes and refunds due 687,756 506,447 Net Cash Provided by (Used in) Operating Activities 4,042,035 ( 1,335,088) Cash Flows from Investing Activities: Acquisition of property, plant and equipment ( 24,292) ( 264,400) Acquisition of intangible assets ( 24,029) ( 63,886) Proceeds of money due from officers 267 25,061 Purchase of marketable securities (4,458,073) ( 1,379,933) Proceeds from sale and maturity of investments 4,009,654 1,092,795 Net Cash (Used in) Investing Activities ( 496,473) ( 590,363) Cash Flows from Financing Activities: Proceeds from borrowings - 3,900,000 Payment on debt (1,500,000) ( 2,700,000) Purchase of treasury stock ( 70,973) - Repurchase of outstanding debentures ( 23,000) - Net Cash (Used in) Provided by Financing Activities (1,593,973) 1,200,000 Net Increase (Decrease) in Cash 1,951,589 ( 725,451) Cash at Beginning of Period 804,508 807,360 Cash at End of Period $2,756,097 $ 81,909
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, 2001 2000 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 68,865 $ 88,968 Income taxes 495,667 97,442 Supplemental Schedule of Noncash Investing and Financing Activities: The Company repurchased common stock in exchange for the issuance of subordinated debentures: Common stock repurchased $ - $ 556,656 Subordinated debentures - ( 556,656) $ - $ -
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 statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, 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 recur ring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended August 31, 2001 are not necessarily indicative of the results that may be expected for the year ended November 30, 2001. 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, 2000. NOTE 2 - ORGANIZATION AND DESCRIPTION OF BUSINESS CCA Industries, Inc. ("CCA") was incorporated in the State of Delaware 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.), all of which are currently inactive. In March of 1998 CCA acquired 80% of the newly organized Fragrance Corporation of America, Ltd. which manufactures and distributes perfume products. In 1999, the Company adopted a formal plan to discontinue the operations of the subsidiary. 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"). All signif icant inter-company accounts and transactions have been eliminated. -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 classified its investments as Available-for-Sale securities. Accordingly, such investments are reported at fair market value, with the resultant unrealized gains and losses reported as a separate component of share holders' 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 accumu lated 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 trade marks are amortized on the straight-line method over a period of 17 years. Goodwill represents the excess of the cost over the fair value of the net assets acquired and is amortized over 60 months. 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 cur rently 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 outstand ing during the year. Diluted earnings per share is computed on the basis of the average number of common shares outstanding 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 options. On March 30, 2001, the Company repriced all of the outstanding stock options to $.56. Revenue Recognition: The Company recognizes sales at the time delivery occurs. 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 accompa nying 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 $329,000 and $323,000 as of August 31, 2001 and November 30, 2000, 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 $1,873,027 and $1,560,549 for the nine months ended August 31, 2001 and 2000, 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 2001 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, 2001 2000 Raw materials $3,436,718 $3,667,757 Finished goods 2,201,224 2,067,670 $5,637,942 $5,735,427 At August 31, 2001 and November 30, 2000, the Company had a reserve for obsolescence of $1,334,188 and $1,050,714, respectively. NOTE 5 - PROPERTY AND EQUIPMENT The components of property and equipment consisted of the following: August 31, November 30, 2001 2000 Machinery and equipment $ 168,421 $ 323,233 Furniture and equipment 697,388 922,386 Transportation equipment 10,918 10,918 Tools, dies, and masters 526,095 1,972,830 Leasehold improvements 121,083 169,820 1,523,905 3,399,187 Less: Accumulated depreciation and amortization 1,077,756 2,723,397 Property and Equipment - Net $ 446,149 $ 675,790 Depreciation expense for the nine months ended August 31, 2001 and 2000 amounted to $253,933 and $275,349, respec- tively. NOTE 6 - INTANGIBLE ASSETS Intangible assets consist of the following: August 31, November 30, 2001 2000 Patents and trademarks $749,586 $738,330 Less: Accumulated amortization 119,415 96,920 Intangible Assets - Net $630,171 $641,410 Amortization expense for the nine months ended August 31, 2001 and 2000 amounted to $35,268 and $10,826, respec- tively. -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 propor tionately over the interim periods based on its total expected costs per its various advertising programs. Consequently a deferral of $734,110 is accordingly re- flected in the balance sheet for the interim period. This deferral is the result of the Company's $6,500,000 media budget for the year which contemplates lower spending in the 4th quarter than in the other three quarters; as well as the Company's Co-op advertising commitments which also anticipates a lower expenditure in the 4th quarter. The table below sets forth the calculation: August August 2001 2000 (In Millions) (In Millions) Media advertising budget for the fiscal year $6.50 $6.00 Pro-rata portion for nine months $4.88 $4.50 Media advertising spent 5.44 5.50 Accrual (deferral) ($.056) ($1.00) Anticipated Co-op advertising commitments $4.00 $3.10 Pro-rata portion for nine months $3.00 $2.33 Co-op advertising spent 3.17 2.62 Accrual (deferral) ($0.17) ($ .29) 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, 2001 2000 (In Thousands) (In Thousands) a) Media advertising $ 608 $ - b) Coop advertising 622 242 c) Accrued returns 493 983 d) Accrued bonuses 329 - $ 2,052 $1,225 * under 5% 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: 2001 2000 Interest income $196,143 $154,509 Dividend income 12,644 35,284 Miscellaneous 38,696 29,239 $247,483 $219,032 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 - 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, 2000 and November 30, 1999 were as follows: August 31, November 30, 2001 2000 Current: COST MARKET COST MARKET Corporate obligations $ 536,000 $ 537,613 $ 536,000 $ 534,590 Government obligations (including mortgage backed securities) 495,005 499,365 1,998,756 2,001,754 Total 1,031,005 1,036,978 2,534,756 2,536,344 Non-Current: Corporate obligations 1,591,900 1,599,325 - - Government obli- gations 835,870 838,167 150,510 146,723 Preferred stock 250,000 253,360 612,561 586,448 Other equity investments 157,142 111,325 148,465 111,930 Total 2,834,912 2,802,177 911,536 845,101 Total $3,865,917 $3,839,155 $3,446,292 $3,381,445 -13- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED) The market value at August 31, 2001 was $3,839,155 as compared to $3,381,445 at November 30, 2000. The cost and market values of the investments at August 31, 2001 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 10/15/01 6.350% 536,000 $ 536,000 $ 537,613 $ 537,613 GMAC Smartnotes 1/15/03 5.550 250,000 250,000 254,565 254,565 GMAC Smartnotes 2/15/03 5.750 140,000 140,000 142,940 142,940 GMAC Smartnotes 6/15/03 4.750 300,000 300,000 302,040 302,040 GMAC Smartnotes 7/15/03 4.650 200,000 200,000 200,878 200,878 GMAC Smartnotes 8/15/03 4.250 499,000 499,000 494,649 494,649 International Business Machines 9/22/03 5.370 100,000 102,040 102,149 102,149 Colgate-Palmolive 12/1/03 5.270 100,000 100,860 102,104 102,104 2,127,900 2,136,938 2,136,938
-14- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - 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: FHLMC 1628-N 12/15/2023 6.500% 29,661 $ 29,099 $ 30,310 $ 30,310 FNMA 93-224-D 11/25/2023 6.500 75,275 75,732 76,616 76,616 FNMA 92-2-N 1/25/2024 6.500 15,804 14,779 15,937 15,937 FHLB 9/15/2003 5.125 255,000 266,200 260,381 260,381 U.S. TREASURY NOTE 11/15/2003 4.250 200,000 199,891 202,188 202,188 U.S. TREASURY NOTE 11/15/2003 4.250 250,000 250,169 252,735 252,735 U.S. TREASURY BILL 10/11/2001 3.815 250,000 245,238 249,053 249,053 U.S. TREASURY NOTE 9/30/2001 5.625 250,000 249,767 250,312 250,312 1,330,875 1,337,532 1,337,532
-15- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - 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: Merrill Lynch Trust 9/30/08 7.28% 6,000 $ 150,000 $ 153,360 $ 153,360 Other Equity Investments: Aberdeen Asia Pacific Income Fund 100,000 100,000 100,000 Dreyfus Premier Limited Term High Income CL B 3.8* 12,824 157,142 111,325 111,325 407,142 364,685 364,685 $3,865,917 $3,839,155 $3,839,155
* Estimated -16- CCA INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) For the three month period ended August 31, 2001, the Company had revenues of $10,608,116 and net income of $304,125 after a provision of taxes of $221,206. Sales returns were 8.5% of gross sales. Sales returns were 6.5% for the prior year's period. Gross margins of 68% were up from 64.7%. This was primarily due to the product mix and better cost control. Selling general and administrative (SG&A) expenses decreased from $3.6 million to $3.5 million. For the three month period ending August 31, advertising, cooper- ative and promotional allowance expenditures were $3.0 million, up from $2.5 million for the three month period ending August 31, 2000. Advertising expenditures were 28.3% of sales compared to 25%. Since both co-op advertising and promotional 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 Interim Financial Reporting the company expenses its advertising and related costs proportionately over the interim periods based on its total expected per its various advertising programs. Conse- quently, a deferral of $.73 million advertising expense for the nine month period is reflected in the balance sheet. The Company de- ferred $1.29 million in the prior year for the nine month period. The deferral is the result of the Company's current $6.5 million media budget for the entire year, which is predicated on substan- tially lower spending in the third and fourth quarters. Co-op expenditures are budgeted at $4 million for the year. Specifically, the Company spent $5.4 million for media advertising in the nine months and $3.2 million in co-op advertising. The difference be- tween the actual expense and the budgeted expense is deferred or accrued over the subsequent six month period and by the end of the year will be fully expensed. For the nine month period ended August 31, 2001, the Company had revenue of $34,311,644 and a net income of $1,778,751 after a provi- sion of income taxes of $1,151,331. In the prior year's period, the Company had revenues of $30,630,611 and net income of $603,718 after a provision for income taxes of $432,141. Revenue for the nine month period ended August 31, 2001 was up approximately $3.7 million from 2000. Gross profit margins for the nine month period ending August 31, 2001 increased from 62.5% last year to 64.8% For the nine month period ended August 31, 2001, advertising, cooperative and promotional allowance expenditures were $8,249,321 as compared to $7,165,084 for the nine month period ending August 31, 2000. Advertising expenditures were 24.2% of sales vs. 23.6% last year. For the nine month period ending August 31, 2001, research and development expenses were $578,718 compared to $388,741 last year. -17- CCA INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) The Company's financial position as of August 31, 2001 consists of current assets of $17,572,862 and current liabilities of $5,345,894. In addition, shareholders' equity increased from $13,966,548 at November 30, 2000 to $15,712,409 at August 31, 2001 primarily due to net income earned during the period. The Company generated $4.0 million in cash from operations due to the nine month net income of $1.8 million coupled with the net effect of the decease in the Company's accounts receivable and deferred expenses versus the increases in the Company's payables. The $4.0 million cash generated by operations, however, was used to retire all of the Company's short-term debt ($1.5 million) and invest in additional securities ($.4 million), leaving the Company with a net increase in its cash position of approximately $2 million. -18- 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, 2001 2000 2001 2000 Item 6. Weighted average shares outstanding - Basic 6,847,006 7,182,301 6,877,678 7,218,251 Net effect of dilutive stock options--based on the treasury stock method using average market price 601,497 338,615 509,425 376,836 Weighted average shares outstanding - Diluted 7,448,503 7,520,916 7,387,103 7,595,087 Net income $ 304,125 $ 59,034 $1,778,751 $ 603,718 Per share amount Basic $.04 $.01 $.26 $.08 Diluted $.04 $.01 $.24 $.08 -19- CCA INDUSTRIES, INC. PART II OTHER INFORMATION All 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, 2001. -20- 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. CCA INDUSTRIES, INC. By: David Edell, President By: Ira W. Berman, Secretary -21-