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 May 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 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 - 6,592,669 shares of as
May 31, 2003
Class A Common Stock, $.01 Par Value - 958,230 shares as of
May 31, 2003
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
May 31, 2003 and November 30, 2002 1-2
Consolidated Statements of Operations
for the three months and six months ended
May 31, 2003 and 2002 3
Consolidated Statements of Comprehensive Income
for the three months and six months ended
May 31, 2003 and 2002 4
Consolidated Statements of Cash Flows for
the six months ended May 31, 2003
and 2002 5
Notes to Consolidated Financial Statements 6-16
Management Discussion and Analysis of
Results of Operations and Financial
Condition 17-18
PART II OTHER INFORMATION 19-20
SIGNATURES
21
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 22-23
CONSOLIDATED BALANCE SHEETS
A S S E T S
May 31, November 30,
2003 2002
Current Assets
Cash and cash equivalents $ 2,345,238 $ 1,585,647
Short-term investments and marketable
securities 3,919,332 3,479,544
Accounts receivable, net of allowances of
$1,677,200 and $1,222,408,
respectively 9,011,150 6,265,955
Inventories 6,013,313 3,743,131
Prepaid expenses and sundry receivables 602,428 363,457
Deferred income taxes 1,337,872 1,287,568
Prepaid income taxes and refunds due 1,703 1,703
Deferred advertising 2,573,105 -
Total Current Assets 25,804,141 16,727,005
Property and Equipment, net of accumulated
depreciation and amortization 805,481 720,739
Intangible Assets, net of accumulated
amortization 554,595 577,414
Other Assets
Marketable securities 5,510,556 6,723,518
Other 56,763 56,388
Total Other Assets 5,567,319 6,779,906
Total Assets $32,731,536 $24,805,064
See Notes Consolidated to Financial Statements.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
May 31, November 30,
2003 2002
Current Liabilities
Accounts payable and accrued
liabilities $ 9,584,657 $ 5,284,109
Income taxes payable 878,634 178,690
Total Current Liabilities 10,463,291 5,462,799
Subordinated Debentures 497,656 501,656
Deferred Income Taxes 13,216 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; 6,592,669 and
6,440,523 shares issued and outstanding,
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 18,176,248 15,389,415
Unrealized gains (losses) on marketable
securities 32,898 ( 107,990)
22,116,079 19,188,358
Less: Treasury Stock (274,055 shares at
May 31, 2003 and 271,155
shares at November 30, 2002,
respectively) 358,706 352,935
Total Shareholders' Equity 21,757,373 18,835,423
Total Liabilities and Shareholders'
Equity $32,731,536 $24,805,064
See Notes to Consolidated Financial Statements.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
May 31, May 31,
2003 2002 2003 2002
Revenues
Sales of Health and
Beauty Aid
Products - Net $17,439,253 $13,213,844 $29,802,038 $23,372,230
Other income 171,597 98,503 323,994 187,311
17,610,850 13,312,347 30,126,032 23,559,541
Costs and Expenses
Costs of sales 5,316,313 4,399,740 9,763,140 8,164,644
Selling, general and
administrative
expenses 4,927,457 3,865,127 9,037,262 7,601,451
Advertising,
cooperative
and promotions 2,633,688 2,858,396 5,356,258 5,121,922
Research and
development 202,077 138,259 431,773 228,061
Provision for doubtful
accounts 195,304 ( 41,801) 232,893 ( 146,161)
Interest expense 7,435 8,320 15,798 17,235
13,282,274 11,228,041 24,837,124 20,987,152
Income before
Income Taxes 4,328,576 2,084,306 5,288,908 2,572,389
Provision for Income
Taxes 1,744,481 866,320 2,131,187 1,054,340
Net Income $ 2,584,095 $ 1,217,986 $ 3,157,721 $ 1,518,049
Earnings per Share
Basic $.36 $.17 $.44 $.22
Diluted $.34 $.16 $.41 $.20
See Notes to Consolidated Financial Statements.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
May 31, May 31,
2003 2002 2003 2002
Net Income $2,584,095 $1,217,986 $3,157,721 $1,518,049
Other Comprehensive
Income
Unrealized holding
gains(loss)on
investments 17,249 3,566 140,888 ( 8,449)
Provision (Benefit) for
Taxes 6,971 1,266 56,758 ( 3,362)
Other Comprehensive
Income (Loss) - Net 10,278 2,300 84,130 ( 5,087)
Comprehensive Income $2,594,373 $1,220,286 $3,241,851 $1,512,962
Earnings Per Share:
Basic $.36 $.17 $.45 $.21
Diluted $.34 $.16 $.42 $.20
See Notes to Consolidated Financial Statements.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
May 31,
2003 2002
Cash Flows from Operating Activities:
Net income $3,157,721 $1,518,049
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 186,991 183,186
(Gain) on sale of marketable
securities and repurchase of
debentures ( 22,758) ( 3,025)
(Increase) decrease in deferred income
taxes ( 42,274) 80,507
(Increase) in accounts receivable ( 2,745,195) ( 2,400,695)
(Increase) decrease in inventory ( 2,270,182) 320,161
(Increase) in prepaid expenses and
miscellaneous receivables ( 238,971) ( 151,231)
(Increase) in deferred advertising ( 2,573,105) ( 1,982,753)
(Increase) in other assets ( 375) -
Increase in accounts payable
and accrued liabilities 4,300,548 4,251,495
Decrease in prepaid income taxes - 220,286
Increase in taxes payable 699,944 519,259
Net Cash Provided by Operating
Activities 452,344 2,555,239
Cash Flows from Investing Activities:
Acquisition of property, plant and
equipment ( 247,732) ( 136,932)
Acquisition of intangible assets ( 1,182) ( 2,945)
Proceeds of money due from officers - 1,371
Purchase of marketable securities ( 3,623,972) ( 3,387,647)
Proceeds from sale and maturity of
investments 4,556,792 324,507
Net Cash Provided by (Used in)
Investing Activities 683,906 ( 3,201,646)
Cash Flows from Financing Activities:
Purchase of treasury stock ( 5,771) -
Repurchase of outstanding debenture - ( 6,000)
Dividends paid ( 370,888) -
Net Cash (Used in) Financing
Activities ( 376,659) ( 6,000)
Net Increase (Decrease) in Cash 759,591 ( 652,407)
Cash and Cash Equivalents at Beginning
of Period 1,585,647 2,555,938
Cash and Cash Equivalents at End
of Period $2,345,238 $1,903,531
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 15,928 $ 17,235
Income taxes 1,460,687 324,810
See Notes to Consolidated Financial Statements.
-5-
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
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six month
period ended May 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
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, 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").
-6-
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 shareholders' equity.
Statements of Cash Flows Disclosure:
For purposes of the statement of cash flows, the Company con
siders 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.
-7-
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 improve
ments 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 5-7 Years
Furniture and fixtures 3-10 Years
Tools, dies and masters 3 Years
Transportation equipment 5 Years
Leasehold improvements 4-10 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 pur
poses.
Tax Credits:
Tax credits, when present, are accounted for using the flow-
through method as a reduction of income taxes in the years
utilized.
-8-
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 weighted 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.
Revenue Recognition:
The Company recognizes sales upon shipment of merchandise. Net
sales are comprised of gross sales 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 Company, 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
$1,047,106 and $695,824 as of May 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 $1,672,134 and $1,057,947
for the six months ended May 31, 2003 and 2002, respectively.
Comprehensive Income:
The Company adopted SFAS #130, Comprehensive Income, which
considers the Company's financial performance in that it in
cludes 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.
-9-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 -INVENTORIES
The components of inventory consist of the following:
May 31, November 30,
2003 2002
Raw materials $3,803,933 $3,031,400
Finished goods 2,209,380 711,731
$6,013,313 $3,743,131
At May 31, 2003 and November 30, 2002, the Company had a
reserve for obsolescence of $1,029,496 and $976,788, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the
following:
May 31, November 30,
2003 2002
Machinery and equipment $ 102,393 $ 97,003
Furniture and equipment 666,085 552,615
Transportation equipment 10,918 10,918
Tools, dies, and masters 314,686 213,188
Leasehold improvements 250,020 222,646
1,344,102 1,096,370
Less: Accumulated depreciation
and amortization 538,621 375,631
Property and Equipment - Net $ 805,481 $ 720,739
Depreciation expense for the six months ended May 31, 2003
and 2002 amounted to $162,990 and $159,293, respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
May 31, November 30,
2003 2002
Patents and trademarks $757,730 $756,548
Less: Accumulated
amortization 203,135 179,134
Intangible Assets - Net $554,595 $577,414
Amortization expense for the six months ended May 31, 2003
and 2002 amounted to $24,001 and $23,893, respectively.
-10-
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 $2,573,105
is accordingly reflected in the balance sheet for the interim period.
This deferral is the result of the Company's media and co-op budget
for the year which contemplates lower spending in the 4th quarter
than in the other three quarters.
The table below sets forth the calculation:
May May
2003 2002
(In Millions) (In Millions)
Media advertising budget for the
fiscal year $8.00 $7.50
Pro-rata portion for six months $4.00 $3.75
Media advertising spent 5.52 5.14
Accrual (deferral) ($1.52) ($1.39)
Anticipated Co-op advertising
commitments $5.00 $4.00
Pro-rata portion for six months $2.50 $2.00
Co-op advertising spent 3.55 2.59
Accrual (deferral) ($1.05) ($ .59)
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:
May 31, November 30,
2003 2002
(In Thousands) (In Thousands)
a)Vacation accrual $ * $ 320
a)Media advertising 1,100 *
b)Coop advertising 1,755 804
c)Accrued returns 1,110 878
d)Accrued bonuses 739 467
$4,704 $2,469
* under 5%
All other liabilities were for trade payables or individually
did not exceed 5% of total current liabilities.
-11-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - OTHER INCOME
Other income consists of the following at May 31:
2003 2002
Interest and dividend
income $241,556 $156,522
Royalty income 58,699 27,480
Miscellaneous 23,739 3,309
$323,994 $187,311
NOTE 10 -NOTES PAYABLE AND SUBORDINATED DEBENTURES
The Company has an available line of credit of $7,000,000.
Interest is calculated on the outstanding balance at prime
minus 1% or Libor plus 150 basis points. The line of credit
is collateralized by all the Company's assets. The Company
was not utilizing their available credit line at May 31, 2003
or November 30, 2002.
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.
-12-
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 con
sist 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 May 31, 2003 and November
30, 2002 were as follows:
May 31, 2003 November 30, 2002
Current: COST MARKET COST MARKET
Corporate
obligations $2,276,900 $2,295,389 $2,066,040 $2,071,603
Government
obligations
(including
mortgage
backed
securities) 1,287,751 1,305,154 1,330,345 1,314,604
Common stock 202,452 210,482 - -
Mutual funds 174,573 108,307 169,589 93,337
Total 3,941,676 3,919,332 3,565,974 3,479,544
Non-Current:
Corporate
obligations 1,875,000 1,880,588 1,025,806 1,016,715
Government
obligations 2,650,819 2,652,268 4,867,627 4,848,293
Preferred stock 829,495 877,700 751,645 758,510
Other equity
investments 100,000 100,000 100,000 100,000
Total 5,455,314 5,510,556 6,745,078 6,723,518
Total $9,396,990 $9,429,888 $10,311,052 $10,203,062
-13-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 -SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at May 31, 2003 was $9,429,888 as compared to $10,203,062 at November
30, 2002. The gross unrealized gains and losses were $149,190 and ($116,292) for May
31, 2003 and $58,411 and ($166,401) for November 30, 2002, respectively. The cost and
market values of the investments at May 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 $ 252,375 $ 252,375
GMAC Smartnotes 10/15/03 4.750 325,000 325,000 328,240 328,240
GMAC Smartnotes 6/15/03 4.750 300,000 300,000 300,273 300,273
GMAC Smartnotes 7/15/03 4.650 200,000 200,000 200,648 200,648
GMAC Smartnotes 8/15/03 4.250 499,000 499,000 501,330 501,330
GMAC Smartnotes 5/15/04 4.250 250,000 250,000 253,738 253,738
GMAC Smartnotes 5/15/05 5.000 175,000 175,000 179,272 179,272
GMAC Smartnotes 8/15/04 2.650 250,000 250,000 249,048 249,048
GMAC Smartnotes 5/15/06 4.050 400,000 400,000 398,152 398,152
Household Finance Corp.
Internotes 5/15/04 4.250 250,000 250,000 255,585 255,585
International Business
Machines 9/22/03 5.370 100,000 102,040 101,211 101,211
Colgate-Palmolive 12/1/03 5.270 100,000 100,860 101,989 101,989
Ford Motor Credit 5/22/06 4.750 250,000 250,000 249,900 249,900
CIT Group Inc. 1/15/06 4.000 200,000 200,000 205,758 205,758
CIT Group Inc. 3/15/05 3.200 100,000 100,000 101,312 101,312
GE Capital Group
Internotes 2/15/06 2.450 250,000 250,000 251,228 251,228
Sears Roebuck Acceptance
Corp. 5/15/06 3.500 250,000 250,000 245,918 245,918
4,151,900 4,175,977 4,175,977
-14-
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:
FHLB 9/15/03 5.125 255,000 266,200 257,869 257,869
FHLMC 2/27/07 2.000 100,000 100,000 100,219 100,219
FHLMC 11/15/17 4.250 200,000 200,000 201,312 201,312
FHLMC 2/27/12 4.000 225,000 225,000 228,587 228,587
FHLMC 10/15/09 3.000 250,000 250,000 251,173 251,173
FHLMC 11/15/09 3.000 250,000 250,000 252,575 252,575
FNMA 8/15/12 4.000 250,000 250,000 256,798 256,798
FHLMC 1/30/06 2.000 250,000 250,000 251,328 251,328
Tennessee Valley Authority
Power Bonds 5/1/29 6.500 26,000 688,530 699,140 699,140
Tobacco Settlement Fin
Corp. N 6/1/15 5.000 200,000 198,500 176,542 176,542
NJ EDA Trans Sublease RV
Lightrail 199A FSA 5/1/04 5.000 300,000 317,444 310,812 310,812
Port Authority NY & NJ
Cons 88th SR BE 10/1/04 4.500 225,000 238,789 234,594 234,594
CLOSED END MUNICIPAL BONDS/MUTUAL FUNDS:
Muniyield New Jersey Insd Frd Inc. 6,500 96,905 101,855 101,855
Muniholdings New Jersey Insd FD Inc. 6,900 94,549 104,535 104,535
Nuveen New Jersey Invt Quality Municipal Fun 6,200 95,162 98,704 98,704
Nuveen New Jersey Prem Inc Municipal Fund 5,200 78,639 83,356 83,356
Van Kamp Amer Cap Inv Gr NJ 4,800 80,502 85,680 85,680
Blackrock New Jersey Municipal Inc. 6,000 87,989 87,840 87,840
Eaton Vance New Jersey Municipal Inc. 5,600 85,506 87,920 87,920
Nuveen New Jersey Dividend Advantage 5,700 84,855 86,583 86,583
3,938,570 3,957,422 3,957,422
-15-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1048:
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 6.10% 14,800 $ 379,495 $ 387,020 $ 387,020
Merrill Lynch Trust 9/30/08 7.28 6,000 150,000 163,680 163,680
Corporate Backed Trust
Certificates For AIG
Sun America 5/17/07 6.70 6,000 150,000 162,000 162,000
Corporate Backed Trust
Certificates For Bristol
Myers Squibb 5/23/07 6.80 6,000 150,000 165,000 165,000
829,495 877,700 877,700
Common Stock:
DTE Energy Co. 1,200 51,649 51,996 51,996
Consolidated Edison Inc. 1,300 51,558 55,887 55,887
Progress Energy Inc. 1,000 48,000 47,050 47,050
Public Service Enterprise Group 1,300 51,245 55,549 55,549
202,452 210,482 210,482
Other Equity Investments:
Aberdeen Asia Pacific
Income Fund 100,000 100,000 100,000
Dreyfus Premier Limited
Term High Income CL B 15,628.688 174,573 108,307 108,307
274,573 208,307 208,307
$9,396,990 $9,429,888 $9,429,888
-16-
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the three month period ending May 31, 2003, the Company had
revenues of $17,610,850 and net income of $2,584,095 after a provision
for taxes of $1,744,481. Last year, for the May 31 quarter, the
Company had $13,312,347 of revenue and net income of $1,217,986. This
represents a 32% and 112% improvement for revenues and net income,
respectively. Gross margins improved from 66.7% to 69.5%. This was
primarily due to economies of scale derived as a result of the higher
sales volume. Selling, general and administrative (SG&A) expenses
increased to $4,927,457 from $3,865,127 as a result of an increase in
staff.
For the three month period ending May 31, 2003, advertising,
cooperative and promotional allowance expenditures were $2.63 million.
Last year, for the same three-month period ending May 31, 2002, they
were $2.86 million. Advertising expenditures were 15.1% of sales
compared to 21.6% last year. Since both co-op advertising and promo-
tions 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 proportionately
over the interim periods, based on its total expected costs per its
various advertising programs. Consequently, a deferral of $1.5 million
for media expense and $1.1 million for co-op expenditures for the six
month period is reflected in the balance sheet. The Company deferred
$1.4 million of media costs in the prior year for the six-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 million for the year. Specifically, the Company spent
$5.5 million for media advertising in the six months and $3.6 million
in co-op advertising. The difference between 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 six month period ended May 31, 2003, the Company had
revenue of $30,126,032 and a net income of $3,157,721 after a provision
for income taxes of $2,131,187. In the prior year's period, the
Company had revenues of $23,559,541 and net income of $1,518,049 after
a provision for income taxes of $1,054,340. Gross profit margins for
the six month period ending May 31, 2003 increased from 65.1% in the
prior year to 67.2%.
-17-
For the six month period ended May 31, 2003, advertising, coopera-
tive and promotional allowance expenditures were $5,356,258 as compared
to $5,121,922 for the six month period ending May 31, 2002. This is
primarily due to an estimated increase in the national advertising
budget from $7.5 million to $8 million annually. Advertising expendi-
tures were 18.0% of sales vs. 21.9% last year.
For the six month period ending May 31, 2003, research and develop-
ment expenses were $431,773 compared to $228,061 last year.
The Company's financial position as of May 31, 2003 consists of
current assets of $25,804,141 and current liabilities of $10,463,291.
In addition, shareholders' equity increased from $18,835,423 at November
30, 2002 to $21,757,373 at May 31, 2003 primarily due to net income
earned during the period.
The Company generated $450,000 in cash from operations due to the
six month net income of $3.16 million, a $4.3 million increase in
accounts payable, and a $700,000 net increase in income taxes due.
Cash decreased due to an inventory increase of $2.3 million, an increase
in the Company's accounts receivable of $2.7 million and an
increase in deferred advertising of $2.6 million. Both increases in
deferred advertising and accounts receivable are "normal" seasonal
increases.
The $450,000 cash generated by operations, however, was used to pay
dividends of $371,000 and for the acquisition of computer equipment of
$114,000 and other fixed assets of $134,000. The Company received net
proceeds from the purchases and sales of marketable securities of
$930,000, leaving the Company with a net increase in its cash position
of approximately $760,000.
-18-
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 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 six
months ended May 31, 2003.
-19-
PART II, ITEM 6. (Continued) EXHIBIT 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended Six Months Ended
May 31, May 31,
2003 2002 2003 2002
Item 6.
Weighted average shares
outstanding - Basic 7,215,128 7,045,557 7,178,242 7,045,557
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 439,401 533,691 463,918 547,560
Weighted average shares
outstanding -
Diluted 7,654,529 7,579,248 7,642,160 7,593,117
Net income $2,584,095 $1,217,986 $3,157,721 $1,518,049
Per share amount
Basic $.36 $.17 $.44 $.22
Diluted $.34 $.16 $.41 $.20
-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-
CERTIFICATIONS
I, David Edell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CCA Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report.
/s/
---------------------------------------------
David Edell
Chief Executive Officer
I, John Bingman, certify that;
1. I have reviewed this quarterly report on Form 10-Q of CCA Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report.
/s/
------------------------------------------------
John Bingman
Treasurer - Chief Financial Officer
-22-
I, Ira Berman, certify that;
1. I have reviewed this quarterly report on Form 10-Q of CCA Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report.
/s/
---------------------------------------------
Ira Berman
Chairman and Secretary
-23-