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 February 28, 2009
Commission File Number 1-31643
CCA INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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04-2795439 |
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(State or other jurisdiction of
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(I.R.S.Employer |
Incorporation or organization)
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Identification Number) |
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200 Murray Hill Parkway |
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East Rutherford, NJ
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07073 |
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(Address of principal executive offices)
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(Zip Code) |
(201) 330-1400
Registrants telephone number, including area code
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 þ No o
Indicated by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company þ |
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange
Act). Yes
o No þ
Common
Stock, $.01 Par Value 6,086,740 shares as of
February 28, 2009
Class A Common Stock, $.01 Par Value 967,702 shares as of February 28, 2009
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
2
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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February 28, |
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November 30, |
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2009 |
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2008 |
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(Unaudited) |
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ASSETS |
Current Assets |
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Cash and cash equivalents |
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$ |
1,443,651 |
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$ |
8,934,699 |
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Short-term investments and marketable
securities |
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11,244,511 |
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6,648,357 |
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Accounts receivable, net of allowances of
$1,005,829 and $823,029, respectively |
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11,286,798 |
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8,230,716 |
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Inventories |
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8,442,643 |
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7,932,798 |
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Prepaid expenses and sundry receivables |
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739,557 |
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578,000 |
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Prepaid income taxes and refunds due |
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1,397,162 |
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1,554,158 |
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Deferred income taxes |
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1,035,262 |
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973,732 |
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Total Current Assets |
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35,589,584 |
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34,852,460 |
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Property and Equipment, net of accumulated
depreciation and amortization |
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564,559 |
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611,226 |
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Intangible Assets, net of accumulated
amortization |
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726,050 |
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727,716 |
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Other Assets |
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Marketable securities |
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2,197,994 |
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2,945,740 |
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Deferred taxes |
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84,714 |
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143,419 |
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Other |
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65,300 |
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65,300 |
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Total Other Assets |
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2,348,008 |
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3,154,459 |
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Total Assets |
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$ |
39,228,201 |
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$ |
39,345,861 |
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See Notes to Unaudited Consolidated Financial Statements.
3
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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February 28, |
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November 30, |
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2009 |
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2008 |
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(Unaudited) |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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$ |
11,529,155 |
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$ |
10,182,510 |
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Capitalized lease obligation current portion |
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58,969 |
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57,697 |
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Dividends payable |
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775,989 |
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775,989 |
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Total Current Liabilities |
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12,364,113 |
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11,016,196 |
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Capitalized lease obligations-long term |
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60,557 |
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75,786 |
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Total Liabilities |
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12,424,670 |
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11,091,982 |
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Shareholders Equity |
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Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued |
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Common stock, $.01 par; authorized
15,000,000 shares; 6,086,740 shares issued and outstanding |
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60,867 |
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60,867 |
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Class A common stock, $.01 par; authorized
5,000,000 shares; 967,702 shares issued and outstanding |
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9,677 |
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9,677 |
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Additional paid-in capital |
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2,329,049 |
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2,329,049 |
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Retained earnings |
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26,268,939 |
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26,920,562 |
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Unrealized (losses) on marketable
securities |
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(1,865,001 |
) |
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(1,066,275 |
) |
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Total Shareholders Equity |
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26,803,531 |
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28,253,879 |
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Total Liabilities and Shareholders Equity |
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$ |
39,228,201 |
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$ |
39,345,861 |
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See Notes to Unaudited Consolidated Financial Statements.
4
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three Months Ended |
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February 28 |
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February 29 |
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2009 |
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2008 |
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Revenues |
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Sales of health and beauty aid products
Net |
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$ |
14,758,850 |
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$ |
13,639,145 |
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Other income |
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185,616 |
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231,895 |
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Total Revenues |
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14,944,466 |
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13,871,040 |
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Costs and Expenses |
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Costs of sales |
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5,616,212 |
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4,893,262 |
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Selling, general and administrative expenses |
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5,315,097 |
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5,682,551 |
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Advertising, cooperative and promotions |
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3,559,279 |
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2,531,150 |
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Research and development |
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126,352 |
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150,084 |
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Provision for doubtful Accounts |
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47,506 |
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82,180 |
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Interest expense |
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3,285 |
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4,346 |
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Total Costs and Expenses |
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14,667,731 |
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13,343,573 |
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Income before Provision for
Income Taxes |
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276,735 |
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527,467 |
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Provision for Income Taxes |
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152,369 |
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183,784 |
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Net Income |
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$ |
124,366 |
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$ |
343,683 |
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Earnings per Share: |
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Basic |
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$ |
0.02 |
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$ |
0.05 |
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Diluted |
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$ |
0.02 |
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$ |
0.05 |
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Number of Common Shares: |
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Weighted average shares
outstanding Basic |
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7,054,442 |
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7,054,442 |
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Weighted average and
potential dilutive
outstanding |
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7,057,168 |
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7,073,556 |
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See Notes to Unaudited Consolidated Financial Statements.
5
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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Three Months Ended |
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February 28 |
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February 29 |
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2009 |
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2008 |
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Net Income |
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$ |
124,366 |
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$ |
343,683 |
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Other Comprehensive Income |
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Unrealized holding gains (losses) on
investments |
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(798,726 |
) |
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20,698 |
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Comprehensive Income |
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$ |
(674,360 |
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$ |
364,381 |
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See Notes to Unaudited Consolidated Financial Statements.
6
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three Months Ended |
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February 28 |
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February 29, |
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2009 |
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2008 |
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Cash Flows from Operating Activities: |
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Net income |
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$ |
124,366 |
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$ |
343,683 |
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Adjustments to reconcile net income to net cash
(used in) provided by operating activities: |
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Depreciation and amortization |
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63,931 |
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58,412 |
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Loss on write off of fixed assets |
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2,653 |
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0 |
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(Gain) on sale of securities |
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(49,969 |
) |
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(50,823 |
) |
(Increase) in deferred income taxes |
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(2,825 |
) |
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(112,355 |
) |
(Increase) in accounts receivable |
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(3,056,082 |
) |
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(1,700,414 |
) |
(Increase) in inventory |
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(509,845 |
) |
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(846,819 |
) |
(Increase) in prepaid expenses and
miscellaneous receivables |
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(161,557 |
) |
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|
(79,095 |
) |
Decrease in prepaid income
taxes and refunds due |
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|
156,996 |
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|
108,740 |
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Increase in accounts payable and accrued
liabilities |
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1,346,644 |
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2,332,042 |
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Net Cash (Used in) Provided by Operating
Activities |
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(2,085,688 |
) |
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53,371 |
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Cash Flows from Investing Activities: |
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Acquisition of property, plant and equipment |
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(18,252 |
) |
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(32,498 |
) |
Purchase of marketable securities |
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(11,582,163 |
) |
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Proceeds from sale and maturity of investments |
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6,985,000 |
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|
5,674,999 |
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Net Cash (Used in) Provided by Investing
Activities |
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|
(4,615,415 |
) |
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|
5,642,501 |
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Cash Flows from Financing Activities: |
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Payments on capital lease obligation |
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(13,956 |
) |
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|
(11,924 |
) |
Dividends paid |
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|
(775,989 |
) |
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|
(634,900 |
) |
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Net Cash (Used in) Financing Activities |
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(789,945 |
) |
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(646,824 |
) |
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Net (Decrease) Increase in Cash |
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(7,491,048 |
) |
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|
5,049,048 |
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Cash and Cash Equivalents at Beginning of Period |
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|
8,934,699 |
|
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|
6,743,960 |
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Cash and Cash Equivalents at End of Period |
|
$ |
1,443,651 |
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|
$ |
11,793,008 |
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Supplemental Disclosures of Cash Flow
Information: |
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Cash paid during the period for: |
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Interest |
|
$ |
3,285 |
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|
$ |
4,346 |
|
Income taxes |
|
|
817 |
|
|
|
187,400 |
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|
|
|
|
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Schedule of Non Cash Financing Activities: |
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|
|
|
|
Dividends declared and accrued |
|
|
775,989 |
|
|
|
705,444 |
|
See Notes to Unaudited Consolidated Financial Statements.
7
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited 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 three month period ended February 28, 2009 are not necessarily indicative of
the results that may be expected for the year ended November 30, 2009. For further
information, refer to the consolidated financial statements and footnotes thereto
included in the Companys annual report on Form 10-K for the year ended November 30,
2008. The accompanying unaudited consolidated financial statements, in the opinion of
management, include all adjustments necessary for a fair presentation. All such
adjustments are of a normal recurring nature.
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. and Nutra Care Corporation, all of which are currently inactive. CCA
has two active wholly-owned subsidiaries, CCA Online Industries, Inc. and CCA IND.,
S.A. DE C.V., a Variable Capital Corporation organized pursuant to the laws of Mexico.
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 significant inter-company accounts and
transactions have been eliminated.
8
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates and Assumptions:
The consolidated financial statements include the use of estimates, which management
believes are reasonable. The process of preparing financial statements in conformity
with accounting principles generally accepted in the United States of America 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.
Other Comprehensive Income:
Total comprehensive income includes changes in equity that are excluded from the
consolidated statement of operations and are recorded directly into a separate section
of consolidated statements of comprehensive income. The Companys accumulated other
comprehensive income shown on the consolidated balance sheet consist of unrealized
gains and losses on investment holdings net of any tax consequence.
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, and on the Statement of Comprehensive Income.
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.
For the three months ended February 28, 2009, dividends declared were $ 775,989 and
dividends paid were in the amount of $775,989.
9
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable:
Accounts receivable consist of trade receivables recorded at original invoice amount,
less an estimated allowance for uncollectible amounts. The accounts receivable balance
is further reduced by allowances for coop advertising and reserves for returns which
are anticipated to be taken as credits against the balances as of February 28, 2009.
The allowances and reserves which are anticipated to be deducted from future invoices
are included in accrued liabilities. Trade credit is generally extended on a short
term basis; thus trade receivables do not bear interest, although a finance charge may
be applied to receivables that are past due. Trade receivables are periodically
evaluated for collectibility based on past credit history with customers and their
current financial condition. Changes in the estimated collectibility of trade
receivables are recorded in the results of operations for the period in which the
estimate is revised. Trade receivables that are deemed uncollectible are offset
against the allowance for uncollectible accounts. The Company generally does not
require collateral for trade receivables.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market. Costs
included in inventory are labor (including the cost of outside contract
manufacturers), materials and allocated manufacturing overhead. Product returns that
are resaleable 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.
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. Assets that are subject to depreciation and
amortization are reviewed for potential impairment whenever events or circumstances
indicate that carrying amounts may not be recoverable.
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 |
|
Remaining life of the lease (approximately four years) |
10
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible Assets:
Intangible assets are stated at cost. Patents are amortized on the straight-line
method over a period of 17 years. Such intangible assets are reviewed for potential
impairment whenever events or circumstances indicate that carrying amounts may not be
recoverable.
Web Site Costs:
Certain costs incurred in creating the graphics and content of the Companys web site
has been capitalized in accordance with the Financial Accounting Standards Emerging
Issue Task Force (EITF) No. 0-02, Accounting for Web Site Development Costs. The
Company has determined that these costs will be amortized over a two year period.
Web site design and conceptual costs are expensed as incurred.
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.
Earnings Per Common Share:
Basic earning per share is calculated using the average number of shares of common
stock outstanding during the period. Diluted earnings per share is computed on the
basis of the average number of common shares outstanding plus the effect of
outstanding common stock equivalents using the treasury stock method and convertible
debentures using the if-converted method. Common stock equivalents consist of stock
options.
Reclassifications
Certain prior years amounts have been reclassified to conform with the current years
presentation.
11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition:
The Company recognizes 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
Company, therefore, records a reserve for returns equal to its gross profit on its
historical percentage of returns on its last five months sales. Those returns which
are anticipated to be taken as credits against the balances as of February 28, 2009
are offset against the accounts receivable. The reserves which are anticipated to be
deducted from future invoices are included in accrued liabilities.
Sales Incentives:
In
accordance with EITF 01 9, the Company has accounted for certain sales incentives
offered to customers by charging them directly to sales as opposed to advertising and
promotional expense. Had EITF 01 9 not been adopted, net sales for the three
months ended February 28, 2009 and February 29, 2008 would have been $16,153,948 and
$14,940,085, respectively.
Advertising Costs:
The Companys policy for fiscal financial reporting is to charge advertising cost to
operations as incurred.
Shipping and Handling Costs:
The Companys policy for financial reporting is to charge shipping costs as part of
selling, general and administrative expense as incurred. Shipping costs included were
$674,772 and $663,939 for the three months ended February 28, 2009 and February 29,
2008, respectively.
Stock Options:
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 123R, Accounting for Share-Based
Compensation which is a revision of SFAS No. 123. Effective for annual or interim
periods beginning after December 15, 2005, SFAS No. 123R requires stock grants to
employees to be recognized in the income statement based on their fair values. The
adoption of SFAS No. 123R did not have any impact on the Companys financial position,
results of operations or cash flow.
12
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements:
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159
(SFAS No. 159). SFAS No. 159 which amends SFAS No. 115 allows certain financial
assets and liabilities to be recognized, at the Companys election, at fair market
value, with any gains or losses for the period recorded in the statement of income.
SFAS No. 159 included available-for-sale securities in the assets eligible for this
treatment. Currently, the Company records the gains or losses for the period in the
statement of comprehensive income and in the equity section of the balance sheet.
SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and
interim periods in those fiscal years. The Company, at this time, has not elected to
recognize any gains or losses for its available-for-sale securities in the statement
of income, and accordingly there will be no impact on the Companys financial position
or results of operations.
In November 2007, the SEC issued Staff Accounting Bulletin No. 109 (SAB 109) which
provides interpretive guidance regarding written derivative loan commitments that are
accounted for at fair value through earnings. SAB 109 is effective for fiscal
quarters beginning after December 15, 2007. The adoption of this statement has not
had a material impact on the Companys financial position or results of operation.
In December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 110 (SAB 110). SAB 110 amends and replaces Question 6 of Section D.2
of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6
of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the
simplified method in developing an estimate of the expected term of plain vanilla
share options and allows usage of that method for option grants prior to December 31,
2007. SAB 110 allows public companies which do not have sufficient historical
experience to provide a reasonable estimate to continue the use of this method for
estimating the expected term of plain vanilla share option grants after December 31,
2007. The adoption of this statement has not had a material impact on the Companys
financial position or results of operation.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141
(revised 2007), Business Combinations (SFAS 141R). SFAS 141R changes accounting for
acquisitions that close beginning in 2009 in a number of areas including the treatment
of contingent consideration, contingencies, acquisition costs, In-process research &
development and restructuring costs. More transactions and events will qualify as
business combinations and will be accounted for at fair value under the new standard.
SFAS 141R promotes greater use of fair values in financial reporting. In addition,
under SFAS 141R, changes in deferred tax asset valuation allowances and acquired
income tax uncertainties in a business combination after the measurement period will
impact income tax expense. Some of the changes will introduce more volatility into
earnings. SFAS 141R is effective for fiscal years beginning on or after December 15,
2008. SFAS 141R will have an impact on accounting for any business acquired after the
effective date of this pronouncement.
13
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB
No. 51 (SFAS 160). SFAS 160 will change the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests (NCI) and
classified as a component of equity. This new consolidation method will significantly
change the accounting for transactions with minority interest holders. SFAS 160 is
effective for fiscal years beginning after December 15, 2008. SFAS 160 would have an
impact on the presentation and disclosure of the noncontrolling interests of any
non-wholly owned business acquired in the future.
In April 2008, the FASB issued FASB Staff Position No. 142-3 (FSP 142-3), which
amends the factors that must be considered in developing renewal or extension
assumptions used to determine the useful life over which to amortize the cost of a
recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets
(SFAS 142). The FSP requires an entity to consider its own assumptions about
renewal or extension of the term of the arrangement, consistent with its expected use
of the asset, and is an attempt to improve consistency between the useful life of a
recognized intangible asset under SFAS 142 and the period of expected cash flows used
to measure the fair value of the asset under SFAS 141. The FSP is effective for
fiscal years beginning after December 15, 2008, and the guidance for determining the
useful life of a recognized intangible asset must be applied prospectively to
intangible assets acquired after the effective date. The FSP is not expected to have a
significant impact on the Companys results of operations, financial condition or
liquidity.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). The statement is intended to improve financial
reporting by identifying a consistent hierarchy for selecting accounting principles to
be used in preparing financial statements that are prepared in conformance with
generally accepted accounting principles. Unlike Statement on Auditing
Standards No. 69, The Meaning of Present Fairly in Conformity With GAAP (SAS 69),
SFAS 162 is directed to the entity rather than the auditor. The statement is effective
60 days following the SECs approval of the Public Company Accounting Oversight Board
(PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity
with GAAP, and is not expected to have any impact on the Companys results of
operations, financial condition or liquidity.
In June 2008, FASB issued FSP Emerging Issues Task Force No. 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities (EITF 03-6-1). Under the FSP, unvested share-based payment awards that
contain rights to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two class method of computing
EPS. The FSP is effective for fiscal years beginning after December 15, 2008, and
interim periods within those years, and is not expected to have a significant impact on the Companys results of operations, financial condition
or liquidity.
14
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In October 2008, the FASB issued FASB Staff Position No. FAS 157-3 (FSP FAS 157-3)
which clarifies the application of FASB Statement of Financial Accounting Standards
No. 157 (SFAS No. 157) in regard to fair value measurements of financial assets in a
market that is not active. FSP FAS 142-3 became effective October 10, 2008 for all
subsequent reporting periods. The adoption of this staff position has had no material
impact on the Companys financial position or results of operation.
In April 2009, the
FASB issued FASB Staff Position No. 107-1 (FSP FAS 107-1) and APB 28-1
(APB 28-1), which amends FASB Statement No. 107, Disclosures about Fair Value of
Financial Instruments and APB Opinion NO. 28, Interim Financial Reporting, to require
disclosures about the fair value of financial instruments for interim reporting periods. FSP FAS
107-1 and APB 28-1 will be effective for interim reporting periods ending after June 15, 2009.
The adoption of this staff position will not have a material impact on the Companys financial
position or results of operation.
In April 2009, the
FASB issued FASB Staff Position No. 157-4 (FSP FAS 157-4), which provides additional
guidance in accordance with FASB No. 157, Fair Value Measurements, when the volume and level
of activity for the asset or liability has significantly decreased. FSP FAS 157-4 shall be
effective for interim and annual reporting periods ending after June 15, 2009. The Company
has not determined the impact of its adoption of this staff position.
In April 2009, the
FASB issued FASB Staff Position No. 115-2 (FSP FAS 115-2) and FASB Staff Position
No. 124-2 (FSP FAS 124-2), which amends the other-than-temporary impairment
guidance for debt and equity securities. FSP FAS 115-2 and FSP FAS 124-2 shall be effective for
interim and annual reporting periods ending after June 15, 2009. The Company has not
determined the impact of its adoption of this staff position.
Management does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
15
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 INVENTORIES
The components of inventory consist of the following:
|
|
|
|
|
|
|
|
|
|
|
February 28, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
5,109,205 |
|
|
$ |
4,880,267 |
|
Finished goods |
|
|
3,333,438 |
|
|
|
3,052,531 |
|
|
|
|
|
|
|
|
|
|
$ |
8,442,643 |
|
|
$ |
7,932,798 |
|
|
|
|
|
|
|
|
At February 28, 2009 and November 30, 2008, the Company had a reserve for
obsolescence of $ 632,086 and $578,941, respectively.
NOTE 5 PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
February 28, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Machinery and equipment |
|
$ |
187,976 |
|
|
$ |
190,308 |
|
Furniture and equipment |
|
|
754,310 |
|
|
|
813,819 |
|
Transportation equipment |
|
|
|
|
|
|
10,918 |
|
Tools, dies, and masters |
|
|
296,123 |
|
|
|
360,701 |
|
Capitalized lease obligations |
|
|
263,067 |
|
|
|
263,067 |
|
Web Site |
|
|
20,000 |
|
|
|
20,000 |
|
Leasehold improvements |
|
|
367,582 |
|
|
|
357,582 |
|
|
|
|
|
|
|
|
|
|
|
1,889,058 |
|
|
|
2,016,395 |
|
Less: Accumulated depreciation
and amortization |
|
|
1,324,499 |
|
|
|
1,405,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment Net |
|
$ |
564,559 |
|
|
$ |
611,226 |
|
|
|
|
|
|
|
|
Depreciation expense for the three months ended February 28, 2009 and February 29,
2008 amounted to $62,266 and $56,746, respectively.
16
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 INTANGIBLE ASSETS
Intangible assets consist of owned trademarks and patents for ten product lines
|
|
|
|
|
|
|
|
|
|
|
February 28, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Patents and trademarks |
|
$ |
886,608 |
|
|
$ |
886,608 |
|
Less: Accumulated amortization |
|
|
160,558 |
|
|
|
158,892 |
|
|
|
|
|
|
|
|
Intangible Assets Net |
|
$ |
726,050 |
|
|
$ |
727,716 |
|
|
|
|
|
|
|
|
Patents are amortized on a straight-line basis over their legal life of 17 years and
trademarks are adjusted to realizable value for each quarterly
reporting period.
Amortization expense for the three months ended February 28, 2009 and February 29, 2008
amounted to $1,665 and $1,665, respectively. Estimated amortization expense for
November 30, 2009, 2010, 2011, 2012 and 2013 will be $6,553, $6,553, $6,288, $6,026 and
$5,911 respectively.
NOTE 7 SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments and marketable securities, which consist of fully guaranteed
bank certificates of deposit, 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
February 28, 2009 and November 30, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2009 |
|
|
November 30, 2008 |
|
|
|
COST |
|
|
MARKET |
|
|
COST |
|
|
MARKET |
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed bank
certificates of
deposit |
|
$ |
4,658,000 |
|
|
$ |
4,672,429 |
|
|
$ |
|
|
|
$ |
|
|
Corporate
obligations |
|
|
399,106 |
|
|
|
397,986 |
|
|
|
200,000 |
|
|
|
197,714 |
|
Government
obligations
(including mortgage
backed securities) |
|
|
5,989,163 |
|
|
|
5,987,530 |
|
|
|
6,200,029 |
|
|
|
6,248,363 |
|
Preferred stock |
|
|
50,000 |
|
|
|
7,120 |
|
|
|
50,000 |
|
|
|
21,640 |
|
Common stock |
|
|
51,649 |
|
|
|
32,124 |
|
|
|
51,648 |
|
|
|
44,628 |
|
Mutual funds |
|
|
215,274 |
|
|
|
129,617 |
|
|
|
215,274 |
|
|
|
114,582 |
|
Other equity
investments |
|
|
70,206 |
|
|
|
17,705 |
|
|
|
70,206 |
|
|
|
21,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current |
|
|
11,433,398 |
|
|
|
11,244,511 |
|
|
|
6,787,157 |
|
|
|
6,648,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
NOTE 7 |
|
SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST |
|
|
MARKET |
|
|
COST |
|
|
MARKET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
|
200,000 |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
Corporate obligations |
|
|
399,264 |
|
|
|
381,998 |
|
|
|
598,370 |
|
|
|
577,334 |
|
Government obligations |
|
|
500,000 |
|
|
|
460,000 |
|
|
|
500,000 |
|
|
|
460,000 |
|
Preferred stock |
|
|
2,774,844 |
|
|
|
1,155,996 |
|
|
|
2,774,845 |
|
|
|
1,908,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current |
|
|
3,874,108 |
|
|
|
2,197,994 |
|
|
|
3,873,215 |
|
|
|
2,945,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
15,307,506 |
|
|
$ |
13,442,505 |
|
|
$ |
10,660,372 |
|
|
$ |
9,594,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank certificates of deposit are insured by the Federal Deposit Insurance Corporation
for the full balance under the Temporary Liquidity Guarantee Program. The Company
maintains accounts with several brokerage firms. The accounts contain cash and
securities. Balances are insured up to $500,000 (with a limit of $100,000 for cash) by
the Securities Investor Protection Corporation (SIPC).
The Company had, at February 28, 2009, an auction rate bond issued by the New Jersey
State Higher Education Assistance Authority (NJHE). The bond was recorded as
non-current marketable securities. The NJHE bond has an original par value of
$500,000, a maturity date of December 1, 2040, a rating of AA by S&P, and has been
placed on negative watch. Fitch has withdrawn their rating. The current interest rate
is 3.238% as of September 18, 2008. Beginning in February 2008, more shares for sale
were submitted in the regularly scheduled auctions for the NJHE auction rate bonds than
there were offers to buy. This meant that these auctions failed to clear and that
many or all auction bond holders who wanted to sell their shares in these auctions were
unable to do so. The Company believes that no permanent impairment has occurred as of
February 28, 2009, as the Company has the ability and intent to hold these investments
long enough to avoid realizing any significant loss. The Company has recognized a
temporary impairment charge of $40,000 against the $500,000 par value of the bond. If
uncertainties in the credit and capital markets continue, resulting in further market
deterioration, the Company may be required to recognize further impairment charges. In
addition, if there are any further ratings downgrades, or if the Company no longer has
the ability to hold these investments, the Company may have further impairment charges.
18
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
NOTE 7 |
|
SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (Continued) |
The Company adopted SFAS No. 157, Fair Value Measurements (SFAS No. 157) as of
December 1, 2007, which expands disclosures about investments that are measured and
reported at fair market value. SFAS No. 157 established a fair value hierarchy that
prioritizes the inputs to valuations techniques utilized to measure fair value into
three broad levels as follows:
Level 1 Quoted market prices in active markets for the identical asset or liability
that the reporting entity has ability to access at measurement date.
Level 2 Quoted market prices for identical or similar assets or liabilities in
markets that are not active, and where fair value is determined through the use of
models or other valuation methodologies.
Level 3 Unobserved inputs for the asset or liability. Fair value is determined by
the reporting entitys own assumptions utilizing the best information available, and
includes situations where there is little market activity for the investment.
All of the Companys investments as of February 28, 2009 would be categorized as Level
1 in respect to the methodology utilized to determine fair market value, with the
exception of the NJHE bond, referenced above, which is categorized as Level 3.
The following table discloses a reconciliation of the NJHE bond Level 3 investment at
measured fair value during the quarter ended February 28, 2009:
|
|
|
|
|
Beginning Balance as of December 1, 2008 |
|
$ |
460,000 |
|
Unrealized (loss) |
|
|
|
|
|
|
|
|
Ending Balance as of February 28, 2009 |
|
$ |
460,000 |
|
|
|
|
|
There was no realized income or loss from the Level 3 NJHE bond investment during the
quarter and year to date ended February 28, 2009.
19
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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:
|
|
|
|
|
|
|
|
|
|
|
February 28, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In Thousands) |
|
|
(In Thousands) |
|
|
a) Media Advertising |
|
$ |
3,309 |
|
|
$ |
1,326 |
|
b) Coop Advertising |
|
|
1,200 |
|
|
|
849 |
|
c) Accrued Returns |
|
|
1,510 |
|
|
|
1,443 |
|
|
|
|
|
|
|
|
|
|
$ |
6,019 |
|
|
$ |
3,618 |
|
|
|
|
|
|
|
|
All other liabilities were for trade payables or individually did not exceed 5% of
total current liabilities.
NOTE 9 OTHER INCOME
Other income consists of the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending |
|
|
|
February 28, |
|
|
February 29, |
|
|
|
2009 |
|
|
2008 |
|
|
Interest and dividend income |
|
$ |
110,400 |
|
|
$ |
204,203 |
|
Royalty income |
|
|
21,589 |
|
|
|
27,043 |
|
Realized gain (loss) on sale of
bonds |
|
|
49,985 |
|
|
|
|
|
Miscellaneous |
|
|
3,642 |
|
|
|
649 |
|
|
|
|
|
|
|
|
|
|
$ |
185,616 |
|
|
$ |
231,895 |
|
|
|
|
|
|
|
|
NOTE 10 NOTES PAYABLE
The Company has an available line of credit of $20,000,000. Interest is calculated at
the Companys option, either on the outstanding balance at the prime rate plus 0.5% or
Libor plus 175 basis points. The line of credit is unsecured as of February 28, 2009
and the Company must adhere to certain financial covenants pertaining to net worth and
debt coverage. The Company was not utilizing their available credit line at February
28, 2009 and November 30, 2008. The Company has extended the line of credit through
August 31, 2009. As of February 28, 2009, the Company was in technical violation of
its line of credit loan agreement due to the declaration of the dividend for the first
quarter ended February 28, 2009. The Company is presently in discussions for the
granting of a waiver by its bank.
20
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 NOTES PAYABLE (Continued)
The Company has never utilized or borrowed any funds against the line of credit since
it was granted. The Company, as of February 28, 2009 had $14,886,156 of free cash and
investments, including $4,872,429 of bank certificates of deposit.
NOTE 11 COMMITMENTS AND CONTINGENCIES
Dividends and Capital Transactions
On January 28, 2009, the board of directors declared a $0.11 per share dividend for the
first quarter ended February 28, 2009. The dividend was payable to all shareholders of
record as of February 3, 2009 and was paid on March 3, 2009.
Collective Bargaining Agreement
On July 8, 2008, the Company signed a new collective bargaining agreement with Local
108, L.I.U. of N.A., AFL-CIO with similar provisions of the one that expired on January
1, 2008. The new agreement is effective January 1, 2008. Other than standard wage,
holiday, vacation and sick day provisions, the agreement calls for CCA to contribute to
the Recycling and General Industrial Union Local 108 Welfare Fund (Welfare Fund)
certain benefits costs. The Welfare Fund will be providing medical, dental and life
insurance for the Companys employees covered under the collective bargaining
agreement. Previously, the Company provided the covered employees medical, dental and
life insurance benefits directly. The new collective bargaining agreement is in effect
through December 31, 2010. This agreement pertains to 32% of the CCA labor force.
NOTE 12 401(K) PLAN
The Company has adopted a 401(K) Profit Sharing Plan that all employees with over one
year of service and attained age 21 are eligible to join. Employees may make salary
reduction contributions up to twenty-five percent of compensation not to exceed the
federal government limits. The Plan allows for the Company to make discretionary
contributions. For all fiscal periods to date, the Company did not make any
contributions.
21
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
At February 28, 2009 and November 30, 2008, respectively, the Company had temporary
differences arising from the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Classified As |
|
|
|
|
|
|
|
Deferred |
|
|
Short-Term |
|
|
Long-Term |
|
Type |
|
Amount |
|
|
Tax |
|
|
Asset |
|
|
(Liability) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
(72,886 |
) |
|
$ |
(29,082 |
) |
|
$ |
|
|
|
$ |
(29,082 |
) |
Reserve for bad debts |
|
|
201,594 |
|
|
|
80,436 |
|
|
|
80,436 |
|
|
|
|
|
Reserve for returns |
|
|
804,235 |
|
|
|
320,890 |
|
|
|
320,890 |
|
|
|
|
|
Reserve for
obsolete inventory |
|
|
632,086 |
|
|
|
252,202 |
|
|
|
252,202 |
|
|
|
|
|
Vacation accrual |
|
|
471,975 |
|
|
|
188,318 |
|
|
|
188,318 |
|
|
|
|
|
Charitable Contributions |
|
|
524,249 |
|
|
|
209,175 |
|
|
|
95,379 |
|
|
|
113,796 |
|
Section 263A costs |
|
|
245,706 |
|
|
|
98,037 |
|
|
|
98,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax |
|
|
|
|
|
$ |
1,119,976 |
|
|
$ |
1,035,262 |
|
|
$ |
84,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
Classified As |
|
|
|
|
|
|
|
Deferred |
|
|
Short-Term |
|
|
Long-Term |
|
Type |
|
Amount |
|
|
Tax |
|
|
Asset |
|
|
(Liability) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
74,244 |
|
|
$ |
29,623 |
|
|
$ |
|
|
|
$ |
29,623 |
|
Reserve for bad debts |
|
|
154,290 |
|
|
|
61,562 |
|
|
|
61,562 |
|
|
|
|
|
Reserve for returns |
|
|
668,738 |
|
|
|
266,827 |
|
|
|
266,827 |
|
|
|
|
|
Reserve for
obsolete inventory |
|
|
578,941 |
|
|
|
230,997 |
|
|
|
230,997 |
|
|
|
|
|
Vacation accrual |
|
|
501,096 |
|
|
|
199,937 |
|
|
|
199,937 |
|
|
|
|
|
Charitable contributions |
|
|
572,568 |
|
|
|
228,455 |
|
|
|
114,659 |
|
|
|
113,796 |
|
Section 263A costs |
|
|
250,000 |
|
|
|
99,750 |
|
|
|
99,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax |
|
|
|
|
|
$ |
1,117,151 |
|
|
$ |
973,732 |
|
|
$ |
143,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
13 INCOME TAXES (Continued)
Income tax expense is made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended February 28, 2009 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
152,190 |
|
|
$ |
46,330 |
|
|
$ |
198,520 |
|
Deferred tax (benefit) |
|
|
(35,380 |
) |
|
|
(10,771 |
) |
|
|
(46,151 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
116,810 |
|
|
$ |
35,559 |
|
|
$ |
152,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended February 29, 2008 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
219,190 |
|
|
$ |
65,820 |
|
|
$ |
285,010 |
|
Deferred tax (benefit) |
|
|
(77,849 |
) |
|
|
(23,377 |
) |
|
|
(101,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
141,341 |
|
|
$ |
42,443 |
|
|
$ |
183,784 |
|
|
|
|
|
|
|
|
|
|
|
23
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 INCOME TAXES (Continued)
Prepaid income taxes and refund due are made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State & |
|
|
|
|
|
|
Federal |
|
|
Local |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2009 |
|
$ |
897,254 |
|
|
$ |
499,908 |
|
|
$ |
1,397,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008 |
|
$ |
1,020,948 |
|
|
$ |
533,210 |
|
|
$ |
1,554,158 |
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of income tax expense computed at the statutory rate to income tax
expense at the effective rate for the three months ended February 28, 2009 and February
29, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
February 28, 2009 |
|
|
February 29, 2008 |
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
of Pretax |
|
|
|
|
|
|
of Pretax |
|
|
|
Amount |
|
|
Income |
|
|
Amount |
|
|
Income |
|
Income tax expense
at federal statutory rate |
|
$ |
94,090 |
|
|
|
34.00 |
% |
|
$ |
179,339 |
|
|
|
34.00 |
% |
Increases in taxes
resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of federal
income tax benefit |
|
|
16,438 |
|
|
|
5.94 |
|
|
|
31,332 |
|
|
|
5.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible expenses and
other adjustments |
|
|
41,841 |
|
|
|
15.11 |
|
|
|
(26,887 |
) |
|
|
(5.10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
at effective rate |
|
$ |
152,369 |
|
|
|
55.05 |
% |
|
$ |
183,784 |
|
|
|
34.84 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
24
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 ANTI-DILUTIVE STOCK OPTIONS
For the three month period ended February 28, 2009, the following stock options were
considered anti-dilutive and accordingly not calculated into the weighted average and
potential dilutive shares outstanding or the diluted earnings per share:
|
|
|
|
|
|
|
Three months ended |
|
|
|
February 28, 2009 |
|
|
|
|
|
|
Stock options granted March 9, 2004 at $9.00 per share |
|
|
50,000 |
|
Stock options granted March 9, 2004 at $8.25 per share |
|
|
50,000 |
|
Stock options granted August 24, 2004 at $7.50 per share |
|
|
16,000 |
|
|
|
|
|
Total anti-dilutive shares |
|
|
116,000 |
|
|
|
|
|
NOTE 15 SUBSEQUENT EVENTS
On April 8, 2009, the Company announced that the Board of Directors had declared a
$0.07 per share dividend for the second quarter of 2009, payable to all shareholders of
record as of May 1, 2009, and payable on June 1, 2009.
25
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) |
Except for historical information contained herein, this Managements Discussion and Analysis
of Financial Condition and Results of Operations contains forward-looking statements. These
statements involve known and unknown risks and uncertainties that may cause actual results or
outcomes to be materially different from any future results, performances or achievements expressed
or implied by such forward-looking statements, and statements which explicitly describe such
issues. Investors are urged to consider any statement labeled with the terms believes,
expects, intends or anticipates to be uncertain and forward-looking.
For the three-month period ended February 28, 2009, the Company had revenues of $14,944,466
and net income of $124,366 after provision for taxes of $152,369. For the same three month period
in 2007, revenues were $13,871,040 and net income was $ 343,683 after a provision for taxes of $
183,784. Fully diluted earnings per share were $0.02 for the first quarter of 2009 as compared to
fully diluted earnings per share of $0.05 for the first quarter of 2008. In accordance with EITF
01-9, the Company has accounted for certain sales incentives offered to customers by charging them
directly to sales as opposed to advertising and promotional expenses. Net sales for the first
quarter of 2009 were reduced by $ 1,395,098 and offset by an equal reduction of trade promotional
expenses, which were included in the Companys advertising expense budget. In the same period of
the prior year, gross sales were reduced by $1,300,939 and trade promotion was credited by that
amount. These accounting adjustments under EIFT 01-9 do not affect net income.
The Companys net sales increased $1,119,704 from $13,639,146 for the three-month period ended
February 29, 2008 to $14,758,850 for the three-month period ended February 28, 2009. Sales
incentives for the first quarter of 2009 increased $86,532 from the first quarter of 2008. Net
sales were higher primarily due to the successful introduction of new products that increased sales
of the Mega-T diet and Sudden Change skin care brands, despite a decrease in sales of Plus White
oral care products. The Company previously disclosed in Form 8-K, filed with the United States
Securities and Exchange Commission on January 21, 2009, that Wal-Mart had advised the Company, due
to the slow down in the economy it will only carry the leading brands in their oral care sections,
and as a result will no longer be purchasing the companys Plus+White® oral care products brand.
Wal-Mart began decreasing its orders of Plus White products during the first quarter of 2009.
Sales returns and allowances were 16.4% of gross sales for the three-month period ended February
28, 2009 versus 15.6% for the same period last year. This was a result of higher sales returns,
with $1,301,476 or 7.4% of gross sales for the first quarter of 2009, versus $866,495 or 5.4% for
the first quarter of 2008. Returns were higher due in part to discontinued products. As part of
the Companys brand strategies, products are constantly reviewed, with new products introduced and
non-performing ones discontinued. Gross profit margins decreased to 61.9% from 64.1% for the three
months ended February 28, 2009 and February 29, 2008 respectively. The gross margin was affected
by the higher level of returns in the first quarter of 2009 versus the same period in 2008. In
addition the cost of goods was higher in the first quarter of 2009 versus the same period in 2008,
primarily due to higher fuel prices which affected the cost of components.
The Companys net sales by category for the first quarter of 2009 were: Dietary Supplement
$6,264,792, 42.5%; Skin Care $3,721,422, 25.2%; Oral Care $2,829,206, 19.2%; Nail Care $1,687,518,
11.4%; Analgesic $167,053, 1.1%; Fragrance, $96,468, .6% and Hair Care and Miscellaneous ($7,609),
0.0%; for a total of $14,758,850.
26
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) (CONTINUED) |
The Company makes every effort to control the cost of manufacturing and has had no substantial
cost increases. Income before taxes is $276,735 for the first quarter of 2009 as compared to
$527,467 for the same quarter in 2008. Returns and accounts receivable reserves accounted for
$1,354,962 that was expensed against earnings for the first quarter of 2009 as opposed to
$1,069,415 that was expensed for the same period in 2008. The increase in the expense resulting
from the increase in accounts receivable reserve is mainly due to the timing of the Companys
sales.
Advertising media expenditures were $3,559,279 in the first quarter of 2009 versus $2,531,150
in the same period in 2008, or an increase of $1,028,129. The higher advertising in 2009 versus
2008 was due primarily to increased media and retailer co-operative advertising. This increase was
a continuation of an advertising program begun in the fourth quarter of 2008 to introduce some of
the Companys new products into the marketplace. A major portion of the Companys co-operative
advertising is reclassified as a reduction of net sales. Included in advertising media expense is
the cost of newspaper inserts.
The selling, general and administrative expense for the first quarter of 2009 was $5,315,097
versus $5,682,551 in the first quarter 2008, or a decrease of $367,454. This was due in part to a
reduction of $249,446 in donations of inventory by the Company to charitable organizations, as well
as managements efforts to reduce general overhead costs. The full effect of managements
overhead reductions will be seen in the second quarter of 2009.
The effective tax rate for the first quarter of 2009 was 55.05% versus 34.8% for the first
quarter of 2008. The increase in the tax rate was primarily due to an increase in the amount of
non-deductible expenses and adjustments during the quarter ended February 28, 2009 versus the
quarter ended February 29, 2008. Non-deductible expenses and adjustments include the timing
difference of depreciation expense on the Companys books versus the income tax return which also
resulted in a decrease in the long term deferred tax asset.
The Companys financial position as of February 28, 2009 consisted of current assets of
$35,589,584 and current liabilities of $12,364,113, or a current ratio of 2.9 to 1. Shareholders
equity decreased from $28,253,879 as of November 30, 2008 to $26,803,531 as of February 28, 2009.
The decrease was due to dividends declared of $775,989 during the first quarter of 2009, while net
income increased $124,366 and unrealized losses increased $798,726. The increase in unrealized
losses was mainly due to the change in the market price of the preferred stock investments.
The Companys cash and cash equivalents were $1,443,651 as of February 28, 2009, a decrease of
$7,491,048 from November 30, 2008. Included in this decrease was the purchase of bank certificates
of deposit in the amount of $4,658,000, which are fully guaranteed by the Federal Deposit Insurance
Corporation (FDIC), and which have been classified as short term investments due to market
fluctuations which can affect the value if redeemed early. All of these certificates of deposit
will mature during the 2009 fiscal year, and the Company fully intends to hold them until maturity.
The certificates are from a number of banks; with no one certificate exceeding the $250,000 FDIC
limit per institution.
27
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) (CONTINUED) |
The overall cash decrease was also due to capital expenditures, the payment of dividends and
increased working capital needs. As of February 28, 2009, the Company had $11,244,511 of short
term marketable securities and $2,197,994 of non-current securities. The Companys cash and cash
equivalents together with both short and long term marketable securities, net of current
liabilities were $2,522,043 as of February 28, 2009.
The Companys cash flow from operations utilized net cash of $2,085,688 for the three months
ended February 28, 2009. Working capital requirements had increased due to increases in accounts
receivable and inventory during the first quarter of 2009, partially offset by an increase in
accounts payable and accrued liabilities.
The Companys long term investments as of February 28, 2009 were $2,197,994. Please refer to
footnote No. 7 of the financial statements for further information regarding the Companys
investments.
Accounts receivable, net of reserves, were $11,286,798 as compared to $8,230,716 as of
February 28, 2009 and November 30, 2008, respectively. Accounts receivable were higher due to the
timing of the Companys sales in the first quarter of 2009 versus the fourth quarter of 2008.
Inventories, net of reserves, were $8,442,643 as of February 28, 2009 as compared to $7,932,798 as
of November 30, 2008. Inventory was higher to satisfy sales and customer requirements for the
second quarter of 2009. Accounts payable and accrued expenses increased to $11,529,155 as of
February 28, 2009 from $10,182,511 as of November 30, 2008. The Company was not utilizing any of
the funds available under its $20,000,000 unsecured credit line as of February 28, 2009. Please
see Footnote No. 10 for further information.
28
|
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK |
The Companys financial statements record the Companys investments under the mark to market
method (i.e., at date-of-statement market value). The investments are, categorically listed, in
Fully Guaranteed Bank Certificates of Deposit, Common Stock, Mutual Funds, Other Equity,
Preferred Stock, Government Obligations and Corporate Obligations. $49,829 of the Companys
$13,442,505 portfolio of investments (approximate, as at February 28, 2009) is invested in the
Common Stock and Other Equity categories, and approximately $1,163,116 in that category are
Preferred Stock holdings. The Company invests in various investment securities. Investment
securities are exposed to various risks such as interest rates, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least reasonably possible
that changes in the values of investment securities will incur in the near term. The Company does
not take positions or engage in transactions in risk-sensitive market instruments in any
substantial degree, nor as defined by SEC rules and instructions, however, due to current
securities market conditions, the Company cannot ascertain the risk of any future change in the
market value of its investments.
ITEM 4. CONTROLS AND PROCEDURES
With the participation of our Chief Executive Officer and Chief Financial Officer, management
has carried out an evaluation of the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of February 28, 2009.
There were no changes in our internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934) subsequent to the date the controls were
evaluated that materially affect, or are reasonably likely to materially affect, our internal
control over financial reporting.
29
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
Item 1. Legal Proceedings:
None.
Item 4. Submission of Matters to a Vote of Security Holders:
Our annual meeting of shareholders was held on June 25, 2008 in New York, New York.
At the meeting the following persons were elected directors: Dunnan Edell (4,933,405
votes for and 573,117 votes withheld), Seth Hamot (5,232,469 votes for and 274,053 votes
withheld) and Robert Lage (5,229,071 votes for and 277,051 votes withheld).
The shareholders approved the appointment of KGS LLP as the Companys independent
certified public accountants for the fiscal year ending November 30, 2008 (5,165,495
votes for, 301,990 votes against and 39,035 votes abstained).
Item 5. Other Information:
Owners of Common Stock and owners of Class A Common Stock are entitled to one vote for each
share of stock held, and the voting and other rights of each class are equivalent except in
respect to the election of directors.
In respect to the election of directors, the Class A Common Stock shareholders have
the right to elect four directors and the Common Stock shareholders have the right to
elect three. (In consequence, no proposal to alter or change the right of Class A
Common Stock shareholders to elect a majority of directors could be effectively voted
unless a separate majority of Class A Common Stock shares were voted herefore.)
Item 6. Exhibits and Reports on Form 8-K:
The following reports were filed with the Securities and Exchange Commission during the
three months ended February 28, 2009:
None.
Form 8-K, filed on January 21, 2009, Regulation FD Disclosure that Wal-Mart had advised
the Company, that starting in March, due to the slowdown in the economy it will only
carry the leading brands in their oral care sections. Therefore starting sometime in
March, Wal-Mart will no longer be purchasing the companys Plus+White® oral care products
brand. In 2008 the companys net sales of Plus+White® to Wal-Mart totaled $6 million.
30
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: April 14, 2009
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CCA INDUSTRIES, INC.
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By: |
/s/ DAVID EDELL
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David Edell, Chief Executive Officer |
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By: |
/s/ STEPHEN A. HEIT
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Stephen A. Heit, Chief Financial Officer |
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31
ITEM 6. - EXHIBIT INDEX
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Exhibit |
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Number |
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Description |
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11 |
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CCA Industries, Inc. And Subsidiaries Computation Of Unaudited Earnings Per Share |
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31.1 |
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Certification of Chief Executive Officer |
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31.2 |
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Certification of Chief Financial Officer |
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32.1 |
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Certification of Chief Executive Officer |
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32.2 |
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Certification of Chief Financial Officer |
32