FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended August 31, 1995 Commission File Number 2-85538 CCA INDUSTRIES, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 04-2795439 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification Number) 200 Murray Hill Parkway East Rutherford, NJ 07073 (Address of principal executive offices) (Zip Code) (201) 330-1400 Registrant's telephone number, including area code Not applicable Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.01 Par Value - 5,570,921 shares as of August 31, 1995 Class A Common Stock, $.01 Par Value - 1,224,230 shares as of August 31, 1995 CCA INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page Number PART I FINANCIAL INFORMATION: Consolidated Balance Sheets as of August 31, 1995 and November 30, 1994. . . . . . . .1-2 Consolidated Statements of Operations for the three Months and nine months ended August 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . .3 Consolidated Statements of Cash Flows for the nine months ended August 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . .4 Notes to Consolidated Financial Statements . . . . . 5-12 Management Discussion and Analysis of Results of Operations and Financial Condition. . . . . . . . . . . . . . . . . . . . .13-14 PART II OTHER INFORMATION. . . . . . . . . . . . . . .15-16 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 17 CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS A S S E T S
August 31, 1995 November 30, (Unaudited) 1994 Current Assets Cash and cash equivalents $ 144,700 $ 100,705 Short-term investments and marketable securities (Note 6) 1,986,324 1,612,819 Accounts receivable, net of allowances of $951,371 and $979,796, respectively 3,715,524 5,339,028 Inventories 6,106,112 7,518,526 Prepaid expenses and sundry receivables 477,559 285,367 Deferred advertising costs (Note 2) 585,059 - Due from officers - Current 2,000 21,231 Prepaid income taxes 387,665 88,279 Deferred income taxes 518,524 529,336 Total Current Assets 13,923,467 15,495,291 Property and Equipment, net of accumulated depreciation and amortization 722,056 683,015 Intangible Assets, net of accumulated amortization of $23,796 at August 31, 1995 and $18,753 at November 30, 1994 114,762 85,967 Other Assets Marketable securities 3,011,922 3,615,161 Treasury bonds 87,300 81,108 Due from officers - Non-current 25,250 25,250 Deferred income taxes 32,357 17,531 Other 54,606 50,570 Total Other Assets 3,211,435 3,789,620 Total Assets $17,971,720 $20,053,893 See Notes to Consolidated Financial Statements. -1- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY August 31, 1995 November 30, (Unaudited) 1994 Current Liabilities Notes payable - Current portion $ 288,000 $ 288,000 Accounts payable and accrued liabilities 5,929,546 7,600,113 Income taxes payable - 6,354 Total Current Liabilities 6,217,546 7,894,467 Long-Term Debt (net of current portion) 183,067 399,067 Shareholders' Equity Common stock, $.01 par; authorized 15,000,000 shares; issued and outstanding 5,570,921 and 5,496,421 shares, respectively 55,709 54,964 Class A common stock, $.01 par; authorized 5,000,000 shares; issued and outstanding 1,224,230 and 1,293,030 shares, respectively 12,242 12,930 Additional paid-in capital 4,281,938 4,275,535 Retained earnings 7,256,399 7,667,797 Unrealized gains (losses) on marketable securities ( 35,181) ( 250,867) Total Shareholders' Equity 11,571,107 11,760,359 Total Liabilities and Shareholders' Equity $17,971,720 $20,053,893 See Notes to Consolidated Financial Statements. -2- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended August 31, August 31, 1995 1994 1995 1994 Revenues Sales of health and beauty products, net $9,023,458 $11,146,324 $29,401,865 $36,351,761 Other income 103,248 93,239 264,555 250,735 9,126,706 11,239,563 29,666,420 36,602,496 Costs and Expenses Costs of sales 3,993,808 4,239,718 11,669,715 13,212,043 Selling, general and administrative expenses 2,159,398 2,610,263 8,110,982 9,003,540 Advertising, cooperative and promotions 3,646,273 3,325,275 9,953,575 10,225,884 Research and development 100,740 188,892 397,110 410,439 Provision for doubtful accounts 7,830 25,443 116,104 76,282 Interest expense 13,459 19,477 56,003 52,229 9,921,508 10,409,068 30,303,489 32,980,417 Net Income before IncomeTaxes ( 794,802) 830,495 ( 637,069) 3,622,079 Provision for Income Taxes ( 305,407) 327,621 ( 225,671) 1,451,367 Net Income ($ 489,395)$ 502,874 ($ 411,398) $2,170,712 Income Per Common Share (Note 2): Net income from operations ($.07) $.06 ($.06) $.27 See notes to Financial Statements. -3- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED AUGUST 31, (UNAUDITED) 1995 1994 Cash Flows from Operating Activities: Net (loss) income ($ 411,398) $2,170,712 Adjustments to reconcile net (loss) income to net cash provided by (Used in) operating activities: Depreciation and amortization 239,654 171,784 Amortization of bond premium 5,553 - Gain on sale of securities ( 1,416) - (Increase) in deferred income taxes ( 4,014) ( 114,222) Decrease in advanced royalties - 81,667 Decrease (increase) in accounts receivable 1,623,504 ( 2,322,070) Decrease in inventory 1,412,414 901,899 (Increase) decrease in prepaid expenses ( 1,076,637) 6,080 (Decrease) in accounts payable and and accrued liabilities ( 1,670,567) ( 1,294,840) (Decrease) in taxes payable ( 6,354) ( 323,096) (Increase) decrease in security deposits ( 4,036) 5,811 Net Cash Provided by (Used in) Operating Activities 106,703 ( 716,275) Cash Flows from Investing Activities: Acquisition of property, plant and equipment ( 307,490) ( 301,108) Purchase of short-term investments and securities ( 313,795) ( 1,138,769) Proceeds of money due from officers 19,231 - (Increase) in other assets ( 6,192) ( 5,760) Proceeds from sale of investments 755,078 - Net Cash Provided (Used in) Investing Activities 146,832 ( 1,445,637) Cash Flows from Financing Activities: Proceeds from borrowings - 700,000 Payment on debt ( 216,000) ( 422,715) Proceeds from stock options exercises 6,460 103,975 Net Cash (Used in) Provided by Financing Activities ( 209,540) 381,260 Net Increase (Decrease) in Cash 43,995 (1,780,652) Cash at Beginning of Period 100,705 1,798,815 Cash at End of Period $ 144,700 $ 18,163 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 57,273 $ 52,366 Income taxes 94,525 1,885,019 See notes to Financial Statements. -4-
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 nine month period ended August 31, 1995 are not necessarily indicative of the results that may be expected for the year ended November 30, 1995. For further information, refer to the consolidated financial statements and foot notes thereto included in the Company's annual report on Form 10-K for the year ended November 30, 1994. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. Advertising and Related Costs: In accordance with APB 28 Interim Financial Reporting the Company ex penses its advertising and related costs proportionately over the interim periods based on its total expected costs per its various advertising programs. Any necessary accrual or deferral is accordingly reflected in the balance sheet for the interim period. However, for annual reporting purposes, no advertising or related costs are capitalized and all are expensed in the fiscal year in which they are incurred. Cash Equivalents: For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of less than three months to be cash equivalents. Inventories: Inventories are stated at the lower of cost (first-in, first-out) or market. Product returns are recorded in inventory when they are received at the lower of their original cost or market, as appropriate. Obsolete inventory is written off and its value is removed from inventory at the time its obsolescence is determined. -5- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment and Depreciation and Amortization: Property and equipment are stated at cost. The Company charges to expense repairs and maintenance items, while major improvements and betterments are capitalized. When the Company sells or otherwise disposes of property and equipment items, the cost and related accumulated depreciation are removed from the respective accounts and any gain or loss is included in earnings. Depreciation and amortization are provided on the straight-line method over the following estimated useful lives or lease terms of the assets: Machinery and equipment 7-10 years Furniture and fixtures 5-7 years Tools, dies and masters 2-7 years Transportation equipment 7 years Leasehold improvements 7-10 years or life of lease whichever is shorter Intangible Assets: Intangible assets are stated at cost. Patents and trademarks are amortized on the straight-line method over a period of 17 years; organization expenses are amortized on the straight-line method over five (5) years. 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 Share: Earnings per share have been computed based on the weighted average of outstanding common shares and common stock equivalents during the periods, based on the treasury stock method using average market price. Since the effect of common stock equivalents is anti-dilutive only the weighted average of outstanding common shares has been used. -6- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3: INVENTORIES The components of inventory consist of the following: August 31, November 30, 1995 1994 Raw materials $3,392,860 $3,903,028 Finished goods 2,713,252 3,615,498 $6,106,112 $7,518,526 NOTE 4: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The following items which exceeded 5% of total current liabilities are included in accounts payable and accrued liabilities as of: August 31, November 30, 1995 1994 a) Media advertising $2,008,000 $1,460,000 b) Coop advertising 650,000 547,000 c) Accrued returns 386,000 443,000 d) Payroll and bonuses * 547,000 $3,044,000 $2,997,000 All other liabilities were for trade payables or individually did not exceed 5% of total current liabilities. * Under 5%. NOTE 5: OTHER INCOME Other income consists of the following for the nine month periods ended August 31, 1995 and 1994: 1995 1994 Interest income $223,112 $242,074 Royalty income 8,349 - Dividend income 12,154 12,358 Miscellaneous 20,940 (3,697) $264,555 $250,735 -7- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 6: SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES Short-term investments and marketable securities consist of corporate and government bonds and equity securities. In 1994 the Company adopted the accounting principles promulgated by SFAS No. 115 Accounting for Certain Investments in Debt 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. Prior to 1994, the Company reported marketable securities at the lower of cost or market value; unrealized losses were charged to earnings. The market value at August 31, 1995 was $5,085,546 as compared to $5,309,088 at November 30, 1994. The cost and market values of the investments at August 31, 1995 were as follows: -8- CCA INDUSTRIES, INC. AND SUBSIDIARIES MARKETABLE SECURITIES - OTHER INVESTMENTS NOTE 6: 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 CORPORATE OBLIGATIONS: AT&T 6/01/98 4.750% $100,000 $ 99,006 $ 96,125 $ 96,125 AT&T 2/15/96 4.500 100,000 100,187 99,407 99,407 AT&T 2/15/96 4.500 300,000 300,254 298,221 298,221 Bank America 7/15/97 6.000 200,000 200,000 199,264 199,264 Bankers Trust 7/01/96 4.700 100,000 100,209 98,783 98,783 Baxter International 10/01/95 5.000 100,000 100,028 99,940 99,940 Baxter International 10/01/95 5.000 100,000 100,046 99,940 99,940 Con Edison 12/15/96 5.900 100,000 99,875 99,535 99,535 Dayton P & L 5/01/97 5.625 100,000 98,265 99,072 99,072 General Motors Acceptance Corp. 10/01/96 8.000 200,000 200,650 203,682 203,682 GMAC 10/02/95 5.250 100,000 100,000 99,944 99,944 ITT Financial Corp. 10/15/95 7.375 200,000 200,064 200,284 200,284 -9- CCA INDUSTRIES, INC. AND SUBSIDIARIES MARKETABLE SECURITIES - OTHER INVESTMENTS (UNAUDITED) NOTE 6: 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 CORPORATE OBLIGATIONS: (Continued) Merrill Lynch 6/24/96 4.750% $100,000 $ 100,143 $ 98,739 $ 98,739 Merrill Lynch 6/24/96 4.750 100,000 100,143 98,739 98,739 Shell Oil Corp. 9/15/95 7.000 100,000 100,011 100,033 100,033 Tennessee Valley 3/04/98 5.125 100,000 100,000 97,281 97,281 Union Electric 3/01/97 5.500 50,000 49,245 49,573 49,573 $2,148,126 $2,138,562 $2,138,562 -10- CCA INDUSTRIES, INC. AND SUBSIDIARIES MARKETABLE SECURITIES - OTHER INVESTMENTS (UNAUDITED) NOTE 6: SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED) COL. A COL. B COL. C COL. D COL. E Amount at Which Each Portfolio Number of Market Of Equity Security Units-Principal Value of Issues and Each Amount of Each Issue Other Security Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet GOVERNMENT OBLIGATIONS: US Treasury Note 10/31/98 4.750% $100,000 $ 99,684 $ 96,469 $ 96,469 US Treasury Note 10/31/98 4.750 200,000 199,992 192,938 192,938 US Treasury Note 5/15/96 4.250 100,000 99,939 99,000 99,000 US Treasury Note 5/15/96 4.250 100,000 100,002 99,000 99,000 US Treasury Note 11/15/96 4.375 100,000 99,969 98,406 98,406 US Treasury Note 10/15/98 7.125 250,000 253,325 258,125 258,125 US Treasury Note 5/15/96 4.250 100,000 99,909 99,000 99,000 US Treasury Note 1/31/97 6.250 100,000 99,500 100,656 100,656 US Treasury Note 12/31/96 6.125 200,000 197,423 201,000 201,000 US Treasury Note 11/15/96 4.375 200,000 197,852 196,812 196,812 US Treasury Note 11/15/96 4.375 200,000 196,133 196,812 196,812 US Treasury Note 11/15/96 4.375 100,000 98,003 98,406 98,406 US Treasury Note 11/15/96 4.375 100,000 97,855 98,406 98,406 US Treasury Bil 7/25/96 5.330 45,000 42,552 42,804 42,804 -11- CCA INDUSTRIES, INC. AND SUBSIDIARIES MARKETABLE SECURITIES - OTHER INVESTMENTS (UNAUDITED) NOTE 6: 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: (Continued) US Treasury Note 8/15/96 4.375% $200,000 $ 195,936 $ 197,562 $ 197,562 FHLMC 1628-N 12/25/2013 6.500 50,000 48,024 44,571 44,571 EE Bonds - 7.050 90,000 87,300 87,300 87,300 FNMA 93-6-26-B 8/25/2023 7.000 10,000 8,897 8,423 8,423 FNMA 93-224-D 11/25/2023 6.500 104,000 101,873 90,575 90,575 FNMA 92-2-N 1/28/2024 6.500 52,000 47,424 43,609 43,609 FHJMC 1702-U 3/15/2024 7.000 4,000 3,739 3,566 3,566 US Treasury Bill 11/16/1995 5.420 200,000 197,320 197,732 197,732 FNMA 11/10/98 5.050 200,000 199,950 192,812 192,812 2,772,601 2,743,984 2,743,984 EQUITY SECURITIES: Number of Shares Preferred Stock: Bank America Corp. 8,000 200,000 203,000 203,000 $5,120,727 $5,085,546 $5,085,546 -12-
CCA INDUSTRIES, INC. MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) For the nine month period ended August 31, 1995, the Company had net sales of $29,401,865 and net (loss) of ($411,398) after a provision for income taxes of ($225,671) as compared to net sales of $36,351,761 and net income of $2,170,712 after a provision for income taxes of $1,451,367 for the nine month period ending August 31, 1994. The cost of sales percentage for the nine months increased from 36.3% in 1994 to 37% in 1995 primarily due to the higher percentage overhead costs (factored into the cost of goods) represented in the total cost of goods; as well as certain product mix fluctuations. Advertising, cooperative and promotional allowance expenditures during the quarter increased as a percentage of sales from 28% in 1994 to 34% in 1995 due to the lower than anticipated sales volume. As part of the registrant's business it is necessary to enter into co-operative advertising agreements and other promotional activities with its accounts, especially upon the introduction of a new product. Both co-op advertising and promotions have a material effect on the Company's operations. If the advertising and promotions are successful, revenues will be increased accordingly. Should the co-op and promotions not be successful, it will have a negative impact on the Company's promotional cost per sale, and have a negative effect on income. The Company attempts to anticipate its advertising and promotional commitments as a percent of gross sales in order to attempt to control its effect on its net income. However, sales for the period were lower then expected and, therefore, the expense as a percentage of sales was higher. 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 is accordingly reflected in the balance sheet for the interim period. Although selling, general and administrative expenses ("SG&A") decreased due to expenses related to the larger sales volume in the prior year, SG&A as a percentage of sales increased to 28% from 25% due to the lower volume. Income before taxes for the nine months decreased to ($637,069) from $3,622,079. This was primarily a result of the lower sales as compared to the prior year. Selling, general and administrative expenses ("SG&A") decreased for the nine months from $9,003,540 to $8,110,982 primarily due to cost related to the lower sales volume (i.e. commissions and freight-out). However, even with this decrease SG&A still represented 28% of sales for 1995 instead of 25% for 1994 due to the large decrease in sales volume. -13- CCA INDUSTRIES, INC. MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) For the three month period ended August 31, 1995, net sales were $9,023,458 as compared to $11,146,324 for August 31, 1994. Net income for the quarter before taxes decreased from $502,874 to ($489,395). Gross margins of 56% for the three months ended August 31, 1995 were down from 62% in 1994. Advertising, cooperative and promotional allowance expenditures during the quarter increased from $3,325,575 to $3,646,273. Selling, general and administrative expenses were approximately 24% as compared with 23%. All of the Company's sales were primarily to drugstore chains, food chains and mass merchandisers throughout the United States. The Company's financial position as at August 31, 1995 consists of current assets of $13,923,467 and current liabilities of $6,217,546. During the nine month period ended August 31, 1995, shareholders' equity decreased from $11,760,359 at November 30, 1994 to $11,571,107 at August 31, 1995. This was due primarily to the losses sustained for the nine months offset by the unrealized gain in certain securities in the Company's investment portfolio of $215,686 in addition to the exercise of stock options. During the nine months, the Company generated $106,703 from operations and $774,309 from the sale and liquidation of loans and investments but used $627,477 to purchase additional property and equipment and marketable securities. The Company also used $216,000 to reduce borrowings and generated $6,460 from stock option exercises. This resulted in an increase in the Company's cash of $43,995. The Company believes that its current financial condition is sufficient to support its proposed operations for the near future. -14- CCA INDUSTRIES, INC. PART II OTHER INFORMATION All information pertaining to Part II is omitted pursuant to the instructions pertaining to that part. The Company did not file any reports on Form 8-K during the three months ended August 31, 1995. -15- PART II, ITEM 6. (Continued) EXHIBIT 11 CCA INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
Three Months Ended Nine Months Ended August 31, August 31, 1995 1994 1995 1994 Item 6. Primary: Average shares outstanding 6,794,733 6,784,994 6,794,108 6,773,186 Net effect of dilutive stock options--based on the treasury stock method using average market price * 1,306,730 * 1,352,454 TOTALS 6,794,733 8,091,724 6,794,108 8,125,640 Net income ($ 489,395) $ 502,874 ($ 411,398) $2,170,712 Per share amount ($.07) $.06 ($.06) $.27
-16- 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 David Edell, President By: Ira W. Berman Ira W. Berman, Secretary -17-