| Delaware | 04-2795439 | |
| (State or other jurisdiction of Incorporation or organization) |
(I.R.S.Employer Identification Number) |
|
| 200 Murray Hill Parkway | ||
| East Rutherford, NJ | 07073 | |
| (Address of principal executive offices) | (Zip Code) |
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
| (Do not check if a smaller reporting company) |
| Page | ||||||||
| Number | ||||||||
PART I FINANCIAL INFORMATION: |
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Item 1. Financial Statements: |
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| Exhibit 11 | ||||||||
| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32.1 | ||||||||
| Exhibit 32.2 | ||||||||
1
| August 31, | November 30, | |||||||
| 2009 | 2008 | |||||||
| (Unaudited) | ||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 7,235,341 | $ | 5,568,699 | ||||
Short-term investments and marketable
securities |
8,593,745 | 10,014,357 | ||||||
Accounts receivable, net of allowances of
$1,015,513 and $823,029, respectively |
9,324,365 | 8,230,716 | ||||||
Inventories |
8,250,184 | 7,932,798 | ||||||
Prepaid expenses and sundry receivables |
495,518 | 578,000 | ||||||
Prepaid income taxes and refunds due |
194,202 | 1,554,158 | ||||||
Deferred income taxes |
1,001,896 | 973,732 | ||||||
Total Current Assets |
35,095,251 | 34,852,460 | ||||||
Property and Equipment, net of accumulated
depreciation and amortization |
679,957 | 611,226 | ||||||
Intangible Assets, net of accumulated
amortization |
722,720 | 727,716 | ||||||
Other Assets |
||||||||
Marketable securities |
3,623,230 | 2,945,740 | ||||||
Deferred taxes |
— | 143,419 | ||||||
Other |
65,300 | 65,300 | ||||||
Total Other Assets |
3,688,530 | 3,154,459 | ||||||
Total Assets |
$ | 40,186,458 | $ | 39,345,861 | ||||
2
| August 31, | November 30, | |||||||
| 2009 | 2008 | |||||||
| (Unaudited) | ||||||||
Current Liabilities |
||||||||
Accounts payable and accrued liabilities |
$ | 10,067,834 | $ | 10,182,510 | ||||
Capitalized lease obligation — current portion |
56,134 | 57,697 | ||||||
Dividends payable |
493,811 | 775,989 | ||||||
Total Current Liabilities |
10,617,779 | 11,016,196 | ||||||
Deferred tax liability |
81,340 | — | ||||||
Capitalized lease obligations-long term |
34,551 | 75,786 | ||||||
Total Liabilities |
10,733,670 | 11,091,982 | ||||||
Shareholders’ Equity |
||||||||
Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued |
— | — | ||||||
Common stock, $.01 par; authorized
15,000,000 shares; 6,086,740 shares issued and outstanding |
60,867 | 60,867 | ||||||
Class A common stock, $.01 par; authorized
5,000,000 shares; 967,702 shares issued and outstanding |
9,677 | 9,677 | ||||||
Additional paid-in capital |
2,329,049 | 2,329,049 | ||||||
Retained earnings |
27,574,799 | 26,920,561 | ||||||
Unrealized (losses) on marketable
securities |
(521,604 | ) | (1,066,275 | ) | ||||
Total Shareholders’ Equity |
29,452,788 | 28,253,879 | ||||||
Total Liabilities and Shareholders’ Equity |
$ | 40,186,458 | $ | 39,345,861 | ||||
3
| Three Months Ended | Nine Months Ended | |||||||||||||||
| August 31, | August 31, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues |
||||||||||||||||
Sales of health and beauty
aid products — Net |
$ | 15,139,754 | $ | 13,939,214 | $ | 44,508,290 | $ | 44,836,420 | ||||||||
Other income |
204,841 | 209,515 | 529,100 | 573,335 | ||||||||||||
Total Revenues |
15,344,595 | 14,148,729 | 45,037,390 | 45,409,755 | ||||||||||||
Costs and Expenses |
||||||||||||||||
Costs of sales |
5,616,335 | 5,252,704 | 16,760,385 | 16,481,264 | ||||||||||||
Selling, general and
administrative expenses |
5,247,923 | 5,648,115 | 15,505,062 | 16,914,888 | ||||||||||||
Advertising, cooperative
and promotions |
1,870,669 | 1,299,435 | 8,320,159 | 7,710,677 | ||||||||||||
Research and development |
123,808 | 147,229 | 369,744 | 438,558 | ||||||||||||
Provision for doubtful
Accounts |
82,735 | (42,363 | ) | 58,061 | 7,733 | |||||||||||
Interest expense |
3,588 | 4,456 | 9,256 | 12,084 | ||||||||||||
Total Costs and Expenses |
12,945,058 | 12,309,576 | 41,022,667 | 41,565,204 | ||||||||||||
Income before Provision for
Income Taxes |
2,399,537 | 1,839,153 | 4,014,723 | 3,844,551 | ||||||||||||
Provision for Income Taxes |
800,191 | 737,733 | 1,596,876 | 1,608,756 | ||||||||||||
Net Income |
$ | 1,599,346 | $ | 1,101,420 | $ | 2,417,847 | $ | 2,235,795 | ||||||||
Earnings per Share: |
||||||||||||||||
Basic |
$ | 0.23 | $ | 0.16 | $ | 0.34 | $ | 0.32 | ||||||||
Diluted |
$ | 0.23 | $ | 0.16 | $ | 0.34 | $ | 0.32 | ||||||||
Number of Common Shares: |
||||||||||||||||
Weighted average shares |
||||||||||||||||
outstanding — Basic |
7,054,442 | 7,054,442 | 7,054,442 | 7,054,442 | ||||||||||||
outstanding — Diluted |
7,054,442 | 7,061,151 | 7,054,442 | 7,065,869 | ||||||||||||
4
| Three Months Ended | Nine Months Ended | |||||||||||||||
| August 31, | August 31, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
Net Income |
$ | 1,599,346 | $ | 1,101,420 | $ | 2,417,847 | $ | 2,235,795 | ||||||||
Other Comprehensive Income |
||||||||||||||||
Unrealized holding gains (losses)
on investments |
283,847 | (246,103 | ) | 544,671 | (213,136 | ) | ||||||||||
Comprehensive Income |
$ | 1,883,193 | $ | 855,317 | $ | 2,962,518 | $ | 2,022,659 | ||||||||
5
| Nine Months Ended | ||||||||
| August 31, | August 31, | |||||||
| 2009 | 2008 | |||||||
Cash Flows from Operating Activities: |
||||||||
Net income |
$ | 2,417,847 | $ | 2,235,795 | ||||
Adjustments to reconcile net income to net
cash
provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
185,138 | 181,846 | ||||||
Loss on write off of fixed assets |
3,262 | 1,247 | ||||||
(Gain) on sale of securities |
(111,411 | ) | (69,842 | ) | ||||
Decrease (Increase) in deferred income taxes |
196,594 | (93,508 | ) | |||||
(Increase) decrease in accounts receivable |
(1,093,648 | ) | 838,856 | |||||
(Increase) in inventory |
(317,386 | ) | (987,759 | ) | ||||
Decrease (Increase) in prepaid expenses
and miscellaneous receivables |
82,482 | (35,590 | ) | |||||
Decrease (Increase) in prepaid income
taxes and refunds due |
1,359,957 | (353,564 | ) | |||||
(Decrease) in accounts payable and
accrued Liabilities |
(114,677 | ) | (529,306 | ) | ||||
Net Cash Provided by Operating Activities |
2,608,158 | 1,188,175 | ||||||
Cash Flows from Investing Activities: |
||||||||
Acquisition of property, plant and equipment |
(252,135 | ) | (220,178 | ) | ||||
Purchase of marketable securities |
(14,242,206 | ) | (20,272,142 | ) | ||||
Proceeds from sale and maturity of
investments |
15,641,409 | 19,815,000 | ||||||
Net Cash Provided by (Used in) Investing
Activities |
1,147,068 | (677,320 | ) | |||||
Cash Flows from Financing Activities: |
||||||||
Increase in capital lease |
— | 20,814 | ||||||
Payments in capital lease obligation |
(42,795 | ) | (37,876 | ) | ||||
Dividends paid |
(2,045,789 | ) | (2,116,333 | ) | ||||
Net Cash (Used in) Financing Activities |
(2,088,584 | ) | (2,133,395 | ) | ||||
Net Increase (Decrease) in Cash |
1,666,642 | (1,622,540 | ) | |||||
Cash and Cash Equivalents at Beginning of
Period |
5,568,699 | 6,743,960 | ||||||
Cash and Cash Equivalents at End of Period |
$ | 7,235,341 | $ | 5,121,420 | ||||
Supplemental Disclosures of Cash Flow
Information: |
. | |||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 9,256 | $ | 12,084 | ||||
Income taxes |
42,945 | 2,053,225 | ||||||
Schedule of Non Cash Financing Activities: |
||||||||
Acquisition of assets through capital leases |
$ | — | $ | 20,814 | ||||
Dividends declared |
1,763,611 | 2,257,422 | ||||||
6
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 nine month period ended August 31, 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 Company’s 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. |
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., Continental Quest Corp., 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. |
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. |
7
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 Company’s 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 certificates of deposit,
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 nine months ended August 31, 2009, dividends declared were $1,763,611 and
dividends paid were in the amount of $2,045,789. |
8
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 August 31, 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) |
9
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 Company’s web site
has been capitalized in accordance with the Financial Accounting Standards Emerging
Issue Task Force (“EITF”) No. 00-02, “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 period amounts have been reclassified to conform to the current year’s
presentation. These reclassifications have no effect on previously reported income. |
10
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 August 31, 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. These accounting adjustments under EITF 01-9 do not affect net
income. |
Advertising Costs: |
The Company’s policy for fiscal financial reporting is to charge advertising cost to
operations as incurred. |
Shipping and Handling Costs: |
The Company’s policy for fiscal financial reporting is to charge shipping costs as
part of selling, general and administrative expense as incurred. Freight costs
included were $683,039 and $827,589 for the three months ended August 31, 2009 and
2008, respectively. Freight costs included were $2,080,172 and $2,484,148 for the
nine months ended August 31, 2009 and 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 Company’s financial position,
results of operations or cash flow. |
11
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 Company’s 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 Company’s financial position
or results of operations. |
In November 2007, the Securities and Exchange Commission (“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 Company’s
financial position or results of operation. |
In December 2007, the SEC 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 Company’s 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. |
12
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 Company’s 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 Company’s results of operations, financial condition
or liquidity. |
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165). The
statement is to establish general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are issued.
SFAS No. 165 shall become effective June 15, 2009 for all subsequent reporting
periods. The adoption of SFAS No. 165 did not have any material impact on the
Company’s financial position or results of operation. |
13
Recent Accounting Pronouncements (Continued) |
In April 2009, the SEC issued Staff Accounting Bulletin No. 111 (“SAB No. 111”). SAB
No. 111 amends Topic 5.M. in regard to other than temporary impairment of certain
investments in debt and equity securities. SAB No. 111 confirms the establishment of
the “other than temporary” category of investment impairment. The adoption of SAB No.
111 is effective immediately and will not have any material impact on the Company’s
financial position or results of operation. |
In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1
(collectively “FSP FAS 107-1”) which amends FASB No. 107, Disclosures about Fair Value
of Financial Instruments, and requires disclosure of the fair value of financial
instruments for interim reporting periods of publicly traded companies as well as in
annual financial statements. FSP FAS 107-1 became effective for interim reporting
periods ending after June 15, 2009. The adoption of FSP FAS 107-1 had no impact on
the Company’s financial position or results of operation. |
In April 2009, the FASB issued FASB Staff Position No. FAS 157-4 (“FSP FAS No. 157-4”)
which provides additional guidance, in accordance with FASB No. 157, for estimating
the fair value of an asset or liability when the volume and level of activity for the
asset or liability have significantly decreased, and identifying circumstances in
which a transaction may not be orderly. The adoption of FSP FAS No. 157-4 became
effective for all interim and annual reporting periods ending after June 15, 2009.
The adoption of FSP FAS No. 157-4 did not have any material impact on the Company’s
financial position or results of operation. |
In April 2009, the FASB issued FASB Staff Position No. 115-2 and 124-2 (“FSP FAS No.
115-2” and FSP FAS No. 124-2”) which amends the guidance in regard to
other-than-temporary impairments on debt and equity securities in the financial
statements. FSP FAS No. 115-2 and FSP FAS No. 124-2 also require additional
disclosures in the financial statements that enable users to understand the types of
debt and equity securities held, including those investments in an unrealized loss
position for which an other-than-temporary impairment has or has not been recognized.
The adoption of FSP FAS No. 115-2 and FSP FAS No. 124-2 became effective for all
interim and annual reporting periods ending after June 15, 2009. The adoption of FSP
FAS No. 115-2 and FSP FAS No. 124-2 did not have any material impact on the Company’s
financial position or results of operation. |
14
Recent Accounting Pronouncements (Continued) |
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS No.
168”), which replaces FASB No. 162. SFAS No. 168 identifies the sources of accounting
principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles (“GAAP”) in the United States. SFAS No. 168
will be effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The adoption of SFAS No. 168 will not have any
material impact on the Company’s financial position or results of operation. |
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
| August 31, | November 30, | |||||||
| 2009 | 2008 | |||||||
Raw materials |
$ | 5,053,608 | $ | 4,880,267 | ||||
Finished goods |
3,196,576 | 3,052,531 | ||||||
| $ | 8,250,184 | $ | 7,932,798 | |||||
| August 31, | November 30, | |||||||
| 2009 | 2008 | |||||||
Machinery and equipment |
$ | 207,885 | $ | 190,308 | ||||
Furniture and equipment |
928,180 | 813,819 | ||||||
Transportation equipment |
— | 10,918 | ||||||
Tools, dies, and masters |
301,023 | 360,701 | ||||||
Capitalized lease obligations |
263,067 | 263,067 | ||||||
Web Site |
20,000 | 20,000 | ||||||
Leasehold improvements |
402,785 | 357,582 | ||||||
| 2,122,940 | 2,016,395 | |||||||
Less: Accumulated depreciation
and amortization |
1,442,983 | 1,405,169 | ||||||
Property and Equipment — Net |
$ | 679,957 | $ | 611,226 | ||||
16
| August 31, | November 30, | |||||||
| 2009 | 2008 | |||||||
Patents and trademarks |
$ | 886,608 | $ | 886,608 | ||||
Less: Accumulated amortization |
163,888 | 158,892 | ||||||
Intangible Assets — Net |
$ | 722,720 | $ | 727,716 | ||||
| August 31, 2009 | November 30, 2008 | |||||||||||||||
| COST | MARKET | COST | MARKET | |||||||||||||
Current |
||||||||||||||||
Guaranteed bank
certificates of
deposit |
$ | 2,389,000 | $ | 2,392,962 | $ | 3,366,000 | $ | 3,366,000 | ||||||||
Corporate
obligations |
798,370 | 810,333 | 449,125 | 446,332 | ||||||||||||
U.S. Government
obligations
(including mortgage
backed securities) |
4,995,331 | 4,998,800 | 5,950,904 | 5,999,745 | ||||||||||||
Preferred stock |
250,000 | 163,820 | 50,000 | 21,640 | ||||||||||||
Common stock |
51,649 | 41,736 | 51,648 | 44,628 | ||||||||||||
Mutual funds |
215,274 | 154,962 | 215,274 | 114,582 | ||||||||||||
Other equity
investments |
70,206 | 31,132 | 70,206 | 21,430 | ||||||||||||
Total Current |
8,769,830 | 8,593,745 | 10,153,157 | 10,014,357 | ||||||||||||
17
| August 31, 2009 | November 30, 2008 | |||||||||||||||
| COST | MARKET | COST | MARKET | |||||||||||||
Non-Current: |
||||||||||||||||
Guaranteed bank
Certificates of deposit |
1,056,000 | 1,051,709 | — | — | ||||||||||||
Corporate obligations |
200,000 | 204,021 | 598,370 | 577,334 | ||||||||||||
State Government obligations |
500,000 | 400,000 | 500,000 | 460,000 | ||||||||||||
Common Stock |
137,904 | 142,460 | ||||||||||||||
Preferred stock |
2,074,845 | 1,825,040 | 2,774,845 | 1,908,406 | ||||||||||||
Total Non-Current |
3,968,749 | 3,623,230 | 3,873,215 | 2,945,740 | ||||||||||||
Total |
$ | 12,738,579 | $ | 12,216,975 | $ | 14,026,372 | $ | 12,960,097 | ||||||||
18
| Significant | ||||||||||||
| Quoted Market | Other | |||||||||||
| Price in Active | Observable | |||||||||||
| August 31, | Markets | Inputs | ||||||||||
| Description | 2009 | (Level 1) | (Level 2) | |||||||||
Bank Certificates of
Deposit |
$ | 3,444,671 | $ | — | $ | 3,444,671 | ||||||
Corporate obligations |
1,014,354 | — | 1,014,354 | |||||||||
Government Obligations |
5,398,800 | 4,998,800 | 400,000 | |||||||||
Preferred Stock |
1,988,860 | 1,988,860 | — | |||||||||
Common Stock |
184,196 | 184,196 | — | |||||||||
Mutual Funds |
154,962 | 154,962 | — | |||||||||
Other Equity |
31,132 | — | 31,132 | |||||||||
Total |
$ | 12,216,975 | $ | 7,326,818 | $ | 4,890,157 | ||||||
19
| Quoted | Significant | |||||||||||
| Market Price | Other | |||||||||||
| in Active | Observable | |||||||||||
| November 30, | Markets | Inputs | ||||||||||
| Description | 2008 | (Level 1) | (Level 2) | |||||||||
Bank Certificates of
Deposit |
$ | 3,366,000 | $ | — | $ | 3,366,000 | ||||||
Corporate obligations |
1,023,666 | — | 1,023,666 | |||||||||
Government Obligations |
6,459,745 | 5,999,745 | 460,000 | |||||||||
Preferred Stock |
1,930,046 | 1,930,046 | — | |||||||||
Common Stock |
44,628 | 44,628 | — | |||||||||
Mutual Funds |
114,582 | 114,582 | — | |||||||||
Other Equity |
21,430 | — | 21,430 | |||||||||
Total |
$ | 12,960,097 | $ | 8,089,001 | $ | 4,871,096 | ||||||
Beginning Balance as of December 1, 2008 |
$ | 460,000 | ||
Temporary Impairment (charge) |
(60,000 | ) | ||
Ending Balance as of August 31, 2009 |
$ | 400,000 | ||
20
| August 31, | November 30, | |||||||
| 2009 | 2008 | |||||||
| (In Thousands) | (In Thousands) | |||||||
a) Accrued Returns |
$ | 1,606 | $ | 1,443 | ||||
b) Media Advertising |
1,489 | 1,326 | ||||||
c) Coop Advertising |
1,693 | 849 | ||||||
d) Accrued Bonuses |
581 | * | ||||||
| $ | 5,369 | $ | 3,618 | |||||
| * | under 5% |
| Three Months Ending August 31, | Nine Months Ending August 31, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
Interest and dividend income |
$ | 32,960 | $ | 130,068 | $ | 245,367 | $ | 421,254 | ||||||||
Royalty income |
30,000 | 79,447 | 87,768 | 132,490 | ||||||||||||
Realized
gain on sale of Bonds |
112,473 | — | 162,458 | (4,073 | ) | |||||||||||
Miscellaneous |
29,408 | — | 33,507 | 23,664 | ||||||||||||
| $ | 204,841 | $ | 209,515 | $ | 529,100 | $ | 573,335 | |||||||||
21
Dividends and Capital Transactions |
On June 29, 2009, the board of directors declared a $0.07 per share dividend for the
third quarter ended August 31, 2009. The dividend was payable to all shareholders of
record as of August 3, 2009 and was paid on September 3, 2009. |
On April 8, 2009, the board of directors declared a $0.07 per share dividend for the
second quarter ended May 31, 2009. The dividend was payable to all shareholders of
record as of May 1, 2009 and was paid on June 1, 2009. |
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 Company’s 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. |
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. |
22
The Company previously adopted the provisions of the Financial Accounting Standards
Board (‘‘FASB’’) Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes –
an interpretation of FASB Statement No. 109’’ (‘‘FIN 48’’). Management believes that
there were no unrecognized tax benefits, or tax positions that would result in
uncertainty regarding the deductions taken, as of August 31, 2009 and November 30,
2008. FIN 48 prescribes a recognition threshold and a measurement attribute for the
financial statement recognition and measurement of tax positions taken or expected to
be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. There
were no penalties or related interest for the fiscal year to date ended August 31, 2009
or for the fiscal year ended November 30, 2008. |
The Company files an income tax return with the United States Department of Treasury,
and with various state jurisdictions as required under the nexus laws and regulations
of those states. The Company is no longer subject to Federal tax examinations for
fiscal 2005 and years prior to fiscal 2005. The Internal Revenue Service has completed
examining the U.S. Income tax return filed for fiscal 2006. As a result of the
examination, the Internal Revenue Service has proposed an adjustment that will result
in a refund to the Company of $94,195. The State of New Jersey, Department of The
Treasury, Division of Taxation is currently examining state income and sales tax
returns filed for the fiscal years 2004 – 2008. As of October 13, 2009, no adjustments
have been proposed. The Company is no longer subject to New Jersey tax examinations
for fiscal 2003 and years prior to fiscal 2003. No other state has notified the
Company of its intent to conduct an examination of tax returns filed in their
jurisdictions. |
As of August 31, 2009, the Company has unrealized losses on its investments of
$521,604, which if realized would have a tax benefit of $208,589. The Company has
determined that this deferred tax benefit has no value at this time, as the Company
does not believe that it will utilize these losses in the future, and accordingly has
not been recorded as a deferred tax asset. |
23
At August 31, 2009 and November 30, 2008, respectively, the Company had temporary
differences arising from the following: |
| August 31, 2009 | ||||||||||||||||||||
| Classified As | ||||||||||||||||||||
| Deferred | Short-Term | Long-Term | Long-Term | |||||||||||||||||
| Type | Amount | Tax | Asset | Asset | (Liability) | |||||||||||||||
Depreciation |
$ | (203,858 | ) | $ | (81,340 | ) | $ | — | $ | — | $ | (81,340 | ) | |||||||
Reserve for bad debts |
197,224 | 78,692 | 78,692 | — | — | |||||||||||||||
Reserve for returns |
818,288 | 326,497 | 326,497 | — | — | |||||||||||||||
Reserve for obsolete
inventory |
572,930 | 228,599 | 228,599 | — | — | |||||||||||||||
Vacation accrual |
496,479 | 198,096 | 198,096 | — | — | |||||||||||||||
Charitable Contributions |
186,098 | 74,252 | 74,252 | — | — | |||||||||||||||
Section 263A costs |
240,000 | 95,760 | 95,760 | — | — | |||||||||||||||
Net deferred income tax |
$ | 920,556 | $ | 1,001,896 | $ | — | $ | (81,340 | ) | |||||||||||
| November 30, 2008 | ||||||||||||||||||||
| Classified As | ||||||||||||||||||||
| Deferred | Short-Term | Long-Term | Long-Term | |||||||||||||||||
| Type | Amount | Tax | Asset | 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 | $ | — | ||||||||||||
24
Income tax expense is made up of the following components: |
| Three Months Ended August 31, 2009 | ||||||||||||
| Federal | State & Local | Total | ||||||||||
Current tax expense |
$ | 660,138 | $ | 192,024 | $ | 852,162 | ||||||
Deferred tax (benefit) |
(40,216 | ) | (11,755 | ) | (51,971 | ) | ||||||
| $ | 619,922 | $ | 180,269 | $ | 800,191 | |||||||
| Three Months Ended August 31, 2008 | ||||||||||||
| Federal | State & Local | Total | ||||||||||
Current tax expense |
$ | 523,722 | $ | 152,344 | $ | 676,066 | ||||||
Deferred tax expense |
44,771 | 16,896 | 61,667 | |||||||||
| $ | 568,493 | $ | 169,240 | $ | 737,733 | |||||||
| Nine Months Ended August 31, 2009 | ||||||||||||
| Federal | State & Local | Total | ||||||||||
Current tax expense |
$ | 1,280,342 | $ | 374,493 | $ | 1,654,835 | ||||||
Deferred tax (benefit) |
(44,843 | ) | (13,116 | ) | (57,959 | ) | ||||||
| $ | 1,235,499 | $ | 361,377 | $ | 1,596,876 | |||||||
| Nine Months Ended August 31, 2008 | ||||||||||||
| Federal | State & Local | Total | ||||||||||
Current tax expense |
$ | 1,231,007 | $ | 360,143 | $ | 1,591,150 | ||||||
Deferred tax expense |
13,621 | 3,985 | 17,606 | |||||||||
| $ | 1,244,628 | $ | 364,128 | $ | 1,608,756 | |||||||
25
Prepaid income taxes and refund due are made up of the following components: |
| Federal | State & Local | Total | ||||||||||
August 31, 2009 |
$ | (72,447 | ) | $ | 266,649 | $ | 194,202 | |||||
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 August 31, 2009 and August 31,
2008 is as follows: |
| Three Months Ended | Three Months Ended | |||||||||||||||
| August 31, 2009 | August 31, 2008 | |||||||||||||||
| Percent | Percent | |||||||||||||||
| of Pretax | of Pretax | |||||||||||||||
| Amount | Income | Amount | Income | |||||||||||||
Income tax expense
at federal statutory rate |
$ | 815,843 | 34.00 | % | $ | 625,312 | 34.00 | % | ||||||||
Increases in taxes
resulting from: |
||||||||||||||||
State income taxes, net of federal
income tax benefit |
142,532 | 5.94 | 109,246 | 5.94 | ||||||||||||
Non-deductible expenses and
other adjustments |
(158,184 | ) | (6.59 | ) | 3,175 | .17 | ||||||||||
Income tax expense
at effective rate |
$ | 800,191 | 33.35 | % | $ | 737,733 | 40.11 | % | ||||||||
26
| Nine Months Ended | Nine Months Ended | |||||||||||||||
| August 31, 2009 | August 31, 2008 | |||||||||||||||
| Percent | Percent | |||||||||||||||
| of Pretax | of Pretax | |||||||||||||||
| Amount | Income | Amount | Income | |||||||||||||
Income tax expense
at federal statutory rate |
$ | 1,365,006 | 34.00 | % | $ | 1,307,147 | 34.00 | % | ||||||||
Increases in taxes
resulting from: |
||||||||||||||||
State income taxes, net of federal
income tax benefit |
238,475 | 5.94 | 228,366 | 5.94 | ||||||||||||
Non-deductible expenses and
other adjustments |
(6,605 | ) | (0.16 | ) | 73,243 | 1.91 | ||||||||||
Income tax expense
at effective rate |
$ | 1,596,876 | 39.78 | % | $ | 1,608,756 | 41.85 | % | ||||||||
On October 12, 2009, the Company announced that the Board of Directors had declared a
$0.07 per share dividend for the fourth quarter of 2009, payable to all shareholders of
record as of November 2, 2009, and payable on December 2, 2009. |
On October 1, 2009, the Company announced that it had been served on September 30, 2009
with a class action suit, Denise Wally vs. CCA Industries, Inc. The claim, which did
not specify any damages, was filed in the Superior Court, State of California, County
of Los Angeles, and Central Civil West, alleging false and misleading claims about one
of the Company’s products sold in California, that violated the California Business and
Professional Code. The Company believes that the claim is without any merit and
intends to vigorously defend the case. |
The Company has evaluated subsequent events that occurred during the period of August
31, 2009 through October 13, 2009, the date that these financial
statements were available to be issued. Except as disclosed above, management concluded that no other events required
potential adjustment to, or disclosure in these consolidated financial statements. |
27
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) |
28
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
(CONTINUED) |
29
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
(CONTINUED) |
30
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
(CONTINUED) |
31
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
(CONTINUED) |
32
| ITEM 3. | QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK |
| ITEM 4. | CONTROLS AND PROCEDURES |
33
| Item 1. | Legal Proceedings: |
| Item 4. | Submission of Matters to a Vote of Security Holders: |
Our annual meeting of shareholders was held on June 24, 2009 in East Rutherford, New
Jersey. At the meeting the following persons were elected directors: Dunnan Edell
(6,369,901 votes for and 381,912 votes withheld), James P. Mastrian (6,424,737 votes for
and 327,076 votes withheld) and Robert Lage (6,426,515 votes for and 325,298 votes
withheld). |
The shareholders approved the appointment of KGS LLP as the Company’s independent
certified public accountants for the fiscal year ending November 30, 2009 (6,574,406
votes for, 135,156 votes against and 44,250 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: |
| (a) | Exhibits |
The following reports were filed with the Securities and Exchange Commission during the
three months ended August 31, 2009: |
| (1 | ) | Form 10Q, filed on July 15, 2009, for the year ended May 31, 2009 |
||
| (11 | ) | Computation of Earnings Per Share* |
||
| (31.1 | ) | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)* |
||
| (31.2 | ) | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)* |
||
| (32.1 | ) | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350* |
||
| (32.2 | ) | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350* |
| * | Filed herewith. |
34
None |
35
|
CCA INDUSTRIES, INC. |
||||
| By: | /s/ DAVID EDELL | |||
| David Edell, Chief Executive Officer | ||||
| By: | /s/ STEPHEN A. HEIT | |||
| Stephen A. Heit, Chief Financial Officer | ||||
36
| Exhibit | ||||
| No. | Description | |||
| (1 | ) | Form 10Q, filed on July 15, 2009, for the year ended May 31, 2009 |
||
| (11 | ) | Computation of Earnings Per Share* |
||
| (31.1 | ) | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)* |
||
| (31.2 | ) | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)* |
||
| (32.1 | ) | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350* |
||
| (32.2 | ) | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350* |
||
| * | Filed herewith. |
37