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, 2000 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 - 5,946,827 shares as of August 31, 2000 Class A Common Stock, $.01 Par Value - 1,020,930 shares as of August 31, 2000 CCA INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page Number PART I FINANCIAL INFORMATION: Consolidated Balance Sheets as of August 31, 2000 and November 30, 1999. . . . . . . . . . . . 1-2 Consolidated Statements of Operations for the three months and nine months ended August 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Comprehensive Income for the three months and nine months ended August 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows for the nine months ended August 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6 Notes to Consolidated Financial Statements . . . . . . . . .7-16 Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . 17-19 PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . 20-21 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS A S S E T S
August 31, November 30, 2000 1999 Current Assets Cash and cash equivalents $ 81,909 $ 807,360 Short-term investments and marketable securities 2,001,307 1,490,469 Accounts receivable, net of allowances of $1,364,993 and $1,183,576, respectively 8,411,816 7,371,532 Inventories 5,332,475 6,235,270 Prepaid expenses and sundry receivables 436,903 822,816 Deferred income taxes 1,333,428 1,178,513 Prepaid income taxes and refunds due 208,388 714,835 Deferred advertising 1,286,557 - Total Current Assets 19,092,783 18,620,795 Property and Equipment, net of accumulated depreciation and amortization 728,779 739,728 Intangible Assets, net of accumulated amortization of $82,666 at August 31, 2000 and $71,840 at November 30, 1999 222,816 169,756 Other Assets Marketable securities 1,566,398 1,809,770 Due from officers - Non-current 32,857 57,918 Deferred income taxes 38,864 42,031 Other 54,646 54,989 Total Other Assets 1,692,765 1,964,708 Total Assets $21,737,143 $21,494,987
See Notes Consolidated to Financial Statements. -1- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, November 30, 2000 1999 Current Liabilities Notes payable $ 2,600,000 $ 1,400,000 Accounts payable and accrued liabilities 3,391,971 4,928,905 Total Current Liabilities 5,991,971 6,328,905 Subordinated Debentures (due August 1, 2005) 556,656 - Shareholders' Equity Common stock, $.01 par; authorized 15,000,000 shares; issued 6,321,151 shares, respectively 63,212 63,212 Class A common stock, $.01 par; authorized 5,000,000 shares; issued and outstanding 1,020,930 shares, respectively 10,209 10,209 Additional paid-in capital 4,453,478 4,453,478 Retained earnings 11,558,921 10,955,203 Unrealized gains (losses) on marketable securities ( 175,482)( 150,854) 15,910,338 15,331,248 Less: Treasury Stock (374,324 and 95,996 shares at August 31, 2000 and November 30, 1999, respectively) 721,822 165,166 Total Shareholders' Equity 15,188,516 15,166,082 Total Liabilities and Shareholders' Equity $21,737,143 $21,494,987
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, 2000 1999 2000 1999 Revenues Sales of Health and Beauty Aid Products - Net $9,905,804 $8,631,951 $30,411,579 $28,398,978 Other income 86,208 102,623 219,032 186,702 9,992,012 8,734,574 30,630,611 28,585,680 Costs and Expenses Costs of sales 3,493,222 3,508,009 11,381,811 11,073,391 Selling, general and administrative expenses 3,595,388 3,200,777 10,309,788 9,509,870 Advertising, cooperative and promotions 2,478,780 1,851,391 7,165,084 6,636,603 Research and development 105,879 118,183 388,741 373,392 Provision for doubtful accounts 10,272 ( 4,044) 144,583 89,758 Interest expense 45,992 - 97,447 - 9,729,533 8,674,316 29,487,454 27,683,014 Income before Provision for Income Taxes 262,479 60,258 1,143,157 902,666 Provision for Income Taxes 123,710 19,694 432,141 290,648 Income From Continuing Operations 138,769 40,564 711,016 612,018 Income (Loss) From Discontinued Operations ( 79,735) (1,132,848) ( 107,298) (1,451,509) Net Income (Loss) $ 59,034 ($1,092,284) $ 603,718 ($ 839,491) Basic Diluted Basic Diluted Basic Diluted Basic Diluted Earnings per Share Continuing Operations $.02 $.02 $.01 $.01 $.10 $.09 $.09 $.09 Discontinued Operations($.01)($.01) ($.16) ($.16) ($.01)($.01) ($.21)($.21) Net Income (Loss) $.01 $.01 ($.15) ($.15) $.08 $.08 ($.12)($.12)
See Notes to Consolidated Financial Statements. -3- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended Nine Months Ended August 31, August 31, 2000 1999 2000 1999 Net Income (Loss) $59,034 ($1,157,167) $603,718 ($839,491) Other Comprehensive Income Unrealized holding gains (loss) on investments 26,674 ( 77,580) ( 24,630) ( 84,699) Provision (Benefit) for Taxes 10,185 ( 29,922) ( 9,311) ( 27,272) Other Comprehensive Income (Loss) - Net 16,489 ( 47,658) ( 15,319) ( 57,427) Comprehensive Income $75,523 ($1,204,825) $588,399 ($896,918) Earnings Per Share: Basic $.01 ($.17) $.08 ($.12) Diluted $.01 ($.17) $.08 ($.12)
See Notes to Consolidated Financial Statements. -4- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Nine Months Ended Ended August 31, August 31, 2000 1999 Cash Flows from Operating Activities: Net income (loss) $ 603,718 ($ 839,491) Adjustments to reconcile net income to net cash (used in) operating activities: Depreciation and amortization 286,175 287,428 Minority deficiency in consolidated subsidiaries - ( 155) Amortization of bond premium - 1,414 Loss on abandoned intangibles - 463,512 (Gain) on sale of marketable securities ( 4,956) ( 21,532) (Increase) decrease in deferred income taxes ( 151,748) 114,883 (Increase) decrease in accounts receivable - Net ( 1,040,284) 944,108 Decrease in inventory 902,795 1,996,368 Decrease (increase) in prepaid expenses and miscellaneous receivables 385,913 ( 32,010) (Increase) in deferred advertising ( 1,286,557) ( 1,551,113) (Decrease) in accounts payable and accrued liabilities ( 1,536,934) ( 53,425) (Decrease) in taxes payable - ( 600,720) Decrease (increase) in security deposits 343 ( 400) Decrease (increase) in prepaid income taxes and refunds due 506,447 ( 1,222,085) Net Cash (Used in) Operating Activities ( 1,335,088) ( 513,218) Cash Flows from Investing Activities: Acquisition of property, plant and equipment( 264,400) ( 117,946) Acquisition of intangible assets ( 63,886) ( 454,735) Proceeds of money due from officers 25,061 1,857 Purchase of marketable securities ( 1,379,933) ( 282,960) Proceeds from sale and maturity of investments 1,092,795 1,320,331 Net Cash (Used in) Provided by Investing Activities ( 590,363) 466,547 Cash Flows from Financing Activities: Proceeds from borrowings 3,900,000 2,850,000 Payment on debt ( 2,700,000) ( 2,500,000) Purchase of treasury stock - ( 9,557) Net Cash Provided by Financing Activities 1,200,000 340,443 Net (Decrease) Increase in Cash ( 725,451) 293,772 Cash at Beginning of Period 807,360 542,289 Cash at End of Period $ 81,909 $ 836,061
See Notes to Consolidated Financial Statements. -5- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED)
Nine Months Nine Months Ended Ended August 31, August 31, 2000 1999 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 88,968 $ 95,971 Income taxes 97,442 1,128,793 Supplemental Schedule of Noncash Investing and Financing Activities: The Company repurchased common stock in exchange for the issuance of subordinated debentures: Common stock repurchased $556,656 $ - Subordinated debentures ( 556,656) - $ - $ - Minority Shareholders' Losses Absorbed by the Company: Minority interest $ - $ 7,643 Retained earnings - ( 7,643) $ - $ -
See Notes to Consolidated Financial Statements. -6- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial state- ments have been prepared in accordance with generally accepted ac- counting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accord ingly, 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, 2000 are not necessarily indicative of the results that may be expected for the year ended November 30, 2000. 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, 1999. NOTE 2 - ORGANIZATION AND DESCRIPTION OF BUSINESS CCA Industries, Inc. ("CCA") was incorporated in the State of Delaware on March 25, 1983. CCA manufactures and distributes health and beauty aid products. CCA has several wholly-owned subsidiaries (CCA Cosmetics, Inc., CCA Labs, Inc., Berdell, Inc., Nutra Care Corporation, and CCA Online Industries, Inc.), all of which are currently inactive. In March of 1998 CCA acquired 80% of the newly organized Fragrance Corporation of America, Ltd. which manufactures and distributes perfume products. In 1999, the Company adopted a formal plan to discontinue the operations of the subsidiary. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of CCA and its wholly-owned subsidiaries (collectively the "Company"). All significant inter-company accounts and transactions have been elimi nated. -7- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates: The consolidated financial statements include the use of estimates, which management believes are reasonable. The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. Short-Term Investments and Marketable Securities: Short-term investments and marketable securities consist of corporate and government bonds and equity securities. The Company has classified its investments as Available-for-Sale securities. Accordingly, such investments are reported at fair market value, with the resultant unrealized gains and losses reported as a separate component of shareholders' equity. Statements of Cash Flows Disclosure: For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of less than three months to be cash equivalents. During fiscal 1999, two officers/shareholders exercised in the aggregate 100,000 options in exchange for 25,000 shares of previously issued common stock. The common shares were put into treasury and were subsequently cancelled. Inventories: Inventories are stated at the lower of cost (first-in, first-out) or market. Product returns are recorded in inventory when they are received at the lower of their original cost or market, as appropriate. Obsolete inventory is written off and its value is removed from inventory at the time its obsolescence is determined. -8- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and Equipment and Depreciation and Amortization Property and equipment are stated at cost. The Company charges to expense repairs and maintenance items, while major improvements and betterments are capitalized. When the Company sells or otherwise disposes of property and equipment items, the cost and related 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. Goodwill represents the excess of the cost over the fair value of the net assets acquired and is amortized over 60 months. Financial Instruments: The carrying value of assets and liabilities considered financial instruments approximate their respective fair value. Income Taxes: Income tax expense includes federal and state taxes 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. -9- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Earnings Per Common Share: The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" in 1998. Basic earnings per share is calculated using the average number of shares of common stock outstand ing during the year. Diluted earnings per share is computed on the basis of the average number of common shares outstanding plus the effect of outstanding stock options using the "treasury stock method" and convertible debentures using the "if-converted" method. Common stock equivalents consist of stock options. Revenue Recognition: The Company recognizes sales at the time delivery occurs. Although no legal right of return exists between the customer and the Company, it is an industry-wide practice to accept returns from customers. The Company, therefore, records a reserve for returns equal to its gross profit on its historical percentage of returns on its last five months sales. Comprehensive Income: The Company adopted SFAS #130, Comprehensive Income, which considers the Company's financial performance in that it includes all changes in equity during the period from transactions and events from non-owner sources. Reclassifications Certain prior year amounts have been reclassified to conform to the 2000 presentation and the restatement for discontinued operations. NOTE 4 - INVENTORIES The components of inventory consist of the following: August 31, November 30, 2000 1999 Raw materials $3,060,925 $3,509,103 Finished goods 2,271,550 2,726,167 $5,332,475 $6,235,270 At August 31, 2000 and November 30, 1999, the Company had a reserve for obsolescence of $815,078 and $1,056,789, respectively. -10- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 - PROPERTY AND EQUIPMENT The components of property and equipment consisted of the following: August 31, November 30, 2000 1999 Machinery and equipment $ 323,233 $ 299,528 Furniture and equipment 910,698 742,547 Transportation equipment 10,918 10,918 Tools, dies, and masters 1,968,055 1,914,684 Leasehold improvements 166,820 147,647 3,379,724 3,115,324 Less: Accumulated depreciation and amortization 2,650,945 2,375,596 Property and Equipment - Net $ 728,779 $ 739,728 Depreciation expense for the nine months ended August 31, 2000 and 1999 amounted to $275,349 and $220,086, respectively. NOTE 6 - INTANGIBLE ASSETS Intangible assets consist of the following: August 31, November 30, 2000 1999 Patents and trademarks $242,173 $241,596 Financing costs 63,309 - 305,482 241,596 Less: Accumulated amortization 82,666 71,840 Intangible Assets - Net $222,816 $169,756 Amortization expense for the nine months ended August 31, 2000 and 1999 amounted to $10,826 and $67,342, respectively. -11- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - DEFERRED ADVERTISING In accordance with APB 28 Interim Financial Reporting the Company expenses its advertising and related costs proportionately over the interim periods based on its total expected costs per its various advertising programs. Consequently a deferral of $1,286,557 is accordingly reflected in the balance sheet for the interim period. This deferral is the result of the Company's $6,000,000 media budget for the year which contemplates lower spending in the 4th quarter than in the other three quarters; as well as the Company's Co-op advertising commitments which also anticipates a lower expenditure in the 4th quarter. The table below sets forth the calculation: August August 2000 1999 (In Millions) (In Millions) Media advertising budget for the fiscal year $6.00 $5.30 Pro-rata portion for nine months $4.50 $3.98 Media advertising spent 5.50 4.71 Accrual (deferral) ($1.00) ($ .73) Anticipated Co-op advertising commitments $3.10 $3.30 Pro-rata portion for nine months 2.33 2.48 Co-op advertising spent 2.62 3.30 Accrual (deferral) ($ .29) ($ .82) NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The following items which exceeded 5% of total current liabilities are included in accounts payable and accrued liabilities as of: August 31, November 30, 2000 1999 (In Thousands) (In Thousands) a) Media advertising $ 726 $ 560 b) Coop advertising 542 * c) Accrued returns 301 630 $1,569 $1,190 * under 5% All other liabilities were for trade payables or individually did not exceed 5%of total current liabilities. -12- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 - OTHER INCOME Other income consists of the following at August 31: 2000 1999 Interest income $154,509 $146,190 Dividend income 35,284 32,673 Miscellaneous 29,239 7,839 $219,032 $186,702 NOTE 10 - SUBORDINATED DEBENTURES On August 1, 2000, the Company repurchased (pursuant to a tender offer) 278,328 shares of its outstanding common stock by issuing subordinated debentures equal to $2 per share, which accrue interest at 6% and are due to mature on August 1, 2005. The interest is payable semi-annually. NOTE 11 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES Short-term investments and marketable securities, which consist of stock and various corporate and government obligations, are stated at market value. The Company has classified its investments as Available-for-Sale securities and considers as current assets those investments which will mature or are likely to be sold in the next fiscal year. The remaining investments are considered non-current assets. The cost and market values of the investments at August 31, 2000 and November 30, 1999 were as follows: August 31, November 30, 2000 1999 Current: COST MARKET COST MARKET Corporate obligations $ - $ - $ 745,044 $ 748,894 Government obligations (including mortgage backed securities) 1,998,196 2,001,307 743,777 741,575 Total 1,998,196 2,001,307 1,488,821 1,490,469 Non-Current: Corporate obligations 536,000 531,755 536,000 532,891 Government obli- gations 151,511 146,094 399,534 390,517 Preferred stock 612,561 579,328 612,561 571,535 Other equity investments 444,919 309,221 414,177 314,827 Total 1,744,991 1,566,398 1,962,272 1,809,770 Total $3,743,187 $3,567,705 $3,451,093 $3,300,239 -13- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED) The market value at August 31, 2000 was $3,567,705 as compared to $3,300,239 at November 30, 1999. The cost and market values of the investments at August 31, 2000 were as follows:
COL. A COL. B COL. C COL.D COL.E Amount at Which Each Portfolio Number of Market Of Equity Security Units-Principal Value of Issues and Each Amount of Each Issue Other Security Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet CORPORATE OBLIGATIONS: GMAC Smartnotes 10/15/019 5.950% 536,000 $536,000 $531,755 $531,755
-14- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL. D COL. E Amount at Which Each Portfolio Number of Market Of Equity Security Units-Principal Value of Issues and Each Amount of Each Issue Other Security Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet GOVERNMENT OBLIGATIONS: FHLMC 1628-N 12/15/2023 6.500% $ 50,000 $ 32,498 $ 31,561 $ 31,561 FNMA 93-224-D 11/25/2023 6.500 104,000 91,182 86,642 86,642 FNMA 92-2-N 1/25/2024 6.500 52,000 27,831 27,891 27,891 US Treasury Note 11/30/2000 4.625 100,000 100,190 99,563 99,563 US Treasury Note 1/31/2001 4.500 250,000 247,891 248,125 248,125 US Treasury Note 9/30/2000 4.500 300,000 300,924 299,343 299,343 US Treasury Note 5/31/2001 5.250 250,000 251,615 247,970 247,970 US Treasury Note 11/30/2000 4.625 200,000 198,694 199,126 199,126 US Treasury Note 5/15/2001 5.625 200,000 202,075 199,000 199,000 US Treasury Bill 10/5/2000 450,000 436,637 447,314 447,314 US Treasury Bill 11/9/2000 6.080 240,000 260,170 260,866 260,866 2,149,707 2,147,401 2,147,401
-15- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL.D COL.E Amount at Which Each Portfolio Number of Market Of Equity Security Units-Principal Value of Issues and Each Amount of Each Issue Other Security Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet EQUITY: Preferred Stock: Tennessee Valley Authority (QIDS) Qtrly Income Debt Secs 3/31/45 8.00% 13,600 $ 362,561 $ 341,700 $ 341,700 Merrill Lynch Trust 9/30/08 7.28 6,000 150,000 137,628 137,628 Other Equity Investments: First Australia Prime 100,000 100,000 100,000 Dreyfus Premier Limited Term High Income CL B 3.80* 11,537 145,444 116,045 116,045 Dreyfus High Yield Strategies Fund 10.50* 20,382 299,475 193,176 193,176 1,057,480 888,549 888,549 $3,743,187 $3,567,705 $3,567,705 * Estimated
-16- CCA INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) For the three month period ending August 31, 2000, the Company had revenues and income from continuing operations of $9,992,012 and $262,479, respectively. The Company had a provision for income taxes of $123,710 and incurred a loss from discontinued operations of its fragrance subsidiary of $79,735. Net income was $59,034. For the prior year period, the Company had revenues from continuing operations of $8,734,574, income before taxes of $134,248, a provision for taxes of $38,697 and a write-off of $1,252,768 from discontinued operations. The Company had a net loss of $1,157,167. For the nine month period ending August 31, 2000, the Company had revenues and income from continuing operations of $30,630,611 and $1,143,157, respectively; a provision for income taxes of $432,141 and income of $711,016. The Company incurred a loss of $107,298 from discontinued operations resulting in net income for the nine month period of $603,718. For the nine month period in the prior year, the Company had revenues of $28,585,680 from continuing operations, income of $902,666, a provision for income taxes of $290,648 and income of $612,018. The Company had a loss of $1,451,509 from discontinued operations resulting in a net loss of $839,491. Net sales for the nine month period ended August 31, 2000 were up $2,012,601 over the prior year's period. Sales returns ran approximately 9% of gross sales, up slightly from 8% during the prior year's period. Gross margins of 62.5% were up from 61% for the prior year. Advertising, cooperative and promotional allowance expenditures increased during the nine month period from $6,636,603 to $7,165,084. Advertising expenditures were 23.5% of sales for the nine months ended August 31, 2000 as compared with 23.4% for the period ended August 31, 1999. 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. In accordance with APB 28 Interim Financial Reporting the Company expenses its advertising and related costs proportionately over the interim periods based on its total expected costs per its various advertising programs. Consequently, a deferral of $1,286,557 is accordingly reflected in the balance sheet for the interim period, as compared to $1,551,113 at August 31, 1999. This deferral is the result of the Company's $6.0 million media budget for the year which contemplates lower spending in the 4th quarter than in the other three quarters; as well as the Company's co-op advertising commitments which also anticipates lower expenditures in the 4th quarter. Specifically, the Company spent approximately $5.5 -17- CCA INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) million in the nine months on media advertising and, therefore, expensed $4.5 million and deferred $1.0 million as of August 31,2000. Similarly, as of August 31, 1999, the Company's co-op advertising commitments for the year ended November 30, 2000 are anticipated to be approximately $3.1 million of which approximately $2.62 million was spent in the first nine months resulting in an expense of $2.33 million and a deferral of approximately $.29 million as of August 31, 2000. Comparatively as of August 31, 1999, the Company had anticipated media advertising expense in fiscal year 1999 of $5.3 million and spent approximately $4.71 million in the first nine months resulting in a deferral of approximately $.73 million. Selling, general and administrative expenses ("SG&A") increased compared to the prior year. The increase to $10,309,788 from $9,509,870 was due mostly to increased freight costs of approximately $400,000, and the increase in commissions, recruiting and royalties. For the three month period ended August 31, 2000, net sales were $9,905,804 as compared to $8,631,951 for August 31, 1999. Income for the quarter before taxes increased to $262,479 from $134,298. Gross margins of approximately 64.7% for the three months ended August 31, 2000 were up from 59.4% in 1999. This was due mainly to the better product mix achieved in 2000. Advertising, cooperative and promotional allowance expense during the quarter increased to $2,478,780 from $1,851,391. Advertising expenses were 25% of sales for the quarter in 2000 as compared to 21.45% in 1999. Selling, general and administrative expenses were approximately 36.3% in the current quarter as compared to 37% in 1999. Research and development expenses for the three and nine months were less than the prior year's period due to the economies of utilizing the services of more in-house staff rather than outside consultants. Bad debt expense for the periods increased due to the increase in reserves on the increasing accounts receivable. Actual write-offs were approximately $40,000 in 1999 as compared to $42,000 in 1998. The Company's interest expense of $97,447 was less than the prior year's amount of $108,626 (all of which was attributable to its discontinued operations). The Company's sales were primarily to drugstore chains, food chains and mass merchandisers. The Company's financial position as at August 31, 2000 consists of current assets of $19,092,783 and current liabilities of $5,991,971. The Company's cash position decreased mostly due to its operations ($1,335,000), but also due to the acquisition of $328,000 of fixed assets, and the net purchase of $286,000 of marketable securities. The Company borrowed an additional $1,200,000 on its line to offset some of the drain on its cash. During the nine month period ended August 31, 2000, shareholders' equity increased from $15,166,082 at November 30, 1999 to $15,188,516 at August 31, 2000. This was primarily due to the difference between the net gain for the period ($603,718) and the subordinated debentures issued ($556,656) to repurchase 278,328 shares of the Company's stock. -18- CCA INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) During the nine months ended August 31, 1999, the Company used $513,000 in operations, $454,000 to pay for costs incurred relating to the acquisition of Shiara Inc's assets in excess of their fair market value, and $118,000 to purchase new fixed assets; and generated $350,000 from new borrowings and approximately $1,037,000 from the net liquidations of securities. These factors resulted in a net increase in the Company's cash of about $294,000. -19- 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, 2000 1999 2000 1999 Item 6. Weighted average shares outstanding - Basic 7,182,301 7,276,085 7,218,251 7,276,085 Net effect of dilutive stock options--based on the treasury stock method using average market price 338,615 * 376,836 * Weighted average shares outstanding - Diluted 7,520,916 7,276,085 7,595,087 7,276,085 Net income $ 59,034 ($1,092,284) $ 603,718 ($ 839,491) Per share amount Basic $.01 ($.15) $.08 ($.12) Diluted $.01 ($.15) $.08 ($.12) * Anti-dilutive -20- CCA INDUSTRIES, INC. PART II OTHER INFORMATION All information pertaining to Part II is omitted pursuant to the instructions pertaining to that part. The Company did not file any reports on Form 8-K during the nine months ended August 31, 2000. -21- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized. CCA INDUSTRIES, INC. By: David Edell, President By: Ira W. Berman, Secretary -22-