FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended May 31, 2001 Commission File Number 2-85538 CCA INDUSTRIES, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 04-2795439 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification Number) 200 Murray Hill Parkway East Rutherford, NJ 07073 (Address of principal executive offices) (Zip Code) (201) 330-1400 Registrant's telephone number, including area code Not applicable Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was re- quired to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.01 Par Value - 5,841,827 shares as of May 31, 2001 Class A Common Stock, $.01 Par Value - 1,020,930 shares as of May 31, 2001 CCA INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page Number PART I FINANCIAL INFORMATION: Consolidated Balance Sheets as of May 31, 2001 and November 30, 2000 . . . . . . . . . . . . . 1-2 Consolidated Statements of Operations for the three months and six months ended May 31, 2001 and 2000 . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Comprehensive Income for the three months and six months ended May 31, 2001 and 2000. . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows for the six months ended May 31, 2001 and 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . .6-15 Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . 16-17 PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . 18-19 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS A S S E T S
May 31, November 30, 2001 2000 Current Assets Cash and cash equivalents $1,757,928 $ 804,508 Short-term investments and marketable securities (Notes 3 and 10) 2,088,143 2,536,344 Accounts receivable, net of allowances of $1,259,081 and $1,379,424, respectively 7,453,359 6,329,755 Inventories 5,825,347 5,735,427 Prepaid expenses and sundry receivables 465,468 324,980 Deferred income taxes 1,674,173 1,529,522 Prepaid income taxes and refunds due - 777,691 Deferred advertising 2,155,380 - Total Current Assets 21,419,798 18,038,227 Property and Equipment, net of accumulated depreciation and amortization 512,990 675,790 Intangible Assets, net of accumulated amortization of $107,531 at May 31, 2001 and $96,920 at November 30, 2000 640,782 641,410 Other Assets Marketable securities 1,555,287 845,101 Due from officers - Non-current 21,840 21,485 Deferred income taxes 38,461 34,517 Other 58,076 55,526 Total Other Assets 1,673,664 956,629 Total Assets $24,247,234 $20,312,056
See Notes Consolidated to Financial Statements. -1- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY
May 31, November 30, 2001 2000 Current Liabilities Notes payable - Current portion $ - $1,500,000 Accounts payable and accrued liabilities 8,049,122 4,288,852 Income tax payable 265,751 - Total Current Liabilities 8,314,873 5,788,852 Subordinate Debentures (Due August 1, 2005) 511,656 556,656 Shareholders' Equity Common stock, $.01 par; authorized 15,000,000 shares; issued and outstanding 6,042,823 shares 60,428 60,428 Class A common stock, $.01 par; authorized 5,000,000 shares; issued and outstanding 1,020,930 10,209 10,209 Additional paid-in capital 3,836,296 3,836,296 Retained earnings 11,775,318 10,300,693 Accumulated other comprehensive income ( 30,011) ( 64,846) 15,652,240 14,142,780 Less: Treasury Stock (200,996 and 107,496 shares at May 31, 2001 and November 30, 2000, respectively) 231,535 176,232 Total Shareholders' Equity 15,420,705 13,966,548 Total Liabilities and Shareholders' Equity $24,247,234 $20,312,056
See Notes to Consolidated Financial Statements. -2- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended May 31, May 31, 2001 2000 2001 2000 Revenues Sales of Health and Beauty Aid Products - Net $13,118,998 $11,955,893 $23,545,367 $20,537,001 Other income 76,605 70,995 158,161 133,196 13,195,603 12,026,888 23,703,528 20,670,197 Costs and Expenses Costs of sales 4,372,263 4,191,876 8,616,410 7,895,907 Selling, general and administrative expenses 3,880,089 3,476,287 6,901,420 6,719,140 Advertising, cooperative and promotions 2,832,541 2,850,053 5,274,853 4,666,354 Research and development 249,272 157,842 340,220 282,862 Provision for doubtful accounts 24,155 67,184 114,673 134,311 Interest expense 10,895 46,031 51,201 68,508 11,369,215 10,789,273 21,298,777 19,767,082 Income before Income Taxes 1,826,388 1,237,615 2,404,751 903,115 Provision for Income Taxes 688,609 486,809 930,126 358,431 Net Income $1,137,779 $ 750,806 $1,474,625 $ 544,684 Earnings per Share Basic $.17 $.10 $.21 $.08 Diluted $.16 $.10 $.20 $.07
See Notes to Consolidated Financial Statements. -3- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended Six Months Ended May 31, May 31, 2001 2000 2001 2000 Net Income $1,137,779 $750,806 $1,474,625 $544,684 Other Comprehensive Income Unrealized holding gains (loss) on invest ments ( 4,682) ( 6,459) 34,835 ( 51,304) Provision (Benefit) for Taxes ( 2,527) ( 2,996) 13,473 ( 19,496) Other Comprehensive Income (Loss) - Net ( 2,155) ( 3,463) 21,362 ( 31,808) Comprehensive Income $1,135,624 $747,343 $1,495,987 $512,876 Earnings Per Share: Basic $.17 $.10 $.22 $.08 Diluted $.16 $.10 $.21 $.07
See Notes to Consolidated Financial Statements. -4- CCA INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Six Months Ended Ended May 31, May 31, 2001 2000 Cash Flows from Operating Activities: Net income $1,474,625 $ 544,684 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 202,615 199,575 Loss (gain) on sale of marketable securities 1,642 ( 4,956) (Increase) decrease in deferred income taxes ( 148,595) 10,336 (Increase) in accounts receivable - Net (1,123,604) (2,787,513) (Increase) decrease in inventory ( 89,920) 610,589 (Increase) decrease in prepaid expenses and miscellaneous receivables ( 140,488) 496,290 (Increase) in deferred advertising (2,155,380)( 2,679,971) Increase in income taxes payable 265,751 - Increase in accounts payable and accrued liabilities 3,760,271 3,251,781 Decrease in prepaid income taxes and refunds due 777,691 273,076 (Increase) decrease in security deposits ( 2,550) 343 Net Cash Provided by(Used in) Operating Activities 2,822,058 ( 85,766) Cash Flows from Investing Activities: Acquisition of property, plant and equipment ( 16,431) ( 252,304) Acquisition of intangible assets ( 22,756) ( 578) (Increase) decrease of money due from officers ( 355) 15,313 Purchase of marketable securities (3,189,974) (1,106,706) Proceeds from sale and maturity of investments 2,938,681 1,092,663 Net Cash (Used in) Investing Activities ( 290,835) ( 251,612) Cash Flows from Financing Activities: Proceeds from borrowings - 1,400,000 Payment on debt (1,500,000) (1,400,000) Purchase of treasury stock ( 55,303) - Repurchase of outstanding debenture ( 22,500) - Net Cash (Used in) Provided by Financing Activities (1,577,803) - Net Increase (Decrease) in Cash 953,420 ( 337,378) Cash at Beginning of Period 804,508 807,360 Cash at End of Period $1,757,928 $ 469,982 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 52,271 $ 55,646 Income taxes 51,806 4,467
See Notes to Consolidated Financial Statements. -5- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated finan cial 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 re quired by generally accepted accounting principles for complete financial statements. In the opinion of manage ment, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended May 31, 2001 are not necessarily indicative of the results that may be expected for the year ended November 30, 2001. 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, 2000. 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 Corpora tion, 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 ac counts of CCA and its wholly-owned subsidiaries (collec tively the "Company"). All significant inter-company ac- counts and transactions have been eliminated. 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 unreal ized gains and losses reported as a separate component of shareholders' equity. -6- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates: The consolidated financial statements include the use of estimates, which management believes are reasonable. The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. Short-Term Investments and Marketable Securities: Short-term investments and marketable securities consist of corporate and government bonds and equity securities. The Company has classified its investments as Available- for-Sale securities. Accordingly, such investments are reported at fair market value, with the resultant unreal ized 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. 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 obso lescence is determined. -7- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and Equipment and Depreciation and Amortization Property and equipment are stated at cost. The Company charges to expense repairs and maintenance items, while major improvements and betterments are capitalized. When the Company sells or otherwise disposes of property and equipment items, the cost and related accumulated depre- ciation 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 trade marks 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 tempo rary 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: The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" in 1998. Basic earnings per share is calculated using the average number of shares of common stock outstanding during the year. Diluted earnings per share is computed on the basis of the 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. On March 30, 2001, the Company repriced all of the outstanding stock options to $.56. -8- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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, there fore, records a reserve for returns equal to its gross profit on its historical percentage of returns on its last five months sales. Accounts Receivable: Accounts receivable with credit balances have been in cluded as a current liability in "Accounts payable and accrued liabilities" in the accompanying balance sheet. The Company uses the allowance method to account for uncollectible accounts receivable. Accounts receivable are presented net of an allowance for doubtful accounts of $363,000 and $323,000 as of May 31, 2001 and November 30, 2000, respectively. Shipping and Handling Costs: The Company presents shipping and handling costs as part of Selling, general and administrative expense and not as part of Cost of sales. Freight costs were $1,271,719 and $1,086,807 for the six months ended May 31, 2001 and 2000, respectively. 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 2001 presentation. NOTE 4 - INVENTORIES The components of inventory consist of the following: May 31, November 30, 2001 2000 Raw materials $3,234,359 $3,667,757 Finished goods 2,590,988 2,067,670 $5,825,347 $5,735,427 At May 31, 2001 and November 30, 2000, the Company had a reserve for obsolescence of $1,559,190 and $1,050,714, respectively. -9- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 - PROPERTY AND EQUIPMENT The components of property and equipment consisted of the following: May 31, November 30, 2001 2000 Machinery and equipment $ 168,421 $ 323,233 Furniture and equipment 695,803 922,386 Transportation equipment 10,918 10,918 Tools, dies, and masters 522,045 1,972,830 Leasehold improvements 118,857 169,820 1,516,044 3,399,187 Less: Accumulated depreciation and amortization 1,003,054 2,723,397 Property and Equipment - Net $ 512,990 $ 675,790 Depreciation expense for the six months ended May 31, 2001 and 2000 amounted to $179,231 and $193,065, respec- tively. During the six months ended May 31, 2001, the Company disposed of approximately $1,900,000 of fully depreciated property and equipment. NOTE 6 - INTANGIBLE ASSETS Intangible assets consist of the following: May 31, November 30, 2001 2000 Patents and trademarks $748,313 $738,300 Less: Accumulated amortization 107,531 96,920 Intangible Assets - Net $640,782 $641,410 Amortization expense for the six months ended May 31, 2001 and 2000 amounted to $23,384 and $6,510, respec- tively. -10- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - DEFERRED ADVERTISING In accordance with APB 28 Interim Financial Reporting the Company expenses its advertising and related costs pro portionately over the interim periods based on its total expected costs per its various advertising programs. Consequently a deferral of $2,155,380 is accordingly reflected in the balance sheet for the interim period. This deferral is the result of the Company's $6,500,000 media budget for the year which contemplates lower spend ing 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: May May 2001 2000 (In Millions) (In Millions) Media advertising budget for the fiscal year $6.50 $6.00 Pro-rata portion for six months $3.25 $3.00 Media advertising spent 4.63 5.29 Accrual (deferral) ($1.38) ($2 29) Anticipated Co-op advertising commitments $4.00 $2.70 Pro-rata portion for six months $2.00 $1.35 Co-op advertising spent 2.78 1.74 Accrual (deferral) ($0.78) ($ .39) NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The following items which exceeded 5% of total current liabilities are included in accounts payable and accrued liabilities as of: May 31, November 30, 2001 2000 (In Thousands) (In Thousands) a) Media advertising $2,022 $ - b) Coop advertising 750 242 c) Accrued returns 492 983 d) Accrued bonuses 486 - $3,750 $1,225 * under 5% -11- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Continued) All other liabilities were for trade payables or individ- ually did not exceed 5% of total current liabilities. NOTE 9 - OTHER INCOME Other income consists of the following at May 31: 2001 2000 Interest income $120,393 $106,331 Dividend income 8,678 20,698 Miscellaneous 29,090 6,167 $158,161 $133,196 NOTE 10 -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 securi ties and considers as current assets those investments which will mature or are likely to be sold in the next fiscal year. The remaining investments are considered non-current assets. The cost and market values of the investments at May 31, 2001 and November 30, 2000 were as follows: May 31, November 30, 2001 2000 Current: COST MARKET COST MARKET Corporate obligations $ 536,000 $ 540,883 $ 536,000 $ 534,590 Government obligations (including mortgage backed securities) 1,543,598 1,547,260 1,998,756 2,001,754 Total 2,079,598 2,088,143 2,534,756 2,536,344 Non-Current: Corporate obligations 592,900 593,226 - - Government obli- gations 596,700 597,421 150,510 146,723 Preferred stock 250,000 251,920 612,561 586,448 Other equity investments 154,245 112,720 148,465 111,930 Total 1,593,845 1,555,287 911,536 845,101 Total $3,673,443 $3,643,430 $3,446,292 $3,381,445 -12- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 -SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED) The market value at May 31, 2001 was $3,643,430 as compared to $3,381,445 at November 30, 2000. The cost and market values of the investments at May 31, 2001 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 10/15/01 5.950% 536,000 $ 536,000 $ 540,883 $ 540,883 GMAC Smartnotes 1/15/03 5.550% 250,000 250,000 251,215 251,215 GMAC Smartnotes 2/15/03 5.750% 140,000 140,000 141,161 141,161 International Business Machines 9/22/03 5.370% 100,000 102,040 100,506 100,506 Colgate-Palmolive 12/1/03 5.270% 100,000 100,860 100,344 100,344 1,128,900 1,134,109 1,134,109
-13- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL. D COL. E Amount at Which Each Portfolio of Number of Market 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% 32,956 $ 32,395 $ 33,337 $ 33,337 FNMA 93-224-D 11/25/2023 6.500 90,494 90,950 91,540 91,540 FNMA 92-2-N 1/25/2024 6.500 24,320 23,295 24,654 24,654 US Treasury Note 7/31/2001 6.625 200,000 204,378 201,064 201,064 US Treasury Note 9/30/2001 5.625 250,000 249,767 251,640 251,640 US Treasury Note 11/15/2003 4.250 200,000 199,891 199,062 199,062 US Treasury Note 11/15/2003 4.250 250,000 250,169 248,828 248,828 US Treasury Bill 8/9/2001 3.550 300,000 297,312 297,972 297,972 US Treasury Bill 6/14/2001 4.520 300,000 296,631 299,544 299,544 US Treasury Bill 10/11/2001 3.815 250,000 245,238 246,805 246,805 FHLBC 6/22/2001 5.610 250,000 250,272 250,235 250,235 2,140,298 2,144,681 2,144,681
-14- CCA INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL.D COL.E Amount at Which Each Portfolio Of Number of Market 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: Merrill Lynch Trust 9/30/08 7.28% 6,000 $ 150,000 $ 151,920 $ 151,920 Other Equity Investments: First Australia Prime 100,000 100,000 100,000 Dreyfus Premier Limited Term High Income CL B 3.8* 12,824 154,245 112,720 112,720 404,245 364,640 364,640 $3,673,443 $3,643,430 $3,643,430 * Estimated
-15- CCA INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) For the three month period ended May 31, 2001, the Company had revenues of $13,195,603 and net income of $1,137,779 after a provision of taxes of $688,609. Sales returns were 7% of gross sales. Sales returns were 6.5% for the prior year's period. Gross margins of 66.7% were up from 64.9%. This was primarily due to the product mix and better cost control. Selling general and administrative (SG&A) increased from $3.5 million to $3.9 million. This is primarily due to a $350,000 reserve taken based on a proposed settlement on a trademark infringement case. Provision for doubtful accounts decreased from $67,000 to $24,000 due to a substantial increase in ac counts receivable during the prior year's period and a higher percentage of accounts receivable this year in the current category. For the three month period ending May 31, advertising, cooperative and promotional allowance expenditures were $2.8 million, substantially the same as for the three month period ending May 31, 2000. Advertising expenditures were 21.6% of sales compared to 23.8%. Since both co-op advertising and promotional have a material effect on the Company's operation, the Company attempts to anticipate its advertising and promo- tional commitments as a percent of gross sales in order to control its effect on its net income in accordance with APB Interim Financial Reporting the company expenses its advertis- ing and related costs proportionately over the interim periods based on its total expected per its various advertising pro- grams. Consequently, a deferral of $2.16 million media expense for the six month period is reflected in the balance sheet. The Company deferred $2.67 million in the prior year for the six month period. The deferral is the result of the Company's current $6.5 million media budget for the entire year, which is predicated on substantially lower spending in the third and fourth quarters. Co-op expenditures are budgeted at $4 million for the year. Specifically, the company spent $4.6 million for media advertising in the six months and $2.8 million in co-op advertising. The difference between the actual expense and the budgeted expense is deferred or accrued over the subsequent six month period and by the end of the year will be fully expensed. For the six month period ended May 31, 2001, the Company had revenue of $23,703,528 and a net income of $1,474,625 after a provision of income taxes of $930,126. In the prior year's period, the Company had revenues of $20,670,197 and net income of $544,684 after a provision for income taxes of $358,431. Revenue for the six month period ended May 31, 2001 was up approximately $3,033,331 from 2000. Gross profit margins for the six month period ending May 31, 2001 increased from 61.6% last year to 63.4% For the six month period ended May 31, 2001, advertising cooperative and promotional allowance expenditures was $5,274,853 as compared to $4,666,354 for the six month period ending May 31, 2000. Advertising expenditures were 22.4% of sales vs. 22.7% last year. For the six month period ending May 31, 2001, research and development expenses were $340,220 compared to $282,862 last year. -16- CCA INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) The Company's financial position as of May 31, 2001 con sists of current assets of $21,419,798 and current liabilities of $8,314,873. In addition, shareholders' equity increased from $13,966,548 at November 30, 2000 to $15,420,705 at May 31, 2001 primarily due to net income earned during the period. The Company generated $2.8 million in cash from operations due to the six month net income of $1.5 million coupled with the net effect of the increase in the Company's accounts re- ceivable and deferred expenses versus the increases in the Company's payables. The $2.8 million cash generated by operations, however, was used to retire all of the Company's short-term debt ($1.5 million) and invest in additional securities ($.3 million), leaving the Company with a net increase in its cash position of approximately $1 million. -17- PART II, ITEM 6. (Continued) EXHIBIT 11 CCA INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) Three Months Ended Six Months Ended May 31, May 31, 2001 2000 2001 2000 Item 6. Weighted average shares outstanding - Basic 6,877,058 7,167,242 6,893,183 7,167,242 Net effect of dilutive stock options--based on the treasury stock method using average market price 399,909 337,075 316,814 356,188 Weighted average shares outstanding - Diluted 7,276,967 7,504,317 7,209,997 7,523,430 Net income $1,137,779 $ 750,806 $1,474,625 $ 544,684 Per share amount Basic $.17 $.10 $.21 $.08 Diluted $.16 $.10 $.20 $.07 -18- 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 six months ended May 31, 2001. -19- 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 -20-