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, 2002
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 - 6,026,427 shares as of August 31, 2002
Class A Common Stock, $.01 Par Value - 973,230 shares as of
August 31, 2002
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
August 31, 2002 and November 30, 2001. . . . . . . . . . . . 1-2
Consolidated Statements of Operations
for the three months and nine months ended
August 31, 2002 and 2001 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Comprehensive Income
for the three months and nine months ended
August 31, 2002 and 2001 . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the nine months ended August 31, 2002
and 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6
Notes to Consolidated Financial Statements . . . . . . . . .7-16
Report of Independent Accountants. . . . . . . . . . . . . . . .17
Management's Discussion and Analysis of
Results of Operations and Financial
Condition . . . . . . . . . . . . . . . . . . . . . . . . 18-19
PART II OTHER INFORMATION AND REPORTS ON FORM 8-K. . . . . . . 20-21
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER PURSUANT TO TITLE 18, UNITED STATES
CODE, SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002 . . . . . . . . . . . . 23-24
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
August 31, November 30,
2002 2001
Current Assets
Cash and cash equivalents $ 2,007,441 $ 2,555,938
Short-term investments and marketable
securities 969,085 355,345
Accounts receivable, net of allowances of
$1,268,199 and $1,295,085, respectively 5,866,051 4,464,991
Inventories 4,542,378 4,783,530
Prepaid expenses and sundry receivables 271,315 401,403
Deferred income taxes 1,493,561 1,617,403
Prepaid income taxes and refunds due 1,703 221,989
Deferred advertising 944,111 -
Total Current Assets 16,095,645 14,400,599
Property and Equipment, net of accumulated
depreciation and amortization 685,090 482,261
Intangible Assets, net of accumulated
amortization of $167,167 at August 31, 2002
and $131,323 at November 30, 2001 586,035 618,933
Other Assets
Marketable securities 8,069,613 4,979,758
Due from officers - Non-current 18,528 20,598
Deferred income taxes 37,298 40,105
Other 56,663 56,663
Total Other Assets 8,182,102 5,097,124
Total Assets $25,548,872 $20,598,917
See Notes Consolidated to Financial Statements.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, November 30,
2002 2001
Current Liabilities
Accounts payable and accrued liabilities $ 6,579,300 $ 4,154,256
Income taxes payable 351,490 9,366
Total Current Liabilities 6,930,790 4,163,622
Subordinated Debentures (due August 1, 2005) 502,656 510,656
Shareholders' Equity
Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued - -
Common stock, $.01 par; authorized
15,000,000 shares; issued 6,290,523 and
6,242,823 shares, respectively 62,905 62,428
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
973,230 and 1,020,930 shares, respectively 9,732 10,209
Additional paid-in capital 3,834,296 3,834,296
Retained earnings 14,555,932 12,315,062
Unrealized (losses) on marketable
securities ( 12,274) ( 50,151)
18,450,591 16,171,844
Less: Treasury Stock (264,096 and
218,196 shares at August 31,
2002 and November 30,
2001, respectively) 335,165 247,205
Total Shareholders' Equity 18,115,426 15,924,639
Total Liabilities and Shareholders'
Equity $25,548,872 $20,598,917
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,
2002 2001 2002 2001
Revenues
Sales of Health and
Beauty Aid
Products - Net $11,391,258 $10,024,875 $34,763,488 $32,909,282
Other income 120,056 89,322 307,367 247,483
11,511,314 10,114,197 35,070,855 33,156,765
Costs and Expenses
Costs of sales 3,559,990 3,368,589 11,724,634 11,984,999
Selling, general and
administrative
expenses 4,039,125 3,515,497 11,640,576 10,416,917
Advertising, cooperative
and promotions 2,536,666 2,480,549 7,658,588 7,094,442
Research and development 184,203 238,498 412,264 578,718
Provision for doubtful
accounts 6,287 ( 25,982) ( 139,874) 88,691
Interest expense 8,688 11,715 25,923 62,916
10,334,959 9,588,866 31,322,111 30,226,683
Income before Provision
for Income Taxes 1,176,355 525,331 3,748,744 2,930,082
Provision for Income
Taxes 453,533 221,206 1,507,873 1,151,331
Net Income $ 722,822 $ 304,125 $ 2,240,871 $ 1,778,751
Earnings per Share
Basic $.10 $.04 $.32 $.26
Diluted $.10 $.04 $.30 $.24
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,
2002 2001 2002 2001
Net Income $ 722,822 $ 304,125 $2,240,871 $1,778,751
Other Comprehensive Income
Unrealized holding gains
(loss) on investments 46,326 3,248 37,877 38,083
Provision for Taxes 18,591 1,367 15,229 14,963
Other Comprehensive Income
- Net 27,735 1,881 22,648 23,120
Comprehensive Income $ 750,557 $ 306,006 $2,263,519 $1,801,871
Earnings Per Share:
Basic $.11 $.04 $.32 $.26
Diluted $.10 $.04 $.30 $.24
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,
2002 2001
Cash Flows from Operating Activities:
Net income $2,240,871 $1,778,751
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 275,175 289,201
Loss on sale of marketable securities 437 5,792
Decrease (increase) in deferred income
taxes 126,650 ( 2,284)
(Increase) decrease in accounts
receivable - Net ( 1,401,060) 753,929
Decrease in inventory 241,152 97,485
Decrease in prepaid expenses
and miscellaneous receivables 130,086 109,694
(Increase) in deferred advertising ( 944,111) ( 734,110)
Increase in accounts payable and
accrued liabilities 2,425,044 980,946
Increase in taxes payable 342,124 76,096
(Increase) in security deposits - ( 1,221)
Decrease in prepaid income
taxes and refunds due 220,286 687,756
Net Cash Provided by Operating Activities 3,656,654 4,042,035
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment ( 442,160) ( 24,292)
Acquisition of intangible assets ( 2,946) ( 24,029)
Proceeds of money due from officers 2,070 267
Purchase of marketable securities ( 4,997,568) ( 4,458,073)
Proceeds from sale and maturity of
investments 1,329,413 4,009,654
Net Cash (Used in) Investing Activities ( 4,111,191) ( 496,473)
Cash Flows from Financing Activities:
Payment on debt - ( 1,500,000)
Purchase of treasury stock ( 87,960) ( 70,973)
Repurchase of outstanding debentures ( 6,000) ( 23,000)
Net Cash (Used in) Financing Activities ( 93,960) ( 1,593,973)
Net (Decrease) Increase in Cash ( 548,497) 1,951,589
Cash at Beginning of Period 2,555,938 804,508
Cash at End of Period $2,007,441 $2,756,097
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,
2002 2001
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 33,628 $ 68,865
Income taxes 913,748 495,667
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, 2002 are not necessarily indicative of
the results that may be expected for the year ended November 30,
2002. 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, 2001.
NOTE 2 - ORGANIZATION AND DESCRIPTION OF BUSINESS
CCA Industries, Inc. ("CCA") was incorporated in the State of Dela
ware 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 manufactured and distributed
perfume products. In 1999, the Company adopted a formal plan to
discontinue the operations of the subsidiary. As of November 30,
2001, the Company had completed its plan of dissolution.
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"). The
minority interest in the discontinued subsidiary is no longer re
flected in the financial statements. All significant inter-company
accounts and transactions have been eliminated.
-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 classi
fied its investments as Available-for-Sale securities. Accordingly,
such investments are reported at fair market value, with the resul
tant 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.
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.
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 outstanding during the year. Diluted earnings per share is
computed on the basis of the average number of common shares out
standing 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 op-
tions. On March 30, 2001, the Company repriced all of the outstand-
ing stock options to $.50.
Revenue Recognition:
The Company recognizes net 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 Com-
pany, therefore, 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 included 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 $410,707 and $391,806 as of August
31, 2002 and November 30, 2001, 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 $1,605,771 and $1,873,027 for the nine months
ended August 31, 2002 and 2001, 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
2002 presentation.
-10-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
August 31, November 30,
2002 2001
Raw materials $3,209,418 $2,225,814
Finished goods 2,192,672 3,610,432
$5,402,090 $5,836,246
At August 31, 2002 and November 30, 2001, the Company had a reserve
for obsolescence of $859,712 and $1,052,716, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the following:
August 31, November 30,
2002 2001
Machinery and equipment $ 175,266 $ 168,421
Furniture and equipment 1,011,529 741,414
Transportation equipment 10,918 10,918
Tools, dies, and masters 607,655 550,825
Leasehold improvements 270,653 162,283
2,076,021 1,633,861
Less: Accumulated depreciation
and amortization 1,390,931 1,151,600
Property and Equipment - Net $ 685,090 $ 482,261
Depreciation expense for the nine months ended August 31, 2002 and
2001 amounted to $239,331 and $253,933, respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
August 31, November 30,
2002 2001
Patents and trademarks $753,202 $750,256
Less: Accumulated amortization 167,167 131,323
Intangible Assets - Net $586,035 $618,933
Amortization expense for the nine months ended August 31, 2002 and
2001 amounted to $35,844 and $35,268, 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 $944,111 is accord
ingly reflected in the balance sheet for the interim period. This
deferral is the result of the Company's $7,500,000 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
2002 2001
(In Millions) (In Millions)
Media advertising budget for the fiscal year $7.50 $6.50
Pro-rata portion for nine months $5.63 $4.88
Media advertising spent 6.40 5.44
Accrual (deferral) ($0.77) ($0.56)
Anticipated Co-op advertising commitments $4.00 $4.00
Pro-rata portion for nine months $3.00 $3.00
Co-op advertising spent 3.17 3.17
Accrual (deferral) ($0.17) ($0.17)
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,
2002 2001
(In Thousands) (In Thousands)
a) Media advertising $ 903 $ 424
b) Coop advertising 1,430 392
c) Accrued returns 814 301
d) Accrued bonuses 537 510
e) Vacation accrual * 254
$3,684 $1,881
* 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:
2002 2001
Interest income $256,047 $196,143
Dividend income 9,352 12,644
Miscellaneous 41,968 38,696
$307,367 $247,483
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,
2002 and November 30, 2001 were as follows:
August 31, November 30,
2002 2001
Current: COST MARKET COST MARKET
Corporate obligations $ 390,000 $ 393,761 $ - $ -
Mutual funds 167,646 92,508 159,805 107,015
Government obligations
(including mortgage
backed securities) 473,714 482,816 247,330 248,330
Total 1,031,360 969,085 407,135 355,345
Non-Current:
Corporate obligations 2,701,846 2,706,418 2,416,846 2,434,080
Government obli-
gations 4,455,367 4,487,575 2,311,273 2,294,058
Preferred stock 762,399 775,620 150,000 151,620
Other equity
investments 100,000 100,000 100,000 100,000
Total 8,019,612 8,069,613 4,978,119 4,979,758
Total $9,050,972 $9,038,698 $5,385,254 $5,335,103
-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, 2002 was $9,038,698 as compared to $5,335,103 at November 30, 2001.
The gross unrealized gains and losses were $82,517 and ($94,791) for August 31, 2002 and $35,542
and ($85,693) for November 30, 2001. The cost and market values of the investments at August 31,
2002 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 10/15/03 4.600% 250,000 $ 250,000 $ 251,063 $ 251,063
GMAC Smartnotes 10/15/03 4.750 325,000 325,000 326,879 326,879
GMAC Smartnotes 1/15/03 5.550 250,000 250,000 252,173 252,173
GMAC Smartnotes 2/15/03 5.750 140,000 140,000 141,588 141,588
GMAC Smartnotes 6/15/03 4.750 300,000 300,000 302,955 302,955
GMAC Smartnotes 7/15/03 4.650 200,000 200,000 201,760 201,760
GMAC Smartnotes 8/15/03 4.250 499,000 499,000 500,667 500,667
GMAC Smartnotes 5/15/04 4.250 250,000 250,000 248,108 248,108
GMAC Smartnotes 5/15/05 5.000 175,000 175,000 174,479 174,479
Household Finance Corp.
Internotes 5/15/04 4.250 250,000 250,000 247,810 247,810
International Business
Machines 9/22/03 5.370 100,000 102,040 102,872 102,872
Colgate-Palmolive 12/1/03 5.270 100,000 100,860 103,259 103,259
Ford Motor Credit 3/20/04 6.125 245,000 249,946 246,566 246,566
3,091,846 3,100,179 3,100,179
-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
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% 11,055 $ 10,493 $ 11,331 $ 11,331
FHLB 9/15/2003 5.125 255,000 266,200 263,925 263,925
FHLMC 6/27/06 3.500 200,000 200,000 200,038 200,038
US Treasury Bill 11/7/2002 1.660 75,000 74,517 74,765 74,765
US Treasury Note 11/15/2003 4.250 200,000 199,891 203,817 203,817
US Treasury Note 11/15/2003 4.250 250,000 250,169 259,404 259,404
FNMA 11/6/2009 4.250 250,000 250,000 252,350 252,350
FNMA 11/6/2009 4.250 500,000 500,000 504,700 504,700
FHLMC 2/27/12 4.000 225,000 225,000 225,169 225,169
FNMA 9/15/04 3.500 250,000 249,805 255,938 255,938
FHLMC 12/6/05 4.600 225,000 225,000 225,070 225,070
FNMA Global 10/15/06 4.375 200,000 199,559 208,250 208,250
FNMA 2/24/05 4.100 200,000 200,000 201,876 201,876
FNMA 5/20/05 3.500 200,000 200,000 200,746 200,746
FNMA 11/15/05 4.250 200,000 200,000 202,344 202,344
FNMA 5/16/06 4.000 200,000 200,000 200,044 200,044
FNMA 8/15/12 4.000 250,000 249,200 249,200 249,200
Tobacco Settlement Fin
Corp. N 6/1/2015 5.000 200,000 198,500 194,588 194,588
NJ EDA Trans Sublease RV
Lightrail 199A FSA 5/1/2004 5.000 300,000 317,444 316,593 316,593
Port Authority NY & NJ
Cons 88th SR BE 10/1/2004 4.500 225,000 238,789 237,427 237,427
Muniyield NJ Insd Frd Inc. 5,500 81,350 84,535 84,535
Muniholdings NJ Insd FD Inc. 5,900 79,896 84,547 84,547
Nuveen NJ Invt Quality Mun Fd 5,200 79,507 80,444 80,444
Nuveen NJ Invt Prem Inc Mun Fd 5,200 78,639 80,340 80,340
Van Kamp Amer Cap Inv Gr NJ 4,800 80,502 81,600 81,600
Blackcock NJ Municipal Inc. 5,500 73,820 71,350 71,350
4,929,081 4,970,391 4,970,391
-15-
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
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:
Merrill Lynch Trust 9/30/08 7.28% 6,000 $ 150,000 $ 152,520 $ 152,520
Tennessee Valley Auth Ser A 5/1/29 6.50 8,000 207,954 211,040 211,040
Tennessee Valley Auth Ser A 5/1/29 6.50 4,000 104,445 105,520 105,520
Corporate Backed Trust
Certificates For AIG
Sun America 5/17/07 6.70 6,000 150,000 153,600 153,600
Corporate Backed Trust
Certificates For Bristol
Myers Squibb 5/23/07 6.80 6,000 150,000 152,940 152,940
762,399 775,620 775,620
Other Equity Investments:
Aberdeen Asia Pacific
Income Fund 100,000 100,000 100,000
Dreyfus Premier Limited
Term High Income CL B 14,545.218 167,646 92,508 92,508
267,646 192,508 192,508
$9,050,972 $9,038,698 $9,038,698
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of CCA Industries. Inc.
We have reviewed the accompanying consolidated balance sheet of CCA Industries,
Inc. (the "Company") and its subsidiaries as of August 31, 2002, and the
related consolidated statements of income for the three months and nine months
ended August 31, 2002 and August 31, 2001, respectively, and the consolidated
statements of cash flows for the nine months ended August 31, 2002 and August
31, 2001. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We previously audited, in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of November
30, 2001, and the related consolidated statements of income, shareholders'
equity, and cash flows for the year then ended (not presented herein), and in
our report dated February 1, 2002, we express an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of November 30, 2001, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
Sheft Kahn & Company LLP
September 30, 2002
Jericho, NY
-17-
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the three month period ended August 31, 2002, the Company had revenues
of $11,511,314 and net income of $722,822 after a provision of taxes of
$453,533. This represents a 13.8% and 138.7% increase in revenue and net
income, respectively, compared to the prior year. Sales returns and allowances
have remained the same. Gross margins increased from 66.4% to 68.7%. Selling,
general and administrative (SG&A) expenses increased from $3.5 million to $4.0
million. In November 2001, in accordance with GAAP, the Company reclassified
certain advertising expenditures as a reduction of sales rather than an adver-
tising expense. As a result, last year's quarter and year-to-date ending
August 31, 2001 have been reclassified to reflect the adoption of EITF 90-16
GAAP standard.
For the three month period ending August 31, 2002, advertising, cooperative
and promotional allowances increased to $2.54 million from $2.48 million for
the quarter ended August 31, 2001. Because sales increased, advertising
expenditures decreased to 22.3% of sales compared to 24.7% last year. Since
both co-op advertising and promotional commitments have a material effect on
the Company's operation, the Company attempts to anticipate its advertising
and promotional 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 advertising and related costs
proportionately over the interim periods based on its total expected per its
various advertising programs. Consequently, a deferral of $774,000 media
expense and $170,000 for co-op is reflected in the balance sheet. This
deferral will be fully expensed by year-end. The deferral is the result of
the Company's current $7.5 million media budget and $4.0 million co-op for the
entire year, which is predicated on substantially lower spending in the third
and fourth quarters. Specifically for the nine months period, the Company
spent approximately $6.4 million for media advertising and $3.2 million for
co-op advertising.
For the nine month period ended August 31, 2002, the Company had revenue of
$35,070,855 and a net income of $2,240,871 after a provision of income taxes of
$1,507,873. In the prior year's period, the Company had revenues of
$33,156,765 and net income of $1,778,751 after a provision for income taxes
of $1,151,331. This represents a revenue increase of 5.8% and a net income
increase of 26%. Gross margins increased from 63.6% last year to 66.3% as a
result of more efficient cost controls.
Advertising, co-op and promotional expenditures were $7,658,588 as compared
to $7,094,442 for the prior nine-month period . Advertising expenditures
were 22% of sales as compared to 21.6% last year. Research and development
expenditures were $412,264. Research and development for the prior year were
$578,718.
-18-
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
The Company's financial position as of August 31, 2002 consists of assets
of $25,548,872 and liabilities of $7,433,446. Current assets are $16,095,645
and current liabilities are $6,930,790, a working capital ratio of 2.3:1. This
Company's actual cash position decreased $548,497 predominately because the
Company used excess cash from operations to invest in $3.7 million in addi-
tional marketable securities and treasury stock. The marketable securities
consist of $969,085 reflected as current assets and $8,069,613 reflected as
other assets. Other factors that reduced cash were seasonal factors, such as
the increase in deferred advertising for which the financial statements
reflect a deferral of $944,000 pursuant to provisions of APB Interim Financial
Reporting Regulations, acquisition of equipment of $442,000, and an increase
in accounts receivable of $1,401,000. The increase in accounts receivable is
predominately due to the large sales increase from the third quarter. Factors
that increased cash flow include an increase in accounts payable and taxes of
$2,894,000 and a decrease in prepaid expenses and inventory of $592,000 and
income net of noncash items of $2,516,000.
-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,
2002 2001 2002 2001
Item 6.
Weighted average shares
outstanding - Basic 7,018,192 6,847,006 7,036,369 6,877,678
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 566,851 601,497 525,643 509,425
Weighted average shares
outstanding - Diluted 7,585,043 7,448,503 7,562,012 7,387,103
Net income $ 722,822 $ 304,125 $2,240,871 $1,778,751
Per share amount
Basic $.10 $.04 $.32 $.26
Diluted $.10 $.04 $.30 $.24
-20-
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
Additional Exhibits
Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to Title 18, United States Code, Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
All other 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, 2002.
-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.
October 11, 2002
CCA INDUSTRIES, INC.
By:
David Edell, President
By:
Ira W. Berman, Secretary
-22-
CERTIFICATIONS
I, David Edell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CCA Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
October 11, 2002
/s/
---------------------------------
David Edell
Chief Executive Officer
I, John Bingman, certify that;
1. I have reviewed this quarterly report on Form 10-Q of CCA Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
October 11, 2002
/s/
-------------------------------------
John Bingman
Treasurer - Chief Financial Officer
-23-
I, Ira Berman, certify that;
1. I have reviewed this quarterly report on Form 10-Q of CCA Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
October 11, 2002
/s/
_________________________
Ira Berman
Chairman and Secretary
-24-