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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 February 28, 2003
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 - $6,440,523 shares of as February 28, 2003
Class A Common Stock, $.01 Par Value - $973,230 shares as of
February 28, 2003
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
February 28, 2003 and November 30, 2002 1-2
Consolidated Statements of Operations
for the three months ended February 28, 2003
and 2002 3
Consolidated Statements of Comprehensive Income
for the three months ended February 28, 2003
and 2002 4
Consolidated Statements of Cash Flows for
the three months ended February 28, 2003
and 2002 5
Notes to Consolidated Financial Statements 6-16
Management Discussion and Analysis of
Results of Operations and Financial
Condition 17-18
PART II OTHER INFORMATION 19-20
SIGNATURES 21
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 22-23
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
February 28, November 30,
2003 2002
Current Assets
Cash and cash equivalents $ 949,601 $ 1,585,647
Short-term investments and marketable
securities 3,228,349 3,479,544
Accounts receivable, net of allowances of
$1,286,169 and $1,222,408, respectively 7,789,367 6,265,955
Inventories 5,177,413 3,743,131
Prepaid expenses and sundry receivables 607,394 363,457
Deferred income taxes 1,313,675 1,287,568
Prepaid income taxes and refunds due 1,703 1,703
Deferred advertising 1,075,178 -
Total Current Assets 20,142,680 16,727,005
Property and Equipment, net of accumulated
depreciation and amortization 764,192 720,739
Intangible Assets, net of accumulated
amortization 566,074 577,414
Other Assets
Marketable securities 7,288,534 6,723,518
Deferred income taxes 2,062 -
Other 56,863 56,388
Total Other Assets 7 347,459 6,779,906
Total Assets $28,820,405 $24,805,064
See Notes Consolidated to Financial Statements.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
February 28, November 30,
2003 2002
Current Liabilities
Accounts payable and accrued liabilities $ 8,701,983 $ 5,284,109
Income taxes payable 93,849 178,690
Total Current Liabilities 8,795,832 5,462,799
Subordinated Debentures 497,656 501,656
Deferred Income Taxes - 5,186
Shareholders' Equity
Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued
Common stock, $.01 par; authorized
15,000,000 shares; 6,440,523 shares
issued and outstanding 64,405 64,405
Class A common stock, $.01 par; authorized
5,000,000 shares; 973,230 shares issued
and outstanding 9,732 9,732
Additional paid-in capital 3,832,796 3,832,796
Retained earnings 15,963,041 15,389,415
Unrealized gains (losses) on marketable
securities 15,649 ( 107,990)
19,885,623 19,188,358
Less: Treasury Stock (274,055 shares at
February 28, 2003 and 271,155
shares at November 30, 2002,
respectively) 358,706 352,935
Total Shareholders' Equity 19,526,917 18,835,423
Total Liabilities and Shareholders' Equity $28,820,405 $24,805,064
See Notes to Consolidated Financial Statements.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
February 28,
2003 2002
Revenues
Sales of health and beauty aid
products - Net $12,362,785 $10,158,386
Other income 152,397 88,808
12,515,182 10,247,194
Costs and Expenses
Costs of sales 4,446,827 3,764,904
Selling, general and administrative
expenses 4,109,805 3,736,324
Advertising, cooperative and promotions 2,722,570 2,263,526
Research and development 229,696 89,802
Provision for doubtful accounts 37,589 ( 104,360)
Interest expense 8,363 8,915
11,554,850 9,759,111
Income before Provision for Income
Taxes 960,332 488,083
Provision for Income Taxes 386,706 188,020
Net Income $ 573,626 $ 300,063
Earnings per Share:
Basic $.08 $.04
Diluted $.08 $.04
See Notes to Consolidated Financial Statements.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
February 28,
2003 2002
Net Income $573,626 $300,063
Other Comprehensive Income
Unrealized holding gains (loss)
on investments 123,639 ( 12,015)
Provision (Benefit) for Taxes 49,787 ( 4,628)
Other Comprehensive (Loss) Income
- Net 73,852 ( 7,387)
Comprehensive Income $647,478 $292,676
Earnings Per Share:
Basic $.09 $.04
Diluted $.09 $.04
See Notes to Consolidated Financial Statements.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
February 28,
2003 2002
Cash Flows from Operating Activities:
Net income $ 573,626 $ 300,063
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 92,491 93,946
(Gain) on sale of marketable securities
and repurchase of debentures ( 5,220) ( 1,025)
(Increase) decrease in deferred income
taxes ( 33,355) 64,456
(Increase) in accounts receivable ( 1,523,412) ( 1,192,871)
(Increase) in inventory ( 1,434,282) ( 72,089)
(Increase) in prepaid expenses and
miscellaneous receivables ( 243,937) ( 89,445)
(Increase) in deferred advertising ( 1,075,178) ( 777,096)
(Increase) in other assets ( 476) -
Increase in accounts payable
and accrued liabilities 3,417,875 1,721,127
(Increase) in prepaid income taxes - ( 103,670)
(Decrease) in taxes payable ( 84,841) ( 9,366)
Net Cash (Used in) Operating Activities ( 316,709) ( 65,970)
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment( 123,943) ( 48,258)
Acquisition of intangible assets ( 661) ( 2,285)
Proceeds of money due from officers - 607
Purchase of marketable securities ( 1,530,182) ( 227,573)
Proceeds from sale and maturity of
investments 1,341,220 53,067
Net Cash (Used in) Investing Activities ( 313,566) ( 224,442)
Cash Flows from Financing Activities:
Purchase of treasury stock ( 5,771) -
Net (Decrease) in Cash ( 636,046) ( 290,412)
Cash and Cash Equivalents at Beginning
of Period 1,585,647 2,555,938
Cash and Cash Equivalents at End
of Period $ 949,601 $2,265,526
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 15,928 $ 16,575
Income taxes 491,887 324,770
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 financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Opera-
ting results for the three month period ended February 28, 2003 are not
necessarily indicative of the results that may be expected for the year
ended November 30, 2003. For further information, refer to the consoli-
dated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended November 30,
2002.
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, CCA Online Industries,
Inc., and CCA Industries Canada (2003) Inc. (incorporated February 25,
2003)], all of which are currently inactive.
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").
-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 state
ments. 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 invest
ments 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.
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.
-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 dis-
poses 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 5-7 Years
Furniture and fixtures 3-10 Years
Tools, dies and masters 3 Years
Transportation equipment 5 Years
Leasehold improvements 4-10 Years or life
of lease, whichever is
shorter
Intangible Assets:
Intangible assets are stated at cost. Patents and trademarks are amor-
tized on the straight-line method over a period of 17 years.
Financial Instruments:
The carrying value of assets and liabilities considered financial instru-
ments 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.
-8-
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 weighted 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 upon shipment of merchandise. Net sales
are comprised of gross sales less expected returns, trade discounts,
customer allowances and various sales incentives. Although no legal right
of return exists between the customer and the Company, it is an industry-
wide practice to accept returns from customers. The Company, therefore,
records a reserve for returns equal to its gross profit on its historical
percentage of returns on its last five months sales.
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 allow-
ance for doubtful accounts of $849,520 and $695,824 as of February 28,
2003 and November 30, 2002, 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 $775,198 and $486,853 for the three months ended
February 28, 2003 and 2002, 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 2003
presentation.
-9-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
February 28, November 30,
2003 2002
Raw materials $3,839,970 $3,031,400
Finished goods 1,337,443 711,731
$5,177,413 $3,743,131
At February 28, 2003 and November 30, 2002, the Company had a
reserve for obsolescence of $1,014,175 and $976,788, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the following:
February 28, November 30,
2003 2002
Machinery and equipment $ 102,393 $ 97,003
Furniture and equipment 601,000 552,615
Transportation equipment 10,918 10,918
Tools, dies, and masters 274,326 213,188
Leasehold improvements 231,676 222,646
1,220,313 1,096,370
Less: Accumulated depreciation
and amortization 456,121 375,631
Property and Equipment - Net $ 764,192 $ 720,739
Depreciation expense for the three months ended February 28, 2003 and
2002 amounted to $80,490 and $82,003, respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
February 28, November 30,
2003 2002
Patents and trademarks $757,209 $756,548
Less: Accumulated amortization 191,135 179,134
Intangible Assets - Net $566,074 $577,414
Amortization expense for the three months ended February 28, 2003 and
2002 amounted to $12,001 and $11,943, respectively.
-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 proportionately over the interim
periods based on its total expected costs per its various advertising
programs. Consequently a deferral of $1,075,178 is accordingly reflected
in the balance sheet for the interim period. This deferral is the result of
the Company's media and co-op budget for the year which contemplates
lower spending in the 4th quarter than in the other three quarters.
The table below sets forth the calculation:
February February
2003 2002
(In Millions) (In Millions)
Media advertising budget for the fiscal year $8.00 $7.00
Pro-rata portion for three months $2.00 $1.75
Media advertising spent 2.01 1.38
Accrual (deferral) ($0.01) $ .37
Anticipated Co-op advertising commitments $5.00 $4.00
Pro-rata portion for three months $1.25 $1.00
Co-op advertising spent 2.31 1.78
Accrual (deferral) ($1.06) ($0.78)
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:
February 28, November 30,
2003 2002
(In Thousands) (In Thousands)
a) Vacation accrual $ * $ 320
a) Media advertising 1,987 *
b) Coop advertising 1,661 804
c) Accrued returns 831 878
d) Accrued bonuses * 467
$4,479 $2,469
* under 5%
All other liabilities were for trade payables or individually did not exceed
5% of total current liabilities.
-11-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - OTHER INCOME
Other income consists of the following at February 28:
2003 2002
Interest and dividend income $131,157 $71,709
Royalty income 15,745 16,051
Miscellaneous 5,495 1,048
$152,397 $88,808
NOTE 10 - NOTES PAYABLE AND SUBORDINATED DEBENTURES
The Company has an available line of credit of $7,000,000. Interest is
calculated on the outstanding balance at prime minus 1% or Libor plus
150 basis points. The line of credit is collateralized by all the Company's
assets. The Company was not utilizing their available credit line at Febru
ary 28, 2003 or November 30, 2002.
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 - COMMITMENTS AND CONTINGENCIES
Litigation
The Company has been named as a defendant in 10 lawsuits alleging that
the plaintiffs were injured as a result of their purchasing and ingesting a
diet suppressant containing phenylpropanolamine (PPA), which the Com
pany utilized as its active ingredient in its products prior to November
2000. The lawsuits brought against the Company are for unspecified
amount of compensatory and exemplary damages.
The Company is insured for three of the 10 cases. CCA has not renewed
the product liability policy covering possible additional lawsuits that might
commence against the Company in connection with PPA. Outside counsel
has advised CCA that as a general matter the PPA cases are defensible,
and the Company plans to vigorously defend its positions. However, there
can be no assurances the current PPA litigations will not have a material
adverse effect on the Company's operations.
Dividends
In January 2003, the Company announced its first dividend of $0.12 per
share payable to all holders of the Company's common stock, $0.06
payable to shareholders of record on April 1, 2003 and $0.06 payable to
shareholders of record on November 1, 2003.
-12-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - 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 February 28, 2003 and November 30, 2002
were as follows:
February 28, 2003 November 30, 2002
Current: COST MARKET COST MARKET
Corporate obligations $ 1,776,900 $ 1,793,734 $2,066,040 $ 2,071,603
Government obligations
(including mortgage
backed securities) 1,330,345 1,335,994 1,330,345 1,314,604
Mutual Funds 171,999 98,621 169,589 93,337
Total 3,279,244 3,228,349 3,565,974 3,479,544
Non-Current:
Corporate obligations 1,624,946 1,632,871 1,025,806 1,016,715
Government obli-
gations 4,667,549 4,701,515 4,867,627 4,848,293
Preferred stock 829,495 854,148 751,645 758,510
Other equity invest-
ments 100,000 100,000 100,000 100,000
Total 7,221,990 7,288,534 6,745,078 6,723,518
Total $10,501,234 $10,516,883 $10,311,052 $10,203,062
-13-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 -SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at February 28, 2003 was $10,516,883 as compared to $10,203,062 at November 30,
2002. The gross unrealized gains and losses were $120,420 and ($104,771) for February 28, 2003 and
$58,411 and ($166,401) for November 30, 2002, respectively. The cost and market values of the
investments at February 28, 2003 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 $ 253,018 $ 253,018
GMAC Smartnotes 10/15/03 4.750 325,000 325,000 326,333 326,333
GMAC Smartnotes 6/15/03 4.750 300,000 300,000 302,010 302,010
GMAC Smartnotes 7/15/03 4.650 200,000 200,000 201,614 201,614
GMAC Smartnotes 8/15/03 4.250 499,000 499,000 502,902 502,902
GMAC Smartnotes 5/15/04 4.250 250,000 250,000 253,080 253,080
GMAC Smartnotes 5/15/05 5.000 175,000 175,000 177,375 177,375
GMAC Smartnotes 8/15/04 2.650 250,000 250,000 247,183 247,183
Household Finance Corp.
Internotes 5/15/04 4.250 250,000 250,000 255,370 255,370
International Business
Machines 9/22/03 5.370 100,000 102,040 102,157 102,157
Colgate-Palmolive 12/1/03 5.270 100,000 100,860 102,647 102,647
Ford Motor Credit 3/20/04 6.125 245,000 249,946 250,535 250,535
CIT Group Inc. 1/15/06 4.000 200,000 200,000 199,860 199,860
GE Capital Group Internotes 2/15/06 2.450 250,000 250,000 249,468 249,468
3,401,846 3,426,605 3,426,605
-14-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 -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:
FHLB 9/15/03 5.125 255,000 266,200 260,301 260,301
FHLMC 6/27/06 3.500 200,000 200,000 201,188 201,188
FHLMC 11/15/17 4.250 200,000 200,000 199,000 199,000
US Treasury Note 11/15/03 4.250 200,000 199,891 202,208 202,208
US Treasury Note 11/15/03 4.250 250,000 250,169 257,355 257,355
US Treasury Note 11/15/07 3.000 250,000 249,922 254,387 254,387
FHLMC 2/27/12 4.000 225,000 225,000 229,430 229,430
FNMA 9/15/04 3.500 250,000 249,805 257,265 257,265
FHLMC 10/15/09 3.000 250,000 250,000 250,313 250,313
FNMA Global 10/15/06 4.375 200,000 199,559 213,562 213,562
FNMA 4/28/06 3.080 250,000 250,000 250,548 250,548
FNMA 11/15/05 4.250 200,000 200,000 200,974 200,974
FNMA 5/16/06 4.000 200,000 200,000 200,876 200,876
FNMA 8/15/12 4.000 250,000 250,000 255,158 255,158
FHLMC 2/7/05 2.375 250,000 250,000 250,470 250,470
FHLMC 1/30/06 2.000 250,000 250,000 250,235 250,235
Federal Home Loan Bank 8/8/06 3.375 250,000 250,000 250,860 250,860
Tennessee Valley Authority
Power Bonds 5/1/29 6.500 26,000 688,530 694,200 694,200
Tobacco Settlement Fin
Corp. N 6/1/15 5.000 200,000 198,500 193,152 193,152
NJ EDA Trans Sublease RV
Lightrail 199A FSA 5/1/04 5.000 300,000 317,444 313,533 313,533
Port Authority NY & NJ
Cons 88th SR BE 10/1/04 4.500 225,000 238,789 236,376 236,376
CLOSED END MUNICIPAL BONDS/MUTUAL FUNDS:
Muniyield New Jersey Insd Frd Inc. 5,500 81,350 82,885 82,885
Muniholdings New Jersey Insd FD Inc. 5,900 79,896 83,603 83,603
Nuveen New Jersey Invt Quality Municipal Fund 5,200 79,507 80,392 80,392
Nuveen New Jersey Prem Inc Municipal Fund 5,200 78,639 80,860 80,860
Van Kamp Amer Cap Inv Gr NJ 4,800 80,502 83,520 83,520
Blackrock New Jersey Municipal Inc. 5,000 73,820 69,300 69,300
Eaton Vance New Jersey Municipal Inc. 4,600 70,481 68,724 68,724
Nuveen New Jersey Dividend Advantage 4,700 69,890 66,834 66,834
5,997,894 6,037,509 6,037,509
-15-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 -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:
Public Income NTS
General Electric Cap Corp. 11/15/32 6.10% 14,800 $ 379,495 $ 380,508 $ 380,508
Merrill Lynch Trust 9/30/08 7.28 6,000 150,000 160,140 160,140
Corporate Backed Trust
Certificates For AIG
Sun America 5/17/07 6.70 6,000 150,000 156,900 156,900
Corporate Backed Trust
Certificates For Bristol
Myers Squibb 5/23/07 6.80 6,000 150,000 156,600 156,600
829,495 854,148 854,148
Other Equity Investments:
Aberdeen Asia Pacific
Income Fund 100,000 100,000 100,000
Dreyfus Premier Limited
Term High Income CL B 14,975,341 171,999 98,621 98,621
271,999 198,621 198,621
$10,501,234 $10,516,883 $10,516,883
-16-
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the three month period ending February 28, 2003, the
Company had revenues of $12,515,182 and net income of $573,626
after a provision for taxes of $386,706. This represents a 22%
and 91% increase in revenues and net income, respectively.
Sales returns and allowances have decreased from 8.05% to 5.73%.
Gross margins increased from 62.94% to 64.03%. Selling, general
and administrative (SGA) expenses increased from $3,736,324 to
$4,109,805. The Company has increased its staff as a result of
its projected increased sales volume anticipated for fiscal
2003. For the three month period ended February 28, 2003,
advertising, co-operative and promotional allowances increased
to $2,722,570 from $2,263,526 for the quarter ended February 28,
2002. In addition, higher sales increased commissions and
freight out for the current period.
Both advertising and co-op commitments have a material effect
on the Company's operations. The Company attempts to anticipate
its advertising and promotional commitments as a percentage of
gross sales in order to control its effect on 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 expenses for its
various advertising programs. Consequently, a deferral of
$1,065,871 for co-op advertising expenses is reflected on the
quarterly balance sheet. This deferral will be fully expensed
by year-end. The deferral is primarily a result of the
Company's current $5,000,000 co-op advertising budget, which is
predicated on substantially lower spending in the third and
fourth quarters. Company commitments were $2,009,307 for its
media advertising for the current quarter of which $9,307 were
deferred.
Co-op advertising expense is accrued as budgeted in quarterly
reports. The entire budgeted accrual has never been fully used
by the Company's accounts as a result of merchandising changes
and cancelled promotions. This year the Company estimated a
$5,000,000 budget in co-op advertising. Every year there have
always been co-op-advertising accruals from the previous fiscal
year, which ultimately are not utilized by the Company's
customers. These previously accrued expenditures are credited
against the subsequent year's co-op budget based upon the aging
of the non-utilized co-op expenses.
For the period ended February 28, 2003, there was
approximately $1,000,000 of unclaimed co-op expenses accrued
from the prior year. Based upon the Company's experience, a
portion of the accrual, $250,000, was offset against the first
quarter's co-op expenses. The balance (if any) will be offset
over the rest of the fiscal year, as it becomes evident that
they will not be utilized. This procedure is consistent with
prior years' methodology with regard to the accrued co-op
expenses.
-17-
The Company's financial position as at February 28, 2003
consists of current assets of $20,142,680 and current
liabilities of $8,795,832, or a current ratio of 2.3:1. In
addition, shareholders' equity increased from $18,835,423 to
$19,526,917 primarily due to net income earned during the
current quarter.
The Company's cash position decreased primarily due to the
purchase of fixed assets and marketable securities ($314,000)
and the net effect of cash used in operations ($317,000). The
increase in accounts receivable is predominately due to large
sales increases in the first quarter, and accounts payable
increased primarily due to accruals for advertising. Research
and development expenses were $229,696.
-18-
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 information pertaining to Part II is omitted pursuant to the
instructions pertaining to that part.
The Company did not file any reports on Form 8-K during the three months
ended February 28, 2003.
-19-
PART II, ITEM 6. (Continued) EXHIBIT 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended
February 28,
2003 2002
Item 6.
Weighted average shares outstanding - Basic 7,140,537 7,045,557
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 475,893 53,691
Weighted average shares outstanding -
Diluted 7,616,430 7,579,248
Net income $573,626 $300,063
Per share amount
Basic $.08 $.04
Diluted $.08 $.04
-20-
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 under-
signed, thereunto duly authorized.
April 7, 2003
CCA INDUSTRIES, INC.
By:
David Edell, President
By:
Ira W. Berman, Secretary
-21-
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 infor-
mation 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.
April 7, 2003
/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 infor-
mation 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.
April 7, 2003
/s/
-------------------------------
John Bingman
Treasurer - Chief Financial Officer
-22-
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 infor-
mation 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.
April 7, 2003
/s/
-----------------------------
Ira Berman
Chairman and Secretary
-23-