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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 29, 2004
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
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 Regis-
trant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule12b-2 of the Exchange Act). Yes______ No X
Common Stock, $.01 Par Value - 6,356,261 shares of as February 29, 2004
Class A Common Stock, $.01 Par Value - 958,230 shares as of
February 29, 2004
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Item1. Financial Statements:
Consolidated Balance Sheets as of
February 29, 2004 and November 30, 2003 1-2
Consolidated Statements of Operations
for the three months ended February 29, 2004
and February 28, 2003 3
Consolidated Statements of Comprehensive Income
for the three months ended February 29, 2004
and February 28, 2003 4
Consolidated Statements of Cash Flows for
the three months ended February 29, 2004
and February 28, 2003 5
Notes to Consolidated Financial Statements 6-18
Item 2. Management Discussion and Analysis of
Results of Operations and Financial
Condition 19-20
Item 3. Quantitative and Qualitative Disclosures about
Mark Risk 20
Item 4. Controls and Procedures 20
PART II OTHER INFORMATION 21
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 22
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
February 29, November 30,
2004 2003
(Unaudited)
Current Assets
Cash and cash equivalents $ 1,814,765 $ 1,206,787
Short-term investments and marketable
securities 2,592,525 2,632,448
Accounts receivable, net of allowances of
$950,737 and $895,723, respectively 8,680,847 6,604,982
Inventories 5,723,142 5,312,699
Prepaid expenses and sundry receivables 557,503 590,850
Deferred income taxes 959,889 963,566
Prepaid income taxes and refunds due 264,534 236,620
Deferred advertising 3,722,909 -
Total Current Assets 24,316,114 17,547,952
Property and Equipment, net of accumulated
depreciation and amortization 680,971 728,522
Intangible Assets, net of accumulated
amortization 520,167 532,193
Other Assets
Marketable securities 10,716,491 10,991,411
Other 37,888 39,138
Total Other Assets 10,754,379 11,030,549
Total Assets $36,271,631 $29,839,216
See Notes Consolidated to Financial Statements.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
February 29, November 30,
2004 2003
(Unaudited)
Current Liabilities
Accounts payable and accrued liabilities $11,425,162 $ 5,603,150
Dividends payable - 379,117
Total Current Liabilities 11,425,162 5,982,267
Subordinated Debentures 497,656 497,656
Deferred Income Taxes 9,406 14,753
Shareholders' Equity
Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued
Common stock, $.01 par; authorized
15,000,000 shares; 6,630,316 and
6,592,669 shares issued, respectively 66,303 65,926
Class A common stock, $.01 par; authorized
5,000,000 shares; 958,230 shares issued
and outstanding 9,582 9,582
Additional paid-in capital 3,831,048 3,831,425
Retained earnings 20,727,683 19,891,541
Unrealized gains (losses) on marketable
securities 63,497 ( 95,228)
24,698,113 23,703,246
Less: Treasury Stock (274,055 shares at
February 29, 2004 and
November 30, 2003, respectively) 358,706 358,706
Total Shareholders' Equity 24,339,407 23,344,540
Total Liabilities and Shareholders' Equity $36,271,631 $29,839,216
See Notes to Consolidated Financial Statements.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
February 29, February 28,
2004 2003
Revenues
Sales of health and beauty aid
products - Net $12,929,465 $12,362,785
Other income 158,023 152,397
13,087,488 12,515,182
Costs and Expenses
Costs of sales 4,849,247 4,446,827
Selling, general and administrative
expenses 3,804,153 4,109,805
Advertising, cooperative and promotions 2,824,306 2,722,570
Research and development 233,846 229,696
Provision for doubtful accounts 9,460 37,589
Interest expense 7,923 8,363
11,728,935 11,554,850
Income before Provision for Income
Taxes 1,358,553 960,332
Provision for Income Taxes 522,411 386,706
Net Income $ 836,142 $ 573,626
Earnings per Share:
Basic $.11 $.08
Diluted $.11 $.08
See Notes to Consolidated Financial Statements.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
February 29, February 28,
2004 2003
Net Income $836,142 $573,626
Other Comprehensive Income
Unrealized holding gains
on investments 158,725 123,639
Provision for Taxes 61,035 49,787
Other Comprehensive Income - Net 97,690 73,852
Comprehensive Income $933,832 $647,478
Earnings Per Share:
Basic $.13 $.09
Diluted $.12 $.09
See Notes to Consolidated Financial Statements.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
February 29, February 28,
2004 2003
Cash Flows from Operating Activities:
Net income $ 836,142 $ 573,626
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 82,991 92,491
(Gain) on sale of marketable securities
and repurchase of debentures ( 1,081) ( 5,220)
(Increase) in deferred income taxes ( 11,076) ( 33,355)
(Increase) in accounts receivable ( 2,075,865) ( 1,523,412)
(Increase) in inventory ( 410,443) ( 1,434,282)
Decrease (increase) in prepaid expenses
and miscellaneous receivables 33,347 ( 243,937)
(Increase) in deferred advertising ( 3,722,909) ( 1,075,178)
Decrease (increase) in other assets 1,250 ( 476)
Increase in accounts payable
and accrued liabilities 5,822,012 3,417,875
(Increase) in prepaid income taxes ( 18,508) -
(Decrease) in taxes payable - ( 84,841)
(Decrease) in dividends payable ( 379,117) -
Net Cash Provided by (Used in)
Operating Activities 156,743 ( 316,709)
Cash Flows from Investing Activities:
Acquisition of property, plant and
equipment ( 23,414) ( 123,943)
Acquisition of intangible assets - ( 661)
Purchase of marketable securities ( 652,292) ( 1,530,182)
Proceeds from sale and maturity of
investments 1,126,941 1,341,220
Net Cash Provided by (Used in)
Investing Activities 451,235 ( 313,566)
Cash Flows from Financing Activities:
Purchase of treasury stock - ( 5,771)
Net Increase (Decrease) in Cash 607,978 ( 636,046)
Cash and Cash Equivalents at Beginning
of Period 1,206,787 1,585,647
Cash and Cash Equivalents at End
of Period $1,814,765 $ 949,601
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 15,388 $ 15,928
Income taxes 552,200 491,887
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. Operating results for the three
month period ended February 29, 2004 are not necessarily indicative of the
results that may be expected for the year ended November 30, 2004. 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, 2003.
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., 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
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
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
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 5-7 Years
Furniture and fixtures 3-10 Years
Tools, dies and masters 3 Years
Transportation equipment 5 Years
Leasehold improvements Remaining life of the lease
(ranging from 1-9 years)
Intangible Assets:
Intangible assets are stated at cost. Patents and trademarks are amortized
on the straight-line method over a period of 15-17 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.
-8-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share:
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-con
verted" 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 consist of trade receivables recorded at original
invoice amount, less an estimated allowance for uncollectible accounts.
Trade credit is generally extended on a short-term basis; thus trade
receivables do not bear interest, although a finance charge may be
applied to receivables that are past due. Trade receivables are periodically
evaluated for collectibility based on past credit history with custom
ers and their current financial condition. Changes in the estimated
collectibility of trade receivables are recorded in the results of operations
for the period in which the estimate is revised. Trade receivables that are
deemed uncollectible are offset against the allowance for uncollectible
accounts. The Company generally does not require collateral for trade
receivables.
Accounts receivable with credit balances have been included as a current
liability in "Accounts payable and accrued liabilities" in the accompanying
balance sheet.
Accounts receivable are presented net of an allowance for doubtful
accounts of $557,941 and $549,851 as of February 29, 2004 and
November 30, 2003, 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 $486,036 and $775,198 for the three months ended
February 29, 2004 and 2003, 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 2004
presentation.
-9-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
February 29, November 30,
2004 2003
Raw materials $3,585,842 $3,746,522
Finished goods 2,137,300 1,566,177
$5,723,142 $5,312,699
At February 29, 2004 and November 30, 2003, the Company had a
reserve for obsolescence of $1,162,135 and $1,153,612, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the following:
February 29, November 30,
2004 2003
Machinery and equipment $ 105,478 $ 105,478
Furniture and equipment 679,257 676,494
Transportation equipment 10,918 10,918
Tools, dies, and masters 368,211 347,560
Leasehold improvements 277,366 277,366
1,441,230 1,417,816
Less: Accumulated depreciation
and amortization 760,259 689,294
Property and Equipment - Net $ 680,971 $ 728,522
Depreciation expense for the three months ended February 29, 2004 and
2003 amounted to $70,965 and $80,490, respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
February 29, November 30,
2004 2003
Patents and trademarks $759,394 $759,394
Less: Accumulated amortization 239,227 227,201
Intangible Assets - Net $520,167 $532,193
Amortization expense for the three months ended February 29, 2004 and
2003 amounted to $12,026 and $12,001, respectively. Estimated
amortization expense for each quarter of the ensuing five years through
February 28, 2009 is $12,000.
-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 $3,722,909 is accordingly
reflected in the balance sheet for the interim period. This deferral is the
result of the Company's $9 million media budget and $5.5 million 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
2004 2003
(In Millions) (In Millions)
Media advertising budget for the fiscal year $9.00 $8.00
Pro-rata portion for three months $2.25 $2.00
Media advertising spent 4.48 2.01
Accrual (deferral) ($2.23) ($0.01)
Anticipated Co-op advertising commitments $5.50 $5.00
Pro-rata portion for three months $1.38 $1.25
Co-op advertising spent 2.87 2.31
Accrual (deferral) ($1.49) ($1.06)
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 29, November 30,
2004 2003
(In Thousands) (In Thousands)
a) Media advertising $4,404 $ *
b) Coop advertising 1,826 607
c) Accrued returns 808 787
d) Accrued bonuses * 499
$7,038 $1,893
* 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:
February 29, February 28,
2004 2003
Interest and dividend income $137,066 $131,157
Royalty income 17,933 15,745
Miscellaneous 3,024 5,495
$158,023 $152,397
NOTE 10 - NOTES PAYABLE AND SUBORDINATED DEBENTURES
The Company has an available line of credit of $10,000,000. Interest is
calculated at the Company's option, either on the outstanding balance at
prime rate minus 1% or Libor plus 150 basis points. The line of credit is
unsecured and the Company must adhere to certain financial covenants
pertaining to net worth and debt coverage. The Company was not
utilizing their available credit line at February 29, 2004 or November 30,
2003.
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 12 lawsuits alleging that
the plaintiffs were injured as a result of their purchasing and ingesting our
diet suppressant containing phenylpropanolamine (PPA), which the
Company 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. Eight of the suits
have been dismissed with prejudice. An additional suit is in the process
of being dismissed. Outside counsel for the Company believes that the
three PPA cases still pending against the Company are defensible. Of the
Company's three pending suits, one is insured by the Company's liability
carrier.
Dividends
CCA declared a dividend of $0.14 per share payable to all holders of the
Company's common stock, $0.07 to shareholders of record on May 1,
2004 payable on June 1, 2004 and $0.07 to shareholders of record on
November 1, 2004, payable on November 30, 2004.
NOTE 12 - PENSION PLANS
The Company has adopted a 401(K) Profit Sharing Plan that covers union
and non-union employees with over one year of service and attained Age
21. Employees may make salary reduction contributions up to twenty-
five percent of compensation not to exceed the federal government limits.
-12-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - 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 29, 2004 and November 30, 2003
were as follows:
February 29, 2004 November 30, 2003
Current: COST MARKET COST MARKET
Corporate
obligations $ 750,000 $ 752,703 $ 850,860 $ 854,466
Government
obligations
(including mortgage
backed securities) 1,260,340 1,279,837 1,260,340 1,248,731
Common stock 304,379 323,840 304,379 295,538
Mutual funds 181,612 122,545 179,320 118,963
Other equity
investments 111,750 113,600 111,750 114,750
Total 2,608,081 2,592,525 2,706,649 2,632,448
Non-Current:
Corporate obligations 5,874,706 5,907,891 5,374,706 5,342,893
Government obli-
gations 3,333,237 3,339,404 4,208,237 4,182,482
Preferred stock 1,329,495 1,369,196 1,329,495 1,366,036
Other equity invest-
ments 100,000 100,000 100,000 100,000
Total 10,637,438 10,716,491 11,012,438 10,991,411
Total $13,245,519 $13,309,016 $13,719,087 $13,623,859
-13-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at February 29, 2004 was $13,309,016 as compared to $13,623,859 at November 30,
2003. The gross unrealized gains and losses were $180,446 and ($1116,947) for February 29, 2004
and $89,761 and ($184,989) for November 30, 2003. The cost and market values of the investments at
February 29, 2004 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 10/15/05 3.100% 200,000 $ 200,000 $ 201,200 $ 201,200
GMAC Smartnotes 10/15/05 3.150 400,000 400,000 403,676 403,676
GMAC Smartnotes 5/15/04 4.250 250,000 250,000 251,068 251,068
GMAC Smartnotes 5/15/05 5.000 175,000 175,000 178,521 178,521
GMAC Smartnotes 8/15/04 2.650 250,000 250,000 250,280 250,280
GMAC Smartnotes 6/15/05 3.550 200,000 200,000 201,636 201,636
GMAC Smartnotes 5/15/06 4.050 400,000 400,000 403,096 403,096
GMAC Smartnotes 10/15/06 3.550 250,000 250,000 252,150 252,150
GMAC Smartnotes 12/15/06 3.400 200,000 200,000 200,472 200,472
Household Finance Corp.
Internotes 5/15/04 4.250 250,000 250,000 251,355 251,355
Household Finance Corp.
Internotes 10/15/06 2.750 100,000 100,000 100,729 100,729
Bear Sterns 2/15/07 2.650 100,000 100,000 99,705 99,705
-14-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - 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 Is Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
CORPORATE OBLIGATIONS (Continued):
Ford Motor Credit 5/22/06 4.750 250,000 $ 250,000 $ 255,675 $ 255,675
Ford Motor Corp. 10/20/06 4.250 100,000 100,000 101,236 101,236
CIT Group Inc. 1/15/06 4.000 200,000 200,000 204,750 204,750
CIT Group Inc. 3/15/05 3.200 100,000 100,000 101,127 101,127
CIT Group Inc. 7/15/05 2.000 100,000 100,000 100,035 100,035
CIT Group Inc. 10/15/05 2.250 100,000 100,000 100,331 100,331
GE Capital Group Internotes 2/15/06 2.450 250,000 250,000 251,118 251,118
GE Capital Group Internotes 7/15/06 2.150 200,000 200,000 199,202 199,202
GE Capital Group Internotes 10/15/06 2.500 400,000 400,000 401,816 401,816
GE Capital Group Internotes 9/15/06 2.550 150,000 150,000 150,455 150,455
GE Capital Group Internotes 9/15/06 2.350 300,000 300,000 300,906 300,906
GE Capital Group Internotes 10/15/06 2.250 300,000 300,000 300,219 300,219
GE Capital Group Internotes 2/15/07 2.500 200,000 200,000 199,418 199,418
Sears Roebuck Acceptance
Corp. 5/15/06 3.500 250,000 250,000 250,953 250,953
American General Fin. Corp. 8/15/05 2.050 200,000 200,000 201,674 201,674
American General Fin. Corp. 9/15/06 2.500 100,000 100,000 99,969 99,969
John Hancock Life Ins. Co. 7/15/06 2.250 200,000 200,000 199,722 199,722
John Hancock Life Ins. Co. 10/15/06 2.450 100,000 100,000 99,290 99,290
John Hancock Life Ins. Co. 7/15/06 2.300 200,000 200,000 198,678 198,678
General Dynamics Corp. 10/15/06 2.125 150,000 149,706 150,132 150,132
6,624,706 6,660,594 6,660,594
-15-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - 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:
US Treasury Note 7/31/05 1.500% 250,000 $ 249,531 $ 250,625 $ 250,625
US Treasury Note 6/30/05 1.125 200,000 199,524 199,626 199,626
Federal Home Loan Bank 8/21/06 2.590 200,000 200,000 200,562 200,562
Federal Home Loan Bank 7/24/06 2.125 100,000 100,000 100,063 100,063
Federal Home Loan Bank 7/28/06 2.189 200,000 199,000 200,000 200,000
FNMA 5/15/06 2.250 200,000 198,772 201,438 201,438
FHLB 6/19/06 2.260 250,000 249,380 250,158 250,158
FHLMC 11/15/17 4.375 200,000 200,000 200,000 200,000
FHLMC 11/15/09 3.000 250,000 250,000 249,193 249,193
FNMA 8/15/12 4.000 250,000 250,000 252,423 252,423
FNMA 12/10/17 3.000 150,000 150,000 152,016 152,016
FNMA 9/24/07 3.000 200,000 200,000 201,438 201,438
Tennessee Valley Authority
Power Bonds 5/1/29 6.500 26,000 688,530 704,340 704,340
Tobacco Settlement Fin
Corp. N 6/1/15 5.000 200,000 198,500 177,522 177,522
NJ EDA Trans Sublease RV
Lightrail 199A FSA 5/1/04 5.000 300,000 317,444 302,158 302,158
Port Authority NY & NJ
Cons 88th SR BE 10/1/04 4.500 225,000 238,789 229,491 229,491
CLOSED END MUNICIPAL BONDS/MUTUAL FUNDS:
Muniyield New Jersey Insd Frd Inc. 6,500 96,905 101,920 101,920
Muniholdings New Jersey Insd FD Inc. 6,900 94,549 104,190 104,190
Nuveen New Jersey Invt Quality Municipal Fund 6,200 95,162 101,370 101,370
Nuveen New Jersey Prem Inc Municipal Fund 5,200 78,639 86,372 86,372
Van Kamp Amer Cap Inv Gr NJ 4,800 80,502 85,248 85,248
Blackrock New Jersey Municipal Inc. 6,000 87,989 88,620 88,620
Eaton Vance New Jersey Municipal Inc. 5,600 85,506 89,040 89,040
Nuveen New Jersey Dividend Advantage 5,700 84,855 91,428 91,428
4,593,577 4,619,241 4,619,241
-16-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - 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 6.100% 14,800 $ 379,495 $ 385,096 $ 385,096
Merrill Lynch Trust 9/30/08 7.280 6,000 150,000 166,440 166,440
Corporate Backed Trust
Certificates For AIG
Sun America 5/17/07 6.700 6,000 150,000 158,400 158,400
Corporate Backed Trust
Certificates For Bristol
Myers Squibb 5/23/07 6.800 6,000 150,000 159,420 159,420
Morgan Stanley Cap Tr 7/15/33 5.750 4,000 100,000 98,120 98,120
ABN AMRO Cap Fund 7/3/08 5.900 2,000 50,000 49,840 49,840
JP Morgan Chase Cap IX 6/15/33 5.875 2,000 50,000 49,480 49,480
Wells Fargo Cap Tr VIII 8/1/33 5.625 8,000 200,000 200,160 200,160
Lehman Cap Trust IV 10/31/52 6.375 4,000 100,000 102,240 102,240
1,329,495 1,369,196 1,369,196
-17-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - 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 (Continued):
Common Stock:
DTE Energy Co. 1,200 $ 51,649 $ 48,552 $ 48,552
Consolidated Edison Inc. 3,800 153,485 167,846 167,846
Progress Energy Inc. 1,000 48,000 46,160 46,160
Public Service Enterprise Group 1,300 51,245 61,282 61,282
304,379 323,840 323,840
Mutual Funds:
Dreyfus Premier Limited
Term High Income CL B 16,604,955 181,612 122,545 122,545
Other Equity Investments:
Aberdeen Asia Pacific
Income Fund 4 100,000 100,000 100,000
Enterprise Production Partners LP 5,000 111,750 113,600 113,600
211,750 213,600 213,600
$13,245,519 $13,309,016 $13,309,016
-18-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
For the three month period ending February 29, 2004, the Company had
revenues of $13,087,488 and net income of $836,142 after a provision for taxes
of $522,411. For the same quarter in 2003, revenues were $12,515,182 and net
income of $573,626 after a provision for taxes of $386,706. Earnings per
share was $0.11 for the first quarter 2004 as compared to earnings per share
of $0.08 for the first quarter 2003. In accordance with EITF 00-14, the
Company has accounted for certain sales incentives offered to customers by
charging them directly to sales as opposed to "advertising and promotional"
expense. Net sales were reduced by $625,226 and offset by an equal reduction
of trade promotional expenses which were included in the Company's advertising
expense budget. In the same period of the prior year, gross sales were
reduced by $324,192 and trade promotion was credited by that amount. These
accounting adjustments under EITF 00-14 do not affect net income.
The 46% increase in net income was a result of a $566,680 increase in
sales and the reduction of $305,652 in selling and general and administrative
expenses. Advertising, co-op and promotional expenses increased by $402,770
compared to the three months ending February 28, 2003. However, since the
above co-op offset to sales of $625,226 was $301,034 higher than last year's
first quarter of $324,192, a net increase of $101,736 is all that is
reflected. Other expenses, however, were reduced. Expense reductions were
$294,862 in freight out, $124,085 in royalty expenses, travel and
entertainment of $83,008, and a decrease in recruitment of $52,872.
Both media 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 No. 28, 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. The total advertising programs for the
year are budgeted at $9 million for media and $5.5 million for co-op
advertising up from $8 million for media and $5 million for the prior year.
The Company's co-op budget for the quarter is $1,375,000. Deducted from the
budgeted figure is the $625,226 offset against net sales. Research of prior
years show that the entire amount of the budgeted co-op has never been fully
utilized by the Company's accounts as a result of merchandising changes and
cancelled promotions. An additional reduction of $231,234 to co-op expense is
due to this reserve placed on co-op commitments. The reduction is based on
an estimate of co-op commitments that will not be utilized based on the
historical facts. The resulting $518,540 was expensed for co-op for the
quarter and a deferral of $1,493,918 for co-op advertising is reflected on the
balance sheet. This deferral will be fully expensed by year-end. The
deferral is primarily a result of the Company's current $5,500,000 co-op
advertising budget, which is predicated on substantially lower spending in the
third and fourth quarters. The Company expensed $2,250,000 for its media
advertising for the current quarter and deferred $2,228,991 for subsequent
deductions.
-19-
For the period ended February 29, 2004, there was approximately $380,800
of unclaimed co-op commitments from the prior years. If it becomes apparent
that this co-op will not be utilized, the unclaimed co-op will be offset
against the expense during the rest of the fiscal year. This procedure is
consistent with prior years' methodology with regard to the unclaimed co-op
expenses.
The Company's financial position as at February 29, 2004 consists of
current assets of $24,316,114 and current liabilities of $11,425,162, or a
current ratio of 2.1:1. In addition, shareholders' equity increased from
$23,344,540 to $24,339,407 primarily due to net income earned during the
current quarter.
All of the Company's investments are classified as available for sale.
Investments with a maturity date greater than one year from February 29, 2004
are presented as long-term investments. Assuming these long-term investments
can be sold and turned into liquid assets at any time, it would result in a
current ratio of 3.1:1.
The Company's cash position increased primarily due to the net proceeds
from redemptions and purchases of marketable securities of $475,000 and the
net effect of cash provided by operations of $157,000. The increase in
accounts receivable is predominately due to large sales increases late in the
first quarter, and accounts payable increased primarily due to accruals for
advertising. Research and development expenses were $233,846.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
The Company's financial statements record the Company's investments under
the "mark to market" method (i.e., at date-of-statement market value). The
investments are, categorically listed, in "Common Stock", "Mutual Funds",
"Other Equity", "Preferred Stock", "Government Obligations" and "Corporate
Obligations". $537,440 of the Company's $13,309,016 portfolio of investments
(approximate, as at Feb. 29, 2004) is invested in the "Common Stock" and
"Other Equity" categories, and approximately $1,369,196 in that category are
Preferred Stock holdings. Whereas the Company does not take positions or
engage in transactions in risk-sensitive market instruments in any substantial
degree, nor as defined by SEC rules and instructions; therefore, the Company
does not believe that its investment-market risk is material.
ITEM 4. CONTROLS AND PROCEDURES
With the participation of our Chief Executive Officer and Chief
Financial Officer, management has carried out an evaluation of the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934). Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of February 29,
2004.
There were no changes in our internal control over financial reporting
(as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934)
subsequent to the date the controls were evaluated that materially affect, or
are reasonably likely to materially affect, our internal control over
financial reporting.
-20-
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
Item 1. Legal Proceedings:
See Part I - Note 11 of the Financial Statements regarding
litigation.
Item 4. Submission of Matters to a Vote of Security Holders:
None.
Item 5. Other Information:
The Company plans to hold its Annual Meeting of Shareholders on June
16, 2004 with proxy materials mailed to shareholders of record on
May 1, 2004 prior to the proposed meeting date.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
(31.1) Certification of Chief Executive Officer pursuant to Rule
13a-14(a)*
(31.2) Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)*
(32.1) Certification of Chief Executive Officer pursuant to 18
U.S.C. 1350*
(32.2) Certification of Chief Financial Officer pursuant to 18
U.S.C. 1350*
* Filed herewith.
(b) Reports on Form 8-K.
Current report on Form 8-K furnished December 11, 2003 pursuant
to Item 5 (Other Events).
-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.
Date: April 7, 2004
CCA INDUSTRIES, INC.
By:
David Edell, Chief Executive Officer
By:
Ira W. Berman, Chairman of the Board
-22-
Exhibit 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended
February 29, February 28,
2004 2003
Item 6.
Weighted average shares outstanding - Basic 7,289,255 7,140,537
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 363,000 475,893
Weighted average shares outstanding -
Diluted 7,652,255 7,616,430
Net income $836,142 $573,626
Per share amount
Basic $.11 $.08
Diluted $.11 $.08
Exhibit 31.1
CERTIFICATION
I, David Edell, Chief Executive Officer of the Registrant, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CCA Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the state
ments made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial informa
tion included in this 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 report.
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, to ensure that material information relation to the Registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to affect, the Registrant's internal control over
financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal controls over financial reporting, to the
Registrant's auditors and the audit committee of the Registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
control over financial reporting.
Date: April 7, 2004
/s/
---------------------------------------
David Edell
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, John Bingman, Chief Financial Officer of the Registrant, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CCA Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the state
ments made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial infor-
mation included in this 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 report.
4. The Registrant's other certifying officer and I are responsible for estab-
lishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relation to the Registrant, in-
cluding its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the Registrant's internal control
over financial reporting that occurred during the Registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to affect, the Registrant's internal control over financial re-
porting; and
5. The Registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal controls over financial reporting, to the
Registrant's auditors and the audit committee of the Registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal con-
trol over financial reporting.
Date: April 7, 2004
/s/
-----------------------------------
John Bingman
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CCA Industries, Inc. (the
"Registrant") on Form 10-Q for the quarterly period ended February 29, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, David Edell, Chief Executive Officer of the Registrant, certify,
in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report, to which this certification is attached, fully complies with
the requirements of section 13(a) of the Securities Exchange Action of
1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Registrant.
Date: April 7, 2004
/s/---------------------------------------
David Edell
Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CCA Industries, Inc. (the
"Registrant") on Form 10-Q for the quarterly period ended February 29, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, John Bingman, Chief Financial Officer of the Registrant, certify,
in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report, to which this certification is attached, fully complies with
the requirements of section 13(a) of the Securities Exchange Action of
1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Registrant.
Date: April 7, 2004
/s/----------------------------------------
John Bingman
Chief Financial Officer