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, 1997
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 - $6,058,621 shares as of February 28, 1997
Class A Common Stock, $.01 Par Value - $1,154,930 shares as of
February 28, 1997
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
February 28, 1997 and November 30, 1996 1-2
Consolidated Statements of Operations
for the three months ended February 28, 1997
and February 29, 1996 3
Consolidated Statements of Cash Flows for
the three months ended February 28, 1997
and February 29, 1996 4-5
Notes to Consolidated Financial Statements 6-12
Management Discussion and Analysis of
Results of Operations and Financial
Condition 13
PART II OTHER INFORMATION 14-15
SIGNATURES 16
<PAGE>
<TABLE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
A S S E T S
February 28, November 30,
1997 1996
<S> <C> <C>
Current Assets
Cash and cash equivalents $1,541,365 $1,422,783
Short-term investments and marketable
securities (Note 4) 1,486,244 1,546,289
Accounts receivable, net of allowances of
$1,013,392 and $1,066,549, respectively
(Note 8) 4,179,291 4,017,500
Inventories 6,233,518 5,875,742
Prepaid expenses and sundry receivables 603,074 603,952
Due from officers - Current 1,500 3,900
Prepaid income taxes 42,911 87,552
Deferred income taxes 479,775 496,267
Deferred Advertising 294,613 -
Total Current Assets 14,862,291 14,053,985
Property and Equipment, net of accumulated
depreciation and amortization 701,490 729,706
Intangible Assets, net of accumulated
amortization of $39,001 at February 28, 1997
and $36,111 at November 30, 1996 162,958 155,037
Other Assets
Marketable securities 2,023,151 1,540,596
Treasury bonds 95,904 93,996
Due from officers - Non-current 25,250 25,250
Deferred income taxes 60,171 55,292
Other 53,867 54,217
Total Other Assets 2,258,343 1,769,351
Total Assets $17,985,082 $16,708,079
</TABLE>
See Notes Consolidated to Financial Statements.
-1-
<PAGE>
<TABLE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
February 28, November 30,
1997 1996
<S> <C> <C>
Current Liabilities
Notes payable - Current portion $ 81,750 $ 163,500
Accounts payable and accrued liabilities 5,847,199 4,794,865
Income taxes payable 47,697 25,505
Total Current Liabilities 5,976,646 4,983,870
Shareholders' Equity
Common stock, $.01 par; authorized
15,000,000 shares; issued and
outstanding 6,058,621 and 6,012,621
shares, respectively 60,586 60,126
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
1,154,930 shares, respectively 11,549 11,549
Additional paid-in capital 4,454,764 4,455,224
Retained earnings 7,526,164 7,216,163
Unrealized (losses) on marketable
securities ( 26,658)( 6,353)
12,026,405 11,736,709
Less: Treasury Stock (7,500 shares at
February 28, 1997) 17,969 12,500
Total Shareholders' Equity 12,008,436 11,724,209
Total Liabilities and Shareholders' Equity $17,985,082 $16,708,079
</TABLE>
See Notes to Consolidated Financial Statements.
-2-
<PAGE>
<TABLE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Sales of health and beauty products, net $8,617,289 $10,125,118
Other income 81,228 60,591
8,698,517 10,185,709
Costs and Expenses
Costs of sales 3,076,627 3,855,577
Selling, general and administrative
expenses 2,764,341 2,844,468
Advertising, cooperative and promotions 2,169,725 2,609,294
Research and development 133,864 136,286
Provision for doubtful accounts 34,834 60,768
Interest expense 2,829 13,441
8,182,220 9,519,834
Income before Income Taxes 516,297 665,875
Provision for Income Taxes 206,296 297,715
Net Income $ 310,001 $ 368,160
Net Income per Common Share (Note 2) $.04 $.05
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
<TABLE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Three Months
Ended Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 310,001 $ 368,160
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 93,060 86,081
Amortization of bond premium 266 762
Gain on sale of securities ( 3,202)
Decrease (increase) in deferred income taxes 11,613 ( 27,093)
(Increase) in accounts receivable ( 161,791) ( 2,717,645)
(Increase) decrease in inventory ( 357,776) 410,688
(Increase) in prepaid expenses ( 293,735) ( 744,119)
Increase in accounts payable 1,052,334 1,299,869
Increase in income taxes payable 66,833 323,738
Net Cash Provided by (Used in)
Operating Activities 717,603 ( 999,559)
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment( 72,765) ( 50,752)
Proceeds of monies due from officers 2,400 -
Decrease (increase) in other assets 350 ( 950)
Purchase of short-term investments ( 1,236,702) -
Proceeds from sale of investments 794,915 400,045
Purchase of treasury stock ( 5,469) -
Net Cash (Used in ) Provided by
Investing Activities ( 517,271) 348,343
Cash Flows from Financing Activities:
Payment on debt ( 81,750)( 82,078)
Proceeds from stock option exercises - 166,940
Proceeds form short term borrowing - 400,000
Net Cash (Used in) Provided by
Financing Activities ( 81,750) 484,862
Net Increase (Decrease) in Cash 118,582 ( 166,354)
Cash and Cash Equivalents at Beginning
of Period 1,422,783 312,150
Cash and Cash Equivalents at End
of Period $1,541,365 $ 145,796
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 1,667 $ 14,246
Income taxes 127,850 -
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
<TABLE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Three Months Three Months
Ended Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Supplemental Schedule of Noncash Investing and
Financing Activities:
The Company issued common stock in
exchange for exercise of options and surrender
of options and surrender of outstanding shares
of stock:
Common stock retired $30,000 $ -
Common stock issued ( 30,000) -
$ - $ -
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
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. Operat
ing results for the three month period ended February 28, 1997 are not
necessarily indicative of the results that may be expected for the year
ended November 30, 1996. 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,
1995.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Com
pany and its wholly-owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated.
Advertising and Related Costs
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. Any necessary accrual or deferral is accordingly reflected in the
balance sheet for the interim period. However, for annual reporting
purposes, no advertising or related costs are capitalized and all are
expensed in the fiscal year in which they are incurred.
Cash Equivalents
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.
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2: 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 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 which ever
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; organization ex-
penses are amortized on the straight-line method over five (5) years.
Tax Credits:
Tax credits, when present, are accounted for using the flow-through
method as a reduction of income taxes in the years utilized.
Earnings Per Share
Earnings per share have been computed based on the weighted average of
outstanding common shares and common stock equivalents during the
periods, based on the treasury stock method using average market price.
Fully diluted earnings per share are not presented because they result in
dilution of less than 3%.
-7-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Instruments
The carrying value of assets and liabilities considered financial instruments
under SFAS No.107 approximate their respective fair value.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those esti
mates.
NOTE 3: INVENTORIES
The components of inventory consist of the following:
February 28, November 30,
1997 1996
Raw materials $3,977,836 $4,065,961
Finished goods 2,255,682 1,808,781
$6,233,518 $5,875,742
NOTE 4: 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,
1997 1996
a) Media advertising $1,211 $ *
b) Coop advertising 481 321
c) Accrued returns 477 505
$2,169 $ 826
All other liabilities were for trade payables or individually did not exceed
5% of total current liabilities.
* Under 5%.
-8-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5: OTHER INCOME
Other income consists of the following at February 28, 1997 and February
29, 1996
1997 1996
Interest income $71,864 $56,532
Dividend income 4,217 4,059
Miscellaneous 5,147 -
$81,228 $60,591
NOTE 6: SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist of corporate and
government bonds and equity securities. In 1994 the Company adopted
the accounting principles promulgated by SFAS No. 115 Accounting for
Certain Investments in Debt and Equity Securities. The Company has
classified its investments as Available-for-Sale securities. Accordingly,
such investments are reported at fair market value, with the resultant
unrealized gains and losses reported as a separate component of share
holders' equity.
The market value at February 28, 1997 was $3,605,299 as compared to
$3,180,881 at November 30, 1996. The cost and market values of the
investments at February 28, 1997 were as follows:
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<PAGE>
<TABLE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
A detail list of the securities held follows:
<CAPTION>
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:
<S> <C> <C> <C> <C> <C> <C>
AT&T 6/01/98 4.750% $100,000 $ 99,006 $ 98,500 $ 98,500
Bank America 7/15/97 6.000 200,000 200,000 200,096 200,096
Dayton P & L 5/01/97 5.625 100,000 98,265 99,982 99,982
Tennessee Valley 3/04/98 5.125 100,000 100,000 99,156 99,156
Union Electric 3/01/97 5.500 50,000 49,244 50,000 50,000
$546,515 $547,734 $547,734
</TABLE>
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<PAGE>
<TABLE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
<CAPTION>
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:
<S> <C> <C> <C> <C> <C> <C>
US Treasury Note 10/31/98 4.750% $100,000 $ 99,684 $ 97,969 $ 97,969
US Treasury Note 10/31/98 4.750 200,000 199,992 195,938 195,938
US Treasury Note 10/15/98 7.125 250,000 251,728 254,063 254,063
US Treasury Note 5/2/97 5.275 200,000 194,874 197,690 197,690
US Treasury Note 1/31/98 5.125 200,000 199,695 198,562 198,562
US Treasury Note 4/30/98 5.125 190,000 189,883 188,457 188,457
US Treasury Note 4/30/98 5.125 10,000 9,992 9,919 9,919
US Treasury Note 5/29/97 5.010 700,000 691,138 691,124 691,124
US Treasury Note 7/31/98 5.250 250,000 249,834 247,813 247,813
US Treasury Note 2/28/99 5.885 250,000 249,953 249,063 249,063
US Treasury Note 6/12/97 5.170 45,000 43,869 44,352 44,352
</TABLE>
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<PAGE>
<TABLE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
<CAPTION>
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: (Continued)
<S> <C> <C> <C> <C> <C> <C>
FHLMC 1628-N 12/15/2023 6.500 50,000 $ 48,024 $ 43,969 $ 43,969
EE Bonds - 7.050 90,000 95,904 95,904 95,904
FNMA 93-G-26-B 8/25/2022 7.000 10,000 8,688 8,339 8,339
FNMA 93-224-D 11/25/2023 6.500 104,000 101,873 89,024 89,024
FNMA 92-2-N 1/25/2024 6.500 52,000 47,424 43,003 43,003
FHJMC 1702-U 3/24/2024 7.00 4,000 2,938 2,815 2,815
FNMA 11/10/98 5.050 200,000 199,950 196,562 196,562
2,885,443 2,854,565 2,854,565
EQUITY SECURITIES:
Number of
Shares
Preferred Stock:
Bank America Corp. 8,000 200,000 203,000 203,000
$3,631,958 $3,605,299 $3,605,299
</TABLE>
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<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the three month period ended February 28, 1997, the Company had net
sales of $8,617,289 and net income of $310,001 after a provision for income
taxes of $206,296, as compared to net sales of $10,125,118 and net income of
$368,160 after provision for income taxes of $297,715 for the three month
period ended February 29, 1996.
All of the Company's sales were primarily to mass merchandisers throughout
the United States.
The cost of sales percentage for the quarter decreased from 38% in 1996 to
36% in 1997 primarily due to the reduction of product promotions for the period;
as well as certain product mix fluctuations. Advertising, cooperative and
promotional allowance expenditures during the quarter decreased as a percentage
of sales from 26% in 1996 to 25% in 1997 due to the decision of the Company
to reduce the percentage of sales spent on the media for the year. As part of
the registrant's business it is necessary to enter into co-operative
advertising agreements and other promotional activities with its accounts,
especially upon the introduction of a new product. Both co-op advertising and
promotions have a material effect on the Company's operations. If the
advertising and promotions are successful, revenues will be increased
accordingly. Should the co-op and promotions not be successful, it will have a
negative impact on the Company's promotional cost per sale, and have a negative
effect on income. The Company attempts to anticipate its advertising and
promotional commitments as a percent of gross sales in order to attempt to
control its effect on its net income. The Company was able to anticipate its
sales level better in 1997 and accordingly the percentage dropped.
Income before taxes for the quarter decreased to $516,297 from $665,875.
This was primarily a result of the lower sales as compared to the prior year.
Selling, general and administrative expenses ("SG&A") decreased due to decreased
personnel costs as well as other cost retainment factors. This decrease in SG&A
costs, however, was not sufficient to offset the decrease in sales and
therefore the percentage to sales increased from 28% in 1996 to 32% in 1997.
The Company's financial position as at February 28, 1997 consists of current
assets of $14,862,291 and current liabilities of $5,976,646. Shareholders'
Equity increased for the three month period from $11,724,209 on November 30,
1996 to $12,008,436 as of February 28, 1997 primarily due to the income of
$310,001 for the period.
Although the Company's operations resulted in the generation of approximately
$700,000 of cash, the Company used approximately $500,000 to purchase
"Available for Sale" securities and fixed assets. The Company also used
approximately $80,000 to reduce its debt. Due to its accessibility to funds,
the Company believes that its current financial condition is sufficient to
support its proposed operations for the near future.
- 13 -
<PAGE>
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
All information pertaining to Part II is omitted pursuant to the instructions
pertaining to that part.
The Company did not file any reports on Form 8-K during the three months
ended February 28, 1997.
-14-
<PAGE>
PART II, ITEM 6. (Continued) EXHIBIT 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Three Months
Ended Ended
February 28, February 29,
1997 1996
Item 6.
Primary:
Average shares outstanding 7,208,551 6,986,689
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 864,342 833,087
TOTALS 8,072,893 7,819,776
Net income $ 310,001 $ 368,160
Per share amount $.04 $.05
* Not included as their effect would be anti-dilutive.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CCA INDUSTRIES, INC.
By:
David Edell
David Edell, President
By: Ira W. Berman
Ira W. Berman, Secretary
-16-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> FEB-28-1997
<CASH> 1,541,365
<SECURITIES> 3,605,299
<RECEIVABLES> 5,192,683
<ALLOWANCES> 1,013,392
<INVENTORY> 6,233,518
<CURRENT-ASSETS> 14,862,291
<PP&E> 2,408,738
<DEPRECIATION> 1,544,290
<TOTAL-ASSETS> 17,985,082
<CURRENT-LIABILITIES> 5,976,646
<BONDS> 0
0
0
<COMMON> 72,135
<OTHER-SE> 11,936,301
<TOTAL-LIABILITY-AND-EQUITY> 17,985,082
<SALES> 8,617,289
<TOTAL-REVENUES> 8,698,517
<CGS> 3,076,627
<TOTAL-COSTS> 8,182,220
<OTHER-EXPENSES> 5,067,930
<LOSS-PROVISION> 39,834
<INTEREST-EXPENSE> 2,829
<INCOME-PRETAX> 516,297
<INCOME-TAX> 206,296
<INCOME-CONTINUING> 310,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 310,001
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
