FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 31, 1999
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 - 6,246,151 shares as of May 31, 1999
Class A Common Stock, $.01 Par Value - 1,020,930 shares as of May 31, 1999
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
May 31, 1999 and November 30, 1998 . . . . . . . . . . . . . 1-2
Consolidated Statements of Operations
for the three months and six months ended
May 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Comprehensive Income
for the three months and six months ended
May 31, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the six months ended May 31, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6
Notes to Consolidated Financial Statements . . . . . . . . .7-15
Management's Discussion and Analysis of
Results of Operations and Financial
Condition . . . . . . . . . . . . . . . . . . . . . . . . 16-18
PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . 19-20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
A S S E T S
<CAPTION>
May 31, November 30,
1999 1998
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 102,076 $ 542,289
Short-term investments and marketable
securities 1,937,852 1,633,452
Accounts receivable, net of allowances of
$1,120,036 and $1,318,185, respectively 9,819,852 7,878,000
Inventories 8,054,564 9,059,456
Prepaid expenses and sundry receivables 412,754 317,318
Deferred income taxes 997,087 974,922
Prepaid income taxes and refunds due 448,443 72,513
Deferred advertising 1,265,960 -
Total Current Assets 23,038,588 20,477,950
Property and Equipment, net of accumulated
depreciation and amortization 816,976 866,663
Intangible Assets, net of accumulated
amortization of $108,919 at May 31, 1999
and $71,373 at November 30, 1998 662,416 245,875
Other Assets
Marketable securities 1,401,393 2,172,253
Due from officers - Non-current 64,818 65,250
Deferred income taxes 51,102 127,256
Other 55,289 54,889
Total Other Assets 1,572,602 2,419,648
Total Assets $26,090,582 $24,010,136
</TABLE>
See Notes Consolidated to Financial Statements.
-1-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
May 31, November 30,
1999 1998
<S> <C> <C>
Current Liabilities
Notes payable $ 1,900,000 $ 1,550,000
Accounts payable and accrued liabilities 8,355,010 6,259,967
Income taxes payable - 600,720
Total Current Liabilities 10,255,010 8,410,687
Minority (Deficiency) Interest in Consolidated
Subsidiary ( 59,102) 7,798
Shareholders' Equity
Common stock, $.01 par; authorized
15,000,000 shares; issued and
outstanding 6,246,151 and 6,246,151
shares, respectively 62,462 62,462
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
1,020,930 and 1,020,930 shares,
respectively 10,209 10,209
Additional paid-in capital 4,454,228 4,454,228
Retained earnings 11,558,403 11,238,704
Unrealized gains (losses) on marketable
securities ( 25,462) ( 18,343)
16,059,840 15,747,260
Less: Treasury Stock (95,996 and 89,519
shares at May 31, 1999 and November
30, 1998, respectively) 165,166 155,609
Total Shareholders' Equity 15,894,674 15,591,651
Total Liabilities and Shareholders' Equity $26,090,582 $24,010,136
</TABLE>
See Notes to Consolidated Financial Statements.
-2-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues
Sales of Health and
Beauty Aid
Products - Net $11,320,784$10,770,270 $21,066,544 $20,122,701
Other income 42,629 97,272 83,607 183,526
11,363,413 10,867,542 21,150,151 20,306,227
Costs and Expenses
Costs of sales 4,471,932 4,127,413 8,487,683 7,714,527
Selling, general and
administrative expenses 3,517,879 3,291,583 6,858,692 6,177,049
Advertising, cooperative
and promotions 2,935,419 1,947,555 5,005,491 4,108,340
Research and development 125,443 171,740 255,209 305,320
Provision for doubtful
accounts 65,111 15,703 112,429 78,940
Interest expense 44,803 967 79,448 967
11,160,587 9,554,961 20,798,952 18,385,143
Income before
Income Taxes 202,826 1,312,581 351,199 1,921,084
Provision for Income
Taxes 21,694 529,161 98,406 761,709
Net Income Including
Minority Deficiency of
Consolidated
Subsidiary 181,132 783,420 252,793 1,159,375
Minority Deficiency in Net
Loss of Consolidated
Subsidiary 75,483 21,424 64,883 21,424
Net Income $ 256,615 $ 804,844 $ 317,676 $1,180,799
Earnings per Share
Basic $.04 $.11 $.04 $.16
Diluted $.03 $.10 $.04 $.15
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Income $256,615 $804,844 $317,676 $1,180,799
Other Comprehensive Income
Unrealized holding gains
(loss) on investments 6,461 1,465 ( 7,119) 7,648
Provision (Benefit) for Taxes 2,650 500 ( 2,850) 3,000
Other Comprehensive
Income (Loss) - Net 3,811 965 ( 4,269) 4,648
Comprehensive Income $260,426 $805,809 $313,407 $1,185,447
Earnings Per Share:
Basic $.04 $.11 $.04 $.16
Diluted $.03 $.10 $.04 $.15
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Six Months
Ended Ended
May 31, May 31,
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 317,676 $1,180,799
Adjustments to reconcile net income to net
cash (used in) operating activities:
Depreciation and amortization 173,795 155,328
Minority deficiency in consolidated
subsidiaries ( 64,883) ( 21,424)
Amortization of bond premium 948 942
Loss (gain) on sale of marketable securities 16,766 ( 4,727)
Decrease (increase) in deferred income taxes 53,989 ( 77,600)
(Increase) in accounts receivable - Net ( 1,941,852) ( 2,506,687)
Decrease (increase) in inventory 1,004,892 ( 2,116,699)
(Increase) in prepaid expenses and
miscellaneous receivables ( 95,436) ( 231,740)
(Increase) in deferred advertising ( 1,265,960) ( 889,090)
Increase in accounts payable and
accrued liabilities 2,095,043 1,678,715
(Decrease) increase in taxes payable ( 976,650) 604,661
(Increase) in security deposits ( 400) ( 820)
Net Cash (Used in) Operating Activities ( 682,072) ( 2,228,342)
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment( 86,562) ( 306,762)
Acquisition of intangible assets ( 454,087) -
Proceeds of money due from officers 432 -
Purchase of marketable securities ( 122,150) ( 1,076,706)
Proceeds from sale and maturity of
investments 563,783 1,036,404
Purchase of treasury stock ( 9,557) -
Net Cash (Used in) Investing
Activities ( 108,141) ( 347,064)
Cash Flows from Financing Activities:
Proceeds from borrowings 2,250,000 1,083,539
Payment on debt ( 1,900,000) ( 386,159)
Net Cash Provided by Financing Activities 350,000 697,380
Net (Decrease) in Cash ( 440,213) ( 1,878,026)
Cash at Beginning of Period 542,289 3,649,774
Cash at End of Period $ 102,076 $1,771,748
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<CAPTION>
Six Months Six Months
Ended Ended
May 31, May 31,
1999 1998
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 76,573 $ 967
Income taxes 1,018,068 150,000
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 $ - $ 35,000
Common stock issued - ( 35,000)
$ - $ -
</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 state-
ments have been prepared in accordance with generally accepted ac-
counting principles for interim financial information and with the instruc-
tions 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 six month period ended May 31, 1999 are not
necessarily indicative of the results that may be expected for the year
ended November 30, 1999. 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,
1998.
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, and CCA Online Industries,
Inc.), all of which are currently inactive.
In March of 1998 CCA acquired 80% of the newly organized Fragrance
Corporation of America, Ltd. which manufactures and distributes perfume
products.
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"). All significant
intercompany accounts and transactions have been eliminated.
Use of Estimates:
The consolidated financial statements include the use of estimates, which
management believes are reasonable. The process of preparing financial
statements in conformity with generally accepted accounting principles
requires the use of estimates and assumptions regarding certain types of
assets, liabilities, revenues, and expenses. Such estimates primarily relate
to unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ from
estimated amounts.
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist of corporate and
government bonds and equity securities. The Company has classified its
investments as Available-for-Sale securities. Accordingly, such investments
are reported at fair market value, with the resultant unrealized gains and
losses reported as a separate component of shareholders' equity.
-7-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
During fiscal 1998, two officers/shareholders exercised in the aggregate
70,000 options in exchange for 16,470 shares previously issued common
stock. The common shares were put into treasury and were subsequently
cancelled.
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.
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company charges to
expense repairs and maintenance items, while major improvements and
betterments are capitalized. When the Company sells or otherwise disposes
of property and equipment items, the cost and related accumulated
depreciation are removed from the respective accounts and any gain or loss
is included in earnings.
Depreciation and amortization are provided on the straight-line method over
the following estimated useful lives or lease terms of the assets:
Machinery and equipment 7-10 Years
Furniture and fixtures 5-7 Years
Tools, dies and masters 2-7 Years
Transportation equipment 7 Years
Leasehold improvements 7-10 Years or life
of lease, whichever is
shorter
Intangible Assets:
Intangible assets are stated at cost. Intangible assets represents the
excess of cost over the fair value of the net assets acquired and is amortized
over 60 months. Patents and trademarks are amortized on the straight-line
method over a period of 17 years.
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Earnings Per Common Share:
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" in 1998. Basic earnings per share
is calculated using the average number of shares of common stock
outstanding during the year. Diluted earnings per share is computed on the
basis of the average number of common shares outstanding plus the effect
of outstanding stock options using the "treasury stock method" and
convertible debentures using the "if-converted" method. Common stock
equivalents consist of stock options.
Revenue Recognition:
The Company recognizes sales at the time delivery occurs. Although no
legal right of return exists between the customer and the Company, it is an
industry-wide practice to accept returns from customers. The Company,
therefore, records a reserve for returns equal to its gross profit on its
historical percentage of returns on its last five months sales.
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
May 31, November 30,
1999 1998
Raw materials $4,586,203 $5,828,257
Finished goods 3,468,361 3,231,199
$8,054,564 $9,059,456
At May 31, 1999 and November 30, 1998, the Company had a reserve for
obsolescence of $834,131 and $836,805, respectively.
-9-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the following:
May 31, November 30,
1999 1998
Machinery and equipment $ 299,528 $ 297,615
Furniture and equipment 742,547 721,296
Transportation equipment 10,918 10,918
Tools, dies, and masters 1,882,372 1,819,974
Leasehold improvements 109,474 108,474
3,044,839 2,958,277
Less: Accumulated depreciation
and amortization 2,227,863 2,091,614
Property and Equipment - Net $ 816,976 $ 866,663
Depreciation expense for the six months ended May 31, 1999 amounted to
$136,249 and for the year ended November 30, 1998 amounted to
$318,715.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
May 31, November 30,
1999 1998
Intangibles $529,739 $ 75,652
Patents and trademarks 241,596 241,596
771,335 317,248
Less: Accumulated amortization 108,919 71,373
Intangible Assets - Net $662,416 $245,875
Amortization expense for the six months ended May 31, 1999 amounted
to $37,546 and for the year ended November 30, 1998 amounted to
$23,417.
In March 1998, the Company acquired, through its newly formed 80%
owned subsidiary, Fragrance Corporation of America, Ltd. (FCA), certain
intangibles (consisting of trademarks, licenses, customer lists, know-how,
etc.) from Shiara, Inc. as well as certain inventory. The costs incurred
to date ($529,739) with regard to the acquisition, in excess of the fair
market of the inventory obtained, has been recorded as intangible assets
on FCA's books and is being amortized over 60 months.
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<PAGE>
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 $1,265,960 is accordingly reflected
in the balance sheet for the interim period. This deferral is the result
of the Company's $6,000,000 media budget for the year which contemplates
lower spending in the 4th quarter than in the other three quarters; as well
as the Company's Co-op advertising commitments which also anticipates
a lower expenditure in the 4th quarter.
The table below sets forth the calculation:
May May
1999 1998
(In Millions)(In Millions)
Media advertising budget for the fiscal year $6.00 $5.00
Pro-rata portion for six months $3.00 $2.50
Media advertising spent 3.32 3.03
Accrual (deferral) ($ .32) ($ .53)
Anticipated Co-op advertising commitments $3.50 $3.00
Pro-rata portion for six months $1.75 $1.50
Co-op advertising spent 2.70 1.86
Accrual (deferral) ($ .95) ($ .36)
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following items which exceeded 5% of total current liabilities are
included in accounts payable and accrued liabilities as of:
May 31, November 30,
1999 1998
(In 000's) (In 000's)
a) Media advertising $1,333 $ 820
b) Coop advertising 755 494
c) Accrued returns 1,439 1,107
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Continued)
All other liabilities were for trade payables or individually did not exceed
5% of total current liabilities.
NOTE 9 - OTHER INCOME
Other income consists of the following at May 31:
1999 1998
Interest income $84,424 $173,734
Dividend income 19,742 1,137
Miscellaneous ( 20,559) 8,655
$83,607 $183,526
NOTE 10 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments and marketable securities, which consist of stock
and various corporate and government obligations, are stated at market
value. The Company has classified its investments as Available-for-Sale
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 May 31, 1999 and November 30, 1998 were as
follows:
May 31, November 30,
1999 1998
Current: COST MARKET COST MARKET
Corporate obligations $1,430,820 $1,440,134$ 780,776$ 786,233
Government obligations
(including mortgage
backed securities) 495,508 497,718 841,067 847,219
Total 1,926,328 1,937,852 1,621,843 1,633,452
Non-Current:
Corporate obligations 285,000 285,000 1,030,044 1,038,450
Government obli-
gations 179,817 177,725 298,600 298,931
Preferred stock 512,561 500,485 512,561 511,500
Other equity
investments 461,000 438,183 361,000 323,372
Total 1,438,378 1,401,393 2,202,205 2,172,253
Total $3,364,706 $3,339,245$3,824,048$3,805,705
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
NOTE 10 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at May 31, 1999 was $3,339,245 as compared to $3,805,705 at November 30, 1998.
The cost and market values of the investments at May 31, 1999 were as 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>
GMAC 2/22/00 5.450% $200,000 $ 199,226 $ 199,780 $ 199,780
GTE Southwest Deb 12/01/99 5.820% 100,000 99,851 100,119 100,119
Florida Power & Light 7/01/99 5.500% 300,000 295,776 300,033 300,033
Virginia Electric & Power 4/01/00 5.875% 250,000 246,117 250,368 250,368
GMAC Smartnotes 10/15/99 5.950% 200,000 200,000 200,272 200,272
Florida Power & Light 4/01/00 5.375% 200,000 199,850 199,562 199,562
Mid American-NB & TC-CD 8/07/01 5.600% 95,000 95,000 95,000 95,000
Mid First Bank-CD 8/14/00 5.550% 95,000 95,000 95,000 95,000
MBNA-CD 8/13/01 5.650% 95,000 95,000 95,000 95,000
Flagstar Bank 10/21/99 4.900% 95,000 95,000 95,000 95,000
Progress Fed Svgs Bank 10/25/99 4.800% 95,000 95,000 95,000 95,000
1,715,820 1,725,134 1,725,134
</TABLE>
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
NOTE 10 - 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
<S> <C> <C> <C> <C> <C> <C>
GOVERNMENT OBLIGATIONS:
US Treasury Note 11/15/99 5.875% 250,000 $ 249,141 $251,015 $ 251,015
US Treasury Zero Coupon 8/15/99 5.920 148,000 146,484 146,551 146,551
Federal Nat. Mtg. Note 7/30/99 5.860 100,000 99,883 100,152 100,152
FHLMC 1628-N 12/15/2023 6.500 50,000 37,774 37,712 37,712
FNMA 93-224-D 11/25/2023 6.500 104,000 101,873 99,166 99,166
FNMA 92-2-N 1/25/2024 6.500 52,000 40,170 40,847 40,847
675,325 675,443 675,443
</TABLE>
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
NOTE 10 - 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
<S> <C> <C> <C> <C> <C> <C>
EQUITY:
Preferred Stock:
Tennessee Valley Authority
(QIDS) Qtrly Income Debt
Secs - Matures 3/31/2045 3/31/00 8.00% 13,600 $ 362,561 $ 349,357 $ 349,567
Merrill Lynch Trust 9/30/08 7.28% 6,000 150,000 151,128 151,128
Other Equity Investments:
First Australia Prime 100,000 100,000 100,000
Dreyfus Premier Limited
Term High Income CL B 121,000 115,282 115,282
Dreyfus High Yield
Strategies Fund 240,000 222,901 222,901
973,561 938,668 938,668
$3,364,706 $3,339,245 $3,339,245
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<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the six month period ended May 31, 1999, the Company had revenues of
$21,150,151 and net income of $317,676 (net of consolidated subsidiary's
deficiency in net loss of $64,883) after a provision for income taxes of
$98,406, as compared to revenues of $20,306,227 and net income of $1,180,799
after a provision for income taxes of $761,709 for the six month period ended
May 31, 1998.
Net sales for the six months ended May 31, 1999 ($21,066,544) were up
approximately $944,000 from the 1998 sales for six months ($20,122,701)
primarily due to the sales of the Company's new subsidiary, Fragrance
Corporation of America, Inc. (FCA), whose sales consist of newly licensed per-
fumes. FCA's net sales for the six months were $1.3 million. Although con-
solidated sales returns continue to run approximately 7% to 8% of consolidated
gross sales, CCA's returns were only $1,015,000 on gross sales of approximately
$21,822,000 (approximately 5%) while FCA's returns were $416,000 on gross sales
of approximately $1,807,000 (approximately 23%). The large percentage of
returns on FCA was due primarily to the large return of Christmas merchandise
coupled with some returns of product of Shiara Inc. (the Company which licensed
its perfume to FCA). Other income ($84,000 vs. $184,000) was less due to the
decrease in the Company's interest income due to their use of cash in the
formation of FCA. Gross margins of 60% for the six months were down from
approximately 61.5% the prior year. This was primarily due to the lower
gross profit margins on FCA's sales. Gross margins are expected to improve in
the future.
Advertising, cooperative and promotional allowance expenditures increased
during the six month period from $4,108,000 to $5,005,000. Advertising
expenditures were 23.75% of sales for the six months ended May 31, 1999
as compared with 20.5% for the period ended May 31, 1998. 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 promo-
tions are successful, revenues will be increased accordingly. Should the co-
op and promotions not be successful, it will have a negative impact on the
ompany'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. In accordance with APB 28 Interim Financial Reporting the Company ex-
penses its advertising and related costs proportionately over the interim
Consequently, a deferral of $1,266,000 is accordingly reflected in the balance
sheet for the interim period, as compared to $889,000 at May 31, 1998. This
deferral is the result of the Company's $6 million media budget for the year
which contemplates lower spending in the 4th quarter than in the other three
quarters; as well as the Company's co-op advertising commitments
which also anticipates lower expenditures in the 4th quarter. Specifically,
the Company spent approximately $3.32 million in the six months on media ad-
vertising and, therefore,expensed $3 million and deferred $.32 million as of
May 31,1999. Similarly, as of May 31, 1999, the Company's co-op advertising
commitments for the year ended November 30, 1999 are anticipated to be
approximately $3.5 million of which approximately $2.7 million was spent in
the first six months resulting in an expense of $1.75 million and a
deferral of approximately $.95 million as of May 31, 1999.
Comparatively as of May 31, 1998, the Company had anticipated media
advertising expense in fiscal year 1998 of $5 million and spent approximately
$3.03 million in the first six months resulting in a deferral of approximately
$.53 million. The anticipated Co-op commitments as of May 31, 1998 were $3
million for the year of which $1.86 million were spent for the six months
resulting in a $.36 million deferral.
-16-
<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
Selling, general and administrative expenses ("SG&A") increased compared to
the prior year. The increase to $6,859,000 from $6,177,000 was due mostly to
the "SG&A" expenses ($564,000) incurred by the Company's newly formed sub-
sidiary.
For the three month period ended May 31, 1999, net sales were $11,320,784 as
compared to $10,770,270 for May 31, 1998. Income for the quarter before taxes
decreased to $256,615 from $804,844. Gross margins of 60.5% for the three
months ended May 31, 1999 were down from 61.7% in 1998. Advertising, co-
operative and promotional allowance expense during the quarter increased to
$2,935,000 from $1,947,000. Advertising expenses were 26% of sales for the
quarter in 1999 as compared to 18% in 1998. Selling, general and administra-
tive expenses were approximately 31% in the current quarter as compared to
30.5% in 1998. During the three month period ended May 31, 1999, the Company
donated a substantial amount of inventory to charity which resulted in a
relatively large tax deduction and decreased its provision for taxes by
approximately $51,000.
Research and development expenses for the three and six months were less due
to the economies of utilizing the services of more in-house staff rather than
outside consultants.
Bad debt expense for the periods increased due to the necessary reserves on
the increasing accounts receivable. Actual write-offs were approximately
$32,000 in 1999 as compared to none in 1998. The Company's interest expense
increased to $79,000 from $1,000 due to the borrowing caused by the use of
cash to start up the FCA business.
The Company's sales were primarily to drugstore chains, food chains and mass
merchandisers.
The Company's financial position as at May 31, 1999 consists of current assets
of $23,038,588 and current liabilities of $10,255,010. The Company's cash
position decreased due to the significant increase in its accounts receivable
partially due to the sales of its new subsidiary and mostly due to a general
slow down in payments by the major retailers. The Company's accounts payable
also increased due to FCA's new business and the Company's extension of its
own payment terms. During the six month period ended May 31, 1999, share-
holders' equity increased from $15,591,651 at November 30, 1998 to $15,894,674
at May 31, 1999. This was due primarily to the net income generated for the
period.
During the six months, the Company used $682,000 in operations, $454,000 to
pay for costs incurred relating to the acquisition of Shiara Inc's assets in
excess of their fair market value and $86,000 to purchase new fixed assets;
and generated, $350,000 from new borrowings and approximately $430,000 from
the net liquidations of securities. These factors resulted in a net decrease
in the Company's cash of about $440,000.
-17-
<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on a 1998 assessment, the Company determined that it had to substan-
tially modify or replace portions of its software so that its computer systems
will function properly with respect to dates in the year 2000 and thereafter.
The Company presently believes that with these modifications to existing soft-
ware and conversions to new software, the Year 2000 Issue will not pose sig-
nificant operational problems for its computer systems. However, if such modi-
fications and conversions are not made, or are not completed timely, the Year
2000 Issue could have a material impact on the operations of the Company.
The Company has initiated formal communications with all of its significant
service providers and suppliers, including its clearing broker, to determine
the extent to which the Company's interface systems are vulnerable to those
third parties' failure to remediate their own Year 2000 issues. The Company's
estimate to complete includes the estimated time associated with the impact of
third party's Year 2000 Issues based on presently available information.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted and would not have an ad-
verse effect on the Company's systems.
The Company does not believe that the Year 2000 issue will have a material
effect on any of the embedded technology in its manufacturing, warehousing or
distribution equipment.
The Company will utilize both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications.
The Company believes it will complete the Year 2000 modifications in a timely
fashion based on management's best estimate, which was derived utilizing
numerous assumptions of future events, including the continued availability of
certain resources, third party modification plans and other factors. However,
there can be no guarantee that this estimate will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
The cost of addressing the Company's Year 2000 issues is expected to be
approximately $400,000 to $500,000. However, some of these costs should be
offset by a grant received from the State of New Jersey to help pay for the
retraining of the Company's staff. The net cost should not have a material
adverse effect on the Company's cash flow or financial position. It could
possibly, however adversely effect the Company's earnings in the year the
majority of costs are incurred. The Company is executing its Year 2000 plan
through its own employees as well as various computer consultants and vendors.
The Year 2000 testing and reprogramming is being done in conjunction with
other ongoing maintenance and reprogramming efforts.
The Company has a contingency plan in place in the event their Year 2000 issue
is not resolved timely.
-18-
<PAGE>
PART II, ITEM 6. (Continued) EXHIBIT 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended Six Months Ended
May 31, May 31,
1999 1998 1999 1998
Item 6.
Weighted average shares
outstanding - Basic 7,171,085 7,259,581 7,171,157 7,242,323
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 815,352 930,907 643,326 826,929
Weighted average shares
outstanding - Diluted 7,986,437 8,190,488 7,814,483 8,069,252
Net income $ 256,615 $ 804,844$ 317,676 $1,180,799
Per share amount
Basic $.04 $.11 $.04 $.16
Diluted $.03 $.10 $.04 $.15
-19-
<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 six months ended
May 31, 1999.
-20-
<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 under-
signed, thereunto duly authorized.
CCA INDUSTRIES, INC.
By:
David Edell, President
By:
Ira W. Berman, Secretary
-21-
<PAGE>
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<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> NOV-30-1999 NOV-30-1998 NOV-30-1999 NOV-30-1998
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<SALES> 11,320,784 10,770,270 21,066,544 20,122,701
<TOTAL-REVENUES> 11,363,413 10,867,542 21,150,151 20,306,227
<CGS> 4,471,932 4,127,413 8,487,683 7,714,527
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