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, 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 of as February 28, 1999
Class A Common Stock, $.01 Par Value - $1,020,930 shares as of
February 28, 1999
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
February 28, 1999 and November 30, 1998 1-2
Consolidated Statements of Operations
for the three months ended February 28, 1999
and February 28, 1998 3
Consolidated Statements of Comprehensive Income
for the three months ended February 28, 1999
and February 28, 1998 4
Consolidated Statements of Cash Flows for
the three months ended February 28, 1999
and February 28, 1998 5-6
Notes to Consolidated Financial Statements 7-16
Management Discussion and Analysis of
Results of Operations and Financial
Condition 17-19
PART II OTHER INFORMATION 20-21
SIGNATURES 22
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
A S S E T S
<CAPTION>
February 28, November 30,
1999 1998
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 241,708 $ 542,289
Short-term investments and marketable
securities (Notes 3 and 10) 1,487,277 1,633,452
Accounts receivable, net of allowances of
$2,332,169 and $1,318,185, respectively
(Note 7) 9,576,359 7,878,000
Inventories 8,689,534 9,059,456
Prepaid expenses and sundry receivables 375,651 317,318
Deferred income taxes 938,045 974,922
Prepaid income taxes and refunds due 174,429 72,513
Deferred advertising 437,146 -
Total Current Assets 21,920,149 20,477,950
Property and Equipment, net of accumulated
depreciation and amortization 837,510 866,663
Intangible Assets, net of accumulated
amortization of $87,807 at February 28, 1999
and $71,373 at November 30, 1998 404,441 245,875
Other Assets
Marketable securities 1,957,694 2,172,253
Due from officers - Non-current 65,250 65,250
Deferred income taxes 137,286 127,256
Other 54,889 54,889
Total Other Assets 2,215,119 2,419,648
Total Assets $25,377,219 $24,010,136
</TABLE>
See Notes Consolidated to Financial Statements.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
February 28, November 30,
1999 1998
<S> <C> <C>
Current Liabilities
Notes payable - Current portion $ 2,700,000 $ 1,550,000
Accounts payable and accrued liabilities 6,926,192 6,259,967
Income taxes payable 97,535 600,720
Total Current Liabilities 9,723,727 8,410,687
Minority Interest in Consolidated Subsidiary 18,398 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 11,299,765 11,238,704
Accumulated other comprehensive income
Unrealized (losses) on marketable
securities ( 26,404) ( 18,343)
15,800,260 15,747,260
Less: Treasury Stock (95,996 and 89,519
shares at February 28, 1999 and
November 30, 1998, respectively) 165,166 155,609
Total Shareholders' Equity 15,635,094 15,591,651
Total Liabilities and Shareholders' Equity $25,377,219 $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 Three Months
Ended Ended
February 28, February 28,
1999 1998
<S> <C> <C>
Sales of health and beauty products, net $ 9,745,760 $9,352,431
Other income 40,978 86,254
9,786,738 9,438,685
Costs and Expenses
Costs of sales 4,015,751 3,587,114
Selling, general and administrative
expenses 3,340,813 2,885,466
Advertising, cooperative and promotions 2,070,072 2,160,785
Research and development 129,766 133,580
Provision for doubtful accounts 47,318 63,237
Interest expense 34,645 -
9,638,365 8,830,182
Income before Income Taxes 148,373 608,503
Provision for Income Taxes 76,712 232,548
Net Income Including Minority
Interest In Consolidated
Subsidiary 71,661 375,955
Minority Interest in Net Income of
Consolidated Subsidiary 10,600 -
Net Income $ 61,061 $375,955
Earnings per Share
Basic $.01 $.05
Diluted $.01 $.05
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
February 28, February 28,
1999 1998
<S> <C> <C>
Net Income $61,061 $375,955
Other Comprehensive Income
Unrealized holding gains (loss)
on investments ( 13,580) 6,183
Provision (Benefit) for Taxes ( 5,500) 2,500
Other Comprehensive Income - Net ( 8,080) 3,683
Comprehensive Income $52,981 $379,638
Earnings Per Share:
Basic $.01 $.05
Diluted $.01 $.05
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
February 28, February 28,
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 61,061 $ 375,955
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Minority interest in consolidated
subsidiary 10,600 -
Depreciation and amortization 99,423 73,996
Amortization of bond premium 471 472
(Loss) gain on sale of securities 6,043 ( 2,976)
Decrease (increase) in deferred income
taxes 32,347 ( 38,883)
(Increase) in accounts receivable (1,698,359) ( 2,384,860)
Decrease (increase) in inventory 369,922 ( 602,756)
(Increase) in prepaid expenses ( 58,333) ( 163,441)
(Increase) in deferred advertising ( 437,146) ( 583,787)
Increase in accounts payable 666,225 2,095,740
(Increase) decrease in prepaid income taxes ( 605,101) 266,312
Net Cash (Used in) Provided by
Operating Activities (1,552,847) ( 964,228)
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment ( 53,836) ( 105,368)
Acquisitions of intangible assets ( 175,000) -
Purchase of short-term investments ( 110,841) ( 532,119)
Proceeds from sale and maturity of
investments 451,500 520,804
Purchase of treasury stock ( 9,557) -
Net Cash (Used in) Investing Activities 102,266 ( 116,683)
Cash Flows from Financing Activities:
Proceeds from borrowings 1,150,000 -
Net (Decrease) Increase in Cash ( 300,581) ( 1,080,911)
Cash and Cash Equivalents at Beginning
of Period 542,289 3,649,774
Cash and Cash Equivalents at End
of Period $ 241,708 $2,568,863
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 30,963 $ -
Income taxes 660,804 5,119
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
February 28, February 28,
1999 1998
<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 $ - $35,000
Common stock issued - ( 35,000)
$ - $ -
</TABLE>
See Notes to Consolidated Financial Statements.
-6-
<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, 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., and Nutra Care Corporation), 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 state
ments. Accordingly, upon settlement, actual results may differ from
estimated amounts.
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist of corporate and
government bonds and equity securities. The Company has classified its
investments as Available-for-Sale securities. Accordingly, such 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 ob-
solescence 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. Patents and trademarks are amortized
on the straight-line method over a period of 17 years. Goodwill represents
the excess of the cost over the fair value of the net assets acquired and is
amortized over 60 months.
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.
-8-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
February 28, November 30,
1999 1998
Raw materials $5,008,626 $ 5,828,257
Finished goods 3,680,908 3,231,199
$8,689,534 $ 9,059,456
At February 28, 1999 and November 30, 1998, the Company had a reserve
for obsolescence of $777,394 and $836,805, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the following:
February 28, November 30,
1999 1998
Machinery and equipment $ 297,615 $ 297,615
Furniture and equipment 735,029 721,296
Transportation equipment 10,918 10,918
Tools, dies, and masters 1,860,077 1,819,974
Leasehold improvements 108,474 108,474
3,012,113 2,958,277
Less: Accumulated depreciation
and amortization 2,174,603 2,091,614
Property and Equipment - Net $ 837,510 $ 866,663
-9-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - PROPERTY AND EQUIPMENT (Continued)
Depreciation and amortization expense for the three months ended February
28, 1999 amounted to $82,989 and for the year ended November 30, 1998
amounted to $318,715.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
February 28, November 30,
1999 1998
Patents and trademarks $241,596 $ 241,596
Goodwill 250,652 75,652
492,248 317,248
Less: Accumulated amortization 87,807 71,373
Intangible Assets - Net $404,441 $ 245,875
Amortization expense for the three months ended February 28, 1999
amounted $16,434 and for the year ended November 30, 1998 amounted
to $23,417.
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 $437,146 is accordingly reflected in
the balance sheet for the interim period. This deferral is the result of
the Company's $5,000,000 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:
February February
1999 1998
(In Millions)(In Millions)
Media advertising budget for the fiscal year $5.00 $5.00
Pro-rata portion for three months $1.25 $1.25
Media advertising spent 1.41 1.61
Accrual (deferral) ($ .16) ($ .36)
Anticipated Co-op advertising commitments $3.00 $3.00
Pro-rata portion for three months $ .75 $ .75
Co-op advertising spent 1.03 .97
Accrual (deferral) ($ .28) ($ .22)
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following items which exceeded 5% of total current liabilities are
included in accounts payable and accrued liabilities as of:
February 28, November 30,
1999 1998
a) Media advertising $ 981 $ 820
b) Coop advertising 558 494
c) Accrued returns 879 1,107
$2,418 $2,421
-10-
<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 February 28:
1999 1998
Interest income $32,800 $ 89,725
Dividend income 6,692 343
Miscellaneous 1,486 ( 3,814)
$40,978 $86,254
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 invest
ments at February 28, 1999 and November 30, 1998 were as follows:
<TABLE>
<CAPTION>
February 28, November 30,
1999 1998
Current: COST MARKET COST MARKET
<S> <C> <C> <C> <C>
Corporate obligations $ 984,853 $ 990,632 $ 780,776 $786,233
Government obligations
(including mortgage
backed securities) 493,361 496,645 841,067 847,219
Total 1,478,214 1,487,277 1,621,843 1,633,452
Non-Current:
Corporate obligations 730,968 736,060 1,030,044 1,038,450
Government obli-
gations 294,133 293,805 298,600 298,931
Preferred stock 512,561 505,850 512,561 511,500
Other equity
investments 461,000 421,979 361,000 323,372
Total 1,998,662 1,957,694 2,202,205 2,172,253
Total $3,476,876 $3,444,971 $3,824,048 $3,805,705
</TABLE>
-11-
<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 February 28, 1999 was $3,444,953 as compared to $3,805,705 at November 30, 1998.
The cost and market values of the investments at February 28, 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 $199,710 $ 199,710
GTE Southwest Deb 12/01/99 5.820% 100,000 99,851 100,269 100,269
Florida Power & Light 7/01/99 5.500% 300,000 295,776 300,261 300,261
Virginia Electric & Power 4/01/00 5.875% 250,000 246,117 251,097 251,097
GMAC Smartnotes 10/15/99 5.950% 200,000 200,000 200,392 200,392
Florida Power & Light 4/01/00 5.375% 200,000 199,850 199,962 199,962
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 1,726,691 1,726,691
</TABLE>
-12-
<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
GOVERNMENT OBLIGATIONS:
<S> <C> <C> <C> <C> <C> <C>
US Treasury Note 11/15/99 5.875 250,000 $ 249,141 $ 251,563 $ 251,563
US Treasury Zero Coupon 8/15/99 5.920 148,000 144,337 144,794 144,794
Federal Nat. Mtg. Note 7/30/99 5.860 100,000 99,883 100,289 100,289
FHLMC 1628-N 12/15/2023 6.500 50,000 41,031 41,292 41,292
EE Bonds - 7.180 90,000 103,806 103,806 103,806
FNMA 93-224-D 11/25/2023 6.500 104,000 101,873 100,560 100,560
FNMA 92-2-N 1/25/2024 6.500 52,000 47,424 48,147 48,147
787,495 790,451 790,451
</TABLE>
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
<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
EQUITY:
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock:
Tennessee Valley Authority
(QIDS) Qtrly Income Debt
Secs - Matures 3/31/2045 3/31/00 8.00% 13,600 $ 362,561 $ 353,600 $ 353,600
Merrill Lynch Trust 9/30/08 7.28% 6,000 150,000 152,250 152,250
Other Equity Investments:
First Australia Prime 100,000 100,000 100,000
Dreyfus Premier Limited
Term High Income CL B 121,000 114,236 114,236
Dreyfus High Yield
Strategies Fund 240,000 207,743 207,743
973,561 927,829 927,829
$3,476,876 $3,444,971 $3,444,971
</TABLE>
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - IMPACT OF YEAR 2000
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 has to
substantially 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 software and conversions to new software, the Year 2000 Issue
will not pose significant operational problems for its computer systems.
However, if such modifications 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 adverse 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.
-15-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - IMPACT OF YEAR 2000 (Continued)
The cost of addressing the Company's Year 2000 issues is expected to be
approximately $400,000 to $500,000. However, approximately $130,000
of these costs should be offset by a grant obtained 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 reprogram
ming 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.
-16-
<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the three month period ended February 28, 1999, the Company had revenues
of $9,786,738 and net income of $61,061 (net of consolidated subsidiary's
interest of $10,600) after a provision for income taxes of $76,712, as compared
to net revenues of $9,438,685 and net income of $375,955 after a provision for
income taxes of $232,548 for the three month period ended February 28, 1998.
Sales for the three months ended February 28, 1998 were up approximately
$400,000 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 three months were $1.09 million. Sales returns
continue to run approximately 7% to 8% of gross sales. Other income ($41,000
vs. $86,000) 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 59% for the
three months were down from the 61.5% of the prior year. This was primarily
due to the lower gross profit margins on FCA's sales during its initial few
months of selling. Gross margins are expected to improve in the future.
Advertising, cooperative and promotional allowance expenditures decreased
during the three month period from $2,160,785 to $2,070,072. Advertising ex-
penditures were 21% of sales for the three months ended February 28, 1999 as
compared with 23% for the period ended February 28, 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
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. 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 $437,146 is accordingly reflected in
the balance sheet for the interim period, as compared to $583,787 at February
28, 1998. This deferral is the result of the Company's $5 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 $1.41 million in the three months on media
advertising and, therefore, expensed $1.25 million and deferred $.16 million
as of February 28, 1999. Similarly, as of February 28, 1999, the Company's
co-op advertising commitments for the year ended November 30, 1999
are anticipated to be approximately $3 million of which approximately $1.03
million was spent in the first three months resulting in an expense of $.75
million and a deferral of
Comparatively as of February 28, 1998, the Company had anticipated media
advertising expense in fiscal year 1997 of $5 million and spent approximately
$1.6 million in the first three months resulting in a deferral of approximately
$.36 million. The anticipated Co-op commitments as of February 28, 1998 were
$3 million for the year of which $.97 million were spent for the three months
resulting in a $.22 million deferral.
Selling, general and administrative expenses ("SG&A") increased compared to
the prior year. The increase to $3,340,813 from $2,885,466 was due mostly to
the "SG&A" expenses ($353,000) incurred by the Company's newly formed sub-
sidiary.
-17-
<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
Research and development expenses for the three 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 decreased due to the fluctuation in the
necessary reserves on the changes in accounts receivable between the
respective period and the quarter just prior to it. Actual write-offs were
approximately $4,000 in 1999 as compared to none in 1998. The Company's
interest expense increased to $35,000 from nothing 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 February 28, 1999 consists of current
assets of $21,920,149 and current liabilities of $9,723,727. The Company's
cash position decreased due to the significant increase in its accounts
receivable primarily caused by the sales of its new subsidiary as well as a
slight increase in its own receivables. The Company's accounts payable also
increased due to FCA's new business. During the three month period ended
February 28, 1999, shareholders' equity increased from $15,591,651 at November
30, 1998 to $15,635,094 at February 28, 1999. This was due primarily to the
net income generated for the period.
During the three months, the Company used $1,550,000 in operations, generated
$1,600,000 from new borrowings, and used approximately $335,000 to purchase
assets and investments. These factors resulted in a net decrease in the
Company's cash of about $300,000.
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 has to sub-
stantially 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 software and conversions to new software, the Year 2000 Issue will
not pose significant operational problems for its computer systems. However,
if such modifications 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.
-18-
<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
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 adverse 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.
-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 three months
ended February 28, 1999.
-20-
<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 28,
1999 1998
Item 6.
Weighted average shares outstanding - Basic 7,111,472 7,238,993
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 903,827 752,780
Weighted average shares outstanding -
Diluted 8,015,299 7,991,773
Net income $ 61,061 $ 375,955
Per share amount
Basic $.01 $.05
Diluted $.01 $.05
-21-
<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, President
By:
Ira W. Berman, Secretary
-22-
<PAGE>
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<ARTICLE> 5
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> NOV-30-1999 NOV-30-1998
<PERIOD-END> FEB-28-1999 FEB-28-1998
<CASH> 241,709 2,568,863
<SECURITIES> 3,444,971 3,820,691
<RECEIVABLES> 11,908,528 7,036,727
<ALLOWANCES> 2,332,169 720,594
<INVENTORY> 8,689,534 6,617,428
<CURRENT-ASSETS> 21,920,149 18,881,579
<PP&E> 3,504,361 2,575,892
<DEPRECIATION> 2,262,410 1,894,851
<TOTAL-ASSETS> 25,377,219 21,968,481
<CURRENT-LIABILITIES> 9,723,727 7,501,821
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0 0
0 0
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<OTHER-SE> 15,562,423 14,393,989
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<CGS> 4,015,751 3,587,114
<TOTAL-COSTS> 9,638,365 8,830,182
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<LOSS-PROVISION> 47,318 63,237
<INTEREST-EXPENSE> 34,645 0
<INCOME-PRETAX> 148,373 608,503
<INCOME-TAX> 76,712 232,548
<INCOME-CONTINUING> 61,061 375,955
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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<NET-INCOME> 61,061 375,955
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