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 August 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 August 31, 1999
Class A Common Stock, $.01 Par Value - 1,020,930 shares as of
August 31, 1999
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
August 31, 1999 and November 30, 1998. . . . . . . . . . . . 1-2
Consolidated Statements of Operations
for the three months and nine months ended
August 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Comprehensive Income
for the three months and nine months ended
August 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the nine months ended August 31, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6
Notes to Consolidated Financial Statements . . . . . . . . .7-16
Management's 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>
August 31, November 30,
1999 1998
<S> <S> <S>
Current Assets
Cash and cash equivalents $ 836,061 $ 542,289
Short-term investments and marketable
securities 1,071,738 1,633,452
Accounts receivable, net of allowances of
$1,236,012 and $1,318,185, respectively 6,933,892 7,878,000
Inventories 7,063,088 9,059,456
Prepaid expenses and sundry receivables 349,328 317,318
Deferred income taxes 945,264 974,922
Prepaid income taxes and refunds due 1,294,598 72,513
Deferred advertising 1,551,113 -
Total Current Assets 20,045,082 20,477,950
Property and Equipment, net of accumulated
depreciation and amortization 764,523 866,663
Intangible Assets, net of accumulated
amortization of $71,840 at August 31, 1999
and $71,373 at November 30, 1998 169,756 245,875
Other Assets
Marketable securities 1,632,012 2,172,253
Due from officers - Non-current 63,393 65,250
Deferred income taxes 42,031 127,256
Other 55,289 54,889
Total Other Assets 1,792,725 2,419,648
Total Assets $22,772,086 $24,010,136
</TABLE>
See Notes Consolidated to Financial Statements.
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
August 31, November 30,
1999 1998
<C> <S> <S>
Current Liabilities
Notes payable $ 1,900,000 $ 1,550,000
Accounts payable and accrued liabilities 6,206,542 6,259,967
Income taxes payable - 600,720
Total Current Liabilities 8,106,542 8,410,687
Minority Interest in Consolidated
Subsidiary - 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 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 10,406,853 11,238,704
Unrealized gains (losses) on marketable
securities ( 103,042) ( 18,343)
14,830,710 15,747,260
Less: Treasury Stock (95,996 and 89,519
shares at August 31, 1999 and
November 30, 1998, respectively) 165,166 155,609
Total Shareholders' Equity 14,665,544 15,591,651
Total Liabilities and Shareholders' Equity$22,772,086 $24,010,136
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues
Sales of Health and
Beauty Aid
Products - Net $8,631,951 $9,774,723 $28,398,978 $29,449,621
Other income 102,623 71,418 186,702 254,944
8,734,574 9,846,141 28,585,680 29,704,565
Costs and Expenses
Costs of sales 3,481,368 3,384,348 11,073,391 10,944,866
Selling, general and
administrative expenses3,153,378 3,047,802 9,509,870 8,855,642
Advertising, cooperative
and promotions 1,851,391 2,683,437 6,636,603 6,748,631
Research and development 118,183 152,425 373,392 457,745
Provision for doubtful
accounts ( 4,044) 24,181 89,758 91,829
8,600,276 9,292,193 27,683,014 27,098,713
Income before Provision
for Income Taxes 134,298 553,948 902,666 2,605,852
Provision for Income
Taxes 38,697 193,882 290,648 1,004,141
Income From Continuing
Operations 95,601 360,066 612,018 1,601,711
Income (Loss) From
Discontinued Operations (1,252,768) 80,289 (1,451,509) 19,443
Net Income (Loss) ($1,157,167) $ 440,355 ($ 839,491) $1,621,154
Basic Diluted Basic Diluted Basic Diluted Basic Diluted
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings per Share
Continuing Operations $ .01 $.01 $.05 $.04 $.09 $.09 $.22 $.20
Discontinued Operations( .17) ( .17) .01 .01 ( .21) ( .21) - -
($.16) ($.16) $.06 $.05 ($.12) ($.12) $.22 $.20
</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 Nine Months Ended
August 31, August 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Income (Loss) ($1,157,167) $440,355 ($ 839,491) $1,621,154
Other Comprehensive Income
Unrealized holding gains
(loss) on investments ( 77,580) ( 47,841) ( 84,699) ( 40,193)
Comprehensive Income ($1,234,747) $392,514 ($924,190) $1,580,961
Earnings Per Share:
Basic ($.17) $.05 ($.13) $.22
Diluted ($.17) $.05 ($.13) $.20
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Nine Months
Ended Ended
August 31, August 31,
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income ($ 839,491) $1,621,154
Adjustments to reconcile net income to net
cash (used in) operating activities:
Depreciation and amortization 287,428 244,689
Minority deficiency in consolidated
subsidiaries ( 155) ( 25,897)
Amortization of bond premium 1,414 1,415
Loss on abandoned intangibles 463,512 -
(Gain) on sale of marketable securities ( 21,532) ( 5,707)
Decrease (increase) in deferred income taxes 114,883 ( 413,999)
Decrease (increase) in accounts
receivable - Net 944,108 ( 3,436,102)
Decrease (increase) in inventory 1,996,368 ( 2,971,028)
(Increase) in prepaid expenses and
miscellaneous receivables ( 32,010) ( 1,668,334)
(Increase) in deferred advertising (1,551,113) -
(Decrease) increase in accounts payable
and accrued liabilities ( 53,425) 2,747,041
(Decrease) increase in taxes payable ( 600,720) 559,701
(Increase) in security deposits ( 400) ( 820)
(Increase) in prepaid income taxes and
refunds due ( 1,222,085) -
Net Cash (Used in) Operating Activities ( 513,218) ( 3,347,887)
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment( 117,946) ( 487,533)
Acquisition of intangible assets ( 454,735) ( 105,651)
Proceeds of money due from officers 1,857 -
Purchase of marketable securities ( 282,960) ( 1,492,833)
Proceeds from sale and maturity of
investments 1,320,331 1,513,943
Net Cash Provided by (Used in)
Investing Activities 466,547 ( 572,074)
Cash Flows from Financing Activities:
Proceeds from borrowings 2,850,000 700,000
Payment on debt ( 2,500,000) -
Purchase of treasury stock ( 9,557) -
Net Cash Provided by Financing Activities 340,443 700,000
Net Increase (Decrease) in Cash 293,772 ( 3,219,961)
Cash at Beginning of Period 542,289 3,649,774
Cash at End of Period $ 836,061 $ 429,813
</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>
Nine Months Nine Months
Ended Ended
August 31, August 31,
1999 1998
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 95,971 $ 4,305
Income taxes 1,128,793 725,000
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)
$ - $ -
Minority Shareholders' Losses Absorbed
by the Company:
Minority interest $ 7,643 $ -
Retained earnings ( 7,643) -
$ - $ -
</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 nine month period ended August 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., ("FCA"), which manufactures and distributes
perfume products.
During the third quarter of fiscal 1999, CCA adopted a formal plan to
dispose of the intangible assets and substantially all of the inventory of
FCA. CCA anticipates the disposal to be completed by the last quarter of
fiscal 2000. As a result, inventory has been written down to expected net
realizable value. In addition, CCA has written off intangible assets
associated with the acquisition of and advances to FCA. The previous
periods financial statements have been restated to give effect to the
discontinued operations.
Components of discontinued operations consist of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Income (loss) from
operations of FCA to
be disposed ($ 431,885) $123,490 ($ 919,052) ($21,577)
Provision (benefit) of
income taxes 67,603 ( 43,201) 356,029 41,020
( 364,282) 80,289 ( 563,023) 19,443
Estimated loss on
disposal of FCA ( 1,467,226) - ( 1,467,226) -
(Provision) benefit
of income taxes 578,740 - 578,740 -
( 888,486) - ( 888,486) -
Total ($1,252,768) $ 80,289 ($1,451,509) $19,443
</TABLE>
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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 obsoles
cence is determined.
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company charges to
expense repairs and maintenance items, while major improvements and
betterments are capitalized. When the Company sells or otherwise disposes
of property and equipment items, the cost and related accumulated
depreciation are removed from the respective accounts and any gain or loss
is included in earnings.
Depreciation and amortization are provided on the straight-line method over
the following estimated useful lives or lease terms of the assets:
Machinery and equipment 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.
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.
-9-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share:
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" in 1998. Basic earnings per share
is calculated using the average number of shares of common stock
outstanding during the year. Diluted earnings per share is computed on the
basis of the 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:
August 31, November 30,
1999 1998
Raw materials $4,210,995 $5,828,257
Finished goods 2,852,093 3,231,199
$7,063,088 $9,059,456
At August 31, 1999 and November 30, 1998, the Company had reserves
for obsolescence as follows:
August 31, November 30,
1999 1998
CCA $ 954,625 $736,805
FCA 1,150,843 100,000
Total $2,105,468 $836,805
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<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:
August 31, November 30,
1999 1998
Machinery and equipment $ 299,527 $ 297,615
Furniture and equipment 742,549 721,296
Transportation equipment 10,918 10,918
Tools, dies, and masters 1,892,082 1,819,974
Leasehold improvements 131,147 108,474
3,076,223 2,958,277
Less: Accumulated depreciation
and amortization 2,311,700 2,091,614
Property and Equipment - Net $ 764,523 $ 866,663
Depreciation expense for the nine months ended August 31, 1999
amounted to $220,086 and for the year ended November 30, 1998
amounted to $318,715.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
August 31, November 30,
1999 1998
Intangibles $ - $ 75,652
Patents and trademarks 241,596 241,596
241,596 317,248
Less: Accumulated amortization 71,840 71,373
Intangible Assets - Net $169,756 $245,875
Amortization expense for the nine months ended August 31, 1999
amounted to $67,342 and for the year ended November 30, 1998
amounted to $23,417. During the third quarter of fiscal 1999, the
Company wrote off $66,875 of accumulated amortization associated with
the disposal of FCA. (See Note 2).
In March 1998, the Company acquired, through its newly formed 80%
owned subsidiary, 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, had
been recorded as intangible assets on FCA's books but has consequently been
written off in full in conjunction with the discontinuance of FCA's perfume
lines. During the third quarter of fiscal 1999, the Company wrote off
$66,875 of accumulated amortization associated with the disposal of FCA.
(See Note 2).
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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 $1,551,113 is accordingly reflected
in the balance sheet for the interim period. This deferral is the result of
the Company's $5,300,000 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:
August August
1999 1998
(In Millions)(In Millions)
Media advertising budget for the fiscal year $5.30 $5.50
Pro-rata portion for nine months $3.98 $4.13
Media advertising spent 4.71 5.25
Accrual (deferral) ($ .73) ($1.12)
Anticipated Co-op advertising commitments $3.30 $3.10
Pro-rata portion for nine months $2.48 $2.33
Co-op advertising spent 3.30 2.78
Accrual (deferral) ($ .82) ($ .45)
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:
August 31, November 30,
1999 1998
(In 000's) (In 000's)
a) Media advertising $ 543 $ 820
b) Coop advertising 612 494
c) Accrued returns 1,485 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 August 31:
1999 1998
Interest income $146,190 $242,038
Dividend income 32,673 7,198
Miscellaneous 7,839 5,708
$186,702 $254,944
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 August 31, 1999 and November 30, 1998 were as
follows:
<TABLE>
<CAPTION>
August 31, November 30,
1999 1998
Current: COST MARKET COST MARKET
<S> <C> <C> <C> <C>
Corporate obligations $1,040,045 $1,043,648$ 780,776$ 786,233
Government obligations
(including mortgage
backed securities) - - 841,067 847,219
Other equity invest-
ments 32,893 28,090 - -
Total 1,072,938 1,071,738 1,621,843 1,633,452
Non-Current:
Corporate obligations 190,000 190,000 1,030,044 1,038,450
Government obli-
gations 562,202 553,166 298,600 298,931
Preferred stock 512,561 488,257 512,561 511,500
Other equity
investments 469,092 400,589 361,000 323,372
Total 1,733,855 1,632,012 2,202,205 2,172,253
Total $2,806,793 $2,703,750$3,824,048$3,805,705
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<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<TABLE>
NOTE 10 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at August 31, 1999 was $2,703,751 as compared to $3,805,705 at November 30, 1998.
The cost and market values of the investments at August 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 MaturityInterest 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 $ 199,698 $ 199,698
GTE Southwest Deb 12/01/99 5.820% 100,000 99,851 99,916 99,916
Virginia Electric & Power 4/01/00 5.875% 250,000 246,118 249,698 249,698
GMAC Smartnotes 10/15/99 5.950% 200,000 200,000 200,050 200,050
Florida Power & Light 4/01/00 5.375% 200,000 199,850 199,286 199,286
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
1,230,045 1,233,648 1,233,648
</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
GOVERNMENT OBLIGATIONS:
<S> <C> <C> <C> <C> <C> <C>
US Treasury Note 11/30/00 4.625% 100,000 $ 100,190 $ 98,719 $ 98,719
US Treasury Note 9/30/00 5.920 300,000 300,925 296,439 296,439
FHLMC 1628-N 12/15/2023 6.500 50,000 34,264 33,922 33,922
FNMA 93-224-D 11/25/2023 6.500 104,000 96,031 92,587 92,587
FNMA 94-2-N 1/25/2024 6.500 52,000 30,792 31,499 31,499
562,202 553,166 553,166
</TABLE>
-15-
<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 MaturityInterest Bonds and Cost of at Balance Issue Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
EQUITY:
Preferred Stock:
<S> <C> <C> <C> <C> <C> <C>
Tennessee Valley Authority
(QIDS) Qtrly Income Debt
Secs - Matures 3/31/2045 3/31/00 8.00% 13,600 $ 362,561 $ 344,257 $ 344,257
Merrill Lynch Trust 9/30/08 7.28% 6,000 150,000 144,000 144,000
Other Equity Investments:
First Australia Prime 100,000 100,000 100,000
Dreyfus Premier Limited
Term High Income CL B 133,497 116,059 116,059
Dreyfus High Yield
Strategies Fund 268,488 212,621 212,621
1,014,546 916,937 916,937
$2,806,793 $2,703,751 $2,703,751
</TABLE>
-16-
<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the nine month period ended August 31, 1999, the Company adopted a
plan for substantially discontinuing operations of its fragrance subsidiary
company, Fragrance Corporation of America, Ltd. As a one time loss, it wrote
off $1,476,226 primarily consisting of intangible assets and substantially all
of the inventory of its subsidiary and incurred $919,052 of losses from dis-
continued operations resulting in a net after taxes charge to income of
$1,451,509.
For the nine month period for the continuing operations, the Company had
revenues of $28,585,680 and net income of $612,018 after a provision for income
taxes of $290,648, as compared to revenues of $29,704,565 and net income of
$1,601,711 after a provision for income taxes of $1,004,141.
Net sales for the nine months ended August 31, 1999 of $28,398,978 were
down approximately $1,050,000 from the 1998 sales for nine months of
$29,449,621. Sales returns continue to run approximately 8% of gross sales.
Other income of $186,702 versus $254,944 was less due to the decrease in the
company's interest income due to their use of cash in financing FCA. Gross
margins of 61% for the nine months were down from 62.8% from the prior year.
Advertising, cooperative and promotional allowance expenditures decreased
during the nine month period from $6,748,631 to $6,636,603. Advertising
expenditures were 23.4% of sales for the nine months ended August 31, 1999 as
compared with 23% for the period ended August 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 pro-
motions 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 $1,551,113 is accordingly reflected in the balance
sheet for the interim period, as compared to $1,575,814 at August 31, 1998.
This deferral is the result of the Company's $5.3 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 $4.71 million in the nine months on media adver-
tising and, therefore, expensed $3.98 million and deferred $.73 million as of
August 31,1999. Similarly, as of August 31, 1999, the Company's co-op
advertising commitments for the year ended November 30, 1999 are anticipated
to be approximately $3.3 million of which approximately $3.3 million was spent
in the first nine months resulting in an expense of $2.48 million and a
deferral of approximately $.82 million as of August 31, 1999.
Comparatively as of August 31, 1998, the Company had anticipated media
advertising expense in fiscal year 1998 of $5.5 million and spent approximately
$5.25 million in the first nine months resulting in a deferral of approximately
$1.12 million. The anticipated Co-op commitments as of August 31, 1998 were
$3.1 million for the year of which $2.78 million were spent for the nine months
resulting in a $.45 million deferral.
-17-
<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 $9,509,870 from $8,855,642 was due mostly to
the cost of improving the software programs to comply with the Y2K issues, the
introduction of a website and additional sales promotions and warehouse.
For the three month period ended August 31, 1999, net sales were $8,631,951
as compared to $9,774,723 for August 31, 1998. Income for the quarter before
taxes decreased to $134,298 from $553,948. Gross margins of approximately
60% for the three months ended August 31, 1999 were down from 65% in 1998.
Advertising, cooperative and promotional allowance expense during the quarter
decreased to $1,851,391 from $2,683,437. Advertising expenses were 21.45%
of sales for the quarter in 1999 as compared to 27.45% in 1998. Selling,
general and administrative expenses were approximately 36.5% in the current
quarter as compared to 31.2% in 1998.
Research and development expenses for the three and nine 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 reduction in reserves
on the decreasing accounts receivable. Actual write-offs were approximately
$42,000 in 1999 as compared to none in 1998. The Company's interest expense
of $108,626, all of which was attributable to its discontinued operations, was
up from $4,305 for the prior year period.
The Company's sales were primarily to drugstore chains, food chains and mass
merchandisers.
The Company's financial position as at August 31, 1999 consists of current
assets of $20,045,082 and current liabilities of $8,106,542. The Company's
cash position increased due mostly to the liquidation of some of its marketable
securities. The Company's accounts payable decreased by $53,425. During the
nine month period ended August 31, 1999, shareholders' equity decreased from
$15,591,651 at November 30, 1998 to $14,665,544 at August 31, 1999. This was
due primarily to the net loss generated for the period.
During the nine months, the Company used $513,000 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 $118,000 to purchase new fixed assets;
and generated, $350,000 from new borrowings and approximately $1,037,000 from
the net liquidations of securities. These factors resulted in a net increase
in the Company's cash of about $294,000.
-18-
<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, in-
cluding, 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
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
thereeafter. 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.
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 pos-
sibly, 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>
PART II, ITEM 6. (Continued) EXHIBIT 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended Nine Months Ended
August 31, August 31,
1999 1998 1999 1998
Item 6.
Weighted average shares
outstanding - Basic 7,171,133 7,259,581 7,171,133 7,243,417
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price * 812,644 * 777,515
Weighted average shares
outstanding - Diluted 7,171,133 8,072,225 7,171,133 8,020,932
Net income (loss) ($1,157,167) $ 440,355 ($ 839,491) $1,621,153
Per share amount
Basic ($.16) $.06 ($.12) $.22
Diluted ($.16) $.05 ($.12) $.20
Stock options were not included in computed diluted weighted average shares
outstanding because their effect were antidilutive.
-20-
<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 nine months ended
August 31, 1999.
-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>
[ARTICLE] 5
[MULTIPLIER] 1
<TABLE>
<S> <C> <C> <C> <C>
[PERIOD-TYPE] 9-MOS 9-MOS 3-MOS 3-MOS
[FISCAL-YEAR-END] NOV-30-1998 NOV-30-1998 NOV-30-1998 NOV-30-1998
[PERIOD-END] AUG-31-1999 AUG-31-1998 AUG-31-1999 AUG-31-1998
[CASH] 836,061 429,813 836,061 429,813
[SECURITIES] 2,703,750 3,742,124 2,703,750 3,742,124
[RECEIVABLES] 8,169,904 8,376,317 8,169,904 8,376,317
[ALLOWANCES] 1,236,012 1,008,942 1,236,012 1,008,942
[INVENTORY] 7,063,088 8,985,700 7,063,088 8,985,700
[CURRENT-ASSETS] 20,045,082 21,755,418 20,045,082 21,755,418
[PP&E] 3,389,659 2,746,461 3,389,659 2,746,461
[DEPRECIATION] 2,383,540 2,001,360 2,383,540 2,001,360
[TOTAL-ASSETS] 22,772,086 24,786,297 22,772,086 24,786,297
[CURRENT-LIABILITIES] 8,106,542 9,146,511 8,106,542 9,146,511
[BONDS] 0 0 0 0
[PREFERRED-MANDATORY] 0 0 0 0
[PREFERRED] 0 0 0 0
[COMMON] 72,671 72,596 72,671 72,596
[OTHER-SE] 14,592,873 15,585,084 14,592,873 15,585,084
[TOTAL-LIABILITY-AND-EQUITY] 22,772,086 24,786,297 22,772,086 24,786,297
[SALES] 28,398,978 29,449,621 8,631,951 9,774,723
[TOTAL-REVENUES] 28,585,680 29,704,565 8,734,574 9,846,141
[CGS] 11,073,391 10,944,866 3,481,368 3,384,348
[TOTAL-COSTS] 27,683,014 27,098,713 8,600,276 9,292,193
[OTHER-EXPENSES] 0 0 0 0
[LOSS-PROVISION] 89,758 91,829 (4,044) 24,181
[INTEREST-EXPENSE] 0 0 0 0
<INCOME PRETAX> 902,666 2,605,852 134,298 553,948
[INCOME-TAX] 290,648 1,004,141 38,697 193,882
[INCOME-CONTINUING] 612,015 1,601,711 95,601 360,066
[DISCONTINUED] ( 1,451,509) 19,443 ( 1,252,768) 80,289
[EXTRAORDINARY] 0 0 0 0
[CHANGES] 0 0 0 0
[NET-INCOME] ( 839,491) 1,621,154 ( 1,157,167) 440,355
[EPS-BASIC] (.12) .22 (.16) .06
[EPS-DILUTED] (.12) .20 (.16) .05
</TABLE>
