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, 2000
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 - 6,225,155 shares as of May 31, 2000
Class A Common Stock, $.01 Par Value - 1,020,930 shares as of
May 31, 2000
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
May 31, 2000 and November 30, 1999 . . . . . . . . . . . . . 1-2
Consolidated Statements of Operations
for the three months and six months ended
May 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Comprehensive Income
for the three months and six months ended
May 31, 2000 and 1999. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the six months ended May 31, 2000
and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . .6-15
Management's Discussion and Analysis of
Results of Operations and Financial
Condition . . . . . . . . . . . . . . . . . . . . . . . . 16-17
PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . 18-19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
A S S E T S
<CAPTION>
May 31, November 30,
2000 1999
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 469,982 $ 807,360
Short-term investments and marketable
securities (Notes 3 and 10) 1,727,202 1,490,469
Accounts receivable, net of allowances of
$1,110,895 and $1,183,576, respectively 10,159,045 7,371,532
Inventories 5,624,681 6,235,270
Prepaid expenses and sundry receivables 326,524 822,816
Deferred income taxes 1,170,288 1,178,513
Prepaid income taxes and refunds due 441,759 714,835
Deferred advertising 2,679,971 -
Total Current Assets 22,599,452 18,620,795
Property and Equipment, net of accumulated
depreciation and amortization 798,967 739,728
Intangible Assets, net of accumulated
amortization of $78,350 at May 31, 2000
and $71,840 at November 30, 1999 163,824 169,756
Other Assets
Marketable securities 1,540,734 1,809,770
Due from officers - Non-current 42,605 57,918
Deferred income taxes 39,920 42,031
Other 54,646 54,989
Total Other Assets 1,677,905 1,964,708
Total Assets $25,240,148 $21,494,987
</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,
2000 1999
<S> <C> <C>
Current Liabilities
Notes payable - Current portion $ 1,400,000 $ 1,400,000
Accounts payable and accrued liabilities 8,180,686 4,928,905
Total Current Liabilities 9,580,686 6,328,905
Shareholders' Equity
Common stock, $.01 par; authorized
15,000,000 shares; issued and
outstanding 6,321,151 shares 63,212 63,212
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
1,020,930 10,209 10,209
Additional paid-in capital 4,453,478 4,453,478
Retained earnings 11,499,887 10,955,203
Accumulated other comprehensive income ( 202,158) ( 150,854)
15,824,628 15,331,248
Less: Treasury Stock (95,996 shares) 165,166 165,166
Total Shareholders' Equity 15,659,462 15,166,082
Total Liabilities and Shareholders' Equity $25,240,148 $21,494,987
</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,
2000 1999 2000 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues
Sales of Health and
Beauty Aid
Products - Net $11,931,856 $11,109,844 $20,505,775 $19,767,027
Other income 70,623 43,101 132,824 84,079
12,002,479 11,152,945 20,638,599 19,851,106
Costs and Expenses
Costs of sales 4,184,558 4,026,263 7,888,589 7,565,382
Selling, general and
administrative expenses 3,512,913 3,389,518 6,714,400 6,309,093
Advertising, cooperative
and promotions 2,850,053 2,765,095 4,686,304 4,785,212
Research and development 157,842 125,443 282,862 255,209
Provision for doubtful
accounts 67,184 50,094 134,311 93,802
Interest expense 46,031 - 51,455 -
10,818,581 10,356,413 19,757,921 19,008,698
Income before
Income Taxes 1,183,898 796,532 880,678 842,408
Provision for Income
Taxes 415,604 235,007 308,431 270,954
Income Before (Loss)
From Discontinued
Operations 768,294 561,525 572,247 571,454
(Loss) From
Discontinued Operations ( 17,488) ( 380,393) ( 27,563) ( 318,661)
Net Income $ 750,806 $ 181,132 $ 544,684 $252,793
Earnings per Share
Basic $.10 $.03 $.08 $.04
Diluted $.10 $.02 $.07 $.03
</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,
2000 1999 2000 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net Income $750,806 $181,132 $544,684 $252,793
Other Comprehensive Income
Unrealized holding gains
(loss) on investments ( 6,459) 6,461 ( 51,304) ( 7,119)
Provision (Benefit) for Taxes ( 2,996) 2,650 ( 19,496) ( 2,850)
Other Comprehensive
Income (Loss) - Net ( 3,463) 3,811 ( 30,782) ( 4,269)
Comprehensive Income $747,343 $184,943 $513,902 $248,524
Earnings Per Share:
Basic $.10 $.03 $.08 $.04
Diluted $.10 $.02 $.07 $.03
</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,
2000 1999
(Restated)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 544,684 $ 317,676
Adjustments to reconcile net income to net
cash (used in) operating activities:
Depreciation and amortization 199,575 173,795
Minority deficiency in consolidated
subsidiaries - ( 64,883)
Amortization of bond premium - 948
(Gain) loss on sale of marketable
securities ( 4,956) 16,766
Decrease in deferred income taxes 10,336 53,989
(Increase) in accounts receivable - Net (2,787,513) ( 1,941,852)
Decrease in inventory 610,589 1,004,892
Decrease (increase) in prepaid expenses and
miscellaneous receivables 496,290 ( 95,436)
(Increase) in deferred advertising (2,679,971) ( 1,265,960)
Increase in accounts payable and
accrued liabilities 3,251,781 2,095,043
Increase (decrease) in prepaid income
taxes and refunds due 273,076 ( 976,650)
Decrease (increase) in security deposits 343 ( 400)
Net Cash (Used in) Operating Activities ( 85,766) ( 682,072)
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment ( 252,304) ( 86,562)
Acquisition of intangible assets ( 578) ( 454,087)
Proceeds of money due from officers 15,313 432
Purchase of marketable securities (1,106,706) ( 122,150)
Proceeds from sale and maturity of
investments 1,092,663 563,783
Purchase of treasury stock - ( 9,557)
Net Cash (Used in) Investing
Activities ( 251,612) ( 108,141)
Cash Flows from Financing Activities:
Proceeds from borrowings 1,400,000 2,250,000
Payment on debt (1,400,000) ( 1,900,000)
Net Cash Provided by Financing Activities - 350,000
Net (Decrease) in Cash ( 337,378) ( 440,213)
Cash at Beginning of Period 807,360 542,289
Cash at End of Period $ 469,982 $ 102,076
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 55,646 $ 76,573
Income taxes 4,467 1,018,068
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<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. Operating results for the six month period
ended May 31, 2000 are not necessarily indicative of the results
that may be expected for the year ended November 30, 2000. For
further information, refer to the consolidated financial state
ments and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended November 30, 1999.
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. In 1999, the Company adopted a formal plan to
discontinue the operations of the subsidiary. The 1999 financial
statements have been restated to give effect for discontinued
operations.
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 inter-company accounts and transactions have been
eliminated.
Use of Estimates:
The consolidated financial statements include the use of esti-
mates, 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.
-6-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates:
The consolidated financial statements include the use of esti
mates, 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 1999, two officers/shareholders exercised in the
aggregate 100,000 options in exchange for 25,000 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.
-7-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company charges to
expense repairs and maintenance items, while major improvements
and betterments are capitalized. When the Company sells or
otherwise disposes of property and equipment items, the cost and
related accumulated depreciation are removed from the respective
accounts and any gain or loss is included in earnings.
Depreciation and amortization are provided on the straight-line
method over the following estimated useful lives or lease terms of
the assets:
Machinery and equipment 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
instruments approximate their respective fair value.
Income Taxes:
Income tax expense includes federal and state taxes currently
payable and deferred taxes arising from temporary differences
between income for financial reporting and income tax purposes.
Tax Credits:
Tax credits, when present, are accounted for using the flow-
through method as a reduction of income taxes in the years
utilized.
-8-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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, there-
fore, records a reserve for returns equal to its gross profit on its histori-
cal 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.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the 2000 presentation.
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
May 31, November 30,
2000 1999
Raw materials $3,587,141 $3,509,103
Finished goods 2,037,540 2,726,167
$5,624,681 $6,235,270
At May 31, 2000 and November 30, 1999, the Company had a reserve
for obsolescence of $792,227 and $1,056,789, 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,
2000 1999
Machinery and equipment $ 323,233 $ 299,528
Furniture and equipment 901,662 742,547
Transportation equipment 10,918 10,918
Tools, dies, and masters 1,964,995 1,914,684
Leasehold improvements 166,820 147,647
3,367,628 3,115,324
Less: Accumulated depreciation
and amortization 2,568,661 2,375,596
Property and Equipment - Net $ 798,967 $ 739,728
Depreciation expense for the six months ended May 31, 2000 and
1999 amounted to $193,065 and $136,249, respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
May 31, November 30,
2000 1999
Patents and trademarks $242,174 $241,596
Less: Accumulated amortization 78,350 71,840
Intangible Assets - Net $163,824 $169,756
Amortization expense for the six months ended May 31, 2000 and
1999 amounted to $6,510 and $7,278, respectively.
-10-
<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
$2,679,971 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:
2000 1999
(In Millions)(In Millions)
Media advertising budget for the
fiscal year $6.00 $6.00
Pro-rata portion for six months $3.00 $3.00
Media advertising spent 5.29 3.32
Accrual (deferral) ($2.29) ($ .32)
Anticipated Co-op advertising commitments $2.70 $3.50
Pro-rata portion for six months $1.35 $1.75
Co-op advertising spent 1.74 2.70
Accrual (deferral) ($ .39) ($ .95)
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,
2000 1999
(In Thousands) (In Thousands)
a) Media advertising $3,114 $ 560
b) Coop advertising 667 *
c) Accrued returns * 630
$3,781 $ 1,190
* under 5%
<PAGE>
-11-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
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:
2000 1999
Interest income $106,331 $84,896
Dividend income 20,698 19,742
Miscellaneous 5,795 ( 20,559)
$132,824 $84,079
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, 2000 and November 30, 1999 were as follows:
<CAPTION>
May 31, November 30,
2000 1999
<S> <C> <C> <C> <C>
Current: COST MARKET COST MARKET
Corporate
obligations $ - $ - $ 745,044 $ 748,894
Government obligations
(including mortgage
backed securities) 1,738,026 1,727,202 743,777 741,575
Total 1,738,026 1,727,202 1,488,821 1,490,469
Non-Current:
Corporate obli-
gations 536,000 527,349 536,000 532,891
Government obli-
gations 151,540 142,267 399,534 390,517
Preferred stock 612,561 567,678 612,561 571,535
Other equity
investments 431,965 303,440 414,177 314,827
Total 1,732,066 1,540,734 1,962,272 1,809,770
Total $3,470,092 $3,267,936 $3,451,093 $3,300,239
</TABLE>
-12-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at May 31, 2000 was $3,267,936 as compared to $3,300,239 at November 30, 1999.
The cost and market values of the investments at May 31, 2000 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 Smartnotes 10/15/019 5.950% 536,000 $536,000 $527,349 $527,349
</TABLE>
-13-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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>
FHLMC 1628-N 12/15/2023 6.500% $ 50,000 $ 32,498 $ 30,982 $ 30,982
FNMA 93-224-D 11/25/2023 6.500 104,000 91,182 84,034 84,034
FNMA 92-2-N 1/25/2024 6.500 52,000 27,860 27,251 27,251
US Treasury Note 11/30/2000 4.625 100,000 100,190 99,094 99,094
US Treasury Note 1/31/2001 4.500 250,000 247,891 246,562 246,562
US Treasury Note 9/30/2000 4.500 300,000 300,924 298,125 298,125
US Treasury Note 5/31/2001 5.250 250,000 251,615 246,408 246,408
US Treasury Note 11/30/2000 4.625 200,000 198,694 198,188 198,188
US Treasury Note 5/15/2001 5.625 200,000 202,075 198,000 198,000
US Treasury Bill 10/5/2000 450,000 436,637 440,825 440,825
1,889,566 1,869,469 1,869,469
</TABLE>
-14-
<PAGE>
CCA INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 3/31/45 8.00% 13,600 $ 362,561 $ 338,300 $ 338,300
Merrill Lynch Trust 9/30/08 7.28% 6,000 150,000 129,378 129,378
Other Equity Investments:
First Australia Prime 100,000 100,000 100,000
Dreyfus Premier Limited
Term High Income CL B 3.8* 11,537 142,174 114,906 114,906
Dreyfus High Yield
Strategies Fund 10.5* 20,382 289,791 188,534 188,534
1,044,526 871,118 871,118
$3,470,092 $3,267,936 $3,267,936
* Estimated
</TABLE>
-15-
<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the three month period ended May 31, 2000, the Company had revenues
of $12,002,479 and a net profit after taxes of $750,806. In the prior year's
period, the Company had revenues of $11,152,945 and a net income of $181,132
(excluding sales from discontinued operations of $210,940). Sales for the
current quarter were increased from the Company's brand products. Sales
returns ran approximately 6.5% of gross sales substantially similar to the
prior year period.
Advertising, cooperative and promotional allowance expenditures were
$2,850,053 as compared to $2,765,095. Advertising expenditures were 24% of
sales for the period as compared to 25%. Since both co-op advertising, media
advertising and promotions have a material effect on the Company's opera
tions, the Company attempts to anticipate its advertising and promotional
commitments as a percentage of anticipated gross sales in order to spread the
costs on its quarterly income statements.
For the six month period ended May 31, 2000, the Company had revenues
of $20,638,599 and net income of $544,684 after a provision of income taxes
of $308,431. In the prior year's period, the Company had revenues of
$19,851,106 and net income of $252,793 after a provision for income taxes of
$270,954. Net sales for the six month period ended May 31, 2000
($20,505,775) were up approximately $740,000 from the 1999 sales for the six
months ($19,767,027) (excluding sales of $1,299,517 from discontinued
operations). Gross profit margins for the six month period were 61.5%
similar to the prior year, despite a special credit allowance of
approximately $250,000 in sales allowances with a major account, which had
a negative impact on the gross profit margin but decreased the cooperative
advertising anticipated expenditures by that amount.
Advertising, cooperative and promotional allowance expenditures
decreased during the six month period from $4,785,212 to $4,686,304.
Advertising expenditures were 23% of sales for the six months ended May 31,
2000 as compared with 24% for the period ended May 31, 1999. 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 $2,679,971 is accordingly reflected in the balance sheet for the
interim period, as compared to $1,265,960 at May 31, 1999. The deferral is
the result of the Company's $6 million media budget for the entire year which
is predicated on substantially lower spending in the third and fourth
quarters; as well as the Company's $2,700,000 co-op advertising budget.
Specifically, the Company spent approximately $5.3 million in the six months
on media advertising and, therefore, expensed $3 million and deferred $2.3
-16-
<PAGE>
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
million as of May 31, 2000. Similarly, as of May 31, 2000, the Company's co-op
advertising commitments for the year ended November 30, 2000 were anticipated
to be approximately $2.7 million of which approximately $1.7 million was
spent in the first six months resulting in an expense of $1.35 million and
a deferral of approximately $400,000 as of May 31, 2000. Approximately
$500,000 has been reduced in the estimated co-op commitment but will be
offset with a special credit allowance against sales given to a major account
which will reduce sales by that amount and have a negative effect on gross
profit margins.
Comparatively as of May 31, 1999, the Company had anticipated media
advertising expense in fiscal year 1999 of $6 million and spent approximately
$3.32 million in the first six months resulting in a deferral of approxi
mately $.32 million. The anticipated co-op commitments as of May 31, 1999
were $3.5 million for the year of which $2.7 million were spent for the six
months resulting in a $.95 million deferral.
Selling, general and administrative expenses ("SG&A")for the three month
and six month periods ($3,512,913 compared to $3,389,518, and $6,714,400
compared to $6,309,093, respectively) increased primarily due to the
increased shipping cost associated with the larger sales volume coupled with
a rise in freight rates as a result of the increase in oil costs; as well as
proportionate increases in commissions.
Research and development expenses for the three and six months were
substantially the same.
Bad debt expense for the six month period increased due to the necessary
reserves on the increasing accounts receivable. Actual write-offs were
approximately $30,000 in 2000 as compared to $32,000 in 1999.
The Company's sales were primarily to drugstore chains, food chains and
mass merchandisers.
The Company's financial position as at May 31, 2000 consists of current
assets of $22,599,452 and current liabilities of $9,580,686. The Company's
cash position decreased due to the significant increase in its accounts
receivable due to a general slow down in payments by the major retailers.
The Company's accounts payable also increased due to the Company's extension
of its own payment terms. During the six month period ended May 31, 2000,
shareholders' equity increased from $15,166,082 at November 30, 1999 to
$15,659,462 at May 31, 2000. This was due primarily to the net income
generated during the period.
During the six months, the Company used $86,000 in operations and
$252,000 to purchase new fixed assets. These factors resulted in a net
decrease in the Company's cash of about $338,000.
-17-
<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,
2000 1999 2000 1999
Item 6.
Weighted average shares
outstanding - Basic 7,167,242 7,171,085 7,167,242 7,171,157
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 337,075 815,352 356,188 643,326
Weighted average shares
outstanding - Diluted 7,504,317 7,986,437 7,523,430 7,814,483
Net income $ 750,806 $ 181,132$ 544,684$ 252,793
Per share amount
Basic $.10 $.03 $.08 $.04
Diluted $.10 $.02 $.07 $.03
-18-
<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, 2000.
-19-
<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
-20-
<PAGE>
