Form 10-Q
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, 2009
Commission File Number 1-31643
CCA INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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04-2795439 |
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(State or other jurisdiction of
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(I.R.S.Employer |
Incorporation or organization)
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Identification Number) |
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200 Murray Hill Parkway |
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East Rutherford, NJ
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07073 |
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(Address of principal executive offices)
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(Zip Code) |
(201) 330-1400
Registrants telephone number, including area code
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes þ No o
Indicated by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
Common Stock, $.01 Par Value 6,086,740 shares as of May 31, 2009
Class A Common Stock, $.01 Par Value 967,702 shares as of
May 31, 2009
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
- 1 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
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May 31, |
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November 30, |
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2009 |
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2008 |
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(Unaudited) |
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Current Assets |
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|
|
|
|
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Cash and cash equivalents |
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$ |
2,851,575 |
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$ |
5,568,699 |
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Short-term investments and marketable
securities |
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10,939,686 |
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10,014,357 |
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Accounts receivable, net of allowances of
$1,774,796 and $823,029, respectively |
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9,493,543 |
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8,230,716 |
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Inventories |
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7,780,934 |
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7,932,798 |
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Prepaid expenses and sundry receivables |
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515,980 |
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578,000 |
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Prepaid income taxes and refunds due |
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833,209 |
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1,554,158 |
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Deferred income taxes |
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1,105,508 |
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973,732 |
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Total Current Assets |
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33,520,435 |
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34,852,460 |
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Property and Equipment, net of accumulated
depreciation and amortization |
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655,634 |
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611,226 |
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Intangible Assets, net of accumulated
amortization |
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724,385 |
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727,716 |
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Other Assets |
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Marketable securities |
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3,573,370 |
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2,945,740 |
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Deferred taxes |
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34,719 |
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143,419 |
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Other |
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65,300 |
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65,300 |
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Total Other Assets |
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3,673,389 |
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3,154,459 |
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Total Assets |
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$ |
38,573,843 |
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$ |
39,345,861 |
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See Notes to Unaudited Consolidated Financial Statements.
- 2 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS EQUITY
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May 31, |
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November 30, |
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2009 |
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2008 |
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(Unaudited) |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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$ |
9,850,950 |
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$ |
10,182,510 |
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Capitalized lease obligation current portion |
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58,927 |
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57,697 |
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Dividends payable |
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493,811 |
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775,989 |
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Total Current Liabilities |
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10,403,688 |
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11,016,196 |
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Deferred tax liability |
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60,413 |
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Capitalized lease obligations-long term |
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46,336 |
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75,786 |
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Total Liabilities |
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10,510,437 |
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11,091,982 |
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Shareholders Equity |
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Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued |
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Common stock, $.01 par; authorized
15,000,000 shares; 6,086,740 shares issued and outstanding |
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60,867 |
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60,867 |
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Class A common stock, $.01 par; authorized
5,000,000 shares; 967,702 shares issued and outstanding |
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9,677 |
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9,677 |
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Additional paid-in capital |
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2,329,049 |
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2,329,049 |
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Retained earnings |
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26,469,264 |
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26,920,561 |
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Unrealized (losses) on marketable
securities |
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(805,451 |
) |
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(1,066,275 |
) |
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Total Shareholders Equity |
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28,063,406 |
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28,253,879 |
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Total Liabilities and Shareholders Equity |
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$ |
38,573,843 |
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$ |
39,345,861 |
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See Notes to Unaudited Consolidated Financial Statements.
3
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three Months Ended |
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Six Months Ended |
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May 31, |
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May 31, |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenues |
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Sales of health and beauty
aid products Net |
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$ |
14,609,686 |
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$ |
17,258,060 |
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$ |
29,368,536 |
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$ |
30,897,205 |
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Other income |
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138,643 |
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131,925 |
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324,260 |
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363,820 |
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Total Revenues |
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14,748,329 |
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17,389,985 |
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29,692,796 |
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31,261,025 |
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Costs and Expenses |
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Costs of sales |
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5,527,838 |
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6,335,298 |
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11,144,050 |
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|
11,228,560 |
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Selling, general and
administrative expenses |
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|
5,050,297 |
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5,785,682 |
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10,257,140 |
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|
11,266,843 |
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Advertising, cooperative
and promotions |
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2,782,150 |
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3,678,702 |
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6,449,490 |
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|
6,411,241 |
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Research and development |
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119,390 |
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|
|
141,175 |
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|
245,936 |
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|
291,259 |
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Provision for doubtful
Accounts |
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|
(72,181 |
) |
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|
(32,085 |
) |
|
|
(24,675 |
) |
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|
50,095 |
|
Interest expense |
|
|
2,383 |
|
|
|
3,283 |
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|
5,668 |
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|
|
7,629 |
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Total Costs and Expenses |
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|
13,409,877 |
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|
15,912,055 |
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28,077,609 |
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29,255,627 |
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Income before Provision for
Income Taxes |
|
|
1,338,452 |
|
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|
1,477,930 |
|
|
|
1,615,187 |
|
|
|
2,005,398 |
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|
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|
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|
|
|
|
|
|
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Provision for Income Taxes |
|
|
644,316 |
|
|
|
687,238 |
|
|
|
796,685 |
|
|
|
871,023 |
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Net Income |
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$ |
694,136 |
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|
$ |
790,692 |
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$ |
818,502 |
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$ |
1,134,375 |
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Earnings per Share: |
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Basic |
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$ |
0.10 |
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$ |
0.11 |
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$ |
0.12 |
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$ |
0.16 |
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Diluted |
|
$ |
0.10 |
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$ |
0.11 |
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$ |
0.12 |
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$ |
0.16 |
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Number of Common Shares: |
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Weighted average shares |
|
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|
|
|
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|
outstanding Basic |
|
|
7,054,442 |
|
|
|
7,054,442 |
|
|
|
7,054,442 |
|
|
|
7,054,442 |
|
|
|
|
|
|
|
|
|
|
|
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|
outstanding Diluted |
|
|
7,054,442 |
|
|
|
7,068,085 |
|
|
|
7,054,442 |
|
|
|
7,070,874 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
See Notes to Unaudited Consolidated Financial Statements.
4
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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Three Months Ended |
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|
Six Months Ended |
|
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|
May 31, |
|
|
May 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
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|
|
|
|
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|
Net Income |
|
$ |
694,136 |
|
|
$ |
790,692 |
|
|
$ |
818,502 |
|
|
$ |
1,134,375 |
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Other Comprehensive Income |
|
|
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|
|
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|
|
|
|
|
|
|
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|
Unrealized holding gains
on investments |
|
|
1,059,550 |
|
|
|
12,269 |
|
|
|
260,824 |
|
|
|
32,967 |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
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|
|
|
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Comprehensive Income |
|
$ |
1,753,686 |
|
|
$ |
802,961 |
|
|
$ |
1,079,326 |
|
|
$ |
1,167,342 |
|
|
|
|
|
|
|
|
|
|
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|
See Notes to Unaudited Consolidated Financial Statements.
5
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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|
|
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|
Six Months Ended |
|
|
|
May 31, |
|
|
May 31, |
|
|
|
2009 |
|
|
2008 |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
818,502 |
|
|
$ |
1,134,375 |
|
Adjustments to reconcile net income to net
cash
provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
124,042 |
|
|
|
118,871 |
|
Loss on write off of fixed assets |
|
|
3,262 |
|
|
|
|
|
(Gain) on sale of securities |
|
|
(49,971 |
) |
|
|
(45,608 |
) |
Decrease (Increase) in deferred income
taxes |
|
|
37,337 |
|
|
|
(152,573 |
) |
(Increase) in accounts receivable |
|
|
(1,262,827 |
) |
|
|
(2,054,385 |
) |
Decrease (Increase) in inventory |
|
|
151,864 |
|
|
|
(690,449 |
) |
Decrease (Increase) in prepaid expenses
and miscellaneous receivables |
|
|
62,020 |
|
|
|
(15,905 |
) |
Decrease (Increase) in prepaid income
taxes and refunds due |
|
|
720,949 |
|
|
|
(315,729 |
) |
(Decrease) Increase in accounts payable and
accrued Liabilities |
|
|
(331,560 |
) |
|
|
2,047,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities |
|
|
273,618 |
|
|
|
25,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Acquisition of property, plant and
equipment |
|
|
(168,382 |
) |
|
|
(189,424 |
) |
Purchase of marketable securities |
|
|
(9,626,163 |
) |
|
|
(11,085,450 |
) |
Proceeds from sale and maturity of
investments |
|
|
8,384,000 |
|
|
|
9,290,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used in) Investing Activities |
|
|
(1,410,545 |
) |
|
|
(1,984,874 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Payments in capital lease obligation |
|
|
(28,219 |
) |
|
|
(24,513 |
) |
Dividends paid |
|
|
(1,551,978 |
) |
|
|
(1,340,344 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used in) Financing Activities |
|
|
(1,580,197 |
) |
|
|
(1,364,857 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) in Cash |
|
|
(2,717,124 |
) |
|
|
(3,324,099 |
) |
Cash and
Cash Equivalents at Beginning of Period |
|
|
5,568,699 |
|
|
|
6,743,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
2,851,575 |
|
|
$ |
3,419,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow
Information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
5,668 |
|
|
$ |
7,629 |
|
Income taxes |
|
|
41,017 |
|
|
|
1,339,325 |
|
Schedule of Non Cash Financing Activities: |
|
|
|
|
|
|
|
|
Acquisition of assets through capital
leases |
|
$ |
|
|
|
$ |
20,814 |
|
Dividends declared and accrued |
|
|
1,269,800 |
|
|
|
1,481,433 |
|
See Notes to Unaudited Consolidated Financial Statements.
6
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited 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, 2009 are not necessarily indicative of the
results that may be expected for the year ended November 30, 2009. For further
information, refer to the consolidated financial statements and footnotes thereto
included in the Companys annual report on Form 10-K for the year ended November 30,
2008. The accompanying unaudited consolidated financial statements, in the opinion of
management, include all adjustments necessary for a fair presentation. All such
adjustments are of a normal recurring nature.
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. CCA
has two active wholly-owned subsidiaries, CCA Online Industries, Inc. and CCA IND.,
S.A. DE C.V., a Variable Capital Corporation organized pursuant to the laws of Mexico.
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.
7
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates and Assumptions:
The consolidated financial statements include the use of estimates, which management
believes are reasonable. The process of preparing financial statements in conformity
with accounting principles generally accepted in the United States of America 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.
Other Comprehensive Income:
Total comprehensive income includes changes in equity that are excluded from the
consolidated statement of operations and are recorded directly into a separate section
of consolidated statements of comprehensive income. The Companys accumulated other
comprehensive income shown on the consolidated balance sheet consist of unrealized
gains and losses on investment holdings net of any tax consequence.
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, and on the Statement of Comprehensive Income.
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.
For the six months ended May 31, 2009, dividends declared were $ 1,269,800 and
dividends paid were in the amount of $1,551,978.
8
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable:
Accounts receivable consist of trade receivables recorded at original invoice amount,
less an estimated allowance for uncollectible amounts. The accounts receivable balance
is further reduced by allowances for coop advertising and reserves for returns which
are anticipated to be taken as credits against the balances as of May 31, 2009. The
allowances and reserves which are anticipated to be deducted from future invoices are
included in accrued liabilities. Trade credit is generally extended on a short term
basis; thus trade receivables do not bear interest, although a finance charge may be
applied to receivables that are past due. Trade receivables are periodically
evaluated for collectibility based on past credit history with customers and their
current financial condition. Changes in the estimated collectibility of trade
receivables are recorded in the results of operations for the period in which the
estimate is revised. Trade receivables that are deemed uncollectible are offset
against the allowance for uncollectible accounts. The Company generally does not
require collateral for trade receivables.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market. Costs
included in inventory are labor (including the cost of outside contract
manufacturers), materials and allocated manufacturing overhead. Product returns that
are resaleable are recorded in inventory when they are received at the lower of their
original cost or market, as appropriate. Obsolete inventory is written off and its
value is removed from inventory at the time its obsolescence is determined.
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company charges to expense repairs and
maintenance items, while major improvements and betterments are capitalized. When the
Company sells or otherwise disposes of property and equipment items, the cost and
related accumulated depreciation are removed from the respective accounts and any gain
or loss is included in earnings. Assets that are subject to depreciation and
amortization are reviewed for potential impairment whenever events or circumstances
indicate that carrying amounts may not be recoverable.
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
|
|
5-7 Years |
Furniture and fixtures
|
|
3-10 Years |
Tools, dies and masters
|
|
3 Years |
Transportation equipment
|
|
5 Years |
Leasehold improvements
|
|
Remaining life of the lease
(approximately four years) |
9
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible Assets:
Intangible assets are stated at cost. Patents are amortized on the straight-line
method over a period of 17 years. Such intangible assets are reviewed for potential
impairment whenever events or circumstances indicate that carrying amounts may not be
recoverable.
Web Site Costs:
Certain costs incurred in creating the graphics and content of the Companys web site
has been capitalized in accordance with the Financial Accounting Standards Emerging
Issue Task Force (EITF) No. 0-02, Accounting for Web Site Development Costs. The
Company has determined that these costs will be amortized over a two year period.
Web site design and conceptual costs are expensed as incurred.
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.
Earnings Per Common Share:
Basic earning per share is calculated using the average number of shares of common
stock outstanding during the period. Diluted earnings per share is computed on the
basis of the average number of common shares outstanding plus the effect of
outstanding common stock equivalents using the treasury stock method and convertible
debentures using the if-converted method. Common stock equivalents consist of stock
options.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current years
presentation. These reclassifications have no effect on previously reported income.
10
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition:
The Company recognizes sales upon shipment of merchandise. Net sales comprise gross
revenues less expected returns, trade discounts, customer allowances and various sales
incentives. 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. Those returns which
are anticipated to be taken as credits against the balances as of May 31, 2009 are
offset against the accounts receivable. The reserves which are anticipated to be
deducted from future invoices are included in accrued liabilities.
Sales Incentives:
In accordance with EITF 01- 9, the Company has accounted for certain sales incentives
offered to customers by charging them directly to sales as opposed to advertising and
promotional expense. Had EITF 01 9 not been adopted, net sales for the three
months ended May 31, 2009 and 2008 would have been $16,240,337 and $18,771,278,
respectively. Net sales for the six months ended May 31, 2009 and 2008 would have
been $32,394,285 and $33,711,363, respectively.
Advertising Costs:
The Companys policy for fiscal financial reporting is to charge advertising cost to
operations as incurred.
Shipping and Handling Costs:
The Companys policy for fiscal financial reporting is to charge shipping costs as
part of selling, general and administrative expense as incurred. Freight costs
included were $722,360 and $992,620 for the three months ended May 31, 2009 and 2008,
respectively. Freight costs included were $1,397,133 and $1,656,559 for the six
months ended May 31, 2009 and 2008, respectively
Stock Options:
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 123R, Accounting for Share-Based
Compensation which is a revision of SFAS No. 123. Effective for annual or interim
periods beginning after December 15, 2005, SFAS No. 123R requires stock grants to
employees to be recognized in the income statement based on their fair values. The
adoption of SFAS No. 123R did not have any impact on the Companys financial position,
results of operations or cash flow.
11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements:
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159
(SFAS No. 159). SFAS No. 159 which amends SFAS No. 115 allows certain financial
assets and liabilities to be recognized, at the Companys election, at fair market
value, with any gains or losses for the period recorded in the statement of income.
SFAS No. 159 included available-for-sale securities in the assets eligible for this
treatment. Currently, the Company records the gains or losses for the period in the
statement of comprehensive income and in the equity section of the balance sheet.
SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and
interim periods in those fiscal years. The Company, at this time, has not elected to
recognize any gains or losses for its available-for-sale securities in the statement
of income, and accordingly there will be no impact on the Companys financial position
or results of operations.
In November 2007, the SEC issued Staff Accounting Bulletin No. 109 (SAB 109) which
provides interpretive guidance regarding written derivative loan commitments that are
accounted for at fair value through earnings. SAB 109 is effective for fiscal
quarters beginning after December 15, 2007. The adoption of this statement has not
had a material impact on the Companys financial position or results of operation.
In December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 110 (SAB 110). SAB 110 amends and replaces Question 6 of Section D.2
of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6
of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the
simplified method in developing an estimate of the expected term of plain vanilla
share options and allows usage of that method for option grants prior to December 31,
2007. SAB 110 allows public companies which do not have sufficient historical
experience to provide a reasonable estimate to continue the use of this method for
estimating the expected term of plain vanilla share option grants after December 31,
2007. The adoption of this statement has not had a material impact on the Companys
financial position or results of operation.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141
(revised 2007), Business Combinations (SFAS 141R). SFAS 141R changes accounting for
acquisitions that close beginning in 2009 in a number of areas including the treatment
of contingent consideration, contingencies, acquisition costs, In-process research &
development and restructuring costs. More transactions and events will qualify as
business combinations and will be accounted for at fair value under the new standard.
SFAS 141R promotes greater use of fair values in financial reporting. In addition,
under SFAS 141R, changes in deferred tax asset valuation allowances and acquired
income tax uncertainties in a business combination after the measurement period will
impact income tax expense. Some of the changes will introduce more volatility into
earnings. SFAS 141R is effective for fiscal years beginning on or after December 15,
2008. SFAS 141R will have an impact on accounting for any business acquired after the
effective date of this pronouncement.
12
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB
No. 51 (SFAS 160). SFAS 160 will change the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests (NCI) and
classified as a component of equity. This new consolidation method will significantly
change the accounting for transactions with minority interest holders. SFAS 160 is
effective for fiscal years beginning after December 15, 2008. SFAS 160 would have an
impact on the presentation and disclosure of the noncontrolling interests of any
non-wholly owned business acquired in the future.
In April 2008, the FASB issued FASB Staff Position No. 142-3 (FSP 142-3), which
amends the factors that must be considered in developing renewal or extension
assumptions used to determine the useful life over which to amortize the cost of a
recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets
(SFAS 142). The FSP requires an entity to consider its own assumptions about
renewal or extension of the term of the arrangement, consistent with its expected use
of the asset, and is an attempt to improve consistency between the useful life of a
recognized intangible asset under SFAS 142 and the period of expected cash flows used
to measure the fair value of the asset under SFAS 141. The FSP is effective for
fiscal years beginning after December 15, 2008, and the guidance for determining the
useful life of a recognized intangible asset must be applied prospectively to
intangible assets acquired after the effective date. The FSP is not expected to have a
significant impact on the Companys results of operations, financial condition or
liquidity.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). The statement is intended to improve financial
reporting by identifying a consistent hierarchy for selecting accounting principles to
be used in preparing financial statements that are prepared in conformance with
generally accepted accounting principles. Unlike Statement on Auditing Standards No.
69, The Meaning of Present Fairly in Conformity With GAAP (SAS 69), SFAS 162 is
directed to the entity rather than the auditor. The statement is effective 60 days
following the SECs approval of the Public Company Accounting Oversight Board (PCAOB)
amendments to AU Section 411, The Meaning of Present Fairly in Conformity with GAAP,
and is not expected to have any impact on the Companys results of operations,
financial condition or liquidity.
In June 2008, FASB issued FSP Emerging Issues Task Force No. 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities (EITF 03-6-1). Under the FSP, unvested share-based payment awards that
contain rights to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two- class method of computing
EPS. The FSP is effective for fiscal years beginning after December 15, 2008, and
interim periods within those years, and is not expected to have a significant impact on the Companys results of operations, financial condition
or liquidity.
13
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In October 2008, the FASB issued FASB Staff Position No. FAS 157-3 (FSP FAS 157-3)
which clarifies the application of FASB Statement of Financial Accounting Standards
No. 157 (SFAS No. 157) in regard to fair value measurements of financial assets in a
market that is not active. FSP FAS 157-3 became effective October 10, 2008 for all
subsequent reporting periods. The adoption of this staff position has had no material
impact on the Companys financial position or results of operation.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No. 165). The
statement is to establish general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are issued.
SFAS No. 165 shall become effective June 15, 2009 for all subsequent reporting
periods. The adoption of SFAS No. 165 is not expected to have any material impact on
the Companys financial position or results of operation.
In April 2009, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 111 (SAB No. 111). SAB No. 111 amends Topic 5.M. in regard to other than
temporary impairment of certain investments in debt and equity securities. SAB No.
111 confirms the establishment of the other than temporary category of investment
impairment. The adoption of SAB No. 111 is effective immediately and will not have
any material impact on the Companys financial position or results of operation.
Management does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
14
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 INVENTORIES
The components of inventory consist of the following:
|
|
|
|
|
|
|
|
|
|
|
May 31, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
4,603,011 |
|
|
$ |
4,880,267 |
|
Finished goods |
|
|
3,177,923 |
|
|
|
3,052,531 |
|
|
|
|
|
|
|
|
|
|
$ |
7,780,934 |
|
|
$ |
7,932,798 |
|
|
|
|
|
|
|
|
At May 31, 2009 and November 30, 2008, the Company had a reserve for obsolescence of
$ 672,403 and $578,941, respectively.
NOTE 5 PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
May 31, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Machinery and equipment |
|
$ |
194,062 |
|
|
$ |
190,308 |
|
Furniture and equipment |
|
|
886,857 |
|
|
|
813,819 |
|
Transportation equipment |
|
|
|
|
|
|
10,918 |
|
Tools, dies, and masters |
|
|
301,023 |
|
|
|
360,701 |
|
Capitalized lease obligations |
|
|
263,067 |
|
|
|
263,067 |
|
Web Site |
|
|
20,000 |
|
|
|
20,000 |
|
Leasehold improvements |
|
|
374,177 |
|
|
|
357,582 |
|
|
|
|
|
|
|
|
|
|
|
2,039,186 |
|
|
|
2,016,395 |
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
and amortization |
|
|
1,383,552 |
|
|
|
1,405,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment Net |
|
$ |
655,634 |
|
|
$ |
611,226 |
|
|
|
|
|
|
|
|
Depreciation expense for the six months ended May 31, 2009 and 2008 amounted to
$120,711 and $115,541, respectively. Furniture and equipment includes $132,550 of
costs for computer equipment and software that has been purchased, but not placed in
service as of yet. No depreciation expense for these assets will be recorded until
they are placed in service.
15
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 INTANGIBLE ASSETS
Intangible assets consist of owned trademarks and patents for ten product lines
|
|
|
|
|
|
|
|
|
|
|
May 31, |
|
|
November 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Patents and trademarks |
|
$ |
886,608 |
|
|
$ |
886,608 |
|
Less: Accumulated amortization |
|
|
162,223 |
|
|
|
158,892 |
|
|
|
|
|
|
|
|
Intangible Assets Net |
|
$ |
724,385 |
|
|
$ |
727,716 |
|
|
|
|
|
|
|
|
Patents are amortized on a straight-line basis over their legal life of 17 years and
trademarks are adjusted to realizable value for each quarterly
reporting period.
Amortization expense for the six months ended May 31, 2009 and 2008 amounted to $3,331
and $3,331, respectively. Estimated amortization expense for November 30, 2009, 2010,
2011, 2012 and 2013 will be $6,553, $6,553, $6,288, $6,026 and $5,911 respectively.
NOTE 7 SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments and marketable securities, which consist of fully guaranteed
bank certificates of deposit, 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, 2009 and November 30, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2009 |
|
|
November 30, 2008 |
|
|
|
COST |
|
|
MARKET |
|
|
COST |
|
|
MARKET |
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed bank
certificates of deposit |
|
$ |
4,093,000 |
|
|
$ |
4,109,420 |
|
|
$ |
3,366,000 |
|
|
$ |
3,366,000 |
|
Corporate
obligations |
|
|
598,756 |
|
|
|
604,480 |
|
|
|
449,125 |
|
|
|
446,332 |
|
Government
obligations |
|
|
5,989,163 |
|
|
|
5,997,510 |
|
|
|
5,950,904 |
|
|
|
5,999,745 |
|
(including mortgage
backed securities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
50,000 |
|
|
|
22,960 |
|
|
|
50,000 |
|
|
|
21,640 |
|
Common stock |
|
|
51,649 |
|
|
|
36,300 |
|
|
|
51,648 |
|
|
|
44,628 |
|
Mutual funds |
|
|
215,274 |
|
|
|
143,857 |
|
|
|
215,274 |
|
|
|
114,582 |
|
Other equity
investments |
|
|
70,206 |
|
|
|
25,159 |
|
|
|
70,206 |
|
|
|
21,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current |
|
|
11,068,048 |
|
|
|
10,939,686 |
|
|
|
10,153,157 |
|
|
|
10,014,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST |
|
|
MARKET |
|
|
COST |
|
|
MARKET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed bank
Certificates of deposit |
|
|
576,000 |
|
|
|
569,725 |
|
|
|
|
|
|
|
|
|
Corporate obligations |
|
|
399,615 |
|
|
|
399,845 |
|
|
|
598,370 |
|
|
|
577,334 |
|
Government obligations |
|
|
500,000 |
|
|
|
400,000 |
|
|
|
500,000 |
|
|
|
460,000 |
|
Preferred stock |
|
|
2,774,844 |
|
|
|
2,203,800 |
|
|
|
2,774,845 |
|
|
|
1,908,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current |
|
|
4,250,459 |
|
|
|
3,573,370 |
|
|
|
3,873,215 |
|
|
|
2,945,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
15,318,507 |
|
|
$ |
14,513,056 |
|
|
$ |
14,026,372 |
|
|
$ |
12,960,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank certificates of deposit are insured by the Federal Deposit Insurance Corporation
for the full balance under the Temporary Liquidity Guarantee Program. The Company
maintains accounts with several brokerage firms. The accounts contain cash and
securities. Balances are insured up to $500,000 (with a limit of $100,000 for cash) by
the Securities Investor Protection Corporation (SIPC).
The Company had, at May 31, 2009, an auction rate bond issued by the New Jersey State
Higher Education Assistance Authority (NJHE). The bond was recorded as non-current
marketable securities. The NJHE bond has an original par value of $500,000, a maturity
date of December 1, 2040, a rating of AA by S&P, and has been placed on negative watch.
Fitch has withdrawn their rating. The current annualized interest rate is 1.35% as of
June 1, 2009. Beginning in February 2008, more shares for sale were submitted in the
regularly scheduled auctions for the NJHE auction rate bonds than there were offers to
buy. This meant that these auctions failed to clear and that many or all auction bond
holders who wanted to sell their shares in these auctions were unable to do so. The
Company believes that no permanent impairment has occurred as of May 31, 2009, as the
NJHE has continued to pay interest on the bond, and the Company has sufficient
resources to enable holding the bond until maturity. The Company recognized a
temporary impairment charge of $40,000 against the $500,000 par value of the bond
during fiscal 2008. The Company has recognized an additional temporary impairment
charge of $60,000 in the second quarter of 2009. If uncertainties in the credit and
capital markets continue, resulting in further market deterioration, the Company may be
required to recognize further impairment charges. In addition, if there are any
further ratings downgrades, or if the Company no longer has the ability to hold these
investments, the Company may have further impairment charges.
17
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The Company adopted SFAS No. 157, Fair Value Measurements (SFAS No. 157) as of
December 1, 2007, which expands disclosures about investments that are measured and
reported at fair market value. SFAS No. 157 established a fair value hierarchy that
prioritizes the inputs to valuations techniques utilized to measure fair value into
three broad levels as follows:
Level 1 Quoted market prices in active markets for the identical asset or liability
that the reporting entity has ability to access at measurement date.
Level 2 Quoted market prices for identical or similar assets or liabilities in
markets that are not active, and where fair value is determined through the use of
models or other valuation methodologies.
Level 3 Unobserved inputs for the asset or liability. Fair value is determined by
the reporting entitys own assumptions utilizing the best information available, and
includes situations where there is little market activity for the investment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
Quoted Market |
|
|
Other |
|
|
|
|
|
|
|
Price in Active |
|
|
Observable |
|
|
|
May 31, |
|
|
Markets |
|
|
Inputs |
|
Description |
|
2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
Bank Certificates of
Deposit |
|
$ |
4,679,145 |
|
|
$ |
|
|
|
$ |
4,679,145 |
|
Corporate obligations |
|
|
1,004,325 |
|
|
|
|
|
|
|
1,004,325 |
|
Government Obligations |
|
|
6,397,510 |
|
|
|
5,997,510 |
|
|
|
400,000 |
|
Preferred Stock |
|
|
2,226,760 |
|
|
|
2,226,760 |
|
|
|
|
|
Common Stock |
|
|
36,300 |
|
|
|
36,300 |
|
|
|
|
|
Mutual Funds |
|
|
143,857 |
|
|
|
143,857 |
|
|
|
|
|
Other Equity |
|
|
25,159 |
|
|
|
|
|
|
|
25,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
14,513,056 |
|
|
$ |
8,404,427 |
|
|
$ |
6,108,629 |
|
|
|
|
|
|
|
|
|
|
|
18
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
Significant |
|
|
|
|
|
|
|
Market Price |
|
|
Other |
|
|
|
|
|
|
|
in Active |
|
|
Observable |
|
|
|
November 30, |
|
|
Markets |
|
|
Inputs |
|
Description |
|
2008 |
|
|
(Level 1) |
|
|
(Level 2) |
|
Bank Certificates of
Deposit |
|
$ |
3,366,000 |
|
|
$ |
|
|
|
$ |
3,366,000 |
|
Corporate obligations |
|
|
1,023,666 |
|
|
|
|
|
|
|
1,023,666 |
|
Government Obligations |
|
|
6,459,745 |
|
|
|
5,999,745 |
|
|
|
460,000 |
|
Preferred Stock |
|
|
1,930,046 |
|
|
|
1,930,046 |
|
|
|
|
|
Common Stock |
|
|
44,628 |
|
|
|
44,628 |
|
|
|
|
|
Mutual Funds |
|
|
114,582 |
|
|
|
114,582 |
|
|
|
|
|
Other Equity |
|
|
21,430 |
|
|
|
|
|
|
|
21,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
12,960,097 |
|
|
$ |
8,089,001 |
|
|
$ |
4,871,096 |
|
|
|
|
|
|
|
|
|
|
|
The following table discloses a reconciliation of the NJHE bond, which is classified as
a Level 2 investment at measured fair value during the quarter ended May 31, 2009:
|
|
|
|
|
Beginning Balance as of December 1, 2008 |
|
$ |
460,000 |
|
Temporary Impairment (charge) |
|
|
(60,000 |
) |
|
|
|
|
Ending Balance as of May 31, 2009 |
|
$ |
400,000 |
|
|
|
|
|
There was no realized income or loss from the Level 2 NJHE bond investment during the
quarter and year to date ended May 31, 2009.
19
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In Thousands) |
|
|
(In Thousands) |
|
a) Accrued Returns |
|
$ |
1,783 |
|
|
$ |
1,443 |
|
b) Media Advertising |
|
|
1,767 |
|
|
|
1,326 |
|
c) Coop Advertising |
|
|
1,372 |
|
|
|
849 |
|
d) Accrued Bonuses |
|
|
733 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
$ |
5,655 |
|
|
$ |
3,618 |
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending May 31, |
|
|
Six Months Ending May 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Interest and dividend income |
|
$ |
102,007 |
|
|
$ |
86,982 |
|
|
$ |
212,407 |
|
|
$ |
291,186 |
|
Royalty income |
|
|
36,180 |
|
|
|
26,000 |
|
|
|
57,768 |
|
|
|
53,043 |
|
Realized
gain on sale of Bonds |
|
|
* |
|
|
|
(4,073 |
) |
|
|
49,985 |
|
|
|
(4,073 |
) |
Miscellaneous |
|
|
456 |
|
|
|
23,016 |
|
|
|
4,099 |
|
|
|
23,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
138,643 |
|
|
$ |
131,925 |
|
|
$ |
324,259 |
|
|
$ |
363,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 10 NOTES PAYABLE
The Company has an available line of credit of $20,000,000. Interest is calculated at
the Companys option, either on the outstanding balance at the prime rate plus 0.5% or
Libor plus 175 basis points. The line of credit is unsecured as of May 31, 2009 and
the Company must adhere to certain financial covenants pertaining to net worth and debt
coverage. The Company was not utilizing their available credit line at May 31, 2009
and November 30, 2008. The Company has extended the line of credit through August 31,
2009. As of May 31, 2009, the Company was in technical violation of its line of credit
loan agreement due to the declaration of the dividend for the first and second quarters
ended February 28 and May 31, 2009. The Company is presently in discussions for the
granting of a waiver by its bank.
20
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 NOTES PAYABLE (CONTINUED)
The Company has never utilized or borrowed any funds against the line of credit since
it was granted. The Company, as of May 31, 2009 had $17,364,631 of free cash and
investments, including $4,679,146 of bank certificates of deposit.
NOTE 11 COMMITMENTS AND CONTINGENCIES
Dividends and Capital Transactions
On April 8, 2009, the board of directors declared a $0.07 per share dividend for the
second quarter ended May 31, 2009. The dividend was payable to all shareholders of
record as of May 1, 2009 and was paid on June 1, 2009.
On January 28, 2009, the board of directors declared a $0.11 per share dividend for the
first quarter ended February 28, 2009. The dividend was payable to all shareholders of
record as of February 3, 2009 and was paid on March 3, 2009.
Collective Bargaining Agreement
On July 8, 2008, the Company signed a new collective bargaining agreement with Local
108, L.I.U. of N.A., AFL-CIO with similar provisions of the one that expired on January
1, 2008. The new agreement is effective January 1, 2008. Other than standard wage,
holiday, vacation and sick day provisions, the agreement calls for CCA to contribute to
the Recycling and General Industrial Union Local 108 Welfare Fund (Welfare Fund)
certain benefits costs. The Welfare Fund will be providing medical, dental and life
insurance for the Companys employees covered under the collective bargaining
agreement. Previously, the Company provided the covered employees medical, dental and
life insurance benefits directly. The new collective bargaining agreement is in effect
through December 31, 2010. This agreement pertains to 32% of the CCA labor force.
NOTE 12 401(K) PLAN
The Company has adopted a 401(K) Profit Sharing Plan that all employees with over one
year of service and attained age 21 are eligible to join. Employees may make salary
reduction contributions up to twenty-five percent of compensation not to exceed the
federal government limits. The Plan allows for the Company to make discretionary
contributions. For all fiscal periods to date, the Company did not make any
contributions.
21
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
13 INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
The Company previously adopted the provisions of the Financial Accounting Standards
Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes
an interpretation of FASB Statement No. 109 (FIN 48). Management believes that
there were no unrecognized tax benefits, or tax positions that would result in
uncertainty regarding the deductions taken, as of May31, 2009 and November 30, 2008.
FIN 48 prescribes a recognition threshold and a measurement attribute for the financial
statement recognition and measurement of tax positions taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. There
were no penalties or related interest for the fiscal year to date ended May 31, 2009 or
for the fiscal year ended November 30, 2008.
The Company files an income tax return with the United States Department of Treasury,
and with various state jurisdictions as required under the nexus laws and regulations
of those states. The Company is no longer subject to Federal tax examinations for
fiscal 2005 and years prior to fiscal 2005. The Internal Revenue Service is currently
examining the U.S. Income tax return filed for fiscal 2006. The Company anticipates
that the examination will be completed by the end of the third quarter of fiscal 2009.
As of July 14, 2009, the Internal Revenue Service has not proposed any adjustments that
would result in a material change to the Companys financial position. The State of
New Jersey, Department of The Treasury, Division of Taxation is currently examining
state income and sales tax returns filed for the fiscal years 2004 2008. As of July
14, 2009, no adjustments have been proposed. The Company is no longer subject to New
Jersey tax examinations for fiscal 2003 and years prior to fiscal 2003. No other state
has notified the Company of its intent to conduct an examination of tax returns filed
in their jurisdictions.
As of May 31, 2009, the Company has unrealized losses on its investments of $805,451,
which if realized would have a tax benefit of $321,375. The Company has determined
that this deferred tax benefit has no value at this time, as the Company does not
believe that it will utilize these losses in the future, and accordingly has not been
recorded as a deferred tax asset.
22
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
13 INCOME TAXES (Continued)
At May 31, 2009 and November 30, 2008, respectively, the Company had temporary
differences arising from the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Classified As |
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
Short-Term |
|
|
Long-Term |
|
|
Long-Term |
|
Type |
|
Amount |
|
|
Tax |
|
|
Asset |
|
|
Asset |
|
|
(Liability) |
|
|
Depreciation |
|
$ |
(151,412 |
) |
|
$ |
(60,413 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(60,413 |
) |
Reserve for bad debts |
|
|
129,393 |
|
|
|
51,628 |
|
|
|
51,628 |
|
|
|
|
|
|
|
|
|
Reserve for returns |
|
|
938,489 |
|
|
|
374,457 |
|
|
|
374,457 |
|
|
|
|
|
|
|
|
|
Reserve for obsolete
inventory |
|
|
672,403 |
|
|
|
268,289 |
|
|
|
268,289 |
|
|
|
|
|
|
|
|
|
Vacation accrual |
|
|
492,693 |
|
|
|
196,585 |
|
|
|
196,585 |
|
|
|
|
|
|
|
|
|
Charitable Contributions |
|
|
378,735 |
|
|
|
151,115 |
|
|
|
116,396 |
|
|
|
34,719 |
|
|
|
|
|
Section 263A costs |
|
|
246,000 |
|
|
|
98,153 |
|
|
|
98,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax |
|
|
|
|
|
$ |
1,079,814 |
|
|
$ |
1,105,508 |
|
|
$ |
34,719 |
|
|
$ |
(60,413 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
Classified As |
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
Short-Term |
|
|
Long-Term |
|
|
Long-Term |
|
Type |
|
Amount |
|
|
Tax |
|
|
Asset |
|
|
Asset |
|
|
(Liability) |
|
|
Depreciation |
|
$ |
74,244 |
|
|
$ |
29,623 |
|
|
$ |
|
|
|
$ |
29,623 |
|
|
$ |
|
|
Reserve for bad
debts |
|
|
154,290 |
|
|
|
61,562 |
|
|
|
61,562 |
|
|
|
|
|
|
|
|
|
Reserve for returns |
|
|
668,738 |
|
|
|
266,827 |
|
|
|
266,827 |
|
|
|
|
|
|
|
|
|
Reserve for
obsolete inventory |
|
|
578,941 |
|
|
|
230,997 |
|
|
|
230,997 |
|
|
|
|
|
|
|
|
|
Vacation accrual |
|
|
501,096 |
|
|
|
199,937 |
|
|
|
199,937 |
|
|
|
|
|
|
|
|
|
Charitable
contributions |
|
|
572,568 |
|
|
|
228,455 |
|
|
|
114,659 |
|
|
|
113,796 |
|
|
|
|
|
Section 263A costs |
|
|
250,000 |
|
|
|
99,750 |
|
|
|
99,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income
tax |
|
|
|
|
|
$ |
1,117,151 |
|
|
$ |
973,732 |
|
|
$ |
143,419 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 INCOME TAXES (CONTINUED)
Income tax expense is made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended May 31, 2009 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
468,014 |
|
|
$ |
136,139 |
|
|
$ |
604,153 |
|
Deferred tax expense |
|
|
31,113 |
|
|
|
9,050 |
|
|
|
40,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
499,127 |
|
|
$ |
145,189 |
|
|
$ |
644,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended May 31, 2008 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
488,095 |
|
|
$ |
141,979 |
|
|
$ |
630,074 |
|
Deferred tax expense |
|
|
44,283 |
|
|
|
12,881 |
|
|
|
57,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
532,378 |
|
|
$ |
154,860 |
|
|
$ |
687,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended May 31, 2009 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
620,204 |
|
|
$ |
182,469 |
|
|
$ |
802,673 |
|
Deferred tax (benefit) |
|
|
(4,627 |
) |
|
|
(1,361 |
) |
|
|
(5,988 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
615,577 |
|
|
$ |
181,108 |
|
|
$ |
796,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended May 31, 2008 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
707,285 |
|
|
$ |
207,799 |
|
|
$ |
915,084 |
|
Deferred tax (benefit) |
|
|
(34,056 |
) |
|
|
(10,005 |
) |
|
|
(44,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
673,229 |
|
|
$ |
197,794 |
|
|
$ |
871,023 |
|
|
|
|
|
|
|
|
|
|
|
24
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 INCOME TAXES (CONTINUED)
Prepaid income taxes and refund due are made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State & |
|
|
|
|
|
|
Federal |
|
|
Local |
|
|
Total |
|
May 31, 2009 |
|
$ |
429,240 |
|
|
$ |
403,969 |
|
|
$ |
833,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008 |
|
$ |
1,020,948 |
|
|
$ |
533,210 |
|
|
$ |
1,554,158 |
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of income tax expense computed at the statutory rate to income tax
expense at the effective rate for the three months ended May 31, 2009 and May 31, 2008
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
May 31, 2009 |
|
|
May 31, 2008 |
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
of Pretax |
|
|
|
|
|
|
of Pretax |
|
|
|
Amount |
|
|
Income |
|
|
Amount |
|
|
Income |
|
Income tax expense
at federal statutory rate |
|
$ |
455,074 |
|
|
|
34.00 |
% |
|
$ |
502,496 |
|
|
|
34.00 |
% |
Increases in taxes
resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of federal
income tax benefit |
|
|
79,504 |
|
|
|
5.94 |
|
|
|
87,789 |
|
|
|
5.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible expenses and
other adjustments |
|
|
109,738 |
|
|
|
8.19 |
|
|
|
96,953 |
|
|
|
6.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
at effective rate |
|
$ |
644,316 |
|
|
|
48.13 |
% |
|
$ |
687,238 |
|
|
|
46.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
25
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 INCOME TAXES (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
Six Months Ended |
|
|
|
May 31, 2009 |
|
|
May 31, 2008 |
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
of Pretax |
|
|
|
|
|
|
of Pretax |
|
|
|
Amount |
|
|
Income |
|
|
Amount |
|
|
Income |
|
Income tax expense
at federal statutory rate |
|
$ |
549,163 |
|
|
|
34.00 |
% |
|
$ |
681,835 |
|
|
|
34.00 |
% |
Increases in taxes
resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of federal
income tax benefit |
|
|
95,942 |
|
|
|
5.94 |
|
|
|
119,121 |
|
|
|
5.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible expenses and
other adjustments |
|
|
151,580 |
|
|
|
9.38 |
|
|
|
70,067 |
|
|
|
3.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
at effective rate |
|
$ |
796,685 |
|
|
|
49.32 |
% |
|
$ |
871,023 |
|
|
|
43.43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 14 ANTI-DILUTIVE STOCK OPTIONS
For the three and six month period ended May 31, 2009, the following stock options were
considered anti-dilutive and accordingly not calculated into the weighted average and
potential dilutive shares outstanding or the diluted earnings per share:
|
|
|
|
|
|
|
Three and Six |
|
|
|
months ended |
|
|
|
May 31, 2009 |
|
|
|
|
|
|
Stock options granted August 24, 2004 at $7.50 per share |
|
|
16,000 |
|
|
|
|
|
Total anti-dilutive shares |
|
|
16,000 |
|
|
|
|
|
NOTE
15 SUBSEQUENT EVENTS
On June 29, 2009, the Company announced that the Board of Directors had declared a
$0.07 per share dividend for the third quarter of 2009, payable to all shareholders of
record as of August 3, 2009, and payable on September 3, 2009.
26
|
|
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) |
Except for historical information contained herein, this Managements Discussion and Analysis
of Financial Condition and Results of Operations contains forward-looking statements. These
statements involve known and unknown risks and uncertainties that may cause actual results or
outcomes to be materially different from any future results, performances or achievements expressed
or implied by such forward-looking statements, and statements which explicitly describe such
issues. Investors are urged to consider any statement labeled with the terms believes,
expects, intends or anticipates to be uncertain and forward-looking.
OVERVIEW
Net income for the second quarter ended May 31, 2009 was $694,136 as opposed to $790,692 for
the same period in 2008. Net income decreased due to the decrease in net sales from $17,258,060 in
the second quarter of 2008 to $14,609,686 in the second quarter of 2009. The company filed a Form
8-K with the United States Securities and Exchange Commission on January 21, 2009 informing that
the Company had been advised by Wal-Mart, that due to the slow down in the economy it will only be
carrying the leading brands in their oral care section, and accordingly, starting in March 2009,
will no longer be purchasing the Plus+White® oral care products brand. In 2008 the companys net
sales of Plus+White® to Wal-Mart totaled $6 million. The Companys management has worked
diligently to reduce its expenses, resulting in a smaller impact on net income. Net income for the
six months ended May 31, 2009 was $818,502, as compared to $1,134,375 for the same period in 2008.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MAY 31, 2009
For the three-month period ended May 31, 2009, the Company had revenues of $14,748,329 and net
income of $694,136 after provision for taxes of $644,316. For the same three month period in 2008,
revenues were $17,389,985 and net income was $790,692 after a provision for taxes of $687,238.
Fully diluted earnings per share were $0.10 for the second quarter of 2009 as compared to fully
diluted earnings per share of $0.11 for the second quarter of 2008. In accordance with EITF 01-9,
the Company has accounted for certain sales incentives offered to customers by charging them
directly to sales as opposed to advertising and promotional expenses. Net sales for the second
quarter of 2009 were reduced by $1,630,652 and offset by an equal reduction of trade promotional
expenses, which were included in the Companys advertising expense budget. In the same period of
the prior year, gross sales were reduced by $1,513,217 and trade promotion was credited by that
amount. These accounting adjustments under EIFT 01-9 do not affect net income.
The Companys net sales decreased $2,648,374 from $17,258,060 for the three-month period ended
May 31, 2008 to $14,609,686 for the three-month period ended May 31, 2009. Sales incentives for
the second quarter of 2009 increased $117,435 from the second quarter of 2008. Net sales were
lower primarily due to the decreased sales of the Plus+White® oral care and Sudden Change products,
offset by an increase in the Mega-T diet supplement brand. The Company previously disclosed in
Form 8-K, filed with the United States Securities and Exchange Commission on January 21, 2009, that
Wal-Mart had advised the Company, due to the slow down in the economy it will only carry the
leading brands in their oral care sections, and as a result will no longer be purchasing the
companys Plus+White® oral care products brand. Sales returns and allowances were 19.5% of
27
|
|
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
(CONTINUED) |
gross
sales for the three-month period ended May 31, 2009 versus 16.3% for the same period last year. This was a
result of higher sales returns, with $1,857,448 or 10.1% of gross sales for the second quarter of
2009, versus $1,700,731 or 8.1% for the second quarter of 2008. Returns were higher due in part to
discontinued products. As part of the Companys brand strategies, products are constantly
reviewed, with new products introduced and non-performing ones discontinued. Gross profit margins
decreased to 62.2% from 63.3% for the three months ended May 31, 2009 and May 31, 2008
respectively. The gross margin was affected by the higher level of returns and sales incentives in
the second quarter of 2009 versus the same period in 2008.
The Companys net sales by category for the second quarter of 2009 were: Dietary Supplement
$6,220,005, 42.6%; Skin Care $4,537,622, 31.1%; Oral Care $2,120,604, 14.5%; Nail Care $1,269,888,
8.7%; Fragrance $218,575, 1.5%; Analgesic, $139,281, 0.9% and Hair Care and Miscellaneous $103,711,
0.7%; for a total of $14,609,686.
The Company makes every effort to control the cost of manufacturing and has had no substantial
cost increases. Income before taxes is $1,338,452 for the second quarter of 2009 as compared to
$1,477,930 for the same quarter in 2008. Returns and accounts receivable reserves accounted for
$1,954,153 that was expensed against earnings for the second quarter of 2009 as opposed to
$1,897,017 that was expensed for the same period in 2008. The increase in the expense resulting
from the increase in accounts receivable reserve is mainly due to the timing of the Companys
sales.
Advertising media expenditures were $2,782,150 in the second quarter of 2009 versus $3,678,702
in the same period in 2008, or a decrease of $896,552. The Company has focused the majority of its
advertising efforts in the second quarter on the Mega-T dietary supplement brand. A major portion
of the Companys co-operative advertising is reclassified as a reduction of net sales. Included in
advertising media expense is the cost of newspaper inserts.
The selling, general and administrative expense for the second quarter of 2009 was $5,050,297
versus $5,785,682 in the second quarter 2008, or a decrease of $735,385. The Companys management
has implemented reductions of personnel costs, royalty expense and freight expense, beginning at
the end of the first quarter 2009. In addition, management has worked to reduce general operating
expenses relative to the reduction in sales.
The effective tax rate for the second quarter of 2009 was 48.1% versus 46.5% for the second
quarter of 2008. The provision for income tax included non-deductible expenses and adjustments of
$109,738. During the second quarter of 2009, there was $315,455 of officer salaries incurred that
were not deductible for tax purposes in calculating the income tax provision.
28
|
|
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
(CONTINUED) |
OPERATING RESULTS FOR THE SIX MONTHS ENDED MAY 31, 2009
For the six-month period ended May 31, 2009, the Company had revenues of $29,692,796 and net
income of $818,502 after provision for taxes of $796,685. For the same six month period in 2008,
revenues were $31,261,025 and net income was $1,134,375 after a provision for taxes of $871,023.
Fully diluted earnings per share were $0.12 for the first six month of 2009 as compared to fully
diluted earnings per share of $0.16 for the first six months of 2008. In accordance with EITF
01-9, the Company has accounted for certain sales incentives offered to customers by charging them
directly to sales as opposed to advertising and promotional expenses. Net sales for the first six
months of 2009 were reduced by $3,025,750 and offset by an equal reduction of trade promotional
expenses, which were included in the Companys advertising expense budget. In the same period of
the prior year, gross sales were reduced by $2,814,157 and trade promotion was credited by that
amount. These accounting adjustments under EIFT 01-9 do not affect net income.
The Companys net sales decreased $1,528,669 from $30,897,205 for the six-month period ended
May 31, 2008 to $29,368,536 for the six-month period ended May 31, 2009. Sales incentives for the
first half of 2009 increased $211,593 from the first half of 2008. Net sales were lower primarily
due to the decreased sales of the Plus+White® oral care and Bikini Zone products, offset by an
increase in the Mega-T diet supplement brand. The Company previously disclosed in Form 8-K, filed
with the United States Securities and Exchange Commission on January 21, 2009, that Wal-Mart had
advised the Company, due to the slow down in the economy it will only carry the leading brands in
their oral care sections, and as a result will no longer be purchasing the companys Plus+White®
oral care products brand. Sales returns and allowances were 17.6% of gross sales for the six-month
period ended May 31, 2009 versus 15.6% for the same period last year. This was a result of higher
sales returns, with $3,158,924 or 8.8% of gross sales for the first half of 2009, versus $2,567,226
or 6.9% for the first half of 2008. Returns were higher due in part to discontinued products. As
part of the Companys brand strategies, products are constantly reviewed, with new products
introduced and non-performing ones discontinued. Gross profit margins decreased to 62.0% from
63.7% for the six months ended May 31, 2009 and May 31, 2008 respectively. The gross margin was
affected by the higher level of returns and sales incentives in the second quarter of 2009 versus
the same period in 2008.
The Companys net sales by category for the first half of 2009 were: Dietary Supplement
$12,478,779, 42.5%; Skin Care $8,213,631, 28.0%; Oral Care $4,954,938, 16.9%; Nail Care $2,928,732,
10.0%; Fragrance $300,661, 1.0%; Analgesic, $299,521, 1.0% and Hair Care and Miscellaneous
$192,273, 0.6%; for a total of $29,368,535.
The Company makes every effort to control the cost of manufacturing and has had no substantial
cost increases. Income before taxes is $1,615,187 for the first half of 2009 as compared to
$2,005,398 for the same period in 2008. Returns and accounts receivable reserves accounted for
$3,309,115 that was expensed against earnings for the first half of 2009 as opposed to $2,966,433
that was expensed for the same period in 2008. The increase in the expense resulting from the
increase in accounts receivable reserve is mainly due to the timing of the Companys sales.
29
|
|
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
(CONTINUED) |
Advertising media expenditures were $6,449,490 in the first half of 2009 versus $6,411,241 in
the same period in 2008. The Company has focused the majority of its advertising efforts in the
first half on the Mega-T dietary supplement brand. A major portion of the Companys co-operative
advertising is reclassified as a reduction of net sales. Included in advertising media expense is
the cost of newspaper inserts.
The selling, general and administrative expense for the six months ended May 31, 2009 was
$10,257,140 versus $11,266,843 in the same period in 2008, or a decrease of $1,009,703. The
Companys management has implemented reductions of personnel costs, royalty expense and freight
expense, most of which began towards the end of the first quarter 2009. In addition, management
has worked to reduce general operating expenses relative to the reduction in sales.
The effective tax rate for the first six months of 2009 was 49.3% versus 43.4% for the first
six months of 2008. The provision for income tax includes non-deductible expenses and adjustments
of $151,580. During the first six months of 2009, $423,146 of officer salaries incurred was not
deductible for tax purposes in calculating the income tax provision.
FINANCIAL POSITION AS OF MAY 31, 2009
The Companys financial position as of May 31, 2009 consisted of current assets of $33,520,435
and current liabilities of $10,403,688, or a current ratio of 3.2 to 1. Shareholders equity
decreased from $28,253,879 as of November 30, 2008 to $28,063,406 as of May 31, 2009. The decrease
was due to dividends declared of $1,269,800 during the first six months of 2009, while net income
increased $818,502. This was partially offset by unrealized holding gains of $260,824 during the
first half of 2009, which is recorded as other comprehensive income. The unrealized gains were
mainly due to the change in the market price of the preferred stock investments. Total unrealized
losses on marketable securities were $805,451 as at May 31, 2009. The Company recognized a
temporary impairment charge of $60,000 on its NJHE auction rate security, which was charged against
comprehensive income. Please see footnote No. 7 of the financial statements for further
information.
The Companys cash and cash equivalents were $2,851,575 as of May 31, 2009, a decrease of
$2,717,124 from November 30, 2008. Included in this decrease was the purchase of bank certificates
of deposit net of certificates that matured during the first half of 2009, in the amount of
$1,303,000, which are fully guaranteed by the Federal Deposit Insurance Corporation (FDIC), and
which have been classified as short term investments due to market fluctuations which can affect
the value if redeemed early. All of these certificates of deposit will mature during the 2009
fiscal year, and the Company fully intends to hold them until maturity. The certificates are from
a number of banks; with no one certificate exceeding the $250,000 FDIC limit per institution. The
balance of the cash decrease was due to capital expenditures of $168,382 and the payment of
dividends of $1,551,978 during the first six months of 2009.
As of May 31, 2009, the Company had $10,939,686 of short term marketable securities and
$3,573,370 of non-current securities. The Companys cash and cash equivalents together with both
short and long term marketable securities, net of current liabilities were $6,960,943 as of May 31,
2009.
30
|
|
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
(CONTINUED) |
The Companys cash flow from operations provided net cash of $273,618 for the six months ended
May 31, 2009.
The Companys long term investments as of May 31, 2009 were $3,573,370. Please refer to
footnote No. 7 of the financial statements for further information regarding the Companys
investments.
Accounts receivable, net of reserves, were $9,493,543 as compared to $8,230,716 as of May 31,
2009 and November 30, 2008, respectively. Accounts receivable were higher due to the timing of the
Companys sales in the second quarter of 2009 versus the fourth quarter of 2008. Inventories, net
of reserves, were $7,780,934 as of May 31, 2009 as compared to $7,932,798 as of November 30, 2008.
Management has been working to control the amount of the Companys investment in inventory.
Prepaid income taxes decreased from $1,554,158 as of November 30, 2008 to $833,209 as of May 31,
2009. Due to the prepaid income tax balance, the Company has reduced significantly the amount of
its estimated tax payments during the first six months of 2009. Deferred tax assets increased
$23,076 from November 30, 2008 to May 31, 2009. The Company also recorded a deferred tax liability
as of May 31, 2009, which consists of a difference in the timing of the depreciation expense on the
Companys tax returns versus the depreciation expense recorded in its financial statements.
Accounts payable and accrued expenses decreased to $9,850,950 as of May 31, 2009 from $10,182,510
as of November 30, 2008. The Company was not utilizing any of the funds available under its
$20,000,000 unsecured credit line as of May 31, 2009. Please see Footnote No. 10 for further
information.
31
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Companys financial statements record the Companys investments under the mark to market
method (i.e., at date-of-statement market value). The investments are, categorically listed, in
Fully Guaranteed Bank Certificates of Deposit, Common Stock, Mutual Funds, Other Equity,
Preferred Stock, Government Obligations and Corporate Obligations. $61,459 of the Companys
$14,513,056 portfolio of investments (approximate, as at May 31, 2009) is invested in the Common
Stock and Other Equity categories, and approximately $2,226,760 in that category are Preferred
Stock holdings. The Company invests in various investment securities. Investment securities are
exposed to various risks such as interest rates, market and credit risks. Due to the level of risk
associated with certain investment securities, it is at least reasonably possible that changes in
the values of investment securities will incur in the near term. The Company does not take
positions or engage in transactions in risk-sensitive market instruments in any substantial degree,
nor as defined by SEC rules and instructions, however, due to current securities market conditions,
the Company cannot ascertain the risk of any future change in the market value of its investments.
ITEM 4. CONTROLS AND PROCEDURES
With the participation of our Chief Executive Officer and Chief Financial Officer, management
has carried out an evaluation of the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of May 31, 2009.
There were no changes in our internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934) subsequent to the date the controls were
evaluated that materially affect, or are reasonably likely to materially affect, our internal
control over financial reporting.
32
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
Item 1. Legal Proceedings:
None.
Item 4. Submission of Matters to a Vote of Security Holders:
Our annual meeting of shareholders was held on June 24, 2009 in East Rutherford, New
Jersey. At the meeting the following persons were elected directors: Dunnan Edell
(6,369,901 votes for and 381,912 votes withheld), James P. Mastrian (6,424,737 votes for
and 327,076 votes withheld) and Robert Lage (6,426,515 votes for and 325,298 votes
withheld).
The shareholders approved the appointment of KGS LLP as the Companys independent
certified public accountants for the fiscal year ending November 30, 2009 (6,574,406
votes for, 135,156 votes against and 44,250 votes abstained).
Item 5. Other Information:
Owners of Common Stock and owners of Class A Common Stock are entitled to one vote for each
share of stock held, and the voting and other rights of each class are equivalent except in
respect to the election of directors.
In respect to the election of directors, the Class A Common Stock shareholders have
the right to elect four directors and the Common Stock shareholders have the right to
elect three. (In consequence, no proposal to alter or change the right of Class A
Common Stock shareholders to elect a majority of directors could be effectively voted
unless a separate majority of Class A Common Stock shares were voted herefore.)
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
The following reports were filed with the Securities and Exchange Commission during the
three months ended May 31, 2009:
|
|
|
|
|
|
(1 |
) |
|
Form 10K, filed on March 3, 2009, for the year ended November 30, 2008 |
|
|
|
|
|
|
(11 |
) |
|
Computation of Earnings Per Share* |
|
|
|
|
|
|
(31.1 |
) |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)* |
|
|
|
|
|
|
(31.2 |
) |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)* |
|
|
|
|
|
|
(32.1 |
) |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350* |
|
|
|
|
|
|
(32.2 |
) |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350* |
33
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K: (Continued).
|
|
|
|
|
|
(2 |
) |
|
Form 10Q, filed on April 14, 2009, for the quarter ended February 28, 2009 |
|
|
|
|
|
|
(11 |
) |
|
Computation of Earnings Per Share* |
|
|
|
|
|
|
(31.1 |
) |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)* |
|
|
|
|
|
|
(31.2 |
) |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)* |
|
|
|
|
|
|
(32.1 |
) |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350* |
|
|
|
|
|
|
(32.2 |
) |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350* |
(b) Reports on Form 8-K.
None
34
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.
Date: July 15, 2009
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CCA INDUSTRIES, INC. |
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By:
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|
/s/ DAVID EDELL
David Edell, Chief Executive Officer
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|
By:
|
|
/s/ STEPHEN A. HEIT
Stephen A. Heit, Chief Financial Officer
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|
|
35
EXHIBIT INDEX
|
|
|
|
|
|
(11 |
) |
|
Computation of Earnings Per Share* |
|
|
|
|
|
|
(31.1 |
) |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)* |
|
|
|
|
|
|
(31.2 |
) |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)* |
|
|
|
|
|
|
(32.1 |
) |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350* |
|
|
|
|
|
|
(32.2 |
) |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350* |
36