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, 2005
Commission File Number 1-31643
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
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 re
quired to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the Registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes No X
Common Stock, $.01 Par Value - 6,225,051 shares of as May 31, 2005
Class A Common Stock, $.01 Par Value - 967,702 shares as of
May 31, 2005
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Item1. Financial Statements:
Consolidated Balance Sheets as of
May 31, 2005 and November 30, 2004 1-2
Consolidated Statements of Income
for the three months and six months
ended May 31, 2005 and 2004 3
Consolidated Statements of Comprehensive Income
for the three months and six months
ended May 31, 2005 and 2004 4
Consolidated Statements of Cash Flows for
the six months ended May 31, 2005 and 2004 5
Notes to Consolidated Financial Statements 6-18
Item 2. Management Discussion and Analysis of
Results of Operations and Financial
Condition 19-21
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 21
Item 4. Controls and Procedures 21
PART II OTHER INFORMATION 22-23
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 24
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
May 31, November 30,
2005 2004
(Unaudited)
Current Assets
Cash and cash equivalents $ 4,425,334 $ 3,142,230
Short-term investments and marketable
securities 2,887,706 1,952,738
Accounts receivable, net of allowances
of $1,041,756 and $517,634,
respectively 8,644,210 8,677,984
Inventories 8,018,532 6,048,000
Prepaid expenses and sundry receivables 522,955 695,653
Deferred income taxes 759,160 650,938
Prepaid income taxes and refunds due 241,214 418,651
Deferred advertising 2,855,175 -
Total Current Assets 28,354,286 21,586,194
Property and Equipment, net of
accumulated depreciation and
amortization 545,132 569,745
Intangible Assets, net of accumulated
amortization 558,545 511,029
Other Assets
Marketable securities 8,648,161 8,852,198
Deferred taxes 49,620 -
Other 48,463 37,411
Total Other Assets 8,746,244 8,889,609
Total Assets $38,204,207 $31,556,577
See Notes Consolidated to Financial Statements.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
May 31, November 30,
2005 2004
(Unaudited)
Current Liabilities
Accounts payable and accrued liabilities $11,540,879 $ 6,982,835
Income tax payable - 59,888
Dividends payable 1,151,121 483,426
Subordinated debentures 497,656 497,656
Total Current Liabilities 13,189,656 8,023,805
Deferred Income Taxes - 10,725
Shareholders' Equity
Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued
Common stock, $.01 par; authorized
15,000,000 shares; 6,225,051 and
6,066,800 shares issued, respectively 62,251 61,535
Class A common stock, $.01 par; authorized
5,000,000 shares; 967,702 and 977,394 shares
issued, respectively 9,677 9,774
Additional paid-in capital 5,093,175 5,094,660
Retained earnings 20,129,963 18,734,693
Unrealized (losses) on marketable
securities ( 280,515) ( 228,944)
25,014,551 23,671,718
Less: Treasury Stock, 86,703 shares, at cost - ( 149,671)
Total Shareholders' Equity 25,014,551 23,522,047
Total Liabilities and Shareholders' Equity $38,204,207 $31,556,577
See Notes to Consolidated Financial Statements.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
May 31, May 31,
2005 2004 2005 2004
Revenues
Sales of health and beauty
aid products - Net $18,492,442 $18,143,645 $33,180,678 $31,073,110
Other income 123,611 195,602 249,563 353,625
18,616,053 18,339,247 33,430,241 31,426,735
Costs and Expenses
Costs of sales 6,202,605 5,852,863 11,647,964 10,702,110
Selling, general and
administrative expenses 5,734,735 4,495,581 10,128,231 8,299,734
Advertising, cooperative
and promotions 3,654,748 3,063,590 6,753,188 5,887,896
Research and development 169,271 206,626 400,799 440,472
Provision for doubtful
accounts 178,736 65,245 292,717 74,705
Interest expense 7,465 8,906 14,936 16,829
15,947,560 13,692,811 29,237,835 25,421,746
Income before Provision for
Income Taxes 2,668,493 4,646,436 4,192,406 6,004,989
Provision for Income Taxes 917,838 1,848,233 1,496,921 2,370,644
Net Income $ 1,750,655 $ 2,798,203 $ 2,695,485 $ 3,634,345
Earnings per Share:
Basic $.25 $.38 $.38 $.50
Diluted $.24 $.36 $.37 $.47
Cash Dividends Declared per
Share $.00 $.00 $.16 $.14
See Notes to Consolidated Financial Statements.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
May 31, May 31,
2005 2004 2005 2004
Net Income $1,750,655 $2,798,203 $2,695,485 $3,634,345
Other Comprehensive Income
Unrealized holding (losses)
on investments ( 26,604) ( 440,603) ( 51,571) ( 281,878)
(Benefit) for Income Taxes ( 9,150) ( 175,260) ( 18,413) ( 111,280)
Other Comprehensive (Loss) - Net ( 17,454) ( 265,343) ( 33,158) ( 170,598)
Comprehensive Income $1,733,201 $2,532,860 $2,662,327 $3,463,747
Earnings Per Share:
Basic $.24 $.35 $.37 $.47
Diluted $.24 $.33 $.36 $.45
See Notes to Consolidated Financial Statements.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
May 31, May 31,
2005 2004
Cash Flows from Operating Activities:
Net income $2,695,485 $3,634,345
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 189,286 165,406
Loss on sale of marketable securities
and repurchase of debentures - 12,285
(Increase) decrease in deferred
income taxes ( 168,567) 127,477
Decrease (increase) in accounts
receivable 33,774 ( 3,024,942)
(Increase) in inventory ( 1,970,532) ( 589,387)
Decrease in prepaid expenses and
miscellaneous receivables 172,699 16,250
(Increase) in deferred advertising ( 2,855,175) ( 5,292,716)
(Increase) decrease in other assets ( 11,052) 1,250
Increase in accounts payable
and accrued liabilities 4,558,044 4,827,402
Decrease in prepaid income taxes 177,437 236,620
(Decrease) increase in taxes payable ( 59,888) 601,696
Net Cash Provided by Operating Activities 2,761,511 715,686
Cash Flows from Investing Activities:
Acquisition of property, plant and
equipment ( 138,224) ( 75,985)
Acquisition of intangible assets ( 73,965) ( 754)
Purchase of marketable securities ( 1,354,318) ( 2,502,801)
Proceeds from sale and maturity of
investments 571,814 2,240,441
Net Cash (Used in) Investing Activities ( 994,693) ( 339,099)
Cash Flows from Financing Activities:
Dividends paid ( 483,715) ( 379,117)
Net Increase (Decrease) in Cash 1,283,103 ( 2,530)
Cash and Cash Equivalents at Beginning
of Period 3,142,231 1,206,787
Cash and Cash Equivalents at End
of Period $4,425,334 $1,204,257
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 14,936 $ 16,829
Income taxes 1,549,435 1,374,450
Supplemental Disclosures of Non-Cash Transactions:
Dividends declared and accrued $1,151,411 $1,028,028
Cancellation of treasury stock
Common stock 867 0
Retained earnings 148,804 0
See Notes to Consolidated Financial Statements.
-5-
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, 2005 are not
necessarily indicative of the results that may be
expected for the year ended November 30, 2005. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended
November 30, 2004. The accompanying unaudited condensed
consolidated financial statements, in the opinion of
management, include all adjustments necessary for a fair
presentation. All such adjustments are of a normal
reoccurring 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., Nutra Care
Corporation, CCA Online Industries, Inc., and CCA
Industries Canada (2003) Inc., all of which are currently
inactive.
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").
-6-
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
estimates, which management believes are reasonable. The
process of preparing financial statements in conformity
with generally accepted accounting principles requires
the use of estimates and assumptions regarding certain
types of assets, liabilities, revenues, and expenses.
Such estimates primarily relate to unsettled transactions
and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ
from estimated amounts.
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist
of corporate and government bonds and equity securities.
The Company has classified its investments as Available-
for-Sale securities. Accordingly, such investments are
reported at fair market value, with the resultant
unrealized gains and losses reported as a separate
component of shareholders' equity.
Statements of Cash Flows Disclosure:
For purposes of the statement of cash flows, the Company
considers all highly liquid instruments purchased with an
original maturity of less than three months to be cash
equivalents.
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-
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 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 (ranging from 1-9 years)
Intangible Assets:
Intangible assets are stated at cost. Patents and
trademarks are amortized on the straight-line method over
a period of 15-17 years. Such intangible assets are
reviewed for potential impairment whenever events or
circumstances indicate that carrying amounts may not be
recoverable.
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-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share:
Basic earnings per share is calculated using the average
weighted number of shares of common stock outstanding
during the year. Diluted earnings per share is computed
on the basis of the weighted 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 upon shipment of
merchandise. Net sales are comprised of gross sales 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.
Accounts Receivable:
Accounts receivable consist of trade receivables recorded
at original invoice amount, less an estimated allowance
for uncollectible accounts. 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.
Accounts receivable are presented net of an allowance for
doubtful accounts of $208,193 and $111,572 as of May 31,
2005 and November 30, 2004, respectively.
Shipping and Handling Costs:
The Company presents shipping and handling costs as part
of selling, general and administrative expense and not as
part of cost of sales. Freight costs were $1,924,679 and
$1,291,784 for the six months ended May 31, 2005 and
2004, respectively.
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 fiscal 2005 presentation.
-9-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements:
In December 2003, the Financial Accounting Standards
Board ("FASB" ) issued Interpretation No. 46R,
"Consolidation of Variable Interest Entities" ("FIN
46R"), which supercedes Interpretation No. 46,
"Consolidation of Variable Interest Entities" issued in
January 2003. FIN 46R requires a company to consolidate
a variable interest entity ("VIE"), as defined, when the
company will absorb a majority of the VIE's expected
losses, receives a majority of the VIE's expected
residual returns or both. FIN 46R also requires
consolidation of existing, non-controlled affiliates if
the VIE in unable to finance its operations without
investor support, or where the other investors do not
have exposure to the significant risks and rewards of
ownership. FIN 46R applies immediately to a VIE created
or acquired after January 31, 2003. For a VIE created
before February 1, 2003, FIN 46R applies in the first
fiscal year or interim period beginning after March 15,
2004, our third fiscal quarter beginning June 1, 2004.
Application of FIN 46R is also required in financial
statements that have interests in structures that are
commonly referred to as special-purpose entities for
periods after December 15, 2003. The adoption of FIN 46R
did not have an impact on our financial position, results
of operations or cash flows.
In November 2004, the FASB issued Statement of Financial
Accounting Standards ("SFAS") No. 151, "Inventory Costs"
("SFAS 151"). SFAS 151 amends the guidance in Accounting
Research Bulletin No. 43, Chapter 4, "Inventory Pricing",
to clarify that abnormal amounts of idle facility
expense, freight, handling costs and wasted materials
(spoilage) should be recognized as current-period charges
and required the allocation of fixed production overheads
to inventory based on normal capacity of the production
facilities. This statement is effective for inventory
costs incurred during fiscal years beginning after June
15, 2005. The adoption of SFAS 151 is not expected to
have an impact on our financial position, results of
operations or cash flows.
In November 2004, the Emerging Issues Task Force ("EITF")
reached a consensus on Issue No. 03-13, "Applying the
Conditions in Paragraph 42 of FASB Statement No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
Assets" in Determining Whether to Report Discontinued
Operations" (EITF 03-13"). Under the consensus, the
approach for assessing whether cash flows of the
component have been eliminated from the ongoing
operations of the entity focuses on whether continuing
cash flows are direct or indirect cash flows. Cash flows
of the component would not be eliminated if the
continuing cash flows to the entity are considered direct
cash flows. The consensus should be applied to a
component of an enterprise that is either disposed of or
classified as held for sale in fiscal period beginning
after December 15, 2004. The adoption of EITF 03-13 is
not expected to have an impact on our financial position,
results of operations or cash flows.
In December 2004, the FASB issued SFAS No. 123 (revised
2004), "Share-Based Payment" ("SFAS 123R"), which is a
revision of SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS 123R supercedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees" and amends
SFAS No. 95, "Statement of Cash Flows". SFAS 123R
focuses primarily on accounting for transactions in which
an entity obtains employee services in share-based
payment transactions and requires all share-based
payments to employees, including grants of employee stock
options, to be recognized in the income statement based
on their fair values. Accordingly, the adoption of SFAS
123R's fair value method will have a significant impact
on our results of operations, although it will have no
impact on our overall financial position. The impact of
the adoption of SFAS 123R cannot be predicted at this
time because it will depend on the levels of share-based
payments granted in the future. SFAS 123R also requires
the benefits of tax deductions in excess of recognized
compensation costs to be reported as a financing cash
flow, rather than as
-10-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued):
an operating cash flow as required under current
literature. This requirement would reduce net operating
cash flows and increase net financing cash flows in
periods after adoption. While we cannot estimate what
those amounts will be in the future (because they depend
on, among other things, the issuance of future options
and when they would be exercised), the amount of
operating cash flows recognized in prior periods for such
excess tax deductions were not material to our
consolidated financial position or results of operations.
This statement is effective for our interim periods
beginning after June 15, 2005.
In December 2004, the FASB issued SFAS 153, "Exchanges of
Nonmonetary Assets" ("SFAS 153"). SFAS 153 amends the
guidance in APB Opinion No. 29, "Accounting for
Nonmonetary Transactions" to eliminate certain exceptions
to the principle that exchanges of nonmonetary assets be
measured based on the fair value of the assets exchanged.
SFAS 153 eliminates the exception for nonmonetary
exchanges of similar productive assets and replaces it
with a general exception for exchanges of nonmonetary
assets that do not have commercial substance. This
statement is effective for nonmonetary asset exchanges in
fiscal years beginning after June 15, 2005. The adoption
of SFAS 153 is not expected to have an impact on our
financial position, results of operations or cash flows.
The American jobs Creation Act of 2004 (the "AJCA") was
enacted on October 22, 2004. The AJCA repeals an export
incentive, creates a new deduction for qualified domestic
manufacturing activities and includes a special one-time
deduction of 85% of certain earnings repatriated to the
U.S.
The FASB issued Staff Position FAS 109-1, "Application of
FASB Statement No. 109, Accounting for Income Taxes, to
the Tax Deduction on Qualified Production Activities
Provided by the American Jobs Creation Act of 2004" ("FSP
FAS 109-1") on December 21, 2004. In accordance with FSP
FAS 109-1, we will treat the deduction for qualified
domestic manufacturing activities, which is effective
upon issuance, as a reduction of the income tax provision
in future years as realized.
In December 2004, the FASB issued Staff Position 109-2
"Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision Within the American Jobs
creation Act of 2004, "allowing companies additional time
to evaluate the effect of the AJCA on plans for
reinvestment or repatriation of foreign earnings. We are
in the process of evaluating the effects of the
repatriation provision.
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
May 31, November 30,
2005 2004
Raw materials $4,958,483 $3,764,473
Finished goods 3,060,049 2,283,527
$8,018,532 $6,048,000
At May 31, 2005 and November 30, 2004, the Company had a
reserve for obsolescence of $628,000 and $871,488,
respectively.
-11-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the
following:
May 31, November 30,
2005 2004
Machinery and equipment $ 116,700 $ 115,104
Furniture and equipment 771,860 708,184
Transportation equipment 10,918 10,918
Tools, dies, and masters 503,169 433,221
Leasehold improvements 294,067 291,063
1,696,714 1,558,490
Less: Accumulated depreciation
and amortization 1,151,582 988,745
Property and Equipment - Net $ 545,132 $ 569,745
Depreciation expense for the six months ended May 31,
2005 and 2004 amounted to $162,837 and $143,197,
respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
May 31, November 30,
2005 2004
Patents and trademarks $860,396 $786,430
Less: Accumulated amortization 301,850 275,401
Intangible Assets - Net $558,546 $511,029
Amortization expense for the six months ended May 31,
2005 and 2004 amounted to $26,449 and $48,200,
respectively. Estimated amortization expense for each
quarter of the ensuing five years through February 28,
2009 is $12,000.
NOTE 7 - DEFERRED ADVERTISING
In accordance with APB 28, Interim Financial Reporting,
the Company expenses its advertising and related costs
over the interim periods based on its total expected
costs per its various advertising programs. Consequently
a deferral of $2,855,175 is accordingly reflected in the
balance sheet for the interim period. This deferral is
the result of the Company's $10 million media budget and
$6 million co-op budget for the year which contemplates
lower spending in the 3rd and 4th quarter than in the
first two quarters.
-12-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - DEFERRED ADVERTISING (Continued)
The table below sets forth the calculation:
May 31 , May 31,
2005 2004
(In Millions) (In Millions)
Media advertising budget for the fiscal year $10.00 $9.00
Pro-rata portion for six months $ 5.00 $4.50
Media advertising spent 6.32 8.72
Accrual (deferral) ($ 1.32) ($4.22)
Anticipated co-op advertising commitments $ 6.00 $5.50
Pro-rata portion for six months $3.00 $2.75
Co-op advertising spent 4.53 3.82
Accrual (deferral) ($ 1.53) ($1.07)
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,
2005 2004
(In Thousands) (In Thousands)
a)Media advertising $ 2,053 $ *
b)Coop advertising 2,372 932
c)Accrued returns 1,346 980
d)Accrued bonuses * 470
$5,771 $2,382
* under 5%
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:
May 31,
2005 2004
Interest and dividend income $204,631 $261,315
Royalty income 44,766 60,380
Miscellaneous 166 31,930
$249,563 $353,625
-13-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10 - NOTES PAYABLE AND SUBORDINATED DEBENTURES
The Company has an available line of credit of
$10,000,000. Interest is calculated at the Company's
option, either on the outstanding balance at prime rate
minus 1% or Libor plus 150 basis points. The line of
credit is unsecured 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, 2005 or November 30,
2004.
On August 1, 2000, the Company repurchased (pursuant to a
tender offer) 278,328 shares of its outstanding common
stock by issuing subordinated debentures equal to $2 per
share, which accrue interest at 6% and are due to mature
on August 1, 2005. The interest is payable semi-
annually.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Litigation
The only material legal proceedings sets forth the fact
that there were originally 13 cases filed in which the
Company was named along with other defendants as a result
of their purchasing and ingesting our diet suppressant
containing phenylpropanolamine (PPA), which the Company
utilized as its active ingredient in its products prior
to November 2000. Eleven cases have been dismissed with
prejudice. These cases cannot be legally reinstated.
The one case in Philadelphia in which one of the
defendants filed for bankruptcy has been delayed. The
court is rendering a decision on our motion to dismiss.
We agree with independent counsel that, as concluded
under the decision in Seattle, unless a plaintiff
ingested a product with PPA within three days of a
stroke, there can be no causation to prove that a product
caused the stroke. We feel that the case should be
dismissed inasmuch as plaintiff at the deposition deposed
that she took our product months before the stroke.
The remaining case in Louisiana is fully insured to the
extent of $5,000,000. After reviewing the plaintiff's
medical records, it does not appear that there is ongoing
significant medical problems that would cause a jury to
render a substantial judgment. Counsel evidently in
discussing the matter with Phoenix Insurance Company, has
not made any substantial efforts to settle the case which
we have been led to believe could be settled for under
$250,000.
We do not believe that any further litigations would be
ensuing because the Statute of Limitations throughout the
country provided that the case must be instituted within
three to four years within the time frame in which a
plaintiff had constructive notice of the product that
proximately caused a stroke. The FDA put out a news
release nationally in October 2000. However, there can be
no assurance that the current PPA litigation will not
have a material adverse effect upon the Company's
operations.
Dividends
CCA declared a dividend of $0.16 per share payable to all
holders of the Company's common stock, $0.08 to
shareholders of record on May 1, 2005 payable on June 1,
2005 and $0.08 to shareholders of record on November 1,
2005, payable on December 1, 2005.
-14-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 12 - PENSION PLANS
The Company has adopted a 401(K) Profit Sharing Plan that
covers union and non-union employees with over one year of
service and attained age 21. Employees may make salary reduction
contributions up to twenty-five percent of compensation
not to exceed the federal government limits. The Company
is not required to match any employee contributions but
may make a voluntary Company contribution at the
discretion of the Board of Directors. No voluntary
contributions were made by the company.
NOTE 13 - 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, 2005 and November
30, 2004 were as follows:
May 31, 2005 November 30, 2004
Current: COST MARKET COST MARKET
Corporate
Obligations $ 2,299,445 $ 2,274,453 $ 1,475,000 $ 1,470,690
Government
obligations
(including mortgage
backed securities) 372,775 370,586 296,814 297,045
Common stock 51,649 57,048 51,649 52,656
Mutual funds 193,048 133,008 188,247 132,347
Other equity
investments 58,420 52,611 - -
Total 2,975,337 2,887,706 2,011,710 1,952,738
Non-Current:
Corporate obligations 5,364,330 5,223,393 5,546,097 5,446,625
Government obli-
gations 2,751,870 2,706,624 2,751,228 2,689,721
Preferred stock 624,845 617,844 624,845 615,852
Other equity invest-
ments 100,000 100,000 100,000 100,000
Total 8,841,045 8,648,161 9,022,170 8,852,198
Total $11,816,382 $11,535,867 $11,033,880 $10,804,936
-15-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 -SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
(CONTINUED)
The market value at May 31, 2005 was $11,535,867 as
compared to $10,804,936 at November 30, 2004. The gross
unrealized gains and losses were $9,694 and ($290,209) for
May 31, 2005 and $4,227 and ($233,171) for November 30,
2004.
NOTE 14-SUBSEQUENT EVENT
The Company has entered into an exclusive consulting
agreement with a firm to enhance the value of the Company
for its shareholders. The enhancement encompasses the
possible acquisition of new trademarks to add to the
Company's product line, the merging with another company,
the selling out to another company or the possibility of
merging and/or selling out to a financial group who may be
interested in taking the Company private.
NOTE 15 -CHANGE IN ESTIMATE
The Company is in discussions with the SEC regarding the best
way to report our advertising expense during the interim
periods. While the outcome will have no effect at all on the
Company's year end financial statements which have always, in
accordance with GAAP, expensed all of the advertising costs
expended during a fiscal year in the year they were incurred;
the financial results of the individual quarters within each
year will be affected.
APB 28 Interim Financial Reporting states "Advertising costs
may be deferred within a fiscal year if the benefits of an
expenditure made clearly extend beyond the interim period in
which the expenditure is made."
This requires an estimate to be made by the company as to how
much benefit of incurred advertising will be realized in
subsequent quarters. As stated in the previously filed 10Q's,
over the past years the Company has reported its advertising
expense consistently according to its interpretation of APB 28
Interim Financial Reporting by expensing its annualized
budgeted advertising expense equally over the four quarters.
The Company feels that its budgeted advertising expense for any
year affects its sales for the entire year regardless of when
the advertisement actually runs. The strategy adopted by the
company to get the most value for its advertising dollars is to
saturate the market during the first two quarters of each
fiscal year so that an impression can be made on the consumer.
The benefit of that advertising is then reflected in the brand
recognition achieved, which carries over into the last two
quarters of the year. By the beginning of the next fiscal year
the Company believes it must, once again, saturate the market
to rekindle the interest in its products. We do not believe
that the advertising spent in a particular quarter relates
solely to the sales in that quarter, especially since although
the advertising might generate sales at the retailer, it
doesn't affect the Company until the retailer reorders to
replace the sold inventory. Depending on the retailer this
could be weeks, months, or quarters later.
-16-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 -CHANGE IN ESTIMATE (CONTINUED)
The SEC believes that pursuant to APB 28 there is no clear
benefit to the subsequent quarters of the advertising dollars
spent in the current quarter and therefore has suggested that
the Company revise its estimate of the benefit derived by
subsequent quarters and expense its advertising during its
interim periods as the costs are incurred.
Had the Company reported its advertising expense according to
the SEC's suggestion in the current and previous two years the
Pro-forma Net income and diluted EPS would have been as follows:
Year Quarter Quarter Quarter Quarter End
(000) (000) (000) (000) (000)
2005 - Proforma
Revenues $14,814 $18,616
Advertising $ 5,323 $ 4,285
NI ($ 435) $ 1,337
EPS ($.06) $ .18
2004 - Proforma
Revenues $13,087 $18,339 $16,696 $13,395 $61,518
Advertising $ 6,547 $ 4,633 $ 551 $ 1,387 $13,119
NI ($ 1,462) $ 1,902 $ 3,584 $ 1,772 $ 5,797
EPS ($ .20) $ .25 $ .47 $ .24 $ .75
2003 - Proforma
Revenues $12,515 $17,611 $12,853 $11,758 $54,737
Advertising $ 4,036 $ 3,893 $ 1,085 $ 1,314 $10,329
NI ($ 218) $ 1,897 $ 2,052 $ 1,521 $ 5,252
EPS ($ .03) $ .25 $ .28 $ .20 $ .68
This reporting change would have had no effect
on the year end financials whatsoever. It simply would have
skewed the quarterly earnings to reflect significantly less
earnings in the first two quarters when we typically spend the
bulk of our advertising dollars and significantly more income
in the third and fourth quarters when we reap the rewards of
our advertising but significantly reduce our current spending.
-17-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 -CHANGE IN ESTIMATE (CONTINUED)
For comparison purposes, the historical numbers we did report
are shown below:
2005
Revenues $14,814 $18,616
Advertising $ 3,098 $ 3,655
NI $ 945 $ 1,751
EPS $ .13 $ .24
2004
Revenues $13,087 $18,339 $16,696 $13,395 $61,518
Advertising $ 2,824 $ 3,064 $ 3,932 $ 3,299 $13,119
NI $ 836 $ 2,798 $ 1,457 $ 705 $ 5,797
EPS $ .11 $ .36 $ .19 $ .09 $ .75
2003
Revenues $12,515 $17,611 $12,853 $11,758 $54,737
Advertising $ 2,723 $ 2,634 $ 2,405 $ 2,568 $10,329
NI $ 574 $ 2,584 $ 1,287 $ 807 $ 5,252
EPS $ .08 $ .34 $ .17 $ .11 $ .68
As shown the year end numbers are exactly the same, the change
simply reallocates when our advertising dollars are expensed.
If our final discussion with the SEC convinces us to change our
method of estimating the benefits derived from our advertising
dollars, we will restate the current quarter to reflect the
change in estimate and will utilize the new method in all
future filings. The affect of the restatement on the 2nd
quarter 2005 financials will be to decrease the earnings from
$1,751,000, $.24 EPS, to ($122,000), ($.02) EPS. This is due
to the fact that since this is a "change in an estimate",
accounting guidelines require us to account for the entire
effect in the most recent quarter rather than restate each of
the prior quarters. Therefore, the entire effect of the current
quarter deferral is reflected in the 2nd quarter earnings as
opposed to being reflected in both the 1st and 2nd quarters as
shown in the proforma table above. As stated above, although
the change makes our 2nd quarter earnings look significantly
lower, its effects will be reversed in the third and fourth
quarters when very little advertising is budgeted to be expended.
-18-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
Except for historical information contained herein, this
"Management's 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.
On March 3, 1986, the Company entered into a License Agreement
with Alleghany Pharmacal Corporation under the terms of which the
Company was granted the exclusive right to use the licensed
products and trademarks for the manufacture and distribution of the
products subject to the License Agreement. Under the terms of the
Alleghany Pharmacal License (see "Business-License Agreements"),
the royalty-rate for those Alleghany Pharmacal License products
previously 'charged' at 6% will be reduced to 1% now that the sum
of $9,000,000 in royalties has been paid thereunder. In April
2003, the Company concluded payment of an aggregate of $9,000,000.
Therefore, all royalty payments were reduced to 1% on all future
orders.
For the three-month period ending May 31, 2005, the company had
revenues of $18,616,053 and net income of $1,750,655 after
provision for taxes of $917,838. For the same quarter in 2004,
revenues of $18,339,247 and net income of $2,798,203 after a
provision for taxes of $1,848,233. Earnings per share was $.24
(diluted) for the second quarter 2005 as compared to earnings $.36
(diluted) for the second quarter 2004. In accordance with EITF 00-
14, 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 2005 were reduced by $812,330 and offset by an equal
reduction of trade promotional expenses, which were included in the
Company's advertising expense budget. In the same period of the
prior year, gross sales were reduced by $636,958 and trade
promotion was credited by that amount. These accounting
adjustments under EIFT 00-14 do not affect net income.
The Company's net sales increased from $18,143,645 for the
three-month period ending May 31, 2004 to $18,492,442 for the three-
month period ending May 31, 2005, showing an increase of sales of
$348,797. Sales returns and allowances increased to 12.99% of
gross sales for the three-month period ending May 31, 2005 from
10.69% the same period last year. Gross profit margins decreased
to 66.46% for three-month period ending May 31, 2005 compared to
67.74% for the same three-month period in the prior year.
The Company's net sales increased from $31,073,110 for six
months ending May 31, 2004 to $33,180,678 for six months ending May
31, 2005, showing an increase of sales of $2,107,568. Sales
returns and allowances decreased to 9.05% of gross sales this year
from 9.72% last year six months ending May 31, 2004. Gross profit
margins decreased to 64.90% for the six months ending May 31, 2005
compared to 65.56% for the same period in the prior year. The
Company's gross sales net of returns by category were: Cosmetics
and Fragrances $3,892,553, 11.07%; Health and Beauty Aids
$21,146,590, 60.13%; and miscellaneous over-the-counter
$10,130,894, 28.81% for an aggregate total of $35,170,037. The
Company makes every effort to control the cost of manufacturing and
has had no substantial cost increases. Net income before taxes is
$4,192,406 as compared to $6,004,990 for the same quarter in 2004.
The 33.85% decrease in net income was a result of an increase
-19-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
of media from 9M to 10M and higher freight out costs due
to fuel surcharges. In accordance with GAAP, the
Company reclassified certain advertising expenditures as a
reduction of sales rather than report them as advertising expenses.
The reclassification is the adoption by the Company of the EITF 00-
14 GAAP standard. The reclassification reflects a reduction in
sales for the six months ending May 31, 2005, and 2004 by
$1,414,113 and $1,261,824. The reclassification reduces the gross
profit margin but does not affect the net income.
For the six-month period ending May 31, 2005, the Company had
revenues of $33,430,241 and net income of $2,695,485 after a
provision for taxes of $1,496,921. For the same quarter in 2004,
revenues were $31,426,735 and net income of $3,634,345 after a
provision for taxes of $2,370,644.
For the six month period ending May 31, 2005, advertising, cooperative
and promotional allowance expenses were $6,753,188 as compared to
$5,887,896 in same period in 2004, increasing $865,292. A portion
of that was that commercial costs increased by $181,720 for the
shooting of many new commercials. The balance was due to the
increased co-op advertising budget ($5.5M to $6.0M) and the media
advertising budget ($9.0M to $10.0M) over the prior year.
Advertising expenditures were 20.4% of sales for the current year
vs. 18.9% last year. The SG&A expenses increased $1,828,497 to
$10,128,231 from $8,299,734 in 2004. The increase was due mainly
to those SG&A expenses which vary in relation to additional sales
volume. Freight out, in particular, increased by $638,889 from
2004 to 2005. That increase is due to three factors. Those
factors are increased sales overall, the increase of oil prices
passed on to CCA, and immediate ship dates of our Denise Austin
Product line. To promote sales, CCA has offered IRC coupons in skus
which increased expenses $82,148. Additionally, royalty expenses
have increased by $131,879 due to the new royalty licenses,
consulting and temporary help expense increased to $316,593 due to
the marketing of new products, as well. Research and development
expenses decreased $39,673 from the six month period last year to
this year.
Both media and co-op commitments have a material effect on the
Company's operations. The Company attempts to anticipate its
advertising and promotional commitments as a percentage of gross
sales in order to control its effect on net income. In accordance
with APB No. 28, Interim Financial Reporting, the Company expenses
its advertising and related costs over the interim periods based on
its total expected expenses for its various advertising programs.
The total advertising programs for the year are budgeted at $10
million for media and $6 million for co-op advertising up from $9
million for media and $5.5 million for the prior year. The
Company's co-op budget for the period ending May 31, 2005 is
$3,000,000. Research of prior year's show that the entire amount
of the budgeted co-op has never been fully utilized by the
Company's accounts as a result of merchandising changes and
cancelled promotions. Reduction of $197,144 to co-op expense is
due to this reserve placed on co-op commitments. The reduction is
based on an estimate of co-op commitments that will not be utilized
based on the historical facts. Of the remaining $2,802,856,
$1,414,113 was offset against net sales in accordance with EITF 00-
14. The remaining $1,388,743 was expensed for co-op for the
quarter and is reflected as part of the total advertising expense
of $6,753,188. Since the actual co-op commitments for the quarter
were $4,730,273, a deferral of $1,525,414 for co-op advertising is
reflected on the balance sheet. This deferral will be fully
expensed by year-end. The deferral is primarily a result of the
Company's current $6,000,000 co-op advertising budget, which is
predicated on substantially lower spending in the third and fourth
quarters. The Company expensed $4,986,786 for its media
advertising for the period ending May 31, 2005 and deferred
$1,329,761 based on actual spending of $6,329,761. Please refer to
footnote 15 to the financial statements with regard to the possible
change of our method of estimating the advertising costs per quarter.
-20-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED)
For the period ended May 31, 2005, there was approximately
$683,225 of unclaimed co-op commitments from the prior years. If
it becomes apparent that this co-op will not be utilized, the
unclaimed co-op will be offset against the expense during the rest
of the fiscal year. This procedure is consistent with prior years'
methodology with regard to the unclaimed co-op expenses.
The Company's financial position as at May 31, 2005 consists of
current assets of $28,354,286 and current liabilities of
$13,189,656, or a current ratio of 2.1:1. In addition,
shareholders' equity increased from $23,522,047 to $25,014,551
primarily due to net income earned during the current quarter.
All of the Company's investments are classified as available
for sale. Investments with a maturity date greater than one year
from May 31, 2005 are presented as long-term investments. Assuming
these long-term investments can be sold and turned into liquid
assets at any time, it would result in a current ratio of 2.8:1.
Accounts receivable were $8,644,210 as compared to $8,677,984
for periods ending May 31, 2005 and November 30, 2004,
respectively. Inventories increased to $8,018,532 from $6,048,000,
due to the addition of the Mega -T and Denise Austin products.
Current liabilities are $13,189,656 for period ending May 31, 2005
as compared to $8,023,805 as of November 30, 2004. Accounts
payable and accrued expenses increased primarily due to the large
amount of advertising incurred for the period but remaining unpaid.
Liabilities also increased due to the increase in inventory of
$1,970,532. As of May 31, 2005, the Company was not utilizing any
of the funds available under its $10,000,000 unsecured credit line.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
The Company's financial statements record the Company's
investments under the "mark to market" method (i.e., at date-of-
statement market value). The investments are, categorically
listed, in "Common Stock", "Mutual Funds", "Other Equity",
"Preferred Stock", "Government Obligations" and "Corporate
Obligations." $209,659 of the Company's $11,535,869 portfolio of
investments (approximate, as at May 31, 2005) is invested in the
"Common Stock" and "Other Equity" categories, and approximately
$617,844 in that category are Preferred Stock holdings. Whereas
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; therefore, the Company does
not believe that its investment-market risk is material.
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, 2005.
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.
-21-
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
Item 1. Legal Proceedings:
See Part I - Note 11 of the Financial Statements regarding
litigation.
Item 4. Submission of Matters to a Vote of Security Holders:
Our annual meeting of shareholders was held on June 15, 2005
in New York, New York. At the meeting, the following persons
were elected as directors: Dunnan Edell (5,647,876 votes for
and 305,785 votes withheld), Dr. Gio Batta Gori (5,647,876
votes for and 833,518 votes withheld) and Robert Lage
(5,647,682 votes for and 305,979 votes withheld).
The shareholders approved the appointment of KGS LLP, formerly
known as Sheft Kahn & Company LLP, as the Company's
independent certified public accountants for the fiscal year
ending November 30, 2005 (5,844,136 votes for, 107,203 against
and 2,322 votes abstained).
Also approved at the annual meeting was the Company's amended
and restated stock option (incentive) plan 2003 (2,229,455
votes for, 584,126 votes against, 74,378 votes abstained and
3,065,702 shares was a broker non-vote).
Item 5. Other Information:
The Company has held its Annual Meeting of Shareholders on
June 15, 2005 with proxy materials mailed to shareholders of
record on May 1, 2005 prior to the meeting date.
On June 16, 2004, the audit committee revised the audit
committee charter. The charter is filed as an exhibit to this
report.
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 therefor.)
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
(10.1) Audit Committee Revised Charter - June 16, 2004 *
(31.1) Certification of Chief Executive Officer pursuant to Rule
13a-14(a)*
-22-
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION (CONTINUED)
(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*
* Filed herewith.
(b) Reports on Form 8-K.
Form 8K - filed April 11, 2005 announcing the technical change
of our auditors from Sheft Kahn & Company LLP to KGS LLP (a
"spin-off" of Sheft Kahn).
Form 8K - Filed June 27, 2005 states the Company has entered
into an exclusive agreement with a New York Stock Exchange
member to enhance shareholders value.
-23-
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 14, 2005
CCA INDUSTRIES, INC.
By:
David Edell, Chief Executive Officer
By:
Ira W. Berman, Chairman of the Board
-24-
EXHIBIT 10.1
CCA Industries, Inc. Audit Committee Charter
Status
The Audit Committee is a committee of the Board of Directors.
Membership
The Audit Committee shall consist of three or more
directors, all of whom, in the judgment of the Board of
Directors, shall be independent in accordance with the
American Stock Exchange listing standards. Each member
shall, in the judgment of the Board of Directors, have the
ability to read and understand the Company's basic
financial statements or shall, at the time of appointment,
undertake training for that purpose. At least one member
of the Audit Committee shall, in the judgment of the Board
of Directors, be an audit committee financial expert in
accordance with the rules and regulations of the
Securities and Exchange Commission and at least one member
(who may also serve as the audit committee financial
expert) shall, in the judgment of the Board of Directors,
have accounting or related financial management expertise
in accordance with the American Stock Exchange listing
standards.
Purpose
The Audit Committee shall represent and assist the Board
of Directors with the oversight of (a) the integrity of
the Company's financial statements and internal controls,
(b) the Company's compliance with legal and regulatory
requirements, (c) the independent auditor's qualifications
and independence and (d) the performance of the Company's
independent auditor. Except, as otherwise required by
applicable laws, regulations or listing standards, all
major decisions are considered by the Board of Directors
as a whole.
Responsibilities
1. Select and retain (subject to approval by the
Company's stockholders), and terminate when appropriate,
the independent auditor, set the independent auditor's
compensation, and pre-approve all audit services to be
provided by the independent auditor.
2. Pre-approve all permitted non-audit services to be
performed by the independent auditor and establish
policies and procedures for the engagement of the
independent auditor to provide permitted not-audit
services.
3. Receive and review: (a) a report by the independent
auditor describing the independent auditor's internal
quality-control procedures and any material issues raised
by the most recent internal quality-control review or peer
review of the independent auditing firm, or by any inquiry
or investigation by governmental or professional
authorities, within the preceding five years, respecting
one or more independent audits carried out by the firm,
and any steps taken to deal with any such issues; and (b)
other required reports from the independent auditor.
4. At least annually, consider the independence of the
independent auditor, including whether the provision by
the independent auditor of permitted non-audit services is
compatible with independence, and obtain and review a
report from the independent auditor describing all
relationships between the auditor and the Company.
5. Review the independent auditor: (a) the scope and
results of the audit; (b) any problems or difficulties
that the auditor encountered in the course of the auditor
work, and management's response; and (c) any questions,
comments or suggestion the auditor may have relating to
the internal controls, and accounting practices and
procedures of the Company or its subsidiaries.
6. Review with the independent auditor and management:
(a) the adequacy and effectiveness of the systems of
internal controls (including any significant deficiencies
and significant changes in internal controls reported to
the Audit Committee by the independent auditor or
management), accounting practices, and disclosure controls
and procedures (and management's reports thereon), of the
Company and its subsidiaries; and (b) current accounting
trends and developments, and take such action with respect
to thereto as may be deemed appropriate.
7. Review with management and the independent auditor
the annual and quarterly financial statements of the
Company, including: (a) the Company's disclosures under
the "Management's Discussion and Analysis of the Financial
Condition and Results of Operations," (b) any material
changes in accounting principles or practices used in
preparing the financial statements prior to the filing of
a report on Form 10-K or 10-Q with the Securities and
Exchange Commission; and (c) the terms required by the
Statement of Auditing Standards 61 as in effect at that
time in the case of the annual statements, and Statement
of Auditing Standards 71 as in effect in the case of the
quarterly statements.
8. Recommend to the Board of Directors, based on the
review described in paragraphs 4 and 7 above, whether the
financial statements should be included in the annual
report on Form 10-K.
9. Review earnings press releases, as well as Company
policies with respect to earnings press releases,
financial information and earnings guidance provided to
analysts and rating agencies.
10. Discuss Company policies with respect to risk
assessment and risk management, and review contingent
liabilities and risks that may be material to the Company
and major legislative and regulatory developments which
could materially impact the Company's contingent
liabilities and risks.
11. Review: (a) the status of compliance with laws,
regulations, and internal procedures, and (b) the scope
and status of systems designed to promote Company
compliance with laws, regulations and internal procedures,
through receiving reports from management, legal counsel
and third parties as determined by the Audit Committee.
12. Establish procedures for the confidential and
anonymous receipt, retention and treatment of complaints
regarding the Company's accounting, internal controls and
auditing matters.
13. Establish policies for the hiring of employees and
former employees of the independent auditor.
14. Obtain the advice and assistance, as appropriate, of
independent counsel and other advisors as necessary to
fulfill the responsibilities of the Audit Committee.
15. Conduct an annual performance evaluation of the Audit
Committee and annually evaluate the adequacy of its
charter.
Meetings
The Audit Committee shall meet as such other times as it
deems necessary to fulfill its responsibilities. The
Audit Committee shall periodically meet separately, in
executive session, with management and the independent
auditor. The Audit Committee shall report regularly to
the Board of Directors with respect to its activities and
make recommendations to the Board of Directors as
appropriate.
Exhibit 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended Six Months Ended
May 31, May 31,
2005 2004 2005 2004
Item 6.
Weighted average shares outstanding -
Basic 7,139,056 7,314,491 7,116,651 7,301,942
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price 196,031 363,170 200,452 363,087
Weighted average shares outstanding -
Diluted 7,335,087 7,677,661 7,317,103 7,665,029
Net income $1,750,655 $2,798,203 $2,695,485 $3,634,345
Per share amount
Basic $.25 $.38 $.38 $.50
Diluted $.24 $.36 $.37 $.47
Exhibit 31.1
CERTIFICATION
I, David Edell, Chief Executive Officer of the Registrant, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of CCA
Industries, Inc.;
2. To the best of my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. To the best of my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this report.
4. The Registrant's other certifying officer, John Bingman,and I are re-
sponsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relation to the
Registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the
Registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to affect, the Registrant's
internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal controls over
financial reporting, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize and report financial informa-
tion; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal control over financial reporting.
Date: July 14, 2005
/s/
-----------------------------------
David Edell
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, John Bingman, Chief Financial Officer of the Registrant, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of CCA
Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this report.
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relation to the
Registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Regis-
trant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to affect, the Registrant's
internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal controls over
financial reporting, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize and report financial informa-
tion; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal control over financial reporting.
Date: July 14, 2005
/s/------------------------------------
John Bingman
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CCA Industries, Inc. (the
"Registrant") on Form 10-Q for the quarterly period ended May 31, 2005
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, David Edell, Chief Executive Officer of the
Registrant, certify, in accordance with 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge:
(1) The Report, to which this certification is attached, fully
complies with the requirements of section 13(a) of the Securities
Exchange Action of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Registrant.
Date: July 14, 2005
/s/-----------------------------
David Edell
Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CCA Industries, Inc. (the
"Registrant") on Form 10-Q for the quarterly period ended May 31, 2005
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, John Bingman, Chief Financial Officer of the
Registrant, certify, in accordance with 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge:
(1) The Report, to which this certification is attached, fully
complies with the requirements of section 13(a) of the Securities
Exchange Action of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Registrant.
Date: July 14, 2005
/s/--------------------------------
John Bingman
Chief Financial Officer