SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended
November 30, 2003
Commission File Number
2-85538-B
CCA INDUSTRIES, INC.
(Exact Name of Registrant as specified in Charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
04-2795439
(I.R.S. Employer
Identification No.)
200 Murray Hill Parkway, East Rutherford, New Jersey 07073
(Address of principal executive offices, including zip code)
(201) 330-1400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Class A Common Stock, par value $.01 per share
(Title of Class)
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 requirement for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X].
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2) Yes No [X].
The aggregate market value of the voting stock held by non-affiliates of the Registrant (i.e., by
persons other than officers and directors of the Registrant), at the closing sales price ($5.30), on May
30, 2003, was as follows:
Class of Voting Stock
Market Value
5,212,338 shares; Common
Stock, $.01 par value
$ 27,625,391
On November 30, 2003 there was an aggregate of 7,276,844 shares of Common Stock and
Class A Common Stock of the Registrant outstanding.
- ii-
CROSS REFERENCE SHEET
Form 10-K
Item No.
1. Business
2. Properties
Headings in this Form
10-K for Year Ended
November 30, 2003
Business
Property
3. Legal Proceedings
Legal Proceedings
4. Submission of Matters
to a Vote of Security
Holders
5. Market for Registrant's
Common Equity and
Related Stockholder
Matters
Submission of Matters to a
Vote of Security Holders
Market for the Company's
Common Stock and Related
Shareholder Matters
6. Selected Financial Data
Selected Financial Data
7. Management's Discussion
and Analysis of Financial
Condition and Results
of Operations
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations
7A. Quantitative and Qualitative
Disclosures about Market Risk
Quantitative and Qualitative
Disclosures about Market Risk
8. Financial Statements
and Supplementary Data
9. Changes In and Dis-
agreements With
Accountants On Accounting
and Financial Disclosure
Financial Statements
and Supplementary Data
Changes In and Dis-
agreements With
Accountants On Accounting
and Financial Disclosure
9A. Control and Procedures
Control and Procedures
10. Directors and
Executive Officers
of the Registrant
Directors and Executive
Officers
- iii-
Form 10-K
Item No.
Headings in this Form
10-K for Year Ended
November 30, 2003
11. Executive Compensation
Executive Compensation
12. Security Ownership
of Certain Beneficial
Owners and Management
13. Certain Relationships
and Related Transactions
14. Principal Accountant Fees
and Services
15. Exhibits, Financial
Statement Schedules,
and Reports on Form
8-K
Security Ownership
of Certain Beneficial
Owners and Management
Certain Relationships
and Related Transactions
Principal Accountant Fees
and Services
Exhibits, Financial
Statement Schedules,
and Reports on Form
8-K
- iv-
Item
PART I
TABLE OF CONTENTS
Page
1. Business.............................................................................................
2. Property.............................................................................................
3. Legal Proceedings..............................................................................
4. Submission of Matters to a Vote of Security Holders..........................
1
6
6
7
PART II
5. Market for the Company's Common Stock and Related
Shareholder Matters...........................................................................
6. Selected Financial Data......................................................................
7. Management's Discussion and Analysis of Financial Condition
11
and Results of Operations..................................................................
7A. Quantitative And Qualitative Disclosure About Market Risk............ 17
8. Financial Statements and Supplementary Data....................................
17
9. Changes In and Disagreements with Accountants On Accounting
18
and Financial Disclosure....................................................................
9A.Controls and Procedures…………………………………………… 18
8
10
PART III
10. Directors and Executive Officers......................................................
11. Executive Compensation..................................................................
12. Security Ownership of Certain Beneficial Owners and Management.
13. Certain Relationships and Related Transactions.................................
14. Principal Accountant Fees and Services…………………………….
19
21
28
29
29
PART IV
15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K... 31
- v-
PART I
Item 1. BUSINESS
(a) General
CCA INDUSTRIES, INC. (hereinafter, “CCA” or the “Company”) was incorporated in
Delaware in 1983.
The Company operates in one industry segment, in what may be generally described as the
health-and-beauty aids business, selling numerous products in several health-and-beauty aids and
cosmeceutical categories. Virtually all Company products are manufactured by contract
manufacturers, pursuant to the Company's specifications and formulations.
The Company owns registered trademarks, or exclusive licenses to use registered
trademarks, that identify its products by brand-name. Under most of the brand names, the Company
markets several different but categorically-related products. The principal brand and trademark
names include “Plus+White” which includes “Booster” (oral health-care products), “Sudden
Change” (skin-care products), “Nutra Nail” and “Power Gel” and “Nutra Nail 60" (nail treatments),
“Bikini Zone” (pre and after-shave products), “Mega T” Green Tea and “SweetEnders” (dietary
products), “Hair Off” (depilatories), “IPR” (foot-care products), “Solar Sense” (sun-care products),
“Wash 'N Curl” (shampoos), “Cherry Vanilla” (perfumes), and “Scar Zone” (scar diminishing
cream).
All Company products are marketed and sold to major drug and food chains, mass
merchandisers, and wholesale beauty-aids distributors throughout the United States and Canada.
In addition, certain of the Company’s products are sold internationally.
The Company recognizes sales at the time its products are shipped to customers. However,
while sales are not formally subject to any contract contingency, the acceptance of returns is an
industry-wide practice. The Company thus estimates ‘unit returns’ based upon a review of the
market’s recent-historical acceptance of subject products as well as current market-expectations, and
equates its reserves for estimated returns in the sum of the gross profits, in the five preceding
months, realized upon an equivalent number of subject-product sales. (See Item 15, Financial
Statements, Note 2). Of course, there can be no precise going-forward assurance in respect to return
rates and gross margins, and in the event of a significant increase in the rate of returns, the
circumstance could have a materially adverse affect upon the Company’s operations.
In or about November 2000, the Company contacted its accounts and instructed them to
return its “Permathene” and “Mega 16" products, which contain phenylpropanolamine (“PPA”), as
a result of a general FDA health-warning concerning PPA (a key ingredient in numerous cold-
remedies and appetite suppressants, which had been ‘on the market’ for some 50 years). The
Company’s revenues from sales of those now discontinued products, in fiscal 2000, were
approximately $2,500,000 (approximately 6.5% of sales).
The Company replaced PPA - product revenue through promotion and sale of “Mega 14”
Balanced Fiber, an all natural-fiber diet product, “Mega T” Green Tea, and Mega G Grapefruit.
These three products accounted for $5,707,304 in net sales, approximately 11% in the current fiscal
year.
In October 2000, the Company paid $450,000 to purchase, from Shiara Holdings, Inc., the
following trademarks: “Cherry Vanilla”, “Cloud Dance”, “Sunset Café’’, “Vision”, “Mandarin
Vanilla” and “Amber Musk”. (Those trademarks had been licensed by the Company since 1998;
and, until their purchase, the Company had been committed to paying 5% royalties, a minimum of
$150,000 per annum minimum royalties, for mark-associated product sales.) Net sales of these
products were $1,682,806 (3% of sales) in the current fiscal year.
The Company's total net-sales in fiscal 2003 were approximately $54,145,000 generating
approximately $35,977,000 in gross profits. International sales accounted for approximately 2 %
of sales. The Company experienced a net profit of approximately $5,212,000 for the current fiscal
year. Its net worth is $23,344,540. (See the Financial Statements and Notes.)
Including the principal members of management (see Directors and Executive Officers), the
Company, at November 30, 2003, had 150 sales, administrative, creative, accounting, receiving, and
warehouse personnel in its employ.
(b) Manufacturing and Shipping
The Company creates formulations, chooses colors and mixtures, and arranges with
independent contractors for the manufacture of its products pursuant to Company specifications.
Manufacturing and component-supply arrangements are maintained with several manufacturers and
suppliers. Almost all orders and other product shipments are delivered from the Company's own
warehouse facilities, which results in more effective inventory control, more efficient shipping
procedures, and the realization of related economies.
(c)i Marketing
The Company markets its products to major drug, food and mass-merchandise retail chains,
and leading wholesalers, through an in-house sales force of employees and independent sales
representatives throughout the United States.
The Company sells its products to approximately 450 accounts, most of which have
numerous outlets. Approximately 40,000 stores carry at least one Company product.
2
During the fiscal year ended November 30, 2003, the Company's largest customers were
Wal-Mart (approximately 34% of net sales), Walgreen (approximately 13%), Rite Aid, CVS, Eckerd
and Albertson (approximately 8%, 7%, 6%, and 4%, respectively). The loss of any of these
principal customers, or substantial reduction of sales revenues realized from their business, could
materially and negatively affect the Company's earnings.
Most of the Company's products are not particularly susceptible to seasonal-sales fluctuation.
However, sales of depilatory, sun-care and diet-aids products customarily peak in the Spring and
Summer months, while fragrance-product sales customarily peak in the Fall and Winter months.
(c)ii Advertising
The Company has an in-house advertising department. The advertising staff designs
point-of-purchase displays, including 'blister cards', sales brochures and packaging layouts. The
production of displays, brochures, layouts and the like is accomplished through contract suppliers.
The Company primarily utilizes local and national television advertisements to promote its
leading brands. On occasion, print and radio advertisements are engaged. In addition, and
more-or-less continuously, store-centered product promotions are co-operatively undertaken with
customers.
Each of the Company's brand-name products is intended to attract a particular demographic
segment of the consumer market, and advertising campaigns are directed to the respective
market-segments.
The Company's in-house staff is responsible for the 'traffic' of its advertising. Placement is
accomplished directly and through media-service companies.
(d) "Wholly-Owned" Products
The majority of the Company's sales revenues are from sales of the Company's
"wholly-owned" product lines (i.e., products sold under trademark names owned by the Company,
and not subject to any other party’s interest or license), which included principally "Plus+White",
"Sudden Change", "Bikini Zone", "Mood Magic", "Mega T", "Cherry Vanilla", and "Scar Zone".
(e) All Products
Health and beauty, cosmetic and fragrance and over the counter products accounted for
approximately 70%, 18% and 11%, respectively, of the Company’s net-sales revenues during fiscal
2003.
3
(e) License-Agreements Products
i. Alleghany Pharmacal
In 1986, the Company entered into a license agreement with Alleghany Pharmacal
Corporation (the "Alleghany Pharmacal License"). Under the terms of the Alleghany Pharmacal
License, the Company was granted, and yet retains, the exclusive right to manufacture and market
certain products, and to use their associated trademarks, including "Nutra Nail," "Nutra Nail 60,"
"Pro Perm," "Hair Off," "Permathene" and "IPR".
The Alleghany Pharmacal License requires the Company (a) to pay royalties of 6% per
annum on net sales of “Pro-Perm” hair-care products, the PPA-based and now discontinued dietary-
product "Permathene", “IPR” foot-care products, "Nutra-Nail" nail-enamel products, and "Hair-Off"
depilatories; and (b) to pay 1% royalties on net sales of a “Hair-Off” mitten that is a
depilatory-product accessory, and “Nutra Nail 60", a fast-acting nail enamel, and “Nutra Nail Power
Gel.”
The Company is required to pay not less than $360,000 per annum in order to maintain
exclusive rights under the Alleghany Pharmacal License. (Royalties have always exceeded the
minimum; but, if they did not, the Company would be entitled to maintain exclusive license rights
by electing to pay the 'difference.' At the same time, the Company would not be required to pay any
fee in excess of royalties payable in respect of realized sales if sales did not yield 'minimum
royalties' and the Company chose in such circumstance to concede the license rights.)
The Alleghany Pharmacal License agreement provides that if, and when, in the aggregate,
$9,000,000 in royalties has been paid thereunder, the royalty-rate for those products now 'charged'
at 6% will be reduced to 1%. The Company paid an aggregate of $9,000,000 in royalties to
Allegheny in April 2003. Commencing May 1, 2003, the license royalty was reduced to 1%.
The products subject to the Alleghany-Pharmacal License accounted for approximately
$14,777,460 or 27 % of total net sales in the fiscal year ended November 30, 2003. “Nutra Nail”
and the “Hair-Off” depilatory were the leaders among all of the Company’s license-agreement
products, producing approximately 16% and 9%, respectively, of net sales.
ii. Solar Sense, Inc.
CCA commenced the marketing of its sun-care products line following a May 1998 License
Agreement with Solar Sense, Inc. (the “Solar Sense License”), pursuant to which it acquired the
exclusive right to use the trademark names "Solar Sense" and "Kids Sense” and the exclusive right
to market mark-associated products. The Solar Sense License requires the Company to pay a 5%
royalty on net sales of said licensed products until $1 million total royalties are paid and 1%,
thereafter; and minimum per-annum royalties of $30,000. CCA realized approximately $1,040,661
in net sales of sun-care products in 2003, and paid or accrued Solar Sense the royalty of $52,033.
iii. The Nail Consultants Ltd.
4
In October of 1999, the Company entered into a License Agreement with The Nail
Consultants, Ltd. for the use of an activator invented in connection with a method for applying a
protective covering to fingernails. The Company’s License Agreement with The Nail Consultants,
Ltd. is for the use of the method and its composition in a new product kit packaged and marketed
by CCA under its own name, “Nutra Nail Power Gel”. The Company is required to pay a royalty
of 5% of net sales of all products sold under the license, by the Company. Net sales were
approximately $2,872,313 in 2003, and the Company paid or accrued the Nail Consultants a royalty
of $143,616.
iv. Hugger Corporation
In October 2002, the Company entered into a License Agreement with Hugger Corporation
for use of its patented oral hygiene system to be used in conjunction with regular toothpaste. The
Company’s License Agreement is for the use of the product designated and referred to in the patent
owned by Hugger Corporation. The Company designed, marketed and distributed the patented
product called “Booster” under its Plus+White brand.
The Company is required to pay a 5% royalty of net sales payable quarterly. During the first
18-month contract period ending June 30, 2004, the minimum royalty the Company is required to
pay is $100,000 to maintain its exclusive rights under the License Agreement. Thereafter, the
Company is required to pay a minimum royalty of $50,000 annually. The royalty will continue until
the Patent expires or an aggregate of $3,500,000 is paid to Licensor. Until that time, Licensee has
no liability to meet minimum royalty requirements except to maintain its rights under the License
Agreement. In fiscal 2003, the net sales were $815,634, and the Company paid or accrued royalties
of $40,781.
v. Other Licenses
The Company is not party to any other license agreement that is currently material to its
operations.
(f) Trademarks
The Company's own trademarks and licensed-use trademarks serve to identify its products
and proprietary interests. The Company considers these marks to be valuable assets. However,
there can be no assurance, as a practical matter, that trademark registration results in marketplace
advantages, or that the presumptive rights acquired by registration will necessarily and precisely
protect the presumed exclusivity and asset value of the marks.
(g) Competition
5
The market for cosmetics and perfumes, and health-and-beauty aids products in general,
including patent medicines, is characterized by vigorous competition among producers, many of
whom have substantially greater financial, technological and marketing resources than the Company.
Major competitors such as Revlon, L'Oreal, Colgate, Del Laboratories, Unilever, and Procter &
Gamble have Fortune 500 status, and the broadest-based public recognition of their products.
Moreover, a substantial number of other health-and-beauty aids manufacturers and distributors may
also have greater resources than the Company.
(h) Government Regulation
All of the products that the Company markets are subject or potentially subject to particular
regulation by government agencies, such as the U.S. Food and Drug Administration, the Federal
Trade Commission, and various state and/or local regulatory bodies. In the event that any future
regulations were to require new approval for any in-the-market products, or should require approval
for any planned product, the Company would attempt to obtain the necessary approval and/or
license, assuming reasonable and sufficient market expectations for the subject product. However,
there can be no assurance, in the absence of particular circumstances, that Company efforts in
respect of any future regulatory requirements would result in approvals and issuance of licenses.
Moreover, if such license-requirement circumstances should arise, delays inherent in any
application-and-approval process, as well as any refusal to approve, could have a material adverse
affect upon existing operations (i.e., concerning in-the-market products) or planned operations.
Item 2. PROPERTY
The principal executive offices of the Company are located at 200 Murray Hill Parkway, East
Rutherford, New Jersey. Under a new net lease, the Company occupies approximately 60,600
square feet of space. Approximately 43,600 square feet in such premises is used for warehousing
and 17,000 square feet for offices. The annual rental is $327,684, with an annual CPI increase of
3% but not to exceed 15% cumulative 5 year increase. The lease expires on May 31, 2012 with a
renewal option for an additional five years.
The lease requires the Company to pay for additional expenses, Common Area Maintenance
(“CAM”), which includes real estate taxes, common area expense, utility expense, repair and
maintenance expense and insurance expense. For the year ended November 30, 2003, CAM was
$220,829.
Item 3. LEGAL PROCEEDINGS
6
The only material legal proceedings outstanding as of November 30, 2003 were related to
the Company’s diet suppressant products containing phenylpropanolamine (“PPA”). There were
approximately eleven suits pending in 2002. Reference is made to Forms 8K filed on May 22, 2002
and November 20, 2002 for the background and the insurance issues relative thereto. Three
additional 8Ks have been filed: one on October 29, 2003, one on November 24, 2003 and one on
December 11, 2003. Seven of the suits have been dismissed with prejudice. An additional suit is
in the process of being dismissed.
There are approximately 5,000 suits that have been brought against the numerous
pharmaceutical companies that have been engaged in distributing and/or manufacturing PPA
products. Almost all have been referred to the United States District Courts in the Western District
of Washington (MDL 1407). Outside counsel for the Company believes that the three PPA cases
still pending against the Company are defensible. Of the Company’s three pending suits, one is
insured by the Company’s liability carrier. However, there can be no assurance that the current PPA
litigation will not have a material adverse effect upon the Company’s operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 9, 2003, the Company held its annual meeting of shareholders. The actions taken,
and the voting results thereupon, were as follows:
(1) David Edell, Ira W. Berman, Jack Polak, and Stanley Kreitman were elected as directors
by the holders of Class A Common Stock. (No proxy was solicited therefore, whereas Messrs.
Berman, Polak and David Edell own more than 98% of the Class A Common Stock, and they
proposed themselves and Mr. Kreitman.)
(2) As proposed by Management, Drew Edell, Dunnan Edell and Robert Lage were elected
as directors by the holders of the Common Stock.
(3) Shareholders approved the authorization proposed by the Board of Directors for the 2003
Stock Option Plan, which authorized the issuance of options to issue up to 1,000,000 shares of
common stock.
(4) The Board's appointment of Sheft Kahn & Company LLP as the Company's independent
certified public accountants for the 2003 fiscal year was approved.
The Company has not submitted any matter to a vote of security holders since the 2003
Annual Meeting.
7
Item 5. MARKET FOR THE COMPANY'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
PART II
In June 2000, the Company filed a Schedule TO (and an Amendment No.1 thereto) with the
Securities And Exchange Commission (“S.E.C.”); and, contemporaneously thereafter, presented the
tender offer subject of the Schedule to its shareholders. Pursuant thereto, the Company offered to
purchase up to 2,500,000 shares of its own Common Stock (but not Class A Common Stock), in
exchange for a $2 subordinated debenture, maturing August 1, 2005, with 6% interest, payable semi-
annually. In response, 278,328 shares were tendered and accepted for payment. The tender offer
closed, as provided in the Schedule TO and the Offer documents presented to all Common Stock
shareholders, on July 31, 2000. (A second and final amendment to the Schedule TO, reporting the
results of the tender offer, was filed with the S.E.C. on August 1, 2000.)
The Company's Common Stock was traded on the NASDAQ National Market. Because, for
some time (a) the Common Stock had traded at less than $1.00 per share, and (b) the total market
value of shares available for public trading had been below $5,000,000, NASDAQ notified the
Company that its stock was de-listed. The stock was then traded on the National Market Bulletin
Board and continued trading on the BB through the first quarter of fiscal 2003. On March 18, 2003
the stock was listed and began trading on the American Stock Exchange under the symbol “CAW.”
The range of high and low sales prices of the Common Stock during each quarter of its 2003,
2002 and 2001 fiscal years was as follows:
Quarter Ended 2003
February 29
$3.80 - $1.70 $1.73 - $1.25 $ .93 - $ .37
$1.09 - $ .62
May 31
$5.43 - $3.05
$1.90 - $ .85
$8.69 - $5.10
August 31
$1.56 - $ .82
November 30 $8.50 - $6.60
$1.74 - $1.38
$2.00 - $1.55
$1.99 - $1.55
2001
2002
The high and low prices for the Company’s Common Stock, on February 5, 2004 were $8.55
to $7.55 per share.
The Company’s only ‘sales’ of unregistered securities were represented by its issuance, in
consequence of the above described tender offer and Schedule TO, of the $2, five-year promissory
notes, 6% interest, subject of the offer’s $2 subordinated debenture. (Those securities are
unregistered pursuant to an exemption from registration requirements. In any event, and in addition
to the form denominated by the S.E.C. as “Schedule TO”, with the Schedule TO information, the
following documents subject of the tender offer were filed with the S.E.C., prior to commencement
of the offering: A Trust Indenture, a form of the eventually-issued Promissory Notes, and the
Offering Document that was thereafter transmitted to Common Stock shareholders.)
8
As at November 30, 2003, there were approximately 199 individual shareholders of record
of the Company's common stock. (There are a substantial number of shares held of record in various
street and depository trust accounts, which represent approximately 1,000 additional shareholders.)
The dividend policy is at the discretion of the Board of Directors and will depend on
numerous factors, including earnings, financial requirements and general business conditions. On
January 8, 2003, the Board of Directors approved the payment of the Company’s first cash dividend
in the amount of $0.12 per share, payable to the holders of the Company’s common stock, $0.06
payable on May 1, 2003 and December 1, 2003 to the shareholders of record on April 1, 2003 and
November 1, 2003, respectively.
On December 13, 2003, the Board of Directors declared a $0.14 per share dividend for fiscal
2004, $0.07 payable to all shareholders of record May 1, 2004 payable on June 1, 2004 and $0.07
payable to all shareholders of record November 1, 2004 payable on November 30, 2004.
9
Item 6. SELECTED FINANCIAL DATA
Statement of Income
Sales
Other income
Costs and Expenses
(excluding special charge)
Income Before Special Charge
and Provision for
Income Taxes
Special Charge
Net Income (Loss) from
Continuing Operations
(Loss) Income from
Discontinued Operations
Net Income (Loss)
Earnings (Loss) Per Share:
Basic
Diluted
2003
$54,145,480
591,271
54,736,751
46,239,853
2002
$45,241,493
439,481
45,680,974
40,645,418
Year Ended November 30,
2000
$36,990,170
186,284
2001
$41,364,648
338,883
41,703,531
38,522,778
37,176,454
36,658,875
1999
$37,898,563
285,469
38,184,032
37,370,017
8,496,898
5,035,556
3,180,753
517,579
814,015
-
-
-
( 1,500,000)
-
5,252,131
3,074,353
2,014,369
( 654,510)
512,504
-
-
-
-
( 803,603)
5,252,131
3,074,353
2,014,369
( 654,510)
( 291,099)
$ .73
$ .69
$
$
.43
.41
$ .29
$ . 27
($ .09)
($ .09)
($ .04)
($ .04)
Weighted Average Number
of Shares Outstanding 7,227,678
7,099,759
6,893,232
7,153,013
7,174,203
Weighted Average Number
of Shares and Common Stock
Equivalents Outstanding
Balance Sheet Data:
7,616,040
2000
$12,361,305
$11,264,206
Working Capital
24,805,064
Total Assets
20,312,056
20,598,917
5,969,641 4,674,278 6,345,508
Total Liabilities
15,924,639 13,966,548 `
Total Stockholders’ Equity 23,344,540 18,835,423
2003
11,565,685
29,839,216
6,494,676
2002
1999
$12,291,890
21,494,987
6,328,905
15,166,082
(1)In December 2003, the Company declared a $.14 dividend payable to all holders of the Company’s common stock, $.07 payable
10
7,579,983
7,153,013
7,174,203
7,526,157
As At November 30,
2001
$10,236,977
payable to shareholders of record on May 1, 2004 and November 1, 2004, respectively.
11
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
Comparison of Results for Fiscal Years 2003 and 2002
The Company’s revenues increased from $45,680,974 in fiscal 2002 to $54,736,751 in the
current fiscal year. Gross profit margins remained at 66% this year as they were last year. Net
income was $5,252,131 as compared to $3,074,353 in fiscal 2002. 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 90-16
GAAP standard. The reclassification reflects a reduction in sales for the years ended November 30,
2003 and 2002 by $1,760,308 and $1,169,775, respectively. The reclassification reduces the gross
profit margin but does not affect the net income.
For the current fiscal year, advertising, cooperative and promotional allowance expenditures
were $10,328,695 as compared to $9,239,249 in fiscal 2002. Advertising expenditures were 19.1%
of sales vs. 20.4% last year. SG&A expenses increased 8.8% to $16,753,269 from $15,389,528 in
2002. The increase was due mainly to SG&A expenses, which vary in relation to additional sales
volume (i.e. payroll, freight-out, royalties, etc.). Sales returns and allowances decreased to 8.5% of
gross sales from 10.4% last year. Research and development expenses increased to $884,425 this
year from $741,974 last year.
On January 22, 2002, K-Mart filed for bankruptcy under Chapter XI. As at November 30,
2002, after adjustments for charge-backs, there was approximately $256,236 due and outstanding
for pre-petition receivables for which the Company had set up a reserve of $230,612 (90%). The
Company’s sales to K-Mart during 2003, all post-petition, were $1,222,842. As at November 30,
12
2003, after K-Mart emerged from bankruptcy, all receivables from K-Mart as debtor-in-possession
were current. In fiscal 2003, the Company wrote off the $230,000 pre-petition receivables and
reduced the reserve accordingly.
Currently, there is no indication as to what percentage of the payables owed by K-Mart will
be paid to suppliers for the indebtedness prior to the filing of the Chapter XI petition. Subsequent
to the write off of the reserve, there have been offers for 15% of the estimated pay out of the
Company’s undisputed non-contingent unsecured claims.
Comparison of Results for Fiscal Years 2002 and 2001
The Company’s revenues increased from $41,703,531 in fiscal 2001 to $45,680,974 in the
fiscal year 2002. Gross profit margins were 66% as compared to 64% last year. Net income was
$3,074,353 as compared to $2,014,369 in fiscal 2001. 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 90-16 GAAP
standard. The reclassification reflects a reduction in sales for the year ended November 30, 2002
and 2001 by $1,169,755 and $1,154,879, respectively. The reclassification reduces the gross profit
margin but does not affect the net income.
For the fiscal year 2002, advertising, cooperative and promotional allowance expenditures
were $9,239,249 as compared to $8,776,470 for fiscal 2001. Advertising expenditures were 20.4%
of sales vs. 21.2% in 2001. SG&A expenses increased 11.4% to $15,389,528 (this includes
$492,045 in legal fees as settlement from two outstanding lawsuits during the year) from
$13,812,890 in 2001. The increase was due mainly to SG&A expenses, which vary in relation to
additional sales volume (i.e. payroll, freight-out, royalties, etc.). Sales returns and allowances
decreased to 10.4% of gross sales from 11.5% in 2001. Research and development expenses
increased to $741,974 in fiscal 2002 from $687,731 in 2001.
On January 22, 2002, K-Mart filed for bankruptcy under Chapter XI. Sales to K-Mart for
the year ended November 30, 2001 were approximately $2,352,000. As at November 30, 2002, after
adjustments for charge-backs, there was $256,236 due and outstanding for pre-petition receivables
for which the Company has set up a reserve of $230,612 (90%). The Company’s sales to K-Mart,
as a debtor-in-possession, during 2002, were $989,558 As at February 18, 2003, there was $147,647
due as administrative receivables from K-Mart as debtor-in-possession, all of which are current.
Currently there is no indication as to what percentage of the payables owed by K-Mart will
be paid to suppliers for the indebtedness prior to the filing of the Chapter XI petition, or if there is
absolute assurance that all administrative priorities (receivables owed) to suppliers under sales to
K-Mart as a debtor-in-possession will be paid in full.
13
Liquidity and Capital Resources
As at November 30, 2003, the Company had working capital of $11,565,685 as compared
to $11,264,206 at November 30, 2002. The increase would have been higher had the Company not
allocated $10,991,411 of their investments into longer-term fixed income instruments. All of the
investments can be liquidated at any time. The ratio of total current assets to current liabilities is 2.9
as compared to a ratio of 3.1 to 1 for the prior year. Stockholders’ equity increased to $23,344,540
from $18,835,423 primarily due to the income from operations.
The Company’s cash position and short-term investments at year-end was $3,839,235, down
from $5,065,191 as at November 30, 2002. The decrease is due to allocating more investments in
long-term securities. In December 2003, the Company declared a $.14 dividend for shareholders
of record in May and November 2004 which will reduce the Company’s cash position by
approximately $880,000.
Inventories were $5,312,699 vs. $3,743,131, and accounts receivable were $6,604,982 vs.
$6,265,955. Current liabilities are $5,982,267 vs. $5,462,799 in the prior year. At year-end, the
Company had long and short-term triple A investments and cash of $14,830,646 as compared to
$11,788,709. As of November 30, 2003, the Company was not utilizing any of the funds available
under its $10,000,000 unsecured credit line.
Inventory, Seasonality, Inflation and General Economic Factors
The Company attempts to keep its inventory for every product at levels that will enable
shipment against orders within a three-week period. However, certain components must be
inventoried well in advance of actual orders because of time-to-acquire circumstances. For the most
part, purchases are based upon projected quarterly requirements, which are projected based upon
sales indications received by the sales and marketing departments, and general business factors. All
of the Company's contract-manufacture products and components are purchased from non-affiliated
entities. Warehousing is provided at Company facilities, and all products are shipped from the
Company's warehouse facilities.
None of the Company’s products are particularly seasonal, but sales of its sun-care,
depilatory and diet-aid products usually peak during the Spring and Summer seasons, and perfume
sales usually peak in Fall and Winter. The Company does not have a product that can be identified
as a ‘Christmas item’.
Because its products are sold to retail stores (throughout the United States and, in small part,
abroad), sales are particularly affected by general economic conditions. Accordingly, any adverse
change in the economic climate can have an adverse impact on the Company's sales and financial
condition. The Company does not believe that inflation or other general economic circumstance that
would negatively affect operations can be predicted at present, but if such circumstances should
occur, they could have material and negative impact on the Company's net sales and revenues; and,
14
more particularly, unless the Company was able to pass along related cost increases to its customers.
There was no significant impact on operations as a result of inflation during the current fiscal year.
Contractual Obligations
The following table sets forth the contractual obligations in total for each year of the next
five years as at November 30, 2003. Such obligations include the current lease for the Company’s
premises, written employment contracts and License Agreements.
2004 2005 2006 2007 2008
548,513
548,513
Lease on Premises (1)
Royalty Expense (2)
640,000
640,000
Employment Contracts (3) 2,098,257 2,192,771 2,292,957 2,399,154 1,988,724
2,617,237
2,821,284
Total Contractual Obligations
548,513
640,000
548,513
640,000
548,513
640,000
2,921,470
2,776,770
3,027,667
(1) The Lease is a net, net lease requiring a yearly rental of $327,684 plus Common Area
Maintenance “CAM”. See Section Part I, Item 2. The rental provided above is the base rental
and estimated CAM. CAM for 2003 was $220,829. The figures above do not include
adjustments for the CPI. The lease has an annual CPI adjustment of 3%, not to exceed 15%
cumulative for five years.
(2) See Section Part I, Item 1(e). The Company is not required to pay any royalty in excess of
realized sales if the Company chooses not to continue under the license. The figures set forth
above reflect estimates of the royalty expense anticipated under the various contracts for the
licensed products based on fiscal 2003 sales. Royalty expense includes Alleghany Pharmacal,
Solar Sense, Hugger Corporation, Nail Consultants, Sweet Enders, Pop Up Nails and Lobe
Wonder.
(3) The Company has executed Employment Contracts with its CEO, David Edell, and its Chairman
of the Board, Ira W. Berman. The contracts for both are exactly the same. The contracts expire
on December 31, 2010. The contracts provide for a base salary which commenced in 1994 in
the amount of $300,000 (plus a bonus of 20% of the base salary), with a year-to-year CPI or 6%,
plus 2.5% of the Company’s pre-tax income less depreciation and amortization (EBITDA). (The
2.5% measure in the bonus provision of the Edell/Berman contracts was amended so as to
calculate it against earnings before income taxes, less depreciation, amortization and
expenditures for media and cooperative advertising in excess of $8,000,000.) On May 24, 2001,
the contract was amended increasing the base salary to $400,000. The figures above include the
total salaries for fiscal 2003 and only the base salaries for the five years (plus 20% of the base
salary), and adjustment for CPI, and without estimating bonuses, as the bonus is contingent upon
future earnings. David Edell’s sons, Dunnan Edell and Drew Edell have five-year employment
contracts in the amounts of $270,000 and $200,000 respectively, which expire on November 30,
2007 (See Item 11, Summary Compensation Table). In July 2003, Dunnan Edell’s salary was
increased to $300,000 and in January 2004, Drew Edell’s salary was increased to $225,000.
15
Dunnan Edell is a director and during fiscal 2003 was appointed President of the Company. Drew
Edell is a director and the Vice President of Operations and Research, and Product Development.
Cautionary Statements Regarding Forward-Looking Statements
This annual report contains forward-looking statements based upon current expectations of
management that involve risks and uncertainty. Actual risks could differ materially from those
anticipated. Additional risks and uncertainties not presently known may possibly impair business
operations. If any of these risks actually occur, the business, financial conditions and operating
results could be materially adversely affected. The cautionary statements made in this Annual
Report on Form 10K should be read as being applicable to all forward-looking statements whenever
they appear in this Annual Report.
Concentration of Risk
The Company relies on mass merchandisers and major drug chains for the sales of its
products. The loss of any one of those accounts could have a substantive negative impact upon its
financial operations. {See Business - General, Item 1(c)i Marketing.}
The Company does not manufacture any of its products. All of the products are
manufactured for the Company by independent contract manufacturers. There can be no assurance
that the failure of a supplier to deliver the products ordered by the Company when requested will
not cause burdensome delays in the Company’s shipments to accounts. The Company does
constantly seek alternative suppliers should a major supplier fail to deliver as contracted. A failure
of the Company to ship as ordered by its accounts could cause penalties and/or cancellations.
There is No Assurance That Business Will Continue to Operate Profitably.
In the current year, net sales were $54,145,480. Almost all of the products were able to
maintain the projected gross profit margins. Net income is $5,252,131. There were no FDA policies
that affected the Company’s brands. In 2000, the FDA suggested the discontinuance of the
Company’s products containing PPA. As a result, revenues that year were reduced by $1,245,000
due to returns. In addition, the Company also wrote down $255,000 in inventory causing the
Company to incur a loss of $654,510 for the year. This fiscal year, the replacement products for the
dietary supplements containing PPA had net revenues of $5,915,484.
The Pending Litigations in Connection with the Sale of the Company’s Products
Containing PPA May Entail Significant Uncertainty and Expense.
As described in “Legal Proceedings” set forth, there were referenced 8Ks filed on May 23,
2002 and November 20, 2002, in which the legal issues were discussed. Three additional 8Ks were
filed, one on October 29. 2003, one on November 24, 2003 and one on December 11, 2003 advising
16
of the dismissal of seven of the eleven lawsuits. An additional lawsuit is in the process of being
dismissed. As previously advised, it is independent counsel’s opinion that the Company has a
defensible position in the three remaining lawsuits.
Competition in the Cosmetic, Health and Beauty Aid Industry is Highly Competitive.
Reference is made to “Business ‘ Sub-section’ of Competition.”
CLASS A Shareholders Retain Control of Board of Directors.
See “Voting” in the Proxy Statement dated May 24, 2003. Class A Shareholders, David
Edell, CEO and Ira W. Berman, Chairman of the Board of Directors, have the right to elect four
members to the Board of Directors. Common stockholders have the right to elect three members
to the Board of Directors.
Future Success Depends on Continued New Product Development.
The Company is not financially as strong to compete with the major companies against
whom it competes. The ability to successfully introduce new niche products and increase the growth
and profitability of its current niche brand products will affect the business and prospects of the
future of the Company.
17
Item 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
The Company’s financial statements (See Item 15) 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” (which, primarily, are intended to be held
to maturity). $510,288 of the Company’s $13,632,859 portfolio of investments (approximate, as at
Nov. 30, 2003) is invested in the ”Common Stock” and “Other Equity” category, and approximately
$1,366,036 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, thus the Company does not believe that its investment-
market risk is material.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are listed under Item 15 in this Form 10-K. The following
financial data is a summary of the quarterly results of operations (unaudited) during and for the years
ended November 30, 2003 and 2002:
Fiscal 2003
Feb. 28
May 31
Aug. 31
Nov. 30
Three Months Ended
Net Sales
Total Revenue
Cost of Products Sold
Net Income
Earnings Per Share:
Basic
Diluted
$12,362,785
12,515,182
4,446,827
573,626
$17,439,253
17,610,850
5,316,313
2,584,095
$12,739,346 $11,604,097
12,852,537 11,758,182
4,030,837 4,374,551
1,287,125 807,285
$.08
.08
$.36
.34
$.18 $.11
.17 .11
Fiscal 2002
Feb. 28
May 31
Aug. 31
Nov. 30
Three Months Ended
Net Sales
Total Revenue
Cost of Products Sold
Net Income
$10,158,386
10,247,194
3,764,904
300,063
$13,213,844
13,312,347
4,399,740
1,217,986
$11,391,258
11,511,314
3,559,990
722,822
$10,478,005
10,610,119
3,617,683
833,482
Earnings Per Share:
Basic
$.12
$.04
Diluted .04 .16 .10 .11
$.10
$.17
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
18
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company did not change its accountants within the twenty-four months prior to the date
of the most recent financial statements (nor since), and had no reported disagreement with its
accountants on any matter of accounting principles or practices.
Item 9A. 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 November 30, 2003.
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 affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
19
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
We have a code of ethics that applies to the Chairman of the Board, Directors, Officers and
Employees, including our Chief Executive Officer, Treasurer and Controllers. You can find our
code of ethics in Exhibit 14.
The Executive Officers and Directors of the Company are as follows:
NAME POSITION
COMPANY SERVICE
YEAR OF FIRST
David Edell
Ira W. Berman
Chief
Executive Officer,
Director
Chairman of the Board
of Directors, Secretary,
Executive Vice President
Dunnan Edell
President
Director
Drew Edell
Vice President-
Operations and
New Product Development
Director
John Bingman
Treasurer
Stanley Kreitman
Director
Jack Polak
Director
Robert Lage
Director
1983
1983
1984
1983
1986
1996
1983
2003
David Edell, age 71, is a director, and the Company's Chief Executive Officer. Prior to his
association with the Company, he was a marketing and financial consultant; and, by 1983, he had
extensive experience in the health and beauty aids field as an executive director and/or officer of
Hazel Bishop, Lanolin Plus and Vitamin Corporation of America. In 1954, David Edell received
a Bachelor of Arts degree from Syracuse University.
Ira W. Berman, age 72, is the Company's Executive Vice President and Corporate Secretary.
20
He is also Chairman of the Board of Directors. Mr. Berman is an attorney who has been engaged
in the practice of law since 1955. He received a Bachelor of Arts Degree (1953) and Bachelor of
Law Degree (1955) from Cornell University, and is a member of the American Bar Association.
Dunnan Edell is the 48 year-old son of David Edell. He is a graduate of George Washington
University. He has been a director since 1994, and in fiscal 2003, he was promoted to position of
President of the Company. He joined the Company in 1984 and was appointed Divisional
Vice-President in 1986. He was employed by Alleghany Pharmacal Corporation from 1982 to 1984,
and by Hazel Bishop from 1977 to 1981.
Drew Edell, the 46 year-old son of David Edell, is a graduate of Pratt Institute, where he
received a Bachelor's degree in Industrial Design. He has been a director since 2000. He joined the
Company in 1983, and in 1985, he was appointed Vice President of Product Development and
Production.
John Bingman, age 52, received a Bachelor of Science degree from Farleigh Dickenson
University in 1973. He worked as a Certified Public Accountant who practiced with the New Jersey
accounting firm of Zarrow, Zarrow & Klein from 1976 to 1986.
Jack Polak, age 91, has been a private investment consultant and a banker since April 1982.
He is a certified Dutch Tax Consultant and a member of The Netherlands. He was knighted on his
80th birthday by Queen Beatrix of the Netherlands for his untiring efforts on behalf of the Anne
Frank Center USA for which he is still actively working as the “Chairman-Emeritus.”
Stanley Kreitman, age 71, has been Vice Chairman of the Board of Manhattan Associates,
an equity-investment firm, since 1994. He is also a director of Medallion Financial Corp., an SBIC.
Mr. Kreitman is Chairman of the Board of Trustees of the New York Institute of Technology since
1989, and of Crime-Stoppers Nassau County (NY) since 1994. Since February 1999 and June 1999,
respectively, he has been a member of the Board of Directors of K.S.W. Corp. and P.M.C.C.
Mortgage Corp. He is also a director and/or executive committee member of the following
organizations: The New York City Board of Corrections, Bank Hapdalim USA (Signature Bank),
The New York College of Osteopathic Medicine, and the Police Athletic League. From 1975 until
1993, he was President of United States Banknote Corporation, a securities printer.
Robert Lage, age 67, is a retired CPA. He became a director in fiscal 2003. He was a
partner at Price WaterhouseCoopers Management Consulting Service prior to his retirement in 1997.
He has been engaged in the practice of public accounting and management consulting since 1959.
He received a BBA from Bernard Baruch College of the City University of New York in 1958.
Item 11. EXECUTIVE COMPENSATION
21
i. Summary Compensation Table
The following table summarizes compensation earned in the 2003, 2002 and 2001 fiscal
years by all of the executive officers whose fiscal 2003 compensation exceeded $100,000, including
the Chief Executive Officer (the "Named Officers").
Annual Compensation Long-Term Compensation
Name and
Principal
Position
David Edell,
Chief
Executive
Officer
Year
2003
2002
2001
Ira W. Berman, 2003
2002
Secretary and
Executive
2001
Vice President
Dunnan Edell,
President
Drew Edell
Vice President
Operations
John Bingman
Treasurer
Joel Last
Vice President
Sales
2003
2002
2001
2003
2002
2001
2003
2002
2001
2003
2002
2001
Patrick Haberman2003
2002
Vice President
2001
Sales
All
Other
Annual
Compen-
sation(1)
Number
of Shares
Covered Other
by Stock Long-Term
Options Compen-
Granted(2) sation
Salary
Bonus
$619,205
584,155
514,399
$459,240
332,060
247,806
-
$39,476
40,152
-
37,859 -
$619,205
584,155
514,399
$459,240
332,060
247,806
$29,499
27,475
27,905
$282,692
253,172
232,595
$ 50,000
45,000
4,231
$11,931
7,281
8,304
$200,000
203,845
187,596
$105,128
99,843
101,354
$160,000
160,000
160,000
$152,077
150,000
150,000
$ 25,000
25,000
3,365
$ 25,000
20,000
1,862
$ 32,000
15,000
10,000
$ 31,350
10,000
7,500
22
$ 5,081
1,178
2,929
$ 2,696
3,037
2,763
$ 4,833
5,984
7,067
$9,278
9,603
8,484
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-------------------------
(1) Includes the personal-use value of Company-leased automobiles, the value of Company-provided
life insurance, and health insurance that is made available to all employees.
(2) Information in respect of stock option plans appears below in the sub-topic, Employment
Contracts/Executive Compensation Program.
ii. Fiscal 2003 Option Grants and Option Exercises,
Year-End Option Valuation, Option Repricing
No new options were issued to any of the Named Officers in fiscal 2003.
The next table identifies 2003 fiscal-year option exercises by Named Officers, and reports
a valuation of their options.
Fiscal 2003 Aggregated Option Exercises
and November 30, 2003 Option Values
Number of
Shares
Number of Shares
Covered by Un-
Value of Unexercised
exercised Options In-the-Money Options
Acquired Value
On Exercise Realized (1) at November 30, 2003 at November 30, 2003
David Edell
Ira W. Berman 85,000
Dunnan Edell
Drew Edell
60,000 $234,000
$331,500
-
-
-
-
97,500
117,000
75,000
75,000
$683,475
$820,170
$525,750
$525,750
---------------------
(1) Represents the difference between market price and the respective exercise prices of options as
of the exercise date.
Repriced Options
The following table identifies the stock options held by the Named Officers and all other officers
and directors, the exercise prices of which have been reduced during the past 10 years.
23
Original
Number Grant Original Date New
Price
of Shares Date Price Repriced
100,000 Aug. 1, 1997 $2.50 May 24, 2001
David Edell (1)
100,000
Ira W. Berman (1)
50,000
Dunnan Edell (1)
Drew Edell (1)
50,000
Stanley Kreitman (1) 25,000
25,000
Jack Polak (1)
25,000
Rami Abada (1)
25,000
Dunnan Edell (1)(2)
25,000
Drew Edell (1)(2)
-------------------
Aug. 1, 1997 2.50 May 24, 2001
Aug. 1, 1997 2.50 May 24, 2001
Aug. 1, 1997 2.50 May 24, 2001
Aug. 1, 1997 2.50 May 24, 2001
Aug. 1, 1997 2.50 May 24, 2001
Aug. 1, 1997 2.50 May 24, 2001
Jun. 10, 1995 4.50 May 24, 2001
Jun. 10, 1995 4.50 May 24, 2001
.50
.50
.50
.50
.50
.50
.50
.50
.50
(1) On November 3, 1998, the full Board of Directors authorized the repricing in consequence of
a declining market valuation, inconsistent with the Company's realizable value. The market
price of the Common Stock at the date of repricing was $1.00; and, at that date, the original
option terms (10 years from August 1, 1997) had approximately 8 years and 10 months
remaining. When the options were originally issued, on August 1, 1997, the market price of the
Company's Common Stock was $2.50. On May 24, 2001, the Company repriced the options
again when the market price was $.50.
(2) On June 10, 2000, the full Board of Directors authorized the repricing in consequence of a
declining market valuation, inconsistent with the Company’s realizable value. The market price
of common stock at the date of repricing was $1.10; and at that date the original terms (5 years
from June 10, 1995) were extended for an additional 5 years. When the options were originally
issued on June 10, 1995, the market price of the Company’s common stock was $3. On May 24,
2001, the Company repriced the options again when the market price was $.50, and changed the
expiration date to August 1, 2007.
iii. Compensation of Directors
Each outside director was paid $3,000 per meeting for attendance of board meetings in
fiscal 2003 (without additional compensation for committee meetings). No new options were
granted to any director in 2003. Mr. Lage received an additional $15,000 as chairman of the
audit committee. The full Board of Directors met four times in fiscal 2003.
iv. Executive Compensation Principles
Audit and Compensation Committee
The Company's Executive Compensation Program is based on guiding principles designed
24
to align executive compensation with Company values and objectives, business strategy,
management initiatives, and financial performance. In applying these principles the Audit and
Compensation Committee of the Board of Directors, comprised of Stanley Kreitman, Jack Polak and
Robert Lage, which met three times in fiscal 2003, has established a program to:
(cid:31) Reward executives for long-term strategic management and the enhancement of
shareholder value.
(cid:31) Integrate compensation programs with both the Company's annual and long-term
strategic planning.
(cid:31) Support a performance-oriented environment that rewards performance not only with respect
to Company goals but also Company performance as compared to industry performance
levels.
Stanley Kreitman, former president of a national bank, qualifies as a “financial expert” as
defined by the SEC in Instruction 1 to proposed Item 309 of Regulation S-K, which is set forth in
the SEC Release No. 34 - 46701 dated October 22, 2003. Mr. Kreitman is an “independent” as
that term is used in Section 10A(m)(3) of the Exchange Act.
Jack Polak was knighted by the Dutch government in 1993. He is a certified Dutch tax
consultant and a member of the association of certified tax accountants. The Board has deemed that
he is both “independent” and qualifies as a “financial expert.”
Robert A. Lage, age 67, chairman of the audit committee and a retired CPA, was a partner
at PriceWaterhouseCoopers Management Consulting Service prior to his retirement in 1997. He has
been engaged in the practice of public accounting and management consulting since 1959. He
received a BBA from Bernard Baruch College of the City University of New York in 1958. The
Board has deemed that he is both “independent” and qualifies as a “financial expert”.
v. Employment Contracts/Compensation Program
The total compensation program consists of both cash and equity based compensation. The
Audit and Compensation Committee (the "Committee") determines the level of salary and bonuses,
if any, for key executive officers of the Company. The Committee determines the salary or salary
range based upon competitive norms. Actual salary changes are based upon performance, and
bonuses were awarded by the Committee in consideration of the Company's performance during the
2003 fiscal year.
The Company has executed Employment Contracts with its CEO, David Edell and its
Chairman of the Board, Ira W. Berman. The contracts for both are exactly the same. The contracts
expire on December 31, 2010. The contracts provide for a base salary which commenced in 1994
in the amount of $300,000, with a year-to-year CPI or 6% plus 2.5% of the Company’s pre-tax
income less depreciation and amortization (EBITDA), plus 20% of the base salary for the fiscal year.
(The “2.5% measure” in the bonus provision of the Edell/Berman contracts was amended so as to
25
calculate it against earnings before income taxes, less depreciation, amortization and expenditures
for media and cooperative advertising in excess of $8,000,000. On May 24, 2001, the contract was
amended increasing the base salary to $400,000.
David Edell’s sons, Dunnan Edell and Drew Edell have five-year employment contracts
in the amounts of $270,000 and $200,000 respectively, which expire on November 30, 2007.
(See Item 11, Summary Comprehensive Table). Dunnan Edell is a director and President of the
Company. Drew Edell is a director and the Vice President of Operations and Research and
Product Development. On July 1 2003, Dunnan Edell’s salary was increased to $300,000, and
on January 5, 2004, Drew Edell’s salary was increased to $225,000.
vi. Stock Option Plans
Long-term incentives are provided through the issuance of stock options.
(The 1984 Stock Option Plan covered 1,500,000 shares of its Common Stock, and the 1986
Stock Option Plan covered 1,500,000 shares of its Common Stock.) On July 9, 2003, the
Company’s Stock Option Plan was approved by the shareholders authorizing the issuance of options
to issue up to 1,000,000 shares.
The Company's 2003 Stock Option Plan covers 1,000,000 shares of its Common Stock.
The 2003 Option Plan provides (as had the 1984 , 1986 and the 1994 plans) for the granting
of two (2) types of options: "Incentive Stock Options" and "Nonqualified Stock Options". The
Incentive Stock Options (but not the Nonqualified Stock Options) are intended to qualify as
"Incentive Stock Options" as defined in Section 422(a) of The Internal Revenue Code. The Plans
are not qualified under Section 401(a) of the Code, nor subject to the provisions of the Employee
Retirement Income Security Act of 1974.
Options may be granted under the Options Plans to employees (including officers and
directors who are also employees) and consultants of the Company provided, however, that
Incentive Stock Options may not be granted to any non-employee director or consultant.
Option plans are administered and interpreted by the Board of Directors. (Where issuance
to a Board member is under consideration, that member must abstain.) The Board has the power,
subject to plan provisions, to determine the persons to whom and the dates on which options will
be
granted, the number of shares subject to each option, the time or times during the term of each when
options may be exercised, and other terms. The Board has the power to delegate administration to
a Committee of not less than two (2) Board members, each of whom must be disinterested within
the meaning of Rule 16b-3 under the Securities Exchange Act, and ineligible to participate in the
option plan or in any other stock purchase, option or appreciation right under plan of the Company
26
or any affiliate. Members of the Board receive no compensation for their services in connection
with the administration of option plans.
Option Plans permit the exercise of options for cash, other property acceptable to the Board
or pursuant to a deferred payment arrangement. The 1994 Plan specifically authorizes that payment
may be made for stock issuable upon exercise by tender of Common Stock of the Company; and the
Executive Committee is authorized to make loans to option exercisers to finance optionee
tax-consequences in respect of option exercise, but such loans must be personally guaranteed and
secured by the issued stock.
The maximum term of each option is ten (10) years. No option granted is transferable by
the optionee other than upon death.
Under the plans, options will terminate three (3) months after the optionee ceases to be
employed by the Company or a parent or subsidiary of the Company unless (i) the termination of
employment is due to such person's permanent and total disability, in which case the option may,
but need not, provide that it may be exercised at any time within one (1) year of such termination
(to the extent the option was vested at the time of such termination); or (ii) the optionee dies while
employed by the Company or a parent or subsidiary of the Company or within three (3) months after
termination of such employment, in which case the option may, but need not provide that it may be
exercised (to the extent the option was vested at the time of the optionee's death) within eighteen
(18) months of the optionee's death by the person or persons to whom the rights under such option
pass by will or by the laws of descent or distribution; or (iii) the option by its terms specifically
provides otherwise.
The exercise price of all nonqualified stock options must be at least equal to 85% of the fair
market value of the underlying stock on the date of grant. The exercise price of all Incentive Stock
Options must be at least equal to the fair market value of the underlying stock on the date of grant.
The aggregate fair market value of stock of the Company (determined at the date of the option
grant) for which any employee may be granted Incentive Stock Options in any calendar year may
not exceed $100,000, plus certain carryover allowances. The exercise price of an Incentive Stock
Option granted to any participant who owns stock possessing more than ten (10%) of the voting
rights of the Company's outstanding capital stock must be at least 110% of the fair market value on
the date of grant.
As at November 30, 2003, 427,500 stock options, yet exercisable, to purchase 427,500
shares of the Company's Common Stock, were outstanding.
vii. Performance Graph
Set forth below is a line graph comparing cumulative total shareholder return on the
Company's Common Stock, with the cumulative total return of companies in the NASDAQ Stock
Market (U.S.) and the cumulative total return of Dow Jones's Cosmetics/Personal Care Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
27
AMONG CCA INDUSTRIES, INC, THE DOW JONES US COSMETICS INDEX
AND THE DOW JONES US TOTAL MARKET INDEX
CCA Industries, Inc.
DJ US Cosmetics Index
DJ US Total Market Index
S
R
A
L
L
O
D
800
700
600
500
400
300
200
100
0
12/31/98
12/31/99
12/31/00
12/31/01
12/31/02
12/31/03
Cumulative Total Return*
12/98
100
CCA Industries, Inc.
DJ US Cosmetics Index
100
DJ US Total Market Index 100
---------------------
* $100 invested on December 31, 1998 in stock and indices, including reinvestment of
dividends.
12/99 12/00 12/01 12/02 12/03
693
103
90
81
77
88
88
98
123
159
74
76
45
85
111
28
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding the ownership of the Company's
Common Stock and/or Class A Common Stock as of November 30, 2003 by (i) all those known by
the Company to be owners of more than five percent of the outstanding shares of Common Stock
or Class A Common Stock; (ii) each officer and director; and (iii) all officers and directors as a
group. Unless otherwise indicated, each of the shareholders has sole voting and investment power
with respect to the shares owned (subject to community property laws, where applicable), and is
beneficial owner of them.
Name and Address
Shares Owned (1):
Shares” (1) Option Share Exercise (1)
Number of “Option Standing/Assuming
Ownership, As A
Percentage of
All Shares Out-
Common
Stock Class A (2)
396,993
484,615
97,500
12.1%, 12.7%
406,583
473,615
117,000
12.1%, 12.9%
27,700
-
25,000
4%, .7%
David Edell
c/o CCA Industries, Inc.
200 Murray Hill Parkway
East Rutherford, NJ 07073
Ira W. Berman
c/o CCA Industries, Inc.
Jack Polak
195 Beach Street
Eastchester, NY 10709
Stanley Kreitman
c/o CCA Industries, Inc.
-
Dunnan Edell
c/o CCA Industries, Inc.
41,250
Robert Lage
72 Cypress Point Lane
Jackson, NJ 08527
-
-
-
-
25,000
0%, .3%
75,000
.6%, 1.5%
-
-
Drew Edell
51,250
-
75,000
.7%, 1.6%
29
c/o CCA Industries, Inc.
John Bingman
c/o CCA Industries, Inc.
Officers and Directors
as a group (8 persons)
_______________________
-
-
-
-
923,776
958,230
414,500
25.9%, 29.8%
(1) The number of “Option Shares” represents the number of shares that could be purchased by and
upon exercise of unexercised options exercisable within 60 days; and the percentage ownership
figure denominated “Assuming Option Share Exercise” assumes, per person, that unexercised
options have been exercised and, thus, that subject shares have been purchased and are actually
owned. In turn, the “assumed” percentage ownership figure is measured, for each owner, as if each
had exercised such options, and purchased subject ‘option shares,’ and thus increased total shares
actually outstanding, but that no other option owner had ‘exercised and purchased.’
(2) David Edell, Ira Berman own 100% of the outstanding shares of Class A Common Stock.
Messrs. David Edell, Dunnan Edell, Drew Edell and Ira Berman are officers and directors. Mr.
Bingman is an officer. Messrs. Lage, Kreitman and Polak are Directors.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2003, several related parties provided services to the Company which were
deemed immaterial to the financial statements.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Sheft Kahn & Company LLP (“Sheft Kahn”) served as the Company’s independent
auditors for 2003 and 2002. The services performed by Sheft Kahn in this capacity included
conducting an audit in accordance with generally accepted auditing standards of, and expressing
an opinion on, the Company’s consolidated financial statements.
Audit Fees
Sheft Kahn’s fees for professional services rendered in connection with the audit and
review of Forms 10-K and all other SEC regulatory filings were $177,614 for the 2003 fiscal
year and $128,425 for the 2002 fiscal year. The Company has paid and is current on all billed
fees.
Tax Fees
30
Sheft Kahn’s fees for professional services rendered in connection with Federal and State
tax return preparation and other tax matters for the 2003 and 2002 fiscal years were $42,846 and
$30,484, respectively.
Consulting Fees
Sheft Kahn’s fees of $23,008 for the 2003 fiscal year were related to work performed in
conjunction with PNC Capital Markets conducting due diligence on the Company for possible
future acquisitions of other companies. The fees of $2,838 for the 2002 fiscal year were related
to matters pertaining to the Company’s new computer system.
Engagements Subject to Approval
Under its charter, the Audit Committee must pre-approve all subsequent engagements of
our independent auditor unless an exception to such pre-approval exists under the Securities
Exchange Act of 1934 or the rules of the Securities and Exchange Commission. Each year, the
independent auditor’s retention to audit our financial statements, including the associated fee, is
approved by the committee before the filing of the preceding year’s annual report on form 10-K.
At the beginning of the fiscal year, the Audit Committee will evaluate other known potential
engagements of the independent auditor, including the scope of the work proposed to be
performed and the proposed fees, and approve or reject each service, taking into account whether
the services are permissible under applicable law and the possible impact of each non-audit
service on the independent auditor’s independence from management. At each subsequent
committee meeting, the committee will receive updates on the services actually provided by the
independent auditor, and management may present additional services for approval. The
committee has delegated to the Chairman of the committee the authority to evaluate and approve
engagements on behalf of the committee in the event that a need arises for pre-approval between
committee meetings. If the Chairman so approves any such engagements, he will report that
approval to the full committee at the next committee meeting.
Since the May 6, 2003 effective date of the Securities and Exchange Commission rules
stating that an auditor is not independent of an audit client if the services it provides to the client
are not appropriately approved, each new engagement of Sheft Kahn & Company LLP was
approved in advance by the Audit Committee, and none of those engagements made use of the
de minimus exception to pre-approval contained in the Commission’s rules.
31
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENTS,
SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements:
Table of Contents, Independent Auditors' Report, Consolidated Balance Sheets as of
November 30, 2003 and 2002, Consolidated Statements of Income (Loss) for the years ended
November 30, 2003, 2002 and 2001, Consolidated Statements of Comprehensive Income (Loss),
Consolidated Statements of Shareholders' Equity for the years ended November 30, 2003, 2002 and
2001, Consolidated Statements of Cash Flows for the years ended November 30, 2003, 2002 and
2001, Notes to Consolidated Financial Statements.
Financial Statement Schedules:
Schedule II: Valuation Accounts; Years Ended Nov. 30, 2003, 2002 and 2001. The
remaining financial statement schedules have been omitted since they are not required to be
filed.
Exhibits:
(3)
(1)
(10)
The Company's Articles of Incorporation and Amendments thereof, and its By-Laws, are
incorporated by reference to their filing with the Form 10-K/A filed April 5, 1995. (Exhibit
pages 000001-23).
The Indenture (and the Promissory note exhibited therewith) defining the rights of former
shareholders who tendered Common Stock to the Company for its $2 per share, five- year,
6% debenture, is filed by reference to the filing of such documents with the Schedule TO
filed with the S.E.C., on June 5, 2001.
(a) The Following Material Contracts are incorporated by reference to their filing with the
Form 10-K/A filed April 5, 1995: Amended and Restated Employment Agreements of
1994, with David Edell and Ira Berman; License Agreement made February 12, 1986 with
Alleghany Pharmacal Corporation.
(b) The February 1999 Amendments to the Amended and Restated Employment Agreements
of David Edell and Ira Berman (1994) are incorporated by reference to the 1998 10-K.
(Exhibit pages 00001-00002).
(c) The Forms 8K, filed on May 22, 2002 and November 20, 2002, are incorporated by
reference to this 2003 10K. Three additional 8Ks are referenced, October 29, 2003,
November 24, 2003 and December 11, 2003.
(d) The Company’s 2003 Stock Option Plan was filed with the 2003 Proxy.
32
(11)
Statement re Per Share Earnings (included in Item 15, Financial Statements)
Two Forms 8-K were filed during the 2003 fiscal year.
(14) Code of Ethics for Chief Executive Officer and Senior Financial Officers
(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*
* Filed herewith.
Shareholders may obtain a copy of any exhibit not filed herewith by writing to CCA
Industries, Inc., 200 Murray Hill Parkway, East Rutherford, New Jersey 07073. Moreover, exhibits
may be inspected and copied at prescribed rates at the Commission’s public reference facilities at
Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549; Jacob K. Javits Federal Building,
26 Federal Plaza, New York, New York 10278; and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials may also be
obtained by mail at prescribed rates from the Public Reference Branch of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and one is available at the Commission’s Internet
website (http://www.sec.gov).
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(A) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned
thereunto duly authorized.
CCA INDUSTRIES, INC.
By:
s/
DUNNAN EDELL, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has
been signed below by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
s/ Co-Chairman
DAVID EDELL
Chief Executive Officer,
Chief Financial Officer,
Director
s/ Chairman of the Board
of Directors, Executive
IRA W. BERMAN
Vice President,
Secretary
February 28, 2004
February 28, 2004
s/ President,
DUNNAN EDELL
Director
February 28, 2004
s/ Vice President,
DREW EDELL
Director
February 28, 2004
s/ Director
STANLEY KREITMAN
s/ Director
ROBERT LAGE
s/ Director
JACK POLAK
s/
JOHN BINGMAN
Treasurer
February 28, 2004
February 28, 2004
February 28, 2004
February 28, 2004
34
35
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2003 AND 2002
C O N T E N T S
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS............................ 1
FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS ............................................................................... 2-3
CONSOLIDATED STATEMENTS OF INCOME .................................................................. 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ................................ 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ................................... 6
CONSOLIDATED STATEMENTS OF CASH FLOWS ......................................................... 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ......................................... 8-32
SUPPLEMENTARY INFORMATION
INDEPENDENT AUDITORS' REPORT
Board of Directors
CCA Industries, Inc.
East Rutherford, New Jersey
We have audited the consolidated balance sheets of CCA Industries, Inc. and Subsidiaries
as of November 30, 2003 and 2002, and the related consolidated statements of income, comprehen-
sive income, shareholders= equity and cash flows for each of the three years in the period ended
November 30, 2003. These consolidated financial statements are the responsibility of the
Company=s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to obtain a
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements and related schedules. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of CCA Industries, Inc. and Subsidiaries as of
November 30, 2003 and 2002, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended November 30, 2003, in conformity with accounting
principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The supplemental schedules listed in the index to Item 15
are presented for purposes of complying with the Securities and Exchange Commission=s rules and
are not a required part of the basic consolidated financial statements. The supplemental schedules
have been subjected to the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, is fairly stated, in all material respects in relation to the
basic consolidated financial statements taken as a whole.
SHEFT KAHN & COMPANY LLP
CERTIFIED PUBLIC ACCOUNTANTS
January 30, 2004
Jericho, New York
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
Current Assets
Cash and cash equivalents (Note 15)
Short-term investments and marketable
securities (Notes 2 and 6)
Accounts receivable, net of allowances of
$895,723 and $1,222,408, respectively
Inventories (Notes 2 and 3)
Prepaid expenses and sundry receivables
Prepaid income taxes and refunds due (Note 8)
Deferred income taxes (Note 8)
November 30,
2003
2002
$ 1,206,787
$ 1,585,647
2,632,448
3,479,544
6,604,982
5,312,699
590,850
236,620
963,566
6,265,955
3,743,131
363,457
1,703
1,287,568
Total Current Assets
17,547,952
16,727,005
Property and Equipment, net of accumulated
depreciation and amortization
(Notes 2 and 4)
Intangible Assets, net of accumulated
amortization (Notes 2 and 5)
Other Assets
Marketable securities (Notes 2 and 6)
Other
Total Other Assets
Total Assets
728,522
720,739
532,193
577,414
10,991,411
39,138
6,723,518
56,388
11,030,549
6,779,906
$29,839,216
$24,805,064
See Notes to Consolidated Financial Statements.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
liabilities (Note 10)
Income tax payable
Dividends payable
November 30,
2003
2002
$ 5,603,150
-
379,117
$ 5,284,109
178,690
-
Total Current Liabilities
5,982,267
5,462,799
Subordinated Debentures (Note 7)
497,656
501,656
Deferred Income Taxes (Note 8)
14,753
5,186
Commitments and Contingencies (Note 12)
Shareholders' Equity
Preferred stock, $1.00 par; authorized
20,000,000 shares; none issued
Common stock, $.01 par; authorized
15,000,000 shares; issued and
outstanding 6,592,669 and
6,440,523 shares, respectively
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
958,230 and 973,230 shares,
respectively
Additional paid-in capital
Retained earnings
Unrealized (losses) on marketable securities
Less: Treasury Stock (274,055 and
271,155 shares at November 30,
2003 and 2002, respectively)
-
-
65,926
64,405
9,582
3,831,425
19,891,541
( 95,228)
23,703,246
9,732
3,832,796
15,389,415
( 107,990)
19,188,358
358,706
352,935
Total Shareholders' Equity
23,344,540
18,835,423
Total Liabilities and Shareholders' Equity
$29,839,216
$24,805,064
See Notes to Consolidated Financial Statements.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended November 30,
2001
2002
2003
Revenues
Sales of health and beauty
aid products, net
Other income
Costs and Expenses
Cost of sales
Selling, general and
administrative expenses
Advertising, cooperative and
promotions
Research and development
Provision for doubtful accounts
Interest expense
$54,145,480
591,271
$45,241,493
439,481
$41,364,648
338,883
54,736,751
45,680,974
41,703,531
18,168,528
15,342,317
14,877,421
16,753,269
15,389,528
13,812,890
10,328,695
884,425
73,537
31,399
9,239,249
741,974
( 105,724)
38,074
8,776,470
687,731
299,254
69,012
46,239,853
40,645,418
38,522,778
Income before Provision
for Income Taxes
8,496,898
5,035,556
3,180,753
Provision for Income Tax
3,244,767
1,961,203
1,166,384
Net Income
$ 5,252,131
$ 3,074,353
$ 2,014,369
Weighted Average Shares
Outstanding
Basic
Diluted
Earnings Per Common Share
(Note 2):
Basic
Diluted
7,227,678
7,616,040
7,099,759
7,579,983
6,893,232
7,526,157
$.73
$.69
$.43
$.41
$.29
$.27
See Notes to Consolidated Financial Statements.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended November 30,
2001
2003
2002
Net Income
$5,252,131
$3,074,353
$2,014,369
Other Comprehensive Income
(Loss)
Unrealized holding gain (loss)
on investments
12,762
( 57,839)
14,696
Provision (Benefit) for Income Taxes 4,874
( 22,527)
5,555
Other Comprehensive Income
(Loss) - Net
7,888
( 35,312)
9,141
Comprehensive Income
$5,260,019
$3,039,041
$2,023,510
Earnings Per Share:
Basic $.73
Diluted
$.43
$.69
$.29
$.40
$.27
See Notes to Consolidated Financial Statements.
-5-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED NOVEMBER 30, 2003, 2002 AND 2001
Common Stock
Shares Amount
Additional
Paid-In
Capital
Retained Marketable Treasury
Stock
Earnings
Unrealized
Gain (Loss) on
Securities
Balance - November 30, 2000
Issuance of common stock
Net income for the year
Unrealized gain on marketable
securities
Purchase of 110,700 shares of
treasury stock
Balance - November 30, 2001
Issuance of common stock
Net income for the year
Unrealized (loss) on marketable
Purchase of 52,959 shares of
securities
treasury stock
Balance - November 30, 2002
Issuance of common stock
Net income for the year
Dividends declared
Unrealized gain on marketable
securities
Purchase of 2,900 shares of
treasury stock
Balance - November 30, 2003
7,063,753
200,000
-
$70,637
2,000
-
$3,836,296
( 2,000)
-
$10,300,693
-
2,014,369
($ 64,847) ($176,232)
-
-
-
-
-
-
-
-
14,696
-
-
7,263,753
150,000
-
-
-
7,413,753
137,146
-
-
-
72,637
1,500
-
-
-
74,137
1,371
-
-
-
3,834,296
( 1,500)
-
- - ( 70,973)
( 50,151) ( 47,205)
-
-
12,315,062
-
3,074,353
-
-
-
-
- ( 57,839)
-
- - ( 05,730)
3,832,796 15,389,415 ( 107,990) ( 352,935)
-
-
-
-
5,252,131
( 750,005)
-
-
-
( 1,371)
-
-
-
-
-
-
12,762
-
-
7,550,899
-
$75,508
-
$3,831,425
-
$19,891,541
- ( 5,771)
($358,706)
($ 95,228)
See Notes to Consolidated Financial Statements.
-6-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30,
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization
(Gain) loss on sale of securities
Decrease (increase) in deferred
income taxes
Loss on disposal of property and
(Increase) decrease in accounts
equipment
receivable
(Increase) decrease in inventory
(Increase) decrease in prepaid expenses
and sundry receivables
(Increase) decrease in prepaid income
taxes and refunds due
Decrease (increase) in other assets
Increase (decrease) in accounts payable
and accrued liabilities
(Decrease) increase in income taxes payable
2003
2002
2001
$5,252,131
$3,074,353
$2,014,369
361,730
( 9,518)
357,627
( 119)
374,953
5,559
333,569
-
( 339,027)
( 1,569,568)
( 227,393)
( 234,917)
17,250
319,041
( 178,690)
375,126
( 93,469)
27,629
-
( 1,800,964)
1,040,399
1,864,764
951,897
37,946
( 76,423)
220,286
275
555,702
( 1,137)
1,129,853
169,324
( 134,596)
9,366
Net Cash Provided by Operating
Activities
3,724,608
4,631,735
5,470,985
Cash Flows from Investing Activities:
Acquisition of property and equipment
Acquisition of intangible assets
Purchase of available for sale securities
Proceeds from sale of available for
sales securities
Proceeds of money due from officers
Net Cash (Used in) Investing
Activities
Cash Flows from Financing Activities:
Payment on debt
Repurchase of outstanding debentures
Purchase of treasury stock
Dividends paid
( 321,446)
( 2,846)
( 9,888,309)
6,485,792
-
( 575,923)
( 6,292)
( 6,767,658)
( 134,247)
( 24,700)
( 7,036,015)
1,839,729
20,598
5,068,493
887
( 3,726,809)
( 5,489,546)
( 2,125,582)
-
-
( 5,771)
( 370,888)
-
( 6,750)
( 105,730)
-
( 1,500,000)
( 23,000)
( 70,973)
-
Net Cash (Used in) Financing Activities
( 376,659)
( 112,480)
( 1,593,973)
Net (Decrease) Increase In Cash
( 378,860)
( 970,291)
1,751,430
Cash at Beginning of Year
Cash at End of Year
1,585,647
$1,206,787
2,555,938
804,508
$1,585,647
$2,555,938
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest
Income taxes
See Notes to Consolidated Financial Statements.
-7-
$ 31,529
3,322,700
$ 38,239
1,310,593
$ 69,958
801,950
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
CCA Industries, Inc. (ACCA@) was incorporated in the State of Delaware on March 25,
1983.
CCA manufactures and distributes health and beauty aid products.
CCA has several wholly-owned subsidiaries (CCA Cosmetics, Inc., CCA Labs, Inc.,
Berdell, Inc., Nutra Care Corporation, and CCA Online Industries, Inc., all of which
are currently inactive.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of CCA and its wholly-
owned subsidiaries (collectively the ACompany@). All significant inter-company ac-
counts and transactions have been eliminated.
Use of Estimates:
The consolidated financial statements include the use of estimates, which management
believes are reasonable. The process of preparing financial statements in conformity
with generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date of the
financial statements. Accordingly, upon settlement, actual results may differ from
estimated amounts.
Other Comprehensive Income:
Total comprehensive income includes changes in equity that are excluded from the
consolidated statements of operations and are recorded directly into a separate section
of consolidated statements of comprehensive income. The Company=s accumulated
other comprehensive income shown on the consolidated balance sheet consist of
unrealized gains and losses on investment holdings.
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.
-8-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Statements of Cash Flows Disclosure (Continued):
During fiscal 2001, two officers/shareholders exercised in the aggregate 400,000 options
in exchange for 200,000 shares of previously issued common stock. The common
shares are included in treasury stock on the balance sheet.
During fiscal 2002, two officers/shareholders exercised in the aggregate 200,000 options
in exchange for 50,000 shares of previously issued common stock. The common shares
are included in treasury stock on the balance sheet.
During fiscal 2003, three officers/shareholders exercised in the aggregate 157,000
options in exchange for 19,854 shares of previously issued common stock. The
common shares are included in treasury stock on the balance sheet.
For the year ended November 30, 2003, dividends declared but not yet due amounted
to $379,117.
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.
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
Furniture and fixtures
Tools, dies and masters
Transportation equipment
Leasehold improvements
Intangible Assets:
5-7 Years
3-10 Years
3 Years
5 Years
Remaining life of the lease (ranging
from 1-9 years)
Intangible assets are stated at cost and consist primarily of trademarks which are
amortized on the straight-line method over a period of 15-17 years.
Financial Instruments:
The carrying value of assets and liabilities considered financial instruments
approximate their respective fair value.
-9-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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:
The Company adopted Statement of Financial Accounting Standards (ASFAS@) No.
128, AEarnings Per Share@ in 1998. Basic earnings per share is calculated using the
average number of shares of common stock outstanding during the year. Diluted
earnings per share is computed on the basis of the average number of common shares
outstanding plus the effect of outstanding stock options using the Atreasury stock
method@ and convertible debentures using the Aif-converted@ method. Common stock
equivalents consist of stock options.
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.
Reclassifications
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
Aadvertising and promotional@ expense. Had EITF 00-14 not been adopted, net sales
for the years ended November 2003, 2002 and 2001 would have been $55,905,788,
$46,850,507 and $42,527,229, respectively.
-10-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising Costs:
The Company=s policy for fiscal financial reporting is to charge advertising cost to
operations as incurred.
Shipping Costs:
The Company=s policy for fiscal financial reporting is to charge shipping cost to
operations as incurred. For the years ended November 30, 2003, 2002 and 2001,
included in selling, general and administrative expenses is shipping costs amounting to
$2,668,246, $2,120,645 and $2,296,585, respectively.
NOTE 3 -
INVENTORIES
At November 30, 2003 and 2002, inventories consist of the following:
Raw materials
Finished goods
2003
$3,746,522
1,566,177
$5,312,699
2002
$2,494,489
1,248,642
$3,743,131
At November 30, 2003 and 2002, the Company had a reserve for obsolete inventory of
$1,153,612 and $976,788, respectively.
NOTE 4 - PROPERTY AND EQUIPMENT
At November 30, 2003 and 2002, property and equipment consisted of the following:
.
Machinery and equipment
Office furniture and equipment
Transportation equipment
Tools, dies, and masters
Leasehold improvements
Less: Accumulated depreciation
and amortization
Property and Equipment - Net
2003
$ 105,478
676,494
10,918
347,560
277,366
1,417,816
689,294
$ 728,522
2002
$ 97,003
552,615
10,918
213,188
222,646
1,096,370
375,631
$ 720,739
Depreciation and amortization expense for the years ended November 30, 2003, 2002
and 2001 amounted to $313,663, $309,816 and $327,777, respectively.
-11-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INTANGIBLE ASSETS
Intangible assets consist of the following at November 30, 2003 and 2002:
Trademarks and patents
Less: Accumulated amortization
Intangible Assets - Net
2003
$759,394
227,201
$532,193
2002
$756,548
179,134
$577,414
Amortization expense for the years ended November 30, 2003, 2002 and 2001 amounted
to $48,067, $47,811 and $47,176, respectively. Estimated amortization expense for each
of the ensuing years through November 30, 2008 is $48,800, $49,200, $49,600, $50,000
and $49,500, respectively.
NOTE 6 - 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 November 30, 2003 and November 30, 2002 were as follows:
November 30,
November 30,
2003
2002
Current:
COST
MARKET
COST MARKET
Corporate obligations
Government obligations
(including mortgage
backed securities)
Common stock
Mutual funds
Other equity
Total
Non-Current:
Corporate obligations
Government obli-
gations
Preferred stock
Other equity
investments
Total
Total
$ 850,860
$ 854,466
$ 2,066,040 $ 2,071,603
1,260,340
304,379
179,320
111,750
1,248,731
295,538
118,963
114,750
1,330,345
-
169,589
-
1,314,604
-
93,337
-
2,706,649
2,632,448
3,565,974
3,479,544
5,374,706
5,342,893
1,025,806
1,016,715
4,208,237
1,329,495
4,182,482
1,366,036
4,867,627
751,645
4,848,293
758,510
100,000
100,000
100,000
100,000
11,012,438
10,991,411
6,745,078
6,723,518
$13,719,087
$13,623,859
-12-
$10,311,052
$10,203,062
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at November 30, 2003 was $13,623,859 as compared to $10,203,062 at November 30,
2002. The gross unrealized gains and losses were $89,761 and ($184,989) for November 30, 2003 and
$58,411 and ($166,401) for November 30, 2002. The cost and market values of the investments at
November 30, 2003 were as follows:
COL. A
COL. B
COL. C
Name of Issuer and
Title of Each Issue
Maturity
Date
Interest
Rate
Number of
Units-Principal
Amount of
Bonds and
Notes
CORPORATE OBLIGATIONS:
GMAC Smartnotes
GMAC Smartnotes
GMAC Smartnotes
GMAC Smartnotes
GMAC Smartnotes
GMAC Smartnotes
GMAC Smartnotes
GMAC Smartnotes
Household Finance Corp.
Internotes
Household Finance Corp.
Internotes
Colgate-Palmolive
Cost of
Each Issue
$ 200,000
400,000
250,000
175,000
250,000
200,000
400,000
250,000
10/15/05
10/15/05
5/15/04
5/15/05
8/15/04
6/15/05
5/15/06
10/15/06
3.100%
3.150
4.250
5.000
2.650
3.550
4.050
3.550
200,000
400,000
250,000
175,000
250,000
200,000
400,000
250,000
5/15/04
4.250
250,000
250,000
10/15/06
12/1/03
2.750
5.270
100,000
100,000
100,000
100,860
-13-
COL.D
COL.E
Amount at Which
Each Portfolio
Market Of Equity Security
Issues and Each
Value of
Each Issue
Other Security
at Balance Issue Carried in
Balance Sheet
Sheet Date
$ 198,792
399,024
251,973
177,431
249,628
199,678
401,780
248,700
252,865
98,866
100,000
$ 198,792
399,024
251,973
177,431
249,628
199,678
401,780
248,700
252,865
98,866
100,000
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A
COL. B
COL. C
Name of Issuer and
Title of Each Issue
Maturity
Date
Interest
Rate
Number of
Units-Principal
Amount of
Bonds and
Notes
Cost of
Each Issue
COL.D
COL.E
Amount at Which
Each Portfolio
Market Of Equity Security
Issues and Each
Value of
Other Security
Each Issue
at Balance Issue Carried in
Balance Sheet
Sheet Date
CORPORATE OBLIGATIONS (Continued):
5/22/06
Ford Motor Credit
10/20/06
Ford Motor Corp.
1/15/06
CIT Group Inc.
3/15/05
CIT Group Inc.
7/15/05
CIT Group Inc.
10/15/05
CIT Group Inc.
2/15/06
GE Capital Group Internotes
GE Capital Group Internotes
7/15/06
10/15/06
GE Capital Group Internotes
9/15/06
GE Capital Group Internotes
GE Capital Group Internotes
9/15/06
GE Capital Group Internotes
10/15/06
Sears Roebuck Acceptance
Corp.
American General Fin. Corp.
American General Fin. Corp.
John Hancock Life Ins. Co.
John Hancock Life Ins. Co.
John Hancock Life Ins. Co.
General Dynamics Corp.
5/15/06
8/15/05
9/15/06
7/15/06
10/15/06
7/15/06
10/15/06
4.750
4.250
4.000
3.200
2.000
2.250
2.450
2.150
2.500
2.550
2.350
2.250
3.500
2.050
2.500
2.250
2.450
2.300
2.125
250,000
100,000
200,000
100,000
100,000
100,000
250,000
200,000
400,000
150,000
300,000
300,000
250,000
200,000
100,000
200,000
100,000
200,000
150,000
$ 250,000 $ 250,738
99,304
202,848
100,870
99,139
99,299
248,725
196,106
395,280
148,025
296,046
295,239
100,000
200,000
100,000
100,000
100,000
250,000
200,000
400,000
150,000
300,000
300,000
250,000
200,000
100,000
200,000
100,000
200,000
149,706
251,823
199,576
98,652
196,412
97,573
195,244
147,723
$ 250,738
99,304
202,848
100,870
99,139
99,299
248,725
196,106
395,280
148,025
296,046
295,239
251,823
199,576
98,652
196,412
97,573
195,244
147,723
-14-
6,225,566
6,197,359
6,197,359
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A
COL. C
COL. B
Name of Issuer and
Title of Each Issue
Maturity
Date
Interest
Rate
7/31/05
6/30/2005
8/21/06
7/24/06
12/15/05
7/28/06
5/15/06
6/19/06
2/27/07
11/15/17
2/27/12
10/15/09
11/15/09
8/15/12
1/30/06
9/24/07
5/1/29
6/1/15
5/1/04
10/1/04
GOVERNMENT OBLIGATIONS:
US Treasury Note
US Treasury Note
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
FNMA
FHLB
FHLMC
FHLMC
FHLMC
FHLMC
FHLMC
FNMA
FHLMC
FNMA
Tennessee Valley Authority
Power Bonds
Tobacco Settlement Fin
Corp. N
NJ EDA Trans Sublease RV
Lightrail 199A FSA
Port Authority NY & NJ
Cons 88th SR BE
CLOSED END MUNICIPAL BONDS/MUTUAL FUNDS:
Muniyield New Jersey Insd Frd Inc.
Muniholdings New Jersey Insd FD Inc.
Nuveen New Jersey Invt Quality Municipal Fund
Nuveen New Jersey Prem Inc Municipal Fund
Van Kamp Amer Cap Inv Gr NJ
Blackrock New Jersey Municipal Inc.
Eaton Vance New Jersey Municipal Inc.
Nuveen New Jersey Dividend Advantage
1.500%
1.125
2.590
2.125
2.550
2.189
2.250
2.260
2.000
4.250
4.000
3.000
3.000
4.000
2.000
3.000
6.500
5.000
5.000
4.500
Number of
Units-Principal
Amount of
Bonds and
Notes
250,000
200,000
200,000
100,000
200,000
200,000
200,000
250,000
100,000
200,000
225,000
250,000
250,000
250,000
250,000
200,000
26,000
200,000
300,000
225,000
6,500
6,900
6,200
5,200
4,800
6,000
5,600
5,700
-15-
Cost of
Each Issue
$ 249,531
199,524
200,000
100,000
200,000
199,000
198,772
249,380
100,000
200,000
225,000
250,000
250,000
250,000
250,000
200,000
688,530
198,500
317,444
238,789
96,905
94,549
95,162
78,639
80,502
87,989
85,506
84,865
5,468,577
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COL. D
COL. E
Amount at Which
Each Portfolio
Market Of Equity Security
Value of
Issues and Each
Other Security
Each Issue
Issue Carried in
at Balance
Sheet Date Balance Sheet
$ 248,750
198,062
199,126
98,375
200,126
197,312
199,062
247,815
100,188
196,626
226,125
249,923
244,623
251,798
250,313
198,126
697,580
178,552
304,935
231,071
95,940
99,981
96,410
81,536
81,888
86,400
86,324
84,246
5,431,213
$ 248,750
198,062
199,126
98,375
200,126
197,312
199,062
247,815
100,188
196,626
226,125
249,923
244,623
251,798
250,313
198,126
697,580
178,552
304,935
231,071
95,940
99,981
96,410
81,536
81,888
86,400
86,324
84,246
5,431,213
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A
COL. B
COL. C
Name of Issuer and
Title of Each Issue
Maturity
Date
Interest
Rate
Number of
Units-Principal
Amount of
Bonds and
Notes
Cost of
Each Issue
COL.D
COL.E
Amount at Which
Each Portfolio
Market Of Equity Security
Issues and Each
Value of
Other Security
Each Issue
at Balance
Issue Carried in
Sheet Date Balance Sheet
EQUITY:
Preferred Stock:
Public Income NTS
General Electric Cap Corp.
Merrill Lynch Trust
Corporate Backed Trust
Certificates For AIG
Sun America
Corporate Backed Trust
Certificates For Bristol
Myers Squibb
Morgan Stanley Cap Tr
ABN AMRO Cap Fund
JP Morgan Chase Cap IX
Wells Fargo Cap Tr VIII
Lehman Cap Trust IV
11/15/32
6.100%
14,800
$ 379,495
$ 385,836
$ 385,836
9/30/08
7.280
6,000
150,000
163,200
163,200
5/17/07
6.700
6,000
150,000
161,940
161,940
5/23/07
7/15/33
7/3/08
6/15/33
8/1/33
10/31/52
6.800
5.750
5.900
5.875
5.625
6.375
6,000
4,000
2,000
2,000
8,000
4,000
150,000
100,000
50,000
50,000
200,000
100,000
163,200
96,720
48,680
48,620
197,840
100,000
163,200
96,720
48,680
48,620
197,840
100,000
1,329,495
1,366,036
1,366,036
-16-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A
COL. B
COL. C
Name of Issuer and
Title of Each Issue
Maturity
Date
Interest
Rate
Number of
Units-Principal
Amount of
Bonds and
Notes
Cost of
Each Issue
COL.D
COL.E
Amount at Which
Each Portfolio
Market Of Equity Security
Issues and Each
Value of
Other Security
Each Issue
at Balance
Issue Carried in
Sheet Date Balance Sheet
EQUITY (Continued):
Common Stock:
DTE Energy Co.
Consolidated Edison Inc.
Progress Energy Inc.
Public Service Enterprise Group
Mutual Funds:
Dreyfus Premier Limited
Term High Income CL B
Other Equity Investments:
Aberdeen Asia Pacific
Income Fund
Enterprise Production Partners LP
1,200
3,800
1,000
1,300
$ 51,649
153,485
48,000
51,245
304,379
$ 45,252
153,140
43,820
53,326
295,538
$ 45,252
153,140
43,820
53,326
295,538
16,296,314
179,320
118,963
118,963
4
5,000
100,000
111,750
211,750
100,000
114,750
214,750
100,000
114,750
214,750
$13,719,087
$13,623,859
$13,623,859
-17-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 -
SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (Continued)
During the years ended November 30, 2003, 2002 and 2001, available-for-sale
securities were liquidated and proceeds amounting to $6,485,792, $1,839,729 and
$5,068,493 were received, with resultant realized gains/(losses) totaling $9,518, ($2,131)
and ($28,559), respectively. Cost of available-for-sale securities includes unamortized
premium or discount.
NOTE 7 - NOTES PAYABLE AND SUBORDINATED DEBENTURES
The Company has an available line of credit of $10,000,000 which was increased from
$7,000,000 on May 27, 2003. Interest is calculated at the Company=s option, either on
the outstanding balance at the prime rate minus 1% or Libor plus 150 basis points at the
Company=s option. The line of credit is unsecured as of October 21, 2003 and must
adhere to certain financial covenants pertaining to net worth and debt coverage. The
Company was not utilizing their available credit line at November 30, 2003 and 2002.
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.
During the year 2001, the Company repurchased $46,000 of debentures for $23,000
resulting in a gain of $23,000.
During the year 2002, the Company repurchased $9,000 of debentures for $6,750
resulting in a gain of $2,250.
NOTE 8 -
INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return. No returns have
been examined by the Internal Revenue Service.
At November 30, 2003 and 2002, respectively, the Company has temporary differences
arising from the following:
Type
Depreciation
Reserve for bad debts
Reserve for returns
Reserve for obsolete
inventory
Section 263A costs
Charitable contributions
Accrued litigation
settlement
Net deferred income
tax
November 30, 2003
Amount
Deferred
Tax
($ 37,633)
549,851
345,872
($ 14,753)
215,558
135,593
Classified As
Short-
Term
Long-
Term
Asset (Liability)
($14,753)
$ -
-
215,558
-
135,593
1,153,612
122,469
186,080
452,251
48,012
72,949
452,251
48,012
72,949
-
-
-
100,000
39,203
39,203
-
$948,814
$963,566
($14,753)
-18-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 -
INCOME TAXES (Continued)
November 30, 2002
Amount
Deferred
Tax
($ 13,024)
695,824
526,584
($ 5,186)
277,100
209,703
Classified As
Short-
Term
Long-
Term
Asset (Liability)
($5,186)
$ -
-
277,100
-
209,703
976,788
290,000
744,010
388,989
115,487
296,289
388,989
115,487
296,289
-
-
-
$1,282,382
$1,287,568
($5,186)
Type
Depreciation
Reserve for bad debts
Reserve for returns
Reserve for obsolete
inventory
Section 263A costs
Charitable contributions
Net deferred income
tax
Income tax expense (benefit) is made up of the following components:
November 30, 2003
Current tax expense
Tax credits
Deferred tax expense
State &
Federal Local Total
$690,924
-
75,965
$2,956,186
( 44,988)
333,569
$2,265,262
( 44,988)
257,604
$2,477,878
$766,889
$3,244,767
-19-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 -
INCOME TAXES (Continued)
Current tax expense
Tax credits
Deferred tax expense
Current tax expense
Tax credits
Deferred tax expense
November 30, 2002
State &
Local
Federal
$1,116,198
( 37,428)
341,365
$1,420,135
$507,307
-
33,761
$541,068
Total
$1,623,505
( 37,428)
375,126
$1,961,203
November 30, 2001
Federal
$976,295
( 35,000)
( 77,369)
$863,926
State &
Local
$170,755
-
131,703
$302,458
Total
$1,147,050
( 35,000)
54,334
$1,166,384
Prepaid income taxes and refund due are made up of the following components:
Federal
State &
Local
Total
November 30, 2003
$59,779
$176,841
$236,620
November 30, 2002
$ -
$ 1,703
$ 1,703
Income taxes payable are made up of the following components:
Federal
State &
Local
Total
November 30, 2003
$ -
$ -
$ -
November 30, 2002
$ 35,873
$142,817
$178,690
-20-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 -
INCOME TAXES (Continued)
A reconciliation of income tax expense (benefit) computed at the statutory rate to income tax expense at the effective rate
for each of the three years ended November 30, 2003 is as follows:
2003
Percent
Of Pretax
Income
Amount
2002
Percent
of Pretax
Amount Income
2001
Percent
of Pretax
Income
Amount
$2,888,945
34.00%
$1,712,089
34.00%
$ 1,081,456
34.00%
Income tax expense (benefit)
at federal statutory rate
Increases (decreases) in taxes
resulting from:
State income taxes, net of federal
income tax benefit
506,147
5.96
357,105
7.09
235,302
7.40
Non-deductible expenses and
other adjustments
( 105,337)
( 1.24 )
( 70,563)
( 1.40 )
( 115,374)
( 3.63 )
Utilization of tax credits
( 44,988)
( .53 )
( 37,428)
( 0.74 )
( 35,000)
( 1.10 )
Income tax expense (benefit)
at effective rate
$3,244,767
38.19%
$1,961,203
38.95%
$1,166,384
36.67%
-21-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 -
STOCK OPTIONS
On November 15, 1984, the Company authorized the granting of incentive stock
options as well as non-qualified options. The plan was amended in 1986 and again in
1994. The following summarizes the stock options outstanding under these plans as of
November 30, 2003:
Date Granted
January 1990 (1)(5)
June 1995 (2)(5)
August 1997 (5)
Number Per Share
Of
Shares
Option
Price
Expiration
14,500
50,000
363,000
427,500
.50
.50(3)(5)
.50(4)(5)
2007
2007
2007
(1) These options were originally scheduled to expire January 2000 but were extended
for an additional five years.
(2) These options were originally scheduled to expire June 2000 but were extended for
an additional five years.
(3) These stock options were repriced from $4.50 to $1.50 in June of 2000 when they
were extended.
(4) These stock options were repriced from $2.50 on November 3, 1998.
(5) On May 24, 2001, the Board of Directors repriced all the outstanding options to
$.50 and changed their expiration date to August 1, 2007.
The following summarizes the activity of shares under option for the two years ended
November 30, 2003:
Balance - November 30,
2001
Granted
Repriced
Exercised
Expired
Cancelled
Balance - November 30,
2002
Granted
Repriced
Exercised
Expired
Cancelled
Balance - November 30,
2003
Number
Of
Shares
Per Share
Option
Price
784,500
-
-
200,000
-
-
584,500
-
-
157,000
-
-
$.50
-
-
( .50)
-
-
.50
-
-
( .50)
-
-
Value
$ 392,250
-
-
( 100,000)
-
-
292,250
-
-
( 78,500)
-
-
427,500
$.50
$ 213,750
-22-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 -
STOCK OPTIONS (Continued)
Pro Forma Disclosure
The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123,
AAccounting for Stock Based Compensation@, issued in October 1995. Accordingly, compensation cost has been recorded
based on the intrinsic value of the option only. The Company recognized no compensation cost in 1999 and 1998,
respectively, for stock-based employee compensation awards. The pro forma compensation cost for stock-based employee
compensation awards was $.8 million, $1 million and $.5 million in 2003, 2002 and 2001, respectively. If the Company had
elected to recognize compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS
No. 123, net income and earnings per share would have been changed to the pro forma amounts indicated in the table
below:
Net income
2003
2002
2001
As Reported
$5,252,131
Pro Forma As Reported
$3,074,353
$4,451,991
Pro Forma As Reported
$2,014,369
$2,063,168
Pro Forma
$1,470,083
Diluted earnings per share
$.69
$.58
$.41
$.27
$.27
$.20
The above pro forma amounts, for purposes of SFAS No. 123, reflect the portion of the estimated fair value of awards
earned in 2003, 2002 and 2001. For purposes of pro forma disclosures, the estimated fair value of the options is amortized
over the options= vesting period (for stock options). The effects on pro forma disclosures of applying SFAS 123 are not likely
to be representative of the effects on pro forma disclosures of future years.
-23-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 -
STOCK OPTIONS
The Company used the Black-Scholes model to value stock options for pro forma
presentation. The assumptions used to estimate the value of the options included in
the pro forma amounts and the weighted average estimated fair value of options
granted are as follows:
2003
Stock Option Plan Shares
2001
2002
Average expected life (years)
3.75
5.10
5.67
Expected volatility
185.67%
210.19%
204.59%
Risk-free interest rate
Weighted average fair value
at grant - Exercise price
equal to market price
3.00%
2.88%
4.25%
$7.01
$1.73
$.69
The Black-Scholes option valuation model was developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully transferable. In
addition, the Black-Scholes model requires the input of highly subjective assumptions,
including the expected stock price volatility and option life. Because the Company=s
stock options granted to employees have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management=s opinion, existing models do
not necessarily provide a reliable measure of the fair value of its stock options granted
to employees. For purposes of this model, no dividends have been assumed.
-24-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE
The following items which exceeded 5% of total current liabilities are included in
accounts payable and accrued liabilities as of:
Coop advertising
Accrued returns
Vacation accrual
Accrued bonuses
November 30,
2002
2003
(In Thousands)
$ 607
787
*
499
$1,893
$804
878
320
467
$2,469
All other liabilities were for trade payables or individually did not exceed 5% of total
current liabilities.
* under 5%
NOTE 11 - OTHER INCOME
Other income was comprised of the following:
Interest income
Dividend income
Realized gain on repurchase of
debentures
Realized (loss) on sale of
securities
Royalty income
Miscellaneous
2003
$461,291
17,693
November 30,
2001
$265,240
16,057
2002
$383,569
11,780
4,000
2,250
25,342
9,518
97,271
5,498
( 2,131)
41,820
2,193
( 30,901)
57,385
5,760
$591,271
$439,481
$338,883
-25-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Leases
The Company currently occupies approximately 60,600 square feet of space used for
warehousing and offices. The annual rental is $327,684, with an annual CPI increase
of 3%, but not to exceed 15% cumulative five year increase. The lease requires the
Company to pay for additional expenses AExpense Rent@ (Common Area Maintenance
ACAM@), which includes real estate taxes, common area expense, utility expense,
repair and maintenance expense and insurance expense. The lease expires on May 31,
2012 with a renewal option for an additional five years.
Rent expense for the years ended November 30, 2003, 2002 and 2001 was $322,684,
433,983 and $531,062, respectively.
In addition, the Company has entered into various property and equipment operating
leases with expiration dates ranging through November 2006.
Future commitments under noncancellable operating lease agreements having a
remaining term in excess of one year for each of the next five (5) years and in the
aggregate are as follows:
Year Ending
November 30,
2004
2005
2006
2007
2008
Royalty Agreements
$396,572
375,934
344,244
329,172
327,684
In 1986, the Company entered into a license agreement with Alleghany Pharmacal
Corporation (the AAlleghany Pharmacal License@). This license required the Company
to pay 6% royalty on net sales but no less than $360,000 per annum to maintain its
license. The Company has expanded the lines licensed from Alleghany and pays only
1% royalty on various new products created by the Company.
The Alleghany Pharmacal License agreement provided that if and when, in the
aggregate, $9,000,000 in royalties have been paid thereunder, the royalty rate for those
products now Acharged@ at 6% will be reduced to 1%. The Company paid an aggregate
of $9,000,000 in royalties to Alleghany in April 2003. Commencing May 1, 2003, the
license royalty was reduced to 1%.
The products subject to the Alleghancy Pharmacal License accounted for
approximately $14,777,460 or 27% of total net sales in the fiscal year ended November
30, 2003.
-26-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
In May of 1998, the Company entered into a License Agreement with Solar Sense, Inc.
for the marketing of sun care products under trademark names. The Company=s
License Agreement with Solar Sense, Inc. is for the exclusive use of the trademark
names ASolar Sense@ and AKids Sense@, in connection with the commercial exploitation
of sun care products. The Company is required to pay a 5% royalty on net sales of the
licensed products until $1 million total royalties are paid and 1% thereafter; and
minimum per-annum royalties of $30,000. The Company realized $1,040,662 in net
sales of sun-care products in 2003, and paid or accrued Solar Sense the royalty of
$52,033.
In October of 1999, the Company entered into a License Agreement with The Nail
Consultants, Ltd. for the use of an activator invented in connection with a method for
applying a protective covering to fingernails. The Company=s License Agreement with
The Nail Consultants, Ltd. is for the exclusive use of the method and its composition
in a new product kit packaged and marketed by CCA under its own name, ANutra Nail
Power Gel@. The Company will pay a royalty of 5% of net sales of all licensed product
sold by the Company. Net sales were $2,872,313 in 2003, and paid or accrued The
Nail Consultants, Ltd. the royalty of $143,616.
In October 2002, the Company entered into a License Agreement with Hugger
Corporation for use of its patented oral hygiene system to be used in conjunction with
regular toothpaste. The Company=s License Agreement is for the use of the product
designated and referred to in the patent owned by Hugger Corporation. The Company
designed, marketed and distributed the patented product called ABooster@ under its
Plus+White brand.
The Company is required to pay a 5% royalty of net sales payable quarterly. During
the first 18-month contract period ending June 30, 2004, the minimum royalty the
Company is required to pay is $100,000 to maintain its exclusive rights under the
License Agreement. Thereafter, the Company is required to pay a minimum royalty of
$50,000 annually. The royalty will continue until the Patent expires or an aggregate of
$3,500,000 is paid to Licensor. Until that time, Licensee has no liability to meet
minimum royalty requirements except to maintain its rights under the License
Agreement. In fiscal 2003, the net sales were $815,634, and the Company paid or
accrued royalties of $40,781.
The Company is not party to any other license agreement that is currently material to
its operations.
-27-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company settled a patent infringement claim for the use of Alpha Hydroxy in its
Sudden Change exfoliation products for $323,927. The Company paid half in
September 2001 and paid the balance in February 2002. The total expense was
recorded in the fiscal year ended November 30, 2001. The Company entered into a
license agreement for the future use of Alpha Hydroxy in its beauty aid products. The
Company will pay a 5% royalty of net sales of all such licensed product sold by the
Company. The license fees in 2003 were not material.
The Company has entered into various other License Agreements, none of which
materially affect the Company's sales, financial results, financial condition, or should
materially affect its future results of operations.
Employment Contracts
During fiscal 1994, the Board of Directors approved contracts for two
officers/shareholders. Pursuant thereto, each was provided a base salary of $300,000 in
fiscal 1994, with yearly increases of the higher of CPI or 6%, and each is paid 2.5% of
the Company=s pre-tax income, less depreciation and amortization, plus 20% of the
adjusted base salary, as a bonus. During 1998 the contracts were amended,
commencing in fiscal 1999, to limit the amount of advertising expense charged against
pre-tax income for purposes of the 2.5% calculation to $8,000,000. In May 2001 an
amendment increased the base salary to $400,000. The contract expires on December
31, 2010.
Two officers of the Company who are the two sons of the Chief Executive Officers of
the Company have five year contracts in the amounts of $270,000 and $200,000 which
expire on November 30, 2007. In July 2003 and January 2004, such officers= salaries
were increased to $300,000 and $223,000, respectively.
Collective Bargaining Agreement
On December 1, 1998, the Company signed a collective bargaining agreement with
Local 734, L.I.U. of N.A., AFL-CIO. Other than standard wage, holiday, vacation and
sick day provisions, the agreement calls for CCA to provide certain medical and
dental benefits and to contribute to the Local 734 Educational Fund $.01 per hour for
each hour the employees are paid. The agreement expired on November 30, 2001. A
new collective bargaining agreement with similar provisions is in effect for December 1,
2001 through November 30, 2004. This agreement pertains to 29% of the CCA labor
force.
Litigation
The Company has been named as a defendant in 11 lawsuits alleging that the plaintiffs
were injured 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. The lawsuits brought against the
Company are for unspecified amount of compensatory and exemplary damages. Seven
of the suits have been dismissed with prejudice. An additional suit is in the process of
being dismissed. Outside counsel for the Company believes that the three PPA cases
still pending against the Company are defensible. Of the Company=s three pending
suits, one is insured by the Company=s liability carrier.
-28-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
Dividends
CCA declared a dividend of $0.14 per share payable to all holders of the Company=s
common stock, $0.07 to shareholders of record on May 1, 2004 payable on June 1,
2004 and $0.07 to shareholders of record on November 1, 2004, payable on November
30, 2004.
NOTE 13 -
PENSION PLANS
The Company has adopted a 401(K) Profit Sharing Plan that covers most of their 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.
NOTE 14 - RELATED PARTY TRANSACTION
During fiscal 2003 and 2002, the Company retained legal services from a firm where a
partner is the son of a Director of the Company. Total legal fees amounted to
approximately $5,000 and $142,000, respectively.
-29-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - CONCENTRATION OF RISK
All of the Company=s products are sold to major drug and food chains merchandisers,
and wholesale beauty-aids distributors throughout the United States and Canada.
During the years ended November 30, 2003, 2002 and 2001, certain customers each
accounted for more than 5% of the Company's net sales, as follows:
Customer
A
B
C
D
E
F
Foreign Sales
* under 5%
2003
34%
13
8
7
6
*
2002
2001
31%
13
7
7
5
*
28%
12
7
5
*
7
2.10%
2.40%
2.85%
The loss of any one of these customers could have a material adverse affect on the
Company=s earnings and financial position.
During the years November 30, 2003, 2002 and 2001, certain products within the
Company=s product lines accounted for more than 10% of the Company=s net sales as
follows:
Product
Health and Beauty
Cosmetic and Fragrance
Over-The-Counter
2003
67%
19
14
2002
75%
19
-
2001
69%
19
-
The Company maintains cash balances at several banks. Accounts at each institution
are insured by the Federal Deposit Insurance Corporation up to $100,000. In addition,
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). Each brokerage firm
has substantial insurance beyond the $500,000 SIPC limit.
-30-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - EARNINGS PER SHARE
Basic earnings per share is calculated using the average number of common shares outstanding. Diluted earnings per share is
computed on the basis of the average number of common shares outstanding plus the effect of outstanding stock options
using the Atreasury stock method@.
Year Ended November 30,
2003
2002
2001
$5,252,131
$3,074,353
$2,014,369
Net income available for common
shareholders, basic and diluted
Weighted average common stock
outstanding- Basic
Net effect of dilutive stock options
388,362
480,224
7,227,678
7,099,759
6,893,232
632,925
Weighted average common stock and
common stock equivalents - Diluted
Basic earnings per share
Diluted earnings per share
7,616,040
7,579,983
7,526,157
$.73
$.69
$.43
$.41
$.29
$.27
-31-
SCHEDULE II
CCA INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION ACCOUNTS
YEARS ENDED NOVEMBER 30, 2003, 2002 AND 2001
COL. A
COL. B
COL. C
COL. D COL. E
Description
Year ended November 30, 2003:
Allowance for doubtful accounts
Balance at
Beginning
Of Year
Additions
Charged To
Costs and
Expenses
Balance
At End
Deductions Of Year
$ 695,824
$ 188,347
$ 334,320
$ 549,851
Reserve for returns and allowances
$ 526,584
$3,444,804
$3,625,516
$ 345,872
Reserve for inventory
obsolescence
Year Ended November 30, 2002:
Allowance for doubtful accounts
$ 976,788
$ 408,993
$ 232,169
$1,153,612
$ 481,399
$ 283,954
$ 69,529
$ 695,824
Reserve for returns and allowances
$ 813,686
$4,094,332
$4,381,434
$ 526,584
Reserve of inventory
obsolescence
Year Ended November 30, 2001:
Allowance for doubtful accounts
$1,052,716
$ 397,643
$ 473,571
$ 976,788
$ 323,257
$ 299,254
$ 141,112
$ 481,399
Reserve for returns and allowances
$1,056,167
$2,833,405
$3,075,886
$ 813,686
Reserve for inventory
obsolescence
$1,050,714
$ 548,815
$ 546,813
$1,052,716
-32-
Exhibit 14
CCA INDUSTRIES, INC.
CODE OF ETHICS FOR CHIEF EXECUTIVE OFFICER AND SENIOR
FINANCIAL OFFICERS
CCA Industries, Inc. (the “Company”) has its Business Guideposts, which is a code of business
conduct applicable to all directors and employees of the Company. The Business Guideposts
contains a number of specific provisions relating to compliance with legal requirements,
conflicts of interest, maintenance of accurate records and reporting financial information
accurately and timely. The Company has also adopted this Code of Ethics specifically for its
chief executive officer (“CEO”) and all financial officers and executives (collectively, the
“Financial Officers and Executives”), including the chief financial officer and controllers. This
Code of Ethics supplements the Business Guideposts and is intended to promote ethical
conduct and compliance with law and to deter wrongdoing and conflicts of interest. The
Financial Officers and Executives subject to this Code of Ethics will be designated and
informed of such designation by the Company.
In addition to the Business Guideposts, the CEO and the Financial Officers and Executives are
subject to the following additional specific policies:
1.
In carrying out their duties, the CEO and Financial Officers and Executives will promote
full, fair, accurate, timely and understandable disclosure in all reports and other documents
the Company files with, or furnishes or submits to the Securities and Exchange
Commission, as well as other public communications made by the Company. Accordingly,
the CEO and each Financial Officer and Executive shall promptly bring to the attention of
the Audit Committee established by the Company, The CEO and/or General Counsel any
material information of which he or she may become aware that affects the disclosures
made by the Company in its public filings, if such information is not already being
adequately addressed in public filings being prepared for the Company.
2. The CEO and each Financial Officer and Executive shall promptly bring to the attention of
the Audit Committee any information he or she may have concerning (a)significant
deficiencies in the design or operation of internal controls which could adversely affect the
Company’s ability to record, process, summarize and report financial data or (b) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company’s financial reporting, disclosures or internal controls.
3.
In carrying out their duties, the CEO and each Financial Officer and Executive shall
endeavor to comply and cause the Company to comply with all applicable governmental
laws, rules and regulations.
4. The CEO shall promptly bring to the attention of the General Counsel or the Chairman of
the Audit Committee and each Financial Officer and Executive shall promptly bring to the
attention of the General Counsel or the CEO, any information he or she may have
concerning any (a) unethical behavior or dishonest or illegal acts in violation of the
Company’s Business Guideposts involving any management or other employee who has a
significant role in the Company’s financial reporting, disclosures or internal controls or (b)
violation of this Code of Ethics, including any actual or apparent conflicts of interest
between personal and professional relationships. If any of the matters described in the
preceding sentence involves the CEO, the Financial Officer or Executive shall promptly
bring the matter to the attention of the General Counsel and the Chairman of the Audit
Committee.
5. The CEO shall promptly bring to the attention of the General Counsel or the Chairman of
the Audit Committee and each Financial Officer and Executive shall promptly bring to the
attention of the General Counsel or the CEO, any evidence he or she may have
concerning any (a) material violation of the securities or other laws, rules and regulations
applicable to the Company and the operation of its business, by the Company or any agent
thereof or (b) material violation by the CEO or any Financial Officer or Executive of the
Business Guideposts or this Code of Ethics. If any violation described in the preceding
sentence involves the CEO, the Financial Officer or Executive shall bring the matter to the
attention of the General Counsel and the Chairman of the Audit Committee. If the CEO or
any Financial Officer or Executive reports such evidence in accordance with this paragraph
and believes or has reason to believe the matter reported is not being or has not been
adequately addressed by the Company, he or she shall report such matter to the Chairman
of the Audit Committee.
6. The Board of Directors shall determine or designate appropriate persons to determine
appropriate actions to be taken in the event of violations of the Business Guideposts or of
this Code of Ethics by the CEO or any Financial Officer or Executive. Such actions shall
be reasonably designed to deter wrongdoing and to promote accountability for adherence
to the Business Guidepost and to this Code of Ethics. The Company shall at least annually
report violations and the actions taken by the Company to the Audit Committee.
CERTIFICATION
I, David Edell, Chief Executive Officer of the Registrant, certify that:
Exhibit 31.1
1.
2.
3.
4.
5.
I have reviewed this annual report on Form 10-K of CCA Industries, Inc.;
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;
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.
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)
(b)
(c)
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;
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
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
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)
(b)
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 information; and
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: February 28, 2004
/s/
---------------------------------------------------
David Edell
Chief Executive Officer
CERTIFICATION
I, John Bingman, Chief Financial Officer of the Registrant, certify that:
Exhibit 31.2
1.
2.
3.
4.
5.
I have reviewed this annual report on Form 10-K of CCA Industries, Inc.;
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;
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.
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)
(b)
(c)
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;
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
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
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)
(b)
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 information; and
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: February 28, 2004
/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 Annual Report of CCA Industries, Inc. (the “Registrant”) on Form
10-K for the annual period ended November 30, 2003 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)
(2)
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
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Date: February 28, 2004
/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 Annual Report of CCA Industries, Inc. (the “Registrant”) on Form
10-K for the annual period ended November 30, 2003 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)
(2)
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
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Date: February 28, 2004
/s/ ---------------------------------------------------
John Bingman
Chief Financial Officer