10-K
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, 2008
Commission File Number 001-31643
CCA INDUSTRIES, INC.
(Exact Name of Registrant as specified in Charter)
|
|
|
DELAWARE
|
|
04-2795439 |
|
|
|
(State or other jurisdiction of
|
|
(I.R.S. Employer |
incorporation or organization)
|
|
Identification No.) |
200 Murray Hill Parkway, East Rutherford, New Jersey 07073
(Address of principal executive offices, including zip code)
(201) 330-1400
(Registrants 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 þ No o.
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 Registrants 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 þ.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer o
|
|
Non-accelerated filer þ
|
|
Smaller reporting company o |
|
|
|
|
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
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 $8.78 on
May 31, 2008, was as follows:
|
|
|
Class of Voting Stock
|
|
Market Value |
|
|
|
4,940,667 shares; Common |
|
|
Stock, $.01 par value
|
|
$43,379,056 |
On February 25, 2009 there was an aggregate of 7,054,442 shares of Common Stock and Class A
Common Stock of the Registrant outstanding.
CROSS REFERENCE SHEET
|
|
|
|
|
Headings in this Form |
Form 10-K |
|
10-K for Year Ended |
Item No. |
|
November 30, 2008 |
|
|
|
1. Business
|
|
Business |
|
|
|
2. Property
|
|
Property |
|
|
|
3. Legal Proceedings
|
|
Legal Proceedings |
|
|
|
4. Submission of Matters
to a Vote of Security
Holders
|
|
Submission of Matters to a
Vote of Security Holders |
|
|
|
5. Market for Registrants
Common Equity and
Related Stockholder
Matters
|
|
Market for the Companys
Common Stock and Related
Shareholder Matters |
|
|
|
6. Selected Financial Data
|
|
Selected Financial Data |
|
|
|
7. Managements Discussion
and Analysis of Financial
Condition and Results
of Operations
|
|
Managements 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
|
|
Financial Statements
and Supplementary Data |
|
|
|
9. Changes In and Dis-agreements With
Accountants On Accounting
and Financial Disclosure
|
|
Changes In and Dis-agreements With
Accountants On Accounting
and Financial Disclosure |
|
|
|
9A. Controls and Procedures
|
|
Controls and Procedures |
|
|
|
10. Directors and
Executive Officers
of the Registrant
|
|
Directors and Executive
Officers of the Registrant |
- ii -
|
|
|
|
|
Headings in this Form |
Form 10-K |
|
10-K for Year Ended |
Item No. |
|
November 30, 2008 |
|
|
|
11. Executive Compensation
|
|
Executive Compensation |
|
|
|
12. Security Ownership
of Certain Beneficial
Owners and Management
and Related Stockholder Matters
|
|
Security Ownership
of Certain Beneficial
Owners and Management and Related
Shareholder Matters |
|
|
|
13. Certain Relationships
and Related Transactions
|
|
Certain Relationships
and Related Transactions |
|
|
|
14. Principal Accountant Fees
and Services
|
|
Principal Accountant Fees
and Services |
|
|
|
15. Exhibits, Financial
Statements, Schedules,
and Reports on Form
8-K
|
|
Exhibits, Financial
Statements, Schedules,
and Reports on Form
8-K |
- iii -
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. All of the Companys products are manufactured by contract manufacturers,
pursuant to the Companys 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 (oral health-care products), Sudden Change (skin-care products), Nutra
Nail and Power Gel (nail treatments), Bikini Zone (pre and after-shave products), Mega T
Green Tea (dietary products), Mega T chewing gum (anti-oxidant dietary product), Hair Off
(depilatories), IPR (foot-care products), Solar Sense (sun-care products), Wash N Curl
(shampoos), Cherry Vanilla and other Vanilla fragrances (perfumes), Pain Bust-R (topical
analgesic) 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. In addition, certain of the
Companys products are sold internationally, through distributors or directly.
The Company recognizes sales at the time its products are shipped to customers. However,
while sales are not formally subject to any contract contingency, returns are accepted if it is in
the best interests of the Companys relationship with the customer. The Company thus estimates
unit returns based upon a review of the markets 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 Companys operations.
The Companys net sales in fiscal 2008 were $ 56,741,133. Gross profits were $34,971,991.
International sales accounted for approximately 4 % of sales. The Company had a net profit of
$1,412,886 for fiscal 2008. Net worth at November 30, 2008 was $ 28,253,879.
- 1 -
Including the principal members of management (see Directors and Executive Officers), the
Company, at November 30, 2008, had 152 sales, administrative, creative, accounting, receiving, and
warehouse personnel in its employ.
(b) Manufacturing and Shipping
The Company creates and/or oversees 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 various
manufacturers and suppliers. All orders and other product shipments are delivered from the
Companys own warehouse facilities, which results in more effective inventory control, more
efficient shipping procedures, and the realization of related economies.
(c) Marketing
The Company markets its products to major drug, food and mass-merchandise retail chains,
warehouse clubs 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 250 accounts, most of which have numerous
outlets. Approximately 40,000 stores carry at least one Company product (SKU).
During the fiscal year ended November 30, 2008, the Companys largest customers were Wal-Mart
(approximately 44% of net sales), Walgreens (approximately 10%), CVS (approximately 7%), Rite Aid
(approximately 5%), and Target, (approximately 4%). The loss of any of these principal customers,
or substantial reduction of sales revenues realized from their business, could materially and
negatively affect the Companys earnings.
Most of the Companys 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.
The Company employs brand managers who are responsible for the marketing of CCAs brands.
These managers work with the Companys in-house advertising and art departments to create media
advertising, packaging and point-of-purchase displays.
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 Companys 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.
- 2 -
The Companys in-house advertising department is responsible for the selection of its media
advertising. Placement is accomplished either directly or through media-service companies.
(d) Wholly-Owned Products
The majority of the Companys sales revenues are from sales of the Companys wholly-owned
product lines (i.e., products sold under trademark names owned by the Company, and not subject to
any other partys interest or license), which include principally Plus+White, Sudden Change,
Wash N Curl, Bikini Zone, Mood Magic, Mega -T, Cherry Vanilla, and Scar Zone.
(e) All Products
The Companys gross sales net of returns by category percentage were: Dietary Supplement
32.7%; Skin Care 29.3%; Oral Care 24.6%; Nail Care 10.3%; Fragrance 2.7% and Hair Care and
Miscellaneous 0.4%.
(f) License-Agreements Products
i. Alleghany Pharmacal
In 1986, the Company entered into a license agreement with Alleghany Pharmacal Corporation
(the Alleghany Pharmacal License). The Alleghany Pharmacal License agreement provides that if,
and when, in the aggregate, $9,000,000 in royalties had been paid thereunder, the royalty-rate for
those products charged at 6% would be reduced to 1%. The Company paid an aggregate of $9,000,000
in royalties to Allegheny as of April 2003. Commencing May 1, 2003, the license royalty was
reduced to 1%. The Company accrued royalties totaling $82,541 to Alleghany Pharmacal for the
fiscal year ended November 30, 2008.
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 royalty
of 5% on net sales of said licensed products until $1 million total royalties are paid. The
Company accrued royalties of $56,051 to Solar Sense, Inc. for the fiscal year ended November 30,
2008.
- 3 -
iii. The Nail Consultants Ltd.
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 Companys 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. The Company accrued royalties
totaling $37,071 to The Nail Consultants, Ltd. for the fiscal year ended November 30, 2008.
iv. Dr. Stephen Hsu Green Tea
Stephen Hsu, PhD., research faculty member of the Medical College of Georgia, entered into an
agreement with the Company on February 26, 2004, to create green tea skin care products based on
his years of research related to the various uses of green tea anti-oxidants for skin care
problems.
Dr. Hsu collaborated with Drew Edell, Vice-President of Research and Development for the
Company, to create and file a patent application for a special anti-oxidant green tea serum to be
used for topical skin application. The patent was filed in November 2004, and is still in review
with the U.S. Patent Office.
Dr. Hsu is entitled to a commission of 3% on the net factory sales of all of the Companys
products using the green tea serum created exclusively for the Company. The Company accrued
commissions totaling $240,215 to Dr. Hsu for the fiscal year ended November 30, 2008.
v. Mega -T Green Tea Chewing Gum and Mints
On May 18, 2004, The Company entered into a license agreement with Tea-Guard, Inc. to
manufacture and distribute Mega -T Green Tea chewing gum and Mega -T Green Tea mints. The license
agreement requires the Company to pay a royalty of 6% of net sales for the products sold under the
license agreement. There is a minimum annual royalty of $250,000 per annum, which was waived by
Tea-Guard, Inc. for the one year period ended February 28, 2008. The minimum payments are required
to maintain the Companys exclusivity for the sale of the products and to continue marketing the
products and until royalties have aggregated to $10,000,000, at which time all royalty obligations
cease. Except as to maintain its rights to exclusivity, the Company has no obligation to meet
minimum royalty requirements. The Company commenced sales of the Mega -T Green Tea Chewing Gum in
July 2004. The Company accrued royalties to Tea-Guard, Inc. totaling $44,866 for the fiscal year
ended November 30, 2008.
vi. Pain Bust R
Effective November 3, 2008, the Company entered into an agreement with Continental Quest
Corp., to purchase certain United States trademarks and inventory relating to the Pain Bust R
business for $285,106 paid at closing. In addition, the Company agreed to pay a royalty equal to
2% of net sales of all Pain Bust R products, which are topical analgesics, until an aggregate
royalty of $1,250,000 is paid, at which time the royalty payments will cease.
- 4 -
vii. Other Licenses
The Company is not party to any other license agreement that is currently material to its
operations.
(g) Trademarks
The Companys 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.
(h) Competition
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, LOreal, Colgate, Coty, 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.
(i) 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.
(j) Dubilier Transaction
On November 1, 2006, the Company entered into a letter of intent with Dubilier and Company
(Dubilier) relating to a proposed acquisition of the Company by Dubilier to take the Company
private. Dubilier did not arrange the necessary financing and the acquisition was terminated on
April 10, 2007. The Company incurred $717,850 of expenses directly related to the proposed
transaction that were charged on its 2007 Statement of Operations.
- 5 -
Item 2. PROPERTY
The principal executive offices of the Company are located at 200 Murray Hill Parkway, East
Rutherford, New Jersey. Under a net lease, the Company occupies approximately 58,625 square feet
of space. Approximately 43,598 square feet in such premises is used for warehousing and 15,027
square feet for offices. The annual rental is $327,684, with an annual CPI increase not
cumulatively exceeding 15% in any consecutive five year period. 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, 2008, CAM was estimated
at $150,000.
On September 26, 2007, the Company entered into an additional lease for warehouse space with
Ninth Avenue Equities Co., Inc. for four and a half years commencing November 1, 2007. The
premises comprise 16,438 square feet of space. The Company is obligated to pay maintenance which
includes but is not limited to real estate taxes and all other common area expenses. The annual
rental is $123,285. For the year ended November 30, 2008, CAM was $28,150.
Item 3. LEGAL PROCEEDINGS
All of the 13 legal proceedings against the Company related to the Companys dietary
suppressant products that contained phenylpropanolamine (PPA) and were previously sold, were
dismissed with prejudice.
There is no significant litigation presently outstanding against the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 25, 2008, 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. The Class A Common Stock shareholders have the right
to elect four members of the Board of Directors. No proxy was solicited therefore, whereas
Messrs. Berman and Edell own 100% of the Class A Common Stock, and they proposed themselves, Mr.
Polak and Mr. Kreitman.
(2) As proposed by Management, Dunnan Edell, Robert Lage and Seth Hamot were elected as
directors by the holders of the Common Stock.
- 6 -
(3) The Boards appointment of KGS LLP as the Companys independent certified public
accountants for the 2008 fiscal year was approved.
The Company has not submitted any matter to a vote of security holders since the 2008 Annual
Meeting.
PART II
|
|
Item 5. |
MARKET FOR THE COMPANYS COMMON STOCK AND RELATED SHAREHOLDER MATTERS |
The Companys Common Stock is traded on the New York Stock Exchange Alternext US under the
symbol CAW.
The range of high and low sales prices of the Common Stock during each quarter of its 2008,
2007 and 2006 fiscal years was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
2008 |
|
|
2007 |
|
|
2006 |
|
February 29 |
|
$ |
9.90 $8.91 |
|
|
$ |
12.12 $11.06 |
|
|
$ |
11.45 $7.80 |
|
May 31 |
|
$ |
9.65 $8.53 |
|
|
$ |
12.04 $9.03 |
|
|
$ |
11.10 $9.95 |
|
August 31 |
|
$ |
8.85 $6.35 |
|
|
$ |
10.60 $8.94 |
|
|
$ |
10.40 $9.41 |
|
November 30 |
|
$ |
6.40 $3.60 |
|
|
$ |
10.25 $9.20 |
|
|
$ |
11.73 $9.49 |
|
The high and low prices for the Companys Common Stock, on February 2, 2009 were $3.11 to
$3.02 per share.
As of November 30, 2008, there were approximately 141 individual shareholders of record of the
Companys 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 November 15, 2005, the Board of Directors declared a $0.05 per share dividend for the
first quarter ended February 28, 2006, payable to all shareholders of record as of February 1, 2006
and payable on March 1, 2006. On March 14, 2006, the Board of Directors declared a $0.05 per
share dividend for the second quarter ended May 31, 2006, payable to all shareholders of
record as of May 1, 2006 and payable on June 1, 2006. On June 29, 2006, the Board of Directors
declared a $0.07 per share dividend for the third quarter ended August 31, 2006, payable to all
shareholders of record as of August 1, 2006 and payable on September 1, 2006. On October 5, 2006,
the Board of Directors declared a $0.07 per share dividend for the fourth quarter ended November
30, 2006, to all shareholders of record as of November 1, 2006 and payable on December 1, 2006.
- 7 -
On December 28, 2006, the Board of Directors declared a $0.07 per share dividend for the first
quarter ended February 28, 2007. The dividend was payable to all shareholders of record as of
February 1, 2007 and payable on March 1, 2007. On April 12, 2007, the Board of Directors declared
a $0.07 per share dividend for the second quarter ended May 31, 2007. The dividend was payable to
all shareholders of record as of May 1, 2007 and payable on June 1, 2007. On June 22, 2007, the
Board of Directors declared a $0.07 per share dividend for the third quarter ended August 31, 2007.
The dividend was payable to all shareholders of record as of August 1, 2007 and payable on
September 1, 2007. On September 26, 2007, the Board of Directors declared a $0.09 dividend for the
fourth quarter ended November 30, 2007. The dividend was payable to all shareholders of record as
of November 1, 2007 and payable on December 1, 2007.
On December 5, 2007, the board of directors declared a $0.10 per share dividend for the first
quarter ending February 29, 2008. The dividend was payable to all shareholders of record as of
February 1, 2008, and was paid on March 1, 2008. On February 25, 2008, the board of directors
declared an $0.11 per share dividend for the second quarter ending May 31, 2008. The dividend was
payable to all shareholders of record as of May 1, 2008, and payable on June 1, 2008. On July 7,
2008, the board of directors declared an $0.11 per share dividend for the third quarter ending
August 31, 2008. The dividend was payable to all shareholders of record as of August 1, 2008, and
payable on September 1, 2008. On October 13, 2008, the board of directors declared a $0.11 per
share dividend for the fourth quarter ending November 30, 2008. The dividend was payable to all
shareholders of record as of November 1, 2008, and payable on December 1, 2008.
On January 28, 2009, the Board of Directors declared a $0.11 per share dividend for the first
quarter of 2009 to all shareholders of record as of February 3, 2009 and payable on March 3, 2009.
- 8 -
Item 6. SELECTED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Statement of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, Net (1) |
|
$ |
56,741,133 |
|
|
$ |
59,832,157 |
|
|
$ |
63,302,220 |
|
|
$ |
61,181,344 |
|
|
$ |
59,008,135 |
|
Other income |
|
|
716,813 |
|
|
|
1,045,710 |
|
|
|
797,803 |
|
|
|
572,909 |
|
|
|
850,196 |
|
Costs and Expenses (1) |
|
|
54,991,547 |
|
|
|
51,283,141 |
|
|
|
55,183,378 |
|
|
|
54,646,715 |
|
|
|
50,484,052 |
|
Income before provision for
Income Taxes |
|
|
2,466,399 |
|
|
|
9,594,726 |
|
|
|
8,916,645 |
|
|
|
7,107,528 |
|
|
|
9,374,279 |
|
Net Income |
|
$ |
1,412,886 |
|
|
$ |
5,537,795 |
|
|
$ |
5,604,251 |
|
|
$ |
3,785,502 |
|
|
$ |
5,796,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
.20 |
|
|
$ |
.79 |
|
|
$ |
.80 |
|
|
$ |
.53 |
|
|
$ |
.78 |
* |
Diluted |
|
$ |
.20 |
|
|
$ |
.78 |
|
|
$ |
.79 |
|
|
$ |
.52 |
|
|
$ |
.75 |
* |
Weighted Average Number
of Shares Outstanding |
|
|
7,054,442 |
|
|
|
7,029,611 |
|
|
|
7,034,276 |
|
|
|
7,145,297 |
|
|
|
7,399,472 |
* |
Weighted Average Number
of Shares and Common Stock
Equivalents Outstanding |
|
|
7,061,646 |
|
|
|
7,058,889 |
|
|
|
7,133,332 |
|
|
|
7,317,994 |
|
|
|
7,680,781 |
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As At November 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital |
|
$ |
23,836,264 |
|
|
$ |
24,922,016 |
|
|
$ |
22,295,983 |
|
|
$ |
18,602,107 |
|
|
$ |
13,562,389 |
|
|
Total Assets |
|
|
39,345,861 |
|
|
|
39,903,876 |
|
|
|
36,516,571 |
|
|
|
35,309,308 |
|
|
|
31,556,577 |
|
|
Total Liabilities |
|
|
11,091,982 |
|
|
|
9,153,558 |
|
|
|
9,131,780 |
|
|
|
9,309,652 |
|
|
|
8,034,530 |
|
Total Shareholders Equity |
|
|
28,253,879 |
|
|
|
30,750,318 |
|
|
|
27,284,791 |
|
|
|
25,999,656 |
|
|
|
23,522,047 |
|
|
|
|
(1) |
|
Certain additional promotional expenses were re-classified during 2006 from an expense to a
reduction of net sales. In order to have an accurate comparison, the same expenses were
re-classified accordingly for the years ended November 30, 2004 and 2005. The reclassification did
not affect the net income for those years. |
|
* |
|
Adjusted for 2% stock dividend in 2004. |
- 9 -
|
|
Item 7. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Except for historical information contained herein, this Managements Discussion and Analysis
of Financial Condition and Results of Operations contains forward-looking statements. These
statements involve known and unknown risks and uncertainties that may cause actual results or
outcomes to be materially different from any future results, performances or achievements expressed
or implied by such forward-looking statements, and statements which explicitly describe such
issues. Investors are urged to consider any statement labeled with the terms believes,
expects, intends or anticipates to be uncertain and forward-looking.
Comparison of Results for Fiscal Years 2008 and 2007
The Companys net sales decreased from $59,832,157 for the fiscal year ended November 30, 2007
to $56,741,133 for the fiscal year ended November 30, 2008. Net sales reflected an adjustment
after reclassifying certain advertising expenses from selling expense to a reduction of net sales,
which does not affect net income, and is more fully described in the footnotes to the financial
statements. During fiscal 2008, the amount of advertising expenses that were classified as a
reduction of net sales was $4,557,507, versus $5,184,112 in fiscal 2007, reflecting a decrease in
the net sales reduction of $626,605. Gross sales were lower primarily in the oral care and
fragrance categories. Sales returns and allowances were 11.6% of gross sales for fiscal 2008
versus 9.6% in fiscal 2007. Sales returns were higher primarily due to a primary customers
integration of a retail store chain that it had acquired into its
operations that resulted in some store closings. The Company also had
$321,070 of returns, primarily in the first three quarters of fiscal 2008, from the unsuccessful
launch of Pound-X, a dietary supplement launched in the fourth quarter of 2006. In addition, the
Company expanded its use of coupons resulting in an expense increase of $387,517 that was charged
against sales allowances. The Company continually has returns of products that have been phased
out and replaced by new items as part of its marketing plan. Gross profit margins declined from
63.6% in fiscal 2007 to 61.6% in fiscal 2008. The change in the gross profit margin was primarily
due to the higher returns and sales allowances in fiscal 2008. In addition, due to the
significantly higher fuel costs in 2008, there was an increase in the cost of goods including
delivery charges.
The Companys net sales, by category were: Dietary Supplement $18,531,613 or 33%, Skin Care
$16,623,447 or 29%, Oral Care $13,944,877 or 25%, Nail Care $5,816,461 or 10%, Fragrance $1,532,679
or 3%, and Hair Care and Miscellaneous $292,056 or 0%.
Income before taxes was $2,466,399 for fiscal 2008 as compared to $9,594,726 for fiscal 2007,
a decrease of $7,128,327. The decrease was primarily due to a $3,684,860 increase in media and
co-operative advertising in fiscal 2008 versus fiscal 2007. In addition, for the reasons as
previously noted, fiscal 2008 returns and allowances were higher by $1,106,135 as compared to
fiscal 2007. Other income declined $328,897, primarily due to lower interest rates. Cost of goods
increased as a result of the increased fuel costs, including delivery charges of raw materials and
components and higher testing costs. Due to the significantly increased fuel charges in 2008, the
cost of freight out increased from 4.1% of gross sales in fiscal 2007 to 4.9% of gross sales in
fiscal 2008. In an effort to attract new customers, the Company increased its use of advertising
in newspaper inserts. Expenses were also higher due to increased donations of inventory in fiscal
2008; however that also resulted in an increased tax benefit which offset the higher expense and
created a deferred tax benefit that will be utilized in future periods.
- 10 -
The allowance for doubtful accounts is a combination of specific and general reserve amounts
relating to accounts receivable. The general reserve is calculated based on historical percentages
applied to aged accounts receivable and the specific reserve is established and revised based on
individual customer circumstances. This allowance increased from $141,607 as of November 30, 2007
to $154,290 as of November 30, 2008. The increase is directly attributable to a higher reserve for
specific disputes.
The reserve for returns and allowances is based on a reserve for returns equal to its gross
profit on its historical percentage of returns on its last five months sales, and a specific
reserve based on customer circumstances. This allowance increased from $1,696,961 as of November
30, 2007 to $2,112,426 as of November 30, 2008. Of this amount, allowances and reserves in the
amount of $1,443,688, which are anticipated to be deducted from future invoices, are included in
accrued liabilities. The increase is mainly due to the timing of the Companys sales.
The reserve for inventory obsolescence is based on a detailed analysis of inventory movement.
The reserve decreased from $604,746 as of November 30, 2007 to $578,941 as of November 30, 2008.
In accordance with GAAP (generally accepted accounting principles), the Company reclassified
certain advertising and promotional expenditures as a reduction of sales rather than report them as
expenses, which has no affect on the net income. This reclassification is the adoption by the
Company of EITF 00-14 Accounting for Certain Sales Incentives (codified by EITF 01-9 Accounting
for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products),
as more fully described in footnote 2 (Sales Incentives), of the financial statements for fiscal
2008. The reclassification reflects a reduction in sales for the fiscal years ended November 30,
2008 and 2007 by $4,557,507 and $5,184,112 respectively.
For the year ended November 30, 2008, the Company had revenues of $57,457,946, and net income
of $1,412,886, after a provision of $1,053,513 for taxes. For the year ended November 30, 2007,
the Company had revenues of $60,877,867, and net income of $5,537,795, after a provision of
$4,056,931 for taxes. Fully diluted earnings per share for fiscal 2008 were $0.20 as compared to
$0.78 for fiscal 2007. As noted earlier, earnings in fiscal 2007 were impacted by the recording of
$717,850 of transaction expenses related to the proposed acquisition of the Company by Dubilier and
Company. Other income decreased from $1,045,710 for fiscal 2007 to $716,813 in fiscal 2008,
primarily due to the decrease in interest rates.
The effective tax rate for fiscal 2008 was 42.7% of income before tax as compared to 42.3% for
fiscal 2007. The slight increase in the tax rate was due to the timing of certain tax deductions
in fiscal 2008 versus 2007, which resulted in a $321,855 increase in deferred tax assets.
- 11 -
For fiscal 2008, advertising, cooperative and promotional expenses were $10,466,740 as
compared to $6,956,407 for fiscal 2007, or an expense increase of $3,510,333. Advertising expenses
were 18.4% of net sales for fiscal 2008 versus 11.6% for fiscal 2007. The increase in advertising
expense was due to the Company supporting a new leading diet product.
Selling, general and administrative expenses increased from $21,266,327 in fiscal 2007 to
$22,122,849 in fiscal 2008. The increase was primarily due to higher freight out costs as a result
of the significant increase in fuel costs, increased selling expenses, and higher donations of
inventory as earlier noted.
As of November 30, 2008, there was $1,286,692 of open cooperative advertising commitments,
of which $748,082 is from 2008, $503,064 is from 2007 and $35,546 is from 2006. The Companys
total cooperative advertising commitment decreased from $6,800,000 in fiscal 2007 to $6,264,562 in
fiscal 2008. Cooperative advertising is advertising that is run by the retailers in which the
Company shares in part of the cost. If it becomes apparent that this cooperative advertising was
not utilized, the unclaimed cooperative advertising will be offset against the expense during the
fiscal year in which it is determined that it did not run. This procedure is consistent with the
prior years methodology with regard to the accrual of unsupported cooperative advertising
commitments.
Comparison of Results for Fiscal Years 2007 and 2006
The Companys net sales decreased from $63,302,220 in the 2006 fiscal year to $59,832,157 in
the 2007 fiscal year. Net sales were adjusted after reclassifying certain advertising expenses
from selling expense to a reduction of net sales, which does not affect the net income, and is more
fully described in the footnotes to the financial statements for fiscal 2007. During fiscal 2007,
the amount of advertising expenses that were classified as a reduction of net sales was $5,184,112,
versus $4,013,619 in fiscal 2006, reflecting an increased net sales reduction of $1,170,493. The
Company had been working to adjust its business model by decreasing the amount of its media
advertising and focusing more on co-operative advertising with its retail partners. A major portion
of the Companys co-operative advertising is reclassified as a reduction of net sales. The
decrease in net sales is attributable to the higher sales incentives, discontinued products and
higher sales returns. Sales returns and allowances were 9.6% of gross sales for fiscal 2007 versus
8.7% in fiscal 2006. Sales returns were higher due to the Companys unsuccessful launch of
Pound-X, a dietary supplement launched in the fourth quarter of 2006, and the returns of other
products that were phased out and replaced by new items. Gross profit margins increased slightly
from 63.3% in fiscal 2006 to 63.6% in fiscal 2007.
The Companys gross sales net of returns and allowances, but before promotional charges, by
category were: Dietary Supplement $20,351,748 or 31% of sales, Skin Care $18,862,125 or 29% of
sales, Oral Care $16,375,634 or 25% of sales, Nail Care $6,977,616 or 11% of sales, Fragrance
$2,259,648 or 3% of sales, and Hair Care and Miscellaneous $686,142 or 1% of sales.
Income before taxes was $9,594,726 for fiscal 2007 as compared to $8,916,645 for fiscal 2006,
an increase of $678,081. The increase was primarily due to a decrease in media advertising in 2007
versus 2006 as the Company focused more on co-operative advertising as noted above.
- 12 -
On November 1, 2006 the Company entered into a letter of intent with Dubilier and Company
relating to a proposed acquisition of the Company by Dubilier, and as more fully described in Note
15 of the financial statements for fiscal 2008. The proposed transaction was formally terminated
by the Company on April 10, 2007. During fiscal 2007, the Company incurred expenses related to the
proposed transaction of $717,850, which is reflected on the financial statements as a special
transaction expense.
The allowance for doubtful accounts is a combination of specific and general reserve amounts
relating to accounts receivable. The general reserve is calculated based on historical percentages
applied to aged accounts receivable and the specific reserve is established and revised based on
individual customer circumstances. This allowance decreased from $185,779 as of November 30, 2006
to $141,607 as of November 30, 2007. The decrease is directly attributable to the reduction of
reserves for specific disputes.
The reserve for returns and allowances is based on a reserve for returns equal to its gross
profit
on its historical percentage of returns on its last five months sales, and a specific reserve
based on customer circumstances. This allowance decreased from $1,851,653 as of November 30, 2006
to $1,696,961 as of November 30, 2007. Of this amount, allowances and reserves in the amount of
$964,266, which are anticipated to be deducted from future invoices, are included in accrued
liabilities. The decrease is mainly due to the timing of the Companys sales.
The reserve for inventory obsolescence is based on a detailed analysis of inventory movement.
The reserve decreased from $777,715 as of November 30, 2006 to $604,746 as of November 30, 2007.
In accordance with GAAP (generally accepted accounting principles), the Company reclassified
certain advertising and promotional expenditures as a reduction of sales rather than report them as
expenses, which has no affect on the net income. This reclassification is the adoption by the
Company of EITF 00-14 Accounting for Certain Sales Incentives (codified by EITF 01-9 Accounting
for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products),
as more fully described in footnote 2 (Sales Incentives), of the financial statements for fiscal
2008. The reclassification reflects a reduction in sales for the fiscal years ended November 30,
2007 and 2006 by $5,184,112 and $4,013,619 respectively. The increase was due to the Company
focusing more on co-operative advertising, most of which is reclassified as a reduction of sales.
For the year ended November 30, 2007, the Company had revenues of $60,877,867, and net income
of $5,537,795, after a provision of $4,056,931 for taxes. For the year ended November 30, 2006,
the Company had revenues of $64,100,023, and net income of $5,604,251, after a provision of
$3,312,394 for taxes. Fully diluted earnings per share for fiscal 2007 were $0.78 as compared to
$0.79 for fiscal 2006. As noted earlier, earnings in fiscal 2007 were impacted by the recording of
$717,850 of transaction expenses related to the proposed acquisition of the Company by Dubilier and
Company.
Other income increased from $797,803 for fiscal 2006 to $1,045,710 in fiscal 2007, primarily due to
higher interest income.
- 13 -
The effective tax rate for fiscal 2007 was 42.3% of income before tax as compared to 37.1% for
fiscal 2006. The income tax rate in 2006 was lower in part due to an over accrual of the actual
tax due for 2005 due to certain deductions and credits that the Company was able to utilize in the
final preparation of the 2005 income tax return that were not anticipated at the time of making the
accrual for financial reporting. These items resulted in an over accrual of $200,000 for fiscal
2005, which was adjusted by reducing the provision for fiscal 2006. Had that adjustment not been
made, the effective
tax rate for fiscal 2006 would have been 39.4%. In addition, during fiscal 2006 there was a
larger deduction for donations of certain of our inventory as compared to fiscal 2007, which
resulted in reducing the effective tax rate for fiscal 2006 further.
For fiscal 2007, advertising, cooperative and promotional expenses were $6,956,407 as compared
to $10,345,407 for fiscal 2006, or an expense reduction of $3,389,000. Advertising expenses were
11.6% of net sales for fiscal 2007 versus 16.3% for fiscal 2006. The reduction in advertising
expense was due to the Company focusing more on cooperative advertising with its retail partners
and less on media advertising. Most of the Companys cooperative advertising is reflected as a
reduction of net sales in accordance with GAAP.
Selling, general and administrative expenses increased slightly from $21,104,728 in fiscal
2006 to $21,266,327 in fiscal 2007. The increase was primarily due to increased compensation and
related benefit costs as a result of hiring additional marketing personnel, as well as salary
increases in the normal course of business.
As of November 30, 2007, there was $1,839,016 of open cooperative advertising commitments, of
which $1,241,482 is from 2007, $226,427 is from 2006 and $371,107 is from 2005. The Companys
total cooperative advertising commitment increased from $6,484,840 in fiscal 2006 to $6,800,000 in
fiscal 2007. Cooperative advertising is advertising that is run by the retailers in which the
Company shares in part of the cost. If it becomes apparent that this cooperative advertising was
not utilized, the unclaimed cooperative advertising will be offset against the expense during the
fiscal year in which it is determined that it did not run. This procedure is consistent with the
prior years methodology with regard to the accrual of unsupported cooperative advertising
commitments.
Liquidity and Capital Resources
As of November 30, 2008, the Company had working capital of $23,836,264 as compared to
$24,922,016 at November 30, 2007. The ratio of total current assets to current liabilities is 3.2
to 1 as compared to a ratio of 3.8 to 1 for the prior year. Stockholders equity decreased to
$28,253,879 in fiscal 2008 from $30,750,318 in fiscal 2007. The decrease was due to an increase in
dividends declared from $2,109,040 in fiscal 2007 to $3,033,411 in fiscal 2008, and an increase in
unrealized losses on marketable securities of $875,914. The Company did not purchase any treasury
stock during fiscal 2008.
- 14 -
The Companys cash position and short-term investments at November 30, 2008 were $15,583,056,
versus $14,747,784 as at November 30, 2007. Non-current or long term investments were $2,945,740
at November 30, 2008 versus $4,801,504 as at November 30, 2007. The Company paid cash dividends
during fiscal 2008 in the amount of $2,892,322, representing the dividends declared at the end of
fiscal 2007 but not paid until fiscal 2008 of $634,900 and $2,257,422 in dividends declared and
paid for fiscal 2008. As of November 30, 2008, there were dividends declared but not paid of
$775,989. The Board of Directors increased the dividends declared during fiscal 2008 resulting
in the larger amount of paid cash dividends in fiscal 2008 versus fiscal 2007. The securities the
Company purchased are all classified as Available for Sale Securities, and are reported at fair
market value as of November 30, 2008, with the resultant unrealized gains or losses reported as a
separate component of shareholders equity. Due to the current securities market conditions, the
Company cannot ascertain the risk of any future change in market value. Our investments are spread
among many different Obligors and Municipalities to decrease the risk due to any specific
concentrations.
The Companys investment in property and equipment consisted mostly of computer hardware and
software, racking for our warehouse facilities, leasehold improvements and furniture to accommodate
our personnel in addition to tools and dies used in the manufacturing process.
Inventories were $7,932,798 and $7,857,322, as of November 30, 2008 and 2007 respectively.
The Company increased the amount of inventory on hand in order to accommodate its customers needs
for just in time inventory shipments. In addition, the inventory obsolescence reserve was reduced
from $604,746 to $578,941.
Accounts receivable as of November 30, 2008 and 2007 were $8,230,716 and $9,119,179
respectively. The decrease in accounts receivable is due to the timing of the Companys sales.
Accounts Receivable allowances and reserves decreased in the aggregate by $51,273 from November 30,
2007 to November 30, 2008. The reserves were higher as of November 30, 2007 due to additional
provisions for Pound-X, a dietary supplement product which was discontinued. The Company does
not anticipate any further Pound-X returns that would be material.
The amount of deferred income tax reflected as a current asset increased from $765,821 as of
November 30, 2007 to $973,732 as of November 30, 2008. The increase was mainly due to the increase
of deferred tax credits for charitable contributions during fiscal 2008. Other material components
of the deferred tax asset are the timing differences caused by changes in the reserve for returns,
inventory and bad debt, as well as the accrual for unused vacation pay. The Company anticipates
that these amounts will be deductible in future tax years. The amount of non-current deferred tax
increased from $29,475 as of November 30, 2007 to $143,419 as of November 30, 2008. The increase
was due to a portion of the charitable contributions for which the benefit is estimated to be
beyond the 2009 fiscal year, and thus has been classified as a long term asset.
Current liabilities are $11,016,196 and $9,038,676, as of November 30, 2008 and 2007
respectively. Current liabilities at November 30, 2008 consisted of accounts payable, accrued
liabilities, short term capital lease obligations and dividends payable. The Companys only long
term obligation is for a portion of its capitalized leases, which is for certain office and
warehouse equipment. At November 30, 2008, the Company had long and short-term triple A
investments and cash of $18,528,796 as compared to $19,549,288 as of November 30, 2007. As of
November 30, 2008, the Company was not utilizing any of the funds available under its $20,000,000
unsecured credit line. During fiscal 2007, 52,089 shares of Company Common Stock were issued to
Dunnan Edell, the Companys President, upon his exercise of stock options for 55,000 shares.
- 15 -
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 Companys contract-manufacture products and components are purchased from
non-affiliated entities. Warehousing is provided at Company facilities, and all products are
shipped from the Companys warehouse facilities.
The Company does not have any products that 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.
The Company plans to continue to promote its sales through an advertising program consisting
of a combination of media and co-op advertising. We continue to invest money into research and
development to build our core products to become leaders in their respective categories. We are
trying to decrease the amount of on hand inventory we stock; however to better service our
customers we often find it difficult to reduce our safety stock. We continue to evaluate our
sales staff and to try to attract aggressive salespeople to increase the distribution of our
current product line. We are also continuing to look for additional businesses or product lines
which we think will help the company to grow and are also reviewing possible acquisitions or any
other offers which we feel will enhance shareholders value.
Because our 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 Companys sales and financial
condition. The Company does not believe that inflation or other general economic circumstance that
would further negatively affect operations can be predicted at present, but if such circumstances
should occur, they could have material and negative impact on the Companys net sales and revenues,
unless the Company was able to pass along related cost increases to its customers. As noted
earlier, significantly higher fuel costs resulted in higher cost of goods and freight out costs
during fiscal 2008. On January 21, 2009, the Company filed Form 8-K with the United States
Securities and Exchange Commission advising that Wal-mart had informed the Company that starting in
March 2009, due to the slowdown in the economy, it will only carry the leading brands in their oral
care sections. Therefore starting sometime in March, Wal-Mart will no longer be purchasing the
companys Plus+White oral care products brand. In 2008 the companys net sales of Plus+White to
Wal-Mart totaled $6 million.
- 16 -
Contractual Obligations
The following table sets forth the contractual obligations in total for each year of the next
five
years as at November 30, 2008. Such obligations include the current lease for the Companys
premises, written employment contracts and License Agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
Lease on Premises (1) |
|
|
751,421 |
|
|
|
692,106 |
|
|
|
665,323 |
|
|
|
326,197 |
|
|
|
|
|
Royalty Expense (2) |
|
|
25,000 |
|
|
|
25,000 |
|
|
|
25,000 |
|
|
|
25,000 |
|
|
|
25,000 |
|
Employment Contracts (3) |
|
|
2,733,050 |
|
|
|
2,859,533 |
|
|
|
1,907,994 |
|
|
|
1,984,974 |
|
|
|
1,441,572 |
|
Open Purchase Orders |
|
|
3,727,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Contractual Obligations |
|
|
7,227,463 |
|
|
|
3,700,155 |
|
|
|
2,619,348 |
|
|
|
2,343,463 |
|
|
|
1,466,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The major 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 2008 is estimated at $150,000. The figures above do not include
adjustments for the CPI. The lease has an annual CPI adjustment, not to cumulatively exceed
15% in any consecutive five year period. The lease expires on May 31, 2012 with a renewal
option for an additional five years. On September 26, 2007, the Company entered into a
warehouse lease with Ninth Avenue Equities Co., Inc. to lease 16,438 square feet of space
known as Unit B located at Murray Hill Industrial Center in East Rutherford, New Jersey for a
four and a half year period. The year end net rental expense including CAM was $28,150. The
annual rental is $123,285 plus CPI adjustments, real estate taxes and common area maintenance
expenses. |
|
(2) |
|
See Section Part I, Item 1(f). 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 minimum requirements to
maintain the licenses under the various contracts for the licensed products based on fiscal
2008 sales. Royalty expense includes Alleghany Pharmacal, Solar Sense, Nail Consultants,
Tea-Guard, Inc. and Stephen Hsu, PhD. |
|
(3) |
|
The Company had executed Employment Contracts on December 1, 1993, 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% increase, plus 2.5% of the Companys pre-tax income less depreciation
and amortization (EBITDA) plus certain fringe benefits including the cost of certain life
insurance, auto expenses, and health insurance. (The 2.5% measure in the bonus provision of
the
Edell/Berman contracts was amended on November 3, 1998 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 then in effect by $100,000 per annum. The contracts also provide that at the end of
the term or upon retirement, Edell/Berman shall be retained by the Company as consultants at the
consideration equal to 50% of the prior years salary and bonus for a five year period. The
figures above include only the base salaries for the five years (plus the portion of the bonus
equal to 20% of the base salary), an adjustment for CPI, and without estimating the 2.5% bonus
provision, as that bonus is contingent upon future earnings, and also including most of the
payments that would be due as consulting payments upon expiration or retirement (the portion
based on the 2.5% bonus provision is not calculated into the consulting payment estimate). On
June 1, 2001, the Company added a provision to the Contracts stating that in the event of death
within the employment and consulting periods, the Company would be obligated for two successive
years to pay the executives estate an amount equal to the annual base salary and bonus. |
- 17 -
|
|
|
|
|
David Edells 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 Edells salary was increased to $300,000 and
in January 2004, Drew Edells salary was increased to $225,000. In fiscal 2005, Drew Edells
salary was increased to $250,000. Dunnan Edell is a director and during fiscal 2003 was
appointed President of the Company and Chief Operating Officer. Drew Edell is the Vice President
of Research, and Product Development. |
|
|
|
On February 10, 2006, the Board of Directors extended the employment contracts for Dunnan Edell
and Drew Edell to December 31, 2010. On May 17, 2007, the employment contracts for Dunnan Edell
and Drew Edell were amended by the Board of Directors, extending the contracts to November 30,
2012, and increasing Dunnan Edells base salary to $350,000 and Drew Edells base salary to
$275,000. |
Recent Accounting Pronouncements
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159
(SFAS No. 159). SFAS No. 159 which amends SFAS No. 115 allows certain financial assets and
liabilities to be recognized, at the Companys election, at fair market value, with any gains or
losses for the period recorded in the statement of income. SFAS No. 159 included
available-for-sale securities in the assets eligible for this treatment. Currently, the Company
records the gains or losses for the period in the statement of comprehensive income and in the
equity section of the balance sheet. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007, and interim periods in those fiscal years. The Company, at this time, has
not elected to recognize any gains or losses for its available-for-sale securities in the
statement of income, and accordingly there will be no impact on the Companys financial position
or results of operations.
In November 2007, the SEC issued Staff Accounting Bulletin No. 109 (SAB 109) which
provides interpretive guidance regarding written derivative loan commitments that are accounted
for at fair value through earnings. SAB 109 is effective for fiscal quarters beginning after
December 15, 2007. The adoption of this statement has not had a material impact on the
Companys financial position or results of operation.
In December 2007, the SEC issued Staff Accounting Bulletin No. 110 (SAB 110) which
provides interpretive guidance regarding the use of a simplified method in estimating the
expected term of plain vanilla share options in accordance with FASB No. 123. SAB 110 is
effective as of January 1, 2007. The adoption of this statement has not had a material impact
on the Companys financial position or results of operation.
- 18 -
In December 2007, the FASB issued a revised Statement of Financial Accounting Standards No.
141 (SFAS No. 141 (revised)) which establishes the methods for accounting for business
combinations. SFAS No. 141 (revised) defines the acquirer and the acquisition date. SFAS No.
141 revised is effective for acquisition dates on or after December 15, 2008. The adoption of
this statement will have no material impact on the Companys financial position or results of
operation.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160
(SFAS No. 160) which establishes accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective
for fiscal years beginning after December 15, 2008. The Company has not determined the impact,
if any, of the adoption of SFAS No. 160.
In April 2008, the FASB issued FASB Staff Position No. FAS 142-3 (FSP FAS 142-3) which
amends the factors that should be considered in determining the useful life of a recognized
intangible asset under FASB Statement of Financial Accounting Standards No. 141 (SFAS No. 141).
FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. The adoption of
this staff position will have no material impact on the Companys financial position or results
of operation.
In October 2008, the FASB issued FASB Staff Position No. FAS 157-3 (FSP FAS 157-3) which
clarifies the application of FASB Statement of Financial Accounting Standards No. 157 (SFAS No.
157) in regard to fair value measurements of financial assets in a market that is not active.
FSP FAS 142-3 became effective October 10, 2008 for all subsequent reporting periods. The
adoption of this staff position has had no material impact on the Companys financial position
or results of operation.
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 food and 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. All of the Companys products have independent competition and must be able
to compete in order to maintain its position on the retail merchandisers shelves. {See Business -
General, Item 1(c) i Marketing.}
- 19 -
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 Companys 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 of our customers orders.
There is No Assurance That The Business Will Continue to Operate Profitably.
In fiscal 2008, net sales were $56,741,133. Net income was $1,412,886. There is no assurance
that all of the Companys products will be successful. During 2008 consumer confidence was at a
record low which had a general impact on retail sales.
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 15, 2008. 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 Success of the Companys Current Products and New
Product Development.
The Company is not financially as strong as the major companies against whom it competes. The
ability to successfully introduce new niche products and increase the growth and profitability of
its current and new niche brand products will affect the business and prospects of the future of
the Company and it relies upon the creativity and marketing skills of management.
Future Possible Litigation
Although there is no substantial litigation pending against the Company, there is always the
possibility that one of the Companys products could cause litigation by a consumer over and above
the Companys Product Liability Insurance. There are no such cases currently against the Company.
All of the companys product must be in compliance with all FDA and states regulations and all
products which are being manufactured for the Company by outside suppliers must conform to the
FDAs Good Manufacturing Practices requirements. It is the Companys responsibility to ascertain
that the suppliers do conform.
- 20 -
The Company Relies On A Few Large Customers For A Significant Portion Of Its Sales.
In fiscal 2008, Wal-Mart Stores Inc. represented approximately 44% of the Companys total
revenues. The Companys ten largest customers accounted for 77% of the Companys total revenues.
The Company has no agreement with any of its customers to stock its products. The Companys
business would suffer materially if it lost Wal-Mart Stores, Inc. The loss of any of the Companys
10 top customers could have an adverse effect on the Companys financial results. On January 21,
2009, the Company filed Form 8-K with the United States Securities and Exchange Commission that
Wal-Mart had advised the Company, that starting sometime in March, it would not be carrying the
Companys oral care product brand. The net sales of the oral care products totaled approximately
$6 million in fiscal 2008, or 24% of Wal-Mart net sales.
The Companys Dietary Supplement Business Could Be Adversely Affected By Unfavorable
Scientific Studies Or Negative Press.
The Companys dietary supplement, Mega -T (Green Tea), to some extent is dependent on
consumers perceptions, and the benefit and integrity of the dietary supplement business. Any
safety alert on any dietary supplement for weight loss may negatively affect the consumers
perceptions of the product category.
The Price of the Companys Stock May Be Volatile
The Companys stock could fluctuate substantially. There is a limited float of shares
tradable. There are factors beyond the Companys control, including by not limited to variations
in the Companys operating revenues and profits, the timing of advertising commitments, the
volatility of small cap stock in general, general stock market conditions, and quarter to quarter
variations.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Companys financial statements (See Item 15) record the Companys 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). $66,058 of the Companys $9,594,097 portfolio of investments ( as at Nov. 30, 2008) is
invested in the Common Stock and Other Equity category, and $1,930,046 are invested in
Preferred Stock holdings. The Company does not take positions or engage in transactions in
risk-sensitive market instruments in any substantial degree, nor as defined by SEC rules and
instructions, however due to current securities market conditions, the Company cannot ascertain the
risk of any future change in the market value of its investments.
- 21 -
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, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Fiscal 2008 |
|
Feb. 28 |
|
|
May 31 |
|
|
Aug. 31 |
|
|
Nov. 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
13,639,145 |
|
|
$ |
17,258,060 |
|
|
$ |
13,939,214 |
|
|
|
11,904,714 |
|
Total Revenue |
|
|
13,871,040 |
|
|
|
17,389,985 |
|
|
|
14,148,729 |
|
|
|
12,048,192 |
|
Cost of Products Sold |
|
|
4,893,262 |
|
|
|
6,335,298 |
|
|
|
5,252,704 |
|
|
|
5,287,878 |
|
Net Income |
|
|
343,683 |
|
|
|
790,692 |
|
|
|
1,101,420 |
|
|
|
(822,909 |
) |
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
.05 |
|
|
$ |
.11 |
|
|
$ |
.16 |
|
|
$ |
(.12 |
) |
Diluted |
|
$ |
.05 |
|
|
$ |
.11 |
|
|
$ |
.16 |
|
|
$ |
(.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Fiscal 2007 ** |
|
Feb. 28 |
|
|
May 31 |
|
|
Aug. 31 |
|
|
Nov. 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
13,727,279 |
|
|
$ |
18,227,413 |
|
|
$ |
13,939,369 |
|
|
|
14,085,903 |
|
Total Revenue |
|
|
13,975,385 |
|
|
|
18,457,562 |
|
|
|
14,266,083 |
|
|
|
14,326,644 |
|
Cost of Products Sold |
|
|
4,905,272 |
|
|
|
6,662,077 |
|
|
|
4,933,134 |
|
|
|
5,081,090 |
|
Net Income |
|
|
472,753 |
|
|
|
1,292,921 |
|
|
|
2,069,604 |
|
|
|
1,702,517 |
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
.07 |
|
|
$ |
.18 |
|
|
$ |
.29 |
|
|
$ |
.25 |
|
Diluted |
|
$ |
.07 |
|
|
$ |
.18 |
|
|
$ |
.29 |
|
|
$ |
.24 |
|
|
|
|
** |
|
After reclassification of certain additional promotional expenses from expense to a reduction of
net sales. |
|
|
|
Item 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 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
Under Section 404 of the Sarbanes-Oxley Act of 2002, The Companys fiscal 2008 annual report
is required to be accompanied by a Section 404 Formal Report by management on the effectiveness
of internal controls over financial reporting. The Company has engaged the services of CBIZ Risk &
Advisory Services, LLC to assist in the development and implementation of procedures to determine
and test the effectiveness of the Companys internal controls over financial reporting. The filing
of the Companys November 30, 2010 annual report must contain an opinion by the Companys
independent accounting firm on the effectiveness of the Companys internal controls. The Companys
officers are continually working to evaluate and confirm that the Companys automated data
processing software systems and other procedures are effective and that the information created by
the Companys systems adequately confirm the validity of the information upon which the Company
relies.
- 22 -
The Company continually takes a thorough review of the effectiveness of its internal controls
and procedures, including financial reporting. It is working to strengthen all of its procedures
wherever necessary.
Managements Report on Internal Control Over Financial Reporting
Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to assess the
effectiveness of the Companys internal control over financial reporting as of November 30, 2008
and report, based on that assessment, whether the Companys internal controls over financial
reporting are effective.
Management of the Company is responsible for establishing and maintaining adequate internal
controls over financial reporting, as defined in Rules 13a-15f or 15d-15f under the Securities
Exchange Act of 1934. The Companys internal control over reporting is designed to provide
reasonable assurance regarding the reliability of the Companys financial reporting and the
preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles.
The Companys internal control over financial reporting includes those policies and procedures
that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management and directors of
the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Companys assets that could have a material
effect on the financial statements.
Internal control over reporting, because of its inherent limitations, may not prevent or
detect misstatements. Projections of any evaluation of effectiveness for future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
The Companys management has assessed the effectiveness of its internal control over financial
reporting as of November 30, 2008 using the criteria as set forth in Internal Control Integrated
Framework by the Committee of Sponsoring Organizations of the Treadway Commission. The Companys
assessment included documenting, evaluating and testing of the design and operating effectiveness
of its internal control over financial reporting. Management of the Company has reviewed the
results with the Audit Committee of the Board of Directors.
Based on the Companys assessment, management has concluded that, as of November 30, 2008, the
Companys internal control over financial reporting was effective.
|
|
|
DAVID EDELL |
|
|
|
/s/ David Edell |
|
|
|
|
|
David Edell, Chief Executive Officer
|
|
|
|
|
|
STEPHEN A. HEIT |
|
|
|
/s/ Stephen A. Heit |
|
|
|
|
|
Stephen A. Heit, Chief Financial Officer |
|
|
- 23 -
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 and Chief Financial Officer. You can find our
code of ethics in Exhibit 14.
The Executive Officers and Directors of the Company are as follows:
|
|
|
|
|
|
|
|
|
YEAR OF FIRST |
|
|
NAME |
|
POSITION |
|
COMPANY SERVICE |
|
David Edell
|
|
Chief
Executive Officer,
Director
|
|
|
1983 |
|
|
|
|
|
|
|
|
Ira W. Berman
|
|
Chairman of the Board
of Directors, Secretary,
Executive Vice President
|
|
|
1983 |
|
|
|
|
|
|
|
|
Dunnan Edell
|
|
President, Chief Operating Officer
and Director
|
|
|
1984 |
|
|
|
|
|
|
|
|
Stephen Heit
|
|
Executive Vice President and
Chief Financial Officer
|
|
|
2005 |
|
|
|
|
|
|
|
|
Drew Edell
|
|
Executive Vice President-
Product Development and Production
|
|
|
1983 |
|
|
|
|
|
|
|
|
John Bingman
|
|
Vice President and Treasurer
|
|
|
1986 |
|
|
|
|
|
|
|
|
Stanley Kreitman
|
|
Director
|
|
|
1996 |
|
|
|
|
|
|
|
|
Jack Polak
|
|
Director
|
|
|
1983 |
|
|
|
|
|
|
|
|
Robert Lage
|
|
Director
|
|
|
2003 |
|
|
|
|
|
|
|
|
Seth Hamot
|
|
Director
|
|
|
2007 |
|
David Edell, age 76, is a director, and the Companys 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 77, is the Companys Executive Vice President and Corporate Secretary. 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 53 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 and Chief Operating Officer. 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.
- 24 -
Stephen Heit, age 54 joined CCA in May 2005 as Executive Vice President Operations, and was
appointed Chief Financial Officer in March 2006. Prior to that he was Vice President Business
Strategies for Del Laboratories, Inc., a consumer products company that was listed on the American
stock exchange, from 2003 to 2005. Mr. Heit served as President of AM Cosmetics, Inc. from 2001 to
2003, as Chief Financial Officer from 1998 to 2003, and Corporate Secretary to the Board of
Directors from 1999 to 2003. From 1986 to 1997 he was the Chief Financial Officer of Pavion
Limited, and also served on the Board of Directors. He also served as a Director of Loeb House,
Inc., a non-profit organization serving mentally handicapped adults from 1987 to 1995, and Director
of Nyack Hospital Foundation from 1993 to 1995. He received a Bachelor of Science from Dominican
College in 1976,
with additional graduate work in Professional Accounting at Fordham University from 1976 1978,
and is a MBA Candidate at the University of Connecticut Graduate Business School.
Drew Edell, the 51 year-old son of David Edell, is a graduate of Pratt Institute, where he
received a Bachelors degree in Industrial Design. He joined the Company in 1983, and in 1985, he
was appointed Vice President of Product Development and Production.
John Bingman, age 57, 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 96, 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 Federation of Certified Tax
Consultants. 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. On May 23, 2004, Hofstra University in Long Island, NY awarded
him with an honorary doctorate in humane letters.
Stanley Kreitman, age 76 has been Vice Chairman of Manhattan Associates an equity investment
firm since 1994. He is a director of Medallion Financial Corp. (NASDAQ), Capital Lease Financial
Corp.(NYSE), KSW Corp., Geneva Mortgage Corp., and Century Bank. He also serves as Chairman of the
New York City Board of Corrections, Nassau County Crime Stoppers, and serves on the board of the
Police Athletic League. From 1975 to 1993 he was President of United States Banknote Corp.(NYSE) a
securities printer.
- 25 -
Robert Lage, age 72, 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.
Seth Hamot, age 46, is a graduate of Princeton University with a degree in Economics. Since
1997, Mr. Hamot has been the Managing Member of Roark, Rearden & Hamot Capital Management, LLC
(RRHCM) and the owner of its corporate predecessor, Roark, Rearden & Hamot, Inc. RRHCM is the
investment manager to Costa Brava partnership III L.P. (Costa Brava), a private investment fund
that owns 549,300 common shares of the Company. Mr. Hamot is also President of Roark, Rearden &
Hamot Capital Management, LLC, the general partner of Costa Brava. Prior to 1997, Mr.
Hamot was one of the partners of the Actionvest entities. Mr. Hamot previously served as a
director of Bradley Pharmaceuticals Inc and as a member of their audit committee. Mr. Hamot
currently serves as a director of Telos Corporation, Tech Team Global, Inc., and Orange 21, Inc.,
all publicly traded companies.
Committees of the Board of Directors
The Board of Directors has established three committees. The audit committee is comprised of
Robert Lage, who serves as its Chairman, Stanley Kreitman and Jack Polak. Each member of the
audit committee qualifies as a financial expert as defined by the United States Securities and
Exchange Commission 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, and are independent as that term is used in
Section 10(m)(3) of the Exchange Act. The compensation committee is comprised of Stanley Kreitman,
Jack Polak, Seth Hamot and Robert Lage. Each member of the compensation committee is
independent. The investment committee is comprised of Ira Berman, Stanley Kreitman and Jack
Polak.
- 26 -
Item 11. EXECUTIVE COMPENSATION
|
i. |
|
Summary Compensation Table |
The following table summarizes compensation earned in the 2008, 2007 and 2006 fiscal years by
the Chief Executive Officer and Chief Financial Officer (the Named Officers), the three most
highly compensated executive officers other than the Named Officers, and the non-executive officer
who would be among the three most highly compensated employees of the Company other than the Named
Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation |
|
|
Long-Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All |
|
|
of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Covered |
|
|
Other |
|
Name and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual |
|
|
by Stock |
|
|
Long-Term |
|
Principal |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compen- |
|
|
Options |
|
|
Compen- |
|
Position |
|
Year |
|
|
Salary |
|
|
Bonus(1) |
|
|
sation(2) |
|
|
Granted(3) |
|
|
sation |
|
David Edell, |
|
|
2008 |
|
|
$ |
812,700 |
|
|
$ |
422,285 |
|
|
$ |
43,639 |
|
|
|
|
|
|
|
0 |
(4) |
Chief Executive
Officer |
|
|
2007 |
|
|
|
794,173 |
|
|
|
532,807 |
|
|
|
44,155 |
|
|
|
|
|
|
|
0 |
(4) |
|
|
|
2006 |
|
|
|
737,001 |
|
|
|
556,410 |
|
|
|
41,193 |
|
|
|
|
|
|
|
0 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ira W. Berman, |
|
|
2008 |
|
|
$ |
812,700 |
|
|
$ |
422,285 |
|
|
$ |
45,443 |
|
|
|
|
|
|
|
0 |
(4) |
Secretary and |
|
|
2007 |
|
|
|
794,173 |
|
|
|
532,807 |
|
|
|
40,699 |
|
|
|
|
|
|
|
0 |
(4) |
Executive
Vice President |
|
|
2006 |
|
|
|
737,001 |
|
|
|
556,410 |
|
|
|
31,718 |
|
|
|
|
|
|
|
0 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dunnan Edell, |
|
|
2008 |
|
|
$ |
343,269 |
|
|
$ |
96,000 |
|
|
$ |
16,632 |
|
|
|
|
|
|
|
0 |
|
President,
Chief Operating Officer |
|
|
2007 |
|
|
|
355,962 |
|
|
|
120,000 |
|
|
|
11,060 |
|
|
|
|
|
|
|
0 |
|
|
|
|
2006 |
|
|
|
300,000 |
|
|
|
120,000 |
|
|
|
9,155 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Heit |
|
|
2008 |
|
|
$ |
234,615 |
|
|
$ |
24,000 |
|
|
$ |
9,093 |
|
|
|
|
|
|
|
0 |
|
Executive Vice President, |
|
|
2007 |
|
|
|
229,327 |
|
|
|
30,000 |
|
|
|
8,081 |
|
|
|
|
|
|
|
0 |
|
Chief Financial
Officer |
|
|
2006 |
|
|
|
211,538 |
|
|
|
30,000 |
|
|
|
7,972 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drew Edell |
|
|
2008 |
|
|
$ |
269,711 |
|
|
$ |
48,000 |
|
|
$ |
11,442 |
|
|
|
|
|
|
|
0 |
|
Executive Vice |
|
|
2007 |
|
|
|
279,904 |
|
|
|
60,000 |
|
|
|
10,008 |
|
|
|
|
|
|
|
0 |
|
President
Product
Development &
Production |
|
|
2006 |
|
|
|
250,000 |
|
|
|
60,000 |
|
|
|
9,188 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon Denis |
|
|
2008 |
|
|
$ |
318,750 |
|
|
$ |
6,250 |
|
|
$ |
10,578 |
|
|
|
|
|
|
|
0 |
|
Senior
Executive Vice President -
Sales |
|
|
2007 |
|
|
|
331,250 |
|
|
|
50,000 |
|
|
|
10,235 |
|
|
|
|
|
|
|
0 |
|
|
|
|
2006 |
|
|
|
248,750 |
|
|
|
75,000 |
|
|
|
6,693 |
|
|
|
|
|
|
|
0 |
|
|
|
|
(1) |
|
Bonus amounts represents amounts earned in each respective fiscal year, not necessarily paid
in each year. |
|
(2) |
|
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. The Employment
Agreement of Edell/Berman provides that they may receive an additional reimbursement for a complete
physical examination and reimbursement of up to $5,000 of medical expenses for each employment or
consulting period. The Company also pays for a life insurance policy owned by Edell/Berman, with a
face value of $750,000 for each policy, as per their respective Employment Agreements. |
|
(3) |
|
Information in respect of stock option plans appears below in the sub-topic, Employment
Contracts/Executive Compensation Program. For information in regard to stock appreciation rights,
refer to Note 9 of the financial statements. |
|
(4) |
|
The employment of Edell/Berman provides that in the event of death within the employment and
consulting periods, the Company is obligated for two successive years to pay the executives estate
an amount equal to the annual base salary and bonus. |
- 27 -
|
ii. |
|
Fiscal 2008 Option Grants and Option Exercises,
Year-End Option Valuation, Option Repricing |
There were no option grants or option exercises during fiscal 2008.
The next table identifies 2008 fiscal-year option exercises by Named Officers and Directors,
and reports a valuation of their options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
Covered by Un- |
|
|
Value of Unexercised |
|
|
|
Acquired |
|
|
Value |
|
|
exercised Options |
|
|
In-the-Money Options |
|
|
|
On Exercise |
|
|
Realized (1) |
|
|
at November 30, 2008 |
|
|
at November 30, 2008(2) |
|
|
David Edell |
|
|
0 |
|
|
|
0 |
|
|
|
25,000 |
|
|
$ |
0.00 |
|
Ira Berman |
|
|
0 |
|
|
|
0 |
|
|
|
25,000 |
|
|
|
0.00 |
|
Dunnan Edell |
|
|
0 |
|
|
|
0 |
|
|
|
15,000 |
|
|
|
0.00 |
|
Drew Edell |
|
|
0 |
|
|
|
0 |
|
|
|
15,000 |
|
|
|
0.00 |
|
John Bingman |
|
|
0 |
|
|
|
0 |
|
|
|
10,000 |
|
|
|
0.00 |
|
|
|
|
(1) |
|
Represents the difference between market price and the respective exercise price of the
options as of the exercise date. |
|
(2) |
|
Represents the difference between market price and the respective exercise prices of
the options as of December 1, 2008. The market price at December 1, 2008 was $3.52. |
|
iii. |
|
Compensation of Directors and Committees of the Board |
Each outside director was paid $2,500 for a conference call meeting and $5,000 per meeting for
attendance of board meetings in fiscal 2008 (without additional compensation for committee
meetings, other than as noted below). Mr. Lage received an additional $30,000 as chairman of the
audit committee. The full Board of Directors met four times in fiscal 2008, for an aggregate
compensation of $70,000. No stock options were awarded.
- 28 -
|
iv. |
|
Executive Compensation Principles
Compensation Committee |
The Companys Executive Compensation Program is based on guiding principles designed to align
executive compensation with Company values and objectives, business strategy, management
initiatives, and financial performance. In applying these principles the Compensation Committee of
the Board of Directors, comprised of Stanley Kreitman, Jack Polak, Seth Hamot and Robert Lage, has
established a program to:
Reward executives for long-term strategic management and the
enhancement of shareholder value.
Integrate compensation programs with both the Companys annual and
long-term strategic planning.
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.
The Compensation Committee has a charter, which was published with the proxy statement for the
2008 annual meeting of shareholders. Compensation, including annual bonus amounts, for the
executive officers named in the Summary Compensation Table (other than David Edell and Ira Berman,
whose compensation and bonus are determined in accordance with their employment agreement) are
recommended by David Edell, Chief Executive Officer, and approved by the Compensation Committee.
|
v. |
|
Employment Contracts/Compensation Program |
The total compensation program consists of both cash and equity based compensation. The
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 employees performance during the 2008 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 (plus a bonus of 20% of the base salary), with a year-to-year CPI or 6% increase, plus
2.5% of the Companys pre-tax income less depreciation and amortization (EBITDA). (The 2.5%
measure in the bonus provision of the Edell/Berman contracts was amended on November 3, 1998 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 then in effect by $100,000 per annum (See Item 11,
Summary Compensation Table). The contracts also provide that at the end of the term or upon
retirement, Edell/Berman shall be retained by the Company as consultants at the consideration equal
to 50% of the prior years salary and bonus for a five year period. The contracts also provide
that in the
event of the death of Edell/Berman within the employment and consulting periods, the Company is
obligated for two successive years to pay the executives estate an amount equal to the annual base
salary and bonus. The Company, per the Employment Agreement, pays for life insurance policies
owned by Edell/Berman with a face value of $750,000 each. Edell/Berman are entitled to have the
Company pay for a complete physical examination and reimbursement of up to $5,000 of medical
expenses during each benefit year.
- 29 -
David Edells 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. On February 10,
2006, the Board of Directors extended the contracts for Dunnan Edell and Drew Edell to December 31,
2010. Dunnan Edell is a director and President of the Company. Drew Edell is the Vice President
of Product Development and Production. On July 1 2003, Dunnan Edells salary was
increased to $300,000, and on January 5, 2004, Drew Edells salary was increased to $225,000 and in
2005, it was increased to $250,000.
On May 17, 2007, the employment contracts for Dunnan Edell and Drew Edell were extended to
November 30, 2012 (See Item 11, Summary Compensation Table). Dunnan Edells salary was increased
to $350,000 and Drew Edells salary was increased to $275,000.
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 Companys Stock
Option Plan was approved by the shareholders authorizing the issuance of options to issue up to
1,000,000 shares.
The Companys 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
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.
- 30 -
The maximum term of each option is ten (10) years. No option granted is transferable by the
optionee other than upon death.
On June 15, 2005, the shareholders approved an amended and Restated Stock Option Plan amending
the 2003 Stock Option Plan.
The Plan provides that the stock option committee may make awards in the form of (a) incentive
stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) restricted
stock, and (e) performance shares.
One new award was made by the committee in fiscal 2007. (See Executive Compensation in Fiscal
2007 Option Grants)
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 persons 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 optionees death) within
eighteen (18) months of the optionees 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 Companys outstanding capital stock must be at least 110% of the fair market value on the date
of grant. As at November 30, 2008, 126,000 stock options, yet exercisable, to purchase 126,000
shares of the Companys Common Stock, were outstanding.
The Company has adopted Stock Appreciation Rights incentives and Restricted Stock grants in
the 2005 Amended Stock Option Plan. No such grants were issued in fiscal 2008. All of the terms
and conditions of the Plan were included in the June 15, 2005 Proxy, which Plan was approved by the
shareholders at the annual meeting. The Proxy was incorporated by reference to the 10K Annual
Report for fiscal 2005.
Set forth below is a line graph comparing cumulative total shareholder return on the Companys
Common Stock, with the cumulative total return of companies in the NASDAQ Stock Market (U.S.) and
the cumulative total return of Dow Joness TMI/Personal Products Index.
- 31 -
CCA Industries ASE
Copyright @ 2008 Dow Jones & Company. All rights reserved.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/03 |
|
|
11/04 |
|
|
11/05 |
|
|
11/06 |
|
|
11/07 |
|
|
11/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCA Idustries, Inc. |
|
|
100.00 |
|
|
|
151.86 |
|
|
|
115.99 |
|
|
|
167.50 |
|
|
|
144.15 |
|
|
|
57.54 |
|
Dow Jones US |
|
|
100.00 |
|
|
|
113.26 |
|
|
|
124.59 |
|
|
|
142.55 |
|
|
|
153.82 |
|
|
|
94.40 |
|
Dow Jones US Personal Products |
|
|
100.00 |
|
|
|
112.10 |
|
|
|
123.69 |
|
|
|
148.33 |
|
|
|
177.02 |
|
|
|
136.70 |
|
|
|
|
Item 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS |
The following table sets forth certain information regarding the beneficial ownership of the
Companys Common Stock and/or Class A Common Stock as of November 30, 2008 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.
- 32 -
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership, As A |
|
|
|
Number of |
|
|
|
|
|
|
Percentage of |
|
|
|
Shares Owned (1): |
|
|
|
|
|
|
All Shares Out- |
|
|
|
Common |
|
|
|
|
|
|
Option |
|
|
Standing/Assuming |
|
Name and Address |
|
Stock |
|
|
Class A (2) |
|
|
Shares (1) |
|
|
Option Share Exercise (1) |
|
|
David Edell |
|
|
146,609 |
|
|
|
484,615 |
|
|
|
25,000 |
|
|
|
8.9 |
% |
|
|
9.3 |
% |
c/o CCA Industries, Inc.
200 Murray Hill Parkway
East Rutherford, NJ 07073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ira W. Berman |
|
|
160,533 |
|
|
|
483,087 |
|
|
|
25,000 |
|
|
|
9.1 |
% |
|
|
9.5 |
% |
c/o CCA Industries, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seth Hamot (3)(4) |
|
|
574,300 |
|
|
|
|
|
|
|
|
|
|
|
8.1 |
% |
|
|
8.1 |
% |
c/o Costa Brava
Partnership III LP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley Kreitman |
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
0.2 |
% |
|
|
0.2 |
% |
c/o CCA Industries, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Lage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0 |
% |
|
|
0.0 |
% |
c/o CCA Industries, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack Polak
c/o CCA Industries, Inc. |
|
|
53,254 |
|
|
|
|
|
|
|
|
|
|
|
0.8 |
% |
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dunnan Edell
c/o CCA Industries, Inc. |
|
|
97,158 |
|
|
|
|
|
|
|
15,000 |
|
|
|
1.4 |
% |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drew Edell
c/o CCA Industries, Inc. |
|
|
98,108 |
|
|
|
|
|
|
|
15,000 |
|
|
|
1.4 |
% |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Bingman
c/o CCA Industries, Inc. |
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
0.0 |
% |
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen A. Heit
c/o CCA Industries, Inc. |
|
|
1,111 |
|
|
|
|
|
|
|
|
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers and Directors
as a group (10 persons) |
|
|
1,146,073 |
|
|
|
967,702 |
|
|
|
90,000 |
|
|
|
30.0 |
% |
|
|
31.2 |
% |
- 33 -
|
|
|
(1) |
|
The number of Option Shares represents the number of shares that could be purchased by, and
upon exercise of unexercised options, exercisable within 90 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 and Ira Berman own 100% of the outstanding shares of Class A Common Stock. Messrs.
David Edell, Dunnan Edell, and Ira Berman are officers and directors. Messrs. Stephen Heit, John
Bingman and Drew Edell are officers. Messrs. Hamot, Lage, Kreitman and Polak are independent,
outside directors |
|
(3) |
|
Includes 574,300 shares beneficially owned by Costa Brava Partnership III L.P. Seth W.
Hamot is the president of Roark, Reardon & Hamot, LLC, which is the general partner of Costa Brava
Partnership III L.P. |
|
(4) |
|
The principal business of Costa Brava Partnership III L.P. is to make investments in, buy,
sell, hold, pledge and assign securities. The principal business of Roark, Rearden and Hamot, LLC
is to act as general partner of Costa Brava Partnership III L.P. The principal business address is
420 Boylston Street, Boston, MA 02116. Seth W. Hamot is the president of Roark, Rearden & Hamot,
LLC, which is the general partner of Costa Brava Partnership III L.P. |
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company did not purchase any shares of common stock from officers, directors or affiliates
in fiscal 2008.
During fiscal 2008, several related parties provided services to the Company, which were
deemed immaterial to the financial statements.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
KGS LLP (KGS) served as the Companys independent auditors for 2008 and 2007. The services
performed by KGS in this capacity included conducting an audit in accordance with generally
accepted auditing standards of, and expressing an opinion on, the Companys consolidated financial
statements.
- 34 -
Audit Fees
KGSs fees for professional services rendered in connection with the audit and review of Forms
10-K and all other SEC regulatory filings were $379,161 for the 2008 fiscal year and $251,363 for
the 2007 fiscal year. The Company has paid and is current on all billed fees.
Audit Related Fees
Audit related fees billed in Fiscal 2008 and 2007 by KGS were $45,515 and $98,015,
respectively. Audit related fees consist primarily of fees billed for professional services
rendered by KGS for accounting consultations and services related to business acquisitions and
dispositions, responses to SEC correspondence, and readiness consultations for Section 404 of the
Sarbanes Oxley Act of 2002.
Tax Fees
KGSs fees for professional services rendered in connection with Federal and State tax return
preparation and other tax matters for the 2008 and 2007 fiscal years were $51,261 and $48,847,
respectively.
All Other Fees
All other fees of $0 and $300 billed in Fiscal years 2008 and 2007, respectively, represent
fees for miscellaneous services other than those described above.
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
auditors retention to audit our financial statements, including the associated fee, is approved by
the committee before the filing of the preceding years 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 auditors 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 KGS 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 Commissions rules.
- 35 -
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements:
Table of Contents, Report of Independent Registered Public Accounting Firm, Consolidated
Balance Sheets as of November 30, 2008 and 2007, Consolidated Statements of Income for the
years ended November 30, 2008, 2007 and 2006, Consolidated Statements of Comprehensive
Income, Consolidated Statements of Shareholders Equity for the years ended November 30,
2008, 2007 and 2006, Consolidated Statements of Cash Flows for the years ended November 30,
2008, 2007 and 2006, Notes to Consolidated Financial Statements.
Financial Statement Supplementary Information:
Schedule II: Valuation Accounts; Years Ended Nov. 30, 2008, 2007 and 2006.
Exhibits: All Exhibits are incorporated by reference.
- 36 -
(1) |
|
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 incorporated by reference to the filing of such documents with the Schedule TO
filed with the SEC, on June 5, 2001. |
(3) |
|
The Companys 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). |
(10.1) |
|
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. |
(10.2) |
|
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). The May 29, 2001 Amended and Restated Employment Agreements of David Edell and
Ira Berman are incorporated by reference herein. |
Previously filed as an exhibit to and incorporated by reference from the indicated report
filed with the Securities and Exchange Commission:
|
(1) |
|
The Forms 8K, filed on May 22, 2002 and November 20, 2002, are incorporated by
reference to this 10K. Three 8Ks are referenced, October 29, 2003, November 24, 2003
and December 11, 2003. Three additional 8Ks are referenced, one on April 7, 2004, one
on August 3, 2004 and the last on October 6, 2004. |
|
(2) |
|
Forms 8K filed on April 11, 2005, June 27, 2005, and July 15, 2005 are
incorporated by reference to this 10K |
|
(3) |
|
The Companys 2003 Stock Option Plan was filed with the 2003 Proxy and is
incorporated by reference to this 10K. |
|
(4) |
|
The Companys 2005 Amended and Restated Stock Option Plan and the 2005 Proxy
are incorporated by reference herein. |
|
(5) |
|
Form 8K, filed on January 21, 2009, is incorporated by reference to this 10K. |
- 37 -
The following reports were filed with the Securities and Exchange Commission during the
three months ended November 30, 2008:
|
(1) |
|
Form 10-Q, filed on October 14, 2008, for the quarter ended August 31, 2008. |
|
(2) |
|
Form 8-K, filed on November 4, 2008, announcing that the Company had purchased
three Trademarks, the first joint pain analgesic products it has ever marketed. The
Trademarks are Pain Bust RI, Pain Bust RII, and Pain Bust R Ultra. |
(11) |
|
Statement re Per Share Earnings (included in Item 15, Financial Statements) |
(14) |
|
Code of Ethics for Chief Executive Officer and Senior Financial Officers are referenced |
(31.1) |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) included herein |
|
(31.2) |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) included herein |
|
(32.1) |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 included herein |
|
(32.2) |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 included herein |
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 Commissions 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 Commissions Internet website
(http://www.sec.gov).
- 38 -
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
|
|
|
|
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/ DAVID EDELL
|
|
Chief Executive Officer,
|
|
February 27, 2009 |
|
|
|
|
|
DAVID EDELL
|
|
Director |
|
|
|
|
|
|
|
|
|
Chairman of the Board of Directors,
|
|
February 27, 2009 |
IRA W. BERMAN
|
|
Executive
Vice President, Secretary |
|
|
|
|
|
|
|
|
|
President, Chief Operating Officer,
|
|
February 27, 2009 |
DUNNAN EDELL
|
|
Director |
|
|
|
|
|
|
|
|
|
Executive Vice President,
|
|
February 27, 2009 |
STEPHEN HEIT
|
|
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
Vice President ,
|
|
February 28, 2009 |
DREW EDELL
|
|
Research & Development |
|
|
|
|
|
|
|
|
|
Director
|
|
February 27, 2009 |
STANLEY KREITMAN |
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
February 27, 2009 |
ROBERT LAGE |
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
February 27, 2009 |
JACK POLAK |
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
February 27, 2009 |
SETH HAMOT |
|
|
|
|
- 39 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2008 AND 2007
C O N T E N T S
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
FINANCIAL STATEMENTS: |
|
|
|
|
|
|
|
|
|
|
|
|
3-4 |
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
9-36 |
|
|
|
|
|
|
SUPPLEMENTARY INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
37 |
|
- 1 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
CCA Industries, Inc.
East Rutherford, New Jersey
We have audited the consolidated balance sheets of CCA Industries, Inc. and Subsidiaries as of
November 30, 2008 and 2007, and the related consolidated statements of income, comprehensive
income, shareholders equity and cash flows for each of the three fiscal years in the period ended
November 30, 2008. These consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the companys
internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, 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, 2008 and 2007, and the consolidated results of their operations and their cash
flows for each of the three fiscal years in the period ended November 30, 2008, in conformity with
accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule titled Schedule II Valuation and Qualifying Accounts
is presented for purposes of additional analysis and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financials statements taken as a whole.
/s/
KGS LLP
CERTIFIED PUBLIC ACCOUNTANTS
February 27, 2009
Jericho, New York
- 2 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
November 30,
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
8,934,699 |
|
|
$ |
6,743,960 |
|
Short-term investments and marketable
securities (Notes 2 and 6) |
|
|
6,648,357 |
|
|
|
8,003,824 |
|
Accounts receivable, net of allowances of
$823,029 and $874,302, respectively |
|
|
8,230,716 |
|
|
|
9,119,179 |
|
Inventories, net of reserve for inventory
obsolescence of $578,941 and $604,746,
respectively (Notes 2 and 3) |
|
|
7,932,798 |
|
|
|
7,857,322 |
|
Prepaid expenses and sundry receivables |
|
|
578,000 |
|
|
|
630,893 |
|
Prepaid income taxes and refunds due
(Note 8) |
|
|
1,554,158 |
|
|
|
839,693 |
|
Deferred income taxes (Note 8) |
|
|
973,732 |
|
|
|
765,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
34,852,460 |
|
|
|
33,960,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, net of accumulated
depreciation and amortization
(Notes 2 and 4) |
|
|
611,226 |
|
|
|
562,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets, net of accumulated
amortization (Notes 2 and 5) |
|
|
727,716 |
|
|
|
484,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets |
|
|
|
|
|
|
|
|
Marketable securities (Notes 2 and 6) |
|
|
2,945,740 |
|
|
|
4,801,504 |
|
Deferred taxes |
|
|
143,419 |
|
|
|
29,475 |
|
Other |
|
|
65,300 |
|
|
|
65,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Assets |
|
|
3,154,459 |
|
|
|
4,896,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
39,345,861 |
|
|
$ |
39,903,876 |
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
- 3 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS EQUITY
November 30,
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (Note 10) |
|
$ |
10,182,510 |
|
|
$ |
8,354,458 |
|
Short term capital lease |
|
|
57,697 |
|
|
|
49,318 |
|
Dividends payable (Note 12) |
|
|
775,989 |
|
|
|
634,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
11,016,196 |
|
|
|
9,038,676 |
|
|
|
|
|
|
|
|
|
|
Capitalized lease obligations |
|
|
75,786 |
|
|
|
114,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
11,091,982 |
|
|
|
9,153,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 6,086,740 and
6,086,740 shares, respectively |
|
|
60,867 |
|
|
|
60,867 |
|
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
967,702 and 967,702 shares, respectively |
|
|
9,677 |
|
|
|
9,677 |
|
Additional paid-in capital |
|
|
2,329,049 |
|
|
|
2,329,049 |
|
Retained earnings |
|
|
26,920,561 |
|
|
|
28,541,086 |
|
Unrealized (losses) on marketable securities
(Note 2) |
|
|
(1,066,275 |
) |
|
|
(190,361 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity |
|
|
28,253,879 |
|
|
|
30,750,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
39,345,861 |
|
|
$ |
39,903,876 |
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
- 4 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended November 30, |
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of health and beauty
aid products, net |
|
|
|
|
|
$ |
56,741,133 |
|
|
$ |
59,832,157 |
|
|
$ |
63,302,220 |
|
Other income |
|
|
|
|
|
|
716,813 |
|
|
|
1,045,710 |
|
|
|
797,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,457,946 |
|
|
|
60,877,867 |
|
|
|
64,100,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
21,769,142 |
|
|
|
21,760,406 |
|
|
|
23,260,307 |
|
Selling, general and
administrative expenses |
|
|
|
|
|
|
22,122,849 |
|
|
|
21,266,327 |
|
|
|
21,104,728 |
|
Advertising, cooperative and
promotions |
|
|
|
|
|
|
10,466,740 |
|
|
|
6,956,407 |
|
|
|
10,345,407 |
|
Research and development |
|
|
|
|
|
|
603,486 |
|
|
|
574,900 |
|
|
|
536,590 |
|
Provision for (benefit from) doubtful
accounts |
|
|
|
|
|
|
12,886 |
|
|
|
(21,839 |
) |
|
|
(73,657 |
) |
Interest expense |
|
|
|
|
|
|
16,444 |
|
|
|
29,090 |
|
|
|
10,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,991,547 |
|
|
|
50,565,291 |
|
|
|
55,183,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction Costs |
|
|
|
|
|
|
|
|
|
|
717,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs and Expenses |
|
|
|
|
|
|
54,991,547 |
|
|
|
51,283,141 |
|
|
|
55,183,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Provision
for Income Taxes |
|
|
|
|
|
|
2,466,399 |
|
|
|
9,594,726 |
|
|
|
8,916,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Tax |
|
|
|
|
|
|
1,053,513 |
|
|
|
4,056,931 |
|
|
|
3,312,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
|
|
$ |
1,412,886 |
|
|
$ |
5,537,795 |
|
|
$ |
5,604,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
7,054,442 |
|
|
|
7,029,611 |
|
|
|
7,034,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
7,061,646 |
|
|
|
7,058,889 |
|
|
|
7,133,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Common Share (Note 2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
$ |
.20 |
|
|
$ |
.79 |
|
|
$ |
.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
$ |
.20 |
|
|
$ |
.78 |
|
|
$ |
.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
- 5 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended November 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
1,412,886 |
|
|
$ |
5,537,795 |
|
|
$ |
5,604,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss)
on investments (Note 6) |
|
|
(875,914 |
) |
|
|
(63,228 |
) |
|
|
251,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
$ |
536,972 |
|
|
$ |
5,474,567 |
|
|
$ |
5,855,457 |
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
- 6 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED NOVEMBER 30, 2008, 2007 AND 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNREALIZED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAIN (LOSS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL |
|
|
|
|
|
|
ON |
|
|
TOTAL |
|
|
|
COMMON STOCK |
|
|
PAID IN |
|
|
RETAINED |
|
|
MARKETABLE |
|
|
SHAREHOLDERS |
|
|
|
SHARES |
|
|
AMOUNT |
|
|
CAPITAL |
|
|
EARNINGS |
|
|
SECURITIES |
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 1, 2005 |
|
|
7,179,757 |
|
|
$ |
71,798 |
|
|
$ |
5,105,732 |
|
|
$ |
21,200,465 |
|
|
|
($378,339 |
) |
|
$ |
25,999,656 |
|
Issuance of common stock |
|
|
95,500 |
|
|
|
955 |
|
|
|
46,795 |
|
|
|
|
|
|
|
|
|
|
|
47,750 |
|
Net income for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,604,251 |
|
|
|
|
|
|
|
5,604,251 |
|
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,692,385 |
) |
|
|
|
|
|
|
(1,692,385 |
) |
Unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251,206 |
|
|
|
251,206 |
|
Purchase and retirement of common stock |
|
|
(272,904 |
) |
|
|
(2,730 |
) |
|
|
(2,822,957 |
) |
|
|
|
|
|
|
|
|
|
|
(2,825,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance November 30, 2006 |
|
|
7,002,353 |
|
|
|
70,023 |
|
|
|
2,329,570 |
|
|
|
25,112,331 |
|
|
|
(127,133 |
) |
|
|
27,384,791 |
|
Issuance of common stock |
|
|
52,089 |
|
|
|
521 |
|
|
|
(521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,537,795 |
|
|
|
|
|
|
|
5,537,795 |
|
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,109,040 |
) |
|
|
|
|
|
|
(2,109,040 |
) |
Unrealized (loss) on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(63,228 |
) |
|
|
(63,228 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance November 30, 2007 |
|
|
7,054,442 |
|
|
|
70,544 |
|
|
|
2,329,049 |
|
|
|
28,541,086 |
|
|
|
(190,361 |
) |
|
|
30,750,318 |
|
Net Income for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,412,886 |
|
|
|
|
|
|
|
1,412,886 |
|
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,033,411 |
) |
|
|
|
|
|
|
(3,033,411 |
) |
Unrealized (loss) on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(875,914 |
) |
|
|
(875,914 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance November 30, 2008 |
|
|
7,054,442 |
|
|
$ |
70,544 |
|
|
$ |
2,329,049 |
|
|
$ |
26,920,561 |
|
|
|
($1,066,275 |
) |
|
$ |
28,253,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
- 7 -
CCA
INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,412,886 |
|
|
$ |
5,537,795 |
|
|
$ |
5,604,251 |
|
Adjustments to reconcile net
income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
246,165 |
|
|
|
257,555 |
|
|
|
227,039 |
|
(Gain) on sale of securities |
|
|
(88,096 |
) |
|
|
(60,697 |
) |
|
|
(62,012 |
) |
Loss on sale or impairment
of intangible assets |
|
|
1,332 |
|
|
|
21,745 |
|
|
|
112,901 |
|
(Increase) decrease in deferred
income taxes |
|
|
(321,855 |
) |
|
|
410,116 |
|
|
|
(363,045 |
) |
Decrease (increase)in accounts receivable |
|
|
888,463 |
|
|
|
(1,930,982 |
) |
|
|
2,072,202 |
|
(Increase) decrease in inventory |
|
|
(75,476 |
) |
|
|
(1,507,309 |
) |
|
|
204,137 |
|
Decrease (increase) in prepaid expenses
and sundry receivables |
|
|
52,893 |
|
|
|
53,982 |
|
|
|
(158,741 |
) |
(Increase) decrease in prepaid income
taxes and refunds due |
|
|
(714,465 |
) |
|
|
(839,693 |
) |
|
|
165,560 |
|
(Increase) decrease in other assets |
|
|
|
|
|
|
(17,800 |
) |
|
|
825 |
|
Increase (decrease) in accounts payable and
accrued liabilities |
|
|
1,828,052 |
|
|
|
250,033 |
|
|
|
(629,667 |
) |
(Decrease) increase in income taxes payable |
|
|
|
|
|
|
(413,869 |
) |
|
|
413,869 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating
Activities |
|
|
3,229,899 |
|
|
|
1,760,876 |
|
|
|
7,587,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment |
|
|
(289,533 |
) |
|
|
(260,453 |
) |
|
|
(309,594 |
) |
Acquisition of intangible assets |
|
|
(250,000 |
) |
|
|
( 522 |
) |
|
|
(45,161 |
) |
Purchase of available for sale securities |
|
|
(22,016,587 |
) |
|
|
(14,824,908 |
) |
|
|
(12,588,205 |
) |
Proceeds from sale of available for
sales securities |
|
|
24,440,000 |
|
|
|
17,605,791 |
|
|
|
10,636,835 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in)
Investing Activities |
|
|
1,883,880 |
|
|
|
2,519,908 |
|
|
|
(2,306,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of common shares |
|
|
|
|
|
|
|
|
|
|
(2,825,687 |
) |
Proceeds from exercise of stock options |
|
|
|
|
|
|
|
|
|
|
47,749 |
|
Increase in capital lease obligation |
|
|
20,814 |
|
|
|
80,036 |
|
|
|
151,407 |
|
Payments for capital lease obligation |
|
|
(51,532 |
) |
|
|
(38,352 |
) |
|
|
(28,890 |
) |
Dividends paid |
|
|
(2,892,322 |
) |
|
|
(1,965,111 |
) |
|
|
(1,776,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used in) Financing Activities |
|
|
(2,923,040 |
) |
|
|
(1,923,427 |
) |
|
|
(4,432,396 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase In Cash |
|
|
2,190,739 |
|
|
|
2,357,357 |
|
|
|
848,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at Beginning of Year |
|
|
6,743,960 |
|
|
|
4,385,340 |
|
|
|
3,536,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year |
|
$ |
8,934,699 |
|
|
$ |
6,743,960 |
|
|
$ |
4,385,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash
Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
16,444 |
|
|
$ |
29,090 |
|
|
$ |
10,003 |
|
Income taxes |
|
|
2,086,300 |
|
|
|
4,882,361 |
|
|
|
2,256,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash
Information: |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared and accrued |
|
$ |
775,989 |
|
|
$ |
634,900 |
|
|
$ |
490,970 |
|
Retirement of -0-, - 0 -, and 272,904 shares of
treasury stock, respectively |
|
|
|
|
|
|
|
|
|
|
2,825,687 |
|
See Notes to Consolidated Financial Statements.
- 8 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS
CCA Industries, Inc. (CCA) was incorporated in the State of Delaware on March 25,
1983.
CCA manufactures and distributes health and beauty aid products.
CCA has several wholly-owned subsidiaries, CCA Cosmetics, Inc., CCA Labs, Inc.,
Berdell, Inc., and Nutra Care Corporation, all of which are currently inactive. CCA
has two active wholly-owned subsidiaries, CCA Online Industries, Inc., and CCA IND.,
S.A. DE C.V., a Variable Capital Corporation organized pursuant to the law of Mexico.
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 Company). All significant inter-company accounts and
transactions have been eliminated.
Estimates and Assumptions:
The consolidated financial statements include the use of estimates, which management
believes are reasonable. The process of preparing financial statements in conformity
with 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 Companys 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. Fair value for Available-for-Sale securities is
determined by reference to quoted market prices or other relevant information.
- 9 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
Accounts receivable consist of trade receivables recorded at original invoice amount,
less an estimated allowance for uncollectible amounts. The accounts receivable balance
is further reduced by allowances for coop advertising and reserves for returns
which are anticipated to be taken as credits against the balances as of November 30th.
The allowances and reserves which are anticipated to be deducted from future invoices
are included in accrued liabilities. Trade credit is generally extended on a short
term basis; thus trade receivables do not bear interest, although a finance charge may
be applied to receivables that are past due. Trade receivables are periodically
evaluated for collectibility based on past credit history with customers and their
current financial condition. Changes in the estimate collectibility of trade
receivables are recorded in the results of operations for the period in which the
estimate is revised. Trade receivables that are deemed uncollectible are offset
against the allowance for uncollectible accounts. The Company generally does not
require collateral for trade receivables.
Statements of Cash Flows Disclosure:
For purposes of the statement of cash flows, the Company considers all highly liquid
instruments purchased with an original maturity of less than three months to be cash
equivalents.
During fiscal 2006, four officers/directors exercised in the aggregate 95,500 options,
David Edell with 22,500, Ira Berman with 28,000, Dunnan Edell with 20,000 and Jack
Pollack with 25,000.
In addition, during fiscal 2006 the Company purchased and retired an aggregate of
225,000 shares of common stock from three officers/directors, David Edell-100,000, Ira
Berman-100,000 and Drew Edell-25,000. The purchase price was $10.50 per share
discounted from $10.82 per share, the closing price at the close of business on the
transaction date. The Company purchased 9,392 shares from Stanley Kreitman, a
director, and 15,000 shares from Rami Abada, a former director, for $10.50 per share
discounted from $10.70 per share, the closing price at the close of business on the
transaction date.
For the year ended November 30, 2008, dividends declared but not yet due amounted to $
775,989.
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.
- 10 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company charges to expense repairs and
maintenance items, while major improvements and betterments are capitalized. When the
Company sells or otherwise disposes of property and equipment items, the cost and
related accumulated depreciation are removed from the respective accounts and any gain
or loss is included in earnings.
Depreciation and amortization are provided on the straight-line method over the
following estimated useful lives or lease terms of the assets:
|
|
|
Machinery and equipment
|
|
5-7 Years |
Furniture and fixtures
|
|
3-10 Years |
Tools, dies and masters
|
|
3 Years |
Transportation equipment
|
|
5 Years |
Leasehold improvements
|
|
Remaining life of the lease
(ranging from 1-9 years) |
Intangible Assets:
Intangible assets are stated at cost. Patents are amortized on the straight-line
method over a period of 17 years. Such intangible assets are reviewed for potential
impairment whenever events or circumstances indicate that carrying amounts may not be
recoverable.
Web Site Costs:
Certain costs incurred in creating the graphics and content of the Companys web site
has been capitalized in accordance with the Financial Accounting Standards Emerging
Issue Task Force (EITF) No. 0-02, Accounting for Web Site Development Costs. The
Company has determined that these costs will be amortized over a two year period. Web
site design and conceptual costs are expensed as incurred.
Financial Instruments:
The carrying value of assets and liabilities considered financial instruments
approximate their respective fair value.
Income Taxes:
Income tax expense includes federal and state taxes currently payable and deferred
taxes arising from temporary differences between income for financial reporting and
income tax purposes.
- 11 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 (SFAS) No. 128,
Earnings Per Share in 1998. Basic earnings per share is calculated using the
average number of shares of common stock outstanding during the year. Diluted
earnings per share is computed on the basis of the average number of common shares
outstanding plus the effect of outstanding stock options using the treasury stock
method and convertible debentures using the if-converted method. Common stock
equivalents consist of stock options.
Revenue Recognition:
The Company recognizes sales 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, returns are accepted if it is in the best interests of the Companys
relationship with the customer. The Company, therefore, records a reserve for returns
equal to its gross profit on its historical percentage of returns on its last five
months sales. Those returns which are anticipated to be taken as credits against the
balances as of November 30th are offset against the accounts receivable. The reserves
which are anticipated to be deducted from future invoices are included in accrued
liabilities.
Sales Incentives
In accordance with EITF 00-14, the Company has accounted for certain sales incentives
offered to customers by charging them directly to sales as opposed to advertising and
promotional expense. Had EITF 00-14 not been adopted, net sales for the years ended
November 2008, 2007 and 2006 would have been $61,298,640, $65,016,269, and $67,701,423
respectively.
Advertising Costs:
The Companys policy is to charge advertising costs to expense as incurred.
Shipping Costs:
The Companys policy for fiscal financial reporting is to charge shipping cost to
selling, general and administrative expense as incurred. For the years ended November
30, 2008, 2007 and 2006, included in selling, general and administrative expenses are
shipping costs amounting to $3,377,366, $2,962,754 and $2,542,685, respectively.
- 12 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock Options:
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123R, Accounting for
Share-Based Compensation which is a revision of SFAS No. 123. Effective for
annual or interim periods beginning after December 15, 2005, SFAS No. 123R
requires stock grants to employees to be recognized in the income statement based on
their fair values. The adoption of SFAS No. 123R did not have any impact on the
Companys financial position, results of operations or cash flow.
Reclassifications
Certain prior years amounts have been reclassified to conform with the current years
presentation.
Recent Accounting Pronouncements
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159
(SFAS No. 159). SFAS No. 159 which amends SFAS No. 115 allows certain financial
assets and liabilities to be recognized, at the Companys election, at fair market
value, with any gains or losses for the period recorded in the statement of income.
SFAS No. 159 included available-for-sale securities in the assets eligible for this
treatment. Currently, the Company records the gains or losses for the period in the
statement of comprehensive income and in the equity section of the balance sheet.
SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and
interim periods in those fiscal years. The Company, at this time, has not elected to
recognize any gains or losses for its available-for-sale securities in the statement
of income, and accordingly there will be no impact on the Companys financial position
or results of operations.
In November 2007, the SEC issued Staff Accounting Bulletin No. 109 (SAB 109) which
provides interpretive guidance regarding written derivative loan commitments that are
accounted for at fair value through earnings. SAB 109 is effective for fiscal
quarters beginning after December 15, 2007. The adoption of this statement has not
had a material impact on the Companys financial position or results of operation.
In December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 110 (SAB 110). SAB 110 amends and replaces Question 6 of Section D.2
of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6
of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the
simplified method in developing an estimate of the expected term of plain vanilla
share options and allows usage of that method for option grants prior to December 31,
2007. SAB 110 allows public companies which do not have sufficient historical
experience to provide a reasonable estimate to continue the use of this method for
estimating the expected term of plain vanilla share option grants after December 31,
2007. The adoption of this statement has not had a material impact on the Companys
financial position or results of operation.
- 13 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141
(revised 2007), Business Combinations (SFAS 141R). SFAS 141R changes accounting for
acquisitions that close beginning in 2009 in a number of areas including the treatment
of contingent consideration, contingencies, acquisition costs, In-process research &
development and restructuring costs. More transactions and events will qualify as
business combinations and will be accounted for at fair value under
the new
standard. SFAS 141R promotes greater use of fair values in financial reporting. In
addition, under SFAS 141R, changes in deferred tax asset valuation allowances and
acquired income tax uncertainties in a business combination after the measurement
period will impact income tax expense. Some of the changes will introduce more
volatility into earnings. SFAS 141R is effective for fiscal years beginning on or
after December 15, 2008. SFAS 141R will have an impact on accounting for any business
acquired after the effective date of this pronouncement.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB
No. 51 (SFAS 160). SFAS 160 will change the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests (NCI) and
classified as a component of equity. This new consolidation method will significantly
change the accounting for transactions with minority interest holders. SFAS 160 is
effective for fiscal years beginning after December 15, 2008. SFAS 160 would have an
impact on the presentation and disclosure of the noncontrolling interests of any
non-wholly owned business acquired in the future.
In April 2008, the FASB issued FASB Staff Position No. 142-3 (FSP 142-3), which
amends the factors that must be considered in developing renewal or extension
assumptions used to determine the useful life over which to amortize the cost of a
recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets
(SFAS 142). The FSP requires an entity to consider its own assumptions about
renewal or extension of the term of the arrangement, consistent with its expected use
of the asset, and is an attempt to improve consistency between the useful life of a
recognized intangible asset under SFAS 142 and the period of expected cash flows used
to measure the fair value of the asset under SFAS 141. The FSP is effective for
fiscal years beginning after December 15, 2008, and the guidance for determining the
useful life of a recognized intangible asset must be applied prospectively to
intangible assets acquired after the effective date. The FSP is not expected to have a
significant impact on the Companys results of operations, financial condition or
liquidity.
- 14 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). The statement is intended to improve financial
reporting by identifying a consistent hierarchy for selecting accounting principles to
be used in preparing financial statements that are prepared in conformance with
generally accepted accounting principles. Unlike Statement on Auditing
Standards No. 69, The Meaning of Present Fairly in Conformity With GAAP (SAS 69),
SFAS 162 is directed to the entity rather than the auditor. The statement is effective
60 days
following the SECs approval of the Public Company Accounting Oversight Board
(PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity
with GAAP, and is not expected to have any impact on the Companys results of
operations, financial condition or liquidity.
In June 2008, FASB issued FSP Emerging Issues Task Force No. 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities (EITF 03-6-1). Under the FSP, unvested share-based payment awards that
contain rights to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two- class method of computing
EPS. The FSP is effective for fiscal years beginning after December 15, 2008, and
interim periods within those years, and is not expected to have a significant impact
on the Companys results of operations, financial condition or liquidity.
In October 2008, the FASB issued FASB Staff Position No. FAS 157-3 (FSP FAS 157-3)
which clarifies the application of FASB Statement of Financial Accounting Standards
No. 157 (SFAS No. 157) in regard to fair value measurements of financial assets in a
market that is not active. FSP FAS 142-3 became effective October 10, 2008 for all
subsequent reporting periods. The adoption of this staff position has had no material
impact on the Companys financial position or results of operation.
Management does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
- 15 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 INVENTORIES
At November 30, 2008 and 2007, inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
4,880,267 |
|
|
$ |
4,717,225 |
|
Finished goods |
|
|
3,052,531 |
|
|
|
3,140,097 |
|
|
|
|
|
|
|
|
|
|
|
$ |
7,932,798 |
|
|
$ |
7,857,322 |
|
|
|
|
|
|
|
|
At November 30, 2008 and 2007, the Company had a reserve for obsolete inventory of $578,941 and $604,746, respectively.
NOTE 4 PROPERTY AND EQUIPMENT
At November 30, 2008 and 2007, property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Machinery and equipment |
|
$ |
190,308 |
|
|
$ |
130,346 |
|
Office furniture and equipment |
|
|
813,819 |
|
|
|
795,714 |
|
Transportation equipment |
|
|
10,918 |
|
|
|
10,918 |
|
Tools, dies, and masters |
|
|
360,701 |
|
|
|
379,171 |
|
Capitalized lease obligations |
|
|
263,067 |
|
|
|
242,254 |
|
Web Site |
|
|
20,000 |
|
|
|
|
|
Leasehold improvements |
|
|
357,582 |
|
|
|
281,582 |
|
|
|
|
|
|
|
|
|
|
|
2,016,395 |
|
|
|
1,839,985 |
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
and amortization |
|
|
1,405,169 |
|
|
|
1,277,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment Net |
|
$ |
611,226 |
|
|
$ |
562,528 |
|
|
|
|
|
|
|
|
Depreciation expense for the years ended November 30, 2008, 2007 and 2006 amounted to
$239,503, $250,307, and $215,197, respectively.
NOTE 5 INTANGIBLE ASSETS
Intangible assets consist of owned trademarks and patents for ten product lines
covering thirty countries. The cost and accumulated amortization for November 30,
2008 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Trademarks and patents |
|
$ |
886,608 |
|
|
$ |
636,608 |
|
Less: Accumulated amortization |
|
|
158,892 |
|
|
|
152,231 |
|
|
|
|
|
|
|
|
Intangible Assets Net |
|
$ |
727,716 |
|
|
$ |
484,377 |
|
|
|
|
|
|
|
|
- 16 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 INTANGIBLE ASSETS (CONTINUED)
Patents are amortized on a straight-line basis over their legal life of 17 years and
trademarks are adjusted to realizable value for each quarterly reporting period.
During 2007, $14,190 (including $1,696 of accumulated amortization) of intangibles
were deemed to be impaired and written off. Amortization expense for the years ended
November 30, 2008, 2007 and 2006 amounted to $ 6,661, $ 7,248 and $11,843,
respectively. Estimated amortization expense for November 30, 2009, 2010, 2011, 2012
and 2013 will be $6,553, $6,553 and $6,288, $6,026 and $5,911 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, 2008 and November 30, 2007 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, |
|
|
November 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
COST |
|
|
MARKET |
|
|
COST |
|
|
MARKET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate obligations |
|
$ |
200,000 |
|
|
$ |
197,714 |
|
|
$ |
5,552,779 |
|
|
$ |
5,555,917 |
|
Government obligations
(including mortgage
backed securities) |
|
|
6,200,029 |
|
|
|
6,248,363 |
|
|
|
2,335,358 |
|
|
|
2,140,921 |
|
Preferred stock |
|
|
50,000 |
|
|
|
21,640 |
|
|
|
50,000 |
|
|
|
38,760 |
|
Common Stock |
|
|
51,648 |
|
|
|
44,628 |
|
|
|
51,649 |
|
|
|
58,860 |
|
Mutual funds |
|
|
215,274 |
|
|
|
114,582 |
|
|
|
215,274 |
|
|
|
151,989 |
|
Other equity |
|
|
70,206 |
|
|
|
21,430 |
|
|
|
70,206 |
|
|
|
57,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,787,157 |
|
|
|
6,648,357 |
|
|
|
8,275,266 |
|
|
|
8,003,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate obligations |
|
|
598,370 |
|
|
|
577,334 |
|
|
|
400,000 |
|
|
|
400,000 |
|
Government obligations |
|
|
500,000 |
|
|
|
460,000 |
|
|
|
3,445,577 |
|
|
|
3,626,508 |
|
Preferred stock |
|
|
2,774,845 |
|
|
|
1,908,406 |
|
|
|
774,845 |
|
|
|
674,996 |
|
Other equity investments |
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,873,215 |
|
|
|
2,945,740 |
|
|
|
4,720,422 |
|
|
|
4,801,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,660,372 |
|
|
$ |
9,594,097 |
|
|
$ |
12,995,687 |
|
|
$ |
12,805,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 17 -
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, 2008 was $ 9,594,097 as compared to $12,805,328 at
November 30,
2007. The gross unrealized gains and (losses) were $48,841 and ($1,115,116) for November
30, 2008 and
$122,117 and ($312,478) for November 30, 2007. The cost and market values of the
investments at
November 30, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COL. A |
|
|
|
|
|
|
|
|
|
COL. B |
|
|
COL. C |
|
|
COL.D |
|
|
COL.E |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Which Each |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Security |
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
|
|
|
|
|
|
|
Issues and |
|
|
|
|
|
|
|
|
|
|
|
of Units- |
|
|
|
|
|
|
|
|
|
|
Each Other |
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
|
|
Market Value |
|
|
Security |
|
|
|
|
|
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
of Each Issue |
|
|
Issue Carried |
|
Name of Issuer and |
|
Maturity |
|
|
Interest |
|
|
Bonds and |
|
|
Cost of |
|
|
at Balance |
|
|
in Balance |
|
Title of Each Issue |
|
Date |
|
|
Rate |
|
|
Notes |
|
|
Each Issue |
|
|
Sheet Date |
|
|
Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORPORATE OBLIGATIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Caterpillar Fin Service Corp |
|
|
10/15/09 |
|
|
|
4.750 |
% |
|
|
200,000 |
|
|
$ |
200,000 |
|
|
$ |
197,714 |
|
|
$ |
197,714 |
|
Merrill Lynch & Co |
|
|
08/04/10 |
|
|
|
4.790 |
|
|
|
200,000 |
|
|
|
199,614 |
|
|
|
191,702 |
|
|
|
191,702 |
|
|
Morgan Stanley |
|
|
01/15/10 |
|
|
|
4.000 |
|
|
|
200,000 |
|
|
|
199,106 |
|
|
|
188,620 |
|
|
|
188,620 |
|
Toyoto Motor |
|
|
04/28/10 |
|
|
|
2.850 |
|
|
|
200,000 |
|
|
|
199,650 |
|
|
|
197,012 |
|
|
|
197,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
798,370 |
|
|
|
775,048 |
|
|
|
775,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOVERNMENT OBLIGATIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Group |
|
|
01/15/09 |
|
|
|
3.875 |
|
|
|
250,000 |
|
|
|
249,125 |
|
|
|
248,618 |
|
|
|
248,618 |
|
NJ ST HGR ED |
|
|
12/01/40 |
|
|
|
0.000 |
|
|
|
500,000 |
|
|
|
500,000 |
|
|
|
460,000 |
|
|
|
460,000 |
|
US Treasury Bill |
|
|
01/15/09 |
|
|
|
0.000 |
|
|
|
4,500,000 |
|
|
|
4,455,584 |
|
|
|
4,499,820 |
|
|
|
4,499,820 |
|
US Treasury Bill |
|
|
01/22/09 |
|
|
|
0.000 |
|
|
|
1,500,000 |
|
|
|
1,495,320 |
|
|
|
1,499,925 |
|
|
|
1,499,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,700,029 |
|
|
|
6,708,363 |
|
|
|
6,708,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 18 -
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 |
|
|
COL.D |
|
|
COL.E |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Which Each |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio of |
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
|
|
|
|
|
|
|
Equity Security |
|
|
|
|
|
|
|
|
|
|
|
of Units- |
|
|
|
|
|
|
|
|
|
|
Issues and |
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
|
|
Market Value |
|
|
Each Other |
|
|
|
|
|
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
of Each Issue |
|
|
Security Issue |
|
Name of Issuer and |
|
Maturity |
|
|
Interest |
|
|
Bonds and |
|
|
Cost of |
|
|
at Balance |
|
|
Carried in |
|
Title of Each Issue |
|
Date |
|
|
Rate |
|
|
Notes |
|
|
Each Issue |
|
|
Sheet Date |
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABN Amro Cap Fund |
|
|
12/31/08 |
|
|
|
5.900 |
|
|
|
2,000 |
|
|
|
50,000 |
|
|
|
21,640 |
|
|
|
21,640 |
|
Bank of America Ser H |
|
|
05/01/13 |
|
|
|
8.200 |
|
|
|
20,000 |
|
|
|
500,000 |
|
|
|
416,400 |
|
|
|
416,400 |
|
Citigroup Dep Shs 1/1200th |
|
|
06/15/13 |
|
|
|
8.500 |
|
|
|
20,000 |
|
|
|
500,000 |
|
|
|
332,000 |
|
|
|
332,000 |
|
Deutsche Bank Capital TR V |
|
|
06/30/18 |
|
|
|
8.050 |
|
|
|
20,000 |
|
|
|
500,000 |
|
|
|
314,800 |
|
|
|
314,800 |
|
General Electric Cap Corp |
|
|
11/15/32 |
|
|
|
6.100 |
|
|
|
8,800 |
|
|
|
224,845 |
|
|
|
175,362 |
|
|
|
175,362 |
|
JP Morgan Chase |
|
|
06/15/33 |
|
|
|
5.875 |
|
|
|
2,000 |
|
|
|
50,000 |
|
|
|
41,360 |
|
|
|
41,360 |
|
Merrill Lynch Dep Shs 1/1200th |
|
|
05/28/13 |
|
|
|
8.625 |
|
|
|
20,000 |
|
|
|
500,000 |
|
|
|
358,000 |
|
|
|
358,000 |
|
MetLife Floater |
|
|
06/15/10 |
|
|
|
4.000 |
|
|
|
8,000 |
|
|
|
200,000 |
|
|
|
70,400 |
|
|
|
70,400 |
|
Morgan Stanley Cap Tr |
|
|
07/15/33 |
|
|
|
5.750 |
|
|
|
4,000 |
|
|
|
100,000 |
|
|
|
49,636 |
|
|
|
49,636 |
|
Wells Fargo Cap Tr VIII |
|
|
08/01/33 |
|
|
|
5.625 |
|
|
|
8,000 |
|
|
|
200,000 |
|
|
|
150,448 |
|
|
|
150,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,824,845 |
|
|
|
1,930,046 |
|
|
|
1,930,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 19 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COL. A |
|
|
|
|
|
|
|
|
|
COL. B |
|
|
COL. C |
|
|
COL. D |
|
|
COL. E |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Which |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security |
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Issues |
|
|
|
|
|
|
|
|
|
|
|
Units-Principal |
|
|
|
|
|
|
Market Value of |
|
|
and Each |
|
|
|
|
|
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
Each Issue at |
|
|
Other Security |
|
Name of Issuer and |
|
Maturity |
|
|
Interest |
|
|
Bonds and |
|
|
Cost of |
|
|
Balance |
|
|
Issue Carried in |
|
Title of Each Issue |
|
Date |
|
|
Rate |
|
|
Notes |
|
|
Each Issue |
|
|
Sheet Date |
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DTE Energy Company |
|
|
|
|
|
|
|
|
|
|
1,200 |
|
|
|
51,648 |
|
|
|
44,628 |
|
|
|
44,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dreyfus Premier Ltd High Income |
|
|
|
|
|
|
|
|
|
|
16,296.314 |
|
|
|
215,274 |
|
|
|
114,582 |
|
|
|
114,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Equity Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PIMCO Floating Rate Strategy |
|
|
|
|
|
|
|
|
|
|
2,900 |
|
|
|
70,206 |
|
|
|
21,430 |
|
|
|
21,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,660,372 |
|
|
$ |
9,594,097 |
|
|
$ |
9,594,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 20 -
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, 2008, 2007 and 2006, available-for-sale securities
were liquidated and proceeds amounting to $24,440,000, $17,605,791 and $10,636,835 were
received, with resultant realized gains totaling $88,096, $60,697, and $62,012,
respectively. Cost of available-for-sale securities includes unamortized premium or
discount.
The Company had, at November 30, 2008, an auction rate bond issued by the New Jersey
State Higher Education Assistance Authority (NJHE). The bond was recorded as
non-current marketable securities. The NJHE bond has an original par value of
$500,000, a maturity date of December 1, 2040, a rating of AA by S&P, and has been
placed on negative watch. Fitch has withdrawn their rating. The current interest rate
is 3.238% as of September 18, 2008. Beginning in February 2008, more shares for sale
were submitted in the regularly scheduled auctions for the NJHE auction rate bonds than
there were offers to buy. This meant that these auctions failed to clear and that
many or all auction bond holders who wanted to sell their shares in these auctions were
unable to do so. The Company believes that no permanent impairment has occurred as of
November 30, 2008, as the Company has the ability and intent to hold these investments
long enough to avoid realizing any significant loss. The Company has recognized a
temporary impairment charge of $40,000 against the $500,000 par value of the bond. If
uncertainties in the credit and capital markets continue, resulting in further market
deterioration, the Company may be required to recognize further impairment charges. In
addition, if there are any further ratings downgrades, or if the Company no longer has
the ability to hold these investments, the Company may have further impairment charges.
The Company adopted SFAS No. 157, Fair Value Measurements (SFAS No. 157) as of
December 1, 2007, which expands disclosures about investments that are measured and
reported at fair market value. SFAS No. 157 established a fair value hierarchy that
prioritizes the inputs to valuations techniques utilized to measure fair value into
three broad levels as follows:
Level 1 Quoted market prices in active markets for the identical asset or liability
that the reporting entity has ability to access at measurement date.
Level 2 Quoted market prices for identical or similar assets or liabilities in
markets that are not active, and where fair value is determined through the use of
models or other valuation methodologies.
Level 3 Unobserved inputs for the asset or liability. Fair value is determined by
the reporting entitys own assumptions utilizing the best information available, and
includes situations where there is little market activity for the investment.
- 21 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
All of the Companys investments as of November 30, 2008 would be categorized as Level
1 in respect to the methodology utilized to determine fair market value, with the
exception of the NJHE bond, referenced above, which is categorized as Level 3.
The following table discloses a reconciliation of the NJHE bond Level 3 investment at
measured fair value during the year ended November 30, 2008:
|
|
|
|
|
Beginning Balance as of December 1, 2007 |
|
$ |
500,000 |
|
Unrealized (loss) |
|
|
(40,000 |
) |
|
|
|
|
Ending Balance as of November 30, 2008 |
|
$ |
460,000 |
|
|
|
|
|
There was no realized income or loss from the Level 3 NJHE bond investment during the
fiscal year ended November 30, 2008.
NOTE 7 NOTES PAYABLE AND SUBORDINATED DEBENTURES
The Company has an available line of credit of $20,000,000. Interest is calculated at
the Companys option, either on the outstanding balance at the prime rate plus 0.5% or
Libor plus 175 basis points. The line of credit is unsecured as of November 30, 2008
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,
2008 and 2007. The Company has extended the line of credit through
August 31, 2009. As of November 30, 2008 and for the year
then ended November 30, 2008, the Company was in compliance with
all covenants under the line of credit agreement.
- 22 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return. The Companys
2004 returns have been examined by the Internal Revenue Service.
At November 30, 2008 and 2007, respectively, the Company has temporary differences
arising from the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
Classified As |
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
Short-Term |
|
|
Long- Term |
|
Type |
|
Amount |
|
|
Tax |
|
|
Asset |
|
|
(Liability) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
74,244 |
|
|
$ |
29,623 |
|
|
$ |
|
|
|
$ |
29,623 |
|
Reserve for bad debts |
|
|
154,290 |
|
|
|
61,562 |
|
|
|
61,562 |
|
|
|
|
|
Reserve for returns |
|
|
668,738 |
|
|
|
266,827 |
|
|
|
266,827 |
|
|
|
|
|
Reserve for
obsolete inventory |
|
|
578,941 |
|
|
|
230,997 |
|
|
|
230,997 |
|
|
|
|
|
Vacation accrual |
|
|
501,096 |
|
|
|
199,937 |
|
|
|
199,937 |
|
|
|
|
|
Charitable contributions |
|
|
572,568 |
|
|
|
228,455 |
|
|
|
114,659 |
|
|
|
113,796 |
|
Section 263A costs |
|
|
250,000 |
|
|
|
99,750 |
|
|
|
99,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax |
|
|
|
|
|
$ |
1,117,151 |
|
|
$ |
973,732 |
|
|
$ |
143,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
Classified As |
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
Short-Term |
|
|
Long-Term |
|
Type |
|
Amount |
|
|
Tax |
|
|
Asset |
|
|
(Liability) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
74,244 |
|
|
$ |
29,475 |
|
|
$ |
|
|
|
$ |
29,475 |
|
Reserve for bad debts |
|
|
141,607 |
|
|
|
56,218 |
|
|
|
56,218 |
|
|
|
|
|
Reserve for returns |
|
|
452,695 |
|
|
|
179,720 |
|
|
|
179,720 |
|
|
|
|
|
Reserve for
obsolete inventory |
|
|
604,746 |
|
|
|
240,084 |
|
|
|
240,084 |
|
|
|
|
|
Vacation accrual |
|
|
484,971 |
|
|
|
192,534 |
|
|
|
192,534 |
|
|
|
|
|
Section 263A costs |
|
|
245,000 |
|
|
|
97,265 |
|
|
|
97,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax |
|
|
|
|
|
$ |
795,296 |
|
|
$ |
765,821 |
|
|
$ |
29,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) is made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
1,030,348 |
|
|
$ |
345,020 |
|
|
$ |
1,375,368 |
|
Deferred tax (benefit) |
|
|
(241,116 |
) |
|
|
(80,739 |
) |
|
|
(321,855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
789,232 |
|
|
$ |
264,281 |
|
|
$ |
1,053,513 |
|
|
|
|
|
|
|
|
|
|
|
- 23 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 INCOME TAXES (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2007 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
2,823,468 |
|
|
$ |
823,347 |
|
|
$ |
3,646,815 |
|
Deferred tax expense |
|
|
317,523 |
|
|
|
92,593 |
|
|
|
410,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,140,991 |
|
|
$ |
915,940 |
|
|
$ |
4,056,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2006 |
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
Current tax expense |
|
$ |
2,892,278 |
|
|
$ |
849,564 |
|
|
$ |
3,741,842 |
|
Deferred tax (benefit) |
|
|
(331,944 |
) |
|
|
(97,504 |
) |
|
|
(429,448 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,560,334 |
|
|
$ |
752,060 |
|
|
$ |
3,312,394 |
|
|
|
|
|
|
|
|
|
|
|
Prepaid income taxes and refund due are made up of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
State & Local |
|
|
Total |
|
|
November 30, 2008 |
|
$ |
1,020,948 |
|
|
$ |
533,210 |
|
|
$ |
1,554,158 |
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2007 |
|
$ |
625,350 |
|
|
$ |
214,343 |
|
|
$ |
839,693 |
|
|
|
|
|
|
|
|
|
|
|
- 24 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 INCOME TAXES (Continued)
A reconciliation of income tax expense computed at the statutory rate to income tax
expense at the effective rate for each of the three years ended November 30,
2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
Of Pretax |
|
|
|
|
|
|
Of Pretax |
|
|
|
|
|
|
Of Pretax |
|
|
|
Amount |
|
|
Income |
|
|
Amount |
|
|
Income |
|
|
Amount |
|
|
Income |
|
Income tax expense
at federal statutory rate |
|
$ |
838,576 |
|
|
|
34.00 |
% |
|
$ |
3,262,207 |
|
|
|
34.00 |
% |
|
$ |
3,031,659 |
|
|
|
34.00 |
% |
Increases (decreases) in taxes
resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of
federal
income tax benefit |
|
|
141,078 |
|
|
|
5.72 |
|
|
|
548,512 |
|
|
|
5.72 |
|
|
|
560,712 |
|
|
|
6.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible expenses and
other adjustments |
|
|
73,859 |
|
|
|
2.99 |
|
|
|
246,212 |
|
|
|
2.56 |
|
|
|
(279,977 |
) |
|
|
(3.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
at effective rate |
|
$ |
1,053,513 |
|
|
|
42.71 |
% |
|
$ |
4,056,931 |
|
|
|
42.28 |
% |
|
$ |
3,312,394 |
|
|
|
37.15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 25 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 STOCK-BASED COMPENSATION
On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No.
123R, Share-Based Payment (SFAS No. 123R) which requires an entity to recognize the
grant-date fair value of stock options and other equity-based compensation issued to
employees in the financial statements. Accordingly, the Company applied the provisions
of SFAS No. 123R to all awards granted subsequent to December 31, 2005 and will apply
the provisions to the extent that these awards are subsequently modified, repurchased
or cancelled.
Prior to January 1, 2006, the Company accounted for stock based compensation plans
under the intrinsic value method of accounting as defined by Accounting Principles
Board Opinion No. 25, Accounting for Stock-Based Compensation, as amended. Under
Opinion No. 25, no compensation expense was recognized for employee share option grants
because the exercise price of the options granted equaled the market price of the
underlying shares on the date of grant. SFAS No. 123, required that the Company
provide pro forma information regarding net earnings as if compensation cost for the
Companys stock-based awards had been determined in accordance with the fair value
prescribed therein.
On September 27, 2007, the Company granted stock appreciation rights for 10,000 shares
to its Executive Vice President of Sales. The stock appreciation rights granted do not
vest until two years after the grant date and expire five years after the grant date.
Upon exercise, the option value would be paid through the issuance of Company stock.
The Company had a charge against earnings during fiscal 2007 of $1,280, no charge in
fiscal 2008, and anticipates no charge in fiscal 2009 based on current value. The
amounts for future years can change, as the valuation of the fair value, as required by
SFAS No. 123R, involves factors such as the Companys dividend yield, interest rates,
and share price volatility, all of which are subject to change. The Company has made
its estimate of fiscal 2009 year charges against earnings based on those factors as of
November 30, 2008.
The following table illustrated the effect on net earning if the Company had not
applied the fair value recognition of SFAS No. 123R to stock-based employee
compensation:
|
|
|
|
|
|
|
|
|
|
|
Year Ended November 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,412,886 |
|
|
$ |
5,537,795 |
|
Add: Total stock-based employee
compensation expense determined
under fair value based method for
all awards net of related tax effects |
|
|
|
|
|
|
1,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net earnings |
|
$ |
1,412,886 |
|
|
$ |
5,539,075 |
|
|
|
|
|
|
|
|
- 26 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 STOCK-BASED COMPENSATION (Continued)
The following summarizes stock option activity for the two years ended November 30, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
Number of |
|
|
exercise price of |
|
|
Weighted Average |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Outstanding Options |
|
|
Remaining Life |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
December 1, 2006 |
|
|
181,000 |
|
|
$ |
5.88 |
|
|
|
1.83 |
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(55,000 |
) |
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding November
30, 2007 |
|
|
126,000 |
|
|
$ |
8.00 |
|
|
|
1.35 |
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding November
30, 2008 |
|
|
126,000 |
|
|
$ |
8.00 |
|
|
|
.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
November 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(In Thousands) |
|
Coop advertising |
|
$ |
849 |
|
|
$ |
1,214 |
|
Accrued returns |
|
|
1,443 |
|
|
|
964 |
|
Accrued bonuses |
|
|
|
|
|
|
841 |
|
Media |
|
|
1,326 |
|
|
|
|
|
Vacation accrual |
|
|
|
|
|
|
485 |
|
|
|
|
|
|
|
|
|
|
$ |
3,618 |
|
|
$ |
3,504 |
|
|
|
|
|
|
|
|
All other liabilities were for trade payables or individually did not exceed 5% of
total current liabilities.
- 27 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 OTHER INCOME
Other income was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
340,795 |
|
|
$ |
755,569 |
|
|
$ |
569,417 |
|
Dividend income |
|
|
94,775 |
|
|
|
33,697 |
|
|
|
43,820 |
|
Realized gain (loss) on sale of
Securities |
|
|
88,096 |
|
|
|
60,697 |
|
|
|
62,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty income |
|
|
169,482 |
|
|
|
125,158 |
|
|
|
108,249 |
|
Miscellaneous |
|
|
23,665 |
|
|
|
70,589 |
|
|
|
14,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
716,813 |
|
|
$ |
1,045,710 |
|
|
$ |
797,803 |
|
|
|
|
|
|
|
|
|
|
|
NOTE 12 COMMITMENTS AND CONTINGENCIES
Leases
The Company currently occupies approximately 58,625 square feet of space used for
warehousing and corporate offices. The annual rental for this space is $327,684, with
an annual CPI increase of 3%, but shall not cumulatively exceed 15% in any consecutive
five year period. The lease requires the Company to pay for additional expenses
Expense Rent (Common Area Maintenance CAM), which includes real estate taxes,
common area expense, utility expense, repair and maintenance expense and insurance
expense. CAM was estimated at $150,000 for the fiscal year ended November 30, 2008.
The lease expires on May 31, 2012 with a renewal option for an additional five years.
On September 26, 2007 the Company entered into an additional lease for warehouse space
at 99 Murray Hill Parkway, East Rutherford, New Jersey for a term commencing November
1, 2007 and ending on May 31, 2012. The premise comprises 16,438 square feet of space
to be used for warehousing and storage. The annual rent is $123,285. The lease
requires the Company to pay for additional expenses Expense Rent (Common Area
Maintenance CAM), which includes real estate taxes, common area expense, certain
utility expense, repair and maintenance expense and insurance expense. For the fiscal
year ended November 30, 2008, CAM was $28,150.
- 28 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued)
Leases (Continued)
Rent expense for the years ended November 30, 2008, 2007 and 2006 was $671,708,
$704,050 and $605,893, respectively.
In addition, the Company has entered into various property and equipment operating
leases with expiration dates ranging through November 2011.
Future commitments under non cancelable 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, |
|
|
|
|
|
|
|
|
|
2009 |
|
|
751,421 |
|
2010 |
|
|
692,106 |
|
2011 |
|
|
665,323 |
|
2012 |
|
|
326,197 |
|
2013 |
|
|
|
|
Royalty Agreements
In 1986, the Company entered into a license agreement with Alleghany Pharmacal
Corporation (the Alleghany Pharmacal License). The Alleghany Pharmacal License
agreement provided that when, in the aggregate, $9,000,000 in royalties have been paid
thereunder, the royalty rate for those products originally charged at 6% will be
reduced to 1%. The Company paid an aggregate of $9,000,000 in royalties to Alleghany
as of April 2003. Commencing May 1, 2004, the license royalty was reduced to 1%. The
royalties accrued to Alleghany-Pharmacal under the license were $82,541 for the fiscal
year ended November 30, 2008.
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 Companys License
Agreement with Solar Sense, Inc. is for the exclusive use of the trademark names Solar
Sense and Kids Sense, in connection with the commercial exploitation of sun care
products. The Company is required to pay a royalty of 5% on net sales of the licensed
products. The royalty accrued to Solar Sense, Inc. under the License Agreement was
$56,051 for the fiscal year ended November 30, 2008.
- 29 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued)
Royalty Agreements (Continued)
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 Companys 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, Nutra Nail
Power Gel. The Company pays a royalty of 5% of net sales of all licensed product
sold. Royalties accrued to The Nail Consultants, Ltd. under the License Agreement
were $37,071 for the fiscal year ended November 30, 2008.
On May 18, 2004, The Company entered into a license agreement with Tea-Guard, Inc. to
manufacture and distribute Mega -T Green Tea chewing gum and Mega -T Green Tea mints.
The Company pays a royalty of 6% of net sales of all products sold under the license
agreement. The license agreement requires the Company to pay a minimum annual royalty
of $250,000 per annum, which was waived by Tea-Guard, Inc.for the one year period
ended February 28, 2008. The minimum payments are required to maintain the Companys
exclusivity for the sale of the products and to continue marketing the products and
until royalties have aggregated to $10,000,000, at which time all royalty obligations
cease. Except as to maintain its rights to exclusivity, the Company has no
obligation to meet minimum royalty requirements. The Company accrued royalties of
$44,866 to Tea-Guard, Inc. for the fiscal year ended November 30, 2008.
On February 26, 2004, the Company entered into an agreement with Dr. Stephen Hsu.
PhD. to create green tea skin care products. Dr. Hsu is entitled to a commission of
3% of the net factory sales of all of the Companys products using the green tea
serum created exclusively for the Company by Dr. Hsu. The Company accrued Dr. Hsu
commissions of $240,215 for the fiscal year ended November 30, 2008.
Effective November 3, 2008, the Company entered into an agreement with Continental
Quest Corp., to purchase certain trademarks and inventory relating to the Pain Bust R
business for $285,106 paid at closing. In addition, the Company agreed to pay a
royalty equal to 2% of net sales of all Pain Bust R products, which are topical
analgesics, until an aggregate royalty of $1,250,000 is paid, at which time the
royalty payments will cease.
- 30 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued)
Royalty Agreements (Continued)
The Company is not party to any other license agreement that is currently material to
its operations.
Total royalty costs expensed by licensor for each fiscal year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary |
|
|
|
|
|
|
|
|
|
Licensor |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A |
|
$ |
56,051 |
|
|
$ |
39,290 |
|
|
$ |
43,367 |
|
B |
|
|
82,541 |
|
|
|
91,662 |
|
|
|
92,630 |
|
C |
|
|
17,695 |
|
|
|
18,020 |
|
|
|
11,892 |
|
D |
|
|
|
|
|
|
5,692 |
|
|
|
(88 |
) |
E |
|
|
2 |
|
|
|
511 |
|
|
|
3,237 |
|
F |
|
|
|
|
|
|
3570 |
|
|
|
1,054 |
|
G |
|
|
|
|
|
|
|
|
|
|
|
|
H |
|
|
44,866 |
|
|
|
196,683 |
|
|
|
74,148 |
|
I |
|
|
37,071 |
|
|
|
33,283 |
|
|
|
81,363 |
|
J |
|
|
|
|
|
|
|
|
|
|
(60,402 |
) |
|
K |
|
|
240,215 |
|
|
|
195,839 |
|
|
|
37,939 |
|
L |
|
|
4,815 |
|
|
|
50,216 |
|
|
|
|
|
M |
|
|
5,876 |
|
|
|
|
|
|
|
|
|
N |
|
|
508 |
|
|
|
|
|
|
|
|
|
Employment Contracts
The Company has executed Employment Contracts with its Chief Executive Officer and its
Chairman of the Board. 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
Companys pre-tax income less depreciation and amortization (EBITDA), plus 20% of the
base salary for the fiscal year plus fringes. The 2.5% measure in the bonus
provision of the two contracts was amended on November 3, 1998 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 then in effect by $100,000 per annum.
Upon expiration of the employment contracts, the agreement provides that the
executives will serve as consultants to the Company for an additional five years. For
the consulting services provided, the executives will be paid fifty percent (50%) of
their annual base salary plus bonus. The Employment Contracts also provide that upon
the death of the Chief Executive Officer and its Chairman of the Board within the
employment and consulting period, the Company is obligated for two successive years to
pay their respective estate an amount equal to their total compensation at that time.
- 31 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued)
Employment Contracts (Continued)
David Edells sons, Dunnan Edell and Drew Edell had five year employment contracts in
the amounts of $270,000 and $200,000 respectively, which were to expire on November
2007. On February 10, 2006, the Board of Directors extended the contracts for Dunnan
Edell and Drew Edell to December 31, 2010. Dunnan Edell is a director and President
of the Company. Drew Edell is the Vice President of Product Development and
Production. On July 1, 2003, Dunnan Edells salary was increased to $300,000, and on
January 5, 2004 Drew Edells salary was increased to $225,000 and in 2005, it was
increased to $250,000. On May 17, 2007 the Board of Directors amended the contracts
for Dunnan Edell and Drew Edell, extending the contracts to November 30, 2012, and
increasing the base salary to $350,000 and $275,000 respectively.
Collective Bargaining Agreement
On July 8, 2008, the Company signed a new collective bargaining agreement with Local
108, L.I.U. of N.A., AFL-CIO with similar provisions of the one that expired on
January 1, 2008. The new agreement is effective January 1, 2008. Other than standard
wage, holiday, vacation and sick day provisions, the agreement calls for CCA to
contribute to the Recycling and General Industrial Union Local 108 Welfare Fund
(Welfare Fund) certain benefits costs. The Welfare Fund will be providing medical,
dental and life insurance for the Companys employees covered under the collective
bargaining agreement. Previously, the Company provided the covered employees medical,
dental and life insurance benefits directly. The new collective bargaining agreement
is in effect through December 31, 2010. This agreement pertains to 29% of the CCA
labor force.
Litigation
All of the Companys litigation other than in the ordinary course of business has been
dismissed. Refer to Form 8-K, filed on May 8, 2007 with the United States Securities
and Exchange Commission for further information.
- 32 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued)
Dividends and Capital Transactions
On December 28, 2006, the Board of Directors declared a $0.07 per share dividend for
the first quarter ended February 28, 2007. The dividend was payable to all
shareholders of record as of February 1, 2007 and payable on March 1, 2007. On April
12, 2007, the Board of Directors declared a $0.07 per share dividend for the second
quarter ended May 31, 2007. The dividend was payable to all shareholders of record
as of May 1, 2007 and payable on June 1, 2007. On June 22, 2007, the Board of
Directors declared a $0.07 per share dividend for the third quarter ended August 31,
2007. The dividend was payable to all shareholders of record as of August 1, 2007
and payable on September 1, 2007. On September 26, 2007, the Board of Directors
declared a $0.09 dividend for the fourth quarter ended November 30, 2007. The
dividend was payable to all shareholders of record as of November 1, 2007 and payable
on December 1, 2007.
On December 5, 2007, the board of directors declared a $0.10 per share dividend for
the first quarter ending February 29, 2008. The dividend was payable to all
shareholders of record as of February 1, 2008, and was paid on March 1, 2008. On
February 25, 2008, the board of directors declared an $0.11 per share dividend for
the second quarter ending May 31, 2008. The dividend was payable to all shareholders
of record as of May 1, 2008, and payable on June 1, 2008. On July 7, 2008, the board
of directors declared an $0.11 per share dividend for the third quarter ending August
31, 2008. The dividend was payable to all shareholders of record as of August 1,
2008, and payable on September 1, 2008. On October 13, 2008, the board of directors
declared a $0.11 per share dividend for the fourth quarter ending November 30, 2008.
The dividend was payable to all shareholders of record as of November 1, 2008, and
payable on December 1, 2008.
NOTE 13 401 (K) PLAN
The Company has adopted a 401(K) Profit Sharing Plan that covers all employees with
over one year of service and attained Age 21. Employees may make salary reduction
contributions up to twenty-five percent of compensation not to exceed the federal
government limits. The Plan allows for the Company to make discretionary
contributions. For all Fiscal periods to date, the Company did not make any
contributions.
- 33 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 CONCENTRATION OF RISK
Most of the Companys 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, 2008, 2007 and 2006, certain customers each
accounted for more than 5% of the Companys net sales, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walmart |
|
|
44 |
% |
|
|
40 |
% |
|
|
36 |
% |
Walgreen |
|
|
10 |
% |
|
|
8 |
% |
|
|
12 |
% |
Rite Aid |
|
|
5 |
% |
|
|
8 |
% |
|
|
* |
|
CVS |
|
|
7 |
% |
|
|
6 |
% |
|
|
6 |
% |
McLanes |
|
|
* |
|
|
|
5 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Sales |
|
|
4 |
% |
|
|
3 |
% |
|
|
2 |
% |
The loss of any one of these customers could have a material adverse affect on the
Companys earnings and financial position.
During the years November 30, 2008, 2007 and 2006, certain products within the
Companys product lines accounted for more than 10% of the Companys net sales as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Category |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dietary Supplement |
|
|
33 |
% |
|
|
31 |
% |
|
|
31 |
% |
Skin Care |
|
|
29 |
% |
|
|
29 |
% |
|
|
30 |
% |
Oral Care |
|
|
25 |
% |
|
|
25 |
% |
|
|
24 |
% |
Nail Care |
|
|
10 |
% |
|
|
11 |
% |
|
|
9 |
% |
- 34 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 CONCENTRATION OF RISK (Continued)
The Company maintains cash balances at several banks. Accounts
at each institution are insured by the Federal Deposit Insurance
Corporation for the full balance under the Temporary Liquidity
Guarantee Program. 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.
NOTE 15 TRANSACTION EXPENSES
On November 1, 2006 the Company entered into a letter of intent
with Dubilier and Company relating to a proposed acquisition of
the Company by Dubilier. A copy of the letter of intent was
included as an exhibit to the Companys 8K filed Report with the
Securities and Exchange Commission on November 2, 2006. On
April 2, 2007, the Company received an opinion from an
investment banking company that from a financial point of view,
the proposed transaction was fair to all shareholders. On April
10, 2007 the Company was advised by Dubilier that it was unable
to obtain its financing, despite the fact that the Company had
met all of its financial requirements of earnings before income
tax, depreciation, and amortization, as well as net working
capital. The board of directors terminated all negotiations
with Dubilier. For the year ended November 30, 2007, costs
associated with the proposed acquisition amounted to $717,850,
and are included as transaction costs in the statement of
income.
NOTE 16 SUBSEQUENT EVENTS
On January 21, 2009, the Company filed Form 8-K with the United
States Securities and Exchange Commission advising that Wal-mart
had informed the Company that starting in March, due to the
slowdown in the economy, it will only carry the leading brands
in their oral care sections. Therefore starting sometime in
March, Wal-Mart will no longer be purchasing the companys
Plus+White oral care products brand. In 2008 the companys net
sales of Plus+White to Wal-Mart totaled $6 million.
On January 28, 2009, the Board of Directors declared a $0.11 per
share dividend for the first quarter of 2009 to all shareholders
of record as of February 1, 2009 and payable on March 1, 2009.
- 35 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 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 treasury stock method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Net income available for common
shareholders, basic and diluted |
|
$ |
1,412,886 |
|
|
$ |
5,537,795 |
|
|
$ |
5,604,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common stock
outstanding- Basic |
|
|
7,054,442 |
|
|
|
7,029,611 |
|
|
|
7,034,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of dilutive stock options |
|
|
7,204 |
|
|
|
29,278 |
|
|
|
99,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common stock and
common stock equivalents Diluted |
|
|
7,061,646 |
|
|
|
7,058,889 |
|
|
|
7,133,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
.20 |
|
|
$ |
.79 |
|
|
$ |
.80 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
.20 |
|
|
$ |
.78 |
|
|
$ |
.79 |
|
|
|
|
|
|
|
|
|
|
|
- 36 -
SCHEDULE II
CCA INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION ACCOUNTS
YEARS ENDED NOVEMBER 30, 2008, 2007 AND 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COL. A |
|
|
|
|
|
COL. B |
|
|
COL. C |
|
|
COL. D |
|
|
COL. E |
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Charged To |
|
|
|
|
|
|
Balance |
|
|
|
|
|
|
|
Beginning |
|
|
Costs and |
|
|
|
|
|
|
At End |
|
Description |
|
|
|
|
|
Of Year |
|
|
Expenses |
|
|
Deductions |
|
|
Of Year |
|
Year Ended November
30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful accounts |
|
|
|
|
|
$ |
141,607 |
|
|
$ |
12,684 |
|
|
$ |
|
|
|
$ |
154,291 |
|
Reserve for returns
and allowances |
|
|
|
|
|
|
732,695 |
|
|
|
2,118,593 |
|
|
|
2,182,550 |
|
|
|
668,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
874,302 |
|
|
$ |
2,131,277 |
|
|
$ |
2,182,550 |
|
|
$ |
823,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve of
inventory
obsolescence |
|
|
|
|
|
$ |
604,746 |
|
|
$ |
173,715 |
|
|
$ |
199,520 |
|
|
$ |
578,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
30, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful accounts |
|
|
|
|
|
$ |
185,779 |
|
|
$ |
(42,544 |
) |
|
$ |
1,628 |
|
|
$ |
141,607 |
|
Reserve for returns
and allowances |
|
|
|
|
|
|
840,418 |
|
|
|
6,039,823 |
|
|
|
6,147,545 |
|
|
|
732,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,026,197 |
|
|
$ |
5,997,279 |
|
|
$ |
6,149,173 |
|
|
$ |
874,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve of
inventory
obsolescence |
|
|
|
|
|
$ |
777,715 |
|
|
$ |
62,827 |
|
|
$ |
235,796 |
|
|
$ |
604,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
30, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful accounts |
|
|
|
|
|
$ |
260,366 |
|
|
$ |
(73,657 |
) |
|
$ |
930 |
|
|
$ |
185,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for returns
and allowances |
|
|
|
|
|
|
678,348 |
|
|
|
4,520,660 |
|
|
|
4,358,590 |
|
|
|
840,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
938,714 |
|
|
$ |
4,447,003 |
|
|
$ |
4,359,520 |
|
|
$ |
1,026,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve of
inventory
obsolescence |
|
|
|
|
|
$ |
854,764 |
|
|
$ |
625,743 |
|
|
$ |
702,792 |
|
|
$ |
777,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 37 -
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) included herein |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) included herein |
|
|
|
|
|
|
32.1 |
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 included herein |
|
|
|
|
|
|
32.2 |
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 included herein |
- 38 -