UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
Commission file number: 0-19954
JEWETT-CAMERON TRADING COMPANY, LTD.
------------------------------------
(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA NONE
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
32275 N.W. Hillcrest, North Plains, Oregon 97133
------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (503) 647-0110
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 since May 16, 1992 and (2) has been subject to the above filing
requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock: 1,157,162 Shares.
---------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Attached hereto and incorporated herein by reference.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Forward-Looking Information:
The following information contains certain forward-looking statements that
anticipate future trends or events. These statements are based on certain
assumptions that may prove to be erroneous and are subject to certain risks
including but not limited to the risks of increased competition in the Company's
industry and other risks detailed in the Company's Securities and Exchange
Commission filings. Accordingly, actual results may differ, possibly materially,
from the predictions contained herein.
Overview:
During the third quarter of Fiscal 1999, ended May 31st, the Company had an
increase in gross sales of $849,586 as compared to the third quarter of Fiscal
1998. The increase in net income for the third quarter of Fiscal 1999 as
compared to the third quarter of Fiscal 1998 was $40,602.
Results of Operations.
For the third quarter of the current fiscal year, ending March 31, 1999, gross
sales increased 8.5% to $10,849,674 compared to $10,000,088 for the same quarter
of the previous year.
General and administrative expenses for the Company were $766,556 for the third
quarter up from $608,676 for the third quarter of last year. The primary reasons
for the increase of $157,880 are increases of $145,522 in the categories of
"wages and employee benefits"; and, $24,015 in "professional fees". Decreases;
however, did occur in the categories of "depreciation and amortization"; "office
and miscellaneous" "warehouse expenses and supplies" and "repairs and
maintenance". The decreases in these categories totaled $11,661.
Net income for the quarter was $235,645 which represents a 21% increase over the
third quarter of last year when net income was $195,043. The increase in net
income was due primarily to a 57% increase in income from operations.
Earnings per share was $0.20 for the third quarter of Fiscal 1999 compared to
$0.17 for the third quarter of fiscal 1998.
For the nine-month period ended May 31, 1999, Sales for Jewett-Cameron Lumber
were $17,802,645, up 3.6% compared to sales of $17,189,841 for the first nine
months of last year.
<PAGE>
Sales for MSI-PRO (pneumatic tools and industrial clamps) were $824,621 for the
first nine months compared to $960,050 for the first nine months of last year,
down 14.1%
Sales for Jewett-Cameron South Pacific in the Kingdom of Tonga were $248,575 for
first nine months compared to $683,246 for the first nine months of last year,
down 63.6%.
For the nine-month period ended May 31, 1999, gross profit as a percentage of
sales increased by about 2.85% and income before taxes increased by $215,602.
In the nine-month period ended May 31, 1999, the net income was $467,816 versus
a net income of $364,093 for the same period last year. Nine-month earnings per
share were $0.40 versus $0.31 last year.
Liquidity and Capital Resources
As of May 31, 1999 the Company had working capital of $3,961,687 which
represented a decrease of $712,757 as compared to the working capital position
of $4,674,444 as of May 31, 1998. The decrease in working capital was due to a
decrease in cash and cash equivalents of $414,437, a decrease in accounts
receivable of $83,292, a decrease in income tax receivable of $24,873, a
decrease in inventory of $1,013,380 and a decrease in prepaid expenses of
$24,283. In the category of current liabilities, bank indebtedness decreased by
$1,450,542 and accounts payable and accrued liabilities increased by $603,034.
Accounts Receivable and Inventory represented 94.5% of current assets and both
continue to turn over at acceptable rates.
External sources of liquidity include a bank line from the United States
National Bank of Oregon. The total line of credit available is $5.0 million of
which there was an outstanding balance as of May 31, 1999 of $2,500,000.. As of
the end of Fiscal 1998 (August 31st) the Company had an outstanding balance of
$767,321 and at the end of the first quarter of Fiscal 1999, the Company had no
outstanding balance.
Based on the Company's current working capital position, its policy of retaining
earnings, and the line of credit available, the Company has adequate working
capital to meet its needs during the current fiscal year.
Impact of the Year 2000 Issue:
The Company has completed as assessment of the impact of the Year 2000 issue on
its internal systems and equipment, on its products and on the systems of its
significant vendors. Based on this assessment, the company believes that its
internal systems have been updated to address the Year 2000 issue, its products
will properly recognize calendar dates beginning in the Year 2000, and its
significant vendors are appropriately addressing the Year 2000 issue.
Accordingly, the Company believes it is Year 2000 ready and does not expect that
the Year 2000 will have a material impact on the Company's business, results of
operations or financial condition. However, there can be no assurance that the
systems of other companies on which the Company relies will not have an adverse
effect on the Company's systems.
<PAGE>
Subsequent Events
None
PART II - OTHER INFORMATION
Item 6. Exhibits
Financial Statements
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Jewett-Cameron Trading Company Ltd.
(Registrant)
Dated: July 13, 1999 By: /s/ Donald M. Boone, President & CFO
------------------------------------
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
(Unaudited - See Notice to Reader)
MAY 31, 1999
<PAGE>
[Davidson & Company Letterhead]
NOTICE TO READER
We have compiled the consolidated balance sheet of Jewett-Cameron Trading
Company Ltd. as at May 31, 1999 and the consolidated statements of operations,
cash flows, and changes in shareholders' equity for the nine month period then
ended from information provided by management. We have not audited, reviewed or
otherwise attempted to verify the accuracy or completeness of such information.
Readers are cautioned that these statements may not be appropriate for their
purposes.
/s/Davidson & Company
Vancouver, Canada Chartered Accountants
June 30, 1999
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
May 31, May 31, August 31,
1999 1998 1998
---------- ---------- ----------
ASSETS
<S> <C> <C> <C>
Current
Cash and cash equivalents $ 379,693 $ 794,130 $ 52,929
Accounts receivable 3,986,176 4,069,468 2,006,270
Income tax receivable - 24,873 -
Inventory 3,809,946 4,823,326 3,048,803
Prepaid expenses 73,120 97,403 45,753
---------- ---------- ----------
Total current assets 8,248,935 9,809,200 5,153,755
Capital assets (Note 3) 1,568,273 1,623,422 1,594,346
Deferred financing charges (Note 4) - 1,792 -
Deferred income taxes (Note 5) 203,200 33,700 203,200
Deposits 74,345 83,345 74,345
Trademarks (Note 6) 172,686 201,998 194,587
---------- ---------- ----------
$10,267,439 $11,753,457 $7,220,233
===============================================================================
- continued -
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
==========================================================================================================
May 31, May 31, August 31,
1999 1998 1998
------------ ------------ ------------
Cont'd...
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Current
Bank indebtedness (Note 7) $ 2,500,000 $ 3,950,542 $ 767,321
Accounts payable and accrued liabilities 1,787,248 1,184,214 736,263
Total current liabilities 4,287,248 5,134,756 1,503,584
Convertible debentures (Note 8) - 549,040 -
Deferred foreign exchange gain - 6,088 -
------------ ------------ ------------
4,287,248 5,689,884 1,503,584
------------ ------------ ------------
Shareholders' equity
Capital stock
Authorized
20,000,000 common shares, without par value
10,000,000 preferred shares, without par value
Issued
1,157,162 common shares (May 31, 1998 - 1,164,762;
August 31, 1998 - 1,176,762) 1,932,096 1,926,235 1,960,368
Additional paid-in capital 582,247 582,247 582,247
Retained earnings 3,664,441 3,555,091 3,291,664
------------ ------------ ------------
6,178,784 6,063,573 5,834,279
Less: Treasury stock - 39,600 common shares (May 31,1998 - Nil;
August 31, 1998 - 20,600) (198,593) - (117,630)
------------ ------------ ------------
5,980,191 6,063,573 5,716,649
------------ ------------ ------------
$ 10,267,439 $ 11,753,457 $ 7,220,233
==========================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
================================================================================================================
Three month Three month Nine month Nine month
period ended period ended period ended period ended
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $ 10,849,674 $ 10,000,088 $ 18,875,841 $ 18,833,137
COST Of SALES 9,425,898 8,972,509 16,024,948 16,448,426
GROSS PROFIT 1,423,776 1,027,579 2,850,893 2,384,711
GENERAL AND ADMINISTRATIVE
EXPENSES - Schedule 766,556 608,676 1,898,410 1,595,373
------------- ------------- ------------- -------------
Income from operations 657,220 418,903 952,483 789,338
------------- ------------- ------------- -------------
OTHER ITEMS
Amortization of deferred financing charges - (5,370) - (16,111)
Interest income 21,641 18,154 35,520 1,995
Interest expense (70,891) (118,910) (102,746) (240,189)
Foreign exchange gain (loss) (12,953) 18,266 931 35,060
Write-down of inventory (48,372) - (48,372) -
------------- ------------- ------------- -------------
(110,575) (87,860) (114,667) (219,245)
------------- ------------- ------------- -------------
Income before income taxes 546,645 331,043 837,816 570,093
Income taxes (311,000) (136,000) (370,000) (206,000)
------------- ------------- ------------- -------------
Net income for the period $ 235,645 $ 195,043 $ 467,816 $ 364,093
================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
======================================================================================================
Three month Three month Nine month Nine month
period ended period ended period ended period ended
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation and amortization $ 36,101 $ 39,440 $ 107,605 $ 129,188
Insurance 15,697 15,510 42,944 34,334
Office and miscellaneous 61,527 66,686 182,378 147,340
Professional fees 47,642 23,627 108,375 77,125
Repairs and maintenance 8,101 10,166 30,032 26,239
Telephone and utilities 22,753 22,847 67,583 63,300
Travel, entertainment and advertising 38,184 38,273 126,592 108,254
Wages and employee benefits 513,366 367,844 1,180,411 946,041
Warehouse expenses and supplies 23,185 24,283 52,490 63,552
----------- ------------ ------------ ------------
$ 766,556 $ 608,676 $ 1,898,410 $ 1,595,373
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
===============================================================================
Nine Month Nine Month
period ended period ended
May 31, May 31,
1999 1998
- -------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income for the period $ 467,816 $ 364,093
Items not involving an outlay of cash:
Depreciation and amortization 107,605 129,188
Amortization of deferred finance charges - 16,111
Amortization of deferred foreign exchange - (35,573)
Write-down of inventory 48,372 -
Other - 1,523
Net change in non-cash working capital items:
Increase in accounts receivable (1,979,906) (997,555)
Decrease in income taxes receivable - 12,787
Increase in inventory (809,515) (786,726)
Increase in prepaid expenses (27,367) (30,661)
Increase in deferred income taxes - (6,500)
Increase in bank indebtedness 1,732,679 1,432,461
Increase in accounts payable and accrued 1,050,985 534,176
liabilities
------------- -----------
Net cash provided by operating activities 590,669 633,324
------------- -----------
FINANCING ACTIVITIES
Treasury shares acquired (215,317) (36,466)
Capital stock issued 11,043 52,119
------------- -----------
Net cash provided by (used for) financing (204,274) 15,653
activities
------------- -----------
INVESTING ACTIVITIES
Deposits - 600
Purchase of capital assets (59,631) (51,125)
------------- -----------
Net cash used for investing activities (59,631) (50,525)
------------- -----------
Increase in cash and cash equivalents 326,764 598,452
Cash and cash equivalents, beginning of period 52,929 195,678
------------- -----------
Cash and cash equivalents, end of period $ 379,693 794,130
==============================================================================
Supplemental disclosure with respect to cash flows (Note 12)
The accompanying notes are and integral part of these consolidated
financial statements.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Expressed in U.S. Dollars)
(Unaudited - See Notice to reader)
<TABLE>
<CAPTION>
Employee Stock
Common Stock Treasury Shares Ownership Plan Shares
------------ --------------- ---------------------
Additional
Number Number Number Paid-In Retained
Of Shares Amount Of Shares Amount Of Shares Amount Capital Earnings Total
--------- ---------- --------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1997 1,237,362 $2,029,527 76,400 $ 290,997 333 $ 16,667 $ 613,892 $3,346,549 $5,682,304
Net income for the year - - - - - - - 102,134 102,134
Stock options exercised 24,000 69,585 - - - - - - 69,585
Shares cancelled (84,600) (138,744) - - - - - - (138,744)
Treasury shares acquired - - 28,800 154,096 - - - - (154,096)
Treasury shares cancelled - - (84,600) (327,463) - - - - 327,463
Employee plan shares released - - - - (333) (16,667) (31,645) - (14,978)
Premium relating to
cancellation of share capital - - - - - - - (157,019) (157,019)
--------- ---------- --------- --------- --------- --------- --------- ---------- ----------
Balance, August 31, 1998 1,176,762 $1,960,368 20,600 $ 117,630 - $ - $ 582,247 $3,291,664 $5,716,649
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1997 1,237,362 $2,029,527 76,400 $ 290,997 333 $ 16,667 $ 613,892 $3,346,549 $5,682,304
Net income for the year - - - - - - - 364,093 364,093
Stock options exercised 12,000 35,452 - - - - - - 35,452
Shares cancelled (84,600) (138,744) - - - - - - (138,744)
Treasury shares acquired - - 8,200 36,466 - - - - (36,466)
Treasury shares cancelled - - (84,600) (327,463) - - - - 327,463
Employee plan shares released - - - - (333) (16,667) (31,645) - (14,978)
Premium relating to
cancellation of share capital - - - - - - - (155,551) (155,551)
--------- ---------- --------- --------- --------- --------- --------- ---------- ----------
Balance, May 31, 1998 1,164,762 $1,926,235 - $ - - $ - $ 582,247 $3,555,091 $6,063,573
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1998 1,176,762 $1,960,368 20,600 $ 117,630 - $ - $ 582,247 $3,291,664 $5,716,649
Net income for the year - - - - - - - 467,816 467,816
Stock options exercised 4,000 11,043 - - - - - - 11,043
Shares cancelled (23,600) (39,315) - - - - - - (39,315)
Treasury shares acquired - - 42,600 215,317 - - - - (215,317)
Treasury shares cancelled - - (23,600) (134,354) - - - - 134,354
Employee plan shares released - - - - - - - - -
Premium relating to
cancellation of share capital - - - - - - - (95,039) (95,039)
--------- ---------- --------- --------- --------- --------- --------- ---------- ----------
Balance, May 31, 1999 1,157,162 $1,932,096 39,600 $ 198,593 - $ - $ 582,247 $3,664,441 $5,980,191
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
MAY 31, 1999
================================================================================
1. NATURE OF OPERATIONS
The Company was incorporated under the Company Act of British Columbia on
July 8, 1987.
The Company and its subsidiaries operate as a wholesaler of lumber and
other building products, as a distributor of industrial tools, and as a
retailer of building materials.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Generally accepted accounting principles
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles of Canada, which are not
materially different from generally accepted accounting principles utilized
in the United States.
Principles of consolidation
These consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, The Jewett-Cameron Lumber Corporation,
MSI-Pro Co., and Material Supply International Inc., all of which are
incorporated under the laws of Oregon, U.S.A. and Jewett-Cameron South
Pacific Ltd., which is incorporated under the laws of Tonga.
Significant inter-company balances and transactions have been eliminated
upon consolidation.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Currency
These financial statements as expressed in U.S. dollars as the Company's
operations are based predominantly in the United States.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Inventory
Inventory is recorded at the lower of cost and net realizable value based
on the average cost method.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
MAY 31, 1999
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd...)
Capital assets and depreciation
Capital assets are recorded at cost and the Company provides for
depreciation over the estimated life of each asset on a straight-line basis
over the following periods:
Office equipment 5-7 years
Warehouse equipment 2-10 years
Automotive equipment 4 years
Buildings 5-30 years
Foreign exchange
Financial statements of the Company's foreign subsidiaries are translated
using the temporal method whereby all monetary assets and liabilities are
translated at the rate of exchange at the balance sheet date. Non-monetary
assets and liabilities are translated at exchange rates prevailing at the
transaction date. Income and expenses are translated at rates which
approximate those in effect on transaction dates. Gains and losses arising
from restatement of foreign currency monetary assets and liabilities at
each period end are included in earnings.
Deferred financing charges
Deferred financing charges are amortized to income over the term of the
debt instrument to which they relate.
Trademarks
The Company accounts for costs of acquiring its trademarks by capitalizing
all costs of acquisition. These costs will be amortized to income over
periods ranging from five to fifteen years.
Comparative figures
Certain comparative figures have been reclassified to conform with the
presentation adopted for the current period.
Financial instruments
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, deposits, bank indebtedness, accounts payable and
accrued liabilities. Unless otherwise noted, it is management's opinion
that the Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments. The fair value of these
financial instruments approximate their carrying values, unless otherwise
noted.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
MAY 31, 1999
================================================================================
3. CAPITAL ASSETS
===========================================================================
May 31, May 31, August 3l,
1999 1998 1998
---------------------------------------------------------------------------
Office equipment $ 179,836 $ 173,315 $ 174,512
Warehouse equipment 217,935 185,842 186,098
Automotive equipment 59,009 58,956 59,009
Building 1,460,982 1,463,663 1,460,982
Land 367,362 344,892 344,892
----------- ----------- -----------
2,285,124 2,226,668 2,225,493
Accumulated depreciation (716,851) (603,246) (631,147)
----------- ----------- -----------
Net book value $ 1,568,273 $ 1,623,422 $ 1,594,346
===========================================================================
4. DEFERRED FINANCING CHARGES
Deferred financing charges are comprised of legal, accounting, commissions
and securities filing fees which were incurred with the placement of the
convertible debentures referred to in Note 8. These deferred financing
charges were being amortized to income over the five year life of the
debentures.
All remaining debentures were redeemed as of June 30, 1998 and the
remaining balance of the deferred financing charges were amortized
accordingly.
===========================================================================
May 31, May 31, August 3l,
1999 1998 1998
---------------------------------------------------------------------------
Deferred financing charges $ - $ 17,903 $ 268,610
Accumulated amortization - (16,111) (268,610)
----------- ----------- -----------
$ - $ 1,792 $ -
===========================================================================
5. DEFERRED INCOME TAXES
Deferred income taxes of $203,200 (May 31, 1998 - $33,700; August 31, 1998
- $203,200) relate principally to timing differences between the accounting
and tax treatment of income, expenses, reserves and depreciation.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
MAY 31,1999
================================================================================
6. TRADEMARKS
Trademark costs are comprised of development and legal fees incurred in
establishing and maintaining trademarks for the Company's industrial tools
business. The trademark costs are being amortized to income over periods
ranging from five to fifteen years.
===========================================================================
May 31, May 31, August 3l,
1999 1998 1998
---------------------------------------------------------------------------
Trademarks $ 283,914 $ 283,914 $ 283,914
Accumulated amortization (111,228) (81,916) (89,327)
----------- ----------- -----------
$ 172,686 $ 201,998 194,587
===========================================================================
7. BANK INDEBTEDNESS
===========================================================================
May 31, May 31, August 3l,
1999 1998 1998
---------------------------------------------------------------------------
Demand loan $ 2,500,000 $ 3,950,542 $ 767,321
===========================================================================
The bank indebtedness is secured by an assignment of accounts receivable
and inventory. Interest is calculated at rates ranging between 8.0625% and
prime plus 0.625% per annum.
8. CONVERTIBLE DEBENTURES
On June 30, 1998, the Company redeemed the balance of its outstanding
debentures for $544,985, being the face value of the debentures.
9. STOCK OPTIONS
At May 31, 1999, the Company had incentive stock option outstanding
enabling the holders to purchase common shares of the Company as follows:
===========================================================================
Number
of Shares Price Expiry Date
---------------------------------------------------------------------------
4,000 Cdn $ 4.25 December 31, 1999
12,000 Cdn $ 4.25 December 31, 2000
70,000 Cdn $ 4.25 August 6, 2006
===========================================================================
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
MAY 31, 1999
================================================================================
10. EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors an employee stock ownership plan ("ESOP") that covers
all U.S. employees who are employed by the Company on August 31 of each
year and who have at least one thousand hours with the Company in the
twelve months preceding that date. The Company makes annual contributions
to the ESOP, at least equal to the ESOP's debt service. The ESOP shares
initially were pledged as collateral for its debt. As the debt is repaid,
shares are released from collateral and allocated to active employees,
based on the proportion of debt service paid in the year. Debt of the ESOP
is recorded as debt of the Company and the shares pledged as collateral are
reported as unearned ESOP shares in the balance sheet. As shares are
released from collateral, the Company reports compensation expense equal to
the current market value of the shares, and the shares become outstanding
for earnings per share computations. ESOP compensation expense was $Nil and
$1,468 for the periods ended May 31, 1999 and May 31, 1998, respectively,
and $1,468 for the year ended August 31, 1998. The ESOP shares as of May
31, 1999 and 1998 and August 31, 1998 were as follows:
===========================================================================
May 31, May 31, August 3l,
1999 1998 1998
---------------------------------------------------------------------------
Allocated shares 90,000 90,000 90,000
Unreleased shares - - -
Total ESOP shares 90,000 90,000 90,000
=============================================================================
Fair market value of unreleased shares $ - $ - $ -
=============================================================================
11. CONTINGENT LIABILITIES AND COMMITMENTS
a) The Company established an Employee Stock Ownership Plan, whereby the
employees may earn up to 90,000 shares of the Company using a formula
based on years of service. The establishment of the plan resulted in
the Company forming a trust which acquired from the 90,000 shares at a
deemed price of Cdn$5.00 per share. As at May 31, 1999, 90,000 of these
shares were earned by the employees under this plan but remain in the
trust (Note 10).
b) At May 31, 1999, May 31, 1998 and August 31, 1998 the Company had an
un-utilized line-of-credit of approximately $4,000,000, $2,500,000 and
$5,700,000, respectively.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
MAY 31, 1999
================================================================================
12. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
===========================================================================
Nine Month Nine Month
period ended period ended
May 31, May 31,
1999 1998
---------------------------------------------------------------------------
Cash paid for:
Interest $ 102,746 $ 229,349
Income taxes 302,417 193,213
===========================================================================
Significant non-cash transactions for the nine month period ended May 31,
1999 are as follows:
The Company cancelled 23,600 treasury shares, repurchased at a price of
$134,354 which had an original cost of $39,315. The difference of
$95,039 between the original cost and purchase price was applied against
retained earnings as a premium relating to the cancellation of share
capital.
Significant non-cash transactions for the nine month period ended May 31,
1998 are as follows:
The Company cancelled 84,600 treasury shares, repurchased at a price of
$327,463, which had an original cost of $138,744. The difference between
the original cost and purchase price was applied to contributed surplus
in the amount of $31,645 and the remaining balance of $155,551 was
applied against retained earnings as a premium relating to the
cancellation of share capital.
13. SEGMENTED INFORMATION
The Company's operations are classified into two principle industry
segments: (sales of) building materials and (sales of) industrial tools.
Sales of building materials consists of wholesale sales of lumber and
building materials in the United States and retail sales of building
materials in Tonga. Sales of industrial tools consists of distribution of
pneumatic air tools and industrial clamps in the United States.
In computing income from operations by industry segment, unallocable
general and administrative expenses have been excluded from each segments'
pre-tax operating earnings before interest expense and have been included
in general corporate and other operations.
- continued -
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited - See Notice to Reader)
MAY 31, 1999
================================================================================
13. SEGMENTED INFORMATION (cont'd...)
Following is a summary of segmented information for the nine month periods
ended May 31, 1999 and 1998 and the year ended August 31, 1998:
===========================================================================
May 31, May 31, August 3l,
1999 1998 1998
---------------------------------------------------------------------------
Sales to unaffiliated customers:
Building Materials:
United States $ 17,802,645 $ 17,189,841 $ 24,126,934
South Pacific 248,575 683,246 831,405
Industrial tools 824,621 960,050 1,220,175
------------ ------------ ------------
$ 18,875,841 $ 18,833,137 $ 26,178,514
==========================================
Income from operations:
Building Materials:
United States $ 1,052,861 $ 711,535 $ 696,556
South Pacific (84,853) 5,735 (44,870)
Industrial tools 80,825 142,072 180,803
General corporate (96,350) (70,004) (104,351)
------------ ------------ ------------
$ 952,483 $ 789,338 $ 728,138
==========================================
Identifiable Assets:
Building Materials:
United States $ 9,517,339 $ 10,545,897 $ 6,200,166
South Pacific 615,543 920,679 770,225
Industrial tools 123,376 149,883 125,132
General corporate 11,181 136,998 124,710
------------ ------------ ------------
$ 10,267,439 $ 11,753,457 $ 7,220,233
==========================================
Depreciation and amortization:
Building Materials:
United States $ 100,217 $ 112,967 $ 148,183
South Pacific 6,033 15,109 14,634
Industrial tools 1,355 1,112 1,683
------------ ------------ ------------
$ 107,605 $ 129,188 $ 164,500
==========================================
Capital expenditures:
Building Materials:
United States $ 57,358 $ 22,176 $ 24,948
South Pacific 2,273 28,949 36,710
------------ ------------ ------------
$ 59,631 $ 51,125 $ 61,658
===============================================================================
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial
information extracted from the financial
statements of Jewett-Cameron Trading Company Ltd.
which are included in its quarterly report,
Form 10-Q for the quarter ended May 31, 1999 and
is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> MAY-31-1999
<CASH> 379,693
<SECURITIES> 0
<RECEIVABLES> 4,406,176
<ALLOWANCES> (420,000)
<INVENTORY> 3,809,946
<CURRENT-ASSETS> 8,248,935
<PP&E> 2,285,124
<DEPRECIATION> (716,851)
<TOTAL-ASSETS> 10,267,439
<CURRENT-LIABILITIES> 4,287,248
<BONDS> 0
0
0
<COMMON> 1,932,096
<OTHER-SE> 4,246,688
<TOTAL-LIABILITY-AND-EQUITY> 10,267,439
<SALES> 10,849,674
<TOTAL-REVENUES> 10,849,674
<CGS> 9,425,898
<TOTAL-COSTS> 10,192,454
<OTHER-EXPENSES> (39,684)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (70,891)
<INCOME-PRETAX> 546,645
<INCOME-TAX> 311,000
<INCOME-CONTINUING> 235,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235,645
<EPS-BASIC> .20
<EPS-DILUTED> .19
<FN>
The currency for this report is U.S. Dollars.
For exchange rate see Accountants' Note 2.
</FN>
</TABLE>
