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, 2000
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 May 31, 2000. Common Stock, no par value
1,075,162 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
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.
Company operations were up during the third quarter of Fiscal 2000, ended May
31, 2000, as sales increased substantially over the second quarter of Fiscal
2000, ended February 29, 2000. Gross sales decreased $619,977 during the third
quarter of Fiscal 2000 as compared to the third quarter of Fiscal 1999. During
the third quarter of Fiscal 2000, the Company experienced an increase in net
income of $18,048 as compared to the third quarter of Fiscal 1999. The overall
result was net income of $253,693 for the third quarter of Fiscal 2000 and net
income for the first nine months of Fiscal 2000 of $371,453.
RESULTS OF OPERATIONS:
THREE MONTHS ENDED May 31, 2000 and 1999:
For the third quarter of the current fiscal year, ending May 31, 2000, sales
decreased 5% to $10,299,697 compared to $10,849,674 for the same quarter of the
previous year.
General and administrative expenses for the Company were $665,001 for the third
quarter down from $766,566 for the third quarter of last year. The primary
reasons for the decrease of $101,565 are decreases of $5,134 in depreciation and
amortization; $3,727 in travel, entertainment and advertising; $130,689 in wages
and employee benefits; $1,595 in office and miscellaneous related expenses; and,
$28,879 in professional fees. Increases; however, did occur in the categories of
bad debt recovery of $39,558; warehouse expenses and supplies of $15,266; and,
repairs and maintenance of $$5,739 .
Net income for the quarter was $253,693. This represents a 7.7% increase over
the third quarter of last year when net income was $235,645. The increase in net
income was due primarily to a decrease in the cost of sales of $419,475 and a
decrease in general and administrative expenses of $101,555.
Earnings per share (fully diluted) was $0.23 for the third quarter of Fiscal
2000 compared to $0.20 for the third quarter of fiscal 1999.
<PAGE>
NINE MONTHS ENDED May 31, 2000:
Sales in the first nine months of Fiscal 2000 decreased 7.6% to $17,435,133
compared to $18,875,841 in the same period last year.
Sales for Jewett-Cameron Lumber were $16,581,802 million for the nine months
ended May 31, 2000, down 6.8% compared to sales of $17,802,645 million for the
same period of last year.
Sales for MSI-PRO (pneumatic tools and industrial clamps) were $807,729 for the
nine months ended May 31, 2000 compared to $824,621 for the same period of last
year, a decrease of $16,892.
Sales for Jewett-Cameron South Pacific in the Kingdom of Tonga were $45,602 for
the nine months ended May 31, 2000 compared to $248,575 for the same period of
last year. The Company has almost completed winding down its operations in the
Kingdom of Tonga.
General and administrative expenses for the Company were $1,688,143 for the nine
month period down from $1,898,410 for the same period of last year. The primary
reasons for the decrease of $210,267 are decreases of $17,322 in depreciation
and amortization; $15,388 in travel, entertainment and advertising; $187,511 in
wages and employee benefits; $13,714 in office and miscellaneous related
expenses; $2,943 in insurance; $5,898 in telephone and utilities; and, $1,893 in
professional fees. An increase; however, did occur in the categories of
warehouse expenses and supplies of $27,675; and, repairs and maintenance of
$7,169.
Net income for the first nine months of Fiscal 2000 was $371,453 which
represents a 20.6% decrease over the first nine months of last year when net
income was $467,816. The decrease in net income was due to a decrease in sales
of $1,440,708 over the same period last year. Even though general and
administrative expenses decreased by 11%; interest income decreased by 51.5%;
interest expense decreased by 28.5%, the loss in foreign exchange of ($40,452)
and the loss on disposal of capital assets of ($53,110) coupled with the
decrease in sales caused the drop in net income.
Earnings per share (fully diluted) was $0.35 for the first nine months of Fiscal
2000 compared to $0.40 for the same period of fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 2000 the Company had working capital of $4,289,794 which
represented an increase of $328,107 as compared to the working capital position
of $3,961,687 as of May 31, 2000. The increase in working capital was due to an
increase in cash and cash equivalents of $9,099; an increase in income tax
receivable of $99,350; a decrease in accounts payable and accrued liabilities of
$691,631 and a decrease in bank indebtedness of $499,949.
Accounts Receivable and Inventory represented 92.4% of current assets and both
continue to turn over at acceptable rates.
<PAGE>
External sources of liquidity include a bank line from the United States
National Bank of Oregon. The total lines of credit available are $6.5 million of
which there was an outstanding balance as of May 31, 2000 of $2,000,051. As of
the end of Fiscal 1999 August 31st) the Company had an outstanding balance of
$87,883 and at the end of the third quarter of Fiscal 1999, the Company had an
outstanding balance of $2,500,000.
Based on the Company's current working capital position, its policy of retaining
earnings, and the line of credit available, management believes that the Company
has adequate working capital to meet its needs during the current fiscal year.
IMPACT OF THE YEAR 2000 ISSUE:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect the company including
those related to customers, suppliers, or other third parties, have been fully
resolved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS:
The Company does not have any derivative financial instruments as of May 31,
2000. However, the Company is exposed to interest rate risk.
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash equivalents as well as
interest paid on debt.
The Company has a line of credit whose interest rate is based on various
published rates that may fluctuate over time based on economic changes in the
environment. The Company is subject to interest rate risk and could be subject
to increased interest payments if market interest rates fluctuate. The Company
does not expect any change in the interest rates to have a material adverse
effect on the Company's results from operations.
<PAGE>
FOREIGN CURRENCY RISK
The Company operates a subsidiary in the Kingdom of Tonga. The Company's
business and financial condition is, therefore, sensitive to currency exchange
rates or any other restrictions imposed on its currency. Since the Company is
currently winding down its operations in the Kingdom of Tonga, management does
not expect the foreign currency exchange rates to significantly impact the
Company in the future.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Default Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6.(a) Exhibit 27 - Financial Data Schedule
Item 6.(b) Reports on Form 8-K - None
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 10, 2000 /s/ Donald M. Boone
--------------- -------------------
Donald M. Boone, President/CEO/Director
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
(Unaudited)
MAY 31, 2000
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
May 31, May 31, August 31,
2000 1999 1999
--------------- --------------- -------------
<S> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 388,792 $ 379,693 $ 223,949
Accounts receivable 3,035,453 3,986,176 2,492,312
Income tax receivable 99,350 - -
Inventory 3,798,395 3,809,946 2,666,835
Prepaid expenses 63,472 73,120 28,543
------------- ------------- -------------
Total current assets 7,385,462 8,248,935 5,411,639
Capital assets (Note 3) 1,399,993 1,568,273 1,511,067
Trademarks (Note 4) - 172,686 -
Deferred income taxes (Note 5) 217,200 203,200 217,200
Deposits 74,745 74,345 74,345
------------- ------------- -------------
Total assets $ 9,077,400 $ 10,267,439 $ 7,214,251
=============== =============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (Note 6) $ 2,000,051 $ 2,500,000 $ 87,883
Accounts payable and accrued liabilities 1,095,617 1,787,248 1,142,289
------------- ------------- -------------
Total current liabilities 3,095,668 4,287,248 1,230,172
------------- ------------- -------------
Shareholders' equity
Capital stock
Authorized
20,000,000 common shares without par value
10,000,000 preferred shares without par value
Issued
1,075,162 common shares (May 31, 1999 - 1,157,162;
August 31, 1999 - 1,157,162) 1,795,157 1,932,096 1,932,097
Additional paid-in capital 582,247 582,247 582,247
Retained earnings 3,868,243 3,664,441 3,789,134
------------- ------------- -------------
6,245,647 6,178,784 6,303,478
Less: Treasury stock - 52,100 common shares (May 31, 1999 - 39,600;
August 31, 1999 - 61,900) (263,915) (198,593) (319,399)
------------- ------------- -------------
Total shareholders' equity 5,981,732 5,980,191 5,984,079
------------- ------------- -------------
Total liabilities and shareholder's equity $ 9,077,400 $ 10,267,439 $ 7,214,251
=============== =============== =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)
(Unaudited)
<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,
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SALES $ 10,299,697 $ 10,849,674 $ 17,435,133 $ 18,875,841
COST OF SALES (9,054,795) (9,474,270) (14,917,098) (16,073,320)
-------------- -------------- -------------- --------------
GROSS PROFIT 1,244,902 1,375,404 2,518,035 2,802,521
GENERAL AND ADMINISTRATIVE
EXPENSES - Schedule (665,001) (766,556) (1,688,143) (1,898,410)
-------------- -------------- -------------- --------------
Income from operations 579,901 608,848 829,892 904,111
-------------- -------------- -------------- --------------
OTHER ITEMS
Loss on disposal of capital assets (11,528) - (53,110) -
Interest and other income 789 21,641 17,226 35,520
Interest expense (55,709) (70,891) (73,503) (102,746)
Foreign exchange gain (loss) (10,760) (12,953) (40,052) 931
-------------- -------------- -------------- --------------
(77,208) (62,203) (149,439) (66,295)
-------------- -------------- -------------- --------------
Income before income taxes 502,693 546,645 680,453 837,816
Income taxes (249,000) (311,000) (309,000) (370,000)
-------------- -------------- -------------- --------------
Net income for the period $ 253,693 $ 235,645 $ 371,453 $ 467,816
============== ============== ============== ==============
Basic earnings per share $ 0.24 $ 0.21 $ 0.36 $ 0.41
============== ============== ============== ==============
Diluted earnings per share $ 0.23 $ 0.20 $ 0.35 $ 0.40
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
(Expressed in U.S. dollars)
(Unaudited)
<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,
2000 1999 2000 1999
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Bad debt (recovery) $ 39,558 $ - $ (442) $ -
Depreciation and amortization 30,967 36,101 90,283 107,605
Insurance 15,563 15,697 40,001 42,944
Office and miscellaneous 59,932 61,527 168,664 182,378
Professional fees 28,763 47,642 106,482 108,375
Repairs and maintenance 13,840 8,101 37,201 30,032
Telephone and utilities 20,793 22,753 61,685 67,583
Travel, entertainment and advertising 34,457 38,184 111,204 126,592
Wages and employee benefits 382,677 513,366 992,900 1,180,411
Warehouse expenses and supplies 38,451 23,185 80,165 52,490
-------------- -------------- -------------- ---------------
$ 665,001 $ 766,556 $ 1,688,143 $ 1,898,410
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine month Nine month
period ended period ended
May 31, May 31,
2000 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period $ 371,453 $ 467,816
Items not involving an outlay of cash:
Depreciation and amortization 90,283 107,605
Bad debt (442) -
Loss on disposal of capital assets 53,110 -
Net change in non-cash working capital items:
Increase in accounts receivable (542,699) (1,979,906)
Increase in income taxes receivable (99,350) -
Increase in inventory (1,131,560) (761,143)
Increase in prepaid expenses (34,929) (27,367)
Increase in bank indebtedness 1,912,168 1,732,679
Increase (decrease) in accounts payable and accrued liabilities (46,672) 1,050,985
-------------- --------------
Net cash provided by operating activities 571,362 590,669
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Treasury shares acquired (373,800) (215,317)
Capital stock issued - 11,043
-------------- --------------
Net cash used in financing activities (373,800) (204,274)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets (32,319) (59,631)
Deposits (400) -
-------------- --------------
Net cash used in investing activities (32,719) (59,631)
-------------- --------------
Increase in cash and cash equivalents 164,843 326,764
Cash and cash equivalents, beginning of period 223,949 52,929
-------------- --------------
Cash and cash equivalents, end of period $ 388,792 $ 379,693
============== ==============
Supplemental disclosure with respect to cash flows (Note 10)
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Expressed in U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Treasury Shares
------------------------- -------------------------- Additional
Number Number Paid-In Retained
of Shares Amount of Shares Amount Capital Earnings Total
----------------------------------- ------------ ------------ ------------ ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 - - - - - 592,509 592,509
Stock options exercised 4,000 11,044 - - - - 11,044
Shares cancelled (23,600) (39,315) - - - - (39,315)
Treasury shares acquired - - 64,900 336,123 - - (336,123)
Treasury shares cancelled - - (23,600) (134,354) - - 134,354
Premium relating to cancellation
of share capital - - - - - (95,039) (95,039)
------------ ------------ ------------ ------------- ----------- ------------ ------------
Balance, August 31, 1999 1,157,162 $ 1,932,097 61,900 $ 319,399 $ 582,247 $ 3,789,134 $ 5,984,079
============ ============ ============ ============= =========== ============ ============
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 period - - - - - 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
Premium relating to cancellation
of capital stock - - - - - (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
============ ============ ============ ============= =========== ============ ============
Balance, August 31, 1999 1,157,162 $ 1,932,097 61,900 $ 319,399 $ 582,247 $ 3,789,134 $ 5,984,079
Net income for the period - - - - - 371,453 371,453
Shares cancelled (82,000) (136,940) - - - (136,940)
Treasury shares acquired - - 73,200 373,800 - - (373,800)
Treasury shares cancelled - - (83,000) (429,284) - - 429,284
-
Premium relating to cancellation
of capital stock - - - - - (292,344) (292,344)
------------ ------------ ------------ ------------- ----------- ------------ ------------
Balance, May 31, 2000 1,075,162 $ 1,795,157 52,100 $ 263,915 $ 582,247 $ 3,868,243 $ 5,981,732
============ ============ ============ ============= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited)
MAY 31, 2000
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
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary (consisting only of normal
recurring accruals) to present fairly the financial information
contained therein. These statements do not include all disclosures
required by generally accepted accounting principles and should be read
in conjunction with the audited financial statements of the Company for
the year ended August 31, 1999. The results of operations for the period
ended May 31, 2000 are not necessarily indicative of the results to be
expected for the year ending August 31, 2000.
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 are 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)
MAY 31, 2000
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
The Company accounts for foreign currency transactions and translation
of foreign currency financial statements under Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52").
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transaction dates. Carrying values of
monetary assets and liabilities are adjusted at each balance sheet date
to reflect the exchange rate at that date. Non monetary assets and
liabilities are translated at the exchange rate on the original
transaction date. Gains and losses from restatement of foreign currency
monetary and non-monetary assets and liabilities are included in income.
Revenues and expenses are translated at the rates of exchange prevailing
on the dates such items are recognized in earnings.
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.
Earnings per share
Basic earnings per share is computed using the weighted average number
of shares outstanding during the period.
Diluted earnings per share consider the dilutive impact of the
conversion of outstanding stock options as if the events occurred during
the period.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited)
MAY 31, 2000
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Earnings per share (cont'd.....)
The earnings per share data for the periods ended May 31, 2000 and May
31, 1999 is summarized as follows:
<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,
2000 1999 2000 1999
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net income $ 253,693 $ 235,645 $ 371,453 $ 467,816
============== ============== ============== ===============
Basic earnings per share weighted average
number of shares outstanding 1,042,362 1,130,662 1,042,362 1,130,662
Effect of dilutive securities
Stock options 28,880 31,774 28,880 31,774
-------------- -------------- -------------- ---------------
Diluted earnings per share weighted average
number of shares outstanding 1,071,242 1,162,436 1,071,242 1,162,436
============== ============== ============== ===============
</TABLE>
Post retirement benefits
Post retirement benefits are accounted for on an accrual basis. Any
difference between net periodic post retirement benefit cost charged
against income and the amount actually funded is recorded as an accrued
or prepaid cost. This policy is consistent with Financial Accounting
Standards No. 106, "Employers Accounting for Post Retirement Benefits
Other than Pensions".
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. In June 1999, the FASB
issued SFAS 137 to defer the effective date of SFAS 133 to fiscal
quarters of fiscal years beginning after June 15, 2000. The Company does
not anticipate that the adoption of the statement will have a
significant impact on its financial statements.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly compensation
cost for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited)
MAY 31, 2000
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total
stockholders' equity as of May 31, 2000.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
May 31, May 31, August 31,
2000 1999 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Office equipment $ 185,422 $ 179,836 $ 210,652
Warehouse equipment 220,998 217,935 213,751
Automotive equipment 43,871 59,009 46,159
Building 1,350,009 1,460,982 1,410,058
Land 375,593 367,362 365,522
-------------- -------------- --------------
2,175,893 2,285,124 2,246,142
Accumulated depreciation (775,900) (716,851) (735,075)
-------------- -------------- --------------
Net book value $ 1,399,993 $ 1,568,273 $ 1,511,067
============== ============== ==============
</TABLE>
4. 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.
<TABLE>
<CAPTION>
May 31, May 31, August 31,
2000 1999 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Trademarks $ - $ 283,914 $ 283,914
Accumulated amortization - (111,228) (118,474)
Write-down of trademarks - - (165,440)
-------------- -------------- --------------
Net book value $ - $ 172,686 $ -
============== ============== ==============
</TABLE>
5. DEFERRED INCOME TAXES
Deferred income taxes of $217,200 (May 31, 1999 - $203,200; August 31,
1999 - $217,200) 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)
MAY 31, 2000
6. BANK INDEBTEDNESS
May 31, May 31, August 31,
2000 1999 1999
--------------- --------------- ---------------
Demand loan $ 2,000,051 $ 2,500,000 $ 87,883
=============== =============== ===============
The bank indebtedness is secured by an assignment of accounts receivable
and inventory. Interest is calculated at either prime or the libor rate
plus 225 basis points.
7. STOCK OPTIONS
At May 31, 2000, the Company had incentive stock options outstanding
enabling the holders to purchase common shares of the Company as
follows:
Number
of Shares Price Expiry Date
----------- --------- ----------------------------------
12,000 Cdn $ 4.25 December 31, 2000
70,000 Cdn $ 4.25 August 6, 2000
8. EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsored 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 ESOP grants to
participants in the plan certain ownership rights in, but not possession
of, the common stock of the Company held by the Trustee of the plan.
Shares of common stock are allocated annually to participants in the
ESOP pursuant to a prescribed formula. The value of the shares released
by the Trustee under the plan's provisions for allocation was recognized
as an expense of $20,000, $Nil and $90,170 for the periods ended May 31,
2000, May 31, 1999 and August 31, 1999, respectively.
May 31, May 31, August 31,
2000 1999 1999
--------------- --------------- ---------------
Allocated shares 107,000 90,000 107,000
Total ESOP shares 107,000 90,000 107,000
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited)
MAY 31, 2000
9. CONTINGENT LIABILITIES
At May 31, 2000, May 31, 1999 and August 31, 1999, the Company had an
un-utilized line-of-credit of approximately $4,500,000, $4,000,000, and
$6,400,000, respectively.
10. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS'
May 31, May 31,
2000 1999
--------------- ---------------
Cash paid for:
Interest $ 77,503 $ 102,746
Income taxes 577,857 302,417
Significant non-cash transactions for the nine month period ended May
31, 2000 are as follows:
The Company cancelled 82,000 treasury shares repurchased at a price of
$429,284 which had an original cost $136,940. The difference between
the original cost and purchase price of $292,344 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, 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.
11. 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.
<PAGE>
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. dollars)
(Unaudited)
MAY 31, 2000
11. SEGMENTED INFORMATION (cont'd.....)
Following is a summary of segmented information for the nine month
periods ended May 31, 2000 and 1999 and the year ended August 31, 1999:
<TABLE>
<CAPTION>
May 31, May 31, August 31,
2000 1999 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Building Materials:
United States $ 16,581,802 $ 17,802,645 $ 27,707,986
South Pacific 45,602 248,575 316,757
Industrial tools 807,729 824,621 1,077,530
-------------- -------------- --------------
$ 17,435,133 $ 18,875,841 $ 29,102,273
============== ============== ==============
Income from operations:
Building Materials:
United States $ 878,108 $ 1,052,861 $ 1,583,793
South Pacific (93,317) (133,225) (138,126)
Industrial tools 121,301 80,825 116,902
General corporate (76,200) (96,350) (111,654)
-------------- -------------- --------------
$ 829,892 $ 904,111 $ 1,450,915
============== ============== ==============
Identifiable assets:
Building Materials:
United States $ 8,584,550 $ 9,517,339 $ 6,521,677
South Pacific 250,280 615,543 464,719
Industrial tools 126,919 123,376 117,549
General corporate 115,651 11,181 110,306
-------------- -------------- --------------
$ 9,077,400 $ 10,267,439 $ 7,214,251
============== ============== ==============
Depreciation and amortization:
Building Materials:
United States $ 87,743 $ 100,217 $ 152,591
South Pacific 1,716 6,033 16,250
Industrial tools 824 1,355 1,594
-------------- -------------- --------------
$ 90,283 $ 107,605 $ 170,435
============== ============== ==============
Capital expenditures:
Building Materials:
United States $ 32,319 $ 57,358 $ 112,411
South Pacific - 2,273 -
-------------- -------------- --------------
$ 32,319 $ 59,631 $ 112,411
============== ============== ==============
</TABLE>
