-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TlQTSzrVQbJr8e7BfKSUMORQP0nFMyrO9w9PprHNJ2EA1YPLXB04fIjplXCcfQty qaMJSfu9Xgl5+n/bN9W/Cg== 0001025894-01-000012.txt : 20010123 0001025894-01-000012.hdr.sgml : 20010123 ACCESSION NUMBER: 0001025894-01-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JEWETT CAMERON TRADING CO LTD CENTRAL INDEX KEY: 0000885307 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-LUMBER & OTHER BUILDING MATERIALS DEALERS [5211] STATE OF INCORPORATION: OR FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19954 FILM NUMBER: 1508959 BUSINESS ADDRESS: STREET 1: 32275 NW HILLCREST CITY: NORTH PLAINS STATE: OR ZIP: 97133 BUSINESS PHONE: 5036470110 10-Q 1 0001.txt QUARTERLY REPORT 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 November 30, 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 November 30, 2000. Common Stock, no par value 1,074,162 Shares. 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. Gross sales decreased $429,916 during the first quarter of Fiscal 2000 as compared to the first quarter of Fiscal 1999. In spite of the decrease in gross sales, during the first quarter of Fiscal 2000, the Company experienced an increase in net income of $7,790. Results of Operations. The Company's operations are classified into three principle industry segments: (sales of) building materials and (sales of) industrial tools and (sales of) processed agricultural seeds. 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. Sales of seeds consists of distribution of processed agricultural seeds in the United States. For the first quarter of the current fiscal year, ending November 30, 2000, sales decreased 10.4% to $3,719,800 compared to $4,149,716 for the same quarter of the previous year. Sales for Jewett-Cameron Lumber were $3,283,140 million for the quarter, down 14.3% compared to sales of $3,829,398 million for the first quarter of last year. Sales for MSI-PRO (pneumatic tools and industrial clamps) were $251,303 for the first quarter compared to $273,414 for the first quarter of last year, down 8%. Sales for Jewett-Cameron South Pacific in the Kingdom of Tonga were nil for first quarter compared to $46,904 for the first quarter of last year. The Company is currently winding down its operations in the Kingdom of Tonga. Sales for Jewett Cameron Seed Company were $185,357 for the first quarter. The first quarter of Fiscal 2001, ended November 30, 2000, was the first quarter of operations for Jewett Cameron Seed Company. General and administrative expenses for the Company were $673,423 for the first quarter up from $540,200 for the first quarter of last year. The primary reasons for the increase of $133,233 are increases of $6,680 in bad debt expense; $8,579 in depreciation and amortization; $6,437 in insurance; $83,190 in wages and employee benefits; and, $30,783 in warehouse expenses and supplies. Decreases did occur, however, in the categories of consulting ($2,797); professional fees ($26,870); repairs and maintenance ($5,469; and travel, entertainment and advertisement ($3,094). Net income for the quarter was $83,963 which represents a 10.2% increase over the first quarter of last year when net income was $76,173. The increase in net income was due to a decrease in cost of sales of ($533,514); a decrease in interest expense of ($9,756); and, a decrease in income taxes of ($20,000). Earnings per share was $0.08 for the first quarter of Fiscal 2000 compared to $0.07 for the first quarter of fiscal 1999. Liquidity and Capital Resources As of November 30, 2000 the Company had working capital of $3,060,590 which represented an decrease of $1,104,914 as compared to the working capital position of $4,165,504 as of November 30, 1999. The decrease in working capital was due primarily to an increase in current liabilities of $1,103,777. Current liabilities at November 30, 2000 consisted of $909,298 in bank indebtedness and $673,096 in accounts payable and accrued liabilities. Accounts Receivable and Inventory represented 92.7% 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 $6.5 million of which there was an outstanding balance of $909,298 on November 30, 2000 and no outstanding balance as of November 30, 1999. As of the end of Fiscal 2000 (August 31st) 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. Item 3 - Quantitative and Qualitative Disclosures about Market Risks: The Company does not have any derivative financial instruments as of November 30, 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. 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: January 15, 2001 /s/ Donald M. Boone ---------------- ------------------- Donald M. Boone, President/CEO/Director JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000
JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) =============================================================================================================== November 30, November 30, August 31, 2000 1999 2000 - ------------------------------------------------------------------------------------ ------------ ------------- ASSETS Current Cash and cash equivalents $ 238,561 $ 619,210 $ 208,277 Accounts receivable 997,571 1,103,961 2,541,387 Inventory 3,306,863 2,890,779 2,622,575 Prepaid expenses 99,989 30,171 24,247 ----------- ----------- ----------- Total current assets 4,642,984 4,644,121 5,396,486 Capital assets (Note 3) 2,890,512 1,493,318 1,343,929 Deferred income taxes (Note 4) 122,200 217,200 122,200 Deposits 74,745 74,345 74,745 ----------- ----------- ----------- Total assets $ 7,730,441 $ 6,428,984 $ 6,937,360 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Bank indebtedness (Note 5) $ 909,298 $ - $ - Accounts payable and accrued liabilities 673,096 478,617 787,128 ----------- ----------- ----------- Total current liabilities 1,582,394 478,617 787,128 ----------- ----------- ----------- Stockholders' equity Capital stock Authorized 20,000,000 common shares without par value 10,000,000 preferred shares without par value Issued 1,074,162 common shares (November 30, 1999 - 1,075,162; August 31, 2000 - 1,074,162) 1,795,157 1,795,157 1,795,157 Additional paid-in capital 582,247 582,247 582,247 Retained earnings 4,189,433 3,572,963 4,105,470 ----------- ----------- ----------- 6,566,837 5,950,367 6,482,874 Less: Treasury stock - 86,500 common shares (November 30, 1999 - Nil; August 31, 2000 - 65,500) (418,790) - (332,642) ----------- ----------- ----------- 6,148,047 5,950,367 6,150,232 ----------- ----------- ----------- Total liabilities and stockholders' equity $ 7,730,441 $ 6,428,984 $ 6,937,360 =========== =========== =========== Contingent liabilities and commitments (Note 9) Subsequent event (Note 13) The accompanying notes are an integral part of these consolidated financial statements.
JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) ================================================= =============== ============ Three Month Three Month Period Ended Period Ended November 30, November 30, 2000 1999 - ------------------------------------------------- ------------ ------------- SALES $ 3,719,800 $ 4,149,716 COST OF SALES 2,964,886 3,497,740 ----------- ----------- GROSS PROFIT 754,914 651,976 GENERAL AND ADMINISTRATIVE EXPENSES - Schedule 637,423 540,200 Foreign exchange loss 3,376 685 ----------- ----------- Income from operations 114,115 111,091 ----------- ----------- OTHER ITEMS Interest and other income 4,697 10,175 Interest expense (9,849) (93) ----------- ----------- (5,152) 10,082 ----------- ----------- Income before income taxes 108,963 121,173 Income taxes 25,000 45,000 ----------- ----------- Net income for the period $ 83,963 $ 76,173 ============ ============= Basic earnings per share $ 0.08 $ 0.07 Diluted earnings per share $ 0.08 $ 0.06 ============ ============= The accompanying notes are an integral part of these consolidated financial statements. JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES (Expressed in U.S. dollars) (Unaudited - Prepared by Management) =========================================== =============== ================ Three Month Three Month Period Ended Period Ended November 30, November 30, 2000 1999 - ------------------------------------------- --------------- ---------------- Bad debt expense $ 6,680 $ - Consulting 653 3,450 Depreciation and amortization 38,953 30,374 Insurance 18,910 12,473 Office and miscellaneous 49,760 49,005 Professional fees 11,269 38,139 Repairs and maintenance 9,198 14,667 Telephone and utilities 20,651 21,622 Travel, entertainment and advertising 34,661 37,755 Wages and employee benefits 397,367 314,177 Warehouse expenses and supplies 49,321 18,538 -------------- -------------- $ 637,423 $ 540,200 =============== ================ The accompanying notes are an integral part of these consolidated financial statements.
JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) =============================================================== =============== ================ Three Month Three Month Period Ended Period Ended November 30, November 30, 2000 1999 - --------------------------------------------------------------- --------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 83,963 $ 76,173 Items not involving an outlay of cash: Depreciation and amortization 38,953 30,374 Foreign exchange loss 3,376 685 Changes in non-cash working capital items:: Decrease in accounts receivable 1,540,440 1,387,666 Increase in inventory (684,288) (223,944) Increase in prepaid expenses (75,742) (1,628) Increase (decrease) in bank indebtedness 909,298 (87,883) Decrease in accounts payable and accrued liabilities (114,032) (663,672) -------------- -------------- Net cash provided by operating activities 1,701,968 517,771 -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Treasury shares acquired (86,148) (109,885) -------------- -------------- Net cash used in financing activities (86,148) (109,885) -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of capital assets (1,585,536) (12,625) -------------- -------------- Net cash used in investing activities (1,585,536) (12,625) -------------- -------------- Increase in cash and cash equivalents 30,284 395,261 Cash and cash equivalents, beginning of period 208,277 223,949 -------------- -------------- Cash and cash equivalents, end of period $ 238,561 $ 619,210 =============== ================
Supplemental disclosures with respect to cash flows (Note 10) The accompanying notes are an integral part of these consolidated financial statements.
JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Expressed in U.S. Dollars) (Unaudited - Prepared by Management) =================================== ========================= ========================== =========== ============ ============ Common Stock Treasury Shares Additional Number Number Paid-In Retained of Shares Amount of Shares Amount Capital Earnings Total - ----------------------------------- ------------ ------------ ------------ ------------- ----------- ------------ ------------ 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 year - - - - - 608,679 608,679 Shares cancelled (83,000) (136,940) - - - - (136,940) Treasury shares acquired - - 86,600 442,526 - - (442,526) Treasury shares cancelled - - (83,000) (429,283) - - 429,283 Premium relating to cancellation of share capital - - - - - (292,343) (292,343) ----------- ----------- ----------- ----------- ---------- ----------- ----------- Balance, August 31, 2000 1,074,162 $ 1,795,157 65,500 $ 332,642 $ 582,247 $ 4,105,470 $ 6,150,232 ============ ============ ============ ============= =========== ============ ============ 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 - - - - - 76,173 76,173 Shares cancelled (82,000) (136,940) - - - - (136,940) Treasury shares acquired - - 20,100 109,885 - - (109,885) Treasury shares cancelled - - (82,000) (429,284) - - 429,284 Premium relating to cancellation of share capital - - - - - (292,344) (292,344) ----------- ----------- ----------- ----------- ---------- ----------- ------------ Balance, November 30, 1999 1,075,162 $ 1,795,157 - $ - $ 582,247 $ 3,572,963 $ 5,950,367 ============ ============ ============ ============= =========== ============ ============ Balance August 31, 2000 1,075,162 $ 1,795,157 65,500 $ 332,642 $ 582,247 $ 4,105,470 $ 6,150,232 Net income for the period - - - - - 83,963 83,963 Treasury shares acquired - - 21,000 86,148 - - (86,148) ----------- ----------- ----------- ----------- ---------- ----------- ----------- Balance, November 30, 2000 1,075,162 $ 1,795,157 86,500 $ 418,790 $ 582,247 $ 4,189,433 $ 6,148,047 =================================== ============ ============ ============ ============= =========== ============ ============
The accompanying notes are an integral part of these consolidated financial statements. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 1. BUSINESS COMBINATION AND ACQUISITION The Company was incorporated under the Company Act of British Columbia on July 8, 1987. During the three month period ended November 30, 2000, the Company acquired all of the assets, including land, buildings and equipment of Agrobiotech Inc. (Hillsborough) for total proceeds of $1,530,762. The cost of the acquisition was allocated as follows: Land $ 456,713 Buildings 782,781 Warehouse equipment 285,768 Office equipment 5,500 ------------- $ 1,530,762 The Company and its subsidiaries operate as a distributor of lumber and other building products, as a distributor of industrial tools, and as a retailer of building materials. Following the acquisition, the Company incorporated Jewett-Cameron Seed Co. under the laws of Oregon, U.S.A. on October 31, 2000. This subsidiary operates as a processor and distributor of agricultural seed products. 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, 2000. The results of operations for the period ended November 30, 2000 are not necessarily indicative of the results to be expected for the year ending August 31, 2001. 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 Jewett-Cameron Seed Co., 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 requires 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. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.....) Revenue recognition The Company recognizes revenue from the sales of building supply products and tools, when the products are shipped and the ultimate collection is reasonably assured. 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. 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 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. Earnings per share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). Under SFAS 128, basic and diluted earnings per share are to be presented. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.....) Earnings per share (cont'd.....) The earnings per share data for the periods ended November 30, 2000 and 1999 is summarized as follows:
======================================================================== ======================== =============== Three Month Three Month Period Ended Period Ended November 30, November 30, 2000 1999 ------------------------------------------------------------------------ ------------ ------------ Net income for United States reporting purposes $ 83,963 $ 76,173 =========== =========== Basic earnings per share weighted average number of shares outstanding 1,003,149 1,147,618 Effect of dilutive securities Stock options 29,680 35,533 ----------- ----------- Diluted earnings per share weighted average number of shares outstanding 1,032,829 1,183,151 ======================================================================== ============ ============
Employee stock option plan The Company accounts for its employee stock option plan using the intrinsic value method. 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 September 1998, the Financial Accounting Standards Board issued Statement 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 adoption by the Company of SFAS 137 during the current period did not have any impact on its financial statements. Comparative figures Certain comparative figures have been reclassified to conform with the presentation adopted for the current period. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.....) Financial instruments The Company's financial instruments consist of cash and cash equivalents, accounts receivable, deposits, 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 other than those disclosed in Note 12, Concentrations of Credit Risk. The fair value of these financial instruments approximate their carrying values, unless otherwise noted. 3. CAPITAL ASSETS ============================== =========== =========== =========== November 30, November 30, August 31, 2000 1999 2000 ------------------------------ ----------- ----------- ----------- Office equipment $ 190,922 $ 214,193 $ 185,422 Warehouse equipment 549,104 219,476 221,568 Automotive equipment - 46,159 - Building 2,308,720 1,413,700 1,288,340 Land 607,713 370,412 375,593 ----------- ----------- ----------- 3,656,459 2,263,940 2,070,923 Accumulated depreciation (765,947) (770,622) (726,994) ----------- ----------- ----------- Net book value $ 2,890,512 $ 1,493,318 $ 1,343,929 ============================== =========== =========== =========== In the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable and an estimate of future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss will be recognized. Management's estimates of revenues, operating expenses, and operating capital are subject to certain risks and uncertainties which may affect the recoverability of the Company's investments. Although management has made its best estimate of these factors based on current conditions, it is possible that changes could occur which could adversely affect management's estimate of the net cash flow expected to be generated from its operations. 4. DEFERRED INCOME TAXES Deferred income taxes of $122,200 (November 30, 1999 - $217,200; August 31, 2000 - $122,200) relate principally to timing differences between the accounting and tax treatment of income, expenses, reserves and depreciation. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 5. BANK INDEBTEDNESS ===================== ================ =============== ================ November 30, November 30, August 31, 2000 1999 2000 --------------------- ---------------- --------------- ---------------- Demand loan $ 909,298 $ - $ - ===================== ================ =============== ================ 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 point. 6. STOCK OPTIONS Stock options to purchase securities from the Company can be granted to directors and employees of the Company on terms and conditions acceptable to the regulatory authorities of Canada, notably the Toronto Stock Exchange ("TSE"), the Ontario Securities Commission and the British Columbia Securities Commission. Under the stock option program, stock options for up to 10% of the number of issued and outstanding common shares may be granted from time to time, provided that stock options in favour of any one individual may not exceed 5% of the issued and outstanding common shares. No stock option granted under the stock option program is transferable by the optionee other than by will or the laws of descent and distribution, and each stock option is exercisable during the lifetime of the optionee only by such optionee. The exercise price of all stock options, granted under the stock option program, must be at least equal to the fair market value (subject to regulated discounts) of such common shares on the date of grant. At November 30, 2000, employee incentive stock options were outstanding enabling the holders to acquire the following number of shares: ============ ============== ================== Number Exercise of Shares Price Expiry Date ------------ -------------- ------------------ 12,000 Cdn$ 8.25 December 31, 2000 70,000 Cdn$ 4.25 August 6, 2006 ============ ============== ================== 7. 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. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 8. STOCK BASED COMPENSATION EXPENSE 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 quoted market price of the Company's stock at the date of grant over the option price. No stock based compensation has resulted from the use of this prior standard. No new stock options were granted during the fiscal period ended November 30, 2000. Following is a summary of the status of the plan during 2000, 1999 and 1998:
====================================================== ========== =========== Weighted Average Number Exercise of Shares Price ------------------------------------------------------ ---------- ----------- Outstanding at August 31, 1999 82,000 Cdn$ 4.84 Granted - Cdn$ 8.25 Forfeited - Exercised - -------- Outstanding at November 30, 1999 and August 31, 2000 82,000 Cdn$ 4.84 Granted - Forfeited - Exercised - -------- Outstanding at November 30, 2000 82,000 Cdn$ 4.84 ====================================================== ======== ===========
Following is a summary of the status of options outstanding at November 30, 2000: ===================================================================== Outstanding Options Exercisable Options ------------------------------- ------------------- Weighted Average Weighted Weighted Remaining Average Average Contractual Exercise Exercise Exercise Price Number Life Price Number Price ----------------- ------- ------------ ---------- ------- ----------- Cdn$8.25 12,000 0.08 Cdn$ 8.25 12,000 Cdn$ 8.25 Cdn$4.25 70,000 5.68 Cdn$ 4.25 70,000 Cdn$ 4.25 ================= ======= ============ ========== ======= =========== JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 9. 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 Company 90,000 shares at a deemed price of Cdn$5.00 per share. As at November 30, 2000 and 1999 and August 31, 2000, 90,000 of these shares were earned by the employees under this plan but remain in the trust (Note 7). b) At November 30, 2000, the Company had an un-utilized line-of-credit of approximately $4,500,000. 10. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO STATEMENTS OF CASH FLOWS ================================== =============== ================ November 30, November 30, 2000 1999 ---------------------------------- --------------- ---------------- Cash paid during the period for: Interest $ 9,849 $ 93 Income taxes - 109,000 ================================== =============== ================ Significant non-cash transaction for the three month period ended November 30, 2000: There were no significant non-cash transactions for the three month period ended November 30, 2000. Significant non-cash transaction for the three month period ended November 30, 1999: The Company cancelled 82,000 treasury shares repurchased at a price of $429,284 which had an original cost of $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. 11. SEGMENTED INFORMATION The Company's operations are classified into three principle industry segments: (sales of) building materials and (sales of) industrial tools and (sales of) processed agricultural seeds. 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. Sales of seeds consists of distribution of processed agricultural seeds in the United States. In computing income from operations by industry segment, unallocable general and administrative expenses have been excluded from each segment's pre-tax operating earnings before interest expense and have been included in general corporate and other operations. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 11. SEGMENTED INFORMATION (cont'd.....) Following is a summary of segmented information for the three month periods ended November 30, 2000 and 1999: ================================== ================ ================ November 30, November 30, 2000 1999 ---------------------------------- ---------------- ---------------- Sales to unaffiliated customers: Building Materials: United States $ 3,283,140 $ 3,829,398 South Pacific - 46,904 Industrial tools 251,303 273,414 Seeds 185,357 - -------------- -------------- $ 3,719,800 $ 4,149,716 ============== ============== Income from operations: Building Materials: United States $ 88,684 $ 116,961 South Pacific (10,125) (35,198) Industrial tools 24,627 41,619 Seeds 29,346 - General corporate (18,417) (12,291) -------------- -------------- $ 114,115 $ 111,091 ============== ============== Identifiable assets: Building Materials: United States $ 6,939,423 $ 5,764,017 South Pacific 237,783 421,517 Industrial tools 105,489 131,672 Seeds 331,384 - General corporate 116,362 111,778 -------------- -------------- $ 7,730,441 $ 6,428,984 ============== ============== Depreciation and amortization: Building Materials: United States $ 30,617 $ 28,869 South Pacific - 1,230 Industrial tools 244 275 Seeds 8,092 - -------------- -------------- $ 38,953 $ 30,374 ============== ============== Capital expenditures: Building Materials: United States $ 54,774 $ 12,625 South Pacific - - Seeds 1,530,762 - -------------- -------------- $ 1,585,536 $ 12,625 ============== ============== JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) NOVEMBER 30, 2000 12. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and trade receivables. As of August 31, 2000 and 1999, substantially all of the Company's cash, including amounts representing outstanding cheques, are deposited with U.S. Bank and U.S. Bancorp Securities. During the normal course of business, the Company extends credit to customers conducting business in the home improvement industry. 13. SUBSEQUENT EVENT Subsequent to November 30, 2000, stock options to acquire 12,000 common shares at CDN$8.25 per share, expired unexercised. -----END PRIVACY-ENHANCED MESSAGE-----