-----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, RoOfscRCdZ8PfFpexes2rTadlSFMoUX+btJB2D3z7CJ81zXlsddhY0xxmKI/2kdu Tk9PLjlfnGA9fgI8vuCCYQ== 0001025894-01-500149.txt : 20010716 0001025894-01-500149.hdr.sgml : 20010716 ACCESSION NUMBER: 0001025894-01-500149 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010531 FILED AS OF DATE: 20010713 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: 1680507 BUSINESS ADDRESS: STREET 1: 32275 NW HILLCREST CITY: NORTH PLAINS STATE: OR ZIP: 97133 BUSINESS PHONE: 5036470110 10-Q 1 jc_105q.txt QUARTERLY REPORT 5-31-2001 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, 2001 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, 2001. 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. Company operations were up during the third quarter of Fiscal 2001, ended May 31, 2001, as sales increased over the second quarter of Fiscal 2001, ended February 28, 2001. Gross sales decreased $2,726,941 during the third quarter of Fiscal 2001 as compared to the third quarter of Fiscal 2000. During the third quarter of Fiscal 2001, the Company experienced an increase in net income of $32,416 as compared to the third quarter of Fiscal 2000. The overall result was net income of $286,109 for the third quarter of Fiscal 2001 and net income for the first nine months of Fiscal 2001 of $417,568. These were increases of $32,416 and $46,115 respectively. RESULTS OF OPERATIONS: THREE MONTHS ENDED May 31, 2001 and 2000: For the third quarter of the current fiscal year, ending May 31, 2001, sales decreased 26% to $7,572,756 compared to $10,299,697 for the same quarter of the previous year. The primary reason for the decrease in sales was the significant overall drop in lumber prices. General and administrative expenses for the Company were $865,425 for the third quarter up from $655,001 for the third quarter of the previous year. The primary reasons for the increase of $200,424 are increases of $35,394 in depreciation and amortization; $14,778 in travel, entertainment and advertising; $182,868 in wages and employee benefits; $20,168 in insurance; $9,392 in telephone and utilities; and, $22,415 in warehouse expenses and supplies. Decreases; however, did occur in the categories of professional fees of $11,392 and repairs and maintenance of $5,583. The increase in corporate activity resulting from the addition of Jewett-Cameron Seed Company accounted for the rise in overall corporate expenses. Net income for the quarter was $286,109. This represents an increase of 12% over the third quarter of last year when net income was $253,693. The increase in net income was due primarily to a decrease in the cost of sales of $2,661,781 and a decrease in income tax expense of $249,000 over the prior like period. Earnings per share (fully diluted) were $0.28 for the third quarter of Fiscal 2001 compared to $0.23 for the third quarter of fiscal 2000 an increase of 20%. NINE MONTHS ENDED May 31, 2001: Sales for the first nine months of Fiscal 2001 decreased 9% to $15,838,071 compared to $17,435,133 in the same period last year. Sales for Jewett-Cameron Lumber were $13,958,483 for the nine months ended May 31, 2001, down 15% compared to sales of $16,581,802 for the same period of last year. Sales for MSI-PRO (pneumatic tools and industrial clamps) were $716,219 for the nine months ended May 31, 2001 compared to $807,729 for the same period of last year, a decrease of $91,510. Sales for Jewett-Cameron South Pacific in the Kingdom of Tonga were nil for the nine months ended May 31, 2001 compared to $45,602 for the same period of last year. The Company has almost completed winding down its operations in the Kingdom of Tonga. Sales for Jewett-Cameron Seed Company were $1,163,369 for the nine months ended May 31, 2001. The Company entered the seed distribution business during the three months period ended November 30, 2000. During that period the Company acquired all of the assets, including land, buildings and equipment, of Agrobiotech Inc. for total proceeds of $1,530,762. On October 31, 2000, the Company incorporated Jewett-Cameron Seed Co. under the laws of Oregon. This subsidiary operates as a processor and distributor of agricultural seed products and the nine month period ended May 31, 2001 is the first nine month reporting period for the Company's seed sales. General and administrative expenses for the Company were $2,245,479 for the nine month period up from $1,688,143 for the same period of last year. The primary reasons for the increase of $557,336 are increases of $70,087 in depreciation and amortization; $47,992 in insurance; $10,858 in office and miscellaneous; $14,432 in telephone and utilities; $19,100 in travel, entertainment and advertising; $68,348 in warehouse expenses and supplies; and, $429,000 in wages and employee benefits. All of these expense categories increased because of the addition of the Company's wholly owned subsidiary, Jewett-Cameron Seed Company. The expense categories of professional fees and repairs and maintenance decreased from the prior like nine month period by $43,076. Net income for the first nine months of Fiscal 2001 was $417,568 which represents a 12% increase over the first nine months of last year when net income was $371,453. The increase in net income was due primarily to a decrease in income tax expense of $296,000. Earnings per share (fully diluted) were $0.40 for the first nine months of Fiscal 2001 compared to $0.35 for the same period of fiscal 2000. Basic earnings per share were $0.42 for the first nine months of Fiscal 2001 compared to $0.36 for the same period of fiscal 2000, an increase of 16%. LIQUIDITY AND CAPITAL RESOURCES As of May 31, 2001 the Company had working capital of $3,421,809 which represented a decrease of $867,985 as compared to the working capital of $4,289,794 as of May 31, 2000. The decrease in working capital was due to a decrease in cash and cash equivalents of $54,161 and an increase in bank indebtedness of $2,483,517. These factors were offset by increases in accounts receivable of $1,238,189; $393,768 in inventory; and, $72,306 in prepaid expenses. The increase in bank indebtedness, which accounted for the decrease in working capital, was a result of increased activity by the Company's wholly owned subsidiary, Jewett-Cameron Seed Company. Accounts Receivable and Inventory represented 96% of current assets and both continue to turn over at acceptable rates. External sources of liquidity include bank credit lines from the United States National Bank of Oregon and Key Bank. The total line of credit available from the United States National Bank of Oregon is $5 million of which there was an outstanding balance as of May 31, 2001 of $2,483,517. The total line of credit available from Key Bank is $1 million of which there was no outstanding balance. As of the end of Fiscal 2000 (August 31st) the Company had no outstanding balances at either financial institution and at the end of the third quarter of Fiscal 2000, the Company also had no outstanding balances at either institution. 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, 2001. 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 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 12, 2000 /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) MAY 31, 2001
JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) =============================================================================================== May 31, August 31, 2001 2000 - ---------------------------------------------------------------- ------------- -------------- ASSETS Current Cash and cash equivalents $ 154,116 $ 208,277 Accounts receivable 3,779,576 2,541,387 Inventory 3,016,343 2,622,575 Prepaid expenses 96,553 24,247 ------------- ------------- Total current assets 7,046,588 5,396,486 Capital assets (Note 3) 2,812,528 1,343,929 Deferred income taxes (Note 4) 122,200 122,200 Deposits 74,745 74,745 ------------- ------------- $ 10,056,061 $ 6,937,360 ================================================================ ============= ============= Continued..... The accompanying notes are an integral part of these consolidated financial statements. JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) ============================================================================================== Cont'd..... LIABILITIES AND STOCKHOLDERS' EQUITY Current Bank indebtedness (Note 5) $ 2,483,517 $ - Accounts payable and accrued liabilities 1,141,262 787,128 ------------- ------------- Total current liabilities 3,624,779 787,128 ------------- ------------- 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 (August 31, 2000 - 1,074,162) 1,795,157 1,795,157 Additional paid-in capital 582,247 582,247 Retained earnings 4,523,038 4,105,470 ------------- ------------- 6,900,442 6,482,874 Less: Treasury stock - 96,000 common shares (August 31, 2000 - 65,500) (469,160) (332,642) ------------- ------------- 6,431,282 6,150,232 $ 10,056,061 $ 6,937,360 ================================================================ ============= =============
Contingent liabilities and commitments (Note 9) 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 Nine Month Nine Month Period Ended Period Ended Period Ended Period Ended May 31, May 31, May 31, May 31, 2001 2000 2001 2000 - ----------------------------------------------------------- ---------------- --------------- ---------------- ---------------- SALES $ 7,572,756 $ 10,299,697 $ 15,838,071 $ 17,435,133 COST OF SALES 6,393,014 9,054,795 13,052,490 14,917,098 --------------- -------------- --------------- --------------- GROSS PROFIT 1,179,742 1,244,902 2,785,581 2,518,035 GENERAL AND ADMINISTRATIVE EXPENSES - Schedule 865,425 665,001 2,245,479 1,688,143 Foreign exchange gain (loss) 11,764 (10,760) (22,119) (40,052) --------------- -------------- --------------- --------------- Income from operations 326,081 569,141 517,983 789,840 --------------- -------------- --------------- --------------- OTHER ITEMS Loss on disposal of capital assets - (11,528) - (53,110) Interest and other income 14,154 789 19,574 17,226 Interest expense (54,126) (55,709) (106,989) (73,503) --------------- -------------- --------------- --------------- (39,972) (66,448) (87,415) (109,387) --------------- -------------- --------------- --------------- Income before income taxes 286,109 502,693 430,568 680,453 Income tax (expense) recovery - (249,000) (13,000) (309,000) --------------- -------------- --------------- --------------- Net income for the period $ 286,109 $ 253,693 $ 417,568 $ 371,453 =========================================================== ================ =============== ================ ================ Basic earnings per share $ 0.29 $ 0.24 $ 0.42 $ 0.36 =========================================================== ================ =============== ================ ================ Diluted earnings per share $ 0.28 $ 0.23 $ 0.40 $ 0.35 =========================================================== ================ =============== ================ ================
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 Nine Month Nine Month Period Ended Period Ended Period Ended Period Ended May 31, May 31, May 31, May 31, 2001 2000 2001 2000 - --------------------------------------- ---------------- --------------- ---------------- ---------------- Bad debt (recovery) $ (28,266) $ 39,558 $ (61,579) $ (442) Consulting 487 - 1,732 - Depreciation and amortization 66,361 30,967 160,370 90,283 Insurance 35,731 15,563 87,993 40,001 Office and miscellaneous 59,653 59,932 179,522 168,664 Professional fees 17,371 28,763 72,120 106,482 Repairs and maintenance 8,257 13,840 28,487 37,201 Telephone and utilities 30,185 20,793 76,117 61,685 Travel, entertainment and advertising 49,235 34,457 130,304 111,204 Warehouse expenses and supplies 60,866 38,451 148,513 80,165 Wages and employee benefits 565,545 382,677 1,421,900 992,900 --------------- -------------- --------------- --------------- $ 865,425 $ 665,001 $ 2,245,479 $ 1,688,143 ======================================= ================ =============== ================ ================
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 Nine Month Nine Month Period Ended Period Ended Period Ended Period Ended May 31, May 31, May 31, May 31, 2001 2000 2001 2000 - ----------------------------------------------------------- ---------------- --------------- ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 286,109 $ 253,693 $ 417,568 $ 371,453 Items not involving an outlay of cash: Depreciation and amortization 66,361 30,967 160,370 90,283 Loss on disposal of capital assets - 11,528 - 53,110 Changes in non-cash working capital items: Increase in accounts receivable (1,176,779) (1,532,610) (1,238,189) (543,141) (Increase) decrease in inventory 1,697,519 1,270,741 (393,768) (1,131,560) (Increase) decrease in prepaid expenses 50,375 37,077 (72,306) (34,929) Increase (decrease) in bank indebtedness (688,207) (207,826) 2,483,517 1,912,168 Increase (decrease) in accounts payable and accrued liabilities (226,804) 532,588 354,134 (146,022) --------------- -------------- --------------- --------------- Net cash provided by operating activities 8,574 396,158 1,711,326 571,362 --------------- -------------- --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES Treasury shares acquired (11,341) (93,967) (136,518) (373,800) Purchase of capital assets (34,254) (8,913) (1,628,969) (32,319) Deposits - (400) - (400) --------------- -------------- --------------- --------------- Net cash used in investing activities (45,595) (103,280) (1,765,487) (406,519) --------------- -------------- --------------- --------------- Change in cash and cash equivalents (37,021) 292,878 (54,161) 164,843 Cash and cash equivalents, beginning of period 191,137 95,914 208,277 223,949 --------------- -------------- --------------- --------------- Cash and cash equivalents, end of period $ 154,116 $ 388,792 $ 154,116 $ 388,792 =========================================================== ================ =============== ================ ================
Supplemental disclosure 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 Net income for the period - - - - - 417,568 417,568 Treasury shares acquired - - 30,500 136,518 - - (136,518) ----------- ----------- ----------- ----------- ---------- ----------- ----------- Balance, May 31, 2001 1,074,162 $ 1,795,157 96,000 $ 469,160 $ 582,247 $ 4,523,038 $ 6,431,282 =================================== ============ ============ ============ ============= =========== ============ ============
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) MAY 31, 2001 1. BUSINESS COMBINATION AND ACQUISITION The Company was incorporated under the Company Act of British Columbia on July 8, 1987. During the period, 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 May 31, 2001 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 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. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) MAY 31, 2001 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.....) Revenue recognition The Company recognizes revenue from the sales of building supply products, tools and processed agricultural seeds, 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 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. 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) MAY 31, 2001 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.....) Financial instruments The Company's financial instruments consist of cash and cash equivalents, accounts receivable, deposits, bank indebtedness and 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 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. The earnings per share data for the periods ended May 31 is summarized as follows:
================================================ =============== ================ ================ =============== Three Month Three Month Nine Month Nine Month Period Ended Period Ended Period Ended Period Ended May 31, May 31, May 31, May 31, 2001 2000 2001 2000 ------------------------------------------------ --------------- ---------------- ---------------- --------------- Net income $ 286,109 $ 253,693 $ 417,568 $ 371,453 ============== =============== =============== ============== Basic earnings per share weighted average number of shares outstanding 998,506 1,042,362 998,506 1,042,362 Effect of dilutive securities Stock options 33,673 28,880 33,673 28,880 -------------- --------------- --------------- -------------- Diluted earnings per share weighted average number of shares outstanding 1,032,179 1,071,242 1,032,179 1,071,242 ================================================ =============== ================ ================ ===============
Employee stock option plan The Company accounts for its employee stock option plan using the intrinsic value method. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) MAY 31, 2001 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.....) Accounting for derivative instruments and hedging activities In September 1998, the Financial Accounting Standards Board ("FASB") 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. In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138 which is a significant amendment to SFAS 133. The adoption by the Company of these standards is not expected to have a material impact on its financial statements. 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". 3. CAPITAL ASSETS ====================================== =============== =============== May 31, August 31, 2001 2000 -------------------------------------- --------------- --------------- Office equipment $ 198,736 $ 185,422 Warehouse equipment 583,451 221,568 Buildings 2,310,074 1,288,340 Land 607,713 375,593 ------------- ------------- 3,699,974 2,070,923 Accumulated depreciation (887,446) (726,994) ------------- ------------- Net book value $ 2,812,528 $ 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. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) MAY 31, 2001 4. DEFERRED INCOME TAXES Deferred income taxes of $122,200 (August 31, 2000 - $122,200) relate principally to timing differences between the accounting and tax treatment of income, expenses, reserves and depreciation. 5. BANK INDEBTEDNESS ====================================== =============== =============== May 31, August 31, 2001 2000 -------------------------------------- --------------- --------------- Demand loan $ 2,483,517 $ - ====================================== =============== =============== 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. 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") and the Ontario 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 May 31, 2001, employee incentive stock options were outstanding enabling the holders to acquire the following number of shares: ============ ============== ================ Number Exercise of Shares Price Expiry Date ------------ -------------- ---------------- 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) MAY 31, 2001 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 standard. No new stock options were granted during the fiscal periods ended May 31, 2001 and 2000. Following is a summary of the status of the plan during 2001 and 2000: ======================================================================= Weighted Average Number Exercise of Shares Price ------------------------------------------------ ---------- ----------- Outstanding at August 31, 1999 82,000 Cdn$ 4.34 Granted - Forfeited - Exercised - -------- Outstanding at May 31, 2000 and August 31, 2000 82,000 Cdn$ 4.34 Granted - Forfeited (12,000) Cdn$ 4.34 Exercised - -------- Outstanding at May 31, 2001 70,000 Cdn$ 4.25 ================================================ ========== =========== Following is a summary of the status of options outstanding at May 31, 2001: ======================================================================= Outstanding Options Exercisable Options ------------------------------- --------------------- Weighted Average Weighted Weighted Remaining Average Average Contractual Exercise Exercise Exercise Price Number Life Price Number Price - ----------------- -------- ------------ --------- -------- ------------ Cdn$4.25 70,000 5.25 Cdn$ 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) MAY 31, 2001 9. CONTINGENT LIABILITIES AND COMMITMENTS a) The Company established an Employee Stock Ownership Plan, whereby the employees may earn 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 May 31, 2001, 129,200 of these shares were earned by the employees under this plan but remain in the trust (Note 7). b) At May 31, 2001, the Company had an un-utilized line-of-credit of approximately $3,500,000. 10. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS ======================================= =============== =============== May 31, May 31, 2001 2000 --------------------------------------- --------------- --------------- Cash paid during the period for: Interest $ 106,989 $ 77,503 Income taxes - 577,857 ======================================= =============== =============== There were no significant non-cash transactions for the nine month period ended May 31, 2001. Significant non-cash transactions for the nine month period ended May 31, 2000: The Company cancelled 83,000 treasury shares repurchased at a price of $429,283 which had an original cost $136,940. The difference between the original cost and purchase price of $292,343 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 segments' 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) MAY 31, 2001 11. SEGMENTED INFORMATION (cont'd.....) Following is a summary of segmented information for the nine month periods ended May 31, 2001 and 2000: ===================================================================== May 31, May 31, 2001 2000 -------------------------------------- --------------- ---------------- Sales to unaffiliated customers: Building Materials: United States $ 13,958,483 $ 16,581,802 South Pacific - 45,602 Industrial tools 716,219 807,729 Seeds 1,163,369 - -------------- ------------- $ 15,838,071 $ 17,435,133 =============== ================ Income from operations: Building Materials: United States $ 602,530 $ 878,108 South Pacific (31,247) (133,369) Industrial tools 60,405 121,301 Seeds (32,538) - General corporate (81,167) (76,200) -------------- -------------- $ 517,983 $ 789,840 =============== ================ Identifiable assets: Building Materials: United States $ 9,468,694 $ 8,584,550 South Pacific - 250,280 Industrial tools 119,922 126,919 Seeds 348,330 - General corporate 119,115 115,651 -------------- -------------- $ 10,056,061 $ 9,077,400 =============== ================ Depreciation and amortization: Building Materials: United States $ 132,112 $ 87,743 South Pacific - 1,716 Industrial tools 650 824 Seeds 27,608 - -------------- ------------- $ 160,370 $ 90,283 =============== ================ Capital expenditures: Building Materials: United States $ 69,453 $ 32,319 South Pacific - - Seeds 1,559,516 - -------------- ------------- $ 1,628,969 $ 32,319 ====================================== =============== ================ JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars) (Unaudited - Prepared by Management) MAY 31, 2001 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 May 31, 2001 and August 31, 2000, 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 and wholesale seed industries. -----END PRIVACY-ENHANCED MESSAGE-----