-----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, VQoTv7lMatrocaxR0RuteuyyQpDWlmoO8y5LH4s5mpp4KN+uJviYW/XWYXKhGyKV vLreBK3cCpE5nq2sCmVhUg== 0001025894-01-500397.txt : 20020412 0001025894-01-500397.hdr.sgml : 20020412 ACCESSION NUMBER: 0001025894-01-500397 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010831 FILED AS OF DATE: 20011128 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19954 FILM NUMBER: 1800652 BUSINESS ADDRESS: STREET 1: 32275 NW HILLCREST CITY: NORTH PLAINS STATE: OR ZIP: 97133 BUSINESS PHONE: 5036470110 10-K 1 jc_108k.txt ANNUAL REPORT 8-31-2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [xx] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended August 31, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [not applicable] Commission File Number: 0-19954 JEWETT-CAMERON TRADING COMPANY LTD. ----------------------------------- (Exact name of registrant as specified in its charter) British Columbia, Canada Not Applicable - ------------------------------- ------------------------------------ (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 xxx No ___ ----- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [xx] State the issuer's revenues for its most recent fiscal year: $22,112,954 ----------- State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days; 11/12/01: US$3,078,391.50 --------------- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date; 11/12/01: 1,074,162 --------- Page 1 of 27 Index to Exhibits on Page 26 Jewett-Cameron Trading Company Ltd. Form 10-K TABLE OF CONTENTS Page PART I Item 1. Description of Business.............................. 3 Item 2. Description of Property............................. 11 Item 3. Legal Proceedings................................... 11 Item 4. Submission of Matters to a Vote of Security Holders. 11 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................ 11 Item 6. Selected Financial Data............................. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.................. 14 Item 8. Financial Statements and Supplemental Data.......... 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............. 18 PART III Item 10. Directors and Executive Officers of the Registrant. 18 Item 11. Executive Compensation............................. 20 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................... 23 Item 13. Certain Relationships and Related Transactions..... 24 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 25 2 PART I ITEM 1. DESCRIPTION OF BUSINESS General Development of Business - ------------------------------- Jewett-Cameron Trading Company Ltd. (the "Company") was incorporated in British Columbia, Canada, on 7/8/87, as a holding company for Jewett-Cameron Lumber Company ("JCLC"). The Company acquired all of the shares of JCLC through a stock-for-stock exchange and on 7/13/87, Jewett-Cameron Lumber Corporation became a wholly owned subsidiary of Jewett-Cameron Trading Company Ltd. Jewett-Cameron Lumber Corporation ("JCLC") was incorporated in the state of Oregon, USA, in September 1953. During the next 31 years it developed a good reputation as a small lumber wholesaler based in Portland, Oregon. In September 1984, the original stockholders sold their interest in the corporation to a new group of investors. Two members of that group remain active in the company: Donald M. Boone and Michael Nasser. JCLC acquired Material Supply International ("Material Supply") in early 1986. MSI-PRO Co. was incorporated in Oregon, USA, in April 1996 as a wholly-owned subsidiary of JCLC and assumed the business of Material Supply. MSI-PRO Co. is engaged in the importation and distribution of pneumatic air tools and industrial clamps. The product line was renamed "MSI-PRO". Material Supply is presently inactive. The Company's wholly-owned subsidiary, Jewett-Cameron South Pacific Ltd. ("JCSP") was incorporated in the Kingdom of Tonga in July 1990. The Company has wound down its operations in Tonga by closing operations. The Company's wholly-owned subsidiary, Jewett-Cameron Seed Company ("JCSC") was incorporated in Oregon, USA in October 2000. This company was formed after the Company acquired certain assets of a company called Agrobiotech Inc. The assets acquired by the Company were located at 31345 N.W. Beach Road in Hillsboro, Oregon. The assets purchased by the Company consisted of thirteen plus acres of land; 105,000 square feet of buildings; rolling stock; and, equipment. This facility was utilized for seed and grain processing, storage and brokerage. JCSC now operates as a seed and grain processing, storage and brokerage business. 3 Financial Information About Business Segments United States Dollars Fiscal Years Ended August 31st 2001 2000 1999 ----------- ----------- ----------- SALES: Building Materials: United States $19,369,153 $23,336,751 $27,707,986 South Pacific 45,602 316,757 Industrial Tools: 919,169 1,111,833 1,077,530 Seed processing & sales 1,824,632 ----------- ----------- ----------- $22,112,954 $24,494,186 $29,102,273 INCOME (LOSS) FROM OPERATIONS: Building Materials: United States $ 843,278 $1,250,539 $1,314,062 South Pacific ( 2,285) (190,610) (138,126) Industrial Tools: (23,981) 150,123 116,902 General Corporate: (107,547) ( 87,549) (111,654) Seed processing & sales 35,984 ----------- ----------- ----------- $745,359 $1,222,503 $1,181,184 IDENTIFIABLE ASSETS: Building Materials: United States $6,739,910 $6,456,978 $6,521,677 South Pacific 247,907 464,719 Industrial Tools: 101,409 116,753 117,549 General Corporate: 19,707 115,722 110,306 Seed processing & sales 815,699 ----------- ----------- ----------- $7,676,725 $6,937,360 $7,214,251 4 Narrative Description of Business - --------------------------------- The following material describes the business of each of the operating subsidiaries. The holding company and the operating subsidiaries employ a total of 50 people. Jewett-Cameron Lumber Corporation - --------------------------------- JCLC operates out of facilities located in North Plains, Oregon, and Ogden, Utah. The Company competes in the following business segments: warehouse distribution and direct sales of building materials to home improvement centers primarily in the Pacific and Rocky Mountain regions of the United States; export of finished building materials to overseas customers, primarily in central and south America; and specialty wood products for government and industrial sales, primarily on a contract-bid basis. During Fiscal 2001/2000/1999, sales to home improvement centers represented about 87.6%/95.3%/95.2% of revenue; with export, industrial tools and seed processing and sales representing 12.4%/4.7%/4.8%, respectively. The Fiscal 2001 increase in the percent related to export, industrial tools and seed processing and sales is a result of the revenues from the first year of operations from Jewett-Cameron Seed Company. JCLC concentrates its sales efforts on the home improvement industry, an industry that has not been subject to major business cycles. Traditionally, the new home construction portion of the lumber industry is highly sensitive to the US economy and interest rates and generally suffers during periods of economic decline and high interest rates, due to the reduction in housing starts. JCLC has concentrated on building a customer base in the residential repair and remodeling segment of the industry (a growing market fueled by professional remodelers and do-it-yourself homeowners), making it less susceptible to swings in housing starts. The products JCLC sells are not unique and with few exceptions are available from multiple suppliers. Products sold to industrial customers often require specialty fabrication such as truck parts and are remanufactured by several outside sources. Export sales are primarily timbers. JCLC's current product categories include: * Fencing - A mix of widths, heights, textures, species, prefabricated panels, split rail, and pickets that are appropriate for the home improvement centers. A similar array of posts, post caps, and rails. * Residential Decking - A selection of widths, lengths, species, treated and stained products along with accessories such as railings and step risers. 5 * Lattice - Stained, painted, and natural panels as well as a selection of vinyl panels. * Garden Timbers - Treated, untreated, or stained including cherrytone garden ties, bender board, stakes, and lathe. * Gates * Arbors * Pine shelving and furring. * Pine kits - Shelving and utility benches. * Fire retardant dimension lumber and plywood. * Dimension lumber. * Plywoods and oriented strand board. * Dowels * Kennels A company-owned distribution center and headquarters office facility in North Plains, Oregon was completed in November 1995. This new complex includes 40,000 square feet under roof of warehouse, office, and manufacturing space on five paved acres. This facility gives JCLC the capacity to provide a broad range of products and services to its customer base from Northern California to Alaska. The company also owns a distribution complex in Ogden, Utah, with a 25,000 square foot warehouse and 3,500 square feet of office space on a total of 30 acres. This facility services customers in the Rocky Mountain Region including the states of Utah, Colorado, Wyoming, Montana, Idaho, and northern Nevada. Inventories are maintained at these facilities and shipped to home improvement center customers. During the season's peak, some of the material is also shipped directly from the producing mill to the customer; as a result, JCLC sells both out of its warehouse facilities and mill direct. No patents, trademarks, licenses, franchises, or concessions are held by JCLC and as a result they are not factors in its business. JCLC does receive commitments from a number of large home improvement chains in the late fail/early winter to supply product at a fixed price for a specified period of time; i.e., for three months of firm pricing once the season begins. Major Customers: Fiscal Years Ended August 31st 2001 2000 1999 ----------------------------- Lowes Companies 8% 15% 28% Fred Meyer Inc. 40% 36% 20% The Home Depot, Inc. 31% 21% 20% Homebase, Inc. 3% 13% 6 The home improvement business is seasonal, with most sales occurring between February and August. The Company negotiates an agreement with each of its major home center customers in the fall of each year to include products to be carried and approximate volumes required for the coming home improvement season. Deliveries for the new season normally begin in late February, depending on weather. JCLC begins buying inventory for the next home improvement season in late fall each year. Consequently, an inventory buildup occurs until the heavy selling season begins in February. Inventory continues to remain high for a few months and then gradually declines to seasonal low levels at the end of the summer. Backlog orders are not a factor in JCLC's business. No material portions of the business are subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government. The home improvement center industry is highly competitive. Many of JCLC's primary competitors are much better financed and have sophisticated national distribution networks. These competitors include: (1) Georgia-Pacific, headquartered in Atlanta, Georgia, with distribution centers throughout the service area; (2) Weyerhaeuser, headquartered in Tacoma, Washington, with distribution centers throughout the service area; (3) Boise Cascade, headquartered in Boise, Idaho, with several distribution centers in the service area; and (4) OREPAC Building Products, headquartered in Wilsonville, Oregon, with several distribution centers in the service area. These competitors, particularly Georgia Pacific, Weyerhaeuser, and Boise Cascade, have product lines which are substantially broader than those of JCLC, and therefore reference to their annual sales includes many more product lines than those sold by JCLC. JCLC's home improvement center market area consists of stores in Alaska, northern California, Oregon, and Washington being served out of the North Plains, Oregon warehouse, and Utah, Colorado, Idaho, Wyoming, Montana, and northern Nevada served out of the Ogden, Utah warehouse. Its home improvement sales of US$19 million represents less than 1% of the lumber category sales by the major home improvement center chains in this primary service area. The larger companies are often unwilling to compete with a JCLC or OREPAC in terms of product flexibility and service of individual retail stores. OREPAC, like JCLC, serves the Pacific region; however, their product mix is different and they concentrate on building materials other than lumber and plywood. During the spring of 1993, JCLC acquired a manufacturing plant to produce several lines of products for home improvement center 7 customers. The plant was moved to a larger facility in Portland in August 1993, and subsequently was moved to an existing building on the North Plains facility in March 1995. The plant currently cuts cedar fencing products and pine boards. MSI-PRO Co. - ---------- MSI-PRO operates from the same facilities as JCLC. MSI-PRO imports and distributes both pneumatic air tools and industrial clamps. Distribution is throughout the United States and Canada to distributors and original equipment manufacturer customers. Sales are made through a network of agents and representatives, each of whom is an independent contractor representing between 10-to-15 other manufacturers who sell to similar customers but are not selling competing lines. MSI-PRO has agents and representatives that cover major industry groupings including industrial suppliers, automotive suppliers, and woodworking suppliers. The pneumatic air tools, manufactured and sold under the name MSI-PRO, are of a light industrial application toward a low end price. MSI-PRO exclusively markets the MSI-PRO line. The industrial clamps are newer to the Company. The line is high-quality and moderately priced and covers a wide variety of potential customers. The products have been manufactured for MSI-PRO by several suppliers in Taiwan and South Korea. All products are covered by more than one supplier. Sales of pneumatic air tools and industrial clamps are not seasonal. MSI-PRO is a registered trademark in the United States and Canada. No other patents, licenses, franchises, or concessions are held by the Company. The market for pneumatic air tools is very competitive. MSI-PRO faces competition from better financed companies with more sophisticated sales forces and distribution networks. The U.S. market for pneumatic air tools is currently approximately $1 billion in annual sales, of which 60% are manufactured in the United States and 40% are imported. The major US manufactured lines are Chicago Pneumatic and Ingersoll-Rand, which rank #1 and #2 in overall size in the industry. A smaller line, Sioux, is also manufactured in the United States. The two largest imported lines today are Florida Pneumatic and Astro Tools. Others include Sunnex, Ames, and Eagle. MSI-PRO's volume today is a very small fraction of the market. The current market strategy that allows MSI-PRO to compete in the pneumatic air tool and industrial clamp markets includes brand name and company recognition, moderate to low price, and continued development of 8 a manufacturer representative organization which covers all of the major users of the tools. The U.S. sales volume in industrial clamps is approximately US$300 million annually. There are fewer competitive lines available and MSI-PRO expects to gain a larger share of the market in industrial clamps than in pneumatic air tools. There are no customers that purchase 10% or more of MSI-PRO's products in any one year. Backlog orders are not a major factor. No portion of the business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government. 9 Jewett-Cameron South Pacific Ltd. - --------------------------------- This Tongan corporation, JCSP, until Fiscal 1999, consisted of three retail building material yards located on separate islands of the Kingdom of Tonga. Products sold included finished lumber, plywood, hardboard, cement, roofing, rebar, windows, doors, plumbing fixtures, floor tile, and other miscellaneous building materials. The finished lumber, plywood, hardboard, and some other building materials were sent from the United States. Most other products were purchased from Fiji, New Zealand, or Australia. All materials were available from multiple sources. Tonga is an island nation of 100,000 people, located in the South Pacific south of the Equator and just west of the International Date Line. The primary sources of income to the Kingdom are money sent home from the 100,000 Tongans living abroad, agricultural exports, and grants from other governments. Very little industry exists. There is a steady demand for building materials in Tonga for remodeling, home construction, commercial buildings, and church construction. Most new houses being built have a western flavor to them, and western building materials are in demand. Materials are readily available from a number of sources, subject primarily to the timing and availability of ships going to the Kingdom. JCSP was able to negotiate favorable shipping arrangements from the U.S. west coast due to the consistent high volume sent to Tonga and other ports in the South Pacific. Over the past several years, the market has become more competitive in Tonga. In addition, a number of contractors and individual homebuilders have begun importing their own building materials and, due to favorable customs treatment, this method of purchasing materials has become a major source of competition to the established building material dealers. JCSP did not maintain its competitive position, sales declined dramatically during Fiscal 1997, Fiscal 1998, and Fiscal 1999 and the operation become unprofitable. Further, during Fiscal 1998, the Tongan currency was devalued substantially in relationship to the United States Dollar; this resulted in a large currency translation loss being reported during Fiscal 1998. Also, the Company elected to write down a substantial number of debts during Fiscal 1998. In Fiscal 1999 the Company made the decision to wind down its operations in Tonga. The Company has wound down its operations in Tonga by closing operations during Fiscal 2000 and as of August 31, 2001, the Company had no remaining interest in Tonga. ITEM 2. DESCRIPTION OF PROPERTY - -------------------------------- 10 The Company's executive offices are located at 32275 NW Hillcrest, North Plains, Oregon 97133. The Company purchased the five acres of land for $350,000 in January 1995 and finished construction for $850,000 of the 40,000 sq.ft. facility (6,000 sq.ft. of office space, 10,000 sq.ft. of manufacturing space, and 24,000 sq.ft. of warehouse space) in October 1995. The facility provides office space for all of the Company's executive offices and is used as a distribution center to service the Company's customer base from northern California to Alaska. In July 1994, the Company purchased a distribution complex at 9501 West 900 South, Ogden, Utah for $295,000. This 30-acre, 28,500 sq.ft. facility is used to service the Company's customer base in the Rocky Mountain region. In October 2000, the Company purchased all of the assets, including land, buildings and equipment of Agrobiotech Inc. (Hillsboro) for total proceeds of $1,530,762. The Company operates its wholly owned subsidiary, Jewett-Cameron Seed Company out of this facility. ITEM 3. LEGAL PROCEEDINGS - -------------------------- The Company knows of no material, active or pending legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation. The Company knows of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ No matters were submitted to a vote of security holders through solicitation or otherwise during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY - ---------------------------------------------- AND RELATED STOCKHOLDER MATTERS ------------------------------- The Registrant's common stock is issued in registered form. Computershare Investor Services, Inc. (located in Vancouver, British Columbia, Canada) is the registrar and transfer agent for the common stock. On 11/13/01, the shareholders' list for the Registrant's common shares showed 27 registered shareholders and 1,074,162 shares 11 outstanding, including 22 registered holders in the United States holding 1,003,030 shares. As of 11/13/01, the Registrant estimates that there are 190 "holders of record" of its common stock resident in the United States holding the above referenced 1,003,030 shares. As of 11/13/01, the Registrant estimates there are over 350 total beneficial shareholders of its common stock. The Registrant completed a one-for-five share consolidation in March 1996. All references to per share prices and the number of shares refer to post-consolidation data unless otherwise indicated. The Registrant's common shares trade on the NASDAQ Small Capital stock exchange in the United States, having the trading symbol "JCTCF" and CUSIP# 47733C-20-7. The common stock commenced public trading on NASDAQ in April 1996. Table No. 1 lists the volume of trading and high, low and closing sales prices on the NASDAQ Small Capital stock exchange for the Registrant's common shares for the last eight fiscal quarters. The price was US$6.75 on 11/13/01. Table No. 1 NASDAQ Small Capital Stock Exchange Common Shares Trading Activity Fiscal - Sales - Quarter US Dollars Ended Volume High Low Closing - -------- ------- ----- ----- ------- 8/31/01 27,400 $6.73 $6.01 $6.73 5/31/01 22,500 6.45 5.31 6.01 2/28/01 41,100 6.69 4.81 5.75 11/30/00 64.200 5.12 4.50 4.81 8/31/00 39,200 $5.50 $4.50 $5.50 5/31/00 20,900 4.93 4.00 4.50 2/29/00 118,700 5.19 4.00 4.78 11/30/99 63,284 5.50 4.88 5.48 The Registrant's common shares also trade on the Toronto Stock Exchange in Toronto, Ontario, Canada, having the trading symbol "JCT". The common stock commenced public trading on the Toronto Stock Exchange in February 1994, following over six years of trading on the Vancouver Stock Exchange. Table No. 2 lists the volume of trading and high, low and closing sales prices on the Toronto Stock Exchange for the Registrant's 12 common shares for the last eight fiscal quarters. The price was CDN$10.75 on 11/13/01. Table No. 2 Toronto Stock Exchange Common Shares Trading Activity Fiscal - Sales - Quarter Canadian Dollars Ended Volume High Low Closing - -------- ------- ----- ----- ------- 8/31/01 10,020 $10.00 $9.26 $10.00 5/31/01 7,140 9.45 8.50 9.34 2/28/01 10,000 9.24 7.50 9.24 11/30/00 22,381 8.10 7.50 7.50 8/31/00 17,000 $8.00 $6.45 $7.70 5/31/00 24,132 7.00 6.45 6.45 2/29/00 42,950 7.55 6.10 7.50 11/30/99 32,970 8.10 7.35 7.55 There are no restrictions that limit the Registrant's ability to pay dividends on its common stock. The Registrant has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Registrant is to retain future earnings for use in its operations and expansion of its business. If dividends were to be paid, Canadian law states that in the case of dividends paid to residents not of Canada, the Canadian tax is withheld by the Registrant, which remits only the net amount to the shareholder. By virtue of Article X of the Tax Convention, the rate of tax on dividends paid to residents of the United States is generally limited to 15% of the gross dividend (or 10% in the case of certain corporate shareholders owning at least 10% of the Registrant's voting shares). In the absence of the treaty provisions, the rate of Canadian withholding tax imposed on non-residents is 25% of the gross dividend. Stock dividends received by non-residents from the Registrant are taxable by Canada as ordinary dividends. 13 ITEM NO. 6. SELECTED FINANCIAL DATA - ------------------------------------ The selected financial data in Table No. 3 for Fiscal 2001/2000/1999 ended August 31st was derived from the financial statements of the Company which were audited by Davidson & Company, independent Chartered Accountants, as indicated in their report which is included elsewhere in this Annual Report. The selected financial data for Fiscal 1998/1997 was derived from audited financial statements of the Company, not included herein. The selected financial data was extracted from the more detailed financial statements and related notes included herein and should be read in conjunction with such financial statements and with the information appearing under the heading, "Management's Discussion and Analysis of Financial Condition and Results of Operations". Table No. 3 Selected Financial Data ($ in 000, expect per share data) Year Year Year Year Year Ended Ended Ended Ended Ended 8/31/01 8/31/00 8/31/99 8/31/98 8/31/97 ------------------------------------------- Revenue $22,113 $24,494 $29,102 $26,179 $28,848 Gross Profit $4,287 $3,866 $4,288 $3,392 $3,374 Net Income $712 $609 $593 $102 $495 Earnings per Share: $0.72 $0.60 $0.52 $0.09 $0.43 Fully Diluted EPS: $0.70 $0.58 $0.51 $0.08 $0.41 Dividends Per Share $0.00 $0.00 $0.00 $0.00 $0.00 Basic Avg Shares(000) 989 1,021 1,132 1,148 1,159 Diluted Avg Shares(000) 1,023 1,054 1,167 1,236 1,335 Working Capital $3666 $4609 $4181 $3650 $4240 Long-Term Debt $0 $0 $0 $0 $580 Shareholders' Equity $6694 $6150 $5984 $5717 $5682 Total Assets $7677 $6937 $7214 $7220 $9441 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ---------------------------------------------------------- CONDITION AND RESULTS OF OPERATION ---------------------------------- The following discussion of the financial condition, changes in financial condition and results of operations of the Company for the fiscal years ended 8/31/01, 8/31/00 and 8/31/99 should be read in conjunction with the financial statements of the Company and related notes included therein. All references to common shares refer to the Company's Common Shares without Par Value unless otherwise indicated. 14 Results of Operations. - ---------------------- Sales decreased 9.7% to $22,112,954 in Fiscal 2001, down from $24,494,186 in Fiscal 2000 and $29,102,273 in Fiscal 1999. Gross profit increased 11% to $4,287,404 from $3,866,372 in Fiscal 2000 and $4,288,024 in Fiscal 1999. General and Administrative Expenses increased 40.5% to $3,464,928 in Fiscal 2001 from $2,465,394 in Fiscal 2000 and $2,895,790 in Fiscal 1999. The significant increase in general and administrative expenses was due almost entirely to the addition of the new business, Jewett-Cameron Seed Company, a wholly-owned subsidiary of the Company. Specific increases in expenses attributable to Jewett-Cameron Seed Company were: warehouse expenses and supplies of $123,177; wages and employee benefits of $572,430; telephone and utilities of $28,911; office and miscellaneous of $63,478; insurance of $48,993; and, depreciation of $94,747. Other Items were ($110,198) in Fiscal 2001 compared with ($66,824) in Fiscal 2000 and ($56,675) in Fiscal 1999. In all three years the bulk of the "other items" consisted of interest expense. Net Income rose to $712,196 in Fiscal 2001 from $608,679 in Fiscal 2000 and $592,509 in Fiscal 1999. Basic EPS was $0.72 in Fiscal 2001 versus $0.60 in Fiscal 2000 and $0.52 in Fiscal 1999. Fully Diluted EPS were $0.70 in Fiscal 2001 versus $0.58 in Fiscal 2000 and $0.51 in Fiscal 1999. Jewett-Cameron Lumber Company - ----------------------------- JCLC posted a 17% decrease in sales to $19.4 million in Fiscal 2001 as a result of continuing low prices in the lumber market and the discontinuing of northwest operations in the area of home improvement products by Homebase, Inc. which in the prior fiscal year (Fiscal 2000) accounted for 13% of the Company's sales. JCLC's income from operations decreased 32% in Fiscal 2001 to $843,278 compared with $1,250,539 in Fiscal 2000 and $1,314,062 in Fiscal 1999. The causes of the decrease are a combination of lower lumber prices and the discontinuing of northwest operations in the area of home improvement products by Homebase, Inc. MSI-PRO Co. - ----------- The Fiscal 1997 renaming of the industrial tools under the "MSI-PRO" label has continued to provide a better product identity and a more efficient use of marketing dollars. Sales decreased in Fiscal 2001 to $919,169 following a marginal increase in Fiscal 15 2000 when the Company decided to focus upon more profitable products. Jewett-Cameron South Pacific - ---------------------------- The Company completed the winding down of its operations in Tonga during Fiscal 2001 and as of fiscal year end, August 31, Jewett-Cameron South Pacific was no longer in existence. Jewett-Cameron Seed Company - --------------------------- Fiscal 2001 was the first year of operations for Jewett-Cameron Seed Company which was incorporated as a wholly owned subsidiary of the Company in October 2000. At the end of Fiscal 2001, sales from Jewett-Cameron Seed Company were $1,824,632 and income from operations was $35,894. Management had previously forecast a loss of approximately $300,000 for Jewett-Cameron Seed Company for its first year of operations; however, because of an effective marketing campaign and efficient operations the projected loss was not realized. Liquidity and Capital Resources - ------------------------------- Cash flows from Fiscal 2001 Operating Activities totaled $1,607,011, including the $712,196 Net Income. Material adjust-ments included $220,070 of amortization/depreciation; a gain of($85,100) in deferred income taxes; a $676,396 decrease in accounts receivable; a $222,548 decrease in inventory; an increase in prepaid expenses of ($36,862); and, a decrease of ($102,237) in accounts payable and accrued liabilities. Cash Flows from Fiscal 2001 Investing Activities totaled ($1,622,072), consisting almost exclusively of the purchase of the capital assets from Agro Biotech in the early part of the fiscal year. Cash Flows from 2001 Financing Activities included an increase in bank indebtedness of $297,960 and Treasury shares acquired in the amount of($168,554). Cash Flows from Fiscal 2000 Operating Activities totaled ($560,034), including the $608,679 Net Income. Material adjustments included depreciation and amortization of $125,323; a foreign exchange loss of $55,357; deferred income taxes of $95,000; a loss on the disposal of capital assets of $73,118; an increase in accounts receivable of ($90,838); a decrease in inventory of $44,260; a decrease in prepaid expenses of $4,296; and a decrease of ($355,161) in accounts payable and accrued liabilities. Cash Flows from Fiscal 2000 Investing Activities totaled ($45,297). This consisted of two items: ($400) in deposits and ($44,897) used in the purchase of capital assets. 16 Cash Flows from Fiscal 2000 Financing Activities totaled ($530,409) including: a decrease in bank indebtedness of ($87,883) and, ($442,526) used to acquire treasury shares. Working capital was $3,665,898 at 8/31/01 compared with $4,609,358 at 8/31/00. Major working capital changes during Fiscal 2001 were an increase in cash of $114,345; a decrease in accounts receivable of $676,396; a decrease in inventory of $222,548; and an increase in current liabilities of 195,723 consisting primarily of bank indebtedness.. The daily cash needs of the Company are met throughout the year through the bank line-of-credit of JCLC. JCLC has a bank line-of-credit of $5.5 million, which along with the working capital surplus is considered adequate to support the Company's sales level anticipated for the coming year. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA - --------------------------------------------------- The financial statements, schedules, and notes thereto as required under ITEM #8 are attached hereto and found immediately following the text of this Annual Report. The audit report of Davidson & Company, independent Chartered Public Accountants, is included herein immediately preceding the financial statements. Audited Financial Statements: - ----------------------------- Fiscal 2001 Ended August 31st - ----------------------------- Independent Auditor's Report, dated 10/19/01 Consolidated Balance Sheets at 8/31/01 and 8/31/00 Consolidated Statements of Operations for the fiscal years ended 8/31/01, 8/31/00 and 8/31/99 Schedule of Consolidated General and Administrative Expenses for the fiscal years ended 8/31/01, 8/31/00 and 8/31/99 Consolidated Statements of Cash Flows for the fiscal years ended 8/31/01, 8/31/00 and 8/31/99 Consolidated Statements of Changes in Shareholders' Equity for the fiscal year ended 8/31/01 Notes to The Consolidated Financial Statements Independent Auditor's Report dated October 19, 2001 Financial Statement Schedule Schedule II: Valuation and Qualifying Accounts 17 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON - --------------------------------------------------------- ACCOUNTING AND FINANCIAL DISCLOSURE. ----------------------------------- Not Applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ Table No. 4 lists as of 11/14/01 the names of the Directors of the Registrant. The Directors have served in their respective capacities since their election at the 1/12/01 Annual Meeting of Shareholders and will serve until the next Annual Shareholders' Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Registrant. Table No. 4 Directors Year First Elected Name Age or Appointed - --------------------------- --- ------------------ Donald M. Boone (3) 61 July 1987 Jeffery J. Lowe (1)(2) 44 February 1995 James R. Schjelderup (1)(2) 47 July 1987 Stephanie Rink (1)(2) 43 July 2000 (1) Member of Audit Committee. (2) Resident of Canada. (3) Resident of Oregon, USA. Table No. 5 lists, as of 11/14/01, the names of the Executive Officers and certain significant employees of the Registrant. The Executive Officers serve at the pleasure of the Board of Directors. All Executive Officers are residents/citizens of the United States and spend full-time on the affairs of the Registrant. Table No. 5 Executive Officers Name Position Board Approval - ----------------- ------------------- -------------- Donald M. Boone President/Treasurer 1987 Michael C. Nasser Corporate Secretary 1987 Business Experience - ------------------- Donald M. Boone has over thirty-seven years in sales and corporate management, including twenty-seven years affiliated with companies in the forest products industry. Jeffery J. Lowe has been a corporate, commercial and securities attorney with Richards Buell Sutton of Vancouver, British Columbia, Canada since 1983. 18 Michael C. Nasser has over thirty-two years experience in sales and corporate management, including twenty-eight years affiliated with companies in the forest products industry. James R. Schjelderup has many years experience in computers and corporate management. He has been an independent computer consultant in the Vancouver, British Columbia, Canada area since 1988. Stephanie Rink has over sixteen years experience in consulting to the management of businesses in the field of personal growth. She has been an independent consultant in the Vancouver, British Columbia, Canada area since 1985 and she travels throughout North America and Europe presenting seminars in personal growth and personal development. Involvement in Certain Legal Proceedings - ---------------------------------------- There have been no events during the last five years that are material to an evaluation of the ability or integrity of any director, person nominated to become a director, executive officer, promoter or control person including: a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; b) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); c) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently enjoining, barring, suspending or otherwise limiting his/her involvement in any type of business, securities or banking activities; and d) being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. Family Relationships/Other Relationships/Arrangements - ----------------------------------------------------- There are no arrangements or understandings between any two or more Directors or Executive Officers, pursuant to which he/she was selected as a Director or Executive Officer. There are no family relationships, material arrangements or understandings between any two or more Directors or Executive Officers. 19 ITEM 11. EXECUTIVE COMPENSATION - -------------------------------- The Company has no formal plan for compensating its Directors for their service in their capacity as Directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director. No Director received any compensation for his services as a Director, including his committee participation and/or special assignments, other than indicated below. The Company grants stock options to Directors, Executive Officers and employees; refer to ITEM #11, "Executive Compensation, Stock Option Program". The Company established an Employee Stock Ownership Plan ("ESOP") that covers all employees of the Company; refer to ITEM #11, "Executive Compensation, Employee Stock Ownership Plan". Other than participation in the aforementioned stock option plan and/or ESOP, no funds were set aside or accrued by the Company during Fiscal 2000 to provide pension, retirement or similar benefits for Directors or Executive Officers. The Company has no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company in Fiscal 2002 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds US$60,000 per Executive Officer. No Executive Officer/Director received other compensation in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Executive Officers/Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation. Except for the aforementioned stock option plan and ESOP, the Company has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company's Directors or Executive Officers. However, Michael C. Nasser receives a discretionary bonus. The Company has no written employment agreements. 20 Cash Compensation - ----------------- Table No. 6 details compensation paid during Fiscal 2001 Ended 8/31/01 to the Chief Executive Officer and the only other Executive Officer, to the extent he was compensated in excess of $100,000. Aggregate compensation to all Directors and Executive Officers during Fiscal 2000 was $209,750. Table No. 6 Summary Compensation Table Name and Annual Compensation -------------------------------- All Principal Fiscal Other Annual Other Position Year Salary Bonus Compensation Compensation - -------------------- ------ -------- ------- ------------ ------------ Donald M. Boone, CEO 2001 $36,000 $30,000 $0 $0 2000 $36,000 0 0 0 1999 $36,000 $30,000 0 0 1998 $36,000 0 0 0 Michael C. Nasser 2001 $143,750 $ 0 $0 $0 Corporate Secretary 2000 $120,000 45,728 0 0 1999 120,000 78,675 0 0 1998 120,000 39,750 0 0 Employee Stock Ownership Plan - ----------------------------- The Company sponsors an employee stock ownership plan ("ESOP") that covers all U.S. employees who are employed by the Company on August 31of 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 Company accounts for its ESOP in accordance with SOP-93-6 (Employers' Accounting for Employee Stock Ownership Plans). Th Company records compensation expense equal to the market price of the shares acquired on the open market. Any dividends on allocated ESOP shares are recorded as a reduction of retained earnings. ESOP compensation expense was $82,530, $79,141 and $90,170 for 2001, 2000 and 1999, respectively. The ESOP shares allocated as of August 31, 2001 were 131,000 and as of August 31, 2000, the ESOP shares allocated were 118,000. Stock Option Program - -------------------- Stock Options to purchase securities from Company can be granted to Directors and Employees of the Company on terms and conditions acceptable to the regulatory authorities in Canada, notably the Toronto Stock Exchange, the Ontario Securities Commission and British Columbia Securities Commission. The Company has no formal written stock option plan. Under the stock option program, stock options for up to 10% of the number of issued and outstanding common shares may be granted from time to time, provided that stock options in favor of any one individual may not exceed 5% of the issued and outstanding 21 common shares. No stock option granted under the stock option program is transferable by the optionee other than by will or the laws of descent and distribution, and each stock option is exercisable during the lifetime of the optionee only by such optionee. The exercise price of all stock options granted under the stock option program must be at least equal to the fair market value (subject to regulated discounts) of such common shares on the date of grant, and the maximum term of each stock option may not exceed five years and are determined in accordance with Toronto Stock Exchange ("TSE") guidelines. The names and titles of the Directors and Executive Officers of the Registrant to whom outstanding stock options have been granted and the number of common shares subject to such options are set forth in Table No. 7 as of 11/14/01, as well as the number of options granted to Directors and all employees as a group. Table No. 7 Stock Options Outstanding Number of Shares of CDN$ Common Exer. Expiration Name Stock Price Date - ------------------------------------ --------- ----- ---------- Donald M. Boone 35,000 $4.25 8/06/2006 Michael C. Nasser 35,000 4.25 8/06/2006 Jeffrey Lowe 4,000 8.25 12/31/2001 James Schjelderup 4,000 8.25 12/31/2001 Total Officers/Directors (4 persons) 78,000 Total Employees/consultants 0 Total Officers/Directors/Employees 78,000 22 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND - ------------------------------------------------------------- MANAGEMENT ---------- The Registrant is a publicly-owned corporation, the shares of which are owned by United States residents, Canadian residents, and residents of other jurisdictions. The Registrant is not controlled directly or indirectly by another corporation or any foreign government. There are no arrangements which may result in a change of control of the Registrant. The Registrant is aware of two individuals as being the beneficial owner of more than ten percent (10%) of the common stock of the Registrant, as described in Table No. 8. Table No. 8 lists as of 11/14/01 all Directors and Executive Officers who beneficially own the Registrant's voting securities and the amount of the Registrant's voting securities owned by the Directors and Executive Officers as a group. Table No. 8 Shareholdings of Directors and Executive Officers Title Amount and Nature Percent of of Beneficial of Class Name of Beneficial Owner (1) Ownership Class # - ------------------------------------ ----------------- ------- Common Donald M. Boone (2) 299,190 26.9% Common Michael C. Nasser (3) 157,304 14.2% Total 456,494 41.1% (1) Addresses: c/o Jewett-Cameron Trading Company Ltd. 32275 NW Hillcrest, North Plains, Oregon 97133 (2) 35,000 represent currently exercisable stock options. (3) 35,000 represent currently exercisable stock options. # Based on 1,074,162 shares outstanding as of 11/14/01 and currently exercisable stock option owned by each beneficial stockholder. 23 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Jeffery J. Lowe, a Director of the Company, is an attorney with Richards Buell Sutton of Vancouver, British Columbia, Canada who are the Company's legal counsel. During Fiscal 2000/1999/1998, respectively, the Company paid them $8,794, $12,959, $6,242, for legal services. Other than discussed above, there have been no transactions since 8/31/95, or proposed transactions, which have materially affected or will materially affect the Company in which any Director, Executive Officer, or beneficial holder of more that 10% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest. Management believes the tran-sactions referenced above were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties. 24 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, - -------------------------------------------------- AND REPORTS ON FORM 8-K ----------------------- (A) Financial Statements and Schedules: - --------------------------------------- Independent Auditor's Report, dated 10/19/01 Consolidated Balance Sheets at 8/31/01 and 8/31/00 Consolidated Statements of Operations for the fiscal years ended 8/31/01, 8/31/00 and 8/31/99 Schedule of Consolidated General and Administrative Expenses for the fiscal years ended 8/31/01, 8/31/00 and 8/31/99 Consolidated Statements of Cash Flows for the fiscal years ended 8/31/01, 8/31/00 and 8/31/99 Consolidated Statements of Changes in Shareholders' Equity for the fiscal year ended 8/31/01 Notes to The Consolidated Financial Statements Independent Auditors' Report, dated 10/19/01 Financial Statement Schedule Schedule II: Valuation and Qualifying Accounts (B) Reports on Form 8-K: - ------------------------ The Company filed no reports on Form 8-K's during the period covered by this Annual Report. 25 (C) Index to Exhibits: - ----------------------- 3. i. Articles of Incorporation of the Company ii. By-Laws (Company has no by-laws) -- Incorporated by Reference to Form 10 -- 4. Instruments Defining Rights of Security Holders. - Refer to Exhibit No. 3. - 9. Voting Trust Agreement: None 10. Material Contracts: None 11. Statement re: Computation of EPS: None 12. Statement re: Computation of Ratios: None 13. Annual Report to Security Holders, Form 10-Q or Quarterly Report to Security Holders: None 16. Letter re: Change of Accountant: None 18. Letter re: Change in Accounting Principles: None 21. Subsidiaries of Registrant: Refer to Page 3 of Form 10-K 22. Published Report Regarding Matters Submitted to Vote of Security Holders: None 24. Power of Attorney: None 27. Financial Data Schedule: None 28. Information from Reports Furnished to State Insurance Regulatory Authorities: Not Applicable 99. Additional Exhibits: -- Incorporated by Reference to Form 10 -- 26 SIGNATURES Pursuant to the requirements of Section 13 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 Date: November 17, 2001 By: /s/ Donald M. Boone -------------------------------------------------- Donald M. Boone, President/CFO/Controller/Director Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: November 17, 2001 By: /s/ Donald M. Boone -------------------------------------------------- Donald M. Boone, President/CFO/Controller/Director Date: November 17, 2001 By: /s/ Michael C. Nasser -------------------------------------- Michael C. Nasser, Corporate Secretary 27 JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 INDEPENDENT AUDITORS' REPORT To the Stockholders and Directors of Jewett-Cameron Trading Company Ltd. We have audited the consolidated balance sheets of Jewett-Cameron Trading Company Ltd. as at August 31, 2001 and 2000 and the consolidated statements of operations, general and administrative expenses, stockholders' equity and cash flows for the years ended August 31, 2001, 2000 and 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as at August 31, 2001 and 2000 and the results of its operations and cash flows for the years ended August 31, 2001, 2000 and 1999, expressed in U.S. dollars, in accordance with generally accepted accounting principles in the United States. As required by the Company Act of British Columbia we report that, in our opinion, these principles have been applied on a consistent basis. /s/DAVIDSON & COMPANY DAVIDSON & COMPANY Vancouver, Canada Chartered Accountants October 19, 2001
JEWETT-CAMERON TRADING COMPANY LTD. CONSOLIDATED BALANCE SHEETS (Expressed in U.S. Dollars) AS AT AUGUST 31 ===================================================================================================== 2001 2000 - ----------------------------------------------------------------------- -------------- -------------- ASSETS Current Cash and cash equivalents $ 322,622 $ 208,277 Accounts receivable, net of allowance of $315,000 (2000 - $250,000) 1,864,991 2,541,387 Inventory (Note 4) 2,400,027 2,622,575 Prepaid expenses 61,109 24,247 ------------ ------------ Total current assets 4,648,749 5,396,486 Capital assets (Note 5) 2,820,676 1,343,929 Deferred income taxes (Note 6) 207,300 122,200 Deposits - 74,745 ------------ ------------ Total assets $ 7,676,725 $ 6,937,360 ======================================================================= ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Bank indebtedness (Note 7) $ 297,960 $ - Accounts payable and accrued liabilities 684,891 787,128 ------------ ------------ Total current liabilities 982,851 787,128 ------------ ------------ Stockholders' equity Capital stock (Note 8) Authorized 20,000,000 Common shares, without par value 10,000,000 Preferred shares, without par value Issued 1,074,162 Common shares (2000 - 1,074,162) 1,795,157 1,795,157 Additional paid-in capital 582,247 582,247 Retained earnings 4,817,666 4,105,470 ------------ ------------ 7,195,070 6,482,874 Less: Treasury stock - 97,000 common shares (2000 - 65,500) (501,196) (332,642) ------------ ------------ Total stockholders' equity 6,693,874 6,150,232 ------------ ------------ Total liabilities and stockholders' equity $ 7,676,725 $ 6,937,360 ======================================================================= ============ ============
Contingent liabilities and commitments (Note 11) 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) YEAR ENDED AUGUST 31 ================================================================================================= 2001 2000 1999 - -------------------------------------------------- ------------- --------------- ---------------- SALES $ 22,112,954 $ 24,494,186 $ 29,102,273 COST OF SALES 17,880,550 20,627,814 24,814,249 ------------ ------------ ------------- GROSS PROFIT 4,232,404 3,866,372 4,288,024 ------------ ------------ ------------- OPERATING COSTS General and administrative expenses - Schedule 3,464,928 2,465,394 2,895,790 Foreign exchange loss 22,117 55,357 532 Loss on disposal of capital assets - - 45,078 Write-down of trademarks - - 165,440 Write-down of capital assets - 73,118 - Litigation settlement - 150,000 - ------------ ------------ ------------ 3,487,045 2,743,869 3,106,840 ------------ ------------ ------------- Income from operations 745,359 1,122,503 1,181,184 ------------ ------------ ------------- OTHER ITEMS Interest and other income 14,002 28,640 37,026 Interest expense (124,200) (95,464) (93,701) ------------ ------------ ------------- (110,198) (66,824) (56,675) ------------ ------------ ------------- Income before income taxes 635,161 1,055,679 1,124,509 ------------ ------------ ------------- Income taxes (Note 6) Current 8,065 352,000 546,00 Deferred (85,100) 95,000 (14,000) ------------ ------------ ------------- (77,035) 447,000 532,000 ------------ ------------ ------------- Net income for the year $ 712,196 $ 608,679 $ 592,509 ================================================== ============ ============ ============= Basic earnings per share $ 0.72 $ 0.60 $ 0.52 ================================================== ============ ============ ============= Diluted earnings per share $ 0.70 $ 0.58 $ 0.51 ================================================== ============ ============ =============
The accompanying notes are an integral part of these consolidated financial statements. JEWETT-CAMERON TRADING COMPANY LTD. SCHEDULE OF CONSOLIDATED GENERAL AND ADMINISTRATIVE EXPENSES (Expressed in U.S. Dollars) YEAR ENDED AUGUST 31 ============================================================================== 2001 2000 1999 - --------------------------------------- ------------ ------------ ------------ Bad debt expense $ 68,698 $ 15,542 $ 196,923 Depreciation and amortization 220,070 125,323 170,435 Insurance 122,620 73,627 55,398 Office and miscellaneous 253,914 190,436 242,558 Professional fees 98,020 116,278 161,500 Rent 5,804 - - Repairs and maintenance 43,599 53,341 36,937 Telephone and utilities 107,069 78,158 90,320 Travel, entertainment and advertising 189,297 152,459 167,929 Wages and employee benefits 2,129,468 1,557,038 1,689,362 Warehouse expenses and supplies 226,369 103,192 84,428 ----------- ----------- ----------- $ 3,464,928 $ 2,465,394 $ 2,895,790 ======================================= ============ ============ ============ 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) YEAR ENDED AUGUST 31 ============================================================================ ================ =============== ================ 2001 2000 1999 - ---------------------------------------------------------------------------- ---------------- --------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income for the year $ 712,196 $ 608,679 $ 592,509 Items not involving an outlay of cash: Depreciation and amortization 220,070 125,323 170,435 Foreign exchange (gain) loss - 55,357 - Deferred income taxes (85,100) 95,000 (14,000) Loss on disposal of capital assets - 73,118 45,078 Write-down of trademarks - - 165,440 Changes in non-cash working capital items: (Increase) decrease in accounts receivable 676,396 (90,838) (486,042) Decrease in inventory 222,548 44,260 381,968 (Increase) decrease in prepaid expenses (36,862) 4,296 17,210 Increase (decrease) in accounts payable and accrued liabilities (102,237) (355,161) 406,026 -------------- -------------- -------------- Net cash provided by operating activities 1,607,011 560,034 599,186 -------------- -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in bank indebtedness 297,960 (87,883) (679,438) Capital stock issued - - 11,044 Treasury shares acquired (168,554) (442,526) (336,123) -------------- -------------- -------------- Net cash provided by (used in) financing activities 129,406 (530,409) (325,079) -------------- -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Deposits 74,745 (400) - Purchase of capital assets (1,696,817) (44,897) (112,411) Proceeds on disposal of capital assets - - 9,324 -------------- -------------- -------------- Net cash used in investing activities (1,622,072) (45,297) (103,087) -------------- -------------- -------------- Change in cash and cash equivalents 114,345 (15,672) 171,020 Cash and cash equivalents, beginning of year 208,277 223,949 52,929 -------------- -------------- -------------- Cash and cash equivalents, end of year $ 322,622 $ 208,277 $ 223,949 ============================================================================ ================ =============== ================
Supplemental disclosures with respect to cash flows (Note 14) 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) YEAR ENDED AUGUST 31 ============================================================================================================================== Common Stock Treasury Shares ------------------------- -------------------------- Additional Number Number Paid-In Retained of Shares Amount of Shares Amount Capital Earnings Total - ----------------------------------- ------------ ------------ ------------ ------------- ----------- ------------ ------------ 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 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 year - - - - - 712,196 712,196 Treasury shares acquired - - 31,500 168,554 - - (168,554) ----------- ----------- ----------- ----------- ---------- ----------- ----------- Balance, August 31, 2001 1,074,162 $ 1,795,157 97,000 $ 501,196 $ 582,247 $ 4,817,666 $ 6,693,874 =================================== ============ ============ ============ ============= =========== ============ ============
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) AUGUST 31, 2001 1. NATURE OF OPERATIONS The Company was incorporated under the Company Act of British Columbia on July 8, 1987. The Company through its subsidiaries operates out of facilities located in North Plains, Oregon and Ogden, Utah. The Company operates as a wholesaler of lumber and building materials to home improvement centres located primarily in the Pacific and Rocky Mountain regions of the United States, as an importer and distributor of pneumatic air tools and industrial clamps throughout the United States, and as a processor and distributor of agricultural seeds in the United States. 2. SIGNIFICANT ACCOUNTING POLICIES Generally accepted accounting principles These consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America, which are not materially different from generally accepted accounting principles utilized in Canada. Principles of consolidation These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, The Jewett-Cameron Lumber Corporation, Jewett-Cameron Seed Co. and MSI-PRO 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. 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. Revenue from the Company's seed operations is generated by the provision of seed processing, handling and storage services provided to seed growers, and by the sales of seed products. Revenue from the provision of these services and products is recognized when the services have been performed and products sold and collection of the amounts is reasonably assured. Currency These financial statements are expressed in U.S. dollars as the Company's operations are based predominately in the United States. Any amounts expressed in Canadian dollars are indicated as such. Cash and cash equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) Inventory Inventory is recorded at the lower of cost, based on the average cost method and net realizable value. 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 The Company's functional currency for all operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Income statement accounts are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements into U.S. dollars are included in current results of operations. Gains and losses resulting from foreign currency translations are also included in current results of operations. 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 years ended August 31 is summarized as follows:
==================================================== =============== =============== =============== 2001 2000 1999 ---------------------------------------------------- --------------- --------------- --------------- Net income $ 712,196 $ 608,679 $ 592,509 ==================================================== =============== =============== =============== Basic earnings per share weighted average number of shares outstanding 988,681 1,020,726 1,131,627 Effect of dilutive securities Stock options 34,740 33,344 34,948 ------------- ------------- ------------- Diluted earnings per share weighted average number of shares outstanding 1,023,421 1,054,070 1,166,575 ==================================================== =============== =============== ===============
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) Earnings per share (cont'd...) Options to purchase 35,260, 48,656, 47,052, shares were outstanding at August 31, 2001, 2000 and 1999, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the common share, and therefore the effect would be anti-dilutive. 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". Financial instruments The Company uses the following methods and assumptions to estimate the fair value of each class of financial instruments for which it is practicable to estimate such values: Bank indebtedness The carry amount approximates fair value due to the short-term nature of the obligation. Cash and short-term investments The carrying amount approximates fair value because of the short maturity of those instruments. Accounts receivable The carrying value of accounts receivable approximates fair value due to the short-term nature and historical collectability. Accounts payable The carrying value of accounts payable approximates fair value due to the short-term nature of the obligations. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) Financial instruments (cont'd...) The estimated fair values of the Company's financial instruments are as follows:
============================== =============================== == =============================== 2001 2000 ------------------------------- ------------------------------- Carrying Fair Carrying Fair Amount Value Amount Value ------------------------------ --------------- --------------- -- --------------- --------------- Bank indebtness $ 297,960 $ 297,960 $ - $ - Cash and cash equivalents 322,622 322,622 208,277 208,277 Accounts receivable 1,864,991 1,864,991 2,541,387 2,541,387 Accounts payable 684,891 684,891 787,128 787,128 ============================== =============== =============== == =============== ===============
Comparative figures Certain comparative figures have been reclassified to conform with the presentation adopted for the current year. Accounting for derivative instruments and hedging activities Effective August 31, 2000, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. This statement requires companies to record derivatives on the balance sheet as assets or liabilities at their fair value. In certain circumstances, changes in the value of such derivatives may be required to be recorded as gains or losses. The impact of this statement did not have a material effect on the Company's consolidated financial statements. Recent accounting pronouncements Effective June 1, 2001, the Company adopted the SEC's Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," ("SAB 101"). SAB 101 provides guidance related to revenue recognition. In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all future business combinations and specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives, and reviewed for impairment in accordance with SFAS No. 121. The Company will adopt the provisions of SFAS 141 and SFAS 142 as of July 1, 2001. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 143 ("SFAS 143") "Accounting for Asset Retirement Obligations" that records the fair value of the liability for closure and removal costs associated with the legal obligations upon retirement or removal of any tangible long-lived assets. The initial recognition of the liability will be capitalized as part of the asset cost and depreciated over its estimated useful life. SFAS 143 is required to be adopted effective January 1, 2003. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) Recent accounting pronouncements (cont'd...) In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144") "Accounting for the Impairment or Disposal of Long-Lived Assets" that supersedes Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment or Disposal of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 is required to be adopted effective January 1, 2002. The adoption of these new pronouncements is not expected to have a material effect on the Company's financial position or results of operations. 3. BUSINESS COMBINATION AND ACQUISITION During the period, the Company acquired all of the assets, including land, buildings and equipment of Agrobiotech Inc. (Hillsboro) 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 Following the acquisition, the Company incorporated Jewett-Cameron Seed Co. under the laws of Oregon, U.S.A. This subsidiary operates as a processor and distributor of agricultural seed products. 4. INVENTORY =================================================== ================ 2001 2000 ------------------------------------ --------------- --------------- Home improvement products $ 1,936,706 $ 2,241,313 Air tools and industrial clamps 280,449 381,262 Seeds 182,872 - -------------- -------------- $ 2,400,027 $ 2,622,575 ==================================== =============== =============== JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 5. CAPITAL ASSETS =================================== ============== ============== 2001 2000 ----------------------------------- -------------- -------------- Office equipment $ 199,348 $ 185,422 Warehouse equipment 651,581 221,568 Buildings 2,072,155 1,288,340 Land 845,632 375,593 ------------- ------------- 3,768,716 2,070,923 Accumulated depreciation (948,040) (726,994) ------------- ------------- Net book value $ 2,820,676 $ 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. 6. INCOME TAXES A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory US federal income tax rate to income before income taxes is as follows:
=================================================== ============== =============== ============== 2001 2000 1999 --------------------------------------------------- -------------- --------------- -------------- Computed tax at the federal statutory rate of 34% $ 215,955 $ 358,931 $ 382,333 State taxes, net of federal benefit 1,541 34,980 51,590 Write-down of assets not deductible - - 5,179 Depreciation (7,612) 17,125 (6,123) Operating loss carryforwards (314,976) (50,514) - Losses of subsidiary 36,133 82,444 93,017 Inventory reserve 10,244 - - Bad debt reserve (26,329) - - Other 8,009 4,034 6,004 ------------- ------------- ------------- Provision (benefit) for income taxes $ (77,035) $ 447,000 $ 532,000 =================================================== ============== =============== ==============
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 6. INCOME TAXES (cont'd...) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
=================================================== ============== =============== =============== 2001 2000 1999 --------------------------------------------------- -------------- --------------- --------------- Deferred tax assets: Allowance for doubtful accounts $ 152,404 $ 87,159 $ 172,848 Difference between book and tax depreciation 54,896 35,041 44,352 Net operating loss carryforwards 246,476 210,128 200,534 ------------- ------------- ------------- Total deferred tax assets 453,776 332,328 417,734 Valuation allowance (246,476) (210,128) (200,534) ------------- ------------- ------------- Net deferred tax assets $ 207,300 $ 122,200 $ 217,200 =================================================== ============== =============== ===============
The Company has provided a full allowance on the deferred tax asset relating to its Canadian net operating loss carryforwards due to the uncertainty of these being realized. At August 31, 2001, the Company has available unused net operating losses that may be applied against future taxable income and that expire as follows: 2002 $ - 2003 241,031 2004 42,208 2005 76,801 2006 27,908 2007 52,108 2008 104,043 ------------- $ 544,099 7. BANK INDEBTEDNESS ====================================== ============== =============== 2001 2000 -------------------------------------- -------------- --------------- Demand loan $ 297,960 $ - ====================================== ============== =============== 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. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 8. CAPITAL STOCK Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company's ability to pay dividends on its common stock. The Company has not declared any dividends since incorporation. Treasury stock Treasury stock is recorded at cost. During fiscal 2001 and 2000, the Company repurchased 31,500 and 86,600 shares, respectively, at an aggregate cost of $168,554 and $442,526, respectively. During fiscal 2000, the Company cancelled 83,000 common shares (1999 - 23,600) with an average cost of $429,283 (1999 - $134,354). The premium paid to acquire these shares over their per share book value in the amount of $292,343 (1999 - $,95,039) was recorded as a decrease to retained earnings. Stock Options The Company has a stock option plan under which stock options to purchase securities from the Company can be granted to directors and employees of the Company on terms and conditions acceptable to the regulatory authorities of Canada, notably the Toronto Stock Exchange ("TSE"), the Ontario Securities Commission and the British Columbia Securities Commission. The Company has no formal written stock option plan. Under the stock option program, stock options for up to 10% of the number of issued and outstanding common shares may be granted from time to time, provided that stock options in favour of any one individual may not exceed 5% of the issued and outstanding common shares. No stock option granted under the stock option program is transferable by the optionee other than by will or the laws of descent and distribution, and each stock option is exercisable during the lifetime of the optionee only by such optionee. The exercise price of all stock options, granted under the stock option program, must be at least equal to the fair market value (subject to regulated discounts) of such common shares on the date of grant. Proceeds received by the Company from exercise of stock options are credited to capital stock. At August 31, 2001, employee incentive stock options were outstanding enabling the holders to acquire the following number of shares: ================ ============= ================= Number Exercise of Shares Price Expiry Date ---------------- ------------- ----------------- 70,000 Cdn$ 4.25 August 6, 2006 8,000 Cdn$ 8.25 December 31, 2001 ================ ============= ================= JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 9. EMPLOYEE STOCK OWNERSHIP PLAN The Company sponsors an employee stock ownership plan ("ESOP") that covers all U.S. employees who are employed by the Company on August 31 of each year and who have at least one thousand hours with the Company in the twelve months preceding that date. The 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 Company accounts for its ESOP in accordance with SOP-93-6 (Employers' Accounting for Employee Stock Ownership Plans). The Company records compensation expense equal to the market price of the shares acquired on the open market. Any dividends on allocated ESOP shares are recorded as a reduction of retained earnings. ESOP compensation expense was $82,530, $79,141 and $90,170, for 2001, 2000 and 1999, respectively. The ESOP shares as of August 31 were as follows: ======================================== ============== ============== 2001 2000 ---------------------------------------- -------------- -------------- Allocated shares 131,000 118,000 ======================================== ============== ============== 10. STOCK BASED COMPENSATION EXPENSE No new stock options were granted during the fiscal year ended August 31, 2001 and 2000. Following is a summary of the status of the plan during 2001, 2000 and 1999: ======================================== ============== =============== Weighted Average Number Exercise of Shares Price ---------------------------------------- -------------- --------------- Outstanding at August 31, 1998 74,000 Cdn$ 4.25 Granted 20,000 Cdn$ 8.25 Forfeited - Exercised (4,000) Cdn$ 4.25 ------------- Outstanding at August 31, 1999 and 2000 90,000 Cdn$ 5.14 Granted - Forfeited - Exercised - Expired (12,000) Cdn$ 8.25 ------------- Outstanding at August 31, 2001 78,000 Cdn$ 4.66 ======================================== ============== =============== JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 10. STOCK BASED COMPENSATION EXPENSE (cont'd...) Following is a summary of the status of options outstanding at August 31, 2001: =============== ======================================================= Outstanding Options Exercisable Options ---------------------------- ------------------- Weighted Average Weighted Weighted Remaining Average Average Contractual Exercise Exercise Exercise Price Number Life Price Number Price --------------- ------ ----------- --------- ------ --------- Cdn$4.25 70,000 Cdn$ 4.25 70,000 Cdn$ 4.25 Cdn$8.25 8,000 Cdn$ 8.25 8,000 Cdn$ 8.25 =============== ====== =========== ========= ====== ========= The Company has elected to follow APB Opinion No. 25 (Accounting for Stock Issued to Employees) in accounting for its employee stock options. Accordingly, no compensation expense is recognized in the Company's financial statements because the exercise price of the Company's employee stock options equals the market price of the Company's common stock on the date of grant. If under Financial Accounting Standards Board Statement No. 123 (Accounting for Stock-Based Compensation) the Company determined compensation costs based on the fair value at the grant date for its stock options, net earnings and earnings per share would have been reduced to the following pro-forma amounts: =========================== ========== =========== =========== 2001 2000 1999 --------------------------- ---------- ----------- ----------- Net income As reported $ 712,196 $ 608,679 $ 592,509 ========== =========== =========== Pro forma $ 712,196 $ 608,679 $ 486,600 ========== =========== =========== Basic earnings per share As reported $ 0.72 $ 0.60 $ 0.52 ========== =========== =========== Pro forma $ 0.72 $ 0.60 $ 0.43 ========== =========== =========== Diluted earnings per share As reported $ 0.70 $ 0.58 $ 0.51 ========== =========== =========== Pro forma $ 0.70 $ 0.58 $ 0.42 =========================== ========== =========== =========== JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 10. STOCK BASED COMPENSATION EXPENSE (cont'd...) The weighted average estimated fair value of stock options granted during 2001, 2000 and 1999 were $Nil, $Nil, and Cdn$0.09 per share, respectively. These amounts were determined using the Black-Scholes option pricing model, which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, the expected dividend payments, and the risk-free interest rate over the expected life of the option. The assumptions used in the Black-Scholes model were as follows for stock options granted in 1999: ============================= =========== ============ ============ 2001 2000 1999 ----------------------------- ----------- ------------ ------------ Risk-free interest rate - - 5.13% Expected life of the options - - 2 years Expected volatility - - 39.85% Expected dividend yield - - - ============================= =========== ============ ============ The Black-Scholes option valuation model was developed for estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Because option valuation models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options, and the Company's options do not have the characteristics of traded options, so the option valuation models do not necessarily provide a reliable measure of the fair value of its options. 11. CONTINGENT LIABILITIES AND COMMITMENTS a) The Company established an Employee Stock Ownership Plan, whereby the employees may earn up to 90,000 shares of the Company using a formula based on years of service. The establishment of the plan resulted in the Company forming a trust, which acquired from the Company 90,000 shares at a deemed price of Cdn$5.00 per share. As at August 31, 2001 and 2000, 90,000 of these shares were earned by the employees under this plan but remain in the trust (Note 9). b) At August 31, 2001 and 2000, the Company had an un-utilized line-of-credit of approximately $4,700,000 and $4,500,000, respectively. 12. SEGMENTED INFORMATION The Company has three principal operating segments: the sales of lumber and building materials to home improvements centres in the United States; the sale of pneumatic air tools and industrial clamps in the United States; and the processing and sales of agricultural seeds in the United States. These operating segments were determined based on the nature of the products offered. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly in deciding how to allocate resources and in assessing performance. The Company evaluates performance based on several factors, of which the primary financial measure is business segment income before taxes. The following tables show the operations of the Company's reportable segments. 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) AUGUST 31, 2001 12. SEGMENTED INFORMATION (cont'd...)
Following is a summary of segmented information for 2001, 2000 and 1999: ================================================= =============== ================ 2001 2000 1999 -------------------------------- ---------------- --------------- ---------------- Sales to unaffiliated customers: Building materials: United States $ 19,369,153 $ 23,336,751 $ 27,707,986 South Pacific - 45,602 316,757 Industrial tools 919,169 1,111,833 1,077,530 Seed processing and sales 1,824,632 - - -------------- -------------- ------------- $ 22,112,954 $ 24,494,186 $ 29,102,273 ================ =============== ================ Income from operations: Building materials: United States $ 843,278 $ 1,250,539 $ 1,314,062 South Pacific (2,285) (190,610) (138,126) Industrial tools (23,981) 150,123 116,902 Seed processing and sales 35,894 - - General corporate (107,547) (87,549) (111,654) -------------- -------------- -------------- $ 745,359 $ 1,122,503 $ 1,181,184 ================ =============== ================ Identifiable assets: Building materials: United States $ 6,739,910 $ 6,456,978 $ 6,521,677 South Pacific - 247,907 464,719 Industrial tools 101,409 116,753 117,549 Seed processing and sales 815,699 - - General corporate 19,707 115,722 110,306 -------------- -------------- -------------- $ 7,676,725 $ 6,937,360 $ 7,214,251 ================ =============== ================ Depreciation and amortization: Building materials: United States $ 220,070 $ 123,150 $ 152,591 South Pacific - 2,173 16,250 Industrial tools - - 1,594 Seed processing and sales - - - -------------- -------------- ------------- $ 220,070 $ 125,323 $ 170,435 ================ =============== ================ - continued - JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 12. SEGMENTED INFORMATION (cont'd...) ================================ ================ =============== ================ 2001 2000 1999 -------------------------------- ---------------- --------------- ---------------- Continued... Capital expenditures: Building materials: United States $ 60,296 $ 44,897 $ 112,411 South Pacific - - - Seed processing and sales 1,636,521 - - -------------- -------------- ------------- $ 1,696,817 $ 44,897 $ 112,411 ================ =============== ================ Interest expense: Building materials United States $ 124,200 $ 95,464 $ 93,701 South Pacific - - - Industrial tools - - - Seed processing and sales - - - -------------- -------------- ------------- $ 124,200 $ 95,464 $ 93,701 ================================== ================ =============== ================
During 2001, the Company made sales to the following customers of the building material segments which were in excess of 10% of total sales for the year: Fred Meyer Inc. - $8,934,216, The Home Depot, Inc. - $6,739,543. During 2000, the Company made sales to the following customers of the building material segments which were in excess of 10% of total sales for the year: Fred Meyer Inc. - $8,756,105, The Home Depot, Inc. - $5,040,083, Lowes Companies - $3,782,656 and Homebase, Inc. - $3,215,835. During 1999, the Company made sales to the following customers of the building materials segment which were in excess of 10% of total sales for the year: Eagle Hardware & Garden - $9,846,757, Fred Meyer, Inc. - $6,838,184 and The Home Depot, Inc. - $6,629,888. 13. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high quality financial institutions and limits the amount of credit exposure with any one institution. The Company has concentrations of credit risk with respect to accounts receivable as large amounts of its accounts receivable are concentrated geographically in the United States amongst a small number of customers. At August 31, 2001, two customers totalling $419,817 and $1,056,600 and at August 31, 2000 three customers totalling $347,676, $505,087 and $1,335,367, respectively, accounted for accounts receivable greater than 10% of total accounts receivable. The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. The Company performs credit evaluations of its commercial customers but generally does not require collateral to support accounts receivable. JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) AUGUST 31, 2001 14. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS =============================== ============= ============ ============ 2001 2000 1999 ------------------------------- ------------- ------------ ------------ Cash paid during the year for: Interest $ 124,200 $ 95,464 $ 93,701 Income taxes - 423,457 433,157 =============================== ============= ============ ============ There were no significant non-cash transactions in 2001. Significant non-cash transaction in 2000: The Company cancelled 83,000 treasury shares repurchased at a price of $429,283, which had an original cost of $136,940. The difference between the original cost and purchase price of $292,343 was applied against retained earnings as a premium relating to cancellation of share capital. Significant non-cash transaction in 1999: The Company cancelled 23,600 treasury shares repurchased at a price of $134,354, which had an original cost of $39,315. The difference between the original cost and purchase price of $95,039 was applied against retained earnings as a premium relating to the cancellation of share capital. 15. SUBSEQUENT EVENT Subsequent to year end, the Company granted options to directors of the Company enabling them to acquire 12,000 shares of the Company at a price of Cdn$7.50 per share, expiring on December 31, 2003. DAVIDSON & COMPANY Chartered Accountants A Partnership of Incorporated Professionals INDEPENDENT AUDITORS' REPORT To the Shareholders of Jewett-Cameron Trading Company Ltd. Our report on the consolidated financial statements of Jewett-Cameron Trading Company Ltd. is included in this Form 10-K. In connection with our examinations of such financial statements, we have also examined the related financial statement schedule listed in the index of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly the information required to be included therein. /s/DAVIDSON & COMPANY DAVIDSON & COMPANY Vancouver, Canada Chartered Accountants October 19, 2001 A Member of SC INTERNATIONAL Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6 Telephone (604) 687-0947 Fax (604) 687-6172
JEWETT-CAMERON TRADING COMPANY LTD. FINANCIAL STATEMENT SCHEDULE SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AUGUST 31, 2001 ==================================== ============ ============ ============= =========== ============= Additions Deductions Balance at Charged to Credited to eductions Beginning Costs and Costs and from Balance at of Year Expenses Expenses Reserves End of Year - ------------------------------------ ------------ ------------ ------------- ----------- ------------- 1999 Allowance deducted from related balance sheet account: Accounts receivable $ 420,000 $ 48,000 $ - $ - $ 468,000 Deferred tax valuation account 187,645 12,889 - - 200,534 ============ ============ ============= =========== ============= 2000 Allowance deducted from related balance sheet account: Accounts receivable $ 468,000 $ 57,306 $ 45,000 $ 230,306 $ 250,000 Deferred tax valuation account 200,534 9,594 - - 210,128 ============ ============ ============= =========== ============= 2001 Allowance deducted from related balance sheet account: Accounts receivable $ 250,000 $ 135,000 $ - $ 70,000 $ 315,000 Deferred tax valuation account 210,128 36,348 - - 246,476 ==================================== ============ ============ ============= =========== =============
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