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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 [FEE REQUIRED]
For the Fiscal Year Ended August 31, 2000
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 I.R.S. Employer ID Number
incorporation or organization
32275 NW Hillcrest, North Plains, Oregon 97133
----------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code:
---------------------------------------------------
503-647-0110
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, without par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 of 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements. 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: $24,494,186
-----------
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; 11/21/99: US$3,438,133
------------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date; 11/21/00: 1,074,162
---------
Page 1 of 61
Index to Exhibits on Page 32
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................................... 12
Item 4. Submission of Matters to a Vote of Security Holders. 13
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters........................ 14
Item 6. Selected Financial Data............................. 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.................. 19
Item 8. Financial Statements and Supplemental Data.......... 23
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............. 23
PART III
Item 10. Directors and Executive Officers of the Registrant. 24
Item 11. Executive Compensation............................. 27
Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................... 30
Item 13. Certain Relationships and Related Transactions..... 31
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K............................ 32
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. Currently, the Company
is dealing with assets which remain in Tonga. These assets consist of remaining
accounts receivable and leases on two parcels of real property.
The Company holds a 62% ownership of a joint venture in the People's Republic of
China, Ningbo Jewett-Cameron Air Tool Co. Ltd., effective October 1994. This
business operates as a trading company buying tools in China and as a
manufacturer of air tools for export to the United States, Canada, and Europe.
The Company's wholly-owned subsidiary, Greenacres Distribution Co., was
incorporated in Oregon, USA, in August 1996. This company was formed for the
purpose of holding the Company's real estate. However, this company's charter
was not renewed.
3
Financial Information About Business Segments
- ---------------------------------------------
United States Dollars
Fiscal Years Ended August 31st
2000 1999 1998
---------------------------------------
SALES:
Building Materials:
United States $23,336,751 $27,707,986 $24,126,934
South Pacific 45,602 316,757 831,405
Industrial Tools: 1,111,833 1,077,530 1,220,175
----------- ------------ -----------
$24,494,186 $29,102,273 $26,178,514
INCOME (LOSS) FROM OPERATIONS:
Building Materials:
United States $1,408,074 $1,583,793 $ 696,556
South Pacific (58,556) (138,126) (44,870)
Industrial Tools: 150,123 116,902 180,803
General Corporate: $87,549) (111,654) (104,351)
----------- ----------- -----------
$1,412,092 $1,450,915 $728,138
IDENTIFIABLE ASSETS:
Building Materials:
United States $6,457,978 $6,521,677 $6,200,166
South Pacific 239,783 464,719 770,225
Industrial Tools: 116,753 117,549 125,132
General Corporate: 115,722 110,306 124,710
---------- ---------- ----------
$6,930,236 $7,214,251 $7,220,233
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 42 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 2000/1999/1998, sales to home improvement centers represented
about 95.3%/95.2%/86.4% of revenue; with export and industrial tools
representing 4.5%/4.8%/6.1%, respectively. The Fiscal 2000 increase in the
percent related to home improvement centers reflects an increase in business
done with dealers and lumber yards located in the western United States.
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.
*Lattice - Stained, painted, and natural panels as well as a
5
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
1999 1999 1998
-----------------------------
Lowes Companies 15% 28% 32%
Fred Meyer Inc. 36% 20% 22%
The Home Depot, Inc. 21% 20% 18%
Homebase, Inc. 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$23 million represents approximately 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
sound quality and 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,
Malaysia, and the Republic of China. All products are covered by more than one
supplier.
Sales of pneumatic air tools and industrial clamps are not seasonal.
A relationship has been established with a factory in Zheijang Province. The
Company has invested in dies and tooling, and manufacturing is being done for a
single air tool. A joint venture manufacturing company was established in China
in October 1994, with the Company holding a 62% ownership interest in the new
company, Ningbo Jewett-Cameron Air Tool Co. Ltd. This joint venture company also
acts as a trading company, purchasing tools from other manufacturers in China.
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
8
#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 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 maintained its
competitive position, sales declined dramatically during Fiscal 1997, Fiscal
1998, and Fiscal 1999 and the operation has 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. Currently, the Company is dealing with assets which remain
in Tonga. These assets consist of remaining accounts receivable and leases on
two parcels of real property. Regarding the real estate leases, the
10
Company is currently attempting to sell these leases which management has priced
below their respective current market values.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices are located at 32775 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.
The Company also leased three sites in Tonga to carry out its South Pacific
region operations; however, with the winding down of the business in Tonga, two
of these leases are currently up for sale and the third has expired.
11
ITEM 3. LEGAL PROCEEDINGS
Other than listed below, 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.
Other than listed below, the Company knows of no active or pending proceedings
against anyone that might materially adversely affect an interest of the
Company.
During 1995, a Company subsidiary, Material Supply International Inc., filed an
action in the US District Court for the District of Columbia against Sunmatch
Industrial Co. Ltd. (a supplier of certain products) for breach of a trademark
licensing agreement. The supplier instituted a counteraction against Material
Supply International claiming damages and breach of the licensing agreement. In
March 1996, a jury decision awarded Material Supply International $150,000, and
awarded the supplier damages in the amount of $908,500. The Company filed an
appeal and, in July 1998, the US Court of Appeals for the District of Columbia
set aside the $908,500 judgment. A motion by Sunmatch to obtain a judgment in
the same amount against two other Company subsidiaries was denied.
In October 1998, Sunmatch renewed its denied motion to obtain the $908,500
judgment against Jewett-Cameron Lumber Company and MSI-Pro Co. Inc. (the two
subsidiaries of the Company). An out of court settlement was reached during
Fiscal 2000 whereby the Company paid Sunmatch $150,000. Subsequently all claims
were dropped.
12
In July 1998, Ernst Home Center Inc. ("Ernst")(a customer of the Company),
brought suit in the US Bankruptcy Court for the Western District of Washington
against the Company to recover an alleged avoidable preferences in the amount of
$246,567. The complaint also contains a cause of action to recover sums due on
an open account in the same amount. The Company filed an answer to that
complaint and demanded a jury trial. A pre-trial conference was held October
1998 at which time a discovery schedule was established and a trial date was set
for April 1999.
Before the suit was filed, Ernst offered to settle its preference claim by
discounting the claimed amount by 20%, which offer the Company rejected.
During Fiscal 1999 this claim was settled in full when the Company paid
$216,466.98 to the estate of Ernst.
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.
13
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 11/21/00, the shareholders' list for the Registrant's common shares showed 15
registered shareholders and 1,074,162 shares outstanding, including 11
registered holders in the United States holding 997,430 shares.
As of 11/21/00, the Registrant estimates that there are 190 "holders of record"
of its common stock resident in the United States holding the above referenced
997,430 shares.
As of 11/21/00, the Registrant estimates there are over 500 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$4.875 on 11/21/99.
Table No. 1
NASDAQ Small Capital Stock Exchange
Common Shares Trading Activity
Fiscal - Sales -
Quarter US Dollars
Ended Volume High Low Closing
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
8/31/99 94,700 $5.50 $4.87 $5.50
5/31/99 77,200 5.13 4.44 4.87
14
2/28/99 77,200 5.13 4.50 4.50
11/30/98 68,000 6.65 4.87 4.87
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 common shares for the last
eight fiscal quarters. The price was CDN$7.35 on 11/21/99.
Table No. 2
Toronto Stock Exchange
Common Shares Trading Activity
Fiscal - Sales -
Quarter Canadian Dollars
Ended Volume High Low Closing
- -------- ------- ----- ----- -------
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
8/31/99 28,000 $8.10 $7.35 $7.50
5/31/99 14,850 7.80 6.80 7.15
2/28/99 25,940 7.95 6.80 6.85
11/30/98 10,883 8.60 8.00 8.00
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.
15
ITEM NO. 6. SELECTED FINANCIAL DATA
- ------------------------------------
The selected financial data in Table No. 3 for Fiscal 2000/1999/1998 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 1997/1996 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
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
-------------------------------------------
Revenue $24,494 $29,102 $26,179 $28,848 $25,996
Gross Profit 3,870 4,347 3,392 3,374 3,533
Net Income $612 $593 $102 $495 $343
Earnings per Share: $0.60 $0.52 $0.09 $0.43 $0.29
Fully Diluted EPS: $0.58 $0.51 $0.08 $0.41 $0.28
Dividends Per Share $0.00 $0.00 $0.00 $0.00 $0.00
Basic Avg Shares(000) 1,021 1,132 1,148 1,159 1,185
Diluted Avg Shares(000) 1,054 1,214 1,236 1,335 1,461
Working Capital $4612 $4181 $3650 $4240 $4467
Long-Term Debt 0 0 0 580 1552
Shareholders' Equity 6154 5984 5717 5682 5236
Total Assets 6930 7214 7220 9441 8011
US GAAP Net Income $612 $593 $91 $468 $335
US GAAP EPS $0.60 $0.52 $0.09 $0.40 $0.27
US GAAP Diluted EPS $0.58 $0.51 $0.08 $0.40 $0.27
US GAAP Basic Shares(000) 1,021 1,132 1,149 1,168 1,226
US GAAP Diluted Shares(000) 1,054 1,167 1,180 1,244 1,390
US GAAP Reconciliation Footnotes
- --------------------------------
Under Canadian GAAP, foreign exchange gains/losses on foreign denominated
long-term debt are deferred and amortized to income over the remaining term of
the long term debt. Under US GAAP, these foreign exchange gains/losses are taken
into income in the year they are incurred.
16
Under Canadian GAAP, income taxes are accounted for using the tax allocation
method under which the income tax provision is based on reported net income.
Full provision is made for income tax deferred to future years as a result of
claiming allowances for income tax purposes which differ from amounts recorded
in the financial statements. For US GAAP reporting purposes, income taxes are
accounted for using the liability method "SFAS #109" which reflects the tax
effect of differences between taxable income and income before income taxes
based on future tax rates. Deferred tax liabilities or assets are adjusted for
changes in tax rates in the period such law is enacted.
Under both Canadian and US GAAP, basic earnings per share is computed by
dividing the income available to common shareholders by the weighted average
number of shares outstanding during the year. For Canadian reporting purposes
fully diluted earnings per share is calculated under the assumption that all
convertible debentures were converted at the date issued and stock options
exercised at the date of grant. For US reporting purposes, in February 1997, the
Financial Accounting Standards Board issued SFAS #128. Under SFAS #128, fully
diluted earnings per share takes into consideration the weighted average number
of shares outstanding during the year and potentially dilutive common shares.
SFAS #128 is effective for interim and annual financial statements ending
12/15/97. The adoption of SFAS #128 resulted in the restatement of the Company's
fully diluted earnings per share in prior periods.
Post-retirement benefits are accounted for on an accrual basis. Any differences
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 SFAS #106.
SFAS #123 encourages but does not require companies to record compensation cost
for stock-based compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation using
APB #25. Accordingly, compensation cost for stock options is measured as the
excess, if any, of quoted market price of the Company's stock at the date of
grant over the option price. No stock-based compensation has resulted from the
use of this prior standard.
SFAS #130 is effective for years beginning after 12/15/97. The primary objective
of this statement is to report and disclose a measure of all changes in equity
of a company that result from transactions and other economic events of the
period other that transactions with owners. The Company does not anticipate that
the statement will have a significant impact on its future financial statements.
SFAS #131 is effective for years beginning after 12/15/97. This statement
requires the use of the "management approach" model for segment reporting. The
management approach model is based on the
17
way a company's management organizes segments within the geography, legal
structure, management structure, or any other manner in which management
disaggregates a company. The Company does not anticipate that the adoption of
the statement will have a significant impact on its financial statements other
than potentially providing more financial statement disclosures.
SFAS #132 standardizes the disclosure requirements for pensions and other
post-retirement benefits. This statement requires additional information on
changes in benefit obligations and fair value of plan assets. It revises prior
standards and is effective for years beginning after 12/15/97. The Company does
not anticipate that the adoption of the statement will have a significant impact
on its financial statements other than potentially providing more financial
statement disclosures.
18
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
8/31/00, 8/31/99 and 8/31/98 should be read in conjunction with the financial
statements of the Company and related notes included therein.
The Company's financial statements are stated in United States Dollars (US$) and
are prepared in accordance with Canadian Generally Accepted Accounting
Principles (GAAP); nevertheless, the financial statements conform in all
material respects with US GAAP, except as disclosed in footnotes to the
financial statements.
Herein, all references to "$" and "US$" refer to United States Dollars and all
references to "CDN$" refer to Canadian Dollars. All references to common shares
refer to the Company's Common Shares without Par Value unless otherwise
indicated.
Results of Operations.
- ----------------------
Sales decreased 18% to $24,494,186 in Fiscal 2000, down from $29,102,273 in
Fiscal 1999 and $26,178,514 in Fiscal 1998.
Gross profit decreased 11% to $3,869,951 from $4,346,705 in Fiscal 1999 and
$3,391,558 in Fiscal 1998.
General and Administrative Expenses decreased 15% to $2,457,859 in Fiscal 2000
from $2,895,790 in Fiscal 1999 and $2,663,420 in Fiscal 1998.
Other Items were ($357,002) in Fiscal 2000 compared with ($326,406) in Fiscal
1999 and ($427,378) in Fiscal 1998.
Net Income rose to $612,090 in Fiscal 2000 from $592,509 in Fiscal 1999 and
$91,033 in Fiscal 1998.
Basic EPS was $0.60 in Fiscal 2000 versus $0.52 in Fiscal 1999 and $0.09 in
Fiscal 1998.
Fully Diluted EPS were $0.58 in Fiscal 2000 versus $0.51 in Fiscal 1999 and
$0.08 in Fiscal 1998.
Jewett-Cameron Lumber Company
- -----------------------------
JCLC posted a 16% decrease in sales to $23.3 million in Fiscal 2000 as a result
of 42% decrease in the price of lumber and a drop in sales of approximately $6
million to a major customer. Management anticipates that the sales to this
customer will increase to prior levels or possibly be higher during fiscal 2001.
19
JCLC's income from operations decreased 11% in Fiscal 2000 to $1,408,074
compared with $1,583,793 in Fiscal 1999 and $696,556 in Fiscal 1998. The causes
of the decrease are a combination of lower lumber prices and the loss in sales
to the major customer mentioned above.
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 increased marginally in Fiscal 2000 to $1,111,833
following a marginal decrease in Fiscal 1999 when the Company decided to focus
upon more profitable products over sales growth. Importantly, this business
decision resulted in an operating profit of $150,123, up from the $116,902
recorded a year earlier.
Jewett-Cameron South Pacific
JCSP posted an 594% sales decrease to $45,602 continuing the 62% decrease for
Fiscal 1999.
In Fiscal 1999 the Company made the decision to wind down its operations in
Tonga. JCSP is now in a non-operating mode and all the inventory has been
liquidated. The Company is currently maintaining no employees on site.
20
Liquidity and Capital Resources
- -------------------------------
Cash Provided by Fiscal 2000 Operating Activities totaled $472,151, including
the $612,090 Net Income. Material adjust-ments included $125,323 of
amortization/depreciation; $55,357 of Foreign exchange loss on debentures;
$94,000 of Deferred income taxes; $73,118 of Loss on disposal of capital assets;
($74,020) of Increase in accounts receivable; ($32,360) in Increase in notes
receivable; $40,681 in Decrease in inventory; ($87,883) in Decrease in bank
indebtedness; and, ($365,696) in Decrease in accounts payable and accrued
liabilities.
Cash Used in Fiscal 2000 Investing Activities totaled ($45,297).
Cash Used by Fiscal 2000 Financing Activities totaled ($442,526) including:
($442,526) used to acquire treasury shares.
Cash used by Fiscal 1999 Operating Activities totaled ($599,186), including the
$592,509 Net Income. Material adjustments included $170,435 of
amortization/depreciation; $196,923 of bad debt; $165,440 of Write-down of
trademarks; ($682,965) of Increase in accounts receivable; $323,287 of Decrease
in inventory; ($679,438) of Decrease in bank indebtedness; and $406,026 of
Increase in accounts payable and accrued liabilities
Cash Used in Fiscal 1999 Investing Activities totaled ($103,087).
Cash Used by Fiscal 1999 Financing Activities totaled ($325,079) including:
$11,044 from the issuance of shares; and, ($336,123) used to acquire treasury
shares.
Working capital was $4,611,769 at 8/31/00 compared with $4,181,467 at 8/31/99
and $3,650,171 at 8/31/98. There were no major working capital changes during
Fiscal 2000.
Major capital changes during Fiscal 1999 being an increase in accounts
receivable of $486,042 and a decrease in inventory of $381,968, and a reduction
in bank indebtedness of $679,483.
21
Accounts receivable was only slightly higher at 8/31/00 compared to 8/31/99.
The cash position of the Company as of end of Fiscal 2000 decreased slightly to
$208,277 from $223,949 at the beginning of the year.
Bank indebtedness at 8/31/00 was nil compared to $87,883 at 8/31/99 and $767,321
at 8/31/98. 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.
22
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 2000/1999/1998 Ended August 31st
- ---------------------------------------
Auditor's Report, dated 10/19/00
Consolidated Balance Sheets at 8/31/00 and 8/31/99
Consolidated Statements of Operations for the fiscal years ended 8/31/00,
8/31/99 and 8/31/98
Schedule of Consolidated General and Administrative Expenses
for the fiscal years ended 8/31/00, 8/31/99 and 8/31/98
Consolidated Statements of Cash Flows for the fiscal years ended 8/31/00,
8/31/99 and 8/31/98
Consolidated Statements of Changes in Shareholders' Equity for the fiscal years
ended 8/31/00, 8/31/99 and 8/31/98
Notes to The Consolidated Financial Statements
Financial Statement Schedule
Schedule II: Valuation and Qualifying Accounts
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE.
------------------------------------
Not Applicable
23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Table No. 4 lists as of 11/21/00 the names of the Directors of the Registrant.
The Directors, with the exception of Stephanie Rink who was elected in July
2000, have served in their respective capacities since their election at the
1/xx/00 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 (1)(3) 60 July 1987
Jeffery J. Lowe (1)(2) 43 February 1995
James R. Schjelderup (1)(2) 46 July 1987
Stephanie Rink (1)(2) 42 July 2000
(1) Member of Audit Committee.
(2) Resident of Canada.
(3) Resident of Oregon, USA.
Table No. 5 lists, as of 11/21/00, 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.
24
Table No. 5
Executive Officers
Name Position __ Board Approval
- -----------------------------------------------------------------
Donald M. Boone President/Treasurer 1987
Michael C. Nasser Corporate Secretary 1987
25
Business Experience
- -------------------
Donald M. Boone has over thirty-six years in sales and corporate management,
including twenty-six 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.
Michael C. Nasser has over thirty-one years experience in sales and corporate
management, including twenty-seven 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 fifteen 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
26
family relationships, material arrangements or understandings between any two or
more Directors or Executive Officers.
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 2001 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.
27
Cash Compensation
- -----------------
Table No. 6 details compensation paid during Fiscal 2000 Ended 8/31/00 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 $264,675.
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 2000 $36,000 $ 0 $0 $0
1999 $36,000 $30,000 0 0
1998 $36,000 0 0 0
Michael C. Nasser 2000 $120,000 $45,728 $0 $0
Corporate Secretary 1999 120,000 78,675 0 0
1998 120,000 39,750 0 0
Employee Stock Ownership Plan
- -----------------------------
Effective 8/31/95, the Company established an Employee Stock Ownership Plan
("ESOP") that covers all U.S. employees who are employed by the Company at the
end of the fiscal year and who had at least 1,000 hours with the Company during
the fiscal year.
The establishment of the ESOP resulted in the Company forming a trust, which
acquired from the Company 90,000 common shares (450,000 pre-consolidation
shares) at CDN$1.00 per share. The trust or ESOP borrowed $350,000 from a bank
to be repaid over three years, guaranteed by the Company to purchase the shares.
The Company was required to make annual contributions to the ESOP at least equal
to the ESOP's debt service. As the debt was repaid, common shares were released
from collateral and allocated to active employees, based on their proportion of
the ESOP. The debt was repaid effective October 1997. The Company's ESOP
compensation expense under Canadian GAAP was $79,141, $90,170 $40,694 and
$129,600 for Fiscal 2000/1999/1998/1997, respectively. As at August 31, 2000 and
1999, 90,000 of these shares were earned by the employees under this plan but
remain in the trust.
28
Stock Option Program
- --------------------
Stock Options to purchase securities from Company can be granted to Directors
and Employees of the Company on terms and conditions acceptable to the
regulatory authorities in Canada, notably the Toronto Stock Exchange, the
Ontario Securities Commission and British Columbia Securities Commission. The
Company has no formal written stock option plan.
Under the stock option program, stock options for up to 10% of the number of
issued and outstanding common shares may be granted from time to time, provided
that stock options in favor of any one individual may not exceed 5% of the
issued and outstanding common shares. No stock option granted under the stock
option program is transferable by the optionee other than by will or the laws of
descent and distribution, and each stock option is exercisable during the
lifetime of the optionee only by such optionee.
The exercise price of all stock options granted under the stock option program
must be at least equal to the fair market value (subject to regulated discounts)
of such common shares on the date of grant, and the maximum term of each stock
option may not exceed five years and are determined in accordance with Toronto
Stock Exchange ("TSE") guidelines.
The names and titles of the Directors and Executive Officers of the Registrant
to whom outstanding stock options have been granted and the number of common
shares subject to such options are set forth in Table No. 7 as of 11/21/00, as
well as the number of options granted to Directors and all employees as a group.
Table No. 7
Stock Options Outstanding
Number of Shares of CDN$
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 6,000 8.25 12/31/2000
James Schjelderup 6,000 8.25 12/31/2000
Total Officers/Directors (4 persons) 82,000
Total Employees/consultants 0
Total Officers/Directors/Employees 82,000
29
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 11/21/00 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) 222,500 20.1%
Common Michael C. Nasser (3) 157,304 14.2%
Total 378,804 34.3%
(1) Addresses: c/o Jewett-Cameron Trading Company Ltd.
32775 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 11/21/00 and currently
exercisable stock option owned by each beneficial stockholder.
30
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.
31
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
- --------------------------------------------------
AND REPORTS ON FORM 8-K
-----------------------
(A) Financial Statements and Schedules:
- ---------------------------------------
Auditor's Report, dated 10/19/00
Consolidated Balance Sheets at 8/31/00 and 8/31/99
Consolidated Statements of Operations
for the fiscal years ended 8/31/00, 8/31/99 and 8/31/98
Schedule of Consolidated General and Administrative Expenses
for the fiscal years ended 8/31/00, 8/31/99 and 8/31/98
Consolidated Statements of Cash Flows
for the fiscal years ended 8/31/00, 8/31/99 and 8/31/98
Consolidated Statements of Changes in Shareholders' Equity
for the fiscal years ended 8/31/00, 8/31/99 and 8/31/98
Notes to The Consolidated Financial Statements
Financial Statement Schedule
Schedule II: Valuation and Qualifying Accounts
(B) Reports on Form 8-K:
- ------------------------
The Company filed no reports on Forms 8-K during the period covered by this
Annual Report.
(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 --
32
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 28, 2000
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 28, 2000
By: /s/ Donald M. Boone
--------------------------------------------------
Donald M. Boone, President/CFO/Controller/Director
Date: November 28, 2000
By: /s/ Michael C. Nasser
--------------------------------------
Michael C. Nasser, Corporate Secretary
33
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
DAVIDSON & COMPANY Chartered Accountants
A Partnership of Incorporated Professionals
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, 2000 and 1999 and the consolidated statements of
operations, general and administrative expenses, stockholders' equity and cash
flows for the years ended August 31, 2000, 1999 and 1998. 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, 2000 and 1999 and the results of its operations and
cash flows for the years ended August 31, 2000, 1999 and 1998, 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.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
October 19, 2000
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.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
AS AT AUGUST 31
========================================================================= ============== ===============
2000 1999
- ------------------------------------------------------------------------- -------------- ---------------
- ------------------------------------------------------------------------- -------------- ---------------
ASSETS
Current
Cash and cash equivalents $ 208,277 $ 223,949
Accounts receivable, net of allowance of $250,000 (1999 - $468,000) 2,541,387 2,492,312
Inventory 2,622,575 2,666,835
Prepaid expenses 24,247 28,543
------------ -------------
Total current assets 5,396,486 5,411,639
Capital assets (Note 4) 1,343,929 1,511,067
Deferred income taxes (Note 5) 122,200 217,200
Deposits 74,745 74,345
------------ -------------
Total assets $ 6,937,360 $ 7,214,251
========================================================================= ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Bank indebtedness (Note 6) $ - $ 87,883
Accounts payable and accrued liabilities 787,128 1,142,289
------------ -------------
Total current liabilities 787,128 1,230,172
------------ -------------
Stockholders' equity
Capital stock
Authorized
20,000,000 common shares, without par value
10,000,000 preferred shares, without par value
Issued
1,074,162 common shares (1999 - 1,157,162) 1,795,157 1,932,097
Additional paid-in capital 582,247 582,247
Retained earnings 4,105,470 3,789,134
------------ -------------
6,482,874 6,303,478
Less: Treasury stock - 65,500 common shares (1999 - 61,900) (332,642) (319,399)
------------ -------------
6,150,232 5,984,079
Total liabilities and stockholders' equity $ 6,937,360 $ 7,214,251
========================================================================= ============== ===============
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
================================================= ================ =============== =============
2000 1999 1998
- ------------------------------------------------- ---------------- --------------- -------------
SALES $ 24,494,186 $ 29,102,273 $ 26,178,514
COST OF SALES 20,627,814 24,814,249 22,786,956
------------- ------------ -------------
GROSS PROFIT 3,866,372 4,288,024 3,391,558
General and administrative expenses - Schedule 2,465,394 2,895,790 2,663,420
Amortization of deferred financing charges - - 17,903
Foreign exchange loss 55,357 532 127,373
Loss on disposal of capital assets - 45,078 -
Write-down of trademarks (Note 3) - 165,440 -
Write-down of capital assets 73,118 - -
Litigation settlement 150,000 - -
------------- ------------ -------------
Income from operations 1,122,503 1,181,184 582,862
------------- ------------ -------------
OTHER ITEMS
Interest and other income 28,640 37,026 2,885
Interest expense (95,464) (93,701) (284,987)
------------- ------------ -------------
(66,824) (56,675) (282,102)
------------- ------------ -------------
Income before income taxes 1,055,679 1,124,509 300,760
Income taxes (Note 5) 447,000 532,000 209,727
------------- ------------ -------------
Net income for the year $ 608,679 $ 592,509 $ 91,033
================================================= ============= ============ =============
Basic earnings per share $ 0.60 $ 0.52 $ 0.09
================================================= ============= ============ =============
Diluted earnings per share $ 0.58 $ 0.51 $ 0.08
================================================= ============= ============ =============
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
======================================= ================ =============== ================
2000 1999 1998
- --------------------------------------- ---------------- --------------- ----------------
Bad debt expense $ 15,542 $ 196,923 $ 409,273
Depreciation and amortization 125,323 170,435 164,500
Insurance 73,627 55,398 48,461
Office and miscellaneous 190,436 242,558 235,563
Professional fees 116,278 161,500 100,418
Repairs and maintenance 53,341 36,937 37,095
Telephone and utilities 78,158 90,320 83,956
Travel, entertainment and advertising 152,459 167,929 146,748
Wages and employee benefits 1,557,038 1,689,362 1,354,750
Warehouse expenses and supplies 103,192 84,428 82,656
--------------- -------------- ---------------
$ 2,465,394 $ 2,895,790 $ 2,663,420
======================================= ================ =============== ================
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
======================================================================= ================ =============== ================
2000 1999 1998
- ----------------------------------------------------------------------- ---------------- --------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year $ 608,679 $ 592,509 $ 91,033
Items not involving an outlay of cash:
Depreciation and amortization 125,323 170,435 164,500
Foreign exchange (gain) loss 55,357 - (34,615)
Amortization of deferred financing charges - - 17,903
Deferred income taxes 95,000 (14,000) (176,000)
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 (90,838) (486,042) 1,103,358
Decrease in inventory 44,260 381,968 987,797
Decrease in prepaid expenses 4,296 17,210 20,989
Decrease in bank indebtedness (87,883) (679,438) (1,750,760)
Increase (decrease) in accounts payable and accrued liabilities (355,161) 406,026 102,892
Decrease in promissory note - - (16,667)
-------------- -------------- --------------
Net cash provided by operating activities 472,151 599,186 510,430
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital stock issued - 11,044 86,252
Treasury shares acquired (442,526) (336,123) (154,096)
Debentures redeemed - - (544,985)
-------------- -------------- --------------
Net cash used in financing activities (442,526) (325,079) (612,829)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits (400) - 9,600
Purchase of capital assets (44,897) (112,411) (61,658)
Proceeds on disposal of capital assets - 9,324 11,708
-------------- -------------- --------------
Net cash used in investing activities (45,297) (103,087) (40,350)
-------------- -------------- --------------
Increase (decrease) in cash and cash equivalents (15,672) 171,020 (142,749)
Cash and cash equivalents, beginning of year 223,949 52,929 195,678
-------------- -------------- --------------
Cash and cash equivalents, end of year $ 208,277 $ 223,949 $ 52,929
======================================================================= ================ =============== ================
Supplemental disclosures with respect to cash flows (Note 15)
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
================================= ========= =========== ======== ======== ========= ======= ======== =========== ===========
Employee Stock
Common Stock Treasury Shares Ownership Plan Shares
Additional
Number Number Number Paid-In Retained
of Shares Amount of Shares Amount of Shares Amount Capital Earnings Total
- --------------------------------- ---------- ------------ --------- -------- --------- ------- -------- ------------ ------------
Balance, August 31, 1997 1,237,362 $ 2,029,527 76,400 $290,997 333 $16,667 $613,892 $ 3,357,650 $ 5,693,405
Net income for the year - - - - - - - 91,033 91,033
Stock options exercised 24,000 69,585 - - - - - - 69,585
Shares cancelled (84,600) (138,744) - - - - - - (138,744)
Treasury shares acquired - - 28,800 154,096 - - - - (154,096)
Treasury shares cancelled - - (84,600) (327,463) - - - - 327,463
Employee plan shares released - - - - (333)(16,667) (31,645) - (14,978)
Premium relating to cancellation
of share capital - - - - - - - (157,019) (157,019)
--------- ----------- -------- -------- --------- ------- -------- ----------- -----------
Balance, August 31, 1998 1,176,762 1,960,368 20,600 117,630 - - 582,247 3,291,664 5,716,649
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
================================= ========= =========== ======== ======== ========= ======= ======== =========== ===========
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, 2000
1. NATURE OF OPERATIONS
The Company was incorporated under the Company Act of British Columbia
on July 8, 1987.
The Company and its subsidiaries operate as a distributor of lumber and
other building products, as a distributor of industrial tools, and as a
retailer of building materials.
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. Information with
respect to differences between generally accepted accounting principles
of Canada and the United States is provided in Note 9.
Principles of consolidation
These consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, The Jewett-Cameron Lumber
Corporation 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.
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.
Inventory
Inventory is recorded at the lower of cost and net realizable value
based on the average cost method.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Capital assets and depreciation
Capital assets are recorded at cost and the Company provides for
depreciation over the estimated life of each asset on a straight-line
basis over the following periods:
Office equipment 5-7 years
Warehouse equipment 2-10 years
Automotive equipment 4 years
Buildings 5-30 years
Foreign exchange
Financial statements of the Company's foreign subsidiaries are
translated using the temporal method whereby all monetary assets and
liabilities are translated at the rate of exchange at the balance sheet
date. Non-monetary assets and liabilities are translated at exchange
rates prevailing at the transaction date. Income and expenses are
translated at rates which approximate those in effect on transaction
dates. Gains and losses arising from restatement of foreign currency
monetary assets and liabilities at each period end are included in
earnings.
Deferred financing charges
Deferred financing charges are amortized to income over the term of the
debt instrument to which they relate.
Trademarks
The Company accounts for costs of acquiring its trademarks by
capitalizing all costs of acquisition. These costs are amortized to
income over periods ranging from five to fifteen years.
Loss 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:
=================================================== =============== =============== =============
2000 1999 1998
--------------------------------------------------- --------------- --------------- -------------
Net income for United States reporting purposes $ 608,679 $ 592,509 $ 91,033
============= ============= =============
Basic earnings per share weighted average number
of shares outstanding 1,020,726 1,131,627 1,148,330
Effect of dilutive securities
Stock options 33,344 34,948 31,437
------------- ------------- -------------
Diluted earnings per share weighted average number
of shares outstanding 1,054,070 1,166,575 1,179,767
=================================================================== =============== =============
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
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's financial instruments consist of cash and cash
equivalents, accounts receivable, notes receivable, deposits and
accounts payable and accrued liabilities. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments, other than those disclosed in Note 14, Concentrations of
Credit Risk. The fair value of these financial instruments approximate
their carrying values, unless otherwise noted.
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
In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") which
establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. In June
1999, the FASB issued SFAS 137 to defer the effective date of SFAS 133
to fiscal quarters of fiscal years beginning after June 15, 2000. The
Company does not anticipate the adoption of the statement will have a
significant impact on its financial statements.
3. TRADEMARKS
Trademarks were comprised of development costs and legal fees incurred
in establishing and maintaining trademarks for the Company's industrial
tools business. The trademark costs were being amortized to income over
periods ranging from five to fifteen years.
================================== ============== ===============
2000 1999
---------------------------------- -------------- ---------------
Trademarks $ - $ 283,914
Accumulated amortization - (118,474)
Write-down of trademarks - (165,440)
------------- -------------
Net book value $ - $ -
================================== ============== ===============
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
4. CAPITAL ASSETS
================================= ============== =============
2000 1999
--------------------------------- -------------- -------------
Office equipment $ 185,422 $ 210,652
Warehouse equipment 177,698 213,751
Automotive equipment 43,870 46,159
Buildings 1,288,340 1,410,058
Land 375,593 365,522
------------- -------------
2,070,923 2,246,142
Accumulated depreciation (726,994) (735,075)
------------- -------------
Net book value $ 1,343,929 $ 1,511,067
================================= ============== =============
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.
5. INCOME TAXES
A reconciliation of income tax expense at the statutory rate to income
tax expense at the Company's effective rate is as follows:
a) For United States reporting purposes:
=================================================== ============== =============== ===============
2000 1999 1998
--------------------------------------------------- -------------- --------------- ---------------
Computed tax at the expected statutory rate $ 362,731 $ 442,693 $ 116,283
Tax reduction due to loss in subsidiary operations 85,206 107,702 97,210
Other differences (937) (18,395) (3,766)
------------- ------------- -------------
Income tax expense - current $ 447,000 $ 532,000 $ 209,727
=================================================== ============== =============== ===============
b) For Canadian reporting purposes:
=================================================== ============== =============== ===============
2000 1999 1998
--------------------------------------------------- -------------- --------------- ---------------
Computed tax at the expected statutory rate $ 485,121 $ 513,001 $ 142,271
Foreign income taxed at different rates (46,697) (91,008) (87,372)
Tax reduction due to loss in subsidiary operations 114,276 124,807 119,268
Other differences (105,700) (14,800) 35,560
------------- ------------- -------------
Income tax expense - current $ 447,000 $ 532,000 $ 209,727
=================================================== ============== =============== ===============
Deferred income taxes of $122,200 (1999 $217,200; 1998 - $203,200)
relate principally to timing differences between the accounting and tax
treatment of income, expenses, reserves and depreciation.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
6. BANK INDEBTEDNESS
================================== ============== =============
2000 1999
---------------------------------- -------------- -------------
Demand loan $ - $ 87,883
================================== ============== =============
The bank indebtedness is secured by an assignment of accounts
receivable and inventory. Interest is calculated at either prime or the
libor rate plus 225 basis points.
7. STOCK OPTIONS
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.
At August 31, 2000, employee incentive stock options were outstanding
enabling the holders to acquire the following number of shares:
================ ============= =================
Number Exercise
of Shares Price Expiry Date
---------------- ------------- -----------------
12,000 Cdn$ 8.25 December 31, 2000
70,000 Cdn$ 4.25 August 6, 2006
================ ============= =================
8. EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsored an employee stock ownership plan ("ESOP") that
covers all U.S. employees who are employed by the Company on August 31
of each year and who have at least one thousand hours with the Company
in the twelve months preceding that date. The ESOP grants to
participants in the plan certain ownership rights in, but not
possession of, the common stock of the Company held by the Trustee of
the Plan. Shares of common stock are allocated annually to participants
in the ESOP pursuant to a prescribed formula. The value of the shares
released by the Trustee under the plan's provisions for allocation was
recognized as an expense of $79,141 for 2000, $90,170 for 1999 and
$40,694 for 1998.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
9. DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with
generally accepted accounting principles in the United States. Except
as set out below, these financial statements also comply, in all
material respects, with accounting principles generally accepted in
Canada.
Income taxes
Under Canadian generally accepted accounting principles, income taxes
are accounted for using the tax allocation method under which the
income tax provision is based on reported net income. Full provision is
made for income tax deferred to future years as a result of claiming
allowances for income tax purposes which differ from amounts recorded
in the financial statements. For United States reporting purposes,
income taxes are accounted for using the liability method as required
by "Accounting Standards No. 109, "Accounting for Income Taxes" which
reflects the tax effect of differences between taxable income and
income before income taxes based on future tax rates. Deferred tax
liabilities or assets are adjusted for changes in tax rates in the
period such law is enacted.
Foreign exchange
Under Canadian generally accepted accounting principles, foreign
exchange gains or losses on foreign denominated long-term debt are
deferred and amortized to income over the remaining term of the
long-term debt. For United States reporting purposes, these foreign
exchange gains or losses are taken into income in the year they
occurred.
The impact of the above differences between Canadian and United States
generally accepted accounting principles on income for the year would
be as follows:
====================================================== ================ =============== ================
2000 1999 1998
------------------------------------------------------ ---------------- --------------- ----------------
Income before income taxes $ 1,055,679 $ 1,124,509 $ 300,760
Reconciling items
Deferred foreign exchange gain - - (34,615)
Amortization of deferred foreign exchange gain - - 45,716
--------------- --------------- --------------
Income before income taxes for Canadian reporting
purposes 1,055,679 1,124,509 311,861
Income taxes (Note 6) (447,000) (532,000) (209,727)
--------------- --------------- --------------
Net income for Canadian reporting purposes $ 608,679 $ 592,509 $ 102,134
================ =============== ================
Earnings per share for Canadian reporting purposes -
basic $ 0.60 $ 0.52 $ 0.09
================ =============== ================
Earnings per share for Canadian reporting purposes -
fully diluted $ 0.55 $ 0.49 $ 0.08
====================================================== ================ =============== ================
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
10. STOCK BASED COMPENSATION EXPENSE
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", encourages but does not require companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Accordingly, compensation
cost for stock options is measured as the excess, if any, of quoted
market price of the Company's stock at the date of grant over the
option price. No stock based compensation has resulted from the use of
this prior standard.
No new stock options were granted during the fiscal year ended August
31, 2000.
Following is a summary of the status of the plan during 2000, 1999 and
1998:
========================================= ============== ===========
Weighted
Average
Number Exercise
of Shares Price
----------------------------------------- ---------- ---------------
Outstanding at August 31, 1997 104,000 Cdn$ 4.38
Granted -
Forfeited (6,000) Cdn$ 6.20
Exercised (24,000) Cdn$ 4.25
---------
Outstanding at August 31, 1998 74,000 Cdn$ 4.25
Granted 12,000 Cdn$ 8.25
Forfeited -
Exercised (4,000) Cdn$ 4.25
---------
Outstanding at August 31, 1999 and 2000 82,000 Cdn$ 4.84
========================================= ========== ===============
Following is a summary of the status of options outstanding at August
31, 2000:
======================================================================
Outstanding Options Exercisable Options
-------------------------------- ---------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Exercise Price Number Life Price Number Price
--------------- ------- ------------ ----------- ------- -------------
Cdn$8.25 12,000 0.33 Cdn$ 8.25 12,000 Cdn$ 8.25
Cdn$4.25 70,000 5.93 Cdn$ 4.25 70,000 Cdn$ 4.25
=============== ======= ============ =========== ======= =============
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
10. STOCK BASED COMPENSATION EXPENSE (cont'd......)
Compensation
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its stock option plan. There was no compensation cost
incurred based on options granted in 2000, 1999 and 1998. Had
compensation cost been recognized on the basis of fair value pursuant
to Statement of Financial Accounting Standards No. 123, net income and
earnings per share would have been adjusted as follows:
================================== ============== =============== ===============
2000 1999 1998
---------------------------------- -------------- --------------- ---------------
Net income
As reported $ 608,679 $ 592,509 $ 91,033
============== =============== ===============
Pro forma $ 608,679 $ 486,600 $ 37,704
============== =============== ===============
Basic earnings per share
Basic earnings per share
As reported $ 0.60 $ 0.52 $ 0.09
============== =============== ===============
Pro forma $ 0.60 $ 0.43 $ 0.03
================================== ============== =============== ===============
Diluted earnings per share
================================== ============== =============== ===============
2000 1999 1998
---------------------------------- -------------- --------------- ---------------
Diluted earnings per share
As reported $ 0.58 $ 0.51 $ 0.08
============== =============== ===============
Pro forma $ 0.58 $ 0.42 $ 0.03
================================== ============== =============== ===============
The fair value of each option granted is estimated using the Black
Scholes Option Pricing Model. The assumptions used in calculating fair
value are as follows:
================================== ============== =============== ===============
2000 1999 1998
---------------------------------- -------------- --------------- ---------------
Risk-free interest rate - 5.13% -
Expected life of the options - 2 years -
Expected volatility - 39.85% -
Expected dividend yield - - -
================================== ============== =============== ===============
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
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, 2000 and 1999, 90,000 of these shares were earned by the
employees under this plan but remain in the trust (Note 8).
b) At August 31, 2000 and 1999, the Company had an un-utilized
line-of-credit of approximately $4,500,000 and $6,400,000,
respectively.
12. REMUNERATION
Aggregate remuneration to directors and officers, including the
Company's five highest paid employees, totalled $496,921 (1999 -
$567,923; 1998 - $477,150).
13. SEGMENTED INFORMATION
The Company's operations are classified into two principle industry
segments: (sales of) building materials and (sales of) industrial
tools.
Sales of building materials consists of wholesale sales of lumber and
building materials in the United States and retail sales of building
materials in Tonga. Sales of industrial tools consists of distribution
of pneumatic air tools and industrial clamps in the United States.
In computing income from operations by industry segment, unallocable
general and administrative expenses have been excluded from each
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, 2000
13. SEGMENTED INFORMATION (cont'd.....)
Following is a summary of segmented information for 2000, 1999, and
1998.
================================== ================ =============== ==============
2000 1999 1998
---------------------------------- ---------------- --------------- --------------
Sales to unaffiliated customers:
Building Materials:
United States $ 23,336,751 $ 27,707,986 $ 24,126,934
South Pacific 45,602 316,757 831,405
Industrial tools 1,111,833 1,077,530 1,220,175
-------------- -------------- --------------
$ 24,494,186 $ 29,102,273 $ 26,178,514
================ =============== ==============
Income from operations:
Building Materials:
United States $ 1,250,539 $ 1,314,062 $ 551,280
South Pacific (190,610) (138,126) (44,870)
Industrial tools 150,123 116,902 180,803
General corporate (87,549) (111,654) (104,351)
-------------- -------------- --------------
$ 1,122,503 $ 1,181,184 $ 582,862
================ =============== ==============
Identifiable assets:
Building Materials:
United States $ 6,456,978 $ 6,521,677 $ 6,200,166
South Pacific 247,907 464,719 770,225
Industrial tools 116,753 117,549 125,132
General corporate 115,722 110,306 124,710
-------------- -------------- --------------
$ 6,937,360 $ 7,214,251 $ 7,220,233
================ =============== ==============
Depreciation and amortization:
Building Materials:
United States $ 123,150 $ 152,591 $ 148,183
South Pacific 2,173 16,250 14,634
Industrial tools - 1,594 1,683
-------------- -------------- --------------
$ 125,323 $ 170,435 $ 164,500
================ =============== ==============
Capital expenditures:
Building Materials:
United States $ 44,897 $ 112,411 $ 24,948
South Pacific - - 36,710
-------------- -------------- --------------
$ 44,897 $ 112,411 $ 61,658
================================== ================ =============== ==============
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.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2000
14. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and trade
receivables. As of August 31, 2000 and 1999, substantially all of the
Company's cash, including amounts representing outstanding cheques, are
deposited with U.S. Bank and U.S. Bancorp Securities. During the normal
course of business, the Company extends credit to customers conducting
business in the home improvement industry.
15. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
================================ ============ =========== ==========
2000 1999 1998
-------------------------------- ------------ ----------- ----------
Cash paid during the year for:
Interest $ 95,464 $ 93,701 $ 292,291
Income taxes 423,457 433,157 213,046
================================ ============ =========== ==========
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.
Significant non-cash transaction in 1998:
The Company cancelled 84,600 treasury shares repurchased at a price
of $327,463, which had an original cost of $138,744. The difference
between the original cost and purchase price was applied to
contributed surplus in the amount of $31,645 and the remaining
balance of $157,019 was applied against retained earnings as a
premium relating to the cancellation of share capital.
16. SUBSEQUENT EVENT
Subsequent to year end, the Company acquired all of the assets,
including land, buildings and equipment of Agrobiotech Inc.
(Hillsborough) for total proceeds of $1,500,000.
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.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
October 19, 2000
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
AUGUST 31, 2000
============================================== =============== =============== =============== =============== ==============
Additions Deductions
Balance at Charged to Credited to Deductions
Beginning Costs and Costs and from Balance at
of Year Expenses Expenses Reserves End of Year
- ---------------------------------------------- --------------- --------------- --------------- --------------- --------------
1998
Allowance deducted from related balance
sheet account:
Accounts receivable $ 20,000 $ 400,000 $ - $ - $ 420,000
=============== =============== =============== =============== ==============
1999
Allowance deducted from related balance
sheet account:
Accounts receivable $ 420,000 $ 48,000 $ - $ - $ 468,000
=============== =============== =============== =============== ==============
2000
Allowance deducted from related balance
sheet account:
Accounts receivable $ 468,000 $ 57,306 $ 45,000 $ 230,306 $ 250,000
============================================== =============== =============== =============== =============== ==============