UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended AUGUST 31, 2017
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from _________ to _________________
Commission File Number: 000-19954
JEWETT-CAMERON TRADING COMPANY LTD.
(Name of registrant as specified in its charter)
_________British Columbia, Canada_______
(State or Incorporation or Organization)
_________N/A________
(IRS Employer ID No.)
32275 NW Hillcrest, North Plains, Oregon, USA 97133
(Address of principal executive offices)
Registrant’s Telephone Number 503-647-0110
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Shares without par value.
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files).
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, or a non-accelerated
filer.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:
February 28, 2017 = $15,581,976
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of November 9, 2017:
2,234,494
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Jewett-Cameron Trading Company Ltd.
Form 10-K Annual Report
Fiscal Year Ended August 31, 2017
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplemental Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Exhibits, Financial Statement Schedules
PART IV
Page
4
7
8
8
9
9
10
12
12
15
15
39
39
39
40
43
45
46
46
47
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ITEM 1. BUSINESS
Forward-Looking Statements
PART I
This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words like “plans”,
“expects”, “aims”, “believes”, “projects”, “anticipates”, “intends”, “estimates”, “will”, “should”, “could” and similar
expressions in connection with any discussion, expectation, or projection of future operating or financial performance,
events or trends. Forward-looking statements are based on management's current expectations and assumptions, which
are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes
and results may differ materially from these expectations and assumptions due to changes in global political, economic,
business, competitive, market, regulatory and other factors. We undertake no obligation to publicly update or review
any forward-looking information, whether as a result of new information, future developments or otherwise.
These factors include, but are not limited to the fact that the Company is in a highly competitive business and may seek
additional financing to expand its business, and are set forth in more detail elsewhere in this Annual Report, including
in the sections, ITEM 1A, “Risk Factors”, and ITEM 7, “Management's Discussion and Analysis of Financial
Condition and Results of Operations”.
Introduction
Jewett-Cameron Trading Company Ltd. is organized under the laws of British Columbia, Canada.
Report, the “Company”, “we”, “our” and “us” refer to Jewett-Cameron Trading Company Ltd. and its subsidiaries.
In this Annual
The Company’s operations are classified into four reportable segments which were determined based on the nature of
the products offered along with the markets being served. The segments are as follows:
Industrial wood products
Lawn, garden, pet and other
Seed processing and sales
Industrial tools and clamps
its subsidiaries. Jewett-Cameron Lumber
Effective September 1, 2013,
Corporation (“JCLC”) was changed to JC USA Inc. (“JC USA”), which has the following four wholly-owned
subsidiaries.
the Company reorganized certain of
The industrial wood products segment reflects the business conducted by Greenwood Products, Inc. (“Greenwood”).
Greenwood is a processor and distributor of industrial wood products. A major product category is treated plywood
that is sold to boat manufacturers and the transportation industry.
The lawn, garden, pet and other segment reflects the business of the newly incorporated Jewett-Cameron Company
(“JCC”). JCC is a wholesaler of wood products and a manufacturer and distributor of specialty metal products formerly
conducted by JCLC. Wood products include fencing and landscape timbers, while metal products include dog kennels,
proprietary gate support systems, perimeter fencing, and greenhouses. JCC uses contract manufacturers to make the
specialty metal products. Some of the products that JCC distributes flow through the Company’s distribution center
located in North Plains, Oregon, and some are shipped direct to the customer from the manufacturer. Primary
customers are home centers and other retailers.
The seed processing and sales segment reflects the business of Jewett-Cameron Seed Company (“JCSC”). JCSC
processes and distributes agricultural seed. Most of this segment’s sales come from selling seed to distributors with a
lesser amount of sales derived from cleaning seed.
The industrial tools and clamps segment reflects the business of MSI-PRO (“MSI”). MSI imports and distributes
products including pneumatic air tools, industrial clamps, and saw blades. These products are primarily sold to
retailers that in turn sell to contractors and end users.
JC USA provides professional and administrative services, including accounting and credit services, to each of its
wholly-owned subsidiary companies.
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Total Company sales were approximately $47.7 million and $48.1 million during fiscal years ended August 31, 2017
and 2016, respectively.
The Company's principal office is located at 32275 NW Hillcrest Street, North Plains, Oregon; and the Company’s
website address is www.jewettcameron.com. Mail is not delivered to the street address, and the Company’s mailing
address is P.O. Box 1010, North Plains, OR 97133. The Company’s phone number is (503) 647-0110, and the fax
number is (503) 647-2272.
The Company files reports and other information with the Securities and Exchange Commission located at 100 F.
Street NE, Washington, D.C. 20549. Copies of these filings may be accessed through their website at www.sec.gov.
Reports are also filed under Canadian regulatory requirements on SEDAR, and these reports may be accessed at
www.sedar.com.
The contact person for the Company is Charles Hopewell, President, Chief Executive Officer, Director, and Principal
Financial Officer.
The Company’s authorized capital includes 21,567,564 common shares without par value; and 10,000,000 preferred
shares without par value. As of August 31, 2017 and November 9, 2017, there were 2,234,494 common shares
outstanding. The Company's common shares are listed on the NASDAQ Capital Market in the United States with the
symbol “JCTCF”.
The Company's fiscal year ends on August 31st.
General Development of Business
Incorporation and Subsidiaries
Jewett-Cameron Trading Company Ltd. was incorporated under the Company Act of British Columbia on July 8, 1987
as a holding company for Jewett-Cameron Lumber Corporation (“JCLC”), which was incorporated in September 1953.
Jewett-Cameron Trading Company, Ltd. acquired all the shares of JCLC through a stock-for-stock exchange on July
13, 1987, and at that time JCLC became a wholly owned subsidiary. Effective September 1, 2013, the Company
completed a reorganization of certain of its subsidiaries and JCLC’s name was changed to JC USA Inc. (“JC USA”).
JC USA has the following wholly owned subsidiaries. MSI-PRO Co. (“MSI”), incorporated in April 1996, Jewett-
incorporated in October 2000, Greenwood Products, Inc. (“Greenwood”),
Cameron Seed Company, (“JCSC”),
incorporated in February 2002, and Jewett-Cameron Company (“JCC”) incorporated in September 2013.
Jewett-
Cameron Trading Company, Ltd. and its subsidiaries have no significant assets in Canada.
Corporate Development
Incorporated in 1953, JC USA operated 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. These individuals are Donald Boone, current Chairman and Director and the former
President, Chief Executive Officer, Treasurer, and Principal Financial Officer; and Michael Nasser, Corporate
Secretary.
In July 1987, the Company acquired JC USA in what was not an arms-length transaction.
In early 1986, prior to JC USA being acquired by the Company, JC USA acquired Material Supply International
(“Material Supply”). Material Supply was engaged in the importation and distribution of pneumatic air tools and
industrial clamps. The product line was re-branded as “MSI-PRO” and MSI was incorporated in 1996 to carry-on the
business of Material Supply.
In October 2000, JCSC was incorporated in anticipation of JC USA acquiring the business and certain assets of a firm
called Agrobiotech Inc. JCSC operates as a seed storage, processing and sales business.
In February 2002, Greenwood was incorporated in anticipation of JC USA acquiring the business and certain assets of
Greenwood Forest Products Inc. Greenwood is involved in the processing and distribution of specialty wood products.
In June 2012, the Company acquired land and fixed assets located in Manning, Oregon for $250,000 cash.
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Narrative Description of Business
The Company’s operations are classified into four segments. Sales, income before taxes, assets, depreciation and
amortization, capital expenditures, and interest expense by segment are shown in the footnotes to the financial
statements.
Lawn, Garden, Pet and Other – JCC
The lawn, garden, pet and other segment reflects the business of the recently incorporated Jewett-Cameron Company
(JCC), which is a manufacturer and distributor of specialty metal products and a wholesaler of wood products formerly
conducted by JCLC.
JCC operates out of a 5.6 acre owned facility located in North Plains, Oregon that includes an office, a warehouse, a
paved yard, and a remanufacturing plant. This business is a wholesaler of wood products and a manufacturer and
distributor of specialty metal products. Wood products are primarily fencing, while metal products include pet
enclosures and kennels, proprietary gate support systems, perimeter fencing, greenhouses, canopies and umbrellas.
Examples of the Company’s brands include Lucky Dog, Animal House and AKC (used under license from the
American Kennel Club) for pet enclosures and kennels; Adjust-A-Gate, Fit-Right, and Perimeter Patrol for gates and
fencing; Early Start, Spring Gardner, and Weatherguard for greenhouses; and TrueShade for patio umbrellas, furniture
covers and canopies. JCC uses contract manufacturers to make the specialty metal products. Some of the products that
JCC distributes flow through the Company’s facility in North Plains, Oregon, and some are shipped direct to the
customer from the manufacturer. Primary customers are home centers and other retailers.
The home improvement business is seasonal, with higher levels of sales occurring between February and August.
Inventory buildup occurs until the start of the season in February and then gradually declines to seasonal low levels at
the end of the summer.
JCC has concentrated on building a customer base for lawn, garden, and pet related products. Management believes
this market is less sensitive to downturns in the U.S. economy than is the market for new home construction.
The wood products that JCC distributes are not unique and are available from multiple suppliers. However, the metal
products that JCC manufactures and distributes may be somewhat differentiated from similar products available from
other suppliers.
JCC owns the patents and manufacturing rights connected with the Adjust-A-Gate and Fit-Right products, which are
the gate support systems for wood, vinyl, chain link, and composite fences. Management believes the ownership of
these patents results in an important competitive advantage for these and certain other products. During fiscal 2017, the
Company applied for 3 new patents (fiscal 2016 – 4), while 4 other patents were granted (fiscal 2016 – 4). JCC also
has two licensing agreements to market pet products.
Backlog orders are a factor in this business as customers may place firm priced orders for both wood and metal
products for shipments to take place three to four months in the future.
Industrial Wood Products - Greenwood
Greenwood is a wholesale distributor of a variety of specialty wood products. Operations are co-located in the building
utilized by JCC and MSI.
Historically, a major product category has been treated plywood that
transportation industry.
Greenwood’s total sales for fiscal 2017 and 2016 were 8% and 10% respectively of total Company sales.
is sold to boat manufacturers and the
In February 2014, the Company sold its excess inventory related to the marine industry.
The markets in which Greenwood competes are sensitive to downturns in the U.S economy.
Inventory is maintained at non-owned warehouse and wood treating facilities throughout the United States and is
primarily shipped to customers on a just-in-time basis. Inventory is generally not purchased on a speculative basis in
anticipation of price changes.
Greenwood has no significant backlog of orders.
- 6 -
Seed Processing and Sales - JCSC
JCSC operates out of an approximately 12 acre owned facility located adjacent to North Plains, Oregon. JCSC
processes and distributes agricultural seed. Most of this segment’s sales come from selling seed to distributors with a
lesser amount of sales derived from cleaning seed. Even though the harvest and processing cycle is seasonal, sales of
JCSC tend to be fairly uniform throughout the year. However, profitability around the month of August may be
unusually high based on a seasonal surge in cleaning sales, which are much more profitable sales than product sales.
JCSC has no backlog of sales orders.
Industrial Tools and Clamps - MSI
This business operates from the same owned facilities as JCC. MSI imports and distributes products including
pneumatic air tools, industrial clamps, and saw blades. These products are primarily sold to retailers that in turn sell to
contractors and end users. Sales of these products tend to be relatively uniform throughout the year.
MSI’s product line was expanded in 2007 to include saw blades, digital calipers, and laser guides. MSI brands include
MSI-Pro, Avenger, and ProMax.
Customer Concentration
The top ten customers were responsible for 79% and 78% of total Company sales for the years ended August 31, 2017
and August 31, 2016, respectively. Also, the Company’s single largest customer was responsible for 32% and 33% of
total Company sales for the years ended August 31, 2017 and August 31, 2016 respectively.
Employees
As of August 31, 2017 the Company had 59 full-time employees (August 31, 2016 – 52 full-time employees). By
segment these employees were located as follows: Greenwood 2, JCC 29, JCSC 9, MSI 5, and JC USA 14. None of
these employees are represented by unions at the Company. Jewett-Cameron Trading Company Ltd. has no direct
employees, and the CEO of the Company is employed by JC USA.
ITEM 1A. RISK FACTORS
Investors should carefully consider the following risk factors and all other information contained in this Annual Report.
There is a great deal of risk involved. Any of the following risks could affect our business, its financial condition, its
potential profits or losses, and could result in you losing your entire investment if our business became insolvent. The
risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties, including
those not presently known to us or that we currently deem immaterial, also may result in decreased revenues, increased
expenses or other events which could result in a decline in the price of our common stock.
Risks Related to Our Common Stock
We may decide to acquire assets or enter into business combinations, which could be paid for, either wholly or
partially with our common stock and if we decide to do this our current shareholders would experience dilution in
their percentage of ownership.
Our Articles of Incorporation give our Board of Directors the right to enter into any contract without the approval of
our shareholders. Therefore, our management could decide to make an investment (buy shares, loan money, etc.)
without shareholder approval.
If we acquire an asset or enter into a business combination, this could include
exchanging a large amount of our common stock, which could dilute the ownership interest of present stockholders.
Future stock distributions could be structured in such a way as to be 1) diluting to our current shareholders or 2)
could cause a change in control to new investors.
If we raise additional funds by selling more of our stock, the new stock may have rights, preferences or privileges
senior to those of the rights of our existing stock. If common stock is issued in return for additional funds, the price per
share could be lower than that paid by our current stockholders. The result of this would be a lessening of each present
stockholder’s relative percentage interest in our company.
- 7 -
The Company’s common shares currently trade within the NASDAQ Capital Market in the United States. The common
shares also formerly traded on the Toronto Stock Exchange in Canada until the Company voluntarily delisted from the
Toronto Stock Exchange on October 11, 2012. The average daily trading volume of our common stock was
approximately 2,460 shares on NASDAQ for the fiscal year ended August 31, 2017. With this limited trading volume,
investors could find it difficult to purchase or sell our common stock.
Risks Related to Our Business
We could experience a decrease in the demand for our products resulting in lower sales volumes.
In the past we have at times experienced decreasing products sales with certain customers. The reasons for this can be
generally attributed to: increased competition; general economic conditions; demand for products; and consumer
interest rates. If economic conditions deteriorate or if consumer preferences change, we could experience a significant
decrease in profitability.
If our top customers were lost, we could experience lower sales volumes.
For the fiscal year ended August 31, 2017 our top ten customers represented 79% of our total sales, and our single
largest customer was responsible for 32% of our total sales. We would experience a significant decrease in sales and
profitability and would have to cut back our operations, if these customers were lost and could not be replaced. Our top
ten customers are in located in North America, and are primarily in the retail home improvement industries.
We could experience delays in the delivery of our products to our customers causing us to lose business.
We purchase our products from other vendors and a delay in shipment from these vendors to us could cause significant
delays in our delivery to our customers. This could result in a decrease in sales orders to us and we would experience a
loss in profitability.
We could lose our credit agreement and could result in our not being able to pay our creditors.
We have a line of credit with U.S. Bank in the amount of $3 million, of which $3 million is available. We are currently
in compliance with the requirements of our existing line of credit. If we lost this credit it could become impossible to
pay some of our creditors on a timely basis.
If we fail to maintain an effective system of internal controls, we may not be able to detect fraud or report our
financial results accurately, which could harm our business and we could be subject to regulatory scrutiny.
We have completed a management assessment of internal controls as prescribed by Section 404 of the Sarbanes-Oxley
Act, which we were required to do in connection with our year ended August 31, 2017. Based on this process we did
not identify any material weaknesses. Although we believe our internal controls are operating effectively, we cannot
guarantee that in the future we will not identify any material weaknesses in connection with this ongoing process.
ITEM 1B. UNRESOLVED STAFF COMMENTS
--- No Disclosure Necessary ---
ITEM 2. PROPERTIES
The Company’s executive offices are located at 32275 NW Hillcrest Street, North Plains, OR 97133. The 5.6 acre
facility, which is owned, consists of 55,250 square feet of covered space (6,000 office and 49,250 warehouse), a little
over three acres of paved yard space, and was originally completed in October 1995. A 12,000 square foot warehouse
expansion was completed in fiscal 2017 which the Company is using for several new product lines. The facility
provides office space for JC USA, including all of the Company’s executive offices, and is used as a distribution center
to service the Company’s customer base for JCC, Greenwood and MSI.
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It is currently used for seed processing and storage.
The property associated with JCSC, which is owned, consists of 11.7 acres of land, 105,000 square feet of buildings,
rolling stock, and equipment.
It is located at 31345 NW Beach
Road, Hillsboro, OR 97124, which is adjacent to North Plains, OR. During fiscal 2010, the Company purchased a seed
testing lab located at 31895 NW Hillcrest Street, North Plains, OR 97133. The facility is 2,000 square feet and provides
testing facilities for JCSC. The Company formerly leased the property for $729 per month until the expiration of the
lease on January 4, 2010. At that time, the Company exercised its option to buy the land and building for a total cost of
$150,946.
In June 2012, the Company acquired land and fixed assets located in Manning, Oregon for $250,000 cash. The land
consists of 7.5 acres and the fixed assets included 12,000 square feet of buildings. The Company has an operating
agreement in place with an outside party.
We believe that our facilities are currently adequate for our requirements, and that our current equipment is in good
condition and is suitable for the operations involved.
ITEM 3. LEGAL PROCEEDINGS
A subsidiary was a plaintiff in a lawsuit filed in Portland, Oregon, entitled, Greenwood Products, Inc. et al v.
Greenwood Forest Products, Inc. et al., Case No. 05-02553 (Multnomah County Circuit Court).
During fiscal 2002 the Company entered into a purchase agreement to acquire inventory over a 15 month period with
an initial estimated value of $7,000,000 from Greenwood Forest Products, Inc. During the year ended August 31,
2003, the Company completed the final phase of the inventory acquisition. As partial consideration for the purchase of
the inventory the Company issued two promissory notes, based on its understanding of the value of the inventory
purchased. The Company believes it overpaid the obligation by approximately $820,000. The holder counterclaimed
for approximately $2,400,000.
Litigation was completed on March 5, 2007, with the court’s general judgment and money award. The net effect was
money judgment in favor of Greenwood Forest Products, Inc. for $242,604. The Company accrued reserves to cover
the money judgment related to this dispute. Both parties filed appeals for review of the court’s opinion.
A series of rulings and appeals between the years ended August 31, 2011 to August 31, 2015, resulted in the Company
recognizing aggregate litigation income of $272,695, and aggregate interest expense of $363,366 to August 31, 2015,
totaling a net loss of $90,671.
During the year ended August 31, 2016, the Company and Greenwood Forest Products, Inc., settled all litigation
between the two companies. The Company made a cash payment of $200,000 to Greenwood Forest Products, Inc., as
full settlement and termination of the litigation (the “Settlement Payment”). During the year ended August 31, 2016,
litigation expense of $115,990 was recorded. As a result, to the date of settlement during the year ended August 31,
2016, the Company has recognized aggregate litigation income, and aggregate interest expense of $156,705, and
$363,366 respectively, resulting in an aggregate loss of $206,661.
The Company does not know of any other material, active or pending legal proceedings against them; nor is the
Company involved as a plaintiff in any other material proceeding or pending litigation. The Company knows of no
other active or pending proceedings against anyone that might materially adversely affect an interest of the Company.
ITEM 4. MINE SAFETY DISCLOSURES
--- No Disclosure Necessary ---
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common shares trade on the NASDAQ Capital Market (formerly the NASDAQ Small Cap Market) in the United
States. The trading symbol for our common stock is “JCTCF” and the CUSIP number for the stock is 47733C-20-7.
Our common stock began trading on the NASDAQ Small Cap Stock Market in April 1996.
The Company declared a two for one stock split of its common stock with a record date of the close of business on
April 25, 2013. Shareholders received one additional common share for each common share held as of the record date.
The stock split was effective as of May 2, 2013.
Table No. 1 lists the volume of trading along with the high, low, and closing sales prices on the NASDAQ Capital
Market for the Company's common shares. Prices are adjusted to reflect the common stock split effective May 2, 2013.
Table No. 1
NASDAQ Capital Market
Common Shares Trading Activity
(US Dollars)
Volume
High
Low
Closing
12,000
$ 14.10
$ 13.51
$ 13.87
205,900
74,800
110,600
227,400
458,100
225,200
130,000
82,600
618,700
895,600
564,100
1,894,300
3,525,600
$ 14.46
$ 12.85
$ 13.10
$ 13.40
$ 14.95
$ 12.44
$ 11.01
$ 10.66
$ 14.46
$ 14.95
$ 13.73
$ 13.44
$ 13.88
$ 11.45
$ 10.80
$ 11.02
$ 10.60
$ 10.63
$ 9.64
$ 8.76
$ 7.70
$ 10.60
$ 7.70
$ 9.09
$ 9.18
$ 5.07
$ 13.95
$ 11.50
$ 12.05
$ 11.80
$ 12.42
$ 12.06
$ 10.15
$ 10.42
$ 13.95
$ 12.42
$ 9.50
$ 9.90
$ 13.00
Period
Ended
Monthly
9/30/17
Quarterly
8/31/17
5/31/17
2/28/17
11/30/16
8/31/16
5/31/16
2/29/16
11/30/15
Annually
8/31/17
8/31/16
8/31/15
8/31/14
8/31/13
The Company’s common shares formerly traded on the Toronto Stock Exchange ("TSX") in Canada, under 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. Effective at the close of business on October 11,
2012, the Company voluntarily delisted its common shares from the TSX. The Company no longer desires to maintain
dual listings due to the costs involved and the volume of trading on the TSX has been minimal.
Holders
Computershare Investor Services Inc. which is located in Vancouver, British Columbia, Canada is the registrar and
transfer agent for the common shares.
On November 9, 2017 there were 2,234,494 of the Company’s common shares outstanding.
- 10 -
Dividends
The Company 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 Company is to retain earnings for use in its operations, expansion of its
business, and the possible repurchase of Company shares. There are no restrictions that limit the ability of the
Company to pay dividends on common equity or that are likely to do so in the future. Any dividends paid by the
Company to U.S. shareholders would be subject to Canadian withholding tax.
Recent Sales of Securities: Use of Proceeds from Securities
The Company has sold no securities in the last 3 fiscal years.
Purchases of equity securities by the issuer and affiliated purchasers
During the fiscal years ended August 31, 2017 and 2016, the Company has repurchased common shares through share
repurchase plans approved by the Board of Directors in accordance with Rule 10b-18 under the U.S. Securities
Exchange Act of 1934.
On March 7, 2016, the Company announced the Board of Directors had authorized a share repurchase plan to purchase
for cancellation up to 250,000 common shares through the facilities of NASDAQ. Transactions may involve Jewett-
Cameron insiders or their affiliates executed in compliance with Jewett-Cameron's Insider Trading Policy. The share
repurchase plan was effected in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934, which
contains restrictions on the number of shares that may be purchased on a single day, subject to certain exceptions for
block purchases, based on the average daily trading volumes ("ADTV") of Jewett-Cameron's shares on NASDAQ.
Purchases shall be limited to one “Block” purchase per week in lieu of the 25% of ADTV limitation for compliance
with Rule 10b-18(b)(4). A “block” as defined under Rule 10b-18(a)(5) means a quantity of stock that, among other
things, is at least 5,000 shares and has a purchase price of at least US$50,000. The plan commenced on March 10,
2016 and terminated on August 25, 2016. Under the Plan, the Company repurchased a total of 175,538 common shares
at a cost of $2,124,579 which is an average price of $12.10.
On May 23, 2017, the Company announced the Board of Directors had authorized a new shares repurchase plan to
purchase for cancellation up to 225,000 common shares through the facilities of NASDAQ under similar terms as the
March 2016 repurchase plan. The Plan commenced on June 1, 2017 and terminated automatically on August 31, 2017.
Under the Plan, the Company repurchased and cancelled a total of 41,800 common shares at a total cost of $526,941
which was an average price of $12.61 per share.
The following table details the Company’s repurchase of its common shares during the fourth quarter of fiscal 2017
ended August 31, 2017.
Period
June
July
August
Total
Total Number of
Shares purchased
Average Price
Paid per
Share
Total number of
shares purchased
as part of publicly
announced plans or
programs
Maximum Number
of shares that may
yet be purchased
under
the plans or programs
27,989
13,476
335
41,800
$ 12.35
$ 13.09
$ 14.15
$ 12.61
27,989
41,465
41,800
41,800
197,011
183,535
- (1)
-
(1)
The current Plan terminated on August 31, 2017.
In addition to the Rule 10b-18 share repurchases, Donald M. Boone, Chairman and former President and CEO,
voluntarily returned 15,000 common shares to the Company’s treasury for cancellation in June 2016. In February 2017,
Mr. Boone voluntarily returned an additional 10,000 to treasury for cancellation. The Company paid no consideration
for these shares.
- 11 -
ITEM 6. SELECTED FINANCIAL DATA
--- No Disclosure Necessary for Smaller Reporting Companies ---
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The Company’s operations are classified into four reportable segments as follows:
Industrial wood products (Greenwood) – Distribution of specialty wood products.
Lawn, garden, pet and other (JCC) – Wholesaling of wood products and manufacturing and distribution of
specialty metal products.
Seed processing and sales (JCSC) – Processing and distribution of agricultural seed.
Industrial tools and clamps (MSI) – Importing and distribution of products including pneumatic air tools,
industrial clamps, and saw blades.
Quarterly Results
The following table summarizes quarterly financial results in fiscal 2017 and fiscal 2016.
dollars except per share amounts.)
(Figures are thousands of
Sales
Gross profit
Net income
Basic earnings per share
Diluted earnings per share
Sales
Gross profit
Net income
Basic earnings per share
Diluted earnings per share
First
Quarter
$ 10,422
2,394
486
0.21
0.21
$
$
First
Quarter
$ 11,942
2,380
532
0.22
0.22
$
$
For the Year Ended August 31, 2017
Fourth
Quarter
Third
Quarter
Second
Quarter
$ 9,499
2,129
309
0.14
0.14
$
$
$ 16,718
3,812
1,206
0.53
0.53
$
$
$ 11,062
2,744
726
0.32
0.32
$
$
For the Year Ended August 31, 2016
Fourth
Quarter
Third
Quarter
Second
Quarter
$ 11,188
2,036
132
0.05
0.05
$
$
$ 14,459
3,177
909
0.37
0.37
$
$
$ 10,522
2,144
552
0.23
0.23
$
$
Full
Year
$ 47,701
11,079
2,727
1.20
1.20
$
$
Full
Year
$ 48,111
9,737
2,125
0.87
0.87
$
$
Fiscal 2017 quarterly per share earnings were calculated using weighted average number of common shares
outstanding of 2,272,522 (2016 - 2,435,650).
RESULTS OF OPERATIONS
Fiscal Years Ended August 31, 2017 and August 31, 2016
Fiscal 2017 sales totaled $47,701,056 compared to sales of $48,110,998 in fiscal 2016, which was a decrease of
$409,942, or 1%. The decrease in sales was primarily due to a decline in industrial wood product sales at Greenwood.
Gross margin rose to 23.2% in fiscal 2017 compared to 20.2% in fiscal 2016 due to a more favorable mix of product
sales.
Operating expenses rose by $520,086 to $6,641,532 in fiscal 2017 from $6,121,446 in fiscal 2016. The increase was
due to an increase in wages and employee benefits, which rose to $4,349,542 from $4,055,948 as the Company hired
additional personnel during fiscal 2017, including a new President and CEO. Selling, general and administrative rose to
$2,016,776 from $1,789,230 as the Company has additional warehouse space to support the introduction of new
products, and depreciation fell slightly to $275,214 from $276,268. Income from operations rose to $4,437,751 in fiscal
2017 from $3,615,146 in fiscal 2016.
- 12 -
Including other items, income before income taxes was $4,465,251 in fiscal 2017 compared to $3,519,893 in fiscal
2016. Other items included loss on sale of property, plant and equipment of $394 compared to a gain of $5,600 in fiscal
2016. Interest and other income rose to $27,894 in fiscal 2017 compared to $15,164 in fiscal 2016. Litigation loss of
$115,990 in fiscal 2016 was related to the settlement of the litigation between the Company and Greenwood Forest
Products, Inc. Interest expense in fiscal 2017 was $Nil compared to $27 in fiscal 2016. Income tax expense was
$1,738,594 in fiscal 2017 compared to $1,394,794 in fiscal 2016. The Company calculates income tax expense based
on combined federal and state rates that are currently in effect.
Net income for fiscal 2017 was $2,726,657, or $1.20 per basic and diluted share, compared to net income of
$2,125,099, or $0.87 per basic and diluted share, for fiscal 2016. The income per share was positively affected by the
repurchase and cancellation of common shares during both fiscal 2017 and 2016, and the weighted number of shares
outstanding were 2,272,522 in fiscal 2017 and 2,435,650 in fiscal 2016.
Lawn, Garden, Pet and Other - JCC
Sales at JCC were $39,273,206 in fiscal 2017 compared to sales of $39,286,126 in fiscal 2016. Operating income at
JCC for 2017 was $3,548,177 compared to $3,253,673 in fiscal 2016, which was an increase of $294,504, or 9%.
Although the level of sales for the current year were flat compared to fiscal 2016, the increase in operating income was
due to a more favorable mix of higher margin product sales as management has worked to establish new sales channels
through both eCommerce and internationally. Overall, the operating results of JCC are seasonal with the first two
quarters of the fiscal year being much slower than the final two quarters of the fiscal year.
The following table shows a breakdown between the metal and wood categories in this segment.
Fiscal Year
2017
2016
Sales in Millions of Dollars
Metal Wood Total
$39.3
$ 9.3
$30.0
$39.3
$12.9
$26.4
Percent of Total Sales
Metal Wood Total
24% 100%
76%
33% 100%
67%
Industrial Wood Products - Greenwood
Sales at Greenwood in fiscal 2017 were $3,804,672, which was a decrease of $899,415, or 19%, from sales of
$4,704,087 in fiscal 2016. Sales during the first half of fiscal 2017 were slow as several primary customers delayed
orders, but began to rebound during the second half. Historically, a large portion of Greenwood’s sales were in the
marine industry, but the Company sold its excess marine industry inventory in fiscal 2014. The Company will maintain
a readiness to participate in the marine segment when the market rebounds. Greenwood recorded an operating loss of
$175,504 in fiscal 2017 compared to a loss of $8,898 in fiscal 2016.
Seed Processing and Sales - JCSC
Sales at JCSC were $3,108,454 in fiscal 2017 compared to sales of $2,927,408 in fiscal 2016 which represents an
increase of $181,046, or 6%. The rebound in residential housing demand in the United States has resulted in higher
demand and prices for grass seed. Management has also worked to improve its seed cleaning and seed sales operations,
which have contributed to the improved results. Operating loss at JCSC for the year was $23,809 compared to an
operating loss of $193,208 in fiscal 2016.
Industrial Tools and Clamps - MSI
Sales at MSI were $1,514,724 in fiscal 2017 compared to sales of $1,193,377 in fiscal 2016, which was an increase of
$321,347, or 27%. During fiscal 2017, management has worked to increase eCommerce sales and to build stronger
relationships with distributors. Sales in fiscal 2016 were negatively affected by increased competitiveness in certain
segments which led to lower operating margins. Operating income at MSI was $85,501 for fiscal 2017 compared to an
operating loss of $100,986 in fiscal 2016.
- 13 -
LIQUIDITY AND CAPITAL RESOURCES
Fiscal Year Ended August 31, 2017
As of August 31, 2017, the Company had working capital of $16,435,306 compared to working capital of $14,450,870
as of August 31, 2016, which is a increase of $1,984,436. The largest changes affecting working capital include an
increase in cash of $1,392,328, increase in accounts receivable of $222,851, and an increase in inventory of $738,528.
Prepaid expenses declined by $237,119.
Accounts payable decreased by $201,844 to $638,128 which is related to the timing of payments due to suppliers.
Accrued liabilities rose to $1,807,192 from $1,473,792, an increase of $333,400. The ratio of current assets to current
liabilities, or current ratio, was 7.7 as of August 31, 2017.
For the fiscal year ended August 31, 2017, the accounts receivable collection period or DSO was 27 days compared to
25 days for the year ended August 31, 2016. Inventory turnover for the year ended August 31, 2017 was 84 days
compared to 78 days for the year ended August 31, 2016.
Purchase of property, plant and equipment used cash of $474,359. During the year the Company repurchased and
cancelled 41,800 common shares which used cash of $526,941. An additional 10,000 common shares were voluntarily
returned by the Company’s Chairman and cancelled.
Based on the Company’s current working capital position, its policy of retaining earnings, and the line of credit
available, the Company has adequate working capital to meet its needs for the coming fiscal year.
Short-term and Long-term Debt
External sources of liquidity include a line of credit from U.S. Bank of $3 million, of which $3 million is available.
Borrowing under the line of credit is secured by an assignment of accounts receivable and inventory. The interest rate
is calculated solely on the one month LIBOR rate plus 175 basis points. As of August 31, 2017 the one month LIBOR
rate plus 175 basis points was 2.99% (1.24% + 1.75%). The line of credit has certain financial covenants. The
Company is in compliance with these covenants.
OTHER MATTERS
Contractual Obligations and Commercial Commitments
The Company currently has no contractual obligations or commercial commitments.
Inflation
The Company does not believe that inflation had a material impact during fiscal 2017 or 2016. Typically, the
Company passes price increases on to the customer.
Critical Accounting Policies
Management is required to make judgments, estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements, the disclosure of contingent assets and liabilities as of the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On a
regular basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these
estimates under different assumptions or conditions.
During the year ended August 31, 2017, the Company did not adopt any new accounting policies that would have a
material impact on the consolidated financial statements, nor did it make changes to accounting policies. Senior
Management has discussed with the Audit Committee the development, selection and disclosure of accounting
estimates used in the preparation of the consolidated financial statements.
- 14 -
Recent Accounting Pronouncements
Management has reviewed the new accounting guidance and determined that there is not a material impact on our
financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The Company did not have any derivative financial instruments as of August 31, 2017, and the Company does not use
derivative instruments for trading purposes.
Changes in U.S. interest rates affect the interest earned on the Company’s cash as well as interest paid on debt. The
Company has a line of credit with an interest rate based on published rates that may fluctuate over time based on
economic changes in the environment. The Company is subject to interest rate risk and could be subject to increased
interest payments if market interest rates fluctuate. The Company does not expect any change in the interest rates to
have a material adverse effect on the Company’s results from operations.
Foreign Currency Risk
The Company operates primarily in the United States. However, a relatively small amount of business is conducted in
currencies other than U.S. dollars. Also, to the extent that the Company uses contract manufacturers in China, currency
exchange rates can influence the Company’s purchasing costs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The financial statements and notes thereto are attached hereto. The audit report of Davidson & Company, LLP
Chartered Accountants is included herein immediately preceding the audited consolidated financial statements.
Audited Consolidated Financial Statements: fiscal 2017 and 2016
Report of Independent Registered Accounting Firm dated November 8, 2017
Consolidated Balance Sheets
Balance Sheets at August 31, 2017 and August 31, 2016
Consolidated Statements of Operations
For the years ended August 31, 2017 and August 31, 2016
Consolidated Statements of Stockholders’ Equity
For the years ended August 31, 2017 and August 31, 2016
Consolidated Statements of Cash Flows
For the years ended August 31, 2017 and August 31, 2016
Notes to Financial Statements
Report of Independent Registered Accounting Firm dated November 8, 2017
Schedule II: Valuation and Qualifying Accounts
- 15 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2017
- 16 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
Jewett-Cameron Trading Company Ltd. and Subsidiaries
We have audited the accompanying consolidated financial statements of Jewett-Cameron Trading Company Ltd. and
Subsidiaries (the “Company”), which comprise the consolidated balance sheets as of August 31, 2017 and 2016, and
the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall consolidated 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
financial position of Jewett-Cameron Trading Company Ltd. and Subsidiaries as of August 31, 2017 and 2016, and the
results of its operations and its cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Vancouver, Canada
November 8, 2017
“DAVIDSON & COMPANY LLP”
Chartered Professional Accountants
- 17 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
AS OF AUGUST 31
ASSETS
Current assets
Cash
Accounts receivable, net of allowance
of $1,725 (August 31, 2016 - $Nil)
Inventory, net of allowance
of $156,713 (August 31, 2016 - $176,717) (note 3)
Prepaid expenses
Prepaid income taxes
Total current assets
2017
2016
$ 5,912,250
$ 4,519,922
3,565,055
8,807,545
595,776
-
3,342,204
8,069,017
832,895
596
18,880,626
16,764,634
Property, plant and equipment, net (note 4)
3,222,572
2,954,595
Intangible assets, net (note 5)
Total assets
77,837
150,543
$ 22,181,035
$ 19,869,772
- Continued -
The accompanying notes are an integral part of these consolidated financial statements.
- 18 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
AS OF AUGUST 31
Continued
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
Accrued liabilities
Total current liabilities
Deferred tax liability (note 6)
Total liabilities
Contingent liabilities and commitments (note 12)
Stockholders’ equity
Capital stock (note 8, 9)
Authorized
21,567,564 common shares, without par value
10,000,000 preferred shares, without par value
Issued
2,234,494 common shares (August 31, 2016 – 2,286,294)
Additional paid-in capital
Retained earnings
Total stockholders’ equity
2017
2016
$
638,128
1,807,192
$
839,972
1,473,792
2,445,320
2,313,764
11,344
31,353
2,456,664
2,345,117
1,054,316
600,804
18,069,251
1,078,759
600,804
15,845,092
19,724,371
17,524,655
Total liabilities and stockholders’ equity
$ 22,181,035
$ 19,869,772
The accompanying notes are an integral part of these consolidated financial statements.
- 19 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
YEARS ENDED AUGUST 31
SALES
COST OF SALES
GROSS PROFIT
OPERATING EXPENSES
Selling, general and administrative
Depreciation and amortization
Wages and employee benefits
Income from operations
OTHER ITEMS
(Loss) gain on sale of property, plant and equipment
Interest and other income
Interest expense
Litigation expense (Note 12(a))
2017
2016
$ 47,701,056
$ 48,110,998
36,621,773
38,374,405
11,079,283
9,736,593
2,016,776
275,214
4,349,542
6,641,532
1,789,231
276,268
4,055,948
6,121,447
4,437,751
3,615,146
(394)
27,894
-
-
27,500
5,600
15,164
(27)
(115,990)
(95,253)
Income before income taxes
4,465,251
3,519,893
Income taxes (note 6)
Current
Deferred (recovery)
Net income for the year
Basic earnings per common share
Diluted earnings per common share
Weighted average number of common shares outstanding:
Basic
Diluted
1,758,603
(20,009)
1,397,741
(2,947)
$ 2,726,657
$ 2,125,099
$
$
1.20
1.20
$
$
0.87
0.87
2,272,522
2,272,522
2,435,650
2,435,650
The accompanying notes are an integral part of these consolidated financial statements.
- 20 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Expressed in U.S. Dollars)
YEARS ENDED AUGUST 31
Capital Stock
Number
of Shares
Amount
Additional
paid-in
capital
Retained
earnings
Total
August 31, 2015
2,476,832
$ 1,168,712
$ 600,804
$ 15,754,619
$ 17,524,135
Shares repurchased and cancelled (note 9)
Net income
(190,538)
-
(89,953)
-
-
-
(2,034,626)
2,125,099
(2,124,579)
2,125,099
August 31, 2016
2,286,294
$ 1,078,759
$ 600,804
$ 15,845,092
$ 17,524,655
Shares repurchased and cancelled (note 9)
Net income
(51,800)
-
(24,443)
-
-
-
(502,498)
2,726,657
(526,941)
2,726,657
August 31, 2017
2,234,494
$ 1,054,316
$ 600,804
$ 18,069,251
$ 19,724,371
The accompanying notes are an integral part of these consolidated financial statements.
- 21 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
YEARS ENDED AUGUST 31
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year
Items not affecting cash:
Depreciation and amortization
Loss (gain) on sale of property, plant and equipment
Deferred income taxes
Interest income on litigation
Decrease in litigation reserve
Changes in non-cash working capital items:
(Increase) decrease in accounts receivable
Decrease in note receivable
(Increase) decrease in inventory
Decrease (increase) in prepaid expenses
Decrease in prepaid income taxes
Increase in accounts payable and accrued liabilities
2017
2016
$ 2,726,657
$ 2,125,099
275,214
394
(20,009)
-
-
(222,851)
-
(738,528)
237,119
596
131,556
276,268
(5,600)
(2,947)
(6,661)
(84,010)
346,043
1,310
282,558
(113,436)
25,974
304,451
Net cash provided by operating activities
2,390,148
3,149,049
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of property, plant and equipment
Purchase of property, plant and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of common stock
3,480
(474,359)
(470,879)
5,600
(926,445)
(920,845)
(526,941)
(2,124,579)
Net cash used in financing activities
(526,941)
(2,124,579)
Net increase in cash
Cash, beginning of year
Cash, end of year
Supplemental disclosure with respect to cash flows (note 15)
1,392,328
4,519,922
103,625
4,416,297
$ 5,912,250
$ 4,519,922
The accompanying notes are an integral part of these consolidated financial statements.
- 22 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
1.
NATURE OF OPERATIONS
Jewett-Cameron Trading Company Ltd. was incorporated in British Columbia on July 8, 1987 as a holding
company for Jewett-Cameron Lumber Corporation (“JCLC”), incorporated September 1953. Jewett-Cameron
Trading Company, Ltd. acquired all the shares of JCLC through a stock-for-stock exchange on July 13, 1987,
and at that time JCLC became a wholly owned subsidiary. Effective September 1, 2013, the Company
reorganized certain of its subsidiaries. JCLC’s name was changed to JC USA Inc. (“JC USA”), and a new
subsidiary, Jewett-Cameron Company (“JCC”), was incorporated.
JC USA has the following wholly owned subsidiaries: MSI-PRO Co. (“MSI”), incorporated April 1996,
Jewett-Cameron Seed Company,
Inc.
(“Greenwood”), incorporated February 2002, and Jewett-Cameron Company, incorporated September 2013.
Jewett-Cameron Trading Company Ltd. and its subsidiaries (the “Company”) have no significant assets in
Canada.
incorporated October 2000, Greenwood Products,
(“JCSC”),
The Company, through its subsidiaries, operates out of facilities located in North Plains, Oregon. JCC’s
business consists of the manufacturing and distribution of specialty metal products and wholesale distribution
of wood products to home centers and other retailers located primarily in the United States. Greenwood is a
processor and distributor of industrial wood and other specialty building products principally to customers in
the marine and transportation industries in the United States. MSI is an importer and distributor of pneumatic
air tools and industrial clamps in the United States. JCSC is a processor and distributor of agricultural seeds in
the United States. JC USA provides professional and administrative services, including accounting and credit
services, to its subsidiary companies.
2.
SIGNIFICANT ACCOUNTING POLICIES
Generally accepted accounting principles
These consolidated financial statements have been prepared in conformity with generally accepted accounting
principles of the United States of America.
Principles of consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries, JC USA, JCC, MSI, JCSC, and Greenwood, all of which are incorporated under the laws of
Oregon, U.S.A.
All inter-company balances and transactions have been eliminated upon consolidation.
Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting
principles in the United States of America 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.
Significant estimates incorporated into the Company’s consolidated financial statements include the estimated
useful lives for depreciable and amortizable assets, the estimated allowances for doubtful accounts receivable
and inventory obsolescence, possible product
returns, and litigation
contingencies and claims. Actual results could differ from those estimates.
liability and possible product
- 23 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Cash and cash equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of
issuance to be cash equivalents. At August 31, 2017, cash was $5,912,250 compared to $4,519,922 at August
31, 2016. At August 31, 2017 and 2016, there were no cash equivalents.
Accounts receivable
Trade and other accounts receivable are reported at face value less any provisions for uncollectible accounts
considered necessary. Accounts receivable primarily includes trade receivables from customers. The Company
estimates doubtful accounts on an item-by-item basis and includes over aged accounts as part of allowance for
doubtful accounts, which are generally ones that are ninety days or greater overdue.
The Company extends credit to domestic customers and offers discounts for early payment. When extension
of credit is not advisable, the Company relies on either prepayment or a letter of credit.
Inventory
Inventory, which consists primarily of finished goods, is recorded at the lower of cost, based on the average
cost method, and market. Market is defined as net realizable value. An allowance for potential non-saleable
inventory due to excess stock or obsolescence is based upon a review of inventory components.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation. The Company provides for
depreciation over the estimated life of each asset on a straight-line basis over the following periods:
Office equipment
Warehouse equipment
Buildings
Intangibles
3-7 years
2-10 years
5-30 years
The Company’s intangible assets have a finite life and are recorded at cost. The most significant intangible
assets are two patents related to gate support systems. Amortization is calculated using the straight-line
method over the remaining lives of 6 months and 18 months, respectively, and are reviewed annually for
impairment.
Asset retirement obligations
The Company records the fair value of an asset retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the
acquisition, construction, development, and normal use of the long-lived assets. The Company also records a
corresponding asset which is amortized over the life of the asset. Subsequent to the initial measurement of the
asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time
(accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement
cost). The Company does not have any significant asset retirement obligations.
- 24 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Impairment of long-lived assets and long-lived assets to be disposed of
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the
If such assets are considered to be impaired, the impairment to be recognized is measured by the
asset.
amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount and the fair value less costs to sell.
Currency and foreign exchange
These financial statements are expressed in U.S. dollars as the Company's operations are primarily based in
the United States.
The Company does not have non-monetary or monetary assets and liabilities that are in a currency other than
the U.S. dollar. Any statement of operations transactions in a foreign currency are translated at rates that
approximate those in effect at the time of translation. Gains and losses from translation of foreign currency
transactions into U.S. dollars are included in current results of operations.
Earnings per share
Basic earnings per common share is computed by dividing net income available to common shareholders by
the weighted average number of common shares outstanding in the period. Diluted earnings per common
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 fiscal years ended August 31, 2017 and 2016 are as follows:
Net income
Basic weighted average number of
common shares outstanding
Effect of dilutive securities
Stock options
Diluted weighted average number
of common shares outstanding
2017
2016
$ 2,726,657
$ 2,125,099
2,272,522
2,435,650
-
-
2,272,522
2,435,650
Basic and diluted earnings per common share
$
1.20
$
0.87
Comprehensive income
The Company has no items of other comprehensive income in any year presented. Therefore, net income
presented in the consolidated statements of operations equals comprehensive income.
- 25 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Stock-based compensation
All stock-based compensation is recognized as an expense in the financial statements and such costs are
measured at the fair value of the award.
No options were granted during the years ended August 31, 2017 and 2016, and there were no options
outstanding on August 31, 2017 or 2016.
Financial instruments
The Company uses the following methods and assumptions to estimate the fair value of each class of financial
instruments for which it is practicable to estimate such values:
Cash - the carrying amount approximates fair value because the amounts consist of cash held at a bank and
cash held in short term investment accounts.
Accounts receivable - the carrying amounts approximate fair value due to the short-term nature and historical
collectability.
Accounts payable and accrued liabilities - the carrying amount approximates fair value due to the short-term
nature of the obligations.
The estimated fair values of the Company's financial instruments as of August 31, 2017 and 2016 follows:
Cash
Accounts receivable, net of allowance
Accounts payable and accrued liabilities
2017
Carrying
Amount
$5,912,250
3,565,055
2,445,320
Fair
Value
$5,912,250
3,565,055
2,445,320
2016
Carrying
Amount
$4,519,922
3,342,204
2,313,764
Fair
Value
$4,519,922
3,342,204
2,313,764
The following table presents information about the assets that are measured at fair value on a recurring basis
as of August 31, 2017, and indicates the fair value hierarchy of the valuation techniques the Company utilized
to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets. Fair values determined by Level 2 inputs utilize data points
that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3
inputs are unobservable data points for the asset or liability, and included situations where there is little, if any,
market activity for the asset:
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
August 31,
2017
$ 5,912,250
$ 5,912,250
$
—
$
—
Assets:
Cash
The fair values of cash are determined through market, observable and corroborated sources.
- 26 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Income taxes
A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting
and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the
year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Shipping and handling costs
The Company incurs certain expenses related to preparing, packaging and shipping its products to its
customers, mainly third-party transportation fees. All costs related to these activities are included as a
component of cost of sales in the consolidated statements of operations. All costs billed to the customer are
included as sales in the consolidated statements of operations.
Revenue recognition
The Company recognizes revenue from the sales of lumber, building supply products, industrial wood
products, specialty metal products, and other specialty products and tools, when the products are shipped, title
passes, and the ultimate collection is reasonably assured. Revenue from the Company's seed operations is
generated from seed processing, handling and storage services provided to seed growers, and by the sales of
seed products. Revenue from the provision of these services and products is recognized when the services
have been performed, products sold and collection of the amounts is reasonably assured.
Recent Accounting Pronouncements
In January 2015, an ASU was issued to simplify the income statement presentation requirements in Subtopic
225-20 by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that
are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the
extraordinary classification simplifies income statement presentation by altogether removing the concept of
extraordinary items from consideration. This ASU is effective for annual periods beginning after December
15, 2015, including interim periods within those annual periods. An entity may apply this ASU prospectively
or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The
Company adopted this ASU on April 1, 2016, prospectively.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The new standard
provides a five-step approach to be applied to all contracts with customers and also requires expanded
disclosures about revenue recognition. The ASU is effective for annual reporting periods beginning after
December 15, 2017, including interim periods and is to be retrospectively applied. Early application is
permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting
periods within that reporting period. The Company is currently assessing the impact of the future adoption of
this standard on the consolidated financial statements.
- 27 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Recent Accounting Pronouncements (cont’d…)
In November 2015, an ASU was issued to simplify the presentation of deferred income taxes. The
amendments in this ASU require that deferred tax liabilities and assets be classified as non-current on the
balance sheet as compared to the current requirements to separate deferred tax liabilities and assets into
current and non-current amounts. This ASU is effective for annual periods beginning after December 15,
2016, including interim periods within those annual periods. Earlier application is permitted. This ASU may
be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods
presented. The adoption of this new guidance is not expected to have a material impact on the Company’s
consolidated financial statements.
In February 2016, Topic 842, Leases was issued to replace the leases requirements in Topic 840, Leases. The
main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities
by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in
the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its
right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is
permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and
lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a
straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that
applied under previous GAAP. Topic 842 will be effective for annual reporting periods beginning after
December 15, 2018, including interim periods within those annual periods and is to be retrospectively applied.
Earlier application is permitted. The adoption of this new guidance is not expected to have a material impact
on the Company’s consolidated financial statements.
In July 2015, Topic 330, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory,
which requires that inventory within the scope of the guidance be measured at the lower of cost and net
realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method (RIM) are
not impacted by the new guidance. The new standard is being issued as part of the simplification initiative.
Prior to the issuance of the standard, inventory was measured at the lower of cost or market (where market
was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a
normal profit margin). This necessitated obtaining three data points to determine market value. Replacing the
concept of market with the single measurement of net realizable value is intended to create efficiencies for
preparers. Further, this change will more closely align U.S. GAAP and IFRS. The guidance will be effective
for fiscal years beginning after December 15, 2016, including interim periods within those years and is to be
prospectively applied. The Company is currently assessing this ASU’s impacts on the Company’s
consolidated results of operations and financial condition.
In November 2016, Topic 230, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted
Cash, a consensus of the FASB’s Emerging Issues Task Force (the “Task Force”). The new standard requires
that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash equivalents. Entities will also be required to
reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. The Company
is currently assessing this ASU’s impacts on the Company’s consolidated results of operations and financial
condition.
- 28 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
3.
INVENTORY
A summary of inventory as of August 31, 2017 and 2016 follows:
Wood products and metal products
Industrial tools
Agricultural seed products
2017
2016
$ 8,184,921
434,871
187,753
$ 7,374,255
450,924
243,838
$ 8,807,545
$ 8,069,017
4.
PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant, and equipment as of August 31, 2017 and 2016 follows:
Office equipment
Warehouse equipment
Buildings
Land
Accumulated depreciation
Net book value
2017
2016
$
561,090
1,290,838
4,097,438
761,924
6,711,290
$
615,031
1,498,960
3,697,100
761,924
6,573,015
(3,488,718)
(3,618,420)
$ 3,222,572
$ 2,954,595
In the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable
and an estimate of future discounted 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 in
its assets. 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.
INTANGIBLE ASSETS
A summary of intangible assets as of August 31, 2017 and 2016 follows:
Patent
Other
Accumulated amortization
Net book value
2017
$ 850,000
43,655
893,655
(815,818)
2016
$ 850,000
43,655
893,655
(743,112)
$ 77,837
$ 150,543
- 29 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
6.
INCOME TAXES
A reconciliation of the provision for income taxes with amounts determined by applying the statutory U.S.
federal income tax rate to income before income taxes is as follows:
Computed tax at the federal statutory rate
State taxes, net of federal benefit
Depreciation
Inventory reserve
Other
2017
2016
$ 1,516,880
217,184
(22,800)
39,357
7,982
$ 1,194,943
169,869
(5,834)
32,269
6,494
Provision for income taxes
$ 1,758,603
$ 1,397,741
Current income taxes
Deferred income taxes
$ 1,758,603
(20,009)
$ 1,738,594
$ 1,397,741
(2,947)
$ 1,394,794
Deferred income tax liability as of August 31, 2017 of $11,344 (August 31, 2016 – $31,353) reflects the net
tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Deferred tax assets:
Allowance for inventory
Allowance for bad debts
Difference between book and tax depreciation
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Net deferred tax liability
2017
2016
$ 116,300
1,294
9,121
126,715
-
126,715
$
78,237
-
28,469
106,706
-
106,706
(138,059)
(138,059)
Combined net deferred tax liability
$
(11,344)
$ (31,353)
7.
BANK INDEBTEDNESS
There was no bank indebtedness under the Company’s line-of-credit as of August 31, 2017 or August 31,
2016. At August 31, 2017, the line of credit borrowing limit was $3,000,000.
Bank indebtedness, when it exists, is secured by an assignment of accounts receivable and inventory. Interest
is calculated solely on the one month LIBOR rate plus 175 basis points (Note 12(b)).
- 30 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
8.
CAPITAL STOCK
Common stock
Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the
Company's ability to pay dividends on its common stock. The Company has not declared any dividends since
incorporation.
9.
CANCELLATION OF CAPITAL STOCK
Treasury stock may be kept based on an acceptable inventory method such as the average cost basis. Upon
disposition or cancellation, the treasury stock account is credited for an amount equal to the number of shares
cancelled, multiplied by the cost per share and the difference is treated as additional paid-in-capital in excess
of stated value.
During the 4th quarter of fiscal 2017 ended August 31, 2017, the Company repurchased and cancelled a total
of 41,800 common shares under a 10b5-1 share repurchase plan. The total cost was $526,941 at an average
price of $12.61 per share. The premium paid to acquire these shares over their per share book value in the
amount of $507,217 was recorded as a decrease to retained earnings.
Donald Boone, Chairman and former President and CEO of the Company, voluntarily returned 10,000
common shares to treasury for cancellation during the fiscal year ended August 31, 2017. The Company paid
no consideration for the shares. Capital stock was reduced by the book value of the shares in the amount of
$4,719, with a corresponding increase to retained earnings of $4,719.
During the 4th quarter of fiscal 2016 ended August 31, 2016, the Company repurchased and cancelled a total
of 112,152 common shares under a 10b5-1 share repurchase plan. The total cost was $1,378,701 at an average
price of $12.29 per share. The premium paid to acquire these shares over their per share book value in the
amount of $1,325,994 was recorded as a decrease to retained earnings. In addition to the shares repurchased
under the 10b5-1 repurchase plan, Donald Boone voluntarily returned 15,000 common shares to treasury for
cancellation. The Company paid no consideration for the shares. Capital stock was reduced by the book value
of the shares in the amount of $7,124, with a corresponding increase to retained earnings of $7,124.
During the 3rd quarter of fiscal 2016 ended May 31, 2016, the Company repurchased and cancelled a total of
63,386 common shares under a 10b5-1 share repurchase plan. The total cost was $745,878 at an average price
of $11.77 per share. The premium paid to acquire these shares over their per share book value in the amount
of $715,756 was recorded as a decrease to retained earnings.
- 31 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
10.
STOCK OPTIONS
The Company has a stock option program under which stock options to purchase securities from the Company
can be granted to directors and employees of the Company on terms and conditions acceptable to the
regulatory authorities of Canada, notably the Ontario Securities Commission and the British Columbia
Securities Commission.
Under the stock option program, stock options for up to 10% of the number of issued and outstanding
common shares may be granted from time to time, provided that stock options in 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. Generally, no
option can be for a term of more than 10 years from the date of the grant.
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. Options vest at
the discretion of the Board of Directors.
The Company had no stock options outstanding as of the years ended August 31, 2017 and August 31, 2016.
11.
PENSION AND PROFIT-SHARING PLANS
The Company has a deferred compensation 401(k) plan for all employees with at least 12 months of service
pending a monthly enrollment time. The plan allows for a non-elective discretionary contribution based on the
first $50,000 of eligible compensation, which was decreased from the prior $60,000 of eligible compensation
during the second quarter of fiscal 2017. During the second quarter of fiscal 2016 ended February 29, 2016,
the Company made an additional 10% contribution for all eligible employees as a one-time compensation
bonus.
For the years ended August 31, 2017 and 2016 the 401(k) compensation expense was $336,473 and $571,551,
respectively.
12.
CONTINGENT LIABILITIES AND COMMITMENTS
a) A subsidiary was a plaintiff in a lawsuit filed in Portland, Oregon, entitled, Greenwood Products, Inc. et al
v. Greenwood Forest Products, Inc. et al., Case No. 05-02553 (Multnomah County Circuit Court).
During fiscal 2002 the Company entered into a purchase agreement to acquire inventory over a 15 month
period with an initial estimated value of $7,000,000 from Greenwood Forest Products, Inc. During the
year ended August 31, 2003, the Company completed the final phase of the inventory acquisition. As
partial consideration for the purchase of the inventory the Company issued two promissory notes, based
on its understanding of the value of the inventory purchased. The Company believes it overpaid the
obligation by approximately $820,000. The holder counterclaimed for approximately $2,400,000.
Litigation was completed on March 5, 2007, with the court’s general judgment and money award. The
net effect was money judgment in favor of Greenwood Forest Products, Inc. for $242,604. The Company
accrued reserves to cover the money judgment related to this dispute. Both parties filed appeals for
review of the court’s opinion.
A series of rulings and appeals between the years ended August 31, 2011 to August 31, 2015, resulted in
the Company recognizing aggregate litigation income of $272,695, and aggregate interest expense of
$363,366 to August 31, 2015, totaling a net loss of $90,671.
- 32 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
12.
CONTINGENT LIABILITIES AND COMMITMENTS (cont’d…)
During the year ended August 31, 2016, the Company and Greenwood Forest Products, Inc., settled all
litigation between the two companies. The Company made a cash payment of $200,000 to Greenwood
Forest Products, Inc., as full settlement and termination of the litigation (the “Settlement Payment”).
During the nine months ended May 31, 2016 and year ended August 31, 2016, litigation expense of
$115,990 was recorded. As a result, to the date of settlement during the year ended August 31, 2016, the
Company recognized aggregate litigation income, and aggregate interest expense of $156,705, and
$363,366 respectively, resulting in an aggregate loss of $206,661.
A summary of the litigation reserve is as follows:
Litigation settlement (1)
Litigation reserve
Interest expense
Interest income
Total
August 31,
2017
$
$
-
-
-
-
-
August 31,
2016
$
$
(84,010)
84,010
-
-
-
(1) The litigation reserve was reversed in full upon the settlement reached during the year ended August 31, 2016.
b) At August 31, 2017 and August 31, 2016, the Company had an un-utilized line-of-credit of $3,000,000
(Note 7). The line-of-credit has certain financial covenants. The Company is in compliance with these
covenants.
13.
SEGMENT INFORMATION
The Company has four principal reportable segments. These reportable segments were determined based on
the nature of the products offered. Reportable segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing performance.
The Company evaluates performance based on several factors, of which the primary financial measure is
business segment income before taxes. The following tables show the operations of the Company's reportable
segments.
- 33 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
13.
SEGMENT INFORMATION (cont’d…)
Following is a summary of segmented information for the years ended August 31:
Sales to unaffiliated customers:
Industrial wood products
Lawn, garden, pet and other
Seed processing and sales
Industrial tools and clamps
Income (loss) before income taxes:
Industrial wood products
Lawn, garden, pet and other
Seed processing and sales
Industrial tools and clamps
Corporate and administrative
Identifiable assets:
Industrial wood products
Lawn, garden, pet and other
Seed processing and sales
Industrial tools and clamps
Corporate and administrative
Depreciation and amortization:
Industrial wood products
Lawn, garden, pet and other
Seed processing and sales
Industrial tools and clamps
Corporate and administrative
Capital expenditures:
Industrial wood products
Lawn, garden, pet and other
Seed processing and sales
Industrial tools and clamps
Corporate and administrative
Interest expense:
2017
2016
3,804,672
39,273,206
3,108,454
1,514,724
47,701,056
(175,504)
3,548,177
(23,809)
85,501
1,030,886
4,465,251
1,153,802
10,706,686
296,579
535,093
9,488,875
22,181,035
330
26,920
12,978
1,314
233,672
275,214
-
-
12,495
-
461,864
474,359
-
$
$
$
$
$
$
$
$
$
$
4,704,087
39,286,126
2,927,408
1,193,377
48,110,998
(8,898)
3,253,673
(193,208)
(100,986)
569,312
3,519,893
787,093
10,325,984
359,070
559,582
7,838,043
19,869,772
655
41,283
10,783
1,856
221,691
276,268
-
910,713
15,732
-
-
926,445
(27)
$
$
$
$
$
$
$
$
$
- 34 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
13.
SEGMENT INFORMATION (cont’d…)
The following table lists sales made by the Company to customers which were in excess of 10% of total sales
for the years ended August 31:
2017
2016
Sales
$
23,442,308
$
23,725,076
The Company conducts business primarily in the United States, but also has limited amounts of sales in
foreign countries. The following table lists sales by country for the fiscal years ended August 31:
United States
Canada
Mexico/Latin America
Europe
Asia/Pacific
Middle East
2017
2016
44,740,560
1,727,758
843,667
68,752
320,319
-
47,701,056
$
$
44,568,899
1,465,208
1,963,994
6,926
94,285
11,686
48,110,998
$
$
All of the Company’s significant identifiable assets were located in the United States as of August 31, 2017
and 2016.
14.
CONCENTRATIONS
Credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of
cash and accounts receivable. The Company places its cash with a high quality financial institution. The
Company has concentrations of credit risk with respect to accounts receivable as large amounts of its accounts
receivable are concentrated geographically in the United States amongst a small number of customers. At
August 31, 2017, three customers accounted for accounts receivable greater than 10% of total accounts
receivable for a total of 66%. At August 31, 2016, two customers accounted for accounts receivable greater
than 10% of total accounts receivable for a total of 62%. The Company controls credit risk through credit
insurance and monitoring procedures. The Company performs credit
approvals, credit
to support accounts
evaluations of its commercial customers but generally does not require collateral
receivable.
limits, credit
Volume of business
The Company has concentrations in the volume of purchases it conducts with its suppliers. For the fiscal year
ended August 31, 2017, there were two suppliers which each accounted for greater than 10% of total
purchases, and the aggregate purchases amounted to $20,111,921. For the fiscal year ended August 31, 2016,
there were three suppliers which each accounted for greater than 10% of total purchases, and the aggregate
purchases amounted to $21,741,249.
- 35 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
15.
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Certain cash payments for the years ended August 31, 2017 and 2016 are summarized as follows:
Cash paid during the year for:
Interest
Income taxes
2017
2016
$
$
-
1,718,725
$
$
-
1,371,707
There were no non-cash investing or financing activities during the years presented.
- 36 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Jewett-Cameron Trading Company Ltd. and Subsidiaries
Our report on the consolidated financial statements of Jewett-Cameron Trading Company Ltd. and Subsidiaries as at
August 31, 2017 and 2016 and for the years then ended is included on Page 17 of this Form 10-K. In connection with
our audits of such consolidated financial statements, we have also audited the related consolidated financial statement
Schedule II for the years ended August 31, 2017 and 2016 included in this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to above for the years ended August 31, 2017 and
2016, when considered in relation to the consolidated financial statements taken as a whole, presents fairly in all
material respects the information required to be included therein.
Vancouver, Canada
November 8, 2017
“DAVIDSON & COMPANY LLP”
Chartered Professional Accountants
- 37 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
AUGUST 31, 2017
August 31, 2017
Allowance deducted from related
Balance sheet account:
Inventory
Accounts Receivable
August 31, 2016
Allowance deducted from related
Balance sheet account:
Inventory
Balance at
Beginning
of Year
Additions
Charged to
Costs and
Expenses
Deductions
Credited to
Costs and
Expenses
Deductions
From
Reserves
Balance at
End of Year
$ 176,717
-
$
$
$
-
1,725
$
$
20,004
-
$
$
$ 120,824
$ 55,893
$
-
$
-
-
-
$ 156,713
1,725
$
$ 176,717
- 38 -
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
--- No Disclosure Necessary ---
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Management has evaluated, under the supervision and with the participation of our Chief Executive Officer and
Principal Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period
covered by this report as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934 (the
“Exchange Act”). Based on that evaluation our Chief Executive Officer and Principal Financial Officer have
concluded that as of the end of the period covered by this report our disclosure controls and procedures are effective in
ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized,
and reported in a timely manner, and (2) accumulated and communicated to our management including our Chief
Executive Officer and Principal Financial Officer as appropriate to allow timely decisions regarding required
disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rules 13a-15(f). Under supervision and with the participation of our
management including our Chief Executive Officer and Principal Financial Officer we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation our management concluded that our internal control over financial reporting was effective as of August 31,
2017.
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation by our
registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to
provide only management’s report in this Annual Report on Form 10-K.
Changes in Internal Controls
There has been no change in our internal control over financial reporting that occurred during our most recent fiscal
year that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
--- No Disclosure Necessary ---
- 39 -
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Table No. 4 lists as of November 9, 2017 the names of the Directors of the Company. The Directors 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 Company. All of the Directors are citizens of the United States.
Table No. 4
Directors
Age
77
67
61
38
70
Date First
Elected
Or Appointed
July 1987
May 2017
February 2017
July 2017
January 2013
Name
Donald M. Boone
Geoff Guilfoy (1) (2)
Charles Hopewell
Sarah Johnson (2)
Frank G. Magdlen (1) (2)
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Table No. 5 lists, as of November 9, 2017, the names of the executive officers of the Company. The executive officers
serve at the pleasure of the Board of Directors. All executive officers are residents and citizens of the United States
and spend 100% of their time on the affairs of the Company.
Table No. 5
Executive Officers
Name
Charles Hopewell
Michael C. Nasser
Position
President and Chief Executive Officer
Corporate Secretary
Age
61
70
Family Relationships/Other Relationships/Arrangements
Date of
Board Approval
February 2017
July 1987
There are no arrangements or understandings between any two or more directors or executive officers, pursuant to
which he/she was selected as a director or executive officer. There are no family relationships, material arrangements
or understandings between any two or more directors or executive officers.
Written Management Agreements
--- No Disclosure Necessary ---
Business Experience
Donald M. Boone has over 45 years of management experience and was Chief Executive Officer of the Company
since its beginning in 1987 until his retirement in February 2017. Before establishing Jewett Cameron, he worked for
companies including Sunrise Forest Products, Oregon Pacific Industries, and Tektronix.
Charles E. Hopewell has over 35 years of experience in senior management positions with manufacturing companies,
including serving as CEO of Sunset Manufacturing Inc and CEO of Aluminite Corporation. He received a degree in
Finance from the University of Oregon and an MBA from Willamette University’s Atkinson School of Management.
Michael C. Nasser has over 40 years of experience in sales and sales management and has worked in this capacity for
the Company since its inception. Prior to this he worked for companies including Sunrise Forest Products and Oregon
Pacific Industries. Mr. Nasser is a graduate of Portland State University.
- 40 -
Geoff Guilfoy is a management consultant with over 40 years of experience, including over 20 years in management
consulting, 17 years in State Government management, and an additional 4 years in the private and non-profit sectors.
Prior to founding Lumen Leaders LLC in 2013, he was the partner in charge of the management consulting group at
AKT LLP, a regional CPA and business consulting firm. He has a Bachelor of Science, Management (Accounting)
from San Jose State University and an MBA from Willamette University.
Sarah Johnson has significant experience in supply chain management and best practices, including the planning and
implementation of improvements to both the manufacturing and supply processes. She serves as the Global Buying
Manager at Columbia Sportswear and is a graduate of Gonzaga University in Spokane, Washington.
Frank G. Magdlen is chairman of the audit committee. He has over 40 years of business experience during which he
held various financial services positions specializing in investment banking, research on small capitalization companies
and portfolio management. Mr. Magdlen has an MBA from University of Southern California, and an undergraduate
degree from University of Portland. Mr. Magdlen is a Chartered Financial Analyst.
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, or control person including:
1)
2)
3)
4)
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;
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding
traffic violations/other minor offenses);
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
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.
Audit Committee Financial Expert
Our Board of Directors has determined that Frank G. Magdlen is the “audit committee financial expert”, as defined in
Item 401(h) of Regulation S-K. Mr. Magdlen is independent as that term is used in Section 240.14a-101 under the
Exchange Act and as defined under NASDAQ Rule 4200 9a) (15).
Audit Committees
The Company has an Audit Committee, which recommends to the board of directors the engagement of the
independent auditors of the Company and reviews with the independent auditors the scope and results of the
Company’s audits,
the Company’s internal accounting controls, and the professional services furnished by the
independent auditors to the Company. The board of directors, in light of the increased responsibilities placed on the
Audit Committee during 2002 by the Sarbanes-Oxley Act and the SEC, adopted an Amended and Restated Charter in
late 2002.
The Audit Committee is directly responsible for the appointment, compensation and oversight of auditors; and
concerns about accounting and auditing matters; and has the authority to engage independent counsel and other outside
advisors.
The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant
pre-approvals required by this policy / procedure. The decisions of any Audit Committee member to whom authority is
delegated to pre-approve a service shall be presented to the Audit Committee at its next scheduled meeting.
- 41 -
In accordance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and rules issued by the Securities and
Exchange Commission,
the Company introduced a procedure for the review and pre-approval of any services
performed by Davidson & Company, LLP Chartered Accountants, including audit services, audit related services, tax
services and other services. The procedure requires that all proposed engagements of Davidson & Company, LLP
Chartered Accountants for audit and permitted non-audit services are submitted to the Audit Committee for approval
prior to the beginning of any such services.
The current members of the Audit Committee are Frank Magdlen (Chairman) and Geoff Guilfoy. All current members
of the Audit Committee are “independent” within the meaning of the new regulations from the SEC regarding audit
committee membership. The Audit Committee met two times in fiscal 2016 and one time in fiscal 2017.
On August 11, 2017, the Company received notice from NASDAQ that since the Company currently has only 2
independent directors on the Audit Committee, it is not in compliance with NASDAQ’s audit committee requirements
under Listing Rule 5605. NASDAQ has granted the Company a cure period to regain compliance which extends until
(i) the earlier of the Company’s next annual shareholders’ meeting or July 24, 2018; or (ii) if the next annual
shareholders’ meeting is held before January 22, 2018, then the Company must evidence compliance no later than
January 22, 2018.
At the next annual meeting, the Company will ask shareholders to authorize additional directors. This authorization
will permit the addition of the required Independent Director to the Board and to the Audit Committee, and will return
the Company into compliance with Listing Rule 5605 before the required date.
Compensation Committee
The Company has a Compensation Committee which recommends to the Board of Directors on compensation matters
for the Company, including compensation plans and benefits of executive officers and directors. This includes
determining the compensation for senior management, the form and amounts of Director compensation, the size and
recipients of bonuses, and equity incentive plans, including the grant of options and other awards. The Committee will
also recommend executive appointments and complete annual performance evaluations of the Chief Executive Officer
and Chief Financial Officer. The Committee also advises on succession plan matters, and has the authority to retain
outside advisors or consultants.
The Committee operates under a written charter, which requires the Committee to consist of at least three members
appointed by the Board. The members shall be independent directors, and the Board will designate one member as
Chairman of the Committee. The Committee shall meet a minimum of one time per year.
Current members of the Compensation Committee are Geoff Guilfoy, Sarah Johnson, and Frank Magdlen. The
Committee met one time in fiscal 2017.
Compliance with Section 16(a) of the Exchange Act.
The Company has reviewed the Forms 3 and 4 furnished to the Company under Rule 16a-3(e) of the Securities Exchange
Act during the most recent fiscal year and the Forms 5 furnished to the Company with respect to its most recent fiscal year,
as well as any written representations received by the Company from persons required to file such forms.
Management has determined that the Form 3 filed by Geoff Guilfoy on May 23, 2017 and the Form 3 filed by Sarah
Johnson on August 25, 2017 were filed late. It was also determined that 8 small purchase transactions by Donald Boone in
June 2017 exceeded the market value limit exemption under Rule 16a-6 and therefore were reported late on Form 5.
Other than the filings named above, there were no other reports that failed to be filed on a timely basis as required by
Section 16(a) of the Securities Exchange Act during the most recent fiscal year.
Code of Ethics
The Company has a written “code of ethics” that meets the United States' Sarbanes-Oxley standards. The code is
posted on the Company’s website.
- 42 -
Limitation of Liability and Indemnification
Our certificate of incorporation limits the personal liability of our board members for breaches by them of their
fiduciary duties. Our bylaws also require us to indemnify our directors and officers to the fullest extent permitted by
British Columbia law. British Columbia law provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except liability for any of the following acts:
a.
b.
c.
d.
any breach of their duty of loyalty to the Company or its stockholders;
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions; and
any transaction from which the director derived an improper personal benefit.
Such limitation of liability may not apply to liabilities arising under the federal securities laws and does not affect the
availability of equitable remedies such as injunctive relief or rescission. In addition, British Columbia laws also permit
us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or
her actions in such capacity, regardless of whether indemnification would be permitted under British Columbia law.
We currently maintain liability insurance for our directors and executive officers.
Among other things, this will provide for indemnification of our directors and executive officers for certain expenses
(including attorneys’ fees), judgments, fines and settlement amounts incurred by any such person in any action or
proceeding, including any action by or in the right of the Company, arising out of such person’s services as a director
or executive officer of ours, any subsidiary of ours or any other company or enterprise to which the person provided
services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified
persons as directors and executive officers.
ITEM 11. EXECUTIVE COMPENSATION
Table No. 6 details compensation paid or accrued for fiscal 2017, 2016 and 2015 for the Company’s chief executive
officer, each of the Company’s most highly compensated executive officers who were serving as executive officers at
the end of the most recently completed financial year and whose total salary and bonus exceeds $100,000 per year.
Name and
Principal
Position
Annual Compensation
Fiscal
Year
Salary
Bonus
Other
Annual
Comp.
Restricted
Stock
Awards
Securities
Underlying
Options/
SARS (#)
LTIP
Payouts
All
Other
Comp.
Long-term Compensation
Awards
Payouts
Charles Hopewell,
President, Chief Executive Officer,
Principal Financial Officer
2017
$134,244
$
-
$
Donald Boone,
President, Chief Executive Officer,
Treasurer, Principal Financial Officer (1) (2)
$
9,334
$ 19,240
$ 29,017
2017
2016
2015
$
$
$
-
-
-
Michael Nasser,
Corporate Secretary
2017
2016
2015
$177,000
$177,000
$177,000
$50,000
$50,000
$24,290
$
$
$
$
$
$
Murray Smith,
Former Chief Financial Officer (3)
2015
$ 68,596
$
-
$
- 43 -
-
-
-
-
-
-
-
-
$
$
$
$
$
$
$
$
-
-
-
-
-
-
-
-
$
$
$
$
$
$
$
$
-
-
-
-
-
-
-
-
$
$
$
$
$
$
$
$
-
-
-
-
-
-
-
-
$
-
$ 4,940
$ 6,207
$ 5,040
$ 15,000
$ 15,000
$ 8,400
$ 8,400
Effective April 1, 2015, Donald Boone voluntarily reduced his salary from $36,000 annually to $9.25 hourly.
(1)
(2) Donald Boone resigned his officer positions effective February 7, 2017.
(3) Murray Smith resigned as Chief Financial Officer effective June 15, 2015.
The Company may grant stock options to directors, executive officers and employees. The Company has a 401(k) Plan
which allows for a non-elective discretionary contribution based on the first $50,000 of eligible compensation, which
was decreased from the prior $60,000 of eligible compensation during the second quarter of fiscal 2017.
Other than participation in the Company’s stock option plan and 401(k), no funds were set aside or accrued during
fiscal 2017 to provide pension, retirement or similar benefits for directors or executive officers.
The Company has no plans or arrangements with respect to remuneration received or that may be received by executive
officers of the Company to compensate such executive 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.
No executive officer or director received other compensation in excess of the lesser of $25,000 or 10% of such officer's
cash compensation, and all executive officers or directors as a group did not receive other compensation, which
exceeded $25,000 times the number of persons in the group or 10% of the compensation.
Except for our 401(k) Plan we have no material stock option plan, bonus or profit sharing plans pursuant to which cash
or non-cash compensation is or may be paid to our directors or executive officers. Michael Nasser received bonuses,
which were determined and approved by the Board of Directors.
Stock Options
The Company may grant stock options to purchase securities to directors and employees on terms and conditions
acceptable to the regulatory authorities in Canada, notably the Ontario Securities Commission and the British Columbia
Securities Commission. The Company has no formal written stock option plan.
Under our stock option program, stock options for up to 10% of the number of our 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 our 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 ten years and are determined in accordance with Toronto Stock Exchange (“TSX”) guidelines.
No options were granted during fiscal 2017 or fiscal 2016, and as of August 31, 2017 there were no options
outstanding.
401(k) Plan
The Company has a 401(k) Plan which allows for a non-elective discretionary contribution based on the first $50,000
of eligible compensation, which was decreased from the first $60,000 of eligible compensation during the second
quarter of fiscal 2017. In fiscal 2016, the Company made an additional 10% contribution for all eligible employees as a
one-time compensation bonus. For the years ended August 31, 2017 and 2016 the 401(k) compensation expense was
$336,473 and $571,551, respectively. The contributions for Donald Boone were $4,940 and $6,207 for the fiscal years
ended August 31, 2017 and 2016 respectively. The contributions for Michael Nasser were $15,000 and $15,000 for the
fiscal years ended August 31, 2017 and 2016 respectively. The contribution for Charles Hopewell was $Nil for the
fiscal year ended August 31, 2017. There are no un-funded liabilities.
Long-Term Incentive Plan / Defined Benefit or Actuarial Plan
During fiscal 2017 the Company had no Long-Term Incentive Plan (“LTIP”) and no LTIP awards were made. Also,
during fiscal 2017 the Company had no Defined Benefit or Actuarial Plan.
- 44 -
Compensation Committee Interlocks and Insider Participation
The Company’s Compensation Committee consists 3 independent directors. None of the members of the Compensation
Committee served as an officer or director of the Company in the prior fiscal year.
No board of director member and none of our executive officers have a relationship that would constitute an
interlocking relationship with executive officers and directors of another entity.
Employment Contracts
Termination of Employment and Change-in-Control Arrangements
--- No Disclosure Necessary ---
Director 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.
During fiscal 2017 the following cash payments were paid to directors to compensate them for board meetings
attended: Donald Boone $Nil (2016 - $Nil); Frank Magdlen $6,600 (fiscal 2016 - $4,200), Ralph Lodewick $4,200
(fiscal 2016 - $4,200), Adrian Russell-Falla $4,800 (fiscal 2016 - $1,800), Geoff Guilfoy $800; and Sarah Johnson
$400.
Executive Officer Compensation
The Company’s Compensation Committee provides advice and recommendations to the Board of Directors on
compensation and benefits for executive officers. As in prior years all judgments regarding executive compensation for
fiscal 2017 were based primarily upon our assessment of each executive officer’s performance and contribution
towards enhancing long-term shareowner value. We rely upon judgment and not upon rigid guidelines or formulas or
short-term changes in our stock price in determining the amount and mix of compensation for each executive officer.
Decisions concerning 2017 compensation considered each executive officer’s level of responsibility and performance.
As noted above, specific decisions involving 2017 executive officer compensation were ultimately based on a judgment
about the individual executive officer’s performance and contribution towards enhancing long-term shareholder value.
The basis for Donald Boone’s compensation as President and CEO was set many years ago, and this compensation
remained unchanged at his request. This amount of compensation was substantially less than what would ordinarily be
considered as normal compensation for being Chief Executive Officer of the Company. During fiscal 2015, Mr. Boone
requested that his compensation be reduced from $36,000 annually to $9.25 per hour, the then current minimum wage
in the State of Oregon. The reduction was approved by the Board of Directors and became effective April 1, 2015 until
his resignation from his executive officer positions effective February 7, 2017.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The Company is a publicly owned corporation. It is not controlled directly or indirectly by another corporation or any
foreign government.
- 45 -
Table No. 7 shows directors, executive officers, and 5% shareholders who beneficially owned the Company’s common
stock and the amount of the Company’s voting stock owned as of November 9, 2017.
Table No. 7.
Shareholdings of Directors, Executive Officers,
and 5% Shareholders
Class
Common
Common
Common
Common
Common
Common
Name
and Address of
of Beneficial Owner
Donald M. Boone
Michael C. Nasser
Charles E. Hopewell
Geoff Guilfoy
Sarah Johnson
Frank Magdlen
Amount of Beneficial
and Voting
Ownership
713,390
229,694
5,000
Nil
Nil
Nil
948,084
Percent of
Class (1)
31.9%
10.2%
0.2%
-
-
-
42.4%
Total directors, executive officers, and 5% shareholders
(1)
Based on 2,234,494 shares outstanding as of November 9, 2017.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
There have been no transactions or proposed transactions, which have materially affected or will materially affect the
Company in which any director, executive officer, or beneficial holder of more than 5% 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.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The audit committee is directly responsible for the appointment, compensation and oversight of auditors; and has the
authority and the funding to engage independent counsel and other outside advisors.
The audit committee may delegate to one or more designated members of the audit committee the authority to grant
pre-approvals required by this policy and procedure. The decisions of any audit committee member to whom authority
is delegated to pre-approve a service shall be presented to the audit committee at its next meeting.
In accordance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and rules issued by the Securities and
Exchange Commission, we introduced a procedure for the review and pre-approval of any services performed by
Davidson & Company, LLP Chartered Accountants, including audit services, audit related services, tax services and
other services. The procedure requires that all proposed engagements of Davidson & Company, LLP Chartered
Accountants for audit and permitted non-audit services are submitted to the finance and audit committee for approval
prior to the beginning of any such services.
- 46 -
Fees, including reimbursements for expenses and for professional services rendered by Davidson & Company, LLP
Chartered Accountants to the Company were:
Fiscal Year
2017
2016
$ 90,000
6,750
24,750
$ 90,000
8.500
24,750
$ 121,500
$ 123,250
Principal Accountant
Fees and Services
Audit fees
Tax fees
All other fees (1)
Total
(1) FY2017:
$8,250 to review the Q1 Form 10Q
$8,250 to review the Q2 Form 10Q
$8,250 to review the Q3 Form 10Q
FY2016:
$8,250 to review the Q1 Form 10Q
$8,250 to review the Q2 Form 10Q
$8,250 to review the Q3 Form 10Q
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(A) Financial Statements and Schedules:
(B) Exhibits:
2.
3.
3.1
4.
9.
10.
11.
12.
13.
14.
16.
18.
21.
22.
23.
24.
31.
32.
99.
Plan of acquisition, reorganization, arrangement, liquidation or succession:
No Disclosure Necessary
Articles of Incorporation/By-Laws:
Incorporated by reference to Form 10 Registration Statement, as amended.
Notice of Articles dated May 1, 2013
(filed as an exhibit to the Fiscal 2013 Form 10-K Annual Report filed on October 30, 2013)
Instruments defining the rights of holders, including indentures
--- Refer to Exhibit #3 ---
Voting Trust Agreements: No Disclosure Necessary.
Material Contracts:
Incorporated by reference to Form 10 Registration Statement, as amended.
Statement re Computation of Per Share Earnings: No Disclosure Necessary
Statements re computation of ratios: No Disclosure Necessary
Annual Report to security holders, Form 10-Q or quarterly report to security holders:
No Disclosure Necessary
Code of Ethics: No Disclosure Necessary
Letter on Change of Certifying Accountant: No Disclosure Necessary
Letter on change in accounting principles: No Disclosure Necessary
Subsidiaries of the Registrant: Refer to page 4 of this Form 10-K
Published report regarding matters submitted to vote
No Disclosure Necessary
Consent of Experts and Counsel: No Disclosure Necessary
Power of Attorney: No Disclosure Necessary
Rule 13a-14a/15d-14(a) Certifications
Section 1350 Certifications
Additional Exhibits: No Disclosure Necessary
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
- 47 -
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURE PAGE
Jewett-Cameron Trading Company Ltd.
Registrant
Dated: November 9, 2017
By:
/s/ “Charles E. Hopewell”
Charles E. Hopewell,
President, CEO and Principal
Financial Officer
Pursuant to the requirements 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.
Dated: November 9, 2017
By:
/s/ “Charles E. Hopewell”
Dated: November 9, 2017
Dated: November 9, 2017
Dated: November 9, 2017
Dated: November 9, 2017
Dated: November 9, 2017
Charles E. Hopewell,
President, CEO and Principal
Financial Officer
By:
/s/ “Michael C. Nasser”
Michael C. Nasser,
Corporate Secretary
By:
/s/ “Donald M. Boone”
Donald M. Boone,
Director
By: /s/ “Geoff Guilfoy”
Geoff Guilfoy,
Director
By: /s/ “Sarah Johnson”
Sarah Johnson,
Director
By: /s/ “Frank Magdlen”
Frank Magdlen,
Director
- 48 -