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, 2019
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 registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, no par value
Trading Symbol(s)
JCTCF
Name of Each Exchange on Which Registered
NASDAQ Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None
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
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act.
Yes No
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, 2019 = $18,705,499
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of November 13,
2019: 3,971,282
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Jewett-Cameron Trading Company Ltd.
Form 10-K Annual Report
Fiscal Year Ended August 31, 2019
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
8
9
10
10
10
10
12
13
18
18
41
41
41
42
45
48
49
49
49
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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 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, eCommerce providers, 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.
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JC USA provides professional and administrative services, including accounting and credit services, to each of its
wholly-owned subsidiary companies.
Total Company sales were approximately $45.4 million and $53.9 million during fiscal years ended August 31, 2019
and 2018, 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. The Company’s primary
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, Board Chair,
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, 2019 and November 13, 2019, there were 3,971,282 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
remained active in the Company. These individuals are Donald Boone, who passed away in May, 2019, and who was
the previous Chairman and Director and the former President, Chief Executive Officer, Treasurer, and Principal
Financial Officer, transitioning to strictly the Board Chair in 2017; and Michael Nasser, who remains active in the
business and is both a Director and the 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.
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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. The property
was sold in an arms-length transaction in the second quarter of fiscal 2019 for $325,000 cash.
In May 2019 Chairman and Co-Founder of the Company Donald M. Boone passed away. Mr. Boone served as
President and CEO from 1984 until 2017 when he voluntarily retired from his officer positions and oversaw the
addition and successful integration of new management and directors.
In September 2019 the Board of Directors decided to permanently close the Company’s MSI-Pro division. Recent
efforts to drive further sales and margin growth were unsuccessful due to a lack of market differentiation and changing
customer patterns. The remaining inventory will be liquidated, and the personnel will be moved into different positions
with the Company.
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 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, and
a paved yard. 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 an array of pet enclosures, kennels, and
pet welfare and comfort products, 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, Perimeter Patrol, and Lifetime
Post 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, eCommerce partners, 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 as its
products serve both new and existing home and pet owners.
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. The company has been successful garnering key patents and trademarks on multiple products that assist
their ability to continue to differentiate based on design and functionality.
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 2018, the
Company applied for zero new patents (fiscal 2018 – 2), while 1 other patent was granted (fiscal 2018 – 3). One of the
patents granted in 2018 was an update of the Adjust-a-Gate, which will extend the protection on the Adjust-a-Gate
products for an additional 15 years. In addition to the patents, JCC also has two licensing agreements to market pet
products.
- 6 -
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 is sold to the transportation industry. In February
2014, the Company sold its remaining and excess inventory related to the marine industry. Greenwood’s total sales for
fiscal 2019 and 2018 were 9% and 8% respectively of total Company sales.
The primary markets in which Greenwood competes has decreased in economic sensitivity as users are incorporating
products into the municipal and mass transit transportations sectors.
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.
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. Sales of seed has some seasonality, but it most affected by weather
patterns in multiple parts of the United States that also affect cyclical planting. The annual weather plays an important
part in year-to-year sales volatility. However, profitability around the month of August may be unusually high based
on a seasonal surge in cleaning sales, which are much more profitable 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 wholesalers 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.
In September 2019, the Board of Directors decided to permanently close the MSI division.
Tariffs
The Company’s metal products are manufactured in China and are imported into the United States. The Office of the
United States Trade Representative (“USTR”) instituted new tariffs on the importation of a number of products into the
United States from China effective September 24, 2018. These new tariffs are a response to what the USTR considers
to be certain unfair trade practices by China. The tariffs began at 10%, and subsequently were increased to 25% as of
May 10, 2019. A number of the Company’s products manufactured in China have been subject to duties of 25% when
imported into the United States.
The company was notified in September 2019 that products that it had imported would be excepted from tariff
treatment moving forward. This exception applies to most of the products the company imports.
- 7 -
Customer Concentration
The top ten customers were responsible for 77% and 85% of total Company sales for the years ended August 31, 2019
and August 31, 2018, respectively. Also, the Company’s single largest customer was responsible for 33% and 38% of
total Company sales for the years ended August 31, 2019 and August 31, 2018 respectively.
Employees
As of August 31, 2019 the Company had 58 full-time employees (August 31, 2018 – 57 full-time employees). By
segment these employees were located as follows: Greenwood 1, JCC 30, JCSC 8, MSI 2, and JC USA 17. 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.
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 5,275 shares on NASDAQ for the fiscal year ended August 31, 2019. 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.
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If our top customers were lost, we could experience lower sales volumes.
For the fiscal year ended August 31, 2019 our top ten customers represented 77% of our total sales, and our single
largest customer was responsible for 33% 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 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.
Governmental actions, such as tariffs, and/or foreign policy actions could adversely and unexpectedly impact our
business.
Since the bulk of our products are supplied from other countries, political actions by either our trading country or our
own domestic policy could impact both availability and cost of our products. Currently, we see this in regard to tariffs
being levied on foreign sourced products entering into the United States, including from China. The continuing tariffs
by the United States on certain Chinese goods include some of our products which we purchase from suppliers in
China. The company has multiple options to assist in mitigating the cost impacts of these government actions.
However, we cannot control the duration or depth of such actions which may increase our product costs which would
reduce our margins and potentially decrease the competitiveness of our products. These actions could have a negative
effect on our business, results of operations, or financial condition.
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.
Our information technology systems are susceptible to certain risks, including cyber security breaches, which could
adversely impact our operations and financial condition.
Our operations involve information technology systems that process,
transmit and store information about our
suppliers, customers, employees, and financial information. These systems face threats including telecommunication
failures, natural disasters, and cyber security threats, including computer viruses, unauthorized access to our systems,
and other security issues. While we have taken aggressive steps to implement security measures to protect our systems
and initiated an ongoing training program to addresses many of the primary causes of cyber threat with all our
employees, such threats change and morph almost daily. There is no guarantee our actions will secure our information
systems against all threats and vulnerabilities. The compromise or failure of our information systems could have a
negative effect on our business, results of operations, or financial condition.
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, 2019. 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 ---
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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.
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 currently used for seed processing and storage. 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
2,000 square foot building that previously housed a seed testing lab located at 31895 NW Hillcrest Street, North Plains,
OR 97133. 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. During the second quarter of fiscal
2019, the Company sold the property for $325,000 cash.
The company is currently acquiring bids to expand within current building spaces as office and employee growth has
exceeded existing capacity. It is likely this expansion will be launched in early calendar 2020.
ITEM 3. LEGAL PROCEEDINGS
The Company is a named party in a Civil Action in Pennsylvania. The matter is an action seeking compensation for
personal injuries and is based on theories of product liability as to Jewett-Cameron. The matter arises out of a dog
allegedly escaping from a Jewett-Cameron kennel product and causing personal injuries to three individuals. Jewett-
Cameron is currently one of three named Defendants. As of this date, no formal responses have been made and no
dates have been established governing the litigation proceedings. This matter is in its early stages making it speculative
to predict as to its outcome. It is the Company’s intention to vigorously defend the lawsuit. Jewett Cameron’s
applicable liability insurer is providing a defense covering Jewett-Cameron’s legal fees and costs.
ITEM 4. MINE SAFETY DISCLOSURES
--- No Disclosure Necessary ---
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 May
22, 2018. Shareholders received one additional common share for each common share held as of the record date. The
stock split was effective as of May 29, 2018.
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 29,
2018.
- 10 -
Table No. 1
NASDAQ Capital Market
Common Shares Trading Activity
(US Dollars)
Volume
High
Low
Closing
18,500
$ 8.10
$ 7.18
$ 7.98
234,800
592,900
190,700
299,800
351,500
141,900
436,000
323,200
1,318,200
1,252,600
1,237,400
1,791,200
1,128,200
$ 9.10
$ 9.32
$ 8.99
$10.00
$ 8.95
$ 8.96
$ 7.95
$ 8.95
$10.00
$ 8.96
$ 7.23
$ 7.48
$ 6.87
$ 7.00
$ 6.95
$ 6.23
$ 7.25
$ 7.49
$ 7.23
$ 6.50
$ 6.76
$ 6.23
$ 6.50
$ 5.30
$ 3.85
$ 4.55
$ 8.04
$ 7.69
$ 7.23
$ 7.32
$ 8.68
$ 8.05
$ 7.35
$ 7.63
$ 8.04
$ 8.68
$ 6.98
$ 6.21
$ 4.75
Period
Ended
Monthly
9/30/19
Quarterly
8/31/19
5/31/19
2/28/19
11/30/18
8/31/18
5/31/18
2/28/18
11/30/17
Annually
8/31/19
8/31/18
8/31/17
8/31/16
8/31/15
Holders
Computershare Investor Services Inc. which is located in Vancouver, British Columbia, Canada is the registrar and
transfer agent for the common shares.
On October 24, 2019 there were 15 registered shareholders and 3,971,282 shares of the Company’s common shares
outstanding.
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, 2019 and 2018, 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.
- 11 -
On May 23, 2017, the Company announced the Board of Directors had authorized a share repurchase plan to purchase
for cancellation up to 225,000 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 June 1, 2017
and terminated on August 31, 2017. Under the Plan, the Company repurchased a total of 83,600 common shares at a
cost of $526,941 which is an average price of $6.30 per share.
On June 6, 2018, the Company announced the Board of Directors had authorized a new 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 June 11, 2018
and terminated upon the completion of the 250,000 share repurchase on October 25, 2018. Under the Plan, the
Company repurchased and cancelled a total of 250,000 common shares at a total cost of $2,164,975 which was an
average price of $8.66 per share.
On February 7, 2019, the Company announced the Board of Directors had authorized a new share repurchase plan to
purchase for cancellation up to 250,000 common shares through the facilities of NASDAQ under similar terms to the
June 2018 plan. The Plan commenced on February 18th and terminated upon the completion of the 250,000 repurchase
on July 22, 2019. A total of 250,000 shares of common stock was repurchased at a total cost of $2,168,065 which
represents an average share price of $8.67 per share.
The following table details the Company’s repurchase of its common shares during the fourth quarter of fiscal 2019
ended August 31, 2019.
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
36,300
10,108
-
46,408
$ 8.63
$ 8.55
-
$ 8.61
239,892
250,000
-
250,000
10,108
Nil
-
Nil (1)
(1)
The current Plan terminated on July 22, 2019.
ITEM 6. SELECTED FINANCIAL DATA
--- No Disclosure Necessary for Smaller Reporting Companies ---
- 12 -
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 2019 and fiscal 2018.
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
$ 9,066
2,309
350
0.08
0.08
$
$
First
Quarter
$ 9,414
2,187
322
0.07
0.07
$
$
For the Year Ended August 31, 2019
Fourth
Quarter
Third
Quarter
Second
Quarter
$ 7,857
1,761
120
0.03
0.03
$
$
$ 16,692
3,638
1,098
0.26
0.26
$
$
$ 11,831
2,256
532
0.13
0.13
$
$
For the Year Ended August 31, 2018
Fourth
Quarter
Third
Quarter
Second
Quarter
$ 13,341
2,636
508
0.12
0.12
$
$
$ 19,935
3,990
1,389
0.31
0.31
$
$
$ 11,233
2,785
702
0.16
0.16
$
$
Full
Year
$ 45,446
9,964
2,100
0.50
0.50
$
$
Full
Year
$ 53,923
11,598
2,921
0.66
0.66
$
$
Fiscal 2019 quarterly per share earnings were calculated using weighted average number of common shares
outstanding of 4,233,304 (2018 – 4,430,940).
RESULTS OF OPERATIONS
During fiscal 2019, extremely wet weather present across much of North America extended deep into the third quarter,
which delayed purchases of outdoor merchandise. The US tariffs on certain Chinese manufactured goods increased
from 10% to 25% during the third quarter, which included a number of the Company’s products and continued to
restrain demand from retailers and consumers. These were the factors primarily responsible for the decline in the
Company’s sales and income for fiscal 2019.
Most of the Company’s metal products are manufactured in China and have been subject to the new United States
Trade Representative (USTR) tariffs. During the year, the Company’s supplier appealed the classification of certain
products to the US Customs Service. Subsequent to the fiscal 2019 year-end, the Company received notice that a
number of its products will be reclassified and will no longer be subject to the 25% tariffs on imported Chinese goods,
although some products will remain under tariff. This reclassification should allow the Company to remain competitive
in both the retail and eCommerce sectors.
- 13 -
The Company continues to develop new products that complement their presence in multiple product and sales
channels. The company debuted a new patented steel fence post, LIFETIME POST™ at the National FenceTech show
in early March 2019 which is now being shipped to major retailers, new distributors, and end users. The product
continues to position the company firmly in the fencing market. The product was specifically designed to complement
Jewett Cameron’s already long running, successful Adjust-A-Gate™ products, thus building a stronger branding in this
market segment.
In addition to the LIFETIME POST™, the Company has other products in development, primarily in the fencing and
pet segments. Management intends to continue to add new products through its internal development process, but may
also seek to acquire products that will provide complementary benefits to its existing offerings. To drive these
initiatives, the Company is continuing to build their product development capabilities during fiscal 2020.
Management continues to add personnel to support new marketing and sales initiatives. A new Chief Revenue Officer
has been added to focus on integrating marketing strategy and sales, including the introduction of new products, and
opening and expanding sales channels. The new position of VP Business Development was filled in October 2019. This
key role will focus on tangible ways to leverage current business assets and entities, such as Greenwood’s specialty
lumber sales and lumber trading, and products and product lines.
The Company is implementing a new Enterprise Resource Planning (ERP) system. The ERP program will streamline
inventory management and distribution to improve product management and shipping procedures. It will also automate
interfaces with customers and tie in all forecasting and planning which allow the Company to better scale these
processes now and in the future as the Company grows with new products and customers.
Management and the Board have also implemented a strategic review of the Company’s secondary business operations
and assets. The industrial tools and seed segments have seen stagnant growth for several years due to increased
competition in these markets and a general shift in wholesale buying patterns. This strategic review resulted in the
decision in September 2019 to permanently close the MSI division, which has recently been a very minor contributor to
the Company’s overall sales and has been posting operating losses. The remaining personnel will be shifted to other
positions in the Company. For JCSC, the Company remains committed to the seed business and grower community.
The Company will continue to focus on improving and growing its seed operations and market share as overall sales
and service opportunities have decreased given the region’s changes to its agricultural base.
During the second quarter of fiscal 2019, the Company sold its surplus Manning property and buildings to an arms-
length party that had a contiguous business and will use the property for their expansion. The Manning property was
originally acquired as an investment and the property was not in close proximity to any of the Company’s current
business operations. Once purchased, the company had leased it to a third party. Proceeds from the sale totaled
$324,675, which represents a gain of $105,365 over the property’s original purchase price net closing costs.
In fiscal 2020, management also intends to focus on promotion of the Jewett-Cameron brand, both its individual brands
in each segment and the Company’s name overall. The intent is to make the consumer more aware of Jewett-Cameron
and drive more cross-over business to each segment and product line. This focus will involve social media, other online
communications, and omnichannel branding. In conjunction with this initiative, the Company also intends to broaden
its product presence in more channels, including retailers and e-commerce, both in the US and internationally.
During the third quarter of fiscal 2019, the Company suffered the loss of its Chairman of the Board, Donald Boone,
who passed away on May 9th, 2019. Mr. Boone was co-founder of the Company and served as President, CEO and as a
Director from 1984 to 2017. As Chairman, Mr. Boone oversaw the successful transition and integration of experienced
new management and Directors in order to strengthen the Company and continue its success well into the future. These
changes included the addition of Charles Hopewell as the new President and CEO in 2017, and several accomplished
Directors added to the Board. In place of Mr. Boone, the Company named Michael Nasser, the other co-founder of the
Company and current Corporate Secretary, to the Board of Directors and approved Mr. Hopewell as the new Chairman.
The entire Company will continue to operate with the same core principles and commitment of service to its customers,
suppliers, employees and shareholders that Mr. Boone established.
- 14 -
The Company has also continued to use its excess cash to repurchase and cancel common shares. During 2019, a total
of 345,671 common shares were repurchased and cancelled at a total cost of $3,061,441. The Company’s cash position
remains strong, totaling $9,652,310 as of August 31st, 2019. The Board may consider utilizing a portion of the
Company’s cash position to repurchase additional shares in the future.
Fiscal Years Ended August 31, 2019 and August 31, 2018
Fiscal 2019 sales totaled $45,446,362 compared to sales of $53,923,152 in fiscal 2018, which was a decrease of
$8,476,790, or 16%. The decrease in sales was primarily due to lower sales at JCC.
Gross margin rose slightly to 21.9% from 21.5% in fiscal 2018 primarily due to an increase in sales of higher margin
metal products in the current year.
Operating expenses declined by $94,514 to $7,226,881 from $7,321,395 in fiscal 2018. The decrease was due to
decreases in depreciation and amortization to $191,819 from $274,065 and wages and employee benefits to $4,907,766
from $4,943,431. Selling, general and administrative rose to $2,127,296 from $2,103,899 as the Company increased its
sales efforts in several key areas. Income from operations fell to $2,737,550 in fiscal 2019 from $4,276,419 in fiscal
2018.
Including other items, income before income taxes was $2,888,144 in fiscal 2019 compared to $4,279,423 in fiscal
2018. Other items included gain on sale of property, plant and equipment of $105,366, which was largely due to the
sale of the Manning property, compared to a loss of $27,022 in fiscal 2018. Interest and other income rose to $45,228
in fiscal 2019 from $30,026 in fiscal 2018 due to higher rates of interest on cash balances from short-term investments.
Income tax expense was $787,692 in fiscal 2019 compared to $1,358,784 in fiscal 2018. The Company calculates
income tax expense based on combined federal and state rates that are currently in effect.
Net income for fiscal 2019 was $2,100,452, or $0.50 per basic and diluted shares, compared to net income of
$2,920,639, or $0.66 per basic and diluted share, for fiscal 2018. The income per share was positively affected by the
repurchase and cancellation of common shares during both fiscal 2019 and 2018, and the weighted number of shares
outstanding were 4,233,304 in fiscal 2019 and 4,430,940 in fiscal 2018, after adjustment for the 2-for-1 stock split
effective May 29, 2018.
Lawn, Garden, Pet and Other - JCC
Sales at JCC were $38,510,213 in fiscal 2019 compared to sales of $47,197,251 in fiscal 2018. Operating income at
JCC for 2019 was $2,040,631 in 2019 compared to $3,652,467 in fiscal 2018, which was a decrease of $1,611,836, or
44%. Extended wet and cold weather across much of North America during the Spring of 2019 significantly delayed,
and ultimately reduced, demand for the Company’s lawn and garden products during the year. The Company also
experienced lower overall demand for metal products during the current period as retailers stocked up on extra
inventory last year ahead of the announced tariffs on Chinese made products. The tariffs caused uncertainly in the
marketplace and had a negative effect on the sales of the Company’s affected products beginning in the 4th quarter of
fiscal 2018 and through the entirety of fiscal 2019. Sales in fiscal 2018 were positively affected by higher sales of
specialty lumber, particularly cedar fencing, which were damaged by tropical storms which did not reoccur in fiscal
2019. 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.
During the first quarter of fiscal 2018, the Company instituted a voluntary recall of a specific product which was sold to
a single retail store customer. After two incidents of breakage, the Company and the retailer immediately and
permanently ceased all sales of the products in early December 2017, and issued a voluntary safety advisory prior to
the US Consumer Product Safety Commission issuing a formal recall of the product in March 2018. The actions taken
by the Company included a recall of units sold. This recall had a negative effect on JCC’s sales and income during
fiscal 2018, as the Company provided the retailer with a return allowance for the units and destroyed all remaining
inventory of the recalled product.
- 15 -
The following table shows a breakdown between the metal and wood categories in this segment.
Fiscal Year
2019
2018
Sales in Millions of Dollars
Metal Wood Total
$38.5
$12.1
$26.4
$47.2
$14.7
$32.5
Percent of Total Sales
Metal Wood Total
31% 100%
69%
31% 100%
69%
The Company’s metal products are manufactured in China and are imported into the United States. Many of the
Company’s metal products have been subject to the new USTR tariffs on the importation of Chinese manufactured
products in the United States. These additional tariffs went into effect on September 24, 2018 at an initial 10% rate but
later rose to a 25% rate. Uncertainty over the tariffs began to negatively affect the Company’s business in the fourth
quarter of fiscal 2018 as customers were attempting to formulate their approach to the tariffs and stalled or delayed
acceptance of initial price increases. The implementation of these additional tariffs reduced the Company’s margins
and overall demand for metal products during all of fiscal 2019. During 2019, the Company’s supplier appealed to
USTR the classification of many of its metal products as subject to specific tariff classes. Subsequent to the fiscal-year
end, the Company was informed that many of its products in both the fencing and pet categories would not be subject
to these tariffs going forward. This action will assist the company in remaining competitive with their products in the
marketplace.
Industrial Wood Products - Greenwood
Sales at Greenwood in fiscal 2019 were $3,910,117, which was an increase of $409,358, or 12%, from sales of
$3,500,759 in fiscal 2018. Margins also rose in fiscal 2019, as management’s efforts to refine the product mix and
redirecting sales directly to end users has led to the improvements. The Company also wrote-off $67,189 of obsolete
inventory during fiscal 2018 and $53,365 of inventory in fiscal 2019. Greenwood recorded operating income of
$71,192 in fiscal 2019 compared to operating income of $494 in fiscal 2018.
Seed Processing and Sales - JCSC
Sales at JCSC were $2,233,406 in fiscal 2019 compared to sales of $2,282,281 in fiscal 2018, which represents a
decrease of $48,875, or 2%. Poor weather across much of North America in both 2019 and 2018 curtailed planting
schedules throughout the Midwest United States which hurt demand for the Company’s clover seed for use as cover
crops. JCSC had an operating loss of $222,191 in fiscal 2019 compared to an operating loss of $58,438 in fiscal 2018.
Industrial Tools and Clamps - MSI
Sales at MSI were $792,626 in fiscal 2019 compared to sales of $942,861 in fiscal 2018, which was a decrease of
$150,235, or 16%. During fiscal 2018, management initiated a review of the segment to improve margins, which
includes reducing inventory holding costs of slower selling items. This review led to the write-off of approximately
$71,000 in obsolete inventory in 2018 and $66,000 in fiscal 2019 but was ultimately unsuccessful in increasing sales or
margins due to a lack of market differentiation and changing customer patterns. Therefore, the Board of Directors has
decided to permanently close MSI effective September 2019. The remaining inventory will be liquidated, and the
personnel transferred to other positions within the Company. Operating loss at MSI in fiscal 2019 was $159,914
compared to an operating loss of $72,417 for fiscal 2018.
Corporate – JC USA
JC USA, the holding company that provides professional and administrative services for the wholly-owned operating
subsidiaries had operating income of $1,158,426 for fiscal 2019 compared to operating income of $757,317 for fiscal
2018. The increase is due to higher rental and administrative fees charged to its subsidiaries related to the inventory
levels maintained throughout the year. The results of JC USA are eliminated on consolidation.
- 16 -
LIQUIDITY AND CAPITAL RESOURCES
Fiscal Year Ended August 31, 2019
As of August 31, 2019, the Company had working capital of $17,761,616 compared to working capital of $18,346,414
as of August 31, 2018, which is a decrease of $584,798. The largest changes affecting working capital include an
increase in cash of $3,554,847, a decrease in accounts receivable of $1,316,540, a decrease in note receivable of
$2,803, a decrease in inventory of $3,425,392 as management has worked to reduce excess inventory in certain
products, an increase in prepaid expenses of $46,288, and an increase in prepaid income taxes of $109,110.
Accounts payable rose slightly by $32,935 to $410,027 from $377,092 which is related to the timing of payments due
to suppliers. Accrued liabilities fell to $1,312,580 from $1,795,207, a decrease of $482,627. The ratio of current assets
to current liabilities, or current ratio, was 11.3 as of August 31, 2019 (August 31, 2018 - 9.4).
For the fiscal year ended August 31, 2019, the accounts receivable collection period or DSO was 23 days compared to
28 days for the year ended August 31, 2018. Inventory turnover for the year ended August 31, 2019 was 83 days
compared to 80 days for the year ended August 31, 2018.
The Company has been utilizing its cash position to repurchase common shares under formal repurchase plans in order
to increase shareholder value. During the fiscal years ended August 31, 2019 and 2018, 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. During fiscal 2019, the Company repurchased for cancelation a total
of 345,671 common shares which used cash of $3,061,441. During fiscal 2018, the Company repurchased for
cancellation 154,329 common shares which used cash of $1,271,599.
The Company also issued 2,294 common shares to its President and CEO in fiscal 2019 pursuant to the Company’s
Restricted Share Plan as consideration for a portion of his fiscal 2018 bonus.
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, 2019 the one month LIBOR
rate plus 175 basis points was 3.92% (2.17% + 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 2019 or 2018. 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.
- 17 -
During the year ended August 31, 2019, 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.
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, 2019, 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 2019 and 2018
Report of Independent Registered Accounting Firm dated November 13, 2019
Consolidated Balance Sheets
Balance Sheets at August 31, 2019 and August 31, 2018
Consolidated Statements of Operations
For the years ended August 31, 2019 and August 31, 2018
Consolidated Statements of Stockholders’ Equity
For the years ended August 31, 2019 and August 31, 2018
Consolidated Statements of Cash Flows
For the years ended August 31, 2019 and August 31, 2018
Notes to Financial Statements
Report of Independent Registered Accounting Firm dated November 13, 2019
Schedule II: Valuation and Qualifying Accounts
- 18 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
AUGUST 31, 2019
- 19 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
Jewett-Cameron Trading Company Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Jewett-Cameron Trading Company Ltd. (the
“Company”), as of August 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’
equity, and cash flows, and the related notes (collectively referred to as the “financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of Jewett-Cameron
Trading Company Ltd. as of August 31, 2019 and 2018, and the results of its operations and its cash flows for the years
ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatements of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
We have served as the Company’s auditor since 2002.
Vancouver, Canada
November 13, 2019
“DAVIDSON & COMPANY LLP”
Chartered Professional Accountants
- 20 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
AS OF AUGUST 31
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net of allowance
of $Nil (August 31, 2018 - $Nil)
Inventory, net of allowance
of $119,357 (August 31, 2018 - $75,336) (note 3)
Note receivable
Prepaid expenses
Prepaid income taxes
Total current assets
2019
2018
$
9,652,310
$
6,097,463
2,835,952
6,377,805
1,197
393,539
223,420
4,152,492
9,803,197
4,000
347,251
114,310
19,484,223
20,518,713
Property, plant and equipment, net (note 4)
2,727,406
3,105,260
Intangible assets, net (note 5)
3,048
3,590
Total assets
$
22,214,677
$
23,627,563
- Continued -
The accompanying notes are an integral part of these consolidated financial statements.
- 21 -
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
Stockholders’ equity
Capital stock (note 8, 9)
Authorized
2019
2018
$
410,027
1,312,580
1,722,607
61,204
1,783,811
$
377,092
1,795,207
2,172,299
81,853
2,254,152
21,567,564 common shares, without par value
10,000,000 preferred shares, without par value
Issued
3,971,282 common shares (August 31, 2018 – 4,314,659)
Additional paid-in capital
Retained earnings
Total stockholders’ equity
936,903
618,707
18,875,256
1,017,908
600,804
19,754,699
20,430,866
21,373,411
Total liabilities and stockholders’ equity
$
22,214,677
$
23,627,563
Contingency (Note 15)
Subsequent Events (Note 16)
The accompanying notes are an integral part of these consolidated financial statements.
- 22 -
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
Gain (loss) on sale of property, plant and equipment
Interest and other income
2019
2018
$
45,446,362
$
53,923,152
35,481,931
42,325,338
9,964,431
11,597,814
2,127,296
191,819
4,907,766
7,226,881
2,103,899
274,065
4,943,431
7,321,395
2,737,550
4,276,419
105,366
45,228
150,594
(27,022)
30,026
3,004
Income before income taxes
2,888,144
4,279,423
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
$
$
$
808,341
(20,649)
2,100,452
0.50
0.50
4,233,304
4,233,304
$
$
$
1,288,275
70,509
2,920,639
0.66
0.66
4,430,940
4,430,940
The accompanying notes are an integral part of these consolidated financial statements.
- 23 -
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
Additiona
l paid-in
capital
Retained
earnings
Total
August 31, 2017
4,468,988
$ 1,054,316
$ 600,804
$ 18,069,251
$ 19,724,371
Shares repurchased and cancelled (note 9)
Net income
(154,329)
-
(36,408)
-
-
(1,235,191)
2,920,639
(1,271,599)
2,920,639
August 31, 2018
4,314,659
$ 1,017,908
$ 600,804
$ 19,754,699
$ 21,373,411
Shares repurchased and cancelled (note 9)
Shares issued pursuant to compensation plans
(note 10)
Net income
(345,671)
(81,546)
-
(2,979,895)
(3,061,441)
2,294
-
541
-
17,903
-
-
2,100,452
18,444
2,100,452
August 31, 2019
3,971,282
$ 936,903
$ 618,707
$ 18,875,256
$ 20,430,866
The accompanying notes are an integral part of these consolidated financial statements.
- 24 -
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
(Gain) loss on sale of property, plant and equipment
Deferred income taxes
Changes in non-cash working capital items:
Decrease (increase) in accounts receivable
Decrease (increase) in note receivable
Decrease (increase) in inventory
(Increase) decrease in prepaid expenses
(Increase) in prepaid income taxes
(Decrease) in accounts payable and accrued liabilities
Net cash provided by operating activities
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
Issuance of common stock
Redemption of common stock
Net cash used in financing activities
Net increase in cash
Cash, beginning of year
Cash, end of year
Supplemental disclosure with respect to cash flows (note 14)
2019
2018
$
2,100,452
$
2,920,639
191,819
(105,366)
(20,649)
1,316,540
2,803
3,425,392
(46,288)
(109,110)
(449,692)
6,305,901
324,675
(32,732)
291,943
18,444
(3,061,441)
(3,042,997)
3,554,847
6,097,463
274,065
27,022
70,509
(587,437)
(4,000)
(995,652)
248,525
(114,310)
(273,021)
1,566,340
1,000
(110,528)
(109,528)
-
(1,271,599)
(1,271,599)
185,213
5,912,250
$
9,652,310
$
6,097,463
The accompanying notes are an integral part of these consolidated financial statements.
- 25 -
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.
On May 29, 2018, the Company completed a 2-for-1 forward stock split of its common shares. All share and
per share amounts have been retroactively restated (Note 8).
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
returns, and litigation
and inventory obsolescence, possible product
contingencies and claims. Actual results could differ from those estimates.
liability and possible product
- 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…)
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, 2019, cash and cash equivalents were $9,652,310 compared to
$6,097,463 at August 31, 2018.
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. Amortization is calculated using
the straight-line method over the remaining life of the asset. The intangible assets 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.
- 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…)
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 number of common shares outstanding has been adjusted for a 2 for 1
forward stock split effective May 29, 2018 (Note 8).
The earnings per share data for the fiscal years ended August 31, 2019 and 2018 are as follows:
Net income
$
2,100,452
$
2,920,639
2019
2018
Basic weighted average number of
common shares outstanding
Effect of dilutive securities
Stock options
Diluted weighted average number
of common shares outstanding
4,233,304
4,430,940
-
-
4,233,304
4,430,940
Basic and diluted earnings per common share
$
0.50
$
0.66
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.
- 28 -
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, 2019 and 2018 and there were no options
outstanding on August 31, 2019 or 2018.
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, 2019 and 2018 follows:
Cash and cash equivalents
Accounts receivable, net of allowance
Accounts payable and accrued liabilities
2019
Carrying
Amount
$9,652,310
2,835,952
1,722,607
Fair
Value
$9,652,310
2,835,952
1,722,607
2018
Carrying
Amount
$6,097,463
4,152,492
2,172,299
Fair
Value
$6,097,463
4,152,492
2,172,299
The following table presents information about the assets that are measured at fair value on a recurring basis
as of August 31, 2019 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,
2019
$ 9,652,310
$ 9,652,310
$
—
$
—
Assets:
Cash and cash equivalents
The fair values of cash are determined through market, observable and corroborated sources.
- 29 -
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 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 adopted this ASU effective September 1, 2018, using the
full retrospective approach, prospectively. The adoption had no material impact on its financial statements on
adoption as the sale of goods by the Company is performed on a standalone basis and revenue is recognized
when the customer obtains control of the goods and in an amount that considers the impact of estimated
returns, discounts and after allowances that are variable in nature.
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.
- 30 -
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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. The accounting standard changes the methodology
for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No.
2016-14 is effective for fiscal years, and interim periods within those years, beginning after December 31,
2019. The Company is currently evaluating the impact of ASU No. 2016-13 on its financial position, results of
operations and liquidity.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash (Topic
230): 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. Topic 230 will
be effective for annual reporting periods beginning after December 15, 2017, including interim periods within
those annual periods. The Company adopted this ASU on September 1, 2018, prospectively. There was no
material impact on the Company’s financial statements on adoption.
3.
INVENTORY
A summary of inventory as of August 31, 2019 and 2018 is as follows:
Wood products and metal products
Industrial tools
Agricultural seed products
2019
5,833,047
239,280
305,478
6,377,805
$
$
$
$
2018
9,189,772
378,163
235,262
9,803,197
- 31 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
4.
PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant, and equipment as of August 31, 2019 and 2018 is as follows:
Office equipment
Warehouse equipment
Buildings
Land
2019
2018
$
486,038
1,265,532
4,072,741
559,065
6,383,376
$
473,702
1,313,714
4,090,527
761,924
6,639,867
Accumulated depreciation
(3,655,970)
(3,534,607)
Net book value
$
2,727,406
$
3,105,260
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, 2019 and 2018 follows:
Intangible assets
2019
43,655
2018
43,655
Accumulated amortization
(40,607)
(40,065)
Net book value
$
3,048
$
3,590
During the fiscal year ended August 31, 2018, the Company conducted a periodic review of the Company’s
patents and determined that two of the patents had expired. The Company immediately amortized the
remaining book value of the patents and derecognized the respective costs and accumulated amortization
values.
- 32 -
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
Provision for income taxes
Current income taxes
Deferred income taxes
2019
605,466
173,114
920
20,458
8,383
808,341
808,341
(20,649)
787,692
2018
1,083,541
228,332
(20,036)
(22,956)
19,394
1,288,275
1,288,275
70,509
1,358,784
$
$
$
$
$
$
$
$
Deferred income tax liability as of August 31, 2019 of $61,204 (August 31, 2018 – $81,853) 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
2019
2018
$
83,243
-
(6,388)
76,855
-
76,855
65,410
-
(9,205)
56,206
-
56,206
(138,059)
(138,059)
Combined net deferred tax liability
$
(61,204)
$
(81,853)
7.
BANK INDEBTEDNESS
There was no bank indebtedness under the Company’s line-of-credit as of August 31, 2019 or August 31,
2018. At August 31, 2019, 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.
- 33 -
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.
Common Stock Split
The Company declared a two for one stock split of its common stock with a record date of the close of
business on May 25, 2018. Shareholders received one additional common share for each common share held
as of the record date. The stock split was effective as of May 29, 2018. Share and per share data have been
retroactively adjusted to reflect the effects of the stock split.
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 2019 ended August 31, 2019, the Company repurchased a total of 46,408
common shares under a 10b-18 share repurchase plan originally announced on February 7, 2019. The total
cost was $399,593 at an average share price of $8.61 per share. The premium paid to acquire those shares over
their per share book value in the amount of $388,645 was recorded as a decrease to retained earnings.
During the 3rd quarter of fiscal 2019 ended May 31, 2019, the Company repurchased a total of 195,142 shares
under a 10b-18 share repurchase plan originally announced on February 7, 2019. The total cost was
$1,704,543 at an average share price of $8.73 per share. The premium paid to acquire those shares over their
per share book value in the amount of $1,658,509 was recorded as a decrease to retained earnings.
During the 2nd quarter of fiscal 2019 ended February 28, 2019, the Company repurchased a total of 8,450
shares under the February 2019 10b-18 share repurchase plan. The total cost was $63,929 at an average share
price of $7.57 per share. The premium paid to acquire those shares over their per share book value in the
amount of $61,936 was recorded as a decrease to retained earnings.
During the 1st quarter of fiscal 2019 ended November 30, 2018, the Company repurchased and cancelled a
total of 95,671 shares under a 10b-18 share repurchase plan originally announced on June 6, 2018. The total
cost was $893,376 at an average share price of $9.34 per share. The premium paid to acquire those shares over
their per share book value in the amount of $870,805 was recorded as a decrease to retained earnings.
During the 4th quarter of fiscal 2018 ended August 31, 2018, the Company repurchased and cancelled a total
of 154,329 common shares under a 10b5-1 share repurchase plan. The total cost was $1,271,599 at an average
price of $8.24 per share. The premium paid to acquire these shares over their per share book value in the
amount of $1,235,191 was recorded as a decrease to retained earnings.
- 34 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
10.
SHARE-BASED INCENTIVE PLANS
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, 2019 and August 31, 2018.
Restricted Share Plan
The Company has a Restricted Share Plan (the “Plan”) as approved by shareholders on February 8, 2019. The
Plan allows the Company to grant, from time to time, restricted shares as compensation to directors, officers,
employees and consultants of the Company. The Restricted Shares are subject to restrictions, including the
period under which the shares will be restricted (the “Restricted Period”) and subject to forfeiture which is
determined by the Board at the time of the grant. The recipient of Restricted Shares is entitled to all of the
rights of a shareholder, including the right to vote such shares and the right to receive any dividends, except
that the shares granted under the Plan are nontransferable during the Restricted Period.
The maximum number of Common Shares reserved for issuance under the Plan will not exceed 1% of the then
issued and outstanding number of Common Shares at the time of the grant. As of August 31, 2019, the
maximum number of shares available to be issued under the Plan was 39,712.
During the year ended August 31, 2019, the Company issued 2,294 common shares under the Plan to the
Company’s CEO as a portion of his earned fiscal 2018 bonus as approved by the Board. The value of this
award was $18,444, with the number of shares issued determined by the closing price of the stock on the day
of the grant.
11.
PENSION AND PROFIT-SHARING PLANS
The Company has a deferred compensation 401(k) plan for all employees with at least 6 months of service
pending a monthly enrolment time. The plan allows for a non-elective discretionary contribution plus
matching employee contributions up to a specific limit. The percentages of contribution remain the discretion
of the Board and are reviewed with management annually. For the years ended August 31, 2019 and 2018 the
401(k) compensation expense was $295,557 and $363,606, respectively.
- 35 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
12.
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.
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
2019
2018
$
$
$
$
$
$
$
$
3,910,117
38,510,213
2,233,406
792,626
45,446,362
71,192
2,040,631
(222,191)
(159,914)
1,158,426
2,888,144
977,117
7,590,487
471,888
279,591
12,895,595
22,214,677
-
23,021
8,007
489
160,302
191,819
$
$
$
$
$
$
$
$
3,500,759
47,197,251
2,282,281
942,861
53,923,152
494
3,652,467
(58,438)
(72,417)
757,317
4,279,423
833,694
12,318,686
438,057
440,386
9,596,740
23,627,563
193
22,534
7,727
970
242,641
274,065
- 36 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
12.
SEGMENT INFORMATION (cont’d…)
Capital expenditures:
Industrial wood products
Lawn, garden, pet and other
Seed processing and sales
Industrial tools and clamps
Corporate and administrative
Interest expense:
2019
-
-
-
-
32,732
32,732
-
$
$
$
2018
-
-
29,638
-
80,890
110,528
-
$
$
$
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:
2019
2018
Sales
$
20,544,268
$
28,392,593
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/ Caribbean
Europe
Asia/Pacific
Middle East
2019
2018
43,894,726
1,243,239
180,664
43,851
83,882
-
45,446,362
$
$
52,050,260
1,429,265
192,539
42,224
196,655
12,209
53,923,152
$
$
All of the Company’s significant identifiable assets were located in the United States as of August 31, 2019
and 2018.
13.
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, 2019, two customers accounted for accounts receivable great than 10% of total accounts receivable
for a total of 56%. At August 31, 2018, three customers accounted for accounts receivable greater than 10% of
total accounts receivable for a total of 56%. The Company controls credit risk through credit approvals, credit
limits, credit
insurance and monitoring procedures. The Company performs credit evaluations of its
commercial customers but generally does not require collateral to support accounts receivable.
- 37 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
13.
CONCENTRATIONS (cont’d…)
Volume of business
The Company has concentrations in the volume of purchases it conducts with its suppliers. For the fiscal year
ended August 31, 2019, there were two suppliers which each accounted for greater than 10% of total
purchases, and the aggregate purchases amounted to $17,745,475. For the fiscal year ended August 31, 2018,
there were two suppliers which each accounted for greater than 10% of total purchases, and the aggregate
purchases amounted to $25,264,412.
14.
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Certain cash payments for the years ended August 31, 2019 and 2018 are summarized as follows:
Cash paid during the year for:
Interest
Income taxes
2019
2018
$
$
-
917,000
$
$
-
1,445,522
There were no non-cash investing or financing activities during the years presented.
15.
CONTINGENCY
The Company is a named party in a Civil Action in Pennsylvania. The matter is an action seeking
compensation for personal injuries and is based on theories of product liability as to Jewett-Cameron. The
matter arises out of a dog allegedly escaping from a Jewett-Cameron kennel product and causing personal
injuries to three individuals. Jewett-Cameron is currently one of three named Defendants. As of this date, no
formal responses have been made and no dates have been established governing the litigation proceedings.
This matter is in its early stages making it speculative to predict as to its outcome. It is the Company’s
intention to vigorously defend the lawsuit. Jewett Cameron’s applicable liability insurer is providing a defense
covering Jewett-Cameron’s legal fees and costs.
16.
SUBSEQUENT EVENTS
Effective September 1, 2019, the Company’s Board of Directors has decided to permanently close the MSI
division and exit the industrial tools business. The costs to close the unit and liquidate the remaining inventory
during fiscal 2020 is not anticipated to be significant due to the unit’s minor overall size and contribution to
sales compared to the Company’s other remaining businesses.
- 38 -
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, 2019 and 2018 and for the years then ended is included on Page 20 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, 2019 and 2018 included in this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to above for the years ended August 31, 2019 and
2018, 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 13, 2019
Chartered Professional Accountants
- 39 -
JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
AUGUST 31, 2018
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
August 31, 2019
Allowance deducted from related
Balance sheet account:
Inventory
Accounts Receivable
August 31, 2018
Allowance deducted from related
Balance sheet account:
Inventory
Accounts Receivable
$
$
$
$
75,336
-
$
$
164,229
-
$
$
-
-
$
$
120,208
-
$
$
119,357
-
156,713
1,725
$
$
98,481
-
$
$
-
1,725
$
$
179,858
-
$
$
75,336
-
- 40 -
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 (2013) 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,
2019.
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 ---
- 41 -
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Table No. 4 lists as of November 1, 2019 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
69
63
40
58
72
72
Date First
Elected
Or Appointed
August 2019
February 2017
July 2017
December 2018
January 2013
May 2019
Name
Geoff Guilfoy (1) (2)
Charles Hopewell
Sarah Johnson (1) (2)
Chris Karlin (1) (2)
Frank G. Magdlen (1) (2)
Michael C. Nasser
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Table No. 5 lists, as of November 1, 2019, 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
63
72
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
Charles E. Hopewell has over 35 years of experience in senior management positions with manufacturing companies,
including serving as CEO of Sunset Manufacturing Inc, Neilsen Manufacturing Inc, and COO of Aluminite
Corporation. In his past positions as COO or CEO, he has been involved in all organizational aspects, including sales
and marketing, plant and equipment, personnel, and finance. He received a degree in Finance from the University of
Oregon and an MBA from Willamette University’s Atkinson Graduate School of Management. Mr. Hopewell has also
worked extensively in local and statewide workforce policy and K-12 CTE education at a Board level, and continues
his involvement with the Oregon Workforce Investment Board and the Oregon Talent Council.
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.
- 42 -
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. For 28 years, he was an Executive Professor at Willamette
University’s Atkinson Graduate School of Management teaching courses on management consulting, nonprofit
management, and government. He currently serves on the Board of Directors of Medical Teams International and is a
former National Board Member of the Institute of Management Consultants USA, and a former Board Member of Co-
Serve International. 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 is currently Global Raw
Materials Planning Manager at Columbia Sportswear. Previously, she served as the Global Buying Manager and as a
Business Process Analyst and Senior Global Buyer at Columbia, which included working with International vendors,
principally in Asia and Canada. Ms. Johnson is a graduate of Gonzaga University in Spokane, Washington.
Chris Karlin is a retired banker who began his banking career in 1980. He served as the Senior Vice President and
Manager of U.S. Bank’s National Government Banking Division from 2005 to 2014 and was responsible for the
strategic vision of the group. He joined U.S. Bank in 1993 as a Relationship Manager in the National Corporate
Division. He has also served as a Regional Manager for the Treasury Management Division in Minneapolis. Prior to
joining U.S. Bank, Chris was with Mitsubishi Bank, serving as Group Manager in its Chicago and Columbus offices,
focusing on public finance and large corporate markets. Chris is a past Chair of the Oregon Bankers Association
(OBA), serves as the Adviser for its Leadership Program and serves on the Board of the OBA's Education Foundation.
Chris has degrees in Economics and Finance from Fort Hays State University (Kansas) and a Master of International
Management from the Thunderbird School of International Management (Arizona).
Frank G. Magdlen is a Chartered Financial Analyst and 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. Since 1999, he has been managing investment
banking activities at GarWood Securities, LLC and The Robins Group, LLC / Crown Point Group Ltd. Mr. Magdlen
has an MBA from University of Southern California, and an undergraduate degree from University of Portland.
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(a)(15).
- 43 -
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.
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), Geoff Guilfoy, Sarah Johnson, and Chris
Karlin. 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 2018 and six times
in fiscal 2019.
On August 11, 2017, the Company received notice from NASDAQ that since the Company had only 2 independent
directors on the Audit Committee, it was not in compliance with NASDAQ’s audit committee requirements under
Listing Rule 5605. NASDAQ granted the Company a cure period to regain compliance which extended 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.
On December 13, 2017, the Company appointed independent director Sarah Johnson to the Audit Committee as the
required third independent member. On January 11, 2018, the Company received noticed from NASDAQ that it had
regained compliance with Listing Rule 5605.
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 Sarah Johnson (Chair), Geoff Guilfoy, Chris Karlin, and Frank
Magdlen. The Committee met one time in fiscal 2018 and two times in fiscal 2019.
- 44 -
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 there was one report 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, as the initial Form 3 for Chris Karlin was filed late.
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.
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 2019, 2018 and 2017 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.
- 45 -
Name and
Principal
Position
Annual Compensation
Fiscal
Year
Salary
Bonus
Other
Annual
Comp.
Restricted
Stock
Awards
Securities
Underlying
Options/
SARS (#)
All
Other
Payouts Comp. (1)
LTIP
Long-term Compensation
Awards
Payouts
Charles Hopewell,
President, Chief Executive Officer,
Principal Financial Officer
Michael Nasser,
Corporate Secretary
2019
2018
2017
$190,000
$178,333
$134,244
$ 20,000
$112,221
-
$
2019
2018
2017
$177,000
$177,000
$177,000
$ 70,000
$ 50,000
$ 50,000
$
$
$
$
$
$
Donald Boone,
President, Chief Executive Officer,
Treasurer, Principal Financial Officer (2) (3)
9,334
2017
$
$
-
$
-
-
-
-
-
-
-
$
$
$
$
$
$
$
-
-
-
-
-
-
-
$
$
$
$
$
$
$
-
-
-
-
-
-
-
$
$
$
$
$
$
$
-
-
-
-
-
-
-
$ 9,000
$ 5,167
-
$
$ 9,000
$ 10,000
$ 15,000
$ 4,940
“All Other Compensation” relates to the Company’s 401K contributions for each individual.
Effective April 1, 2015, Donald Boone voluntarily reduced his salary from $36,000 annually to $9.25 hourly.
(1)
(2)
(3) Donald Boone resigned his officer positions effective February 7, 2017.
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 $45,000 of eligible compensation, which
was decreased from the prior $50,000 during the second quarter of fiscal 2018 and from $60,000 of eligible
compensation during the second quarter of fiscal 2017.
Other than participation in the Company’s Restricted Share Plan and 401(k), no funds were set aside or accrued during
fiscal 2019 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 Restricted Stock Plan and 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 and Charles Hopewell received bonuses, which were determined and approved by the Board of
Directors.
The Board approved a non-qualified Profit Sharing plan for employees who did not receive any other form of
commission or bonus. The plan is formula based proportionately balancing years of service and compensation. The
Board has year-to-year responsibility to review the amount funded to the program and the overall program will be
based on a percentage of operating or pre-tax profit.
- 46 -
Restricted Share Plan
The Company has a Restricted Share Plan which allows the Company to grant restricted shares as compensation to
directors, officers, employees and consultants of the Company. The Restricted Shares are subject to restrictions,
including the period under which the shares will be restricted and subject to forfeiture which is determined by the
Board at the time of the grant. The recipient of Restricted Shares is entitled to all of the rights of a shareholder,
including the right to vote such shares and the right to receive any dividends, except that the shares granted under the
Plan are nontransferable during the Restricted Period.
The maximum number of Common Shares reserved for issuance under the Plan will not exceed 1% of the then issued
and outstanding number of Common Shares at the time of the grant. During the year ended August 31, 2019, the
Company issued 2,294 common shares (fiscal 2018 – Nil) under the Restricted Share Plan.
401(k) Plan
The Company has a 401(k) Plan which allows for a non-elective discretionary contribution based on the first $45,000
of eligible compensation, which was decreased from the prior $50,000 during the second quarter of fiscal 2018.
Beginning in fiscal 2019, the Company also reduced the percentage amount of the discretionary contribution while
adding a matching contribution, which is designed to encourage employees to participate with their own contributions.
For the years ended August 31, 2019 and 2018 the 401(k) compensation expense was $295,557 and $363,606,
respectively. The contributions for Charles Hopewell were $9,000 and $5,167 for the fiscal years ended August 31,
2019 and 2018 respectively. The contributions for Michael Nasser were $9,000 and $10,000 for the fiscal years ended
August 31, 2019 and 2018 respectively. There are no un-funded liabilities.
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 2019 or fiscal 2018, and as of August 31, 2019 there were no options
outstanding.
Long-Term Incentive Plan / Defined Benefit or Actuarial Plan
During fiscal 2019 the Company had no Long-Term Incentive Plan (“LTIP”) and no LTIP awards were made. Also,
during fiscal 2019 the Company had no Defined Benefit or Actuarial Plan.
Compensation Committee Interlocks and Insider Participation
The Company’s Compensation Committee consists of 4 independent directors. None of the members of the
Compensation Committee served as an officer or employee 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.
- 47 -
Employment Contracts
Termination of Employment and Change-in-Control Arrangements
--- No Disclosure Necessary ---
Director Compensation
The Company is compensating directors at the rate of $1,000 per month as of January 1, 2019. Directors are also
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 2019 the following cash payments were paid to directors to compensate them for board meetings
attended: Charles Hopewell $Nil (2018 - $Nil); Donald Boone $Nil (2018 - $Nil); Frank Magdlen $10,600 (fiscal 2018
- $2,600), Geoff Guilfoy $3,600 (fiscal 2018 - $2,333); Sarah Johnson $10,600 (fiscal 2018 -$2,167); and Chris Karlin
$8,800 (fiscal 2018 - $nil).
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 2019 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.
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.
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 1, 2019.
Table No. 7.
Shareholdings of Directors, Executive Officers,
and 5% Shareholders
Class
Common
Common
Common
Common
Common
Common
Common
Name
and Address of
of Beneficial Owner
Donald Boone Estate Trust
Michael C. Nasser
Charles E. Hopewell
Geoff Guilfoy
Sarah Johnson
Chris Karlin
Frank Magdlen
Total directors, executive officers, and 5% shareholders
(1)
Based on 3,971,282 shares outstanding as of November 1, 2019.
- 48 -
Amount of Beneficial
and Voting
Ownership
Percent of
Class (1)
1,256,488
331,888
12,294
Nil
Nil
Nil
Nil
1,600,670
31.6%
8.4%
0.3%
-
-
-
-
40.3%
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.
Fees, including reimbursements for expenses and for professional services rendered by Davidson & Company, LLP
Chartered Accountants to the Company were:
Fiscal Year
2019
2018
$
$
$
90,000
5,000
24,750
90,000
4,750
24,750
119,750
$
119,500
Principal Accountant
Fees and Services
Audit fees
Tax fees
All other fees (1)
Total
(1) FY2019:
$8,250 to review the Q1 Form 10Q
$8,250 to review the Q2 Form 10Q
$8,250 to review the Q3 Form 10Q
FY2018:
$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
3.2
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.
Amended and Restated Articles of Incorporation of Jewett-Cameron Lumber Corporation
(filed as an exhibit to the 10-Q Quarterly Report filed on January 13, 2014)
Articles of Incorporation of Jewett-Cameron Company.
(filed as an exhibit to the 10-Q Quarterly Report filed on January 13, 2014)
- 49 -
4.
9.
10.
11.
12.
13.
14.
16.
18.
21.
22.
23.
24.
31.1
32.1
99.
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
Certification of Chief Executive Officer and Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act, Charles Hopewell
Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C., 1350
(Section 906 of the Sarbanes-Oxley Act), Charles Hopewell
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
- 50 -
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
Dated: November 13, 2019
Jewett-Cameron Trading Company Ltd.
Registrant
By: /s/ “Charles E. Hopewell”
Charles E. Hopewell,
President, CEO, Principal
Financial Officer and Director
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 13, 2019
Dated: November 13, 2019
Dated: November 13, 2019
Dated: November 13, 2019
Dated: November 13, 2019
Dated: November 13, 2019
By: /s/ “Charles E. Hopewell”
Charles E. Hopewell,
President, CEO, Principal
Financial Officer and Director
By: /s/ “Michael C. Nasser
Michael C. Nasser,
Corporate Secretary and Director
By: /s/ “Geoff Guilfoy”
Geoff Guilfoy,
Director
By:
/s/ “Sarah Johnson”
Sarah Johnson,
Director
By: /s/ “Chris Karlin
Chris Karlin,
Director
By:
/s/ “Frank Magdlen”
Frank Magdlen,
Director
- 51 -