(Expressed in U.S. Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
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. JCLCs 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, (JCSC), incorporated October 2000, Greenwood Products, 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.
The Company, through its subsidiaries, operates out of facilities located in North Plains, Oregon. JCCs 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.
These unaudited financial statements are those of the Company and its wholly owned subsidiaries. In the opinion of management, the accompanying Consolidated Financial Statements of Jewett-Cameron Trading Company Ltd., contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state its financial position as of May 31, 2016 and August 31, 2015 and its results of operations and cash flows for the three and nine month periods ended May 31, 2016 and May 31, 2015 in accordance with generally accepted accounting principles of the United States of America (U.S. GAAP). Operating results for the three and nine month periods ended May 31, 2016 are not necessarily indicative of the results that may be experienced for the fiscal year ending August 31, 2016.
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.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(contd
)
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 Companys consolidated financial statements include the estimated useful lives for depreciable and amortizable assets, the estimated allowances for doubtful accounts receivable and inventory obsolescence, possible product liability and possible product returns, and litigation contingencies and claims. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. At May 31, 2016, cash was $6,285,575 compared to $4,416,297 at August 31, 2015. At May 31, 2016 and August 31, 2015, there were no cash equivalents.
Accounts receivable
Trade and other accounts receivable are reported at face value less any provisions for uncollectible accounts considered necessary. Accounts receivable primarily includes trade receivables from customers. The Company estimates doubtful accounts on an item-by-item basis and includes over aged accounts as part of allowance for doubtful accounts, which are generally ones that are ninety days or greater overdue.
The Company extends credit to domestic customers and offers discounts for early payment. When extension of credit is not advisable, the Company relies on either prepayment or a letter of credit.
Inventory
Inventory, which consists primarily of finished goods, is recorded at the lower of cost, based on the average cost method, and market. Market is defined as net realizable value. An allowance for potential non-saleable inventory due to excess stock or obsolescence is based upon a review of inventory components.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation. The Company provides for depreciation over the estimated life of each asset on a straight-line basis over the following periods:
|
|
|
|
Office equipment
|
3-7 years
|
|
Warehouse equipment
|
2-10 years
|
|
Buildings
|
5-30 years
|
Intangibles
The Companys intangible assets have a finite life and are recorded at cost. The most significant intangible assets are two patents related to gate support systems. Amortization is calculated using the straight-line method over the remaining lives of 21 months and 33 months, respectively, and are reviewed annually for impairment.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(contd
)
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.
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 asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the 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 based only 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.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(contd
)
Earnings per share
(contd
)
The earnings per share data for the three and nine month periods ended May 31, 2016 and 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Month Period
Ended May 31,
|
|
Nine Month Period
Ended May 31,
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$ 908,730
|
|
$ 461,100
|
|
$ 1,572,935
|
|
$ 1,072,447
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of
common shares outstanding
|
2,458,170
|
|
2,561,702
|
|
2,470,566
|
|
2,612,199
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
Stock options
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number
of common shares outstanding
|
2,458,170
|
|
2,561,702
|
|
2,470,566
|
|
2,612,199
|
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.
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 nine month period ended May 31, 2016, and there were no options outstanding on May 31, 2016.
Financial instruments
The Company uses the following methods and assumptions to estimate the fair value of each class of financial instruments for which it is practicable to estimate such values:
Cash
- the carrying amount approximates fair value because the amounts consist of cash held at a bank and cash held in short term investment accounts.
Accounts receivable
- the carrying amounts approximate fair value due to the short-term nature and historical collectability.
Notes receivable -
the carrying amounts approximate fair value due to the short-term nature of the amount.
Accounts payable and accrued liabilities
- the carrying amount approximates fair value due to the short-term nature of the obligations.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(contd
)
Financial instruments
(contd
)
The estimated fair values of the Company's financial instruments as of May 31, 2016 and August 31, 2015 follows:
|
|
|
|
|
|
|
|
|
May 31,
2016
|
|
August 31,
2015
|
|
|
Carrying
|
Fair
|
|
Carrying
|
Fair
|
|
|
Amount
|
Value
|
|
Amount
|
Value
|
|
Cash
|
$6,285,575
|
$6,285,575
|
|
$4,416,297
|
$4,416,297
|
|
Accounts receivable, net of allowance
|
4,382,438
|
4,382,438
|
|
3,688,247
|
3,688,247
|
|
Note receivable
|
-
|
-
|
|
1,310
|
1,310
|
|
Accounts payable and accrued liabilities
|
2,698,740
|
2,698,740
|
|
2,009,313
|
2,009,313
|
The following table presents information about the assets that are measured at fair value on a recurring basis as of May 31, 2016, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31,
2016
|
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
6,285,575
|
|
$
|
6,285,575
|
|
$
|
|
|
$
|
|
The fair values of cash are determined through market, observable and corroborated sources.
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 goods sold in the consolidated statement of operations. All costs billed to the customer are included as revenue in the consolidated statement of operations.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES
(contd
)
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
Management has reviewed the new accounting guidance and determined that there is not a material impact on our financial statements.
3.
INVENTORY
A summary of inventory is as follows:
|
|
|
|
|
|
|
May 31,
2016
|
|
August 31,
2015
|
|
|
|
|
|
|
Wood products and metal products
|
$ 6,621,744
|
|
$ 7,376,505
|
|
Industrial tools
|
394,937
|
|
525,667
|
|
Agricultural seed products
|
281,213
|
|
449,403
|
|
|
|
|
|
|
|
$ 7,297,894
|
|
$ 8,351,575
|
4.
PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant, and equipment is as follows:
|
|
|
|
|
|
|
May 31,
2016
|
|
August 31,
2015
|
|
|
|
|
|
|
Office equipment
|
600,805
|
|
$ 591,124
|
|
Warehouse equipment
|
1,484,512
|
|
1,520,724
|
|
Buildings
|
2,878,849
|
|
2,878,849
|
|
Land
|
761,924
|
|
761,924
|
|
|
5,726,090
|
|
5,752,621
|
|
|
|
|
|
|
Accumulated depreciation
|
(3,587,290)
|
|
(3,520,910)
|
|
|
|
|
|
|
Net book value
|
$ 2,138,800
|
|
$ 2,231,711
|
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
4.
PROPERTY, PLANT AND EQUIPMENT
(contd
)
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 is as follows:
|
|
|
|
|
|
|
May 31,
2016
|
|
August 31,
2015
|
|
Patent
|
$ 850,000
|
|
$ 850,000
|
|
Other
|
43,655
|
|
43,655
|
|
|
893,655
|
|
893,655
|
|
Accumulated amortization
|
(724,935)
|
|
(670,405)
|
|
|
|
|
|
|
Net book value
|
$ 168,720
|
|
$ 223,250
|
6.
DEFERRED INCOME TAXES
Deferred income tax liability as of May 31, 2016 of $4,203 (August 31, 2015 $34,300) 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.
7.
BANK INDEBTEDNESS
There was no bank indebtedness under the Companys $3,000,000 line of credit as of May 31, 2016 or August 31, 2015.
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.
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.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
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 3
rd
quarter of fiscal 2016 ended May 31, 2016, the Company repurchased and cancelled a total of 63,386 common shares under a 10b5-1 share repurchase plan. The total cost was $745,878 at an average price of $11.77 per share. The premium paid to acquire these shares over their per share book value in the amount of $715,756 was recorded as a decrease to retained earnings.
During the 4
th
quarter of fiscal 2015 ended August 31, 2015, the Company repurchased and cancelled a total of 4,778 common shares under a 10b5-1 share repurchase plan. The total cost was $54,491 at an average price of $11.41 per share. The premium paid to acquire these shares over their per share book value in the amount of $52,236 was recorded as a decrease to retained earnings. In addition to the shares repurchased under the 10b5-1 repurchase plan, Donald Boone, President and CEO of the Company, voluntarily returned 15,000 common shares to treasury for cancellation. The Company paid no consideration for the shares. Capital stock was reduced by the book value of the shares in the amount of $7,077.
During the 3
rd
quarter of fiscal 2015 ended May 31, 2015, the Company repurchased and cancelled a total of 89,051 common shares under a 10b5-1 share repurchase plan. The total cost was $1,101,574 at an average price of $12.37 per share. The premium paid to acquire these shares over their per share book value in the amount of $1,059,554 was recorded as a decrease to retained earnings.
During the 1
st
quarter of fiscal 2015 ended November 30, 2014, the Company repurchased and cancelled a total of 118,969 common shares under a 10b5-1 share repurchase plan. The total cost was $1,292,477 at an average price of $10.86 per share. The premium paid to acquire these shares over their per share book value in the amount of $1,236,340 was recorded as a decrease to retained earnings.
10.
STOCK OPTIONS
The Company has a stock option program under which stock options to purchase securities from the Company can be granted to directors and employees of the Company on terms and conditions acceptable to the regulatory authorities of Canada, notably the Ontario Securities Commission and the British Columbia Securities Commission.
Under the stock option program, stock options for up to 10% of the number of issued and outstanding common shares may be granted from time to time, provided that stock options in favor of any one individual may not exceed 5% of the issued and outstanding common shares. No stock option granted under the stock option program is transferable by the optionee other than by will or the laws of descent and distribution, and each stock option is exercisable during the lifetime of the optionee only by such optionee. Generally, no option can be for a term of more than 10 years from the date of the grant.
The exercise price of all stock options, granted under the stock option program, must be at least equal to the fair market value (subject to regulated discounts) of such common shares on the date of grant. Options vest at the discretion of the Board of Directors.
The Company had no stock options outstanding as of May 31, 2016 and August 31, 2015.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
11.
PENSION AND PROFIT-SHARING PLANS
The Company has a deferred compensation 401(k) plan for all employees with at least 12 months of service pending a monthly enrollment time. The plan allows for a non-elective discretionary contribution based on the first $60,000 of eligible compensation. During the second quarter of fiscal 2016 ended February 29, 2016, the Company made an additional 10% contribution for all eligible employees as a one-time compensation bonus. For the nine month periods ended May 31, 2016 and 2015, the 401(k) compensation expense was $360,275 and $186,345, respectively.
12.
CONTINGENT LIABILITIES AND COMMITMENTS
a)
A subsidiary was a plaintiff in a lawsuit filed in Portland, Oregon, entitled, Greenwood Products, Inc. et al v. Greenwood Forest Products, Inc. et al., Case No. 05-02553 (Multnomah County Circuit Court).
During fiscal 2002 the Company entered into a purchase agreement to acquire inventory over a 15 month period with an initial estimated value of $7,000,000 from Greenwood Forest Products, Inc. During the year ended August 31, 2003, the Company completed the final phase of the inventory acquisition. As partial consideration for the purchase of the inventory the Company issued two promissory notes, based on its understanding of the value of the inventory purchased. The Company believes it overpaid the obligation by approximately $820,000. The holder counterclaimed for approximately $2,400,000.
Litigation was completed on March 5, 2007, with the courts general judgment and money award. The net effect was money judgment in favor of Greenwood Forest Products, Inc. for $242,604. The Company accrued reserves to cover the money judgment related to this dispute. Both parties filed appeals for review of the courts opinion.
During the 1st quarter of fiscal 2011, the Oregon Court of Appeals ruled that the judgment in favor of Jewett Cameron as plaintiffs should be reversed and the judgment in favor of the defendants should stand. The judgment in favor of the Company was for $819,000 plus attorneys fees. The judgment against the plaintiffs is for $1,187,137. The Company appealed the decision to the Oregon Supreme Court. During the 1st quarter of fiscal 2011, the Company recorded a litigation loss of $962,137 and interest of $391,988 in addition to the existing litigation reserve of $225,000. Additional interest of $48,790 was recorded during the remainder of fiscal 2011. During the 1st quarter of fiscal 2012 ended November 30, 2011, additional interest of $16,204 was accrued.
In February 2012, the Company received the decision from the Oregon Supreme Court which was favorable to Jewett Cameron as plaintiff. As a result, the Company has reversed $1,459,832 of the litigation reserve and accrued interest during the 2nd quarter of fiscal 2012 ended February 29, 2012. The reversal was treated as a one-time gain during the quarter.
In July 2014, upon remand from the Oregon Supreme Court, the Oregon Court of Appeals has concluded that Greenwood Forest Products, Inc. as defendants are entitled to a new trial, and, as a consequence, ruled that the judgment in favor of Jewett Cameron as plaintiffs should be reversed and the judgment in favor of defendants should stand. The judgment in favor of the Company was for $819,000 plus attorneys fees. The judgment against plaintiffs was for $1,187,137. On August 7, 2014, the Company filed a petition with the Oregon Supreme Court for a review of the Oregon Court of Appeals notice. The petition requests the Oregon Supreme Court review the most recent ruling by the Oregon Court of Appeals, reverse the decision, and affirm the original judgment of the trial court. In September 2015, the Oregon Supreme Court ruled on the Companys petition and has reversed the decision of the Oregon Court of Appeals and remanded the case to back to the Court of Appeals for further proceedings. The Court also denied the defendants request for a new trial.
During the year ended August 31, 2015, the Company recorded $26,716 of interest income due to the favorable difference in interest rates between the judgments. During the nine months ended May 31, 2016, the Company recorded $6,661 of interest income.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
12.
CONTINGENT LIABILITIES AND COMMITMENTS
(contd
)
During the quarter ended February 29, 2016, the Company and Greenwood Forest Products, Inc., settled all litigation between the two companies. The Company made a cash payment of $200,000 to Greenwood Forest Products, Inc., as full settlement and termination of the litigation (the Settlement Payment). The litigation expense of $115,990 represents the difference between the Settlement Payment, and the litigation reserve balance on the date of settlement of $84,010 which is net of interest income recognized for the period.
A summary of the litigation reserve is as follows:
|
|
|
|
|
|
|
May 31,
2016
|
|
August 31,
2015
|
|
|
|
|
|
|
Litigation expense
(1)
|
$ (84,010)
|
|
$ -
|
|
Litigation reserve
|
84,010
|
|
117,387
|
|
Interest expense
|
-
|
|
-
|
|
Interest income
|
-
|
|
(26,716)
|
|
Total
|
$ -
|
|
$ 90,671
|
(1)
The litigation reserve was reversed in full upon the settlement reached during the nine month period ended May 31, 2016.
b)
At May 31, 2016 and August 31, 2015 the Company had an un-utilized line-of-credit of $3,000,000 (note 7). The line-of-credit has certain financial covenants. The Company is in compliance with these covenants.
13.
SEGMENT INFORMATION
The Company has four principal reportable segments. These reportable segments were determined based on the nature of the products offered. Reportable segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company evaluates performance based on several factors, of which the primary financial measure is business segment income before taxes. The following tables show the operations of the Company's reportable segments.
Following is a summary of segmented information for the nine month periods ended May 31:
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Sales to unaffiliated customers:
|
|
|
|
|
|
|
Industrial wood products
|
$
|
3,810,183
|
|
$
|
3,183,802
|
|
Lawn, garden, pet and other
|
|
30,313,357
|
|
|
24,164,127
|
|
Seed processing and sales
|
|
2,587,373
|
|
|
2,103,553
|
|
Industrial tools and clamps
|
|
877,441
|
|
|
1,303,947
|
|
|
$
|
37,588,354
|
|
$
|
30,755,429
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
Industrial wood products
|
$
|
36,714
|
|
$
|
60,543
|
|
Lawn, garden, pet and other
|
|
2,417,382
|
|
|
1,058,352
|
|
Seed processing and sales
|
|
(95,840)
|
|
|
50,753
|
|
Industrial tools and clamps
|
|
(83,839)
|
|
|
68,227
|
|
Corporate and administrative
|
|
359,478
|
|
|
560,026
|
|
|
$
|
2,633,895
|
|
$
|
1,797,901
|
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
13.
SEGMENT INFORMATION
(contd
)
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
Industrial wood products
|
$
|
1,074,934
|
|
$
|
1,242,471
|
|
Lawn, garden, pet and other
|
|
10,215,128
|
|
|
11,342,373
|
|
Seed processing and sales
|
|
364,294
|
|
|
552,280
|
|
Industrial tools and clamps
|
|
504,628
|
|
|
747,022
|
|
Corporate and administrative
|
|
8,895,151
|
|
|
4,762,020
|
|
|
$
|
21,054,135
|
|
$
|
18,616,166
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
Industrial wood products
|
$
|
573
|
|
$
|
735
|
|
Lawn, garden, pet and other
|
|
49,318
|
|
|
43,537
|
|
Seed processing and sales
|
|
7,943
|
|
|
8,209
|
|
Industrial tools and clamps
|
|
1,528
|
|
|
2,067
|
|
Corporate and administrative
|
|
167,599
|
|
|
156,346
|
|
|
$
|
226,961
|
|
$
|
210,894
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
Industrial wood products
|
$
|
-
|
|
$
|
-
|
|
Lawn, garden, pet and other
|
|
-
|
|
|
-
|
|
Seed processing and sales
|
|
-
|
|
|
-
|
|
Industrial tools and clamps
|
|
-
|
|
|
-
|
|
Corporate and administrative
|
|
79,521
|
|
|
85,240
|
|
|
$
|
79,521
|
|
$
|
85,240
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
Lawn, garden, pet and other
|
$
|
658
|
|
$
|
658
|
The following table lists sales made by the Company to customers which were in excess of 10% of total sales for the nine months ended May 31, 2016 and 2015:
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Sales
|
$ 18,108,481
|
|
$ 13,426,962
|
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 nine months ended May 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
United States
|
$
|
34,666,374
|
|
$
|
29,044,754
|
|
Canada
|
|
1,051,116
|
|
|
919,603
|
|
Mexico / Latin America
|
|
1,774,158
|
|
|
744,775
|
|
Middle East
|
|
11,686
|
|
|
12,164
|
|
Africa
|
|
-
|
|
|
2,960
|
|
Asia/Pacific
|
|
85,020
|
|
|
31,173
|
|
|
$
|
37,588,354
|
|
$
|
30,755,429
|
All of the Companys significant identifiable assets were located in the United States as of May 31, 2016 and 2015.
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
May 31, 2016
(Unaudited)
14.
CONCENTRATIONS
Credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with a high quality financial institution. The Company has concentrations of credit risk with respect to accounts receivable as large amounts of its accounts receivable are concentrated geographically in the United States amongst a small number of customers. At May 31, 2016, one customer accounted for accounts receivable greater than 10% of total accounts receivable at 43%. At May 31, 2015, four customers accounted for accounts receivable greater than 10% of total accounts receivable at 77%. 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.
Volume of business
The Company has concentrations in the volume of purchases it conducts with its suppliers. For the nine months ended May 31, 2016, there were three suppliers that each accounted for 10% of total purchases, and the aggregate purchases amounted to $16,016,162. For the nine months ended May 31, 2015, there were three suppliers that each accounted for greater than 10% of total purchases, and the aggregate purchases amounted to $15,064,820.
15.
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Certain cash payments for the nine months ended May 31, 2016 and 2015 are summarized as follows:
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Cash paid during the periods for:
|
|
|
|
|
|
|
Interest
|
$
|
-
|
|
$
|
-
|
|
Income taxes
|
$
|
895,607
|
|
$
|
379,234
|
There were no non-cash investing or financing activities during the periods presented.
16.
SUBSEQUENT EVENTS
a)
Subsequent to the end of the third quarter, the Company re-purchased and cancelled a total of 42,742 shares of its common stock pursuant to the Companys 10b5-1 share re-purchase plan, previously announced on March 7, 2016. The total cost was $489,274 at an average share price of $11.45 per share.
b)
On June 2, 2016, the Company incorporated a new wholly-owned subsidiary in the State of Oregon.
c)
On June 22, 2016, Donald Boone, President and CEO of the Company, voluntarily returned 15,000 common shares to treasury for cancellation. No consideration was paid to Mr. Boone for the shares.
Item 2.