Jewett-Cameron reports fiscal Q3 net income of US$936,329, down 8.1% from a year ago, on revenues up 1.9% to US$15.3M; increased raw material prices, competition in market segment lowered margins for the quarter, company says

NORTH PLAINS, Oregon , July 14, 2014 (press release) – Jewett-Cameron Trading Company Ltd. (NASDAQ: JCTCF) today reported financial results for the third quarter and nine month periods of fiscal 2014 ended May 31, 2014.

Sales for the third quarter of fiscal 2014 totaled $15.3 million compared to sales of $15.1 million for the third quarter of fiscal 2013. Income from operations was $1,552,537 compared to income of $1,686,508 for the third quarter ended May 31, 2013. Net income after other items and income taxes for the current quarter was $936,329, or $0.33 per share, compared to net income of $1,018,564, or $0.32 per share, in the year-ago quarter.

For the nine months ended May 31, 2014, Jewett-Cameron reported sales of $33.1 million compared to sales of $38.6 million for the nine months ended May 31, 2013. Net income was $1,506,306, or $0.50 per share, compared to net income of $2,289,941, or $0.73 per share, in the first nine months of fiscal 2013. The year ago period was positively affected by the one-time gain on the sale of property of $353,852.

"Several of our market segments have become much more competitive during the last year," said CEO Don Boone. "We have also seen increases in raw material prices, which together has resulted in lower margins. As a response, we have initiated several programs to obtain new business, including introductory pricing and the launch of several new products."

As of May 31, 2014, the Company's cash position was $4.2 million, and there was no borrowing against its $1.0 million line of credit. The Company has historically utilized its cash position by implementing share repurchase programs as an effective method of enhancing shareholder value. During the third quarter of fiscal 2014 ended May 31, 2014, the Company repurchased and cancelled a total of 327,078 common shares at a total cost of $3,234,699, which represents an average price of $9.89 per share. In the second quarter of fiscal 2014, the Company repurchased and cancelled 58,180 common shares at a cost of $569,019, which represents an average price of $9.78 per share. These repurchases were pursuant to Rule 10b-18 share repurchase plans. Under the current plan, the Company may repurchase up to 300,000 common shares through the facilities of the NASDAQ Stock Market ("NASDAQ"). The Plan will remain in place until November 14, 2014 but may be limited or terminated at any time without prior notice. As of July 14, 2014, a total of 71,765 common shares have been repurchased under the new Plan.

In July 2014, the Company received notice in the lawsuit Greenwood Products, Inc. et al v. Greenwood Forest Products, Inc. et al., Case No. 05-02553 (Multnomah County Circuit Court) which involves a Company subsidiary as plaintiff. 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. As a consequence, the Court 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. The Company is currently assessing the impact of this new ruling, and is evaluating potential next steps. As of the date of this filing, the potential exposure to the Company of this new ruling is $1.8 million.

About Jewett-Cameron Trading Company Ltd.

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, Jewett-Cameron 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, ("JCSC"), incorporated October 2000, Greenwood Products, Inc. ("Greenwood"), incorporated February 2002, and Jewett-Cameron Company ("JCC"), 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. 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 products used in a variety of markets and applications, including the marine and transportation markets. 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.

Forward-looking Statements

The information in this release contains certain forward-looking statements that anticipate future trends and events. These statements are based on certain assumptions that may prove to be erroneous and are subject to certain risks, including but not limited to, the uncertainties of the Company's new product introductions, the risks of increased competition and technological change in the Company's industry, and other factors detailed in the Company's SEC filings. Accordingly, actual results may differ, possibly materially, from predictions contained herein.

JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)

 
 

May 31,
2014

 

August 31,
2013

       

ASSETS

     
       

Current assets

     

  Cash

$   4,240,397

 

$    8,308,445

  Accounts receivable, net of allowance of $Nil (August 31, 2013 - $Nil)

4,923,144

 

3,344,777

  Inventory, net of allowance of $115,426 (August 31, 2013 - $134,259) (note 3)

7,245,395

 

8,520,991

  Note receivable

15,000

 

15,000

  Prepaid expenses

1,326,824

 

587,609

  Prepaid income taxes

317,445

 

270,423

       

  Total current assets

18,068,205

 

21,047,245

       

Property, plant and equipment, net (note 4)

2,177,368

 

2,241,950

       

Intangible assets, net (note 5)

314,133

 

368,662

       

Total assets

$  20,559,706

 

$  23,657,857

       

LIABILITIES AND STOCKHOLDERS' EQUITY

     
       

Current liabilities

     
       

  Accounts payable

$    962,733

 

$  1,715,458

  Litigation reserve (note 13(a))

124,121

 

144,103

  Accrued liabilities

1,127,861

 

1,149,882

       

  Total current liabilities

2,214,715

 

3,009,443

       

Deferred tax liability (note 6)

44,382

 

50,393

       

Total liabilities

2,259,097

 

3,059,836

       

Contingent liabilities and commitments (note 13)

     
       

Stockholders' equity

     

  Capital stock (note 8)

     

     Authorized

     

      21,567,564 common shares, without par value

     

      10,000,000 preferred shares, without par value

     

    Issued

     

      2,749,678 common shares  (August 31, 2013 - 3,134,936)

1,297,457

 

1,479,246

  Additional paid-in capital

600,804

 

600,804

  Retained earnings

16,402,348

 

18,517,971

       

  Total stockholders' equity

18,300,609

 

20,598,021

       

  Total liabilities and stockholders' equity

$  20,559,706

 

$  23,657,857

 

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. Dollars)

(Prepared by Management)

(Unaudited)

 

Three Month 
Period Ended 
May 31,

 

Nine Month 
Period Ended
May 31,

 

2014

 

2013

 

2014

 

2013

               

SALES

$  15,335,570

 

$  15,051,509

 

$ 33,074,500

 

$ 38,575,738

               

COST OF SALES

12,384,976

 

12,021,388

 

26,516,458

 

31,114,942

               

GROSS PROFIT

2,950,594

 

3,030,121

 

6,558,042

 

7,460,796

               

OPERATING EXPENSES

             

  Selling, general and administrative expenses

402,013

 

372,191

 

1,240,800

 

1,176,173

  Depreciation and amortization

73,145

 

66,735

 

212,694

 

188,431

  Wages and employee benefits

922,899

 

904,687

 

2,599,270

 

2,658,240

               
 

1,398,057

 

1,343,613

 

4,052,764

 

4,022,844

               

Income from operations

1,552,537

 

1,686,508

 

2,505,278

 

3,437,952

               

OTHER ITEMS

             

   Gain on sale of property, plant and equipment

-

 

-

 

4,109

 

353,852

   Interest and other income

6,734

 

6,734

 

20,008

 

30,049

   Interest expense

-

 

-

 

-

 

(400)

 

6,734

 

6,734

 

24,117

 

383,501

               

Income before income taxes

1,559,271

 

1,693,242

 

2,529,395

 

3,821,453

               

Income tax expense

(622,942)

 

(674,678)

 

(1,023,089)

 

(1,531,512)

               

Net income

$     936,329

 

$    1,018,564

 

$  1,506,306

 

$  2,289,941

               

Basic earnings per common share

$           0.33

 

$             0.32

 

$           0.50

 

$            0.73

               

Diluted earnings per common share

$           0.33

 

$             0.32

 

$           0.50

 

$            0.73

               

Weighted average number of common shares outstanding:

             

  Basic

2,866,273

 

3,135,128

 

3,042,692

 

3,135,641

  Diluted

2,866,273

 

3,135,128

 

3,042,692

 

3,135,641

               

 

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)

(Prepared by Management)

(Unaudited)

 

Three Month 
Period Ended
May 31,

 

Nine Month 
Period Ended
May 31,

 

2014

 

2013

 

2014

 

2013

               

CASH FLOWS FROM OPERATING ACTIVITIES

             

Net income

$    936,329

 

$  1,018,564

 

$  1,506,306

 

$  2,289,941

Items not involving an outlay of cash:

             

  Depreciation and amortization

73,145

 

66,735

 

212,694

 

188,431

  (Gain) loss on sale of property, plant and equipment

-

 

-

 

(4,109)

 

(353,852)

  Deferred income tax expense (recovery)

2,355

 

594

 

(6,011)

 

152,017

  Interest income on litigation

(6,734)

 

(6,734)

 

(19,982)

 

(19,982)

               

Changes in non-cash working capital items:

             

  (Increase) decrease in accounts receivable

(666,858)

 

2,474,524

 

(1,578,367)

 

(1,727,858)

  Decrease in inventory

283,331

 

1,017,381

 

1,275,596

 

2,410,477

  (Increase) decrease in note receivable

(15,000)

 

(15,000)

 

-

 

5,000

  (Increase) decrease in prepaid expenses

762,010

 

(459,525)

 

(739,215)

 

(1,501,480)

  (Increase) decrease in prepaid income taxes

174,587

 

128,084

 

(47,022)

 

(125,868)

  Increase (decrease) in accounts payable and

  accrued liabilities

 

133,976

 

 

(835,443)

 

 

(774,746)

 

 

(1,131,569)

  Decrease in accrued income taxes

-

 

-

 

-

 

(37,203)

               

Net cash provided by (used in) operating activities

1,677,141

 

3,389,180

 

(174,856)

 

148,054

               

CASH FLOWS FROM INVESTING ACTIVITIES

             

  Purchase of property, plant and equipment

(18,899)

 

(52,889)

 

(94,274)

 

(183,679)

  Proceeds from sale of property, plant and

  equipment

 

-

 

 

-

 

 

4,800

 

 

410,000

               

Net cash provided by (used in) investing activities

(18,899)

 

(52,889)

 

(89,474)

 

226,321

               

CASH FLOWS FROM FINANCING ACTIVITIES

             

  Redemption of common stock

(3,234,699)

 

-

 

(3,803,718)

 

(4,884)

               

Net cash used in financing activities

(3,234,699)

 

-

 

(3,803,718)

 

(4,884)

               

Net increase (decrease) in cash

(1,576,457)

 

3,336,291

 

(4,068,048)

 

369,491

               

Cash, beginning of period

5,816,854

 

4,342,588

 

8,308,445

 

7,309,388

               

Cash, end of period

$  4,240,397

 

$  7,678,879

 

$  4,240,397

 

$  7,678,879

 

Contact: Don Boone, President & CEO, (503) 647-0110

SOURCE Jewett-Cameron Trading Company Ltd.

RELATED LINKS
http://www.jewettcameron.com

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