JewettCameron Trading Company Reports Operating Results (10-Q)
Jewett Cameron has a market cap of $21.7 million; its shares were traded at around $9.52 with a P/E ratio of 11.3 and P/S ratio of 0.5. Jewett Cameron had an annual average earning growth of 20.2% over the past 10 years.
Highlight of Business Operations: Sales at Greenwood were $1,835,698 for the three months ended November 30, 2010 compared to sales of $2,419,765 for the three months ended November 30, 2009, which was a decrease of $584,067, or 24%. Sales to boat manufacturers represented approximately 11% of Greenwoods total sales for the year ended August 31, 2010, and demand from these kinds of customers has been severely affected by weak economic conditions. Boat manufacturers continue to work down excess inventory accumulated over the past two years, and until such point, we do not foresee an industry recovery. We continue to develop a readiness to participate when the market rebounds. In the meantime, we have been searching for alternative uses for our industrial wood products and developing new customer relationships. Operating loss before taxes at Greenwood was ($151,027) compared to ($10,812) for the three months ended November 30, 2009, which was a decrease of ($140,215).
Sales at JCLC were $2,898,006 for the three months ended November 30, 2010 compared to sales of $3,651,100 in the three month period ended November 30, 2009, which was a decrease of $753,094, or 21%. Operating income before one-time charges was $194,297, which was a decrease of $446,294 compared to the income of $640,591 from the quarter ended November 30, 2009. The lower operating income was in line with the lower sales for the quarter, and was primarily due to order delays. Overall, the operating results of JCLC are seasonal with the first two quarters of the fiscal year being much slower than the final two quarters of the fiscal year.
Sales at JCSC were $915,928 for the three months ended November 30, 2010 compared to sales of $864,161 for the three months ended November 30, 2009. Demand for grass seed from new home construction and the golf course industry in North America continues to remain weak. In the current quarter, JCSC operating income was $41,946 compared to an operating loss of ($481,506) in the year-ago quarter. The quarter ended November 30, 2009 was negatively affected by a one-time $463,498 inventory write-down due to the significant decrease in market value.
Operating expenses decreased by $114,598 from $1,481,698 for the three month period ended November 30, 2009 to $1,367,100 in the current three month period ended November 30, 2010. This decrease was primarily attributable to lower commissions and bonuses, a direct correlation to the decrease in sales. Selling, General and Administrative Expenses decreased by $60,531 from $540,715 to $480,184. Wages and Employee Benefits declined by $58,748 to $821,539 from $880,287. Depreciation and Amortization increased by $4,681 to $65,377 from $60,696.
After the effects of the litigation reserve, net loss for the three month period ended November 30, 2010 was ($846,335), or ($0.37) per basic and diluted share, compared to net income of $72,630 or $0.03 per basic and diluted share for the three month period ended November 30, 2009.
As of November 30, 2010, the Company had working capital of $14,069,867 compared to working capital of $17,336,242 as of August 31, 2010. This represents a decrease of $3,266,375, which was largely due to the Company establishing a Litigation Reserve of $1,579,125 in the current quarter, as well as repurchasing and cancelling a total of 297,072 common shares at a cost of $2,450,844, all of which was funded from existing cash balances. The largest differences in individual components of working capital during the quarter were a $1,049,995 decrease in cash and cash equivalents; a $2,114,056 decrease in accounts receivable; a $486,814 increase in inventory; an increase of $87,584 in prepaid expenses; an increase of $200,817 in accounts payable; a decrease of $680,191 in accrued liabilities; and the litigation reserve of $1,354,125 which was established in the current quarter.
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