JEWETT CAMERON TRADING CO LTD - Quarter Report: 2005 February (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

X               QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2005

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: 0-19954

JEWETT-CAMERON TRADING COMPANY, LTD.

(Exact name of registrant as specified in its charter)

32275 N.W. Hillcrest, North Plains, Oregon 97133

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (503) 647-0110

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 since May 16, 1992 and (2) has been subject to the above filing requirements for the past 90 days.

Yes  X   No ___

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes ___ No ___

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of February

28, 2005.  Common Stock, no par value

1,465,859 Shares

Jewett-Cameron Trading Company Ltd.

Index to Form 10-Q

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollars)

(Prepared by Management)

- continued -

The accompanying notes are an integral part of these consolidated financial statements.

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollars)

(Prepared by Management)

Nature of operations (Note 1)

The accompanying notes are an integral part of these consolidated financial statements.

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. dollars)

(Prepared by Management)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

JEWETT-CAMERON TRADING COMPANY, LTD, AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Expressed in U.S. Dollars)

(Prepared by Management)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars)

(Prepared by Management)

(Unaudited)

Supplemental disclosure with respect to cash flows (Note 14)

The accompanying notes are an integral part of these consolidated financial statements.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

1.

NATURE OF OPERATIONS

Jewett-Cameron Trading Company Ltd. and subsidiaries (the “Company” or “Jewett”) was incorporated under the Company Act of British Columbia on July 8, 1987.

The Company, through its subsidiaries, operates out of facilities located in North Plains, Oregon, Portland, Oregon and Ogden, Utah.  The Company operates as a wholesaler of lumber and building materials to home improvement centres located primarily in the Pacific and Rocky Mountain regions of the United States; as a processor and distributor of industrial wood and other specialty building products principally to original equipment manufacturers in the United States; as an importer and distributor of pneumatic air tools and industrial clamps in the United States; and as a processor and distributor of agricultural seeds in the United States.

2.

SIGNIFICANT ACCOUNTING POLICIES

Generally accepted accounting principles

These consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which are not materially different from generally accepted accounting principles in Canada.  In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary (consisting only of normal recurring accruals) to present fairly the financial information contained therein.  These consolidated financial statements do not include all disclosures required by generally accepted accounting principles in the United States of America and should be read in conjunction with the audited consolidated financial statements of the Company for the year ended August 31, 2004.  The results of operations for the period ended February 28, 2005 are not necessarily indicative of the results to be expected for the year ending August 31, 2005.

Principles of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, The Jewett-Cameron Lumber Corporation, Jewett-Cameron Seed Co., Greenwood Products, Inc. and MSI-PRO Co., all of which are incorporated under the laws of Oregon, U.S.A.

Significant 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.  Actual results could differ from those estimates.

Currency

These financial statements are expressed in U.S. dollars as the Company's operations are based predominately in the United States.  Any amounts expressed in Canadian dollars (“Cdn$”)  are indicated as such.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

2.

SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.  At February 28, 2005 and August 31, 2004, cash and cash equivalents consisted of cash held at financial institutions.

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 more overdue.

Inventory

Inventory is recorded at the lower of cost, based on the average cost method, or market.  Market is defined as net realizable value.

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:

Impairment of long-lived assets and long-lived assets to be disposed of

Long-lived assets and certain identifiable recorded intangibles 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.

Foreign exchange

The Company's functional currency for all operations worldwide is the U.S. dollar.  The Company does not have any non-monetary or monetary assets and liabilities that are in a currency other than the U.S. dollar.  Any revenue and expense transactions in a foreign currency are translated at rates approximating those in effect at the time of the transaction.  Gains and losses from translation of foreign currency transactions into U.S. dollars are included in current results of operations.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

2.

SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Net income (loss) per share

Basic net income (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share takes into consideration common shares outstanding (computed under basic net income (loss) per share) and potentially dilutive common shares.

The net income (loss) per share data for the periods ended February 28, 2005 and February 29, 2004 is summarized as follows:

As of February 29, 2004, the Company has 105,000 potentially dilutive stock options which have been excluded from net income (loss) per share for the three month period ended February 29, 2004 as they have proved to be anti-dilutive.

Stock option plan

Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”) encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans based on the fair value of options granted.  The Company has elected to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations and to provide additional disclosures with respect to the pro-forma effects of adoption had the Company recorded compensation expense as provided in SFAS No. 123.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

2.

SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Stock option plan (cont’d…)

In accordance with APB 25, compensation costs for stock options are recognized in income based on the excess, if any, of the quoted market price of the stock at the grant date of the award or other measurement date over the amount an employee must pay to acquire the stock.  Generally, the exercise price for stock options granted to employees equals or exceeds the fair market value of the Company's common stock at the date of grant, thereby resulting in no recognition of compensation expense by the Company.

The Company accounts for stock based compensation associated with the repricing of employee stock options in accordance with the provisions of FASB Interpretation No. 44, “Accounting for Certain Transactions involving Stock Compensation” (“FIN 44”).  For accounting purposes, the repricing of existing stock options requires variable accounting for the new options granted from the date of modification.  Variable accounting requires that the intrinsic value, being the excess of the current market price at the end of each reporting period in excess of the exercise price of the repriced options, be expensed as non-cash stock based compensation expense until such time as the repriced options are exercised, expire or are otherwise forfeited.  Any increase in the intrinsic value of the repriced options will decrease reported earnings and any subsequent decreases in value will increase reported earnings.

If under SFAS No. 123 the Company determined compensation costs based on the fair value at the grant date for its stock options, net income (loss) and net income (loss) per share would have been reduced (increased) to the following pro-forma amounts:

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

2.

SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Comprehensive income

The Company has no items of other comprehensive income in any period presented.  Therefore, net income (loss) presented in the consolidated statements of operations equals comprehensive income.

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 and cash equivalents

The carrying amount approximates fair value because the amounts consist of cash held at financial institutions.

Accounts receivable / Note receivable

The carrying amounts approximate fair value due to the short-term nature and historical collectability.

Bank indebtedness

The carrying amount approximates fair value due to the short-term nature of the obligation.

Accounts payable / Accrued liabilities / Income taxes payable

The carrying amount approximates fair value due to the short-term nature of the obligations.

Notes payable

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 are as follows:

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

2.

SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Income taxes

Income taxes are provided in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for 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 period in 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 statements of operations. All costs billed to the customer are included as revenue in the consolidated statements of operations.

Revenue recognition

The Company recognizes revenue from the sales of building supply products, industrial wood 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 by the provision of 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 and products sold and collection of the amounts is reasonably assured.

Recent accounting pronouncements

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 151, “Inventory Costs – an amendment of ARB No. 43, Chapter 4” (“SFAS No. 151”) which revised Accounting Research Bulletin No.43, “Restatement and Revision of Accounting Research Bulletins” (“ARB No. 43”) relating to inventory costs. This revision is to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage).  SFAS No. 151 requires that these items be recognized as a current period charge regardless of whether they meet the criterion specified in ARB No. 43 and requires the allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities.  SFAS No. 151 is effective for financial statements for fiscal years beginning after June 15, 2005.

 In December 2004, FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nonmonetary Assets – an amendment of APB Opinion No. 29” (“SFAS No. 153”) which amends Accounting Principles Board Opinion No. 29, “Accounting for Nonmonetary Transactions” to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance.  A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

2.           SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Recent accounting pronouncements, (cont’d…).

In December 2004, FASB issued Statement of Financial Accounting Standards No. 123R, “Share Based Payment” (“SFAS No. 123R”).  SFAS No. 123R supersedes APB 25 and its related implementation guidance by requiring entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions) and revises SFAS No. 123 as follows:

i)

Public entities are required to measure liabilities incurred to employees in share-based payment transactions at fair value and nonpublic entities may elect to measure their liabilities to employees incurred in share-based payment transactions at their intrinsic value whereas under SFAS No. 123, all share-based payment liabilities were measured at their intrinsic value.

ii)

Nonpublic entities are required to calculate fair value using an appropriate industry sector index for the expected volatility of its share price if it is not practicable to estimate the expected volatility of the entity’s share price.

iii)

Entities are required to estimate the number of instruments for which the requisite service is expected to be rendered as opposed to accounting for forfeitures as they occur.

iv)

Incremental compensation cost for a modification of the terms or conditions of an award is measured by comparing the fair value of the modified award with the fair value of the award immediately before the modification whereas SFAS No. 123 required that the effects of a modification be measured as the difference between the fair value of the modified award at the date it is granted and the award’s value immediately before the modification determined based on the shorter of (1) its remaining initially estimated expected life or (2) the expected life of the modified award.

SFAS No. 123R also clarifies and expands guidance in several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to reporting periods.  SFAS No. 123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS No. 123 as originally issued and Emerging Issues Task Force 96-18.  SFAS No. 123R also does not address the accounting for employee share ownership plans which are subject to Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans”.  Public entities (other than those filing as small business issuers) will be required to apply SFAS No. 123R as of the first interim or annual reporting period that begins after June 15, 2005.  Public entities that file as small business issuers will be required to apply SFAS No. 123R in the first interim or annual reporting period that begins after December 15, 2005.  For nonpublic entities, SFAS No. 123R must be applied as of the beginning of the first annual reporting period beginning after December 15, 2005.

The adoption of these new pronouncements are not expected to have a material effect on the Company's consolidated financial position or results of operations.

3.

INVENTORY

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

4.

NOTE RECEIVABLE

The note receivable is due on demand and bears interest at prime plus 1%.  The note was assumed from Greenwood Forest Products, Inc. (Greenwood) during the year ended August 31, 2003 in exchange for a note payable which is included in the notes payable balance as of February 28, 2005.

5.

PROPERTY, PLANT AND EQUIPMENT

In the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable and an estimate of future undiscounted 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.  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.

6.

DEFERRED INCOME TAXES

Deferred income taxes of $45,700 (August 31, 2004 - $45,700) relate principally to temporary differences between the accounting and tax treatment of income, expenses, reserves and depreciation.

7.

BANK INDEBTEDNESS

The bank indebtedness is secured by an assignment of accounts receivable and inventory.  Interest is calculated at either prime or the LIBOR rate plus 190 basis points  The weighted average interest rate for the period was 5.20% (2004 – 3.52%)

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

8.

NOTES PAYABLE

The notes are due to the former shareholders of Greenwood for the inventory purchases completed during the year ended August 31, 2003.  The amounts were converted from trade payable to notes payable during the year ended August 31, 2003.

Prior to the demand date, the Company has initiated legal action to resolve the balances due on the notes  (Note 11).

9.

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.

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 Toronto Stock Exchange ("TSX"), 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 favour 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.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

10.

STOCK OPTIONS  (cont’d…)

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.  

Proceeds received by the Company from exercise of stock options are credited to capital stock.

At February 28, 2005, employee incentive stock options were outstanding enabling the holders to acquire the following number of shares:

Following is a summary of the status of the plan:

Following is a summary of the status of options outstanding at February 28, 2005:

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

11.

CONTINGENT LIABILITIES AND COMMITMENTS

a)

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 Ltd.  During fiscal 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 is currently in dispute with the holders of the notes as to the final amounts owing and accordingly has recorded its estimate of the amounts owing based on information available to it as at February 28, 2005 and August 31, 2004.  In the event that resolution of the dispute results in a change to the promissory notes, any gain or loss will be recognized in the period that the final determination of the amount is made. However, any potential change is currently not determinable at this time.

b)

The Company leases office premises pursuant to an operating lease which expires in January 2006. For the six month periods ended February 28, 2005 and February 29, 2004, rental expense was $97,799 and $94,671 respectively.  The Company has extended this lease with a new expiration date of January 31, 2006.

Future minimum annual lease payments are as follows:

c)

At February 28, 2005, the Company had an un-utilized line-of-credit of approximately $2,850,000 (Note 7).

12.

SEGMENT INFORMATION

The Company has four principal reportable segments: the sale of lumber and building materials to home improvement centres in the United States; the processing and sale of industrial products to original equipment manufacturers in the United States; the sale of pneumatic air tools and industrial clamps in the United States; and the processing and sale of agricultural seeds in the United States.

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.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

12.

SEGMENT INFORMATION (cont'd…)

Following is a summary of segmented information for the periods ended February 28, 2005 and February 29, 2004:

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited - Prepared by Management)

FEBRUARY 28, 2005

12.

SEGMENT INFORMATION (cont'd…)

For the six month periods ended February 28, 2005 and February 29, 2004, the Company made sales of $5,138,610 (2004 - $3,806,247) to customers of the building materials segment which were in excess of 10% of total sales for the six month period.

13.

CONCENTRATIONS

Credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.  The Company places its cash and cash equivalents with high quality financial institutions and limits the amount of credit exposure with any one 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 February 28, 2005 and August 31, 2004, no customers accounted for accounts receivable greater than 10% of total accounts receivable.  The Company controls credit risk through credit approvals, credit limits, 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 period ended February 28, 2005, the Company had no suppliers that accounted for greater than 10% of total purchases.  For the period ended February 29, 2004, there were two suppliers totalling $4,119,619 and 2,946,034 that accounted for purchases greater than 10% of total purchases in the industrial wood products segment.

14.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

There were no significant non-cash transactions for the six month periods ended February 28, 2005 and February 29, 2004.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

These unaudited consolidated financial statements are those of Jewett-Cameron Trading Company Ltd. (the “Company” or “Jewett-Cameron”) and its wholly owned subsidiaries. In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments necessary to fairly state its financial position as of February 28, 2005 and August 31, 2004 and its results of operations and its cash flows for the three-month periods and the six-month periods ended February 28, 2005 and February 29, 2004 in conformity with US GAAP.  Operating results for the three-month period and the six-month period ended February 28, 2005 are not necessarily indicative of the results that may be experienced for the fiscal year ending August 31, 2005.

The Company’s number of days in receivables was approximately 31 days as at February 28, 2005 and at August 31, 2004 the number of days in receivables were 30.  

The Company’s number of days in inventory remained constant at 53 as at February 28, 2005 and 55 days as at August 31, 2004.  

RESULTS OF OPERATIONS

Jewett Cameron’s operations are classified into four principal industry segments: the sale of lumber and building materials to home improvement centers in the United States; the processing and sale of industrial products to original equipment manufacturers in the United States; the sale of pneumatic air tools and industrial clamps in the United States; and, the processing and sale of agricultural seeds in the United States. Sales of building materials have traditionally consisted of wholesale sales of lumber and building materials in the United States. This has transitioned to include both wood and non-wood items.  Sales in this category are attributable to Jewett Cameron Lumber Corporation, a wholly owned subsidiary of the Company, and consist primarily of lumber and building materials such as decking materials, fencing materials, lattice work, arbors, garden seats, green houses, dog kennels, outdoor umbrellas, etc. These sales occur year-round; however, they are greater in the spring and summer months. Sales and processing of industrial products to original equipment manufacturers consist of wholesale sales of products primarily to the transportation and recreational boating industries in the United States. Sales in this category are attributable to Greenwood Products, Inc. (“Greenwood Products”) , a wholly owned subsidiary of Jewett Cameron Lumber Corporation. Approximately 50% of Greenwood Product s’ sales are attributable to the recreational boating industry and are generally stronger during the spring and summer months. Sales of pneumatic air tools and industrial clamps consist of the distribution of pneumatic air tools and industrial clamps in the United States. Sales in this category are attributable to MSI-PRO Co., a wholly owned subsidiary of Jewett Cameron Lumber Corporation.   The processing and sale of agricultural seeds consists of the storage, processing and distribution of processed agricultural seeds and grain in the United States. Sales in this category are attributable to Jewett Cameron Seed Company, a wholly owned subsidiary of Jewett Cameron Lumber Corporation. Harvest months in the Northwest are June through September, and consequently, a greater portion of the revenues attributable to Jewett Cameron Seed Company occurs during this time of year. The Company’s major distribution centers are located in North Plains, Oregon and Ogden, Utah.

Three Months Ended February 28, 2005 and February 29, 2004

For the second quarter ended February 28, 2005, sales increased 15% to $19,344,565 compared to $16,859,686 for the same quarter of the previous fiscal year.

The principal reason for the 15% increase in sales was primarily the result of continuing the changes including the introduction of new product lines in the area of lumber and building material sales. The Company also continued with the changes which were instigated during the year ended August 31, 2003 , includ ing the reorganizations at Jewett Cameron Seed Company; and, higher prices of the products sold through Greenwood Products. The higher prices of the products sold through Greenwood Products is a direct result of higher raw material costs for these items. The new products introduced through Jewett Cameron Lumber Company included dog kennels; outdoor gates; mobile outdoor umbrellas; green houses; and, storage buildings. The reorganization at Jewett Cameron Seed Company consisted of some changes in staff responsibilities and a reduction in line management.

Cost of sales accounted for 87% of sales for the second quarter of the current fiscal year compared to 90% for the second quarter of the prior fiscal year, a decrease of 3%.  The decrease was primarily attributed to higher margins for the products included in the category of lumber and building materials.  The newer products, described above, also carried higher margins.          

Operating expenses accounted for 12% of sales for the second quarter of the current fiscal year compared to 10% for the second quarter of the last fiscal year, an increase of 2%.  The increase was primarily due to the increase in wages and employee benefits proportionately to sales resulting from the reorganization changes described earlier. General and administrative expenses for the Company were $555,14 5 for the second quarter of the current fiscal year , which was lower by $211,08 6 than the general and administrative expenses of $766,231 for the second quarter of the last fiscal year.  Management believes that with the current organizational structure, general and administrative expenses will remain constant at slightly under $600,000 per quarter.

The net income for the second quarter of the current fiscal year was $104,624 compared to a net loss experienced by the Company during the second fiscal quarter of the last fiscal year in the amount of ($43,840).  The increase in net income was due primarily to higher sales and higher profit margins in both the industrial wood products segment of the business and the lumber and building materials segment of the business.  The improved financial results came about because in the prior financial reporting periods the Company was introducing new products to the market. In some cases, the Company was entering into markets where previously they had not been active. These actions required sales costs, including free samples and price discounting, which are no longer necessary. The elimination of these costs increased sales margins  

The diluted earnings per share was $0.07 for the second fiscal quarter of Fiscal 2005 compared to a diluted loss per share of ($0.03) for the second fiscal quarter of Fiscal 2004.

Six Months Ended February 28, 2005 and February 29, 2004

For the first six months of the current fiscal year, ended February 28, 2005, sales increased 16% to $37,485,055 compared to $32,365,737 for the same fiscal period of the previous fiscal year.

The principal reason for the 16% increase in sales was the result of continuing the changes, which were instigated during Fiscal 2003. These changes included the introduction of new products in the area of lumber and building material sales; reorganizations at Jewett Cameron Seed Company; and, higher prices of the products sold through Greenwood Products. The higher prices of the products sold through Greenwood Products is a direct result of higher raw material costs for these items. The new products introduced through Jewett Cameron Lumber Company included dog kennels; outdoor gates; mobile outdoor umbrellas; green houses; and, storage buildings. The reorganization at Jewett Cameron Seed Company consisted of some changes in staff responsibilities and a reduction in line management.

Sales of lumber and materials were $5,707,065 for the first six months, an increase of 17% compared to sales of $4,894,952 for the first six months of the last fiscal last year. Management attributes this increase to the Company’s continuing shift towards additional product lines including such as dog kennels, metal fencing and other products.  

Revenue from the sales of industrial wood products was $28,641,150 for the first six months, an increase of 19% compared to revenues of $23,970,907 for the first six months of last year.

Sales of pneumatic tools and industrial clamps were $558,507 for the first six months compared to $475,323 for the first six months of the last fiscal year, an increase of 17.5%. The efforts of the sales staff, hired during Fiscal 2003, continue to result in the stronger sales evidenced during the first six months of Fiscal 2005.

Sales of processed seeds and grain were $2,578,333 for the first six months compared to $3,024,555 for the first six months of the last fiscal year, a decrease of 15%. The sales of processed seeds and grain are accomplished through the activities of Jewett Cameron Seed Company, which is a wholly owned subsidiary of Jewett Cameron Lumber Company.  The decrease in sales, which occurred in the first six months of Fiscal 2005 as compared to the first six months of Fiscal 2004, was due primarily to normal seasonal fluctuations.

Cost of sales accounted for 87% of sales for the first six months compared to 88% for the first six months of the prior fiscal year, a decrease of 1%.               

Operating expenses accounted for 12% of sales for the first six months compared to 11% for the first six months of the last fiscal year, an increase of 1%.  The increase was primarily due to the increase in wages and employee benefits proportionately to sales. This increase resulted from the inclusion of independent sales representatives in this category that were accounted for in the past as a general sales expense.  General and administrative expenses for the Company were $1,151,749 for the first six months, which was lower by $212,921 than the general and administrative expenses of $1,364,670 for the first six months of the last fiscal year.  Management believes that with the current organizational structure, general and administrative expenses will remain constant at slightly under $600,000 per quarter.

The net income for the six months ended February 28, 2005 was $272,459, which represents a 530% increase over the first six months of the last fiscal year when the Company had net income in the amount of $51,095.  The increase in net income was due primarily to higher sales and higher profit margins in both the industrial wood products segment of the business and the lumber and building materials segment of the business.  The reasons for the increases are identical to those disclosed earlier in RESULTS OF OPERATIONS, Three Months Ended February 28, 2005 and February 29, 2004.

The diluted earnings per share was $0.18 for the first six months of Fiscal 2005 compared to diluted earnings per share of $0.03 for the first six months of Fiscal 2004.

LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 2005 , the Company had working capital of $5,958,603, which represented an increase of $411,619 as compared to the working capital position of $5,546,984 as of August 31, 2004.  The primary reason for the increase in working capital was an increase in cash and cash equivalents in the amount of $856,709. Accounts receivable also increased in the amount of $1,401,191. Prepaid expenses increased from $123,890 at August 31, 2004 to $190,070 at February 28, 2005. The increase in the working capital result ing from the 15% increase in sales also decrease d bank indebtedness in the amount of  $1,296,680.  The higher revenues and the resultant increase in liquidity allowed the Company to reduce its bank borrowing. The greater sales activity did result in an increase in accounts payable at February 28, 2005 in the amount of $3,165,996 as compared to accounts payable in the amount of $2,375,785 at August 31, 2004.

Accounts receivable and inventory represented 92% of current assets and both continue to turn over at acceptable rates.

External sources of liquidity include a bank line from the United States National Bank of Oregon.  The total line of credit available is $8.0 million of which there was an outstanding balance on February 28, 2005 of $4,952,872 and an outstanding balance as of August 31, 2004 of $6,249,552.

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 during the remainder of the current fiscal year.

Business Risks

This quarterly report includes “forward–looking statements” as that term is defined in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “anticipates,” or “hopeful,” or the negative of those terms or other comparable terminology, or by discussions of strategy, plans or intentions. For example, this section contains numerous forward-looking statements.  All forward-looking statements in this report are made based on management’s current expectations and estimates, which involve risks and uncertainties, including those described in the following paragraphs.

•

Demand for company products may change;

•

Production time and the overall cost of products could increase if any of the primary suppliers are lost or if any primary supplier increased the prices of products;

•

Fluctuations in quarterly and annual operating results may make it difficult to predict future performance;

•

Shareholders could experience significant dilution;

•

The Company could lose its significant customers;

•

The Company could experience delays in the delivery of its products;

•

A loss of the bank credit agreement could impact future liquidity;

•

The limited daily trading volume of the Company’s common stock could make it difficult for investors to purchase additional shares or sell currently held shares.

Demand for Company products may change:

In the past the Company has experienced decreasing annual sales in the areas of lumber and building materials and industrial tools. The reasons for this can be generally attributed to worldwide economic conditions, specifically those pertaining to lumber prices; demand for industrial tools; and, consumer interest rates. If economic conditions continue to worsen or if consumer preferences change, the Company could experience a significant decrease in profitability.

Production time and the overall cost of products could increase if any of the primary suppliers are lost or if a primary supplier increased the prices of raw materials:

The Company’s manufacturing operation, which consists of cutting fencing material to specific sizes and shapes, depends upon obtaining adequate supplies of lumber on a timely basis. The results of operations could be adversely affected if adequate supplies of raw materials cannot be obtained in a timely manner or if the costs of lumber increased significantly.

Fluctuations in quarterly and annual operating results may make it difficult to predict future performance:

Quarterly and annual operating results could fluctuate in the future due to a variety of factors, some of which are beyond management’s control. As a result of quarterly fluctuations, it is important to realize quarter-to-quarter comparisons of operating results are not necessarily meaningful and should not be relied upon as indicators of future performance.

Shareholders could experience significant dilution:

The Company is authorized to issue up to 10,000,000 shares of preferred stock, without par value per share.  As of the date of this report, no shares of preferred stock have been issued.  The Company’s preferred stock may bear such rights and preferences, including dividend and liquidation preferences, as the board of directors may fix and determine from time to time.  Any such preferences may operate to the detriment of the rights of the holders of the common stock and would cause dilution to these shareholders.

The Company could lose its significant customers:

The top ten customers of the Company represent 49% of its business.  The Company would experience a significantly adverse effect if these customers were lost and could not be replaced.

The Company could experience delays in the delivery of its products:

The Company purchases its products from other vendors and a delay in shipment from these vendors to the Company could cause significant delays in delivery to the Company’s customers. This could result in a decrease in sales orders to the Company.

A loss of the bank credit agreement could impact future liquidity:

The Company currently maintains a line of credit with U.S. Bank in the amount of $8 million. A loss of this credit line could have a significantly adverse effect on the liquidity of the Company.

The limited daily trading volume of the Company’s common stock could make it difficult for investors to purchase additional shares or sell currently held shares in the open market:

The shares of the Company currently trade within the NASDAQ system in the United States and on the Toronto Stock Exchange in Canada. The average daily trading volume of the Company’s common stock is 500 shares within the NASDAQ system and significantly less on the Toronto Stock Exchange.  With this limited trading volume investors could find it difficult to purchase or sell the Company’s common stock.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Company did not have any derivative financial instruments as of February 28, 2005.  However, the Company is exposed to interest rate risk.

The Company’s interest income and expense are most sensitive to changes in the general level of U.S. interest rates.  In this regard, changes in U.S. interest rates affect the interest earned on the Company’s cash equivalents as well as interest paid on debt.

The Company has a line of credit whose interest rate is based on various 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

Management does not expect foreign currency exchange rates to significantly impact the Company in the future as all of the Company’s business operations are in the United States.

Item 4.  Controls and Procedures

a)

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14 (c) promulgated under the Securities Exchange Act of 1934, as amended, within 90 days of the filing date of this amended report.  Based on their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective.

b)

There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph a) above.

Part II – OTHER INFORMATION

Item 1.

 Legal Proceedings

---No Disclosure Required---

Item 2.

  Unregstered Sales of Equity in Securities and Use of Proceeds

---No Disclosure Required---

Item 3.

 Defaults Upon Senior Securities

---No Disclosure Required---       

Item 4.

 Submission of Matters to a Vote of Securities Holders

---No Disclosure Required---

Item 5.  Other Information

---No Disclosure Required---

Item 6.  Exhibits

SIGNATURES

Pursuant to the requirements 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.

Jewett-Cameron Trading Company Ltd.

(Registrant)

Dated: April 13, 2005

        /s/  Donald M. Boone

  Donald M. Boone, President/CEO/Director

Dated: Apirl 13, 2005                                /s/  Michael C. Nasser

                                                                        Michael C. Nasser, Corporate Secretary