Sales Performance - Sales increased by 10% in the current fiscal second quarter compared to the second quarter of fiscal 2024, driven by strength in fencing products, particularly Lifetime Steel Posts®[104] - Sales for the three months ended February 28, 2025, were $9,054,951, an increase of $825,759, or 10% compared to the same period last year[120] - Sales at JCC rose to $7,943,319 for the three months ended February 28, 2025, representing an increase of $559,354, or 8%[121] - Sales at Greenwood increased by $287,559, or 35%, to $1,111,632 for the three months ended February 28, 2025[122] - Sales for the six months ended February 28, 2025, were $18,321,951, an increase of $286,918, or 2% compared to the prior year[128] Product Development and Launches - The Adjust-A-Gate® Unlimited, a fully adjustable complete gate kit, was launched in December, enhancing the fencing product line[107] - MyEcoWorld® secured its first grocery store placement with the launch of Pet Waste Bags into 59 Tops Friendly Markets across the Northeast[110] - The company has successfully installed new in-store displayers for Lifetime Steel Posts® in 334 Home Depot and Lowe's stores, exceeding the original goal of 300 installations[105] - The company anticipates replenishment orders for in-store displayers during the second half of fiscal 2025 as initial supplies are sold through[106] Financial Performance - Gross margin for the three months ended February 28, 2025, was 20.1%, down from 25.1% in the prior year due to a less favorable product mix and higher logistics costs[124] - Operating expenses decreased by $205,008 to $2,586,195 compared to the same quarter last year, primarily due to lower wages and employee benefits[125] - Net loss for the quarter ended February 28, 2025, was ($573,094), or ($0.16) per share, compared to a net loss of ($534,145), or ($0.15) per share, for the same period last year[127] - Gross margin for the six-month period ended February 28, 2025, was 19.2%, down from 22.3% in the prior year[133] - Net loss for the six months ended February 28, 2025, was ($1,231,811), or ($0.35) per share, compared to net income of $757,395, or $0.22 per share, for the same period last year[137] Inventory and Working Capital - Pet product inventory has decreased by 17% year-over-year from February 2024 and nearly 60% from February 2023, reflecting efforts to reduce overall inventory levels[109] - As of February 28, 2025, the company had working capital of $19,086,483, a decrease of $1,461,610 from the previous period[138] - As of February 28, 2025, accounts receivable and inventory represented 89% of current assets and 74% of total assets, up from 73% and 61% respectively as of August 31, 2024[141] - The accounts receivable collection period (DSO) increased to 55 days for the three months ended February 28, 2025, compared to 52 days for the same period in 2024; inventory turnover improved to 175 days from 258 days[142] Competition and Market Conditions - The company is facing significant competition, which could reduce demand for its products and impact revenue and profitability[163] - Tariff rates on steel products imported from China reached 70% as of March 2025, due to a combination of existing tariffs and new rates imposed by the U.S. government[148] - The company is shifting to suppliers outside of China to mitigate tariff impacts, but faces uncertainty regarding the interpretation and applicability of new tariffs[149] - Inflation has led to increased costs for raw materials, energy, and logistics, negatively affecting gross margins; the company expects continued pressure on margins in fiscal 2025[150] Financing and Credit - The company has drawn approximately $3,000,000 against its asset-based line of credit to fund inventory purchases ahead of the busy Spring and Summer sales season[143] - The interest rate on the current line of credit rose to approximately 12.25% as of March 2025, following an increase in the Prime Interest Rate from 3.25% in January 2022 to about 7.50% in February 2025[151] - The company has a line of credit with a maximum draw amount of $6,000,000, which is set to expire on June 30, 2025[171] - The company is exposed to interest rate risk as its interest expense is computed at the prime rate plus 4.75%, with a floor of 11%[179] Compliance and Risk Management - The company has committed to ensuring compliance with the Uyghur Forced Labor Prevention Act, ensuring that none of its products are sourced from regions associated with forced labor[157] - The company faces risks related to product liability claims, which could have a material negative effect on its financial condition[170] - The company operates primarily in the U.S., but may experience foreign currency risk as it expands international sales[181] - The company relies on its intellectual property rights, and any infringement could lead to significant litigation costs[169] - The company has completed a management assessment of internal controls and did not identify any material weaknesses or significant deficiencies[173] Operational Changes - The company ended regular operations at JCSC effective August 31, 2023, and is currently working to sell the remaining equipment and property[91] - The company is exploring options to optimize importing Sugi Cedar from Asia to improve margins and offer competitive pricing[108] - The company's outdoor product sales are highly seasonal, with the majority of revenues occurring during the third and fourth quarters of the fiscal year[168]
Jewett-Cameron Trading Co Ltd(JCTC) - 2025 Q2 - Quarterly Report