Jewett-Cameron Trading Company, Ltd.

views updated

Jewett-Cameron Trading Company, Ltd.

32275 Northwest Hillcrest
North Plains, Oregon 97133
U.S.A .
Telephone: (503) 647-0110
Fax: (503) 647-2272
Web site: http://www.jewettcameron.com

Public Company
Incorporated: 1953 as Jewett-Cameron Lumber Company
Employees: 59
Sales: $76.1 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: JCTCF
NAIC: 444190 Other Building Material Dealers

ORIGINS

EXPANSION AND AVOIDING A CRISIS

ACQUISITIONS

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

ORIGINS

When Jewett-Cameron Trading celebrated its 50th anniversary in 2003, the company was enjoying the greatest financial growth in history, having nearly doubled its annual sales the previous year. For years, however, the company led an anonymous existence without any display of financial vibrancy, operating as a small lumber wholesaler based in Portland, Oregon. The company was founded in September 1953 as Jewett-Cameron Lumber Company, and maintained its low profile for precisely 31 years. In September 1984, the original owners of the wholesale business sold it to a group of investors, two of whom, Donald M. Boone and Michael C. Nasser, would take an active role in running the company for the decades to come. The intervention of Boone and Nasser injected Jewett-Cameron Lumber with ambition, giving birth to Jewett-Cameron Trading and a new era in which the Portland company would play a more prominent role in the building materials distribution business.

Veterans of the forest products industry, Boone and Nasser possessed the managerial skill to lead Jewett-Cameron Lumber toward distinction. Before purchasing Jewett-Cameron Lumber, the pair had spent a decade transforming Sunrise Forest Products from a start-up enterprise into a $100 million-in-sales company. When they left Sunrise Forest in 1984, Boone and Nasser were ready to lend their talents to promoting the growth of Jewett-Cameron Lumber, with Boone assuming the duties of chief executive officer and president and Nasser taking on the role of corporate secretary. Boone’s first significant action brought Jewett-Cameron Lumber into a new business area, one that would provide a modest stream of revenue for decades to come. In early 1986, Jewett-Cameron Lumber acquired Material Supply International, an importer and distributor of pneumatic air tools and industrial clamps. Material Supply became the first of more than a handful of operating subsidiaries that Boone presided over, and in mid-1987 he formed the entity that would control the operating subsidiaries, Jewett-Cameron Trading Company, Ltd. A holding company incorporated in British Columbia, Canada, but domiciled in North Plains, Oregon, Jewett-Cameron Trading would serve as Boone’s vehicle for growth, operating as the owner of Jewett-Cameron Lumber, Material Supply, and the other wholly owned subsidiaries that would join the fold in the years to come.

Not long after the holding company was formed, Boone’s aggressive approach to expansion was on display. The Jewett-Cameron enterprise, after more than three decades of limiting its activities to the Portland area, entered the Kingdom of Tonga as the 1990s began. In 1990, Jewett-Cameron South Pacific Ltd. was formed as a subsidiary to enter the island nation’s building materials market, which served the 100,000 Tongans who relied almost entirely on imported goods for their needs. There was a steady demand for building materials in Tonga for remodeling projects and the construction of new homes, commercial buildings, and churches. Jewett-Cameron South Pacific met the demand by importing finished lumber, plywood, and hardboard from the United States. The subsidiary also sold cement, roofing materials, rebar, windows, doors, plumbing fixtures, and floor tile, obtaining the products from suppliers in Fiji, New Zealand, and Australia. Jewett-Cameron South Pacific’s operations grew to comprise three retail building material yards located on separate islands in Tonga before Boone made the strategic decision to exit the country.

During the second half of the 1990s, competition intensified, particularly among local contractors and individual homebuilders, who benefited from favorable customs treatment and began importing their own building materials. Further, in 1998 Tongan currency was devalued substantially in relationship to U.S. currency, causing a major currency translation loss for the subsidiary. After watching sales fall during the latter half of the decade, Boone decided in 1999 to liquidate Jewett-Cameron South Pacific’s inventory and shutter operations in Tonga.

EXPANSION AND AVOIDING A CRISIS

On the domestic front, Boone expanded Jewett-Cameron Trading’s operations during the 1990s, shaping the company into a supplier to home improvement chains. Jewett-Cameron Trading distinguished itself from competitors by supplying hard-to-handle products to retail giants such as The Home Depot, Inc., Fred Meyer, Inc., and Eagle Hardware & Garden, who preferred turning to Jewett-Cameron Trading rather than using their own internal distribution systems for certain products. During the 1990s, Boone established the framework that would enable the company to excel as the “nanny to the big-box retailers,” as he referred to his company years later in a November 24, 2006, interview with the Portland Business Journal. In 1994, he purchased a 25,000-square-foot distribution facility in Ogden, Utah, which the company used to serve customers in Utah, Colorado, Wyoming, Montana, Idaho, and Nevada. The following year, construction was completed on a distribution center and headquarters facility in North Plains, Oregon, 20 miles west of Portland. The complex consisted of 40,000 square feet of warehouse, office, and manufacturing space, which was used to serve a territory stretching from Alaska to northern California.

COMPANY PERSPECTIVES

At Jewett Cameron, our goal is simple: remain the industry leader by delivering high quality, high value products to customers. The Jewett Cameron Lumber Corporation, a wholly owned subsidiary, focuses on home improvement products. Recent acquisitions have diversified our product lines and provide higher quality for customers in new markets. New product families include premiere dog kennels (AKC licensed), sturdy outdoor gate systems, flexible-use greenhouses and multi-purpose storage buildings.

The merchandise handled by Jewett-Cameron’s distribution network included a variety of value-added products desired by home improvement stores. Through Jewett-Cameron Lumber, the company supplied a mix of widths, heights, textures, and species of fencing. Residential decking materials included a range of widths, lengths, and species of treated and stained products, as well as accessories such as railings and step risers. The company supplied stained, painted, vinyl, and natural panels used for latticework, garden timbers, gates, arbors, and dog kennels. Dimension lumber, plywood, and pine shelving rounded out the company’s product categories, giving Boone a broad selection of merchandise to offer to his retail customers.

The first full decade of Boone’s control over the Jewett-Cameron enterprise included several other notable events, with one standing out in particular. In 1994, he formed a joint venture, Ningbo Jewett-Cameron Air Tool Co. Ltd., that provided entry into the People’s Republic of China. Jewett-Cameron Trading held a 62 percent interest in the joint venture, which operated as a trading company that purchased tools in China and as a manufacturer of air tools for export to North America and Europe. In early 1996, he rebranded Material Supply, the importer and distributor of pneumatic air tools and industrial clamps, as MSIPRO Co., a move designed to improve the marketing appeal of the subsidiary’s products.

Easily the most significant event during the 1990s occurred midway through the decade, as Boone and his team were confronted with an enormous problem that threatened to devastate the company. In early 1996, Boone and senior executives became aware their most important customer was suffering from financial difficulties. Ernst Home and Garden Centers, a retail chain based in Seattle, Washington, was struggling, reeling from merchandising problems and poor management. The chain, which would declare bankruptcy before the end of 1996, accounted for 52 percent of Jewett-Cameron Trading’s $31.8 million in revenue in 1995. Its demise promised to deliver a staggering blow to Boone’s business, but he moved quickly to mitigate the damage, suspending standard credit terms with the chain in April 1996 and brokering deals with other home improvement chains to compensate for the substantial loss in business. Jewett-Cameron Lumber recorded a 19 percent decline in sales in 1996 because of the collapse of Ernst, but the financial toll could have been much worse. “They had shifted Ernst, very quickly, to an all-cash basis and started to diversify away,” an analyst said in a February 26, 1999, interview with Business Journal-Portland. “They did a fantastic job in replacing that business.”

KEY DATES

1953:: Jewett-Cameron Lumber Company is founded as a lumber wholesaler in Portland, Oregon.
1984:: The original owners of the wholesale business sell their company to a group of investors who include Donald M. Boone and Michael C. Nasser.
1986:: Material Supply International, an importer and distributor of pneumatic air tools and industrial clamps, is acquired.
1987:: Jewett-Cameron Trading Company, Ltd., incorporated in British Columbia, Canada, is formed as a holding company for Material Supply and the lumber wholesale business.
1990:: The company begins distributing building materials in the Kingdom of Tonga.
1994:: A distribution facility in Ogden, Utah, is acquired.
1995:: Construction of a headquarters facility and distribution center in North Plains, Oregon, is completed.
1996:: Material Supply is renamed MSI-PRO Co.
1999:: Jewett-Cameron Trading closes its operations in Tonga.
2000:: The acquisition of Agrobiotech Inc. marks the company’s entry into the grain and seed processing business.
2002:: The purchase of Greenwood Forest Products,Inc., nearly doubles annual sales, adding product lines that serve the marine industry.
2004:: DGI Worldwide, Inc., is purchased, adding a number of outdoor products and an offshore manufacturing facility to Jewett-Cameron Trading’s holdings.
2007:: Jewett-Cameron Trading announces more than 900 PetSmart stores will carry the company’s line of dog kennels.

ACQUISITIONS

By the end of the 1990s, having survived the crucible of Ernst’s bankruptcy, Boone stood as a respected chief executive officer of a company that excelled in the distribution business. Boone wanted more, however, expressing a desire to expand geographically and to diversify. Jewett-Cameron Trading generated $29.1 million in revenue in 1999, essentially the same volume of business the company had been producing throughout much of the 1990s. Aside from the roughly $1 million in sales derived from MSI-PRO Co., the company was reliant on Jewett-Cameron Lumber for its living, an overdependence that Boone wanted to change by acquiring other businesses. Acquisitions offered Boone a chance to achieve growth and to diversify in one stroke, but his efforts to find suitable acquisition candidates at a suitable price had failed. Boone had tried to acquire several companies during the late 1990s, but the deals fell through for a variety of reasons. “We’ve dated long enough to get under the covers and peek,” Boone said in a February 26, 1999, interview with Business Journal-Portland, referring to his parried advances on the acquisition front. Prospective acquisition candidates, Boone explained, were demanding premium prices for their businesses, putting the chief executive officer of a company that served the retail industry in the odd position of wishing for an economic slump to drive down asking prices of the businesses he wanted to acquire. As Jewett-Cameron Trading entered the 21st century, Boone’s wish came true. The economy faltered and Boone struck out on the acquisition trail, completing deals that quickly elevated his company’s stature.

Jewett-Cameron’s designation as a holding company was not put to full use until Boone began adding subsidiary companies in the years leading up to the 50th anniversary of the Jewett-Cameron name. In October 2000, Boone formed Jewett-Cameron Seed Company to control assets he acquired from Agrobiotech Inc., a purchase that moved the building materials distributor and industrial tools importer and distributor into the entirely new field of grain and seed processing. In the deal, Boone acquired more than 13 acres of land in Hillsboro, Oregon, and 105,000 square feet of buildings, stock, and equipment, assets that would generate $1.8 million in revenue in 2001 and $2.6 million in revenue in 2002. The acquisition added a business whose financial power only slightly bettered that of MSI-PRO, a welcomed addition but relatively insignificant when considered as part of Jewett-Cameron Trading’s total volume.

His next deal was decidedly more significant. In February 2002, Greenwood Products Inc. was incorporated as a new Jewett-Cameron Trading subsidiary to manage the acquisition by Jewett-Cameron Lumber of Greenwood Forest Products, Inc. The addition of Portland-based Greenwood Forest Products provided a tremendous boost to Jewett-Cameron Trading’s financial stature, enabling the company to nearly double its sales total in 2002. The acquisition also exposed Boone’s company to new markets. “The heart and soul of [Greenwood Forest Product’s] business has been treated panels for original equipment manufacturers and for industrial applications,” Boone explained in a May 25, 2002, interview with the Portland Business Journal. Nearly half of the company’s sales were derived from the marine industry, primarily from boat makers who used the treated panels because they resisted corrosion from salt. Greenwood Forest Products also sold its panels to manufacturers of buses and light-rail cars who needed panels that resisted rotting from salt spread on the road during snowy weather, deriving roughly 15 percent of its sales from such customers.

Boone celebrated the 20th anniversary of his investment in Jewett-Cameron Lumber by completing his third acquisition in four years. In early 2004, he purchased DGI Worldwide, Inc., taking another important step toward shaping Jewett-Cameron Trading into a diversified holding company. The acquisition included DGI’s outdoor products division and its offshore manufacturing facility, which expanded Jewett-Cameron Trading’s product portfolio substantially. New products gained from the deal included the Lucky Dog and AKC Licensed brands of kennels and runs, Weatherguard shelters and greenhouses, Perimeter Patrol fencing, and Adjust-A-Gate.

Boone’s acquisition spree created a much larger, more diverse enterprise, fueling the company’s financial growth as it prepared for its second half-century of business. By 2006, the company’s earnings had increased nearly 700 percent during the previous three years. Sales had increased robustly as well, driven upwards by the addition of the Greenwood Products subsidiary. Jewett-Cameron Trading generated $76 million in revenue in 2006, more than twice the total recorded before Boone embarked on his buying spree, deriving $49 million from the sale of the industrial wood products sold by Greenwood Products. The foray into grain and seed processing had realized significant growth as well, contributing $5.6 million to Jewett-Cameron Trading’s revenue total in 2006. “I haven’t found anything that can outperform Jewett-Cameron,” a securities broker remarked in a November 24, 2006, interview with the Portland Business Journal. “I have enough confidence in Jewett-Cameron to get in a motor home and leave and not worry about my investment.”