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Parthenon LLC Delivers Open Letter to the Jewett-Cameron (NASDAQ: JCTCF) Board of Directors

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Parthenon , a major shareholder of Jewett-Cameron Trading Company (NASDAQ: JCTCF), has issued an open letter to the company's board expressing serious concerns about its performance and future viability. The letter highlights:

1. Poor stock performance: -46.3% over 5 years vs. Russell 2000 +62.4%
2. Declining profitability: EBITDA dropped from $4M average to negative $1.2M
3. Operational challenges: Supply chain risks, pricing power, growing competition
4. High-cost debt: New credit line at prime rate + 4.75% (13.25% total)
5. Lack of insider ownership: Less than 1% owned by insiders, no purchases in 10 years

Parthenon urges the board to explore strategic alternatives, including a potential sale, to maximize shareholder value.

Parthenon, un azionista di maggioranza della Jewett-Cameron Trading Company (NASDAQ: JCTCF), ha inviato una lettera aperta al consiglio di amministrazione dell'azienda esprimendo serie preoccupazioni riguardo le sue performance e la futura sostenibilità. La lettera evidenzia:

1. Scarsa performance delle azioni: -46,3% in 5 anni rispetto al Russell 2000 +62,4%
2. Profittabilità in calo: l'EBITDA è passato da una media di 4 milioni di dollari a -1,2 milioni di dollari
3. Problemi operativi: rischi nella catena di fornitura, potere di prezzo, crescente concorrenza
4. Debito ad alto costo: nuova linea di credito al tasso prime + 4,75% (totalmente 13,25%)
5. Mancanza di proprietà interna: meno dell'1% posseduto da insider, nessun acquisto negli ultimi 10 anni

Parthenon esorta il consiglio a esplorare alternative strategiche, incluso una possibile vendita, per massimizzare il valore per gli azionisti.

Parthenon, un accionista mayoritario de la Jewett-Cameron Trading Company (NASDAQ: JCTCF), ha emitido una carta abierta al consejo de la empresa expresando serias preocupaciones sobre su rendimiento y viabilidad futura. La carta destaca:

1. Pobre rendimiento de las acciones: -46.3% en 5 años frente a Russell 2000 +62.4%
2. Caída de la rentabilidad: el EBITDA cayó de un promedio de $4M a -$1.2M
3. Desafíos operativos: riesgos en la cadena de suministro, poder de fijación de precios, creciente competencia
4. Deuda de alto costo: nueva línea de crédito al tipo de interés preferencial + 4.75% (13.25% en total)
5. Falta de propiedad interna: menos del 1% de propiedad por insiders, sin compras en 10 años

Parthenon insta al consejo a explorar alternativas estratégicas, incluida una posible venta, para maximizar el valor para los accionistas.

Parthenon은 Jewett-Cameron Trading Company (NASDAQ: JCTCF)의 주요 주주로, 회사의 이사회에 성과와 미래 지속 가능성에 대한 심각한 우려를 표현하는 공개 서한을 발송했습니다. 서한의 요점은 다음과 같습니다:

1. 주식 성과 부진: 5년 동안 -46.3% 대 Russell 2000 +62.4%
2. 수익성 감소: EBITDA가 평균 400만 달러에서 -120만 달러로 감소
3. 운영상의 도전 과제: 공급망 위험, 가격 결정력, 증가하는 경쟁
4. 높은 비용의 부채: 프라임 금리 + 4.75%의 새로운 신용 한도 (13.25% 총)
5. 내부 소유 부족: 1% 미만이 내부자 소유, 10년 동안 구매 없음

Parthenon은 주주 가치를 극대화하기 위해 가능한 매각을 포함한 전략적 대안을 탐색할 것을 이사회에 촉구합니다.

Parthenon, un actionnaire majoritaire de la Jewett-Cameron Trading Company (NASDAQ: JCTCF), a envoyé une lettre ouverte au conseil de l'entreprise exprimant de sérieuses préoccupations concernant sa performance et sa viabilité future. La lettre met en évidence :

1. Mauvaise performance des actions : -46,3 % sur 5 ans contre Russell 2000 +62,4 %
2. Rentabilité en déclin : l'EBITDA est tombé de 4 millions de dollars en moyenne à -1,2 million de dollars
3. Défis opérationnels : risques liés à la chaîne d'approvisionnement, pouvoir de fixation des prix, concurrence croissante
4. Dettes coûteuses : nouvelle ligne de crédit au taux préférentiel + 4,75% (13,25% au total)
5. Absence de propriété interne : moins de 1 % détenu par des initiés, aucun achat depuis 10 ans

Parthenon exhorte le conseil à explorer des alternatives stratégiques, y compris une vente potentielle, pour maximiser la valeur des actionnaires.

Parthenon, ein Mehrheitsaktionär der Jewett-Cameron Trading Company (NASDAQ: JCTCF), hat einen offenen Brief an den Vorstand des Unternehmens geschickt, in dem er ernsthafte Bedenken hinsichtlich der Leistung und zukünftigen Lebensfähigkeit äußert. Der Brief hebt hervor:

1. Schlechte Aktienperformance: -46,3% über 5 Jahre im Vergleich zum Russell 2000 +62,4%
2. Sinkende Rentabilität: EBITDA sank von durchschnittlich 4 Millionen USD auf negative 1,2 Millionen USD
3. Betriebliche Herausforderungen: Risiken in der Lieferkette, Preissetzungsmacht, wachsende Konkurrenz
4. Hochverzinsliche Schulden: neue Kreditlinie zu prime rate + 4,75% (insgesamt 13,25%)
5. Fehlende Insiderbesitz: weniger als 1% vom Management gehalten, keine Käufe in 10 Jahren

Parthenon fordert den Vorstand auf, strategische Alternativen zu prüfen, einschließlich eines möglichen Verkaufs, um den Wert für die Aktionäre zu maximieren.

Positive
  • Jewett-Cameron's branded pet containment, area fencing, and wood panel products could have value above current market valuation to a potential buyer
  • Company-owned real estate could be valuable in a potential sale
  • Potential for large expense synergies if acquired by a larger company
Negative
  • Stock price declined 46.3% over past 5 years, underperforming Russell 2000 index
  • EBITDA dropped from $4 million average to negative $1.2 million in recent quarters
  • High-cost debt with new credit line at prime rate plus 4.75% (13.25% total)
  • Insiders own less than 1% of outstanding stock, with no insider purchases in 10 years
  • Operational challenges including supply chain risks, pricing power, and growing competition
  • Few successful new product line extensions over the past decade
  • Expected marginal profitability (if any) for fiscal year ending August 2024
  • Fears of worse financial results in Fiscal Year 2025

Believes that the Board should immediately begin exploring Strategic Alternatives to maximize Shareholder value

The Performance of the stock has been abysmal

Profitability has collapsed over the past 3 years

Insiders own less than 1% of the outstanding stock

No insider has purchased a single share of stock in 10 years – an unequivocal vote of "no confidence" in the business

LOUISVILLE, Ky, Sept. 3, 2024 /PRNewswire/ --

Jewett-Cameron Trading Company LTD.
Attn: The Board of Directors
32275 N.W. Hillcrest
P.O. Box 1010
North Plains, Oregon 97133

Members of the Board of Directors:

Parthenon LLC is one of the largest shareholders of Jewett-Cameron Trading Company Ltd. (NASDAQ: JCTCF), with a beneficial ownership of approximately 6.2%. We have been continuous shareholders since 2011. We have generally been very patient and supportive owners. However, over the past two years, we have discussed our growing apprehension and disappointment with the current CEO and the Board Chairman in numerous conversations. Our warnings, which have unfortunately proven even more prescient than we imagined, have largely been ignored. We are writing this letter to express our serious concerns regarding both the business and stock performance and the extremely problematic prospects for the long-term viability of Jewett-Cameron as an independent public company. In addition, the near-total lack of ownership by the board and management creates a governance structure with an appalling economic and incentive mismatch between insiders and outside shareholders. Management has failed operationally and strategically, yet continues to implement more of the same failed strategies of the past. Management has not articulated any rational, sound plan to address the serious and growing challenges the company faces. We believe management is in denial about the severity of the hurdles the company must surmount to generate positive returns for shareholders. They seem unaware of the need to act with urgency before more (or all) shareholder value is destroyed.

A brief summation of the stock and business performance will serve to illustrate the depth of the problem. Over the past five years ending August 23, Jewett-Cameron stock has returned a horrific negative 46.3%, while the Russell 2000 Index is up 62.4% for the same period. For the past 10 years, the total return in the stock has been negative 11.4%. The Russell 2000 is up 118.8% for the same period. The stock collapse has mirrored the business collapse. For the 10 Fiscal Years (FY) ending August 31, 2012 through 2021, Jewett-Cameron generated an average of approximately $4 million in EBITDA annually with a low of approximately $3 million in FY 2019. In FY 2022, EBITDA declined to $2.4 million. In FY 2023, EBITDA was slightly below $1 million. This fiscal year, through the first nine months ending May 31, EBITDA was approximately negative $1.2 million. We expect the company to be only marginally profitable (if at all) for the fiscal year ending August 2024. Based on management's comments in the third quarter 10-Q, along with our discussions with management and our own analysis, we fear that Fiscal Year 2025 results are likely to be worse than any of the past three years.

The challenges Jewett-Cameron must overcome to return to consistent profitability are, we believe, numerous, daunting, and growing. These include supply chain concentration that carries significant geopolitical risks along with rising procurement costs, limited pricing power with its most important customers, and growing competition in several important product lines. The company has introduced few successful new product line extensions over the past decade, and none that have had a meaningful positive impact on profitability. The weight of all these challenges will be difficult, if not impossible, to overcome as a small independent company with limited resources.

Our fears for the long-term viability of Jewett-Cameron as an independent company have been, as the board knows, echoed by the credit market. The company was forced to search for a new lender for its credit line this past spring after being dropped by their then-current lender. Management was able to secure a new line, but will pay interest computed at the prime rate plus 4.75%. That is now equal to a very painful, and telling, 13.25%. This extremely high-cost debt will weigh heavily on already severely diminished pre-tax profits.

Insiders own only 32,518 shares, or 0.93%. That amounts to $141,453 (at market close on August 23), a shamefully miniscule capital commitment. Even more disturbing, nearly all the shares owned by insiders were obtained through grants and options. Over the past 10 years, based on publicly available information, we think that no board member or senior executive has purchased even a single share of stock. This is a clear, and appalling, vote of "no confidence" in the prospects of the company that insiders manage and oversee.

In addition, we were incredibly disappointed and angered to see the board attempt to entrench themselves by instituting a staggered board in February 2024. Fortunately, this arrogant and self-serving move was voted down by shareholders (in a true "grassroots" vote, as we are aware of no public campaign waged against the proposal). 

We feel that Jewett-Cameron's branded pet containment, area fencing, and wood panel products, along with the company-owned real estate, could have a value well above the public market valuation to a buyer with the capital, expertise, and infrastructure to maximize the returns. The expense synergies in the right "home" are, we believe, potentially quite large. The board should explore, with the assistance of a qualified outside advisor, if the best path forward for the company and shareholders would be for those products to be part of a larger company with much greater resources. We are very concerned this may be the only viable long-term path forward for Jewett-Cameron. We believe the board should immediately begin to fulfill its fiduciary duty to consider the best interests of all shareholders.

Sincerely,

Thomas A. Corea
Chief Executive Officer
Parthenon LLC

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SOURCE Parthenon, LLC

FAQ

What is Parthenon 's ownership stake in Jewett-Cameron (JCTCF)?

Parthenon owns approximately 6.2% of Jewett-Cameron Trading Company (NASDAQ: JCTCF) and has been a continuous shareholder since 2011.

How has Jewett-Cameron's (JCTCF) stock performed compared to the Russell 2000 Index?

Over the past five years ending August 23, 2024, Jewett-Cameron's stock has returned -46.3%, while the Russell 2000 Index is up 62.4% for the same period.

What is the current EBITDA trend for Jewett-Cameron (JCTCF)?

Jewett-Cameron's EBITDA has declined from an average of $4 million annually (FY 2012-2021) to $2.4 million in FY 2022, slightly below $1 million in FY 2023, and approximately negative $1.2 million for the first nine months of FY 2024.

What is the insider ownership percentage of Jewett-Cameron (JCTCF)?

Insiders own only 32,518 shares, or 0.93% of Jewett-Cameron's outstanding stock, valued at $141,453 as of August 23, 2024.

What action does Parthenon suggest for Jewett-Cameron's (JCTCF) board?

Parthenon urges Jewett-Cameron's board to immediately begin exploring strategic alternatives, including a potential sale of the company, to maximize shareholder value.

Jewett-Cameron Trading

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