The Jean Coutu Group (PJC) Inc.
TSX : PJC.A

The Jean Coutu Group (PJC) Inc.

October 06, 2009 07:00 ET

The Jean Coutu Group-Second Quarter Fiscal Year 2010 Results

Reports Operating income before amortization ("OIBA") of $61.4 million for the second quarter, an increase of 8.1% compared to the second quarter of fiscal year 2009

LONGUEUIL, QUEBEC--(Marketwire - Oct. 6, 2009) - The Jean Coutu Group (PJC) Inc. (the "Company" or the "Jean Coutu Group") (TSX:PJC.A) reported its financial results today for the second quarter of fiscal year 2010 ended August 29, 2009.



SUMMARY OF RESULTS
(Unaudited, in millions of Canadian dollars, except per share amounts)

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First half First half
Q2-2010 Q2-2009 2010 2009
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$ $ $ $

Revenues 608.7 567.5 1,228.0 1,141.8
Operating income before
amortization ("OIBA") 61.4 56.8 126.1 111.2
Share of loss in Rite
Aid, a company subject
to significant
influence ("Rite Aid") 24.3 73.1 55.2 126.5

Net earnings (loss) 14.9 (39.1) 25.2 (59.3)
Per share 0.07 (0.16) 0.11 (0.24)
Earnings before specific
items and share of
loss in Rite Aid 37.1 34.2 75.6 67.4
Per share 0.16 0.14 0.32 0.27
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HIGHLIGHTS

- Revenues increased by 7.3% and OIBA increased by 8.1% during the second quarter of fiscal year 2010 compared with the same period last year.

- Earnings before specific items and share of loss in Rite Aid is $0.16 per share for the second quarter of fiscal year 2010, an increase of $0.02 per share compared with the second quarter of fiscal year 2009.

- The carrying value of the investment in Rite Aid was reduced down to zero at the end of the second quarter of fiscal year 2010.

Financial results

"We are very satisfied with our second quarter's results. The expansion of our network and the solid operating performance of our organization have allowed us to reach our objectives," said Francois J. Coutu, President and Chief Executive Officer. "Retail sales increased significantly in spite of the economic conditions that prevailed over the last few months. This demonstrates clearly the efficiency of our network and the resilience of the pharmacy sector in the context of a more difficult business environment."

Revenues

Revenues consist of sales plus other revenues derived from franchising activities in Canada. Merchandise sales to PJC franchisees through our distribution centres account for most of our sales.

Revenues amounted to $608.7 million during the quarter ended August 29, 2009, compared with $567.5 million during the quarter ended August 30, 2008. This increase is attributable to the overall market growth and the expansion of the Jean Coutu Group network of franchised stores.

Other revenues amounted to $59.7 million during the second quarter of fiscal year 2010 compared with $57.6 million during the second quarter of fiscal year 2009. This increase is attributable to the increase in rental revenues and other services related to the expansion of the Jean Coutu Group network of franchised stores.

OIBA

OIBA increased by $4.6 million and amounted to $61.4 million for the second quarter of fiscal year 2010 compared with $56.8 million for the second quarter of fiscal year 2009. The increase in OIBA is mostly attributable to a strong operational performance in the franchising activities and of the subsidiary Pro Doc by the introduction of new products combined with the increased sales to Quebec pharmacists. Gross sales of Pro Doc products, net of intercompany's eliminations, amounted to $22.7 million in the second quarter of fiscal year 2010 compared with $5.2 million in the second quarter of fiscal year 2009. OIBA as a percentage of revenues ended the second quarter of fiscal year 2010 at 10.1% compared with 10% for the second quarter of the previous fiscal year.

For the first half of fiscal year 2010, OIBA increased by $14.9 million and amounted to $126.1 million compared with $111.2 million during the first half of fiscal year 2009. OIBA as a percentage of revenues ended the first half of fiscal year 2010 at 10.3% compared with 9.7% for the first half of fiscal year 2009.

Share of loss in Rite Aid, a company subject to significant influence

The share of loss in Rite Aid included in the Company's earnings during the second quarter of fiscal year 2010 amounted to $24.3 million ($0.10 per share) compared with $73.1 million ($0.30 per share) during the second quarter of fiscal year 2009.This is a non-cash charge.

For the 13- and 26-week periods ended August 29, 2009, the Company's share of loss in Rite Aid exceeded the carrying value of its investment. As required by Canadian GAAP, the Company reduced the carrying value of its investment down to zero and ceased recording its share of loss in Rite Aid exceeding the carrying value of its investment, since the Company has not guaranteed obligations of Rite Aid and is not committed to provide further financial support to Rite Aid. As at August 29, 2009, the Company's unrecognized share of loss in Rite Aid amounted to $11.0 million.

Net earnings (loss)

For the quarter ended August 29, 2009, the net earnings amounted to $14.9 million ($0.07 per share) compared with a net loss of $39.1 million ($0.16 per share) for the quarter ended August 30, 2008.

Earnings before specific items and share of loss in Rite Aid amounted to $37.1 million ($0.16 per share) during the second quarter of fiscal year 2010 compared with $34.2 million ($0.14 per share) during the second quarter of the previous fiscal year.

Information on the Jean Coutu Group network of franchised stores

Our franchising activities include operating two distribution centres and providing many services to our network of PJC franchised stores.
Retail sales increase reflects overall market growth and openings, renovations and relocations of network stores. Data on the growth included herewith was calculated based on comparable periods. During the second quarter of fiscal year 2010, on a same-store basis, PJC network retail sales grew of 3.8%, pharmacy sales gained 5.8% and front-end sales increased by 1.3% compared with the same period last year.



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First half First half
Network performance(1) Q2-2010 Q2-2009 2010 2009
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Retail sales
(in millions
of dollars) $878.9 $823.6 $1,762.8 $1,651.7
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Retail sales growth
(in %)

Total stores
Total 6.7% 4.9% 6.7% 5.0%
Pharmacy 9.1% 6.9% 8.9% 7.1%
Front-end 3.7% 0.8% 3.7% 1.1%

Same store
Total 3.8% 3.6% 3.9% 4.0%
Pharmacy 5.8% 5.7% 5.7% 6.2%
Front-end 1.3% - 0.5% 1.3% 0.0%
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(1) Franchised outlets' retail sales are not included in the Company's
Consolidated Financial Statements


Store network development

During the second quarter of fiscal year 2010, there were 5 store openings, including 1 relocation, in the PJC network of franchised stores. In addition, 6 stores were significantly renovated or expanded.

Dividend

The Board of the Jean Coutu Group declared a quarterly dividend of $0.045 per share. This dividend will be payable on November 6, 2009, to all holders of Class A subordinate voting shares and holders of Class B shares listed in the Company's shareholder ledger as of October 23, 2009.

Non-GAAP financial measures

This press release contains certain financial measures that are not defined by the Canadian Generally Accepted Accounting Principles ("GAAP"). This information has been reconciled with performance measures defined by GAAP in the related section of this press release.

Outlook

With its operations and financial flexibility, the Company is very well positioned to capitalize on the growth in the drugstore retail industry. Demographic trends are expected to contribute to growth in the consumption of prescription drugs and to the increased use of pharmaceuticals as the primary intervention in individual healthcare. Management believes that these trends will continue despite the current economic slowdown, and that the Company will grow its revenues through differentiation and quality of offering and service levels to its network of franchised stores, with a focus on sales growth, its real estate program and operating efficiency.

Conference call

Financial analysts are invited to attend the second quarter of fiscal year 2010 results conference call to be held on October 6, 2009, at 9:00 AM (ET). The toll free call-in number is 1 888-789-9572 - access code 5767268 followed by pound sign (#). Media and other interested individuals are invited to listen to the live or deferred broadcast on The Jean Coutu Group corporate website at www.jeancoutu.com. A full replay will also be available by dialling 514-861-2272 or toll free at 1 800-408-3053 until November 5, 2009. The access code is 6788684, followed by pound sign (#).

Supporting documentation (Management's discussion and analysis and investor presentation) is available at www.jeancoutu.com using the investors' link. Readers may also access additional information and filings related to the Company using the following link to the www.sedar.com website.

About The Jean Coutu Group

The Jean Coutu Group is one of the most trusted names in Canadian pharmacy retailing. The Company operates a network of 362 franchised stores in Canada located in the provinces of Quebec, New Brunswick and Ontario under the banners of PJC Jean Coutu, PJC Clinique and PJC Sante Beaute, and employs more than 16,000 people. Furthermore, as of December 2007, we own Pro Doc Ltd ("Pro Doc"), a Quebec-based subsidiary and manufacturer of generic drugs. The Company also holds a significant interest in Rite Aid Corporation ("Rite Aid") a national chain of drugstores in the United States with more than 4,800 drugstores in 31 states and the District of Columbia.

This press release contains forward-looking statements that involve risks and uncertainties, and which are based on the Company's current expectations, estimates, projections and assumptions and were made by the Jean Coutu Group in light of its experience and its perception of historical trends. All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, costs, operating or financial results, are forward-looking statements. All statements other than statements of historical facts included in this press release, including statements regarding the prospects of the Company's industry and the Company's prospects, plans, financial position and business strategy may constitute forward-looking statements within the meaning of the Canadian securities legislation and regulations. Some of the forward-looking statements may be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "project", "could", "anticipate", "plan", "foresee", "believe" or "continue" or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. These statements do not reflect the potential impact of any non-recurring items or of any mergers, acquisitions, dispositions, asset write-downs or other transactions or charges that may be announced or that may occur after the date hereof. While the list below of cautionary statements is not exhaustive, some important factors that could affect our future operating results, financial position and cash flows and could cause our actual results to differ materially from those expressed in these forward-looking statements are our equity interest in Rite Aid Corporation ("Rite Aid"), general economic, financial or market conditions, the investment in ABCP, the cyclical and seasonal variations in the industry in which we operate, the changes in the regulatory environment as it relates to the sale of prescription drugs, the ability to attract and retain pharmacists, the intensity of competitive activity in the industry in which we operate, labour disruptions, including possibly strikes and labour protests, changes in laws and regulations, or in their interpretations, changes in tax regulations and accounting pronouncements, the success of the Company's business model, the supplier and brand reputations and the accuracy of management's assumptions and other factors that are beyond our control.

These and other factors could cause our actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. Investors and others are cautioned that undue reliance should not be placed on any forward-looking statements. For more information on the risks, uncertainties and assumptions that would cause the Company's actual results to differ from current expectations, please also refer to the Company's public filings available at www.sedar.com and www.jeancoutu.com. Further details and descriptions of these and other factors are disclosed in the Company's Annual Information Form under "Risk Factors" and in the "Risks and uncertainties" section of the MD&A for the fiscal year ended February 28, 2009. We expressly disclaim any obligation or intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.



THE JEAN COUTU GROUP (PJC) INC.

Consolidated statements of earnings 13 weeks 26 weeks

For the periods ended
August 29, 2009 and
August 30, 2008 2009 2008 2009 2008
--------------------------------------------------------------------------
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(unaudited, in millions of
Canadian dollars, unless
otherwise noted) $ $ $ $

Sales 549.0 509.9 1,108.6 1,026.6
Other revenues 59.7 57.6 119.4 115.2
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608.7 567.5 1,228.0 1,141.8

Operating expenses
Cost of goods sold 498.1 465.1 1,002.2 936.9
General and operating
expenses 52.3 47.0 105.7 96.4
Amortization 4.4 4.1 8.5 8.0
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554.8 516.2 1,116.4 1,041.3
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Operating income 53.9 51.3 111.6 100.5
Financing expenses (revenues) (1.9) 1.5 (4.1) 2.8
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Earnings before the
following items 55.8 49.8 115.7 97.7
Share of loss in Rite Aid, a
company subject to
significant influence 24.3 73.1 55.2 126.5
Income taxes 16.6 15.8 35.3 30.5
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Net earnings (loss) 14.9 (39.1) 25.2 (59.3)
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Basic and diluted earnings
(loss) per share, in dollars 0.07 (0.16) 0.11 (0.24)
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Consolidated statements of
comprehensive income 13 weeks 26 weeks

For the periods ended
August 29, 2009 and
August 30, 2008 2009 2008 2009 2008
--------------------------------------------------------------------------
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(unaudited, in millions of
Canadian dollars) $ $ $ $

Net earnings (loss) 14.9 (39.1) 25.2 (59.3)
Other comprehensive income
Foreign currency translation
adjustments 0.2 72.8 (6.7) 84.3
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Comprehensive income 15.1 33.7 18.5 25.0
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THE JEAN COUTU GROUP (PJC) INC.

Consolidated statements of changes
in shareholders' equity 13 weeks 26 weeks

For the periods ended
August 29, 2009 and
August 30, 2008 2009 2008 2009 2008
--------------------------------------------------------------------------
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(unaudited, in millions of
Canadian dollars) $ $ $ $

Capital stock, beginning
of period 649.3 715.4 648.1 715.4
Redemption of stock - (33.9) - (33.9)
Options exercised 0.9 - 2.1 -
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Capital stock, end of period 650.2 681.5 650.2 681.5
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Contributed surplus, beginning
of period 30.7 19.7 28.4 16.7
Stock-based compensation cost 0.2 0.2 0.4 0.5
Stock-based compensation in
Rite Aid, a company subject
to significant influence 1.4 2.4 3.5 5.1
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Contributed surplus,
end of period 32.3 22.3 32.3 22.3
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Retained earnings (deficit),
beginning of period (324.4) 900.6 (324.1) 930.8
Net earnings (loss) 14.9 (39.1) 25.2 (59.3)
Dividends (10.7) (9.6) (21.3) (19.6)
Excess of purchase price
over carrying value of
Class A subordinate voting
shares acquired - (12.8) - (12.8)
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Retained earnings (deficit),
end of period (320.2) 839.1 (320.2) 839.1
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Accumulated other
comprehensive income (loss),
beginning of period 96.3 (167.3) 103.2 (178.8)
Foreign currency translation
adjustments 0.2 72.8 (6.7) 84.3
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Accumulated other comprehensive
income (loss), end of period 96.5 (94.5) 96.5 (94.5)
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Total shareholders' equity 458.8 1,448.4 458.8 1,448.4
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THE JEAN COUTU GROUP (PJC) INC.

Consolidated balance sheets

As at As at
August 29, 2009 February 28, 2009
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--------------------------------------------------------------------------
(in millions of Canadian dollars) $ $
(unaudited) (audited)

Assets
Current assets
Accounts receivable 178.4 183.6
Inventories 163.4 159.4
Prepaid expenses 6.1 6.2
--------------------------------------------------------------------------
347.9 349.2
Investments 51.9 110.1
Property and equipment 381.2 366.2
Goodwill 36.0 36.0
Other long-term assets 164.7 152.9
--------------------------------------------------------------------------
981.7 1,014.4
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Liabilities
Current liabilities
Accounts payable and
accrued liabilities 200.3 217.0
Income taxes payable 34.6 36.4
Short-term portion of long-term debt 2.9 5.9
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237.8 259.3
Long-term debt 254.8 269.8
Other long-term liabilities 30.3 29.7
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522.9 558.8
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Shareholders' equity
Capital stock 650.2 648.1
Contributed surplus 32.3 28.4

Deficit (320.2) (324.1)
Accumulated other comprehensive income 96.5 103.2
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(223.7) (220.9)
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458.8 455.6
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981.7 1,014.4
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THE JEAN COUTU GROUP (PJC) INC.

Consolidated statements of cash 13 weeks 26 weeks
flows
For the periods ended
August 29, 2009 and
August 30, 2008 2009 2008 2009 2008
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(unaudited, in millions of
Canadian dollars) $ $ $ $

Operating activities
Net earnings (loss) 14.9 (39.1) 25.2 (59.3)
Items not affecting cash
Amortization 7.5 5.5 14.5 10.7
Change in fair value of
third party asset-backed
commercial paper (2.1) - (4.0) -
Share of loss in Rite Aid,
a company subject to
significant influence 24.3 73.1 55.2 126.5
Future income taxes 1.3 2.6 7.4 4.7
Other (0.7) (0.3) (1.9) (0.3)
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45.2 41.8 96.4 82.3

Net changes in non-cash asset
and liability items (6.3) (6.4) (14.8) (58.6)
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Cash flow provided by
operating activities 38.9 35.4 81.6 23.7
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Investing activities
Investments and business
acquisition 0.8 0.4 0.7 (0.8)
Purchase of property and
equipment (14.0) (7.1) (24.1) (21.4)
Proceeds from disposal of
property and equipment 0.1 0.1 0.1 0.3
Other long-term assets (12.9) (24.5) (21.8) (35.3)
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Cash flow used in investing
activities (26.0) (31.1) (45.1) (57.2)
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Financing activities
Net change in revolving
credit facility, net of fees (1.7) 52.0 (14.8) 100.0
Repayment of long-term debt (1.4) - (2.5) (0.2)
Issuance of capital stock 0.9 - 2.1 -
Redemption of capital stock - (46.7) - (46.7)
Dividends (10.7) (9.6) (21.3) (19.6)
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Cash flow provided by (used in)
financing activities (12.9) (4.3) (36.5) 33.5
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Net change in cash and cash
equivalents - - - -
Cash and cash equivalents,
beginning of period - - - -
--------------------------------------------------------------------------
Cash and cash equivalents,
end of period - - - -
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Contact Information

  • Source:
    The Jean Coutu Group (PJC) Inc.
    Andre Belzile
    Senior Vice-President, Finance and Corporate Affairs
    450-646-9760
    or
    Information:
    The Jean Coutu Group (PJC) Inc.
    Helene Bisson
    Senior Director, Communications
    450-646-9611, Ext. 1165