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

The Jean Coutu Group (PJC) Inc.

January 08, 2015 07:00 ET

The Jean Coutu Group: Third Quarter of Fiscal Year 2015 Results

LONGUEUIL, QUÉBEC--(Marketwired - Jan. 8, 2015) - The Jean Coutu Group (PJC) Inc. (the "Corporation" or the "Jean Coutu Group") (TSX:PJC.A) reported today its financial results for the quarter ended November 29, 2014.

SUMMARY OF RESULTS

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

Third quarter 39-week period
2015 2014 2015 2014
$ $ $ $
Revenues 736.7 712.5 2,099.7 2,047.9
Operating income before amortization ("OIBA") 84.8 88.0 247.8 247.0
Gains related to the investment in Rite Aid - - - 212.7
Net profit 56.0 62.5 163.7 379.3
Per share 0.30 0.30 0.87 1.79
Net profit before gains related to the investment in Rite Aid (1) 56.0 62.5 163.7 166.6
Per share 0.30 0.30 0.87 0.79
(1) See the "Non-IFRS financial measure" section.

HIGHLIGHTS

  • Revenues increased by 3.4% to $736.7 million in the third quarter of fiscal year 2015.

  • OIBA decreased by $3.2 million to $84.8 million in the third quarter of fiscal year 2015 following an increase in expenses related to share-based payments instruments of $4.0 million.

  • The Corporation cancelled a portion of $250.0 million of the $500.0 million aggregate amount available under the credit facility in order to reduce standby fees.

Financial results

"The front end sales increased during the third quarter despite a very competitive environment which reflects a successful implementation of our strategies" stated Mr. Francois J. Coutu". "We will continue dedicating the necessary efforts to reach our objectives, thus sustain our long term growth."

Revenues

Revenues consist mainly of sales and other revenues derived from franchising activities. Merchandise sales to PJC franchisees made mostly through our distribution centres account for the greater part of our revenues.

Revenues amounted to $736.7 million during the quarter ended November 29, 2014, compared with $712.5 million for the quarter ended November 30, 2013. During the 39-week period of fiscal year 2015, revenues amounted to $2,099.7 million compared with 2,047.9 million for the same period of the previous fiscal year, an increase of 2.5%. This increase is attributable to overall market growth and the expansion of the PJC network of franchised stores despite the deflationary impact on revenues of the volume increase in prescriptions of generic drugs compared with brand name drugs as well as the price reductions of generic drugs.

OIBA

OIBA decreased by $3.2 million to $84.8 million during the quarter ended November 29, 2014 compared with $88.0 million for the quarter ended November 30, 2013. For the third quarter of fiscal year 2015, OIBA was negatively impacted by the share-based payments instruments (stock appreciation rights and deferred share units) expenses of $4.4 million, compared with $0.4 million for the quarter ended November 30, 2013. The increase of this expense is mainly due to the growth of the Corporation's share market price. OIBA as a percentage of revenues ended the third quarter of fiscal year 2015 at 11.5% compared with 12.4% for the same quarter of the previous fiscal year.

For the 39-week period of fiscal year 2015, the Corporation's OIBA increased by $0.8 million amounting to $247.8 million compared with $247.0 million for the same period of fiscal year 2014. For the 39-week period of fiscal year 2015, OIBA was also negatively impacted by the share-based payments instruments expenses of $5.9 million, compared with $2.2 million for the same period of fiscal year 2014. As a percentage of revenues, OIBA ended the 39-week period of fiscal year 2015 at 11.8% compared with 12.1% for the same period of the previous fiscal year.

Pro Doc

Gross sales of Pro Doc drugs, net of intersegment eliminations, amounted to $50.7 million during the quarter ended November 29, 2014, compared with $47.9 million for the quarter ended November 30, 2013. Pro Doc's contribution to the consolidated OIBA amounted to $22.3 million during the quarter ended November 29, 2014, compared with $21.6 million for the quarter ended November 30, 2013. Pro Doc's contribution to the consolidated OIBA as a percentage of gross sales, net of intersegment eliminations, ended the third quarter of fiscal year 2015 at 44.0% compared with 45.1% for the same period of the previous fiscal year.

Gross sales of Pro Doc drugs, net of intersegment eliminations, amounted to $147.1 million during the 39-week period of fiscal year 2015, compared with $138.2 million for the same period of fiscal year 2014. Pro Doc's contribution to the consolidated OIBA amounted to $67.1 million during the 39-week period of fiscal year 2015, compared with $58.0 million for the same period of fiscal year 2014. Pro Doc's contribution to the consolidated OIBA as a percentage of its gross sales, net of intersegment eliminations, ended the 39-week period of fiscal year 2015 at 45.6% compared with 42.0% for the same period of the previous fiscal year.

Net profit

Net profit amounted to $56.0 million ($0.30 per share) during the quarter ended November 29, 2014 compared with $62.5 million ($0.30 per share) for the quarter ended November 30, 2013. The decrease in net profit is also attributable to the increase of the share-based payments instruments expenses.

Net profit during the 39-week period of fiscal year 2015 amounted to $163.7 million ($0.87 per share) compared with $379.3 million ($1.79 per share) for the same period of fiscal year 2014. The decrease in net profit is mainly attributable to the gains of $212.7 million related to the investment in Rite Aid recognized during the 39-week period of fiscal year 2014. Net profit before gains related to the investment in Rite Aid amounted to $166.6 million ($0.79 per share) for the 39-week period of fiscal year 2014.

Information on the PJC network of franchised stores

The Corporation carries on the franchising activity under the banners of PJC Jean Coutu, PJC Clinique, PJC Jean Coutu Santé and PJC Jean Coutu Santé Beauté, operates two distribution centres and coordinates several other services for the benefit of its franchisees.

During the quarter ended November 29, 2014, on a same-store basis, the PJC network's retail sales increased by 3.1%, pharmacy sales increased by 3.8% and front-end sales increased by 2.0%, compared with the corresponding period last year. Sales of non-prescription drugs, which represented 8.8% of total retail sales, increased by 1.6% whereas these sales were stable for the corresponding period of fiscal year 2014.

During the 39-week period of fiscal year 2015, on a same store basis, the PJC network's retail sales grew by 1.9%, pharmacy sales increased by 2.2% and front-end sales increased by 1.0%, compared with the same period last year. Sales of non-prescription drugs, which represented 8.6% of total retail sales, increased by 0.8% whereas these sales had increased by 1.6% for the same period of fiscal year 2014.

Generic drugs reached 68.1% of prescriptions during the third quarter of fiscal year 2015 compared with 66.7% of prescriptions for the comparable period of the previous fiscal year. The increase in the number of generic drugs prescriptions with lower selling prices than brand name drugs had a deflationary impact on the pharmacy's retail sales. For the third quarter of fiscal year 2015 the introduction of new generic drugs reduced pharmacy's retail sales growth by 0.6% and price reductions of generic drugs reduced the growth of those sales by another 0.6%.

Third quarter 39-week period
Network performance (1)(unaudited) 2015 2014 2015 2014
Retail sales (in millions of dollars) $1,049.6 $1,012.7 $3,075.6 $3,002.7
Retail sales growth (in percentage)
Total stores
Total 3.6 % (0.6 )% 2.4 % 0.3 %
Pharmacy 4.2 % (0.8 )% 2.7 % (0.1 )%
Front-end (2) 2.7 % (0.6 )% 1.7 % 0.8 %
Same store
Total 3.1 % (1.3 )% 1.9 % (0.3 )%
Pharmacy 3.8 % (1.6 )% 2.2 % (0.7 )%
Front-end (2) 2.0 % (1.3 )% 1.0 % 0.2 %
Prescriptions growth (in percentage)
Total stores 4.0 % 4.5 % 4.0 % 4.8 %
Same store 3.7 % 4.0 % 3.6 % 4.2 %
(1) Franchised outlets' retail sales are not included in the Corporation's consolidated financial statements.
(2) Front-end retail sales exclude sales of services which are included in the total retail sales growth.

PJC network of franchised stores expansion

During the third quarter of fiscal year 2015, there were 3 openings in the PJC network of franchised stores, including 1 relocation. Furthermore, the Corporation proceeded to the closing of 2 stores. Also, 3 stores were significantly renovated or expanded.

As at November 29, 2014, total selling square footage of the PJC network amounted to 3,167,000 square feet compared with 3,083,000 square feet as at November 30, 2013.

Financing activities

On December 3, 2014, the Corporation cancelled $250.0 million of the $500.0 million aggregate amount available under the unsecured revolving credit facility, which was not drawn by the Corporation on that date, in order to reduce standby fees. Under the facility credit agreement, the Corporation may, under certain circumstances and subject to receipt of additional commitments from existing lenders or other eligible institutions, request increases to the credit facility up to an aggregate amount, together with all then-existing commitments, of $750.0 million.

On April 30, 2014, the Corporation announced its intention to repurchase for cancelation under a normal course issuer bid, when it is considered advisable, up to 8,190,000 of its outstanding Class "A" Subordinate Voting Shares.

For the 13-week period ended November 29, 2014, the Corporation did not repurchase any Class "A" subordinate voting shares. For the 39-week period ended November 29, 2014, the Corporation repurchased under its normal course issuer bid 2,574,100 Class "A" subordinate voting shares at the average price of $21.62 per share for a total consideration of $55.6 million including related costs. An amount of $42.9 million representing the excess of the purchase price over the carrying value of the repurchased shares was included in retained earnings for the 39-week period ended November 29, 2014. The shares repurchased during the 39-week period ended November 29, 2014 were cancelled during that period.

Dividend

The Board of the Jean Coutu Group declared a quarterly dividend of $0.10 per share. This dividend will be paid on February 6, 2014, to all holders of Class "A" Subordinate Voting Shares and holders of Class "B" Shares listed in the Corporation's shareholder ledger as at January 23, 2014.

Strategies and outlook

With its operations and financial flexibility, the Corporation is very well positioned to capitalize on the growth in the drugstore retail industry. Demographic trends are expected to contribute to the growth in prescription drugs consumption and to the increased use of pharmaceuticals as the primary intervention in individual healthcare. Management believes that these trends will continue and that the Corporation will maintain its growth in 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. The growth in the number of generic drugs prescriptions, with lower selling prices than the branded name drugs, will however have a deflationary impact on retail sales in pharmacy but the volume increase in the generic drugs operating segment will have a positive impact on consolidated margins.

Conference call

Financial analysts and investors are invited to attend the conference call on the third quarter of fiscal year 2015 financial results to be held on January 8, 2015, at 9:00 AM (ET). The call-in number is 514-861-2255 or toll free at 1-877-695-6175, access code 5030120 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 February 8, 2015. The access code is 7546847 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 Corporation 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 Corporation operates a network of 416 franchised stores located in the provinces of Québec, New Brunswick and Ontario under the banners of PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté, which employs close to 20,000 people. Furthermore, the Jean Coutu Group owns Pro Doc Ltd ("Pro Doc"), a Québec-based subsidiary and manufacturer of generic drugs.

This press release contains forward-looking statements that involve risks and uncertainties, and which are based on the Corporation's current expectations, estimates, projections and assumptions that were made by the Corporation 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 Corporation'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 Corporation's industry and the Corporation'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", "should", "would", "anticipate", "plan", "foresee", "believe" or "continue" or the negatives of these terms or variations of them or similar terminology. Although the Corporation 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 nonrecurring 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 the Corporation's future operating results, financial position and cash flows and could cause its actual results to differ materially from those expressed in these forward-looking statements are changes in the legislation or the regulatory environment as it relates to the sale of prescription drugs and the pharmacy exercise, the success of the Corporation's business model, changes in laws and regulations, or in their interpretations, changes to tax regulations and accounting pronouncements, the cyclical and seasonal variations in the industry in which the Corporation operates, the intensity of competitive activity in the industry in which the Corporation operates, the supplier and brand reputations, the Corporation's ability to attract and retain pharmacists, labour disruptions, including possibly strikes and labour protests, the accuracy of management's assumptions and other factors that are beyond the Corporation's control. These and other factors could cause the Corporation's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied in those forward-looking statements.

Forward-looking statements are provided for the purpose of assisting in understanding the Corporation's financial position and results of operation and to present information about management's current expectations and plans relating to the future. Investors and others are thus cautioned that such statements may not be appropriate for other purposes and they should not place undue reliance on them. For more information on the risks, uncertainties and assumptions that would cause the Corporation's actual results to differ from current expectations, please also refer to the Corporation'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 Corporation's Annual Information Form under "Risk Factors" and also in the "Critical accounting estimates", "Risks and uncertainties" and "Strategies and outlook" sections of the Corporation's annual management's discussion and analysis. The forward-looking statements in this press release reflect the Corporation's expectations as of the date hereof and are subject to change after such date. The Corporation expressly disclaims 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.

Condensed consolidated statements of income

13 weeks 39 weeks
For the periods ended November 29, 2014 and November 30, 20132014 2013 2014 2013
(unaudited, in millions of Canadian dollars, unless otherwise noted)$ $ $ $
Sales666.6 642.3 1,891.8 1,843.5
Other revenues70.1 70.2 207.9 204.4
736.7 712.5 2,099.7 2,047.9
Operating expenses
Cost of sales577.3 556.3 1,640.2 1,602.1
General and operating expenses74.6 68.2 211.7 198.8
Operating income before depreciation and amortization84.8 88.0 247.8 247.0
Depreciation and amortization8.1 8.1 24.0 24.1
Operating income76.7 79.9 223.8 222.9
Financing revenus(0.1)(1.5)(0.8)(1.8)
Profit before the following items76.8 81.4 224.6 224.7
Gains on sales of investment in Rite Aid- - - 212.7
Profit before income taxes76.8 81.4 224.6 437.4
Income taxes20.8 18.9 60.9 58.1
Net profit56.0 62.5 163.7 379.3
Basic and diluted profit per share, in dollars0.30 0.30 0.87 1.79

Condensed consolidated statements of comprehensive income

13 weeks39 weeks
For the periods ended November 29, 2014 and November 30, 20132014201320142013
(unaudited, in millions of Canadian dollars)$$$$
Net profit56.062.5163.7379.3
Other comprehensive income, net of taxes of nil
Items that will be reclassified subsequently to net profit:
Available-for-sale financial asset:
Change in fair value---171.9
Reclassification of gains on sales to net profit---(212.7)
---(40.8)
Total comprehensive income56.062.5163.7338.5

THE JEAN COUTU GROUP (PJC) INC.

Condensed consolidated statements of changes in equity

For the periods ended November 29, 2014 and November 30, 2013
(unaudited, in millions of Canadian dollars)
Capital Treasury Contributed Investment in Retained Total
stock stock surplus Rite Aid earnings equity
$ $ $ $ $ $
Balance at March 1, 2014422.1 (3.0)55.1 - 457.9 932.1
Net profit- - - - 163.7 163.7
Other comprehensive income- - - - - -
Total comprehensive income- - - - 163.7 163.7
Redemption of capital stock(12.7)- - - (42.9)(55.6)
Dividends- - - - (56.5)(56.5)
Share-based compensation cost- - 0.7 - - 0.7
Options exercised3.3 - (0.5)- - 2.8
Balance at November 29, 2014412.7 (3.0)55.3 - 522.2 987.2
Balance at March 2, 2013537.1 (2.2)1.7 40.8 533.4 1,110.8
Net profit- - - - 379.3 379.3
Other comprehensive income- - - (40.8)- (40.8)
Total comprehensive income- - - (40.8)379.3 338.5
Redemption of capital stock(125.7)- - - (337.7)(463.4)
Dividends- - - - (148.8)(148.8)
Share-based compensation cost- - 0.7 - - 0.7
Options exercised8.0 - (0.5)- - 7.5
Balance at November 30, 2013419.4 (2.2)1.9 - 426.2 845.3

THE JEAN COUTU GROUP (PJC) INC.

Condensed consolidated statements of financial position

As at
November 29,
2014
As at
March 1,
2014
(unaudited, in millions of Canadian dollars)$$
Current assets
Cash93.574.3
Trade and other receivables232.6206.9
Inventories221.6189.8
Prepaid expenses7.56.2
555.2477.2
Non-current assets
Long-term receivables from franchisees26.523.7
Investment in associates and joint ventures15.113.6
Property and equipment413.5361.1
Investment property24.124.7
Intangible assets207.8202.0
Goodwill36.036.0
Deferred tax12.511.3
Other long-term assets15.315.0
Total assets1,306.01,164.6
Current liabilities
Trade and other payables261.6209.3
Income taxes payable36.94.6
298.5213.9
Non-current liabilities
Deferred tax0.71.0
Other long-term liabilities19.617.6
Total liabilities318.8232.5
Equity987.2932.1
Total liabilities and equity1,306.01,164.6

THE JEAN COUTU GROUP (PJC) INC.

Condensed consolidated statements of cash flows

13 weeks 39 weeks
For the periods ended November 29, 2014 and November 30, 20132014 2013 2014 2013
(unaudited, in millions of Canadian dollars)$ $ $ $
Operating activities
Net profit56.0 62.5 163.7 379.3
Adjustments:
Depreciation and amortization8.1 8.1 24.0 24.1
Gains on sales of investment in Rite Aid- - - (212.7)
Interest income(0.3)(1.8)(1.2)(3.4)
Income taxes20.8 18.9 60.9 58.1
Others1.2 0.7 3.3 1.4
85.8 88.4 250.7 246.8
Net change in non-cash asset and liability items(10.0)12.7 (24.0)(14.2)
Interest received0.3 1.8 1.2 2.8
Income taxes paid(7.4)0.2 (30.1)(38.3)
Cash flow related to operating activities68.7 103.1 197.8 197.1
Investing activities
Proceeds from disposal of the investment in Rite Aid- - - 477.9
Investments in an associate and in a joint venture- (1.4)(1.0)(2.7)
Purchase of property and equipment(26.7)(15.3)(47.8)(24.5)
Proceeds from disposal of property and equipment- - - 1.6
Purchase of investment property(0.2)- (1.2)(0.2)
Proceeds from disposal of investment property- - 1.0 0.6
Net change in long-term receivables from franchisees(0.7)0.7 (5.9)0.1
Purchase of intangible assets(5.4)(6.7)(14.2)(17.3)
Cash flow related to investing activities(33.0)(22.7)(69.1)435.5
Financing activities
Financing fees(0.2)(0.3)(0.2)(0.3)
Issuance of capital stock1.8 0.7 2.8 7.5
Redemption of capital stock(3.7)(407.5)(55.6)(465.3)
Dividends paid(18.8)(17.9)(56.5)(54.1)
Cash flow related to financing activities(20.9)(425.0)(109.5)(512.2)
Net change in cash and cash equivalents14.8 (344.6)19.2 120.4
Cash and cash equivalents, beginning of period78.7 463.4 74.3 (1.6)
Cash and cash equivalents, end of period93.5 118.8 93.5 118.8

THE JEAN COUTU GROUP (PJC) INC.

Unaudited additional informations

For the periods ended November 29, 2014 and November 30, 2013
(in millions of Canadian dollars, except per share amounts)

Non-IFRS financial measure

Net profit (or net profit per share) before gains related to the investment in Rite Aid is a non-IFRS measure. The Corporation believes that it is useful for investors to be aware of significant items of an unusual or non- recurring nature that have adversely or positively affected the IFRS measures applied by the Corporation, and that the above-mentioned non-IFRS measure provides investors with a performance measure to compare the results between periods with no regards to these items. The Corporation's measure excluding certain items has no standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures presented by other corporations. Therefore, it should not be considered in isolation.

Net profit and basic profit per share are reconciled hereunder to net profit (or net profit per share) before gains related to the investment in Rite Aid. All amounts are net of income taxes when applicable.

13 weeks39 weeks
2014201320142013
$$$$
Net profit56.062.5163.7379.3
Gains on sales of investment in Rite Aid---(212.7)
Net profit before gains related to the investment in Rite Aid56.062.5163.7166.6
Basic profit per share0.300.300.871.79
Gains on sales of investment in Rite Aid---(1.00)
Net profit per share before gains related to the investment in Rite Aid0.300.300.870.79

Contact Information

  • Source:
    The Jean Coutu Group (PJC) Inc.
    Andre Belzile
    Senior Vice-President, Finance and Corporate Affairs
    (450) 646-9760

    Information:
    Helene Bisson
    Vice-President, Communications
    (450) 646-9611, Ext. 1165