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Press release from Marketwire

The Jean Coutu Group: Fourth Quarter and Fiscal Year 2011 Results

- Operating income before amortization ("OIBA") amounted to $75.6 million, an increase of 6.2% compared with the fourth quarter of fiscal year 2010. - Net earnings per share amounted to $0.20 compared with $0.18 during the fourth quarter of fiscal year 2010. - Quarterly dividend increases by 9.1% to $0.06 per share.

Thursday, April 28, 2011

The Jean Coutu Group: Fourth Quarter and Fiscal Year 2011 Results07:01 EDT Thursday, April 28, 2011MONTREAL, QUEBEC--(Marketwire - April 28, 2011) - The Jean Coutu Group (PJC) Inc. (TSX:PJC.A) (the "Corporation" or the "Jean Coutu Group") reported its financial results today for the fourth quarter and fiscal year ended February 26, 2011.Summary of results(Unaudited, in millions of Canadian dollars, except per share amounts)Q4-2011Q4-2010Fiscal year 2011Fiscal year 2010$$$$Revenues655.6637.02,597.82,543.1Operating income before amortization ("OIBA")75.671.2291.1268.8Share of loss in Rite Aid Corporation a corporation subject to significant influence ("Rite Aid")---55.2Net earnings46.442.8180.2112.6Per share0.200.180.770.48Earnings before specific items and share of loss in Rite Aid45.642.9179.1162.7Per share0.200.180.770.69HighlightsRevenues increased by 2.2% and OIBA increased by 8.3% during fiscal year 2011 compared with the previous fiscal year. Earnings before specific items and share of loss in Rite Aid was $0.77 per share for fiscal year 2011, an increase of $0.08 per share compared with fiscal year 2010. During fiscal year 2011, the PJC network of franchised stores continued its expansion by opening 30 stores, including 9 relocations. Financial results "We are very satisfied with the results of the fourth quarter and fiscal year 2011. We successfully continued the implementation of our business plan, which resulted in a strong growth in our net earnings" said François J Coutu, President and chief Executive Officer. "Our network's continuous expansion and our operations' growth allowed us to partly offset deflationary impact on revenues from the price reduction of generic drugs."Revenues Revenues consist mainly of sales and other revenues derived from franchising activities. Merchandise sales to PJC franchisees mostly through our distribution centres account for the greater part of our sales.Revenues amounted to $655.6 million during the fourth quarter ended February 26, 2011, compared with $637.0 million during the fourth quarter ended February 27, 2010, an increase of 2.9%. For fiscal year 2011, revenues amounted to $2.598 billion compared with $2.543 billion during the previous fiscal year, an increase of 2.2%. These increases are attributable to overall market growth and the expansion of the PJC network of franchised stores, despite the deflationary impact on revenues from the introduction of the generic version of large volume drugs as well as the price reduction of generic drugs decreed by the Québec government. OIBA OIBA increased by $4.4 million to $75.6 million for the fourth quarter of fiscal year 2011 compared with $71.2 million for the fourth quarter of fiscal year 2010. This increase is mostly attributable to a strong operational performance in the franchising activities and of the subsidiary Pro Doc Ltd. Gross Sales of Pro Doc products, net of intersegment's eliminations, amounted to $37.4 million in the fourth quarter ended February 26, 2011, compared with $28.9 million in the same period of fiscal year 2010. OIBA as a percentage of revenues ended the fourth quarter of fiscal year 2011 at 11.5% compared with 11.2% for the fourth quarter of the previous fiscal year.For fiscal year 2011, OIBA of the Corporation increased by $22.3 million to $291.1 million compared with $268.8 million during fiscal year 2010. OIBA as a percentage of revenues ended fiscal year 2011 at 11.2% compared with 10.6% for the previous fiscal year.Share of loss in Rite Aid, a corporation subject to significant influenceDuring fiscal year ended February 27, 2010, the Corporation's share of loss in Rite Aid exceeded the carrying value of its investment. As required by Canadian GAAP, the Corporation 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 Corporation has not guaranteed Rite Aid's obligations and is not committed to provide it with further financial support. For the fourth quarter ended February 26, 2011 and for fiscal year 2011, the Corporation's unrecognized share of loss in Rite Aid amounted to $60.9 million and $160.6 million respectively. As at February 26, 2011, the Corporation's total unrecognized share of loss in Rite Aid amounted to $250.0 million and the quoted market value of equity interest in Rite Aid was US$322.5 million (February 27, 2010 - US$383.0 million).Net earnings Net earnings amounted to $46.4 million ($0.20 per share) during the fourth quarter ended February 26, 2011 compared with $42.8 million ($0.18 per share) during the fourth quarter ended February 27, 2010. Net earnings amounted to $180.2 million ($0.77 per share) for fiscal year 2011 compared with $112.6 million ($0.48 per share) for fiscal year 2010.Earnings before specific items and share of loss in Rite Aid amounted to $45.6 million ($0.20 per share) during the fourth quarter of fiscal year 2011 compared with $42.9 million ($0.18 per share) during the fourth quarter of fiscal year 2010, an increase of 6.3%. Earnings before specific items and share of loss in Rite Aid amounted to $179.1 million ($0.77 per share) for fiscal year 2011 compared with $162.7 million ($0.69 per share) for fiscal year 2010.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.On a same-store basis, PJC network retail sales grew by 1.4%, pharmacy sales gained 0.9% and front-end sales increased by 1.5% in the fourth quarter of fiscal year 2011 compared with the fourth quarter of the previous fiscal year. During the fourth quarter ended February 26, 2011, sales of non-prescription drugs, which represented 9% of total retail sales, increased by 8.5%, whereas these sales had increased by 2.7% during the fourth quarter of the previous fiscal year. The stronger flu season this year compared with the same period last year contributed to the increase in the sales of cough, cold and flu medications.During fiscal year 2011, on a same-store basis, PJC network retail sales grew by 1.6%, pharmacy sales gained 1.9% and front-end sales increased by 0.3% compared with the previous fiscal year. During fiscal year 2011, sales of non-prescription drugs, which represented 9% of total retail sales, increased by 3.2%, whereas these sales had increased by 8.1% during the previous fiscal year. Customers' cautiousness in view of the A(H1N1) flu had contributed to the increase in non-prescription drugs during the previous fiscal year.Following the introduction of the generic version of large volume drugs over the last 12 months, generic drugs reached 55.6% of drugs' prescriptions during the fourth quarter of fiscal year 2011 compared with 51.2% during the same quarter of the previous fiscal year. The increase in the number of generic drugs' prescriptions with lower selling prices had a deflationary impact on the pharmacy's retail sales. Therefore, the introduction of new generic drugs reduced pharmacy's retail sales growth by 3.4% and the price reduction of generic drugs decreed by the Québec government reduced pharmacy's retail sales growth by 1.0% during the fourth quarter of fiscal year 2011.Network performance (1)Q4-2011Q4-2010Fiscal year 2011Fiscal year 2010Retail sales (unaudited, in millions of dollars)$988.5$951.3$3,778.5$3,637.2Retail sales growth (in %)Total storesTotal3.9%5.8%3.9%7.0%Pharmacy3.4%6.7%3.9%8.3%Front-end4.2%4.4%3.2%5.1%Same storeTotal1.4%3.8%1.6%4.5%Pharmacy0.9%4.8%1.9%5.7%Front-end1.5%2.2%0.3%2.8%(1) Franchised outlets' retail sales are not included in the Corporation's Consolidated Financial StatementsPJC network of franchised stores expansionDuring the fourth quarter of fiscal year 2011, there were 2 store openings in the PJC network of franchised stores, including one relocation and there was one store closed. In addition, 5 stores were significantly renovated or expanded.During fiscal year 2011, there were 30 store openings in the PJC network of franchised stores, including 9 relocations and there were 2 stores closed. In addition, 26 stores were significantly renovated or expanded.Capital-stock On April 29, 2010, the Corporation announced its intention to purchase for cancellation, if it is considered advisable, up to 11,110,000 of its outstanding Class A subordinate voting shares, representing approximately 10% of the current public float of such shares, over a 12-month period ending no later than May 3, 2011. The shares were or will be purchased through the facilities of the Toronto Stock Exchange and in accordance with its requirements.For the 13-week period ended February 26, 2011, the Corporation purchased 1,622,200 Class A subordinate voting shares at an average price of $9.66 per share for a total consideration of $15.7 million including related costs. An amount of $7.1 million representing the excess of the purchase price over the carrying value of the purchased shares was recorded in the deficit.For the fiscal year ended February 26, 2011, the Corporation purchased 6,819,900 Class A subordinate voting shares at an average price of $9.23 per share for a total consideration of $63.0 million including related costs. An amount of $26.4 million representing the excess of the purchase price over the carrying value of the purchased shares was recorded in deficit. The shares purchased during the fiscal year ended February 26, 2011 were cancelled.Dividend The Board of the Jean Coutu Group declared a quarterly dividend of $0.06 per share, an increase of 9.1% compared with the previous quarter. This dividend will be paid on May 28, 2011, to all holders of Class A subordinate voting shares and holders of Class B shares listed in the Corporation's shareholder ledger as of May 14, 2011. This quarterly dividend represents $0.24 per share on an annual basis.Non Canadian-GAAP financial measures This press release contains certain financial measures that are not defined by the Canadian Generally Accepted Accounting Principles ("GAAP"). These measures have been reconciled with performance measures defined by Canadian GAAP in the related section of this press release.Strategies and outlook With its operations and financial flexibility, the Corporation is very well positioned to capitalize on the growth in 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 will however have a deflationary impact on retail sales in the pharmacy section but the contribution of Pro Doc will have a positive impact on consolidated margins.The first implementation date for price reduction of generic drugs announced November 5, 2010 by the "Conseil du medicament du Québec" was December 17, 2010. More price reductions are scheduled until April 2012 to insure that the generic product price is not higher than any selling price granted to other provincial drug insurance programs. The 5% rebates offered by generic drug manufacturers, which represented the distributors' profit margin, were also abolished since last December 17. Therefore, a maximum of 6% administration fees are added to the generic drug price since then, in order to match up with the distributor margin of the innovator products. Furthermore, since April 20, 2011, the administration fee percentage increased from 6% to 6.25% and, starting in April 2012, these fees will increase to 6.50% for generic drugs as well as for innovator products. The consolidated results of the Corporation will be affected by these measures but we believe that the impact will be offset in the short term by normal growth of the Corporation's operations.Conference call Financial analysts and investors are invited to attend the fourth quarter and fiscal year 2011 results conference call to be held on April 28, 2011, at 9:00 AM (ET). The call-in number is 514-861-2255 or toll free at 1 866-696-5910 – access code 8238674 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 May 28, 2011. The access code is 1640134, 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 GroupThe Jean Coutu Group is one of the most trusted names in Canadian pharmacy retailing. The Corporation operates a network of 389 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, and employs over 18,000 people. Furthermore, as of December 2007, the Jean Coutu Group owns Pro Doc Ltd ("Pro Doc"), a Québec-based subsidiary and manufacturer of generic drugs. The Corporation also holds a significant interest in Rite Aid Corporation ("Rite Aid") a national chain of drugstores in the United States with over 4,700 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 Corporation's current expectations, estimates, projections and assumptions 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 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 MD&A, 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", "anticipate", "plan", "foresee", "believe" or "continue", the negatives of these terms, the variations of them or the use of other similar terms. 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 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, namely 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 we operate, the intensity of competitive activity in the industry in which we operate, the supplier and brand reputations, our equity interest in Rite Aid Corporation ("Rite Aid"), our 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 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 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. In particular, further details and descriptions of these and other factors are disclosed in the Corporation's Annual Information Form under "Risk Factors" and in the "Risks and uncertainties" section of the MD&A for the fiscal year ended February 26, 2011. 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 any other reason, unless required by the applicable securities laws.THE JEAN COUTU GROUP (PJC) INC.Consolidated statements of earnings13 weeks52 weeksFor the periods ended February 26, 2011 and February 27, 20102011201020112010(unaudited, in millions of Canadian dollars, unless otherwise noted)$$$$Sales591.4573.72,348.72,298.4Other revenues64.263.3249.1244.7655.6637.02,597.82,543.1Operating expensesCost of goods sold525.2513.92,091.62,068.9General and operating expenses59.055.4230.1218.1Amortization of property and equipment4.94.517.617.6589.1573.82,339.32,304.6Operating income66.563.2258.5238.5Financing expenses (revenues)(0.1)0.30.7(4.2)Earnings before the following items66.662.9257.8242.7Share of loss in Rite Aid, a company subject to significant influence---55.2Income taxes20.220.177.674.9Net earnings46.442.8180.2112.6Basic and diluted earnings per share, in dollars0.200.180.770.48Consolidated statements of comprehensive income13 weeks52 weeksFor the periods ended February 26, 2011 and February 27, 20102011201020112010(unaudited, in millions of Canadian dollars)$$$$Net earnings46.442.8180.2112.6Other comprehensive incomeForeign currency translation adjustments---(6.7)Income taxes related to the above items-(16.4)-(16.4)-(16.4)-(23.1)Comprehensive income46.426.4180.289.5THE JEAN COUTU GROUP (PJC) INC.Consolidated statements of changes in shareholders' equity13 weeks52 weeksFor the periods ended February 26, 2011 and February 27, 20102011201020112010(unaudited, in millions of Canadian dollars)$$$$Capital stock, beginning of period622.9650.4650.8648.1Redemption of stock(8.6)-(36.6)-Options exercised0.10.40.22.7Capital stock, end of period614.4650.8614.4650.8Contributed surplus, beginning of period33.332.532.728.4Stock-based compensation cost0.20.20.80.8Stock-based compensation in Rite Aid, a company subject to significant influence---3.5Contributed surplus, end of period33.532.733.532.7Deficit, beginning of period(178.2)(286.2)(254.0)(324.1)Net earnings46.442.8180.2112.6Dividends(12.7)(10.6)(51.4)(42.5)Excess of purchase price over carrying value of Class A subordinate voting shares acquired(7.1)-(26.4)-Deficit, end of period(151.6)(254.0)(151.6)(254.0)Accumulated other comprehensive income, beginning of period80.196.580.1103.2Foreign currency translation adjustments, including income taxes effect-(16.4)-(23.1)Accumulated other comprehensive income, end of period80.180.180.180.1Total shareholders' equity576.4509.6576.4509.6THE JEAN COUTU GROUP (PJC) INC.Consolidated balance sheetsAs atFebruary 26, 2011As at February 27, 2010(in millions of Canadian dollars)$$(unaudited)(audited)AssetsCurrent assetsAccounts receivable197.0194.1Inventories173.2163.8Prepaid expenses6.95.0Future income taxes3.63.8380.7366.7Long-term receivables from franchisees34.733.3Other financial assets23.022.7Investments in companies subject to significant influence7.67.9Property and equipment414.4394.6Goodwill36.036.0Future income taxes10.715.8Other long-term assets138.3107.91,045.4984.9LiabilitiesCurrent liabilitiesBank overdraft16.513.3Accounts payable and accrued liabilities210.1195.2Income taxes payable28.736.1255.3244.6Long-term debt184.8199.9Future income taxes1.51.3Other long-term liabilities27.429.5469.0475.3Shareholders' equityCapital stock614.4650.8Contributed surplus33.532.7Deficit(151.6)(254.0)Accumulated other comprehensive income80.180.1576.4509.61,045.4984.9THE JEAN COUTU GROUP (PJC) INC.Consolidated statements of cash flows13 weeks52 weeksFor the periods ended February 26, 2011 and February 27, 20102011201020112010(unaudited, in millions of Canadian dollars)$$$$Operating activitiesNet earnings46.442.8180.2112.6Items not affecting cashAmortization9.18.032.630.3Change in fair value of third party asset-backed commercial paper and related options of repayment(0.7)0.1(1.0)(4.6)Share of loss in Rite Aid, a company subject to significant influence---55.2Future income taxes1.815.75.524.7Other1.6(1.1)3.8(2.9)58.265.5221.1215.3Net changes in non-cash asset and liability items15.4(7.1)(7.6)(12.5)Cash flow related to operating activities73.658.4213.5202.8Investing activitiesNet change in long-term receivables from franchisees(1.0)(7.4)(6.8)(10.5)Receipts from other financial assets0.10.20.63.5Purchase of property and equipment(8.9)(11.9)(43.9)(46.9)Proceeds from disposal of property and equipment3.0-6.01.2Other long-term assets(1.2)-(45.5)(27.2)Cash flow related to investing activities(8.0)(19.1)(89.6)(79.9)Financing activitiesNet change in revolving credit facility(34.9)(16.7)(15.1)(69.8)Repayment of long-term debt---(5.4)Issuance of capital stock0.10.40.22.7Redemption of capital stock(14.9)-(60.8)-Dividends(12.7)(10.6)(51.4)(42.5)Cash flow related to financing activities(62.4)(26.9)(127.1)(115.0)Net change in cash and cash equivalents3.212.4(3.2)7.9Bank overdraft, beginning of period(19.7)(25.7)(13.3)(21.2)Bank overdraft, end of period(16.5)(13.3)(16.5)(13.3)THE JEAN COUTU GROUP (PJC) INC.Unaudited additional informationFor the periods ended February 26, 2011 and February 27, 2010(In millions of Canadian dollars )Non-GAAP measuresOperating income before amortization ("OIBA") is not a measure of performance under Canadian generally accepted accounting principles ("GAAP"); however, management uses this performance measure in assessing the operating and financial performance of its operations. Besides, we believe that OIBA is an additional measure used by investors to evaluate operating performance and capacity of a company to meet its financial obligations.However, OIBA is not and must not be used as an alternative to net earnings or cash flow generated by operating activities as defined by GAAP. OIBA is not necessarily an indication that cash flow will be sufficient to meet our financial obligations. Furthermore, our definition of OIBA may not be necessarily comparative to a similar measure reported by other companies.Net earnings, which is a performance measure defined by GAAP, is reconciled hereunder with OIBA.13 weeks52 weeks2011201020112010$$$$Net earnings46.442.8180.2112.6Financing expenses (revenues)(0.1)0.30.7(4.2)Share of loss in Rite Aid---55.2Income taxes20.220.177.674.9Operating income66.563.2258.5238.5Amortization of property and equipment4.94.517.617.6Amortization of incentives paid to franchisees (1)4.23.515.012.7Operating income before amortization75.671.2291.1268.8(1) Amortization of incentives paid to franchisees is applied against other revenues in the consolidated financial statements.THE JEAN COUTU GROUP (PJC) INC.Unaudited additional informationFor the periods ended February 26, 2011 and February 27, 2010(In millions of Canadian dollars except per share amounts)Earnings (or earnings per share) before specific items and earnings (or earnings per share) before specific items and share of loss in Rite Aid are non-GAAP measures. The Company believes that it is useful for investors to be aware of significant items of an unusual or non-recurring nature that have adversely or positively affected its GAAP measures, and that the above-mentioned non-GAAP measures provide investors with a measure of performance with which to compare its results between periods without regard to these items. The Company's measures excluding certain items have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation.Net earnings and earnings per share are reconciled hereunder to earnings (and earnings per share) before specific items and earnings (and earnings per share) before specific items and share of loss in Rite Aid. All amounts are net of income taxes when applicable. 13 weeks52 weeks2011201020112010$$$$Net earnings46.442.8180.2112.6Unrealized foreign exchange gains on monetary items(0.1)-(0.1)(0.5)Change in fair value of third party asset-backed commercial paper and related options of repayment(0.7)0.1(1.0)(4.6)Earnings before specific items45.642.9179.1107.5Share of loss in Rite Aid---55.2Earnings before specific items and share of loss in Rite Aid45.642.9179.1162.7Earnings per share0.200.180.770.48Change in fair value of third party asset-backed commercial paper and related options of repayment---(0.02)Earnings per share before specific items0.200.180.770.46Share of loss in Rite Aid---0.23Earnings per share before specific items and share of loss in Rite Aid0.200.180.770.69FOR FURTHER INFORMATION PLEASE CONTACT: Andre BelzileThe Jean Coutu Group (PJC) Inc.Senior Vice-President, Finance and Corporate Affairs450-646-9760ORHelene BissonThe Jean Coutu Group (PJC) Inc.Vice-President, Communications450-646-9611, Ext. 1165