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Press release from Marketwire

The Jean Coutu Group: Second Quarter of Fiscal Year 2012 Results

- Net profit per share amounted to $0.29, including a $0.10 gain on sale of Rite Aid's shares, compared with $0.18 during the second quarter of fiscal year 2011. - Revenues amounted to $635.2 million compared to $625.6 million during the second quarter of fiscal year 2011, a 1.5 % increase.

Tuesday, October 04, 2011

The Jean Coutu Group: Second Quarter of Fiscal Year 2012 Results07:00 EDT Tuesday, October 04, 2011LONGUEUIL, QUÉBEC--(Marketwire - Oct. 4, 2011) - The Jean Coutu Group (PJC) Inc. (TSX:PJC.A)(the "Corporation" or the "Jean Coutu Group") reported its financial results today for the second quarter of fiscal year 2012 ended August 27, 2011.Summary of results(Unaudited, in millions of Canadian dollars, except per share amounts)Q2-2012Q2-2011First-half 2012First-half 2011$$$$Revenues635.2625.61,295.81,271.9Operating income before amortization ("OIBA")70.869.3147.9139.6Net profit66.443.4116.387.3Per share0.290.180.510.37HighlightsOperating income before depreciation and amortization ("OIBA") increased by 2.2 % for the second quarter of fiscal year 2012, despite the generic drugs price reduction to 30% of the brand name drugs price on April 21, as previously decreed by the Québec government. During the second quarter of fiscal year 2012, the Corporation repurchased 5,714,000 Class A subordinate voting shares at an average price of $11.91 per share, for a total consideration of $68.1 million. For the second quarter of fiscal year 2012, the Corporation sold 17,574,100 common shares of Rite Aid for a total consideration of $22.0 million, net of related costs, which resulted in a gain of $0.10 per share. Financial results"We are very satisfied with our results for the second quarter and first half of fiscal 2012. Despite the price reductions of generic drugs, we have posted a significant growth of our operational results, which demonstrates the success of the implementation of our business plan," said François J. Coutu, President and Chief Executive Officer. "We intend to confirm our position as leader in the pharmacy industry by continuing the development of our product offering and our network's expansion and renovation projects".International Financial Reporting Standards ("IFRS") All figures in this release are in Canadian dollars and presented according to IFRS accounting standards. In preparing its comparative information for fiscal year 2011, the Corporation adjusted amounts previously reported in the financial statements prepared in accordance with Canadian Generally Accepted Accounting principles "Canadian GAAP". Readers are referred to Note 20 of the Corporation's unaudited condensed consolidated interim financial statements for the second quarter of 2012 for further information about the transition to IFRS.Revenue Revenue consists 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 sales.Revenue amounted to $635.2 million during the second quarter ended August 27, 2011, compared with $625.6 million during the second quarter ended August 28, 2010, an increase of 1.5%. During the first half of fiscal year 2012, revenue amounted to $1,295.8 million compared to $1,271.9 million during the first half of previous fiscal year, an increase of 1.9%. This increase is attributable to overall market growth and the expansion of the PJC network of franchised stores, despite the deflationary impact on revenue due to the introduction of the generic version of large volume drugs as well as the price reductions of generic drugs previously decreed by the Québec government.OIBA OIBA increased by $1.5 million to $70.8 million for the second quarter of fiscal year 2012 compared with $69.3 million for the second quarter of fiscal year 2011. This increase is mostly attributable to a strong operational performance of the franchising activities. Gross sales of Pro Doc drugs, net of intersegments eliminations, amounted to $33.6 million in the second quarter ended August 27, 2011, compared with $34.0 million for the same period of fiscal year 2011. OIBA as a percentage of revenue ended the second quarter of fiscal year 2012 at 11.1% same as for the second quarter of the previous fiscal year.For the first half of fiscal year 2012, OIBA increased by $8.3 million and amounted to $147.9 million compared with $139.6 million during the first half of fiscal year 2011. OIBA as a percentage of revenues ended the first half of fiscal year 2012 at 11.4% compared with 11.0% for the first half of previous fiscal year.Rite Aid During the 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 IFRS, 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. For the second quarter ended August 27, 2011, the Corporation's unrecognized share of loss in Rite Aid amounted to $2.5 million, net of dilution gain related to the partial sales of this investment.For the 13-week period ended August 27, 2011, the Corporation sold 17,574,100 common shares of Rite Aid for a total consideration of $22 million (US$22.9 million),net of related costs, which resulted in a gain on disposal of investments in associate – Rite Aid since the value of this investment was previously reduced to zero.Net profit Net profit amounted to $66.4 million ($0.29 per share) during the second quarter ended August 27, 2011 compared with $43.4 million ($0.18 per share) during the second quarter ended August 28, 2010. The increase is mainly attributable to the gain on disposal of shares in Rite Aid for a total consideration of $22.0 million, net of related costs ($0.10 per share).Net profit for the first-half of fiscal 2012 amounted to $116.3 million ($0.51 per share) compared with $87.3 million ($0.37 per share) for the first-half of fiscal 2011. The increase is mainly attributable to the gain on disposal of shares in Rite-Aid for a total consideration of $22.0 million, net of related costs ($0.10 per share).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, the PJC network's retail sales grew by 1.2%, pharmacy sales gained 0.8% and front-end sales increased by 2.0% in the second quarter of fiscal year 2012 compared with the same period last year. During the second quarter ended August 27, 2011, sales of non-prescription drugs, which represented 8% of total retail sales, increased by 2.9%, whereas these sales had increased by 4.5% during the second quarter of the previous fiscal year.On a same-store basis, the PJC network's retail sales grew by 1.2%, pharmacy sales gained 0.8% and front-end sales increased by 2.0% in the second quarter of fiscal year 2012 compared with the same period last year. During the second quarter ended August 27, 2011, sales of non-prescription drugs, which represented 8 % of total retail sales, increased by 2.9%, whereas these sales had increased by 4.5% during the second quarter of the previous fiscal year.Following the introduction of the generic version of large volume drugs, generic drugs reached 57.2% of drugs prescriptions during the second quarter of fiscal year 2012 compared with 53.2% during the same quarter 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. Therefore, the introduction of new generic drugs reduced pharmacy's retail sales growth by 2.3% and price reductions of generic drugs decreed by the Québec government reduced the growth of those sales by 3.6% during the second quarter of fiscal year 2012.Network performance (1)Q2-2012Q2-2011First half 2012First half 2011Retail sales (unaudited, in millions of dollars)$943.1$914.1$1,900.3$1,844.5Retail sales growth (in %)Total storesTotal3.2%4.0%3.0%4.6%Pharmacy3.0%3.9%2.6%4.8%Front-end3.7%3.1%3.6%3.6%Same storeTotal1.2%1.9%1.0%2.4%Pharmacy0.8%2.2%0.4%3.0%Front-end2.0%0.2%1.8%0.6%(1)Franchised outlets' retail sales are not included in the Corporation's consolidated financial statementsPJC network of franchised stores expansion During the second quarter of fiscal year 2012, there were 5 store openings in the PJC network of franchised stores, including 3 relocations. In addition, 10 stores were significantly renovated or expanded.Capital-stock On May 2, 2011, the Corporation announced its intention to repurchase for cancellation, if it is considered advisable, up to 10,400,000 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, 2012. The shares were or will be repurchased through the facilities of the Toronto Stock Exchange and in accordance with its requirements.For the 13-week period ended August 27, 2011, the Corporation repurchased 5,714,000 Class A subordinate voting shares at an average price of $11.91 per share for a total consideration of $68.1 million including related costs. An amount of $37.6 million representing the excess of the purchase price over the carrying value of the repurchased shares was recorded in the retained earnings for the 13-week period ended August 27, 2011. For the 26-week period ended August 27, 2011, the Corporation repurchased 7,919,450 class A subordinate voting shares at an average price of $11.65 per share for a total consideration of $92.3 million. An amount of $50.0 million representing the excess of the purchase price over the carrying value of the repurchased shares was recorded in the retained earnings for the 26-week period ended August 27, 2011. The shares repurchased during the 26-week period ended August 27, 2011 were cancelled.Dividend The Board of the Jean Coutu Group declared a quarterly dividend of $0.06 per share. This dividend will be paid on November 4, 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 October 21, 2011.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 sales 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 Pro Doc's contribution will have a positive impact on the consolidated margins.Conference call Financial analysts and investors are invited to attend the second quarter of fiscal year 2012 results conference call to be held on October 4, 2011, at 9:00 AM (ET). The call-in number is 514 861-2255 or toll free at 1 877 405-9213, access code 3081044 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 3, 2011. The access code is 8581766, 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 394 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 close to 19,000 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 approximately 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.Condensed consolidated statements of income13 weeks26 weeksFor the periods ended August 27, 2011 and August 28, 20102011201020112010(unaudited, in millions of Canadian dollars, unless otherwise noted)$$$$Sales570.8559.61,164.71,142.6Other revenues64.466.0131.1129.3635.2625.61,295.81,271.9Operating expensesCost of sales507.5500.41,033.71,021.0General and operating expenses56.955.9114.2111.3Operating income before depreciation and amortization70.869.3147.9139.6Depreciation and amortization7.56.814.913.6Operating income63.362.5133.0126.0Financing expenses, net0.90.61.41.3Profit before the following items62.461.9131.6124.7Gains on sales of investment in associate Rite Aid22.0-22.0-Profit before income taxes84.461.9153.6124.7Income taxes18.018.537.337.4Net profit66.443.4116.387.3Basic and diluted profit per share, in dollars0.290.180.510.37Condensed consolidated statements of comprehensive income13 weeks26 weeksFor the periods ended August 27, 2011 and August 28, 20102011201020112010(unaudited, in millions of Canadian dollars)$$$$Net profit66.443.4116.387.3Other comprehensive income----Total comprehensive income66.443.4116.387.3THE JEAN COUTU GROUP (PJC) INC.Condensed consolidated statements of changes in equity13 weeks26 weeksFor the periods ended August 27, 2011 and August 28, 20102011201020112010(unaudited, in millions of Canadian dollars)$$$$Capital stock, beginning of period602.6641.8614.4650.8Redemption of capital stock(30.5)(4.9)(42.3)(14.0)Options exercised---0.1Capital stock, end of period572.1636.9572.1636.9Contributed surplus, beginning of period1.60.81.40.6Share-based compensation cost0.20.20.40.4Contributed surplus, end of period1.81.01.81.0ReservesEmployee benefits reserves, beginning and end of period(0.9)(0.9)(0.9)(0.9)Retained earnings (deficit), beginning of period7.1(96.4)(16.6)(121.4)Net profit66.443.4116.387.3Dividends(13.6)(12.8)(27.4)(25.8)Excess of purchase price over carrying value of Class A subordinate voting shares repurchased(37.6)(3.1)(50.0)(9.0)Retained earnings (deficit), end of period22.3(68.9)22.3(68.9)Equity, end of period595.3568.1595.3568.1THE JEAN COUTU GROUP (PJC) INC.Condensed consolidated statements of financial positionAs at August 27, 2011As at February 26, 2011(unaudited, in millions of Canadian dollars)$$Current assetsTrade and other receivables186.1193.5Inventories167.1173.2Income taxes recoverable2.4-Prepaid expenses5.86.9361.4373.6Non-current assetsLong-term receivables from franchisees34.334.7Other financial assets17.223.0Investment in associates6.87.6Property and equipment361.6362.4Investment property18.920.5Intangible assets183.5174.4Goodwill36.036.0Deferred tax14.717.4Other long-term assets9.910.1Total assets1,044.31,059.7Current liabilitiesBank overdraft11.916.5Trade and other payables209.0208.7Income taxes payable27.935.6Short term portion of long-term debt184.8-433.6260.8Non-current liabilitiesLong-term debt-184.8Deferred tax1.41.4Other long-term liabilities14.014.4Total liabilities449.0461.4EquityCapital stock572.1614.4Contributed surplus1.81.4Reserves(0.9)(0.9)Retained earnings (deficit)22.3(16.6)Total equity595.3598.3Total liabilities and equity1,044.31,059.7THE JEAN COUTU GROUP (PJC) INC.Condensed consolidated statements of cash flows13 weeks26 weeksFor the periods ended August 27, 2011 and August 28, 20102011201020112010(unaudited, in millions of Canadian dollars)$$$$Operating activitiesNet profit66.443.4116.387.3Adjustments for:Depreciation and amortization7.56.814.913.6Change in fair value of other financial assets0.20.2(0.1)0.5Gains on sales of investment in associate Rite Aid(22.0)-(22.0)-Interest on long-term debt and other interest0.80.71.51.2Income taxes18.018.537.337.4Others1.01.20.31.871.970.8148.2141.8Net changes in non-cash asset and liability items(3.8)(10.9)7.00.6Interest paid(0.7)(0.6)(1.5)(1.1)Income taxes paid(17.9)(15.3)(44.7)(46.0)Cash flow related to operating activities49.544.0109.095.3Investing activitiesProceeds from disposal of investment in associate Rite Aid22.0-22.0-Purchase of property and equipment(7.2)(12.9)(12.0)(23.0)Proceeds from disposal of property and equipment2.0-2.01.8Purchase of investment property-(0.1)-(0.3)Proceeds from disposal of investment property1.7-2.30.7Net change in long-term receivables from franchisees(4.3)(3.3)(1.1)(4.6)Receipts from other financial assets0.10.25.90.4Purchase of intangible assets(5.2)(4.3)(14.1)(14.5)Others(0.5)-2.0-Cash flow related to investing activities8.6(20.4)7.0(39.5)Financing activitiesNet change in revolving credit facility39.99.9-(5.1)Issuance of capital stock---0.1Redemption of capital stock(60.0)(9.4)(84.0)(23.0)Dividends paid(13.6)(12.8)(27.4)(25.8)Cash flow related to financing activities(33.7)(12.3)(111.4)(53.8)Net change in cash and cash equivalents24.411.34.62.0Bank overdraft, beginning of period(36.3)(22.6)(16.5)(13.3)Bank overdraft, end of period(11.9)(11.3)(11.9)(11.3)FOR FURTHER INFORMATION PLEASE CONTACT: Andre BelzileThe Jean Coutu Group (PJC) Inc.Senior Vice-President, Finance and Corporate Affairs(450) 646-9760ORVice-President, CommunicationsHelene Bisson(450) 646-9611, Ext. 1165