The Jean Coutu Group reports financial results for third-quarter of fiscal year 2010

The Jean Coutu Group (PJC) Inc.

- Reports operating income before amortization ("OIBA") of $71.5 million for the third quarter, an increase of 19.0% compared with the third quarter of fiscal year 2009.

- Net earnings per share amounted to $0.19 compared with a net loss per share of $1.66 during the third quarter of fiscal year 2009.

The Jean Coutu Group (PJC) Inc. (the "Company" or the "Jean Coutu Group") reported its financial results today for the third quarter of fiscal year 2010 ended November 28, 2009.

HIGHLIGHTS

- Revenues increased by 9.3% and OIBA increased by 19.0% during the third quarter of fiscal year 2010 compared with the same period last year.

- Earnings before specific items and share of loss in Rite Aid is $0.19 per share for the third quarter of fiscal year 2010, an increase of $0.04 per share compared with the third quarter of fiscal year 2009.

Financial results

"We are very pleased with the third quarter's results. Our network's continuous growth, the solid operating performance of our organization and the strength of the pharmacy industry allowed us to show a significant increase in our OIBA" said Mr. Francois J. Coutu, President and Chief Executive Officer. "We are determined to continue applying our business plan efficiently in order to reach the goals we have set."

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 $678.1 million during the quarter ended November 28, 2009, compared with $620.3 million during the quarter ended November 29, 2008. This increase is attributable to the overall market growth and the expansion of the Jean Coutu Group network of franchised stores. Furthermore, the consumers' cautiousness in view of the A(H1N1) flu contributed to the increase of the over-the-counter drug sales.

Other revenues amounted to $62.0 million during the third quarter of fiscal year 2010 compared with $58.2 million during the third 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 $11.4 million and amounted to $71.5 million for the third quarter of fiscal year 2010 compared with $60.1 million for the third 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. Gross sales of Pro Doc products, net of intercompany's eliminations, amounted to $26.8 million in the third quarter of fiscal year 2010 compared with $9.2 million in the third quarter of fiscal year 2009. OIBA as a percentage of revenues ended the third quarter of fiscal year 2010 at 10.5% compared with 9.7% for the comparable period of the previous fiscal year.

For the 39-week period of fiscal year 2010, OIBA increased by $26.3 million and amounted to $197.6 million compared with $171.3 million during the 39-week period of fiscal year 2009. OIBA as a percentage of revenues ended the 39-week period of fiscal year 2010 at 10.4% compared with 9.7% for the 39-week period of fiscal year 2009.

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

No share of loss in Rite Aid was accounted in the Company's earnings during the third quarter of fiscal year 2010 compared with $431.7 million ($1.79 per share) during the third quarter of fiscal year 2009.This is a non-cash charge.

For the 39-week periods ended November 28, 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. For the 13- and 39-week periods ended November 28, 2009, the Company's unrecognized share of loss in Rite Aid amounted to $24.6 and $35.6 million respectively.

Net earnings (loss)

For the quarter ended November 28, 2009, the net earnings amounted to $44.6 million ($0.19 per share) compared with a net loss of $399.2 million ($1.66 per share) for the quarter ended November 29, 2008.

Earnings before specific items and share of loss in Rite Aid amounted to $44.2 million ($0.19 per share) during the third quarter of fiscal year 2010 compared with $36.7 million ($0.15 per share) during the third 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. Furthermore, the consumers' cautiousness in view of the A(H1N1) flu contributed to the increase of the over-the-counter drug sales. Data on the growth included herewith was calculated based on comparable periods. During the third quarter of fiscal year 2010, on a same-store basis, PJC network retail sales grew of 6.3%, pharmacy sales gained 6.5% and front-end sales increased by 6.6% compared with the same period last year. During the third quarter of fiscal year 2010, the sales of non-prescription drugs, which represented 10% of total retail sales, increased by 16.0%, whereas these sales had increased by 6.4% at the same period last year.

Store network development

During the third quarter of fiscal year 2010, there were 5 store openings, including one relocation, in the PJC network of franchised stores. In addition, 14 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 February 5, 2010, to all holders of Class A subordinate voting shares and holders of Class B shares listed in the Company's shareholder ledger as of January 22, 2010.

Non-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 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.

Source: Jean Coutu Group (PJC) Inc.