Metro's Q4 earnings up 10.7% year-over-year to C$93.4M while sales rise 1.1% to C$2.56B; same-store sales slip 0.5% due to deflation in certain product categories

MONTREAL , November 18, 2010 (press release) – METRO INC. (TSX: MRU.A) today announced record results for the fourth quarter and fiscal year ended September 25, 2010.

2010 FOURTH QUARTER HIGHLIGHTS

- Net earnings of $93.4 million, up 10.7% or 8.7% on an adjusted basis(1)
- Fully diluted net earnings per share of $0.88, up 14.3% or 12.8% on an adjusted basis(1)
- Sales of $2,559.9 million, up 1.1%
- Declared dividend of $0.17 per share, up 23.6%

FISCAL 2010 HIGHLIGHTS

- Net earnings of $391.8 million, up 10.6%
- Adjusted net earnings(1) of $382.4 million, up 6.5%
- Adjusted fully diluted net earnings(1) per share of $3.56, up 10.2%
- Sales of $11,342.9 million, up 1.3%
- Repurchase of nearly 4 million shares

"We are very satisfied with our 2010 financial results considering the challenges of persistent deflation in certain product categories and continuing consumer caution. Dunnhumby Canada, our joint venture created in the fall of 2009, and our Metro & Moi loyalty program rolled out across Québec at the end of the fiscal year, laid the groundwork for a renewed customer-based approach that will allow us to differentiate ourselves in the coming years. Although the economic and competitive environments remain challenging, we are confident that we can continue(2) to grow in 2011," stated Eric R. La Flèche, President and Chief Executive Officer.

SALES

2010 fourth quarter sales reached $2,559.9 million compared to $2,532.5 million last year, an increase of 1.1%. Sales for fiscal 2010 reached $11,342.9 million, up 1.3% compared to sales of $11,196.0 million for fiscal 2009.

These increases were achieved despite a slight drop in the value of our basket, whereas last year, high food price inflation and the temporary closing of several stores of a competitor due to a labour conflict had a positive impact on our sales. Same-store sales declined 0.5% due to deflation in certain product categories.

EARNINGS BEFORE FINANCIAL COSTS, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA)(1)

Fourth quarter EBITDA(1) in 2010 was $185.6 million, up 5.6% from $175.8 million for the same quarter last year. Fourth quarter EBITDA(1) represented 7.3% of sales versus 6.9% last year. Excluding non-recurring costs of $2.3 million before taxes to convert our Ontario supermarkets to the Metro banner, adjusted EBITDA(1) for the fourth quarter of 2009 represented 7.0% of sales.

EBITDA(1) for fiscal 2010 was $787.0 million or 6.9% of sales compared to $741.6 million or 6.6% of sales for fiscal 2009. Excluding non-recurring costs of $0.9 million and $11.0 million before taxes to convert our Ontario supermarkets to the Metro banner in fiscal 2010 and 2009 respectively, adjusted EBITDA(1) represented 6.9% of sales in 2010 and 6.7% in 2009.

Our share of earnings from our investment in Alimentation Couche-Tard for the fourth quarter and fiscal 2010 were $15.1 million and $40.4 million respectively, compared to $11.7 million and $37.4 million for the corresponding periods of fiscal 2009. Excluding non-recurring items as well as our share of earnings from our investment in Alimentation Couche-Tard, our adjusted EBITDA(1) for the fourth quarter and fiscal 2010 were $170.5 million and $747.5 million respectively or 6.7% and 6.6% of sales versus $166.4 million or 6.6% of sales for the fourth quarter of 2009 and $715.2 million or 6.4% for fiscal 2009.

These increases are due mainly to an increase in our gross margins driven by our improved store operations.

DEPRECIATION AND AMORTIZATION AND FINANCIAL COSTS

Total amortization expenses for the fourth quarter and fiscal 2010 amounted to $45.3 million and $201.2 million respectively, compared with $46.3 million and $189.1 million for the same periods of 2009. Fourth quarter financial costs totalled $9.5 million in 2010 versus $10.1 million last year, while financial costs for fiscal 2010 totalled $44.7 million versus $48.0 million last year. Interest rates for fiscal 2010 averaged 4.0% versus 4.4% last year.

INCOME TAXES

The 2010 fourth quarter and fiscal 2010 income tax expenses of $37.4 million and $149.3 million represented effective tax rates of 28.6% and 27.6% respectively. In the first quarter of 2010, we benefited from a $10.0 million reduction in our future income tax liabilities and income tax expense. Excluding this reduction, our effective tax rate for fiscal 2010 was 29.4%. The 2009 fourth quarter and fiscal 2009 income tax expenses were $35.0 million and $150.1 million respectively and the tax rates were 29.3% and 29.8% respectively. In the third quarter of 2009, the Québec government reduced the tax rate on investment income and this reduction cut our future income tax liabilities by $2.7 million and our tax expenses by the same amount. Excluding this reduction, our effective fiscal 2009 tax rate was 30.3%.

NET EARNINGS

The 2010 fourth quarter net earnings were $93.4 million compared to $84.4 million for the corresponding quarter last year, an increase of 10.7%. Fully diluted net earnings per share rose 14.3% to $0.88 from $0.77 last year. Excluding banner conversion costs of $2.3 million before taxes recorded in the fourth quarter of 2009, our 2010 fourth quarter net earnings and fully diluted net earnings per share were up 8.7% and 12.8% respectively.

Net earnings for fiscal 2010 reached $391.8 million versus $354.4 million last year, up 10.6%. Fully diluted net earnings per share were $3.65 compared to $3.19 last year, an increase of 14.4%. Excluding the 2010 first quarter and 2009 third quarter income tax expense decreases of $10.0 million and $2.7 million respectively and pre-tax banner conversion costs of $0.9 million in 2010 and $11.0 million in 2009, adjusted net earnings(1) for fiscal 2010 were $382.4 million, up 6.5% from the $359.0 million for fiscal 2009. Adjusted fully diluted net earnings per share(1) were $3.56, up 10.2% from $3.23 last year.

First, second, third and fourth quarter sales for 2010 were up 1.7%, 1.1%, 1.4% and 1.1% respectively over those in fiscal 2009. These increases were achieved despite persistent deflation in certain product categories in 2010, whereas last year, high food price inflation and the temporary closing of several stores of a competitor due to a labour conflict had a positive impact on our sales for the corresponding quarters.

First quarter net earnings and fully diluted net earnings per share for 2010 were up 21.0% and 24.7% respectively over those in fiscal 2009. Excluding banner conversion costs of $0.9 million and $4.5 million before taxes recorded respectively in the first quarters of 2010 and 2009, as well as the income tax expense decrease of $10.0 million in the first quarter of 2010 further to future decreases in the Ontario tax rate, adjusted net earnings(1) were up 5.5% and adjusted fully diluted net earnings per share(1) were up 7.9%.

Second quarter net earnings and fully diluted net earnings per share for 2010 were up 5.2% and 8.8% respectively from those in 2009.

Third quarter net earnings and fully diluted net earnings per share in 2010 were up 6.6% and 10.9% respectively from 2009. Excluding non-recurring items recorded in the third quarter of 2009, namely $2.9 million before taxes to convert our Ontario supermarkets to the Metro banner as well as an income tax expense decrease of $2.7 million, net earnings and fully diluted net earnings per share for the third quarter of 2010 were up 7.3% and 10.9%, compared to adjusted net earnings(1) and adjusted fully diluted net earnings per share(1) for the third quarter of 2009.

Fourth quarter net earnings and fully diluted net earnings per share in 2010 were up 10.7% and 14.3% over those for 2009. Excluding 2009 fourth quarter banner conversion costs of $2.3 million before taxes, net earnings and fully diluted net earnings per share for the fourth quarter of 2010 were up 8.7% and 12.8% over adjusted net earnings(1) and adjusted fully diluted net earnings per share(1) for the fourth quarter of 2009.

Cash Position

OPERATING ACTIVITIES

Operating activities generated cash flows of $179.3 million in the fourth quarter and $547.8 million for fiscal 2010, compared to $230.8 million in the fourth quarter of 2009 and $520.1 million for fiscal 2009. The variations in generated cash are due primarily to increased net earnings and variations in non-cash working capital.

INVESTING ACTIVITIES

Investing activities required outflows of $30.2 million in the fourth quarter and $339.8 million for fiscal 2010 versus $94.8 million in the fourth quarter of 2009 and $258.8 million for fiscal 2009. The decrease in fourth quarter outflows in 2010 compared with 2009 is due primarily to reduced acquisition of fixed assets in 2010, while the increase in outflows for fiscal 2010 compared with fiscal 2009 is attributable to the 2010 acquisition of 18 stores for valuable cash consideration of $152.3 million (net of cash acquired totalling $0.3 million).

During fiscal 2010, the Company and its retailers invested $278.7 million in our retail network, for a net expansion of 364,100 square feet or 1.9%. Major renovations and expansions of 35 stores were completed, and 13 new stores were opened.

FINANCING ACTIVITIES

Financing activities required outflows of $54.6 million in the fourth quarter of 2010 compared to $58.7 million in the fourth quarter of 2009.

Financing activities required outflows of $234.7 million for fiscal 2010 versus $171.6 million for fiscal 2009. The increase of outflows is attributable to a greater number of Class A Subordinate shares being repurchased, higher dividends, and a decrease in issuance of shares in 2010 compared to 2009.

Financial Position

Despite the difficult economic environment, we do not anticipate(2) any liquidity risk and consider our financial position at the end of fiscal 2010 as very solid. We had an unused authorized revolving line of credit of $400.0 million. Our long-term debt corresponded to 29.1% of the combined total of long-term debt and shareholders' equity (long-term debt/total capital).

NORMAL COURSE ISSUER BID PROGRAM

The Company decided to renew the issuer bid program as an additional option for using excess funds. Thus, we will be able to decide, in the shareholders' best interest, to reimburse debt or to repurchase Company shares. The Board of Directors authorized the Company to repurchase, in the normal course of business, between September 8, 2010 and September 7, 2011, up to 6,000,000 of its Class A Subordinate Shares representing approximately 5.7% of its issued and outstanding shares at the close of the Toronto Stock Exchange on August 6, 2010. Repurchases will be made through the stock exchange at market price, in accordance with its policies and regulations, as well as by other means as may be permitted by TSX and any other securities regulatory authorities, including by private agreements. The Class A Subordinate Shares so repurchased will be cancelled. Under the normal course issuer bid program covering the period from September 8, 2009 to September 7, 2010, the Company repurchased 4,030,600 Class A Subordinate shares at an average price of $40.42 per share for a total of $162.9 million. Under the existing program covering the period from September 8, 2010 to September 7, 2011, the Company has repurchased, as of November 5, 2010, 623,800 Class A Subordinate shares at an average price of $45.04 per share for a total of $28.1 million.

DIVIDENDS

On September 21, 2010, the Company's Board of Directors declared a quarterly dividend of $0.17 per Class A Subordinate Share and Class B Share payable November 16, 2010, an increase of 23.6% over last year. On an annualized basis, this dividend represents 20.2% of 2009 net earnings.

SHARE TRADING

The value of METRO shares remained in the $33.02 to $47.01 range in fiscal 2010. During this period, a total of 72.3 million shares traded on the Toronto Stock Exchange. The closing price on Friday, September 24, 2010 was $45.15, compared with $34.73 at the end of fiscal 2009. The closing price on November 5, 2010 was $46.52.

Press release

This press release sets out the financial position and consolidated results of METRO INC. on September 25, 2010. It should be read in conjunction with the unaudited interim consolidated financial statements and accompanying notes in this press release along with the consolidated financial statements for the fiscal year ended September 26, 2009 and related notes and MD&A presented in the Company's 2009 Annual Report. This press release is based upon information as at November 5, 2010 unless otherwise stated.

Non-GAAP Measurements

In addition to the Canadian Generally Accepted Accounting Principles (GAAP) earnings measurements provided, we have included certain non-GAAP earnings measurements. These measurements are presented for information purposes only. They do not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similar measurements presented by other public companies.

Earnings before financial costs, taxes, depreciation and amortization (EBITDA)

EBITDA is a measurement of earnings that excludes financial costs, taxes, depreciation and amortization. We believe that EBITDA is a measurement commonly used by readers of financial statements to evaluate a company's operational cash-generating capacity and ability to discharge its financial expenses.

Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net earnings per share

Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net earnings per share are earnings measurements that exclude non-recurring items. We believe that presenting earnings without non-recurring items leaves readers of financial statements better informed as to the current period and corresponding period's earnings, thus enabling them to better evaluate the Company's performance and judge its future outlook.

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