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Press release from CNW Group

Indigo Fiscal-Year Earnings Up 14%

Monday, May 31, 2010

Indigo Fiscal-Year Earnings Up 14%16:46 EDT Monday, May 31, 2010Revenue Rises 3.0%TORONTO, May 31 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 14% increase in net earnings for its fiscal year ending April 3, 2010. Net earnings for the year were $34.9 million compared to $30.7 million last year. The Company noted that this year was a 53-week reporting period.Revenue for the year was $969 million, up $28.5 million, or 3.0% from last year. On a 52 week, comparable store basis, Indigo and Chapters superstores posted 0.6% growth, while Coles and Indigo Spirit small format stores were down 2.2%. Sales from Indigo's online channel, chapters.indigo.ca, decreased 4.8%.Commenting on the results, CEO Heather Reisman said, "We are pleased with our bottom line improvement, particularly since we invested significant capital and operating expense in Kobo, our digital reading initiative. We are also very pleased with the growth in our lifestyle and toy businesses, which allowed us to report top line growth against a year which included phenomenal sales from Stephanie Meyer's Twilight series. This confirms that our strategy of enriching our assortment is being well accepted by our customers."Revenue for the fourth quarter was up $13.7 million over the same quarter last year. The Company noted that this was a 14-week reporting period. On a 13 week, comparable store basis, Indigo and Chapters superstores were down 2.7% while Coles and Indigo Spirit small format stores were down 5.8%. Sales from Indigo's online channel, chapter.indigo.ca, decreased 3.3%.Ms Reisman noted, "The last quarter was a challenging one for us, with no blockbuster hit to compete with last year's over-the-top success of Stephanie Meyer. Our store traffic was also down materially during the two weeks of the Olympics as Canadians stayed home to cheer on our athletes."Net earnings for the quarter were $0.5 million compared to $1.9 million last year. This quarter included significant expense related to the start up and growth of Kobo, which the Company expects will continue in the coming fiscal year.Shortly after the close of the fiscal year, Canadian retailers, including Indigo, launched Kobo eReaders in-store nationally and online to high demand. Retailers in the United States and Australia will launch the Kobo eReader in May and June, 2010.Indigo transferred all of the assets of its digital reading initiative into a newly formed company, Kobo Inc. (www.kobobooks.com) in December, 2009. Kobo subsequently raised $16 million in funding from strategic partners, including $5 million from Indigo, and investment from US based Borders Group Inc., Instant Fame, a division of Cheung Kong (Holdings) Limited of Hong Kong, and REDGroup Retail PTY Ltd of Australia.In the fiscal year, the Company opened six new superstores across the country. New stores were opened in Surrey, BC; Calgary, AB (2); Edmonton, AB; Milton, ON; and Laval, QC and residents of those cities now enjoy award winning book, toy and gift lover's havens in their market. Indigo also expanded their IndigoKids departments in 30 locations continuing their strategy to make Indigo the ultimate family friendly destination and the largest specialty toy retailer in Canada.Forward-Looking StatementsStatements contained in this news release that are not historical facts are forward-looking statements which involve risk and uncertainties that could cause results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are: general economic, market or business conditions in Canada; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond the control of the Company.Non-GAAP Financial MeasuresThe Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles. In order to provide additional insight into the business, the Company has also provided non-GAAP data, including comparative store sales growth, in the press release above. This measure does not have a standardized meaning prescribed by GAAP, and is therefore specific to Indigo and may not be comparable to similar measures presented by other companies. Comparative store sales growth is a key indicator used by the Company to measure performance against internal targets and prior period results. This measure is commonly used by financial analysts and investors to compare Indigo to other retailers. Comparable store sales are defined as sales generated by stores that have been open for more than 12 months on a 52-week basis.About Indigo Books & Music Inc.Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (TSX:IDG). As the largest book, gift and specialty toy retailer in the country, Indigo operates in all provinces under different banners including Indigo Books & Music; Indigo Books, Gifts, Kids; IndigoSpirit; Chapters; The World's Biggest Bookstore; and Coles. The online division, www.chapters.indigo.ca, features books, eBooks, toys, music and DVDs, and hosts the award winning Indigo Online Community. In 2008, Indigo launched Pistachio, an eco-aware lifestyle store. In 2009, Indigo spun off their digital eReading division to launch KOBO Inc. - a leading destination for eReading.Chapters and Indigo are rated as the number one and number two most favoured retailers in Canada by the Kubas Major Market Retail Report, and have occupied the list since 2000.In 2004, Indigo founded the Indigo Love of Reading Foundation, a registered charity that provides new books and education materials to high-needs Canadian elementary schools, to address the literacy crisis in Canada. To date the Foundation has contributed $9 mm to schools in need.Visit loveofreading.org for more information.To learn more about Indigo, please visit the About Our Company section of www.chapters.indigo.ca. << Consolidated Balance Sheets As at As at April 3, March 28, (thousands of dollars) 2010 2009 ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 103,898 92,169 Accounts receivable 8,455 9,890 Inventories 224,406 221,767 Income taxes recoverable 899 - Prepaid expenses 6,771 5,118 Future tax assets 6,615 6,181 ------------------------------------------------------------------------- Total current assets 351,044 335,125 ------------------------------------------------------------------------- Property, plant and equipment 77,478 72,137 Future tax assets 40,894 36,422 Intangible assets 23,794 16,299 Goodwill 26,632 27,523 ------------------------------------------------------------------------- Total assets 519,842 487,506 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 229,920 233,353 Deferred revenue 12,882 11,612 Income taxes payable - 344 Current portion of long-term debt 1,863 2,734 ------------------------------------------------------------------------- Total current liabilities 244,665 248,043 ------------------------------------------------------------------------- Long-term accrued liabilities 8,203 6,301 Long-term debt 1,174 2,272 ------------------------------------------------------------------------- Total liabilities 254,042 256,616 ------------------------------------------------------------------------- Non-controlling interest 6,831 - Shareholders' equity Share capital 198,635 196,471 Contributed surplus 4,670 3,685 Retained earnings 55,664 30,734 ------------------------------------------------------------------------- Total shareholders' equity 258,969 230,890 ------------------------------------------------------------------------- Total liabilities and shareholders' equity 519,842 487,506 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Statements of Earnings and Comprehensive Earnings 53-week 52-week period ended period ended April 3, March 28, (thousands of dollars, except per share data) 2010 2009 ------------------------------------------------------------------------- Revenues 968,927 940,399 Cost of sales, operations, selling and administration 895,930 867,945 ------------------------------------------------------------------------- 72,997 72,454 ------------------------------------------------------------------------- Depreciation of property, plant and equipment 19,682 22,223 Amortization of intangible assets 8,326 5,638 Write-off of capital assets 1,086 - ------------------------------------------------------------------------- 29,094 27,861 ------------------------------------------------------------------------- Earnings before the undernoted items 43,903 44,593 Interest on long-term debt and financing charges 214 309 Interest income on cash and cash equivalents (333) (1,443) Dilution gain on sale of non-controlling interest in subsidiary (3,019) - Deemed disposition of goodwill 891 - ------------------------------------------------------------------------- Earnings before income taxes and non-controlling interest 46,150 45,727 Income tax expense Current 1,481 344 Future 11,056 14,733 ------------------------------------------------------------------------- 12,537 15,077 ------------------------------------------------------------------------- Earnings before non-controlling interest 33,613 30,650 Non-controlling interest (1,310) - ------------------------------------------------------------------------- Net earnings and comprehensive earnings for the period 34,923 30,650 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net earnings per common share Basic $ 1.42 $ 1.24 Diluted $ 1.39 $ 1.21 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Statements of Cash Flows 53-week 52-week period ended period ended April 3, March 28 (thousands of dollars) 2010 2009 ------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings 34,923 30,650 Add (deduct) items not affecting cash Depreciation of property, plant and equipment 19,682 22,223 Amortization of intangible assets 8,326 5,638 Stock-based compensation 1,130 862 Directors' stock-based compensation 378 362 Future tax assets 2,842 10,324 Loss on disposal of capital assets 290 30 Write-off of capital assets 1,086 - Non-controlling interest (1,310) - Dilution gain on sale of non-controlling interest in subsidiary (3,019) - Deemed disposal of goodwill 891 - Other 1,387 883 Net change in non-cash working capital balances related to operations Accounts receivable 1,435 (894) Inventories (2,639) (15,508) Prepaid expenses (1,653) (189) Income taxes payable (recoverable) (1,243) 365 Deferred revenue 1,270 1,262 Accounts payable and accrued liabilities (1,531) 38,782 ------------------------------------------------------------------------- Cash flows from operating activities 62,245 94,790 ------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (24,927) (34,041) Addition of intangible assets (16,231) (12,176) Acquisition of non-capital tax losses (7,748) (2,932) ------------------------------------------------------------------------- Cash flows used in investing activities (48,906) (49,149) ------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt (3,031) (3,784) Proceeds from share issuances 1,909 287 Repurchase of common shares (446) (5,025) Issuance of equity securities by subsidiary to non-controlling interest 11,000 - Dividends paid (9,815) - ------------------------------------------------------------------------- Cash flows used in financing activities (383) (8,522) ------------------------------------------------------------------------- Effect of foreign currency exchange rate changes on cash and cash equivalents (1,227) (883) Net increase in cash and cash equivalents during the period 11,729 36,236 Cash and cash equivalents, beginning of period 92,169 55,933 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 103,898 92,169 ------------------------------------------------------------------------- ------------------------------------------------------------------------- >> For further information: Janet Eger, Director, Public Relations, (416) 342-8561, jeger@indigo.ca