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Press release from CNW Group

Indigo Q2 Revenue Up 3.8%

Tuesday, November 09, 2010

Indigo Q2 Revenue Up 3.8%16:01 EST Tuesday, November 09, 2010Digital and Lifestyle Businesses Grow RapidlyTORONTO, Nov. 9 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 3.8% growth in revenue for its second quarter ending October 2, 2010.Revenue for the quarter was $214.8 million, up $7.8 million from last year. On a comparable store basis, Indigo and Chapters superstores posted a 0.7% decline in revenue, while small format stores were down 4.8%.Commenting on the results, CEO Heather Reisman said, "We are pleased with our top line revenue growth, particularly in our rapidly growing digital business.  Consumers have responded very favourably to our Kobo eReader, launched in the middle of our first quarter, and are showing even greater response to the new Wi-Fi model launched this past month." Ms. Reisman noted, "Our core retail book business experienced a challenging quarter against a very strong line up of titles in the same period last year.  Our gift and toy businesses continued to show significant growth and reinforced our decision to expand these categories meaningfully in a majority of stores moving forward." Net loss for the quarter was $1.7 million compared to a net profit of $2.2 million last year.  Ms. Reisman noted, "The increased loss was expected as we continue to invest in the growth and development of our digital initiatives and the re-development of our stores to accommodate growth in our gift and toy businesses".The Board of Directors today also approved a quarterly dividend of 11 cents per common share to be paid on December 14th, 2010, to all shareholders of record as of November 30th, 2010.During the quarter, Kobo, the global eReading service of which Indigo owns 59%, announced plans for its application to be preloaded on both the Samsung Galaxy and the BlackBerry® PlayBook™ tablets. They also announced their 3rd Quarter launch of the new Kobo Wireless eReader which adds Wi-Fi connectivity, upgraded hardware with faster performance, longer battery life, a sharper eInk screen and easy access to the Kobo store hosting more than 2.2 million books.  Shortly after the close of the quarter, Kobo announced the addition of dozens of newspaper and magazines to the assortment including The Globe and Mail, The New York Times, The Wall Street Journal, and Harvard Business Review.  Kobo will continue to expand its newspaper and magazine offering. Kobo also announced that it will now be selling in 2,500 Walmart locations throughout the United States, expanding on its current availability at Canadian Walmart stores.Given the continued growth of Kobo's business, Kobo is seeking to raise additional financing by way of a private placement to cover working capital needs. The amount to be raised, the financial terms, and the timing of the financing will be determined by Kobo in consultation with its financial advisors.Also in the second quarter, Indigo launched expanded toy sections in six stores nationally, with the Company poised to become the largest specialty toy retailer in Canada in time for the holiday period. Indigo also hosted the first "Teen Read Awards", a three month national online and in-store celebration of young adult fiction, where fans cast over 300 thousand votes to select and honour their favourite books.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.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(Unaudited)  As at As atAs at  October 2,   September 26,April 3,(thousands of dollars) 2010 20092010     ASSETS    Current    Cash and cash equivalents 59,35078,589103,489Restricted cash 2,472466409Accounts receivable 10,5358,4708,455Inventories 267,316234,190  224,406Income taxes recoverable 899866899Prepaid expenses 22,1526,5776,771Future tax assets 6,5785,8856,615Total current assets 369,302335,043351,044Property, plant and equipment 85,58079,67277,478Intangible assets 26,78118,39323,794Future tax assets 40,89436,42240,894Goodwill 26,63227,52326,632Total assets 549,189497,053519,842     LIABILITIES AND SHAREHOLDERS' EQUITY    Current    Accounts payable and accrued liabilities 263,314247,273229,920Deferred revenue 23,61912,53712,882Current portion of long-term debt 1,3922,4081,863Total current liabilities 288,325262,218244,665Long-term accrued liabilities 6,9626,2968,203Long-term debt 2,3471,8271,174Total liabilities 297,634270,341254,042Non-controlling interest 3,738-6,831Shareholders' equity    Share capital 199,906196,638198,635Contributed surplus 4,9924,3514,670Retained earnings 42,91925,72355,664Total shareholders' equity 247,817226,712258,969Total liabilities and shareholders' equity 549,189497,053519,842Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)(Unaudited)     (thousands of dollars, except per share data)13-weekperiod endedOctober 2,201013-weekperiod endedSeptember 26,200926-weekperiod endedOctober 2,201026-weekperiod endedSeptember 26,2009     Revenues214,764206,990419,050400,541Cost of sales, operations, selling and administration212,040197,075417,054386,667 2,7249,9151,99613,874Depreciation of property, plant and equipment4,4654,9188,9709,830Amortization of intangible assets2,5182,1244,9303,965 6,9837,04213,90013,795Earnings (loss) before the undernoted items(4,259)2,873(11,904)79Interest on long-term debt and financing charges106143118Interest income on cash and cash equivalents(104)(125)(184)(136)Earnings (loss) before income taxes and non-controlling interest(4,165)2,937(11,763)97Income tax expense45873737201Earnings (loss) before non-controlling interest(4,623)2,200(11,800)(104)Non-controlling interest(2,814)-(4,683)-Net earnings (loss) and comprehensive earnings (loss) for the period(1,809)2,200(7,117)(104)     Net earnings (loss) per common share    Basic$(0.07)$0.09$(0.29)$(0.00)Diluted$(0.07)$0.09$(0.29)$(0.00)Consolidated Statements of Cash Flows(Unaudited)     (thousands of dollars)13-weekperiod endedOctober 2,201013-weekperiod endedSeptember 26,200926-weekperiod endedOctober 2,201026-weekperiod endedSeptember 26,2009     CASH FLOWS FROM OPERATING ACTIVITIES    Net earnings (loss)(1,809)2,200(7,117)(104)Add (deduct) items not affecting cash     Depreciation of property, plant and equipment4,4654,9188,9709,830 Amortization of intangible assets2,5182,1244,9303,965 Stock-based compensation131268306511 Directors' stock-based compensation20468316193 Future tax assets45883237296 Loss on disposal of capital assets216569173 Non-controlling interest(2,814)-(4,683)- Other1,449(70)52335     Net change in non-cash working capital balances related to operations     Accounts receivable292(560)(2,080)1,420 Inventories(43,480)(25,982)(42,910)(12,423) Prepaid expenses(16,204)(946)(15,381)(1,459) Income taxes recoverable-(1,210)-(1,210) Deferred revenue8,77010310,737925 Accounts payable and accrued liabilities40,01749,58732,15313,915Cash flows used in operating activities(6,001)31,497(14,130)16,067     CASH FLOWS FROM INVESTING ACTIVITIES    Change in restricted cash(1,276)(103)(2,063)(98)Purchase of property, plant and equipment(10,535)(13,567)(14,812)(16,805)Addition of intangible assets(4,438)(2,905)(7,917)(6,059)Cash flows used in investing activities(16,249)(16,575)(24,792)(22,962)     CASH FLOWS FROM FINANCING ACTIVITIES    Repayment of long-term debt(961)(762)(1,627)(1,504)Proceeds from share issuances1,1071011,181129Repurchase of common shares(74)-(387)-Issuance of equity securities by subsidiary to non-controlling interest1,190-1,190-Dividends paid(2,729)(4,907)(5,451)(4,907)Cash flows used in financing activities(1,467)(5,568)(5,094)(6,282)     Effect of foreign currency exchange rate changes on cash and cash equivalents(1,247)70(123)(35)     Net increase (decrease) in cash and cash equivalents during the period(24,964)9,424(44,139)(13,212)Cash and cash equivalents, beginning of period84,31469,165103,48991,801Cash and cash equivalents, end of period59,35078,58959,35078,589For further information: Janet Eger Director, Public Relations 416 342 8561 jeger@indigo.ca