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Press release from CNW Group

Indigo Q3 Revenue Up 14%

Tuesday, February 08, 2011

Indigo Q3 Revenue Up 14%16:01 EST Tuesday, February 08, 2011Digital Business Grows RapidlyTORONTO, Feb. 8 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 14% growth in revenue for its third quarter ending January 1, 2011.Revenue for the quarter was $387.6 million, up $47.4 million from last year driven by strong growth in the Company's digital business.  On a comparable store basis, Indigo and Chapters superstores posted a 2.6% increase in revenue, while Coles and Indigo Spirit small format stores were down 0.8%.  Sales from Indigo's online channel, chapters.indigo.ca, were up 6.5% compared to last year.Commenting on the results, CEO Heather Reisman said, "We are pleased with our top line revenue growth, particularly in our rapidly growing digital business.  Kobo eReaders were the hottest items in our stores over the holidays.  Consumers have also responded very favourably to our broader gift and toy selection and reinforced our decision to continue expanding these categories."Net profit for the quarter was $30.2 million compared to a net profit of $34.5 million last year.  Ms. Reisman noted, "A reduced profit was expected as we continue to invest in the growth of our digital initiatives and the re-development of our stores and distribution centre to accommodate growth in our gift and toy businesses."During the quarter the Company expanded its IndigoKids departments in seven British Columbia stores further advancing its strategy to make Indigo the ultimate family friendly destination. Indigo launched its IndigoStudio pilot in two GTA stores and launched Photogifts online at chapters.indigo.ca/photogifts. In this quarter, Indigo also revamped its online experience, expanding the online assortment to include gift and lifestyle product and significantly increased the depth and breadth of toys available online.The Board of Directors today also approved a quarterly dividend of 11 cents per common share to be paid on March 14th, 2011, to all shareholders of record as of February 28, 2011.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(Unaudited)  As at As atAs at  January 1, December 26,April 3,(thousands of dollars) 201120092010     ASSETS    Current    Cash and cash equivalents 144,335202,082103,489Restricted cash 308681409Accounts receivable 26,00716,2318,455Inventories 255,750246,312224,406Income taxes recoverable 899-899Prepaid expenses 13,7295,0906,771Future tax assets 5,1464,5896,615Total current assets 446,174474,985351,044Property, plant and equipment 87,95078,66977,478Intangible assets 28,36020,31723,794Future tax assets 29,11423,16440,894Goodwill 26,63226,63226,632Total assets 618,230623,767519,842     LIABILITIES AND SHAREHOLDERS' EQUITY    Current    Accounts payable and accrued liabilities 316,813333,319229,920Deferred revenue 12,63912,18012,882Income taxes payable -703-Current portion of long-term debt 1,3022,3881,863Total current liabilities 330,754348,590244,665Long-term accrued liabilities 6,8227,0968,203Long-term debt 2,0811,3281,174Total liabilities 339,657357,014254,042Non-controlling interest 1,9097,9056,831Shareholders' equity    Share capital 201,280196,585198,635Contributed surplus 5,0254,6414,670Retained earnings 70,35957,62255,664Total shareholders' equity 276,664258,848258,969Total liabilities and shareholders' equity 618,230623,767519,842Consolidated Statements of Earnings and Comprehensive Earnings(Unaudited) 13-week13-week39-week39-week period endedperiod endedperiod endedperiod ended January 1,December 26,January 1,December 26,(thousands of dollars, except per share data)2011200920112009     Revenues387,642340,195806,692740,736Cost of sales, operations, selling and administration349,910287,717766,964674,384 37,73252,47839,72866,352Depreciation of property, plant and equipment5,1525,07914,12214,909Amortization of intangible assets2,7262,1847,6566,149Write-off of capital assets-455-455 7,8787,71821,77821,513Earnings before the undernoted items29,85444,76017,95044,839Interest on long-term debt and financing charges7249115167Interest income on cash and cash equivalents(131)(45)(315)(181)Dilution gain on sale of non-controlling interest in subsidiary-(3,019)-(3,019)Deemed disposition of goodwill-891-891Earnings before income taxes and non-controlling interest29,91346,88418,15046,981Income tax expense       Current-2,169-2,169   Future3,70710,2613,74410,462    3,70712,4303,74412,631Earnings before non-controlling interest26,20634,45414,40634,350Non-controlling interest(3,976)(76)(8,659)(76)Net earnings and comprehensive earnings for the period30,18234,53023,06534,426     Net earnings per common share    Basic$1.21$1.41$0.93$1.40Diluted$1.19$1.38$0.92$1.37Consolidated Statements of Cash Flows(Unaudited)      13-week13-week39-week39-week period endedperiod endedperiod endedperiod ended January 1,December 26,January 1,December 26,(thousands of dollars)2011200920112009     CASH FLOWS FROM OPERATING ACTIVITIES    Net earnings30,18234,53023,06534,426Add (deduct) items not affecting cash     Depreciation of property, plant and equipment5,1525,07914,12214,909 Amortization of intangible assets2,7262,1847,6566,149 Stock-based compensation214299520810 Directors' stock-based compensation10096416289 Future tax assets13,21214,55413,24914,850 Loss on disposal of capital assets48373256 Write-off of capital assets-455-455 Non-controlling interest(3,976)(76)(8,659)(76) Dilution gain on sale of non-controlling interest in subsidiary-(3,019)-(3,019) Deemed disposal of goodwill-891-891 Other6116181,134653     Net change in non-cash working capital balances related to operations     Accounts receivable(15,472)(7,761)(17,552)(6,341) Inventories11,566(12,122)(31,344)(24,545) Prepaid expenses8,4231,487(6,958)  28 Income taxes payable-1,569-359 Deferred revenue(10,980)(357)(243)568 Accounts payable and accrued liabilities53,35986,84685,512100,761Cash flows from operating activities95,121125,35680,991141,423     CASH FLOWS FROM INVESTING ACTIVITIES    Change in restricted cash2,164(215)101(313)Purchase of property, plant and equipment(7,526)(3,963)(22,338)(20,768)Addition of intangible assets(4,305)(4,518)(12,222)(10,577)Cash flows used in investing activities(9,667)(8,696)(34,459)(31,658)     CASH FLOWS FROM FINANCING ACTIVITIES    Repayment of long-term debt(356)(760)(1,983)(2,264)Proceeds from share issuances1,0931102,274239Repurchase of common shares-(446)(387)(446)Issuance of equity securities by subsidiary to non-controlling interest1,90511,0003,09511,000Dividends paid(2,742)(2,453)(8,193)(7,360)Cash flows from (used in) financing activities(100)7,451(5,194)1,169     Effect of foreign currency exchange rate changes on cash and cash equivalents(369)(618)(492)(653)     Net increase in cash and cash equivalents during the period84,985123,49340,846110,281Cash and cash equivalents, beginning of period59,35078,589103,48991,801Cash and cash equivalents, end of period144,335202,082144,335202,082For further information: Janet Eger Director, Public Relations 416 342 8561 jeger@indigo.ca