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Press release from CNW Group

Indigo Revenue Up in Third Quarter

Wednesday, February 08, 2012

Indigo Revenue Up in Third Quarter16:01 EST Wednesday, February 08, 2012-Sales Up In Store, Online with Double Digit Increases in Gift, Lifestyle and Toys-TORONTO, Feb. 8, 2012 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 0.5% growth in revenue for its third quarter ending December 31, 2011.  Revenue for the quarter was $352.9 million, up $1.7 million from last year driven by growth in the gift, lifestyle, toy, and eReader businesses.On a comparable store basis, Indigo and Chapters superstores posted a 1.8% increase in revenue, and Coles and IndigoSpirit small format stores were up by 2.5%.  Sales from Indigo's online channel, chapters.indigo.ca were up 9.3% compared to last year.Commenting on the results, CEO Heather Reisman said, "We were very pleased with our holiday results.  We recorded the highest sales day in the history of our Company during December and experienced double digit growth in our gift, lifestyle, and toy businesses".Net profit from continuing operations for the quarter was $23.7 million compared to a net profit from continuing operations of $27.0 million last year.  Ms. Reisman noted, "The reduced profit was due to lower gross margins as a result of increased promotional discounts to drive print sales and increased sales of low margin eReaders.  This margin impact has not yet been offset by expected growth in the gift, lifestyle and toy businesses. The Company also recorded a $4.0 million non-cash asset impairment charge during the quarter.  Excluding this charge, net profit increased $0.7 million."During the quarter, the Company entered into an agreement with Rakuten, Inc. to acquire all of the outstanding shares of Kobo Inc. on a fully diluted basis for an aggregate price of US$315 million.  The sale was completed shortly after quarter end and Indigo received US$146.1 million from the proceeds of the sale.  The Company noted that it intends to keep the cash proceeds to support its growth and transformation strategy.The Company also announced that Ted Marlow decided to return to the U.S. and has stepped down from his role as President. "We thank Ted for his leadership over the past year," said Ms. Reisman.The Board of Directors today approved a quarterly dividend of 11 cents per common share to be paid on March 12, 2012, to all shareholders of record as of February 24, 2012.Forward-Looking Statements Statements 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-IFRS Financial Measures The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards.  In order to provide additional insight into the business, the Company has also provided non-IFRS data, including comparative store sales growth, in the press release above. This measure does not have a standardized meaning prescribed by IFRS 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 (IDG) and the majority shareholder of the global eReading service Kobo Inc. As the largest book, gift and specialty toy retailer in Canada, 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 channel, indigo.ca, features books, eBooks, toys, gifts and, and hosts the award winning Indigo Online Community.  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 $10.5 million to schools in need. Visit loveofreading.org for more information.To learn more about Indigo, please visit the About Our Company section of www.indigo.ca.Consolidated Balance Sheets(Unaudited)       As at As atAs at  December 31, January 1,April 2,(thousands of Canadian dollars) 2011 20112011ASSETS    Current    Cash and cash equivalents 148,610 144,64383,661Accounts receivable 21,690 26,00712,684Inventories 234,705 255,750232,694Income taxes recoverable - 899-Prepaid expenses 3,915 13,7297,941Derivatives 1,747 --Assets held for sale 117,551 --Total current assets 528,218 441,028336,980Property, plant and equipment 70,409 85,72278,777Intangible assets 22,333 28,35930,614Deferred tax assets 60,290 34,84738,004Goodwill 1,216 26,63226,632Total assets 682,466 616,588511,007LIABILITIES AND EQUITY    Current    Accounts payable and accrued liabilities 241,553 256,432180,899Unredeemed gift card liability 60,959 57,09440,991Provisions -   33-Deferred revenue 12,110 12,63911,528Income taxes payable 310 -657Notes payable 5,224 --Current portion of long-term debt 1,163 1,3021,290Liabilities associated with assets held for sale 114,400 --Total current liabilities 435,719 327,500235,365Long-term accrued liabilities 4,820 6,8226,284Long-term debt 1,327 2,0811,995Total liabilities 441,866 336,403243,644Equity    Share capital 203,254 201,294202,220Contributed surplus 6,860 5,9866,066Retained earnings 16,468 70,82548,629Total equity attributable to shareholders of the Company 226,582 278,105256,915Non-controlling interest 14,018 2,08010,448Total equity 240,600 280,185267,363Total liabilities and equity 682,466 616,588511,007Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)(Unaudited)      13-week13-week39-week39-week period endedperiod endedperiod endedperiod ended December 31,January 1,December 31,January 1,(thousands of Canadian dollars, except per share data)2011201120112011     Revenues352,858 351,225738,111 756,289Cost of sales208,456 199,335431,035 426,615Gross profit144,402 151,890307,076 329,674Cost of operations82,277 84,041213,986 213,948Selling and administrative expenses21,376 20,83858,708 56,846Foreign currency translation(1,780)75(1,167)339Operating earnings before the following42,529 46,93635,549 58,541Depreciation of property, plant and equipment4,810 4,80113,826 13,424Amortization of intangible assets2,082 1,9556,266 5,793Impairment of capital assets3,956 -3,956 -Impairment of goodwill- -25,416 -Interest on long-term debt and financing charges34 72117 115Interest income on cash and cash equivalents(25)(122)(40)(295)Earnings (loss) before income taxes31,672 40,230(13,992)39,504Income tax expense7,961 13,2803,109 13,367Earnings (loss) and comprehensive earnings (loss) from continuing operations23,711 26,950(17,101)26,137Loss and comprehensive loss from discontinued operations, net of taxes(17,906)(10,107)(41,679)(21,151)Net earnings (loss) and comprehensive earnings (loss) for the period5,805 16,843(58,780)4,986     Net earnings (loss) and comprehensive earnings (loss) attributable to:    Shareholders of the Company14,362 20,827(38,863)13,699Non-controlling interest(8,557)(3,984)(19,917)(8,713)Total net earnings (loss) and comprehensive earnings (loss) for the period5,805 16,843(58,780)4,986     Net earnings (loss) per common share     Basic$0.57 $0.84$(1.54)$0.55Diluted$0.56 $0.82$(1.54)$0.54Consolidated Statements of Cash Flows(Unaudited) 13-week 13-week39-week 39-week period ended period endedperiod ended period ended December 31, January 1,December 31, January 1,(thousands of Canadian dollars)2011   2,0112011   2,011     CASH FLOWS FROM OPERATING ACTIVITIES    Net earnings (loss) from continuing operations for the period23,711 26,950  (17,101)26,137Add (deduct) items not affecting cash     Depreciation of property, plant and equipment  4,810   4,80113,826 13,424 Amortization of intangible assets  2,082   1,955  6,266   5,793 Impairment of capital assets  3,956   -  3,956   - Impairment of goodwill  -   -25,416   - Loss on disposal of capital assets50 465 73 Stock-based compensation  196   243  866   532 Directors' compensation  117   100  384   416 Deferred tax assets  7,961 13,280  3,109 13,367 Interest on long-term debt and financing charges34 72  117   115 Interest income on cash and cash equivalents  (25)(122)  (40)(295) Other  2,453   36343   494Net change in non-cash working capital balances related to continuing operations97,121 56,51485,620 32,325Operating cash flows of discontinued operations  (51,874)(9,102)  (68,687)  (11,587)Cash flows from operating activities90,592 95,05853,840 80,794     CASH FLOWS FROM INVESTING ACTIVITIES    Acquisition of non-capital tax losses  -   -  (10,559)  -Purchase of property, plant and equipment(4,682)(7,382)  (10,530)  (21,878)Addition of intangible assets(2,152)(3,182)(6,040)(8,893)Investing cash flows of discontinued operations(3,289)(1,267)(7,936)(3,789)Cash flows used in investing activities  (10,123)  (11,831)  (35,065)  (34,560)     CASH FLOWS FROM FINANCING ACTIVITIES    Notes payable  -   -  5,280   -Repayment of long-term debt(335)(356)(1,047)(1,983)Interest received15 54  109   177Proceeds from share issuances  -   1,093  578   2,274Repurchase of common shares  -   -  - (387)Purchase of shares in subsidiary  - (5,714)(3,009)(9,286)Dividends paid(2,776)(2,742)(8,315)(8,193)Financing cash flows of discontinued operations50,604   7,62875,082 12,401Cash flows from (used in) financing activities47,508   (37)68,678 (4,997)     Effect of foreign currency exchange rate changes on cash and cash equivalents(2,422)(369)  (68)(492)     Net increase in cash and cash equivalents during the period  125,555 82,82187,385 40,745Cash and cash equivalents, beginning of period45,491 61,82283,661   103,898Cash and cash equivalents, end of period  171,046   144,643  171,046   144,643     Cash and cash equivalents attributable to:    Continuing operations  148,610   136,648  148,610   136,648Discontinued operations22,436   7,99522,436   7,995   171,046   144,643  171,046   144,643  For further information: Janet Eger Vice President, Public Relations 416 342 8561 jeger@indigo.ca