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Press release from CNW Group

Indigo Reports Record Net Earnings

Tuesday, May 29, 2012

Indigo Reports Record Net Earnings16:01 EDT Tuesday, May 29, 2012- $165 Million Gain on Kobo Sale -TORONTO, May 29, 2012 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 2.3% decline in revenue for its fiscal year ended March 31, 2012.  Revenue for the year was $934 million compared to $956 million last year.  The decline was primarily due to lower physical book sales which were partially offset by continued growth in Indigo's digital, gift, lifestyle and toy businesses.  Additionally, the Company deferred $7 million in revenue during the year due to the free plum rewards loyalty program launched nationally in April of 2011.  The Company will recognize this revenue in future years as customers redeem the points earned on past purchases.On a comparable store basis, Indigo and Chapters superstore revenue decreased 1.9%, while Coles and IndigoSpirit small format store revenue decreased 0.8%.  Sales from Indigo's online channel,indigo.ca, were up 2.9% compared to last year.Net earnings attributable to shareholders of the Company for the year were $93 million, up from a loss of $6 million last year. Net earnings attributable to shareholders of the Company do not include the portion of Kobo losses attributable to minority shareholders and as such, this earnings number is used to calculate the Company's earnings per share.  The significant increase in net earnings was due to the recognition of a $165 million pre-tax gain on the sale of all outstanding shares of Kobo Inc. to Rakuten, Inc. on January 11, 2012.Commenting on the results, CEO Heather Reisman said, "We are enormously proud of Kobo and pleased for Indigo and all Indigo shareholders that this sale represented such an attractive return on our investment.  We've accelerated our transformation from a bookstore to the world's first cultural department store and are gratified that our efforts are being positively received by our customers."Revenue for the fourth quarter was $196 million, down $4 million from the previous year due to lower physical book sales which were partially offset by the growth in the digital, gift, lifestyle and toy businesses. Net earnings attributable to shareholders of the Company for the quarter were $132 million compared to a net loss of $19 million last year.  The increase in earnings was due to the gain realized from the Kobo sale.During the fourth quarter, only one year after its launch, Indigo's plum rewards loyalty program grew to over 4 million members.Due to the sale of Kobo, the operating results of Kobo have been reported as discontinued operations and the prior period results have been restated accordingly.  As such, Indigo's restated revenues and expenses no longer include Kobo's revenues and expenses which are now reported as discontinued operations.  The restated quarterly statements for the Company's first and second quarter of this fiscal year are available on the Company's website at indigo.ca/investor-relations.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). 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, offers a one stop online shop with a robust selection of books, toys, home décor, stationery and gifts.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 $13 million, equating to more than a million books, to high needs elementary schools across Canada. Visit loveofreading.org for more information.To learn more about Indigo, please visit the Our Company section at indigo.ca.Consolidated Balance Sheets        As atAs atAs at  March 31,April 2,April 4,(thousands of Canadian dollars) 201220112010ASSETS    Current    Cash and cash equivalents 207,60183,661103,898Accounts receivable 12,62712,6848,455Inventories 229,706232,694224,406Income taxes recoverable --899Prepaid expenses 3,6957,9416,771Total current assets 453,629336,980344,429Property, plant and equipment 67,46478,77774,800Intangible assets 22,81030,61423,793Goodwill -26,63226,632Deferred tax assets 48,63338,00448,214Total assets 592,536511,007517,868LIABILITIES AND EQUITY    Current    Accounts payable and accrued liabilities 174,201180,899179,063Unredeemed gift card liability 42,71140,99137,816Provisions 232-178Deferred revenue 11,23411,52812,882Income taxes payable 65657-Current portion of long-term debt 1,0601,2901,863Total current liabilities 229,503235,365231,802Long-term accrued liabilities 5,8006,2848,203Long-term provisions 460--Long-term debt 1,1411,9951,174Total liabilities 236,904243,644241,179Equity    Share capital 203,373202,220198,635Contributed surplus 7,0396,0665,633Retained earnings 145,22048,62965,496Total equity attributable to shareholders of the Company 355,632256,915269,764Non-controlling interest -10,4486,925Total equity 355,632267,363276,689Total liabilities and equity 592,536511,007517,868Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)  13-week13-week52-week52-week period endedperiod endedperiod endedperiod ended March 31,April 2,March 31,April 2,(thousands of Canadian dollars, except per share data)2012201120122011     Revenues195,879 200,160933,990 956,449Cost of sales113,889 116,393544,924 543,008Gross profit81,990 83,767389,066 413,441Operating and administrative expenses97,710 97,577418,701 387,927Operating earnings (loss)(15,720)(13,810)(29,635)25,514Interest on long-term debt and financing charges36 97  153   212Interest income on cash and cash equivalents(420)(220)(460)(515)Earnings (loss) before income taxes(15,336)(13,687)(29,328)25,817Income tax expense (recovery)       Current71 1,21471 1,214   Deferred(4,681)(3,156)(1,572)10,211    (4,610)(1,942)(1,501)11,425Earnings (loss) and comprehensive earnings (loss) for the period from continuing operations(10,726)(11,745)(27,827)14,392Earnings (loss) and comprehensive earnings (loss) for the period from discontinued operations (net of tax)135,695 (12,625)94,016 (33,776)Net earnings (loss) and comprehensive earnings (loss) for the period124,969 (24,370)66,189 (19,384)     Net earnings (loss) and comprehensive earnings (loss) attributable to:    Shareholders of the Company131,527 (19,441)92,664 (5,742)Non-controlling interest(6,558)(4,929)(26,475)(13,642)Total net earnings (loss) and comprehensive earnings (loss) for the period124,969 (24,370)66,189 (19,384)     Net earnings (loss) per common share from continuing operations    Basic$(0.43)$(0.31)$(1.10)$  0.58Diluted$(0.43)$(0.31)$(1.10)$  0.57     Net earnings (loss) per common share from discontinued operations    Basic$  5.64 $(0.47)$  4.78 $(0.81)Diluted$  5.58 $(0.47)$  4.73 $(0.81)     Net earnings (loss) per common share    Basic$  5.21 $(0.78)$  3.68 $(0.23)Diluted$  5.16 $(0.78)$  3.64 $(0.23)Consolidated Statements of Cash Flows 13-week 13-week52-week 52-week period ended period endedperiod ended period ended March 31, April 2,March 31, April 2,(thousands of Canadian dollars)2012 20112012 2011     CASH FLOWS FROM OPERATING ACTIVITIES    Net earnings (loss) from continuing operations for the period  (10,726)  (11,745)  (27,827)14,392Add (deduct) items not affecting cash      Depreciation of property, plant and equipment4,590 4,94518,416 18,369  Amortization of intangible assets1,977 1,8708,243 7,663  Impairment of capital assets- 4,8823,956 4,882  Impairment of goodwill- -25,416  -  Loss on disposal of capital assets59 95124 168  Stock-based compensation175 1391,041 671  Directors' compensation116 138500 554  Deferred tax assets(4,681)(3,156)(1,572)10,211  Other  (248)587  (205)1,081Net change in non-cash working capital balances related to continuing operations  (68,695)  (58,413)16,925   (26,088)Interest on long-term debt and financing charges36 97153 212Interest income on cash and cash equivalents  (420)  (220)  (460)  (515)Income taxes received (paid)  (325)736  (325)736Operating cash flows of discontinued operations11,809 (2,676)  (56,878)  (14,263)Cash flows from (used in) operating activities  (66,333)  (62,721)  (12,493)18,073CASH FLOWS FROM INVESTING ACTIVITIES    Acquisition of non-capital tax losses- -  (10,559)-Purchase of property, plant and equipment(1,611)(2,767)  (12,141)  (24,645)Addition of intangible assets(2,513)(1,896)(8,553)  (10,789)Investing cash flows of discontinued operations  (948)(3,747)(8,884)(7,536)Cash flows used in investing activities(5,072)(8,410)  (40,137)  (42,970)CASH FLOWS FROM FINANCING ACTIVITIES    Notes payable(5,280)-- -Repayment of long-term debt  (320)(90)(1,367)(2,073)Interest received172 139281 316Proceeds from share issuances7 729585 3,003Repurchase of common shares- --   (387)Purchase of shares in subsidiary- (9,985)(3,009)  (19,271)Cash disposal resulting from sale of subsidiary  (33,033)-  (33,033)-Proceeds from sale of subsidiary  148,941 -  148,941 -Dividends paid(2,775)(2,755)  (11,090)  (10,948)Financing cash flows of discontinued operations  (263)22,71274,819 35,113Cash flows from financing activities  107,449 10,750  176,127 5,753Effect of foreign currency exchange rate changes on cash & cash equivalents511   (601)443 (1,093)Net increase (decrease) in cash and cash equivalents during the period36,555   (60,982)  123,940   (20,237)Cash and cash equivalents, beginning of period  171,046   144,64383,661   103,898Cash and cash equivalents, end of period  207,601 83,661  207,601 83,661Cash and cash equivalents attributable to:    Continuing operations  207,601 59,685  207,601 59,685Discontinued operations- 23,976- 23,976   207,601 83,661  207,601 83,661  For further information: Janet Eger Vice President, Public Relations 416 342 8561