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Press release from CNW Group

Indigo First Quarter Results Improved Significantly

Wednesday, August 08, 2012

Indigo First Quarter Results Improved Significantly16:01 EDT Wednesday, August 08, 2012Growth in Trade Books; Continued Double Digit Growth in Gift, Lifestyle, and Toys TORONTO, Aug. 8, 2012 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 0.8% decrease in net revenue for its first quarter ending June 30, 2012. Revenue for the quarter was $186.5 million, down $1.5 million from last year driven significantly by lower sales of eReaders due to the strong launch of the Kobo Touch in the same period last year and a delay in the launch of new Kobo devices.  Trade book sales were up 0.6% behind strong sales of the Fifty Shades and Hunger Game trilogies and the Indigo Spotlight programs highlighting hidden gems.On a comparable store basis, Indigo and Chapters superstores posted a 0.9% decrease in revenue, while Coles and IndigoSpirit small format stores were up 6.0%.Commenting on the results, CEO Heather Reisman said, "We are very pleased to see continued double digit growth in our general merchandise businesses as we expand our exciting gift, lifestyle and IndigoKids categories. We're also happy to see positive comp sales in our small format stores driven by the strong book titles this quarter and the expansion of some general merchandise to our smaller stores."The net loss attributable to shareholders of the Company from continuing operations improved $6.5 million from a loss of $12.0 million last year to a loss of $5.5 million this year.  The significant reduction in net loss was due to improvements in net margins and lower operating expenses.Ms. Reisman noted, "While a loss in this quarter is typical for our business, we're encouraged that our efforts to improve margins and drive productivity, two of our top strategic priorities for this year, are clearly showing positive results."The net loss per share improved from a loss of $0.72 per share last year to a loss of $0.22 per share due to the improvements mentioned above and to the elimination of losses from discontinued operations as a result of the sale of Kobo in January 2012.During the quarter, the Company completed the upgrade of its retail distribution facility to support the growth of its general merchandise business and improve the efficiency of its supply chain operations.    The Company also completed the launch of its talent management software tool, along with enhancements to existing human resources reporting tools.The Board of Directors today approved a quarterly dividend of 11 cents per common share to be paid on September 5th, 2012, to all shareholders of record as of August 22, 2012.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-IFRS Financial MeasuresThe 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, as well as the Indigo "Adopt A School" program, have 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(Unaudited)       As atAs atAs at  June 30,July 2,March 31,(thousands of Canadian dollars) 201220112012ASSETS    Current    Cash and cash equivalents 188,595 73,385207,601Accounts receivable 13,586 14,38012,627Inventories 219,964 215,746229,706Prepaid expenses 4,520 6,8403,695Total current assets 426,665 310,351453,629Property, plant and equipment 63,537 76,53267,464Intangible assets 22,198 30,62022,810Goodwill - 26,632-Deferred tax assets 52,675 66,09348,633Total assets 565,075 510,228592,536LIABILITIES AND EQUITY    Current    Accounts payable and accrued liabilities 154,690 165,382174,201Unredeemed gift card liability 43,174 41,60042,711Provisions 237 -232Deferred revenue 11,980 11,46711,234Income taxes payable 69 64965Notes payable - 4,896-Current portion of long-term debt 1,006 1,2811,060Total current liabilities 211,156 225,275229,503Long-term accrued liabilities 4,644 5,2755,800Long-term provisions 391 -460Long-term debt 1,135 1,6851,141Total liabilities 217,326 232,235236,904Equity    Share capital 203,482 202,962203,373Contributed surplus 7,310 6,6467,039Retained earnings 136,957 42,135145,220Total equity attributable to shareholders of the Company 347,749 251,743355,632Non-controlling interest - 26,250-Total equity 347,749 277,993355,632Total liabilities and equity 565,075 510,228592,536Consolidated Statements of Loss and Comprehensive Loss(Unaudited)    13-week13-week period endedperiod ended June 30,July 2,(thousands of Canadian dollars, except per share data)20122011   Revenues   186,483    188,005Cost of sales   106,388    111,082Gross profit80,095 76,923Operating and administrative expenses90,174 92,691Operating loss   (10,079)   (15,768)Interest on long-term debt and financing charges          31           44Interest income on cash and cash equivalents     (581)       (71)Loss before income taxes(9,529)   (15,741)Income tax recovery(4,042)(3,778)Loss and comprehensive loss for the period from continuing operations(5,487)   (11,963)Loss and comprehensive loss for the period from discontinued operations (net of tax)-    (12,231)Net loss and comprehensive loss for the period(5,487)   (24,194)   Net loss and comprehensive loss attributable to:  Shareholders of the Company(5,487)(18,105)Non-controlling interest- (6,089)Total net loss and comprehensive loss for the period(5,487)(24,194)   Net loss per common share from continuing operations  Basic$(0.22)$(0.48)Diluted$(0.22)$(0.48)   Net loss per common share from discontinued operations   Basic$       -  $(0.24)Diluted$       -  $(0.24)   Net loss per common share   Basic$(0.22)$(0.72)Diluted$(0.22)$(0.72)Consolidated Statements of Cash Flows(Unaudited) 13-week13-week period endedperiod ended June 30,July 2,(thousands of Canadian dollars)20122011   CASH FLOWS FROM OPERATING ACTIVITIES  Net loss from continuing operations for the period(5,487)(11,963)Add (deduct) items not affecting cash   Depreciation of property, plant and equipment4,7194,459 Amortization of intangible assets2,4222,081 Impairment of capital assets250- Loss on disposal of capital assets444 Stock-based compensation159595 Directors' compensation133149 Deferred tax assets(4,042)(3,602) Other(753)(286)Net change in non-cash working capital balances related to continuing operations   (11,564)6,805Interest on long-term debt and financing charges3144Interest income on cash and cash equivalents(581)(71)Income taxes received4-Operating cash flows of discontinued operations- (16,531)Cash flows used in operating activities(14,665)(18,316)   CASH FLOWS FROM INVESTING ACTIVITIES  Acquisition of non-capital tax losses- (10,109)Purchase of property, plant and equipment(784)(2,197)Addition of intangible assets(1,830)(1,629)Investing cash flows of discontinued operations- (2,158)Cash flows used in investing activities(2,614)(16,093)   CASH FLOWS FROM FINANCING ACTIVITIES  Notes payable- 5,055Repayment of long-term debt(346)(319)Interest received55984Proceeds from share issuances88578Purchase of shares in subsidiary- (3,009)Dividends paid(2,776)(2,767)Financing cash flows of discontinued operations- 24,442Cash flows used in financing activities(2,475)24,064   Effect of foreign currency exchange rate changes on cash and cash equivalents74869   Net decrease in cash and cash equivalents during the period(19,006)(10,276)Cash and cash equivalents, beginning of period207,60183,661Cash and cash equivalents, end of period188,59573,385   Cash and cash equivalents attributable to:  Continuing operations188,59543,656Discontinued operations- 29,729 188,59573,385  SOURCE: Indigo Books & Music Inc.For further information: Janet Eger Vice President, Public Relations 416 342 8561 jeger@indigo.ca