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Press release from CNW Group

Indigo Q2 Results Reflect Strong Margin and Productivity Improvements

Tuesday, November 06, 2012

Indigo Q2 Results Reflect Strong Margin and Productivity Improvements16:01 EST Tuesday, November 06, 2012Plum Rewards Membership Tops 5 Million Customers TORONTO, Nov. 6, 2012 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 5.9% decrease in net revenue for its second quarter ending September 29, 2012. Revenue for the quarter was $185.6 million, down $11.6 million from last year driven primarily by a delay in the planned launch of the new Kobo devices.  In addition, the Company operated seven fewer Coles stores.  Book sales for the quarter were down only modestly to last year owing to strong titles as well as effective efforts to drive book sales both in store and online.On a comparable store basis, Indigo and Chapters superstores posted a 6.5% decrease in revenue, while Coles and IndigoSpirit small format stores were down 2.2%.Commenting on the results, CEO Heather Reisman said, "We are focused on driving significant margin and productivity improvements and are pleased that our on-going efforts are reflected in our results.  We will continue to broaden our assortment in our key growth categories to drive higher top line sales to offset the decline in physical books. We're also pleased to have the newest Kobo eReaders now in store as top gift picks for the upcoming holiday season."The net loss attributable to shareholders of the Company from continuing operations improved $24.8 million from a loss of $28.8 million last year to a loss of $4.0 million this year.  The significant reduction in net loss was due to there being no impairment charges in the current year.  In the same period last year, the Company recorded a full write down of the $25.4 million of goodwill allocated to the Indigo segment.  In addition, the Company experienced improvements in margin and productivity in the current year.The net loss per share from continuing operations improved from a loss of $1.14 per share last year to a loss of $0.16 per share due to the above noted factors.In the quarter, the Company's plum rewards program was recognized for global leadership, earning the award for Loyalty Innovation in Retail at the 3rd Annual COLLOQUY Loyalty Awards.  In less than 18 months, five million Canadians joined the plum rewards program, collecting over seven billion plum points.  Designed in response to customer feedback, plum rewards help shoppers discover products that match their interests and passions while rewarding and recognizing their purchases. Plum rewards members can collect points on virtually every in-store purchase, have self-service access to personalized recommendations and offers online or at in-store kiosks, and enjoy special member pricing on online book purchases.Also in the second quarter, Indigo launched its award winning annual Adopt-A-School program, a three week national fundraising campaign that raised over $580 thousand — the equivalent of over 50 thousand books — to support 570 participating schools across Canada. Through the program Indigo helps augment the $1.5 million in grants made annually by the Indigo Love of Reading Foundation to benefit high needs elementary schools.The Board of Directors today approved a quarterly dividend of 11 cents per common share to be paid on December 5, 2012, to all shareholders of record as of November 20, 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 unaudited interim condensed consolidated financial statements in accordance with International Financial Reporting Standards and International Accounting Standards 34, "Interim Financial Reporting."  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 at As atAs at  September 29,October 1,March 31,(thousands of Canadian dollars) 2012 20112012ASSETS    Current    Cash and cash equivalents 192,598 45,491207,601Accounts receivable 14,092 21,83112,627Inventories 247,604 263,918229,706Prepaid expenses 4,835 15,2853,695Total current assets 459,129 346,525453,629Property, plant and equipment 62,111 76,03167,464Intangible assets 22,467 31,25122,810Goodwill - 1,216-Deferred tax assets 53,986 68,25048,633Total assets 597,693 523,273592,536LIABILITIES AND EQUITY    Current    Accounts payable and accrued liabilities 198,435 224,159174,201Unredeemed gift card liability 37,912 36,29242,711Provisions 175 -232Deferred revenue 12,882 12,40111,234Income taxes payable 111 65065Notes payable - 5,168-Current portion of long-term debt 900 1,3051,060Total current liabilities 250,415 279,975229,503Long-term accrued liabilities 4,448 5,0385,800Long-term provisions 391 -460Long-term debt 1,045 1,6231,141Total liabilities 256,299 286,636236,904Equity    Share capital 203,660 202,962203,373Contributed surplus 7,570 6,8397,039Retained earnings 130,164 4,882145,220Total equity attributable to shareholders of Indigo 341,394 214,683355,632Non-controlling interest - 21,954-Total equity 341,394 236,637355,632Total liabilities and equity 597,693 523,273592,536Consolidated Statements of Loss and Comprehensive Loss(Unaudited)      13-week13-week26-week26-week period endedperiod endedperiod endedperiod ended September 29,October 1,September 29,October 1,(thousands of Canadian dollars, except per share data)2012201120122011     Revenues185,589 197,248372,072 385,253Cost of sales100,487 111,497206,875 222,579Gross profit85,102 85,751165,197 162,674Operating and administrative expenses90,975 115,579181,149 208,270Operating loss(5,873)(29,828)(15,952)(45,596)Interest on long-term debt and financing charges29 3960 83Interest expense (income) on cash and cash equivalents(578)56(1,159)(15)Loss before income taxes(5,324)(29,923)(14,853)(45,664)Income tax recovery(1,311)(1,074)(5,353)(4,852)Loss and comprehensive loss for the period from continuing operations(4,013)(28,849)(9,500)(40,812)Loss and comprehensive loss for the period from discontinued operations (net of tax)- (11,542)- (23,773)Net loss and comprehensive loss for the period(4,013)(40,391)(9,500)(64,585)     Net loss and comprehensive loss attributable to:    Shareholders of Indigo(4,013)(35,120)(9,500)(53,225)Non-controlling interest- (5,271)- (11,360)     Net loss per common share from continuing operations    Basic$(0.16)$(1.14)$(0.38)$(1.62)Diluted$(0.16)$(1.14)$(0.38)$(1.62)          Net loss per common share from discontinued operations    Basic$ -$(0.25)$ -$(0.49)Diluted$ -$(0.25)$ -$(0.49)     Net loss per common share    Basic$(0.16)$(1.39)$(0.38)$(2.11)Diluted$(0.16)$(1.39)$(0.38)$(2.11)Consolidated Statements of Cash Flows(Unaudited) 13-week13-week26-week26-week period endedperiod endedperiod endedperiod ended September 29,October 1,September 29,October 1,(thousands of Canadian dollars)2012201120122011     CASH FLOWS FROM OPERATING ACTIVITIES    Net loss from continuing operations for the period(4,013)(28,849)(9,500)(40,812)Add (deduct) items not affecting cash     Depreciation of property, plant and equipment4,329 4,5579,048 9,016 Amortization of intangible assets2,515 2,1034,937 4,184 Impairment of capital assets- -250 - Impairment of goodwill- 25,416- 25,416 Loss on disposal of capital assets- 1144 15 Stock-based compensation200 75359 670 Directors' compensation96 118229 267 Deferred tax assets(1,311)(1,250)(5,353)(4,852) Other510 (2,125)(243)(2,411)Net change in non-cash working capital balances related to continuing operations10,667 (18,306)(897)(11,501)Interest on long-term debt and financing charges29 3960 83Interest expense (income) on cash and cash equivalents(578)56(1,159)(15)Income taxes received41 -45 -Operating cash flows of discontinued operations- (282)- (16,813)Cash flows from (used in) operating activities12,485 (18,437)(2,180)(36,753)     CASH FLOWS FROM INVESTING ACTIVITIES    Acquisition of non-capital tax losses- (450)- (10,559)Purchase of property, plant and equipment(2,764)(3,651)(3,548)(5,848)Addition of intangible assets(2,784)(2,259)(4,614)(3,888)Investing cash flows of discontinued operations- (2,488)- (4,646)Cash flows used in investing activities(5,548)(8,848)(8,162)(24,941)     CASH FLOWS FROM FINANCING ACTIVITIES    Notes payable- 225- 5,280Repayment of long-term debt(338)(393)(684)(712)Interest received565 101,124 94Proceeds from share issuances142 -230 578Purchase of shares in subsidiary- -- (3,009)Dividends paid(2,780)(2,772)(5,556)(5,539)Financing cash flows of discontinued operations- 36- 24,478Cash flows from (used in) financing activities(2,411)(2,894)(4,886)21,170     Effect of foreign currency exchange rate changes on cash and cash equivalents(523)2,285225 2,354     Net increase (decrease) in cash and cash equivalents during the period4,003 (27,894)(15,003)(38,170)Cash and cash equivalents, beginning of period188,595 73,385207,601 83,661Cash and cash equivalents, end of period192,598 45,491192,598 45,491     Cash and cash equivalents attributable to:    Continuing operations192,598 18,497192,598 18,497Discontinued operations- 26,994- 26,994 192,598 45,491192,598 45,491  SOURCE: Indigo Books & Music Inc.For further information: Janet Eger Vice President, Public Relations 416 342 8561 jeger@indigo.ca