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Press release from CNW Group

Indigo Full Year Results Show Solid Margin Improvement

Tuesday, May 28, 2013

Indigo Full Year Results Show Solid Margin Improvement

16:01 EDT Tuesday, May 28, 2013

Improved Net Earnings from Continuing Operations

TORONTO, May 28, 2013 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported full year gross profit $2.7 million higher than last year due to a 2.2% improvement in margin rate.  The improvement in margin rate was a result of a shift in product mix to higher margin products, lower sales discounts, fewer markdowns and shipping more product through the Company's distribution center.

Net earnings from continued operations attributable to shareholders of the Company for the year were $4.3 million, compared to a net loss of $27.8 million last year.  The improvement in earnings was primarily due to improved margins and no goodwill impairment charges being recognized in fiscal 2013.

Revenue for the fiscal year ended March 30, 2013 was $893 million compared to $934 million last year, a decline of 4.4%.  The decline was primarily due to lower physical book and eReader sales.  Additionally, the Company operated nine fewer small format stores.

The revenue decline was partially offset by double-digit growth in lifestyle, paper and toy sales and an increase in revenue from the Kobo revenue-sharing agreement due to the growth in digital reading.

On a comparable store basis, Indigo and Chapters superstore revenue decreased 4.6%, while Coles and IndigoSpirit small format store revenue decreased 2.4%.  Online sales grew 1%.

Revenue for the fourth quarter was $185 million, down $11 million from the previous year against the blockbuster Hunger Games Trilogy in the fourth quarter last year. Net loss from continuing operations attributable to shareholders of the Company for the quarter was $8.2 million compared to a net loss of $10.7 million last year.  The increase in earnings was due to a 2.4% improvement in margin rate and lower operating and selling and administrative expenses due to the Company's on-going focus on its Galileo productivity improvement initiative.

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 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 $13.5 million—equating to close to two 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 at   As at
    March 30,   March 31,
(thousands of Canadian dollars)   2013   2012
ASSETS        
Current        
Cash and cash equivalents   211,701   207,601
Accounts receivable   7,180   12,627
Inventories   216,916   229,706
Prepaid expenses   4,235   3,695
Total current assets   440,032   453,629
         
Property, plant and equipment   59,319   67,464
Intangible assets   22,164   22,810
Deferred tax assets   48,731   48,633
Total assets   570,246   592,536
LIABILITIES AND EQUITY        
Current        
Accounts payable and accrued liabilities   151,283   174,201
Unredeemed gift card liability   47,169   42,711
Provisions   2,168   232
Deferred revenue   13,733   11,234
Income taxes payable   11   65
Current portion of long-term debt   773   1,060
Total current liabilities   215,137   229,503
Long-term accrued liabilities   4,004   5,800
Long-term provisions   78   460
Long-term debt   705   1,141
Total liabilities   219,924   236,904
Equity        
Share capital   203,805   203,373
Contributed surplus   8,128   7,039
Retained earnings   138,389   145,220
Total equity   350,322   355,632
Total liabilities and equity   570,246   592,536




Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)
         
  13-week 13-week 52-week 52-week
  period ended period ended period ended period ended
  March 30, March 31, March 30, March 31,
(thousands of Canadian dollars, except per share data) 2013 2012 2013 2012
         
Revenues 184,814 195,879 892,458 933,990
Cost of sales (102,968) (113,889) (500,681) (544,924)
Gross profit 81,846 81,990 391,777 389,066
Operating, selling and administrative expenses (93,252) (97,710) (390,080) (418,701)
Operating earnings (loss) (11,406) (15,720) 1,697 (29,635)
Interest on long-term debt and financing charges (27) (36) (116) (153)
Interest income on cash and cash equivalents 765 420 2,609 460
Earnings (loss) before income taxes (10,668) (15,336) 4,190 (29,328)
Income tax recovery (expense)        
    Current - (71) - (71)
    Deferred 2,421 4,681 98 1,572
Earnings (loss) and comprehensive earnings (loss) for
the period from continuing operations
(8,247) (10,726) 4,288 (27,827)
Earnings and comprehensive earnings for the period  
from discontinued operations (net of tax)
- 135,695 - 94,016
Net earnings (loss) and comprehensive earnings (loss)  
for the period
(8,247) 124,969 4,288 66,189
         
Net earnings (loss) and comprehensive earnings (loss)   
attributable to:
       
Shareholders of Indigo (8,247) 131,527 4,288 92,664
Non-controlling interest - (6,558) - (26,475)
         
Net earnings (loss) per common share from  
continuing operations
       
Basic $(0.33) $(0.43) $0.17 $(1.10)
Diluted $(0.33) $(0.43) $0.17 $(1.10)
         
Net earnings per common share from  
discontinued operations
       
Basic $        - $5.64 $       - $4.78
Diluted $        - $5.58 $       - $4.73
         
Net earnings (loss) per common share        
Basic $(0.33) $5.21 $0.17 $3.68
Diluted $(0.33) $5.16 $0.17 $3.64





Consolidated Statements of Cash Flows
 
  13-week 13-week 52-week 52-week
  period ended period ended period ended period ended
  March 30, March 31, March 30, March 31,
(thousands of Canadian dollars) 2013 2012 2013 2012
         
CASH FLOWS FROM OPERATING ACTIVITIES        
Net earnings (loss) from continuing operations for the period (8,247) (10,726) 4,288 (27,827)
Add (deduct) items not affecting cash        
  Depreciation of property, plant and equipment 4,363 4,590 17,838 18,416
  Amortization of intangible assets 2,691 1,977 10,245 8,243
  Net impairment of capital assets - - 250 3,956
   Impairment of goodwill - - - 25,416
  Loss on disposal of capital assets 21 59 65 124
  Stock-based compensation 174 175 743 1,041
  Directors' compensation 116 116 446 500
  Deferred tax assets (2,421) (4,681) (98) (1,572)
  Other (25) (248) (443) (205)
Net change in non-cash working capital balances related
to continuing operations
(91,394) (68,695) 1,408 16,925
Interest on long-term debt and financing charges 27 36 116 153
Interest income on cash and cash equivalents (765) (420) (2,609) (460)
Income taxes received (paid) (13) (325) 32 (325)
Operating cash flows of discontinued operations - 11,809 - (56,878)
Cash flows from (used in) operating activities (95,473) (66,333) 32,281 (12,493)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Acquisition of non-capital tax losses - - - (10,559)
Purchase of property, plant and equipment (2,572) (1,611) (9,521) (12,141)
Addition of intangible assets (2,745) (2,513) (9,621) (8,553)
Interest received 796 276 2,676 526
Cash disposal resulting from sale of subsidiary - (33,033) - (33,033)
Proceeds from sale of subsidiary - 148,941 - 148,941
Investing cash flows of discontinued operations - (948) - (8,884)
Cash flows from (used in) investing activities (4,521) 111,112 (16,466) 76,297
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Notes payable - (5,280) - -
Repayment of long-term debt (236) (320) (1,200) (1,367)
Interest paid (33) (104) (160) (245)
Proceeds from share issuances 52 7 332 585
Dividends paid (2,783) (2,775) (11,119) (11,090)
Purchase of shares in subsidiary - - - (3,009)
Financing cash flows of discontinued operations - (263) - 74,819
Cash flows from (used in) financing activities (3,000) (8,735) (12,147) 59,693
         
Effect of foreign currency exchange rate changes on cash
and cash equivalents
3 511 432 443
         
Net increase (decrease) in cash and cash equivalents during the period (102,991) 36,555 4,100 123,940
Cash and cash equivalents, beginning of period 314,692 171,046 207,601 83,661
Cash and cash equivalents, end of period 211,701 207,601 211,701 207,601

 

 

 

SOURCE: Indigo Books & Music Inc.

For further information:

Janet Eger
Vice President, Public Relations
416 342 8561
jeger@indigo.ca

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