Indigo First Quarter Results Improved Significantly

Growth 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 5^th, 2012, to all shareholders of record as of August 22, 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). 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 at	As at
		June 30,	July 2,	March 31,
(thousands of Canadian dollars)		2012	2011	2012
ASSETS
Current
Cash and cash equivalents		188,595	73,385	207,601
Accounts receivable		13,586	14,380	12,627
Inventories		219,964	215,746	229,706
Prepaid expenses		4,520	6,840	3,695
Total current assets		426,665	310,351	453,629
Property, plant and equipment		63,537	76,532	67,464
Intangible assets		22,198	30,620	22,810
Goodwill		-	26,632	-
Deferred tax assets		52,675	66,093	48,633
Total assets		565,075	510,228	592,536
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities		154,690	165,382	174,201
Unredeemed gift card liability		43,174	41,600	42,711
Provisions		237	-	232
Deferred revenue		11,980	11,467	11,234
Income taxes payable		69	649	65
Notes payable		-	4,896	-
Current portion of long-term debt		1,006	1,281	1,060
Total current liabilities		211,156	225,275	229,503
Long-term accrued liabilities		4,644	5,275	5,800
Long-term provisions		391	-	460
Long-term debt		1,135	1,685	1,141
Total liabilities		217,326	232,235	236,904
Equity
Share capital		203,482	202,962	203,373
Contributed surplus		7,310	6,646	7,039
Retained earnings		136,957	42,135	145,220
Total equity attributable to shareholders of the Company		347,749	251,743	355,632
Non-controlling interest		-	26,250	-
Total equity		347,749	277,993	355,632
Total liabilities and equity		565,075	510,228	592,536

Consolidated Statements of Loss and Comprehensive Loss
(Unaudited)
		13-week	13-week
		period ended	period ended
		June 30,	July 2,
(thousands of Canadian dollars, except per share data)		2012	2011
Revenues		186,483	188,005
Cost of sales		106,388	111,082
Gross profit		80,095	76,923
Operating and administrative expenses		90,174	92,691
Operating loss		(10,079)	(15,768)
Interest on long-term debt and financing charges		31	44
Interest 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-week	13-week
		period ended	period ended
		June 30,	July 2,
(thousands of Canadian dollars)		2012	2011
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 equipment	4,719	4,459
	Amortization of intangible assets	2,422	2,081
	Impairment of capital assets	250	-
	Loss on disposal of capital assets	44	4
	Stock-based compensation	159	595
	Directors' compensation	133	149
	Deferred tax assets	(4,042)	(3,602)
	Other	(753)	(286)
Net change in non-cash working capital balances related to continuing operations		(11,564)	6,805
Interest on long-term debt and financing charges		31	44
Interest income on cash and cash equivalents		(581)	(71)
Income taxes received		4	-
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		-	5,055
Repayment of long-term debt		(346)	(319)
Interest received		559	84
Proceeds from share issuances		88	578
Purchase of shares in subsidiary		-	(3,009)
Dividends paid		(2,776)	(2,767)
Financing cash flows of discontinued operations		-	24,442
Cash flows used in financing activities		(2,475)	24,064
Effect of foreign currency exchange rate changes on cash and cash equivalents		748	69
Net decrease in cash and cash equivalents during the period		(19,006)	(10,276)
Cash and cash equivalents, beginning of period		207,601	83,661
Cash and cash equivalents, end of period		188,595	73,385
Cash and cash equivalents attributable to:
Continuing operations		188,595	43,656
Discontinued operations		-	29,729
		188,595	73,385

 

 

SOURCE: Indigo Books & Music Inc.

Janet Eger
Vice President, Public Relations
416 342 8561
[email protected]