Indigo Q2 Results Reflect Strong Margin and Productivity Improvements

Plum 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 3^rd 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 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 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
		September 29,	October 1,	March 31,
(thousands of Canadian dollars)		2012	2011	2012
ASSETS
Current
Cash and cash equivalents		192,598	45,491	207,601
Accounts receivable		14,092	21,831	12,627
Inventories		247,604	263,918	229,706
Prepaid expenses		4,835	15,285	3,695
Total current assets		459,129	346,525	453,629
Property, plant and equipment		62,111	76,031	67,464
Intangible assets		22,467	31,251	22,810
Goodwill		-	1,216	-
Deferred tax assets		53,986	68,250	48,633
Total assets		597,693	523,273	592,536
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities		198,435	224,159	174,201
Unredeemed gift card liability		37,912	36,292	42,711
Provisions		175	-	232
Deferred revenue		12,882	12,401	11,234
Income taxes payable		111	650	65
Notes payable		-	5,168	-
Current portion of long-term debt		900	1,305	1,060
Total current liabilities		250,415	279,975	229,503
Long-term accrued liabilities		4,448	5,038	5,800
Long-term provisions		391	-	460
Long-term debt		1,045	1,623	1,141
Total liabilities		256,299	286,636	236,904
Equity
Share capital		203,660	202,962	203,373
Contributed surplus		7,570	6,839	7,039
Retained earnings		130,164	4,882	145,220
Total equity attributable to shareholders of Indigo		341,394	214,683	355,632
Non-controlling interest		-	21,954	-
Total equity		341,394	236,637	355,632
Total liabilities and equity		597,693	523,273	592,536

Consolidated Statements of Loss and Comprehensive Loss
(Unaudited)
	13-week	13-week	26-week	26-week
	period ended	period ended	period ended	period ended
	September 29,	October 1,	September 29,	October 1,
(thousands of Canadian dollars, except per share data)	2012	2011	2012	2011
Revenues	185,589	197,248	372,072	385,253
Cost of sales	100,487	111,497	206,875	222,579
Gross profit	85,102	85,751	165,197	162,674
Operating and administrative expenses	90,975	115,579	181,149	208,270
Operating loss	(5,873)	(29,828)	(15,952)	(45,596)
Interest on long-term debt and financing charges	29	39	60	83
Interest 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-week	13-week	26-week	26-week
		period ended	period ended	period ended	period ended
		September 29,	October 1,	September 29,	October 1,
(thousands of Canadian dollars)		2012	2011	2012	2011
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 equipment	4,329	4,557	9,048	9,016
	Amortization of intangible assets	2,515	2,103	4,937	4,184
	Impairment of capital assets	-	-	250	-
	Impairment of goodwill	-	25,416	-	25,416
	Loss on disposal of capital assets	-	11	44	15
	Stock-based compensation	200	75	359	670
	Directors' compensation	96	118	229	267
	Deferred tax assets	(1,311)	(1,250)	(5,353)	(4,852)
	Other	510	(2,125)	(243)	(2,411)
Net change in non-cash working capital balances related to continuing operations		10,667	(18,306)	(897)	(11,501)
Interest on long-term debt and financing charges		29	39	60	83
Interest expense (income) on cash and cash equivalents		(578)	56	(1,159)	(15)
Income taxes received		41	-	45	-
Operating cash flows of discontinued operations		-	(282)	-	(16,813)
Cash flows from (used in) operating activities		12,485	(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	-	5,280
Repayment of long-term debt		(338)	(393)	(684)	(712)
Interest received		565	10	1,124	94
Proceeds from share issuances		142	-	230	578
Purchase of shares in subsidiary		-	-	-	(3,009)
Dividends paid		(2,780)	(2,772)	(5,556)	(5,539)
Financing cash flows of discontinued operations		-	36	-	24,478
Cash 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)	2,285	225	2,354
Net increase (decrease) in cash and cash equivalents during the period		4,003	(27,894)	(15,003)	(38,170)
Cash and cash equivalents, beginning of period		188,595	73,385	207,601	83,661
Cash and cash equivalents, end of period		192,598	45,491	192,598	45,491
Cash and cash equivalents attributable to:
Continuing operations		192,598	18,497	192,598	18,497
Discontinued operations		-	26,994	-	26,994
		192,598	45,491	192,598	45,491

 

 

SOURCE: Indigo Books & Music Inc.

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