Indigo Reports $24.5M Improvement in Q3 Net Earnings

Comparable Superstore Sales grow by 5.5% and Online Sales grow by 10.6%

TORONTO, Feb. 3, 2015 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported revenue for the quarter ended December 27, 2014 of $339.4 million, up $7.0 million from last year, despite operating five fewer superstores and one less small format store. 

On a comparable store basis, Indigo and Chapters superstores posted 5.5% growth, while sales at Coles and Indigospirit small format stores were flat.  Sales from Indigo's online channel, indigo.ca, grew by 10.6%.

The increase in revenue was driven by continued double digit growth in Lifestyle, Paper and Toys, including the highly successful American Girl®. Additionally, the core trade books business grew in spite of the lack of major hit titles compared to the same period last year.  Gross profit margin rate improved by 1.1% compared to the same period last year as a result of higher sell through of full priced goods and more effective use of promotions.

Commenting on the results, CEO Heather Reisman said, "We are pleased with these results which show both top line growth and improvements in profitability. We're confident these results demonstrate customer affection for our brand. Our entire team is focused on continuing to position this vibrant Canadian business for long-term growth and success."

The Company recognized net earnings of $33.0 million which is $1.28 net earnings per common share for this quarter, compared to net earnings of $8.5 million, or $0.33 net earnings per common share, for the same period last year. The improvement of $24.5 million was primarily driven by higher revenues, improved margins, lower operating costs and a lower tax expense.

During the quarter, the Company launched the 1450 square-foot American Girl® specialty boutique at Chapters Rideau in Ottawa, marking the third retail location for the iconic brand in Canada, exclusively available at Indigo and Chapters.

Analyst/Investor Call

Indigo will host a conference call for analysts and investors to review these results at 5:00 p.m. (Eastern Time) today, February 3, 2015.  The call can be accessed by dialling 416-764-8688 from within the Toronto area, or 1-888-390-0546 outside of Toronto.  The eight digit participant code is 52848004. 

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on February 10, 2015. The call playback can be accessed after 7:00 p.m. (ET) on February 3, 2015, by dialing 416-764-8677 from within the Toronto area, or 1-888-390-0541 outside of Toronto.  The six-digit replay passcode number is 848004 #.  The conference call transcript will be archived in the Investor Relations section of the Indigo website, www.indigo.ca.

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; 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.

Indigo founded the Indigo Love of Reading Foundation in 2004 to address the underfunding of public elementary school libraries. Every year the Indigo Love of Reading Foundation grants $1.5 million to 20 high-needs elementary schools so they can transform their libraries with the purchase of new books and education resources. To date, the Indigo Love of Reading Foundation's Literacy Fund has committed $15 million to 170 Canadian schools. The Foundation's annual grassroots Adopt a School program unites employees, customers, schools and their communities to raise funds to put even more books into the hands of children. Over the past five years we have raised over $2.7 million so 463,000 children have a book to call their own.

To learn more about Indigo, please visit the Our Company section at indigo.ca.

Consolidated Balance Sheets
(Unaudited)
		As at	As at	As at
		December 27,	December 28,	March 29,
(thousands of Canadian dollars)		2014	2013	2014
ASSETS
Current
Cash and cash equivalents		287,227	265,292	157,578
Accounts Receivable		20,784	25,846	5,582
Inventories		223,260	247,780	218,979
Prepaid expenses		5,864	5,075	5,184
Total current assets		537,135	543,993	387,323
Property, plant and equipment		56,771	62,396	58,476
Intangible assets		17,902	22,039	21,587
Equity investment		1,684	1,609	598
Deferred tax assets		40,766	38,821	44,604
Total assets		654,258	668,858	512,588
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities		248,881	259,559	136,428
Unredeemed gift card liability		64,232	64,256	46,827
Provisions		885	1,524	928
Deferred revenue		13,380	13,185	12,860
Income taxes payable		26	38	-
Current portion of long-term debt		187	727	584
Total current liabilities		327,591	339,289	197,627
Long-term accrued liabilities		2,335	3,562	2,896
Long-term provisions		99	78	164
Long-term debt		94	275	227
Total liabilities		330,119	343,204	200,914
Equity
Share capital		204,970	203,812	203,812
Contributed surplus		9,715	8,422	8,820
Retained earnings		109,454	113,420	99,042
Total equity		324,139	325,654	311,674
Total liabilities and equity		654,258	668,858	512,588

Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)
(Unaudited)
	13-week	13-week	39-week	39-week
	period ended	period ended	period ended	period ended
	December 27,	December 28,	December 27,	December 28,
(thousands of Canadian dollars, except per share data)	2014	2013	2014	2013
Revenues	339,389	332,393	709,221	683,335
Cost of sales	(191,709)	(191,433)	(398,265)	(387,657)
Gross profit	147,680	140,960	310,956	295,678
Operating, selling, and administrative expenses	(113,012)	(115,389)	(298,997)	(305,073)
Operating profit (loss)	34,668	25,571	11,959	(9,395)
Interest on long-term debt and financing charges	(19)	(25)	(48)	(82)
Interest income on cash and cash equivalents	465	582	1,253	1,766
Share of earnings from equity investment	1,684	1,609	1,086	1,000
Earnings (loss) before income taxes	36,798	27,737	14,250	(6,711)
Income tax expense	(3,838)	(19,240)	(3,838)	(9,910)
Net earnings (loss) and comprehensive earnings (loss) for the period	32,960	8,497	10,412	(16,621)
Net earnings (loss) per common share
Basic	$  1.28	$  0.33	$  0.41	$  (0.65)
Diluted	$  1.27	$  0.33	$  0.40	$  (0.65)

Consolidated Statements of Cash Flows
(Unaudited)
		13-week	13-week	39-week	39-week
		period ended	period ended	period ended	period ended
		December 27,	December 28,	December 27,	December 28,
(thousands of Canadian dollars)		2014	2013	2014	2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) for the period		32,960	8,497	10,412	(16,621)
Add (deduct) items not affecting cash
	Depreciation of property, plant, and equipment	3,703	4,101	11,036	12,214
	Amortization of intangible assets	3,032	2,724	8,881	8,198
	Net impairment (reversal) of capital assets	(458)	505	(458)	505
	Loss on disposal of capital assets	25	100	34	113
	Stock-based compensation	315	228	813	925
	Directors' compensation	86	100	252	344
	Deferred tax assets	3,838	19,240	3,838	9,910
	Other	(175)	(442)	(716)	(430)
Net change in non-cash working capital balances		101,386	79,640	109,546	73,947
Interest on long-term debt and financing charges		19	25	48	82
Interest income on cash and cash equivalents		(465)	(582)	(1,253)	(1,766)
Income taxes received		26	27	26	26
Share of earnings from equity investment		(1,684)	(1,609)	(1,086)	(1,000)
Cash flows from operating activities		142,608	112,554	141,373	86,447
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(4,196)	(9,030)	(8,907)	(16,188)
Addition of intangible assets		(1,384)	(2,508)	(5,196)	(8,073)
Distributions from equity investment		-	-	-	359
Interest received		207	582	995	1,823
Cash flows used in investing activities		(5,373)	(10,956)	(13,108)	(22,079)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		(170)	(189)	(536)	(620)
Interest paid		(19)	-	(50)	(70)
Proceeds from share issuances		317	-	988	7
Dividends paid		-	(2,783)	-	(8,348)
Repurchase of options		-	-	-	(975)
Cash flows from (used in) financing activities		128	(2,972)	402	(10,006)
Effect of foreign currency exchange rate changes on cash and cash equivalents		435	406	982	368
Net increase in cash and cash equivalents during the period		137,798	99,032	129,649	54,730
Cash and cash equivalents, beginning of period		149,429	166,260	157,578	210,562
Cash and cash equivalents, end of period		287,227	265,292	287,227	265,292

SOURCE Indigo Books & Music Inc.

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

Related Links

http://www.indigo.ca