Indigo Reports Record Net Earnings

- $165 Million Gain on Kobo Sale -

TORONTO, May 29, 2012 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 2.3% decline in revenue for its fiscal year ended March 31, 2012.  Revenue for the year was $934 million compared to $956 million last year.  The decline was primarily due to lower physical book sales which were partially offset by continued growth in Indigo's digital, gift, lifestyle and toy businesses.  Additionally, the Company deferred $7 million in revenue during the year due to the free plum rewards loyalty program launched nationally in April of 2011.  The Company will recognize this revenue in future years as customers redeem the points earned on past purchases.

On a comparable store basis, Indigo and Chapters superstore revenue decreased 1.9%, while Coles and IndigoSpirit small format store revenue decreased 0.8%.  Sales from Indigo's online channel,indigo.ca, were up 2.9% compared to last year.

Net earnings attributable to shareholders of the Company for the year were $93 million, up from a loss of $6 million last year. Net earnings attributable to shareholders of the Company do not include the portion of Kobo losses attributable to minority shareholders and as such, this earnings number is used to calculate the Company's earnings per share.  The significant increase in net earnings was due to the recognition of a $165 million pre-tax gain on the sale of all outstanding shares of Kobo Inc. to Rakuten, Inc. on January 11, 2012.

Commenting on the results, CEO Heather Reisman said, "We are enormously proud of Kobo and pleased for Indigo and all Indigo shareholders that this sale represented such an attractive return on our investment.  We've accelerated our transformation from a bookstore to the world's first cultural department store and are gratified that our efforts are being positively received by our customers."

Revenue for the fourth quarter was $196 million, down $4 million from the previous year due to lower physical book sales which were partially offset by the growth in the digital, gift, lifestyle and toy businesses. Net earnings attributable to shareholders of the Company for the quarter were $132 million compared to a net loss of $19 million last year.  The increase in earnings was due to the gain realized from the Kobo sale.

During the fourth quarter, only one year after its launch, Indigo's plum rewards loyalty program grew to over 4 million members.

Due to the sale of Kobo, the operating results of Kobo have been reported as discontinued operations and the prior period results have been restated accordingly.  As such, Indigo's restated revenues and expenses no longer include Kobo's revenues and expenses which are now reported as discontinued operations.  The restated quarterly statements for the Company's first and second quarter of this fiscal year are available on the Company's website at indigo.ca/investor-relations.

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 has 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
		As at	As at	As at
		March 31,	April 2,	April 4,
(thousands of Canadian dollars)		2012	2011	2010
ASSETS
Current
Cash and cash equivalents		207,601	83,661	103,898
Accounts receivable		12,627	12,684	8,455
Inventories		229,706	232,694	224,406
Income taxes recoverable		-	-	899
Prepaid expenses		3,695	7,941	6,771
Total current assets		453,629	336,980	344,429
Property, plant and equipment		67,464	78,777	74,800
Intangible assets		22,810	30,614	23,793
Goodwill		-	26,632	26,632
Deferred tax assets		48,633	38,004	48,214
Total assets		592,536	511,007	517,868
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities		174,201	180,899	179,063
Unredeemed gift card liability		42,711	40,991	37,816
Provisions		232	-	178
Deferred revenue		11,234	11,528	12,882
Income taxes payable		65	657	-
Current portion of long-term debt		1,060	1,290	1,863
Total current liabilities		229,503	235,365	231,802
Long-term accrued liabilities		5,800	6,284	8,203
Long-term provisions		460	-	-
Long-term debt		1,141	1,995	1,174
Total liabilities		236,904	243,644	241,179
Equity
Share capital		203,373	202,220	198,635
Contributed surplus		7,039	6,066	5,633
Retained earnings		145,220	48,629	65,496
Total equity attributable to shareholders of the Company		355,632	256,915	269,764
Non-controlling interest		-	10,448	6,925
Total equity		355,632	267,363	276,689
Total liabilities and equity		592,536	511,007	517,868

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 31,	April 2,	March 31,	April 2,
(thousands of Canadian dollars, except per share data)	2012	2011	2012	2011
Revenues	195,879	200,160	933,990	956,449
Cost of sales	113,889	116,393	544,924	543,008
Gross profit	81,990	83,767	389,066	413,441
Operating and administrative expenses	97,710	97,577	418,701	387,927
Operating earnings (loss)	(15,720)	(13,810)	(29,635)	25,514
Interest on long-term debt and financing charges	36	97	153	212
Interest income on cash and cash equivalents	(420)	(220)	(460)	(515)
Earnings (loss) before income taxes	(15,336)	(13,687)	(29,328)	25,817
Income tax expense (recovery)
Current	71	1,214	71	1,214
Deferred	(4,681)	(3,156)	(1,572)	10,211
	(4,610)	(1,942)	(1,501)	11,425
Earnings (loss) and comprehensive earnings (loss) for the period from continuing operations	(10,726)	(11,745)	(27,827)	14,392
Earnings (loss) and comprehensive earnings (loss) for the period from discontinued operations (net of tax)	135,695	(12,625)	94,016	(33,776)
Net earnings (loss) and comprehensive earnings (loss) for the period	124,969	(24,370)	66,189	(19,384)
Net earnings (loss) and comprehensive earnings (loss) attributable to:
Shareholders of the Company	131,527	(19,441)	92,664	(5,742)
Non-controlling interest	(6,558)	(4,929)	(26,475)	(13,642)
Total net earnings (loss) and comprehensive earnings (loss) for the period	124,969	(24,370)	66,189	(19,384)
Net earnings (loss) per common share from continuing operations
Basic	$(0.43)	$(0.31)	$(1.10)	$  0.58
Diluted	$(0.43)	$(0.31)	$(1.10)	$  0.57
Net earnings (loss) per common share from discontinued operations
Basic	$  5.64	$(0.47)	$  4.78	$(0.81)
Diluted	$  5.58	$(0.47)	$  4.73	$(0.81)
Net earnings (loss) per common share
Basic	$  5.21	$(0.78)	$  3.68	$(0.23)
Diluted	$  5.16	$(0.78)	$  3.64	$(0.23)

Consolidated Statements of Cash Flows
		13-week		13-week		52-week		52-week
		period ended		period ended		period ended		period ended
		March 31,		April 2,		March 31,		April 2,
(thousands of Canadian dollars)		2012		2011		2012		2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) from continuing operations for the period		(10,726)		(11,745)		(27,827)		14,392
Add (deduct) items not affecting cash
Depreciation of property, plant and equipment		4,590		4,945		18,416		18,369
Amortization of intangible assets		1,977		1,870		8,243		7,663
Impairment of capital assets		-		4,882		3,956		4,882
Impairment of goodwill		-		-		25,416		-
Loss on disposal of capital assets		59		95		124		168
Stock-based compensation		175		139		1,041		671
Directors' compensation		116		138		500		554
Deferred tax assets		(4,681)		(3,156)		(1,572)		10,211
Other		(248)		587		(205)		1,081
Net change in non-cash working capital balances related to continuing operations		(68,695)		(58,413)		16,925		(26,088)
Interest on long-term debt and financing charges		36		97		153		212
Interest income on cash and cash equivalents		(420)		(220)		(460)		(515)
Income taxes received (paid)		(325)		736		(325)		736
Operating cash flows of discontinued operations		11,809		(2,676)		(56,878)		(14,263)
Cash flows from (used in) operating activities		(66,333)		(62,721)		(12,493)		18,073
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of non-capital tax losses		-		-		(10,559)		-
Purchase of property, plant and equipment		(1,611)		(2,767)		(12,141)		(24,645)
Addition of intangible assets		(2,513)		(1,896)		(8,553)		(10,789)
Investing cash flows of discontinued operations		(948)		(3,747)		(8,884)		(7,536)
Cash flows used in investing activities		(5,072)		(8,410)		(40,137)		(42,970)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable		(5,280)		-		-		-
Repayment of long-term debt		(320)		(90)		(1,367)		(2,073)
Interest received		172		139		281		316
Proceeds from share issuances		7		729		585		3,003
Repurchase of common shares		-		-		-		(387)
Purchase of shares in subsidiary		-		(9,985)		(3,009)		(19,271)
Cash disposal resulting from sale of subsidiary		(33,033)		-		(33,033)		-
Proceeds from sale of subsidiary		148,941		-		148,941		-
Dividends paid		(2,775)		(2,755)		(11,090)		(10,948)
Financing cash flows of discontinued operations		(263)		22,712		74,819		35,113
Cash flows from financing activities		107,449		10,750		176,127		5,753
Effect of foreign currency exchange rate changes on cash & cash equivalents		511		(601)		443		(1,093)
Net increase (decrease) in cash and cash equivalents during the period		36,555		(60,982)		123,940		(20,237)
Cash and cash equivalents, beginning of period		171,046		144,643		83,661		103,898
Cash and cash equivalents, end of period		207,601		83,661		207,601		83,661
Cash and cash equivalents attributable to:
Continuing operations		207,601		59,685		207,601		59,685
Discontinued operations		-		23,976		-		23,976
		207,601		83,661		207,601		83,661

 

 

Janet Eger
Vice President, Public Relations
416 342 8561