- $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
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