2014

Indigo Reports Q1 Results

Announces Launch of !ndgiotech and Poppin
Indigo named TOP Retail Employer Brand

TORONTO, Aug. 7, 2013 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported revenue of $171.5 million for its first quarter ending June 29, 2013.  Revenue declined 8.1% from the previous year due primarily to the phenomenal success of the Fifty Shades and Hunger Games trilogies last year. The Company is also operating eight fewer small format stores.  Excluding revenue from the two hit trilogies, revenue declined only 1.3% from the same quarter last year. The Company again experienced double-digit revenue growth in lifestyle, paper and toy products.

On a comparable store basis, Indigo and Chapters superstores posted a 7.3% decrease in revenue, while Coles and IndigoSpirit small format stores were down 13.1% with the impact of the blockbuster trilogies.  Excluding the blockbuster titles, comparable store sales declined 1.6% in superstores and increased 1.1% in small format stores. Online sales were flat compared to the same period last year notwithstanding the impact of Fifty Shades and Hunger Games series.  Additionally, online sales of lifestyle, paper, and toy products continue to grow.

The Company recognized a net loss of $15.0 million for the 13-week period ended June 29, 2013 ($0.59 net loss per common share), compared to a net loss of $5.5 million ($0.22 net loss per common share) last year. The decrease was primarily the result of the decline in hit-related book sales, higher inventory markdown as well as intentionally higher selling and administrative expenses compared to last year. As part of its transformational strategy to drive top-of-mind consumer awareness in its key growth categories, the Company invested more in building its general merchandise capabilities and in marketing.

During the quarter, the Company announced the arrival of Poppin®, a lifestyle brand that brings design to the desk top. Indigo is the exclusive Canadian retailer in store and online at Indigo.ca.

Indigo also announced the introduction of 39 !ndigotech™ shops within its stores to launch across Canada in Q2 and Q3. In addition to Kobo devices, !ndigotech™ features a wide selection of Apple® products including iPad™ and iPad Mini™ tablets, iPod® devices and AppleTV®, Apple® accessories, and a curated selection of other design inspired lifestyle electronics and accessories.

In the quarter, Indigo was named the top Canadian retail employer, and sixth overall out of all employers, by Randstad Canada.  The Randstad Award rewards and encourages best practices in building the best employer brands, and is the only employer award where winners are chosen entirely by workers and job seekers in search of employment opportunities within Canada's leading organizations.

Also during the quarter, Indigo announced for the ninth consecutive year that the Love of Reading Foundation will donate $1.5 million to 20 high-needs elementary schools in an effort to bolster literacy and transform school libraries across the country.

The Board of Directors today approved a quarterly dividend of 11 cents per common share to be paid on September 4, 2013, to all shareholders of record as of August 21, 2013.

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 more than $15 million—equating to over 1.3 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       As at
            June 29,       June 30,       March 30,       April 1,
(thousands of Canadian dollars)           2013       2012       2013       2012
ASSETS                                    
Current                                    
Cash and cash equivalents           191,346       188,588       210,562       206,718
Accounts receivable           9,010       13,768       7,126       12,810
Inventories           207,029       217,921       216,533       229,199
Prepaid expenses           5,288       4,391       4,153       3,692
Total current assets           412,673       424,668       438,374       452,419
                                     
Property, plant and equipment           56,144       62,998       58,903       66,928
Intangible assets           21,283       22,198       22,164       22,810
Equity investment           597       494       968       961
Deferred tax assets           54,570       52,675       48,731       48,633
Total assets           545,267       563,033       569,140       591,751
LIABILITIES AND EQUITY                                    
Current                                    
Accounts payable and accrued liabilities           145,892       152,648       150,177       173,416
Unredeemed gift card liability           46,901       43,174       47,169       42,711
Provisions           1,828       237       2,168       232
Deferred revenue           13,753       11,980       13,733       11,234
Income taxes payable           11       69       11       65
Current portion of long-term debt           757       1,006       773       1,060
Total current liabilities           209,142       209,114       214,031       228,718
Long-term accrued liabilities           3,368       4,644       4,004       5,800
Long-term provisions           78       391       78       460
Long-term debt           527       1,135       705       1,141
Total liabilities           213,115       215,284       218,818       236,119
Equity                                    
Share capital           203,805       203,482       203,805       203,373
Contributed surplus           7,789       7,310       8,128       7,039
Retained earnings           120,558       136,957       138,389       145,220
Total equity           332,152       347,749       350,322       355,632
Total liabilities and equity           545,267       563,033       569,140       591,751
                                     

Consolidated Statements of Loss and Comprehensive Loss
(Unaudited)
                     
            13-week       13-week
            period ended       period ended
            June 29,       June 30,
(thousands of Canadian dollars, except per share data)           2013       2012
                     
Revenues           171,525       186,626
Cost of sales           (99,289)       (106,328)
Gross profit           72,236       80,298
Operating, selling and administrative expenses           (93,309)       (90,017)
Operating loss           (21,073)       (9,719)
Interest on long-term debt and financing charges           (27)       (31)
Interest income on cash and cash equivalents           584       581
Share of loss from equity investment           (371)       (360)
Loss before income taxes           (20,887)       (9,529)
Income tax recovery           5,839       4,042
Net loss and comprehensive loss for the period           (15,048)       (5,487)
                     
Net loss per common share                    
Basic           $(0.59)       $(0.22)
Diluted           $(0.59)       $(0.22)
                     

Consolidated Statements of Cash Flows
(Unaudited)
        13-week       13-week
        period ended       period ended
        June 29,       June 30,
(thousands of Canadian dollars)       2013       2012
                 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss from for the period       (15,048)       (5,487)
Add (deduct) items not affecting cash                
  Depreciation of property, plant and equipment       4,039       4,719
  Amortization of intangible assets       2,713       2,422
  Net impairment of capital assets       -       250
  Loss on disposal of capital assets       10       44
  Stock-based compensation       503       159
  Directors' compensation       133       133
  Deferred tax assets       (5,839)       (4,042)
  Other       (575)       (754)
Net change in non-cash working capital balances       976       (11,158)
Interest on long-term debt and financing charges       27       31
Interest income on cash and cash equivalents       (584)       (581)
Income taxes received       -       4
Distributions from equity investment       -       107
Share of loss from equity investment       371       360
Cash flows used in operating activities       (13,274)       (13,793)
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of property, plant and equipment       (1,290)       (781)
Addition of intangible assets       (1,832)       (1,830)
Interest received       640       607
Cash flows used in investing activities       (2,482)       (2,004)
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Repayment of long-term debt       (197)       (346)
Interest paid       (36)       (48)
Proceeds from share issuances       -       88
Dividends paid       (2,783)       (2,776)
Repurchase of options       (975)       -
Cash flows used in financing activities       (3,991)       (3,082)
                 
Effect of foreign currency exchange rate changes on cash and cash equivalents       531       749
                 
Net decrease in cash and cash equivalents during the period       (19,216)       (18,130)
Cash and cash equivalents, beginning of period       210,562       206,718
Cash and cash equivalents, end of period       191,346       188,588

 

SOURCE Indigo Books & Music Inc.



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