2014

Indigo Reports Q3 Revenue up 3.0%

Online Revenues at Record Level, Significant Growth in General Merchandise

TORONTO, Feb. 4, 2014 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported 3.0% growth in revenue for its third quarter ended December 28, 2013.  Revenue for the quarter was $332.4 million, up $9.8 million from the previous year driven by double-digit growth in its lifestyle, paper, and toy businesses and new revenue from its recently launched !ndigotech™ business.  Additionally, the Company experienced growth in its print business due to a strong line-up of hit titles.  The revenue growth was achieved despite the Company operating eight fewer small format stores and one less superstore compared to the same time last year.

On a comparable store basis, Indigo and Chapters superstores posted a 2.6% increase in revenue, while Coles and Indigospirit small format store revenues were up 0.5%. Online sales increased 19.3% to a record $41.5 million, up from $34.8 million for the same period last year.

Commenting on the results, CEO Heather Reisman said, "It is very satisfying to see the Company achieve this positive growth - particularly given the impact of unusually bad weather this holiday season.  Clearly the investments we are making to transform Indigo are resonating with our customers."

The Company reported net earnings of $8.5 million for the 13-week period ended December 28, 2013 ($0.33 net earnings per common share), compared to net earnings of $22.0 million ($0.86 net earnings per common share) in the same period last year.  Net earnings declined as a result of both higher tax expense as the Company recorded a valuation allowance against the deferred tax assets and intentional investments made to advance the Company's transformational agenda.  Specifically, the Company invested in expanding merchandising space for growing categories within its existing superstores, in online marketing to drive customer acquisition, in improving its online capabilities and launching additional !ndigotech™ locations. Excluding the valuation allowance, net earnings for the third quarter of fiscal 2014 would have been $20.9 million ($0.82 net earnings per common share), compared to net earnings of $22.0 million ($0.86 net earnings per common share) in the same period last year.

By the end of Q3, the Company had opened its 37th !ndigotech™ shop.  These shops within shops feature design-inspired lifestyle electronics and accessories.

In the quarter, the Company also launched its Indigo Mobile App for both Android and iOS platforms which simplifies the Indigo shopping experience for quicker and easier purchasing, at home, in-store, or on the go. The Indigo Mobile App, in addition to effortless mobile shopping, gives customers access to their plum loyalty and rewards membership, great product information, personalized recommendations and offers that understand, anticipate and cater to their shopping needs.

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 its "Adopt a School" program, have contributed more than $15.6 million — equating to over 1.4 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
    December 28,     December 29,       March 30,
(thousands of Canadian dollars)   2013     2012       2013
ASSETS                  
Current                  
Cash and cash equivalents   265,292     310,076       210,562
Accounts receivable   25,846     26,968       7,126
Inventories   247,780     239,836       216,533
Prepaid expenses   5,075     4,144       4,153
Total current assets   543,993     581,024       438,374
Property, plant and equipment   62,396     60,619       58,903
Intangible assets   22,039     22,112       22,164
Equity investment   1,609     2,080       968
Deferred tax assets   38,821     46,310       48,731
Total assets   668,858     712,145       569,140
LIABILITIES AND EQUITY                  
Current                  
Accounts payable and accrued liabilities   259,559     267,177       150,177
Unredeemed gift card liability   64,256     63,639       47,169
Provisions   1,524     221       2,168
Deferred revenue   13,185     13,882       13,733
Income taxes payable   38     111       11
Current portion of long-term debt   727     811       773
Total current liabilities   339,289     345,841       214,031
Long-term accrued liabilities   3,562     4,153       4,004
Long-term provisions   78     285       78
Long-term debt   275     856       705
Total liabilities   343,204     351,135       218,818
Equity                  
Share capital   203,812     203,733       203,805
Contributed surplus   8,422     7,858       8,128
Retained earnings   113,420     149,419       138,389
Total equity   325,654     361,010       350,322
Total liabilities and equity   668,858     712,145       569,140
                   

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 28,     December 29,     December 28,     December 29,
(thousands of Canadian dollars, except per share data)     2013     2012     2013     2012
                         
Revenues     332,393     322,620     683,335     694,809
Cost of sales     (191,433)     (185,500)     (387,657)     (392,184)
Gross profit     140,960     137,120     295,678     302,625
Operating, selling and administrative expenses     (115,389)     (110,032)     (305,073)     (290,768)
Operating profit (loss)     25,571     27,088     (9,395)     11,857
Interest on long-term debt and financing charges     (25)     (17)     (82)     (69)
Interest income on cash and cash equivalents     582     685     1,766     1,844
Share of earnings from equity investment     1,609     1,955     1,000     1,226
Earnings (loss) before income taxes     27,737     29,711     (6,711)     14,858
Income tax recovery (expense)     (19,240)     (7,676)     (9,910)     (2,323)
Net earnings (loss) and comprehensive earnings (loss) for the period     8,497     22,035     (16,621)     12,535
                         
Net earnings (loss) per common share                        
Basic     $0.33     $0.86     $(0.65)     $0.49
Diluted     $0.33     $0.86     $(0.65)     $0.49
                         

Consolidated Statements of Cash Flows
(Unaudited)
 
      13-week     13-week     39-week     39-week
      period ended     period ended     period ended     period ended
      December 28,     December 29,     December 28,     December 29,
(thousands of Canadian dollars)     2013     2012     2013     2012
                         
CASH FLOWS FROM OPERATING ACTIVITIES                        
Net earnings (loss) for the period     8,497     22,035     (16,621)     12,535
Add (deduct) items not affecting cash                        
 Depreciation of property, plant and equipment     4,101     4,277     12,214     13,325
 Amortization of intangible assets     2,724     2,617     8,198     7,554
 Net impairment of capital assets     505     -     505     250
 Loss on disposal of capital assets     100     -     113     44
 Stock-based compensation     228     210     925     569
 Directors' compensation     100     101     344     330
 Deferred tax assets     19,240     7,676     9,910     2,323
 Other     (442)     (195)     (430)     (440)
Net change in non-cash working capital balances     79,640     91,363     73,947     90,068
Interest on long-term debt and financing charges     25     17     82     69
Interest income on cash and cash equivalents     (582)     (685)     (1,766)     (1,844)
Income taxes received (paid)     27     -     26     45
Distributions from equity investment     -     -     359     107
Share of earnings from equity investment     (1,609)     (1,955)     (1,000)     (1,226)
Cash flows from operating activities     112,554     125,461     86,806     123,709
                         
CASH FLOWS FROM INVESTING ACTIVITIES                        
Purchase of property, plant and equipment     (9,030)     (3,415)     (16,188)     (6,869)
Addition of intangible assets     (2,508)     (2,262)     (8,073)     (6,876)
Interest received     582     682     1,823     1,900
Cash flows used in investing activities     (10,956)     (4,995)     (22,438)     (11,845)
                         
CASH FLOWS FROM FINANCING ACTIVITIES                        
Notes payable     -     190     -     190
Repayment of long-term debt     (189)     (280)     (620)     (964)
Interest paid     -     (41)     (70)     (127)
Proceeds from share issuances     -     50     7     280
Dividends paid     (2,783)     (2,780)     (8,348)     (8,336)
Repurchase of options     -     -     (975)     -
Cash flows used in financing activities     (2,972)     (2,861)     (10,006)     (8,957)
                         
Effect of foreign currency exchange rate changes on cash and cash equivalents     406     224     368     451
                         
Net increase in cash and cash equivalents during the period     99,032     117,829     54,730     103,358
Cash and cash equivalents, beginning of period     166,260     192,247     210,562     206,718
Cash and cash equivalents, end of period     265,292     310,076     265,292     310,076

 

SOURCE Indigo Books & Music Inc.



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