Book Sales Rise Despite Tough Economic Climate
TORONTO, Jan. 27 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's
largest book retailer, reported a 2.3% increase in revenue for its third
quarter ending December 27, 2008.
Revenue for the quarter was $330.0 million, up $7.4 million from the same
quarter last year. On a comparable store basis, Indigo and Chapters
superstores posted 2.2% growth, while Coles small format stores were up 3.2%.
Sales from Indigo's online channel, chapters.indigo.ca decreased 2.6% to $30.1
million.
Pre-tax earnings for the quarter were $40.1 million, down $1.5 million,
or 3.6% from the same quarter last year. Net income for the quarter was $26.8
million, down $22.4 million from $49.2 million last year. This year's results
include tax expense of $13.4 million while last year's numbers included a $7.6
million tax recovery, which combined account for $21.0 million of the decrease
in reported net income.
Commenting on the results, CEO Heather Reisman said, "We're very
satisfied with our top line growth given the challenging economic climate. Our
profit was dampened by the steep and unexpected decline in the Canadian dollar
during the quarter which impacted the cost of imported goods and a number of
our operating costs. We chose not to pass these cost increases to our
consumers during these times." Ms Reisman also noted, "The Company also
absorbed the costs associated with the launch of its new Pistachio concept."
Two new Indigo Books, Gifts, Life superstores opened in the third
quarter. Residents of Saskatoon, Saskatchewan and Stoney Creek, Ontario now
enjoy an award winning booklover's haven in their markets. Surrey, British
Columbia will host the launch of the newest Indigo store in the spring of
2009. Indigo also expanded toy sections at five superstores located in Calgary
and Ontario in the quarter.
Two of the Company's new eco-aware Pistachio stores launched this quarter
in Toronto at Yonge and Eglinton and Yorkdale Mall, with a focus on paper,
home decor, gifts, and apothecary. Many Pistachio branded products are
available nationally at select Indigo and Chapters stores.
Additionally, the Company announced "Shortcovers," a new digital
initiative developed by Indigo Books & Music Inc. set to launch in the current
quarter at www.shortcovers.com. Shortcovers will serve customers who want the
convenience of accessing and reading their selected content, anytime,
anywhere, on the mobile devices they already own.
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-GAAP Financial Measures
The Company prepares its consolidated financial statements in accordance
with Canadian generally accepted accounting principles. In order to provide
additional insight into the business, the Company has also provided non-GAAP
data, including comparative store sales growth, in the press release above.
This measure does not have a standardized meaning prescribed by GAAP, 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.
About Indigo Books & Music Inc.
Indigo is a publicly traded Canadian company listed on the Toronto Stock
Exchange (TSX:IDG). As the largest book retailer in the country, Indigo
operates in all provinces under different banners including Indigo Books &
Music; Indigo Books, Gifts, Life; IndigoSpirit, Chapters, The World's Biggest
Bookstore, and Coles. The online division, www.chapters.indigo.ca, features
books, toys, music and DVDs, and hosts the award winning Indigo Online
Community. In 2008, Indigo launched Pistachio, an eco-aware lifestyle store
featuring stationery, gifts and home décor, and apothecary.
Chapters and Indigo are rated as the number one and number two retailers
in Canada by the Kubas Major Market Retail Report, and have occupied the list
since 2000.
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. Visit loveofreading.org for more information.
To learn more about Indigo, please visit the About Our Company section of
www.chapters.indigo.ca.Consolidated Balance Sheets
(Unaudited)
As at As at As at
December 27, December 29, March 29,
(thousands of dollars) 2008 2007 2008
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ASSETS
Current
Cash and cash equivalents 168,092 107,236 55,933
Accounts receivable 17,689 16,922 8,996
Inventories 228,017 228,670 206,259
Income taxes recoverable - 21 21
Prepaid expenses 4,740 3,811 4,929
Future tax assets 6,590 7,347 6,745
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Total current assets 425,128 364,007 282,883
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Property, plant and equipment 81,114 67,779 67,348
Future tax assets 31,085 42,955 43,250
Goodwill and intangible assets 28,121 27,523 27,523
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Total assets 565,448 502,264 421,004
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued
liabilities 312,262 276,900 193,323
Deferred revenue 11,101 10,624 10,350
Derivative liabilities - 1,498 -
Income taxes payable 2,308 - -
Current portion of long-term debt 2,740 2,525 2,648
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Total current liabilities 328,411 291,547 206,321
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Long-term accrued liabilities 6,174 7,304 7,549
Long-term debt 2,210 4,144 3,380
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Total liabilities 336,795 302,995 217,250
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Shareholders' equity
Share capital 196,471 198,861 198,938
Contributed surplus 3,365 2,251 2,564
Retained earnings (deficit) 28,817 (878) 2,252
Accumulated other comprehensive loss - (965) -
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Total shareholders' equity 228,653 199,269 203,754
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Total liabilities and
shareholders' equity 565,448 502,264 421,004
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Consolidated Statements of Earnings
(Unaudited)
13-week 13-week 39-week 39-week
period period period period
ended ended ended ended
(thousands of dollars, December December December December
except per share data) 27, 2008 29, 2007 27, 2008 29, 2007
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Revenues 330,014 322,552 725,877 716,642
Cost of sales, operations,
selling and administration 283,462 273,555 662,519 651,280
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46,552 48,997 63,358 65,362
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Amortization of property,
plant and equipment 6,716 7,340 20,874 22,426
Amortization of intangible
assets 38 - 38 -
Amortization of pre-opening
store costs - 36 - 144
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6,754 7,376 20,912 22,570
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Earnings before the
undernoted items 39,798 41,621 42,446 42,792
Interest on long-term debt
and financing charges 69 133 248 583
Interest expense (income)
on bank indebtedness (391) (137) (1,184) 85
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Earnings before income taxes 40,120 41,625 43,382 42,124
Income tax expense (recovery)
Current 2,329 - 2,329 -
Future 11,021 (7,554) 12,320 (7,554)
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Net earnings for the period 26,770 49,179 28,733 49,678
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Net earnings per common share
Basic $1.09 $1.98 $1.17 $2.01
Diluted $1.07 $1.94 $1.14 $1.96
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Consolidated Statements of Cash Flows
(Unaudited)
13-week 13-week 39-week 39-week
period period period period
ended ended ended ended
December December December December
(thousands of dollars) 27, 2008 29, 2007 27, 2008 29, 2007
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CASH FLOWS FROM OPERATING
ACTIVITIES
Net earnings for the period 26,770 49,179 28,733 49,678
Add (deduct) items not
affecting cash
Amortization 6,716 7,376 20,874 22,570
Stock-based compensation 219 210 641 512
Directors' compensation 86 81 263 257
Future tax assets 11,021 (8,554) 12,320 (8,554)
Loss on disposal of property,
plant and equipment - 96 13 96
Amortization of
intangible assets 38 - 38 -
Amortization and write-off
of deferred financing charges - 38 - 214
Other - 25 - 6
Net change in non-cash
working capital balances
related to operations
Accounts receivable (9,455) (8,414) (8,693) (7,074)
Inventories (12,843) 8,278 (21,758) (4,611)
Prepaid expenses 398 433 189 623
Income taxes
recoverable/payable 2,329 173 2,329 173
Deferred revenue (452) (252) 751 3
Accounts payable and
accrued liabilities 92,807 70,921 117,564 66,855
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Cash flows from operating
activities 117,634 119,590 153,264 120,748
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CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property,
plant and equipment (15,830) (5,626) (32,732) (12,728)
Addition of intangible asset (636) - (636) -
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Cash flows used in
investing activities (16,466) (5,626) (33,368) (12,728)
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CASH FLOWS FROM FINANCING
ACTIVITIES
Decrease in bank indebtedness - (15,794) - -
Repayment of long-term debt (727) (759) (2,999) (15,422)
Proceeds from share issuances 10 501 287 999
Repurchase of common shares (2,395) - (5,025) -
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Cash flows used in
financing activities (3,112) (16,052) (7,737) (14,423)
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Net increase in cash and
cash equivalents during
the period 98,056 97,912 112,159 93,597
Cash and cash equivalents,
beginning of period 70,036 9,324 55,933 13,639
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Cash and cash equivalents,
end of period 168,092 107,236 168,092 107,236
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For further information: Janet Eger, Director, Public Relations, (416)
342-8561, jeger@indigo.ca
