Indigo Q3 Revenue Up 14%

Digital Business Grows Rapidly

TORONTO, Feb. 8 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 14% growth in revenue for its third quarter ending January 1, 2011.

Revenue for the quarter was $387.6 million, up $47.4 million from last year driven by strong growth in the Company's digital business.  On a comparable store basis, Indigo and Chapters superstores posted a 2.6% increase in revenue, while Coles and Indigo Spirit small format stores were down 0.8%.  Sales from Indigo's online channel, chapters.indigo.ca, were up 6.5% compared to last year.

Commenting on the results, CEO Heather Reisman said, "We are pleased with our top line revenue growth, particularly in our rapidly growing digital business.  Kobo eReaders were the hottest items in our stores over the holidays.  Consumers have also responded very favourably to our broader gift and toy selection and reinforced our decision to continue expanding these categories."

Net profit for the quarter was $30.2 million compared to a net profit of $34.5 million last year.  Ms. Reisman noted, "A reduced profit was expected as we continue to invest in the growth of our digital initiatives and the re-development of our stores and distribution centre to accommodate growth in our gift and toy businesses."

During the quarter the Company expanded its IndigoKids departments in seven British Columbia stores further advancing its strategy to make Indigo the ultimate family friendly destination. Indigo launched its IndigoStudio pilot in two GTA stores and launched Photogifts online at chapters.indigo.ca/photogifts. In this quarter, Indigo also revamped its online experience, expanding the online assortment to include gift and lifestyle product and significantly increased the depth and breadth of toys available online.

The Board of Directors today also approved a quarterly dividend of 11 cents per common share to be paid on March 14th, 2011, to all shareholders of record as of February 28, 2011.

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 on a 52-week basis.

About Indigo Books & Music Inc.

Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (TSX:IDG). As the largest book, gift and specialty toy retailer in the country, 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 division, www.chapters.indigo.ca, features books, eBooks, toys, music and DVDs, and hosts the award winning Indigo Online Community. In 2008, Indigo launched Pistachio, an eco-aware lifestyle store. In 2009, Indigo spun off their digital eReading division to launch KOBO Inc. - a leading destination for eReading.

Chapters and Indigo are rated as the number one and number two most favoured 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. To date the Foundation has contributed $9 mm to schools in need.

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
    January 1, December 26, April 3,
(thousands of dollars)   2011 2009 2010
         
ASSETS        
Current        
Cash and cash equivalents   144,335 202,082 103,489
Restricted cash   308 681 409
Accounts receivable   26,007 16,231 8,455
Inventories   255,750 246,312 224,406
Income taxes recoverable   899 - 899
Prepaid expenses   13,729 5,090 6,771
Future tax assets   5,146 4,589 6,615
Total current assets   446,174 474,985 351,044
Property, plant and equipment   87,950 78,669 77,478
Intangible assets   28,360 20,317 23,794
Future tax assets   29,114 23,164 40,894
Goodwill   26,632 26,632 26,632
Total assets   618,230 623,767 519,842
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current        
Accounts payable and accrued liabilities   316,813 333,319 229,920
Deferred revenue   12,639 12,180 12,882
Income taxes payable   - 703 -
Current portion of long-term debt   1,302 2,388 1,863
Total current liabilities   330,754 348,590 244,665
Long-term accrued liabilities   6,822 7,096 8,203
Long-term debt   2,081 1,328 1,174
Total liabilities   339,657 357,014 254,042
Non-controlling interest   1,909 7,905 6,831
Shareholders' equity        
Share capital   201,280 196,585 198,635
Contributed surplus   5,025 4,641 4,670
Retained earnings   70,359 57,622 55,664
Total shareholders' equity   276,664 258,848 258,969
Total liabilities and shareholders' equity   618,230 623,767 519,842

Consolidated Statements of Earnings and Comprehensive Earnings
(Unaudited)
  13-week 13-week 39-week 39-week
  period ended period ended period ended period ended
  January 1, December 26, January 1, December 26,
(thousands of dollars, except per share data) 2011 2009 2011 2009
         
Revenues 387,642 340,195 806,692 740,736
Cost of sales, operations, selling and administration 349,910 287,717 766,964 674,384
  37,732 52,478 39,728 66,352
Depreciation of property, plant and equipment 5,152 5,079 14,122 14,909
Amortization of intangible assets 2,726 2,184 7,656 6,149
Write-off of capital assets - 455 - 455
  7,878 7,718 21,778 21,513
Earnings before the undernoted items 29,854 44,760 17,950 44,839
Interest on long-term debt and financing charges 72 49 115 167
Interest income on cash and cash equivalents (131) (45) (315) (181)
Dilution gain on sale of non-controlling interest in subsidiary - (3,019) - (3,019)
Deemed disposition of goodwill - 891 - 891
Earnings before income taxes and non-controlling interest 29,913 46,884 18,150 46,981
Income tax expense        
   Current - 2,169 - 2,169
   Future 3,707 10,261 3,744 10,462
     3,707 12,430 3,744 12,631
Earnings before non-controlling interest 26,206 34,454 14,406 34,350
Non-controlling interest (3,976) (76) (8,659) (76)
Net earnings and comprehensive earnings for the period 30,182 34,530 23,065 34,426
         
Net earnings per common share        
Basic $1.21 $1.41 $0.93 $1.40
Diluted $1.19 $1.38 $0.92 $1.37

Consolidated Statements of Cash Flows
(Unaudited)
         
  13-week 13-week 39-week 39-week
  period ended period ended period ended period ended
  January 1, December 26, January 1, December 26,
(thousands of dollars) 2011 2009 2011 2009
         
CASH FLOWS FROM OPERATING ACTIVITIES        
Net earnings 30,182 34,530 23,065 34,426
Add (deduct) items not affecting cash        
 Depreciation of property, plant and equipment 5,152 5,079 14,122 14,909
 Amortization of intangible assets 2,726 2,184 7,656 6,149
 Stock-based compensation 214 299 520 810
 Directors' stock-based compensation 100 96 416 289
 Future tax assets 13,212 14,554 13,249 14,850
 Loss on disposal of capital assets 4 83 73 256
 Write-off of capital assets - 455 - 455
 Non-controlling interest (3,976) (76) (8,659) (76)
 Dilution gain on sale of non-controlling interest in subsidiary - (3,019) - (3,019)
 Deemed disposal of goodwill - 891 - 891
 Other 611 618 1,134 653
         
Net change in non-cash working capital balances related to operations        
 Accounts receivable (15,472) (7,761) (17,552) (6,341)
 Inventories 11,566 (12,122) (31,344) (24,545)
 Prepaid expenses 8,423 1,487 (6,958)   28
 Income taxes payable - 1,569 - 359
 Deferred revenue (10,980) (357) (243) 568
 Accounts payable and accrued liabilities 53,359 86,846 85,512 100,761
Cash flows from operating activities 95,121 125,356 80,991 141,423
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Change in restricted cash 2,164 (215) 101 (313)
Purchase of property, plant and equipment (7,526) (3,963) (22,338) (20,768)
Addition of intangible assets (4,305) (4,518) (12,222) (10,577)
Cash flows used in investing activities (9,667) (8,696) (34,459) (31,658)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Repayment of long-term debt (356) (760) (1,983) (2,264)
Proceeds from share issuances 1,093 110 2,274 239
Repurchase of common shares - (446) (387) (446)
Issuance of equity securities by subsidiary to non-controlling interest 1,905 11,000 3,095 11,000
Dividends paid (2,742) (2,453) (8,193) (7,360)
Cash flows from (used in) financing activities (100) 7,451 (5,194) 1,169
         
Effect of foreign currency exchange rate changes on cash and cash equivalents (369) (618) (492) (653)
         
Net increase in cash and cash equivalents during the period 84,985 123,493 40,846 110,281
Cash and cash equivalents, beginning of period 59,350 78,589 103,489 91,801
Cash and cash equivalents, end of period 144,335 202,082 144,335 202,082

SOURCE Indigo Books

For further information:

Janet Eger
Director, Public Relations
416 342 8561
jeger@indigo.ca


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