Happy Holidays for Indigo



    Profits and revenues both up after 2006 Christmas season

    TORONTO, Jan. 31 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's
largest book retailer, reported strong earnings and revenues for its third
quarter ended December 30, 2006. The retailer's profit was up 3% to
$41.0 million for the period including the Christmas shopping season, pushing
earnings to $1.68 per share, up $0.03 from a year ago. Included in these
results was a $1.6 million write-off of software assets related to the
company's online business. Normalizing for this charge, the Company's net
earnings would have increased 7.2%. Operating earnings for the quarter grew 6%
or almost $3 million to $51.2 million.
    Indigo grew revenues 3.4% to $320.5 million, compared to $309.9 million
in the same quarter last year. Comparative store sales for the quarter
increased 2.5% to $206.5 million in superstores while small format stores rose
0.6% to $62.1 million. The company opened two new superstores late in the
quarter.
    Commenting on the results, Indigo CEO Heather Reisman said: "We are
pleased with our performance given a 6% average decline in the price of US
published books driven by the strong Canadian Dollar. Not only have we have
been able to grow our top line well above the North American industry average,
but we've done so without the benefit of strong blockbuster titles this past
quarter, compared to last year."
    The Company's online sales rose 17.7% to $28.6 million, continuing the
track record of double digit growth since the inception of the channel.
    On a year-to-date basis, net earnings increased to $34.2 million, up 4%
from last year's $32.8 million. On a per share basis, earnings were $1.41
compared to $1.36 the year prior. Revenues were up 1.7% to $673.1 million from
$661.7 million while same store sales grew 1.9% in superstores and 0.6% in
small format stores.

    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.

    About Indigo Books & Music Inc.

    Indigo is a Canadian company and the largest book retailer in Canada,
operating bookstores in all provinces under the names Indigo Books Music &
more, Chapters, The World's Biggest Bookstore and Coles. Indigo operates
chapters.indigo.ca, an online retailer of books, gifts, music, videos, and
DVDs. It is a publicly traded company listed on the Toronto Stock Exchange
under the stock symbol IDG.
    In 2005, the Company qualified as one of Canada's Top 100 Employers in a
survey run by Mediacorp Canada. To learn more about Indigo, please visit the
About Our Company section of chapters.indigo.ca.


    
                         Consolidated Balance Sheets
                                 (Unaudited)

                                           As at         As at         As at
                                     December 30,  December 31,      April 1,
    (thousands of dollars)                  2006          2005          2006
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents             76,655        57,824         5,983
    Accounts receivable                   13,054        12,283         5,937
    Inventories                          248,596       231,532       214,598
    Income taxes recoverable                 444           246           156
    Prepaid expenses                       4,229         3,524         9,301
    Future tax assets                      9,014        10,723         9,014
    -------------------------------------------------------------------------
    Total current assets                 351,992       316,132       244,989
    -------------------------------------------------------------------------
    Capital assets, net                   80,570        86,747        85,959
    Future tax assets                     19,750         9,807        19,750
    Goodwill                              39,999        48,233        39,999
    Deferred financing charges, net
     of accumulated amortization of
     $834 (December 31, 2005 - $567;
     April 1, 2006 - $606)                   178           445           406
    -------------------------------------------------------------------------
    Total assets                         492,489       461,364       391,103
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                          -             -        12,728
    Accounts payable and accrued
     liabilities                         301,493       287,946       208,590
    Deferred revenue                      10,014         8,713         9,032
    Current portion of long-term debt     15,551        14,278        14,300
    -------------------------------------------------------------------------
    Total current liabilities            327,058       310,937       244,650
    -------------------------------------------------------------------------
    Long-term accrued liabilities          8,667        11,066        12,859
    Long-term debt                         5,135        16,707        17,938
    -------------------------------------------------------------------------
    Total liabilities                    340,860       338,710       275,447
    -------------------------------------------------------------------------

    Shareholders' equity
    Share capital                        196,201       194,667       194,861
    Contributed surplus                    1,759         1,113         1,336
    Deficit                              (46,331)      (73,126)      (80,541)
    -------------------------------------------------------------------------
    Total shareholders' equity           151,629       122,654       115,656
    -------------------------------------------------------------------------
    Total liabilities and
     shareholders' equity                492,489       461,364       391,103
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                     Consolidated Statements of Earnings
                                 (Unaudited)

    (thousands of          13-week       13-week       39-week       39-week
     dollars,         period ended  period ended  period ended  period ended
     except per        December 30,  December 31,  December 30,  December 31,
     share data)              2006          2005          2006          2005
    -------------------------------------------------------------------------

    Revenues               320,491       309,868       673,147       661,703
    Cost of sales,
     operations, selling
     and administration    269,287       261,569       611,778       606,981
    -------------------------------------------------------------------------
                            51,204        48,299        61,369        54,722
    -------------------------------------------------------------------------

    Amortization of
     capital assets          7,843         7,254        22,983        20,913
    Capital assets
     write-off               1,639             -         1,639             -
    Amortization of
     pre-opening store
     costs                      51             -           151             -
    -------------------------------------------------------------------------
                             9,533         7,254        24,773        20,913
    -------------------------------------------------------------------------
    Earnings before the
     undernoted items       41,671        41,045        36,596        33,809
    Recovery of
     restructuring costs         -             -             -        (2,759)
    Interest on long-term
     debt and financing
     charges                   437           365           837         1,062
    Interest on bank
     indebtedness              257           829         1,639         2,484
    -------------------------------------------------------------------------
    Earnings before
     income taxes           40,977        39,851        34,120        33,022
    Income tax expense
     (recovery)                  -            90           (90)          270
    -------------------------------------------------------------------------
    Net earnings for
     the period             40,977        39,761        34,210        32,752
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per
     common share
    Basic                   $ 1.68        $ 1.65        $ 1.41        $ 1.36
    Diluted                 $ 1.62        $ 1.61        $ 1.36        $ 1.33
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Sorya Ingrid Gaulin, Vice-President, Public
Relations, T: (416) 646-8965, sgaulin@indigo.ca


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