Indigo Books & Music Inc. Q2 Revenue Up 1%

    
                              Dividend Declared
                   Company Continues to Invest in Digital
    

TORONTO, Oct. 26 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book retailer, reported a 1% increase in revenue for its second quarter ending September 26, 2009.

Revenue for the quarter was $207 million, up $1.7 million from the same quarter last year. The increase was attributable to the opening of four new superstores in the quarter. On a comparable store basis, Indigo and Chapters superstores were down 0.9%, while Coles and Indigo Spirit small format stores were down 2.1%. Sales from Indigo's online channel, chapters.indigo.ca, decreased 5.2% to $20 million. Last year's results included revenue from the phenomenally successful "Twilight" series by Stephenie Meyer.

Net earnings for the quarter were $2.2 million compared to a $3.2 million net earnings last year.

Commenting on the quarter's results, CEO Heather Reisman said, "We are satisfied with our results through what has proven to be a very turbulent time for most retailers. It is important to note that the drop in bottom line results reflects our increased operating investment in Shortcovers, our digital initiative." Shortcovers launched in late February 2009 and serves customers who want the convenience of accessing and reading their selected content, anytime, anywhere, on the mobile devices they already own (www.shortcovers.com).

The Company also announced today that its Board of Directors has declared a quarterly cash dividend of $0.10 per outstanding common share to be paid to shareholders of record as of the close of business on November 13, 2009, with a payment date of November 30, 2009.

During the quarter the Company opened four new superstores. Residents of Milton, Ontario and Edmonton, Alberta now enjoy an award winning booklover's haven in their market, while residents of Calgary, Alberta have two new stores to experience. The Company also opened a new superstore in Laval, Quebec just after the quarter ended.

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, Kids; 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
                                    September 26, September 27,     March 28,
    (thousands of dollars)                  2009          2008          2009
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents             79,055        70,036        92,169
    Accounts receivable                    8,470         8,234         9,890
    Inventories                          234,190       215,174       221,767
    Income taxes recoverable                 866            21             -
    Prepaid expenses                       6,577         5,138         5,118
    Future tax assets                      5,885         6,745         6,181
    -------------------------------------------------------------------------
    Total current assets                 335,043       305,348       335,125
    -------------------------------------------------------------------------
    Property, plant and equipment         79,672        59,145        72,137
    Future tax assets                     36,422        41,951        36,422
    Intangible assets                     18,393        12,069        16,299
    Goodwill                              27,523        27,523        27,523
    -------------------------------------------------------------------------
    Total assets                         497,053       446,036       487,506
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS'
     EQUITY
    Current
    Accounts payable and accrued
     liabilities                         247,273       218,785       233,353
    Deferred revenue                      12,537        11,553        11,612
    Income taxes payable                       -             -           344
    Current portion of long-term debt      2,408         2,589         2,734
    -------------------------------------------------------------------------
    Total current liabilities            262,218       232,927       248,043
    -------------------------------------------------------------------------
    Long-term accrued liabilities          6,296         6,844         6,301
    Long-term debt                         1,827         2,302         2,272
    -------------------------------------------------------------------------
    Total liabilities                    270,341       242,073       256,616
    -------------------------------------------------------------------------

    Shareholders' equity
      Share capital                      196,638       197,877       196,471
    Contributed surplus                    4,351         3,062         3,685
    Retained earnings                     25,723         3,024        30,734
    -------------------------------------------------------------------------
    Total shareholders' equity           226,712       203,963       230,890
    -------------------------------------------------------------------------
    Total liabilities and
     shareholders' equity                497,053       446,036       487,506
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                 Consolidated Statements of Earnings (Loss)
                                 (Unaudited)


                                 13-week     13-week     26-week     26-week
                                  period      period      period      period
                                   ended       ended       ended       ended
    (thousands of dollars,     September   September   September   September
     except per share data)     26, 2009    27, 2008    26, 2009    27, 2008
    -------------------------------------------------------------------------

    Revenues                     206,990     205,261     400,541     395,863
    Cost of sales, operations,
     selling and
     administration              197,075     193,659     386,667     379,057
    -------------------------------------------------------------------------
                                   9,915      11,602      13,874      16,806
    -------------------------------------------------------------------------
    Amortization of property,
     plant and equipment           4,918       5,758       9,830      11,558
    Amortization of intangible
     assets                        2,124       1,289       3,965       2,600
    -------------------------------------------------------------------------
                                   7,042       7,047      13,795      14,158
    -------------------------------------------------------------------------
    Earnings before the
     undernoted items              2,873       4,555          79       2,648
    Interest on long-term debt
     and financing charges            61          71         118         179
    Interest income on cash
     and cash equivalents           (125)       (400)       (136)       (793)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                         2,937       4,884          97       3,262
    Income tax expense               737       1,696         201       1,299
    -------------------------------------------------------------------------
    Net earnings (loss) for
     the period                    2,200       3,188        (104)      1,963
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings (loss) per
     common share
    Basic                          $0.09       $0.13      $(0.00)      $0.08
    Diluted                        $0.09       $0.13      $(0.00)      $0.08
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    Consolidated Statements of Cash Flows
                                 (Unaudited)

                                 13-week     13-week     26-week     26-week
                                  period      period      period      period
                                   ended       ended       ended       ended
                               September   September   September   September
    (thousands of dollars)      26, 2009    27, 2008    26, 2009    27, 2008
    -------------------------------------------------------------------------

    CASH FLOWS FROM OPERATING
     ACTIVITIES
    Net earnings (loss)            2,200       3,188        (104)      1,963
    Add (deduct) items not
     affecting cash
      Amortization of property,
       plant and equipment         4,918       5,758       9,830      11,558
      Stock-based compensation       268         189         511         422
      Directors' compensation         68          72         193         177
      Future tax assets              832       1,696         296       1,299
      Loss on disposal of
       property, plant and
       equipment                     165           -         173          13
      Amortization of
       intangible assets           2,124       1,289       3,965       2,600

    Net change in non-cash
     working capital balances
     related to operations
      Accounts receivable           (560)       (845)      1,420         762
      Inventories                (25,982)    (17,986)    (12,423)     (8,915)
      Prepaid expenses              (946)        112      (1,459)       (209)
      Income taxes
       recoverable/payable        (1,210)          -      (1,210)          -
      Deferred revenue               103         721         925       1,203
      Accounts payable and
       accrued liabilities        49,587      31,767      13,915      24,757
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                   31,567      25,961      16,032      35,630
    -------------------------------------------------------------------------

    CASH FLOWS FROM INVESTING
     ACTIVITIES
    Purchase of property, plant
     and equipment               (13,567)     (7,879)    (16,805)    (11,993)
    Addition of intangible
     assets                       (2,905)     (3,135)     (6,059)     (4,909)
    -------------------------------------------------------------------------
    Cash flows used in
     investing activities        (16,472)    (11,014)    (22,864)    (16,902)
    -------------------------------------------------------------------------

    CASH FLOWS FROM FINANCING
     ACTIVITIES
    Repayment of long-term debt     (762)       (675)     (1,504)     (2,272)
    Proceeds from share issuances    101         178         129         277
    Dividends paid                (4,907)          -      (4,907)          -
    Repurchase of common shares        -      (1,466)          -      (2,630)
    -------------------------------------------------------------------------
    Cash flows used in financing
     activities                   (5,568)     (1,963)     (6,282)     (4,625)
    -------------------------------------------------------------------------

    Net increase (decrease) in
     cash and cash equivalents
     during the period             9,527      12,984     (13,114)     14,103
    Cash and cash equivalents,
     beginning of period          69,528      57,052      92,169      55,933
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                79,055      70,036      79,055      70,036
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE Indigo Books & Music Inc.

For further information: For further information: Janet Eger, Director, Public Relations, (416) 342-8561, jeger@indigo.ca


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