Indigo Q2 Pre-Tax Earnings Up 46%



    TORONTO, Oct. 29 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's
largest book retailer, reported strong gains in pre-tax earnings for its
second quarter ending September 27, 2008 despite not having a blockbuster
"Harry Potter" release in this year's results. The Company's pre-tax earnings
for the quarter were $4.9 million, up from $3.3 million in the same quarter
last year. Net earnings were down slightly at $3.2 million versus $3.3 million
last year due to the Company moving from non-taxable to taxable status.
    Revenue for the quarter was $205.3 million, down from $209.2 million last
year.
    Commenting on the results, CEO Heather Reisman said, "We knew it would be
tough to grow the top line against this quarter last year given the phenomenal
success of Harry Potter and the Deathly Hallows. Still, we were pleased with
the bottom line results given today's challenging economic climate."
    On a comparable store basis, and excluding Harry Potter from last year's
numbers, Indigo and Chapters superstores posted 2.0% growth, while Coles small
format stores were up 7.4%. Sales from Indigo's online channel,
chapters.indigo.ca, decreased 19.8% to $21.1 million. Excluding Harry Potter
from last year's numbers, the online channel posted 4.7% growth.
    Two new superstores, featuring Indigo's award-winning store design,
opened in the second quarter, bringing a booklover's haven to both Saint John,
New Brunswick and Winnipeg, Manitoba.
    Also in the second quarter, thousands of fans attended national Midnight
Masquerade celebrations to mark the release of Breaking Dawn, Stephenie
Meyer's final book in the Twilight series.

    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 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, music, movies and more. It is
a publicly traded company listed on the Toronto Stock Exchange under the stock
symbol IDG.
    In 2006 and 2007 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.
    In 2004, Indigo founded the Indigo Love of Reading Foundation, a
registered charity whose mission is to provide new books and creative learning
materials to high-needs elementary schools, enhancing the literacy and
self-esteem of students in Canada. Visit chapters.indigo.ca/loveofreading for
more information. To date, the Indigo Love of Reading Fund has committed $6
million to 50 schools for the purchase of books and learning materials.


    

                         Consolidated Balance Sheets
                                 (Unaudited)

                                           As at         As at         As at
                                    September 27, September 29,     March 29,
    (thousands of dollars)                  2008          2007          2008
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents             70,036         9,324        55,933
    Accounts receivable                    8,234         8,508         8,996
    Inventories                          215,174       236,948       206,259
    Income taxes recoverable                  21           194            21
    Prepaid expenses                       5,138         4,280         4,929
    Future tax assets                      6,745         9,205         6,745
    -------------------------------------------------------------------------
    Total current assets                 305,348       268,459       282,883
    -------------------------------------------------------------------------
    Property and equipment                71,214        69,556        67,348
    Future tax assets                     41,951        32,035        43,250
    Goodwill                              27,523        27,523        27,523
    -------------------------------------------------------------------------
    Total assets                         446,036       397,573       421,004
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                          -        15,794             -
    Accounts payable and accrued
     liabilities                         218,785       205,538       193,323
    Deferred revenue                      11,553        10,876        10,350
    Derivative liabilities                     -         2,584             -
    Current portion of long-term debt      2,589         2,732         2,648
    -------------------------------------------------------------------------
    Total current liabilities            232,927       237,524       206,321
    -------------------------------------------------------------------------
    Long-term accrued liabilities          6,844         7,745         7,549
    Long-term debt                         2,302         4,625         3,380
    -------------------------------------------------------------------------
    Total liabilities                    242,073       249,894       217,250
    -------------------------------------------------------------------------

    Shareholders' equity
    Share capital                        197,877       198,181       198,938
    Contributed surplus                    3,062         2,139         2,564
    Retained earnings (deficit)            3,024       (50,057)        2,252
    Accumulated other comprehensive loss       -        (2,584)            -
    -------------------------------------------------------------------------
    Total shareholders' equity           203,963       147,679       203,754
    -------------------------------------------------------------------------
    Total liabilities and shareholders'
     equity                              446,036       397,573       421,004
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                     Consolidated Statements of Earnings
                                 (Unaudited)

                           13-week       13-week       26-week       26-week
    (thousands of     period ended  period ended  period ended  period ended
     dollars, except  September 27, September 29, September 27, September 29,
     per share data)          2008          2007          2008          2007
    -------------------------------------------------------------------------

    Revenues               205,261       209,173       395,863       394,090
    Cost of sales,
     operations, selling
     and administration    193,659       197,961       379,057       377,725
    -------------------------------------------------------------------------
                            11,602        11,212        16,806        16,365
    -------------------------------------------------------------------------
    Amortization of
     property and
     equipment               7,047         7,476        14,158        15,086
    Amortization of
     pre-opening store costs     -            54             -           108
    -------------------------------------------------------------------------
                             7,047         7,530        14,158        15,194
    -------------------------------------------------------------------------
    Earnings before the
     undernoted items        4,555         3,682         2,648         1,171
    Interest on long-term
     debt and financing
     charges                    71           203           179           450
    Interest expense (income)
     on bank indebtedness     (400)          140          (793)          222
    -------------------------------------------------------------------------
    Earnings before income
     taxes                   4,884         3,339         3,262           499
    Income tax expense       1,696             -         1,299             -
    -------------------------------------------------------------------------
    Net earnings for the
     period                  3,188         3,339         1,963           499
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per common
     share
    Basic                    $0.13         $0.14         $0.08         $0.02
    Diluted                  $0.13         $0.13         $0.08         $0.02
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number
     of common shares
     outstanding            24,743        24,692        24,689        24,670
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    Consolidated Statements of Cash Flows
                                 (Unaudited)

                           13-week       13-week       26-week       26-week
                      period ended  period ended  period ended  period ended
    (thousands of     September 27, September 29, September 27, September 29,
     dollars)                 2008          2007          2008          2007
    -------------------------------------------------------------------------

    CASH FLOWS FROM
     OPERATING
     ACTIVITIES
    Net earnings for
     the period              3,188         3,339         1,963           499
    Add (deduct) items
     not affecting cash
      Amortization           7,047         7,530        14,158        15,194
      Stock-based
       compensation            189           162           422           302
      Directors'
       compensation             72            66           177           176
      Future tax assets      1,696             -         1,299             -
      Loss on disposal of
       property and
       equipment                 -             -            13             -
      Amortization and
       write-off of deferred
       financing charges         -            37             -           176
      Other                      -           (36)            -           (19)

    Net change in non-cash
     working capital balances
     related to operations
      Accounts receivable     (845)       (1,091)          762         1,340
      Inventories          (17,986)      (22,635)       (8,915)      (12,889)
      Prepaid expenses         112           751          (209)          190
      Deferred revenue         721        (1,555)        1,203           255
      Accounts payable and
       accrued liabilities  31,767        17,067        24,757        (4,066)
    -------------------------------------------------------------------------
    Cash flows from
     operating activities   25,961         3,635        35,630         1,158
    -------------------------------------------------------------------------

    CASH FLOWS FROM
     INVESTING ACTIVITIES
    Purchase of property
     and equipment         (11,014)       (4,163)      (16,902)       (7,102)
                          ---------------------------------------------------
    Cash flows used in
     investing activities  (11,014)       (4,163)      (16,902)       (7,102)

    CASH FLOWS FROM
     FINANCING ACTIVITIES
    Increase in bank
     indebtedness                -         3,274             -        15,794
    Repayment of long-term
     debt                     (675)         (768)       (2,272)      (14,663)
    Proceeds from share
     issuances                 178           476           277           498
    Repurchase of common
     shares                 (1,466)            -        (2,630)            -
    -------------------------------------------------------------------------
    Cash flows from
     financing activities   (1,963)        2,982        (4,625)        1,629
    -------------------------------------------------------------------------

    Net increase (decrease)
     in cash and cash
     equivalents during
     the period             12,984         2,454        14,103        (4,315)
    Cash and cash
     equivalents,
     beginning of period    57,052         6,870        55,933        13,639
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                 70,036         9,324        70,036         9,324
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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


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