Indigo Q3 Revenue Up 2.3%



    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
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
    Total current assets                   425,128       364,007     282,883
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
    Total assets                           565,448       502,264     421,004
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
    Total current liabilities              328,411       291,547     206,321
    -------------------------------------------------------------------------
    Long-term accrued liabilities            6,174         7,304       7,549
    Long-term debt                           2,210         4,144       3,380
    -------------------------------------------------------------------------
    Total liabilities                      336,795       302,995     217,250
    -------------------------------------------------------------------------

    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)          -
    -------------------------------------------------------------------------
    Total shareholders' equity             228,653       199,269     203,754
    -------------------------------------------------------------------------
    Total liabilities and
     shareholders' equity                  565,448       502,264     421,004
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                     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
    -------------------------------------------------------------------------

    Revenues                        330,014    322,552    725,877    716,642
    Cost of sales, operations,
     selling and administration     283,462    273,555    662,519    651,280
    -------------------------------------------------------------------------
                                     46,552     48,997     63,358     65,362
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                      6,754      7,376     20,912     22,570
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
    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)
    -------------------------------------------------------------------------
    Net earnings for the period      26,770     49,179     28,733     49,678
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per common share
    Basic                             $1.09      $1.98      $1.17      $2.01
    Diluted                           $1.07      $1.94      $1.14      $1.96
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    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
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                     117,634    119,590    153,264    120,748
    -------------------------------------------------------------------------

    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)         -
                                  -------------------------------------------
    Cash flows used in
     investing activities           (16,466)    (5,626)   (33,368)   (12,728)
    -------------------------------------------------------------------------

    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)         -
    -------------------------------------------------------------------------
    Cash flows used in
     financing activities            (3,112)   (16,052)    (7,737)   (14,423)
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                  168,092    107,236    168,092    107,236
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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


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