Indigo Reports $24.5M Improvement in Q3 Net Earnings

Comparable Superstore Sales grow by 5.5% and Online Sales grow by 10.6%

TORONTO, Feb. 3, 2015 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported revenue for the quarter ended December 27, 2014 of $339.4 million, up $7.0 million from last year, despite operating five fewer superstores and one less small format store. 

On a comparable store basis, Indigo and Chapters superstores posted 5.5% growth, while sales at Coles and Indigospirit small format stores were flat.  Sales from Indigo's online channel, indigo.ca, grew by 10.6%.

The increase in revenue was driven by continued double digit growth in Lifestyle, Paper and Toys, including the highly successful American Girl®. Additionally, the core trade books business grew in spite of the lack of major hit titles compared to the same period last year.  Gross profit margin rate improved by 1.1% compared to the same period last year as a result of higher sell through of full priced goods and more effective use of promotions.

Commenting on the results, CEO Heather Reisman said, "We are pleased with these results which show both top line growth and improvements in profitability. We're confident these results demonstrate customer affection for our brand. Our entire team is focused on continuing to position this vibrant Canadian business for long-term growth and success."

The Company recognized net earnings of $33.0 million which is $1.28 net earnings per common share for this quarter, compared to net earnings of $8.5 million, or $0.33 net earnings per common share, for the same period last year. The improvement of $24.5 million was primarily driven by higher revenues, improved margins, lower operating costs and a lower tax expense.

During the quarter, the Company launched the 1450 square-foot American Girl® specialty boutique at Chapters Rideau in Ottawa, marking the third retail location for the iconic brand in Canada, exclusively available at Indigo and Chapters.

Analyst/Investor Call

Indigo will host a conference call for analysts and investors to review these results at 5:00 p.m. (Eastern Time) today, February 3, 2015.  The call can be accessed by dialling 416-764-8688 from within the Toronto area, or 1-888-390-0546 outside of Toronto.  The eight digit participant code is 52848004. 

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on February 10, 2015. The call playback can be accessed after 7:00 p.m. (ET) on February 3, 2015, by dialing 416-764-8677 from within the Toronto area, or 1-888-390-0541 outside of Toronto.  The six-digit replay passcode number is 848004 #.  The conference call transcript will be archived in the Investor Relations section of the Indigo website, www.indigo.ca.

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-IFRS Financial Measures

The Company prepares its unaudited interim condensed consolidated financial statements in accordance with International Financial Reporting Standards and International Accounting Standards 34, "Interim Financial Reporting."  In order to provide additional insight into the business, the Company has also provided non-IFRS data, including comparative store sales growth, in the press release above. This measure does not have a standardized meaning prescribed by IFRS 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 (IDG). As the largest book, gift and specialty toy retailer in Canada, Indigo operates in all provinces under different banners including Indigo Books & Music; Indigo Books, Gifts, Kids; Indigospirit; Chapters; and Coles. The online channel, indigo.ca, offers a one-stop online shop with a robust selection of books, toys, home décor, stationery, and gifts.

Indigo founded the Indigo Love of Reading Foundation in 2004 to address the underfunding of public elementary school libraries. Every year the Indigo Love of Reading Foundation grants $1.5 million to 20 high-needs elementary schools so they can transform their libraries with the purchase of new books and education resources. To date, the Indigo Love of Reading Foundation's Literacy Fund has committed $15 million to 170 Canadian schools. The Foundation's annual grassroots Adopt a School program unites employees, customers, schools and their communities to raise funds to put even more books into the hands of children. Over the past five years we have raised over $2.7 million so 463,000 children have a book to call their own.

To learn more about Indigo, please visit the Our Company section at indigo.ca.

Consolidated Balance Sheets

(Unaudited)








As at

As at

As at



December 27,

December 28,

March 29,

(thousands of Canadian dollars)


2014

2013

2014






ASSETS





Current





Cash and cash equivalents


287,227

265,292

157,578

Accounts Receivable


20,784

25,846

5,582

Inventories


223,260

247,780

218,979

Prepaid expenses


5,864

5,075

5,184

Total current assets


537,135

543,993

387,323

Property, plant and equipment


56,771

62,396

58,476

Intangible assets


17,902

22,039

21,587

Equity investment


1,684

1,609

598

Deferred tax assets


40,766

38,821

44,604

Total assets


654,258

668,858

512,588

LIABILITIES AND EQUITY





Current





Accounts payable and accrued liabilities


248,881

259,559

136,428

Unredeemed gift card liability


64,232

64,256

46,827

Provisions


885

1,524

928

Deferred revenue


13,380

13,185

12,860

Income taxes payable


26

38

-

Current portion of long-term debt


187

727

584

Total current liabilities


327,591

339,289

197,627

Long-term accrued liabilities


2,335

3,562

2,896

Long-term provisions


99

78

164

Long-term debt


94

275

227

Total liabilities


330,119

343,204

200,914

Equity





Share capital


204,970

203,812

203,812

Contributed surplus


9,715

8,422

8,820

Retained earnings


109,454

113,420

99,042

Total equity


324,139

325,654

311,674

Total liabilities and equity


654,258

668,858

512,588


Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)

(Unaudited)







13-week

13-week

39-week

39-week


period ended

period ended

period ended

period ended


December 27,

December 28,

December 27,

December 28,

(thousands of Canadian dollars, except per share data)

2014

2013

2014

2013






Revenues

339,389

332,393

709,221

683,335

Cost of sales

(191,709)

(191,433)

(398,265)

(387,657)

Gross profit

147,680

140,960

310,956

295,678

Operating, selling, and administrative expenses

(113,012)

(115,389)

(298,997)

(305,073)

Operating profit (loss)

34,668

25,571

11,959

(9,395)

Interest on long-term debt and financing charges

(19)

(25)

(48)

(82)

Interest income on cash and cash equivalents

465

582

1,253

1,766

Share of earnings from equity investment

1,684

1,609

1,086

1,000

Earnings (loss) before income taxes

36,798

27,737

14,250

(6,711)

Income tax expense

(3,838)

(19,240)

(3,838)

(9,910)

Net earnings (loss) and comprehensive earnings (loss) for the period

32,960

8,497

10,412

(16,621)






Net earnings (loss) per common share





Basic

$  1.28

$  0.33

$  0.41

$  (0.65)

Diluted

$  1.27

$  0.33

$  0.40

$  (0.65)


Consolidated Statements of Cash Flows

(Unaudited)


13-week

13-week

39-week

39-week


period ended

period ended

period ended

period ended


December 27,

December 28,

December 27,

December 28,

(thousands of Canadian dollars)

2014

2013

2014

2013






CASH FLOWS FROM OPERATING ACTIVITIES





Net earnings (loss) for the period

32,960

8,497

10,412

(16,621)

Add (deduct) items not affecting cash






Depreciation of property, plant, and equipment

3,703

4,101

11,036

12,214


Amortization of intangible assets

3,032

2,724

8,881

8,198


Net impairment (reversal) of capital assets

(458)

505

(458)

505


Loss on disposal of capital assets

25

100

34

113


Stock-based compensation

315

228

813

925


Directors' compensation

86

100

252

344


Deferred tax assets

3,838

19,240

3,838

9,910


Other

(175)

(442)

(716)

(430)

Net change in non-cash working capital balances

101,386

79,640

109,546

73,947

Interest on long-term debt and financing charges

19

25

48

82

Interest income on cash and cash equivalents

(465)

(582)

(1,253)

(1,766)

Income taxes received

26

27

26

26

Share of earnings from equity investment

(1,684)

(1,609)

(1,086)

(1,000)

Cash flows from operating activities

142,608

112,554

141,373

86,447






CASH FLOWS FROM INVESTING ACTIVITIES





Purchase of property, plant and equipment

(4,196)

(9,030)

(8,907)

(16,188)

Addition of intangible assets

(1,384)

(2,508)

(5,196)

(8,073)

Distributions from equity investment

-

-

-

359

Interest received

207

582

995

1,823

Cash flows used in investing activities

(5,373)

(10,956)

(13,108)

(22,079)






CASH FLOWS FROM FINANCING ACTIVITIES





Repayment of long-term debt

(170)

(189)

(536)

(620)

Interest paid

(19)

-

(50)

(70)

Proceeds from share issuances

317

-

988

7

Dividends paid

-

(2,783)

-

(8,348)

Repurchase of options

-

-

-

(975)

Cash flows from (used in) financing activities

128

(2,972)

402

(10,006)






Effect of foreign currency exchange rate changes on

cash and cash equivalents

435

406

982

368






Net increase in cash and cash equivalents during the period

137,798

99,032

129,649

54,730

Cash and cash equivalents, beginning of period

149,429

166,260

157,578

210,562

Cash and cash equivalents, end of period

287,227

265,292

287,227

265,292

SOURCE Indigo Books & Music Inc.

For further information: Janet Eger, Vice President, Public Affairs, 416 342 8561, jeger@indigo.ca

RELATED LINKS
http://www.indigo.ca

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