Indigo Reports Gains in Third Quarter Revenue and Earnings



    TORONTO, Jan. 29 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's
largest book retailer, reported gains in net revenue and net earnings for its
third quarter ending December 29th, 2007.
    Total revenue for the quarter increased 0.7% to $322.6 million. On a
comparable store basis, Indigo and Chapters superstores posted 0.6% growth,
while Coles small format stores were down 1.7%. Sales from Indigo's online
channel, chapters.indigo.ca, grew 8.0% to $30.9 million.
    The Company's net earnings for the third quarter increased to
$49.2 million, up $8.2 million from the same quarter last year. Included in
this year's results was a $7.6 million non-cash tax recovery. Pre-tax earnings
rose $0.6 million to $41.6 million.
    On a year-to-date basis, total revenue has increased 6.5% to
$716.6 million while net income is up 45.2% to $49.7 million.
    Commenting on the results, Indigo CEO Heather Reisman said: "We were
satisfied with the results given the headwinds we faced on a number of fronts:
an unprecedented rise in the Canadian dollar, no blockbuster hits, and a
particularly tough season for weather. We, along with our publishers, offered
significant discounts on books to bring Canadian prices more in line with
those in the U.S. We were encouraged to see consumers respond by buying more
books, but lower prices clearly slowed our top line revenue growth in the
quarter. We believe that in the mid to long term, lower prices are good for
our customers and will ultimately drive higher sales."
    Other events in the third quarter included positive consumer response to
Indigo's Online Community launched in October 2007 at
http://www.chapters.indigo.ca/community. The platform combines social
networking functionality with booklover inspired content and tools. With over
75,000 members to date this site is fast becoming the social network haven for
Canadian booklovers.
    Additionally, the well-received in-store speaking series "The
Entrepreneurs," is now available online at
http://www.chapters.indigo.ca/entrepreneur. Produced in partnership with TD
Canada Trust, the series features Canada's leading entrepreneurs including
Peter Munk, Robert Lantos and Gerry Schwartz, providing customers from coast
to coast insight from Canada's most respected business leaders.

    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 2005 and 2006, 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 also 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.

    
                         Consolidated Balance Sheets
                                 (Unaudited)

                                              As at         As at      As at
                                        December 29,  December 30,  March 31,
    (thousands of dollars)                     2007          2006       2007
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents               107,236        76,655     13,639
    Accounts receivable                      16,922        13,054      9,848
    Inventories                             228,670       248,596    224,059
    Income taxes recoverable                     21           444        194
    Prepaid expenses                          3,811         4,229      4,578
    Future tax assets                         7,347         9,014      9,205
    -------------------------------------------------------------------------
    Total current assets                    364,007       351,992    261,523
    -------------------------------------------------------------------------
    Capital assets, net                      67,779        80,570     76,186
    Future tax assets                        42,955        19,750     32,035
    Goodwill                                 27,523        39,999     27,523
    -------------------------------------------------------------------------
    Total assets                            502,264       492,311    397,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                             -             -          -
    Accounts payable
     and accrued liabilities                276,900       301,493    206,542
    Deferred revenue                         10,624        10,014     10,621
    Derivative liabilities                    1,498             -          -
    Current portion of long-term debt         2,525        15,373     15,562
    -------------------------------------------------------------------------
    Total current liabilities               291,547       326,880    232,725
    -------------------------------------------------------------------------
    Long-term accrued liabilities             7,304         8,667     10,807
    Long-term debt                            4,144         5,135      4,928
    -------------------------------------------------------------------------
    Total liabilities                       302,995       340,682    248,460
    -------------------------------------------------------------------------

    Shareholders' equity
    Share capital                           198,861       196,201    197,592
    Contributed surplus                       2,251         1,759      1,752
    Deficit                                    (878)      (46,331)   (50,537)
    Accumulated other comprehensive loss       (965)            -          -
    -------------------------------------------------------------------------
    Total shareholders' equity              199,269       151,629    148,807
    -------------------------------------------------------------------------
    Total liabilities
     and shareholders' equity               502,264       492,311    397,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                     Consolidated Statements of Earnings
                                 (Unaudited)

                                    13-week    13-week    39-week    39-week
                                     period     period     period     period
    (thousands of                     ended      ended      ended      ended
    dollars, except                December   December   December   December
    per share data)                29, 2007   30, 2006   29, 2007   30, 2006
    -------------------------------------------------------------------------

    Revenues                        322,552    320,491    716,642    673,147
    Cost of sales,
     operations, selling
     and administration             273,555    269,287    651,280    611,778
    -------------------------------------------------------------------------
                                     48,997     51,204     65,362     61,369
    -------------------------------------------------------------------------

    Amortization of
     capital assets                   7,340      7,843     22,426     22,983
    Capital assets
     write-off                            -      1,639          -      1,639
    Amortization of
     pre-opening store costs             36         51        144        151
    -------------------------------------------------------------------------
                                      7,376      9,533     22,570     24,773
    -------------------------------------------------------------------------
    Earnings before the
     undernoted items                41,621     41,671     42,792     36,596
    Interest on long-term debt
     and financing charges              133        437        583        837
    Interest (income) on bank
     indebtedness                      (137)       257         85      1,639
    -------------------------------------------------------------------------
    Earnings before income taxes     41,625     40,977     42,124     34,120
    Income tax recovery              (7,554)         -     (7,554)       (90)
    -------------------------------------------------------------------------
    Net earnings for the period      49,179     40,977     49,678     34,210
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per common share
    Basic                             $1.98      $1.68      $2.01      $1.41
    Diluted                           $1.94      $1.62      $1.96      $1.36
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of
     common shares outstanding       24,794     24,403     24,712     24,304
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    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)         29, 2007   30, 2006   29, 2007   30, 2006
    -------------------------------------------------------------------------

    CASH FLOWS FROM OPERATING
     ACTIVITIES
    Net earnings for the period      49,179     40,977     49,678     34,210
    Add (deduct) items not
     affecting cash
      Amortization                    7,376      7,894     22,570     23,134
      Stock-based compensation          210        142        512        420
      Directors' compensation            81         68        257        219
      Future income taxes            (8,554)         -     (8,554)         -
      Loss on disposal
       of capital assets                 96        187         96        208
      Write-off of capital assets         -      1,639          -      1,639
      Amortization and write-off
       of deferred financing charges     38         73        214        228
      Other                              25          -          6          -

    Net change in non-cash
     working capital balances
     related to operations
      Accounts receivable            (8,414)    (7,163)    (7,074)    (7,117)
      Inventories                     8,278     (2,856)    (4,611)   (33,998)
      Prepaid expenses                  433        314        623      4,921
      Income taxes recoverable          173          -        173       (288)
      Deferred revenue                 (252)      (378)         3        982
      Accounts payable
       and accrued liabilities       70,921     85,482     66,855     88,712
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                     119,590    126,379    120,748    113,270
    -------------------------------------------------------------------------

    CASH FLOWS FROM INVESTING
     ACTIVITIES
    Purchase of capital assets       (5,626)    (8,330)   (12,728)   (16,667)
    Proceeds from sale of
     capital assets                       -          8          -         67
    -------------------------------------------------------------------------
    Cash flows used in investing
     activities                      (5,626)    (8,322)   (12,728)   (16,600)
    -------------------------------------------------------------------------

    CASH FLOWS FROM FINANCING
     ACTIVITIES
    Decrease in bank indebtedness   (15,794)   (35,176)         -    (12,728)
    Repayment of long-term debt        (759)   (12,758)   (15,422)   (14,394)
    Proceeds from share issuances       501        355        999      1,124
    -------------------------------------------------------------------------
    Cash flows used in financing
     activities                     (16,052)   (47,579)   (14,423)   (25,998)
    -------------------------------------------------------------------------

    Net increase in cash and cash
     equivalents during the period   97,912     70,478     93,597     70,672
    Cash and cash equivalents,
     beginning of period              9,324      6,177     13,639      5,983
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                  107,236     76,655    107,236     76,655
    -------------------------------------------------------------------------
    





For further information:

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


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