Digital Business Grows Rapidly
TORONTO, Aug. 9 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 5.5% growth in revenue for its first quarter ending July 3, 2010.
Revenue for the quarter was $204.3 million, up $10.7 million from last year. On a comparable store basis, Indigo and Chapters superstores posted 1.5% growth, while Coles and Indigo Spirit small format stores were down 0.7%. Sales from Indigo's online channel, chapters.indigo.ca were flat to last year.
Commenting on the results, CEO Heather Reisman said, "We are pleased with our top line revenue growth, particularly from our rapidly growing digital business. Consumers have responded very favourably to our Kobo eReader launched in late May, and the business continues to gain traction in markets around the world."
Net loss for the quarter, historically the Company's weakest in any fiscal year, was $5.3 million compared to $2.3 million last year. Ms Reisman noted, "The increased loss is not unexpected as we continue to invest significantly in the growth and development of Kobo. We expect this investment to pay off materially in the mid to longer term".
The Board of Directors today also approved a quarterly dividend of 11 cents per common share to be paid on September 13th, 2010, to all shareholders of record as of August 30th, 2010.
During the quarter, the Company rolled out their Kobo eReader to Indigo and Chapters stores nationally. Indigo also launched an innovative "Teen Read Award" marketing program in-store and online at www.teenreadawards.ca to celebrate and reward the legions of Young Adult fiction fans who have propelled the division's substantial growth over the last five years. Additionally, the Indigo Love of Reading Foundation awarded $1.5 million in grants to 20 high-needs elementary schools across the country, bringing their commitment to $9 million dollars since the foundation launched in 2004. To date, Indigo has supported 90 schools nationally through the program.
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 on a 52-week basis.
About Indigo Books & Music Inc.
Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (TSX:IDG). As the largest book, gift and specialty toy 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, eBooks, toys, music and DVDs, and hosts the award winning Indigo Online Community. In 2008, Indigo launched Pistachio, an eco-aware lifestyle store. In 2009, Indigo spun off their digital eReading division to launch KOBO Inc. - a leading destination for eReading.
Chapters and Indigo are rated as the number one and number two most favoured 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. To date the Foundation has contributed $9 mm to schools in need.
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
July 3, June 27, April 3,
(thousands of dollars) 2010 2009 2010
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ASSETS
Current
Cash and cash equivalents 84,314 69,165 103,489
Restricted cash 1,196 363 409
Accounts receivable 10,827 7,910 8,455
Inventories 223,836 208,208 224,406
Income taxes recoverable 899 - 899
Prepaid expenses 5,948 5,631 6,771
Future tax assets 7,036 6,717 6,615
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Total current assets 334,056 297,994 351,044
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Property, plant and equipment 77,470 70,597 77,478
Future tax assets 40,894 36,422 40,894
Intangible assets 24,861 17,612 23,794
Goodwill 26,632 27,523 26,632
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Total assets 503,913 450,148 519,842
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 223,418 197,859 229,920
Deferred revenue 14,849 12,434 12,882
Dividends payable - 2,453 -
Income taxes payable - 344 -
Current portion of long-term debt 1,460 2,538 1,863
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Total current liabilities 239,727 215,628 244,665
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Long-term accrued liabilities 6,841 6,123 8,203
Long-term debt 1,198 1,868 1,174
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Total liabilities 247,766 223,619 254,042
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Non-controlling interest 5,160 - 6,831
Shareholders' equity
Share capital 198,561 196,508 198,635
Contributed surplus 4,936 4,044 4,670
Retained earnings 47,490 25,977 55,664
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Total shareholders' equity 250,987 226,529 258,969
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Total liabilities and shareholders'
equity 503,913 450,148 519,842
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Consolidated Statements of Loss and Comprehensive Loss
(Unaudited)
13-week 13-week
period period
ended ended
July 3, June 27,
(thousands of dollars, except per share data) 2010 2009
-------------------------------------------------------------------------
Revenues 204,286 193,551
Cost of sales, operations, selling and
administration 205,014 189,592
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(728) 3,959
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Depreciation of property, plant and equipment 4,505 4,912
Amortization of intangible assets 2,412 1,841
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6,917 6,753
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Loss before the undernoted items (7,645) (2,794)
Interest on long-term debt and financing charges 33 57
Interest income on cash and cash equivalents (80) (11)
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Loss before income taxes and non-controlling
interest (7,598) (2,840)
Income tax recovery (421) (536)
Loss before non-controlling interest (7,177) (2,840)
Non-controlling interest (1,869) -
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Net loss and comprehensive loss for the period (5,308) (2,840)
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Net earnings per common share
Basic $(0.21) $(0.09)
Diluted $(0.21) $(0.09)
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Consolidated Statements of Cash Flows
(Unaudited)
13-week 13-week
period period
ended ended
July 3, June 27,
(thousands of dollars) 2010 2009
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (5,308) (2,304)
Add (deduct) items not affecting cash
Depreciation of property, plant and equipment 4,505 4,912
Amortization of intangible assets 2,412 1,841
Stock-based compensation 175 243
Directors' stock-based compensation 112 125
Future tax assets (421) (536)
Loss on disposal of capital assets 67 8
Non-controlling interest (1,869) -
Other (926) 105
Net change in non-cash working capital balances
related to operations
Accounts receivable (2,372) 1,980
Inventories 570 13,559
Prepaid expenses 823 (513)
Deferred revenue 1,967 822
Accounts payable and accrued liabilities (7,864) (35,672)
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Cash flows used in operating activities (8,129) (15,430)
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CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash (787) 5
Purchase of property, plant and equipment (4,277) (3,238)
Addition of intangible assets (3,479) (3,154)
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Cash flows used in investing activities (8,543) (6,387)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (666) (742)
Proceeds from share issuances 74 28
Repurchase of common shares (313) -
Dividends paid (2,722) -
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Cash flows used in financing activities (3,627) (714)
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Effect of foreign currency exchange rate changes
on cash and cash equivalents 1,124 (105)
Net decrease in cash and cash equivalents during
the period (19,175) (22,636)
Cash and cash equivalents, beginning of period 103,489 91,801
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Cash and cash equivalents, end of period 84,314 69,165
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For further information: Janet Eger, Director, Public Relations, 416 342 8561, [email protected]
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