Indigo Revenue Up 8.5%

    Strong Growth Slashes First Quarter Loss in Half

    TORONTO, Aug. 1 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's
largest book retailer, reported strong first quarter growth across all
channels. Total revenues for the quarter increased 8.5% to $184.9 million. On
a comparative basis, Indigo and Chapters superstores and Coles small format
stores both had significant revenue increases of 6.1% and 6.0%, respectively.
Sales from Indigo's online channel,, grew 19.6% (to $19.5
million). The Company noted that sales from the recently released Harry Potter
novel were not included in these results since they occurred in the Company's
second quarter.
    The Company's operating earnings, or EBITDA, more than doubled to $5.2
million for the first quarter. First quarter net loss was reduced to $2.8 from
a loss of $5.8 million in the same quarter last year.
    Commenting on these results, Indigo CEO Heather Reisman said: "these are
very satisfying results, reflecting our continuing strong focus on customer
programs, effective merchandising, and strong inventory management."
    Ms. Reisman also noted that she was thrilled that Chapters and Indigo
were rated as the number one and number three retailers in Canada by the Kubas
Major Market Retail Report for 2007. "It's a terrific feeling knowing that our
customers believe so strongly in us and that our stores and staff continue to
deliver the ultimate retail experience for Canadians," she said.

    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 EBITDA, 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.
    EBITDA 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.
EBITDA is defined as earnings before interest, taxes, depreciation and

    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, 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
    In 2004, Indigo also founded the Indigo Love of Reading Fund, 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 for
more information.

                         Consolidated Balance Sheets

                                                 As at      As at      As at
                                               June 30,    July 1,  March 31,
    (thousands of dollars)                        2007       2006       2007

    Cash and cash equivalents                    6,870      6,004     13,639
    Accounts receivable                          7,417      5,372      9,848
    Inventories                                214,313    216,816    224,059
    Income taxes recoverable                       194        246        194
    Prepaid expenses                             5,085      7,423      4,578
    Future tax assets                            9,205      9,014      9,205
    Total current assets                       243,084    244,875    261,523
    Capital assets, net                         72,303     83,505     76,186
    Future tax assets                           32,035     19,750     32,035
    Goodwill                                    27,523     39,999     27,523
    Total assets                               374,945    388,129    397,267

    Bank indebtedness                           12,520     28,758          -
    Accounts payable and accrued liabilities   187,207    196,642    206,542
    Deferred revenue                            12,431      9,650     10,621
    Derivative liabilities                       1,400          -          -
    Current portion of long-term debt            2,661     14,270     15,562
    Total current liabilities                  216,219    249,320    232,725
    Long-term accrued liabilities                9,009      9,739     10,807
    Long-term debt                               4,861     18,899      4,928
    Total liabilities                          230,089    277,958    248,460

    Shareholders' equity
    Share capital                              197,622    194,979    197,592
    Contributed surplus                          1,994      1,524      1,752
    Deficit                                    (53,396)   (86,332)   (50,537)
    Accumulated other comprehensive loss        (1,364)         -          -
    Total shareholders' equity                 144,856    110,171    148,807
    Total liabilities and shareholders'
     equity                                    374,945    388,129    397,267

                     Consolidated Statements of Earnings

                                                          13-week    13-week
                                                           period     period
                                                            ended      ended
                                                          June 30,    July 1,
    (thousands of dollars, except per share data)            2007       2006

    Revenues                                              184,917    170,351
    Cost of sales, operations, selling and administration 179,764    167,947
                                                            5,153      2,404

    Amortization of capital assets                          7,610      7,389
    Amortization of pre-opening store costs                    54         51
                                                            7,664      7,440
    Loss before the undernoted items                       (2,511)    (5,036)
    Interest on long-term debt and financing charges          247        259
    Interest on bank indebtedness                              82        586
    Loss before income taxes                               (2,840)    (5,881)
    Income tax recovery                                         -        (90)
    Net loss for the period                                (2,840)    (5,791)

    Net loss per common share
    Basic                                                $  (0.12)  $  (0.24)
    Diluted                                              $  (0.12)  $  (0.24)
    Weighted average number of common shares outstanding   24,648     24,231

For further information:

For further information: Lisa Huie, Manager Public Relations, T: (416)

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