Indigo Q2 Results Reflect Strong Margin and Productivity Improvements Plum Rewards Membership Tops 5 Million Customers TORONTO, Nov. 6, 2012 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 5.9% decrease in net revenue for its second quarter ending September 29, 2012. Revenue for the quarter was $185.6 million, down $11.6 million from last year driven primarily by a delay in the planned launch of the new Kobo devices. In addition, the Company operated seven fewer Coles stores. Book sales for the quarter were down only modestly to last year owing to strong titles as well as effective efforts to drive book sales both in store and online. On a comparable store basis, Indigo and Chapters superstores posted a 6.5% decrease in revenue, while Coles and IndigoSpirit small format stores were down 2.2%. Commenting on the results, CEO Heather Reisman said, "We are focused on driving significant margin and productivity improvements and are pleased that our on-going efforts are reflected in our results. We will continue to broaden our assortment in our key growth categories to drive higher top line sales to offset the decline in physical books. We're also pleased to have the newest Kobo eReaders now in store as top gift picks for the upcoming holiday season." The net loss attributable to shareholders of the Company from continuing operations improved $24.8 million from a loss of $28.8 million last year to a loss of $4.0 million this year. The significant reduction in net loss was due to there being no impairment charges in the current year. In the same period last year, the Company recorded a full write down of the $25.4 million of goodwill allocated to the Indigo segment. In addition, the Company experienced improvements in margin and productivity in the current year. The net loss per share from continuing operations improved from a loss of $1.14 per share last year to a loss of $0.16 per share due to the above noted factors. In the quarter, the Company's plum rewards program was recognized for global leadership, earning the award for Loyalty Innovation in Retail at the 3(rd) Annual COLLOQUY Loyalty Awards. In less than 18 months, five million Canadians joined the plum rewards program, collecting over seven billion plum points. Designed in response to customer feedback, plum rewards help shoppers discover products that match their interests and passions while rewarding and recognizing their purchases. Plum rewards members can collect points on virtually every in-store purchase, have self-service access to personalized recommendations and offers online or at in-store kiosks, and enjoy special member pricing on online book purchases. Also in the second quarter, Indigo launched its award winning annual Adopt-A-School program, a three week national fundraising campaign that raised over $580 thousand — the equivalent of over 50 thousand books — to support 570 participating schools across Canada. Through the program Indigo helps augment the $1.5 million in grants made annually by the Indigo Love of Reading Foundation to benefit high needs elementary schools. The Board of Directors today approved a quarterly dividend of 11 cents per common share to be paid on December 5, 2012, to all shareholders of record as of November 20, 2012. 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; The World's Biggest Bookstore; 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. 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, as well as the Indigo "Adopt A School" program, have contributed $13 million, equating to more than a million books, to high-needs elementary schools across Canada. Visit loveofreading.org for more information. To learn more about Indigo, please visit the Our Company section at indigo.ca. Consolidated Balance Sheets (Unaudited) As at As at As at September 29, October 1, March 31, (thousands of Canadian dollars) 2012 2011 2012 ASSETS Current Cash and cash equivalents 192,598 45,491 207,601 Accounts receivable 14,092 21,831 12,627 Inventories 247,604 263,918 229,706 Prepaid expenses 4,835 15,285 3,695 Total current assets 459,129 346,525 453,629 Property, plant and equipment 62,111 76,031 67,464 Intangible assets 22,467 31,251 22,810 Goodwill - 1,216 - Deferred tax assets 53,986 68,250 48,633 Total assets 597,693 523,273 592,536 LIABILITIES AND EQUITY Current Accounts payable and accrued 198,435 224,159 174,201 liabilities Unredeemed gift card liability 37,912 36,292 42,711 Provisions 175 - 232 Deferred revenue 12,882 12,401 11,234 Income taxes payable 111 650 65 Notes payable - 5,168 - Current portion of long-term debt 900 1,305 1,060 Total current liabilities 250,415 279,975 229,503 Long-term accrued liabilities 4,448 5,038 5,800 Long-term provisions 391 - 460 Long-term debt 1,045 1,623 1,141 Total liabilities 256,299 286,636 236,904 Equity Share capital 203,660 202,962 203,373 Contributed surplus 7,570 6,839 7,039 Retained earnings 130,164 4,882 145,220 Total equity attributable to 341,394 214,683 355,632 shareholders of Indigo Non-controlling interest - 21,954 - Total equity 341,394 236,637 355,632 Total liabilities and equity 597,693 523,273 592,536 Consolidated Statements of Loss and Comprehensive Loss (Unaudited) 13-week 13-week 26-week 26-week period ended period ended period ended period ended September 29, October 1, September 29, October 1, (thousands of 2012 2011 2012 2011 Canadian dollars, except per share data) Revenues 185,589 197,248 372,072 385,253 Cost of sales 100,487 111,497 206,875 222,579 Gross profit 85,102 85,751 165,197 162,674 Operating and 90,975 115,579 181,149 208,270 administrative expenses Operating loss (5,873) (29,828) (15,952) (45,596) Interest on 29 39 60 83 long-term debt and financing charges Interest expense (578) 56 (1,159) (15) (income) on cash and cash equivalents Loss before (5,324) (29,923) (14,853) (45,664) income taxes Income tax (1,311) (1,074) (5,353) (4,852) recovery Loss and (4,013) (28,849) (9,500) (40,812) comprehensive loss for the period from continuing operations Loss and - (11,542) - (23,773) comprehensive loss for the period from discontinued operations (net of tax) Net loss and (4,013) (40,391) (9,500) (64,585) comprehensive loss for the period Net loss and comprehensive loss attributable to: Shareholders of (4,013) (35,120) (9,500) (53,225) Indigo Non-controlling - (5,271) - (11,360) interest Net loss per common share from continuing operations Basic $(0.16) $(1.14) $(0.38) $(1.62) Diluted $(0.16) $(1.14) $(0.38) $(1.62) Net loss per common share from discontinued operations Basic $ - $(0.25) $ - $(0.49) Diluted $ - $(0.25) $ - $(0.49) Net loss per common share Basic $(0.16) $(1.39) $(0.38) $(2.11) Diluted $(0.16) $(1.39) $(0.38) $(2.11) Consolidated Statements of Cash Flows (Unaudited) 13-week 13-week 26-week 26-week period ended period ended period ended period ended September 29, October 1, September 29, October 1, (thousands of 2012 2011 2012 2011 Canadian dollars) CASH FLOWS FROM OPERATING ACTIVITIES Net loss from (4,013) (28,849) (9,500) (40,812) continuing operations for the period Add (deduct) items not affecting cash Depreciation of 4,329 4,557 9,048 9,016 property, plant and equipment Amortization of 2,515 2,103 4,937 4,184 intangible assets Impairment of - - 250 - capital assets Impairment of - 25,416 - 25,416 goodwill Loss on - 11 44 15 disposal of capital assets Stock-based 200 75 359 670 compensation Directors' 96 118 229 267 compensation Deferred tax (1,311) (1,250) (5,353) (4,852) assets Other 510 (2,125) (243) (2,411) Net change in 10,667 (18,306) (897) (11,501) non-cash working capital balances related to continuing operations Interest on 29 39 60 83 long-term debt and financing charges Interest expense (578) 56 (1,159) (15) (income) on cash and cash equivalents Income taxes 41 - 45 - received Operating cash - (282) - (16,813) flows of discontinued operations Cash flows from 12,485 (18,437) (2,180) (36,753) (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of - (450) - (10,559) non-capital tax losses Purchase of (2,764) (3,651) (3,548) (5,848) property, plant and equipment Addition of (2,784) (2,259) (4,614) (3,888) intangible assets Investing cash - (2,488) - (4,646) flows of discontinued operations Cash flows used (5,548) (8,848) (8,162) (24,941) in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Notes payable - 225 - 5,280 Repayment of (338) (393) (684) (712) long-term debt Interest received 565 10 1,124 94 Proceeds from 142 - 230 578 share issuances Purchase of - - - (3,009) shares in subsidiary Dividends paid (2,780) (2,772) (5,556) (5,539) Financing cash - 36 - 24,478 flows of discontinued operations Cash flows from (2,411) (2,894) (4,886) 21,170 (used in) financing activities Effect of foreign (523) 2,285 225 2,354 currency exchange rate changes on cash and cash equivalents Net increase 4,003 (27,894) (15,003) (38,170) (decrease) in cash and cash equivalents during the period Cash and cash 188,595 73,385 207,601 83,661 equivalents, beginning of period Cash and cash 192,598 45,491 192,598 45,491 equivalents, end of period Cash and cash equivalents attributable to: Continuing 192,598 18,497 192,598 18,497 operations Discontinued - 26,994 - 26,994 operations 192,598 45,491 192,598 45,491 Janet Eger Vice President, Public Relations 416 342 8561 email@example.com SOURCE: Indigo Books & Music Inc. 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Indigo Q2 Results Reflect Strong Margin and Productivity Improvements
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