- Improved Net Earnings, Growth in Online, Increased
Investment to Accelerate Transformation -
TORONTO,
Feb. 5, 2013 /CNW/ - Indigo Books & Music Inc. (TSX: IDG),
Canada's largest book, gift and
specialty toy retailer reported a 4.9% decrease in net revenue for
its third quarter ending December 29,
2012. Revenue for the quarter was $335.6 million. The decrease was due to
lower eReader revenues and declining book sales, as consumers shift
to digital reading, and the absence of any hit books as against two
blockbusters last holiday. The decrease in eReader and book
revenue was partially offset by continued growth in the gift,
lifestyle and toy businesses.
On a comparable store basis, Indigo and Chapters
superstores posted a 5.0% decrease in revenue, while Coles and
IndigoSpirit small format stores were down 5.2%. Online sales
increased 3.6% compared to the same period last year. The
increase was driven by growth in the gift, lifestyle and toys
businesses and higher book sales.
Indigo generated higher gross profit compared to
last year as a result of a 2.2% improvement in margin rate.
The improvement in margin rate can be attributed to a shift to
higher margin gift and lifestyle products, lower sales discounts,
fewer markdowns, and shipping more products through the Company's
distribution centres.
In the quarter, the Company continued to make
meaningful operating investments in its transformation. Commenting
on the results, CEO Heather Reisman
said, "We are pleased that our results reflect our efforts to
dramatically improve margins and significantly expand our product
mix in key categories and online to drive sales growth. We've made
great strides during the quarter to accelerate our transformation
while reinforcing our position as Canada's preferred destination for gift
giving. It is satisfying to know that customers continue to
see Indigo as their gift destination of choice."
The net earnings attributable to shareholders of
the Company increased $7.6 million
from $14.4 million last year to
$22.0 million this year. The
increase in the net earnings was due to the elimination of losses
from discontinued operations as a result of the sale of Kobo in
January 2013 partially offset by
increased investment in the business transformation. The net
earnings per share improved from net earnings of $0.57 per share last year to net earnings of
$0.87 per share.
The Board of Directors today approved a
quarterly dividend of 11 cents per
common share to be paid on March 6,
2013, to all shareholders of record as of February 19, 2013.
During the quarter, Indigo partnered nationally
with the Governor General Literary Awards to showcase and support
the best of the best in Canadian literature in both English and
French.
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 |
|
|
December 29, |
December 31, |
March 31, |
(thousands of Canadian dollars) |
|
2012 |
2011 |
2012 |
ASSETS |
|
|
|
|
Current |
|
|
|
|
Cash and cash equivalents |
|
314,692 |
148,610 |
207,601 |
Accounts receivable |
|
27,075 |
21,690 |
12,627 |
Inventories |
|
242,303 |
234,705 |
229,706 |
Prepaid expenses |
|
4,151 |
3,915 |
3,695 |
Derivatives |
|
- |
1,747 |
- |
Assets held for sale |
|
- |
117,551 |
- |
Total current assets |
|
588,221 |
528,218 |
453,629 |
|
|
|
|
|
Property, plant and equipment |
|
61,085 |
70,409 |
67,464 |
Intangible assets |
|
22,112 |
22,333 |
22,810 |
Goodwill |
|
- |
1,216 |
- |
Deferred tax assets |
|
46,310 |
60,290 |
48,633 |
Total assets |
|
717,728 |
682,466 |
592,536 |
LIABILITIES AND EQUITY |
|
|
|
|
Current |
|
|
|
|
Accounts payable and accrued liabilities |
|
272,760 |
241,553 |
174,201 |
Unredeemed gift card liability |
|
63,639 |
60,959 |
42,711 |
Provisions |
|
221 |
- |
232 |
Deferred revenue |
|
13,882 |
12,110 |
11,234 |
Income taxes payable |
|
111 |
310 |
65 |
Notes payable |
|
- |
5,224 |
- |
Current portion of long-term debt |
|
811 |
1,163 |
1,060 |
Liabilities associated with assets held for
sale |
|
- |
114,400 |
- |
Total current liabilities |
|
351,424 |
435,719 |
229,503 |
Long-term accrued liabilities |
|
4,153 |
4,820 |
5,800 |
Long-term provisions |
|
285 |
- |
460 |
Long-term debt |
|
856 |
1,327 |
1,141 |
Total liabilities |
|
356,718 |
441,866 |
236,904 |
Equity |
|
|
|
|
Share capital |
|
203,733 |
203,254 |
203,373 |
Contributed surplus |
|
7,858 |
6,860 |
7,039 |
Retained earnings |
|
149,419 |
16,468 |
145,220 |
Total equity attributable to shareholders of
Indigo |
|
361,010 |
226,582 |
355,632 |
Non-controlling interest |
|
- |
14,018 |
- |
Total equity |
|
361,010 |
240,600 |
355,632 |
Total liabilities and equity |
|
717,728 |
682,466 |
592,536 |
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 29, |
December 31, |
December 29, |
December 31, |
(thousands of Canadian dollars, except per share
data) |
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
Revenues |
335,572 |
352,858 |
707,644 |
738,111 |
Cost of sales |
190,838 |
208,456 |
397,713 |
431,035 |
Gross profit |
144,734 |
144,402 |
309,931 |
307,076 |
Operating and administrative expenses |
115,679 |
112,721 |
296,828 |
320,991 |
Operating earnings (loss) |
29,055 |
31,681 |
13,103 |
(13,915) |
Interest on long-term debt and financing
charges |
29 |
34 |
89 |
117 |
Interest income on cash and cash equivalents |
(685) |
(25) |
(1,844) |
(40) |
Earnings (loss) before income taxes |
29,711 |
31,672 |
14,858 |
(13,992) |
Income tax expense |
7,676 |
7,961 |
2,323 |
3,109 |
Earnings (loss) and comprehensive earnings (loss)
for the period from continuing operations |
22,035 |
23,711 |
12,535 |
(17,101) |
Loss and comprehensive loss for the period from
discontinued operations (net of tax) |
- |
(17,906) |
- |
(41,679) |
Net earnings (loss) and comprehensive earnings
(loss) for the period |
22,035 |
5,805 |
12,535 |
(58,780) |
|
|
|
|
|
Net earnings (loss) and comprehensive earnings
(loss) attributable to: |
|
|
|
|
Shareholders of Indigo |
22,035 |
14,362 |
12,535 |
(38,863) |
Non-controlling interest |
- |
(8,557) |
- |
(19,917) |
|
|
|
|
|
Net earnings (loss) per common share from
continuing operations |
|
|
|
|
Basic |
$0.87 |
$0.94 |
$0.50 |
$(0.68) |
Diluted |
$0.86 |
$0.93 |
$0.49 |
$(0.68) |
|
|
|
|
|
Net loss per common share from discontinued
operations |
|
|
|
|
Basic |
$ - |
$(0.37) |
$ - |
$(0.86) |
Diluted |
$ - |
$(0.37) |
$ - |
$(0.86) |
|
|
|
|
|
Net earnings (loss) per common share |
|
|
|
|
Basic |
$0.87 |
$0.57 |
$0.50 |
$(1.54) |
Diluted |
$0.86 |
$0.56 |
$0.49 |
$(1.54) |
Consolidated
Statements of Cash Flows |
(Unaudited) |
|
13-week |
13-week |
39-week |
39-week |
|
period ended |
period ended |
period ended |
period ended |
|
December 29, |
December 31, |
December 29, |
December 31, |
(thousands of Canadian dollars) |
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
Net earnings (loss) from continuing
operations for the period |
22,035 |
23,711 |
12,535 |
(17,101) |
Add (deduct) items not affecting
cash |
|
|
|
|
|
Depreciation of property, plant and equipment |
4,427 |
4,810 |
13,475 |
13,826 |
|
Amortization of intangible assets |
2,617 |
2,082 |
7,554 |
6,266 |
|
Impairment of capital assets |
- |
3,956 |
250 |
3,956 |
|
Impairment of goodwill |
- |
- |
- |
25,416 |
|
Loss on disposal of capital assets |
- |
50 |
44 |
65 |
|
Stock-based compensation |
210 |
196 |
569 |
866 |
|
Directors' compensation |
101 |
117 |
330 |
384 |
|
Deferred tax assets |
7,676 |
7,961 |
2,323 |
3,109 |
|
Other |
(175) |
2,453 |
(418) |
43 |
Net change in non-cash working capital
balances related to continuing operations |
93,699 |
97,121 |
92,802 |
85,620 |
Interest on long-term debt and
financing charges |
29 |
34 |
89 |
117 |
Interest income on cash and cash
equivalents |
(685) |
(25) |
(1,844) |
(40) |
Income taxes received |
- |
- |
45 |
- |
Operating cash flows of discontinued
operations |
- |
(51,874) |
- |
(68,687) |
Cash flows from operating
activities |
129,934 |
90,592 |
127,754 |
53,840 |
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
Acquisition of non-capital tax
losses |
- |
- |
- |
(10,559) |
Purchase of property, plant and
equipment |
(3,401) |
(4,682) |
(6,949) |
(10,530) |
Addition of intangible assets |
(2,262) |
(2,152) |
(6,876) |
(6,040) |
Investing cash flows of discontinued
operations |
- |
(3,289) |
- |
(7,936) |
Cash flows used in investing
activities |
(5,663) |
(10,123) |
(13,825) |
(35,065) |
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
Notes payable |
- |
- |
- |
5,280 |
Repayment of long-term debt |
(280) |
(335) |
(964) |
(1,047) |
Interest received |
629 |
15 |
1,753 |
109 |
Proceeds from share issuances |
50 |
- |
280 |
578 |
Purchase of shares in subsidiary |
- |
- |
- |
(3,009) |
Dividends paid |
(2,780) |
(2,776) |
(8,336) |
(8,315) |
Financing cash flows of discontinued
operations |
- |
50,604 |
- |
75,082 |
Cash flows from (used in) financing
activities |
(2,381) |
47,508 |
(7,267) |
68,678 |
|
|
|
|
|
Effect of foreign currency exchange
rate changes on cash and cash equivalents |
204 |
(2,422) |
429 |
(68) |
|
|
|
|
|
Net increase in cash and cash
equivalents during the period |
122,094 |
125,555 |
107,091 |
87,385 |
Cash and cash equivalents, beginning
of period |
192,598 |
45,491 |
207,601 |
83,661 |
Cash and cash equivalents, end of
period |
314,692 |
171,046 |
314,692 |
171,046 |
|
|
|
|
|
Cash and cash equivalents
attributable to: |
|
|
|
|
Continuing operations |
314,692 |
148,610 |
314,692 |
148,610 |
Discontinued operations |
- |
22,436 |
- |
22,436 |
|
314,692 |
171,046 |
314,692 |
171,046 |
SOURCE Indigo Books & Music
Inc.