Indigo Full Year Results Show Solid Margin Improvement
Improved Net Earnings from Continuing Operations
TORONTO, May 28, 2013 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported full year gross profit $2.7 million higher than last year due to a 2.2% improvement in margin rate. The improvement in margin rate was a result of a shift in product mix to higher margin products, lower sales discounts, fewer markdowns and shipping more product through the Company's distribution center.
Net earnings from continued operations attributable to shareholders of the Company for the year were $4.3 million, compared to a net loss of $27.8 million last year. The improvement in earnings was primarily due to improved margins and no goodwill impairment charges being recognized in fiscal 2013.
Revenue for the fiscal year ended March 30, 2013 was $893 million compared to $934 million last year, a decline of 4.4%. The decline was primarily due to lower physical book and eReader sales. Additionally, the Company operated nine fewer small format stores.
The revenue decline was partially offset by double-digit growth in lifestyle, paper and toy sales and an increase in revenue from the Kobo revenue-sharing agreement due to the growth in digital reading.
On a comparable store basis, Indigo and Chapters superstore revenue decreased 4.6%, while Coles and IndigoSpirit small format store revenue decreased 2.4%. Online sales grew 1%.
Revenue for the fourth quarter was $185 million, down $11 million from the previous year against the blockbuster Hunger Games Trilogy in the fourth quarter last year. Net loss from continuing operations attributable to shareholders of the Company for the quarter was $8.2 million compared to a net loss of $10.7 million last year. The increase in earnings was due to a 2.4% improvement in margin rate and lower operating and selling and administrative expenses due to the Company's on-going focus on its Galileo productivity improvement initiative.
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 $13.5 million—equating to close to two 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 | ||||
| As at | As at | |||
| March 30, | March 31, | |||
| (thousands of Canadian dollars) | 2013 | 2012 | ||
| ASSETS | ||||
| Current | ||||
| Cash and cash equivalents | 211,701 | 207,601 | ||
| Accounts receivable | 7,180 | 12,627 | ||
| Inventories | 216,916 | 229,706 | ||
| Prepaid expenses | 4,235 | 3,695 | ||
| Total current assets | 440,032 | 453,629 | ||
| Property, plant and equipment | 59,319 | 67,464 | ||
| Intangible assets | 22,164 | 22,810 | ||
| Deferred tax assets | 48,731 | 48,633 | ||
| Total assets | 570,246 | 592,536 | ||
| LIABILITIES AND EQUITY | ||||
| Current | ||||
| Accounts payable and accrued liabilities | 151,283 | 174,201 | ||
| Unredeemed gift card liability | 47,169 | 42,711 | ||
| Provisions | 2,168 | 232 | ||
| Deferred revenue | 13,733 | 11,234 | ||
| Income taxes payable | 11 | 65 | ||
| Current portion of long-term debt | 773 | 1,060 | ||
| Total current liabilities | 215,137 | 229,503 | ||
| Long-term accrued liabilities | 4,004 | 5,800 | ||
| Long-term provisions | 78 | 460 | ||
| Long-term debt | 705 | 1,141 | ||
| Total liabilities | 219,924 | 236,904 | ||
| Equity | ||||
| Share capital | 203,805 | 203,373 | ||
| Contributed surplus | 8,128 | 7,039 | ||
| Retained earnings | 138,389 | 145,220 | ||
| Total equity | 350,322 | 355,632 | ||
| Total liabilities and equity | 570,246 | 592,536 | ||
| Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss) | |||||
| 13-week | 13-week | 52-week | 52-week | ||
| period ended | period ended | period ended | period ended | ||
| March 30, | March 31, | March 30, | March 31, | ||
| (thousands of Canadian dollars, except per share data) | 2013 | 2012 | 2013 | 2012 | |
| Revenues | 184,814 | 195,879 | 892,458 | 933,990 | |
| Cost of sales | (102,968) | (113,889) | (500,681) | (544,924) | |
| Gross profit | 81,846 | 81,990 | 391,777 | 389,066 | |
| Operating, selling and administrative expenses | (93,252) | (97,710) | (390,080) | (418,701) | |
| Operating earnings (loss) | (11,406) | (15,720) | 1,697 | (29,635) | |
| Interest on long-term debt and financing charges | (27) | (36) | (116) | (153) | |
| Interest income on cash and cash equivalents | 765 | 420 | 2,609 | 460 | |
| Earnings (loss) before income taxes | (10,668) | (15,336) | 4,190 | (29,328) | |
| Income tax recovery (expense) | |||||
| Current | - | (71) | - | (71) | |
| Deferred | 2,421 | 4,681 | 98 | 1,572 | |
| Earnings (loss) and comprehensive earnings (loss) for the period from continuing operations |
(8,247) | (10,726) | 4,288 | (27,827) | |
| Earnings and comprehensive earnings for the period from discontinued operations (net of tax) |
- | 135,695 | - | 94,016 | |
| Net earnings (loss) and comprehensive earnings (loss) for the period |
(8,247) | 124,969 | 4,288 | 66,189 | |
| Net earnings (loss) and comprehensive earnings (loss) attributable to: |
|||||
| Shareholders of Indigo | (8,247) | 131,527 | 4,288 | 92,664 | |
| Non-controlling interest | - | (6,558) | - | (26,475) | |
| Net earnings (loss) per common share from continuing operations |
|||||
| Basic | $(0.33) | $(0.43) | $0.17 | $(1.10) | |
| Diluted | $(0.33) | $(0.43) | $0.17 | $(1.10) | |
| Net earnings per common share from discontinued operations |
|||||
| Basic | $ - | $5.64 | $ - | $4.78 | |
| Diluted | $ - | $5.58 | $ - | $4.73 | |
| Net earnings (loss) per common share | |||||
| Basic | $(0.33) | $5.21 | $0.17 | $3.68 | |
| Diluted | $(0.33) | $5.16 | $0.17 | $3.64 | |
| Consolidated Statements of Cash Flows | |||||
| 13-week | 13-week | 52-week | 52-week | ||
| period ended | period ended | period ended | period ended | ||
| March 30, | March 31, | March 30, | March 31, | ||
| (thousands of Canadian dollars) | 2013 | 2012 | 2013 | 2012 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||
| Net earnings (loss) from continuing operations for the period | (8,247) | (10,726) | 4,288 | (27,827) | |
| Add (deduct) items not affecting cash | |||||
| Depreciation of property, plant and equipment | 4,363 | 4,590 | 17,838 | 18,416 | |
| Amortization of intangible assets | 2,691 | 1,977 | 10,245 | 8,243 | |
| Net impairment of capital assets | - | - | 250 | 3,956 | |
| Impairment of goodwill | - | - | - | 25,416 | |
| Loss on disposal of capital assets | 21 | 59 | 65 | 124 | |
| Stock-based compensation | 174 | 175 | 743 | 1,041 | |
| Directors' compensation | 116 | 116 | 446 | 500 | |
| Deferred tax assets | (2,421) | (4,681) | (98) | (1,572) | |
| Other | (25) | (248) | (443) | (205) | |
| Net change in non-cash working capital balances related to continuing operations |
(91,394) | (68,695) | 1,408 | 16,925 | |
| Interest on long-term debt and financing charges | 27 | 36 | 116 | 153 | |
| Interest income on cash and cash equivalents | (765) | (420) | (2,609) | (460) | |
| Income taxes received (paid) | (13) | (325) | 32 | (325) | |
| Operating cash flows of discontinued operations | - | 11,809 | - | (56,878) | |
| Cash flows from (used in) operating activities | (95,473) | (66,333) | 32,281 | (12,493) | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||
| Acquisition of non-capital tax losses | - | - | - | (10,559) | |
| Purchase of property, plant and equipment | (2,572) | (1,611) | (9,521) | (12,141) | |
| Addition of intangible assets | (2,745) | (2,513) | (9,621) | (8,553) | |
| Interest received | 796 | 276 | 2,676 | 526 | |
| Cash disposal resulting from sale of subsidiary | - | (33,033) | - | (33,033) | |
| Proceeds from sale of subsidiary | - | 148,941 | - | 148,941 | |
| Investing cash flows of discontinued operations | - | (948) | - | (8,884) | |
| Cash flows from (used in) investing activities | (4,521) | 111,112 | (16,466) | 76,297 | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||
| Notes payable | - | (5,280) | - | - | |
| Repayment of long-term debt | (236) | (320) | (1,200) | (1,367) | |
| Interest paid | (33) | (104) | (160) | (245) | |
| Proceeds from share issuances | 52 | 7 | 332 | 585 | |
| Dividends paid | (2,783) | (2,775) | (11,119) | (11,090) | |
| Purchase of shares in subsidiary | - | - | - | (3,009) | |
| Financing cash flows of discontinued operations | - | (263) | - | 74,819 | |
| Cash flows from (used in) financing activities | (3,000) | (8,735) | (12,147) | 59,693 | |
| Effect of foreign currency exchange rate changes on cash and cash equivalents |
3 | 511 | 432 | 443 | |
| Net increase (decrease) in cash and cash equivalents during the period | (102,991) | 36,555 | 4,100 | 123,940 | |
| Cash and cash equivalents, beginning of period | 314,692 | 171,046 | 207,601 | 83,661 | |
| Cash and cash equivalents, end of period | 211,701 | 207,601 | 211,701 | 207,601 | |
SOURCE: Indigo Books & Music Inc.
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