TORONTO, Feb. 4, 2021 /CNW/ - Indigo Books & Music Inc. (TSX: IDG),
Canada's largest book and
lifestyle retailer, reported third quarter financial results.
Double-digit revenue growth in the first seven weeks of the
quarter provided some cushion but could not overcome the severe
impact of new government-mandated closures in several provinces, as
well as severe customer capacity restrictions in markets with open
stores. As a result, revenue for the third quarter ended
December 26, 2020, initially headed
to show real growth, came in at $365.4
million compared to revenue of $383.7 million in the same period last year,
a decrease of $18.3 million or 5
percent.
Revenues were challenged by a significant wave of mandated
COVID-19 store closures in Manitoba, Ontario and Quebec during the second part of November and
December, a critical period of sales. The Company achieved
exceptional e-commerce revenue growth of 92%, and the success of
the Company's enhanced omnichannel capabilities, including
click-and-collect, curbside pickup and Instacart, did blunt some of
the effects of mandated re-closures. Bright spots in the quarter
also included double-digit growth in the Company's baby and
wellness categories and continued strength in its proprietary
lifestyle brand OUI, showcasing customers' affinity for both
core categories and new product assortment.
Commenting on the results, CEO Heather
Reisman said: "These results are a testament to the
demonstrated resilience of our teams and a deep affinity for our
brand, achieved against massive disruption from mandated shut-downs
and store limitations during the most important six weeks of our
year. These shutdowns created a particularly uneven playing field
in Ontario with 'essential'
retailers selling all non-essential items, a practice disallowed by
other provinces. Nevertheless, we remain energized by the momentum
we saw pre-closures and look forward to having COVID-19 behind
us."
Adjusted EBITDA for the period was $37.8
million for the 13-week period ended December 26, 2020, compared to $43.3 million for the same period last year. In
the quarter, the Company recognized $9.7
million in occupancy expense abatement to share the
financial burden of COVID-19 and $3.2
million in government support from the Canada Emergency Wage Subsidy.
Indigo reported net earnings of $30.7
million ($1.11 net earnings
per basic common share) for the third quarter ended December 26, 2020, compared to net earnings of
$25.8 million ($0.94 net earnings per basic common share) last
year. This improvement was a result of income taxes and the
application of previously unrecognized income tax losses.
With no outstanding debt and a cash balance of $229.4 million, the Company continues to be well
positioned to manage through these uncertain times.
Analyst/Investor Call
Indigo will host a conference call for analysts and investors to
review these results at 9:00 a.m. (Eastern
Time) tomorrow, February 5th, 2021. The call can be
accessed by dialing 647-427-7450 from within the Toronto area, or 1-888-231-8191 outside of
Toronto. The seven-digit
participant code
is 6671095.
A playback of the call will also be available by telephone until
11:59 p.m. (ET) on February 12,
2021. The call playback can be accessed after 12:00 p.m. (ET) on February 6, by dialing
416-849-0833 from within the Toronto area, or 1-855-859-2056outside of
Toronto. The seven-digit replay
passcode number is 6671095. The conference call
transcript will be archived in the Investor Relations section of
the Indigo website, www.indigo.ca.
Forward-Looking Statements
Statements contained in this news release that are not historical
facts are "forward-looking information" within the meaning of
applicable Canadian securities legislation. To the extent any
forward-looking information constitutes "financial outlooks" within
the meaning of applicable Canadian securities laws, such
information is being provided as preliminary financial and
operational results. Financial outlooks, as with forward-looking
information generally, are, without limitation, based on the
assumptions and subject to various risks and uncertainties that
could cause actual results to differ materially from those
expressed in or implied in this news release. Among the key factors
that could cause such differences are: general economic, market or
business conditions; the future impacts and government response to
the COVID-19 pandemic, including any impact to online and/or retail
operations of the Company; competitive actions by other companies;
changes in laws or regulations; and other factors, many of which
are beyond the control of the Company, as set out in the Company's
annual information form dated June 23,
2020 and available on the Company's issuer profile on SEDAR
at www.sedar.com.
Undue reliance should not be placed on such forward-looking
information and no assurance can be given that such events will
occur in the disclosed time frames or at all. Any forward-looking
information included in this news release is made as of the date of
this news release and the Company does not undertake an obligation
to publicly update such forward-looking information to reflect new
information, subsequent events or otherwise unless required by
applicable securities laws.
Non-IFRS Financial Measures
The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards
("IFRS"). In order to provide additional insight into the business,
the Company has also provided non-IFRS data, specifically adjusted
EBITDA, in this press release. These measures do not have
standardized meanings prescribed by IFRS and are therefore specific
to Indigo and may not be comparable to similar measures presented
by other companies.
For additional context see "Results of Operations" and "Non-IFRS
Financial Measures" in the Management's Discussion and Analysis
(which can be found at www.indigo.ca/investor-relations or
www.sedar.com).
About Indigo Books &
Music Inc.
Indigo is a publicly traded Canadian company listed on the Toronto
Stock Exchange (IDG). Indigo is the world's first Cultural
Department Store – a physical and digital meeting place inspired by
and filled with books, music, art, ideas, and beautifully designed
lifestyle products. Indigo believes in real books, in living life
fully and generously, in being kind to each other and that stories
– big and little – connect us.
Indigo founded the Indigo Love of Reading Foundation in 2004 to
address the underfunding of public elementary school libraries.
Every year the Foundation provides grants to high-needs elementary
schools so they can transform their libraries with the purchase of
new books and educational resources. To date, the Foundation has
committed over $32 million to more
than 3,000 elementary schools, benefitting more than 1,000,000
students. Most recently in April
2020, in the wake of the COVID-19 pandemic and unprecedented
nation-wide school closures, the Foundation committed $1.0 million to provide books to families in
need. 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
26,
|
December
28,
|
March
28,
|
(thousands of
Canadian dollars)
|
2020
|
2019
|
2020
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
229,424
|
216,198
|
120,473
|
Short-term
investments
|
-
|
7,750
|
-
|
Accounts
receivable
|
26,395
|
19,755
|
7,640
|
Inventories
|
218,163
|
247,261
|
241,812
|
Prepaid
expenses
|
7,937
|
6,604
|
6,062
|
Income taxes
receivable
|
138
|
138
|
138
|
Derivative
assets
|
-
|
19
|
3,794
|
Other
assets
|
3,202
|
4,185
|
2,320
|
Total current
assets
|
485,259
|
501,910
|
382,239
|
Loan
receivable
|
446
|
926
|
446
|
Property, plant, and
equipment, net
|
80,982
|
110,455
|
91,215
|
Right-of-use assets,
net
|
366,104
|
430,994
|
382,146
|
Intangible assets,
net
|
21,475
|
29,351
|
24,571
|
Equity investment,
net
|
2,350
|
2,611
|
2,353
|
Deferred tax
assets
|
-
|
89,782
|
-
|
Total
assets
|
956,616
|
1,166,029
|
882,970
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
|
|
|
|
Accounts payable and
accrued liabilities
|
249,992
|
261,281
|
164,294
|
Unredeemed gift card
liability
|
68,626
|
65,676
|
51,673
|
Provisions
|
2,185
|
180
|
2,034
|
Deferred
revenue
|
16,880
|
10,234
|
10,682
|
Short-term lease
liabilities
|
63,022
|
65,454
|
68,402
|
Derivative
liabilities
|
1,716
|
803
|
-
|
Total current
liabilities
|
402,421
|
403,628
|
297,085
|
Long-term accrued
liabilities
|
1,371
|
1,476
|
1,196
|
Long-term
provisions
|
696
|
45
|
469
|
Long-term lease
liabilities
|
491,378
|
509,708
|
500,215
|
Total
liabilities
|
895,866
|
914,857
|
798,965
|
Equity
|
|
|
|
Share
capital
|
226,986
|
226,986
|
226,986
|
Contributed
surplus
|
14,075
|
12,463
|
12,822
|
Retained earnings
(deficit)
|
(177,202)
|
12,522
|
(158,801)
|
Accumulated other
comprehensive income (loss)
|
(3,109)
|
(799)
|
2,998
|
Total
equity
|
60,750
|
251,172
|
84,005
|
Total liabilities
and equity
|
956,616
|
1,166,029
|
882,970
|
|
|
|
|
|
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
26,
|
December
28,
|
December
26,
|
December
28,
|
(thousands of
Canadian dollars, except per share data)
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Revenue
|
365,426
|
383,737
|
705,786
|
779,657
|
Cost of
sales
|
(217,940)
|
(216,872)
|
(440,773)
|
(444,119)
|
Gross
profit
|
147,486
|
166,865
|
265,013
|
335,538
|
Operating, selling,
and other expenses
|
(110,843)
|
(124,641)
|
(264,948)
|
(334,233)
|
Operating
profit
|
36,643
|
42,224
|
65
|
1,305
|
Net interest
expense
|
(5,921)
|
(5,964)
|
(18,466)
|
(17,234)
|
Share of loss from
equity investments
|
-
|
-
|
-
|
(1,588)
|
Earnings (loss)
before income taxes
|
30,722
|
36,260
|
(18,401)
|
(17,517)
|
Income tax recovery
(expense)
|
-
|
(10,411)
|
-
|
3,842
|
Net earnings
(loss)
|
30,722
|
25,849
|
(18,401)
|
(13,675)
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
|
Items that are or may
be reclassified subsequently to net earnings (loss):
|
|
|
|
|
Net change in fair
value of cash flow hedges
[net of taxes of 0 and 0; 2019 - 190 and
283]
|
(3,151)
|
(520)
|
(4,654)
|
(771)
|
Reclassification of
net realized (gain) loss
[net of taxes of 0 and 0; 2019 - 0 and 215]
|
(861)
|
2
|
(856)
|
(586)
|
Foreign currency
translation adjustment [net of taxes of 0 and 0; 2019 - 0 and
0]
|
(597)
|
-
|
(597)
|
-
|
Other comprehensive
loss
|
(4,609)
|
(518)
|
(6,107)
|
(1,357)
|
|
|
|
|
|
Total
comprehensive earnings (loss)
|
26,113
|
25,331
|
(24,508)
|
(15,032)
|
|
|
|
|
|
Net earnings
(loss) per common share
|
|
|
|
|
Basic
|
$
|
1.11
|
$
0.94
|
$
(0.67)
|
$
(0.50)
|
Diluted
|
$
|
1.09
|
$
0.94
|
$
(0.67)
|
$
(0.50)
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
|
|
|
|
|
13-week
|
13-week
|
39-week
|
39-week
|
|
period
ended
|
period
ended
|
period
ended
|
period
ended
|
|
December
26,
|
December
28,
|
December
26,
|
December
28,
|
(thousands of
Canadian dollars)
|
2,020
|
2019
|
2020
|
2019
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net earnings
(loss)
|
30,722
|
25,849
|
(18,401)
|
(13,675)
|
Adjustments to
reconcile net earnings (loss) to cash flows from
operating activities
|
|
|
|
|
Depreciation of
property, plant, and equipment
|
4,129
|
5,651
|
13,020
|
17,475
|
Depreciation of
right-of-use assets
|
10,183
|
9,980
|
31,728
|
30,002
|
Amortization of
intangible assets
|
3,187
|
3,393
|
9,718
|
9,971
|
Gain on disposal of
equity investment
|
-
|
(1,484)
|
-
|
(1,484)
|
Loss on disposal of
capital assets
|
-
|
70
|
247
|
1,021
|
Share-based
compensation
|
425
|
359
|
1,031
|
980
|
Directors'
compensation
|
74
|
65
|
222
|
222
|
Deferred income tax
expense (recovery)
|
-
|
10,411
|
-
|
(3,842)
|
Rent
concessions
|
(462)
|
-
|
(4,141)
|
-
|
Other
|
(787)
|
278
|
(899)
|
634
|
Net change in
non-cash working capital balances related to operations
|
54,853
|
113,337
|
111,540
|
93,806
|
Interest
expense
|
6,154
|
6,466
|
19,107
|
18,867
|
Interest
income
|
(233)
|
(460)
|
(641)
|
(1,633)
|
Share of loss from
equity investments
|
-
|
-
|
-
|
1,588
|
Cash flows from
operating activities
|
108,245
|
173,915
|
162,531
|
153,932
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Net purchases of
property, plant, and equipment
|
(1,543)
|
1,098
|
(3,528)
|
(3,134)
|
Addition of
intangible assets
|
(2,385)
|
(1,879)
|
(6,635)
|
(6,804)
|
Change in short-term
investments
|
-
|
12,750
|
-
|
79,400
|
Interest
received
|
233
|
587
|
641
|
1,413
|
Cash flows from
(used for) investing activities
|
(3,695)
|
12,556
|
(9,522)
|
70,875
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Repayment of
principal on lease liabilities
|
(7,052)
|
(10,137)
|
(25,890)
|
(30,752)
|
Interest
paid
|
(6,154)
|
(6,465)
|
(19,107)
|
(18,867)
|
Cash flows used
for financing activities
|
(13,206)
|
(16,602)
|
(44,997)
|
(49,619)
|
|
|
|
|
|
Effect of foreign
currency exchange rate changes on cash and cash
equivalents
|
559
|
(286)
|
939
|
(280)
|
|
|
|
|
|
Net increase in
cash and cash equivalents during the period
|
91,903
|
169,583
|
108,951
|
174,908
|
Cash and cash
equivalents, beginning of period
|
137,521
|
46,615
|
120,473
|
41,290
|
Cash and cash
equivalents, end of period
|
229,424
|
216,198
|
229,424
|
216,198
|
Non-IFRS Financial
Measures
|
|
|
|
|
|
The following table
reconciles adjusted EBITDA to net earnings (loss) before income
taxes, the most comparable IFRS
measure:
|
|
|
|
|
|
|
13-week
|
13-week
|
39-week
|
39-week
|
|
period
ended
|
period
ended
|
period
ended
|
period
ended
|
|
December
26,
|
December
28,
|
December
26,
|
December
28,
|
(millions of Canadian
dollars)
|
2020
|
2019
|
2020
|
2019
|
Revenue
|
365.4
|
383.7
|
705.8
|
779.7
|
Cost of
sales
|
(217.9)
|
(216.9)
|
(440.8)
|
(444.1)
|
Cost of
operations
|
(69.4)
|
(77.8)
|
(154.2)
|
(197.4)
|
Selling, general and
administrative expenses
|
(23.9)
|
(29.2)
|
(57.2)
|
(79.8)
|
Depreciation of
right-of-use assets
|
(10.2)
|
(10.0)
|
(31.7)
|
(30.0)
|
Finance charges
related to leases
|
(6.2)
|
(6.5)
|
(19.1)
|
(18.9)
|
Adjusted
EBITDA1
|
37.8
|
43.3
|
2.8
|
9.5
|
Depreciation of
property, plant and equipment
|
(4.1)
|
(5.7)
|
(13.0)
|
(17.5)
|
Amortization of
intangible assets
|
(3.2)
|
(3.4)
|
(9.7)
|
(10.0)
|
Gain on disposal of
capital assets
|
-
|
1.4
|
0.9
|
0.5
|
Net interest
income
|
0.2
|
0.5
|
0.6
|
1.6
|
Share of loss from
equity investments
|
-
|
-
|
-
|
(1.6)
|
Earnings (loss)
before income taxes
|
30.7
|
36.3
|
(18.4)
|
(17.5)
|
1Earnings
before interest, taxes, depreciation, amortization, impairment,
asset disposals, and share of loss from equity investments, and
includes IFRS 16 right-of-use asset depreciation and associated
finance charges.
|
SOURCE Indigo Books & Music
Inc.