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Norwich Union - Car Insurance Indigo's Superstore comparative store sales increase 5.0% in Q3 Indigo's comparative store sales increase 5.1% YTD Operating earnings increase 16.6% in Q3; 17.1% YTD TORONTO, February 6, 2003 - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book retailer, reported solid store sales growth for the fifth consecutive quarter - which included the recent holiday selling period - due to strong in-store customer service efforts as well as meaningful improvements in inventory management and merchandising. The revenue increase and operating improvements resulted in a 16.6% increase in operating earnings over the comparable period last year. " It was gratifying to our entire team to see that these improvements in our stores and operations increased our bottom line", said Heather Reisman, Chief Executive Officer. Superstores showed particularly solid comparative sales growth in the third quarter ended December 28, 2002, continuing the positive trends of the last five quarters. Comparative store sales at Chapters, Indigo and The World's Biggest Bookstore increased 5.0% as compared to a 1.9% increase the previous year. Sales in the mall stores were slightly below last year on a comparative basis - experiencing a decrease of 1.8% - due to the weak traffic in malls during the holiday period. Year to date, however, mall store sales are trending up 2.3% on a comparative store basis. In total, the comparative store sales for the third quarter were up by 3.5%; and year to date comparative store sales have increased a strong 5.1%. "These third quarter results are particularly satisfying when compared to our industry counterparts in the United States, which reported negative comparative store sales in both superstores and mall stores in the holiday period", said Reisman. Consolidated revenue rose for the fifth straight quarter. Sales increased $3.5 million to $277.4 million notwithstanding that, during this period, the company operated four fewer superstores and nine fewer mall stores, which reduced total selling space by more than 139,000 square feet. Year to date revenues at the end of the third quarter totaled $605.0 million as compared to $565.0 million year to date last year. The increase is almost entirely attributable to comparative store sales growth as well as significant growth in the company's Online division where sales increased 19.7%. "We are extremely appreciative of the support we have received from our customers across the country during this holiday season", said Reisman. "We are also appreciative of the tremendous effort of all our employees who achieved these results in a less than ideal economic environment." The total number of superstores at the end of the period was 89 compared to 93 at the end of the third quarter last year. The total number of mall stores was 181, compared to 190 at the end of the same period last year. Store closures are part of an ongoing initiative to streamline the real estate portfolio and close under-performing locations in over-served markets. Consolidated earnings before interest, taxes, restructuring charges, amortization and non-controlling interest (operating earnings) in the third quarter were $40.7 million compared to $34.9 million in the third quarter last year. The $5.8 million increase in operating earnings is, as mentioned above, largely attributable to a stronger merchandise mix resulting in higher sales and better margins and a reduction in distribution costs. Consolidated net income for the third quarter was $30.8 million ($1.28 per share) compared to consolidated net income of $18.8 million ($1.20 per share) in the third quarter last year, an increase of $12 million ($0.08 per share). Consolidated net income on a year to date basis was $10.0 million ($0.45 per share) as compared to a consolidated net loss of $19.4 million ($1.30 per share) last year. This represents an improvement of $29.4 million ($1.75 per share). The consolidated net loss for the comparative three quarters in fiscal 2002 included restructuring and other charges of $21.2 million ($1.42 per share) relating to store closures and other charges associated with the merger of Indigo and Chapters Inc. No such restructuring charges were incurred this year. 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. 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 www.chapters.indigo.ca, an online retailer of books, gifts, videos, and DVDs. Indigo is a publicly traded company listed on the Toronto Stock Exchange under the stock symbol IDG. To learn more about Indigo, please visit the About Our Company section of www.chapters.indigo.ca. For further information: Tracy Nesdoly Communications 416-263-5025 Indigo Books & Music Inc. Indigo Books & Music Inc. Consolidated Statements of Earnings Unaudited [in thousands of dollars] 13-week period ended December 28, 2002 13-week period ended December 29, 2001 26-week period ended December 28, 2002 26-week period ended December 29, 2001 Revenue 277,454 273,891 604,997 565,046 Cost of product, purchasing, selling and administration 236,786 238,967 564,901 530,797 40,668 34,924 40,096 34,249 Amortization of capital assets 5,926 7,636 17,892 22,738 Amortization of pre-opening store costs 14 58 28 443 Amortization of goodwill - 249 - 749 Earnings before the undernoted items 34,728 26,981 22,176 10,319 Restructuring charges - - - 21,152 Interest on long-term debt and financing charges 2,394 2,246 7,017 5,235 Interest on current debt 1,413 1,961 4,749 4,626 Earnings (loss) before income tax and non-controlling interest 30,921 22,774 10,410 (20,694) Income tax expense 150 4102 450 450 Earnings (loss) before non-controlling interest 30,771 18,672 9,960 (21,144) Non-controlling interest - (127) - (1,716) Net earnings (loss) $ 30,771 $ 18,799 $ 9,960 $ (19,428) Basic net earnings (loss) per common share $ 1.28 $ 1.20 $ 0.45 $ (1.30) Diluted net earnings (loss) per common share $ 1.21 $ 1.10 $ 0.45 $ (1.30) Weighted average common shares outstanding Basic 23,956 15,678 22,020 14,957 Diluted 25,824 17,427 22,041 14,957 Indigo Books & Music Inc. Consolidated Balance Sheets Figures as at December 28, 2002 and December 29, 2001 are unaudited [in thousands of dollars] As at December 28, 2002 As at December 29, 2001 As at March 30, 2002 Assets Cash and cash equivalents $ 65,564 $ 25,322 $ 677 Accounts receivable 17,859 16,526 12,817 Inventories 253,560 270,255 223,467 Income taxes receivable 52 4,695 4,950 Prepaid expenses 5,548 4,624 4,338 Future income tax assets 6,538 2,921 6,538 Total current assets 349,121 324,343 252,787 Capital assets, net 106,875 132,249 115,041 Future income taxes assets 4,145 7,762 4,145 Goodwill 64,570 59,331 64,570 Deferred financing fees 2,164 3,383 3,289 Total assets 526,875 527,068 439,832 Liabilities and shareholders' equity Bank indebtedness - - 57,254 Accounts payable and accrued liabilities 302,013 305,530 198,746 Deferred revenue 6,378 6,137 6,625 Current portion long-term debt 31,000 20,000 31,000 Total current liabilities 339,391 331,667 293,625 Accrued benefit obligations 920 1,916 1,306 Long-term debt 53,000 84,000 53,000 Convertible debentures 29,853 27,133 28,071 Non-controlling interest - - - Total liabilities 423,164 444,716 376,002 Shareholders' equity Share capital 193,426 153,543 163,505 Equity portion of convertible debentures 1,903 1,903 1,903 Deficit (91,618) (73,094) (101,578) Total shareholders' equity 103,711 82,352 63,830 Total liabilities and shareholders' equity $ 526,875 $ 527,068 $ 439,832 Retail Corporate Profile Management SEDAR Filings News Releases Online Corporate Profile Management News Releases Info Desk iREWARDS Program About Our Company Affiliate Opportunities Careers Contact Us Corporate Sales Gift Certificates Privacy Policy Shipping Rates Store Locations Wish List chapters.indigo.ca: home Shopping Bag | Account Centre | Wish List | Help iREWARDS Program | Corporate Sales | Store Locations All Products Books DVD Video Gifts Books Advanced Search Search Tips Browse Books Art and Architecture Audiobooks Biography & Memoir Business and Finance Children's Books Computers View all Categories Browse DVD Action & Adventure Comedies Dramas Foreign Films Horror & Suspense Kids & Family View all Categories Browse Video Action & Adventure Comedies Dramas Foreign Films Horror & Suspense Kids & Family View all Categories . 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