Indigo Releases Second Quarter Results

    TORONTO, Oct. 31 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's
largest book retailer, reported strong second quarter growth across all
channels. Total revenue for the quarter increased 14.8% to $209.2 million. On
a comparative basis, Indigo and Chapters superstores posted 10.2% growth,
while Coles small format stores were up 10.7%. Sales from Indigo's online
channel, chapters.indigo.ca, grew 50.3% to $26.3 million.
    The Company's net earnings for the second quarter increased to
$3.3 million, up $4.3 million from a loss of $1.0 million in the same quarter
last year. Operating earnings, or EBITDA, rose 43.6% to $11.2 million.
    Commenting on the results, Indigo CEO Heather Reisman said: "Canadian
booklovers continue to show us their passion for books, and our results also
point to their appreciation for our other product lines such as lifestyle
gifts and kids toys." Ms. Reisman also noted: "The release of Harry Potter and
the Deathly Hallows was clearly a major event for us in the quarter, but even
without this blockbuster book our results were strong".
    Excluding Harry Potter, revenue for the quarter was up 7.1% in Indigo and
Chapters superstores and 6.4% in Coles small format stores, while sales from
Indigo's online channel grew 14.9%.
    In a separate announcement, the company confirmed the opening of 8 new
superstores over the next 18 months, including sites in Vancouver, Calgary,
Saskatoon, Winnipeg, Stoney Creek, Milton, Mississauga and St John. As well,
the company plans to significantly expand its toy business across large format
stores over the next 18 months due to the positive reception for its
edutainment offering to date.
    Recently Indigo produced The Entrepreneurs, a series of interviews with
some of Canada's leading entrepreneurs which will soon be available both
online and in-store; released Writing on the Wall, a documentary about the
literacy crises in Canada; and introduced their new online Community,
chapters.indigo.ca/community, an innovative platform that combines social
networking functionality with booklover inspired content tools in a bold
effort to transfer the social atmosphere and knowledgeable environment of the
Indigo in-store experience into the online channel.

    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-GAAP Financial Measures

    The Company prepares its consolidated financial statements in accordance
with Canadian generally accepted accounting principles. In order to provide
additional insight into the business, the Company has also provided non-GAAP
data, including operating earnings or EBITDA, in the press release above. This
measure does not have a standardized meaning prescribed by GAAP, and is
therefore specific to Indigo and may not be comparable to similar measures
presented by other companies.
    Operating earnings or EBITDA 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. EBITDA is defined as earnings before interest, taxes,
depreciation and amortization.

    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
chapters.indigo.ca, an online retailer of books, music, movies and more. It is
a publicly traded company listed on the Toronto Stock Exchange under the stock
symbol IDG.
    In 2005 and 2006, the Company qualified as one of Canada's Top 100
Employers in a survey run by Mediacorp Canada. To learn more about Indigo,
please visit the About Our Company section of chapters.indigo.ca.
    In 2004, Indigo also founded the Indigo Love of Reading Foundation, a
registered charity whose mission is to provide new books and creative learning
materials to high-needs elementary schools, enhancing the literacy and
self-esteem of students in Canada. Visit chapters.indigo.ca/loveofreading for
more information.

                     Consolidated Statements of Earnings
                                 (Unaudited)

                           13-week       13-week       26-week       26-week
    (thousands of     period ended  period ended  period ended  period ended
    dollars, except   September 29, September 30, September 29, September 30,
    per share data)           2007          2006          2007          2006
    -------------------------------------------------------------------------

    Revenues               209,173       182,305       394,090       352,656
    Cost of sales,
     operations, selling
     and administration    197,961       174,544       377,725       342,491
    -------------------------------------------------------------------------
                            11,212         7,761        16,365        10,165
    -------------------------------------------------------------------------

    Amortization of
     capital assets          7,476         7,751        15,086        15,140
    Amortization of
     pre-opening store
     costs                      54            49           108           100
    -------------------------------------------------------------------------
                             7,530         7,800        15,194        15,240
    -------------------------------------------------------------------------
    Earnings (loss)
     before the
     undernoted items        3,682           (39)        1,171        (5,075)
    Interest on long-term
     debt and financing
     charges                   203           141           450           400
    Interest on bank
     indebtedness              140           796           222         1,382
    -------------------------------------------------------------------------
    Earnings (loss)
     before income taxes     3,339          (976)          499        (6,857)
    Income tax recovery          -             -             -           (90)
    -------------------------------------------------------------------------
    Net earnings (loss)
     for the period          3,339          (976)          499        (6,767)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings (loss)
     per common share

    Basic                $    0.14     $   (0.04)    $    0.02     $   (0.28)
    Diluted              $    0.13     $   (0.04)    $    0.02     $   (0.28)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of common
     shares outstanding     24,692        24,279        24,670        24,255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                         Consolidated Balance Sheets
                                 (Unaudited)


                                           As at         As at         As at
                                    September 29, September 30,     March 31,
    (thousands of dollars)                  2007          2006          2007
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents              9,324         6,177        13,639
    Accounts receivable                    8,508         5,891         9,848
    Inventories                          236,948       245,740       224,059
    Income taxes recoverable                 194           444           194
    Prepaid expenses                       4,280         4,594         4,578
    Future tax assets                      9,205         9,014         9,205
    -------------------------------------------------------------------------
    Total current assets                 268,459       271,860       261,523
    -------------------------------------------------------------------------
    Capital assets, net                   69,556        81,803        76,186
    Future tax assets                     32,035        19,750        32,035
    Goodwill                              27,523        39,999        27,523
    -------------------------------------------------------------------------
    Total assets                         397,573       413,412       397,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                     15,794        35,176             -
    Accounts payable and
     accrued liabilities                 205,538       215,540       206,542
    Deferred revenue                      10,876        10,392        10,621
    Derivative liabilities                 2,584             -             -
    Current portion of long-term debt      2,732        27,423        15,562
    -------------------------------------------------------------------------
    Total current liabilities            237,524       288,531       232,725
    -------------------------------------------------------------------------
    Long-term accrued liabilities          7,745         9,139        10,807
    Long-term debt                         4,625         5,655         4,928
    -------------------------------------------------------------------------
    Total liabilities                    249,894       303,325       248,460
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Shareholders' equity
    Share capital                        198,181       195,775       197,592
    Contributed surplus                    2,139         1,620         1,752
    Deficit                              (50,057)      (87,308)      (50,537)
    Accumulated other
     comprehensive loss                   (2,584)            -             -
    -------------------------------------------------------------------------
    Total shareholders' equity           147,679       110,087       148,807
    -------------------------------------------------------------------------
    Total liabilities and
     shareholders' equity                397,573       413,412       397,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

For further information: Lisa Huie, Manager, Public Relations, (416)
646-8926, lhuie@indigo.ca