Dabbs Indigo Books & Music Inc. second quarter earnings improve by $3.9 million YTD loss reduced by 95.6% to $0.7 million TORONTO Nov. 20, 2001 - Indigo Books & Music Inc., (TSE: IDG) the nation’s largest book retailer, reported earnings before interest, taxes, depreciation and amortization (EBIDTA) of $1.0 million for the second fiscal quarter ended September 29, 2001, representing a $3.9 million improvement over the $2.9 million EBITDA loss in the same period the previous year. This is the first time since September 1998 that the Company has reported positive consolidated operating earnings for the second quarter. Year to date, the EBITDA loss for the 26-week period ended September 29, 2001 was reduced by $15.2 million to $0.7 million as compared to an EBITDA loss of $15.9 million the previous year. "The operating changes made this year are beginning to have positive impact,” said Heather Reisman, President and Chief Executive Officer of Indigo. “We hope to see further improvements as a result of our new merchandising standards, improved inventory mix, process improvements in our warehouse and positive relationships with suppliers. In addition, with the merger of Chapters and Indigo and the subsequent acquisition of Chapters Online, we can continue our focus on reducing costs." Reisman said that September revenues were adversely affected in the aftermath of the tragic events of September 11. "Due to the impact of September 11, consumer confidence remains uncertain and we expect the upcoming holiday season to be extremely challenging," said Reisman. Total consolidated revenues in the second quarter increased 1.2% to $155.9 million from $154.1 million in the second quarter last year. The sales increase was primarily attributable to the addition of 15 Indigo superstores for the seven weeks in the quarter following the merger on August 14 and to operating five additional Chapters superstores, offset by sales decreases from closing 24 mall stores and from lower sales at Chapters Online. On a year to date basis, total consolidated revenues were $291.2 million as compared to $290.9 million last year. The consolidated net loss for the second quarter was $31.3 million ($2.49 per share) as compared to a net loss of $7.8 million ($0.68 per share) in the second quarter last year. This loss is primarily due to restructuring and other charges of $21.2 million ($1.69 per share) relating to store closures and other costs associated with the merger. The charges comprise $12.3 million in non-cash capital asset write downs, $4.5 million relating to store closings, $1.7 million relating to relocation and other costs associated with the merger and $2.7 million in financing charges. It is anticipated that further store closures and other costs related to the merger will be incurred during the remainder of the year. Indigo Retail Retail sales in the second quarter of fiscal year 2002 were $149.0 million as compared to $141.3 million for the same period last year, an increase of 5.5%. Retail sales on a year to date basis were $274.9 million as compared to $265.5 million last year, an increase of $9.4 million or 3.5%. Operating earnings year to date were $2.0 million, compared to $2.1 million on the same basis last year. Superstores Revenues at the 92 Chapters and Indigo superstores, including the World’s Biggest Bookstore, grew to $104.5 million, a 12.5% increase compared to $92.9 million in the second quarter last year. Comparative store sales declined 3.1% during the quarter attributable to the addition of stores in shared trade areas. Year to date revenues increased $15.4 million to $191.7 million as compared to last year, attributed to the addition of Indigo superstores and five additional Chapters stores. Mall stores Revenues declined to $37.4 million in the second quarter, a decrease of 9.3% in comparison to $41.2 million in the second quarter last year. The decline in revenue was the result of the closure of 24 locations or approximately 10% fewer stores than the same quarter last year. A comparative store sales decrease of 0.7% is a significant improvement over the 5% decline in the second quarter last year. Year to date revenues decreased $5.6 million to $73.1 million compared to last year. Comparative store sales increased 1.3% year to date, a significant improvement over a 5.6% decrease during the same period last year. Online Revenues in the second quarter were $6.9 million as compared to $12.7 million in the second quarter last year, a decrease of 46%. The decline was anticipated and is attributed to less aggressive marketing activities and a greater focus on cost containment. Operating losses were reduced by $7.2 million to $1.3 million as a result of cost reduction and restructuring activities undertaken in the previous two quarters. Operating losses were reduced by $15.3 million on a year to date basis to $2.7 million, a significant improvement. Forward-Looking Statements Statements contained in this press release which are not historical facts are forward-looking statements which involve risk and uncertainties which 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 and its subsidiaries. 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, Coles, SmithBooks, and World's Biggest Bookstore. Indigo is majority owner of Chapters Online Inc., operating www.chapters.indigo.ca, an online retailer of books, music, videos and DVDs. Indigo is a publicly traded company, listed on the TSE under the stock symbol IDG. To learn more about Indigo, please visit the About Our Company section of chapters.indigo.ca . 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