Coastal Contacts Inc.
TSX : COA

Coastal Contacts Inc.

March 11, 2009 08:00 ET

Coastal Contacts Reports Financial Results for the First Fiscal Quarter of 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire – March 11, 2009) –

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Coastal Contacts Inc. ("Coastal") (TSX:COA) today announced its unaudited financial results for the first fiscal quarter ended January 31, 2009.

Key figures include:

- $31.3 million of sales, an increase of 24% compared to the same period last year

- 299,855 total orders shipped

- 600 basis point improvement in gross margin to 31% compared to the same period last year

- $2.0 million of Adjusted EBITDA

- $1.0 million of net earnings

- $0.02 of net earnings per share

- $1.7 million of cash generated from net earnings excluding non-cash items

Sales for the quarter were $31.3 million, an increase of $6.0 million or 24% from the same period in 2008. Gross profit was $9.6 million or 31% of sales, compared to 25% in the same period in 2008. Adjusted EBITDA during the quarter was $2.0 million and net earnings for the quarter was $1.0 million or $0.02 per share.

"Coastal achieved excellent operating results in the first quarter of the year," said Roger Hardy, Coastal Contacts' President and CEO. "Our efforts to build a geographically diversified, consumer focused company continued this quarter with improvements in our developing markets. We continue to follow a long term strategy that is resonating with consumers."

"We believe the current economic climate is creating interest in optical product channels that provide competitive prices, quality and convenience. Further investments in our retail brands are expanding our stable and recurring revenue base of contact lens wearers and driving new customer traffic in our eyeglasses business. We believe our business will benefit from consumers seeking lower cost alternatives that add value to their lives.

The eyeglasses business Coastal launched in the first fiscal quarter of 2008 is showing encouraging growth as consumers adopt the online model. Customer response from surveys has been overwhelmingly positive as they realize it is possible to buy a pair of high quality eyeglasses from us with prices starting at $38, which could cost hundreds of dollars in traditional retail channels."

Hardy continued, "the strong results experienced by the Coastal brands are a testament to the efforts of our entire team. The restructuring initiatives we completed in fiscal 2008 continue to benefit us, and allow us to better focus our investments on initiatives that build value over time. We are pleased that we have been proactive in cost management, and believe we are in a better position to address the challenges and opportunities of the global economic environment by providing our customers with new, innovative, low-cost alternatives to the historical monopolies against which we compete."

The following selected financial information is qualified in its entirety by, and should be read in conjunction with, our unaudited consolidated financial statements as at and for the three month period ended January 31, 2009 and accompanying notes and Management's Discussion and Analysis of Financial Condition and Results of Operations filed on SEDAR.

Coastal Contacts' risks and uncertainties are discussed in detail in the Company's 2008 Annual Information Form (AIF) dated January 29, 2009. The AIF is available on SEDAR.

For a reconciliation of Adjusted EBITDA to net earnings, refer to "Supplemental Non-GAAP Measures" herein.



COASTAL CONTACTS INC.
CONSOLIDATED BALANCE SHEETS
($000's)

January 31, October 31,
2009 2008
------------------------------------------------------------------------
(Unaudited)
ASSETS
Current
Cash and cash equivalents 11,956 15,206
Accounts receivable 8,053 7,279
Income tax receivable - 57
Inventory 10,783 9,495
Prepaid expenses 1,380 1,693
Future income tax 159 157
Due from related parties 365 361
------------------------------------------------------------------------
32,696 34,248
------------------------------------------------------------------------

Property, equipment and leasehold improvements 2,930 3,038
Intangible assets 10,219 11,061
Goodwill 7,522 7,908
------------------------------------------------------------------------
53,367 56,255
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES
Current
Accounts payable and accrued liabilities 15,819 18,787
Income tax payable 454 -
Deferred revenue 43 27
Current portion of lease inducement 68 67
------------------------------------------------------------------------
16,384 18,881
------------------------------------------------------------------------

Long-term lease inducement 59 79
Future income tax 3,568 3,825
------------------------------------------------------------------------
20,011 22,785
------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital
Authorized:
Unlimited common shares without par value
Unlimited Class A preferred shares
without par value
Issued and outstanding:
58,318,643 common shares (2008 - 58,318,643) 41,250 41,250
Shares held in treasury
19,024 common shares (2008 - nil) (17) -
Contributed surplus 1,748 1,600
Accumulated other comprehensive loss (4,117) (2,904)
Deficit (5,508) (6,476)
------------------------------------------------------------------------
33,356 33,470
------------------------------------------------------------------------
53,367 56,255
------------------------------------------------------------------------
------------------------------------------------------------------------



COASTAL CONTACTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE EARNINGS (LOSS)
(Unaudited) ($000's, except share and per share amounts)

Three months ended January 31 2009 2008
------------------------------------------------------------------------

Sales 31,342 25,375
Cost of sales 21,733 19,012
------------------------------------------------------------------------
Gross profit 9,609 6,363
------------------------------------------------------------------------

Advertising 4,126 3,137
Selling, general and administration expenses 3,660 3,547
Share-based compensation 148 155
Amortization on property, equipment and
leasehold improvements 215 229
Amortization on intangible assets 399 371
Foreign exchange gains (202) (245)
Interest income, net (42) (232)
------------------------------------------------------------------------
Earnings (loss) before income taxes 1,305 (599)
Income tax expense 337 102
------------------------------------------------------------------------
Net earnings (loss) 968 (701)

Other comprehensive earnings (loss)
Unrealized foreign exchange gains (losses)
on translation of financial statements of
self-sustaining foreign operations (1,213) 1,281
------------------------------------------------------------------------
Comprehensive earnings (loss) (245) 580
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic earnings (loss) per share 0.02 (0.01)
Diluted earnings (loss) per share 0.02 (0.01)
------------------------------------------------------------------------
------------------------------------------------------------------------

Weighted average number of
common shares outstanding
Basic 58,318,284 71,275,469
Diluted 58,320,367 71,275,469
------------------------------------------------------------------------
------------------------------------------------------------------------


Supplemental Non-GAAP Measures:

We report our results in accordance with Canadian GAAP, however, we present Adjusted EBITDA in this release because we believe that our investors can use this figure to make more informed investment decisions about us. Adjusted EBITDA is a non-GAAP measure that does not have any standardized meaning prescribed by Canadian GAAP and is therefore unlikely to be comparable to similar measures presented by other companies.

Adjusted EBITDA should be considered in addition to, and not as a substitute for, net earnings, cash flows and other measures of financial performance and liquidity reported in accordance with Canadian GAAP. Adjusted EBITDA differs from the most comparable GAAP measure, net earnings, primarily because it does not include interest, income taxes, amortization and share-based compensation expense.

The following table provides a reconciliation of net earnings to Adjusted EBITDA:



For the three months ended January 31,
----------------------------------------

($000's) 2009 2008
------------------------------------------------------------------------

Net earnings (loss) 968 (701)

Amortization 614 600

Interest income, net (42) (232)

Income tax expense 337 102

Share-based compensation 148 155
------------------------------------------------------------------------

Adjusted EBITDA 2,025 (76)
------------------------------------------------------------------------
------------------------------------------------------------------------


About Coastal Contacts Inc.:

Coastal Contacts Inc. (www.coastalcontacts.com) is the world's leading direct-to-consumer vision products company which designs, produces and distributes a diversified offering such as contact lenses and eyeglasses. The Company's unique combination of branded and private label products represent quality, value and above all, service. Coastal sells into more than 150 countries through proprietary web properties which reflect the culture and consumer preference of the target market. As new markets for eyeglasses and contact lenses evolve, the Company is positioned to become the vision product consumer's retailer of choice owing to its unbeatable value proposition combining value and service. Already No. 1 in many of its markets, Coastal is rapidly advancing toward its goal of becoming the "World's Optical Store".

All statements made in this news release, other than statements of historical fact, are forward-looking statements. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "goal", "target", "should," "likely," "potential," "continue," "project," "forecast," "prospects," and similar expressions typically are used to identify forward-looking statements. Examples of such forward looking statements within this document include statements relating to: our perception of the contact lens industry or market and anticipated trends in that market in any of the countries in which we do business; our anticipated business operations and implementations of strategy; customer perceptions of and responses to our business and strategy; the effect of the current economic climate on our business and consumer behaviour; the results of further investments in our retail brands; the extent to which our business will benefit from consumers seeking lower cost alternatives; the restructuring initiatives we completed in fiscal 2008; and our ability to address challenges and opportunities resulting from current economic conditions.

Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about our business and the industry and markets in which we operate. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Assumptions underlying our expectations regarding forward-looking statements or information contained in this news release include, among others: that we will maintain our position in the markets we operate in and expand into other markets in a favourable manner; that we will have sufficient capital to continue making investments in advertising, property, equipment and leasehold improvements and personnel to support our business and new product lines, including our prescription eyeglass business; that we will be successful in implementing our strategy; that we will be able to generate and maintain sufficient cash flows to support our operations; that we will be successful in responding to challenges resulting from current economic conditions; and that current economic conditions will result in consumers seeking lower cost alternatives in our industry from which we will benefit. The foregoing list of assumptions is not exhaustive.

Persons reading this news release are cautioned that forward-looking statements or information are only predictions, and that our actual future results or performance may be materially different due to a number of factors. These factors include, but are not limited to: changes in the market; downturns in economic conditions; consumer credit risk; our ability to implement our business strategies; competition; limited suppliers; inventory risk; disruption in our distribution facilities; mergers and acquisitions; foreign currency exchange rate fluctuations; regulatory requirements; demand for contact lenses and related vision care products; and dependence on the internet and other risks detailed in our filings with the Canadian securities regulatory authorities. Reference should be made to the section entitled "Risk Factors" contained in our most recently filed Annual Information Form dated January 29, 2009, for a detailed description of the risks and uncertainties relating to our business. These risks, as well as others, could cause actual results and events to vary significantly. Accordingly, readers should not place undue reliance on forward-looking statements and information, which are qualified in their entirety by this cautionary statement. These forward-looking statements are made as of the date of this news release and we expressly disclaim any intent or obligation to update these forward-looking statements, unless we specifically state otherwise and except as required by applicable law.

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