Coastal Contacts Inc.

Coastal Contacts Inc.

June 14, 2007 16:00 ET

Coastal Contacts Reports Fourth Consecutive Quarter of Record Revenues

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 14, 2007) -


Coastal Contacts Inc. (TSX:COA) today announced its unaudited financial results for its second fiscal quarter ended April 30, 2007. Revenue for the second quarter grew 40% to a new quarterly record of $24.6 million, an increase of $7.0 million versus the same period in 2006. EBITDA during the quarter was $1.0 million versus $0.5 million in the second quarter of 2006. Although earnings per share on a fully diluted basis remained at a break-even level, net income for the quarter grew to $0.3 million versus $0.1 million for the same period in 2006.

Roger Hardy, Coastal Contacts' President and CEO commented, "Our financial results for the second fiscal quarter of 2007 reflect our ongoing commitment to building a strategic presence in key markets for vision care products around the world. We continue to add thousands of new customers each quarter, the majority of whom become repeat customers, building a recurring revenue opportunity in our core product category. We believe that there are significant untapped opportunities to further monetize the relationship we are building with our customers through product line expansions, some of which will carry premium margins."

The Company noted the following highlights for the second fiscal quarter of 2007:

- Total orders shipped for the quarter increased 21% to 254,921, an increase of 45,027 orders over the same period in 2006

- Returning customers accounted for 54% of orders shipped during the quarter

- Gross profit margin increased to 27% in the quarter compared to 24% in the second fiscal quarter of 2006

- Selling, general and administrative expenses (SG&A) decreased to 23% of sales in the quarter compared to 24% in the same period in 2006

Mr. Hardy continued, "We believe our global platform for vision care products represents a key strategic advantage that will provide us with unparalleled opportunities in the coming years. We will remain focused on leveraging our developing global infrastructure to further this advantage and are confident that we will emerge as the worldwide leader in this market. We believe that our combination of global presence, excellent execution, and superior service model will enable us to deliver excellent value and returns to our shareholders."

The Company was pleased to note that, during the second quarter, its wholly-owned Swedish subsidiary, Lensway, was awarded first place in the annual Q-Survey awards for customer service in its European operations. Lensway received the award twice in the last three years. Q-Survey is a European company offering benchmarking and quality assurance of call centre services through surveys and analysis. The relevant judgment criteria for the competition included general attitude, treatment of customers, commitment, accuracy, knowledge of products, initiative and efficiency. Lensway was set apart from the competition due to its consistency of service across multiple languages servicing numerous markets throughout Europe.

Subsequent to the end of the second quarter Coastal was ranked:

- 128th out of the top 500 e-tailers in the United States by industry leading Internet Retailer magazine

- 18th in the Profit 100 listing of the fastest growing companies in Canada for the past five fiscal years

The Company believes it will achieve another record quarter of revenues in its third fiscal quarter of 2007, with gross margins to be consistent with recent ranges. The Company expects to incur additional SG&A expense to address a traditionally strong marketing environment in Europe, and currently expects to incur unrealized foreign exchange losses relating to inter-company monetary assets and liabilities that are within the Coastal group of companies. The Company expects EBITDA to range between $0.6 million to $1.0 million without giving effect to foreign exchange gains or losses.

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 April 30, 2007 and related 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 2006 Annual Information Form (AIF) filed January 29, 2007. The AIF is available on SEDAR.

EBITDA as referenced in this release is a non-GAAP figure and is defined as earnings before interest, income taxes, depreciation, amortization and share-based compensation.

(Unaudited) ($000's)

April 30, October 31,
2007 2006

Cash and cash equivalents 16,688 24,273
Short-term investments 3,892 -
Accounts receivable 6,566 7,127
Inventory 12,066 12,262
Prepaid expenses 1,363 702
Due from related parties 624 610
41,199 44,974
Property, equipment and leasehold improvements 2,958 2,773
Intangible assets 12,631 13,632
Goodwill 8,323 6,697
65,111 68,076


Accounts payable and accrued liabilities 9,541 11,793
Income taxes payable 726 212
Deferred revenue 241 205
Current portion of lease inducement 54 53
10,562 12,263
Long-term lease inducement 107 133
Future income tax liability 3,920 4,227
14,589 16,623

Shareholders' equity
Share capital
Unlimited common shares without par value
Unlimited Class A preferred shares without
par value
Issued and outstanding:
73,180,412 common shares (2006 - 74,681,712) 52,439 53,515
Shares held in Treasury
674,500 common shares (2006 - 42,700) (605) (41)
Contributed surplus 713 530
Accumulated other comprehensive income (2,083) (2,135)
Retained earnings (deficit) 58 (416)
50,522 51,453
65,111 68,076

(Unaudited) ($000's)

Three months ended
April 30 April 30
2007 2006
Sales 24,602 17,603
Cost of sales 17,977 13,315
Gross profit 6,625 4,288

Selling, general and administration expenses 5,767 4,277
Share-based compensation 77 19
Amortization on property, equipment and
leasehold improvements 214 172
Amortization on intangible assets 243 118
Foreign exchange gains (149) (464)
Interest income, net (198) (271)
Income before income taxes 671 437
Income tax expense - current 385 154
Income tax expense (recovery) - future (27) 183
Net income 313 100

Coastal Contacts will host a conference call on Thursday, June 14, 2007 at 4:30pm (EST) to discuss financial results and Company operations.

To attend the conference call, participants in Toronto may dial 416-850-9140. Participants outside the greater Toronto area may dial the North American toll-free number 1-866-400-3320.

A replay of the call will be available for 7 days. To access the replay in Toronto listeners may dial 416-915-1035. The North American toll-free number for the replay is 1-866-245-6755. The passcode to access the replay is 93149.

About Coastal Contacts:

Coastal Contacts is the world's fastest-growing vision care supplier. Leveraging its world class operations in Europe, North America and Asia, Coastal is building a predictable recurring revenue stream in the contact lens segment and is developing complementary branded vision care products. Already No.1 in most of its markets, Coastal is rapidly advancing toward its goal of becoming the dominant global vision care supplier.

This news release contains certain forward-looking statements that reflect the current views and/or expectations of Coastal Contacts Inc. with respect to its performance, business and future events. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, those relating to changes in the market, potential downturns in economic conditions, limited suppliers, inventory risk, disruption in our distribution facilities, foreign exchange fluctuations, regulatory requirements, demand for contact lenses, competition and dependence on the internet. These risks, as well as others, could cause actual results and events to vary significantly. Coastal Contacts does not undertake any obligations to release publicly any revisions for updating any voluntary forward-looking statements.

Neither the TSX nor any other regulatory body has reviewed and therefore does not accept responsibility for the adequacy or accuracy of this release.

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