Coastal Contacts Inc.

Coastal Contacts Inc.

September 13, 2007 16:00 ET

Coastal Contacts Reports Healthy Third Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 13, 2007) -


Coastal Contacts Inc. (TSX:COA) today announced its unaudited financial results for the third fiscal quarter ended July 31, 2007. Revenue for the third quarter grew 26% to a new quarterly record of $27.3 million, an increase of $5.6 million versus the same period in 2006. EBITDA during the quarter was $1.1 million versus a loss of $1.8 million in the third quarter of 2006. Net income was $0.4 million or $0.01 per share, versus a loss of $2.1 million or $0.03 per share for the same period in 2006.

"Our financial results for the third fiscal quarter of 2007 demonstrate our ability to combine rapid growth with profitability," commented Roger Hardy, Coastal Contacts' President and CEO, "We continue to focus on markets that offer strong margin and high growth opportunities, leveraging Coastal's comparative advantages to build a recurring revenue stream that we believe will create significant value for our shareholders. In addition, we are actively pursuing private label product development, such as the recent launch of Healthy Eyes Multi-Purpose Contact Lens Solution to further monetize our growing database."

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

- Total orders shipped for the quarter increased 19% to 278,272, an increase of 43,595 orders over the same period in 2006

- Gross profit of $7.5 million represented 28% of sales in the quarter compared to 21% in the third fiscal quarter of 2006

- Selling, general and administrative expenses (SG&A) decreased to 23% of sales in the quarter compared to 30% in the same period in 2006

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

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

Mr. Hardy added, "Coastal now has annualized sales of over $100 million, profitable operating results in four consecutive quarters, and increasing growth opportunities available due to a larger scale, international business platform. Coastal is well positioned to rapidly advance towards its goal of becoming a dominant global vision care supplier."

The company is currently anticipating a revenue range of approximately $120 - $125 million for our 2008 fiscal year beginning November 1, 2007. This forecast is based on successful deployment of our business initiatives, stable foreign exchange rates, reorder rates and customer acquisition costs, and current economic and business conditions. The forecast is a forward looking statement and is subject to these assumptions and the various risks and uncertainties outlined in this press release.

At the end of the third quarter Coastal announced the launch of its own private label Healthy Eyes Multi Purpose Solution for soft contact lenses. The global market for contact lens solutions is estimated at over $1.6 billion annually. Initially the Company plans to market the solution to its growing base of customers focusing on its natural formulation, proper eye care protocols and the ability to provide "one stop shopping" to customers for contact lenses and solutions.

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 July 31, 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

EBITDA and orders shipped as referenced in this release are non-GAAP figures. EBITDA is defined as earnings before interest, income taxes, amortization and share-based compensation.

Coastal Contacts Inc.

(Unaudited) ($000's)

July 31, October 31,
2007 2006

Cash and cash equivalents 19,483 24,273
Short-term investments 3,934 -
Accounts receivable 8,258 7,127
Inventory 9,091 12,262
Prepaid expenses 2,199 702
Due from related parties 628 610
43,593 44,974
Property, equipment and leasehold improvements 2,761 2,773
Intangible assets 12,287 13,632
Goodwill 8,009 6,697
66,650 68,076

Accounts payable and accrued liabilities 11,803 11,793
Income taxes payable 842 212
Deferred revenue 179 205
Current portion of lease inducement 53 53
12,877 12,263
Long-term lease inducement 93 133
Future income tax liability 3,727 4,227
16,697 16,623
Shareholders' equity
Share capital
Unlimited common shares without par value
Unlimited Class A preferred shares without
par value
Issued and outstanding:
72,479,512 common shares (2006 - 74,681,712) 51,937 53,515
Shares held in Treasury
423,200 common shares (2006 - 42,700) (460) (41)
Contributed surplus 845 530
Accumulated other comprehensive income (2,669) (2,135)
Retained earnings (deficit) 300 (416)
49,953 51,453
66,650 68,076

(Unaudited) ($000's)

Three months ended
July 31, July 31,
2007 2006

Sales 27,310 21,657
Cost of sales 19,772 17,027
Gross profit 7,538 4,630

Selling, general and administration expenses 6,286 6,534
Share-based compensation 132 40
Amortization on property, equipment
and leasehold improvements 210 181
Amortization on intangible assets 327 151
Foreign exchange (gain) loss 165 (111)
Interest income, net (176) (300)
Income (loss) before income taxes 594 (1,865)
Income tax expense - current 268 195
Income tax expense (recovery) - future (48) 83
Net income (loss) 374 (2,143)

Coastal Contacts will host a conference call on Thursday, September 13, 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 one of the world's fastest-growing vision care suppliers. 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 many 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, changes in business strategy, 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.

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