Coastal Contacts Inc.
TSX : COA

Coastal Contacts Inc.

March 15, 2007 08:00 ET

Coastal Contacts Reports Third Consecutive Quarter of Record Revenues

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 15, 2007) -

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

Coastal Contacts Inc. (TSX:COA) today announced its unaudited financial results for the quarter ended January 31, 2007. Revenue for the first quarter was $23.6 million, a new quarterly record and an increase of $ 5.2 million or 28% from the same period in 2006. EBITDA during the quarter was $1.2 million versus $0.6 million in the first quarter of 2006. Net income for the quarter was $0.7 million or $0.01 per share versus $0.2 million for the same period in 2006.

"Our financial results for the first fiscal quarter of 2007 reflect our commitment to profitable growth," said Roger Hardy, Coastal Contacts' Chairman and CEO. "We are encouraged by activities in all of our markets around the world, each holding opportunities for sales growth and margin enhancement. The two businesses acquired in Singapore and the Netherlands in late 2006 are now fully integrated and aggressively pursuing growth in their respective regions. The revenue increase we experienced in Q1 was a balance of organic growth in existing markets, favourable foreign exchange rates, and incremental revenue from the acquisitions completed in the fourth quarter of 2006."

Highlights for the first fiscal quarter of 2007:

- Total order volume for the quarter was 248,489 orders, an increase of 66,979 orders (37%) over the same period in 2006.

- Reorders represented 52% of the orders in the quarter.

- Gross profit margin increased to 27% in the quarter compared to 25% in the first fiscal quarter of 2006.

- Selling, general and administrative expenses (SG&A) increased to 25% in the quarter compared to 24% in the same period in 2006.

"Strategically we have positioned Coastal to take advantage of rapidly increasing Internet adoption rates in high growth markets such as Asia and Europe", said Hardy. "This trend in both regions is opening the market for direct to consumer marketing of contact lenses, allowing us to leverage our business model and continue our profitable growth."

Strategic initiatives undertaken during the quarter included the following:

- Actively engaged in the development of branded vision care products to broaden Coastal's product offering.
- Actively engaged in discussion with potential acquisition targets in global markets.
- Further development of its strong co-marketing relationships with contact lens manufacturers.

Company guidance for Q2, fiscal 2007 is revenue of $25.5 million, an increase of 45% over the same period in 2006. EBITDA is forecast in the range of $1.0-$1.5 million, excluding the impact of foreign exchange.

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, 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, taxes, depreciation and stock based compensation.



CONSOLIDATED BALANCE SHEETS
(Unaudited)

January 31, October 31,
2007 2006
$000's $000's
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ASSETS
Current
Cash and cash equivalents 23,358 24,273
Accounts receivable 7,665 7,127
Inventory 13,453 12,262
Prepaid expenses 1,230 702
Due from related parties 606 610
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46,312 44,974
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Property, equipment and leasehold improvements 2,924 2,773
Intangible assets 12,969 13,632
Goodwill 8,562 6,697
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70,767 68,076
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 14,005 11,867
Income taxes payable 472 212
Deferred revenue 350 205
Current portion of lease inducement 67 26
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14,894 12,310
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Long-term lease inducement 106 86
Future income tax liability 4,034 4,227
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19,034 16,623
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Shareholders' equity
Share capital
Authorized:
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) 53,263 53,515
Shares held in Treasury
1,135,500 common shares (2006 - 42,700) (1,242) (41)
Contributed surplus 636 530
Accumulated other comprehensive income (1,088) (2,135)
Retained earnings (deficit) 164 (416)
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51,733 51,453
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70,767 68,076
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CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)

For the three months ended January 31 2007 2006
$000's $000's
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Sales 23,605 18,410
Cost of sales 17,305 13,790
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Gross profit 6,300 4,620
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Selling, general and administration expenses 5,802 4,329
Share-based compensation 106 27
Amortization on property, equipment and
leasehold improvements 160 171
Amortization on intangible assets 344 90
Foreign exchange gains (685) (273)
Interest on long-term debt 13 16
Interest income (252) (86)
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Income before income taxes 812 346
Income tax expense - current 160 89
Income tax expense (recovery) - future (29) 20
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Net income 681 237
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Other comprehensive income, net of tax

Unrealized foreign exchange gains on
translation of financial statements of
self-sustaining foreign operations 1,047 158
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Comprehensive Income 1,728 395
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Basic earnings per share 0.01 0.00
Diluted earnings per share 0.01 0.00
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Weighted average number of common shares
outstanding - basic 74,338,984 58,034,604
Weighted average number of common shares
outstanding - diluted 74,869,028 60,264,972
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Coastal Contacts will host a conference call on Thursday, March 15 at 2:00pm (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 566200.

A live audio webcast of the call will be available in real time or on demand. The PowerPoint presentation to be used in the presentation will also be available by following the webcast instructions at www.coastalcontacts.com in the Investor Relations section.

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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