Coastal Contacts reports third quarter 2008 financials



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

    TSX Symbol: COA
    

    VANCOUVER, Sept. 11 /CNW/ - Coastal Contacts Inc. ("Coastal") (TSX:COA)
today announced its unaudited financial results for the third fiscal quarter
ended July 31, 2008.
    Revenue for the quarter was a record $32.7 million, an increase of
$5.4 million or 20% from the same period in 2007. Gross profit was a record
$9.0 million, an increase of 19% over the same period in 2007. Adjusted EBITDA
during the quarter was $1.3 million versus $1.1 million in the third quarter
of 2007. Net income for the quarter was $0.2 million or $0.00 per share,
versus net income of $0.4 million or $0.01 per share for the same period in
2007. The Company ended the quarter with $20.0 million in cash and cash
equivalents.
    "Coastal achieved another quarter of record results and further
strengthened our position as the world's leading direct to consumer retailer
of vision care products. The Company experienced growth in all key markets,
demonstrating a balanced and sustainable multi-market strategy, unique to
Coastal Contacts. There are several key factors aligning in our markets which
give us confidence in the Company's prospects going forward," said Roger
Hardy, Coastal Contacts' President and CEO.
    "First, from an available market perspective an increasing number of
adults around the world now require vision correction, owing to an aging
population and growing computer usage. In markets such as the United States,
market research now indicates that more than 86% of the adult population use
some form of corrective or non-corrective eyewear.
    Second, the market for contact lenses continues to show strong growth
worldwide at approximately 9% compounded annually. Advances in contact lens
technology now allow users as young as 10 years old and have enhanced the
market for users between the ages of 35 and 49. As well, improving economic
status of consumers in markets such as Asia have created a new customer base
seeking traditionally "Western" consumer products like contact lenses.
    Third, eCommerce usage continues to grow at a rate faster than
traditional "brick and mortar" channels as consumers seek convenience and
value when buying personal consumable items such as vision care products. In
the US between 2001 and 2006 retail e-sales increased at an average annual
growth rate of 25.4% compared with 4.8% for total retail sales."
    Hardy continued, "By combining these factors with our leadership position
in multiple markets around the world, we are encouraged by our results and the
potential that lies ahead. Our estimates indicate that approximately 10% of
the $5 billion contact lens market is purchased using the direct to consumer
channel. We estimate that some markets may have grown to more than 40%
penetration, which gives us significant opportunity to expand our business
globally. Further expansion of our product offering to include eyeglasses
provides our customers with another opportunity to take advantage of Coastal's
value proposition. We are the only direct-to-consumer retailer of vision care
products to be executing an international multi market strategy and are
ideally positioned to take advantage of this exciting opportunity.
    We continue to believe that Coastal shares are significantly undervalued
in the current stock market environment. In the interest of enhancing future
shareholder value, the Company executed a further buyback of common shares on
August 1, 2008, acquiring and cancelling 5 million common shares for
$5 million, representing approximately 8% of the outstanding shares
immediately prior to purchase."

    Highlights for the third quarter of 2008:

    
    -   Revenue grew to a record $32.7 million, an increase of $5.4 million
        or 20% from the same period in 2007.
    -   Gross profit was a record $9.0 million, an increase of 19% over the
        same period in 2007.
    -   Total order volume for the quarter was 323,786 orders, an increase of
        16% over the same period in 2007.
    -   Reorders represented 65-69% of the orders in the quarter.
    -   Cash and cash equivalents totalled $20.0 million as at July 31, 2008.
    

    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 and nine month periods ended
July 31, 2008 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 2007 Annual Information Form (AIF) dated January 2, 2008. The AIF is
available on SEDAR.
    Adjusted EBITDA as referenced in this release is a non-GAAP measure and
is defined as earnings before interest, taxes, depreciation, amortization,
share-based compensation and restructuring costs.


    
    Coastal Contacts Inc.
    CONSOLIDATED BALANCE SHEETS
    ($000's)

                                                     July 31,     October 31,
                                                       2008          2007
    -------------------------------------------------------------------------
                                                   (unaudited)

    ASSETS
    Current
    Cash and cash equivalents                         19,959          23,367
    Short-term investments                                 -           3,976
    Accounts receivable                                7,833           6,649
    Inventory                                         10,624           8,531
    Prepaid expenses                                   2,095           1,270
    Due from related parties                             367             348
    -------------------------------------------------------------------------
                                                      40,878          44,141
    -------------------------------------------------------------------------

    Property, equipment and leasehold improvements     2,901           2,700
    Intangible assets                                 12,225          11,712
    Goodwill                                           8,537           7,529
    -------------------------------------------------------------------------
                                                      64,541          66,082
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities          20,220          13,881
    Income tax payable                                   161             711
    Deferred revenue                                      21              23
    Current portion of lease inducement                   68              68
    -------------------------------------------------------------------------
                                                      20,470          14,683
    -------------------------------------------------------------------------

    Long-term lease inducement                            99             158
    Future income tax liability                        4,159           3,661
    -------------------------------------------------------------------------
                                                      24,728          18,502
    -------------------------------------------------------------------------

    Shareholders' equity
    Share capital
      Authorized:
        Unlimited common shares without par value
        Unlimited Class A preferred shares without
         par value
    Issued and outstanding:
     63,430,443 common shares (2007 - 71,426,512)     44,996          50,857
    Shares held in Treasury
     nil (2007 - 78,500 common shares)                     -             (89)
    Contributed surplus                                2,081             973
    Accumulated other comprehensive loss              (1,834)         (4,091)
    Deficit                                           (5,430)            (70)
    -------------------------------------------------------------------------
                                                      39,813          47,580
    -------------------------------------------------------------------------
                                                      64,541          66,082
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Coastal Contacts Inc.
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (Unaudited) ($000's, except share and per share amounts)

                                 Three months ended       Nine months ended
                                      July 31                 July 31
                                 -------------------     -------------------
                                   2008        2007        2008        2007
    -------------------------------------------------------------------------

    Sales                         32,725      27,310      86,731      75,517
    Cost of sales                 23,775      19,772      63,289      55,054
    -------------------------------------------------------------------------
    Gross profit                   8,950       7,538      23,442      20,463
    -------------------------------------------------------------------------

    Selling, general and
     administration expenses       7,674       6,286      21,519      17,868
    Share-based compensation         160         132         495         315
    Amortization on property,
     equipment and leasehold
     improvements                    231         210         697         584
    Amortization on intangible
     assets                          432         327       1,234         914
    Foreign exchange (gains)
     losses                          (64)        165        (259)       (669)
    Interest income, net             (91)       (176)       (477)       (626)
    Restructuring charges              -           -         844           -
    -------------------------------------------------------------------------
    Earnings (loss) before income
     taxes                           608         594        (611)      2,077
    Income tax expense - current     460         268         668         813
    Income tax recovery - future     (63)        (48)        (95)       (104)
    -------------------------------------------------------------------------

    Net earnings (loss)              211         374      (1,184)      1,368
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss) per
     share                          0.00        0.01       (0.02)       0.02
    Diluted earnings (loss) per
     share                          0.00        0.01       (0.02)       0.02
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of common shares
     outstanding
     - basic                  63,430,443  72,454,142  68,217,592  73,263,054
    Weighted average number
     of common shares
     outstanding
     - diluted                63,534,580  73,030,749  68,217,592  73,853,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Coastal Contacts will host a conference call on Thursday, September 11 at
1:00pm (EST) to discuss financial results and 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
417948.

    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".

    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, consumer credit risk, limited
suppliers, inventory risk, disruption in our distribution facilities, foreign
exchange fluctuations, changes in business strategy, regulatory requirements,
demand for contact lenses and other vision care products, 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.
    




For further information:

For further information: Terry Vanderkruyk, Vice President, Corporate
Development, Coastal Contacts Inc., (604) 676-4498,
terryv@coastalcontacts.com

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COASTAL CONTACTS INC.

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