Coastal Contacts reports first quarter 2008 financials


    TSX Symbol: COA

    VANCOUVER, March 13 /CNW/ - Coastal Contacts Inc. (TSX:COA) today
announced its unaudited financial results for the first quarter ended
January 31, 2008. Revenue for the quarter was $25.4 million, an increase of
$1.8 million or 7% from the same period in 2007. EBITDA during the quarter was
$(0.1) million versus $1.2 million in the first quarter of 2007. Net loss for
the quarter was ($0.7) million or ($0.01) per share versus net income of
$0.7 million or $0.01 per share for the same period in 2007. The Company ended
the quarter with $27.3 million in cash and cash equivalents, and generated
$0.4 million in cash from operations in the first fiscal quarter of 2008.
    Foreign currency exchange rate fluctuations, including the strengthening
of the Canadian dollar relative to the Swedish Krona and the U.S. dollar over
the last year, contributed to a negative foreign exchange impact on revenue
growth in the quarter of $1.9 million. Excluding the impact of foreign
currency exchange rate fluctuations, revenue in the first quarter of 2008
would have grown by $3.7 million or 16%, compared to the first quarter of
    "Our financial results for the first fiscal quarter of 2008 reflect the
long term strategic investments that Coastal is making towards building a
diversified vision products company with the potential to generate a robust
earnings stream," said Roger Hardy, Coastal Contacts' Chairman and CEO. "We
are investing in three major initiatives from which we believe we will
generate significant lasting value:

    1)  We built two eyeglass manufacturing labs and initiated a trial
        campaign of a prescription eyeglasses business this quarter. With
        more than 1.5 million active vision corrected customers we are
        encouraged by the early results of the trial campaign from both a
        revenue and margin perspective. We believe that Coastal's eyeglass
        business will become an integral component of our business model,
        which we hope will contribute up to 10% of revenue and meaningful
        margins by the end of fiscal 2008.

    2)  The vision products industry is evolving and the direct to consumer
        channel is being endorsed by major traditional retailers. We have
        tightened our strategic focus in order to be prepared for potential
        partnerships and other opportunities that we are developing.

    3)  We are optimizing our business operations around the world, and
        subsequent to the end of the first fiscal quarter began initiatives
        to improve efficiency. We expect to incur one-time restructuring
        charges of approximately $0.8 million relating to severance and other
        costs relating to these initiatives in the second quarter of 2008,
        and as a result expect related annual savings of approximately
        $0.8 million".

    Highlights for the first quarter of 2008:

    -   Revenue for the period was $25.4 million, an increase of $1.8 million
        or 7% from the same period in 2007.
    -   Total order volume for the quarter was 277,018 orders, an increase of
        28,529 orders or 11% over the same period in 2007.
    -   Reorders represented 60-65% of the orders in the quarter.
    -   Cash and cash equivalents at the end of the quarter totalled
        $27.3 million.

    Strategic initiatives undertaken during the quarter included the 

    -   Launched a successful prescription glasses trial campaign to existing
        customers resulting in more than 1,000 pairs of eyeglasses
        successfully delivered.
    -   Launched three private label brands of eyeglasses as part of our
        product offering.
    -   Held strategic meetings to consider several acquisition targets.
    -   Retained both DoubleClick and its performance marketing division,
        DoubleClick Performics, to assist with USA search campaign
    -   Presented at ICR Exchange Conference in the United States.
    -   Presented at the Roth Capital Growth Stock Conference in the United
    -   Announced Intent to purchase up to 7,000,000 common shares of Coastal
        in a modified "Dutch Auction" issuer bid.

    Subsequent to the end of the first quarter of 2008 the Company:

    -   Launched a new eyeglasses business unit in North America and Europe
        following the results of a successful trial campaign.

    -   Purchased for cancellation approximately 6.8 million common shares of
        the Company under the terms of its previously announced issuer bid.
        After the purchase, approximately 64.2 million common shares of the
        Company remain outstanding.

    "We believe that the combination of optimizing our operations, broadening
our offering with high margin products such as eyeglasses and significantly
reducing our shares outstanding will serve our shareholders well going
forward. We see tremendous value in the business we are building and large
strategic partners are taking note" stated Mr. Hardy. "Since October, 2006 the
Company has repurchased for cancellation approximately 11 million shares
representing approximately 15% of our outstanding shares, while maintaining a
strong cash balance and incurring no long term debt. We anticipate several
positive catalysts as we move forward this year, including further progress
with our new eyeglass business, entry into additional geographic markets and
potential partnerships."
    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, 2008 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 2007 Annual Information Form (AIF) dated January 2, 2008. 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, amortization and stock based

                             (Unaudited) ($000's)

    Three months ended January 31                          2008         2007

    Sales                                                25,375       23,605
    Cost of sales                                        19,012       17,305
    Gross profit                                          6,363        6,300

    Selling, general and administration expenses          6,684        5,802
    Share-based compensation                                155          106
    Amortization on property, equipment and leasehold
     improvements                                           229          160
    Amortization on intangible assets                       371          344
    Foreign exchange gain                                  (245)        (685)
    Interest income, net                                   (232)        (239)
    Income (loss) before income taxes                      (599)         812
    Income tax expense - current                            112          160
    Income tax recovery - future                            (10)         (29)
    Net income (loss)                                      (701)         681

                         CONSOLIDATED BALANCE SHEETS
                             (Unaudited) ($000's)

                                                     January 31,  October 31,
                                                           2008         2007

    Cash and cash equivalents                            27,334       23,367
    Short-term investments                                    -        3,976
    Accounts receivable                                   6,866        6,649
    Inventory                                            10,200        8,531
    Prepaid expenses                                      1,404        1,270
    Due from related parties                                347          348
                                                         46,151       44,141
    Property, equipment and leasehold improvements        2,901        2,700
    Intangible assets                                    12,285       11,712
    Goodwill                                              7,986        7,529
                                                         69,323       66,082

    Accounts payable and accrued liabilities             16,763       13,881
    Income taxes payable                                    337          711
    Deferred revenue                                         48           23
    Current portion of lease inducement                      68           68
                                                         17,216       14,683
    Long-term lease inducement                              138          158
    Future income tax liability                           3,964        3,661
                                                         21,318       18,502

    Shareholders' equity
    Share capital
        Unlimited common shares without par value
        Unlimited Class A preferred shares without
         par value
      Issued and outstanding:
        71,214,912 common shares (2007 - 71,426,512)     50,707       50,857
      Shares held in Treasury
        139,700 common shares (2007 - 78,500)              (160)         (89)
    Contributed surplus                                   1,128          973
    Accumulated other comprehensive income (loss)        (2,810)      (4,091)
    Retained earnings (deficit)                            (860)         (70)
                                                         48,005       47,580
                                                         69,323       66,082

    Coastal Contacts will host a conference call on Thursday, March 13 at
6:00pm (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

    About Coastal Contacts:

    Coastal Contacts is one of the world's fastest growing vision care
suppliers. Leveraging its world class operations in North America and Europe,
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 "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

For further information:

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

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