Coastal Contacts reports second quarter 2008 financials


    TSX Symbol: COA

    VANCOUVER, June 12 /CNW/ - Coastal Contacts Inc. (TSX:COA) today
announced its unaudited financial results for the second quarter ended
April 30, 2008. Revenue for the quarter was a record $28.6 million, an
increase of $4 million or 16% from the same period in 2007. Gross profit was a
record $8.1 million, an increase of 23% over the same period in 2007. Adjusted
EBITDA during the quarter was $0.9 million versus $1.0 million in the second
quarter of 2007. Net loss for the quarter was $0.7 million or $0.01 per share,
versus net income of $0.3 million or $0.00 per share for the same period in
2007. Net income was impacted by a one time restructuring charge of
$0.8 million in the second quarter related to the consolidation of businesses
previously acquired in The Netherlands and Singapore. The Company ended the
quarter with $17.5 million in cash and cash equivalents.
    "Our financial results for the second fiscal quarter of 2008 are
encouraging as we execute on two major initiatives that we believe have the
potential to take Coastal's revenue and earnings to the next level," said
Roger Hardy, Coastal Contacts' Chairman and CEO.
    Firstly, we completed the consolidation of businesses acquired in the
Netherlands and Singapore, concentrating operations in our Stockholm and
Vancouver distribution hubs. We previously guided for this one time
restructuring charge and anticipate a positive return on this expense which we
will invest in long term growth oriented initiatives.
    Secondly, based on our experience since the beginning of 2008, we have
committed fully to building a direct to consumer eyeglasses business. By
extending our product offering into the eyeglasses category, which is at least
eight times larger than the contact lens market globally, we can leverage our
existing customer base of more than 1.5 million active customers and access
the more than 50% of the world's population that currently corrects their
vision with eyeglasses. The eyeglasses industry, like the contact lens market,
has been characterized by high prices and inconsistant service levels owing to
significant channel inefficiencies between the manufacturers and end users.
Our approach is to offer consumers the highest quality designer and private
label eyeglasses frames and combine them in our labs with state of the art
lenses to provide a product offering which is complete, simple and affordable.
We are also undertaking innovative marketing strategies and are providing
service offerings which are designed to bridge any objection a consumer may
have when considering the purchase of eyeglasses over the Internet."

    Highlights for the second quarter of 2008:

    -   Revenue grew to a record $28.6 million, an increase of $4 million or
        16% from the same period in 2007.
    -   Gross profit was a record $8.1 million, an increase of 23% over the
        same period in 2007.
    -   Total order volume for the quarter was 291,607 orders, an increase of
        14% 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
        $17.5 million.

    Key events during the quarter included the following:

    -   Launched a new eyeglasses business unit in North America and Europe.
    -   Purchased for cancellation approximately 7.7 million common shares of
        the Company pursuant to its previously announced issuer bids. After
        the purchase, approximately 63.4 million common shares of the Company
        remained outstanding.
    -   Announced that the Supreme Court of British Columbia denied the
        petition filed by the College of Opticians of British Columbia
        seeking to restrict the Company and its subsidiary Clearly Contacts
        Ltd. from selling contact lenses to members of the public in British
    -   Ranked 5th in the Health and Beauty Category of the top
        500 e-Retailers in the United States by industry leading Internet
        Retailer magazine.

    "Coastal's vision products business model is based on the philosophy of
providing consumers with greater choice as to where to purchase optical
products. We will vigorously defend the basic right of consumers to choose
their supplier." stated Mr. Hardy. "Given our growing list of more than
1.5 million active customers we know with certainty the model works and are
now extending that value proposition into the dynamic eyeglasses sector. The
efficiencies being created through offering an expanded product line by
leveraging our marketing efforts combined with operating improvements in the
second quarter, should contribute positively to both revenue and earnings
through the remainder of fiscal 2008 and into 2009."

    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, 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.
    Adjusted EBITDA as referenced in this release is a non-GAAP measure and
is defined as earnings before interest, taxes, depreciation, amortization,
stock based compensation and restructuring costs.

    (Unaudited) ($000's)

                                      Three months ended    Six months ended
                                             April 30            April 30
                                         ----------------    ----------------
                                          2008      2007      2008      2007

    Sales                               28,632    24,602    54,007    48,207
    Cost of sales                       20,503    17,977    39,515    35,282
    Gross profit                         8,129     6,625    14,492    12,925

    Selling, general and
     administration expenses             7,162     5,767    13,846    11,582
    Share-based compensation               179        77       334       183
    Amortization on property, equipment
     and leasehold improvements            249       214       478       374
    Amortization on intangible assets      420       243       791       587
    Foreign exchange (gains) losses         50      (149)     (195)     (834)
    Interest income, net                  (155)     (198)     (387)     (450)
    Restructuring charges                  844         -       844         -
    Earnings (loss) before income taxes   (620)      671    (1,219)    1,483
    Income tax expense - current            94       385       206       545
    Income tax recovery - future           (22)      (27)      (32)      (56)
    Net Earnings (loss)                   (692)      313    (1,393)      994

    Coastal Contacts Inc.
                                                             April   October
                                                          30, 2008  31, 2007
    Cash and cash equivalents                               17,544    23,367
    Short-term investments                                       -     3,976
    Accounts receivable                                      7,343     6,649
    Inventory                                                9,563     8,531
    Prepaid expenses                                         1,630     1,270
    Due from related parties                                   363       348
                                                            36,443    44,141
    Property, equipment and leasehold improvements           3,143     2,700
    Intangible assets                                       12,548    11,712
    Goodwill                                                 8,486     7,529
                                                            60,620    66,082

    Accounts payable and accrued liabilities                16,722    13,881
    Income taxes payable                                       164       711
    Deferred revenue                                            25        23
    Current portion of lease inducement                         68        68
                                                            16,979    14,683
    Long-term lease inducement                                 119       158
    Future income tax liability                              4,203     3,661
                                                            21,301    18,502

    Shareholders' equity
    Share capital
        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                                      1,305       973
    Accumulated other comprehensive loss                    (1,343)   (4,091)
    Deficit                                                 (5,639)      (70)
                                                            39,319    47,580
                                                            60,620    66,082

    Coastal Contacts will host a conference call on Thursday, June 12 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

    About Coastal Contacts:

    Coastal Contacts 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

For further information:

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

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