BriteSmile Reports Second Quarter 2006 Results

WALNUT CREEK, Calif., Aug. 21  /PRNewswire-FirstCall/ -- BriteSmile, Inc. (NASDAQ:BSML), a leading provider of state-of-the-art teeth-whitening systems, today released results for the second quarter ended July 1, 2006.

The results of BriteSmile's continuing operations for the second quarter 2006 and all prior comparative quarters presented in this report reflect the results of BriteSmile's 17 whitening centers, retail product sales, supporting overhead, and related assets and liabilities ("Centers Business"). The Centers Business was reclassified to continuing operations from its treatment in the first quarter as a discontinued operation due to the termination of the agreement to sell the Centers Business in May. BriteSmile intends to continue operating its whitening centers.

Discontinued operations presented in this report for all earlier comparative periods reflect the results of the Associated Centers business that was sold to Discus Dental, Inc. in March 2006.

Total revenue for the second quarter of 2006 was $7.8 million, up 52% compared to $5.1 million in the second quarter of 2005.  The net loss in the second quarter of 2006 was $774,000 or $(0.07) per share. This compares to a net loss of $6.8 million or $(0.65) per share in the second quarter of 2005.

EBITDA (earnings before interest, tax, depreciation, and amortization) for the second quarter ended July 1, 2006 was a negative $1.4 million, compared to a negative EBITDA of $2.6 million in the second quarter of 2005. Excluding approximately $2.2 million of post-close costs related to the sale of the Associated Centers business and costs related to the Company's legal claims, BriteSmile achieved an adjusted positive EBITDA of approximately $800,000 on its continuing Centers Business in the second quarter of 2006.

EBITDA is a non-GAAP financial measure. More information regarding this non-GAAP financial measure, and a reconciliation of EBITDA to net loss, the most directly comparable GAAP measure, is provided below.

"I am very pleased with the excellent performance of our whitening centers in the second quarter," said John Reed, CEO of BriteSmile. "Total whitening procedures performed in our 17 centers increased by 84% in the second quarter of 2006 compared to a year ago. This sales increase reflects a very strong response to our procedure price reduction to $399 at the end of the first quarter, as well as the addition of two spas since June of last year. At the same time, we were able to significantly improve our advertising productivity as we reduced advertising expense by approximately 60% compared to the spend level in the second quarter of last year. We have also streamlined the spa operating expenses which, combined with the higher revenue levels, have improved the cash contribution of all spas. Looking forward, BriteSmile will continue to drive the Centers Business through advertising, promotions, and other retail strategies to maximize the performance of BriteSmile," said Mr. Reed.

BriteSmile will not have an earnings conference call this quarter. Please consult the Company's second quarter Form 10-Q filed with the SEC for more information regarding second quarter 2006 results.

BriteSmile markets the most advanced teeth whitening technology available through 17 state-of-the-art BriteSmile Professional Teeth Whitening Centers. BriteSmile Centers are currently operating in Beverly Hills, Irvine, Palo Alto, Walnut Creek, San Francisco and La Jolla, CA; Houston, TX; Denver, CO; Boston, MA; McLean, VA; Atlanta, GA; New York, NY; Chicago and Schaumburg, IL; and, Phoenix, AZ. For more information about BriteSmile's procedure, call 1-800-BRITESMILE or visit the Company's Website at http://www.britesmile.com/ .

This release, other than historical information, consists of forward- looking statements that involve risks and uncertainties such as the Company's ability to successfully and profitably operate the Spa Center business. Readers are referred to the documents filed by BriteSmile with the Securities and Exchange Commission, specifically the Company's most recent reports on Forms 10-K and 10-Q, that identify important risk factors which could cause actual results to differ from those contained in the forward-looking statements. BriteSmile and its affiliates disclaim any intent or obligation to update these forward-looking statements.

Non-GAAP Financial Information

BriteSmile provides non-GAAP EBITDA or earnings before interest, taxes, depreciation and amortization as additional information for its operating results. These measures are not in accordance with, or an alternative for financial measures calculated in accordance with generally accepted accounting principles, including net income or loss, the most directly comparable GAAP measure, and may be different from non-GAAP measures used by other companies. BriteSmile's management believes this non-GAAP measure is useful to investors because of: (i) the significant amount of non-cash depreciation and amortization historically incurred by the Company in its operating results ($1.2 million in first half 2005 and $0.8 million in first half 2006), (ii) the non-cash amortization of the discount on debt of $0.7 million in the second quarter of 2005, and (iii) the second quarter results for 2006 included approximately $1.3 million of gain from the settlement of the Procter and Gamble legal claim. Investors are cautioned that the items excluded from EBITDA are significant components in understanding and assessing BriteSmile's financial performance.

  BRITESMILE, INC.
  CONDENSED CONSOLIDATED BALANCE SHEETS
   ($ in thousands, except share data)

                                             July 1, 2006     Dec. 31, 2005
  ASSETS                                       (unaudited)
  CURRENT ASSETS:
  Cash and cash equivalents                       $5,432            $5,518
     Trade accounts receivable, net                  709               113
     Inventories                                     742               375
    Assets held for sale                               -            12,214
    Prepaid expenses and other                       503             1,159
          Total Current Assets                     7,386            19,379

    Property and equipment, net                    5,007             5,847
    Investments, restricted as to use             12,250             1,466
    Other assets                                     924             1,150

          TOTAL ASSETS                           $25,567           $27,842

  LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES:
    Accounts payable                              $1,449            $3,695
    Accrued liabilities                           10,904             7,533
    Accrual for Center closures                      189               403
    Gift certificate liability                     1,245             1,235
    Smile Forever - Deferred Revenue               1,306             1,197
    Liabilities held for sale                          -               803
    Accrued interest due to a related
     party                                             -               264
    Long-term debt with related party -
     current portion                                   -             6,024
    Convertible debt - current portion                 -             6,828
    Convertible debt with a related
     party -- current portion                          -               621
    Financial instruments related to
     convertible debt -- current portion               -                 9
    Capital lease obligations with
     related parties -- current portion                -                73
          Total Current Liabilities               15,093            28,685

  LONG TERM LIABILITIES:
  Accrual for Center closures                        344               242
    Smile Forever Deferred Revenue                   549               313
    Other Long Term Liabilities                      973             1,053
          Total Long-term Liabilities              1,866             1,608
          Total Liabilities                       16,959            30,293

  SHAREHOLDERS' EQUITY
    Common stock, $.001 par value                     38                38
    Preferred Stock, no par value                      -                 -
     Additional paid-in capital                  173,491           173,340
             Accumulated Deficit                (164,921)         (175,829)
  Total shareholders' equity (deficit)             8,608            (2,451)

  TOTAL LIABILITIES AND SHAREHOLDERS'
   EQUITY                                        $25,567           $27,842


  BriteSmile, Inc.
  Condensed Consolidated Statements of Operations
  (Unaudited)
  (In Thousands Except Share Data)

                               13 Weeks    13 Weeks    26 Weeks    26 Weeks
                                 Ended       Ended       Ended       Ended
                                 July 1,    June 25,     July 1,    June 25,
                                  2006        2005        2006        2005
  REVENUES:
    Center whitening fees, net   $6,430      $4,149     $10,943      $8,580
    Product and other revenue
     (incl. Smile Forever)        1,330         953       2,852       1,826
      Total revenues, net        $7,760      $5,102     $13,795     $10,406

  OPERATING COSTS AND
   EXPENSES:
    Operating and occupancy
     costs                        3,663       3,620       7,001       6,702
    Selling, general and
     administrative expenses      5,477       3,975       9,374       7,926
    Research and development
     expenses                        45          74          90         341
         Total Operating
          Expense before
          depreciation &
          amortization            9,185       7,669      16,465      14,969

         Operating
          Income/(Loss)
          before
          depreciation &
          amortization          $(1,425)    $(2,567)    $(2,670)    $(4,563)
         (EBITDA)

    Depreciation and
     amortization                   714         591         821       1,161

          Gain/(Loss) from
           Continuing Operations (2,139)     (3,159)     (3,491)     (5,723)

  OTHER INCOME/(EXPENSES):
    Amortization of discount on
     debt                             -        (663)       (530)     (1,300)
    Loss on early
     extinguishment of debt           -           -      (5,039)          -
    Gain/(Loss) on mark-to-market
     of convertible
     note instruments                 -         (99)          -       2,631
    Gain on settlement of
     legal claim                  1,257           -       1,257           -
    Other income/(expense),
     net                            119        (517)       (845)       (725)

          Gain/(Loss) from
           Continuing Operations
           before income tax       (763)     (4,438)     (8,648)     (5,117)

  INCOME TAX                         11          25          46         121

          Net Income/(loss) from
           Continuing Operations  $(774)    $(4,463)    $(8,694)    $(5,239)

  Gain/(Loss) from
   Discontinued Operations,
   net of tax                        $-     $(2,341)    $19,602     $(4,753)
         Net Income/(Loss)        $(774)    $(6,804)    $10,908     $(9,992)

  BASIC/DILUTED NET LOSS PER
   SHARE FOR CONTINUING
   OPERATIONS                    $(0.07)     $(0.42)     $(0.82)     $(0.50)
  BASIC/DILUTED NET
   INCOME/(LOSS) PER SHARE
   FOR DISCONTINUED
   OPERATIONS                      $-        $(0.23)      $1.85      $(0.45)
  BASIC/DILUTED NET
   INCOME/(LOSS) PER COMMON
   SHARE                         $(0.07)     $(0.65)      $1.03      $(0.95)
  WEIGHTED AVERAGE
   SHARES -- BASIC           10,549,423  10,548,621  10,549,277  10,519,416
  WEIGHTED AVERAGE
   SHARES -- DILUTED         10,549,423  10,548,621  10,558,949  10,519,416


  Reconciliation of EBITDA to Net Income:
                                 13 weeks   13 weeks   26 weeks     26 weeks
                                  ended      ended       ended       ended
                                 July 1,    June 25,    July 1,    June 25,
                                  2006        2005        2006        2005

  Net Income/(loss) from
   Continuing Operations          $(774)    $(4,463)    $(8,694)    $(5,239)

  Add back: Loss on early
   extinguishment of debt            $-          $-       5,039          $-
  Add back:  (Other income)/
   expense, net                   $(119)       $517        $845        $725
  Add back:  Amortization
   of debt discount                  $-        $663        $530      $1,300
  Add back:  Income tax expense     $11         $25         $46        $121
  Add back:  Depreciation and
   amortization                    $714        $591        $821      $1,161
  Gain/loss on legal settlement  (1,257)          -      (1,257)          -
  (Gain)/loss from mark-to-market
   of financial instruments related
   to convertible debt               $-         $99          $-     $(2,631)
  EBITDA                        $(1,425)    $(2,567)    $(2,670)    $(4,563)


DATASOURCE: BriteSmile, Inc.



CONTACT:  investors, Kenneth A. Czaja, CFO of BriteSmile, Inc.,

[phone]



Web site:  http://www.britesmile.com/ 

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