MONTREAL, QUEBEC -- (Marketwire) -- 03/13/09 -- Optimal Group Inc. (NASDAQ: OPMR) today announced its financial results for the year-ended December 31, 2008. All references are in U.S. dollars.
Year-end 2008 results
Revenues for the year-ended December 31, 2008 were $152.5 million compared to $84.9 million for the year-ended December 31, 2007. In the fourth quarter of 2008, the Company sold substantially all of the payment processing assets that were used exclusively in the business of processing payments for "card-not-present" transactions. The results of operations for this business are included in discontinued operations in the consolidated statements of operations and the remaining assets and liabilities of the Company's payment processing business segment are classified as discontinued in the consolidated balance sheet.
EBITDA for the year-ended December 31, 2008 was $(10.7) million or $(0.41) per diluted share compared to EBITDA of $1.8 million or $0.08 per diluted share for the comparable period in 2007.
EBITDA is a non-GAAP (generally accepted accounting principles) financial measure calculated as earnings before investment income, taxes and depreciation and amortization and excludes the impact of impairment losses, stock-based compensation and discontinued operations. A reconciliation of Optimal's EBITDA is included in Annex A.
Net loss for the year-ended December 31, 2008 was $111.0 million or $(4.29) per share. A significant part of the net loss includes: goodwill and other intangible impairment losses of $66.9 million, amortization of other intangibles of $18.5 million, and loss from discontinued operations of $12.0 million, net of income taxes. This is compared to a net loss for the year-ended December 31, 2007 of $36.5 million or $(1.51) per share which included: amortization of intangibles of $12.7 million and a loss of $31.0 million from discontinued operations, net of income tax.
Due largely to a general deterioration of the economic environment, sales, operating profits and cash flows in the consumer robotic, toy and entertainment products segment were lower than expected in 2008. The Company tested the consumer robotic, toy and entertainment segment for impairment at September 30, 2008 and December 31, 2008. The Company revised its forecast for the next five years to reflect lower growth expectations for this segment. At December 31, 2008, the Company recognized a goodwill impairment loss of $41.4 million and an impairment loss of $2.4 million nonamortizable intangibles for this segment.
At June 30, 2008, the Company tested goodwill for impairment in the payment processing segment as the Company determined that there was a more likely than not expectation that a significant portion, or this entire segment, could be sold over the course of the following 12 months. As a result, the Company recorded a goodwill impairment loss of $10.8 million in the second quarter of 2008.
At December 31, 2008, the Company tested the remaining other intangibles held in the payment processing segment for impairment, as the Company determined that there was a more likely than not expectation that a significant portion of these other intangibles would be sold over the course of the next twelve months. As a result of this analysis, the Company recorded other intangible impairment losses of $12.2 million at December 31, 2008 based on the estimated fair value to be realized as proceeds from these transactions.
Goodwill, other intangible impairment losses and amortization of other intangibles do not result in any cash expenditures and do not affect the Company's cash position, cash flow from operating activities or availability under any of its credit facilities.
The downturn in the global economy has had a significant effect on the toy industry and all wholesalers that operate in that segment, including the Company's principal operating subsidiary, WowWee. Consumer confidence reached an all-time low in December 2008, driving retail sales weakness in the fourth quarter and holiday season as consumers, fearful of the economy's direction, significantly reduced discretionary spending. The Company anticipates that the unfavourable economic conditions experienced in 2008 will continue into 2009. Optimal expects revenues to be under pressure in 2009 as a result of retail softness driven by a continued pull-back in consumers' willingness to spend and retailers' desire to reduce inventories, weakening foreign exchange in international markets, and the sale of fewer entertainment-related products in 2009. As a result, Optimal intends to manage its business based on reduced revenue assumptions and to continue to take actions intended to improve profitability and strengthen the Company's balance sheet. In that regard, the Company continues to focus on margins and the preservation of cash in 2009. Optimal plans to tightly manage its inventories, capital expenditures and other spending activity in 2009.
U.S. Gaming Payment Processing
As previously announced, following announcements by the U.S. Attorney's Office in the Southern District of New York relating to its investigation of the U.S. Internet gambling industry, the Company, in March 2007, initiated discussions with the U.S Attorney's Office and is in the process of responding to a voluntary request for information issued by the U.S Attorney's Office. The Company is not in a position to determine when these discussions will conclude nor the likely outcome of these discussions.
Cancellation of Outstanding Options
The Company announces that the Board of Directors has approved the cancellation of all options outstanding under the Company's stock option plan. Options to acquire an aggregate of 1,531,000 Class "A" shares of the Company at $4.21 per share, and 3,646,356 Class "A" shares of the Company at $7.10 per share are currently outstanding. The cancellation of any outstanding options and the forfeiture of the option holder's rights there under are subject to, and will become effective only once the option holder has consented to such cancellation.
About Optimal Group
Optimal Group Inc. has operated and, through various subsidiaries, has actively managed a variety of businesses.
Optimal Group Inc. currently operates:
The WowWee group of companies, with operations in Hong Kong, Carlsbad, California, Brussels, Belgium and Montreal, Quebec. WowWee Group Limited, based in Hong Kong, is a leading designer, developer, marketer and distributor of technology-based consumer robotic, toy and entertainment products.
Optimal Payments Corp., which processes credit card payments, primarily for small and medium-sized retail point-of-sale merchants.
For more information about Optimal, please visit the Company's website at www.optimalgrp.com.
Cautionary Statements Regarding Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as "expects", "intends", "anticipates", "plans", "believes", "seeks", "estimates", or variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include, but are not limited to, statements about our current expectations with respect to our future growth strategies, results, opportunities and prospects, competitive position and industry environment.
