Premier Discloses Near-Term Need for Financing
CHICAGO, Jan. 6 /PRNewswire-FirstCall/ -- Sellers Capital LLC (Sellers Capital), the largest shareholder of Premier Exhibitions, Inc. (Premier) (PRXI), representing approximately 16.3% of the outstanding shares, believes Premier's earnings release issued today shows that the company's financial condition and core business continue to deteriorate. Sellers Capital is concerned about Premier's financial condition and believes that urgent action is necessary.
Although the Company claims that Premier 'continues to be significantly impacted by weakening global economic conditions,' the release fails to indicate that the attendance trends affecting Premier's exhibits have been negative for the past four quarters.
Gross margin, a good indicator of Premier's performance, continues to deteriorate. In the third quarter, gross margin declined to 36.1% as compared to a gross margin of 47.3% in the second quarter and a gross margin of 68.9% in the third quarter of fiscal 2008. Notably, gross margin would have been 9.1% in the third quarter, down from 47.3% in the prior quarter, if the company had not recognized non-recurring revenue of $4 million in the third quarter. Sellers Capital feels any comparison of operating performance between the third quarter of 2009 and previous quarters must take this quarter's non-recurring source of revenue into account.
The amendment to Premier's agreement with Live Nation resulted in recognition of non-recurring revenue in the third quarter. Without this one-time revenue, the operating results for the quarter would have been a net loss in excess of $5 million, or more than ($1.60) per share. As a result of the Live Nation amendment, we believe Premier is obligated to spend millions of dollars in future fixed and variable expenses with no certainty that any net revenue will be recognized from these future expenditures.
The Company also indicates that the company 'may require additional outside capital resources in fiscal 2010' to continue operating. Since fiscal 2010 begins in March 2009, Premier is indicating that, in as few as two months, it may lack sufficient resources to operate despite starting the quarter with over $6 million in the bank and receiving an additional $4 million in the quarter from the Live Nation contract. Sellers Capital believes that Premier's current burn rate will cause it to run out of cash and fully use up any available borrowing capability under its credit facility within two to three months.
