Annual Revenue Down 12.3% and Annual Net Income Down 181.4%
ATLANTA, May 7, 2009 (GLOBE NEWSWIRE) -- Premier Exhibitions, Inc. (Nasdaq:PRXI), a major developer of touring museum quality exhibits, today announced financial results for the fourth quarter and fiscal year ended February 28, 2009 (fiscal 2009). Revenues for the fourth quarter decreased 41.2 %, to $10.1 million, compared to $17.2 million in the same period last year. The Company incurred a net loss of $8.2 million for the fourth quarter compared to net income of $0.8 million in the same quarter last year. Diluted income (loss) per common share for each of the quarters ended February 2009 and 2008 was ($0.28) and $0.02, respectively. EBITDA (a non-GAAP measure) for the fourth quarter ended February 28, 2009 and for the same quarter last year was ($9.8) million and $2.0 million, respectively. Adjusted EBITDA (a non-GAAP measure) for the fourth quarter ended February 28, 2009 and for the same quarter last year was ($7.9) million and $3.3 million, respectively. Reconciled GAAP and non-GAAP financial measures are provided as an exhibit.
Revenues for fiscal 2009 decreased 12.3%, to $54.0 million, compared to $61.5 million in the Company's fiscal year ended February 29, 2008 (fiscal 2008). Net income for fiscal 2009 decreased 181.4% to a net loss of $10.0 million, compared to net income of $12.3 million in the prior year ended February 29, 2008. Diluted income (loss) per common share for the years ended February 28, 2009 and February 29, 2008 was ($0.34) and $0.37, respectively. EBITDA (a non-GAAP measure) for fiscal year 2009 and 2008 was ($9.0) million and $20.9 million, respectively. Adjusted EBITDA (a non-GAAP measure) for fiscal year 2009 and 2008 was ($7.5) million and $25.6 million, respectively.
Overview
On January 28, 2009, Sellers Capital Master Fund, Ltd., the Company's largest shareholder, was successful in a consent solicitation and succeeded in having four new independent directors elected to the Company's Board. Upon election of the Sellers nominees, the Board terminated Arnie Geller as President and Chief Executive Officer of the Company and replaced him as Chairman of the Board. Mark Sellers, the managing member of Sellers Capital LLC, the investment manager of Sellers Capital Master Fund, Ltd., became the Chairman of the Board and Christopher Davino, one of the independent board members elected as a result of the consent solicitation, was appointed interim President and Chief Executive Officer.
Operating profit for the current quarter, before non-recurring items, was $(5.6) million. The Company's attendance levels at the Company's exhibitions declined due to the Company's inability to locate and open new profitable exhibition venues and the impact of current economic conditions that significantly reduced consumer discretionary spending. The Company's operating results for the fourth quarter and fiscal year reflect the impact of these challenges.
Overall attendance at the Company's Bodies and Titanic exhibitions was down 18% in the current quarter compared to the same quarter last year. This decline resulted from days of operations decreasing 19% and a Bodies and Titanic operating venue decrease from 26 to 22. The attendance decline was due to having one inactive exhibition and having ten exhibitions in storage for a period of time during the quarter and reduced attendance per venue - average attendance per venue declined from 49,408 to 43,872 in the quarter compared to the same quarter last year. However, there was continued strength and, in some cases improvement, at certain of the Company's locations. In addition, the Company's attendance results were very strong during the fourth quarter at the newly opened Bodies exhibitions in Athens, Dublin and Warsaw. The Company also saw continued strength at the Bodies exhibition in San Juan, Puerto Rico as well as at the Titanic exhibitions in Milwaukee and Montreal.
The results for the Company's exhibitions are driven by a number of factors including, but not limited to: (i) the size and quality of the market; (ii) self-run or promoter/museum relationship; and (iii) the costs to the Company associated with the exhibition. The market in the U.S. for Bodies...The Exhibition has been saturated and the Company has been forced into secondary and tertiary markets for its self-run opportunities. Many of these self-run exhibitions have been in commercial venues that required significant costs to renovate or prepare to house the exhibition. The Company's partners have also failed to find sufficient numbers of suitable markets and venues to keep the Company's Bodies specimen sets working sufficiently to cover the Company's costs to acquire these specimens.
The overhead costs associated with unused specimen sets for the Company's Bodies exhibitions unable to be placed in the market were a significant drag on operating profit. Annual payment obligations on the Bodies specimen sets total $8,000,000. If the Company is unable to keep these specimen sets working, operating profit is adversely affected. Over the past fiscal year, the average days of use for the Company's Bodies specimen sets has decreased dramatically. Profitability is driven off the continued use of these specimen sets to offset the fixed costs associated with them. Similarly, while the overhead with the Titanic exhibitions is less significant than for Bodies, the Company's inability to adequately book exhibitions into the future and manage its calendar has resulted in significant increases in operating costs for the Company.
For the most recent quarter and the fiscal year ended February 28, 2009, as compared to the fourth quarter and fiscal year ended February 28, 2008, gross margins for the Bodies and Titanic properties declined. The combination of increased operating costs, venues situated in smaller markets and reduced attendance has reduced the amount of income available to cover overhead expenses.
Gross Margin Contribution
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FY '09 FY '08 Qtr 2/28/09 Qtr 2/28/08
------ ------ ----------- -----------
Bodies $16.7 million $30.7 million $2.4 million $7.2 million
Titanic $5.6 million $10.1 million $1.3 million $1.6 million
Attendance at exhibitions has been negatively impacted by the domestic and world economic situation. Currently, the Company has five operating Titanic exhibitions located in Atlanta, GA; Las Vegas, NV; Idaho Falls, ID; Milwaukee, WI and Montreal, Canada with one exhibition in storage. The Company also currently has ten operating Bodies exhibitions located in Mashantucket, CT; Atlanta, GA; Las Vegas, NV; New York, NY; Tallahassee, FL; San Juan, Puerto Rico; Athens, Greece; Dublin, Ireland; Warsaw, Poland and Porto Alegre, Brazil and six exhibitions in storage. The Company recently completed Titanic exhibitions in Madrid, Spain and plans to open three new Titanic, three new Bodies and one Star Trek exhibition in the next 30 days.
For the fourth quarter ended February 28, 2009, there were a number of non-recurring items that were reflected in the financial results (all of which are discussed in more detailed in the following narrative). In total, there were $5.6 million in non-recurring charges that included:
1) Write-offs due to the disposition of the MGR merchandising
operation totaling $1.9 million.
2) An impairment charge of $1.5 million and a write-off of
$0.4 million in related assets due to the cessation of the Sports
Immortals project.
3) $1.5 million related to the expense recognition associated with
the acceleration of option awards for terminated employees,
primarily Mr. Geller.
4) $0.3 million in proxy related expenses to contest the Sellers
consent solicitation.
The MGR costs relate to a decision by prior management to partially unwind the MGR acquisition that occurred last year. The charge relates primarily to the write-off of goodwill and other intangibles totaling $1.1 million which was the excess of the amount paid over the fair market value of the assets acquired. The Sports Immortals charges relate to a decision by current management not to pursue this opportunity given the potential costs to bring this opportunity to market, the lack of apparent interest in the concept from venue operators and promoters, and the potential licensing issues that would need to be resolved to exhibit many of the artifacts.
When new management arrived, it was immediately apparent that the Company lacked a structured "go-to-market" approach to get its exhibit properties booked timely and well in advance of the opening date to facilitate sufficient marketing, public relations and advertising to support the venue's ultimate profitability. Moreover, the process of initiating license agreements such as Sports Immortals lacked any ROI measures or other measures one might expect when committing large sums of money to purchase a concept that requires significant additional resources to convert into a marketable exhibit.
The Company has embarked on several new initiatives to address these challenges which are designed to stabilize the company, operationally and financially. These initiatives include achieving a break even cash flow, making the core operations more efficient and profitable, assessing all of the Company's third-party and contractual relationships, and assessing and reducing the Company's infrastructure.
The Company believes it is imperative for the Company to maintain an overhead cost structure consistent with current market and economic conditions. The Company is reviewing all departments to identify cost savings and efficiencies that can be implemented immediately. This includes internal costs as well as spending on outside consultants and advisors. The Company intends to significantly reduce its general and administrative spending for fiscal year 2010.
Another focus is on maximizing the benefit of the Company's contractual partner arrangements. Management's goal is to have the Company's partners more engaged and active in placing the Company's properties in suitable venues and markets with sufficient lead time to increase the probability of success. This effort is coupled with the development of the Company's internal "go-to-market" process, which will enable the Company to better assess potential markets, provide adequate lead time for planning and advertising and create accountability for engaging in successful self-run exhibitions.
The team is committed to engaging in a turnaround plan for the Company that will not only stabilize the Company but will also strengthen it to grow over time.
Other developments include:
Live Nation Agreement: On November 30, 2008, the Company executed an amendment to an agreement with Live Nation for the combined sales, marketing and operation of human anatomy exhibitions on an international basis (excluding North America). This amendment provides for an upfront license fee to be paid to the Company of $4.0 million in exchange for the right to jointly promote 8 exhibitions. $3.0 million of such license fee was paid to the Company on December 5, 2008 and another $0.5 million was paid to the Company on January 9, 2009. The remaining $0.5 million is recorded as a receivable as of year-end and the amount was subsequently paid in April 2009. While this is an exclusive arrangement between the parties, the new arrangement includes best efforts by both the Company and its partners to secure new locations and possible arrangements with third party promoters.
Luxor: The Company's permanent Titanic exhibition at the Luxor Hotel and Casino opened on December 20, 2008. This exhibition was newly designed for the Luxor and includes more than 20 never before seen artifacts including gaming chips, passenger personal papers and decorative sections from Titanic's famed Grand Staircase. This new exhibition is located adjacent to the Company's Bodies exhibition at the Luxor. The Company expects to be able to leverage the presence of two exhibitions in a single location in terms of sales and marketing efforts and costs of operation.
Dialog in the Dark: The Company's "Dialog in the Dark" exhibition continues to draw increasing numbers of attendees to the Company's location in Atlanta. This new exhibition has been well received by visitors and the media. The Company's Dialog in the Dark exhibit in Kansas City was not profitable and closed early. The loss on that exhibition was $(0.9) million. The Company continues to have difficulty identifying venues for this exhibit and is exploring alternatives to improve the commercial viability of the project.
Sports Immortals: On March 13, 2008, the Company entered into an exclusive license agreement with Sports Immortals, Inc. for the promotion of Joel Platt's extensive sports memorabilia collection of both fixed and touring exhibitions. The Company has determined that the capital required to develop, build and install this exhibition is beyond the Company's financial capabilities at this time. Due to the significant capital requirements to produce, develop and bring to market the Sports Immortals exhibition, the Company has put these plans on hold.
MGR: On December 29, 2008, the Company completed the closing of a transaction to sell selected assets and liabilities of the Company's merchandising operation that were acquired from MGR Entertainment for $1.0 million. These assets and liabilities were focused on the live music business and were purchased by us in March, 2008. This aspect of the merchandising business was not consistent with the Company's current business strategy, required ongoing capital commitments and achieved low operating margins. As a result of the disposition, the Company recorded a loss of $1.9 million comprised of goodwill, intangible assets and other assets in the amount $0.9 million, $0.2 million, net of amortization and $0.8 million, respectively. The Company continues to focus on merchandising activities at all the Company's exhibition locations to increase revenue per attendee and the Company's margins on this activity.
Titanic Litigation: On March 25, 2008, the court entered an order granting permission to the U.S. to file an amicus curiae (friend of the court) response regarding the motion of R.M.S. Titanic, Inc. ("RMST") for an interim salvage award. The U.S. response states that an interim in specie award with limitations, made by the court to RMST, could serve as an appropriate mechanism to satisfy RMST's motion for a salvage award and to help ensure that the artifacts recovered by RMST from the wreck of the Titanic are conserved and curated together in an intact collection that is available to the public for historical review, educational purposes, and scientific research in perpetuity. The District Court has not yet ruled on the motion for an interim in specie salvage award. On April 15, 2008, the District Court entered an order requesting RMST to propose suggested covenants that would be included in an in specie award. The order also outlines a process for further discussion pertaining to such covenants should the court decide to issue an in specie award. In September 2008, RMST submitted revised covenants and conditions in connection with the Company's request for an in specie award for the remaining Titanic artifacts. This submission was made pursuant to the order issued by the U.S. District Court in April 2008. As part of developing the revised covenants and restrictions, the Company engaged in consultative discussions with the U.S. government over the past several months. On October 14, 2008, the U.S. filed an amicus response to RMST's proposed revised covenants, and by leave of the District Court granted on October 31, 2008, RMST in turn filed a reply brief on November 12, 2008. On November 18, 2008, the Company attended a status conference at the District Court. At the conclusion of that hearing, the District Court asked for certain additional submissions from RMST and the U.S. which were provided. The District Court indicated it would complete its review of the proposed revised covenants and conditions, and any final areas of disagreement between the U.S. government and RMST, and likely issue its final version of the covenants and order in the future. There have not been any further decisions or announcements from the District Court since the November 18 hearing. The Company cannot predict how the District Court will ultimately rule on RMST's motion for an interim salvage award.
Fiscal 2009 was a challenging year for the Company with a very difficult economic climate coupled with significant organizational changes and numerous external distractions and challenges. The Company is actively focused on finalizing and implementing a revised business plan that addresses the need for new and profitable venue locations and a streamlined organizational structure. The Company intends to focus on improving the Company's "go-to-market" practices, stabilizing the Company's operating and financial results and significantly improving communication with partners and shareholders while steadily increasing shareholder value.
Fourth Quarter Comparison
Outlined below are explanations for significant variances in the Company's income statement between the fourth quarter of Fiscal 2009 and the fourth quarter of Fiscal 2008.
Revenue
The decrease in revenue was primarily due to:
* Overall attendance at the Company's Bodies and Titanic exhibitions
was down 18% in the current quarter compared to the same quarter
last year. Despite Star Trek and Dialog in the Dark adding 93,866
attendees compared to the same quarter last year, overall
attendance at the Company's exhibitions decreased 11% compared to
the same quarter last year. Attendance at the Company's human
anatomy exhibits was down 26% due to a decrease in the number of
operating "Bodies...The Exhibition", "Bodies Revealed" and
"Our Body: The Universe Within" locations to 16 in the current
quarter compared to 19 in the same quarter last year. Moreover,
there were 786 operating days in the current quarter compared to
1,159 operating days in the same quarter last year. Attendance at
the Company's Titanic exhibits was up 13% driven by a 16% increase
in operating days to 492 in the current quarter compared to 423
operating days in the same quarter last year. The overall decrease
in attendance primarily resulted from having one inactive
exhibition and having ten exhibitions in storage for a period of
time during the quarter and underperforming venues primarily due
to reduced attendance associated with the economic downturn.
* License revenue, a component of exhibition revenue, decreased to
$0.9 million for the current quarter compared to $1.5 million for
the same quarter last year.
