Sellers: Premier may be out of cash soon
Atlanta Business Chronicle
Sellers Capital LLC claims Premier Exhibitions Inc.’s net loss of $1.8 million for the third quarter “shows that the company's financial condition and core business continue to deteriorate” and it warned Premier may soon burn through its cash.
Chicago-based Sellers owns a 16 percent stake in Atlanta-based Premier Exhibitions (NASDAQ: PRXI) and is currently engaged in a shareholder fight for control of the company.
In a news release that followed Premier’s earnings report Tuesday, Sellers noted Premier’s gross margin 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,” Sellers said. “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.”
If not for an amendment to Premier's agreement with Live Nation that resulted in recognition of non-recurring revenue in the third quarter, the operating results for the quarter would have been a net loss in excess of $5 million, Sellers said.
Sellers also pointed out Premier’s admission it "may require additional outside capital resources in fiscal 2010" to continue operating. But Sellers also said that 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.”
Sellers said it believes Premier will soon lose access to its credit facility because it is unlikely to book another $4 million in non-recurring revenue from a transaction similar to the Live Nation amendment in the fourth quarter.
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