Executives
Chris Davino -- Chief Executive Officer
John Stone -- CFO
Mark Sellers – Chairman
Brian Wainger – Consultant
Analysts
Sam Yake -- BGB Securities
Andrew Cowen – Tricadia Capital
Brian Novelline - DRW Investments
Premier Exhibitions, Inc. (PRXI) F2Q10 (Qtr End 08/31/09) Earnings Call Transcript October 8, 2009 8:00 AM ET
Operator
Good day and welcome to the Premier Exhibitions, Inc. second quarter 2010 earnings results conference call. Just as a reminder, today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Chris Davino. Please go ahead, sir.
Chris Davino
Good morning everyone. Thanks for taking the time to dial-in this morning. Hopefully, everyone can hear us clearly, if you can’t, let us know. We had some tone problems earlier on. First, I would like to hand the phone, the call to John Stone, our CFO to go through our quarterly financial results. Then, I will give a brief business update, and obviously then we will take questions. John?
John Stone
Thank you, Chris, and again, thank you for joining us this morning. Before I get into the results, I need to remind everyone that we’ll be making forward-looking statements on today’s call. These forward-looking statements are based on our current expectations and are subject to a number of uncertainties and risks. Actual results may differ materially. Please refer to the risk factors identified in our Form 10-K for the period ended February 28, 2009, and our subsequent filings with the Securities and Exchange Commission.
As we look at the results for the second quarter of fiscal 2010, I will be focusing attention today primarily on a sequential comparison to the first fiscal quarter, because we believe the sequential view is the best way to assess progress as we restructure the business.
So, looking first at Table 2, the operating statement, comparing the two right-hand columns, the three months ended May 31st, 2009 and August 31st, 2009, total revenue increased $2.5 million or 23%. We saw a 11% increase in attendance on a mere 1% increase in operating days. The average revenue per attendee increased $1.15 to $9.44. This was driven by better results from self-run venues where we do not share revenues. In terms of raw attendance, the biggest increase was in the Titanic exhibits, while Bodies remained comparatively even. Other exhibits netted some assistance in terms of raw attendance.
Speaking briefly to the year-over-year comparison, the decline in revenue is largely a reflection of a decrease in the number of Bodies exhibitions touring. This was partially offset by improved attendance at our self-run exhibits.
Looking at the cost of revenue, focusing first on sequential comparison, costs were relatively flat with just a 3% increase. I think to place this in the proper context, revenue increased 23% sequentially and cost of revenue only 3. And remember that last quarter, we reported a 30% sequential reduction in the cost of revenue, that’s in comparison to the February quarter. The overall sequential dynamics here continue to be characterized by reductions in production costs, but in this quarter, we spent more on marketing than in the first quarter. We are pleased with the results of the new marketing agency relationship as evidenced by the increased attendance.
The comparison of the cost of revenue year-over-year reflects reduced production and reduced marketing costs, and this reinforces the benefits we are getting from the new marketing agency relationship. Obviously, the sequential comparison, the increased revenue and relatively flat costs had a very favorable impact on gross profit, earning $2.4 million more in the second quarter, and increasing the margin percentage to 61 from 53. The cost containment and adjustment to marketing behavior are even more pronounced in the year-over-year quarterly comparisons, where despite at a 11% decrease in revenue, gross profit increased by more, nearly $3 million, with margin percentages expanding from 47% to again 60%.
Just to pause and point out a couple of things in case they are not obvious. First, while we are glad to see the improvements in gross profit margin, it is bound to fluctuate. Production costs vary depending on the number of shows moving in any given quarter, how far they have to move, how difficult it is to get into a venue. Likewise, marketing costs will fluctuate from quarter-to-quarter, and while we have a smarter marketing approach and our aim is to approach each market in a thoughtful, intelligent manner, there can be no guarantee of the outcome of these promotions, which takes me to my second point, attendance. We live and die in this business on attendance, which at a very simplistic level is a matter of deploying our exhibits in the best possible markets and the best possible venues and a well-executed marketing campaign. Once an exhibit opens, it will continue to tear tickets, tens of thousands of tickets, and will only be profitable if it reaches the attendance goals we set out for it. Yet, the cost of that exhibit are largely fixed, except for marketing.
What I am getting at here is the business has high fixed costs. When you are committed to a particular show, you have to market it. And then, if attendance is good, you can make good market margins. We are totally dependent on attendance and that is the single biggest variable. This quarter’s results demonstrate that point very clearly, and I am stressing this to underscore why we have been so focused on developing a process for taking each show to market. A repeatable process that takes into consideration all the disciplines of the business before committing to a particular venue, to be sure we do this right. If we do it right, the results indicate we can make good money.
Okay, returning to the numbers, because Chris will give you an operational update in a couple of minutes. Looking at G&A expense on a sequential basis, G&A was relatively flat. At this point in the turnaround, we are incurring some atypical costs. Last quarter, we recorded a charge for the estimated cost of reducing the number of Bodies exhibits we would tour. This quarter, as you can see on the summary of G&A expense on Table 5, this quarter, we incurred an unusually high amount of account receivables write-offs as we restructured relationships with JAM and STBN, while continuing to have a high level of legal and professional service fees, given the litigious nature of the restructuring and some other matters.
The year-over-year comparison of G&A expense doesn’t help one’s understanding just on service and that is really why we included the supplemental Table 5 on G&A. Looking at Table 5, the prior year second quarter G&A expense benefited from the reversal of $2.6 million in stock-based compensation, due to the fact that the prior CEO was leaving and posted [ph] its shares, which has nothing to do with the normal operating costs of the business on a go-forward basis. Meanwhile, the cash portion of compensation expense through restructuring of operations, we have reduced the cash cost of compensation by 58%, which happens to be roughly $2.7 million of savings in the quarter. In fact, if you computed the cost of G&A without the stock-based comp element, the cost of G&A for the two quarters presented are almost exactly equal, roughly $7.3 million or $7.4 million.
Now, you might think that still sounds high for this business for one quarter, and I might agree. However, look at the other components of G&A in the current quarter. There is $1.6 million in bad debt, clearly not an ordinary run rate. There is nearly $2 million in legal and professional fees, also clearly not an ordinary run rate. The vast majority of these fees relate to legacy issues that we inherited and that we are pressing to resolve. So, eventually, we anticipate these legal and professional fees, for example, will largely go away.
So, I hope this gives you some insight into the G&A line item. We are not prepared to give guidance on this line, because as we stated, we are very early in the turnaround, and while we don’t like some of these costs, litigation, for example. We also are not in an ordinary operating mode. Some of these items may be difficult to predicate, estimate and control. We do think that by being transparent with these sorts of things, it may increase your understanding of the business.
All right. Moving on, below G&A line, not much to report, amortization is down sequentially. We wrote off three sets of human specimens last quarter, that explains that. Depreciation was up year-over-year, largely due to investments made in the Luxor location. Obviously, we did not have any impairment charges this quarter. Other expense this quarter included interest on the $12 million of convertible notes, and of course, this will stock now that we have converted those. And as we go down, this all nets to a loss before taxes, and we continue to record a benefit from income taxes. All of that renders a loss for the quarter, about $500,000 or $0.02 per share.
We also like to consider our operating performance in terms of non-GAAP measure, adjusted EBITDA, which as Table 4 indicates, improved in both the year-over-year and sequential comparisons, to a positive $826,000 in the current quarter. Like my comments on gross margin, while we are pleased to see this in the positive territory, and believe the business may be capable of higher percentages of EBITDA in relation to revenue, that depends on continued improvement in operations and precise execution on our go-to-market strategy, as well as a host of other variables that weigh on the business as we attempt to restructure to it.
Turning for a minute to the balance sheet, which is Table 1 and the statement of cash flows, Table 3, cash and marketable securities combined were $10.9 million at the end of the second quarter, up from $9.1 million at the end of the first quarter, and by $6.7 million at the end of last year. Obviously, this trend is impacted foremost by the $12 million capital raise. As the six-month cash flow statement indicates, we have used about $8.4 million in working capital and everything else nets to an additional $1 million source of funds. Receivables rose by almost $1 million during the second quarter, back to the range they were at the beginning of the year. The current tax assets have risen, reflecting the benefit of the year-to-date loss. Long-term assets were little changed during the second quarter, still reflecting the impairment charges we took in the first quarter.
On the liability side of the balance sheet, you will see the reduction in current liabilities that consumed the bare amount of the working capital, but with the company back within trading terms with many of our key vendors, and of course, the $12 million convertible promissory notes associated with the capital rates are classified as long term in this balance sheet, despite our exercise in the right to convert them to stocks subsequently.
I think that’s it for the most part concerning the second quarter financial results. We are still in the early phases of this turnaround, but we are seeing signs of improvement. With that, I will hand the call back to Chris. Chris?
Chris Davino
Thanks John. I want to take an opportunity this morning to give an update on the state of our turnaround efforts. I guess let me say upfront that I have received some questions in the past about our dissent of our updates, and I would point it out that given this to the dynamic situation in my view, I believe that warrants us being bit more expansive, some management teams might be in another circumstances.
Also, we have made some changes of late, and with those changes have made some disclosures. So, I think it’s appropriate to provide some backdrop on the context. With that backdrop, I will state my view that the first stages of restructuring, the stabilization phase is largely complete. The initial goals and objectives, which I will review again in broad strokes, have been largely accomplished. And from a cash flow perspective, as John said, we are quietly on a relatively solid ground. From that vantage point, we can begin and formulate a strategic plan to build upon the short-term operations level that we put in place which I will describe.
First and foremost, and John mentioned this briefly, and we have spoken about on prior calls, was the need really to develop what I would characterize as a comprehensive revenue architecture that provides an opportunity not only for consistent bookings, but hopefully improve finance results or the shows that we do open.
Let me step back and disclose that obviously one of the first things I have done coming to Premier was to conduct a thorough analysis of the self-run venues that Premier has operated in this two years prior to taking charge. I think there were somewhere of 17 or 18 different venues. Not surprisingly, the results of those venues were relatively meager. I think what’s important to note and instructive were the reasons for lack of success. Poor market and venue selection, lack of planning, limited coordination of activates, and an overall rush for market which exacerbated all of those issues. As a consequence, our folks over the last couple of months have been to develop a more structured and thoughtful approach that remains really the functional disciplines of the organization to the decision making process, and also after more vigorous evaluation of markets [ph].
The timing of entering markets is also a critical situation. Although the need for me has been real, we have attempted to take time not only to carefully select markets, but importantly once the decision is made to go into a market, have really taken the time to develop, to really carefully go through execution plans, hopefully in an effort to alleviate some of the mistakes that have been made in the past. In terms of the specifics, we recently announced Seattle, and we have been talking about in terms of process has been featured in our execution plans for that market. So, hopefully, we will see the results – the results will better that out as a consequence.
In terms of other markets, what I would say is stand by for some additional future announcements in short order. In addition to the revenue architecture, we have obviously tried to bring a bit more order, through the operational and organizational structure. What does that mean? Really, two specific things. First, we wanted to bring more clarity to roles and responsibilities and to empower people to deliver results within specific functional disciplines and again specific initiatives. As that may sound very basic for many of you and it certainly is. But for Premier, I can assure you, like many (inaudible) walked in over the years has suffered gravely from a dysfunctional organizational structure and as a resultant, I guess what I would characterize a strained corporate culture. Therefore, the attention over the last couple of months is to bring some sense of structure, some sense of disciple to the organization.
Second choice [ph] is one of the organizational structure’s resources, and we have spoken about this at length in prior calls. Obviously as I have talked about earlier, Premier has suffered as a result of losing some key people in the time period leaving us to arrival [ph] in January. As such, one of our most important priorities has been to identify, bring talent to the table in the areas of sales, sponsorship. We have identified and brought in some folks with specific marketing capabilities. Some of this has been in an effort to show up our base business.
Some of this has been (inaudible) to the table and get specific strategic initiatives, which I will discuss in a moment. I guess a couple of noteworthy events in that regard. First we brought on David Parr [ph], VP of Sales, Head of our Go-to-Market activities. David brings a lot of experience in the event business. He understands promotional and marketing aspects in putting up shares to various markets, which is obviously critical for us.
Second, we brought on a gentleman by the name of Brian Baker as VP of Partner Relations, which for us really means directing our sponsorship activities. Like David, Brian also brings years and years of experience to the table.
Organizational structure was the secondary focus, the next area really we are discussing in third–party relationships. Again as I said on prior calls. Premier significantly relies on third parties for a number of things. Everything from promotional activities, the specimens themselves are obviously leased. We also rely on third parties for procuring content, you know, examples of that are obviously Star Trek, Sports Immortals, Dialog in the Dark and some others, which we are having, we disclosed.
Over the last several months, we have taken time to evaluate to all our properties, to assess the overall viability of the content themselves, to consider the market ability of various exhibitions as they have been currently conceived. As a result of those efforts, we have made some key changes. We decided to terminate our contract with Sports Immortals. That’s currently in litigation. We have an extremely strong case, vis-à-vis, not only defending the claims, but pursuing counter claims. For now, I will leave that one there.
Star Trek, we decided recently not to proceed with that property. While we believe that Star Trek is obviously an important and well recognized brand, and that the exhibition will still attract customer’s overtime, we and our partners there decided it would probably better for one party to proceed with the exhibition, given the risk reward profile. So, with that, we entered into an agreement, whereby Premier will be providing need for services in the near term and potentially in the longer term by our former partner.
We are also critically evaluating over the properties, and by that I mean our existing operating properties like Dialog in the Dark as well as some pipeline properties. With regard to both, we are spending time and committing resources to assess everything from the marketing ability of the content, the potential level of customer interest, but also the need to grab specific strategies around branding, marketing and messaging, before we make additional to all exhibitions out in the marketplace.
In addition to the content providers, an area of focus for the last couple of months has been regarding third-party relationships that are really the service providers. And by that I mean marketing, PR, promotional activities. John spoke briefly about the benefits we have got [ph] marketing orientation, event plan focus, and we have obviously seen some success from that. These are all some marketing PR and promotional activities, these are just obviously they are now enclosed in the market (inaudible).
With regard to promoters, first we have really assessed our need to work with promoters in the first instance, first as having self promoters or self-run venues. When we determined as a result of exercise, we believe we will benefit from that [ph].
In North America, we believe we can largely operate our, and that gets back to comments made earlier about revenue architecture and organizational structure. I believe it’s the result of right framework we are going to market that’s sensible, shouldn’t have to rely on third parties to be successful. Internationally, we have determined it makes sense to contain the work with promoters, where they provide knowledge for markets, as key relationships with important local constituencies, be it outlets, governmental agencies with the customer base itself, but then pressure really becomes which promoters.
And again, as part of our assessment, we have considered for the promoters that we worked with in the past, those that we would consider work with in the future, their core competencies, financial capabilities, abilities to deliver specific relationships in the market and importantly an ability to forge a good working relationship with us.
Most notably, the outcome of debt exercise has been a couple of things. One, we terminated our relationship with JAM, and we restructured our relationship with STBN, which is obviously (inaudible) entity. As part of the termination of the JAM relationship, we followed suit and ultimately settle, take possession of the New York Bodies Exhibition. As a consequence of doing that, we achieved two things. On a go-forward basis, we are going to keep 100% of the profits from that venue, rather than splitting it with our promoters, with our promoter partners. And separately, we have an ability now to operate the venue ourselves, rather than using the services of Running Subway.
Now, I would like to point out, that speaks nothing in my view of our view of Running Subway as a partner. They are very capable organization, very professionally run, we just felt that financially it was better for us and served our needs to operate our – consistent with our strategy, generally North America.
In terms of the restructuring relationships with STBN, I think the press release was very specific as to the rationale as well as the terms of that restructuring. So, that provides some color as it relates to recent activities. In terms of the go-forward strategy, I guess the first couple of things are noteworthy.
First, the folks will continue to be on filling the calendar and otherwise requiring the basic business model. In addition, we are in the process of trapping and putting (inaudible) really intended to create long-term value. Any of those initiatives will link to our existing core properties, Titanic and Bodies -- the but I guess at this stage, suffice it to say that we are investing in repositioning both of those properties.
Titanic, I will start there, obviously a one-of-a-kind property. It’s an exhibition that’s had a fair amount of success over the years, I think it’s fair to say. Having been seen by millions and millions of people, unlike many other entertainment properties that have been in the market for years, we believe we will benefit from taking another look at really contemplating, reimagining the actual exhibition itself, with the goal of making more experiential, more engaging and really more moving for our customers.
Another important initiative around Titanic is providing a higher degree of connectivity between Titanic assets, and by that I mean the artifacts, the passenger stories, maritime community tie-ins, and tie-in that really the vast and deep Titanic customer fan base. I mean, it’s really outside the exhibition itself, which is really a moment in time. Specifically, the objective is to develop a digital strategy, which is really an online experience that marries some of the best features of the evolving digital space to the unique and important and hugely popular Titanic brand.
There are also some other initiatives regarding Titanic that are probably too early in this development stages to discuss here, but suffice it to say that with a 100-year anniversary approaching, there are a number of things that we believe we are in an unique position to do with the company, not only to celebrate Titanic at the anniversary, but to begin to realize the inherent value of the property.
For Bodies, the focus will continue to be not only tackling associated [ph] with the calendar, we are bringing some new capabilities to table and hopefully a fresh perspective regarding again marketing PR and market average, and I think it’s fair to say in many ways, our game plan against those activities have been relatively big for years, especially in certain markets like Vegas and New York where it’s been for a while. So, we think we will benefit from a slightly different strategic approach, we are bringing in resources that will help us in this event.
In terms of new content, Premier is still seen as a leader in our space, therefore we see a lot of opportunities on a day-to-day basis. We are constantly evaluating new exhibitions, and helpfully for this company, we will take a more thoughtful approach than we have taken in the past with respect to new opportunities that we end up pursuing. Obviously, you know, I am covering just a little bit of ground here with regard to these initiatives, but I think it’s – the obvious takeaway is like for any company, laying up all of the initiatives like this comes with, or will come with a certain level of investment and resources, be it capital, expertise, technology. It also comes with a certain level of risk, but we think on the balance, these initiatives are critically important and ultimately going to realize the value that we see in the business, I think on a go-forward basis.
So, I again covered a bit of ground on not only the historical turnaround of activities but some of the strategic focuses that we have begun to address now. With that, I guess I will turn it over to you guys for Q&A.
Question-and-Answer Session
Operator
(Operator instructions) And we will take our question from Sam Yake with BGB Securities.
Sam Yake – BGB Securities
Yes, good morning.
Chris Davino
Good morning, Sam.
Sam Yake – BGB Securities
Yes. I am not sure if Mr. Sellers is on the call, but I had kind of a longer-term general question. And that is, I don’t know, what his – if you could go into a little bit maybe if his intentions with the company, does he plan to, maybe, kind of turn it into like his little, his own little Berkshire Hathaway type vehicle, or you guys going to stay just focused on the exhibitions arena, or you are going to maybe – he’s going to take into different businesses?
Chris Davino
I can answer that from a management perspective, and then Mark, you may provide some additional color. I think we are approaching this situation like any management team would. We are focusing on our core competencies in the base business, which is the exhibition business where we provide. As I said before, we see opportunities all the time, some that are directly in line with the exhibitions that we have, some of them that are somewhat, you know large yield or slightly different in other areas of the entertainment space.
But, I think it makes sense, certainly in the near term, the next 12 to 18 months to be focusing on what we are good at, which is designing, producing, taking to market exhibitions that we think the market will find interesting. That’s our core business. We are not going to be, at least in my view, straying too far from that. The focus is to continue to build on the initiatives to date that not only stabilize the company, but then really to overtime, enhance value, create value, but in the four walls of the exhibition entertainment space primarily, if that’s helpful.
Sam Yake – BGB Securities
Okay, yes, helpful.
Mark Sellers
This is Mark. Yes, I don’t have any plans in turning this into the next Berkshire Hathaway.
Sam Yake – BGB Securities
Okay. And one final question on Titanic. I know it’s so complicated and there’s been a lot of and you have said and written about in the past, but do you have any kind of general timeframe for some kind of clarity on the whole, you know the Salvage claim?
Chris Davino
We are also joined today by our two in-house consultant. I would like to turn it over to Brian Wainger to give some update on the events you are hearing that is coming up. Brian, you want to tackle that?
Brian Wainger
Thanks Chris. We had announced probably that the court in the eastern District of Virginia handling the Salvage litigation requested a hearing on the company’s motion for a Salvage reward scheduled to begin October 26th. So, we are preparing to present a hearing to the court on the company’s motion. We do not know if the court will make a ruling after the hearing or immediately after the hearing, or if we will wait for some period of time for a written order. But certainly, we are expecting some developments with that case in the near future.
Sam Yake – BGB Securities
Okay. Thanks so much and good luck.
Chris Davino
Thank you.
Operator
(Operator instructions) And we will take our next question from Andrew Cowen with Tricadia.
Chris Davino
Good morning Andrew.
Andrew Cowen – Tricadia Capital
Good morning. Couple of questions. First of all, congratulations on returning the company to EBITDA profitability. That’s nice to see that this company, and run in capable hands, and still a survivor. Just a couple of questions -- sorry?
Chris Davino
Go ahead, Andrew.
Andrew Cowen – Tricadia Capital
Just a couple of questions. On the first quarter conference call, I had asked about the G&A expense. It does look like, you know, backing out the one-time items which going forward on bad debt expense and a few other line items there, but you were able to take about $2 million out of the compensation, excluding the stock-based compensation?
Chris Davino
Yes.
Andrew Cowen – Tricadia Capital
And it didn’t seem like on that first quarter conference call that, that you are talking about, something like $1 million. So, just kind of curious as to where the extra million dollars came from or why we weren’t able to get a little bit more clarity on that, you know, when we were pretty deep into that quarter already?
John Stone
Fair question. And let me say in the context of the first quarter call, I think we were discussing the fourth quarter by comparison to the first quarter, and you were asking about a go-forward kind of trend. You know, be mindful that schedule five here is really produced to explained kind of bizarre fluctuation and that you could –
Andrew Cowen – Tricadia Capital
Yes, I appreciate that, but I was kind of taking – you know, I was just going back through the conference call and it seemed that, you know, I would add, well $7 million run rate on G&A is just not going to really get us there, and it does seem that in some sort of normalized environment that you can get the company back to – I am assuming once we are past the litigious base of the company, which hopefully are – and you did a nice job of coming back on rent expense and sort of other normal recurring cash expenses, but that was after that first quarter. So this was – so it doesn’t look like you are returning the company back to something like $3 million or $4 million quarterly G&A expenses, is that correct?
John Stone
I really can’t respond to the question, because I don’t want to get into detail, you know, giving you guidance or validating guidance.
Andrew Cowen – Tricadia Capital
Let me ask in another way. So, if you had $2 million [ph] of quarterly, yet this quarter, you had $2 million of quarterly compensation and you had bad debt expense of $1.6 million. I am very hopeful that that’s not going to be repeating. So, even if you are – and your rent expense is (inaudible). So even if your legal expenses still run at $1 million a quarter, which just seems to me like on the high side, I guess there would have to be something rather large in that other line to get G&A up above $4 million a quarter – just doing, you know, back of the envelope math?
John Stone
I think that if I can provide any additional color here, it would be that we would kind of expect the compensation expense in this line item to be material cost on ordinary run rate.
Andrew Cowen – Tricadia Capital
Okay.
John Stone
And you are certainly hearing this year-over-year comparison, you are seeing the benefit of kind of how we structure compensation now. But then, I will caution that Chris just described that we are going to, we have brought on some talent, some of that came on somewhere during this quarter, and then we continue to bring on some other challenge now, some of that stuff we do in a contractor mode, so that we have the resources we need, while we need them, and we are not real big on big permanent ads, but I am just saying, I have to be cautious by giving you guidance here for the reasons I said.
There is a lot of different things weighing on the company right now and some of them are very hard to predict or control or estimate. So, we hope that by blowing out the line like this, we help you make your own estimates of what you think we are capable of. We certainly share your ambition to get keep this line under control.
Andrew Cowen – Tricadia Capital
What about – can you talk a little about that bad debt expense?
John Stone
I will talk a little about it. Yes, really it’s motivated by repositioning ourselves, which Chris described with some promoters. And you know, a large chunk of it came out of the negotiations over the New York City Bodies show. We were owed some money, our partners there, we had disputes without going into or replaying the whole thing. We wound up in court, and ultimately reached the settlement outside the court and walked away from some receivables there that is more than – well more than half of that $1.6 million. But we felt that it was a very good trade in order to take full control of sole possession of the New York Bodies show.
Andrew Cowen – Tricadia Capital
Okay. So, I shouldn’t assume $1.6 million is any kind of normalized run rate or bad debt right?
John Stone
That’s correct. I think you have to look at this, as you know, we are in a consumer business. We certainly face a risk if a partner or a promoter were to, you know, somehow take our money. But there’s no way that, that’s an ordinary run rate at all.
Andrew Cowen – Tricadia Capital
But what’s in that other line?
John Stone
All kinds of things. Telephones, fax, travel, but there is no one item there that’s more than 10% of the total through the quarter.
Andrew Cowen – Tricadia Capital
Okay. Beyond – now that you have settled the case with JAM and Michael Cohl – is it correct to assume that the largest legal obstacle you have now is your case with Gellar?
John Stone
I think it’s fair to comment to later.
Andrew Cowen – Tricadia Capital
Okay.
John Stone
Sports Immortals [ph].
Andrew Cowen – Tricadia Capital
And just sorry to take up so much time, but just trying to get some more clarity on the casuals here. So, it does – I can understand that you are needing to get the current liabilities back down to a rationale level, we were always running around $3.5 million and its head spiked up, and now we are back to about $5.5 million. Is that sort of a fair level now, or you are going to have to – is working capital bit more of a bleed going forward, because you know working capital has historically for this company been a nice positive without account payables getting completely out of whack.
John Stone
I don’t expect working capital consume a lot more, and you know, I would point out there are other sources of funds in the assets side of the balance sheet. So, I am comfortable that we are not going to see another chunk of capital used up just on working capital.
Andrew Cowen – Tricadia Capital
Okay. So, assuming sort of a neutral capital, working capital balance going forward even through the slight source of funds and sort of steady state where you are now, the company is basically back to at least cash flow breakeven?
John Stone
I am not going to address cash flow breakeven. We are going to have to see that in this quarter, but yes, I don’t think working capital, I think to say, we are balanced on working capital right now, which is a fair assumption.
Chris Davino
Fair comment to say that it’s largely dictated by the number of shows, shows we are rolling out. If you had a number of shows in a particular quarter, you are certainly investing in working capital.
John Stone
Yes, it absolutely does, and keep in mind, and thank you, Chris, but when you are loading in the show, you are really pumping the capital, and then it takes weeks and months to recover that capital. So, the ebbs and flows of working capital will move quarterly and driver that certainly shows, the number of shows that are in motion.
Andrew Cowen – Tricadia Capital
Okay. And just last question. So, you have, I understand you have got rid of three Bodies shows you run them off at least?
John Stone
That’s correct.
Andrew Cowen – Tricadia Capital
So, I assume those are the Bodies within or Bodies exhibition that’s something that --
John Stone
Yes.
Andrew Cowen – Tricadia Capital
So, we are down to 13 shows?
John Stone
Put it again?
Andrew Cowen – Tricadia Capital
We are down to 13 shows?
John Stone
Right.
Andrew Cowen – Tricadia Capital
Okay. And how many of those are either in place or going to new place?
John Stone
Our goal in the short-term without being too specific is to – because some of this is in motion is to obviously have all the shows booked and working at any point in time. Obviously, we started from pretty difficult position, when we got here, with a significant number of openings. As I said in my comments, we have tried to have some discipline as there has been this tension to just immediately fill the calendar, but we want to do it, as I said earlier, in a thoughtful way in markets that made sense, in venues that could accommodate our shows. And while we weren’t doing it directly with promoters. So, we are trying to do a couple of things. We are trying to strike a balance between those shows that are self promoted, have a maybe a few more of those than we have done in the past, where we have historically relied on promoters.
So, with that, as I said earlier, again the tension to rush, to fill, but also to do it in a thoughtful way. So, I guess the bottom line, Andrew, is over the next period of time, hopefully not long, we will be having all of our shows worked. Now, I can’t say that’s going to be today or tomorrow, but that’s our short-term focus.
Andrew Cowen – Tricadia Capital
Would that be something for the Christmas season or --?
John Stone
Again, I think the fairest way to describe is in the short term the next couple of months, our focus is having a full calendar and then having that rolled on a consistent basis, again gaining markets and venues that ultimately would be profitable based on our new approach. Now is that all categorically wired? It never is in this business. There is always risk that even in markets where you think it’s working for long time, you know, closed in certain venues. We are trying to put six to nine-month shows into venues that are working for 10-year tenants. That’s just one dynamic for all host of dynamics.
So, as it relates to self-runs, it’s actually relatively complicated equation, it takes time again to find the right operating model. So, I am hopeful that in the short term, I think but I think it’s important -- it deserves an answer I think. Our goal in the short term, over the next couple of months to have a calendar that’s generally filled with venues that we are hopeful to have to be profitable.
Andrew Cowen – Tricadia Capital
And how of the shows you are working now?
Chris Davino
What I would suggest – it’s difficult question to answer and in any moment of [ph]. If you looking at it in a quarter, I would suggest, taking the number of operating days, that we have published, dividing it by the number of calendar days, which for this quarter, would have been 92 days, and you will come up with a number that averages through the quarter.
Andrew Cowen – Tricadia Capital
Okay, that’s fair enough.
Chris Davino
One specimen set or artifact set may have been used during the quarter.
Andrew Cowen – Tricadia Capital
Okay, thank you.
John Stone
Thanks Andrew for the questions.
Operator
(Operator instructions) We will take our next question from Brian Novelline with DRW Investments.
John Stone
Good morning Brian.
Brian Novelline - DRW Investments
Good morning. Congratulations on just and Andrew’s comments, but on the panic from JAM, that $1.8 million that was disclosed, that was obviously not in the quarter. Is that offset by other expenses or --?
Chris Davino
The payment was actually from STBN, stepping in and taking JAM’s possession in total. You know, it’s in respect of amounts that we previously owed.
John Stone
Is that your question Brian?
Brian Novelline - DRW Investments
Right. Okay, so it’s just cash [ph] it’s not --?
Chris Davino
Yes, look at it as a collection of a significant past due receivables.
Brian Novelline - DRW Investments
Okay, and that’s not reflected right in the quarter, right?
John Stone
No, that’s not reflected in the August 31st cash balance, no.
Brian Novelline - DRW Investments
And with regard to your announcements on some of your exhibits, would it be any further write downs that you expect or related to Sports Immortals or Star Trek?
John Stone
No, not with respect to those two, no write downs of assets.
Brian Novelline - DRW Investments
No other –?
John Stone
And we are not, you know, we still carry some intangibles related to Bodies for the specimen that we still have. We are comfortable though with the bandwidth, the capacity we have. And you know, there is an awful lot of significant assets related to other properties. I will make a distinction though between a write-down and a charge as Chris stated, we are in litigation with Sports Immortals, and so there could be something related to that, but we do feel sort of strong about our position vis-à-vis that.
Brian Novelline - DRW Investments
Okay. And then on the litigation expense, was that – so that was primarily the legal introduction or that was, if you would say, primarily related to those relationship restructuring. I am just trying to think because obviously going to court this quarter, you are going to have some expenses there?
John Stone
Yes, I think it’s fair to say that right now, and I mean this respectfully that the lawyers are deeply involved in helping us restructure the business. And it’s unfortunate necessary consequence of what’s happened there. There’s certainly some – there’s going to be some dynamic in the current quarter, we are now in the third fiscal quarter, related to our appearance in the court (inaudible). We had other professional fees though for example. We disclosed last quarter that under examination by the IRS and that’s not a cheap thing to do. So, there’s just all kinds of things that are going on right now, and it’s not, it’s certainly not your ordinary course for a company to go through these kinds of things.
Brian Novelline -- DRW Investments
Right, so there’s an elevated number this quarter, but certainly next quarter, there are some things that could keep it high.
John Stone
That’s correct. We think that you know, certainly inspirational goal is to get this back down under control, but we cannot control the counterparties to these lawsuits. So, that’s probably the best way to characterize it.
Brian Novelline -- DRW Investments
Okay, got it. As far as – is there any other kind of major hires outstanding?
Chris Davino
Yes, I guess I would characterize it this way. John touched upon it briefly and I have mentioned it also. I guess I would look it this way, Brian. We are undertaking, really characterized some relatively bold initiatives around not only our existing some other properties that we are looking at (inaudible). As we have all discussed in the past, I think you guys are all well aware, the company is limited in some certain, really key areas, that are more strategic nature, in terms of capabilities around, as I described you know digital developing, you know developing a digital strategy.
Historically, we had no capabilities in those areas, and those are very capabilities and we need people that really understand that part of the marketing universe as it were. So, you need to bring in, really capable resources. And as John said, you are not that’s really going to position for the long term, like you are bringing in consultants to help, you know, execute against, you know what we believe to be a very important strategic initiative.
So, I would just use that as an example to our number of cases like that where we think we need specific capabilities that we don’t have in-house that we normally wouldn’t keep on a go-forward basis, but we think are important to bring to bear in the short term. So, you are going to see some of that over the next couple of months, but I would characterize it not as operating expenses or salary or payroll but really an investment in resources around the strategic initiatives.
John Stone
I think I would like to add one thing look at building those competencies and maybe a different skill set.
Brian Novelline -- DRW Investments
Okay. And then is there any further update on the third phase in Vegas?
John Stone
Nothing to really disclose this time. We are talking to – obviously considering (inaudible) reporting various properties into that space, both our own and third parties, really the focus on third parties, but there’s really nothing to announce at this point in time.
Brian Novelline -- DRW Investments
Very well. I appreciate all the time. Thanks.
John Stone
Thanks Brian.
Operator
That does conclude the question-and-answer session today. At this time, Mr. Davino, I would like to turn the conference back over to you for any additional or closing remarks.
Chris Davino
I would just like to thank everyone for again taking the time to join, appreciate the questions. And if people haven’t followed the questions, at any point in time, John and I are always available. With that, wish you all a great day. Thanks so much.
John Stone
Thank you.
Operator
Thank you for your participation in Premier Exhibitions, Inc earnings call. If you have any further questions or comments, you may contact the company directly. This concludes today’s call.
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