Premier Exhibitions' CEO Discusses F2Q 2014 Results - Earnings Call Transcript

Oct.10.13 | About: Premier Exhibitions, (PRXI)

Premier Exhibitions, Inc. (NASDAQ:PRXI)

F2Q 2014 Earnings Conference Call

October 9, 2013 17:30 ET

Executives

Sam Weiser - President and Chief Executive Officer

Michael Little - Chief Financial Officer and Chief Operating Officer

Analysts

Andrew Shapiro - Lawndale Capital

Bill Vlahos - Odyssey Partners

Stuart Fishman - Private Investor

Scott Shonborn - Private Investor

Ethan Starr - Private Investor

Don Whitaker Sr. - Private Investor

Larry Burke - Private Investor

Joshua Kramme - Private Investor

Operator

Good afternoon. Welcome to the Premier Exhibitions’ Q2 Fiscal Year 2014 Earnings Call. Today’s conference is being recorded.

I would like to remind everyone the company will be making forward-looking statements on today’s call. These forward-looking statements are based on current expectations and are subject to a number of risks and uncertainties and are not guarantees of future performance. Undue reliance should not be placed upon them as actual results may differ materially. Please refer to the risk factors identified in the company’s filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on the company’s operating results, performance and financial conditions.

And now I’d like to turn the conference over to Mr. Sam Weiser, Chief Executive Officer and President of Premier Exhibitions. Please go ahead, sir.

Sam Weiser

Thank you, operator and good afternoon everyone. Before we begin, I would like to remind you that on today’s call, we will discuss adjusted EBITDA, which is a non-GAAP financial measure that our company uses as a key metric for evaluating performance internally. Adjusted EBITDA also provides investors with additional information to facilitate the comparison of past and present performance and an explanation and reconciliation table to the nearest GAAP measure can be found in our earnings release.

I want to begin the call by saying that despite some positive momentum, Premier is facing challenges as we work to grow the operating segment of our business. Overall, our results are disappointing. However, there are some positive developments. Although, we did not capture a full quarter of exhibition revenue at Buena Park due to its August opening, our initial ticket sales including group sales have exceeded our expectations. That trend has continued and we are trying to maintain the momentum through our third fiscal quarter and into the important holiday season.

We are pleased with these early results for Buena Park and we remain positive that this location will prove to be a successful addition to our portfolio of permanent locations. We will introduce Pompeii at the Franklin Institute in Philadelphia November and complete the three city tour which stops in Los Angeles at the California Science Center and Seattle at the Pacific Science Center. Following that tour, the artifacts under Italian law are required to return to Italy. However, if the three cities prove successful, we believe we could secure the opportunity to develop subsequent tours for the exhibition.

Despite the positives of a successful opening of our Buena Park location in launching Pompeii, our top line revenue fell sharply compared to the same period last year. As the revenue comparison was impacted primarily by a strong showing for Titanic at the Henry Ford in fiscal 2013 and with the loss of our Seaport location in New York City. Last year’s revenue lift from the 100th anniversary of Titanic coupled with the closure of our Seaport location and our inability to secure our replacement location that meets the company’s risk reward parameters will remain hurdles for us in the third and fourth quarters in terms of both absolute performance and year-over-year comparisons. Our lower revenues in the second quarter also negatively impacted our year-over-year P&L comparison and Mike will review all the specifics in more detail during his segment of the call.

Over the past year, we have worked diligently to place new content in the market. Unfortunately, we lost a large opportunity earlier this year when we were unable to come to agreement with a major international broadcasting company on an exhibition we had in development. After expending significant management time and financial resources in an attempt to obtain an agreement that was fair and that would have met our financial requirements for new projects, we were unable to close the deal.

In addition, our initial attempt to negotiate for a space in New York’s Times Square did not result in a signed lease. Finding space in this location is a long-term proposition and the company will live with the economic terms of this arrangement for a number of years. So while we would like to be back in the New York market, we will not enter into a lease unless it makes good economic sense for the company over the long-term. Both of these setbacks have had a significant impact on current year results and our forecast for the remainder of the year.

I want to stress that I am confident about the future of our exhibition business. We are intently focused on launching new content and securing new permanent locations for our existing brands. In addition to Pompeii, we have a number of opportunities in the pipeline and anticipate a number of announcements related to our continued efforts to bring new content to the market over the remainder of the fiscal year that will positively impact our performance for fiscal ‘15 and years beyond.

I also want to announce that effective today we are terminating the law non-binding LOI with the Hampton Roads group due to a lack of progress on their part in obtaining requisite financing to consummate a sale of the Titanic assets on agreed upon terms. We believe we have given this group more than sufficient time to demonstrate their ability to raise the required capital. We have always believed that the Hampton Roads region was an ideal location for the permanent home of the collection. The consortium has indicated its intent to continue its efforts to secure financing to acquire the assets and we remain open to reengaging with this group or reconstitute a group representing the interest of the Hampton Roads area.

As we move on and begin pursuing alternatives to affect a sale of these assets, our three criteria; price, satisfying the core and tax efficiency for our shareholders remain paramount. Over the past year, we have learned a great deal about how to structure a transaction that will meet these criteria and of course who the likely buyers or contributors would be. As we have discussed on prior calls, we have been working on alternatives and we are focused on altering our approach to achieve a satisfactory conclusion to the company’s efforts to place these assets in the hands of a worthy steward who can oversee the collection and the wreck site for the foreseeable future.

In the short-term in consultation with our advisors, we will be refining our comprehensive strategy for transferring the assets based on what we learned while working with the Hampton Roads group. This process will include reviewing our list of regions that would provide a suitable home for the collection, where there are sufficient number of possible buyers or contributors who would support the initiative, individuals, foundations, museums and endowments with the focus on preserving Titanic’s legacy and pursuing the numerous opportunities that exist for those with unfettered access to the wreck site.

I have two priorities as the CEO of Premier, grow the profitability of the operating business and monetize the Titanic assets. All of us at the company are working tirelessly to accomplish both objectives. And I am confident that those two priorities will be accomplished with significant reward to our shareholders. Thank you for your patience as we execute on both fronts simultaneously.

I will now turn the call over to Mike. After Mike concludes his remarks, we will be happy to take your questions. Mike?

Michael Little

Thank you, Sam and good afternoon everyone. I will first summarize overall results and then provide greater detail on the P&L. For the first three-month period in August 31, total revenues fell 41.8% or approximately $5.6 million to $7.8 million from $13.4 million in the same period last year. Similar to the previous quarter, the year-over-year decline is largely due to two items. First, as Sam mentioned, we enjoyed an exceptional strong performance at the Henry Ford Museum during the second quarter of the fiscal 2013, when this regional cultural hub hosted our exhibit, Titanic Exhibit, as we marked the 100th anniversary.

In the current three-month period, we cycled over the attendance spikes and related increases in merchandise sales at both the Henry Ford Museum and other Titanic venues with three fewer exhibits while experiencing relatively weaker attendance numbers. In addition because these touring properties have not reached certain thresholds, they have not yet fully yielded profit-sharing revenue.

Last year at this time, we also benefited from having The South Street Seaport open during the peak summer tour season in New York cities. This alone is estimated and have resulted in a $1.7 million in loss revenues for the quarter based on comparable fiscal ‘13 results. Again, as Sam referenced, although we were able to partially offset the Seaport with the ongoing, with the opening of the semi-permanent exhibit in Buena Park, Buena Park itself did not open until August and therefore only contributed to one month of revenue versus three for the Seaport.

Having discussed our top line let me turn your attention to the cost of revenues, gross profits and margin. Total cost of revenue decreased by $1.4 million, or 27.2% to $3.8 million compared to the same period last year. Primarily, it was a result of lower exhibition cost as we incurred lower marketing expense and operating expense because of the Seaport closure. Cost of merchandise as a percentage of merchandise revenue fell slightly in the second quarter because of lower freight and handling cost.

Gross profits were $4 million compared to $8.2 million last year, which on a percentage basis reflect a 51.1% decline. Gross margin was 51.2%, which compared unfavorably to the 61% margins we achieved last year as we de-levered across most new line items within our cost of sales. Quite simply, we are not able to reduce our expenses to the extent the revenues declined. In a similar vein, adjusted EBITDA decreased to $1.2 million compared to $4.3 million in the year ago period. Please review the reconciliation tables at the end of the earnings release to see how we arrived at those figures. Finally, net income after non-controlling interest fell to a loss of $62,000 from $2.7 million or an earnings per share to zero on a share basis of $49.3 million, which compared to $0.05 on a share basis of $49.1 million last year.

So with that overview, let’s delve into our results in greater detail. Exhibition revenue fell $4.6 million to $6 million from $10.6 million for the reasons described earlier. We had a total of 15 exhibits presented in the second quarter which compared against 18 in the second quarter last year and similar to the first quarter experienced a change in our revenue mix on a year-to-year basis.

Revenue from self-run was $61.7 million of total exhibit revenue in the second quarter of fiscal 2014 which compared to 55% in the year ago period. The reason for this variance is the exceptionally strong showing we had at the Henry Ford Museum last year. On a year-over-year basis, attendance in the second quarter fell 58% to 388,000 from 924,000 while average attendance per exhibition day fell 40% to 347 which compared against 578. On a plus note, average ticket price at our semi-permanent museums and other locations increased 6.2% to $15.21 compared to the second quarter of fiscal 2013.

Merchandise revenues for the quarter decreased $930,000 or 36% to $1.7 million from $2.6 million in the year ago period as a consequence on lower attendance at our venues. However, merchandise per ticket rose slightly from $3.27 from $3.21 per person. In addition, the second quarter, there was a $188,000 management fee relating to the AEI acquisition, which compared against $250,000 in the same period last year.

Turning to G&A, our corporate expense fell $1 million to $3.2 million compared to the second quarter of 2013. This decrease was due to lower salary and wages, professional fees and stock compensation expenses. Depreciation and amortization expense increased to $1 million from $817,000 as we placed our 3D and 2D film assets into service during the third quarter of fiscal ‘13. However, this amortization expense increase was partially offset by lower depreciation expense from many of the fixed assets that are now fully depreciated. Please note that going forward, depreciation expense is expected to increase due to the fixed assets purchased related to our recent opened Buena Park venue.

Finally, loss from operations in the second quarter was $214,000 compared to net income from operations of $3.1 million in the period year ago. As a result, the before mentioned lower exhibition and merchandise revenue that were only partially offset by the decrease of cost of goods sold and G&A. Interest expense was $99,000 for the quarter on our notes payable mainly related to the AEI transaction, but was more than offset by proceeds from insurance settlement during that quarter. This compared against $222,000 interest expense in the same period last year, which was somewhat offset by a gain on debt modification of $71,000. We also had a income tax benefit of $69,000 compared to an income tax expense of $116,000 the same period in the prior year. The fiscal 2013 income tax expense relates primarily due to the Federal Alternative Minimum Tax and state income taxes.

In terms of the balance sheet, cash and marketable securities were $5.7 million on August 31, 2013, which is approximately $1.8 million below our first quarter level of $7.6 million as we made investments in property and equipment related to our Buena Park venue. As previously announced the company’s board authorized stock repurchase of up to $1.5 million of our outstanding common stock. While we have not and won’t disclose the specific price triggers on our purchase business, our ability to execute under that authorization is restricted by the security laws as it pertains to insider trading.

During the second quarter, we did not have an open window for trading. In the coming weeks, we do expect to finalize and execute a trading plan at prices and amounts determined by the board under the approved authorization. This gives us the ability to enhance value for our shareholders through stock repurchases reflecting our confidence in our business over the long-term.

Operator, with that, let’s open the line for questions. Thank you.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Andrew Shapiro with Lawndale Capital. Please go ahead.

Andrew Shapiro - Lawndale Capital

Yes, hi. I have a few questions. I will ask a few and back on the question queue catches others. Can you clarify as you walk through this with formalized language? Up to this point the company did not have a 10b5 plan that allowed the company to buyback shares, but what you are seeing is, is that the board has now authorized or is in the process of authorizing such a 10b5 plan that the company will be able to acquire shares even when in possession of inside info?

Sam Weiser

Andrew, I think what we said was is that we did have an open window at anytime subsequent to the Board’s authorization but that we do believe that the window will now open now that we have come through this earnings period and that 10b51 plan will be put in place so that going forward should we be in possession of inside information. We won’t be restricted from executing under that plan.

Andrew Shapiro - Lawndale Capital

Perfect. And so there is a 10b5 plan now available and is just a question now whether it’s 1, 2, 3 whatever days after this call that the window opens?

Sam Weiser

I think that the securities law requires you to be in an open window in order to execute the plan.

Andrew Shapiro - Lawndale Capital

Right.

Sam Weiser

So once the plan – once the window opens, the plan can be executed. And from that point forward that can be programmatic.

Andrew Shapiro - Lawndale Capital

Excellent. And what is – is there Premier’s board’s defined window, because that’s a company-to-company thing?

Sam Weiser

I don’t know whether or not, I can’t really answer that question, because I need to go back to council, but I believe it will be within the next few days.

Andrew Shapiro - Lawndale Capital

Okay.

Sam Weiser

When that window will open for us.

Andrew Shapiro - Lawndale Capital

Okay. And then on PP&E, during the quarter, according to your press release $2.3 million went out for CapEx, was that all Buena Park?

Sam Weiser

Mike?

Michael Little

It was not all Buena Park.

Andrew Shapiro - Lawndale Capital

Can you discuss what was Buena Park and what were the other material amounts?

Michael Little

Yes. So in past practice, we specifically don’t address the by venue capital spends. So in past, we have not disclosed that, but it’s not all Buena Park at the moment.

Sam Weiser

So we haven’t – as we talked about new content, Andrew, it’s a combination of all the things that are going on. We have had some inventory build on some merchandise for new programs. We have had new content development costs. And we have also had the Buena Park build. So it’s a combination of all of those things.

Andrew Shapiro - Lawndale Capital

Okay. The number of venues dropped from your last quarter’s metrics table from 18 in the May quarter to 15, does the 15 include Buena Park and then which four venues or three venues are gone?

Sam Weiser

I think that the answer to that is our exhibitions cycle, I don’t know specifically and I apologize for this and I will research it and certainly get back to you specifically on this answer, but our exhibition cycle in and out of use. So I am not sure exactly what that was. I think one of it gives possibly dialogue in the dark, I don’t know is it year-over-year comparison.

Michael Little

Yes, that would be year-over-year comparison.

Andrew Shapiro - Lawndale Capital

So I am doing the sequential which is the May quarter press release to the new August quarter press release?

Michael Little

Yes. So what you are going to find with that is Buena Park would be an addition, because we did have those units online as the end of August, but as Sam mentioned as lot of our shows turnover in the month of August and September, that’s why you have that kind of decrease on tours.

Andrew Shapiro - Lawndale Capital

The four sites were out since Buena Park is part of the 15?

Michael Little

Yes.

Sam Weiser

Well, when you say out, I just want to be clear, Andrew, that could mean that they were closing, because they were open during the quarter, but they were closed as of the end of the quarter. And then they expect to reopen that fall in quarter.

Andrew Shapiro - Lawndale Capital

So the current quarter ended November, we maybe back up to 18?

Sam Weiser

Yes.

Andrew Shapiro - Lawndale Capital

Okay.

Michael Little

We may.

Sam Weiser

We may, yes, we have to go to that.

Michael Little

Like I said, we will do the research Andrew and I will come back to you on that.

Andrew Shapiro - Lawndale Capital

Great. I have other questions. I will back out into the queue, come back to me, a bunch of its definitions with respect to your metrics table.

Sam Weiser

Okay.

Operator

Thank you. We will go next to Bill Vlahos with Odyssey Partners. Please go ahead.

Bill Vlahos - Odyssey Partners

Hi guys.

Sam Weiser

Hi Bill.

Bill Vlahos - Odyssey Partners

So I am calling primarily in terms of the sales of Titanic assets, so it’s now been I believe 26 months since the court allowed you guys to sell and monetize the assets, the process has obviously been butchered, you guys hired an optional since that have been an investment banking firm, you spend an inordinate amount of time with the group and obviously whose prospects of being able to financially do this deal are shaking, you admit that you learned a lot through this process. So I basically have two questions. One, how can you guys have not hired an investment banking firm to monetize these assets, presumably we already have the expertise that we will not have to learn on the shareholder dime?

And two, Sam, I hate to say this, but would you consider resigning, I mean, obviously this has not gone well, the stock is trading below the price before the approval of the court to sell the assets, the market cap is obscene and you guys I am sure are nice people, you have done a good job turning around the business, but you don’t have the ability or the expertise to monetize these assets. Meanwhile, you are getting paid $350,000 a year for a micro-cap company. Your Board of Directors are collecting a total comp of $90,000 a year which is obscene. So will you hire banking firm and will you consider resigning?

Sam Weiser

I will answer the first question. I will answer your both questions. The answer is no, I am not considering resigning and two, as we said all along, we are looking at all of our alternatives including hiring an investment bank as I had the last two quarters. Bill, I said that we are in the process of evaluating our alternatives and the Board is in the process of evaluating various options which include the possibility of hiring an investment bank to sell the assets. I would argue that the…

Bill Vlahos - Odyssey Partners

You say that the last several quarters while the bank – while the board is collecting $90,000 a year in comp?

Sam Weiser

Yes. I understand your frustration.

Bill Vlahos - Odyssey Partners

I am not frustrated, I am just pointing the facts that you guys have not been able to monetize these assets and I understand why don’t you hire a banking firm instead of keep trying to learn on the shareholders’ dime?

Sam Weiser

We understand and I will absolutely communicate your concerns to the board.

Bill Vlahos - Odyssey Partners

Well, why don’t you just answer the question?

Sam Weiser

I think I did answer the question.

Bill Vlahos - Odyssey Partners

No, you didn’t? Why don’t you hire a banking firm? Why you are trying to learn on a shareholder dime?

Sam Weiser

We are not learning on a shareholder dime, we understand the value of the assets, we understand the composition of the assets and we understand the nature of the lights that are embedded within RMS Titanic. We also understand the skill sets of investment banks and we have learned about the skill sets of auction houses and we understand all of that….

Bill Vlahos - Odyssey Partners

You have learned, you keep telling you have learned, you have learned, you have learned.

Sam Weiser

Bill, let me finish and then I will let you continue, but we now understand all of those dynamics and we continue to pursue the most beneficial transaction for the shareholders of this company. The board is evaluating its options and they are in the process of making those determinations. I can’t speak for everyone on the board. I am only person on the board, but I know the board is doing what I have said all along that they are doing which is evaluating those alternatives and they will be making decisions and they will be announced once they are made.

Bill Vlahos - Odyssey Partners

Does they haven’t been able to accomplished them, it’s been 25th month and you keep saying they have learned, they have learned, they have learned, why do they have to keep learning, why not hire a banking firm that has this expertise already? It sounds to me like the board is just trying to serve the shareholders with their $90,000 a year compensation?

Sam Weiser

Well, Bill, if you have an investment banking firm that you know that can sell that has experience selling artifacts from a ship wreck, I would encourage you to call me offline and give me the name of that.

Bill Vlahos - Odyssey Partners

So why don’t I call you tomorrow, I will give you the names of the banks that have expertise in selling unique assets?

Sam Weiser

That’s fine.

Bill Vlahos - Odyssey Partners

I can give you (inaudible) to that.

Sam Weiser

Bill, no, that’s fine, call me tomorrow and I will be happy to have that conversation with you.

Bill Vlahos - Odyssey Partners

Great. And then in the meantime, I think you should consider resigning?

Sam Weiser

I heard what you said and now I am sure the Board has heard what you said as well.

Bill Vlahos - Odyssey Partners

Great.

Sam Weiser

Alright, thanks. Great.

Operator

Thank you. We will go next to Stuart Fishman, a Private Investor. Please go ahead.

Stuart Fishman - Private Investor

Yes. If you would consider disclose or at least comment regarding the level of interest in last year’s auction, because I believe, I am sorry, as I know that hasn’t been disclosed so that might give us investors an idea of what you know further to what is an amount regarding monetizing those assets? Thank you.

Sam Weiser

Stuart, I appreciate the comment and the question. We have said all along and we are going to state to that which is that we had – we engaged in an auction process. We signed non-disclosures and other agreements with people in order to get information to them and we are not at liberty to disclose that information to you or to anyone else. But I think that in our opinion, we are going to continue on with this process because we believe there is sufficient interest and that it’s time to take the opportunity to look at other alternatives and other structures in order to try to monetize those assets.

Stuart Fishman - Private Investor

Okay. I mean, I understand you cannot disclose information regarding the bidders, that’s perfectly understandable. I am talking about the level of interest or at least if you can quantify or at least some sort of quantification. I mean, we understand the letter of intent that you accepted, so that gives us an idea of what you were looking for that we knew all along from the court proceedings, but after the auction we haven’t heard anything regarding particularly that other than the objective was not met? So I mean, again, I understand that you are not going to be sort of anything about the bidders, that’s understandable, I am talking about the bids per se or in general?

Sam Weiser

Again, I am not prepared to have that discussion this afternoon. It’s not generally – it’s not a general practice to disclose the bidding process whether it’s a unique asset like Titanic or a subsidiary of any corporation. All I can tell you is that there was interest in the assets. We settled in on the group in the Hampton Roads area. We worked with them for a year. It didn’t work out and now we are going to pursue other alternatives.

Stuart Fishman - Private Investor

Okay, thank you.

Operator

Thank you. We will go next to Scott Shonborn, a Private Investor. Please go ahead.

Sam Weiser

Hi Scott.

Scott Shonborn - Private Investor

Yes, hi, Sam and Michael. Just as an Private Investor, and I am not knowing all the facts trying to do at my own research, but I remember with our salvor for rights that when we give the last dice, there was a specific mapping of the three fields and I am assuming that there are more artifacts still on that debris field that may or maybe secured. And my question will be if and when future artifacts are secured, will those be additional assets that the customer could monetize or would those rights still with the sale that you are pursuing now. So my big question was always $189 million which assets those include and I think there was a second number of assets and then possibly future substantial assets that are still there now?

Sam Weiser

The any assets that remain on the ocean floor would likely be conveyed as part of the transaction through the salvor rights. So they would not be external to the transaction. I think the transaction that we are contemplating is one that conveys both the assets that we have recovered, the intellectual properties surrounding that recovery.

Scott Shonborn - Private Investor

Okay.

Sam Weiser

As well as the rights to ongoing salvor-in-possession privileges that come with being RMS Titanic.

Scott Shonborn - Private Investor

Okay. So just to make sure, so basically you are saying that the deal or future deal can monetize is really a one if all for all of the Titanic assets?

Sam Weiser

Correct. And in respect of part of what you said yes, we have mapped the floor. We know what is down there. So whoever would still acquire the assets would know what artifacts remain on the bottom.

Scott Shonborn - Private Investor

So assuming all of that, we are still in the neighborhood of $189 million is what the goal is or at least that amount?

Sam Weiser

I think that’s – that was the transaction value that we were able to agree on. I think as we move forward in this process, we are hopeful that we will generate bids in that neighborhood, but we are going to just pursue the process and see what we get.

Scott Shonborn - Private Investor

Okay, well, thank you very much.

Sam Weiser

Alright.

Operator

Thank you. We will go back to Andrew Shapiro with Lawndale Capital. Please go ahead.

Sam Weiser

Hi Andrew.

Andrew Shapiro - Lawndale Capital

Hi. I have a few questions on the definitions, but the first thing I want to do is hearing Mr. Vlahos’ questions, I didn’t appreciate to realize that each member of the board during this extended time period was earning $90,000 a year in director comp and in light of the fact that this company’s operating size is greatly diminished. And this process is going on so long. I was wondering and I would like you to have either the Chairman or the Head of the Governance Committee contact me, because I would like to talk to them about the concept, because I know it’s not up to you and you don’t actually get paid as a member of the board, but to the extent board members are listening, I think it’s probably incumbent of the board to potentially either disgorge or return some of the compensation they either have been paid or take a pay cut probably in half of what they have been paid, because at $90,000 a year, I can pay a lot of companies much larger than Premier Exhibitions, where those public company directors are maybe not learning on the job, I don’t want to be as critical as Mr. Vlahos is, but they are not getting paid anything close to $90,000 a year each. And I think Bill does have a valid point that the director compensation here in light of the progress that’s been made and everything else I think is disproportionate and a bit out of whack. So if you would say to make sure the Chairman or the Head of the Governance Committee to reach out to me, I would like to talk with them about this?

Sam Weiser

I will do that.

Andrew Shapiro - Lawndale Capital

With respect to the metrics, I am trying to understand here is you got the calculation of operating days was up despite I guess three fewer venues , so how do you define operating days that are in your metrics?

Michael Little

It clearly stays open for any of our exhibits.

Andrew Shapiro - Lawndale Capital

Okay. So your three fewer exhibits open at the end of the quarter?

Michael Little

Yes.

Andrew Shapiro - Lawndale Capital

Yet from prior quarter your operating days were higher?

Michael Little

Yes, one of the things that you are going to see and Andrew if I am looking at this metric page…

Andrew Shapiro - Lawndale Capital

Yes.

Michael Little

Last year we had 3D…

Andrew Shapiro - Lawndale Capital

I am putting sequentially just so you know, because last year is just a record year and I don’t care about it.

Michael Little

Got it.

Sam Weiser

So let me just say that in the first quarter, in the third quarter of every year, we generally turn over the majority of our shows.

Michael Little

Out for the shows.

Sam Weiser

So our turning shows, so in those two quarters you will have less operating days than you do in the second and the fourth quarter. So that is probably the biggest reason, Andrew, for why the numbers of days are up in the second quarter versus the first quarter. They generally move in the April-May timeframe after spring break and before the summer season starts and then they move again after the summer in late September and early October before the holidays. So while they are staggered, most of the shows turn over in the first and third quarter.

Andrew Shapiro - Lawndale Capital

Okay. And that’s why we have more operating days in the most recent quarter which is considered second quarter?

Sam Weiser

Correct.

Andrew Shapiro - Lawndale Capital

Alright. And then your average quarter less attendance and more operating days, it was a big drop in average attendance is that because you are doing with beginning and ending numbers here, what do we define in average attendance days on average retail?

Sam Weiser

So, that calculation is solely the amount of tickets or the attendance that came through the current styles during that run of the venue divided by the operating days.

Andrew Shapiro - Lawndale Capital

Okay. So our numbers were greatly reduced because our operating days were then up and our attendance numbers were way down?

Sam Weiser

Yes.

Michael Little

And that was a function of both the Henry Ford, which had unbelievably strong numbers.

Andrew Shapiro - Lawndale Capital

Again, I am talking sequential quarter. So that wouldn’t be Henry Ford on a sequential basis?

Michael Little

Well, great. You are right, I am sorry, my mistake, my mistake.

Sam Weiser

The year-over-year, but yes you are right.

Andrew Shapiro - Lawndale Capital

Yes, so sequentially what’s going on, I mean, because they both got in summer, well, actually one spring, so well summer was worse for you.

Sam Weiser

Yes, I mean what we can do is we can look into it, is that the exact answer for you…

Andrew Shapiro - Lawndale Capital

I am just wondering do you see – do you review this, because I am assuming you are reviewing it, are there any troubling patterns that have occurred in terms of the attendance with your ongoing exhibitions?

Sam Weiser

I mean yes, I mean the traffic trends in a couple of our permanent locations are down. And we have following the year of the 100th anniversary we have had Titanic in different locations, where the demand hasn’t been quite as great. So I would have to go back and actually look at the actual composition quarter-over-quarter, which we will do and get back to you, but generally speaking, we are aware of the trend in terms of overall declines in attendance with our existing brands, which is both one of the major reasons why we are pursuing all of this new content as well as we are making changes with respect to our marketing in our permanent locations in order to drive traffic to those particular venues.

Andrew Shapiro - Lawndale Capital

Okay. So if you view to look at your various exhibitions as individual businesses, right.

Sam Weiser

Yes.

Andrew Shapiro - Lawndale Capital

And you just discussed how some of the attendance trends might be negative and down and not driving as much traffic as they used to. If these were individual businesses that you owned and calling separate divisions at some point if they don’t kind of earn an adequate return on capital or an adequate return on your allocated resources and others might earn a better return, you would get a sooner dispose of them and monetize them. Are your exhibits that you have, are they of the type if you could turnaround I mean other than Titanic, which you have been attempting to do, are they of the type that you can turnaround and monetize them to some other entertainment conglomerate that things that they could do better with it and then receive obviously some proceeds as well as reallocate the company’s managerial or overhead resources to grow and get a better return on your new stuff?

Sam Weiser

I think let me just address that by saying yes, we do look at each individual operating unit and we evaluate each individual operating unit, whether it be permanent or touring in terms of the performance that we are getting and the return that we are getting from that unit. I don’t believe necessarily that disposing of a unit or turning it over to another company would necessarily yield better opportunities for the company and I am not aware of any companies or groups that have proved it – have approached us with the belief that they could take over some of these properties and do a “better job” than we are doing. I will say that we do manage each of our permanent locations as a standalone. We will look at our cost structure and we look at each of those on a operating basis and we make adjustments as necessary both to their operating costs and their marketing spends. So we are managing each one of those locations in a manner as which that they are a standalone business. With respect to some of the touring units in terms of turning them over to another third-party, in some cases we don’t have the light to assign the license agreements. With respect to Titanic, I think we are in the best position to maximize the value from those exhibitions, so…

Andrew Shapiro - Lawndale Capital

Okay.

Sam Weiser

But if someone came and approached us, I am sure that Mike and I would listen.

Andrew Shapiro - Lawndale Capital

Okay. Now, you have on the board, the board that I am also joining and being so much critical of the compensation arrangements, some individuals who have some pretty impressive backgrounds are people with banking experience and fund experience and all that. And so the comment made about learning and evaluating the issue of the investment bankers, how long has the board been evaluating and considering the use of an investment banker relative to what you had. I mean, last quarter I think was the first time I heard about it. But I am just wondering how long has that been and how much longer do these esteemed and qualified and intelligent individuals who are getting paid a good dollar how much longer do they need to have a beauty contest to pick a banker?

Sam Weiser

That those are excellent questions, I think that the answers is that the assumption is that without a formalized relationship with the banker that the company hasn’t been seeking the advice of advisors and external third-parties, which I am not sure would be a fair assumption. The fact that someone hasn’t been retained or a firm hasn’t retained doesn’t mean that the members of the board haven’t used their contacts and their industry knowledge and experience to get the company the benefit of those insights and opportunities that they can make available to the company. I think that what’s going on now is process of trying to make a determination of what the appropriate needs are for the company in both the short-term and the long-term and to identify whether or not a firm exists that can meet both the short-term and long-term needs of the company both in terms of financing the new content development as well as seeking to monetize the Titanic assets, which are two distinct and unique kinds of functions. So I think that when you ask me how long it will take, I can’t answer that question. What I can tell you is, is that the breadth of knowledge and the experience of our Board members is being utilized on an ongoing basis in order to try to find the right fit and the right solutions for this company given the fact that we have very good prospects on the new content development front and also the fact that we are confident that by pursuing new opportunities on the monetization that we hopefully will be able to generate additional interest to begin the process all over again.

Andrew Shapiro - Lawndale Capital

Now following up on that is with the skill set that’s involved and I think just what your last answer was, is one of the potential scenarios of the board – does one of those potential scenarios remain the scenario that the board feels it doesn’t need the assistance of a banker in the sale of RMS Titanic?

Sam Weiser

I can’t answer that question, because I can’t really speak for all the individual board members. I do know that we as a board are evaluating a number of different opportunities and evaluating what we need. And so I think that’s kind of a wait and see Andrew on that one to see where the board comes out when they finally evaluate all of the factors and make their decision.

Andrew Shapiro - Lawndale Capital

Yes. Okay, well I guess and it would feel better then if they are accomplished cut, then they would say well they are not getting paid to do this, I know you either get a banker to get it done or they will work more expeditiously to maybe make it happen. I will backup in the queue in case others have questions. Thanks.

Sam Weiser

And Andrew, I will look forward to speaking with you offline whenever it’s convenient for you and we will get back to you some of the answers to these questions.

Andrew Shapiro - Lawndale Capital

Great and I will appreciate it. Thanks.

Sam Weiser

Alright, thanks. Operator, next call?

Operator

Certainly, we will go next to Ethan Starr, a Private Investor. Please go ahead.

Sam Weiser

Hi, Ethan.

Ethan Starr - Private Investor

Hi. Yes, I am wondering if you are considering groups located in Las Vegas to sell the Titanic assets to?

Sam Weiser

We are not going to disclose specific groups, but I would say that we are open to groups anywhere in the country or around the world that have the right makeup in order to be worthy stewards and get court support as well as to meet the price expectations and the tax efficiency that we are looking for.

Ethan Starr - Private Investor

Okay. I can’t speak as far as court support, but I would think that Las Vegas would be a deal as far as the entertainment industry in casinos and stuff and certainly people they would have the money to pay hopefully whether the court (inaudible). Will you avoid going with another group in the future that basically is going around begging for money?

Sam Weiser

I don’t think that, that will be a fair characterization, but I think that as we go through this process, we will qualify various groups and individuals, but I think that we now understand and recognize the value of the public-private partnership with respect to the placement of the assets. And so I think as we move forward and we go back to our work, we are going to evaluate all the various options both individuals, groups, public-private consortiums etcetera, but I think that this is a unique asset as others have mentioned. And I think it requires a unique group of people or a unique organizational structure in order to make it happen, because these assets can’t survive on their own and they won’t last in the basement of the museum without conservation. So it’s a unique asset that needs to be sold and it’s something that I think that all the groups that we talk to we evaluate their ability both to steward, to collection as well as to finance the purchase.

Ethan Starr - Private Investor

Okay, sure. That’s all understandable. And I’d be thrilled (inaudible) could come up with money to buy it tomorrow, but from my standpoint just understand is just looking out to see if I can clear on patent handle looking for money?

Sam Weiser

There were a lot of issues and unfortunately because of the confidentiality between the group I am sure, a company I can’t disclose it, but there were lots of issues, we have retained some, we didn’t overcome others, and ultimately we have determined that this was an investment, because the company was just to move on.

Ethan Starr - Private Investor

Okay. Well, I appreciate the effort and hope we can monetize the assets soon.

Sam Weiser

Thanks.

Ethan Starr - Private Investor

Okay, thank you.

Operator

Thank you. We will go next to Don Whitaker, a Private Investor. Please go ahead.

Sam Weiser

Hi Don.

Don Whitaker Sr. - Private Investor

Sam.

Sam Weiser

Yes.

Don Whitaker Sr. - Private Investor

Don Whitaker Sr. this time, and my main concern I believe here is the appraised value of $189 million. Early on in my life I realized that a diamond can be appraised for $5,000, but you go next door to another jeweler, you can’t get a gram for it. I think we have all learned a lesson here in investing in the stock, because that the numbers are 48 million to 50 million shares of stock outstanding we got our little calculators out and thought it was an undervalued play, because the operating company would be worth something also. And I think we have been wrong here, because totally wrong is it just I think the term appraised value is very similar to my diamond ring analogy. No one is breaking the down the doors now to buy the stock when they do the math and it’s approximately $75 million maybe even less as of today’s announcement for $189 million worth of appraised assets plus the fact that the operating companies got to be worth something, we would assume especially if the director fees go down and they like Andy suggested that is one thing probably the main concern. I mean wealthy individuals all along museums, people like James Cameron that are involved in the exploration, so many other people, they do math. People say well it doesn’t mean anything to them, they don’t think in terms of stock, well I think they do and they see the handwriting on the wall too. So hopefully the management, the board is not saying well we have got $189 million or nothing as the marketplace is telling us otherwise and many times Mr. Marketplace doesn’t lie, that’s just my thought there?

Sam Weiser

Don, I think that I have been around the investment business a long time and I have seen lots of situations and I understand exactly where you are coming from. I think the board recognizes all of the issues. We are comfortable with the appraisal, but I think that as we go forward in this process we have to evaluate all of the various options. I can’t sit down and explain and I know my counsel would kill me if I started to talk about how to value the company.

Don Whitaker Sr. - Private Investor

But anyone needs to do the marketplace to tell me, we all know that it is undervalued assets in the marketplace at all times, but no one is so obvious out there then everybody talk to the 100-year anniversary even though with the fiasco of the [currency] situation, you may having a bidding process for a company with Federal Court restrictions was looking back obviously not the best decision, but the restrictions on the sale of course determines the value too, because restrictions will diminish over time because it’s obvious that the assets need to find a home hopefully that the judge in place will realize that too and work with any potential buyer. One last thing Sam is the term the letter of intent that we have all been involved in letter of intent thinking absolutely nothing for one-sided agreements where they tie one-party up and the other one can do anything they want until there is something in writing, whether it forfeits here if this doesn’t come through or something I would be very reluctant to ever sign a letter of intent in anything?

Sam Weiser

I am certain if the directors have heard you and I think that we will obviously we understand where you are coming from and I think that as we move forward in this process, although I know people are complaining about learning as the process goes along. I think we are smarter now that we understand what we are dealing with in terms of the asset. There are certain people who would view the covenants as restrictive and other people who would view the covenants as an advantage. So I think that it’s just a matter of going out and being smarter this time about how we approach the marketplace and I think that…

Don Whitaker Sr. - Private Investor

Yes, your hands are probably tied, because as you have the letter of intent, you couldn’t go to the wealthy individuals that might potentially want a museum with their name on it or a city they had tie-ins to the Titanic in some way or the other is a port city that they would increase the tourists than you considerably. There are so many different avenues there that could be sought and you couldn’t do it while you signed the letter of intent probably?

Sam Weiser

Well, we understand all those opportunities and I can assure you that we will be running them all down in the near-term here.

Don Whitaker Sr. - Private Investor

Good deal.

Sam Weiser

Alright.

Don Whitaker Sr. - Private Investor

Good wishes in the process and take the (inaudible).

Sam Weiser

Thanks Don and please feel free to give me a call anytime, I am happy to talk to you about this.

Don Whitaker Sr. - Private Investor

Thank you, Sam.

Sam Weiser

Alright, bye-bye.

Operator

Thank you. We will go next to Larry Burke, a Private Investor. Please go ahead.

Larry Burke - Private Investor

Yes, perhaps you can answer this when a customer does a Google search for Premier Exhibitions or quick see, they come up with Viagra Pharmacy. And I have contacted the company twice in the past week and I still see it, I just did it now, I had someone 200 miles away do the same thing. It brings up the heading Viagra Pharmacy and do you have to actually click on Viagra Pharmacy to bring up your website, any comment?

Sam Weiser

This is news to me and I would like to tell you to tell you as it…

Larry Burke - Private Investor

It’s been that way for at least a week that I know of. If you bring – all you have to do is Google in Premier Exhibitions or PRXI and the heading, sub-heading Viagra Pharmacy comes up with www.prxi.com underneath it, so a customer has to actually click on Viagra Pharmacy to get into your website.

Sam Weiser

That’s news to me, but we will get on it right away. And I assure you, I thank you very much for alerting us to that. I don’t know exactly what’s going on, but we will certainly find out and appreciate that the heads up that I was not aware of it.

Larry Burke - Private Investor

Okay, thank you. Good luck.

Sam Weiser

Thanks.

Operator

Thank you. We will go next to Joshua Kramme, a Private Investor. Please go ahead.

Joshua Kramme - Private Investor

Hi. So I am not as a sophisticated stock investor as other people on the call, but I [quit] from those while the call was going on and I have been an investor in this company for two years and to say that I am disappointed is an understatement. And again I am a harsh judge of myself, character wise as well as other people and so you got to think what I would do with agreement policy, now you don’t know me from Adam, but on the call two objectives were stated by Mr. Weiser, one was to grow the operating business of the company and two monetize the assets of Titanic. And over the last two years based on the share price sliding, 50% revenues plummeting this quarter, and finally the cancellation of the non-binding letter of intent, which I think most people wouldn’t have thought non-binding letter of intent (inaudible) ago, yes, that’s garbage, but cancelling the non-binding letter of intent, I almost feel like you really just had no choice in doing that otherwise you would have had short of a revolt on this call.

So based on your own two metrics of your goal to grow revenue and monetize the Titanic, which you also had stated in prior calls that you have found like I interpreted as you stated that you have found that person or the party that’s most likely to do the deal nothing had happened. And so based on what you have stated numerous times and leading everyone to believe that the deal is in the work that it’s going to happen, I don’t know how on earth you can state that you are not even open to resigning, because using your own two metrics as a gauge of your performance, I would say we know what the answer is. You haven’t grown the revenues you haven’t monetized the assets and for you to say you are not open to resignation, I kind of feel like well, you have been compensated to do those two jobs and you haven’t been. So my question for you is again how can you stand there and say or sit there and say to the public who have been paying your salary for two years and were down 50% in their stock price, you are not even open to resigning to find someone else to do your job better than you? That’s my question.

Sam Weiser

Well, it didn’t sound like a question, it sounds more like a statement, but as I said I am comfortable with the job that I have done. I know what’s in the works, I know what’s in the plan and it’s easy I think from the outside to draw the conclusions and I understand completely why those conclusions are being drawn, but I do have two priorities and that is to grow the business, which we started that process a year ago when we acquired AEI. And we have continued to move forward and have a good strong pipeline of opportunities that are going to – that I think are going to develop. In addition, with respect to the monetization I think that what’s happened has happened. I can’t go back and rewrite history, all I can do is take the company forward and that’s my intention. And if the board chooses to relieve me of those duties, that’s their prerogative, but as far as I am concerned continuity of management and ongoing operations are critical to preserving and growing shareholder value. And I am committed to the company and I am going to remain committed to the company until such time if someone tells me that I need to go do something else. So I appreciate your thoughts and I understand exactly where you are coming from.

Joshua Kramme - Private Investor

And one other follow-up question and what about the – there was a reference in a prior conference call to this exhibit that was going to be monumental in rival bodies, I mean, was that one of the things that you stated on this call that’s now been cancelled?

Sam Weiser

I think over time we have talked about a number of opportunities yesterday. I talked about one, the major international broadcaster that we spent a great deal of time and effort trying to secure the rights, which we thought would have been a very significant and groundbreaking opportunity and we didn’t get it. So that’s history we are moving on and we are continuing to grow our pipeline.

Joshua Kramme - Private Investor

Alright, thank you. No more questions.

Operator

Thank you. It appears that’s all the time we have for questions today. I will turn it back to our speakers for any final remarks.

Sam Weiser

Okay, well thank you all very much for attending the conference call. Mike and I are always available for many investors who didn’t get a chance to ask questions or have follow-up questions if you want, please give us a call we are more than happy to spend the time on the phone going through anything you want to discuss. And we appreciate your interest and your support of the stock and the company. Thanks so much.

Operator

This does conclude today’s program. We appreciate your participation. You may disconnect at anytime and have a great day.

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Premier Exhibitions (PRXI): Q2 EPS of $0.00 vs. $0.05 last year .

Revenue of $7.8M  vs. $13.4M last year . (PR)