Friday, March 13, 2009

Mark Sellers' first conference call as Premier's Chairman

Now that I am sufficiently recovered (I think) from listening in on Mark Sellers' first conference call as Chairman of Premier, here's the link to the transcript of the same.

Things are in much worse shape at Premier than I'd envisioned (I was pessimistic before the call). As I'd posted elsewhere, I was certainly wrong in my assessment that prior management was running the company terribly. The truth is that that they were hardly running the company at all. I still cannot believe some of the stuff that Sellers mentioned in that call. I'll bet Sellers wasn't prepared for most of it either. The single most damaging piece of information to come out of that call was the lack of scheduled exhibition days for later this year. This implies that capital will need to be raised (although there was no indication of just how much would need to be raised) with the options ranked in the following order:
(a). Selling a portion of the business. I'd guess Sellers was referring to the Titanic (and it's associated assets) here.
(b). Raising debt capital.
(c). Raising equity capital. The question here is the amount of dilution that might occur under this scenario.

If none of this works out, Sellers mentioned that they'd look to sell the entire company. Clearly, though, this is his least preferred option. The interim CEO, Chris Davino, spoke for a bit about the problems at Premier and how they were approaching it. I liked the guy. He was brutally honest and realistic about the situation. As would be obvious in a situation like this, they are looking to get to cash-flow neutral as a first step. I find it interesting though that Chris has been appointed for a period to last between 4-6 months. That, quite possibly, gives us an upper bound on management's estimate for Premier to get back to at least not bleeding cash.

On the good news front(there is some), Sellers was quite clear that Premier wouldn't provide earnings guidance any more. If every CEO in the corporate world were to make the same decision, long-term shareholders, in aggregate, would be wealthier than they would be otherwise. This decision alone is indicative of Sellers' clear understanding of the true nature of most businesses(even if their managements would like you to believe otherwise) and his gumption in standing up for what he believes in. In this otherwise sordid affair to date, I couldn't be happier than to be associated with a manager like Mark Sellers.

The company has some serious issues to work through. Quite clearly, I made a mistake in making the decision to buy Premier. There was at least one issue that, if I'd picked up on it, would've given me serious qualms about buying into Premier. I'll have more to say about that in another post. The outcome of the investment may still be alright from here, but that'll have been despite my process, not because of it.

Often wrong but seldom in doubt,
Ragu

6 comments:

  1. Ragu,

    Yes, you may still come out winning with premier in the long run despite all the screw-ups.

    A google on Davino brought up this -

    http://archive.recordonline.com/archive/2006/03/21/news-dcmlchartwellsuit-03-21.html

    Yet, you have to trust Mark on this judgement and hope Davino's good at his job.

    regards,
    Qleap

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  2. Ragu,

    you should be doing well over a 3 year time frame with this company... don't let these price fluctuations or the ineptness of former management get you down.

    turnarounds are messy; and even me, the person that thinks 100 year old dishes are next to worthless, can argue that this company is worth more dead than alive.

    -jeff

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  3. Qleap,

    This might still be a winning bet. There is a significant difference though between a good bet and a winning bet. In this case, the information to indicate that this wasn't a bet worth making was available. I missed it and that's indicative of a process deficiency.

    Re. Davino, I saw that link as well. In the absence of any other information regarding the case, I am not going to second guess Sellers here.

    Jeff,

    Price fluctuations don't bother me much. Value impairments do. I place much more value on the Titanic assets than you do. Balancing that, I am not as optimistic as Sellers is about the growth prospects for this business. It goes without saying that I will be happy to be proven right about the former and wrong about the latter.

    --Ragu

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  4. Ragu,

    Planning to post on the issues you feel you should have picked up before buying this ?

    Eagerly waiting for this.

    thanks
    Qleap

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  5. An interesting post regarding the assets of Premier. They don't OWN any of the artifacts collected from the titanic.

    valueinvestortoday.com/2009/10/28/did-value-investor-mark-sellers-over-value-prxi

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  6. Premier isn't allowed to sell any assets. The only assets they have claim to regarding the Titanic is from the 1987 French ruling. That ruling has been in debate ever since. Nonetheless, according to France, they gave Premier ownership of the assets salvaged up to 1987 with the exception that they are not allowed to sell any of the assets or dispose of them in any way.

    The ruling after 1987 up until now has been that Premier is allowed to salvage the artifacts but can not claim a material ownership of them.

    So, If they want to raise capital, they're going to have to find other ways of doing so because they can't sell any of the artifacts from the Titanic.

    ReplyDelete