Ballantyne Reports Financial Results for Third Quarter of 2014

OMAHA, Neb.--()--Ballantyne Strong, Inc. (NYSE MKT: BTN), a diversified provider of digital technology services, products and solutions, today reported financial results for the third quarter ended September 30, 2014.

Net revenues were $22.7 million in the third quarter of 2014, compared with $18.9 million in the same period of the prior year. Net loss totaled $109,000, or ($0.01) per diluted share, in the third quarter of 2014, compared with net income of $46,000, or $0.00 per diluted share, in the same period of the prior year.

Gary L. Cavey, President and CEO of Ballantyne Strong, commented, “Our third quarter results reflect our changing business mix, as we have been able to offset declining demand in the legacy cinema business with growth in our expanded managed services segment. We continue to make investments in new product areas in order to create a more diversified revenue mix with better long-term growth opportunities. We believe our financial performance will be relatively consistent going forward until our newer businesses increase in scale, which should result in a higher level of profitability.”

Q3 2014 Financial Summary

Managed Services revenues were $7.2 million in the third quarter of 2014, compared with $2.7 million in the same period of the prior year. The increase is attributable to the acquisition of Convergent Media Systems.

Systems Integration revenues were $15.7 million in the third quarter of 2014, compared with $16.2 million in the same period of the prior year. The decline is primarily attributable to the continued softening in demand as the cinema industry’s shift to a digital equipment platform winds down.

Consolidated gross profit was $4.1 million in the third quarter of 2014, compared with $3.3 million in the same quarter of the prior year. Gross margin was 17.9% in the third quarter of 2014, compared with 17.7% in the same quarter of the prior year.

Selling, general and administrative expenses (SG&A) were $4.9 million in the third quarter of 2014, compared with $3.4 million in the same quarter of the prior year. The increase in SG&A was primarily attributable to the addition of Convergent’s operations.

Nine Month Results

For the nine months ended September 30, 2014, net revenues were $66.7 million, compared with $70.9 million for the same period in 2013. Gross profit amounted to $12.5 million, or 18.8% of net revenues, compared to gross profit of $11.9 million, or 16.8% of net revenues, in the prior-year period. Net loss was $322,000, or ($0.02) per share, compared to net earnings of $1.9 million, or $0.13 per diluted share, in the first nine months of 2013.

Balance Sheet

Ballantyne’s cash and cash equivalents balance at September 30, 2014 was $24.0 million, compared with $26.9 million at the end of the prior quarter. The decrease in cash and cash equivalents balance was primarily attributable to an increase in inventory and capital investments to support future sales growth.

Conference Call and Webcast

A conference call to discuss 2014 third quarter financial results will be held on Friday, November 7, 2014 at 12:00 p.m. Eastern Time / 11:00 a.m. Central Time. Investors and analysts are invited to access the conference call by dialing 866-652-5200 (domestic) or 412-317-6060 (international), and referencing “Ballantyne Strong.” There will also be a live webcast of the call available at the Investor Relations section of http://www.strong-world.com.

After the live webcast, a replay will remain available in the Investor Relations section of Ballantyne Strong’s website. A replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) through November 17, 2014, conference ID 10055261.

About Ballantyne Strong, Inc. (www.strong-world.com)

Ballantyne Strong designs, integrates, and installs technology solutions for a broad range of applications; develops and delivers out-of-home messaging, advertising and communications; manufactures projection screens and lighting products; and provides managed services including monitoring of networked equipment. The Company focuses on serving the retail, financial, government and cinema markets.

Forward-Looking Statements

Except for the historical information in this press release, it includes forward-looking statements that involve risks and uncertainties, including but not limited to, quarterly fluctuations in results; customer demand for the Company’s products; the development of new technology for alternate means of motion picture presentation; domestic and international economic conditions; the management of growth; and other risks detailed from time to time in the Company’s Securities and Exchange Commission filings. Actual results may differ materially from management’s expectations.

     

Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)

 

September 30,
2014

December 31,
2013

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 24,016 $ 28,791
Accounts receivable (net of allowance for doubtful accounts of $636 and $703, respectively) 15,043 20,047
Inventories:
Finished goods, net 13,457 10,949
Work in process 870 345
Raw materials and components, net 2,204 3,891
Total inventories, net 16,531 15,185
Recoverable income taxes 5,021 2,207
Other current assets 5,429 5,873
Total current assets 66,040 72,103
Property, plant and equipment (net of accumulated depreciation of $5,713 and $4,781, respectively) 14,079 14,721
Note receivable 2,855 2,497
Intangible assets, net 1,074 895
Goodwill 1,066 1,123
Other assets 3,977 4,105
Total assets $ 89,091 $ 95,444
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 10,798 $ 12,844
Accrued expenses 4,174 6,236
Customer deposits/deferred revenue 3,142 3,474
Income tax payable 726 888
Total current liabilities 18,840 23,442
Deferred revenue 2,413 3,008
Deferred income taxes 766 790
Other accrued expenses, net of current portion 1,716 1,748
Total liabilities 23,735 28,988
Stockholders’ equity:
Preferred stock, par value $.01 per share; Authorized 1,000 shares, none outstanding
Common stock, par value $.01 per share; Authorized 25,000 shares; issued 17,152 and 16,869 shares at September 30, 2014 and December 31, 2013, respectively; 14,421 and 14,138 shares outstanding at September 30, 2014 and December 31, 2013, respectively 167 167
Additional paid-in capital 38,524 38,231
Accumulated other comprehensive income:
Foreign currency translation (2,072 ) (959)
Postretirement benefit obligations 190 190
Retained earnings 46,786 47,066
83,595 84,695
Less 2,731 of common shares in treasury, at cost at September 30, 2014 and December 31, 2013 (18,239 ) (18,239 )
Total stockholders’ equity 65,356 66,456
Total liabilities and stockholders’ equity $ 89,091 $ 95,444
 
     

Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2014 and 2013
(In thousands, except per share data)
(Unaudited)

 
Three Months Ended September 30, Nine Months Ended September 30,
2014   2013 2014   2013
Net product sales $ 17,396 $ 16,275 $ 48,432 $ 62,877
Net service revenues 5,268 2,580 18,280 7,988
Total net revenues 22,664 18,855 66,712 70,865
Cost of products sold 15,042 13,343 41,676 52,486
Cost of services 3,565 2,174 12,516 6,448
Total cost of revenues 18,607 15,517 54,192 58,934
Gross profit 4,057 3,338 12,520 11,931
Selling and administrative expenses:
Selling 1,843 850 4,947 2,586
Administrative 3,066 2,524 9,781 7,478
Total selling and administrative expenses 4,909 3,374 14,728 10,064
Gain on the sale/disposal/transfer of assets 4 3 12 7
Income (loss) from operations (848 ) (33 ) (2,196 ) 1,874
Equity income (loss) of joint venture 2 95 (117 )
Other income:
Interest income 175 159 534 169
Interest expense (15 ) (7 ) (43 )
Other income (expense), net 255 (33 ) 341 463
Total other income 415 119 832 632
Earnings (loss) before income taxes (433 ) 88 (1,269 ) 2,389
Income tax benefit (expense) 324 (42 ) 947 (502 )
Net earnings (loss) $ (109 ) $ 46 $ (322 ) $ 1,887
Basic earnings (loss) per share $ (0.01 ) $ 0.00 $ (0.02 ) $ 0.13
Diluted earnings (loss) per share $ (0.01 ) $ 0.00 $ (0.02 ) $ 0.13
 
 
Weighted average shares outstanding:
Basic 14,086 14,009 14,052 13,995
Diluted 14,086 14,039 14,052 14,025
 
   

Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2014 and 2013
(In thousands)
(Unaudited)

 
Nine Months Ended September 30,
2014   2013
 
Cash flows from operating activities:
Net earnings (loss) $ (322 ) $ 1,887
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for doubtful accounts 9 194
Provision for obsolete inventory (117 ) (13 )
Provision for warranty (191 ) 321
Depreciation and amortization 1,374 1,022
Equity in (income) loss of joint venture (95 ) 117
Loss on forward contracts 145 (9 )
(Gain) loss on disposal or transfer of assets (12 ) (7 )
Deferred income taxes (916 ) 376
Share-based compensation expense 292 345
Changes in operating assets and liabilities:
Accounts, unbilled and notes receivable 5,976 13,441
Inventories (1,348 ) (2,912 )
Other current assets (8 ) 1,563
Accounts payable (2,094 ) (7,665 )
Accrued expenses (2,050 ) (1,048 )
Customer deposits/deferred revenue (917 ) (2,771 )
Current income taxes (2,938 ) 813
Other assets   (83 )   121
Net cash (used in) provided by operating activities (3,295 ) 5,775
 
Cash Flows from investing activities:
Purchase of Peintures Elite, Inc. (1,747 )
Deposit on Convergent acquisition (17,424 )
Capital expenditures (1,057 ) (231 )
Proceeds from sale of assets   58   6
Net cash used in investing activities (999 ) (19,396)
 
Cash flows from financing activities:
Excess tax benefits from share-based arrangements (7 ) (11 )
Payments on capital lease obligations (14 )
Proceeds from employee stock purchase plan     4
Net cash used in financing activities (21 ) (7 )
Effect of exchange rate changes on cash and cash equivalents   (460 )   (207 )
Net decrease in cash and cash equivalents (4,775 ) (13,835 )
Cash and cash equivalents at beginning of period   28,791   40,168
Cash and cash equivalents at end of period $ 24,016 $ 26,333
 

Contacts

Ballantyne Strong, Inc.
Nate Legband, 402-829-9404
Chief Financial Officer
or
Financial Profiles
Tony Rossi, 310-622-8221
trossi@finprofiles.com