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Ballantyne Reports 2012 Q3 Net Revenues of $39.3M

Ballantyne Strong, Inc. (NYSE MKT: BTN):

Conference call:       Today - Friday, November 9, 2012 at 10:00 AM ET
Webcast / Replay URL:

http://www.strong-world.com (Investor Relations section) or www.earnings.com

The replay will be available on the Internet for 30 days.
Dial-in number:       (800) 381-7839 (no pass code required)
 

Ballantyne Strong, Inc. (NYSE MKT: BTN), a provider of digital cinema projection equipment, screens and services as well as specialty lighting equipment, today reported financial results for the third quarter ended September 30, 2012.

Commenting on the Company’s operating results, President and CEO Gary L. Cavey stated,

“Net revenues for the third quarter came in at $39.3 million, down 38% from a year ago when Ballantyne achieved an all-time record as a result of a significant digital cinema deployment. The diluted loss per share of $0.02 compared to net earnings of $0.33 per share in the record-setting Q3 ’11.

“Third quarter results reflect the recent industry pricing pressure related to the advanced stage of the domestic digital system rollout, putting pressure on margins for equipment resellers. We are actively focused on expanding into complementary opportunities that build upon our competencies. Ballantyne’s reputation as a customer-focused service provider with an 80-year track record of success is evidence of the Company’s ability to transition to new markets and technologies. Our strong balance sheet and strategic focus positions us for future growth.

“Ballantyne’s year-over-year comparisons reflect the record revenue and bottom-line net income numbers generated in last year’s third quarter when our cinema services group successfully completed the Marcus Theatres digital rollout of more than 550 projection systems in an unprecedented 45-day period.

“We remain focused on further leveraging our strong industry position, technological expertise and customer service orientation as we transition Ballantyne from its recent successes in the cinema industry’s widespread adoption of the digital platform. Our mid-term goal is to achieve sustainable and more predictable performance derived from a larger recurring revenue base in areas such as service. We are optimistic that with the stability of the Company’s healthy balance sheet, including $36.8 million in cash and no long-term debt, and our continued emphasis on achieving operational efficiency, Ballantyne remains well positioned to generate continued success over the next phase of our corporate evolution.”

Third Quarter Highlights

  • Strong Lighting has been awarded the prestigious World Trade Center lighting contract to produce the world’s first high-powered LED beacon light.
  • The state-of-the-art Network Operations Center (NOC) continues to achieve substantial growth, delivering a 250% increase from the year ago period.
  • Ballantyne captured one of the largest digital equipment sales in Latin America.

Third Quarter Results

Ballantyne Strong’s total net revenues decreased 38% to $39.3 million versus $63.4 million for Q3 ’11. The decrease was largely due to the challenging comparison to the record-setting prior-year period.

Digital cinema products accounted for $30.6 million of the Company’s total sales during the period compared to $54.0 million in the year ago quarter. As mentioned above, the decrease was largely due to the challenging comparison to the prior-year period although the decline was more pronounced as the Virtual Print Free (VPF) providers extended their installation deadlines, some as far out as April of next year, as long as an exhibitor is signed up for a given program. BTN continues to leverage its worldwide relationships with exhibitors and has captured a digital deployment contract from one of the largest cinema chains in Latin America, with delivery scheduled for Q4 and early 2013. In addition, a focused sales effort on the remaining U.S. projector market has also contributed to steady sales from the smaller to mid-sized exhibitors.

Cinema service revenue of $4.3 million declined 7.4% as compared to $4.6 million in Q3 ’11. The decrease was due to the substantial installation revenue recognized the prior year, which was partially offset with growth in the service and Network Operations Center (NOC) 24/7 monitoring businesses. Sales growth in service and NOC monitoring, when compared to the year-ago quarter, increased approximately 25% and 250%, respectively.

The Company’s cinema screen business generated sales of $3.0 million during the quarter, 24% higher than the year-ago level, reflecting a significant increase in large format screen sales as well as continued international screen sales growth.

The specialty lighting business generated quarterly sales of $0.8 million, up from $0.7 million a year ago. The slight increase was a result of ongoing efforts to support and grow this business with an array of LED-focused products. We were recently awarded the World Trade Center lighting contract to produce the world’s first high-powered LED beacon light based on its proprietary LED Solutions technology. The Company also secured a contract to provide the architectural lighting for the antenna of the World Trade Center.

Gross profit was $3.7 million, down 63% from $10.1 million a year ago. The reduced volume, as discussed previously, impacted gross profit by $3.9 million with the remaining $2.5 million shortfall associated with competitive pressures within the digital equipment market, lower margin sales on international business and reduced leverage on fixed costs due to the lower Q3 sales volume.

SG&A expenses were relatively flat at $3.7 million versus $3.5 million in the prior-year period. The Company continues to exercise expense discipline to ensure spending is allocated in-line with business trends and the ongoing transformation of its business, including the expansion of its global products and services re-focus, as announced in early 2012.

The Company reported a net loss for the quarter of $0.3 million, or $0.02 per diluted share, compared to net income of $4.7 million, or $0.33 per diluted share in Q3 ’12.

Nine-Month Results

Net revenues for the nine months ended September 30, 2012 decreased approximately 2% to $130.0 million, compared to the first nine months of 2011, leading to a gross profit of $16.4 million, or 13% of net revenues, compared to gross profit of $22.9 million, or 17.2% of net revenues in the comparable prior-year period. Net earnings were $4.0 million, or $0.28 per diluted share, compared to net earnings of $8.7 million, or $0.60 per diluted share in the first nine months of 2011.

Balance Sheet and Cash Flow Update

Ballantyne’s cash and cash equivalents balance at quarter-end was $36.8 million, up from $35.9 million at the end of Q2 ’12.

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

Ballantyne Strong is a provider of digital cinema projection equipment, screens and services as well as specialty lighting equipment. The Company supplies major and independent theater chains, top arenas, theme parks and architectural sites around the world.

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 Statements of Operations

Three and Nine Months Ended September 30, 2012 and 2011

(Unaudited)

             
Three Months Ended

September 30,

Nine Months Ended

September 30,

2012     2011 2012     2011
Net revenues $ 39,260 $ 63,437 $ 129,987 $ 132,906
Cost of revenues   35,539     53,387     113,569     110,019  
Gross profit 3,721 10,050 16,418 22,887
Selling and administrative expenses:
Selling 1,349 933 3,381 2,924
Administrative   2,345     2,543     8,572     7,473  
Total selling and administrative expenses 3,694 3,476 11,952 7,473
Gain (loss) on the sale/disposal/transfer of assets   (17 )   13     1,361     36  
Income from operations 10 6,587 5,827 12,526
Net interest expense (8 ) (12 ) (30 ) (38 )
Equity in income (loss) of joint venture (65 ) 207 1 (121 )
Other income (expense), net   (205 )   127     208     48  
Income before income taxes (268 ) 6,909 6,006 12,415
Income tax expense   --     (2,170 )   (2,024 )   (3,683 )
Net earnings $ (268 ) $ 4,739   $ 3,982   $ 8,732  
Basic earnings per share $ (0.02 ) $ 0.33   $ 0.28   $ 0.61  
Diluted earnings per share $ (0.02 ) $ 0.33   $ 0.28   $ 0.60  
 
Weighted average shares outstanding:
Basic   13,959     14,462     14,055     14,404  
Diluted   13,959     14,488     14,136     14,483  
 
 

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

September 30, 2012 and December 31, 2011

(In thousands)

(Unaudited)

             
September 30,
2012
December 31,
2011
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 36,763 $ 39,889
Accounts receivable (net of allowance) 26,091 30,579
Unbilled revenue 272 2,586
Inventories, net 14,254 14,920
Other current assets   6,380     8,446  
Total current assets 83,760 96,420
Investment in joint venture

1,849
Property, plant and equipment (net of accumulated depreciation) 10,586 9,419
Property held for sale

1,810
Note receivable 2,217 2,062
Other non-current assets   2,311     1,896  
Total assets $ 98,874   $ 113,456  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 19,963 $ 31,924
Other accrued expenses 4,249 4,820
Customer deposits/deferred revenue 4,697 5,037
Income tax payable  

    4,135  
Total current liabilities 28,909 45,916
Deferred revenue 3,202 3,569
Other non-current liabilities   1,286     748  
Total liabilities 33,397 50,233
 
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 16,779 and 16,667 shares at September 30, 2012
and December 31, 2011, respectively; 14,048 and 14,512 shares
outstanding at September 30, 2012 and December 31, 2011,
respectively

167 167
Additional paid-in capital 37,658 37,234
Accumulated other comprehensive income:
Foreign currency translation 435 (137 )
Minimum pension liability 81 81
Retained earnings   45,375     41,361  
83,716 78,706

Less 2,713 and 2,155 of common shares in treasury, at cost at
June 30, 2012 and December 31, 2011, respectively

  (18,239 )   (15,483 )
Total stockholders’ equity   65,477     63,223  
Total liabilities and stockholders’ equity $ 98,874   $ 113,456  
 
 

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2012 and 2011

(In thousands)

(Unaudited)

       
Nine Months Ended

September 30,

2012       2011
 
Net cash (used in) operating activities $ (5,346 ) $ (183 )
 
Cash flows from investing activities:
Return of investment from Joint Venture 1,849
Excess distribution of investment from Joint Venture 659
 
Capital expenditures (1,095 ) (2,436 )
Proceeds from sale of assets   3,332     47  
Net cash provided by (used in) investing activities   4,745     (2,389 )
 
Cash flows from financing activities:
 
Purchase of treasury stock (2,756 )
Proceeds from exercise of stock options 177
Excess tax benefits from share-based compensation 301
Proceeds from employee stock purchase plan       164  
Net cash (used in) provided by financing activities   (2,756 )   642  
Effect of exchange rate changes on cash and cash equivalents   231     (373 )
Net (decrease) increase in cash and cash equivalents (3,126 ) 194
Cash and cash equivalents at beginning of period   39,889     22,250  
Cash and cash equivalents at end of period $ 36,763   $ 22,444  
 

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