Ballantyne Strong, Inc. (NYSE MKT: BTN), a holding company
with diverse business activities focused on serving the cinema,
retail, financial and government markets, today reported financial
results for the third quarter ended September 30, 2015.
Net revenues were $23.5 million in the third quarter of 2015,
compared with $22.7 million in the same period of the prior year.
Net losses totaled $3.2 million, or ($0.23) per share, in the third
quarter of 2015, compared with net losses of $109,000, or ($0.01)
per share, in the same period of the prior year.
The financial results for the third quarter of 2015 include $3.9
million of charges that are expected to be non-recurring in nature.
These charges include the following items:
- A charge of $1.6 million related to the
valuation of notes receivable
- A charge of $1.0 million related to the
valuation of inventory
- A charge of $0.6 million related to the
impairment of software intangibles
- A charge associated with a deferred tax
asset write off of $0.4 million
- Other net charges of $0.3 million
Kyle Cerminara, Executive Chairman of Ballantyne Strong,
commented, “In our first full quarter leading Ballantyne Strong,
this newly constructed Board has taken major steps to position the
Company for success. We started the process of implementing
zero-based budgeting and the results are starting to show in our
improving adjusted gross margin and SG&A. We have taken a deep
dive into every business line at Ballantyne Strong and we have made
significant changes to the leadership of our business lines. We are
enthusiastic about our strong market position in the cinema
industry and we believe that Ray Boegner’s leadership will further
strengthen our position in this very important industry. The
addition of Steve Schilling as President of our newly unified
Digital Media business should begin to start showing revenue and
earnings growth as our business model unfolds. We are excited about
the future of Ballantyne Strong and our ability to drive
significant shareholder value.”
Q3 2015 Financial SummaryManaged Services revenues were
$9.0 million in the third quarter of 2015, compared with $7.2
million in the same period of the prior year. The increase is
attributable to increased demand from the service business as well
as higher project revenues in the digital media business.
Systems Integration revenues were $14.8 million in the third
quarter of 2015, compared with $15.7 million in the same period of
the prior year. The decrease is primarily attributable to lower
sales of digital projectors and cinema equipment, which was
partially offset by higher sales of screens.
Consolidated gross profit was $4.0 million in the third quarter
of 2015, compared with $4.1 million in the same quarter of the
prior year. Gross margin was 16.9% in the third quarter of 2015,
compared with 17.9% in the same quarter of the prior year. The key
driver of the decrease in gross margin as a percentage of revenue
was a write off of inventory as we continue to evaluate our lines
of business. Excluding this charge, gross profit was $5.0 million
and gross margin was 21.2%. This represents an improvement of 330
basis points in comparison to the same quarter of the prior
year.
Selling, general and administrative expenses (SG&A) were
$5.2 million in the third quarter of 2015, compared with $4.9
million in the same quarter of the prior year. SG&A in the
third quarter of 2015 included charges for the impairment of
intangibles and other charges. Excluding these charges, SG&A
expenses were $4.3 million. This represents a 13% reduction in
comparison to the same quarter of the prior year. This decrease in
comparison to the prior year was attributable to reductions in
compensation related expenses.
Nine Month ResultsFor the nine months ended September 30,
2015, net revenues were $65.7 million, compared with $66.7 million
for the same period in 2014. Gross profit amounted to $11.9
million, or 18.1% of net revenues, compared to gross profit of
$12.5 million, or 18.8% of net revenues in the prior year period.
Net loss was $16.3 million, or ($1.15) per share, compared to a net
loss of $0.3 million, or ($0.02) per diluted share, in the first
nine months of 2014. The results for the nine months ended
September 30, 2015 included $16.6 million of charges that are
expected to be non-recurring in nature. These charges were related
to a notes receivable valuation, severance, facility consolidation,
the proxy contest, inventory valuation, software intangible
impairment, other charges and deferred tax valuation
allowances.
Balance SheetBallantyne’s cash and cash equivalents
balance at September 30, 2015 was $24.7 million, which was in line
with the $24.7 million at the end of the prior quarter. The
significant items outlined above were all non-cash in nature and
allowed the Company to maintain its strong cash position.
Conference Call and WebcastA conference call to discuss
2015 third quarter financial results will be held on Wednesday,
November 4, 2015 at 5:00 p.m. Eastern Time / 4:00 p.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”. A link to the
third quarter presentation and a live webcast of the call is
available on the Investors – Financial Reports & Webcasts
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 20, 2015, conference
ID 10071983.
About Ballantyne Strong, Inc.
(www.strong-world.com)Ballantyne Strong and its
subsidiaries engage in diverse business activities including the
design, integration and installation of technology solutions for a
broad range of applications; development and delivery of
out-of-home messaging, advertising and communications;
manufacturing of projection screens; and providing managed services
including monitoring of networked equipment. The Company focuses on
serving the cinema, retail, financial, and government markets.
Forward-Looking StatementsExcept 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, December 31, 2015
2014 (Unaudited) Assets Current assets:
Cash and cash equivalents $ 24,749 $ 22,491 Accounts receivable
(net of allowance for doubtful accounts of $811 and $679,
respectively) 13,650 19,220 Inventories: Finished goods, net 9,241
9,529 Work in process 345 632 Raw materials and components, net
1,151 2,281 Total inventories, net 10,737 12,442 Recoverable income
taxes 111 1,255 Deferred income taxes 1,119 3,541 Other current
assets 2,712 2,956 Current assets held for sale 638 2,712 Total
current assets 53,716 64,617 Property, plant and equipment (net of
accumulated depreciation of $6,316 and $5,834, respectively) 12,517
13,914 Intangible assets, net 264 1,168 Goodwill 895 1,029 Notes
receivable 1,669 2,985 Deferred income taxes — 4,910 Other assets
570 1,447 Total assets $ 69,631 $ 90,070
Liabilities and
Stockholders’ Equity Current liabilities: Accounts payable $
7,616 $ 9,039 Accrued expenses 4,738 4,366 Customer
deposits/deferred revenue 4,203 5,473 Income tax payable 1,166
1,009 Total current liabilities 17,723 19,887 Deferred revenue
1,525 2,230 Deferred income taxes 2,346 715 Other accrued expenses,
net of current portion 1,523 1,776 Total liabilities 23,117
24,608 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 16,895
and 16,809 shares at September 30, 2015 and December 31, 2014,
respectively; 14,164 and 14,078 shares outstanding at September 30,
2015 and December 31, 2014, respectively 168 168 Additional paid-in
capital 38,927 38,657 Accumulated other comprehensive income:
Foreign currency translation (5,258 ) (2,325 ) Postretirement
benefit obligations 139 139 Retained earnings 30,778 47,062 64,754
83,701 Less 2,731 of common shares in treasury, at cost at
September 30, 2015 and December 31, 2014
(18,240
)
(18,239
) Total stockholders’ equity 46,514 65,462 Total liabilities and
stockholders’ equity $ 69,631 $ 90,070
Ballantyne Strong, Inc. and
Subsidiaries
Condensed Consolidated Statements of
Operations
Three and Nine Months Ended September
30, 2015 and 2014
(In thousands, except per share
data)
(Unaudited)
Three Months Ended September 30, Nine
Months Ended September 30, 2015 2014
2015 2014 Net product sales $ 17,327 $ 17,396
$ 48,257 $ 48,432 Net service revenues 6,185 5,268 17,442 18,280
Total net revenues 23,512 22,664 65,699 66,712 Cost of products
sold 15,271 15,042 42,439 41,676 Cost of services 4,273 3,565
11,362 12,516 Total cost of revenues 19,544 18,607 53,801 54,192
Gross profit 3,968 4,057 11,898 12,520 Selling and administrative
expenses: Selling 1,187 1,843 4,307 4,947 Administrative 4,032
3,066 11,893 9,781 Total selling and administrative expenses 5,219
4,909 16,200 14,728 Gain (loss) on the sale or disposal of assets
(15 ) 4 (393 ) 12 Loss from operations (1,266 ) (848 ) (4,695 )
(2,196) Equity income of joint venture — — 94 95 Other income
(expense): Interest income 21 175 351 534 Interest expense (7 ) (15
) (31 ) (43 ) Fair value adjustment to notes receivable (1,595) —
(1,595 ) — Other income, net 763 255 1,345 341 Total other
income (expense) (818) 415 70 832 Loss before income taxes
(2,084 ) (433 ) (4,531 ) (1,269 ) Income tax benefit (expense)
(1,117 ) 324 (11,753 ) 947 Net loss $ (3,201 ) $ (109) $ (16,284 )
$ (322 ) Basic loss per share $ (0.23 ) $ (0.01) $ (1.15 ) $ (0.02
) Diluted loss per share $ (0.23 ) $ (0.01) $ (1.15 ) $ (0.02 )
Weighted average shares outstanding: Basic 14,164
14,086 14,122 14,052 Diluted 14,164 14,086 14,122 14,052
Ballantyne Strong, Inc. and
Subsidiaries
Condensed Consolidated Statements of
Cash Flows
Nine Months Ended September, 2015 and
2014
(In thousands)
(Unaudited)
Nine Months Ended September 30, 2015
2014 Cash flows from operating activities: Net loss $
(16,284 ) $ (322 ) Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: Provision for doubtful
accounts 215 9 Provision for obsolete inventory 1,645 (117 )
Provision for warranty 583 (191 ) Depreciation and amortization
1,646 1,374 Fair value adjustment to notes receivable 1,595 —
Impairment of intangibles 638 — Equity in income of joint venture
(94 ) (95 ) Loss on forward contracts — 145 (Gain) loss on disposal
of assets 393 (12 ) Deferred income taxes 8,765 (916 ) Share-based
compensation expense 269 292 Changes in operating assets and
liabilities: Accounts, unbilled and notes receivable 6,166 5,976
Inventories 1,108 (1,348) Other current assets 96 (8) Accounts
payable (1,341 ) (2,094 ) Accrued expenses (238 ) (2,050 ) Customer
deposits/deferred revenue (1,931 ) (917 ) Current income taxes
1,425 (2,938 ) Other assets (62 ) (83 ) Net cash
provided by (used in) operating activities 4,594 (3,295 )
Cash flows from investing activities: Capital expenditures (1,051 )
(1,057 ) Proceeds from sale of assets 38 58 Net cash
used in investing activities (1,013 ) (999 ) Cash flows from
financing activities:
Payments on capital lease obligations
(14 ) (14 ) Excess tax benefits from share-based arrangements
10 (7 ) Net cash used in financing activities (4 )
(21 ) Effect of exchange rate changes on cash and cash equivalents
(1,319 ) (460 ) Net increase (decrease) in cash and
cash equivalents 2,258 (4,775 ) Cash and cash equivalents at
beginning of period 22,491 28,791 Cash and cash
equivalents at end of period $ 24,749 $ 24,016 Supplemental
disclosure of non-cash investing and financing activities: Capital
lease obligations for property and equipment $ 935 $ 158
Reconciliation of Non-GAAP Financial Measures
Adjusted Gross Profit, Adjusted Gross
Margin Percentage and Adjusted Selling and Administrative Expenses
Reconciliation
Adjusted gross profit, adjusted gross margin percentage and
adjusted selling and administrative expenses are non-GAAP measures.
The Company believes these measures provide a useful indication of
profitability and basis for assessing and analyzing the operations
of the Company as it transitions to a new Board and evaluates the
Company’s lines of business without the impact of charges related
to severance, facility consolidation, the proxy contest, inventory
valuation, software intangibles impairment and other charges.
These adjusted financial measures should not be considered in
isolation or as a substitute for other profitability metrics
prepared in accordance with GAAP. Adjusted financial measures, as
presented, may not be comparable to similarly titled measures of
other companies. Adjusted financial measures for 2015 are not tax
effected due to the tax valuation allowance recorded in 2015.
Set forth below is a reconciliation of gross profit and selling
and administrative expense to adjusted gross profit, adjusted gross
margin percentage and adjusted selling and administrative expense.
There were no similar items noted during the three months ended
September 30, 2014. There was one similar item related to other
charges noted during the nine months ended September 30, 2014.
Reconciliation of Gross Profit and
Gross Margin Percentage Unaudited, in thousands
Three months ended 30-Sep-15 Amount
Percentage Gross profit $ 3,968 16.9% Inventory
valuation 1,020 4.3% Adjusted gross profit $ 4,988
21.2%
Reconciliation of Selling and
Administrative Unaudited, in thousands Three months
ended 30-Sep-15 Selling and administrative expenses $
5,219 Software intangibles impairment (638) Other charges (400)
Facility consolidation costs 93 Adjusted selling and
administrative expenses $ 4,274
Reconciliation of
Gross Profit and Gross Margin Percentage Unaudited, in
thousands Nine months ended 30-Sep-15
Amount Percentage Gross profit $ 11,898 18.1%
Inventory valuation 1,978 3.0% Adjusted gross profit
$ 13,876 21.1%
Reconciliation of Selling and
Administrative Unaudited, in thousands Nine months
ended 30-Sep-15 Selling and administrative expenses $
16,200 Severance costs (695) Facility consolidation costs 34 Proxy
contest charges (460) Software intangibles impairment (638) Other
charges (400) Adjusted selling and administrative expenses $
14,041
Reconciliation of Selling and
Administrative Unaudited, in thousands Nine months
ended 30-Sep-14 Selling and administrative expenses $
14,728 Other charges (106) Adjusted selling and
administrative expenses $ 14,622
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Ballantyne Strong, Inc.Nate Legband, 402-829-9404Chief
Financial OfficerorElise Stejskal, 402-829-9423Investor
Relations
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