BTN Ballantyne Strong Inc

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 fourth quarter ended December 31, 2015.

Net revenues were $27.1 million in the fourth quarter of 2015, compared with $28.4 million in the same period of the prior year. Net losses totaled $1.2 million, or ($0.08) per share, in the fourth quarter of 2015, compared with net income of $318,000, or $0.02 per share, in the same period of the prior year.

The financial results for the fourth quarter of 2015 include $1.8 million of charges that are expected to be non-recurring in nature. These charges include the following items:

• A charge of $1.0 million related to bad debt
• A charge of $0.4 million of income tax expense driven by a change in permanently reinvested earnings
• A charge of $0.2 million for severance costs
• Other charges of $0.2 million

Kyle Cerminara, Chairman and CEO of Ballantyne Strong, commented, “We are excited about the continued improvements in our Cinema and Digital Media businesses. Over the past several months the Board has implemented a strategy for the company that focuses on making optimal capital allocation decisions across the company’s businesses and investments. We expect to continue to invest in and grow the Cinema and Digital Media businesses. We are also evaluating investments in other industries where we believe the company can earn high returns on invested capital. Increased cash flow and return on invested capital is what we expect to drive increased shareholder value at Ballantyne Strong over the next five years and beyond.”

Q4 2015 Financial SummaryCinema revenues were $19.4 million in the fourth quarter of 2015, compared with $19.3 million in the same period of the prior year. The increase is primarily attributable to higher sales of digital projectors and cinema equipment.

Digital Media revenues were $8.0 million in the fourth quarter of 2015, compared with $9.4 million in the same period of the prior year. The decrease is attributable to lower project revenues as the prior year included two large installations.

Consolidated gross profit was $5.7 million in the fourth quarter of 2015, compared with $5.6 million in the same quarter of the prior year. Gross margin was 20.9% in the fourth quarter of 2015, compared with 19.9% in the same quarter of the prior year. This represents an improvement of 100 basis points in comparison to the same quarter of the prior year. Margin improvements were driven by the Digital Media segment.

Selling, general and administrative expenses (SG&A) were $5.9 million in the fourth quarter of 2015, compared with $5.2 million in the same quarter of the prior year. SG&A in the fourth quarter of 2015 included charges for bad debt, severance and other charges. Excluding these charges, adjusted SG&A expenses were $4.5 million. This represents a 13.5% 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.

Twelve Month ResultsFor the twelve months ended December 31, 2015, net revenues were $92.8 million, compared with $95.1 million for the same period in 2014. Gross profit amounted to $17.6 million, or 18.9% of net revenues, compared to gross profit of $18.2 million, or 19.1% of net revenues in the prior year period. Net loss was $17.5 million, or ($1.24) per share, compared to a net loss of $4 thousand, or $0.00 per share, for the twelve months ended December 31, 2014. The results for the twelve months ended December 31, 2015 included $18.4 million of charges that are expected to be non-recurring in nature. These charges were related to a notes receivable valuation adjustment, severance, facility consolidation, the proxy contest, inventory valuation, software intangible impairment, bad debt, other charges and deferred tax valuation allowances.

Balance SheetBallantyne’s cash and cash equivalents balance at December 31, 2015 was $22.1 million, which was lower than the $24.7 million at the end of the prior quarter. The decrease in cash was driven by cash utilized during the quarter for investments in marketable securities of $2.1 million and equity investments of $4.0 million. The business operations continue to be cash generative. Most of 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 fourth quarter financial results will be held on Monday, March 7, 2016 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 fourth 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 March 17, 2016, conference ID 10079832.

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)

    December 31, December 31, 2015 2014 Assets Current assets: Cash and cash equivalents $ 22,070 $ 22,491 Accounts receivable (less allowance for doubtful accounts of $1,927 in 2015 and $679 in 2014) 11,359 20,266 Inventories, net 9,693 14,108 Recoverable income taxes 85 1,255 Other current assets   2,739     2,956   Total current assets 45,946 61,076 Property, plant and equipment, net 11,768 13,914 Marketable securities 2,101 — Equity method investments 4,001 — Intangible assets, net 235 1,168 Goodwill 863 1,029 Notes receivable 1,669 2,985 Deferred income taxes — 7,736 Other assets   281     1,447   Total assets $ 66,864   $ 89,355   Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 7,369 $ 9,039 Accrued expenses 4,100 4,366 Customer deposits/deferred revenue 5,007 5,473 Income tax payable   1,291     1,009   Total current liabilities 17,767 19,887 Deferred revenue 1,288 2,230 Deferred income taxes 1,716 — Other accrued expenses, net of current portion   1,581     1,776   Total liabilities 22,352 23,893 Commitments and contingencies 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 16,925 and 16,809 shares at December 31, 2015 and December 31, 2014, respectively; 14,191 and 14,078 shares outstanding at December 31, 2015 and 2014, respectively 169 168 Additional paid-in capital 39,157 38,657 Accumulated other comprehensive income (loss): Foreign currency translation (6,229 ) (2,325 ) Postretirement benefit obligation 74 139 Retained earnings   29,595     47,062   62,766 83,701 Less 2,734 and 2,731 of common shares in treasury, at December 31, 2015 and 2014, respectively, at cost   (18,254 )   (18,239 ) Total stockholders’ equity   44,512     65,462   Total liabilities and stockholders’ equity $ 66,864   $ 89,355    

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three and Twelve Months Ended December 31, 2015 and 2014

(In thousands, except per share data)

(Unaudited)

    Three Months Ended December 31, Twelve Months Ended December 31, 2015   2014 2015   2014 Net revenues $ 27,124 $ 28,374 $ 92,829 $ 95,086 Cost of revenues 21,442 22,734 75,242 76,926 Gross profit 5,682 5,640 17,587 18,160 Selling and administrative expenses: Selling 1,215 2,288 5,522 7,235 Administrative 4,701 2,959 16,594 12,740 Total selling and administrative expenses 5,916 5,247 22,116 19,975 Gain (loss) on the sale/disposal/transfer of assets (31)

(2)

(425) 10 Income (loss) from operations (265) 391 (4,954) (1,805) Net interest income 11 166 326 657 Equity income (loss) of equity method investments 1 (17) 96 78 Fair value adjustment for notes receivable — — (1,595) — Other income, net 318 260 1,661 601 Income (loss) before income taxes 65 800 (4,466) (469) Income tax benefit (expense) (1,248)

(482)

(13,001) 465 Net earnings (loss) $ (1,183) $ 318 $ (17,467) $ (4) Basic earnings (loss) per share $ (0.08) $ 0.02 $ (1.24) $ 0.00 Diluted earnings (loss) per share $ (0.08) $ 0.02 $ (1.24) $ 0.00     Weighted average shares outstanding: Basic 14,176 14,078 14,135 14,061 Diluted 14,176 14,215 14,135 14,061  

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Twelve Months Ended December 31, 2015 and 2014

(In thousands)

(Unaudited)

 

 

Years Ended December 31,

2015   2014   Cash flows from operating activities: Net earnings (loss) $ (17,467 ) $ (4 ) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Provision for doubtful accounts

1,379 92 Provision for obsolete inventory 1,970 (200 ) Provision for warranty 800 — Depreciation and amortization 2,332 1,924 Impairment of intangibles 638 — Fair value adjustment to notes receivable 1,595 — Equity in (income) loss of equity method investments (96 ) (78 ) Fair value change in marketable securities (118 ) — Gain loss on forward contracts — 145 (Gain) loss on disposal or transfer of assets 425 (11 ) Deferred income taxes 9,193 (4,533 ) Share-based compensation expense 501 427 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable, unbilled and notes receivable 8,044 758 Inventories 1,893 1,149 Other current assets (166 ) 8 Accounts payable (1,588 ) (3,732 ) Accrued expenses (1,477 ) (1,904 ) Customer deposits/deferred revenue (1,359 ) 1,229 Current income taxes 1,620 1,145 Other assets   (137 )   (87 ) Net cash provided by (used in) operating activities   7,982     (3,672 ) Cash flows from investing activities: Purchase of businesses, net of cash acquired — — Purchase of equity securities (5,983 ) — Capital expenditures (442 ) (1,982 ) Proceeds from sales of assets   220     57   Net cash used in investing activities   (6,205 )   (1,925 ) Cash flows from financing activities: Purchase of treasury stock (15 ) — Proceeds from employee stock purchase plan — — Payments on capital lease obligations (200 ) (14 ) Excess tax benefits from share-based arrangements   12     (7 ) Net cash provided by (used in) financing activities (203 ) (21 ) Effect of exchange rate changes on cash and cash equivalents   (1,995 )   (682 ) Net decrease in cash and cash equivalents (421 ) (6,300 ) Cash and cash equivalents at beginning of year   22,491     28,791   Cash and cash equivalents at end of year $ 22,070   $ 22,491   Supplemental disclosure of cash paid for: Interest $ 45 $ 34 Income Taxes $ 2,272 $ 1,724 Supplemental disclosure of non-cash investing and financing activities: Capital lease obligations for property and equipment $ 752 $ 310  

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, bad debt 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 December 31, 2014. There was one similar item related to other charges noted during the twelve months ended December 31, 2014.

Reconciliation of Selling and Administrative   Unaudited, in thousands   Three months ended 31-Dec-15 Selling and administrative expenses $ 5,916 Severance costs (169) Bad debt (956) Other charges   (251) Adjusted selling and administrative expenses $ 4,540   Reconciliation of Gross Profit and Gross Margin Percentage Unaudited, in thousands Twelve months ended 31-Dec-15 Amount Percentage Gross profit $ 17,587 18.9% Inventory valuation   1,978 2.1% Adjusted gross profit $ 19,565 21.1%   Reconciliation of Selling and Administrative Unaudited, in thousands Twelve months ended 31-Dec-15 Selling and administrative expenses $ 22,116 Severance costs (864) Facility consolidation costs (333) Proxy contest charges (460) Software intangibles impairment (638) Bad debt (1,176) Other charges   (431) Adjusted selling and administrative expenses $ 18,214     Reconciliation of Selling and Administrative Unaudited, in thousands Twelve months ended 31-Dec-14 Selling and administrative expenses $ 19,975 Other charges   (69) Adjusted selling and administrative expenses $ 19,906

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Ballantyne Strong, Inc.Nate Legband, 402-829-9404Chief Financial OfficerorElise Stejskal, 402-829-9423Investor Relations