Ballantyne Strong, Inc. (NYSE
American: BTN) (the “Company”), a holding company with diverse
business activities focused on serving the cinema, retail,
financial, advertising and government markets, today announced
financial results for the period ended March 31, 2019. The Company
conducts its operations through three operating segments: Strong
Cinema, Convergent and Strong Outdoor.
First Quarter 2019
Highlights
- Total revenue decreased 9.6% to $14.3
million for the first quarter of 2019 as revenue growth at
Convergent and Strong Outdoor were offset by lower revenue
generated by Strong Cinema as our production facility was closed
for several weeks in the quarter due to weather-related damage. The
facility resumed production and shipping in March, and we are
rebuilding the damaged section of the facility which was fully
covered by insurance.
- Gross profit decreased 7.2% to $2.6
million for the first quarter of 2019 as favorable contributions
from Convergent, where revenue growth was accompanied by an
increase in gross profit margins from 14.5% to 28.3%, were offset
by the flow through of decreased revenue at Strong Cinema from the
temporary plant closure. The favorable trend at Convergent is due
to the combination of growth in high margin recurring revenue and
cost reduction initiatives.
- Operating loss improved by $0.5 million
for first quarter of 2019 to $2.6 million as improved operating
performance at Convergent and reductions in administrative expenses
were partially offset by increased investment in start-up operating
expenses at Strong Outdoor and by the lower contribution from
Strong Cinema.
- Net loss was $4.2 million ($0.29 per
share) for the first quarter of 2019 as compared to $3.8 million
($0.26 per share) in the prior year as improved operating
performance was offset by non-cash fair value adjustments and
equity method investment losses.
- Adjusted EBITDA, a non-GAAP measure,
improved to negative $1.6 million for the first quarter of 2019
from negative $2.1 million in the prior year due to operating
improvements at Convergent and reduced administrative
expenses.
Kyle Cerminara, Chairman and CEO commented, “We continued to see
strong performance from our Convergent business, which has turned
around significantly over the past few quarters. Strong Cinema was
impacted by weather damage to our facility in Quebec, and we
stopped shipping for several weeks during the first quarter. The
facility resumed operations in March, and we are fully insured for
property and casualty and business interruption. We expect
insurance recoveries to be approximately $5 million CDN, which will
positively impact future quarters as those claims are
finalized.
“The Convergent team has done a tremendous job accelerating high
margin recurring revenue growth while also significantly lowering
their operating costs. Strong Outdoor is building out its sales
leadership team and we expect to see growth accelerating in the
second half of 2019.”
Conference Call
The Company will host a conference call on Tuesday, May 14, 2019
at 4:30 pm Eastern Time. Investors and analysts are invited to
access the conference call by dialing 877-407-3982 (domestic) or
201-493-6780 (international) and providing the operator with
conference ID number: 13690794. A replay will be available
approximately two hours after the conclusion of the conference call
until Friday, June 14, 2019 by dialing 844-512-2921 in the U.S. and
Canada and 412-317-6671 internationally and entering the conference
ID number: 13690794.
Use of Non-GAAP Measures
Ballantyne Strong, Inc. prepares its consolidated financial
statements in accordance with United States generally accepted
accounting principles (“GAAP”). In addition to disclosing financial
results prepared in accordance with GAAP, the Company discloses
information regarding Adjusted EBITDA, which differs from the term
EBITDA as it is commonly used. In addition to adjusting net income
(loss) to exclude taxes, interest, and depreciation and
amortization, Adjusted EBITDA also excludes share-based
compensation, impairment charges, equity method income, fair value
adjustments, severance and transactional expenses and other
non-cash charges.
EBITDA and Adjusted EBITDA are not measures of performance
defined in accordance with GAAP. However, Adjusted EBITDA is used
internally in planning and evaluating the Company’s operating
performance. Accordingly, management believes that disclosure of
these metrics offers investors, bankers and other stakeholders an
additional view of the Company’s operations that, when coupled with
the GAAP results, provides a more complete understanding of the
Company’s financial results.
EBITDA and Adjusted EBITDA should not be considered as an
alternative to net loss or to net cash used in operating activities
as measures of operating results or liquidity. Our calculation of
EBITDA and Adjusted EBITDA may not be comparable to similarly
titled measures used by other companies, and the measures exclude
financial information that some may consider important in
evaluating the Company’s performance. A reconciliation of GAAP net
loss to EBITDA and Adjusted EBITDA is included in the accompanying
financial schedules.
EBITDA and Adjusted EBITDA have limitations as analytical tools,
and you should not consider them in isolation, or as substitutes
for analysis of our results as reported under GAAP. Some of these
limitations are (i) they do not reflect our cash expenditures, or
future requirements for capital expenditures or contractual
commitments, (ii) they do not reflect changes in, or cash
requirements for, our working capital needs, (iii) EBITDA and
Adjusted EBITDA do not reflect interest expense, or the cash
requirements necessary to service interest or principal payments,
on our debt, (iv) although depreciation and amortization are
non-cash charges, the assets being depreciated and amortized will
often have to be replaced in the future, and EBITDA and Adjusted
EBITDA do not reflect any cash requirements for such replacements,
(v) they do not adjust for all non-cash income or expense items
that are reflected in our statements of cash flows, (vi) they do
not reflect the impact of earnings or charges resulting from
matters we consider not to be indicative of our ongoing operations,
and (vii) other companies in our industry may calculate these
measures differently than we do, limiting their usefulness as
comparative measures.
We believe EBITDA and Adjusted EBITDA facilitate operating
performance comparisons from period to period by isolating the
effects of some items that vary from period to period without any
correlation to core operating performance or that vary widely among
similar companies. These potential differences may be caused by
variations in capital structures (affecting interest expense), tax
positions (such as the impact on periods or companies of changes in
effective tax rates or net operating losses) and the age and book
depreciation of facilities and equipment (affecting relative
depreciation expense). We also present EBITDA and Adjusted EBITDA
because (i) we believe these measures are frequently used by
securities analysts, investors and other interested parties to
evaluate companies in our industry, (ii) we believe investors will
find these measures useful in assessing our ability to service or
incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA
internally as benchmarks to evaluate our operating performance or
compare our performance to that of our competitors.
For further information, please refer to Ballantyne Strong,
Inc.’s Quarterly Report on Form 10-Q to be filed with the
Securities and Exchange Commission on or about May 15, 2019,
available online at www.sec.gov.
About Ballantyne
Strong, Inc.
(www.ballantynestrong.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 of managed
services including monitoring of networked equipment. The Company
focuses on serving the cinema, retail, financial, advertising and
government markets.
Forward-Looking
Statements
Except for the historical information in this press release, it
includes forward-looking statements which involve a number of risks
and uncertainties, including but not limited to those discussed in
the “Risk Factors” section contained in Item 1A in our Annual
Report on Form 10-K for the year ended December 31, 2018 and the
following risks and uncertainties: the Company’s ability to expand
its revenue streams, potential interruptions of supplier
relationships or higher prices charged by suppliers, the Company’s
ability to successfully compete and introduce enhancements and new
features that achieve market acceptance and that keep pace with
technological developments, the Company’s ability to successfully
execute its capital allocation strategy, the Company’s ability to
maintain its brand and reputation and retain or replace its
significant customers, the impact of a challenging global economic
environment or a downturn in the markets, economic and political
risks of selling products in foreign countries, risks of
non-compliance with U.S. and foreign laws and regulations,
potential sales tax collections and claims for uncollected amounts,
cybersecurity risks and risks of damage and interruptions of
information technology systems, the Company’s ability to retain key
members of management and successfully integrate new executives,
the Company’s ability to complete acquisitions, strategic
investments, entry into new lines of business, divestitures,
mergers or other transactions on acceptable terms or at all, the
Company’s ability to utilize or assert its intellectual property
rights, the impact of natural disasters and other catastrophic
events, the adequacy of insurance and the impact of having a
controlling stockholder. Given the risks and uncertainties, readers
should not place undue reliance on any forward-looking statement
and should recognize that the statements are predictions of future
results which may not occur as anticipated. Actual results could
differ materially from those anticipated in the forward-looking
statements and from historical results, due to the risks and
uncertainties described herein, as well as others not now
anticipated. New risk factors emerge from time to time and it is
not possible for management to predict all such risk factors, nor
can it assess the impact of all such factors on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements. Except where required by law, the
Company assumes no obligation to update forward-looking statements
to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements.
Ballantyne Strong, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In thousands, except par
values) March 31, 2019
December 31, 2018 (unaudited)
Assets Current assets:
Cash and cash equivalents $ 4,989 $ 6,698 Restricted cash 350 350
Accounts receivable (net of allowance for doubtful accounts of
$1,624 and $1,832, respectively) 12,394 13,841 Inventories, net
3,615 3,490 Recoverable income taxes 735 281 Other current assets
1,876 1,663 Total current assets 23,959
26,323 Property, plant and equipment (net of accumulated
depreciation of $8,687 and $9,046, respectively) 10,298 14,483
Operating lease right-of-use assets 9,588 - Finance lease
right-of-use assets 839 692 Equity method investments 10,450 11,167
Intangible assets, net 1,748 1,795 Goodwill 894 875 Notes
receivable 3,455 3,965 Other assets 326 337
Total assets $ 61,557 $ 59,637
Liabilities
and Stockholders' Equity Current liabilities: Accounts payable
$ 4,092 $ 4,724 Accrued expenses 2,709 2,782 Short-term debt 3,340
3,152 Current portion of long-term debt 923 1,094 Current portion
of operating lease obligations 1,833 - Current portion of finance
lease obligations 181 160 Deferred revenue and customer deposits
2,323 2,310 Total current liabilities
15,401 14,222 Long-term debt, net of current portion and debt
issuance costs 3,645 10,053 Operating lease obligations, net of
current portion 8,042 - Finance lease obligations, net of current
portion 590 427 Deferred revenue and customer deposits, net of
current portion 1,171 1,167 Deferred income taxes 2,577 2,516 Other
accrued expenses, net of current portion 87
254 Total liabilities 31,513 28,639 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 17,313 and 17,237 shares at March
31, 2019 and December 31, 2018, respectively; outstanding 14,519
and 14,443 shares at March 31, 2019 and December 31, 2018,
respectively 169 169 Additional paid-in capital 41,717 41,474
Accumulated other comprehensive income (loss): Foreign currency
translation (5,051 ) (5,308 ) Postretirement benefit obligations
127 125 Unrealized loss on available-for-sale securities of equity
method investment (286 ) (195 ) Retained earnings 11,954
13,319 48,630 49,584 Less 2,794 of common
shares in treasury, at cost (18,586 ) (18,586 ) Total
stockholders' equity 30,044 30,998
Total liabilities and stockholders' equity $ 61,557 $ 59,637
Ballantyne Strong, Inc. and
Subsidiaries Condensed Consolidated Statements of
Operations (In thousands, except per share amounts)
(Unaudited) Three Months
Ended March 31, 2019 2018 Net product sales $
5,579 $ 8,639 Net service revenues 8,727 7,189
Total net revenues 14,306 15,828 Cost of products sold 3,523
5,812 Cost of services 8,138 7,166
Total cost of revenues 11,661 12,978
Gross profit 2,645 2,850 Selling and administrative expenses:
Selling 1,228 1,225 Administrative 3,929 4,709
Total selling and administrative expenses 5,157 5,934 Loss
on disposal of assets (64 ) - Loss from
operations (2,576 ) (3,084 ) Other income (expense): Interest
expense (119 ) (45 ) Fair value adjustment to notes receivable (510
) (42 ) Foreign currency transaction (loss) gain (143 ) 104 Other
income (expense), net 36 (10 ) Total other
(expense) income (736 ) 7 Loss before income
taxes and equity method investment loss (3,312 ) (3,077 ) Income
tax expense 141 698 Equity method investment loss (697 )
(10 ) Net loss $ (4,150 ) $ (3,785 ) Basic loss per share $
(0.29 ) $ (0.26 ) Diluted loss per share $ (0.29 ) $ (0.26 )
Ballantyne Strong, Inc. and Subsidiaries Condensed
Consolidated Statements of Cash Flows (In thousands)
(Unaudited) Three
Months Ended March 31, 2019 2018 Cash flows from
operating activities: Net loss $ (4,150 ) $ (3,785 ) Adjustments to
reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts, net of recoveries (310 ) 103
Provision for obsolete inventory 53 44 Provision for warranty 67 79
Depreciation and amortization 795 524 Amortization and accretion of
operating leases 579 - Fair value adjustment to notes receivable
510 42 Equity method investment loss 697 10 Recognition of contract
acquisition costs - 57 Loss on disposal of assets 64 - Deferred
income taxes 50 87 Stock-based compensation expense 243 255 Changes
in operating assets and liabilities: Accounts receivable 1,819 (178
) Inventories (145 ) 537 Other current assets 2 5 Accounts payable
(592 ) 256 Accrued expenses (13 ) 429 Operating lease obligations
(590 ) - Deferred revenue and customer deposits 11 704 Current
income taxes (444 ) 36 Other assets (71 ) (796 ) Net
cash used in operating activities (1,425 ) (1,591 ) Cash
flows from investing activities: Proceeds from sale of property,
plant and equipment 86 - Dividends received from investee in excess
of cumulative earnings - 23 Capital expenditures (257 )
(356 ) Net cash used in investing activities (171 ) (333 )
Cash flows from financing activities: Proceeds from issuance
of long-term debt 237 - Principal payments on short-term debt (79 )
- Principal payments on long-term debt (245 ) (16 ) Payments on
capital lease obligations (49 ) (53 ) Net cash used
in financing activities (136 ) (69 ) Effect of
exchange rate changes on cash and cash equivalents 23
471 Net decrease in cash and cash equivalents and
restricted cash (1,709 ) (1,522 ) Cash and cash equivalents and
restricted cash at beginning of period 7,048
4,870 Cash and cash equivalents and restricted cash at end
of period $ 5,339 $ 3,348 Components of cash and cash
equivalents and restricted cash: Cash and cash equivalents $ 4,989
$ 3,348 Restricted cash 350 - Total
cash and cash equivalents and restricted cash $ 5,339 $
3,348
Ballantyne Strong, Inc. and Subsidiaries Summary
by Business Segments (In thousands) (Unaudited)
Quarters Ended March 31, 2019
2018 Strong Cinema Revenue $ 7,853 $ 11,450 Gross
profit 2,415 3,385 Operating income 1,159 2,325 Adjusted EBITDA $
1,343 $ 2,692
Convergent Revenue $ 5,538 $ 4,607
Gross profit 1,569 666 Operating income (loss) 752 (1,025 )
Adjusted EBITDA $ 1,163 $ (776 )
Strong Outdoor
Revenue $ 1,093 $ 62 Gross loss (1,416 ) (1,265 ) Operating loss
(2,012 ) (1,497 ) Adjusted EBITDA $ (1,911 ) $ (1,452 )
Corporate and Other Revenue $ (178 ) $ (291 ) Gross profit
77 64 Operating loss (2,475 ) (2,887 ) Adjusted EBITDA $ (2,176 ) $
(2,571 )
Consolidated Revenue $ 14,306 $ 15,828 Gross
profit 2,645 2,850 Operating loss (2,576 ) (3,084 ) Adjusted EBITDA
$ (1,581 ) $ (2,107 )
Ballantyne Strong, Inc. and
Subsidiaries
Reconciliation of Net Loss to Adjusted
EBITDA
(In thousands) (Unaudited)
Quarters Ended March 31,
2019
2018
Strong Strong
Corporate
Strong Strong Corporate Cinema Convergent Outdoor
and Other
Consolidated Cinema Convergent Outdoor and Other Consolidated Net
income (loss) $ (348 ) 579 $ (2,034 ) (2,347 ) $ (4,150 ) $ 1,862
(1,125 ) $ (1,497 ) (3,025 ) $ (3,785 ) Interest expense, net 35 92
23 (31 ) 119 14 9 - 22 45 Income tax expense 23 68 - 50 141 653 45
- - 698 Depreciation and amortization 219
423 100 53
795 224 295
45 45 609
EBITDA (71 ) 1,162 (1,911 ) (2,275 ) (3,095 ) 2,753 (776 ) (1,452 )
(2,958 ) (2,433 ) Stock-based compensation expense - - - 243 243 -
- - 255 255 Fair value adjustment to notes receivable 510 - - - 510
42 - - - 42 Equity method investment loss (income) 841 - - (144 )
697 (103 ) - - 113 10 Loss on disposal of assets 63 1 - - 64 - - -
- - Severance and other - -
- - -
- - -
19 19 Adjusted EBITDA $
1,343 $ 1,163 $ (1,911 ) $ (2,176 )
$ (1,581 ) $ 2,692 $ (776 ) $ (1,452 )
$ (2,571 ) $ (2,107 )
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190514006006/en/
Ballantyne Strong, Inc.Mark RobersonChief Financial
OfficerMark.Roberson@btn-inc.com704-994-8295
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