Ballantyne Strong, Inc. (NYSEMKT: BTN):
| Conference call: | Today – March 14 at 12:00 p.m. ET | ||||||||
| Webcast / Replay URL: | http://www.strong-world.com(Investor Relations section) | ||||||||
| The replay will be available on the Internet for 90 days. | |||||||||
| Dial-in number: | 877-941-0844; conference ID 4671381 or “Ballantyne Strong” | ||||||||
Ballantyne Strong, Inc. (NYSEMKT: BTN), a diversified provider of digital technology services, products and solutions, today reported financial results for the fourth quarter ended December 31, 2013.
Net revenues were $32.7 million in the fourth quarter of 2013, compared with $39.1 million in the same period of the prior year. Net loss totaled $1.7 million, or ($0.12) per share, in the fourth quarter of 2013, compared with net income of $1.6 million, or $0.11 per diluted share, in the same period of the prior year.
The financial results for the fourth quarter of 2013 include the following items:
- Acquisition, transition, and severance costs of $1.8 million related to the integration of Convergent Media Systems
- Purchase accounting adjustments of $0.2 million associated with the acquisition of Convergent Media Systems
- An income tax charge of $1.0 million related to a change in position with regards to reinvestment of cash in our Canadian operations
Excluding these costs, the Company generated net income of $0.6 million, or $0.04 per diluted share, in the fourth quarter of 2013.
Gary L. Cavey, President and CEO of Ballantyne Strong, commented, “We had a strong finish to 2013 driven by several large orders for digital projectors in our international markets. While the digital conversion cycle is largely complete, we expect the cinema market to continue to be a source of revenues driven by future product upgrade cycles, ongoing parts and replacement orders, and the development of additional managed services relationships with our theatre customers.
“We have made good progress with the integration of Convergent Media Systems. We are in the process of strengthening Convergent’s business development capabilities including adding more experienced sales people in our targeted vertical markets and bringing on a new VP of sales and marketing. The sales cycle is very long for digital media projects and it will take some time to build our sales pipeline, but we are excited about the long-term growth opportunities in this business.
“We continue to look for new product opportunities that will enable us to leverage our existing infrastructure. With this strategy in mind, we have finalized an agreement with VIASS (Video Intelligence as a Service) to become a value-added reseller of cloud-based video security solutions. We believe the installation of video security solutions will create additional maintenance and monitoring contract opportunities for our Network Operations Centers. We anticipate that this new product line will become a meaningful contributor to our revenue mix during the second half of 2014,” said Mr. Cavey.
Corporate Reorganization
Following the acquisition of Convergent Media Systems, Ballantyne Strong reorganized the Company into the following two segments in order to enhance efficiencies and better focus on growth opportunities:
Managed Services: Consisting of the Company’s digital technology services and solutions businesses.
Systems Integration: Consisting of the Company’s full range of product solutions for the theatre exhibition industry, video-based security products, and specialty lighting solutions.
All historical financial data has been restated to reflect the new segments.
Q4 2013 Financial Summary
Managed Services revenues were $10.6 million in the fourth quarter of 2013, compared with $3.9 million in the same period of the prior year. The increase is attributable to the acquisition of Convergent Media Systems, which offset the decline in installation revenue associated with the shift to digital equipment winding down.
Systems Integration revenues were $22.1 million in the fourth quarter of 2013, compared with $35.2 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 $4.9 million in the fourth quarter of 2013, compared with $6.2 million in the same quarter of the prior year. Gross margin was 15.0% in the fourth quarter of 2013, compared with 15.8% in the same quarter of the prior year. The decline in gross margin was primarily attributable to lower sales volumes in the Systems Integration segment.
Selling, general and administrative expenses (SG&A) were $6.7 million in the fourth quarter of 2013, compared with $4.0 million in the same quarter of the prior year. SG&A in the fourth quarter of 2013 included $1.5 million in severance expense and $0.3 million in acquisition and transition costs related to Convergent. Excluding these expenses, the remainder of the increase in SG&A was attributable to the addition of Convergent’s operations.
Income tax expense was $0.3 million for the fourth quarter of 2013. The Company reviewed the cash reinvestment policy and concluded that $12.0 million of the cash available in Canada would no longer be considered permanently reinvested, which resulted in additional income tax expense of $1.0 million. The cash will be distributed when needed for working capital purposes and future acquisition activities within the United States.
Full Year 2013 Results
Net revenues were $103.6 million for the full year 2013, compared with $169.1 million during 2012. Gross profit amounted to $16.8 million, or 16.3% of net revenues, compared to gross profit of $22.6 million, or 13.4% of net revenues in the prior-year period. Net earnings for the full year 2013 were $0.2 million, or $0.01 per diluted share, compared to net earnings of $5.5 million, or $0.39 per diluted share, in 2012. The full year results included $2.1 million of costs attributable to acquisition, transition, and severance costs and purchase accounting adjustments. Excluding these costs, the Company had net income of $2.6 million, or $0.19 per diluted share.
Balance Sheet and Cash Flow Update
Ballantyne’s cash and cash equivalents balance at December 31, 2013 was $28.8 million, an increase from $26.3 million at the end of the prior quarter. The increase in cash and cash equivalents balance is due to the strong sales volume in the fourth quarter driving collections on accounts receivable and lower inventory, along with an increase in payables due to timing of purchases.
For the full year 2013, the Company generated $8.5 million in cash flow from operations.
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 Statements of Operations Three and Twelve Months Ended December 31, 2013 and 2012 (In thousands, except per share data) (Unaudited) | |||||||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
| Net revenues | $ | 32,745 | $ | 39,097 | $ | 103,610 | $ | 169,084 | |||||||||||||
| Cost of revenues | 27,831 | 32,921 | 86,765 | 146,490 | |||||||||||||||||
| Gross profit | 4,915 | 6,176 | 16,845 | 22,594 | |||||||||||||||||
| Selling and administrative expenses: | |||||||||||||||||||||
| Selling | 1,379 | 1,062 | 3,965 | 4,467 | |||||||||||||||||
| Administrative | 5,295 | 2,909 | 12,773 | 11,456 | |||||||||||||||||
| Total selling and administrative expenses | 6,675 | 3,971 | 16,738 | 15,923 | |||||||||||||||||
| Gain (loss) on the sale/disposal/transfer of assets | (16 | ) | (29 | ) | (8 | ) | 1,332 | ||||||||||||||
| Income from operations | (1,776 | ) | 2,176 | 99 | 8,003 | ||||||||||||||||
| Net interest income (expense) | 181 | (2 | ) | 350 | (33 | ) | |||||||||||||||
| Equity income (loss) of joint venture | 92 | 9 | (25 | ) | 10 | ||||||||||||||||
| Other income (expense), net | 64 | (39 | ) | 527 | 170 | ||||||||||||||||
| Income (loss) before income taxes | (1,439 | ) | 2,144 | 951 | 8,150 | ||||||||||||||||
| Income tax expense | (286 | ) | (584 | ) | (788 | ) | (2,608 | ) | |||||||||||||
| Net earnings (loss) | $ | (1,725 | ) | $ | 1,560 | $ | 163 | $ | 5,542 | ||||||||||||
| Basic earnings (loss) per share | $ | (0.12 | ) | $ | 0.11 | $ | 0.01 | $ | 0.39 | ||||||||||||
| Diluted earnings (loss) per share | $ | (0.12 | ) | $ | 0.11 | $ | 0.01 | $ | 0.39 | ||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||
| Basic | 14,009 | 13,966 | 13,999 | 14,038 | |||||||||||||||||
| Diluted | 14,009 | 14,015 | 14,031 | 14,115 | |||||||||||||||||
Ballantyne Strong, Inc. and Subsidiaries Consolidated Balance Sheets ($ and shares in thousands except par values) | ||||||||||||||||||
December 31, 2013 | December 31, 2012 | |||||||||||||||||
| Assets | ||||||||||||||||||
| Current assets: | ||||||||||||||||||
| Cash and cash equivalents | $ | 28,791 | $ | 40,168 | ||||||||||||||
| Accounts receivable (less allowance for doubtful accounts of $703 in 2013 and $487 in 2012) | 20,047 | 26,227 | ||||||||||||||||
| Inventories, net | 15,185 | 10,971 | ||||||||||||||||
| Recoverable income taxes | 2,207 | 2,069 | ||||||||||||||||
| Deferred income taxes | 2,264 | 1,724 | ||||||||||||||||
| Other current assets | 3,609 | 2,948 | ||||||||||||||||
| Total current assets | 72,103 | 84,107 | ||||||||||||||||
| Property, plant and equipment, net | 14,721 | 11,105 | ||||||||||||||||
| Intangible assets, net | 895 | 105 | ||||||||||||||||
| Goodwill | 1,123 | — | ||||||||||||||||
| Notes receivable | 2,497 | 2,232 | ||||||||||||||||
| Deferred income taxes | 1,393 | 1,936 | ||||||||||||||||
| Other assets | 2,712 | 61 | ||||||||||||||||
| Total assets | $ | 95,444 | $ | 99,546 | ||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Accounts payable | $ | 12,844 | $ | 16,646 | ||||||||||||||
| Accrued expenses | 6,236 | 5,313 | ||||||||||||||||
| Customer deposits/deferred revenue | 3,474 | 5,251 | ||||||||||||||||
| Income tax payable | 888 | — | ||||||||||||||||
| Total current liabilities | 23,442 | 27,210 | ||||||||||||||||
| Deferred revenue | 3,008 | 3,302 | ||||||||||||||||
| Deferred income taxes | 790 | 580 | ||||||||||||||||
| Other accrued expenses, net of current portion | 1,748 | 1,538 | ||||||||||||||||
| Total liabilities | 28,988 | 32,630 | ||||||||||||||||
| 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 16,869 and 16,782 shares at December 31, 2013 and December 31, 2012, respectively; 14,139 and 14,051 shares outstanding at December 31, 2013 and 2012, respectively | 167 | 167 | ||||||||||||||||
| Additional paid-in capital | 38,231 | 37,770 | ||||||||||||||||
| Accumulated other comprehensive income (loss): | ||||||||||||||||||
| Foreign currency translation | (959 | ) | 269 | |||||||||||||||
| Postretirement benefit obligation | 190 | 46 | ||||||||||||||||
| Retained earnings | 47,066 | 46,903 | ||||||||||||||||
| 84,695 | 85,155 | |||||||||||||||||
| Less 2,731 of common shares in treasury, at December 31, 2013 and 2012, respectively, at cost | (18,239 | ) | (18,239 | ) | ||||||||||||||
| Total stockholders’ equity | 66,456 | 66,916 | ||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 95,444 | $ | 99,546 | ||||||||||||||
Ballantyne Strong, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) | ||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||
| 2013 | 2012 | 2011 | ||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net earnings | $ | 163 | $ | 5,542 | $ | 10,347 | ||||||||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||||||
| Provision for doubtful accounts | 273 | 626 | (14 | ) | ||||||||||||||||
| Provision for obsolete inventory | (111 | ) | (350 | ) | (216 | ) | ||||||||||||||
| Provision for warranty | 430 | 538 | 418 | |||||||||||||||||
| Depreciation and amortization | 1,511 | 1,268 | 1,757 | |||||||||||||||||
| Equity in (income) loss of joint venture | 25 | (10 | ) | 189 | ||||||||||||||||
| (Gain) loss on forward contracts | 380 | (145 | ) | 306 | ||||||||||||||||
| (Gain) loss on disposal or transfer of assets | 8 | (1,332 | ) | (11 | ) | |||||||||||||||
| Deferred income taxes | 1,339 | 71 | (1,211 | ) | ||||||||||||||||
| Share-based compensation expense | 461 | 393 | 373 | |||||||||||||||||
| Excess tax benefits from share-based arrangements | — | — | (359 | ) | ||||||||||||||||
| Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||||||||||||||
| Accounts, unbilled and notes receivable | 8,932 | 6,402 | (12,009 | ) | ||||||||||||||||
| Inventories | 689 | 4,265 | 13,684 | |||||||||||||||||
| Other current assets | 1,826 | 2,605 | (2,761 | ) | ||||||||||||||||
| Accounts payable | (4,813 | ) | (15,534 | ) | 1,418 | |||||||||||||||
| Accrued expenses | (235 | ) | 572 | 197 | ||||||||||||||||
| Customer deposits/deferred revenue | (3,327 | ) | (88 | ) | 5,774 | |||||||||||||||
| Current income taxes | 685 | (5,382 | ) | 2,133 | ||||||||||||||||
| Other assets | 268 | 130 | 37 | |||||||||||||||||
| Net cash (used in) provided by operating activities | 8,504 | (429 | ) | 20,052 | ||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Purchase of businesses, net of cash acquired | (18,810 | ) | — | — | ||||||||||||||||
| Distribution from joint venture | — | 2,509 | — | |||||||||||||||||
| Capital expenditures | (529 | ) | (2,541 | ) | (2,886 | ) | ||||||||||||||
| Proceeds from sales of assets | 5 | 3,334 | 88 | |||||||||||||||||
| Net cash provided by (used in) investing activities | (19,334 | ) | 3,302 | (2,798 | ) | |||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Purchase of treasury stock | — | (2,756 | ) | — | ||||||||||||||||
| Proceeds from employee stock purchase plan | 4 | 8 | 25 | |||||||||||||||||
| Proceeds from exercise of stock options | — | — | 178 | |||||||||||||||||
| Excess tax benefits from share-based arrangements | 16 | 2 | 359 | |||||||||||||||||
| Net cash (used in) provided by financing activities | 20 | (2,746 | ) | 562 | ||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (567 | ) | 152 | (177 | ) | |||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (11,377 | ) | 279 | 17,639 | ||||||||||||||||
| Cash and cash equivalents at beginning of year | 40,168 | 39,889 | 22,250 | |||||||||||||||||
| Cash and cash equivalents at end of year | $ | 28,791 | $ | 40,168 | $ | 39,889 | ||||||||||||||
| Supplemental disclosure of cash paid for: | ||||||||||||||||||||
| Interest | $ | 27 | $ | 22 | $ | 36 | ||||||||||||||
| Income Taxes | $ | 961 | $ | 4,469 | $ | 4,233 | ||||||||||||||
Supplemental disclosure of non-cash activities: | ||||||||||||||||||||
| Common stock exchanged for stock options | $ | — | $ | — | $ | 100 | ||||||||||||||
Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income and Adjusted EPS Reconciliation
Adjusted net income and adjusted EPS are non-GAAP measures. The Company believes these measures provide a useful indication of profitability and basis for assessing the operations of the Company without the impact of merger and acquisition related costs, reorganization costs and tax charges for changes in reinvestment positions.
Adjusted net income should not be considered in isolation or as a substitute for net income or other profitability metrics prepared in accordance with GAAP. Adjusted net income, as presented, may not be comparable to similarly titled measures of other companies.
Set forth below is a reconciliation of adjusted net income to net income. There were no similar items noted during 2012.
| Unaudited, in thousands except per share | ||||||||
Three months ended December 31, 2013 | ||||||||
| Net Income | $ | (1,725 | ) | |||||
| Severance costs | 1,460 | |||||||
| Acquisition costs | 165 | |||||||
| Transitional costs | 159 | |||||||
| Amortization of inventory markup | 164 | |||||||
| Amortization of deferred revenue haircut | 50 | |||||||
| Pre-tax total | 1,998 | |||||||
| Income tax expense on adjustments | (729 | ) | ||||||
| Income tax on change in reinvestment position | 1,038 | |||||||
| Adjusted net income | $ | 582 | ||||||
| Diluted shares outstanding | 14,042 | |||||||
| Adjusted EPS-diluted | $ | 0.04 | ||||||
Twelve months ended December 31, 2013 | ||||||||
| Net Income | $ | 163 | ||||||
| Severance costs | 1,460 | |||||||
| Acquisition costs | 359 | |||||||
| Transitional costs | 159 | |||||||
| Amortization of inventory markup | 164 | |||||||
| Amortization of deferred revenue haircut | 50 | |||||||
| Pre-tax total | 2,192 | |||||||
| Income tax expense on adjustments | (792 | ) | ||||||
| Income tax on change in reinvestment position | 1,038 | |||||||
| Adjusted net income | $ | 2,601 | ||||||
| Diluted shares outstanding | 14,031 | |||||||
| Adjusted EPS-diluted | $ | 0.19 | ||||||
Contacts:
Mary A. Carstens
Chief Financial
Officer
402-453-4444
or
Financial Profiles
Tricia
Ross
916-939-7285
tross@finprofiles.com
