Ballantyne Strong, Inc. (NYSE MKT: BTN), a diversified provider of digital technology services, products and solutions, today reported financial results for the third quarter ended September 30, 2014.
Net revenues were $22.7 million in the third quarter of 2014, compared with $18.9 million in the same period of the prior year. Net loss totaled $109,000, or ($0.01) per diluted share, in the third quarter of 2014, compared with net income of $46,000, or $0.00 per diluted share, in the same period of the prior year.
Gary L. Cavey, President and CEO of Ballantyne Strong, commented, “Our third quarter results reflect our changing business mix, as we have been able to offset declining demand in the legacy cinema business with growth in our expanded managed services segment. We continue to make investments in new product areas in order to create a more diversified revenue mix with better long-term growth opportunities. We believe our financial performance will be relatively consistent going forward until our newer businesses increase in scale, which should result in a higher level of profitability.”
Q3 2014 Financial Summary
Managed Services revenues were $7.2 million in the third quarter of 2014, compared with $2.7 million in the same period of the prior year. The increase is attributable to the acquisition of Convergent Media Systems.
Systems Integration revenues were $15.7 million in the third quarter of 2014, compared with $16.2 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 $4.1 million in the third quarter of 2014, compared with $3.3 million in the same quarter of the prior year. Gross margin was 17.9% in the third quarter of 2014, compared with 17.7% in the same quarter of the prior year.
Selling, general and administrative expenses (SG&A) were $4.9 million in the third quarter of 2014, compared with $3.4 million in the same quarter of the prior year. The increase in SG&A was primarily attributable to the addition of Convergent’s operations.
Nine Month Results
For the nine months ended September 30, 2014, net revenues were $66.7 million, compared with $70.9 million for the same period in 2013. Gross profit amounted to $12.5 million, or 18.8% of net revenues, compared to gross profit of $11.9 million, or 16.8% of net revenues, in the prior-year period. Net loss was $322,000, or ($0.02) per share, compared to net earnings of $1.9 million, or $0.13 per diluted share, in the first nine months of 2013.
Balance Sheet
Ballantyne’s cash and cash equivalents balance at September 30, 2014 was $24.0 million, compared with $26.9 million at the end of the prior quarter. The decrease in cash and cash equivalents balance was primarily attributable to an increase in inventory and capital investments to support future sales growth.
Conference Call and Webcast
A conference call to discuss 2014 third quarter financial results will be held on Friday, November 7, 2014 at 12:00 p.m. Eastern Time / 11:00 a.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.” There will also be a live webcast of the call available at the Investor Relations 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 17, 2014, conference ID 10055261.
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 | ||||||||||
September 30, | December 31, | |||||||||
| (Unaudited) | ||||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 24,016 | $ | 28,791 | ||||||
| Accounts receivable (net of allowance for doubtful accounts of $636 and $703, respectively) | 15,043 | 20,047 | ||||||||
| Inventories: | ||||||||||
| Finished goods, net | 13,457 | 10,949 | ||||||||
| Work in process | 870 | 345 | ||||||||
| Raw materials and components, net | 2,204 | 3,891 | ||||||||
| Total inventories, net | 16,531 | 15,185 | ||||||||
| Recoverable income taxes | 5,021 | 2,207 | ||||||||
| Other current assets | 5,429 | 5,873 | ||||||||
| Total current assets | 66,040 | 72,103 | ||||||||
| Property, plant and equipment (net of accumulated depreciation of $5,713 and $4,781, respectively) | 14,079 | 14,721 | ||||||||
| Note receivable | 2,855 | 2,497 | ||||||||
| Intangible assets, net | 1,074 | 895 | ||||||||
| Goodwill | 1,066 | 1,123 | ||||||||
| Other assets | 3,977 | 4,105 | ||||||||
| Total assets | $ | 89,091 | $ | 95,444 | ||||||
| Liabilities and Stockholders’ Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 10,798 | $ | 12,844 | ||||||
| Accrued expenses | 4,174 | 6,236 | ||||||||
| Customer deposits/deferred revenue | 3,142 | 3,474 | ||||||||
| Income tax payable | 726 | 888 | ||||||||
| Total current liabilities | 18,840 | 23,442 | ||||||||
| Deferred revenue | 2,413 | 3,008 | ||||||||
| Deferred income taxes | 766 | 790 | ||||||||
| Other accrued expenses, net of current portion | 1,716 | 1,748 | ||||||||
| Total liabilities | 23,735 | 28,988 | ||||||||
| 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 17,152 and 16,869 shares at September 30, 2014 and December 31, 2013, respectively; 14,421 and 14,138 shares outstanding at September 30, 2014 and December 31, 2013, respectively | 167 | 167 | ||||||||
| Additional paid-in capital | 38,524 | 38,231 | ||||||||
| Accumulated other comprehensive income: | ||||||||||
| Foreign currency translation | (2,072 | ) | (959) | |||||||
| Postretirement benefit obligations | 190 | 190 | ||||||||
| Retained earnings | 46,786 | 47,066 | ||||||||
| 83,595 | 84,695 | |||||||||
| Less 2,731 of common shares in treasury, at cost at September 30, 2014 and December 31, 2013 | (18,239 | ) | (18,239 | ) | ||||||
| Total stockholders’ equity | 65,356 | 66,456 | ||||||||
| Total liabilities and stockholders’ equity | $ | 89,091 | $ | 95,444 | ||||||
Ballantyne Strong, Inc. and Subsidiaries | |||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| Net product sales | $ | 17,396 | $ | 16,275 | $ | 48,432 | $ | 62,877 | |||||||||
| Net service revenues | 5,268 | 2,580 | 18,280 | 7,988 | |||||||||||||
| Total net revenues | 22,664 | 18,855 | 66,712 | 70,865 | |||||||||||||
| Cost of products sold | 15,042 | 13,343 | 41,676 | 52,486 | |||||||||||||
| Cost of services | 3,565 | 2,174 | 12,516 | 6,448 | |||||||||||||
| Total cost of revenues | 18,607 | 15,517 | 54,192 | 58,934 | |||||||||||||
| Gross profit | 4,057 | 3,338 | 12,520 | 11,931 | |||||||||||||
| Selling and administrative expenses: | |||||||||||||||||
| Selling | 1,843 | 850 | 4,947 | 2,586 | |||||||||||||
| Administrative | 3,066 | 2,524 | 9,781 | 7,478 | |||||||||||||
| Total selling and administrative expenses | 4,909 | 3,374 | 14,728 | 10,064 | |||||||||||||
| Gain on the sale/disposal/transfer of assets | 4 | 3 | 12 | 7 | |||||||||||||
| Income (loss) from operations | (848 | ) | (33 | ) | (2,196 | ) | 1,874 | ||||||||||
| Equity income (loss) of joint venture | — | 2 | 95 | (117 | ) | ||||||||||||
| Other income: | |||||||||||||||||
| Interest income | 175 | 159 | 534 | 169 | |||||||||||||
| Interest expense | (15 | ) | (7 | ) | (43 | ) | — | ||||||||||
| Other income (expense), net | 255 | (33 | ) | 341 | 463 | ||||||||||||
| Total other income | 415 | 119 | 832 | 632 | |||||||||||||
| Earnings (loss) before income taxes | (433 | ) | 88 | (1,269 | ) | 2,389 | |||||||||||
| Income tax benefit (expense) | 324 | (42 | ) | 947 | (502 | ) | |||||||||||
| Net earnings (loss) | $ | (109 | ) | $ | 46 | $ | (322 | ) | $ | 1,887 | |||||||
| Basic earnings (loss) per share | $ | (0.01 | ) | $ | 0.00 | $ | (0.02 | ) | $ | 0.13 | |||||||
| Diluted earnings (loss) per share | $ | (0.01 | ) | $ | 0.00 | $ | (0.02 | ) | $ | 0.13 | |||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 14,086 | 14,009 | 14,052 | 13,995 | |||||||||||||
| Diluted | 14,086 | 14,039 | 14,052 | 14,025 | |||||||||||||
Ballantyne Strong, Inc. and Subsidiaries | |||||||||
| Nine Months Ended September 30, | |||||||||
| 2014 | 2013 | ||||||||
| Cash flows from operating activities: | |||||||||
| Net earnings (loss) | $ | (322 | ) | $ | 1,887 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||
| Provision for doubtful accounts | 9 | 194 | |||||||
| Provision for obsolete inventory | (117 | ) | (13 | ) | |||||
| Provision for warranty | (191 | ) | 321 | ||||||
| Depreciation and amortization | 1,374 | 1,022 | |||||||
| Equity in (income) loss of joint venture | (95 | ) | 117 | ||||||
| Loss on forward contracts | 145 | (9 | ) | ||||||
| (Gain) loss on disposal or transfer of assets | (12 | ) | (7 | ) | |||||
| Deferred income taxes | (916 | ) | 376 | ||||||
| Share-based compensation expense | 292 | 345 | |||||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts, unbilled and notes receivable | 5,976 | 13,441 | |||||||
| Inventories | (1,348 | ) | (2,912 | ) | |||||
| Other current assets | (8 | ) | 1,563 | ||||||
| Accounts payable | (2,094 | ) | (7,665 | ) | |||||
| Accrued expenses | (2,050 | ) | (1,048 | ) | |||||
| Customer deposits/deferred revenue | (917 | ) | (2,771 | ) | |||||
| Current income taxes | (2,938 | ) | 813 | ||||||
| Other assets | (83 | ) | 121 | ||||||
| Net cash (used in) provided by operating activities | (3,295 | ) | 5,775 | ||||||
| Cash Flows from investing activities: | |||||||||
| Purchase of Peintures Elite, Inc. | — | (1,747 | ) | ||||||
| Deposit on Convergent acquisition | — | (17,424 | ) | ||||||
| Capital expenditures | (1,057 | ) | (231 | ) | |||||
| Proceeds from sale of assets | 58 | 6 | |||||||
| Net cash used in investing activities | (999 | ) | (19,396) | ||||||
| Cash flows from financing activities: | |||||||||
| Excess tax benefits from share-based arrangements | (7 | ) | (11 | ) | |||||
| Payments on capital lease obligations | (14 | ) | — | ||||||
| Proceeds from employee stock purchase plan | — | 4 | |||||||
| Net cash used in financing activities | (21 | ) | (7 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | (460 | ) | (207 | ) | |||||
| Net decrease in cash and cash equivalents | (4,775 | ) | (13,835 | ) | |||||
| Cash and cash equivalents at beginning of period | 28,791 | 40,168 | |||||||
| Cash and cash equivalents at end of period | $ | 24,016 | $ | 26,333 | |||||
Contacts:
Nate Legband, 402-829-9404
Chief
Financial Officer
or
Financial Profiles
Tony Rossi,
310-622-8221
trossi@finprofiles.com
