Form 8-K BALLANTYNE STRONG, INC. For: Nov 04

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 8-K

 

CURRENT REPORT

 
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

November 4, 2015

Date of Report (Date of earliest event reported)

 

BALLANTYNE STRONG, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		1-13906		47-0587703
(State or other jurisdiction of		(Commission		(IRS Employer
incorporation or organization)		File No.)		Identification Number)

 

13710 FNB Parkway, Suite 400
Omaha, Nebraska		68154
(Address of principal executive offices)		(Zip Code)

 

(402) 453-4444

(Registrant’s telephone number including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Form 8-K

 

Item 2.02 Results of Operations and Financial Condition

 

Ballantyne Strong, Inc. (the “Company”) issued a press release on November 4, 2015 with earnings information for the Company’s quarter ended September 30, 2015. The press release is furnished with this Form 8-K as Exhibit 99.1. The Company also issued an investor presentation on November 4, 2015 that is furnished with this Form 8-K as Exhibit 99.2.

 

Item 7.01 Regulation FD Disclosure

 

See “Item 2.02 Results of Operations and Financial Condition” above.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits.

 

99.1 Press Release with earnings information, dated November 4, 2015, issued by the Company.

 

99.2 Investor Presentation, dated November 4, 2015, issued by the Company.

 

The information contained in this Current Report under Item 2.02, including the exhibit referenced in Item 9.01, is being “furnished” pursuant to “Item 2.02 Results of Operations and Financial Condition” and Item 7.01 Regulation FD Disclosure” of Form 8-K and, as such, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in Items 2.02 and 7.01 of this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	BALLANTYNE STRONG, INC.
Date: November 4, 2015	By:	/s/ Nathan D. Legband
		Nathan D. Legband
		Chief Financial Officer

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press Release of Ballantyne Strong, Inc., dated November 4, 2015, reporting the Company’s financial results for the fiscal quarter ended September 30, 2015.
99.2		Investor Presentation of Ballantyne Strong, Inc., dated November 4, 2015.

 

 

 

 

Ballantyne Strong Reports Financial Results for Third Quarter 2015

 

OMAHA, Nebraska (November 4, 2015) – 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 Summary

 

Managed 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 Results

 

For 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 Sheet

 

Ballantyne’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 Webcast

 

A 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 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.

 

CONTACT:

 

Nate Legband		Elise Stejskal
Chief Financial Officer		Investor Relations
402/829-9404		402/829-9423

 

 

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

 

		September 30, 2015				December 31, 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

 

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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