OMAHA, Neb.--(BUSINESS WIRE)--Ballantyne Strong, Inc. (NYSE American: BTN), a holding company with diverse business activities focused on serving the cinema, retail, financial, advertising and government markets, today reported financial results for the first quarter ended March 31, 2018.
Net revenues were $15.8 million in the first quarter of 2018, compared with $17.9 million in the same period of the prior year. Loss from operations was ($3.1) million in the first quarter of 2018, compared with ($0.6) million in the same period of the prior year. Net loss from continuing operations was ($3.8) million, or ($0.26) per share, in the first quarter of 2018 compared with net income from continuing operations of $0.4 million, or $0.03 per share, in the same period of the prior year.
Kyle Cerminara, Chairman and CEO of Ballantyne Strong, Inc., commented, “We incurred significant start-up costs with the launch of our New York City taxi-top advertising business, which we believe will be a notable contributor to Digital Media revenue in the second half of 2018. We also signed a very significant Digital Signage as a Service (DSaaS) contract that should begin to benefit our Digital Media results in late 2018. Lastly, we announced an agreement with Eclipse Screens under which we expect to benefit from selling screens to the themed entertainment industry over the coming months and years.”
Q1 2018 Financial Summary
Cinema revenues were $11.4 million
in the first quarter of 2018, compared with $12.7 million in the same
period of the prior year. The decrease was driven by decreased sales of
lamps, projectors and screen support systems, partially offset by
increases in sales of audio equipment and projection system installation
services.
Digital Media revenues were $4.7 million in the first quarter of 2018, compared with $5.3 million in the same period of the prior year. This decrease was driven by decreased non-recurring digital signage equipment sales, partially offset by increased recurring digital signage as a service (“DSaaS”) and increased sales of installation services.
Consolidated gross profit was $2.9 million in the first quarter of 2018, compared with $4.4 million in the same quarter of the prior year. Gross margin was 18.0% in the first quarter of 2018, compared with 24.8% in the same quarter of the prior year. The decrease in gross margin percentage was driven by an increase in fixed costs in the Digital Media segment associated with the operational ramp up of the new Strong Digital Media advertising business. Revenues are expected to gradually increase throughout 2018 and 2019 absorbing a larger portion of those fixed costs until the business generates a positive gross profit in late 2018 or early 2019.
Selling and administrative expenses were $5.9 million in the first quarter of 2018, compared with $5.0 million in the same quarter of the prior year. The increase was driven by an increase in audit, tax and legal expenses of $0.4 million, compensation and benefit expense of $0.4 million and amortization expense of $0.1 million.
Balance Sheet
Ballantyne’s cash and cash equivalents balance
at March 31, 2018 was $3.3 million, compared to $4.9 million at December
31, 2017. The decrease in cash was primarily driven by operating losses.
Equity method investments had a book value of $17.8 million and a market
value of $15.5 million as of March 31, 2018.
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 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 fiscal
year ended December 31, 2017 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 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,
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 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) | ||||||||
| March 31, 2018 | December 31, 2017 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,348 | $ | 4,870 | ||||
| Accounts receivable, net | 10,749 | 10,766 | ||||||
| Inventories, net | 4,193 | 4,821 | ||||||
| Other current assets | 2,064 | 1,785 | ||||||
| Total current assets | 20,354 | 22,242 | ||||||
| Property, plant and equipment, net | 10,542 | 10,826 | ||||||
| Equity method investments | 17,833 | 18,053 | ||||||
| Goodwill and intangible assets, net | 4,873 | 4,924 | ||||||
| Other assets | 3,429 | 2,969 | ||||||
| Total assets | $ | 57,031 | $ | 59,014 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 7,783 | $ | 6,496 | ||||
| Short-term debt, including current portion of long-term | 565 | 565 | ||||||
| Deferred revenue and customer deposits | 2,314 | 1,619 | ||||||
| Other current liabilities | 40 | - | ||||||
| Total current liabilities | 10,702 | 8,680 | ||||||
| Long-term debt, net of current portion and debt issuance costs | 1,855 | 1,870 | ||||||
| Other liabilities | 4,316 | 4,342 | ||||||
| Total liabilities | 16,873 | 14,892 | ||||||
| Stockholders' equity | 40,158 | 44,122 | ||||||
| Total liabilities and stockholders' equity | $ | 57,031 | $ | 59,014 | ||||
| Ballantyne Strong, Inc. and Subsidiaries | |||||||||
| Condensed Consolidated Statements of Operations | |||||||||
| (In thousands, except per share data) | |||||||||
| (Unaudited) | |||||||||
| Three Months Ended March 31, | |||||||||
| 2018 | 2017 | ||||||||
| Net product sales | $ | 8,639 | $ | 12,456 | |||||
| Net service revenues | 7,189 | 5,470 | |||||||
| Total net revenues | 15,828 | 17,926 | |||||||
| Cost of products sold | 5,812 | 10,308 | |||||||
| Cost of services | 7,166 | 3,179 | |||||||
| Total cost of revenues | 12,978 | 13,487 | |||||||
| Gross profit | 2,850 | 4,439 | |||||||
| Selling and administrative expenses: | |||||||||
| Selling | 1,225 | 1,490 | |||||||
| Administrative | 4,709 | 3,547 | |||||||
| Total selling and administrative expenses | 5,934 | 5,037 | |||||||
| Loss from operations | (3,084 | ) | (598 | ) | |||||
| Other income (expense): | |||||||||
| Interest income | - | 22 | |||||||
| Interest expense | (45 | ) | (10 | ) | |||||
| Foreign currency transaction gain | 104 | 3 | |||||||
| Fair value adjustment to notes receivable | (42 | ) | - | ||||||
| Other (expense) income, net | (10 | ) | 5 | ||||||
| Total other income | 7 | 20 | |||||||
| Loss before income taxes and equity method investment (loss) income | (3,077 | ) | (578 | ) | |||||
| Income tax expense | 698 | 1,493 | |||||||
| Equity method investment (loss) income | (10 | ) | 2,481 | ||||||
| Net (loss) earnings from continuing operations | (3,785 | ) | 410 | ||||||
| Net loss from discontinued operations, net of tax | - | (23 | ) | ||||||
| Net (loss) earnings | $ | (3,785 | ) | $ | 387 | ||||
| Net (loss) earnings per share - basic | |||||||||
| Net (loss) earnings from continuing operations | $ | (0.26 | ) | $ | 0.03 | ||||
| Net loss from discontinued operations | - | (0.00 | ) | ||||||
| Net (loss) earnings | (0.26 | ) | 0.03 | ||||||
| Net (loss) earnings per share - diluted | |||||||||
| Net (loss) earnings from continuing operations | $ | (0.26 | ) | $ | 0.03 | ||||
| Net loss from discontinued operations | - | (0.00 | ) | ||||||
| Net (loss) earnings | (0.26 | ) | 0.03 | ||||||
| Ballantyne Strong, Inc. and Subsidiaries | ||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2018 | 2017 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net (loss) earnings | $ | (3,785 | ) | $ | 387 | |||||
| Net loss from discontinued operations, net of tax | - | (23 | ) | |||||||
| Net (loss) earnings from continuing operations | (3,785 | ) | 410 | |||||||
| Non-cash expenses, net | 1,149 | 1,574 | ||||||||
| Fair value adjustment to notes receivable | 42 | - | ||||||||
| Equity method investment loss (income) | 10 | (2,481 | ) | |||||||
| Changes in operating assets and liabilities, net | 993 | 1,064 | ||||||||
| Net cash flows (used in) provided by operating activities - continuing operations | (1,591 | ) | 567 | |||||||
| Net cash flows used in operating activities - discontinued operations | - | (24 | ) | |||||||
| Net cash (used in) provided by operating activities | (1,591 | ) | 543 | |||||||
| Cash flows from investing activities: | ||||||||||
| Purchase of equity securities | - | (2,525 | ) | |||||||
| Dividends received from investee in excess of cumulative earnings | 23 | 103 | ||||||||
| Capital expenditures | (356 | ) | (1,120 | ) | ||||||
| Net cash used in investing activities - continuing operations | (333 | ) | (3,542 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Principal payments on long-term debt | (16 | ) | - | |||||||
| Purchase of treasury stock | - | (65 | ) | |||||||
| Payments on capital lease obligations | (53 | ) | (67 | ) | ||||||
| Net cash used in financing activities | (69 | ) | (132 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents - continuing operations | 471 | 39 | ||||||||
| Net decrease in cash and cash equivalents | (1,522 | ) | (3,092 | ) | ||||||
| Discontinued operations cash activity included above: | ||||||||||
| Add: Cash balance included in assets held for sale at beginning of period | - | 175 | ||||||||
| Less: Cash balance included in assets held for sale at end of period | - | (150 | ) | |||||||
| Cash and cash equivalents at beginning of period | 4,870 | 7,596 | ||||||||
| Cash and cash equivalents at end of period | $ | 3,348 | $ | 4,529 | ||||||
