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Ballantyne Reports Financial Results for First Quarter of 2014

Ballantyne Strong, Inc. (NYSE MKT: BTN):

     
Conference call:   Today – May 8 at 11:00 a.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:   800-762-8795 ; conference ID 4681716 or “Ballantyne Strong”
 

Ballantyne Strong, Inc. (NYSE MKT: BTN), a diversified provider of digital technology services, products and solutions, today reported financial results for the first quarter ended March 31, 2014.

Net revenues were $22.0 million in the first quarter of 2014, compared with $27.6 million in the same period of the prior year. Net loss totaled $0.6 million, or ($0.04) per share, in the first quarter of 2014, compared with net income of $0.6 million, or $0.04 per diluted share, in the same period of the prior year.

Gary L. Cavey, President and CEO of Ballantyne Strong, commented, “Although total revenues were impacted by seasonal weakness in the first quarter, we are very pleased with the improvement we are seeing in gross margin as a result of the growth in our Managed Services segment. For the first quarter of 2014, Managed Services increased to 38% of our total revenue, up from 9% in the same period of the prior year. This helped drive a nearly five percentage point improvement in our gross margin to 19.1%.

“We continue to introduce new products that will drive organic revenue growth. We recently introduced our Integrated Cyber Screens, a new line of smaller motorized screens that will enable us to offer our world-class big screen quality to the professional audiovisual market for the first time. The Integrated Cyber series is designed for use in smaller venues such as conference rooms, media rooms, museums, schools and worship facilities. This new product line will open up an entirely new market for us that we believe can help drive continued growth in our screen business in the years ahead,” said Mr. Cavey.

Q1 2014 Financial Summary

Managed Services revenues were $8.4 million in the first quarter of 2014, compared with $2.5 million in the same period of the prior year. The increase is attributable to the acquisition of Convergent Media Systems.

Systems Integration revenues were $14.0 million in the first quarter of 2014, compared with $25.5 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.

Consolidated gross profit was $4.2 million in the first quarter of 2014, compared with $3.9 million in the same quarter of the prior year. Gross margin was 19.1% in the first quarter of 2014, compared with 14.2% in the same quarter of the prior year. The improvement in gross margin was primarily attributable to a higher contribution of Managed Services revenue within the overall sales mix.

Selling, general and administrative expenses (SG&A) were $5.4 million in the first quarter of 2014, compared with $3.4 million in the same quarter of the prior year. The increase in SG&A was attributable to the addition of Convergent’s operations.

Balance Sheet and Cash Flow Update

Ballantyne’s cash and cash equivalents balance at March 31, 2014 was $25.5 million, a decrease from $28.8 million at the end of the prior quarter. The decrease in cash and cash equivalents balance was primarily attributable to a decrease in accounts payable.

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.

-tables follow-

Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2014 and 2013
(In thousands, except per share data)
(Unaudited)
 
    2014       2013  
 
Net product sales $ 14,834 $ 25,196
Net service revenues   7,187     2,425  
Total net revenues   22,021     27,621  
 
Cost of products sold 12,450 21,593
Cost of services   5,355     2,114  
Total cost of revenues   17,805     23,707  
Gross profit 4,216 3,914
Selling and administrative expenses:
Selling 1,546 866
Administrative   3,893     2,501  
Total selling and administrative expenses 5,439 3,367
Gain (loss) on sale or disposal of assets   7     2  
Income (loss) from operations (1,216 ) 549
Equity in income (loss) of joint venture 95 (106 )
Other income (expense):
Interest income 177 22
Interest expense (9 ) (7 )
Other income (expense), net   209     248  
Total other income (expense)   377     263  
Earnings (loss) before income taxes (744 ) 706
Income tax benefit (expense)   150     (141 )
Net earnings (loss) $ (594 ) $ 565  
Basic earnings (loss) per share $ (0.04 ) $ 0.04  
Diluted earnings (loss) per share $ (0.04 ) $ 0.04  
Weighted average shares outstanding:
Basic   14,026     13,979  
Diluted   14,026     14,023  
 
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
 
  March 31,   December 31,
  2014     2013  
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 25,491 $ 28,791
Accounts receivable (net of allowance for doubtful accounts of $759 and $703, respectively) 16,511 20,047
Inventories:
Finished goods, net 10,597 10,949
Work in process 359 345
Raw materials and components, net   4,304     3,891  
Total inventories, net 15,260 15,185
Recoverable income taxes 3,445 2,207
Other current assets   5,500     5,873  
Total current assets 66,207 72,103
Property, plant and equipment (net of accumulated depreciation of $5,007 and $4,781, respectively) 14,202 14,721
Note receivable 2,611 2,497
Intangible assets, net 939 895
Goodwill 1,080 1,123
Other assets   3,672     4,105  
Total assets $ 88,711   $ 95,444  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 9,483 $ 12,844
Accrued expenses 4,962 6,236
Customer deposits/deferred revenue 3,621 3,474
Income tax payable   496     888  
Total current liabilities 18,562 23,442
Deferred revenue 2,643 3,008
Deferred income taxes 755 790
Other accrued expenses, net of current portion   1,781     1,748  
Total liabilities 23,741 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 16,869 shares at March 31, 2014 and December 31, 2013, respectively; 14,138 shares outstanding at March 31, 2014 and December 31, 2013, respectively 167 167
Additional paid-in capital 38,332 38,231
Accumulated other comprehensive income:
Foreign currency translation (1,989 ) (959 )
Postretirement benefit obligations 190 190
Retained earnings   46,509     47,066  
83,209 84,695
Less 2,731 of common shares in treasury, at cost at March 31, 2014 and December 31, 2013   (18,239 )   (18,239 )
Total stockholders’ equity   64,970     66,456  
Total liabilities and stockholders’ equity $ 88,711   $ 95,444  
 
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2014 and 2013
(In thousands)
(Unaudited)
 
    2014       2013  
 
Cash flows from operating activities:
Net earnings (loss) $ (594 ) $ 565
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for doubtful accounts 69 30
Provision for obsolete inventory (8 ) 24
Provision for warranty (134 ) 106
Depreciation and amortization 434 338
Equity in (income) loss of joint venture (95 ) 106
Loss on forward contracts 348
(Gain) loss on disposal or transfer of assets (7 ) 2
Deferred income taxes 519 (10 )
Share-based compensation expense 101 95
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts, unbilled and notes receivable 3,709 6,010
Inventories (179 ) (2,773 )
Other current assets (200 ) 821
Accounts payable (3,314 ) (1,810 )
Accrued expenses (1,343 ) (315 )
Customer deposits/deferred revenue (208 ) (859 )
Current income taxes (1,599 ) (444 )
Other assets   (56 )   43  
Net cash (used in) provided by operating activities   (2,557 )   1,929  
Cash flows from investing activities:
Capital expenditures (258 ) (73 )
Proceeds from sales of assets   56     2  
Net cash used in investing activities   (202 )   (71 )
Cash flows from financing activities:
Proceeds from employee stock purchase plan       4  
Net cash provided by financing activities 4
Effect of exchange rate changes on cash and cash equivalents   (541 )   (167 )
Net increase (decrease) in cash and cash equivalents (3,300 ) 1,695
Cash and cash equivalents at beginning of year   28,791     40,168  
Cash and cash equivalents at end of year $ 25,491   $ 41,863  

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