Ballantyne Strong Reports First Quarter 2019 Operating Results

OMAHA, Neb.–(BUSINESS WIRE)–Ballantyne Strong, Inc. (NYSE American:
BTN) (the “Company”), a holding company with diverse business activities
focused on serving the cinema, retail, financial, advertising and
government markets, today announced financial results for the period
ended March 31, 2019. The Company conducts its operations through three
operating segments: Strong Cinema, Convergent and Strong Outdoor.

First Quarter 2019 Highlights

  • Total revenue decreased 9.6% to $14.3 million for the first quarter of
    2019 as revenue growth at Convergent and Strong Outdoor were offset by
    lower revenue generated by Strong Cinema as our production facility
    was closed for several weeks in the quarter due to weather-related
    damage. The facility resumed production and shipping in March, and we
    are rebuilding the damaged section of the facility which was fully
    covered by insurance.
  • Gross profit decreased 7.2% to $2.6 million for the first quarter of
    2019 as favorable contributions from Convergent, where revenue growth
    was accompanied by an increase in gross profit margins from 14.5% to
    28.3%, were offset by the flow through of decreased revenue at Strong
    Cinema from the temporary plant closure. The favorable trend at
    Convergent is due to the combination of growth in high margin
    recurring revenue and cost reduction initiatives.
  • Operating loss improved by $0.5 million for first quarter of 2019 to
    $2.6 million as improved operating performance at Convergent and
    reductions in administrative expenses were partially offset by
    increased investment in start-up operating expenses at Strong Outdoor
    and by the lower contribution from Strong Cinema.
  • Net loss was $4.2 million ($0.29 per share) for the first quarter of
    2019 as compared to $3.8 million ($0.26 per share) in the prior year
    as improved operating performance was offset by non-cash fair value
    adjustments and equity method investment losses.
  • Adjusted EBITDA, a non-GAAP measure, improved to negative $1.6 million
    for the first quarter of 2019 from negative $2.1 million in the prior
    year due to operating improvements at Convergent and reduced
    administrative expenses.

Kyle Cerminara, Chairman and CEO commented, “We continued to see strong
performance from our Convergent business, which has turned around
significantly over the past few quarters. Strong Cinema was impacted by
weather damage to our facility in Quebec, and we stopped shipping for
several weeks during the first quarter. The facility resumed operations
in March, and we are fully insured for property and casualty and
business interruption. We expect insurance recoveries to be
approximately $5 million CDN, which will positively impact future
quarters as those claims are finalized.

“The Convergent team has done a tremendous job accelerating high margin
recurring revenue growth while also significantly lowering their
operating costs. Strong Outdoor is building out its sales leadership
team and we expect to see growth accelerating in the second half of
2019.”

Conference Call

The Company will host a conference call on Tuesday, May 14, 2019 at 4:30
pm Eastern Time. Investors and analysts are invited to access the
conference call by dialing 877-407-3982 (domestic) or 201-493-6780
(international) and providing the operator with conference ID number:
13690794. A replay will be available approximately two hours after the
conclusion of the conference call until Friday, June 14, 2019 by dialing
844-512-2921 in the U.S. and Canada and 412-317-6671 internationally and
entering the conference ID number: 13690794.

Use of Non-GAAP Measures

Ballantyne Strong, Inc. prepares its consolidated financial statements
in accordance with United States generally accepted accounting
principles (“GAAP”). In addition to disclosing financial results
prepared in accordance with GAAP, the Company discloses information
regarding Adjusted EBITDA, which differs from the term EBITDA as it is
commonly used. In addition to adjusting net income (loss) to exclude
taxes, interest, and depreciation and amortization, Adjusted EBITDA also
excludes share-based compensation, impairment charges, equity method
income, fair value adjustments, severance and transactional expenses and
other non-cash charges.

EBITDA and Adjusted EBITDA are not measures of performance defined in
accordance with GAAP. However, Adjusted EBITDA is used internally in
planning and evaluating the Company’s operating performance.
Accordingly, management believes that disclosure of these metrics offers
investors, bankers and other stakeholders an additional view of the
Company’s operations that, when coupled with the GAAP results, provides
a more complete understanding of the Company’s financial results.

EBITDA and Adjusted EBITDA should not be considered as an alternative to
net loss or to net cash used in operating activities as measures of
operating results or liquidity. Our calculation of EBITDA and Adjusted
EBITDA may not be comparable to similarly titled measures used by other
companies, and the measures exclude financial information that some may
consider important in evaluating the Company’s performance. A
reconciliation of GAAP net loss to EBITDA and Adjusted EBITDA is
included in the accompanying financial schedules.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you
should not consider them in isolation, or as substitutes for analysis of
our results as reported under GAAP. Some of these limitations are (i)
they do not reflect our cash expenditures, or future requirements for
capital expenditures or contractual commitments, (ii) they do not
reflect changes in, or cash requirements for, our working capital needs,
(iii) EBITDA and Adjusted EBITDA do not reflect interest expense, or the
cash requirements necessary to service interest or principal payments,
on our debt, (iv) although depreciation and amortization are non-cash
charges, the assets being depreciated and amortized will often have to
be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect
any cash requirements for such replacements, (v) they do not adjust for
all non-cash income or expense items that are reflected in our
statements of cash flows, (vi) they do not reflect the impact of
earnings or charges resulting from matters we consider not to be
indicative of our ongoing operations, and (vii) other companies in our
industry may calculate these measures differently than we do, limiting
their usefulness as comparative measures.

We believe EBITDA and Adjusted EBITDA facilitate operating performance
comparisons from period to period by isolating the effects of some items
that vary from period to period without any correlation to core
operating performance or that vary widely among similar companies. These
potential differences may be caused by variations in capital structures
(affecting interest expense), tax positions (such as the impact on
periods or companies of changes in effective tax rates or net operating
losses) and the age and book depreciation of facilities and equipment
(affecting relative depreciation expense). We also present EBITDA and
Adjusted EBITDA because (i) we believe these measures are frequently
used by securities analysts, investors and other interested parties to
evaluate companies in our industry, (ii) we believe investors will find
these measures useful in assessing our ability to service or incur
indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally as
benchmarks to evaluate our operating performance or compare our
performance to that of our competitors.

For further information, please refer to Ballantyne Strong, Inc.’s
Quarterly Report on Form 10-Q to be filed with the Securities and
Exchange Commission on or about May 15, 2019, available online at www.sec.gov.

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 of 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 year ended December 31, 2018 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 maintain its brand and reputation and 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, potential
sales tax collections and claims for uncollected amounts, 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 utilize or 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, except par values)
       
March 31, 2019 December 31, 2018
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,989 $ 6,698
Restricted cash 350 350
Accounts receivable (net of allowance for doubtful accounts of
$1,624 and $1,832, respectively)
12,394 13,841
Inventories, net 3,615 3,490
Recoverable income taxes 735 281
Other current assets   1,876     1,663  
Total current assets 23,959 26,323
Property, plant and equipment (net of accumulated depreciation of
$8,687 and $9,046, respectively)
10,298 14,483
Operating lease right-of-use assets 9,588
Finance lease right-of-use assets 839 692
Equity method investments 10,450 11,167
Intangible assets, net 1,748 1,795
Goodwill 894 875
Notes receivable 3,455 3,965
Other assets   326     337  
Total assets $ 61,557   $ 59,637  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 4,092 $ 4,724
Accrued expenses 2,709 2,782
Short-term debt 3,340 3,152
Current portion of long-term debt 923 1,094
Current portion of operating lease obligations 1,833
Current portion of finance lease obligations 181 160
Deferred revenue and customer deposits   2,323     2,310  
Total current liabilities 15,401 14,222
Long-term debt, net of current portion and debt issuance costs 3,645 10,053
Operating lease obligations, net of current portion 8,042
Finance lease obligations, net of current portion 590 427
Deferred revenue and customer deposits, net of current portion 1,171 1,167
Deferred income taxes 2,577 2,516
Other accrued expenses, net of current portion   87     254  
Total liabilities 31,513 28,639
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 17,313 and 17,237 shares at March 31, 2019 and December 31,
2018, respectively; outstanding 14,519 and 14,443 shares at March
31, 2019 and December 31, 2018, respectively
169 169
Additional paid-in capital 41,717 41,474
Accumulated other comprehensive income (loss):
Foreign currency translation (5,051 ) (5,308 )
Postretirement benefit obligations 127 125
Unrealized loss on available-for-sale securities of equity method
investment
(286 ) (195 )
Retained earnings   11,954     13,319  
48,630 49,584
Less 2,794 of common shares in treasury, at cost   (18,586 )   (18,586 )
Total stockholders’ equity   30,044     30,998  
Total liabilities and stockholders’ equity $ 61,557   $ 59,637  
 
 
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
       
Three Months Ended March 31,
2019 2018
Net product sales $ 5,579 $ 8,639
Net service revenues   8,727     7,189  
Total net revenues 14,306 15,828
Cost of products sold 3,523 5,812
Cost of services   8,138     7,166  
Total cost of revenues   11,661     12,978  
Gross profit 2,645 2,850
Selling and administrative expenses:
Selling 1,228 1,225
Administrative   3,929     4,709  
Total selling and administrative expenses 5,157 5,934
Loss on disposal of assets   (64 )    
Loss from operations (2,576 ) (3,084 )
Other income (expense):
Interest expense (119 ) (45 )
Fair value adjustment to notes receivable (510 ) (42 )
Foreign currency transaction (loss) gain (143 ) 104
Other income (expense), net   36     (10 )
Total other (expense) income   (736 )   7  
Loss before income taxes and equity method investment loss (3,312 ) (3,077 )
Income tax expense 141 698
Equity method investment loss   (697 )   (10 )
Net loss $ (4,150 ) $ (3,785 )
Basic loss per share $ (0.29 ) $ (0.26 )
Diluted loss per share $ (0.29 ) $ (0.26 )
 
 
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
 
Three Months Ended March 31,
2019 2018
Cash flows from operating activities:
Net loss $ (4,150 ) $ (3,785 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Provision for doubtful accounts, net of recoveries (310 ) 103
Provision for obsolete inventory 53 44
Provision for warranty 67 79
Depreciation and amortization 795 524
Amortization and accretion of operating leases 579
Fair value adjustment to notes receivable 510 42
Equity method investment loss 697 10
Recognition of contract acquisition costs 57
Loss on disposal of assets 64
Deferred income taxes 50 87
Stock-based compensation expense 243 255
Changes in operating assets and liabilities:
Accounts receivable 1,819 (178 )
Inventories (145 ) 537
Other current assets 2 5
Accounts payable (592 ) 256
Accrued expenses (13 ) 429
Operating lease obligations (590 )
Deferred revenue and customer deposits 11 704
Current income taxes (444 ) 36
Other assets   (71 )   (796 )
Net cash used in operating activities (1,425 ) (1,591 )
 
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 86
Dividends received from investee in excess of cumulative earnings 23
Capital expenditures   (257 )   (356 )
Net cash used in investing activities (171 ) (333 )
 
Cash flows from financing activities:
Proceeds from issuance of long-term debt 237
Principal payments on short-term debt (79 )
Principal payments on long-term debt (245 ) (16 )
Payments on capital lease obligations   (49 )   (53 )
Net cash used in financing activities   (136 )   (69 )
Effect of exchange rate changes on cash and cash equivalents   23     471  
Net decrease in cash and cash equivalents and restricted cash (1,709 ) (1,522 )
Cash and cash equivalents and restricted cash at beginning of period   7,048     4,870  
Cash and cash equivalents and restricted cash at end of period $ 5,339   $ 3,348  
Components of cash and cash equivalents and restricted cash:
Cash and cash equivalents $ 4,989 $ 3,348
Restricted cash   350      
Total cash and cash equivalents and restricted cash $ 5,339   $ 3,348  

 

 
Ballantyne Strong, Inc. and Subsidiaries
Summary by Business Segments
(In thousands)
(Unaudited)
       
Quarters Ended March 31,
2019 2018
Strong Cinema
Revenue $ 7,853 $ 11,450
Gross profit 2,415 3,385
Operating income 1,159 2,325
Adjusted EBITDA $ 1,343 $ 2,692
 
Convergent
Revenue $ 5,538 $ 4,607
Gross profit 1,569 666
Operating income (loss) 752 (1,025 )
Adjusted EBITDA $ 1,163 $ (776 )
 
Strong Outdoor
Revenue $ 1,093 $ 62
Gross loss (1,416 ) (1,265 )
Operating loss (2,012 ) (1,497 )
Adjusted EBITDA $ (1,911 ) $ (1,452 )
 
Corporate and Other
Revenue $ (178 ) $ (291 )
Gross profit 77 64
Operating loss (2,475 ) (2,887 )
Adjusted EBITDA $ (2,176 ) $ (2,571 )
 
Consolidated
Revenue $ 14,306 $ 15,828
Gross profit 2,645 2,850
Operating loss (2,576 ) (3,084 )
Adjusted EBITDA $ (1,581 ) $ (2,107 )
 
 

Ballantyne Strong, Inc. and Subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA

(In thousands)
(Unaudited)
                       

Quarters Ended March 31,

2019

2018

 
 
Strong Strong

Corporate

Strong Strong Corporate
Cinema Convergent Outdoor

and Other

Consolidated Cinema Convergent Outdoor and Other Consolidated
Net income (loss) $ (348 ) 579 $ (2,034 ) (2,347 ) $ (4,150 ) $ 1,862 (1,125 ) $ (1,497 ) (3,025 ) $ (3,785 )
Interest expense, net 35 92 23 (31 ) 119 14 9 22 45
Income tax expense 23 68 50 141 653 45 698
Depreciation and amortization   219       423     100       53       795     224       295       45       45       609  
EBITDA (71 ) 1,162 (1,911 ) (2,275 ) (3,095 ) 2,753 (776 ) (1,452 ) (2,958 ) (2,433 )
Stock-based compensation expense 243 243 255 255
Fair value adjustment to notes receivable 510 510 42 42
Equity method investment loss (income) 841 (144 ) 697 (103 ) 113 10
Loss on disposal of assets 63 1 64
Severance and other                                               19       19  
Adjusted EBITDA $ 1,343     $ 1,163   $ (1,911 )   $ (2,176 )   $ (1,581 ) $ 2,692     $ (776 )   $ (1,452 )   $ (2,571 )   $ (2,107 )
 

Contacts

Ballantyne Strong, Inc.
Mark Roberson
Chief
Financial Officer
Mark.Roberson@btn-inc.com
704-994-8295

Ballantyne Strong Reports First Quarter 2019 Operating Results

OMAHA, Neb.–(BUSINESS WIRE)–Ballantyne Strong, Inc. (NYSE American:
BTN) (the “Company”), a holding company with diverse business activities
focused on serving the cinema, retail, financial, advertising and
government markets, today announced financial results for the period
ended March 31, 2019. The Company conducts its operations through three
operating segments: Strong Cinema, Convergent and Strong Outdoor.

First Quarter 2019 Highlights

  • Total revenue decreased 9.6% to $14.3 million for the first quarter of
    2019 as revenue growth at Convergent and Strong Outdoor were offset by
    lower revenue generated by Strong Cinema as our production facility
    was closed for several weeks in the quarter due to weather-related
    damage. The facility resumed production and shipping in March, and we
    are rebuilding the damaged section of the facility which was fully
    covered by insurance.
  • Gross profit decreased 7.2% to $2.6 million for the first quarter of
    2019 as favorable contributions from Convergent, where revenue growth
    was accompanied by an increase in gross profit margins from 14.5% to
    28.3%, were offset by the flow through of decreased revenue at Strong
    Cinema from the temporary plant closure. The favorable trend at
    Convergent is due to the combination of growth in high margin
    recurring revenue and cost reduction initiatives.
  • Operating loss improved by $0.5 million for first quarter of 2019 to
    $2.6 million as improved operating performance at Convergent and
    reductions in administrative expenses were partially offset by
    increased investment in start-up operating expenses at Strong Outdoor
    and by the lower contribution from Strong Cinema.
  • Net loss was $4.2 million ($0.29 per share) for the first quarter of
    2019 as compared to $3.8 million ($0.26 per share) in the prior year
    as improved operating performance was offset by non-cash fair value
    adjustments and equity method investment losses.
  • Adjusted EBITDA, a non-GAAP measure, improved to negative $1.6 million
    for the first quarter of 2019 from negative $2.1 million in the prior
    year due to operating improvements at Convergent and reduced
    administrative expenses.

Kyle Cerminara, Chairman and CEO commented, “We continued to see strong
performance from our Convergent business, which has turned around
significantly over the past few quarters. Strong Cinema was impacted by
weather damage to our facility in Quebec, and we stopped shipping for
several weeks during the first quarter. The facility resumed operations
in March, and we are fully insured for property and casualty and
business interruption. We expect insurance recoveries to be
approximately $5 million CDN, which will positively impact future
quarters as those claims are finalized.

“The Convergent team has done a tremendous job accelerating high margin
recurring revenue growth while also significantly lowering their
operating costs. Strong Outdoor is building out its sales leadership
team and we expect to see growth accelerating in the second half of
2019.”

Conference Call

The Company will host a conference call on Tuesday, May 14, 2019 at 4:30
pm Eastern Time. Investors and analysts are invited to access the
conference call by dialing 877-407-3982 (domestic) or 201-493-6780
(international) and providing the operator with conference ID number:
13690794. A replay will be available approximately two hours after the
conclusion of the conference call until Friday, June 14, 2019 by dialing
844-512-2921 in the U.S. and Canada and 412-317-6671 internationally and
entering the conference ID number: 13690794.

Use of Non-GAAP Measures

Ballantyne Strong, Inc. prepares its consolidated financial statements
in accordance with United States generally accepted accounting
principles (“GAAP”). In addition to disclosing financial results
prepared in accordance with GAAP, the Company discloses information
regarding Adjusted EBITDA, which differs from the term EBITDA as it is
commonly used. In addition to adjusting net income (loss) to exclude
taxes, interest, and depreciation and amortization, Adjusted EBITDA also
excludes share-based compensation, impairment charges, equity method
income, fair value adjustments, severance and transactional expenses and
other non-cash charges.

EBITDA and Adjusted EBITDA are not measures of performance defined in
accordance with GAAP. However, Adjusted EBITDA is used internally in
planning and evaluating the Company’s operating performance.
Accordingly, management believes that disclosure of these metrics offers
investors, bankers and other stakeholders an additional view of the
Company’s operations that, when coupled with the GAAP results, provides
a more complete understanding of the Company’s financial results.

EBITDA and Adjusted EBITDA should not be considered as an alternative to
net loss or to net cash used in operating activities as measures of
operating results or liquidity. Our calculation of EBITDA and Adjusted
EBITDA may not be comparable to similarly titled measures used by other
companies, and the measures exclude financial information that some may
consider important in evaluating the Company’s performance. A
reconciliation of GAAP net loss to EBITDA and Adjusted EBITDA is
included in the accompanying financial schedules.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you
should not consider them in isolation, or as substitutes for analysis of
our results as reported under GAAP. Some of these limitations are (i)
they do not reflect our cash expenditures, or future requirements for
capital expenditures or contractual commitments, (ii) they do not
reflect changes in, or cash requirements for, our working capital needs,
(iii) EBITDA and Adjusted EBITDA do not reflect interest expense, or the
cash requirements necessary to service interest or principal payments,
on our debt, (iv) although depreciation and amortization are non-cash
charges, the assets being depreciated and amortized will often have to
be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect
any cash requirements for such replacements, (v) they do not adjust for
all non-cash income or expense items that are reflected in our
statements of cash flows, (vi) they do not reflect the impact of
earnings or charges resulting from matters we consider not to be
indicative of our ongoing operations, and (vii) other companies in our
industry may calculate these measures differently than we do, limiting
their usefulness as comparative measures.

We believe EBITDA and Adjusted EBITDA facilitate operating performance
comparisons from period to period by isolating the effects of some items
that vary from period to period without any correlation to core
operating performance or that vary widely among similar companies. These
potential differences may be caused by variations in capital structures
(affecting interest expense), tax positions (such as the impact on
periods or companies of changes in effective tax rates or net operating
losses) and the age and book depreciation of facilities and equipment
(affecting relative depreciation expense). We also present EBITDA and
Adjusted EBITDA because (i) we believe these measures are frequently
used by securities analysts, investors and other interested parties to
evaluate companies in our industry, (ii) we believe investors will find
these measures useful in assessing our ability to service or incur
indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally as
benchmarks to evaluate our operating performance or compare our
performance to that of our competitors.

For further information, please refer to Ballantyne Strong, Inc.’s
Quarterly Report on Form 10-Q to be filed with the Securities and
Exchange Commission on or about May 15, 2019, available online at www.sec.gov.

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 of 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 year ended December 31, 2018 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 maintain its brand and reputation and 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, potential
sales tax collections and claims for uncollected amounts, 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 utilize or 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, except par values)
       
March 31, 2019 December 31, 2018
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,989 $ 6,698
Restricted cash 350 350
Accounts receivable (net of allowance for doubtful accounts of
$1,624 and $1,832, respectively)
12,394 13,841
Inventories, net 3,615 3,490
Recoverable income taxes 735 281
Other current assets   1,876     1,663  
Total current assets 23,959 26,323
Property, plant and equipment (net of accumulated depreciation of
$8,687 and $9,046, respectively)
10,298 14,483
Operating lease right-of-use assets 9,588
Finance lease right-of-use assets 839 692
Equity method investments 10,450 11,167
Intangible assets, net 1,748 1,795
Goodwill 894 875
Notes receivable 3,455 3,965
Other assets   326     337  
Total assets $ 61,557   $ 59,637  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 4,092 $ 4,724
Accrued expenses 2,709 2,782
Short-term debt 3,340 3,152
Current portion of long-term debt 923 1,094
Current portion of operating lease obligations 1,833
Current portion of finance lease obligations 181 160
Deferred revenue and customer deposits   2,323     2,310  
Total current liabilities 15,401 14,222
Long-term debt, net of current portion and debt issuance costs 3,645 10,053
Operating lease obligations, net of current portion 8,042
Finance lease obligations, net of current portion 590 427
Deferred revenue and customer deposits, net of current portion 1,171 1,167
Deferred income taxes 2,577 2,516
Other accrued expenses, net of current portion   87     254  
Total liabilities 31,513 28,639
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 17,313 and 17,237 shares at March 31, 2019 and December 31,
2018, respectively; outstanding 14,519 and 14,443 shares at March
31, 2019 and December 31, 2018, respectively
169 169
Additional paid-in capital 41,717 41,474
Accumulated other comprehensive income (loss):
Foreign currency translation (5,051 ) (5,308 )
Postretirement benefit obligations 127 125
Unrealized loss on available-for-sale securities of equity method
investment
(286 ) (195 )
Retained earnings   11,954     13,319  
48,630 49,584
Less 2,794 of common shares in treasury, at cost   (18,586 )   (18,586 )
Total stockholders’ equity   30,044     30,998  
Total liabilities and stockholders’ equity $ 61,557   $ 59,637  
 
 
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
       
Three Months Ended March 31,
2019 2018
Net product sales $ 5,579 $ 8,639
Net service revenues   8,727     7,189  
Total net revenues 14,306 15,828
Cost of products sold 3,523 5,812
Cost of services   8,138     7,166  
Total cost of revenues   11,661     12,978  
Gross profit 2,645 2,850
Selling and administrative expenses:
Selling 1,228 1,225
Administrative   3,929     4,709  
Total selling and administrative expenses 5,157 5,934
Loss on disposal of assets   (64 )    
Loss from operations (2,576 ) (3,084 )
Other income (expense):
Interest expense (119 ) (45 )
Fair value adjustment to notes receivable (510 ) (42 )
Foreign currency transaction (loss) gain (143 ) 104
Other income (expense), net   36     (10 )
Total other (expense) income   (736 )   7  
Loss before income taxes and equity method investment loss (3,312 ) (3,077 )
Income tax expense 141 698
Equity method investment loss   (697 )   (10 )
Net loss $ (4,150 ) $ (3,785 )
Basic loss per share $ (0.29 ) $ (0.26 )
Diluted loss per share $ (0.29 ) $ (0.26 )
 
 
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
 
Three Months Ended March 31,
2019 2018
Cash flows from operating activities:
Net loss $ (4,150 ) $ (3,785 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Provision for doubtful accounts, net of recoveries (310 ) 103
Provision for obsolete inventory 53 44
Provision for warranty 67 79
Depreciation and amortization 795 524
Amortization and accretion of operating leases 579
Fair value adjustment to notes receivable 510 42
Equity method investment loss 697 10
Recognition of contract acquisition costs 57
Loss on disposal of assets 64
Deferred income taxes 50 87
Stock-based compensation expense 243 255
Changes in operating assets and liabilities:
Accounts receivable 1,819 (178 )
Inventories (145 ) 537
Other current assets 2 5
Accounts payable (592 ) 256
Accrued expenses (13 ) 429
Operating lease obligations (590 )
Deferred revenue and customer deposits 11 704
Current income taxes (444 ) 36
Other assets   (71 )   (796 )
Net cash used in operating activities (1,425 ) (1,591 )
 
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 86
Dividends received from investee in excess of cumulative earnings 23
Capital expenditures   (257 )   (356 )
Net cash used in investing activities (171 ) (333 )
 
Cash flows from financing activities:
Proceeds from issuance of long-term debt 237
Principal payments on short-term debt (79 )
Principal payments on long-term debt (245 ) (16 )
Payments on capital lease obligations   (49 )   (53 )
Net cash used in financing activities   (136 )   (69 )
Effect of exchange rate changes on cash and cash equivalents   23     471  
Net decrease in cash and cash equivalents and restricted cash (1,709 ) (1,522 )
Cash and cash equivalents and restricted cash at beginning of period   7,048     4,870  
Cash and cash equivalents and restricted cash at end of period $ 5,339   $ 3,348  
Components of cash and cash equivalents and restricted cash:
Cash and cash equivalents $ 4,989 $ 3,348
Restricted cash   350      
Total cash and cash equivalents and restricted cash $ 5,339   $ 3,348  

 

 
Ballantyne Strong, Inc. and Subsidiaries
Summary by Business Segments
(In thousands)
(Unaudited)
       
Quarters Ended March 31,
2019 2018
Strong Cinema
Revenue $ 7,853 $ 11,450
Gross profit 2,415 3,385
Operating income 1,159 2,325
Adjusted EBITDA $ 1,343 $ 2,692
 
Convergent
Revenue $ 5,538 $ 4,607
Gross profit 1,569 666
Operating income (loss) 752 (1,025 )
Adjusted EBITDA $ 1,163 $ (776 )
 
Strong Outdoor
Revenue $ 1,093 $ 62
Gross loss (1,416 ) (1,265 )
Operating loss (2,012 ) (1,497 )
Adjusted EBITDA $ (1,911 ) $ (1,452 )
 
Corporate and Other
Revenue $ (178 ) $ (291 )
Gross profit 77 64
Operating loss (2,475 ) (2,887 )
Adjusted EBITDA $ (2,176 ) $ (2,571 )
 
Consolidated
Revenue $ 14,306 $ 15,828
Gross profit 2,645 2,850
Operating loss (2,576 ) (3,084 )
Adjusted EBITDA $ (1,581 ) $ (2,107 )
 
 

Ballantyne Strong, Inc. and Subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA

(In thousands)
(Unaudited)
                       

Quarters Ended March 31,

2019

2018

 
 
Strong Strong

Corporate

Strong Strong Corporate
Cinema Convergent Outdoor

and Other

Consolidated Cinema Convergent Outdoor and Other Consolidated
Net income (loss) $ (348 ) 579 $ (2,034 ) (2,347 ) $ (4,150 ) $ 1,862 (1,125 ) $ (1,497 ) (3,025 ) $ (3,785 )
Interest expense, net 35 92 23 (31 ) 119 14 9 22 45
Income tax expense 23 68 50 141 653 45 698
Depreciation and amortization   219       423     100       53       795     224       295       45       45       609  
EBITDA (71 ) 1,162 (1,911 ) (2,275 ) (3,095 ) 2,753 (776 ) (1,452 ) (2,958 ) (2,433 )
Stock-based compensation expense 243 243 255 255
Fair value adjustment to notes receivable 510 510 42 42
Equity method investment loss (income) 841 (144 ) 697 (103 ) 113 10
Loss on disposal of assets 63 1 64
Severance and other                                               19       19  
Adjusted EBITDA $ 1,343     $ 1,163   $ (1,911 )   $ (2,176 )   $ (1,581 ) $ 2,692     $ (776 )   $ (1,452 )   $ (2,571 )   $ (2,107 )
 

Contacts

Ballantyne Strong, Inc.
Mark Roberson
Chief
Financial Officer
Mark.Roberson@btn-inc.com
704-994-8295

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