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 |
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|
Reconciliation of Net Loss to Adjusted EBITDA |
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| (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 | ) | ||||||||||||||
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