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| 8-K - BALLANTYNE STRONG, INC. | form8-k.htm |
Ballantyne Strong Reports Financial Results
for Second Quarter 2018
OMAHA, Nebraska (August 8, 2018) – 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 second quarter ended June 30, 2018.
Net revenues were $14.2 million in the second quarter of 2018, compared with $19.4 million in the same period of the prior year. Loss from operations was ($5.5) million in the second quarter of 2018, compared with ($0.8) million in the same period of the prior year. Net loss from continuing operations was ($6.8) million, or ($0.47) per share, in the second quarter of 2018 compared with net loss from continuing operations of ($1.9) million, or ($0.14) per share, in the same period of the prior year.
Kyle Cerminara, Chairman and CEO of Ballantyne Strong, Inc., commented, “During the second quarter, we continued to make significant investments in our Strong Digital Media taxi-top advertising business, with much of the revenue expected to begin in the second half of 2018. We also began a large Digital Signage as a Service (DSaaS) implementation for a significant new customer that is expected to add over $1.0 million per quarter of incremental recurring revenue beginning in the next few months. We completed a sale-leaseback of our Alpharetta, Georgia office building for $7.0 million, and a portion of the proceeds was used to retire existing debt. Lastly, we experienced some notable charges in the quarter, including a $1.3 million software impairment charge, a $0.7 million impairment charge to the carrying value of our Itasca investment based on the purchase price paid by our affiliate, Fundamental Global, for a large block of stock in Itasca and a $0.5 million inventory obsolescence charge. Our efforts in the second half of 2018 will be heavily focused on executing against our strategy in the Digital Media segment, while continuing to focus on optimal capital allocation among our businesses and creating long-term value for our shareholders.”
Q2 2018 Financial Summary
Cinema revenues were $10.4 million in the second quarter of 2018, compared with $13.2 million in the same period of the prior year. The decrease was driven by decreased lamp sales, as the Company terminated its distributorship for certain cinema lamp products in July 2017 due to the very low margins earned on those products, and decreased sales of screens and projectors.
Digital Media revenues were $3.8 million in the second quarter of 2018, compared with $6.3 million in the same period of the prior year. This decrease was driven primarily by decreased non-recurring digital signage installation sales. Smaller decreases in sales of recurring contract maintenance services, digital signage equipment and non-recurring maintenance services were partially offset by increased digital signage as a service (“DSaaS”) revenues and revenue in the current year from our taxicab advertising business, which did not exist in the prior year. We expect DSaaS revenues to continue to increase during the second half of the year as we implement DSaaS for a new customer during the third quarter, which we expect to generate over $1.0 million of DSaaS revenues per quarter when fully implemented. We also expect taxicab advertising revenues to gradually increase during the second half of the year.
Consolidated gross profit was $1.3 million in the second quarter of 2018, compared with $5.3 million in the same quarter of the prior year. Gross margin was 9.1% in the second quarter of 2018, compared with 27.2% in the same quarter of the prior year. The decrease in gross margin percentage was driven primarily by an increase in fixed costs in the Digital Media segment associated with the new Strong Digital Media taxicab advertising business. Excluding the new taxicab advertising business, gross profit was $3.2 million, or 23.6% gross margin. Advertising revenues are expected to gradually increase throughout 2018, 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 $5.5 million in the second quarter of 2018, compared with $6.1 million in the same quarter of the prior year. The decrease was driven by a decreases in consulting expenses of $0.2 million and bad debt expense of $0.4 million.
Balance Sheet
Ballantyne’s cash and cash equivalents balance at June 30, 2018 was $6.8 million, compared to $4.9 million at December 31, 2017. The increase in cash was primarily driven by the net proceeds from a sale-leaseback of the Company’s Alpharetta, Georgia office facility during the second quarter of 2018. This increase was partially offset by the cash impact of operating losses. Equity method investments had a book value of $16.8 million and a market value of $15.0 million as of June 30, 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.
CONTACT:
Lance Schulz
Chief Financial Officer
402/829-9427
-tables follow-
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
| June 30, 2018 | December 31, 2017 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,847 | $ | 4,870 | ||||
| Accounts receivable, net | 10,751 | 10,766 | ||||||
| Inventories, net | 3,651 | 4,821 | ||||||
| Other current assets | 2,202 | 1,785 | ||||||
| Total current assets | 23,451 | 22,242 | ||||||
| Property, plant and equipment, net | 11,926 | 10,826 | ||||||
| Equity method investments | 16,811 | 18,053 | ||||||
| Goodwill and intangible assets, net | 3,580 | 4,924 | ||||||
| Other assets | 3,446 | 2,969 | ||||||
| Total assets | $ | 59,214 | $ | 59,014 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 7,758 | $ | 6,496 | ||||
| Short-term debt, including current portion of long-term | 3,128 | 565 | ||||||
| Deferred revenue and customer deposits | 2,781 | 1,619 | ||||||
| Other current liabilities | 152 | - | ||||||
| Total current liabilities | 13,819 | 8,680 | ||||||
| Long-term debt, net of current portion and debt issuance costs | 7,993 | 1,870 | ||||||
| Other liabilities | 4,178 | 4,342 | ||||||
| Total liabilities | 25,990 | 14,892 | ||||||
| Stockholders’ equity | 33,224 | 44,122 | ||||||
| Total liabilities and stockholders’ equity | $ | 59,214 | $ | 59,014 | ||||
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net product sales | $ | 7,450 | $ | 12,917 | $ | 16,089 | $ | 25,493 | ||||||||
| Net service revenues | 6,728 | 6,483 | 13,916 | 11,832 | ||||||||||||
| Total net revenues | 14,178 | 19,400 | 30,005 | 37,325 | ||||||||||||
| Cost of products sold | 5,420 | 10,429 | 11,232 | 20,817 | ||||||||||||
| Cost of services | 7,466 | 3,697 | 14,632 | 6,795 | ||||||||||||
| Total cost of revenues | 12,886 | 14,126 | 25,864 | 27,612 | ||||||||||||
| Gross profit | 1,292 | 5,274 | 4,141 | 9,713 | ||||||||||||
| Selling and administrative expenses: | ||||||||||||||||
| Selling | 1,274 | 1,419 | 2,500 | 2,909 | ||||||||||||
| Administrative | 4,208 | 4,688 | 8,917 | 8,234 | ||||||||||||
| Total selling and administrative expenses | 5,482 | 6,107 | 11,417 | 11,143 | ||||||||||||
| Loss on disposal of assets | (1,331 | ) | - | (1,331 | ) | - | ||||||||||
| Loss from operations | (5,521 | ) | (833 | ) | (8,607 | ) | (1,430 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | - | - | - | 22 | ||||||||||||
| Interest expense | (42 | ) | (28 | ) | (87 | ) | (38 | ) | ||||||||
| Foreign currency transaction gain (loss) | 3 | (107 | ) | 107 | (104 | ) | ||||||||||
| Fair value adjustment to notes receivable | 192 | - | 150 | - | ||||||||||||
| Other (expense) income, net | (5 | ) | 7 | (11 | ) | 10 | ||||||||||
| Total other income (expense) | 148 | (128 | ) | 159 | (110 | ) | ||||||||||
| Loss before income taxes and equity method investment (loss) income | (5,373 | ) | (961 | ) | (8,448 | ) | (1,540 | ) | ||||||||
| Income tax expense | 642 | 776 | 1,339 | 2,269 | ||||||||||||
| Equity method investment (loss) income | (740 | ) | (212 | ) | (751 | ) | 2,269 | |||||||||
| Net loss from continuing operations | (6,755 | ) | (1,949 | ) | (10,538 | ) | (1,540 | ) | ||||||||
| Net loss from discontinued operations, net of tax | - | (26 | ) | - | (49 | ) | ||||||||||
| Net loss | $ | (6,755 | ) | $ | (1,975 | ) | $ | (10,538 | ) | $ | (1,589 | ) | ||||
| Net loss per share - basic | ||||||||||||||||
| Net loss from continuing operations | $ | (0.47 | ) | $ | (0.14 | ) | $ | (0.73 | ) | $ | (0.11 | ) | ||||
| Net loss from discontinued operations | - | (0.00 | ) | - | (0.00 | ) | ||||||||||
| Net loss | (0.47 | ) | (0.14 | ) | (0.73 | ) | (0.11 | ) | ||||||||
| Net loss per share - diluted | ||||||||||||||||
| Net loss from continuing operations | $ | (0.47 | ) | $ | (0.14 | ) | $ | (0.73 | ) | $ | (0.11 | ) | ||||
| Net loss from discontinued operations | - | (0.00 | ) | - | (0.00 | ) | ||||||||||
| Net loss | (0.47 | ) | (0.14 | ) | (0.73 | ) | (0.11 | ) | ||||||||
Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2018 | 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (10,538 | ) | $ | (1,589 | ) | ||
| Net loss from discontinued operations, net of tax | - | (49 | ) | |||||
| Net loss from continuing operations | (10,538 | ) | (1,540 | ) | ||||
| Non-cash expenses, net | 2,479 | 2,661 | ||||||
| Fair value adjustment to notes receivable | (150 | ) | - | |||||
| Equity method investment loss (income) | 751 | (2,269 | ) | |||||
| Loss on disposal of assets | 1,331 | - | ||||||
| Changes in operating assets and liabilities, net | 1,962 | (1,037 | ) | |||||
| Net cash flows used in operating activities - continuing operations | (4,165 | ) | (2,185 | ) | ||||
| Net cash flows used in operating activities - discontinued operations | - | (146 | ) | |||||
| Net cash used in operating activities | (4,165 | ) | (2,331 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of equity securities | - | (2,525 | ) | |||||
| Dividends received from investee in excess of cumulative earnings | 46 | 103 | ||||||
| Capital expenditures | (887 | ) | (2,103 | ) | ||||
| Proceeds from sale of business | - | 60 | ||||||
| Net cash used in investing activities | (841 | ) | (4,465 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale-leaseback financing | 7,000 | - | ||||||
| Proceeds from issuance of debt | 3,234 | 2,000 | ||||||
| Principal payments on debt | (3,013 | ) | (2 | ) | ||||
| Other | (121 | ) | (239 | ) | ||||
| Net cash provided by financing activities | 7,100 | 1,759 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (117 | ) | 66 | |||||
| Net increase (decrease) in cash and cash equivalents | 1,977 | (4,971 | ) | |||||
| Discontinued operations 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 | - | - | ||||||
| Cash and cash equivalents at beginning of period | 4,870 | 7,596 | ||||||
| Cash and cash equivalents at end of period | $ | 6,847 | $ | 2,800 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Term loan borrowings to finance equipment purchases | $ | 1,608 | $ | - | ||||
| Issuance of short-term progress payment note payable | $ | - | $ | 2,500 | ||||