Ballantyne of Omaha, Inc. (Amex: BTN), a motion picture projection,
specialty lighting and digital cinema equipment and services provider,
today reported financial results for the third quarter (Q3) and nine
months ended September 30, 2006.
Net revenues in Q3 2006 were $13.1 million, a 8% decline from net
revenues of $14.3 million in the year-ago third quarter, principally
reflecting an expected decrease in demand for film-based theater
equipment as theatre owners formulate their plans for the deployment of
digital projection technology. Q3 net revenues reflected the
contribution of $1.3 million in sales generated by Ballantyne’s
Strong Technical Services subsidiary, which was acquired effective May
31, 2006.
Gross profit in Q3 2006 declined to $2.2 million, or 16.8% of net
revenues, versus Q3 2005 gross profit of $4.1 million, or 28.4% of net
revenues. The decline in gross margin is principally reflective of
reduced operating efficiencies on lower sales. Q3 margins were also
dampened by the deferral of revenue recognition and the expensing of the
entire cost of 12 digital projectors sold and financed by Ballantyne in
the quarter; only the down payment was recorded as revenue in the
period. This accounting treatment was driven by the fact that the
collection of the remaining payments over five years were not “reasonably
assured” primarily due to the uncertainties
surrounding the long-term nature of the contract. As future payments are
received related to this agreement, revenue will be recognized with no
associated cost.
Total Q3 2006 selling, general and administrative expenses declined 11%
to $1.9 million compared to $2.2 million in Q3 2005, primarily
reflecting the absence of bonus accruals throughout 2006, due to
management not meeting certain financial targets.
Ballantyne reported Q3 2006 net income of $0.4 million, or $0.03 per
diluted share, compared to net income of $1.2 million, or $0.09 per
diluted share, in Q3 2005. Per share results for the third quarters of
2006 and 2005 are based on a weighted average number of diluted shares
outstanding of 14,029,604 and 13,955,817, respectively.
Ballantyne’s cash position declined modestly
to $20.7 million at the close of Q3 2006, compared to $21.4 million at
the close of Q2 2006. The decrease reflects a $2.1 million increase in
accounts receivable that resulted largely due to slower than anticipated
A/R collections during the period, offset by a $1.5 million decline in
inventories as compared to the close of Q2 2006. The sequential decrease
in inventories from Q2 to Q3 2006 is largely the result of Ballantyne’s
active management of vendor purchase orders to more closely match
production needs.
John P. Wilmers, President and Chief Executive Officer of Ballantyne,
commented, “Our third quarter performance
reflects the initial impact of the rollout of digital cinema projection
equipment within the exhibition industry and that trend’s
effect on our traditional film equipment business. Importantly, our Q3
results reflected the first full quarter’s
benefit from our Strong Technical Services (STS) subsidiary, which we
acquired effective May 31, 2006. STS provides installation and ‘after-sale’
service for our customer’s digital cinema
projection equipment, as well as traditional film projectors, and it
represents an important component of our Digital Cinema growth strategy.
“We just completed a successful exhibition of
our digital cinema offerings at the ShowEast convention last week. Our
customers are responding very favorably to the NEC Starus™
Line of Digital Cinema Projectors as well as the service organization we
are forming to support their digital cinema roll-outs.”
For the nine month period ended September 30, 2006, net revenues were
$37.4 million compared to $39.8 million. Gross profit in the first three
quarters of 2006 was $8.3 million, or 22.1% of net revenues, compared to
gross profit of $11.1 million, or 28.0 % of net revenues. Net income for
the first nine months of 2006 was $2.0 million, or $0.14 per diluted
share, compared to net income of $3.2 million, or $0.23 per diluted
share, in the first nine months of 2005. Per share results for the first
nine months of 2006 and 2005 are based on a weighted average number of
diluted shares outstanding of 14,007,988 and 13,903,081, respectively.
Ballantyne is a provider of motion picture projection, specialty
lighting, specialty projection equipment and digital cinema equipment
and services. The Company supplies major theater chains, top arenas,
television and motion picture production studios, theme parks and
architectural sites around the world. For more information visit www.ballantyne-omaha.com.
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.
