Ballantyne Strong, Inc (BTN)

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Ballantyne Strong, Inc (BTN)

Q4 2012 Earnings Call

March 11, 2013 10:00 am ET

Executives

Robert Rinderman

Gary L. Cavey - Chief Executive Officer, President and Director

Mary A. Carstens - Chief Financial Officer, Senior Vice President, Treasurer and Secretary

Analysts

Aaron Syvertsen - Sidoti & Company, LLC

Eric Wold - B. Riley & Co., LLC, Research Division

Christopher Owens

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Ballantyne Strong 2012 Q4 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Monday, March 11, 2013. I would now like to turn the conference over to Rob Rinderman, Ballantyne Strong Investor Relations. Please go ahead, sir.

Robert Rinderman

Thank you very much, Sharlene. Good morning, everyone. Welcome to Ballantyne Strong 2012 Fourth Quarter Results Conference Call and Webcast. Today's call and webcast may contain forward-looking statements related to the company's future operating results.

Listeners are cautioned that such statements are based upon current expectations and assumptions that involve certain inherent risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. And these risks and uncertainties are detailed from time to time in the company's SEC filings. The company's actual performance may differ materially because of these or other factors as discussed in the Management's Discussion and Analysis section of Ballantyne's filings, copies of which can be obtained from the SEC or via the company's website at strong-world.com.

All information discussed on this call is as of today, March 11, 2013, and Ballantyne undertakes no obligation to update any statements or expectations from prior conversations. Today's call is being webcast live over the Internet, and a replay will be available on our website for a minimum of 30 days.

I'll now turn it over to President and CEO, Gary Cavey, who's joined this morning by CFO, Mary Carstens. Gary?

Gary L. Cavey

Thank you, Rob. Good morning, everybody. We appreciate you joining us. Earlier today, Ballantyne reported a sequential return to profitability with our 2012 fourth quarter results. Revenues amounted to $39.1 million, and we achieved net income of $1.6 million or diluted earnings per share of $0.11. Mary will provide additional financial color on the quarter, full year and an update on our capital structure.

Importantly, we achieved year-over-year improvement in our corporate gross margin percentage in Q4, as well as significant sequential gross margin percentage increase compared to the Q3 level. This was particularly welcome news following the competitive pricing pressures as well as the service business transitional costs, which also weighed on our results for that period.

On our last quarter's investor call, we indicated that an extension of the Cinema industry's virtual print fee deadline, originally set for September, had delayed some exhibitor decision-making and ultimately some purchases and installs to convert to digital from analog. Subsequent to our comments, we learned that one of the most important VPF programs was set to be terminated at year end, and this helped generate a flurry of purchasing activity in late 2012, which ultimately benefited our Q4 results.

We continue to successfully leverage our long-standing reputation as the Cinema industry's leading provider of one-stop product and services. Capitalizing on our wide range of offerings, we've been bundling digital projector sales with our higher-margin Cinema Screens, which we generate manufacture-level margins.

We also are combining Ballantyne's post-sale maintenance service, both on demand and annual servicing contracts, with our round-the-clock proactive monitoring operates, which is done by our skilled technical service team based in Omaha at the company's state-of-the-art Network Operations Center.

Since its foundings more than 8 decades ago, our company has been a trusted partner and supplier to thousands of theater, theatrical exhibitors that are -- the world over. As we've been discussing in recent quarters, our main focus at this juncture is remaining on the path we are on, as a one-stop leader of turnkey solutions to cinema owners.

But given where we are at the advanced stage of the digital projection conversion cycle, especially domestically, we must also continue to innovate internally in order to meet the evolving product and service needs of our valued exhibition industry customers in today's digital world.

Ballantyne also needs to remain focused on growing our business in a disciplined manner via M&A opportunities, which could provide growth for the company. The senior management team and I continue to spend a considerable portion of our time seeking and evaluating attractive acquisition opportunities that tie our core strengths as an organization that will ultimately be financially accretive for the benefit of the company's stakeholders.

To briefly reiterate that we've been discussing following Q3, we greatly appreciate the patience and loyalty that our valued shareholders have shown as our Senior Management Team and Board of Directors continue to explore future acquisitions that will be made with our organization's long-term success as our main goal. As you know, we are not seeking to add low-margin revenues simply for the sake of potentially making up for any top line shortfall due to the industry being in the later stages of the digital rollout.

Reflecting our year-end balance sheet, Mary and the finance team have done an excellent job in maintaining the company's history of disciplined cash management. We will strive to continue this approach so we have ample resources in the form of cash plus credit facility available when we ultimately find the right target or targets. Keep in mind our proven M&A capabilities have been exemplified by our successful Canadian-based Cinema Screen manufacturing business and the company's leading cinema services team of skilled technicians and engineers, both aimed to Ballantyne through acquisitions in the recent past.

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