Ballantyne Strong, Inc (BTN)

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Ballantyne Strong, Inc. (BTN)

Q3 2012 Earnings Call

November 9, 2012 10:00 AM ET

Executives

Rob Rinderman – IR

Gary Cavey – President and CEO

Mary Carstens – SVP, Secretary, Treasurer and CFO

Analysts

Eric Wold – B Riley

Ethan Starr – Private Investor

Bernie Harris – BJ Harris

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ballantyne Strong Q3 2012 results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Friday, November 9, 2012.

I would now like to turn the conference over to Rob Rinderman, Ballantyne Strong Investor Relations. Please go ahead.

Rob Rinderman

Thank you, Frank. Good morning again, everyone, and welcome to Ballantyne Strong’s 2012 third quarter earnings 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 discussed in the management’s Discussion and Analysis section of Ballantyne’s filing, copies of which can be obtained from the SEC or via the company’s website at strong-world.com.

All information discussed on this conference call is as of today, November 9, 2012, 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 like to turn the call over to President and CEO, Gary Cavey, who is joined this morning by CFO Mary Carstens. Gary?

Gary Cavey

Thank you, Rob. Good morning, everybody, and thank you for joining us today. We know some of you were unfortunately in the path of Hurricane Sandy, so on behalf of the entire Ballantyne family we want to extend our sincere best wishes to all who were impacted and wish you all a full and speedy recovery.

Before the market opening, we reported our 2012 third quarter results. Q3 revenues were $39.3 million, and our bottom line was a diluted loss of $0.02 per share. Mary will provide additional color on the quarter and our updated capital structure following my opening remarks.

The challenging net revenue and net income comparisons for the quarter are directly attributable to our record-setting performance in the prior-year period, which included the market theater digital deployment. In addition, there was some impact due to the recent decision of the leading virtual print providers to extend their deadlines originally set for September 2012. This move encouraged a few of our exhibitor customers to sign up for our VPF plan now, but to delay their equipment purchases and subsequent installs for a later date.

Despite the VPF extensions and competitive pricing pressures on our company as a projection system reseller, we are successfully leveraging our unique competitive advantage as a leading turnkey cinema systems and service provider. As a result we have been winning additional business by building lower-margin digital projector sales with the higher margin cinema screen and after-the-sale service, which provides Ballantyne with a higher margin than we generate from standalone equipment sales. As a result of the VPF extensions, we expect some of the delayed business to positively impact future reporting periods, pending the ultimate timing of the financing to fund these installs.

For those of you who have been closely following Ballantyne, our operating results for the most recent period should not be at all surprising, given the recent challenging cinema industry trends, which has led to recent pricing pressures and margin compression on the equipment side, subjects we have openly and candidly discussed on several previous quarterly conference calls and in other investor-related forums.

Ballantyne has enjoyed a recent track record of success, with more than three years of positive financial results. While Q3 performance curbed this long trend due to the maturity of the industry transition to digital systems, we are optimistic about the future long-term performance. Our main focus today is continuing in the most important role of serving a very large global cinema customer base by maintaining and further improving upon our leading position as the provider of the most comprehensive one-stop array of digital projection systems and manufactured screens and unparalleled service.

We are of course keenly aware that in order to move forward as an organization, we must again adapt and modify the company’s focus to meet the needs of our core constituency, the world cinema owners, both large and small. Ballantyne has had a long history of being a leader in the cinema industry as the world’s largest manufacturer of 35-mm projectors, with a global installed base in excess of 50,000 machines. This figure comes from only a few years ago before the industry began its historic digital transformation. But like 8-track tape players, the VCR and soon the CD and DVD, there is frankly no longer much demand for the outdated analog-based entertainment technology.

In order to thrive in years ahead, as we have successfully done so many times throughout our 80-year history, we’re in the process of actively transitioning Ballantyne’s operating model, as the industry we serve has dramatically changed and is rapidly evolving on its new digital platform. Clearly, although challenges lie ahead, our entire senior management team has been and will continue to devote a significant portion of our time to proactively evaluating organic growth opportunities and potential acquisitions that capitalized upon our organization’s unique core competencies.

Read the rest of this transcript for free on seekingalpha.com