-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LGCpVWEDF+F1n5dCyrwYEmnbacwgdtuFlm7ks4O0KydoVaAssyBj6FFrB9Qclsn1 /ZVQw9+WqW8uFZfFO2AhzA== 0000912057-00-024008.txt : 20000515 0000912057-00-024008.hdr.sgml : 20000515 ACCESSION NUMBER: 0000912057-00-024008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALLANTYNE OF OMAHA INC CENTRAL INDEX KEY: 0000946454 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 470587703 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13906 FILM NUMBER: 630098 BUSINESS ADDRESS: STREET 1: 4350 MCKINLEY ST CITY: OMAHA STATE: NE ZIP: 68112 BUSINESS PHONE: 4024534444 MAIL ADDRESS: STREET 1: 4350 MCKINLEY ST CITY: OMAHA STATE: NE ZIP: 68112 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMMISSION Washington, DC 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For Quarter Ended Commission File Number March 31, 2000 1-13906 BALLANTYNE OF OMAHA, INC. ------------------------- (Exact name of Registrant as specified in its charter) Delaware 47-0587703 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 4350 McKinley Street, Omaha, Nebraska 68112 ------------------------------------------- (Address of principal executive offices including zip code) Registrant's telephone number, including area code: (402) 453-4444 Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of the latest practicable date: Class Outstanding as of May 5, 2000 - ---------------------- Common Stock, $.01 Par value 12,459,323 shares BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES INDEX Part I. Financial Information
Item 1. Consolidated Financial Statements Page ---- Consolidated Balance Sheets - March 31, 2000 and December 31, 1999.............. 2 Consolidated Statements of Operations - Three Months Ended March 31, 2000 and 1999..................................................... 3 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999..................................................... 4 Notes to Consolidated Financial Statements Three Months Ended March 31, 2000........................................... 5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.......................................... 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk........................... 13 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K..................................................... 14
1 PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS Ballantyne of Omaha, Inc. and Subsidiaries Consolidated Balance Sheets
March 31, December 31, 2000 1999 ----------------- ----------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 388,054 $ 857,089 Accounts receivable (less allowance for doubtful accounts of $560,939 in 2000 and $526,221 in 1999) 12,705,073 15,510,265 Inventories 29,025,853 26,210,431 Recoverable income taxes 230,556 - Deferred income taxes 1,009,697 1,039,733 Other current assets 521,076 523,841 ----------------- ----------------- Total current assets 43,880,309 44,141,359 Plant and equipment, net 13,255,150 13,319,706 Other assets, net 3,203,039 3,295,165 ----------------- ----------------- Total assets $ 60,338,498 $ 60,756,230 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ - $ 20,000 Accounts payable 3,306,950 6,063,078 Accrued expenses 3,187,154 3,437,885 Income taxes payable - 219,499 ----------------- ----------------- Total current liabilities 6,494,104 9,740,462 Deferred income taxes 684,713 735,271 Long-term debt - 48,877 Note payable to bank 14,106,000 10,369,000 Stockholders' equity: Preferred stock, par value $.01 per share; authorized 1,000,000 shares, none outstanding - - Common stock, par value $.01 per share; authorized 25,000,000 shares; issued 14,557,128 shares 145,571 145,571 Additional paid-in capital 31,663,043 31,663,043 Retained earnings 22,560,521 23,369,460 ----------------- ----------------- Less cost of 2,097,805 common shares in treasury, at cost 54,369,135 55,178,074 (15,315,454) (15,315,454) ----------------- ----------------- Total stockholders' equity 39,053,681 39,862,620 ----------------- ----------------- Total liabilities and stockholders' equity $ 60,338,498 $ 60,756,230 ================= =================
See accompanying notes to consolidated financial statements. 2 Ballantyne of Omaha, Inc. and Subsidiaries Consolidated Statements of Operations Three Months Ended March 31, 2000 and 1999 (Unaudited)
2000 1999 ---- ---- Net revenues $ 11,849,586 $ 20,197,020 Cost of revenues 9,371,706 14,017,333 ----------------- ---------------- Gross profit 2,477,880 6,179,687 Operating expenses: Selling 1,375,474 1,091,545 General and administrative 2,097,671 1,878,241 ----------------- ---------------- Total operating expenses 3,473,145 2,969,786 ----------------- ---------------- Income (loss) from operations (995,265) 3,209,901 Interest income 6,301 2,877 Interest expense (244,474) (235,041) ----------------- ---------------- Net interest expense (238,173) (232,164) ----------------- ---------------- Income (loss) before income taxes (1,233,438) 2,977,737 Income tax expense (benefit) (424,499) 1,141,185 ----------------- ---------------- Net income (loss) $ (808,939) $ 1,836,552 ================= ================ Net income (loss) per share: Basic $ (.06) $ 0.14 ================= ================ Diluted $ (.06) $ 0.14 ================= ================ Weighted average shares outstanding: Basic 12,459,323 12,677,434 ================= ================ Diluted 12,459,323 13,328,863 ================= ================
See accompanying notes to consolidated financial statements. 3 Ballantyne of Omaha, Inc. and Subsidiaries Consolidated Statements of Cash Flows Three Months Ended March 31, 2000 and 1999 (Unaudited)
2000 1999 ---- ---- Cash flows from operating activities: Net income (loss) $ (808,939) $ 1,836,552 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 798,150 663,856 Gain on sale of fixed assets (22,858) - Changes in assets and liabilities, net of assets acquired: Accounts receivable 2,805,192 1,026,110 Inventories (2,815,422) (1,914,300) Other current assets 2,765 13,780 Accounts payable (2,756,128) (190,608) Accrued expenses (250,731) (115,926) Income taxes (470,577) 858,303 Other assets (89,998) (27,489) ----------------- ----------------- Net cash provided by (used in) operating activities (3,608,546) 2,150,278 ----------------- ----------------- Cash flows from investing activities: Proceeds from sales of fixed assets 45,025 - Capital expenditures (573,637) (894,313) Net cash used in investing ----------------- ----------------- activities (528,612) (894,313) ----------------- ----------------- Cash flows from financing activities: Payments of long-term debt (68,877) - Net proceeds (payments) on revolving credit facility 3,737,000 (802,000) Proceeds from exercise of stock options - 43,777 ----------------- ----------------- Net cash provided by (used in) financing activities 3,668,123 (758,223) ----------------- ----------------- Net increase (decrease) in cash and cash equivalents (469,035) 497,742 Cash and cash equivalents at beginning of period 857,089 594,686 ----------------- ----------------- Cash and cash equivalents at end of period $ 388,054 $ 1,092,428 ================ =================
See accompanying notes to consolidated financial statements. 4 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended March 31, 2000 (Unaudited) 1. Company Ballantyne of Omaha, Inc., a Delaware corporation ("Ballantyne" or the "Company"), and its wholly-owned subsidiaries, Strong Westrex, Inc., Design & Manufacturing, Inc., Xenotech Rental Corp. and Xenotech Strong, Inc., design, develop, manufacture and distribute commercial motion picture equipment, lighting systems and restaurant equipment. The Company's products are distributed worldwide through a domestic and international dealer network and are sold to major movie exhibition companies, sports arenas, auditoriums, amusement parks, special venues, restaurants, supermarkets and convenience food stores. Approximately 26% of the Company's common stock is owned by Canrad of Delaware, Inc. ("Canrad"), which is an indirect wholly-owned subsidiary of ARC International Corporation. 2. Summary of Significant Accounting Policies The principal accounting policies upon which the accompanying consolidated financial statements are based are summarized as follows: a. Basis of Presentation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. All such adjustments are, in the opinion of management, of a normal, recurring nature. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and related notes included in the Company's latest annual report on Form 10-K. b. Stock Dividend The Company's Board of directors declared a 5% stock dividend of the Company's common stock on January 28, 1999. The stock dividend was paid on March 1, 1999 to shareholders of record on February 15, 1999. The stock dividend resulted in the issuance of 601,455 shares of common stock. The dividend has been accounted for as if it occurred on December 31, 1998. c. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and include appropriate elements of material, labor and manufacturing overhead. 5 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended March 31, 2000 (Unaudited) d. Plant and Equipment Significant expenditures for the replacement or expansion of plant and equipment are capitalized. Depreciation of plant and equipment is provided over the estimated useful lives of the respective assets using the straight-line method. Estimated useful lives range from 3 to 20 years. e. Revenue Recognition The Company recognizes revenue from product sales upon shipment to the customer. Revenues related to equipment rental and services are recognized as earned over the terms of the contracts. f. Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. g. Net Income (Loss) Per Common Share Basic net income (loss) per share has been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted net income per share has been computed on the basis of the weighted average number of shares of common stock outstanding after giving effect to potential common shares from dilutive stock options. Diluted net income per share for the three months ended March 31, 1999 includes an increase in the weighted average shares outstanding for dilutive stock options of 651,429. Diluted net loss per share for the three months ended March 31, 2000 exclude potentially dilutive stock options of 450,218 shares because to do so would have been antidilutive. h. Reclassifications Certain of the 1999 amounts have been reclassified to conform to the 2000 presentation. 3. Inventories Inventories consist of the following:
March 31, December 31, 2000 1999 ----------------- ----------------- Raw materials $ 20,488,297 $ 20,041,081 Work in process 3,820,468 3,564,972 Finished goods 4,717,088 2,604,378 ----------------- ----------------- $ 29,025,853 $ 26,210,431 ================= =================
6 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended March 31, 2000 (Unaudited) 4. Comprehensive Income The Company's comprehensive income consists solely of net income (loss). The Company had no other comprehensive income for the three months ended March 31, 2000 and 1999. 5. Related Party Transaction On June 24, 1999, the Company advanced $500,000 to the Chairman of the Board under a term loan agreement. The loan bears interest, payable monthly, at 1% above the current interest rate on the Company's revolving credit facility. At March 31, 2000 the unpaid balance on the loan was $500,000 and is due on June 24, 2000. In conjunction with the agreement, the Chairman entered into an agreement with ARC International Corporation ("ARC") to loan the proceeds from this note to ARC under similar terms. 6. Business Segment Information The Company's operations are conducted principally through three business segments: Theatre, Lighting and Restaurant. Theatre operations include the design, manufacture, assembly and sale of motion picture projectors, xenon lamphouses and power supplies, sound systems and the sale of film handling equipment and lenses for the theatre exhibition industry. The lighting segment operations include the sale and rental of follow spotlights, stationary searchlights, audio visual equipment and computer operated lighting systems for the motion picture production, television, live entertainment, theme parks, audio visual and architectural industries. The restaurant segment includes the design, manufacture, assembly and sale of pressure fryers, smoker ovens and rotisseries and the sale of seasonings, marinades, mesquite and hickory woods and point of purchase displays. The Company allocates resources to business segments and evaluates the performance of these segments based upon reported segment gross profit. However, certain key operations of a particular segment are tracked on the basis of operating profit. There are no significant intersegment sales. All intersegment transfers are recorded at historical cost. 7 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended March 31, 2000 (Unaudited) 6. Business Segment Information (continued) SUMMARY BY BUSINESS SEGMENTS
March 31, March 31, 2000 1999 ---- ---- Net revenue Theatre $ 8,895,966 $ 17,600,018 Lighting Sales 1,064,284 1,168,453 Rental 1,447,158 914,621 ------------ ------------ Total lighting 2,511,442 2,083,074 Restaurant 442,178 513,928 ------------ ------------ Total revenue $ 11,849,586 $ 20,197,020 Gross profit Theatre $ 1,693,055 $ 5,424,426 Lighting Sales 232,442 465,854 Rental 463,947 179,513 ------------ ------------ Total lighting 696,389 645,367 Restaurant 88,436 109,894 ------------ ------------ Total gross profit 2,477,880 6,179,687 Corporate overhead (3,473,145) (2,969,786) ------------ ------------ Operating income (loss) (995,265) 3,209,901 Net interest expense (238,173) (232,164) ------------ ------------ Income (loss) before income taxes $ (1,233,438) $ 2,977,737 ============ ============ Identifiable assets Theatre $ 49,161,878 $ 49,884,233 Lighting 9,780,134 7,597,511 Restaurant 1,396,486 853,261 ------------ ------------ Total $ 60,338,498 $ 58,335,005 ============ ============ Expenditures on capital equipment Theatre $ 250,932 $ 493,186 Lighting 322,705 401,127 Restaurant - - ------------ ------------ Total $ 573,637 $ 894,313 ============ ============ Depreciation and amortization Theatre $ 488,504 $ 397,691 Lighting 309,646 266,165 Restaurant - - ------------ ------------ Total $ 798,150 $ 663,856 ============ ============
8 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended March 31, 2000 (Unaudited) 6. Business Segment Information (continued) SUMMARY BY GEOGRAPHICAL AREA:
March 31, March 31, 2000 1999 ---- ---- Net revenue United States $ 7,868,230 $17,168,340 Canada 1,589,602 1,098,416 Asia 1,100,005 912,508 Mexico 264,663 74,346 Europe 733,812 769,422 Other 293,274 173,988 ----------- ----------- Total $11,849,586 $20,197,020 =========== =========== Identifiable assets United States $59,270,834 $57,499,702 Canada - - Asia 1,067,664 835,303 Mexico - - Europe - - Other - - ----------- ----------- Total $60,338,498 $58,335,005 =========== ===========
Net revenues by business segment are to unaffiliated customers. Net sales by geographical area are based on destination of sales. Identifiable assets by geographical area are based on location of facilities. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this document. Management's Discussion and Analysis contains 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 other Securities and Exchange Commission filings. Actual results may differ materially from management expectations. THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999 Net revenues for the three months ended March 31, 2000 (the "2000 Period") decreased $8.4 million or 41.3% to $11.8 million from $20.2 million for the three months ended March 31, 1999 (the "1999 Period"). Consolidated domestic net revenues decreased $9.3 million to $7.9 million in the 2000 Period from $17.2 million in the 1999 Period due to the reasons described below. Net revenues from foreign sales increased $1.0 million or 31.4% to $4.0 million from $3.0 million in the 1999 Period. This increase was attributable to higher sales in Canada and Asia. The Company expects foreign sales to continue to increase as the year progresses. The following table shows comparative net revenues of theatre, lighting and restaurant products for the respective periods:
Three Months Ended March 31, ------------------------------------------- 2000 1999 ---- ---- Theatre $ 8,895,966 $ 17,600,018 Lighting 2,511,442 2,083,074 Restaurant 442,178 513,928 ----------------- ----------------- Total net revenues $ 11,849,586 $ 20,197,020 ================= =================
REVENUES Theatre Segment The decrease in net revenues primarily relates to lower sales of theatre products, which decreased $8.7 million or 49.5% from $17.6 million in the 1999 Period to $8.9 million in the 2000 Period. In particular, sales of projection equipment decreased $7.4 million from $14.0 million in the 1999 Period to $6.6 million in the 2000 Period. The Company also experienced softer sales of lenses, which decreased $1.5 million to $0.3 million in the 2000 Period from $1.8 million in the 1999 Period. The lower projection equipment and lens sales were mainly due to less theatre construction, which was a result of over construction in certain areas of the country, rising interest rates and reduced attendance at older theatres. All of this has negatively impacted the Company's customers in the form of reduced operating margins and higher financial leverage causing them to build fewer theatres. The Company expects the curtailed theatre growth to continue for the rest of the year, however, revenues are expected to increase as the year progresses but at lower levels than the year before. Partially offsetting the lower projection equipment and lens sales in the segment were replacement part sales which increased $0.2 million to $2.0 million in the 2000 Period compared to $1.8 million in the 1999 Period, an increase of 14.4%, reflecting a higher installed base of projection equipment. 10 Lighting Segment Sales and rentals in the lighting segment increased $0.4 million or 20.6% from $2.1 million in the 1999 Period to $2.5 million in the 2000 Period, mainly due to revenue generated from the Company's audio visual products where revenue increased $0.5 million from the prior year. Revenues from promotional lighting products increased $0.13 million from the prior year but continued to be disappointing, as the increase did not allow this product line to break even. Spotlight sales were softer resulting in a decrease in revenue of $0.19 million from the prior year. Restaurant Segment Restaurant sales remained flat at approximately $0.5 million for the 1999 and 2000 Periods. GROSS PROFIT Overall, consolidated gross profit decreased $3.7 million to $2.5 million in the 2000 Period from $6.2 million in the 1999 Period. The decrease relates to the theatre segment where gross profit decreased $3.7 million compared to the 1999 Period. Additionally, gross profit in the theatre segment as a percentage of net revenues decreased from 30.8% to 19.0% in the 2000 Period. The decreases resulted from two main items, the first of which were lower revenues in the theatre segment, which resulted in lost gross profit of approximately $2.4 million. Also contributing to the lost gross profit were negative manufacturing variances created by less volume through the Company's two main manufacturing plants. This was the result of the levels of sales not being sufficient to fully absorb the Company's manufacturing overhead. Additionally, the level of sales coupled with increased inventory caused plant labor utilization to drop considerably. The Company is actively taking steps to reduce its cost structure, which included reducing personnel during the quarter by approximately 17% and lowering inventory to offset these negative trends. Gross profit in the lighting segment rose $0.05 million during the quarter but as a percentage of gross revenue decreased to 27.7% in the 2000 Period from 31.0% in the 1999 Period. The decrease was mainly due to margins on spotlight sales, which was related to the manufacturing inefficiencies discussed earlier. Restaurant gross profit and margins were slightly lower due to the same manufacturing inefficiencies. OPERATING EXPENSES Operating expenses in the 2000 Period increased approximately $0.5 million or 16.9% from the 1999 Period and as a percentage of net revenues, increased to 29.3% for the 2000 Period from 14.7% for the 1999 Period. Included in operating expenses for the quarter were restructuring charges of approximately $0.5 million relating to the Company reducing its workforce by approximately 17% and also terminating the contract of the president of Xenotech Strong, Inc. As of March 31, 2000 approximately $0.15 million has been paid with regard to the restructuring charges and the remainder has been paid in the second quarter. The workforce reduction was the first step by the Company to reduce costs and inventory in anticipation of softer sales during fiscal 2000. The increase in operating expenses as a percentage of revenues was mainly due to lower sales volume in the theatre segment as a large percentage of the Company's operating expenses are fixed in the short-term. OTHER ITEMS Net interest expense was approximately $0.2 million for the 1999 and 2000 Periods due to borrowings on the Company's line of credit. 11 The Company's effective tax rate for the 2000 Period was 34.4% compared to 38.3% in the 1999 Period. The decline from 1999 reflects certain state tax credits and the benefit of the new foreign sales corporation. The difference between the Company's effective tax rate and the Federal statutory rate of 34% reflects the non-deductibility of certain intangible assets, principally Goodwill and the impact of state income taxes. For reasons outlined above, the Company experienced a net loss for the 2000 Period of approximately $0.8 million compared to net income of $1.8 million in the 1999 Period. This translated into a net loss per share - basic and diluted of $.06 per share in the 2000 Period compared to net income per share - basic and diluted of $0.14 per share in the 1999 Period. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2000, the Company maintained a $20 million line of credit with Norwest Bank Nebraska, N.A. (the "Norwest Facility"). At March 31, 2000, $5.9 million of the Norwest Facility was unused. Borrowings outstanding under the Norwest Facility bear interest, payable monthly, at a rate equal to the Prime Rate less 0.75% (8.25% at March 31, 2000). All of the Company's assets secure the Norwest Facility. The Company was in compliance with all restrictive covenants at March 31, 2000 and 1999. Historically, the Company has funded its working capital requirements through cash flow generated by its operations. Net cash used in operating activities was $3.6 million in the 2000 Period compared to cash provided by operating activities of $2.2 million in the 1999 Period. The decrease in operating cash flow was due to lower operating income coupled with an increase in inventory and a decrease in accounts payable during the 2000 Period. The increase in inventory was due to less sales volume compared to the 1999 Period and the decrease in accounts payable was due to a substantial reduction in the purchase of raw materials compared to the 1999 Period. The Company anticipates that internally generated funds and borrowings available under the Norwest Facility will be sufficient to meet its working capital needs, planned 2000 capital expenditures and to pursue opportunities to expand its markets and businesses. Net cash used in investing activities was $0.5 million and $0.9 million for the 2000 and 1999 Periods, respectively. Investing activities in both periods mainly reflect capital expenditures. Net cash provided by financing activities was $3.7 million for the 2000 Period compared to cash used in financing activities of $0.8 million in the 1999 Period. The change mainly represents draws on the Company's line of credit due to the operating cash flow shortfalls discussed earlier. The Company does not engage in any hedging activities, including currency-hedging activities, in connection with its foreign operations and sales. To date, all of the Company's international sales have been denominated in U.S. dollars, exclusive of Strong Westrex, Inc. sales, which are denominated in Hong Kong dollars. SEASONALITY Generally, the Company's business exhibits a moderate level of seasonality as sales of theatre products typically increase during the third and fourth quarters. The Company believes that such increased sales reflect seasonal increases in the construction of new motion picture screens in anticipation of the holiday movie season. 12 INFLATION The Company believes that the relatively moderate rates of inflation in recent years have not had a significant impact on its net revenues or profitability. Historically, the Company has been able to offset any inflationary effects by either increasing prices or improving cost efficiencies. YEAR 2000 The Company did not experience any significant malfunctions or errors in its operating or business systems when the date changed from 1999 to 2000. Additionally, the Company is not currently aware of any significant year 2000 or similar problems that have arisen for its customers or suppliers. The Company expended an immaterial amount to ready itself for the year 2000. Management does not expect year 2000 issues to have a material adverse effect on the Company's operations or financial results in 2000. DIGITAL CINEMA UPDATE The current motion picture exhibition industry is based on the use of film technology to deliver motion pictures to the public. However, in the last few years, there have been innovations in technology to show motion pictures digitally. While this technology is still in the prototypical stage, the Company is currently in the process of weighing a number of alternatives. The Company has started developing a proprietary digital projector by partnering with Lumavision Display, Inc., however, that is only one of the alternatives that the Company is currently considering. The Company has committed initial funding to the project and approximately $0.2 million was expensed to cost of revenues during the 2000 Period. Although there can be no assurance that the Company will participate in the digital cinema industry, the Company believes that it is well positioned to maintain its current position as the industry's leading supplier of motion picture projection equipment whether it be digital or film. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has evaluated its exposure to fluctuation in the foreign currency environment and has concluded that its exposure to fluctuation in the foreign currency environment would not be material to the consolidated financial statements. The Company has also evaluated its exposure to fluctuations in interest rates and the corresponding effect on the rate of interest on the Company's floating rate line of credit. Assuming amounts remain outstanding on the line of credit, increases in interest rates would increase interest expense. At current amounts outstanding on the line of credit, a one percent increase in the interest rate would increase yearly interest expense by approximately $141,000. The Company has not historically and is not currently using derivative instruments to manage the above risks. 13 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 11 Computation of net income per share 27 Financial Data Schedule (for SEC information only) (b) Reports on Form 8-K filed for the three months ended March 31, 2000 No reports on Form 8-K were filed during the three months ended March 31, 2000. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BALLANTYNE OF OMAHA, INC. By: /s/ John Wilmers By: /s/ Brad French -------------------------------- -------------------------------- John Wilmers, President, Brad French, Secretary, Treasurer, Chief Executive Officer and Director and Chief Financial Officer Date: May 5, 2000 Date: May 5, 2000 15 EX-11 2 EX-11 Exhibit 11 Ballantyne of Omaha, Inc. and Subsidiaries Computation of Net Income Per Share of Common Stock Three Months Ended March 31, 2000 and 1999
2000 1999 ---- ---- BASIC NET INCOME (LOSS PER SHARE) Net income (loss) applicable to common stock $ (808,939) $ 1,836,552 Weighted average common shares outstanding 12,459,323 12,677,434 ------------ ------------ Basic income (loss) per share $ (0.06) $ 0.14 ============ ============ DILUTED NET INCOME (LOSS PER SHARE) Net income (loss) applicable to common stock $ (808,939) $ 1,836,552 Weighted average common shares outstanding 12,459,323 12,677,434 Assuming conversion of options outstanding # - 651,429 ------------ ------------ Weighted average common shares outstanding, as adjusted 12,459,323 13,328,863 ------------ ------------ Diluted net income (loss) per share $ (0.06) $ 0.14 ============ ============
# Diluted net loss per share for the three months ended March 31, 2000 exclude potentially dilutive stock options of 450,218 shares because to do so would have been antidilutive. 16 EX-27 3 EXHIBIT 27
5 1 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 388,054 0 13,266,012 560,939 29,025,853 43,880,309 20,762,742 7,507,592 60,338,498 6,494,104 0 0 0 145,571 38,908,110 60,338,498 10,402,428 11,849,586 8,388,495 9,371,706 3,299,145 174,000 244,474 (1,233,438) (424,499) (808,939) 0 0 0 (808,939) (.06) (.06) Excludes potentially dilutive stock options of 450,218 shares because to do so would have been antidilutive.
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