-----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, A9cd7rf/xCMyI41ImRoVJm6a5S77RBOBJjg6XrbNWuvHUyb27cBFyO7bjfFsH6Wy zpabedqtYEtsQaCEo4sx9g== /in/edgar/work/20000814/0000912057-00-037384/0000912057-00-037384.txt : 20000921 0000912057-00-037384.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037384 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALLANTYNE OF OMAHA INC CENTRAL INDEX KEY: 0000946454 STANDARD INDUSTRIAL CLASSIFICATION: [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: 699756 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 a10-q.txt 10-Q SECURITIES AND EXCHANGE COMMISSION 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 June 30, 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 August 4, 2000 - ---------------- Common Stock, $.01 12,480,192 shares par value BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements Page ---- Consolidated Balance Sheets-June 30, 2000 and December 31, 1999..................... 2 Consolidated Statements of Operations- Three and Six Months Ended June 30, 2000 and 1999........................................................... 3 Consolidated Statements of Cash Flows- Six Months Ended June 30, 2000 and 1999........................................................... 4 Notes to Consolidated Financial Statements Three and Six Months Ended June 30, 2000......................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................10 Item 3. Quantitative and Qualitative Disclosures About Market Risk..............................16 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.....................................17 Item 5. Other Information.......................................................................17 Item 6. Exhibits and Reports on Form 8-K........................................................17 Signatures.......................................................................................18
1 PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS Ballantyne of Omaha, Inc. and Subsidiaries Consolidated Balance Sheets
June 30, December 31, 2000 1999 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 906,104 $ 857,089 Accounts receivable 13,938,964 15,510,265 Recoverable income taxes 445,716 - Inventories 24,821,709 26,210,431 Deferred income taxes 1,336,592 1,039,733 Other current assets 12,058 523,841 ---------- ---------- Total current assets 41,461,143 44,141,359 Plant and equipment, net 13,004,673 13,319,706 Other assets, net 3,095,387 3,295,165 ---------- ---------- Total assets $ 57,561,203 $ 60,756,230 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ - $ 20,000 Notes payable to bank-short term 12,042,000 - Accounts payable 3,228,341 6,063,078 Accrued expenses 3,130,290 3,437,885 Income taxes payable - 219,499 ---------- ---------- Total current liabilities 18,400,631 9,740,462 Deferred income taxes 724,682 735,271 Long-term debt - 48,877 Notes payable to bank - 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 14,577,997 shares in 2000 and 14,557,128 shares in 1999 145,780 145,571 Additional paid-in capital 31,715,006 31,663,043 Retained earnings 21,890,558 23,369,460 ---------- ---------- 53,751,344 55,178,074 Less cost of 2,097,805 common shares in treasury, at cost (15,315,454) (15,315,454) ---------- ---------- Total stockholders' equity 38,435,890 39,862,620 ---------- ---------- Total liabilities and stockholders' equity $ 57,561,203 $ 60,756,230 ========== ==========
See accompanying notes to consolidated financial statements. 2 Ballantyne of Omaha, Inc. and Subsidiaries Consolidated Statements of Operations Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)
Three Months Ended Six Months Ended June 30 June 30 ------- ------- 2000 1999 2000 1999 ---- ---- ---- ---- Net revenues $ 15,298,514 $ 21,303,110 $ 27,148,100 $ 41,500,130 Cost of revenues 13,042,688 15,103,080 22,414,394 29,120,413 ---------- ---------- ---------- ---------- Gross profit 2,255,826 6,200,030 4,733,706 12,379,717 Operating expenses: Selling 1,172,702 1,197,932 2,548,176 2,289,477 General and administrative 1,372,263 1,874,316 2,959,543 3,752,557 Personnel reduction expense - - 510,391 - Reserve for term loan 511,744 - 511,744 - ---------- ---------- ---------- ---------- Total operating expenses 3,056,709 3,072,248 6,529,854 6,042,034 ---------- ---------- ---------- ---------- Income (loss) from operations (800,883) 3,127,782 (1,796,148) 6,337,683 Interest income 2,481 5,117 8,782 7,994 Interest expense (303,580) (192,420) (548,054) (427,461) ---------- ---------- ---------- ---------- Net interest expense (301,099) (187,303) (539,272) (419,467) ---------- ---------- ---------- ---------- Income (loss) before income taxes (1,101,982) 2,940,479 (2,335,420) 5,918,216 Income tax benefit (expense) 432,019 (1,117,287) 856,518 (2,258,472) ---------- ---------- ---------- ---------- Net income (loss) $ (669,963) $ 1,823,192 $ (1,478,902) $ 3,659,744 ========== ========== ========== ========== Net income (loss) per share: Basic $ (0.05) $ 0.14 $ (0.12) $ 0.29 ========== ========== ========== ========== Diluted $ (0.05) $ 0.14 $ (0.12) $ 0.28 ========== ========== ========== ========== Weighted average shares: Basic 12,461,187 12,644,264 12,460,255 12,647,681 ========== ========== ========== ========== Diluted 12,461,187 13,218,712 12,460,255 13,268,561 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 3 Ballantyne of Omaha, Inc. and Subsidiaries Consolidated Statements of Cash Flows Six Months Ended June 30, 2000 and 1999 (Unaudited)
2000 1999 ---- ---- Cash flows from operating activities: Net income (loss) $ (1,478,902) $ 3,659,744 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,516,574 1,316,568 Provision for doubtful accounts 293,998 102,000 Gain on sale of fixed assets (28,958) - Reserve for term loan 511,744 - Changes in assets and liabilities: Accounts receivable 1,277,303 263,303 Inventories 1,388,722 (2,853,351) Other current assets 39 (497,241) Accounts payable (2,834,737) 679,609 Accrued expenses (307,595) (90,537) Income taxes (972,663) 44,434 Other assets (75,811) (35,408) --------- ---------- Net cash provided by (used in) operating activities (710,286) 2,589,121 --------- ---------- Cash flows from investing activities: Proceeds from sales of fixed assets 55,525 - Capital expenditures (952,519) (1,990,649) --------- ---------- Net cash used in investing activities (896,994) (1,990,649) --------- ---------- Cash flows from financing activities: Repayments of long-term debt (68,877) - Net proceeds from note payable to bank 1,673,000 455,000 Proceeds from exercise of stock options 52,172 98,555 Purchase of Treasury Stock - (1,065,908) --------- ---------- Net cash provided by (used in) financing activities 1,656,295 (512,353) --------- ---------- Net increase in cash and cash equivalents 49,015 86,119 Cash and cash equivalents at beginning of period 857,089 594,686 --------- ---------- Cash and cash equivalents at end of period $ 906,104 $ 680,805 ========= ==========
See accompanying notes to consolidated financial statements. 4 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three and Six Months Ended June 30, 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 normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. 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. The results of operations for the three and six months periods ended June 30, 2000 are not necessarily indicative of the operating results for the full year. b. 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. c. 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. 5 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three and Six Months Ended June 30, 2000 (Unaudited) d. 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. e. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. f. Net Income (Loss) Per Common Share Net income (loss) per share - basic has been computed on the basis of the weighted average number of shares of common stock outstanding. Net income (loss) per share - diluted 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. Net income (loss) per share - diluted includes an increase in the weighted average shares outstanding for dilutive stock options of 574,448 and 620,880 for the three and six months ended June 30, 1999, respectively. Given the net losses for the three and six months ended June 30, 2000, the diluted weighted average shares calculation excludes stock options, because inclusion thereof would be anti-dilutive. 3. Inventories Inventories consist of the following:
June 30, December 31, 2000 1999 ---- ---- Raw materials and supplies $ 19,023,277 $ 20,041,081 Work in process 2,603,406 3,564,972 Finished goods 3,195,026 2,604,378 ----------- ------------ $ 24,821,709 $ 26,210,431 =========== ============
4. Comprehensive Income The Company's comprehensive income consists solely of net income (loss). The Company had no other comprehensive income for the three and six months ended June 30, 2000 and 1999. 6 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three and Six Months Ended June 30, 2000 (Unaudited) 5. Stockholder Rights Plan On May 26, 2000 the Board of Directors of the Company adopted a Stockholder Rights Plan (the "Plan"). Under terms of the Plan, which expires June 9, 2010, the Company declared a distribution of one right for each outstanding share of common stock. The rights become exercisable only if a person or group (other than certain exempt persons as defined) acquires 15 percent or more of Ballantyne common stock or announces a tender offer for 15 percent or more of Ballantyne's common stock. Under certain circumstances, the Plan allows stockholders, other than the acquiring person or group to purchase the Company's common stock at an exercise price of half the market price. 6. Related Party Transaction On June 24, 2000 a term loan to the former Chairman of the Board of the Company went into default. Due to the uncertainty regarding the ultimate recovery of the note, the Company recorded a reserve in the amount of $511,644, which included the remaining principal and interest balance on June 30, 2000. 7. Notes Payable to Bank The Company's revolving credit facility maturity date is May 31, 2001. As such, the unpaid balance of the facility is included in current liabilities on the balance sheet at June 30, 2000. The Company expects to renew or replace the credit facility prior to the maturity date. 8. 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 and computer operated lighting systems for the motion picture production, television, live entertainment, theme parks, promotional lighting and architectural industries. The lighting segment also includes the sale and rental of audio visual products. The restaurant segment includes the design, manufacture, assembly and sale of pressure fryers; smoke ovens and rotisseries and the sale of seasonings, marinades and barbecue sauces, 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 and Six Months Ended June 30, 2000 (Unaudited) SUMMARY BY BUSINESS SEGMENTS
Three Months Ended Six Months Ended June 30 June 30 ------- ------- 2000 1999 2000 1999 ---- ---- ---- ---- Net revenue Theatre $ 12,485,156 $ 18,206,766 $ 21,381,122 $ 35,806,784 Lighting Sales 1,125,080 1,347,610 2,189,364 2,516,063 Rental 1,173,951 1,013,607 2,621,109 1,928,228 ---------- ---------- ---------- ---------- Total lighting 2,299,031 2,361,217 4,810,473 4,444,291 Restaurant 514,327 735,127 956,505 1,249,055 ---------- ---------- ---------- ---------- Total $ 15,298,514 $ 21,303,110 $ 27,148,100 $ 41,500,130 Gross profit Theatre $ 1,751,474 $ 5,405,266 $ 3,444,529 $ 10,829,692 Lighting Sales 179,566 461,604 412,008 927,458 Rental 260,834 173,275 724,781 352,788 ---------- ---------- ---------- ---------- Total lighting 440,400 634,879 1,136,789 1,280,246 Restaurant 63,952 159,885 152,388 269,779 ---------- ---------- ---------- ----------- Total 2,255,826 6,200,030 4,733,706 12,379,717 Corporate overhead (3,056,709) (3,072,248) (6,529,854) (6,042,034) ---------- ---------- ---------- ----------- Income (loss) from operations (800,883) 3,127,782 (1,796,148) 6,337,683 Net interest expense (301,099) (187,303) (539,272) (419,467) ---------- ---------- ---------- ----------- Income(loss) before income taxes $ (1,101,982) $ 2,940,479 $ (2,335,420) $ 5,918,216 ========== ========== ========== =========== Expenditures on capital equipment Theatre $ 196,559 $ 628,232 $ 447,491 $ 1,121,418 Lighting 182,323 468,104 505,028 869,231 Restaurant - - - - ---------- ---------- ---------- ----------- Total $ 378,882 $ 1,096,336 $ 952,519 $ 1,990,649 ========== ========== ========== =========== Depreciation and amortization Theatre $ 414,700 $ 389,314 $ 903,204 $ 787,005 Lighting 303,724 263,398 613,370 529,563 Restaurant - - - - ---------- ---------- ---------- ----------- Total $ 718,424 $ 652,712 $ 1,516,574 $ 1,316,568 ========== ========== ========== ===========
8 Ballantyne of Omaha, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three and Six Months Ended June 30, 2000 (Unaudited) SUMMARY BY BUSINESS SEGMENTS (CONTINUED)
June 30, December 31, 2000 1999 ---- ---- Identifiable assets Theatre $ 47,134,169 $ 52,100,915 Lighting 9,052,835 7,258,787 Restaurant 1,374,199 1,396,528 ---------- ---------- Total $ 57,561,203 $ 60,756,230 ========== ==========
SUMMARY BY GEOGRAPHICAL AREA:
Three Months Ended Six Months Ended June 30 June 30 ------- ------- 2000 1999 2000 1999 ---- ---- ---- ---- Net revenue United States $ 11,469,028 $ 18,048,640 $ 19,337,258 $ 35,216,980 Canada 608,058 637,381 2,197,660 1,735,797 Asia 1,165,593 767,462 2,265,598 1,679,970 Mexico 310,676 452,182 575,339 526,528 Europe 1,457,261 1,268,331 2,191,073 2,037,753 Other 287,898 129,114 581,172 303,102 ----------- ----------- ---------- ---------- Total $ 15,298,514 $ 21,303,110 $ 27,148,100 $ 41,500,130 ========== ========== ========== ==========
June 30, December 31, 2000 1999 ---- ---- Identifiable assets United States $ 56,549,762 $ 59,912,380 Asia 1,011,441 843,850 ---------- ---------- Total $ 57,561,203 $ 60,756,230 ========== ==========
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 JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1999 REVENUES CONSOLIDATED Net revenues for the three months ended June 30, 2000 (the "2000 Period") decreased $6.0 million or 28.2% to $15.3 million from $21.3 million for the three months ended June 30, 1999 (the "1999 Period"). Consolidated domestic net revenues decreased $6.6 million to $11.5 million in the 2000 Period from $18.1 million in the 1999 Period due to the reasons described in each segment below, while foreign revenues increased $0.6 million or 17.7% to $3.8 million from $3.2 million in the 1999 Period. This increase was attributable to higher sales in Europe and Asia. The Company expects foreign sales to continue to increase as the year progresses due to increased theatre construction but not at sufficient levels to offset the domestic shortfall. The following table shows comparative net revenues of theatre, lighting and restaurant products for the respective periods:
Three Months Ended June 30, --------------------------- 2000 1999 ---- ---- Theatre $ 12,485,156 $ 18,206,766 Restaurant 514,327 735,127 Lighting 2,299,031 2,361,217 --------- --------- Total net revenues $ 15,298,514 $ 21,303,110 ========== ==========
THEATRE SEGMENT The decrease in consolidated net revenues primarily related to lower sales of theatre products which decreased $5.7 million or 31.4% from $18.2 million in the 1999 Period to $12.5 million in the 2000 Period. In particular, sales of projection equipment decreased $5.2 million from $14.8 million in the 1999 Period to $9.6 million in the 2000 Period. The Company also experienced softer sales of lenses, which decreased $0.5 million to $0.8 million in the 2000 Period from $1.3 million in the 1999 Period. Replacement part sales remained flat at approximately $2.1 million for the 1999 and 2000 Periods. Replacement part sales are not directly related to the volume of projection equipment sold, but are more a reflection of the needs of current customers that have projection equipment previously purchased from the Company. 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 10 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. LIGHTING SEGMENT Sales and rentals in the lighting segment decreased slightly to $2.3 million in the 2000 Period from $2.4 million in the 1999 Period despite a substantial increase in revenues from the Company's audio visual products, where revenue increased $0.6 million to $1.2 million in the 2000 Period from $0.6 million in the 1999 Period. The increase in audio visual revenues resulted from the continued growth in business in the Orlando and Fort Lauderdale, Florida area. Offsetting the growth in audio visual revenues were softer sales and rentals of entertainment, promotional and architectural lighting products where revenues decreased $0.7 million from $1.8 million in the 1999 Period to approximately $1.1 million in the 2000 Period. In particular, revenue from entertainment lighting products continued to be weak in the Los Angeles and Hollywood areas. RESTAURANT SEGMENT Restaurant sales decreased $0.2 million to $0.5 million in the 2000 Period from $0.7 million in the 1999 Period due to softer sales of gas and pressure fryers. GROSS PROFIT Overall, consolidated gross profit decreased $3.9 million to $2.3 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 29.7% to 14.0% in the 2000 Period. The decreases resulted from two main items, the first of which were lower revenues, which resulted in lost gross profit of approximately $1.7 million. Also contributing to the lost gross profit and margin were negative manufacturing variances created by less volume through the Company's two main manufacturing plants which resulted in the levels of sales not being sufficient to fully absorb the Company's manufacturing overhead. Additionally, the amount of sales coupled with current inventory levels caused plant labor utilization to drop considerably. To offset these negative trends, the Company is taking steps to reduce its cost structure, lower inventory and bring in custom manufacturing work into its plant facilities to increase labor utilization and absorb more manufacturing overhead. Gross profit in the lighting segment decreased $0.2 million during the quarter and as a percentage of gross revenue decreased to 19.2% in the 2000 Period from 26.9% in the 1999 Period. The decrease related in part to poor margins generated from the Company's rental operations in California, where the rental revenue generated was not sufficient to cover certain fixed costs. Additionally, margins on spotlight sales were lower due to the manufacturing inefficiencies discussed in the preceding paragraph as the impact of lower theatre volume impacted all product lines manufactured. Restaurant gross profit and margins were lower due to the same manufacturing inefficiencies and less sales compared to the 1999 Period. 11 OPERATING EXPENSES Operating expenses were approximately $3.1 million for the 2000 and 1999 Periods but as a percentage of net revenues, increased to 20.0% for the 2000 Period from 14.4% for the 1999 Period. Included in operating expenses for the quarter was a reserve of approximately $0.5 million taken for the default in repayment of a term loan due June 24, 2000, made by the Company to the former Chairman of the Board. Even though the Company intends to vigorously pursue collection of the defaulted loan, the Company could not predict its outcome with any reasonable degree of certainty and, accordingly recorded the reserve. If this reserve is not considered, operating expenses actually decreased for the quarter due to decreases in bonus and cash discount expenses. The increase in operating expenses as a percentage of revenues relates to lower sales volume as a large percentage of the Company's operating expenses are fixed in the short-term. OTHER ITEMS Net interest expense was approximately $0.3 million for the 2000 Period compared to $0.2 million in the 1999 Period due to higher average borrowings on the Company's line of credit, along with an increase in the Company's interest rate. The Company's effective tax (benefit) rate for the 2000 Period was (39.2%) compared to 38.0% in the 1999 Period. 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 $0.7 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 $0.05 per share in the 2000 Period compared to net income per share - basic and diluted of $0.14 per share in the 1999 Period. SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999 REVENUES CONSOLIDATED Net revenues for the six months ended June 30, 2000 (the "2000 Period") decreased $14.4 million or 34.6% to $27.1 million from $41.5 million for the six months ended June 30, 1999 (the "1999 Period"). Consolidated domestic net revenues decreased $15.9 million to $19.3 million in the 2000 Period from $35.2 million in the 1999 Period due to the reasons described in each segment below. Foreign sales increased $1.5 million or 24.3% to $7.8 million from $6.3 million in the 1999 Period due to higher sales in Canada, Asia and Europe. 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:
Six Months Ended June 30, ------------------------- 2000 1999 ---- ---- Theatre $ 21,381,122 $ 35,806,784 Lighting 4,810,473 4,444,291 Restaurant 956,505 1,249,055 ---------- ---------- Total net revenues $ 27,148,100 $ 41,500,130 ========== ==========
12 REVENUES THEATRE SEGMENT The decrease in net revenues primarily relates to lower sales of theatre products, which decreased $14.4 million or 40.3% from $35.8 million in the 1999 Period to $21.4 million in the 2000 Period. In particular, sales of projection equipment decreased $12.8 million from $28.8 million in the 1999 Period to $16.0 million in the 2000 Period. The Company also experienced softer sales of lenses, which decreased $1.9 million to $1.1 million in the 2000 Period from $3.0 million in the 1999 Period. Replacement parts in the theatre segment rose $0.3 million or 8.6% to $4.3 million in the 2000 Period from $4.0 million in the 1999 Period reflecting a higher installed base of projection equipment. Replacement part sales are not directly related to the volume of projection equipment sold, but are more a reflection of the needs of current customers that have projection equipment previously purchased from the Company. 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. LIGHTING SEGMENT Sales and rentals in the lighting segment increased slightly from $4.4 million in the 1999 Period to $4.8 million in the 2000 Period, mainly due to the Company's audio visual products, where revenue increased $1.1 million from the prior year to $2.2 million in the 2000 Period. Revenues from entertainment, promotional and architectural lighting products offset the increase in audio visual product revenues decreasing $0.7 million to $2.6 million in the 2000 Period from $3.3 million in the 1999 Period as entertainment lighting products continued to be disappointing in the Los Angeles and North Hollywood areas. RESTAURANT SEGMENT Restaurant sales decreased $0.3 million in the 2000 Period from $1.3 million in the 1999 Period to $1.0 million in the 2000 Period as sales of gas and pressure fryers were softer. GROSS PROFIT Overall, consolidated gross profit decreased $7.7 million to $4.7 million in the 2000 Period from $12.4 million in the 1999 Period. The decrease mainly relates to the theatre segment where gross profit decreased $7.4 million compared to the 1999 Period. Additionally, gross profit in the theatre segment as a percentage of net revenues decreased from 30.2% to 16.1% in the 2000 Period. As with the quarter, 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 $4.2 million. Also contributing to the lost gross profit were negative manufacturing variances created by less volume through the Company's two main manufacturing plants which resulted in 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. To offset these negative trends, the Company is actively taking steps to reduce its cost structure, lower inventory and bring in custom manufacturing work into its plant facilities to increase labor utilization and absorb more manufacturing overhead. 13 Gross profit in the lighting segment rose slightly during the year, but as a percentage of gross revenue decreased to 23.6% in the 2000 Period from 28.8% in the 1999 Period. As with the quarter ending June 30, 2000, the decrease is related to soft sales and rentals in California along with lower margins on spotlight sales related to the same manufacturing variances discussed in the theatre segment. Restaurant gross profit and margins were also lower due to the manufacturing inefficiencies discussed above. OPERATING EXPENSES Operating expenses in the 2000 Period increased approximately $0.5 million or 8.1% from the 1999 Period and as a percentage of net revenues, increased to 24.1% for the 2000 Period from 14.6% for the 1999 Period. Included in operating expenses for the 2000 Period were charges of approximately $0.5 million relating to the Company reducing its workforce in the first quarter and a $0.5 million reserve relating to the default of a term loan made to the former Chairman of the Board. This reserve is discussed in further detail earlier in this document in Management's Discussion and Analysis for the quarter ended June 30, 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 $0.5 million for the 2000 Period compared to $0.4 million in the 1999 Period due to higher borrowings on the Company's line of credit, coupled with an increase in the interest rate. As discussed earlier, the borrowings resulted from less operating cash flow. The Company's effective tax (benefit) rate for the 2000 Period was (36.7%) compared to 38.1% 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 $1.5 million compared to net income of $3.7 million in the 1999 Period. This translated into a net loss per share - basic and diluted of $0.12 per share in the 2000 Period compared to net income per share - basic of $0.29 per share and net income per share - diluted of $0.28 per share in the 1999 Period, respectively. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2000, the Company maintained a $20 million line of credit with Wells Fargo Bank (the "Credit Facility"). At June 30, 2000, $7.9 million of the Credit Facility was available. Borrowings outstanding under the Credit Facility bear interest, payable monthly, at a rate equal to the Prime Rate less 0.75% (8.75% at June 30, 2000). All of the Company's assets secure the Credit Facility. The Company was in compliance with all restrictive covenants at June 30, 2000 and 1999. The Company expects to renew or replace the Credit Facility prior to the maturity date of May 31, 2001. Historically, the Company has funded its working capital requirements through cash flow generated by its operations. Net cash used in operating activities was $0.7 million in the 2000 Period compared to cash provided by operating activities of $2.6 million in the 1999 Period. The decrease in operating cash flow 14 was due to lower operating income coupled with a decrease in accounts payable during the 2000 Period. The decrease in accounts payable was due to invoices paid in 2000 related to raw material inventory purchased late in 1999 relating to the buildup of inventory during that time. Since most of the raw material inventory was paid for in the first quarter of 2000 and with the Company now buying less inventory, cash flow from operations should increase in the second half of the year. The Company anticipates that internally generated funds and borrowings available under the Credit 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 $0.9 million and $2.0 million for the 2000 and 1999 Periods, respectively. The large decrease relates to buying less rental equipment at the Company's North Hollywood rental facility due to disappointing operating results from that location. Investing activities in both periods mainly reflect capital expenditures. Net cash provided by financing activities was $1.7 million for the 2000 Period compared to cash used in financing activities of $0.5 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. Historically, the Hong Kong dollar has not experienced large fluctuations compared to the U.S. dollar. 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. 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 15 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 $0.4 million was expensed 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 Credit Facility. Assuming amounts remain outstanding on the Credit Facility, increases in interest rates would increase interest expense. At current amounts outstanding on the Credit Facility, 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. 16 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's regular Annual Meeting of Stockholders was held on June 21, 2000 for the purpose of electing two nominees as directors. For the Annual Meeting there were 12,459,323 shares outstanding and eligible to vote of which 8,265,463 were present at the meeting or by proxy. The tabulations for the election of the directors were as follows:
For Withheld Abstain --- -------- ------- Ronald H. Echtenkamp 8,010,698 254,765 - William F. Welsh II 7,954,993 310,470 -
Following the election of these directors, The Board of Directors ("Board") numbered five members. ITEM 5. OTHER INFORMATION On May 25, 2000 Arnold S. Tenney and Jeffrey D. Chelin resigned as directors of the Company. Mr. Tenney was previously the Chairman of the Board, and as of yet the Board has not named a replacement for that position. On June 2, 2000, William F. Welsh II was named to the Board to replace Mr. Chelin. Additionally, effective June 12, 2000, the Board named Lee J. Seidler to serve on the Board. 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 June 30, 2000 On May 26, 2000 the Company filed a current report on Form 8-K pertaining to a Shareholder Rights Agreement between the Company and Chase Mellon Shareholders Services LLC dated May 25, 2000. 17 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: August 4, 2000 Date: August 4, 2000 18 EX-11 2 ex-11.txt EXHIBIT 11 Ballantyne of Omaha, Inc. and Subsidiaries Computation of Net Income Per Share of Common Stock Three and Six Months Ended June 30, 2000 and 1999
Three Months Ended Six Months Ended June 30 June 30 ------- ------- 2000 1999 2000 1999 ---- ---- ---- ---- BASIC NET INCOME (LOSS) Income (loss) applicable to common stock $ (669,963) $ 1,823,192 $ (1,478,902) $ 3,659,744 Weighted average common Shares outstanding 12,461,187 12,644,264 12,460,255 12,647,681 ---------- ---------- ---------- ---------- Basic net income (loss) per share $ (0.05) $ 0.14 $ (0.12) $ 0.29 ========== ========== =========== ========== DILUTED NET INCOME (LOSS) Net income (loss) applicable to Common stock $ (669,963) $ 1,823,192 $ (1,478,902) $ 3,659,744 Weighted average common Shares outstanding 12,461,187 12,644,264 12,460,255 12,647,681 Assuming conversion of Options outstanding* - 574,448 - 620,880 ---------- ---------- ---------- ---------- Weighted average common Shares outstanding, as adjusted 12,461,187 13,218,712 12,460,255 13,268,561 ---------- ---------- ---------- ---------- Diluted net income (loss) per share $ (0.05) $ 0.14 $ (0.12) $ 0.28 ========== ========== =========== ==========
*Excludes impact of stock options of 4,592 and 303,358 for the three and six months ended June 30, 2000 because inclusion thereof would be anti-dilutive. EX-27 3 ex-27.txt EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SECURITY AND EXCHANGE FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 906,104 0 14,572,629 633,665 24,821,709 41,461,143 21,128,395 8,123,722 57,561,203 18,400,631 0 0 0 145,780 38,290,110 57,561,203 24,526,991 27,148,100 20,518,066 22,414,394 6,235,856 293,998 539,272 (2,335,420) 856,518 (1,478,902) 0 0 0 (1,478,902) ($0.12) ($0.12) Excludes impact of stock options because inclusion thereof would be anti-dilutive.
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