SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 1997 1-13906
BALLANTYNE OF OMAHA, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 47-0587703
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4350 McKinley Street, Omaha, Nebraska 68112
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(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 No X
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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 April 30, 1997
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Common Stock, $.01 8,579,769
par value
Page 1
BALLANTYNE OF OMAHA, INC.
INDEX
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 2 - 3
Consolidated Statements of Income
for the Three Months
ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows
for the Three Months ended
March 31, 1997 and 1996 5 - 6
Notes to Consolidated Financial
Statements 7 - 9
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 10 - 12
Part II. Other Information 13
Item 6. Exhibits and Reports on Form 8-K
Page 2
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED BALANCE SHEETS
A S S E T S
March 31, December 31,
1997 1996
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(Unaudited)
Current
Cash $ 6,258,708 $ 6,042,593
Accounts receivable (less
allowance of $150,461
at March 31, 1997 and
$143,000 at December 31, 1996) 8,343,123 9,090,616
Inventories 13,670,586 11,901,123
Deferred income taxes 501,025 501,025
Other current assets 32,210 103,702
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Total current assets 28,805,652 27,639,059
Net property, plant and equipment 4,066,012 3,863,809
Goodwill, other intangibles and
other assets, net 940,800 959,352
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$33,812,464 $32,462,220
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See accompanying notes to consolidated financial statements
Page 3
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED BALANCE SHEETS
L I A B I L I T I E S
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
Current
Intercompany payable $ 141,566 $ 93,140
Current installments of long-term debt - 308,107
Accounts payable 5,447,882 5,759,722
Accrued expenses 1,330,141 1,655,883
Income taxes 909,256 79,754
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Total current liabilities 7,828,845 7,896,606
Deferred income taxes 386,472 386,472
Long-term debt, excluding current portion - 150,195
S T O C K H O L D E R S ' E Q U I T Y
Preferred stock, par value
$.01 per share; authorized
1,000,000 shares - -
Common stock, par value
$.01 per share; authorized
10,000,000 shares; 8,569,769
shares outstanding 85,698 85,698
Additional paid-in capital 18,906,556 18,906,556
Retained earnings 6,604,893 5,036,693
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25,597,147 24,028,947
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$33,812,464 $32,462,220
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See accompanying notes to consolidated financial statements
Page 4
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,
1997 1996
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Net sales $14,724,814 $11,362,637
Cost of sales 10,368,767 8,174,415
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Gross profit 4,356,047 3,188,222
Total operating expense 1,940,768 1,573,680
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Income from operations 2,415,279 1,614,542
Net interest income (expense) 53,180 (186,105)
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Income before income taxes 2,468,459 1,428,437
Income taxes 900,259 566,263
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Net income 1,568,200 862,174
Net income per share 0.17 0.13
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Weighted average shares outstanding 9,340,702 6,880,731
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See accompanying notes to consolidated financial statements
Page 5
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31,
1997 1996
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Cash flows from operating
activities:
Net income $ 1,568,200 $ 862,174
Depreciation and amortization 188,172 144,801
Changes in assets and liabilities
Trade receivables 747,493 (1,578,462)
Other current assets 71,492 16,786
Inventories (1,769,463) (1,325,736)
Accounts payable (311,840) 1,632,728
Accrued expenses (325,742) (325,086)
Income taxes 829,502 (345,295)
Other assets (18,623) (18,468)
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Net cash provided by (used in)
operating activities 979,191 (936,558)
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Cash flows from
financing activities:
Change in loan from parent 48,426 (11,532)
Repayment of long-term debt (458,302) (170,413)
Net proceeds from revolving credit facility - 1,289,000
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Net cash provided by (used in)
financing activities (409,876) 1,107,055
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See accompanying notes to consolidated financial statements
Page 6
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
1997 1996
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Cash flows from investing
activities - Capital expenditures $ (353,200) $ (34,596)
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Net increase in cash 216,115 135,901
Cash at beginning of period 6,042,593 204,172
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Cash at end of period 6,258,708 340,073
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Supplemental disclosure of
cash flow information:
Interest payments 11,182 186,105
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Income tax payments (net) 70,757 908,500
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Other noncash activities in 1996 included approximately $194,200 of capital
lease obligations in exchange for equipment.
See accompanying notes to consolidated financial statements
Page 7
BALLANTYNE OF OMAHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997
1. The Company
Ballantyne of Omaha Inc. ("Ballantyne" or the "Company") and its
subsidiaries Strong International Inc., Westrex and Flavor-Crisp of
America Inc., design, develop, manufacture and distribute commercial
motion picture projection equipment, follow spotlights 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.
A majority (50.4%) 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.
The consolidated financial statements include the accounts of the Company
and its wholly-owned 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 connection with the consolidated financial
statements and related notes included in the Company's latest annual
report on Form 10-K.
2. Inventories
Inventories consist of the following:
March 31, December 31,
1997 1996
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Raw Material $10,220,419 $ 8,888,123
Work-in-process 1,981,160 2,184,945
Finished goods 1,469,007 828,055
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$13,670,586 $11,901,123
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3. Net Income Per Share
Net income per share is based on the weighted average number of common
shares outstanding. The effects of the assumed exercise of outstanding
stock options and warrants have been included in the income per share
calculation for the period that the shares were assumed issued using the
treasury stock method. Weighted average shares outstanding amounted to
9,340,702 for the three months ended March 31, 1997 and 6,880,731 for the
three months ended March 31, 1996. Prior to the IPO, the Company was a
wholly owned subsidiary of Canrad.
4. Stock Dividend
The Company's Board of Directors declared a 3-for-2 stock split of the
Company's common stock on January 29, 1997. The stock split was in the
form of a 50% common stock dividend payable March 5, 1997 to shareholders
of record on February 10, 1997. As a result of the stock split,
Ballantyne's outstanding shares of common stock increased to 8,569,769 at
March 31, 1997.
The Company's Board of Directors declared a 10% stock distribution on
January 23, 1996, which was issued on March 8, 1996, to shareholders of
record on February 9, 1996. This stock distribution resulted in the
issuance of 600,000 shares of common stock. The stock distribution is not
considered a distribution of earnings except to the extent that the Company
has retained earnings, but rather had the effect of increasing the number
of outstanding shares.
Per share data have been restated for these stock transactions as of the
earliest period presented.
5. Related Party Transactions
The Company is a party to a management agreement with Canrad, Inc.
Pursuant to the terms of the agreement, Canrad, Inc. provides certain
services to the Company. Such services include strategic planning,
acquisition assistance, procurement of capital and debt arrangements,
securing health and business insurance coverages, audit and income tax
planning and other matters. Fees charged for these services amounted to
$75,000 for the three month periods ended March 31, 1997 and 1996.
6. Subsequent Acquisition
Page 9
On April 30, 1997, the Company purchased certain net assets, primarily
accounts receivable, inventories and fixed assets of Xenotech ("Xenotech")
for a purchase price of approximately $1,000,000. The purchase, which was
effective as of April 1, 1997, was paid for through cash flow from
operations. The purchase price has been assigned to the assets acquired
based upon the fair market value of such assets. No goodwill was recorded
in connection with the acquisition. Xenotech produces, sells and rents a
complete line of stationary searchlights and computer operated lighting
systems for the motion picture production, television, live entertainment,
theme parks and architectural industries.
In addition, the Company entered into a five-year non-compete agreement
with Richard Hart, Xenotech's founder and sole proprietor. The agreement
is for a total of $250,000 payable by Ballantyne in equal installments of
$50,000. The present value of the noncompete payments has been included as
part of the total purchase price.
Page 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis relates to the accompanying
unaudited consolidated financial statements and presents a current
assessment of material changes in financial condition and results of
operations. A detailed discussion and analysis for the preceding years
appears in the Registrant's December 31, 1996 Annual Report to
Stockholders.
RESULTS OF OPERATIONS
Consolidated net sales of $14,724,814 for the three month period
ended March 31, 1997 represents an increase of 30% over the respective
prior year period. The following table shows comparative net sales by
industry segment for the Company's operations:
NET SALES (000'S OMITTED)
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Three Months Ended
1997 1996
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Theatre Products $14,112 $10,883
Restaurant Products 613 480
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$14,725 $11,363
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Net sales in the Theatre segment increased approximately $3,229,000
or 30% for the three months ended March 31, 1997 as compared to the
same period of the prior year. The increase is attributable to unit sales
increases of projectors, sound heads, platters and lenses which is
reflective of the continued planned industry-wide expansion of both the
domestic and world-wide theatre markets.
Net sales of Restaurant products increased by approximately $133,000
or 28%. The increase relates mainly to sales of pressure fryers.
Gross profit as a percentage of net sales increased to 30% for the
three months ended March 31, 1997 from 28% for the same three month period
of 1996. The increase is attributable to increase sales volume and
throughput in manufacturing.
Selling, general and administrative expenses increased approximately
$367,000 for
Page 11
the three month period ended March 31, 1997 as compared to the same
period of the prior year. As a percentage of net sales, such expenses
decreased to 13% for the quarter from 14% for the same quarter of the
prior year. The additional theatre sales have been generated without a
significant increase in selling costs, travel and the number of
employees.
Interest expense amounted to approximately $11,182 for the three
month period ended March 31, 1997 as compared to $186,100 for the same
three month period of 1996. The decrease in interest expense relates to
repayments of the Company's Industrial Revenue Bonds and having no
borrowings under the Norwest Bank revolving credit facility.
The actual income tax expense amounted to approximately 36% for the
current three month period as compared to a statutory rate of 34%. The
difference relates to the non-deductibility of certain intangible expenses,
principally goodwill, and the effects of state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company had no outstanding borrowings.
The principal reason for the decrease from December 31, 1996 relates to
the repayments of the Company's Industrial Revenue Bonds and a final
payment of $100,000 pursuant to a non-compete agreement with Optical
Radiation Corporation. At March 31, 1997, $9,500,000 was available for
reborrowing under a revolving credit facility with Norwest Bank. The
revolving credit facility will mature on August 30, 2000.
The Norwest facility agreement contains restrictive covenants which
include among other things, a prohibition on the payment of cash dividends
and requirements relating to current debt, debt service coverage and total
debt to tangible net worth ratios and tangible net worth. At March 31,
1997, the Company was in compliance with these covenants.
The Company's growth has been financed through a combination of cash
provided from operations, proceeds from equity offerings and borrowings
under a revolving credit facility with Norwest Bank. Cash provided from
operations increased approximately $1,900,000 from the same period of the
prior year. The increase relates mainly to higher sales while keeping
operating expenses under control.
The Company expects that it will have capital expenditures of
approximately $1,740,000 in 1997 which include manufacturing equipment
and expansion of its current facility.
The Company anticipates that internally generated funds and borrowings
under its operating facility will be sufficient to meet it's working
capital needs.
The Company does not engage in any currency hedging activities in
connection
Page 12
with its foreign operations and sales.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per share" which revises the calculation and
presentation provisions of Accounting Principals Board Opinion 15 and
related interpretations. Statement No. 128 is effective for the Company's
fiscal year ending December 31, 1997. Retroactive application will be
required. The Company believes the adoption statement 128 will not have
a significant effect on its reported earnings per share.
Page 13
PART II. Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.3.3 Employment Agreement dated November 20, 1996 between the Company
and Ray F. Boegner
11 Computation of net earnings per share (included in financial
statements)
27 Financial Data Schedule (for SEC information only)
(b) Reports on Form 8-K
No report on Form 8-K was filed during the three months ended March 31,
1997.
Page 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be filed on its behalf by the
undersigned, thereunto duly authorized.
BALLANTYNE OF OMAHA, INC.
Date: May 13, 1997 By: /s/ John Wilmers
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John Wilmers, President
Chief Executive Officer,
and Director
Date: May 13, 1997 By: /s/ Brad French
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Brad French, Secretary, Treasurer,
and Chief Financial Officer