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
June 30, 1996 1-13906
BALLANTYNE OF OMAHA, INC.
-------------------------
(Exact name of Registrant as specified in its charter)
Delaware 47-0587703
- ------------------------------- ----------------------
(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 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 June 30, 1996
- ------------------ -------------------------------
Common Stock, $.01 4,399,995
par value
BALLANTYNE OF OMAHA, INC.
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INDEX
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Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995 2 - 3
Consolidated Statements of Income
for the Six Months
ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
for the Six months ended
June 30, 1996 and 1995 5 - 6
Notes to Consolidated Financial
Statements 7 - 8
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9 - 10
Part II. Other Information 11
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
Signatures
Exhibit Index
Page 2
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
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BALLANTYNE OF OMAHA, INC.
CONSOLIDATED BALANCE SHEETS
A S S E T S
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
Current
Cash $ 211,030 204,172
Accounts receivable (less
allowance of $108,682 in 1996
and $118,033 in 1995) 7,139,825 5,713,141
Inventories 10,112,844 9,306,157
Deferred income taxes 515,926 515,926
Other current assets 122,763 51,873
----------- ----------
18,102,388 15,791,269
Net property, plant and equipment 3,286,381 2,934,619
Goodwill, other intangibles and
other assets, net 1,066,150 1,102,314
----------- ----------
$22,454,919 19,828,202
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Page 3
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED BALANCE SHEETS
L I A B I L I T I E S
June 30, December 31,
1996 1995
------------ -----------
(Unaudited)
Current
Intercompany payable to parent $ 112,236 $ 135,588
Current portion of long-term debt 879,860 839,508
Accounts payable 4,546,898 3,680,020
Accrued expenses 1,407,680 1,444,937
Income taxes 252,994 1,066,532
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7,199,668 7,166,585
Deferred income taxes 386,472 386,472
Long-term debt 7,846,282 7,219,930
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; 4,399,995
in 1996 and 4,400,000 in 1995
shares outstanding 44,000 44,000
Additional paid-in capital 5,011,215 5,011,215
Retained earnings 1,967,282 -
----------- -----------
7,022,497 5,055,215
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$22,454,919 $19,828,202
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Page 4
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended June 30,
1996 1995
Net sales $23,857,860 $18,065,803
Cost of sales 17,075,185 12,790,689
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Gross profit 6,782,675 5,275,114
Total operating expense 3,152,602 2,801,317
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Income from operations 3,630,073 2,473,797
Interest expense 381,771 41,415
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Income before income taxes 3,248,302 2,432,382
Income taxes 1,281,020 981,551
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Net income $ 1,967,282 $ 1,450,831
=========== ===========
Net income per share $0.41 $0.28
=========== ===========
Weighted average shares outstanding 4,781,318 4,400,000
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Page 5
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30,
1996 1995
Cash flows from operating
activities:
Net income $ 1,967,282 $ 1,450,831
Depreciation and amortization 247,906 273,799
Changes in assets and liabilities
Trade receivables (1,426,684) (1,808,909)
Other current assets (70,890) (54,170)
Inventories (806,687) (103,372)
Accounts payable 866,878 833,961
Accrued expenses (37,257) 64,403
Income taxes (813,538) (16,839)
Goodwill, other intangibles
and other assets 10,010 22,963
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Net cash provided by (used in)
operating activities (62,980) 662,667
----------- -----------
Cash flows from
financing activities
Change in intercompany payable to parent (23,352) (34,406)
Repayment of long-term debt (245,549) (485,943)
Net proceeds from revolving credit facility 530,000 -
----------- -----------
Net cash provided by (used in) financing activities 261,099 (520,349)
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Page 6
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
1996 1995
Cash flows from investing
activities:
Capital expenditures (191,261) (89,470)
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Net increase in cash 6,858 52,848
Cash at beginning of period 204,172 260,006
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Cash at end of period $ 211,030 $312,854
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Supplemental disclosure of
cash flow information:
Interest payments $ 379,290 $ 41,415
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Income tax payments $2,094,558 $981,551
========== ========
Other noncash activities in 1996 include approximately $382,300 of additional
capital lease obligations in exchange for equipment.
Page 7
BALLANTYNE OF OMAHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
1. General
Ballantyne of Omaha, Inc. ("Ballantyne" or the "Company") and its wholly-owned
subsidiaries, Strong International Inc. 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 of the Company's common stock is owned by Canrad of
Delaware, Inc. ("Canrad Delaware"), 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. These consolidated financial statements should be read in connection
with the consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
2. Inventories
Inventories consist of the following
June 30, December 31,
1996 1995
------------ ------------
Raw Material $ 7,299,451 6,708,016
Work-in-process 1,526,420 1,167,433
Finished goods 1,286,973 1,430,708
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$10,112,844 9,306,157
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Page 8
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 4,781,318 for the six months
ended June 30, 1996 and 4,400,000 for the three months ended June 30, 1995.
Prior to the Company's initial public offering in September 1995, the Company
was a wholly-owned subsidiary of Canrad Delaware.
Net income per share has been calculated to reflect the effects of the interest
expense less related income tax effects of the $8,000,000 borrowing pursuant to
the Norwest Bank revolving credit facility which is assumed to be outstanding as
of the beginning of each period presented, with no repayment being made during
such period, and the 400,000-to-1 common stock exchange. The Company's Board of
Directors declared a 10% stock distribution on January 23, 1996, which issued on
March 8, 1996, to shareholders of record on February 9, 1996. This stock
distribution resulted in the issuance of approximately 400,000 shares of common
stock. Per share data have been restated to reflect these stock distributions as
of the earliest period presented. 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.
4. Related Party Transactions
Canrad Inc., the parent of Canrad Delaware, provides services to its
subsidiaries on a corporate basis. Such services include strategic planning,
acquisition assistance, procurement of capital and debt arrangements, securing
health and business insurance coverages and payment of medical claims, audit and
income tax planning and other matters. Fees charged for these services amounted
to $150,000 for the six month periods ended June 30, 1996 and 1995.
Page 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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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 Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
Liquidity and Capital Resources
- -------------------------------
The Company's borrowings (including long and short-term) of approximately
$8.7 million reflect an increase of approximately $666,700 as compared to
December 31, 1995. The principal reasons for the increase were $530,000 from
borrowings under the Company's revolving credit facility with Norwest Bank
Nebraska, N.A. (the "Norwest Facility") and a capital lease for the purchase of
manufacturing equipment in the amount of $382,300. These increases were offset
by a payment of $94,100 pursuant to a non-compete agreement with Optical
Radiation Corporation, $95,600 of payments made pursuant to the 7.9% Industrial
Development Revenue Bond and $55,900 of payments on capital lease obligations.
The Company's intercompany payable to parent reflects a decrease of
approximately $23,400 at June 30, 1996 as compared to the end of the prior year.
The Company anticipates that internally generated funds and borrowings under
the Norwest Facility will be sufficient to meet its working capital needs. Net
cash provided (used) by operating activities for the years ended December 31,
1993, 1994, and 1995 and the six months ended June 30, 1996 was $3.1 million,
$3.4 million, $2.4 million and $(63,000), respectively. For the six months
ended June 30, 1995, net cash provided by operating activities was approximately
$662,700. The decrease in net cash provided by operating activities were
primarily due to increases in net income, inventory and trade receivables, and
decreases in income taxes payable. Prior to its initial public offering, the
Company did not pay quarterly estimated taxes and therefore the Company had
significantly higher cash tax payments during the six months ended June 30,
1996. The Company expects that it will have capital expenditures on equipment
of approximately $900,000 in 1996. The Company does not engage in any currency
hedging activities in connection with its foreign operations and sales.
Results of Operations
- ---------------------
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1995
Net sales for the six months ended June 30, 1996 (the "1996 Period") increased
32.1% to approximately $23.9 million from approximately $18.1 million for the
six months ended June 30, 1995 (the "1995 Period"). The following table sets
forth net sales of theatre products and restaurant products for the respective
periods:
Page 10
SIX MONTHS ENDED JUNE 30,
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1995 1996
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Theatre Products..... $16,467,600 $22,698,900
Restaurant Products.. 1,598,200 1,159,000
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Total Net Sales...... $18,065,800 $23,857,900
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Net sales of theatre products increased approximately $6.2 million or 37.8%
for the 1996 Period as compared to the 1995 Period. Net sales of commercial
motion picture projection equipment increased approximately $6.1 million or
39.9%, and net sales of follow spotlights increased approximately $ 102,000 or
10.9%. The majority of the increase in net sales of commercial motion picture
projection equipment was attributable to increased sales of such equipment to
foreign customers and to domestic customers for end users expanding into foreign
markets. Net sales of replacement parts increased approximately $400,000 or
17.0% for the 1996 Period as compared to the 1995 Period.
Net sales of restaurant products decreased approximately $439,200, due in part
to a loss of one customer account by one of the Company's major restaurant
products customers.
Gross profit as a percentage of net sales decreased to 28.4% for the 1996
Period from 29.2% for the 1995 Period. The decrease is primarily attributable to
a greater percentage of lower margin theatre products sold in the 1996 Period as
compared to the 1995 Period.
Operating expenses increased approximately $351,300 or 12.5% for the 1996
Period as compared to the 1995 Period. However, as a percentage of net sales,
such expenses decreased to 13.2% for the 1996 Period from 15.5% for the 1995
Period as a result of an increase in net sales of theatre products without a
proportional significant increase in selling costs (which include advertising,
travel and personnel expenses).
Interest expense was approximately $381,800 for the 1996 Period as compared to
approximately $41,400 for the 1995 Period. This increase reflects the interest
expense attributable to the incurrence of $8.0 million of indebtedness in
September 1995 under the Norwest Facility in connection with the Company's
initial public offering. See "--Liquidity and Capital Resources."
The effective tax rate was 39.4% for the 1996 Period as compared to the
statutory rate of 34.0%. The difference relates to the effect of state income
taxes and the non-deductibility of certain intangible expenses, principally
goodwill.
PART II. OTHER INFORMATION
Item 4. Submission of Matter to a Vote of Security Holders
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The Company's regular Annual Meeting of Stockholders was held on June 11, 1996
for the purpose of electing two nominees as directors and approving an amendment
to the Company's 1995 Outside Directors' Stock Option Plan (the "Amendment")
which (i) changed the vesting schedule
Page 11
of options granted thereunder (including outstanding options) and (ii) provides
for the granting of additional options for non-employee directors at specified
times. With respect to the election of directors, both director nominees were
re-elected. With respect to the Amendment, 3,933,876 shares were voted in favor
of the Amendment, 26,613 shares were voted against the Amendment, 10,705 shares
abstained from voting and there were no broken non-votes.
Page 12
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
EXHIBIT
NO. DESCRIPTION
- -- -----------
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to
the Registration Statement on Form S-1, File No. 33-93244 (the "IPO
Registration Statement")).
3.2 By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the
IPO Registration Statement).
4.1 Trust Indenture dated as of September 1, 1988 by and between the County of
Douglas, Nebraska and FirstTier Bank, National Association, Omaha
(incorporated by reference to Exhibit 4.1 to the IPO Registration
Statement).
4.2 Loan Agreement dated August 30, 1995, as amended as of November 24, 1995,
between the Company and Norwest Bank Nebraska, N.A. (incorporated by
reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
10.8 1995 Outside Directors Stock Option Plan, as amended as of July 8, 1996.
10.14 Stock Option Agreement dated as of September 19, 1995 between the
Company and Jaffoni & Collins Incorporated.
10.15 Stock Option Agreement dated as of December 22, 1995 between the
Company and Geller & Friend Capital Partners, Inc.
10.16 Extension Agreement to Employment Agreement between the Company and
John Wilmers dated July 8, 1996.
11.1 Computation of net earnings per share (included in Consolidated Financial
Statements).
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the period April 1,
1996 to June 30, 1996.
Page 13
SIGNATURES
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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: July 10, 1996 By: /s/ Ronald H. Echtenkamp
------------------------------
Ronald H. Echtenkamp
President and Chief Executive Officer
Date: July 10, 1996 By: /s/ Brad French
------------------------------
Brad French, Secretary, Treasurer, and
Chief Financial Officer
Page 14
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- -- -----------
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to
the Registration Statement on Form S-1, File No. 33-93244 (the "IPO
Registration Statement")).
3.2 By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the
IPO Registration Statement).
4.1 Trust Indenture dated as of September 1, 1988 by and between the County of
Douglas, Nebraska and FirstTier Bank, National Association, Omaha
(incorporated by reference to Exhibit 4.1 to the IPO Registration
Statement).
4.2 Loan Agreement dated August 30, 1995, as amended as of November 24, 1995,
between the Company and Norwest Bank Nebraska, N.A. (incorporated by
reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
10.8 1995 Outside Directors Stock Option Plan, as amended as of July 8, 1996.
10.14 Stock Option Agreement dated as of September 19, 1995 between the
Company and Jaffoni & Collins Incorporated.
10.15 Stock Option Agreement dated as of December 22, 1995 between the
Company and Geller & Friend Capital Partners, Inc.
10.16 Extension Agreement to Employment Agreement between the Company and
John Wilmers dated July 8, 1996.
11.1 Computation of net earnings per share (included in Consolidated Financial
Statements).
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the period April 1,
1996 to June 30, 1996.
Page 15