Omaha, Neb. --Ballantyne Strong, Inc. (NYSE Amex: BTN), a provider of digital cinema projection equipment and services, cinema screens and other cinema products, today reported financial results for the third quarter (Q3) and nine months ended September 30, 2010.
Third Quarter Results
Ballantyne Strong's net revenues rose 99% to $32.9 million, its second consecutive all-time record quarter, as a result of significant year-over-year sales increases in digital cinema equipment, cinema screens and digital cinema services. Net earnings rose to $2.3 million, or $0.16 per diluted share, compared to net earnings of $0.5 million, or $0.04 per diluted share a year-ago.
Sales of digital cinema equipment rose 291% to $20.2 million, reflecting continuing global demand for the Company's digital projection systems, primarily in the Americas and China. Ballantyne's cinema screen sales increased approximately 77% to $5.0 million in Q3 2010, principally due to accelerating demand for specialty "silver" screens used for digital 3D as exhibitors continue to upgrade certain theatre auditoriums to 3D. Cinema services revenue rose 148% to $2.2 million, reflecting growing demand for Ballantyne's team of over 60 digital cinema technicians to complete digital projection equipment installations and integrations.
Consolidated gross profit rose to $6.5 million, or 19.6% of revenue in Q3 2010, from $3.6 million, or 21.5% of revenue in Q3 2009. The expected decline in gross profit margin reflects the increase in digital projection equipment sales that carry lower margins than most of the Company's other products and services. SG&A rose 20.5% to approximately $2.9 million but declined significantly as a percentage of net revenues to 8.9%, compared to 14.7% in Q3 2009.
For the nine-months ended September 30, 2010, net revenues rose 70.8% to $91.0 million. Gross profit in the first nine months of 2010 was $16.7 million, or 18.4% of net revenues, compared to 2009 gross profit of $11.2 million, or 21.0% of net revenues. Net earnings for the first nine months of 2010 were $6.1 million, or $0.42 per diluted share, compared to net earnings of $2.0 million, or $0.14 per diluted share, in the same period of 2009.
Balance Sheet Update
Ballantyne used $1.5 million in cash from operating activities in Q3 ‘10 and ended the period with $19.2 million in cash and cash equivalents, compared to $23.6 million at December 31, 2009. As previously announced, Ballantyne is investing in the expansion of its Quebec-based Strong/MDI cinema screen manufacturing facility, including the purchase of the existing facility and an adjacent parcel of land, and has commenced the expansion of the facility's manufacturing capacity. Approximately $0.5 million of the $6 million expansion program was expended during Q3 2010. Ballantyne also deployed additional capital to complete its state-of-the-art Digital Network Operations Center (NOC), which provides 24/7 remote monitoring services capable of tracking and servicing a wide array of digital systems. The NOC opened October 1 at the Company's Omaha, NE headquarters.
On November 1, Ballantyne announced the appointment of Gary L. Cavey as President and Chief Executive Officer, replacing retiring CEO John P. Wilmers, who will remain with the Company and focus on Ballantyne's growing business opportunities in Asia.
Gary Cavey, commented, "This is a very exciting time to join Ballantyne, as the Company is solidly positioned and achieved another revenue record in Q3, as the theatre industry's conversion to digital projection technology, including digital 3D, gained momentum. The digital trend is enabling strong growth in digital projector systems, cinema screens and digital cinema services. Through the first nine months of this year, Ballantyne sold 931 digital projection systems, generated $13.0 million from cinema screen sales and installed approximately 1,200 digital projection systems.
"The expansion of our ISO 9001 Strong/MDI screen manufacturing facility is on-schedule, and when completed its capacity will be approximately 35% greater. The opening of our NOC is another key step in our evolution as a full-service digital cinema product and services provider. In addition to the NOC's value to our exhibitor clients with remote monitoring and servicing, we are also focusing on expanding and diversifying the NOC's services into other digital systems including audio, flat panels and associated networks that provide unifying connections and systems security."