<PAGE>
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
September 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
(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 September 30, 1996
- ------------------ 5,664,995
Common Stock, $.01
par value
<PAGE>
BALLANTYNE OF OMAHA, INC.
INDEX
Page No.
--------
Part I. Financial Information
Item I. Financial Statements
Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995 2 - 3
Consolidated Statements of Income
for the Three Months and Nine Months
ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
for the Nine Months ended
September 30, 1996 and 1995 5 - 6
Notes to Consolidated Financial
Statements 7 - 8
Item II. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9 - 10
Part II. Other Information 11
Page 1
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BALLANTYNE OF OMAHA, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
Current
Cash $ 5,573,846 204,172
Accounts receivable (less
allowance of $115,008;
December 31, 1995 - $118,033) 7,705,223 5,713,141
Inventories 10,988,205 9,306,157
Deferred income taxes 515,926 515,926
Other current assets 42,414 51,873
----------- ----------
24,825,614 15,791,269
Net property, plant and equipment 3,558,161 2,934,619
Goodwill, other intangibles and
other assets, net 1,007,659 1,102,314
----------- ----------
$29,391,434 19,828,202
----------- ----------
----------- ----------
See accompanying notes to consolidated financial statements.
Page 2
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BALLANTYNE OF OMAHA, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
Current
Intercompany Payable to parent $ 150,354 135,588
Current portion of long-term debt 285,488 839,508
Accounts payable 4,306,447 3,680,020
Accrued expenses 1,865,021 1,444,937
Income taxes 210,426 1,066,532
----------- ----------
6,817,736 7,166,585
Deferred income taxes 386,472 386,472
Long-term debt 232,338 7,219,930
STOCKHOLDERS' EQUITY
Preferred stock, par value
$.01 per share; authorized
1,000,000 shares - -
Common stock, par value
$.01 per share; authorized
10,000,000 shares; 5,664,995
in 1996 and 4,400,000 in 1995
shares outstanding 56,650 44,000
Additional paid-in capital 18,658,894 5,011,215
Retained earnings 3,239,344 -
----------- ----------
21,954,888 5,055,215
----------- ----------
$29,391,434 19,828,202
----------- ----------
----------- ----------
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $12,637,047 9,375,040 36,494,907 27,440,843
Cost of sales 8,695,855 6,727,716 25,771,040 19,518,405
----------- --------- ---------- ----------
3,941,192 2,647,324 10,723,867 7,922,438
Total operating expense 1,798,294 1,353,624 4,950,896 4,154,941
----------- --------- ---------- ----------
Income from operations 2,142,898 1,293,700 5,772,971 3,767,497
Interest expense 42,405 54,669 424,176 96,084
----------- --------- ---------- ----------
Income before income taxes 2,100,493 1,239,031 5,348,795 3,671,413
Income taxes 828,432 464,257 2,109,452 1,445,808
----------- --------- ---------- ----------
Net income $ 1,272,061 774,774 3,239,343 2,225,605
----------- --------- ---------- ----------
----------- --------- ---------- ----------
Net income per share .23 .15 .64 .44
----------- --------- ---------- ----------
----------- --------- ---------- ----------
Weighted average shares
outstanding 5,543,599 4,400,000 5,057,951 4,400,000
----------- --------- ---------- ----------
----------- --------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
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BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30,
1996 1995
----------- ----------
Cash flows from operating
activities:
Net income $3,239,344 2,225,605
Depreciation and amortization 432,436 411,386
Changes in assets and liabilities
Trade receivables (1,992,082) (2,277,290)
Other current assets 9,459 (22,839)
Inventories (1,682,048) (987,033)
Goodwill, other intangibles
and other assets (7,123) 12,509
Accounts payable 626,427 1,382,524
Accrued expenses 420,084 565,693
Income Taxes (856,106) -
----------- ----------
Net cash provided by
operating activities 190,391 1,310,555
----------- ----------
Cash flows from
financing activities
Dividends paid - (8,000,000)
Change in intercompany payable to parent 14,766 (446,008)
Change in long-term debt (7,923,912) 7,359,895
----------- ----------
Net proceeds from Equity Offering 13,660,329 -
----------- ----------
Net cash used in financing activities $ 5,751,183 (1,086,113)
----------- ----------
Page 5
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BALLANTYNE OF OMAHA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
1996 1995
---------- ---------
Cash flows from investing
activities:
Capital expenditures (571,900) (135,586)
---------- ---------
Net cash used in investing
activities (571,900) (135,586)
---------- ---------
Net increase in cash 5,369,674 88,856
Cash at beginning of period 204,172 260,006
---------- ---------
Cash at end of period 5,573,846 348,862
---------- ---------
---------- ---------
Supplemental disclosure of
cash flow information:
Interest payments 424,176 96,084
---------- ---------
Income tax payments $2,965,558 1,259,608
---------- ---------
---------- ---------
Other noncash activities in 1996 include approximately $382,300 of additional
capital lease obligations in exchange for equipment.
See accompanying notes to consolidated financial statements.
Page 6
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BALLANTYNE OF OMAHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996
1. The Company
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 to 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 conjunction 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
September 30, December 31,
1996 1995
------------- ------------
Raw Material $8,000,755 6,708,016
Work-in-process 1,811,586 1,167,433
Finished goods 1,175,864 1,430,708
----------- ---------
$10,988,205 9,306,157
----------- ---------
----------- ---------
Page 7
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3. Common Stock
a. Equity Offering
On August 1, 1996, the Company completed an offering of its shares of
capital stock pursuant to a Registration Statement on Form S-1 ("the
Offering"). Pursuant to the Offering, the Company sold 1,100,000
shares of Common Stock to the public at the price of $12.125 per
share. In addition, the Company granted the Underwriters an option,
exercisable until August 31, 1996 to purchase an aggregate of up to
165,000 additional shares of Common Stock at $12.125 price per share
less underwriting discounts and commissions, to cover over-allotments,
if any. The underwriters purchased all 165,000 shares on August 16,
1996. The net proceeds to the Company from the Offering were
$13,660,329. See Note 4 regarding indebtedness.
b. Initial Public Offering
On September 6, 1995, the Company completed the initial public
offering of its shares of capital Stock pursuant to its
Registration Statement on Form S-1 (the "IPO"). Pursuant to the
IPO, Canrad of Delaware Inc., ("Canrad"), the holder of record of
all of the outstanding shares of capital stock of Ballantyne, sold
1,200,000 shares of Ballantyne common stock to the public at an IPO
price of $6.50. In connection with the IPO, on June 30, 1995, the
Company effected a 400,000-to-1 stock exchange which has been given
retroactive effect in the accompanying consolidated balance sheets.
The authorized common stock of Ballantyne was increased from
100,000 shares to 10,000,000 shares and the 10 issued shares
increased to 4,000,000 shares. As a result, $40,000 was
transferred from additional paid-in capital to common stock. In
addition, the Company is authorized to issue up to 1,000,000 shares
of preferred stock, $.01 per value.
On October 2, 1995, an additional 180,000 shares of Ballantyne were
sold by Canrad at the IPO price of $6.50.
4. Indebtedness
The Company used $7,601,000 of the proceeds of the Offering to pay off
indebtedness owed under a revolving credit facility from Norwest Bank
Nebraska, N.A.
5. 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 $75,000 and
$225,000 for the three and nine month periods ended September 30, 1996
and 1995, respectively.
Page 8
<PAGE>
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 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 $517,800
reflect a decrease of approximately $7,541,600 as compared to December 31, 1995.
The principal reasons for the decrease were the payoff of $7,090,000 from
borrowings under the Company's revolving credit facility with Norwest Bank
Nebraska, N.A. (The "Norwest Facility") and capital lease payoffs of
manufacturing equipment in the amount of $215,000. Also a payment of $91,800
pursuant to a non-compete agreement with Optical Radiation Corporation and
$144,800 of payments made pursuant to the 7.9% Industrial Development Revenue
Bond.
The Company's intercompany payable to parent reflects an increase of
approximately $14,800 at September 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 nine months ended September 30, 1996 was $3.1
million, $3.4 million, $2.4 million and $190,400, respectively. For the nine
months ended September 30, 1995, net cash provided by operating activities was
approximately $1,310,600. The decrease in net cash provided by operating
activities was primarily due to increases in net income, inventory, trade
receivables and 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 nine months ended September
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
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1995
Net sales of $12.6 million and $36.5 million for the three and nine
month periods ended
Page 9
<PAGE>
September 30, 1996 represent increases of 35% and 33% over the respective
prior year periods. The following table sets forth net sales of theatre
products and restaurant products for the respective periods:
(000's Omitted)
----------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------- ----- ------ ------
Theatre Products $12,025 8,650 34,725 25,118
Restaurant Products 612 725 1,771 2,323
------- ----- ------ ------
Total Net Sales $12,637 9,375 36,495 27,441
------- ----- ------ ------
------- ----- ------ ------
Net sales of theatre products increased approximately $3,375,000 or
39% for the three months and approximately $9,054,000 or 33% for the nine months
ended September 30, 1996 as compared to the same periods of the prior year. The
majority of 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.
Gross profit as a percentage of net sales increased to 31% for the
three months ended September 30, 1996 from 28% for the same three month period
of 1995. The increase is primarily attributable to better efficiencies in
manufacturing caused by increased throughput.
Gross profit as a percentage of net sales was 29% for the nine months
ended September 30, 1996 and 1995.
Operating expenses increased approximately $444,700 and $795,600 for
the three and nine month periods ended September 30, 1996 as compared to the
same periods of the prior year. As a percentage of net sales, such expenses
decreased to 14.2% for the current quarter and to 13.6% for the current nine
months from 14.4% and 15.1% for the same quarter and nine month periods of the
prior year. The additional theatre sales have been generated without a
corresponding increase in selling costs, travel and the number of employees.
Operating expenses include a corporate overhead charge of $75,000 and $225,000
for the three and nine month periods of 1996 and 1995.
Interest expense amounted to approximately $42,400 and $424,200 for
the three and nine month periods ended September 30, 1996 as compared to $54,669
and $96,084 for the same three and nine month periods of 1995. 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. This indebtedness was repaid in full in
August 1996. See "Liquidity and Capital Resources."
The actual income tax expense amounted to approximately 39.4% for the
current three and nine month periods as compared to a statutory rate of 34%.
The differences relate to the non-deductibility of certain intangible expenses,
principally goodwill, and the effects of state income taxes.
Page 10
<PAGE>
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: November 14, 1996 By: /s/ Ronald H. Echtenkamp
------------------------
Ronald H. Echtenkamp
President and Chief Executive Officer
Date: November 14, 1996 By: /s/ Brad French
------------------------
Brad French, Secretary, Treasurer, and
Chief Financial Officer
Page 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
DATED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,573,846
<SECURITIES> 0
<RECEIVABLES> 7,820,231
<ALLOWANCES> 115,008
<INVENTORY> 10,988,205
<CURRENT-ASSETS> 24,825,614
<PP&E> 3,558,161
<DEPRECIATION> 2,499,783
<TOTAL-ASSETS> 29,391,434
<CURRENT-LIABILITIES> 6,817,736
<BONDS> 232,338
0
0
<COMMON> 56,650
<OTHER-SE> 21,954,888
<TOTAL-LIABILITY-AND-EQUITY> 29,391,434
<SALES> 36,494,907
<TOTAL-REVENUES> 36,494,907
<CGS> 25,771,040
<TOTAL-COSTS> 25,771,040
<OTHER-EXPENSES> 4,933,482
<LOSS-PROVISION> 17,414
<INTEREST-EXPENSE> 424,176
<INCOME-PRETAX> 5,348,795
<INCOME-TAX> 2,109,452
<INCOME-CONTINUING> 3,239,343
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,239,343
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.64
</TABLE>
