Ballantyne Strong CEO Discusses Q4 2010 Results - Earnings Call Transcript

Ballantyne Strong, Inc. (BTN)

Q4 2010 Earnings Call

March 16, 2011 9:00 am ET

Executives

Robert Rinderman – Investor Relations, Jaffoni & Collins Incorporated

Gary L. Cavey – President and Chief Executive Officer

Kevin S. Herrmann – Secretary Treasurer and Chief Financial Officer

Analysts

Greg Scott – Merriman Capital

Robert Routh – Phoenix Partners Group

Michael Rindos – Rodman & Renshaw

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ballantyne Strong 2010 Fourth Quarter Results Conference Call. During today’s presentation, all participants will be in a listen-only mode. And afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, March 16, 2011.

And I would now like to turn the conference over to Mr. Robert Rinderman, Ballantyne Strong Investor Relations. Please go ahead, Mr. Rinderman.

Robert Rinderman

Thank you very much, Chantal. Good morning, everyone. Welcome to Ballantyne Strong’s 2010 fourth quarter and year-end results conference call.

This call may contain forward-looking statements related to the future financial results of Ballantyne Strong. Listeners are cautioned that such statements are based upon current expectations and assumptions and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

Listeners should note that these statements are only predictions. They are subject to inherent risks and uncertainties that are detailed from time-to-time in the company’s Securities & Exchange Commission filings.

The company’s actual performance can differ materially because of these or other factors discussed in the management discussion and analysis of results of operations and financial conditions section of the company’s SEC filings, copies of which can be obtained from the SEC website at sec.gov or Ballantyne Strong’s website at www.ballantyne-strong.com.

All information in this conference call is as of today and the company undertakes no obligation to update these statements or to update these expectations from prior conversations. I’ll remind listeners that this call is being webcast live over the Internet and that a replay will be available on Ballantyne’s website for 30 days after the call.

I’m now going to turn the call over to Ballantyne’s President and CEO, Gary Cavey who is joined this morning by CFO, Kevin Herrmann. Gary?

Gary L. Cavey

Thank you, Rob. Good morning everybody. We appreciate you joining us today and are delighted report a third straight record quarter, as well as the company’s best follow year of financial results in nearly 80-year history.

The strong Q4 and full-year performance is due to a great team effort here at Ballantyne Strong. We’ve been achieving across the board success in digital products, cinema screens, and cinema services, albeit by the ongoing transformation of the movie industry to digital technology both domestically and internationally.

While many of the larger U.S. theatre circuits have been rapidly adding digital projectors in recent quarters, the smaller independent chains and many of the mom and pops have continued to struggle with securing the requisite financing needed to purchase digital systems. Some have been adding real deep compatible 3D projectors and silver screens on a screen by screen basis, many of which have been supplied by Ballantyne.

However, most of the smaller exhibitors have shut short of digitizing their entire circuits due to lack of funding. The largest domestic exhibitors are capitalizing on their DCIP Consortium funding to finance their role outs, but many of the remaining players are facing challenges.

The tough year-over-year movie box office comparisons and modest relative performances in Q4, 2010 and to date in Q1, 2011 is also exasperating the difficulty many are having as their cash flow is down year-over-year since Q3 of last year. Fortunately, some domestic chains have successfully secured funding for digital. One such example is our recent partnering with Cinedigm and Cinemaworld of Florida.

In conjunction with Cinedigm, Ballantyne is providing turnkey digital cinema solution for Cinemaworld, including NEC projectors, installation services, and silver screens for their 43 auditoriums at three locations in Florida and Rhode Island.

The bright side of the picture is that because of the funding challenges impacting the smaller players is likely that the U.S. digital transformation will continue for more years than originally expected. We believe Ballantyne is well positioned to serve these customers as a leading turnkey one-stop cinema solution provider.

In our view cinema technology will continue to evolve very rapidly. As recently seen with NEC’s introduction of the new higher resolution projectors based on a new Texas Instrument 4K chip and there are timeless cutting edge developments yet to come, many of which we can’t even foresee as we sit here today.

Given our diversified business model, touching distribution, screens, services and parts and combined with our unrivaled cinema industry expertise puts us in an ideal position to be a trusted partner in delivering such state-of-the-art developments to our customers.

The international markets, especially China and Latin America, where our company is the master reseller of complete digital projection systems in offering lots of runway for future growth. Latin America, Americans World Hollywood tales, especially family oriented animated features, but the digital rollout there has been slower to develop due to the absence of virtual print fees or VPS funding model. Even more exciting for BTN is the tremendous cinema growth being experienced in China.

With only about 6,500 screens today for a population of more than 1.3 billion people supported by a fast-growing economy and expanding middle class, China is clearly one of the most significant growth markets for our products and services. This compares to the United States market, which has approximately 39,000 cinema screens serving a population of slightly more than 300 million.

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