Ballantyne Strong, Inc. Q2 2009 Earnings Call Transcript

Aug. 9.09 | About: Ballantyne Strong, (BTN)

Ballantyne Strong, Inc. (NYSEMKT:BTN)

Q2 2009 Earnings Call Transcript

August 7, 2009 10:00 am ET

Executives

John Wilmers -- President and CEO

Kevin Herrmann -- Secretary Treasurer and CFO

Analysts

Tom Stewart

David Wright -- Henry Investment Trust

Chris Brown [ph] -- Erosites Capital [ph]

Tom Duffy

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ballantyne Strong 2009 second quarter conference call.

This conference call will contain statements that are forward-looking statements relating 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 US Private Securities Litigation Reform Act of 1995. Listeners should note that these statements are only predictions.

They are subject to inherent risks and uncertainties and may be impacted by several factors, including but not limited to customer demands for the company’s products, the development of new technology for alternative means of motion picture presentation, domestic and international economic conditions, the achievement of lower costs and expenses, credit concerns in the theater exhibition industry and other risks detailed from time-to-time in the company’s other Securities & Exchange Commission filings.

The company’s actual performance and results could differ materially because of these factors and other factors discussed in the management’s 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 www.sec.gov or Ballantyne Strong's website 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 expectations from prior conversations. I also would remind listeners this call is being webcast live over the Internet and recorded today Friday, August 7, 2009. A replay of the call will be available on Ballantyne’s corporate website for 30 days after the call ends.

I would now like to turn the conference over to Mr. John Wilmers, President and CEO of Ballantyne-Strong. Please go ahead.

John Wilmers

Thank you, operator, and good morning to all of you. Thanks for joining us on the conference call today. Joining me today is Kevin Herrmann, our CFO. I will give a brief overview on Q2 developments and the outlook and then hand off the call to Kevin to give you a more in-depth look of our financials.

Let us get started. Quarter two performance follows strong performance from quarter one. In the area of digital equipment sales, we went from 7.4 million to 10 million in the quarter. That demand has been driven primarily by the desire for the exhibitors, big and small, to be involved in the 3-D phenomena, if you will, that is going on out there.

During the quarter, we shipped a hundred projectors to the China Film Group to suburb customers throughout China. And good demand from Latin America and independent exhibitors in the US prevailed. The key not only with the Latin America exhibitors but also smaller chains in the US, as I said, are very interested in being involved and enjoying the monetary reward of showing the 3-D movies out there.

At our screen company, MDI, we grew to the $3.1 million, against 1.1 million a year ago. This obviously has been driven by that demand for 3-D and the silver screen that most of the processes required. At MDI, we are continuing to focus on R&D to as we improve not only the silver screen that we provide to the industry but also the high gain white screens that we look to be a future source of revenue for the company.

One example in this R&D and the improvements we have made in our manufacturing process is we built the largest screen in our history last quarter, a 35 by 150 foot screen for Disney in Florida. So you can imagine screens of that size our facility in Joliet, Quebec, is certainly capable of any number of large and different type screens.

In our service company, Strong Technical Services, we were 44% over year ago levels, with improved margins. I know this is -- we're very happy about this and I know all of you out there are happy to hear plusses coming from our service company. STS is one of the largest and most capable service organizations in the industry and as this rollout begins, and it is beginning, we look to improve the results, continue to improve the results in that area.

As a matter of fact, STS technicians and this speaks to the agnostic nature of our service companies in dealing with all manufacturers of digital cinema equipment. Presently, they are installing Sony 4K systems for Regal and that company, STS, continues to work on the agreement with Barco and I would say we are in the 11th hour and that should be signed very quickly to do their service and installation work.

In the area of exports, we have been focused on opportunities in Asia, particularly in China. As I mentioned a 100 screen order from the China Film Group. We have a great track record over there and great relationships in that part of the world and we're going to continue to leverage that and grow that area. We also are looking at screen opportunities in Asia, screen, whether it is partnering or whatever in order to further expand our screen business in that part of the world.

We are also, one other thing, looking at adding product to our line in Asia, that being such as our deal with GDC over there and the servers that we sell along with the projectors. And Taiwan is still a very important part of our future. By the end of the year, we will have our agreement, but in the interim, we have an agreement and we look for that part of the world to provide us with some good growth as we go forward.

In the area of financial improvements, I'm sure you're all aware that we converted all of our ARS to cash in quarter two. This was, as you all know, was a long time coming for us, but we're happy to have it happen the way it was. We are – and as far as, you know getting everything back at par, plus the interest earned over the year, was good for the company.

We are continuing our ongoing initiatives internally to manage the cost of our legacy business, our film business. That is a constant ongoing project within the company, very important that we balance the inventory, and get the legacy equipment down to a point that is manageable as we transition to digital. One very important part of that, our part sales, and they have been maintaining their levels, so we're very happy about that as far as the film business is concerned.

In the area of acquisitions, we continue with the $20 million in cash in the bank. We certainly are looking for ways that we can improve our position, not only in our core business, but also we're looking to expand in other areas that could be helpful, primarily in areas that would touch on the cinema business, but could also have opportunities outside of the cinema business. So we're working on that very diligently as we go forward.

DCIP, we talk about it a lot, obviously it is something that is out of our control, but in the end, we feel it is still a catalyst as they get their funding in place. It will not only move the partners forward, but it will also move the rest of industry. We can't provide an exact date for when it will rollout but we feel we do feel that the economy, as it slowly rebuilds, we're going to see some activity there, hopefully by the -- before the end of the year.

It is going to put a lot of pressure on the independent and other exhibitors to move forward to prevent them from feeling like they are being left behind, so we think it is a real catalyst for this rollout to begin. We also of course have our agreement with Cinedigm in place for supplying equipment, doing service, which we think is very important as they move forward and arrange for the financing that they need to get their program rolling again.

In the area of 2K versus 4K, the immediate reaction to that has quieted considerably. Now there is debate on 2K and 4K and what is better and this sort of thing. We know there has been comparisons made. We feel that the DLP technology is the superior solution. It is hard to differentiate between 4K and 2K, 2K has an installed base of 8,000 worldwide, that has a proven technology. And we feel that it is adequate and lower-cost and works on larger screens. So all of those things provide us with the indications, which is a healthy demand for 2K continuing.

NEC is making some great progress next-generation projectors. We're going to show the Series II to projectors at ShowEast in Orlando in October of this year, but they are also having initiatives where two or three other models that they are working on, and we expect to see them late in the year and early into next year. And pertaining or regarding 4K, when it is any C position [ph], when they do get the 4K chip from TI and they fully understand the delivery times and other things associated with it, they will have a 4K machine also, when the product or the chips become available.

With that overview of the quarter and a little bit of a look at the future, let me now turn the call over to Kevin, and he's going to walk you through the financials. Kevin?

Kevin Herrmann

Thanks, John. During the second quarter, we generated 1.6 million of operating income compared to 634,000 in Q1 of this year and also compared to a loss of 70,000 in the year ago second quarter. As we reviewed in the press release, second-quarter revenues increased 44% to 19.6 million from 13.6 million a year ago. The increase during the quarter was largely due to a $7.4 million increase in revenue contribution from the sale of digital projectors, along with higher cinema screen revenues and a year-over-year increase in our cinema service business as John had discussed earlier.

Our gross profit during the quarter increased to 4.3 million or 21.7% of revenues compared to 2.0 million or 15% of revenues in the year ago period. This improvement resulted in higher cinema screen sales, higher digital projection sales, and a margin improvement in the company's services subsidiary. During the quarter, selling, general and administrative expenses increased to 2.6 million from 2.4 a year ago, but declined as a percentage of revenue to 13.5% from 17.4% a year ago. As we have discussed previously, we expect SG&A cost to decrease as a percentage of sales the more digital ramps up.

The increase in expenses primarily reflects higher insurance costs and the increased business volume, higher non-cash stock compensation expense, and expenses related to our office in Beijing, which was not open a year ago. Our results were impacted by lower net interest income, which declined by $100,000 compared to a year ago, principally due to lower interest rates resulting from the current economic rate environment.

Second quarter results also reflect the loss of approximately 234,000 from our equity and our loss of our joint venture with RealD comparing to a loss of approximately $185,000 a year ago. As we have discussed the joint venture was formed during fiscal 2007 to fund certain 3-D digital cinema deployments for key customers and the increased loss reflects higher depreciation and interest expense for more deployments under this program.

Once these customers begin their full-scale rollout of digital cinema, we expect to turn our investment in this joint venture into cash, which currently is in excess of $4 million. These factors all contributed to Ballantyne generating first-quarter net income of approximately 934,000 or $0.07 per diluted share compared to a net loss of approximately 120,000 or a diluted loss per share of $0.01 a year ago.

I would now like to discuss a few items on our balance sheet, which remained strong at the end of the quarter. As John mentioned during the quarter, we redeemed all of our remaining outstanding AAA rated auction rate securities at par value, yielding total cash proceeds of approximately 9.4 million. Reflecting these proceeds coupled with earlier redemptions of 600,000 of such securities, our cash and cash equivalents rose to 21.2 million from 11.4 million at the end of fiscal year 2008.

We generated cash flow from operations of approximately 73,000 during the quarter or during the year compared to a loss of 440,000 a year ago. This improved cash flow was accomplished by earning over 2.2 million of operating income during the year so far. This income was offset by temporary increases in receivable balances, which rose to 13.6 million from 7 million at the end of fiscal 2008, a result of increased sales and the timing of related payments.

Certain items helped offset the working capital tied up in these receivables and pertained to accounts payables where balances increased 3.4 million and inventory levels, which fell 500,000 during 2009 as we continued to reduce our legacy term inventory. Finally, we expect to receive an income tax refund of approximately 1.2 million in the coming months pertaining to fiscal 2008 results.

With that, John and I would like to open the call to your questions. Operator, please proceed with the Q&A session.

Question-and-Answer Session

Operator

Thank you. (Operator instructions).

John Wilmers

Hello?

Operator

Please stand by for our first question. Our first question comes from the line of Tom Stewart, private investor. Please proceed.

Tom Stewart

Hi. Can you hear me?

John Wilmers

Yes, we can. I'm glad we can. I was wondering what was going on there.

Tom Stewart

All right. There is somebody out here. I was wondering if you could break down the number of mechanical film projectors you sold in the quarter and the number of digital.

Kevin Herrmann

Yes. We sold a hundred -- approximately 190 digital systems and 21 film finished systems.

Tom Stewart

Wonderful. You referred to the -- doing some installation in the integration of Regal, are you still expecting to continue that with them for their rollout?

John Wilmers

Yes, we are. We are still expecting to -- the area of integration that is still up in the air in terms of how much we will do, it is not as, it is not like we were planning to do originally, but we will be doing some integration. But as far as the installation is concerned, we are expecting to do the majority, if not all, of the rollouts of the Sony machines for Regal cinema.

Tom Stewart

Great. Any word on the DCLP – or DCIP funding, is that still on the works, or any news there?

John Wilmers

Just what I had mentioned, you know, we don't even want to talk much about that anymore only because we have been talking about it for a couple of years and it never seems to come to fruition. But we expect with the credit markets and things loosening up and the economy picking up a bit, and what we're having is, before the end of the year, there should be some part of that funding in place.

Tom Stewart

Okay. It seems like the markets are starting to loosen up a little bit. And one last question, you referred to Latin America, am I correct to assume you do have a lot of the NEC distribution rights for Central and South America?

John Wilmers

Yes, we do. We are the master reseller for -- we call it the Americas, so it is North, South, Central like that. Yes, we do have that.

Tom Stewart

Wonderful. Well that is all I have. Thank you so much for answering my questions.

John Wilmers

Thank you.

Operator

Our next question comes from the line of David Wright with Henry Investment Trust. Please proceed.

David Wright -- Henry Investment Trust

John, Kevin, good morning.

John Wilmers

Good morning.

Kevin Herrmann

Good morning.

David Wright -- Henry Investment Trust

Nice results. Tell me again what was the size of the screen that you did for Disney?

John Wilmers

It was 30 by 150. That is – typically, the average width of the screen, I guess, in the cinemas today is roughly around 40 feet is probably the average, probably less than that. The average is probably around the low 30s when you consider all of them. So that just gets -- puts it in perspective in terms of the size. And one of the things we have at the facility up in Canada is a large five storey high facility to paint the screens, and that is why we have been so successful for the silver screens or 3-D.

We have this terrific capacity and the size of this building lends itself for us to not only do the large ones but to do multiple smaller ones. So yes, we think that is a real plus in our pocket, you know going forward, as we look to do not only the silver screens, large, large silver, but also the high gain screens that we are doing a whole lot of R&D on right now.

David Wright -- Henry Investment Trust

That kind of makes me think about the vehicle assembly facility at the Kennedy Space Center. A big hull thing.

John Wilmers

Yes.

David Wright -- Henry Investment Trust

Okay, well, that is great. So then how – when you say you want to go after more screen business in Asia, do you have any shipping or transit issues?

John Wilmers

Well, we do really have. We have kind of a -- we have a shipping issue to whatever extent -- I mean it can be done, but it is difficult, and that is why we are looking in Asia to either in a partnership or an acquisition or something in that area that we could then complement the manufacturing of the screens and cover Asia from that part of the world which would make it a lot easier.

You could do it in a much more timely fashion. And in this business, the people that, when they decide to change their screen, they certainly want to do it very quickly. And they are not – we are not -- we don't have the -- we are not able to have long lead times and that sort of thing. So if we are manufacturing the screens in that part of the world, we will have a lot better chance to compete over there.

David Wright -- Henry Investment Trust

Okay. And last question on screens, can you -- how much of the most recent quarter screen revenues, you know, came from installations for instance with projectors that Ballantyne had sold and how much was for other installations, you know 50-50, or how did it break out?

John Wilmers

Well, I don't have that answer, but I'm just speculating and looking. We, in the last quarter, we shipped many screens to Regal. I think we're just about done. We were shipping to Regal for the last year on a monthly basis. So at this point in time, those aren't going with any C projectors. I would -- it is hard for me to say, I don't think we could say it is -- it is really difficult, it is really difficult, probably 30%, I guess if I had to reach a number, grab a number out of there, understanding that we are shipping to Regal, which at this point in time, they are using Sony projectors. So it wouldn't – you know, that gives it skew to a lower percentage, so 30 probably makes sense.

David Wright -- Henry Investment Trust

30 being the number of screens that are sold?

John Wilmers

No, 30% of the screens would be coupled with an NEC projector.

David Wright -- Henry Investment Trust

Okay, right. That is what I was looking for.

Just over to working capital, you talked in the past about wanting to husband [ph] your working capital, so that you would be in a position to handle very large orders and bring stuff through a bit. Now that you have redeemed the auction rate securities, you have quite a lot of cash, DCIP awards, if you will, are clarifying themselves a little bit, what is your guys current thinking on your working capital and how you might want to use some of it?

Kevin Herrmann

Well, I don't think -- I think it is going to be dependent on the demand for projectors out there, and how many units we are shipping to the clients. And as we talked about, I don't think redemptions of ARS really changes that, because we had a line of credit against the ARS before they were liquid. It is an expensive unit. It can cost up to 50,000 if you have to carry 200 or 300 units in your inventory and have some tied up in AR. It is easy to get – or you need $15 million, 15, say even more than that, of working capital, temporarily tied up at a given point in time. When that really truly ramps up, obviously we are a long way from that right now, you know with the current volumes, but looking ahead, that number really hasn't changed.

John Wilmers

And Kevin has been meeting with all the local banks, and we continue to talk with our bank in terms of aligning that, so that we now -- you know that we don't necessarily have to same okay, we have got 20, and we want to tie up 20, because we don't want to cut our -- we don't want to cut the opportunity here for our acquisitions and things as we go forward, we need that cash too. But we do need to want to buffer the need for that.

And we know, because as Kevin says, these things are not inexpensive, and we also know that we need to have inventory here. We don't want to have a situation where we end up missing orders. That is paramount in our mind that we will have inventory. So if we do need to even invest a bit more in that of our working capital in keeping some inventory to meet these demands, we're going to continue to do that.

David Wright -- Henry Investment Trust

Okay. And Kevin, where are you keeping the cash these days in terms of instruments?

Kevin Herrmann

Well, we have it at several banks in trusts and the investments are investments in very safe government securities.

John Wilmers

We don't make any money on it to speak of, but they are the safest vehicles available, and after the auction rate, I will call it debacle, we are watching that very closely.

David Wright -- Henry Investment Trust

Okay. Well, thanks for taking my questions, and that was a good quarter.

John Wilmers

Thank you, David. I appreciate that.

Operator

(Operator instructions). Our next question comes from the line of Chris Brown [ph] with Erosites Capital [ph]. Please proceed.

Chris Brown -- Erosites Capital

Good morning, gentlemen, great quarter.

John Wilmers

Thank you.

Chris Brown -- Erosites Capital

I had a question about the long-term goals for your business. You guys, that is an incredibly impressive quarter from a revenue perspective, you are close to an $80 million run rate now for annualized revenue, is that something that over the next few years you guys think is sustainable or is that something you think you could grow?

John Wilmers

I think certainly I'm always the guys that says the glass is half full, I certainly think we can grow it over the next several years. We not only look at the rollout, which we've talked about it for so long but it is in fact beginning to some extent in that our service group is out installing the Sonys right now for Regal Cinema, so we're seeing the movement toward this major rollout, and we look then for that major rollout to be occurring over the next three to five years, heavily in the next three years.

So we -- I firmly believe that we can. And also one other thing, if we are successful in our acquisition hunt that we're doing right now, I feel very confident that we will be able to maintain and grow this business over the next two to three years easily. I mean that is as much visibility as I think any one of us have.

Chris Brown -- Erosites Capital

Sure. Well, thank you for your comments earlier on working capital, it was actually very helpful. I was also curious what sort of recurrence are you guys looking for in terms of returns on invested capital for any acquisition you might do, and if you don't find those sorts of opportunities would you consider paying a dividend at this point?

John Wilmers

Well, you know the dividend isn't sitting right out there. We have got two things, working capital and acquisitions that are primary to what we're trying to do right now. As far as acquisitions are concerned, we're looking to you know as everyone would be, we want something that is accretive immediately. One thing we have to do though is to look to the future and if there is a business that we can invest in and increase its revenues, it would then increase its bottom line, and our bottom line, then we're going to be the -- you know we have to take that into consideration.

We've got to have a view not only of today but of two and three years from now as far as the acquisitions are concerned. So that is the way we're looking at it. As I said, the dividend, I guess if we never did the -- if we didn't do an acquisition and/or if the rollout stalled, and we had the cash, and we didn't need it for working capital, who knows, that would be a decision the board would have to make.

Chris Brown -- Erosites Capital

Thank you.

Operator

Our next question comes from the line of Tom Duffy [ph], private investor. Please proceed.

Tom Duffy

Thanks for taking the call. Congratulations on another great quarter. I know when I first started investing in your stock, you're basically trading at or below cash, so it is nice to see that the market has actually assigned a value to your operations.

John Wilmers

Yes, it is. It is a sign of trust.

Tom Duffy

You know, I know that, you know, you guys are vying for business from the big three, and you know we know how two of those have gone Regal and AMC going agency and that leaves I guess Cinemark left, can you give us any update on to how things are progressing there?

John Wilmers

Well, with Cinemark, we are committed to our goal at this point in time. We have a lot of -- we are having a lot of discussions with them on the service installation part of the business going forward and we're going to continue that. But we're also going to continue working with them in trying to improve our share of the market down there. You know, they have made a commitment to Barco, but on the other hand, I don't believe that any of these commitments made by any of the people out there are set in stone, and we are certainly going to continue our effort using everything we have, our sales, our service, customer service, everything we have, and the product. As I said, NEC is coming with their Series II projector that will be showing in October. They also have other models that they are preparing, and with that, we will go back loaded with more ammunition to go back and try to recapture some of that market share.

Tom Duffy

Okay. And I know that Dolby has a 3-D system that doesn't require a silver screen to be utilized, can you kind of talk about that, do you view that as a potential threat or not really that – you believe that your systems are superior?

John Wilmers

Well, I think we have to look at the real deal our partners, that process requires a silver screen, and is by far the most successful out there. It is – I mean it is -- I don't know what the percentage is, but they are the by far the largest out there right now. Dolby is steadily putting systems out there, Dolby requires a lot of time, a new screen, whether it be silver, whether it be just a new white gain screen, and that is one of the things that we're doing in the R&D area with our company up in Canada, the screen company.

We're working on a high gain, white screen. And what this is, is it is a – it would be a screen that one of the problems with the Dolby is the light level, and this is just the way it is. And so number one, when you put a Dolby 3-D in today, you probably want to put a new screen in anyhow, if you want it to be optimal. And number two, if we come out with the high gain, I mean the other high gain white screen, which is going to be a bigger plus for the Dolby process that is out there.

So the way I would look at it is, RealD has the most systems out there. They require the silver screen. That process has contributed to a lot of business at MDI up in Canada, but we're working to make sure that this high gain white screen that we are working on is out there and satisfies not only the needs for the people like Dolby that won't require a silver screen, but also across the industry where people are looking to improve their performance, and also to use smaller xenon lamps in their machines and things so that they can cut their operating expenses.

So there is some real plusses to going forward with this high gain white screen. It is the 3-D type thing for a Dolby, but also for the regular exhibitor, where you can save some money by downsizing to xenon to project with. So that is why we're working on the white high gain screen right now out there.

Tom Duffy

Okay. And I know that you just reported a strong second-quarter and you talked about what the longer-term potential may be to grow the company, but in the near term, in the next quarter or so, can you show sequential growth, or was this kind of like an anomaly, because of that large quarter for the China Film Group?

John Wilmers

Well, you know we -- I wouldn't say it was an anomaly, because you know we did well in the first quarter too. So we did the first quarter, the second quarter. The third and fourth, remember the jury is still out, but we feel confident that the business -- we are going to be able to maintain the business . So much depends on these funding plans and everything, they still don't to depend on it. But as far as the traditional business, frankly, we're looking at a good month this month in our conventional projector business.

Some you know you tell that to certain people, they say, are people still buying those things? Yes, they are, they are buying those things. So you know there are variables here, I feel good about the next couple of months here for the third quarter. And then remember in the fourth quarter, we have Avatar breaking the biggest 3-D movie out there that ever came out. We're going to still – we still have people clamoring to install digital machines not only here, but in South America, the Latin American countries, to meet those deadlines.

So I think with that opportunity out there, and our conventional business purring along, our parts business moving along very nicely, I think we have a very good opportunity to continue the performance that we have seen in the first couple of quarters.

Tom Duffy

Okay. I just have one last question here. I know a lot of the previous analysts and callers you know were talking about what you might do with the cash and your dividend, possibly buy back and various things to enhance shareholder value. And I think you made it pretty clear that you're eyeing out some acquisitions and you want to have the working capital and all those things. So you're kind of ruling those out. But how about on a personal level, as the principals of the company to buy back some stock, and make some personal purchases, and it doesn't seem like you have a significant stake in the company at this point?

John Wilmers

Well, I guess it is a matter of what you consider a significant stake in the company. You know…

Tom Duffy

But you have about 1% of the common stock?

John Wilmers

Management?

Tom Duffy

Well I know – yes, as a group or just individually?

John Wilmers

Management, Kevin, what is management? 6% or 7% of the common stock. Just this is one thing that we talk about a lot around. Just keep in mind that we have people working and doing their business, doing their jobs, getting paid a certain amount of money, and they are in an environment where they have to live and they have families and their supporting them, and we're not leaving a lot of discretionary income there to go out and buy stock.

So you know we don't have options, we are not granted options anymore. We are – we do have a restricted stock plan, but that is certainly not on a level that would take us to very large amounts of investment in the company. I understand we are coming from but we -- I think everyone on this management group, if they have the extra cash in the quarter, they would be buying the stock. But again remember, this is a tough economic time and it is tough for everyone, whether you're the management or the guys working in our factories.

Tom Duffy

Okay, I appreciate that. But I think you know as a shareholder and other shareholders would agree that, it would instill some confidence to see you guys personally step up to the play and make some purchases, even if they were small, thousand shares or something, just to show that you actually are buying the stock.

John Wilmers

Well, I frankly, last year, I exercised some options I had to basically do that, and I got to tell you, don't do that if you don't want to get killed by alternative minimum tax, frankly. So I guess last year, I invested in the company to the tune of the $50,000, $60,000 in my efforts to show the investment community that I was investing in the company.

You know I think the bottom line is what I said, everyone here, if they have discretionary income, extra income, these are all guys that are raising families, and in this environment, they don't have a lot of extra cash to invest. So I think, and myself, frankly, I'm in the same situation. So it is as simple as that.

Tom Duffy

Okay, thanks a lot. Wish you continued success.

John Wilmers

Thank you.

Operator

I'm showing no further questions at this time. Mr. Wilmers, I will turn the conference back over to you.

John Wilmers

Thank you, and thanks to all of you for participating today.

I think -- I hope I have showed you that we, Kevin and I, we are really pretty pleased with the progress, especially in the area of digital cinema. We see the machines going out here on a regular basis, they're not large numbers, but this is what is encouraging to us, it isn't for the Regals or the Cinemarks of the world, it is for the other people, it is for the people in Latin America, South America, the independent exhibitors in this country, the people that are anxious to become a part of the 3-D thing.

So we're pleased with the performance of digital. We are also pleased with the performance of our film machines. They really have held up and the parts business that goes along with it that you all know is very important to our operation here. There is a lot of opportunity out there for products and services that we can add on to our offering to our customers and we're working on that on a daily basis.

Key right now, we're managing our business, we are limiting costs, we're looking, we're cutting where we can, and we are truly streamlining the business, particularly in the area of our legacy inventory. And we -- all of us on the management team remain very optimistic about this business opportunity, not only in the sales and the service end, but and the screen end, I mean all aspects of our business are in a plus category right now, and we are happy about all of them.

We thank you for your interest and continued patience. I know with the rollout being put off so many times, it sometimes is stuff, but I want you all to know that we are working very hard to make sure this company has its share and more than its share of the business when that rollout finally begins.

I hope to see some of you at ShowEast. It is not the largest convention. It is in Orlando on October, but if you're interested and can get down there, we would love to see you come by our booth and really get an idea of what we're doing. And plus to that is we will be showing that new Series II projector from NEC. So anyway, thanks again for participating today and we will talk to you all again soon. Thank you very much.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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