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Executives

Robert Rinderman – IR

Gary Cavey – President and CEO

Mary Carstens – CFO

Kevin Herrmann – VP

Analysts

Eric Wold – Merriman Capital

Robert Routh – Phoenix Partners Group

James Fronda – Sidoti & Co

Jack Lee – Akita Capital

John Curti – Singular Research

Eric Barber [ph] – Private Investor

Ballantyne Strong, Inc. (BTN) Q2 2011 Earnings Call August 8, 2011 10:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ballantyne Strong 2011 Second Quarter Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Monday, August 8, 2011.

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

Robert Rinderman

Thank you very much, Frank. Good morning, everyone. Welcome to Ballantyne Strong’s 2011 second quarter results conference call.

This call may contain forward-looking statements related to Ballantyne’s future financial results and 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 and 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 may differ materially because of these or 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 or Ballantyne’s corporate website www.strong-world.com.

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

Now I’m going to turn the call over to President and CEO, Gary Cavey, who is joined this morning by CFO, Mary Carstens and Vice President, Kevin Herrmann. Gary, please go ahead.

Gary Cavey

Thank you, Rob. We appreciate you joining us today. Earlier this morning we reported second quarter diluted earnings of $0.17 per share on a 15% increase in net revenues to $37.6 million. All three of the core digital cinema components of our business Projection Equipments, Screens and Services achieved year-over-year growth compared to the 2010 period. Ballantyne’s Digital Products and Services businesses led the way this quarter with net revenue increases of 38%.

Kevin will fill you in with more details on our financials following my remarks. Before we go any further, it’s my pleasure to introduce you to Mary Carstens, Ballantyne’s new Chief Financial Officer. As mentioned in our recent press release, announcing her appointment, Mary brings a wide array of financial experience and expertise to renew position and she has worked in various financial capacities at two multibillion dollar, New York Stock Exchange listed companies.

Importantly, Mary nicely complements Kevin’s skill set which includes both the cinema industry knowledge and a broad understanding of and a long history with Ballantyne. Kevin played a crucial role in helping spearhead our company’s successful transformation from the analog cinema world to digital. Since Mary is obviously very new to BTN, she is going to primarily play the role of an observer today. Somewhere to when I was when we first joining our company last November.

I made a few introductory comments on that call which was led by my predecessor John Wilmers and of course Kevin. So before I go any further with my opening remarks, I would like to have Mary say a few words and introduce herself. Mary?

Mary Carstens

Thank you, Gary. It’s a pleasure to be with you all today as Gary mentioned, I’ve spent the past 17 years of my career with A.O. Smith, a global manufacturing conglomerate and at Belden, a manufacturer and marketer of cable and networking products. I held various positions at Belden including Vice President of Finance for the Global Manufacturing Group, responsible for deploying lean and standard work throughout the organization. And during the most recent 2.5 year period with Belden, before I accepted the CFO position here at Ballantyne, I was based in Hong Kong and oversaw the Asia-Pacific regions finance, IT, and legal functions.

Clearly one of the reasons I am excited about joining the Ballantyne team is our growth opportunities in Asia, particularly China. It’s no secret that China continues to be dramatically under screened compared to their enormous population and capturing a growing portion of their projection systems and related ancillary cinema business including screens remains a top priority. We recently added an experienced Chief Operating Officer to assist P.L. Wong, who by all accounts has been doing an excellent job heading up Ballantyne’s Asian operations.

So were the challenge, joining a new organization but I’ve been very pleased with both the quality and character of my new colleagues here in Omaha. In the near future, I plan to visit our state-of-the-art screen manufacturing facility in Quebec and of course our Asian operations. I want to echo Gary’s sentiment about working with Kevin. He has already done a great job of helping facilitate my transition, assisting me in rapidly getting up to speed on corporate finances, global strategy and also on what has been happening in the cinema industry in general.

I was especially attracted to this opportunity given Ballantyne’s unique position as a turnkey one-stop digital cinema product and service provider and look forward to playing a key part in Ballantyne’s bright, future building upon eight decades of success in serving the exhibition community. I also hope to meet and have a dialog with many of you who are participating on today’s call including our shareholders, analysts and other company followers. I will now turn it back to Gary in continuation of his opening remarks.

Gary Cavey

Thank you, Mary. I would like to expand a bit on something she just mentioned. In my role as President and CEO since joining the company approximately eight months ago, I’ve been doing an extensive amount of travel both throughout the U.S. and around the globe. I’ve met with many of our valued customers, partners and suppliers some multiple times.

I’ve also attended and participated on the company’s behalf at quite a few trade shows. What has been particularly impressive and eye-opening for me is the strong loyalty and tremendous respect and appreciation there is throughout our industry for the Ballantyne brand and the customer centric folks who work here. As Mary underscored Ballantyne has a very long track record of success and we remain uniquely well positioned as a leader in the one-stop cinema products and solutions.

As reiterated in our Q2 release, with the solid cash position and untapped $20 million credit facility, Ballantyne has the experienced folks at George K. Baum actively seeking acquisition opportunities that will be accretive to our shareholders. My fellow management team members and Board of Directors also agreed that this is the best course of action and long-term use of our capital. The company’s Board will continue to consider alternative uses of capital. However, at the present, we remain firmly committed to a combination of organic growth in complementary acquisitions that will leverage our leading position in the cinema space and the numerous core competences we outlined in the release.

Taking a look again at the recent quarter, we are very pleased that the U.S. industry box office numbers made a nice come back in Q2 following two challenging quarters. Q3 has also gotten off to a solid start. We witnessed a very strong late Q2 debut of Transformers 3 followed by the record setting final of the Harry Porter franchise and the debut of Captain America to name a few recent successes. The balance of the year also looks good with lots of diverse 3D products and a promising holiday slate.

As we’ve indicated on previous conference calls, one of the key issues impacting the cinema industry and Ballantyne in particular is largely out of our direct control. Many of the independent cinema chains and smaller theater owners continue to experience challenges securing the requisite funding needed to digitize their entire circuits. As a result, we have a number of customers that had given us verbal commitments to buy but we are awaiting definitive purchase orders before we can comment shipping and the bottleneck is invariably the financing.

In fairness to the banks, digital projection system purchases are somewhat complicated and expensive transactions involving multiple parties. As we saw when the big three U.S. theater operators formed their DCIP Consortium it ultimately took several years for them to secure the requirement financing – funding. Having said that, we remain optimistic that these recent financing gating opportunities will ultimately get resolved favorably because both sides are incentivized to convert from analog to digital and we believe that the time is of the essence.

The Hollywood studios are actively pushing exhibitors and have set a September 2012 deadline or theaters run the risk of not receiving moving prints. In fact, late last week, Fox, one of the major Hollywood studios announced that as of 2011 year-end, they will only be supplying digital prints to certain Asian countries including Hong Kong. With the virtual print being modeled, the studios garnered tremendous cost savings using digital delivery compared to their traditional save light [ph] method in the old analog world.

Exhibitors are also incentivized to upgrade because they need digital for 3D which brings ticket premiums. They also benefit from programming flexibility incremental pre-show advertising revenues as a much better visual and sound experience for their patrons and perhaps most importantly, over the long run, the ability to play alternative content on their screens.

We expect the alternative contents such as opera, live sports, concerts and other entertainment advanced to become increasingly prevalent in the future as the global digital screen footprint continues to expand. The key benefits for the theater owners is achieving better capacity utilization especially on week days and week nights, when the majority of the seats are typically unfilled.

That concludes my remarks. Kevin will now discuss our quarter in more detail and update you on our capital position. Kevin?

Kevin Herrmann

Thank you, Gary. I am pleased to report strong financial results for the quarter led by our revenues increasing 15% to $37.6 million from $32.7 million in the year-ago quarter. We achieved strong profitability growth led by operating income rising 17% to $3.7 million during the quarter. In addition, we improved our cash flow by $9.2 million sequentially from the first quarter of this year.

Second quarter net earnings amounted to $2.5 million or $0.17 per diluted share versus earnings of $2.8 million or $0.19 per diluted share in the year earlier period. As I mentioned earlier, the year-ago Q2 results reflected $0.06 per diluted share from the unwinding of our Digital Link II joint-venture with RealD. No such income occurred during the present quarter.

Our weighted average diluted shares outstanding in both quarters were $14.4 million. Now let’s take a closer look at our top line performance. Digital Product revenues increased 34% to $26.4 million, primarily driven by a rise in Projection Equipment sales as the digital rollout continues. Our cinema Service groups 38% year-over-year revenue growth of $2.9 million resulted from the additional opportunities at the digital rollout presents itself, namely projection system installations and after-sales services.

Digital Focus services now account for 93% of our total service revenues. Screen sales amounted to $4.9 million during the quarter compared to $4.5 million a year-ago. Our Screen growth was lower sequentially from Q1, a result of the slowing of 3D screen orders to a degree of some exhibitors had accelerated their digital 3D rollout in the past quarter to meet certain 3D spring movie releases.

As expected, our legacy film business continued to decline during Q2 with lower 35 millimeter projectors spare part contributions versus 2010 levels. With the ongoing momentum of digital cinema, sales of these products fell to $2.6 million during the quarter from $5.5 million a year-ago. During Q2, we sold 428 NEC Digital Projection systems worldwide compared to 342 in the year-ago period. 311 of these systems were sold to domestic based exhibitors with 75 going to Asia and the balance of theaters in the Americas including Latin America and the Caribbean.

During the quarter, our gross profit rose 14% to $6.8 million or an 18% gross margin. This compares to a year-ago gross profit of $6 million at an 18.2% gross profit margin. Selling expenses rose from $800,000 in Q2 2010 to $1 million in our current second quarter, consistent with the higher revenue growth and also due to the hiring of certain sales and international personnel to achieve organic growth for our service, network operating center and digital projector businesses.

G&A expenses were flat on a year-over-year comparison, but declined a 5.6% of net revenue from 6.5% a year-ago. Turning now to our balance sheet at June 30, were our cash and cash equivalence balance bounced back as expected to $20.8 million, up from the $11.6 million balance at the end of the first quarter resulting from the generation of $9.2 million of operating cash flow during the quarter.

As we discussed last quarter, our cash balances were lower at the end of March due to a temporary inventory increase to support future business. While we spent approximately $2 million in CapEx so far this year, only approximately $200,000 came in the second quarter and we expect to continue the lower spending in the second half of the year. We also ended the quarter with an untapped $20 million credit facility with Wells Fargo and continue to be well positioned to fund both our future working capital requirements and to explore the M&A opportunities Gary spoke to earlier. To sum up, we were pleased with our quarterly results and remain excited about the opportunities that lay in front of us.

That concludes our prepared remarks. Operator, please open up the line for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) One moment please for the first question. Our first question comes from the line of Eric Wold of Merriman Capital. Please proceed.

Eric Wold – Merriman Capital

Thank you, good morning.

Gary Cavey

Good morning.

Eric Wold – Merriman Capital

Couple of questions, one on the – detailed question is for Kevin, first on the income statement. So the nice reduction in administrative costs year-over-year and sequentially, how should we think about that level spending in terms of the dollar – but not certainly the percentage of sales of dollar amount going forward. Is that a good level to hold or how much of that…

Kevin Herrmann

Well it does – there is some lumpiness with our G&A and the first quarter G&A was higher a lot of which is you have a lot of public companies in the first quarter that’s when the audit is done. You’re preparing for the annual meeting proxy and things like that. So it’s usually lower in the second quarter. Then you get into third and fourth quarter, you have maybe somewhat higher run rate. So it’s going to be somewhere in the middle, between first and second quarters. And so the run rate – I wouldn’t take the second quarter as the run rate but somewhat take the second quarter at a $100,000 or $200,000 to that and you should be in good shape.

Eric Wold – Merriman Capital

Okay. And then on the outlook in China, what’s been the situation recently, I don’t know who acquire [ph] or what’s the situation recently in terms of tenders, you know have there been any major tenders that have actually occurred that Ballantyne is not one or it’s really just not been anything even tendered recently?

Gary Cavey

Eric, it’s been pretty slow and it’s because particularly in China what’s happening is the rapid increase of inflation in the economy and they’ve really slowed down – the government has slowed down the lending on real estate and other capital expenditures right now. We don’t know how long that’s going to last, it hasn’t completely stopped, but it certainly has slowed down any type of capital expenditures going Asian corporations right now.

So I think we’re going to see the pace probably stay a little slower and probably the size of tenders will be a little smaller for the time being.

Eric Wold – Merriman Capital

Okay. And then last question, on the M&A you – now that you’re pretty specifics, but can you give a sense of kind of the activity you and your Board and looking at opportunities, how many companies have you kind of keep the fires on and how many you’re still kind of under consideration. And what’s the potential that an acquisition happening is outside of the cinema industry?

Gary Cavey

Well, we’re very actively engaged Baum in the first quarter, and we did a really in-depth analysis of ourselves and we had a lot of contribution to what our strengths and weakness, what our core competencies was. And we’ve really just launched the hunt in over the last 90 days. And we’re looking at a lot of opportunities doing a lot of sorting. we’re certainly looking to keep close to what we know best, and so far there has been a lot of activity, I can’t give you numbers Eric, but it’s been very active.

Eric Wold – Merriman Capital

And lastly on that, is the thought still to get something announced and completed within 2012?

Gary Cavey

I think that’s going to be a stretch, I think we said before, it would be nine to 12 months, nine would be very early and it could be somewhere in the 12 months or more range for our transaction to be completed.

Eric Wold – Merriman Capital

Okay.

Gary Cavey

But I can tell you we have a strong, strong focus, on organic as well as this acquisition activity. So we’re working very hard at it.

Eric Wold – Merriman Capital

So nine to 12, so 2012 is still in that mix?

Gary Cavey

Yes, it’s still a possibility.

Eric Wold – Merriman Capital

Okay, thank you guys.

Gary Cavey

Thank you.

Kevin Herrmann

Thanks, Eric.

Operator

Our next question comes from the line of Robert Routh with Phoenix Partners Group. Please proceed.

Robert Routh – Phoenix Partners Group

Good morning guys.

Gary Cavey

Good morning.

Robert Routh – Phoenix Partners Group

Few quick questions. The first is your digital numbers are looking good and also the balance sheet is solid. And your cost of equity is your cost of capital right now because the balance sheet is accumulating cash and you would assume that given the low share count, the liquidity isn’t much of an issue, if I understand [ph] as to why you’re ruling out repurchasing shares or doing anything like that at this time to create increased equity leverage so when if you do something, the stock really moves and (inaudible).

Kevin Herrmann

Well Robert, this is Kevin. I think what we’ve been talking about is growing this company, both through organic growth and through acquisitions. And to do that, it requires significant amounts of capital potentially to go through that process. So as we’ve talked about in the press release, and Gary mentioned earlier, at this point in time, that’s where the company believes its capital should be allocated.

Robert Routh – Phoenix Partners Group

Okay, fair. But is there level where you would think if you don’t find anything to stay in 12 months where the best use of the cash would be a buyback little stock or to do something like that or…

Kevin Herrmann

Yes, I don’t think the company – yes, I think that’s the thing to be clear is that the company is not ruling out anything. As circumstances change in the future, thoughts will change.

Robert Routh – Phoenix Partners Group

Sure.

Kevin Herrmann

And the best use of capital could be that. As go after three, six, twelve months from now, things could be different.

Robert Routh – Phoenix Partners Group

Sure, fair enough. Okay, also could you give us a little bit an update on the joint-venture you have with RealD, the Digital Link II, I know at some point in the future you guys should get a cash influx from that and obviously getting that taken care of, so why don’t you give us an update on that and how much from the recapture and all that you expect you could receive?

Kevin Herrmann

Right, well you know as you’ve probably been seeing through the financials lately, we have not been selling new equipment into that joint-venture. So what we have left is, I guess the best term is probably unwinding of that joint-venture. If we would have a snapshot as of the end of the quarter at the end of June, we would probably have around $2.5 million, $2.6 million of the cash of return of capital coming back to balance in our share. And then as far as the P&L impact, what we have in the past is depreciation recapture, this equipment has been depreciated down. Once it’s sold to the exhibitor, we get to recapture that depreciation.

There is probably built-in gains of around $1 million coming to us when all of a sudden down from that standpoint.

Robert Routh – Phoenix Partners Group

Okay, but there is $2.5 million that would be return of capital that would be just raise your cash balance if you’re not [ph] taxing on that, correct?

Kevin Herrmann

Well, no there would – yes the $2.5…

Robert Routh – Phoenix Partners Group

On the recapturing.

Kevin Herrmann

Right. The $2.6 million, most of that is actually return to capital that should be very little tax on that.

Robert Routh – Phoenix Partners Group

Great, okay. And then just one other quick question, obviously there is one company out there, some people have been talking about that Chris McGurk just joined Cinedigm. And I was just curious, you guys must in the same business or different business, is it really strategic or it’s a totally different focus different everything, it shouldn’t be apples-to-oranges?

Gary Cavey

Cinedigm is always really been more of a cost potential customer of our Cera [ph] VPF provider. So they are working with our customers, which are the exhibitors, taking the access to the VPF. So in some instances, we or our competitors are actually selling the product to Cinedigm or Cinedigm is actually facilitating that. So they are really a customer – more of a customer than anything else.

Robert Routh – Phoenix Partners Group

Okay. And just one last housekeeping question on that is based on what they’ve done in the Chris joining, at least what you guys do, any possibility of some far that you would consider that makes sense for you to combine as you look for strategic acquisitions, I mean I know their balance sheet isn’t strong as yours in the debt side, it’s clear that you don’t any, but just is there a world in which that could ever make sense or is it just doesn’t?

Gary Cavey

Yes, Robert, this is Gary. I don’t have an answer for you on that but it’s certainly – we are not ruling anything out on our searches, so for an acquisition and I appreciate your input on that but right now, really don’t have any answer for you on that.

Robert Routh – Phoenix Partners Group

Okay, fair enough. Just a little bit clear, that you guys are – you do business because you get along.

Gary Cavey

Exactly.

Robert Routh – Phoenix Partners Group

It’s not like a competitive type situation, it’s complementary. Great, thank you very much.

Operator

Our next question comes from the line of (inaudible). Please proceed.

Unidentified Analyst

Hi, I had two questions. You talked about some of the slowdown in lending in China. Are you actually seeing customers push back shipment dates on orders that you’ve actually manufactured, gone prepared?

Gary Cavey

Well they are slowing down the pace of how fast they are taking the orders, yes.

Unidentified Analyst

So you have seen shipment delays.

Gary Cavey

Yes, and it’s not just our industry, it’s in the entire construction industry in China. It’s not a different where they’re putting cinemas in China than where they put them in here in the U.S., they’re building strip shopping centers and go in there or other types of areas like that. So that area has slowed down some. Once again it hasn’t completely stopped, it’s just at a slower pace.

Unidentified Analyst

Okay. And I was hoping if you could give me some clarity on the wording in the press release regarding the – you talked about the M&A strategy and then you say other strategic initiatives with George Baum & Company, just to clarify is the company for sale at this point or have you engaged Baum to actually in fact to sell the company?

Gary Cavey

No, we are not engaged to sell the company.

Unidentified Analyst

Okay. Can you help me understand the reasoning behind that even with the share price increase today, the business is trading probably for less than net asset value, so it would seem the business would should be attractive at least to a third-party or even ourselves through share repurchase. So can you help me understand that?

Gary Cavey

Well I don’t think we have much more to give you the input as to the direction that the Board has decided to go which is we think the company is very solid. We’re in a good position within this industry to grow. And we’re going to use the capital that we have for both acquisitions and some organic growth as well as maybe some strategic joint-ventures and we’re looking at all of those.

Unidentified Analyst

Okay, thank you.

Operator

(Operator Instructions) Our next question comes from the line of James Fronda from Sidoti & Co. Please proceed.

James Fronda – Sidoti & Co

Hi guys, how are you?

Gary Cavey

Great, thank you.

Kevin Herrmann

Good.

James Fronda – Sidoti & Co

Could you just give a little more color on the domestic front and how financing is going, I know things were stopped last quarter, I just wanted to get a little color on that?

Gary Cavey

I think Kevin and I will both answer. I think one of the things when you see for six to eight months previously how slow the box office receipts were and attendance was down, cash flow was bad for the theaters. And when you’re looking at buying capital goods, it really slows down the process of going forward. And now that that’s improved dramatically, things that were just kind of at slow pace is of course now people are looking at things much more positively, at least until last Friday.

Kevin Herrmann

Yes, I guess what I would add is lot of these deals are in negotiations. They are somewhat complicated, there is multiple parties. The exhibitor has to sign up to a VPF program with that through Cinedigm or another program. Then you have to bring in the financial institutions and everybody has to kind of come together and sign all the documents and it just takes a while to get that accomplished.

James Fronda – Sidoti & Co

All right, okay. In terms of the business in China, is that going to much of the tax rate at all, I mean is there anything we could forecast out going forward?

Kevin Herrmann

Well, our effective tax rates has been fluctuating somewhat. Its lower this quarter primarily due to tax credits that we’re receiving up in Canada with the build out of that plant up there. But at the end of the day, it should be ranging in a fairly tight range of anywhere from 29% to 30% over a 12-month period.

James Fronda – Sidoti & Co

Thanks guys, I appreciate it.

Gary Cavey

Thank you.

Operator

Our next question comes from the line of Jack Lee [ph] with Akita Capital [ph]. Please proceed.

Jack Lee – Akita Capital

Good morning, guys.

Gary Cavey

Good morning.

Jack Lee – Akita Capital

I was wondering, how many projectors were sold in this quarter and how many of those orders were in China?

Kevin Herrmann

Yes, Jack we sold around 428 projectors this quarter, 75 of which were in – what I would call Asia, most of which are in China.

Jack Lee – Akita Capital

All right, thank you. I think that’s it for me.

Kevin Herrmann

Thank you, Jack.

Operator

Our next question comes from the line of John Curti of Singular Research. Please proceed.

John Curti – Singular Research

Good morning. Wondering if or I shouldn’t say if – when your stock price gets higher, would you consider using your stock as currency as part of your acquisition strategy to make a larger acquisition and what is available with your cash and your credit line?

Gary Cavey

It’s a possibility John. I’ve come from corporations, public corporations where we said our most expensive form of money was our own stock, but we certainly would consider it.

John Curti – Singular Research

And then the debt line that’s out there illuming for the theater change to convert over, how hard do you think the studios are going to press that or is it going to be one of these kind of movable dates [ph], I mean obviously they’ve probably need a deadline out there to get people off the dime and to force them in that direction, but when (inaudible) with a lot of these smaller independents, are they just going to end up cutting them off, are they going to completely phase out the analog – the prints?

Gary Cavey

I don’t know that we have any more insights than anybody else does on that John. It strictly would be a guess, where they’ve slated for a while, it’s a strong possibility. You have to look at it if there is lot of films not just going into this country but all over the world. So they need to produce that film. And also the other thing they could do would be to start raising to price of the film.

John Curti – Singular Research

Okay. And what does a cost of a conversion run, realizing that obviously if you’re big multi chain operation when you’re converting over a bunch of and then you’re going to get some sort of volume discounts etcetera, but how large of an investment is it for say somebody that’s got maybe four to five theaters with maybe five or 10 screens?

Gary Cavey

Probably about 50,000 to 60,000 per screen. It varies according to screen size of course.

John Curti – Singular Research

Okay, thank you.

Gary Cavey

You bet.

Operator

We have a follow-up from Jack Lee of Akita Capital. Please proceed.

Jack Lee – Akita Capital

Sorry guys, just a couple of more couples. For the projector sales, how many of those were from existing customers and how many of those were from new customers?

Gary Cavey

Well our customer base, because of the film side of the business, most of the exhibitors have been customer from time to time, I guess if you wanted to look at just looking at film projectors and what’s been sold in the past, its 70% to 80% are probably being sold to existing customers that we would consider an existing customer.

Jack Lee – Akita Capital

Got you. And then can you also give me the breakdown from the cinema service sector?

Kevin Herrmann

Well our cinema service for the quarter, we did around $2.9 million worth of business that compared to $2.1 million a year-ago. The increase is coming as I mentioned in my opening remarks, is coming from the Digital Service is what’s increasing, the film service business is been dropping. And it dropped by around probably a $0.5 million from this quarter versus last quarter. And we expect that to continue along with obviously since the rollout continues our Digital Service to remain brisk.

Jack Lee – Akita Capital

Okay. And is the majority of that coming from installations or is that not coming from installations [ph]?

Kevin Herrmann

That’s a fair statements right now, a lot of the business, the exhibitors what they are doing, their main concern is getting these projectors installed. And so that’s where a lot of that is coming from, absolutely.

Jack Lee – Akita Capital

Okay, thank you Kevin.

Kevin Herrmann

You bet.

Operator

Our last question comes from the line of Eric Barber [ph], a private investor. Please proceed.

Eric Barber

Hi, not to continue to beat a dead horse here, but I guess I am just having a problem with the math of this, and the difference between growing and growing value. Now I mean on all four mergers and acquisitions and growing the company organically but I mean are you saying that you’re seeing potential opportunities out there where the companies are willing to sell to you for 80% of their net asset value or what the 20% earnings at no debt, because that now I am having a difficult time seeing how the Board to make the argument to its shareholders that deploying cash into a firm that can generate that type of value and return to the shareholder for being more valid use of cash from a value perspective, than repurchasing stock or at least leave yourself the ability to repurchase stock at these type of levels?

Gary Cavey

Well Eric, we’ll certainly pass that on back to our Board of Directors. We welcome the inputs you have. We’ve shared our position and position of the management team as well as the Board of Directors and we would certainly reflect on your comments. I appreciate it.

Eric Barber

But from a mathematical standpoint your position is that you can generate more – that there is more opportunity in terms of value and mergers and acquisitions to buy back from a mathematical standpoint, or just a pure growth standpoint.

Gary Cavey

Well I don’t have an acquisition that I can tell you right now that that the answer to that Eric.

Eric Barber

Okay. All right, and I guess just one other question in terms of the – in regards to the business, has there been any progress in Latin America, I know they’ve been sort of – there is sort of the most outdated region, the slowest to switch towards digital, I was wondering if you guys saw any progress on that front?

Gary Cavey

Yes, they don’t have a VPF program down in South Americas. So we’ve always and the plan is to slower build out. And we are garnering business down there. And it’s mostly 3D. And actually 3D is even more popular as we talked about offshore than it is even here in the U.S. So that’s primarily where the most activity is happening is around 3D in South America.

Kevin Herrmann

Yes, so I think the gist of it is its fair to say that Latin and South America are substantially behind the United States as far as rolling out entire circuits.

Eric Barber

Okay, thank you.

Kevin Herrmann

Thank you.

Operator

Mr. Cavey, there are no further question at this time. Please continue with your presentation or closing remarks.

Gary Cavey

Well thank you very much. Thank you again for joining us today. We truly appreciate your ongoing interest in Ballantyne. Mary, Kevin and I look forward to speaking with you again following the release of our third quarter results later this year. Have a great day.

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. Have a great day everybody.

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