Ballantyne Q2 Net Revenues Increase 7.8% TO $13.6 Million

August 4, 2008

Source: Ballantyne

Ballantyne of Omaha, Inc., a provider of motion picture projection, digital cinema and cinema screen equipment and services, today reported financial results for the second quarter (Q2) and six months ended June 30, 2008. Ballantyne also announced the sale of 23 NEC STARUS digital cinema projector systems by its Strong Digital Systems (SDS) division in July. The projectors were sold through Digital Link II, LLC, an entity formed by REAL D and Ballantyne during fiscal 2007.

Net revenues in Q2 2008 were $13.6 million, a 7.8% increase from net revenues of $12.7 million in Q2 2007, principally reflecting a $1.9 million increase in the sale of digital cinema projection equipment to $2.6 million, compared to sales of $0.7 million in the year ago period. The results also reflect the contribution of $1.2 million in sales from the Company’s screen subsidiary, Marcel Desrochers, Inc. (MDI), acquired in mid-October 2007. These increases more than offset a $2.1 million decrease in sales of traditional film-based projection equipment versus Q2 2007.

Gross profit in Q2 2008 was $2.0 million, or 15.0% of net revenues, versus Q2 2007 gross profit of $2.5 million, or 19.6% of net revenues. The decline in gross profit reflects an increase in lower margin digital equipment sales as well as lower than expected margins from our service subsidiary as it awaits the larger scale industry roll-out of digital cinema installations.

Q2 2008 selling, general and administrative (SG&A) expenses increased to $2.4 million as compared to $2.3 million in Q2 2007, principally reflecting the addition of MDI’s expenses.

Ballantyne reported a Q2 2008 net loss of $0.1 million, or $(0.01) per share, compared to a net loss of $0.2 million, or $(0.01) per share, in Q2 2007. Per share results for the second quarters of 2008 and 2007 are based on a weighted average number of shares outstanding of 13,890,882 and 13,813,048, respectively.

Also during the quarter, Ballantyne sold its coater and marinade product line for approximately $275,000, resulting in a gain of approximately $258,000. The sale provides capital to fund the Company’s operations focused on the exhibition industry.

John P. Wilmers, President and Chief Executive Officer of Ballantyne, commented, “Our Q2 performance continued to reflect the early stages of the technology transition taking place in the cinema exhibition market, as well as the benefit of our addition of the MDI screen business in October 2007. We were also pleased to liquidate approximately $1.2 million of our Auction-Rate Securities (ARS) at par value for cash during the second quarter.

“There have been recent encouraging statements regarding the expected timing of the large scale rollout of digital cinema installations through the DCIP plan, with the later part of Q4 2008 now being contemplated. This represents a key opportunity for our Company, and we believe we are well positioned with both services and projection equipment to meet exhibitors’ needs. In the interim, 3D digital cinema continues to be an important catalyst in our sales efforts, and is driven by 3D releases such as this month’s Journey To the Center of the Earth.

“Subsequent to the close of Q2 2008, we completed the sale of 23 digital projectors and were involved in a range of installations of projection equipment as well as the RealD technology, also in conjunction with the release of Journey To the Center of the Earth. The projectors were sold under our Digital Link II program with RealD.”

For the six-month period ended June 30, 2008, net revenues amounted to $27.8 million compared to $25.6 million a year ago. Gross profit in the first half of 2008 was $4.4 million, or 15.7% of net revenues, compared to first half 2007 gross profit of $5.2 million, or 20.3% of net revenues. We experienced a net loss for the first six months of 2008 of $0.4 million, or $(0.03) per share, compared to net income of $0.4 million, or $0.03 per diluted share, in the first half of 2007. Per share results for the first six months of 2008 and 2007 are based on a weighted average number of diluted shares outstanding of 13,874,661 and 14,081,439 respectively.

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