Ballantyne provides update on outlook for its Digital Cinema Businesses

Mumbai: Ballantyne of Omaha, Inc., a provider of cinema equipment and services, today provided an update on its current operations and expectations for its digital cinema businesses. Ballantyne also disclosed that it executed a contract with NEC Viewtechnology Trading that expands its distribution territory for the NEC Staru Line of Digital Cinema Projectors to include the Peoples Republic of China.

Digital Projector Sales Expectations

Based on the current status of discussions with certain exhibitors who are members of Digital Cinema Implementation Partners (DCIP), which account for approximately 15,000 cinema screens in North America, Ballantyne now believes that its expected market share for digital cinema equipment sales to DCIP’s members will likely be below the Company’s original expectations. Ballantyne’s assessment of its market share within DCIP members is based on information gleaned from planning dialogues with these organizations. The market share assessment is not based on executed purchase orders, and as a result, actual order activity could differ from current expectations.

Of the three major DCIP members, one currently indicates that Ballantyne’s share of their digital cinema projector purchases could approximate 15-20% of their total planned projector purchases. A second DCIP member has indicated that they intend to purchase nearly 100% of their digital projectors from a Ballantyne/NEC competitor, and a third DCIP member has not yet made its equipment procurement intentions known.

Ballantyne is working to improve its market share with the members of DCIP, and it continues to market its products to the remaining exhibitors in North America, which represent approximately 22,000 screens. Ballantyne also continues to expect digital projector sales in Central and South America, regions where Ballantyne also serves as NEC’s master reseller and which account for approximately 3,500 screens.

Ballantyne president and chief executive officer John P. Wilmers commented, "While it is premature to make definitive statements on ultimate market share allocations for our digital cinema equipment and services, Ballantyne’s Board and management felt an obligation to inform our investors of the procurement trends we are currently witnessing from certain exhibitors within DCIP. We are disappointed by the market share allocation currently anticipated from DCIP at this stage in their planning process and are working with our partner, NEC, to determine ways to improve our sales to DCIP. At this time, we are pleased with the demand we are seeing for our digital cinema integration and installation services, and our cinema screen business is generating strong results.

"We remain optimistic regarding the longer term prospects for our company and continue to focus on delivering the highest level of customer service to ensure the success of our exhibitor clients. We maintain an ongoing dialogue with the members of DCIP, seeking to increase our market share for projectors, electronic and mechanical components and installation services. We stand ready to deliver additional equipment and services should any of these customers’ preferences change."

Digital Projector Integration and Installation Expectations

The sales and marketing efforts of Ballantyne’s Technical Services (STS) subsidiary are generating high demand for its service offerings which are agnostic as to the brand of equipment requiring service. While contracts have not been executed, ongoing customer conversations suggest that STS is currently slated to receive a majority of the digital cinema installation and integration business pertaining to one DCIP member and is in dialogue with a second DCIP member regarding potential service opportunities. Ballantyne remains confident that STS’ "agnostic" service offerings will continue to see robust demand for installation and integration services and expects to offer ongoing service and maintenance to its customers once their digital systems are in place.

3-D and Conventional Cinema Screens

Ballantyne’s cinema screen business, Strong Screen Systems (SSS), has seen significant demand for specialty screens for 3-D cinema as well as certain large format uses. Internationally, Asia represents an attractive growth opportunity as SSS has not previously been able to access this substantial market. Ballantyne plans to leverage its cinema screen presence in Asia through its long-standing Hong Kong and recently established Beijing sales offices.

Peoples Republic of China

Ballantyne recently executed an agreement with NEC Viewtechnology Trading (Shenzehen), Ltd., granting Ballantyne’s Strong Westrex (Beijing) Trading Co. Ltd. subsidiary distribution rights to NEC’s Starus line of digital cinema projectors for the Peoples Republic of China (PRC). In conjunction with the PRC distribution agreement, Ballantyne has completed the opening of its Beijing sales and service office. Strong Westrex, which has a 40+ year reputation in the Asian cinema market, will initiate a proactive sales and promotion campaign to highlight Ballantyne’s digital cinema projector and screen offerings, targeting the entities that control cinema procurement. The PRC with its substantial population and robust economy represents a very attractive, rapidly growing cinema market both in terms of screens and ticket sales. The country currently has approximately 6,000 cinema screens and that base is anticipated to grow significantly in the coming years.