Ultralife Corp. (ULBI) Reports Second Quarter Results

Ultralife Corporation (NASDAQ: ULBI) reported operating income from continuing operations of $2.9 million on revenue of $43.6 million for the quarter ended July 3, 2011. For the second quarter of 2010, the company reported operating income from continuing operations of $1.0 million on revenue of $33.6 million.

Revenue for our second quarter increased by 29% over last year. The growth was driven by solid demand from our defense customers, including resumed order activity from our core U.S. government customer, and further penetration of our batteries into the metering business in China, said Michael D. Popielec, Ultralifes president and chief executive officer. We are continuing to make progress towards improving the companys profitability through lean manufacturing, reductions in non-value-added overhead and the implementation of plans to further consolidate our facilities footprint. These operational efficiencies are unlocking resources that we are allocating to new product development and expanded sales coverage. Having exited the Energy Services business one quarter ahead of schedule, we are now channeling all of our attention on positioning the company for sustainable, profitable growth.

As a result of our financial performance, working capital management and cash generated from lean initiatives, we reduced our revolver balance by $6.5 million during the second quarter to $3.7 million at quarter end. Working capital efficiencies included the reduction in inventory levels and improved accounts receivable collections, added Philip A. Fain, Ultralifes chief financial officer.

Second Quarter 2011 Financial Results

During the quarter, Ultralife completed the exit of the Energy Services business. As a result, the Energy Services segment has been reclassified as a discontinued operation. In connection with exiting the Energy Services business, the company incurred closing costs of $2.9 million for the first six months of 2011, the cash component of which amounted to $2.0 million. All figures presented below represent results from continuing operations.

Revenue increased by 29% to $43.6 million, compared to $33.6 million for the second quarter of 2010, consisting of a 23% increase in Battery Energy Product sales and a 49% increase in Communications Systems sales.

Gross margin was $11.8 million, or 27.1% of revenue, compared to $9.0 million, or 26.8% of revenue, for the same quarter a year ago, reflecting a favorable mix of high-margin Communications Systems sales. Included in gross margin for the second quarter of 2011 was a $0.3 million severance charge related to overhead reductions.

Operating expenses were $8.9 million, compared to $8.0 million a year ago reflecting higher new product development costs, higher selling expenses, and relocation and severance expenses that did not occur in the same period last year. As a percent of revenue, operating expenses were 20.5%, compared to 23.8% a year ago. Operating income grew to $2.9 million, representing an operating margin of 6.6%, compared to $1.0 million, for an operating margin of 2.9%, for the same quarter last year.

Net income from continuing operations was $2.6 million, or $0.15 per share, compared to $0.6 million, or $0.03 per share, for the second quarter of 2010. Net loss from discontinued operations was $2.1 million, or $0.12 per share, reflecting the cost of exiting the Energy Services business, compared to a net loss of $0.6 million, or $0.03 per share, for the same quarter last year. For the second quarter of 2010, the net loss from discontinued operations represented the operating loss of the Energy Services business.

Six Months Ended July 3, 2011 Financial Results

For the six month period ended July 3, 2011, revenue from continuing operations was $72.0 million, compared to $70.1 million for the same period a year ago. Year-to-date 2011 revenue was negatively impacted by a $2.7 million charge recorded in the first quarter to reflect the settlement with the U.S. Government related to exigent contracts completed between 2003 and 2004. This charge resulted in an operating loss of $1.3 million, compared to operating income of $2.8 million for the first half of 2010. The net loss from continuing operations was $1.5 million, or $0.08 per share, compared to net income of $1.8 million, or $0.11 per share, for the same period a year ago. The net loss from discontinued operations was $3.8 million, or $0.22 per share, including $2.9 million of costs related to the exit of the Energy Services business, compared to a net loss of $1.5 million, or $0.09 per share, for the first half of 2010.

Outlook

Management reaffirmed its guidance for 2011, which calls for revenue of approximately $162 million and operating income of approximately $7.8 million. Management cautions that the timing of orders and shipments may cause variability in quarterly results.

About Ultralife Corporation

Ultralife Corporation serves its markets with products and services ranging from portable power solutions to communications and electronics systems. Through its engineering and collaborative approach to problem solving, Ultralife serves government, defense and commercial customers across the globe.

Headquartered in Newark, New York, the company’s business segments include: Battery Energy Products and Communications Systems. Ultralife has operations in North America, Europe and Asia. For more information, visit www.ultralifecorp.com.

This press release may contain forward-looking statements based on current expectations that involve a number of risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include: uncertain global economic conditions, increased competitive environment and pricing pressures, disruptions related to restructuring actions and delays. The Company cautions investors not to place undue reliance on forward-looking statements, which reflect the Company’s analysis only as of today’s date. The Company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Ultralife’s financial results is included in Ultralife’s Securities and Exchange Commission (SEC) filings, including the latest Annual Report on Form 10-K.

Conference Call Information

Ultralife will hold its second quarter earnings conference call today at 10:00 AM ET. To participate, please call (800) 915-4836, identify yourself and ask for the Ultralife call. The conference call will also be broadcast live over the Internet at http://investor.ultralifecorp.com. To listen to the call, please go to the web site at least fifteen minutes early to download and install any necessary audio software. For those who cannot listen to the live webcast, a replay of the webcast will be available shortly after the call at the same location.

ULTRALIFE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
		Three-Month Periods Ended									Six-Month Periods Ended
		July 3,				June 27,					July 3,				June 27,
		2011				2010					2011				2010
Revenues:
Battery energy products		$	31,239			$	25,387				$	55,487			$	49,677
Communications systems			12,316				8,260					16,524				20,439
Total revenues			43,555				33,647					72,011				70,116
Cost of products sold:
Battery energy products			23,986				19,382					45,193				38,470
Communications systems			7,772				5,259					10,483				12,801
Total cost of products sold			31,758				24,641					55,676				51,271
Gross margin			11,797				9,006					16,335				18,845
Operating expenses:
Research and development			2,114				1,883					4,621				3,590
Selling, general, and administrative			6,820				6,137					12,971				12,481
Total operating expenses			8,934				8,020					17,592				16,071
Operating income (loss)			2,863				986					(1,257	)			2,774
Other income (expense):
Interest income			1				–					2				–
Interest expense			(162	)			(215	)				(318	)			(710	)
Miscellaneous			(9	)			(124	)				290				(83	)
Income (loss) from continuing operations before income taxes			2,693				647					(1,283	)			1,981
Income tax provision-current			63				28					67				66
Income tax provision-deferred			67				39					133				94
Total income taxes			130				67					200				160
Net income (loss) from continuing operations			2,563				580					(1,483	)			1,821
Net (income) loss from continuing operations attributable
to noncontrolling interest			15				3					28				(6	)
Net income (loss) from continuing operations attributable to Ultralife			2,578				583					(1,455	)			1,815
Discontinued operations:
Loss from discontinued operations, net of tax			(2,139	)			(563	)				(3,796	)			(1,508	)
Net income (loss) attributable to Ultralife		$	439			$	20				$	(5,251	)		$	307
Net income (loss) attributable to Ultralife common shareholders – basic
Continuing operations		$	0.15			$	0.03				$	(0.08	)		$	0.11
Discontinued operations		$	(0.12	)		$	(0.03	)			$	(0.22	)		$	(0.09	)
Total		$	0.03			$	0.00				$	(0.30	)		$	0.02
Net income (loss) attributable to Ultralife common shareholders – diluted
Continuing operations		$	0.15			$	0.03				$	(0.08	)		$	0.11
Discontinued operations		$	(0.12	)		$	(0.03	)			$	(0.22	)		$	(0.09	)
Total		$	0.03			$	0.00				$	(0.30	)		$	0.02
Weighted average shares outstanding – basic			17,296				17,164					17,286				17,089
Weighted average shares outstanding – diluted			17,308				17,169					17,286				17,094

ULTRALIFE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(unaudited)
		July 3,					December 31,
ASSETS		2011					2010
Current assets:
Cash and cash equivalents		$	4,033				$	5,105
Trade accounts receivable, net			25,162					34,270
Inventories			32,056					33,122
Prepaid expenses and other current assets			3,194					3,157
Total current assets			64,445					75,654
Property and equipment			13,649					14,485
Other assets
Goodwill, intangible and other assets			24,345					24,696
Total Assets		$	102,439				$	114,835
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt		$	3,757				$	8,717
Accounts payable			14,097					16,409
Other current liabilities			10,016					11,219
Total current liabilities			27,870					36,345
Long-term liabilities:
Long-term debt and capital lease obligations			1					251
Other long-term liabilities			5,186					4,444
Total long-term liabilities			5,187					4,695
Shareholders’ equity:
Ultralife equity:
Common stock, par value $0.10 per share			1,871					1,865
Capital in excess of par value			171,599					171,020
Accumulated other comprehensive loss			(975	)				(1,262	)
Accumulated deficit			(95,451	)				(90,200	)
			77,044					81,423
Less — Treasury stock, at cost			7,658					7,652
Total Ultralife equity			69,386					73,771
Noncontrolling interest			(4	)				24
Total shareholders’ equity			69,382					73,795
Total Liabilities and Shareholders’ Equity		$	102,439				$	114,835