Ultralife Corporation Reports Third Quarter Results

Revenue for the third quarter was $42.4 million compared to $68.0 million for the same quarter last year, a $25.6 million decline attributable to lower communications systems revenue. Revenue in the third quarter of 2008 included $40.7 million of communications systems revenue related primarily to orders received in the latter part of 2007 that were fulfilled during 2008. The company's three other reporting segments -- non-rechargeable products, rechargeable products and design and installation services -- grew in total by $5.5 million. That gain was led by a $2.6 million increase in non-rechargeable products revenue reflecting strong sales of BA-5390 batteries. Gross margin for the third quarter was 24.5% compared to 23.1% for the comparable quarter last year. Included in the gross margin for the third quarter of 2009 was a $1.3 million gain related to the resolution of a trade dispute.

Operating expenses for the third quarter of 2009 totaled $10.8 million compared to $10.4 million for the same quarter last year. Operating loss for the third quarter was $0.4 million compared to operating income of $5.3 million for the third quarter last year. Net loss for the third quarter was $0.6 million, or $0.04 per share, compared to net income for the third quarter of 2008 of $4.7 million, or $0.26 per share.

For the nine-month period ended September 27, 2009, revenue was $121.8 million compared to $205.5 million for the same period a year ago. Operating loss amounted to $9.0 million compared to operating income of $17.6 million for the first nine months of 2008. Net loss for the nine-month period ended September 27, 2009 was $10.1 million, or $0.59 per share, compared to net income of $13.5 million, or $0.77 per share, for the same period a year ago.

"Third quarter results demonstrated the strength of our core business as revenue grew sequentially despite only a modest order for advanced communications systems and without the contribution of initial orders from General Dynamics UK to supply rechargeable battery systems to the UK Ministry of Defence," said John D. Kavazanjian, Ultralife's president and chief executive officer. "Our standby power business improved as we closed orders that had been pushed back earlier in the year and increased the mix of higher-margin service revenue. As a result, even though we are still contending with pricing pressures and the effects of the economic slowdown, gross margin in our design and installation services segment more than tripled quarter to quarter. Finally, we implemented the planned cost reduction actions during the quarter and, with last quarter's $1.2 million in non-recurring expenses behind us, we have met our objective of reducing quarterly operating expenses to the $11 million range.

"Attention to operating expenses, streamlining operations, lowering the cost basis of the business and improving manufacturing efficiencies all will remain high priorities for the company," concluded Kavazanjian. "We are diligently focused on positioning the company to return to sustainable profitability in the fourth quarter with a right-sized business model to deliver incremental profits on revenue growth in 2010."

Outlook

Based on expected shipments of government/defense orders in the fourth quarter, management has revised its outlook for 2009 and now expects revenue of approximately $175 million and to be profitable in the fourth quarter yielding an operating loss of between $8.0 million and $9.0 million for the year.

Segment Reporting

Beginning with the first quarter of fiscal 2010, management intends to realign its reporting segments. The Non-rechargeable Products and Rechargeable Products segments will be combined into a segment called Battery & Energy Products. The Communications Systems segment will include the company's RedBlack Communications business, which currently is included in the Design & Installation Services segment. The Design & Installation Services segment, to be renamed Energy Services, will continue to encompass the company's standby power business.

About Ultralife Corporation

Ultralife Corporation, which began as a battery company, now serves its markets with products and services ranging from portable and standby 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.

Ultralife's family of brands includes: Ultralife Batteries, Stationary Power Services, RPS Power Systems, ABLE, McDowell Research, RedBlack Communications and AMTI. Ultralife's operations are 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: worsening global economic conditions, increased competitive environment and pricing pressures, disruptions related to restructuring actions and delays, and the possibility of intangible asset impairment charges that may be taken should management decide to retire one or more of the brands of acquired companies in the future. 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.

ULTRALIFE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
                                                                    Three-Month Periods Ended             Nine-Month Periods Ended
                                                                    September 27,      September 27,      September 27,       September 27,
                                                                    2009               2008               2009                2008
Revenues:
Non-rechargeable products                                           $    18,358        $    15,741        $    52,855         $    48,056
Rechargeable products                                                    8,484              8,020              32,645              19,248
Communications systems                                                   9,565              40,675             20,402              126,675
Design and installation services                                         5,956              3,557              15,857              11,499
Total revenues                                                           42,363             67,993             121,759             205,478
Cost of products sold:
Non-rechargeable products                                                15,001             13,835             43,319              40,843
Rechargeable products                                                    6,483              6,282              25,219              15,488
Communications systems                                                   5,820              29,304             14,442              92,442
Design and installation services                                         4,695              2,886              13,854              9,516
Total cost of products sold                                              31,999             52,307             96,834              158,289
Gross margin                                                             10,364             15,686             24,925              47,189
Operating expenses:
Research and development                                                 2,748              2,161              7,242               5,907
Selling, general, and administrative                                     8,020              8,227              26,669              23,684
Total operating expenses                                                 10,768             10,388             33,911              29,591
Operating income (loss)                                                  (404   )           5,298              (8,986  )           17,598
Other income (expense):
Interest income                                                          16                 5                  20                  18
Interest expense                                                         (470   )           (248   )           (1,002  )           (817    )
Gain on insurance settlement                                             -                  -                  -                   39
Gain on debt conversion                                                  -                  -                  -                   313
Miscellaneous                                                            350                (175   )           152                 (66     )
Income (loss) before income taxes                                        (508   )           4,880              (9,816  )           17,085
Income tax provision-current                                             17                 151                19                  469
Income tax provision-deferred                                            88                 62                 272                 3,148
Total income taxes                                                       105                213                291                 3,617
Net income (loss)                                                        (613   )           4,667              (10,107 )           13,468
Net (income) loss attributable to noncontrolling interest                8                  (10    )           26                  18
Net income (loss) attributable to Ultralife                         $    (605   )      $    4,657         $    (10,081 )      $    13,486
Net income (loss) attributable to Ultralife common shareholders -   $    (0.04  )      $    0.27          $    (0.59   )      $    0.78
basic
Net income (loss) attributable to Ultralife common shareholders -   $    (0.04  )      $    0.26          $    (0.59   )      $    0.77
diluted
Weighted average shares outstanding - basic                              16,921             17,366             16,996              17,220
Weighted average shares outstanding - diluted                            16,921             17,722             16,996              17,742

ULTRALIFE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(unaudited)
                                                        September 27,       December 31,
ASSETS                                                  2009                2008
Current assets:
Cash and investments                                    $    1,697          $    1,878
Trade accounts receivable, net                               36,230              30,588
Inventories                                                  42,907              40,465
Prepaid expenses and other current assets                    2,293               2,242
Total current assets                                         83,127              75,173
Property and equipment                                       17,291              18,465
Other assets
Goodwill, intangible and other assets                        39,182              35,949
Total Assets                                            $    139,600        $    129,587
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt   $    26,995         $    1,425
Accounts payable                                             15,080              20,255
Other current liabilities                                    11,298              10,556
Total current liabilities                                    53,373              32,236
Long-term liabilities:
Long-term debt and capital lease obligations                 4,455               4,670
Other long-term liabilities                                  4,915               4,528
Total long-term liabilities                                  9,370               9,198
Shareholders' equity:
Ultralife equity:
Common stock, par value $0.10 per share                      1,829               1,815
Capital in excess of par value                               168,686             167,259
Accumulated other comprehensive loss                         (1,257  )           (1,930  )
Accumulated deficit                                          (84,861 )           (74,780 )
                                                             84,397              92,364
Less -- Treasury stock, at cost                              7,558               4,232
Total Ultralife equity                                       76,839              88,132
Noncontrolling interest                                      18                  21
Total shareholders' equity                                   76,857              88,153
Total Liabilities and Shareholders' Equity              $    139,600        $    129,587

SOURCE: Ultralife Corporation

Company: 
Ultralife Corporation 
John C. Casper, 315-332-7100 
jcasper@ultralifecorp.com 
or 
Investor Relations: 
Lippert/Heilshorn & Associates, Inc. 
Jody Burfening, 212-838-3777 
jburfening@lhai.com