Ultralife Corporation (NASDAQ: ULBI) reported operating income of $4.7 million on revenue of $53.3 million for the quarter ended September 26, 2010. For the third quarter of 2009, the company reported an operating loss of $0.4 million on revenue of $42.4 million.

Gross margin for the third quarter of 2010 was $14.9 million, or 27.9% of revenue, compared to $10.4 million, or 24.5% of revenue, for the same quarter a year ago, reflecting a favorable mix of high-margin Communications Systems revenue, including strong AMTI amplifier revenue, and Battery & Energy Products manufacturing efficiencies notably in the company’s China operations. Included in gross margin for the third quarter last year was a $1.3 million gain related to the resolution of a trade dispute.

Operating expenses for the third quarter of 2010 totaled $10.2 million compared to $10.8 million a year ago. Net income for the third quarter of 2010 was $4.5 million, or $0.26 per share, compared to a net loss of $0.6 million, or $0.04 per share, for the same quarter in 2009.

For the nine months ended September 26, 2010, revenue was $128.8 million compared to $121.8 million for the same period a year ago. Operating income amounted to $6.0 million compared to an operating loss of $9.0 million for the first nine months of 2009. Net income was $4.8 million for the nine months ended September 26, 2010, or $0.28 per share, compared to a net loss of $10.1 million, or $0.59 per share, for the same period a year ago.

“During the third quarter we generated strong incremental returns on revenue growth,” said John D. Kavazanjian, Ultralife’s president and chief executive officer. “Our focus on developing and selling higher-margin products with greater engineering content helped produce the third consecutive quarter of significant gross margin expansion. After taking into account the planned increase in product development, gross margin gains flowed through to operating income as we held firm on cost controls and realized operational efficiencies.

“Revenue grew by 26% year-over-year led by Communication Systems sales,” added Kavazanjian. “Absent orders for standard military batteries from the U.S. Defense Logistics Agency, Battery & Energy Products revenue increased by 32% as international defense order activity remained robust and volumes in our China operation continued to grow. Results in Energy Services were softer than expected, however, as standby power customers, still cautious about capital spending, delayed project implementations.”

“Our year-to-date performance puts us on track to deliver gross margin expansion and strong operating income growth in 2010. As we continue to generate positive cash flow from operations, we are also making solid progress toward our goal of sustaining a net positive cash position,” concluded Kavazanjian.

Outlook

The company reaffirms its 2010 forecast which calls for revenue in the range of $177 million to $182 million and operating income of approximately $7.0 million. Management cautions that the timing of orders and shipments may cause some variability in quarterly results.

About Ultralife Corporation

Ultralife Corporation, which began as a battery company, 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.

Headquartered in Newark, New York, the company’s business segments include: Battery & Energy Products, Communications Systems and Energy Services. 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: worsening global economic conditions, increased competitive environment and pricing pressures, 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. 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 third 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 Nine-Month Periods Ended
 
September 26, September 27, September 26, September 27,
2010 2009 2010 2009
 
Revenues:
Battery & energy products $   20,632 $   24,809 $   66,440 $   73,435
Communications systems 30,180 12,228 54,488 33,850
Energy services     2,469       5,326       7,884       14,474  
Total revenues 53,281 42,363 128,812 121,759
 
Cost of products sold:
Battery & energy products 16,151 19,553 51,958 60,083
Communications systems 19,536 7,955 35,000 23,640
Energy services     2,722       4,491       7,804       13,111  
Total cost of products sold     38,409       31,999       94,762       96,834  
 
Gross margin 14,872 10,364 34,050 24,925
 
Operating expenses:
Research and development 2,611 2,748 6,242 7,242
Selling, general, and administrative     7,545       8,020       21,827       26,669  
Total operating expenses     10,156       10,768       28,069       33,911  
 

Operating income (loss)
4,716 (404 ) 5,981 (8,986 )
 
Other income (expense):
Interest income - 16 2 20
Interest expense (253 ) (470 ) (972 ) (1,002 )
Miscellaneous     449       350       370       152  

Income (loss) before income taxes
    4,912       (508 )     5,381       (9,816 )
 

Income tax provision-current
130 17 164 19

Income tax provision-deferred
    284       88       406       272  
Total income taxes     414       105       570       291  
 

Net income (loss)
4,498 (613 ) 4,811 (10,107 )
 

Net (income) loss attributable to noncontrolling interest
    28       8       22       26  
 

Net income (loss) attributable to Ultralife
$   4,526   $   (605 ) $   4,833   $ (10,081 )
 
 

Net income (loss) attributable to Ultralife common shareholders - basic
$   0.26   $   (0.04 ) $   0.28   $   (0.59 )

Net income (loss) attributable to Ultralife common shareholders - diluted
$   0.26   $   (0.04 ) $   0.28   $   (0.59 )
 
 
Weighted average shares outstanding - basic     17,225       16,921       17,131       16,996  

Weighted average shares outstanding - diluted
    17,449       16,921       17,136       16,996  

 
ULTRALIFE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(unaudited)
             
 
September 26, December 31,
ASSETS 2010 2009
 
Current assets:
Cash and cash equivalents $   7,568 $   6,094
Trade accounts receivable, net 29,855 32,449
Inventories 38,037 35,503
Prepaid expenses and other current assets     2,369       1,912  
Total current assets 77,829 75,958
 
Property and equipment 14,818 16,648
 
Other assets
Goodwill, intangible and other assets     38,373       38,560  
 
Total Assets $   131,020   $   131,166  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Short-term debt and current portion of long-term debt $ 12,143 $ 19,082
Accounts payable 16,951 19,177
Other current liabilities     12,031       9,875  
Total current liabilities     41,125       48,134  
 
Long-term liabilities:
Long-term debt and capital lease obligations 303 267
Other long-term liabilities     5,032       4,651  
Total long-term liabilities     5,335       4,918  
 
 
 
Shareholders' equity:
Ultralife equity:
Common stock, par value $0.10 per share 1,863 1,831
Capital in excess of par value 170,725 169,064
Accumulated other comprehensive loss (1,220 ) (1,256 )
Accumulated deficit     (79,188 )     (84,021 )
92,180 85,618
Less -- Treasury stock, at cost     7,652       7,558  
Total Ultralife equity 84,528 78,060
Noncontrolling interest     32       54  
Total shareholders' equity     84,560       78,114  
 
Total Liabilities and Shareholders' Equity $   131,020   $   131,166  

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