Ultralife Batteries Reports Second Quarter Results

Ultralife Batteries, Inc. (NASDAQ: ULBI) reported record revenues of $35.2 million for its second quarter of 2007, an increase of 65% compared with $21.4 million reported in the same three-month period in 2006. Operating income rose more than three-fold to $1.7 million compared with $0.5 million a year ago. Second quarter revenues grew $13.8 million year-over-year due in part to higher sales to international governments and defense organizations, as well as the addition of communications accessories sales from the McDowell acquisition which the company completed in mid-2006. As a percentage of revenues, gross margin for the second quarter of 2007 was 24%, up from 20% a year ago due to higher sales and production volumes and a shift toward more highly engineered products. Operating expenses totaled $6.9 million, which included $1.4 million of additional expenses and $0.6 million of intangible asset amortization connected with last year’s acquisitions. Excluding these items, operating expenses rose $1.0 million over the $3.9 million reported in the comparable quarter last year due to increased corporate costs required to operate a larger, more diverse business. Net interest expense was $0.6 million in the second quarter of 2007, up from $0.2 million reported in the prior year due to the increased debt to finance last year’s acquisitions. Net income for the second quarter of 2007 was $1.3 million, or $0.08 per diluted share, compared with net income of $109,000, or $0.01 per share, for the same quarter in 2006. For the six-month period ended June 30, 2007, revenues totaled $67.5 million compared to $39.7 million for the same period a year ago. Operating income amounted to $2.3 million for the first half of 2007, an increase of $1.6 million over 2006. Net income for the first half of 2007 was $1.3 million, or $0.08 per diluted share, compared to $249,000, or $0.02 per share, for the same period last year. "Second quarter results offer solid evidence of the success we have achieved in diversifying the company’s government/defense revenue mix and in broadening the range of our product offering, coupled with our commitment to improving operational efficiencies,” said John D. Kavazanjian, Ultralife’s president and chief executive officer. "Second quarter revenue marked the fourth consecutive quarter of year-over-year growth and surpassed last quarter’s record level. In addition, we continued to drive gross margin expansion as we increased the contribution of higher engineered products and improved manufacturing efficiencies. Asset utilization also improved with inventory levels and revolver borrowings down from the first quarter.” "To build on these positive trends in margins and asset utilization, we are continuing to push for margin improvement in our communications accessories business and for even better operational efficiencies across the organization,” continued Kavazanjian. "At the same time, we are addressing an ever-widening set of growth opportunities as demand for portable power in new and existing applications is proliferating in both government/defense and commercial markets. With an expanding portfolio of high performance products, supported by our unrivaled product development capability and engineering expertise, and an established global distribution network, we are in an excellent position to translate these opportunities into continued profitable revenue growth.” Outlook Management is projecting revenue between $33 million and $36 million for its third quarter ending September 29, 2007, based on current backlog, anticipated orders and anticipated delivery schedules. Based on this revenue estimate, management anticipates reporting operating income in the range of $1.2 million to $1.8 million, inclusive of approximately $1.0 million of non-cash expenses related to stock-based compensation and intangible asset amortization. About Ultralife Batteries, Inc. Ultralife is a global provider of high-energy power solutions and communications accessories for diverse applications. The company develops, manufactures and markets a wide range of non-rechargeable and rechargeable batteries, charging systems and accessories including power supplies, amplifiers, amplified speakers, equipment mounts, case equipment and integrated communication systems for markets including defense, commercial and consumer portable electronics. Through its portfolio of standard products and engineered solutions, Ultralife is at the forefront of providing the next generation of power systems and accessories. Defense, commercial and retail customers include: General Dynamics, Philips Medical Systems, General Motors, Energizer, Kidde Safety, Lowe’s, Radio Shack and the national defense agencies of the United States, United Kingdom, Germany, Australia and New Zealand, among others. Ultralife’s headquarters, principal manufacturing and research facilities are in Newark, New York, near Rochester. Ultralife’s three other operating units are: Ultralife Batteries (UK) Ltd., in Abingdon, England; McDowell Research in Waco, Texas; and ABLE New Energy in Shenzhen, China. Detailed information on Ultralife is available at: www.ultralifebatteries.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. 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 Investors are invited to listen to a live webcast of the conference call at 10:00 a.m. ET on August 2, 2007 at http://investor.ultralifebatteries.com. To listen to the live 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 broadcast, a replay of the webcast will be available shortly after the call at the same location for 90 days. Investors may also listen to a telephone replay of the conference call by dialing 888-203-1112, Reservation 2728461, during the period starting at 1:00 p.m. ET August 2 and ending at 1:00 p.m. ET August 9, 2007. Ultralife® is a registered trademark of Ultralife Batteries, Inc.   ULTRALIFE BATTERIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited)                   Three-Month Periods Ended Six-Month Periods Ended   June 30, July 1, June 30, July 1,   2007   2006   2007   2006   Revenues: Non-rechargeable products $ 22,808 $ 18,458 $ 40,966 $ 34,103 Rechargeable products 4,561 2,648 10,090 5,213 Communications accessories 7,688 - 16,179 - Technology contracts   139   287   281   396 Total revenues 35,196 21,393 67,516 39,712   Cost of products sold: Non-rechargeable products 16,607 14,900 30,217 27,223 Rechargeable products 3,618 1,859 7,785 3,728 Communications accessories 6,237 - 13,208 - Technology contracts   117   257   188   414 Total cost of products sold   26,579   17,016   51,398   31,365   Gross margin 8,617 4,377 16,118 8,347   Operating expenses: Research and development 1,688 884 3,302 1,844 Selling, general, and administrative   5,212   3,032   10,508   5,814 Total operating expenses   6,900   3,916   13,810   7,658   Operating income 1,717 461 2,308 689   Other income (expense): Interest income 18 40 32 85 Interest expense (604) (207) (1,261) (412) Gain on insurance settlement - 43 - 191 Miscellaneous   167   139   183   147 Income before income taxes   1,298   476   1,262   700   Income tax provision-current - 20 - 24 Income tax provision-deferred   -   347   -   427 Total income taxes   -   367   -   451   Net income $ 1,298 $ 109 $ 1,262 $ 249     Earnings per share - basic $ 0.09 $ 0.01 $ 0.08 $ 0.02 Earnings per share - diluted $ 0.08 $ 0.01 $ 0.08 $ 0.02     Weighted average shares outstanding - basic   15,123   14,851   15,100   14,807 Weighted average shares outstanding - diluted   15,331   15,165   15,320   15,150 ULTRALIFE BATTERIES, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share Amounts) (unaudited)     June 30, December 31, ASSETS 2007 2006   Current assets: Cash and investments $ 553 $ 720 Trade accounts receivable, net 23,190 24,197 Inventories 30,554 27,360 Prepaid expenses and other current assets 2,897 3,603 Total current assets 57,194 55,880   Property and equipment 19,396 19,396   Other assets Goodwill, intangible and other assets 22,832 22,482   Total Assets $ 99,422 $ 97,758   LIABILITIES AND SHAREHOLDERS' EQUITY   Current liabilities: Short-term debt and current portion of long-term debt $ 13,110 $ 12,246 Accounts payable 14,480 15,925 Other current liabilities 8,479 9,639 Total current liabilities 36,069 37,810   Long-term liabilities: Long-term debt and capital lease obligations 20,350 20,043 Other long-term liabilities 482 316 Total long-term liabilities 20,832 20,359   Shareholders' equity: Common stock, par value $0.10 per share 1,586 1,578 Capital in excess of par value 136,071 134,736 Accumulated other comprehensive income 6 (321) Accumulated deficit (92,764) (94,026) 44,899 41,967 Less -- Treasury stock, at cost 2,378 2,378 Total shareholders' equity 42,521 39,589   Total Liabilities and Shareholders' Equity $ 99,422 $ 97,758