Ultralife Batteries Reports Third Quarter Results

Ultralife Batteries, Inc. (NASDAQ: ULBI) reported an operating loss of $2.1 million on revenues of $23.7 million for the third quarter ended September 30, 2006. In comparison, the company reported an operating loss of $1.5 million on revenues of $15.7 million for the same period last year. Subsequent to announcing preliminary third quarter results on October 26, the company adjusted third quarter revenue to reflect a final review of shipments at McDowell and updated its estimate of intangible amortization expense. Third quarter revenue growth reflects increases in 9-volt sales and higher commercial business, particularly from the automotive telematics market, as well as the addition of McDowell Research and ABLE New Energy, which were acquired on July 3 and May 19, respectively, of this year. As a percentage of revenues, gross margins were 17% compared with 15% in the same quarter last year. Operating expenses of $6.1 million included $0.4 million in stock-based compensation expense, $0.5 million in intangible amortization, and $1.4 million in added operating costs from the newly-acquired companies. For the same period last year, operating expenses amounted to $3.9 million. Net loss for the third quarter of 2006 was $1.7 million, or $0.11 per common share, compared to a net loss of $1.3 million, or $0.09 loss per common share, for the third quarter of 2005. For the nine-month period ended September 30, 2006, revenues totaled $63.4 million compared to $52.7 million for the same period last year. The company reported an operating loss of $1.4 million, including $1.0 million in stock-based compensation expense and $0.5 million of intangible amortization, compared to an operating loss of $3.0 million for the first nine months of 2005. Net loss for the first three quarters of 2006 was $1.4 million, or $0.10 per share, compared to a net loss for the same period last year of $4.3 million, or $0.30 per share. "Revenues for the third quarter are indicative of the success we are having in progressing opportunities in our commercial business and in diversifying our government/military business,” said John D. Kavazanjian, Ultralife’s president and chief executive officer. "Since reporting preliminary third quarter results, we have satisfied ourselves that the handful of issues which had a bearing on the quarter’s performance are substantially behind us.” "As we move forward in the fourth quarter, the initiatives we are implementing to enhance operations at McDowell and ABLE should benefit our bottom line performance,” concluded Kavazanjian. "In addition, through increased coordination of sales and marketing functions we are making progress toward integrating both McDowell and ABLE into our core business and organizing ourselves to optimally leverage a broadened product portfolio and wider array of growth opportunities. Based on our backlog of contract awards and our pipeline for new business, we remain comfortable with the revenue outlook for the fourth quarter we provided on October 26. The combination of our augmented growth strategy and stabilized cost structure will give us a solid foundation on which to drive the company’s earnings power in 2007.” Outlook For the fourth quarter of 2006, management expects revenues of approximately $35 million, resulting in revenues for the full year in the range of $100 million. Operating income for the fourth quarter is projected to range between $2.5 million and $3.0 million, including non-cash charges for stock based compensation expense and intangible amortization, which are assumed to be $0.5 million and $0.4 million, respectively. 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 military, 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. Commercial, retail and government 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: addressing the process of U.S. military procurement, 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 November 9, 2006 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 #3984741, during the period starting at 1:00 p.m. ET November 9 and ending at 1:00 p.m. ET November 16, 2006. 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 Nine-Month Periods Ended   September 30, October 1, September 30, October 1, 2006  2005  2006  2005    Revenues: Non-rechargeable products $ 16,998  $ 12,805  $ 51,101  $ 43,305  Rechargeable products 3,463  2,286  8,676  7,676  Communications accessories 3,046  -  3,046  -  Technology contracts 218  601  614  1,677  Total revenues 23,725  15,692  63,437  52,658    Cost of products sold: Non-rechargeable products 14,598  10,994  41,821  35,845  Rechargeable products 3,066  1,830  6,794  6,730  Communications accessories 1,942  -  1,942  -  Technology contracts 138  508  552  1,495  Total cost of products sold 19,744  13,332  51,109  44,070    Gross margin 3,981  2,360  12,328  8,588    Operating expenses: Research and development 1,239  969  3,083  2,874  Selling, general, and administrative 4,367  2,902  10,181  8,745  Amortization of intangible assets 512  -  512  -  Total operating expenses 6,118  3,871  13,776  11,619    Operating income /(loss) (2,137) (1,511) (1,448) (3,031)   Other income (expense): Interest income 19  44  104  162  Interest expense (451) (220) (863) (593) Gain on insurance settlement -  -  191  -  Miscellaneous 39  (9) 186  (203) Income/(loss) before income taxes (2,530) (1,696) (1,830) (3,665)   Income tax provision/(benefit)-current (4) 5  20  3  Income tax provision/(benefit)-deferred (828) (385) (401) 637  Total income taxes (832) (380) (381) 640    Net Income/(Loss) $ (1,698) $ (1,316) $ (1,449) $ (4,305)     Earnings/(Loss) per share - basic $ (0.11) $ (0.09) $ (0.10) $ (0.30) Earnings/(Loss) per share - diluted $ (0.11) $ (0.09) $ (0.10) $ (0.30)     Weighted average shares outstanding - basic 14,987  14,642  14,867  14,497  Weighted average shares outstanding - diluted 14,987  14,642  14,867  14,497  ULTRALIFE BATTERIES, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share Amounts) (unaudited)     September 30, December 31, ASSETS 2006  2005    Current assets: Cash and investments $ 1,345  $ 3,214  Trade accounts receivable, net 18,453  10,965  Inventories 22,949  19,446  Prepaid expenses and other current assets 5,819  5,737  Total current assets 48,566  39,362    Property and equipment 19,663  19,931    Other assets 44,003  21,464    Total Assets $ 112,232  $ 80,757    LIABILITIES AND SHAREHOLDERS' EQUITY   Current liabilities: Short-term debt and current portion of long-term debt $ 8,736  $ 7,715  Accounts payable 10,295  5,218  Other current liabilities 8,274  5,450  Total current liabilities 27,305  18,383    Long-term liabilities: Long-term debt and capital lease obligations 20,052  25  Other long-term liabilities 156  242  Total long-term liabilities 20,208  267    Shareholders' equity: Common stock, par value $0.10 per share 1,576  1,547  Capital in excess of par value 134,078  130,530  Accumulated other comprehensive income (570) (1,054) Accumulated deficit (67,987) (66,538) 67,097  64,485  Less -- Treasury stock, at cost 2,378  2,378  Total shareholders' equity 64,719  62,107    Total Liabilities and Shareholders' Equity $ 112,232  $ 80,757