Ultralife Corporation (NASDAQ: ULBI) reported operating income of $2.3 million on revenue of $28.6 million for the second quarter ended June 30, 2020. For the second quarter of 2019, the Company reported operating income of $3.0 million on revenue of $29.4 million.

“Ultralife’s second quarter adjusted earnings per share of $0.13 cents reflects the benefits of our end-market diversity and resilient business model in the face of continued business disruptions caused by the pandemic,” said Michael D. Popielec, President and Chief Executive Officer. “Our Battery and Energy Products’ medical sales and government/defense sales increased 72% and 50% year over year, respectively, and when combined with the contribution from SWE, nearly offset Communications Systems sales which were lower due to the completion of shipments on a major contract. Altogether, our second quarter performance reinforces our view that Ultralife is durably positioned both to sustain profitability and positive cash flow/liquidity through a period of economic weakness and to execute on initiatives to drive future growth opportunities.”

Second Quarter 2020 Financial Results

Revenue was $28.6 million, a decrease of $0.8 million, or 2.8%, compared to $29.4 million for the second quarter of 2019, as a significant increase in battery sales across diversified end markets was offset by higher Communications Systems sales in 2019. Overall, commercial sales increased 7.5% and government/defense sales decreased 13.7% from the 2019 period. Battery & Energy Products revenues grew 18.4% to $24.0 million, compared to $20.3 million last year, reflecting a 71.7% increase in medical battery sales and a 49.8% increase in government/defense sales, partially offset by a 33.7% decline in oil & gas market sales. Communications Systems sales decreased 50.3% to $4.5 million compared to $9.1 million for the same period last year, primarily reflecting higher 2019 shipments of mounted power amplifiers to support the U.S. Army’s Network Modernization initiatives under the delivery orders announced in October 2018. These orders were completed in the second quarter of 2020.

Gross profit was $8.0 million, or 27.9% of revenue, compared to $8.9 million, or 30.2% of revenue, for the same quarter a year ago. Battery & Energy Products’ gross margin was 25.1%, compared to 27.9% last year, reflecting incremental costs in 2020 associated with the transition of new products to higher volume production and supply chain disruptions relating to COVID-19. Communications Systems gross margin was 42.8%, compared to 35.3% last year, due to efficiencies and improved productivity in the production of vehicle amplifier-adaptor systems for the U.S. Army.

Operating expenses were $5.7 million compared to $5.8 million last year. Included in operating expenses for the 2019 quarter was $0.2 million of non-recurring expenses related to the acquisition of SWE. Operating expenses were 19.8% of revenue for both the 2020 and 2019 periods.

Operating income was $2.3 million compared to $3.0 million last year, and operating margin was 8.0% compared to 10.3% last year.

Net income was $1.7 million or $0.10 per diluted share using the U.S. statutory tax rate, compared to net income of $2.3 million, or $0.14 per diluted share for the second quarter of 2019. Adjusted EPS was $0.13 on a diluted basis for the second quarter of 2020, compared to $0.18 for the 2019 period. Adjusted EPS excludes the provision for deferred taxes which primarily represents non-cash charges of $0.4 million for U.S. taxes which will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future.

Adjusted EBITDA, defined as EBITDA including non-cash, stock-based compensation expense, was $3.3 million for the second quarter of 2020, or 11.6% of sales, compared to $4.1 million for the second quarter of 2019, or 13.9% of sales. For the trailing twelve-month period, Adjusted EBITDA was $11.6 million or 10.2% of sales.

See the “Non-GAAP Financial Measures” section of this release for a reconciliation of Adjusted EPS to EPS and Adjusted EBITDA to Net Income Attributable to Ultralife Corporation.

About Ultralife Corporation

Ultralife Corporation serves its markets with products and services ranging from 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.ultralifecorporation.com.

Conference Call Information

Ultralife will hold its second quarter earnings conference call today at 8:30 AM ET. To participate in the live call, please dial (800) 915-4836 at least ten minutes before the scheduled start time, identify yourself and ask for the Ultralife call. A live webcast of the conference call will be available to investors in the Events & Presentations section of the Company's website at http://investor.ultralifecorporation.com. 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.

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 potential reductions in revenues from key customers, acceptance of our new products on a global basis and uncertain global economic conditions. 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 AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Dollars in Thousands)(Unaudited)

ASSETS

  June 30,2020   December 31,2019
Current Assets:      
Cash $8,389   $7,405
Trade Accounts Receivable, Net 26,405   30,106
Inventories, Net 28,064   29,759
Prepaid Expenses and Other Current Assets 2,144   3,103
Total Current Assets 65,002   70,373
       
Property, Equipment and Improvements, Net 22,713   22,525
Goodwill 26,459   26,753
Other Intangible Assets, Net 9,250   9,721
Deferred Income Taxes, Net 12,526   13,222
Other Non-Current Assets 1,638   1,963
Total Assets $137,588   $144,557
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current Liabilities:      
Accounts Payable $7,766   $9,388
Current Portion of Long-Term Debt 1,482   1,372
Accrued Compensation and Related Benefits 1,382   1,655
Accrued Expenses and Other Current Liabilities 3,840   4,775
Total Current Liabilities 14,470   17,190
Long-Term Debt 9,284   15,780
Deferred Income Taxes 501   559
Other Non-Current Liabilities 999   1,278
Total Liabilities 25,254   34,807
       
Shareholders' Equity:      
Common Stock 2,030   2,026
Capital in Excess of Par Value 184,900   184,292
Accumulated Deficit (50,113)   (52,830)
Accumulated Other Comprehensive Loss (3,296)   (2,531)
Treasury Stock (21,246)   (21,231)
Total Ultralife Equity 112,275   109,726
Non-Controlling Interest 59   24
Total Shareholders’ Equity 112,334   109,750
       
Total Liabilities and Shareholders' Equity $137,588   $144,557
ULTRALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
               
  Three-Month Period Ended   Six-Month Period Ended
  June 30,   June 30,   June 30,   June 30,
  2020   2019   2020   2019
Revenues:              
Battery & Energy Products $24,036   $20,300   $44,797   $36,298
Communications Systems 4,524   9,097   9,577   11,981
Total Revenues 28,560   29,397   54,374   48,279
               
Cost of Products Sold:              
Battery & Energy Products 18,010   14,645   33,455   26,233
Communications Systems 2,587   5,887   5,622   8,097
Total Cost of Products Sold 20,597   20,532   39,077   34,330
               
Gross Profit 7,963   8,865   15,297   13,949
               
Operating Expenses:              
Research and Development 1,275   1,587   2,823   2,623
Selling, General and Administrative 4,394   4,236   8,695   7,736
Total Operating Expenses 5,669   5,823   11,518   10,359
               
Operating Income 2,294   3,042   3,779   3,590
               
Other Expense 117   83   209   141
Income Before Income Tax Provision 2,177   2,959   3,570   3,449
               
Income Tax Provision 499   676   818   717
               
Net Income 1,678   2,283   2,752   2,732
               
Net Income Attributable to Non-Controlling Interest 20   27   35   51
               
Net Income Attributable to Ultralife Corporation $1,658   $2,256   $2,717   $2,681
               
               
Net Income Per Share Attributable to Ultralife Common Shareholders – Basic $.10   $.14   $.17   $.17
               
Net Income Per Share Attributable to Ultralife Common Shareholders – Diluted $.10   $.14   $.17   $.17
               
Weighted Average Shares Outstanding – Basic 15,882   15,742   15,880   15,741
               
Weighted Average Shares Outstanding – Diluted 16,133   16,193   16,114   16,180

Non-GAAP Financial Measures:

Adjusted Earnings Per Share

In evaluating our business, we consider and use Adjusted EPS, a non-GAAP financial measure, as a supplemental measure of our business performance. We define Adjusted EPS as net income attributable to Ultralife Corporation excluding the provision for deferred taxes divided by our weighted average shares outstanding on both a basic and diluted basis. We believe that this information is useful in providing period-to-period comparisons of our results by reflecting the portion of our tax provision that will be offset by our U.S. net operating loss carryforwards and other tax credits for the foreseeable future. We reconcile Adjusted EPS to EPS, the most comparable financial measure under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). Neither current nor potential investors in our securities should rely on Adjusted EPS as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of Adjusted EPS to EPS and net income attributable to Ultralife.

ULTRALIFE CORPORATION AND SUBSIDIARIES
CALCULATION OF ADJUSTED EPS
(In Thousands Except Per Share Amounts)
(Unaudited)
  Three-Month Period Ended
  June 30, 2020   June 30, 2019
  Amount   PerBasicShare   PerDilutedShare   Amount   PerBasicShare   PerDilutedShare
Net Income $1,658   $.10   $.10   $2,256   $.14   $.14
Deferred Tax Provision 391   .03   .03   641   .04   .04
Adjusted Net Income $2,049   $.13   $.13   $2,897   $.18   $.18
                       
Weighted Average Shares Outstanding     15,882   16,133       15,742   16,193
  Six-Month Period Ended
  June 30, 2020   June 30, 2019
  Amount   PerBasicShare   PerDilutedShare   Amount   PerBasicShare   PerDilutedShare
Net Income $2,717   $.17   $.17   $2,681   $.17   $.17
Deferred Tax Provision 633   .04   .04   636   .04   .04
Adjusted Net Income $3,350   $.21   $.21   $3,317   $.21   $.21
                       
Weighted Average Shares Outstanding     15,880   16,114       15,741   16,180

Adjusted EBITDA

In evaluating our business, we consider and use Adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure of our operating performance. We define Adjusted EBITDA as net income attributable to Ultralife Corporation before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expenses/income that we do not consider reflective of our ongoing operations. We reconcile Adjusted EBITDA to net income attributable to Ultralife Corporation, the most comparable financial measure under U.S. GAAP. Neither current nor potential investors in our securities should rely on Adjusted EBITDA as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of Adjusted EBITDA to net income attributable to Ultralife.

ULTRALIFE CORPORATION AND SUBSIDIARIES
CALCULATION OF ADJUSTED EBITDA
(Dollars in Thousands)
(Unaudited)
  Three-Month Period Ended   Six-Month Period Ended
  June 30,2020   June 30,2019   June 30,2020   June 30,2019
               
Net Income Attributable to Ultralife Corporation $1,658   $2,256   $2,717   $2,681
Adjustments:              
Interest and Financing Expense, Net 106   114   280   119
Income Tax Provision 499   676   818   717
Depreciation Expense 582   515   1,161   962
Amortization of Intangible Assets and Financing Fees 158   143   319   244
Stock-Based Compensation Expense 304   175   534   360
Non-Cash Purchase Accounting Adjustments -   205   -   205
Adjusted EBITDA $3,307   $4,084   $5,829   $5,288
Company Contact: Investor Relations Contact:
Ultralife Corporation LHA
Philip A. Fain Jody Burfening
(315) 210-6110 (212) 838-3777
pfain@ulbi.com jburfening@lhai.com
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