GlobeNewswire Inc | Oct 29, 2020 07:00AM EDT

October 29, 2020

NEWARK, N.Y. , Oct. 29, 2020 (GLOBE NEWSWIRE) -- Ultralife Corporation (NASDAQ: ULBI) reported operating income of $0.7 million on revenue of $24.4 million for the third quarter ended September 30, 2020. For the third quarter of 2019, the Company reported operating income of $1.3 million on revenue of $27.5 million.

Effective execution of both our end-market diversification strategy and operating discipline during the third quarter sustained profitability and positive cash flows, despite a reduction in total Company results largely due to the continuing global economic impact of the pandemic, said Michael D. Popielec, President and Chief Executive Officer. Within Battery & Energy Products, we posted record quarterly medical sales which increased 102% over last year, and a 23% increase in government/defense sales. These strong gains were offset by economic weakness in the oil and gas sector and lower sales for our Communications Systems business. In response, we continued our spending control, matching the overall percentage decline in our revenue with a comparable reduction in operating expenses. By preserving profitability and continuing to improve working capital management, during the quarter we also further reduced debt by $7.1 million. Supported by a solid balance sheet and resilient business model, we are committed to completing our strategic growth projects and are well positioned to withstand current economic headwinds.

ThirdQuarter 2020 Financial Results

Revenue was $24.4 million, a decrease of $3.1 million, or 11.4%, compared to $27.5 million for the third quarter of 2019, as a 22.2% increase in core battery sales across diversified end-markets was offset by lower oil & gas market and Communications Systems sales. Total Company commercial sales decreased 10.8% and government/defense sales decreased 12.5% from the 2019 period. Battery & Energy Products revenues declined 3.4% to $21.8 million, compared to $22.6 million last year, as a 102.1% increase in medical battery sales, especially those used in ventilators, respirators and infusion pumps, and a 23.4% increase in government/defense sales, were offset by a 68.7% decline in oil & gas market sales. Communications Systems sales decreased 48.3% to $2.5 million compared to $4.9 million for the same period last year, primarily reflecting 2019 shipments of vehicle amplifier-adaptor systems to support the U.S. Armys Network Modernization initiatives under the delivery orders announced in October 2018. These orders were completed in the second quarter of 2020. The net adverse impact of COVID-19 on revenues for the 2020 period was approximately $2.9 million as a substantial increase in demand for medical batteries was more than offset by weakened demand in the oil & gas and international industrial markets. Logistics disruptions also delayed certain shipments.

Gross profit was $6.5 million, or 26.7% of revenue, compared to $7.9 million, or 28.6% of revenue, for the same quarter a year ago. Battery & Energy Products gross margin was 26.0%, compared to 27.1% last year, primarily due to the mix impact of lower oil & gas market sales in 2020. Communications Systems gross margin was 32.8%, compared to 35.5% last year, due to lower factory throughput in 2020 and sales mix.

Operating expenses were $5.8 million compared to $6.6 million last year, a reduction of 11.5%. Operating expenses were 23.8% of revenue equal to that of the year-earlier period.

Operating income was $0.7 million compared to $1.3 million last year, and operating margin was 2.9% compared to 4.8% last year. The net adverse impact of COVID-19 on operating income for the 2020 period was approximately $1.0 million.

Net income was $0.4 million or $0.03 per diluted share on a GAAP basis using the U.S. statutory tax rate, compared to net income of $0.9 million, or $0.06 per diluted share for the third quarter of 2019. Adjusted EPS was $0.04 on a diluted basis for the third quarter of 2020, compared to $0.07 for the 2019 period. Adjusted EPS excludes the provision for deferred taxes which primarily represents non-cash charges of $0.2 million for U.S. taxes which will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. The net adverse impact of COVID-19 on Adjusted EPS for the 2020 period was approximately $0.06.

Adjusted EBITDA, defined as EBITDA including non-cash, stock-based compensation expense, for the trailing twelve-month period was $10.9 million or 9.9% of sales.

During the third quarter of 2020, the Company continued its strong working capital management reducing the debt related to the May 2019 acquisition of Southwest Electronic Energy Corporation by $7.1 million, or 64.6%, to $3.9 million while increasing its cash on hand by $5.4 million, or 64.2%, to $13.8 million.

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 third 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 Ultralifes financial results is included in Ultralifes 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

September December 30, 31, 2020 2019Current Assets: Cash $ 13,777 $ 7,405 Trade Accounts Receivable, Net 15,012 30,106 Inventories, Net 29,746 29,759 Prepaid Expenses and Other Current Assets 3,661 3,103 Total Current Assets 62,196 70,373 Property, Equipment and Improvements, Net 22,605 22,525 Goodwill 26,705 26,753 Other Intangible Assets, Net 9,212 9,721 Deferred Income Taxes, Net 12,425 13,222 Other Non-Current Assets 2,411 1,963 Total Assets $ 135,554 $ 144,557

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:Accounts Payable $ 8,875 $ 9,388 Current Portion of Long-Term Debt 1,537 1,372 Accrued Compensation and Related Benefits 1,258 1,655 Accrued Expenses and Other Current Liabilities 5,702 4,775 Total Current Liabilities 17,372 17,190 Long-Term Debt 2,190 15,780 Deferred Income Taxes 480 559 Other Non-Current Liabilities 1,675 1,278 Total Liabilities 21,717 34,807 Shareholders' Equity: Common Stock 2,033 2,026 Capital in Excess of Par Value 185,261 184,292 Accumulated Deficit (49,706 ) (52,830 )Accumulated Other Comprehensive Loss (2,619 ) (2,531 )Treasury Stock (21,246 ) (21,231 )Total Ultralife Equity 113,723 109,726 Non-Controlling Interest 114 24 Total Shareholders? Equity 113,837 109,750 Total Liabilities and Shareholders' $ 135,554 $ 144,557 Equity





ULTRALIFE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In Thousands Except Per Share Amounts)(Unaudited)

Three-Month Period Nine-Month Period Ended Ended September September September September 30, 29, 30, 29, 2020 2019 2020 2019Revenues: Battery & Energy Products $ 21,819 $ 22,578 $ 66,616 $ 58,876Communications Systems 2,543 4,915 12,120 16,896Total Revenues 24,362 27,493 78,736 75,772 Cost of Products Sold: Battery & Energy Products 16,142 16,461 49,597 42,694Communications Systems 1,709 3,171 7,331 11,268Total Cost of Products Sold 17,851 19,632 56,928 53,962 Gross Profit 6,511 7,861 21,808 21,810 Operating Expenses: Research and Development 1,606 2,029 4,429 4,652Selling, General and 4,198 4,526 12,893 12,262AdministrativeTotal Operating Expenses 5,804 6,555 17,322 16,914 Operating Income 707 1,306 4,486 4,896 Other Expense 53 160 262 301Income Before Income Tax 654 1,146 4,224 4,595ProvisionIncome Tax Provision 192 225 1,010 942 Net Income 462 921 3,214 3,653 Net Income Attributable to 55 23 90 74Non-Controlling Interest Net Income Attributable to $ 407 $ 898 $ 3,124 $ 3,579Ultralife Corporation Net Income Per Share Attributableto Ultralife Common Shareholders $ 0.03 $ 0.06 $ 0.20 $ 0.23? Basic Net Income Per Share Attributableto Ultralife Common Shareholders $ 0.03 $ 0.06 $ 0.19 $ 0.22? Diluted Weighted Average Shares 15,908 15,785 15,889 15,756Outstanding ? Basic Weighted Average Shares 16,089 16,162 16,103 16,138Outstanding ? Diluted



Non-GAAP Financial Measures:

Adjusted Earnings Per Share

In evaluating our business, we consider and use Adjusted EPS, a non-GAAP financial measure, as asupplemental measure of our business performance. We define Adjusted EPS as net income attributableto Ultralife Corporation excluding the provision for deferred taxes divided by our weighted averageshares 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 SUBSIDIARIESCALCULATION OF ADJUSTED EPS(In Thousands Except Per Share Amounts)(Unaudited)

Three-Month Period Ended September 30, 2020 September 29, 2019 Per Per Per Per Amount Basic Diluted Amount Basic Diluted Share Share Share ShareNet Income $ 407 $.03 $.03 $ 898 $.06 $.06Deferred Tax 188 .01 .01 165 .01 .01ProvisionAdjusted Net $ 595 $.04 $.04 $ 1,063 $.07 $.07Income Weighted AverageShares 15,908 16,089 15,785 16,162Outstanding

Nine-Month Period Ended September 30, 2020 September 29, 2019 Per Per Per Per Amount Basic Diluted Amount Basic Diluted Share Share Share ShareNet Income $ 3,124 $.20 $.19 $ 3,579 $.23 $.22Deferred Tax 821 .05 .05 801 .05 .05ProvisionAdjusted Net $ 3,945 $.25 $.24 $ 4,380 $.28 $.27Income Weighted AverageShares 15,889 16,103 15,756 16,138Outstanding

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 SUBSIDIARIESCALCULATION OF ADJUSTED EBITDA(Dollars in Thousands)(Unaudited) Three-Month Period Nine-Month Period Ended Ended September September September September 30, 2020 29, 2019 30, 2020 29, 2019 Net Income Attributable to $ 407 $ 898 $ 3,124 $ 3,579Ultralife CorporationAdjustments: Interest and Financing 92 220 372 339Expense, NetIncome Tax Provision 192 225 1,010 942Depreciation Expense 582 586 1,743 1,548Amortization of Intangible 161 160 480 404Assets and Financing FeesStock-Based Compensation 222 159 756 519ExpenseNon-Cash Purchase Accounting - 59 - 264AdjustmentsAdjusted EBITDA $ 1,656 $ 2,307 $ 7,485 $ 7,595

Company Contact: Investor Relations Contact:Ultralife Corporation LHAPhilip A. Fain Jody Burfening(315) 210-6110 (212) 838-3777pfain@ulbi.com jburfening@lhai.com