ULBI

Ultralife Corporation (ULBI)

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Ultralife Corp. (ULBI)

Q3 2010 Earnings Call

October 28, 2010 10:00 am ET

Executives

Jody Burfening - Lippert/Heilshorn & Associates

John Kavazanjian - President and CEO

Phil Fain - CFO

Analysts

Zach Larkin - Stephen’s Inc

Ted Kundtz - Needham

Jim McElree - Merriman

Walter Nasdeo - Ardour Capital

Sam Bergman - Bayberry Asset Management

Presentation

Operator

Welcome to the Ultralife Corporation Third Quarter Earnings Conference Call. At this time for opening remarks and introductions, I would like to turn the call over to Ms. Jody Burfening. Please go ahead.

Jody Burfening

This is Jody Burfening of Lippert/Heilshorn & Associates. Thank you for joining us this morning for Ultralife Corporation’s earnings conference call for the third quarter fiscal 2010.

With us on today’s call are John Kavazanjian, Ultralife’s President and CEO; and Phil Fain, Ultralife’s Chief Financial Officer. The earnings press release was issued earlier this morning and if anyone has not yet received a copy, I invite you to visit the Ultralife website at www.ultralifecorp.com, where you will find the release under Investor News in the Investor Relations section.

Before turning the call over to management, I would like to remind everyone that some statements made during this conference call contains forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. These include worsening global economic conditions, increased competitive environment and pricing pressures, the possibility of intangible asset and impairment charges that may be taken, should management decide to retire one or more 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. A more detailed description of such uncertainties is contained in the company’s filings with the Securities and Exchange Commission such as the company’s report on Form 10-K for the period ending December 31, 2009.

In addition, on today’s call, management will refer to certain non-GAAP financial measures that management considers to be useful metrics that differ from GAAP. These non-GAAP measures should be considered as supplemental to corresponding GAAP figures.

With that, I would now like to turn the call over to John.

John Kavazanjian

Good morning everybody and welcome to the Ultralife Corporation conference call for the third quarter of 2010. Joining me today is Phil Fain, our Chief Financial Officer.

Today, we reported revenue of $53.3 million for the third quarter of 2010 and an operating profit of $4.7 million and an adjusted EBITDA of $6.9 million. Gross margin was 28% and this was led by a 35% gross margin in our Communications Systems segment primarily because of our mix highly engineered amplifier products.

Battery and Energy products are on tract at 22% gross margin with the very strong showing by our China operation and despite a year-over-year sales decline due to the lack of shipments the standard military batteries to the Defense Logistics Agency. With the award of new contract and several new orders, we expect this revenue stream to return in 2011.

In Battery and Energy products with the award of a contract and new order placements (inaudible) activity with standard batteries for the US Department of Defense coming back in 2011.

Even without this business, strong international defense order activity, growing demand in the medical sector and strengths in our China operation with the growth in our non-DOD business.

China and its first volume shipment of the new version of our 9-volt lithium batteries and saw continued activity and is lithium-thionyl chloride line particularly in the automated meter reading segment.

Ultralife China is also seeing several new customers as well and has some very strong Thin Cell product. The Thin Cell packages, our industry leading lithium manganese oxide chemistry in a foil limited package with total flexibility in size and thickness down to as lowest 0.6 millimeters. The unique offerings it seem great interest in Tracking/RFID and smart card application.

Communications Systems sales were robust $30 million fueled by shipments on the SATCOM-On-The-Move order that we received early in the second quarter. Shipment on this order will be completed for early in the fourth quarter.

In Energy services, while we have seen increases in project activity, capital expenditure delays late in the quarter caused revenue to be lighter than we had expect. We still expect to see some pickup with traditionally a slow fourth quarter in energy services.

New products continue to be an important part of our sales and margin growth. We recently released our newest version of our 2590 family, the high capacity version. We now to feel the rechargeable battery above the capacity of non-rechargeable sulfur dioxide BA-5590 battery, over 7 amp-hour, and to keep our non-rechargeable products ahead of that curve, we also released our new 13 amp-hour D cell.

The capacity more than 15% higher and already industry late leading D cell, we now can construct versions of our BA-5590 with that cell. Bringing its industry leading capacity for the 11 amp hours to 13 amp hours and do the same with other products take advantage of this new capability.

In Communications Systems, we have also extended our product line. Our A320 pocket amplifier for handheld radios has now passed (inaudible) communication security testing including the DAMA SATCOM protocol and together with higher stock in radio, it now comprises the first handheld radio system ever to be certified by the US Military for use in satellite communications. This will enable the soldier on the ground not only the extended range that the pocket amplifier brings, but the ability to access SATCOM capability that previously could only be gotten for vehicle systems in the mobile environment.

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