Ultralife Corporation Reports Second Quarter Results

NEWARK, N.Y.--(Business Wire)--
Ultralife Corporation (NASDAQ: ULBI) reported operating income of
$9.9 million on revenue of $87.9 million for its second quarter of
2008. In comparison, the company reported operating income of $1.7
million on revenue of $35.2 million in the second quarter of 2007. As
a percentage of revenue, operating income increased from 5% in the
second quarter of 2007 to 11% in the second quarter of 2008.

Revenue increased $52.7 million over the same quarter last year
driven by strong shipments of advanced communications systems. In
addition, revenue in design and installation services grew as a result
of the addition of RedBlack Communications and Stationary Power
Services, acquired in September 2007 and November 2007, respectively.
Non-rechargeable product revenue declined from last year's strong
high-rate battery shipments to international customers. As a
percentage of revenue, gross margin for the second quarter of 2008 was
23.5%, compared with 24.5% in the same quarter a year ago. Gross
margin improvements in communications systems were offset by a decline
in non-rechargeable product margin, mainly due to product mix and
certain restructuring costs incurred at the company's U.K. operation.

Operating expenses for the second quarter of 2008 totaled $10.7
million compared to $6.9 million a year ago. As a percentage of
revenue, operating expenses declined from 20% in the second quarter of
2007 to 12% in the second quarter of 2008. The $3.8 million increase
in expenses included $1.2 million related to the addition of RedBlack
and Stationary Power, $0.7 million for higher sales-based
compensation, $0.5 million for higher investment in product
development, and $0.2 million for higher stock compensation expense,
in addition to generally higher costs related to enhanced sales and
marketing efforts and higher administrative costs resulting from
operating a more diverse organization. Income tax expense for the
quarter was $3.4 million, which included a non-cash charge of $3.1
million related to the recognition of a net deferred tax liability in
connection with book/tax differences for goodwill and certain
intangible assets. Net income for the second quarter of 2008 was $6.4
million, or $0.36 per share, compared with $1.3 million, or $0.08 per
share, for the same quarter in 2007.

For the six-month period ended June 28, 2008, revenue totaled
$137.5 million compared to $67.5 million for the same period a year
ago. Operating income amounted to $12.3 million for the first half of
2008 compared to $2.3 million for the same period last year, an
increase of $10.0 million. Net income for the first half of 2008 was
$8.8 million, or $0.50 per share, compared to $1.3 million, or $0.08
per share, for the same period last year.

"Second quarter revenue generation pushed our operating margin
into double digits, demonstrating the operating leverage of our
business model," said John D. Kavazanjian, president and chief
executive officer. "Revenue growth was fueled largely by deliveries of
communications systems orders, and gross margin in that segment grew
to 27% from 19% in the same quarter last year and 25% in the prior
quarter. We invested a portion of that gross margin dollar improvement
in resources to drive future growth, including expanded sales and
service capabilities for standby power, additional R&D programs and
enhanced business development efforts.

"During the second half of the year, we are focused on further
capitalizing on our broadened market opportunities and product
portfolio. We have a solid backlog of orders in our non-rechargeable
products segment, a strong pipeline of prospects in our rechargeable
products segment and an expanding product line in communications
systems supporting growth while revenue is ramping in design and
installation services," added Kavazanjian. "At the same time that we
are further penetrating existing markets, we are creating future
market opportunities through increased product development activities
in the areas of smart batteries and chargers, communications and fuel
cell systems. As we advance these opportunities, we will become the
agent of commercialization for these and other new technologies for
our customers. With our diversified platforms, application focus and
near- and long-term market opportunities, we are well positioned to
sustain profitable year-over-year growth for the rest of 2008."

Outlook

For the second half of 2008, the company forecasts revenue in the
range of $130 million and operating income in the range of $10 million
based upon current backlog and anticipated order activity from new and
existing customers. As a result, management anticipates full year 2008
revenue and operating income of approximately $270 million and $22
million, respectively. While several large orders are contributing to
a nearly doubling of revenue in 2008 over 2007, management anticipates
a revenue base of at least $250 million for 2009, based on its outlook
for order opportunities and strong demand for the company's products
and services.

While management is confident in its full year outlook,
variability in the timing of orders and shipments makes predicting
revenue on a quarterly basis challenging. Therefore, going forward,
management will provide revenue and earnings guidance on an annual
basis.

About Ultralife Corporation

Ultralife Corporation, which began as a battery company, now
serves its markets with products and services ranging from portable
and standby 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.

Ultralife's family of brands includes: Ultralife Batteries,
Stationary Power Services, RPS Power Systems, ABLE, McDowell Research
and RedBlack Communications. Ultralife's operations are in North
America, Europe and Asia. For more information, visit www.ulbi.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 July 31, 2008 at
http://investor.ultralifecorp.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 2040563, during the period starting at 1:00
p.m. ET July 31 and ending at 1:00 p.m. ET August 11, 2008.

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ULTRALIFE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)

----------------------------------------------------------------------

Three-Month Six-Month Periods
Periods Ended Ended

June 28, June 30, June 28, June 30,
2008 2007 2008 2007
-------- -------- --------- --------

Revenues:
Non-rechargeable products $17,699 $22,808 $ 32,315 $40,966
Rechargeable products 4,490 4,561 11,228 10,090
Communications systems 61,946 7,688 86,000 16,179
Design and installation
services 3,763 139 7,942 281
-------- -------- --------- --------
Total revenues 87,898 35,196 137,485 67,516

Cost of products sold:
Non-rechargeable products 15,448 16,607 27,008 30,217
Rechargeable products 3,669 3,618 9,206 7,785
Communications systems 45,205 6,237 63,138 13,208
Design and installation
services 2,948 117 6,630 188
-------- -------- --------- --------
Total cost of products sold 67,270 26,579 105,982 51,398
-------- -------- --------- --------

Gross margin 20,628 8,617 31,503 16,118

Operating expenses:
Research and development 2,137 1,688 3,746 3,302
Selling, general, and
administrative 8,554 5,212 15,457 10,508
-------- -------- --------- --------
Total operating expenses 10,691 6,900 19,203 13,810
-------- -------- --------- --------

Operating income 9,937 1,717 12,300 2,308

Other income (expense):
Interest income 2 18 13 32
Interest expense (240) (604) (569) (1,261)
Gain on insurance settlement - - 39 -
Gain on debt conversion - - 313 -
Miscellaneous 55 167 137 183
-------- -------- --------- --------
Income before income taxes 9,754 1,298 12,233 1,262
-------- -------- --------- --------

Income tax provision-current 264 - 318 -
Income tax benefit-deferred 3,095 - 3,086 -
-------- -------- --------- --------
Total income taxes 3,359 - 3,404 -
-------- -------- --------- --------

Net income $ 6,395 $ 1,298 $ 8,829 $ 1,262
======== ======== ========= ========

Earnings per share - basic $ 0.37 $ 0.09 $ 0.51 $ 0.08
======== ======== ========= ========
Earnings per share - diluted $ 0.36 $ 0.08 $ 0.50 $ 0.08
======== ======== ========= ========

Weighted average shares
outstanding - basic 17,309 15,123 17,155 15,100
======== ======== ========= ========
Weighted average shares
outstanding - diluted 17,720 15,331 17,800 15,320
======== ======== ========= ========
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ULTRALIFE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(unaudited)
----------------------------------------------------------------------

June 28, December
31,
ASSETS 2008 2007
--------- ---------

Current assets:
Cash and investments $ 827 $ 2,245
Trade accounts receivable, net 52,937 26,540
Inventories 46,073 35,098
Prepaid expenses and other current assets 1,713 4,410
--------- ---------
Total current assets 101,550 68,293

Property and equipment 19,030 19,365

Other assets
Goodwill, intangible and other assets 33,448 34,390
--------- ---------

Total Assets $154,028 $122,048
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Short-term debt and current portion of long-
term debt $ 8,713 $ 13,423
Accounts payable 34,979 18,326
Other current liabilities 15,614 10,083
--------- ---------
Total current liabilities 59,306 41,832
--------- ---------

Long-term liabilities:
Long-term debt and capital lease obligations 4,683 16,224
Other long-term liabilities 4,151 985
--------- ---------
Total long-term liabilities 8,834 17,209
--------- ---------

Minority interest in equity of subsidiaries 31 -

Shareholders' equity:
Common stock, par value $0.10 per share 1,808 1,712
Capital in excess of par value 165,833 152,070
Accumulated other comprehensive income 231 69
Accumulated deficit (79,614) (88,443)
--------- ---------
88,258 65,408
Less -- Treasury stock, at cost 2,401 2,401
--------- ---------
Total shareholders' equity 85,857 63,007
--------- ---------

Total Liabilities and Shareholders' Equity $154,028 $122,048
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Ultralife Corporation
Robert W. Fishback, 315-332-7100
bfishback@ulbi.com
or
Investor Relations:
Lippert/Heilshorn & Associates, Inc.
Jody Burfening, 212-838-3777
jburfening@lhai.com

Copyright Business Wire 2008