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Mail Stop 0306
May 31, 2005
Via Facsimile and U.S. Mail
Mr. John D. Kavazanjian
President and Chief Executive Officer
Ultralife Batteries, Inc.
2000 Technology Parkway
Newark, NY 14513
Re: Ultralife Batteries, Inc.
Form 10-K for the year ended December 31, 2004
SEC File No. 0-20852
Dear Mr. Kavazanjian:
We have reviewed your filing and have the following
comments.
We have limited our review of your filing to those issues we have
addressed in our comments. Where indicated, we think you should
revise your future filings in response to these comments. If you
disagree, we will consider your explanation as to why our comments
are inapplicable or a revision is unnecessary. Please be as
detailed
as necessary in your explanation. In some of our comments, we may
ask you to provide us with information so we may better understand
your disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the year ended December 31, 2004
Financial Statements
Notes to Consolidated Financial Statements, page 47
Note 1: Summary of Operations and Significant Accounting Policies,
page 47
l. Revenue Recognition, page 49
1. We note from your disclosure on page 9 that you enter into
arrangements to sell your batteries through domestic and
international distributors. Tell us and disclose in future filings
the significant terms of these arrangements with distributors,
including any post shipment obligations, acceptance provisions and
return provisions that may exist and how you account for such
obligations. Also, tell us supplementally if you grant price
concessions to your distributions and if so, tell us how you
account
for price concessions. Please expand your policy for revenue
recognition to include the accounting for distributor arrangements
in
future filings to the extent sales through distributors are
significant.
2. Reference is made to your disclosure on page 9 stating that you
have traditionally had a number of long-term sales contracts with
customers." Expand in future filings to disclose the nature and
terms of such contracts.
Note 6: Commitments and Contingencies, page 56
e. Government Grants/Loans, page 57
3. It appears from your disclosure that you obtain certain
grants/loans from government agencies to assist with various
funding
needs. Clarify to us how you account for funding received under
these programs. Also, we note in September 2003 you entered into a
contract with CECOM and received $3.1 million for manufacturing
equipment to expand capabilities. Tell us how you will account
for
the receipts and expenditures in connection with this contract.
Note 8: Income Taxes, page 62
4. We note that you substantively reduced your valuation allowance
for deferred tax assets related to US operations in 2004 primarily
as
a result of current year earnings and your expectation of future
profitability from US operations. Tell us and revise here and in
MD&A in future filings to provide an enhanced discussion of the
reasons why you believe at this time that realization of the
deferred
tax assets is more likely than not given your lack of history of
profitability. Refer to the guidance provided in paragraphs 20-25
of
SFAS 109.
5. Supplementally tell us in further detail the nature of the
"change
in ownership" that took place in the fourth quarter 2003.
Note 10: Commitments and Contingencies, page 11
6. We note the reference to involvement in environmental
remediation
efforts at your Newark, New York location. Please tell us and
disclose in future filings the amounts of environmental
expenditures
capitalized and the amount of your accrual at each balance sheet
date.
7. We note that due to the passage of time, the final costs of the
remediation efforts may not be within the original estimate
disclosed. We further note that you believe that the ultimate
resolution may have a significant adverse impact on your results
of
operations. Tell us how you have complied with the disclosure
requirements of environmental matters pursuant to SAB Topic 5-Y in
your 2004 Form 10-K.
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your response to our
comments
and provides any requested information. Detailed cover letters
greatly facilitate our review. Please file your cover letter on
EDGAR. Please understand that we may have additional comments
after
reviewing your response to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information required under the
Securities Exchange Act of 1934 and that they have provided all
information investors require for an informed decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Heather Tress, Staff Accountant, at (202)
551-
3624 or me at (202) 551-3327 if you have questions regarding
comments
on the financial statements and related matters.
Sincerely,
Michele Gohlke
Accounting Branch Chief
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Mr. John D. Kavazanjian
Ultralife Batteries, Inc.
May 31, 2005
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