UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 2004
or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
________________ to ________________
Commission file number 0-20852
ULTRALIFE BATTERIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1387013
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2000 Technology Parkway, Newark, New York 14513
(Address of principal executive offices)
(Zip Code)
(315) 332-7100
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.10 par value - 14,198,825 shares of common stock
outstanding, net of 727,250 treasury shares, as of June 26, 2004.
1
ULTRALIFE BATTERIES, INC.
INDEX
- --------------------------------------------------------------------------------
This Amendment No. 1 to Form 10-Q for Ultralife Batteries, Inc. for the period
ended June 26, 2004, dated as of August 2, 2004, is being filed to correct
typographical errors made in the Company's Condensed Consolidated Statement of
Operations and Condensed Consolidated Statement of Cash Flows. These errors
occurred when the original documents provided to the financial printer were
converted to EDGAR format. The totals and subtotals on these statements, and the
operating results, have not changed as a result of these corrections.
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 26, 2004 and December 31, 2003 ........................... 3
Condensed Consolidated Statements of Operations -
Three and Six months ended June 26, 2004
and June 28, 2003 ............................................. 4
Condensed Consolidated Statements of Cash Flows -
Three and Six months ended June 26, 2004
and June 28, 2003 ............................................. 5
Notes to Consolidated Financial Statements ...................... 6
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................ 14
Signatures ...................................................... 15
Index to Exhibits ............................................... 16
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
(unaudited)
June 26, December 31,
ASSETS 2004 2003
--------- ------------
Current assets:
Cash and cash equivalents $ 941 $ 830
Restricted cash 51 50
Trade accounts receivable (less
allowance for doubtful accounts
of $223 at June 26, 2004 and
$168 at December 31, 2003) 20,205 17,803
UTI note receivable -- 2,350
Inventories 16,131 10,209
Prepaid expenses and other current
assets 1,662 1,314
--------- ---------
Total current assets 38,990 32,556
--------- ---------
Property, plant and equipment, net 19,169 18,213
Other assets:
Investment in UTI -- 1,550
Technology license agreements
(net of accumulated amortization
of $1,451 at June 26, 2004 and
$1,418 at December 31, 2003) -- 33
--------- ---------
-- 1,583
--------- ---------
Total Assets $ 58,159 $ 52,352
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current
portion of long-term debt $ 5,439 $ 8,295
Accounts payable 7,720 6,385
Income taxes payable 13 106
Other current liabilities 3,828 3,068
--------- ---------
Total current liabilities 17,000 17,854
Long-term liabilities:
Debt and capital lease obligations 68 68
Commitments and contingencies
(Note 10)
Shareholders' equity:
Preferred stock, par value $0.10
per share, authorized 1,000,000
shares; none outstanding -- --
Common stock, par value $0.10 per
share, authorized 40,000,000
shares; issued - 14,926,075 at
June 26, 2004 and 14,302,782 at
December 31, 2003 1,493 1,430
Capital in excess of par value 124,276 120,626
Accumulated other comprehensive loss (638) (723)
Accumulated deficit (81,662) (84,525)
--------- ---------
43,469 36,808
Less -- Treasury stock, at cost
-- 727,250 shares 2,378 2,378
--------- ---------
Total shareholders' equity 41,091 34,430
--------- ---------
Total Liabilities and Shareholders'
Equity $ 58,159 $ 52,352
========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
3
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(unaudited)
Three Months Ended Six Months Ended
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
-------- -------- -------- --------
Revenues $ 28,439 $ 20,110 $ 55,427 $ 35,538
Cost of products sold 21,391 15,379 42,047 27,648
-------- -------- -------- --------
Gross margin 7,048 4,731 13,380 7,890
-------- -------- -------- --------
Operating expenses:
Research and development 560 646 1,063 1,231
Selling, general, and
administrative 2,858 2,187 5,329 4,149
-------- -------- -------- --------
Total operating expenses 3,418 2,833 6,392 5,380
-------- -------- -------- --------
Operating income 3,630 1,898 6,988 2,510
Other income (expense):
Interest income 27 4 47 5
Interest expense (110) (150) (235) (242)
Write-off of UTI investment and
note receivable (3,951) -- (3,951) --
Miscellaneous 32 397 93 187
-------- -------- -------- --------
(Loss) income before income taxes (372) 2,149 2,942 2,460
-------- -------- -------- --------
Income taxes -- -- 79 --
-------- -------- -------- --------
Net (loss) income $ (372) $ 2,149 $ 2,863 $ 2,460
======== ======== ======== ========
(Loss) earnings per share - basic $ (0.03) $ 0.17 $ 0.21 $ 0.19
======== ======== ======== ========
(Loss) earnings per share - diluted $ (0.03) $ 0.16 $ 0.19 $ 0.19
======== ======== ======== ========
Weighted average shares
outstanding - basic 14,115 12,927 13,930 12,895
======== ======== ======== ========
Weighted average shares
outstanding - diluted 14,115 13,651 15,109 13,266
======== ======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
4
ULTRALIFE BATTERIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(unaudited)
- --------------------------------------------------------------------------------
Six Months Ended
June 26, June 28,
2004 2003
OPERATING ACTIVITIES
Net income $ 2,863 $ 2,460
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 1,705 1,504
Gain on asset disposal (14) --
Foreign exchange gain (87) (192)
Write-off of UTI investment
and note receivable 3,951 --
Write-down of inventory damaged
in fire 543 --
Write-down of fixed assets
damaged in fire 112
Non-cash stock-based compensation 10 26
Changes in operating assets
and liabilities:
Accounts receivable (2,402) (6,940)
Inventories (6,465) (916)
Prepaid expenses and other
current assets 399 (142)
Insurance receivable relating
to fires (798) --
Income taxes payable (93) --
Accounts payable and other
current liabilities 2,095 3,957
--------- ---------
Net cash provided by (used in)
operating activities 1,819 (243)
--------- ---------
INVESTING ACTIVITIES
Purchase of property and equipment (2,628) (3,278)
Proceeds from asset disposal 16 --
Purchase of securities (1) --
--------- ---------
Net cash used in investing activities (2,613) (3,278)
--------- ---------
FINANCING ACTIVITIES
Change in revolving credit facilities (2,456) 2,440
Proceeds from issuance of common stock 3,703 1,128
Proceeds from issuance of debt -- 500
Principal payments on long-term
debt and capital lease obligations (400) (401)
Proceeds from grant -- 117
--------- ---------
Net cash provided by financing
activities 847 3,784
--------- ---------
Effect of exchange rate changes
on cash 58 27
--------- ---------
Increase in cash and cash equivalents 111 290
Cash and cash equivalents at
beginning of period 830 1,322
--------- ---------
Cash and cash equivalents at end
of period $ 941 $ 1,612
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Taxes paid $ 255 $ --
========= =========
Interest paid $ 173 $ 116
========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
5
ULTRALIFE BATTERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar Amounts in Thousands - Except Share and Per Share Amounts)
(unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals and adjustments) considered necessary for a fair
presentation of the condensed consolidated financial statements have been
included. Results for interim periods should not be considered indicative
of results to be expected for a full year. Reference should be made to the
consolidated financial statements contained in the Company's Form 10-K for
the twelve-month period ended December 31, 2003.
The Company's monthly closing schedule is a weekly-based cycle as
opposed to a calendar month-based cycle. While the actual dates for the
quarter-ends will change slightly each year, the Company believes that
there are not any material differences when making quarterly comparisons.
2. WRITE-OFF OF UTI INVESTMENT AND NOTE RECEIVABLE
In June 2004, the Company recorded a $3,951 non-cash, non-operating
charge related to the Company's ownership interest in Ultralife Taiwan,
Inc. ("UTI") that consisted of a write-off of its $2,401 note receivable
from UTI, including accrued interest, and the book value of its $1,550
equity investment in UTI. The Company decided to record this charge due to
recent events that have caused increasing uncertainty over UTI's near-term
financial viability, including a failure by UTI to meet commitments made
to the Company and its other creditors to secure additional financial
support before July 1, 2004. Based on these factors, and UTI's operating
losses over several years, the Company's investment has had an other than
temporary decline in fair value and the Company believes that the
probability of being reimbursed for the note receivable is nominal. The
Company continues to hold a 9.2% equity interest in UTI, and it is working
with UTI to help it through its financial difficulties in an effort to
ensure a satisfactory outcome for all parties involved. The Company does
not believe the write-off poses a risk to its current operations or future
growth prospects because UTI continues to manufacture product for it and
the Company has taken steps to establish alternate sources of supply.
3. EARNINGS (LOSS) PER SHARE
Basic earnings per share are calculated by dividing net income by
the weighted average number of common shares outstanding during the
period. Diluted earnings per share are calculated by dividing net income,
adjusted for interest on convertible securities, by potentially dilutive
common shares, which include stock options, warrants and convertible
securities.
Net loss per share is calculated by dividing net loss by the
weighted average number of common shares outstanding during the period.
The impact of conversion of dilutive securities, such as stock options and
warrants, are not considered where a net loss is reported as the inclusion
of such securities would be anti-dilutive. As a result, basic loss per
share is the same as diluted loss per share.
6
The computation of basic and diluted earnings per share is
summarized as follows:
(In thousands, except per share data) Three Months Ended Six Months Ended
--------------------------------------------------------------------
June 26, 2004 June 28, 2003 June 26, 2004 June 28, 2003
--------------------------------------------------------------------
Net (Loss) / Income (a) $ (372) $ 2,149 $ 2,863 $ 2,460
Effect of Dilutive Securities:
Stock Options / Warrants -- 44 -- 44
Convertible Note -- 6 -- 9
-----------------------------------------------------------------
Net (Loss) / Income - Adjusted (b) $ (372) $ 2,199 $ 2,863 $ 2,513
=================================================================
Average Shares Outstanding - Basic (c) 14,115 12,927 13,930 12,895
Effect of Dilutive Securities:
Stock Options / Warrants -- 557 1,179 246
Convertible Note -- 167 -- 125
-----------------------------------------------------------------
Average Shares Outstanding - Diluted (d) 14,115 13,651 15,109 13,266
=================================================================
EPS - Basic (a/c) $ (0.03) $ 0.17 $ 0.21 $ 0.19
EPS - Diluted (b/d) $ (0.03) $ 0.16 $ 0.19 $ 0.19
The Company also had the equivalent of 1,056,880 options and
warrants outstanding for the three-month period ended June 26, 2004 which
were not included in the computation of diluted EPS because these
securities would have been anti-dilutive for that period.
4. STOCK-BASED COMPENSATION
The Company has various stock-based employee compensation plans. The
Company applies Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations
which require compensation costs to be recognized based on the difference,
if any, between the quoted market price of the stock on the grant date and
the exercise price. As all options granted to employees under such plans
had an exercise price at least equal to the market value of the underlying
common stock on the date of grant, and given the fixed nature of the
equity instruments, no stock-based employee compensation cost is reflected
in net (loss) income. The effect on net (loss) income and (loss) earnings
per share if the Company had applied the fair value recognition provisions
of Statement of Financial Accounting Standards ("SFAS") No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure, an
Amendment of SFAS No. 123", to stock-based employee compensation is as
follows:
7
(In thousands, except per share data) Three Months Ended Six Months Ended
----------------------------------------------------------------------
June 26, 2004 June 28, 2003 June 26, 2004 June 28, 2003
----------------------------------------------------------------------
Net (loss) income, as reported $ (372) $ 2,149 $ 2,863 $ 2,460
Add: Stock-based employee compensation
expense included in reported net (loss)
income, net of related tax effects -- -- -- --
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (467) (317) (681) (540)
-----------------------------------------------------------------
Pro forma net (loss) income $ (839) $ 1,832 $ 2,182 $ 1,920
(Loss) earnings per share:
Basic - as reported $ (0.03) $ 0.17 $ 0.21 $ 0.19
Basic - pro forma $ (0.06) $ 0.14 $ 0.16 $ 0.15
Diluted - as reported $ (0.03) $ 0.16 $ 0.19 $ 0.19
Diluted - pro forma $ (0.06) $ 0.13 $ 0.14 $ 0.14
During the first six months of 2004, the Company issued 623,293
shares of common stock as a result of exercises of stock options and
warrants. The Company received approximately $3,703 in cash proceeds as a
result of these transactions.
5. COMPREHENSIVE (LOSS) INCOME
The components of the Company's total comprehensive (loss) income
were:
Three Months Ended Six Months Ended
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
-----------------------------------------------------------------
Net (loss) income $ (372) $ 2,149 $ 2,863 $ 2,460
Foreign currency translation adjustments 15 (124) 85 (65)
-----------------------------------------------------------------
Total comprehensive (loss) income $ (357) $ 2,025 $ 2,948 $ 2,395
=================================================================
8
6. INVENTORIES
Inventories are stated at the lower of cost or market with cost
determined under the first-in, first- out (FIFO) method. The composition
of inventories was:
June 26, 2004 December 31, 2003
--------------------------------
Raw materials $ 6,368 $ 5,946
Work in process 4,004 2,306
Finished goods 6,266 2,699
-------------------------
16,638 10,951
Less: Reserve for obsolescence 507 742
-------------------------
$ 16,131 $ 10,209
=========================
7. PROPERTY, PLANT AND EQUIPMENT
Major classes of property, plant and equipment consisted of the
following:
June 26, 2004 December 31, 2003
--------------------------------
Land $ 123 $ 123
Buildings and leasehold improvements 2,540 1,845
Machinery and equipment 34,053 33,207
Furniture and fixtures 371 358
Computer hardware and software 1,664 1,554
Construction in progress 2,762 1,748
-------------------------
41,513 38,835
Less: Accumulated depreciation 22,344 20,622
-------------------------
$ 19,169 $ 18,213
=========================
8. DEBT
As of June 26, 2004, the Company had $867 outstanding under the term
loan component of its credit facility with its primary lending bank, and
had $4,209 of borrowings outstanding under the revolver component of the
credit facility. The Company's additional borrowing capacity under the
revolver component of the credit facility as of June 26, 2004 was
approximately $5,900, net of outstanding letters of credit of $3,600. At
June 26, 2004, the Company's net worth was $41,091, compared to the debt
covenant requiring a minimum net worth of approximately $22,406. (See Note
13 for information on the Company's new credit facility.)
As of June 26, 2004, the Company's wholly-owned U.K. subsidiary,
Ultralife Batteries (UK) Ltd., had approximately $345 outstanding under
its revolving credit facility with a commercial bank in the U.K. This
credit facility provides the Company's U.K. operation with additional
financing flexibility for its working capital needs. Any borrowings
against this credit facility are collateralized with that company's
outstanding accounts receivable balances. There was approximately $476 in
additional borrowing capacity under this credit facility as of June 26,
2004.
9
9. INCOME TAXES
The liability method, prescribed by SFAS No. 109, "Accounting for
Income Taxes", is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that may be in effect
when the differences are expected to reverse. The Company recorded an
income tax expense of $79 for the six months ended June 26, 2004 relating
to alternative minimum tax calculations.
As of December 31, 2003, the Company had foreign and domestic net
operating loss carryforwards totaling approximately $76,829 that are
available to reduce future taxable income. The Company has not reported a
deferred tax asset on its Consolidated Balance Sheet due to prior
operating losses. It is reasonably possible the Company's profitability in
2003 and 2004 would result in the recognition of a deferred tax asset
during 2004. The Company has determined that a change in ownership as
defined under Internal Revenue Code Section 382 occurred during the fourth
quarter of 2003. As a result, the net operating loss carryforwards will be
subject to an annual limitation, currently estimated to be in the range of
approximately $14,000 to $18,000. Such a limitation could result in the
possibility of a cash outlay for income taxes in a future year when
earnings exceed the amount of NOLs that can be used by the Company.
10. COMMITMENTS AND CONTINGENCIES
As of June 26, 2004, the Company had $51 in restricted cash in
support of a corporate credit card account.
As of June 26, 2004, the Company had open capital commitments to
purchase approximately $2,071 of production machinery and equipment.
The Company estimates future costs associated with expected product
failure rates, material usage and service costs in the development of its
warranty obligations. Warranty reserves, included in other current
liabilities on the Company's Consolidated Condensed Balance Sheet, are
based on historical experience of warranty claims and generally will be
estimated as a percentage of sales over the warranty period. In the event
the actual results of these items differ from the estimates, an adjustment
to the warranty obligation would be recorded. Changes in the Company's
product warranty liability during the first six months of 2004 were as
follows:
Balance at December 31, 2003 $ 278
Accruals for warranties issued 237
Settlements made (147)
-----
Balance at June 26, 2004 $ 368
=====
The Company is subject to legal proceedings and claims which arise
in the normal course of business. The Company believes that the final
disposition of such matters will not have a material adverse effect on the
financial position or results of operations of the Company.
In conjunction with the Company's purchase/lease of its Newark, New
York facility in 1998, the Company entered into a payment-in-lieu of tax
agreement which provides the Company with real estate tax concessions upon
meeting certain conditions. In connection with this agreement, a
consulting firm performed a Phase I and II Environmental Site Assessment
which revealed the existence of contaminated soil and ground water around
one of the buildings. The Company retained an engineering firm which
estimated that the cost of remediation should be in the range of $230.
This cost, however, is merely an estimate and the cost may in fact be much
higher. In February, 1998, the
10
Company entered into an agreement with a third party, which provides that
the Company and this third party will retain an environmental consulting
firm to conduct a supplemental Phase II investigation to verify the
existence of the contaminants and further delineate the nature of the
environmental concern. The third party agreed to reimburse the Company for
fifty percent (50%) of the cost of correcting the environmental concern on
the Newark property. The Company has fully reserved for its portion of the
estimated liability. Test sampling was completed in the spring of 2001,
and the engineering report was submitted to the New York State Department
of Environmental Conservation (NYSDEC) for review. NYSDEC reviewed the
report and, in January 2002, recommended additional testing. The Company
submitted a work plan to NYSDEC in October 2003, which was approved
shortly thereafter. The Company sought proposals from engineering firms to
complete the remedial work outlined in the work plan. A firm was selected
to perform the tasks associated with the remediation activities, which
were completed in December 2003. The test results were then forwarded to
NYSDEC for comment. NYSDEC responded to the Company in March 2004
requesting a report summarizing the data, findings, discussions and
conclusions. The report has been submitted to NYSDEC who will review and
make recommendations as to whether additional remediation is required.
Because the Company believes that the source of the contamination has been
removed, NYSDEC recommended that the Company conduct quarterly monitoring
of the groundwater for one year. The Company believes that the final cost
to remediate will not exceed the original estimate. The Company awaits
final comments from the NYSDEC and will begin the additional sampling upon
approval of the conclusions stated in the report. Because this is a
voluntary remediation, there is no requirement for the Company to complete
the project within any specific time frame. The ultimate resolution of
this matter may have a significant adverse impact on the results of
operations in the period in which it is resolved. Furthermore, the Company
may face claims resulting in substantial liability which could have a
material adverse effect on the Company's business, financial condition and
the results of operations in the period in which such claims are resolved.
A retail end-user of a product manufactured by one of Ultralife's
customers (the "Customer") has made a claim against the Customer wherein
it is asserted that the Customer's product, which is powered by an
Ultralife battery, does not operate according to the Customer's product
specification. No claim has been filed against Ultralife. However, in the
interest of fostering good customer relations, in September 2002,
Ultralife agreed to lend technical support to the Customer in defense of
its claim. The claim between the end-user and the Customer has now been
settled. Ultralife has renewed its commitment to the Customer to honor its
warranty by replacing any batteries that may be determined to be
defective. In the event a claim is filed against Ultralife and it is
ultimately determined that Ultralife's product was defective, replacement
of batteries to this Customer or end-user may have a material adverse
effect on the Company's financial position and results of operations.
11. BUSINESS SEGMENT INFORMATION
The Company reports its results in three operating segments: Primary
Batteries, Rechargeable Batteries, and Technology Contracts. The Primary
Batteries segment includes 9-volt, cylindrical and various other
non-rechargeable specialty batteries. The Rechargeable Batteries segment
includes the Company's lithium polymer and lithium ion rechargeable
batteries. The Technology Contracts segment includes revenues and related
costs associated with various government and military development
contracts. The Company looks at its segment performance at the gross
margin level, and does not allocate research and development or selling,
general and administrative costs against the segments. All other items
that do not specifically relate to these three segments and are not
considered in the performance of the segments are considered to be
Corporate charges.
11
Three Months Ended June 26, 2004
Primary Rechargeable Technology
Batteries Batteries Contracts Corporate Total
-----------------------------------------------------------------------------
Revenues $ 26,321 $ 1,691 $ 427 $ -- $ 28,439
Segment contribution 7,048 (82) 82 (3,418) 3,630
Interest expense, net (83) (83)
Write-down of UTI investment
and note receivable (3,951) (3,951)
Miscellaneous 32 32
Income taxes -- --
--------
Net loss $ (372)
Total assets $ 48,928 $ 4,179 $ 243 $ 4,809 $ 58,159
Three Months Ended June 28, 2003
Primary Rechargeable Technology
Batteries Batteries Contracts Corporate Total
-----------------------------------------------------------------------------
Revenues $ 19,570 $ 258 $ 282 $ -- $ 20,110
Segment contribution 5,008 (389) 112 (2,833) 1,898
Interest expense, net (146) (146)
Miscellaneous 397 397
Income taxes -- --
--------
Net income $ 2,149
Total assets $ 31,956 $ 3,249 $ 140 $ 6,191 $ 41,536
Six Months Ended June 26, 2004
Primary Rechargeable Technology
Batteries Batteries Contracts Corporate Total
-----------------------------------------------------------------------------
Revenues $ 51,643 $ 3,065 $ 719 $ -- $ 55,427
Segment contribution 13,822 (567) 125 (6,392) 6,988
Interest expense, net (188) (188)
Write-down of UTI investment
and note receivable (3,951) (3,951)
Miscellaneous 93 93
Income taxes (79) (79)
--------
Net income $ 2,863
Total assets $ 48,928 $ 4,179 $ 243 $ 4,809 $ 58,159
Six Months Ended June 28, 2003
Primary Rechargeable Technology
Batteries Batteries Contracts Corporate Total
-----------------------------------------------------------------------------
Revenues $ 34,202 $ 638 $ 698 $ -- $ 35,538
Segment contribution 8,172 (596) 314 (5,380) 2,510
Interest expense, net (237) (237)
Miscellaneous 187 187
Income taxes -- --
--------
Net income $ 2,460
Total assets $ 31,956 $ 3,249 $ 140 $ 6,191 $ 41,536
12
12. FIRES AT MANUFACTURING FACILITIES
In May 2004 and June 2004, the Company experienced two fires that
damaged certain inventory and property at its facilities. The May 2004
fire occurred at the Company's U.S. facility and was caused by cells that
shorted out when a forklift truck accidentally tipped the cells over in an
oven in an enclosed area. Certain inventory, equipment and a small portion
of the building where the fire was contained were damaged. The June 2004
fire happened at the Company's U.K. location and mainly caused damage to
various inventory and the U.K. company's leased facility. The fire was
contained mainly in a bunkered, non-manufacturing area designed to store
various material, and there was additional smoke and water damage to the
facility and its contents. It is unknown how the U.K. fire was started.
The fires caused relatively minor disruptions to the production
operations, and had no impact on the Company's ability to meet customer
demand during the quarter.
The Company maintains replacement cost insurance on the property and
equipment it owns or rents, with relatively low deductibles. The total of
the two losses related to company-owned assets, including expenditures
required to repair and clean up the facilities, is expected to be in the
range of $2,000. The Company is working closely with the insurance
companies on these matters, and it expects to be fully reimbursed by the
insurance companies for these losses. The impacts on the Consolidated
Statement of Operations and the net cash outflows from the Company are
expected to be negligible. At June 26, 2004, the Company's prepaid and
other current assets on its Consolidated Balance Sheet included a
receivable from insurance companies for approximately $800 for equipment
losses, inventory losses and clean-up costs incurred to date.
13. SUBSEQUENT EVENT - NEW CREDIT FACILITY
On June 30, 2004, the Company closed on a new secured $25,000 credit
facility, comprised of a five-year $10,000 term loan component and a
three-year $15,000 revolving credit component. This agreement replaces the
Company's $15,000 credit facility that expired on the same date.
On June 30, 2004, the Company drew down the full $10,000 term loan.
The proceeds of the term loan, which is to be repaid in equal monthly
installments over five years, are to be used for the retirement of
outstanding debt and capital expenditures. Availability under the
revolving credit component is subject to a debt to earnings ratio, whereas
availability under the previous facility was limited by various asset
values. The lenders of the new credit facility are JP Morgan Chase Bank
and Manufacturers and Traders Trust Company, with JP Morgan Chase Bank
acting as the administrative agent.
On July 1, 2004, the Company entered into an interest rate swap
arrangement to be effective on August 2, 2004, related to the $10,000 term
loan, in order to take advantage of historically low interest rates. The
Company received a fixed rate of interest in exchange for a variable rate.
The swap rate received was 3.98% for five years and will be adjusted
accordingly for a Eurodollar spread incorporated in the agreement, which
is dependent upon a debt to earnings ratio within a predetermined grid. At
July 1, 2004, the total adjusted rate of interest that the Company will
pay on the outstanding portion of the $10,000 term loan was 5.23%.
13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Credit Agreement dated as of June 30, 2004 with JPMorgan Chase
Bank as Administrative Agent
10.2 General Security Agreement dated as of June 30, 2004 in favor
of JPMorgan Chase Bank
31.1 Section 302 Certification - CEO
31.2 Section 302 Certification - CFO
32 Section 906 Certifications
(b) Reports on Form 8-K
On April 14, 2004, the Company filed Form 8-K with the Securities
and Exchange Commission announcing that it will report its first quarter
2004 results for the period ended March 27, 2004 before the market opens
on Thursday, April 29, 2004.*
On April 22, 2004, the Company filed Form 8-K with the Securities
and Exchange Commission announcing it had received an order valued at
approximately $1.5 million to supply custom lithium ion batteries and
chargers to Cubic Defense Applications.*
On April 27, 2004, the Company filed Form 8-K with the Securities
and Exchange Commission announcing that it had received an order valued at
$6 million from the U.S. Army Communications Electronics Command (CECOM)
for its BA-5372/U military batteries.*
On April 29, 2004, the Company filed a Form 8-K with the Securities
and Exchange Commission announcing its financial results for the quarter
ended March 27, 2004.*
On April 29, 2004, the Company filed a Form 8-K with the Securities
and Exchange Commission disclosing that two sitting directors would not
stand for re-election to the Board of Directors at the Annual Meeting.
On May 4, 2004, the Company filed a Form 8-K with the Securities and
Exchange Commission announcing the election of Philip M. Meek, Vice
President of Manufacturing, as an officer of the company.
On May 27, 2004, the Company filed Form 8-K with the Securities and
Exchange Commission indicating that it would hold its annual meeting of
shareholders for the period ending December 31, 2003, at the JPMorgan
Chase Conference Center in New York City on Thursday, June 10, 2004.*
On June 15, 2004, the Company filed a Form 8-K with the Securities
and Exchange Commission announcing the election of Paula H. J.
Cholmondeley to its board of directors.*
*This information was furnished but not filed in accordance with
Regulation FD.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ULTRALIFE BATTERIES, INC.
(Registrant)
Date: August 6, 2004 By: /s/ John D. Kavazanjian
-----------------------------
John D. Kavazanjian
President and Chief Executive
Officer
Date: August 6, 2004 By: /s/ Robert W. Fishback
-----------------------------
Robert W. Fishback
Vice President - Finance and
Chief Financial Officer
15
Index to Exhibits
31.1 Section 302 Certification - CEO
31.2 Section 302 Certification - CFO
32 Section 906 Certifications
16
Exhibit 31.1
I, John D. Kavazanjian, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ultralife Batteries,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2004 /s/ John D. Kavazanjian
-------------------------------------
John D. Kavazanjian
President and Chief Executive Officer
Exhibit 31.2
I, Robert W. Fishback, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ultralife Batteries,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2004 /s/ Robert W. Fishback
----------------------------
Robert W. Fishback
Vice President - Finance and
Chief Financial Officer
Exhibit 32
Section 1350 Certification
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 ("Section 906"), John D. Kavazanjian and Robert W.
Fishback, the President and Chief Executive Officer and Vice President - Finance
and Chief Financial Officer, respectively, of Ultralife Batteries, Inc., certify
that (i) the Quarterly Report on Form 10-Q for the quarter ended June 26, 2004
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and (ii) the information contained in such report fairly
presents, in all material respects, the financial condition and results of
operations of Ultralife Batteries, Inc.
A signed original of this written statement required by Section 906 has been
provided to Ultralife Batteries, Inc. and will be retained by Ultralife
Batteries, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.
Date: August 6, 2004 /s/ John D. Kavazanjian
-------------------------------------
John D. Kavazanjian
President and Chief Executive Officer
Date: August 6, 2004 /s/ Robert W. Fishback
-------------------------------------
Robert W. Fishback
Vice President - Finance and
Chief Financial Officer