UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ____________ to ____________
Commission file number:
ULTRALIFE CORPORATION
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation of organization)
(Address of principal executive offices) (Zip Code) | (I.R.S. Employer Identification No.)
( (Registrant's telephone number, including area code:) |
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | |
(Title of each class) | (Trading Symbol) | (Name of each exchange on which registered) |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
|
Non-accelerated filer ☐ | Smaller reporting company |
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of July 26, 2021, the registrant had
ULTRALIFE CORPORATION AND SUBSIDIARIES
INDEX
Page |
||
PART I. |
FINANCIAL INFORMATION |
|
Item 1. |
Consolidated Financial Statements (unaudited): |
|
Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 |
1 |
|
Consolidated Statements of Income and Comprehensive Income for the Three and Six-Month Periods Ended June 30, 2021 and June 30, 2020 |
2 |
|
Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2021 and June 30, 2020 |
3 |
|
Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six-Month Periods Ended June 30, 2021 and June 30, 2020 | 4 |
|
Notes to Consolidated Financial Statements |
5 |
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
16 |
Item 4. |
Controls and Procedures |
25 |
PART II. |
OTHER INFORMATION |
|
Item 6. |
Exhibits |
26 |
Signatures |
27 |
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
ULTRALIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) (Unaudited) |
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Trade accounts receivable, net of allowance for doubtful accounts of $ and $ , respectively | ||||||||
Inventories, net | ||||||||
Prepaid expenses and other current assets | ||||||||
Total current assets | ||||||||
Property, plant and equipment, net | ||||||||
Goodwill | ||||||||
Other intangible assets, net | ||||||||
Deferred income taxes, net | ||||||||
Other noncurrent assets | ||||||||
Total Assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Current portion of long-term debt | ||||||||
Accrued compensation and related benefits | ||||||||
Accrued expenses and other current liabilities | ||||||||
Total current liabilities | ||||||||
Deferred income taxes | ||||||||
Other noncurrent liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 8) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock – par value $ per share; authorized shares; issued | ||||||||
Common stock – par value $ per share; authorized shares; issued – shares at June 30, 2021 and shares at December 31, 2020; outstanding – shares at June 30, 2021 and shares at December 31, 2020 | ||||||||
Capital in excess of par value | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Treasury stock - at cost; shares at June 30, 2021 and shares at December 31, 2020 | ( | ) | ( | ) | ||||
Total Ultralife Corporation equity | ||||||||
Non-controlling interest | ||||||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
The accompanying notes are an integral part of these consolidated financial statements.
ULTRALIFE CORPORATION AND SUBSIDIARIES |
|||||||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
|||||||
(In thousands except per share amounts) |
|||||||
(Unaudited)
|
Three-month period ended |
Six-month period ended |
|||||||||||||||
June 30, 2021 |
June 30, 2020 |
June 30, 2021 |
June 30, 2020 |
|||||||||||||
Revenues |
$ | $ | $ | $ | ||||||||||||
Cost of products sold |
||||||||||||||||
Gross profit |
||||||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
||||||||||||||||
Selling, general and administrative |
||||||||||||||||
Total operating expenses |
||||||||||||||||
Operating income |
||||||||||||||||
Other expense (income): |
||||||||||||||||
Interest and financing expense |
||||||||||||||||
Miscellaneous |
( |
) | ( |
) | ( |
) | ||||||||||
Total other expense |
||||||||||||||||
Income before income tax provision |
||||||||||||||||
Income tax provision |
||||||||||||||||
Net income |
||||||||||||||||
Net income attributable to non-controlling interest |
||||||||||||||||
Net income attributable to Ultralife Corporation |
||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation adjustments |
( |
) | ||||||||||||||
Comprehensive income attributable to Ultralife Corporation |
$ | $ | $ | $ | ||||||||||||
Net income per share attributable to Ultralife common stockholders – basic |
$ | . |
$ | . |
$ | . |
$ | . |
||||||||
Net income per share attributable to Ultralife common stockholders – diluted |
$ | . |
$ | . |
$ | . |
$ | . |
||||||||
Weighted average shares outstanding – basic |
||||||||||||||||
Potential common shares |
||||||||||||||||
Weighted average shares outstanding - diluted |
The accompanying notes are an integral part of these consolidated financial statements. |
ULTRALIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) |
Six-month period ended |
||||||||
June 30, 2021 |
June 30, 2020 |
|||||||
OPERATING ACTIVITIES: |
||||||||
Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation |
||||||||
Amortization of intangible assets |
||||||||
Amortization of financing fees |
||||||||
Stock-based compensation |
||||||||
Deferred income taxes |
||||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
||||||||
Inventories |
||||||||
Prepaid expenses and other assets |
||||||||
Accounts payable and other liabilities |
( |
) | ( |
) | ||||
Net cash provided by operating activities |
||||||||
INVESTING ACTIVITIES: |
||||||||
Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
Proceeds from sale of equipment |
||||||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
FINANCING ACTIVITIES: |
||||||||
Payment of credit facilities |
( |
) | ( |
) | ||||
Proceeds from exercise of stock options |
||||||||
Tax withholdings on stock-based awards |
( |
) | ( |
) | ||||
Net cash used in financing activities |
( |
) | ( |
) | ||||
Effect of exchange rate changes on cash |
( |
) | ( |
) | ||||
INCREASE IN CASH |
||||||||
Cash, Beginning of period |
||||||||
Cash, End of period |
$ | $ |
The accompanying notes are an integral part of these consolidated financial statements. |
ULTRALIFE CORPORATION AND SUBSIDIARIES |
|||||||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY |
|||||||||||||||
(In thousands except share amounts) (Unaudited) |
Capital |
Accumulated |
|||||||||||||||||||||||||||||||
Common Stock |
in Excess |
Other |
Non- |
|||||||||||||||||||||||||||||
Number of |
of Par |
Comprehensive |
Accumulated |
Treasury |
Controlling |
|||||||||||||||||||||||||||
Shares |
Amount |
Value |
Income (Loss) |
Deficit |
Stock |
Interest |
Total |
|||||||||||||||||||||||||
Balance – December 31, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Stock option exercises |
||||||||||||||||||||||||||||||||
Stock-based compensation – stock options |
||||||||||||||||||||||||||||||||
Stock-based compensation -restricted stock |
||||||||||||||||||||||||||||||||
Vesting of restricted stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Foreign currency translation adjustments |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Balance – June 30, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
Balance – December 31, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Stock option exercises |
( |
) | ||||||||||||||||||||||||||||||
Stock-based compensation – stock options |
||||||||||||||||||||||||||||||||
Stock-based compensation -restricted stock |
||||||||||||||||||||||||||||||||
Vesting of restricted stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Foreign currency translation adjustments |
||||||||||||||||||||||||||||||||
Balance – June 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
Balance – March 31, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Stock option exercises |
||||||||||||||||||||||||||||||||
Stock-based compensation – stock options |
||||||||||||||||||||||||||||||||
Stock-based compensation -restricted stock |
||||||||||||||||||||||||||||||||
Vesting of restricted stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Foreign currency translation adjustments |
||||||||||||||||||||||||||||||||
Balance – June 30, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
Balance – March 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Stock option exercises |
||||||||||||||||||||||||||||||||
Stock-based compensation – stock options |
||||||||||||||||||||||||||||||||
Stock-based compensation -restricted stock |
||||||||||||||||||||||||||||||||
Vesting of restricted stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Foreign currency translation adjustments |
||||||||||||||||||||||||||||||||
Balance – June 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ |
The accompanying notes are an integral part of these consolidated financial statements.
ULTRALIFE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
(Unaudited)
1. | BASIS OF PRESENTATION |
The accompanying unaudited Consolidated Financial Statements of Ultralife Corporation and its subsidiaries (the “Company”, “Ultralife”, “we” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all 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 Consolidated Financial Statements have been included. Results for interim periods should not be considered indicative of results to be expected for any subsequent interim period or the full year. Reference should be made to the Consolidated Financial Statements and related notes thereto contained in our Form 10-K for the year ended December 31, 2020.
The December 31, 2020 consolidated balance sheet information referenced herein was derived from audited Consolidated Financial Statements but does not include all disclosures required by GAAP.
Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.
Recently Adopted Accounting Guidance
Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. Adoption of the new standard did not materially impact the Company’s Consolidated Financial Statements.
Recent Accounting Guidance Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently assessing the impact that adopting this new accounting standard will have on our Consolidated Financial Statements.
2. |
DEBT |
On May 1, 2019, Ultralife, Southwest Electronic Energy Corporation, a Texas corporation (“SWE”), and CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), as borrowers, entered into the First Amendment Agreement (the “First Amendment Agreement”) with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent, to amend the Credit and Security Agreement by and among Ultralife and KeyBank dated May 31, 2017 (the “Credit Agreement”, and together with the First Amendment Agreement, the “Amended Credit Agreement”).
The Amended Credit Agreement, among other things, provides for a
As of June 30, 2021, the Company had $
The Company is required to repay the borrowings under the Term Loan Facility in
In addition to the customary affirmative and negative covenants, the Company must maintain a consolidated fixed charge coverage ratio equal to or greater than
Borrowings under the Credit Facilities are secured by substantially all the assets of the Company. Availability under the Revolving Credit Facility is subject to certain borrowing base limits based on receivables and inventories.
Interest will accrue on outstanding indebtedness under the Credit Facilities at the Base Rate or the Overnight LIBOR Rate, as selected by the Company, plus the applicable margin. The Base Rate is the higher of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus
The Company must pay a quarterly fee of
Payments must be made by the Company to the extent borrowings exceed the maximum amount then permitted to be drawn on the Credit Facilities and from the proceeds of certain transactions. Upon the occurrence of an event of default, the outstanding obligations may be accelerated and the Bank will have other customary remedies including resort to the security interest the Company provided to the Bank.
3. |
EARNINGS PER SHARE |
Basic earnings per share (“EPS”) is computed by dividing net income attributable to Ultralife by the weighted-average shares outstanding during the period. Diluted EPS includes the dilutive effect of securities, if any, and is calculated using the treasury stock method. For the three-month period ended June 30, 2021,
There were
4. |
SUPPLEMENTAL BALANCE SHEET INFORMATION |
Fair Value Measurements and Disclosures
The fair value of financial instruments approximated their carrying values at June 30, 2021 and December 31, 2020. The fair value of cash, accounts receivable, accounts payable, accrued liabilities, and the current portion of long-term debt approximates carrying value due to the short-term nature of these instruments.
Cash
The composition of the Company’s cash was as follows:
June 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Cash |
$ | $ | ||||||
Restricted cash |
||||||||
Total |
$ | $ |
As of June 30, 2021 and December 31, 2020, restricted cash included $
Inventories
Inventories are stated at the lower of cost or net realizable value, net of obsolescence reserves, with cost determined under the first-in, first-out (FIFO) method. The composition of inventories, net was:
June 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Raw materials |
$ | $ | ||||||
Work in process |
||||||||
Finished goods |
||||||||
Total |
$ | $ |
Property, Plant and Equipment, Net
Major classes of property, plant and equipment consisted of the following:
June 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Land |
$ | $ | ||||||
Buildings and leasehold improvements |
||||||||
Machinery and equipment |
||||||||
Furniture and fixtures |
||||||||
Computer hardware and software |
||||||||
Construction in process |
||||||||
Less: Accumulated depreciation |
( |
) | ( |
) | ||||
Property, plant and equipment, net |
$ | $ |
Depreciation expense for property, plant and equipment was as follows:
Three-month period ended |
Six-month period ended |
|||||||||||||||
June 30, |
June 30, |
June 30, |
June 30, |
|||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Depreciation expense |
$ | $ | $ | $ |
Goodwill
The following table summarizes the goodwill activity by segment for the six-month period ended June 30, 2021.
Battery & Energy |
Communications |
|||||||||||
Products |
Systems |
Total |
||||||||||
Balance – December 31, 2020 |
$ | $ | $ | |||||||||
Effect of foreign currency translation |
||||||||||||
Balance – June 30, 2021 |
$ | $ | $ |
Other Intangible Assets, Net
The composition of other intangible assets was:
June 30, 2021 |
||||||||||||
Accumulated |
||||||||||||
Cost |
Amortization |
Net |
||||||||||
Trademarks |
$ | $ | $ | |||||||||
Customer relationships |
||||||||||||
Patents and technology |
||||||||||||
Distributor relationships |
||||||||||||
Trade name |
||||||||||||
Total |
$ | $ | $ |
December 31, 2020 |
||||||||||||
Accumulated |
||||||||||||
Cost |
Amortization |
Net |
||||||||||
Trademarks |
$ | $ | $ | |||||||||
Customer relationships |
||||||||||||
Patents and technology |
||||||||||||
Distributor relationships |
||||||||||||
Trade name |
||||||||||||
Total |
$ | $ | $ |
The change in the cost of total intangible assets from December 31, 2020 to June 30, 2021 is a result of the effect of foreign currency translations.
Amortization expense for other intangible assets was as follows:
Three-month period ended |
Six-month period ended |
|||||||||||||||
June 30, |
June 30, |
June 30, |
June 30, |
|||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Amortization included in: |
||||||||||||||||
Research and development |
$ | $ | $ | $ | ||||||||||||
Selling, general and administrative |
||||||||||||||||
Total amortization expense |
$ | $ | $ | $ |
5. |
STOCK-BASED COMPENSATION |
We recorded non-cash stock compensation expense in each period as follows:
Three-month period ended |
Six-month period ended |
|||||||||||||||
June 30, |
June 30, |
June 30, |
June 30, |
|||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Stock options |
$ | $ | $ | $ | ||||||||||||
Restricted stock grants |
||||||||||||||||
Total |
$ | $ | $ | $ |
We have stock options outstanding from various stock-based employee compensation plans for which we record compensation cost relating to share-based payment transactions in our financial statements. As of June 30, 2021, there was $
The following table summarizes stock option activity for the six-month period ended June 30, 2021:
Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (years) |
Aggregate Intrinsic Value |
|||||||||||||
Outstanding at January 1, 2021 |
$ | |||||||||||||||
Granted |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Forfeited or expired |
( |
) | ||||||||||||||
Outstanding at June 30, 2021 |
$ | $ | ||||||||||||||
Vested and expected to vest at June 30, 2021 |
$ | $ | ||||||||||||||
Exercisable at June 30, 2021 |
$ | $ |
Cash received from stock option exercises under our stock-based compensation plans for the three-month periods ended June 30, 2021 and June 30, 2020 was $
In October 2020,
6. | INCOME TAXES |
Our effective income tax rate for the six-month periods ended June 30, 2021 and June 30, 2020 was
As of December 31, 2020, we have domestic net operating loss (“NOL”) carryforwards of $
As of June 30, 2021, for certain past operations in the U.K., we continue to report a valuation allowance for NOL carryforwards of approximately $
As of June 30, 2021, we have
recognized a valuation allowance against our other foreign deferred tax assets, as realization is considered to be more likely than not.
As of June 30, 2021, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations, other than earnings generated in the U.K.
There were
As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. In August 2020, the Internal Revenue Service (“IRS”) completed its examination of the Company’s federal tax returns for 2016-2018 with no material adjustments identified. Our U.S. tax matters for 2019 and 2020 remain subject to IRS examination. Our U.S. tax matters for
2002, 2005-2007 and 2011-2015 also remain subject to IRS examination due to the remaining availability of NOL carryforwards generated in those years. Our U.S. tax matters for 2002, 2005-2007 and 2011-2020 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years through 2020 remain subject to examination by the respective foreign tax jurisdiction authorities.
7. |
OPERATING LEASES |
The Company has operating leases predominantly for operating facilities. As of June 30, 2021, the remaining lease terms on our operating leases range from less than one (
The components of lease expense for the current and prior-year comparative periods were as follows:
Three months ended |
Six months ended |
|||||||||||||||
June 30, 2021 |
June 30, 2020 |
June 30, 2021 |
June 30, 2020 |
|||||||||||||
Operating lease cost |
$ | $ | $ | $ | ||||||||||||
Variable lease cost |
||||||||||||||||
Total lease cost |
$ | $ | $ | $ |
Supplemental cash flow information related to leases was as follows:
Six months ended |
||||||||
June 30, 2021 |
June 30, 2020 |
|||||||
Cash paid for amounts included in the measurement of lease liabilities: |
||||||||
Operating cash flows from operating leases |
$ | $ | ||||||
Right-of-use assets obtained in exchange for lease liabilities: |
$ | $ |
Supplemental balance sheet information related to leases was as follows:
Balance Sheet Classification |
June 30, 2021 |
December 31, 2020 |
|||||||
Assets: |
|||||||||
Operating lease right-of-use asset |
Other noncurrent assets |
$ | $ | ||||||
Liabilities: |
|||||||||
Current operating lease liability |
Accrued expenses and other current liabilities |
$ | $ | ||||||
Operating lease liability, net of current portion |
Other noncurrent liabilities |
||||||||
Total operating lease liability |
$ | $ | |||||||
Weighted-average remaining lease term (years) |
|||||||||
Weighted-average discount rate |
% | % |
Future minimum lease payments as of June 30, 2021 are as follows:
Maturity of Operating Lease Liabilities |
||||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
||||
Total lease payments |
||||
Less: Imputed interest |
||||
Present value of remaining lease payments |
$ |
8. |
COMMITMENTS AND CONTINGENCIES |
a. Purchase Commitments
As of June 30, 2021, we have made commitments to purchase approximately $
b. Product Warranties
We estimate future warranty costs to be incurred for product failure rates, material usage and service costs in the development of our warranty obligations. Estimated future warranty costs are based on actual past experience and are generally estimated as a percentage of sales over the warranty period. Changes in our product warranty liability during the first six months of 2021 and 2020 were as follows:
Six-month period ended June 30, |
||||||||
2021 |
2020 |
|||||||
Accrued warranty obligations – beginning |
$ | $ | ||||||
Accruals for warranties issued |
||||||||
Settlements made |
( |
) | ( |
) | ||||
Accrued warranty obligations – ending |
$ | $ |
c. Contingencies and Legal Matters
We are subject to legal proceedings and claims that arise from time to time in the ordinary course of business. We believe that the final disposition of any such matters of which we are currently aware will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, recognizing that legal matters are subject to inherent uncertainties, there exists the possibility that ultimate resolution of current or future legal matters could have a material adverse impact on the Company’s financial position, results of operations or cash flows. We are not aware of any such situations at this time.
9. |
REVENUE RECOGNITION |
Revenues are generated from the sale of products. Performance obligations are met and revenue is recognized upon transfer of control to the customer, which is generally upon shipment. When contract terms require transfer of control upon delivery at a customer’s location, revenue is recognized on the date of delivery. For products shipped under vendor-managed inventory arrangements, revenue is recognized and billed when the product is consumed by the customer, at which point control has transferred and there are no further obligations by the Company. Revenue is measured as the amount of consideration we expect to receive in exchange for shipped product. Sales, value-added and other taxes billed and collected from customers are excluded from revenue. Customers, including distributors, do not have a general right of return.
Revenues recognized from prior period performance obligations for the six-month periods ended June 30, 2021 and 2020 were not material.
Deferred revenue, unbilled revenue and deferred contract costs recorded on our Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 were not material. As of June 30, 2021 and December 31, 2020, the Company had no unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Pursuant to Topic 606, we have applied the practical expedient with respect to disclosure of the deferral and future expected timing of revenue recognition for transaction price allocated to remaining performance obligations.
10. |
BUSINESS SEGMENT INFORMATION |
We report our results in
The components of segment performance were as follows:
Three-month period ended June 30, 2021:
Battery & Energy Products |
Communications Systems |
Corporate |
Total |
|||||||||||||
Revenues |
$ | $ | $ | $ | ||||||||||||
Segment contribution |
( |
) | ||||||||||||||
Other expense |
( |
) | ( |
) | ||||||||||||
Income tax provision |
( |
) | ( |
) | ||||||||||||
Non-controlling interest |
( |
) | ( |
) | ||||||||||||
Net income attributable to Ultralife |
$ |
Three-month period ended June 30, 2020:
Battery & Energy Products |
Communications Systems |
Corporate |
Total |
|||||||||||||
Revenues |
$ | $ | $ | $ | ||||||||||||
Segment contribution |
( |
) | ||||||||||||||
Other expense |
( |
) | ( |
) | ||||||||||||
Income tax provision |
( |
) | ( |
) | ||||||||||||
Non-controlling interest |
( |
) | ( |
) | ||||||||||||
Net income attributable to Ultralife |
$ |
Six-month period ended June 30, 2021:
Battery & Energy Products |
Communications Systems |
Corporate |
Total |
|||||||||||||
Revenues |
$ | $ | $ | $ | ||||||||||||
Segment contribution |
( |
) | ||||||||||||||
Other expense |
( |
) | ( |
) | ||||||||||||
Income tax provision |
( |
) | ( |
) | ||||||||||||
Non-controlling interest |
( |
) | ( |
) | ||||||||||||
Net income attributable to Ultralife |
$ |
Six-month period ended June 30, 2020:
Battery & Energy Products |
Communications Systems |
Corporate |
Total |
|||||||||||||
Revenues |
$ | $ | $ | $ | ||||||||||||
Segment contribution |
( |
) | ||||||||||||||
Other expense |
( |
) | ( |
) | ||||||||||||
Income tax provision |
( |
) | ( |
) | ||||||||||||
Non-controlling interest |
( |
) | ( |
) | ||||||||||||
Net income attributable to Ultralife |
$ |
The following tables disaggregate our business segment revenues by major source and geography.
Commercial and Government/Defense Revenue Information:
Three-month period ended June 30, 2021:
Total Revenue |
Commercial |
Government/ Defense |
||||||||||
Battery & Energy Products |
$ | $ | $ | |||||||||
Communications Systems |
||||||||||||
Total |
$ | $ | $ | |||||||||
% | % |
Three-month period ended June 30, 2020:
Total Revenue |
Commercial |
Government/ Defense |
||||||||||
Battery & Energy Products |
$ | $ | $ | |||||||||
Communications Systems |
||||||||||||
Total |
$ | $ | $ | |||||||||
% | % |
Six-month period ended June 30, 2021:
Total Revenue |
Commercial |
Government/ Defense |
||||||||||
Battery & Energy Products |
$ | $ | $ | |||||||||
Communications Systems |
||||||||||||
Total |
$ | $ | $ | |||||||||
% | % |
Six-month period ended June 30, 2020:
Total Revenue |
Commercial |
Government/ Defense |
||||||||||
Battery & Energy Products |
$ | $ | $ | |||||||||
Communications Systems |
||||||||||||
Total |
$ | $ | $ | |||||||||
% | % |
U.S. and Non-U.S. Revenue Information1:
Three-month period ended June 30, 2021:
Total Revenue |
United States |
Non-United States |
||||||||||
Battery & Energy Products |
$ | $ | $ | |||||||||
Communications Systems |
||||||||||||
Total |
$ | $ | $ | |||||||||
% | % |
Three-month period ended June 30, 2020:
Total Revenue |
United States |
Non-United States |
||||||||||
Battery & Energy Products |
$ | $ | $ | |||||||||
Communications Systems |
||||||||||||
Total |
$ | $ | $ | |||||||||
% | % |
Six-month period ended June 30, 2021:
Total Revenue |
United States |
Non-United States |
||||||||||
Battery & Energy Products |
$ | $ | $ | |||||||||
Communications Systems |
||||||||||||
Total |
$ | $ | $ | |||||||||
% | % |
Six-month period ended June 30, 2020:
Total Revenue |
United States |
Non-United States |
||||||||||
Battery & Energy Products |
$ | $ | $ | |||||||||
Communications Systems |
||||||||||||
Total |
$ | $ | $ | |||||||||
% | % |
1 Sales classified to U.S. include shipments to U.S.-based prime contractors which in some cases may serve non-U.S. projects.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report contains certain forward-looking statements and information that are based on the beliefs of management as well as assumptions made by and information currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, the effects of the novel coronavirus disease of 2019 (“COVID-19”); our reliance on certain key customers; possible future declines in demand for the products that use our batteries or communications systems; the unique risks associated with our China operations; potential costs because of the warranties we supply with our products and services; potential disruptions in our supply of raw materials and components; our efforts to develop new commercial applications for our products; reduced U.S. and foreign military spending including the uncertainty associated with government budget approvals; possible breaches in security and other disruptions; variability in our quarterly and annual results and the price of our common stock; safety risks, including the risk of fire; our entrance into new end-markets which could lead to additional financial exposure; fluctuations in the price of oil and the resulting impact on the level of downhole drilling; our ability to retain top management and key personnel; our resources being overwhelmed by our growth prospects; our inability to comply with changes to the regulations for the shipment of our products; our customers’ demand falling short of volume expectations in our supply agreements; possible impairments of our goodwill and other intangible assets; negative publicity concerning Lithium-ion batteries; our exposure to foreign currency fluctuations; the risk that we are unable to protect our proprietary and intellectual property; rules and procedures regarding contracting with the U.S. and foreign governments; our ability to utilize our net operating loss carryforwards; exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; our ability to comply with government regulations regarding the use of “conflict minerals”; possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; known and unknown environmental matters; technological innovations in the non-rechargeable and rechargeable battery industries; and other risks and uncertainties, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those forward-looking statements described herein. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “seek,” “project,” “intend,” “plan,” “may,” “will,” “should,” or words of similar import, and in each case, their negatives, are intended to identify forward-looking statements. For further discussion of certain of the matters described above and other risks and uncertainties, see Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if our results of operations, financial condition and liquidity and the development of the industries in which we operate are consistent with the forward-looking statements contained in this quarterly report, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim any obligation to update any risk factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in this Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, 2020 to reflect new information or risks, future events or other developments.