UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(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 ☐ |
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 October 31, 2024, the registrant had
ULTRALIFE CORPORATION AND SUBSIDIARIES
INDEX
|
Page |
||
|
PART I. |
FINANCIAL INFORMATION |
|
|
Item 1. |
Consolidated Financial Statements (unaudited): |
|
|
Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 |
1 |
|
|
Consolidated Statements of Income and Comprehensive Income for the Three and Nine-Month Periods Ended September 30, 2024 and September 30, 2023 |
2 |
|
|
Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2024 and September 30, 2023 |
3 |
|
|
Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine-Month Periods Ended September 30, 2024 and September 30, 2023 |
4 |
|
|
Notes to Consolidated Financial Statements (unaudited) |
5 |
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
|
Item 4. |
Controls and Procedures |
27 |
|
PART II. |
OTHER INFORMATION |
|
|
Item 6. |
Exhibits |
28 |
|
Signatures |
29 |
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
ULTRALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands except share amounts)
(Unaudited)
|
September 30, 2024 |
December 31, 2023 |
|||||||
| ASSETS | ||||||||
|
Current assets: |
||||||||
|
Cash |
$ | $ | ||||||
|
Trade accounts receivable, net of allowance for expected credit losses of $ |
||||||||
|
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 |
||||||||
|
Long-term debt, net |
||||||||
|
Deferred income taxes |
||||||||
|
Other noncurrent liabilities |
||||||||
|
Total liabilities |
||||||||
|
Commitments and contingencies (Note 8) |
|
|
||||||
|
Stockholders’ equity: |
||||||||
|
Preferred stock – par value $ per share; authorized |
||||||||
|
Common stock – par value $ per share; authorized |
||||||||
|
Capital in excess of par value |
||||||||
|
Accumulated deficit |
( |
) | ( |
) | ||||
|
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
|
Treasury stock - at cost; |
( |
) | ( |
) | ||||
|
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 |
Nine-month period ended |
|||||||||||||||
|
September 30, 2024 |
September 30, 2023 |
September 30, 2024 |
September 30, 2023 |
|||||||||||||
|
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 income |
||||||||||||||||
|
Total other (expense) income |
( |
) | ( |
) | ( |
) | ||||||||||
|
Income before income taxes |
||||||||||||||||
|
Income tax provision |
||||||||||||||||
|
Net income |
||||||||||||||||
|
Net income (loss) attributable to non-controlling interest |
( |
) | ( |
) | ||||||||||||
|
Net income attributable to Ultralife Corporation |
||||||||||||||||
|
Other comprehensive 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)
|
Nine-month period ended |
||||||||
|
September 30, 2024 |
September 30, 2023 |
|||||||
|
OPERATING ACTIVITIES: |
||||||||
|
Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) 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 (used in) operating activities |
( |
) | ||||||
|
INVESTING ACTIVITIES: |
||||||||
|
Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
|
Net cash used in investing activities |
( |
) | ( |
) | ||||
|
FINANCING ACTIVITIES: |
||||||||
|
(Payments) borrowings on revolving credit facility |
( |
) | ||||||
|
Payments on term loan facility |
( |
) | ( |
) | ||||
|
Debt issuance costs |
( |
) | ||||||
|
Proceeds from exercise of stock options |
||||||||
|
Net cash (used in) provided by financing activities |
( |
) | ||||||
|
Effect of exchange rate changes on cash |
( |
) | ||||||
|
(DECREASE) 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, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
|
Net income |
( |
) | ||||||||||||||||||||||||||||||
|
Stock option exercises |
||||||||||||||||||||||||||||||||
|
Stock-based compensation – stock options |
||||||||||||||||||||||||||||||||
|
Stock-based compensation - restricted stock |
||||||||||||||||||||||||||||||||
|
Foreign currency translation adjustments |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Balance – September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
|
Balance – December 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
|
Net income |
||||||||||||||||||||||||||||||||
|
Stock option exercises |
||||||||||||||||||||||||||||||||
|
Stock-based compensation – stock options |
||||||||||||||||||||||||||||||||
|
Stock-based compensation - restricted stock |
||||||||||||||||||||||||||||||||
|
Foreign currency translation adjustments |
||||||||||||||||||||||||||||||||
|
Balance – September 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
|
Balance – June 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
|
Net income |
( |
) | ||||||||||||||||||||||||||||||
|
Stock option exercises |
||||||||||||||||||||||||||||||||
|
Stock-based compensation – stock options |
||||||||||||||||||||||||||||||||
|
Stock-based compensation - restricted stock |
||||||||||||||||||||||||||||||||
|
Foreign currency translation adjustments |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Balance – September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
|
Balance – June 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
|
Net income |
||||||||||||||||||||||||||||||||
|
Stock option exercises |
||||||||||||||||||||||||||||||||
|
Stock-based compensation – stock options |
||||||||||||||||||||||||||||||||
|
Stock-based compensation - restricted stock |
||||||||||||||||||||||||||||||||
|
Foreign currency translation adjustments |
||||||||||||||||||||||||||||||||
|
Balance – September 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
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” or “Ultralife”) 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 notes 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 a 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, 2023.
The December 31, 2023 consolidated balance sheet information referenced herein was derived from audited 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.
Recent Accounting Guidance Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” to expand the disclosure requirements for reportable segments. This standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Adoption will not have an impact on the Company's results of operations, financial position or cash flows. The Company is currently evaluating the effect that adoption of this standard will have on the Company's disclosures.
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
|
2. |
DEBT |
On December 13, 2021, Ultralife, Southwest Electronic Energy Corporation – an Ultralife Company, a Texas corporation and wholly owned subsidiary of Ultralife (“SWE”), CLB, INC., a Texas corporation and wholly owned subsidiary of SWE (“CLB”), Ultralife Excell Holding Corp., a Delaware corporation and wholly owned subsidiary of Ultralife (“UEHC”), Ultralife Canada Holding Corp., a Delaware corporation and wholly owned subsidiary of UEHC (“UCHC”), and Excell Battery Corporation USA, a Texas corporation and wholly owned subsidiary of UEHC (“Excell USA”), as borrowers, entered into the Second Amendment Agreement with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent, to amend the Credit and Security Agreement dated May 31, 2017 as amended by the First Amendment Agreement by and among Ultralife, SWE, CLB and KeyBank dated May 1, 2019 (the “Credit Agreement”). On November 28, 2022, Ultralife, SWE, CLB, UEHC, UCHC, Excell USA, and Excell Battery Canada ULC, a British Columbia unlimited liability corporation and wholly owned subsidiary of UCHC (“Excell Canada”), entered into that certain Third Amendment Agreement with KeyBank, to further amend the Credit Agreement to, among other things, facilitate the joinder of Excell Canada as a guarantor under the Credit Agreement and to replace the LIBOR benchmark thereunder with the Secured Overnight Financing Rate or “SOFR” (the “Third Amendment Agreement”). On June 30, 2024, Ultralife, SWE, CLB, UEHC, Excell USA and Excell Canada entered into that certain Fourth Amendment Agreement with KeyBank to extend the period under which loans may be requested by the Company under the Credit Agreement to May 30, 2028, to increase the “Applicable Margin” used in the calculation of the rate at which interest accrues on outstanding indebtedness under the Credit Agreement and to increase the fee payable on the average daily unused availability under the $
The Amended Credit Agreement, among other things, provides for a
As of September 30, 2024, the Company had $
The remaining availability under the Revolving Credit Facility is subject to certain borrowing base limits based on trade receivables and inventories.
The Company is required to repay the borrowings under the Term Loan Facility in equal consecutive monthly payments commencing on February 1, 2022, in arrears, together with applicable interest. All unpaid principal and accrued and unpaid interest with respect to the Term Loan Facility is due and payable in full on January 1, 2027. All unpaid principal and accrued and unpaid interest with respect to the Revolving Credit Facility is due and payable in full on May 30, 2028. The Company may voluntarily prepay principal amounts outstanding at any time subject to certain restrictions.
In addition to the customary affirmative and negative covenants, the Company must maintain a consolidated senior leverage ratio, as defined in the Amended Credit Agreement, of equal to or less than
Borrowings under the Amended Credit Agreement are secured by substantially all the assets of the Company and its subsidiaries.
Interest accrues on outstanding indebtedness under the Amended Credit Agreement at the Daily Simple Rate, plus an index spread adjustment of
In addition, the Company must pay a fee of
Payments must be made by the Company to the extent borrowings exceed the maximum amount then permitted to be drawn under the terms of the Amended Credit Agreement 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.
Future minimum principal repayment obligations under the terms of the Amended Credit Agreement as of September 30, 2024 are as follows:
|
2024 |
$ |
|||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
Total |
$ |
On October 31, 2024, the Company acquired Electrochem Solutions, Inc., and in connection with such acquisition the Company refinanced its debt obligations under the Amended Credit Agreement by entering into a new Credit and Security Agreement with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent (the “New Credit Agreement”). See Note 11 for a description of the debt obligations under the New Credit Agreement.
|
3. |
EARNINGS PER SHARE |
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) attributable to Ultralife Corporation 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 September 30, 2024, there were
For the nine-month period ended September 30, 2024, there were
|
4. |
SUPPLEMENTAL BALANCE SHEET INFORMATION |
Fair Value Measurements and Disclosures
The fair value of financial instruments approximated their carrying values at September 30, 2024 and December 31, 2023. 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:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Cash |
$ | $ | ||||||
|
Restricted cash |
||||||||
|
Total |
$ | $ | ||||||
As December 31, 2023, restricted cash of $
Inventories, Net
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:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Raw materials |
$ | $ | ||||||
|
Work in process |
||||||||
|
Finished goods |
||||||||
|
Total |
$ | $ | ||||||
Property, Plant and Equipment, Net
Major classes of property, plant and equipment consisted of the following:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
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 |
Nine-month period ended |
|||||||||||||||
|
September 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Depreciation expense |
$ | $ | $ | $ | ||||||||||||
Goodwill
The following table summarizes the goodwill activity by segment for the nine-month period ended September 30, 2024.
| Battery &
Energy |
Communications |
|||||||||||
|
Products |
Systems |
Total |
||||||||||
|
Balance – December 31, 2023 |
$ | $ | $ | |||||||||
|
Effect of foreign currency translation |
||||||||||||
|
Balance – September 30, 2024 |
$ | $ | $ | |||||||||
Other Intangible Assets, Net
The composition of other intangible assets was:
|
at September 30, 2024 |
||||||||||||
|
Accumulated |
||||||||||||
|
Cost |
Amortization |
Net |
||||||||||
|
Customer relationships |
$ | $ | $ | |||||||||
|
Patents and technology |
||||||||||||
|
Trade names |
||||||||||||
|
Trademarks |
||||||||||||
|
Other |
||||||||||||
|
Total other intangible assets |
$ | $ | $ | |||||||||
|
at December 31, 2023 |
||||||||||||
|
Accumulated |
||||||||||||
|
Cost |
Amortization |
Net |
||||||||||
|
Customer relationships |
$ | $ | $ | |||||||||
|
Patents and technology |
||||||||||||
|
Trade names |
||||||||||||
|
Trademarks |
||||||||||||
|
Other |
||||||||||||
|
Total other intangible assets |
$ | $ | $ | |||||||||
The change in the cost of total intangible assets from December 31, 2023 to September 30, 2024 is the effect of foreign currency translations.
Amortization expense for other intangible assets was as follows:
|
Three-month period ended |
Nine-month period ended |
|||||||||||||||
|
September 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Amortization included in: |
||||||||||||||||
|
Selling, general and administrative |
$ | $ | $ | $ | ||||||||||||
|
Research and development |
||||||||||||||||
|
Total amortization expense |
$ | $ | $ | $ | ||||||||||||
|
5. |
STOCK-BASED COMPENSATION |
We recorded non-cash stock compensation expense in each period as follows:
|
Three-month period ended |
Nine-month period ended |
|||||||||||||||
|
September 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Stock options |
$ | $ | $ | $ | ||||||||||||
|
Restricted stock |
||||||||||||||||
|
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 September 30, 2024, there was $
The following table summarizes stock option activity for the nine-month period ended September 30, 2024:
|
Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (years) |
Aggregate Intrinsic Value |
|||||||||||||
|
Outstanding at January 1, 2024 |
$ | |||||||||||||||
|
Granted |
||||||||||||||||
|
Exercised |
( |
) | ||||||||||||||
|
Forfeited or expired |
( |
) | $ | |||||||||||||
|
Outstanding at September 30, 2024 |
$ | $ | ||||||||||||||
|
Vested and expected to vest at September 30, 2024 |
$ | $ | ||||||||||||||
|
Exercisable at September 30, 2024 |
$ | $ | ||||||||||||||
Cash received from stock option exercises under our stock-based compensation plans for the three-month periods ended September 30, 2024 and September 30, 2023 was $
Restricted stock awards vest in equal annual installments over three years. Unrecognized compensation cost related to unvested restricted shares at September 30, 2024 and September 30, 2023, respectively, was $
|
6. |
INCOME TAXES |
Our effective tax rate for the nine-month periods ended September 30, 2024 and September 30, 2023 was
As of December 31, 2023, we have domestic net operating loss (“NOL”) carryforwards of $
As of September 30, 2024, for certain past operations in the U.K., we continue to report a valuation allowance for NOL carryforwards of approximately $
As of September 30, 2024, 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 September 30, 2024, 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 unrecognized tax benefits related to uncertain tax positions at September 30, 2024 and December 31, 2023.
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. Our U.S. tax matters for 2020 thru 2023 remain subject to IRS examination. Our U.S. tax matters for 2001-2002, 2005-2007, 2009, and -2015 also remain subject to IRS examination due to the remaining availability of net operating loss carryforwards generated in those years. Our U.S. tax matters for thru 2023 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years thru 2023 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 September 30, 2024, the remaining lease terms on our operating leases range from approximately less than one (
The components of lease expense for the current and prior-year comparative periods were as follows:
|
Three months ended |
Nine months ended |
|||||||||||||||
|
September 30, 2024 |
September 30, 2023 |
September 30, 2024 |
September 30, 2023 |
|||||||||||||
|
Operating lease cost |
$ | $ | $ | $ | ||||||||||||
|
Variable lease cost |
||||||||||||||||
|
Total lease cost |
$ | $ | $ | $ | ||||||||||||
Supplemental cash flow information related to leases was as follows:
|
Nine-month period ended September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
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 consolidated balance sheet information related to leases was as follows:
|
Balance sheet classification |
September 30, 2024 |
December 31, 2023 |
|||||||
|
Assets: |
|||||||||
|
Operating lease right-of-use asset |
|
$ | $ | ||||||
|
Liabilities: |
|||||||||
|
Current operating lease liability |
|
$ | $ | ||||||
|
Operating lease liability, net of current portion |
|
||||||||
|
Total operating lease liability |
$ | $ | |||||||
|
Weighted-average remaining lease term (years) |
|||||||||
|
Weighted-average discount rate |
% | % | |||||||
Future minimum lease payments as of September 30, 2024 are as follows:
|
Maturity of operating lease liabilities |
||||
|
2024 |
$ | |||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
Thereafter |
||||
|
Total lease payments |
||||
|
Less: Imputed interest |
( |
) | ||
|
Present value of remaining lease payments |
$ |
|
8. |
COMMITMENTS AND CONTINGENCIES |
Purchase Commitments
As of September 30, 2024, we have made commitments to purchase approximately $
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 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 nine months of 2024 and 2023 were as follows:
|
Nine-month period ended September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Accrued warranty obligations – beginning |
$ | $ | ||||||
|
Accruals for warranties issued |
||||||||
|
Settlements made |
( |
) | ( |
) | ||||
|
Accrued warranty obligations – ending |
$ | $ | ||||||
Contingencies and Legal Matters
We are subject to legal proceedings and claims that arise from time to time in the normal course of business. We believe that the final disposition of any such matters 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 these 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.
Separately priced extended warranty contracts are offered on certain Communications Systems products for a duration of up to eight (
As of September 30, 2024, there was deferred revenue on extended warranty contracts of $
As of December 31, 2023, there was deferred revenue on extended warranty contracts of $
As of September 30, 2024 and December 31, 2023, the Company had no other 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 operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes Lithium 9-volt, cylindrical and various other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design. We believe that reporting performance at the gross profit level is the best indicator of segment performance.
Three-month period ended September 30, 2024:
|
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 September 30, 2023:
|
Battery & Energy Products |
Communications Systems |
Corporate |
Total |
|||||||||||||
|
Revenues |
$ | $ | $ | $ | ||||||||||||
|
Segment contribution |
( |
) | ||||||||||||||
|
Other expense |
( |
) | ( |
) | ||||||||||||
|
Income tax provision |
( |
) | ( |
) | ||||||||||||
|
Non-controlling interest |
||||||||||||||||
|
Net income attributable to Ultralife |
$ | |||||||||||||||
Nine-month period ended September 30, 2024:
|
Battery & Energy Products |
Communications Systems |
Corporate |
Total |
|||||||||||||
|
Revenues |
$ | $ | $ | |||||||||||||
|
Segment contribution |
( |
) | ||||||||||||||
|
Other expense |
( |
) | ( |
) | ||||||||||||
|
Income tax provision |
( |
) | ( |
) | ||||||||||||
|
Non-controlling interest |
( |
) | ( |
) | ||||||||||||
|
Net income attributable to Ultralife |
$ | |||||||||||||||
Nine-month period ended September 30, 2023:
|
Battery & Energy Products |
Communications Systems |
Corporate |
Total |
|||||||||||||
|
Revenues |
$ | $ | $ | $ | ||||||||||||
|
Segment contribution |
( |
) | ||||||||||||||
|
Other income |
||||||||||||||||
|
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 September 30, 2024:
|
Total Revenue |
Commercial |
Government/ Defense |
||||||||||
|
Battery & Energy Products |
$ | $ | $ | |||||||||
|
Communications Systems |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
| % | % | |||||||||||
Three-month period ended September 30, 2023:
|
Total Revenue |
Commercial |
Government/ Defense |
||||||||||
|
Battery & Energy Products |
$ | $ | $ | |||||||||
|
Communications Systems |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
| % | % | |||||||||||
Nine-month period ended September 30, 2024:
|
Total Revenue |
Commercial |
Government/ Defense |
||||||||||
|
Battery & Energy Products |
$ | $ | $ | |||||||||
|
Communications Systems |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
| % | % | |||||||||||
Nine-month period ended September 30, 2023:
|
Total Revenue |
Commercial |
Government/ Defense |
||||||||||
|
Battery & Energy Products |
$ | $ | $ | |||||||||
|
Communications Systems |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
| % | % | |||||||||||
U.S. and Non-U.S. Revenue Information1:
Three-month period ended September 30, 2024:
|
Total Revenue |
United States |
Non-United States |
||||||||||
|
Battery & Energy Products |
$ | $ | $ | |||||||||
|
Communications Systems |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
| % | % | |||||||||||
Three-month period ended September 30, 2023:
|
Total Revenue |
United States |
Non-United States |
||||||||||
|
Battery & Energy Products |
$ | $ | $ | |||||||||
|
Communications Systems |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
| % | % | |||||||||||
Nine-month period ended September 30, 2024:
|
Total Revenue |
United States |
Non-United States |
||||||||||
|
Battery & Energy Products |
$ | $ | $ | |||||||||
|
Communications Systems |
||||||||||||
|
Total |
$ | $ | $ | |||||||||
| % | % | |||||||||||
Nine-month period ended September 30, 2023:
|
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.
|
11. |
SUBSEQUENT EVENTS |
Acquisition of Electrochem Solutions, Inc.
On October 31, 2024, the Company completed the acquisition of all issued and outstanding shares of Electrochem Solutions, Inc., a Massachusetts corporation (“Electrochem”), pursuant to a stock purchase agreement (the “Agreement”) with Greatbatch Ltd., a New York corporation (the “Seller”), dated September 27, 2024. The Agreement established a purchase price of $
Based in Raynham, MA and with over forty years of battery technology experience in critical applications, Electrochem designs and manufactures primary lithium metal and ultracapacitor cells and battery packs serving energy, military and various environmental, industrial and utility end markets on a global basis. Acquiring Electrochem advances our strategy of more fully realizing the operating leverage of our business model through scale and manufacturing cost efficiencies. Electrochem brings a blue-chip customer base with little or no overlap with Ultralife’s customers, long-tenured technical resources which we plan to utilize in progressing our global new product initiatives, and a complimentary portfolio of highly engineered thionyl, sulfuryl and bromine chloride cells and packs which can be commercially cost prohibitive to substitute or switch out. We view this acquisition as an avenue to create highly attractive opportunities to drive revenue growth through heightened cross-selling platforms and extend our reach into underserved adjacent markets that demand uncompromised safety, service, reliability and quality. In addition, the combination of Electrochem and Ultralife creates achievable opportunities for gross margin expansion through the realization of vertical integration, supply chain synergies and lean initiatives. With Electrochem we are increasing our value to our customers and significantly strengthening our competitive position in our end markets.
The Company funded the purchase price for the Acquisition through the New Credit Agreement, as defined and described below.
The Agreement contains customary terms and conditions including representations and warranties, subject to a mutually acceptable buyer-side representation and warranty insurance policy obtained by the Company, the cost of which was shared equally between the Company and the Seller.
The acquisition of Electrochem will be accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed will be recognized at fair value as of the acquisition date. The operating results and cash flows of Electrochem will be included in the consolidated financial statements from the date of acquisition in the Company’s Battery & Energy Products segment.
Due to the timing of the acquisition, the initial accounting is not yet complete. The Company is in the process of preparing the preliminary estimate of the fair value of assets acquired and liabilities assumed and the associated adjustments for the supplemental pro forma revenue and earnings information.
For the three and nine months ended September 30, 2024, the Company incurred non-recurring transaction costs of $
New Credit Agreement
On October 31, 2024, Ultralife, SWE, CLB, Excell USA, and Electrochem, as borrowers, and certain other subsidiaries of the Company, entered into a new Credit and Security Agreement with KeyBank National Association (“KeyBank” or the “Bank”), as lender and administrative agent (the “New Credit Agreement”). The proceeds of the loans under the New Credit Agreement were used, in part, to repay outstanding indebtedness under the Company’s Amended Credit Agreement.
The New Credit Agreement, among other things, provides in its term loan provisions for a
Upon closing of the Acquisition on October 31, 2024, the Company borrowed the full amount of the Term Loan Facility.
The New Credit Agreement also provides under its revolving credit provisions for revolving loans, letters of credit, and swing loans (“Revolving Credit Facility”). Upon the effectiveness of the New Credit Agreement, any amounts outstanding under letters of credit issued pursuant to the Amended Credit Agreement became issued under the New Credit Agreement. The availability under the Revolving Credit Facility is subject to certain borrowing base limits based on trade receivables and inventories. All unpaid principal and accrued and unpaid interest with respect to the Revolving Credit Facility is due and payable in full on October 31, 2029.
The Company may voluntarily prepay principal amounts outstanding under the New Credit Agreement at any time subject to certain advance notifications and other restrictions.
In addition to the customary affirmative and negative covenants, the Company must maintain a consolidated fixed charge coverage ratio, as defined in the New Credit Agreement, of equal to or greater than
Borrowings under the New Credit Agreement are secured by substantially all the assets of the Company and certain of its present and future subsidiaries who are or become parties to, or guarantors under the new Credit Agreement.
Interest will accrue on outstanding indebtedness under the Term Loan Facility and Revolving Credit Facilities at a variable rate of interest based on designated interest rate benchmarks plus a varying margin determined by reference to the consolidated senior leverage ratio in effect from time to time.
The Company must pay a fee of , or basis points (depending on the consolidated senior leverage ratio in effect from time to time) based on the average daily unused availability under the Revolving Credit Facility.
Payments must be made by the Company to the extent borrowings exceed the maximum amount then permitted to be borrowed 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.
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, changes in economic conditions including inflation and supply chain disruptions affecting our business, revenues and earnings adversely; our reliance on certain key customers; reductions or delays in U.S. and foreign military spending; our efforts to develop new products or new commercial applications for our products; potential disruptions in our supply of raw materials and components; breaches in information systems security and other disruptions in our information technology systems; our ability to recruit and retain top management and key personnel; our resources being overwhelmed by our growth; the continued impact of COVID-19, or other pandemics that may arise, causing delays in the manufacture and delivery of our mission critical products to end customers; the unique risks associated with our China operations; fluctuations in the price of oil and the resulting impact on the demand for downhole drilling; possible future declines in demand for the products that use our batteries or communications systems; variability in our quarterly and annual results and the price of our common stock; safety risks, including the risk of fire; rising interest rates increasing the cost of our variable borrowings; purchases by our customers of product quantities not meeting the volume expectations in our supply agreements; potential costs attributable to the warranties we supply with our products and services; our inability to comply with changes to the regulations for the shipment of our products; our entrance into new end-markets which could lead to additional financial exposure; negative publicity concerning Lithium-ion batteries; our ability to utilize our net operating loss carryforwards; our exposure to foreign currency fluctuations; possible impairments of our goodwill and other intangible assets; 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; exposure to possible violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; known and unknown environmental matters; possible audits of our contracts by the U.S. and foreign governments and their respective defense agencies; our ability to comply with government regulations regarding the use of “conflict minerals”; 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,” “foresee,” “could,” “likely,” or words of similar import 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, 2023.
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 developments in 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 document, 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. Any forward-looking statements that we make herein speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. 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 to reflect new information or risks, future events or other developments.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the consolidated financial statements and notes thereto in Part I, Item 1 of this Form 10-Q, and the consolidated financial statements and notes thereto and risk factors in our Annual Report on Form 10-K for the year ended December 31, 2023.
The financial information in this MD&A is presented in thousands of dollars, except for share and per share amounts, unless otherwise specified.
General
We offer products and services ranging from power solutions to communications and electronics systems to customers across the globe in the government, defense and commercial sectors. With an emphasis on strong engineering and a collaborative approach to problem solving, we design and manufacture power and communications systems including rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems and accessories, and custom engineered systems related to those product lines. We continually evaluate ways to grow, including the design, development and sale of new products, expansion of our sales force to penetrate new markets and territories, as well as seeking opportunities to expand through acquisitions.
We sell our products worldwide through a variety of trade channels, including original equipment manufacturers (“OEMs”), industrial and defense supply distributors, and directly to U.S. and foreign defense departments. We enjoy strong name recognition in our markets under our Ultralife®, Ultralife HiRate®, Ultralife Thin Cell®, Ultralife Batteries Inc.®, Lithium Power®, McDowell Research®, AMTITM, ABLETM, ACCUTRONICSTM, ACCUPROTM, ENTELLIONTM, SWE Southwest Electronic Energy GroupTM, SWE SEASAFETM, Excell Battery GroupTM and Criterion GaugeTM brands, among others. We have sales, operations and product development facilities in North America, Europe and Asia.
We report our results in two operating segments: Battery & Energy Products and Communications Systems. The Battery & Energy Products segment includes Lithium 9-volt, cylindrical, thin cell and other non-rechargeable batteries, in addition to rechargeable batteries, uninterruptable power supplies, charging systems and accessories. The Communications Systems segment includes RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, equipment mounts, case equipment, man-portable systems, integrated communication systems for fixed or vehicle applications and communications and electronics systems design. We believe that reporting performance at the gross profit level is the best indicator of segment performance. As such, we report segment performance at the gross profit level and operating expenses as Corporate charges. (See Note 10 in the notes to consolidated financial statements in Item 1 of Part 1 of this Form 10-Q.)
Our website address is www.ultralifecorporation.com. We make available free of charge via a hyperlink on our website (see Investor Relations link on the website) our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports and statements as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). We will provide copies of these reports upon written request to the attention of Philip A. Fain, CFO, Treasurer and Secretary, Ultralife Corporation, 2000 Technology Parkway, Newark, New York, 14513. Our filings with the SEC are also available through the SEC website at www.sec.gov or at the SEC Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by calling 1-800-SEC-0330.
Overview
Consolidated revenues of $35,694 for the three-month period ended September 30, 2024, decreased by $3,794 or 9.6%, from $39,488 for the three-month period ended September 30, 2023, reflecting decreases in government/defense sales of 14.1% and commercial sales of 6.8%. Sales for our Battery & Energy Products segment increased 1.9% from $31,919 for the third quarter of 2023 to $32,529 for the third quarter of 2024, and sales for our Communications Systems segment decreased 58.2% from $7,569 to $3,165.
Gross profit was $8,682, or 24.3% of revenue, for the three-month period ended September 30, 2024, compared to $9,774, or 24.8% of revenue, for the same quarter a year ago. The 50-basis point decline primarily resulted from lower factory volume and the lower-margin product mix for our Communications Systems segment.
Operating expenses increased to $8,171 for the three-month period ended September 30, 2024, compared to $7,639 for the three-month period ended September 30, 2023. The increase of $532 or 7.0% was primarily attributable to investments in new product development, the addition of sales resources to support future growth, and the recognition of legal and other fees recognized in the period directly relating to the execution of a stock purchase agreement on September 27, 2024 to acquire Electrochem Solutions, Inc. Operating expenses represented 22.9% of revenues compared to 19.3% of revenues for the year-earlier period.
Operating income for the three-month period ended September 30, 2024 was $511, or 1.4% of revenues, compared to $2,135 or 5.4% of revenue for the year-earlier period. The decrease in operating income resulted from a 9.6% decline in revenues, the cost of our investments in new product development, the cost of additional sales resources to support future organic growth and expenses directly relating to the execution of a stock purchase agreement on September 27, 2024 to acquire Electrochem Solutions, Inc.
Net income attributable to Ultralife Corporation was $258 or $0.02 per share – basic and diluted on a GAAP basis, compared to $1,330 or $0.08 per share – basic and diluted for, the third quarter of 2023.
Adjusted EBITDA, defined as net income (loss) attributable to Ultralife Corporation before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expenses/income that we do not consider reflective of our ongoing operations, amounted to $1,919, or 5.4% of revenues, for the third quarter of 2024, compared to $3,480 or 8.8% of revenues, for the third quarter of 2023. See the section “Adjusted EBITDA” beginning on Page 23 for a reconciliation of adjusted EBITDA to net income attributable to Ultralife Corporation.
Our top priorities continue to be gross margin increases through focused initiatives on material deflation and lean productivity and growing our opportunity funnels and customer wins to continue fueling our growth. We remain optimistic that we are well positioned to sustain long-term profitable growth.
Results of Operations
Three-Month Periods Ended September 30, 2024 and September 30, 2023
Revenues. Consolidated revenues for the three-month period ended September 30, 2024 were $35,694, a decrease of $3,794, or 9.6%, from $39,488 for the three-month period ended September 30, 2023. Overall, government/defense sales decreased 14.1% and commercial sales decreased 6.8%.
Battery & Energy Products revenues increased $610, or 1.9%, from $31,919 for the three-month period ended September 30, 2023 to $32,529 for the three-month period ended September 30, 2024. The revenue growth was primarily attributable to an increase in government/defense sales of $2,244 or 28.9% reflecting strong demand from our U.S.-based global prime, partially offset by a decrease of $1,634 or 6.8% in commercial sales, The decline in commercial sales primarily resulted from a 12.4% decrease in medical battery sales and a 10.9% in industrial market sales, partially offset by a 1.5% increase in oil & gas market sales.
Communications Systems sales decreased $4,404, or 58.2%, from $7,569 for the three-month period ended September 30, 2023 to $3,165 for the three-month period ended September 30, 2024. The decrease was primarily attributable to large shipments in the 2023 period of vehicle-amplifier adaptor orders to a global defense contractor for the U.S. Army and of integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor for an ongoing allied country government/defense modernization program which had been delayed from earlier periods due to supply chain disruptions and the timing of orders for the current year period.
Cost of Products Sold / Gross Profit. Cost of products sold totaled $27,012 for the quarter ended September 30, 2024, a decrease of $2,702, or 9.1%, from the $29,714 reported for the same three-month period a year ago. Consolidated cost of products sold as a percentage of total revenue increased from 75.2% for the three-month period ended September 30, 2023 to 75.7% for the three-month period ended September 30, 2024. Correspondingly, consolidated gross margin decreased from 24.8% for the three-month period ended September 30, 2023, to 24.3% for the three-month period ended September 30, 2024, primarily reflecting lower factory volume and product mix for our Communications Systems segment.
For our Battery & Energy Products segment, gross profit for the third quarter of 2024 was $8,047, an increase of $319 or 4.1% from gross profit of $7,728 for the third quarter of 2023. Battery & Energy Products’ gross margin of 24.7% increased by 50-basis points from the 24.2% gross margin for the year-earlier period, primarily reflecting higher factory volume in our Newark, NY facility, partially offset by some inefficiencies resulting from delays in raw material components.
For our Communications Systems segment, gross profit for the third quarter of 2024 was $635 or 20.0% of revenues, compared to gross profit of $2,046 or 27.0% of revenues for the third quarter of 2023. The 700-basis point decrease in gross margin was primarily due to lower factory volume and unfavorable product mix as compared to the year-earlier period.
Operating Expenses. Operating expenses for the three-month period ended September 30, 2024 were $8,171, an increase of $532, or 7.0%, from the $7,639 for the three-month period ended September 30, 2023. The increase was primarily attributable to investments in new product development and the addition of experienced sales resources to drive organic sales growth and expenses directly relating to the execution of a stock purchase agreement on September 27, 2024 to acquire Electrochem Solutions, Inc. in the 2024 third quarter.
Overall, operating expenses were 22.9% of revenue for the quarter ended September 30, 2024 compared to 19.3% of revenue for the quarter ended September 30, 2023. Amortization expense associated with intangible assets related to our acquisitions was $229 for the third quarter of 2024 ($204 in selling, general and administrative expenses and $25 in research and development costs), compared to $227 for the third quarter of 2023 ($203 in selling, general, and administrative expenses and $24 in research and development costs). Research and development costs were $2,101 for the three-month period ended September 30, 2024, an increase of $232 or 12.4%, from $1,869 for the three-month period ended September 30, 2023. The increase is largely attributable to the timing of new product development in both of our businesses as we aggressively pursue both government/defense major programs and commercial opportunities. Selling, general, and administrative expenses were $6,070 for the three-month period ended September 30, 2024, an increase of $300 or 5.2% from $5,770 for the third quarter of 2023. The period over period increase was primarily attributable to the recognition of legal and other fees incurred directly relating to the execution of a stock purchase agreement on September 27, 2024 to acquire Electrochem Solutions, Inc. and additional sales resources to support future organic growth.
Other (Expense) Income. Other expense totaled $158 for the three-month period ended September 30, 2024, compared to $386 for the three-month period ended September 30, 2023. Interest and financing expense decreased $413, or 70.3%, from $586 for the third quarter of 2023 to $173 for the comparable period in 2024. The decrease is due to the continued paydown of debt in the third quarter of 2024. Miscellaneous income amounted to $15 for the third quarter of 2024 compared to $200 for the third quarter of 2023, primarily attributable to foreign exchange gains due to fluctuations in foreign currency exchange rates.
Income Taxes. The income tax provision for the 2024 third quarter was $74, compared to $446 for the third quarter of 2023. Our effective tax rate decreased to 21.0% for the third quarter of 2024 as compared to 25.5% for the third quarter of 2023, primarily attributable to the geographic mix of our operating results. The income tax provision for the third quarter of 2024 is comprised of a $173 current provision for taxes expected to be paid on income primarily from foreign jurisdictions and a deferred tax benefit of $99. For the comparable 2023 period, the income tax provision for the third quarter of 2023 is comprised of an $89 current provision for taxes expected to be paid on income primarily in foreign jurisdictions, representing a cash-based effective tax rate of 5.1%, and a $357 deferred tax provision which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. The period over period change in the cash-based current tax provisions is primarily attributable to the geographic mix of our operating results. See Note 6 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q for additional information regarding our income taxes.
Net Income (Loss) Attributable to Ultralife. Net income attributable to Ultralife was $258, or $0.02 per share – basic and diluted on a GAAP basis for the three-month period ended September 30, 2024, compared to $1,330, or $0.08 per share – basic and diluted, for the three-month period ended September 30, 2023. Adjusted EPS was $0.01 on a diluted basis for the third quarter of 2024, compared to $0.10 for the third quarter of 2023. Adjusted EPS excludes the provision (benefit) for deferred taxes of ($99) and $357 for the 2024 and 2023 periods, respectively, which primarily represent non-cash charges (benefits) for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. See the section “Adjusted EPS” on Page 26 for a reconciliation of adjusted EPS to EPS.
Weighted average shares outstanding used to compute diluted earnings per share increased from 16,303,139 for the third quarter of 2023 to 16,874,057 for the third quarter of 2024. The increase is attributable to stock option exercises since the third quarter of 2023 and a greater average stock price in the current quarter. Accordingly, dilutive shares of 249,082 were added to basic weighted average shares for the 2024 period compared to 65,275 for the 2023 period.
Nine-Month Periods Ended September 30, 2024 and September 30, 2023
Revenues. Consolidated revenues for the nine-month period ended September 30, 2024 were $120,604, an increase of $6,508, or 5.7%, over $114,096 for the nine-month period ended September 30, 2023. Overall, government/defense sales increased $5,507 or 13.5% and commercial sales increased $1,001 or 1.4%. On January 25, 2023, the Company experienced a ransomware cyberattack which impacted our ability to process orders, ship products, provide services to our customers and effectively manage our sales and operating planning process over a several week period for our Newark, NY location and an even longer period for our Virginia Beach, VA location. A large portion of our time during the quarter was devoted to data restoration, systems security augmentation, and regulatory reporting of the cyberattack, all of which were successfully accomplished with no ransom paid. Management continues to work on its cybersecurity insurance claim covering the cost of engaging external cybersecurity experts and the business interruption impact.
Battery & Energy Products revenues increased $9,951, or 10.6%, from $94,250 for the nine-month period ended September 30, 2023 to $104,201 for the nine-month period ended September 30, 2024. The increase was attributable to a $8,950 or 42.8% increase in government/defense sales and a $1,001 or 1.4% increase in commercial sales. The increase in government/defense sales primarily reflects continued strong demand from our largest U.S.-based global prime. The growth in commercial sales was driven by a $4,146 or 16.7% increase in medical sales due to continuing surging demand for our core medical battery products from global medical device OEM’s, partially offset by a decrease of $2,591 or 8.3% in oil & gas sales and a $550 or 3.2% decrease in industrial sales due primarily to general economic conditions.
Communications Systems revenues decreased $3,443, or 17.3%, from $19,846 for the nine-month period ended September 30, 2023 to $16,403 for the nine-month period ended September 30, 2024. This decrease was primarily attributable to shipments of vehicle-amplifier adaptor orders to a global defense contractor for the U.S. Army and of integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor for an ongoing allied country government/defense modernization program in 2023 and the timing of orders in 2024.
Cost of Products Sold / Gross Profit. Cost of products sold totaled $88,889 for the nine-month period ended September 30, 2024, an increase of $2,591, or 3.0%, from the $86,298 reported for the same nine-month period a year ago. Consolidated cost of products sold as a percentage of total revenue decreased from 75.6% for the nine-month period ended September 30, 2023 to 73.7% for the nine-month period ended September 30, 2024. Correspondingly, consolidated gross margin increased from 24.4% for the nine-month period ended September 30, 2023, to 26.3% for the nine-month period ended September 30, 2024, primarily reflecting higher factory volume, level loading of production and improved price realization for our Battery & Energy Products Segment, tempered by lower volume experienced in our Communications Systems segment.
For our Battery & Energy Products segment, gross profit for the first nine months of 2024 was $26,986 an increase of $5,203 or 23.9% over gross profit of $21,783 for the comparable 2023 period. Battery & Energy Products’ gross margin of 25.9% increased by 90 basis points from the 25.0% gross margin for the year-earlier period, primarily reflecting higher factory volume, more level-loaded production driving utilization and price realization.
For our Communications Systems segment, gross profit for the first nine months of 2024 was $4,729 or 28.8% of revenues, compared to gross profit of $6,015 or 30.3% of revenues, for the comparable 2023 period. The decrease of 150 basis points was primarily due to lower factory volume and unfavorable product mix compared to last year’s nine-month period.
Operating Expenses. Operating expenses for the nine-month period ended September 30, 2024 were $23,224, an increase of $1,252 or 5.7% from the $21,972 for the nine-month period ended September 30, 2023. The increase is primarily attributable to commissions on higher sales, greater participation in trade shows, the addition of experienced sales resources, investments in new product development and the recognition of expenses directly relating to the signing of the stock purchase agreement on September 30th to acquire Electrochem Solutions, Inc. Both periods reflected continued tight control over discretionary spending.
Overall, operating expenses as a percentage of revenues were 19.3% for both the nine-month period ended September 30, 2024 and the nine-month period ended September 30, 2023. Amortization expense associated with intangible assets related to our acquisitions was $684 for the first nine months of 2024 ($609 in selling, general and administrative expenses and $75 in research and development costs), compared with $663 for the first nine months of 2023 ($591 in selling, general, and administrative expenses and $72 in research and development costs). Research and development costs were $5,854 for the nine-month period ended September 30, 2024, an increase of $175 or 3.1%, from $5,679 for the nine-months ended September 30, 2023. The increase reflects higher investments in new product development in both of our segments to drive organic sales growth. Selling, general, and administrative expenses were $17,370 for the 2024 nine-month period, an increase of $1,077 or 6.6% over the $16,293 for the year-earlier period, primarily reflecting commissions on higher sales, greater participation in trade shows, the addition of experienced sales resources and the recognition of expenses directly relating to the execution of a stock purchase agreement on September 27, 2024 to acquire Electrochem Solutions, Inc.
Other Income (Expense). Other expense totaled $685 for the nine-month period ended September 30, 2024, compared to other income of $178 for the nine-month period ended September 30, 2023. Other income (expense) for the 2024 period includes a preliminary payment of $235 from our insurance carrier pertaining to the cyberattack experienced by the Company in the first quarter of 2023, and other income for the 2023 period includes $1,544 attributable to an Employee Retention Credit (“ERC”) claimed by the Company under Section 2301 of the Coronavirus Aid, Relief and Economic Security Act. Interest and financing expense decreased $339 or 23.4% from $1,450 for the first nine months of 2023 to $1,111 for the comparable period in 2024. The decrease is primarily due to the reduction of our debt during the second and third quarters of 2024. Excluding the $235 gain attributable to insurance proceeds in 2024, miscellaneous income was $191, and excluding the $1,544 ERC gain in the 2023 period, miscellaneous income amounted to $84, primarily attributable to foreign exchange gains and loss due to fluctuations in foreign currency exchange rates.
Income Taxes. The income tax provision for the 2024 nine-month period was $1,630, compared to $1,688 for the 2023 nine-month period. Our effective tax rate decreased to 20.9% for the 2024 period as compared to 28.1% for the 2023 period, primarily attributable to the geographic mix of our operating results. The income tax provision for the first nine months of 2024 is comprised of a $335 current provision for taxes expected to be paid on income primarily in foreign jurisdictions, representing a cash-based effective tax rate of 4.3%, and a $1,295 deferred tax provision which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. For the comparable 2023 period, the income tax provision for the first nine months of 2023 is comprised of a $443 current provision for taxes expected to be paid on income primarily in foreign jurisdictions, representing a cash-based effective tax rate of 7.4%, and an $1,245 deferred tax provision which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. The period over period change in the cash-based taxes is primarily attributable to the geographic mix of our operating results. See Note 6 to the consolidated financial statements in Item 1 of Part I of this Form 10-Q for additional information regarding our income taxes.
Net Income Attributable to Ultralife. Net income attributable to Ultralife was $6,118, or $0.37 per share – basic and diluted on a GAAP basis for the nine-month period ended September 30, 2024, compared to $4,324, or $0.27 per share – basic and diluted, for the nine-month period ended September 30, 2023. Adjusted EPS was $0.44 on a diluted basis for the 2024 period, compared to $0.34 for the 2023 period. Adjusted EPS excludes the provision for deferred taxes of $1,295 and $1,245 for the 2024 and 2023 periods, respectively, which primarily represents non-cash charges for U.S. taxes that we expect will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future. See the section “Adjusted EPS” on Page 26 for a reconciliation of adjusted EPS to EPS.
Weighted average shares outstanding used to compute diluted earnings per share increased from 16,174,341 for the first nine-months of 2023 to 16,742,120 for the first nine-months of 2024. The increase is attributable to stock option exercises since the third quarter of 2023 and a greater average stock price in the current period. Accordingly, diluted shares of 212,072 were added to basic weighted average shares outstanding in 2024 compared to 2,441 for the 2023 period.
Adjusted EBITDA
In evaluating our business, we consider and use adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure of our operating performance. We define adjusted EBITDA as net income (loss) attributable to Ultralife before interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expense/income that we do not consider reflective of our ongoing continuing operations. We also use adjusted EBITDA as a supplemental measure to review and assess our operating performance and to enhance comparability between periods. We believe the use of adjusted EBITDA facilitates investors’ understanding of operating performance from period to period by backing out potential differences caused by variations in such items as capital structures (affecting relative interest expense and stock-based compensation expense), the amortization of intangible assets acquired through our business acquisitions (affecting relative amortization expense and provision (benefit) for income taxes), the age and book value of facilities and equipment (affecting relative depreciation expense) and one-time charges/benefits relating to income taxes. We also present adjusted EBITDA from operations because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. We reconcile adjusted EBITDA to net income (loss) attributable to Ultralife, the most comparable financial measure under GAAP.
We use adjusted EBITDA in our decision-making processes relating to the operation of our business together with GAAP financial measures such as operating income (loss). We believe that adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while eliminating the effects of depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance, and of stock-based compensation, which is a non-cash expense that varies widely among companies. We believe that by presenting adjusted EBITDA, we assist investors in gaining a better understanding of our business on a going forward basis. We provide information relating to our adjusted EBITDA so that securities analysts, investors and other interested parties have the same data that we employ in assessing our overall operations. We believe that trends in our adjusted EBITDA are a valuable indicator of our operating performance on a consolidated basis and of our ability to produce operating cash flows to fund working capital needs, to service debt obligations and to fund capital expenditures.
The term adjusted EBITDA is not defined under GAAP and is not a measure of operating income (loss), operating performance or liquidity presented in accordance with GAAP. Our adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss) attributable to Ultralife or other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include, but are not limited to, the following:
|
● |
Adjusted EBITDA does not reflect (1) our cash expenditures or future requirements for capital expenditures or contractual commitments; (2) changes in, or cash requirements for, our working capital needs; (3) the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; (4) income taxes or the cash requirements for any tax payments; and (5) all of the costs associated with operating our business; |
|
● |
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and adjusted EBITDA from continuing operations does not reflect any cash requirements for such replacements; |
|
● |
While stock-based compensation is a component of cost of products sold and operating expenses, the impact on our consolidated financial statements compared to other companies can vary significantly due to such factors as assumed life of the stock-based awards and assumed volatility of our common stock; and |
|
● |
Other companies may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
We compensate for these limitations by relying primarily on our GAAP results and using adjusted EBITDA only on a supplemental basis. Neither current nor potential investors in our securities should rely on adjusted EBITDA as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of adjusted EBITDA to net income attributable to Ultralife Corporation.
Adjusted EBITDA is calculated as follows for the periods presented:
|
Three-Month Period Ended |
Nine-Month Period Ended |
|||||||||||||||
|
September 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Net income attributable to Ultralife Corporation |
$ | 258 | $ | 1,330 | $ | 6,118 | $ | 4,324 | ||||||||
|
Add: |
||||||||||||||||
|
Interest expense |
173 | 586 | 1,111 | 1,450 | ||||||||||||
|
Income tax provision |
74 | 446 | 1,630 | 1,688 | ||||||||||||
|
Depreciation expense |
765 | 760 | 2,294 | 2,282 | ||||||||||||
|
Amortization expense |
229 | 227 | 684 | 663 | ||||||||||||
|
Stock-based compensation expense |
170 | 131 | 490 | 424 | ||||||||||||
|
Cybersecurity insurance policy deductible |
- | - | - | 100 | ||||||||||||
| Non-recurring acquisition costs | 250 | - | 250 | - | ||||||||||||
|
Adjusted EBITDA |
$ | 1,919 | $ | 3,480 | $ | 12,577 | $ | 10,931 | ||||||||
Adjusted Earnings Per Share
In evaluating our business, we consider and use adjusted EPS, a non-GAAP financial measure, as a supplemental measure of our business performance. We define adjusted EPS as net income attributable to Ultralife Corporation excluding the provision (benefit) for deferred income taxes divided by our weighted average shares outstanding on both a basic and diluted basis. We believe that this information is useful in providing period-to-period comparisons of our results by reflecting the portion of our tax provision that will be predominantly offset by our U.S. net operating loss carryforwards and other tax credits for the foreseeable future. We reconcile adjusted EPS to EPS, the most comparable financial measure under GAAP. Neither current nor potential investors in our securities should rely on adjusted EPS as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of adjusted EPS to EPS and net income attributable to Ultralife Corporation.
Adjusted EPS is calculated as follows for the periods presented:
|
Three-Month Period Ended |
||||||||||||||||||||||||
|
September 30, 2024 |
September 30, 2023 |
|||||||||||||||||||||||
|
Amount |
Per Basic Share |
Per Diluted Share |
Amount |
Per Basic Share |
Per Diluted Share |
|||||||||||||||||||
|
Net income attributable to Ultralife Corporation |
$ | 258 | $ | .02 | $ | .02 | $ | 1,330 | $ | .08 | $ | .08 | ||||||||||||
|
Deferred tax provision (benefit) |
(99 | ) | (.01 | ) | (.01 | ) | 357 | .02 | .02 | |||||||||||||||
|
Adjusted net income |
$ | 159 | $ | .01 | $ | .01 | $ | 1,687 | $ | .10 | $ | .10 | ||||||||||||
|
Weighted Average Shares Outstanding |
16,625 | 16,874 | 16,238 | 16,303 | ||||||||||||||||||||
|
Nine-Month Period Ended |
||||||||||||||||||||||||
|
September 30, 2024 |
September 30, 2023 |
|||||||||||||||||||||||
|
Amount |
Per Basic Share |
Per Diluted Share |
Amount |
Per Basic Share |
Per Diluted Share |
|||||||||||||||||||
|
Net income attributable to Ultralife Corporation |
$ | 6,118 | $ | .37 | $ | .37 | $ | 4,324 | $ | .27 | $ | .27 | ||||||||||||
|
Deferred tax provision |
1,295 | .08 | .07 | 1,245 | .07 | .07 | ||||||||||||||||||
|
Adjusted net income |
$ | 7,413 | $ | .45 | $ | .44 | $ | 5,569 | $ | .34 | $ | .34 | ||||||||||||
|
Weighted Average Shares Outstanding |
16,530 | 16,742 | 16,172 | 16,174 | ||||||||||||||||||||
Liquidity and Capital Resources
As of September 30, 2024, cash totaled $6,774, as compared to $10,278 at December 31, 2023. The decrease reflects a $17,712 reduction in our outstanding debt, largely offset by strong income and cash generation during the period.
For the nine-month period ended September 30, 2024, cash generated from operations was $13,590, as compared to $503 used in operations for the nine-month period ended September 30, 2023. For the 2024 period, cash generated from operations was comprised of net income of $6,176, plus non-cash items totaling $4,807 for depreciation, amortization, stock-based compensation, and deferred taxes, plus $2,607 attributable to reduced working capital.
Cash used in investing activities for the nine months ended September 30, 2024 was $1,326 for capital expenditures, primarily reflecting investments in equipment for new products transitioning to higher-volume manufacturing.
Cash used in financing activities for the nine months ended September 30, 2024 was $15,820, representing a $17,712 reduction in our outstanding debt and $68 in debt issuance costs paid during the period in connection with the Fourth Amendment Agreement, partially offset by $1,960 in cash generated from employee stock option exercise proceeds.
We continue to have significant U.S. net operating loss carryforwards available to utilize as an offset to future taxable income. See Note 6 to the consolidated financial statements of this Form 10-Q for additional information.
Going forward, we expect positive operating cash flow and the availability under our Revolving Credit Facility will be sufficient to meet our general funding requirements for the foreseeable future.
To provide flexibility in accessing the capital markets, on March 30, 2021, the Company filed a shelf registration statement on Form S-3 (File No. 333-254846) (the “Prior Registration Statement”) registering securities in an aggregate amount of $100,000,000. None of the $100,000,000 of registered securities were sold under the Prior Registration Statement (the “Unsold Securities”). Under the rules of the Securities and Exchange Commission (the “SEC”) the Prior Registration Statement was set to expire on April 2, 2024. Therefore, on March 29, 2024, the Company filed a new shelf registration statement on Form S-3 (File No. 333-278360) (the “New Registration Statement”) to replace the Prior Registration Statement. The New Registration Statement includes all $100,000,000 of the Unsold Securities registered on the Prior Registration Statement. During the grace period afforded by Rule 415(a)(5) under the Securities Act of 1933, as amended (the “Securities Act”), we may offer and sell the Unsold Securities under the Prior Registration Statement until the SEC declares the New Registration Statement effective. Pursuant to Rule 415(a)(6) under the Securities Act, the offering of the Unsold Securities under the Prior Registration Statement will be deemed terminated as of the date of effectiveness of the New Registration Statement. Upon the filing of an appropriate prospectus supplement or supplements under either the Prior Registration Statement, or upon its effectiveness the New Registration Statement, we may offer and sell our securities from time to time in one or more offerings, at our discretion. We intend to use the net proceeds resulting from any sales of these securities for general corporate purposes which may include, but are not limited to, potential acquisitions of complementary businesses or technologies, strategic capital expenditures to expand and protect our competitive position, and investments in the development of transformational, competitively differentiated products for attractive growth markets.
Commitments
As of September 30, 2024, the Company had $3,368 outstanding borrowings on the Revolving Credit Facility and $4,667 on the Term Loan Facility. The Company was in full compliance with all covenants under the Amended Credit Agreement as of September 30, 2024.
As of September 30, 2024, we have made commitments to purchase approximately $597 of production machinery and equipment.
Critical Accounting Policies
Management exercises judgment in making important decisions pertaining to choosing and applying accounting policies and methodologies in many areas. Not only are these decisions necessary to comply with GAAP, but they also reflect management’s view of the most appropriate manner in which to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 to the consolidated financial statements in our 2023 Annual Report on Form 10-K should be reviewed for a greater understanding of how our financial performance is recorded and reported.
During the first nine months of 2024, there were no significant changes in the manner in which our significant accounting policies were applied or in which related assumptions and estimates were developed.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our President and Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer and Treasurer (Principal Financial Officer) have evaluated our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e)) as of the end of the period covered by this quarterly report. Based on this evaluation, our President and Chief Executive Officer and Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures were effective as of such date.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)) that occurred during the fiscal quarter covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. INFORMATION
Item 6. Exhibits
|
Exhibit Index |
Exhibit Description |
Incorporated by Reference from |
| 10.1 | Stock Purchase Agreement dated September 27, 2024 | Filed as Exhibit 10.1 to the Company’s Form 8-K filed October 3, 2024 | ||
| 10.2 | Credit and Security Agreement dated as of October 31, 2024 | Filed as Exhibit 10.2 to the Company’s Form 8-K filed November 6, 2024 |
|
31.1 |
Filed herewith |
|||
|
31.2 |
Filed herewith |
|||
|
32 |
Furnished herewith |
|||
|
101.INS |
Inline XBRL Instance Document |
Filed herewith |
||
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
Filed herewith |
||
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
Filed herewith |
||
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
Filed herewith |
||
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
Filed herewith |
||
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
Filed herewith |
||
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Filed herewith |
Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, (ii) Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2024 and 2023, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023, (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023, and (v) Notes to Consolidated Financial Statements.
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 CORPORATION |
|||
|
(Registrant) |
|||
|
Date: November 12, 2024 |
By: |
/s/ Michael E. Manna |
|
|
Michael E. Manna |
|||
|
President and Chief Executive Officer |
|||
|
(Principal Executive Officer) |
|||
|
Date: November 12, 2024 |
By: |
/s/ Philip A. Fain |
|
|
Philip A. Fain |
|||
|
Chief Financial Officer and Treasurer |
|||
|
(Principal Financial Officer and |
|||
|
Principal Accounting Officer) |
|||
Exhibit 31.1
I, Michael E. Manna, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Ultralife Corporation; |
|
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: November 12, 2024 |
By: |
/s/ Michael E. Manna |
|
|
Michael E. Manna |
|||
|
President and Chief Executive Officer |
|||
Exhibit 31.2
I, Philip A. Fain, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Ultralife Corporation; |
|
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: November 12, 2024 |
By: |
/s/ Philip A. Fain |
|
|
Philip A. Fain |
|||
|
Chief Financial Officer and Treasurer |
|||
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”), Michael E. Manna and Philip A. Fain, the President and Chief Executive Officer and Chief Financial Officer and Treasurer, respectively, of Ultralife Corporation, certify that (i) the Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 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 Corporation.
A signed original of this written statement required by Section 906 has been provided to Ultralife Corporation and will be retained by Ultralife Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
|
Date: November 12, 2024 |
By: |
/s/ Michael E. Manna |
|
|
Michael E. Manna |
|||
|
President and Chief Executive Officer |
|||
|
Date: November 12, 2024 |
By: |
/s/ Philip A. Fain |
|
|
Philip A. Fain |
|||
|
Chief Financial Officer and Treasurer |
|||