##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 27, 2009
 or
 o
    
    Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 for the transition period from
 to
 Commission file number 0-20852
 ULTRALIFE CORPORATION
  Delaware
    
    16-1387013(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 2000
Technology Parkway, Newark, New York 14513
 (Registrants
telephone number, including area code)
 
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




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##### 



PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets 

September 27, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations 

Three- and nine-month periods ended September 27, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows 

Nine-month periods ended September 27, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    30Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    48Item 4. Controls and Procedures
    
    
    48PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    49Item 1A. Risk Factors
    
    
    49Item 6. Exhibits
    
    
    51Signatures
    
    
    52Index to Exhibits
    
    
    53Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



Item 1.
    
    Financial Statements
  
    September 27,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,697
    
    
    $
    1,878Trade accounts receivable (less allowance for doubtful accounts
of $1,116 at September 27, 2009 and $1,086 at December 31, 2008)
    
    
    36,230
    
    
    
    30,588Inventories
    
    
    42,907
    
    
    
    40,465Deferred tax asset  current
    
    
    441
    
    
    
    441Prepaid expenses and other current assets
    
    
    1,852
    
    
    
    1,801Total current assets
    
    
    83,127
    
    
    
    75,173Property, plant and equipment, net
    
    
    17,291
    
    
    
    18,465Other assets:Goodwill
    
    
    25,609
    
    
    
    22,943Intangible assets, net
    
    
    13,492
    
    
    
    12,925Security deposits and other long-term assets
    
    
    81
    
    
    
    8139,182
    
    
    
    35,949Total Assets
    
    $
    139,600
    
    
    $
    129,587LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of debt and capital lease obligations
    
    $
    26,995
    
    
    $
    1,425Accounts payable
    
    
    15,080
    
    
    
    20,255Income taxes payable
    
    
    15
    
    
    
    582Other current liabilities
    
    
    11,283
    
    
    
    9,974Total current liabilities
    
    
    53,373
    
    
    
    32,236Long-term liabilities:Debt and capital lease obligations
    
    
    4,455
    
    
    
    4,670Deferred tax liability  long-term
    
    
    4,166
    
    
    
    3,894Other long-term liabilities
    
    
    749
    
    
    
    634Total long-term liabilities
    
    
    9,370
    
    
    
    9,198Commitments and contingencies (Note 11)Shareholders equity:Ultralife equity:Preferred stock, par value $0.10 per share, authorized 1,000,000 shares;
none issued and outstanding
    
    
    
    
    
    
    Common stock, par value $0.10 per share, authorized 40,000,000 shares;
issued  18,372,175 at September 27, 2009 and 18,227,009 at December 31, 2008
    
    
    1,829
    
    
    
    1,815Capital in excess of par value
    
    
    168,686
    
    
    
    167,259Accumulated other comprehensive loss
    
    
    (1,257
    )
    
    
    (1,930
    )Accumulated deficit
    
    
    (84,861
    )
    
    
    (74,780
    )84,397
    
    
    
    92,364Less  Treasury stock, at cost  1,358,507 and 942,202 shares outstanding, respectively
    
    
    7,558
    
    
    
    4,232Total Ultralife equity
    
    
    76,839
    
    
    
    88,132Noncontrolling interest
    
    
    18
    
    
    
    21Total shareholders equity
    
    
    76,857
    
    
    
    88,153Total Liabilities and Shareholders Equity
    
    $
    139,600
    
    
    $
    129,587
  
  3




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Three-Month Periods Ended
    
    

Nine-Month Periods EndedSeptember 27,
    
    
    September 27,
    
    
    September 27,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    42,363
    
    
    $
    67,993
    
    
    $
    121,759
    
    
    $
    205,478Cost of products sold
    
    
    31,999
    
    
    
    52,307
    
    
    
    96,834
    
    
    
    158,289Gross margin
    
    
    10,364
    
    
    
    15,686
    
    
    
    24,925
    
    
    
    47,189Operating expenses:Research and development (including $139, $155, $397 and $472
respectively, of amortization of intangible assets)
    
    
    2,748
    
    
    
    2,161
    
    
    
    7,242
    
    
    
    5,907Selling, general, and administrative (including $310, $362, $859 and $1,091
respectively, of amortization of intangible assets)
    
    
    8,020
    
    
    
    8,227
    
    
    
    26,669
    
    
    
    23,684Total operating expenses
    
    
    10,768
    
    
    
    10,388
    
    
    
    33,911
    
    
    
    29,591Operating income (loss)
    
    
    (404
    )
    
    
    5,298
    
    
    
    (8,986
    )
    
    
    17,598Other income (expense):Interest income
    
    
    16
    
    
    
    5
    
    
    
    20
    
    
    
    18Interest expense
    
    
    (470
    )
    
    
    (248
    )
    
    
    (1,002
    )
    
    
    (817
    )Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Gain on debt conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313Miscellaneous
    
    
    350
    
    
    
    (175
    )
    
    
    152
    
    
    
    (66
    )Income (loss) before income taxes
    
    
    (508
    )
    
    
    4,880
    
    
    
    (9,816
    )
    
    
    17,085Income tax provision-current
    
    
    17
    
    
    
    151
    
    
    
    19
    
    
    
    469Income tax provision-deferred
    
    
    88
    
    
    
    62
    
    
    
    272
    
    
    
    3,148Total income taxes
    
    
    105
    
    
    
    213
    
    
    
    291
    
    
    
    3,617Net income (loss)
    
    
    (613
    )
    
    
    4,667
    
    
    
    (10,107
    )
    
    
    13,468Net (income) loss attributable to noncontrolling interest
    
    
    8
    
    
    
    (10
    )
    
    
    26
    
    
    
    18Net income (loss) attributable to Ultralife
    
    $
    (605
    )
    
    $
    4,657
    
    
    $
    (10,081
    )
    
    $
    13,486Net income (loss) attributable to Ultralife common shareholders  basic
    
    $
    (0.04
    )
    
    $
    0.27
    
    
    $
    (0.59
    )
    
    $
    0.78Net income (loss) attributable to Ultralife common shareholders  diluted
    
    $
    (0.04
    )
    
    $
    0.26
    
    
    $
    (0.59
    )
    
    $
    0.77Weighted average shares outstanding  basic
    
    
    16,921
    
    
    
    17,366
    
    
    
    16,996
    
    
    
    17,220Weighted average shares outstanding  diluted
    
    
    16,921
    
    
    
    17,722
    
    
    
    16,996
    
    
    
    17,742
   4




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Nine-Month Periods EndedSeptember 27,
    
    
    September 27,2009
    
    
    2008OPERATING ACTIVITIESNet income (loss)
    
    $
    (10,107
    )
    
    $
    13,468Adjustments to reconcile net income (loss)
to net cash used in operating activities:Depreciation and amortization of financing fees
    
    
    2,986
    
    
    
    2,896Amortization of intangible assets
    
    
    1,256
    
    
    
    1,563Gain on asset disposal
    
    
    
    
    
    
    (3
    )Gain on insurance settlement
    
    
    
    
    
    
    (39
    )Foreign exchange (gain) loss
    
    
    (150
    )
    
    
    130Gain on litigation settlement
    
    
    (1,256
    )
    
    
    Gain on debt conversion
    
    
    
    
    
    
    (313
    )Impairment of long-lived assets
    
    
    
    
    
    
    138Non-cash stock-based compensation
    
    
    995
    
    
    
    1,691Changes in deferred income taxes
    
    
    272
    
    
    
    3,148Changes in operating assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    (5,307
    )
    
    
    (8,465
    )Inventories
    
    
    135
    
    
    
    (7,347
    )Prepaid expenses and other current assets
    
    
    (112
    )
    
    
    2,455Insurance receivable relating to fires
    
    
    
    
    
    
    201Income taxes payable
    
    
    (567
    )
    
    
    469Accounts payable and other liabilities
    
    
    (3,203
    )
    
    
    6,468Net cash provided from (used in) operating activities
    
    
    (15,058
    )
    
    
    16,460INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (1,443
    )
    
    
    (2,282
    )Payments for acquired companies, net of cash acquired
    
    
    (6,766
    )
    
    
    (368
    )Net cash used in investing activities
    
    
    (8,209
    )
    
    
    (2,650
    )FINANCING ACTIVITIESNet change in revolving credit facilities
    
    
    26,550
    
    
    
    (11,204
    )Proceeds from issuance of common stock
    
    
    310
    
    
    
    2,276Proceeds from issuance of debt
    
    
    751
    
    
    
    Principal payments on debt and capital lease obligations
    
    
    (1,468
    )
    
    
    (1,669
    )Purchase of treasury stock
    
    
    (3,326
    )
    
    
    Net cash provided from (used in) financing activities
    
    
    22,817
    
    
    
    (10,597
    )Effect of exchange rate changes on cash
    
    
    269
    
    
    
    59Change in cash and cash equivalents
    
    
    (181
    )
    
    
    3,272Cash and cash equivalents at beginning of period
    
    
    1,878
    
    
    
    2,245Cash and cash equivalents at end of period
    
    $
    1,697
    
    
    $
    5,517SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for income taxes
    
    $
    605
    
    
    $
    Cash paid for interest
    
    $
    823
    
    
    $
    787Noncash investing and financing activities:Purchase of property and equipment via notes payable
    
    $
    102
    
    
    $
    66Conversion of convertible notes into shares of common stock
    
    $
    
    
    
    $
    10,500
   5




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1.
    
    BASIS OF PRESENTATION
      2.
    
    ACQUISITIONS AND JOINT VENTURES
 2009 Activity
  AMTI Brand
   6




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ASSETSCurrent assets:Cash
    
    $
    Trade accounts receivable, net
    
    
    696Inventories
    
    
    2,350Total current assets
    
    
    3,046Property, plant and equipment, net
    
    
    206Goodwill
    
    
    1,397Intangible Assets:Trademarks
    
    
    450Patents and Technology
    
    
    800Customer Relationships
    
    
    920Total assets acquired
    
    
    6,819LIABILITIESCurrent liabilities:Accounts payable
    
    
    801Other current liabilities
    
    
    301Total current liabilities
    
    
    1,102Long-term liabilities:Other long-term liabilities
    
    
    Total liabilities assumed
    
    
    1,102Total Purchase Price
    
    $
    5,717
   7




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2008 Activity
  Ultralife Batteries India Private Limited
  U.S. Energy Systems, Inc. and U.S. Power Services, Inc.
      8




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ASSETSCurrent assets:Cash
    
    $
    Total current assets
    
    
    Property, plant and equipment, net
    
    
    306Goodwill
    
    
    1,431Intangible Assets:Patents and Technology
    
    
    220Customer Relationships
    
    
    1,300Total assets acquired
    
    
    3,257LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    
    56Other current liabilities
    
    
    43Total current liabilities
    
    
    99Long-term liabilities:Debt
    
    
    228Total liabilities assumed
    
    
    327Total Purchase Price
    
    $
    2,930
  3.
    
    INVENTORIES
  September 27, 2009
    
    
    December 31, 2008Raw materials
    
    $
    27,477
    
    
    $
    29,352Work in process
    
    
    7,476
    
    
    
    9,087Finished goods
    
    
    11,761
    
    
    
    4,87646,714
    
    
    
    43,315Less: Reserve for obsolescence
    
    
    3,807
    
    
    
    2,850$
    42,907
    
    
    $
    40,465
  9




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4.
    
    PROPERTY, PLANT AND EQUIPMENT
  September 27, 2009
    
    
    December 31, 2008Land
    
    $
    123
    
    
    $
    123Buildings and leasehold improvements
    
    
    5,982
    
    
    
    5,274Machinery and equipment
    
    
    43,844
    
    
    
    42,172Furniture and fixtures
    
    
    1,823
    
    
    
    1,669Computer hardware and software
    
    
    3,387
    
    
    
    2,808Construction in progress
    
    
    1,181
    
    
    
    2,02356,340
    
    
    
    54,069Less: Accumulated depreciation
    
    
    39,049
    
    
    
    35,604$
    17,291
    
    
    $
    18,465
  5.
    
    GOODWILL AND INTANGIBLE ASSETS
   Non-
    
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    InstallationProducts
    
    
    Products
    
    
    Systems
    
    
    Services
    
    
    TotalBalance at December 31, 2007
    
    $
    1,703
    
    
    $
    4,287
    
    
    $
    10,460
    
    
    $
    4,730
    
    
    $
    21,180Adjustments to purchase price allocation
    
    
    250
    
    
    
    30
    
    
    
    
    
    
    
    233
    
    
    
    513Effect of foreign currency translations
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114Balance at September 27, 2008
    
    
    2,067
    
    
    
    4,317
    
    
    
    10,460
    
    
    
    4,963
    
    
    
    21,807Adjustments to purchase price allocation
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    1
    
    
    
    20Acquisition of US Energy
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,111
    
    
    
    1,111Effect of foreign currency translations
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Balance at December 31, 2008
    
    
    2,072
    
    
    
    4,336
    
    
    
    10,460
    
    
    
    6,075
    
    
    
    22,943Adjustments to purchase price allocation
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    1,158
    
    
    
    1,269Acquisition of AMTI
    
    
    
    
    
    
    
    
    
    
    1,397
    
    
    
    
    
    
    
    1,397Effect of foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at September 27, 2009
    
    $
    2,072
    
    
    $
    4,447
    
    
    $
    11,857
    
    
    $
    7,233
    
    
    $
    25,609
   10




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September 27, 2009AccumulatedGross Assets
    
    
    Amortization
    
    
    NetTrademarks
    
    $
    4,856
    
    
    $
    
    
    
    $
    4,856Patents and technology
    
    
    5,119
    
    
    
    2,710
    
    
    
    2,409Customer relationships
    
    
    9,772
    
    
    
    3,696
    
    
    
    6,076Distributor relationships
    
    
    352
    
    
    
    206
    
    
    
    146Non-compete agreements
    
    
    393
    
    
    
    388
    
    
    
    5Total intangible assets
    
    $
    20,492
    
    
    $
    7,000
    
    
    $
    13,492
 December 31, 2008AccumulatedGross Assets
    
    
    Amortization
    
    
    NetTrademarks
    
    $
    4,789
    
    
    $
    
    
    
    $
    4,789Patents and technology
    
    
    4,229
    
    
    
    2,313
    
    
    
    1,916Customer relationships
    
    
    8,906
    
    
    
    2,934
    
    
    
    5,972Distributor relationships
    
    
    352
    
    
    
    180
    
    
    
    172Non-compete agreements
    
    
    393
    
    
    
    317
    
    
    
    76Total intangible assets
    
    $
    18,669
    
    
    $
    5,744
    
    
    $
    12,925
   6.
    
    DEBT
   11




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12




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13




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7.
    
    SHAREHOLDERS EQUITY
          14




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15




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Nine-Month Periods EndedSeptember 27,
    
    
    September 27,2009
    
    
    2008Risk-free interest rate
    
    
    1.44
    %
    
    
    2.33
    %Volatility factor
    
    
    68.58
    %
    
    
    59.46
    %Dividends
    
    
    0.00
    %
    
    
    0.00
    %Weighted average expected life (years)
    
    
    3.51
    
    
    
    3.55
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber
    
    
    Exercise Price
    
    
    Contractual
    
    
    Intrinsicof Shares
    
    
    Per Share
    
    
    Term
    
    
    ValueShares under option at January 1, 2009
    
    
    1,651,007
    
    
    $
    12.33Options granted
    
    
    250,820
    
    
    
    8.35Options exercised
    
    
    (89,355
    )
    
    
    4.87Options forfeited
    
    
    (39,319
    )
    
    
    11.40Options expired
    
    
    (26,177
    )
    
    
    16.44Shares under option at September 27, 2009
    
    
    1,746,976
    
    
    $
    12.10
    
    
    3.63 years
    
    
    $
    71Vested and expected to vest as of
September 27, 2009
    
    
    1,667,983
    
    
    $
    12.17
    
    
    3.55 years
    
    
    $
    70Options exercisable at September 27, 2009
    
    
    1,229,546
    
    
    $
    12.85
    
    
    2.84 years
    
    
    $
    69
   16




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Nine-Month Period Ended
    
    
    Nine-Month Period EndedSeptember 27, 2009
    
    
    September 27, 2008Number of shares awarded
    
    
    24,786
    
    
    
    6,800Weighted average fair value per share
    
    $
    10.58
    
    
    $
    12.59Aggregate total value
    
    $
    246
    
    
    $
    86
  Weighted AverageNumber of Shares
    
    
    Grant Date Fair ValueUnvested at December 31, 2008
    
    
    76,664
    
    
    $
    11.47Granted
    
    
    24,786
    
    
    
    7.44Vested
    
    
    (26,100
    )
    
    
    11.64Forfeited
    
    
    (4,722
    )
    
    
    11.31Unvested at September 27, 2009
    
    
    70,628
    
    
    $
    10.00
    17




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8.
    
    INCOME TAXES
    Three-Month Periods Ended
    
    
    Nine-Month Periods EndedSeptember 27,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Income (Loss) before Incomes Taxes (a)
    
    $
    (508
    )
    
    $
    4,880
    
    
    $
    (9,816
    )
    
    $
    17,085Total Income Tax Provision (b)
    
    $
    105
    
    
    $
    213
    
    
    $
    291
    
    
    $
    3,617Effective Tax Rate (b/a)
    
    
    20.7
    %
    
    
    4.4
    %
    
    
    3.0
    %
    
    
    21.2
    %
   18




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9.
    
    EARNINGS PER SHARE
    Three-Month Periods Ended
    
    
    Nine-Month Periods EndedSeptember 27,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net Income (Loss) attributable to Ultralife
    
    $
    (605
    )
    
    $
    4,657
    
    
    $
    (10,081
    )
    
    $
    13,486Net Income (Loss) attributable to
participating securities (unvested
restricted stock awards) (-0-,
81,000, -0-,
and 85,000 shares, respectively)
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    (66
    )Net Income (Loss) attributable to Ultralife
common shareholders (a)
    
    
    (605
    )
    
    
    4,635
    
    
    
    (10,081
    )
    
    
    13,420Effect of Dilutive Securities:Convertible Notes Payable
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    165Net Income (Loss) attributable to Ultralife
common shareholders  Adjusted (b)
    
    $
    (605
    )
    
    $
    4,685
    
    
    $
    (10,081
    )
    
    $
    13,585Average
Common Shares Outstanding  Basic (c)
    
    
    16,921,000
    
    
    
    17,366,000
    
    
    
    16,996,000
    
    
    
    17,220,000Effect of Dilutive Securities:Stock Options / Warrants
    
    
    
    
    
    
    89,000
    
    
    
    
    
    
    
    185,000Convertible Notes Payable
    
    
    
    
    
    
    267,000
    
    
    
    
    
    
    
    337,000Average
Common Shares Outstanding  Diluted (d)
    
    
    16,921,000
    
    
    
    17,722,000
    
    
    
    16,996,000
    
    
    
    17,742,000EPS  Basic (a/c)
    
    $
    (0.04
    )
    
    $
    0.27
    
    
    $
    (0.59
    )
    
    $
    0.78EPS  Diluted (b/d)
    
    $
    (0.04
    )
    
    $
    0.26
    
    
    $
    (0.59
    )
    
    $
    0.77
  20




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10.
    
    COMPREHENSIVE INCOME
  Three-Month Periods Ended
    
    
    Nine-Month Periods EndedSeptember 27,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss) attributable to Ultralife
    
    $
    (605
    )
    
    $
    4,657
    
    
    $
    (10,081
    )
    
    $
    13,486Foreign currency translation adjustments
    
    
    (201
    )
    
    
    (628
    )
    
    
    661
    
    
    
    (447
    )Change in fair value of derivatives
    
    
    1
    
    
    
    9
    
    
    
    12
    
    
    
    (10
    )Total comprehensive income (loss)
    
    $
    (805
    )
    
    $
    4,038
    
    
    $
    (9,408
    )
    
    $
    13,029
 11.
    
    COMMITMENTS AND CONTINGENCIES
     Balance at December 31, 2008
    
    $
    1,010Accruals for warranties issued
    
    
    228Settlements made
    
    
    (193
    )Balance at September 27, 2009
    
    $
    1,045
  21




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23




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24




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12.
    
    BUSINESS SEGMENT INFORMATION
  Three-Month Period Ended September 27, 2009
 Non-
    
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    InstallationProducts
    
    
    Products
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    18,358
    
    
    $
    8,484
    
    
    $
    9,565
    
    
    $
    5,956
    
    
    $
    
    
    
    $
    42,363Segment contribution
    
    
    3,357
    
    
    
    2,001
    
    
    
    3,745
    
    
    
    1,261
    
    
    
    (10,768
    )
    
    
    (404
    )Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (454
    )
    
    
    (454
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    350Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    (17
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    (88
    )Non controlling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    8Net loss
attributable to
Ultralife
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (605
    )Total assets
    
    $
    42,996
    
    
    $
    24,165
    
    
    $
    44,106
    
    
    $
    22,463
    
    
    $
    5,870
    
    
    $
    139,600
  25




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Three-Month Period Ended September 27, 2008
 Non-
    
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    InstallationProducts
    
    
    Products
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    15,741
    
    
    $
    8,020
    
    
    $
    40,675
    
    
    $
    3,557
    
    
    $
    
    
    
    $
    67,993Segment contribution
    
    
    1,906
    
    
    
    1,738
    
    
    
    11,371
    
    
    
    671
    
    
    
    (10,388
    )
    
    
    5,298Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (243
    )
    
    
    (243
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175
    )
    
    
    (175
    )Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )
    
    
    (151
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62
    )
    
    
    (62
    )Non controlling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )Net income
attributable to
Ultralife
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,657Total assets
    
    $
    43,527
    
    
    $
    22,212
    
    
    $
    44,559
    
    
    $
    16,081
    
    
    $
    9,965
    
    
    $
    136,344
 Nine-Month Period Ended September 27, 2009
 Non-
    
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    InstallationProducts
    
    
    Products
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    52,855
    
    
    $
    32,645
    
    
    $
    20,402
    
    
    $
    15,857
    
    
    $
    
    
    
    $
    121,759Segment contribution
    
    
    9,536
    
    
    
    7,426
    
    
    
    5,960
    
    
    
    2,003
    
    
    
    (33,911
    )
    
    
    (8,986
    )Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (982
    )
    
    
    (982
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152
    
    
    
    152Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    (19
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (272
    )
    
    
    (272
    )Non controlling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    26Net loss
attributable to
Ultralife
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (10,081
    )Total assets
    
    $
    42,996
    
    
    $
    24,165
    
    
    $
    44,106
    
    
    $
    22,463
    
    
    $
    5,870
    
    
    $
    139,600
 Nine-Month Period Ended September 27, 2008
 Non-
    
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    InstallationProducts
    
    
    Products
    
    
    Systems
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    48,056
    
    
    $
    19,248
    
    
    $
    126,675
    
    
    $
    11,499
    
    
    $
    
    
    
    $
    205,478Segment contribution
    
    
    7,213
    
    
    
    3,760
    
    
    
    34,233
    
    
    
    1,983
    
    
    
    (29,591
    )
    
    
    17,598Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (799
    )
    
    
    (799
    )Gain on debt conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    313Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (27
    )Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (469
    )
    
    
    (469
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,148
    )
    
    
    (3,148
    )Non controlling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Net loss
attributable to
Ultralife
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    13,486Total assets
    
    $
    43,527
    
    
    $
    22,212
    
    
    $
    44,559
    
    
    $
    16,081
    
    
    $
    9,965
    
    
    $
    136,344
  26




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13.
    
    FIRE AT MANUFACTURING FACILITY
  14.
    
    FAIR VALUE OF FINANCIAL INSTRUMENTS
  15.
    
    RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
      27




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Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    General
    30




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Overview
    31




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32




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Results of Operations
 Three-month periods ended September 27, 2009 and September 27, 2008
 Revenues.
     Cost of Products Sold.
    33




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Operating Expenses.
 Other Income (Expense).
 Income Taxes.
 Three-Month Periods EndedSeptember 27,2009
    
    
    2008Income (Loss) before Incomes Taxes (a)
    
    $
    (508
    )
    
    $
    4,880Total Income Tax Provision (b)
    
    $
    105
    
    
    $
    213Effective Tax Rate (b/a)
    
    
    20.7
    %
    
    
    4.4
    %
  34




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Net Income (Loss) Attributable to Ultralife.
 Nine-month periods ended September 27, 2009 and September 27, 2008
 Revenues.
    35




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Cost of Products Sold.
      36




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Operating Expenses.
 Other Income (Expense).
 Income Taxes.
  Nine-Month Periods EndedSeptember 27,2009
    
    
    2008Income (Loss) before Incomes Taxes (a)
    
    $
    (9,816
    )
    
    $
    17,085Total Income Tax Provision (b)
    
    $
    291
    
    
    $
    3,617Effective Tax Rate (b/a)
    
    
    3.0
    %
    
    
    21.2
    %
  37




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Net Income (Loss) Attributable to Ultralife.
 Adjusted EBITDA
   38




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
    
    Adjusted EBITDA (1) does not reflect our cash expenditures or future requirements
for capital expenditures or contractual commitments; (2) does not reflect changes in,
or cash requirements for, our working capital needs; (3) does not reflect the
interest expense, or the cash requirements necessary to service interest or principal
payments, on our debt; (4) does not reflect income taxes or the cash requirements for
any tax payments; and (5) does not reflect 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 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.
  39




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Three-Month Periods Ended
    
    
    Nine-Month Periods EndedSeptember 27,
    
    
    September 27,
    
    
    September 27,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss) attributable
to Ultralife
    
    $
    (605
    )
    
    $
    4,657
    
    
    $
    (10,081
    )
    
    $
    13,486Add: interest expense, net
    
    
    454
    
    
    
    243
    
    
    
    982
    
    
    
    779Add: income tax provision
    
    
    105
    
    
    
    213
    
    
    
    291
    
    
    
    3,617Add: depreciation expense
    
    
    1,047
    
    
    
    965
    
    
    
    2,986
    
    
    
    2,896Add: amortization expense
    
    
    449
    
    
    
    517
    
    
    
    1,256
    
    
    
    1,563Add: stock-based compensation
expense
    
    
    (82
    )
    
    
    495
    
    
    
    995
    
    
    
    1,691Less: gain on debt conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (313
    )Adjusted EBITDA
    
    $
    1,368
    
    
    $
    7,090
    
    
    $
    (3,571
    )
    
    $
    23,739
 Liquidity and Capital Resources
      40




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Debt Commitments
       41




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42




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Equity Transactions
   Other Matters
    43




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Outlook
   Recent Accounting Pronouncements and Developments
     44




---



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45




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46




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Critical Accounting Policies
    47




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Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

(Dollars in thousands)
     
 Item 4.
    
    CONTROLS AND PROCEDURES
    48




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PART II OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   
 Item 1A.
    
    Risk Factors
    Updated Risk Factor
 We may be unable to obtain financing to fund ongoing operations and future growth.
   49




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New Risk Factor
 Any impairment of goodwill and indefinite-lived intangible assets, and other intangible assets,
could negatively impact our results of operations.
   50




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Item 6.
    
    Exhibits
 ExhibitIndex
    
    Description of Document
    
    Incorporated By Reference from:10.1
    
    
    Employment Agreement
between the Registrant
and John D. Kavazanjian
    
    Exhibit 99.1 of the Form 8-K
filed on July 9, 200910.2
    
    
    Employment Agreement
between the Registrant
and William A. Schmitz
    
    Exhibit 99.2 of the Form 8-K
filed on July 9, 200910.3
    
    
    Waiver and Amendment
Number One to Amended
and Restated Credit
Agreement as of June
28, 2009, with the
Lenders Party Thereto
and JPMorgan Chase
Bank, N.A. as
Administrative Agent
    
    Exhibit 10.4 of the Form 10-Q
for the August 10, 200931.1
    
    
    CEO 302 Certifications
    
    Filed herewith31.2
    
    
    CFO 302 Certifications
    
    Filed herewith32.1
    
    
    906 Certifications
    
    Filed herewith
  51




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ULTRALIFE CORPORATION
(Registrant)Date: November 6, 2009
    By:
    /s/ John D. KavazanjianJohn D. KavazanjianPresident and Chief Executive Officer
(Principal Executive Officer)Date: November 6, 2009
    By:
    /s/ John C. CasperJohn C. CasperVice President of Finance and
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)  52




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31.1
    
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
  53