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, 2008
 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 
of incorporation or organization)
    
    (I.R.S. Employer Identification
No.)
 
 
 
 þ o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




---



##### 



PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets 
September 27, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations 
Three- and nine-month periods ended September 27, 2008
 and September 29, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows 
 Nine-month periods ended September 27, 2008 and September 29, 2007
    
    
    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
    
    
    43Item 4.
    
    
    
    Controls and Procedures
    
    
    43PART II
    
    OTHER INFORMATIONItem 1.
    
    
    
    Legal Proceedings
    
    
    44Item 1A.
    
    
    
    Risk Factors
    
    
    46Item 6.
    
    
    
    Exhibits
    
    
    46Signatures
    
    
    
    
    
    
    47Index to Exhibits
    
    
    48
 2




---



##### 



September 27,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,517
    
    
    $
    2,245Trade accounts receivable (less allowance for doubtful accounts
of $660 at September 27, 2008 and $485 at December 31, 2007)
    
    
    34,946
    
    
    
    26,540Inventories
    
    
    42,226
    
    
    
    35,098Due from insurance company
    
    
    
    
    
    
    152Deferred tax asset  current
    
    
    310
    
    
    
    309Prepaid expenses and other current assets
    
    
    1,941
    
    
    
    3,949Total current assets
    
    
    84,940
    
    
    
    68,293Property, plant and equipment, net
    
    
    17,914
    
    
    
    19,365Other assets:Goodwill
    
    
    21,807
    
    
    
    21,180Intangible assets, net
    
    
    11,609
    
    
    
    13,113Security deposits and other long-term assets
    
    
    74
    
    
    
    9733,490
    
    
    
    34,390Total Assets
    
    $
    136,344
    
    
    $
    122,048LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of debt and capital lease obligations
    
    $
    1,870
    
    
    $
    13,423Accounts payable
    
    
    18,944
    
    
    
    18,326Income taxes payable
    
    
    469
    
    
    
    Other current liabilities
    
    
    15,773
    
    
    
    10,083Total current liabilities
    
    
    37,056
    
    
    
    41,832Long-term liabilities:Debt and capital lease obligations
    
    
    4,470
    
    
    
    16,224Deferred tax liability  long-term
    
    
    3,613
    
    
    
    455Other long-term liabilities
    
    
    661
    
    
    
    530Total long-term liabilities
    
    
    8,744
    
    
    
    17,209Commitments and contingencies (Note 11)Minority interest in equity of subsidiaries
    
    
    41
    
    
    
    Shareholders 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  18,187,119 at September 27, 2008 and 17,208,862 at
December 31, 2007
    
    
    1,812
    
    
    
    1,712Capital in excess of par value
    
    
    166,437
    
    
    
    152,070Accumulated other comprehensive income
    
    
    (388
    )
    
    
    69Accumulated deficit
    
    
    (74,957
    )
    
    
    (88,443
    )92,904
    
    
    
    65,408Less Treasury stock, at cost  728,690 shares outstanding
    
    
    2,401
    
    
    
    2,401Total shareholders equity
    
    
    90,503
    
    
    
    63,007Total Liabilities and Shareholders Equity
    
    $
    136,344
    
    
    $
    122,048
  3




---



##### 



Three-Month Periods Ended
    
    
    Nine-Month Periods EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    67,993
    
    
    $
    33,291
    
    
    $
    205,478
    
    
    $
    100,807Cost of products sold
    
    
    52,307
    
    
    
    26,369
    
    
    
    158,289
    
    
    
    77,767Gross margin
    
    
    15,686
    
    
    
    6,922
    
    
    
    47,189
    
    
    
    23,040Operating expenses:Research and development (including $155, $255,
$472 and $764 respectively, of amortization of
intangible assets)
    
    
    2,161
    
    
    
    1,547
    
    
    
    5,907
    
    
    
    4,849Selling, general, and administrative (including
$362, $294, $1,091 and $866 respectively, of
amortization of intangible assets)
    
    
    8,227
    
    
    
    5,177
    
    
    
    23,684
    
    
    
    15,685Total operating expenses
    
    
    10,388
    
    
    
    6,724
    
    
    
    29,591
    
    
    
    20,534Operating income
    
    
    5,298
    
    
    
    198
    
    
    
    17,598
    
    
    
    2,506Other income (expense):Interest income
    
    
    5
    
    
    
    12
    
    
    
    18
    
    
    
    44Interest expense
    
    
    (248
    )
    
    
    (509
    )
    
    
    (817
    )
    
    
    (1,770
    )Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    Gain on debt conversion
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    Minority interest in (income) loss of subsidiaries
    
    
    (10
    )
    
    
    
    
    
    
    18
    
    
    
    Miscellaneous
    
    
    (175
    )
    
    
    171
    
    
    
    (66
    )
    
    
    354Income (loss) before income taxes
    
    
    4,870
    
    
    
    (128
    )
    
    
    17,103
    
    
    
    1,134Income tax provision-current
    
    
    151
    
    
    
    
    
    
    
    469
    
    
    
    Income tax provision-deferred
    
    
    62
    
    
    
    
    
    
    
    3,148
    
    
    
    Total income taxes
    
    
    213
    
    
    
    
    
    
    
    3,617
    
    
    
    Net income (loss)
    
    $
    4,657
    
    
    $
    (128
    )
    
    $
    13,486
    
    
    $
    1,134Earnings (loss) per share  basic
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    0.78
    
    
    $
    0.08Earnings (loss) per share  diluted
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    0.77
    
    
    $
    0.07Weighted average shares outstanding  basic
    
    
    17,366
    
    
    
    15,160
    
    
    
    17,220
    
    
    
    15,120Weighted average shares outstanding  diluted
    
    
    17,733
    
    
    
    15,160
    
    
    
    17,768
    
    
    
    15,346
  4




---



##### 



Nine-Month Periods EndedSeptember 27,
    
    
    September 29,2008
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    13,486
    
    
    $
    1,134Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of financing fees
    
    
    2,896
    
    
    
    2,871Amortization of intangible assets
    
    
    1,563
    
    
    
    1,630(Gain) loss on asset disposal
    
    
    (3
    )
    
    
    6Gain on insurance settlement
    
    
    (39
    )
    
    
    Foreign exchange (gain) loss
    
    
    130
    
    
    
    (295
    )Gain on debt conversion
    
    
    (313
    )
    
    
    Impairment of long-lived assets
    
    
    138
    
    
    
    Non-cash stock-based compensation
    
    
    1,691
    
    
    
    1,532Minority interest in loss of subsidiaries
    
    
    (18
    )
    
    
    Changes in deferred income taxes
    
    
    3,148
    
    
    
    Changes in operating assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    (8,465
    )
    
    
    871Inventories
    
    
    (7,347
    )
    
    
    (2,394
    )Prepaid expenses and other current assets
    
    
    2,455
    
    
    
    816Insurance receivable relating to fires
    
    
    201
    
    
    
    664Income taxes payable
    
    
    469
    
    
    
    Accounts payable and other liabilities
    
    
    6,468
    
    
    
    (2,671
    )Net cash provided from operating activities
    
    
    16,460
    
    
    
    4,164INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (2,282
    )
    
    
    (1,706
    )Payments for acquired companies, net of cash acquired
    
    
    (368
    )
    
    
    (2,457
    )Net cash used in investing activities
    
    
    (2,650
    )
    
    
    (4,163
    )FINANCING ACTIVITIESNet change in revolving credit facilities
    
    
    (11,204
    )
    
    
    1,355Proceeds from issuance of common stock
    
    
    2,276
    
    
    
    470Principal payments on debt and capital lease obligations
    
    
    (1,669
    )
    
    
    (1,849
    )Net cash used in financing activities
    
    
    (10,597
    )
    
    
    (24
    )Effect of exchange rate changes on cash
    
    
    59
    
    
    
    230Change in cash and cash equivalents
    
    
    3,272
    
    
    
    207Cash and cash equivalents at beginning of period
    
    
    2,245
    
    
    
    720Cash and cash equivalents at end of period
    
    $
    5,517
    
    
    $
    927SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for income taxes
    
    $
    
    
    
    $
    Cash paid for interest
    
    $
    787
    
    
    $
    1,683Noncash investing and financing activities:Purchase of property and equipment via notes payable
    
    $
    66
    
    
    $
    410Conversion of convertible notes into shares of common stock
    
    $
    10,500
    
    
    $
    
  5




---



##### 



1.
    
    BASIS OF PRESENTATION
     2.
    
    ACQUISITIONS AND JOINT VENTURES
  2008 Activity
 Ultralife Batteries India Private Limited
  2007 Activity
 RedBlack Communications, Inc. (formerly Innovative Solutions Consulting, Inc.)
  6




---



##### 



ASSETSCurrent assets:Cash
    
    $
    57Trade accounts receivables, net
    
    
    535Prepaid expenses and other current assets
    
    
    175Total current assets
    
    
    767Property, plant and equipment, net
    
    
    687Goodwill
    
    
    1,187Intangible Assets:Non-compete agreements
    
    
    180Total assets acquired
    
    
    2,821LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    
    720Accounts payable
    
    
    431Other current liabilities
    
    
    159Total current liabilities
    
    
    1,310Long-term liabilities:Debt
    
    
    188Total liabilities assumed
    
    
    1,498Total Purchase Price
    
    $
    1,323
 7




---



##### 



(in thousands, except per
    
    Three-Month
    
    Nine-Monthshare data)
    
    Period Ended
    
    Period EndedSeptember 29,
    
    September 29,2007
    
    2007Revenues
    
    $
    34,271
    
    
    $
    102,909Net income
(loss)
    
    $
    (107
    )
    
    $
    784Earnings
(loss) per share  Basic
    
    $
    (0.01
    )
    
    $
    0.05Earnings
(loss) per share  Diluted
    
    $
    (0.01
    )
    
    $
    0.05
 Stationary Power Services, Inc. and Reserve Power Systems, Inc.
   8




---



##### 



9




---



##### 



ASSETSCurrent assets:Cash
    
    $
    111Trade accounts receivables, net
    
    
    1,594Inventories
    
    
    1,687Prepaid expenses and other current assets
    
    
    52Total current assets
    
    
    3,444Property, plant and equipment, net
    
    
    324Goodwill
    
    
    5,478Intangible Assets:Trademarks
    
    
    1,300Patents and Technology
    
    
    440Customer Relationships
    
    
    4,600Other Assets:Security deposits
    
    
    12Total assets acquired
    
    
    15,598LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    
    1,277Accounts payable
    
    
    1,958Other current liabilities
    
    
    788Total current liabilities
    
    
    4,023Long-term liabilities:Debt
    
    
    137Other long-term liabilities
    
    
    20Total liabilities assumed
    
    
    4,180Total Purchase Price
    
    $
    11,418
    10




---



##### 



(in thousands, except per
    
    Three-Month
    
    Nine-Monthshare data)
    
    Period Ended
    
    Period EndedSeptember 29,
    
    September 29,2007
    
    2007Revenues
    
    $
    35,639
    
    
    $
    106,760Net Income
    
    $
    98
    
    
    $
    1,400Earnings per share  Basic
    
    $
    0.01
    
    
    $
    0.09Earnings per share  Diluted
    
    $
    0.01
    
    
    $
    0.09
 2006 Acquisitions
 ABLE New Energy Co., Ltd.
  Risk-free interest rate
    
    
    4.31
    %Volatility factor
    
    
    61.25
    %Dividends
    
    
    0.00
    %Weighted average expected life (years)
    
    
    2.50
   11




---



##### 



3.
    
    GOODWILL AND INTANGIBLE ASSETS
   Non-
    
    
    
    
    
    
    
    
    
    Design andRechargeable
    
    Rechargeable
    
    Communications
    
    InstallationProducts
    
    Products
    
    Systems
    
    Services
    
    TotalBalance at December 31, 2006
    
    $
    1,239
    
    
    $
    2,421
    
    
    $
    9,684
    
    
    $
    
    
    
    $
    13,344Acquisition of RedBlack
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    742
    
    
    
    742Adjustments to purchase price allocation
    
    
    328
    
    
    
    194
    
    
    
    776
    
    
    
    
    
    
    
    1,298Effect of foreign currency translations
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90Balance at
September 29, 2007
    
    
    1,657
    
    
    
    2,615
    
    
    
    10,460
    
    
    
    742
    
    
    
    15,474Acquisition of SPS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,825
    
    
    
    3,825Acquisition of RPS
    
    
    
    
    
    
    1,672
    
    
    
    
    
    
    
    
    
    
    
    1,672Adjustments to purchase price allocation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    163Effect of foreign currency translations
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46Balance 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
    
    
    
    $
    21,807
   September 27, 2008AccumulatedGross Assets
    
    Amortization
    
    NetTrademarks
    
    $
    4,405
    
    
    $
    
    
    
    $
    4,405Patents and technology
    
    
    4,097
    
    
    
    2,153
    
    
    
    1,944Customer relationships
    
    
    7,550
    
    
    
    2,585
    
    
    
    4,965Distributor relationships
    
    
    351
    
    
    
    168
    
    
    
    183Non-compete agreements
    
    
    393
    
    
    
    281
    
    
    
    112Total intangible assets
    
    $
    16,796
    
    
    $
    5,187
    
    
    $
    11,609
 December 31, 2007AccumulatedGross Assets
    
    Amortization
    
    NetTrademarks
    
    $
    4,399
    
    
    $
    
    
    
    $
    4,399Patents and technology
    
    
    4,069
    
    
    
    1,662
    
    
    
    2,407Customer relationships
    
    
    7,489
    
    
    
    1,608
    
    
    
    5,881Distributor relationships
    
    
    329
    
    
    
    123
    
    
    
    206Non-compete agreements
    
    
    390
    
    
    
    170
    
    
    
    220Total intangible assets
    
    $
    16,676
    
    
    $
    3,563
    
    
    $
    13,113
 12




---



##### 



4.
    
    EARNINGS PER SHARE
   Three-Month Periods
    
    Nine-Month PeriodsEnded
    
    EndedSeptember 27,
    
    September 29,
    
    September 27,
    
    September 29,(Shares in thousands)
    
    2008
    
    2007
    
    2008
    
    2007Net Income (a)
    
    $
    4,657
    
    
    $
    (128
    )
    
    $
    13,486
    
    
    $
    1,134Effect of Dilutive Securities:Convertible Notes Payable
    
    
    50
    
    
    
    
    
    
    
    165
    
    
    
    Net Income  Adjusted (b)
    
    $
    4,707
    
    
    $
    (128
    )
    
    $
    13,651
    
    
    $
    1,134Average Shares Outstanding  Basic (c)
    
    
    17,366
    
    
    
    15,160
    
    
    
    17,220
    
    
    
    15,120Effect of Dilutive Securities:Stock Options / Warrants
    
    
    89
    
    
    
    
    
    
    
    185
    
    
    
    215Restricted Stock
    
    
    11
    
    
    
    
    
    
    
    26
    
    
    
    11Convertible Notes Payable
    
    
    267
    
    
    
    
    
    
    
    337
    
    
    
    Average Shares Outstanding  Diluted (d)
    
    
    17,733
    
    
    
    15,160
    
    
    
    17,768
    
    
    
    15,346EPS  Basic (a/c)
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    0.78
    
    
    $
    0.08EPS  Diluted (b/d)
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    0.77
    
    
    $
    0.07
   13




---



##### 



5.
    
    STOCK-BASED COMPENSATION
        14




---



##### 



Nine-Month
    
    Nine-MonthPeriod Ended
    
    Period EndedSeptember 27,
    
    September 29,2008
    
    2007Risk-free interest rate
    
    
    2.33
    %
    
    
    4.63
    %Volatility factor
    
    
    59.46
    %
    
    
    57.17
    %Dividends
    
    
    0.00
    %
    
    
    0.00
    %Weighted average expected life (years)
    
    
    3.55
    
    
    
    3.75
   15




---



##### 



WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber
    
    Exercise Price
    
    Contractual
    
    Intrinsicof Shares
    
    Per Share
    
    Term
    
    ValueShares under option at January 1, 2008
    
    
    1,769,463
    
    
    $
    11.51Options granted
    
    
    197,000
    
    
    
    13.19Options exercised
    
    
    (189,035
    )
    
    
    6.71Options forfeited
    
    
    (20,149
    )
    
    
    10.67Options expired
    
    
    (4,250
    )
    
    
    14.74Shares under option at September 27, 2008
    
    
    1,753,029
    
    
    $
    12.21
    
    
    4.08 years
    
    $
    662Vested and expected to vest as of
September 27, 2008
    
    
    1,647,515
    
    
    $
    12.26
    
    
    4.01 years
    
    $
    662Options exercisable at September 27, 2008
    
    
    1,106,076
    
    
    $
    12.50
    
    
    3.30 years
    
    $
    662
        Nine-Month Period EndedSeptember 29, 2007Number of shares awarded
    
    
    28,948Weighted average fair value per share
    
    $
    10.57Aggregate total value
    
    $
    305,980
  Weighted AverageNumber of Shares
    
    
    Grant Date Fair ValueUnvested at December 31, 2007
    
    
    91,903
    
    
    $
    11.28Granted
    
    
    
    
    
    
    Vested
    
    
    (17,874
    )
    
    
    11.13Forfeited
    
    
    
    
    
    
    Unvested at September 27, 2008
    
    
    74,029
    
    
    $
    11.31
 16




---



##### 



6.
    
    COMPREHENSIVE INCOME
  Three-Month Periods
    
    
    Nine-Month PeriodsEnded
    
    
    EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    4,657
    
    
    $
    (128
    )
    
    $
    13,486
    
    
    $
    1,134Foreign currency translation adjustments
    
    
    (628
    )
    
    
    167
    
    
    
    (447
    )
    
    
    507Change in fair value of derivatives, net of tax
    
    
    9
    
    
    
    (19
    )
    
    
    (10
    )
    
    
    (32
    )Total comprehensive income
    
    $
    4,038
    
    
    $
    20
    
    
    $
    13,029
    
    
    $
    1,609
 7.
    
    INVENTORIES
  September 27, 2008
    
    
    December 31, 2007Raw materials
    
    $
    28,306
    
    
    $
    22,613Work in process
    
    
    10,608
    
    
    
    7,493Finished goods
    
    
    6,313
    
    
    
    7,32545,227
    
    
    
    37,431Less: Reserve for obsolescence
    
    
    3,001
    
    
    
    2,333$
    42,226
    
    
    $
    35,098
 8.
    
    PROPERTY, PLANT AND EQUIPMENT
  September 27, 2008
    
    
    December 31, 2007Land
    
    $
    123
    
    
    $
    123Buildings and leasehold improvements
    
    
    5,148
    
    
    
    5,104Machinery and equipment
    
    
    43,507
    
    
    
    43,252Furniture and fixtures
    
    
    1,595
    
    
    
    1,229Computer hardware and software
    
    
    2,839
    
    
    
    2,359Construction in progress
    
    
    929
    
    
    
    1,09054,141
    
    
    
    53,157Less: Accumulated depreciation
    
    
    36,227
    
    
    
    33,792$
    17,914
    
    
    $
    19,365
  17




---



##### 



9.
    
    DEBT
     18




---



##### 



19




---



##### 



10.
    
    INCOME TAXES
     20




---



##### 



21




---



##### 



Balance at December 31, 2007
    
    $
    501Accruals for warranties issued
    
    
    695Settlements made
    
    
    (273
    )Balance at September 27, 2008
    
    $
    923
      22




---



##### 



23




---



##### 



24




---



##### 



12.
    
    BUSINESS SEGMENT INFORMATION
  Three-Month
Period Ended September 27, 2008Non-
    
    
    
    
    
    
    
    
    
    
    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
    )Gain on debt
conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (185
    )
    
    
    (185
    )Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )
    
    
    (151
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62
    )
    
    
    (62
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,657Total assets
    
    $
    43,527
    
    
    $
    22,212
    
    
    $
    44,559
    
    
    $
    16,081
    
    
    $
    9,965
    
    
    $
    136,344
 Three-Month
Period Ended September 29, 2007Non-Rechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    TechnologyProducts
    
    
    Products
    
    
    Accessories
    
    
    Contracts
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    22,819
    
    
    $
    3,252
    
    
    $
    6,733
    
    
    $
    487
    
    
    $
    
    
    
    $
    33,291Segment contribution
    
    
    4,360
    
    
    
    703
    
    
    
    1,637
    
    
    
    222
    
    
    
    (6,724
    )
    
    
    198Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (497
    )
    
    
    (497
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171
    
    
    
    171Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (128
    )Total assets
    
    $
    50,725
    
    
    $
    17,770
    
    
    $
    26,440
    
    
    $
    88
    
    
    $
    4,265
    
    
    $
    99,288
 25




---



##### 



Nine-Month
Period Ended September 27, 2008Non-
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (469
    )
    
    
    (469
    )Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,148
    )
    
    
    (3,148
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    13,486Total assets
    
    $
    43,527
    
    
    $
    22,212
    
    
    $
    44,559
    
    
    $
    16,081
    
    
    $
    9,965
    
    
    $
    136,344
 Nine-Month
Period Ended September 29, 2007Non-Rechargeable
    
    
    Rechargeable
    
    
    Communications
    
    
    TechnologyProducts
    
    
    Products
    
    
    Accessories
    
    
    Contracts
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    63,785
    
    
    $
    13,342
    
    
    $
    22,912
    
    
    $
    768
    
    
    $
    
    
    
    $
    100,807Segment contribution
    
    
    15,109
    
    
    
    3,008
    
    
    
    4,608
    
    
    
    315
    
    
    
    (20,534
    )
    
    
    2,506Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,726
    )
    
    
    (1,726
    )Miscellaneous
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    354
    
    
    
    354Income taxes-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income taxes-deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,134Total assets
    
    $
    50,725
    
    
    $
    17,770
    
    
    $
    26,440
    
    
    $
    88
    
    
    $
    4,265
    
    
    $
    99,288
 13.
    
    FIRE AT MANUFACTURING FACILITY
  14.
    
    RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
   26




---



##### 



27




---



##### 



15.
    
    SUBSEQUENT EVENTS
   28




---



##### 



29




---



##### 



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




---



##### 



Results of Operations
 Three-month periods ended September 27, 2008 and September 29, 2007
 Revenues.
  31




---



##### 



Cost of Products Sold.
     Operating Expenses.
 Other Income (Expense).
 32




---



##### 



Income Taxes.
   Net Income.
 Nine-month periods ended September 27, 2008 and September 29, 2007
 Revenues.
    33




---



##### 



Cost of Products Sold.
     Operating Expenses.
 Other Income (Expense).
 34




---



##### 



Income Taxes.
   Net
Income.
 Adjusted EBITDA
  35




---



##### 




    
    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.
  36




---



##### 



Three-Month Period Ended
    
    
    Nine-Month Period EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    4,657
    
    
    $
    (128
    )
    
    $
    13,486
    
    
    $
    1,134Add: interest expense, net
    
    
    243
    
    
    
    497
    
    
    
    799
    
    
    
    1,726Add: income tax provision
    
    
    213
    
    
    
    
    
    
    
    3,617
    
    
    
    Add: depreciation expense
    
    
    965
    
    
    
    955
    
    
    
    2,896
    
    
    
    2,871Add: amortization expense
    
    
    517
    
    
    
    549
    
    
    
    1,563
    
    
    
    1,630Add: stock-based
compensation expense
    
    
    495
    
    
    
    501
    
    
    
    1,691
    
    
    
    1,532Less: gain on debt conversion
    
    
    
    
    
    
    
    
    
    
    (313
    )
    
    
    Adjusted EBITDA
    
    $
    7,090
    
    
    $
    2,374
    
    
    $
    23,739
    
    
    $
    8,893
 Liquidity and Capital Resources
       37




---



##### 



38




---



##### 



Outlook
  39




---



##### 



Recent Accounting Pronouncements and Developments
    40




---



##### 



41




---



##### 



Critical Accounting Policies
   42




---



##### 



Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(Dollars in thousands)
    
 Item 4.
    
    CONTROLS AND PROCEDURES
   43




---



##### 



PART II OTHER INFORMATION
 
      44




---



##### 



45




---



##### 



Item 1A. Risk Factors
  We face risks related to general domestic and global economic conditions and to the current credit
crisis.
  
  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
 
 46




---



##### 



ULTRALIFE CORPORATION
(Registrant)Date: November 5, 2008
    By:
    /s/ John D. KavazanjianJohn D. KavazanjianPresident and Chief Executive OfficerDate: November 5, 2008
    By:
    /s/ Robert W. FishbackRobert W. FishbackVice President  Finance and Chief
Financial Officer 
 47




---



##### 



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
 48