Ultralife(ULBI) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements This section presents Ultralife Corporation's unaudited consolidated financial statements for Q1 2020, highlighting a significant revenue increase to $25.81 million and net income of $1.06 million Consolidated Balance Sheets Total assets increased slightly to $146.15 million as of March 31, 2020, driven by higher trade accounts receivable, with total liabilities and shareholders' equity also rising Consolidated Balance Sheet Highlights (In Thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $73,568 | $70,373 | | Total Assets | $146,150 | $144,557 | | Total Current Liabilities | $18,928 | $17,190 | | Total Liabilities | $35,881 | $34,807 | | Total Shareholders' Equity | $110,269 | $109,750 | Consolidated Statements of Income and Comprehensive Income Q1 2020 revenues increased 36.7% year-over-year to $25.81 million, with gross profit rising to $7.33 million and net income more than doubling to $1.06 million Q1 2020 vs. Q1 2019 Income Statement (In Thousands, except per share data) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Revenues | $25,814 | $18,882 | | Gross Profit | $7,334 | $5,084 | | Operating Income | $1,485 | $548 | | Net Income Attributable to Ultralife | $1,059 | $425 | | Diluted EPS | $0.07 | $0.03 | Consolidated Statements of Cash Flows Q1 2020 operating activities used $365 thousand in cash, primarily due to increased accounts receivable, resulting in an overall $1.30 million decrease in cash for the quarter Q1 2020 vs. Q1 2019 Cash Flow Summary (In Thousands) | Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(365) | $(545) | | Net cash used in investing activities | $(445) | $(2,581) | | Net cash used in financing activities | $(322) | $(1,609) | | Decrease in Cash | $(1,296) | $(4,694) | | Cash, End of period | $6,109 | $21,240 | Notes to Consolidated Financial Statements Notes detail accounting policies, the SWE acquisition contributing $5,437 thousand revenue and $271 thousand net income in Q1 2020, and the repayment of a $3.459 million PPP loan - On April 14, 2020, the company entered into a $3.459 million PPP loan agreement, which it repaid on April 27, 2020, to ensure compliance with revised government guidelines[21][22] - The acquisition of Southwest Electronic Energy Corporation (SWE) on May 1, 2019, contributed revenue of $5,437 thousand and net income of $271 thousand for the three months ended March 31, 2020[31] Segment Revenue by Source - Q1 2020 vs Q1 2019 (In Thousands) | Segment & Source | Q1 2020 Revenue | Q1 2019 Revenue | | :--- | :--- | :--- | | Battery & Energy Products | | | | Commercial | $14,802 | $10,010 | | Government/Defense | $5,959 | $5,988 | | Total Battery & Energy | $20,761 | $15,998 | | Communications Systems | | | | Government/Defense | $5,053 | $2,884 | | Total Communications | $5,053 | $2,884 | | Total Company | $25,814 | $18,882 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 36.7% increase in Q1 2020 consolidated revenues, with operating income rising 170.5% to $1.485 million, despite an estimated $500 thousand COVID-19 impact on net income - The COVID-19 pandemic adversely impacted net income by an estimated $500 thousand for the quarter ended March 31, 2020, mainly from the temporary shutdown of the China facility and supply chain disruptions[86] Q1 2020 Performance Summary (In Thousands) | Metric | Q1 2020 | Q1 2019 | Change | | :--- | :--- | :--- | :--- | | Revenues | $25,814 | $18,882 | +36.7% | | Gross Profit | $7,334 | $5,084 | +44.3% | | Operating Income | $1,485 | $548 | +170.5% | | Net Income (to Ultralife) | $1,059 | $425 | +149.2% | - Revenue growth was driven by the SWE acquisition in the Battery & Energy Products segment and higher shipments of vehicle amplifier-adaptor systems in the Communications Systems segment[97][98] Reconciliation of Net Income to Adjusted EBITDA (In Thousands) | Line Item | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net income attributable to Ultralife | $1,059 | $425 | | Interest expense | 174 | 5 | | Income tax provision | 319 | 41 | | Depreciation expense | 579 | 447 | | Amortization & financing fees | 161 | 101 | | Stock-based compensation expense | 230 | 185 | | Adjusted EBITDA | $2,522 | $1,204 | Item 4. Controls and Procedures As of March 31, 2020, the company's disclosure controls and procedures were deemed effective, with no material changes to internal control over financial reporting during Q1 2020 - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[125] - No changes in internal control over financial reporting occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[126] PART II. OTHER INFORMATION Item 1A. Risk Factors The primary risk factor is the adverse impact of the COVID-19 pandemic on business, operating results, and financial condition, including supply chain and demand disruptions - The company's business, operating results, and financial condition may be adversely impacted by the COVID-19 pandemic, which already affected Q1 2020 results through a facility closure in China and supply chain disruptions[129][130] - Potential future effects of COVID-19 that pose a material risk include: limited availability or increased cost of raw materials and components; reduced demand and/or pricing for products; inability of customers to pay or remain solvent; reduced availability of the workforce; and increased cyber threats[130] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act and XBRL data files List of Filed Exhibits | Exhibit Index | Description | | :--- | :--- | | 31.1 | Rule 13a-14(a) / 15d-14(a) CEO Certifications | | 31.2 | Rule 13a-14(a) / 15d-14(a) CFO Certifications | | 32 | Section 1350 Certifications | | 101 | XBRL Data Files (Instance, Schema, etc.) | Signatures The quarterly report was signed on April 30, 2020, by the company's principal executive and financial officers, authorizing its submission - The report was signed on April 30, 2020, by Michael D. Popielec (President and CEO) and Philip A. Fain (CFO and Treasurer)[136]