Ultralife(ULBI) - 2021 Q1 - Quarterly Report

Part I: Financial Information Consolidated Financial Statements (Unaudited) Q1 2021 revenues slightly increased to $26.0 million, net income decreased, and operating cash flow improved to $3.9 million Consolidated Balance Sheets Total assets slightly decreased to $136.4 million, liabilities fell, and shareholders' equity increased to $117.9 million Consolidated Balance Sheet Highlights (In Thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $63,520 | $64,496 | | Total Assets | $136,390 | $137,701 | | Total Current Liabilities | $16,635 | $18,706 | | Total Liabilities | $18,529 | $20,778 | | Total Shareholders' Equity | $117,861 | $116,923 | Consolidated Statements of Income and Comprehensive Income Q1 2021 revenues were flat at $26.0 million, while gross profit and operating income declined, leading to lower net income Q1 2021 vs. Q1 2020 Income Statement (In Thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Revenues | $25,973 | $25,814 | | Gross Profit | $6,978 | $7,334 | | Operating Income | $952 | $1,485 | | Net Income Attributable to Ultralife | $671 | $1,059 | | Diluted EPS | $0.04 | $0.07 | Consolidated Statements of Cash Flows Operating cash flow significantly improved to $3.9 million in Q1 2021, resulting in a $3.0 million increase in cash balance Q1 2021 vs. Q1 2020 Cash Flow Summary (In Thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,903 | $(365) | | Net cash used in investing activities | $(489) | $(445) | | Net cash used in financing activities | $(420) | $(322) | | Increase (Decrease) in Cash | $3,009 | $(1,296) | | Cash, End of period | $13,662 | $6,109 | Notes to Consolidated Financial Statements Notes detail debt compliance, effective tax rate changes, and segment performance, with Battery & Energy Products growing - The company is in full compliance with its debt covenants as of March 31, 2021, which include a consolidated fixed charge coverage ratio and a senior leverage ratio[26] - The effective tax rate for Q1 2021 was 24.2%, compared to 22.9% for Q1 2020, with the change primarily due to the geographic mix of earnings. The company has significant domestic NOL carryforwards of $47.8 million[45][46] Segment Revenue (In Thousands) | Segment | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Battery & Energy Products | $22,111 | $20,761 | | Communications Systems | $3,862 | $5,053 | | Total | $25,973 | $25,814 | Revenue by Source (In Thousands) | Source | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Commercial | $14,345 (55%) | $14,802 (57%) | | Government/Defense | $11,628 (45%) | $11,012 (43%) | Management's Discussion and Analysis (MD&A) MD&A discusses slight revenue growth, gross margin decline, lower operating income, COVID-19 impact, and liquidity - The COVID-19 pandemic had an estimated net negative impact in Q1 2021, reducing sales by approximately $2.0 million, operating income by $0.9 million, and diluted EPS by $0.04[80] - Battery & Energy Products revenues grew 6.5%, driven by a 32.2% increase in medical sales and a 30.3% increase in government/defense sales, but offset by a 30.0% decrease in oil & gas market sales[90] - Communications Systems revenues decreased 23.6%, primarily due to the completion of large delivery orders to the U.S. Army in 2020 that were not repeated in Q1 2021[91] - The company filed a shelf registration statement on Form S-3, effective April 2, 2021, allowing it to offer and sell up to $100 million in securities for general corporate purposes, including potential acquisitions[114] Results of Operations Q1 2021 revenues increased slightly, driven by Battery & Energy Products growth, while gross margin declined - Consolidated gross margin decreased by 150 basis points to 26.9%, primarily reflecting sales mix, costs to transition new products to higher volume, and higher freight costs[83][92] - Operating expenses increased by 3.0% to $6.0 million, driven by a 6.4% increase in R&D and a 9.6% increase in sales and marketing, reflecting investments in new product development and market launches[84][95] Adjusted EBITDA and Adjusted EPS (Non-GAAP) Non-GAAP Adjusted EBITDA decreased to $2.0 million and Adjusted EPS fell to $0.05 per diluted share in Q1 2021 Adjusted EBITDA Reconciliation (In Thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net income attributable to Ultralife | $671 | $1,059 | | Add: Interest, Taxes, D&A, Stock Comp. | $1,341 | $1,463 | | Adjusted EBITDA | $2,012 | $2,522 | Adjusted EPS Reconciliation | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.04 | $0.07 | | Deferred tax provision per share | $0.01 | $0.01 | | Adjusted Diluted EPS (Non-GAAP) | $0.05 | $0.08 | Liquidity and Capital Resources Cash increased by $3.0 million to $13.7 million due to strong operating cash flow and a litigation settlement - Cash increased by $3.0 million during the quarter, primarily due to $3.9 million generated from operations, which included net proceeds of $1,593 thousand from a class action lawsuit[109][110] - As of March 31, 2021, the company had no amounts outstanding on its $30 million Revolving Credit Facility and was in full compliance with all debt covenants[115] Controls and Procedures Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[119] - No changes occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[120] Part II: Other Information Exhibits This section lists key exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data - The report includes CEO and CFO certifications (Exhibits 31.1, 31.2, and 32) and financial statements formatted in Inline XBRL (Exhibit 101)[122] Signatures The Form 10-Q was signed by the CEO and CFO on April 29, 2021 - The Form 10-Q was signed and authorized on April 29, 2021[127]