Ultralife(US:ULBI)2024-03-21 20:47Financial Performance - Revenues for the Battery & Energy Products segment for the year ended December 31, 2023, were $129,953, with a segment contribution (gross profit) of $30,775[23] - Revenues for the Communications Systems segment for the year ended December 31, 2023, were $28,691, with a segment contribution (gross profit) of $8,425[26] - Corporate operating expenses for the year ended December 31, 2023, were $29,725, with no revenues reported[27] - Consolidated revenues increased by $26,804 or 20.3% to $158,644 for the year ended December 31, 2023, compared to $131,840 for 2022[193] - Net income attributable to Ultralife Corporation was $7,197, or $0.44 per share for 2023, compared to a net loss of $119, or $0.01 per share for 2022[198] - Adjusted EPS for 2023 was $0.52 per share, compared to a loss of $0.07 per share in 2022[198] - The effective tax rate for 2023 was 21.4%, down from 73.1% in 2022, primarily due to the increase in income before income taxes[214] Market Presence and Demand - The company operates in multiple global markets, with sales, operations, and product development facilities in North America, Europe, and Asia[18] - The company reported sales to U.S. customers of approximately $81.4 million and to foreign customers of approximately $77.2 million in 2023, compared to $67.9 million and $63.9 million in 2022, respectively[59] - The backlog for Battery & Energy Products increased by 4% year-over-year to approximately $92 million at the end of 2023, driven by demand in medical, government, defense, and oil and gas sectors[65] - The year-end backlog for 2023 was $103,535, indicating strong demand for the company's products[193] - Sales to non-U.S. customers accounted for 49% of total revenues in 2023, up from 48% in 2022, indicating a significant reliance on international markets[149] Product Development and Innovation - The company continues to seek funding for new product development through contracts with government agencies and private sector third parties[22] - The company has expanded its product offerings through strategic acquisitions, including Excell Battery Group, which enhances its Battery & Energy Products business[36] - The company is actively developing new battery and power solutions, including a Thionyl Chloride battery project in China[85] - Research and development expenditures rose to $8,587 in 2023 from $7,874 in 2022, with customer-sponsored R&D increasing from $793 to $1,056, reflecting a focus on developing new products[84] - Research and development costs increased by $450 or 6.4% in 2023, reflecting investments in new product development[212] Competitive Landscape - The rechargeable batteries market is competitive, with cycle life being a critical factor; Lithium-ion batteries generally offer higher energy density and longer cycle life compared to Nickel Metal Hydride batteries[46] - The company faces intense competition in the battery and communications systems markets, with competitors having significantly greater resources[107] - The company continues to develop new products and applications, but faces risks related to market acceptance and competition[118] Operational Efficiency - The company has adequate manufacturing capacity for its 9-volt Lithium batteries to meet forecasted customer demand over the next three years[41] - Manufacturing facilities in Newark, New York, and Shenzhen, China, have the capacity to produce significant volumes of batteries and energy products, with no constraints on manufacturing equipment capacity[79] - The company has invested in new machinery to alleviate production bottlenecks and ensure capacity meets customer demand[76] - The company has implemented proactive measures to align cost increases with customer price increases and improve its sales and operations planning process[111] Financial Health and Risks - As of December 31, 2023, the company had $6,167 outstanding principal on the Term Loan Facility and $19,580 on the Revolving Credit Facility, with rising interest rates expected to adversely impact financial results[142] - The company is highly dependent on key personnel, and the loss of these employees could materially affect its business and financial condition[129] - The company has experienced supply chain disruptions in 2023, impacting raw material prices and availability, which may continue into 2024[75] - The company is subject to compliance with export regulations, and any failure could have a material adverse effect on its business[101] - The company is subject to annual impairment testing for goodwill and other indefinite-lived intangible assets, which could lead to significant non-cash impairment charges if future valuations decline[150] Environmental and Compliance Issues - Environmental compliance costs were $199 in 2023, down from $264 in 2022, reflecting ongoing efforts to manage hazardous waste disposal[95] - The company is committed to responsible product stewardship and compliance with recycling regulations, with current estimated costs not expected to be significant[160] - Compliance with environmental regulations may impose future liabilities and costs, although current operations are believed to be in substantial compliance[156] - The company is required to perform due diligence regarding the use of conflict minerals, which may increase operational costs and affect supplier relationships[162] Cybersecurity and Operational Risks - The company has maintained a cybersecurity insurance policy to mitigate the impact of potential cybersecurity incidents[124] - The company experienced production and shipping downtime for several weeks due to a cybersecurity incident, resulting in a deductible of $100 recognized in the 2023 results[126] - The company continues to monitor cybersecurity risks and has implemented measures to mitigate potential impacts on operations[171] - The company has filed a business interruption claim with its cyber insurance underwriter, which is currently under review[126] Employee and Workforce Management - The company employed a total of 536 employees as of December 31, 2023, with 412 in production, 75 in sales and administration, and 49 in research and development[109] - The company is subject to safety risks associated with Lithium batteries, which could lead to significant production delays or claims for damages[140]