Good day and welcome to this Ultralife Corporation First Quarter Earnings Release Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Ms. Jody Burfening. Please go ahead.

Thank you, and good morning, everyone. This is Jody Burfening of Lippert/Heilshorn & Associates. Thank you all for joining us this morning for Ultralife Corporation's earnings conference call for the first quarter of fiscal 2009. The earnings press release was issued earlier this morning and if anyone has not yet received a copy, I invite you to visit the Ultralife website at www.ulbi.com where you will find the release under Investor News in the Investor Relations section. A replay of today’s call will be made available starting at 1 o’clock today through 1 p.m. on May 7. To access the replay, please dial 800-203-1112 pass code 2784675. In a minute, I'll turn the call over to John Kavazanjian, Ultralife's President and CEO, who along with Bob Fishback, Ultralife's Chief Financial Officer, will provide their formal remarks. Before turning the call over to John, I'd like to remind everyone that some statements made during this conference call contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. These include worsening global economic conditions, increased competitive environment, and pricing pressures, disruptions related to restructuring actions and delays. The company cautions investors not to place undue reliance on forward-looking statements, which reflect the company's analysis only as of today's date. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. A more detailed description of such uncertainties is contained in the company's filings with the Securities and Exchange Commission such as the company's Annual Report on Form 10-K for the period ending December 31, 2008. In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful metrics that differ from GAAP. These non-GAAP measures should be considered as supplemental to corresponding GAAP figures. With that, I would now like to turn the call over to John. Good morning, John.

Thank you, Jody. Good morning and welcome to the Ultralife Corporation conference call for the first quarter of 2009. I have joining me today Bob Fishback, our Chief Financial Officer; Julius Cirin, our Vice President of Corporate Marketing and Technology; and Bill Schmitz, our Chief Operating Officer. Today, we reported revenue of $39.8 million for the first quarter of 2009 and an operating loss of $2.3 million. Compared to last year when we were starting to fill more than $100 million in advanced communications systems, revenue declined. Revenue was also lower than the fourth quarter due to continued delays in contracting associated with funded government programs. Additionally, revenues in Non-Rechargeable Products was down from last quarter. Significant decrease in revenue in Communications Systems had a negative effect on operating income and was the primary cause of the quarter’s operating loss. In Communications Systems, we still expect the award of significant business particularly in the area of SATCOM-On-The-Move systems. Updating of the DoD fleet replenishment of worn-out vehicle, and deployment of new platforms is budgeted and proceeding. These vehicles systems are all planned with SATCOM communication. A severe shortage of contracting officers combined with high level of new activity and new working relationships with new civilian leadership has caused a delay in the issuance of contract. We expect this situation to improve, but cannot count on the delays to be caught up by year’s end. We do expect that one of the remedies for this will be more multi-year contracts eliminating the need for annual renewals. Although our other business segments are relatively stable, in the context of a weakened economy, inventory corrections are restricting growth. In our standby power business in particular, price erosion in component parts driven by inventory liquidations by our competitors had a negative effect on margin.…

Thank you, John, and good morning everyone. Earlier this morning, we released our first quarter results for the fiscal period ended March 29, 2009. Consolidated revenues totaled 39.8 million for the first quarter, a 20% decline over the 49.6 million of revenue reported in the same period a year ago. The $9.8 million decrease resulted primarily from lower Communication Systems sales versus last year's results, which were driven by three large orders we received in latter part of 2007 for SATCOM-On-The-Move and other advanced communication systems. Offsetting the $19.8 million decrease in Communication Systems, in part was $7.1 million increase in rechargeable product revenues due to strong demand for batteries and charging systems from US defense customers. Non-rechargeable revenues rose $1 million as a result of higher shipments in BA-5390 batteries, offset in part by a decline in sales to automotive telematics customers, most notably General Motors. Revenue in our Design and Installation Services segment rose $2 million, mainly driven by the added revenue base provided from the acquisition of US Energy Systems in the fourth quarter of 2008. Gross profit amounted to $7.8 million in the first quarter of ‘09, a decrease of 3.1 million from 2008, primarily related to the decrease in consolidated revenue. As a percentage of total revenue, consolidated gross margins were approximately 20% in Q1 2009 compared with 22% in last year's first quarter. While quarterly margins improved in our rechargeable product segment from 18% last year to 25% in 2009 as a result of higher sales volumes and favorable product mix, margins in our other three segments declined. Non-rechargeable gross margins declined from 20% to 18% do generally to lower production volumes that resulted in unfavorable overhead absorption. Our Communications Systems margins for the first quarter of ’09 were 25%, down slightly from 26%…

Thank you, Bob. Now, I would like to turn back to Ben [ph] and ask him to open it up for questions.

Thank you. (Operator instructions) And we will take our first question from Steve Sanders with Stephens Inc. Trey Grooms – Stephens Inc. : This is Trey for Steve. Good morning.

Trey Grooms – Stephens Inc. : I was hoping you could help us connect the dots on the revised 230 million in revenue guidance coming off the $40 million quarter. How does that growth come in in the various segments and what visibility do you have on that?

It is pretty straightforward, Trey. We expected this year to be around $60 million in SATCOM systems, and that came out about $15 million a quarter and it didn't happen. It didn't happen because of delays, it’s still budgeted plan, we have – it's a little frustrating in terms of control over it, because we do this through a prime, and the prime has got to get the contract award in place of the government before we just start shipping the product. So we've had a couple of false starts here. We did not want to get our supply lines messed up. We had problems last year and we got some relatively large orders, and it took us a good six months to get supply lines in shape. So we have kind of absorbed that – the shock to our supply lines by continuing to supply. But I think it's pretty straightforward, as we contribute about 15 million of that, we were down a couple of million dollars in delays because the slow startup of the auto industry. And then we had a couple of timing issues in terms of lot acceptance on shipments. 9-Volt was a little lower maybe $0.5 million lower, so that is the best I can bridge it. I will also say that we were – in terms of the UK MoD program, we were probably a quarter later than we were told that was going to happen also. That solicitation was done in the fall. It was supposed to have awarded in January. So that was a good three or four months behind. Trey Grooms – Stephens Inc. : Okay. And then, I guess assuming that sales are going to tend up in some steady level for the remainder of the year, could you talk about how you see revenue margins in 2Q versus 1Q or second-half versus first-half?

Trey Grooms – Stephens Inc. : Okay. And then on the spares order then, kind of relating to your commentary there, is that something that I guess there wouldn't be delay or lag to ship out once that finally goes through whatever the process is?

The government contracting office made a decision back in the fall to instead of placing a separate order for the spares to put that under a total multi-year contract. And that's what we have to wait for and again that's not with us, that's a contract between the government and the prime, who is managing the program for them and we have to wait for that to happen. So that's all under the same multi-year IDIQ contract. Trey Grooms – Stephens Inc. : Okay. And then just to clarify the comment in the releases on the call around component suppliers, you're talking about your actual competition and not the components that you use. So does – that would be a little counterintuitive if obviously your suppliers are having competition, you would think that that would drive price down, and therefore it would benefit your margins.

Yes, it's been our – it's been in our competition. When we go into semi-power installations, part components of those is anywhere from 50 – they could be as high as 75%, if it is just a plain battery swap out, of the initial installation work. And everybody is getting compressed in cash flows from suppliers to distributors to the installers themselves who may hold some inventory, and we saw a tremendous flushing of inventories. People selling – we have people selling batteries that we buy from other suppliers – known suppliers, they are selling them below our cost. And sometimes we think below their own cost, purely to get cash. It can't go on forever but it's just something we face out there in the marketplace. And we have moved more to a model of not selling parts, but selling parts bundled with service. And as we do that, we are able to handle that a lot better over time and we embarked on that program sometime in February and March when it became apparent to (inaudible) going on, it's a little early but April results have shown a market improvement just because of the way we package things for people, the things that we can do for those who can't, which is bundling services together with our products. Trey Grooms – Stephens Inc. : Okay.

It’s going to help, but until this stops – there are still people with inventory out there who need to get into cash who are pushing it through. And this is, like I said manufacturers, distributors everybody in the chain. Trey Grooms – Stephens Inc. : Okay. That was helpful. Thanks guys.

And our next question comes from Ted Kundtz with Needham. Ted Kundtz – Needham & Company : Yes. Hello John and Bob. Could you just go back over, John, you said the SATCOM was really – it was no basis in the quarter for that, you were expecting 15 million and you got nothing?

It was zero. Ted Kundtz – Needham & Company : Zero. Okay. And I guess the question really is sort of a follow-up on the prior one discussion, what's your confidence level of that really kind of ramping back up in this quarter and or is everything just kept kind of get pushed out?

What we have done, Ted, is assume everything gets pushed out. And all I can tell you – I don't know what the production levels on existing contracts are. I can tell you a few things first. We have an IDIQ contract in place like we do for certain of the battery types. We get good predictable flow of orders. We can plan them. We can do them. Last year, in the SATCOM systems, we got one big order that we scrambled to get done first and it was done as sole source procurement, urgent need, go get it. Now they are trying to put in place a multi-year contract vehicle. So we don't have that happen again. But on the front end of it, it is just taken an extraordinarily long time for the government and the prime to get this put in place. And I can't even speculate about what it takes. I know the pressures though that are on contracting officers, both internally and just plain old workload, that is pushing this. But this is one of these things that we've been kind of on the edge of our seats day-to-day ready to move on since – literally since the fourth quarter, because we know the demand is there, because we know the Command – people who are assembling parts need what we have. But you also see some of the other programs sliding. There is a program that hasn’t been awarded yet for the MATV, they are calling it. It had a protest, it's been delayed, things are getting delayed because there's a little – there is a contracting bottle that going on in the military right now that, again, I can't speculate as why, except to say I think there is a heavy load and I know that they are down significant number of contract officers right now.

So the reason we adjusted our guidance is not because we don't believe we are going to get an order, but we think – I can tell you, if we get an order we can catch up the rest of the year. That is not the issue. The issue now is – some of the vehicle programs move it a little slower, because it is affecting us, it's affecting others. We talk to others in the industry. We go to industry consortia and stuff. Nobody is confused about the budget, nobody is confused about the needs, but things are taken longer. Trey Grooms – Stephens Inc. : Okay. I guess the risk is that, this doesn't come in in this quarter and it just gets delayed into – and there is another shortfall in the second quarter because it gets pushed over into third quarter – so that is a possibility. Because you don't have the order yet and you don't really know when it is coming. So–

It’s always a possibility until we get it. Trey Grooms – Stephens Inc. : Right.

We are confident cognizant of it. All I can tell you is, we know what the demand from the Command is for this, and it’s becoming reasonably urgent. So – all we can hope is that, that spurs people to come together and get this done faster. To some extent, and again I don't know what the loads on particular individual people in the contracting community are, but I know across the board they are heavy. And to some extent, they have to rise to an urgent need to become the priority for the contracting group. I don't know because – unfortunately, we have to work through the prime on this, this is the way we do it, this is the way we've run this business and we have to wait for them to get through that. So it's always a possibility, it's not our belief that it will take that long, but it's always a possibility. Trey Grooms – Stephens Inc. : Okay. And that is the biggest risk to the balance of the year it sounds like. The other things you feel like you're fairly comfortable with all the other programs that the UK, the international business as well.

Yes. The rest of our business is really doing pretty well. I mean again we’ve seen some softness in businesses like 9-Volt. We really believe that is – and that's a small, that's about 10% of our business. We believe that people are cutting their inventories down. There's no question about it. We know that some of their shortfall in telematics is that the auto manufacturers have cut their inventories down. They don't have the luxury of having any buffer stock anymore, because cash is very dear out there in the market. So that's happening. It can happen for ever, right, I mean you can’t take your – you can't get negative inventory, but we are seeing that. But despite that, we still see pretty strong demand out there for what we are doing and nothing strange [ph]. Trey Grooms – Stephens Inc. : Okay. Now, you make a press release when you do get the SATCOM business, hardly able to do that?

Yes, we will. Trey Grooms – Stephens Inc. : Okay.

We believe it will be of magnitude that it will be – and it is certainly important enough that we would do that. Trey Grooms – Stephens Inc. : Right. It seems that a lot of the – is really contingent on that if it's that much business out there $60 million of business. And the other thing is, could you just remind us what the – you had talked about pricing in standby power, how difficult that is and the lot of the excess inventories – or the selling going on there. How big a business is that for you right now? What was that in the quarter? It's not a huge business right now.

Design and Installation Services were about $6 million and the majority 90% of that was standby power. Trey Grooms – Stephens Inc. : Okay. 90%. Okay. Does that situation, sounds like that could extend for a bit as well the pressure there?

Yes. I mean our goal has been to get that to a 30% margin. We think we can, but right now, our near-term goal is to pick up another – there is 10 points to be had by just getting ourselves in shape to sell product in a bundled way. And we think we are on a path to do that. That’s $0.5 million right there just on the volume we have. But it may take a little longer to get to the 30% as long as this extreme price pressure is there. It can't be there forever. Trey Grooms – Stephens Inc. : Just looking at – you talk about your goals for the operating income and just kind of backing into it on the back of the envelope thing, it seemed like the margins have to average like 24% in the year – gross margins. That is quite a big increase to kind of expect in the balance of the year. Does that sound pretty – how do you plan to get there, if that number is correct.

You have to understand that the business that has been delayed is pretty much 25% of our business is our systems business, which really pulls the best margins. That business is a minimum 30% gross margin business. And when you start looking at how much overhead it pulls, on an incremental basis it’s 35% to 40% on an incremental basis. So if you do the math of a shortfall, it holds – we triangulate this five different ways just to make sure that we have our model all right. It really does hold together. Trey Grooms – Stephens Inc. : Yes. Okay.

Okay. Thanks a lot.

And our next question comes from James McIlree with Collins Stewart. James McIlree – Collins Stewart : Thanks. Good morning.

Good morning, Jim. James McIlree – Collins Stewart : John and Bob, can you tell me kind of rough numbers how you get to the 230 for the year, if you broke that down into the major – into the four major reporting categories, how would you roughly get to the 230?

I think it's fairly simple. If you look at where our businesses right now Jim, without any Communication Systems product was $40 million a quarter and that's with historically low numbers – recently historically low numbers of 9-Volt communications accessories and automotive. What we would consider a bottom. That is about $120 million minimum for the next three quarters. We are short, if there is about $60 million in Communication Systems to go and with growth in some of the businesses and new business that we’ve won overseas in the UK and that easily makes another 10 million of that. James McIlree – Collins Stewart : Okay. So it's really hinging on the comp system orders?

James McIlree – Collins Stewart :

Yes. It’s about 15 systems and about 10 in spares. James McIlree – Collins Stewart : Okay. And so the 15 systems would be for the variety of vehicle programs out there like Humvees, MATV, possibly MRAP spares or replacements things like that.

Humvees and MRAP. There is still MRAPs being produced. James McIlree – Collins Stewart : Okay. And is the spares business, is that part of the same IDIQ that you referred to or is that something different?

The issue we ran into the fall was that decision was made instead of making that a separate order under the previous vehicle which was a self sourced procurement. I believe the new administration is not thrilled with sole source procurements. It wants to be as competitive as possible and asked if that will be put into the new IDIQ contract. And that’s a guess on my part, but pretty good one. And so that decision was made to do that and that’s part of that. James McIlree – Collins Stewart : So the IDIQ itself has not been let, is that correct?

That’s correct. James McIlree – Collins Stewart : Okay. So the first step is going to be you are going to get to be part of the IDIQ and then the past quarters under it.

The prime will get the IDIQ contract, which then will allow the programs to order again. James McIlree – Collins Stewart : Okay.

So all we know Jim is what the prime tells us, number one. Number two, what we could ask for price quotes is to be able to put into that contract. And then third, what we know from the programs asking us we are in a position to deliver when the contract vehicle gets put in place. James McIlree – Collins Stewart : I hate to be a pest about it. So the IDIQ relates to the prime’s IDIQ and then they are – as part of that, then they are tasking you to supply to that.

Exactly. James McIlree – Collins Stewart : Okay, great.

And the IDIQ is done by the Central Command, ECOM. James McIlree – Collins Stewart : Right.

And then the orders against that get placed by the programs. James McIlree – Collins Stewart : Right. Okay, great. I will circle back. Thank you very much.

(Operator instructions) And we will take our next question from Richard Baxter with Ardour Capital. Richard Baxter – Ardour Capital Investments : Thank you. I guess just to continue on with the pricing pressure question. Are you seeing sort of pricing pressures in both the batteries and the power electronics for this or just namely the batteries or

We’ve seen some in power electronics, but it is mainly in the battery area. Richard Baxter – Ardour Capital Investments : Okay. And then I guess first on something different, can you talk a little bit about integrating the AMTI into your communication business.

Rich, I just want to – we were to talk about – in standby power? Richard Baxter – Ardour Capital Investments : Correct.

And AMTI will be rolled into our communications business. We already have an amplifier part of that business, the small group that we acquired a couple of years ago in Seattle. They do more of the amplifiers for the higher end systems. AMTI gives us the handheld radio smaller portable systems component of that. Richard Baxter – Ardour Capital Investments : Now the amplifiers some of the more higher margin components of these things that you are going for?

Yes. Amplifiers are higher margin components because there is a whole lot more engineering work that goes into them. They are multiband amplifiers to enable frequency hopping. And they have very uniform performance across those bands. They have to manage sheet and there is a fair amount of software in them as well that they handle it different way. Richard Baxter – Ardour Capital Investments : Okay, great. Thank you.

And our next question comes from James McIlree with Collins Stewart. James McIlree – Collins Stewart : Yes. Thanks again. Just on the gross margin side. For the non-rechargeable batteries, you had a pretty good gross margin improvement quarter-to-quarter, excuse me, for the rechargeable batteries, a pretty good gross margin improvement, is that a sustainable level going forward?

Yes. Really – in the rechargeable battery area, we were hurt last year by cell pricing. We couldn’t reprice our contracts, and cell pricing went up significantly. There was a shortage out there, there were couple of fires, we started recovering that. We had to work through some old inventory. We got through most of it last year. We got some of it this year. But the answer is, yes, it’s sustainable as we move forward. The other is, as we deploy more programs there, we get a better mix of both smart batteries which are – with our smart circuit capability, which have a lot more value, we get a better margin on and chargers, smart chargers and chargers, which also do better for us. Yes, I think it is very sustainable. James McIlree – Collins Stewart : And I think a few years ago, you got – you’ve almost hit 30% gross margin in that business. Is that possible again?

I think we said 25% to 30% is what we like to be in gross margin. We may top above that time to time, but because of mix and stuff, but 25 to 30 is where we are heading. James McIlree – Collins Stewart : And then on the non-rechargeables, it seems to be flattish quarter-to-quarter, and I think you also want to be 25%, 30% there right?

I would say, we are going to be about 25%, mid-20s and the issue there is that, with our 9-Volt product which is the big chunk of that, we compete against fairly commoditized alkaline and other products there. So there is only, while we believe we create a lot of value, it’s pretty hard to capture a lot of it in consumer markets. So we have markets to compete with the consumer type of product. So that’s why that pulls us down a little bit. James McIlree – Collins Stewart : So better margins would await either a mix shift and or your better economy. So you don’t have the pricing pressures? Is that a fair enough assumption?

That’s a very fair assumption. James McIlree – Collins Stewart : Okay.

And certainly volume helps in that area because we have a lot of our depreciation and overhead equipment is tied up in that area. James McIlree – Collins Stewart : Right. Great. Thanks again.

And our next question comes from Jill Mastoloni [ph] of Catapult Capital. Jill Mastoloni – Catapult Capital : Hi, guys. Thank you for opening the call up. Can you go through your line of credit and any debt covenants that you may have and your balance sheet is a little bit worrisome sort of where you stand regarding potentially raising cash and if the buyback is potentially or if anything is remaining if that would be put on hold given the balance sheet concerns.

First, I’ll tell you that the buyback expired on the 30 of April. Jill Mastoloni – Catapult Capital : Okay.

That program is over. So we are done with that at the moment. On the debt covenant question, we have two debt covenants, two financial covenants that we need to comply with, one is debt to EBITDA covenant and one is a fixed charge coverage ratio that we’re in compliance with at the end of the quarter. Jill Mastoloni – Catapult Capital : And what are those – what is the debt to EBITDA and fixed charge coverage ratios?

What are the ratios themselves or numbers? Jill Mastoloni – Catapult Capital : Yes.

I don’t have them right of the top of my head, but we are – the part of the document – the document itself as far as the credit facility is filed. We don’t disclose the calculations on what we provide to the banks. We are within the numbers that are always in our covenant.

The other thing I would mention to you is, we’ve got about $7 million in inventory right now tied up from awaiting these orders, so that we can execute on that program. We probably have another couple of million dollars in inventory, because we’ve started increasing our production of non-rechargeable because we are quoting lead-times kind of six months now on some of our military and non-rechargeable batteries, which we think is unacceptable. On top of that, we acquired significant set of inventory with the AMTI acquisition probably a couple of – $2 million or $3 million worth of inventory there that was too much, but they only had two sales people. Now we have a whole sales force selling it. So just inventory alone, we will probably have about $10 million that we would hope to turn into receivable in the next quarter or two. Jill Mastoloni – Catapult Capital : Okay. It sounds like you are fairly comfortable with the balance sheet at this point with the ability to turn the inventory over.

Yes. We are comfortable with it. Jill Mastoloni – Catapult Capital : Okay. Thank you guys.

Significant conversation (inaudible) when we embarked on the buyback and I think we are comfortable with it. Jill Mastoloni – Catapult Capital : Okay. Thank you very much.

(Operator instructions) And there appear to be no further questions at this time. I would like to turn the conference back over to John Kavazanjian for any closing or additional comments.

Thank you, Ben. Thanks everybody for participating. We still have a fundamentally very strong business or we certainly would have liked to had a stronger start to the year. We see continued demand in the defense business. And we are going to get through these contracting delays. Our commercial business, though, slightly affected by some of the conditions we’ve talked about, really does have extending opportunities, because of the new value we are bring in the applications that we participate, and really through some of the new initiatives in alternative energy and energy storage. We really do look forward to updating you again our progress next quarter and thank you all for participating.

This concludes today's conference. Thank you for joining us and have a wonderful day.