Good day and welcome to this Ultralife Corporation First Quarter 2013 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, Tim, and thank you everyone and good morning. This is Jody Burfening of LHA. Thank you for joining us for Ultralife's earnings conference call for the first quarter of fiscal 2013. With us on today’s call are Mike Popielec, Ultralife’s President and CEO and Phil Fain, Ultralife’s Chief Financial Officer. The earnings press release was issued earlier this morning. If anyone has not yet received a copy, I invite you to visit the company’s website, www.ultralifecorp.com, where you will find the release under Investor News in the Investor Relations section. Before turning the call over to management, I would 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 potential reductions in U.S. military spending, uncertain global economic conditions and acceptance of the company’s new products on a global basis. 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. Further information on these factors and other factors that could affect Ultralife’s financial results is included in Ultralife’s filings with the SEC including the latest annual report on Form 10-K. 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 Mike. Good morning, Mike.

Good morning, Jody and thank you everyone for joining the call this morning. I plan to start today by making some high level observations about our first quarter 2013 operating performance. Then I will turn the call over to Phil, who will take you through the detailed financial results. After Phil has finished, I will take the call back to provide an update on our top 2013 priorities and then share with you our thoughts on the full year financial outlook for 2013 before opening it up for questions. In the first quarter of 2013, by ensuring operating expense reductions track net revenue decline while significantly improving operating efficiency and product mix, solid execution by the teams reversed the prior year's first quarter $1.3 million operating loss, and delivered a third profitable quarter in a row. Reported first quarter 2013 gross margin of 30.3%, an increase of 630 basis points year-over-year and a 24% reduction in year-over-year operating expenses offset the impact of the revenue decline and led to an operating margin achievement of 1.8%, up 650 basis points year-over-year. Our communications systems business revenue was up 7% year-over-year, its third consecutive quarter of year-over-year revenue growth, while our battery and energy product revenues continue to be challenged and were down 35%. Looking a little closer at our B&E products business, the negative revenue comparable was driven by a year-over-year reduction in charger orders from one of our large U.S. government defense OEM and some end of life legacy product buys that occurred in Q1 or last year, associated with our next generation 9-volt product line transition. Noteworthy, is that although the aforementioned 9-volt revenue decline represented approximately 25% of the total B&E revenue drop, given the higher gross margin associated with the new next generation 9-volt battery, the gross…

Thank you, Mike and good morning everyone. Earlier this morning, we released our first quarter results for the period ended March 31, 2013. For purposes of reviewing our first quarter financial results, I will discuss operating results from continuing operations for 2013 compared to 2012. Consolidated revenues for the first quarter totaled $21 million, representing a $6.5 million or 24% decline from the $27.5 million for the first quarter of 2012. Revenues from our battery and energy products segment were $13.1 million, a decline of $7 million or 35% from last year. This decrease is primarily attributable to the continued slow down in the U.S. government and defense order rate for rechargeable and non-rechargeable batteries and charger systems, as well as the selloff of our legacy 9-volt batteries with the introduction of the newly designed in the product in the first quarter of 2012. The sales mix of our battery sales were split 50:50 between domestic and international in 2013, versus a 70:30 split for the year earlier period. Communication systems sales of $8 million increased by $0.5 million or 7% from the prior year. This increase was attributable to shipments of 20-watt amplifiers and accessories for solider modernization programs undertaken by allied countries and continued strong demand for these products by U.S. Special Forces. International shipments for the communication systems business were 41% consistent with the 2012 running rate. Our consolidated gross profit was $6.4 million compared to $6.6 million for the first quarter of 2012. As a percentage of total revenues, consolidated gross margin was 30.3% versus 24.0% for last year's first quarter, an increase of 630 basis points. This represents the third sequential quarter that the company has reported gross margin in excess of 30%. The year-over-year improvement reflects the continued productivity gains resulting from our implementation…

Thanks, Phil. The top three priorities that we have established to drive efficient operational execution and to reposition the company for growth, have evolved from the prior years but in 2013 fundamentally remain, one, improving profitability; two, executing on a growth game plan; and three, leveraging our China operations for global growth and competitiveness. Regarding improving profitability, we continued to be mindful of our 30, 5, 5 10 equals 10% operating margin business model goal. Achieving 30% gross margins is a key element in having the cost headroom to spend roughly 5% of sales on each, the new product and selling initiatives, we view critical to increasing competitive advantage and driving growth. We will continuously drive new lean projects to improve variable cost productivity and offset any labor or material cost increases and mix fluctuations. As our first half of the year tends to see less revenue throughput than the second half, with one quarter behind us, we are off to a good start. We [pulse] manufacturing P&L metrics and actions plans weekly and have added a formal sales and operations planning process to gain better inventory efficiency, cycle time reduction, and of course more variable cost productivity. Today we have been aggressively returning the company to profitability without sacrificing our investment towards future organic revenue growth opportunities. We are seeing the approach start to pay off in the quarterly, year-over-year revenue growth of our communications systems business that has now delivered in four of the last five quarters. And we are acutely focused on achieving a similar outcome in our battery and energy products business. Whereas we are pleased with the operation execution and productivity gains to date, we know that by far the biggest impact we can have on our overall company profitability going forward is to capture…

(Operator Instructions) We will take our first question from Walter Nasdeo with Ardour Capital.

Obviously, you have had some good results on the cost cutting side and increasing the margins. I am still a little shady though, on how you are going to -- for the rest of this year, get the mid to upper single digit growth over the last year, considering where we are starting the year off in the low $20 million level. So can you kind of talk about that? I understand that second half is going to be better than first half but that’s still kind of a pretty big increase that we need to see. And can you kind of maybe walk me through that a little slower maybe, I guess. I don’t know, because I had a hard time following it.

That’s correct. Let's take at the top level. We are expecting the communication systems business to show the growth rate that we mentioned in the prepared remarks. The first quarter of this year for our B&E products business, we knew it was going to be another tough comparable. The comparables for the rest of the year quarter by quarter for the B&E business, look more favorable versus our internal pending projects pipeline such that with some things happening the way we think they could happen, continue expansion of our new product development driven revenue opportunities and some commercial customers that are getting more and more engaged with some of our new products. We are looking to try to get B&E by the end of the year, really to trip over the flat to slightly up year-over-year revenue. And that when combined with the communications systems business revenue, would yield the overall guidance level we have for revenue improvement year-over-year. Most of the --- when you break down the pieces of the B&E business, historically there was a pretty large chunk of business associated with telematics in our commercial segments which we have now lapped. We had to lap the Iraq and Afghanistan draw down, decline in some of our core battery packs. Those are now starting to be fully lapped. And then now we have some lumpiness in terms of some large charger orders that happened about a year ago. All those considered, we have to say that we are expecting to have more reasonable comparable opportunities to the rest of the year. And all up all in , we are hoping to our guidance for mid-single digit revenue growth.

Okay. But as the battery segment increases, we should look for the margins to pull back a little bit, right?

You know in terms of mix, I guess logically you could say that. But certainly we will continue to try to eke out 100 to 150-200 basis points each year in the businesses such that, yeah, the mix maybe is more favorable at this point but hopefully the EPS number is much more favorable.

We just had a question from Gary Siperstein with Eliot-Rose Asset Management.

Mike, can you give us any color of where we stand with Harris. I saw that they -- I guess their IDQ was increased by $0.5 billion and I know they have been a big customer in the past. Can you talk about that relationship and the potential going forward?

No, we don’t typically respond too much about any specific customers. But relative to Harris, we continue to enjoy a very closer relationships. We now are [OEM] partners in terms of number of the activities we pursue together. They have been very public in some of their business challenges. That gives us visibility if you will, maybe not always positive as some of the potential trends for our revenue, which have been well factored into our operational plans so we maintain profitability. So we work closely with them. We are not expecting the things that they have been announcing publicly to affect us more than what we had already anticipated and for the large part have been factored into our business model.

Okay. And the decline in the inventories, Phil, for the quarter. Is that sort of -- now that you have got the low hanging fruit, is that sort of a quarterly decline in inventories that we can expect and where do you see normalized inventories bottoming out?

Gary, I would a expect a continued improvement quarter-over-quarter that’s going to lead us to the goal that we had talked about earlier. And there is a couple of different ways to look at it. One way is the traditional way that I spend a lot of time looking at, and that is reducing the dollar value of the inventory because it provides the cheapest financing that the company could ever wish for. Second of all, we look very closely to inventory turns for the total company, by business segment, and down to specific product lines. And as I think you are aware of, this has been a major initiative, the next step of our lean experts, and they have extensive plans at the product line basis that are coming together, that we monitor weekly and that we should expect to see continued results going forward. So I would say at this point, we are in line with our internal expectations for inventory.

Okay. And Mike, back to getting sales to move in the right direction. So you mentioned the new products over the past 12 to 18 months, and the seeds you have planted and the products better, many large companies are looking at and may go into bigger orders for us. Plus this sales team, you have improved. What else is there? I mean is it new additional products coming forward from those that you have mentioned or is it you know the sequester or the government slow down sort of bottoming. Maybe not growing, but at least not hurting us anymore. Can you talk to that point a little bit?

Yeah, I think in a nutshell, we are targeting customers not to just similar to our core U.S. government defense customers who tend to take a long time to specify, evaluate tests and be very comfortable with our products before ordering in large quantities. And to the extent that, as I stated in my prepared remarks, we are going after those types of commercial customers, there is still that lengthy process. And you can show your [case] ideas on a PowerPoint slide and still they have chance to go through a really demo and get a lot of, voice the customer feedback on it, you really don’t have a product that is going to be able to be bought in in large quantity. So it's really just getting through that process. But what I like about where we are, is that the interest level is growing widely. And as long as we are focused on making sure that we spend our precious financial and human resources on products that -- actually we have a clear competitive advantage and some stickiness with the customer, I am confident about our growth prospects. It's when it gets too diluted and try to serve too many different customers with too many different ideas, given the small size of our company that we can sort floor ourselves down. So the irony of it is, that with the more opportunities we have to be even more selective so we can get some revenue to bottom line.

Okay. My recollection was in the last conference call, you guys implied that there could be, I guess a larger potential order out there? And obviously there has been no news yet. So has that disappeared or has it just moved to the right?

Those opportunities are still on play.

(Operator Instructions) And at this time there are no other questions in queue and I will turn it back to our presenters for any closing remarks.

Thank you once again everyone for joining us for our first quarter 2013 earnings call. I look forward to meeting up with several of you in person over the next week or so and to sharing with you our quarterly progress in each quarter’s conference call in the future. Thank you very much.

And that concludes today's conference call. We appreciate your participation.