Good day, and welcome to this Ultralife Corporation Second Quarter 2015 Earnings Release Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Jody Burfening. Please go ahead, ma’am.

Thank you, Melanie and good morning, everyone and thank you for joining us this morning for Ultralife Corporation’s earnings conference call for the second quarter of fiscal 2015. With us on the call this morning 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. And if anyone who has not yet received a copy, I invite you to visit the Company’s Web site, at www.ultracorp.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 will 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 reflects 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 Securities and Exchange Commission, 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. Today, I will start by making some overall comments about our second quarter 2015 operating performance, then I will turn the call over to Phil, who will take you through a detailed financial results. After Phil is finished, I will provide an update on the progress against our revenue initiatives for 2015 before opening it up for questions. For the second quarter of 2015, we were pleased to deliver a third consecutive quarter of total Company profitability and positive EPS generating an operating profit of $0.8 million on revenues of $19 million or an operating margin of 4.3%. This represents a year-over-year improvement in operating profit of $2.1 million on an increase in revenue of $3.8 million again illustrating leveraged earnings growth on increased revenue and the execution of our business model. Commercial revenues for our battery and energy products business grew by almost 7% year-over-year driven by continued strength in our 9-volt product line use and smoke detectors and growth in shipments of our rechargeable batteries for medical device applications. Government defense revenues for batter and energy products almost doubled year-over-year driven by sales to OEMs and the DLA which led to an overall battery energy product sales increase of 31%. Although our communication systems business revenues were roughly the same as last year’s second quarter, the composition of revenue improved with sales of a broad range of new products to our OEM channels and a more consistent day to day flow business; led by momentum in our batter energy products business, total Company revenue increased by approximately 25% in the prior year, the second consecutive quarter of double digit year-over-year revenue growth. Total Company gross margin rate in Q2 2015 increased year-over-year by 320 basis points or 30.9% driven by favourable mix as well as volume leverage, achieving 30% plus total Company gross margin, remains a key starting point in our stated 30, 5, 5, 10 equals 10 business model equation which guides us in allocating funding for revenue initiatives such as new product development and market reach expansion, while targeting an initial 10% operating margin rate goal. We also continued to tighten our operating expenses while continuing to fully fund revenue growth initiatives; reducing operating expense 9% in the face of increasing year-over-year revenue, improved our base cost as a percent of sales by 980 basis points. Adding it all up, in Q2 2015, the combined effect of increased revenue, improved gross margins and reduced operating expenses led to a 1,300 basis point favourable swing in total Company operating margin rate year-over-year demonstrating significant leverage to earnings growth. Now, I’d like to ask Ultralife’s CFO, Phil Fain, to take you through additional details of the second quarter 2015 financial performance. Phil?

Thank you, Mike and good morning everyone. Earlier this morning, we released our second quarter results for the period ended June 28, 2015. Consolidated revenues for the second quarter totalled $19 million representing a $3.8 million or 25% increase from the $15.2 million for the second quarter of 2014. Revenues from our Battery & Energy Product segment were 16.0 million, an increase of 3.8 million or 31% from last year, reflecting growth in both government and defense and commercial sales. The year-over-year growth of 94% in government and defense sales was driven by higher sales of batteries to a large international crime defense supplier in shipments of primary batteries to the U.S. government’s Defense Logistics Agency for the third consecutive quarter. Commercial sales for the second quarter of 2015 increased 7% over 2014 with higher shipments of 9-volt batteries for large global smoke detector OEMs and rechargeable batteries into medical channels. Commercial sales were up 14% sequentially over the first quarter. As a result Battery & Energy Product sales were split 58-42 between commercial and government and defense compared to 72, 28 for the 2014 period. Communication system sales of 3.0 million slightly decreased by 51,000 or 1.7% from the 2014 period, the second quarter of 2014 benefitted from the fulfillment of 1.9 million order for our universal vehicle adapters shortly after its market launch to a large U.S. prime. Nevertheless for the 2015 period, we experienced more broad-based sales as well as increases in our order flow reflecting increased demand from system integrators and support of the U.S. Department of Defense programs in international projects. On a consolidated basis, the commercial, the government defense was almost evenly balanced at 49-51 versus 58-42 for the year earlier period. Our consolidated gross profit was 5.9 million compared to 4.2 million for…

Thank you, Phil. With respect to our revenue growth initiatives, in 2015 we remain focused on three core elements. Expanding our market sales reach, new product development and pursuing acquisitions. In our battery and energy products business, our commercial diversification strategy continues. And in Q2 commercial market sales represented 58% of total battery and energy products revenue. Our core 9-volt lithium battery demand remains solid and was recently bolstered by some new mandate requirements for smoke detectors particularly in Europe. 9-volt sales represented 25% of total B&E Q2 revenue and were up 31% year-over-year. Also noteworthy from an operational standpoint the short-term OEM volume increases we saw earlier in the year were a good test of a lean manufacturing flexing capability of our China facility and team through massive demand spike without major cost editions or otherwise inefficient disruptions to the operations. With our Ultralife Thin Cell technology providing the highest capacity lithium 9-volt battery on the market today and regulatory criteria's driving longer life smoke life smoke detector capability we remain well position for serving the global smoke detector market. Also after our length in country business development cycle with several key customers we are starting to get some good traction with our own locally manufactured Thionyl Chloride primary batteries in China for [indiscernible] applications. In the global medical market battery and charger sales to OEM's on respiratory devices and fusion pumps, AEDs, medical cards and diagnostic devices represented 18% of our business and were up almost 45% year-over-year. We continue to develop new commercial revenue streams from close collaboration with other OEM device manufactures and applications serving not only medical but also safety and security, asset tracking and portable energy storage markets. The investment over the past several years in new products and the accumulation of these diversified…

Thank you. [Operator Instructions] We’ll take our first question from Gary Siperstein with Eliot Rose Asset Management.

You hit it out of the ballpark in just about every metric, I mean it really seems like it's coming together tremendously. Just a couple of follow-up questions on Mike you mentioned I think a new product, I think you said Auto Topas in China or is that for the 9-volt and can you just explain what the opportunity is?

Yes Gary this is something we’ve been talking about over a last couple of years where we provide either a thin cell battery or the Thionyl Chloride primary itself for the Topas devices used throughout the roads in China. It's taken several years doing lots of different trials and now we’re starting to see unit shipments in the hundreds of thousands of levels versus in the past maybe so for example. So we like that because in addition to that 9-volt product which is manufacturing in China we’ve spent some investment over the years to increase our capability and productivity of our tooling and to see the Topas business come to fruition after a couple of year of work is quite exciting for us, it helps diversify that operations. So we’re not just solely dependent on 9-volt product in our China operations.

So that’s not something on the com, you actually had some revenues in Q2?

That’s correct and it continues to grow.

And in terms of the medical, is that -- are we at a point now where I guess sequentially that is stagnant in terms of the four, or five, or six different applications or is that increasing like three new applications maybe three or six months ago that we were shipping on and now there is five applications or seven. Can you give me a little sense of the cadence?

That continues to grow as well and I mentioned in my prepared remarks that we have some product development and some FDA approvals that we expect to have them through the end of this year and into next year which would add to that revenue stream in medical device product. So I would say it continues to grow, it's slow given the nature of approval cycle, but it's a never -- and no way really hit a top, I think there is still opportunity for growth there.

And also the smoke detector, can you give us a sense of that cadence as well you said mostly Europe is that expanding from country-to-country due to these new mandates is that a multiyear opportunity how do you frame that?

I believe it's a multiyear opportunity I mean the demand surge that we've saw in the early part of the year which what I referred to in the comments of the OEM spike and how the China team responded to that was result in some legislation in particular European country where there was a mandate for smoke detectors which here before wasn’t in place in the past calls we've talked about that due to prior department associations and various movements with municipalities on a prudential level and you can even maybe nationwide there is a desire to have longer life batteries and sealed smoke detectors such that when those batteries ware out people don’t disable a smoke detectors because they haven’t replace the battery so were watching a number of different areas for continued growth it's difficult to predict when it is going to happen and honestly it feel like some of the stuff that happened in Europe early in the year caught a couple of people buys surprise not just us but quite frankly even some of the own device manufactures so we still think that dynamic of longer life les user interfaceable and using or not using smoke detectors I think the legislation is trending more towards that being an opportunity first to grow and liable business on a worldwide basis.

And you mentioned in the communication systems the sequential improvement the better mix and more broad based orders so can you tell me what really what that means in other words is it maybe last quarter to first quarter it was the revenue level perhaps was four or five customers and now it's 8 or 10 or is it different products what do you mean by broad based orders?

Different products and I try to make reference in my prepared remarks about the power amplifier business which is still one of the core product lines for the communication systems business what we saw after the wars in Afghanistan and Iraq that which were quite intensive from the standpoint of needing of amplifiers due to the terrain we know that there was a huge demand as the military buyers well in excess of current demand so you don’t run out and so after repatriation occurred from both the Iran and Afghanistan wars we knew that there was a surplus of some of our core 20 volt amplifiers out in the field and so as time goes on now and technology continues to involve and there is the consumption of some of those that residual to supply chain we’re starting to see a nice pick up and the demand of our core product lines so not only do we have the revenues that were getting from a integrated solutions and some of the vehicles that to your products but were also starting to see a little bit of the a recovery in our core power amplifier business and we view that as a positive for our communication system business.

Let me ask you in terms of it seems like I know you are equally frustrated but the big com order that we’d been hoping for has been just stating for I don’t know if it's two years or four years by now of Witchcraft but for a while there was four or five or six potential significant orders announceable orders that were moving through the procedures to get a an actual award. Can you give us any color on that have we lost any of the competition had any of them awarded or there are all live and active which is the slowness of the government?

There is still a live and active I mean I'm not aware any of those major opportunities that we may have alluded to that we've lost but priorities change the military has a precious amount of funding or spending on different products and different capabilities and those varies requirements from different branches of the service we get our ourselves extremely well aligned and in some times the money goes to some other project and not ours so we’re still very optimistic about what the opportunities are with some of the longer range larger programs for account systems. What's been very positive is that our battery energy products business continues to do well which is giving us some P&L cover if you will to continue invest in some of longer term opportunities for com system so we've been able to throughout over the last two quarters or three quarters some good profitability, some good top line growth organically while still continuing to position ourselves for some of those larger program opportunities for com systems. I think we all are frustrated that they haven’t had them sooner but we’re 100% behind our com systems team and employees are putting their efforts with the customers because ultimately you won't believe what they are doing and want to continue to support the work wider.

I mean I think there was a recently in the last 90 days I think Harris and maybe one of Harris’ competitors were both I guess qualified I think was an IDQ and it was over billion dollars I think it was communications or radios or things like that is that something do we supply Harris on that or and do we supply the competitors well?

Yes. We don’t comment on specific relationship with specific radio manufactures but our strategy is to support whomever comes to us for products to help support their efforts to win and it just really deploy a strategy it's good to be wanted by everybody and that I have to try to pick winners or losers. So we work closely with each of the individual OEMs we maintain the professionalism in keeping things separate but remember it comes with us and collaborate with us on a product offering integrated solution. We want to do everything we possibly can to help make them win.

Okay, and in terms of the inventory with sales increasing and outside of Facebook and Google, there are not many public companies that have been increasing sales lately. I hate to put you in that category. But with sales increasing, we’re still seeing moderation in your inventory. So Phil is that a good place where we should maintain at around 24 million even though sales are increasing?

My suggestion on that Gary is a definitive no. We feel that there continues to be additional opportunity to reduce inventory, to increase inventory turns and we’re going to continue our efforts through the lean process into sound business management to take advantage of this very cheap financing alternative for the Company.

And still I don’t -- I couldn’t dig it out, I tried to dig it out earlier, I couldn’t find it. What did we do in Q3 last year and Q4 last year?

As far as EPS growth Gary?

Yes, sales and EPS.

Sure, EPS in Q3 last year was negative $0.02, Q4 of last year was positive $0.05.

And do you have the revenue figure for Q3 and Q4?

Q3 last year was 16.1, Q4 last year was 19.9.

So congratulations again on three profitable quarters in a row. And I am not really asking to comment on this, but historically I think the back half of the year has been a little stronger. I don’t know if that’s seasonal budget flushes or the government’s fiscal year ended in the back half of our calendar year. But if one were to say that you could possibly repeat the Q2 and Q3 with a nickel and then have a little better in the fourth quarter. We have the situation where we could do $0.20 this year. And all of a sudden on the bid side of the stock, we’re on to 20 times earnings and still under book with the share buybacks, with the reduced denominator, I think, book is 4.05, 4.10. And then if we could add to some growth next year, even just $0.0205 a quarter next year get to the $0.30 and then at $4 we’re only 13 times. So, we seem exceptionally cheap, we’re still not discovered by the street. With that spectacular quarter today, the stocks only traded 3,200 shares. So I am not asking you to comment on my earnings projections and possibilities, but it seems like the leverage in the model it’s very-very possible to have a real significant ramp in EPS in the back half of the year and into next year. Therefore, the stock under book under one time sales with a low teen multiple seems excessively cheap. And then in light of the volume today, it shows to me that we’re really still not followed by anyone, normally a company people were expecting couple of cents in earnings and you do $0.05. There is volume. There is a beat, and a beat in a ray people start to think. So I know you had been down on the business and I am not telling you to necessarily raise your head. But being a public company most companies do both, they love the businesses and they do the investor relations to get some attention. So could you tell us how you’re going to get attention while you continue to deliver good numbers, to get analyst coverage, to increase the volume and the stock, et cetera?

I agree with you and understand your point of view on this. And becoming more active in terms of investor marketing is certainly on the table as we continue to build sustainable top-line growth we expect to be more positively disposed telling our story to perspective investors.

So the three black quarters in a row going into -- strictly into this seasonally strong period, you’re going to get out there a little more and maybe be a little more proactive than reactive on the IR side of it?

That would be the inset.

Would you guys consider a nominal dividend so again differentiate yourself and there’s certain institutions that can only buy dividend paying stock, even if it was just a penny a quarter with your significant cash generation capabilities and the leverage in the model the fact that you can make so much money and generate so much cash on such a small level of revenues, could put us on the screen for a lot more potential buyers. And the only reason I mentioned this Mike is because we’ve talked about acquisition for couple of years now and nothing has come to fruition. And I am not pushing you obviously rather you do nothing than a bad acquisition. So I know it takes time, et cetera. But since we don’t know if we’re going to make an acquisition for sure, and we have the excess capital in addition of the buyback program, even a penny a quarter dividend doesn’t question much. But it again help attract attention to the improving story.

Gary thank you for your thoughts and I’ll just share with you that management and the Board are continuously evaluating capital allocation and the best opportunities to maximizing sustained shareholder value, they have the topic that we’re continuously discussing and very important to us. We’re going to do what we feel is best for the company going forward.

Thank you.

And Gary if I could talk about the acquisition just really quickly, it's still extremely high priority for us, we have a disciplined process, we talked a little bit in the past about our pipeline and some of the things we come across. The other key point I think I make is that as our results become attractive, I think we become more attractive potential buyer and we were having some struggling quarters in the middle of a turnaround, I think some of that is more difficult to have some of the really good candidates out there take you seriously. And now just -- now we are having the financial capability, but the fact that I think we’re more of a attractive companies to for other team that to join up with, I think we’ll have some other opportunities first and start acquisitions.

And just remind me the -- is the line of credit was 25 was a flex or a bubble to the 35 million?

Gary it’s 20 million with a flex to 35.

[Operator Instructions] It looks like we have no other questions at this time.

Well, thank you very much everybody for joining the call for our second quarter 2015 recap. I look forward to sharing with you our quarterly progress on each of our quarter’s conference calls in the future. Thank you and have a great day.

This does conclude today’s conference. And thank you for your participation.