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Ultralife Batteries CEO looks to double firm’s revenues to $200 million by ’09

The top executive at Ultralife Batteries Inc. believes the company will reach $200 million in annual revenues over the next three to five years.
“Next year should be a good cash-generating year for us,” said John Kavazanjian, president and CEO.
He expects to reach that number over the next few years by estimating that Ultralife will receive some $80 million in the military market, $50 million in rechargeable-battery sales, $24 million in 9-volt battery sales, $30 million in automotive telematics and $15 million in search and rescue.
In September, the company reported that it expects to generate no less than $97 million in revenues this year.
Since taking the helm of the Wayne County firm in 1999, Kavazanjian has made several changes. Over the past five years, the company has cut costs by reducing its inventory, labor content and scrap rate.
What also helps Ultralife, Kavazanjian said, is the company’s ability to do something well and build on that.
“We identify target markets and push at those markets,” he said.
Kavazanjian noted sometimes products they would not think would have a great appeal can become commercialized.
For example, a standard rechargeable version of one of Ultralife’s military batteries was used by non-military customers for things such as the tracking of shipping containers, heating thermal blankets for emergency medical technicians and for portable instruments at factories.
They also offer some exclusive products.
Ultralife has the only lithium nine-volt battery on the market, company officials said. With a 10-year life expectancy, the battery is used in smoke detectors for companies such as Kidde PLC and First Alert/Power Mate Inc.
The company also makes lithium thin-cell batteries, which are wafer-thin, long-lasting, lightweight and operate in a wide range of temperatures.
The military market, domestic and international, continues to be Ultralife’s biggest, generating some 60 percent of the company’s business. It is one of three companies that mass produce industrial-grade lithium batteries for the U.S. Army. It has a competitive advantage for sulphur manganese batteries, which are safer and have more energy than sulphur dioxide batteries, which have been around longer, company officials said. The company is able to offer a variety of battery types at competitive rates.
Kavazanjian expects to see growth in commercial areas, including automatic telematics, which is the integration of mobile communications with vehicle information and management systems. It includes bringing cellular phone, Internet and navigation and safety services to the vehicle. Ultralife has a contract with AB Volvo and is entering into another agreement with another automotive manufacturer that the company declined to identify.
Other areas expected to increase for the company next year include homeland security, where Ultralife would provide batteries for items such as a portable fingerprinting card; search and rescue, for emergency beacons used when ships and airplanes need assistance; and the medical arena, where growth is expected in wearable medical devices.
Kavazanjian said there has been and will continue to be growth in the rechargeable-battery business, which has grown to $2.6 million in the third quarter, up from $300,000 a year ago.
Ultralife has been waiting for confirmation of a large, long-term defense contract. Because the military has made some changes in its purchasing organization, the wait has been much longer than expected, Kavazanjian said. The transfer of procurement authority from the U.S. Army Communications and Electronics Command to the Defense Logistics Agency has caused some delays and is a factor company officials think will affect fourth quarter earnings.
In October, the company laid off some 126 hourly workers due to the uncertainty on military sales. Kavazanjian is optimistic Ultralife will be awarded the contract, bringing the company back to base profitability and possibly adding back some of the jobs that were cut.
The company employs 460 workers in Newark and 80 in its U.K. plant.
Financially, Ultralife is on solid footing, said Robert Fishback, chief financial officer. The company has nearly $13 million in cash and investments.
For the first nine months of 2004, the company recorded revenues of $79.8 million, up 44 percent from $55.4 million over the same period last year. Net income for that same period was $4.3 million, compared to $4.2 million in 2003.
David Kurzman, an analyst with Needham and Co. in New York City, who follows Ultralife, said the stock is performing well and the company could see an increase in revenues next year of at least 20 percent.
If Ultralife receives the military contract, the company could start seeing returns on that in the second quarter of 2005, Kurzman said. Ultralife’s non-military business is also expected to do well, he said, especially the rechargeable-battery business, which could double next year from $7 million in 2004 to $14 million in 2005.
(adeckert@rbj.net / 585-546-8303)

12/03/04 (C) Rochester Business Journal


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