Ultralife Batteries Reports Third Quarter Results

The third quarter revenue reflects lower shipments of BA-5390batteries to the U.S. military, as anticipated. Gross margins for thequarter were 15% compared to 20% in the same quarter last year,reflecting lower production volumes. Operating expenses were $3.9million compared with $3.3 million last year, reflecting an increasedcommitment to new product development and higher administrative costs.Income taxes in the third quarter of 2005 amounted to a benefit of$0.4 million. The net loss for the third quarter of 2005 was $1.3million, or $0.09 per share, compared with net income of $1.4 million,or $0.09 per diluted share, for the same period a year ago.

For the nine-month period ended October 1, 2005, revenues totaled$52.7 million compared with $79.8 million reported for the same periodlast year, resulting mainly from lower shipments of BA-5390 batteriesto the U.S. military, and offset in part by higher commercial revenuesand other military-related sales. The company reported an operatingloss of $3.0 million for the first nine months of 2005 compared tooperating income of $8.5 million last year, reflecting the revenuedecline and higher operating expenses. The net loss for the first ninemonths of 2005 was $4.3 million, or $0.30 per share, compared to netincome of $4.3 million, or $0.28 per diluted share, for 2004.

"Ultralife's third quarter results were essentially consistentwith our latest guidance, which assumed no order activity from theU.S. military for BA-5390 batteries," said John D. Kavazanjian,president and chief executive officer. "As anticipated, we did finishall testing on the new version of the BA-5390 with the state-of-chargeindicator in September and the qualification process is in the finalapproval stage. Longer term, the U.S. military has issued newguidelines requiring a state-of-charge indicator in all new contractsfor multi-cell batteries, a development which bolsters our convictionthat our competitive advantages create a strong opportunity for us tocontinue gaining share in the military market.

"In addition, during the third quarter we continued to advance ourcommercial business as we started shipping to new search and rescuecustomers, maintained strong activity in medical applications, andbegan production under our new automotive telematics backup batterycontract for shipments starting in the fourth quarter."

Kavazanjian concluded, "Recognizing the ongoing uncertain timingand quantity of BA-5390 orders, we took steps in the third quarter toreduce overhead costs by up to $1 million on a quarterly basis. Weexpect these actions, including the implementation of tightenedspending controls and greater expense scrutiny, will reduce ourbreakeven cost infrastructure to $18 million in quarterly revenues,assuming a steady rate of production. With this cost structure, westill have the manufacturing flexibility necessary to ramp up quicklyin response to a resumption in BA-5390 orders."

Outlook

Management expects fourth quarter revenues to be in the range of$19 million, consistent with the most recent guidance for thecompany's second half revenues of approximately $35 million, assumingno BA-5390 order activity from the U.S. military. Sales to commercialcustomers, particularly in the automotive telematics market, areexpected to grow from the third quarter, as are sales of other batteryproducts direct to the military and military battery assemblers. In aneffort to further trim current inventory levels, production rates areprojected to remain temporarily lower throughout the fourth quarter.This will likely result in under-absorbed manufacturing overheads and,as a result, management is projecting an operating loss in the rangeof $0.5 million for the fourth quarter.

About Ultralife Batteries, Inc.

Ultralife is a global provider of power solutions for diverseapplications. The company develops, manufactures and markets a widerange of non-rechargeable and rechargeable batteries, charging systemsand accessories for use in military, industrial and consumer portableelectronic products. Through its range of standard products andengineered solutions, Ultralife is able to provide the next generationof power systems. Industrial, retail and government customers includeGeneral Dynamics, Philips Medical Systems, General Motors, Energizer,Kidde Safety, Lowe's, Radio Shack and the national defense agencies ofthe United States, United Kingdom and Germany, among others.

Ultralife's headquarters, principal manufacturing and researchfacilities are in Newark, New York, near Rochester. Ultralife (UK)Ltd., a second manufacturing facility, is located in Abingdon,England. Both facilities are ISO-9001 certified. Detailed informationabout Ultralife is available at the Company's web site,www.ultralifebatteries.com.

This press release may contain forward-looking statements based oncurrent expectations that involve a number of risks and uncertainties.The potential risks and uncertainties that could cause actual resultsto differ materially include: worsening global economic conditions,increased competitive environment and pricing pressures, disruptionsrelated to restructuring actions and delays. Further information onthese factors and other factors that could affect Ultralife'sfinancial results is included in Ultralife's Securities and ExchangeCommission (SEC) filings, including the latest Annual Report on Form10-K.

Conference Call Information

Investors are invited to listen to a live webcast of theconference call at 10:00 a.m. ET on November 3, 2005 athttp://investor.ultralifebatteries.com. To listen to the live call,please go to the web site at least fifteen minutes early to downloadand install any necessary audio software. For those who cannot listento the live broadcast, a replay of the webcast will be availableshortly after the call at the same location for 90 days. Investors mayalso listen to a telephone replay of the conference call by dialing888-203-1112, Reservation #4404901, during the period starting at 1:00p.m. ET November 3 and ending at 1:00 p.m. ET November 10, 2005.

Ultralife(R) is a registered trademark of Ultralife Batteries,Inc.
ULTRALIFE BATTERIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
---------------------------------------------------------------------

Three-Month Periods Nine-Month Periods
Ended Ended

October September October September
1, 2005 25, 2004 1, 2005 25, 2004
--------- --------- -------- ----------

Revenues:
Non-rechargeable products $ 12,805 $ 21,343 $43,305 $ 72,986
Rechargeable products 2,286 2,588 7,676 5,653
Technology contracts 601 462 1,677 1,181
--------- --------- -------- ----------
Total revenues 15,692 24,393 52,658 79,820

Cost of products sold:
Non-rechargeable products 10,994 16,570 35,845 54,391
Rechargeable products 1,830 2,608 6,730 6,240
Technology contracts 508 339 1,495 933
--------- --------- -------- ----------
Total cost of products sold 13,332 19,517 44,070 61,564
--------- --------- -------- ----------

Gross margin 2,360 4,876 8,588 18,256

Operating expenses:
Research and development 969 692 2,874 1,755
Selling, general, and
administrative 2,902 2,653 8,745 7,982
--------- --------- -------- ----------
Total operating expenses 3,871 3,345 11,619 9,737
--------- --------- -------- ----------

Operating (loss)/income (1,511) 1,531 (3,031) 8,519

Other income (expense):
Interest income 44 20 162 67
Interest expense (220) (174) (593) (409)
Write-off of UTI investment
and note receivable - - - (3,951)
Miscellaneous (9) (61) (203) 32
--------- --------- -------- ----------
(Loss)/income before income
taxes (1,696) 1,316 (3,665) 4,258
--------- --------- -------- ----------

Income tax provision/(benefit)-
current 5 (101) 3 (22)
Income tax (benefit)/provision-
deferred (385) - 637 -
--------- --------- -------- ----------
Total income taxes (380) (101) 640 (22)
--------- --------- -------- ----------

Net (loss)/income $ (1,316) $ 1,417 $(4,305) $ 4,280
========= ========= ======== ==========


(Loss)/earnings per share -
basic $ (0.09) $ 0.10 $ (0.30) $ 0.31
========= ========= ======== ==========
(Loss)/earnings per share -
diluted $ (0.09) $ 0.09 $ (0.30) $ 0.28
========= ========= ======== ==========


Weighted average shares
outstanding - basic 14,642 14,238 14,497 14,026
========= ========= ======== ==========
Weighted average shares
outstanding - diluted 14,642 15,121 14,497 15,104
========= ========= ======== ==========


ULTRALIFE BATTERIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(unaudited)
----------------------------------------------------------------------

October 1, December 31,
ASSETS 2005 2004
----------- ------------

Current assets:
Cash and investments $ 3,006 $ 11,529
Trade accounts receivable, net 10,897 8,585
Inventories 19,679 13,938
Prepaid expenses and other current assets 4,545 6,131
----------- ------------
Total current assets 38,127 40,183

Property and equipment 20,729 20,202

Other assets 21,906 20,749
----------- ------------

Total Assets $ 80,762 $ 81,134
=========== ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Short-term debt and current portion of
long-term debt $ 8,094 $ 2,390
Accounts payable 5,993 3,545
Other current liabilities 4,353 3,603
----------- ------------
Total current liabilities 18,440 9,538
----------- ------------

Long-term liabilities:
Long-term debt and capital lease
obligations 48 7,215
Other long-term liabilities 349 756
----------- ------------
Total long-term liabilities 397 7,971
----------- ------------

Shareholders' equity:
Common stock, par value $0.10 per share 1,544 1,502
Capital in excess of par value 130,192 127,299
Accumulated other comprehensive income (935) (605)
Accumulated deficit (66,498) (62,193)
----------- ------------
64,303 66,003
Less --Treasury stock, at cost 2,378 2,378
----------- ------------
Total shareholders' equity 61,925 63,625
----------- ------------

Total Liabilities and Shareholders' Equity $ 80,762 $ 81,134
=========== ============