20140509HRTQ114EarningsReleaseFINAL
NEWS RELEASE
25 Sawyer Passway ● Fitchburg, Massachusetts 01420


FOR IMMEDIATE RELEASE
Exhibit 99.01        
Arrhythmia Research Technology, Inc. Reports
Earnings Per Share of $0.09 on 6.9% Increase in First Quarter 2014 Sales
Net sales increased 6.9% over first quarter 2013 while gross margin expanded to 21.7% from 16.9%
Renewed cost discipline and favorable product mix drive margin expansion in the quarter
SG&A declines 8.1%, more than offsetting the increase in research and development investments related to new product development which grew 63.0% to $96,827
Achieved first quarterly profit in three years; 5.4% operating margin
FITCHBURG, MA, May 9, 2014 -- Arrhythmia Research Technology, Inc. (NYSE MKT: HRT) (“Micron Products” or “HRT”), operates through its wholly-owned subsidiary Micron Products, Inc. The Company is a diversified manufacturer of proprietary, highly engineered technologies, such as machined orthopedic implants, injection molded medical disposables, and sensors for biomonitoring electrodes. Today, the Company announced results for its first quarter ended March 31, 2014. The Company's consolidated financial results include certain discontinued operations from September 2012.
Salvatore Emma, Jr., the Company's President and CEO, commented, "We had a solid first quarter that reflects the many changes we have been making in the Company, including realigned product focus, cost discipline, LEAN production processes and identifying new opportunities for our specialized engineering design and manufacturing capabilities. A favorable mix of products, such as orthopedic implant components and software licenses, helped to improve margin in the quarter. Of note, we have increased our research and development efforts as new products, customers and capabilities will drive the future for the Company.”
Summary First Quarter Results
Three Months Ended March 31,
2014
2013
$  Change

% Change

Net sales
$
6,029,843

$
5,643,189

$
386,654

6.9
%
Net income (loss) from continuing operations before tax
260,319

(82,442)

342,761

415.8
%
Tax provision (benefit)
1,177

(84,509)

85,686

101.4
%
Net loss from discontinued operations, net of tax
(2,425)

(7,738)

5,313

68.7
%
Total net income (loss)
$
256,717

$
(5,671
)
$
262,388

 
Diluted earnings (loss) per share
$
0.09

$
0.00

$
0.09

 

Note: discontinued operations did not effect per share results





Arrhythmia Research Technology, Inc. Reports Earnings Per Share of $0.09 on 6.9% Increase in First Quarter 2014 Sales
May 9, 2014
Page 2 of 6

First quarter 2014 revenue of $6.0 million increased $0.4 million, or 6.9%, compared with the first quarter of 2013. Higher sales reflect the success of Micron Products’ precision-machined orthopedic implants, as well as $250K in sales of Predictor® licenses, the Company’s proprietary and customizable signal-averaging electrocardiography (SAECG) software used to help assess a patient’s risk of certain heart arrhythmias.
Gross profit grew 38% to $1.3 million, or 21.7% of sales. Expanded gross margin resulted from the significant operating leverage gained on increased volume of machined orthopedic implants and sensors, as well as a lower cost of goods sold associated with Predictor license revenue. Last year’s first quarter gross profit was $952 thousand, or 16.9% of sales.
Moderately higher selling and marketing expenses of $0.1 million reflect the Company’s strategy to grow sales of its higher margin, precision-machined orthopedic implants and other customer specific proprietary technologies for the military, law enforcement and automotive industries.
During the first quarter of 2014, the Company's general and administrative expenses declined
$0.1 million to 9.9% of sales compared with 12.8% of sales for the same period last year.
Research and development (R&D) expenses for the quarter increased $37,425 to $96,827, or 1.6% of sales, up from $59,402, or 1.1% of sales, last year.
“We are committed to the development of new products for the medical device, military and law enforcement industries. We believe that our R&D investments will drive future growth,” added Mr. Emma.
Interest expense increased $59,601 to $70,149 over the prior-year period as a result of the Company’s new credit facility, which it entered into in March 2013, and the subordinated promissory notes, which the Company entered into in December 2013.
Net income increased $262,388 to $256,717. On a diluted per share basis, earnings were $0.09 per share, measurably improved over break-even in the same period last year.
Mr. Emma concluded, “We are transforming Micron Products by exploiting our engineering design and manufacturing expertise to capture opportunities to diversify our products and customers. We are anticipating new sales potential combined with profitable, efficient operations. We are highly optimistic about our future and believe we are strategically positioned for growth over the long term.”
About Arrhythmia Research Technology, Inc.
The Company, through its wholly-owned subsidiary Micron Products, Inc., manufactures components, devices and equipment for medical, military, law enforcement, industrial and automotive applications. The Company's orthopedic implant machining operation produces quick-turn, high volume and patient-specific, finished orthopedic implants. The Company has custom thermoplastic injection molding capabilities as well, and provides a full array of design, engineering and production services and management. Its strategy for growth is to capitalize on its engineering expertise to develop proprietary products with its customers that rely on Micron’s extensive manufacturing capabilities for production. The Company is a market leader in the production and sale of silver/silver chloride coated and conductive resin sensors used as consumable component parts in the manufacture of integrated disposable electrophysiological sensors. In addition to its manufacturing capabilities, the Company also licenses proprietary customizable signal-averaging electrocardiography (SAECG) software used to help assess a patient's risk of certain heart arrhythmias.
The Company routinely posts news and other important information on its websites: http://www.arthrt.com and http://www.micronproducts.com



Arrhythmia Research Technology, Inc. Reports Earnings Per Share of $0.09 on 6.9% Increase in First Quarter 2014 Sales
May 9, 2014
Page 3 of 6


Safe Harbor Statement
The information made available in this news release contains forward-looking statements which reflect HRT's current view of future events, results of operations, cash flows, performance, business prospects and opportunities. Wherever used, the words "anticipate," "believe," "expect," "intend," "plan," "project," "will continue," "will likely result," "may," and similar expressions identify forward-looking statements as such term is defined in the Securities Exchange Act of 1934. Any such forward-looking statements are subject to risks and uncertainties and the Company's actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities could differ materially from historical results or current expectations. Some of these risks include, without limitation, the impact of economic and industry conditions, competition, food and drug safety issues, store expansion and remodeling, labor relations issues, costs of providing employee benefits, regulatory matters, legal and administrative proceedings, information technology, security, severe weather, natural disasters, accounting matters, other risk factors relating to our business or industry and other risks detailed from time to time in the Securities and Exchange Commission filings of HRT. Forward-looking statements contained herein speak only as of the date made and, thus, HRT undertakes no obligation to update or publicly announce the revision of any of the forward-looking statements contained herein to reflect new information, future events, developments or changed circumstances or for any other reason.

For more information contact:
 
 
Investor Contact:
Company Contact:
Alex P. Hamilton/Deborah K. Pawlowski
Derek T. Welch
Kei Advisors LLC
Controller
716.242.8632/716.843.3908
978-602-1443
ahamilton@keiadvisors.com/dpawlowski@keiadvisors.com
 








FINANCIAL TABLES TO FOLLOW



Arrhythmia Research Technology, Inc. Reports Earnings Per Share of $0.09 on 6.9% Increase in First Quarter 2014 Sales
May 9, 2014
Page 4 of 6


ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
Three months ended March 31,
 
2014
 
2013
Net sales
$
6,029,843

 
$
5,643,189

Cost of sales
4,718,557

 
4,691,041

Gross profit
1,311,286

 
952,148

Gross profit margin
21.7
%
 
16.9
%
Selling and marketing
291,672

 
240,375

General and administrative
594,631

 
724,130

Research and development
96,827

 
59,402

Total operating expenses
983,130

 
1,023,907

Income (loss) from continuing operations
328,156

 
(71,759)

Operating margin
5.4
%
 
NM

Other income (expense):
 
 
 
Interest expense
(70,149)

 
(10,548)

Other income (expense)
2,312

 
(135)

Total other expense, net
(67,837)

 
(10,683)

Income (loss) from continuing operations before income taxes
260,319

 
(82,442)

Income tax provision (benefit)
1,177

 
(84,509)

Net income from continuing operations
259,142

 
2,067

Discontinued Operations:
 
 
 
Loss from discontinued operations, net of tax benefits of $0 and $5,031 for the three months ended March 31, 2014 and 2013, respectively
(2,425)

 
(7,738)

Net income (loss)
$
256,717

 
$
(5,671
)
 
 
 
 
Earnings per share – basic

$0.09

 

$0.00

Earnings per share – diluted

$0.09

 

$0.00

Weighted average common shares outstanding – basic
2,722,239

 
2,704,239

Weighted average common shares outstanding – diluted
2,777,739

 
2,704,239


NM = not meaningful













Arrhythmia Research Technology, Inc. Reports Earnings Per Share of $0.09 on 6.9% Increase in First Quarter 2014 Sales
May 9, 2014
Page 5 of 6

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
As of
Assets
March 31, 2014
 
December 31, 2013
Current assets:
 
 
 
Cash and cash equivalents
$
297,248

 
$
749,766

Restricted cash
1,000,000

 
1,000,000

Trade accounts receivable, net of allowance for doubtful accounts of $40,000 at March 31, 2014 and December 31, 2013, respectively
4,046,038

 
3,803,853

Inventories, net
2,754,309

 
2,335,291

Prepaid expenses and other current assets
487,756

 
513,197

Assets from discontinued operations, current

 
1,509

Total current assets
8,585,351

 
8,403,616

Property, plant and equipment, net
7,593,779

 
7,579,556

Intangible assets, net
176,977

 
184,517

Other assets
172,498

 
185,595

Total assets
$
16,528,605

 
$
16,353,284

Liabilities and Shareholders’ Equity
 
 
 
Current liabilities:
 
 
 
Equipment line of credit, current portion

 
85,387

Term notes payable, current portion
$
474,470

 
$
335,760

Accounts payable
2,121,539

 
2,156,031

Accrued expenses & other current liabilities
477,715

 
436,775

Customer deposits
317,845

 
341,465

Deferred revenue, current
254,965

 
248,559

Performance guarantee liability
1,000,000

 
1,000,000

Liabilities from discontinued operations, current
320,702

 
319,787

Total current liabilities
4,967,236

 
4,923,764

Long-term liabilities:
 
 
 
Revolving line of credit
2,656,495

 
2,774,495

Equipment line of credit, non-current portion

 
538,707

Term notes payable, non-current portion
1,699,405

 
1,179,709

Subordinated promissory notes
424,690

 
417,769

Deferred revenue, non-current
166,288

 
172,316

Total long-term liabilities
4,946,878

 
5,082,996

Total liabilities
$
9,914,114

 
$
10,006,760

Shareholders’ equity:
 
 
 
Preferred stock, $1 par value; 2,000,000 shares authorized, none issued

 

Common stock, $.01 par value; 10,000,000 shares authorized; 3,926,491 issued, 2,722,239 outstanding at March 31, 2014 and December 31, 2013, respectively
39,265

 
39,265

Additional paid-in-capital
11,247,486

 
11,236,236

Treasury stock at cost, 1,204,252 shares at March 31, 2014 and December 31, 2013, respectively
(3,272,808)

 
(3,272,808)

Accumulated other comprehensive income
42,502

 
42,502

Accumulated deficit
(1,441,954)

 
(1,698,671)

Total shareholders’ equity
$
6,614,491

 
$
6,346,524

Total liabilities and shareholders’ equity
$
16,528,605

 
$
16,353,284




Arrhythmia Research Technology, Inc. Reports Earnings Per Share of $0.09 on 6.9% Increase in First Quarter 2014 Sales
May 9, 2014
Page 6 of 6


ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
 
Three months ended March 31,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net income (loss)
$
256,717

 
$
(5,671
)
Loss from discontinued operations
2,425

 
7,738

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
385,359

 
337,426

Non-cash interest expense
6,921

 

Share-based compensation expense
11,250

 
14,246

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(242,185)

 
24,840

Inventories
(419,018)

 
(344,549)

Deposits, prepaid expenses and other assets
25,441

 
122,391

Other non-current assets
13,097

 
(41,921)

Accounts payable
(34,492)

 
(24,940)

Accrued expenses and other current liabilities
23,724

 
56,013

Other non-current liabilities
(6,028)

 
(21,069)

Net cash provided by operating activities of continuing operations
23,211

 
124,504

Net cash used in operating activities of discontinued operations
(1,509)

 
(46,178)

Net cash provided by operating activities
21,702

 
78,326

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(391,738)

 
(63,568)

Cash paid for patents and trademarks
(303)

 
(32,828)

Net cash used in investing activities from continuing operations
(392,041)

 
(96,396)

Net cash provided by investing activities from discontinued operations

 
78,814

Net cash used in investing activities
(392,041)

 
(17,582)

Cash flows from financing activities:
 
 
 
Proceeds from (payments on) revolving line of credit, net
(118,000)

 

Proceeds from equipment line of credit
116,905

 

Payments on term notes payable
(82,593)

 
(186,657)

Net cash used in financing activities from continuing operations
(83,688)

 
(186,657)

Net cash used in financing activities from discontinued operations

 
(41,183)

Net cash used in financing activities
(83,688)

 
(227,840)

Net decrease in cash and cash equivalents
(454,027)

 
(167,096)

Cash and cash equivalents, beginning of period
751,275

 
508,590

Cash and cash equivalents, end of period
297,248

 
341,494

Less: cash and cash equivalents of discontinued operations at end of period

 
21,503

Cash and cash equivalents of continuing operations at end of period
$
297,248

 
$
319,991