FITCHBURG, Mass., March 10, 2016 (GLOBE NEWSWIRE) -- Arrhythmia Research Technology, Inc. (NYSE MKT:HRT) (the "Company"), through its wholly-owned subsidiary, Micron Products, Inc., a diversified contract manufacturing organization that produces highly-engineered, innovative medical device components requiring precision machining and injection molding, announced results for its fourth quarter and year ended December 31, 2015.

"2015 was a challenging year, but we were able to expand product mix, manufacturing capabilities, and add sales personnel in an effort to grow in higher margin product lines," commented Salvatore Emma, Jr., President and CEO.  "The investment in new sales personnel is generating new leads and quoting activity for both our machined and plastic injection molded product lines.  In the second quarter of 2016 we should begin to realize the efforts of our expanded sales activities."
Fourth Quarter 2015 Review                    
                     
$ In thousands Q4 2015   Q4 2014 $  Change % Change
Net sales $   4,752     $ 5,741   $   (989 )   (17.2 %)
Gross profit $   617     $ 1,032   $   (415 )   (40.2 %)
  Gross margin     13.0   %   18.0 %        
Net income (loss) $   (387 )   $ 32   $   (419 )  
Diluted earnings (loss) per share $   (0.14 )   $ 0.01   $   (0.15 )  
                           

Fourth quarter net sales decreased $1.0 million compared with the same period last year, primarily due to a 23.4% and 23.8% decline in custom thermoplastic injection molding and orthopedic implant components, respectively.  The decrease in custom thermoplastic injection molding was due in part to the expiration of certain government contracts.  The decrease in orthopedic implant components was due to reduced demand in the quarter.  Also impacting the quarter as compared with the same quarter last year was lower net sensor sales resulting from a 7.2% decline in sensor volume, a 10.9% decline in the weighted average cost of silver and delays of product orders from international customers reacting to the strength of the U.S. dollar.

The $415 thousand decline in gross profit is largely due to lower net sales of orthopedic implant components, combined with increased labor costs related to the validation of new processes and equipment in the fourth quarter of 2015.  The decline was also due in part to lower net sales of custom thermoplastic injection molding for the reasons stated above.

Total operating expenses were $914 thousand, or 19.2% of sales, in the fourth quarter of 2015, and reflect increased costs related to the expansion of the Company's sales force, partially offset by decreased commissions as a result of lower sales.  The 2014 fourth quarter had operating expenses of $934 thousand, or 16.3% of sales. 

Consolidated net loss was $387 thousand, or $0.14 per diluted share, in the fourth quarter of 2015 compared with net income of $32 thousand, or $0.01 per diluted share in 2014.  The 2015 period includes the impact of lower sales and gross profit as well as costs associated with the expansion of the sales force.

EBITDA (1) (income from continuing operations adjusted for income taxes, other income and expense, interest, depreciation and amortization, impairment of intangibles and share-based compensation expense) for the fourth quarter of 2015 was $71 thousand, or 1.5% of net sales, compared with $471 thousand, or 8.2% of net sales, for the same period in 2014.  (1)See attached table for additional important disclosures regarding the Company's use of EBITDA, as well as a reconciliation of net income (loss) from continuing operations to EBITDA.
2015 Review                    
                     
$ In thousands 2015   2014 $  Change % Change
Net sales $   21,495     $ 24,070   $   (2,575 )   (10.7 %)
Gross profit $   3,163     $ 4,638   $   (1,475 )   (31.8 %)
  Gross margin     14.7   %   19.3 %        
Total net (loss) income $   (429 )   $ 659   $   (1,088 )  
Diluted (loss) earnings per share $   (0.15 )   $ 0.23   $   (0.38 )  
                           

Net sales for 2015 were $21.5 million, a decrease of $2.6 million, or 10.7%, from 2014.  The decline in net sales was due primarily to a 20.0% and 11.7% decrease in net sensor sales and orthopedic implant components, respectively, partially offset by a 7.9% increase in net sales of custom thermoplastic injection molded components. 

The decline in net sensor sales was driven by 10.9% lower volume, in part due to lower demand from the Company's largest 2014 customer, and a 17.7% reduction in the weighted average price of silver compared with 2014.  The decline in orthopedic implant components was due to product and customer mix, and production delays encountered in the first quarter.  The increase in net sales in custom thermoplastic injection molding was due largely to increased orders for automotive components. 

Gross profit in 2015 decreased by $1.5 million, or 31.8%, to $3.2 million, or 14.7% as a percentage of net sales.  The decrease was due primarily to lower order volume and product mix for machined orthopedic implant components as well as lower order volume for sensors combined with declining silver prices and the absence of sales in 2015 of the Company's Predictor licenses.  Gross profit was also impacted by increased expenses in the Company's quality functions to support the long-term growth strategy for component manufacturing of machined and plastic parts.  Gross margin pressure was partially offset by improved efficiencies, negotiated price reductions in raw materials, and investments in automation.

Total operating expenses for 2015 were $3.7 million, or 17.2% of net sales, a decrease of $64 thousand, or 1.7%, when compared with the prior year.  The decline in operating expenses was attributable to lower expenses for research and development staff and product development, and bonus and commission compensation.  These decreases were partially offset by higher selling and marketing expenses due to the addition of two salespeople as well as consulting and professional fees, insurance, and director compensation resulting from the addition of two new directors in 2015.

Consolidated net loss was $429 thousand, or $0.15 per diluted share, in 2015 compared with net income of $659 thousand, or $0.23 per diluted share, in 2014. The 2015 period includes income from discontinued operations of $363 thousand as a result of the final discharge order related to the bankruptcy of RMDDxUSA.

EBITDA (1) in 2015 was $1.1 million, or 5.1% of net sales, compared with $2.5 million, or 10.2% of net sales, for 2014.  ( 1) See attached table for additional important disclosures regarding the Company's use of EBITDA, as well as a reconciliation of net income (loss) from continuing operations to EBITDA.

Cash flow and financial resources

At December 31, 2015, the Company had cash on hand of $272 thousand and working capital of   $2.5 million.  In 2015, the Company generated net cash from operating activities of continuing operations of $1.5 million and used net cash of $1.2 million for capital expenditures.

Outlook: Investing for growth

Mr. Emma concluded, "The investments we are making are essential to broadening our customer base and product mix.  Expanding our manufacturing capacity and increasing our technical capabilities in areas like machining, finishing and automation should contribute to improved margins.  We are confident that our investments in equipment and new processes, and strengthening of our sales and marketing organization, will put us on a path for long term growth and profitability."

About Arrhythmia Research Technology, Inc.Arrhythmia Research Technology, Inc., through its wholly-owned subsidiary, Micron Products, Inc., is a diversified contract manufacturing organization that produces highly-engineered, innovative medical device components requiring precision machining and injection molding.  The Company also manufactures components, devices and equipment for military, law enforcement, industrial and automotive applications.  In addition, 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.  The Company's strategy for growth is to build a best-in-class quality organization and capitalize on its engineering design expertise and reliable, proprietary manufacturing processes to further penetrate the medical device contract manufacturing market.

The Company routinely posts news and other important information on its websites: http://www.arthrt.com, http://www.micronproducts.com and http://www.micronmedical.com.

Safe Harbor StatementForward-looking statements made herein are based on current expectations of Arrhythmia Research Technology, Inc. ("our" or the "Company") that involve a number of risks and uncertainties and should not be considered as guarantees of future performance. The factors that could cause actual results to differ materially include our ability to obtain and retain order volumes from customers who represent significant proportions of net sales; our ability to maintain our pricing model, offset higher costs with price increases and/or decrease our cost of sales; variability of customer delivery requirements;  the level of and ability to generate sales of higher margin products and services; our ability to renew our credit facility and manage our level of debt and provisions in the debt agreements which could make the Company sensitive to the effects of economic downturns and limit our ability to react to changes in the economy or our industry; failure to comply with financial and other covenants in our credit facility; reliance on revenues from exports and impact on financial results due to economic uncertainty or downturns in foreign markets; volatility in commodity and energy prices and our ability to offset higher costs with price increases; continued availability of supplies or materials used in manufacturing at competitive prices; variations in the mix of products sold; continued availability of supplies or materials used in manufacturing at competitive prices; and the amount and timing of investments in capital equipment, sales and marketing, engineering and information technology resources.  More information about factors that potentially could affect the Company's financial results is included in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission.

FINANCIAL TABLES FOLLOW. 
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                         
    Three Months Ended   Years Ended
    December 31,   December 31,
    2015   2014   2015   2014
Net sales   $   4,751,711     $   5,740,820     $   21,495,184     $   24,070,292  
Cost of sales       4,134,936         4,708,907         18,332,346         19,432,241  
Gross profit       616,775         1,031,913         3,162,838         4,638,051  
                         
Selling and marketing       346,110         230,204         1,086,586         1,015,279  
General and administrative       530,012         587,516         2,355,484         2,322,795  
Research and development       38,308         115,905         241,100         408,867  
Total operating expenses       914,430         933,625         3,683,170         3,746,941  
                         
Income (loss) from continuing operations       (297,655 )       98,288         (520,332 )       891,110  
Other income (expense):                        
Interest expense       (58,165 )       (67,224 )       (260,300 )       (274,138 )
Other income (expense), net       (30,076 )       1,284         (10,212 )       46,184  
Total other expense, net       (88,241 )       (65,940 )       (270,512 )       (227,954 )
Income (loss) from continuing operations before income taxes       (385,896 )       32,348         (790,844 )       663,156  
Income tax provision       932         (39 )       932         2,168  
Net income (loss) from continuing operations       (386,828 )       32,387         (791,776 )       660,988  
Discontinued Operations:                        
Income (loss) from discontinued operations, net of tax provision of $0 for the three and twelve months ended December 31, 2015 and 2014 (includes $42,502 accumulated other comprehensive income reclassification in 2015)                       362,610         (1,779 )
Net income (loss)   $   (386,828 )   $   32,387     $   (429,166 )   $   659,209  
Other comprehensive income:                            
Reclassification of gains from foreign currency translation                       (42,502 )        
Comprehensive income (loss)   $   (386,828 )   $   32,387     $   (471,668 )   $   659,209  
Earnings (loss) per share - basic                        
Continuing operations   $   (0.14 )   $   0.01     $   (0.28 )   $   0.24  
Discontinued operations                       0.13          
Earnings (loss) per share - basic   $   (0.14 )   $   0.01     $   (0.15 )   $   0.24  
Earnings (loss) per share - diluted                        
Continuing operations   $   (0.14 )   $   0.01     $   (0.28 )   $   0.23  
Discontinued operations                       0.13          
Earnings (loss) per share - diluted   $   (0.14 )   $   0.01     $   (0.15 )   $   0.23  
Weighted average common shares outstanding - basic       2,791,466         2,773,361         2,784,757         2,742,080  
Weighted average common shares outstanding - diluted       2,791,466         2,849,981         2,784,757         2,863,098  
                                         

ARRHYTHMIA RESEARCH TECHNOLOGY, INC .
CONDENSED CONSOLIDATED BALANCE SHEETS
             
    December 31,   December 31,
    2015   2014
Assets            
Current assets:            
Cash and cash equivalents   $   272,291     $   209,398  
Trade accounts receivable, net of allowance for doubtful accounts of $60,000 at December 31, 2015 and $45,000 at December 31, 2014       2,798,353         3,536,747  
Inventories       2,118,712         2,514,241  
Prepaid expenses and other current assets       614,129         519,582  
Total current assets       5,803,485         6,779,968  
Property, plant and equipment, net       6,626,069         7,618,901  
Assets held for sale, net       665,000          
Intangible assets, net       18,645         134,022  
Other assets       268,835         570,357  
Total assets   $   13,382,034     $   15,103,248  
Liabilities and Shareholders' Equity            
Current liabilities:            
Revolving line of credit, current portion   $       $   2,071,495  
Equipment line of credit, current portion       35,718          
Term notes payable, current portion       589,635         490,341  
Subordinated promissory notes       473,135          
Accounts payable       1,553,388         1,857,156  
Accrued expenses and other current liabilities       275,777         405,975  
Customer deposits       93,407         98,110  
Deferred revenue, current       272,837         228,363  
Liabilities from discontinued operations, current               320,056  
Total current liabilities       3,293,897         5,471,496  
Long-term liabilities:            
Revolving line of credit, non-current portion       1,511,495          
Equipment line of credit, non-current portion       301,132          
Term notes payable, non-current portion       1,120,652         1,330,755  
Subordinated promissory notes               445,452  
Deferred revenue, non-current       272,181         610,430  
Total long-term liabilities       3,205,460         2,386,637  
Total liabilities       6,499,357         7,858,133  
Commitments and Contingencies            
Shareholders' equity:            
Preferred stock, $0.001 par value; 2,000,000 shares authorized, none issued                
Common stock, $0.01 par value; 10,000,000 shares authorized; 3,926,491 issued, 2,801,639 outstanding at December 31, 2015 and 3,926,491 issued, 2,778,339 outstanding at December 31, 2014       39,265         39,265  
Additional paid-in-capital       11,381,536         11,336,693  
Treasury stock at cost, 1,124,852 shares at December 31, 2015 and 1,148,152 shares at December 31, 2014       (3,069,496 )       (3,133,883 )
Accumulated other comprehensive income               42,502  
Accumulated deficit       (1,468,628 )       (1,039,462 )
Total shareholders' equity       6,882,677         7,245,115  
Total liabilities and shareholders' equity   $   13,382,034     $   15,103,248  

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
             
    Years Ended
    December 31,
    2015   2014
Cash flows from operating activities:            
Net income (loss)   $   (429,166 )   $   659,209  
Loss (income) from discontinued operations       (362,610 )       1,779  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:            
(Gain) loss on sale of property, plant and equipment       13,320         (21,000 )
Depreciation and amortization       1,464,588         1,475,806  
Impairment of intangibles       118,318         63,087  
Non-cash interest expense       27,683         27,683  
Change in allowance for doubtful accounts       15,000         5,000  
Share-based compensation expense       29,178         33,390  
Changes in operating assets and liabilities:            
Accounts receivable       723,394         262,106  
Inventories       395,529         (178,950 )
Prepaid expenses and other current assets       (94,547 )       (6,385 )
Other non-current assets       301,522         (384,762 )
Accounts payable       (303,768 )       (298,875 )
Accrued expenses and other current liabilities       (90,426 )       (294,351 )
Other non-current liabilities       (338,249 )       438,114  
Net cash provided by (used in) operating activities of continuing operations       1,469,766         1,781,851  
Net cash provided by (used in) operating activities of discontinued operations               (1,509 )
Net cash provided by (used in) operating activities       1,469,766         1,780,342  
Cash flows from investing activities:            
Purchases of property, plant and equipment       (1,182,541 )       (1,514,678 )
Proceeds from sale of property, plant and equipment       35,700         24,500  
Cash paid for patents and trademarks       (6,176 )       (16,566 )
Net cash provided by (used in) investing activities from continuing operations       (1,153,017 )       (1,506,744 )
Net cash provided by (used in) investing activities from discontinued operations                
Net cash provided by (used in) investing activities       (1,153,017 )       (1,506,744 )
Cash flows from financing activities:            
Proceeds from (payments on) revolving line of credit, net       (560,000 )       (703,000 )
Proceeds from equipment line of credit       752,635         116,905  
Payments on term notes payable       (526,594 )       (435,372 )
Proceeds from warrant exercises               105,300  
Proceeds from stock option exercises       80,103         100,692  
Net cash provided by (used in) financing activities from continuing operations       (253,856 )       (815,475 )
Net cash provided by (used in) financing activities from discontinued operations                
Net cash provided by (used in) financing activities       (253,856 )       (815,475 )
Net increase (decrease) in cash and cash equivalents       62,893         (541,877 )
Cash and cash equivalents, beginning of period       209,398         751,275  
Cash and cash equivalents, end of period       272,291         209,398  
Less: cash and cash equivalents of discontinued operations at end of period                
Cash and cash equivalents of continuing operations at end of period   $   272,291     $   209,398  

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
EBITDA RECONCILIATION (1)
(Unaudited, $ in thousands)
               
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
    2015       2014       2015       2014  
Net income (loss) from continuing operations $   (387 )   $   32     $   (792 )   $   661  
Income tax provision   1       -       1       2  
Other (income) expense   30       (1 )     10       (46 )
Interest expense   58       67       260       274  
Depreciation and amortization   363       362       1,465       1,476  
Impairment of intangibles   -       -       118       63  
Share-based compensation   6       11       29       33  
EBITDA $   71     $   471     $   1,091     $ 2,463  
EBITDA margin %   1.5 %     8.2 %     5.1 %     10.2 %
 
(1) Non-GAAP Financial Measures
In addition to reporting net income, a U.S. generally accepted accounting principle ("GAAP") measure, this news release contains information about EBITDA (income from continuing operations adjusted for income taxes, other income and expense, interest, depreciation and amortization, impairment of intangibles and share-based compensation expense), which is a non-GAAP measure.  The Company believes EBITDA allows investors to view its performance in a manner similar to the methods used by management and provides additional insight into its operating results.  EBITDA is not calculated through the application of GAAP.  Accordingly, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure.  The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

For more information, contact:Investor and Media Contact:Deborah K. PawlowskiKei Advisors LLC716.843.3908dpawlowski@keiadvisors.comCompany Contact:Derek T. WelchChief Financial Officer978.345.5000

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