Arrhythmia Research Technology, Inc. Reports 12.8% Net Sales Growth And 5.1 Point Margin Expansion In 2014

• Net sales grew 12.8% to $24.1 million in 2014
• Full year gross margin expanded 5.1 points to 19.3%, driven by improved efficiencies and higher volumes
• Achieved net income of $0.7 million, or $0.23 per diluted share, in 2014
• Generated $1.8 million of cash from operations for the year
• Adjusted EBITDA⁽¹⁾, a non-GAAP measure, grew $1.9 million to $2.5 million in 2014

FITCHBURG, Mass., March 20, 2015 (GLOBE NEWSWIRE) -- Arrhythmia Research Technology, Inc. (NYSE MKT:HRT) (the "Company"), through its wholly-owned subsidiary, Micron Products, Inc., is a diversified contract manufacturing organization that produces highly-engineered, innovative medical device technologies requiring precision machining and injection molding, announced today results for its fourth quarter and year ended December 31, 2014.

Salvatore Emma, Jr., President and CEO, commented, "Our revenue and earnings growth was driven by increased volume across all product lines, cost discipline, and improved operational efficiencies. Thanks to the hard work and dedication of our employees, the Company achieved its first profitable year since 2010 and its most profitable year since 2007."

Strong net sales growth in 2014; Fourth quarter impacted by orders and product mix

Net sales for the year ended December 31, 2014 were $24.1 million, up 12.8% from $21.3 million in 2013. Growth was driven primarily by higher net sales of sensors and strong demand for orthopedic implant components.

Sensor net sales dollars increased 10.3% due primarily to a 23.4% increase in volume over the prior-year period. Somewhat offsetting the high volume growth was the decline in the silver surcharge billed which reflected a 20.0% decline in the average price of silver over the prior-year period. Net sales of contract manufacturing of orthopedic implant components increased 36.2% due to higher order volume. The 3.0% increase in custom thermoplastic injection molding and tooling was due to product mix and increased order volume of automotive and medical device components.

Mr. Emma added, "We believe that contract manufacturing of medical devices and components will be a primary driver of future growth. Our investments in quality, throughput and expanded capabilities have allowed us to strengthen partnerships across our existing customer base and add new customers, positioning us well for long-term growth."

Net sales for the fourth quarter of 2014 were $5.7 million compared with $6.1 million in the prior-year. Due to the timing of customer orders and shipments, net sales of orthopedic implant components were down 18.8% compared with the fourth quarter of 2013. Net sales from thermoplastic injection molding products were 6.5% lower due to product mix and decreased order volume from medical device components.

Sensor net sales dollars were up 6.8%, primarily a result of a 28.0% increase in volume over the prior-year period. Despite higher sensor volume, the silver surcharge billed was lower due to a 20.8% decline in the average price of silver over the prior-year period.

Fourth quarter margin expands despite lower net sales

Gross profit improved in the 2014 fourth quarter to $1.0 million, or 18.0% of net sales, over the prior-year period, while gross margin expanded 2.0 points as a result of product mix, improved productivity and cost efficiencies.

Selling and marketing expenses were $230 thousand, or 4.0% of net sales, in the fourth quarter of 2014, compared with $253 thousand, or 4.2% of net sales, in the 2013 fourth quarter. Commissions declined $20 thousand due to lower net sales.

Fourth quarter 2014 general and administrative expenses declined $80 thousand, or 12.0%, to $588 thousand, or 10.2% of net sales, compared with $668 thousand, or 11.0% of net sales, in the prior-year period. Directors' compensation was lower by $62 thousand due to the issuance of stock to the independent directors in 2013. Accounting fees were lower by $50 thousand due in part to the impact of the transition of auditors in 2013. Additionally, legal fees were lower by $49 thousand. These decreases were partially offset by higher wages, taxes and benefits of $89 thousand due in part to bonus accruals of $34 thousand and severance of $22 thousand.

Research and development expenses for the fourth quarter of 2014 were $116 thousand, or 2.0% of net sales, compared with $84 thousand, or 1.4% of net sales, in the prior-year period. The increase was related to efforts to develop a unique process to improve silver coating during the manufacturing processes. The Company also conducts customer-funded research and development of new products in the military and law enforcement industry. 

Net income improved to $32 thousand, or earnings of $0.01 per diluted share, in the fourth quarter of 2014, from a net loss of $77 thousand, or a loss of $0.03 per diluted share, in the same period in 2013. 

Adjusted EBITDA⁽¹⁾ (income from continuing operations adjusted for income taxes, other income and expense, interest, depreciation and amortization, and share-based compensation expense) for the fourth quarter of 2014 was $471 thousand, or 8.2% of net sales, compared with $402 thousand, or 6.6% of net sales, for the same period of the prior year. ⁽¹⁾See attached table for additional important disclosures regarding the Company's use of Adjusted EBITDA, as well as a reconciliation of net income (loss) from continuing operations to Adjusted EBITDA.