Arrhythmia Research Technology, Inc. Reports 2016 Third

FITCHBURG, MA --(Marketwired - November 09, 2016) - 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 third quarter ended September 30, 2016.

"Although the Company posted a net operating loss of $69 thousand in Q3, we reduced the net loss by $197 thousand and gross profit by 8.4% over the same period last year. We are pleased to report the Company is making progress to diversify its customer base and improve margins. The Company added several new machining and plastic injection molding customers in the past six months. Our appeal to these new customers has been our ability to deliver high quality components with better-than-market lead times at a competitive price.

"We continue to work vigorously toward improved market share in sensors. Our continued use of automation and our unique partnerships with suppliers are helping to improve gross margin," commented Salvatore Emma, Jr., President and CEO.

Third Quarter 2016 Review

Net Sales for the third quarter 2016 decreased $513 thousand when compared to the same period last year. The decrease was driven by a decline in net sales in machined components and sensors of 27.9% and 13.0%, respectively. As an offset, net sales in thermoplastic injection molding increased 3.1%.

Despite a decline in sales, gross profit in the third quarter 2016 increased by $93 thousand and gross profit as a percentage of sales increased 3.5 points to 17.2% when compared to third quarter 2015. Despite a decrease in volume, an increase in gross profit of 26.3% was realized in sensors due to an increase in the weighted average price of silver paired with customer and product mix. In the same period, improvements in automation, operating leverage and increased sales in automotive components lead to an increase in gross profit of 13.0%. These increases were offset by a 31.1% decrease in gross profit in machined components due to lower sales volume.

The increase in gross profit was partly due to reductions in other indirect manufacturing overhead expenses.

Total operating expenses decreased $111 thousand to $809 thousand or 17.2% of sales in the third quarter of 2016 as compared to $920 thousand or 17.6% in the same period last year.

Net loss from continuing operations was $69 thousand, or $0.02 per diluted share, compared with net loss of $266 thousand, or $0.10 per diluted share, in the 2015 third quarter.

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 third quarter of 2016 was $413 thousand, or 8.8% of net sales, compared with $292 thousand, or 5.6% of net sales, for the same period in 2015. ⁽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.

First Nine Months 2016 Review

Net Sales for the first nine months of 2016 decreased $1,919 thousand or 12.2%, when compared to the same period last year. The decrease was driven by a decline in net sales of machined components and sensors of 25.1% and 11.8%, respectively. Additionally, there was a slight decline in thermoplastic injection molding net sales.

Although there was a decrease in gross profit for the first nine months of 2016 of $105 thousand, gross profit as a percentage of sales increased 1.3 points to 16.5% when compared to the same period in the prior year. The decline in gross profit was primarily the result of a 25.7% decrease in gross profit from machined components due to lower volume and costs related to process validation for new customers. Additionally, there was a 17.8% decrease in gross profit from sensors due to lower per unit pricing, as well as customer and product mix. Gross profit from thermoplastic injection molded products increased a net of 3.2% as a result of higher sales and efficiency improvements from automation.

The decreases in gross profit were partially offset by reductions in other indirect manufacturing overhead expenses.

Total operating expenses were $2.6 million or 17.8% of sales for the nine months of 2016 as compared to $2.8 million or 16.5% in the same period last year.

In the first nine months of 2016, net loss from continuing operations was $391 thousand, or $0.14 per diluted share, compared with net loss of $405 thousand, or $0.15 per diluted share, in the same period in 2015.

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 first nine months of 2016 was $989 thousand, or 6.7% of net sales, compared with $1,020 thousand, or 6.1% of net sales, for the same period in 2015. ⁽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 September 30, 2016, the Company had cash on hand of $207 thousand and working capital of $712 thousand as compared to $272 thousand and $2.5 million at December 31, 2015. The change in working capital is due to the reclassification of the revolving line of credit to current liabilities because the maturity date is June 30, 2017. In the third quarter of 2016, the Company had net cash provided by operating activities of $851 thousand and used net cash of $1,069 thousand for capital expenditures. Cash provided by investing activities of $153 thousand was due primarily to net borrowing from the Company's revolver as well as payments made on debt. The Company has recently received a commitment letter from its bank to restructure its debt and add a new equipment line of credit.

Increasing orders from new and existing customers is expected to increase short term working capital needs, which, together with timing of receipts from accounts receivables, is expected to cause fluctuations in cash flows and borrowings over the next several quarters.

Outlook: Improved Operating Leverage

Mr. Emma concluded, "Micron's strength is in its talented staff and their expertise in lean manufacturing, tight tolerance machining, injection molding and silver coating. Our OEM customers trust Micron with their brand which is a responsibility we take very seriously and is demonstrated by winning additional orders and new business. As we look forward into 2017, a continued strong sales effort, cost discipline, and our operating leverage will help to improve earnings."

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 contract manufacturer with a specialized focus on plastic injection molding and highly-engineered medical devices and components requiring precision machining.

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 Statement Forward-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.

⁽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, 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.