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Arrhythmia Research Technology Inc Reports Operating Results (10-Q)

November 10, 2010 | About:
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10qk

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Arrhythmia Research Technology Inc (HRT) filed Quarterly Report for the period ended 2010-11-10.

Arrhythmia Research Technology Inc has a market cap of $16.8 million; its shares were traded at around $6.02 with a P/E ratio of 30.2 and P/S ratio of 0.8. The dividend yield of Arrhythmia Research Technology Inc stocks is 2%. Arrhythmia Research Technology Inc had an annual average earning growth of 3.8% over the past 10 years.HRT is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Revenue for the three months ended September 30, 2010 was $5,888,277 versus $5,457,377 for the three months ended September 30, 2009, an increase of 7.9%. Revenues related to licensing of the Company s SAECG product accounted for $200,000 in the three months ended September 30, 2010. Micron s medical sensors and snaps with silver surcharge revenue increased by $586,000 and high volume precision molded products and other miscellaneous sales increased by $47,000. The increase in revenues from sensors and snaps is due to increased volume in sensors and higher silver surcharge. Revenue from the Micron Integrated Technology s (MIT) product life cycle management programs decreased $402,000. MIT s revenue is derived from the custom molding, precision metal machining and mold making activities. The revenue declines reflect timing delays with a defense industry product line and medical molding and precision machining partially offset by increases in tooling sales. RMDDx did not contribute to revenues for the three months ended September 30, 2010.

Revenue for the nine months ended September 30, 2010 was $17,255,916 versus $15,512,270 for the nine months ended September 30, 2009, an increase of 11%. Revenues related to the customization and licensing of the Company s SAECG product accounted for $300,000 in the nine months ended September 30, 2010. Micron s medical sensors and snaps with silver surcharge revenue increased by $1,794,000 and high volume precision molded products and other miscellaneous sales increased by $32,000. The increase in revenues from sensors and snaps is due to increased volume in sensors and higher silver surcharge. Revenue from the Micron Integrated Technology s (MIT) product life cycle management programs decreased $382,000. MIT s revenue is derived from the custom molding, precision metal machining and mold making activities. The revenue decreases reflect lower volume of defense industry products and tooling sales partially offset by an increase in custom molded and precision machined medical products. RMDDx did not contribute to revenues for the nine months ended September 30, 2010.

Cost of sales was $4,605,683 or 78.2% of sales for the three months ended September 30, 2010 as compared to $4,576,068 or 83.9% for the same period in 2009. Cost of sales was $13,894,697 or 80.5% for the nine months ended September 30, 2010 as compared to $12,811,506 or 82.6% for the same period in 2009. Cost containment and reduction remains a priority of management. The increased cost of silver negatively affects margins as the higher cost increases both the revenues and cost of sales. The cost of sales excluding silver continues to improve as a result of the ongoing lean manufacturing projects and capital investment in new automated equipment. Management continues to investigate ways to improve the overall gross margin by elimination of low contribution products while increasing sales of higher margin products and investing in new equipment and technologies.

General and administrative expense was $749,396 for the three months ended September 30, 2010 as compared to $509,037 for the same period in 2009. The general and administrative expense was 12.7% of sales in the three months ended September 30, 2010 and 9.3% for the same period in 2009. General and administrative expense was $2,025,255 for the nine months ended September 30, 2010 as compared to $1,596,933 for the same period in 2009. The general and administrative expense was 11.7% of sales in the nine months ended September 30, 2010 and 10.3% for the same period in 2009. Approximately $80,000 was expended in the due diligence and transactional costs in the merger and acquisition activities in the nine months ended September 30, 2010. The other increased expenses included the operational infrastructure for RMDDx, travel and other administrative expenses associated with a startup entity. As of the June 30, 2010 measurement date, the Company is not an accelerated filer; therefore, the expense related to auditor attestation for Section 404b of the Sarbanes-Oxley Act of 2002 will not be incurred in 2010.

Research and development expense was $76,189 for the three months ended September 30, 2010 as compared to $54,444 for the same period in 2009. The research and development expense was 1.3% of sales in the three months ended September 30, 2010 as compared to 1.0% in the same period in 2009. Research and development expense was $179,000 for the nine months ended September 30, 2010 as compared to $180,918 for the same period in 2009. The research and development expense was 1.0% of sales in the nine months ended September 30, 2010 and 1.2% in the same period in 2009. Approximately 35% of the expense was related to ART s SAECG software, Predictor™. The customization of the software is paid by ART s customers, and therefore is included as a cost of goods sold. The remaining portion of the research and development expense is associated with the development of a new type of electrophysiological sensor for Micron s sensor product line. This work is expected to continue through the end of 2010.

Other income (expense), net was $(2,450) versus $(15,291) for the three months ended September 30, 2010 and 2009, respectively. In the nine months ended September 30, 2010 other income was $142,319 versus an expense of $34,504. Interest income of $9,100 and realized gains on currency translation in the period ended September 30, 2010 was offset by a loss on the disposal of assets as compared with interest income of $8,900 offset by a gain on disposal of assets and interest expense of $10,081 associated with an equipment note in the period ended September 30, 2009. The acquisition of RMDDx resulted in a one time non-cash gain of $146,288 in the nine month period ended September 30, 2010 due to purchase accounting.

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