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OurPet’s Company Reports Record Second Quarter 2017 Results

FAIRPORT HARBOR, Ohio, July 27, 2017 (GLOBE NEWSWIRE) -- OurPet’s Company (OTCQX:OPCO) (www.ourpets.com), a leading proprietary pet supply company, today reported record net revenue and strong net income for the three months ended June 30, 2017.

Second Quarter 2017 Highlights

  • Increased net revenue by 13.7% to $6.18 million for the second quarter of 2017 compared to $5.44 million in the year-ago period;
  • Realized a 1.7% increase in gross profit margin reaching 30.6% for the second quarter of 2017 compared to 28.9% in the year-ago period;
  • Increased net income by 59.5% to $246,619 for the second quarter of 2017 compared to $154,634 in the year-ago period;
  • Grew E-Commerce sales by 78% to $1.0 million for the second quarter of 2017 compared to $564,000 in the year-ago period, and;
  • Announced the opening of a bonded warehouse in China’s Free Trade Zone, as well as a partnership with a new Chinese distributor.

Dr. Steven Tsengas, Chairman and CEO commented, “We are pleased with our strong operating performance driven by the record double digit revenue growth in E-Commerce sales during the quarter. The retail consumer preference landscape is changing rapidly as consumers move towards the user-friendly self-help internet environment. While we also saw positive growth in our Pet Specialty and Value channels during the quarter, E-Commerce grew a record 78%, and OurPet’s will continue to invest significant resources in order to ensure that we are well positioned to capitalize on this trend in the future."

Dr. Tsengas continued, “While our bottom line was substantially higher than the same period a year ago, we are not satisfied with our current operating and net margins. Our SG&A expenses increased to 25.8% of sales from 24.7% for the same period a year ago, primarily due to increased investment in customer sales, marketing and promotional programs. We’ve since initiated cost reduction actions to bring SG&A down without compromising customer satisfaction.

“Revenues for the Pet Specialty channel increased 11.5% over the same period a year ago with most distributors showing healthy increases; specifically revenue associated with one of our largest Pet Specialty customers grew 51%. Revenues in the Food, Drug and Mass retail channel declined about 3.1% from the same period a year ago primarily due to decreases in toys and accessories sales. The Value channel saw revenue increase 87.3% with one major Value retailer switching from their private label products to the OurPet’s branded Pet Zone® products.

“International sales comprised almost 11% of our total sales during the second quarter of 2017 compared to about 8.5% in the prior-year period. International sales in Europe are beginning to show traction as the initial stocking of our major European Master Distributor commences. Within Asia, the company announced the opening of a bonded warehouse in China’s Free Trade Zone, as well as a partnership with a new Chinese distributor that will give OurPet’s access to the Chinese market. Within South Korea, OurPet’s has grown its relationship with its distributor, who continues to expand into OurPet’s full product line.

“This quarter’s sales growth within product categories was fueled by our Bowls and Feeders which grew revenues 20% over the prior-year period. Our Designer Diner® (Pet Zone® brand) and Barking Bistro® (OurPets® brand) adjustable three height feeder led the way with over 400% revenue growth from the prior-year period, with most of this business coming from the E-Commerce channel. Second quarter Toys and Accessories sales were relatively flat, with gains in the E-Commerce channel being offset by decreases in the Food, Drug and Mass retail channel. OurPet’s is seeing a shift occurring from traditional toys to electronic and interactive toys, and continues to introduce innovative electronic toys that challenge cats and dogs such as our Bird in a Cage™, Pounce House™, Whirling Wiggler™, and Catty Whack®.

“The Waste and Odor category grew 25% over the prior-year period, fueled by increased sales of our Switchgrass Natural Cat Litter™ with BioChar. This innovative cat litter is increasingly gaining traction, particularly in the International sector and some grocery chains domestically, and we are really excited about this product’s potential. OurPets® Intelligent Pet Care™ (IPC) products, the SmartScoop® - Intelligent Litter Box, the SmartLink® Feeder – Intelligent Pet Bowl and the SmartLink® Waterer – Intelligent Water Fountain are innovative products that are still in early days of adoption. As customers understand the benefits of monitoring pet behavior patterns with respect to eating, drinking and waste elimination, we believe this product group will strongly resonate in the marketplace, particularly with the millennial shopper."

Dr. Tsengas concluded, “The economic landscape is continuously changing and we know we must adapt to that change. However, we hold fast to our basic business model which combines technical knowledge with pet knowledge to create innovative solutions that satisfy the needs of pets, pet parents and retailers. This has been a time-tested equation for success, and we look forward to expanding on that success in the coming years.”

2017 Second-Quarter Results
Net revenue increased 13.7% to $6,183,800 for the second quarter of 2017 compared to revenues of $5,436,902 for the prior-year period. The approximate $747,000 increase was due to strong sales (78% growth) in the E-Commerce channel, particularly from raised feeders and toys and accessories as well as growth in the Pet Specialty and Value channels.

Gross profit increased 20.5% to $1,893,818 for the second quarter 2017 compared to $1,571,844 for the prior-year period. Gross profit margin increased to 30.6% from 28.9% in the prior-year period.

Net income increased 59.5% to $246,619 in the second quarter of 2017 compared to $154,634 for the prior-year period. Net income per diluted share was $0.01 compared to $0.01 in the prior-year period, based on weighted average shares of 18,922,288 for the current quarter compared to a weighted average of 18,277,336 shares for the prior-year period.

Adjusted EBITDA increased 7.3% to $451,678 for the second quarter of 2017 compared to $421,043 for the prior-year period. A reconciliation of Adjusted EBITDA to GAAP Net Income is provided in an attachment to the summary financial statements.

2017 First Six Months Results
Net revenue increased 9.5% to $12,720,610 for the first six months of 2017 compared to revenues of $11,612,887 for the prior-year period. The approximate $1,108,000 increase was due to strong sales in the E-commerce channel (69% growth), particularly from raised feeders and toys and accessories as well as 32% growth in the Value channel.

Gross profit increased 18.15% to $4,018,586 for the first six months of 2017 compared to $3,403,701 for the prior-year period. Gross profit margin increased to 31.6% from 29.3% in the prior-year period.

Net income increased 49.6% to $629,996 in the first six months of 2017 compared to $421,214 for the prior-year period. Net income per diluted share was $0.03 compared to $0.02 in the prior-year period, based on weighted average shares of 18,691,913 for the first six months compared to a weighted average of 18,250,885 shares for the prior-year period.

Adjusted EBITDA increased 2.6% to $1,067,333 the first six months of 2017 compared to $1,040,416 for the prior-year period. A reconciliation of Adjusted EBITDA to GAAP Net Income is provided in an attachment to the summary financial statements.

About OurPet’s Company
OurPet’s Company designs, produces and markets a broad line of innovative, high-quality accessory and consumable pet products in the U.S. and overseas. Investors and customers may visit www.ourpets.com for more information about our company and its products. OurPet’s websites include www.petzonebrand.com and www.ourpets.com.

Forward-Looking Statements
Certain of the matters set forth in this press release are forward-looking and involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: business conditions; growth in the industry; general economic conditions; addition or loss of significant customers; the loss of key personnel; product development; competition; risks of doing business abroad; foreign government regulations; fluctuations in foreign currency rates; rising costs for raw materials and sources of supply that may be limited or unavailable from time to time; the timing of orders booked; and the other risks that are described from time to time in OurPet’s filings with the Securities and Exchange Commission.


OURPET'S COMPANY AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2017 2016
2017 2016
Net revenue$6,183,800 $5,436,902 $12,720,610 $11,612,887
Cost of goods sold 4,289,982 3,865,058 8,702,024 8,209,186
Gross profit on sales 1,893,818 1,571,844 4,018,586 3,403,701
Selling, general and administrative expenses 1,597,633 1,344,142 3,241,514 2,760,729
Income from operations 296,185 227,702 777,072 642,972
Other income 4,291 (7,463) 14,244 (34,468)
Interest expense 22,914 27,920 44,759 60,756
Income before taxes 268,980 207,245 718,069 616,684
Income Tax expense 22,361 52,611 88,073 195,470
Net Income$246,619 $154,634 $629,996 $421,214
Basic and Diluted Net Income Per Common
Share After Dividend Requirements For Preferred
Stock$0.01 $0.01 $0.03 $0.02
Weighted average number of common shares
outstanding used to calculate 18,276,189 17,657,516 18,043,671 17,643,936
basic earnings per share
Weighted average number of common and
equivalent shares outstanding used to 18,922,288 18,277,336 18,691,913 18,250,885
calculate diluted earnings per share
OURPET'S COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2017 2016
ASSETS
Cash and equivalents$829,707 $127,979
Receivables, net 3,616,558 4,641,798
Inventories, net 7,985,228 7,010,536
Prepaid expenses 915,206 885,391
Total current assets 13,346,699 12,665,704
LONG TERM ASSETS
Property and equipment, net 2,111,480 2,000,906
Amortizable Intangible Assets, net 410,871 404,273
Intangible Assets 477,328 477,328
Goodwill 67,511 67,511
Deposits and Other assets 25,000 98,524
Total long term assets 3,092,190 3,048,542
Total assets$16,438,889 $15,714,246
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt 246,652 228,941
Accounts payable 908,133 784,900
Accrued expenses 606,948 713,532
Total current liabilities 1,761,733 1,727,373
LONG TERM LIABILITIES
Long-term debt - less current portion above 611,782 645,203
Revolving line of credit 2,010,142 2,083,966
Deferred income taxes 357,659 362,753
Total long term liabilities 2,979,583 3,091,922
Total liabilities 4,741,316 4,819,295
Stockholders' Equity 11,697,573 10,894,951
Total liabilities and stockholders' equity$16,438,889 $15,714,246


OurPet's Company
EBITDA -Q2'17 and YTD 2017 vs. prior comparable periods in 2016
EBITDA Q2'17Q2'16 1st six
months 2017
1st six
months 2016
Q2'17
Variance $
Q2'17
Variance %
1st six
months'17
Variance $
1st six
months'17
Variance %
Net Income$ 246,619 $ 154,634 $ 629,996 $ 421,214 $ 91,985 59.49% $ 208,782 49.57%
Interest 22,914 27,920 44,759 60,756 $ (5,006)-17.93% $ (15,997)-26.33%
Tax Expense 22,361 52,611 88,073 195,470 $ (30,250)-57.50% $ (107,397)-54.94%
Depreciation 138,657 166,685 262,725 325,275 $ (28,028)-16.81% $ (62,550)-19.23%
Amortization 15,127 13,193 29,780 25,701 $ 1,934 14.66% $ 4,079 15.87%
Total EBITDA$ 445,678 $ 415,043 $ 1,055,333 $ 1,028,416 $ 30,635 7.38% $ 26,917 2.62%
Stock Options expense$ 6,000 $ 6,000 $ 12,000 $ 12,000 $ - 0.00% $ - 0.00%
Warrants expense$ - $ - $ - $ - $ - 0.00% $ - 0.00%
Total Adjusted EBITDA$ 451,678 $ 421,043 $ 1,067,333 $ 1,040,416 $ 30,635 7.28% $ 26,917 2.59%

The above table reconciles the Company’s disclosure of Net Income per GAAP with the non GAAP financial measure EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization.) As the investment community has often requested the EBITDA calculation to help them evaluate performance, Management has chosen to provide this disclosure. Although EBITDA is widely used in the investment community as a benchmark to reflect operating performance, financing capability and liquidity, it is not regarded as a measure of operating performance and liquidity under generally accepted accounting principles (“GAAP”). It also does not represent cash flows from operating activities. In addition, the Company’s EBITDA may not be comparable to similar indicators provided by other companies. The Presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss), or any component thereof, in accordance with GAAP.

For further information, contact: Contacts OurPet’s Company Dr. Steven Tsengas, CEO (440) 354-6500, x111 Alpha IR Group Chris Donovan or Steve Calk (312) 445-2870 OPCO@alpha-ir.com

Source:OurPet's Company