SOURCE: OurPet's

October 25, 2006 08:30 ET

OurPet's Company Reports Record 2006 Third-Quarter and Nine-Months Financial Results

FAIRPORT HARBOR, OH -- (MARKET WIRE) -- October 25, 2006 --

--  Third-Quarter Revenues Up 39.3%
--  Third-Quarter Net Income Up 237.2%
--  Signs Exclusive Licensing Agreement with DockDogs®
--  Management Optimistic About Last Quarter of 2006
OurPet's Company (OTCBB: OPCO): a growing designer, developer, producer, and marketer of accessory and consumable pet products, today reported financial results for its third quarter and nine months ended September 30, 2006.

Net revenues for the 2006 third quarter increased 39.3 percent to $2,256,020 from $1,619,413 in the same period a year ago. Gross margin, as a percent of sales for the 2006 third quarter, increased to 29.4 percent from 26.0 percent in the 2005 third quarter. Net income for the 2006 third quarter was $144,470, compared to $42,839 for the same period in 2005, or an improvement of 237.2 percent. Earnings, before interest, taxes, depreciation, and amortization (EBITDA), for the 2006 third quarter increased 125.6 percent to $278,349, compared to $123,375 for the 2005 third quarter.

Revenues for the nine months of 2006 increased 31.8 percent to $6,559,530 from $4,978,373 in the comparable period last year. For the 2006 nine months, gross margin was 26.6 percent compared to 27.1 percent in the 2005 nine months. The gross margin in the nine months of 2006 decreased as a result of lower profitability on certain Pet Zone products and aggressive pricing to penetrate new market segments. Net income for the 2006 nine months was $223,704, from $170,270 for the same period in 2005 -- an improvement of 31.4 percent. EBITDA for the 2006 nine months increased 49.8 percent to $616,265 from $411,322 for the 2005 nine months.

Dr. Steven Tsengas, President and CEO stated, "The Company reported record revenues and earnings for both the 2006 third quarter and nine months. Further, the 2006 year-to-date revenues and earnings are almost equal to what they were for the 2005 full year. The Company's growth over the third-quarter and nine-month period is a result of increased acceptance of our products with consumers, the addition of Pet Zone products, successful marketing efforts, and benefits from our previously disclosed cost reduction initiatives.

"The second half of the year is normally the strongest period of the year and we are pleased to begin the second half with record sales and earnings, which bodes well for our 2006 full-year results. Our financial results tend to fluctuate from quarter-to-quarter, as a result of customer decisions related to promotions and new product roll-outs, and supplier schedule adherence associated with mold completions and product deliveries. We are working hard to increase our customer distribution and with our suppliers to limit these fluctuations.

"We continue to have success penetrating new distribution channels and are pleased to have recently signed an exclusive licensing agreement with DockDogs® -- the governing body for the nation's fastest growing canine sport. DockDogs® events feature dogs running off a dock into a pool of water, competing to see which one can jump the farthest. According to the agreement, OurPet's will become the exclusive provider of a line of licensed DockDogs® pet products, to be sold at all DockDogs® events, as well as online and through retail stores beginning in early 2007. Further, OurPet's will display and promote its own product line through the DockDogs® website and at all of its 2007 events and demos. The initial roll-out of DockDogs® licensed merchandise will include 10-15 SKUs, with a mix of both OurPet's proprietary products and non-proprietary products."

Dr. Tsengas concluded, "This is an exciting time for OurPet's. Our trailing twelve months revenues and earnings now stand at $8,147,564 and $307,672, respectively. Along with our continued aggressive new product development program, we are expanding our infrastructure and investing in additional personnel to position OurPet's for future growth. We are optimistic that financial results for the 2006 fourth quarter and full year will compare favorably to the same periods last year. We look forward to communicating our 2006 annual financial results, which should be released in March 2007."

About OurPet's Company

OurPet's 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 for more information about the Company and its products. The American Pet Products Manufacturers' Association APPMA(a) estimates that the pet industry will expand to $35.9 billion in 2005 versus $17.0 billion in 1994, making it the seventh largest industry in the U.S. and 60 percent larger than the toy industry.

(a) APPMA, 2005/2006 National Pet Owners Survey

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements contain the words "projects," "anticipates," "believes," "expects," "intends," "will," "may" and similar words and expressions. Each such statement is subject to uncertainties, risks and other factors that could cause actual results or performance to differ materially from the results or performance expressed in or implied by such statements. The forward-looking statements in this news release that contain projections of the Company's expected financial performance and other projections regarding future performance are inherently subject to change, given the nature of projections, and the Company's actual performance may be better or worse than projected. Uncertainties, risks and other factors that may cause actual results or performance to differ materially from any results or performance expressed or implied by forward-looking statements in this news release include: (1) the Company's ability to manage its operating expenses and realize operating efficiencies, (2) the Company's ability to maintain and grow its sales with existing and new customers, (3) the Company's ability to retain existing members of its senior management team and to attract additional management employees, (4) the Company's ability to manage fluctuations in the availability and cost of key materials and tools of production, (5) general economic conditions that might impact demand for the Company's products, (6) competition from existing or new participants in the pet products industry, (7) the Company's ability to design and bring to market new products on a timely and profitable basis, (8) challenges to the Company's patents or trademarks on existing or new products, or (9) the Company's ability to secure access to sufficient capital on favorable terms to manage and grow its business. A discussion of other risk factors that may cause actual results to differ from the results expressed in or implied by these forward-looking statements can be found in the Company's periodic filings with the SEC. The Company disclaims any duty to provide updates to the forward-looking statements and projections made in this news release.

                          OURPET'S COMPANY AND SUBSIDIARIES

                         Three Months Ended          Nine Months Ended
                            September 30,               September 30,
                   --------------------------  --------------------------
                         2006          2005          2006          2005
                   ------------  ------------  ------------  ------------
Net revenue        $  2,256,020  $  1,619,413  $  6,559,530  $  4,978,373
Cost of goods sold    1,591,717     1,199,095     4,813,354     3,628,968
                   ------------  ------------  ------------  ------------
     Gross profit
       on sales         664,303       420,318     1,746,176     1,349,405
Selling, general
 and administrative
 expenses               488,217       356,964     1,389,852     1,120,126
                   ------------  ------------  ------------  ------------
     Income from
      operations        176,086        63,354       356,324       229,279
 expenses                     -             -       (55,292)            -
Other income
 (expense), net          15,213          (707)       47,396        (6,906)
Interest expense        (46,829)      (19,808)     (124,724)      (52,103)
                   ------------  ------------  ------------  ------------
     Net income    $    144,470  $     42,839  $    223,704  $    170,270
                   ============  ============  ============  ============

Basic and Diluted
 Net Income Per
 Common Share
 After Dividend
 Requirements For
 Preferred Stock   $       0.01  $          -  $       0.01  $       0.01
                   ============  ============  ============  ============

Weighted average
 number of common
 and equivalent
 shares outstanding
 used to calculate
 basic and diluted
 earnings per share  15,508,798    12,053,082    15,471,048    11,887,653

                          CONSOLIDATED BALANCE SHEETS

                                          September 30,   December 31,
                                               2006            2005
                                           -----------     -----------
   Cash and equivalents                    $   149,902     $     6,477
   Receivables, net                          1,100,305         930,772
   Inventories                               3,192,403       2,060,172
   Prepaid expenses                            102,477          98,964
                                           -----------     -----------
           Total current assets              4,545,087       3,096,385

   Property and equipment, net               1,945,463         862,719
   Other                                       320,437         218,976
                                           -----------     -----------

           Total assets                    $ 6,810,987     $ 4,178,080
                                           ===========     ===========

   Notes payable                           $ 1,525,000     $ 1,100,000
   Current maturities of long-term debt        172,950         119,185
   Accounts payable                          1,472,252         867,612
   Accrued expenses                            136,570         150,687
                                           -----------     -----------
           Total current liabilities         3,306,772       2,237,484

   Long-term debt                              310,718          22,843
   Stockholders' Equity                      3,193,497       1,917,753
                                           -----------     -----------

            Total liabilities and
             stockholders' equity          $ 6,810,987     $ 4,178,080
                                           ===========     ===========

Contact Information

    OurPet's, Company
    Dr. Steven Tsengas
    (440) 354-6500 (Ext. 111)

    SM Berger & Company, Inc.
    Andrew Berger
    (216) 464-6400