SOURCE: The OurPets Co.

The OurPets Co.

November 02, 2015 08:00 ET

OurPet's Company Reports Third Quarter 2015 Results

Record Q3 Net Revenue of Nearly $6.0 Million -- Net Income Increases 428% to $410,450

FAIRPORT HARBOR, OH--(Marketwired - November 02, 2015) - OurPet's Company (OTCQX: OPCO) (www.ourpets.com), a leading proprietary pet supply company, today reported record third-quarter revenue of $5.99 million, an increase of 7% from $5.60 million in revenues for the comparable three months of 2014. Net income for the third quarter ended September 30, 2015, increased 428% to $410,450, or $0.02 diluted earnings per share, compared to $77,751, or $0.00, for the year prior.

Dr. Steven Tsengas, President and CEO, commented, "We are pleased with our results for the third quarter in which we achieved record net revenue, gross margins improving to 34%, and net income from operations of almost 11% of sales. We continue to see strong sales growth in the Pet Specialty channel driven by our cat toys and bowls/feeder lines. E-commerce sales rebounded and grew 7% while the Food, Drug, Mass channel slightly decreased; however, we anticipate improved sales as the conversion to the PetZone brand is completed by year end. Unfortunately, with the strengthening of the U.S. dollar, international sales have been negatively impacted particularly in Canada and the United Kingdom."

Dr. Tsengas continued, "We have expanded and strengthened our relationship with several domestic and international independent sales representative organizations, and have added another experienced salesperson to our staff. With the recent and anticipated introduction of a significant number of new innovative products in all our product categories, we are experiencing robust sales activity. Our Catty Whack™, winner of the SuperZoo 'Best New Cat Product' award, is beginning to ship and is receiving strong consumer reaction. We expect to release more information on other major, trend-setting products over the next six months.

"As we have previously communicated, the last five years have been challenging for OurPet's as we have transitioned from a small- to a medium-sized company poised for accelerated future growth in both revenue and net income. This required large investments in management/operating informational systems; strengthening and, where appropriate, adding management and professional/technical talent; improving warehousing and inventory management efficiencies; strengthening relationships of strategic domestic and overseas suppliers; and strengthening our relationship with our banking resources. We sincerely believe that these improvements will positively impact revenue and profit results going into the fourth quarter of 2015 and beyond."

2015 Third Quarter Results

Net revenue increased 7% to $5,986,645 for the 2015 third quarter versus the same period last year. The $386,000 increase was attributable to strong sales in the Pet Specialty and Value channels, partially offset by a decrease in the Food, Drug and Mass channel.

Gross Profit was $2,012,177 for the 2015 third quarter compared to $1,640,751 the prior year. Gross profit margin increased 4.3 percentage points to 33.6% for the 2015 third quarter from 29.3% for the same period a year ago due to continuous improvement initiatives, price increases, and product mix.

Income from operations increased to $649,023 for the 2015 third quarter from $152,768 a year ago. This increase was primarily due to higher gross profit and also benefited from lower selling, general, and administrative expenses.

Other income for the 2015 third quarter increased to $14,582 from $6,051 a year ago due to a higher amount of patent infringement settlements.

Income before taxes was almost five times greater at $627,686 for the 2015 third quarter compared to $127,666 a year ago.

Income tax expense for the 2015 third quarter increased to $217,236 from $49,915 a year ago due to the higher income.

Net income increased to $410,450 for the 2015 third quarter from $77,751 last year. Net income per diluted share increased to $0.02 for the third quarter of 2015 from $0.00 a year ago.

EBITDA was $825,696 for the 2015 third quarter versus $323,140 a year ago. A reconciliation of EBITDA to GAAP net income is provided in an attachment to the summary financial statements.

2015 First Nine Months Results

Net revenue increased 6% to $17,170,795 for the first nine months of 2015. The year-over-year increase was due to strong Pet Specialty sales, especially in the bowls and feeders category.

Gross profit increased 15% to $5,424,591 for the first nine months of 2015 versus the prior year. Gross profit margin increased 2.5 percentage points to 31.6% for the first nine months of 2015 from 29.1% the prior year due to the same factors that benefited the 2015 third quarter results.

Income from operations increased 143% to $1,427,797 for the first nine months of 2015, which was attributable to higher gross profit and lower selling, general, and administrative expenses.

Other income decreased to $40,582 for the first nine months of 2015 from $77,713 for the same period last year due to a greater amount of patent infringement settlements in 2014.

Income before taxes increased to $1,383,158 for the first nine months of 2015 compared to $566,658 for the same period a year ago.

Income tax expense was $496,839 for the first nine months of 2015 compared to $206,723 the prior year.

Net income for the first nine months of 2015 increased 146% to $886,319 from $359,935 for the same period in 2014. Net income per share increased to $0.04 for the first nine months of 2015 from $0.02 last year.

EBITDA increased 72% to $1,984,688 the first nine months of 2015 compared to $1,153,656 the prior year. A reconciliation of EBITDA to GAAP Net Income is provided in an attachment to the summary financial statements.

The Current Ratio improved to 5.61, reflecting or strong liquidity, while Stockholders’ Equity improved by $904,319 or 12.1% over the comparable date last year.

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 SEC reports.

 
OURPET'S COMPANY AND SUBSIDIARIES 
CONSOLIDATED OPERATING RESULTS 
                  
   For the Three Months Ended   For the Nine Months Ended  
   September 30,   September 30,  
   2015  2014   2015  2014  
                  
Net revenue  $5,986,645   $5,601,011   $17,170,795   $16,175,692  
Cost of goods sold   3,974,468    3,960,260    11,746,204    11,462,593  
  Gross profit on sales   2,012,177    1,640,751    5,424,591    4,713,099  
                      
Selling, general and administrative expenses   1,363,154    1,487,983    3,996,794    4,126,635  
                      
  Income from operations   649,023    152,768    1,427,797    586,464  
                      
Other (income) and expense, net   (14,582 )  (6,051 )  (40,582 )  (77,713 )
Interest expense   35,919    31,153    85,221    97,519  
Income before taxes   627,686    127,666    1,383,158    566,658  
                      
Income Tax expense   217,236    49,915    496,839    206,723  
Net Income  $410,450   $77,751   $886,319   $359,935  
                      
                      
 Basic and Diluted Net Income Per Common Share After Dividend Requirements For Preferred Stock  $0.02   $0.00   $0.04   $0.02  
                      
Weighted average number of common shares outstanding used to calculate basic earnings per share   17,562,239    17,056,910    17,558,085    16,884,581  
                      
Weighted average number of common and equivalent shares outstanding used to calculate diluted earnings per share   19,824,793    18,037,565    19,220,115    18,160,977  
                      
 
 
OURPET'S COMPANY AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 
       
   September 30,  December 31,
   2015  2014
ASSETS        
 Cash and equivalents  $101,775  $192,448
 Receivables, net   4,048,759   3,116,448
 Inventories, net   7,802,675   6,894,115
 Prepaid expenses   467,126   478,593
  Total current assets   12,420,335   10,681,604
         
LONG TERM ASSETS        
 Property and equipment, net   1,867,252   1,769,548
 Amortizable intangible assets, net   361,259   384,063
 Non amortizable Intangible Assets   461,000   461,000
 Goodwill   67,511   67,511
 Deposits and Other assets   18,003   18,003
  Total long term assets   2,775,025   2,700,125
         
  Total assets  $15,195,360  $13,381,729
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
 Current maturities of long-term debt   311,470   601,632
 Accounts payable   1,244,885   1,489,982
 Accrued expenses   656,652   565,491
  Total current liabilities   2,213,007   2,657,105
         
LONG TERM LIABILITIES        
 Long-term debt - less current portion above   938,894   119,780
 Revolving line of credit   3,473,032   2,862,032
 Deferred income taxes   204,947   281,651
  Total long term liabilities   4,616,873   3,263,463
         
  Total liabilities   6,829,880   5,920,568
         
 Stockholders' Equity   8,365,480   7,461,161
         
  Total liabilities and stockholders' equity  $15,195,360  $13,381,729
         
  
  
OURPET'S COMPANY AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
 
   September 30,  December 31,
   2015  2014
   Unaudited   
ASSETS        
         
CURRENT ASSETS        
 Cash and cash equivalents  $101,775  $192,448
 Accounts receivable - trade, less allowance for doubtful accounts of $37,824 and $39,539   4,048,759   3,116,448
 Inventories net of reserve   7,802,675   6,894,115
 Prepaid expenses   467,126   478,593
  Total current assets   12,420,335   10,681,604
         
PROPERTY AND EQUIPMENT        
 Computers and office equipment   1,020,239   883,163
 Warehouse equipment   585,815   567,816
 Leasehold improvements   289,217   276,952
 Tooling   4,207,203   3,885,401
 Construction in progress   222,573   157,031
  Total   6,325,047   5,770,363
 Less accumulated depreciation   4,457,795   4,000,815
  Net property and equipment   1,867,252   1,769,548
         
OTHER ASSETS        
 Amortizable Intangible Assets, less amortization of $476,677 and $417,349   361,259   384,063
 Intangible Assets   461,000   461,000
 Goodwill   67,511   67,511
 Deposits and other assets   18,003   18,003
  Total other assets   907,773   930,577
          
  Total assets  $15,195,360  $13,381,729
         

The accompanying notes are an integral part of the condensed consolidated financial statements.

 
OURPET'S COMPANY AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
       
   September 30,  December 31,
   2015  2014
   Unaudited   
LIABILITIES        
         
CURRENT LIABILITIES        
 Current maturities of long-term debt   311,470   601,632
 Accounts payable - trade   1,244,885   1,489,982
 Other accrued expenses   656,652   565,491
  Total current liabilities   2,213,007   2,657,105
         
LONG-TERM LIABILITIES        
 Long-term debt - less current portion above   938,894   119,780
 Revolving Line of Credit   3,473,032   2,862,032
 Deferred Income Taxes   204,947   281,651
  Total long term liabilities   4,616,873   3,263,463
         
  Total liabilities   6,829,880   5,920,568
         
STOCKHOLDERS' EQUITY        
         
COMMON STOCK,        
 no par value; 50,000,000 shares authorized, 17,562,239 and 16,657,660 shares issued and outstanding at September 30, 2015 and December 31, 2014 respectively   5,031,766   5,031,766
         
CONVERTIBLE PREFERRED STOCK,        
 no par value; convertible into Common Stock at the rate of 10 common shares for each preferred share; 4,825,000 shares authorized, 63,500 shares issued and outstanding at September 30, 2015 and December 31, 2014   579,850   579,850
         
 Series 2009 no par value; convertible into Common Stock at the rate of 10 common shares for each preferred share; 175,000 shares authorized, 123,616 shares issued and outstanding at September 30, 2015 and December 31, 2014   865,312   865,312
         
PAID-IN CAPITAL   71,307   53,307
         
ACCUMULATED EARNINGS   1,817,245   930,926
  Total stockholders' equity   8,365,480   7,461,161
         
  Total liabilities and stockholders' equity  $15,195,360  $13,381,729
         

The accompanying notes are an integral part of the consolidated financial statements.

 
OURPETS COMPANY AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF OPERATIONS 
(Unaudited)
                  
   For the Three Months Ended September 30,   For the Nine Months Ended September 30,  
   2015   2014   2015   2014  
                      
                      
Net revenue  $5,986,645   $5,601,011   $17,170,795   $16,175,692  
                      
Cost of goods sold   3,974,468    3,960,260    11,746,204    11,462,593  
                      
Gross profit on sales   2,012,177    1,640,751    5,424,591    4,713,099  
                      
Selling, general and administrative expenses   1,363,154    1,487,983    3,996,794    4,126,635  
                      
Income from operations   649,023    152,768    1,427,797    586,464  
                      
Other income   (14,582 )  (6,051 )  (40,582 )  (77,713 )
Interest expense   35,919    31,153    85,221    97,519  
                      
Income before income taxes   627,686    127,666    1,383,158    566,658  
                      
Income tax expense   217,236    49,915    496,839    206,723  
                      
Net income  $410,450   $77,751   $886,319   $359,935  
                      
                      
Basic and Diluted Earnings Per Common Share After Dividend Requirements For Preferred Stock:                     
 Net Income  $0.02   $0.00   $0.04   $0.02  
                      
Weighted average number of common shares outstanding used to calculate basic earnings per share   17,562,239    17,056,910    17,558,085    16,884,581  
                      
Weighted average number of common and equivalent shares outstanding used to calculate diluted earnings per share   19,824,793    18,037,565    19,220,115    18,160,977  
                      

The accompanying notes are an integral part of the consolidated financial statements.

 
OURPET'S COMPANY AND SUBSIDIARIES
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
 
FOR THE NINE MONTHS ENDED September 30, 2015
                            
   Preferred Stock  Series 2009 Preferred Stock  Common Stock         
   Number of
Shares
 Amount  Number of
Shares
 Amount  Number of
Shares
 Amount  Paid-In
Capital
 Accumulated
Earnings
 Total
Stockholders'
Equity
Balance at December 31, 2014  63,500  $579,850  123,616  $865,312  17,553,007  $5,031,766  $53,307  $930,926  $7,461,161
                                  
Common Stock issued upon exercise of stock options  -   -  -   -  9,232   -   -   -   -
Net income  -   -  -   -  -   -   -   886,319   886,319
Stock-Based compensation expense  -   -  -   -  -   -   18,000   -   18,000
                                  
Balance at September 30, 2015 (unaudited)  63,500  $579,850  123,616  $865,312  17,562,239  $5,031,766  $71,307  $1,817,245  $8,365,480
                                  

The accompanying notes are an integral part of the condensed consolidated financial statements.

 
OURPET'S COMPANY AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)
          
   For the Nine Months Ended  
   September 30,  
   2015   2014  
CASH FLOWS FROM OPERATING ACTIVITIES           
 Net income  $886,319   $359,935  
 Adjustments to reconcile net income to net cash used in operating activities:           
  Loss on Disposal of Fixed Assets   20,657    12,323  
  Depreciation expense   456,981    430,988  
  Amortization expense   59,328    58,491  
  Stock option expense   18,000    9,000  
  (Increase) decrease in assets:           
   Accounts receivable - trade   (932,311 )  (417,090 )
   Inventories   (908,560 )  (1,848,425 )
   Prepaid expenses   11,467    33,901  
  Amortizable Intangible Asset Additions   (36,524 )  (67,154 )
  Increase (decrease) in liabilities:           
   Accounts payable - trade   (245,097 )  933,303  
   Accrued expenses   91,161    (415,195 )
   Deferred tax liabilities   (76,704 )  (58,234 )
    Net cash used in operating activities   (655,284 )  (968,157 )
            
CASH FLOWS FROM INVESTING ACTIVITIES           
 Acquisition of property and equipment   (490,341 )  (398,816 )
    Net cash used in investing activities   (490,341 )  (398,816 )
            
CASH FLOWS FROM FINANCING ACTIVITIES           
 Principal borrowings of long-term debt   1,000,000    -  
 Principal payments on long-term debt   (556,048 )  (335,289 )
 Borrowings on bank line of credit   611,000    1,649,000  
 Issuances of Common Stock   -    72,500  
    Net cash provided by financing activities   1,054,952    1,386,211  
    Net increase (decrease) in cash   (90,673 )  19,238  
            
CASH AT BEGINNING OF PERIOD   192,448    57,975  
CASH AT END OF PERIOD  $101,775   $77,213  
            
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION           
 Interest paid  $126,552   $81,856  
 Income taxes paid  $472,150   $425,466  
            
SUPPLEMENTAL DISCLOSURE OF NON CASH TRANSACTIONS           
 Non cash exercise of stock options/ warrants  $6,933   $539,128  
 Tooling Obtained through Asset Purchase  $85,000   $-  
            

The accompanying notes are an integral part of the consolidated financial statements.

  
OURPET'S COMPANY AND SUBSIDIARIES 
STATEMENT OF COMPUTATION OF NET INCOME PER SHARE 
                 
   For the Three Months Ended   For the Nine Months Ended  
   September 30,   September 30,  
   2015  2014   2015   2014  
                     
Net income (loss)  $410,450  $77,751   $886,319   $359,935  
                     
Preferred Stock dividend requirements   -   (24,610 )  (35,621 )  (73,028 )
                     
Net income (loss) attributable to common stockholders  $410,450  $53,141   $850,698   $286,907  
                     
Basic weighted average number of common shares outstanding   17,562,239   17,056,910    17,558,085    16,884,581  
                     
Preferred Stock Common Share Equivalents   1,871,160   -    1,236,160    -  
                     
Dilutive Stock Options outstanding for the Period   97,973   380,077    111,733    594,024  
                     
Dilutive Warrants outstanding for the Period   293,420   600,578    314,137    682,372  
                     
Diluted weighted average number of common and equivalent shares outstanding   19,824,793   18,037,565    19,220,115    18,160,978  
                     
Basic and Diluted Net income (loss) per common share  $0.02  $0.00   $0.04   $0.02  
                     
 
EBITDA Q3'15
             
EBITDA  Q3'15  Q3'14  1st nine
months
2015
 1st nine
months
2014
                 
Net Income  $410,450  $77,751  $886,319  $359,935
Interest   35,919   31,153   85,221   97,519
Tax Expense   217,236   49,915   496,839   206,723
Depreciation   143,135   143,977   456,981   430,988
Amortization   18,956   20,344   59,328   58,491
 Total EBITDA  $825,696  $323,140  $1,984,688  $1,153,656
             

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.

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