OurPet’s Company Reports Results for 2016 Second Quarter

FAIRPORT HARBOR, Ohio–(BUSINESS WIRE)–OurPet’s Company (OTCQX: OPCO) (“the Company”) (www.ourpets.com),
a leading proprietary pet supply company, today reports its
second-quarter results for the three-month period ended June 30, 2016,
which were impacted by a temporary reduction of purchase orders from a
major retail customer clearing out its existing private-label inventory
to make room for soon-to-launch OurPet’s branded products.

Second-quarter 2016 revenue decreased 2.7% to $5.4 million compared to
$5.6 million for the same period a year ago. Net income for the 2016
second quarter decreased 41% to $154,634 compared to $262,076 the prior
year. Earnings per share remained steady at $0.01 for the second quarter
of 2016 and 2015.

Dr. Steven Tsengas, president and CEO of OurPet’s, says, “While we were
disappointed with the decline in revenues and net income, the decreases
are directly attributable to a major pet specialty retailer’s decision
to transition out of its private label stainless steel rubber bonded
bowls and toys and accessories, which we previously supplied, to make
room in its inventory for OurPet’s branded products that will be rolled
out during Q3 and Q4 of this year. This planned depletion of the
customer’s private label inventory resulted in a temporary OurPet’s
revenue disruption of approximately $521,000 for the second quarter of
this year. Had this customer’s inventory reduction not occurred, we
believe we would have shown strong revenue growth for the 2nd quarter
instead of the revenue decline and obviously greater sales growth for
the first six months of 2016. Overall, we are very pleased with the
growing acceptance of our branded products: ‘OurPet’s’ in the Pet
Specialty channel and ‘PetZone’ in the ‘Food, Drug, Mass’ (FDM) channel.
As of June 30, 2016, we had a record order pipeline of approximately
$1.9 million with over $1 million of it from our previously mentioned
major pet specialty retailer. Additionally, despite the temporary
setback in sales, we were able to reduce our inventory to less than $7.2
million compared to $8 million at end of 2015. We have used the proceeds
to reduce our line of credit from $3.3 million to $2.4 million.”

Second-quarter net income decreased by $107,442 to $154,634 from
$262,076 for the same quarter a year ago. The Company attributes the
decrease to the lower gross profit ($146,000) and increased Selling,
General and Administrative expenses of $49,000 primarily related to
major new product launches, all of which were offset by a decrease of
$104,000 in income tax expense.

Based on historical performance, new products and overall market, the
Company anticipates a solid performance in the last six months of 2016.

“We recently attended the SuperZoo National trade show in Las Vegas
where we presented another very strong showing of innovative products
led by our Intelligent Pet Care BlueTooth® line; our Switchgrass Natural
Cat Litter™; our newest generation of electronic cat toys that will
simply drive cats wild; and a new very stylish 3-height Store-N-Feed.
Due to the seasonal nature of the pet industry, we typically experience
our strongest sales in the second half of the year. We have no reason to
believe this year will be any different,” Dr. Tsengas concludes.

2016 Second-Quarter Results

Net revenue declined 2.7% to $5,436,902 for the 2016 second quarter from
$5,586,828 for the same period last year. The decrease of approximately
$150,000 is attributable to a major pet specialty customer clearing out
their inventory of private label products to allow for the purchase of
OurPet’s branded products. We also offered additional promotions,
discounts and allowances to other customers switching over to our new
brands.

Second-quarter sales for every other channel were up over the same
period a year ago with e-commerce up 21%, FDM retail up over 12%, and
value retail up over 78%. International sales were down 8.1% primarily
due to the strong dollar. With respect to product categories, sales of
toys and accessories were up over 33% over last year’s second quarter as
well as waste management and odor control were up 14%.

Gross profit was down approximately $146,000 to $1,571,844 for the 2016
second quarter compared to $1,718,069 for the period last year. Gross
profit margin decreased 1.9 percentage points to 28.9% for the 2016
second quarter from 30.8% for the same period a year ago due to a
heavier than usual sales mix of slow moving and excess inventory and
unfavorable overhead absorption.

Income from operations decreased to $227,702 for the 2016 second quarter
from $422,463 a year ago. This approximate $195,000 decrease was
primarily due to the lower gross profit combined with about $49,000 in
higher Selling, General and Administrative expenses.

Net income decreased 41% to $154,634 for the 2016 second quarter from
$262,076 last year. Earnings per share were $0.01 for the second quarter
of 2016 and 2015.

2016 First Six Months Results

Net revenue increased 3.8% to $11,612,887 for the first half of 2016
from $11,184,150 for the same period a year ago. The $428,737
year-over-year increase was due to strong first half revenue growth in
all channels except for Pet Specialty as noted above. Food, Drug, Mass
increased 11%, E-Commerce increased 17% and Value increased 168%.

Gross profit decreased .3% to $3,403,701 for the first six months of
2016 versus $3,412,414 for the first half of last year due to the lower
sales volume. Gross profit margin decreased 1.2 percentage points to
29.3% for the first six months of 2016 from 30.5% the prior year due to
the same factors that adversely impacted the 2016 second quarter results.

Income from operations decreased 17% to $642,972 for the 2016 first
half, which was attributable to lower gross profit and higher selling,
general, and administrative expenses.

Other income increased to $34,468 for the first six months of 2016 from
$26,000 for the same period last year.

Income before taxes decreased 18.4% to $616,684 for the first half of
2016 versus $755,474 for the same period a year ago.

Income tax expense was $195,470 for the first six months of 2016
compared to $279,606 the prior year.

Net income for the first six months of 2016 decreased 11.5% to $421,214
from $475,868 for the same period in 2015. Earnings per share remained
at $0.02 for the first six months of both 2016 and 2015.

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.

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 Six Months Ended
		June 30,				June 30,
		2016		2015		2016		2015
Net revenue		$ 5,436,902		$ 5,586,828		$ 11,612,887		$ 11,184,150
Cost of goods sold		3,865,058		3,868,759		8,209,186		7,771,736
Gross profit on sales		1,571,844		1,718,069		3,403,701		3,412,414
Selling, general and administrative expenses		1,344,142		1,295,606		2,760,729		2,633,638
Income from operations		227,702		422,463		642,972		778,776
Other income		(7,463)		(21,277)		(34,468)		(26,000)
Interest expense		27,920		24,795		60,756		49,302
Income before taxes		207,245		418,945		616,684		755,474
Income Tax expense		52,611		156,869		195,470		279,606
Net Income		$ 154,634		$ 262,076		$ 421,214		$ 475,868
Basic and Diluted Net Income Per Common
Share After Dividend Requirements For Preferred
Stock		$ 0.01		$ 0.01		$ 0.02		$ 0.02
Weighted average number of common shares
outstanding used to calculate		17,657,516		17,558,838		17,643,936		17,555,973
basic earnings per share
Weighted average number of common and
equivalent shares outstanding used to		18,277,335		19,201,418		18,250,885		19,172,847
calculate diluted earnings per share

OURPET’S COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
		June 30,			December 31,
			2016			2015
ASSETS
Cash and equivalents		$	168,635		$	100,000
Receivables, net			3,325,003			4,294,810
Inventories, net			7,181,216			7,914,613
Prepaid expenses			645,076			582,676
Total current assets			11,319,930			12,892,099
LONG TERM ASSETS
Property and equipment, net			1,962,490			1,873,260
Amortizable Intangible Assets, net			375,792			357,341
Intangible Assets			461,000			461,000
Goodwill			67,511			67,511
Deposits and Other assets			18,003			18,003
Total long term assets			2,884,796			2,777,115
Total assets		$	14,204,726		$	15,669,214
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current maturities of long-term debt			248,153			276,890
Accounts payable			716,122			1,582,849
Accrued expenses			531,200			571,858
Total current liabilities			1,495,475			2,431,597
LONG TERM LIABILITIES
Long-term debt – less current portion above			759,794			876,248
Revolving line of credit			2,405,032			3,267,170
Deferred income taxes			320,955			333,834
Total long term liabilities			3,485,781			4,477,252
Total liabilities			4,981,256			6,908,849
Stockholders’ Equity			9,223,470			8,760,365
Total liabilities and stockholders’ equity		$	14,204,726		$	15,669,214

Contacts

OurPet’s Company
Dr. Steven Tsengas, CEO, 440-343-6500, x111
or
Investor
Relations
Dream Team.
Michael McCarthy, 512-758-8877