EXHIBIT 99.1
SYNERGY BRANDS REPORTS NINE MONTHS RESULTS
REVENUES INCREASE BY 32% TO $28.1 MILLION; THIRD QUARTER SALES REACHED A RECORD
$10.3 MILLION.
GROSS PROFIT FOR THE NINE MONTHS INCREASED BY 82% TO $2 MILLION.
Net loss narrows by 68% for the nine-month period.
November 14, 2003: Synergy Brands Inc (Synergy), Melville, New York, NASDAQ
Small-Cap, (SYBR)
Results for nine months ended September 30, 2003
Sales increased by 32% to $28.1 million for the nine months ended September
30, 2003. The grocery and health & Beauty Aid (HBA) businesses
(www.DealByNet.com supra BtoB) increased by 28% as compared to the prior period.
The rise is also attributable to a 53% increase in sales of salon hair care
products as well as a 66% increase in Internet related sales, especially in the
Company's premium Cigar operation resulting from the purchase of Cigars Around
the World. Although sales increased by 32%, the Company's gross profit increased
by 82% to a record $2.0 million for the nine months ended September 30, 2003.
The Company increased its margin due to two factors, (i) Sales of salon products
and Internet related goods categories materially increased which sales
traditionally result in higher gross margin to the Company and (ii) Promotional
funding from the Company's suppliers materially increased for the nine months
period as compared to the prior period in the Company's grocery BtoB operation.
The Company's grocery operation provided 63% of the overall margin contribution
for the nine months ended September 30, 2003 as compared to a 56% contribution
in the prior year. The Company used this additional margin to expand its Direct
Store operation by expanding its warehousing, transportation and logistical
support centers. The BtoB operation was able to expand its overall gross profit
by over 105%, while increasing revenues by 28% through optimizing its
procurement cycles and maximizing its promotional programs. Management has
worked closely with its primary vendors to migrate its purchases to customized
displays of nationally branded products that can be bulk shipped to optimize
retail floor displays. This enables the company to increase revenues and procure
goods at lower average costs then regular stock units.
Below is the Gross profit analysis for the Nine months ended September 30,
2003 as compared to September 30, 2002.
Gross Profit Analysis table
Gross Gross Gross Gross Profit Gross Gross Profit
Profit% Profit% Profit% Contribution Profit % Contribution
9/30/03 9/30/03 9/30/03 9/30/02
PHS Group 5.5% 3.4% $1,286,397 63.0% $627,357 55.9%
BtoB)
Proset 10.5% 13.7% $315,687 15.5% $269,294 24.0%
Salon Products
B2C sites 27.6% 23.5% $441,653 21.5% $225,934 20.1%
Total Gross 7.3% 5.3% $2,043,737 $1,122,585
Profit
Earnings before interest, taxes, depreciation & amortization (EBITDA)
improved by 93% to a loss of $113,665 [$0.07 per share] for the nine months
ended September 30, 2003 as compared to a loss of $1.6 million [$1.24 per
share]. (see end table below). The improvement in EBITDA is due to several
factors including; increased gross profit, a reduction in operating expenses,
and an increase in the equity in earning's from Interline travel and tours a 20%
investee. The net loss of the Company was reduced by 68% to a net loss of
$816,292 or $(0.55) per share for the nine months ended September 30, 2003 as
compared to a net loss of $2,523,546 or $(1.95) per share for prior period. The
improvement in profitability is predominately related to a reduction of
operating expenses, increased revenue and an increase in gross profit.
The company also owns a 20% stake in Interline travel and tours (ITT), a
travel company specializing in hotel and cruise sales solely to airline related
employees. Information on ITT can be found at www.perx.com. The Company recorded
earnings under the equity method in ITT of $92,368 for the nine months ended
September 30, 2003 as compared to $61,965 for the nine months ended September
30, 2002. For the full fiscal year period of ITT, which ended June 30, 2003, ITT
generated almost $900,000 in pre-tax income. The Company's share under the
equity method would have amounted to $180,000 for the full fiscal year. The
Company has this investment recorded on its Balance sheet at a value of
$164,549. Management believes, with no assurances, that its book value based
upon cost is significantly lower then the potential market value of this
investment. Subsequent to this investment, certain shareholders of ITT provided
PHS Group, the company's B2B operation, with $850,000 in 12% notes that are
secured by the Company's investment in the stock of ITT. In a joint effort with
ITT, Synergy Brands is exploring all possible options with investment bankers to
optimize the valuation of ITT.
Nine Months Ended September 30, 2003 and 2002
Salon Grocery and
Products HBA (BtoB) B2C Sum
Revenue 2003 $3,010,607 $ 23,502,757 $ 1,599,533 $ 28,112,897
2002 $1,969,383 $ 18,364,964 $ 960,893 $ 21,295,240
Net Income 2003 $(323,360) $ (135,013) $ (357,919) $ (816,292)
(Loss) 2002 $(620,300) $ (339,360) $(1,563,886) $(2,523,546)
Interest & 2003 $146,974 $ 323,043 $28,137 $498,154
Finance Expenses 2002 $ 29,908 $ 51,164 $49,048 $130,120
Depreciation & 2003 $159,732 $ 204,579 $130,273 $494,584
amortization 2002 $394,551 $ 204,420 $154,499 $753,470
Results for three months ended September 30, 2003
Sales increased by 85% to a record $10.3 million for the three months ended
September 30, 2003 from the same period in the prior year. Sequentially sales
increased by 18% from the second quarter ended June 30, 2003. The grocery
business (BtoB) increased by 87% for the three months ended September 30, 2003
as compared to the three months ended September 30, 2002. The rise is also
attributable to a 51% increase in sales of salon hair care products as well as a
120% increase in Internet related sales, especially in the Company's premium
Cigar operation resulting from the purchase of Cigars Around the World. Although
sales increased by 85%, the Company's gross profit increased by 31% to $619,625
for the three months ended September 30, 2003 from the prior year. The Company
increased its margin due to two factors, (i) Sales of salon products and
Internet related goods categories materially increased which sales traditionally
result in a higher gross margin to the Company and (ii) Promotional funding from
the Company's suppliers materially increased for the three months period as
compared to the prior period in the Company's grocery Business to Business
(BtoB) operations.
In 2003, PHS powered by DealBynet (DBN) (The Company's BtoB operation)
created a full service direct store delivery (DSD) operation.
* In the second quarter of 2003, major suppliers advised PHS that in
order to qualify for significant promotional rebates retail performance
was required. Management evaluated the programs required and decided
that it can best serve its customers by continuing to reduce product
costs through the optimization of manufacturers rebates that it can
pass along to its customer base.
In order to develop the initial plan PHS initiated the following
operating plan;
* Lease a fleet of trucks for direct store efficiency; and Hire, train
and manage a staff of company drivers with CDL qualifications as well
as Develop a customer routing system;
* Operate a company warehouse for logistics and inventory management;
* Expanded a retail sales staff;
* Hire telemarketers to facilitate order taking and Catalog generation
as well as provide technical training for customer web based ordering;
* Open a total 1000 retail accounts;
* Develop a competitive niche by selling high velocity, high demand
products already being purchased for wholesale distribution at ultra
competitive pricing for the purpose of increasing our market
penetration;
* Increase gross Margin for the BtoB operation to 10%.
As of the end of the third quarter of 2003 the following goals were
achieved;
* DBN leased six trucks and consigned its warehouse for its TL
deliveries.
* A special purpose warehouse was engaged in Q3 of 2003. At current
volume levels, management is seeking to open a dedicated company
operated facility to further streamline its DSD operation.
* Over 300 accounts were opened and a daily route was developed.
* Material portions of PHS sales were handled through the company's DSD
and warehousing operations.
* The start-up costs for the DBN DSD operation were about $250,000 in
Q3. These items have been expensed as selling general and
administrative expenses in accordance with GAAP. PHS has been able to
absorb all the incremental costs and still reduce its over-all SG&A
expenses from the prior period even though higher margins and revenues.
Management believes that its investment in the start-up costs for a newly
developed routing system for retail accounts should allow its customers to
benefit from its streamlined logistics model of selling highly desired national
brand name products at reduced prices. By creating dedicated routes, PHS
believes that customers will value consistency of deliveries on a predictable
cycle under selective merchandising conditions that may allow for rebate
optimization.
EBITDA improved by 60% to a loss of $208,433 [$0.11 per share] for the
third quarter ended September 30, 2003 as compared to a loss of $519,051 [$0.39
per share] for the same period in 2002. (see table below). The improvement in
EBITDA is due to several factors including; increased gross profit, a reduction
in operating expenses, increase in the net earnings from Interline travel and
tours and an increase in revenues. The net loss of the Company was reduced by
25% to a net loss of $599,423 or $0.34 per share for the three months, ended
September 30, 2003 as compared to a net loss of $799,236 or $0.60 per share for
the three months ended September 30, 2002. The improvement in profitability is
predominately related to a reduction of operating expenses and an increase in
gross profit.
Liquidity and Capital resources
Working capital materially improved to $1,707,840 at September 30, 2003 as
compared to $51,542 at December 31, 2002. Shareholders' Equity increased by $1.3
million to $3.4 million from December 31, 2002 predominately due to a $1.6
million placement of Series A Class B preferred stock. The company was able to
increase its equity after absorbing almost one $1 million in depreciation and
financing costs for the nine months ended September 30, 2003. The Company's
liquidity improved through the placement of $1.6 million of Class B series A
preferred stock and $850,000 in long-term notes as well as strong cash flow from
operations. The Company utilized this placement to leverage and reduce borrowing
of its $7 million revolving line of credit with its bank, so that it can
maximize its ability to generate sales through inventory and receivable
financing.
The company completed the acquisition of Cigars around the World (CAW) on
June 1, 2003. CAW is a leading supplier of premium hand made cigars to some of
the most prestigious Hotels, Restaurants, Casinos and Golf Clubs in the United
States. CAW provides its customers with a turnkey package that includes
merchandising, special display units and retail product guidance to major cigar
retailers. This acquisition is expected to be immediately accretive to operating
income and is a strategic addition to the current Internet operations of the
company. CAW distribution will be handled at the current cigar distribution
facilities in Florida. The company's Cigar operations are conducted through Gran
Reserve Corporation (GRC), which is wholly owned by Synergy Brands.
Three months ended Nine months ended
09/30/03 09/30/02 change 09/30/03 09/30/02 change
Statement of operations data
Revenues
PHS Group (dealbynet BtoB) $ 8,889,336 $4,761,945 86.67% $ 23,502,757 $ 18,364,964 27.98%
Proset (Hair Care distribution) $ 753,731 $ 498,420 51.22% $ 3,010,607 $ 1,969,383 52.87%
GRC (BtoC) $ 634,960 $ 288,923 119.77% $ 1,599,533 $ 960,893 66.47%
------------ ---------- ------------- -----------
Total $10,278,027 $5,549,288 85.21% $ 28,112,897 $ 21,295,240 32.01%
============ ========== ============= ===========
Gross Profit $ 619,625 $ 474,171 30.68% $ 2,043,737 $ 1,122,585 82.06%
============ ========== ============= ===========
6.03% 8.54% -29.39% 7.27% 5.27% 37.95%
EBITDA $ (208,433) $(519,051) 59.84% $ (113,665) $(1,605,669) 92.92%
============ ========== ============= ===========
Per common share (non GAAP measure) $ (0.11) $ (0.39) 71.05% $ (0.07) $ (1.24) 94.35%
============ ========== ============= ===========
Net Profit (loss) $ (599,423) $(799,236) 25.00% $ (816,292) $(2,523,546) 67.65%
============ ========== ============= ===========
Per common share $ (0.34) $ (0.60) 45.92% $ (0.55) $ (1.95) 73.85%
============ ========== ============= ===========
Weighted shares outstanding 1,825,140 1,322,377 1,568,756 1,293,949
============ ========== ============= ===========
EBITDA ANALYSIS
Net Profit (loss) $ (599,423) $ (799,236) 25.00% $ (816,292) $(2,523,546) 67.65%
Interest expense $ 194,837 $ 26,878 624.89% $ 498,154 $ 130,120 282.84%
Interest income $ (3,404) $ (2,086) 63.18% $ (10,066) $ (21,347) 52.85%
Other Income (expense) $ 1,725 $ (7,028) 124.54% $ (312,703) $ 32,947 -1049.11%
Income tax expense $ 7,383 -100.00% $ 32,658 $ 22,687 43.95%
Depreciation and Amortization $ 197,832 $ 255,038 -22.43% $ 494,584 $ 753,470 -34.36%
------------ ---------- ------------- -----------
EBITDA $ (208,433) $ (519,051) 59.84% $ (113,665) $(1,605,669) 92.92%
============ ========== ============= ===========
Per common share (non GAAP measure) (0.11) (0.39) (0.07) (1.24)
============ ========== ============= ===========
EBITDA excludes the following line items on the Company's statements of
operations:
Depreciation and Amortization
Interest income and expenses
Other income and loss
Income tax expense
About Synergy Brands:
Synergy Brands is a holding company, which operates through three unique
business segments that all utilize distribution and logistics. The businesses
include PHS Group (also known as www.dealbynet.com), Gran Reserve Corporation
(GRC), and Proset Hair Systems (Proset). PHS operates the company's distribution
business in the grocery and health beauty aids consumer markets (supra BtoB
operation). Proset wholesale salon products to chain drug stores and GRC manages
the company's online properties, which include www.CigarGold.com,
www.BeautyBuys.com, www.cigarsaroundtheworld.com, and store.perx.com. The
company also owns a 20% stake in Interline travel and tours (ITT), a travel
company specializing in hotel and cruise sales solely to airline related
employees. Information on ITT can be found at www.perx.com.
(*) FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE AND MUCH OF THE FINANCIAL FIGURES AND OTHER INFORMATION
PRESENTED STATE AND REFLECT ASSUMPTIONS, EXPECTATIONS, PROJECTIONS, INTENTIONS
AND/OR BELIEFS ABOUT EVENTS THAT ARE INTENDED AS "FORWARD LOOKING STATEMENTS"
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. IN PARTICULAR THESE
INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS REFLECTING EARNINGS, PROFIT AND LOSS
OF THE COMPANY AND ASSOCIATED COSTS QUOTED HEREIN ON FIGURES EXPECTED TO BE
DISCLOSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10KSB. ANY OR ALL OF THE
COMPANY'S FORWARD-LOOKING STATEMENTS MAY TURN OUT TO BE WRONG. THEY CAN BE
EFFECTED BY INACCURATE ASSUMPTIONS OR BY KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES. FOR A DESCRIPTION OF MANY OF THESE RISK AND UNCERTAINTIES PLEASE
REFER TO THE COMPANY'S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
(WWW.SEC.GOV), INCLUDING FORMS 10KSB AND 10QSB. IN PARTICULAR BUT NOT TO THE
EXCLUSION OF OTHER RISKS AND UNCERTAINTIES, THE PROJECTIONS IN THIS RELEASE ARE
BASED UPON ASSUMPTIONS ON APPLICABILITY OF CERTAIN ACCOUNTING REGULATIONS
BELIEVED APPLICABLE BY THE COMPANY. EBITDA IS NOT REPORTED IN ACCORDANCE TO
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) AND SHOULD NOT BE RELIED UPON AS
SUCH.EBITDA EXCLUDES INTEREST, TAXES, DEPRECIATION AND AMORTIZATION AND OTHER
INCOME AND EXPENSES. THE COMPANY PLANS ON FILING ITS 10QSB BY NOVEMBER 14, 2003.
THE INFORMATION THAT WILL BE REPORTED UNDER THAT FILING WILL HAVE THE REVIWED
FINANCIAL STATEMENTS UNDER GAAP AS WELL AS ALL OTHER SEC REQUIREMENTS. THIS
RELEASE IS FOR INFORMATIONAL PURPOSES ONLY.
Contact: Bev Jedynak
Martin E. Janis & Company, Inc.
312-943-1100 ext. 12
b.jedynak-janispr@att.net