EXHIBIT 99.1
SYNERGY BRANDS REPORTS FY 2003 RESULTS
REVENUES JUMP BY 29% TO $40.5 MILLION
EBITDA IMPROVES BY 106% TO EARNINGS OF $92,000 AS COMPARED TO A $1.41 MILLION
LOSS IN 2002.
LOSS NARROWS BY 44% TO $1.36 MILLION.
Melville, NY. Synergy Brands, (NASADAQ SCM SYBR)
KEY HIGHLIGHTS:
o EBITDA for combined operating segments increased by 650% to $458,553 or
$.28 per share as compared to prior year.
o Financing costs increased by 258% to $689,286 as compared to the prior
year.
o The Company's grocery segment (PHS Group) generated $34.7 million
revenues a 25% increase from the prior year.
o PHS is responsible for 86% of total revenues and 69% of gross profit.
o Loss narrows to $1.36 million or $.82 per share as compared to a loss of
$2.49 million, $1.08 per share for the prior year.
o B2C revenues jump by 69% while Salon product revenues increased by 45% in
FY 2003 as compared to FY 2002.
RESULTS OF OPERATIONS
Revenues increased by 29% to $40,540,577 for the year ended December 31 2003 as
compared $31,540,675 for the year ended December 31, 2002. Revenues increased
across all of the Company's business segments. The largest percentage increase
was in the Company's B2C operations. Revenues increased in this segment as a
result of the Company's acquisition of Cigars Around the World in June of 2003.
The Company's grocery operation continued to develop additional vendor
relationships in the grocery and HBA businesses as well as expand its sales in
Canada. Proset increased its revenues by selling its products to larger
distributors as well as retail customers.
Gross profit increased by 65% to $2.8 million in 2003 as compared to 2002. The
overall gross profit percentage increased to 6.9% to from 5.4%. The increase in
gross profit is attributable to better operating margins in the B2B operations
realized through higher vendor allowances as well as an increase of Direct Store
Delivery sales, whose sales generate higher gross margins. The acquisition of
CAW also helped increase gross profit. The following segment analysis will
further define the components, which caused the increase in operating gross
profit. In this period the Company utilized its own truck fleet and developed a
Direct Store Delivery (DSD) warehousing operation which cost the Company
$371,000 as compared to $209,000 in 2002. Management believes that this
operation should increase the Company's sales and gross profit. In order for the
Company to achieve improved profitability it needs to reduce its financing costs
and increase revenues and operating margins.
The net loss per common shareholder of the Company was reduced by 45.5% to
$1,355,223 in 2003 as compared to a net loss of $2,486,567 in 2002. The loss was
reduced through sales growth, an increase in operating gross profit, a reduction
of SG&A expenses and a significant reduction in corporate expenses. However,
financing costs increased for the year as a result of the Company's growth.
Material factors that affected the Company's costs were increased financing
costs and the control of operating margins. The increase was attributable to the
development of the Company's wholesaling operation. Corporate expenses such as
legal, accounting, and regulatory costs represent the difference between the
Company's consolidated results and operating results. Management believes that
its corporate expenses may increase as a result of additional regulatory
requirements that have been enacted by the Securities and Exchange Commission
(SEC). The Company will be required to comply with additional governance and
financial regulations that will likely result in additional corporate expenses.
Corporate loss for 2003 totaled $459,565, which include legal, accounting and
regulatory expenses.
Earnings before interest, taxes, depreciation and amortization (EBITDA) improved
from a loss of $1,408,048 to a gain of $91,600 for the year ended December 31,
2003 as compared to December 31, 2002. The improvement is attributable to an
increase in revenues, an increase in operating gross profit and a reduction in
SG&A. However financing costs increased by 226% to $690,038. Management believes
that financing costs were increased as a result of revenue growth. As a result
the Company was required to utilize its line of credit to support account
receivable and inventory growth. Although the working capital needed to support
revenue growth is directly related to the growth in accounts receivable and
inventory, the Company has invested in capital assets, such as warehousing and
trucks to support the growth of the business. EBITDA from the Company's
operating businesses increased by 650% to $458,553 in 2003 as compared to a loss
of $83,331 in 2002.
SUMMARY OF OPERATING SEGMENTS AND SUMMARY CONSOLIDATED RESULTS OF OPERATIONS
Operating Operating and
Year ended 12/31/2003 Segments Corporate Segments
Revenue 40,540,577 28.53% 40,540,577 28.53%
Gross Profit 2,809,199 65.41% 2,809,199 64.41%
SG&A 2,655,864 13.71% 3,076,297 -16.09%
Net loss (817,685) 28.43% -1,355,223 45.49%
Net loss per common share (0.49) 43.76% (0.82) 57.06%
Depreciation and amortization 600,730 -44.32% 692,698 -22.51%
Interest income 13,805 356.51% 13,913 -47.88%
Interest and financing expenses 689,286 257.27% 690,038 226.60%
Dividends paid - 78,000
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EBITDA 458,553 650.28% 91,600 106.51%
========== =========
EBITDA net income per share .28 533.70% .06 105.55%
Year ended 12/31/2002
Revenue 31,540,675 31,540,675
Gross Profit 1,698,297 1,698,297
SG&A 2,335,719 3,666,235
Net loss (1,142,511) (2,486,567)
Net loss per common share -0.88 -1.91
Depreciation and amortization 869,273 893,935
Interest income 3,024 26,695
Interest and financing expenses 192,931 211,279
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EBITDA (83,331) (1,408,048)
========== =========
EBITDA net income per share (.06) (1.08)
In order to fully understand the company's results a discussion of the Company's
segments and their respective results follows;
PHS SEGMENT INFORMATION OF OPERATING BUSINESSES
B2B CHANGE
Year ended December 31, 2003
Revenue 34,740,999 25.21%
Gross Profit 1,927,416 77.96%
SG&A 1,323,887 33.24%
Net Loss (79,864) 72.75%
Depreciation and amortization 272,812 0.05%
Interest income 13,805 356.51%
Interest and financing expenses 449,876 375.65%
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EBITDA 629,019 784.24%
========
Year ended December 31, 2002
Revenue 27,745,818
Gross Profit 1,083,069
SG&A 993,644
Net Loss (293,088)
Depreciation and amortization 272,667
Interest income 3,024
Interest and financing expenses 94,582
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EBITDA 71,137
========
PHS increased its revenues by 25.2% to $34.7 million for the year ended December
31, 2003 as compared to the prior year. The increase in PHS business is
attributable to the utilization of additional vendors, development of a
wholesale operation and expansion of the Canadian distribution business in
Ontario, Canada. The Company also benefited from increases in the vendor
allowances it receives from its vendors, thereby providing its customers with
additional discounts. This also resulted in increased sales. Gross profit
increased by 78% to $1.9 million in 2003 as compared to 2002. PHS increased its
gross profit by increasing DSD sales as well as focusing on promotional
merchandise offered by its vendors. In 2003 several PHS vendors created special
packaging with promotional pricing that enabled PHS to widen its margin. As an
example, special packaging was created for Nyquil, Marcal paper, Clorox displays
as well as Herbal essence shampoos among others, with unique retail display
features, that PHS has been able to strongly promote during FY 2003 as opposed
to marketing those products for normal replenishment. Promotional displays allow
PHS to sell better mixes of product as well as introduce new items in
combination with regularly stocked items. Vendor allowances as a result
increased by 69% to $2.7 million in 2003 as compared to $1.6 million in 2002,
thus materially increasing PHS gross profit in 2003. EBITDA increased by 9 times
to $629,019 in 2003 as compared to $71,137 in 2002. As long as the Company
maintains or expands its vendor relationships, management believes that it can
continue to improve its operating results. Management needs to also reduce its
financing costs for PHS as they represent 71% of EBITDA and a substantial
component of the Company's overall expenditures.
PROSET SEGMENT INFORMATION OF OPERATING BUSINESSES
SALON
PRODUCTS CHANGE
Year ended December 31, 2003
Revenue 3,671,106 44.69%
Gross Profit 334,305 9.20%
SG&A 429,684 -29.91%
Net Loss (502,158) 39.77%
Depreciation and amortization 213,198 -54.53%
Interest and financing expenses 199,892 231.30%
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EBITDA (89,068) 70.75%
===========
Year ended December 31, 2002
Revenue 2,537,216
Gross Profit 315,290
SG&A 613,077
Net Loss (833,712)
Depreciation and amortization 468.842
Interest and financing expenses 60,336
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EBITDA (304,534)
===========
Proset increased its revenues by 44.7% in 2003 as compared to 2002. The growth
in Proset business is attributable to increased wholesale and distribution
activity, as opposed to Direct Store Delivery (DSD) business. As a result, the
Company's customer base has expanded to include smaller distributors that
purchase salon products in higher quantities, which in turn reduces the
Company's gross profit, but increases revenues. However, distributor sales
require less labor, warehousing and distribution costs, but rely on optimal
market conditions and product availability. The salon business is highly
fragmented and very competitive. Proset must maintain strong vendor relations,
which include manufacturers, distributors and resellers in order to keep a
supply chain for its customer base. EBITDA improved from a loss of $304,534 in
2002 to a loss of $89,068 in 2003. This improvement was caused by a reduction in
labor cost, warehousing expenses, increased revenues and a reduction in freight
expenses. Financing costs are also an important factor in the operation of
Proset. As revenues increased financing costs increased by 231% to $199,892. In
order to improve the profitability of proset, management believes that financing
costs need to reduced.
B2C SEGMENT INFORMATION OF OPERATING BUSINESSES
B2C CHANGE
Year ended December 31, 2003
Revenue 2,128,472 69.24%
Gross Profit 537,478 79.20%
SG&A 888,293 21.85%
Net Loss (235,636) -1399.82%
Depreciation and amortization 114,720 -10.21%
Interest and financing expenses 39,518 3.96%
---------
EBITDA (81,398) 154.24%
=========
Year ended December 31, 2002
Revenue 1,257,641
Gross Profit 299,938
SG&A 728,998
Net Loss ( 15,711)
Depreciation and amortization 127,764
Interest and financing expenses 38,013
---------
EBITDA 150,066
=========
The Company's B2C segment includes three businesses, which include Cigars Around
the World, CigarGold and BeautyBuys. Cigars Around the World (CAW) was acquired
in June of 2003. CAW sells premium cigars to Hotels, Restaurants, Casinos, PGA
Clubs and other leisure related destinations. CAW sells its cigars in through
customized retail displayed humidors. CAW also has its own retail website that
operates under the name www.CigarsAroundTheWorld.com. The displays range from
counter top humidors to Walled Display units. CigarGold (CG) is the Company's
cigar online unit. CG sells premium cigars online to retail customers throughout
the United States. It has a selection of over 1000 products, which include
brand-name hand made premium cigars and cigar accessories. CigarGold operates
under the domain names: www.CigarGold.com, www.NetCigar.com, and
www.GoldCigar.com. The online unit also operates www.BeautyBuys.com.
BeautyBuys.com sells salon hair products to the retail consumer. Previously the
operation also sold fragrances and cosmetics to retail customers. However, the
Company decided in 2003 to limit its selection to salon hair care products,
since those items are already carried and stocked within its wholesale salon
operation, Proset Hair Systems.
Revenues in the Company's B2C operation increased by 69.2% to $2.1 million from
2002 to 2003. The increase is predominately attributable to the acquisition of
CAW. CAW represents 40% of FY 2003 B2C revenues while internet sales remained
the same from the prior year. Gross profit improved by 79% in 2003 as compared
to 2002. The increase in gross profit is attributable to higher revenues
realized through the acquisition of CAW in FY 2003. EBITDA improved by 154% for
the same period. The Company believes that future growth in B2C operations may
come from acquisitions or joint ventures as the industry consolidates its mail
order and internet based operations. The table above provides comparative
details for the Company's B2C operation.
ABOUT SYNERGY BRANDS:
Synergy Brands, Inc. (SYBR or the Company) is a holding company that operates in
wholesale distribution of consumer goods as well as retail distribution of
premium cigars and salon products through three segments. It principally focuses
on the sale of nationally known brand name consumer products manufactured by
major U.S. manufacturers. The consumer products are concentrated within the
Grocery and Health & Beauty Aids (HBA) industries as well as the premium cigar
business. The company distributes and sells these products through wholly owned
subsidiaries in two distinct manners.
Business-to-Business (B2B): The Company operates two businesses segments within
the B2B sector. B2B is defined as sales to non-retail customers.
PHS Group ("PHS") distributes Grocery and HBA products to retailers and
wholesalers predominately located in the Northeastern United States. PHS is the
largest subsidiary of the Company and represents about 86% of the overall
Company sales. PHS's core sales base continues to be the distribution of
nationally branded consumer products in the grocery and (HBA) sectors. PHS has
positioned itself as a distributor for major manufacturers as opposed to a full
line wholesaler. A full line wholesaler has the responsibility of servicing the
entire needs of a retail operation, whereby a distributor caters to specific
merchandising categories. As a result, PHS is able to plan the needs of its
customers directly from the source of supply and in turn increase sales to its
customers through this unique focus. PHS concentrates on the fastest moving
promotional items such as: Tide, Bounty, Nyquil, Pantene, Clorox bleach, Scott
tissues, Marcal tissues among many others, and uses logistics and distribution
savings to streamline and reduce its sale prices. The second business segment
within the Company's B2B sector is Proset Hair Systems (Proset). Proset
distributes Salon Hair care products to wholesalers, distributors, chain drug
stores and supermarkets in the Northeastern part of the United States.
Business to Consumer (B2C): The Company operates three businesses within the B2C
segment. B2C is defined as sales to retail customers.
The Company's B2C activities are conducted through its wholly owned subsidiary
Gran Reserve Corporation (GRC). GRC operates the following businesses
o Cigars Around the World is a recently acquired company that sells premium
cigars to restaurants, hotels, casinos, country clubs and many other
leisure related destinations. The company was acquired in June 2003.
o CigarGold.com sells premium cigars through the Internet directly to the
consumer.
o BeautyBuys.com sells salon hair care products directly to the consumer.
The Company also owns 20% of the outstanding common stock of Interline Travel
and Tours, Inc. (ITT). ITT provides cruise and resort hotel packages through a
proprietary reservation system to airline employees and their retirees. ITT is
believed to be the largest Company in this sector of the travel industry.
Information on ITT can be found at www.perx.com. The Company believes that its
capital investment in this unique travel Company may provide for future capital
appreciation. Synergy Brands does not manage ITT's day-to day operations. For
further information please visit our corporate website at www.sybr.com
FORWARD LOOKING STATEMENTS
This press release and company review and assumptions made regarding the
financial figures and other information references and presented, state and
reflect assumptions, expectations, projections, intentions, and/or beliefs about
past and future events that are intended as "forward looking statements" under
the Private Securities Litigation Reform Act of 1995. You can identify these
statements by the fact that they do not relate to historical or current facts.
They use words such as "anticipate", "estimate", "project", "forecast", "may",
"will", "should", "expect", "assume", and other derivations thereof and other
words of similar meaning. In particular these include, but are not limited to,
statements reflecting the projected revenues, earnings, profit and loss of the
company and associated costs. Any or all of the company's forward-looking
statements may turn out to be wrong. They can be affected 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 & Exchange Commission (www.sec.gov), including Forms
10KSB and 10QSB.
Contact: Bev Jedynak
Martin E. Janis & Company, Inc.
312-943-1100 ext. 12
b.jedynak-janispr@att.net