Synergy Brands Reports Strong Third Quarter and Nine Month Results
Revenues Up 24% for Third Quarter; 20% for Nine Month Period
Syosset, NY, November 14, 2005 - Synergy Brands, Inc. (NASDAQ:SYBR) announced
strong top line growth for the third quarter ending September 30, 2005. The
company delivered sales growth of 24% versus the same period one year ago. For
the nine-month period ending September 30, 2005, sales were up 20%.
Executive Summary
o Revenues increased 20% to $48 million for nine months; 24% to $17.1 million
for the third quarter
o Working capital increased 333% from $1.1 million to $4.9 million
o Gross Profit increased 12% to $3.2 million for the nine months
o Operating loss reduced by 71% to $76,000
o Net loss reduced 42% from $0.65 per share to $0.38 per share
o Equity increased by 209% from $2.6 million to $7.9 million.
"We continue to strengthen our business and reduce our operating losses. Our
gross profit continues to rise and we continue to work toward profitability,"
said Mair Faibish, Chairman of Synergy Brands. He noted that although the recent
hurricane in South Florida has affected the company's cigar operations, "the
effect should be minimal and we do not forsee any significant change to our
expectations for the year."
Financial Highlights
o Gross profit for the nine months ended September 30, 2005 was $3,157,740 as
compared to $2,814,959 for the nine months ended September 30, 2004, an
increase of 12.2%. The following segment analysis will further define the
components, which caused the increase in operating gross profit. In
particular the company relies on vendor allowances and promotions that
materially affect the Company's gross profit. The allowances are depended
upon the vendors the Company purchases its goods from.
o Selling and general administrative expenses (SG&A) increased by 11% while
revenues increased by 20% for the nine months ended September 30, 2005,
compared to the nine months ended September 30, 2004. The Company
streamlined its operations by centralizing all administrative functions at
its corporate offices, reduced staff in its Proset operation through
outsourcing, while also reducing costs involved in retail sales. The
largest subsidiary of the Company, PHS Group, increased its SG&A expenses
by 29% to $1,546,787 for the nine months ended September 30, while revenues
grew by 30% to $45.5 million.
Segment Data:
PHS Group (B2B Grocery and HBA distribution operation)
PHS increased its revenues by 39% to $16.3 million for the three months ended
September 30, 2005, as compared to $11.7 million for the three months ended
September 30, 2004. For the nine months, PHS increased its revenues 30% to $45.5
million compared to $35.1 million for the like period one year ago. 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. For the quarter, overall gross profit percentage
decreased from 8.1% to 6.1%; for the nine months, overall gross profit
percentage increased from 5.5% to 5.9%. Gross profit increased by 4% to $998,246
for the quarter compared to $951,985 for the like quarter one year ago. For the
nine-month period, gross profit increased 38% to $2,688,644 as compared to
$1,946,284 last year. In 2005 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 2005 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. PHS has been negatively affected by the distribution of
Folgers Coffee from New Orleans. P&G expects to resume normal shipments of
Folgers by the end of 2005, but there is no assurance that this goal will be
achieved. For the nine-month period, net profit improved from a loss of $17,322
to a profit of $168,651.
GRC (B2C Cigar operations)
The Company's B2C segment, which includes Cigars Around the World, CigarGold and
BeautyBuys recorded flat revenue for the quarter of $521,589 compared to
$581,485 for the same period last year. For the nine-month period, revenue
declined slightly to $1,439,198 compared to $1,553,374 last year. Cigars Around
the World, on a current operating basis, represented approximately 59% of
revenue for the quarter and 62% of revenue for the nine months in the B2C
segment of Synergy's business. Gross profit for the three months ended September
30, 2005 was $169,704, compared to $159,688 a year earlier. For the nine months,
gross profit was $436,786 compared to $416,240 a year ago. While Cigars Around
the World is operating profitably, the logistical support in Miami, Florida is
consuming the segment's resources and thereby not allowing it show profit at
these sales levels. Furthermore, the company previously reported that it
anticipates minimal interruption from recent weather-related activities in South
Florida. The segment continues to have more than 20,000 customers, generating an
average order of $100 with more than a 50% repeat rate, generating a 99%
fulfillment rate, which is believed to be far in excess of the competition. The
company believes that building its B2C segment brands along with the popularity
of Bill Rancic, winner of the NBC show "The Apprentice" should bring this
segment to profitability. GRC signed a partnership deal with Overstock, a
distribution deal with ClubCorp and continues to promote its brands with Google
and Yahoo. The operation is expected to continue to focus on online marketing,
destination resorts and in store activities.
Interline Travel and Tours (www.perx.com)
SYBR added to its investment in Interline Travel & Tour, Inc. (ITT) in the
fourth quarter by investing one million dollars in a $3.5 million private
placement through a subsidiary. ITT has used the proceeds of the placement in
part to acquire a competitor in the North American interline travel industry as
well as a controlling interest in a European travel retailer. Interline is the
travel industry term used to define an airline employee and ITT's travel
offerings are primarily for the use of interliners. The combination of the
companies should bring about critical mass in this industry for ITT. The
acquisition is expected to allow the companies to take advantage of the other's
strengths in both the cruise and resort vacation markets while providing ITT
with a footprint into the European travel segment. The companies expect to offer
increased capabilities to book online a wider variety of product as a result of
the transaction. SYBR believes that increasing its stake and position with ITT
may allow for its 22% stake in ITT to appreciate in value if ITT's mass becomes
a factor in the travel industry. On a combined basis ITT and the acquisition
noted above generated in excess of $60 million in annual travel bookings. SYBR's
plan for the future is to assist ITT in the business integration and to seek to
maximize shareholder value for ITT and SYBR shareholders. For the quarter ended
9/30/2005, SYBR reported $50,000 in earnings as compared to $36,000 for the
prior period for its 22% stake in ITT.
Proset
Proset revenues decreased 82% for the three months ended September 30, 2005
compared to the three months ended September 30, 2004. For the nine months,
revenues decreased 70% to $985,102. The decrease in revenue is attributable to
the transferring of Proset's business model from one of retail service to
wholesale distribution. This is the third quarter of operations whereby Proset
is relying on the importation and packaging of product. Management has been
disappointed with Proset's results. Its operations have added $372,000 to the
Company's loss. Management will continue to attempt to contain Proset's costs
and explore options to streamline its operations.
About Synergy Brands
Synergy Brands, Inc. is a holding company that operates in the wholesale and
online distribution of groceries and health and beauty aids (HBA) as well as
wholesale and online distribution of premium cigars and salon products through
three business 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 uses
logistics web based programs to optimize its distribution costs on both
wholesale and retail levels.
The company also owns 22 percent of the outstanding common stock of Interline
Travel and Tours, Inc. (aka:PERX). PERX provides cruise and resort hotel
packages through a proprietary reservation system to airline employees and their
retirees. PERX is believed to be the largest company in this sector of the
travel industry. Information on PERX can be found at www.perx.com. The company
believes that its capital investment in this unique travel company could provide
material future capital appreciation. Synergy Brands does not manage PERX's
day-to-day operations. Synergy and PERX have been exploring several
opportunities to optimize shareholder value of both companies.
FORWARD LOOKING STATEMENTS
This press release and company review and assumptions made regarding the
financial figures and other information, referenced and presented, state and
reflect assumptions, expectations, projections, intentions and/or beliefs about
past and future events that are intended as "forward-looking statement" 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", "believe", "estimate", "project",
"forecast", "may", "will", "should", "expect", "assume", and other deviations
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 or unknown risks and uncertainties. For a
description of many of these risks and uncertainties, please refer to the
Company's filings with the U.S. Securities and Exchange Commission (www.sec.gov)
including Forms 10K and 10Q.
Contact: Beverly Jedynak Amy Ruffalo
Martin E. Janis & Co., Inc. Martin E. Janis & Co., Inc.
312-943-1100 ext. 12 312-943-1100 ext. 15
bjedynak@janispr.com aruffalo@janispr.com