Synergy Brands Increases Revenue 13% in 2005 to $64.1 million
- -EBITDA Increases 15% and Cash Flow Improves 42%
- -Completes $1.75 million refinancing
- -PHS Group posts record year
- -PERX adds two travel Companies to its portfolio
- -Company issues Guidance for FY 2006
Syosset, NY, March 31, 2006 - Synergy Brands, Inc. (NASDAQ:SYBR) today announced
that for fiscal 2005, ending December 31, 2005, the Company achieved revenue of
$64.1 million, a 13 percent increase from the $56.7 million recorded a year
earlier. The Company's net loss attributable to common shareholders for the year
was $2.9 million or ($.75) per share, compared to a net loss attributable to
common shareholders of $2.1 million or ($.97) per share a year earlier. EBITDA
improved in 2005 by 15% percent to $505,000. The Company also reduced its cash
requirements from operating activities by 42 percent from $7 million in 2004 to
$4.1 million in 2005. This was a result of a net decrease of $5.6 million in
accounts receivables from $6.5 million to $900,000.
Mair Faibish, Chairman and CEO of Synergy Brands noted that some $1.8 million of
the Company's net loss represented non-cash charges, which include depreciation
and amortization, impairment & reserves and equity based charges. Financing
costs totaled $1.9 million and represented the largest cost center for the
Company. "We continue the process of reducing these charges, as we believe that
this reduction could be achieved through equity-based transactions and
refinancing at lower rates"
Synergy Brands' working capital improved by $1.4 million to $4.5 million in
2005, due to a $900,000 reduction in the Company's line of credit and a $1.6
million reduction in accounts payable. Receivables increased by $900,000 due to
revenue increases and vendor rebates. The capital resources available to the
Company consist of $6.3 million in lines of credit, $2.7 million in long-term
notes and $4 million in Preferred Stock. The Company's objective is to reduce
its notes through the issuance of equity and cash flow as well as refinancing
its current obligations with lower rates. Shareholders' equity improved to $6.9
million with a total of 4.6 million common shares outstanding.
Synergy Brands continued the process of reducing its financing costs by securing
a $1.75 Million financing with Laurus Master Fund, Ltd. Synergy secured a 10%
fixed rate, which amortizes based on a five-year amortization period. The
proceeds were used to reduce higher coupon debt. This deal brings total
borrowing from Laurus to approximately $2.9 million.
"We believe that Synergy is now in a position that allows the Company to realize
the benefit of its expanded operating margins and attract lower cost financing.
We increased our revenue at a rapid rate over the past five years and we now
believe that a reduction in financing costs should be the next phase of our
business plan." stated Mair Faibish, President of Synergy Brands. The Laurus
deal closed in March 2006.
The Company expects to continue to seek a reduction in its financing costs and
believes that at its current revenue levels it may be able to achieve a
profitable operation.
Guidance (*)
For fiscal 2006, the Company projects revenue of $65 million with a gross profit
of $4.7 million, EBITDA of $920,000 ($.20 per share) and operating profit of
$300,000 ($.07 per share). In addition, the Company anticipates reducing its
loss to $750,000 or ($0.17) per share in 2006. This guidance is based strictly
on assumptions by management through reference to past financial performance and
expectations. This guidance should not be relied upon, if at all, until actual
results are reported.
Segment Detail
PHS Group
Synergy's Grocery operation improved its operation through an expansion of its
Metro NY wholesale operation as well as its wholesale distribution operations.
Sales improved by 21 percent to $61.4 million and operating profit increased by
29 percent to $1.2 million. PHS represented 96 percent of the Company's overall
revenues and provides most of the cash flow for the Company's other segments and
corporate overhead. PHS plans to continue attempting to build its Metro NY
operations and increase its international sales to Canada and the Caribbean.
B2C Operations (Gran Reserve Corporation supra GRC)
B2C operations consist of www.CigarGold.com, www.CigarsAroundtheWorld.com,
www.BeautyBuys.com, and the Cigars Around the World retail store operation in
Miami and online partnership programs with other companies such as Overstock.com
and Google. The operation has relocated to a 6,000 square foot facility in Miami
Lakes, Florida, which handles order flow for the operation as well as the
Company's new retail operation. Sales decreased by 7 percent in 2005 to $1.9
million, while the operating loss was reduced by 26 percent to $427,000.
Revenues were reduced due to Hurricane Wilma, which disrupted operations in the
fourth quarter of 2005. Retail store operations commenced in December 2005 but
the Company's grand opening occurred on March 4, 2006. GRC plans to have its
retail outlets act as hubs for expansion in fiscal 2006. The combination of
online sales as well as retail store sales is expected to be a focus for growth
in 2006. The retail store is an expansion of Bill Rancic's Cigars Around the
World (CAW) concept of providing the ultimate destination to a cigar aficionado.
The Company has been disappointed by GRC's growth and believes that rapidly
changing anti-smoking legislation may shift the Cigar business to one of a
complete destination business as opposed to a leisure activity.
Proset operations
Proset had a disappointing year in FY 2005. Proset developed additional sources
for its goods predominately in Europe, but access to goods has been limited in
2005. In the first quarter of 2006, the Company secured direct contacts in
Europe of luxury goods and secured Costco and others for distribution of these
products. Management expects that Proset-operating results should significantly
improve in fiscal 2006. Furthermore, Proset's operating structure has been
integrated into PHS Group, thus allowing for logistics to be integrated into PHS
operations. Proset is expected to have a record first quarter in FY 2006. The
flow of luxury goods has materialized in the first quarter and Costco has
already received numerous deliveries.
Interline vacations (www.perx.com)
The Company owns 22% of the outstanding stock of PERX. PERX provides resort
vacations and cruises to airline employees through a proprietary online system
and reservation centers. PERX is believed to be the largest interline travel
Company in the United States. Information can be found at www.perx.com. Synergy
invested an additional $1 million in a private placement offered by PERX in the
4th quarter of 2005 for the purpose of PERX acquiring two companies in similar
business models. It is expected that the combined PERX operations should
generate $70 million in travel bookings with a $2.5 million EBITDA. SYBR and
PERX have been exploring strategic opportunities to optimize the shareholder
value of both companies.
Corporate Expenses
The Company's allocation to corporate expenses was increased by 5% to $700,000.
Corporate expenses represent 17% of overall operating expense of the Company.
Corporate expenses include all fees relating to the operations of the holding
Company, Synergy Brands.
SEGMENT INFORMATION OF OPERATING BUSINESSES
TOTAL
PROSET CHANGE PHS GROUP CHANGE B2C CHANGE OPERATING CHANGE
Y/E 12/31/05
Revenue $786,908 -79.95% $61,450,467 21.14% $1,899,715 -7.45% $64,137,090 13.11%
Gross Profit ($178,735)-130.39% $3,423,960 22.03% $582,154 15.71% $3,827,379 -1.79%
SG&A $292,034 3.28% $2,211,290 18.23% $853,349 -9.12% $3,356,673 8.56%
Operatimg Profit(loss) ($947,775)-1103.07% $1,199,866 29.17% ($427,672) -26.42% ($175,581)-139.71%
Net loss ($1,031,57-370.60% ($111,784) -33.44% ($445,505) -30.92% ($1,588,865) -53.96%
Net loss per common share ($0.26) ($0.03) ($0.12) ($0.42)
Non Cash Charges
Interest and financing expenses $80,233 -65.55% $1,297,348 11.02% -100.00% $1,377,581 -4.60%
EBITDA
Per share
Y/E 12/31/04
Revenue $3,923,823 $50,728,560 $2,052,661 $56,705,044
Gross Profit $588,154 $2,805,747 $503,098 $3,896,999
SG&A $282,747 $1,870,312 $939,028 $3,092,087
Operatimg Profit(loss) $94,487 $928,934 ($581,231) $442,190
Net Profit(loss) ($219,204) ($167,951) ($644,870) ($1,032,025)
Net loss per common share ($0.10) ($0.08) ($0.29) ($0.47)
Non Cash Charges
Interest and financing expenses $232,913 $1,168,607 $42,500 $1,444,020
EBITDA
Per share
SEGMENT INFORMATION OF OPERATING BUSINESSES
continued
TOTAL
CONSOLIDATED CHANGE
Y/E 12/31/05
Revenue $64,137,090 13.11%
Gross Profit $3,827,379 -1.79%
SG&A $4,055,560 7.99%
Operatimg Profit(loss) ($1,019,732) -96.82%
Net loss ($2,878,111) -34.95%
Net loss per common share ($0.75) 21.95%
Non Cash Charges $1,789,976 75.79%
Interest and financing expenses $1,593,639 2.58%
EBITDA $505,504 15.15%
Per share $0.13 15.15%
Y/E 12/31/04
Revenue $56,705,044
Gross Profit $3,896,999
SG&A $3,755,614
Operatimg Profit(loss) ($518,105)
Net Profit(loss) ($2,132,754)
Net loss per common share ($0.97)
Non Cash Charges $1,018,235
Interest and financing expenses $1,553,521
EBITDA $439,002
Per share $0.11
About Synergy Brands
Synergy Brands, Inc. is a holding Company that operates in the wholesale and
Internet distribution of consumer goods as well as the retail distribution of
premium cigars in the U.S. and Canada. 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.
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 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", "believe" and other deviations thereof and
other words of similar meaning. In particular these include, but are not limited
to, statements reflecting the projected business activities and goals, 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 & Exchange
Commission (www.sec.gov including Forms 10K and 10Q). *EBITDA represents
earnings before interest, taxes, depreciation and amortization (non-cash
charges) and is not a GAAP number, and relevance is therefore is often
questioned, but it is useful in analyzing a wholesale distribution business such
as the Company. The reconciliation to relevant comparable GAAP figures in the
net loss is included in the table presented.
Contact: Bev Jedynak (ext. 12, bjedynak@janispr.com)
Amy Ruffalo (ext. 15, aruffalo@janispr.com)
Martin E. Janis & Company, Inc.
312-943-1100