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OFFON

SYNERGY BRANDS INC.

(SYBRQ)
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Synergy Brands Inc : Synergy Brands Reports Second Quarter Results

08/14/2007 | 11:43am EDT

Synergy Brands, Inc. (NASDAQ:SYBR):

  • Profit from operating segments increased by 153% to $642,000 (8 cents per share)
  • PHS generated record revenues of $21.3 million a 41% increase;
  • PHS net profit jumped by 162% to $730,000 (9 cents per share);

Overall revenues increased by 39% to $21.8 million for the quarter ended June 30, 2007, as compared to $15.7 million for the same period in the prior year. The largest percentage increase was in the Company's grocery and HBA operations conducted through its wholly owned subsidiary PHS Group. The Company's grocery operation continued to develop additional vendor relationships in the grocery and HBA businesses as well as expand its Private Label programs. Other operations including cigar operations, discontinued operations and minority interest in travel accounted for less then 3% of the Company's overall business.

Gross profit increased by 63% to $1.9 million as compared to $1.1 million for the same period in the prior year. Operating profit increased to $630,000 as compared to $20,000. A major contributing factor to the improvement is the consistent growth of PHS Group, the Company's Grocery, HBA and private label businesses. Operating profit for PHS Group increased to $1,089,000 from $535,000 while net profit increased to $730,000 from $278,000. The Company has been able to achieve profitability through increased sales and wider profit margins generated by higher vendor rebates and gross profit generated by private label sales. The wider profit margins have been achieved through a diversification of the business from wholesale distribution to direct store deliveries and co-packing private label baking mixes and spices. PHS has been able to leverage its warehouse logistics into efficient distribution of private label products, both domestic and through importation. The Company plans to further expand into the Dominican Republic, Colombia, Israel and Canada and continue to expand its assembly operations in China for retail spice production. The Company reported a net profit of $164,000 as compared to a net loss of $406,000 for the quarter ended June 30, 2007 as compared to the quarter ended June 30, 2006.

The table at the end of this release contains relevant financial data for the three months and six months ended June 30, 2007 as compared to the comparable periods ended June 30, 2006.

PHS GROUP

PHS increased its revenues by 41% to $21.3 million for quarter ended June 30, 2007 as compared to $15.2 million for the similar period in the prior year. The increase in PHS business is attributable to the further development of a private label grocery program designed to sell proprietary products, more specifically in the baking mix and spice markets, to national chains located in the United States and Canada, and organic growth in sales to its customers in the Northeastern Section of the United States. Several PHS vendors created special packaging with promotional pricing that enabled PHS to widen its profit margin. As an example, special packaging was created for Folgers, Marcal paper, Crest displays, Duracell and Gillette among others, with unique retail display features, that PHS has been able to strongly promote during FY 2007 as opposed to marketing those products for normal replenishment. PHS is also developing proprietary packaging for national chains in the baking mix and spice retail sectors to be displayed in unique planograms. The Company believes that promotional displays allow PHS to sell what the Company considers better mixes of product as well as introduce new items in combination with regularly stocked items. As long as the Company maintains or expands its vendor relationships, management believes that it can continue to improve its operating results. Net profit for this segment was $730,000 for the quarter ended June 30, 2007 as compared to a profit of $278,000 for the quarter ended June 30, 2006.

QUALITY FOOD BRANDS

On May 18, 2007 PHS acquired the assets of a baking mix manufacturing facility that was known as Loretta Baking Mix Products (LBMP). PHS has secured and established several national chains that have been generating substantial orders for PHS. Baking mix facilities have to be American Baking Association (ABA) approved. This plant is already certified for all regulatory baking mix needs and has certifications needed to manufacture a variety of baking mixes. This facility was already co-packing for PHS since FY 2006. PHS has started to develop proprietary brands for its account under the County Fare, Country Value and Rich and Moist Labels. PHS has started the process of seeking customers that may not have their own private label brands, but are only selling baking mix national brands such as Duncan Hines. PHS has positioned the brands that it has developed as value brands that are expected to provide higher margins to the retailer as national brands, but do not have the costs of development that a private label brand would have. Synergy believes that building brand value may enhance shareholder value. PHS plans on expanding the business in the existing facility. Since all process approvals that have been granted are for the use of this facility, any expansion should be modular and cost effective. The facility already has the regulatory certifications to operate a baking mix manufacturing plant and would therefore ease the process of future expansion. The anticipated expansion is being ascertained for existing PHS customers that PHS has been servicing for 12 months and expansion opportunities that PHS has been developing internally. The information systems needed to support this operation already existed within the manufacturing process. The IT requirements as well as logistical requirements were already in place to support PHS customers.

Below is a summary of the full results by segment and consolidated for Synergy Brands for the six months and three months ended June 30, 2007

PHS GROUP

GRAN RESERVE
CORP

OPERATING
SEGMENTS

CONSOLIDATED
RESULTS

3months ended 6/30/07
Revenue $21,341,435 $451,968 $21,793,403 $21,793,403
Gross Profit $1,749,906 $123,550 $1,873,456 $1,873,456
SG&A $657,554 $175,187 $832,741 $1,201,841
Operating Profit (loss) $1,088,731 ($88,096 ) $1,000,635 $629,512
Net Profit (loss) from continuing operations $729,573 ($88,088 ) $641,485 $177,042
Per Share continuing operations $0.09 ($0.01 ) $0.08 $0.02
Non Cash Charges $3,621 $38,554 $42,175 $129,281
Financing & Dividend Charges $359,158 $359,158 $592,877
Income Tax Expense $436
EBITDA $1,092,352 ($49,534 ) $1,042,818 $899,636
Per Share $0.13 ($0.01 ) $0.12 $0.11
Net loss from discontinued operations ($12,863 )
Per share discontinued operations $0.00
Net Profit (loss) attributable to shareholders $164,179
Per Share $0.02
 

3months ended 6/30/06

Revenue $15,153,530 $526,149 $15,679,679 $15,679,679
Gross Profit $990,509 $157,614 $1,148,123 $1,148,123
SG&A $452,526 $140,751 $593,277 $1,049,207
Operating Profit (loss) $535,015 ($22,251 ) $512,764 $20,496
Net Profit (loss) from continuing operations $278,128 ($25,175 ) $252,953 ($350,395 )
Per Share continuing operations $0.07 ($0.01 ) $0.06 ($0.07 )
Non Cash Charges $2,968 $41,196 $44,164 $182,267
Financing & Dividend Charges $254,424 $254,424 $492,685
Income Tax Expense $100
EBITDA $535,520 $16,021 $551,541 $324,657
Per Share 0.11 0.00 $0.11 $0.07
Net loss from discontinued operations ($55,519 )
Per share discontinued operations ($0.02 )
Net loss attributable to shareholders ($405,914 )
Per Share ($0.09 )
PHS GROUP

GRAN RESERVE
CORP

OPERATING
SEGMENTS

CONSOLIDATED
RESULTS

6months ended 6/30/07
Revenue $38,567,319 $839,797 $39,407,116 $39,407,116
Gross Profit $3,048,551 $238,681 $3,287,232 $3,287,232
SG&A $1,281,544 $347,301 $1,628,845 $2,267,514
Operating Profit (loss) $1,759,765 ($184,193 ) $1,575,572 $932,857
Net Profit (loss) from continuing operations $988,575 ($184,389 ) $804,186 ($112,288 )
Per Share continuing operations $0.12 ($0.02 ) $0.10 ($0.02 )
Non Cash Charges $7,242 $79,750 $86,992 $217,091
Financing & Dividend Charges $768,063 $0 $768,063 $1,263,560
Income Tax Expense $47,218
EBITDA $1,763,880 ($104,639 ) $1,659,241 $1,415,581
Per Share $0.22 ($0.02 ) $0.20 $0.18
Net loss from discontinued operations ($19,076 )
Per share discontinued operations $0.00
Net loss attributable to shareholders ($131,364 )
Per Share ($0.02 )
 

6months ended 6/30/06

Revenue $29,640,533 $917,301 $30,557,834 $30,557,834
Gross Profit $1,952,028 $270,466 $2,222,494 $2,222,494
SG&A $1,023,717 $359,965 $1,383,682 $2,056,421
Operating Profit (loss) $922,139 ($167,727 ) $754,412 $9,019
Net Profit (loss) from continuing operations $371,727 ($170,624 ) $201,103 ($815,917 )
Per Share continuing operations $0.09 ($0.04 ) $0.05 ($0.17 )
Non Cash Charges $6,172 $82,392 $88,564 $363,301
Financing & Dividend Charges $547,557 $547,557 $961,332
Income Tax Expense $37,928
EBITDA $925,456 ($88,232 ) $837,224 $546,644
Per Share 0.20 (0.02 ) $0.18 $0.12
Net loss from discontinued operations ($58,933 )
Per share discontinued operations

ę Business Wire 2007
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Managers and Directors
Mair Faibish Chairman & Chief Executive Officer
William Edward Rancic Director
Frank A. Bellis Director
Joel Sebastian Director
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