Synergy Brands, Inc. (NASDAQ:SYBR)

Synergy Brands is a holding Company that operates through wholly owned business segments. In order to clearly explain the results of operations, each segment is analyzed respectively in this release.

Summary Results:

9 months ended 9/30/06

9 months ended 9/30/05

Revenue $50,389,202  5.09% $47,947,473 
Gross Profit $3,664,022  16.03% $3,157,740 
Operating Profit (loss) $76,820  200.57% ($76,387)
Net Profit (loss) ($1,316,830) -3.83% ($1,369,289)
Per Share ($0.27) ($0.38)
EBITDA $902,446  71.71% $525,549 
Per Share $0.19  $0.14 
 
3 months ended 9/30/06

3 months ended 9/30/05

Revenue $18,838,342  10.02% $17,122,629 
Gross Profit $1,281,755  9.55% $1,169,966 
Operating Profit (loss) $80,967  200.72% $26,924 
Net Profit (loss) ($441,980) -11.53% ($396,272)
Per Share ($0.08) ($0.09)
EBITDA $321,748  26.05% $255,263 
Per Share $0.07  $0.06 

Detailed Table with GAAP reconciliation is presented at the end of the release.

Results for Nine months ended September 30, 2006

Revenues increased by 5% to $50,389,202 for the nine months ended September 30, 2006, as compared to $47,947,473 for the nine months ended September 30, 2005. The increase in sales was predominately from the sale of PHS [Grocery and HBA operations] private label proprietary brand products and an increase in the Company's PHS wholesale distribution operations.

The Company has been able to diversify its product selection in national brands, proprietary brands and private label to achieve better operating margins. The Company grew revenue its by 5%, which resulted in a gross profit increase of 16%. The Company attained an operating profit of $76,820 at September 30,2006 as compared to a $76,387 operating loss at September 30, 2005. PHS represents 95% of the operation and contributes all of the Company's operating cash flow while also supporting the regulatory corporate costs of the Company. GRC continues to improve with its wholesale and store operations, and is striving to grow its online revenues.

The Company reported a net profit from operating segments of $248,050 as compared to a net loss from operating segments of $505,240 for the prior period. Net loss attributable to Common Stockholders of the Company was $1,316,830 for the nine months ended September 30, 2006 as compared to $1,369,289 for the nine months ended September 30, 2005. EBITDA increased by 72% to $902,000 for the nine months predominately due to an operating profit, increased revenues and higher gross margins. However, the major expense contributing to the net loss were financing costs, which totaled $1.6 million for the nine months. The Company believes that if it can reduce its financing costs it may be able to generate a positive cash flow from operations.

PHS Group (B2B Operations Grocery and HBA operations)

Synergy's Grocery operation improved its operation through an expansion of its Metro NY wholesale operation and private label distribution to national chains. Sales improved by 5% to $47.7 million and operating profit increased by 33% to $1,514,199 for the nine month period ended September 30, 2006 as compared to such same period ended September 30, 2005. PHS represented 95% of the Company's overall revenues and provides the most of the cash flow for the Company's other segments as well as corporate regulatory expenses. PHS plans to continue it goals of building its Metro NY, operations and increasing private label sales and proprietary product revenues while increasing its international sales to Canada and the Caribbean.

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, increase of its Domestic Wholesale business, increase of private label distribution and expansion into the Dominican Republic. PHS increased its gross profit by increasing Direct Store Delivery sales as well as focusing on promotional and co-packed merchandise offered by its vendors and partners. The overall gross profit percentage increased from 5.9% to 6.4%. PHS has been able to maintain its sales and customer base while increasing gross profit by 14%. This has been achieved through its wholesale operations by generating incremental retail sales as opposed to lower margin wholesale revenues. Additionally, PHS has taken advantage of promotional rebates, which further enables its cost of goods to be reduced. PHS plans to continue this approach, but it does rely on manufactures promotion to achieve its targeted results. Continuing the development of grocery products produced for the benefit of PHS customers is another objective currently being developed and executed by PHS. Net profit was $638,005 for the nine months ended September 30, 2006 as compared to a profit of $168,651 for the nine months ended September 30, 2005.

Gran Reserve Corporation (GRC: B2C Operation)

B2C operations consist of www.CigarGold.com, www.CigarsAroundtheWorld.com, www.BeautyBuys.com; retail store operation in Miami and online partnership programs such as www.Overstock.com and www.Google.com. The operation has relocated to a 6,000 square foot facility in Miami Lakes, Florida, which handles administration, and order flow for the operation. Sales remained flat at $1,445,571 while operating loss decreased by 26% to $216,727. Retail store operations commenced in December of 2005 with a grand opening, which occurred on March 4, 2006. GRC plans to have its retail outlets act as its hubs for expansion in FY 2006-2007. The combination of online sales as well as retail store sales is expected to be the focus for growth in FY 2006-2007. 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 antismoking legislation may shift the Cigar business to be a complete destination business as opposed to a leisurely activity.

Interline Travel (www.perx.com)

Synergy Brands also owns 22% of the outstanding common stock of Interline Travel and Tours, Inc. also known as PERX. PERX provides cruise and resort hotel packages through a proprietary reservation system to airline employees and retirees. Synergy Brands does not manage PERX's day-to-day operations. PERX generated $57.7 million in travel bookings for the nine months of 2006 with an EBITDA of $1.85 million and a pre-tax profit of $1.3 million. Synergy Brands and PERX have been exploring several opportunities to optimize the shareholder value of both companies and management believes that its capital investment in this unique travel company may provide future capital appreciation. Additional information on PERX can be found at www.perx.com.

Results of operations can be fully reviewed on the Company's 10Q filing under Management Discussion and Analysis and Liquidity and Capital Resources sections at the Company's website at www.sybr.com . The table below provides summary results for the nine months and three months ended September 30, 2006 as Compared to the prior period in FY 2005.

PHS

CHANGE OPERATING SEGMENTS CHANGE TOTAL CHANGE

9 months ended 9/30/06

Revenue $47,720,070  4.83% $50,389,202  5.09% $50,389,202  5.09%
Gross Profit $3,072,591  14.28% $3,664,022  16.03% $3,664,022  16.03%
SG&A $1,549,490  0.17% $2,268,257  -4.38% $3,311,653  15.66%
Operating Profit (loss) $1,514,199  33.64% $1,194,893  128.25% $76,820  200.57%
Net Profit (loss) $638,005  278.30% $248,050  149.10% ($1,316,830) -3.83%
Per Share $0.13  $0.05  ($0.27)
Non Cash Charges $8,902  1.14% $207,118  -22.79% $547,269  23.89%
Financing & Dividend Charges $871,995  -8.34% $934,711  -6.84% $1,627,045  18.85%
Income Tax Expense -100.00% $986  -92.70% $44,962  -46.58%
EBITDA $1,518,902  33.29% $1,390,865  78.34% $902,446  71.71%
Per Share $0.32  $0.30  $0.19 
 

9 months ended 9/30/05

Revenue $45,523,173  $47,947,473  $47,947,473 
Gross Profit $2,688,644  $3,157,740  $3,157,740 
SG&A $1,546,787  $2,372,215  $2,863,156 
Operating Profit (loss) $1,133,055  $523,502  ($76,387)
Net Profit (loss) $168,651  ($505,240) ($1,369,289)
Per Share $0.04  ($0.13) ($0.38)
Non Cash Charges $8,802  $268,269  $441,742 
Financing & Dividend Charges $951,384  $1,003,365  $1,368,933 
Income Tax Expense $10,721  $13,504  $84,163 
EBITDA 1,139,558  $779,898  $525,549 
Per Share $0.31  $0.21  $0.14 

SEGMENT INFORMATION OF
OPERATING BUSINESSES

 

PHS

CHANGE OPERATING SEGMENTS CHANGE TOTAL CHANGE

3 months ended 9/30/06

Revenue $18,079,537  10.63% $18,838,342  10.02% $18,838,342  10.02%
Gross Profit $1,120,563  12.25% $1,281,755  9.55% $1,281,755  9.55%
SG&A $525,773  1.83% $761,388  -6.91% $1,132,045  11.04%
Operating Profit (loss) $592,060  23.61% $453,647  71.29% $80,967  200.72%
Net Profit (loss) $266,278  66.79% $105,880  234.63% ($441,980) -11.53%
Per Share $0.05  $0.02  ($0.08)
Non Cash Charges $2,730  -6.95% $68,802  -22.97% $136,298  -16.19%
Financing & Dividend Charges $324,438  3.22% $342,077  2.75% $620,636  30.93%
Income Tax Expenses -100.00% $746  -87.43% $6,794  -54.35%
EBITDA $593,446  23.55% $517,505  48.06% $321,748  26.05%
Per Share $0.12  $0.11  $0.07 
 

3 months ended 9/30/05

Revenue $16,342,845  $17,122,629  $17,122,629 
Gross Profit $998,246  $1,169,966  $1,169,966 
SG&A $516,347  $817,887  $1,019,493 
Operating Profit (loss) $478,965  $264,846  $26,924 
Net Profit (loss) $159,651  ($78,646) ($396,272)
Per Share $0.04  ($0.01) ($0.09)
Non Cash Charges $2,934  $89,315  $162,631 
Financing & Dividend Charges $314,324  $332,921  $474,021 
Income Tax Expenses $3,402  $5,935  $14,883 
EBITDA $480,311  $349,525  $255,263 

Per Share

0.12 

$0.09  $0.06 

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 derivations 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 (all 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 above.