Synergy Brands Nine Month $67.3 Million Revenue Generates $.25 Per Share EBITDA and Net Income of $0.04 Per Share.

Synergy Brands (OTCQX:SYBR), the Company that owns and operates Quality Food Brands (QFB), a Michigan-based manufacturer and distributor of packaged foods under the Paula Deen, Loretta, Country Value and Gourmet Select brands to supermarkets, dollar stores and mass merchandisers throughout the US, and PHS Group, the largest distributor of nationally branded products in New York, today reported results for the third quarter and nine month period ending September 30, 2010.

Synergy Brands has been transitioning its business over the past year to create a balance among the brands it manufacturers through its QFB subsidiary with its traditional grocery distribution business in New York state. The core operations of Synergy Brands include the baking mix manufacturing, spice business and grocery packaged meal business carried out at the QFB location in Michigan, which is owned 100 percent by PHS, and the grocery and HBA wholesale business located in New York that is directly operated by PHS. The Company has been expanding its QFB facilities in Michigan to reflect the changed focus of the company, which includes eventually discontinuing its traditional grocery operations in New York and converting that distribution center to a distribution hub for the QFB products that can service the Northeast corridor of the United States. This strategic plan is designed to allow the company to focus on developing its proprietary branded products and private label products in Michigan and then utilize its warehousing and distribution infrastructure to gain national access to major chains throughout North America and selected international markets.

The Company initiated this strategy specifically to achieve significant shareholder value, and the very strong results for the Quality Food Brands segment of the business, which are broken out separately on the accompanying charts, indicate that the plan is on track. For the three months ending September 30, 2010 Quality Foods Brands saw revenue growth of approximately 79 percent. Revenues for the quarter ending September 30, 2010 were $14.9 million compared to $8.3 million for the same quarter a year ago. The gross profit on this revenue increased 92 percent to approximately $2.9 million versus approximately $1.5 million for the same quarter a year ago. Operating profit for the quarter saw a 301 percent increase over the same quarter last year with approximately $1.8 million versus $446,000. Net profit for the quarter increased 581 percent to approximately $1.5 million for the quarter ending September 30, 2010 as compared to $213,000 for the same quarter a year ago. When viewed in a per share manner, the net income per share is $0.08 compared to $.01 one year ago, a 472 percent increase.

For the nine month, QFB comparisons are even more compelling: QFB Revenues almost doubled to $40.7 million for the nine months ending September 30, 2010 compared to $21.2 million for the similar period in 2009, while gross profit for the nine months 2010 was approximately $6.6 million compared to $3.5 million, an 89 percent increase. Operating profits increased for the nine months by approximately 381 percent to approximately $3.4 million compared to $702,000 a year ago. Net profit for the nine months ending September 30, 2010 showed a whopping 1132 percent increase over 2009 at approximately $2.2 million compared to 181,000 for the similar period. On a per share basis, this would reflect $0.12 for the period ending September 30, 2010 versus $0.01 for the like period one year ago. EBITDA continued to be strong at approximately $ 4 million for the nine months 2010 versus approximately $1.5 million for the similar period in 2009.

For the quarter the Company reported consolidated revenue of $21,556,392, a decrease of 17 percent from the $25,998,270 reported for the same quarter a year ago. Net income however, increased 79 percent to $713,580 or $.04 per share compared to $397,914 or $.03 per share reported one year ago for the same quarter. The increase in net income is attributed primarily to the strong Quality Food Brands growth during the quarter and the increased margins resulting from that business. For the nine months ending September 30, 2010, the company reported revenue of $67,339,851 a 12 percent decrease from revenue of $76,835,183 reported for the nine months ending September 30, 2009. Net income for the nine months was $680,330 or $0.04 per share compared to $1,089,281 or $0.07 per share for the similar period one year ago. The consolidation of operations between PHS and QFB has caused the low margin sales of PHS to be reduced in exchange for higher margin QFB sales. This trend is expected to continue. QFB has been using PHS logistical network in NY to increase revenues without incurring marginal warehousing and shipping expenses as the business expands.

“These strong QFB results affirm our business strategy for the Company as we move forward,” said Mair Faibish, CEO of Synergy Brands. He noted that the move to high quality yet economically priced packaged goods reflects a new paradigm among consumers today. “Consumers have drastically changed the way they shop during the recent recession. We see this very strongly in our business and hear this from our customers and potential customers,” Faibish said.

               
9 months ended9 months ended3 months ended

3 months ended

Results of Operation

9/30/2010

9/30/2009

CHANGE

9/30/2010

9/30/2009

CHANGE
 
Revenue 67,339,851 76,835,183 -12.36% 21,566,392 25,998,270 -17.05%
Gross Profit 8,659,636 7,809,227 10.89% 3,279,914 2,828,394 15.96%
Net GAAP Profit 680,330 1,089,281 37.54% 713,580 397,914 79.33%
Per Share 0.04 0.07 0.04 0.03
Cash Flow (1) 1,928,683 2,326,531 -17.10% 1,098,549 779,241 40.98%
Per share 0.11 0.16 0.06 0.05
EBITDA (2) 4,365,306 3,840,214 13.67% 1,860,274 1,426,073 30.45%
Per share 0.25 0.25 0.10 0.09
 
Cash Flow reconciliation (1)
 
Net GAAP Profit 680,330 1,089,281 713,580 397,914
Depreciation & Amortization 496,604 481,008 167,958 160,336
Operating non-cash charges 360,747 336,954 87,471 103,701
Non cash-Financing Charges 391,002 419,288 129,540 117,290

Cash Flow

1,928,6832,326,5311,098,549779,241
 
EBITDA Reconciliation (2)
 
Net GAAP Profit 680,330 1,089,281 713,580 397,914
Depreciation & Amortization 496,604 481,008 167,958 160,336
Operating non-cash charges 360,747 336,954 87,471 103,701
Financing and Dividend Charges 2,827,625 1,932,971 891,265 764,122
EBITDA4,365,3063,840,2141,860,2741,426,073
 
               
QUALITY FOOD BRANDS INC
STATEMENT OF OPERATIONS
9/30/2010
 
9 MOS-9/30/10 9 MOS-9/30/09 % CHANGE 3 MOS 9/30/10 3 MOS-9/30/09 % CHANGE
NET SALES $40,711,475 $21,864,673 86.20 % $14,905,594 $8,335,360 78.82 %
 
COST OF SALES
COST OF PRODUCT $33,565,601 $18,032,517 86.14 % $11,784,241 $6,718,601 75.40 %
SHIPPING AND HANDLING COSTS $557,573 $348,223 60.12 % $260,992 $129,001 102.32 %
$34,123,174 $18,380,740 $12,045,233 $6,847,602
 
GROSS PROFIT $6,588,301 $3,483,933 89.11 % $2,860,361 $1,487,758 92.26 %
 
OPERATING EXPENSES

SG&A

$3,069,019 $2,647,873 15.91 % $1,022,249 $996,797 2.55 %
DEPRECIATION AND AMORTIZATION $144,156 $133,995 7.58 % $48,052 $44,665 7.58 %
$3,213,175 $2,781,868 $1,070,301 $1,041,462
 
OPERATING PROFIT $3,375,126 $702,065 380.74 % $1,790,060 $446,296 301.09 %
 
OTHER INCOME(EXPENSES)
OTHER INCOME(EXPENSES) $4,500 $14,950 -69.90 % $1,500 $5,650 -73.45 %
INTEREST AND FINANCING EXPENSES -$1,136,820 -$529,831 114.56 % -$340,279 -$233,378 45.81 %
-$1,132,320 -$514,881 -$338,779 -$227,728
 
PROFIT BEFORE INCOME TAXES $2,242,806 $187,184 1098.18 % $1,451,281 $218,568 564.00 %
 
INCOME TAX EXPENSE $10,000 $5,999 66.69 % $5,499 -100.00 %
 
NET PROFIT $2,232,806 $181,185 1132.33 % $1,451,281 $213,069 581.13 %
 
BASIC AND DILUTED NET PROFIT
PER COMMON SHARE: $0.12 $0.01 930.89 % $0.08 $0.01 472.36 %
 
 
EBITDA RECONCILIATION:
NET PROFIT $2,232,806 $181,185 1132.33 % $1,451,281 $213,069 581.13 %
DEPRECIATION AND AMORTIZATION $474,930 $463,374 2.49 % $158,310 $154,458 2.49 %
OPERATION NON CASH CHARGES $154,164 $272,103 -43.34 % $51,388 $90,701 -43.34 %
INTEREST & FINANCING CHARGES $1,136,820 $529,831 114.56 % $340,279 $233,378 45.81 %
EBITDA $3,998,720 $1,446,493 176.44 % $2,001,258 $691,606 189.36 %
 

About Synergy Brands:

For detailed Consolidated Financial Statement please go to: www.sybr.com.

For complete product offerings please go to www.qfbi.net.

Forward-looking statements:

This press release and company review and assumptions made regarding 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 1994. 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, non-GAAP, measures of operations, profit and loss of the Company and associated costs (such as EBITDA or non cash-charges). 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 or uncertainties. The company undertakes no obligation to update any forward looking statements.