SMART BALANCE, Inc. (SMBL)

This innovative health concious company is doing great things. And if a small company can do big things in such and ugly market, to me, Smart Balance has a very bright future

Dec. 2009 MF Rulebreaker recommendation

I do not know enough about an SPAC and how that can affect risk/return for a company. But I do know this is an excellent brand with rapid growth headed by experienced management. Add the possibility of being taken over, and I've got to say I'm in at 5.50 and in more at 5.00

baby boomers, health freaks are totally feeling these products.

Small-cap growth stock with a low-beta and poor recent relative performance. All these things look good to me for long-term prospects...

Good product

Mmm...food...

Smart Balance (Nasdaq SMBL)

HQ: Paramus, NJ
Website: http://www.smartbalance.com
Market Cap: $423mln
Cash/Debt: $8.13mln/$74.09mln
Revenue (TTM): $233,706mln
Earnings (TTM): ($4,644)
Revenue 07-08 $111,038/$221,872
Earnings 07-08 ($101,707/($6,968)
Recent price $6.75
52 week range: $4.58 - $8.73

- Smart Balance is marketer of functional food products in the U.S.

Why Buy?

- Strong brand name holding up well during recession
- Increased market share for 29th straight quarter
- Tasty, Heart healthy food lineup is the Smart
choice for increasingly Health conscious consumers
- Strong cash flows are moving to the bottom line

Most have probably seen Smart Balance’s line of healthy buttery spreads while shopping for the weekly groceries. I can attest to the tasty, omega 3 enriched spreads myself; I’ve been using the spread for many years. Recently I’ve tried the cooking oil and the popcorn. Haven’t tried the spread yet? Maybe you should – the spreads are made from a blend of natural oils (Omega 3’s) to help balance unhealthy fats in consumer’s diets and to help improve the good-to-bad cholesterol ratio.
As the brand name grows, the company is hoping its loyal customers of their butter spreads will realize the benefits of healthy fats can be found in its new offerings: Peanut Butter, cooking sprays and oils, mayonnaise, popcorn, cheddar cheese, cream cheese, and milk.

Some Notes:

The buttery spread is the company’s workhorse – representing 75% of sales.

Smart Balance became 2nd largest marketer of branded spreads in the U.S. during Q1 09

Their Market Share for spreads increased by 1.5 points to 15.1% in Q1 representing 29 consecutive quarters of market share growth

CEO has goal for Smart Balance to become a billion dollar brand.

Smart Balance outsources its manufacturing through 3rd party co-packers. They do not own or operate any manufacturing facilities. Because Smart Balance outsources so much, the employee headcount remains very small – as of dec 2008, they had 60 full and part time workers.

Outlook for first half of 2009 – high teens – mid twenties revenue growth over 2008. Drivers for the revenue should come from increased distribution in the northeast and new product launches – milk, oils, popcorn, and peanut butter

Biggest customer – Walmart accounting for 20% of revenues
*No other customer accounted for more than 10% of revenues

Financials:

Sales increased 99.8% YOY 07-08
COGS increased 116% YOY
62.63mln shares o/s
LT Debt $69,504,174
*Co paid down $50mln in debt over 2008
Plans to pay down additional debt during 2009

.02 shr last quarter was first profitable quarter.

Analysts see .11 for 2009 and .27 in 2010 (which would be 145% eps growth)
Company lost -.11 for 2008

Produced close to $3mln in CFFO in Q1
$19mln in CFFO in 2008

Insiders own ~5% stock

Biggest Competitors: (and likely acquirers) ConAgra Foods, Unilever, Kraft Foods

Things to watch going forward:

How will the new product offerings do? Can they drive sales?

Debt – like to see them paying it down

Cash – would also like to see a larger cash hoard

Profitability – can they lower costs and improve margins?

That should cover most of it.. let me know if I have missed anything. Theres plenty of info on the company website and good info in the 10k, but no need to make this post too long. ;)

heres an interesting piece from the WSJ if anyone is interested:

http://online.wsj.com/article/SB124424070116490215......

Thanks for reading if you have made it this far.

Matt

Peanut Butter (no trans fats...for real. buttery spread (good), Mayo (exelent). Good products low stock price. Be patient ...this one will go higher.

Smart Balance may fall into the "fad" category. Only proper management on part of the company can solidify the position.

Stay away from this one. SPACs are a bad deal for the small investors.

Winning brand, increasing product line, repeat purchases due to customer loyalty, good shelf location for products.

Good product--price has come back. Will be bought out in the next couple years.

Management seems to have a stellar track record...I'm going with them...hopefully the money will follow...

A blank check company whose objective is to acquire through a merger, stock exchange, asset acquisition or similar business combination with an operating business or brand in the consumer food and beverage industry

Should benefit from wary consumers in a shaky market. People gotta eat, and eat healthy to avoid the doctor.

Ripe for a buyout!

SELL SELL

This stock has some products ready to hit the market and, more important, a CEO with a track record of sucess in foods.