Unassociated Document

Paramus, N.J. (February 25, 2010) – Smart Balance, Inc. (NasdaqGM: SMBL) today announced its results for the fourth quarter and full year ended December 31, 2009. For the fourth quarter, the Company reported net sales of $58.9 million, a decrease of 10.1% compared to last year, and earnings per share of $0.00, compared to a loss of $0.04 per share in 2008. The fourth quarter of 2009 included $1.5 million ($0.9 million after-tax) or $0.01 per share, of after-tax impact of one-time costs related to the refinancing of the Company’s debt.

Fourth quarter net sales decreased in 2009 compared to 2008 due to higher promotion spending and a 1.5% volume decline in case shipments. The improvement in earnings per share was due to increased gross profit and lower interest expense and related costs, partially offset by the one-time impact of the Company’s 2009 debt refinancing.

The Company increased market share in its core category of spreads by 0.2 points to 13.6% in the fourth quarter versus the same quarter in 2008, representing the 31st consecutive quarter of market share growth, according to Information Resources, Inc. (IRI) food channel data. For the year, the Company’s market share in spreads increased 1.0 points to 14.6%.

For the full year of 2009, sales increased 7.9% compared to 2008 primarily due to a 6.4% increase in case shipment volume. Year over year, gross profit increased 21.6% and operating income increased 107.4%. Cash operating income increased approximately 31% to $32.8 million in 2009 from $25.1 million in 2008 (see table for a reconciliation of this non-GAAP measure to operating income). Earnings per share in 2009 were $0.06, up $0.17 versus a loss of $0.11 in 2008.

Mr. Hughes added “Despite the continued challenging economic and competitive environment, the Company has executed on initiatives that we expect will provide a strong platform for growth. In 2009, we expanded distribution of our enhanced milk products, introduced sour cream, signed an exclusive global agreement to license the Bestlife™ brand and refinanced our debt for financial flexibility. I look forward to 2010 and progress on the national rollout of milk. Success in the milk category, with its high purchase frequency, is the critical element for our growth beyond spreads and achieving our future business goals.”

The Company’s outlook for 2010 reflects net sales percentage growth compared to 2009 in the mid-teens driven by the rollout of milks, execution of our three-tier spreads strategy - including the introduction of Bestlife™ brand spreads - and distribution of sour cream. The Company’s outlook for 2010 also reflects cash operating income percentage growth compared to 2009 in the mid-teens.

Net sales for the fourth quarter of 2009 decreased 10.1% to $58.9 million from $65.6 million for the fourth quarter of 2008. The decrease was primarily due to higher trade and consumer promotion spending - reflecting more competitive pricing and coupons to drive trial of new products - and a 1.5% decline in case shipment volume. The lower volume was primarily due to a decline in the core category of spreads that more than offset increases from the expansion of the Company’s milks in the Northeast and the introduction of the new sour cream products.

Operating income increased 58.3% to $2.6 million for the fourth quarter of 2009 compared with $1.7 million in the fourth quarter of 2008 as the increase in gross margin was partially offset by higher operating expenses, reflecting higher staff and related costs along with higher marketing investments, both to support growth.

Reconciliation of Operating Income to Cash Operating Income – Fourth Quarter

$ in Millions	2009		2008

Operating Income		2.6		1.7
Non-cash charges affecting Operating Income:
Stock-based Compensation Expense		4.0		4.0
Depreciation		0.2		0.1
Amortization of Intangibles		1.0		1.0
		5.2		5.1
Cash Operating Income		7.8		6.8

Net income for the fourth quarter of 2009 was $0.1 million compared to a loss of $2.6 million for the fourth quarter of 2008, an increase of $2.7 million, reflecting the Company’s higher operating income, and lower interest and debt related costs. Net income for 2009 included $1.5 million in costs ($0.9 million after tax) related to the refinancing of the Company’s debt. See table below.

One-time Refinancing Items Affecting 2009 Fourth Quarter

$ in Millions	Profit/(Loss)			Cash Flow

New financing costs (amortized over life of debt)		-			(2.2	)
Deferred original financing costs write-off		(1.4	)		-
Unamortized portion of debt administrative costs		(0.1	)
Existing interest rate swap pay off		-			(3.8	)
Sub-total		(1.5	)		(6.0	)
Tax Impact (including deferred taxes on swap)		0.6			2.1
Total		(0.9	)		(3.9	)
Impact on Earnings Per Share	$	(0.01	)

Net sales for the year ended December 31, 2009 increased 7.9% to $239.5 million compared to $221.9 million for 2008. The increase was due primarily to an increase in case shipment volume of 6.4% and the carryover impact of price increases in 2008, partially offset by higher trade promotion spending and coupon redemption costs. The increase in case shipment volume was related to the expansion of the Company’s milk products into select markets in the Northeast, growth in the spreads category, and the introduction of sour cream in the second half of the year. These increases were partially offset by declines in the cheese category, including the discontinuance of cream cheese.

Gross profit for the year ended December 31, 2009 increased 21.6% to $115.5 million compared to gross profit of $95.0 million in 2008. The increase in gross profit was due to higher prices, increased case shipment volume and lower input costs, partially offset by higher trade promotion spending and coupon redemption costs.

Operating income more than doubled to $11.8 million in 2009 from $5.7 million in 2008 due to the $20.5 million increase in gross profit partially offset by a $14.4 million increase in operating expenses. Operating expenses increased in 2009 compared to 2008 due primarily to increased headcount and related costs to support future growth and higher marketing expenses to increase awareness and trial of our products.

Reconciliation of Operating Income to Cash Operating Income – Full Year

$ in Millions	2009		2008

Operating Income		11.8		5.7
Non-cash charges affecting Operating Income:
Stock-based Compensation Expense		16.1		14.9
Depreciation		0.8		0.4
Amortization of Intangibles		4.1		4.1
		21.0		19.4
Operating Income excluding non-cash charges		32.8		25.1

Net Income for 2009 was $3.5 million compared to a net loss of $6.9 million in 2008. The $10.4 million improvement reflects the gains in operating income and lower interest expenses and debt related costs. Net income for 2009 included $1.5 million in costs ($0.9 million after tax) related to the refinancing of the Company’s debt in the fourth quarter.

Statements made in this press release that are not historical facts, including statements about the Company’s plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may include use of the words “expect”, “anticipate”, “plan”, “intend”, “project”, “may”, “believe” and similar expressions. Forward-looking statements speak only as of the date they are made, and, except for the Company’s ongoing obligations under the U.S. federal securities laws, the Company undertakes no obligation to publicly update any forward-looking statement, whether to reflect actual results of operations, changes in financial condition, changes in general economic or business conditions, changes in estimates, expectations or assumptions, or circumstances or events arising after the issuance of this press release. Actual results may differ materially from such forward-looking statements for a number of reasons, including those risks and uncertainties set forth in the Company’s filings with the SEC and the Company’s ability to:

The Company uses the term “cash operating income” as an important measure of profitability and performance. Cash operating income is a non-GAAP measure defined as operating income excluding stock based compensation, depreciation, and amortization of intangibles. Our management uses cash operating income for planning purposes, and we believe this measure provides investors and securities analysts with important supplemental information regarding the Company’s profitability and operating performance. However, non-GAAP financial measures such as cash operating income should be viewed in addition to, and not as an alternative for, the company's results prepared in accordance with GAAP. In addition, the non-GAAP measures the company uses may differ from non-GAAP measures used by other companies. We have included in this press release reconciliations of cash operating income to operating income as calculated in accordance with GAAP.

Smart Balance, Inc. (NasdaqGM: SMBL) is committed to providing superior tasting heart healthier alternatives in every category it enters by avoiding trans fats naturally, balancing fats and/or reducing saturated fats, total fat and cholesterol. The company markets the Smart Balance® line of products, which include Smart Balance® Buttery Spreads, Milk, Butter Blend Sticks, Sour Cream, Peanut Butter, Microwave Popcorn, Cooking Oil, Mayonnaise, Non-Stick Cooking Spray and Cheese, and also markets natural food products under the Earth Balance® brand and healthier lifestyle products under the Bestlife™ brand.

	December 31,			December 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	7,538		$	5,492
Accounts receivable, net of allowance of: $345 (2009) and $256 (2008)		11,970			14,283
Accounts receivable - other		650			692
Income taxes receivable		1,131			–
Inventories		5,812			9,322
Prepaid taxes		405			709
Prepaid expenses and other assets		3,392			1,019
Deferred tax asset		462			650
Total current assets		31,360			32,167
Property and equipment, net		4,634			4,301
Other assets:
Goodwill		374,886			374,886
Intangible assets, net		151,089			155,223
Deferred costs, net		2,111			1,737
Other assets		985			222
Total other assets		529,071			532,068
Total assets	$	565,065		$	568,536
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses	$	22,626		$	24,938
Income taxes payable		–			1,080
Current portion of long term debt		5,500			–
Total current liabilities		28,126			26,018
Long term debt		51,143			69,504
Derivative liability		-			5,132
Deferred tax liability		43,824			46,268
Other liabilities		965			163
Total liabilities		124,058			147,085
Commitment and contingencies

Stockholders' equity
Convertible Preferred stock, $.0001 par value, 50,000,000 shares authorized;		-			-
Common stock, $.0001 par value, 250,000,000 shares authorized; 62,630,683 issued and outstanding		6			6
Additional paid in capital		523,467			507,377
Retained deficit		(82,466	)		(85,932	)
Total stockholders' equity		441,007			421,451
Total liabilities and stockholders' equity	$	565,065		$	568,536

	Three Months ended December 31, 2009			Three Months ended December 31, 2008			Year ended December 31, 2009			Year ended December 31, 2008


Net sales	$	58,913		$	65,561		$	239,503		$	221,872
Cost of goods sold		29,673			38,506			123,974			126,904
Gross profit		29,240			27,055			115,529			94,968
Operating expenses:
Marketing		9,810			9,436			37,383			33,034
Selling		4,567			4,803			17,580			16,662
General and administrative		12,238			11,157			48,756			39,578
Total operating expenses		26,615			25,396			103,719			89,274
Operating Income		2,625			1,659			11,810			5,694
Other income (expense):
Interest income		-			8			3			292
Interest expense		(950	)		(1,863	)		(3,653	)		(9,049	)
Gain (Loss) on derivative liability		(175	)		(2,550	)		(1,045	)		(5,132	)
Other expense, net		(1,703	)		(923	)		(2,291	)		(2,336	)
Total other income (expense)		(2,828	)		(5,328	)		(6,986	)		(16,225	)
(Loss) income before income taxes		(203	)		(3,669	)		4,824			(10,531	)
(Benefit) provision for income taxes		(259	)		(1,028	)		1,358			(3,563	)
Net income (loss)	$	56		$	(2,641	)	$	3,466		$	(6,968	)

Net income (loss) available for common shares	$	56		$	(2,641	)	$	3,466		$	(6,968	)

Net income (loss) per share - basic and diluted	$	-		$	(0.04	)	$	0.06		$	(0.11	)
Weighted average shares outstanding:
Basic		62,630,683			62,630,683			62,630,683			62,523,742
Diluted		62,631,058			62,630,683			62,703,434			62,523,742

Media Contact:	Investor Contact:
Brent Burkhardt	John Mintz
Executive Vice President	Vice President Finance &
Managing Director	Investor Relations
TBC Public Relations	Smart Balance, Inc.
bburkhardt@tbc.us	investor@smartbalance.com
410-986-1303	201-568-9300