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Non-Tech : Smart Balance (SMBL) A smart and balanced investment!

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To: Arthur Radley who wrote (3)4/11/2008 11:41:02 AM
From: Glenn Petersen  Read Replies (1) of 33

2008 may be a transitional year for Smart Balance. As you note, if they can continue to grow the top line the profits will follow.

I have always thought that the acquisition of Smart Balance was one of the better blank check transactions and it got overwhelming shareholder approval:

Of the 11,439,610 eligible common shares voted at the meeting (representing 89.6% of shares entitled to vote on the merger proposal), 99.9% voted in favor of the acquisition, with only 500 shares abstaining from the vote. No holders of shares issued in the company's initial public offering voted against the acquisition and none elected to have such shares converted into a pro rata portion of the IPO trust account.

Message 23553559

A couple of observations:

-- The EBITDA for 2007 was $30.2 million. Because the impact of the revenue growth in 2008 will be partially offset by margin pressures, the EBITDA generated in 2008 may be limited to $35 million.

-- The company currently has a market cap of approximately $500 million.

-- If you back out the goodwill and the other intangible assets, the company has a negative tangible net worth of $122.4 million.

-- The company had $119.5 million in long-term debt at the end of the year, of which $40 million was paid down after year end. On the plus side, $76.9 million of the remaining debt is not due until 2013.

It would be nice if the could do a follow-on offering and raise another $40 to $50 million, though that would be difficult, if not impossible, in the current market.

IMHO, the stock may drift a bit lower. The first quarter numbers may set the tone for the remainder of the year.


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