• by Karlene Lukovitz  @KLmarketdaily, August 5, 2010

Smart Balance, Inc. reported a more moderate sales loss than projected for its second quarter, and updated investors on the progress of strategic initiatives aimed at repositioning the company as a multi-category, multi-brand "health and wellness innovation platform."

Smart Balance saw total net sales decline by 4.4% to $55.6 million, in Q2. However, the company had projected a decline of 6% to 7% (to $54 million).

Net loss per share for the period was $2.08. During the quarter, Smart Balance recorded a one-time, non-cash goodwill impairment charge of $2.08 per share and a one-time net charge of $0.02 per share related to its previously announced organizational realignment. Excluding the one-time charges, EPS was $0.02, which was flat with Q2 '09.

Smart Balance projects full-year net sales growth in the range of 2% to 4% and cash operating income in line with that of the prior year, excluding one-time items. Prior to mid-June, the company had been projecting growth in the mid-teens for both net sales and cash operating income, according to NASDAQ.com.

The Q2 sales decline reflected lower case shipments in spreads (-6%) and grocery products (-11%) due to continued competitive promotional pressure and consumer price sensitivity, according to the company.

Spreads were also affected by overall category weakness: The category's retail sales in the food channel declined 12% in dollars and 7% in units during Q2 2010 versus the same period last year, according to Nielsen.

However, Smart Balance saw a slight uptick in its spreads share of market (to 15.5%, versus 15.4% in Q2 '09), and its spreads losses were partially offset by expanded distribution of its dairy-aisle milk and sour cream products.

One core component of the company's new, broader health/wellness platform, which it has been building for three years, is a three-tiered spreads strategy. On that front, its Earth Balance and Bestlife brands performed well during Q2, and a stronger support program was launched for the Smart Balance brand, reported chairman/CEO Stephen Hughes.

In June, in an update conference call for the investment community, Hughes reported that the company's expansion of the Smart Balance enhanced milk brand, while successful, had been slowed somewhat by the difficult consumer environment and the timing of retailer shelf placement resets.

However, in commenting on the Q2 results, Hughes noted that the company's enhanced milk initiative has now reached 66% distribution in the food channel. This, combined with its newly launched Earth Balance Soymilk brand, puts Smart Balance "well on [its] way" toward its transition to a health/wellness platform, he said.

Smart Balance expects both the spreads strategy and dairy case expansion initiatives to "drive significant growth over time," Hughes said.