The small firm, which creates custom signs for grocery stores, has invested in new technology and expanded after a $125M settlement.
Insignia Systems, which makes in-store point-of-purchase signs and services for consumer food manufacturers and grocery retailers, bested Rupert Murdoch’s huge News America Marketing in a decadelong legal battle that ended with a favorable settlement to Insignia in 2011 of $125 million.
“We came off the settlement and celebrated,” said CEO Glen Dall, who joined the company from a competitor in 2009 and was named CEO in August. “And when we woke, we realized that our business strategy had been the all-consuming lawsuit.”
In fact, the settlement amount was a whopping seven times depressed 2011 net revenue of $17 million. The company had taken its eye off the business.
Insignia used most of the settlement money to pay $30 million in taxes, $30 million in lawyer bills, a special dividend to shareholders of about $30 million and about $12 million to plug six quarters of operating losses in 2011-12.
That left about $22 million in cash by early 2012 and a fervent need to shore up its eroding business.
Brooklyn Park-based Insignia lost huge Kroger Co. toward the end of the litigation. That was 25 percent of Insignia’s business.
Sales dropped 43 percent in 2011. Management restructured and cut employees by more than a third to 65 in a morale-killing move.
The 23-year-old company refocused around “POPS, ” a color-bursting, in-store price advertising program that drives incremental, profitable sales, even though the Gatorade or Miracle Whip or Crystal Farms cheese slices often are not on sale. It works for many packaged foods companies and many retailers.
Insignia also doubled the number of salespeople to 13 calling on food companies and retail accounts.
“We inspire shoppers to buy … and we deliver value,” Dall said.
Dall, 51, succeeded longtime CEO Scott Drill, 60, the architect of the successful News America lawsuit who remains an adviser.
Drill, who hired Dall from competitor Valassis as chief operating officer in 2009, made $1.6 million in bonuses over the last two years related to the News America settlement. The board awarded Dall no bonus atop his $257,000 salary in 2012, a year of layoffs and restructuring.
Results have improved markedly since 2012. Insignia, over the last four fiscal quarters, recorded operating earnings of $3 million on revenue of $25 million, including its highest sales quarter since 2010.
The company’s stock price, which shot to $7 per share in 2011 at the News America settlement, fell to $1.50 per share in 2012, amid the layoffs and restructuring. It rose to $3 per share earlier this month, as more customers signed up and results improved. Shares closed Friday at $2.75, down 2 percent for the day.
Insignia is increasing employment from 65 to 75 this year. Its stock-option program has been expanded to all employees. That sounds fair for the survivors who are generating more profitable sales for shareholders.
Still, will Insignia, despite the improved performance, remain an independent public company? Its market value is less than $40 million, tiny for a public company. And thinly traded stocks that trade for less than $5 generally are eschewed by institutional owners who want liquidity, the ability to get in and out without driving huge price gyrations.
‘Back on track’
Bruce Hendry, the veteran Twin Cities value investor, owns 1.14 million shares, or 8.3 percent of the company. He invested during the lawsuit and says he’s probably at about break-even.