# Bloomia Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2011

- Company: [Bloomia Holdings, Inc.](/companies/tulp.md) (CIK 875355)
- Form: 10-Q
- Filed: 2011-11-03
- Accepted by EDGAR: Nov 3, 2011, 19:21 ET
- Period: 2011-09-30
- Accession: 0000897101-11-001848
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/875355/000089710111001848/insignia115149_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/875355/000089710111001848/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2011-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2011-07-01 to 2011-09-30 | $3.1m | us-gaap:Revenues |
| Revenue | 9 months, 2011-01-01 to 2011-09-30 | $13.0m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2011-07-01 to 2011-09-30 | $2.9m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2011-01-01 to 2011-09-30 | $8.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2011-07-01 to 2011-09-30 | $170.0k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2011-01-01 to 2011-09-30 | $4.1m | us-gaap:GrossProfit |
| Operating income | 3 months, 2011-07-01 to 2011-09-30 | −$2.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2011-01-01 to 2011-09-30 | $83.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2011-07-01 to 2011-09-30 | −$1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2011-01-01 to 2011-09-30 | $32.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2011-07-01 to 2011-09-30 | −$1.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2011-01-01 to 2011-09-30 | $51.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2011-07-01 to 2011-09-30 | −$0.11 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2011-01-01 to 2011-09-30 | $3.23 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2011-07-01 to 2011-09-30 | −$0.11 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2011-01-01 to 2011-09-30 | $3.31 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2011-07-01 to 2011-09-30 | 15,121,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2011-01-01 to 2011-09-30 | 15,951,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2011-01-01 to 2011-09-30 | $64.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2011-01-01 to 2011-09-30 | $1.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2011-01-01 to 2011-09-30 | $31.3m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2011-01-01 to 2011-09-30 | $14.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2011-09-30 | $31.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2011-09-30 | $35.7m | us-gaap:AssetsCurrent |
| Total assets | at 2011-09-30 | $42.0m | us-gaap:Assets |
| Current liabilities | at 2011-09-30 | $10.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2011-09-30 | $11.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2011-09-30 | $30.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 21,075 characters.

Overview

Insignia Systems, Inc. markets in-store advertising programs, services and products to retailers and consumer packaged goods manufacturers. The Company’s services and products include the Insignia Point-of-Purchase Services (POPS) in-store advertising program, thermal sign card supplies for the Company’s SIGNright and Impulse systems, Stylus software and laser printable cardstock and label supplies.

### Results of Operations

The following table sets forth, for the periods indicated, certain items in the Company’s Statements of Operations as a percentage of total net sales.

|  | Three Months Ended September 30 2011 | 2010 | Nine Months Ended September 30 2011 | 2010 |
| --- | ---: | ---: | ---: | ---: |
| Net Sales | 100.0% | 100.0% | 100.0% | 100.0% |
| Cost of sales | 94.4 | 47.5 | 68.2 | 48.3 |
| Gross Profit | 5.6 | 52.5 | 31.8 | 51.7 |
| Operating expenses: |  |  |  |  |
| Selling | 43.5 | 23.1 | 33.0 | 23.7 |
| Marketing | 13.9 | 5.0 | 9.7 | 5.4 |
| General and administrative | 40.6 | 13.5 | 34.6 | 17.6 |
| Gain from litigation settlement, net | 0.0 | 0.0 | (688.7) | 0.0 |
| Total operating expenses | 98.0 | 41.6 | (611.4) | 46.7 |
| Operating income (loss) | (92.4) | 10.9 | 643.2 | 5.0 |
| Other income | 0.4 | 0.0 | 0.4 | 0.1 |
| Income (loss) before taxes | (92.0) | 10.9 | 643.6 | 5.1 |
| Income tax expense (benefit) | (35.8) | 0.0 | 248.6 | 0.0 |
| Net income (loss) | (56.2)% | 10.9% | 395.0% | 5.1% |

Decreased net sales in the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010, combined with the effect of fixed costs in the costs of sales, resulted in a decrease in gross profit as a percent of total net sales in the 2011 periods. The decreases in gross profit and increased operating expenses as a percent of total net sales in the three and nine month 2011 periods were dramatically offset by the litigation settlement, resulting in significant net income in the nine months ended September 30, 2011 as compared to the net income in the nine months ended September 30, 2010. See the non-GAAP financial measures information which follows later in this section for a comparison of the 2011 and 2010 periods’ non-GAAP net income (loss).

Three and Nine Months ended September 30, 2011 Compared to Three and Nine Months Ended September 30, 2010

***Net Sales.*** Net sales for the three months ended September 30, 2011, decreased 64.1% to $3,060,000 compared to $8,517,000 for the three months ended September 30, 2010. Net sales for the nine months ended September 30, 2011, decreased 42.7% to $13,033,000 compared to $22,726,000 for the nine months ended September 30, 2010.

Service revenues from our POPSign programs for the three months ended September 30, 2011, decreased 67.4% to $2,563,000 compared to $7,858,000 for the three months ended September 30, 2010. The decrease was primarily due to a decrease of 181% in the number of signs placed, combined with an 8% decrease in the average sign price. Service revenues from our POPSign programs for the nine months ended September 30, 2011, decreased 44.6% to $11,383,000 compared to $20,557,000 for the nine months ended September 30, 2010. The decrease in service revenues for the nine-month period was due primarily to a 72% decrease in the number of signs placed combined with a 5% decrease in the average sign price. The decrease in the number of signs displayed in the 2011 periods was primarily related to the expiration of the Kroger retailer contract at the end of 2010. For the three and nine months ended September 30, 2010, revenue recognized by advertising in Kroger stores was $2,290,000 and $7,293,000, respectively.

Product sales for the three months ended September 30, 2011, decreased 24.6% to $497,000 compared to $659,000 for the three months ended September 30, 2010. Product sales for the nine months ended September 30, 2011, decreased 23.9% to $1,650,000 compared to $2,169,000 for the nine months ended September 30, 2010. The decreases in both 2011 periods were primarily due to lower sales of laser printer supplies.

***Gross Profit.*** Gross profit for the three months ended September 30, 2011, decreased 96.2% to $170,000 compared to $4,475,000 for the three months ended September 30, 2010. Gross profit for the nine months ended September 30, 2011, decreased 64.7% to $4,144,000 compared to $11,750,000 for the nine months ended September 30, 2010. Gross profit as a percentage of total net sales decreased to 5.6% for the three months ended September 30, 2011, compared to 52.5% for the three months ended September 30, 2010. Gross profit as a percentage of total net sales decreased to 31.8% for the nine months ended September 30, 2011, compared to 51.7% for the nine months ended September 30, 2010.

Gross profit from our POPSign program revenues for the three months ended September 30, 2011, decreased 99.3% to $31,000 compared to $4,258,000 for the three months ended September 30, 2010. Gross profit from our POPSign program revenues for the nine months ended September 30, 2011, decreased 67.4% to $3,603,000 compared to $11,039,000 for the nine months ended September 30, 2010. The decreases in both 2011 periods were primarily due to decreased sales. Gross profit as a percentage of POPSign program revenues for the three months ended September 30, 2011, decreased to 1.2% compared to 54.2% for the three months ended September 30, 2010. Gross profit as a percentage of POPSign program revenues for the nine months ended September 30, 2011, decreased to 31.7% compared to 53.7% for the nine months ended September 30, 2010. The decreases in gross profit as a percentage of POPSign program revenues in both 2011 periods were primarily due to increased retailer costs and the effect of fixed costs on lower sales.

Gross profit from our product sales for the three months ended September 30, 2011, decreased 35.9% to $139,000 compared to $217,000 for the three months ended September 30, 2010. Gross profit from our product sales for the nine months ended September 30, 2011, decreased 23.9% to $541,000 compared to $711,000 for the nine months ended September 30, 2010. The decreases in both 2011 periods were primarily due to decreased sales. Gross profit as a percentage of product sales was 28.0% for the three months ended September 30, 2011, compared to 32.9% for the three months ended September 30, 2010. The decrease was primarily due to the effect of fixed costs on lower sales partially offset by lower variable costs. Gross profit as a percentage of product sales was 32.8% for the nine months ended September 30, 2011, compared to 32.8% for the nine months ended September 30, 2010. No change year over year was primarily due to higher margin sales offset by the effect of fixed costs on lower total net sales.

### Operating Expenses

***Selling.*** Selling expenses for the three months ended September 30, 2011, decreased 32.3% to $1,332,000 compared to $1,968,000 for the three months ended September 30, 2010. Selling expenses for the nine months ended September 30, 2011, decreased 20.2% to $4,295,000 compared to $5,379,000 for the nine months ended September 30, 2010. Decreases in the 2011 periods were primarily due to decreased sales commissions related to decreased POPSign program revenues.

Selling expenses as a percentage of total net sales increased to 43.5% for the three months ended September 30, 2011, compared to 23.1% for the three months ended September 30, 2010. Selling expenses as a percentage of total net sales increased to 33.0% for the nine months ended September 30, 2011, compared to 23.7% for the nine months ended September 30, 2010. The increases in the selling expenses as a percentage of total net sales in the 2011 periods were due to the effect of fixed selling expenses on lower sales.

***Marketing.*** Marketing expenses for the three months ended September 30, 2011, decreased 0.7% to $426,000 compared to $429,000 for the three months ended September 30, 2010. Marketing expenses for the nine months ended September 30, 2011, increased 3.1% to $1,273,000 compared to $1,235,000 for the nine months ended September 30, 2010. Increased expenses in the nine-month 2011 period was primarily the result of increased marketing efforts.

Marketing expenses as a percentage of total net sales increased to 13.9% for the three months ended September 30, 2011, compared to 5.0% for the three months ended September 30, 2010. Marketing expenses as a percentage of total net sales increased to 9.7% for the nine months ended September 30, 2011, compared to 5.4% for the nine months ended September 30, 2010. The increases in marketing expenses as a percentage of total net sales in the 2011 periods were primarily due to decreased sales.

***General and administrative.*** General and administrative expenses for the three months ended September 30, 2011, increased 8.4% to $1,242,000 compared to $1,146,000 for the three months ended September 30, 2010. General and administrative expenses for the nine months ended September 30, 2011, increased 12.6% to $4,505,000 compared to $4,001,000 for the nine months ended September 30, 2010. The increase in the third quarter 2011 period was primarily due to additional accounting fees related to the 2010 restatement, partially offset by decreased legal expense. The increase in the nine-month 2011 period was due to additional accounting and legal fees.

General and administrative expenses as a percentage of total net sales increased to 40.6% for the three months ended September 30, 2011, compared to 13.5% for the three months ended September 30, 2010. General and administrative expenses as percentage of total net sales increased to 34.6% for the nine months ended September 30, 2011, compared to 17.6% for the nine months ended September 30, 2010. Increased expenses in the 2011 periods were primarily the result of additional accounting and legal fees relative to lower net sales.

Legal fees and expenses were $158,000 for the three months ended September 30, 2011, compared to $288,000 for the three months ended September 30, 2010. Legal fees and expenses were $1,452,000 for the nine months ended September 30, 2011, compared to $1,377,000 for the nine months ended September 30, 2010. Legal fees for the three and nine months ended September 30, 2011 were primarily due to post settlement activities. Management does not expect significant legal fees and expenses in future periods in connection with post-settlement activities.

***Gain from litigation settlement.*** On February 9, 2011, the Company entered into a Settlement Agreement in its lawsuit against News America. As part of the Settlement Agreement, News America paid the Company $125,000,000, and the Company paid News America $4,000,000 in exchange for a 10-year arrangement to sell signs with price into News America’s network of retailers as News America’s exclusive agent. Netted against this settlement was a contingent fee payment of $31,250,000 to the Company’s lead trial counsel as well as performance bonus payments of $3,988,000 to certain employees in connection with the settlement, resulting in a net pre-tax gain of $89,762,000.

***Other Income.*** Other income for the three months ended September 30, 2011, was $13,000 compared to $0 for the three months ended September 30, 2010. Other income for the nine months ended September 30, 2011, was $55,000 compared to $16,000 for the nine months ended September 30, 2010. Higher other income in the 2011 periods was primarily due to increased interest income in the 2011 periods as a result of higher cash and cash equivalents balances in the 2011 periods, which was partially offset by lower interest rates.

***Income Taxes.*** As a result of the taxable income generated by the settlement proceeds, $5,385,000 of the deferred tax assets was utilized during the first nine months of 2011. For the three months ended September 30, 2011, an income tax benefit was recorded of $1,096,000, or 38.9% of loss before income taxes. For the nine months ended September 30, 2011, the provision for income taxes was $32,411,000, or 38.6% of income before income taxes. The income tax provision (benefit) during the three and nine months ended September 30, 2011 is comprised of federal and state taxes. The primary difference between the Company’s September 30, 2011 effective tax rate and the statutory federal rate is due to state income taxes. For the three and nine months ended September 30, 2010, no provision for income taxes or tax benefit was recorded as a full valuation allowance existed on the Company’s deferred tax assets.

***Net Income (Loss).*** The net loss for the three months ended September 30, 2011, was $(1,721,000) compared to a net income of $932,000 for the three months ended September 30, 2010. Net income for the nine months ended September 30, 2011, was $51,477,000 compared to $1,151,000 for the nine months ended September 30, 2010.

### Non-GAAP Financial Measures

To supplement the Company’s financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company has provided certain non-GAAP financial measures of financial performance in prior public announcements. These non-GAAP measures include:

- net income (loss) before gain from litigation settlement (net of tax), and
- net income (loss) before gain from litigation settlement (net of tax) and News America related legal expense.

The Company’s reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, or superior to, GAAP results.

These non-GAAP measures are provided to enhance investors’ overall understanding of the Company’s current financial performance and ability to generate cash flows. In many cases non-GAAP financial measures are used by analysts and investors to evaluate the Company’s performance. Reconciliation to the nearest GAAP measure can be found in the financial table included below.

|  | Three Months Ended September 30 2011 | 2010 | Nine Months Ended September 30 2011 | 2010 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $(1,721,000) | $932,000 | $51,477,000 | $1,151,000 |
| Adjustment: |  |  |  |  |
| Gain from litigation settlement (net of tax) (see below) | — | — | (55,062,000) | — |
| Non-GAAP net income (loss) before gain from litigation settlement (net of tax) | (1,721,000) | 932,000 | (3,585,000) | 1,151,000 |
| Adjustment: |  |  |  |  |
| News America related legal expense | 80,000 | 261,000 | 1,098,000 | 1,188,000 |
| Non-GAAP net income (loss) before gain from litigation settlement (net of tax) and News America related legal expense | $(1,641,000) | $1,193,000 | $(2,487,000) | $2,339,000 |
| Gain from litigation settlement (net of tax): |  |  |  |  |
| Settlement proceeds | $— | $— | $125,000,000 | $— |
| Less contingent attorney’s fees | — | — | (31,250,000) | — |
| Less bonuses paid to employees | — | — | (3,988,000) | — |
|  | — | — | 89,762,000 | — |
| Less settlement related income taxes | — | — | (34,700,000) | — |
| Gain from litigation settlement (net of tax) | $— | $— | $55,062,000 | $— |

15

Liquidity and Capital Resources

The Company has financed its operations with proceeds from public and private stock sales and sales of its services and products. At September 30, 2011, working capital is $25,316,000 compared to $12,505,000 at December 31, 2010. During the nine months ended September 30, 2011, cash, cash equivalents and short-term investments increased $18,234,000 from $13,696,000 at December 31, 2010, to $31,930,000 at September 30, 2011.

Net cash provided by operating activities during the nine months ended September 30, 2011, was $64,285,000. Net income of $51,477,000, plus non-cash adjustments of $6,374,000 and changes in operating assets and liabilities of $6,434,000 resulted in the $64,285,000 of cash provided by operating activities. The non-cash adjustments consisted of depreciation and amortization expense, deferred income tax expense and stock-based compensation expense. The most significant component of the change in operating assets and liabilities was income tax payable. Income tax payable increased by $8,919,000, before the excess tax benefit from stock options of $2,300,000 was reclassified to additional paid-in capital, primarily due to taxable income generated by the litigation settlement. Accrued retailer payments decreased $1,055,000 primarily related to the payment to one of our retailers, and accrued compensation increased $1,306,000 primarily due to the terms of the performance bonus plan related to the News America settlement, partially offset by decreased accrued commissions. The Company expects accounts receivable, accounts payable, accrued liabilities and deferred revenue to fluctuate during future periods depending on the level of POPSign revenues and related business activity as well as billing arrangements with customers and payment terms with retailers.

Net cash of $4,720,000 was used in investing activities during the nine months ended September 30, 2011. Proceeds from the sale of investments were more than offset by the purchase of property and equipment and the payment of $4,000,000 in exchange for a 10-year selling arrangement. Proceeds of $500,000 during the nine months consisted entirely of redemptions of 6-month certificates of deposit. Capital expenditures of $1,220,000 during the period consisted primarily of the construction in progress of a laser die cutter and related equipment. The Company expects additional capital expenditures of approximately $1,000,000 as it completes the purchase and installation of the laser die cutter and related equipment, which is expected to be placed in service no later than December 31, 2011.

Net cash of $40,831,000, which included dividends paid of $31,335,000 and an excess tax benefit from stock options of $2,300,000, was used in financing activities during the nine months ended September 30, 2011. The repurchase of common stock of $14,921,000, pursuant to a plan adopted on February 22, 2011, and further amended May 25, 2011, was partially offset by $3,125,000 of proceeds from the issuance of common stock from the exercise of employee stock options and the employee stock purchase plan.

The Company believes that based upon current business conditions, its existing cash balance and future cash from operations will be sufficient for its cash requirements for the remainder of 2011 and for the next twelve months. However, there can be no assurances that this will occur or that the Company will be able to secure additional financing from public or private stock sales or from other financing agreements if needed.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 1 to the annual financial statements as of and for the year ended December 31, 2010, included in our Form 10-K/A filed with the Securities and Exchange Commission on September 9, 2011. We believe our most critical accounting policies and estimates include the following:

- revenue recognition;
- allowance for doubtful accounts;
- income taxes; and
- stock-based compensation.

Cautionary Statement Regarding Forward-Looking Information

Statements made in this quarterly report on Form 10-Q, in the Company’s other SEC filings, in press releases and in oral statements to shareholders and securities analysts, which are not statements of historical or current facts, are “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from the results or performance expressed or implied by such forward-looking statements. The words “believes,” “expects,” “anticipates,” “seeks” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. These statements are subject to the risks and uncertainties that could cause actual results to differ materially and adversely from the forward-looking statements. These risks and uncertainties include, but are not limited to, the risks presented in our Annual Report on Form 10-K/A for the year ended December 31, 2010.

## Controls and procedures

As filed, 1,645 characters.

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report. Disclosure controls and procedures ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and are designed to ensure that information required to be disclosed by us in these reports is accumulated and communicated to the Company’s management, including its Chief Executive Office and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosures.

(b) Changes in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 275 characters.

We described the most significant risk factors applicable to the Company in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K/A for the year ended December 31, 2010. We believe there have been no material changes from the risk factors disclosed on Form 10-K/A.

Filed Nov 3, 2011.
Source: SEC EDGAR, the filing index for accession 0000897101-11-001848. Last ingested by Listed: Oct 24, 2026, 14:58 ET. No prices; not investment advice.