MAAL Marketing Alliance Inc (PK)

FY 2015 First Quarter Financial Highlights (all comparisons to the prior year)

• Revenues decreased to $6,549,538 from $6,989,061
• Operating income increased 28.2% to $747,626, compared to $583,342
• Operating EBITDA (excluding investment portfolio income) was $912,738, compared to $735,066
• Net income of $527,751, or $0.09 per share, as compared to net income of $290,342, or $0.05 per share (all per share values were adjusted retroactively for stock split at February 28, 2014)

The Marketing Alliance, Inc. (OTC:MAAL) (“TMA”), today announced financial results for its fiscal 2015 first quarter ended June 30, 2014.

Mr. Timothy M. Klusas, TMA’s Chief Executive Officer, stated, “We are pleased to report increases in operating income, operating EBITDA (excluding investment portfolio income) and net income. As we detailed in our prior update, our businesses continued to encounter challenges within their respective industries. We have attempted to rationalize some of our expenses to better meet demand and improve our businesses' respective positioning in the current market.”

Mr. Klusas provided additional details below on each of the Company’s operations for the first quarter of the fiscal 2015 year:

• Insurance Distribution Business: “We continued to work closely with our long-time existing and recently added carriers to properly communicate their product’s value proposition among our distribution network. We recognized that this is a process that takes time, especially as carriers have continued to shift product structures in recent months to better adjust for the prevailing low-interest rate environment. This caused short term inefficiencies as our new relationships replace older ones. In addition, we saw distributors and their agents gain traction in life insurance sales as other product changes and industry distractions, such as the implementation of a new health care system, moved more to the background. While these factors still persist, the volatility of these associated changes seems to have, at least temporarily, reduced. This continues to be an ongoing effort, but we are pleased with the progress of our distributors in our network.”
• Earth Moving and Excavating Business: “This business continued to be challenged due to adverse weather (rain) and low crop prices, particularly corn and soybeans. Because crop prices drive the customers’ revenue that ultimately funds our services, we saw some projects were deferred until later in the year. We have been attempting to rationalize our cost base in this business to better respond to current crop prices.”
• Entertainment (Monkey Joe’s) Facilities: “While still a relatively small portion of the Company’s overall business, we have been pleased with the progress of our current two facilities. We believe the recent investments we made over the prior six months will enhance the customers’ experience and enjoyment of our facilities.”

Fiscal 2015 First Quarter Financial Review

• Total revenues for the three-month period ended June 30, 2014, were $6,549,538, as compared to $6,989,061 in the prior year quarter. The decrease was the result of a total net decrease of $449,957 in commission and construction revenue that was offset by an increase in entertainment facilities revenue from the prior year period.
• Net operating revenue (gross profit) for the quarter was $2,025,214, compared to net operating revenue of $2,110,119 in the prior-year fiscal period. The decrease in gross profit was in part the result of a decline in construction revenue for the quarter, which was partially offset by a $230,016 (including depreciation) reduction in construction cost over the prior year period. The increase in costs of revenues in the family entertainment business was partially due to prizes and other expenses associated with video games.
• Operating expenses decreased by $249,189 versus the prior-year period. The decrease was due to declines in compensation, office, administrative and payroll related expenses.
• Operating income was $747,626 compared to operating income of $583,342 reported in the prior-year period. This change was due in part to the factors discussed above as well as decreases in operating expenses.
• Operating EBITDA (excluding investment portfolio income) for the quarter was $912,738 compared to $735,066 in the prior-year period. A note reconciling operating EBITDA to operating income can be found at the end of this release.
• Net income for the fiscal 2015 first quarter was $527,751, or earnings per share of $0.09, compared to a net income of $290,342, or earnings per share of $0.05, in the prior year period.

Balance Sheet Information

TMA’s balance sheet at June 30, 2014 reflected cash and cash equivalents of approximately $5.6 million, working capital of $11.9 million, and shareholders’ equity of $13.3 million; compared to $5.5 million, $11.3 million, and $12.8 million, respectively, at March 31, 2014.

About The Marketing Alliance, Inc.

Headquartered in St. Louis, MO, TMA operates three business segments. TMA provides support to independent insurance brokerage agencies, with a goal of providing members value-added services on a more efficient basis than they can achieve individually. The Company also owns an earth moving and excavating business and two children’s play and party facilities. Investor information can be accessed through the shareholder section of TMA’s website at: http://www.themarketingalliance.com/shareholder-information.

TMA’s common stock is quoted on the OTC Markets (http://www.otcmarkets.com) under the symbol “MAAL”.

Forward Looking Statement

Investors are cautioned that forward-looking statements involve risks and uncertainties that may affect TMA's business and prospects. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during fiscal 2015 and the production of favorable returns to shareholders, our intent to focus on increasing the rate of growth of new relationships with carriers, our attempts to reduce fixed costs of our earth moving and excavation business and our expected revenues from policies in force. Any forward-looking statements contained in this press release represent our estimates only as of the date hereof, or as of such earlier dates as are indicated, and should not be relied upon as representing our estimates as of any subsequent date. These statements involve a number of risks and uncertainties, including, but not limited to, expectations of the economic environment; material adverse changes in economic conditions in the markets we serve and in the general economy; future regulatory actions and conditions in the states in which we conduct our business; the integration of our operations with those of businesses or assets we have acquired or may acquire in the future and the failure to realize the expected benefits of such acquisition and integration. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

  Consolidated Statement of Operations    

 

Three-months endedJune 30,

2014     2013 Commission revenue $ 5,669,881 $ 5,775,207 Construction revenue 555,395 900,026 Family entertainment revenue $ 324,262   $ 313,828   Revenues 6,549,538 6,989,061   Distributor Related Expenses Bonus & commissions 3,627,732 3,835,675 Processing & distribution 476,595 423,834 Depreciation   2,667     2,469   Total 4,106,994 4,261,978   Cost of Construction Direct and Indirect costs of construction 253,504 480,410 Depreciation   86,479     89,589   Total 339,983 569,999   Family entertainment cost of sales   77,347     46,965     Net Operating Revenue   2,025,214     2,110,119     Operating Expenses   1,277,588     1,526,777     Operating Income 747,626 583,342   Other Income (Expense) Investment gain, (loss) net 113,177 (118,154 ) Interest expense (29,519 ) (28,854 ) (Loss) on disposal of assets (197 ) - Interest rate swap, fair value adjustment   307     17,329     Income Before Provision for Income Tax 831,394 453,663   Provision for income taxes   303,643     163,321     Net Income $ 527,751   $ 290,342     Average Shares Outstanding 6,024,200 6,024,200   Operating Income per Share $ 0.12 $ 0.10 Net Income per Share $ 0.09 $ 0.05  

Note: * - Operating EPS and Net EPS stated after giving effect to a 2:1 stock split for shareholders of record as of February 28, 2014 and was distributed on or about March 28, 2014. Shares outstanding increased to 6,024,200 from 3,012,100 with this stock split and have been retroactively adjusted to account for the split.

  Consolidated Selected Balance Sheet Items       As of Assets 6/30/14     3/31/14 Cash & Equivalents $ 5,621,349 $ 5,531,060 Investments 5,362,311 5,245,505 Receivables 7,897,253 7,607,064 Other   2,151,184   1,899,946 Total Current Assets 21,032,097 20,283,575   Property and Equipment, Net 1,433,653 1,490,381 Intangible Assets, net 804,338 835,290

Other

  887,833   920,566  

Total Non Current Assets

  3,125,824   3,246,237   Total Assets $ 24,157,921 $ 23,529,812   Liabilities & Stockholders' Equity Total Current Liabilities $ 9,116,295 $ 8,993,130   Long Term Liabilities  

1,707,649

 

1,730,456

  Total Liabilities   10,823,944   10,723,586   Stockholders' Equity   13,333,977   12,806,226   Liabilities & Stockholders' Equity $ 24,157,921 $ 23,529,812  

Note – Operating EBITDA (excluding investment portfolio income)

Q1FY2015 Operating EBITDA (excluding investment portfolio income) was determined by adding Q1FY 2015 Operating Income of $747,626 and Depreciation and Amortization Expense of $165,112 for a total of $912,738. Q1FY2014 Operating EBITDA (excluding investment portfolio income) was determined by adding Q1FY 2014 Operating Income of $583,342 and Depreciation and Amortization Expense of $151,724 for a sum of $735,066. The Company elects not to include investment portfolio income because the Company believes it is non-operating in nature.

The Company uses Operating EBITDA as a measure of operating performance. However, Operating EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or GAAP, and when analyzing its operating performance, investors should use Operating EBITDA in addition to, and not as an alternative for, income as determined in accordance with GAAP. Because not all companies use identical calculations, its presentation of Operating EBITDA may not be comparable to similarly titled measures of other companies and is therefore limited as a comparative measure. Furthermore, as an analytical tool, Operating EBITDA has additional limitations, including that (a) it is not intended to be a measure of free cash flow, as it does not consider certain cash requirements such as tax payments; (b) it does not reflect changes in, or cash requirements for, its working capital needs; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Operating EBITDA does not reflect any cash requirements for such replacements, or future requirements for capital expenditures or contractual commitments. To compensate for these limitations, the Company evaluates its profitability by considering the economic effect of the excluded expense items independently as well as in connection with its analysis of cash flows from operations and through the use of other financial measures.

The Company believes Operating EBITDA is useful to an investor in evaluating its operating performance because it is widely used to measure a company’s operating performance without regard to certain non-cash or unrealized expenses (such as depreciation and amortization) and expenses that are not reflective of its core operating results over time. The Company believes Operating EBITDA presents a meaningful measure of corporate performance exclusive of its capital structure, the method by which assets were acquired and non-cash charges, and provides additional useful information to measure performance on a consistent basis, particularly with respect to changes in performance from period to period.

The Marketing Alliance, Inc.Timothy M. Klusas, 314-275-8713Presidenttklusas@themarketingalliance.comwww.themarketingalliance.comorInvestor RelationsThe Equity Group Inc.Adam Prior, 212-836-9606Senior Vice Presidentaprior@equityny.comorTerry Downs, 212-836-9615Associatetdowns@equityny.com