The Marketing Alliance Announces Financial Results for Its Fiscal 2015 Second Quarter and Six Months Ended September 30, 2014

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

  • Revenues were $6,236,435 compared to $6,261,436, largely due to lower construction revenues versus the prior year period
  • Net operating revenue (gross profit) improved to $1,722,337, compared to $1,721,114
  • Operating income was $177,967 compared to $171,598
  • Operating EBITDA (excluding investment portfolio income) was $333,253, compared to $332,927
  • Net income (loss) of ($36,926), or ($0.01) per share, as compared to net income of $187,447, or $0.03 per share (all per share values were adjusted retroactively for stock split at February 28, 2014)
  • Subsequent to end of the quarter, the Board of Directors authorized a $0.21 per share cash dividend for shareholders of record on December 12, 2014, to be paid on or about January 30, 2015, representing an increase of 16.7% over the previous annual cash dividend after giving effect to the 2:1 stock split distributed on March 28, 2014

ST. LOUIS--()--The Marketing Alliance, Inc. (OTC: MAAL) (“TMA”), today announced financial results for its fiscal 2015 second quarter and six months ended September 30, 2014.

Mr. Timothy M. Klusas, TMA’s Chief Executive Officer, stated, “We were pleased with revenue increases this quarter in our insurance and family entertainment businesses. However, revenue growth in our land improvement business was challenged by low crop prices. We felt like we continued to take steps to reduce costs and operate more efficiently, despite the setbacks of low crop prices which drive the demand for our services. TMA remains committed to growing each of our lines of business while continuing to explore opportunities to increase returns for our shareholders.” Mr. Klusas provided additional details below on each of the Company’s operations for the second quarter of the fiscal 2015 year:

  • Insurance Distribution Business: “We are pleased with our results for the quarter, as we saw an increase in commission revenues this quarter over the prior year period. We commend our network of brokerage general agents, as they have continued to have to adapt to changes within the industry throughout a protracted low-interest rate environment. Low interest rates have the general effect of making some life insurance products more expensive causing an environment where product prices are increasing, or some products even discontinued. Also, annuity and long-term care products could appear less attractive to consumers than in past periods of time when interest rates were closer to historical averages. However, we are continuing to work with our distributors to ensure that they have top-notch access and information on a broad spectrum of insurance products offered by our carriers.
  • Earth Moving (Land Improvement – Construction): “Market conditions continued to impact our results for the quarter, as low prices for soybeans and corn have caused many of our customers to defer or alter purchases of land improvement and crop yield-improving services. We have continued to evaluate ways to more efficiently utilize assets in this operating environment, including expanding our market by geography and areas served as well as looking for opportunities to reduce costs.
  • Family Entertainment: “We are pleased to report an 18% increase in year-over-year revenue for business. We believe the increase is attributable in part to internal improvements that the Company has made since we acquired these facilities in September 2012. These improvements included increased marketing efforts to expand our customer base and purchasing additional video game machines for our customers to enjoy during their visit.”

Fiscal 2015 Second Quarter Financial Review

  • Total revenues for the three-month period ended September 30, 2014, were $6,236,435, as compared to $6,261,436 in the prior year quarter. The decrease was due to a $299,972 decline in construction revenue which was partially offset by an increase of $220,569 in commission revenue and a $54,402 increase in revenue from the two family entertainment facilities.
  • Net operating revenue (gross profit) for the quarter was $1,722,337, compared to net operating revenue of $1,721,114 in the prior-year fiscal period.
  • Operating expenses decreased by $5,146 for the fiscal 2015 second quarter as compared to the prior year, due in part to less compensation expense for the quarter versus the prior year. The decrease in compensation expense was offset by increases in administrative and professional related expenses from the prior year, of which approximately $50,000 of the increase in this quarter was a unique one-time expense related to a non-recurring project.
  • Operating income was $177,967, compared to operating income of $171,598 reported in the prior-year period, resulting from similar levels of gross profit and overall operating expenses in the prior year period.
  • Operating EBITDA (excluding investment portfolio income) for the quarter was $333,253 compared to $332,927 in the prior-year period. A note reconciling operating EBITDA to operating income can be found at the end of this release.
  • Net income (loss) for the fiscal 2015 second quarter was ($36,926), or ($0.01) per share, as compared to net income of $187,447, or $0.03 per share, in the prior year period despite nearly the same levels of operating income. The net loss for the fiscal 2015 second quarter was the result of the performance of the Company’s investment portfolio as compared to the same period of the prior year. (Operating EPS and Net EPS are stated after giving effect to a 2:1 stock split for shareholders of record as of February 28, 2014 and paid March 28, 2014 for all periods. 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.)
  • Net investment loss, net (from investment portfolio) for the second quarter ended September 30, 2014 was $247,256, as compared to net investment gain, net of $148,104, for the same quarter of the previous fiscal year. The decrease was largely due to increased realized and unrealized losses on investments during the period as opposed to realized and unrealized gains in the prior year period.
  • Capital expenditures were approximately $308,000 in the quarter and comprised primarily of the purchase of real estate for the construction / land improvement business of roughly $240,000. Rental expense (replaced by this purchase) for the facility that housed the construction / land improvement business was $60,000 in the prior fiscal year. Most of the remaining purchases were for new video game machines in the family entertainment business, completing projects at those facilities.

Fiscal 2015 Six Months Financial Review

  • Total revenues for the six months ended September 30, 2014 were $12,785,973, compared to $13,250,497 in revenues for the prior-year period. Construction revenues were $644,603 less than the prior period, although the decrease was partially offset by insurance distribution revenue increases and family entertainment revenue increases.
  • Net operating revenue (gross profit) was $3,747,551, which compares to net operating revenue of $3,831,233 in the prior-year fiscal period.
  • Operating income was $925,593 compared to $754,940 for the prior-year period, driven mostly by a $254,335 decrease in operating expenses. The decrease in operating expenses was due to declines in compensation, office, and payroll related expenses.
  • Operating EBITDA (excluding investment revenue) for the six months was $1,245,991 versus $1,067,993 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 six months ended September 30, 2014 was $490,825, or $0.08 per share, compared to $477,819 or $0.08 per share, in the prior-year period.

Balance Sheet Information

  • TMA’s balance sheet at September 30, 2014 reflected cash and cash equivalents of approximately $5.5 million, working capital of $11.5 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 and, our attempts to reduce costs of our earth moving and excavation business. 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
 
Quarter Ended   Year to Date
3 Months Ended 6 Months Ended
9/30/2014   9/30/2013 9/30/2014   9/30/2013
 
Commission revenue $ 5,513,621 $ 5,293,052 $ 11,183,502 $ 11,068,259
Construction revenue 360,526 660,498 915,921 1,560,524
Family entertainment revenue $ 362,288 $ 307,886   686,550   621,714
Revenues 6,236,435 6,261,436 12,785,973 13,250,497
 
Distributor Related Expenses
Bonus & commissions 3,705,731 3,634,177 7,333,463 7,469,852
Processing & distribution 447,987 389,373 924,582 813,207
Depreciation   2,711   3,219   5,378   5,688
Total 4,156,429 4,026,769 8,263,423 8,288,747
 
Cost of Construction
Direct and Indirect costs of construction 208,751 372,259 462,255 852,669
Depreciation   84,045   89,443   170,524   179,032
Total 292,796 461,702 632,779 1,031,701
 
Family entertainment cost of sales   64,873   51,851   142,220   98,816
 
Net Operating Revenue   1,722,337   1,721,114   3,747,551   3,831,233
 
Operating Expenses   1,544,370   1,549,516   2,821,958   3,076,293
 
Operating Income 177,967 171,598 925,593 754,940
 
Other Income (Expense)
Investment gain, (loss) net (247,256) 148,104 (134,079) 29,950
Interest expense (28,872) (21,791) (58,391) (50,645)
Gain on sale of assets 8,738 11,380 8,541 11,380
Interest rate swap, fair value adjustment   5,744   (2,024)   6,051   15,305
 
Income (Loss) Before Provision for Income Tax (83,679) 307,267 747,715 760,930
 
Provision for income taxes   (46,753)   119,790   256,890   283,111
 
Net Income (loss) $ (36,926) $ 187,477 $ 490,825 $ 477,819
 
Average Shares Outstanding 6,024,200 6,024,200 6,024,200 6,024,200
 
Operating Income per Share $ 0.03 $ 0.03 $ 0.15 $ 0.13
Net Income per Share $ (0.01) $ 0.03 $ 0.08 $ 0.08
 

Note: * - Operating EPS and Net EPS stated after giving effect to 2:1 stock split for shareholders of record as of February 28, 2014 and paid March 28, 2014 for all periods. 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 9/30/14   3/31/14
Cash & Equivalents $ 5,543,421 $ 5,531,060
Investments 5,223,543 5,245,505
Receivables 7,943,674 7,607,064
Other   1,454,660   1,899,946
Total Current Assets 20,165,298 20,283,575
 
Property and Equipment, Net 1,579,025 1,490,381
Intangible Assets, net 783,785 835,290
Other   904,509   920,566

Total Non Current Assets

  3,267,319   3,246,237
 
Total Assets $ 23,432,617 $ 23,529,812
 
Liabilities & Stockholders' Equity
Total Current Liabilities $ 8,622,861 $ 8,993,130
Long Term Liabilities  

1,512,705

 

1,730,456

 
Total Liabilities   10,135,566   10,723,586
 
Stockholders' Equity   13,297,051   12,806,226
 
Liabilities & Stockholders' Equity $ 23,432,617 $ 23,529,812
 

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal year 2015 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2015 second quarter operating income of $177,967 and depreciation and amortization expense of $155,286 for a sum of $333,253. Fiscal year 2014 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2014 second quarter operating income of $171,598 and depreciation and amortization expense of $161,329 for a sum of $332,927. The Company elects not to include investment portfolio income because the Company believes it is non-operating in nature.

Fiscal year 2015 six months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2015 six month operating income of $925,593 and depreciation and amortization expense of $320,398 for a sum of $1,245,991. Fiscal year 2014 six months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2014 six month operating income of $754,940 and depreciation and amortization expense of $313,053 for a sum of $1,067,993. 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.

Contacts

The Marketing Alliance, Inc.
Timothy M. Klusas, President
314-275-8713
tklusas@themarketingalliance.com
www.themarketingalliance.com
or
Investor Relations
The Equity Group Inc.
Adam Prior, Senior Vice President
212-836-9606
aprior@equityny.com
or
Terry Downs, Associate
212-836-9615
tdowns@equityny.com

Contacts

The Marketing Alliance, Inc.
Timothy M. Klusas, President
314-275-8713
tklusas@themarketingalliance.com
www.themarketingalliance.com
or
Investor Relations
The Equity Group Inc.
Adam Prior, Senior Vice President
212-836-9606
aprior@equityny.com
or
Terry Downs, Associate
212-836-9615
tdowns@equityny.com