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The Marketing Alliance Announces Unaudited Financial Results for Its Fiscal 2015 Third Quarter and Nine Months Ended December 31, 2014
[March 06, 2015]

The Marketing Alliance Announces Unaudited Financial Results for Its Fiscal 2015 Third Quarter and Nine Months Ended December 31, 2014


The Marketing Alliance, Inc. (OTC:MAAL) ("TMA"), today announced unaudited financial results for its fiscal 2015 third quarter and nine months ended December 31, 2014.

Mr. Timothy M. Klusas, TMA's Chief Executive Officer, provided additional details below on each of the Company's operations for the third quarter of the fiscal 2015 year:

  • Insurance Distribution Business: "We reported another quarterly gain in commission revenue (versus the prior year period) in our insurance business. We worked closely with our network of independent General Agents to ensure that they had both the access and information concerning the wide range of products offered by our carrier network. Our expenses increased due to additional marketing expenses necessary to grow the insurance business and establish new carrier relationships. We felt that this effort allowed each distributor to better compete in the marketplace by providing a more diversified offering to its customer base, which has been important given the rapid changes in product / carrier availability in the current low interest rate environment. Throughout this period of low interest rates, we have seen many life insurance products increase in price to non-competitive levels or even discontinue. We feel, over the long-term, our investments in a wide range of carrier relationships strengthen our value proposition to distributors by having a more diversified pool of carrier partners to ensure access to competitive life insurance products. However, in the short term, changes in product can lead to challenging business conditions for our distributors and create additional marketing expenses for TMA. We were pleased to see additional revenues this quarter, and our plans are to continue to assist our distribution partners to steadily improve production levels."
  • Earth Moving (Land Improvement - Construction): "We saw progress through increased sales during the fiscal third quarter, which is seasonally one of the Company's strongest. We continued to focus on actively seeking projects that best utilize our assets and reinvigorated our marketing efforts to reach those customers and markets. I am particularly pleased that we accomplished this in the backdrop of challenged corn and soybean prices for our customers, which is their main source of revenue to pay for our services. We have worked diligently to explain to farmers, that, in the long-term, an improved crop field drainage scheme will ultimately yield a higher amount of harvestable bushels per acre. We continued to see progress in selling our value proposition of improved crop yields through our draining and tiling services. While this has been a long process, we felt our marketing efforts were much more productive than in the past."
  • Family Entertainment (including acquisition of new franchises): "We have been happy with the performance at our two existing family entertainment franchised locations in St. Louis. The improvements made to these facilities have increased revenues at each location. We felt this was a good platform to seek additional opportunities to build upon with what we have learned. As a result, we were happy to effectuate an opportunity to acquire additional existing Monkey Joe's franchised locations in Florida at the beginning of 2015 (current fiscal 2015 fourth quarter). We felt comfortable with our ability to integrate these two additional locations into our current operations, which are managed in St. Louis."

Fiscal 2015 Third Quarter Financial Review

  • Total revenues for the three-month period ended December 31, 2014 were $7,399,580, as compared to $6,869,504 in the prior year quarter. The increase was due to improvements in revenue for each of the three business lines of the Company when compared to the prior year period.
  • Net operating revenue (gross profit) for the quarter was $1,731,495, compared to net operating revenue of $1,774,704 in the prior-year fiscal period. Gross profit was adversely affected by additional marketing investments required to grow the Company's insurance distribution business.
  • Operating income was $340,528, compared to operating income of $222,699 reported in the prior-year period. The increase in operating income was primary due to reductions in operating expenses and increases in revenue for the fiscal 2015 third quarter as compared to the prior year.
  • Operating EBITDA (excluding investment portfolio income) for the quarter was $496,053, compared to $387,278 in the prior-year period. A note reconciling operating EBITDA to operating income can be found at the end of this release. The increase in Operating EBITDA (excluding investment portfolio income) was driven by many of the same reasons as Operating income.
  • Net income for the fiscal 2015 third quarter was $262,671, or $0.04 per share, as compared to net income of $252,145, or $0.04 per share, in the prior year period. (Operating EPS and Net EPS are stated after giving effect to the 100% stock split effective February 28, 2014 for all periods. Shares outstanding increased to 6,024,200 from 3,012,100 with this stock split, and per share information has been retroactively adjusted to account for the split.) Net income was adversely affected by investment loss, net (from investment portfolio), below.
  • Investment loss, net (from investment portfolio) for the third quarter ended December 31, 2014 was $2,952, as compared to investment gain, net, of $227,105 for the same quarter of the previous fiscal year.
  • Capital expenditures in the quarter were $116,126, of which most were for the Land Improvement-Construction business for the purchases of two new pieces of equipment to enhance our capabilities. One piece of equipment replaces a less-efficient older model of similar equipment and allows us to do more different types of projects, while a second purchase allows us to undertake projects that are more complex and greater in size than before.

Fiscal 2015 Nine Months Financial Review

  • Total revenues for the nine months ended December 31, 2014 were $20,185,553, compared to $20,120,001 in revenues for the prior-year period.
  • Net operating revenue (gross profit) was $5,479,046, which compares to net operating revenue of $5,605,937 in the prior-year fiscal period.
  • Operating income was $1,266,121, compared to $977,639 for the prior-year period. The increase in operating income was primarily due to reductions in operating expenses versus the prior year period.
  • Operating EBITDA (excluding investment revenue) for the nine months was $1,742,044 versus $1,455,271 in the prior-year period. A note reconciling Operating EBITDA to Operating income can be found at the end of this release. The increase in Operating EBITDA (excluding investment portfolio income) was driven by many of the same reasons as Operating income.
  • Net income for the nine months ended December 31, 2014 was $753,496, or $0.13 per share, compared to $729,964 or $0.12 per share, in the prior-year period. (As noted above, per share information has been retroactively adjusted to account for the 100% stock split effective February 28, 2014.)

Balance Sheet Information

  • TMA's balance sheet at December 31, 2014 reflected cash and cash equivalents of approximately $5.9 million, working capital of $11.9 million, and shareholders' equity of $13.6 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. 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: the product lines, and the prices and other terms and characteristics of the product lines, offered by life insurance carriers; the desirability of carrier product lines the desirability of carrier product lines to our distributors and their customers; 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 ended   Nine-months ended
December 31, December 31,
(Unaudited) (Unaudited)
  2014       2013     2014       2013  
 
Commission revenue $ 6,313,729 $ 5,877,841 $ 17,497,231 $ 16,946,100
Construction revenue 680,517 630,415 1,596,438 2,190,939
Family entertainment revenue   405,334     361,248     1,091,884     982,962  
Total revenues   7,399,580     6,869,504     20,185,553     20,120,001  
 
Distributor related expenses:
Distributor bonuses and commissions 4,766,404 4,210,579 12,099,867 11,680,431
Business processing and distributor costs 422,350 343,556 1,346,932 1,156,763
Depreciation   2,736     3,145     8,114     8,833  
  5,191,490     4,557,280     13,454,913     12,846,027  
Costs of construction:
Direct and indirect costs of construction 334,359 374,363 796,614 1,227,032
Depreciation   84,585     86,712     255,109     265,744  
  418,944     461,075     1,051,723     1,492,776  
 
Family entertainment costs of sales:   57,651     76,445     199,871     175,261  
 
 
Net operating revenue   1,731,495     1,774,704     5,479,046     5,605,937  
 
Operating Expenses   1,390,967     1,552,005     4,212,925     4,628,298  
 
Operating income   340,528     222,699     1,266,121     977,639  
 
Other income (expense):
Investment gain, net (2,952 ) 227,105 (137,031 ) 257,055
Interest expense (27,084 ) (29,750 ) (85,475 ) (80,395 )
Gain on sale of assets - (3,184 ) 8,541 8,196
Interest rate swap, fair value adjustment   469     4,265     6,520     19,570  
 
Income before provision for income taxes 310,961 421,135 1,058,676 1,182,065
 
Provision for income taxes   48,290     168,990     305,180     452,101  
 
Net income $ 262,671 $ 252,145 $ 753,496 $ 729,964
 
Average Shares Outstanding 6,024,200 6,024,200 6,024,200 6,024,200
 
Operating Income per Share $ 0.06 $ 0.04 $ 0.21 $ 0.16
Net Income per Share $ 0.04 $ 0.04 $ 0.13 $ 0.12
 

Note: * - Operating EPS and Net EPS stated after giving effect to the 100% stock split for shareholders effective February 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
12/31/14   3/31/14
Assets (Unaudited) (Audited)
Cash & Equivalents $ 5,926,647 $ 5,531,060
Investments 5,157,790 5,245,505
Receivables 7,770,170 7,607,064
Other 1,401,409 1,899,946
Total Current Assets 20,256,016 20,283,575
 
Property and Equipment, Net 1,552,716 1,490,381
Intangible Assets, net 763,233 835,290
Other 664,973 920,566

Total Non Current Assets

2,980,922 3,246,237
 
Total Assets $ 23,236,938 $ 23,529,812
 
Liabilities & Stockholders' Equity
Total Current Liabilities $ 8,353,680 $ 8,993,130
Long Term Liabilities

1,323,536

1,730,456

 
Total Liabilities 9,677,216 10,723,586
 
Stockholders' Equity 13,559,722 12,806,226
 
Liabilities & Stockholders' Equity $ 23,236,938 $ 23,529,812
 

Note - Operating EBITDA (excluding investment portfolio income)

Fiscal year 2015 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2015 third quarter operating income of $340,528 and depreciation and amortization expense of $155,525 for a sum of $496,053. Fiscal year 2014 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2014 third quarter operating income of $222,699 and depreciation and amortization expense of $164,579 for a sum of $387,278. The Company elects not to include investment portfolio income because the Company believes it is non-operating in nature.

Fiscal year 2015 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2015 nine month operating income of $1,266,121 and depreciation and amortization expense of $475,923 for a sum of $1,742,044. Fiscal year 2014 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2014 nine months operating income of $977,639 and depreciation and amortization expense of $477,632 for a sum of $1,455,271. 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.


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