MAAL Marketing Alliance Inc (PK)

FY 2014 First Quarter Financial Highlights (all comparisons to the prior year)

• Revenues increased to $6,989,061 from $6,832,850
• Operating income was $583,342, compared to $593,308
• Operating EBITDA (excluding investment portfolio income) was $735,066, compared to $711,828
• Net income of $290,342, or $0.10 per share, as compared to net income of $253,414, or $0.08 per share (all per share values were adjusted retroactively for stock split at July 26, 2013)

Highlights Subsequent to the Quarter

• Board of Directors declared a 6:5 stock split (20%) distributed as one additional share for every five shares owned. The new shares were distributed on August 9, 2013, to shareholders of record as of close of business on July 26, 2013. As a result of the stock split, the outstanding shares of the Company’s common stock increased to approximately 3,012,100 shares outstanding

The Marketing Alliance, Inc. (OTC:MAAL) (“TMA”), today announced financial results for its fiscal 2014 first quarter ended June 30, 2013.

Mr. Timothy M. Klusas, TMA’s Chief Executive Officer, stated, “We were pleased to report increases in total revenue and EBITDA versus this quarter last year, as well as an increase of over 14% in net income.” Mr. Klusas provided additional details below on each of the Company’s operations for the first quarter of the fiscal 2014 year:

• Insurance Distribution Business: “We are pleased with our progress in adjusting to the current interest rate environment. In our life insurance distribution business low interest rates have caused suppliers (insurance carriers) to reduce the number of products they offer due to increasingly costly guarantees associated with those products. I am impressed with our distributors’ flexibility to emphasize different carriers’ products and especially a new supplier for us in the quarter, Lincoln Financial, to offset these challenges. Typically for our business the integration of new distribution and new products into existing distribution could take many months, so I am grateful that our team and our distributors recognized this situation long ago and we all jointly benefitted from this effort. Although increases in interest rates during the quarter could help to alleviate some of these effects, the timing of the rate increases was too late to affect this quarter given the long sales cycle.”
• Earth Moving and Excavating Business: “During the quarter, we continued to execute our integration plan for this part of the Company. This plan included redistributing certain costs directly to the construction operations instead of grouping these costs with general operating expenses (also see financial review below). Had we applied the same criteria to the comparable quarter last year, cost of construction would have increased by approximately $147,000 and general operating expenses would have decreased by an identical amount, with no change in operating income. Revenue was affected by less favorable weather compared to last year (the busy spring season beginning later this year), and we were more selective in projects we initiated. Our increase in gross margin (using comparable costs, above) was due in part to this effort.”
• Entertainment Facilities: “In a contrast to our earth moving and excavating business, the first and third quarters of our fiscal year are typically the slower seasons for our two children and party entertainment facilities. This is due in part to more comfortable temperatures outdoors for other recreational activities, sports, and back-to-school and end-of-school activities. We closed this acquisition a little over a year ago, and are pleased with the growth and development of the business. Relative to other businesses, this business increased our Operating Expenses disproportionately, as one of the largest expenses of this business was rent to maintain large, open facilities for this business. ”

Fiscal 2014 First Quarter Financial Review

• Total revenues for the three-month period ended June 30, 2013, were $6,989,061, as compared to $6,832,850 in the prior year quarter. The increase was due to an additional $313,828 received in revenue from the two entertainment facilities, which offset a total decrease of $157,617 in commission and construction revenue from the prior year period.
• Net operating revenue (gross profit) for the quarter was $2,110,119, compared to net operating revenue of $1,839,291 in the prior-year fiscal period. Approximately $147,000 direct and indirect construction expenses were reclassified, but were fully offset by an offsetting reclassification in SG&A. No reclassifications of expenses affected operating income.
• Operating income was $583,342, versus operating income of $593,308 reported in the prior-year period. This change was due in part to the factors discussed above in each of the businesses and an increase in operating expenses that exceeded the increase in net operating revenue.
• Operating EBITDA (excluding investment portfolio income) for the quarter was $735,066 compared to $711,828 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 2014 first quarter was $290,342, or earnings per share of $0.10, compared to a net income of $253,414, or $0.08 per share, in the prior year period. (Operating EPS and Net EPS are stated after giving effect to the 20% stock split for shareholders of record as of July 26, 2013 and paid August 9, 2013 for all periods. Shares outstanding increased to 3,012,100 from 2,510,083 with this stock split and have been retroactively adjusted to account for the split.)
• Net investment loss (from investment portfolio) for the first quarter ended June 30, 2013 was $118,154, as compared to net investment loss of $168,474, for the same quarter of the previous fiscal year. The change was due in part to realized gains versus realized losses in the prior year period and less unrealized losses this quarter versus the prior year period.

Balance Sheet Information

TMA’s balance sheet at June 30, 2013 reflected cash and cash equivalents of approximately $5.9 million, working capital of $12.9 million, and shareholders’ equity of $13.6 million; compared to $6.0 million, $12.7 million, and $13.3 million, respectively, at March 31, 2013.

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, 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 June 30, 2013     2012 Commission revenue $ 5,775,207 $ 5,819,062 Construction revenue 900,026 1,013,788 Family entertainment revenue $ 313,828     -   Revenues 6,989,061 6,832,850   Distributor Related Expenses Bonus & commissions 3,835,675 3,881,884 Processing & distribution 423,834 599,311 Depreciation   2,469     3,674   Total 4,261,978 4,484,869   Cost of Construction Direct and Indirect costs of construction 480,410 418,528 Depreciation   89,589     90,162   Total 569,999 508,690   Family entertainment cost of sales   46,965     -     Net Operating Revenue   2,110,119     1,839,291     Operating Expenses   1,526,777     1,245,983     Operating Income 583,342 593,308   Other Income (Expense) Investment gain, (loss) net (118,154 ) (168,474 ) Interest expense (28,854 ) (26,408 ) Interest rate swap, fair value adjustment   17,329     -     Income Before Provision for Income Tax 453,663 398,426   Provision for income taxes   163,321     145,012     Net Income $ 290,342   $ 253,414     Average Shares Outstanding 3,012,100 3,012,100   Operating Income per Share $ 0.19 $ 0.20 Net Income per Share $ 0.10 $ 0.08  

Note: * - Operating EPS and Net EPS stated after giving effect to the 20% stock split for shareholders of record as of July 26, 2013 and paid August 9, 2013 for all periods. Shares outstanding increased to 3,012,100 from 2,510,083 with this stock split and have been retroactively adjusted to account for the split.

  Consolidated Selected Balance Sheet Items       As of Assets 6/30/13     3/31/13 Cash & Equivalents $ 5,863,625 $ 6,007,286 Investments 4,328,273 4,237,026 Receivables 9,326,423 9,251,879 Other   555,700   621,312 Total Current Assets 20,074,021 20,117,503   Property and Equipment, Net 1,558,139 1,652,031 Intangible Assets, net 929,946 960,899 Other   804,541   801,576

Total Non Current Assets

  3,292,626   3,414,506   Total Assets $ 23,366,647 $ 23,532,009   Liabilities & Stockholders' Equity Total Current Liabilities $ 7,192,375 $ 7,463,975   Long Term Liabilities  

2,590,906

 

2,775,010

  Total Liabilities   9,783,281   10,238,985   Stockholders' Equity   13,583,366   13,293,024   Liabilities & Stockholders' Equity $ 23,366,647 $ 23,532,009  

Note – Operating EBITDA (excluding investment portfolio income)

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.

Q1FY2013 Operating EBITDA (excluding investment portfolio income) was determined by adding Q1FY 2013 Operating Income of $593,308 and Depreciation and Amortization Expense of $118,520 for a sum of $711,828. 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