Monday, August 1, 2011

The Marketing Alliance Update

I've posted a few things about The Marketing Alliance (HERE, HERE, and HERE), a company that is the biggest holding in the fund I help manage as of 6/30/2011. For those still following it, the company just reported fiscal Q4 and year-end results. Of special note is an acquisition the company made that I think shows the capital allocation potential that my colleagues and I see in this business, Tim Klusas in particular, and one of the reasons why it has been our biggest holding for a while now:
Subsequent to the end of the quarter, TMA acquired certain assets and inventory of JDC Construction, Inc., formerly doing business as Empire Construction & Trenching, Inc., which was a firm that provided erosion control, conservation services, and other construction services for farms, cities, counties, states and general contractors. The benefits of these services for agriculture include increases in crop yields, usable acreage, and improvements in soil conservation efforts. The founder and prior management of JDC Construction will continue to manage and operate the business as an employee of a newly formed entity utilizing the purchased assets. Terms of the transaction were not disclosed, although it does include an option to acquire the remainder of the assets of the business.

Mr. Klusas stated, “We are pleased to be able to put cash on the Company’s balance sheet to work with an impressive entrepreneur in a business outside of financial services. This transaction, to purchase assets and form a new operating company with the existing management, provided a new and diverse revenue stream outside of the insurance distribution business and our non-operating investment activities. This transaction met our criteria as one that would have been accretive, could have been fully funded from cash on hand, and whose expected return exceeded what we currently earn on cash.”

Mr. Klusas concluded, “Because this is a separate company with its own management, we do not expect any distractions in our insurance distribution business and feel a more diversified set of revenue streams adds to our capabilities.”
Here's a summary of the rest of the highlights from the press release:

FY 2011 Q4 Financial Highlights

  • Operating income increased 28% to $2,106,887
  • Revenues increased 15% to $5,575,051
  • Net income was $1,569,975, or $0.83 per share, compared to $1,483,641, or $0.78 per share, in the prior-year period

FY 2011 Annual Financial Highlights

  • FY 2011 operating income increased 48% to $4,119,136
  • FY 2011 revenues increased 10% to $21,535,235
  • FY 2011 net income was $3,150,323, or $1.66 per share, compared to $2,532,864, or $1.33 per share, in the prior year

Subsequent Highlights

  • Board of Directors declared a 10% stock dividend on shares of common stock, payable on July 15, 2011, increasing the total amount of common stock to 2,091,735 shares outstanding.
For the rest of the press release, go HERE.

To view Matt's Value Investors Club write-up from earlier this year, go HERE.

*This is not a recommendation to buy or sell a security. Please do your own research before making an investment decision. The fund I co-manage owns shares in the stock of The Marketing Alliance (MAAL.PK) and we may be buying or selling shares at any given time.