AlarmForce Announces Record Revenue for 2011

Common shares traded on the Toronto Stock Exchange
Trading symbol:  AF

TORONTO, Jan. 26, 2012 /CNW/ - TSX - Trading symbol - AF

AlarmForce Industries Inc., Canada's largest manufacturer and installer of live two-way voice home alarms systems, is pleased to announce annual results for the year ended October 31, 2011:

                               
               October 31, 2011       October 31, 2010       Change  
              (year ended)       (year ended)       (year over year)  
                                 
Revenue             $40,854,000       $37,187,000       +10%  
                               
Gross profit             $31,215,000       $28,954,000       + 8%  
                               
Income before income taxes           $5,389,000       $  7,052,000       -24%  
                               
Net income           $ 3,381,000       $ 4,782,000       -29%  
                                 
Cash flow from operations               $ 8,622,000       $ 7,209,000         +20%  
                               
Cash flow from operations excluding working capital              $ 7,333,000       $  8,294,000                 - 12%  
                                 
EBITDA             $ 9,989,000       $  10,813,000                  - 8%  
                               
EBITDA/share           $  0.82       $  0.88         - 8%  
                                 
Basic Net income / share           $0.28       $0.39       -29%  
Diluted Net income / share           $0.28       $0.39       -29%  
                                 
                               
* EBITDA (Earnings Before Interest, Income Taxes, Depreciation, and Amortization) is a key measure in the security industry
and should not be interpreted as GAAP)

EBITDA is defined as earnings before interest expenses, income taxes, depreciation and amortization. EBITDA is a standard measure used in the security industry to assist in understanding and comparing operating results and is often referred to by our competitors. Management views EBITDA as an important measure of operating performance of the Company. Yet, since it does not have any standardized meaning defined by Canadian GAAP, it may not be considered in isolation of GAAP measures such as net income/loss or cash flows, as a measure of liquidity. The Company, however, utilizes these measures in making operating decisions and assessing its performance. Management believes that it is an important measure as it allows the Company to assess its ongoing business without the impact of depreciation or amortization expenses. Since EBITDA is not a defined term under Canadian GAAP, it is unlikely to be comparable to similar measures presented by other issuers.

Joel Matlin, President and CEO, announced that AlarmForce Industries Inc. added over 26,400 new accounts in the fiscal year ended October 31, 2011, closing with a subscriber base of 124,100 accounts.

Mr. Matlin said that, "The annual net growth rate in the total subscriber base was 9%, which added to our monthly recurring revenues and resulted in record total revenues of $40.9 million, with an increase of $3.7 million or 10% per annum. Given the challenges and uncertainty in the economic climate and consumer confidence, we are pleased with the positive growth in subscribers and revenues."

"Earnings per share decreased from 39 cents per share to 28 cents per share, and net income decreased by 29%, from $4.8 million to $3.4 million in 2011. Gross profit increased by 8% for the year, while as a percentage of sales it decreased from 78% to 76%. In assessing these results it is important to understand the key indicators of economic progress and metrics in our business. As our organic growth creates new subscriber accounts, which represent long-term recurring monthly revenues for the company, the costs to create accounts are expensed up-front in the first year even though each account continues to generate recurring cash flows for us over the life of the subscriber relationship. Competitor alarm companies that grow by acquiring accounts, on the other hand, capitalize their acquisition costs, and amortize them over the life of the subscriber relationship. The impact on our results is felt especially when annual marketing expenses are increasing, which typically happens when we enter or open new markets. In other words new subscriber account creation costs tend to drag reported net income down, even though the economic value of the business continues to go up with the subscriber base."

"EBITDA decreased from $10.8 million to $10.0 million. In our view, a metric that does a better job of tracking the underlying value of our business is the EBITDA excluding marketing expenses, which increased from $20.1 million to $20.8 million in 2011, a 3% increase. Our cash flows from operations increased by 20% to $8.6 million in 2011, sufficient to offset the capital expenditures of $3.7 million without adding any debt. We continue to operate debt-free, funding all our growth, including marketing, research and development expenses, from internal cash flows."

"Our focus is on increasing the subscriber base by entering new markets, notwithstanding the drag on reported income as a result of up-front creation costs. We believe it is economic value creation that counts, rather than occasional declines in reported income. This will likely have a greater impact in the next couple of years due to our marketing budget, which we expect will increase in order to accelerate growth, both by entering new markets as well as a result of the introduction of our innovative system VideoRelay. Our model, based on growing organically through marketing programs and brand development, has consistently proved itself successful as we have entered each new market."

"AlarmForce has been a leader in offering new features to consumers who have become better educated and aware and about enhanced services. Our innovative VideoRelay product offers the consumer an unprecedented level of control over their home security, and at a cost substantially lower than that of similar products offered by our competitors."

"Our debt-free balance sheet and the cash resources at our disposal are capable of funding rapid growth as a result of new market opportunities. The addition of VideoRelay will give us a significant market opportunity, both as a stand-alone installation as well as bundled with the home alarm system, regardless of whether it is a competitor's system or an AlarmForce system. This flexibility as well as our capability of providing a one-stop solution will give us a competitive advantage to accelerate our subscriber growth in the future. "

Mr. Matlin closed by saying: "The response that we have received to our VideoRelay system in Ontario and Quebec has been very positive and we anticipate the same results in the rollout to the rest of Canada. We are extremely optimistic for our future growth as we roll out VideoRelay in the US markets. Combined with our two-way voice product and our AlarmCare Personal Emergency Response System, we are confident that our brand will continue to represent the best value proposition to the consumer. "

AlarmForce provides security and personal emergency response monitoring and related services to residential and commercial subscribers throughout Canada and selected centers across the United States. The Company is a leading provider of two-way voice alarm systems in Canada and sole provider of AlarmPlus, a wireless line-cut protection system. More information about the Company's products and services can be found at   www.alarmforce.com

SOURCE Alarmforce Industries Inc.

For further information:

Investor Relations Department
Tel: (416) 445-2001 ext. 225
Fax: (416) 445-9381
investorrelations@alarmforce.com.

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Alarmforce Industries Inc.

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