AlarmForce Industries Inc.

AlarmForce Industries Inc.

January 30, 2006 11:13 ET

AlarmForce Posts 17 Year Record Growth and Revenue in 2005

TORONTO, ONTARIO--(CCNMatthews - Jan. 30, 2006) - AlarmForce Industries Inc. (the " Company" ) (TSX:AF) is pleased to announce annual results for the year ended October 31, 2005.

2005 2004(1) Change
(Year ended) (Year ended)(Year over Year)

Revenue 17,227,000 14,393,000 +20%
Cash flows from
operating activities
excl. working capital 3,206,000 2,610,000 +23%
Diluted cash flow
per share 0.27 0.24 +13%
Adjusted EBITDA(2) 9,157,000 6,718,000 +36%
Income before taxes 1,290,000 804,000 +60%
Net income 810,214 303,600 +167%

Net income/share 0.07 0.03 +33%
Diluted Net income
per share 0.07 0.03 +33%
Diluted Adjusted
EBITDA per share 0.77 0.61 +26%

(1) As restated to reflect announcements on September 14, 2005 and
January 30, 2006.
(2) Earnings before interest, taxes depreciation and amortization
and direct-response marketing expenditure as reconciled to GAAP
earnings in management' s discussion and analysis of annual

Announcing the Company' s results, Mr. Joel Matlin, the President and CEO of the Company, said: " In 2005, AlarmForce achieved the highest growth in our seventeen year history, up by 16.4% from the record achieved last year. Our subscriber account base continued to expand organically with total new installations in 2005 of 13,400 subscriber accounts, bringing the total accounts to over 57,000. This represents a growth rate that is more than twice the average in the alarm industry in North America. In mid 2005 we also commenced the first phase of expansion into the United States, where we have now successfully established the early stage of our residential alarm business. By replicating our unique operating model of organic account creation and utilizing our infrastructure in Canada in the State of North Carolina, subscriber accounts are being generated from three new centres. As announced in December, we are adding the State of Ohio to our market population coverage and will commence to build brand awareness there as it is continuing to expand in North Carolina."

" Our accomplishments in 2005 included an increase in operating efficiency with Gross margin to Revenue ratio climbing from 77% to 79%. Due to the expansion into the United States we saw an increased investment in inventory, but at the same time our accounts receivable decreased from 2004, as a result of highly effective collection procedures and controls."

" We are on track with controlling the cost of account creation and debt, with net debt per subscriber account decreasing from $34 per account in 2004 to $11 per account in 2005. As a result, the company' s debt to equity ratio decreased significantly, going from 0.14 to 0.07, which I believe is the lowest ratio relative to the rest of the alarm industry. In addition, AlarmForce does not capitalize direct-response marketing expenditure and is one of the few companies in the alarm industry whose growth is internally generated. The annual budget for the direct-response marketing expenditures has increased steadily, due to the increase in subscriber account creation. The company' s cash flow from operations before working capital is $ 3.2 Million an increase of 23% from 2004. Excluding the discretionary marketing budget, the cash flow is $ 8.04 Million."

On the Company' s future outlook, Mr. Matlin said: " We expect to continue to achieve strong organic account growth through direct-response marketing programs, which have proven to be highly cost-effective as well as a differentiating feature in the alarm industry. Our monthly recurring revenues, cash flows and subscriber base are expected to continue to grow strongly in 2006 and subsequent years. With continuing brand expansion, growth in monitored subscriber accounts, operating efficiency and a strong cash position, we are confident that our financial resources and cash flows will be sufficient to finance capital and operating requirements into the foreseeable future. We expect to continue building brand development in the United States which will contribute more to growth in 2006, reflecting a full year of results relative to the mid-year start in 2005."


The Company is also announcing the restatement of its financial statements for the year ended Oct 31, 2004 to correct the accounting of certain intangible assets and the corresponding future income tax provision. Based upon an interpretation of section 3465.37 of the CICA handbook, no provision for future income tax was previously reflected in the financial statements and upon further review, the Company determined that a retroactive correction should be made to reflect the future income tax. The Company has applied the correction to prior periods whereby the carrying value of these intangible assets are grossed up for the future tax liability and amortized over the respective useful life to properly match the future income provision in the appropriate years.

The effect of these changes on the 2004 financial statement balances is as follows:

Previously reported Increase/(decrease) Restated
------------------- ------------------- --------

$ $ $
- - -

Balance Sheet:
Intangible Assets 3,175,803 1,598,267 4,774,070
Future Income Taxes (171,500) 1,598,267 1,426,767
Retained Earnings/
(Deficit) 871,428 - 871,428

Income Statement:
Amortization -
Intangible Assets 245,424 244,988 490,412
Future Income taxes 347,708 (244,988) 102,720
Net Income (loss) 303,600 - 303,600

Basic net income (loss)
per common Share 0.03 0.00 0.03

Diluted net income (loss)
per common share 0.03 0.00 0.03

The financial statements for the year ended October 31, 2005 and the restated statements for the year ended October 31, 2004 will be available to the public on SEDAR at on January 30, 2005.

AlarmForce Industries Inc. is Canada' s largest manufacturer and installer of two-way voice home alarm systems and line-cut protection with offices across Canada and the United States.

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