First National AlarmCap Income Fund
TSX : FNA.UN

First National AlarmCap Income Fund

March 25, 2011 16:01 ET

First National AlarmCap Income Fund Presents Its 2010 Year End Results

EDMONTON, ALBERTA--(Marketwire - March 25, 2011) - The Management and Trustees of First National AlarmCap Income Fund (TSX:FNA.UN) are pleased to report results for the fourth quarter (Q4) and year ended December 31, 2010.

For 2010, the Fund:

  1. generated net cash of $3.5 million before repayment of the subordinated debt;
  2. repaid $5 million of subordinated debt carrying interest of 9% per annum;
  3. entered into an agreement to sell its Securex division which resulted in the Fund receiving and cancelling a significant block of the Fund's Class A units held by a single unitholder;
  4. paid distributions of $0.30 per unit for the year; and
  5. realized a 35% increase in the market price of its Class A units from $3.00 at the beginning of the year to $4.05 at the end of the year.

During the fourth quarter, the Fund entered into an agreement to sell the Securex division of its operations, including certain assets and liabilities related to the Securex division, for an aggregate consideration of $10,505,000. The sale closed March 4, 2011 with an effective date of February 28, 2011. The proceeds received from the purchaser included the transfer of 1,750,000 Class A Trust Units (representing 27.15% of the Fund's total units outstanding) and $475,000, subject to a working capital adjustment.

The divestiture of the Securex division is a key transaction designed to maximize the value of the Fund. It will enable the Fund to directly manage all of its assets rather than delegating management to a third party, which was the case with the Securex division. As a significant block of Units were tendered as part of the consideration for the sale, the Fund will have a widely held unitholder base which may better enable it to evaluate strategic alternatives in the future in order to maximize unitholder value.

As a result of this divestiture, we have recorded the Securex division's assets, liabilities, revenues and expenses as "discontinued operations" in the year-end financial statements as required under Canadian GAAP and have restated our quarterly comparative results to reflect this change in presentation.

Total revenues for the year from continuing operations were $24.2 million, down 1.4% from $24.6 million in 2009, in line with a small net decrease in subscribers on a full year basis. EBITDA from continuing operations for the year was $11.4 million compared to $11.3 million in 2009 as a result of lower general and administration costs. Net income before tax from continuing operations was $2.0 million compared to a loss of $7.8 million in 2009. In 2009 the Fund took a goodwill impairment charge of $9.4 million against continuing operations.

On a quarterly basis, the Fund earned revenues from continuing operations in Q4 of $6.1 million compared to $6.0 million for the third quarter. The Fund experienced a slight increase in the number of customers in Q4 which resulted in this increase in revenues. The Fund expects its customer base and revenues to grow in 2011 as it focuses on opportunities in its Microtec division and the addition of new dealers outside of Quebec.

Also in Q4, the Fund realized EBITDA from continuing operations of $2.9 million, the same as Q3 and up from $2.7 million in Q4 of 2009. The Fund continues to implement its business plan of improving customer service and delivering new services while focusing on strategies to reduce customer attrition and to recruit new customers.

Cash on hand at the end of 2010 was $9.5 million, down from $11.0 million in 2009 as it used cash on hand to eliminate its subordinated debt. As previously reported, the Fund repaid $2 million of its $5 million subordinated debt in Q2 and in Q4, it repaid the remaining $3 million of subordinated debt. Subsequent to year end, the Fund extended its current Bank Credit Agreement to September 30, 2011 and paid down the bank debt from $41,250,000 to $35,000,000. This extension will allow the Fund to review its options with regards to conversion to a corporation and consider other strategic alternatives to maximize unitholder value.

The Trustees are pleased to announce a distribution for the month of March in the amount of $0.025 per unit. With regards to future distributions, the Trustees will continue to monitor, on a monthly basis, a number of relevant factors including compliance with all of the debt covenants of its Bank Credit Agreement, the projected profitability of the Fund, and the level of cash resources required to implement its business plan.

The Fund is an unincorporated, open-ended, limited purpose trust and its Class A trust units are listed on the Toronto Stock Exchange under the ticker symbol 'FNA.UN'. It is one of the leading Canadian-owned security alarm service providers in Canada, serving more than 77,000 residential and commercial customers. It offers customers a full suite of security and related monitoring products and services, including intrusion, smoke detection, and environmental services. Monitoring services are provided 24 hours per day, 365 days per year from our state-of-the-art monitoring centres.

A copy of the consolidated financial statements for the quarter ended December 31, 2010, related Management's Discussion & Analysis, and additional information concerning the Fund is available on SEDAR at www.sedar.com or at www.alarmcap.ca.

Cautionary statement regarding forward-looking information and statements

Certain statements contained in this news release, which relate to matters that are not historical facts, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information and statements in this news release include but are not limited to: customer base and revenues to grow in 2011, confidence that its alarm monitoring business will remain in demand and that the Fund has the capacity and ability to execute its business plan. These statements are based on certain assumptions and analysis made by the Fund in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results, performance or achievements will conform to the Fund's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Fund's expectations. Such risks and uncertainties include, but are not limited to: fluctuations in the demand for monitoring and installation of security systems, general economic, market or business conditions; changes in laws or regulations, including taxation and environmental; the lack of availability of qualified personnel or management; and other unforeseen conditions which could impact the use of services supplied by the Fund. See also the Fund's Annual Information Form dated March 26, 2010, available on the Fund's website (www.alarmcap.ca) and on SEDAR at www.sedar.com for a comprehensive set of risk factors related to the Fund. Consequently, all of the forward-looking information and statements made in this report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Fund will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Fund or its business or operations. Except as may be required by law, the Fund assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events or otherwise.

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