GWR Global Water Resources Corp. Reports Fourth Quarter and Year End 2013 Results

PHOENIX, March 25, 2014 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) today reported its financial results for the fourth quarter and year ended December 31, 2013. See information below regarding tomorrow's conference call.

The Company was established to acquire an equity interest in Global Water Resources, Inc. ("Global Water" or "GWRI"). Global Water is a U.S., pure-play, water resource management company based in Phoenix, Arizona, that owns and operates water, wastewater and recycled water utilities.  The Company accounts for its investment in Global Water using the equity method of accounting; therefore the financial information of Global Water is not consolidated with that of the Company. All references in this press release to consolidated financial information refer to Global Water on a consolidated basis and, unless otherwise indicated, all amounts are in U.S. dollars.

Highlights:

  • Grew active service connections to 42,726 at December 31, 2013, compared with 41,008 at December 31, 2012, representing a 4.2% annual increase.
  • Achieved $4.8 million and $17.7 million in EBITDA for the three months and year ended December 31, 2013, respectively, within the Regulated Utilities business, compared to $3.9 million and $15.7 million for the corresponding periods in 2012.
  • Received approval of the rate case settlement agreement by the Arizona Corporation Commission ("ACC"), subsequent to year end, which provides an overall cumulative revenue increase of $4.3 million, or 14%, with the majority of this revenue increase phased in over two years, beginning in January 2015. The settlement also restored greater than $60 million in rate base or future rate base, which will have the immediate impact of restoring significant shareholder equity on the balance sheet.
  • Strategically divested of several non-core assets including FATHOM™ and the Loop 303 project.

"Our progress during 2013 lays the foundation for our new strategic plan for the Company going forward," said Trevor Hill, Chairman of the Board. "With the renewed growth in our service territories and our new rates, we are well positioned to generate strong, predictable and stable cash flows as a pure-play, high-growth, water and wastewater utility company."

Summary of Financial Results

Consolidated revenues for the three months ended December 31, 2013, decreased $0.7 million, or 7.8%, to $7.8 million compared to $8.4 million in the corresponding period in 2012. Consolidated revenues for the year ended December 31, 2013, decreased $0.1 million, or 0.3%, to $33.4 million compared to $33.5 million in fiscal 2012.

Excluding revenues of the Company's prior FATHOM™ business, which was sold on June 5, 2013, GWRI's revenues totaled $7.7 million and $7.5 million for the three months ended December 31, 2013 and 2012, respectively, and totaled $32.2 million and $30.7 million for the year ended December 31, 2013 and 2012, respectively.  The increase primarily reflects the positive impact of growing active service connections within the regulated utilities business.

Consolidated EBITDA increased $1.4 million, or 45%, to $4.6 million for the three months ended December 31, 2013, compared to $3.2 million in the same period last year. EBITDA for the year ended December 31, 2013 totalled $12.7 million compared to $12.6 million for 2012.

Consolidated net income was $0.1 million for the three months ended December 31, 2013, compared to a net loss of $1.8 million for the same period in 2012. Consolidated net loss totaled $6.0 million for the year ended December 31, 2013, compared to $38.5 million for 2012. The change is predominantly due to a $32.7 million noncash charge attributed to a valuation allowance recorded against the Company's net deferred tax assets during 2012.  

Business Outlook

Global Water's growth strategy for the regulated business is driven by increased service connections, utility rate increases approved by the ACC, and continued operating efficiencies.  As previously discussed, population and community growth in the metropolitan Phoenix area served by Global Water's utilities have a direct impact on the Company's earnings.

The fourth quarter of 2013 continued the positive growth trend from a combination of new homes built and re-establishing service on previously vacant homes.  As of December 31, 2013, total service connections increased to 44,608 from 43,623 as of December 31, 2012.  Total active service connections increased 4.2% to 42,726 as of December 31, 2013, from 41,008 as of December 31, 2012.  Of the 1,718 active connections added this year, 985 were new homes built and 733 were previously vacant homes.

During the economic downturn beginning in 2008, Global Water experienced an increase in the number of vacant homes in its utility areas, reaching 4,647 vacant connections, or 11.2%, at its peak in February of 2009.  By comparison, the level of vacant connections was 1,882, or 4.2% of total service connections as of December 31, 2013; the lowest vacancy rate since April 2008.

Based on economic metrics and published analyses of industry experts, the metropolitan Phoenix area is expected to experience strong population and employment growth for the foreseeable future, which management believes will result in real estate development and connection growth in Global Water's utility service areas.

On February 10, 2014, the Company announced the approval of the rate case settlement agreement by the ACC, involving seven Global Water regulated utility subsidiaries.

The settlement agreement, which was wholly approved by the Commissioners, includes the following major terms:

  • An overall cumulative revenue increase of $4.3 million, or 14%, for Global Water's utilities based on 2011 test year connections, with the majority of this revenue increase phased in over two years, beginning in January 2015. 
  • Full reversal of the imputation of Contributions in Aid of Construction ("CIAC") associated with funds previously received under Infrastructure Coordination and Financing Agreements ("ICFAs").  The imputation was required as part of Global Water's last rate case.  The reversal restores approximately $60 million in rate base or future rate base, which will have the immediate impact of restoring significant shareholder equity on the balance sheet.
  • Global Water will not enter into any new ICFAs. Existing ICFAs will remain in place, but a portion of future payments under the ICFAs will be used to fund hook-up fees, which are accounted for as CIAC once used to fund the construction of utility infrastructure.
  • A 9.5% return on common equity will be adopted for the purpose of determining rates to be paid by customers.
  • None of Global Water's utilities may file another rate application before May 31, 2016.  Subsidiaries Santa Cruz Water Company and Palo Verde Utilities Company may not file for another rate increase before May 31, 2017.

The final Decision and Order is posted on the Company's website and at the ACC's eDocket website, http://edocket.azcc.gov under the docket number 12-0309. The settlement agreement is also posted in both locations.

The full financial statements and management's discussion and analysis for the Company and Global Water will be available March 26, 2014, on the Company's SEDAR profile at www.sedar.com or on the Company's website at www.gwresources.com.

Conference Call
Global Water will conduct a conference call on Wednesday, March 26, 2014, at 9:00 a.m. ET.  Interested persons may access the call by dialing (647) 427-7450 or toll free at (888) 231-8191.  Shortly after the conclusion of the call, a replay will be available by dialing (416) 849-0833 or (855) 859-2056.  The passcode is 3004458.  The replay will expire at midnight (ET) on Wednesday, April 9, 2014.  A copy of the transcript and an audio replay of the conference call, once available, will be archived within the investor section of the Company's web site at www.gwresources.com.

About GWR Global Water Resources Corp.
The Company was incorporated in British Columbia to acquire shares of U.S. based Global Water Resources, Inc. ("Global Water") and to actively participate in the management, business and operations of Global Water through its representation on the board of directors of Global Water and its shared management of Global Water.

About Global Water
Global Water is a pure-play, high-growth water resources company located in Phoenix, Arizona, that owns and operates regulated water, wastewater and recycled water utilities in the metropolitan Phoenix area.

Cautionary Note Regarding Forward-Looking Statements
This press release includes certain forward-looking statements.  These forward looking statements include, but are not limited to our plans, objectives, expectations and intentions, and other statements contained in this release that are not historical facts as well as statements identified by words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", or the negative of these terms, or other words of similar meaning.  These statements are based on our current beliefs or expectations and are inherently subject to significant uncertainties and changes in circumstances, many of which are beyond our control.  Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors and other factors discussed under the heading "Risk Factors" in the Company's most recent Annual Information Form. We undertake no obligation to publicly update any forward-looking statement, except as required by law, whether as a result of new information, future developments or otherwise.

Cautionary Note Regarding Non-GAAP Measures
This press release contains references to "EBITDA".  EBITDA is defined for the purposes of this press release as income or loss from continuing operations before interest expense, income tax expense, depreciation and amortization. Management believes that EBITDA is useful supplemental measure of Global Water's operating performance.  However, EBITDA is not a recognized earnings measure under U.S. GAAP or Canadian GAAP and does not have a standardized meaning prescribed by U.S. GAAP or Canadian GAAP.  Therefore, EBITDA may not be comparable to similar measures presented by other issuers.  EBITDA should not be construed as an alternative to net income or loss.  See "Consolidated Statements of Operations for the eight quarters end December 31, 2013" in the attached schedules for a reconciliation of EBITDA to net income, the nearest comparable U.S, GAAP measure.


GWR GLOBAL WATER RESOURCES CORP.
BALANCE SHEETS
As of December 31, 2013 and 2012
(Unaudited)
                     
            December 31, 2013   December 31, 2012
            (in thousands of US$, except share data)
ASSETS                    
                     
CURRENT ASSETS:                    
  Cash and cash equivalents            $ -   $ -
  Other current assets                    -           1
    Total current assets                    -           1
                         
  Equity method investment                    30,962           34,852
TOTAL ASSETS            $ 30,962   $ 34,853
                     
LIABILITIES AND SHAREHOLDERS' EQUITY                    
                     
LIABILITIES:                    
  Accounts payable and accrued expenses            $ 10   $ 32
  Other noncurrent liabilities                    72           41
    Total liabilities                    82           73
                     
SHAREHOLDERS' EQUITY:                    
  Common stock, unlimited shares authorized, 8,754,612
shares issued and outstanding at December 31, 2013
and 2012 
                  55,815           55,767
  Accumulated deficit                     (24,935)           (20,987)
    Total shareholders' equity                    30,880           34,780
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY            $ 30,962   $ 34,853
                     

                             
GWR GLOBAL WATER RESOURCES CORP.
STATEMENTS OF OPERATIONS
For the Three Months and Years Ended December 31, 2013 and 2012
(Unaudited)
                             
        Three Months Ended December 31,   Years Ended December 31,
           2013      2012      2013      2012
        (in thousands of US$, except share and per share amounts)
         
INCOME (LOSS) FROM EQUITY INVESTMENT           $ 66      $ (874)      $ (3,628)      $ (18,694)
OPERATING EXPENSES                   59              64              320              397
OPERATING INCOME (LOSS)                   7              (938)              (3,948)              (19,091)
INCOME (LOSS) BEFORE INCOME TAXES                   7              (938)              (3,948)              (19,091)
INCOME TAX BENEFIT                   -              -              -              -
NET INCOME (LOSS)           $ 7      $ (938)      $ (3,948)      $ (19,091)
                                               
WEIGHTED AVERAGE SHARES:                                              
  Basic                8,754,612           8,754,612              8,754,612              8,754,612
  Diluted                8,754,612           8,754,612              8,754,612              8,754,612
                                                  
LOSS PER SHARE:                                                    
  Basic           $ (0.00)      $ (0.11)      $ (0.45)      $ (2.18)
  Diluted           $ (0.00)      $ (0.11)      $ (0.45)      $ (2.18)
                                                     
                                                     
LOSS, EXCLUDING GAIN ON SALE OF GWRI CONTRACTS,
LOSS ON THE SALE OF FATHOM™ AND THE EFFECT OF
GWRI'S INCOME TAX VALUATION ALLOWANCE 
         $ (548)      $ (605)      $ (4,600)      $ (2,900)
LOSS PER SHARE, EXCLUDING GAIN ON SALE OF GWRI
CONTRACTS, LOSS ON THE SALE OF FATHOM™ AND
THE EFFECT OF GWRI'S INCOME TAX VALUATION
ALLOWANCE 
         $ (0.07)      $ (0.07)      $ (0.53)      $ (0.33)
           

                     
GLOBAL WATER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2013 and 2012
(Unaudited)
                     
            December 31, 2013   December 31, 2012
            (in thousands of US$, except share data)
ASSETS                    
                     
PROPERTY, PLANT AND EQUIPMENT:                    
  Property, plant and equipment            $ 317,319   $ 321,697
  Less accumulated depreciation                    (68,309)           (61,461)
    Net property, plant and equipment                    249,010           260,236
                         
CURRENT ASSETS:                    
  Cash and cash equivalents                    1,960           3,816
  Accounts receivable - net                    1,474           1,926
  Other receivables                    8           215
  Due from related party                    939           -
  Accrued revenue                    1,809           1,599
  Restricted cash                    197           -
  Prepaid expenses and other current assets                    623           1,194
    Total current assets                    7,010           8,750
                         
OTHER ASSETS:                    
  Goodwill                    13,082           13,082
  Intangible assets - net                    1,545           1,545
  Regulatory assets                    400           715
  Deposits                    28           43
  Bond service fund and other restricted cash                    11,383           11,383
  Debt issuance costs - net                    3,361           3,643
  Convertible note                    750           -
  Equity method investment                    141           -
    Total other assets                    30,690           30,411
TOTAL ASSETS            $ 286,710   $ 299,397
                     
LIABILITIES AND EQUITY (DEFICIT)                    
                     
CURRENT LIABILITIES:                    
  Accounts payable            $ 1,778   $ 3,676
  Accrued expenses                    3,793           4,263
  Deferred revenue                    16           1,000
  Customer and meter deposits                    2,579           2,565
  Long-term debt - current portion                    4,172           3,203
    Total current liabilities                    12,338           14,707
                         
NONCURRENT LIABILITIES:                    
  Long-term debt                    128,738           132,770
  Advances in aid of construction                    97,253           100,192
  Contributions in aid of construction - net                    74,774           71,879
  Deferred income tax liability                    589           589
  Acquisition liability                    4,688           4,688
  Other non-current liabilities                    1,172           1,136
    Total noncurrent liabilities                    307,214           311,254
    Total liabilities                    319,552           325,961
                         
SHAREHOLDERS' EQUITY (DEFICIT):                    
  Common stock, $0.01 par value, 1,000,000 shares authorized, 182,050 shares
issued and outstanding at December 31, 2013 and 2012 
            2     2
  Paid in capital                    55,286           55,286
  Accumulated deficit                    (87,892)           (81,852)
    Total equity (deficit)                    (32,842)           (26,564)
TOTAL            $ 286,710   $ 299,397
                     

                                 
                                 
GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Years Ended December 31, 2013 and 2012
(Unaudited)
                                 
            Three Months Ended December 31,   Years Ended December 31,
                  2013      2012      2013      2012
            (in thousands of US$)
REVENUES:                                                     
  Water services                 $ 4,223      $ 4,156      $ 18,200      $ 17,417
  Wastewater and recycled water services                          3,498                 3,331               13,829               13,244
  Unregulated revenues                          45                 937               1,405               2,877
    Total revenues                          7,766                 8,424               33,434               33,538
                                               
OPERATING EXPENSES:                                              
  Operations and maintenance                          2,460                 2,862               11,995               11,994
  General and administrative                          1,671                 2,362               9,623               9,657
  Depreciation                          2,134                 2,866               9,801               10,899
    Total operating expenses                          6,265                 8,090               31,419               32,550
OPERATING INCOME (LOSS)                          1,501                 334               2,015               988
                                             
OTHER INCOME (EXPENSE):                                              
  Interest income                         20                5               47               6
  Interest expense                         (2,351)                (2,085)               (8,935)               (9,565)
  Other                         978                (14)               849               757
    Total other income (expense)                         (1,353)                (2,094)               (8,039)               (8,802)
                                                      
LOSS BEFORE INCOME TAXES                         148                (1,760)               (6,024)               (7,814)
INCOME TAX (EXPENSE) BENEFIT                         (11)                (6)               (16)               (30,667)
NET LOSS               $ 137      $ (1,766)      $ (6,040)      $ (38,481)

                           
Net Income (Loss) and EBITDA per Share Information for the Three Months and Year Ended December 31, 2013
(amounts in thousands of US dollars, except share data):
                           
            Three Months Ended
December 31, 2013
        Year Ended
   December 31, 2013
           Net Income
(Loss)
  EBITDA   Net Loss   EBITDA
Amount for the period ended December 31, 2013        $ 137      $ 4,613      $ (6,040)      $ 12,665
Weighted average number of Global Water shares outstanding
during the period ended December 31, 2013 
       182,050     182,050     182,050     182,050
Global Water per share amount        $ 0.75   $ 25.34   $ (33.18)   $ 69.57
                                                  
Global Water per share amount, excluding gain on Sale of 303
Contracts and the loss on the Sale of GWM 
       $ (5.59)   $ 19.01   $ (40.62)   $ 62.13

                                                 
                                                 
GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Eight Quarters Ended December 31, 2012
(Unaudited)
                                                 
    2013   2012
    Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1
    (in thousands of US$)
REVENUES:                                                
  Water services    $ 4,223   $ 5,405   $ 4,973   $ 3,599   $ 4,156   $ 4,863   $ 4,844   $ 3,554
  Wastewater and recycled water services      3,498           3,536           3,482           3,313           3,331           3,328           3,353           3,232
  Unregulated revenues      45           49           634           677           937           829           572           539
    Total revenues      7,766           8,990           9,089           7,589           8,424           9,020           8,769           7,325
                                                 
OPERATING EXPENSES:                                                
  Operations and maintenance      2,460           3,043           3,338     3,154           2,862           3,276           2,919     2,937
  General and administrative      1,671           2,608           2,535     2,809           2,362           2,178           2,457     2,660
  Depreciation      2,134           2,306           2,664     2,697           2,866           2,662           2,706     2,665
    Total operating expenses      6,265           7,957           8,537           8,660           8,090           8,116           8,082     8,262
  OPERATING INCOME (LOSS)      1,501           1,033           552     (1,071)           334           904           687           (937)
                                                 
OPERATING INCOME (EXPENSE):                                                            
  Interest income      20           20           6           1           5           1           -           -
  Interest expense      (2,351)     (2,209)     (2,136)     (2,239)     (2,085)     (2,245)     (3,005)     (2,230)
  Other      978           1,818     (1,964)           17           (14)           723           54           (6)
    Total other income (expense)      (1,353)           (371)     (4,094)     (2,221)     (2,094)     (1,521)     (2,951)     (2,236)
INCOME (LOSS) BEFORE INCOME TAXES            148           662     (3,542)     (3,292)     (1,760)           (617)     (2,264)     (3,173)
INCOME TAX (EXPENSE) BENEFIT            (11)           -           (1)           (2)           (6)           -     (31,885)           1,224
NET INCOME (LOSS)    $ 137   $ 660   $ (3,543)   $ (3,294)   $ (1,766)   $ (617)   $ (34,149)   $ (1,949)
                                                 
  Income tax expense (benefit)    $ 11   $ -   $ 1   $ 2   $ 6   $ -   $ 31,885   $ (1,224)
  Interest income      (20)           (20)           (6)           (1)     (5)           (1)           -           -
  Interest expense            2,351           2,209           2,136           2,239     2,085     2,245     3,005     2,230
  Depreciation      2,134           2,306           2,664           2,697     2,866     2,662     2,706     2,665
EBITDA    $ 4,613   $ 5,157   $ 1,252   $ 1,643   $ 3,186   $ 4,289   $ 3,447   $ 1,722
                                                 
LOSS, EXCLUDING GAIN ON SALE OF 303
CONTRACTS, LOSS ON THE SALE OF GWM
AND TAX VALUATION ALLOWANCE 
  $ (1,017)   $ (1,475)   $ (1,609)   $ (3,294)   $ (1,073)   $ (397)   $ (1,394)   $ (1,949)
                                                 
Active service connections at period end      42,726     42,482     42,112     41,607     41,008     40,833     40,503     40,100
                                                 
                         
                         
GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months and Years Ended December 31, 2013 and 2012
(Unaudited)
                         
    Three Months Ended December 31,   Years Ended December 31,
          2013   2012   2013   2012
    (in thousands of US$)
CASH FLOWS FROM OPERATING ACTIVITIES:                           
  Net income (loss)       $ 137   $ (1,766)   $ (6,040)   $ (38,481)
  Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
                                      
    Deferred compensation               180           (5)     576     357
    Depreciation               2,134           2,866           9,801           10,899
    Amortization of deferred debt issuance costs and discounts               179           42           435           353
    Write-off of debt issuance costs               -           -           -           618
    (Gain) on sale of 303 contracts               (1,130)           -           (3,265)           -
    Loss on disposal of fixed and intangible assets               -           19           2           19
    Loss on disposal of GWM net assets               -           -           1,934           -
    (Gain) loss on equity method investment               308           -           707           -
    Imputed interest expense on deferred payments for acquisitions
- net of cash paid 
             -           -           -           (463)
    Provision for doubtful accounts receivable               (34)           37           99           160
    Deferred income tax expense (benefit)               11           6           16           30,667
    Changes in assets and liabilities - excluding effects of acquisitions:                                                   
      Accounts receivable               309           416           (302)           658
      Other current assets               473           (51)           (2,353)           (807)
      Accounts payable and other current liabilities               (4,109)           (1,462)           213           829
      Other noncurrent assets               2           (123)           352           (354)
      Other noncurrent liabilities               (4)           (5)           (106)           613
         Net cash provided by (used in) operating activities               (1,544)           (26)           2,069           5,068
                                        
CASH FLOWS FROM INVESTING ACTIVITIES:                                       
  Capital expenditures               (574)           (927)           (5,294)           (5,174)
  Proceeds from disposal of fixed and intangible assets               1           -           13           -
  Net cash received from the sale of GWM               -           -           1,771           -
  Proceeds received from the sale of 303 contracts               1,130           -           3,130           -
  (Deposits into) withdrawals from restricted cash               590           (3)           (197)           (2,645)
  Deposits received               5           -           15           -
         Net cash provided by (used in) investing activities               1,152           (930)           (562)           (7,819)
                                        
CASH FLOWS FROM FINANCING ACTIVITIES:                                       
  Proceeds from bonds               -           -           -           14,000
  Repayments of bonds         (2,475)        (2,090)        (2,475)        (2,090)
  Loan borrowings               -           -           -           18,000
  Loan repayments               (601)           (101)           (605)           (15,526)
  Principal payments under capital lease         (15)        (30)        (84)        (52)
  Deposit into escrow for debt service               -              -              -              (3,923)
  Redemption from escrow for debt service               -              -              -              3,923
  Related-party loan proceeds               -           -           -           8,910
  Related-party loan repayments               -           -           -           (8,910)
  Debt issuance costs paid               -           -           (195)           (1,465)
  Acquisition of utilities - deferred acquisition payments               -           -           -           (11,163)
  Advances in aid of construction               71           381           460           760
  Contributions in aid of construction under ICFA and other agreements               221           500           221           2,421
  Refunds of advances for construction               (180)              (42)              (685)              (551)
         Net cash provided by (used in) financing activities           (2,979)       (1,382)           (3,363)           4,334
                                        
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               (3,371)           (2,338)           (1,856)           1,583
CASH AND CASH EQUIVALENTS - Beginning of period               5,331           6,154           3,816           2,233
CASH AND CASH EQUIVALENTS - End of period       $ 1,960   $ 3,816   $ 1,960   $ 3,816

 

 

 

SOURCE GWR Global Water Resources Corp.

For further information:

Ross Marshall
Investor Relations
Tel:  416.815.00700 ext. 238
Email: rmarshall@tmxequicom.com
www.gwresources.com
www.gwfathom.com