GWR Global Water Resources Corp. Reports Second Quarter 2014 Results

PHOENIX, AZ, Aug. 13, 2014 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) (OTCQX: GWGWF) today reported its financial results for the second quarter ended June 30, 2014.

The Company was established to acquire an equity interest in Global Water Resources, Inc. ("Global Water"). 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.

Second Quarter 2014 Highlights:

  • Continued dividend policy declared in March 2014, equating to C$0.264 annualized per share, paid monthly at C$0.022 per share.
  • Grew active service connections for the second quarter to 43,202 compared with 42,726 at December 31, 2013, representing an annualized growth rate of 2.2% for 2014.  On a trailing twelve month basis, service connections have increased 2.6%.
  • Appointed Ron Fleming as interim Chief Executive Officer and Mike Liebman as Chief Financial Officer of the Company and Global Water.

"We have made great progress on the execution of our strategic plan to focus Global Water on our core regulated utilities and to surface the underlying value of these assets," said Ron Fleming, interim CEO of Global Water. "We will continue to build off of these accomplishments, and leverage stable, efficient utility operations combined with strong revenue growth driven by new connections and new rates starting January 2015, to fully restore and grow the value of our company."

Summary of Financial Results

Consolidated revenues for the three and six months ended June 30, 2014, were $8.9 million and $15.9, respectively, compared to $9.1 million and $16.7 million for the three and six months ended June 30, 2013. The change in consolidated revenues reflects the decrease in unregulated revenues during the 2014 period compared to the same period last year due to the sale of FATHOM on June 5, 2013.

Excluding the Company's prior FATHOM business, Global Water's revenues for the three and six months ended June 30, 2013 totaled $8.5 million and $15.5 million, respectively, as compared to $8.9 million and $15.9 million for the three and six months ended June 30, 2014, respectively.  These increases primarily reflect the positive impact of growing active service connections within the regulated utilities business.

EBITDA for the three and six months ended June 30, 2014, totalled $3.7 million and $58.3 million, respectively, compared to $1.3 million and $2.9 million for the same periods last year. The increase in EBITDA is primarily due to the $50.7 million gain on regulatory order recorded in the six months ended June 30, 2014 in connection with the Arizona Corporation Commission's (ACC) February 2014 Rate Decision, as well as the elimination of losses associated with the FATHOM business.

Consolidated net loss was $0.5 million for the three months ended June 30, 2014, compared to $3.5 million for the same period last year. The year-over-year improvement primarily relates to the $1.9 million loss recorded on the sale of Global Water Management during the 2013 period as well as the elimination of FATHOM related losses. Consolidated net income was $65.8 million for the six months ended June 30, 2014, compared to a consolidated net loss of $6.8 million last year. The increase in net income is primarily due to the $50.7 million gain on regulatory order recorded during the quarter, the $16.1 million income tax benefit recognized in connection with the release of the deferred income tax valuation allowance as well as the elimination of losses associated with the FATHOM business.

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 second quarter of 2014 continued the positive growth trend from a combination of new homes built and re-establishing service on previously vacant homes.  As of June 30, 2014, total service connections increased 260 to 44,868 from 44,608 as of December 31, 2013.  Total active service connections increased 476 to 43,202 as of June 30, 2014, from 42,726 as of December 31, 2013.  

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 1,666, or 3.7% of total service connections as of June 30, 2014; 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 due in part to its large availability of lots and infrastructure capacity.

The rate case settlement agreement approved by the ACC will see a collective revenue requirement increase of $4.3 million based on 2011 test year service connections, phased-in over time, commencing in January 2015.

Conference Call
Global Water will conduct a conference call on Wednesday, August 13, 2014, at 4:00 p.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 79489198.  The replay will expire at midnight (ET) on Wednesday, August 27, 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 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 June 30, 2014" 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 June 30, 2014 and December 31, 2013
(Unaudited)



June 30, 2014

December 31, 2013


(in thousands of US$, except share data)

ASSETS








CURRENT ASSETS:





Cash and cash equivalents


$

-


$

-


Dividend receivable



182



-


Other current assets



40



-



Total current assets



222



-










Equity method investment



61,540



30,962

TOTAL  ASSETS


$

61,762


$

30,962





LIABILITIES AND SHAREHOLDERS' EQUITY








LIABILITIES:





Accounts payable and accrued expenses


$

232


$

10


Other noncurrent liabilities



134



72


Deferred tax liability



1,526



-



Total liabilities



1,892



82





SHAREHOLDERS' EQUITY:





Common stock, unlimited shares authorized, 8,754,612 shares issued and
outstanding at June 30, 2014 and December 31, 2013



55,815



55,815


Retained earnings (accumulated deficit)



4,055



(24,935)


Total shareholders' equity



59,870



30,880

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


$

61,762


$

30,962

 

 

GWR GLOBAL WATER RESOURCES CORP.
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2014 and 2013
(Unaudited)





Three Months Ended June 30,


Six Months Ended June 30,




2014


2013


2014


2013




(in thousands of US$, except share and per share data)











GAIN (LOSS) FROM EQUITY INVESTMENT



$

(235)


$

(2,399)


$

31,641


$

(4,012)

OPERATING EXPENSES



262


17


408


148

OPERATING INCOME (LOSS)



(497)


(2,416)


31,233


(4,160)

INCOME (LOSS) BEFORE INCOME TAXES



(497)


(2,416)


31,233


(4,160)

INCOME TAX BENEFIT (EXPENSE)



311


-


(1,526)


-

NET INCOME (LOSS)



$

(186)


$

(2,416)


$

29,707


$

(4,160)











WEIGHTED AVERAGE SHARES:











Basic



8,754,612


8,754,612


8,754,612


8,754,612


Diluted



8,754,612


8,754,612


8,762,348


8,754,612











EARNINGS (LOSS) PER SHARE:











Basic



$

(0.02)


$

(0.28)


$

3.39


$

(0.48)


Diluted



$

(0.02)


$

(0.28)


$

3.39


$

(0.48)

 

 


GLOBAL WATER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2014 and December 31, 2013
(Unaudited)



June 30, 2014

December 31, 2013


(in thousands of US$, except share data)

ASSETS








PROPERTY, PLANT AND EQUIPMENT:





Property, plant and equipment


$

317,971


$

317,319


Less accumulated depreciation


(73,600)


(68,309)



Net property, plant and equipment


244,371


249,010





CURRENT ASSETS:





Cash and cash equivalents


6,373


1,960


Accounts receivable – net


1,685


1,474


Due from related party


613


939


Accrued revenue


2,202


1,809


Restricted cash


-


197


Prepaid expenses and other current assets


558


631


Convertible note


484


-


Deferred tax assets - current


1,052


-



Total current assets


12,967


7,010





OTHER ASSETS:





Goodwill


13,082


13,082


Intangible assets – net


12,772


12,772


Regulatory assets


400


400


Deposits


26


28


Bond service fund and other restricted cash


11,384


11,383


Debt issuance costs – net


3,224


3,361


Convertible note


-


750


Equity method investment


-


141


Deferred tax assets


14,810


-



Total other assets


55,698


41,917

TOTAL


$

313,036


$

297,937





LIABILITIES AND EQUITY (DEFICIT)








CURRENT LIABILITIES:





Accounts payable


$

1,541


$

1,778


Accrued expenses


5,882


3,793


Deferred revenue – current portion


12


16


Customer and meter deposits


2,645


2,579


Long-term debt – current portion


3,166


4,172



Total current liabilities


13,246


12,338





NONCURRENT LIABILITIES:





Long-term debt


128,750


128,738


Deferred regulatory gain


19,526


-


Regulatory liability


7,859


11,227


Advances in aid of construction


97,447


97,253


Contributions in aid of construction – net


10,241


74,774


Deferred income tax liability


-


589


Acquisition liability


4,688


4,688


Other noncurrent liabilities


189


1,172



Total noncurrent liabilities


268,700


318,441



Total liabilities


281,946


330,779









EQUITY (DEFICIT):





Common stock, $0.01 par value, 1,000,000 shares authorized, 182,050 shares issued and
outstanding at June 30, 2014 and December 31, 2013


2


2


Paid in capital


53,184


55,048


Accumulated deficit


(22,096)


(87,892)



Total equity (deficit)


31,090


(32,842)

TOTAL


$

313,036


$

297,937

 

 

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2014 and 2013
(Unaudited)






Three Months Ended June 30,


Six Months Ended June 30,





2014


2013


2014


2013





(in thousands of US$)


REVENUES:












Water services



$

5,127


$

4,973


$

8,744


$

8,572



Wastewater and recycled water services



3,612


3,482


6,977


6,795



Unregulated revenues



116


634


130


1,311




Total revenues



8,855


9,089


15,851


16,678













OPERATING EXPENSES:












Operations and maintenance



2,695


3,338


5,178


6,492



General and administrative



2,280


2,535


4,769


5,344



Gain on regulatory order



-


-


(50,664)


-



Depreciation



2,427


2,664


4,671


5,361




Total operating expenses



7,402


8,537


(36,046)


17,197


OPERATING INCOME (LOSS)



1,453


552


51,897


(519)













OTHER INCOME (EXPENSE):












Interest income



22


6


41


7



Interest expense



(2,152)


(2,136)


(4,376)


(4,375)



Other



(147)


(1,964)


1,774


(1,947)




Total other income (expense)



(2,277)


(4,094)


(2,561)


(6,315)













INCOME (LOSS) BEFORE INCOME TAXES



(824)


(3,542)


49,336


(6,834)


INCOME TAX BENEFIT (EXPENSE)



335


(1)


16,460


(3)


NET INCOME (LOSS)



$

(489)


$

(3,543)


$

65,796


$

(6,837)


 

Net Loss and EBITDA per Share Information for the Three Months Ended June 30, 2014 and 2013 (amounts in thousands of US dollars, except share data):



Net Loss


EBITDA






Amount for the three months ended June 30, 2014


$

(489)


$

3,733

Weighted average number of GWRI shares outstanding during the three months ended June 30, 2014


182,050


182,050

GWRI per share amount


$

(2.69)


$

20.51











Net Loss


EBITDA






Amount for the three months ended June 30, 2013


$

(3,543)


$

1,252

Weighted average number of GWRI shares outstanding during the three months ended June 30, 2013


182,050


182,050

GWRI per share amount


$

(19.46)


$

6.88

GWRI per share, excluding loss on sale of GWM


$

(8.84)


$

17.50

 

 

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Eight Quarters Ended June 30, 2014
(Unaudited)




2014


2013


2012



Q2

Q1


Q4

Q3

Q2

Q1


Q4

Q3

REVENUES:












Water services


$

5,127

$

3,617


$

4,223

$

5,405

$

4,973

$

3,599


$

4,156

$

4,863


Wastewater and recycled water services


3,612

3,365


3,498

3,536

3,482

3,313


3,331

3,328


Unregulated revenues


116

14


45

49

634

677


937

829



Total revenues


8,855

6,996


7,766

8,990

9,089

7,589


8,424

9,020













OPERATING EXPENSES:












Operations and maintenance


2,695

2,483


2,460

3,043

3,338

3,154


2,862

3,276


General and administrative


2,280

2,489


1,671

2,608

2,535

2,809


2,362

2,178


Gain on regulatory order


-

(50,664)


-

-

-

-


-

-


Depreciation


2,427

2,244


2,134

2,306

2,664

2,697


2,866

2,662



Total operating expenses


7,402

(43,448)


6,265

7,957

8,537

8,660


8,090

8,116

OPERATING INCOME (LOSS)


1,453

50,444


1,501

1,033

552

(1,071)


334

904












OTHER INCOME (EXPENSE):












Interest income


22

19


20

20

6

1


5

1


Interest expense


(2,152)

(2,224)


(2,351)

(2,209)

(2,136)

(2,239)


(2,085)

(2,245)


Other


(147)

1,921


978

1,818

(1,964)

17


(14)

723



Total other income (expense)


(2,277)

(284)


(1,353)

(371)

(4,094)

(2,221)


(2,094)

(1,521)

INCOME (LOSS) BEFORE INCOME TAXES


(824)

50,160


148

662

(3,542)

(3,292)


(1,760)

(617)

INCOME TAX BENEFIT (EXPENSE)


335

16,125


(11)

(2)

(1)

(2)


(6)

-

NET INCOME (LOSS)


$

(489)

$

66,285


$

137

$

660

$

(3,543)

$

(3,294)


$

(1,766)

$

(617)













LOSS, EXCLUDING GAIN ON REGULATORY
ORDER, GAIN ON SALE OF 303
CONTRACTS, LOSS ON THE SALE OF GWM
AND TAX VALUATION ALLOWANCE


$

(489)

$

(496)


$

(1,017)

$

(1,475)

$

(1,609)

$

(3,294)


$

(1,073)

$

(397)













Active service connections at period end


43,202

42,984


42,726

42,482

42,112

41,607


41,008

40,833

 

 

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Six Months Ended June 30, 2014 and 2013
(Unaudited)




Three Months Ended June 30,


Six Months Ended June 30,



2014


2013


2014


2013



(in thousands of US$)










CASH FLOWS FROM OPERATING ACTIVITIES:









Net income (loss)



$

(489)


$

(3,543)


$

65,796


$

(6,837)

Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:










Deferred compensation


564


(163)


864


(29)


Depreciation


2,427


2,664


4,671


5,361


Amortization of deferred debt issuance costs and discounts


89


86


176


166


Loss on disposal of fixed assets


3


-


3


2


Loss on disposal of GWM net assets


-


1,934


-


1,934


Loss on equity method investment


232


75


406


75


Gain on regulatory order


-


-


(50,664)


-


Provision for doubtful accounts receivable


28


31


43


57


Deferred income tax expense (benefit)


(335)


1


(16,460)


3


Changes in assets and liabilities:











Accounts receivable


(326)


(787)


(254)


(827)



Other current assets


(528)


(924)


(302)


(1,756)



Accounts payable and other current liabilities


(2,845)


(106)


(260)


3,585



Other noncurrent assets


22


(150)


31


(105)



Other noncurrent liabilities


51


(37)


2,853


(64)




Net cash provided by (used in) operating activities


(1,107)


(919)


6,903


1,565










CASH FLOWS FROM INVESTING ACTIVITIES:










Capital expenditures


(560)


(1,269)


(666)


(3,649)


Proceeds from sale of fixed assets


-


12


-


12


Net cash received from the sale of GWM


-


1, 771


-


1,771


Withdrawals of restricted cash


-


-


197


-


Deposits received


1


7


2


11




Net cash provided by (used in) investing activities


(559)


521


(467)


(1,855)










CASH FLOWS FROM FINANCING ACTIVITIES:










Loan repayments


(1)


(2)


(1,002)


(3)


Principal payments under capital leases


(20)


(27)


(65)


(61)


Debt issuance costs paid


-


(195)


-


(195)


Advances in aid of construction


133


120


194


249


Dividends paid


(1,150)


-


(1,150)


-


Refunds of advances for construction


-


(1)


-


(1)




Net cash used in financing activities


(1,038)


(105)


(2,023)


(11)










INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(2,704)


(503)


4,413


(301)

CASH AND CASH EQUIVALENTS – Beginning of period


9,077


4,018


1,960


3,816

CASH AND CASH EQUIVALENTS – End of period


$

6,373


$

3,515


$

6,373


$

3,515

 

SOURCE GWR Global Water Resources Corp.

For further information: Ross Marshall, Investor Relations, Tel: 416.815.0700 ext. 238, Email: rmarshall@tmxequicom.com, www.gwresources.com, www.gwfathom.com