GWR Global Water Resources Corp. Reports Fourth Quarter and Year-End 2012 Results

PHOENIX, March 28, 2013 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) today reported its financial results for the fourth quarter and year ended December 31, 2012. See information below regarding today's conference call information.

The Company was established to acquire an equity interest in Global Water Resources, Inc. ("Global Water"). Global Water is a leading water resource management and technology company based in Phoenix, Arizona, that owns and operates water, wastewater and recycled water utilities, and provides data and water management services through its unique, award winning platform, FATHOM™ Utility-to-Utility (U2U™) Solutions. 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 regulated active service connections to 41,008 at December 31, 2012, a 3.2% annual increase, of which growth for new homes more than doubled, to 1.7%, compared to 2011.
  • Achieved regulatory commission application sufficiency for an approximate 28% increase in utility rates for regulated division.
  • Awarded agreement by the City of Glendale, Arizona, to provide wastewater and recycled water services to approximately 7,000 acres.
  • Extended our agreement with the City of Torrance, California, to provide additional FATHOM™ services to 10,000 accounts.
  • Selected by the City of Adelanto, California, to provide a fully integrated Customer Information System ("CIS"), including utility billing and customer care, Advanced Metering Infrastructure ("AMI") and Asset Management systems to approximately 7,400 service connections.
  • Contracted with the City of Kennedale, Texas, to provide a fully integrated CIS, including utility billing, customer care and AMI for 2,600 connections.
  • Extended our partnership with Thames Water Utilities Ltd of the United Kingdom to research improved service for residential and commercial customers with a customized FATHOM™ offering.

Summary of Financial Results

Consolidated revenues for the three months ended December 31, 2012, increased $0.7 million, or 8.9%, to $8.4 million compared to the corresponding period last year. Consolidated revenues for the year ended December 31, 2012 decreased $2.9 million, or 7.9 %, to $33.5 million compared to the same period in 2011.

Consolidated revenues include revenue generated by our utility companies, which is subject to regulation from the Arizona Corporation Commission ("ACC"). Such regulated utility revenue increased $0.8 million, or 11.4% to approximately $7.5 million for the three months ended December 31, 2012, compared to the three months ended December 31, 2011; and increased $2.1 million, or 7.4%, to $30.7 million for the year ended December 31, 2012, compared to the year 2011. The increase in regulated utility revenue was due primarily to the rate increase phase-in effective January 1, 2012, pursuant to the 2010 Regulatory Rate Decision, as well as to growth in the number of active service connections.

Consolidated revenues also include revenues not subject to regulation of the ACC. Such unregulated revenues primarily relate to the Company's FATHOM™ business which is comprised of recurring operations and nonrecurring activities associated with FATHOM™ implementations. Recurring FATHOM™ revenues increased $41,000, or 7.7%, to approximately $569,000 for the three months ended December 31, 2012, compared to the three months ended December 31, 2011; and increased $464,000, or 26.6%, to approximately $2.2 million for the year ended December 31, 2012.  The increase is attributed to the increased number of FATHOM™ clients.

While recurring revenue increased substantially, implementation revenue, which is generally lumpy in nature, decreased compared to last year. The decrease was primarily attributed to the Company recognizing $137,000 and $385,000 of such revenue for the three months and year ended December 31, 2012, respectively, compared with $88,000 and $4.6 million of FATHOM™ implementation revenue for the three months and year ended December 31, 2011, respectively.  During 2012, the Company had no AMI implementation activities compared with two AMI implementations occurring in 2011. Non-recurring and other implementation revenues and expenses recorded during 2012 primarily related to the activities performed for Thames Water and with the cities of Corpus Christi, Texas and El Cajon, California.

Additionally as part of unregulated revenues, the Company recognized $379,000 and $1.4 million of revenue for the three-month and full-year periods ended December 31, 2011, related to the sale of certain contractual rights. This compares to $132,000 of such revenue recognized in the three-month and full-year periods ended December 31, 2012.

EBITDA increased $0.5 million or 16.7% to $3.2 million for the three months ended December 31, 2012, compared to the same period last year. EBITDA for the year ended December 31, 2012, totalled $12.6 million compared to $14.1 million for 2011.

Consolidated net loss was $1.8 million for the three months ended December 31, 2012, compared to $1.4 million for the same period last year. Consolidated net loss was $38.5 million for the year ended December 31, 2012, compared to $3.3 million for 2011. The change is predominantly due to a $33.7 million noncash charge attributed to a valuation allowance recorded against the Company's net deferred tax assets during 2012. The underlying deferred tax asset is still preserved. Excluding the effect of the valuation allowance, consolidated net loss totalled $4.8 million for year ended December 31, 2012, compared with $3.3 million for 2011.

"Our regulated utilities are seeing organic growth and an increasing rate of return. This is being driven by a significant uptick in new home permitting and construction activity," said Trevor Hill, President and CEO of Global Water.  "Arizona is also topping the charts for the nation in job growth which is another solid indicator of a stabilizing and improving economic environment.  The utility rate increase application process has also gone smoothly to date.  The combined effect of these two factors contributes to an improving outlook through 2013 and into 2014."

"As we reflect on the fourth quarter and the entire 2012 year, we increased our FATHOM™ recurring revenue on a run-rate basis by 26.6%. Even though our implementation revenue was lower than previous years, and although the FATHOM™ sales cycle remains challenging, the primary driver of FATHOM™'s value is recurring revenue," continued Mr. Hill. "The achievements of the past year are significant to our market position and enhance Global Water's growth potential going forward. We continue to grow the fundamentals of our business across both the regulated and the FATHOM™ divisions. FATHOM™ continues to build momentum within the United States and abroad."

Business Outlook

Global Water's growth strategy for its existing regulated business is driven by increased service connections, continued operating efficiencies as well as utility rate increases approved by the economic regulator.  In November 2012, the rate applications filed with the ACC for increased rates for seven of the Company's utilities were determined sufficient by the ACC Staff.  The evaluation process, including a formal rate hearing, is expected to conclude within one year and new rates will become effective.

The current revenue requirement in place was set in a rate case that concluded in 2010 and was based on a 2008 historic test year. Since that time, certain costs related to utility operations have increased and the Company is seeking to recover costs omitted from the last rate case to minimize the impact on rate payers. The Company continues to make the necessary capital improvements to maintain industry-leading performance for compliant operations, reliability, customer service and critical water resource management.  The Company is also hopeful the ACC will reverse all, or a part, of its decision in the last rate case regarding the treatment of funds received from developers which would restore rate base for the Company.  The rate applications request an adjustment to the revenue requirements for all seven utilities representing a collective rate increase of approximately 28%, or approximately $8.4 million, of annualized revenues over 2012.  We expect that the rate increase will be phased-in over a two to three year period.

With respect to FATHOM™, the business expansion continues to include market adoption and expanding channels to market.  The primary channels remain the direct sales and partner channels in both the national and the international markets.  The opportunity that the FATHOM™ Operating System ("FATHOM™ OS") platform offers, coupled with the brand visibility associated with our international work, has driven an increased level of interest within both the national and international markets - particularly with larger municipalities with systems in need of updating or upgrading.  This interest has also opened up an emerging channel to market for large cities based on the incremental capability of FATHOM™.  The Company has capitalized on the incremental channel through follow-on work with one of these customers and has been selected pending council approval on a second incremental customer.

The full financial statements and management's discussion and analysis for the Company and Global Water will be available March 28, 2013, 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 Thursday, March 28, 2013 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 23164142.  The replay will expire at midnight (ET) on Thursday, April 4, 2013.  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.

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, 2012" 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, 2012 and 2011
(Unaudited)
                   
        December 31, 2012     December 31, 2011
        (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                34,852             54,063
TOTAL ASSETS        $  34,853     $  54,063
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
                   
LIABILITIES:                  
  Accounts payable and accrued expenses        $  32     $ 8
  Due to related party                -             256
  Other noncurrent liabilities                41             25
    Total liabilities                73             289
                   
SHAREHOLDERS' EQUITY:                  
  Common stock, unlimited shares authorized, 8,754,612 shares
  issued and outstanding at December 31, 2012 and 2011 
              55,767             55,670
  Accumulated deficit                 (20,987)             (1,896)
    Total shareholders' equity                34,780             53,774
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $  34,853     $  54,063

   

GWR GLOBAL WATER RESOURCES CORP.
STATEMENTS OF OPERATIONS
For the Three Months and Years Ended December 31, 2012 and 2011
(Unaudited)
                             
      Three Months Ended December 31,      Years Ended December 31,
      2012   2011      2012     2011
                              
                                                 
LOSS FROM EQUITY INVESTMENT      $ (874)   $ (676)      $  (18,694)     $ (1,580)
OPERATING EXPENSES              64            35              397             255
OPERATING INCOME (LOSS)              (938)            (711)              (19,091)             (1,835)
LOSS BEFORE INCOME TAXES              (938)            (711)              (19,091)             (1,835)
INCOME TAX BENEFIT              -            -              -             -
NET LOSS      $ (938)   $ (711)      $  (19,091)     $ (1,835)
                                         
WEIGHTED AVERAGE SHARES:                                        
  Basic           8,754,612           8,754,612              8,754,612       8,712,476
  Diluted           8,754,612           8,754,612              8,754,612       8,712,476
                                         
LOSS PER SHARE:                                        
  Basic      $ (0.11)   $ (0.08)      $  (2.18)     $ (0.21)
  Diluted      $ (0.11)   $ (0.08)      $  (2.18)     $ (0.21)
                                         
                                         
LOSS EXCLUDING EFFECT OF GWRI VALUATION
ALLOWANCE 
    $ (605)   $ (711)      $  (2,900)     $ (1,835)
LOSS PER SHARE EXCLUDING EFFECT OF GWRI
VALUATION ALLOWANCE 
    $ (0.07)   $ (0.08)      $  (0.33)     $ (0.21)
                             


GLOBAL WATER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2012 and 2011
(Unaudited)
                   
        December 31, 2012     December 31, 2011
        (in thousands of US$, except share data)
ASSETS                  
PROPERTY, PLANT AND EQUIPMENT:                  
  Property, plant and equipment        $ 321,697     $ 317,804
  Less accumulated depreciation                (61,461)             (51,856)
    Net property, plant and equipment                260,236             265,948
CURRENT ASSETS:                  
  Cash and cash equivalents                3,816             2,233
  Accounts receivable - net                1,926             2,779
  Other receivables                215             444
  Accrued revenue                1,599             1,254
  Prepaid expenses and other current assets                1,194             425
  Deferred tax asset - current                -             2,003
    Total current assets                8,750             9,138
OTHER ASSETS:                  
  Goodwill                13,082             13,082
  Intangible assets - net                1,545             1,545
  Regulatory assets                715             486
  Deposits                43             63
  Bond service fund and other restricted cash                11,383             9,287
  Debt issuance costs - net                3,643             3,005
  Deferred tax assets                -             28,068
    Total other assets                30,411             55,536
TOTAL ASSETS        $ 299,397     $ 330,622
LIABILITIES AND EQUITY (DEFICIT)                  
CURRENT LIABILITIES:                  
  Accounts payable        $ 3,676     $ 3,637
  Accrued expenses                4,263             3,884
  Deferred revenue                1,000             2
  Accrued acquisition payments                -             5,919
  Customer and meter deposits                2,565             2,371
  Long-term debt - current portion                3,203             5,757
    Total current liabilities                14,707             21,570
NONCURRENT LIABILITIES:                  
  Long-term debt                132,770             115,476
  Advances in aid of construction                100,192             105,331
  Contributions in aid of construction - net                71,879             64,775
  Deferred income tax liability                589             -
  Acquisition liability                4,688             10,395
  Other non-current liabilities                1,136             713
    Total noncurrent liabilities                311,254             296,690
    Total liabilities                325,961             318,260
SHAREHOLDERS' EQUITY (DEFICIT):                  
  Common stock, $0.01 par value, 1,000,000 shares authorized, 182,050 shares
  issued and outstanding at December 31, 2012 and 2011 
        2             2
  Paid in capital                55,286             55,731
  Accumulated deficit                (81,852)             (43,371)
    Total equity (deficit)                (26,564)             12,362
TOTAL        $ 299,397     $ 330,622
                   

   

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Years Ended December 31, 2012 and 2011
(Unaudited)
                                   
               Three Months Ended December 31,      Years Ended December 31,
                 2012   2011      2012     2011
                                   
REVENUES:                                                 
  Water services                 $ 4,156   $ 3,815      $ 17,417     $ 17,130
  Wastewater and recycled water services                          3,331           2,903               13,244             11,412
  Unregulated revenues                          937           1,016               2,877             7,863
    Total revenues                          8,424           7,734               33,538             36,405
                                          
OPERATING EXPENSES:                                         
  Operations and maintenance                         2,862           2,767               11,994             12,157
  General and administrative                          2,362           2,238               9,657             10,192
  Depreciation                         2,866           2,738               10,899             10,487
    Total operating expenses                          8,090           7,743               32,550             32,836
OPERATING INCOME (LOSS)                          334           (9)               988             3,569
                                         
OTHER INCOME (EXPENSE):                                         
  Interest income                        5           -               6             2
  Interest expense                         (2,085)           (2,194)               (9,565)             (8,908)
  Other                         (14)           2               757             57
    Total other income (expense)                        (2,094)           (2,192)               (8,802)             (8,849)
                                               
LOSS BEFORE INCOME TAXES                         (1,760)           (2,201)               (7,814)             (5,280)
INCOME TAX (EXPENSE) BENEFIT                        (6)           795               (30,667)             1,972
NET LOSS               $ (1,766)   $ (1,406)      $ (38,481)     $ (3,308)
 

Net Loss and EBITDA per Share Information for the Three Months and Year Ended December 31, 2012
(amounts in thousands of US dollars, except share data):
                               
         Three Months Ended
December 31, 2012
  Year Ended
   December 31, 2012
         Net Loss     EBITDA   Net Loss     EBITDA
Amount for the period ended December 31, 2012         $ (1,766)     $ 3,186      $ (38,481)     $ 12,644
Weighted average number of Global Water shares
  outstanding during the period ended December 31, 2012 
               182,050             182,050     182,050       182,050
Global Water  per share amount         $ (9.70)     $ 17.50   $ (211.38)     $ 69.45
                                                    
Global Water  per share amount, excluding valuation allowance         $ (5.89)     $ 17.50   $ (26.44)     $ 69.45
                             

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Eight Quarters Ended December 31, 2012
(Unaudited)
                                                                   
        2012     2011
        Q4     Q3     Q2     Q1     Q4     Q3     Q2     Q1
                                                                   
REVENUES:                                                                  
  Water services        $ 4,156     $ 4,863     $ 4,844     $ 3,554     $ 3,815     $ 5,394     $ 4,497     $ 3,424
  Wastewater and recycled water services          3,331       3,328       3,353       3,232       2,903       2,872       2,866       2,771
  Unregulated revenues          937       829       572       539       1,016       1,885       1,991       2,971
    Total revenues          8,424       9,020       8,769       7,325       7,734       10,151       9,354       9,166
OPERATING EXPENSES:                                                                  
  Operations and maintenance          2,862       3,276       2,919       2,937       2,767       3,164       3,151       3,075
  General and administrative          2,362       2,178       2,457       2,660       2,238       2,384       2,678       2,892
  Goodwill impairment          -       -       -       -       -       -       -       -
  Depreciation          2,866       2,662       2,706       2,665       2,738       2,557       2,580       2,612
    Total operating expenses          8,090       8,116       8,082       8,262       7,743       8,105       8,409       8,579
  OPERATING INCOME (LOSS)          334       904       687       (937)       (9)       2,046       945       587
OPERATING INCOME (EXPENSE):                                                                  
  Interest income          5       1       -       -       -       -       -       2
  Interest expense          (2,085)       (2,245)       (3,005)       (2,230)       (2,194)       (2,196)       (2,202)       (2,316)
  Other          (14)       723       54       (6)       2       (8)       23       40
    Total other income (expense)          (2,094)       (1,521)       (2,951)       (2,236)       (2,192)       (2,204)       (2,179)       (2,274)
LOSS BEFORE INCOME TAXES          (1,760)       (617)       (2,264)       (3,173)       (2,201)       (158)       (1,234)       (1,687)
INCOME TAX (EXPENSE) BENEFIT          (6)       -       (31,885)       1,224       795       56       471       650
NET LOSS        $ (1,766)     $ (617)     $ (34,149)     $ (1,949)     $ (1,406)     $ (102)     $ (763)     $ (1,037)
  Income tax expense (benefit)        $ 6     $ -     $ 31,885     $ (1,224)       (795)       (56)       (471)       (650)
  Interest income          (5)       (1)       -       -       -       -       -       (2)
  Interest expense          2,085       2,245       3,005       2,230       2,194       2,196       2,202       2,316
  Depreciation          2,866       2,662       2,706       2,665       2,738       2,557       2,580       2,612
EBITDA        $ 3,186     $ 4,289     $ 3,447     $ 1,722     $ 2,731     $ 4,595     $ 3,548     $ 3,239
Active service connections at period end          41,008       40,833       40,503       40,100       39,731       39,644       39,342       39,011
                                                                   

   

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months and Years Ended December 31, 2012 and 2011
(Unaudited)
                               
        Three Months Ended December 31,   Years Ended December 31,
              2012   2011   2012     2011
        (in thousands of US$)
CASH FLOWS FROM OPERATING ACTIVITIES:                                 
  Net loss           $ (1,766)   $ (1,406)   $ (38,481)     $ (3,308)
  Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
                                            
    Deferred compensation                   (5)           65     357       471
    Depreciation                   2,866           2,738           10,899             10,487
    Amortization of deferred debt issuance costs and discounts                   42           55           353             243
    Write-off of debt issuance costs                   -           -           618             -
    Loss on disposal of fixed and intangible assets                   19           -           19             45
    Gain on advance in aid of construction purchase                   -           -           -             (22)
    Gain on settlement of acquisition liability                   -           -           -             (80)
    Imputed interest expense on deferred payments for acquisitions
- net of cash paid 
                 -           157           (463)             (191)
    Provision for doubtful accounts receivable                   37           45           160             185
    Deferred income tax expense (benefit)                   6           (795)           30,667             (1,972)
    Changes in assets and liabilities - excluding effects of acquisitions:                                                         
      Accounts receivable                   416           (11)           658             (1,218)
      Other current assets                   (51)           995           (807)             (675)
      Accounts payable and other current liabilities                   (1,462)           (2,203)           829             (298)
      Other noncurrent assets                   (123)           (4)           (354)             (80)
      Other noncurrent liabilities                   (5)           42           613             412
         Net cash provided by (used in) operating activities                   (26)           (322)           5,068             3,999
                                                    
CASH FLOWS FROM INVESTING ACTIVITIES:                                                   
  Capital expenditures                   (927)           (2,176)           (5,174)             (7,358)
  Proceeds from disposal of fixed and intangible assets                   -           1           -             35
  Deposits (withdraws) of restricted cash                   (3)           (8)           (2,645)             (62)
  Deposits received                   -           (1)           -             7
         Net cash used in investing activities                   (930)           (2,184)           (7,819)             (7,358)
                                                    
CASH FLOWS FROM FINANCING ACTIVITIES:                                                   
  Proceeds from bonds                   -           -           14,000             -
  Repayments of bonds             (2,090)           (1,260)        (2,090)          (1,260)
  Loan borrowings                   -           3,500           18,000             16,510
  Loan repayments                   (101)           (62)           (15,526)             (21,903)
  Principal payments under capital lease             (30)        -        (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                   -           -           (1,465)             (34)
  Acquisition of utilities - deferred acquisition payments                   -           -           (11,163)             (4,381)
  Net proceeds from the sale of stock                   -           -           -             4,011
  Advances in aid of construction, net of refunds paid                   381           8           760             645
  Contributions in aid of construction under ICFA and other agreements                   500           2,264           2,421             2513
  Refunds of advances for construction                   (42)              (169)              (551)                (672)
         Net cash provided by (used in) financing activities               (1,382)     4,281           4,334             (4,571)
                                                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   (2,338)           1,775           1,583             (7,930)
CASH AND CASH EQUIVALENTS - Beginning of period                   6,154           458           2,233             10,163
CASH AND CASH EQUIVALENTS - End of period           $ 3,816   $ 2,233   $ 3,816     $ 2,233

 

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

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GWR Global Water Resources Corp.

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