GWR Global Water Resources Corp. Reports Fourth Quarter and Fiscal 2015 Results

/THIS PRESS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT INTENDED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES/

PHOENIX, AZ, March 11, 2016 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) (OTCQX: GWGWF) today reported its financial results for the quarter and year ended December 31, 2015.  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 water resources company located in Phoenix, Arizona, that owns and operates regulated water, wastewater and recycled water utilities in the metropolitan Phoenix area.  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.

Fiscal 2015 Highlights

  • Completed the disposition of Valencia Water Company, Inc. ("Valencia") to the City of Buckeye for $55 million on closing and an additional $108,000 as a result of a working capital adjustment;
  • Adjusting for the disposition of Valencia, grew active service connections by 889 (or 2.4%) to 37,784, compared with 36,895 at the end of last year;
  • Adjusting for the impact of Valencia, increased yearly revenue by $2.0 million;
  • Issued a special cash dividend of CAD $1.55 per share paid to shareholders on August 12, 2015; and
  • Increased the monthly dividend to CAD $0.0283 per share (an annualized amount of CAD $0.3396 per share), marking the third increase since the dividend was initiated in March 2014.

"Our focus through 2015 was on streamlining operations around our core utilities and providing further value for our shareholders through the special dividend and the dividend increase," said Ron Fleming, President and CEO of Global Water.

Summary of Financial Results

Consolidated Revenues

Consolidated revenues for the quarter and year ended December 31, 2015 were $7.1 million and $32.0 million, respectively, compared to $7.9 million and $32.6 million for the quarter and year ended December 31, 2014.

The decrease in revenue was primarily due to the impacts of the Valencia disposition. Adjusting for those impacts, consolidated revenues for the quarter and year ended December 31, 2015 increased $0.6 million, or 9.3%, and $2.0 million, or 7.5%, respectively.

Operating Expenses

Operating expenses for the quarter and year ended December 31, 2015 were $5.7 million and $25.4 million, respectively, compared to $7.0 million and $28.4 million for the quarter and year ended December 31, 2014.  This represents a reduction of 19.1% and 10.8% for the quarter and year, respectively.  These reductions were due to a combination of corporate initiatives to reduce costs and the Valencia disposition.  Operating expenses for the year ended December 31, 2014 excludes the $50.7 million one-time gain associated with the regulatory order recognized in connection with the Arizona Corporation Commission's regulatory reversal.

Net Income

Global Water realized a net loss of $30,000 and net income of $21.4 million, respectively, for the quarter and year ended December 31, 2015, compared to a net loss of $0.8 million and an income of $64.9 million for the quarter and year ended December 31, 2014.

The net income for the year ended December 31, 2015 is primarily attributed to the gain recorded with the Valencia disposition. The large variance in net income is primarily due to the gain on the regulatory order and tax benefit recorded in 2014, offset by the gain on the Valencia disposition in 2015.

EBITDA

EBITDA for the quarter and year ended December 31, 2015 was $3.2 million and $58.5 million, respectively, compared to $3.9 million and $66.6 million for the quarter and year ended December 31, 2014. The change in EBITDA for the quarter is driven by the $0.7 million difference recorded as the Company's equity investment in the Fathom business, wherein a loss of $0.1 million was recorded in 2015 and a gain of $0.6 million was recorded in 2014.  Additionally, in the quarter ended December 31, 2015, the company offset the lost EBITDA associated with the Valencia disposition through achieving higher rates, organic growth and expense reductions.  The variance between the years is attributed to the gain on the regulatory order recorded in 2014, offset by the gain on the Valencia disposition in 2015.  Additionally, the lost EBITDA associated with the Valencia disposition in 2015 was offset by higher rates, organic growth and expense reductions.

Adjusted EBITDA for the quarter and year ended December 31, 2015 was $3.4 million and $15.7 million, respectively, compared to $3.3 million and $13.7 million for the quarter and year ended December 31, 2014.  The improvements to Adjusted EBITDA in the quarter and year ended December 31, 2015 can be primarily attributed to increased rates, organic growth and expense reductions.  These gains were offset by the lower Adjusted EBITDA associated with the Valencia disposition.

Business Outlook

Global Water's growth strategy for its regulated water, wastewater and recycled water business is driven by increased service connections, continued operating efficiencies and utility rate increases approved by the ACC.

Connection Rates

Excluding impact of Valencia operations, the fourth quarter of 2015 continued to show positive growth in new connections and re-establishing service on previously vacant homes.  As of December 31, 2015, active service connections increased by 889 to 37,784, compared with 36,895 as of December 31, 2014. This represents an annualized increase of 2.4%.

The Company's vacancy rate is now at 2.5% after reaching a peak of 11.2% in February of 2009.

Willow Valley Water Company

The company expects the pending sale of Willow Valley Water Company to be completed in the second quarter of 2016.

Conference Call

Global Water will conduct a conference call on Friday, March 11, 2016, at 1:00 p.m. EST.  Interested persons may access the call by dialing (647) 427-7450 or toll free at (888) 231-8191.

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.

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" and Adjusted EBITDA. EBITDA is defined for the purposes of this press release as net income or loss before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA less the gain or loss related to non-recurring events. Management believes that EBITDA and Adjusted EBITDA are useful supplemental measures of our operating performance and provide meaningful measures of overall corporate performance exclusive of our capital structure and the method and timing of expenditures associated with building and placing our systems. EBITDA is also presented because management believes that it is frequently used by investment analysts, investors and other interested parties as a measure of financial performance. Adjusted EBITDA is also presented because management believes that it provides a measure of our recurring core business.

However, EBITDA and Adjusted EBITDA are not recognized earnings measures under U.S. GAAP and do not have a standardized meaning prescribed by U.S. GAAP. Therefore, EBITDA and Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA and Adjusted EBITDA should not be construed as an alternatives to net income or loss or other income statement data (which are determined in accordance with U.S. GAAP) as an indicator of our performance or as a measure of liquidity and cash flows. Management's method of calculating EBITDA and Adjusted EBITDA may differ materially from the method used by other companies and accordingly, may not be comparable to similarly titled measures used by other companies.  See "Consolidated Statements of Operations for the eight quarters ended December 31, 2015" 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, 2015 and December 31, 2014
(Unaudited)
             
      December 31,
2015
    December 31,
2014
      (in thousands of US$, except share data)
ASSETS            
CURRENT ASSETS:            
  Cash and cash equivalents    $   —   $ 189
  Dividend receivable       179      —
  Other current assets       36      18
Total current assets      215      207
             
Equity method investment      55,549      59,794
TOTAL ASSETS   $ 55,764   $ 60,001
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
LIABILITIES:            
  Dividends payable, accounts payable and accrued expenses    $   345   $   212
  Other noncurrent liabilities       275      155
  Deferred tax liability       769      1,666
Total liabilities      1,389      2,033
             
COMMITMENTS AND CONTINGENCIES (see Note 9)            
             
SHAREHOLDERS' EQUITY:            
  Common stock, unlimited shares authorized, 8,726,747 and 8,754,612 shares
issued and outstanding at December 31, 2015 and December 31, 2014,
respectively
     55,532      55,807
  Retained earnings (accumulated deficit)      (1,157)      2,161
  Total shareholders' equity      54,375      57,968
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 55,764   $ 60,001

 

 
GWR GLOBAL WATER RESOURCES CORP.
STATEMENTS OF OPERATIONS
For the Three Months and Years Ended December 31, 2015 and 2014
(Unaudited)
                         
      Three Months Ended December
31,
    Twelve Months Ended December
31,
      2015     2014     2015     2014
      (in thousands of US$, except share and per share data)
  GAIN FROM EQUITY INVESTMENT    $   (15)   $ (403)   $ 10,259   $ 31,225
  OPERATING EXPENSES       521      127      1,846      666
OPERATING INCOME       (536)      (530)      8,413      30,559
INCOME (LOSS) BEFORE INCOME TAXES       (536)      (530)      8,413      30,559
INCOME TAX (BENEFIT) EXPENSE       158      110      897      (1,666)
NET INCOME   $ (378)   $ (420)   $ 9,310   $ 28,893
                         
WEIGHTED AVERAGE SHARES:                        
Basic     8,735,950      8,754,612     8,747,801     8,754,612
Diluted     8,735,964      8,754,612     8,747,813     8,764,494
                         
EARNINGS (LOSS) PER SHARE:                        
Basic   $ (0.04)   $ (0.05)   $ 1.06   $ 3.30
Diluted   $ (0.04)   $ (0.05)   $ 1.06   $ 3.30

 

 
GLOBAL WATER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2015 and December 31, 2014
(Unaudited)
             
      December 31, 2015     December 31, 2014
ASSETS     (in thousands of US$, except share data)
PROPERTY, PLANT AND EQUIPMENT:            
Property, plant and equipment   $   258,244   $ 318,995
Less accumulated depreciation      (64,092)      (78,571)
Net property, plant and equipment      194,152      240,424
CURRENT ASSETS:            
Cash and cash equivalents      11,513      6,577
  Accounts receivable—net       1,132      1,365
Due from related party      306      645
Accrued revenue      1,745      1,762
Prepaid expenses and other current assets      1,179      353
  Deferred tax assets—current       —      1,591
  Assets held for sale       2,840      —
Total current assets      18,715      12,293
OTHER ASSETS:            
Goodwill      —      13,082
  Intangible assets—net       12,772      12,772
Regulatory assets      227      400
Deposits      13      25
Bond service fund and other restricted cash      9,042      9,927
  Debt issuance costs—net       2,233      2,722
  Equity method investment—related party      821      1,150
Deferred tax assets      —      14,806
Total other assets      25,108      54,884
TOTAL   $ 237,975   $ 307,601
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)            
CURRENT LIABILITIES:            
Accounts payable   $ 1,322   $ 1,531
Accrued expenses      5,137      6,832
Deferred revenue      11      13
Customer and meter deposits      1,706      2,601
  Long-term debt—current portion       1,994      2,653
  Liabilities held for sale      493      —
Total current liabilities      10,663      13,630
NONCURRENT LIABILITIES:            
Long-term debt      104,650      127,491
Deferred regulatory gain      19,730      19,730
Regulatory liability      7,859      7,859
Advances in aid of construction      61,480      89,206
  Contributions in aid of construction—net       4,426      17,096
Deferred income tax liability      4,164      —
Acquisition liability      4,688      4,688
Other noncurrent liabilities      252      221
Total noncurrent liabilities      207,249      266,291
Total liabilities      217,912      279,921
Commitments and contingencies (see Note 12)            
SHAREHOLDERS' EQUITY:            
  Common stock, $0.01 par value, 1,000,000 shares authorized,
181,179 and 182,050 shares issued and outstanding as of
December 31, 2015 and December 31, 2014, respectively
     2      2
Paid in capital      21,659      50,639
Accumulated deficit      (1,598)      (22,961)
Total shareholders' equity      20,063      27,680
TOTAL   $ 237,975   $ 307,601

 

 
GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Years Ended December 31, 2015 and 2014
(Unaudited)
                         
      Three Months Ended December 31,     Twelve Months Ended December 31,
      2015     2014     2015     2014
      (in thousands of US$)
REVENUES:                        
  Water services   $   3,182   $ 4,245   $ 16,320   $ 18,076
  Wastewater and recycled water services      3,777      3,551      15,020      14,112
  Unregulated revenues      150      117      616      371
    Total revenues      7,109      7,913      31,956      32,559
                         
OPERATING EXPENSES:                        
  Operations and maintenance      1,473      1,959      7,080      8,020
  Operations and maintenance - related party      467      604      2,179      2,398
  General and administrative      2,066      2,199      7,957      8,809
  Gain on regulatory order      —      —      —      (50,664)
  Depreciation      1,687      2,279      8,213      9,205
    Total operating expenses      5,693      7,041      25,429      (22,232)
OPERATING INCOME      1,416      872      6,527      54,791
                         
OTHER INCOME (EXPENSE):                        
  Interest income      3      15      11      79
  Interest expense      (1,803)      (3,025)      (8,299)      (9,512)
  Gain on condemnation of Valencia      (91)      —      42,983      —
  Other      203      89      767      2,162
  Other - related party      (32)      692      (3)      416
    Total other income (expense)      (1,720)      (2,229)      35,459      (6,855)
                         
INCOME BEFORE INCOME TAXES      (304)      (1,357)      41,986      47,936
INCOME TAX (EXPENSE) BENEFIT      274      518      (20,623)      16,995
NET INCOME   $ (30)   $  (839)   $ 21,363   $  64,931

 

 
GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Eight Quarters Ended December 31, 2015
(Unaudited)
                                               
    2015       2014
REVENUES:   Q4     Q3     Q2     Q1     Q4     Q3     Q2     Q1
  Water services $   3,182   $ 4,131   $ 5,114   $ 3,893   $ 4,245   $ 5,087   $ 5,127   $ 3,617
  Wastewater and recycled water services     3,777      3,848      3,793      3,602      3,551      3,584      3,612      3,365
  Unregulated revenues     150      164      175      127      117      124      116      14
Total revenues    7,109      8,143      9,082      7,622      7,913      8,795      8,855      6,996
                                               
OPERATING EXPENSES:                                              
  Operations and maintenance     1,473      1,690      2,057      1,860      1,959      2,077      2,097      1,888
  Operations and maintenance - related party    467      483      618      611      604      600      598      595
  General and administrative     2,066      2,020      1,807      2,064      2,199      1,841      2,280      2,489
  Gain on regulatory order     —      —      —      —      —      —      —      (50,664)
    Depreciation     1,687      1,894      2,320      2,312      2,279      2,255      2,427      2,244
     5,693      6,087      6,802      6,847      7,041      6,773      7,402      (43,448)
OPERATING INCOME     1,416      2,056      2,280      775      872      2,022      1,453      50,444
                                               
OTHER INCOME (EXPENSE):                                              
  Interest income     3      4      2      2      15      23      22      19
  Interest expense     (1,803)      (2,367)      (2,050)      (2,079)      (3,025)      (2,111)      (2,152)      (2,224)
  Gain on condemnation of Valencia    (91)      43,074      —      —      —      —      —      —
  Other     203      402      338      (176)      89      21      19      2,033
  Other - related party     (32)      (31)      25      35      692      2      (166)      (112)
Total other income (expense)    (1,720)      41,082      (1,685)      (2,218)      (2,229)      (2,065)      (2,277)      (284)
INCOME (LOSS) BEFORE INCOME TAXES     (304)      43,138      595      (1,443)      (1,357)      (43)      (824)      50,160
INCOME TAX  BENEFIT (EXPENSE)    274      (21,233)      (192)      528      518      17      335      16,125
NET INCOME (LOSS) $ (30)   $ 21,905   $ 403   $   (915)   $   (839)   $ (26)   $   (489)   $ 66,285
                                               
Adjusted EBITDA (1)    3,392      4,433      4,723      3,166      3,314      4,367      3,966      2,098
 
(1) Adjustments exclude the gain on Sale of Valencia, loss on assets held for sale, gain on sale of Loop 303 Contracts, loss on equity
investment, gain on regulatory order, gain on SNR litigation proceeds and loss on sale of GWM.

 

 
GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months and Years Ended December 31, 2015 and 2014
(Unaudited)
                         
      Three Months Ended December
31,
    Twelve Months Ended December
31,
      2015     2014     2015     2014
      (in thousands of US$)
CASH FLOWS FROM OPERATING ACTIVITIES:                        
  Net income    $   (30)   $ (839)   $ 21,363   $ 64,931
    Adjustments to reconcile net income to net cash provided by operating
activities:
                       
    Deferred compensation      300      269      798      1,361
    Depreciation      1,688      2,279      8,213      9,205
    Amortization of deferred debt issuance costs and discounts      46      68      204      334
    Write-off of debt issuance costs      —      696      282      696
    Loss on disposal of fixed assets      —      —      —      6
    Gain on condemnation of Valencia      91      —      (42,983)      —
    Gain on sale of 303 contracts      —      —      (296)      —
    Loss (Gain) on equity method investment       117      (617)      329      (144)
    Gain on regulatory order      —      —      —      (50,664)
    Other losses (gains)      —      (56)      176      (56)
    Provision for doubtful accounts receivable      14      28      69      83
    Deferred income tax expense (benefit)      (304)      (518)      20,561      (16,995)
    Changes in assets and liabilities:                        
      Accounts receivable      153      111      125      26
      Other current assets      (612)      154      (2,241)      —
      Accounts payable and other current liabilities      (2,518)      (2,417)      (2,502)      (227)
      Other noncurrent assets      29      6      147      34
      Other noncurrent liabilities      —      204      —      3,056
        Net cash provided by operating activities      (1,026)      (632)      4,245      11,646
CASH FLOWS FROM INVESTING ACTIVITIES:                        
  Capital expenditures      (1,178)      (601)      (3,355)      (1,655)
  Proceeds from the condemnation of Valencia      (91)      —      55,107      —
  Proceeds received from the sale of Loop 303 Contracts      —      —      296      —
  (Deposits) withdrawals of restricted cash       7      1      (70)      198
  Cash advance to related party      —      —      (12,745)      —
  Repayment of related party cash advance      509      —      12,745      —
  Other cash flows from investing activities      (4)      26      (6)      26
        Net cash provided by (used in) investing activities       (757)      (574)      51,972     (1,431)
CASH FLOWS FROM FINANCING ACTIVITIES:                        
  Repayments of bond debt      (1,775)      (12,347)      (1,775)      (12,347)
  Deposits in bond service fund      —      (1,000)      —      (1,000)
  Proceeds withdrawn from bond service fund      —      626      1,001      626
  Loan borrowings      —      21,800      —      21,800
  Loan repayments      —      (9,383)      (21,719)      (10,390)
  Principal payments under capital leases      (27)      (20)      (99)      (105)
  Debt issuance costs paid      —      (300)      —      (346)
  Advances in aid of construction      75      64      357      365
  Refunds of advances for construction      (554)      (11)      (975)      (747)
  Dividends paid      (1,053)      (1,140)      (27,607)      (3,454)
  Share Repurchase      (137)      —      (464)      —
        Net cash used in financing activities      (3,471)      (1,711)      (51,281)      (5,598)
INCREASE IN CASH AND CASH EQUIVALENTS      (5,254)      (2,917)      4,936      4,617
CASH AND CASH EQUIVALENTS - Beginning of period      16,767      9,494      6,577      1,960
CASH AND CASH EQUIVALENTS - End of period   $ 11,513   $ 6,577   $ 11,513   $ 6,577

  

 

SOURCE GWR Global Water Resources Corp.

For further information:

Laura Scutaru
Investor Relations | NATIONAL Equicom
Tel: 416.586.1964
Email: lscutaru@national.ca
www.gwresources.com


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