GWR Global Water Resources Corp. Reports Third Quarter 2015 Results

- Completed Disposition of Valencia -

PHOENIX, AZ, Nov. 12, 2015 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) (OTCQX: GWGWF) today reported its financial results for the quarter ended September 30, 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 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.

Third Quarter and Year-To-Date 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;
  • In conjunction with the disposition of Valencia, paid off MidFirst debt of $21.3 million;
  • Issued a special cash dividend of CAD $1.55 per share paid to shareholders on August 12, 2015;
  • 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;
  • Excluding impacts of Valencia operations, grew active service connections by 743 to 37,638 as of September 30, 2015, compared with 36,895 as of December 31, 2014. This represents an annualized increase of 2.7%;
  • Excluding impacts of the Valencia operations, increased revenues by $618,000 (or 8.7%) to $7.8 million in Q3-2015 compared to $7.1 million Q3-2014. This increase is primarily driven by new rates, organic growth and lower precipitation in Q3-2015 compared to Q3-2014, and;
  • Excluding impacts of the Valencia operations, increased Adjusted EBITDA by $700,000 (or 20%) going to $4.1 million in Q3-2015 compared to $3.4 million in Q3-2014.

"We achieved meaningful results in the third quarter of 2015, adding to what has already been a very strong year," said Ron Fleming, President and CEO of Global Water. "The disposition of Valencia and subsequent pay-down of debt, combined with strong top-line growth for the remaining utilities, has increased our margins and improved our cash flows."

"These achievements allowed us to issue a special dividend and an increased recurring monthly dividend," continued Mr. Fleming. "We are committed to our long-term strategy for growth and remain confident that we are well-positioned for positive future results."

Summary of Financial Results

Consolidated Revenues

Consolidated revenues for the three and nine months ended September 30, 2015, were $8.1 million and $24.8 million, respectively, compared to $8.8 million and $24.6 million for the three and nine months ended September 30, 2014.  

Excluding impacts of the Valencia operations, consolidated revenues for the three and nine months ended September 30, 2015, were $7.8 million and $21.6 million, respectively, compared to $7.1 million and $20.2 million for the three and nine months ended September 30, 2014.   

Primary drivers for the increase in revenue (excluding impacts of Valencia operations) are the rate increases, customer growth (2.7% annualized) and lower precipitation in Q3-2015 compared to Q3-2014.

Operating Expenses

Operating expenses for the three and nine months ended September 30, 2015 were $6.1 million and $19.7 million, respectively, compared to $6.8 million and $21.4 million for the three and nine months ended September 30, 2014.  Note that the nine months ended September 30, 2014 amount excludes the $50.7 million one-time gain associated with the regulatory order.  

The $700,000 and $1.7 million decreases in operating expenses for the three and nine month periods, respectively, are primarily attributed to lower Operations and Maintenance costs as a result of the Valencia disposition.

Net Income

Global Water realized a net income of $21.9 million and $21.4 million, respectively, for the three and nine months ended September 30, 2015, compared to a net loss of $26,000 and an income of $65.8 million for the three and nine months ended September 30, 2014.

The net income in the three months ended September 30, 2015 compared to a net loss in the same period last year is primarily attributed to the gain recorded in relation to the Valencia disposition.  The large variance in net income for the nine-month periods 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 three and nine months ended September 30, 2015 was $47.4 million and $55.3 million, respectively, compared to $4.3 million and $62.6 million for the three and nine months ended September 30, 2014. The change in EBITDA for the three months ended September 30, 2015 was attributed to the $43.4 million gain recorded in relation to the Valencia disposition.

Adjusted EBITDA for the three and nine months ended September 30, 2015 was $4.4 million and $12.3 million, respectively, compared to $4.4 million and $10.4 million for the three and nine months ended September 30, 2014.

Removing impacts of the Valencia operations Adjusted EBITDA increased by $700,000 (or 20%) going to $4.1 million in Q3-2015 compared to $3.4 million in Q3-2014.  This increase is driven by strong top-line growth and effectively managing controllable operating expenses.

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 impacts of Valencia operations, the third quarter of 2015 continued to show positive growth in new connections and re-establishing service on previously vacant homes.  As of September 30, 2015, active service connections increased by 743 to 37,638 as of September 30, 2015, compared with 36,895 as of December 31, 2014. This represents an annualized increase of 2.7%.

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

Arizona's Growth Corridor: Positive Population Trends

The Metropolitan Phoenix area is steadily growing due to low-cost housing, excellent weather, large and growing universities, a diverse employment base and low taxes. Its population has increased throughout 2014 and into 2015, and it continues to grow.

The Arizona Department of Administration – Office of Employment and Population Statistics ("ADOA-EPS") predicts that Maricopa County will have a population of 4.5 million by 2020. This rate of growth, combined with six more years of rate phase-ins, will create the opportunity for Global Water to meaningfully increase its active connections and regulated revenues for the foreseeable future.

Strategic Initiatives

The Board of Directors has directed management to take steps to advance a series of transactions aimed at, among other things, simplifying the Company's capital structure and improving liquidity. These transactions, subject to all required approvals and final Board approval, would result in a merger of the Company into Global Water, a listing on a US stock exchange, refinancing of outstanding debt and a potential issuance of equity. There can be no assurance that any or all of these transactions will be completed.

Conference Call

Global Water will conduct a conference call on Thursday, November 12, 2015, at 1:00 p.m. EST.  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 58432275. The replay will expire at midnight (EST) on November 26, 2015.  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 a 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 do 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 ended December 31, 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 September 30, 2015 and December 31, 2014
(Unaudited)










September 30,
2015


December 31,
2014




(in thousands of US$, except share data)

ASSETS





CURRENT ASSETS:






Cash and cash equivalents


$                         683


$                         189


Other current assets


36


18

Total current assets


719


207






Equity method investment


56,696


59,794

TOTAL ASSETS


$                    57,415


$                    60,001











LIABILITIES AND SHAREHOLDERS' EQUITY





LIABILITIES:






Dividends payable, accounts payable and accrued expenses


$                         293


$                         212


Due to related party


516



Other noncurrent liabilities


237


155


Deferred tax liability


927


1,666

Total liabilities


1,973


2,033






COMMITMENTS AND CONTINGENCIES (see Note 9)










SHAREHOLDERS' EQUITY:






Common stock, unlimited shares authorized, 8,753,948 and 8,754,612 shares issued

and outstanding at September 30, 2015 and December 31, 2014, respectively   


55,669


55,807


Retained earnings


(227)


2,161


Total shareholders' equity


55,442


57,968

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


$                    57,415


$                    60,001

 

GWR GLOBAL WATER RESOURCES CORP.
STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2015 and 2014
(Unaudited)












Three Months Ended

 September 30,


Nine Months Ended

 September 30,



2015


2014


2015


2014



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

GAIN (LOSS) FROM EQUITY INVESTMENT


$      10,520


$           (13)


$      10,274


$      31,628

OPERATING EXPENSES


829


131


1,325


539

OPERATING INCOME (LOSS)


9,691


(144)


8,949


31,089

INCOME (LOSS) BEFORE INCOME TAXES


9,691


(144)


8,949


31,089

INCOME TAX BENEFIT (EXPENSE)


707


(250)


739


(1,776)

NET INCOME (LOSS)


$      10,398


$         (394)


$        9,688


$      29,313










WEIGHTED AVERAGE SHARES:









Basic


8,755,458


8,754,612


8,751,936


8,754,612

Diluted


8,755,472


8,754,612


8,751,948


8,765,026










EARNINGS (LOSS) PER SHARE:









Basic


$          1.19


$        (0.04)


$          1.11


$          3.35

Diluted


$          1.19


$        (0.04)


$          1.11


$          3.34










GLOBAL WATER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
As of September 30, 2015 and December 31, 2014
(Unaudited)








September 30, 2015


December 31, 2014

ASSETS


(in thousands of US$, except share data)

PROPERTY, PLANT AND EQUIPMENT:





Property, plant and equipment


$                  256,013


$                  318,995

Less accumulated depreciation


(62,402)


(78,571)

Net property, plant and equipment


193,611


240,424

CURRENT ASSETS:





Cash and cash equivalents


16,767


6,577

Accounts receivable – net


1,299


1,365

Due from related party


265


457

Accrued revenue


1,871


1,762

Prepaid expenses and other current assets


1,398


541

Deferred tax assets - current


1,514


1,591

Assets held for sale


2,887


Total current assets


26,001


12,293

OTHER ASSETS:





Goodwill



13,082

Intangible assets – net


12,772


12,772

Regulatory assets


255


400

Deposits


13


25

Bond service fund and other restricted cash


9,042


9,927

Debt issuance costs - net


2,276


2,722

Equity method investment


938


1,150

Deferred tax assets



14,806

Total other assets


25,296


54,884

TOTAL


$                  244,908


$                  307,601

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)





CURRENT LIABILITIES:





Accounts payable


$                      1,356


$                      1,531

Accrued expenses


8,044


6,832

Deferred revenue – current portion


9


13

Customer and meter deposits


1,691


2,601

Long-term debt – current portion


1,883


2,653

Liabilities held for sale


503


Total current liabilities


13,486


13,630

NONCURRENT LIABILITIES:





Long-term debt


106,558


127,491

Deferred regulatory gain


19,730


19,730

Regulatory liability


7,859


7,859

Advances in aid of construction


60,070


89,206

Contributions in aid of construction – net


4,473


17,096

Acquisition liability


4,688


4,688


Deferred income tax liability


5,984


Other noncurrent liabilities


209


221

Total noncurrent liabilities


209,571


266,291

Total liabilities


223,057


279,921

Commitments and contingencies (see Note 12)





SHAREHOLDERS' EQUITY (DEFICIT):






Common stock, $0.01 par value, 1,000,000 shares authorized,

181,449 and 182,050 shares issued and outstanding at September

30, 2015 and December 31, 2014


2


2

Paid in capital


23,417


50,639

Accumulated deficit


(1,568)


(22,961)


Total shareholders' equity


21,851


27,680

TOTAL


$                  244,908


$                  307,601

 

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2015 and 2014
(Unaudited)










Three Months Ended

 September 30,


Nine Months Ended

 September 30,


2015


2014


2015


2014


(in thousands of US$)

REVENUES:







Water services

$          4,131


$          5,087


$        13,138


$        13,831


Wastewater and recycled water services

3,848


3,584


11,243


10,561


Unregulated revenues

164


124


466


254



Total revenues

8,143


8,795


24,847


24,646









OPERATING EXPENSES:









Operations and maintenance

2,173


2,677


7,319


7,855


General and administrative

2,020


1,841


5,891


6,610


Gain on regulatory order




(50,664)


Depreciation

1,894


2,255


6,526


6,926



Total operating expenses

6,087


6,773


19,736


(29,273)

OPERATING INCOME

2,056


2,022


5,111


53,919









OTHER INCOME (EXPENSE):









Interest income

4


23


8


64


Interest expense

(2,367)


(2,111)


(6,496)


(6,487)


Other

43,445


23


43,667


1,797



Total other income (expense)

41,082


(2,065)


37,179


(4,626)









INCOME (LOSS) BEFORE INCOME TAXES

43,138


(43)


42,290


49,293

INCOME TAX BENEFIT (EXPENSE)

(21,233)


17


(20,897)


16,477

NET INCOME (LOSS)

$        21,905


$             (26)


$        21,393


$        65,770

 

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Eight Quarters Ended September 30, 2015
(Unaudited)















2015


2014


2013

REVENUES:


Q3

Q2

Q1


Q4

Q3

Q2

Q1


Q4


Water services


$    4,131

$    5,114

$    3,893


$    4,245

$    5,087

$    5,127

$    3,617


$    4,223


Wastewater and recycled water services


3,848

3,793

3,602


3,551

3,584

3,612

3,365


3,498


Unregulated revenues


164

175

127


117

124

116

14


45



Total revenues


8,143

9,082

7,622


7,913

8,795

8,855

6,996


7,766













OPERATING EXPENSES:













Operations and maintenance


2,173

2,675

2,471


2,563

2,677

2,695

2,483


2,460


General and administrative


2,020

1,807

2,064


2,199

1,841

2,280

2,489


1,671


Gain on regulatory order



(50,664)



Depreciation


1,894

2,320

2,312


2,279

2,255

2,427

2,244


2,134



Total operating expenses


6,087

6,802

6,847


7,041

6,773

7,402

(43,448)


6,265

OPERATING INCOME (LOSS)   


2,056

2,280

775


872

2,022

1,453

50,444


1,501













OTHER INCOME (EXPENSE):













Interest income


4

2

2


15

23

22

19


20


Interest expense


(2,367)

(2,050)

(2,079)


(3,025)

(2,111)

(2,152)

(2,224)


(2,351)


Other


43,445

363

(141)


781

23

(147)

1,921


978



Total other income (expense)


41,082

(1,685)

(2,218)


(2,229)

(2,065)

(2,277)

(284)


(1,353)

INCOME (LOSS) BEFORE INCOME TAXES   


43,138

595

(1,443)


(1,357)

(43)

(824)

50,160


148

INCOME TAX  BENEFIT (EXPENSE)    


(21,233)

(192)

528


518

17

335

16,125


(11)

NET INCOME (LOSS)   


$  21,905

$       403

$      (915)


$      (839)

$        (26)

$      (489)

$  66,285


$       137













Adjusted EBITDA (1)


4,433

4,723

3,166


3,314

4,367

3,966

2,098


3,767













(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 and Nine Months Ended September 30, 2015 and 2014
(Unaudited)
















Three Months Ended

 September 30,


Nine Months Ended

 September 30,







2015


2014


2015


2014







(in thousands of US$)

CASH FLOWS FROM OPERATING ACTIVITIES:










Net income (loss)   


$      21,905


$           (26)


$      21,393


$      65,770



Adjustments to reconcile net income (loss) to net cash

provided by operating activities:











Deferred compensation   


55


228


498


1,092



Depreciation   


1,893


2,255


6,525


6,926



Amortization of deferred debt issuance costs and discounts   


46


90


158


266



Write-off of debt issuance costs


282



282




Loss on disposal of fixed assets   



3



6



Gain on sale of Valencia


(43,074)



(43,074)




Gain on sale of 303 contracts




(296)




Loss on equity method investment   


112


67


212


473



Gain on regulatory order   





(50,664)



Other gains and losses




176




Provision for doubtful accounts receivable   


27


12


55


55



Deferred income tax expense (benefit)


21,201


(17)


20,865


(16,477)



Changes in assets and liabilities:












Accounts receivable   


262


170


(28)


(85)




Other current assets   


(523)


147


(1,480)


(154)




Accounts payable and other current liabilities   


2,258


2,450


(165)


2,190




Other noncurrent assets   


33


(3)


118


28




Other noncurrent liabilities   



(1)



2,852





Net cash provided by operating activities   


4,477


5,375


5,239


12,278

CASH FLOWS FROM INVESTING ACTIVITIES:










Capital expenditures   


(1,168)


(388)


(2,177)


(1,054)


Proceeds from the sale of Valencia


55,198



55,198



(Deposits) withdrawals of restricted cash   


3



(77)


197


Cash received from the sale of Loop 303 Contracts




296



Cash advance to related party


(11,638)



(12,745)



Repayment of related party cash advance


11,394



12,227



Deposits received (refunded)



(2)


7






Net cash used in investing activities   


53,789


(390)


52,729


(857)

CASH FLOWS FROM FINANCING ACTIVITIES:










Proceeds withdrawn from bond service fund


1,001



1,001



Loan repayments   


(21,326)


(5)


(21,719)


(1,007)


Principal payments under capital leases   


(24)


(20)


(72)


(85)


Debt issuance costs paid



(46)



(46)


Advances in aid of construction   


138


107


282


301


Dividends paid   


(24,228)


(1,164)


(26,521)


(2,314)


Share repurchase


(231)



(327)



Refunds of advances for construction   


(393)


(736)


(422)


(736)





Net cash used in financing activities   


(45,063)


(1,864)


(47,778)


(3,887)

INCREASE IN CASH AND CASH EQUIVALENTS   


13,203


3,121


10,190


7,534

CASH AND CASH EQUIVALENTS – Beginning of period   


3,564


6,373


6,577


1,960

CASH AND CASH EQUIVALENTS – End of period   


$      16,767


$        9,494


$      16,767


$        9,494

 

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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