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

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

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

Highlights:

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

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

Summary of Financial Results

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

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

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

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

Business Outlook

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GLOBAL WATER RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Eight Quarters Ended December 31, 2012 (Unaudited)
				2013												2012
				Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
				(in thousands of US$)
REVENUES:
	Water services			$	4,223		$	5,405		$	4,973		$	3,599		$	4,156		$	4,863		$	4,844		$	3,554
	Wastewater and recycled water services				3,498			3,536			3,482			3,313			3,331			3,328			3,353			3,232
	Unregulated revenues				45			49			634			677			937			829			572			539
		Total revenues			7,766			8,990			9,089			7,589			8,424			9,020			8,769			7,325
OPERATING EXPENSES:
	Operations and maintenance				2,460			3,043			3,338			3,154			2,862			3,276			2,919			2,937
	General and administrative				1,671			2,608			2,535			2,809			2,362			2,178			2,457			2,660
	Depreciation				2,134			2,306			2,664			2,697			2,866			2,662			2,706			2,665
		Total operating expenses			6,265			7,957			8,537			8,660			8,090			8,116			8,082			8,262
	OPERATING INCOME (LOSS)				1,501			1,033			552			(1,071)			334			904			687			(937)
OPERATING INCOME (EXPENSE):
	Interest income				20			20			6			1			5			1			-			-
	Interest expense				(2,351)			(2,209)			(2,136)			(2,239)			(2,085)			(2,245)			(3,005)			(2,230)
	Other				978			1,818			(1,964)			17			(14)			723			54			(6)
		Total other income (expense)			(1,353)			(371)			(4,094)			(2,221)			(2,094)			(1,521)			(2,951)			(2,236)
INCOME (LOSS) BEFORE INCOME TAXES					148			662			(3,542)			(3,292)			(1,760)			(617)			(2,264)			(3,173)
INCOME TAX (EXPENSE) BENEFIT					(11)			-			(1)			(2)			(6)			-			(31,885)			1,224
NET INCOME (LOSS)				$	137		$	660		$	(3,543)		$	(3,294)		$	(1,766)		$	(617)		$	(34,149)		$	(1,949)
	Income tax expense (benefit)			$	11		$	-		$	1		$	2		$	6		$	-		$	31,885		$	(1,224)
	Interest income				(20)			(20)			(6)			(1)			(5)			(1)			-			-
	Interest expense				2,351			2,209			2,136			2,239			2,085			2,245			3,005			2,230
	Depreciation				2,134			2,306			2,664			2,697			2,866			2,662			2,706			2,665
EBITDA				$	4,613		$	5,157		$	1,252		$	1,643		$	3,186		$	4,289		$	3,447		$	1,722
LOSS, EXCLUDING GAIN ON SALE OF 303 CONTRACTS, LOSS ON THE SALE OF GWM AND TAX VALUATION ALLOWANCE				$	(1,017)		$	(1,475)		$	(1,609)		$	(3,294)		$	(1,073)		$	(397)		$	(1,394)		$	(1,949)
Active service connections at period end					42,726			42,482			42,112			41,607			41,008			40,833			40,503			40,100

GLOBAL WATER RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months and Years Ended December 31, 2013 and 2012 (Unaudited)
					Three Months Ended December 31,						Years Ended December 31,
					2013			2012			2013			2012
					(in thousands of US$)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)				$	137		$	(1,766)		$	(6,040)		$	(38,481)
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Deferred compensation				180			(5)			576			357
		Depreciation				2,134			2,866			9,801			10,899
		Amortization of deferred debt issuance costs and discounts				179			42			435			353
		Write-off of debt issuance costs				-			-			-			618
		(Gain) on sale of 303 contracts				(1,130)			-			(3,265)			-
		Loss on disposal of fixed and intangible assets				-			19			2			19
		Loss on disposal of GWM net assets				-			-			1,934			-
		(Gain) loss on equity method investment				308			-			707			-
		Imputed interest expense on deferred payments for acquisitions - net of cash paid				-			-			-			(463)
		Provision for doubtful accounts receivable				(34)			37			99			160
		Deferred income tax expense (benefit)				11			6			16			30,667
		Changes in assets and liabilities - excluding effects of acquisitions:
			Accounts receivable			309			416			(302)			658
			Other current assets			473			(51)			(2,353)			(807)
			Accounts payable and other current liabilities			(4,109)			(1,462)			213			829
			Other noncurrent assets			2			(123)			352			(354)
			Other noncurrent liabilities			(4)			(5)			(106)			613
			Net cash provided by (used in) operating activities			(1,544)			(26)			2,069			5,068
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures					(574)			(927)			(5,294)			(5,174)
	Proceeds from disposal of fixed and intangible assets					1			-			13			-
	Net cash received from the sale of GWM					-			-			1,771			-
	Proceeds received from the sale of 303 contracts					1,130			-			3,130			-
	(Deposits into) withdrawals from restricted cash					590			(3)			(197)			(2,645)
	Deposits received					5			-			15			-
			Net cash provided by (used in) investing activities			1,152			(930)			(562)			(7,819)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from bonds					-			-			-			14,000
	Repayments of bonds					(2,475)			(2,090)			(2,475)			(2,090)
	Loan borrowings					-			-			-			18,000
	Loan repayments					(601)			(101)			(605)			(15,526)
	Principal payments under capital lease					(15)			(30)			(84)			(52)
	Deposit into escrow for debt service					-			-			-			(3,923)
	Redemption from escrow for debt service					-			-			-			3,923
	Related-party loan proceeds					-			-			-			8,910
	Related-party loan repayments					-			-			-			(8,910)
	Debt issuance costs paid					-			-			(195)			(1,465)
	Acquisition of utilities - deferred acquisition payments					-			-			-			(11,163)
	Advances in aid of construction					71			381			460			760
	Contributions in aid of construction under ICFA and other agreements					221			500			221			2,421
	Refunds of advances for construction					(180)			(42)			(685)			(551)
			Net cash provided by (used in) financing activities			(2,979)			(1,382)			(3,363)			4,334
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						(3,371)			(2,338)			(1,856)			1,583
CASH AND CASH EQUIVALENTS - Beginning of period						5,331			6,154			3,816			2,233
CASH AND CASH EQUIVALENTS - End of period					$	1,960		$	3,816		$	1,960		$	3,816

 

 

 

SOURCE: GWR Global Water Resources Corp.

Ross Marshall
Investor Relations
Tel:  [phone] ext. 238
Email: [email protected]
www.gwresources.com
www.gwfathom.com