GWR Global Water Resources Corp. Reports Third Quarter 2014 Results and Company to Increase Dividend 9%
PHOENIX, AZ, Nov. 12, 2014 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) (OTCQX: GWGWF) today reported its financial results for the third quarter ended September 30, 2014.
The Company was established to acquire an equity interest in Global Water Resources, Inc. ("Global Water"). Global Water is a U.S., pure-play, water resource management company based in Phoenix, Arizona, that owns and operates water, wastewater and recycled water utilities. The Company accounts for its investment in Global Water using the equity method of accounting; therefore the financial information of Global Water is not consolidated with that of the Company. All references in this press release to consolidated financial information refer to Global Water on a consolidated basis and, unless otherwise indicated, all amounts are in U.S. dollars.
Third Quarter 2014 Highlights:
- Grew active service connections for the third quarter to 43,374 compared with 42,726 at December 31, 2013, representing an annualized growth rate of 2.0% for 2014.
- Adjusted EBITDA for the quarter of $4.3 million, as compared to $3.0 million for Q3 of 2013, attributable mainly to a $0.7 million reduction in operating expenses and a one-time $0.5 million expense in 2013.
- Subsequent to the quarter close, refinanced $21.8 million of debt into a new, low interest facility with a 10 year term and a 20 year amortization. The longer amortization period compared to the previous facilities reduces principal payments by approximately $2.0 million per year over the next 5 years.
- Subsequent to quarter close, Board of Directors approved a dividend policy that will increase the annual dividend from $0.264 CAD to $0.288 CAD, reflecting an increase of $0.024 CAD (approximately 9%). This will result in a monthly dividend of $0.024 CAD (compared to $0.022 CAD in previous months). This increase to the dividend policy will be effective for the next dividend to be paid in December 2014.
"In the third quarter we continued to execute on our strategic plan to focus on our core utility assets, reduce costs, and optimize our capital structure including the refinancing of debt" said Ron Fleming, President and Interim-CEO of Global Water. "Our continued progress, including the refinancing of our Regions Debt, provided the opportunity to increase the dividend to our shareholders."
Summary of Financial Results
Consolidated revenues for the three and nine months ended September 30, 2014, were $8.8 million and $24.6 million, respectively, compared to $9.0 million and $25.7 million for the same periods in the prior year. The change in consolidated revenues for the quarter reflects reduced water consumption due to an exceptionally wet monsoon season, with rainfall recorded during the quarter at approximately 13 times the level during the same period in the prior year. The reduction in revenues for the nine-month period was primarily due to the decrease in unregulated revenues related to the sale of FATHOM in June 2013.
EBITDA for the three and nine months ended September 30, 2014, totalled $4.3 million and $62.6 million, respectively, compared to $5.2 million and $8.1 million for the same periods last year. Last year's EBITDA for the quarter included a $2.1 million gain for the sale of contracts offset by a one- time expense of $0.5 million. This year's EBITDA for the quarter includes a $0.7 million reduction in operational expenses. The year to date increase in EBITDA is due primarily to the $50.7 million gain on regulatory order, recorded earlier in 2014, regarding the Arizona Corporation Commission's (ACC) February 2014 Rate Decision. Additionally, we've reduced operating expenses and eliminated losses as a result of selling Fathom.
The Company recorded a net loss for the third quarter of $26,000, as compared to net income of $660,000 for the three months ended September 30, 2013. Last year's third quarter profit included a $2.1 million gain for the sale of contracts. This year's net loss was due to lower revenues related to weather influenced water consumption patterns, offset by lower operating expenses.
Operating expenses came in at $6.8 million for the three months ended September 30, 2014, representing a 14.9% reduction from the $8.0 million in operating expenses recorded for the same period in the prior year, as a result of the Company's continued initiatives to reduce operating costs.
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 third quarter of 2014 continued the positive growth trend from a combination of new homes built and re-establishing service on previously vacant homes. As of September 30, 2014, total service connections increased to 45,104 from 44,608 as of December 31, 2013. Total active service connections increased to 43,374 as of September 30, 2014, from 42,726 as of December 31, 2013.
During the economic downturn beginning in 2008, Global Water experienced an increase in the number of vacant homes in its utility areas, reaching 4,647 vacant connections, or 11.2%, at its peak in February of 2009. By comparison, the level of vacant connections was 1,730, or 3.8% of total service connections as of September 30, 2014; remaining near the lowest vacancy rates for the past six years.
Based on economic metrics and published analyses of industry experts, the metropolitan Phoenix area is expected to experience continued population and employment growth for the foreseeable future, which management believes will result in real estate development and connection growth in Global Water's utility service areas due in part to its large availability of lots and infrastructure capacity.
The rate case settlement agreement approved by the ACC will see a collective revenue requirement increase of $4.3 million based on 2011 test year service connections, phased-in over time, commencing in January 2015.
Conference Call
Global Water will conduct a conference call on Wednesday, November 12, 2014, at 11:30a.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 28624846. The replay will expire at midnight (ET) on Wednesday, November 26, 2014. A copy of the transcript and an audio replay of the conference call, once available, will be archived within the investor section of the Company's web site at www.gwresources.com
About GWR Global Water Resources Corp.
The Company was incorporated in British Columbia to acquire shares of U.S. based Global Water and to actively participate in the management, business and operations of Global Water through its representation on the board of directors of Global Water and its shared management of Global Water.
About Global Water
Global Water is a pure-play, high-growth water resources company located in Phoenix, Arizona, that owns and operates regulated water, wastewater and recycled water utilities in the metropolitan Phoenix area.
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain forward-looking statements. These forward looking statements include, but are not limited to our plans, objectives, expectations and intentions, and other statements contained in this release that are not historical facts as well as statements identified by words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", or the negative of these terms, or other words of similar meaning. These statements are based on our current beliefs or expectations and are inherently subject to significant uncertainties and changes in circumstances, many of which are beyond our control. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors and other factors discussed under the heading "Risk Factors" in the Company's most recent Annual Information Form. We undertake no obligation to publicly update any forward-looking statement, except as required by law, whether as a result of new information, future developments or otherwise.
Cautionary Note Regarding Non-GAAP Measures
This press release contains references to "EBITDA" and "adjusted 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. Adjusted EBITDA is defined as EBITDA less the gain or loss related to non-recurring events, and includes an adjustment for the gain on the303 sale in the third quarter of 2013.Management believes that EBITDA and adjusted EBITDA are useful supplemental measures of Global Water's operating performance. However, EBITDA and adjusted EBITDA are not recognized earnings measures under U.S. GAAP or Canadian GAAP and do not have a standardized meaning prescribed by U.S. GAAP or Canadian GAAP. Therefore, EBITDA and adjusted EBITDAmay not be comparable to similar measures presented by other issuers. EBITDA and adjusted EBITDAshould not be construed as an alternative to net income or loss. See "Consolidated Statements of Operations for the eight quarters end March 31, 2014" in the attached schedules for a reconciliation of EBITDA and adjusted EBITDAto net income, the nearest comparable U.S, GAAP measure.
GWR GLOBAL WATER RESOURCES CORP. |
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September 30, 2014 |
December 31, 2013 |
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(in thousands of US$, except share data) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | - | $ | - | |||
Dividend receivable | 174 | ||||||
Other current assets | 20 | - | |||||
Total current assets | 194 | - | |||||
Equity method investment | 60,847 | 30,962 | |||||
TOTAL ASSETS | $ | 61,041 | $ | 30,962 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
LIABILITIES: | |||||||
Accounts payable and accrued expenses | $ | 179 | $ | 10 | |||
Other noncurrent liabilities | 140 | 72 | |||||
Deferred tax liability | 1,776 | - | |||||
Total liabilities | 2,095 | 82 | |||||
SHAREHOLDERS' EQUITY: | |||||||
Common stock, unlimited shares authorized, 8,754,612 shares issued and outstanding at September 30, 2014 and December 31, 2013 |
55,815 | 55,815 | |||||
Retained earnings (accumulated deficit) | 3,131 | (24,935) | |||||
Total shareholders' equity | 58,946 | 30,880 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 61,041 | $ | 30,962 |
GWR GLOBAL WATER RESOURCES CORP. STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited) |
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Three Months Ended September 30, | Nine months ended September 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
(in thousands of US$, except share and per share amounts) | ||||||||||||
GAIN (LOSS) FROM EQUITY INVESTMENT | $ | (13) | $ | 318 | $ | 31,628 | $ | (3,694) | ||||
OPERATING EXPENSES | 131 | 113 | 539 | 261 | ||||||||
OPERATING INCOME (LOSS) | (144) | 205 | 31,089 | (3,955) | ||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (144) | 205 | 31,089 | (3,955) | ||||||||
INCOME TAX BENEFIT (EXPENSE) | (250) | - | (1,776) | - | ||||||||
NET INCOME (LOSS) | $ | (394) | $ | 205 | $ | 29,313 | $ | (3,955) | ||||
WEIGHTED AVERAGE SHARES: | ||||||||||||
Basic | 8,754,612 | 8,754,612 | 8,754,612 | 8,754,612 | ||||||||
Diluted | 8,754,612 | 8,754,612 | 8,765,026 | 8,754,612 | ||||||||
EARNINGS (LOSS) PER SHARE: | ||||||||||||
Basic | $ | (0.04) | $ | 0.02 | $ | 3.35 | $ | (0.45) | ||||
Diluted | $ | (0.04) | $ | 0.02 | $ | 3.34 | $ | (0.45) | ||||
GLOBAL WATER RESOURCES, INC. CONSOLIDATED BALANCE SHEETS As of September 30, 2014 and December 31, 2013 (Unaudited) |
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September 30, 2014 | December 31, 2013 | ||||||
(in thousands of US$, except share data) | |||||||
ASSETS | |||||||
PROPERTY, PLANT AND EQUIPMENT: | |||||||
Property, plant and equipment | $ | 318,290 | $ | 317,319 | |||
Less accumulated depreciation | (76,103) | (68,309) | |||||
Net property, plant and equipment | 242,187 | 249,010 | |||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | 9,494 | 1,960 | |||||
Accounts receivable - net | 1,504 | 1,474 | |||||
Other receivables | 664 | 939 | |||||
Accrued revenue | 1,884 | 1,809 | |||||
Restricted cash | - | 197 | |||||
Prepaid expenses and other current assets | 554 | 631 | |||||
Convertible note | 417 | - | |||||
Deferred tax assets - current | 1,440 | - | |||||
Total current assets | 15,957 | 7,010 | |||||
OTHER ASSETS: | |||||||
Goodwill | 13,082 | 13,082 | |||||
Intangible assets - net | 12,772 | 12,772 | |||||
Regulatory assets | 400 | 400 | |||||
Deposits | 27 | 28 | |||||
Bond service fund and other restricted cash | 11,385 | 11,383 | |||||
Debt issuance costs - net | 3,188 | 3,361 | |||||
Convertible note | - | 750 | |||||
Equity method investment | - | 141 | |||||
Deferred tax assets | 14,439 | - | |||||
Total other assets | 55,293 | 41,917 | |||||
TOTAL | $ | 313,437 | $ | 297,937 | |||
LIABILITIES AND EQUITY (DEFICIT) | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 1,523 | $ | 1,778 | |||
Accrued expenses | 8,699 | 3,793 | |||||
Deferred revenue - current portion | 13 | 16 | |||||
Customer and meter deposits | 2,665 | 2,579 | |||||
Long-term debt - current portion | 3,164 | 4,172 | |||||
Total current liabilities | 16,064 | 12,338 | |||||
NONCURRENT LIABILITIES: | |||||||
Long-term debt | 128,734 | 128,738 | |||||
Deferred regulatory gain | 19,526 | - | |||||
Regulatory liability | 7,859 | 11,227 | |||||
Advances in aid of construction | 90,714 | 97,253 | |||||
Contributions in aid of construction - net | 15,861 | 74,774 | |||||
Deferred income tax liability | - | 589 | |||||
Acquisition liability | 4,688 | 4,688 | |||||
Other non-current liabilities | 206 | 1,172 | |||||
Total noncurrent liabilities | 267,588 | 318,441 | |||||
Total liabilities | 283,652 | 330,779 | |||||
EQUITY (DEFICIT): | |||||||
Common stock, $0.01 par value, 1,000,000 shares authorized, 182,050 shares issued and outstanding at September 30, 2014 and December 31, 2013 |
2 | 2 | |||||
Paid in capital | 51,905 | 55,048 | |||||
Accumulated deficit | (22,122) | (87,892) | |||||
Total equity (deficit) | 29,785 | (32,842) | |||||
TOTAL | $ | 313,437 | $ | 297,937 |
GLOBAL WATER RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited) |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
(in thousands of US$ | |||||||||||||
REVENUES: | |||||||||||||
Water services | $ | 5,087 | $ | 5,405 | $ | 13,831 | $ | 13,977 | |||||
Wastewater and recycled water services | 3,584 | 3,536 | 10,561 | 10,331 | |||||||||
Unregulated revenues | 124 | 49 | 254 | 1,360 | |||||||||
Total revenues | 8,795 | 8,990 | 24,646 | 25,668 | |||||||||
OPERATING EXPENSES: | |||||||||||||
Operations and maintenance | 2,677 | 3,043 | 7,855 | 9,535 | |||||||||
General and administrative | 1,841 | 2,608 | 6,610 | 7,952 | |||||||||
Gain on regulatory order | - | - | (50,664) | - | |||||||||
Depreciation | 2,255 | 2,306 | 6,926 | 7,667 | |||||||||
Total operating expenses | 6,773 | 7,957 | (29,273) | 25,154 | |||||||||
OPERATING INCOME | 2,022 | 1,033 | 53,919 | 514 | |||||||||
OTHER INCOME (EXPENSE): | |||||||||||||
Interest income | 23 | 20 | 64 | 27 | |||||||||
Interest expense | (2,111) | (2,209) | (6,487) | (6,584) | |||||||||
Other | 23 | 1,818 | 1,797 | (129) | |||||||||
Total other income (expense) | (2,065) | (371) | (4,626) | (6,686) | |||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 43 | 662 | 49,293 | (6,172) | |||||||||
INCOME TAX BENEFIT (EXPENSE) | 17 | (2) | 16,477 | (5) | |||||||||
NET INCOME | $ | (26) | $ | 660 | $ | 65,770 | $ | (6,177) |
Net Loss | EBITDA | ||||||
Amount for the three months ended September 30, 2014 | $ | (26) | $ | 4,300 | |||
Weighted average number of GWRI shares outstanding during three months ended September 30, 2014 |
182,050 | 182,050 | |||||
GWRI per share amount | $ | (0.14) | $ | 23.62 | |||
Net Income | EBITDA | ||||||
Amount for the three months ended September 30, 2013 | $ | 660 | $ | 5,157 | |||
Weighted average number of GWRI shares outstanding during three months ended September 30, 2013 |
182,050 | 182,050 | |||||
GWRI per share amount | 3.63 | 28.33 | |||||
GWRI per share, excluding loss on sale GWM | (8.10) | 16.60 | |||||
GLOBAL WATER RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Eight Quarters Ended September 30, 2014 (Unaudited) |
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2014 | 2013 | 2012 | |||||||||||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||||||||||||
REVENUES: | |||||||||||||||||||||||||
Water services | $ | 5,087 | $ | 5,127 | $ | 3,617 | $ | 4,223 | $ | 5,405 | $ | 4,973 | $ | 3,599 | $ | 4,156 | |||||||||
Wastewater and recycled water services | 3,584 | 3,612 | 3,365 | 3,498 | 3,536 | 3,482 | 3,313 | 3,331 | |||||||||||||||||
Unregulated revenues | 124 | 116 | 14 | 45 | 49 | 634 | 677 | 937 | |||||||||||||||||
Total revenues | 8,795 | 8,855 | 6,996 | 7,766 | 8,990 | 9,089 | 7,589 | 8,424 | |||||||||||||||||
OPERATING EXPENSES: | |||||||||||||||||||||||||
Operations and maintenance | 2,677 | 2,695 | 2,483 | 2,460 | 3,043 | 3,338 | 3,154 | 2,862 | |||||||||||||||||
General and administrative | 1,841 | 2,280 | 2,489 | 1,671 | 2,608 | 2,535 | 2,809 | 2,362 | |||||||||||||||||
Gain on regulatory order | - | - | (50,664) | - | - | - | - | - | |||||||||||||||||
Depreciation | 2,255 | 2,427 | 2,244 | 2,134 | 2,306 | 2,664 | 2,697 | 2,866 | |||||||||||||||||
Total operating expenses | 6,773 | 7,402 | (43,448) | 6,265 | 7,957 | 8,537 | 8,660 | 8,090 | |||||||||||||||||
OPERATING INCOME (LOSS) | 2,022 | 1,453 | 50,444 | 1,501 | 1,033 | 552 | (1,071) | 334 | |||||||||||||||||
OPERATING INCOME (EXPENSE): | |||||||||||||||||||||||||
Interest income | 23 | 22 | 19 | 20 | 20 | 6 | 1 | 5 | |||||||||||||||||
Interest expense | (2,111) | (2,152) | (2,224) | (2,351) | (2,209) | (2,136) | (2,239) | (2,085) | |||||||||||||||||
Other | 23 | (147) | 1,921 | 978 | 1,818 | (1,964) | 17 | (14) | |||||||||||||||||
Total other income (expense) | (2,065) | (2,277) | (284) | (1,353) | (371) | (4,094) | (2,221) | (2,094) | |||||||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (43) | (824) | 50,160 | 148 | 662 | (3,542) | (3,292) | (1,760) | |||||||||||||||||
INCOME TAX BENEFIT (EXPENSE) | 17 | 335 | 16,125 | (11) | (2) | (1) | (2) | (6) | |||||||||||||||||
NET INCOME (LOSS) | $ | (26) | $ | (489) | $ | 66,285 | $ | 137 | $ | 660 | $ | (3,543) | $ | (3,294) | $ | (1,766) | |||||||||
LOSS, EXCLUDING GAIN ON REGULATORY ORDER, GAINSALE OF 303 CONTRACTS, LOSS ON THE SALE OF GWM AND TAX VALUATION ALLOWANCE |
$ | (26) | $ | (489) | $ | (496) | $ | (1,017) | $ | (1,475) | $ | (1,609) | $ | (3,294) | $ | (1,073) | |||||||||
Active service connections at period end | 43,374 | 43,202 | 42,984 | 42,726 | 42,482 | 42,112 | 41,607 | 41,008 |
GLOBAL WATER RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three AND Nine Months Ended September 30, 2014 and 2013 (Unaudited) |
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
(in thousands of US$) | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||
Net income (loss) | $ | (26) | $ | 660 | $ | 65,770 | $ | (6,177) | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||
Deferred compensation | 228 | 425 | 1,092 | 396 | |||||||||
Depreciation | 2,255 | 2,306 | 6,926 | 7,667 | |||||||||
Amortization of deferred debt issuance costs and discounts | 90 | 90 | 266 | 256 | |||||||||
Loss on disposal of fixed assets | 3 | - | 6 | 2 | |||||||||
Loss on disposal of GWM net assets | - | - | - | 1,934 | |||||||||
Gain on sale of 303 assets | - | (2,135) | - | (2,135) | |||||||||
Loss on equity method investment | 67 | 324 | 473 | 399 | |||||||||
Gain on regulatory order | - | - | (50,664) | - | |||||||||
Provision for doubtful accounts receivable | 12 | 76 | 55 | 133 | |||||||||
Deferred income tax expense (benefit) | (17) | 2 | (16,477) | 5 | |||||||||
Changes in assets and liabilities - excluding effects of acquisitions: | |||||||||||||
Accounts receivable | 170 | 216 | (85) | (611) | |||||||||
Other current assets | 147 | (1,070) | (154) | (2,826) | |||||||||
Accounts payable and other current liabilities | 2,450 | 737 | 2,190 | 4,322 | |||||||||
Other noncurrent assets | (3) | 455 | 28 | 350 | |||||||||
Other noncurrent liabilities | (1) | (38) | 2,852 | (102) | |||||||||
Net cash provided by (used in) operating activities | 5,375 | 2,048 | 12,278 | 3,613 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||
Capital expenditures | (388) | (1,071) | (1,054) | (4,720) | |||||||||
Proceeds from disposal of fixed assets | - | - | - | 12 | |||||||||
Net cash received from the sale of GWM | - | - | - | 1,771 | |||||||||
Initial proceeds received from the sale of 303 contracts | - | 2,000 | - | 2,000 | |||||||||
Withdrawals of restricted cash | - | (787) | 197 | (787) | |||||||||
Deposits received | (2) | (1) | - | 10 | |||||||||
Net cash provided by (used in) investing activities | (390) | 141 | (857) | (1,714) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||
Loan repayments | (5) | (1) | (1,007) | (4) | |||||||||
Principal payments under capital leases | (20) | (8) | (85) | (69) | |||||||||
Debt issuance costs paid | (46) | - | (46) | (195) | |||||||||
Advances in aid of construction | 107 | 140 | 301 | (389) | |||||||||
Dividends paid | (1,164) | - | (2,314) | - | |||||||||
Refunds of advances for construction | (736) | (504) | (736) | (505) | |||||||||
Net cash used in financing activities | (1,864) | (373) | (3,887) | (384) | |||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 3,121 | 1,816 | 7,534 | 1,515 | |||||||||
CASH AND CASH EQUIVALENTS - Beginning of period | 6,373 | 3,515 | 1,960 | 3,816 | |||||||||
CASH AND CASH EQUIVALENTS - End of period | $ | 9,494 | $ | 5,331 | $ | 9,494 | $ | 5,331 |
SOURCE: GWR Global Water Resources Corp.
Marc Lakmaaker
Investor Relations
Tel: 416.815.0700 ext. 248
Email: [email protected]
www.gwresources.com
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