GWR Global Water Resources Corp. Reports Second Quarter 2014 Results
PHOENIX, AZ, Aug. 13, 2014 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) (OTCQX: GWGWF) today reported its financial results for the second quarter ended June 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.
Second Quarter 2014 Highlights:
- Continued dividend policy declared in March 2014, equating to C$0.264 annualized per share, paid monthly at C$0.022 per share.
- Grew active service connections for the second quarter to 43,202 compared with 42,726 at December 31, 2013, representing an annualized growth rate of 2.2% for 2014. On a trailing twelve month basis, service connections have increased 2.6%.
- Appointed Ron Fleming as interim Chief Executive Officer and Mike Liebman as Chief Financial Officer of the Company and Global Water.
"We have made great progress on the execution of our strategic plan to focus Global Water on our core regulated utilities and to surface the underlying value of these assets," said Ron Fleming, interim CEO of Global Water. "We will continue to build off of these accomplishments, and leverage stable, efficient utility operations combined with strong revenue growth driven by new connections and new rates starting January 2015, to fully restore and grow the value of our company."
Summary of Financial Results
Consolidated revenues for the three and six months ended June 30, 2014, were $8.9 million and $15.9, respectively, compared to $9.1 million and $16.7 million for the three and six months ended June 30, 2013. The change in consolidated revenues reflects the decrease in unregulated revenues during the 2014 period compared to the same period last year due to the sale of FATHOM on June 5, 2013.
Excluding the Company's prior FATHOM business, Global Water's revenues for the three and six months ended June 30, 2013 totaled $8.5 million and $15.5 million, respectively, as compared to $8.9 million and $15.9 million for the three and six months ended June 30, 2014, respectively. These increases primarily reflect the positive impact of growing active service connections within the regulated utilities business.
EBITDA for the three and six months ended June 30, 2014, totalled $3.7 million and $58.3 million, respectively, compared to $1.3 million and $2.9 million for the same periods last year. The increase in EBITDA is primarily due to the $50.7 million gain on regulatory order recorded in the six months ended June 30, 2014 in connection with the Arizona Corporation Commission's (ACC) February 2014 Rate Decision, as well as the elimination of losses associated with the FATHOM business.
Consolidated net loss was $0.5 million for the three months ended June 30, 2014, compared to $3.5 million for the same period last year. The year-over-year improvement primarily relates to the $1.9 million loss recorded on the sale of Global Water Management during the 2013 period as well as the elimination of FATHOM related losses. Consolidated net income was $65.8 million for the six months ended June 30, 2014, compared to a consolidated net loss of $6.8 million last year. The increase in net income is primarily due to the $50.7 million gain on regulatory order recorded during the quarter, the $16.1 million income tax benefit recognized in connection with the release of the deferred income tax valuation allowance as well as the elimination of losses associated with the FATHOM business.
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 second 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 June 30, 2014, total service connections increased 260 to 44,868 from 44,608 as of December 31, 2013. Total active service connections increased 476 to 43,202 as of June 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 1,666, or 3.7% of total service connections as of June 30, 2014; 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 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, August 13, 2014, at 4:00 p.m. ET. Interested persons may access the call by dialing (647) 427-7450 or toll free at (888) 231-8191. Shortly after the conclusion of the call, a replay will be available by dialing (416) 849-0833 or (855) 859-2056. The passcode is 79489198. The replay will expire at midnight (ET) on Wednesday, August 27, 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". 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 June 30, 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. |
||||||||
June 30, 2014 |
December 31, 2013 |
|||||||
(in thousands of US$, except share data) |
||||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ |
- |
$ |
- |
||||
Dividend receivable |
182 |
- |
||||||
Other current assets |
40 |
- |
||||||
Total current assets |
222 |
- |
||||||
Equity method investment |
61,540 |
30,962 |
||||||
TOTAL ASSETS |
$ |
61,762 |
$ |
30,962 |
||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
LIABILITIES: |
||||||||
Accounts payable and accrued expenses |
$ |
232 |
$ |
10 |
||||
Other noncurrent liabilities |
134 |
72 |
||||||
Deferred tax liability |
1,526 |
- |
||||||
Total liabilities |
1,892 |
82 |
||||||
SHAREHOLDERS' EQUITY: |
||||||||
Common stock, unlimited shares authorized, 8,754,612 shares issued and |
55,815 |
55,815 |
||||||
Retained earnings (accumulated deficit) |
4,055 |
(24,935) |
||||||
Total shareholders' equity |
59,870 |
30,880 |
||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
61,762 |
$ |
30,962 |
GWR GLOBAL WATER RESOURCES CORP. |
||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||
(in thousands of US$, except share and per share data) |
||||||||||||||
GAIN (LOSS) FROM EQUITY INVESTMENT |
$ |
(235) |
$ |
(2,399) |
$ |
31,641 |
$ |
(4,012) |
||||||
OPERATING EXPENSES |
262 |
17 |
408 |
148 |
||||||||||
OPERATING INCOME (LOSS) |
(497) |
(2,416) |
31,233 |
(4,160) |
||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
(497) |
(2,416) |
31,233 |
(4,160) |
||||||||||
INCOME TAX BENEFIT (EXPENSE) |
311 |
- |
(1,526) |
- |
||||||||||
NET INCOME (LOSS) |
$ |
(186) |
$ |
(2,416) |
$ |
29,707 |
$ |
(4,160) |
||||||
WEIGHTED AVERAGE SHARES: |
||||||||||||||
Basic |
8,754,612 |
8,754,612 |
8,754,612 |
8,754,612 |
||||||||||
Diluted |
8,754,612 |
8,754,612 |
8,762,348 |
8,754,612 |
||||||||||
EARNINGS (LOSS) PER SHARE: |
||||||||||||||
Basic |
$ |
(0.02) |
$ |
(0.28) |
$ |
3.39 |
$ |
(0.48) |
||||||
Diluted |
$ |
(0.02) |
$ |
(0.28) |
$ |
3.39 |
$ |
(0.48) |
GLOBAL WATER RESOURCES, INC. |
||||||||
June 30, 2014 |
December 31, 2013 |
|||||||
(in thousands of US$, except share data) |
||||||||
ASSETS |
||||||||
PROPERTY, PLANT AND EQUIPMENT: |
||||||||
Property, plant and equipment |
$ |
317,971 |
$ |
317,319 |
||||
Less accumulated depreciation |
(73,600) |
(68,309) |
||||||
Net property, plant and equipment |
244,371 |
249,010 |
||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
6,373 |
1,960 |
||||||
Accounts receivable – net |
1,685 |
1,474 |
||||||
Due from related party |
613 |
939 |
||||||
Accrued revenue |
2,202 |
1,809 |
||||||
Restricted cash |
- |
197 |
||||||
Prepaid expenses and other current assets |
558 |
631 |
||||||
Convertible note |
484 |
- |
||||||
Deferred tax assets - current |
1,052 |
- |
||||||
Total current assets |
12,967 |
7,010 |
||||||
OTHER ASSETS: |
||||||||
Goodwill |
13,082 |
13,082 |
||||||
Intangible assets – net |
12,772 |
12,772 |
||||||
Regulatory assets |
400 |
400 |
||||||
Deposits |
26 |
28 |
||||||
Bond service fund and other restricted cash |
11,384 |
11,383 |
||||||
Debt issuance costs – net |
3,224 |
3,361 |
||||||
Convertible note |
- |
750 |
||||||
Equity method investment |
- |
141 |
||||||
Deferred tax assets |
14,810 |
- |
||||||
Total other assets |
55,698 |
41,917 |
||||||
TOTAL |
$ |
313,036 |
$ |
297,937 |
||||
LIABILITIES AND EQUITY (DEFICIT) |
||||||||
CURRENT LIABILITIES: |
||||||||
Accounts payable |
$ |
1,541 |
$ |
1,778 |
||||
Accrued expenses |
5,882 |
3,793 |
||||||
Deferred revenue – current portion |
12 |
16 |
||||||
Customer and meter deposits |
2,645 |
2,579 |
||||||
Long-term debt – current portion |
3,166 |
4,172 |
||||||
Total current liabilities |
13,246 |
12,338 |
||||||
NONCURRENT LIABILITIES: |
||||||||
Long-term debt |
128,750 |
128,738 |
||||||
Deferred regulatory gain |
19,526 |
- |
||||||
Regulatory liability |
7,859 |
11,227 |
||||||
Advances in aid of construction |
97,447 |
97,253 |
||||||
Contributions in aid of construction – net |
10,241 |
74,774 |
||||||
Deferred income tax liability |
- |
589 |
||||||
Acquisition liability |
4,688 |
4,688 |
||||||
Other noncurrent liabilities |
189 |
1,172 |
||||||
Total noncurrent liabilities |
268,700 |
318,441 |
||||||
Total liabilities |
281,946 |
330,779 |
||||||
EQUITY (DEFICIT): |
||||||||
Common stock, $0.01 par value, 1,000,000 shares authorized, 182,050 shares issued and |
2 |
2 |
||||||
Paid in capital |
53,184 |
55,048 |
||||||
Accumulated deficit |
(22,096) |
(87,892) |
||||||
Total equity (deficit) |
31,090 |
(32,842) |
||||||
TOTAL |
$ |
313,036 |
$ |
297,937 |
GLOBAL WATER RESOURCES, INC. |
|||||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||||||
(in thousands of US$) |
|||||||||||||||||||
REVENUES: |
|||||||||||||||||||
Water services |
$ |
5,127 |
$ |
4,973 |
$ |
8,744 |
$ |
8,572 |
|||||||||||
Wastewater and recycled water services |
3,612 |
3,482 |
6,977 |
6,795 |
|||||||||||||||
Unregulated revenues |
116 |
634 |
130 |
1,311 |
|||||||||||||||
Total revenues |
8,855 |
9,089 |
15,851 |
16,678 |
|||||||||||||||
OPERATING EXPENSES: |
|||||||||||||||||||
Operations and maintenance |
2,695 |
3,338 |
5,178 |
6,492 |
|||||||||||||||
General and administrative |
2,280 |
2,535 |
4,769 |
5,344 |
|||||||||||||||
Gain on regulatory order |
- |
- |
(50,664) |
- |
|||||||||||||||
Depreciation |
2,427 |
2,664 |
4,671 |
5,361 |
|||||||||||||||
Total operating expenses |
7,402 |
8,537 |
(36,046) |
17,197 |
|||||||||||||||
OPERATING INCOME (LOSS) |
1,453 |
552 |
51,897 |
(519) |
|||||||||||||||
OTHER INCOME (EXPENSE): |
|||||||||||||||||||
Interest income |
22 |
6 |
41 |
7 |
|||||||||||||||
Interest expense |
(2,152) |
(2,136) |
(4,376) |
(4,375) |
|||||||||||||||
Other |
(147) |
(1,964) |
1,774 |
(1,947) |
|||||||||||||||
Total other income (expense) |
(2,277) |
(4,094) |
(2,561) |
(6,315) |
|||||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
(824) |
(3,542) |
49,336 |
(6,834) |
|||||||||||||||
INCOME TAX BENEFIT (EXPENSE) |
335 |
(1) |
16,460 |
(3) |
|||||||||||||||
NET INCOME (LOSS) |
$ |
(489) |
$ |
(3,543) |
$ |
65,796 |
$ |
(6,837) |
Net Loss and EBITDA per Share Information for the Three Months Ended June 30, 2014 and 2013 (amounts in thousands of US dollars, except share data):
Net Loss |
EBITDA |
||||||||
Amount for the three months ended June 30, 2014 |
$ |
(489) |
$ |
3,733 |
|||||
Weighted average number of GWRI shares outstanding during the three months ended June 30, 2014 |
182,050 |
182,050 |
|||||||
GWRI per share amount |
$ |
(2.69) |
$ |
20.51 |
|||||
Net Loss |
EBITDA |
||||||||
Amount for the three months ended June 30, 2013 |
$ |
(3,543) |
$ |
1,252 |
|||||
Weighted average number of GWRI shares outstanding during the three months ended June 30, 2013 |
182,050 |
182,050 |
|||||||
GWRI per share amount |
$ |
(19.46) |
$ |
6.88 |
|||||
GWRI per share, excluding loss on sale of GWM |
$ |
(8.84) |
$ |
17.50 |
GLOBAL WATER RESOURCES, INC. |
||||||||||||||||||||||||
2014 |
2013 |
2012 |
||||||||||||||||||||||
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
|||||||||||||||||
REVENUES: |
||||||||||||||||||||||||
Water services |
$ |
5,127 |
$ |
3,617 |
$ |
4,223 |
$ |
5,405 |
$ |
4,973 |
$ |
3,599 |
$ |
4,156 |
$ |
4,863 |
||||||||
Wastewater and recycled water services |
3,612 |
3,365 |
3,498 |
3,536 |
3,482 |
3,313 |
3,331 |
3,328 |
||||||||||||||||
Unregulated revenues |
116 |
14 |
45 |
49 |
634 |
677 |
937 |
829 |
||||||||||||||||
Total revenues |
8,855 |
6,996 |
7,766 |
8,990 |
9,089 |
7,589 |
8,424 |
9,020 |
||||||||||||||||
OPERATING EXPENSES: |
||||||||||||||||||||||||
Operations and maintenance |
2,695 |
2,483 |
2,460 |
3,043 |
3,338 |
3,154 |
2,862 |
3,276 |
||||||||||||||||
General and administrative |
2,280 |
2,489 |
1,671 |
2,608 |
2,535 |
2,809 |
2,362 |
2,178 |
||||||||||||||||
Gain on regulatory order |
- |
(50,664) |
- |
- |
- |
- |
- |
- |
||||||||||||||||
Depreciation |
2,427 |
2,244 |
2,134 |
2,306 |
2,664 |
2,697 |
2,866 |
2,662 |
||||||||||||||||
Total operating expenses |
7,402 |
(43,448) |
6,265 |
7,957 |
8,537 |
8,660 |
8,090 |
8,116 |
||||||||||||||||
OPERATING INCOME (LOSS) |
1,453 |
50,444 |
1,501 |
1,033 |
552 |
(1,071) |
334 |
904 |
||||||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||||||||||
Interest income |
22 |
19 |
20 |
20 |
6 |
1 |
5 |
1 |
||||||||||||||||
Interest expense |
(2,152) |
(2,224) |
(2,351) |
(2,209) |
(2,136) |
(2,239) |
(2,085) |
(2,245) |
||||||||||||||||
Other |
(147) |
1,921 |
978 |
1,818 |
(1,964) |
17 |
(14) |
723 |
||||||||||||||||
Total other income (expense) |
(2,277) |
(284) |
(1,353) |
(371) |
(4,094) |
(2,221) |
(2,094) |
(1,521) |
||||||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
(824) |
50,160 |
148 |
662 |
(3,542) |
(3,292) |
(1,760) |
(617) |
||||||||||||||||
INCOME TAX BENEFIT (EXPENSE) |
335 |
16,125 |
(11) |
(2) |
(1) |
(2) |
(6) |
- |
||||||||||||||||
NET INCOME (LOSS) |
$ |
(489) |
$ |
66,285 |
$ |
137 |
$ |
660 |
$ |
(3,543) |
$ |
(3,294) |
$ |
(1,766) |
$ |
(617) |
||||||||
LOSS, EXCLUDING GAIN ON REGULATORY |
$ |
(489) |
$ |
(496) |
$ |
(1,017) |
$ |
(1,475) |
$ |
(1,609) |
$ |
(3,294) |
$ |
(1,073) |
$ |
(397) |
||||||||
Active service connections at period end |
43,202 |
42,984 |
42,726 |
42,482 |
42,112 |
41,607 |
41,008 |
40,833 |
GLOBAL WATER RESOURCES, INC. |
||||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||||||
(in thousands of US$) |
||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||
Net income (loss) |
$ |
(489) |
$ |
(3,543) |
$ |
65,796 |
$ |
(6,837) |
||||||||||
Adjustments to reconcile net income (loss) to net cash provided by |
||||||||||||||||||
Deferred compensation |
564 |
(163) |
864 |
(29) |
||||||||||||||
Depreciation |
2,427 |
2,664 |
4,671 |
5,361 |
||||||||||||||
Amortization of deferred debt issuance costs and discounts |
89 |
86 |
176 |
166 |
||||||||||||||
Loss on disposal of fixed assets |
3 |
- |
3 |
2 |
||||||||||||||
Loss on disposal of GWM net assets |
- |
1,934 |
- |
1,934 |
||||||||||||||
Loss on equity method investment |
232 |
75 |
406 |
75 |
||||||||||||||
Gain on regulatory order |
- |
- |
(50,664) |
- |
||||||||||||||
Provision for doubtful accounts receivable |
28 |
31 |
43 |
57 |
||||||||||||||
Deferred income tax expense (benefit) |
(335) |
1 |
(16,460) |
3 |
||||||||||||||
Changes in assets and liabilities: |
||||||||||||||||||
Accounts receivable |
(326) |
(787) |
(254) |
(827) |
||||||||||||||
Other current assets |
(528) |
(924) |
(302) |
(1,756) |
||||||||||||||
Accounts payable and other current liabilities |
(2,845) |
(106) |
(260) |
3,585 |
||||||||||||||
Other noncurrent assets |
22 |
(150) |
31 |
(105) |
||||||||||||||
Other noncurrent liabilities |
51 |
(37) |
2,853 |
(64) |
||||||||||||||
Net cash provided by (used in) operating activities |
(1,107) |
(919) |
6,903 |
1,565 |
||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||
Capital expenditures |
(560) |
(1,269) |
(666) |
(3,649) |
||||||||||||||
Proceeds from sale of fixed assets |
- |
12 |
- |
12 |
||||||||||||||
Net cash received from the sale of GWM |
- |
1, 771 |
- |
1,771 |
||||||||||||||
Withdrawals of restricted cash |
- |
- |
197 |
- |
||||||||||||||
Deposits received |
1 |
7 |
2 |
11 |
||||||||||||||
Net cash provided by (used in) investing activities |
(559) |
521 |
(467) |
(1,855) |
||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||
Loan repayments |
(1) |
(2) |
(1,002) |
(3) |
||||||||||||||
Principal payments under capital leases |
(20) |
(27) |
(65) |
(61) |
||||||||||||||
Debt issuance costs paid |
- |
(195) |
- |
(195) |
||||||||||||||
Advances in aid of construction |
133 |
120 |
194 |
249 |
||||||||||||||
Dividends paid |
(1,150) |
- |
(1,150) |
- |
||||||||||||||
Refunds of advances for construction |
- |
(1) |
- |
(1) |
||||||||||||||
Net cash used in financing activities |
(1,038) |
(105) |
(2,023) |
(11) |
||||||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(2,704) |
(503) |
4,413 |
(301) |
||||||||||||||
CASH AND CASH EQUIVALENTS – Beginning of period |
9,077 |
4,018 |
1,960 |
3,816 |
||||||||||||||
CASH AND CASH EQUIVALENTS – End of period |
$ |
6,373 |
$ |
3,515 |
$ |
6,373 |
$ |
3,515 |
SOURCE: GWR Global Water Resources Corp.
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Ross Marshall, Investor Relations, Tel: 416.815.0700 ext. 238, Email: [email protected], www.gwresources.com, www.gwfathom.com
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