GWR Global Water Resources Corp. Reports Second Quarter 2015 Results

- Decreased operating expenses by over 8% from Q2 2014 -
- Increased Adjusted EBITDA by 30% through first half of 2015 vs. first half of 2014 -
- Increased monthly dividend by nearly 9% -

PHOENIX, AZ, Aug. 13, 2015 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) (OTCQX: GWGWF) today reported its financial results for the quarter ended June 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.

Second Quarter and Year To Date Highlights

• Grew active service connections by 649 to 44,217 as of June 30, 2015, compared with 43,568 as of December 31, 2014. This represents an annualized 3% increase; 
• Achieved $0.2 million revenue increase for the quarter ended June 30, 2015 which was $9.1 million compared to $8.9 million in the quarter ended June 30, 2014; and a year to date revenue increase of $0.9 million, which was $16.7 million for the six months ended June 30, 2015 compared to $15.8 million for the same period in 2014.  This represents a 5.4% increase;
• Achieved $0.6 million (or over 8%) decrease in operating expenses for the quarter ended June 30, 2015, which were $6.8 million compared to $7.4 million for the quarter ended June 30, 2014; and achieved approximately $1.0 million reduction in operating expenses for the six months ended June 30, 2015 compared to the same period in 2014 (after excluding the $50.7 million one-time gain associated with the regulatory order experienced in 2014);
• Achieved $0.7 million improvement in Adjusted EBITDA for the quarter ended June 30, 2015, which was approximately $4.7 million compared to $4.0 million in the quarter ended June 30, 2014; Achieved $1.8 million (or 30%) improvement in Adjusted EBITDA for the six months ended June 30, 2015, which was approximately $7.9 million compared to $6.1 million for the same period in 2014; and,
• Commenced a normal course issuer bid which allows the Company to repurchase up to 87,500 common shares, representing approximately 1% of the total issued and outstanding common shares, between May 13, 2015 and May 12, 2016, and repurchased 30,400 shares to date.

Highlights Subsequent to Quarter End

• Completed the sale of Valencia Water Company's assets to the City of Buckeye for $55.0 million in up-front payments and a 20-year growth premium with payments up to an additional $45.0 million;
• Issued a special cash dividend of CAD $1.55 per share, which was paid on August 12, 2015 to shareholders of record as of the close of business on August 7, 2015; and,
• Increased the monthly dividend by nearly 9%, reflecting an annualized amount of CAD $0.3396 per share or CAD $0.0283 per share on a monthly basis. This increase will be reflected in the dividend payable August 28, 2015 to shareholders of record as of the close of business on August 14, 2015.

"2015 has been an exceptionally strong year for us," stated Ron Fleming, President and CEO of Global Water. "In addition to closing the Buckeye transaction, we continued to demonstrate strong financial performance driven by the phase-in of new rates, increased connections and significant reductions to recurring operating expenses."

"In July 2015, we issued a special dividend and announced an increase to our monthly dividend. Both of these initiatives have further demonstrated our commitment to returning consistent value to our shareholders," continued Mr. Fleming. "As we look towards the second half of the year, we remain confident that we'll be able to continue to deliver on this commitment and are well-positioned for positive long-term results."

Summary of Financial Results

Consolidated Revenues

Consolidated revenues for the three and six months ended June 30, 2015 were $9.1 million and $16.7 million, respectively, compared to $8.9 million and $15.9 million for the three and six months ended June 30, 2014. The increase in both periods is primarily attributed to the phase-in of incremental revenues from the rate case settlement with the Arizona Corporation Commission (ACC), and to customer growth of approximately 3.0% year to date on an annualized basis. The revenue increase in the second quarter was offset by a decline in consumption due to higher precipitation and lower average temperatures during the period.

Operating Expenses

Operating expenses for the three and six months ended June 30, 2015 were $6.8 million and $13.6 million, respectively, compared to $7.4 million and $14.6 million for the three and six months ended June 30, 2014.  Note that the six months ended June 30, 2014 amounts exclude the $50.7 million one-time gain associated with the regulatory order.

The $0.6 million improvement in the second quarter of 2015 represents an 8% decrease in operating expenses from the same period last year, primarily attributed to lower personnel costs associated with the completion of the executive transition plan, lower deferred compensation expenses and reduced contract services expenses related to residual disposal. The $1.0 million decrease in operating expenses for the six months ended June 30, 2015 was also primarily attributed to lower personnel costs associated with the completion of the executive transition plan, lower deferred compensation expenses and reduced contract services expenses related to residual disposal.

Net Income

Global Water realized a net income of $0.4 million and a loss of $0.5 million, respectively, for the three and six months ended June 30, 2015, compared to a net loss of $0.5 million and an income of $65.8 million for the three and six months ended June 30, 2014.

The change in the three months ended June 30, 2015 is primarily attributed to increased revenue due to an increased customer base, rate increases from the ACC settlement and the $0.6 million reduction in total operating expenses. In addition to the revenue and expense improvements, the change in the six months ended June 30, 2015 was also attributed to the $50.7 million gain and $16.1 million tax benefit related to the regulatory order that were recorded by the Company during the six months ended June 30, 2014.  Additionally, there was a one-time event wherein $2.0 million of income was recorded during six months ended June 30, 2014 related to the settlement of outstanding litigation.

EBITDA

EBITDA for the three and six months ended June 30, 2015 was $5.0 million and $7.9 million, respectively, compared to $3.7 million and $58.3 million for the three and six months ended June 30, 2014. The change in EBITDA for the three months ended June 30, 2015 was primarily attributed to the increased rates and reduced general and administrative expenses previously mentioned. For the six months ended June 30, 2015 compared to the six months ended June 30, 2014, the change in EBITDA is primarily attributed to the $50.7 million gain on regulatory order and one-time $2.0 million of income related to the settlement of outstanding litigation, both of which were recorded in the six months ended June 30, 2014.

Adjusted EBITDA for the three and six months ended June 30, 2015 was $4.7 million and $7.9 million, respectively, compared to $4.0 million and $6.1 million for the three and six months ended June 30, 2014. The $0.7 million and $1.8 million increase in Adjusted EBITDA for both the three and six month periods ended June 30, 2015, respectively, was primarily attributed to the rate increase, growth in new connections and reduction in general and administrative 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.

Arizona's Growth Corridor: Positive Population Trends

The second quarter of 2015 continued to show positive growth in new connections and re-establishing service on previously vacant homes. As of June 30, 2015, total service connections increased to 45,504 compared to 45,235 as of December 31, 2014. The Company's vacancy rate is now at 2.8% after reaching a peak of 11.2% in February of 2009.  Total active connections have increased to 44,217 compared to 43,568 as of December 31, 2014.

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.

Disposition of Non-Core Assets

On July 15^th of this year, Global Water completed the transfer of the assets of Valencia Water Company, Inc. to the City of Buckeye. Upon closing the transaction, the City of Buckeye paid Global Water US$55 million and an additional US$198,000 as a result of a working capital adjustment. The agreement also stipulates that Buckeye will pay Global Water a growth premium equal to US$3,000 for each new meter installed within Valencia's prior service area for a 20-year period subject to a maximum payout of US$45 million. The first growth premium payment will occur in mid-November and will include payment for the new water meters installed during the first three quarters of 2015, with all subsequent payments to be made quarterly.

In consideration of this transaction, combined with marked growth and operational progress, on July 28, 2015, the Company announced a special dividend in the amount of CAD $1.55 per share. Furthermore, on July 31, 2015 the Company announced a nearly 9% increase to the monthly cash dividend in the amount of CAD $0.0283 per Share, or an annualized amount of CAD $0.3396 per Share. This marked the third increase to the dividend since it was initiated last year.

Conference Call

Global Water will conduct a conference call on Thursday, August 13, 2015, at 1:00 p.m. EST.  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 91842440. The replay will expire at midnight (EST) on August 27, 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 June 30, 2015 and December 31, 2014
(Unaudited)
			June 30, 2015		December 31, 2014
			(in thousands of US$, except share data)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$                              450		$                              189
	Other current assets		51		18
Total current assets			501		207
Equity method investment			57,921		59,794
TOTAL ASSETS			$                         58,422		$                         60,001
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
	Dividends payable, accounts payable and accrued expenses		$                              196		$                              212
	Due to related party		268		—
	Other noncurrent liabilities		229		155
	Deferred tax liability		1,635		1,666
Total liabilities			2,328		2,033
COMMITMENTS AND CONTINGENCIES (see Note 9)
SHAREHOLDERS' EQUITY:
	Common stock, unlimited shares authorized, 8,737,412 shares issued and outstanding at June 30, 2015 and December 31, 2014		55,712		55,807
	Retained earnings		382		2,161
	Total shareholders' equity		56,094		57,968
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$                         58,422		$                         60,001

 

GWR GLOBAL WATER RESOURCES CORP.
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2015 and 2014
(Unaudited)
		Three Months Ended June 30,				Six Months Ended June 30,
		2015		2014		2015		2014
		(in thousands of US$, except share and per share data)
GAIN (LOSS) FROM EQUITY INVESTMENT		$              194		$            (235)		$            (246)		$         31,641
OPERATING EXPENSES		262		262		496		408
OPERATING INCOME (LOSS)		(68)		(497)		(742)		31,233
INCOME (LOSS) BEFORE INCOME TAXES		(68)		(497)		(742)		31,233
INCOME TAX BENEFIT (EXPENSE)		(81)		311		32		(1,526)
NET INCOME (LOSS)		$            (149)		$            (186)		$            (710)		$         29,707
WEIGHTED AVERAGE SHARES:
Basic		8,744,912		8,754,612		8,749,682		8,754,612
Diluted		8,744,912		8,754,612		8,749,682		8,762,348
EARNINGS (LOSS) PER SHARE:
Basic		$           (0.02)		$           (0.02)		$           (0.08)		$             3.39
Diluted		$           (0.02)		$           (0.02)		$           (0.08)		$             3.39

 

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2015 and December 31, 2014
(Unaudited)
				June 30, 2015		December 31, 2014
ASSETS				(in thousands of US$, except share data)
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment				$                       254,790		$                       318,995
	Less accumulated depreciation			(60,692)		(78,571)
		Net property, plant and equipment		194,098		240,424
CURRENT ASSETS:
	Cash and cash equivalents			3,564		6,577
	Accounts receivable – net			1,416		1,365
	Due from related party			598		457
	Accrued revenue			1,830		1,762
	Prepaid expenses and other current assets			615		541
	Deferred tax assets - current			1,675		1,591
	Assets held for sale			56,117		—
		Total current assets		65,815		12,293
OTHER ASSETS:
	Goodwill			—		13,082
	Intangible assets – net			12,772		12,772
	Regulatory assets			333		400
	Deposits			19		25
	Bond service fund and other restricted cash			10,043		9,927
	Debt issuance costs - net			2,601		2,722
	Equity method investment			1,050		1,150
	Deferred tax assets			15,057		14,806
	Total other assets			41,875		54,884
TOTAL				$                       301,788		$                       307,601
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
	Accounts payable			$                              982		$                           1,531
	Accrued expenses			5,032		6,832
	Deferred revenue – current portion			9		13
	Customer and meter deposits			1,855		2,601
	Long-term debt – current portion			2,683		2,653
	Liabilities held for sale			41,871		—
		Total current liabilities		52,432		13,630
NONCURRENT LIABILITIES:
	Long-term debt			127,104		127,491
	Deferred regulatory gain			19,730		19,730
	Regulatory liability			7,859		7,859
	Advances in aid of construction			60,940		89,206
	Contributions in aid of construction – net			4,520		17,096
	Acquisition liability			4,688		4,688
	Other noncurrent liabilities			203		221
		Total noncurrent liabilities		225,044		266,291
		Total liabilities		277,476		279,921
Commitments and contingencies (see Note 12)
EQUITY (DEFICIT):
	Common stock, $0.01 par value, 1,000,000 shares authorized, 181,878 and 182,050 shares issued and outstanding at June 30, 2015 and December 31, 2014			2		2
	Paid in capital			47,783		50,639
	Accumulated deficit			(23,473)		(22,961)
		Total equity		24,312		27,680
TOTAL				$                       301,788		$                       307,601

 

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2015 and 2014
(Unaudited)
			Three Months Ended June 30,				Six Months Ended June 30,
			2015		2014		2015		2014
			(in thousands of US$)
REVENUES:
	Water services		$              5,114		$             5,127		$              9,007		$              8,744
	Wastewater and recycled water services		3,793		3,612		7,395		6,977
	Unregulated revenues		175		116		302		130
		Total revenues	9,082		8,855		16,704		15,851
OPERATING EXPENSES:
	Operations and maintenance		2,675		2,695		5,146		5,178
	General and administrative		1,807		2,280		3,871		4,769
	Gain on regulatory order		—		—		—		(50,664)
	Depreciation		2,320		2,427		4,632		4,671
		Total operating expenses	6,802		7,402		13,649		(36,046)
OPERATING INCOME			2,280		1,453		3,055		51,897
OTHER INCOME (EXPENSE):
	Interest income		2		22		4		41
	Interest expense		(2,050)		(2,152)		(4,129)		(4,376)
	Other		363		(147)		222		1,774
		Total other income (expense)	(1,685)		(2,277)		(3,903)		(2,561)
INCOME (LOSS) BEFORE INCOME TAXES			595		(824)		(848)		49,336
INCOME TAX BENEFIT (EXPENSE)			(192)		335		336		16,460
NET INCOME (LOSS)			$                 403		$               (489)		$               (512)		$            65,796

 

GLOBAL WATER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Eight Quarters Ended June 30, 2015
(Unaudited)
				2015				2014								2013
REVENUES:				Q2		Q1		Q4		Q3		Q2		Q1		Q4		Q3
	Water services			$     5,114		$     3,893		$     4,245		$     5,087		$     5,127		$     3,617		$     4,223		$     5,405
	Wastewater and recycled water services			3,793		3,602		3,551		3,584		3,612		3,365		3,498		3,536
	Unregulated revenues			175		127		117		124		116		14		45		49
		Total revenues		9,082		7,622		7,913		8,795		8,855		6,996		7,766		8,990
OPERATING EXPENSES:
	Operations and maintenance			2,675		2,471		2,563		2,677		2,695		2,483		2,460		3,043
	General and administrative			1,807		2,064		2,199		1,841		2,280		2,489		1,671		2,608
	Gain on regulatory order			—		—		—		—		—		(50,664)		—		—
	Depreciation			2,320		2,312		2,279		2,255		2,427		2,244		2,134		2,306
		Total operating expenses		6,802		6,847		7,041		6,773		7,402		(43,448)		6,265		7,957
OPERATING INCOME (LOSS)				2,280		775		872		2,022		1,453		50,444		1,501		1,033
OTHER INCOME (EXPENSE):
	Interest income			2		2		15		23		22		19		20		20
	Interest expense			(2,050)		(2,079)		(3,025)		(2,111)		(2,152)		(2,224)		(2,351)		(2,209)
	Other			363		(141)		781		23		(147)		1,921		978		1,818
		Total other income (expense)		(1,685)		(2,218)		(2,229)		(2,065)		(2,277)		(284)		(1,353)		(371)
INCOME (LOSS) BEFORE INCOME TAXES				595		(1,443)		(1,357)		(43)		(824)		50,160		148		662
INCOME TAX  BENEFIT (EXPENSE)				(192)		528		518		17		335		16,125		(11)		(2)
NET INCOME (LOSS)				$        403		$      (915)		$      (839)		$        (26)		$      (489)		$   66,285		$        137		$        660
Adjusted EBITDA ^(1)				4,723		3,166		3,314		4,367		3,966		2,098		3,767		3,346

⁽¹⁾ Adjustments exclude the 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 Six Months Ended June 30, 2015 and 2014
(Unaudited)
						Three Months Ended June 30,				Six Months Ended June 30,
						2015		2014		2015		2014
						(in thousands of US$)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)					$            403		$          (489)		$          (512)		$       65,796
		Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Deferred compensation				256		564		443		864
		Depreciation				2,320		2,427		4,632		4,671
		Amortization of deferred debt issuance costs and discounts				56		89		112		176
		Loss on disposal of fixed assets				—		3		—		3
		Gain on sale of 303 contracts				(296)		—		(296)		—
		Loss on equity method investment				56		232		100		406
		Gain on regulatory order				—		—		—		(50,664)
		Other gains and losses				—		—		176		—
		Provision for doubtful accounts receivable				12		28		28		43
		Deferred income tax expense (benefit)				192		(335)		(336)		(16,460)
		Changes in assets and liabilities:
			Accounts receivable			(451)		(326)		(290)		(254)
			Other current assets			(625)		(528)		(957)		(302)
			Accounts payable and other current liabilities			(1,960)		(2,845)		(2,423)		(260)
			Other noncurrent assets			35		22		85		31
			Other noncurrent liabilities			—		51		—		2,853
				Net cash provided by (used in) operating activities		(2)		(1,107)		762		6,903
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures					(590)		(560)		(1,009)		(666)
	(Deposits) withdrawals of restricted cash					(76)		—		(80)		197
	Cash received from the sale of Loop 303 Contracts					296		—		296		—
	Cash advance to related party					—		—		(1,107)		—
	Repayment of related party cash advance					651		—		833		—
	Deposits received					1		1		7		2
				Net cash used in investing activities		282		(559)		(1,060)		(467)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Loan repayments					(197)		(1)		(393)		(1,002)
	Principal payments under capital leases					(26)		(20)		(48)		(65)
	Advances in aid of construction					94		133		144		194
	Dividends paid					(1,181)		(1,150)		(2,293)		(1,150)
	Share repurchase					(96)		—		(96)		—
	Refunds of advances for construction					(17)		—		(29)		—
				Net cash used in financing activities		(1,423)		(1,038)		(2,715)		(2,023)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						(1,143)		(2,704)		(3,013)		4,413
CASH AND CASH EQUIVALENTS – Beginning of period						4,707		9,077		6,577		1,960
CASH AND CASH EQUIVALENTS – End of period						$         3,564		$         6,373		$         3,564		$         6,373

SOURCE GWR Global Water Resources Corp.

Marina Proskurovsky, Investor Relations | NATIONAL Equicom, Tel: [phone] ext. 288, Email: [email protected], www.gwresources.com