PHOENIX, AZ, Aug. 9, 2012 /CNW/ - GWR Global Water Resources Corp. (the "Company") (TSX: GWR) today reported its financial results for the second quarter ended June 30, 2012. 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 leading water resource management and technology company based in Phoenix, Arizona that owns and operates water, wastewater and recycled water utilities, and provides data and water management services through its unique, award winning platform, FATHOM™ Utility-to-Utility (U₂U™) Solutions. 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 US dollars.

Second Quarter Highlights:

• Active service connections of 40,503 as of June 30, 2012, 3.9% annualized growth compared with 39,731 as of December 31, 2011
• Raised $25 million of new debt with favorable interest rates and terms, primarily utilized to extinguish certain existing debt and improve future cash flow
• Received a favorable arbitration award in excess of $6.3 million
• Goleta Water District approved FATHOM™ as the Customer Information System to service approximately 16,600 service connections
• Entered into an agreement with Thames Water Utilities Ltd. in London, England to bring FATHOM™ tools to customers of the United Kingdom
• Filed for an approximate 25% increase in regulated utility rates, subsequent to the end of the quarter
• Launched the FATHOM™ Mobile Android application, subsequent to the end of the quarter, enabling utility customers to view account activity and bills, monitor water usage and make payments on their smartphone

Financial Highlights

Consolidated revenues for the three months ended June 30, 2012 totalled $8.8 million compared to $9.4 million for the same period last year. Consolidated revenues for the six months ended June 30, 2012 totalled $16.1 million compared to $18.5 million for the same period in 2011.

Consolidated revenues include regulated revenue which increased $0.8 million, or 11.3%, to $8.2 million for the three months ended June 30, 2012 compared with the same period last year. For the six months ended June 30, 2012, regulated revenues increased $1.4 million, or 10.5%, to $15.0 million compared with the same period last year. The increase in regulated revenue was due primarily to the rate increase phase-in pursuant to the 2010 Regulatory Rate Decision effective January 1, 2012, as well as to growth in the number of active service connections.

Consolidated revenues also include recurring revenue from the Company's FATHOM™ business which increased 30.7% to $558,000 for the three months ended June 30, 2012 compared with the same period last year. For the six months ended June 30, 2012, recurring FATHOM™ revenues increased 42.1% to approximately $1.1 million compared with the same period last year. While recurring revenue increased substantially, implementation revenue, which is generally lumpy in nature, decreased compared to last year as Global Water recorded no material Advanced Metering Infrastructure ("AMI") implementations during the 2012 period. Consolidated revenues also decreased in 2012 compared to 2011 due to no sale of contractual rights to date this year.

EBITDA for the three months ended June 30, 2012 totalled $3.4 million compared to $3.5 million for the same period last year. EBITDA for the six months ended June 30, 2012 totalled $5.2 million compared to $6.8 million for the same period last year. The change in EBITDA is primarily due to the change in implementation revenue mentioned above and due to revenue from the sale of contractual rights in the previous period.

Consolidated net loss was $34.1 million and $36.1 million for the three and six months ended June 30, 2012, respectively, compared to $0.8 million and $1.8 million for the same periods last year. The change is predominantly due to a $32.8 million nonrecurring, noncash charge attributed to a valuation allowance recorded against the Company's net deferred tax assets. Excluding this charge, consolidated net loss totaled $1.4 million and $3.3 million for the three and six months ended June 30, 2012, respectively, compared with $0.8 million and $1.8 million for the same periods last year.

The recording of the valuation allowance was made as a result of a GAAP accounting standard that considers historical results and existing contracts to determine whether an allowance should be recorded against the deferred tax asset. The deferred tax assets are still preserved for the purposes of the Company's tax returns and the allowance may be reduced when profitability is achieved as a result of new contracts, as a result of increases in utility rates from the pending rate case, or cost cutting measures taken by the Company. The valuation allowance had no impact on the Company's cash flows and management continues to believe in the long-term growth and profitability of the Company.

Business Outlook

Global Water's growth strategy for the regulated business is driven by increased service connections, continued operating efficiencies and utility rate increases approved by the economic regulator.  In July 2012, Global Water filed rate applications for each of its operating utilities. The filing is the initial step in obtaining rate increases for the six utilities that are currently not achieving their authorized rate of return. The evaluation process is expected to take approximately 12 months from the time the filings are deemed sufficient. The current revenue requirement was set in a rate case that concluded in 2010 and was based on a 2008 historic test year. Since that time, certain costs related to utility operations have increased. Global Water has also continued to make the necessary capital improvements to maintain industry‐leading performance for compliant operations, reliability, customer service, and critical water resource management.  The applications request a collective rate increase of approximately 25% or $8 million of annualized revenue.

Expansion of FATHOM^TM is driven by both market adoption and expanding the channels to market.  The primary channels remain the direct sales and partner channels in both the national and the international markets.  With the benefits offered by Global Water's FATHOM^TM OS platform, coupled with the visibility associated with its international expansion, there has been increased interest within both the national and international markets - particularly with larger municipalities using systems in need of updating or upgrading. Management believes there is an emerging opportunity to market to large cities based on FATHOM^TM's ability to be implemented incrementally.

"We continue to add new accounts to our FATHOM^TM business as water utilities recognize the benefits of back-office automation. Our growing customer base is attracting new interest among stronger and larger accounts and strategic partners. Our ability to deploy FATHOM^TM incrementally, starting with high-value meters, is opening up new opportunities to work with larger cities than we've historically targeted. We continue to execute on our strategy and our international thought leadership on Smartgrid for water has become our most notable and significant calling card in market development," said Trevor Hill, President and CEO of Global Water.

The full financial statements and management's discussion and analysis for the Company and Global Water will be available August 9, 2012 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 August 9, 2012 at 4:00 p.m. ET.  You 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 1 (855) 859-2056.  The passcode is 17199158.  The passcode will expire at midnight (ET) on August 23, 2012.  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.

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, 2012" 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, 2012 and December 31, 2011

(Unaudited)

				June 30, 2012			December 31, 2011
				(in thousands of US$, except share data)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	-		$	-
	Other current assets				19			-
		Total current assets			19			-
	Equity method investment				36,596			54,063
TOTAL  ASSETS				$	36,615		$	54,063
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
	Accounts payable and accrued expenses			$	58		$	8
	Due to related party				458			256
	Other noncurrent liabilities				39			25
		Total liabilities			555			289
SHAREHOLDERS' EQUITY:
	Common stock, unlimited shares authorized, 8,754,612   shares issued and outstanding at June 30, 2012 and   December 31, 2011				55,735			55,670
	Accumulated deficit				(19,675)			(1,896)
		Total shareholders' equity			36,060			53,774
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY				$	36,615		$	54,063

GWR GLOBAL WATER RESOURCES CORP.

STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2012 and 2011

(Unaudited)

							Three Months Ended June 30,											Six Months Ended June 30,
							2012				2011							2012					2011
							(in thousands of US$, except share and per share data)
LOSS FROM EQUITY INVESTMENT							$	(16,448)			$	(367)						$	(17,499)				$	(855)
OPERATING EXPENSES								156				71							280					183
OPERATING INCOME (LOSS)								(16,604)				(438)							(17,779)					(1,038)
LOSS BEFORE INCOME TAXES								(16,604)				(438)							(17,779)					(1,038)
INCOME TAX BENEFIT								-				-							-					-
NET LOSS							$	(16,604)			$	(438)						$	(17,779)				$	(1,038)
WEIGHTED AVERAGE SHARES:
		Basic						8,754,612				8,754,612							8,754,612					8,669,642
		Diluted						8,754,612				8,754,612							8,754,612					8,669,642
LOSS PER SHARE:
		Basic					$	(1.90)			$	(0.05)						$	(2.03)				$	(0.12)
		Diluted					$	(1.90)			$	(0.05)						$	(2.03)				$	(0.12)
NET LOSS EXCUDING EFFECT OF GWRI VALUATION ALLOWANCE							$	(852)			$	(438)						$	(2,027)				$	(1,038)
LOSS PER SHARE EXCLUDING EFFECT OF GWRI VALUATION ALLOWANCE							$	(0.10)			$	(0.05)						$	(0.23)				$	(0.12)

GLOBAL WATER RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

As of June 30, 2012 and December 31, 2011

(Unaudited)

				June 30, 2012			December 31, 2011
				(in thousands of US$, except share data)
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
	Property, plant and equipment			$	320,428		$	317,804
	Less accumulated depreciation				(57,799)			(51,856)
		Net property, plant and equipment			262,629			265,948
CURRENT ASSETS:
	Cash and cash equivalents				2,860			2,233
	Accounts receivable - net				2,367			2,779
	Other receivables				684			444
	Accrued revenue				1,939			1,254
	Prepaid expenses and other current assets				5,141			425
	Deferred tax asset - current				-			2,003
		Total current assets			12,991			9,138
OTHER ASSETS:
	Goodwill				13,082			13,082
	Intangible assets - net				1,545			1,545
	Regulatory assets				612			486
	Deposits				59			63
	Bond service fund and other restricted cash				11,387			9,287
	Debt issuance costs - net				3,686			3,005
	Deferred tax assets				-			28,068
		Total other assets			30,371			55,536
TOTAL ASSETS				$	305,991		$	330,622
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
	Accounts payable			$	3,196		$	3,637
	Accrued expenses				4,762			3,884
	Deferred revenue				154			2
	Accrued acquisition payments				-			5,919
	Customer and meter deposits				2,502			2,371
	Long-term debt - current portion				6,484			5,757
		Total current liabilities			17,098			21,570
NONCURRENT LIABILITIES:
	Long-term debt				135,624			115,476
	Advances in aid of construction				105,485			105,331
	Contributions in aid of construction - net				65,203			64,775
	Deferred income tax liability				589			-
	Acquisition liability				4,688			10,395
	Other non-current liabilities				955			713
		Total noncurrent liabilities			312,544			296,690
		Total liabilities			329,642			318,260
SHAREHOLDERS' EQUITY (DEFICIT):
	Common stock, $0.01 par value, 1,000,000 shares authorized, 182,050 shares issued and   outstanding at June 30, 2012 and December 31, 2011				2			2
	Paid in capital				55,816			55,731
	Accumulated deficit				(79,469)			(43,371)
		Total equity (deficit)			(23,651)			12,362
TOTAL				$	305,991		$	330,622

 

GLOBAL WATER RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2012 and 2011

(Unaudited)

					Three Months Ended June 30,							Six Months Ended June 30,
						2012			2011				2012			2011
					(in thousands of US$)
REVENUES:
	Water services				$	4,844		$	4,497			$	8,398		$	7,921
	Wastewater and recycled water services					3,353			2,866				6,585			5,637
	Unregulated revenues					572			1,991				1,111			4,962
		Total revenues				8,769			9,354				16,094			18,520
OPERATING EXPENSES:
	Operations and maintenance					2,919			3,151				5,856			6,226
	General and administrative					2,457			2,678				5,117			5,570
	Depreciation					2,706			2,580				5,371			5,192
		Total operating expenses				8,082			8,409				16,344			16,988
OPERATING INCOME (LOSS)						687			945				(250)			1,532
OTHER INCOME (EXPENSE):
	Interest income					-			-				-			2
	Interest expense					(3,005)			(2,202)				(5,235)			(4,518)
	Other					54			23				48			63
		Total other income (expense)				(2,951)			(2,179)				(5,187)			(4,453)
LOSS BEFORE INCOME TAXES						(2,264)			(1,234)				(5,437)			(2,921)
INCOME TAX (EXPENSE) BENEFIT						(31,885)			471				(30,661)			1,121
NET LOSS					$	(34,149)		$	(763)			$	(36,098)		$	(1,800)

Net Loss and EBITDA per Share Information for the Three and Six Months Ended June 30, 2012   

(amounts in thousands of US dollars, except share data):

		Three Months Ended June 30, 2012						Six Months Ended    June 30, 2012
		Net Loss			EBITDA			Net Loss			EBITDA
Amount for the period ended June 30, 2012		$	(34,149)		$	3,447		$	(36,098)		$	5,169
Weighted average number of Global Water shares outstanding during the period ended June 30, 2012			182,050			182,050			182,050			182,050
Global Water  per share amount		$	(187.58)		$	18.93		$	(198.29)		$	28.39
Global Water  per share amount, excluding valuation allowance		$	(7.66)		$	18.93		$	(18.37)		$	28.39

GLOBAL WATER RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Eight Quarters Ended June 30, 2012

(Unaudited)

				2012					2011									2010
					Q2		Q1			Q4		Q3		Q2		Q1			Q4		Q3
				(in thousands of US$, except service connections)
REVENUES:
	Water services			$	4,844	$	3,554		$	3,815	$	5,394	$	4,497	$	3,424		$	3,836	$	4,810
	Wastewater and recycled water services				3,353		3,232			2,903		2,872		2,866		2,771			2,219		2,076
	Unregulated revenues				572		539			1,016		1,885		1,991		2,971			3,160		259
		Total revenues			8,769		7,325			7,734		10,151		9,354		9,166			9,215		7,145
OPERATING EXPENSES:
	Operations and maintenance				2,919		2,937			2,758		3,583		3,547		3,357			3,681		1,980
	General and administrative				2,457		2,660			2,247		1,965		2,282		2,610			1,778		1,817
	Goodwill impairment				-		-			-		-		-		-			-		23,985
	Depreciation				2,706		2,665			2,738		2,557		2,580		2,612			2,619		2,640
		Total operating expenses			8,082		8,262			7,743		8,105		8,409		8,579			8,078		30,422
	OPERATING INCOME (LOSS)				687		(937)			(9)		2,046		945		587			1,137		(23,277)
OPERATING INCOME (EXPENSE):
	Interest income				-		-			-		-		-		2			-		-
	Interest expense				(3,005)		(2,230)			(2,194)		(2,196)		(2,202)		(2,316)			(3,428)		(3,293)
	Other				54		(6)			2		(8)		23		40			51		8
		Total other income (expense)			(2,951)		(2,236)			(2,192)		(2,204)		(2,179)		(2,274)			(3,377)		(3,285)
LOSS BEFORE INCOME TAXES					(2,264)		(3,173)			(2,201)		(158)		(1,234)		(1,687)			(2,240)		(26,562)
INCOME TAX (EXPENSE) BENEFIT					(31,885)		1,224			795		56		471		650			2,607		323
NET INCOME (LOSS)				$	(34,149)	$	(1,949)		$	(1,406)	$	(102)	$	(763)	$	(1,037)		$	367	$	(26,239)
	Income tax expense (benefit)			$	31,885	$	(1,224)			(795)		(56)		(471)		(650)			(2,607)		(323)
	Interest income				-		-			-		-		-		(2)			-		-
	Interest expense				3,005		2,230			2,194		2,196		2,202		2,316			3,428		3,293
	Depreciation				2,706		2,665			2,738		2,557		2,580		2,612			2,619		2,640
EBITDA					3,447		1,722		$	2,731	$	4,595	$	3,548	$	3,239		$	3,807	$	(20,629)
	Goodwill impairment				-		-			-		-		-		-			-		23,985
	Other regulatory and governmental fees				-		-			-		-		-		-			-		133
	Other, net				-		-			-		-		-		-			(51)		(8)
ADJUSTED EBITDA					3,447		1,722		$	2,731	$	4,595	$	3,548	$	3,239		$	3,756	$	3,481
Active service connections at period end					40,503		40,100			39,731		39,644		39,342		39,011			38,459		38,923

GLOBAL WATER RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three and Six Months Ended June 30, 2012 and 2011

(Unaudited)

						Three Months Ended June 30,						Six Months Ended June 30,
						2012			2011			2012			2011
						(in thousands of US$)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss					$	(34,149)		$	(763)		$	(36,098)		$	(1,800)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Deferred compensation					146			134			265			296
		Depreciation					2,706			2,580			5,371			5,192
		Amortization of deferred debt issuance costs and discounts					173			55			230			133
		Write-off of debt issuance costs					602			-			602			-
		Loss on disposal of fixed and intangible assets					-			9			-			33
		Gain on advance in aid of construction purchase					-			-			-			(22)
		Gain on settlement of acquisition liability					-			-			-			(80)
		Imputed interest expense on deferred payments for acquisitions - net of cash paid					-			151			(463)			(503)
		Provision for doubtful accounts receivable					41			59			82			91
		Deferred income tax expense (benefit)					31,885			(471)			30,661			(1,121)
		Changes in assets and liabilities - excluding effects of acquisitions:
			Accounts receivable				91			(2,871)			331			(2,762)
			Other current assets				(595)			(122)			(1,165)			(1,415)
			Accounts payable and other current liabilities				(1,526)			(84)			343			318
			Other noncurrent assets				(67)			(51)			(126)			(57)
			Other noncurrent liabilities				628			(58)			613			382
				Net cash used in operating activities			(65)			(1,432)			646			(1,315)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures						(1,429)			(1,475)			(2,285)			(3,081)
	Proceeds from disposal of fixed and intangible assets						-			8			-			34
	Deposits of restricted cash						(2,507)			(22)			(2,653)			(44)
	Deposits received						1			-			3			5
				Net cash used in investing activities			(3,935)			(1,489)			(4,935)			(3,086)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from bonds						14,000			-			14,000			-
	Loan borrowings						11,000			6,904			18,000			9,268
	Loan repayments						(7,063)			(4,809)			(11,136)			(15,076)
	Deposits to escrow for debt service						(3,923)			-			(3,923)			-
	Related-party loan proceeds						-			-			8,910			-
	Related-party loan repayments						(8,910)			-			(8,910)			-
	Debt issuance costs paid						(1,323)			-			(1,465)			(34)
	Acquisition of utilities - deferred acquisition payments						-			-			(11,163)			(4,381)
	Proceeds from the sale of stock / Financing costs paid						-			-			-			4,011
	Advances in aid of construction, net of refunds paid						100			44			155			483
	Contributions in aid of construction under ICFA and other agreements						418			99			448			99
				Net cash provided by (used in) financing activities			4,299			2,238			4,916			(5,630)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS							299			(683)			627			(10,031)
CASH AND CASH EQUIVALENTS - Beginning of period							2,561			815			2,233			10,163
CASH AND CASH EQUIVALENTS - End of period						$	2,860		$	132		$	2,860		$	132

 

 

 

 

SOURCE: GWR Global Water Resources Corp.

For further information:

Ross Marshall
Investor Relations
Tel:  416.815.0700 ext. 238
Email:  rmarshall@equicomgroup.com
www.gwresources.com
www.gwfathom.com