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Press release from CNW Group

GWR Global Water Resources Corp. reports second quarter 2012 results

Thursday, August 09, 2012

GWR Global Water Resources Corp. reports second quarter 2012 results07:00 EDT Thursday, August 09, 2012PHOENIX, 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, 2011Raised $25 million of new debt with favorable interest rates and terms, primarily utilized to extinguish certain existing debt and improve future cash flowReceived a favorable arbitration award in excess of $6.3 millionGoleta Water District approved FATHOM™ as the Customer Information System to service approximately 16,600 service connectionsEntered into an agreement with Thames Water Utilities Ltd. in London, England to bring FATHOM™ tools to customers of the United KingdomFiled for an approximate 25% increase in regulated utility rates, subsequent to the end of the quarterLaunched 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 smartphoneFinancial HighlightsConsolidated 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 OutlookGlobal 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 FATHOMTM 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 FATHOMTM 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 FATHOMTM's ability to be implemented incrementally."We continue to add new accounts to our FATHOMTM 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 FATHOMTM 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 CallGlobal 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 StatementsThis 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 MeasuresThis 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 SHEETSAs 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        54,063TOTAL  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        53,774TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $36,615 $54,063GWR GLOBAL WATER RESOURCES CORP.STATEMENTS OF OPERATIONSFor the Three and Six Months Ended June 30, 2012 and 2011(Unaudited)             Three Months Ended June 30,    Six Months Ended June 30,             2012 2011 2012  2011        (in thousands of US$, except share and per share data)                                          LOSS FROM EQUITY INVESTMENT         $(16,448)    $(367)    $(17,499)    $(855)OPERATING EXPENSES                156            71           280           183OPERATING 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 GWRIVALUATION ALLOWANCE         $(852)    $(438)    $(2,027)    $(1,038)LOSS PER SHARE EXCLUDING EFFECTOF GWRI VALUATION ALLOWANCE         $(0.10)    $(0.05)    $(0.23)    $(0.12)GLOBAL WATER RESOURCES, INC.CONSOLIDATED BALANCE SHEETSAs of June 30, 2012 and December 31, 2011(Unaudited)   June 30, 2012 December 31, 2011  (in thousands of US$, 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        55,536TOTAL 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)        12,362TOTAL  $305,991 $330,622 GLOBAL WATER RESOURCES, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFor the Three and Six Months Ended June 30, 2012 and 2011(Unaudited)                       Three Months Ended June 30, Six Months Ended June 30,      2012  2011  2012  2011     (in thousands of US$)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           16,988OPERATING 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)           1,121NET 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 EBITDAAmount for the period ended June 30, 2012     $(34,149)    $3,447    $(36,098)    $5,169Weighted average number of Global Water sharesoutstanding during the period ended June 30, 2012       182,050   182,050  182,050  182,050Global 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) $28.39GLOBAL WATER RESOURCES, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFor the Eight Quarters Ended June 30, 2012(Unaudited)     2012 2011 2010   Q2 Q1  Q4 Q3 Q2 Q1  Q4 Q3    (in thousands of US$, 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       323NET 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       2,640EBITDA   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$  3,481Active service connections at period end   40,503 40,100  39,731 39,644 39,342 39,011        38,459       38,923GLOBAL WATER RESOURCES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFor 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        10,163CASH 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