10-Q 1 gwrs-20220331.htm 10-Q gwrs-20220331
false2022Q10001434728--12-315.050.03.015.0http://fasb.org/us-gaap/2021-01-31#LongTermDebtAndCapitalLeaseObligationshttp://fasb.org/us-gaap/2021-01-31#LongTermDebtAndCapitalLeaseObligationsCurrentP2Y484800014347282022-01-012022-03-3100014347282022-05-04xbrli:shares00014347282022-03-31iso4217:USD00014347282021-12-31iso4217:USDxbrli:shares00014347282021-01-012021-03-310001434728us-gaap:CommonStockMember2020-12-310001434728us-gaap:TreasuryStockMember2020-12-310001434728us-gaap:AdditionalPaidInCapitalMember2020-12-310001434728us-gaap:RetainedEarningsMember2020-12-3100014347282020-12-310001434728us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001434728us-gaap:RetainedEarningsMember2021-01-012021-03-310001434728us-gaap:TreasuryStockMember2021-01-012021-03-310001434728us-gaap:CommonStockMember2021-01-012021-03-310001434728us-gaap:CommonStockMember2021-03-310001434728us-gaap:TreasuryStockMember2021-03-310001434728us-gaap:AdditionalPaidInCapitalMember2021-03-310001434728us-gaap:RetainedEarningsMember2021-03-3100014347282021-03-310001434728us-gaap:CommonStockMember2021-12-310001434728us-gaap:TreasuryStockMember2021-12-310001434728us-gaap:AdditionalPaidInCapitalMember2021-12-310001434728us-gaap:RetainedEarningsMember2021-12-310001434728us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001434728us-gaap:RetainedEarningsMember2022-01-012022-03-310001434728us-gaap:CommonStockMember2022-01-012022-03-310001434728us-gaap:CommonStockMember2022-03-310001434728us-gaap:TreasuryStockMember2022-03-310001434728us-gaap:AdditionalPaidInCapitalMember2022-03-310001434728us-gaap:RetainedEarningsMember2022-03-310001434728gwrs:ValenciaWaterCompanyMember2015-07-140001434728gwrs:ValenciaWaterCompanyMember2015-07-142015-07-140001434728gwrs:ValenciaWaterCompanyMember2022-01-012022-03-310001434728gwrs:ValenciaWaterCompanyMember2021-01-012021-03-310001434728gwrs:TaxCutsandJobsActMembergwrs:SantaCruzMember2021-12-310001434728gwrs:PaloVerdeMembergwrs:TaxCutsandJobsActMember2021-12-310001434728gwrs:TonopahMembergwrs:TaxCutsandJobsActMember2021-12-310001434728gwrs:TaxCutsandJobsActMembergwrs:NorthernScottsdaleMember2021-12-31xbrli:pure0001434728gwrs:ContributorMember2022-01-012022-03-310001434728gwrs:TaxPayerMember2022-01-012022-03-3100014347282021-01-0100014347282020-08-282020-08-28gwrs:utility00014347282020-08-2800014347282021-08-020001434728gwrs:PinalCountyMemberus-gaap:GeographicConcentrationRiskMembergwrs:ServiceConnectionsGeographicAreaMember2022-01-012022-03-310001434728gwrs:NorthernTrustLoanAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-04-302020-04-300001434728gwrs:NorthernTrustLoanAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-04-300001434728gwrs:NorthernTrustLoanAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-04-302020-04-300001434728gwrs:RinconWaterCompanyIncMember2022-01-202022-01-20gwrs:active_water_connectionutr:sqmi0001434728gwrs:TwinHawksUtilityIncMember2022-01-132022-01-130001434728gwrs:TwentySeventeenStockOptionGrantMember2022-03-310001434728gwrs:TwentySeventeenStockOptionGrantMember2022-01-012022-03-310001434728gwrs:TwentyNineteenStockOptionGrantMemberMember2022-03-310001434728gwrs:TwentyNineteenStockOptionGrantMemberMember2022-01-012022-03-310001434728gwrs:TwentyTwentyRestrictedStockAwardsMember2022-03-310001434728gwrs:TwentyTwentyOneRestrictedStockAwardsMember2022-03-310001434728gwrs:TwentyTwentyRestrictedStockAwardsMember2022-01-012022-03-310001434728gwrs:TwentyTwentyOneRestrictedStockAwardsMember2022-01-012022-03-310001434728gwrs:TwentyTwentyRestrictedStockAwardsMember2021-03-3100014347282012-07-092012-07-0900014347282014-02-012014-02-2800014347282014-01-012014-12-310001434728gwrs:InfrastructureCoordinationAndFinancingAgreementsMember2014-12-310001434728gwrs:InfrastructureCoordinationAndFinancingAgreementsMember2022-03-310001434728gwrs:TaxCutsandJobsActMember2022-03-310001434728us-gaap:RegulatedOperationMembergwrs:WaterServicesMembergwrs:ResidentialMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:WaterServicesMembergwrs:ResidentialMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:IrrigationMembergwrs:WaterServicesMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:IrrigationMembergwrs:WaterServicesMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:WaterServicesMembergwrs:CommercialMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:WaterServicesMembergwrs:CommercialMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:ConstructionservicesMembergwrs:WaterServicesMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:ConstructionservicesMembergwrs:WaterServicesMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:OtherWaterServicesMembergwrs:WaterServicesMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:OtherWaterServicesMembergwrs:WaterServicesMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:WaterServicesMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:WaterServicesMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:WastewaterandrecycledwaterMembergwrs:ResidentialMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:WastewaterandrecycledwaterMembergwrs:ResidentialMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:WastewaterandrecycledwaterMembergwrs:CommercialMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:WastewaterandrecycledwaterMembergwrs:CommercialMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:WastewaterandrecycledwaterMembergwrs:RecycledwaterMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:WastewaterandrecycledwaterMembergwrs:RecycledwaterMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:OtherwastewaterMembergwrs:WastewaterandrecycledwaterMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:OtherwastewaterMembergwrs:WastewaterandrecycledwaterMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMembergwrs:WastewaterandrecycledwaterMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMembergwrs:WastewaterandrecycledwaterMember2021-01-012021-03-310001434728us-gaap:RegulatedOperationMember2022-01-012022-03-310001434728us-gaap:RegulatedOperationMember2021-01-012021-03-310001434728gwrs:RentRevenueMemberus-gaap:UnregulatedOperationMember2022-01-012022-03-310001434728gwrs:RentRevenueMemberus-gaap:UnregulatedOperationMember2021-01-012021-03-310001434728us-gaap:UnregulatedOperationMember2022-01-012022-03-310001434728us-gaap:UnregulatedOperationMember2021-01-012021-03-310001434728gwrs:WaterServicesMember2022-03-310001434728gwrs:WaterServicesMember2021-12-310001434728gwrs:WastewaterandrecycledwaterMember2022-03-310001434728gwrs:WastewaterandrecycledwaterMember2021-12-3100014347282022-01-100001434728gwrs:PlantEquipmentAndWaterAndSewerLinesMember2022-03-310001434728gwrs:PlantEquipmentAndWaterAndSewerLinesMember2021-12-310001434728gwrs:ComputerAndOfficeEquipmentMember2022-03-310001434728gwrs:ComputerAndOfficeEquipmentMember2021-12-310001434728srt:MinimumMembergwrs:PlantEquipmentAndWaterAndSewerLinesMember2022-01-012022-03-310001434728gwrs:PlantEquipmentAndWaterAndSewerLinesMembersrt:MaximumMember2022-01-012022-03-310001434728srt:MinimumMembergwrs:ComputerAndOfficeEquipmentMember2022-01-012022-03-310001434728gwrs:ComputerAndOfficeEquipmentMembersrt:MaximumMember2022-01-012022-03-3100014347282022-02-142022-02-140001434728gwrs:CPWaterCertificateOfConvenienceAndNecessityServiceAreaMember2022-03-310001434728gwrs:CPWaterCertificateOfConvenienceAndNecessityServiceAreaMember2021-12-310001434728us-gaap:TrademarksMember2022-03-310001434728us-gaap:TrademarksMember2021-12-310001434728us-gaap:FranchiseRightsMember2022-03-310001434728us-gaap:FranchiseRightsMember2021-12-310001434728gwrs:RedRockUtilitiesMember2022-03-310001434728gwrs:RedRockUtilitiesMember2021-12-310001434728gwrs:AcquiredInfrastructureCoordinationAndFinancingAgreementsMember2022-03-310001434728gwrs:AcquiredInfrastructureCoordinationAndFinancingAgreementsMember2021-12-310001434728us-gaap:ContractualRightsMember2022-03-310001434728us-gaap:ContractualRightsMember2021-12-310001434728gwrs:HookUpFeeFundsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001434728us-gaap:FairValueInputsLevel2Membergwrs:HookUpFeeFundsMember2022-03-310001434728gwrs:HookUpFeeFundsMemberus-gaap:FairValueInputsLevel3Member2022-03-310001434728gwrs:HookUpFeeFundsMember2022-03-310001434728gwrs:HookUpFeeFundsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001434728us-gaap:FairValueInputsLevel2Membergwrs:HookUpFeeFundsMember2021-12-310001434728gwrs:HookUpFeeFundsMemberus-gaap:FairValueInputsLevel3Member2021-12-310001434728gwrs:HookUpFeeFundsMember2021-12-310001434728us-gaap:FairValueInputsLevel1Member2022-03-310001434728us-gaap:FairValueInputsLevel2Member2022-03-310001434728us-gaap:FairValueInputsLevel3Member2022-03-310001434728us-gaap:FairValueInputsLevel1Member2021-12-310001434728us-gaap:FairValueInputsLevel2Member2021-12-310001434728us-gaap:FairValueInputsLevel3Member2021-12-310001434728us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2022-03-310001434728us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2022-03-310001434728us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMember2022-03-310001434728us-gaap:CertificatesOfDepositMember2022-03-310001434728us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2021-12-310001434728us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2021-12-310001434728us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMember2021-12-310001434728us-gaap:CertificatesOfDepositMember2021-12-310001434728gwrs:RedRockUtilitiesMember2018-10-160001434728gwrs:RedRockUtilitiesMember2018-10-162018-10-160001434728gwrs:NotesAndBondsPayableMembergwrs:FourPointThreeEightZeroPercentSeriesATwoThousandAndSixteenMaturingJuneTwoThousandAndTwentyEightMember2022-03-310001434728gwrs:NotesAndBondsPayableMembergwrs:FourPointThreeEightZeroPercentSeriesATwoThousandAndSixteenMaturingJuneTwoThousandAndTwentyEightMember2021-12-310001434728gwrs:FourPointFiveEightZeroPercentSeriesBTwoThousandAndSixteenMaturingJuneTwoThousandAndThirtySixMembergwrs:NotesAndBondsPayableMember2022-03-310001434728gwrs:FourPointFiveEightZeroPercentSeriesBTwoThousandAndSixteenMaturingJuneTwoThousandAndThirtySixMembergwrs:NotesAndBondsPayableMember2021-12-310001434728gwrs:NotesAndBondsPayableMember2022-03-310001434728gwrs:NotesAndBondsPayableMember2021-12-310001434728us-gaap:SecuredDebtMember2022-03-310001434728us-gaap:SecuredDebtMember2021-12-310001434728us-gaap:SecuredDebtMember2016-06-24gwrs:debt_instrument0001434728us-gaap:SecuredDebtMembergwrs:SeriesASeniorSecuredNotesMember2016-06-240001434728us-gaap:SecuredDebtMembergwrs:SeriesASeniorSecuredNotesMember2016-06-242016-06-240001434728gwrs:SeriesBSeniorSecuredNotesMemberus-gaap:SecuredDebtMember2016-06-240001434728gwrs:SeriesBSeniorSecuredNotesMemberus-gaap:SecuredDebtMember2016-06-242016-06-240001434728us-gaap:SecuredDebtMember2016-06-242016-06-240001434728us-gaap:SecuredDebtMember2016-04-012016-06-300001434728us-gaap:RevolvingCreditFacilityMember2016-06-242016-06-240001434728us-gaap:RevolvingCreditFacilityMember2022-01-012022-03-310001434728gwrs:NorthernTrustLoanAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-04-302021-06-300001434728gwrs:NorthernTrustLoanAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMembersrt:ScenarioForecastMember2021-07-012024-03-310001434728us-gaap:EmployeeStockOptionMembergwrs:TwentySeventeenStockOptionGrantMember2022-01-012022-03-310001434728us-gaap:EmployeeStockOptionMembergwrs:TwentySeventeenStockOptionGrantMember2021-01-012021-03-310001434728us-gaap:EmployeeStockOptionMembergwrs:TwentyNineteenStockOptionGrantMemberMember2022-01-012022-03-310001434728us-gaap:EmployeeStockOptionMembergwrs:TwentyNineteenStockOptionGrantMemberMember2021-01-012021-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12018Member2022-01-012022-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12018Member2022-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12018Member2021-01-012021-03-310001434728gwrs:Q12019Memberus-gaap:PhantomShareUnitsPSUsMember2022-01-012022-03-310001434728gwrs:Q12019Memberus-gaap:PhantomShareUnitsPSUsMember2022-03-310001434728gwrs:Q12019Memberus-gaap:PhantomShareUnitsPSUsMember2021-01-012021-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12020Member2022-01-012022-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12020Member2022-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12020Member2021-01-012021-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12021Member2022-01-012022-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12021Member2022-03-310001434728us-gaap:PhantomShareUnitsPSUsMembergwrs:Q12021Member2021-01-012021-03-310001434728gwrs:Q12022Memberus-gaap:PhantomShareUnitsPSUsMember2022-01-012022-03-310001434728gwrs:Q12022Memberus-gaap:PhantomShareUnitsPSUsMember2022-03-310001434728gwrs:Q12022Memberus-gaap:PhantomShareUnitsPSUsMember2021-01-012021-03-310001434728us-gaap:PhantomShareUnitsPSUsMember2022-01-012022-03-310001434728us-gaap:PhantomShareUnitsPSUsMember2022-03-310001434728us-gaap:PhantomShareUnitsPSUsMember2021-01-012021-03-310001434728gwrs:Q12015Memberus-gaap:StockAppreciationRightsSARSMembergwrs:MembersOfManagementMember2022-01-012022-03-310001434728gwrs:Q12015Memberus-gaap:StockAppreciationRightsSARSMembergwrs:MembersOfManagementMember2022-03-310001434728gwrs:Q12015Memberus-gaap:StockAppreciationRightsSARSMembergwrs:MembersOfManagementMember2021-01-012021-03-310001434728us-gaap:StockAppreciationRightsSARSMembersrt:ExecutiveOfficerMembergwrs:Q22015Member2022-01-012022-03-310001434728us-gaap:StockAppreciationRightsSARSMembersrt:ExecutiveOfficerMembergwrs:Q22015Member2022-03-310001434728us-gaap:StockAppreciationRightsSARSMembersrt:ExecutiveOfficerMembergwrs:Q22015Member2021-01-012021-03-310001434728us-gaap:StockAppreciationRightsSARSMembergwrs:MembersOfManagementMembergwrs:Q32017Member2022-01-012022-03-310001434728us-gaap:StockAppreciationRightsSARSMembergwrs:MembersOfManagementMembergwrs:Q32017Member2022-03-310001434728us-gaap:StockAppreciationRightsSARSMembergwrs:MembersOfManagementMembergwrs:Q32017Member2021-01-012021-03-310001434728us-gaap:StockAppreciationRightsSARSMembergwrs:Q12018Membergwrs:MembersOfManagementMember2022-01-012022-03-310001434728us-gaap:StockAppreciationRightsSARSMembergwrs:Q12018Membergwrs:MembersOfManagementMember2022-03-310001434728us-gaap:StockAppreciationRightsSARSMembergwrs:Q12018Membergwrs:MembersOfManagementMember2021-01-012021-03-310001434728us-gaap:StockAppreciationRightsSARSMember2022-01-012022-03-310001434728us-gaap:StockAppreciationRightsSARSMember2022-03-310001434728us-gaap:StockAppreciationRightsSARSMember2021-01-012021-03-310001434728gwrs:YearOneMemberus-gaap:StockAppreciationRightsSARSMembersrt:ExecutiveOfficerMembergwrs:Q22015Member2022-01-012022-03-310001434728us-gaap:StockAppreciationRightsSARSMembersrt:ExecutiveOfficerMembergwrs:YearTwoMembergwrs:Q22015Member2022-01-012022-03-310001434728gwrs:YearThreeMemberus-gaap:StockAppreciationRightsSARSMembersrt:ExecutiveOfficerMembergwrs:Q22015Member2022-01-012022-03-310001434728us-gaap:StockAppreciationRightsSARSMembersrt:ExecutiveOfficerMembergwrs:YearFourMembergwrs:Q22015Member2022-01-012022-03-310001434728gwrs:PhantomShareUnitsAndStockAppreciationRightsMember2022-01-012022-03-310001434728gwrs:PhantomShareUnitsAndStockAppreciationRightsMember2021-01-012021-03-310001434728srt:MinimumMemberus-gaap:RestrictedStockMember2022-01-012022-03-310001434728srt:MaximumMemberus-gaap:RestrictedStockMember2022-01-012022-03-310001434728gwrs:MembersOfManagementMembergwrs:Q22020Memberus-gaap:RestrictedStockMember2022-01-012022-03-310001434728gwrs:MembersOfManagementMembergwrs:Q22020Memberus-gaap:RestrictedStockMember2021-01-012021-03-310001434728gwrs:MembersOfManagementMembergwrs:Q22020Memberus-gaap:RestrictedStockMember2021-12-310001434728gwrs:MembersOfManagementMembergwrs:Q22020Memberus-gaap:RestrictedStockMember2022-03-310001434728srt:OfficeBuildingMember2019-01-012019-01-310001434728srt:OfficeBuildingMember2022-01-012022-03-310001434728srt:OfficeBuildingMember2021-01-012021-03-310001434728srt:OfficeBuildingMemberus-gaap:SubsequentEventMember2022-05-010001434728srt:OfficeBuildingMembersrt:ScenarioForecastMember2022-05-012025-04-300001434728srt:OfficeBuildingMembersrt:ScenarioForecastMember2025-05-012027-04-300001434728gwrs:FarmersWaterCompanyMemberus-gaap:SubsequentEventMember2022-04-142022-04-14
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 
_____________________________________________________________
FORM 10-Q 
_____________________________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 001-37756 
______________________________________________________________
Global Water Resources, Inc.
(Exact Name of Registrant as Specified in its Charter) 
______________________________________________________________
Delaware90-0632193
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
21410 N. 19th Avenue #220
Phoenix,Arizona85027
(Address of principal executive offices)(Zip Code)
 
Registrant’s telephone number, including area code: (480) 360-7775
Securities registered pursuant to Section 12(b) of the Act:
______________________________________________________________
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareGWRSThe NASDAQ Stock Market, LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer 
Non-accelerated filer x Smaller reporting company x
    Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No
As of May 4, 2022, the registrant had 22,649,492 shares of common stock, $0.01 par value per share, outstanding.


TABLE OF CONTENTS
 
PART I. 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II. 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

-2-


GLOBAL WATER RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
 March 31, 2022December 31, 2021
ASSETS  
UTILITY PLANT: 
Land1,456 1,338 
Depreciable property, plant and equipment315,721 313,700 
Other697 697 
Construction work-in-process59,023 53,511 
Less accumulated depreciation(117,088)(113,380)
Net property, plant and equipment259,809 255,866 
CURRENT ASSETS:
Cash and cash equivalents11,135 12,637 
Accounts receivable — net1,927 1,994 
Customer payments in-transit323 201 
Unbilled revenue2,584 2,510 
Prepaid expenses and other current assets1,876 1,645 
Total current assets17,845 18,987 
OTHER ASSETS:
Goodwill5,760 5,730 
Intangible assets — net10,359 10,339 
Regulatory asset2,769 2,336 
Restricted cash806 806 
Other noncurrent assets34 10 
Right of Use Asset - Finance Lease50  
Total other assets19,778 19,221 
TOTAL ASSETS297,432 294,074 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable602 2,120 
Accrued expenses10,815 9,191 
Customer and meter deposits1,732 1,646 
Long-term debt and capital leases — current portion3,981 3,975 
Total current liabilities17,130 16,932 
NONCURRENT LIABILITIES:
Long-term debt and capital leases108,911 108,933 
Deferred revenue - ICFA20,108 19,035 
Regulatory liability7,425 7,421 
Advances in aid of construction85,654 84,578 
Contributions in aid of construction — net21,842 21,326 
Deferred income tax liabilities — net3,420 3,269 
Acquisition liability1,762 1,773 
Other noncurrent liabilities1,490 778 
Right of Use Liability - Finance Lease50  
Total noncurrent liabilities250,662 247,113 
Total liabilities267,792 264,045 
Commitments and contingencies (Refer to Note 15)
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par value, 60,000,000 shares authorized; 22,832,263 and 22,832,013 shares issued as of March 31, 2022 and December 31, 2021, respectively.
228 228 
Treasury stock, 182,445 and 182,445 shares at March 31, 2022 and December 31, 2021, respectively.
(2)(2)
Paid in capital29,414 29,803 
Retained earnings  
Total shareholders' equity29,640 30,029 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY297,432 294,074 
See accompanying notes to the condensed consolidated financial statements
-3-


GLOBAL WATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)

 
 Three Months Ended March 31,
 20222021
REVENUES:  
Water services4,348 3,986 
Wastewater and recycled water services5,681 5,243 
Unregulated revenues 29 
Total revenues10,029 9,258 
OPERATING EXPENSES:  
Operations and maintenance2,543 2,499 
General and administrative3,780 3,490 
Depreciation and amortization2,343 2,226 
Total operating expenses8,666 8,215 
OPERATING INCOME1,363 1,043 
OTHER INCOME (EXPENSE):  
Interest income2 5 
Interest expense(1,205)(1,325)
Other1,072 15 
Total other expense(131)(1,305)
INCOME (LOSS) BEFORE INCOME TAXES1,232 (262)
INCOME TAX BENEFIT (EXPENSE)(343)45 
NET INCOME (LOSS)$889 $(217)
Basic earnings (loss) per common share$0.04 $(0.01)
Diluted earnings (loss) per common share$0.04 $(0.01)
Dividends declared per common share$0.07 $0.07 
Weighted average number of common shares used in the determination of:  
Basic22,649,215 22,587,766 
Diluted22,901,232 22,587,766 
 
See accompanying notes to the condensed consolidated financial statements
-4-


GLOBAL WATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share and per share amounts)
(Unaudited)

 Common Stock SharesCommon StockTreasury Stock SharesTreasury StockPaid-in CapitalRetained EarningsTotal Equity
BALANCE - December 31, 202022,690,477 $227 (102,711)$(1)$31,962 $ $32,188 
Dividend declared $0.07 per share
— — — — (1,650) (1,650)
Issuance of common stock— — — — — —  
Treasury Stock— — (398)— — —  
Stock option exercise628 — — — — —  
Stock compensation— — — — 271 — 271 
Net income (loss)— — — — — (217)(217)
BALANCE - March 31, 202122,691,105 $227 (103,109)$(1)$30,583 $(217)$30,592 
BALANCE - December 31, 202122,832,013 $228 (182,445)$(2)$29,803 $ $30,029 
Dividend declared $0.07 per share
— — — — (781)(889)(1,670)
Issuance of common stock— — — — — —  
Treasury Stock— — — — — —  
Stock option exercise250 — — — 3 — 3 
Stock compensation— — — — 389 — 389 
Net income— — — — — 889 889 
BALANCE - March 31, 202222,832,263 $228 (182,445)$(2)$29,414 $ $29,640 

See accompanying notes to the condensed consolidated financial statements
-5-


GLOBAL WATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

 Three Months Ended March 31,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss)$889 $(217)
Adjustments to reconcile net income to net cash provided by operating activities:  
Deferred compensation498 775 
Depreciation and amortization2,343 2,226 
Amortization of deferred debt issuance costs and discounts11 11 
Other losses(8) 
Provision for doubtful accounts receivable26 42 
Deferred income tax expense151 (79)
Changes in assets and liabilities:  
Accounts receivable41 370 
Other current assets(452)(74)
Accounts payable and other current liabilities74 798 
Other noncurrent assets20 (50)
Other noncurrent liabilities1,778 999 
Net cash provided by operating activities5,371 4,801 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Capital expenditures(6,169)(3,269)
Cash paid for acquisitions, net of cash acquired(85) 
Net cash used in investing activities(6,254)(3,269)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Dividends paid(1,670)(1,650)
Advances in aid of construction1,076 987 
Proceeds from stock option exercise3  
Principal payments under capital lease(28)(31)
Net cash (used) provided by financing activities(619)(694)
INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(1,502)838 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period13,443 21,305 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH – End of period$11,941 $22,143 
 
See accompanying notes to the condensed consolidated financial statements

Supplemental disclosure of cash flow information:
March 31, 2022March 31, 2021
Cash and cash equivalents$11,135 $18,209 
Restricted Cash806 3,934 
Total cash, cash equivalents, and restricted cash$11,941 $22,143 

-6-


GLOBAL WATER RESOURCES, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
1. BASIS OF PRESENTATION, CORPORATE TRANSACTIONS, SIGNIFICANT ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation and Principles of Consolidation
The condensed consolidated financial statements of Global Water Resources, Inc. (the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 are unaudited. The December 31, 2021 condensed consolidated balance sheet data was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These financial statements follow the same accounting policies and methods of their application as the Company’s most recent annual consolidated financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021. In our opinion, these financial statements include all normal and recurring adjustments necessary for the fair statement of the results for the interim period. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year, due to the seasonality of our business.
The Company prepares its financial statements in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Corporate Transactions
Stipulated Condemnation of the Operations and Assets of Valencia Water Company, Inc.
On July 14, 2015, the Company closed the stipulated condemnation to transfer the operations and assets of Valencia Water Company, Inc. ("Valencia") to the City of Buckeye. Terms of the condemnation were agreed upon through a settlement agreement and stipulated final judgment of condemnation wherein the City of Buckeye acquired all the operations and assets of Valencia and assumed operation of the utility upon close. The City of Buckeye is obligated to pay the Company a growth premium equal to $3,000 for each new water meter installed within Valencia’s prior service areas in the City of Buckeye, for a 20-year period ending December 31, 2034, subject to a maximum payout of $45.0 million over the term of the agreement. The Company received growth premium of $1.1 million and less than $0.1 million for the three months ended March 31, 2022 and 2021. The increase was due to increased meter connections in the area over the prior year period.
Arizona Corporation Commission (the “ACC”) Tax Docket
The Company had a regulatory asset of $2.8 million and $2.3 million at March 31, 2022 and December 31, 2021, respectively, and regulatory liabilities of $0.8 million at March 31, 2022 and December 31, 2021, respectively, related to the Federal Tax Cuts and Jobs Act (the "TCJA") signed into law on December 22, 2017. Under ASC 740, Income Taxes, the tax effects of changes in tax laws must be recognized in the period in which the law is enacted. ASC 740 also requires deferred income tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Company’s deferred income taxes were re-measured based upon the new tax rate. For the Company’s regulated entities, substantially all of the change in deferred income taxes is recorded as an offset to either a regulatory asset or liability because the impact of changes in the rates are expected to be recovered from or refunded to customers.
On December 20, 2017, the ACC opened a docket to address the utility ratemaking implications of the TCJA. The ACC subsequently approved an order in February 2018 requiring Arizona utilities to apply regulatory accounting treatment, which includes the use of regulatory assets and regulatory liabilities, to address all impacts from the enactment of the TCJA.
On September 20, 2018, the ACC issued Rate Decision No. 76901, which set forth the reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah and Northern Scottsdale utilities due to the lower corporate tax rates under the TCJA.  Rate Decision No. 76901 adopted a phase-in approach for the reductions to match the phase-in of our revenue requirement under Rate Decision No. 74364 enacted in February 2014. In 2021, the final year of the phase-in, the aggregate annual reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities was approximately $415,000,
-7-


$669,000, $16,000, and $5,000, respectively. The ACC also approved a carrying cost of 4.25% on regulatory liabilities resulting from the difference of the fully phased-in rates to be applied in 2021 versus the years leading up to 2021 (i.e., 2018 through 2020).
Rate Decision No. 76901, however, did not address the impacts of the TCJA on accumulated deferred income taxes (“ADIT”), including excess ADIT (“EADIT”).  Following the ACC's request for a proposal, the Company made its proposal in filings on December 19, 2018 and July 1, 2019. ACC Staff reviewed the Company's filing and requested that the Company defer tariff revisions until such revisions can be considered in the next rate case. ACC Staff also requested that the Company defer consideration of the regulatory assets and regulatory liabilities associated with 2018 EADIT amortization. On July 18, 2019, the Company made a filing proposing these items be deferred to the next rate case. Refer to " — Corporate Transactions — ACC Rate Case" for additional information regarding the Company's next rate case.
On November 27, 2018, February 20, 2019, February 28, 2019, and January 23, 2020, the ACC adopted orders relating to the funding for income taxes on contributions in aid of construction (“CIAC”) and advances in aid of construction (“AIAC”) (which became taxable for our regulated utilities under the TCJA). Those orders 1) require that under the hybrid sharing method, a contributor will pay a gross-up to the utility consisting of 55% of the income tax expense with the utility covering the remaining 45% of the income tax expense; 2) remove the full gross-up method option for Class A and B utilities and their affiliates (which includes all of our utilities); 3) ensure proper ratemaking treatment of a utility using the self-pay method; 4) clarify that pass-through entities that are owned by a “C” corporation can recover tax expense according to methods allowed; and 5) require Class A and B utilities to self-pay the taxes associated with hook-up fee contributions but permit using a portion of the hook-up fees to fund these taxes. The Company's utilities have adopted the hybrid sharing method for income tax on CIAC and AIAC.
Effective January 1, 2021, CIAC and AIAC for regulated water and sewage disposal facility companies were excluded from income under Internal Revenue Code Section 118. Due to the 2021 IRC Section 118 amendment, the Company refunded $1.4 million in developer taxes paid for contributions made after December 31, 2020. For more details regarding the ruling, refer to "— Corporate Transactions — ACC Tax Docket."
ACC Rate Case
On August 28, 2020, 12 of our 18 regulated utilities each filed a rate case application with the ACC for water, wastewater, and recycled water rates, which proposed a collective revenue requirement increase of $4.6 million (relative to expected revenues in 2021, which is the final year of the rate phase-in from the last rate case) based on a 2019 test year. On August 2, 2021, we filed rejoinder testimony with the ACC updating our collective revenue increase to approximately $3.0 million. An evidentiary hearing was conducted beginning August 9, 2021. Certain of our utilities, including Santa Cruz and Palo Verde, have also requested that the rate increases be phased in over three years, beginning January 1, 2022. A final decision is not expected until the second quarter of 2022; therefore, any phase-in did not begin as requested on January 1, 2022 and may be shorter or longer than three years, if a revenue increase is approved.
We also requested the consolidation of water and/or wastewater rates for our Red Rock, Santa Cruz, Palo Verde, Picacho Water, and Picacho Utilities located in Pinal County. Of our utilities filing a rate case, these utilities make up approximately 96% of the Company's active service connections; provide or will provide water, wastewater, and recycled water services; and are expected to create economies of scale that are beneficial to all customers if consolidated.
There can be no assurance, however, that the ACC will approve the requested rate increase or any increase or the consolidation of water and wastewater rates described above, and the ACC could take other actions as a result of the rate case. Further, it is possible that the ACC may determine to decrease future rates. There can also be no assurance as to the timing of when an approved rate increase (if any) would go into effect.
Revolving Credit Line
On April 30, 2020, the Company entered into an agreement with The Northern Trust Company, an Illinois banking corporation, for a two-year revolving line of credit up to $10.0 million with an initial maturity date of April 30, 2022. This credit facility, which may be used to refinance existing indebtedness, to acquire assets to use in and/or expand the Company’s business, and for general corporate purposes, bears an interest rate equal to the London Interbank Offered Rate (LIBOR) plus 2.00% and has no unused line fee. This credit facility replaced the previous revolving line of credit with MidFirst Bank, which was terminated in April 2020. As of March 31, 2022, we had no outstanding borrowings under this credit line.
On April 30, 2021, the Company and The Northern Trust Company entered into an amendment to the loan agreement pursuant to which, among other things, the maturity date for the Company’s revolving line of credit was extended to April 30, 2024.
-8-


Recent Events
Acquisition of Rincon Water Company, Inc.
On January 20, 2022, the Company acquired the assets of Rincon Water Company, Inc., a water utility in Pima County, Arizona. The acquisition added an additional 73 connections and approximately 8.6 square miles of service area at the time of acquisition.
Acquisition of Twin Hawks Utility, Inc.
On January 13, 2022, Santa Cruz acquired the assets of Twin Hawks Utility, Inc., a water utility in Pinal County, Arizona. The acquisition added an additional 18 connections and approximately 0.5 square miles of service area at the time of acquisition to the assets of Santa Cruz.
Significant Accounting Policies
Basic and Diluted Earnings per Common Share
Diluted earnings per share is based upon the weighted average number of common shares, including both outstanding shares and shares potentially issuable in connection with stock options and restricted stock awards granted.
As of March 31, 2022, the Company had 563,213 options outstanding to acquire an equivalent number of shares of GWRI common stock. The 320,321 options outstanding from the 2017 option grant equated to 128,375 common share equivalents, which were included within the calculation of diluted earnings per share for the three months ended March 31, 2022. The 242,892 options outstanding from the 2019 option grant equated to 51,431 common share equivalents, which were included within the calculation of diluted earnings per share for the three months ended March 31, 2022. As of March 31, 2022, there were 74,164 and 147,250 restricted stock awards outstanding from the 2020 grant and 2021 grant. The 74,164 restricted stock awards outstanding from the 2020 grant equated to 57,566 common share equivalents for the three months ended March 31, 2022, respectively, which were included within the calculation of diluted earnings per share for the three months ended March 31, 2022. The 147,250 restricted stock awards outstanding from the 2021 grant equated to 14,646 common share equivalents for the three months ended March 31, 2022, which were included within the calculation of diluted earnings per share for the three months ended March 31, 2022.
As of March 31, 2021, the Company had 623,351 options outstanding to acquire an equivalent number of shares of GWRI common stock. For the three months ended March 31, 2021, the 623,351 options outstanding were not included within the dilutive earnings per share calculation as the Company incurred losses in this period and to do so would be antidilutive. As of March 31, 2021, the 128,327 restricted stock awards outstanding from the 2020 grant were not included within the calculation of diluted earnings per share as the Company incurred losses in this period and to do so would be antidilutive.
Refer to Note 13 – “Deferred Compensation Awards” for additional information regarding the option and restricted stock grants.
Customer payments in-transit
Customer payments in-transit represent funds received by our third-party payment processor related to customer payments, a majority of which were paid for with debit cards, credit cards, and checks, to which the Company does not have immediate access but settles within a few days of the payment transaction.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”, or "ASC 842"). ASC 842 requires lessees to record a right-of-use asset and corresponding lease obligation for lease arrangements with a term of greater than twelve months and requires additional disclosures about leasing arrangements. The Company implemented Topic 842 on January 1, 2021. The implementation did not result in material changes to our consolidated financial statements. Refer to Note 4 — "Leases" of the notes to the unaudited condensed consolidated financial statements for additional information.
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350) ("ASU 2018-15"). ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a Cloud Computing Arrangement ("CCA") that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered
-9-


a service contract. The Company implemented Topic 350 on January 1, 2021. The implementation did not result in material changes to our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 eliminates Step 2 from the impairment test which requires entities to determine the implied fair value of goodwill to measure if any impairment expense is necessary. Instead, entities will record impairment expenses based on the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2019-10 extended the effective date for this ASU. The Company implemented ASU 2017-04 on January 1, 2021. The implementation did not result in material changes to our consolidated financial statements.
2. REGULATORY DECISION AND RELATED ACCOUNTING AND POLICY CHANGES
Our regulated utilities and certain other balances are subject to regulation by the ACC and meet the requirements for regulatory accounting found within ASC 980, Regulated Operations.
In accordance with ASC 980, rates charged to utility customers are intended to recover the costs of the provision of service plus a reasonable return in the same period. Changes to the rates are made through formal rate applications with the ACC, which we have done for all of our operating utilities as described below.
On July 9, 2012, we filed formal rate applications with the ACC to adjust the revenue requirements for seven utilities representing a collective rate increase of approximately 28% over 2011 revenue levels. In August 2013, the Company entered into a settlement agreement with ACC Staff, the Residential Utility Consumers Office, the City of Maricopa, and other parties to the rate case. The settlement required approval by the ACC’s Commissioners before it could take effect. In February 2014, the rate case proceedings were completed and the ACC issued Rate Decision No. 74364, effectively approving the settlement agreement. The rulings of the decision include, but are not limited to, the following:
For the Company’s utilities, adjusting for the condemnation of the operations and assets of Valencia and sale of Willow Valley Water Co., Inc. ("Willow Valley"), which occurred in 2015 and 2016, respectively, a collective revenue requirement increase of $3.6 million based on 2011 test year service connections, phased-in over time, with the first increase in January 2015 as follows (in thousands, not updated for the TCJA, refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions— ACC Tax Docket" for further details):
 IncrementalCumulative
2015$1,083 $1,083 
2016887 1,970 
2017335 2,305 
2018335 2,640 
2019335 2,975 
2020335 3,310 
2021335 3,645 
Full reversal of the imputation of CIAC balances associated with funds previously received under infrastructure coordination and financing agreements ("ICFAs"), as required in the Company’s last rate case. The reversal restored rate base or future rate base and had a significant impact of restoring shareholder equity on the balance sheet.
The Company has agreed to not enter into any new ICFAs. Existing ICFAs will remain in place, but a portion of future payments to be received under the ICFAs will be considered as hook-up fees, which are accounted for as CIAC once expended on plant.
A 9.5% return on common equity was adopted.
On September 20, 2018, the ACC issued Rate Decision No. 76901, which set forth the reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities due to the TCJA. Rate Decision No. 76901 adopted a phase-in approach for the reductions to match the phase-in of our revenue requirements under Rate Decision No. 74364. Refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions — ACC Tax Docket" for details regarding Rate Decision No. 76901.
On August 28, 2020, 12 of our 18 regulated utilities each filed a rate case application with the ACC for water, wastewater, and recycled water rates, as well as the consolidation of water and/or wastewater rates for certain of the utilities using the twelve
-10-


The following provides additional discussion on accounting and policy changes resulting from Rate Decision No. 74364.
Infrastructure Coordination and Financing Agreements – ICFAs are agreements with developers and homebuilders whereby GWRI, the indirect parent of the operating utilities, provides services to plan, coordinate, and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder.
Under the ICFAs, GWRI has a contractual obligation to ensure physical capacity exists through its regulated utilities for water and wastewater to the landowner/developer when needed. This obligation persists regardless of connection growth. Fees for these services are typically a negotiated amount per equivalent dwelling unit for the specified development or portion of land. Payments are generally due in installments, with a portion due upon signing of the agreement, a portion due upon completion of certain milestones, and the final payment due upon final plat approval or sale of the subdivision. The payments are non-refundable. The agreements are generally recorded against the land and must be assumed in the event of a sale or transfer of the land. The regional planning and coordination of the infrastructure in the various service areas has been an important part of GWRI’s business model.
In February 2014, the ACC issued Rate Decision No. 74364, and concluded ICFA funds already received would no longer be deemed CIAC for rate making purposes. ICFA funds already received or which had become due prior to the date of Rate Decision No. 74364 were recognized as revenue once the obligations specified in the ICFA were met. Rate Decision No. 74364 prescribes that of the ICFA funds which come due and are paid subsequent to December 31, 2013, 70% of the ICFA funds will be recorded in the associated utility subsidiary as a hook-up fee (“HUF”) liability, with the remaining 30% to be recorded as deferred revenue, which the Company accounts for in accordance with the Company's ICFA revenue recognition policy. A HUF tariff, specifying the dollar value of a HUF for each utility, was approved by the ACC as part of Rate Decision No. 74364. The Company is responsible for assuring the full HUF value is paid from ICFA proceeds, and recorded in its full amount, even if it results in recording less than 30% of the ICFA fee as deferred revenue.
The Company will account for the portion allocated to the HUF as a CIAC contribution. However, in accordance with the ACC directives the CIAC is not deducted from rate base until the HUF funds are expended for utility plant. Such funds will be segregated in a separate bank account and used for plant. A HUF liability will be established and will be amortized as a reduction of depreciation expense over the useful life of the related plant once the HUF funds are utilized for the construction of plant. For facilities required under a HUF or ICFA, the utilities must first use the HUF moneys received, after which, it may use debt or equity financing for the remainder of construction. The Company will record 30% of the funds received, up until the HUF liability is fully funded, as deferred revenue, which is to be recognized as revenue once the obligations specified within the ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred.
As of March 31, 2022 and December 31, 2021, ICFA deferred revenue recorded on the consolidated balance sheet totaled $20.1 million and $19.0 million, respectively, which represents deferred revenue recorded for ICFA funds received on contracts.
Intangible assets / Regulatory liability – Pursuant to Rate Decision No. 74364, approximately 70% of ICFA funds to be received in the future will be recorded as a HUF, until the HUF is fully funded at the Company’s applicable utility subsidiary. The remaining approximate 30% of future ICFA funds will be recorded at the parent company level and will be subject to the Company’s ICFA revenue recognition accounting policy. As the Company now expects to experience an economic benefit from the approximately 30% portion of future ICFA funds, 30% of the regulatory liability, or $3.4 million, was reversed in 2014. The remaining 70% of the regulatory liability, or $7.9 million, will continue to be recorded on the balance sheet.
The intangible assets amortize when the corresponding ICFA funds are received in proportion to the amount of total cash expected to be received under the underlying agreements. The recognition of amortization expense will be partially offset by a corresponding reduction of the regulatory liability.
As of March 31, 2022, regulatory liability recorded on the consolidated balance sheet totaled $7.4 million, of which $5.9 million relates to the offset of intangible assets related to ICFA contracts obtained in connection with our Santa Cruz, Palo Verde, and Sonoran acquisitions, and the remaining $1.5 million relates to the TCJA rate reduction mandated by the ACC pursuant to Rate Decision No. 76901.

-11-


3. REVENUE RECOGNITION
Regulated Revenue
The Company's operating revenues are primarily attributable to regulated services based upon tariff rates approved by the ACC. Regulated service revenues consist of amounts billed to customers based on approved fixed monthly fees and consumption fees, as well as unbilled revenues estimated from the last meter reading date to the end of the accounting period utilizing historical customer data recorded as accrued revenue. The measurement of sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, the Company estimates consumption since the date of the last meter reading and a corresponding unbilled revenue is recognized. The unbilled revenue estimate is based upon the number of unbilled days that month and the average daily customer billing rate from the previous month (which fluctuates based upon customer usage). The Company applies the invoice practical expedient and recognizes revenue from contracts with customers in the amount for which the Company has a right to invoice. The Company has the right to invoice for the volume of consumption, service charge, and other authorized charges.
The Company satisfies its performance obligation to provide water, wastewater, and recycled services over time as the services are rendered. Regulated services may be terminated by the customers at will, and, as a result, no separate financing component is recognized for the Company's collections from customers, which generally require payment within 15 days of billing. The Company applies judgment, based principally on historical payment experience, in estimating its customers' ability to pay.
The Company has elected to present sales taxes on a net basis and as such, sales taxes are included in Accounts Payable and Accrued Liabilities until remitted to the taxing authorities.
Unregulated Revenue
Unregulated revenues represent those revenues that are not subject to the ratemaking process of the ACC. Unregulated revenues are limited to rental revenue and imputed revenues resulting from a portion of ICFA funds received. ICFAs are agreements with developers and homebuilders where the Company provides services to plan, coordinate, and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder. In return, the developers and homebuilders pay the Company an agreed-upon amount per dwelling unit for the specified development or portion of land. In addition, under ICFA agreements, the Company has a contractual obligation to ensure physical capacity exists through its regulated utilities for water and wastewater to the developer when needed. This obligation persists regardless of connection growth.
The Company believes that these services are not distinct in the context of the contract because they are highly interdependent with the Company’s ability to provide fitted capacity for water and wastewater services. The Company concluded that the goods and services provided under ICFA contracts constitute a single performance obligation.
ICFA revenue is recognized at a point in time when the Company has the necessary capacity in place within its infrastructure to provide water/wastewater services to the developer. The Company exercises judgment when estimating the number of equivalent dwelling units that the Company has capacity to serve.
-12-


Disaggregated Revenues
For the three months ended March 31, 2022 and 2021, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):
 Three Months Ended March 31,
 20222021
REGULATED REVENUE
Water Services  
Residential$3,401 $3,081 
Irrigation346 453 
Commercial284 180 
Construction121 152 
Other water revenues196 120 
Total water revenues4,348 3,986 
Wastewater and recycled water services
Residential 5,142 4,780 
Commercial270 249 
Recycled water revenues162 156 
Other wastewater revenues107 58 
Total wastewater and recycled water revenues5,681 5,243 
TOTAL REGULATED REVENUE10,029 9,229 
UNREGULATED REVENUE
Rental revenues 29 
TOTAL UNREGULATED REVENUE 29 
TOTAL REVENUE$10,029 $9,258 
Contract Balances
Our contract assets and liabilities consist of the following (in thousands):
 March 31, 2022December 31, 2021
CONTRACT ASSETS
Accounts receivable
Water services$1,047 $1,139 
Wastewater and recycled water services1,037 988 
Total contract assets$2,084 $2,126 
CONTRACT LIABILITIES
Deferred revenue - ICFA$20,108 $19,035 
Refund liability - regulated769 762 
Total contract liabilities$20,877 $19,797 
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted revenue expected to be recognized in future periods was approximately $20.1 million and $19.0 million at March 31, 2022 and December 31, 2021, respectively. Deferred revenue - ICFA is recognized as revenue once the obligations specified within the applicable ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred. Due to the uncertainty of future events, the Company is unable to estimate when to expect recognition of deferred revenue - ICFA.
-13-


4. LEASES
On January 1, 2021, the Company adopted ASC 842 using the modified retrospective method. The Company elected the practical expedient package when scoping and identifying leases. As such, the Company has not reassessed: 1) whether any expired or existing contracts are or contain leases; 2) the lease classification for any expired or existing leases; and 3) the initial direct costs for any existing leases. The Company notes that this practical expedient applies to all expired or existing contracts as of the effective date of the Company's adoption. The Company elected this practical expedient package for all lessee arrangements.
On January 10, 2022, the Company entered into a five-year finance lease for office equipment which expires on January 31, 2027. There is no purchase option in the lease agreement but the Company controls and obtains substantially all of the benefit from the identified asset. The lease does not provide an implicit borrowing rate (“IBR”), and as such, we used an estimate IBR of 2.39% which was based on The Treasury High Quality Market Corporate Bond Yield Curve.
The right-of-use ("ROU") asset recorded represents the Company’s right to use an underlying asset for the lease term and lease liability represents the Company’s obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As of March 31, 2022, ROU assets and liabilities totaled $50,409 and $50,334, respectively.
As of March 31, 2022, the Company has not entered into any operating leases. Refer to Note 15 — "Commitments and Contingencies" for additional information.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment at March 31, 2022 and December 31, 2021 consist of the following (in thousands):
 March 31, 2022December 31, 2021
Plant, equipment, and water and sewer lines$313,053 $311,041 
Computers, office equipment and software2,668 2,659 
Total property, plant and equipment315,721 313,700 
Depreciation of property, plant, and equipment is computed based on the estimated useful lives as follows:
Useful Lives
Plant, equipment, and water and sewer lines
5 to 50 years
Computers, office equipment and software
3 to 15 years
6. ACCOUNTS RECEIVABLE
Accounts receivable as of March 31, 2022 and December 31, 2021 consist of the following (in thousands):
 March 31, 2022December 31, 2021
Billed receivables$2,084 $2,126 
Less allowance for doubtful accounts(157)(132)
Accounts receivable – net$1,927 $1,994 
7. GOODWILL AND INTANGIBLE ASSETS
Goodwill
As of March 31, 2022, the goodwill balance of $5.8 million related to the Turner, Red Rock, Mirabell, Francesca, Tortolita, Lyn Lee, Las Quintas Serenas, Rincon and Twin Hawks. There were no indicators of impairment identified as a result of the Company's review of events and circumstances related to its goodwill subsequent to the acquisitions. Based on our annual impairment testing completed on February 14, 2022, no impairment was recorded.
-14-


Intangible Assets
As of March 31, 2022 and December 31, 2021, intangible assets consisted of the following (in thousands):
 March 31, 2022December 31, 2021
Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
Accumulated
Amortization
Net
Amount
INDEFINITE LIVED INTANGIBLE ASSETS:    
CP Water Certificate of Convenience & Necessity service area$1,532 $1,532 $1,532 $1,532 
Intangible trademark13 13 13 13 
Franchise contract rights132 132 130 130 
Organizational costs87 87 68 68 
 1,764 1,764 1,743 1,743 
DEFINITE LIVED INTANGIBLE ASSETS:    
Acquired ICFAs17,978 (14,565)3,413 17,978 (14,565)3,413 
Sonoran contract rights7,406 (2,224)5,182 7,407 (2,224)5,183 
 25,384 (16,789)8,595 25,385 (16,789)8,596 
Total intangible assets$27,148 $(16,789)$10,359 $27,128 $(16,789)$10,339 
A Certificate of Convenience & Necessity ("CC&N") is a permit issued by the ACC allowing a public service corporation to serve a specified area, and preventing other public service corporations from offering the same services within the specified area. The CP Water CC&N intangible asset was acquired through the acquisition of CP Water Company in 2006. This CC&N permit has no outstanding conditions that would require renewal.
Franchise contract rights and organizational costs relate to our 2018 acquisition of Red Rock. Franchise contract rights are agreements with Pima and Pinal counties that allow the Company to place infrastructure in public right-of-way and permits expected to be renewable indefinitely. The organizational costs represent fees paid to federal or state governments for the privilege of incorporation and expenditures incident to organizing the corporation and preparing it to conduct business.
Acquired ICFAs and contract rights related to our 2005 acquisition of Sonoran Utility Services, LLC assets are amortized when cash is received in proportion to the amount of total cash expected to be received under the underlying agreements. Due to the uncertainty of the timing of when cash will be received under ICFA agreements and contract rights, we cannot reliably estimate when the remaining intangible assets' amortization will be recorded. There was no amortization recorded for these balances for both the three months ended March 31, 2022 and 2021.
8. TRANSACTIONS WITH RELATED PARTIES
The Company provides medical benefits to our employees through our participation in a pooled plan sponsored by an affiliate of a significant shareholder and director of the Company. Medical claims paid to the plan were approximately $0.1 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively.
9. ACCRUED EXPENSES
Accrued expenses at March 31, 2022 and December 31, 2021 consist of the following (in thousands):
 March 31, 2022December 31, 2021
Deferred compensation$1,130 $1,211 
Property taxes668 1,238 
Income taxes1,585 1,407 
Interest1,780 492 
Dividend payable498 547 
Asset retirement obligation697 697 
Accrued Bonus259 478 
Other accrued liabilities4,198 3,121 
Total accrued expenses$10,815 $9,191 
-15-


10. FAIR VALUE
Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurement, establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company's assumptions (unobservable inputs). The hierarchy consists of three levels, as follows:
Level 1 - Quoted market prices in active markets for identical assets or liabilities
Level 2 - Inputs other than Level 1 that are either directly or indirectly observable
Level 3 - Unobservable inputs developed using the Company's estimates and assumptions, which reflect those that the Company believes market participants would use.
Financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 were as follows (in thousands):
March 31, 2022December 31, 2021
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Asset/Liability Type:
HUF Funds - restricted cash(1)
$16 $ $ $16 $16 $ $ $16 
Demand Deposit(2)
135   135 135   135 
Certificate of Deposit - Restricted(1)
 790  790  790  790 
Long-term debt(3)
 117,915  117,915  125,650  125,650 
Acquisition Liability(4)
  838 838   838 838 
Total$151 $118,705 $838 $119,694 $151 $126,440 $838 $127,429 
(1) HUF Funds - restricted cash and Certificate of Deposit - Restricted are presented on the Restricted cash line item of the Company's consolidated balance sheets and are valued at amortized cost, which approximates fair value.
(2) Demand Deposit is presented on the Cash and cash equivalents line item of the Company's consolidated balance sheets and is valued at amortized cost, which approximates fair value.
(3) The fair value of our debt was estimated based on interest rates considered available for instruments of similar terms and remaining maturities.
(4) As part of the Red Rock acquisition, the Company is required to pay to the seller a growth premium equal to $750 (not in thousands) for each new account established within three specified growth premium areas, commencing in each area on the date of the first meter installation and ending on the earlier of ten years after such first installation date, or twenty years from the acquisition date. The fair value of the acquisition liability was calculated using a discounted cash flow technique which utilized unobservable inputs developed using the Company's estimates and assumptions. Significant inputs used in the fair value calculation are as follows: year of the first meter installation, total new accounts per year, years to complete full build out, and discount rate.

-16-


11. DEBT
The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of March 31, 2022 and December 31, 2021 are as follows (in thousands):
 March 31, 2022December 31, 2021
 Short-termLong-termShort-termLong-term
BONDS AND NOTES PAYABLE -    
4.38% Series A 2016, maturing June 2028
$ $28,750 $ $28,750 
4.58% Series B 2016, maturing June 2036
3,833 80,500 3,833 80,500 
 3,833 109,250 3,833 109,250 
OTHER
Capital lease obligations148 165 142 199 
Debt issuance costs (504) (516)
Total debt$3,981 $108,911 $3,975 $108,933 
2016 Senior Secured Notes
On June 24, 2016, the Company issued two series of senior secured notes with an aggregate total principal balance of $115.0 million at a blended interest rate of 4.55%. Series A carries a principal balance of $28.8 million and bears an interest rate of 4.38% over a twelve-year term, with the principal payment due on June 15, 2028. Series B carries a principal balance of $86.3 million and bears an interest rate of 4.58% over a 20-year term. Series B is interest only for the first five years, with $1.9 million principal payments paid semiannually thereafter beginning December 2021. The proceeds of the senior secured notes were primarily used to refinance the previously outstanding long-term tax-exempt bonds, which were subject to an early redemption option at 103%, plus accrued interest, as a result of our initial public offering in the United States. As part of the refinancing of the long-term debt, the Company paid a prepayment penalty of $3.2 million and wrote off the remaining $2.2 million in capitalized loan fees related to the tax-exempt bonds, which were recorded as additional interest expense in the second quarter of 2016. The senior secured notes are collateralized by a security interest in the Company’s equity interest in its subsidiaries, including all payments representing profits and qualifying distributions. Debt issuance costs totaled $0.5 million as of March 31, 2022 and December 31, 2021, respectively.
The senior secured notes require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. Consolidated EBITDA is calculated as net income plus depreciation and amortization, taxes, interest and other non-cash charges net of non-cash income. Consolidated debt service is calculated as interest expense, principal payments, and dividend or stock repurchases. The senior secured notes also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25. However, for the quarter ended June 30, 2021 through the quarter ending March 31, 2024, the debt service ratio drops to 1.20. The debt service ratio increases to 1.25 for any fiscal quarter during the period from and after June 30, 2024. As of March 31, 2022, the Company was in compliance with its financial debt covenants.
Revolving Credit Line
On April 30, 2020, the Company entered into an agreement with The Northern Trust Company, an Illinois banking corporation (the “Northern Trust Loan Agreement”), for a two-year revolving line of credit up to $10.0 million with a maturity date of April 30, 2022. This credit facility, which may be used to refinance existing indebtedness, to acquire assets to use in and/or expand the Company’s business, and for general corporate purposes, bears an interest rate equal to LIBOR plus 2.00% and has no unused line fee. This credit facility replaced the previous revolving line of credit with MidFirst Bank, which was terminated in April 2020. On April 30, 2021, the Company and The Northern Trust Company entered into an amendment to the Northern Trust Loan Agreement pursuant to which, among other things, the maturity date for the Company's revolving credit line was extended from April 30, 2022 to April 30, 2024. As of March 31, 2022, the Company had no outstanding borrowings under this credit line. There were $15,000 and $17,000 unamortized debt issuance costs as of March 31, 2022 and December 31, 2021, respectively.
The Northern Trust Loan Agreement requires the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. The Northern Trust Loan Agreement also contains a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25. However, for the quarter ending June 30, 2021 through the quarter ending March 31, 2024, the debt service ratio drops to 1.20. As of March 31, 2022, the Company was in compliance with its financial debt covenants.
-17-


At March 31, 2022, the remaining aggregate annual maturities of debt and minimum lease payments under capital lease obligations for the years ended December 31 are as follows (in thousands):
 DebtCapital Lease Obligations
Remaining nine months of 2022$3,833 $100 
20233,833 106 
20243,833 61 
20253,833 33 
20263,833  
Thereafter93,918  
Subtotal113,083 300 
Less: amount representing interest— (16)
Total$113,083 $284 
12. INCOME TAXES
During the three months ended March 31, 2022, the Company recorded tax expense of $0.3 million on pre-tax income of $1.2 million compared to a tax benefit of less than $0.1 million on pre-tax loss of $0.3 million for the three months ended March 31, 2021. The income tax provision was computed based on the Company’s estimated effective tax rate and forecasted income expected for the full year, including the impact of any unusual, infrequent, or non-recurring items. The Company's effective tax rate decreased during the three months ended March 31, 2022 due to the exercise and vesting of stock-based compensation in 2021, resulting in windfall tax benefits.
13. DEFERRED COMPENSATION AWARDS
Stock-based compensation
Stock-based compensation related to option awards is measured based on the fair value of the award. The fair value of stock option awards is determined using a Black-Scholes option-pricing model. We recognize compensation expense associated with the options over the vesting period.
2017 stock option grant
Stock-based compensation expense of $0 and $65,000 was recorded for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there are 320,321 options outstanding and no options were exercised or forfeited during the three months ended March 31, 2022.
2019 stock option grant
Stock-based compensation expense of $45,000 and $47,000 was recorded for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, 250 options have been exercised and no options have been forfeited with 242,892 options outstanding during the three months ended March 31, 2022.
-18-


Phantom stock/Restricted stock units compensation
The following table details total awards granted and the number of units outstanding as of March 31, 2022 along with the amounts paid to holders of the phantom stock units ("PSUs") and/or restricted stock units ("RSUs") for the three months ended March 31, 2022 and 2021 (in thousands, except unit amounts):
Amounts Paid For the Three Months Ended March 31,
Grant DateUnits GrantedUnits Outstanding20222021
Q1 201830,907  $ $39 
Q1 201932,190  45 40 
Q1 2020