10q10k10q10k.net

What changed in Global Water Resources, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Global Water Resources, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+334 added−310 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-09)

Top changes in Global Water Resources, Inc.'s 2023 10-K

334 paragraphs added · 310 removed · 257 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

70 edited+4 added−5 removed102 unchanged
Biggest changeA summary description of our utilities at December 31, 2022 is set forth in the following table and described in more detail below: -9- Table of Contents Utility Date of Acquisition (A) or Formation (F) Service Provided Square Miles of Service Area (1)(2) Active Service Connections (2) Average Monthly Rate Per Service Connection PINAL COUNTY Global Water - Santa Cruz Water Company, Inc. 2004 (A) Water 99 26,737 $ 56 Global Water - Palo Verde Utilities Company, Inc. 2004 (A) Wastewater and Recycled Water 124 26,415 73 MARICOPA COUNTY Global Water - Hassayampa Utilities Company, Inc. 2005 (F) Wastewater and Recycled Water 43 — — Global Water - Belmont Water Company, Inc. 2006 (A) Water 111 580 83 Global Water - Turner Ranches Irrigation, Inc. 2018 (A) Water 7 962 77 PIMA COUNTY Global Water - Francesca Water Company, Inc. 2020 (A) Water 0.4 121 56 Global Water - Mirabell Water Company, Inc. 2020 (A) Water 0.4 61 74 Global Water - Lyn Lee Water Company, Inc. 2020 (A) Water 1 39 40 Global Water - Tortolita Water Company, Inc. 2020 (A) Water 0.1 23 57 Global Water - Las Quintas Serenas Water Company, Inc. 2021 (A) Water 2.5 1,252 50 Global Water - Rincon Water Company, Inc. 2022 (A) Water 9 80 67 Total 397 56,270 (1) Certified areas may overlap in whole or in part for separate utilities.
Biggest changeA summary description of our utilities at December 31, 2023 is set forth in the following table and described in more detail below: -9- Table of Con tents Utility Date of Acquisition (A) or Formation (F) Service Provided Square Miles of Service Area (1) Active Service Connections Average Monthly Rate Per Service Connection PINAL COUNTY Global Water - Santa Cruz Water Company, Inc. 2004 (A) Water 90 27,766 $ 63 Global Water - Palo Verde Utilities Company, Inc. 2004 (A) Wastewater and Recycled Water 115 27,421 77 MARICOPA COUNTY Global Water - Hassayampa Utilities Company, Inc. 2005 (F) Wastewater and Recycled Water 43 0 0 Global Water - Belmont Water Company, Inc. 2006 (A) Water 111 622 142 Global Water - Turner Ranches Irrigation, Inc. 2018 (A) Water 7 962 82 PIMA COUNTY Global Water - Red Rock Water Company, Inc. 2018 (A) Water 7.0 0 0 Global Water - Francesca Water Company, Inc. 2020 (A) Water 0.4 119 61 Global Water - Mirabell Water Company, Inc. 2020 (A) Water 0.4 61 82 Global Water - Lyn Lee Water Company, Inc. 2020 (A) Water 1 38 44 Global Water - Tortolita Water Company, Inc. 2020 (A) Water 0.1 23 59 Global Water - Las Quintas Serenas Water Company, Inc. 2021 (A) Water 3.0 1,238 51 Global Water - Rincon Water Company, Inc. 2022 (A) Water 9 79 77 Global Water - Farmers Water Company, Inc. 2023 (A) Water 21 3,462 27 Total 408 61,791 (1) Certified areas may overlap in whole or in part for separate utilities.
This approach employs a series of principles and practices that can be tailored to each community: • Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future; • Regional planning; • Use of advanced technology and data; • Employing respected subject matter experts and retaining thought and application leaders; • Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, regulators, and utility staff are knowledgeable on the principles and practices of our Total Water Management approach; and • Establishing partnerships with communities, developers, and industry stakeholders to gain support of our Total Water Management principles and practices.
This approach employs a series of principles and practices that can be tailored to each community: • Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future; • Regional planning; • Use of advanced technology and data; • Employing respected subject matter experts and retaining thought and application leaders; • Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, regulators, and utility staff are knowledgeable on the principles and practices of the Total Water Management approach; and • Establishing partnerships with communities, developers, and industry stakeholders to gain support of the Total Water Management principles and practices.
Contaminants of emerging concern ("CECs") are chemicals and other substances that have no regulatory standard, but have been discovered in water or in the environment where they had not previously been detected, or were only present at insignificant levels. We believe CECs may form the basis for additional regulatory initiatives and requirements in the future.
Contaminants of emerging concern (“CECs”) are chemicals and other substances that have no regulatory standard, but have been discovered in water or in the environment where they had not previously been detected, or were only present at insignificant levels. We believe CECs may form the basis for additional regulatory initiatives and requirements in the future.
Under the latter approach, the water provider must demonstrate satisfaction of assured water supply requirements for the developments within its service areas resulting in a Designation of Assured Water Supply ("DAWS") for the provider. At present, we have obtained a DAWS in the Maricopa/Casa Grande service territory (Santa Cruz) for approximately 22,900 acre-feet of water use.
Under the latter approach, the water provider must demonstrate satisfaction of assured water supply requirements for the developments within its service areas resulting in a Designation of Assured Water Supply (“DAWS”) for the provider. At present, we have obtained a DAWS in the Maricopa/Casa Grande service territory (Santa Cruz) for approximately 22,900 acre-feet of water use.
To date, the Company has reused approximately 10.7 billion gallons of recycled water in the City of Maricopa. • Integrating and standardizing water, wastewater, and recycled water infrastructure delivery systems using a separate distribution system of purple pipes to conserve water resources, reduce energy, treatment, and consumable costs (e.g., chemicals, filter media, other general materials, and supplies), provide operational efficiencies, and align the otherwise disparate objectives of water sales and conservation. ◦ In addition to the previous example, which related to the requirements for recycled water usage, the separate distribution system of purple pipes, and water conservation achievements, the Company believes that its model results in additional benefits from an economic perspective due to lower use of power and consumables.
To date, the Company has reused approximately 11.7 billion gallons of recycled water in the City of Maricopa. • Integrating and standardizing water, wastewater, and recycled water infrastructure delivery systems using a separate distribution system of purple pipes to conserve water resources, reduce energy, treatment, and consumable costs (e.g., chemicals, filter media, other general materials, and supplies), provide operational efficiencies, and align the otherwise disparate objectives of water sales and conservation. ◦ In addition to the previous example, which related to the requirements for recycled water usage, the separate distribution system of purple pipes, and water conservation achievements, the Company believes that its model results in additional benefits from an economic perspective due to lower use of power and consumables.
The Company seeks to deploy an integrated approach, referred to as “Total Water Management." Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically.
The Company seeks to deploy an integrated approach, referred to as “Total Water Management.” Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically.
For additional information related to the rate case, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Rate Case Activity”, included in Part II, Item 8 of this report and Note 2 — “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report.
For additional information related to the rate case, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Rate Case Activity”, included in Part II, Item 7 of this report and Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report.
The Company has implemented automated meter reading for 99% of its active customers with a substantial proportion of its remaining customers in the process of or being, or planned to be, upgraded with such functionality. Currently, all meters in our Maricopa service areas allow for automated meter reading.
The Company has implemented automated meter reading for 99% of its active customers with a substantial proportion of its remaining customers in the process of or being, or planned to be, upgraded with such functionality. Currently, all meters in our Maricopa service areas allow for automated meter infrastructure.
Components of our Total Water Management approach include: • Regional planning to reduce overall design and implementation costs, leveraging the benefits of replicable designs, gaining the benefits of economies of scale, and enhancing the Company’s position as a primary water and wastewater service provider in the region. ◦ For example, the Company has secured four separate area-wide Clean Water Act Section 208 Regional Water Quality Management Plans in its major planning areas, covering more than 500 square miles of land.
Components of our Total Water Management approach include: • Regional planning to reduce overall design and implementation costs, leveraging the benefits of replicable designs, gaining the benefits of economies of scale, and enhancing the Company’s position as a premier water and wastewater service provider in the region. ◦ For example, the Company has secured four separate area-wide Clean Water Act Section 208 Regional Water Quality Management Plans in its major planning areas, covering more than 500 square miles of land.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and proxy statements are accessible through our website, free of charge, as soon as reasonably practicable after these reports are filed electronically with, or furnished to, the SEC.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and proxy statements are accessible through our website, free of charge, as soon as reasonably practicable after these reports are filed electronically with, or furnished to, the SEC.
In order to meet their capital spending challenges and take advantage of technology-related operating efficiencies, many municipalities are examining a combination of outsourcing and partnerships with the private sector or outright privatizations. • Outsourcing involves municipally-owned utilities contracting with private sector service providers to provide services, such as meter reading, billing, maintenance, or asset management services. -6- Table of Contents • Public-private partnerships among government, operating companies, and private investors include arrangements, such as design, build, and operate contracts; build, own, operate, and transfer contracts; and own, leaseback, and operate contracts. • Privatization involves a transfer of responsibility for, and ownership of, the utility from the municipality to private investors.
In order to meet their capital spending challenges and take advantage of technology-related operating efficiencies, many municipalities are examining a combination of outsourcing and partnerships with the private sector or outright privatizations. • Outsourcing involves municipally-owned utilities contracting with private sector service providers to provide services, such as meter reading, billing, maintenance, or asset management services. -6- Table of Con tents • Public-private partnerships among government, operating companies, and private investors include arrangements, such as design, build, and operate contracts; build, own, operate, and transfer contracts; and own, leaseback, and operate contracts. • Privatization involves a transfer of responsibility for, and ownership of, the utility from the municipality to private investors.
(water services only) 1 • Global Water - Picacho Cove Water (water services only) In addition, the following utilities were consolidated into Palo Verde: • Global Water - Red Rock Utilities Company, Inc. (wastewater and recycled water services only) • Global Water - Picacho Cove Utilities Company, Inc.
(water services only) • Global Water - Picacho Cove Water Company, Inc. (water services only) In addition, the following utilities were consolidated into Palo Verde: • Global Water - Red Rock Utilities Company, Inc. (wastewater and recycled water services only) • Global Water - Picacho Cove Utilities Company, Inc.
Approximately 61% of the recycled water goes towards common area non-potable irrigation and for use at a local farm, which allows for the recycled water to naturally recharge into the aquifer. This reduces the total amount of limited ground or surface water that would otherwise be required within the community by almost 30%.
Approximately 66% of the recycled water goes towards common area non-potable irrigation and for use at a local farm, which allows for the recycled water to naturally recharge into the aquifer. This reduces the total amount of limited ground or surface water that would otherwise be required within the community by almost 30%.
The benefits of this system include the significantly enhanced ability to: achieve compliance and safety mandates; reduce service outages; troubleshoot systems; provide for remote operations; and allow for proactive maintenance and lower costs related to efficient real-time operations. ◦ Automated Meter Reading.
The benefits of this system include the significantly enhanced ability to: achieve compliance and safety mandates; reduce service outages; troubleshoot systems; provide for remote operations; and allow for proactive maintenance and lower costs related to efficient real-time operations. ◦ Automated Meter Infrastructure.
We are also subject to state environmental laws and regulations, such as Arizona’s Aquifer Protection Program and other environmental laws and regulations enforced by the Arizona Department of Environmental Quality ("ADEQ"), and extensive regulation by the ACC, which regulates public utilities.
We are also subject to state environmental laws and regulations, such as Arizona’s Aquifer Protection Program and other environmental laws and regulations enforced by the Arizona Department of Environmental Quality (“ADEQ”), and extensive regulation by the ACC, which regulates public utilities.
We believe competition for new service areas and acquisitions is based on relationships with municipalities and developers, experience in making acquisitions, the ability to -16- Table of Contents finance and obtain regulatory approval, quality and breadth of products and services, the ability to integrate both water and wastewater services, and implement conservation practices throughout the service areas, price, speed, and ease of implementation.
We believe competition for new service areas and acquisitions is based on relationships with municipalities and developers, experience in making acquisitions, the ability to finance and obtain regulatory approval, quality and breadth of products and services, the ability to integrate both water and wastewater services, and implement conservation practices throughout the service areas, price, speed, and ease of implementation.
With this data, we can better model demand usage, identify system water loss, identify leaks on the customer side of the meter, monitor for abnormal usage, and present interval, hourly, daily, weekly, or monthly usage back to the customers. -8- Table of Contents ◦ Back-Office Technologies and Paperless Billing.
With this data, we can better model demand usage, identify system water loss, identify leaks on the customer side of the meter, monitor for abnormal usage, and present interval, hourly, daily, weekly, or monthly usage back to the customers. -8- Table of Con tents ◦ Back-Office Technologies and Paperless Billing.
(wastewater services only) For additional information related to the rate case, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Rate Case Activity”, included in Part II, Item 7 of this report and Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report.
For additional information related to the rate case, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Rate Case Activity”, included in Part II, Item 7 of this report and Note 2 — “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report.
Safe Drinking Water Act -12- Table of Contents The federal Safe Drinking Water Act and regulations promulgated thereunder establish minimum national quality standards for drinking water. The EPA has issued rules governing the levels of numerous naturally occurring and man-made chemical and microbial contaminants and radionuclides allowable in drinking water and continues to propose new rules.
Safe Drinking Water Act The federal Safe Drinking Water Act and regulations promulgated thereunder establish minimum national quality standards for drinking water. The EPA has issued rules governing the levels of numerous naturally occurring and man-made chemical and microbial contaminants and radionuclides allowable in drinking water and continues to propose new rules.
The utility segment of the U.S. water industry is highly fragmented, with approximately 50,000 water utilities and approximately 16,000 community wastewater utilities, according to the U.S. Environmental Protection Agency ("EPA") .
The utility segment of the U.S. water industry is highly fragmented, with approximately 50,000 water utilities and approximately 16,000 community wastewater utilities, according to the U.S. Environmental Protection Agency (“EPA”) .
Because the Company requires developers -7- Table of Contents to take back and utilize recycled water within their communities and invest in “purple pipe” recycled water infrastructure during the initial development of subdivisions, the Company is now able to distribute the majority of its recycled water back to the community for beneficial purposes.
Because the Company requires developers -7- Table of Con tents to take back and utilize recycled water within their communities and invest in “purple pipe” recycled water infrastructure during the initial development of subdivisions, the Company is now able to distribute the majority of its recycled water back to the community for beneficial purposes.
The Reorganization Transaction was conditional upon the concurrent completion of an initial public offering of shares of common stock of the Company in the U.S., which was completed on May 3, 2016. -17- Table of Contents Available Information We maintain an Internet website at www.gwresources.com .
The Reorganization Transaction was conditional upon the concurrent completion of an initial public offering of shares of common stock of the Company in the U.S., which was completed on May 3, 2016. Available Information We maintain an Internet website at www.gwresources.com .
Competition As an owner and operator of regulated utilities, we do not face competition within our existing service areas because Arizona law provides the holder of a CC&N for water and wastewater service with an exclusive right to provide that service within the certificated area, as against other public service corporations.
Competition -16- Table of Con tents As an owner and operator of regulated utilities, we do not face competition within our existing service areas because Arizona law provides the holder of a CC&N for water and wastewater service with an exclusive right to provide that service within the certificated area, as against other public service corporations.
While we do not make public comments on the details of our security programs, we have been in contact with federal, state, and local law enforcement agencies to coordinate and improve the security of our water delivery systems and to safeguard our water supply.
While we do not make public comments on the details of our -15- Table of Con tents security programs, we have been in contact with federal, state, and local law enforcement agencies to coordinate and improve the security of our water delivery systems and to safeguard our water supply.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . -18- Table of Contents
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . -18- Table of Con tents
The ACC has exclusive authority to approve rates, mandate accounting treatments, authorize long-term financing programs, evaluate significant capital expenditures and plant additions, examine and regulate transactions between a regulated subsidiary and its affiliated entities, and approve or disapprove some reorganizations, mergers, and acquisitions prior to their completion.
The ACC has exclusive constitutional authority related to ratemaking and extensive constitutional authority to mandate accounting treatments, authorize long-term financing programs, evaluate significant capital expenditures and plant additions, examine and regulate transactions between a regulated subsidiary and its affiliated entities, and approve or disapprove some reorganizations, mergers, and acquisitions prior to their completion.
The Company is the water, wastewater, and recycled water provider for the City of Maricopa, which currently has a population of approximately 64,000. A community of this size produces an approximate annual average of 3.45 million gallons of wastewater per day.
The Company is the water, wastewater, and recycled water provider for the City of Maricopa, which currently has a population of approximately 74,000. A community of this size produces an approximate annual average of 3.7 million gallons of wastewater per day.
Turner is a non-potable irrigation water utility located in Maricopa County, Arizona, with approximately seven square miles of service area. Turner served 962 residential irrigation customers as of December 31, 2022. We formerly operated additional utilities in Maricopa County through Valencia Water Company, Inc. ("Valencia") and Water Utility of Greater Buckeye ("Greater Buckeye").
Turner is a non-potable irrigation water utility located in Maricopa County, Arizona, with approximately seven square miles of service area. Turner served 962 residential irrigation customers as of December 31, 2023. We formerly operated additional utilities in Maricopa County through Valencia Water Company, Inc. (“Valencia”) and Water Utility of Greater Buckeye (“Greater Buckeye”).
We offer comprehensive compensation and benefits package to attract and retain top talent. In addition to competitive base wages, additional benefits include annual bonus opportunities, employee stock options, Company matched 401(k) plan, healthcare and insurance benefits, flexible spending accounts and paid time off. As of December 31, 2022, we employed 94 full-time individuals and 6 part-time employees.
We offer comprehensive compensation and benefits package to attract and retain top talent. In addition to competitive base wages, additional benefits include annual bonus opportunities, employee stock options, Company matched 401(k) plan, healthcare and insurance benefits, flexible spending accounts and paid time off. As of December 31, 2023, we employed 106 full-time individuals and 3 part-time employees.
For 2022, we achieved a compliance rate of 99.7% for meeting state and federal drinking water standards and 99.8% for compliance with wastewater requirements, for an overall compliance rating of 99.8%. Compliance with governmental regulations is of utmost importance to us, and considerable time and resources are spent ensuring compliance with all applicable federal, state, and local laws and regulations.
For 2023, we achieved a compliance rate of 99.9% for meeting state and federal drinking water standards and 99.9% for compliance with wastewater requirements, for an overall compliance rating of 99.9%. Compliance with governmental regulations is of utmost importance to us, and considerable time and resources are spent ensuring compliance with all applicable federal, state, and local laws and regulations.
Water Industry In the U.S., the water industry is characterized by: • Significant Constraints on the Availability of Fresh Water . In Arizona, the Arizona Department of Water Resources ("ADWR") estimates that annual water usage is 7 million acre-feet per year.
Water Industry In the U.S., the water industry is characterized by: • Significant Constraints on the Availability of Fresh Water . In Arizona, the Arizona Department of Water Resources (“ADWR”) estimates that annual water usage is 7 million acre-feet per year, as of 2017.
Valencia was consolidated with Greater Buckeye in 2008, and on July 14, 2015, we closed the stipulated condemnation to transfer the operations and assets of Valencia to the City of Buckeye.
Valencia was consolidated with Greater Buckeye in 2008, and on July 14, 2015, we closed the stipulated condemnation to transfer the operations and assets of Valencia to the City of -11- Table of Con tents Buckeye.
Operations We treat water to potable standards and also treat, clean, and recycle wastewater for a variety of non-potable uses.
Operations We treat water to potable standards and also treat, clean, and recycle wastewater for a variety of non-potable uses. A description of these operations follows.
Our utilities presently employ groundwater systems for potable water production. Water is brought to the surface from underground aquifers (water levels vary from approximately 75 to 700 feet below land surface depending on the area), disinfected and stored in tanks for distribution to customers. In some instances, individual raw water supplies do not meet the legislative requirements for certain constituents.
Water is brought to the surface from underground aquifers (water levels vary from approximately 75 to 700 feet below land surface depending on the area), disinfected and stored in tanks for distribution to customers. In some instances, individual raw water supplies do not meet the legislative requirements for certain constituents.
In 2022, we used approximately 7,900 acre-feet of the annually available 22,914 acre-feet already permitted in the DAWS. In our West Valley service territory (Greater Tonopah), we are seeking a DAWS in the future.
In 2023, we used approximately 8,750 acre-feet of the annually available 22,914 acre-feet already permitted in the DAWS. In our West Valley service territory (Greater Tonopah), we are seeking a DAWS in the future.
The Belmont development is a mixed use, master planned community. We formed Hassayampa in 2005. Hassayampa is a wastewater utility and has a CC&N for approximately 43 square miles in an area in western Maricopa County known as Tonopah.
The Belmont development is a mixed use, master planned community. We formed Hassayampa in 2005. Hassayampa is a wastewater utility and has a Certificate of Convenience & Necessity (“CC&N”) for approximately 43 square miles in an area in western Maricopa County known as Tonopah.
This represents an increase of twelve employees, or 12% from December 31, 2021 due primarily to the hiring of additional employees throughout the organization as the company continues to grow. Currently, none of our employees participate in collective bargaining agreements, and we consider our employee relations to be good.
This represents an increase of nine employees, or 9% from December 31, 2022 due primarily to the hiring of additional employees throughout the organization as the company continues to grow and the acquisition of Farmers in February 2023. Currently, none of our employees participate in collective bargaining agreements, and we consider our employee relations to be good.
Francesca is located in the southwest area of Tucson, Arizona whereas Tortolita and Lyn Lee are located in Marana, Arizona. As of December 31, 2022, Francesca, Tortolita, and Lyn Lee serve 121, 23, and 39 active water connections, respectively. We acquired Las Quintas Serenas in November 2021.
We acquired Francesca, Tortolita and Lyn Lee in November 2020. Francesca is located in the southwest area of Tucson, Arizona whereas Tortolita and Lyn Lee are located in Marana, Arizona. As of December 31, 2023, Francesca, Tortolita, and Lyn Lee served 119, 23, and 38 active water connections, respectively. We acquired Las Quintas Serenas in November 2021.
(“GWRC”), which was incorporated under the Business Corporations Act (British Columbia) on March 23, 2010 to acquire shares of our common stock and to actively participate in our management, business, and operations through its representation on our board of directors and its shared management.
The members established a new entity, GWR Global Water Resources Corp. (“GWRC”), which was incorporated under the Business Corporations Act (British Columbia) on March 23, 2010 to acquire shares of our common stock and to actively participate in our management, business, and operations through its representation on our board of directors and its shared management.
In addition to regulation by governmental entities, our operations may also be affected by civic or consumer advocacy groups. These organizations provide a voice for customers at local and national levels to communicate their service priorities and concerns. Although these organizations may lack regulatory or enforcement authority, they may be influential in achieving service quality and rate improvements for customers.
In addition to regulation by governmental entities, our operations may also be affected by civic or consumer advocacy groups. These organizations provide a voice for customers at local and national levels to communicate their service priorities and concerns.
(2) In February 2023 the Company completed the acquisition of Farmers Water Co., an operator of a water utility with service area in Sahuarita, Arizona and in unincorporated Pima County, Arizona. The acquisition added approximately 3,300 active water connections and 21.5 square miles of service area.
In February 2023, the Company completed the acquisition of Farmers Water Co., an operator of a water utility with service area in Sahuarita, Arizona and in unincorporated Pima County, Arizona. As of December 31, 2023, Farmers served 3,462 active water connections with approximately 21.0 square miles of service area.
While we are not presently regulated to meet source control requirements, we maintain source control through various Codes of Practice that have been accepted by the ACC as enforceable limits on consumer discharges to sanitary sewer systems. We believe we maintain the necessary permits and approvals for the discharges from our water and wastewater facilities.
While we are not presently regulated to meet source control requirements, we maintain source control through various Codes of Practice that have been accepted by the ACC as enforceable limits on consumer discharges to sanitary sewer systems.
The activities of these businesses include the building, financing, and operating of water and wastewater utilities, utility repair services, contract operations, laboratory services, manufacturing and distribution of infrastructure and technology components, and other specialized services. At present, the Company does not perform any unregulated services. -5- Table of Contents Key Characteristics of the U.S.
The activities of these businesses include the building, financing, and operating of water and wastewater utilities, utility repair services, contract operations, laboratory services, manufacturing and distribution of infrastructure and technology components, and other specialized services. -5- Table of Con tents Key Characteristics of the U.S.
Santa Cruz and Palo Verde provide water and wastewater services, respectively, under an innovative public-private partnership memorandum of understanding with the City of Maricopa in Pinal County for approximately 278 square miles of its -10- Table of Contents planning area.
Most of the Santa Cruz and Palo Verde infrastructure is less than twenty years old. Santa Cruz and Palo Verde provide water, wastewater, and recycled water services, respectively, under an innovative public-private partnership memorandum of understanding with the City of Maricopa in Pinal County for approximately 278 square miles of its planning area.
Water quality tests are conducted at subcontracted laboratory facilities in addition to providing continuous online instrumentation for monitoring parameters, such as turbidity and disinfectant residuals, and allowing for adjustments to chemical treatment based on changes in incoming water quality.
Water samples across our water system are analyzed on a regular basis in material compliance with regulatory requirements. Water quality tests are conducted at subcontracted laboratory facilities in addition to providing continuous online instrumentation for monitoring parameters, such as turbidity and disinfectant residuals, and allowing for adjustments to chemical treatment based on changes in incoming water quality.
The ACC is comprised of five elected members, each serving a four year term. -13- Table of Contents Companies that wish to provide water or wastewater service apply for a CC&N with the ACC, which, if granted, allows them to serve customers within a geographic area specified by a legal description of the property.
Companies that wish to provide water or wastewater service apply for a CC&N with the ACC, which, if granted, allows them to serve customers within a geographic area specified by a legal description of the property.
(“Las Quintas Serenas”), and Global Water - Rincon Water Company, Inc. ("Rincon"). We acquired Mirabell in October 2020. Mirabell serves 61 active water connections as of December 31, 2022. Mirabell has a CC&N for 0.4 square miles located in the southwest area of Tucson, Arizona. We acquired Francesca, Tortolita and Lyn Lee in November 2020.
(“Las Quintas Serenas”), Global Water - Rincon Water Company, Inc. (“Rincon”), Red Rock-Pima, and Global Water - Farmers Company, Inc. (“Farmers”). We acquired Mirabell in October 2020. Mirabell served 61 active water connections as of December 31, 2023. Mirabell has a CC&N for 0.4 square miles located in the southwest area of Tucson, Arizona.
As of December 31, 2022, our utilities collectively had 56,270 active service connections offering predictable rate-regulated cash flows. Revenues from our regulated utilities accounted for approximately 100.0% of total revenues in 2022.
As of December 31, 2023, our utilities collectively had 61,791 active service connections offering predictable rate-regulated cash flows. Revenues from our regulated utilities accounted for approximately 94.7% of total revenues in 2023.
A description of these operations follows. -15- Table of Contents Sources of Water Supply Our water supplies are primarily derived from groundwater; however, we currently augment these supplies with recycled water and intend to augment them with surface water and increased use of recycled water in the future. • Potable Water.
Sources of Water Supply Our water supplies are primarily derived from groundwater; however, we currently augment these supplies with recycled water and intend to augment them with surface water and increased use of recycled water in the future. • Potable Water. Our utilities presently employ groundwater systems for potable water production.
The relative proximity to a significant urban center, coupled with relatively abundant and inexpensive land, were the key drivers of the real estate boom experienced by this community.
Pinal County The City of Maricopa is located in Pinal County approximately 12 miles south of Phoenix. The relative proximity to a significant urban center, coupled with relatively abundant and inexpensive land, were the key drivers of the real estate boom experienced by this community.
In January 2022, Santa Cruz acquired Twin Hawks Utility, Inc., which added 18 new connections to Santa Cruz, at the time of acquisition. Palo Verde serves 26,415 active service connections as of December 31, 2022 and revenues from Palo Verde represented approximately 51.8% and 50.7% of our total revenue for the years ended December 31, 2022 and 2021, respectively.
Santa Cruz served 27,766 active service connections as of December 31, 2023 and revenues from Santa Cruz represented approximately 39.3% and 40.0% of our total revenue for the years ended December 31, 2023 and 2022, respectively. In January 2022, Santa Cruz acquired Twin Hawks Utility, Inc., which added 18 new connections to Santa Cruz, at the time of acquisition.
Las Quintas Serenas serves 1,252 active water connections with approximately 2.5 square miles of service area located in Sahuarita, Arizona. In January 2022, the Company acquired the assets of Rincon Water Company, Inc., a water utility serving Sahuarita, Arizona through 80 connections and approximately 9 square miles of service area.
Las Quintas Serenas served 1,238 active water connections with approximately 3.0 square miles of service area located in Sahuarita, Arizona. In January 2022, the Company acquired the assets of Rincon Water Company, Inc., a water utility serving the vicinity of Vail, Arizona.
The utility segment is characterized by high barriers to entry, including high capital spending requirements. • General Water Products and Services. This business includes manufacturing, engineering and consulting companies, and numerous other fee-for-service businesses.
Investor-owned water and wastewater utilities are generally economically regulated, including rate regulation, by public utility commissions in the states in which they operate. The utility segment is characterized by high barriers to entry, including high capital spending requirements. • General Water Products and Services. This business includes manufacturing, engineering and consulting companies, and numerous other fee-for-service businesses.
Additionally, the ACC has statutory authority to oversee service quality and consumer complaints, and approve or disapprove expansion of service areas.
Additionally, the ACC has statutory authority to oversee service quality and consumer complaints, and approve or disapprove expansion of service areas. The ACC is comprised of five elected members, each serving a four year term.
(“Santa Cruz”) and Global Water - Palo Verde Utilities Company, Inc. (“Palo Verde”) utilities, which are located within a single service area. U.S. Water Industry Overview U.S. Water Industry Areas of Business The U.S. water industry has two main areas of business: • Utility Services to Customers .
Approximately 89.3% of the active service connections are customers of the Company’s the Company’s Global Water - Santa Cruz Water Company, Inc. (“Santa Cruz”) and Global Water - Palo Verde Utilities Company, Inc. (“Palo Verde”) utilities, which are located within a single service area. U.S. Water Industry Overview U.S.
("Greater Tonopah") • Global Water - Northern Scottsdale Water Company, Inc. ("Northern Scottsdale") • Global Water - Eagletail Water Company, Inc. ("Eagletail") The rate proceedings also resulted in the consolidated of Global Water - Balterra Utilities Company, Inc. into Hassayampa. Belmont serves 580 active service connections as of December 31, 2022.
(“Eagletail”) Global Water - Greater Tonopah Water Company, Inc. was then renamed Global Water - Belmont Water Company, Inc. (“Belmont”). The rate proceedings also resulted in the consolidation of Global Water - Balterra Utilities Company, Inc. into Hassayampa. Belmont served 622 active service connections as of December 31, 2023.
See “Risk Factors—Business and Operational Factors—Inadequate water and wastewater supplies could have a material adverse effect upon our ability to achieve the customer growth necessary to increase our revenues,” included in Part I, Item 1A of this report, for additional information.
See “Risk Factors—Business and Operational Factors—Inadequate water and wastewater supplies could have a material adverse effect upon our ability to achieve the customer growth necessary to increase our revenues,” included in Part I, Item 1A of this report, for additional information. -14- Table of Con tents Nearly all of our service areas are located in “Active Management Areas” within which the use of groundwater is regulated by ADWR in order to manage ongoing problems with groundwater overdraft.
Serving more than 74,000 people in approximately 29,000 homes within our 397 square miles of certificated service areas as of December 31, 2022, GWRI provides water and wastewater utility services under the regulatory authority of the ACC. Approximately 91.0% of the active service connections are customers of Global Water - Santa Cruz Water Company, Inc.
Serving more than 82,000 people in approximately 32,000 homes within the Company’s 408 square miles of certificated service areas as of December 31, 2023, the Company provides water and wastewater utility services under the regulatory authority of the ACC.
Maricopa County We operate in this region through Global Water - Belmont Water Company, Inc. ("Belmont"), Global Water - Hassayampa Utilities Company, Inc. (“Hassayampa”), and Global Water - Turner Ranches Irrigation, Inc. ("Turner"). As a result of the rate proceedings completed in 2022, Belmont was formed and consolidated the following utilities: • Global Water - Greater Tonopah Water Company, Inc.
Maricopa County We operate in this region through Global Water - Belmont Water Company, Inc., Global Water - Hassayampa Utilities Company, Inc. (“Hassayampa”), and Global Water - Turner Ranches Irrigation, Inc. (“Turner”).
We signed a similar memorandum of understanding with the City of Casa Grande to partner in providing water, wastewater, and recycled water services to an approximate 100 square miles of its western region for anticipated growth.
We signed a similar memorandum of understanding with the City of Casa Grande to partner in providing water, wastewater, and recycled water services to an approximate 100 square miles of its western region for anticipated growth. -10- Table of Con tents Rate proceedings were completed in 2022 for both Santa Cruz and Palo Verde , which resulted, among other things, in consolidation of the following utilities into Santa Cruz: • Global Water - Red Rock Utilities Company, Inc.
Demonstration of an assured water supply requires, among other things, that an applicant demonstrate that water supplies will be physically, continuously, and legally available to satisfy the water needs of the proposed use for at least 100 years. -14- Table of Contents A developer may make an independent showing of an assured water supply resulting in a Certificate of Assured Water Supply ("CAWS") for a subdivision or may obtain a written commitment for service from a designated water provider, such as a privately owned water company or a municipal water supplier.
Demonstration of an assured water supply requires, among other things, that an applicant demonstrate that water supplies will be physically, continuously, and legally available to satisfy the water needs of the proposed use for at least 100 years.
Global Water Management, LLC (“GWM”) was formed as an affiliated company to provide business development, management, construction project management, operations, and administrative services to GWR and all of its regulated subsidiaries.
Global Water Management, LLC (“GWM”) was formed as an affiliated company to provide business development, management, construction project management, operations, and administrative services to GWR and all of its regulated subsidiaries. -17- Table of Con tents In early 2010, the members of GWR made the decision to raise money through the capital markets, and GWR and GWM were reorganized to form Global Water Resources, Inc., a Delaware corporation.
Rate proceedings were completed in 2022 for both Santa Cruz and Palo Verde , which resulted, among other things, in consolidation of the following utilities into Santa Cruz: • Global Water - Red Rock Utilities Company, Inc.
As a result of the rate proceedings completed in 2022, which resulted, among other things, in consolidation of the following utilities into Global Water - Greater Tonopah Water Company, Inc.: • Global Water - Northern Scottsdale Water Company, Inc. (“Northern Scottsdale”) • Global Water - Eagletail Water Company, Inc.
At this time, the Pima County service area has no active service connections. -11- Table of Contents Operations and Assets of Valencia Water Company, Inc.” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
See Note 1 — “Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions — Stipulated Condemnation of the Operations and Assets of Valencia Water Company, Inc.” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
This business includes water and wastewater utilities, which are owned and operated by governmental subdivisions or investors in the private sector. Investor-owned water and wastewater utilities are generally economically regulated, including rate regulation, by public utility commissions in the states in which they operate.
Water Industry Areas of Business The U.S. water industry has two main areas of business: • Utility Services to Customers . This business includes water and wastewater utilities, which are owned and operated by governmental subdivisions or investors in the private sector.
We acquired Santa Cruz and Palo Verde in 2004. Santa Cruz serves 26,737 active service connections as of December 31, 2022 and revenues from Santa Cruz represented approximately 40.0% and 39.5% of our total revenue for the years ended December 31, 2022 and 2021, respectively.
Palo Verde served 27,421 active service connections as of December 31, 2023 and revenues from Palo Verde represented approximately 47.9% and 51.8% of our total revenue for the years ended December 31, 2023 and 2022, respectively. The Santa Cruz and Palo Verde service areas include approximately 205 square miles, which we believe provide further opportunities for growth.
Arizona Regulatory Agencies The ACC is the regulatory authority in Arizona with jurisdiction over water and wastewater utilities.
We believe we maintain the necessary permits and approvals for the discharges from our water and wastewater facilities. -13- Table of Con tents Arizona Regulatory Agencies The ACC is the regulatory authority in Arizona with jurisdiction over privately-held water and wastewater utilities.
We maintain a comprehensive environmental program which addresses, among other things, responsible business practices and compliance with environmental laws and regulations, including the use and conservation of natural resources. Water samples across our water system are analyzed on a regular basis in material compliance with regulatory requirements.
Although these organizations may lack regulatory or enforcement authority, they may be influential in achieving service quality and rate improvements for customers. -12- Table of Con tents We maintain a comprehensive environmental program which addresses, among other things, responsible business practices and compliance with environmental laws and regulations, including the use and conservation of natural resources.
While growth has slowed nationally over the past five years, the City of Maricopa continues to grow, as demonstrated by our addition of 12,692 active service connections, which represents 6.6% annualized growth from December 2017 to December 2022.
The City of Maricopa continues to grow, as demonstrated by our addition of 12,959 active service connections, which represents 6.1% annualized growth from December 2018 to December 2023. Development in the area is still considered to be affordable with the median home value being $341,000 compared to $429,000 in the Phoenix Metro area.
Development in the area is still considered to be affordable with the median home value being $349,450 compared to $425,000 in the Phoenix Metro area. We operate in this region through Global Water - Santa Cruz Water Company, Inc. ("Santa Cruz") and Global Water - Palo Verde Utilities Company, Inc. ("Palo Verde").
We operate in this region through Global Water - Santa Cruz Water Company, Inc. (“Santa Cruz”) and Global Water - Palo Verde Utilities Company, Inc. (“Palo Verde”). We acquired Santa Cruz and Palo Verde in 2004.
Removed
Refer to Note 16 - "Subsequent Events" of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details. Pinal County The City of Maricopa is located in Pinal County approximately 12 miles south of Phoenix.
Added
(wastewater services only) Prior to the consolidation in 2022, Global Water - Red Rock Utilities Company, Inc. provided water and wastewater utility services in Pinal County and had a service area for water utility service in Pima County. Only service areas located in Pinal County were consolidated into Santa Cruz and Palo Verde.
Removed
The Santa Cruz and Palo Verde service areas include approximately 223 square miles, which we believe provide further opportunities for growth. Most of the Santa Cruz and Palo Verde infrastructure is less than nineteen years old.
Added
Refer to the Pima County section for information on Global Water - Red Rock Water Company, Inc. which holds the Pima County water utility service area.
Removed
See Note 1 — “Description of Business, Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions — Stipulated Condemnation of the 1 The Red Rock service area includes territories in both Pinal and Pima Counties, however, only the Pinal County service area was consolidated into Santa Cruz.
Added
As of December 31, 2023, Rincon served 79 active water connections with approximately 9.0 square miles of service area. Global Water - Red Rock Water Company, Inc. (“Red Rock”) was acquired by the Company in 2018 and holds service areas located in Pima County . At this time, Red Rock has no active service connections.
Removed
Nearly all of our service areas are located in “Active Management Areas” within which the use of groundwater is regulated by ADWR in order to manage ongoing problems with groundwater overdraft.
Added
A developer may make an independent showing of an assured water supply resulting in a Certificate of Assured Water Supply (“CAWS”) for a subdivision or may obtain a written commitment for service from a designated water provider, such as a privately owned water company or a municipal water supplier.
Removed
In early 2010, the members of GWR made the decision to raise money through the capital markets, and GWR and GWM were reorganized to form Global Water Resources, Inc., a Delaware corporation. The members established a new entity, GWR Global Water Resources Corp.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

69 edited+7 added−13 removed183 unchanged
Biggest changeWhile the COVID-19 pandemic did not have a material effect on our business operations, results of operations, cash flows, and financial position for the year ended December 31, 2022, the COVID-19 pandemic and the related responses from government authorities could adversely impact us in a number of ways, including, but not limited to, the following: • disruptions to our operations and business activities, including any closures of offices or facilities, and to those of governmental agencies regulating our business, suppliers, customers, and other business partners; • reduced demand for our water and wastewater services from our commercial customers, particularly as businesses are shutdown; • greater difficulty in collecting customer receivables; -29- Table of Contents • a slowdown or disruption in the supply chain for the supplies used in our operations, including chemicals used to treat water and wastewater, in addition to higher costs; • limitations on employee resources, productivity, and availability, including due to sickness, government restrictions, labor supply shortages, and the desire of employees to avoid contact with large groups of people; • potential legislative or regulatory efforts to impose new requirements on our operations; • a continuation of worsening of general economic conditions, including increased inflation; • an increase in the cost or the difficulty to obtain debt or equity financing could affect our financial condition or future investment opportunities; and • an increase in regulatory restrictions or continued market volatility could hinder our ability to execute strategic business activities, including acquisitions, as well as negatively impact our stock price.
Biggest changeThese impacts may include, among others, disruptions to our operations and business activities, including any closures of offices or facilities, and to those of governmental agencies regulating our business, suppliers, customers, and other business partners; reduce demand for our water and wastewater services from our commercial customers, particularly if businesses are shutdown; greater difficulty in collecting customer receivables; a slowdown or disruption in the supply chain for the supplies used in our operations, including chemicals used to treat water and wastewater, in addition to higher costs; and limitations on employee resources, productivity, and availability, including due to sickness, government restrictions, labor supply shortages, and the desire of employees to avoid contact with large groups of people.
Technology Factors Our information technology systems may be vulnerable to unauthorized external or internal threats due to hacking, ransomware, viruses, or other cybersecurity breaches. As operators of critical infrastructure, we may face a heightened risk of cyberattacks from internal or external sources.
Our information technology systems may be vulnerable to unauthorized external or internal threats due to hacking, ransomware, viruses, or other cybersecurity breaches. As operators of critical infrastructure, we may face a heightened risk of cyberattacks from internal or external sources.
Our effective income tax rate could be adversely affected by various factors, many of which are outside of our control, including: • changes in tax laws, regulations, and/or interpretations of such tax laws in multiple jurisdictions, including but not limited to U.S. federal and state regulations or interpretations resulting from the 2017 Tax Cuts and Jobs Act (the "TCJA"); • increases in corporate tax rates and the availability of deductions or credits; • tax effects related to purchase accounting for acquisitions; and • resolutions of issues arising from tax examinations and any related interest or penalties.
Our effective income tax rate could be adversely affected by various factors, many of which are outside of our control, including: • changes in tax laws, regulations, and/or interpretations of such tax laws in multiple jurisdictions, including but not limited to U.S. federal and state regulations or interpretations resulting from the 2017 Tax Cuts and Jobs Act (the “TCJA”); • increases in corporate tax rates and the availability of deductions or credits; • tax effects related to purchase accounting for acquisitions; and • resolutions of issues arising from tax examinations and any related interest or penalties.
The single family housing market is affected by a number of national and regional economic factors, including: • interest rates and general levels of economic output; • levels of activity in the local real estate market; -31- Table of Contents • the state of domestic credit markets, mortgage standards, and availability of credit; • competition from other builders and other projects in the area and other states; • federal programs to assist home purchasers; • costs and availability of labor and materials; • government regulations affecting land development, home building, and mortgage financing; • availability of financing for development and for home purchasers; • changes in the income tax treatment relating to real property ownership; • unexpected increases in development costs; • increased commute times and fuel costs that may adversely affect the desirability of outlying suburbs; • availability of, among other things, other utilities, adequate transportation, and school facilities; and • environmental problems with such land.
The single family housing market is affected by a number of national and regional economic factors, including: • interest rates and general levels of economic output; • levels of activity in the local real estate market; • the state of domestic credit markets, mortgage standards, and availability of credit; • competition from other builders and other projects in the area and other states; • federal programs to assist home purchasers; • costs and availability of labor and materials; • government regulations affecting land development, home building, and mortgage financing; • availability of financing for development and for home purchasers; • changes in the income tax treatment relating to real property ownership; • unexpected increases in development costs; • increased commute times and fuel costs that may adversely affect the desirability of outlying suburbs; • availability of, among other things, other utilities, adequate transportation, and school facilities; and • environmental problems with such land.
Environmental Protection Agency ("EPA") implemented a new arsenic maximum contaminant level, which effectively required the installation and operation of costly arsenic treatment systems at many of our water production facilities. To comply with federal, state, and local environmental laws, our existing facilities may need to be altered or replaced, which may cause us to incur significant additional costs.
Environmental Protection Agency (“EPA”) implemented a new arsenic maximum contaminant level, which effectively required the installation and operation of costly arsenic treatment systems at many of our water production facilities. To comply with federal, state, and local environmental laws, our existing facilities may need to be altered or replaced, which may cause us to incur significant additional costs.
Any defects in our systems or significant reliability, quality, or performance problems with respect to our systems or services could have a number of negative effects on our profitability, results of operations, liquidity, and cash flows, including: • loss of revenues; • diversion of management and development resources and the attention of engineering personnel; • significant customer relations problems; • increased repair, support, and insurance expenses; -24- Table of Contents • adverse regulatory actions; and • legal actions for damages by our customers, including but not limited to damages based on commercial losses and effects on human health.
Any defects in our systems or significant reliability, quality, or performance problems with respect to our systems or services could have a number of negative effects on our profitability, results of operations, liquidity, and cash flows, including: -24- Table of Con tents • loss of revenues; • diversion of management and development resources and the attention of engineering personnel; • significant customer relations problems; • increased repair, support, and insurance expenses; • adverse regulatory actions; and • legal actions for damages by our customers, including but not limited to damages based on commercial losses and effects on human health.
The risk of natural adverse weather conditions, pandemic outbreaks, global political events, war, or terrorism could disrupt our business, impacting operating costs and capital expenditures. Our facilities are located in areas which have been and could be subject to natural disasters such as drought, floods, fires or earthquakes.
Business and Operational Factors The risk of natural adverse weather conditions, pandemic outbreaks, global political events, war, or terrorism could disrupt our business, impacting operating costs and capital expenditures. Our facilities are located in areas which have been and could be subject to natural disasters such as drought, floods, fires or earthquakes.
The potential negotiation of future acquisitions and development of new projects could require us to incur significant costs and expose us to significant risks, including: • risks relating to the condition of assets acquired and exposure to residual liabilities of prior businesses; • operating risks, including equipment, technology and supply problems, failure to achieve expected synergies and operating efficiencies, regulatory requirements, and approvals necessary for acquisitions; • risks that potential acquisitions may require the disproportionate attention of our senior management, which could distract them from the management of our existing business; • risks related to our ability to retain experienced personnel of the acquired company; and • risks that certain acquisitions may require regulatory approvals, which could be refused or delayed and which could result in unforeseen regulatory expenses or unfavorable regulatory conditions.
The potential negotiation of future acquisitions and development of new projects could require us to incur significant costs and expose us to significant risks, including: • risks relating to the condition of assets acquired and exposure to residual liabilities of prior businesses; • operating risks, including equipment, technology and supply problems, failure to achieve expected synergies and operating efficiencies, regulatory requirements, and approvals necessary for acquisitions; • risks that potential acquisitions may require the disproportionate attention of our senior management, which could distract them from the management of our existing business; • risks related to our ability to retain experienced personnel of the acquired company; and -26- Table of Con tents • risks that certain acquisitions may require regulatory approvals, which could be refused or delayed and which could result in unforeseen regulatory expenses or unfavorable regulatory conditions.
Other global incidents, such as the COVID-19 pandemic, could have a similar effect of disrupting our business to the extent they reach and impact the service areas in which we operate, the availability of supplies we need, the customers we serve, or the employees who operate our businesses.
Other global incidents, such as a pandemic, could have a similar effect of disrupting our business to the extent they reach and impact the service areas in which we operate, the availability of supplies we need, the customers we serve, or the employees who operate our businesses.
Our calculation of the provision for income taxes is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the Internal Revenue Service ("IRS") and other taxing authorities.
Our calculation of the provision for income taxes is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the Internal Revenue Service (“IRS”) and other taxing authorities.
Public perception of an unsafe water supply would harm our business, particularly with respect to our ability to implement water recycling as a key element of our business strategy. -30- Table of Contents Market and Financial Factors We will need additional capital to grow our business, and additional financing may not be available to us on favorable terms when required, or at all.
Public perception of an unsafe water supply would harm our business, particularly with respect to our ability to implement water recycling as a key element of our business strategy. Market and Financial Factors We will need additional capital to grow our business, and additional financing may not be available to us on favorable terms when required, or at all.
In addition, our owned utilities and/or the developments that we serve must demonstrate to the ADWR that there exists a 100-year water supply and obtain either a “Certificate of Assured Water Supply,” which is a certificate issued by the ADWR evidencing sufficient groundwater, surface water, or effluent of adequate quality will be continuously available to satisfy the water needs of the proposed use for at least one hundred years and which applies to a specific subdivision, or a DAWS, which applies to the utility’s entire service area.
In addition, our owned utilities and/or the developments that we serve must demonstrate to the ADWR that there exists a 100-year water supply and obtain either a CAWS, which is a certificate issued by the ADWR evidencing sufficient groundwater, surface water, or effluent of adequate quality will be continuously available to satisfy the water needs of the proposed use for at least one hundred years and which applies to a specific subdivision, or a DAWS, which applies to the utility’s entire service area.
Insofar as we intend to rely on the pumping of groundwater -22- Table of Contents and the generation and delivery of recycled water to meet future demands in our current service areas, our ability and/or the ability of developers inside of our service areas to meet regulatory requirements and to demonstrate assured and adequate water supplies is essential to the continued growth of our service connections and our capacity to supply water to our customers.
Insofar as we intend to rely on the pumping of groundwater and the generation and delivery of recycled water to meet future demands in our current service areas, our ability and/or the ability of developers inside of our service areas to meet regulatory requirements and to demonstrate assured and adequate water supplies is essential to the continued growth of our service connections and our capacity to supply water to our customers.
Should a municipality or other governmental subdivision seek to acquire some or all of our assets through eminent domain, we would likely resist the acquisition. -21- Table of Contents Contesting an exercise of condemnation through eminent domain may result in costly legal proceedings and may divert the attention of our management from the operation of our business.
Should a municipality or other governmental subdivision seek to acquire some or all of our assets through eminent domain, we would likely resist the acquisition. Contesting an exercise of condemnation through eminent domain may result in costly legal proceedings and may divert the attention of our management from the operation of our business.
Furthermore, laws and regulations have been enacted that seek to reduce or limit greenhouse gas emissions and require additional reporting and monitoring, and these -25- Table of Contents regulations may become more pervasive or stringent in light of changing governmental agendas and priorities, although the exact nature and timing of these changes is uncertain.
Furthermore, laws and regulations have been enacted that seek to reduce or limit greenhouse gas emissions and require additional reporting and monitoring, and these regulations may become more pervasive or stringent in light of changing governmental agendas and priorities, although the exact nature and timing of these changes is uncertain.
Our determination of tax liabilities is always subject to review or examination by applicable tax authorities. Any adverse outcome of such review or examination could have a material adverse effect on our financial condition and results of operations. -20- Table of Contents Significant judgment is required in determining our provision for income taxes.
Our determination of tax liabilities is always subject to review or examination by applicable tax authorities. Any adverse outcome of such review or examination could have a material adverse effect on our financial condition and results of operations. Significant judgment is required in determining our provision for income taxes.
Further, our information technology systems are vulnerable to damage or interruption from: • power loss, computer systems failures, and internet, telecommunications, or data network failures; • operator negligence or improper operation by, or supervision of, employees; • physical and electronic loss of customer data, including as a result of or security breaches, cyberattacks, misappropriation, and similar events; • computer viruses; • intentional acts of vandalism and similar events; and • fires, floods, earthquakes, and other natural disasters.
Further, our information technology systems are vulnerable to damage or interruption from: • power loss, computer systems failures, and internet, telecommunications, or data network failures; • operator negligence or improper operation by, or supervision of, employees; • physical and electronic loss of customer data, including as a result of or security breaches, cyberattacks, misappropriation, and similar events; • computer viruses; • intentional acts of vandalism and similar events; and -32- Table of Con tents • fires, floods, earthquakes, and other natural disasters.
Among other things, if we are found to be liable for consequences of water contamination arising out of human exposure to hazardous substances in our water supplies or other damage, we would be -28- Table of Contents subject to civil or criminal enforcement actions, litigation, and other proceedings or clean up obligations.
Among other things, if we are found to be liable for consequences of water contamination arising out of human exposure to hazardous substances in our water supplies or other damage, we would be subject to civil or criminal enforcement actions, litigation, and other proceedings or clean up obligations.
We have to comply with Section 404(a) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). Section 404(a) of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting.
We have to comply with Section 404(a) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Section 404(a) of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting.
Our existing indebtedness could affect our business adversely and limit our ability to plan for or respond to growth opportunities, and we may be unable to generate sufficient cash flow to satisfy our liquidity needs. As of December 31, 2022, we had total indebtedness of $108.8 million. In addition, we may incur substantial additional indebtedness in the future.
Our existing indebtedness could affect our business adversely and limit our ability to plan for or respond to growth opportunities, and we may be unable to generate sufficient cash flow to satisfy our liquidity needs. As of December 31, 2023, we had total indebtedness of $108.0 million . In addition, we may incur substantial additional indebtedness in the future.
If we are unable to execute our growth strategy effectively, we will need to rely more heavily on regulatory rate increases to increase our revenue. However, there can be no assurance that the regulatory authorities will approve any rate increases. -27- Table of Contents We face competition for new service areas and acquisition targets.
If we are unable to execute our growth strategy effectively, we will need to rely more heavily on regulatory rate increases to increase our revenue. However, there can be no assurance that the regulatory authorities will approve any rate increases. We face competition for new service areas and acquisition targets.
For example, our information technology -32- Table of Contents systems allow us, among other things, to bill our customers, provide customer service through our call center, manage certain financial records, track assets and accounts receivable collections, read water meters remotely, identify high water usage, and identify water theft from disconnected meters.
For example, our information technology systems allow us, among other things, to bill our customers, provide customer service through our call center, manage certain financial records, track assets and accounts receivable collections, read water meters remotely, identify high water usage, and identify water theft from disconnected meters.
We may encounter problems or delays for any requested improvements and receiving a favorable attestation in connection with the attestation to be provided by our independent registered public accounting firm after we cease to be a smaller reporting -34- Table of Contents company that is a non-accelerated filer.
We may encounter problems or delays for any requested improvements and receiving a favorable attestation in connection with the attestation to be provided by our independent registered public accounting firm after we cease to be a smaller reporting company that is a non-accelerated filer.
Taking advantage of the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors. We are a "smaller reporting company" as defined in the Exchange Act.
Taking advantage of the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors. We are a “smaller reporting company” as defined in the Exchange Act.
If a developer has an ICFA, and/or once a developer has entered into a service agreement with our utility subsidiary and the property being developed has been included within a service area, we have the obligation to serve under the terms of those agreements and existing regulations.
If a developer has an ICFA, and/or once a developer has entered into a service agreement with our utility subsidiary and the property being developed has been included within a service area, we have the obligation to serve under the terms of those -23- Table of Con tents agreements and existing regulations.
In addition, governments or government agencies that regulate our operations may enact legislation or adopt new requirements that could have an adverse effect on our business, including: • restricting ownership or investment; • providing for the expropriation of our assets by the government through condemnation or similar proceedings; • providing for changes to water and wastewater quality standards; • requiring cancellation or renegotiation of, or unilateral changes to, agreements relating to our provision of water and wastewater services; • changing regulatory or legislative emphasis on water conservation in comparison to other goals and initiatives; • promoting an increase of competition among water companies within our designated service areas; • requiring the provision of water or wastewater services at no charge or at reduced prices; • restricting the ability to terminate services to customers whose accounts are in arrears; • restricting the ability to sell assets or issue securities; • adversely changing tax, legal, or regulatory requirements, including employment, property ownership, or general business regulations; changing environmental requirements and the imposition of additional requirements and costs on our operations; and including but not limited to changes adopted in response to regulatory measures to address the COVID-19 pandemic or global climate change; • changes in the charges applied to raw water abstraction; • changes in rate making policies; or • restrictions relating to water use and supply, including restrictions on use, increased offsetting groundwater replenishment obligations, changes to the character of groundwater rights, and settlement of Native American claims.
In addition, governments or government agencies that regulate our operations may enact legislation or adopt new requirements that could have an adverse effect on our business, including: • restricting ownership or investment; • providing for the expropriation of our assets by the government through condemnation or similar proceedings; • providing for changes to water and wastewater quality standards; • requiring cancellation or renegotiation of, or unilateral changes to, agreements relating to our provision of water and wastewater services; • changing regulatory or legislative emphasis on water conservation in comparison to other goals and initiatives; • promoting an increase of competition among water companies within our designated service areas; • requiring the provision of water or wastewater services at no charge or at reduced prices; • restricting the ability to terminate services to customers whose accounts are in arrears; • restricting the ability to sell assets or issue securities; • adversely changing tax, legal, or regulatory requirements, including employment, property ownership, or general business regulations; • changing environmental requirements and the imposition of additional requirements and costs on our operations; • changes in the charges applied to raw water abstraction; • changes in rate making policies; or • restrictions relating to water use and supply, including restrictions on use, increased offsetting groundwater replenishment obligations, changes to the character of groundwater rights, and settlement of Native American claims.
The businesses and other assets we acquire in the future may not achieve sufficient revenue or profitability to justify our investment, and any difficulties we may encounter in the integration process could interfere with our operations, reduce operating margins, and -26- Table of Contents divert management's attention.
The businesses and other assets we acquire in the future may not achieve sufficient revenue or profitability to justify our investment, and any difficulties we may encounter in the integration process could interfere with our operations, reduce operating margins, and divert management’s attention.
This is because we must obtain regulatory approval to increase our rates, which can be time-consuming and costly and our requests for increases may not be approved in part or in full. We are required to test our water quality for certain parameters and potential contaminants on a regular basis.
This is because we must obtain regulatory approval to increase our rates, which can be time-consuming and costly and our requests for increases may not be approved in part or in full. -19- Table of Con tents We are required to test our water quality for certain parameters and potential contaminants on a regular basis.
The market price for our common stock is likely to be volatile, due to many factors, outside our control, including those described elsewhere in this “Risk Factors” section, as well as the following: -33- Table of Contents • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our services; • future announcements concerning our business or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by investment analysts or failure to meet their expectations; • the market’s perception towards our reduced disclosure as a result of being a "smaller reporting company” as defined in the Exchange Act; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations, or principles; • changes in senior management or key personnel; • issuances, exchanges, or sales, or expected issuances, exchanges, or sales of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and • changes in general market, economic, and political conditions in the U.S., and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war (including the ongoing war between Russia and Ukraine), other geopolitical uncertainties, public health concerns (including health epidemics or outbreaks of communicable diseases such as the COVID-19 pandemic), and responses to such events.
The market price for our common stock is likely to be volatile, due to many factors, outside our control, including those described elsewhere in this “Risk Factors” section, as well as the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our services; • future announcements concerning our business or our competitors’ businesses; • regulatory developments, including those related to the ACC; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by investment analysts or failure to meet their expectations; • the market’s perception towards our reduced disclosure as a result of being a “smaller reporting company” as defined in the Exchange Act; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations, or principles; • changes in senior management or key personnel; -33- Table of Con tents • issuances, exchanges, or sales, or expected issuances, exchanges, or sales of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and • changes in general market, economic, and political conditions in the U.S., and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war (including the ongoing wars between Russia and Ukraine and between Israel and Hamas), other geopolitical uncertainties, public health concerns, and responses to such events.
The ACC has exclusive authority to approve rates, mandate accounting treatments, authorize long-term financing programs, evaluate significant capital expenditures and plant additions, examine and regulate transactions between a regulated subsidiary and its affiliated entities, and approve or disapprove some reorganizations, mergers, and acquisitions prior to their completion.
The ACC has exclusive constitutional authority related to ratemaking and extensive constitutional authority to mandate accounting treatments, authorize long-term financing programs, evaluate significant capital expenditures and plant additions, examine and regulate transactions between a regulated subsidiary and its affiliated entities, and approve or disapprove some reorganizations, mergers, and acquisitions prior to their completion.
Legal, Regulatory, and Legislative Factors We have significant obligations under Infrastructure Coordination and Financing Agreements (“ICFAs”), yet funds from our ICFAs are dependent on development activities by developers which we do not control and are also subject to certain regulatory requirements. Prior to 2014, we extended water and wastewater infrastructure financing to developers and builders through ICFAs.
We have significant obligations under Infrastructure Coordination and Financing Agreements (“ICFAs”), yet funds from our ICFAs are dependent on development activities by developers which we do not control and are also subject to certain regulatory requirements. Prior to 2014, we extended water and wastewater infrastructure financing to developers and builders through ICFA contracts.
The discovery of previously unknown conditions, or the imposition of cleanup obligations in the future, could result in significant costs, and could adversely affect our financial condition, results of operations, cash flow, and liquidity.
The discovery of -28- Table of Con tents previously unknown conditions, or the imposition of cleanup obligations in the future, could result in significant costs, and could adversely affect our financial condition, results of operations, cash flow, and liquidity.
Using a new water source is generally associated with increased costs compared to an existing water source and, as indicated above, purchasing water is typically more expensive than obtaining the water from other means.
Using a new water source is generally associated with increased costs compared to an existing water source -27- Table of Con tents and, as indicated above, purchasing water is typically more expensive than obtaining the water from other means.
Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action, and potentially civil litigation.
Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action, and potentially civil litigation. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We currently intend to continue to pay a regular monthly dividend on our common stock of $0.02483 per share ($0.29796 per share annually).
We currently intend to continue to pay a regular monthly dividend on our common stock of $0.02508 per share ($0.30096 per share annually).
The loss or shutdown over an extended period of operations at any of our treatment facilities or any losses relating to these risks could have a material adverse impact on our profitability, results of operations, liquidity, and cash flows.
The loss or shutdown over an extended period of operations at any of our treatment facilities or any losses relating to these risks could have a material adverse impact on our profitability, results of operations, liquidity, and cash flows. Service interruptions, including due to any disruption or problem at our facilities could increase our expenses.
If these officers or employees cause a large number of securities to be sold in the public market, such sales could also reduce the trading price of our common stock and impede our ability to raise future capital.
If these officers or employees cause a large number of securities to be sold in the public market, such sales could also reduce the trading price of our common stock and impede our ability to raise future capital. We incur costs as a result of being a public company in the U.S.
Whether or not we provide guidance, investment analysts may publish their estimates of our future financial performance. Our actual results may not always be in line with or exceed any guidance we have provided or the expectations of investment analysts, especially in times of economic uncertainty.
Our actual results may not always be in line with or exceed any guidance we have provided or the expectations of investment analysts, especially in times of economic uncertainty.
Our operations of regulated utilities are currently located exclusively in the state of Arizona, and more specifically approximately 91.0% of our active service connections are within a single municipality, which increases the impact of local conditions on our results of operations.
Our operations of regulated utilities are currently located exclusively in the state of Arizona, and more specifically approximately 85.6% of our active service connections are within a single municipality, which increases the impact of local conditions on our results of operations. -25- Table of Con tents The customers of our regulated utilities are currently located exclusively in the state of Arizona and 85.6% of our active service connections are located in the City of Maricopa, Arizona.
Changes in, interpretations of, or enforcement trends related to tax rules and regulations may adversely affect our effective income tax rates or operating margins and we may be required to pay additional tax assessments.
Condemnation also results in a loss of revenue from the operations of the affected utility. Changes in, interpretations of, or enforcement trends related to tax rules and regulations may adversely affect our effective income tax rates or operating margins and we may be required to pay additional tax assessments.
Extending/expanding the existing infrastructure to provide service may result in the need to make additional, currently unplanned, capital improvements and there is no guarantee that we may recover our costs timely.
Extending/expanding the existing infrastructure to provide service may result in the need to make additional, currently unplanned, capital improvements and there is no guarantee that we may recover our costs timely. As a result, our return on our investment and cash flow stream could be adversely affected.
A failure of major pipes or reservoirs could result in injuries and property damage for which we may be liable. The failure of major pipes and reservoirs may also result in the need to shut down some facilities or parts of our network in order to conduct repairs.
The failure of major pipes and reservoirs may also result in the need to shut down some facilities or parts of our network in order to conduct repairs.
We may provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this Form 10-K and in our other public filings with the SEC and public statements.
Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this Form 10-K and in our other public filings with the SEC and public statements. Whether or not we provide guidance, investment analysts may publish their estimates of our future financial performance.
As a result, our return on our investment and cash flow stream could be adversely affected. -23- Table of Contents If we do not manage our anticipated growth effectively, we may not be able to develop or implement the infrastructure necessary to support our operations and could suffer a loss of profitability.
If we do not manage our anticipated growth effectively, we may not be able to develop or implement the infrastructure necessary to support our operations and could suffer a loss of profitability.
A 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, which we refer to as “service areas.” Real estate development is a cyclical industry and the growth rate of development, especially residential development, from 2006 through 2019, both nationally and in Arizona had been below historical rates.
A 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, which we refer to as “service areas.” Moreover, real estate development is a cyclical industry.
See “—Business and Operational Factors — The COVID-19 global pandemic could adversely effect our business operations, cash flows, and financial positio n to an extent that is difficult to predict ” for additional information.
See “—Business and Operational Factors — Pandemics, epidemics or disease outbreaks, such as the COVID-19 pandemic, could adversely affect our business operations, cash flows, and financial position to an extent that is difficult to predict . ” for additional information.
In addition, our service areas are susceptible to pandemic outbreaks, terrorist acts, and operations may be affected by disruptive political events, both global and domestic, such as civil unrest in countries in which our vendors are located or products are manufactured, and in the US where protests and other disturbances may affect our ability to operate.
In addition, our service areas are susceptible to pandemic outbreaks, terrorist acts, and operations may be affected by disruptive political events, both global and domestic, such as civil unrest in countries in which our vendors are located or products are manufactured, and in the US where protests and other disturbances may affect our ability to operate. -22- Table of Con tents Inadequate water and wastewater supplies could have a material adverse effect upon our ability to achieve the customer growth necessary to increase our revenues.
We are subject to industrial risks that could adversely affect our results of operations. The operations of our water and wastewater treatment plants involve physical, chemical, and biological processes and the use of pumps, generators, and other industrial equipment.
The operations of our water and wastewater treatment plants involve physical, chemical, and biological processes and the use of pumps, generators, and other industrial equipment.
Such remediation losses may not be covered by insurance policies and may make it difficult for us to secure insurance in the future at acceptable insurance premium rates.
Such remediation losses may not be covered by insurance policies and may make it difficult for us to secure insurance in the future at acceptable insurance premium rates. We are subject to industrial risks that could adversely affect our results of operations.
If one or more of these analysts cease to cover our common stock, we could lose visibility in the market for our stock, which in turn could cause our common stock price to decline. We incur costs as a result of being a public company in the U.S.
If one or more of these analysts cease to cover our -35- Table of Con tents common stock, we could lose visibility in the market for our stock, which in turn could cause our common stock price to decline.
If our business does not generate sufficient cash flow from operations or if we are unable to borrow money or otherwise generate funds sufficient to enable us to fund our liquidity needs, we may be unable to plan for or respond to growth opportunities, which could adversely affect our operating results and business prospects.
If our business does not generate sufficient cash flow from operations or if we are unable to borrow money or otherwise generate funds sufficient to enable us to fund our liquidity needs, we may be unable to plan for or respond to growth opportunities, which could adversely affect our operating results and business prospects. -30- Table of Con tents Our growth depends significantly on increased residential and commercial development in our service areas, and if developers or builders are unable to complete additional residential and commercial projects, our revenue may not increase.
The passage of certain initiatives could depress expected population growth, impact our business or growth plans, and have a material adverse impact on our financial condition, results of operations or cash flows. Our ability to expand into new service areas and to expand current water and wastewater service depends on approval from regulatory agencies.
The passage of certain initiatives could depress expected population growth, impact our business or growth plans, and have a material adverse impact on our financial condition, results of operations or cash flows.
Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or results of operations in future periods.
Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or results of operations in future periods. Legal, Regulatory, and Legislative Factors Proposals to change policy in Arizona made through legislative, regulatory, or ballot initiatives may impact our growth, business plans and financial condition.
See “Management’s Discussion and Analysis of Results of Operations and Financial Condition —Corporate Transactions —ACC Tax Docket” in Part II, Item 7 of this report for more information on the ACC docket that addresses the utility ratemaking implications of the TCJA.
See “Management’s Discussion and Analysis of Results of Operations and Financial Condition —Corporate Transactions —ACC Tax Docket” in Part II, Item 7 of this report for more information on the ACC docket that addresses the utility ratemaking implications of the TCJA. -21- Table of Con tents We are exposed to various risks relating to legal proceedings or claims that could materially adversely affect our operating results.
We are subject to comprehensive regulation by several federal, state and local regulatory agencies that significantly influence our business, liquidity, and results of operations and our ability to fully recover costs from utility customers in a timely manner. The ACC is the regulatory authority with jurisdiction over water and wastewater utilities.
We are subject to regulation by the ACC and our financial condition depends upon our ability to recover costs in a timely manner from customers through regulated rates. -20- Table of Con tents We are subject to comprehensive regulation by several federal, state and local regulatory agencies that significantly influence our business, liquidity, and results of operations.
As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are otherwise applicable generally to public companies including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act (so long as we also remain a non-accelerated filer); (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and (iii) reduced disclosure obligations regarding financial statements.
As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are otherwise applicable generally to public companies including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act (so long as we also remain a non-accelerated filer); (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and (iii) reduced disclosure obligations regarding financial statements. -34- Table of Con tents We may take advantage of the scaled disclosures available to smaller reporting companies for so long as our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter.
We are exposed to various risks relating to legal proceedings or claims that could materially adversely affect our operating results. We are a party to lawsuits in the normal course of our business. Litigation in general can be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict.
We are a party to lawsuits in the normal course of our business. Litigation in general can be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. Responding to lawsuits brought against us, or legal actions that we may initiate, can often be expensive and time-consuming.
Any of the foregoing could have a material adverse impact on our business, financial condition, results of operations, and cash flows. Maintaining our operational technology and information technology systems or implementing new systems could result in higher than expected costs or otherwise adversely impact our internal controls environment, operations, and profitability.
Technology Factors -31- Table of Con tents Maintaining our operational technology and information technology systems or implementing new systems could result in higher than expected costs or otherwise adversely impact our internal controls environment, operations, and profitability.
Our growth depends significantly on increased residential and commercial development in our service areas, and if developers or builders are unable to complete additional residential and commercial projects, our revenue may not increase. The growth of our customer base depends almost entirely on the success of developers in developing residential and commercial properties within our CC&N areas.
The growth of our customer base depends almost entirely on the success of developers in developing residential and commercial properties within our CC&N areas.
Pursuant to this regulatory mandate, the ACC may impose conditions that could discourage, delay, or prevent a transaction involving a change in control of our company. -35- Table of Contents General Risk Factors If our operating and financial performance in any given period does not meet the guidance that we provide to the public or the expectations of investment analysts, our stock price may decline.
General Risk Factors If our operating and financial performance in any given period does not meet the guidance that we provide to the public or the expectations of investment analysts, our stock price may decline. We may provide public guidance on our expected operating and financial results for future periods.
Any failure of our network of treatment facilities, water and wastewater pipes and water reservoirs could result in losses and damages that may affect our financial condition and reputation. Our utilities distribute water and collect wastewater through an extensive network of pipes and store water in reservoirs located across our service areas.
Our utilities distribute water and collect wastewater through an extensive network of pipes and store water in reservoirs located across our service areas. A failure of major pipes or reservoirs could result in injuries and property damage for which we may be liable.
Failure by us to observe the conditions and comply with the requirements of permits and other applicable laws and regulations could result in delays, additional costs, fines, and other adverse consequences, including the inability to proceed with development in our service areas. -19- Table of Contents We may incur higher compliance or remediation costs than expected in any particular period and may not be able to pass those increased costs along to our customers immediately through rate increases, or at all.
Failure by us to observe the conditions and comply with the requirements of permits and other applicable laws and regulations could result in delays, additional costs, fines, and other adverse consequences, including the inability to proceed with development in our service areas.
If we are unable to compete effectively for new service areas and acquisitions of existing utilities, our ability to increase our rate base and revenue could be adversely affected. Service interruptions, including due to any disruption or problem at our facilities could increase our expenses.
If we are unable to compete effectively for new service areas and acquisitions of existing utilities, our ability to increase our rate base and revenue could be adversely affected. Any failure of our network of treatment facilities, water and wastewater pipes and water reservoirs could result in losses and damages that may affect our financial condition and reputation.
This would cause us to rely more heavily on regulatory rate increases to increase our revenues.
We may have difficulty accomplishing our growth strategy within and outside of our current service areas. This would cause us to rely more heavily on regulatory rate increases to increase our revenues.
Responding to lawsuits brought against us, or legal actions that we may initiate, can often be expensive and time-consuming. Unfavorable outcomes from these claims and/or lawsuits could materially adversely affect our business, results of operations, and financial condition, and we could incur substantial monetary liability and/or be required to change our business practices.
Unfavorable outcomes from these claims and/or lawsuits could materially adversely affect our business, results of operations, and financial condition, and we could incur substantial monetary liability and/or be required to change our business practices. Our ability to expand into new service areas and to expand current water and wastewater service depends on approval from regulatory agencies.
An adverse change in any of these conditions would therefore affect our profitability, results of operations, liquidity, and cash flows more significantly than if our utilities operated more broadly in other geographic areas. We may have difficulty accomplishing our growth strategy within and outside of our current service areas.
As a result, we cannot diversify or mitigate the risks presented by local regulatory, economic, political, demographic, and weather conditions in this area. An adverse change in any of these conditions would therefore affect our profitability, results of operations, liquidity, and cash flows more significantly than if our utilities operated more broadly in other geographic areas.
Condemnation also results in a loss of revenue from the operations of the affected utility. We are subject to environmental risks that may subject us to clean-up costs or litigation that could adversely affect our business, operating results, financial condition, and prospects.
See “—Business and Operational Factors — Doing business in jurisdictions other than Arizona may present unforeseen regulatory, legal, and operational challenges that could impede or delay our operations or adversely affect our profitability.” We are subject to environmental risks that may subject us to clean-up costs or litigation that could adversely affect our business, operating results, financial condition, and prospects.
See “—Business and Operational Factors — Doing business in jurisdictions other than Arizona may present unforeseen regulatory, legal, and operational challenges that could impede or delay our operations or adversely affect our profitability.” Our water and wastewater systems are subject to condemnation by governmental authorities, which may result in the receipt of less than the fair market value of our assets and a loss of revenue from our operations .
Decisions made by the ACC could have a material adverse impact on our financial condition, results of operations and cash flows. Our water and wastewater systems are subject to condemnation by governmental authorities, which may result in the receipt of less than the fair market value of our assets and a loss of revenue from our operations .
The COVID-19 global pandemic could adversely affect our business operations, cash flows, and financial position to an extent that is difficult to predict. The COVID-19 pandemic has adversely affected economies, supply chains, workforce participation and financial markets across the globe. Since the initial outbreak, new variants of COVID-19 that are significantly more contagious than previous strains, have emerged.
Pandemics, epidemics or disease outbreaks, such as the COVID-19 pandemic, could adversely affect our business operations, cash flows, and financial position to an extent that is difficult to predict. The occurrence of pandemics, epidemics or disease outbreaks, such as the COVID-19 pandemic, could adversely affect our business operations, cash flows, and financial position.
Removed
These agreements are contracts with developers or builders in which we coordinate and fund the construction of water, wastewater, and recycled water facilities that will be owned and operated by our regulated subsidiaries in advance of completion of developments in the area.
Added
We may incur higher compliance or remediation costs than expected in any particular period and may not be able to pass those increased costs along to our customers immediately through rate increases, or at all.
Removed
Proposals to change policy in Arizona made through ballot initiatives may impact our growth, business plans and financial condition.
Added
In particular, the ACC is the regulatory authority with jurisdiction over privately-held water and wastewater utilities and our ability to fully recover costs from utility customers in a timely manner.
Removed
We are subject to regulation by the Arizona Corporation Commission and our financial condition depends upon our ability to recover costs in a timely manner from customers through regulated rates.
Added
There would be many variables and uncertainties associated with any future pandemics, epidemics or disease outbreaks, including, but not limited to, the duration and severity of the outbreak; the extent of travel restrictions, business closures and other measures imposed by governmental authorities; availability of vaccines; and other factors that may be currently unknown or considered immaterial, to fully assess the potential impact on our business operations, cash flows, and financial position. -29- Table of Con tents Doing business in jurisdictions other than Arizona may present unforeseen regulatory, legal, and operational challenges that could impede or delay our operations or adversely affect our profitability.
Removed
Decisions made by the ACC could have a material adverse impact on our financial condition, results of operations and cash flows. Business and Operational Factors Inadequate water and wastewater supplies could have a material adverse effect upon our ability to achieve the customer growth necessary to increase our revenues.
Added
For example, the growth rate of development, especially residential development, from 2006 through 2019, both nationally and in Arizona had been below historical rates.
Removed
The customers of our regulated utilities are currently located exclusively in the state of Arizona and 91.0% of our active service connections are located in the City of Maricopa, Arizona. As a result, we cannot diversify or mitigate the risks presented by local regulatory, economic, political, demographic, and weather conditions in this area.
Added
Any of the foregoing could have a material adverse impact on our business, financial condition, results of operations, and cash flows. We rely on telecommunications vendors to interlink our sites and enable centralized management of Information and Operation Technologies. Disruption of those interlinks may adversely affect our results of operations.
Removed
The spread of these new strains initially caused many government authorities and businesses to reimplement prior restrictions in an effort to lessen the spread of COVID-19 and its variants; however, while many of these restrictions have been lifted, uncertainty remains as to whether additional restrictions may be initiated or again reimplemented in responses to surges in COVID-19 cases.

… 9 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

4 edited+3 added−0 removed2 unchanged
Biggest changeOwned Water Utility Plant 4 Sites - Vail, Arizona Global Water - Rincon Water Company, Inc. Owned We believe that our existing properties are adequate to meet our current needs.
Biggest changeOwned Water Utility Plant Well Site - Red Rock, Arizona Global Water - Red Rock Utility Water Company Owned Global Water Center - Regional Office Green Valley, Arizona Global Water - Farmers Water Company, Inc. Leased We believe that our existing properties are adequate to meet our current needs.
ITEM 2. PROPERTIES The following table lists the principal properties that we own or lease: Nature of Property Location Operated By Owned or Leased Corporate Offices Phoenix, Arizona Global Water Resources, Inc. Leased Wastewater Treatment Plant Maricopa, Arizona Global Water - Palo Verde Utilities Company, Inc.
ITEM 2. PROPERTIES The following table lists the principal properties that we own or lease: Nature of Property Location Operated By Owned or Leased Corporate Offices Phoenix, Arizona Global Water Resources, Inc. Leased Wastewater Utility Plant 2 Wastewater Treatment Plants - Maricopa, Arizona Global Water - Palo Verde Utilities Company, Inc.
Owned Water Utility Plant Marana, Arizona Global Water - Tortolita Water Company, Inc. Owned Water Utility Plant Marana, Arizona Global Water - Lyn Lee Water Company, Inc. Owned Water Utility Plant Sahuarita, Arizona Global Water - Las Quintas Serenas Water Company, Inc. Owned Water Utility Plant Water Distribution Site - Vail, Arizona Global Water - Rincon Water Company, Inc.
Owned Water Utility Plant Marana, Arizona Global Water - Tortolita Water Company, Inc. Owned Water Utility Plant Marana, Arizona Global Water - Lyn Lee Water Company, Inc. Owned Water Utility Plant Water Distribution Site, Sahuarita, Arizona Global Water - Las Quintas Serenas Water Company, Inc.
Owned Water Utility Plant 14 sites - Maricopa County, Arizona Global Water - Belmont Water Company, Inc. Owned Irrigation Utility Plant Mesa, Arizona Global Water - Turner Ranches Irrigation, Inc. Owned Water Utility Plant Tucson, Arizona Global Water - Mirabell Water Company, Inc. Owned Water Utility Plant Tucson, Arizona Global Water - Francesca Water Company, Inc.
Owned Water Utility Plant 14 sites - Maricopa County, Arizona Global Water - Belmont Water Company, Inc. Owned Irrigation Utility Plant Mesa, Arizona Global Water - Turner Ranches Irrigation, Inc. Owned Water Utility Plant Water Distribution Site - Tucson, Arizona Global Water - Mirabell Water Company, Inc.
Added
Owned Water Utility Plant Well Site - Tucson, Arizona Global Water - Mirabell Water Company, Inc. Owned Water Utility Plant 2 Water Distribution Sites - Tucson, Arizona Global Water - Francesca Water Company, Inc. Owned Water Utility Plant 2 Well Sites - Tucson, Arizona Global Water - Francesca Water Company, Inc.
Added
Owned Water Utility Plant 2 Well Sites, Sahuarita, Arizona Global Water - Las Quintas Serenas Water Company, Inc. Owned Water Utility Plant 2 Water Distribution Sites - Vail, Arizona Global Water - Rincon Water Company, Inc. Owned Water Utility Plant 4 Water Distribution Sites - Sahuarita, Arizona Global Water - Farmers Water Company, Inc.
Added
Owned Water Utility Plant 3 Well Sites - Sahuarita, Arizona Global Water - Farmers Water Company, Inc. Owned Water Utility Plant 3 Water Distribution Sites - Green Valley, Arizona Global Water - Farmers Water Company, Inc.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS In the ordinary course of business, we may, from time to time, be subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. To our knowledge, we are not involved in any legal proceeding which is expected to have a material effect on us. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.
Biggest changeITEM 3. LEGAL PROCEEDINGS In the ordinary course of business, the Company may, from time to time, be subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. To our knowledge, the Company is not involved in any legal proceeding which is expected to have a material effect on the Company.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−0 removed2 unchanged
Biggest changeSee “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Liquidity and Capital Resources” in Part II, Item 7 of this report for a discussion of provisions of our senior secured notes and our revolving credit facility that limit the payment of dividends. -38- Table of Contents Performance Graph The following graph compares the relative performance of our common stock, the S&P 500 Index, and our Peer Group Index.
Biggest changeSee “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Liquidity and Capital Resources” in Part II, Item 7 of this report for a discussion of provisions of our senior secured notes and our revolving credit facility that limit the payment of dividends.
Shareholders As of March 8, 2023, there were approximately [16] shareholders of record of our common stock. Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record.
Shareholders As of March 6, 2024, there were approximately 56 shareholders of record of our common stock. Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record.
Dividends We currently intend to continue to pay a regular monthly dividend of $0.02483 per share ($0.29796 per share annually).
Dividends We currently intend to continue to pay a regular monthly dividend of 0.02508 per share (0.30096 per share annually).
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1 to 31, 2022 — $ — — — November 1 to 30, 2022 — $ — — — December 1 to 31, 2022 — $ — — — Total — — Unregistered Sales of Equity Securities None. -39- Table of Contents
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1 to 31, 2022 201 $ 9.52 — — November 1 to 30, 2022 9,921 $ 11.35 — — December 1 to 31, 2022 — $ — — — Total 10,122 — Unregistered Sales of Equity Securities None.
This graph covers the period from December 31, 2017 through December 31, 2022. The graph assumes that $100 was invested on December 31, 2017 in the common stock of GWRS, the S&P 500 Index, and our Peer Group Index, and also assumes reinvestment of dividends.
The graph assumes that $100 was invested on December 31, 2018 in the common stock of GWRS, the S&P 500 Index, and our Peer Group Index, and also assumes reinvestment of dividends.
The stock price performance on the following graph is not necessarily indicative of future stock price performance. * Peer group includes American States Water Company, American Water Works, Aqua America, Inc., Artesian Resources Corp., California Water, SJW Group, Middlesex Water Company, and York Water Co. 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Global Water Resources, Inc. $ 100.00 $ 163.04 $ 211.78 $ 232.44 $ 248.02 $ 221.51 S&P 500 Index $ 100.00 $ 120.76 $ 155.64 $ 180.94 $ 218.36 $ 184.96 Peer Group Index* $ 100.00 $ 161.07 $ 207.70 $ 231.18 $ 264.86 $ 279.76 Issuer Purchases of Equity Securities The following table presents information with respect to purchases of common stock we made during the three months ended December 31, 2022.
The stock price performance on the following graph is not necessarily indicative of future stock price performance. * Peer group includes American States Water Company, American Water Works, Aqua America, Inc., Artesian Resources Corp., California Water, SJW Group, Middlesex Water Company, and York Water Co. 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Global Water Resources, Inc. $ 100.00 $ 130.02 $ 142.85 $ 152.53 $ 136.34 $ 119.63 S&P 500 Index $ 100.00 $ 128.88 $ 149.83 $ 180.81 $ 153.16 $ 190.27 Peer Group Index* $ 100.00 $ 132.45 $ 151.09 $ 176.57 $ 190.23 $ 137.35 Issuer Purchases of Equity Securities The following table presents information with respect to purchases of common stock we made during the three months ended December 31, 2022.
Added
Table of Con tents Performance Graph The following graph compares the relative performance of our common stock, the S&P 500 Index, and our Peer Group Index. This graph covers the period from December 31, 2018 through December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

107 edited+62 added−35 removed37 unchanged
Biggest changeThe ACC also approved: (i) the consolidation of water and/or wastewater rates to create economies of scale that are beneficial to all customers when rates are consolidated; (ii) acquisition premiums relating to the Company’s acquisitions of its Red Rock and Turner Ranches utilities, which increase the rate base for such utilities and result in an increase in the annual collective revenue requirement included in the table above; (iii) the Company’s ability to annually adjust rates to flow through changes in property tax expense and/or changes in income tax expense, without the necessity of a rate case proceeding; and (iv) a sustainable water surcharge, which will allow semiannual surcharges to be added to customer bills based on verified costs of new water resources. -45- Finally, Rate Decision No. 78644 requires the Company to work with ACC staff and the Residential Utility Consumer Office to prepare a Private Letter Ruling request to the Internal Revenue Service (“IRS”) to clarify whether the failure to eliminate the deferred taxes attributable to assets condemned in a transaction governed by Section 1033 of the Internal Revenue Code ("IRC") would violate the normalization provisions of Section 168(i)(9) of the IRC.
Biggest changeThe ACC also approved: (i) the consolidation of water and/or wastewater rates to create economies of scale that are beneficial to all customers when rates are consolidated; (ii) acquisition premiums relating to the Company’s acquisitions of its Red Rock and Turner Ranches utilities, which increase the rate base for such utilities and result in an increase in the annual collective revenue requirement included in the table above; (iii) the Company’s ability to annually adjust rates to flow through certain changes in tax expense, primarily related to income taxes, without the necessity of a rate case proceeding; and (iv) a sustainable water surcharge, which will allow semiannual surcharges to be added to customer bills based on verified costs of new water resources.
Refer to Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
Refer to Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
This approach employs a series of principles and practices that can be tailored to each community: • Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future; • Regional planning; • Use of advanced technology and data; • Employing respected subject matter experts and retaining thought and application leaders; • Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, regulators, and utility staff are knowledgeable on the principles and practices of our Total Water Management approach; and • Establishing partnerships with communities, developers, and industry stakeholders to gain support of our Total Water Management principles and practices.
This approach employs a series of principles and practices that can be tailored to each community: • Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future; • Regional planning; • Use of advanced technology and data; • Employing respected subject matter experts and retaining thought and application leaders; • Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, regulators, and utility staff are knowledgeable on the principles and practices of the Total Water Management approach; and • Establishing partnerships with communities, developers, and industry stakeholders to gain support of the Total Water Management principles and practices.
Although it is difficult to project the ultimate costs of complying with pending or future requirements, we do not expect current requirements under current regulation to have a material impact on our operations or financial condition, although it is possible new methods of treating drinking water may be required if additional regulations become effective in the future.
Although it is difficult to project the ultimate costs of complying with pending or future requirements, we do not expect requirements under current regulations to have a material impact on our operations or financial condition, although it is possible new methods of treating drinking water may be required if additional regulations become effective in the future.
The Company seeks to deploy an integrated approach, referred to as “Total Water Management." Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically.
The Company seeks to deploy an integrated approach, referred to as “Total Water Management.” Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically.
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, initially bore an interest rate equal to the London Interbank Offered Rate (LIBOR) plus 2.00% and has no unused line fee.
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, initially bore an interest rate equal to the London Interbank Offered Rate (LIBOR) plus 2.00% and had no unused line fee.
Additionally, our financial condition, results of operations, and cash flow are impacted by the methods, assumptions, and estimates used in the application of critical accounting policies. Although our management believes that these estimates, assumptions, and other judgments are appropriate, they relate to matters that are inherently uncertain and that may change in subsequent periods.
Additionally, the Company’s financial condition, results of operations, and cash flow are impacted by the methods, assumptions, and estimates used in the application of critical accounting policies. Although management believes that these estimates, assumptions, and other judgments are appropriate, they relate to matters that are inherently uncertain and that may change in subsequent periods.
Additionally, the chief operating decision maker uses consolidated financial information to evaluate our performance, which is the same basis on which he communicates our results and performance to our board of directors. It is upon this consolidated basis from which he bases all significant decisions regarding the allocation of our resources on a consolidated level.
Additionally, the chief operating decision maker uses consolidated financial information to evaluate performance, which is the same basis on which he communicates results and performance to the Company’s board of directors. It is upon this consolidated basis from which he bases all significant decisions regarding the allocation of the Company’s resources on a consolidated level.
Financing Activity On August 1, 2022, the Company completed a public offering of 1,150,000 shares of common stock at a public offering price of $13.50 per share, which included 150,000 shares issued and sold to the underwriter following the exercise in full of its option to purchase additional shares of common stock.
On August 1, 2022, the Company completed a public offering of 1,150,000 shares of common stock at a public offering price of $13.50 per share, which included 150,000 shares issued and sold to the underwriter following the exercise in full of its option to purchase additional shares of common stock.
When our regulated subsidiaries file rate cases, their capital assets, operating costs and other matters are subject to review, and disallowances may occur, and the Company may be required to write-off related regulatory assets that are not specifically recoverable and determine if other assets might be impaired.
When the Company’s regulated subsidiaries file rate cases, their capital assets, operating costs and other matters are subject to review, and disallowances may occur, and the Company may be required to write-off related regulatory assets that are not specifically recoverable and determine if other assets might be impaired.
See Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for more information regarding our rate proceedings.
See Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for more information regarding the Company’s rate proceedings.
Cash from Operating Activities Cash flows provided by operating activities are used for operating needs and to meet capital expenditure requirements. Our future cash flows from operating activities will be affected by economic utility regulation, infrastructure investment, growth in service connections, customer usage of water, compliance with environmental health and safety standards, production costs, weather, and seasonality.
Cash from Operating Activities Cash flows provided by operating activities are used for operating needs and to meet capital expenditure requirements. The Company’s future cash flows from operating activities will be affected by economic utility regulation, infrastructure investment, growth in service connections, customer usage of water, compliance with environmental health and safety standards, production costs, weather, and seasonality.
Factors Affecting our Results of Operations Our financial condition and results of operations are influenced by a variety of industry-wide factors, including but not limited to: • population and community growth; • economic and environmental utility regulation; • economic environment; • the need for infrastructure investment; • production and treatment costs; • weather and seasonality; and • access to and quality of water supply.
Factors Affecting our Results of Operations Table of Con tents Our financial condition and results of operations are influenced by a variety of industry-wide factors, including but not limited to: • population and community growth; • economic and environmental utility regulation; • economic environment; • the need for infrastructure investment; • production and treatment costs; • weather and seasonality; and • access to and quality of water supply.
The overall revenue requirement for rate making purposes is established by multiplying the rate of return by the rate base and adding “prudently” incurred operating expenses for the test year, depreciation, and any applicable pro forma adjustments.
The overall revenue requirement for rate making purposes is established by multiplying the rate of return by the rate base and adding reasonably incurred operating expenses for the test year, depreciation, and any applicable pro forma adjustments.
Critical Accounting Policies, Judgments, and Estimates The application of critical accounting policies is particularly important to our financial condition and results of operations and provides a framework for management to make significant estimates, assumptions, and other judgments.
Critical Accounting Estimates The application of critical accounting policies is particularly important to the Company’s financial condition and results of operations and provides a framework for management to make significant estimates, assumptions, and other judgments.
We continue to execute on our strategy to optimize and focus the Company in order to provide greater value to our customers and shareholders by aiming to deliver predictable financial results, making prudent capital investments, and focusing our efforts on earning an appropriate rate of return on our investments.
The Company continues to execute on the strategy to optimize and focus the Company in order to provide greater value to our customers and shareholders by aiming to deliver predictable financial results, making prudent capital investments, and focusing our efforts on earning an appropriate rate of return on our investments.
Recent Accounting Pronouncements A discussion of recently issued and recently issued but not yet adopted accounting pronouncements is included in Note 1 – “Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements - Corporate Transactions - Revolving Line of Credit" of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report and is incorporated herein by reference.
Recent Accounting Pronouncements A discussion of recently issued and recently issued but not yet adopted accounting pronouncements is included in Note 1 – “Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements - Recent Accounting Pronouncements” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report and is incorporated herein by reference.
We currently rely predominantly (and are likely to continue to rely) on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to meet future demands in our service areas. At present, groundwater (and recycled water derived from groundwater) is the primary water supply available to us.
We currently rely predominantly (and are likely to continue to rely) on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to -46- Table of Con tents meet future demands in our service areas. At present, groundwater (and recycled water derived from groundwater) is the primary water supply available to us.
Accordingly, changes in the estimates, assumptions, and other judgments applied to these accounting policies could have a significant impact on our financial condition and results of operations as reflected in our financial statements.
Accordingly, changes in the estimates, assumptions, and other judgments applied to these accounting policies could have a significant impact on the Company’s financial condition and results of operations as reflected in its financial statements.
However, insurance coverage may not be adequate or available to cover unanticipated losses or claims. We are self-insured to the extent that losses are within the policy deductible or exceed the amount of insurance maintained. Such losses could have a material adverse effect on our short-term and long-term financial condition and the results of operations and cash flows.
However, insurance coverage may not be adequate or available to cover unanticipated losses or claims. The Company is self-insured to the extent that losses are within the policy deductible or exceed the amount of insurance maintained. Such losses could have a material adverse effect on the Company’s short-term and long-term financial condition and the results of operations and cash flows.
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.
The Series A Notes and the Series B 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.
The graph below presents the historical change in active and total connections for our ongoing operations over the past five years. -42- Economic and Environmental Utility Regulation We are subject to extensive regulation of our rates by the ACC, which is charged with establishing rates based on the provision of reliable service at a reasonable cost while also providing an opportunity to earn a fair rate of return on rate base for investors of utilities.
The graph below presents the historical change in active connections for our ongoing operations over the past five years. -43- Table of Con tents -44- Table of Con tents Economic and Environmental Utility Regulation We are subject to extensive regulation of our rates by the ACC, which is charged with establishing rates based on the provision of reliable service at a reasonable cost while also providing an opportunity to earn a fair rate of return on rate base for investors of utilities.
Income Taxes -53- Estimation of income taxes includes an evaluation of the recoverability of deferred tax assets based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income before they expire. The Company’s assessment is based upon existing tax laws and estimates of future taxable income.
Income Taxes -55- Table of Con tents Estimation of income taxes includes an evaluation of the recoverability of deferred tax assets based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income before they expire. The Company’s assessment is based upon existing tax laws and estimates of future taxable income.
As newer or stricter standards are introduced, they could increase our operating expenses. We would generally expect to recover expenses associated with compliance for environmental and health and safety standards through rate increases, but this recovery may be affected by regulatory lag.
As other newer or stricter standards are introduced in the future, they could also increase our operating expenses. We generally expect to recover expenses associated with compliance for environmental and health and safety standards through rate increases, but this recovery may be affected by regulatory lag.
Despite the general slowdown in housing in the Phoenix metropolitan area primarily due to inflation and increased interest rates, management believes that we are well-positioned to benefit from the growth expected in the Phoenix metropolitan area due to the availability of lots and existing infrastructure in place within our services areas.
Despite a general slowdown in housing for the Phoenix metropolitan area primarily due to inflation and increased interest rates, management believes that we are well-positioned to benefit from the growth expected in the Phoenix metropolitan area due to the availability of lots, existing infrastructure in place within our services areas, and increased activity related to multi-family developments.
Rate Case Activity On July 27, 2022, the ACC issued Rate Decision No. 78644 relating to the Company's recent rate case involving 12 of the Company's regulated utilities, consisting of approximately 96% of the Company's active service connections at the time of the rate case application filing.
On July 27, 2022, the ACC issued Rate Decision No. 78644 relating to the Company’s previous rate case involving 12 of the Company’s regulated utilities, which consisted of approximately 96% of the Company’s active service connections at the time of the rate case application filing.
We continue to invest capital prudently in our existing, core service areas where we are able to deploy our Total Water Management model as this includes any required maintenance capital expenditures and the construction of new water and wastewater treatment and delivery facilities.
The Company continues to invest capital prudently in existing, core service areas where the Company is able to deploy the Total Water Management model as this includes any required maintenance capital expenditures and the construction of new water and wastewater treatment and delivery facilities.
While we report revenue, disaggregated by service type, on the face of our statement of operations, we do not manage the business based on any performance measure at the individual revenue stream level. We do not have any customers that contribute more than 10% to our revenues or revenue streams.
While the Company reports revenue, disaggregated by service type, on the face of the statement of operations, the Company does not manage the business based on any performance measure at the individual revenue stream level. The Company does not have any customers that contribute more than 10% to the Company’s revenues or revenue streams.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management’s discussion and analysis of Global Water Resources, Inc.'s (the "Company", "GWRI", "we", or "us") financial condition and results of operations (“MD&A”) relate to the year ended December 31, 2022 and should be read together with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this report.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management’s discussion and analysis of Global Water Resources, Inc.’s (the “Company”, “GWRI”, “we”, or “us”) financial condition and results of operations (“MD&A”) relate to the year ended December 31, 2023 and should be read together with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this report.
During the twelve months ended December 31, 2022, Arizona’s employment rate increased by 3.1%, ranking the state in the top twenty nationally for job growth. According to the W.P.
During the twelve months ended December 31, 2023, Arizona’s employment rate increased by 2.0%, ranking the state in the top twenty nationally for job growth. According to the W.P.
In consideration of the Financial Accounting Standards Board’s Accounting Standards Codification 280, Segment Reporting , we are not organized around specific products and services, geographic regions, or regulatory environments. We currently operate in one geographic region within the State of Arizona, wherein each operating utility operates within the same regulatory environment.
In consideration of the Financial Accounting Standards Board’s Accounting Standards Codification 280, Segment Reporting , the Company is not organized around specific products and services, geographic regions, or regulatory -48- Table of Con tents environments. The Company currently operates in one geographic region within the State of Arizona, wherein each operating utility operates within the same regulatory environment.
Refer to Note 11 — "Debt" of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information. As of December 31, 2022, the Company was in compliance with its financial debt covenants.
Refer to Note 11 — “Debt” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information. As of December 31, 2023, the Company was in compliance with its financial debt covenants under the Northern Trust Loan Agreement.
The proceeds of the senior secured notes were primarily used to refinance our long-term tax exempt bonds, pursuant to an early redemption option at 103%, plus accrued interest, as a result of the initial public offering of our common stock in May 2016.
The proceeds of the Series A Notes and the Series B Notes were primarily used to refinance the Company’s long-term tax exempt bonds, pursuant to an early redemption option at 103%, plus accrued interest, as a result of the Company’s U.S. initial public offering of its common stock in May 2016.
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 was interest only for the first five years, with $1.9 million principal payments paid semiannually thereafter beginning December 2021.
Series B carries a principal balance of $86.3 million and bears an interest rate of 4.58% over a 20-year term, with the principal payment due on June 15, 2036 (the “Series B Notes”). The Series B Notes were interest only for the first five years, with $1.9 million principal payments paid semiannually thereafter beginning December 2021.
For the year ended December 31, 2022, our net cash provided by operating activities totaled $23.3 million compared to $20.4 million for the year ended December 31, 2021.
For the year ended December 31, 2023, net cash provided by operating activities totaled approximately $25.4 million compared to $23.3 million for the year ended December 31, 2022.
Although we expect monthly dividends will be declared and paid for the foreseeable future, the declaration of any dividends is at the discretion of our board of directors and is subject to legal requirements and debt service ratio covenant requirements (refer to “—Senior Secured Notes" and "—Revolving Credit Line").
Although the Company expects that monthly dividends will be declared and paid for the foreseeable future, the declaration of any dividends is at the discretion of the Company’s board of directors and is subject to legal requirements and debt service ratio covenant requirements (refer to “—Senior Secured Notes” and “—Revolving Credit Line”).
Water services revenue associated with the basic service charge, excluding miscellaneous charges, increased $1.2 million, or 11.9%, to $11.1 million for the year ended December 31, 2022 compared to $9.9 million for the year ended December 31, 2021.
Water services revenue associated with the basic service charge, excluding miscellaneous charges, increased $1.7 million, or 15.5%, to $12.8 million for the year ended December 31, 2023 compared to $11.1 million for the year ended December 31, 2022.
Refer to Note 16 - "Subsequent Events" of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details.
Refer to Note 11 — “Debt” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
The decrease was primarily due to the decrease in our stock price during the year ended December 31, 2022 compared to the year ended December 31, 2021. Regulatory expense increased $0.3 million, or 20.3%, to $0.4 million for the year ended December 31, 2022 compared to $0.1 million for the year ended December 31, 2021.
The increase was primarily due to the change in our stock price during the year ended December 31, 2023 compared to the year ended December 31, 2022. Regulatory expense decreased $0.3 million, or 76.7%, to $0.1 million for the year ended December 31, 2023 compared to $0.4 million for the year ended December 31, 2022.
Cash from Investing Activities Our net cash used in investing activities totaled $34.2 million for the year ended December 31, 2022 compared to $20.3 million for the year ended December 31, 2021.
Cash from Investing Activities The net cash used in investing activities totaled approximately $28.6 million for the year ended December 31, 2023 compared to $34.2 million for the year ended December 31, 2022.
We believe it is common industry practice to file for a rate increase every three to five years. Refer to “—Rate Case Activity” below and Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
Refer to “—Rate Case Activity” below and Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
The increase was primarily due to the increase in active service connections, which included organic growth combined with new connections associated with the acquisition of Las Quintas, as well as an increase in rates due to Rate Decision No. 78644.
The increase was primarily due to the increase in active service connections largely from new connections associated with the acquisition of Farmers, as well as an increase in rates due to Rate Decision No. 78644.
According to the 2020 U.S. Census Data, the Phoenix metropolitan statistical area (“MSA”) is the 11th largest MSA in the U.S. and had a population of 4.8 million, an increase of 14% over the 4.2 million people reported in the 2010 Census.
Census estimates, the Phoenix metropolitan statistical area (“MSA”) is the 11th largest MSA in the U.S. and had an estimated population of 5.0 million, an increase of 3.5% over the 4.8 million people reported in the 2020 Census.
A discount to the volumetric rate applies for customers that use less than an amount specified by the ACC. For all investor-owned water utilities, the ACC requires the establishment of inverted tier conservation-oriented rates, meaning that the price of water increases as consumption increases. For wastewater utilities, wastewater collection, and treatment can be based on volumetric or fixed fees.
A discount to the volumetric rate applies for customers that use less than an amount specified by the ACC. For all investor-owned water utilities, the ACC has, as a policy matter, required the establishment of inverted tier conservation-oriented rates, meaning that the price of water increases as consumption increases.
Recycled water services revenue, which is based on the number of gallons delivered, increased by approximately $0.1 million or 9.7%, to $1.2 million for the year ended December 31, 2022 compared to $1.1 million for the year ended December 31, 2021.
Recycled water services revenue, which is based on the number of gallons delivered and directly impacted by wastewater volume, increased by approximately 9.9% to $1.4 million for the year ended December 31, 2023 from $1.2 million for the year ended December 31, 2022.
Some result in direct obligations on the Company's balance sheet while others are firm commitments or commitments based on uncertainties and undetermined execution times.
Contractual Obligations In the course of normal business activities, the Company enters into a variety of contractual obligations and commitments. Some result in direct obligations on the Company’s balance sheet while others are firm commitments or commitments based on uncertainties and undetermined execution times.
Operating Expenses – The following table summarizes our operating expenses for the year ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 Operations and maintenance $ 10,889 $ 10,299 General and administrative 16,130 15,146 Depreciation 9,890 9,490 Total operating expenses $ 36,909 $ 34,935 Operations and Maintenance – Operations and maintenance costs, consisting of personnel costs, production costs (primarily chemicals and purchased electrical power), maintenance costs, and property tax, increased $0.6 million, or 5.7%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Operating Expenses – The following table summarizes operating expenses for the year ended December 31, 2023 and 2022 (in thousands): For the Year Ended December 31, 2023 2022 Operations and maintenance $ 12,669 $ 10,889 General and administrative 16,636 16,130 Depreciation and amortization 11,437 9,890 Total operating expenses $ 40,742 $ 36,909 Operations and Maintenance – Operations and maintenance costs, consisting of personnel costs, production costs (primarily chemicals and purchased electrical power), maintenance costs, and property tax, increased approximately $1.8 million, or 16.3%, to $12.7 million for the year ended December 31, 2023 compared to $10.9 million for the year ended December 31, 2022.
Debt issuance costs as of both December 31, 2022 and 2021 were $0.5 million. -51- 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 initially up to $10.0 million with an initial maturity date of April 30, 2022.
Revolving Credit Line On April 30, 2020, the Company entered into an agreement with The Northern Trust, Company, an Illinois banking corporation (“Northern Trust”), which was initially for a two-year revolving line of credit up to $10.0 million with an maturity date of April 30, 2022.
Senior Secured Notes On June 24, 2016, we issued two series of senior secured notes with a 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 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 (the “Series A Notes”).
Notwithstanding the foregoing, we believe that we have an adequate supply of water to service our current demand and growth for the foreseeable future. For additional information and risks associated with the access to and quality of water supply, see “Risk Factors,” included in Part I, Item 1A of this report.
For additional information and risks associated with the access to and quality of water supply, see “Risk Factors,” included in Part I, Item 1A of this report.
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 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.
Consolidated debt service is calculated as interest expense, principal payments, and dividend or stock repurchases. The Series A Notes and the Series B Notes also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25.
Outstanding Share Data As of March 8, 2023, there were 23,871,046 shares of our common stock outstanding and stock based awards to acquire an additional 517,980 shares of our common stock outstanding. Liquidity and Capital Resources Our capital resources are provided by internally generated cash flows from operations as well as debt and equity financing.
Outstanding Share Data As of March 6, 2024, there were 24,175,241 shares of the Company’s common stock outstanding and stock-based awards outstanding to acquire an additional 425,884 shares of the Company’s common stock. -51- Table of Con tents Liquidity and Capital Resources The Company’s capital resources are provided by internally generated cash flows from operations as well as debt and equity financing.
Access to and Quality of Water Supply In many areas of Arizona (including certain areas that we service), water supplies are limited and, in some cases, current usage rates exceed sustainable levels for certain water resources.
For additional information and risks associated with weather and seasonality, see “Risk Factors,” included in Part I, Item 1A of this report. Access to and Quality of Water Supply In many areas of Arizona (including certain areas that we service), water supplies are limited and, in some cases, current usage rates exceed sustainable levels for certain water resources.
While specific facts and circumstances could change, we believe that we have sufficient cash on hand, the ability to draw on our $15.0 million revolving line of credit (which reflects the increased borrowing amount under this recently amended facility as discussed below), and will be able to generate sufficient cash flows to meet our operating cash flow requirements and capital expenditure plan, as well as remain in compliance with our debt covenants, for the next twelve months and beyond. -50- In March 2014, we initiated a dividend program to declare and pay a monthly dividend.
While specific facts and circumstances could change, the Company believes that with the cash on hand and the ability to draw on its $15.0 million revolving line of credit, it will be able to generate sufficient cash flows to meet its operating cash flow requirements and capital expenditure plan, as well as remain in compliance with its debt covenants, for the next twelve months and beyond.
Contract services increased $0.2 million, or 14.4%, to $1.4 million for the year ended December 31, 2022 compared to $1.2 million for the year ended December 31, 2021. The increase was primarily due to increased costs for billing software related to the additional connections year over year.
Contract services increased $0.2 million to $1.6 million for the year ended December 31, 2023 from $1.4 million for the year ended December 31, 2022. The increase was primarily due to increased costs for billing software related to the additional connections period over period, cloud storage services, and billing distribution services as a result of additional customers.
Portions of these refund amounts are payable annually over the next two decades, and amounts not paid by the contract expiration dates become nonrefundable and are transferred to CIAC. Insurance Coverage We carry various property, casualty, and financial insurance policies with limits, deductibles, and exclusions consistent with industry standards.
Portions of these refund amounts are payable annually over the next two decades, and amounts not paid by the contract expiration dates become nonrefundable and are transferred to CIAC.
The volume of recycled water delivered increased 44 million gallons, or 6.4%, to 727 million gallons for the year ended December 31, 2022 compared to 683 million gallons for the year ended December 31, 2021.
The volume of recycled water delivered rose by 12.6% with 818 million gallons delivered for the year ended December 31, 2023 compared to 727 million gallons delivered for the year ended December 31, 2022.
The $13.9 million increase in cash used in investing activities was primarily driven by the increase in capital expenditures of $15.7 million, offset by a decrease of approximately $1.9 million in cash paid for acquisitions for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The $5.6 million decrease in cash used in investing activities was primarily driven by a decrease in capital expenditures of $11.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, partially offset by the $6.2 million cash paid for the acquisition of Farmers (net of cash acquired) in 2023.
Rate cases and other rate-related proceedings can take a year or more to complete. As a result, there is frequently a delay, or regulatory lag, between the time of a capital investment or incurrence of an operating expense increase and when those costs are reflected in rates.
As a result, there is frequently a delay, or regulatory lag, between the time of a capital investment or incurrence of an operating expense increase and when those costs are reflected in rates. We believe it is common industry practice to file for a rate increase every three to five years.
The $3.0 million increase in cash from operating activities was primarily driven by the improvement in net income for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The $2.1 million increase in cash from operating activities was primarily driven by the improvement in net income and increased depreciation expense for the year ended December 31, 2023 compared to the year ended December 31, 2022, as well as an increase in current liabilities for 2023 as compared to the prior year.
The Company received net proceeds of approximately $14.9 million from the offering after deducting underwriting discounts and commissions and offering expenses paid by the Company.
The Company received net proceeds of approximately $14.9 million from the offering after deducting underwriting discounts and commissions and offering expenses paid by the Company. Insurance Coverage The Company carries various property, casualty, and financial insurance policies with limits, deductibles, and exclusions consistent with industry standards.
Wastewater and Recycled Water Services – Wastewater and recycled water services revenue increased $1.6 million, or 7.2%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase in wastewater and recycled water services revenue was primarily driven by a $1.5 million increase in wastewater services revenue.
Wastewater and Recycled Water Services – Wastewater and recycled water services revenue increased $1.6 million, or 6.5%, to $25.4 million for the year ended December 31, 2023 compared to $23.8 million for the year ended December 31, 2022.
The improvement of $0.8 million in other expense was related to the $1.1 million increase in income associated with Buckeye growth premiums, as a result of increased meter connections in the area, combined with a decrease in interest expense of $1.2 million primarily attributable to an increase in capitalized interest for the year ended December 31, 2021.
The increase of $0.1 million in other expense was related to a $0.1 million decrease in income associated with Buckeye growth premiums as a result of fewer new meter connections in the area, an increase in interest expense of $0.1 million, and a $0.1 million increase in other expense, offset by an increase in the equity portion of allowance for funds used during construction of $0.3 million for the year ended December 31, 2023.
Our wastewater utility services are billed based solely on a fixed fee, determined by the size of the water meter installed. Recycled water is sold on a volumetric basis with no fixed fee component. -43- We are required to file rate cases with the ACC to obtain approval for a change in rates.
For wastewater utilities, wastewater collection, and treatment can be based on volumetric or fixed fees. Our wastewater utility services are billed based solely on a fixed fee, determined by the size of the water meter installed. Recycled water is sold on a volumetric basis with no fixed fee component.
The increase in -48- wastewater services revenue reflects the increase in active wastewater connections, which increased 4.5% to 26,415 as of December 31, 2022 from 25,288 as of December 31, 2021, combined with an increase in rates due to Rate Decision No. 78644.
The increase was primarily driven by higher wastewater services revenue of $1.4 million resulting from the 3.8% increase in active wastewater connections from 26,415 as of December 31, 2022 to 27,421 as of December 31, 2023, combined with an increase in rates due to Rate Decision No. 78644.
The increase in water services revenue was primarily related to organic growth in connections, the acquisition of Las Quintas Serenas, and an increase in rates related to Rate Decision No. 78644.
The increase in water services revenue was primarily related to the weather conditions discussed above prompting higher consumption during high usage months, the acquisition of Farmers, an increase in rates related to Rate Decision No. 78644, and organic connection growth.
Refer to Note 14 — “Deferred Compensation Awards” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information. Board compensation expense decreased $0.4 million, or 50.4%, to $0.3 million for the year ended December 31, 2022 compared to $0.7 million for the year ended December 31, 2021.
Refer to Note 13 — “Deferred Compensation Awards” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
Additionally, our regulated utility subsidiaries receive advances and contributions from customers, home builders, and real estate developers to partially fund construction necessary to extend service to new areas.
Additionally, its regulated utility subsidiaries receive advances and contributions from customers, home builders, and real estate developers to partially fund construction necessary to extend service to new areas. The Company uses capital resources primarily to: • fund operating costs; • fund capital requirements, including construction expenditures; • make debt and interest payments; • fund acquisitions; and • pay dividends.
Utilities power and related expenses increased $0.3 million, or 13.3%, to $2.3 million for the year ended December 31, 2022 compared to $2.0 million for the year ended December 31, 2021. The increase was attributable to higher electric utility expense due to increased pump usage from additional connections and escalated consumption.
Utility power and related expenses increased $0.4 million to $2.7 million for the year ended December 31, 2023 compared to $2.3 million for the same period in 2022. The additional power costs were attributable to increased pump usage related to escalated consumption and additional connections, from both the Farmers acquisition and organic growth.
Based on the information described above and in accordance with the applicable literature, management has concluded that we are currently organized and operated as one operating and reportable segment. -47- Comparison of Results of Operations for the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (in thousands, except for share amounts): For the Year Ended December 31, 2022 2021 Revenues $ 44,728 $ 41,914 Operating expenses 36,909 34,935 Operating income 7,819 6,979 Total other expense (1,379) (2,220) Income before income taxes 6,440 4,759 Income tax expense (934) (1,150) Net income $ 5,506 $ 3,609 Basic earnings per common share $ 0.24 $ 0.16 Diluted earnings per common share $ 0.24 $ 0.16 Revenues – The following table summarizes our revenues for the years ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 Water services $ 20,885 $ 18,944 Wastewater and recycled water services 23,843 22,241 Unregulated revenues — 729 Total revenues $ 44,728 $ 41,914 Total revenues increased $2.8 million, or 6.7%, to $44.7 million for the year ended December 31, 2022 compared to $41.9 million for the year ended December 31, 2021.
Comparison of Results of Operations for the Year Ended December 31, 2023 and 2022 The following table summarizes results of operations for the year ended December 31, 2023 and 2022 (in thousands, except for share amounts): For the Year Ended December 31, 2023 2022 Revenues $ 53,028 $ 44,728 Operating expenses 40,742 36,909 Operating income 12,286 7,819 Total other expense (1,432) (1,379) Income before income taxes 10,854 6,440 Income tax expense (2,872) (934) Net income $ 7,982 $ 5,506 Basic earnings per common share $ 0.33 $ 0.24 Diluted earnings per common share $ 0.33 $ 0.24 Revenues – The following table summarizes revenues for the year ended December 31, 2023 and 2022 (in thousands): For the Year Ended December 31, 2023 2022 Water services $ 24,860 $ 20,885 Wastewater and recycled water services 25,382 23,843 Unregulated revenues 2,786 — Total revenues $ 53,028 $ 44,728 Total revenues increased $8.3 million, or 18.6%, to $53.0 million for the year ended December 31, 2023 compared to $44.7 million for the year ended December 31, 2022.
Total personnel expenses increased $0.1 million, or 2.0%, to $3.5 million for the year ended December 31, 2022 compared to $3.4 million for the year ended December 31, 2021. The increase in personnel expenses was primarily related salary and wage increases, partially offset by lower medical expenses.
The increase was primarily related salary and wage increases as a result of increased personnel, higher medical expenses, and a cost of living adjustment. Information technology expenses increased $0.2 million, or 25.0%, to $1.0 million for the year ended December 31, 2023 compared to $0.8 million for the year ended December 31, 2022.
Our water systems generally experience higher demand in the summer due to the warmer temperatures and increased usage by customers for irrigation and other outdoor uses. However, summer weather that is cooler or wetter than average generally suppresses customer water demand and can have a downward effect on our operating revenue and operating income.
Also, customer usage of water and recycled water is affected by weather conditions, particularly during the summer. Our water systems generally experience higher demand in the summer due to the warmer temperatures and increased usage by customers for irrigation and other outdoor uses.
Conversely, when weather conditions are extremely dry, our business may be affected by government-issued drought-related warnings and/or water usage restrictions that would artificially lower customer demand and reduce our operating revenue. The limited geographic diversity of our service areas makes the results of our operations more sensitive to the effect of local weather extremes.
However, summer weather that is cooler or wetter than average generally suppresses customer water demand and can have a downward effect on our operating revenue and operating income. Conversely, when weather conditions are extremely dry, our business may be affected by government-issued drought-related warnings and/or water usage restrictions that would artificially lower customer demand and reduce our operating revenue.
Our projected capital expenditures and other investments are subject to periodic review and revision to reflect changes in economic conditions and other factors. As a result, we may reduce capital expenditures to correspond with any decreases in demand for housing in our service areas.
The projected capital expenditures and other investments are subject to periodic review and revision to reflect changes in economic conditions and other factors.
The debt service ratio increases to 1.25 for any fiscal quarter during the period from and after June 30, 2024. As of December 31, 2022, the Company was in compliance with its financial debt covenants.
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.
Such recovery will take place over an extended period of time because recovery through rate increases is subject to regulatory lag. As of December 31, 2022, we have no notable near-term cash expenditures, other than the principal payments for our Series B senior secured notes in the amount of $1.9 million due in each of June and December of 2023.
As of December 31, 2023, the Company has no notable near-term cash expenditures, other than the principal payments for its Series B senior secured notes in the amount of $1.9 million due in both June 2024 and December 2024.
Carey School of Business Greater Phoenix Blue Chip Real Estate Consensus Panel (the "Greater Phoenix Blue Chip Panel"), during 2022 the single-family housing market experienced a decline in permits issued with -41- approximately 24,600 issued in 2022 as compared to approximately 31,000 issued in 2021.
Carey School of Business Greater Phoenix Blue Chip Real Estate Consensus Panel (the “Greater Phoenix Blue Chip Panel”), the single-family housing market experienced a weakness in permits during 2022 and 2023, however, the outlook for single-family housing is improving.
The decrease was primarily driven by the 2017 TCJA reversal of approximately $0.7 million, offset by an increase in pre-tax net income for the year ended December 31, 2022. Net Income – Our net income totaled $5.5 million for the year ended December 31, 2022 compared to net income of $3.6 million for the year ended December 31, 2021.
Also contributing to the increase in income tax expense was higher pre-tax income for the year ended December 31, 2023. Net Income – Net income totaled $8.0 million for the year ended December 31, 2023 compared to net income of $5.5 million for the year ended December 31, 2022.
The increase was primarily related to legal fees incurred in connection with the rate case and acquisition related matters. Depreciation and amortization - Depreciation and amortization expense increased $0.4 million, or 4.2%, to $9.9 million for the year ended December 31, 2022, compared to $9.5 million for the year ended December 31, 2021.
The decrease was primarily related to legal fees incurred for acquisition related matters during 2022 that did not occur in 2023. Deferred compensation expense decreased $0.4 million, or 21.0%, to $1.2 million for the year ended December 31, 2023 compared to $1.6 million for the year ended December 31, 2022.
Personnel related costs increased $0.4 million, or 7.0%, to $6.4 million for the year ended December 31, 2022 compared to $5.9 million for the year ended December 31, 2021. The increase was primarily related salary and wage increases, partially offset by lower medical expenses.
These costs increased $0.5 million, or 3.1%, to $16.6 million for the year ended December 31, 2023 compared to $16.1 million for the year ended December 31, 2022. Personnel related costs increased $1.1 million, or 17.3%, to $7.5 million for the year ended December 31, 2023 compared to $6.4 million for the year ended December 31, 2022.

… 124 more changes not shown on this page.

Other GWRS 10-K year-over-year comparisons