What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-05 · 121 added, 93 removed, 573 unchanged (27% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

PROPERTY, PLANT AND EQUIPMENT:

39 unchanged sentences

Common stock, $ 0.01 par value, 60,000,000 shares authorized;

22,748,143 and 22,690,477 shares issued as of June 30, 2021 and December 31, 2020, respectively.

Treasury stock, 127,708 and 102,711 shares at June 30, 2021 and December 31, 2020, respectively.

22,830,888 and 22,690,477 shares issued as of September 30, 2021 and December 31, 2020, respectively.

Treasury stock, 181,702 and 102,711 shares at September 30, 2021 and December 31, 2020, respectively.

Paid in capital 30,699 31,962

6 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

13 unchanged sentences

Other 803 70 2,447 ( 361 )

Total other income (expense) 284 ( 1,812 ) ( 1,021 ) ( 3,049 )

INCOME (LOSS) BEFORE INCOME TAXES 2,623 ( 85 ) 2,361 475

INCOME TAX BENEFIT (EXPENSE) ( 641 ) ( 37 ) ( 596 ) ( 243 )

NET INCOME (LOSS) $ 1,982 $ ( 122 ) $ 1,765 $ 232

Basic earnings (loss) per common share $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.01

Diluted earnings (loss) per common share $ 0.09 $ ( 0.01 ) $ 0.08 $ 0.01

Total other expense ( 472 ) ( 1,263 ) ( 1,493 ) ( 4,312 )

INCOME BEFORE INCOME TAXES 1,821 1,629 4,182 2,104

INCOME TAX EXPENSE ( 323 ) ( 498 ) ( 919 ) ( 741 )

NET INCOME $ 1,498 $ 1,131 $ 3,263 $ 1,363

Basic earnings per common share $ 0.07 $ 0.05 $ 0.14 $ 0.06

Diluted earnings per common share $ 0.07 $ 0.05 $ 0.14 $ 0.06

Dividends declared per common share $ 0.07 $ 0.07 $ 0.22 $ 0.22

20 unchanged sentences

BALANCE - June 30, 2020 22,685,583 $ 227 ( 99,039 ) $ ( 1 ) $ 33,941 $ ( 122 ) $ 34,045

Dividend declared $ 0.07 per share

— ( 624 ) ( 1,009 ) $ ( 1,633 )

Treasury stock — — ( 943 ) — ( 1 ) — ( 1 )

Stock option exercise 1,125 — — — — — —

Stock compensation — — — — 275 — 275

Net income — — — — — 1,131 1,131

BALANCE - September 30, 2020 22,686,708 $ 227 ( 99,982 ) $ ( 1 ) $ 33,591 $ — $ 33,817

BALANCE - December 31, 2020 22,690,477 $ 227 ( 102,711 ) $ ( 1 ) $ 31,962 $ — $ 32,188

Dividend declared $ 0.07 per share

— — — — ( 1,650 ) — ( 1,650 )

Treasury Stock — — ( 398 ) — — — —

11 unchanged sentences

BALANCE - June 30, 2021 22,748,143 $ 227 ( 127,708 ) $ ( 1 ) $ 30,955 $ ( 217 ) $ 30,964

Dividend declared $ 0.07 per share

( 151 ) ( 1,498 ) ( 1,649 )

Treasury Stock ( 53,994 ) ( 1 ) — ( 1 )

Stock option exercise 82,745 1 1

Stock compensation 112 112

Net income (loss) 1,498 1,498

BALANCE - September 30, 2021 22,830,888 $ 228 ( 181,702 ) $ ( 2 ) $ 30,916 $ ( 217 ) $ 30,925

See accompanying notes to the condensed consolidated financial statements

2 unchanged sentences

(Unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

24 unchanged sentences

Principal payments under capital lease ( 108 ) ( 77 )

Refunds of advances for construction ( 968 ) ( 959 )

Loan repayments ( 1 ) ( 24 )

8 unchanged sentences

Supplemental disclosure of cash flow information:

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Cash and cash equivalents $ 21,241 $ 18,062

6 unchanged sentences

The condensed consolidated financial statements of Global Water Resources, Inc.

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 are unaudited.

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 are unaudited.

The December 31, 2020 condensed consolidated balance sheet data was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.

4 unchanged sentences

In our opinion, these financial statements include all normal and recurring adjustments necessary for the fair statement of the results for the interim period.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year, due to the seasonality of our business.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year, due to the seasonality of our business.

The Company prepares its financial statements in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC").

14 unchanged sentences

The City of Buckeye is obligated to pay the Company a growth premium equal to $ 3,000 for each new water meter installed within Valencia’s prior service areas in the City of Buckeye, for a 20 -year period ending December 31, 2034, subject to a maximum payout of $ 45.0 million over the term of the agreement.

The Company received growth premiums of $ 0.2 million for both the three and six months ended June 30, 2021 and $ 0.1 million for both the three and six months ended June 30, 2020.

The Company received growth premiums of $ 0.8 million and $ 0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $ 0.9 million and $ 0.2 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase in growth premiums was primarily driven by the receipt of a lump sum payment of $ 0.4 million from the City of Buckeye during the three months ended September 30, 2021, due to an internal audit of premiums that resulted in findings of past growth premiums that had not been remitted to the Company.

The increase was also due to increased meter connections in the area over the prior year period.

Private Letter Ruling

6 unchanged sentences

The three specified growth premium areas are located in Pima County, Arizona where Red Rock has not yet begun operating, and where Red Rock is authorized to provide water utility services only.

As of June 30, 2021, no meters have been installed and no accounts have been established in any of the three growth premium areas.

As of September 30, 2021, no meters have been installed and no accounts have been established in any of the three growth premium areas.

Arizona Corporation Commission (the “ACC”) Tax Docket

The Company had regulatory assets of $ 2.2 million and $ 2.0 million at June 30, 2021 and December 31, 2020, respectively, and regulatory liabilities of $ 0.7 million at both June 30, 2021 and December 31, 2020, related to the Federal Tax Cuts and Jobs Act (the "TCJA") signed into law on December 22, 2017.

The Company had regulatory assets of $ 2.3 million and $ 2.0 million at September 30, 2021 and December 31, 2020, respectively, and regulatory liabilities of $ 0.7 million at both September 30, 2021 and December 31, 2020, related to the Federal Tax Cuts and Jobs Act (the "TCJA") signed into law on December 22, 2017.

Under ASC 740, Income Taxes , the tax effects of changes in tax laws must be recognized in the period in which the law is enacted.

29 unchanged sentences

On August 2, 2021, we filed rejoinder testimony with the ACC updating our collective revenue increase to approximately $ 3.0 million.

An evidentiary hearing was conducted beginning August 9, 2021.

Certain of our utilities, including Santa Cruz and Palo Verde, have also requested that the rate increases be phased in over three years, beginning January 1, 2022.

The phase-in period may be shorter depending on the total revenue increase approved.

We also requested the consolidation of water and/or wastewater rates for our Red Rock, Santa Cruz, Palo Verde, Picacho Water, and Picacho Utilities.

These utilities are all located in Pinal County;

make up approximately 97% of the Company's active service connections;

A final decision is not expected until the first quarter of 2022;

therefore, any phase-in will likely not begin as requested on January 1, 2022 and may be shorter or longer than three years, if a revenue increase is approved.

We also requested the consolidation of water and/or wastewater rates for our Red Rock, Santa Cruz, Palo Verde, Picacho Water, and Picacho Utilities located in Pinal County.

These utilities make up approximately 97 % of the Company's active service connections;

provide or will provide water, wastewater, and recycled water services;

7 unchanged sentences

The issuance of the additional shares was completed pursuant to the exercise in full of the underwriter's over-allotment option.

Total net proceeds of approximately $ 11.5 million were received after deducting underwriting discounts and commissions and offering expenses payable by us, which collectively totaled approximately $ 1.0 million.

Total net proceeds of approximately $ 11.5 million were received after deducting underwriting discounts and commissions and offering expenses paid by us, which collectively totaled approximately $ 1.0 million.

Significant Accounting Policies

1 unchanged sentence

Diluted EPS is based upon the weighted average number of common shares, including both outstanding shares and shares potentially issuable in connection with stock options and restricted stock awards granted.

As of June 30, 2021, the Company had 620,476 options outstanding to acquire an equivalent number of shares of GWRI common stock.

The 381,496 options outstanding from the 2017 option grant equated to 166,348 and 163,707 common share equivalents for the three and six months ended June 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2021.

The remaining 238,980 options outstanding from the 2019 option grant equated to 55,232 and 53,414 common share equivalents for the three and six months ended June 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2021.

As of June 30, 2021, there were 74,164 restricted stock awards outstanding from the 2020 grant.

The 74,164 restricted stock awards outstanding equated to 53,658 and 63,507 common share equivalents for the three and six months ended June 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and six months ended June 30, 2021.

As of June 30, 2021, there were 164,650 restricted stock awards outstanding from the 2021 grant, which were not included within the calculation of diluted earnings per share for the three and six months ended June 30, 2021, as to do so would be antidilutive.

As of June 30, 2020, the Company had 632,500 options outstanding to acquire an equivalent number of shares of GWRI common stock.

For the three months ended June 30, 2020, the 632,500 options outstanding were not included within the calculation of diluted earnings per share as the Company incurred losses in this period and to include them would be anti-dilutive.

For the six months ended June 30, 2020, the 386,896 options outstanding from the 2017 option grant equated to 35,902 common share equivalents, which were included within the calculation of diluted earnings per share.

The remaining 245,604 options outstanding from the 2019 option grant were not included for the six months ended June 30, 2020 dilutive earnings per share calculation, as to do so would be antidilutive.

As of June 30, 2020, there were 128,327 restricted stock awards outstanding, which were not included within the calculation of diluted earnings per share as to do so would be antidilutive.

As of September 30, 2021, the Company had 537,731 options outstanding to acquire an equivalent number of shares of GWRI common stock.

The 320,321 options outstanding from the 2017 option grant equated to 171,669 and 167,320 common share equivalents for the three and nine months ended September 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2021.

The remaining 217,410 options outstanding from the 2019 option grant equated to 70,674 and 61,755 common share equivalents for the three and nine months ended September 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2021.

As of September 30, 2021, there were 74,164 and 143,800 restricted stock awards outstanding from the 2020 grant and 2021 grant, respectively.

The 74,164 restricted stock awards outstanding from the 2020 grant equated to 42,362 and 56,777 common share equivalents for the three and nine months ended September 30, 2021, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2021.

The 143,800 restricted stock awards outstanding from the 2021 grant equated to 20,472 for the three months ended September 30, 2021, which were included within the calculation of diluted earnings per share for the three months ended September 30, 2021.

The 143,800 restricted stock awards outstanding from the 2021 grant were not included within the dilutive earnings per share calculation for the nine months ended September 30, 2021, as to do so would be antidilutive.

As of September 30, 2020, the Company had 631,375 options outstanding to acquire an equivalent number of shares of GWRI common stock.

The 385,771 options outstanding from the 2017 option grant equated to 32,339 and 34,696 common share equivalents for the three and nine months ended September 30, 2020, respectively, which were included within the calculation of diluted earnings per share for the three and nine months ended September 30, 2020.

The remaining 245,604 options outstanding from the 2019 option grant were not included within the dilutive earnings per share calculation for the three and nine months ended September 30, 2020, as to do so would be antidilutive.

As of September 30, 2020, the 128,327 restricted stock awards outstanding from the 2020 grant equated to 14,206 and zero common share equivalents for the three and nine months ended September 30, 2020, respectively.

The 14,206 common share equivalents were included within the calculation of diluted earnings per share for the three months ended September 30, 2020.

Refer to Note 13 – “Deferred Compensation Awards” for additional information regarding the option and restricted stock grants.

51 unchanged sentences

76901 adopted a phase-in approach for the reductions to match the phase-in of our revenue requirements under Rate Decision No.

Refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions — ACC Tax Docket" for details regarding Rate Decision No.

to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions — ACC Tax Docket" for details regarding Rate Decision No.

On August 28, 2020, 12 of our 17 regulated utilities each filed a rate case application with the ACC for water, wastewater, and recycled water rates, as well as the consolidation of water and/or wastewater rates for certain of the utilities.

23 unchanged sentences

The Company will record 30 % of the funds received, up until the HUF liability is fully funded, as deferred revenue, which is to be recognized as revenue once the obligations specified within the ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred.

As of June 30, 2021 and December 31, 2020, ICFA deferred revenue recorded on the consolidated balance sheet totaled $ 18.5 million and $ 17.8 million, respectively, which represents deferred revenue recorded for ICFA funds received on contracts that had become due prior to Rate Decision No.

As of September 30, 2021 and December 31, 2020, ICFA deferred revenue recorded on the consolidated balance sheet totaled $ 18.9 million and $ 17.8 million, respectively, which represents deferred revenue recorded for ICFA funds received on contracts that had become due prior to Rate Decision No.

Refer to Note 3 — "Revenue Recognition" of the notes to the unaudited condensed consolidated financial statements for additional discussion regarding ICFA revenue.

6 unchanged sentences

The recognition of amortization expense will be partially offset by a corresponding reduction of the regulatory liability.

As of June 30, 2021, regulatory liability recorded on the consolidated balance sheet totaled $ 7.7 million, of which $ 6.2 million relates to the offset of intangible assets related to ICFA contracts obtained in connection with our Santa Cruz, Palo Verde, and Sonoran acquisitions, and the remaining $ 1.5 million relates to the TCJA rate reduction mandated by the ACC pursuant to Rate Decision No.

As of September 30, 2021, regulatory liability recorded on the consolidated balance sheet totaled $ 7.6 million, of which $ 6.1 million relates to the offset of intangible assets related to ICFA contracts obtained in connection with our Santa Cruz, Palo Verde, and Sonoran acquisitions, and the remaining $ 1.5 million relates to the TCJA rate reduction mandated by the ACC pursuant to Rate Decision No.

REVENUE RECOGNITION

23 unchanged sentences

Disaggregated Revenues

For the three and six months ended June 30, 2021 and 2020, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):

Three Months Ended June 30,

For the three months ended September 30, 2021 and 2020, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):

Three Months Ended September 30,

REGULATED REVENUE

14 unchanged sentences

UNREGULATED REVENUE

ICFA revenues 692 —

Rental revenues — 26

Other Miscellaneous revenues — 1

TOTAL UNREGULATED REVENUE 692 27

2 unchanged sentences

Our contract assets and liabilities consist of the following (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

CONTRACT ASSETS

9 unchanged sentences

Total contract liabilities $ 19,697 $ 18,580

(1) The decrease in accounts receivable was primarily due to the reimplementation of disconnection notices and disconnections during the six months ended June 30, 2021, which had previously been temporarily suspended due to the COVID-19 pandemic.

(1) The decrease in accounts receivable was primarily due to the reimplementation of disconnection notices and disconnections during the nine months ended September 30, 2021, which had previously been temporarily suspended due to the COVID-19 pandemic.

(2) The increase in refund liability is due to the phase-in approach approved in Rate Decision No.

2 unchanged sentences

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

Contracted revenue expected to be recognized in future periods was approximately $ 18.5 million and $ 17.8 million at June 30, 2021 and December 31, 2020, respectively.

Contracted revenue expected to be recognized in future periods was approximately $ 18.9 million and $ 17.8 million at September 30, 2021 and December 31, 2020, respectively.

Deferred revenue - ICFA is recognized as revenue once the obligations specified within the applicable ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred.

19 unchanged sentences

The adoption of ASC 842 resulted in the initial recognition of ROU assets of $ 189,000 and related lease liabilities of $ 210,000 .

As of June 30, 2021, ROU assets and liabilities totaled $ 111 ,000 and $ 132 ,000, respectively, of which relate to office rent.

As of September 30, 2021, ROU assets and liabilities totaled $ 81 ,000 and $ 102 ,000, respectively, of which relate to office rent.

PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment at June 30, 2021 and December 31, 2020 consist of the following (in thousands):

June 30, 2021 December 31, 2020 Average Depreciation Life (in years)

Property, plant, and equipment at September 30, 2021 and December 31, 2020 consist of the following (in thousands):

September 30, 2021 December 31, 2020 Average Depreciation Life (in years)

Mains/lines/sewers $ 163,820 $ 145,910 49

12 unchanged sentences

ACCOUNTS RECEIVABLE

Accounts receivable as of June 30, 2021 and December 31, 2020 consist of the following (in thousands):

June 30, 2021 December 31, 2020

Accounts receivable as of September 30, 2021 and December 31, 2020 consist of the following (in thousands):

September 30, 2021 December 31, 2020

Billed receivables $ 2,063 $ 2,352

2 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

As of June 30, 2021, the goodwill balance of $ 4.6 million related to the Turner, Red Rock, Mirabell, Francesca, Tortolita, and Lyn Lee acquisitions.

As of September 30, 2021, the goodwill balance of $ 4.6 million related to the Turner, Red Rock, Mirabell, Francesca, Tortolita, and Lyn Lee acquisitions.

There were no indicators of impairment identified as a result of the Company's review of events and circumstances related to its goodwill subsequent to the acquisitions.

1 unchanged sentence

Intangible Assets

As of June 30, 2021 and December 31, 2020, intangible assets consisted of the following (in thousands):

June 30, 2021 December 31, 2020

As of September 30, 2021 and December 31, 2020, intangible assets consisted of the following (in thousands):

September 30, 2021 December 31, 2020

Amount Accumulated

21 unchanged sentences

Due to the uncertainty of the timing of when cash will be received under ICFA agreements and contract rights, we cannot reliably estimate when the remaining intangible assets' amortization will be recorded.

Amortization in the amount of $ 0.5 million was recorded for these balances for both the three and six months ended June 30, 2021 and $ 0.3 million was recorded during both the three and six months ended June 30, 2020.

Amortization in the amounts of $ 0.1 million and $ 0.6 million were recorded for these balances for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2020, amortization in the amount of $ 0.6 million and $ 0.8 million were recorded, respectively.

TRANSACTIONS WITH RELATED PARTIES

The Company provides medical benefits to our employees through our participation in a pooled plan sponsored by an affiliate of a shareholder and director of the Company.

Medical claims paid to the plan were approximately $ 0.2 million and $ 0.1 million for the three months ended June 30, 2021 and 2020, respectively.

Medical claims paid to the plan were approximately $ 0.3 million for both the six months ended June 30, 2021 and 2020, respectively.

Medical claims paid to the plan were approximately $ 0.2 million for both the three months ended September 30, 2021 and 2020.

Medical claims paid to the plan were approximately $ 0.5 million for both the nine months ended September 30, 2021 and 2020.

ACCRUED EXPENSES

Accrued expenses at June 30, 2021 and December 31, 2020 consist of the following (in thousands):

June 30, 2021 December 31, 2020

Accrued expenses at September 30, 2021 and December 31, 2020 consist of the following (in thousands):

September 30, 2021 December 31, 2020

Deferred compensation $ 1,362 $ 1,399

13 unchanged sentences

• Level 3 - Unobservable inputs developed using the Company's estimates and assumptions, which reflect those that the Company believes market participants would use.

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 were as follows (in thousands):

June 30, 2021 December 31, 2020

Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 were as follows (in thousands):

September 30, 2021 December 31, 2020

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

18 unchanged sentences

year of the first meter installation, total new accounts per year, years to complete full build out, and discount rate.

The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of June 30, 2021 and December 31, 2020 are as follows (in thousands):

June 30, 2021 December 31, 2020

The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of September 30, 2021 and December 31, 2020 are as follows (in thousands):

September 30, 2021 December 31, 2020

Short-term Long-term Short-term Long-term

1 unchanged sentence

4.38 % Series A 2016, maturing June 2028

$ — $ 28,750 $ — $ 28,750

4.58 % Series B 2016, maturing June 2036

3,833 82,417 1,917 84,333

4.65 % Harquahala Loan, maturing January 2021 (1)

9 unchanged sentences

Series B carries a principal balance of $ 86.3 million and bears an interest rate of 4.58 % over a 20 -year term.

Series B is interest only for the first five years, with $ 1.9 million principal payments paid semiannually thereafter.

Series B is interest only for the first five years , with $ 1.9 million principal payments paid semiannually thereafter beginning December 2021.

The proceeds of the senior secured notes were primarily used to refinance the previously outstanding long-term tax exempt bonds, which were subject to an early redemption option at 103 %, plus accrued interest, as a result of our initial public offering in the United States.

1 unchanged sentence

The senior secured notes are collateralized by a security interest in the Company’s equity interest in its subsidiaries, including all payments representing profits and qualifying distributions.

Debt issuance costs as of June 30, 2021 and December 31, 2020 were $ 0.5 million and $ 0.6 million, respectively.

Debt issuance costs as of September 30, 2021 and December 31, 2020 were $ 0.5 million and $ 0.6 million, respectively.

The senior secured notes require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00.

4 unchanged sentences

The debt service ratio increases to 1.25 for any fiscal quarter during the period from and after June 30, 2024.

As of June 30, 2021, the Company was in compliance with its financial debt covenants.

As of September 30, 2021, the Company was in compliance with its financial debt covenants.

Revolving Credit Line

3 unchanged sentences

On April 30, 2021, the Company and The Northern Trust Company entered into an amendment to the Northern Trust Loan Agreement pursuant to which, among other things, the maturity date for the Company's revolving credit line was extended from April 30, 2022 to April 30, 2024.

As of June 30, 2021, the Company had no outstanding borrowings under this credit line.

There were $ 20,000 and $ 46,000 unamortized debt issuance costs as of June 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, the Company had no outstanding borrowings under this credit line.

There were $ 19 ,000 and $ 46,000 unamortized debt issuance costs as of September 30, 2021 and December 31, 2020, respectively.

The Northern Trust Loan Agreement requires the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00.

1 unchanged sentence

However, for the quarter ending June 30, 2021 through the quarter ending March 31, 2024, the ratio drops to 1.20 .

As of June 30, 2021, the Company was in compliance with its financial debt covenants.

At June 30, 2021, the remaining aggregate annual maturities of debt and minimum lease payments under capital lease obligations for the years ended December 31 are as follows (in thousands):

As of September 30, 2021, the Company was in compliance with its financial debt covenants.

At September 30, 2021, the remaining aggregate annual maturities of debt and minimum lease payments under capital lease obligations for the years ended December 31 are as follows (in thousands):

Debt Capital Lease

Remaining six months of 2021 $ 1,917 $ 85

Remaining three months of 2021 $ 1,917 $ 43

2022 3,833 142

6 unchanged sentences

Total $ 115,000 $ 358

During the three months ended June 30, 2021, the Company recorded tax expense of $ 0.6 million on pre-tax income of $ 2.6 million compared to a tax expense of $ 37 ,000 on pre-tax loss of $ 0.1 million for the three months ended June 30, 2020.

During the six months ended June 30, 2021, the Company recorded a tax expense of $0.6 million on pre-tax income of $ 2.4 million, compared to a tax expense of $ 0.2 million on pre-tax income of $ 0.5 million.

During the three months ended September 30, 2021, the Company recorded tax expense of $ 0.3 million on pre-tax income of $ 1.8 million compared to a tax expense of $ 0.5 million on pre-tax income of $ 1.6 million for the three months ended September 30, 2020.

During the nine months ended September 30, 2021, the Company recorded a tax expense of $ 0.9 million on pre-tax income of $ 4.2 million, compared to a tax expense of $ 0.7 million on pre-tax income of $ 2.1 million.

The income tax provision was computed based on the Company’s estimated effective tax rate and forecasted income expected for the full year, including the impact of any unusual, infrequent, or non-recurring items.

The Company's effective tax rate decreased during the three and nine months ended September 30, 2021 due to the exercise and vesting of stock-based compensation in 2021, resulting in windfall tax benefits.

DEFERRED COMPENSATION AWARDS

4 unchanged sentences

2017 stock option grant

Stock-based compensation expense of $ 67 ,000 was recorded for both the three months ended June 30, 2021 and 2020, and $ 131 ,000 and $ 134 ,000 was recorded for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, 14,279 options have been exercised and 64,625 options have been forfeited with 381,496 outstanding.

Stock-based compensation expense of $ 29 ,000 and $ 67 ,000 was recorded for the three months ended September 30, 2021 and 2020, respectively, and $ 160 ,000 and $ 200 ,000 was recorded for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, 30,980 options have been exercised and 113,699 options have been forfeited with 320,321 outstanding.

2019 stock option grant

Stock-based compensation expense of $ 48 ,000 and $ 49 ,000 was recorded for the three months ended June 30, 2021 and 2020, respectively and $ 95 ,000 and $ 97 ,000 was recorded for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, 4,272 options have been exercised and 6,748 options have been forfeited with 238,980 options outstanding.

Phantom stock compensation/Restricted stock units

The following table details total awards granted and the number of units outstanding as of June 30, 2021 along with the amounts paid to holders of the phantom stock units ("PSUs") and/or restricted stock units ("RSUs") for the three and six months ended June 30, 2021 and 2020 (in thousands, except unit amounts):

Amounts Paid For the Three Months Ended June 30, Amounts Paid For the Six Months Ended June 30,

Stock-based compensation expense of $ 23 ,000 and $ 49 ,000 was recorded for the three months ended September 30, 2021 and 2020, respectively, and $ 118 ,000 and $ 146 ,000 was recorded for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, 10,619 options have been exercised and 21,971 options have been forfeited with 217,410 options outstanding.

Phantom stock/Restricted stock units compensation

The following table details total awards granted and the number of units outstanding as of September 30, 2021 along with the amounts paid to holders of the phantom stock units ("PSUs") and/or restricted stock units ("RSUs") for the three and nine months ended September 30, 2021 and 2020 (in thousands, except unit amounts):

Amounts Paid For the Three Months Ended September 30, Amounts Paid For the Nine Months Ended September 30,

Grant Date Units Granted Units Outstanding 2021 2020 2021 2020

8 unchanged sentences

Stock appreciation rights compensation

The following table details the recipients of the stock appreciation rights (“SARs”) awards, the grant date, units granted, exercise price, outstanding units as of June 30, 2021 and amounts paid during the three and six months ended June 30, 2021 and 2020 (in thousands, except unit and per unit amounts):

Amounts Paid For the Three Months Ended June 30, Amounts Paid For the Six Months Ended June 30,

The following table details the recipients of the stock appreciation rights (“SARs”) awards, the grant date, units granted, exercise price, outstanding units as of September 30, 2021 and amounts paid during the three and nine months ended September 30, 2021 and 2020 (in thousands, except unit and per unit amounts):

Amounts Paid For the Three Months Ended September 30, Amounts Paid For the Nine Months Ended September 30,

Recipients Grant Date Units Granted Exercise Price Units Outstanding 2021 2020 2021 2020

8 unchanged sentences

Total 735,000 95,750 $ 510 $ — $ 779 $ 300

(1) The SARs vest ratably over sixteen quarters from the grant date.

(1) The SARs vest ratably over 16 quarters from the grant date.

(2) The exercise price was determined to be the fair market value of one share of GWRC stock on the grant date of February 11, 2015.

(3) The SARs vest over sixteen quarters, vesting 20% per year for the first three years, with the remainder, 40%, vesting in year four.

(3) The SARs vest over 16 quarters, vesting 20 % per year for the first three years, with the remainder, 40 %, vesting in year four.

(4) The exercise price was determined to be the fair market value of one share of GWRC stock on the grant date of May 8, 2015.

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(6) The exercise price was determined to be the fair market value of one share of GWRI stock on the grant date of March 12, 2018.

For the three months ended June 30, 2021 and 2020, the Company recorded approximately $ 0.4 million and $ 0.2 million of compensation expense related to the PSUs/RSUs and SARs, respectively.

For the six months ended June 30, 2021 and 2020, the Company recorded approximately $ 0.7 million of compensation expense and $ 0.3 million of negative compensation expense related to the PSUs/RSUs and SARs, respectively.

Based on GWRI’s closing share price on June 30, 2021 (the last trading date of the quarter), deferred compensation expense to be recognized over future periods is estimated for the years ending December 31 as follows (in thousands):

Remaining six months of 2021 $ 229 $ 19

For the three months ended September 30, 2021 and 2020, the Company recorded approximately $ 0.4 million and $ 0.2 million of compensation expense related to the PSUs/RSUs and SARs, respectively.

For the nine months ended September 30, 2021 and 2020, the Company recorded approximately $ 1.1 million of compensation expense and $ 0.3 million of negative compensation expense related to the PSUs/RSUs and SARs, respectively.

Based on GWRI’s closing share price on September 30, 2021 (the last trading date of the quarter), deferred compensation expense to be recognized over future periods is estimated for the years ending December 31 as follows (in thousands):

Remaining three months of 2021 $ 126 $ 6

Total $ 722 $ 42

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The Company assumes that forfeitures will be minimal and recognizes forfeitures as they occur, which results in a reduction in compensation expense.

During the three and six months ended June 30, 2021, 164,950 RSAs were issued.

For the three and six months ended June 30, 2021, the Company recorded approximately $ 0.3 million and $ 0.5 million of compensation expense related to the RSAs, respectively.

For both the three and six months ended June 30, 2020, the Company recorded approximately $ 0.7 million of compensation expense related to the grant and partial vesting of RSAs.

The following table summarizes the RSA transactions as of the three months ended June 30, 2021:

During the three and nine months ended September 30, 2021, 164,950 RSAs were issued.

For the three and nine months ended September 30, 2021, the Company recorded approximately $ 0.3 million and $ 0.8 million of compensation expense related to the RSAs, respectively.

For the three and nine months ended September 30, 2020, the Company recorded approximately $ 0.2 million and $ 0.8 million of compensation expense related to the grant and partial vesting of RSAs.

The following table summarizes the RSA transactions as of the three months ended September 30, 2021:

Number of RSAs Weighted Average Fair Value

Nonvested stock units at beginning of period 238,813 $ 14.91

Granted 164,950 $ 16.59

Stock units vested and issued 54,163 $ 11.32

Forfeited 20,850 —

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SUPPLEMENTAL CASH FLOW INFORMATION

The following is supplemental cash flow information for the six months ended June 30, 2021 and 2020 (in thousands):

For the Six Months Ended June 30,

The following is supplemental cash flow information for the nine months ended September 30, 2021 and 2020 (in thousands):

For the Nine Months Ended September 30,

Supplemental cash flow information:

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COMMITMENTS AND CONTINGENCIES

In January 2019, the the Company's corporate office lease agreement was amended to extend the term of the lease, with a commencement date of March 1, 2019 and termination date of May 31, 2022.

In January 2019, the Company's corporate office lease agreement was amended to extend the term of the lease, with a commencement date of March 1, 2019 and termination date of May 31, 2022.

As such, the Company's monthly rent expense increased to approximately $ 15,000 .

Rent expense arising from the operating leases totaled approximately $ 48 ,000 and $ 44 ,000 for the three months ended June 30, 2021 and 2020, respectively, and $ 93 ,000 and $ 89 ,000 for the six months ended June 30, 2021 and 2020, respectively.

Rent expense arising from the operating leases totaled approximately $ 51 ,000 and $ 44 ,000 for the three months ended September 30, 2021 and 2020, respectively, and $ 144 ,000 and $ 133 ,000 for the nine months ended September 30, 2021 and 2020, respectively.

Contingencies

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Management is not aware of any legal proceeding of which the ultimate resolution could materially affect our financial position, results of operations, or cash flows.

SUBSEQUENT EVENTS

Acquisition of Las Quintas Serenas Water Company

On November 3, 2021, the Company completed the acquisition of Las Quintas Serenas Water Company ("Las Quintas"), an operator of a water utility with service area in the Pima county of Arizona.

The acquisition added over 1,100 connections and approximately 2.5 square miles of service area.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements