Pure Cycle Corporation · NASDAQ:PCYO
Pure Cycle — Investor Presentation (July 2009)
58 slides from Pure Cycle's investor presentation, July 2009
Slide 1: Corporate Overview updated July 2009
PURE CYCLE CORPORATION Corporate Overview updated July 2009 Including Financial Information for the nine months ended May 31, 2009
Slide 2: Safe Harbor Statement
“SAFE HARBOR” STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements that are not historical facts contained in this Presentation are forward looking statements that involve risk and uncertainties that could cause actual results l to differ diff ffrom projected
Slide 3: Corporate Overview – What We Do
PURE CYCLE CORPORATION CORPORATE OVERVIEW – WHAT WE DO Pure Cycle is an investor owned, full service water and wastewater service p provider engaged g g in the design, g construction, operation p and maintenance of water and wastewater systems. We provide water and wastewater services utilizing wate
Slide 4: Overview – What We Do: Vertically Integrated Model
PURE CYCLE CORPORATION OVERVIEW – WHAT WE DO We pursue a vertically integrated business model delivering efficiency and water conservation byy owningg all assets and resources necessary y to offer complete water and wastewater services, including the following assets: • Water rights used to provide
Slide 5: Overview – Our Business
PURE CYCLE CORPORATION OVERVIEW – OUR BUSINESS We primarily operate in two lines of business: • Construction business – the design and construction of water and wastewater systems (owned ( and managed). ) • Service provider business – the operation and maintenance of water and wastewater systems (ow
Slide 6: Overview – Water Recycling and Reuse
PURE CYCLE CORPORATION OVERVIEW – WHAT WE DO Environmentally responsible water recycling and reuse are integral components of our systems. Water is a valuable and often wasted natural resource that should be conserved and reused as much as possible. We will employ an aquifer storage and recovery sys
Slide 7: Overview – Balanced Water Portfolio
PURE CYCLE CORPORATION OVERVIEW – WHAT WE DO Our balanced portfolio is one of the largest unallocated portfolios of water in the state. This provides us the ability to service approximately 180,000 single ffamily equivalent homes. 7 Updated July 2009
Slide 8: Water Ownership – How It Varies in the US
PURE CYCLE CORPORATION WATER OWNERSHIP – HOW IT VARIES IN THE US Water ownership throughout the US varies depending on the region and state, in general: • West of the Mississippi River, water ownership is defined predominately by “Appropriative Rights” • East of the Mississippi River, water ownershi
Slide 9: Riparian Rights vs Appropriative Rights
PURE CYCLE CORPORATION WATER OWNERSHIP – HOW IT VARIES THROUGHOUT THE US What is the difference between Riparian rights and Appropriative rights? Riparian Rights Appropriative Rights Where can water be used: On the land adjacent to water Can be diverted and used on any property Can it be diverted to
Slide 10: Water Ownership – Colorado
PURE CYCLE CORPORATION WATER OWNERSHIP – COLORADO Colorado follows Appropriative Water Laws I C In Colorado l d water llaws are established bli h d at the h SState level. l l • Water rights are based on stream flows and a “priority system”. • An owner of a senior water right is entitled to their ful
Slide 11: Water Ownership – Colorado Semi-Arid
PURE CYCLE CORPORATION WATER OWNERSHIP – COLORADO Colorado is a semi-arid state, thus water availability is vital to our success. • Average precipitation of approximately 17 inches per year in the Denver metro area. • Approximately A i l 85% off the h water available il bl for f use isi west off the
Slide 12: Our Water Ownership
PURE CYCLE CORPORATION OUR WATER OWNERSHIP Pure Cycle owns or controls one of the largest unallocated portfolios of water in the State - described in greater detail in later slides. Our Denver / South Platte supplies consist of: • Over 30,000 acre-feet of Denver basin groundwater • Over 8,000 acre-f
Slide 13: Our Water Ownership – Revenue Fees
PURE CYCLE CORPORATION OUR WATER OWNERSHIP Using the water rights we own, we generate revenues from the following fees: Tap Fees: One time fee paid by developers (finances access to water and wholesale facilities such as wells, storage, treatment) Base Fee: Fixed monthly fee to home/business owners
Slide 14: Our Water Ownership – Rates and Charges
PURE CYCLE CORPORATION OUR WATER OWNERSHIP Based on the rates and charges at the three surrounding communities our rates as of July y 1,, 2009 are: Tap Fees Rate Base District $/SFE East Cherry Creek W&S District $ 21,500 Parker Water & Sanitation District 22,000 Town of Castle Rock 24,065 Averages
Slide 15: Water Tap Fee Over the Past Years
PURE CYCLE CORPORATION OUR WATER OWNERSHIP – WATER TAP FEE THE PAST 7 YEARS 102% increase over seven years $22,500 $ $21,500 $20,000 $16,840 $14,740 $12,420 $11,150 2003 2004 2005 2006 2007 2008 2009 11% 19% 14% 19% 8% 5% Year-to-Year Year to Year Increase 15 Updated July 2009
Slide 16: Tap Fee Comparison to Denver Metro Area
PURE CYCLE CORPORATION OUR WATER OWNERSHIP How do Pure Cycle’s tap fees compare to the rest of the Denver Metro area? Broomfield Brighton Thornton $16,500 $22,454 $20,554 $ per single family equivalent. As of January 1, 2009 Golden (our tap fee is $18,814 Aurora* effective July 1, 2009) $23 592 $23,
Slide 17: Projected Revenues
PURE CYCLE CORPORATION OUR WATER OWNERSHIP – PROJECTED REVENUES Pure Cycle can supply water to 180,000 SFEs. Based on current tap fees and service charges, this equals current dollar gross revenues of: Tap Fees Total Tap Fees “current Service (effective 7/1) dollars” (billions) Water $22,500/SFE $4.
Slide 18: Our Denver / Front Range Assets – Lowry Range
PURE CYCLE CORPORATION OUR WATER OWNERSHIP Our Denver / Front Range Assets – Located at the Lowry Range 18 Updated July 2009
Slide 19: Our Service Area
PURE CYCLE CORPORATION OUR SERVICE AREA Pure Cycle provides 25 76 Denver water and wastewater Int’ll Int services to customers Airport primarily in the Denver, Colorado metropolitan area. Downtown Our main service area is Denver 70 the Lowry Range property t and d th the “I “I-70 70 Corridor” locate
Slide 20: Activity Update – Sky Ranch
Sky Ranch ACTIVITY UPDATE – what is happening in our Service Area – see following Chronology slides 2 sections covered by our existing g agreement g with the State (1,280 ac) Development Parcel Conservation Area W t R Water Resource A Area Targeted Service Area Proposed transmission pipelines Existi
Slide 21: Chronology of Lowry Range Development Plan
PURE CYCLE CORPORATION OUR SERVICE AREA Chronology of Lowry Range Development Plan: • December 2006 • Land Board awards exclusive negotiating rights to Lend Lease Communities. • February 2007 • Arapahoe County amends Comprehensive Plan to change designation of the Development Parcel creates sub area
Slide 22: Chronology of Lowry Range Development Plan (continued)
PURE CYCLE CORPORATION OUR SERVICE AREA Chronology of Lowry Range Development Plan (continued): • April 2008 • Water Court rules in favor of Rangeview/ Pure Cycle in reservoir case. • October 2008 • Lend Lease announces it may terminate involvement with Lowry Range. • January 2009 • L dL Lend Lease
Slide 23: Lowry Range – Planned Uses
PURE CYCLE CORPORATION LOWRY RANGE – PLANNED USES Development parcel - approximately pp y 3,900 , acres Conservation parcel – approximately 17,000 acres Water resource parcel pa ce – approximately 5,500 acres 23 Updated July 2009
Slide 24: Our Service Area – Reservoir Sites
PURE CYCLE CORPORATION OUR SERVICE AREA Reservoir Sites What is Aurora’s interest in our reservoir sites? • Location – adjacent to the existing Aurora Reservoir and City’s future water treatment plant. • We remain dedicated to our long standing relationship with the Land Board and will continue to e
Slide 25: Our Arkansas River Valley Assets
PURE CYCLE CORPORATION OUR WATER OWNERSHIP Our Arkansas River Valley Assets – Located in Southeastern Colorado 25 Updated July 2009
Slide 26: Arkansas River Interests Acquired in 2006
PURE CYCLE CORPORATION OUR WATER OWNERSHIP In 2006 Pure Cycle acquired the following Arkansas River interests: • Approximately 60,000 acre-feet of senior 1883 water rights in the Arkansas River and its tributaries represented by over 21,600 shares of the Fort Lyon Canal Company (“FLCC”); • Approxima
Slide 27: Arkansas River Valley – Update
PURE CYCLE CORPORATION ARKANSAS RIVER VALLEY – UPDATE We continue to evaluate shared opportunities for our Arkansas River assets including the “Super Ditch” and a pipeline and pump station infrastructure to move the water to our service area. • Super Ditch is evaluating a water court filing to chang
Slide 28: Our Colorado River Assets
PURE CYCLE CORPORATION OUR WATER OWNERSHIP Our Colorado River Assets – Located in Western Colorado 28 Updated July 2009
Slide 29: Paradise Project
PURE CYCLE CORPORATION OUR WATER OWNERSHIP Our Paradise Project includes 70,000 acre feet of conditionally decreed water together g with a storage g right g to construct a 70,000 acre foot reservoir. The proposed dam and water rights diversion would be located approximately 2 miles north east of DeB
Slide 30: Well Enhancement and Recovery Systems
PURE CYCLE CORPORATION OUR WATER OWNERSHIP Well Enhancement and Recovery Systems – un-consolidated joint venture 30 Updated July 2009
Slide 31: Well Enhancement and Recovery Systems, LLC
PURE CYCLE CORPORATION WELL ENHANCEMENT AND RECOVERY SYSTEMS, LLC In 2007 we and two other parties formed Well Enhancement andd Recovery R Systems S LLC (“W (“Wellll E Enhancement h LLC”) LLC”). Well W ll Enhancement LLC was established to develop a proprietary new tool and process which we believe
Slide 32: Well Enhancement and Recovery Systems, LLC
PURE CYCLE CORPORATION WELL ENHANCEMENT AND RECOVERY SYSTEMS, LLC • Well Enhancement is a 33% owned joint venture. It is developing a new tool and process designed to increase the efficiency of deep water wells in the Denver metropolitan area. • In our fiscal 2008, the tool and process was completed
Slide 33: Current Financial Information as of Quarter Ended May 2009
CURRENT FINANCIAL INFORMATION AS OF THE QUARTER ENDED MAY 31, 2009 33 Updated July 2009
Slide 34: Summary of Significant Items
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 31 2009 – SUMMARY OF SIGNIFICANT ITEMS Supreme Court Ruling • On June 1, 1 2009, 2009 the Colorado Supreme Court upheld the Colorado Water Court’s ruling requiring the City of Aurora to remove reservoir sites which are su
Slide 35: Tap Participation Fee
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 31 2009 – SUMMARY OF SIGNIFICANT ITEMS Tap Participation Fee : • In light of weak new home construction market and developer terminating agreement with the State Land Board at Lowry, we updated our valuation of the Tap Pa
Slide 36: Colorado Market Update
PURE CYCLE CORPORATION COLORADO MARKET UPDATE The nationwide housing market continues to be weak. * • New single family home sales declined 60% from 2005 – 2008. • Hosing starts fell 30% in 2008 compared to 2005. • The national median home price (adjusted for inflation) fell 29.8% from 2005 – 2009.
Slide 37: Colorado Market Update – Positive Signs
PURE CYCLE CORPORATION COLORADO MARKET UPDATE However, the Colorado market is showing some positive signs: • Foreclosures - in 2008 Colorado had the highest foreclosures in the nation, now completed foreclosures are down 50% for the first quarter of 2009 (2,577 completed foreclosures) versus the sam
Slide 38: Summary Statement of Operations
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 2009 – SUMMARY STATEMENT OF OPERATIONS Nine Months Ended May 31, 2009 2008 $ Change % Change Total revenues $ 180 400 180,400 $ 194 100 194,100 $ (13 700) (13,700) -7% 7% Total cost of revenues (120,400) (118,500) (1,900)
Slide 39: Summary Statement of Operations – Explanations
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 2009 – SUMMARY STATEMENT OF OPERATIONS Revenues and gross margin were negatively impacted by reductions in water usage due d to above b average precipitation i i i llevels l iin 2009 along l the h CColorado l d Front F Ra
Slide 40: Summary Statement of Operations – Imputed Interest
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 2009 – SUMMARY STATEMENT OF OPERATIONS Imputed interest on the Tap participation Fee liability y Fair valued,, adjusted j whenever events or circumstances indicate a change g in the fair value. y Value based on management
Slide 41: Summary Financial Position
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 31 2009 – SUMMARY FINANCIAL POSITION May 31, 31 2009 August 31, 31 2008 $ Change % Change Assets Cash and equivalents and marketable securities $ 3,947,500 $ 5,239,000 $ (1,291,500) -25% Other current assets 322 700 322,7
Slide 42: Significant Balance Sheet Accounts – Cash and Water Rights
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 31 2009 – SUMMARY FINANCIAL POSITION Significant balance sheet accounts Cash and equivalents of $3 $3.9 9 million y We have an effective shelf registration which allows us to sell up to $5.7 million in stock. Investments
Slide 43: Significant Balance Sheet Accounts – Liabilities and Equity
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 31 2009 – SUMMARY FINANCIAL POSITION Significant balance sheet accounts Total liabilities of $59.5 million y $56.7 million of this is the Tap Participation Fee Liability – which is not payable until we sell water taps. y
Slide 44: Summary Cash Flow Information
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 31 2009 – SUMMARY CASH FLOW INFORMATION Nine Months Ended May 31, 2009 2008 Cash used by operating activities $ (1,246,900) $ (956,800) Cash (used) provided by investing activities (3 067 400) (3,067,400) 501 300 501,300
Slide 45: Cash Flow – Cash Used by Operations
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 2009 – SUMMARY CASH FLOW INFORMATION – CASH USED BY OPERATIONS Nine Months Ended May 31, 2009 2008 Cash used by operating activities $ (1,246,900) $ (956,800) Cash (used) provided by investing activities (3,067,400) 501,3
Slide 46: Cash Flow – Cash Used by Investing
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 2009 – SUMMARY CASH FLOW INFORMATION – CASH USED BY INVESTING Nine Months Ended May 31, 2009 2008 Cash used by operating activities $ (1,246,900) (1 246 900) $ (956,800) (956 800) Cash (used) provided by investing activit
Slide 47: Composition of Losses
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31 31, 2009 – COMPOSITION OF LOSSES 10% decrease $1,073.0 $1,194.4 $218.5 $263 8 $263.8 $273.7 $285.1 $286.2 76% of Net Loss $2,862.0 $3,255.0 $4,438.5 Net Loss $5,273.0 Net Loss 2009 2008 TPF Interest Depreciation / Non-cash
Slide 48: G&A Expenses
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31 31, 2009 $1,810.5 $1,650.3 $1,547.9 2009 2008 2007 G&A expenses (in thousands) – decreased approximately 14%. 14% See following slide for further details. 48 Updated July 2009
Slide 49: G&A Expense Components
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31, 31 2009 Our G&A expenses for the nine months ended May 31, 2009 and 2008, respectively, are comprised of approximately: • $369,800 and $367,300 of salary and salary related expenses, not including approximately $218,500 a
Slide 50: Total Revenues
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31 31, 2009 $194.0 $180.4 $178.1 2009 2008 2007 Total revenues declined due to decreased water usage as a result of above average precipitation in 2009. 50 Updated July 2009
Slide 51: Water Usage Revenues
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31 31, 2009 Water usage revenues – declined approximately 13% due to usage $102.0 decreases, offset by the 7/1/08 rate increase. $88.3 $88 3 $92.0 25.5 25.8 2009 2008 2007 19.1 Water usage ((millions of g gallons)) declined 2
Slide 52: Net Loss
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31 31, 2009 $5,273.1 $5,157.4 $4,438.6 2009 2008 2007 Net loss decreased approximately 16% due to the decreases in the G&A expenses as noted on a previous slide, and the recognition of approximately $59,700 of gain on the sal
Slide 53: Current Assets
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31 31, 2009 $7.3 $4.3 $5.5 2009 2008 2007 Current assets (in millions) at May 31, 31 2009, 2009 August 31 31, 2008 and 2007. 2007 Decrease mainly due to decreases in cash used in operating activities. 53 Updated July 2009
Slide 54: Investments in Water and Water Systems
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31 31, 2009 $103.2 $103.3 $103.2 2009 2008 2007 Investments in water and water systems (in millions) at May 31, 31 2009, 2009 August 31, 2008 and 2007. 54 Updated July 2009
Slide 55: Total Equity
PURE CYCLE CORPORATION SUMMARY FINANCIAL INFORMATION NINE MONTHS ENDED MAY 31 31, 2009 $57.8 $53.2 $49.0 2009 2008 2007 Total equity (in millions) as of May 31 31, 2009 2009, August 31 31, 2008 and 2007. 2007 Decreases mainly due to net losses. 55 Updated July 2009
Slide 56: Key Employees and Board of Directors
PURE CYCLE CORPORATION KEY EMPLOYEES AND BOARD OF DIRECTORS Corporate Outside Audit Governance Compensation Management Director Committee Committee Committee Mark W. Harding – President Scott E. Lehman – Engineering Kevin B. McNeill – Controller Harrison H. Augur Chairman of the Board Mark D. Campbe
Slide 57: Significant Institutional Shareholders
PURE CYCLE CORPORATION SIGNIFICANT INSTITUTIONAL SHAREHOLDERS % of Shares Shareholder Shares Held Outstanding PAR Capital Management, Management Inc. Inc 31M 3.1 13 70% 13.70% High Plains A&M 3.0 M 13.39% W lli Wellington Management M C Company 22M 2.2 9 82% 9.82% Trigran Investments 1.7 M 8.12% RMB
Slide 58: General Information
PURE CYCLE CORPORATION GENERAL INFORMATION o Ticker symbol: o PCYO – traded on the NASDAQ Capital Market o Website: o www.purecyclewater.com o Phone number: o 303-292-3456 o Address o 8451 Delaware Street, Thornton, CO 80260 o F more information For i f i email il us at: o info@purecyclewater.com Th