Pure Cycle Corporation
Q1 2008 Earnings Call Transcript

Published: 16 Jan 2008

[Operator:]

Good day ladies and gentlemen and welcome to the first quarter 2008 financial release and 2008 annual stockholders’ meeting conference call. My name is Jahida and I will be your coordinator for today. At this time all participants are in listen only mode. We will be facilitating a question and answer session towards the end of this conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call Mr. Mark Harding, President. Please proceed.

[Mark W. Harding:]

Good afternoon everyone. I’d like to welcome you to Pure Cycle Corporations 2008 annual stockholder meeting and first quarter ended November 30, 2007 earnings release. My name is Mark Harding and I’m the president of Pure Cycle and I will act as chairman for this meeting. I’d like to welcome the other members of the board of directors. If you could just raise your hand I’d like to welcome our chairman, Mr. Harry Augar, Mr. Mark Campbell, Mr. Art Epker, Mr. Dick Guido, Mr. Peter Howell and Mr. George Middlemas. In order to conduct this meeting in an orderly fashion we’ve adopted the order of business as noted in the agenda provided to everyone attending the meeting and on the presentation which you can access through our website at www.PureCycleWater.com on page 3 of the slide show. We ask you in all fairness to the stockholders and investors joining us, everyone please adhere to this agenda. Mr. Scott Lehman the secretary of the company will act as secretary of the meeting and I hereby appoint Mr. Patrick Hayes of Computer Share Trust Company, our transfer agent, as the inspector of elections for the meeting and I ask that he subscribe his oath of office and file it with the secretary if he’s not already done so. As I mentioned we will have a brief presentation that will outline our first quarter financial results. You can tag along with the presentation through the slide show. You’ll have to advance those slides yourself as you access that through our website. I’ll try and note the transition of the slides as we move through the presentation. The board of directors has fixed December 6, 2007 as the record date for determination of stockholders entitled to notice of and to vote at this annual meeting or any postponement or adjournment there of. Mr. Lehman, secretary of the meeting please report on the notice of this meeting the presence of the forum and the affidavit of mailing.

[Scott E. Lehman:]

Mr. Chairman, I present to the meeting the following

[Mark W. Harding:]

Thank you Mr. Secretary. Please file these materials with the minutes of this meeting. Having a quorum we will proceed with the business of the meeting and the first quarter earnings release. A press release has been distributed and the company’s Form 10Q has been filed with the Securities & Exchange Commission on January 9, 2008. The press release as well as the Form 10Q is available at the company’s website. If we turn to the first Slide, the first Slide is a Safe Harbor statement that says that investors are cautioned that statements are not historical facts, are forward-leaning statements that involve risks and uncertainties that could cause actual results to differ materially from projected results. As I think most of you are familiar with forward-leaning statements – as we move on we’ve kind of gone over the agenda. I’d like to highlight some of the significant events for the first quarter. Really two areas standout in terms of highlights. The most active one will be the repurchase of an additional $4.7 million of CAA interest. In October, 2007 the company issued 211,000 shares of restricted stock to the owners of those interests. From an accounting journal entry standpoint to further – if that’s affected, no good dead goes unpunished. It did result in the company taking a loss of $273,000 and that’s a function of how we account for what the balance was booked for, what we retired that out for from the value of the stock that was given in consideration. As of November 30, 2007 the remaining positions held by third party to the CAA agreement resulted in approximately $3.5 million. So, that interest started out around $36 million and we boiled that down to around $3.5 million. I think that’s a favorable aspect for the company, for the shareholders and for those that converted their interest into an alternate form of interest. The other notable feature for first quarter this year was that pursuant to the reporting methodology that we have under the acquisition of the Arkansas River assets; take a look at the contingent portion of that which is the tap participation fee payable. And, as a result of the company’s reevaluation of that tap participation fee we will have a change of an increase in the total estimated future payments of that from approximately $104 million to $108 million. Those are what the total future potential payments might be. Due to the use of the effective interest method the imputed interest expense will decrease by approximately $183,000 to $1 million for the three months ended November 30, 2007, annualizing that out to an annualized decrease that will result in a decrease of about $700,000 in interest expense to that particular component. What the company does in that particular element is we reset that each year to determine how the likelihood of the timing and payment of those are. That’s a function of the anticipation of payment of future tap fees, what the tap fees with be and discount rate, present valuing some of those payments over a period of time. So, that will be an instrument that will constantly be reassessed by management and our auditors as we move forward and obtain additional information. As we transition to the next Slide, what I’d like to do is give you a brief activity update. I know all of you probably listen to our annual call for fiscal year 2007 just less than 60 days ago and not a lot has transpired since that time. If I could just take a look at highlighting the area of emphasis that the company’s working on. This Slide will represent that. What this illustrates is where the company’s service area is in [inaudible] the Denver metropolitan area. This really drills down specifically into southeast Arapahoe County. If you take a look at the yellow area, that’s the company’s service area that we have in our existing relationship with Power State Land Board. Taking a look at the Land Board’s proposal dating back to December, 2005 when they selected various criteria for a conservation proposal as well as a development proposal. Those areas are highlighted – the green is the Land Board RFP development proposal which they have entered into a development and management services agreement with an Australian based company called Lend Lease Communities. The gray shaded area is where they entered into negotiation with a conservation team. They have yet to conclude a definitive agreement on the conservation parcel. And then, the red area is the area that they’ve identified to set aside for water resource development. So, they have a three phase vision for the Lowry Range which encompasses all three distinct elements

[Operator:]

(Operator Instructions)

[Mark W. Harding:]

If there’s no questions and you think of something later, please feel free to give me a call. I’d be more than happy to answer any questions. Or, if you’re listening to this on a re-broadcast and you have any questions, please don’t hesitate to give me a call at the office. I’d be more than happy to address any questions you might have. If there are questions, you can chime in; otherwise we will move on to the proxy items. Thank you all. We’ll conclude this call. Moderator, thank you for your participation. We look forward to our next quarterly update in March.

[Operator:]

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.