The U.S. water and wastewater industry has three main segments: utility, which involves supplying water, wastewater and water recycling services to consumers; general products and services, which involves providing water- and wastewater-related products and services to water and wastewater utilities and other customers on a contract basis; and water resource management, which involves production and monetization of water as a commodity through the trading of rights and credits.

Aging water infrastructure coupled with continuing population growth will require significant infrastructure investment throughout the U.S. Required spending encompasses rehabilitation of existing systems, installation of new infrastructure to accommodate growth in and improvements to water quality and wastewater discharges mandated by stricter water quality standards which began with the passing of the Clean Water Act in 1972 and the Safe Drinking Water Act of 1974.

The U.S. Environmental Protection Agency (EPA) estimates that approximately $276.7 billion will be needed between 2003 to 2022 in order to continue to provide clean and safe drinking water to water system consumers. These needs include installation of new infrastructure as well as rehabilitation or replacement of deteriorated or undersized infrastructure. The EPA documented the total infrastructure needs of publicly-owned wastewater treatment utilities during the period between 2004 and 2024 at $202.5 billion, of which more than 65% represented wastewater treatment, collection and conveyance.

Recycled water distribution is a new category designed to report on the increasing trend toward using recycled water for beneficial purposes such as irrigation. Fifteen states reported $4.3 billion in recycled water distribution needs in response to the EPA survey. According to Global Water Intelligence Water Reuse Markets 2005-2015, A Global Assessment and Forecast, approximately $25.1 billion is projected for investment in recycled water distribution internationally over the next ten years.

The Company treats water to potable standards and also treats, cleans and recycles wastewater for a variety of non-potable uses.

The Company water supply is primarily derived from groundwater; however, it currently augments these supplies with recycled water and intends to augment them with surface water and increased use of recycled water in the future.

The Company’s utilities presently employ groundwater systems for potable water production. Water is brought to the surface from underground aquifers (water levels vary from 50 to 650 feet below land surface depending on the area), disinfected and stored in tanks for distribution to customers.

Recycled water is created by taking wastewater and applying advanced tertiary treatment (screening, biological reduction, filtration and disinfection processes) to create a high quality, non-potable water source. Each step is monitored and controlled in order that the stringent requirements for recycled water are continuously met.

The Company designs and builds standard, decentralized facilities that are scaled to the service areas they serve in order to achieve optimum efficiency in providing both water and wastewater services.

The Company plans to provide water transmission pipelines for communities that are importing water to fulfill their water supply requirements. This type of project typically requires large-diameter pipes that transport water over a distance of several miles.

Operating expenses increased $7.4 million, or 54%, from $13.8 million for 2006 to $21.2 million for 2007.

Operations and maintenance costs increased $1.2 million, or 80%, in 2007 compared to 2006.

Consolidated depreciation and amortization expense increased $3.0 million, or 54%, from $5.6 million for 2006 to $8.6 million for 2007.

Interest expense increased $2.9 million, or 199%, from $1.4 million for 2006 to $4.3 million for 2007.

Net income from continuing operations decreased $4.3 million, or 68%, from $6.3 million for 2006 to $2.0 million for 2007.