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Section 1: 8-K (FORM 8-K)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 8-K

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

May 10, 2016

(Date of earliest event reported)

 

CONSOLIDATED WATER CO. LTD.

(Exact Name of Registrant as Specified in Charter)

 

  Cayman Islands, B.W.I. 0-25248 98-0619652  
  (State or Other Jurisdiction of (Commission File No.) (IRS Employer Identification No.)  
  Incorporation)      

 

Regatta Office Park

Windward Three, 4th Floor

West Bay Road, P.O. Box 1114

Grand Cayman, KY1-1102

Cayman Islands

(Address of Principal Executive Offices)

 

(345) 945-4277

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

Item 2.02.Results of Operations and Financial Condition.

 

On May 10, 2016, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the first quarter ended March 31, 2016. A copy of the press release is attached as Exhibit 99.1 to this report.

 

The information in this report, including the exhibit hereto, is being “furnished” in accordance with General Instruction B.2 of Form 8-K. As such, this information is not deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filings with the Securities and Exchange Commission unless it is explicitly so incorporated in such filings.

 

Item 9.01.Financial Statements and Exhibits.

 

(d)Exhibits.

  

Exhibit No.   Title
     
99.1   Press release issued by the Company on May 10, 2016.

 

2 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  CONSOLIDATED WATER CO. LTD.
   
     
  By: /s/ David W. Sasnett
  Name:   David W. Sasnett
  Title: Executive Vice President & Chief Financial Officer
     
Date: May 10, 2016    

 

3 

 

 

EXHIBIT INDEX

 

Exhibit   Description
     
99.1   Press release issued by the Company on May 10, 2016.

 

4 

 

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

CONSOLIDATED WATER CO. LTD.

REPORTS FIRST QUARTER OPERATING RESULTS

 

COMPANY ANNOUNCES AEREX ACQUISITION AND SUBMITS OFFICIAL TENDER FOR MEXICO PROJECT

  

GEORGE TOWN, Grand Cayman, Cayman Islands (May 10, 2016) -- Consolidated Water Co. Ltd. (NASDAQ Global Select Market: “CWCO”) (“Consolidated Water” or “the Company”), which develops and operates seawater desalination plants and water distribution systems in areas of the world where naturally occurring supplies of potable water are scarce or nonexistent, today reported its operating results for the first quarter of 2016. The Company will host an investor conference call on Wednesday, May 11, 2016 at 11:00 a.m. EDT (see details below) to discuss its operating results and other topics of interest.

 

First Quarter Operating Results

 

Net income attributable to the Company’s stockholders increased to $2,054,641, or $0.14 per diluted share, for the quarter ended March 31, 2016, compared to $1,921,261, or $0.13 per diluted share, for the quarter ended March 31, 2015.

 

Revenues generated by retail water operations were $5,970,238 in 2016 as compared to $6,135,638 in 2015. Although the volume of water sold by the retail segment increased by approximately 5% from 2015 to 2016, retail revenues declined by approximately 3% in 2016 due to (i) lower energy costs, which reduced the energy component of the retail water rates charged to Cayman retail customers; and (ii) the annual first quarter adjustment of base rates under the Company’s retail license, which were lowered in 2016 by 4.4% due to downward movement in the price indices used as the basis for such rate adjustments.

 

Bulk segment revenues were $7,265,293 for the current period as compared to $8,382,316 for the prior year period. The current period decrease in bulk revenues is attributable to both the Company’s Bahamas and Cayman operations, which generated approximately $916,000 and $224,000 less in revenues, respectively, in 2016 than in 2015 due to a significant decrease in the prices of diesel fuel and electricity from 2015 to 2016, which reduced the energy component of bulk water rates.

 

Services segment revenues were $799,241 and $148,158 for 2016 and 2015, respectively. Services revenues increased in 2016 due to the addition of the revenues of Aerex Industries, Inc. (“Aerex”) after the acquisition of 51% of this company on February 11, 2016.

 

Consolidated gross profit remained relatively consistent at $6,177,031 (44% of total revenues) in 2016, versus $6,148,302 (42% of total revenues) in 2015 as did gross profit on retail revenues, which was $3,340,564 (56% of retail revenues) and $3,368,775 (55% of retail revenues) in 2016 and 2015, respectively. Gross profit on bulk revenues decreased to approximately $2.7 million (37% of bulk revenues), compared with approximately $2.9 million (35% of bulk revenues) for the prior year period. The services segment generated gross profit of $181,498 in 2016, while incurring a negative gross profit of ($136,729) in 2015.

 

 

 

 

Consolidated general and administrative expenses (“G&A”) increased to approximately $4.5 million in 2016 from approximately $3.9 million in 2015 due to an increase in the project development expenses incurred by NSC of approximately $230,000 and the addition of the G&A expenses of Aerex.

 

Net other income for 2016 was $389,557, as compared to net other expense of ($219,557) for 2015. The fluctuation in this net component of consolidated results of operations resulted principally from (i) a decrease in the impairment charge recorded for the equity investment in OC-BVI from 2015 of $260,000; and (ii) foreign currency gains recorded for CW-Bali in 2016 as compared to foreign currency losses recorded for this subsidiary in 2015.

 

Management Comments

 

“We are pleased to have completed during this past quarter the acquisition of a 51% interest in Aerex Industries Inc. for $7.7 million in cash. Aerex, located in Fort Pierce, Florida, is an original equipment manufacturer and service provider of a wide range of products and services applicable to municipal water treatment, and industrial water and wastewater treatment,” commented Chief Executive Officer Rick McTaggart. “Aerex’s products include membrane separation equipment, filtration equipment, piping systems, vessels and custom fabricated components. Aerex also provides engineering, design, consulting, inspection, training and equipment maintenance services. Our ownership in Aerex gives us the traditional benefits associated with the vertical integration of a portion of our supply chain, and more importantly represents a significant first step in our strategy to expand our products, service offerings and customer base and provides us with the capabilities of pursuing complementary water related business in the U.S. market. Due to the nature of Aerex’s business, we expect its revenues will fluctuate more than the revenues we have historically generated under our long term water supply contracts and utility license.”

 

“We reached a significant milestone in the development phase of our 100 million gallon per day seawater desalination plant in Rosarito, Baja California, Mexico on April 21st when our Mexican subsidiary, NSC Agua SA de CV, and its partners, NuWater SAPI de CV and Degremont SA de CV, submitted a proposal in response to the public tendering process conducted by the State of Baja California, Mexico to design, build and operate a desalination plant to be located in Rosarito Beach, Baja California. We believe that our proposal is very competitive and reflects our deep knowledge of a project that we have been developing for nearly six years. The Government of the State of Baja California accepted three proposals, including our own, and intends to announce the results of its technical evaluation of these proposals on May 20th, at which time the financial proposals of all technically compliant bidders will be publically disclosed. We will keep investors apprised of any material developments regarding this important project.”

 

Cash Dividends

 

On April 30, 2016, the Company paid a quarterly cash dividend of $0.075 per share to shareholders of record at the close of business on April 1, 2016. The Company has paid cash dividends to shareholders since 1985.

 

Investor Conference Call

 

The Company will host a conference call at 11:00 a.m. Eastern Time (EDT) on Wednesday, May 11, 2016 to discuss its first quarter operating results and other topics of interest. Shareholders and other interested parties may participate in the conference call by dialing 844-875-6913 (international/local participants dial 412-317-6709) and requesting participation in the “Consolidated Water Company Call” a few minutes before 11:00 a.m. EDT on Wednesday, May 11, 2016.

 

 

 

 

A replay of the conference call will be available one hour after the call through May 18, 2016 by dialing 877-344-7529 (international/local participants dial 412-317-0088) and entering the conference ID # 10085951, and on the Company’s website at www.cwco.com.

 

CWCO-E

 

About Consolidated Water Co. Ltd.

 

Consolidated Water Co. Ltd. develops and operates seawater desalination plants and water distribution systems in areas of the world where naturally occurring supplies of potable water are scarce or nonexistent. The Company operates water production and distribution facilities and provides water-related products and services to customers in the Cayman Islands, Belize, the British Virgin Islands, The Commonwealth of The Bahamas, Indonesia and the United States.

 

Consolidated Water Co. Ltd. is headquartered in George Town, Grand Cayman, in the Cayman Islands. The Company’s ordinary (common) stock is traded on the NASDAQ Global Select Market under the symbol “CWCO”. Additional information on the Company is available on its website at http://www.cwco.com.

 

This press release includes statements that may constitute “forward-looking” statements, usually containing the words “believe”, “estimate”, “project”, “intend”, “expect”, “should” or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company’s products and services in the marketplace, changes in its relationships with the governments of the jurisdictions in which it operates, the outcome of its negotiations with the Cayman government regarding a new retail license agreement, its ability to successfully secure contracts for water projects, including the projects under development in Baja California, Mexico and Bali, Indonesia, its ability to develop and operate such projects profitably, and its ability to manage growth and other risks detailed in the Company’s periodic report filings with the Securities and Exchange Commission (“SEC”).

 

By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.

 

For further information, please contact:

 

Frederick W. McTaggart, President and CEO, at (345) 945-4277 or David W. Sasnett, Executive Vice President and CFO, at (954) 509-8200 or via e-mail at info@cwco.com

 

or

 

RJ Falkner & Company, Inc., Investor Relations Counsel at (800) 377-9893 or

via e-mail at info@rjfalkner.com

  

(Financial Highlights Follow)

 

 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,   December 31, 
   2016   2015 
   (Unaudited)     
ASSETS          
Current assets          
Cash and cash equivalents  $35,550,623   $44,792,734 
Certificate of deposit   5,637,538    5,637,538 
Restricted cash   -    428,203 
Accounts receivable, net   13,799,199    9,529,016 
Inventory   1,890,613    1,918,728 
Prepaid expenses and other current assets   800,063    1,282,660 
Current portion of loans receivable   1,871,925    1,841,851 
Costs and estimated earnings in excess of billings   393,096    - 
Total current assets   59,943,057    65,430,730 
Property, plant and equipment, net   54,817,803    53,743,170 
Construction in progress   2,769,970    1,928,610 
Inventory, non-current   4,594,425    4,558,374 
Loans receivable   3,289,604    3,769,016 
Investment in OC-BVI   4,578,060    4,548,271 
Intangible assets, net   6,452,727    771,811 
Goodwill   11,534,248    3,499,037 
Land held for development   20,558,424    20,558,424 
Other assets   2,784,901    2,767,583 
Total assets  $171,323,219   $161,575,026 
           
LIABILITIES AND EQUITY          
Current liabilities          
Accounts payable and other current liabilities  $3,904,296   $4,829,535 
Dividends payable   1,177,772    1,177,246 
Note payable to related party   490,000    - 
Demand loan payable   6,489,582    6,958,328 
Billings in excess of costs and estimated earnings   153,525    189,985 
Total current liabilities   12,215,175    13,155,094 
Deferred tax liability   2,378,029    - 
Other liabilities   607,827    224,827 
Total liabilities   15,201,031    13,379,921 
Commitments and contingencies          
Equity          
Consolidated Water Co. Ltd. stockholders' equity          
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares;  issued and outstanding 38,004 and 38,804 shares, respectively   22,802    23,282 
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,785,922 and 14,781,201 shares, respectively   8,871,553    8,868,721 
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued   -    - 
Additional paid-in capital   84,745,395    84,597,349 
Retained earnings   53,027,621    52,084,175 
Cumulative translation adjustment   (536,381)   (533,365)
Total Consolidated Water Co. Ltd. stockholders' equity   146,130,990    145,040,162 
Non-controlling interests   9,991,198    3,154,943 
Total equity   156,122,188    148,195,105 
Total liabilities and equity  $171,323,219   $161,575,026 

 

 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

   Three Months Ended March 31, 
   2016   2015 
Retail revenues  $5,970,238   $6,135,638 
Bulk revenues   7,265,293    8,382,316 
Services revenues   799,241    148,158 
Total revenues   14,034,772    14,666,112 
           
Cost of retail revenues   2,629,674    2,766,863 
Cost of bulk revenues   4,610,324    5,466,060 
Cost of services revenues   617,743    284,887 
Total cost of revenues   7,857,741    8,517,810 
Gross profit   6,177,031    6,148,302 
General and administrative expenses   4,460,986    3,892,966 
Income from operations   1,716,045    2,255,336 
           
Other income (expense):          
Interest income   216,835    233,582 
Interest expense   (64,046)   (69,532)
Profit sharing income from OC-BVI   34,425    26,325 
Equity in earnings of OC-BVI   45,364    75,155 
Impairment of investment in OC-BVI   (50,000)   (310,000)
Other   206,979    (175,087)
Other income (expense), net   389,557    (219,557)
Income before income taxes   2,105,602    2,035,779 
Provision for (benefit from) income taxes   (73,269)   - 
Net income   2,178,871    2,035,779 
Income attributable to non-controlling interests   124,230    114,518 
Net income attributable to Consolidated Water Co. Ltd. stockholders  $2,054,641   $1,921,261 
           
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.14   $0.13 

Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders

  $0.14   $0.13 
Dividends declared per common share  $0.075   $0.075 
           
Weighted average number of common shares used in the determination of:          
Basic earnings per share   14,783,380    14,718,757 
Diluted earnings per share   14,864,125    14,764,169 

  

 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

    Three Months Ended March 31,  
    2016     2015  
Net income   $ 2,178,871     $ 2,035,779  
Other comprehensive income (loss)                
Foreign currency translation adjustment     (3,175 )     (35,549 )
Total other comprehensive income (loss)     (3,175 )     (35,549 )
Comprehensive income     2,175,696       2,000,230  
Comprehensive income attributable to non-controlling interests     124,071       112,741  
Comprehensive income attributable to Consolidated Water Co. Ltd. stockholders   $ 2,051,625     $ 1,887,489  

 

 

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