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Section 1: 8-K (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

 

March 19, 2018

(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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On March 19, 2018, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the fiscal year ended December 31, 2017. 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 March 19, 2018.

 

 1 

 

  

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: March 19, 2018      

 

 2 

 

  

EXHIBIT INDEX

 

Exhibit   Description
     
99.1   Press release issued by the Company on March 19, 2018.

 

 3 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

  

Exhibit 99.1

 

CONSOLIDATED WATER CO. LTD.

REPORTS FULL YEAR 2017 RESULTS and

ANNOUNCES RECORD AND MEETING DATES FOR 2018 SHAREHOLDERS’ MEETING

 

Equity Funding in Place for Rosarito Project —

 

·Full Year 2017 Total Revenues Increased 7.7% and Amounted to $62.3 Million; Gross Profit of $25.4 Million, Increased 4.9% from Prior Year
·Net Income Attributable to Consolidated Water Stockholders Was $6.1 Million, or $0.41 per Fully Diluted Share, Inclusive of $3 Million Expense Related to the Rosarito Project
·Operating Cash Flow of $13.6 Million
·Cash and Cash Equivalents of $47.2 million

 

GEORGE TOWN, Cayman Islands, March 19, 2018 — Consolidated Water Co. Ltd. (NASDAQ: CWCO), a leading developer and operator of seawater desalination plants, reported financial and operating results for its fiscal year ended December 31, 2017.

 

Management Commentary

 

President and CEO Rick McTaggart commented: “2017 was a year of continued progress for us. We extended several water supply contracts, benefitted from a considerable improvement in our manufacturing operations and made substantial headway on our Rosarito project.”

 

“Gross profit increased for the year, thanks to improved results from our Bulk and Manufacturing operations, which more than offset slight year-on-year declines in our Retail and Services segments. We also continued to expend funds in 2017 to develop the Rosarito project. These expenses amounted to $3 million and will no longer be required once we close on the project and commence construction.”

 

“We continued to generate healthy cash flows from operations and gained greater visibility on long-term cash flows over the course of the year. These factors, together with our expectation that development funding commitments for the Rosarito project will end in the near future, were contributing factors to our Board of Directors’ decision to increase our quarterly dividend to $0.085 per share from $0.075 per share.”

 

 

 

 

2017 Financial Results

 

Total revenues for 2017 were $62.3 million, an increase of $4.4 million from the $57.9 million reported for the full year 2016. Gross profit amounted to $25.4 million, up 4.9% from $24.3 million last year. Inclusive of $3 million Rosarito-related expense, net income attributable to Consolidated Water stockholders was $6.1 million, or $0.41 per fully diluted share, an increase of 55.1% from the $4.0 million, or $0.27 per fully diluted share, earned in 2016.

 

Net cash provided by operating activities for 2017 was $13.6 million, a 74% increase when compared to last year’s $7.8 million. Capital expenditures were $4.6 million. Cash and cash equivalents increased to $47.2 million as of December 31, 2017.

 

Segment Results

 

Year Ended December 31, 2017
   Retail   Bulk   Services   Manufacturing 
Revenues  $23,225,066   $31,621,756   $469,347   $6,990,496 
Cost of revenues  $10,372,199   $21,066,207   $469,797   $4,963,962 
Gross profit  $12,852,867   $10,555,549   ($450)  $2,026,534 

 

Year Ended December 31, 2016
    Retail    Bulk    Services    Manufacturing 
Revenues  $23,505,619   $29,647,034   $835,770   $3,887,284 
Cost of revenues  $10,294,298   $19,488,550   $751,139   $3,090,834 
Gross profit  $13,211,321   $10,158,484   $84,631   $796,450 

 

Summary and Outlook

 

“We ended 2017 in a strong financial position, reflecting the steady operating performance of our core water operations and year-on-year improvement in our manufacturing segment. The equity partnership agreement that we completed in early March of this year with SUEZ, a global leader in water treatment, and Greenfield, an affiliate of a leading U.S. asset management firm, represents a critical milestone in the development of our Rosarito project. This enterprise will encompass one of the largest desalination plants in the Western Hemisphere, providing needed water to a water stressed region of North America. With capacity of up to 100 million gallons per day upon completion of Phase 2, Rosarito is a transformative project for our company as its capacity will be greater than that of our existing portfolio,” Mr. McTaggart concluded.

 

 

 

 

Annual General Meeting of Shareholders

 

The Company announced that it has set Tuesday, May 22, 2018 as the date of its annual meeting of shareholders to be held at 10:00 am, local time, at The Westin Grand Cayman Seven Mile Beach Resort & Spa in Grand Cayman. Holders of record of the Company’s stock as of March 19, 2018 will be entitled to vote at the meeting.

 

Investor Conference Call

 

The Company will host a conference call at 11:00 a.m. Eastern Time (EDT) on Monday, March 19, 2018 to review the Company's operating results for the fourth quarter and full year of 2017, along with other relevant topics of interest. Shareholders and other interested parties may participate in the conference call by dialing 844-875-6913 (international participants dial 412-317-6709) and requesting participation in the "Consolidated Water Company Call" a few minutes before 11:00 a.m. EDT on Monday, March 19, 2018.

 

A replay of the conference call will be available one hour after the call through Monday, March 26, 2018 at 9:00 a.m. EDT by dialing 877-344-7529 (international participants dial 412-317-0088) and entering the conference ID # 10117813.

 

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. The Company operates water production and/or distribution facilities in the Cayman Islands, Belize, the British Virgin Islands, The Commonwealth of The Bahamas, and Bali, Indonesia. The Company also manufactures and services a wide range of products and provides design, engineering, management, operating and other services applicable to commercial and municipal water production, supply and treatment, and industrial water and wastewater treatment in 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 project under development in Baja California, Mexico, 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 our investor relations firm, AdvisIRy Partners:

 

Lynn Morgen: (212) 223 4147 lynn.morgen@advisiry.com

Eric Prouty: (212) 750 5800 eric.prouty@advisiry.com

Viktoriia Nakhla: (646) 625-4800 vicky.nakhla@advisiry.com

 

 

(Financial Highlights Follow)

 

 

 

  

CONSOLIDATED WATER CO. LTD.

 

CONSOLIDATED BALANCE SHEETS

 

   December 31, 
   2017   2016 
ASSETS          
Current assets          
Cash and cash equivalents  $47,182,966   $39,254,116 
Accounts receivable, net   15,047,846    16,500,798 
Inventory   1,744,445    2,305,879 
Prepaid expenses and other current assets   1,077,257    1,096,200 
Current portion of loans receivable   1,400,448    1,633,588 
Costs and estimated earnings in excess of billings   238,435    85,211 
Total current assets   66,691,397    60,875,792 
Property, plant and equipment, net   50,525,064    53,084,105 
Construction in progress   1,823,284    885,494 
Inventory, non-current   4,758,973    4,606,088 
Loans receivable   734,980    2,135,428 
Investment in OC-BVI   2,783,882    4,086,630 
Goodwill   8,384,248    9,784,248 
Land held for development   20,558,424    20,558,424 
Intangible assets, net   3,765,434    5,195,476 
Other assets   5,455,209    2,392,843 
Total assets  $165,480,895   $163,604,528 
           
LIABILITIES AND EQUITY          
Current liabilities          
Accounts payable and other current liabilities  $5,662,448   $4,898,908 
Dividends payable   1,281,612    1,187,214 
Note payable to related party   686,000    490,000 
Billings in excess of costs and estimated earnings   1,258    102,966 
Total current liabilities   7,631,318    6,679,088 
Deferred tax liability   1,024,893    1,915,241 
Other liabilities   803,307    904,827 
Total liabilities   9,459,518    9,499,156 
Commitments and contingencies          
Equity          
Consolidated Water Co. Ltd. stockholders' equity          
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 33,488 and 35,225 shares, respectively   20,093    21,135 
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,918,869 and 14,871,664 shares, respectively   8,951,321    8,922,998 
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued   -    - 
Additional paid-in capital   86,405,387    85,621,033 
Retained earnings   53,105,196    51,589,337 
Cumulative translation adjustment   (549,555)   (549,555)
Total Consolidated Water Co. Ltd. stockholders' equity   147,932,442    145,604,948 
Non-controlling interests   8,088,935    8,500,424 
Total equity   156,021,377    154,105,372 
Total liabilities and equity  $165,480,895   $163,604,528 

 

 

 

 

CONSOLIDATED WATER CO. LTD.

 

CONSOLIDATED STATEMENTS OF INCOME

 

   Year Ended December 31, 
   2017   2016   2015 
Retail revenues  $23,225,066   $23,505,619   $23,254,757 
Bulk revenues   31,621,756    29,647,034    31,854,255 
Services revenues   469,347    835,770    2,007,190 
Manufacturing revenues   6,990,496    3,887,284    - 
Total revenues   62,306,665    57,875,707    57,116,202 
                
Cost of retail revenues   10,372,199    10,294,298    10,543,972 
Cost of bulk revenues   21,066,207    19,488,550    21,634,789 
Cost of services revenues   469,797    751,139    1,629,221 
Cost of manufacturing revenues   4,963,962    3,090,834    - 
Total cost of revenues   36,872,165    33,624,821    33,807,982 
Gross profit   25,434,500    24,250,886    23,308,220 
General and administrative expenses   19,072,979    18,677,584    14,840,156 
Long-lived asset impairment and disposition losses, net   3,040,158    3,435,619    32,566 
Income from operations   3,321,363    2,137,683    8,435,498 
                
Other income (expense):               
Interest income   380,563    609,750    1,013,252 
Interest expense   (6,806)   (104,048)   (269,090)
Profit sharing income from OC-BVI   46,575    125,550    105,300 
Equity in the earnings of OC-BVI   127,802    337,809    294,368 
Impairment loss on investment in OC-BVI   -    (925,000)   (1,060,000)
Net unrealized gain (loss) on put/call options   960,000    (297,000)   - 
Other   14,099    356,512    (593,834)
Other income (expense), net   1,522,233    103,573    (510,004)
Income before income taxes   4,843,596    2,241,256    7,925,494 
Provision for (benefit from) income taxes   (888,977)   (536,057)   - 
Net income   5,732,573    2,777,313    7,925,494 
Income (loss) attributable to non-controlling interests   (411,489)   (1,183,188)   406,793 
Net income attributable to Consolidated Water Co. Ltd. stockholders  $6,144,062   $3,960,501   $7,518,701 
                
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.41   $0.27   $0.51 
                
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.41   $0.27   $0.51 
                
Dividends declared per common share  $0.31   $0.30   $0.30 
                
Weighted average number of common shares used in the determination of:               
Basic earnings per share   14,896,944    14,809,909    14,741,748 
Diluted earnings per share   15,006,681    14,944,028    14,827,755 

 

 

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