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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, 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 May 10, 2018, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the first quarter ended March 31, 2018. 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, 2018.

 

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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, 2018      

 

2 

 

  

EXHIBIT INDEX

 

Exhibit   Description
     
99.1   Press release issued by the Company on May 10, 2018.

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

CONSOLIDATED WATER CO. LTD.

REPORTS FIRST QUARTER 2018 RESULTS

 

Steady Results from Desalination Operations

Significant Pick-up in Manufacturing Orders

Continued Progress on Rosarito Project: Secured Equity Partners

 

·First Quarter 2018 Total Revenues and Gross Profit of $15.3 Million and $6.6 Million, respectively
·Net Income Attributable to Consolidated Water Stockholders of $2.1 Million, or $0.14 per Fully Diluted Share, Inclusive of $0.7 million in Expenses Related to the Rosarito Project
·Cash and Cash Equivalents of $43.7 Million

 

GEORGE TOWN, Cayman Islands, May 10, 2018 — Consolidated Water Co. Ltd. (NASDAQ: CWCO), a leading developer and operator of seawater desalination plants, reported financial and operating results for its first quarter ended March 31, 2018.

 

Management Commentary

 

President and CEO Rick McTaggart commented: “Our core desalination business in the first quarter of 2018 remained consistent and in line with our expectations. A highlight was the strong performance of our Bulk segment, which experienced a 7% sales increase year-over-year due to higher volumes and energy pass-through charges in the Bahamas. Revenues in our Retail segment remained stable year-on-year as slightly higher sales volumes were offset by a shift in the sales mix to larger customers in Grand Cayman with a lower effective water rate.

 

“The timing of order bookings and the allocation of a portion of our manufacturing capacity to internal component production resulted in lower first quarter comparisons in our manufacturing segment. Our manufacturing operations produced approximately $700,000 worth of components for the refurbishment of our Bahamas Windsor plant. This project and the expansion of our Governor’s Harbour plant in Grand Cayman resulted in higher capital expenditures in the first quarter but will lead to improved efficiencies for these plants,” Mr. McTaggart noted.

 

 

 

 

First Quarter 2018 Financial Results

 

Total revenues for the first quarter of 2018 were $15.3 million, compared to $15.7 million in the first quarter of 2017. Gross profit amounted to $6.6 million, compared to $6.8 million in the year ago quarter. Inclusive of $0.7 million Rosarito-related expenses, net income attributable to Consolidated Water stockholders was $2.1 million, or $0.14 per fully diluted share, compared to $2.6 million, or $0.18 per fully diluted share, reported in last year’s first quarter.

 

Net cash provided by operating activities was $0.7 million, a significant improvement when compared to last year’s $0.7 million of negative operating cash flow. Capital expenditures amounted to $2.9 million. Cash and cash equivalents were $43.7 million as of March 31, 2018.

 

Segment Results

 

   Three Months Ended March 31, 2018 (Unaudited) 
   Retail   Bulk   Services   Manufacturing   Total 
Revenues  $6,431,348   $8,228,515   $123,764   $552,768   $15,336,395 
Cost of revenues   2,761,554    5,396,591    134,871    438,861    8,731,877 
Gross profit (loss)  $3,669,794   $2,831,924   $(11,107)  $113,907   $6,604,518 

 

   Three Months Ended March 31, 2017 (Unaudited) 
   Retail   Bulk   Services   Manufacturing   Total 
Revenues  $6,476,604   $7,690,402   $130,252   $1,379,848   $15,677,106 
Cost of revenues   2,684,286    5,015,789    102,166    1,041,297    8,843,538 
Gross profit  $3,792,318   $2,674,613   $28,086   $338,551   $6,833,568 

 

Summary and Outlook

 

“Our first quarter laid the groundwork for successes to come in the remainder of 2018.

 

·The financial results from our core retail and bulk operations will continue to provide a solid foundation for other initiatives, and our capital expenditures in 2018 for these businesses will ensure their ongoing efficiency and reliability.
·Our manufacturing segment is anticipated to experience year-over-year revenue growth for the remainder of the year due to a significant pickup in orders during the first quarter from both existing and new customers.
·We will continue our progress with respect to the Rosarito project. In the first quarter, we executed a subscription agreement for the equity funding of Rosarito with SUEZ, a global leader in water treatment, and Greenfield, an affiliate of a leading U.S. asset management firm. The aggregate funding to be provided in the form of equity and subordinated shareholder loans is presently estimated at approximately 20% of the total cost of Phase 1 of the Project. NSC expects to generate a portion of its funding for AdR through the sale to AdR of the land it has purchased for the Project. Going forward, we expect to complete the negotiation and execution of the debt financing agreements and be able to obtain all outstanding permits from the federal, state and municipal authorities.

 

“Given our strong balance sheet and cash position supporting our growth opportunities and dividend payments, our capital allocation priorities remain the same,” Mr. McTaggart concluded.

 

 

 

 

Investor Conference Call

 

The Company will host a conference call at 11:00 a.m. Eastern Time (EDT) on Friday, May 11, 2018 to review the Company's operating results for the first quarter of 2018, 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 Friday, May 11, 2018.

 

A replay of the conference call will be available one hour after the call through Friday, May 18, 2018 at 9:00 a.m. EDT by dialing 877-344-7529 (international participants dial 412-317-0088) and entering the conference ID #10120185.

 

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.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,   December 31, 
   2018   2017 
   (Unaudited)     
ASSETS          
Current assets          
Cash and cash equivalents  $43,680,866   $47,182,966 
Accounts receivable, net   17,840,028    15,047,846 
Inventory   1,745,594    1,744,445 
Prepaid expenses and other current assets   950,232    1,077,257 
Current portion of loans receivable   1,423,308    1,400,448 
Costs and estimated earnings in excess of billings   199,018    238,435 
Total current assets   65,839,046    66,691,397 
Property, plant and equipment, net   49,519,137    50,525,064 
Construction in progress   5,230,707    1,823,284 
Inventory, non-current   4,800,005    4,758,973 
Loans receivable   370,465    734,980 
Investment in OC-BVI   2,892,825    2,783,882 
Goodwill   8,384,248    8,384,248 
Land held for development   20,558,424    20,558,424 
Intangible assets, net   3,413,886    3,765,434 
Other assets   4,905,152    5,455,209 
Total assets  $165,913,895   $165,480,895 
           
LIABILITIES AND EQUITY          
Current liabilities          
Accounts payable and other current liabilities  $5,637,338   $5,662,448 
Dividends payable   1,285,031    1,281,612 
Note payable to related party   294,000    686,000 
Billings in excess of costs and estimated earnings   -    1,258 
Total current liabilities   7,216,369    7,631,318 
Deferred tax liability   928,876    1,024,893 
Other liabilities   803,307    803,307 
Total liabilities   8,948,552    9,459,518 
Commitments and contingencies          
Equity          
Consolidated Water Co. Ltd. stockholders' equity          
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 33,034 and 33,488 shares, respectively   19,820    20,093 
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,959,309 and 14,918,869 shares, respectively   8,975,585    8,951,321 
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued   -    - 
Additional paid-in capital   86,543,291    86,405,387 
Retained earnings   53,921,760    53,105,196 
Cumulative translation adjustment   (549,555)   (549,555)
Total Consolidated Water Co. Ltd. stockholders' equity   148,910,901    147,932,442 
Non-controlling interests   8,054,442    8,088,935 
Total equity   156,965,343    156,021,377 
Total liabilities and equity  $165,913,895   $165,480,895 

 

 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

   Three Months Ended March 31, 
   2018   2017 
Retail revenues  $6,431,348   $6,476,604 
Bulk revenues   8,228,515    7,690,402 
Services revenues   123,764    130,252 
Manufacturing revenues   552,768    1,379,848 
Total revenues   15,336,395    15,677,106 
           
Cost of retail revenues   2,761,554    2,684,286 
Cost of bulk revenues   5,396,591    5,015,789 
Cost of services revenues   134,871    102,166 
Cost of manufacturing revenues   438,861    1,041,297 
Total cost of revenues   8,731,877    8,843,538 
Gross profit   6,604,518    6,833,568 
General and administrative expenses   4,767,444    4,797,192 
Loss (gain) on asset dispositions and impairments, net   1,340    (9,627)
Income from operations   1,835,734    2,046,003 
           
Other income (expense):          
Interest income   161,121    122,191 
Interest expense   (1,754)   (2,223)
Profit sharing income from OC-BVI   28,350    10,125 
Equity in the earnings of OC-BVI   80,593    26,866 
Net unrealized gain (loss) on put/call options   (206,000)   165,000 
Other   82,600    71,793 
Other income, net   144,910    393,752 
Income before income taxes   1,980,644    2,439,755 
Provision for (benefit from) income taxes   (77,388)   (139,697)
Net income   2,058,032    2,579,452 
Income (loss) attributable to non-controlling interests   (34,493)   (51,776)
Net income attributable to Consolidated Water Co. Ltd. stockholders  $2,092,525   $2,631,228 
           
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.14   $0.18 
           
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.14   $0.18 
           
Dividends declared per common share  $0.085   $0.075 
           
Weighted average number of common shares used in the determination of:          
Basic earnings per share   14,959,259    14,871,862 
Diluted earnings per share   15,114,477    15,035,219 

 

 

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