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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

 

August 9, 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 August 9, 2018, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the second quarter ended June 30, 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 August 9, 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: August 10, 2018      

 

2 

 

  

EXHIBIT INDEX

 

Exhibit   Description
     
99.1   Press release issued by the Company on August 9, 2018.

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

CONSOLIDATED WATER CO. LTD.

REPORTS SECOND QUARTER 2018 RESULTS

 

Core Desalination Business Drives Steady Revenues and Earnings

Further Progress Achieved on Rosarito Project

 

Second Quarter 2018 Total Revenues Increased 3.9% to $15.9 million; Gross Profit Was $6.6 Million, Up 2.2% Year-Over-Year

Net Income Attributable to Consolidated Water Stockholders Increased to $2.2 Million, or $0.14 per Fully Diluted Share

 

GEORGE TOWN, Cayman Islands, August 9, 2018 — Consolidated Water Co. Ltd. (NASDAQ: CWCO), a leading developer and operator of seawater desalination plants, reported financial and operating results for its second quarter ended June 30, 2018.

 

Management Commentary

 

President and CEO Rick McTaggart commented: “Our core desalination business continued to perform well in the second quarter, and revenues in our manufacturing segment nearly doubled on an unconsolidated basis. However, similar to the first quarter, a portion of our manufacturing segment’s production, equivalent to $1.1 million in the second quarter and $1.8 million year-to-date, was allocated for our internal use in the refurbishment of our Windsor plant in the Bahamas and our Governor’s Harbor plant in the Cayman Islands, and was not recognized as revenue. These internal projects have obscured the year-over-year improvement in our manufacturing segment. Looking forward, we expect manufacturing sales to continue to improve based on orders in hand for the remainder of this year.”

 

“We made significant progress on our Rosarito project during the second quarter by achieving several important milestones. Specifically, (i) we signed an amended public private partnership agreement, which addressed foreign currency exchange and interest rate adjustment concerns related to the project; (ii) we obtained additional rights of way for the project’s aqueduct and now have the majority of such rights of way required for the project; and (iii) we signed the turn-key engineering, procurement and construction contract with Suez for the desalination plant and aqueduct. These accomplishments have moved us forward in line with our expectations for completion of the conditions of the project,” Mr. McTaggart noted.

 

Second Quarter 2018 Financial Results

 

Total revenues for the second quarter 2018 were $15.9 million, representing a 3.9% increase from $15.3 million in the second quarter of 2017. Gross profit amounted to $6.6 million, compared to $6.5 million in the year ago quarter. Inclusive of $0.7 million in Rosarito-related expenses, net income attributable to Consolidated Water stockholders was $2.2 million, or $0.14 per fully diluted share, compared to $0.6 million, or $0.04 per fully diluted share, reported in last year’s comparable quarter. In the second quarter of 2017, the Company recorded an impairment loss of $1.0 million relating to its Bali operations, however this subsidiary did not have a material adverse impact on the Company’s results of operations for the second quarter of 2018.

 

First Half 2018 Financial Results

 

Total revenues for the first six months of 2018 were $31.2 million, compared to the $31.0 million reported in last year's comparable period. Gross profit was $13.2 million, compared to $13.3 million for the first half of 2017. Net income attributable to Consolidated Water stockholders was $4.3 million ($0.28 per fully diluted share), an increase of 31.5% from the $3.3 million ($0.22 per fully diluted share), earned in the first six months of 2017. Net income and diluted EPS for the first half of 2018 and 2017 included operating expenses of $1.3 million and $1.6 million, respectively, related to development costs for the Rosarito desalination plant.

 

Segment Results

 

   Three Months Ended June 30, 2018 (Unaudited) 
   Retail   Bulk   Services   Manufacturing   Total 
Revenues  $6,268,023   $8,488,850   $122,912   $992,430   $15,872,215 
Cost of revenues   2,722,650    5,793,704    104,069    655,679    9,276,102 
Gross profit  $3,545,373   $2,695,146   $18,843   $336,751   $6,596,113 

 

   Three Months Ended June 30, 2017 (Unaudited) 
   Retail   Bulk   Services   Manufacturing   Total 
Revenues  $6,064,016   $8,043,921   $119,204   $1,056,047   $15,283,188 
Cost of revenues   2,722,890    5,152,212    103,753    847,760    8,826,615 
Gross profit  $3,341,126   $2,891,709   $15,451   $208,287   $6,456,573 

 

 

 

 

Summary and Outlook

 

“Our core desalination business continued its steady performance year-to-date, and the outlook for this business is favorable for volume increases in the Caribbean, particularly in the Cayman Islands, which is experiencing positive tourism industry trends. Additionally, we continue to expect improved year-over-year results from our manufacturing operations for the full 2018 fiscal year.”

 

“We continue to maintain solid forward momentum with respect to our transformational Rosarito project, which is envisioned as the largest desalination plant in the Western Hemisphere. We remain focused on the negotiation and execution of the debt financing agreements necessary to provide the funding for the first phase of the project. As a reminder, the first phase of the project will supply 50 million gallons of water a day to Mexico, with an opportunity to expand the plant capacity in the project’s second phase by an additional 50 million gallons per day.“

 

“Our company continues to be very well capitalized, providing us with the ability to execute on our growth strategy while simultaneously returning capital to our shareholders in the form of dividends,” Mr. McTaggart concluded.

 

Investor Conference Call

 

The Company will host a conference call at 8:30 a.m. Eastern Time (EDT) on Monday, August 13, 2018 to review the Company's operating results for the second 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 8:30 a.m. EDT on Monday, August 13, 2018.

 

A replay of the conference call will be available one hour after the call through Monday, August 20, 2018 at 8:30 a.m. EDT by dialing 877-344-7529 (international participants dial 412-317-0088) and entering the conference ID # 10122958.

 

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 new water projects including the project under development in Baja California, Mexico, its ability to develop and operate such projects profitably, its ability to renew existing bulk water supply contracts, its ability to collect its delinquent accounts receivable in the Bahamas, and its ability to manage growth and other risks detailed in the Company’s periodic report filings with the Securities and Exchange Commission.

 

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

 

 

 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2018   2017 
   (Unaudited)     
ASSETS          
Current assets          
Cash and cash equivalents  $34,092,347   $47,182,966 
Accounts receivable, net   22,161,267    15,047,846 
Inventory   2,703,806    1,744,445 
Prepaid expenses and other current assets   1,880,849    1,077,257 
Current portion of loans receivable   1,446,540    1,400,448 
Costs and estimated earnings in excess of billings   844,693    238,435 
Total current assets   63,129,502    66,691,397 
Property, plant and equipment, net   48,476,540    50,525,064 
Construction in progress   11,397,699    1,823,284 
Inventory, non-current   4,706,727    4,758,973 
Loans receivable   -    734,980 
Investment in OC-BVI   2,501,008    2,783,882 
Goodwill   8,384,248    8,384,248 
Land held for development   20,642,660    20,558,424 
Intangible assets, net   3,062,337    3,765,434 
Other assets   5,000,103    5,455,209 
Total assets  $167,300,824   $165,480,895 
           
LIABILITIES AND EQUITY          
Current liabilities          
Accounts payable and other current liabilities  $5,841,427   $5,662,448 
Dividends payable   1,285,270    1,281,612 
Note payable to related party   294,000    686,000 
Billings in excess of costs and estimated earnings   1,971    1,258 
Total current liabilities   7,422,668    7,631,318 
Deferred tax liability   832,917    1,024,893 
Other liabilities   778,307    803,307 
Total liabilities   9,033,892    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 41,033 and 33,488 shares, respectively   24,620    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   86,717,545    86,405,387 
Retained earnings   54,835,603    53,105,196 
Cumulative translation adjustment   (549,555)   (549,555)
Total Consolidated Water Co. Ltd. stockholders' equity   150,003,798    147,932,442 
Non-controlling interests   8,263,134    8,088,935 
Total equity   158,266,932    156,021,377 
Total liabilities and equity  $167,300,824   $165,480,895 

 

 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2018   2017   2018   2017 
Retail revenues  $6,268,023   $6,064,016   $12,699,371   $12,540,620 
Bulk revenues   8,488,850    8,043,921    16,717,365    15,734,323 
Services revenues   122,912    119,204    246,676    249,456 
Manufacturing revenues   992,430    1,056,047    1,545,198    2,435,895 
Total revenues   15,872,215    15,283,188    31,208,610    30,960,294 
                     
Cost of retail revenues   2,722,650    2,722,890    5,484,204    5,407,176 
Cost of bulk revenues   5,793,704    5,152,212    11,190,295    10,168,001 
Cost of services revenues   104,069    103,753    238,940    205,919 
Cost of manufacturing revenues   655,679    847,760    1,094,540    1,889,057 
Total cost of revenues   9,276,102    8,826,615    18,007,979    17,670,153 
Gross profit   6,596,113    6,456,573    13,200,631    13,290,141 
General and administrative expenses   4,554,754    5,001,669    9,322,198    9,798,861 
Loss on asset dispositions and impairments, net   650    997,006    1,990    987,406 
Income from operations   2,040,709    457,898    3,876,443    2,503,874 
                     
Other income (expense):                    
Interest income   170,102    108,881    331,223    231,072 
Interest expense   (2,876)   (7,939)   (4,630)   (10,162)
Profit sharing income from OC-BVI   56,700    -    85,050    10,125 
Equity in the earnings (losses) of OC-BVI   157,483    (37,824)   238,076    (10,958)
Net unrealized gain (loss) on put/call options   84,000    (13,000)   (122,000)   152,000 
Other   (158,111)   (31,829)   (75,511)   39,991 
Other income, net   307,298    18,289    452,208    412,068 
Income before income taxes   2,348,007    476,187    4,328,651    2,915,942 
Benefit from income taxes   (48,878)   (136,448)   (126,266)   (276,145)
Net income   2,396,885    612,635    4,454,917    3,192,087 
Income (loss) attributable to non-controlling interests   208,692    (11,913)   174,199    (63,689)
Net income attributable to Consolidated Water Co. Ltd. stockholders  $2,188,193   $624,548   $4,280,718   $3,255,776 
                     
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.15   $0.04   $0.29   $0.22 
                     
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.14   $0.04   $0.28   $0.22 
                     
Dividends declared per common share  $0.085   $0.075   $0.17   $0.15 
                     
Weighted average number of common shares used in the determination of:                    
Basic earnings per share   14,959,309    14,889,816    14,959,284    14,880,889 
Diluted earnings per share   15,117,726    15,055,554    15,116,712    15,045,204 

 

 

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