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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

 

November 8, 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 November 8, 2018, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the third quarter ended September 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 November 8, 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: November 8, 2018      

 

2 

 

  

EXHIBIT INDEX

 

Exhibit   Description
     
99.1   Press release issued by the Company on November 8, 2018.

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

  

Exhibit 99.1

 

CONSOLIDATED WATER CO. LTD.

REPORTS THIRD QUARTER 2018 RESULTS

 

Strong Gross Profit Performance Driven by Growth in All Business Segments

 

·Third Quarter 2018 Total Revenues Increased 13.6% to $18.8 million; Gross Profit Was $7.5 Million, Up 19.3% Year-Over-Year
·Net Income Attributable to Consolidated Water Stockholders Increased to $4.6 Million, or $0.30 per Fully Diluted Share from $1.2 million, or $0.08 per Fully Diluted Share

  

GEORGE TOWN, Cayman Islands, November 8, 2018 — Consolidated Water Co. Ltd. (NASDAQ: CWCO), a leading developer and operator of seawater desalination plants, reported financial and operating results for its third quarter ended September 30, 2018.

 

Management Commentary

 

President and CEO Rick McTaggart commented: “We are pleased to report double-digit increases in gross profit across each of our business segments in the third quarter. Our retail desalination operations benefitted from higher volumes and fuel pass-through charges, and our manufacturing operations achieved operating improvements thanks to increased order flows and higher utilization. Income from operations for the third quarter more than doubled year-over-year to $2.6 million, and net earnings for the period were up over 3.5 times from 2017 levels, thanks to a one-time gain of approximately $1.9 million, reflecting the favorable resolution of outstanding litigation in the British Virgin Islands.”

 

“As we previously disclosed, we are in discussions to possibly sell our operations in Belize to our customer there. As part of this dialogue, we were able to repatriate $2.75 million from our Belize operations in the third quarter, as well as an additional $1.0 million after the quarter end, following many years of difficulties in transferring funds due to the economic conditions in the region.”

 

“Subsequent to the quarter end, we re-commissioned our Windsor plant in the Bahamas, which is our second largest facility in our plant portfolio. This facility, which provides 2.6 million US gallons per day to the government-owned Water and Sewerage Corporation, was refurbished with equipment manufactured by us and designed with embedded operating efficiencies,” Mr. McTaggart noted.

 

Financial Results for the Three Months Ended September 30, 2018

 

Total revenues for the third quarter 2018 were $18.8 million, representing a 13.6% increase from $16.6 million in the third quarter of 2017. Gross profit amounted to $7.5 million, reflecting a 19.3% increase from $6.3 million in the year ago quarter. Inclusive of $846,000 in Rosarito-related expenses, net income attributable to Consolidated Water stockholders was $4.6 million, or $0.30 per fully diluted share, ahead of $1.2 million, or $0.08 per fully diluted share, reported in last year’s comparable quarter.

 

Financial Results for the Nine Months Ended September 30, 2018

 

Total revenues for the first nine months of 2018 were $50.0 million, up 5.3% compared to the $47.5 million reported in last year's comparable period. Gross profit was $20.7 million, up 5.8% from $19.6 million for the first nine months of 2017. Net income attributable to Consolidated Water stockholders year-to-date was $8.8 million ($0.58 per fully diluted share), an increase of 99.9% from the $4.4 million ($0.29 per fully diluted share) in the comparable period of 2017. Net income and diluted EPS for the first nine months of 2018 and 2017 included operating expenses of $2.2 million and $2.5 million, respectively, related to development costs for the Rosarito desalination plant.

 

Segment Results                    
  Three Months Ended September 30, 2018 (Unaudited) 
  Retail   Bulk   Services   Manufacturing   Total 
Revenues  $6,185,558   $8,577,456   $807,424   $3,253,750   $18,824,188 
Cost of revenues   2,750,599    5,658,373    682,713    2,205,830    11,297,515 
Gross profit  $3,434,959   $2,919,083   $124,711   $1,047,920   $7,526,673 

 

 

   Three Months Ended September 30, 2017 (Unaudited) 
  Retail   Bulk   Services   Manufacturing   Total 
Revenues  $5,570,654   $7,881,464   $111,302   $3,008,783   $16,572,203 
Cost of revenues   2,488,441    5,582,401    114,667    2,078,888    10,264,397 
Gross profit (loss)  $3,082,213   $2,299,063   $(3,365)  $929,895   $6,307,806 

 

 

 

 

Summary and Outlook

 

“Our year-to-date consolidated financial results demonstrate the positive performance of our core desalination operations, and in the third quarter we saw a recovery in manufacturing, reflecting our ability to take on third party orders now that our Windsor plant is completed.”

 

“We continue to execute on the next steps with respect to the Rosarito project, which represents the most important initiative we have undertaken. Faced with water shortages, Mexico is turning to alternative solutions, such as desalination, and the Rosarito plant will secure drinking water supplies in the coastal region of Baja California for the next 40 years.”

 

“Our capital allocation priorities remain the same: investing in the business and returning the capital to our shareholders in the form of dividends. Our capital expenditures will decrease now that the Windsor plant is completed but will remain above last year’s levels as we also continue to work on the expansion of the Abel Castillo Water Works plant in Grand Cayman. The improvements to this plant will continue through the first quarter of 2019,” Mr. McTaggart concluded.

 

Investor Conference Call

 

The Company will host a conference call at 8:30 a.m. Eastern Time (EST) on Friday, November 9, 2018 to review the Company's operating results for the third 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. EST on Friday, November 9, 2018.

 

A replay of the conference call will be available one hour after the call through Friday, November 16, 2018 at 9:00 a.m. EST by dialing 877-344-7529 (international participants dial 412-317-0088) and entering the conference ID # 10126036.

 

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”, “will” 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 (“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

 

 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2018   2017 
    (Unaudited)      
ASSETS          
Current assets          
Cash and cash equivalents  $34,367,483   $47,182,966 
Accounts receivable, net   22,996,276    15,047,846 
Inventory   2,538,052    1,744,445 
Prepaid expenses and other current assets   1,598,061    1,077,257 
Current portion of loans receivable   1,093,641    1,400,448 
Costs and estimated earnings in excess of billings   1,396,166    238,435 
Total current assets   63,989,679    66,691,397 
Property, plant and equipment, net   47,342,177    50,525,064 
Construction in progress   16,742,806    1,823,284 
Inventory, non-current   4,825,253    4,758,973 
Loans receivable   -    734,980 
Investment in OC-BVI   2,464,537    2,783,882 
Goodwill   8,384,248    8,384,248 
Land and rights of way held for development   23,673,855    21,505,675 
Intangible assets, net   2,710,790    3,765,434 
Other assets   2,369,214    4,507,958 
Total assets  $172,502,559   $165,480,895 
           
LIABILITIES AND EQUITY          
Current liabilities          
Accounts payable and other current liabilities  $6,539,508   $5,662,448 
Dividends payable   1,284,964    1,281,612 
Note payable to related party   1,078,000    686,000 
Billings in excess of costs and estimated earnings   21,578    1,258 
Total current liabilities   8,924,050    7,631,318 
Deferred tax liability   757,447    1,024,893 
Other liabilities   778,307    803,307 
Total liabilities   10,459,804    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 36,498 and 33,488 shares, respectively   21,899    20,093 
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,964,281 and 14,918,869 shares, respectively   8,978,569    8,951,321 
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued   -    - 
Additional paid-in capital   86,904,523    86,405,387 
Retained earnings   58,113,606    53,105,196 
Cumulative translation adjustment   (549,555)   (549,555)
Total Consolidated Water Co. Ltd. stockholders' equity   153,469,042    147,932,442 
Non-controlling interests   8,573,713    8,088,935 
Total equity   162,042,755    156,021,377 
Total liabilities and equity  $172,502,559   $165,480,895 

 

 

 

  

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2018   2017   2018   2017 
Retail revenues  $6,185,558   $5,570,654   $18,884,929   $18,111,274 
Bulk revenues   8,577,456    7,881,464    25,294,821    23,615,787 
Services revenues   807,424    111,302    1,054,100    360,758 
Manufacturing revenues   3,253,750    3,008,783    4,798,948    5,444,678 
Total revenues   18,824,188    16,572,203    50,032,798    47,532,497 
                     
Cost of retail revenues   2,750,599    2,488,441    8,234,803    7,895,617 
Cost of bulk revenues   5,658,373    5,582,401    16,848,668    15,750,402 
Cost of services revenues   682,713    114,667    921,653    320,586 
Cost of manufacturing revenues   2,205,830    2,078,888    3,300,370    3,967,945 
Total cost of revenues   11,297,515    10,264,397    29,305,494    27,934,550 
Gross profit   7,526,673    6,307,806    20,727,304    19,597,947 
General and administrative expenses   4,941,564    4,896,323    14,263,762    14,695,184 
Loss on asset dispositions and impairments, net   12,415    578,480    14,405    1,578,480 
Income from operations   2,572,694    833,003    6,449,137    3,324,283 
                     
Other income (expense):                    
Interest income   172,805    70,741    504,028    301,813 
Interest expense   (2,492)   (1,016)   (7,122)   (11,178)
Profit-sharing income from OC-BVI   536,625    36,450    621,675    46,575 
Equity in the earnings of OC-BVI   1,472,154    138,913    1,710,230    127,955 
Net unrealized gain (loss) on put/call options   75,000    171,000    (47,000)   323,000 
Other   48,841    31,206    (26,670)   83,791 
Other income, net   2,302,933    447,294    2,755,141    871,956 
Income before income taxes   4,875,627    1,280,297    9,204,278    4,196,239 
Provision for (benefit from) income taxes   12,659    (136,447)   (113,607)   (412,592)
Net income   4,862,968    1,416,744    9,317,885    4,608,831 
Income attributable to non-controlling interests   310,579    255,605    484,778    191,916 
Net income attributable to Consolidated Water Co. Ltd. stockholders  $4,552,389   $1,161,139   $8,833,107   $4,416,915 
                     
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.30   $0.08   $0.59   $0.30 
                     
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders  $0.30   $0.08   $0.58   $0.29 
                     
Dividends declared per common share  $0.085   $0.075   $0.255   $0.225 
                     
Weighted average number of common shares used in the determination of:                    
Basic earnings per share   14,963,195    14,898,246    14,960,602    14,886,738 
Diluted earnings per share   15,124,720    15,072,142    15,119,415    15,054,343 

 

 

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