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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

 

March 16, 2020

(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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A common stock, $0.60 par value   CWCO   The Nasdaq Global Select Market

 

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 16, 2020, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the year ended December 31, 2019. 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 16, 2020.

 

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SIGNATURE

 

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 16, 2020      

 

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

 

 

 

Consolidated Water Reports 2019 Record Results; Total Revenue up 5% to $68.8 million, Net Income up 8% to $12.2 million

Company Sets Dates for Annual Shareholders’ Meeting and Holders of Record

 

GEORGE TOWN, Cayman Islands, March 16, 2020 -- Consolidated Water Co. Ltd. (Nasdaq Global Select Market: CWCO), a leading developer and operator of advanced water supply and treatment plants, reported results for the year ended December 31, 2019. All annual comparisons are to the previous year unless otherwise noted.

 

2019 Financial Highlights

 

·Revenue increased 5% to a record $68.8 million, driving gross profit up 6% to $28.3 million.

 

·Net income attributable to stockholders increased 8% to a record $12.2 million or $0.80 per diluted share.

 

·Cash and cash equivalents totaled $42.9 million at December 31, 2019.

 

·Paid $5.1 million in dividends in 2019.

 

2019 Operational Highlights

 

·Expanded the company’s product offerings and presence in the U.S. by acquiring a controlling interest in PERC Water Corporation, an innovative water infrastructure company, in October.

 

·Completed the sale of CW-Belize to the company’s government-controlled Belize customer for $7.0 million in February.

 

·Generated a gain on asset dispositions of approximately $445,000 primarily from the sale of CW-Bali in June.

 

·Continued to advance the development project in Rosarito, Baja California, Mexico involving the construction and operation of a major seawater desalination plant and distribution pipeline. Designed to produce 100 million gallons per day of potable water, the plant is expected to be the largest of its kind in the Western Hemisphere and a major, much-needed new source of drinking water for the coastal region of Baja California for at least 37 years.

 

Management Commentary

 

“2019 was a banner year for Consolidated Water, with strong progress made in many areas of our business driving record revenue and net income,” commented Chief Executive Officer Rick McTaggart. “Our retail segment increased its revenue and gross profit, while our bulk segment won two competitive tender processes for Grand Cayman that replaced expiring contracts. Our manufacturing segment increased sales by $6.3 million, and we dramatically expanded the offerings of our services segment through the acquisition of PERC Water.

 

“We also increased our cash balances by $11.6 million and our working capital by $10.8 million. From a financial condition perspective, the company has never been stronger, and we have more than ample liquidity and capital resources to pursue our strategic initiatives.

 

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“While naturally we are concerned about the impact of the COVID-19 virus on the world economy and our business, we remain optimistic about our long-term prospects. Travel interruptions or a temporary decline in tourism would likely adversely affect our desalination business in the Caribbean. Because the vast majority of our retail customers are residents and businesses on Grand Cayman who depend on tourism, we may be asked to do our part to help support customers who become economically challenged. Our bulk water supply contracts with government entities provide for guaranteed minimum monthly payments. To be sure, this remains a fluid situation and we are monitoring it closely.

 

“We are taking the necessary precautions to help protect our customers and employees, but at this point we do not anticipate a significant impact of COVID-19 on our North American-based business. Our current manufacturing segment order backlog already exceeds the level we had at this time last year, and PERC is pursuing several promising project and management contract opportunities. We are proceeding with the development of our project in Mexico, which we anticipate will be transformative for our company once we complete the financing stage and commence construction.”

 

2019 Financial Summary

 

Revenue increased 5% to a record $68.8 million from $65.7 million in 2018, which was driven primarily by increases of $6.3 million in manufacturing and $835,000 in retail. The increase was partially offset by decreases of $4.0 million in bulk water sales and $52,000 in services.

 

The increase in manufacturing revenue was due to an increase in the number of orders that resulted in expanded project production activity. Retail segment revenue was higher due to a slight increase in the volume of water sold by Cayman Water and higher energy prices.

 

The decrease in bulk water revenue was due to the lower rates that came into effect in February for water supplied by the Red Gate and North Sound plants, as well as lower rates that came into effect in July for the North Side Water Works plant under the new contracts for those plants.

 

The slight decrease in services reflects $710,000 in 2018 from an OC-BVI plant refurbishment project and $518,000 for pipeline installations made on Grand Cayman in 2018. The services segment did not complete any such projects in 2019. However, the services segment benefited from $1.4 million in revenue contributed by PERC Water.

 

Gross profit increased 6% to $28.3 million in 2019 from $26.7 million in 2018, with gross margin as a percentage of revenue improving from 40.7% to 41.1%.

 

Net income attributable to stockholders increased 8% to a record $12.2 million or $0.80 per diluted share, compared to $11.3 million or $0.75 per diluted share in 2018.

 

Cash and cash equivalents totaled $42.9 million as of December 31, 2019, as compared to $31.3 million as of December 31, 2018. The increase resulted primarily from net income generated from continuing operations and the sale of CW-Belize.

 

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2019 Segment Results

 

   Year Ended December 31, 2019 
   Retail   Bulk   Services   Manufacturing   Total 
Revenue  $26,456,022   $26,986,108   $1,759,446   $13,592,075   $68,793,651 
Cost of revenue   11,611,165    18,606,805    1,215,193    9,086,140    40,519,303 
Gross profit   14,844,857    8,379,303    544,253    4,505,935    28,274,348 
General and administrative expenses   13,422,821    1,238,296    2,740,219    1,947,622    19,348,958 
Gain on asset dispositions and impairments, net   398,041    47,000    -    -    445,041 
Income (loss) from operations  $1,820,077   $7,188,007   $(2,195,966)  $2,558,313    9,370,431 
Other income, net                       801,091 
Income before income taxes                       10,171,522 
Provision for income taxes                       66,621 
Net income from continuing operations                       10,104,901 
Income from continuing operations attributable to non-controlling interests                       1,549,978 
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                       8,554,923 
Net income from discontinued operations                       3,621,170 
Net income attributable to Consolidated Water Co. Ltd. stockholders                      $12,176,093 

 

   Year Ended December 31, 2018 
   Retail   Bulk   Services   Manufacturing   Total 
Revenue  $25,621,048   $31,031,287   $1,811,372   $7,256,150   $65,719,857 
Cost of revenue   11,011,456    21,551,383    1,503,034    4,911,697    38,977,570 
Gross profit   14,609,592    9,479,904    308,338    2,344,453    26,742,287 
General and administrative expenses   12,029,646    1,301,042    2,889,703    2,489,028    18,709,419 
(Loss) on asset dispositions and impairments, net   (12,263)   -    (41,180)   (3,331)   (56,774)
Income (loss) from operations  $2,567,683   $8,178,862   $(2,622,545)  $(147,906)   7,976,094 
Other income, net                       2,740,064 
Income before income taxes                       10,716,158 
Benefit from income taxes                       (157,291)
Net income from continuing operations                       10,873,449 
Income from continuing operations attributable to non-controlling interests                       695,787 
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                       10,177,662 
Net income from discontinued operations                       1,115,825 
Net income attributable to Consolidated Water Co. Ltd. stockholders                      $11,293,487 

 

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Revenues by Geographic Region

 

   Year ended December 31, 
   2019   2018 
Cayman Islands  $30,327,139   $34,623,925 
Bahamas   23,114,860    23,241,361 
Indonesia   131    153,233 
United States   14,968,868    7,256,150 
Revenues earned from management services agreement with OC-BVI   382,653    445,188 
   $68,793,651   $65,719,857 

 

Annual General Meeting of Shareholders

The company has set May 19, 2020 as the date of its annual meeting of shareholders to be held at 3:00 p.m. 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 17, 2020 will be entitled to vote at the meeting.

 

Conference Call

 

Consolidated Water management will host a conference call to discuss these results, followed by a question and answer period.

 

Date: Monday, March 16, 2020

Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)

Toll-free dial-in number: 1-844-875-6913

International dial-in number: 1-412-317-6709

Conference ID: 10140082

 

Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact CMA at 1-949-432-7566.

 

A replay of the call will be available after 1:00 p.m. Eastern time on the same day through March 23, 2020, as well as available for replay via the Investors section of the Consolidated Water website at www.cwco.com.

 

Toll-free replay number: 1-877-344-7529

International replay number: 1-412-317-0088

Replay ID: 10140082

 

About Consolidated Water Co. Ltd.

Consolidated Water Co. Ltd. develops and operates advanced water supply and treatment plants and water distribution systems. The company operates water production facilities in the Cayman Islands, The Bahamas and the British Virgin Islands and operates water treatment facilities in the United States. 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. For more information, visit www.cwco.com.

 

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Cautionary Note Regarding Forward-Looking Statements

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 (i) continued acceptance of the company's products and services in the marketplace; (ii) changes in its relationships with the governments of the jurisdictions in which it operates; (iii) the outcome of its negotiations with the Cayman government regarding a new retail license agreement; (iv) its ability to complete the project under development in Baja California, Mexico; (v) the future financial performance of its subsidiary that manufactures water treatment-related systems and products and provides design, engineering, management, operating and other services applicable to commercial, municipal and industrial water production; (vi) the collection of its delinquent accounts receivable in the Bahamas; (vii) its ability to integrate and profitably operate recently acquired subsidiary PERC Water Corporation; (viii) the possible adverse impact of the COVID-19 virus on the company’s business; and (ix) various other risks, as detailed in the company's periodic report filings with the Securities and Exchange Commission (“SEC”). For more information about risks and uncertainties associated with the company’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the company’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting the company’s Secretary at the company’s executive offices or at the “Investors – SEC Filings” page of the company’s website at http://ir.cwco.com/docs/. Except as otherwise required by law, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Company Contact:

David W. Sasnett

Executive Vice President and CFO

Tel (954) 509-8200

[email protected]

 

 

Investor Relations Contact
Ron Both, CMA
Tel (949) 432-7566
[email protected]

 

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CONSOLIDATED WATER CO. LTD.

 

CONSOLIDATED BALANCE SHEETS

 

   December 31, 
   2019   2018 
ASSETS        
Current assets          
Cash and cash equivalents  $42,902,669   $31,337,477 
Accounts receivable, net   23,229,689    22,462,217 
Inventory   3,287,555    2,232,721 
Prepaid expenses and other current assets   2,346,918    2,801,674 
Current portion of loans receivable   -    734,980 
Costs and estimated earnings in excess of billings   1,675,781    835,669 
Current assets of discontinued operations   -    1,959,494 
Total current assets   73,442,612    62,364,232 
Property, plant and equipment, net   61,248,979    58,880,818 
Construction in progress   1,335,597    6,015,043 
Inventory, non-current   4,404,378    4,545,198 
Investment in OC-BVI   1,903,602    2,584,987 
Goodwill   13,325,013    8,004,597 
Land and rights of way held for development   24,162,523    24,161,024 
Intangible assets, net   5,040,000    1,891,667 
Operating lease right-of-use assets   4,439,212    - 
Other assets   2,990,228    2,123,999 
Long-term assets of discontinued operations   -    1,944,033 
Total assets  $192,292,144   $172,515,598 
           
LIABILITIES AND EQUITY          
Current liabilities          
Accounts payable, accrued expenses and other current liabilities  $3,672,142   $4,570,641 
Accrued compensation   1,821,395    1,286,468 
Dividends payable   1,292,187    1,286,493 
Current maturities of operating leases   755,751    - 
Current portion of long-term debt   17,753    - 
Billings in excess of costs and estimated earnings   614,386    109,940 
Current liabilities of discontinued operations   -    646,452 
Total current liabilities   8,173,614    7,899,994 
Long term debt   61,146    - 
Deferred tax liabilities   1,529,035    659,874 
Noncurrent operating leases   3,836,475    - 
Net liability arising from put/call options   664,000    - 
Other liabilities   75,000    199,827 
Total liabilities   14,339,270    8,759,695 
Commitments and contingencies          
Equity          
Consolidated Water Co. Ltd. stockholders' equity          
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 33,751 and 34,796 shares, respectively   20,251    20,878 
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 15,049,608 and 14,982,906 shares, respectively   9,029,765    8,989,744 
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued   -    - 
Additional paid-in capital   88,356,509    87,211,953 
Retained earnings   66,352,733    59,298,161 
Cumulative translation adjustment   -    (549,555)
Total Consolidated Water Co. Ltd. stockholders' equity   163,759,258    154,971,181 
Non-controlling interests   14,193,616    8,784,722 
Total equity   177,952,874    163,755,903 
Total liabilities and equity  $192,292,144   $172,515,598 

 

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CONSOLIDATED WATER CO. LTD.

 

CONSOLIDATED STATEMENTS OF INCOME

 

   Year Ended December 31, 
   2019   2018 
Total revenue  $68,793,651   $65,719,857 
Total cost of revenue   40,519,303    38,977,570 
Gross profit   28,274,348    26,742,287 
General and administrative expenses   19,348,958    18,709,419 
Gain (loss) on asset dispositions and impairments, net   445,041    (56,774)
Income from operations   9,370,431    7,976,094 
           
Other income (expense):          
Interest income   588,509    663,197 
Interest expense   (2,814)   (8,427)
Profit-sharing income from OC-BVI   16,200    654,075 
Equity in the earnings of OC-BVI   44,765    1,798,280 
Net unrealized gain (loss) on put/call options   56,000    (256,000)
Other   98,431    (111,061)
Other income, net   801,091    2,740,064 
Income before income taxes   10,171,522    10,716,158 
Provision for (benefit from) income taxes   66,621    (157,291)
Net income from continuing operations   10,104,901    10,873,449 
Income from continuing operations attributable to non-controlling interests   1,549,978    695,787 
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders   8,554,923    10,177,662 
Gain on sale of discontinued operations   3,621,170    - 
Net income from discontinued operations   -    1,115,825 
Total income from discontinued operations   3,621,170    1,115,825 
Net income attributable to Consolidated Water Co. Ltd. stockholders  $12,176,093   $11,293,487 
           
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders          
Continuing operations  $0.57   $0.68 
Discontinued operations   0.24    0.07 
Basic earnings per share  $0.81   $0.75 
           
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders          
Continuing operations  $0.56   $0.68 
Discontinued operations   0.24    0.07 
Diluted earnings per share  $0.80   $0.75 
           
Dividends declared per common and redeemable preferred shares  $0.34   $0.34 
           
Weighted average number of common shares used in the determination of:          
Basic earnings per share   15,025,639    14,962,760 
Diluted earnings per share   15,137,076    15,074,147 

 

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