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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 15, 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 May 15, 2020, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the first quarter ended March 31, 2020. 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 15, 2020. 

 

 

 

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: May 18, 2020      

 

 

 

EXHIBIT INDEX

 

Exhibit   Description
     
99.1   Press release issued by the Company on May 15, 2020.

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

 

Consolidated Water Reports Q1 2020 Results

 

Revenue up 22% to $20.7 million, Net Income from Continuing Operations Attributable to Stockholders Increased 13% to $2.9 million or $0.19 per Share

GEORGE TOWN, Cayman Islands, May 15, 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 first quarter ended March 31, 2020. Quarterly comparisons are to the year-ago quarter unless otherwise noted.

 

Q1 2020 Highlights

 

·Revenue increased 22% to $20.7 million.

 

·Gross profit up 21% to $8.4 million.

 

·Net income from continuing operations attributable to stockholders increased 13% to $2.9 million or $0.19 per diluted share.

 

·Cash and cash equivalents totaled $32.3 million as of March 31, 2020.

 

·Paid $1.3 million in dividends.

 

·Acquired remaining 49% interest in Aerex Industries, the company’s custom and specialty manufacturer of water treatment-related systems and products based in Ft. Pierce, Florida.

 

Management Commentary

 

“In Q1, we reported record quarterly revenue as a result of the addition of $3.0 million of revenue from PERC Water, our 51% owned subsidiary which we acquired in Q4 of 2019,” commented Consolidated Water CEO, Rick McTaggart. “Our retail segment and manufacturing segment also increased their revenue and gross profit from the first quarter of last year.

 

“Regional water management challenges are creating demand not only for potable water solutions, like desalination, but also for wastewater treatment and reuse projects. For states actively pursuing these projects, like California, Arizona, Texas and Florida, the anticipated demand for new wastewater treatment facilities and operations is actually several times higher than the corresponding category for potable water. In February, the U.S. Environmental Protection Agency issued its long-awaited National Reuse Action Plan in which it emphasizes the importance of water reuse for all industries.

 

“PERC supports our pursuit of these water reuse projects and other emerging opportunities, and has proven to be highly complementary and synergistic to our existing business and overall mission. PERC allows us to offer our customers a comprehensive solution for improving their water infrastructure, as well as provides a solid platform upon which we can expand our core business of designing, constructing and operating desalination plants in North America. PERC exemplifies the high-quality opportunities we are pursuing to drive continued growth and enhance shareholder value over the coming years.

 

 

 

 

“During the quarter, we acquired the remaining 49% interest in Aerex. Since our initial acquisition of 51% of Aerex in February 2016, we have strengthened Aerex’s capabilities and resources and expanded its product offerings. This has resulted in improved results, which we expect to enhance shareholder value over the coming years.

 

“While we continue to be concerned about the impact of the COVID-19 pandemic on the world economy and our business, we remain optimistic about the future. Over the near term, travel interruptions and resulting decline in tourism will likely adversely affect our retail water business on Grand Cayman.

 

“Our revenue from bulk water supply contracts with government entities is not as directly affected by a short-term decline in tourism but could be adversely impacted over the longer term by continued weakness in the economies of the Cayman Islands and The Bahamas. The COVID-19 pandemic has already drastically slowed the economies of these countries. While our U.S.-based businesses are not affected by tourism, these businesses could be adversely affected by a decline in the U.S. and world economies or supply chain interruptions.

 

“We will remain vigilant and responsive to any challenges that may arise as this global pandemic plays out. At the same time, we will continue our mission of addressing water resource challenges. This includes continuing to actively evaluate acquisition targets in North America that would expand our geographic footprint and diversify our revenue streams.”

 

Q1 2020 Financial Summary

 

Revenue increased 22% to $20.7 million from $17.0 million in the first quarter of 2019, which was driven primarily by increases of $3.0 million in the services segment, $823,000 in the manufacturing segment and $571,000 in the retail segment. The increases were partially offset by a decrease of $671,000 in the bulk segment.

 

The increase in service revenue was due to the addition of $3.0 million in revenue from PERC as a result of acquiring 51% of the company in late October 2019. The increase in manufacturing revenue was due to an increase in the number of orders that resulted in expanded project production activity. The increase in retail revenue was due to a 10% increase in the volume of water sold by Cayman Water due to drought-like conditions on Grand Cayman.

 

The decrease in bulk water revenue was due to the lower rates that came into effect in February 2019 for water supplied by the Red Gate and North Sound plants, as well as lower rates that came into effect in July 2019 for the North Side Water Works plant under the new contracts for those plants.

 

Gross profit for the first quarter of 2020 was $8.4 million, up 21% from $7.0 million in the same year-ago quarter.

 

Net income attributable to Consolidated Water stockholders for the first quarter of 2020 was $2.9 million or $0.19 per fully diluted share, down 53% from $6.2 million or $0.41 per fully diluted share in the first quarter of 2019. The decrease was due to the gain on the sale of the company’s discontinued Belize operations of approximately $3.6 million in the first quarter of 2019.

 

 

 

 

Cash and cash equivalents totaled $32.3 million as of March 31, 2020, as compared to $42.9 million as of December 31, 2019. The decrease in cash and cash equivalents was primarily due to the acquisition of the remaining 49% interest in Aerex.

 

Segment Results

 

   Three Months Ended March 31, 2020 
   Retail   Bulk   Services   Manufacturing   Total 
Revenue  $7,257,432   $6,440,284   $3,114,813   $3,913,192   $20,725,721 
Cost of revenue   2,986,620    4,564,580    2,273,520    2,460,680    12,285,400 
Gross profit   4,270,812    1,875,704    841,293    1,452,512    8,440,321 
General and administrative expenses   3,373,839    292,046    1,131,138    356,734    5,153,757 
Gain (loss) on asset dispositions and impairments, net   -    200    (420)   -    (220)
Income (loss) from operations  $896,973   $1,583,858   $(290,265)  $1,095,778    3,286,344 
Other income, net                       169,344 
Income before income taxes                       3,455,688 
Provision for income taxes                       206,083 
Net income                       3,249,605 
Income attributable to non-controlling interests                       360,998 
Net income attributable to Consolidated Water Co. Ltd. stockholders                      $2,888,607 

  

 

   Three Months Ended March 31, 2019 
   Retail   Bulk   Services   Manufacturing   Total 
Revenue  $6,686,660   $7,111,313   $100,577   $3,089,974   $16,988,524 
Cost of revenue   2,825,604    4,954,591    121,919    2,124,107    10,026,221 
Gross profit   3,861,056    2,156,722    (21,342)   965,867    6,962,303 
General and administrative expenses   3,117,278    261,412    485,885    513,459    4,378,034 
Gain (loss) on asset dispositions and impairments, net   (2,731)   46,500    -    -    43,769 
Income (loss) from operations  $741,047   $1,941,810   $(507,227)  $452,408    2,628,038 
Other income, net                       260,090 
Income before income taxes                       2,888,128 
Provision for income taxes                       48,959 
Net income from continuing operations                       2,839,169 
Income from continuing operations attributable to non-controlling interests                       273,908 
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                       2,565,261 
Total income from discontinued operations                       3,621,170 
Net income attributable to Consolidated Water Co. Ltd. stockholders                      $6,186,431 

 

Annual General Meeting of Shareholders 

The company has set August 17, 2020 as the date of its annual meeting of shareholders to be held at a time and location yet to be determined. Holders of record of the company’s stock as of June 15, 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, May 18, 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: 10143041

 

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 May 25, 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: 10143041

 

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.

 

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]


 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,   December 31, 
   2020   2019 
    (Unaudited)      
ASSETS          
Current assets          
Cash and cash equivalents  $32,310,781   $42,902,669 
Accounts receivable, net   25,624,783    23,229,689 
Inventory   6,282,173    3,287,555 
Prepaid expenses and other current assets   2,353,521    2,346,918 
Costs and estimated earnings in excess of billings   1,968,324    1,675,781 
Total current assets   68,539,582    73,442,612 
Property, plant and equipment, net   61,239,413    61,248,979 
Construction in progress   328,334    1,335,597 
Inventory, non-current   4,534,074    4,404,378 
Investment in OC-BVI   1,939,610    1,903,602 
Goodwill   13,325,013    13,325,013 
Land and rights of way held for development   24,162,523    24,162,523 
Intangible assets, net   4,785,833    5,040,000 
Operating lease right-of-use assets   4,043,717    4,439,212 
Other assets   2,794,060    2,990,228 
Total assets  $185,692,159   $192,292,144 
           
LIABILITIES AND EQUITY          
Current liabilities          
Accounts payable, accrued expenses and other current liabilities  $4,364,590   $3,672,142 
Accrued compensation   1,077,650    1,821,395 
Dividends payable   1,297,703    1,292,187 
Current maturities of operating leases   761,540    755,751 
Current portion of long-term debt   42,211    17,753 
Billings in excess of costs and estimated earnings   903,692    614,386 
Total current liabilities   8,447,386    8,173,614 
Long term debt   155,484    61,146 
Deferred tax liabilities   1,448,306    1,529,035 
Noncurrent operating leases   3,166,476    3,836,475 
Net liability arising from put/call options   825,000    664,000 
Other liabilities   75,000    75,000 
Total liabilities   14,117,652    14,339,270 
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 33,751 shares, respectively   20,251    20,251 
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 15,114,506 and 15,049,608 shares, respectively   9,068,704    9,029,765 
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued   -    - 
Additional paid-in capital   86,034,929    88,356,509 
Retained earnings   67,951,962    66,352,733 
Total Consolidated Water Co. Ltd. stockholders' equity   163,075,846    163,759,258 
Non-controlling interests   8,498,661    14,193,616 
Total equity   171,574,507    177,952,874 
Total liabilities and equity  $185,692,159   $192,292,144 

 

 

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

   Three Months Ended March 31, 
   2020   2019 
Total revenue  $20,725,721   $16,988,524 
Total cost of revenue   12,285,400    10,026,221 
Gross profit   8,440,321    6,962,303 
General and administrative expenses   5,153,757    4,378,034 
Gain (loss) on asset dispositions and impairments, net   (220)   43,769 
Income from operations   3,286,344    2,628,038 
           
Other income (expense):          
Interest income   136,440    150,185 
Interest expense   (2,526)   - 
Profit-sharing income from OC-BVI   10,125    6,075 
Equity in the earnings of OC-BVI   25,883    13,461 
Net unrealized loss on put/call options   (161,000)   (24,000)
Other   160,422    114,369 
Other income, net   169,344    260,090 
Income before income taxes   3,455,688    2,888,128 
Provision for income taxes   206,083    48,959 
Net income from continuing operations   3,249,605    2,839,169 
Income from continuing operations attributable to non-controlling interests   360,998    273,908 
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders   2,888,607    2,565,261 
Gain on sale of discontinued operations   -    3,621,170 
Total income from discontinued operations   -    3,621,170 
Net income attributable to Consolidated Water Co. Ltd. stockholders  $2,888,607   $6,186,431 
           
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders          
Continuing operations  $0.19   $0.17 
Discontinued operations   -    0.24 
Basic earnings per share  $0.19   $0.41 
           
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders          
Continuing operations  $0.19   $0.17 
Discontinued operations   -    0.24 
Diluted earnings per share  $0.19   $0.41 
           
Dividends declared per common and redeemable preferred shares  $0.085   $0.085 
           
Weighted average number of common shares used in the determination of:          
Basic earnings per share   15,114,506    15,020,344 
Diluted earnings per share   15,268,884    15,184,435 

  

 

 

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