Form 8-K CONSOLIDATED WATER CO For: Aug 09

 

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, 2016

(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, 4^th 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))

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On August 9, 2016, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the second quarter ended June 30, 2016. 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, 2016.

 

 

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, 2016

 

  

EXHIBIT INDEX

 

Exhibit		Description
99.1		Press release issued by the Company on August 9, 2016.

 

 

  

Exhibit 99.1

 

CONSOLIDATED WATER CO. LTD.

REPORTS SECOND QUARTER OPERATING RESULTS

 

COMPANY WINS TENDER FOR MEXICO PROJECT

 

 

GEORGE TOWN, Grand Cayman, Cayman Islands (August 9, 2016) -- Consolidated Water Co. Ltd. (NASDAQ Global Select Market: “CWCO”) (“Consolidated Water” or “the Company”), which develops and operates seawater desalination plants and water distribution systems in areas of the world where naturally occurring supplies of potable water are scarce or nonexistent, today reported its operating results for the second quarter of 2016. The Company will host an investor conference call on Wednesday, August 10, 2016 at 11:00 a.m. EDT (see details below) to discuss its operating results and other topics of interest.

 

Second Quarter Operating Results

 

Net income attributable to Consolidated Water Co. Ltd. stockholders for the quarter ended June 30, 2016 was $2,204,333 ($0.15 per share on a fully-diluted basis), as compared to $2,228,100 ($0.15 per share on a fully-diluted basis) for the quarter ended June 30, 2015.

 

Revenues generated by retail water operations were $6,292,833 in 2016 as compared to $6,152,185 in 2015. Although the volume of water sold by the retail segment increased by approximately 10% from 2015 to 2016, retail revenues increased by only approximately 2% in 2016 due to (i) lower energy costs, which reduced the energy component of the rates charged to the Cayman retail customers by $172,437 from 2015; and (ii) the annual first quarter adjustment of base rates under the Company’s retail license, which were lowered in 2016 by 4.4% due to downward movement in the price indices used as the basis for such rate adjustments.

 

Bulk segment revenues were $7,441,061 and $8,187,273 for 2016 and 2015, respectively. The decrease in bulk revenues from 2015 to 2016 is attributable to the Company’s Bahamas and Cayman operations, which generated approximately $587,000 and $210,000 less in revenues, respectively, in 2016 than in 2015 due to a significant decrease in the prices of diesel fuel and electricity from 2015 to 2016, which reduced the energy component of bulk water rates.

 

Services segment revenues were $1,664,741 and $146,211 for 2016 and 2015, respectively. Services revenues increased in 2016 primarily as a result of the addition of the revenues of Aerex Industries, Inc. (“Aerex”) after the acquisition of 51% of this company on February 11, 2016.

 

Consolidated gross profit increased to $6,592,379 (43% of total revenues) in 2016, versus $5,965,294 (41% of total revenues) in 2015. Gross profit for retail revenues was $3,607,517 (57% of retail revenues) and $3,494,487 (57% of retail revenues) in 2016 and 2015, respectively. Gross profit on bulk revenues was $2,627,800 (35% of bulk revenues), compared with $2,537,344 (31% of bulk revenues) for the prior year period. The services segment generated gross profit of $357,062 in 2016, while incurring a negative gross profit of ($66,537) in 2015.

 

Consolidated general and administrative expenses (“G&A”) increased to approximately $4.9 million in 2016 from approximately $3.7 million in 2015 due to the addition of the G&A expenses of Aerex and an increase in the project development expenses incurred by the Company’s Mexican subsidiary, N.S.C. Agua S.A. de C.V. (“NSC”).

 

Other income (expense), net for 2016 was $418,837 as compared to $28,195 for 2015. The fluctuation in this net component of results of operations reflects (i) the impairment charge recorded for the Company’s equity investment in Ocean Conversion (BVI) Ltd. (“OC-BVI”) in 2015 of $275,000, as no impairment charge was recorded for this investment in 2016; and (ii) foreign currency gains recorded for PT Consolidated Water Bali (“CW-Bali”) in 2016 as compared to foreign currency losses recorded for this subsidiary in 2015.

 

 

Management Comments

 

“Our gross profit, both in dollars and as a percentage of revenues increased for all three of our business segments this past quarter compared to the second quarter of 2015, resulting in a total gross profit increase this past quarter of approximately $627,000, or 11%, compared to the same period of 2015,” stated CEO Rick McTaggart.

 

“Our newly-acquired Aerex subsidiary contributed approximately $1.3 million in revenues to our services segment this past quarter.  Aerex is an original equipment manufacturer of a wide range of products and services applicable to the water industry, and consequently its revenues and earnings are dependent on the timing and size of purchase orders for these products and services.  While Aerex’s financial performance during the four months following its acquisition has not been consistent on average with its 2015 financial performance, we remain extremely positive about the contribution that Aerex will make to our Company.

 

We were very pleased to announce in mid-June that our consortium was declared the winner of the bidding process for the 100 million gallon per day seawater desalination plant in Rosarito, Mexico.  We are currently in the process of finalizing a public-private partnership agreement with the State of Baja California, Mexico which we expect to execute in the coming weeks. 

 

We believe that our negotiations with the Cayman Islands Water Authority for a new water utility license in Grand Cayman are nearing an end, and although a few important differences have yet to be resolved, we remain hopeful that these negotiations will be concluded before the end of this year,” concluded Mr. McTaggart.

 

Six Months Operating Results

 

Net income attributable to Consolidated Water Co. Ltd. stockholders for 2016 was $4,258,974 ($0.29 per share on a fully-diluted basis), as compared to $4,149,361 ($0.28 per share on a fully-diluted basis) for 2015.

 

Total revenues for 2016 and 2015 were $29,433,407 and $29,151,781, respectively. Higher revenues for the services segment in 2016 served to offset a decline in bulk segment revenues as retail revenue remained relatively consistent in 2016 from 2015. Gross profit for 2016 was $12,769,410 or 43% of total revenues, as compared to $12,113,596 or 42% of total revenues, for 2015. Gross profit for the retail and services segments increased while the bulk segment gross profit declined in 2016 from 2015.

 

G&A expenses on a consolidated basis were $9,396,760 and $7,554,540 for 2016 and 2015, respectively. The increase in consolidated G&A expenses from 2015 to 2016 is primarily attributable to the addition of approximately $1,022,000 in expenses for Aerex after the Company’s acquisition of a 51% ownership interest in this company in February 2016 and an increase of approximately $629,000 in the project development expenses incurred by the Company’s Mexican subsidiary, NSC.

 

Other income (expense), net for 2016 was $808,394 as compared to ($191,362) for 2015. The fluctuation in this net component of results of operations reflects (i) a decrease in the impairment charge recorded for the Company’s equity investment in OC-BVI in 2016 as compared to 2015 of $535,000; and (ii) foreign currency gains recorded for CW-Bali in 2016 of approximately $174,000 as compared to foreign currency losses recorded for this subsidiary in 2015 of approximately ($233,000).

 

 

Cash Dividends

 

On July 31, 2016, the Company paid a quarterly cash dividend of $0.075 per share to shareholders of record at the close of business on July 1, 2016. The Company has paid cash dividends to shareholders since 1985.

 

Investor Conference Call

 

The Company will host a conference call at 11:00 a.m. Eastern Time (EDT) on Wednesday, August 10, 2016 to discuss its second quarter operating results and other topics of interest. Shareholders and other interested parties may participate in the conference call by dialing 844-875-6913 (international/local participants dial 412-317-6709) and requesting participation in the “Consolidated Water Company Call” a few minutes before 11:00 a.m. EDT on Wednesday, August 10, 2016.

 

 

A replay of the conference call will be available one hour after the call through August 17, 2016 by dialing 877-344-7529 (international/local participants dial 412-317-0088) and entering the conference ID # 10091314, and on the Company’s website at www.cwco.com.

 

CWCO-E

 

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 or nonexistent. The Company operates water production and distribution facilities and provides water-related products and services to customers in the Cayman Islands, Belize, the British Virgin Islands, The Commonwealth of The Bahamas, Indonesia and 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 projects under development in Baja California, Mexico and Bali, Indonesia, 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:

 

Frederick W. McTaggart, President and CEO, at (345) 945-4277 or David W. Sasnett, Executive Vice President and CFO, at (954) 509-8200 or via e-mail at [email protected]

 

 

 

 

(Financial Highlights Follow)

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2016				2015
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	37,081,272			$	44,792,734
Certificate of deposit			-				5,637,538
Restricted cash			-				428,203
Accounts receivable, net			13,717,123				9,529,016
Inventory			1,988,249				1,918,728
Prepaid expenses and other current assets			837,947				1,282,660
Current portion of loans receivable			1,902,490				1,841,851
Costs and estimated earnings in excess of billings			1,066,367				-
Total current assets			56,593,448				65,430,730
Property, plant and equipment, net			54,251,554				53,743,170
Construction in progress			2,163,548				1,928,610
Inventory, non-current			4,508,940				4,558,374
Loans receivable			2,802,365				3,769,016
Investment in OC-BVI			4,678,093				4,548,271
Intangible assets, net			5,993,644				771,811
Goodwill			11,534,248				3,499,037
Land held for development			20,558,424				20,558,424
Other assets			2,717,744				2,767,583
Total assets		$	165,802,008			$	161,575,026
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other current liabilities		$	4,060,956			$	4,829,535
Dividends payable			1,183,134				1,177,246
Note payable to related party			490,000				-
Demand loan payable			-				6,958,328
Billings in excess of costs and estimated earnings			1,469				189,985
Total current liabilities			5,735,559				13,155,094
Deferred tax liability			2,207,636				-
Other liabilities			557,827				224,827
Total liabilities			8,501,022				13,379,921
Commitments and contingencies
Equity
Consolidated Water Co. Ltd. stockholders' equity
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares;  issued and outstanding 45,206 and 38,804 shares, respectively			27,124				23,282
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,806,040 and 14,781,201 shares, respectively			8,883,624				8,868,721
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued			-				-
Additional paid-in capital			84,960,531				84,597,349
Retained earnings			54,118,710				52,084,175
Cumulative translation adjustment			(538,907	)			(533,365	)
Total Consolidated Water Co. Ltd. stockholders' equity			147,451,082				145,040,162
Non-controlling interests			9,849,904				3,154,943
Total equity			157,300,986				148,195,105
Total liabilities and equity		$	165,802,008			$	161,575,026

 

  

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2016				2015				2016				2015
Retail revenues		$	6,292,833			$	6,152,185			$	12,263,071			$	12,287,823
Bulk revenues			7,441,061				8,187,273				14,706,354				16,569,589
Services revenues			1,664,741				146,211				2,463,982				294,369
Total revenues			15,398,635				14,485,669				29,433,407				29,151,781
Cost of retail revenues			2,685,316				2,657,698				5,314,990				5,424,561
Cost of bulk revenues			4,813,261				5,649,929				9,423,585				11,115,989
Cost of services revenues			1,307,679				212,748				1,925,422				497,635
Total cost of revenues			8,806,256				8,520,375				16,663,997				17,038,185
Gross profit			6,592,379				5,965,294				12,769,410				12,113,596
General and administrative expenses			4,935,774				3,661,574				9,396,760				7,554,540
Income from operations			1,656,605				2,303,720				3,372,650				4,559,056
Other income (expense):
Interest income			159,891				258,201				376,726				491,783
Interest expense			(30,323	)			(67,929	)			(94,369	)			(137,461	)
Profit sharing income from OC-BVI			14,175				22,275				48,600				48,600
Equity in earnings of OC-BVI			85,858				62,668				131,222				137,823
Impairment of investment in OC-BVI			-				(275,000	)			(50,000	)			(585,000	)
Other			189,236				27,980				396,215				(147,107	)
Other income (expense), net			418,837				28,195				808,394				(191,362	)
Income before income taxes			2,075,442				2,331,915				4,181,044				4,367,694
Provision for (benefit from) income taxes			(170,393	)			-				(243,662	)			-
Net income			2,245,835				2,331,915				4,424,706				4,367,694
Income attributable to non-controlling interests			41,502				103,815				165,732				218,333
Net income attributable to Consolidated Water Co. Ltd. stockholders		$	2,204,333			$	2,228,100			$	4,258,974			$	4,149,361
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders		$	0.15			$	0.15			$	0.29			$	0.28
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders		$	0.15			$	0.15			$	0.29			$	0.28
Dividends declared per common share		$	0.075			$	0.075			$	0.15			$	0.15
Weighted average number of common shares used in the determination of:
Basic earnings per share			14,792,053				14,736,057				14,787,716				14,727,455
Diluted earnings per share			14,871,119				14,793,298				14,863,791				14,780,269

 

  

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2016				2015				2016				2015
Net income		$	2,245,835			$	2,331,915			$	4,424,706			$	4,367,694
Other comprehensive income (loss)
Foreign currency translation adjustment			(2,659	)			(7,202	)			(5,834	)			(42,751	)
Total other comprehensive income (loss)			(2,659	)			(7,202	)			(5,834	)			(42,751	)
Comprehensive income			2,243,176				2,324,713				4,418,872				4,324,943
Comprehensive income attributable to non-controlling interests			41,369				103,454				165,440				216,195
Comprehensive income attributable to Consolidated Water Co. Ltd. stockholders		$	2,201,807			$	2,221,259			$	4,253,432			$	4,108,748

 

 

 

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