Form 8-K CONSOLIDATED WATER CO For: May 11

 

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 11, 2015

(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 May 11, 2015, Consolidated Water Co. Ltd. (the “Company”) issued a press release announcing its results of operations for the first quarter ended March 31, 2015. A copy of the press release is attached as Exhibit 99.1 to this report. This information is not deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act registration statements.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits.

  

Exhibit No.		Title
99.1		Press release issued by the Company on May 11, 2015.

 

 

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: May 12, 2015

 

 

EXHIBIT INDEX

 

Exhibit		Description
99.1		Press release issued by the Company on May 11, 2015.

 

 

Exhibit 99.1

 

CONSOLIDATED WATER CO. LTD.

REPORTS FIRST QUARTER OPERATING RESULTS

 

NET INCOME ATTRIBUTABLE TO STOCKHOLDERS UP $1.3 MILLION AS MEXICO PROJECT DEVELOPMENT EXPENDITURES DECREASE FROM PRIOR-YEAR PERIOD

 

GEORGE TOWN, Grand Cayman, Cayman Islands (May 11, 2015) — 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 first quarter of 2015. The Company will host an investor conference call on Tuesday, May 12, 2015 at 11:00 a.m. EDT (see details below) to discuss its operating results and other topics of interest.

 

First Quarter Operating Results

 

Net income attributable to the Company’s stockholders increased to $1,921,261, or $0.13 per diluted share, for the quarter ended March 31, 2015, compared to $654,909, or $0.04 per diluted share, for the quarter ended March 31, 2014.

 

Total revenues declined 10% to approximately $14.7 million in the most recent quarter, compared with approximately $16.3 million in the prior-year period. The decrease in revenues was attributable to lower revenues for the Company’s bulk water and services business segments, partially offset by a modest increase in retail water revenues.

 

While retail water revenues increased slightly, such revenues approximated $6.1 million in the first quarters of both 2015 and 2014. An increase of 2% in the number of gallons of water sold by our Cayman Water retail operations was more than offset by a decrease in electricity costs that reduced the energy component of the Company’s retail water rates for 2015 when compared with the first quarter of the previous year.

 

Bulk water revenues declined 16% to approximately $8.4 million in the first quarter of 2015, compared with approximately $10.0 million in the year-earlier period. The decrease in bulk revenues was primarily attributable to the Company’s Bahamas operations, which generated approximately $1.4 million less in revenues in the first quarter of 2015 than in the three months ended March 31, 2014. The decrease at the Bahamas operations resulted from a significant decline in the prices of diesel fuel and electricity, which reduced the energy component of the Company’s bulk water rates in the Bahamas. Revenues for bulk operations in the Cayman Islands and Belize declined slightly from the prior-year period, again the result of lower energy prices.

 

Services segment revenues declined to $148,158 in the most recent quarter, compared with $275,913 a year earlier, due to a decrease in the purchasing fees charged to the Company’s affiliate, Ocean Conversion (BVI) Ltd. (“OC-BVI”).

 

Consolidated gross profit increased 1% to approximately $6.1 million (41% of total revenues) in the first quarter of 2015, versus approximately $6.0 million (37% of total revenues) in the 2014 quarter. Gross profit on retail revenues rose 2% to approximately $3.3 million (53% of retail revenues) in the three months ended March 31, 2015, compared with approximately $3.2 million (52% of retail revenues) in the year-earlier period. The slight improvement in retail gross profit margin was due to lower electricity prices and energy reduction efforts that reduced energy costs in 2015 by approximately $95,000. Gross profit on bulk revenues increased 3% to approximately $2.9 million (35% of bulk revenues), compared with approximately $2.8 million (29% of bulk revenues) a year earlier. Both total gross profit dollars and gross profit as a percentage of revenues in 2015 benefited from the reduction in energy prices, as energy expense for the Company’s bulk operations was approximately $1,575,000 less than in the first quarter of 2014. The services segment generated a negative gross profit of ($136,729) in the first quarter of 2015, compared with a negative gross profit of ($59,351) in the prior-year quarter.

 

 

The services business segment incurred an operating loss of approximately ($0.7 million) in the most recent quarter, versus an operating loss of approximately ($2.1 million) in the first quarter of 2014, primarily due to a decrease of approximately $1.4 million in the project development expenses incurred by N.S.C. Agua, S.A. de C.V. (“NSC”), the Company’s Mexico subsidiary. The services segment is expected to continue to incur losses from operations while the Company funds the project development activities of NSC and/or until such time as significant new management services or plant construction contracts are obtained.

 

Consolidated general and administrative expenses (“G&A”) declined 29% to approximately $3.8 million in the 2015 quarter, compared with approximately $5.3 million a year earlier. The decrease in consolidated G&A expenses in 2015 resulted from a reduction of approximately $1.4 million in project development expenses incurred by NSC.

 

Interest income increased 35% to $233,582 in the three months ended March 31, 2015, compared with $172,932 in the 2014 quarter. Interest expense declined 76% to $69,532 in the most recent quarter, versus $295,737 a year earlier, reflecting the prepayment premium paid for the early redemption on February 17, 2014 of the remaining outstanding balance on bonds payable and the amortization of the related bond discount and deferred issuance costs at the time of prepayment.

 

The Company recognized earnings and profit sharing on its equity investment in OC-BVI of $101,480 in the first quarter of 2015, compared with $74,739 in the first quarter of 2014. The Company also recognized an impairment loss of $310,000 on its equity investment in OC-BVI during the first quarter of 2015 due to the continuing maturation of OC-BVI’s current contract for its Bar Bay plant.

 

The Company reported “other” expense of ($175,087) in the three months ended March 31, 2015, compared with “other” income of $198,296 in the prior-year period. The fluctuation in these amounts is primarily the result of foreign currency gains and/or losses recorded for the Company’s subsidiary in Bali, Indonesia, PT Consolidated Water Bali (“CW-Bali”).

 

Management Comments

 

“Although revenues declined in the first quarter of 2015 due to lower fuel and electricity costs that were passed on to our customers, gross profit in terms of dollars increased slightly due to a reduction in operating costs,” stated Mr. Rick McTaggart, Chief Executive Officer of Consolidated Water Co. Ltd.. “Our net income rose from the prior-year quarter primarily due to a $1.4 million reduction in development costs incurred by our NSC subsidiary, which is pursuing a 100 million gallon per day desalination plant project in Rosarito Beach, Mexico. NSC’s expenses are beginning to slow as we move closer to the end of the initial development process for this very important project, which is designed to supply potable water to the drought-plagued northern Baja California, Mexico and San Diego, California regions.”

 

“In accordance with the requirements of the new public-private partnership legislation that was enacted last year, in late March 2015 we submitted our initial proposal to the State of Baja California, Mexico to provide desalinated water from the proposed Rosarito plant and are awaiting the State’s response. If the State elects to proceed with the Project it will conduct a public tender process, in response to which NSC will submit a more detailed proposal consistent with the terms of the tender. During the first quarter of 2015, NSC entered into a Letter of Intent with a potential equity partner with substantial financial resources and a history of successful capital project investments in Mexico to enhance the quality of its proposal(s) to the State.”

 

“In the Cayman Islands, the Water Authority – Cayman (“WAC”) has accepted our proposal to operate its North Sound Desalination Plant on the island of Grand Cayman for an additional two years, subject to receiving approval from the Cayman Islands Government Central Tenders Committee. Although the current operating agreement expired on April 1, 2015, we continue to operate the plant on the same terms and conditions until advised otherwise by the WAC,” concluded Mr. McTaggart.

 

 

Cash Dividends

 

On April 30, 2015, the Company paid a quarterly cash dividend of $0.075 per share to shareholders of record at the close of business on April 1, 2015. 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 Tuesday, May 12, 2015 to discuss its first quarter operating results and other topics of interest. Shareholders and other interested parties may participate in the conference call by dialing 877-374-8416 (international/local participants dial 412-317-6716) and requesting participation in the “Consolidated Water Co. Ltd. Conference Call” a few minutes before 11:00 a.m. EDT on Tuesday, May 12, 2015.

 

A replay of the conference call will be available one hour after the call through 9:00 a.m. EDT on Tuesday, May 19, 2015 by dialing 877-344-7529 (international/local participants dial 412-317-0088) and entering the conference ID # 10065412, 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/or distribution facilities in the Cayman Islands, Belize, the British Virgin Islands, The Commonwealth of The Bahamas, and Bali, Indonesia.

 

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]

 

or

 

RJ Falkner & Company, Inc., Investor Relations Counsel at (800) 377-9893 or

via e-mail at [email protected]

 

(Financial Highlights Follow)

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31,				December 31,
		2015				2014
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	36,754,928			$	35,713,689
Certificate of deposit			5,000,000				5,000,000
Restricted cash			442,955				456,083
Accounts receivable, net			12,535,264				11,773,744
Inventory			1,790,103				1,738,382
Prepaid expenses and other current assets			1,530,915				1,961,385
Current portion of loans receivable			1,754,498				1,726,310
Costs and estimated earnings in excess of billings - construction project			869,539				1,090,489
Total current assets			60,678,202				59,460,082
Property, plant and equipment, net			55,064,046				56,396,988
Construction in progress			2,195,456				1,900,016
Inventory, non-current			4,433,571				4,240,977
Loans receivable			5,161,530				5,610,867
Investment in OC-BVI			5,000,083				5,208,603
Intangible assets, net			888,877				927,900
Goodwill			3,499,037				3,499,037
Investment in land			20,558,424				20,558,424
Other assets			2,554,454				2,656,937
Total assets		$	160,033,680			$	160,459,831
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other current liabilities		$	4,914,993			$	5,962,015
Dividends payable			1,191,703				1,190,325
Demand loan payable			8,500,000				9,000,000
Total current liabilities			14,606,696				16,152,340
Other liabilities			224,827				224,827
Total liabilities			14,831,523				16,377,167
Commitments and contingencies
Equity
Consolidated Water Co. Ltd. stockholders' equity
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares;
issued and outstanding 36,840 and 36,840 shares, respectively			22,104				22,104
Class A common stock, $0.60 par value. Authorized 24,655,000 shares;
issued and outstanding 14,734,272 and 14,715,899 shares, respectively			8,840,563				8,829,539
Class B common stock, $0.60 par value. Authorized 145,000 shares;
none issued			-				-
Additional paid-in capital			83,994,765				83,779,292
Retained earnings			49,814,648				49,000,621
Cumulative translation adjustment			(516,160	)			(482,388	)
Total Consolidated Water Co. Ltd. stockholders' equity			142,155,920				141,149,168
Non-controlling interests			3,046,237				2,933,496
Total equity			145,202,157				144,082,664
Total liabilities and equity		$	160,033,680			$	160,459,831

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

		Three Months Ended March 31,
		2015				2014
Retail water revenues		$	6,135,638			$	6,112,961
Bulk water revenues			8,382,316				9,959,736
Services revenues			148,158				275,913
Total revenues			14,666,112				16,348,610
Cost of retail revenues			2,876,788				2,931,376
Cost of bulk revenues			5,449,512				7,111,545
Cost of services revenues			284,887				335,264
Total cost of revenues			8,611,187				10,378,185
Gross profit			6,054,925				5,970,425
General and administrative expenses			3,799,589				5,342,633
Income from operations			2,255,336				627,792
Other income (expense):
Interest income			233,582				172,932
Interest expense			(69,532	)			(295,737	)
Profit sharing income from OC-BVI			26,325				20,250
Equity in earnings of OC-BVI			75,155				54,489
Impairment of investment in OC-BVI			(310,000	)			-
Other			(175,087	)			198,296
Other income, net			(219,557	)			150,230
Net income			2,035,779				778,022
Income attributable to non-controlling interests			114,518				123,113
Net income attributable to Consolidated Water Co. Ltd. stockholders		$	1,921,261			$	654,909
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders		$	0.13			$	0.04
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders		$	0.13			$	0.04
Dividends declared per common share		$	0.075			$	0.075
Weighted average number of common shares used in the determination of:
Basic earnings per share			14,718,757				14,686,744
Diluted earnings per share			14,764,169				14,766,985

 

 

CONSOLIDATED WATER CO. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

		Three Months Ended March 31,
		2015				2014
Net Income		$	2,035,779			$	778,022
Other comprehensive income (loss)
Foreign currency translation adjustment			(35,549	)			100,456
Total other comprehensive income (loss)			(35,549	)			100,456
Comprehensive income			2,000,230				878,478
Comprehensive income attributable to non-controlling interests			112,741				128,136
Comprehensive income attributable to Consolidated Water Co. Ltd. stockholders		$	1,887,489			$	750,342

 

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