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 12, 2014
(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)) |
Item 2.02. Results
of Operations and Financial Condition.
On May 12, 2014, Consolidated Water Co.
Ltd. (the “Company”) issued a press release announcing its results of operations for the fiscal quarter ended March
31, 2014. 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 |
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|
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99.1 |
|
Press release issued by the Company on May 12, 2014. |
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 |
|
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Date: May 13, 2014 |
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EXHIBIT INDEX
Exhibit |
|
Description |
|
|
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99.1 |
|
Press release issued by the Company on May 12, 2014. |
EXHIBIT 99.1
CONSOLIDATED WATER CO. LTD.
REPORTS FIRST QUARTER OPERATING RESULTS
GEORGE TOWN, Grand Cayman, Cayman Islands
(May 12, 2014) -- 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 2014. The Company will host an investor conference call on Tuesday, May 13, 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 totaled $654,909, or $0.04 per diluted share, for the quarter ended March 31, 2014, compared with net income attributable
to CWCO stockholders of $3,742,003, or $0.26 per diluted share, for the three months ended March 31, 2013. The decrease in net
income from the first quarter of 2013 to the first quarter of 2014 was primarily attributable to lower earnings and profit sharing
derived from the Company’s equity investment in its affiliate, OC-BVI, higher project development expenses incurred by the
Company’s Mexico subsidiary, N.S.C. Agua, S.A. de C.V. (“NSC), and lower operating income from the retail business
segment.
Total revenues for the quarter ended March
31, 2014 decreased slightly (1%) to approximately $16.3 million, compared with approximately $16.6 million in the 2013 quarter.
Retail water revenues declined 4% to approximately
$6.1 million (37% of total revenues) in the most recent quarter, versus approximately $6.4 million (39% of total revenues) in the
first quarter of 2013. The reduction in retail revenues was due to an approximate 4% decrease in the number of gallons of water
sold by the Company’s retail operations. Management believes this decrease in volume of retail water sold reflects rainfall
for the first quarter of 2014 that was 12 times higher than that for the first quarter of 2013 and, to a lesser extent, the adoption
of water conservation measures by certain large retail customers.
Bulk water revenues were relatively unchanged
(up 1%) at approximately $10.0 million (61% of total revenues) in the first quarter of 2014, compared with approximately $9.9 million
(60% of total revenues) in the prior-year quarter. The Company’s subsidiary, Consolidated Water (Bahamas) Limited (“CW-Bahamas”)
supplied the aggregate amount of water contracted by the Water & Sewerage Corporation of The Bahamas (“WSC”) under
the water supply agreement for the Windsor plant in July 2013, at which time such agreement expired. However, at the request of
the government of The Bahamas, CW-Bahamas continues to supply water to the government of The Bahamas from this plant. The government
of The Bahamas has not yet decided whether or not it will extend CW-Bahamas’ water supply agreement for the Windsor plant
on a long-term basis.
Services revenues declined 9% to $275,913
in the quarter ended March 31, 2014, compared with $303,495 in the corresponding period of 2013, primarily due to a non-recurring
sale of chemicals and materials to an unrelated company in the first quarter of 2013.
Consolidated gross profit declined 4% to
approximately $6.0 million (37% of total revenues) in the three months ended March 31, 2014, versus approximately $6.2 million
(38% of total revenues) in the three months ended March 31, 2013. Gross profit on retail revenues declined 11% to approximately
$3.2 million in the most recent quarter (52% of retail revenues), compared with approximately $3.6 million (56% of retail revenues)
in the year-earlier period. Gross profit on bulk revenues increased 7% to approximately $2.8 million (29% of bulk revenues), compared
with approximately $2.7 million (27% of bulk revenues) a year earlier. The services segment recorded a negative gross profit of
($59,351) in the 2014 quarter, compared with a negative gross profit of ($9,030) in the first quarter of 2013.
Consolidated general and administrative
expenses (“G&A”) increased 50% to approximately $5.3 million in the first quarter of 2014, compared with approximately
$3.6 million in the year-earlier quarter, reflecting an approximate $1.5 million increase in NSC’s project development costs
attributable primarily to a $1 million payment on an option agreement and a $350,000 payment resulting from a decision not to extend
a letter of intent with an engineering, procurement and construction contractor. G&A expense increases also included $120,000
in additional professional fees, $124,000 in higher base salaries, and an increase of $27,000 in information technology expenses.
Interest income remained relatively consistent
at $172,932 for the first quarter of 2014, versus $180,088 in the first quarter of 2013. Interest expense increased to $295,737
in the three months ended March 31, 2014, up from $135,425 in the prior-year quarter, reflecting the prepayment premium paid for
the early redemption on February 17, 2014 of the remaining outstanding balance on the Company’s bonds payable and the amortization
of the related bond discount and deferred issuance costs.
The Company recognized earnings and profit
sharing on its investment in OC-BVI of $74,739 in the first quarter of 2014, compared with $1,075,320 in the first quarter of 2013.
The additional earnings and profit sharing recognized in the 2013 quarter from this equity investment resulted from the payment
by the British Virgin Islands government to OC-BVI in January 2013 of the remaining $2.0 million of the amount awarded OC-BVI as
a result of the resolution of the Baughers Bay litigation.
Management Comments
“Two factors had a significant impact
on the comparability of our first quarter results for 2014 and 2013,” noted Rick McTaggart, Chief Executive Officer of Consolidated
Water Co. Ltd. “In February 2014, we paid $1 million to a previous NSC shareholder to exercise an option and avoid dilution
of our existing ownership in our Mexican subsidiary, NSC, which increased our general and administrative costs for the quarter.
This was a one-time expense that kept our ownership in the Mexican desalination project at 99.95%. Meanwhile, last year’s
first quarter results benefited from the receipt by our OC-BVI affiliate of a $2.0 million payment from the British Virgin Islands
government that was related to the resolution of the Baughers Bay litigation. These factors, combined with lower operating income
for our retail segment and higher project development expenses at our Mexican subsidiary, were responsible for the decrease in
profitability in the first quarter of 2014, relative to the prior-year period.”
“The profitability of our bulk water
operations improved during the most recent quarter, as gross profit increased in dollar terms and as a percentage of revenues due
to a very respectable increase in our Cayman Islands bulk water gross margin from 24% to 30% due to higher plant utilizations.
Revenues and gross profit of our retail water segment in the Cayman Islands was adversely impacted by a 12-fold increase in rainfall
during the first quarter of this year when compared to the same period in 2013.”
“We have been awarded three contracts
this year by the Water Authority-Cayman in the Cayman Islands. The first is a new contract to refurbish the 800,000 gallon per
day Lower Valley desalination plant in Grand Cayman, Cayman Islands. The second is a one-year extension through April 1, 2015 of
the operating and maintenance contract for the 1.6 million gallon per day North Sound plant in Grand Cayman. Finally, we entered
into a new contract to provide a 60,000 gallon per day desalination plant in Cayman Brac, Cayman Islands. The Lower Valley
and Cayman Brac contracts were awarded to us through a competitive tendering process that included a number of overseas suppliers.
This firmly underscored our competitiveness in our home market. The Lower Valley project will be completed during the first
quarter of 2015, and completion of the Cayman Brac project is scheduled later this year,” concluded Mr. McTaggart.
Cash Dividends
On April 30, 2014, the Company paid a
quarterly cash dividend of $0.075 per share for the 20th consecutive quarter. 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 13, 2014. 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 Conference Call” a few minutes before 11:00 a.m.
EDT on May 13, 2014.
A replay of the conference call will
be available one hour after the call through Tuesday, May 20, 2014 by dialing 877-344-7529
(international/local participants dial 412-317-0088) and entering the conference ID # 10045961, 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 info@cwco.com
or
RJ Falkner & Company, Inc., Investor
Relations Counsel at (800) 377-9893 or
via e-mail at info@rjfalkner.com
(Financial Highlights Follow)
CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
March 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash and cash equivalents | |
$ | 24,693,011 | | |
$ | 33,626,516 | |
Certificate of deposit | |
| 1,000,000 | | |
| - | |
Marketable securities | |
| 8,596,543 | | |
| 8,587,475 | |
Accounts receivable, net | |
| 23,815,493 | | |
| 18,859,560 | |
Inventory | |
| 1,370,036 | | |
| 1,383,135 | |
Prepaid expenses and other current assets | |
| 2,490,098 | | |
| 3,435,127 | |
Current portion of loans receivable | |
| 1,644,436 | | |
| 1,691,102 | |
Total current assets | |
| 63,609,617 | | |
| 67,582,915 | |
| |
| | | |
| | |
Property, plant and equipment, net | |
| 57,881,089 | | |
| 58,602,886 | |
Construction in progress | |
| 1,729,638 | | |
| 1,450,417 | |
Inventory, non-current | |
| 4,243,526 | | |
| 4,204,089 | |
Loans receivable | |
| 6,916,027 | | |
| 7,337,177 | |
Investment in OC-BVI | |
| 5,970,987 | | |
| 6,623,448 | |
Intangible assets, net | |
| 1,044,966 | | |
| 1,096,488 | |
Goodwill | |
| 3,499,037 | | |
| 3,499,037 | |
Investment in land | |
| 12,175,566 | | |
| 12,175,566 | |
Other assets | |
| 2,683,742 | | |
| 2,792,831 | |
Total assets | |
$ | 159,754,195 | | |
$ | 165,364,854 | |
| |
| | | |
| | |
LIABILITIES AND EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and other current liabilities | |
$ | 6,768,431 | | |
$ | 7,157,896 | |
Dividends payable | |
| 1,165,032 | | |
| 1,164,026 | |
Current portion of long term debt | |
| - | | |
| 5,205,167 | |
Land purchase obligation | |
| 10,050,000 | | |
| 10,050,000 | |
Total current liabilities | |
| 17,983,463 | | |
| 23,577,089 | |
Other liabilities | |
| 264,827 | | |
| 289,392 | |
Total liabilities | |
| 18,248,290 | | |
| 23,866,481 | |
Commitments and contingencies | |
| | | |
| | |
Equity | |
| | | |
| | |
Consolidated Water Co. Ltd. stockholders' equity | |
| | | |
| | |
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 37,408 and 37,408 shares, respectively | |
| 22,445 | | |
| 22,445 | |
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,698,499 and 14,686,197 shares, respectively | |
| 8,819,099 | | |
| 8,811,718 | |
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued or outstanding | |
| - | | |
| - | |
Additional paid-in capital | |
| 83,607,653 | | |
| 83,381,387 | |
Retained earnings | |
| 46,705,864 | | |
| 47,155,548 | |
Cumulative translation adjustment | |
| (376,550 | ) | |
| (471,983 | ) |
Total Consolidated Water Co. Ltd. stockholders' equity | |
| 138,778,511 | | |
| 138,899,115 | |
Non-controlling interests | |
| 2,727,394 | | |
| 2,599,258 | |
Total equity | |
| 141,505,905 | | |
| 141,498,373 | |
Total liabilities and equity | |
$ | 159,754,195 | | |
$ | 165,364,854 | |
CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(UNAUDITED)
| |
Three Months Ended March 31, | |
| |
2014 | | |
2013 | |
Retail water revenues | |
$ | 6,112,961 | | |
$ | 6,395,012 | |
Bulk water revenues | |
| 9,959,736 | | |
| 9,856,690 | |
Services revenues | |
| 275,913 | | |
| 303,495 | |
Total revenues | |
| 16,348,610 | | |
| 16,555,197 | |
| |
| | | |
| | |
Cost of retail revenues | |
| 2,931,376 | | |
| 2,834,752 | |
Cost of bulk revenues | |
| 7,111,545 | | |
| 7,187,413 | |
Cost of services revenues | |
| 335,264 | | |
| 312,525 | |
Total cost of revenues | |
| 10,378,185 | | |
| 10,334,690 | |
Gross profit | |
| 5,970,425 | | |
| 6,220,507 | |
General and administrative expenses | |
| 5,342,633 | | |
| 3,568,936 | |
Income from operations | |
| 627,792 | | |
| 2,651,571 | |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Interest income | |
| 172,932 | | |
| 180,088 | |
Interest expense | |
| (295,737 | ) | |
| (132,425 | ) |
Profit sharing income from OC-BVI | |
| 20,250 | | |
| 287,459 | |
Equity in earnings of OC-BVI | |
| 54,489 | | |
| 787,861 | |
Other | |
| 198,296 | | |
| 89,133 | |
Other income (expense), net | |
| 150,230 | | |
| 1,212,116 | |
Net income | |
| 778,022 | | |
| 3,863,687 | |
Income attributable to non-controlling interests | |
| 123,113 | | |
| 121,684 | |
Net income attributable to Consolidated Water Co. Ltd. stockholders | |
$ | 654,909 | | |
$ | 3,742,003 | |
| |
| | | |
| | |
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders | |
$ | 0.04 | | |
$ | 0.26 | |
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders | |
$ | 0.04 | | |
$ | 0.26 | |
Dividends declared per common share | |
$ | 0.075 | | |
$ | 0.075 | |
| |
| | | |
| | |
Weighted average number of common shares used in the determination of: | |
| | | |
| | |
Basic earnings per share | |
| 14,686,744 | | |
| 14,598,096 | |
Diluted earnings per share | |
| 14,766,985 | | |
| 14,635,334 | |
CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| |
Three Months Ended March 31, | |
| |
2014 | | |
2013 | |
Net Income | |
$ | 778,022 | | |
$ | 3,863,687 | |
Other comprehensive income (loss) | |
| | | |
| | |
Foreign currency translation adjustment | |
| 100,456 | | |
| (22,703 | ) |
Total other comprehensive income (loss) | |
| 100,456 | | |
| (22,703 | ) |
Comprehensive income | |
| 878,478 | | |
| 3,840,984 | |
Comprehensive income attributable to the non-controlling interest | |
| 128,136 | | |
| 120,549 | |
Comprehensive income attributable to Consolidated Water Co. Ltd. stockholders | |
$ | 750,342 | | |
$ | 3,720,435 | |
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