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, 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, 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 March 16, 2015, Consolidated Water Co.
Ltd. (the “Company”) issued a press release announcing its results of operations for the fiscal year ended December
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. |
| Exhibit No. |
|
Title |
| |
|
|
| 99.1 |
|
Press release issued by the Company on March 16, 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: March 16, 2015 |
|
|
EXHIBIT INDEX
| Exhibit |
|
Description |
| |
|
|
| 99.1 |
|
Press release issued by the Company on March 16, 2015. |
Exhibit 99.1
CONSOLIDATED WATER CO. LTD.
REPORTS 2014 OPERATING RESULTS
NEW MILESTONES REACHED IN MEXICO DESALINATION
PLANT DEVELOPMENT PROJECT
GEORGE TOWN, Grand Cayman, Cayman Islands
(March 16, 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 year ended December 31, 2014. The Company will host an investor conference call on Tuesday, March 17, 2015 at 11:00 a.m.
EDT (see details below) to discuss its operating results and other topics of interest.
2014 Operating Results
Net income attributable to the Company’s
stockholders decreased to $6,265,358, or $0.42 per diluted share, for the year ended December 31, 2014, compared with net income
attributable to CWCO stockholders of $8,594,519, or $0.58 per diluted share, for the year ended December 31, 2013.
Total revenues increased 3% to approximately
$65.6 million in 2014, compared with approximately $63.8 million in the previous year. The increase in revenues was attributable
to higher revenues for the Company’s retail and services business segments.
Retail water revenues increased 5% to approximately
$24.1 million in the year ended December 31, 2014, versus approximately $23.0 million in 2013. The expansion in retail revenues
was primarily due to an approximate 3% increase in the number of gallons of water sold by the Company’s retail operations
in the Cayman Islands, along with an increase of approximately $328,000 in revenues generated by the Company’s retail operations
in Bali, Indonesia.
Bulk water revenues declined 2% to approximately
$39.2 million in 2014, compared with approximately $40.0 million in 2013. The decrease in bulk revenues of approximately $759,000
was attributable to the Company’s Bahamas operations, which generated approximately $2.5 million less in revenues in 2014
than in the previous year. The decrease in the volume of water sold by the Company’s Bahamas operations to the Water and
Sewerage Corporation of The Bahamas (“WSC”) was partially offset by an increase in revenues from the Cayman bulk water
operations. In 2013, the WSC purchased water volumes from the Company’s Blue Hills plant that were significantly higher than
the minimum amounts it was required to purchase under the water supply agreement for the plant. However, as a result of water conservation
and loss mitigation efforts implemented since 2012, the WSC has reduced the amount of water lost by its distribution system and
consequently in 2014 decreased the volume of water it purchased from the Blue Hills plant. However, the WSC continued to purchase
more than the minimum amount stipulated in its contract with the Company. Revenues generated by the Company’s Cayman bulk
operations increased by $1.7 million due to a 23% increase in gallons of water sold, due to the temporary closing (for refurbishment)
of the one plant owned by the Water Authority-Cayman that the Company no longer operates.
Services segment revenues increased to
$2,253,135 in 2014, compared with $843,413 in 2013, primarily due to construction revenues generated from contracts with the Water
Authority-Cayman to refurbish its Lower Valley plant and to build a plant on the island of Cayman Brac.
Consolidated gross profit declined slightly
to approximately $23.1 million (35% of total revenues) in 2014, versus approximately $23.5 million (37% of total revenues) in 2013.
Gross profit on retail revenues was relatively unchanged at approximately $12.1 million (50% of retail revenues) in 2014, compared
with approximately $12.0 million (52% of retail revenues) in 2013. The decline in retail gross profit margin as a percentage of
sales was due to higher plant and pipeline maintenance costs for the Company’s Cayman operations and a negative gross profit
for the Company’s Bali operations. Gross profit on bulk revenues declined 3% to approximately $11.3 million (29% of bulk
revenues) in 2014, compared with approximately $11.7 million (29% of bulk revenues) a year earlier. Gross profit as a percentage
of bulk water sales remained relatively constant as greater gross profit for the Company’s Cayman bulk operations in 2014
mitigated the lower gross profit for its Bahamas bulk operations. The services segment generated a negative gross profit of ($327,125)
in 2014, compared with a negative gross profit of ($236,847) in the previous year.
The services business segment incurred
operating losses of approximately ($4.2 million) in 2014 and approximately ($3.6 million) in 2013. The services segment is expected
to continue to incur losses from operations while the Company funds the project development activities of its Mexico subsidiary,
N.S.C. Agua, S.A. de C.V. (“NSC”) and/or until such time as significant new management services or plant construction
contracts are obtained.
Consolidated general and administrative
expenses (“G&A”) increased 5% to approximately $16.7 million in 2014, compared with approximately $15.8 million
in the previous year. The increase in consolidated G&A expenses in 2014 resulted from an increase of approximately $544,000
in project development expenses incurred by NSC and an approximate $378,000 increase in consulting and legal fees related to the
judicial review conducted in conjunction with retail license negotiations in the Cayman Islands. These increases were partially
offset by decreases of approximately $108,000 in non-Mexico-related business development costs and an approximate $91,000 reduction
in research and development expenses.
Interest income increased to $1,440,631
in 2014, from $826,570 in 2013, due to interest on past due accounts receivables from the WSC. Interest expense was relatively
unchanged at $488,770 and $484,057 in 2014 and 2013, respectively.
The Company recognized earnings and profit
sharing on its equity investment in OC-BVI of $414,755 in 2014, compared with $1,337,352 in 2013. The additional earnings and profit
sharing recognized in 2013 from the equity investment in OC-BVI resulted from the payment by the British Virgin Islands government
to OC-BVI in January 2013 of $2.0 million of the amount awarded to OC-BVI as a result of the Baughers Bay litigation.
The Company recorded impairment losses
on its investment in OC-BVI of $860,000 and $200,000 in 2014 and 2013, respectively.
Management Comments
“We reported higher revenues for
the year ended December 31, 2014,” stated Mr. Rick McTaggart, Chief Executive Officer of Consolidated Water Co. Ltd., “as
an increase in retail revenues, including a resumption of growth in water sales within our license area in the Cayman Islands after
a recent decline, combined with higher services segment revenues, more than offset a slight decline in bulk water segment revenues
that reflected the success of a water loss mitigation program undertaken by our customer in the Bahamas. A significant increase
in services segment revenues was due to construction revenues derived from capital projects for the Water Authority-Cayman on the
islands of Grand Cayman and Cayman Brac.”
“Our operating activities generated
$19.3 million in cash during 2014, which allowed us to continue funding development activities related to our 100 million gallon-per-day
seawater desalination project in northern Baja California, Mexico, including the final payment of $17.4 million for the land upon
which the plant will be constructed, while at the same time reducing total liabilities on our balance sheet by 31% to $16.4 million.
As of December 31, 2014, our unrestricted cash and cash equivalents and certificate of deposit of almost $41 million exceeded our
total liabilities by more than $24.3 million, and our stockholders’ equity totaled $141.1 million. We are proud of our balance
sheet, which remains one of the strongest in our industry.”
“Since
the end of 2014, our development project in Mexico has achieved several significant milestones,” continued Mr. McTaggart.
“In January 2015, the Government of Baja California, Mexico, officially accepted our initial expression of interest under
the new Public-Private Associations Law to build a desalination plant and conveyance pipeline at Playas de Rosarito, Baja California,
Mexico and has asked us to develop and submit a detailed proposal. In February 2015, in order
to enhance our chances of successfully completing the development of the Rosarito Project, we partnered with a group of companies
with substantial resources and a history of successful capital project investments in Mexico. These developments were followed
by the February 2015 receipt of the approved environmental permit for our proposed desalination plant from the Mexican environmental
regulatory authority and confirmation from the Municipality of Playas de Rosarito that our application to rezone the project site
to ‘for industrial use’ was approved. We look forward to further progress on the largest development project in our
Company’s history during the remainder of 2015.”
“Finally, I would like to provide
an update on developments in our newest retail market, on the island of Bali, Indonesia. We
successfully completed the expansion of our Bali desalination plant in 2014 to 790,000 gallons per day and are currently evaluating
strategies to increase and smooth out the seasonality of our water sales in this very price-sensitive market. We continue to believe
that there is a significant unfulfilled demand for drinking water in this region, where the Indonesian Government has announced
plans to greatly expand infrastructure and promote tourism in the coming years,” concluded Mr. McTaggart.
Cash Dividends
On February 25, 2015, the Company announced
that it will pay a quarterly cash dividend of $0.075 per share on April 30, 2015 to shareholders of record at the close of business
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, March 17, 2015 to discuss its 2014 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, March 17, 2015.
A replay of the conference call will
be available one hour after the call through 9:00 a.m. EDT on Tuesday, March 24, 2015 by dialing 877-344-7529
(international/local participants dial 412-317-0088) and entering the conference ID # 10061979, 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.
CONSOLIDATED BALANCE
SHEETS
| | |
December 31, | |
| | |
2014 | | |
2013 | |
| ASSETS | |
| | | |
| | |
| Current assets | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 35,713,689 | | |
$ | 33,626,516 | |
| Certificate of deposit | |
| 5,000,000 | | |
| - | |
| Restricted cash | |
| 456,083 | | |
| - | |
| Marketable securities | |
| - | | |
| 8,587,475 | |
| Accounts receivable, net | |
| 11,773,744 | | |
| 18,859,560 | |
| Inventory | |
| 1,738,382 | | |
| 1,383,135 | |
| Prepaid expenses and other current assets | |
| 1,961,385 | | |
| 2,435,127 | |
| Current portion of loans receivable | |
| 1,726,310 | | |
| 1,691,102 | |
| Costs and estimated earnings in excess of billings - construction project | |
| 1,090,489 | | |
| - | |
| Total current assets | |
| 59,460,082 | | |
| 66,582,915 | |
| Property, plant and equipment, net | |
| 56,396,988 | | |
| 58,602,886 | |
| Construction in progress | |
| 1,900,016 | | |
| 1,450,417 | |
| Inventory, non-current | |
| 4,240,977 | | |
| 4,204,089 | |
| Loans receivable | |
| 5,610,867 | | |
| 7,337,177 | |
| Investment in OC-BVI | |
| 5,208,603 | | |
| 6,623,448 | |
| Intangible assets, net | |
| 927,900 | | |
| 1,096,488 | |
| Goodwill | |
| 3,499,037 | | |
| 3,499,037 | |
| Investment in land | |
| 20,558,424 | | |
| 13,175,566 | |
| Other assets | |
| 2,656,937 | | |
| 2,792,831 | |
| Total assets | |
$ | 160,459,831 | | |
$ | 165,364,854 | |
| | |
| | | |
| | |
| LIABILITIES AND EQUITY | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable and other current liabilities | |
$ | 5,962,015 | | |
$ | 7,157,896 | |
| Dividends payable | |
| 1,190,325 | | |
| 1,164,026 | |
| Demand loan payable | |
| 9,000,000 | | |
| - | |
| Current portion of long term debt | |
| - | | |
| 5,205,167 | |
| Land purchase obligation | |
| - | | |
| 10,050,000 | |
| Total current liabilities | |
| 16,152,340 | | |
| 23,577,089 | |
| Other liabilities | |
| 224,827 | | |
| 289,392 | |
| Total liabilities | |
| 16,377,167 | | |
| 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 36,840 and 37,408 shares, respectively | |
| 22,104 | | |
| 22,445 | |
| Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,715,899 and 14,686,197 shares, respectively | |
| 8,829,539 | | |
| 8,811,718 | |
| Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued or outstanding | |
| - | | |
| - | |
| Additional paid-in capital | |
| 83,779,292 | | |
| 83,381,387 | |
| Retained earnings | |
| 49,000,621 | | |
| 47,155,548 | |
| Cumulative translation adjustment | |
| (482,388 | ) | |
| (471,983 | ) |
| Total Consolidated Water Co. Ltd. stockholders' equity | |
| 141,149,168 | | |
| 138,899,115 | |
| Non-controlling interests | |
| 2,933,496 | | |
| 2,599,258 | |
| Total equity | |
| 144,082,664 | | |
| 141,498,373 | |
| Total liabilities and equity | |
$ | 160,459,831 | | |
$ | 165,364,854 | |
CONSOLIDATED WATER CO.
LTD.
CONSOLIDATED STATEMENTS
OF INCOME
| | |
Year
Ended December 31, | |
| | |
2014 | | |
2013 | | |
2012 | |
| Retail water revenues | |
$ | 24,104,932 | | |
$ | 23,018,498 | | |
$ | 24,222,895 | |
| Bulk water revenues | |
| 39,201,011 | | |
| 39,960,220 | | |
| 40,758,182 | |
| Services revenues | |
| 2,253,135 | | |
| 843,413 | | |
| 469,625 | |
| Total
revenues | |
| 65,559,078 | | |
| 63,822,131 | | |
| 65,450,702 | |
| | |
| | | |
| | | |
| | |
| Cost of retail revenues | |
| 12,010,263 | | |
| 11,023,096 | | |
| 11,548,255 | |
| Cost of bulk revenues | |
| 27,853,057 | | |
| 28,212,896 | | |
| 31,679,887 | |
| Cost of services revenues | |
| 2,580,260 | | |
| 1,080,260 | | |
| 230,118 | |
| Total
cost of revenues | |
| 42,443,580 | | |
| 40,316,252 | | |
| 43,458,260 | |
| Gross profit | |
| 23,115,498 | | |
| 23,505,879 | | |
| 21,992,442 | |
| General and administrative expenses | |
| 16,654,439 | | |
| 15,844,303 | | |
| 14,542,817 | |
| Impairment losses | |
| - | | |
| - | | |
| 521,444 | |
| Income
from operations | |
| 6,461,059 | | |
| 7,661,576 | | |
| 6,928,181 | |
| | |
| | | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | | |
| | |
| Interest income | |
| 1,440,631 | | |
| 826,570 | | |
| 835,941 | |
| Interest expense | |
| (488,770 | ) | |
| (484,057 | ) | |
| (876,971 | ) |
| Profit sharing income
from OC-BVI | |
| 111,375 | | |
| 357,636 | | |
| 343,454 | |
| Equity in earnings of
OC-BVI | |
| 303,380 | | |
| 979,716 | | |
| 2,121,319 | |
| Impairment of investment
in OC-BVI | |
| (860,000 | ) | |
| (200,000 | ) | |
| - | |
| Other | |
| (203,135 | ) | |
| 7,048 | | |
| 272,085 | |
| Other
income (expense), net | |
| 303,481 | | |
| 1,486,913 | | |
| 2,695,828 | |
| Net income | |
| 6,764,540 | | |
| 9,148,489 | | |
| 9,624,009 | |
| Income
attributable to non-controlling interests | |
| 499,182 | | |
| 553,970 | | |
| 308,495 | |
| Net
income attributable to Consolidated Water Co. Ltd. stockholders | |
$ | 6,265,358 | | |
$ | 8,594,519 | | |
$ | 9,315,514 | |
| | |
| | | |
| | | |
| | |
| Basic
earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders | |
$ | 0.43 | | |
$ | 0.59 | | |
$ | 0.64 | |
| Diluted
earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders | |
$ | 0.42 | | |
$ | 0.58 | | |
$ | 0.64 | |
| Dividends declared
per common share | |
$ | 0.30 | | |
$ | 0.30 | | |
$ | 0.30 | |
| | |
| | | |
| | | |
| | |
| Weighted average number of common shares
used in the determination of: | |
| | | |
| | | |
| | |
| Basic earnings per
share | |
| 14,697,896 | | |
| 14,633,884 | | |
| 14,578,518 | |
| Diluted earnings
per share | |
| 14,764,323 | | |
| 14,703,880 | | |
| 14,606,148 | |
CONSOLIDATED WATER CO. LTD.
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
| | |
Year Ended December 31, | |
| | |
2014 | | |
2013 | | |
2012 | |
| Net Income | |
$ | 6,764,540 | | |
$ | 9,148,489 | | |
$ | 9,624,009 | |
| Other comprehensive income (loss) | |
| | | |
| | | |
| | |
| Foreign currency translation adjustment | |
| (10,953 | ) | |
| (480,614 | ) | |
| (16,210 | ) |
| Total other comprehensive income (loss) | |
| (10,953 | ) | |
| (480,614 | ) | |
| (16,210 | ) |
| Comprehensive income | |
| 6,753,587 | | |
| 8,667,875 | | |
| 9,607,799 | |
| Comprehensive income attributable to non-controlling interests | |
| 498,634 | | |
| 529,939 | | |
| 307,685 | |
| Comprehensive income attributable to Consolidated Water Co. Ltd. stockholders | |
$ | 6,254,953 | | |
$ | 8,137,936 | | |
$ | 9,300,114 | |
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