SOURCE: Consolidated Water Co. Ltd.

Consolidated Water Co. Ltd.

March 16, 2015 08:28 ET

Consolidated Water Co. Ltd. Reports 2014 Operating Results

New Milestones Reached in Mexico Desalination Plant Development Project

GEORGE TOWN, GRAND CAYMAN, CAYMAN ISLANDS--(Marketwired - Mar 16, 2015) - Consolidated Water Co. Ltd. (NASDAQ: 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.

(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  
                         
                         

Contact Information

  • For further information, please contact:

    Frederick W. McTaggart
    President and CEO
    (345) 945-4277

    or

    David W. Sasnett
    Executive Vice President and CFO
    (954) 509-8200
    or via e-mail at info@cwco.com

    or

    RJ Falkner & Company, Inc.
    Investor Relations Counsel
    (800) 377-9893 or
    via e-mail at info@rjfalkner.com