SOURCE: Consolidated Water Co. Ltd.

Consolidated Water Co. Ltd.

November 09, 2015 17:35 ET

Consolidated Water Co. Ltd. Reports Third Quarter Operating Results

GEORGE TOWN, GRAND CAYMAN, CAYMAN ISLANDS--(Marketwired - Nov 9, 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 third quarter and first nine months of 2015. The Company will host an investor conference call on Tuesday, November 10, 2015 at 11:00 a.m. Eastern Time (see details below) to discuss its operating results and other topics of interest.

Third Quarter Operating Results

Net income attributable to the Company's stockholders totaled $1,775,500, or $0.12 per diluted share, for the quarter ended September 30, 2015, compared with $1,882,692, or $0.13 per diluted share, for the quarter ended September 30, 2014.

Total revenues declined by approximately 14% to $14.6 million in the third quarter of 2015, compared with approximately $17.0 million in the third quarter of 2014. The decrease in revenues was attributable to lower revenues in all three of the Company's business segments.

Retail water revenues totaled approximately $5.8 million in the third quarter of 2015, compared with approximately $5.9 million in the prior-year period. While the volume of water sold by the retail segment was comparable with prior-year levels, revenues declined due to a decrease in electricity prices from 2014 to 2015 that reduced the energy component of the Company's retail water rates. Under the terms of the Company's retail license, a portion of the rates it charges customers is adjusted upward or downward consistent with movements in the price the Company pays for electricity.

Bulk water revenues were approximately $7.9 million in the third quarter of 2015, compared with approximately $9.9 million in the year-earlier period. The decrease in bulk revenues was attributable to both the Bahamas and Cayman operations, where revenues decreased by approximately $1,444,000 and $487,000, respectively, from the prior-year period. The 2015 revenue decrease for bulk operations resulted from declines of 14% and 4% in the volumes of water sold by the Bahamas and Cayman operations, respectively, as well as from significant decreases in the prices of diesel fuel and electricity from 2014 to 2015 that reduced the energy component of the Company's bulk water rates. Lower volumes of water sold in the Bahamas reflected continuing water conservation and loss mitigation efforts by the Water and Sewerage Corporation of the Bahamas. Lower volumes of water sold in the Cayman Islands resulted from a decrease in demand from the Water Authority - Cayman ("WAC"). 

Services segment revenues declined to $857,441 in the most recent quarter, compared with $1,178,710 a year earlier. The decrease was due to declines in plant construction revenues and lower procurement services fees.

Consolidated gross profit decreased to approximately $5.5 million (38% of total revenues) in the most recent quarter, versus approximately $5.7 million (33% of total revenues) in the 2014 quarter. Gross profit on retail revenues increased slightly to approximately $3.1 million (53% of retail revenues) in the three months ended September 30, 2015, compared with approximately $3.0 million (50% of retail revenues) in the year-earlier period. The slight improvement in retail gross profit margin as a percentage of revenues was due to improved operating efficiencies and lower energy costs in 2015 as compared to 2014. Gross profit on bulk revenues declined to approximately $2.3 million (29% of bulk revenues), compared with approximately $2.8 million (28% of bulk revenues) a year earlier. Total gross profit dollars from bulk operations decreased due to lower revenues in 2015. The services segment incurred a gross profit of $195,240 in the third quarter of 2015, compared with a negative gross profit of ($83,236) in the prior-year quarter.

The retail segment contributed $442,809 and $250,658 to the Company's income from operations in the third quarters of 2015 and 2014, respectively. The bulk segment contributed $1,917,226 to income from operations in the third quarter of 2015, compared with $2,282,396 in the prior-year quarter. The services segment incurred an operating loss of ($206,259) in the most recent quarter, versus an operating loss of ($817,695) in the third quarter of 2014. The services segment is expected to continue to incur losses from operations while the Company continues to fund 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") decreased to approximately $3.4 million in the third quarter of 2015, compared with approximately $4.0 million a year earlier. The lower G&A expenses in the third quarter of 2015, relative to the prior-year quarter of 2014, primarily resulted from a $163,000 decrease in legal fees related to retail license negotiations in the Cayman Islands and a $312,000 reduction in project development expenses incurred by NSC.

Interest income decreased to $270,830 in the three months ended September 30, 2015, compared with $334,499 in the same 2014 quarter, due to lower interest earned on delinquent receivables in 2015.

The Company recognized earnings and profit sharing on its equity investment in Ocean Conversion (BVI) Ltd. ("OC-BVI") of $101,644 in the third quarter of 2015, compared with $111,855 in the third quarter of 2014. As a result of the projected declining cash flows from OC-BVI's Bar Bay contract, the Company recorded an impairment charge of $225,000 in the third quarter of 2015 to reduce the carrying value of its equity investment in OC-BVI to its estimated fair value. 

Other expense increased to $383,511 for the third quarter of 2015 from $101,297 for the third quarter of 2014 due to incremental foreign currency losses of approximately $225,000 recorded for the Company's CW-Bali subsidiary.

Management Comments

"The improvement to income from operations in the most recent quarter was due to a reduction in general and administrative expenses related to our development project in Mexico," stated Mr. Rick McTaggart, Chief Executive Officer of Consolidated Water Co. Ltd. "However, net income declined slightly, from approximately $1.9 million in the third quarter of 2014 to $1.8 million in the third quarter of 2015, due to a $225,000 non-cash impairment charge in the 2015 quarter against our investment in OC-BVI, as well as higher foreign currency losses for our Bali, Indonesia operations."

"I am pleased to report that negotiations between the Company and the Cayman Islands Regulator for our new water utility license recommenced in earnest this past quarter. Earlier this year, our existing license was extended through December 31, 2015 to facilitate negotiations for the new license. We are encouraged by the present tone and the constructiveness of these renewed negotiations."

"I am also very pleased to announce that our 100 million gallon-per-day desalination plant project in Baja California, Mexico reached two very important milestones within the past several months," continued Mr. McTaggart.

"Firstly, in response to our March 2015 APP Proposal, we received a letter dated June 30, 2015 from the Director General of the Baja California State Water Commission ("CEA"), the state agency with responsibility for the Project, in which the CEA stated that our project is in the public interest with high social benefits, and is consistent with the objectives of the State Development Plan, and therefore the Project should proceed and the required public tender should be called."

"Consequently, on Friday, November 6, 2015, the State of Baja California, Mexico, officially commenced the tender for the Project and has set March 23, 2016 as the tender submission date. The State tendering process requires that bidders provide certain legal, technical and financial qualifications in order to obtain the tender documents. We are currently working through this process with our Project partners and look forward to providing a fully responsive and competitive tender to the State. After spending more than five years and approximately $37 million developing this very important project for the region, we are extremely pleased that the Rosarito Project has reached these major milestones and we will keep investors updated on any material developments related to this Project," concluded Mr. McTaggart.

Nine-Month Operating Results

Net income attributable to the Company's stockholders increased 12% to $5,924,861, or $0.40 per diluted share, for the nine months ended September 30, 2015, compared with $5,297,294, or $0.36 per diluted share, for the first nine months of 2014.

Total revenues were approximately $43.8 million in the first nine months of 2015, compared with approximately $50.3 million in the corresponding period of the previous year. The decrease in revenues was attributable to lower revenues in all three of the Company's business segments.

Retail water revenues declined modestly to approximately $18.1 million for the nine months ended September 30, 2015, compared with approximately $18.5 million in the prior-year period. The decrease in revenues was attributable to a decrease in electricity prices from 2014 to 2015 that reduced the energy component of the Company's retail water rates.

Bulk water revenues declined to approximately $24.5 million in the nine months ended September 30, 2015, compared with approximately $29.8 million in the year-earlier period. The decrease in bulk revenues was attributable to both the Bahamas and Cayman operations, where the volumes of water sold decreased 12% and 3%, respectively, from the prior-year period. Also, significant decreases in the prices of diesel fuel and electricity from 2014 to 2015 reduced the energy component of the Company's bulk water rates. 

Services segment revenues totaled $1,151,810 in the first nine months of 2015, compared with $1,921,004 a year earlier. The decrease was due to declines in plant construction revenues of approximately $549,000 and procurement services fees of approximately $220,000.

Consolidated gross profit declined to approximately $17.5 million (40% of total revenues) in the most recent nine-month period, versus approximately $18.0 million (36% of total revenues) in the first nine months of 2014. Gross profit on retail revenues remained consistent at approximately $9.7 million (54% of retail revenues) in the nine months ended September 30, 2015, compared with approximately $9.6 million (51% of retail revenues) in the year-earlier period. Gross profit on bulk revenues declined to approximately $7.8 million (32% of bulk revenues), compared with approximately $8.7 million (29% of bulk revenues) a year earlier. The services segment incurred a negative gross profit of ($8,026) in the first nine months of 2015, compared with a negative gross profit of ($222,595) in the prior-year period. 

The retail segment contributed $1,640,683 and $1,080,496 to the Company's income from operations in the first nine months of 2015 and 2014, respectively. The bulk segment contributed $6,574,093 to income from operations in the first nine months of 2015, compared with $7,440,494 in the corresponding period of 2014. The services business segment incurred an operating loss of ($1,501,944) in the nine months ended September 30, 2015, versus an operating loss of ($3,588,954) in the year-earlier period. The services segment is expected to continue to incur losses from operations while the Company continues to fund the project development activities of its Mexico subsidiary, NSC, and/or until such time as significant new management services or plant construction contracts are obtained.

Consolidated G&A declined to approximately $10.8 million in the 2015 nine-month period, compared with approximately $13.1 million a year earlier. The decrease in G&A expenses in the first nine months of 2015, relative to the 2014 period, of approximately $2.3 million, resulted primarily from a $461,000 decrease in professional fees related to the judicial review conducted in connection with the retail license negotiations in the Cayman Islands and an approximate $1,802,000 reduction in project development expenses incurred by NSC.

Interest expense decreased to $204,027 in the nine months ended September 30, 2015, compared with $413,783 in the 2014 period, reflecting the prepayment premium paid for the early redemption in February 2014 on the remaining outstanding balance on the Company's bonds payable and the amortization of the related bond discount and deferred issuance costs. 

As a result of the declining cash flows projected from its Bar Bay contract, the Company recorded impairment charges during the first nine months of 2015 aggregating $810,000 to reduce the carrying value of its investment in OC-BVI to its estimated fair value.

Other expense increased to $530,618 for the first nine months of 2015 from $20,804 for same period of 2014 due to incremental foreign currency losses of approximately $471,000 recorded for CW-Bali.

Cash Dividends

On October 31, 2015, the Company paid a quarterly cash dividend of $0.075 per share to shareholders of record at the close of business on October 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 (EST) on Tuesday, November 10, 2015 to discuss its operating results for the third quarter and first nine months of 2015, along with 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. EST on Tuesday, November 10, 2015.

A replay of the conference call will be available one hour after the call through 9:00 a.m. EST on Tuesday, November 17, 2015 by dialing 877-344-7529 (international/local participants dial 412-317-0088) and entering the conference ID # 10075644, 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
             
    September 30,     December 31,  
    2015     2014  
    (Unaudited)        
ASSETS                
Current assets                
  Cash and cash equivalents   $ 40,766,125     $ 35,713,689  
  Certificate of deposit     5,637,538       5,000,000  
  Restricted cash     433,218       456,083  
  Accounts receivable, net     9,914,534       11,773,744  
  Inventory     1,745,946       1,738,382  
  Prepaid expenses and other current assets     1,985,965       1,612,860  
  Current portion of loans receivable     1,812,261       1,726,310  
  Costs and estimated earnings in excess of billings - construction projects     1,499,384       1,090,489  
Total current assets     63,794,971       59,111,557  
Property, plant and equipment, net     53,761,233       56,396,988  
Construction in progress     2,529,161       1,900,016  
Inventory, non-current     4,478,029       4,240,977  
Loans receivable     4,240,725       5,610,867  
Investment in OC-BVI     4,686,670       5,208,603  
Intangible assets, net     810,834       927,900  
Goodwill     3,499,037       3,499,037  
Land held for development     20,558,424       20,558,424  
Other assets     2,793,238       3,005,462  
Total assets   $ 161,152,322     $ 160,459,831  
                 
LIABILITIES AND EQUITY                
Current liabilities                
Accounts payable and other current liabilities   $ 4,938,617     $ 5,962,015  
Dividends payable     1,192,867       1,190,325  
Demand loan payable     7,500,000       9,000,000  
Total current liabilities     13,631,484       16,152,340  
Other liabilities     224,827       224,827  
Total liabilities     13,856,311       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 39,164 and 36,840 shares, respectively     23,498       22,104  
  Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,750,800 and 14,715,899 shares, respectively     8,850,480       8,829,539  
  Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued     -       -  
  Additional paid-in capital     84,303,569       83,779,292  
  Retained earnings     51,601,238       49,000,621  
  Cumulative translation adjustment     (525,352 )     (482,388 )
Total Consolidated Water Co. Ltd. stockholders' equity     144,253,433       141,149,168  
Non-controlling interests     3,042,578       2,933,496  
Total equity     147,296,011       144,082,664  
Total liabilities and equity   $ 161,152,322     $ 160,459,831  
                 
                 
 
CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
             
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2015     2014     2015     2014  
Retail revenues   $ 5,828,288     $ 5,936,623     $ 18,116,111     $ 18,548,841  
Bulk revenues     7,919,920       9,905,723       24,489,509       29,831,653  
Services revenues     857,441       1,178,710       1,151,810       1,921,004  
  Total revenues     14,605,649       17,021,056       43,757,430       50,301,498  
                                 
Cost of retail revenues     2,752,358       2,945,756       8,400,744       8,996,615  
Cost of bulk revenues     5,644,699       7,113,039       16,727,592       21,120,498  
Cost of services revenues     662,201       1,261,946       1,159,836       2,143,599  
  Total cost of revenues     9,059,258       11,320,741       26,288,172       32,260,712  
Gross profit     5,546,391       5,700,315       17,469,258       18,040,786  
General and administrative expenses     3,392,615       3,984,956       10,756,426       13,108,750  
Income from operations     2,153,776       1,715,359       6,712,832       4,932,036  
                                 
Other income (expense):                                
  Interest income     270,830       334,499       762,613       874,203  
  Interest expense     (66,566 )     (70,515 )     (204,027 )     (413,783 )
  Profit sharing income from OC-BVI     28,350       30,375       76,950       81,000  
  Equity in earnings of OC-BVI     73,294       81,480       211,117       221,809  
  Impairment of investment in OC-BVI     (225,000 )     -       (810,000 )     -  
  Other     (383,511 )     (101,297 )     (530,618 )     (20,804 )
    Other income (expense), net     (302,603 )     274,542       (493,965 )     742,425  
Net income     1,851,173       1,989,901       6,218,867       5,674,461  
Income attributable to non-controlling interests     75,673       107,209       294,006       377,167  
Net income attributable to Consolidated Water Co. Ltd. stockholders   $ 1,775,500     $ 1,882,692     $ 5,924,861     $ 5,297,294  
                                 
Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders   $ 0.12     $ 0.13     $ 0.40     $ 0.36  
                                 
Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders   $ 0.12     $ 0.13     $ 0.40     $ 0.36  
                                 
Dividends declared per common share   $ 0.075     $ 0.075     $ 0.225     $ 0.225  
                                 
Weighted average number of common shares used in the determination of:                                
  Basic earnings per share     14,749,249       14,700,939       14,734,799       14,695,446  
  Diluted earnings per share     14,802,322       14,763,914       14,787,904       14,764,127  
                                   
                                   
 
CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
 
           
    Three Months Ended September 30,     Nine Months Ended September 30,
    2015     2014     2015     2014
Net income   $ 1,851,173     $ 1,989,901     $ 6,218,867     $ 5,674,461
Other comprehensive income (loss)                              
  Foreign currency translation adjustment     (2,475 )     (29,873 )     (45,226 )     6,473
  Total other comprehensive income (loss)     (2,475 )     (29,873 )     (45,226 )     6,473
Comprehensive income     1,848,698       1,960,028       6,173,641       5,680,934
Comprehensive income attributable to non-controlling interests     75,550       105,716       291,745       377,491
Comprehensive income attributable to Consolidated Water Co. Ltd. stockholders   $ 1,773,148     $ 1,854,312     $ 5,881,896     $ 5,303,443
                               

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
    info@cwco.com

    or

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