Consolidated Water Reports Second Quarter Results
GEORGE TOWN, Cayman Islands, Aug. 9, 2017 /PRNewswire/ -- Consolidated Water Co. Ltd. (NASDAQ: CWCO), a leading developer and operator of seawater desalination plants, reported financial and operating results for the second quarter ended June 30, 2017.
Management Commentary
"Our second quarter results reflect the stability of existing desalination operations and our continued investment in the development of our large Rosarito, Mexico project," said Rick McTaggart, Chief Executive Officer. "Our desalination operations, which reflect the positive outcome of negotiations over the past 12 months to extend four bulk water contracts, continue to meet expectations and provide a solid foundation for our other initiatives. Manufacturing segment results reflected lower sales this past quarter, but we are encouraged by an increase in orders that we expect will positively impact sales for this segment in the second half of 2017.
Net income from continuing operations continues to reflect our ongoing Rosarito project development costs. The decline compared to last year's second quarter was primarily due to lower revenues from our retail and services segments resulting in a modest decline in gross profit and lower other (non-operating) income due to reduced earnings from our investment in OC-BVI and the absence of the one-time gain on sale of assets that occurred in the 2016 second quarter. Our results from continuing operations exclude the impairment loss resulting from our recent decision to discontinue our operations in Bali.
During the second quarter, we made considerable progress on our Rosarito project and expect to be in a position to break ground by year end. Our total investment in the Rosarito project to date has been $42.9 million, of which $21.0 million has been spent on land, right of ways and equipment and approximately $21.9 million on development expenses. We were pleased to see that in May, the Otay Water District received a permit to build and operate a nearly four-mile cross border pipeline that could ultimately be used to transport potable water from our Rosarito desalination plant. The Otay Water District currently serves a population of over 223,000 within the San Diego metropolitan area," Mr. McTaggart noted.
Second Quarter 2017 Financial Results
Total revenues for the 2017 second quarter were $15.3 million, slightly below the $15.4 million reported in last year's second quarter due primarily to modest declines in retail, services and manufacturing segments revenues that were partially offset by higher revenues in the bulk segment. Gross profit decreased 3.2% to $6.5 million from $6.7 million. Net income from continuing operations attributable to Consolidated Water stockholders was $1.7 million, or $0.11 per fully diluted share, a decrease of 27.7% from the $2.3 million, or $0.16 per fully diluted share, earned in the similar year-ago period. Net income from continuing operations for the 2017 second quarter included operating expenses of $885,000 related to costs for the Rosarito desalination plant. The Company incurred a $1.0 million impairment loss in the second quarter related to its Bali operation, which is now classified as a discontinued operation. After accounting for that loss, net income attributable to Consolidated Water stockholders was $624,548, or $0.04 per diluted share.
First Half 2017 Financial Results
Total revenues for the first six months of 2017 were $31.0 million, an increase of $1.5 million from the $29.4 million reported in last year's comparable period. Gross profit was up 3.0% to $13.4 million from $13.0 million. Net income from continuing operations attributable to Consolidated Water stockholders was $4.4 million, or $0.29 per fully diluted share, an increase of 0.4% from the $4.4 million, or $0.29 per fully diluted share, earned in the similar year-ago period. Net income and diluted EPS for the first half of 2017 and 2016 included operating expenses of $1.6 million and $1.6 million, respectively, related to development costs for the Rosarito desalination plant. After accounting for the impairment loss related to the Company's Bali operations, net income attributable to Consolidated Water stockholders was $3.3 million, or $0.21 per diluted share.
Net cash provided by operating activities for the six months ended June 30, 2017 was $9.6 million and capital expenditures totaled $2.6 million.
Segment Results
Three Months Ended June 30, 2017 (Unaudited) ------------------------------------------- Retail Bulk Services Manufacturing ------ ---- -------- ------------- Revenues $6,029,449 $8,043,921 $119,204 $1,056,047 -------- ---------- ---------- -------- ---------- Cost of revenues 2,659,066 5,152,212 103,753 847,760 ---------------- --------- --------- ------- ------- Gross profit 3,370,383 2,891,709 15,451 208,287 ------------ --------- --------- ------ ------- Three Months Ended June 30, 2016 (Unaudited) ------------------------------------------- Retail Bulk Services Manufacturing ------ ---- -------- ------------- Revenues $6,273,400 $7,441,061 $403,935 $1,260,806 -------- ---------- ---------- -------- ---------- Cost of revenues 2,555,545 4,813,261 272,537 1,035,142 ---------------- --------- --------- ------- --------- Gross profit 3,717,855 2,627,800 131,398 225,664 ------------ --------- --------- ------- -------
Summary and Outlook
"In summary, we are pleased with the consistent performance of our core desalination operations and the improving prospects for our manufacturing segment. Renewal negotiations for our Cayman retail license began in July 2017 with the newly formed OfReg, and we have been informed that our retail license has been extended through January 31, 2018, while negotiations continue.
We continue to make progress on the Rosarito project, which should be a transformational event for the Company once it is completed. This is a very complex project and is the largest infrastructure project ever undertaken by the State of Baja California, Mexico. Over the past six months we have been working together with Mexican State and Federal government agencies to achieve the various conditions precedent in the public-private partnership agreement. In the third quarter, we look forward to finalizing financing negotiations for the project, and we continue to work closely with the client, our partners, advisors and financing institutions with the goal of commencing construction on this landmark project by year end.
Importantly, we maintained a strong balance sheet and continued to generate significant operating cash flows over the first six months of 2017, which provides us with the credit standing and liquidity to invest in the Rosarito project while maintaining dividends to our shareholders," Mr. McTaggart concluded.
For further information, please contact our investor relations firm, MBS Value Partners:
Lynn Morgen: (212) 223 4147 lynn.morgen@mbsvalue.com
Eric Prouty: (978) 456 9539 eric.prouty@mbsvalue.com
Viktoriia Nakhla: (646) 625-4800 viktoriia.nakhla@mbsvalue.com
(Financial Highlights Follow)
CONSOLIDATED WATER CO. LTD. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2017 2016 ---- ---- (Unaudited) ASSETS Current assets Cash and cash equivalents $45,950,954 $39,126,214 Accounts receivable, net 14,091,119 16,480,639 Inventory 3,057,218 1,985,006 Prepaid expenses and other current assets 1,330,580 1,084,155 Current portion of loans receivable 1,355,824 1,633,588 Costs and estimated earnings in excess of billings 543,893 85,211 Current assets of discontinued operations 154,331 480,979 ------- ------- Total current assets 66,483,919 60,875,792 Property, plant and equipment, net 50,463,135 52,471,537 Construction in progress 2,804,958 885,494 Inventory, non-current 4,497,027 4,558,816 Loans receivable 1,446,541 2,135,428 Investment in OC-BVI 2,949,547 4,086,630 Intangible assets, net 4,468,530 5,195,476 Goodwill 9,784,248 9,784,248 Land held for development 20,558,424 20,558,424 Other assets 2,183,317 2,280,519 Long-term assets of discontinued operations 154,501 772,164 ------- ------- Total assets $165,794,147 $163,604,528 ============ ============ LIABILITIES AND EQUITY Current liabilities Accounts payable and other current liabilities $4,878,489 $4,840,387 Dividends payable 1,189,786 1,187,214 Notes payable to related party 392,000 490,000 Billings in excess of costs and estimated earnings 1,396,426 102,966 Current liabilities of discontinued operations 55,329 58,521 ------ ------ Total current liabilities 7,912,030 6,679,088 Deferred tax liability 1,639,096 1,915,241 Other liabilities 752,828 904,827 ------- ------- Total liabilities 10,303,954 9,499,156 ---------- --------- Commitments and contingencies Equity Consolidated Water Co. Ltd. stockholders' equity Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 45,087 and 35,225 shares, respectively 27,052 21,135 Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 8,933,919 8,922,998 14,889,865 and 14,871,664 shares, respectively Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued - - Additional paid-in capital 85,926,072 85,621,033 Retained earnings 52,606,237 51,589,337 Cumulative translation adjustment (549,555) (549,555) -------- -------- Total Consolidated Water Co. Ltd. stockholders' equity 146,943,725 145,604,948 Non-controlling interests 8,546,468 8,500,424 --------- --------- Total equity 155,490,193 154,105,372 Total liabilities and equity $165,794,147 $163,604,528 ============ ============
CONSOLIDATED WATER CO. LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 2017 2016 2017 2016 ---- ---- ---- ---- Retail revenues $6,029,449 $6,273,400 $12,478,399 $12,216,660 Bulk revenues 8,043,921 7,441,061 15,734,323 14,706,354 Services revenues 119,204 403,935 249,456 584,647 Manufacturing revenues 1,056,047 1,260,806 2,435,895 1,879,335 --------- --------- --------- --------- Total revenues 15,248,621 15,379,202 30,898,073 29,386,996 ---------- ---------- ---------- ---------- Cost of retail revenues 2,659,066 2,555,545 5,278,713 5,065,540 Cost of bulk revenues 5,152,212 4,813,261 10,168,001 9,423,585 Cost of services revenues 103,753 272,537 205,919 469,813 Cost of manufacturing revenues 847,760 1,035,142 1,889,057 1,455,609 ------- --------- --------- --------- Total cost of revenues 8,762,791 8,676,485 17,541,690 16,414,547 --------- --------- ---------- ---------- Gross profit 6,485,830 6,702,717 13,356,383 12,972,449 General and administrative expenses 4,960,170 4,888,794 9,714,680 9,295,856 --------- --------- --------- --------- Income from operations 1,525,660 1,813,923 3,641,703 3,676,593 --------- --------- --------- --------- Other income (expense): Interest income 108,821 158,085 230,893 374,843 Interest expense (7,939) (30,323) (10,162) (94,369) Profit sharing income from OC-BVI - 14,175 10,125 48,600 Equity in the earnings (losses) of OC-BVI (37,824) 85,858 (10,958) 131,222 Impairment loss on investment in OC-BVI - - - (50,000) Unrealized gain (loss) on put/call options (13,000) - 152,000 - Other (28,530) 176,383 53,191 222,129 ------- ------- ------ ------- Other income, net 21,528 404,178 425,089 632,425 ------ ------- ------- ------- Income before income taxes 1,547,188 2,218,101 4,066,792 4,309,018 Benefit from income taxes (136,448) (170,393) (276,145) (243,662) -------- -------- -------- -------- Net income from continuing operations 1,683,636 2,388,494 4,342,937 4,552,680 before non-controlling interests Income (loss) from continuing (8,354) 48,544 (56,146) 172,040 operations attributable to non- controlling interests Net income from continuing operations 1,691,990 2,339,950 4,399,083 4,380,640 Loss from discontinued operations (1,071,001) (142,659) (1,150,850) (127,974) Loss from discontinued operations (3,559) (7,042) (7,543) (6,308) attributable to non-controlling interests Net loss from discontinued operations (1,067,442) (135,617) (1,143,307) (121,666) ---------- -------- ---------- -------- Net income attributable to $624,548 $2,204,333 $3,255,776 $4,258,974 Consolidated Water Co. Ltd. stockholders Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders Continuing operations $0.11 $0.16 $0.30 $0.30 ===== ===== ===== ===== Discontinued operations $(0.07) $(0.01) $(0.08) $(0.01) ====== ====== ====== ====== Basic earnings per share $0.04 $0.15 $0.22 $0.29 ===== ===== ===== ===== Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders Continuing operations $0.11 $0.16 $0.29 $0.29 ===== ===== ===== ===== Discontinued operations $(0.07) $(0.01) $(0.08) $ - ====== ====== ====== === === Diluted earnings per share $0.04 $0.15 $0.21 $0.29 ===== ===== ===== ===== Dividends declared per common share $0.075 $0.075 $0.15 $0.15 ====== ====== ===== ===== Weighted average number of common shares used in the determination of: Basic earnings per share 14,889,816 14,792,053 14,880,889 14,787,716 ========== ========== ========== ========== Diluted earnings per share 15,055,554 14,871,119 15,045,204 14,863,791 ========== ========== ========== ==========
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SOURCE Consolidated Water Co. Ltd.