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.