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Consolidated Water Co. Ltd. Reports 21% Increase in First Quarter Earnings

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  Published in Business and Finance on Monday, May 10th 2010 at 15:32 GMT by Market Wire
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GEORGE TOWN, GRAND CAYMAN, CAYMAN ISLANDS--(Marketwire - May 10, 2010) - Consolidated Water Co. Ltd. (NASDAQ: [ CWCO ]), 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 first quarter of 2010. The Company will host an investor conference call tomorrow -- Tuesday, May 11, 2010 -- at 11:00 a.m. EDT (see details below).

Total revenues for the three months ended March 31, 2010 declined 7% to approximately $14.7 million, compared with approximately $15.9 million in the quarter ended March 31, 2009. All three of the Company's business segments recorded lower revenues in the most recent quarter than in the prior-year period.

Retail water revenues declined 2% to approximately $6.4 million in the quarter ended March 31, 2010, versus approximately $6.5 million in the first quarter of 2009 due to inflation index-related decreases in base rates that went into effect during the first quarter. The volume of gallons sold in 2010 by the retail business segment increased approximately 19% from prior-year levels. Substantially all of the increase was related to water sold to the Water Authority - Cayman ("WAC") at bulk water prices while the Red Gate plant was being refurbished. Bulk water revenues decreased 2% to approximately $6.3 million, compared with $6.4 million in the year-earlier quarter. The volume of water sold by the bulk segment was approximately the same in the first quarters of 2009 and 2010, respectively. Services revenues decreased 30% to approximately $2.0 million, compared with approximately $2.9 million in the first quarter of 2009, reflecting a decline in project construction activity.

Net income attributable to stockholders increased 21% to $3,076,936, or $0.21 per diluted share, in the quarter ended March 31, 2010, compared with net income of $2,550,158, or $0.18 per diluted share, in the quarter ended March 31, 2009. The improvement in net income was primarily the result of the Company's recognition of $212,709 in earnings on its investment in OC-BVI, its British Virgin Islands ("BVI") affiliate, in the most recent quarter. Such earnings were primarily due to revenues recognized on an accrual basis for water sold from the Bar Bay plant on the island of Tortola pursuant to the seven-year water sale agreement between OC-BVI and the BVI Government that was signed on March 4, 2010. In the three months ended March 31, 2009, the Company recognized a loss from its investment in OC-BVI totaling $(608,999) due to OC-BVI's contractual dispute with the BVI Government relating to its Baughers Bay plant.

Consolidated gross profit decreased 8% to approximately $5.5 million (37% of revenues) in 2010's first quarter, versus approximately $6.0 million (38% of revenues) a year earlier. Gross profit on retail revenues approximated $3.5 million (55% of revenues) in the most recent quarter, compared with approximately $4.0 million (61% of revenues) in the quarter ended March 31, 2010. The decline in retail gross profit margins reflects the annual adjustment of the Company's base water rates during the first quarter of 2010, which decreased due to downward movement in consumer price indices used to determine such rates, and the incremental sales to WAC, which were made at bulk sale rates. Gross profit on bulk revenues was unchanged at approximately $1.4 million (22% of revenues) in the first quarter of 2010 and 2009. Gross profit on services revenues increased to $593,849, from $571,867 a year earlier, due to a decrease in project construction costs.

General and administrative expenses decreased slightly to $2,465,066 in the most recent quarter, versus $2,501,203 in the first quarter of 2009, as major individual expense categories that comprise consolidated G&A expenses remained relatively consistent with prior-year levels.

Interest income increased by $143,871, or 91%, to $302,175 in the first quarter of 2010, versus $158,304 in the first quarter of 2009. Interest expense declined 5% to $404,813, from $426,229 in the prior-year period. Other income totaled $50,867 in the three months ended March 31, 2010, versus $45,407 in the quarter ended March 31, 2009.

"We are very pleased to recognize a profit on our equity investment in OC-BVI during the first quarter of 2010," noted Rick McTaggart, Chief Executive Officer of Consolidated Water Co. Ltd. "This profit primarily reflects the revenues and earnings being generated by OC-BVI's Bar Bay seawater desalination plant on the island of Tortola. It is also important to consider that on March 29, 2010, OC-BVI vacated the Baughers Bay plant, and the BVI government assumed direct responsibility for the plant's operations. We are therefore no longer recording losses related to the Baughers Bay plant. However, we are still awaiting the outcome of legal appeals made by OC-BVI and the BVI government regarding earlier court rulings involving the dispute between the two parties, which could impact our equity earnings from OC-BVI in the future."

"The relative stability of operating results at our retail and bulk business segments during the most recent quarter, when compared with the prior-year period, illustrates the critical importance of quality potable water in countries where naturally occurring sources of clean water are unable to satisfy the demands of local citizens, businesses and institutions."

"We continue to pursue new business opportunities in the Caribbean and elsewhere," continued McTaggart. "We are currently preparing bids with our partners for several new projects in the Caribbean, one of which is quite large for the region, and we expect these projects to be awarded to successful bidders later this year. We ended our first quarter with $48 million in cash and cash equivalents, $53 million in net working capital, a current ratio of 6.8-to-1.0, $126 million in stockholders' equity, and a low 16% debt-to-equity-ratio. Our strong financial position, low debt levels and excellent liquidity provide us with the elements necessary to aggressively pursue further expansion of our operations."

The Company will host a conference call at 11:00 a.m. EDT tomorrow -- Tuesday, May 11, 2010. Shareholders and other interested parties may participate in the conference call by dialing 800-860-2442 (international/local participants dial 412-858-4600) and requesting participation in the "Consolidated Water Conference Call" a few minutes before 11:00 a.m. EDT on May 11, 2010. A replay of the conference call will be available one hour after the call through May 18, 2010 by dialing 877-344-7529 (international/local participants dial 412-317-0088) and entering the conference ID 440419.

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 Bermuda.

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 relationship with the Governments of the jurisdictions in which it operates, the manner in which the disputed issues between OC-BVI and the BVI Government are resolved, the ability to successfully secure contracts for water projects, the ability to develop and operate such projects profitably and the Company's ability to manage growth and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. 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.

 CONSOLIDATED WATER CO. LTD. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 2010 2009 ------------- ------------- (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 48,073,599 $ 44,429,190 Accounts receivable, net 9,794,613 9,980,928 Inventory 1,950,391 1,832,564 Prepaid expenses and other current assets 1,186,585 1,689,874 Current portion of loans receivable 1,216,139 1,216,098 ------------- ------------- Total current assets 62,221,327 59,148,654 Property, plant and equipment, net 59,024,253 60,245,525 Construction in progress 962,231 1,000,882 Costs and estimated earnings in excess of billings - construction project 3,354,470 1,872,552 Inventory non-current 3,240,555 3,352,054 Loans receivable 10,578,250 10,875,848 Investment in affiliate 8,644,341 9,157,995 Intangible assets, net 1,886,639 1,919,656 Goodwill 3,587,754 3,587,754 Other assets 3,256,135 3,314,861 ------------- ------------- Total assets $ 156,755,955 $ 154,475,781 ============= ============= LIABILITIES AND EQUITY Current liabilities Accounts payable and other current liabilities $ 6,607,242 $ 6,187,606 Dividends payable 1,152,662 1,152,702 Current portion of long term debt 1,350,639 1,322,483 ------------- ------------- Total current liabilities 9,110,543 8,662,791 Long term debt 19,457,033 19,806,784 Other liabilities 459,786 465,408 ------------- ------------- Total liabilities 29,027,362 28,934,983 ------------- ------------- Equity Consolidated Water Co. Ltd. stockholders' equity Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 17,126 and 17,192 shares, respectively 10,275 10,315 Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 14,541,878 shares, respectively 8,725,127 8,725,127 Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued or outstanding - - Additional paid-in capital 81,087,724 80,990,686 Retained earnings 36,351,252 34,365,640 ------------- ------------- Total Consolidated Water Co. Ltd. stockholders' equity 126,174,378 124,091,768 Noncontrolling interests 1,554,215 1,449,030 ------------- ------------- Total equity 127,728,593 125,540,798 ------------- ------------- Total liabilities and equity $ 156,755,955 $ 154,475,781 ============= ============= CONSOLIDATED WATER CO. LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31, -------------------------- 2010 2009 ------------ ------------ Retail water revenues $ 6,385,406 $ 6,537,328 Bulk water revenues 6,257,942 6,406,993 Services revenues 2,033,963 2,919,734 ------------ ------------ Total revenues 14,677,311 15,864,055 ------------ ------------ Cost of retail revenues 2,853,585 2,549,119 Cost of bulk revenues 4,897,363 4,986,569 Cost of services revenues 1,440,114 2,347,867 ------------ ------------ Total cost of revenues 9,191,062 9,883,555 ------------ ------------ Gross profit 5,486,249 5,980,500 General and administrative expenses 2,465,066 2,501,203 ------------ ------------ Income from operations 3,021,183 3,479,297 ------------ ------------ Other income (expense): Interest income 302,175 158,304 Interest expense (404,813) (426,229) Other income 50,867 45,407 Equity in earnings (loss) of affiliate 212,709 (608,999) ------------ ------------ Other income (expense), net 160,938 (831,517) ------------ ------------ Net income 3,182,121 2,647,780 Income attributable to noncontrolling interests 105,185 97,622 ------------ ------------ Net income attributable to Consolidated Water Co. Ltd. stockholders $ 3,076,936 $ 2,550,158 ============ ============ Basic earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders $ 0.21 $ 0.18 ============ ============ Diluted earnings per common share attributable to Consolidated Water Co. Ltd. common stockholders $ 0.21 $ 0.18 ============ ============ Dividends declared per common share $ 0.075 $ 0.065 ============ ============ Weighted average number of common shares used in the determination of: Basic earnings per share 14,541,878 14,530,183 ============ ============ Diluted earnings per share 14,600,906 14,550,733 ============ ============