What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-14 · 91 added, 78 removed, 543 unchanged (24% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

Gain on asset dispositions and impairments, net

Income from operations

47 unchanged sentences

Balance as of June 30, 2024

Conversion of preferred stock

Buyback of preferred stock

Exercise of options

Dividends declared

( 1,745,942 )

( 1,978,042 )

Stock-based compensation

Balance as of September 30, 2024

preferred stock

18 unchanged sentences

Balance as of June 30, 2023

Conversion of preferred stock

Exercise of options

Dividends declared

( 1,499,538 )

Stock-based compensation

Balance as of September 30, 2023

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

10 unchanged sentences

Compensation expense relating to stock and stock option grants

Loss (gain) on asset dispositions and impairments, net

Gain on asset dispositions and impairments, net

Profit-sharing and equity in earnings of OC-BVI

2 unchanged sentences

( 11,080,886 )

( 3,259,462 )

Contract assets

3 unchanged sentences

( 1,269,737 )

( 1,978,213 )

Accounts payable, accrued expenses and other current liabilities

5 unchanged sentences

Net cash used in operating activities - discontinued operations

( 1,432,041 )

Net cash provided by operating activities

7 unchanged sentences

( 2,440,027 )

Net cash provided by investing activities - continuing operations

( 5,528,658 )

Net cash provided by investing activities - discontinued operations

Net cash provided by investing activities

Net cash provided by (used in) investing activities

( 6,542,387 )

4 unchanged sentences

Dividends paid to preferred shareholders

Dividends paid to non-controlling interests

Buyback of redeemable preferred stock

9 unchanged sentences

cash and cash equivalents at end of period - discontinued operations

( 1,355,104 )

Cash and cash equivalents at end of period

2 unchanged sentences

Issuance of 57,384 and 44,783 , respectively, shares of common stock for services rendered

Conversion (on a one-to-one basis) of 643 shares of redeemable preferred stock to common stock

Conversion (on a one-to-one basis) of 5,530 and 7,936 , respectively, shares of redeemable preferred stock to common stock

Dividends declared but not paid

47 unchanged sentences

The exchange rates for conversion of Mexican pesos and euros into US$ vary based upon market conditions.

Net foreign currency gains arising from transactions and re-measurements were $ 16,602 and $ 24,397 for the three months ended June 30, 2024 and 2023, respectively, and $ 40,799 and $ 50,176 for the six months ended June 30, 2024 and 2023, and are included in “Other income (expense) - Other” in the accompanying condensed consolidated statements of income.

Net foreign currency gains arising from transactions and re-measurements were $ 24,807 and $ 22,077 for the three months ended September 30, 2024 and 2023, respectively, and $ 65,606 and $ 72,253 for the nine months ended September 30, 2024 and 2023, and are included in “Other income (expense) - Other” in the accompanying condensed consolidated statements of income.

Cash and cash equivalents:

Cash and cash equivalents consist of demand deposits at banks and certificates of deposit at banks with original maturities of three months or less.

Cash and cash equivalents as of June 30, 2024 and December 31, 2023 include approximately $ 5.2 million and $ 5.1 million, respectively, of certificates of deposits with original maturities of three months or less.

Cash and cash equivalents as of September 30, 2024 and December 31, 2023 include approximately $ 5.2 million and $ 5.1 million, respectively, of certificates of deposits with original maturities of three months or less.

Certain transfers from the Company’s Bahamas bank accounts to Company bank accounts in other countries require the approval of the Central Bank of The Bahamas.

The equivalent United States dollar cash balances held in The Bahamas as of June 30, 2024 and December 31, 2023 were approximately $ 9.4 million and $ 3.0 million, respectively.

The equivalent United States dollar cash balances held in The Bahamas as of September 30, 2024 and December 31, 2023 were approximately $ 11.4 million and $ 3.0 million, respectively.

Goodwill and intangible assets:

20 unchanged sentences

The following table presents the Company’s revenue disaggregated by revenue source.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Retail revenue

3 unchanged sentences

Services revenue consists of the following:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Construction revenue

11 unchanged sentences

The Company produces and supplies water to government-owned utilities in the Cayman Islands and The Bahamas.

OC-Cayman provides bulk water to the Water Authority-Cayman (“WAC”), a government-owned utility and regulatory agency, under two agreements.

OC-Cayman provides bulk water to the Water Authority-Cayman (“WAC”), a government-owned utility and regulatory agency, under three agreements.

The WAC in turn distributes such water to properties in Grand Cayman outside of Cayman Water’s retail license area.

15 unchanged sentences

The Company estimates total costs to be incurred and profit to be earned on each long-term, fixed price contract prior to commencement of work on the contract and updates these estimates as work on the contract progresses.

The cumulative amount of revenue recorded on a contract at a specified point in time is that percentage of total estimated revenue that incurred costs to date comprise of estimated total contract costs.

The cumulative amount of revenue recorded on a contract at a specified point in time is that percentage of total estimated revenue that incurred costs to date comprised of estimated total contract costs.

Due to the extended time it may take to complete many of the Company’s contracts and the scope and nature of the work required to be performed on those contracts, the estimations of total revenue and costs at completion are complicated and subject to many variables and, accordingly, are subject to changes.

4 unchanged sentences

The Company has elected the “right to invoice” practical expedient for revenue recognition on its operations and maintenance, design and consulting contracts and recognizes revenue in the amount to which the Company has a right to invoice, recognizing this revenue from the transfer of goods or services to customers at a point in time.

For the three months ended June 30, 2024 and 2023, the Company recognized $ 3,988,174 and $ 19,839,950 , respectively, of its services revenue from the transfer of goods or services to customers over time.

For the three months ended September 30, 2024 and 2023, the Company recognized $ 4,246,506 and $ 24,219,737 , respectively, of its services revenue from the transfer of goods or services to customers over time.

The remaining services revenue of $ 8,431,331 and $ 5,207,927 , respectively, was recognized from the transfer of goods or services to customers at a point in time.

For the six months ended June 30, 2024 and 2023, the Company recognized $ 13,385,268 and $ 28,428,534 , respectively, of its services revenue from the transfer of goods or services to customers over time.

For the nine months ended September 30, 2024 and 2023, the Company recognized $ 17,631,774 and $ 52,648,271 , respectively, of its services revenue from the transfer of goods or services to customers over time.

The remaining services revenue of $ 24,386,143 and $ 13,595,057 , respectively, was recognized from the transfer of goods or services to customers at a point in time.

For the three and six months ended June 30, 2024 and 2023, the Company recognized all of its manufacturing revenue from the transfer of goods or services to customers over time.

For the three and nine months ended September 30, 2024 and 2023, the Company recognized all of its manufacturing revenue from the transfer of goods or services to customers over time.

Revenue recognized and amounts billed on contracts in progress are summarized as follows:

September 30,

Revenue recognized to date on contracts in progress

3 unchanged sentences

Net contract asset /(liability)

( 4,060,359 )

The above net balances are reflected in the accompanying condensed consolidated balance sheets as follows:

September 30,

Contract assets

3 unchanged sentences

Net contract asset /(liability)

As of June 30, 2024, the Company had unsatisfied or partially unsatisfied performance obligations for contracts in progress representing approximately $ 145.4 million in aggregate transaction price for contracts with an original expected length of greater than one year .

( 4,060,359 )

As of September 30, 2024, the Company had unsatisfied or partially unsatisfied performance obligations for contracts in progress representing approximately $ 154.6 million in aggregate transaction price for contracts with an original expected length of greater than one year .

The Company expects to earn revenue as it satisfies its performance obligations under those contracts in the amount of approximately $ 8.1 million during the remainder of the year ending December 31, 2024 and approximately $ 146.5 million thereafter .

In addition, the Company recognized revenue of approximately $ 5.0 million in the six months ended June 30, 2024, that was included in the contract liability balance as of December 31, 2023.

In addition, the Company recognized revenue of approximately $ 6.2 million in the nine months ended September 30, 2024, that was included in the contract liability balance as of December 31, 2023.

Practical Expedients and Exemptions

14 unchanged sentences

The Company’s segments are strategic business units that are managed separately because each segment sells different products and/or services, serves customers with distinctly different needs and generates different gross profit margins.

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Manufacturing

1 unchanged sentence

General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

Income from operations

Gain on asset dispositions and impairments, net

Income (loss) from operations

Other income, net

4 unchanged sentences

Net income from continuing operations attributable to Consolidated Water Co.

Net income from discontinued operations

Net loss from discontinued operations

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the three months ended June 30, 2024 for the retail, bulk, services and manufacturing segments were $ 633,958 , $ 716,726 , $ 251,548 and $ 65,406 , respectively.

Three Months Ended June 30, 2023

Depreciation and amortization expenses for the three months ended September 30, 2024 for the retail, bulk, services and manufacturing segments were $ 638,465 , $ 726,503 , $ 247,330 and $ 65,775 , respectively.

Three Months Ended September 30, 2023

Manufacturing

1 unchanged sentence

General and administrative expenses

Gain on asset dispositions and impairments, net

Income from operations

Income (loss) from operations

Other income, net

6 unchanged sentences

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the three months ended June 30, 2023 for the retail, bulk, services and manufacturing segments were $ 593,337 , $ 840,200 , $ 174,084 and $ 68,160 , respectively.

Six Months Ended June 30, 2024

Depreciation and amortization expenses for the three months ended September 30, 2023 for the retail, bulk, services and manufacturing segments were $ 593,306 , $ 748,594 , $ 182,825 and $ 68,197 , respectively.

Nine Months Ended September 30, 2024

Manufacturing

1 unchanged sentence

General and administrative expenses

Gain (loss) on asset dispositions and impairments, net

Gain on asset dispositions and impairments, net

Income from operations

7 unchanged sentences

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the six months ended June 30, 2024 for the retail, bulk, services and manufacturing segments were $ 1,274,428 , $ 1,433,054 , $ 503,300 and $ 131,555 , respectively.

Six Months Ended June 30, 2023

Depreciation and amortization expenses for the nine months ended September 30, 2024 for the retail, bulk, services and manufacturing segments were $ 1,912,893 , $ 2,159,557 , $ 750,630 and $ 197,330 , respectively.

Nine Months Ended September 30, 2023

Manufacturing

11 unchanged sentences

Net income attributable to Consolidated Water Co.

Depreciation and amortization expenses for the six months ended June 30, 2023 for the retail, bulk, services and manufacturing segments were $ 1,219,974 , $ 1,568,329 , $ 345,433 and $ 136,123 , respectively.

As of June 30, 2024

Depreciation and amortization expenses for the nine months ended September 30, 2023 for the retail, bulk, services and manufacturing segments were $ 1,813,280 , $ 2,316,923 , $ 528,258 and $ 204,320 , respectively.

As of September 30, 2024

Manufacturing

22 unchanged sentences

The following summarizes information related to the computation of basic and diluted EPS:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net income from continuing operations attributable to Consolidated Water Co.

12 unchanged sentences

Through a series of transactions that began in 2012, NSC purchased 20.1 hectares of land for approximately $ 21.1 million on which the proposed Project’s plant was to be constructed.

Following an assessment by the State of Baja, California (the “State”) of the need for such a desalination plant and the passage of enabling legislation in November 2015, the State officially commenced the required public tender for the Project.

A consortium (the “Consortium”) comprised of NSC, Suez Medio Ambiente México, S.A.

(“Suez MA”), a subsidiary of SUEZ International, S.A.S., and NuWater S.A.P.I.

(“NuWater”) submitted its tender for the Project in April 2016 and in June 2016, the State designated the Consortium as the winner of the tender process for the Project.

In August 2016, NSC and NuWater incorporated a new company under the name AdR to pursue completion of the Project and executed a shareholders agreement for AdR agreeing among other things that (i) AdR would purchase the land and

other Project assets from NSC on the date that the Project begins commercial operation and (ii) AdR would enter into a Management and Technical Services Agreement with NSC effective on the first day that the Project begins commercial operation.

NSC initially owned 99.6 % of the equity of AdR.

In February 2018, CW-Holdings acquired the remaining 0.4 % ownership in AdR from NuWater.

In November 2015, the State of Baja California (the “State”) officially commenced the public tender for the Project.

A consortium (the “Consortium”) comprised of NSC and two other parties submitted its tender for the Project in April 2016 and in June 2016, the State designated the Consortium as the winner of the tender process for the Project.

In August 2016, NSC incorporated a new company under the name AdR to pursue completion of the Project and executed a shareholders agreement for AdR agreeing among other things that (i) AdR would purchase the land and other Project assets from NSC on the date that the Project begins commercial operation and (ii) AdR would enter into a Management and Technical Services Agreement with NSC effective on the first day that the Project begins commercial operation.

On August 22, 2016, the Public Private Partnership Agreement for the Project (the “APP Contract”) was executed between AdR, the State Water Commission of Baja, California (“CEA”), and the Government of Baja California, as represented by the Secretary of Planning and Finance and the Public Utilities Commission of Tijuana (“CESPT”).

1 unchanged sentence

the first with a capacity of 50 million gallons per day and an aqueduct to the Mexican public water system in Tijuana, Baja California and the second phase with a capacity of 50 million gallons per day.

The first phase was to be operational within 36 months of commencing construction and the second phase was to be operational by January 2025.

The first phase was to be operational within 36 months of commencing construction

and the second phase was to be operational by January 2025.

The APP Contract further required AdR to operate and maintain the plant and aqueduct for a period of 37 years starting from the commencement of operation of the first phase.

At the end of the operating period, the plant and aqueduct would have been transferred to CEA.

The APP Contract was subsequently amended by the parties in June 2018 to increase the scope of Phase 1 and to allow for changes in the water tariff due to the changes in the exchange rate for the peso, interest rates and construction costs that had and would occur from the date the APP Contract was signed to the date construction commenced.

On June 29, 2020, AdR received a letter (the “Letter”) from the Director General of CEA and the Director General of CESPT terminating the APP Contract.

The Letter requested that AdR provide an inventory of the assets that currently comprise the “Project Works” (as defined in the APP Contract) for the purpose of acknowledging and paying the non-recoverable expenses made by AdR in connection with the Project, with such reimbursement to be calculated in accordance with the terms of the APP Contract.

The applicable law required that this list of non-recoverable expenses made by AdR in connection with the Project be submitted to CEA and CESPT within 20 business days from the date of receipt of the Letter.

AdR initiated an amparo claim before a federal district court in Tijuana, Baja California, to challenge the provision of the applicable law requiring submittal of the list of non-recoverable expenses within the 20 business days term, as AdR considered such term to be unreasonably short due to the magnitude of the Project and the scope of supporting documentation required to be provided with respect to the non-recoverable expenses.

AdR obtained an initial provisional suspension of the lapsing of such 20 -day term from the court, and on August 10, 2020 the court made such suspension definitive until the completion of the amparo trial.

As such, the 20 -day term for filing the list of non-recoverable expenses was suspended.

Therefore, on August 28, 2020, AdR submitted their list of non-recoverable expenses, including those of NSC, to CEA and CESPT which was comprised of 51,144,525 United States dollars and an additional 137,333,114 Mexican pesos.

In February 2021, AdR withdrew this amparo claim, and such withdrawal was accepted by the federal district court in Tijuana.

To date, AdR has not received a formal response from CEA or CESPT to its submission of non-recoverable expenses.

The Letter requested that AdR provide an inventory of the assets that comprised the “Project Works” (as defined in the APP Contract) for the purpose of acknowledging and paying the non-recoverable expenses made by AdR in connection with the Project, with such reimbursement to be calculated in accordance with the terms of the APP Contract.

On August 28, 2020, AdR submitted their list of non-recoverable expenses, including those of NSC, to CEA and CESPT which was comprised of 51,144,525 United States dollars and an additional 137,333,114 Mexican pesos.

The Company believed CW-Cooperatief, as a Netherlands company, had certain rights relating to its investments in NSC and AdR under the Agreement on Promotion, Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the United Mexican States entered into force as of October 1, 1999 (the “Treaty”).

15 unchanged sentences

Summarized financial information for the discontinued Mexico project development operation is as follows:

September 30,

Prepaid expenses and other current assets

1 unchanged sentence

Total liabilities of discontinued operations

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Loss from discontinued operations

( 1,496,840 )

Gain on sale of land and project documentation

15 unchanged sentences

The following table presents the lease-related assets and liabilities and their respective classification on the condensed consolidated balance sheets:

September 30,

Prepaid expenses and other current assets

Current assets of discontinued operations

Operating lease right-of-use assets

1 unchanged sentence

Current maturities of operating leases

Current liabilities of discontinued operations

Noncurrent operating leases

5 unchanged sentences

The components of lease costs were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease costs

3 unchanged sentences

Supplemental cash flow information related to leases is as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

Cash paid for amounts included in measurement of liabilities:

1 unchanged sentence

Operating cash outflows for operating leases - discontinued operations

Future lease payments relating to the Company’s operating lease liabilities from continuing operations as of June 30, 2024 were as follows:

Future lease payments relating to the Company’s operating lease liabilities from continuing operations as of September 30, 2024 were as follows:

Years ending December 31,

4 unchanged sentences

Noncurrent lease obligations

As of June 30, 2024 and December 31, 2023, the carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued expenses, accrued compensation, dividends payable and other current liabilities approximate their fair values due to the short-term maturities of these instruments.

As of September 30, 2024 and December 31, 2023, the carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued expenses, accrued compensation, dividends payable and other current liabilities approximate their fair values due to the short-term maturities of these instruments.

Under US GAAP, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

11 unchanged sentences

Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

As of June 30, 2024 and December 31, 2023, the Company does not have assets and liabilities measured at fair value to present in the fair value hierarchy.

Contingencies

As of September 30, 2024 and December 31, 2023, the Company does not have assets and liabilities measured at fair value to present in the fair value hierarchy.

Commitments and contingencies

The Company sells water through its Cayman Water retail operations under a license issued in July 1990 by the Cayman Islands government (the “1990 license”) that granted Cayman Water the exclusive right to provide potable water to customers within its licensed service area.

2 unchanged sentences

Seven Mile Beach and West Bay.

For the three months ended June 30, 2024 and 2023, the Company generated approximately 25 % and 17 %, respectively, of its consolidated revenue and 39 % and 27 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the six months ended June 30, 2024 and 2023, the Company generated approximately 23 % and 20 %, respectively, of its consolidated revenue and 38 % and 32 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the three months ended September 30, 2024 and 2023, the Company generated approximately 23 % and 14 %, respectively, of its consolidated revenue and 34 % and 23 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

For the nine months ended September 30, 2024 and 2023, the Company generated approximately 23 % and 18 %, respectively, of its consolidated revenue and 36 % and 29 %, respectively, of its consolidated gross profit from the retail water operations conducted under the 1990 license.

The 1990 license was originally scheduled to expire in July 2010 but was extended several times by the Cayman Islands government in order to provide the parties with additional time to negotiate the terms of a new license agreement.

9 unchanged sentences

Such impairment losses could have a material adverse impact on the Company’s consolidated financial condition and results of operations.

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $ 25.4 million and $ 26.9 million as of June 30, 2024 and December 31, 2023, respectively.

CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $ 25.1 million and $ 26.9 million as of September 30, 2024 and December 31, 2023, respectively.

Approximately 77 % and 80 % of the accounts receivable balances were delinquent as of those dates, respectively.

2 unchanged sentences

All previous delinquent accounts receivable from the WSC, including accrued interest thereon, were eventually paid in full.

Based upon this payment history, CW-Bahamas has not provided a material allowance for credit losses for its accounts receivable from the WSC as of June 30, 2024.

CW-Bahamas held discussions with the WSC in March 2024 and with representatives of The Bahamas Government in April 2024 during which CW-Bahamas was informed that the Government intends to substantially reduce CW-Bahamas’ accounts receivable from the WSC over the course of 2024.

Based upon this payment history, CW-Bahamas has not provided a material allowance for credit losses for its accounts receivable from the WSC as of September 30, 2024.

In a report dated October 6, 2022, Moody’s Investor Services (“Moody’s”) downgraded The Bahamas’ long-term issuer and senior unsecured ratings to B1 from Ba3.

Moody’s also lowered The Bahamas’ local currency ceiling to Baa3 from Baa2 and its foreign currency ceiling to Ba1 from Baa3.

Moody’s iterated these ratings in April and October 2023 and April 2024, noting that such ratings are “stable.”

Moody’s has maintained these ratings through the date of its most current report issued in October 2024.

If CW-Bahamas is unable to collect a sufficient portion of its delinquent accounts receivable, one or more of the following events may occur:

3 unchanged sentences

Any of these events could have a material adverse impact on the Company’s consolidated financial condition, results of operations, and cash flows.

CW-Bahamas Performance Guarantees

The contracts to supply water to the WSC from the Blue Hills and Windsor plants require CW-Bahamas to guarantee delivery of a minimum quantity of water per week.

If the WSC requires the water and CW-Bahamas does not meet this minimum, CW-Bahamas is required to pay the WSC for the difference between the minimum and actual gallons delivered at a per gallon rate equal to the price per gallon that the WSC is currently paying CW-Bahamas under the contract.

The Blue Hills contract expires in 2032 and requires CW-Bahamas to deliver 63.0 million gallons of water each week.

The Windsor contract expires in 2033 and requires CW-Bahamas to deliver 16.8 million gallons of water each week.

CW-Bahamas has been in compliance with the performance guarantees under these contracts for all periods since the inception of the contracts.

Impact of recent accounting standards

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements