EXHIBIT 99.1
NEWS RELEASE
| March 19, 2009 | OTCBB: DPDW |
DEEP DOWN REPORTS 84.5% INCREASE IN REVENUE
HOUSTON, TX March 19, 2009 - Deep Down, Inc. (OTCBB: DPDW), today commented on its results of operations for the year ended December 31, 2008, reported on Form 10-K and filed on March 16, 2009 with the Securities and Exchange Commission.
Revenues for the year 2008 were $35.8 million for an increase of 84.5% over last year’s revenues of $19.4 million. A net loss of $4.3 million was reported as compared to net income of $1.0 million reported for the year 2007. The increase in revenues was primarily attributable to the inclusion of our acquisitions of Mako Technologies, Inc. for the whole year and Flotation Technologies, Inc. for 8 months. Gross profit was $14.1 million for the year ended December 31, 2008, compared to $6.1 million for the previous year, reflecting an overall improvement in gross profit margin from 31% to 39%. Gross margins were positively impacted by the inclusion of our acquisitions of Flotation and Mako, which had slightly better margins than the rest of the Company’s operations.
“In 2008 the Company sold $40 million of common stock in a private placement that required the Company to file a registration statement with the Securities and Exchange Commission to register these shares,” commented Eugene L. Butler, Deep Down’s Chief Financial Officer. “This successful transaction allowed us to acquire Flotation Technologies, Inc. and retire $12.5 million of long-term debt. The Company’s net loss is directly attributable to $6.7 million in one-time expenses for the year ended December 31, 2008. The expenses recorded for the early retirement of debt reduced earnings by $2.9 million. In connection with the Flotation Technologies, Inc. acquisition and the filing of the registration statement, our selling, general and administrative expenses increased approximately $1.2 million for professional fees and $1.2 million for registration statement fees. Additionally, our bad debt expense increased $1.4 million as a result of increasing our reserves as well as expensing a receivable for a large customer in Louisiana that filed for bankruptcy during the year. The Company would have been profitable without these one-time type expenses; however, we now will be much stronger in future operations.”
“2008 has been a very difficult year economically and on Wall Street; however, it has been a very good year for Deep Down in continuing our dramatic growth operationally,” commented Ronald E. Smith, Deep Down's President and Chief Executive Officer. “Our 2008 results reflect growth through the increase in our core operations and our acquisitions, as well as our successful efforts to improve the balance sheet through the elimination of our very expensive debt.
“It is critical to understand our business is project-based, and not tied to the constantly fluctuating price of oil. Forecasted subsea tree demand within the subsea and deepwater subsectors continues to grow in spite of the volatility of the oil & gas industry. With our company’s history of year-over-year growth and the strong outlook for the deepwater market, we are positioned for increased growth during 2009. We truly are in the best of markets, during the worst of times,” Smith concluded.
About Deep Down, Inc.
Deep Down, Inc. is an oilfield services company serving the worldwide offshore exploration and production industry. Deep Down’s proven services and technological solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads, distributed and drill riser buoyancy, ROVs and ROV tooling, as well as marine vessel automation, control, and ballast systems. Deep Down supports subsea engineering, installation, commissioning, and maintenance projects through specialized, highly experienced service teams and engineered technological solutions. The Company’s primary focus is on more complex deepwater and ultra-deepwater oil production distribution system support services and technologies, used between the platform and the wellhead. Deep Down provides these services through its four subsidiaries. More information about Deep Down is available at www.deepdowncorp.com, by contacting the Company at (281) 517-5000, or ir@deepdowninc.com.
One of our most important responsibilities is to communicate with shareholders in an open and direct manner. Comments are based on current management expectations, and are considered "forward-looking statements," generally preceded by words such as "plans," "expects," "believes," "anticipates," or "intends." We cannot promise future returns. Our statements reflect our best judgment at the time they are issued, and we disclaim any obligation to update or alter forward-looking statements as the result of new information or future events. Deep Down urges investors to review the risks and uncertainties contained within its filings with the Securities and Exchange Commission.
For Further Information
Steven Haag, Investor Relations
ir@deepdowninc.com
(281) 517-5000
DEEP DOWN, INC.
CONSOLIDATED BALANCE SHEETS
| | | December 31, 2008 | | | December 31, 2007 | |
| ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 2,495,464 | | | $ | 2,206,220 | |
| Restricted cash | | | 135,855 | | | | 375,000 | |
| Accounts receivable, net | | | 10,772,097 | | | | 7,190,466 | |
| Prepaid expenses and other current assets | | | 633,868 | | | | 720,886 | |
| Inventory | | | 1,224,170 | | | | 502,253 | |
| Costs and estimated earnings in excess of billings on uncompleted contracts | | | 707,737 | | | | - | |
| Work in progress | | | 137,940 | | | | 749,455 | |
| Deferred tax asset | | | 216,900 | | | | 75,810 | |
| Receivable from Prospect, net | | | - | | | | 2,687,333 | |
| Total current assets | | | 16,324,031 | | | | 14,507,423 | |
| Property and equipment, net | | | 13,799,196 | | | | 5,368,961 | |
| Other assets, net | | | 457,836 | | | | 1,211,514 | |
| Intangibles, net | | | 18,090,680 | | | | 4,369,647 | |
| Goodwill | | | 15,024,300 | | | | 10,594,144 | |
| Total assets | | $ | 63,696,043 | | | $ | 36,051,689 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 4,318,394 | | | $ | 3,569,826 | |
| Billings in excess of costs and estimated earnings on uncompleted contracts | | | 2,315,043 | | | | 188,030 | |
| Payable to Mako shareholders | | | - | | | | 3,205,667 | |
| Current portion of long-term debt | | | 382,912 | | | | 995,177 | |
| Total current liabilities | | | 7,016,349 | | | | 7,958,700 | |
| Long-term debt, net of accumulated discount of $0 and $1,703,258 respectively | | | 1,718,475 | | | | 10,698,818 | |
| Deferred tax liabilities | | | 1,125,945 | | | | - | |
Series E redeemable exchangeable preferred stock, par value $0.01, face value and liquidation preference of $1,000 per share, no dividend preference, authorized 10,000,000 aggregate shares of all series of preferred stock, -0- and 500 issued and outstanding, respectively | | | - | | | | 386,411 | |
| Total liabilities | | | 9,860,769 | | | | 19,043,929 | |
| Temporary equity: | | | | | | | | |
Series D redeemable convertible preferred stock, $0.01 par value, face value and liquidation preference of $1,000 per share, no dividend preference, authorized 10,000,000 aggregate shares of all series of preferred stock, -0- and 5,000 issued and outstanding, respectively | | | - | | | | 4,419,244 | |
| Total temporary equity | | | - | | | | 4,419,244 | |
| Stockholders' equity: | | | | | | | | |
| | | | | | | | | |
Common stock, $0.001 par value, 490,000,000 shares authorized, 177,350,630 and 85,976,532 shares issued and outstanding, respectively | | | 177,351 | | | | 85,977 | |
| Additional paid-in capital | | | 60,328,124 | | | | 14,849,847 | |
| Accumulated deficit | | | (6,670,201 | ) | | | (2,347,308 | ) |
| Total stockholders' equity | | | 53,835,274 | | | | 12,588,516 | |
| Total liabilities and stockholders' equity | | $ | 63,696,043 | | | $ | 36,051,689 | |
| | | | | | | | | |
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | For the Twelve Months Ended | |
| | | December 31, | |
| | | 2008 | | | 2007 | |
| | | | | | | |
| Revenues | | $ | 35,769,705 | | | $ | 19,389,730 | |
| Cost of sales | | | 21,686,033 | | | | 13,306,086 | |
| Gross profit | | | 14,083,672 | | | | 6,083,644 | |
| Operating expenses: | | | | | | | | |
| Selling, general & administrative | | | 14,290,440 | | | | 4,284,553 | |
| Depreciation and amortization | | | 1,285,079 | | | | 141,247 | |
| Total operating expenses | | | 15,575,519 | | | | 4,425,800 | |
| Operating income (loss) | | | (1,491,847 | ) | | | 1,657,844 | |
| Other income (expense): | | | | | | | | |
| Gain (loss) on debt extinguishment | | | (446,412 | ) | | | 2,000,000 | |
| Interest income | | | 110,504 | | | | 92,664 | |
| Interest expense | | | (3,511,177 | ) | | | (2,430,149 | ) |
| Other (expense) income | | | (26,333 | ) | | | 1,823 | |
| Total other expense | | | (3,873,418 | ) | | | (335,662 | ) |
| Income (loss) before income taxes | | | (5,365,265 | ) | | | 1,322,182 | |
| Benefit from (provision for) income taxes | | | 1,042,372 | | | | (369,673 | ) |
| Net income (loss) | | $ | (4,322,893 | ) | | $ | 952,509 | |
| Earnings (loss) per share: | | | | | | | | |
| Basic | | $ | (0.03 | ) | | $ | 0.01 | |
| Weighted-average common shares outstanding | | | 142,906,616 | | | | 73,917,190 | |
| | | | | | | | | |
| Diluted | | $ | (0.03 | ) | | $ | 0.01 | |
| Weighted-average common shares outstanding | | | 142,906,616 | | | | 104,349,455 | |
| | | | | | | | | |
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
| | | 2008 | | | 2007 | |
| Cash flows from operating activities: | | | | | | |
| Net income/(loss) | | $ | (4,322,893 | ) | | $ | 952,509 | |
| Adjustments to reconcile net income to net cash | | | | | | | | |
| used in operating activities: | | | | | | | | |
| Gain on extinguishment of debt | | | - | | | | (2,000,000 | ) |
| Interest income | | | (54,975 | ) | | | - | |
| Non-cash amortization of debt discount | | | 1,816,847 | | | | 1,780,922 | |
| Non-cash amortization of deferred financing costs | | | 762,700 | | | | 54,016 | |
| Share-based compensation | | | 584,009 | | | | 187,394 | |
| Bad debt expense | | | 1,507,494 | | | | 108,398 | |
| Depreciation and amortization | | | 2,363,106 | | | | 426,964 | |
| Loss on disposal of equipment | | | 228,352 | | | | 24,336 | |
| Deferred taxes payable | | | (855,708 | ) | | | - | |
| Changes in assets and liabilities: | | | | | | | | |
| Lease receivable | | | - | | | | (863,000 | ) |
| Accounts receivable | | | (3,087,260 | ) | | | (4,388,146 | ) |
| Prepaid expenses and other current assets | | | (493,100 | ) | | | (54,310 | ) |
| Inventory | | | (1,224,170 | ) | | | - | |
| Finished goods | | | - | | | | (502,253 | ) |
| Costs and estimated earnings in excess of billings on uncompleted contracts | | | 1,482,698 | | | | - | |
| Work in progress | | | (707,737 | ) | | | 246,278 | |
| Accounts payable and accrued liabilities | | | (328,788 | ) | | | 1,022,726 | |
| Billings in excess of costs and estimated earnings on uncompleted contracts | | | 2,127,013 | | | | (1,970 | ) |
| Net cash used in operating activities | | $ | (202,412 | ) | | $ | (3,006,136 | ) |
| Cash flows used in investing activities: | | | | | | | | |
| Cash paid for acquisition of Flotation, net of cash acquired of $235,040 | | | (22,161,864 | ) | | | - | |
| Cash paid for acquisition of Mako, net of cash acquired of $280,841 | | | (4,236,634 | ) | | | 280,841 | |
| Cash deficit acquired in ElectroWave acquisition | | | - | | | | (18,974 | ) |
| Cash paid for third party debt | | | - | | | | (432,475 | ) |
| Cash received from sale of ElectroWave receivables | | | - | | | | 261,068 | |
| Cash paid for final acquisition costs | | | - | | | | (242,924 | ) |
| Purchases of equipment | | | (4,803,795 | ) | | | (830,965 | ) |
| Restricted cash | | | 239,145 | | | | (375,000 | ) |
| Net cash used in investing activities | | $ | (30,963,148 | ) | | $ | (1,358,429 | ) |
| Cash flows from financing activities: | | | | | | | | |
| Payment for cancellation of common stock | | | - | | | | (250,000 | ) |
| Redemption of preferred stock | | | - | | | | (250,000 | ) |
| Proceeds from sale of common stock, net of expenses | | | 37,059,670 | | | | 3,960,000 | |
| Proceeds from sales-type lease | | | 587,000 | | | | 276,000 | |
| Borrowings on debt - related party | | | - | | | | 150,000 | |
| Payments on debt - related party | | | - | | | | (150,000 | ) |
| Borrowings on long-term debt | | | 6,769,087 | | | | 6,204,779 | |
| Increase in deferred financing fees | | | - | | | | (442,198 | ) |
| Creation of debt discount due to lender's fees | | | - | | | | (180,000 | ) |
| Payments of long-term debt | | | (12,960,953 | ) | | | (2,760,258 | ) |
| Net cash provided by financing activities | | $ | 31,454,804 | | | $ | 6,558,323 | |
| Change in cash and equivalents | | | 289,244 | | | | 2,193,758 | |
| Cash and cash equivalents, beginning of period | | | 2,206,220 | | | | 12,462 | |
| Cash and cash equivalents, end of period | | $ | 2,495,464 | | | $ | 2,206,220 | |
| | | | | | | | | |
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