NEWS RELEASE
| November 13, 2012 | OTCQB: DPDW |
DEEP DOWN REPORTS THIRD QUARTER 2012 RESULTS
| ● | Net Income Increases 60% to $970 thousand | |
| ● | Modified EBITDA Increases 41% to $1.9 million | |
| ● | Backlog $16.3 million | |
HOUSTON, November 13, 2012 /PRNewswire/ -- Deep Down, Inc. (OTC QB: DPDW) ("Deep Down" or the "Company"), an oilfield services company specializing in products and services for the deepwater and ultra-deepwater oil and gas industry, today reported net income of $970 thousand for the third quarter of 2012, an improvement of $364 thousand over the same period in 2011.
OPERATING RESULTS
For the third quarter of 2012, Deep Down reported net income of $970 thousand, or $0.10 income per diluted share, compared to net income of $606 thousand, or $0.06 income per diluted share, in the third quarter of 2011.
Revenues for the third quarter of 2012 were $9.4 million. Revenues for the third quarter of 2011 were $8.6 million. The $0.8 million increase in revenues in the 2012 period compared to the 2011 period was due primarily to an increase of $2.3 million in our subsea solutions services due to continued strong demand for our technologically innovative solutions, offset by a decrease of $1.5 million in our ROV and topside equipment rental services due to decreased demand.
Gross profit for the third quarter of 2012 was $3.2 million, or 34 percent of revenues. Gross profit for the third quarter of 2011 was $2.7 million, or 31 percent of revenues. The $0.5 million, or 3 percentage-points, increase in gross profit in the 2012 period compared to the same period in 2011, was due primarily to a $1.3 million increase related to our subsea solutions services, offset by a $0.8 million decrease related to our ROV and topside equipment rental services.
Selling, general and administrative expenses ("SG&A") for both the third quarter of 2012 and the third quarter of 2011 were $2.0 million. Slight decreases in professional services fees and share-based compensation expense were offset by a reduction in reimbursements under a terminated joint venture management services agreement, leaving SG&A flat in the 2012 period compared to the 2011 period.
The Company's management evaluates its financial performance based on a non-GAAP measure, Modified EBITDA, which consists of earnings (net income or loss) available to common shareholders before net interest expense, income taxes, depreciation and amortization, and other non-cash and non-recurring charges. Modified EBITDA was $1.9 million in the third quarter of 2012. Modified EBITDA was $1.3 million in the third quarter of 2011. The $0.6 million increase in Modified EBITDA in the 2012 period compared to the 2011 period was caused primarily by increased gross profit before depreciation and non-recurring operational consolidation expense of $0.6 million.
At September 30, 2012, we had working capital of $4.5 million, including cash and cash equivalents of $2.2 million. We believe our current cash balance, in addition to cash we expect to generate from operations, will ensure that we have adequate liquidity to meet our future operating requirements.
EXECUTIVE MANAGEMENT
Ronald E. Smith, Chief Executive Officer stated, "This was the Company's strongest third quarter performance since 2008. We are very satisfied with what our subsea solutions business was able to achieve in the third quarter of 2012. We added approximately $4.6 million to backlog bringing total current backlog to approximately $16.3 million.
On August 27, 2012, we announced that we had consolidated the operations of our ROV and topside equipment rental business as part of our ongoing cost containment program. All of the assets and operations previously located in Morgan City, Louisiana are now operating out of our Channelview, Texas facility. We were able to reduce our total workforce by 10% and expect to recognize additional cost savings during the remainder of 2012 and beyond. Additionally, our customers will benefit from increased visibility of these services and synergies in our operations."
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 tooling, 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. More information about Deep Down is available at www.deepdowncorp.com.
Forward-Looking Statements
Any forward-looking statements in the preceding paragraphs of this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties in that actual results may differ materially from those projected in the forward-looking statements. In the course of operations, we are subject to certain risk factors, competition and competitive pressures, sensitivity to general economic and industrial conditions, international political and economic risks, availability and price of raw materials and execution of business strategy. For further information, please refer to the Company's filings with the Securities and Exchange Commission, copies of which are available from the Company without charge.
For Further Information
Investor Relations
Preston Graham
Stonegate Securities, Inc.
preston@stonegateinc.com
| | | For the Three Months Ended | |
| | | September 30, | |
| | | 2012 | | | 2011 | |
| (in thousands, except per share amounts) | | | | | | |
| Results of operations data: | | | | | | |
| Revenues | | $ | 9,391 | | | $ | 8,568 | |
| Cost of sales | | | 6,228 | | | | 5,879 | |
| Gross profit | | | 3,163 | | | | 2,689 | |
| Total operating expenses | | | 2,106 | | | | 2,124 | |
| Operating income | | | 1,057 | | | | 565 | |
| Total other expense | | | (13 | ) | | | (58 | ) |
| Income before income taxes | | | 1,044 | | | | 507 | |
| Income tax (expense) benefit | | | (74 | ) | | | 99 | |
| Net income | | $ | 970 | | | $ | 606 | |
| Net income per share, basic and diluted | | $ | 0.10 | | | $ | 0.06 | |
| Weighted-average shares outstanding, basic and diluted | | | 10,161 | | | | 10,302 | |
| | | | | | | | | |
| Modified EBITDA data: | | | | | | | | |
| Net income | | $ | 970 | | | $ | 606 | |
| Add back interest expense, net | | | 34 | | | | 84 | |
| Add back depreciation and amortization | | | 474 | | | | 460 | |
| Add back (deduct) income tax expense (benefit) | | | 74 | | | | (99 | ) |
| Add back share-based compensation | | | 142 | | | | 198 | |
| Add back non-recurring operational consolidation expense | | | 200 | | | | - | |
| Add back equity in net loss of joint venture | | | 39 | | | | 124 | |
| Modified EBITDA | | $ | 1,933 | | | $ | 1,373 | |
| | | | | | | | | |
| | | For the Nine Months Ended | |
| | | September 30, | |
| | | | 2012 | | | | 2011 | |
| (in thousands) | | | | | | | | |
| Cash flow data: | | | | | | | | |
| Cash provided by (used in): | | | | | | | | |
| Operating activities | | $ | 307 | | | $ | 1,856 | |
| Investing activities | | | (1,488 | ) | | | (1,786 | ) |
| Financing activities | | | (1,600 | ) | | | (1,219 | ) |
| | | | | | | | | |
| | | September 30, 2012 | | December 31, 2011 | |
| (in thousands) | | | | | | | | |
| Balance sheet data: | | | | | | | | |
| Cash and cash equivalents | | $ | 2,198 | | | $ | 4,979 | |
| Current assets | | | 11,499 | | | | 11,411 | |
| Current liabilities | | | 7,000 | | | | 7,486 | |
| Working capital | | | 4,499 | | | | 3,925 | |
| Total assets | | | 33,648 | | | | 32,444 | |
| Total debt | | | 2,704 | | | | 3,066 | |
| Total liabilities | | | 7,125 | | | | 7,659 | |
| Stockholders' equity | | | 26,523 | | | | 24,785 | |
