Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 12, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Deep Down, Inc. | ' |
Entity Central Index Key | '0001110607 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 15,130,601 |
Document Fiscal Period Focus | 'Q2 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
ASSETS | ' | ' |
Cash and cash equivalents | $5,713 | $5,260 |
Accounts receivable, net of allowance of $535 and $1,006, respectively | 7,436 | 4,979 |
Inventory, Net | 3,341 | 254 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 2,684 | 5,847 |
Prepaid expenses and other current assets | 80 | 274 |
Total current assets | 19,254 | 16,614 |
Property, plant and equipment, net | 12,058 | 15,395 |
Investment in joint venture | 468 | 468 |
Intangibles, net | 85 | 119 |
Goodwill | 4,916 | 4,916 |
Other assets | 268 | 790 |
Total assets | 37,049 | 38,302 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ' | ' |
Accounts payable and accrued liabilities | 2,616 | 2,788 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 646 | 201 |
Current portion of long-term debt | 942 | 1,716 |
Total current liabilities | 4,204 | 4,705 |
Long-term debt, net | 3,143 | 3,218 |
Total liabilities | 7,347 | 7,923 |
Stockholders' equity: | ' | ' |
Preferred stock, $0.001 par value, 10,000 shares authorized, 0 shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value, 24,500 shares authorized, 15,131 and 15,261 shares issued and outstanding, respectively | 15 | 15 |
Additional paid-in capital | 72,274 | 72,142 |
Accumulated deficit | -42,587 | -41,778 |
Total stockholders' equity | 29,702 | 30,379 |
Total liabilities and stockholders' equity | $37,049 | $38,302 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
ASSETS | ' | ' |
Accounts receivable allowance | $535 | $1,006 |
Stockholders' equity: | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $0.00 | $0.00 |
Common stock shares authorized | 24,500,000 | 24,500,000 |
Common stock issued | 15,131,000 | 15,261,000 |
Common stock outstanding | 15,131,000 | 15,261,000 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Income Statement [Abstract] | ' | ' | ' | ' |
Revenues | $5,847 | $9,156 | $12,010 | $15,314 |
Cost of sales: | ' | ' | ' | ' |
Cost of sales | 3,778 | 5,284 | 7,325 | 8,929 |
Depreciation expense | 356 | 352 | 723 | 699 |
Total cost of sales | 4,134 | 5,636 | 8,048 | 9,628 |
Gross profit | 1,713 | 3,520 | 3,962 | 5,686 |
Operating expenses: | ' | ' | ' | ' |
Selling, general and administrative | 2,803 | 2,366 | 4,940 | 4,229 |
Depreciation and amortization | 40 | 33 | 83 | 65 |
Total operating expenses | 2,843 | 2,399 | 5,023 | 4,294 |
Operating (loss) income | -1,130 | 1,121 | -1,061 | 1,392 |
Other income (expense): | ' | ' | ' | ' |
Interest expense, net | -48 | -54 | -109 | -91 |
Equity in net income of joint venture | 0 | 0 | 0 | 1 |
Other, net | -20 | 4 | 353 | 14 |
Total other income (expense) | -68 | -50 | 244 | -76 |
(Loss) income before income taxes | -1,198 | 1,071 | -817 | 1,316 |
Income tax benefit (expense) | 18 | -49 | 9 | -70 |
Net (loss) income | ($1,180) | $1,022 | ($808) | $1,246 |
Net (loss) income per share: | ' | ' | ' | ' |
Basic | ($0.08) | $0.10 | ($0.05) | $0.12 |
Diluted | ($0.08) | $0.10 | ($0.05) | $0.12 |
Weighted-average shares outstanding: | ' | ' | ' | ' |
Basic | 15,215 | 10,324 | 15,227 | 10,238 |
Diluted | 15,215 | 10,324 | 15,227 | 10,238 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Cash flows from operating activities: | ' | ' |
Net (loss) income | ($808) | $1,246 |
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ' | ' |
Equity in net income of joint venture | 0 | -1 |
Share-based compensation | 435 | 275 |
Bad debt expense (credit) | 3 | -62 |
Depreciation and amortization | 806 | 764 |
Gain on disposal of property, plant and equipment | -317 | -8 |
Inventory obsolescence expense | 68 | 0 |
Changes in assets and liabilities: | ' | ' |
Accounts receivable | -2,638 | 454 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 3,163 | -2,774 |
Prepaid expenses and other current assets | 194 | 203 |
Other assets | 126 | 13 |
Inventory | -38 | -67 |
Accounts payable and accrued liabilities | -172 | -980 |
Deferred revenues | 0 | -44 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 445 | 107 |
Net cash used in operating activities | 1,267 | -874 |
Cash flows from investing activities: | ' | ' |
Purchases of property, plant and equipment | -665 | -122 |
Proceeds from sale of property, plant and equipment | 906 | 8 |
Cash paid for deposits | -47 | -290 |
Repayments on notes receivable | 4 | 3 |
Distribution from joint venture | 0 | 500 |
Net cash provided by investing activities | 198 | 99 |
Cash flows from financing activities: | ' | ' |
Cash paid for purchase of our common stock | -126 | 0 |
Proceeds from bank term loans | 2,200 | 1,021 |
Cash paid for deferred financing costs | -37 | -45 |
Repayments of long-term debt | -3,049 | -618 |
Net cash (used in) provided by financing activities | -1,012 | 358 |
Change in cash and equivalents | 453 | -417 |
Cash and cash equivalents, beginning of period | 5,260 | 1,523 |
Cash and cash equivalents, end of period | 5,713 | 1,106 |
Supplemental schedule of significant noncash transactions: | ' | ' |
Common Stock surrendered by employees related to payroll taxes on vested restricted stock awards | 178 | 34 |
Reclassification of equipment from property, plant and equipment to finished goods inventory | 3,117 | 0 |
Reclassification of land and buildings purchase price from deposits in other assets to property, plant and equipment | $500 | $0 |
1_BASIS_OF_PRESENTATION
1. BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2014 | |
Accounting Policies [Abstract] | ' |
BASIS OF PRESENTATION | ' |
Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q. As permitted under those rules, certain notes or other financial information that are normally required by United States generally accepted accounting principles (“US GAAP”) can be condensed or omitted. Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 28, 2014 with the Commission. | |
Preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosed amounts of contingent assets and liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. | |
Principles of Consolidation | |
The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated. | |
Segments | |
For the six months ended June 30, 2014 and 2013, our operating segments have been aggregated into a single reporting segment. | |
Recently Adopted Accounting Standards | |
In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The guidance states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, which would be our fiscal year ended September 30, 2015. This guidance should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The impacts that adoption of the ASU is expected to have on the Company’s consolidated financial statements and related disclosures are being evaluated. | |
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” This standard provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. This new standard is effective for us beginning in the year 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method therefore we are evaluating the effect that this new guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting. |
2_LIQUIDITY_AND_FINANCIAL_COND
2. LIQUIDITY AND FINANCIAL CONDITION | 6 Months Ended |
Jun. 30, 2014 | |
Risks and Uncertainties [Abstract] | ' |
LIQUIDITY AND FINANCIAL CONDITION | ' |
Historically, we have supplemented the financing of our capital needs primarily through debt and equity financings. Since 2008, we have maintained a credit facility with Whitney Bank, a state chartered bank (“Whitney”); see additional discussion in Note 7, “Long-Term Debt”. During the third quarter of 2013, we issued an additional 4,444 shares of common stock resulting in net cash proceeds of $7,628. As a result of our credit facility, the private placement and cash we expect to generate from operations, we believe we will have adequate liquidity to meet our future operating requirements. |
3_INVENTORY
3. INVENTORY | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
3. INVENTORY | ' | ||||||||
The components of inventory are summarized below: | |||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Spare parts | $ | 205 | $ | 209 | |||||
Reserve for obsolescence | (68 | ) | – | ||||||
Work in progress | 87 | 45 | |||||||
Finished goods | 3,117 | – | |||||||
Inventory, net | $ | 3,341 | $ | 254 | |||||
The finished goods inventory balance of $3,117 at June 30, 2014 consists of a 3.5 metric ton portable umbilical carousel which we fabricated and bought back from a customer in November 2013. |
4_BILLINGS_COSTS_AND_ESTIMATED
4. BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Billings Costs And Estimated Earnings On Uncompleted Contracts | ' | ||||||||
BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS | ' | ||||||||
The components of billings, costs and estimated earnings on uncompleted contracts are summarized below: | |||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Costs incurred on uncompleted contracts | $ | 4,165 | $ | 14,496 | |||||
Estimated earnings on uncompleted contracts | 2,236 | 5,539 | |||||||
6,401 | 20,035 | ||||||||
Less: Billings to date on uncompleted contracts | (4,363 | ) | (14,389 | ) | |||||
$ | 2,038 | $ | 5,646 | ||||||
Included in the accompanying consolidated balance sheets under the following captions: | |||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 2,684 | $ | 5,847 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | (646 | ) | (201 | ) | |||||
$ | 2,038 | $ | 5,646 | ||||||
The balances in costs and estimated earnings in excess of billings on uncompleted contracts at June 30, 2014 and December 31, 2013 consisted primarily of earned but unbilled revenues related to large fixed-price projects. | |||||||||
The balances in billings in excess of costs and estimated earnings on uncompleted contracts at June 30, 2014 and December 31, 2013 consisted primarily of unearned billings related to large fixed-price projects. |
5_INVESTMENT_IN_JOINT_VENTURE
5. INVESTMENT IN JOINT VENTURE | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract] | ' | ||||
INVESTMENT IN JOINT VENTURE | ' | ||||
Effective December 31, 2010, we engaged in a transaction in which all of the operating assets and substantially all of the liabilities of a former wholly-owned subsidiary, Flotation Technologies, Inc. (“Flotation”) were contributed, along with other contributions we made, to a joint venture entity named Cuming Flotation Technologies, LLC (“CFT”) in return for a 20 percent common unit ownership interest in CFT. | |||||
On October 7, 2011, CFT consummated a transaction pursuant to that certain Stock Purchase Agreement (the “Purchase Agreement”), by and between CFT and a Houston-based company (“Buyer”) pursuant to which Buyer purchased from CFT (i) all of the issued and outstanding shares of capital stock of Cuming Corporation (“Cuming”), the principal operating subsidiary of CFT, (ii) the shares of 230 Bodwell Corporation, a Massachusetts corporation and subsidiary of Cuming, and (iii) certain assets that, immediately prior to closing, were acquired by Cuming, for a purchase price of $60,000 (less certain debt and subject to a purchase price adjustment for working capital and potential earn-out payments). We are entitled to 20 percent of future potential earn-out proceeds from the sale. Earn-out proceeds were $0 for the six months ended June 30, 2014 and 2013. | |||||
The components of our Investment in joint venture are summarized below: | |||||
Investment in joint venture, December 31, 2013 | $ | 468 | |||
Equity in net income of CFT for the six months ended June 30, 2014 | – | ||||
Investment in joint venture, June 30, 2014 | $ | 468 |
6_PROPERTY_PLANT_AND_EQUIPMENT
6. PROPERTY, PLANT AND EQUIPMENT | 6 Months Ended | ||||||||||||
Jun. 30, 2014 | |||||||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||||||
PROPERTY, PLANT AND EQUIPMENT | ' | ||||||||||||
The components of net property, plant and equipment are summarized below: | |||||||||||||
Range of | |||||||||||||
30-Jun-14 | 31-Dec-13 | Asset Lives | |||||||||||
Land | $ | 1,582 | $ | 1,582 | – | ||||||||
Buildings and improvements | 1,571 | 1,571 | 7 - 36 years | ||||||||||
Leasehold improvements | 602 | 602 | 2 - 5 years | ||||||||||
Equipment | 13,745 | 17,840 | 2 - 30 years | ||||||||||
Furniture, computers and office equipment | 1,220 | 1,329 | 2 - 8 years | ||||||||||
Construction in progress | 1,326 | 189 | – | ||||||||||
Total property, plant and equipment | 20,046 | 23,113 | |||||||||||
Less: Accumulated depreciation and amortization | (7,988 | ) | (7,718 | ) | |||||||||
Property, plant and equipment, net | $ | 12,058 | $ | 15,395 |
7_LONGTERM_DEBT
7. LONG-TERM DEBT | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
LONG-TERM DEBT | ' | ||||||||
Long-term debt consisted of the following: | |||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Secured credit agreement - Whitney | $ | 4,002 | $ | 1,917 | |||||
Other debt | – | 2,906 | |||||||
Capital lease obligations | 83 | 111 | |||||||
Total long-term debt | 4,085 | 4,934 | |||||||
Less: Current portion of long-term debt | (942 | ) | (1,716 | ) | |||||
Long-term debt, net of current portion | $ | 3,143 | $ | 3,218 | |||||
Whitney Credit Agreement | |||||||||
Since 2008, we have maintained a credit facility (the “Facility”) with Whitney Bank, a state chartered bank (“Whitney”). The Facility has been amended and restated several times, most recently effective April 15, 2014. The current relevant terms of the Facility include: | |||||||||
· | a committed amount under the revolving credit facility (“Revolving Credit Facility”) of $5,000, at an interest rate of 3.5 percent per annum, maturing June 30, 2015; | ||||||||
· | a real estate term facility (“RE Term Facility”) of $2,000, at an interest rate of 4.0 percent per annum, maturing April 15, 2018, with the Company being obligated to make monthly increasing repayments of principal (along with accrued and unpaid interest thereon) starting at $8, beginning April 1, 2013; | ||||||||
· | a carousel term facility (“Carousel Term Facility”) of $2,200, at an interest rate of 3.5 percent per annum, maturing October 15, 2016, with the Company being obligated to make monthly repayments of principal of $65 (along with accrued and unpaid interest thereon) beginning July 1, 2014; and | ||||||||
· | outstanding balances under the Facility are secured by all of the Company’s assets. | ||||||||
As of June 30, 2014, the Company’s indebtedness under the Revolving Credit Facility, the RE Term Facility, and the Carousel Term Facility was $0, $1,867, and $2,135, respectively. | |||||||||
Our credit agreement with Whitney obligates us to comply with the following financial covenants: | |||||||||
· | Leverage Ratio - The ratio of total debt to consolidated EBITDA must be less than 3.0 to 1.0; actual Leverage Ratio as of June 30, 2014: 29.6 to 1.0. | ||||||||
· | Fixed Charge Coverage Ratio - The ratio of consolidated EBITDA to consolidated net interest expense, plus principal payments on total debt, must be greater than 1.5 to 1.0; actual Fixed Charge Coverage Ratio as of June 30, 2014: (0.1) to 1.0. | ||||||||
· | Tangible Net Worth - Our consolidated net worth, after deducting other assets as are properly classified as “intangible assets,” plus 50 percent of net income, after provision for taxes, must be in excess of $16,700; actual Tangible Net Worth as of June 30, 2014: $24,701. | ||||||||
· | Moreover, we continue to have obligations for other covenants, including, among others, limitations on issuance of common stock, liens, transactions with affiliates, additional indebtedness and permitted investments. | ||||||||
On December 31, 2013, we were in compliance with all of these financial covenants. However, at June 30, 2014, we were not in compliance with the Leverage Ratio and Fixed Charge Coverage Ratio covenants. We have received a waiver from Whitney for this non-compliance and for the possible non-compliance with these covenants for the quarter ending September 30, 2014. In exchange for these waivers, we are obligated to pay Whitney a $5 fee, and are required to maintain a minimum of $3,900 in our existing interest-bearing account at Whitney. This requirement will continue until such time as we have regained compliance with these covenants, which is projected to be December 31, 2014. | |||||||||
Other Debt | |||||||||
On November 5, 2013, we entered into a Purchase and Sale Agreement (“PSA”) with a customer to buy back a 3.5 metric ton portable umbilical carousel, which we had fabricated specifically for this customer. The PSA calls for purchase price of $3,293 to be paid in 24 monthly installments of approximately $137, commencing November 5, 2013 through October 5, 2015. We used the proceeds of the Whitney Carousel Term Facility to retire this obligation, and the balance at June 30, 2014 was $0. |
8_SHAREBASED_COMPENSATION
8. SHARE-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2014 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
SHARE-BASED COMPENSATION | ' |
We have a share-based compensation plan, the “2003 Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Award Plan” (the “Plan”). Awards of common stock and options to purchase common stock granted under the Plan have vesting periods of three years and options are exercisable for two years once fully vested. Share-based compensation expense related to awards is based on the fair value at the date of grant, and is recognized over the vesting periods, net of estimated forfeitures. Effective April 1, 2014, we changed our estimated forfeiture rate from 20 percent to 0 percent. Under the Plan, the total number of options permitted is 15 percent of issued and outstanding common shares. | |
Summary of Shares of Restricted Stock | |
On May 1, 2014, we granted 30 shares of restricted stock, with a grant date fair value of $1.77 per share, to a newly-appointed director, who is not an employee of the Company or any of its affiliates. The restrictions on these service-based shares of restricted stock, issued during the six months ended June 30, 2014, will lapse with respect to one-third of the shares on each of the first, second and third anniversaries of the effective date of grant. | |
During the six months ended June 30, 2014 and 2013, we recognized a total of $366 and $198, respectively, of share-based compensation expense related to restricted stock awards, which is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The unamortized portion of the estimated fair value of restricted stock awards was $1,002 at June 30, 2014. | |
Summary of Stock Options | |
For the six months ended June 30, 2014 and 2013, we recognized a total of $69 and $77, respectively, of share-based compensation expense related to outstanding stock option awards, which is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The unamortized portion of the estimated fair value of non-vested stock options was $0 at June 30, 2014. |
9_INCOME_TAXES
9. INCOME TAXES | 6 Months Ended |
Jun. 30, 2014 | |
Income Tax Disclosure [Abstract] | ' |
INCOME TAXES | ' |
Income tax expense during interim periods is based on applying the estimated annual effective income tax rate to interim period operations. The estimated annual effective income tax rate may vary from the statutory rate due to the impact of permanent items relative to our pre-tax income, as well as by any valuation allowance recorded. We employ an asset and liability approach that results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial basis and the tax basis of those assets and liabilities. A valuation allowance is established when it is more likely than not that some of the deferred tax assets will not be realized. Although our future projections indicate that we may be able to realize some of these deferred tax assets, due to the degree of uncertainty of these projections, at June 30, 2014 management has recorded a full deferred tax asset valuation allowance. |
10_COMMITMENTS_AND_CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
COMMITMENTS AND CONTINGENCIES | ' |
Litigation | |
From time to time we are involved in legal proceedings arising in the normal course of business. As of the date of this Report, we were not involved in any material actual or pending legal proceedings. | |
Operating Leases | |
We lease certain offices, facilities, equipment and vehicles under non-cancellable operating and capital leases expiring at various dates through 2023. | |
Letters of Credit | |
Certain of our customers could require us to issue a standby letter of credit (“LC”) in the ordinary course of business to ensure performance under terms of a contract or as a form of product warranty. The beneficiary could demand payment from the issuing bank for the amount of the outstanding letter of credit. There were $415 in LC’s outstanding at June 30, 2014 and December 31, 2013. |
11_EARNINGS_PER_COMMON_SHARE
11. EARNINGS PER COMMON SHARE | 6 Months Ended |
Jun. 30, 2014 | |
Net (loss) income per share: | ' |
EARNINGS PER COMMON SHARE | ' |
Basic earnings per share (“EPS”) is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income (loss) by the weighted-average number of common shares and dilutive common stock equivalents (stock options) outstanding during the period. Diluted EPS reflects the potential dilution that could occur if options to purchase common stock were exercised for shares of common stock. | |
At June 30, 2014 and 2013, there were outstanding stock options convertible to 325 and 945 shares of common stock, respectively. There were no dilutive securities included in the computation of diluted earnings per share for the six months ended June 30, 2013 and 2014 because their inclusion would be anti-dilutive. |
12_STOCKHOLDERS_EQUITY
12. STOCKHOLDERS' EQUITY | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Stockholders' equity: | ' | ||||
STOCKHOLDERS' EQUITY | ' | ||||
Common Stock | |||||
The number of shares of common stock outstanding is as follows: | |||||
Balance, December 31, 2013 | 15,261 | ||||
Shares purchased and retired February 28, 2014 | (66 | ) | |||
Restricted stock award issued May 1, 2014 | 30 | ||||
Shares surrendered and retired June 30, 2014 | (94 | ) | |||
Balance, June 30, 2014 | 15,131 |
1_BASIS_OF_PRESENTATION_Polici
1. BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Jun. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q. As permitted under those rules, certain notes or other financial information that are normally required by United States generally accepted accounting principles (“US GAAP”) can be condensed or omitted. Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 28, 2014 with the Commission. | |
Preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosed amounts of contingent assets and liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. | |
Principles of Consolidation | ' |
Principles of Consolidation | |
The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated. | |
Segments | ' |
Segments | |
For the six months ended June 30, 2014 and 2013, our operating segments have been aggregated into a single reporting segment. | |
Recently Adopted Accounting Standards | ' |
Recently Adopted Accounting Standards | |
Effective January 1, 2013, we adopted ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” issued by the FASB. Significant amounts reclassified out of accumulated other comprehensive income are required to be presented either on the face of the financial statements or in the notes to the financial statements. The updated guidance is to be applied prospectively, effective January 1, 2013. The adoption of this update concerns disclosure only and did not have any financial impact on our unaudited condensed consolidated financial statements. |
3_INVENTORY_Tables
3. INVENTORY (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventory | ' | ||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Spare parts | $ | 205 | $ | 209 | |||||
Reserve for obsolescence | (68 | ) | – | ||||||
Work in progress | 87 | 45 | |||||||
Finished goods | 3,117 | – | |||||||
Inventory, net | $ | 3,341 | $ | 254 |
4_BILLINGS_COSTS_AND_ESTIMATED1
4. BILLINGS, COSTS AND ESTIMATED EARNINGS (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Billings Costs And Estimated Earnings On Uncompleted Contracts | ' | ||||||||
COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS | ' | ||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Costs incurred on uncompleted contracts | $ | 4,165 | $ | 14,496 | |||||
Estimated earnings on uncompleted contracts | 2,236 | 5,539 | |||||||
6,401 | 20,035 | ||||||||
Less: Billings to date on uncompleted contracts | (4,363 | ) | (14,389 | ) | |||||
$ | 2,038 | $ | 5,646 | ||||||
Included in the accompanying consolidated balance sheets under the following captions: | |||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 2,684 | $ | 5,847 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | (646 | ) | (201 | ) | |||||
$ | 2,038 | $ | 5,646 |
5_INVESTMENT_IN_JOINT_VENTURE_
5. INVESTMENT IN JOINT VENTURE (Tables) | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract] | ' | ||||
Investment in Joint Venture | ' | ||||
Investment in joint venture, December 31, 2013 | $ | 468 | |||
Equity in net income of CFT for the six months ended June 30, 2014 | – | ||||
Investment in joint venture, June 30, 2014 | $ | 468 |
6_PROPERTY_PLANT_AND_EQUIPMENT1
6. PROPERTY, PLANT AND EQUIPMENT (Tables) | 6 Months Ended | ||||||||||||
Jun. 30, 2014 | |||||||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||||||
Net Property, plant and equipment | ' | ||||||||||||
Range of | |||||||||||||
30-Jun-14 | 31-Dec-13 | Asset Lives | |||||||||||
Land | $ | 1,582 | $ | 1,582 | – | ||||||||
Buildings and improvements | 1,571 | 1,571 | 7 - 36 years | ||||||||||
Leasehold improvements | 602 | 602 | 2 - 5 years | ||||||||||
Equipment | 13,745 | 17,840 | 2 - 30 years | ||||||||||
Furniture, computers and office equipment | 1,220 | 1,329 | 2 - 8 years | ||||||||||
Construction in progress | 1,326 | 189 | – | ||||||||||
Total property, plant and equipment | 20,046 | 23,113 | |||||||||||
Less: Accumulated depreciation and amortization | (7,988 | ) | (7,718 | ) | |||||||||
Property, plant and equipment, net | $ | 12,058 | $ | 15,395 |
7_LONGTERM_DEBT_Tables
7. LONG-TERM DEBT (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Long-term Debt | ' | ||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Secured credit agreement - Whitney | $ | 4,002 | $ | 1,917 | |||||
Other debt | – | 2,906 | |||||||
Capital lease obligations | 83 | 111 | |||||||
Total long-term debt | 4,085 | 4,934 | |||||||
Less: Current portion of long-term debt | (942 | ) | (1,716 | ) | |||||
Long-term debt, net of current portion | $ | 3,143 | $ | 3,218 |
12_STOCKHOLDERS_EQUITY_Tables
12. STOCKHOLDERS' EQUITY (Tables) | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Stockholders' equity: | ' | ||||
Number of shares of common stock outstanding | ' | ||||
Balance, December 31, 2013 | 15,261 | ||||
Shares purchased and retired February 28, 2014 | (66 | ) | |||
Restricted stock award issued May 1, 2014 | 30 | ||||
Shares surrendered and retired June 30, 2014 | (94 | ) | |||
Balance, June 30, 2014 | 15,131 |
3_INVENTORY_Details
3. INVENTORY (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Inventory Disclosure [Abstract] | ' | ' |
Spare parts | $205 | $209 |
Reserve for obsolescence | -68 | 0 |
Work in progress | 87 | 45 |
Finished goods | 3,117 | 0 |
Inventory, net | $3,341 | $254 |
4_BILLINGS_COSTS_AND_ESTIMATED2
4. BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Billings In Excess Of Costs And Estimated Earnings On Uncompleted Contracts And Deferred Revenues | ' | ' |
Costs incurred on uncompleted contracts | $4,165 | $14,496 |
Estimated earnings on uncompleted contracts | 2,236 | 5,539 |
Gross costs and estimated earnings | 6,401 | 20,035 |
Less: Billings to date on uncompleted contracts | -4,363 | -14,389 |
Costs incurred plus estimated earning less billings on uncompleted contracts | 2,038 | 5,646 |
Included in the accompanying condensed consolidated balance sheets under the following captions: | ' | ' |
Costs and estimated earnings in excess of billings on uncompleted contracts | 2,684 | 5,847 |
Billings in excess of costs and estimated earnings on uncompleted contracts | -646 | -201 |
Total costs and estimated earnings and billings in excess of cost on uncompleted contracts | $2,038 | $5,646 |
5_INVESTMENT_IN_JOINT_VENTURE_1
5. INVESTMENT IN JOINT VENTURE (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract] | ' | ' | ' | ' |
Investment in joint venture - Beginning balance | ' | ' | $468 | ' |
Equity in net income of CFT | 0 | 0 | 0 | 1 |
Investment in joint venture - Ending balance | $468 | ' | $468 | ' |
5_INVESTMENT_IN_JOINT_VENTURE_2
5. INVESTMENT IN JOINT VENTURE (Details Narrative) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract] | ' | ' |
Future earn-out proceeds from the sale | 20.00% | 20.00% |
Earn-out proceeds | $0 | $0 |
5_PROPERTY_PLANT_AND_EQUIPMENT
5. PROPERTY, PLANT AND EQUIPMENT (Details) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Dec. 31, 2013 |
Total property, plant and equipment | $20,046 | $23,113 |
Less: Accumulated depreciation and amortization | -7,988 | -7,718 |
Property, plant and equipment,Net | 12,058 | 15,395 |
Land | ' | ' |
Total property, plant and equipment | 1,582 | 1,582 |
Building and improvements | ' | ' |
Total property, plant and equipment | 1,571 | 1,571 |
Range of Asset lives | '7-36 years | ' |
Leasehold Improvements | ' | ' |
Total property, plant and equipment | 602 | 602 |
Range of Asset lives | '2-5 years | ' |
Equipment | ' | ' |
Total property, plant and equipment | 13,745 | 17,840 |
Range of Asset lives | '2-30 years | ' |
Furniture, computers and office equipment | ' | ' |
Total property, plant and equipment | 1,220 | 1,329 |
Range of Asset lives | '2-8 years | ' |
Construction in Progress | ' | ' |
Total property, plant and equipment | $1,326 | $189 |
7_LONGTERM_DEBT_Details
7. LONG-TERM DEBT (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Debt Disclosure [Abstract] | ' | ' |
Secured credit agreement - Whitney Bank | $4,002 | $1,917 |
Other debt | 0 | 2,906 |
Capital lease obligations | 83 | 111 |
Total long-term debt | 4,085 | 4,934 |
Less: Current portion of long-term debt | -942 | -1,716 |
Long-term debt, net of current portion | $3,143 | $3,218 |
7_LONGTERM_DEBT_Details_Narrat
7. LONG-TERM DEBT (Details Narrative) (USD $) | Jun. 30, 2014 |
In Thousands, unless otherwise specified | |
Revolving Credit Facililty | ' |
Line of credit | $0 |
RE Term Facility | ' |
Line of credit | 1,867 |
Carousel Term | ' |
Line of credit | $2,135 |
8_SHAREBASED_COMPENSATION_Deta
8. SHARE-BASED COMPENSATION (Details Narrative) (USD $) | 6 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Stock Options | ' | ' |
Share-based compensation expense | $69 | $77 |
Unamortized portion of restricted stock awards | 1,002 | ' |
Unamortized portion of fair value of stock options | 0 | ' |
Restricted Stock Awards | ' | ' |
Restricted stock granted | 30 | ' |
Share-based compensation expense | $366 | $198 |
10_COMMITMENTS_AND_CONTINGENCI1
10. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Commitments and Contingencies Disclosure [Abstract] | ' | ' |
Letters Of Credit Outstanding | $415 | $415 |
10_EARNINGS_PER_COMMON_SHARE_D
10. EARNINGS PER COMMON SHARE (Details Narrative) (Stock Options) | Jun. 30, 2014 | Jun. 30, 2013 |
Stock Options | ' | ' |
Outstanding shares available to convert to common stock | 325 | 945 |
11_STOCKHOLDERS_EQUITY_Details
11. STOCKHOLDERS' EQUITY (Details) (USD $) | 6 Months Ended |
In Thousands, except Share data, unless otherwise specified | Jun. 30, 2014 |
Stockholders' equity: | ' |
Beginning balance | 15,261 |
Shares purchased and retired | -66 |
Restricted stock award | $30 |
Shares surrendered and retired | ($94) |
Ending balance | 15,131 |