HOUSTON, Aug. 20 TX-DPDW-rev-increase
HOUSTON, Aug. 20 /PRNewswire-FirstCall/ -- Deep Down, Inc.
(OTC Bulletin Board: DPDW) announced unaudited results on August 15, 2008, for
the three months and six months ended June 30, 2008, on Form 10-Q filed with
the U.S. Securities and Exchange Commission.
Deep Down generated revenue of $14.2 million for the six months ended
June 30, 2008 compared to $7.2 million for the same period last year, an
increase of $7.0 million, or 96%. Our acquisitions accounted for $5.1 million
of this increase. Mako was included for the entire period and accounted for
$2.7 million of the increase. Flotation Technologies was included for two
months and accounted for $1.5 million of the increase. ElectroWave was
included for six months and accounted for $0.9 million of the increase, but
the six month period in 2007 included only three months revenue for
ElectroWave since it was acquired in April 2007. Our existing businesses
continued to strengthen with increased revenues of $1.9 million, or 29%, over
last year's six month period. Contract revenues were up 25%, and rentals were
up 47%. Our offshore market continues to be strong as we continue to expand
our customer base.
Deep Down generated revenues of $7.9 million for the three months ended
June 30, 2008 compared to $5.1 million for the same period last year, an
increase of $2.8 million, or 54%. Our acquisitions represented $3.0 million
of the increase in revenue in addition to a slight revenue decrease in the
core business of $0.2 million. This slight decrease in revenue was a result of
certain customers delaying scheduled projects.
Gross margin for the six months ended June 30, 2008 was $4.8 million
compared to $2.7 million in the same prior year period, an increase of
$2.1 million, or 79%. $1.4 million of the increase is attributable to the
inclusion of the acquisitions in this period. The overall gross margin was
34 % for the first six months of 2008 as compared to 37% for the same period
last year. The gross margin is slightly lower due to an increase in personnel.
SG&A for the six months ended June 30, 2008, was $5.4 million compared to
$1.8 million for the same period last year, an increase of $3.6 million, or
209%. The acquisitions of Mako and Flotation represented $1.5 million of the
increase. Bad debt expense increased by $0.8 million due to the write-off of
two accounts, one of which filed for bankruptcy protection during the quarter
($0.2 million of the total bad debt is included in the Mako subsidiary).
Personnel and related costs increased by $1.0 million primarily due to an
expansion of our businesses, combined with the related costs of administering
a public company and complying with reporting requirements. Additionally, we
paid approximately $0.7 million in professional, accounting, and legal fees to
support our various initiatives during the six months ended June 30, 2008,
including the filing of a registration statement, acquisitions and reporting
requirements. Stock based compensation related to employee stock options and
restricted stock was approximately $0.3 million in the current fiscal year
compared to approximately $40,000 for the comparable prior year period.
Operating loss for the six months ended June 30, 2008, was $1.5 million
compared to operating income of $0.8 million for the same prior year period.
Net loss for the six months ended June 30, 2008, was $5.0 million compared to
net income of $0.8 million for the same prior period. Income was impacted by
one-time interest expense and loss on debt extinguishment expenses totaling
$2.6 million related to the early payoff of our secured credit agreement (the
"Credit Agreement"). Earnings before interest, taxes, depreciation,
amortization and other non-cash charges ("EBITDA") for the six months ended
June 30, 2008, was $0.5 million, compared to $1.0 million, a decrease of
$0.5 million over the same prior year period.
Interest expense for the six months ended June 30, 2008, was $3.5 million
compared to $1.5 million for the same prior year period. In connection with
the early payoff of the Credit Agreement, Deep Down accelerated the remaining
deferred financing costs totaling $0.7 million and recorded this charge to
interest expense. Additionally, $1.5 million in debt discounts were
accelerated and recorded to interest expense, along with early termination
fees of approximately $0.5 million. Deep Down paid cash interest related to
the Credit Agreement totaling $0.8 million for the six months ended June 30,
2008. For the comparable period last year, $1.4 million of the total interest
was related to accretion on the redemption of Series G and Series E Preferred
Stock.
"I am pleased to report this quarter that Deep Down continues to improve
its financial position. The Company is now essentially debt free and has
retired all of its remaining preferred shares. Liquidity is strong with
unrestricted cash and equivalents of $4.1 million and a current ratio of
3.8. Our working capital position is $10.8 million. Stockholders' equity has
improved dramatically and is now $52.9 million compared to $12.6 million on
December 31, 2007. We remain excited and optimistic about the prospects for
continued revenue growth and a return to profitability," commented Robert E.
Chamberlain, Jr., Deep Down's Chairman.
About Deep Down, Inc.
Deep Down specializes in the provision of innovative solutions,
installation management, engineering services, support services, custom
fabrication and storage management services for the offshore subsea control,
umbilical, and pipeline industries. The company fabricates component parts of
subsea distribution systems and assemblies that specialize in the development
of subsea fields and tie backs. These items include umbilicals, flow lines,
distribution systems, pipeline terminations, controls, winches, and launch and
retrieval systems, among others. Deep Down provides these services from the
initial field conception phase, through manufacturing, site integration
testing, installation, topside connections, and the final commissioning of a
project.
The Company's ElectroWave subsidiary offers products and services in the
fields of electronic monitoring and control systems for the energy, military,
and commercial business sectors. ElectroWave designs, manufactures, installs,
and commissions integrated PLC and SCADA based instrumentation and control
systems, including ballast control and monitoring, drilling instrumentation,
vessel management systems, marine advisory systems, machinery plant control
and monitoring systems, and closed circuit television systems.
The Company's Mako subsidiary serves the growing offshore petroleum and
marine industries with technical support services, and products vital to
offshore petroleum production, through rentals of its remotely operated
vehicles (ROV), topside and subsea equipment, and diving support systems used
in diving operations, maintenance and repair operations, offshore
construction, and environmental/marine surveys.
Flotation engineers, designs and manufactures deepwater buoyancy systems
using high-strength Flotec(TM) syntactic foam and polyurethane elastomers.
Flotation's product offerings include distributed buoyancy for flexible pipes
and umbilicals, drilling riser buoyance modules, CoreTec(TM) drilling riser
buoyancy modules, ROVits(TM) buoyancy, Hydro-Float mooring buoys,
Stablemoor(TM) low-drag ADCP deployment solution, Quick-Loc(TM) cable floats,
Hardball(TM) umbilical floats, Flotec(TM) cable and pipeline protection,
Inflex(TM) polymer bend restrictors, and installation buoyancy of any size and
depth rating.
The Company's strategy is to become a leading provider of products and
services to the offshore industry, including shallow, deep, and ultra-deep
water applications in oil and gas exploration, development and production
activities, and maritime operations. Management plans to achieve this
strategy through organic growth and strategic acquisitions of complementary
businesses with technological advantages in deepwater environments. For
further company information, please visit http://www.deepdowninc.com,
http://www.electrowaveusa.com, http://www.makotechnologies.com and
http://www.flotec.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.
DEEP DOWN, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2008 2007
ASSETS
Cash and equivalents$4,085,543 $2,206,220
Restricted cash -375,000
Accounts receivable, net of allowance of
$818,992 and $139,787 respectively 8,614,961 7,190,466
Prepaid expenses and other current assets 710,213312,058
Inventory 179,343502,253
Lease receivable, short-term 414,000414,000
Work in progress 681,790945,612
Receivable from Prospect, net- 2,687,333
Total current assets14,685,850 14,632,942
Property and equipment, net 10,651,053 5,172,804
Other assets, net of accumulated amortization
of $0 and $54,560 respectively550,819 1,109,152
Lease receivable, long-term500173,000
Intangibles, net18,745,713 4,369,647
Goodwill13,001,556 10,594,144
Total assets $57,635,491$36,051,689
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities$3,070,105 $3,569,826
Deferred revenue 725,521188,030
Payable to Mako shareholders - 3,205,667
Current portion of long-term debt 47,477995,177
Total current liabilities3,843,103 7,958,700
Long-term debt, net of accumulated discount of
$0 and $1,703,258 respectively919,381 10,698,818
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 liabilities4,762,484 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, 174,732,501 and 85,976,526
shares issued and outstanding, respectively 174,733 85,977
Paid-in capital 60,000,402 14,849,847
Accumulated deficit (7,302,128)(2,347,308)
Total stockholders' equity 52,873,007 12,588,516
Total liabilities and stockholders' equity $57,635,491$36,051,689
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
20082007 2008 2007
Revenues
Contract revenue $5,670,385 $4,508,635 $11,007,914 $6,110,916
Rental revenue 2,249,811 636,1533,191,7471,132,266
Total revenues 7,920,196 5,144,788 14,199,6617,243,182
Cost of sales 5,496,427 3,293,3139,372,7984,545,402
Gross profit 2,423,769 1,851,4754,826,8632,697,780
Operating expenses:
Selling, general &
administrative 3,681,643 1,103,9025,443,8901,763,622
Depreciation and
amortization 543,128 90,196 841,277 154,221
Total operating
expenses 4,224,771 1,194,0986,285,1671,917,843
Operating income (loss) (1,801,002)657,377 (1,458,304) 779,937
Other income (expense):
Gain (loss) on debt
extinguishment (446,412) 2,000,000 (446,412) 2,000,000
Interest income27,346 16,290 66,510 16,290
Interest expense (2,690,534) (1,276,770) (3,459,564) (1,508,657)
Other expense (39,771) - (11,416) -
Total other income
(expense) (3,149,371)739,520 (3,850,882) 507,633
Income (loss) before
income taxes(4,950,373) 1,396,897 (5,309,186) 1,287,570
Benefit from (provision
for) income taxes 85,000(447,363) 354,366 (447,363)
Net income (loss) $(4,865,373) $949,534 $(4,954,820)$840,207
Earnings per share:
Basic $(0.04) $0.01 $(0.05) $0.01
Weighted-average common
shares outstanding 132,666,860 67,870,171 109,326,053 74,417,132
Diluted $(0.04) $0.01 $(0.05) $0.01
Weighted-average common
shares outstanding 132,666,860 93,799,839 109,326,053 100,315,405
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Six Months Ended June 30, 2008
Common Stock Paid-in Accumulated
Shares AmountCapital Deficit Total
Balance at
December 31,
200785,976,532 $85,977 $14,849,847 $(2,347,308) $12,588,516
Net loss-- - (4,954,820) (4,954,820)
Exchange of
Series D
preferred
stock 25,866,518 25,867 4,393,3774,419,244
Stock issued
for acquisition
of Mako2,802,9692,803 1,959,2751,962,078
Stock issued for
acquisition
of Flotation 1,714,2861,714 1,421,1431,422,857
Warrants issued
for acquisition
of Flotation- 121,793 121,793
Restricted stock
issued 1,200,0001,200 (1,200) -
Stock issued in
private
placement 57,142,857 57,143 37,002,527 37,059,670
Cashless
exercise of
stock options 29,339 29 (29) -
Stock based
compensation-- 253,669 253,669
Balance at
June 30, 2008 174,732,501 $174,733 $60,000,402 $(7,302,128) $52,873,007
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Six Months Ended
June 30,
2008 2007
Cash flows from operating activities:
Net loss$(4,954,820) $840,208
Adjustments to reconcile net income to net
cash used in operating activities:
Gain on extinguishment of debt -(2,000,000)
Interest income (30,467) (16,290)
Amortization of debt discount 1,816,847 1,391,506
Amortization of deferred financing costs 762,700 -
Share-based compensation 253,66939,565
Bad debt expense 832,328 -
Depreciation and amortization 898,998 154,221
Loss on disposal of equipment 9,136 -
Changes in assets and liabilities:
Lease receivable- (750,000)
Accounts receivable (254,958) (531,356)
Prepaid expenses and other current assets(586,618)1,655
Inventory(179,343) (472,253)
Work in progress1,135,005 (119,552)
Accounts payable and accrued liabilities (1,601,586)1,808,987
Deferred revenue 537,49180,628
Net cash provided by operating activities $(1,361,618) $427,319
Cash flows from investing activities:
Cash paid for acquisition of Flotation(22,116,140)-
Cash paid for acquisition of Mako (1,319,967)-
Cash paid for third party debt - (432,475)
Cash received from sale of ElectroWave
receivables- 261,068
Cash deficit acquired an acquisition of a
business - (18,974)
Purchases of equipment (687,060) (442,788)
Restricted cash 375,000 -
Net cash used in investing activities$(23,748,167)$(633,169)
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 37,059,670 960,000
Proceeds from long term debt2,687,333 -
Proceeds from sales-type lease172,50069,000
Borrowings on debt - related party - 150,000
Payments of long-term debt(12,930,395) (222,307)
Net cash provided by (used in) financing
activities $26,989,108 $456,693
Change in cash and equivalents1,879,323 250,843
Cash and equivalents, beginning of period 2,206,22012,462
Cash and equivalents, end of period $4,085,543 $263,305
Supplemental schedule of noncash investing
and financing activities:
Acquisition of a business $ - $(190,381)
Exchange of receivables for acquisition of a
business $ - $171,407
Warrants issued for acquisition of Flotation $121,793 $ -
Stock issued for acquisition of Flotation $1,422,857 $ -
Stock issued for acquisition of Mako $1,962,078 $ -
Fixed assets purchased with capital lease $ - $525,000
Fixed assets transferred from Inventory $502,253 $ -
Exchange of Series D preferred stock $4,419,244
Exchange of Series E preferred stock $ -$3,366,778
Redemption of Series E preferred stock$ -$2,000,000
Exchange of Series E preferred stock for
subordinated debenture $500,000 $ -
Common shares issued as restricted stock $1,200 $ -
Supplemental Disclosures:
Cash paid for interest $880,017 $117,151
Cash paid for pre-payment penalties$446,413 $ -
Cash paid for taxes$275,000 $ -
SOURCE Deep Down, Inc.
