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11/19/10 11:38 AM
11/19/10 6:12 PM
11/19/10 6:13 PM
HOUSTON, Nov. 19, 2010 /PRNewswire-FirstCall/ -- Deep Down, Inc. (OTC Bulletin Board: 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 announced net income of $1.1 million for the third quarter of 2010, excluding a $4.5 million non-cash impairment of goodwill.
OPERATING RESULTS
For the third quarter of 2010, Deep Down reported a net loss of $3.4 million, or $0.02 loss per diluted share, after a $4.5 million non-cash impairment of goodwill, on revenues of $11.4 million compared to a loss of $2.1 million, or $0.01 loss per diluted share on revenues of $8.4 million during the same quarter last year.
Revenues increased by $3.0 million, or 36 percent to $11.4 million for the third quarter 2010 from $8.4 million for the same quarter last year. The increase in revenues was due primarily to higher utilization of equipment, ROVs and personnel, increased equipment and tooling rentals, greater demand for engineered subsea projects (including installation support services) and increased manufacture of products for deepwater projects. The higher demand is attributable to the increased demand for our products and services primarily in Brazil and West Africa and higher equipment and personnel utilization and increased rentals in the Gulf of Mexico.
Gross profit increased $2.6 million to $4.7 million for the third quarter 2010, an increase of 121 percent over the same period of the prior year, reflecting an overall increase in the gross profit margin from 26 percent to 41 percent. The increase in gross profit and gross profit margin was due to the increased revenues described above and to the larger percentage of service rather than product revenue during the same period last year.
Our management evaluates the Company's performance based on a non-GAAP measure, Adjusted EBITDA, which consists of earnings (net income or loss) available to common shareholders before cumulative effect of net interest expense, income taxes, non-cash stock compensation expense, non-cash impairments, depreciation and amortization and other non-cash items. Adjusted EBITDA for the third quarter 2010 was $2.5 million compared to negative $660 thousand for the same period last year. The dramatic improvement was driven primarily by the increase in gross profit and lower SG&A expenses.
WORKING CAPITAL
The Company's working capital declined by $1.7 million to negative $554 thousand at September 30, 2010 from $1.2 million at December 31, 2009 primarily as a result of reclassifying $2.5 million of its long-term debt to current liabilities. All of the debt from one of the Company's lenders in the amount of $3.2 million is due April 15, 2011. As of September 30, 2010, we were in compliance with all financial covenants associated with this debt. The Company is currently in discussions with several lenders who have expressed interest in refinancing the Company's debt. The Company's cash balance was $3.6 million at September 30, 2010 compared to $0.9 million at December 31, 2009.
Ronald E. Smith, Chief Executive Officer stated, "The industry has gone through some very difficult times the past eighteen months, however it is now showing signs of strengthening. Our third quarter was very positive, showing significant growth in revenues, along with improved margins and reduced expenses. The Company would have reported net income in excess of $1.1 million this quarter except for a $4.5 million goodwill write-down. Our cash flow continues to strengthen as well, as can be seen by a $3.1 million improvement in Adjusted EBITDA in the third quarter this year as compared to third quarter last year. We expect business to continue to improve over the next several quarters."
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 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.
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