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Revenues for the second quarter of 2009 were $6,200,595, compared to $7,920,196 for the second quarter of 2008, for a 22% decrease. The reduction in revenue over the same prior year period was a result of customers delaying future projects or slowing down many of their offshore and deepwater projects. Net loss for the second quarter ended June 30, 2009, was $1,761,094 as compared to a net loss of $4,865,373 for the same period of 2008.
Gross profit decreased approximately $0.5 million to approximately $1.9 million for the three months ended June 30, 2009, a decrease of approximately 22% compared to the three months ended June 30, 2008. This decrease in gross profit was consistent with the decrease in total revenue. Accordingly, our gross margins remained constant at 30% of revenue for the second quarter of 2009.
"Operations for the past six months have been negatively impacted by the worldwide recession, lower oil prices and delays in many of our major projects," commented Eugene L. Butler, Chief Financial Officer. "We have also had a slow start on the production of our large floatation order. As a result of this downturn in the industry, our operations in the first half of 2009 were significantly lower than expected and had a negative EBITDA of approximately $1.8 million. The third quarter of 2009 started out sluggish, however, we are finally commencing the production cycle of our large floatation order, we have several ROVs that have started working again, and our offshore service jobs are increasing. Our backlog is currently over $20 million and is expected to continue to increase over the next several quarters. We have also commenced a cost containment program to lower overall costs; particularly, our general and administrative expenses."
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. 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.
DEEP DOWN, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2009 December 31, 2008
ASSETS
Current Assets:
Cash and cash equivalents $1,900,547 $2,495,464
Restricted cash 135,855 135,855
Accounts receivable, net 7,261,971 10,772,097
Inventory 1,146,395 1,362,110
Costs and estimated earnings in excess
of billings on uncompleted contracts 81,124 707,737
Deferred tax asset 2,373,957 216,900
Prepaid expenses and other current
assets 778,071 633,868
Total current assets 13,677,920 16,324,031
Property and equipment, net 19,606,805 13,799,196
Intangibles, net 17,436,378 18,090,680
Goodwill 14,965,975 15,024,300
Other assets, net 1,062,986 457,836
Total assets $66,750,064 $63,696,043
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities $3,035,403 $4,318,394
Billings in excess of costs and
estimated earnings on uncompleted
contracts 3,951,364 2,315,043
Current portion of long-term debt 579,586 382,912
Total current liabilities 7,566,353 7,016,349
Long-term debt 5,256,366 1,718,475
Deferred tax liabilities 2,261,488 1,125,945
Total liabilities 15,084,207 9,860,769
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, $0.001 par value,
490,000,000 shares authorized,
179,700,630 and 177,350,630 shares
issued and outstanding, respectively 179,701 177,351
Additional paid-in capital 60,647,226 60,328,124
Accumulated deficit (9,161,070) (6,670,201)
Total stockholders' equity 51,665,857 53,835,274
Total liabilities and
stockholders' equity $66,750,064 $63,696,043
See accompanying notes to unaudited consolidated financial statements.
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Six Months
Ended Ended
June 30, June 30,
2009 2008 2009 2008
Revenues $6,200,595 $7,920,196 $13,303,184 $14,199,663
Cost of sales 4,338,341 5,525,006 9,137,129 9,456,561
Gross profit 1,862,254 2,395,190 4,166,055 4,743,102
Operating expenses:
Selling, general &
administrative 3,873,521 3,803,556 6,717,297 5,682,965
Depreciation and
amortization 420,675 394,918 826,772 520,721
Total operating
expenses 4,294,196 4,198,474 7,544,069 6,203,686
Operating loss (2,431,942) (1,803,284) (3,378,014) (1,460,584)
Other income (expense):
Interest income 3,927 27,347 6,155 66,510
Interest expense (69,753) (2,690,533) (118,097) (3,459,564)
Loss on debt
extinguishment - (446,412) - (446,412)
Other income (expense) 14,378 (37,491) 11,468 (9,136)
Total other expense (51,448) (3,147,089) (100,474) (3,848,602)
Loss before income taxes (2,483,390) (4,950,373) (3,478,488) (5,309,186)
Income tax benefit 722,296 85,000 987,619 354,366
Net loss $(1,761,094)$(4,865,373) $(2,490,869)$(4,954,820)
Loss per share:
Basic and diluted $ (0.01) $ (0.04) $ (0.01) $ (0.05)
Weighted-average common
shares outstanding 176,150,630 132,666,860 176,150,630 109,326,053
See accompanying notes to unaudited consolidated financial statements.
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2009 2008
Cash flows from operating activities:
Net loss $(2,490,869) $(4,954,820)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Interest income - (30,467)
Non-cash amortization of debt
discount - 1,816,847
Non-cash amortization of
deferred financing costs - 762,700
Share-based compensation 321,452 253,669
Bad debt expense 96,128 832,328
Depreciation and amortization 1,523,728 898,998
Loss on disposal of equipment (15,531) 9,136
Deferred taxes payable (1,021,514) -
Changes in assets and liabilities:
Accounts receivable 3,498,428 (254,958)
Inventory 215,715 955,662
Costs and estimated earnings in
excess of billings
on uncompleted contracts 626,613 -
Prepaid expenses and other
current assets (144,203) (586,618)
Other Assets (203,868) -
Accounts payable and accrued
liabilities (1,309,096) (1,601,586)
Billings in excess of costs and
estimated earnings on uncompleted
contracts 1,636,321 537,491
Net cash provided by (used in)
operating activities 2,733,304 (1,361,618)
Cash flows used in investing activities:
Cash paid for acquisition of
Flotation, net of cash acquired
of $0 and $235,040 - (22,116,140)
Cash paid for acquisition of Mako,
net of expenses - (4,236,634)
Purchases of property and equipment (4,557,799) (687,060)
Proceeds from sale of property
and equipment 48,073 -
Cash paid for capitalized software (277,403) -
Purchase of investment (100,000) -
Note receivable (25,000) -
Repayments on note receivable 1,121 -
Restricted cash - 375,000
Net cash used in investing
activities (4,911,008) (26,664,834)
Cash flows from financing activities:
Proceeds from sale of common stock,
net of expenses - 37,059,670
Proceeds from sales-type lease - 172,500
Borrowings on long-term debt 1,829,500 5,604,000
Repayments on long-term debt (246,713) (12,930,395)
Net cash provided by financing
activities 1,582,787 29,905,775
Change in cash and equivalents (594,917) 1,879,323
Cash and cash equivalents, beginning
of period 2,495,464 2,206,220
Cash and cash equivalents, end of
period $1,900,547 $4,085,543
See accompanying notes to unaudited consolidated financial statements.
SOURCE Deep Down, Inc.
http://www.deepdowninc.com
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