DPDW Deep Down Inc (QB)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

August 14, 2014

 

DEEP DOWN, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Nevada		0-30351		75-2263732
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

8827 W. Sam Houston Pkwy N. Suite 100, Houston, TX 77040

(Address of principal executive offices) (Zip Code)

(281) 517-5000

Registrant’s telephone number, including area code

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

SECTION 2 – Financial Information

 

ITEM 2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On August 14, 2014, Deep Down, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2014. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.

SECTION 9 – Financial Statements and Exhibits

 

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits:

 

99.1

Press Release issued by Deep Down, Inc. dated August 14, 2014

 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	DEEP DOWN, INC.
	By :		/s/ Eugene L. Butler
			Eugene L. Butler
			Executive Chairman and Chief Financial Officer

Date: August 15, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.1

 

 

 

NEWS RELEASE

 

August 14, 2014

OTCQX:  DPDW

 

DEEP DOWN REPORTS FIRST QUARTER 2014 RESULTS

 

HOUSTON, August 14, 2014 /PRNewswire/ -- Deep Down, Inc. (OTCQX: DPDW) ("Deep Down" or the "Company"), an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services, today reported financial results for the quarter ended June 30, 2014.   

 

OPERATING RESULTS

 

For the second quarter of 2014, Deep Down reported a net loss of $1.2 million, or $0.08 loss per diluted share, compared to net income of $1.0 million, or $0.10 income per diluted share, for the second quarter of 2013.

 

Revenues for the second quarter of 2014 and 2013 were $5.8 million and $9.2 million, respectively. The $3.4 million decrease (37 percent) is the result of the 2013 period being unusually high. Additionally, projects valued in excess of $17.0 million were delayed during the second quarter of 2014, resulting in lower revenues of approximately $7.0 million.

 

Gross profit as a percentage of revenues for the second quarter of 2014 and 2013 was 29 percent and 38 percent, respectively. The nine percentage point decrease in gross profit was due primarily to the delay of several lump sum projects just discussed. The delay of these projects negatively impacted the gross margin by approximately $2.6 million.

 

Selling, general and administrative expenses (“SG&A”) for the second quarter of 2014 was $2.8 million, or 48 percent of revenues. SG&A for the second quarter of 2013 was $2.4 million, or 26 percent of revenues. The $0.4 million increase in SG&A is due primarily to quality, project management, engineering, shop improvements related to safety systems, increased security costs and an increase in bad debt expense.

 

A significant portion of the increase was due to the impact of the decision to delay a Latin America regional operation in Panama, which included a $0.2 million accrual of all related costs, and an increase in security costs at the new facility of $0.1 million.

 

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 $(0.3) million for the second quarter of 2014 vs. $1.7 million for the second quarter of 2013. The $2.0 million decrease in Modified EBITDA was due to a $1.8 million decrease in gross profit before depreciation due to reasons previously discussed, and a $0.2 million increase in SG&A before Panama exit costs and share-based compensation expense, also due to reasons previously discussed.

 

LIQUIDITY / CAPITAL RESOURCES

 

In the third quarter of 2013, in a private placement, we issued 4.4 million shares of our common stock raising net cash proceeds of $7.6 million. Effective April 15, 2014, we completed the renewal of our bank credit facility. At June 30, 2014, we had working capital of $15.1 million, including cash and cash equivalents of $5.7 million. Because of these factors, and because of cash we expect to generate from operations, we believe that we will have adequate liquidity to meet our future operating requirements.

 

 

EXECUTIVE MANAGEMENT

 

Ronald E. Smith, Chief Executive Officer, stated, “Although our second quarter results were not what we had hoped, there is more to the story than meets the eye. The disappointing revenue and gross profit figures were caused primarily by customer requested delays in several of our large fixed-price contracts.  Had these delays not occurred and we had met our contract delivery dates, we would have added approximately $7.0 million to revenue and approximately $2.6 million to gross profit in the quarter. We are hopeful that as these delays abate, the effect of completing these projects for our customers will have a positive effect on the third and fourth quarters of 2014.  

 

“Our balance sheet remains strong, and we continue to replenish our backlog, which is currently at approximately $28.5 million as of July 31, 2014. We are fully operational at our new facility and sufficiently staffed with the right people. Relations with our customers has never been better, and we are poised to generate excellent financial results for the remainder of 2014.”

 

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 (LSFL), installation 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

Casey Stegman

casey@stonegateinc.com

Stonegate Inc.

972.850.2001

 

 

DEEP DOWN, INC.

SUMMARY FINANCIAL DATA

(Unaudited)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2014				2013				2014				2013
(in thousands, except per share amounts)
Results of operations data:
Revenues		$	5,847			$	9,156			$	12,010			$	15,314
Cost of sales			4,134				5,636				8,048				9,628
Gross profit			1,713				3,520				3,962				5,686
Total operating expenses			2,843				2,399				5,023				4,294
Operating (loss) income			(1,130	)			1,121				(1,061	)			1,392
Total other (expense) income			(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 and diluted
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
Modified EBITDA data:
Net (loss) income		$	(1,180	)		$	1,022			$	(808	)		$	1,246
Add back interest expense, net			48				54				109				91
Add back depreciation and amortization			396				385				806				764
(Deduct) add back income tax (benefit) expense			(18	)			49				(9	)			70
Add back Panama exit costs accrual			192				–				192				–
Add back share-based compensation			300				235				435				275
Modified EBITDA		$	(262	)		$	1,745			$	725			$	2,446
(in thousands)
Cash flow data:
Cash provided by (used in):
Operating activities										$	1,267			$	(874	)
Investing activities											198				99
Financing activities											(1,012	)			358

 

		June 30, 2014				December 31, 2013
(in thousands)
Balance sheet data:
Cash and cash equivalents		$	5,713			$	5,260
Current assets			19,254				16,614
Current liabilities			4,204				4,705
Working capital			15,050				11,909
Total assets			37,049				38,302
Total debt			4,085				4,934
Total liabilities			7,347				7,923
Stockholders' equity			29,702				30,379