Deep Down Releases 2010 Annual Results (USA)

Deep Down, Inc. an oilfield services company specializing in products and services for the deepwater and ultra-deepwater oil and gas industry, announced a net loss of $2.8 million for 2010, excluding a $10.1 million non-cash loss on contribution of the net assets of a wholly-owned subsidiary to a joint venture and a $4.5 million non-cash impairment of goodwill.

OPERATING RESULTS

For 2010, Deep Down reported a net loss of $17.4 million, or $0.09 loss per diluted share, after a $10.1 million non-cash loss on contribution of the net assets of a wholly-owned subsidiary to a joint venture and a $4.5 million non-cash impairment of goodwill, on revenues of $42.5 million compared to a net loss of $16.8 million, or $0.09 loss per diluted share on revenues of $28.8 million in 2009.

Revenues increased $13.7 million, or 47 percent, to $42.5 million in 2010 from $28.8 million in 2009. The increase in revenues was due primarily to generally higher demand for our services and products, especially in the GOM and West Africa, leading to higher utilization of our personnel, equipment and ROVs, increased equipment and tooling rentals, greater output of engineered subsea projects (including installation support services) and increased manufacture of products for deepwater and ultra-deepwater projects.

Gross profit increased $4.7 million to $13.6 million in 2010, an increase of 52 percent compared to the prior year. The increase in gross profit was due to the increased revenues described above and to the larger percentage of service rather than engineered product revenue compared to 2009.

The Company’s management evaluates its financial performance based on a non-GAAP measure, Adjusted EBITDA, which consists of earnings (net income or loss) available to common shareholders before the effects 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 2010 was $2.7 million compared to negative $2.9 million in 2009. The dramatic improvement was driven primarily by increased gross profit and lower SG&A expenses.

WORKING CAPITAL

The Company’s working capital was $1.6 million at December 31, 2010, an increase of $1.1 million from the $0.5 million of working capital at December 31, 2009. This increase is due primarily to the Company’s large cash balance at December 31, 2010 ($3.7 million) resulting mainly from a project in process offshore Gabon at year-end.

At December 31, 2010, we were not in compliance with all of the financial covenants associated with $2.9 million in debt we owe to our primary lender. This non-compliance occurred primarily as a result of financial adjustments associated with the closing of the Cuming Flotation Technologies joint venture on December 31, 2010. We have received a waiver from our lender, curing our non-compliance. Additionally, we have received a one-year extension of the maturity date of this debt to April 15, 2012.

Ronald E. Smith, Chief Executive Officer stated, “Our industry has gone through some very difficult times the past two years; however, it is now showing signs of strengthening. Our third and fourth quarters were very positive, showing significant growth in revenues, along with improved margins and reduced expenses. The Company would have reported net income of approximately $0.2 million during the last half of 2010 except for a $10.1 million non-cash loss on contribution of the net assets of a wholly-owned subsidiary to a joint venture and a $4.5 million goodwill write-down. Our cash flow continues to strengthen as well, as can be seen by the $5.6 million improvement in Adjusted EBITDA in 2010 compared to 2009. We expect business to continue to improve over the next several quarters.

“We also expect to earn a high return on our 20% investment in Cuming Flotation Technologies, a joint venture we formed along with York Capital Management, creating a worldwide leader in manufactured marine buoyancy products.”

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 info: Deep Down

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Source: deepdowncorp, April 18, 2011;