Deep Down, Inc. (“Deep Down”), an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services, reported financial results for the third quarter of 2013.
OPERATING RESULTS
For the third quarter of 2013, Deep Down reported net income of $0.4 million, or $0.03 income per diluted share, compared to net income of $1.0 million, or $0.10 income per diluted share, for the third quarter of 2012.
Revenues for the third quarter of 2013 were $8.6 million and $9.4 million for the third quarter of 2012. The 8 percent decrease in revenues occurred primarily due to reduced ROV and topside equipment rental services as a result of the consolidation of Mako’s operations into the Deep Down Delaware operating segment in the third quarter of 2012.
Gross profit for the third quarter of 2013 was $2.5 million, or 29 percent of revenues. Gross profit for the third quarter of 2012 was $3.2 million, or 34 percent of revenues. The 5 percentage point decrease in gross profit was due primarily to rent expense of approximately $0.3 million associated with our new facility, as well as a $0.6 million negative adjustment on a large fixed-price fabrication project.
Operating expenses for the third quarter of 2013 were $2.1 million, or 25 percent of revenues. Operating expenses for the third quarter of 2012 were $2.1 million, or 22 percent of revenues. Overall, operating expenses were consistent between the quarterly periods.
Modified EBITDA was $1.0 million in the third quarter of 2013. Modified EBITDA was $1.9 million in the third quarter of 2012. The $0.9 million decrease in Modified EBITDA was due primarily to decreased gross profit before depreciation expense of $0.7 million. Additionally, there was a $0.2 million reduction in operational consolidation expense. 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.
WORKING CAPITAL
At September 30, 2013, we had working capital of $15.4 million. In the first quarter of 2013, we entered into the fifth amendment of our bank credit agreement, which among other things, increased the committed amount under our revolving credit facility to $5 million from $2 million. During the third quarter of 2013, we issued an additional 4,443,611 shares of common stock resulting in a cash increase of $7.6 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, “Our third quarter results were lower than expected due to our financial performance on a significant fixed-price order for a major oil company operating in Brazil, as well as increased rent for our new facility. Nevertheless, we are very pleased with our continued success in obtaining new orders as our backlog has grown to over $27 million. The new facility has enabled us to expand our steel flying lead business, and we believe it will continue to positively impact future growth.”
Press Release, November 14, 2013; Image: deep down