Deep Down Reports Increased Income (USA)

Deep Down, Inc., an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services, today reported net income of $1.0 million, or $0.10 per diluted share, for the second quarter of 2013, an improvement of $0.4 million from the second quarter of 2012.

Revenues increased by $1.3 million in the second quarter of 2013 compared to the prior-year quarter. The increase of 16 percent in revenues occurred primarily due to increased demand by the customers for the technologically innovative solutions as a result of the consistently successful project execution.

Gross profit increased by $0.6 million to $3.5 million, or 38 percent of revenues, in the second quarter of 2013 compared to the prior-year quarter. Gross profit of 38 percent of revenues is consistent with the expectations for the second quarter of 2013.

Operating expenses increased by $0.2 million in the second quarter of 2013 compared to the prior-year quarter. The slight increase was due primarily to increased lease costs associated with the new facility.

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 increased by $0.3 million to $1.7 million in the second quarter of 2013 compared to the prior-year quarter. The increase in Modified EBITDA is due primarily to increased gross profit before depreciation expense of $0.7 million, partially offset by increased selling, general and administrative expenses before amortization of share-based compensation of $0.4 million.

At June 30, 2013, we had working capital of $7.5 million. Additionally, 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. 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.

Ronald E. Smith, Chief Executive Officer, stated, “We are pleased with our results for the second quarter of 2013. Our backlog has reached $26 million and our business is increasing. To accommodate this increase, we entered into a long-term facility lease in June 2013, which enables us to expand our capacity and take on much larger jobs.”

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Press Release, August 13, 2013