Deep Down Reports Q1 2011 Results
* Comparable Revenues increase 75 percent to $6.3 million
* Comparable Gross Profit increases 20 percent to $1.2 million
* Modified EBITDA increases $0.2 million
Deep Down, Inc. (OTC Bulletin Board: DPDW) (“Deep Down” or the “Company”), an oilfield services company specializing in products and services for the deepwater and ultra-deepwater oil and gas industry, today announced a net loss of $1.8 million for the first quarter of 2011, an improvement of $0.7 million, or 28%, over the same period in 2010.
For the first quarter of 2011, Deep Down reported a net loss of $1.8 million, or $0.01 loss per diluted share, compared to a net loss of $2.5 million, or $0.01 loss per diluted share, in the first quarter of 2010.
Revenues for the first quarter of 2011 were $6.3 million. Revenues for the first quarter of 2010 were also $6.3 million, but included $2.7 million related to our Flotation operating segment, which was contributed to the Cuming Flotation Technologies, LLC joint venture (“CFT”), effective December 31, 2010. Excluding the first quarter 2010 revenue related to the Flotation operating segment, comparable revenues increased $2.7 million or 75% from the quarter ended March 31, 2010 to the quarter ended March 31, 2011, partially as the result of a large installation of a subsea distribution system we performed offshore Gabon, West Africa which commenced in the fourth quarter of 2010 and was completed in the first quarter of 2011. Additionally, our ROV and related services revenues increased due to improved utilization and we recorded increased revenue on a large fabrication project that is projected to be completed in mid-2011.
Gross profit for the first quarter of 2011 was $1.2 million, or 19 percent of revenues. Gross profit for the first quarter of 2010 was $1.6 million or 25 percent of revenues, and included $0.6 million, or 23 percent of revenues, related to our Flotation operating segment, which, as was previously mentioned, was contributed to CFT effective December 31, 2010. Excluding the first quarter 2010 gross profit related to the Flotation operating segment, comparable gross profit increased $0.2 million or 20% from the quarter ended March 31, 2010 to the quarter ended March 31, 2011, primarily as the result of the previously mentioned installation job we performed offshore Gabon, West Africa and improved utilization of our ROV fleet.
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 the effects of net interest expense, income taxes, non-cash stock compensation expense, equity in net loss of joint venture, non-cash impairments, depreciation and amortization and other non-cash items. Modified EBITDA for the first quarter of 2011 was negative $1.0 million compared to negative $1.2 million in the first quarter of 2010. The $0.2 million improvement was driven primarily by increased gross profit as previously mentioned.
The Company's working capital was negative $0.1 million at March 31, 2011, a decrease of $1.7 million from the $1.6 million of working capital at December 31, 2010. This decrease is due primarily to the Company’s large $3.7 million cash balance at December 31, 2010 resulting mainly from a large installation job we performed offshore Gabon, West Africa which commenced in the fourth quarter of 2010 and was completed in the first quarter of 2011. We believe we will achieve our planned financial results, and therefore we believe that we will have adequate liquidity to meet our future operating requirements.
At March 31, 2011, we were not in compliance with one of the financial covenants associated with $2.7 million in debt we owe to our primary lender. We have received a waiver from our lender curing our non-compliance.
Ronald E. Smith, Chief Executive Officer stated, “Historically, our first quarter tends to be sluggish because our customers are rolling out their newly approved annual budgets. In light of that fact, we performed reasonably well in the first quarter of 2011 as our comparable revenues, gross profit and modified-EBITDA figures all improved over the first quarter of 2010.
“Our industry continues to show signs of strengthening. We participated extensively in the annual Offshore Technology Conference (the “OTC”), which was held in Houston, Texas on May 2-5, 2011. The mood of the participating customers and vendors with respect to the oil and gas industry’s outlook was very positive. In addition, we were awarded the 2011 Woelfel Best Mechanical Engineering Achievement Award, which recognizes a product, device, or system displayed at the OTC, which best reflects innovation and/or practical use of mechanical engineering in solving problems, improving design or maximizing performance. The award was for our 3,400 Ton Umbilical Storage Carousel. As a result of receiving this award, we received many customer inquiries regarding our ability to provide them with our technology as it applied to their specific needs, and we hope to leverage this into multiple carousel and other orders. We believe we are poised for growth and profitability for the remainder of 2011 and beyond.
“CFT’s profit in the first quarter of 2011 was lower than anticipated primarily due to weather-related shipment delays. It is expected that the shortfall will be covered during the remainder of the year as these shipments occur. Additionally, CFT has been awarded multiple international contracts, the value of which, with options, exceeds $50 million. We continue to believe very strongly in CFT and its prospects of being very profitable for Deep Down in 2011 and beyond.”
Source: Deep Down