HOUSTON, Dec. 28 /PRNewswire-FirstCall/ -- Deep Down, Inc. (BULLETIN BOARD: DPDW) today released unaudited financial information for its recently acquired subsidiary Deep Down, Inc. ("DDI"), a Delaware Sub-S corporation. Audited financials and pro forma financials are expected to be completed by mid-January 2007.
Revenue for the newly acquired subsidiary increased approximately 73% for the nine-month period ending September 30, 2006, as compared to the same period in 2005. During 2006, DDI started a new product line to design, engineer, and manufacture Launch and Recovery Systems ("LARS") through its relationship with Strategic Offshore Services Corporation ("SOS"). SOS was merged into DDI immediately prior to the Company's acquisition of DDI. Deep Down plans to continue to expand its revenue by offering innovative solutions, internally developed product line extensions, and new product line acquisitions. Gross profit and net income margins reflect the hiring of additional personnel and other one-time startup costs associated with the new LARS division. Management expects margins on its current businesses to recover to historical levels.
Due to its strong, stable banking relationships, Deep Down has begun to lease large manufactured equipment items to select customers. Deep Down recently leased a Launch and Recovery System ("LARS") to a new customer who was interested in paying for the new equipment with their operating budget, not their capital budget.
The financial information is summarized from the following sources as indicated:
Financial statements reviewed but unaudited by A J Donahue, P.C., CPA for the twelve months ended December 31, 2005 and the nine months ended September 30, 2006. Financial statements compiled but unaudited by A J Donahue, P.C., CPA for the nine months ended September 30, 2005; the three months ended September 30, 2005; and the three months ended September 30, 2006.
About Deep Down, Inc.
Deep Down specializes in the provision of installation management, engineering services, support services and storage management services for the subsea controls, umbilicals & pipeline industries offshore. The company also fabricates component parts for subsea distribution systems and assemblies that specialize in the development of offshore subsea fields and tie backs. These items include umbilicals, flowlines, distribution systems, pipeline terminations, controls, winches, and launch and retrieval systems, among others. Deep Down provides these services from the initial field conception phase, thru manufacturing, site integration testing, installation, topsides connections, and the final commissioning of a project. The company's strategy is to consolidate service providers to the offshore industry, and designers and manufacturers of subsea, surface, and offshore rig equipment used by major integrated, large independent, and foreign national oil and gas companies in deep-water exploration and production of oil and gas throughout the world. Deep Down's customers include Royal Dutch Shell, Exxon Mobil Corporation, Devon Energy Corporation, Chevron Corporation, Anadarko Petroleum Corporation, Marathon Oil Corporation, Kerr-McGee Corporation, Cal Dive International Inc., Oceaneering International, Inc., Subsea 7, Inc., Acergy, Nexen Inc., Noble Energy Inc., Aker Kvaerner, and Dril-Quip, Inc., among others.
One of our most important responsibilities is to communicate with shareholders in an open and direct manner. Comments are based on current management expectations, and are considered "forward-looking statements," generally preceded by words such as "plans," "expects," "believes," "anticipates," or "intends." We cannot promise future returns. Our statements reflect our best judgment at the time they are issued, and we disclaim any obligation to update or alter forward-looking statements as the result of new information or future events. Deep Down urges investors to review the risks and uncertainties contained within its filings with the Securities and Exchange Commission.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause Deep Down or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The Company is under no duty to update any of the forward-looking statements after the date of this report to conform its prior statements to actual results.
Further, this report contains forward looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act that involve substantial risks and uncertainties. Such statements include, without limitation, all statements as to expectation or belief and statements as to our future results of operations, the progress of any research, product development and clinical programs, the need for, and timing of, additional capital and capital expenditures, partnering prospects, the protection of and the need for additional intellectual property rights, effects of regulations, the need for additional facilities and potential market opportunities. The Company' actual results may vary materially from those contained in such forward-looking statements because of risks to which the Company is subject, such as lack of available funding, competition from third parties, intellectual property rights of third parties, regulatory constraints, litigation and other risks to which the Company is subject.
DEEP DOWN, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2006 and December 31, 2005
(unaudited)
September 30, December 31,
2006 2005
ASSETS
Current assets:
Cash $16,251 $132,264
Accounts receivable 1,881,495 927,020
Work In Process 828,375 91,653
Inventory 249,582 176,056
Prepaid expenses and others 16,265 36,092
Total current assets 2,991,968 1,363,085
Equipment (Net of Accumulated Depreciation) 962,205 1,726,000
TOTAL ASSETS $3,954,173 $3,089,085
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short Term Note Payable $453,200 $50,000
Current portion of Long Term Debt 403,057 176,970
Accounts payable 761,604 211,698
Accrued expenses 286,222 108,138
Other current liabilities 205,462 34,041
Total current liabilities 2,109,545 580,847
Long term debt 862,999 1,410,613
Total liabilities 2,972,544 1,991,460
Stockholders' Equity:
Retained Earnings 1,096,625 351,258
Capital Stock 1,000 1,000
Shareholder Distributions -1,049,906 -74,381
Net Income 933,910 819,749
Total stockholders' Equity 981,629 1,097,625
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $3,954,173 $3,089,085
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months and Nine Months Ended September 30, 2006 and 2005
(unaudited)
Three Months Ended Nine Months Ended
2006 2005 2006 2005
Revenues
Contract Services $1,042,096 $595,071 $3,189,267 $2,049,746
Equipment Rentals 404,081 357,530 1,365,167 770,810
Miscellaneous 774,399 231,074 1,791,800 791,272
Discounts & Allowances (10,000) --- (70,184) ---
Total revenues 2,210,576 1,183,676 6,276,050 3,611,828
Cost of sales 1,442,454 454,215 3,362,811 1,661,195
Gross Profit 768,122 729,461 2,913,239 1,950,633
General and
administrative 591,445 419,120 1,887,714 1,008,874
Depreciation expense 58,294 63,000 169,808 189,000
Total operating expenses 649,739 482,120 2,057,522 1,197,874
Net operating income
(loss) 118,383 247,341 855,717 752,759
Interest income --- --- --- ---
Interest expense (40,661) (41,699) (119,499) (124,492)
Net income (loss) before
extraordinary items 77,722 205,642 736,218 628,267
Extraordinary Items:
Miscellaneous sales
& other --- 9,654 1,743 85,124
Gain (loss) on sale
of asset 196,406 (6,273) 196,406 (82,179)
Net income (loss) $274,128 209,023 $934,367 631,212
Income (loss) per share:
- Basic $274 $209 $934 $631
- Diluted $274 $209 $934 $631
Weighted average shares
outstanding:
- Basic 1,000 1,000 1,000 1,000
- Diluted 1,000 1,000 1,000 1,000
DEEP DOWN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months and Nine Months Ended September 30, 2006 and 2005
(unaudited)
Three Months Ended Nine Months Ended
2006 2005 2006 2005
Cash flows from
operating activities
Net income $274,127 $209,023 $933,910 $631,327
Adjustments to
reconcile net income
to net cash used in
operating activities:
Depreciation expense 58,293 63,000 169,808 189,000
Reclass (gain) loss on
sale of property (196,405) --- (196,405) 82,179
Changes in:
Accounts receivable (633,403) (190,943) (569,238) (176,438)
Work In progress (630,348) (1,517) (716,895) 31,604
Inventory 0 12,500 (73,526) ---
Accounts payable 420,234 (149,926) 549,906 (328,120)
Accrued expenses 170,660 (2,035) 349,505 67,460
Net cash provided by
(used in) operating
activities (536,841) (59,898) 447,065 497,012
Cash flows used in
investing activities
Purchase of equipment (59,416) --- (392,889) (2,402)
Sale of Fixed Assets 1,183,278 53,024 1,183,277 144,999
Cash flows provided by
(used in) investing
activities 1,123,862 53,024 790,388 142,597
Cash flows from
financing activities
Proceeds from
(repayment of)
factored receivables (88,757) 106,233 (385,237) 326,617
Proceeds from notes
payable 1,446,800 --- 950,004 28,004
Repayments on notes
payable (1,226,714) (118,324) (868,328) (885,935)
Dividends paid (804,906) (45,257) (1,049,906) (74,381)
Net cash provided by
(used in) financing
activities (673,577) (57,348) (1,353,467) (605,695)
Net change in cash (86,556) (64,223) (116,012) 33,914
Cash at beginning of
period 102,808 111,896 132,264 13,759
Cash at end of period $16,252 $47,673 $16,252 $47,673
Cash paid during the
period for:
Interest $40,661 $41,699 $119,499 $124,492
