Current report Deep Down, Inc.

8-K - Current report

Published: 2018-03-28 21:34:51
Submitted: 2018-03-29
Period Ending In: 2018-03-28
deepdown_8k-032818.htm FORM 8-K


> ENT> 8-K 1 deepdown_8k-032818.htm FORM 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported)

March 28, 2018

 

DEEP DOWN, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   000-30351   75-2263732

(State or other jurisdiction

of incorporation)

  (Commission File
Number)
 

(I.R.S. Employer

Identification No.)

 

8827 W. Sam Houston Pkwy N. Suite 100, Houston, TX 77040

(Address of principal executive offices) (Zip Code)

 

(281) 517-5000

Registrant’s telephone number, including area code

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

 

     

 

 

SECTION 2 – Financial Information

 

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On March 28, 2018, Deep Down, Inc. issued a press release announcing its financial results for the year ended December 31, 2017. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.

 

SECTION 9 – Financial Statements and Exhibits

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

 

(d) Exhibits:

 

  99.1 Press Release issued by Deep Down, Inc. dated March 28, 2018

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: March 28, 2018 DEEP DOWN, INC.
   
  By:

/s/ Charles K. Njuguna

    Charles K. Njuguna
    Chief Financial Officer

 

 

 

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deepdown_8k-ex9901.htm PRESS RELEASE


> ENT> EX-99.1 2 deepdown_8k-ex9901.htm PRESS RELEASE

 

Deepwater Offshore Oil and Gas Specialist Deep Down Reports 2017

 

Revenues and Hosts Investor Call Tomorrow March 29 at 10am ET

 

Houston, TX – March 28, 2018 – Deep Down, Inc. (OTCQX: DPDW) (“Deep Down” or the “Company”), a specialist in deepwater oil and gas production and distribution equipment and services, today reported financial results for the fourth quarter (Q4 ’17) and year ended December 31, 2017. Deep Down will hold a conference call tomorrow at 10:00 am ET to review its results and 2018 outlook (details below).

 

Deep Down at a Glance

 

Share Price:   $ 0.75     Cash & Short-term Investments*:   $ 5.0M  
52-Week Range:     $0.67 - $1.25     Book Value*:   $ 21.8M  
Shares Out*:     13.4M     Price / Book Value:     0.46x  
Market Cap:   $ 10.1M     2017 Revenue*:   $ 19.5M  

 

* at 12/31/17

 

Operating Results

 

Q4’17 revenues declined to $5.0 million compared to $5.9 million in Q4’ 16, primarily due to fewer customer orders in the 2017 period.

 

Revenues in 2017 decreased 23% to $19.5 million, compared to $25.4 million in 2016, primarily related to lower deepwater project activity reflecting weaker energy pricing beginning in 2014. Deep Down is cautiously optimistic regarding its order outlook in 2018 and beyond as a result of the strengthening in oil prices and the impact the Company is seeing on deepwater exploration and development activity with customers and customer prospects.

 

Gross margin increased to 44% in Q4 ’17 compared to 40% in Q4 ’16 and increased to 44% in 2017 as compared to 36% in 2016. The improvements were principally due to an increased proportion of higher-margin service work in the 2017 periods.

 

Principally due to lower revenues in the 2017 periods, Q4 ’17 gross profit declined 6% to $2.2 million, compared to $2.3 million in Q4 ’16, and 2017 gross profit also declined 6% to $8.5 million, compared to $9.0 million in 2016.

 

Selling, general and administrative expenses (SG&A) for 2017 declined to $9.1 million compared to $9.7 million in 2016, principally due to lower revenue levels as well as internal cost containment measures.

 

Modified EBITDA for 2017 declined to $0.7 million compared to $1.0 million in 2016, primarily due to lower revenues in 2017. Modified EBITDA is comprised 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.

 

Deep Down reported a net loss of $0.1 million, or ($0.01) loss per basic share, compared to net income of $0.2 million, or $0.01 per diluted share, in 2016, with the decrease due primarily due to lower revenues.

 

At December 31, 2017, Deep Down had working capital of $8.2 million, including cash and short-term investments of $5.0 million and total shareholders’ equity of $21.8 million.

 

Executive Commentary:

 

Ronald E. Smith, CEO, stated, "While our revenue declined in 2017 versus 2016 as the industry continued to adjust to lower commodities pricing, our dialogues with existing and prospective customers suggest that 2018 represents the start of a recovery in deepwater development activity, sparked by higher oil prices which have averaged over $60 per barrel in the last three months.

 

 

 

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“Supporting this view, two key customer assignments originally scheduled to begin in the third quarter 2017 moved forward in the fourth quarter and are in the final stages today. In certain geographies, oil majors are expected to commence more offshore projects in 2018 than in the prior three years combined. We continue to see solid new customer opportunities for Deep Down in West Africa, Latin America and the Caribbean, though as can be expected in foreign jurisdictions, some of these engagements are moving forward more slowly than we had anticipated at the time of our Q3 conference call.

 

“Recent advances in oilfield technology have allowed our customers to extract more natural resources from older wells that were previously viewed as supply constrained. More efficient production provides incremental cash flow for our customers, which can fuel additional projects requiring Deep Down equipment and services. These industry trends combined with some customer specific developments are what provide us confidence in our outlook for 2018 and beyond.”

 

Deep Down CFO Charles Njuguna, commented, “Deep Down’s strong balance sheet positions us well to execute on the opportunities in our business, and we will continue to actively manage our overhead, margins and cash flow as we evaluate and proceed on all future projects. In this regard, Deep Down recently made adjustments to right-size our staffing levels to our expected order activity. Management continues to evaluate opportunities to optimize our cost structure and to pursue the sale of non-core assets in an effort to further enhance our financial liquidity.

 

“Deep Down also remains committed to the ongoing opportunistic repurchase of our common stock at prices below book value. However, we also need to balance this attractive use of cash with the need to maintain sufficient levels of working capital in the business. This will position us well as we pursue new contract opportunities, as well as provide the strong balance sheet required of companies that conduct business with large energy concerns. In order to position Deep Down for opportunistic common stock repurchases, on March 26th our Board authorized the repurchase of up to an additional $1 million in shares of our outstanding common stock.”

 

Conference Call Details:  
   
Call Dial-in: 877-303-6187 or 678-894-3073 international – Call ID: 6597346
   
Webcast / Replay URL: Deep Down Webcast
   
Call Replay: 855-859-2056 or 404 537-3406 international– Call ID: 6597346
Available through 4/5/18

 

About Deep Down, Inc. (www.deepdowninc.com)

Deep Down focuses on complex deepwater and ultra-deepwater oil and gas production distribution system technologies and support services, connecting the platform and the wellhead. Deep Down's proven services and technological solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads, installation buoyancy, remotely operated vehicles 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.

 

Investor Relations:

Catalyst IR

Chris Eddy or Tanya Kamatu

212-924-9800

dpdw@catalyst-ir.com

 

Forward-Looking Statements Any forward-looking statements in the preceding paragraphs of this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties in that actual results may differ materially from those projected in the forward-looking statements. In the course of operations, we are subject to certain risk factors, competition and competitive pressures, sensitivity to general economic and industrial conditions, international political and economic risks, availability and price of raw materials and execution of business strategy. For further information, please refer to the Company's filings with the Securities and Exchange Commission, copies of which are available from the Company without charge.

 

 

 

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Deep Down, Inc.

Summary Financial Data

 

    Year ended     Three Months Ended  
    December 31,     December 31,  
    2017     2016     2017     2016  
(In thousands, except per share amounts)   audited     audited     unaudited     unaudited  
Revenues   $ 19,478     $ 25,384     $ 5,020     $ 5,895  
Cost of sales     10,931       16,367       2,815       3,550  
Gross profit     8,547       9,017       2,205       2,345  
Total operating expenses     9,384       9,869       2,150       2,179  
Operating income (loss)     (837 )     (852 )     55       166  
Total other income (expense)     726       1,036       13       17  
Income (loss) before income taxes     (111 )     184       68       183  
Income tax expense (benefit)     (5 )     (20 )     10       (5 )
Net (loss) income   $ (116 )   $ 164     $ 78     $ 178  
Net income (loss) per share, basic and diluted   $ (0.01 )   $ 0.01     $ 0.01     $ 0.01  
Weighted-average shares outstanding, basic and diluted     14,233       15,520       13,436       15,478  
                                 
Modified EBITDA data:                                
Net (loss) income   $ (116 )   $ 164                  
Deduct gain on sales of assets     (576 )     (1,070 )                
(Deduct) add interest (income) expense, net     (56 )     34                  
Add depreciation and amortization     1,348       1,532                  
Add income tax expense, net     5       20                  
Add share-based compensation     134       344                  
Modified (EBITDA Loss) EBITDA   $ 739     $ 1,024                  
                                 
Cash flow data:                                
Cash provided by (used in):                                
Operating activities   $ (762 )   $ 5,614                  
Investing activities     (2,029 )     1,644                  
  Financing activities - share repurchases*     (1,473 )     (567 )                
  Financing activities - other           1,138                  
Financing activities - total     (1,473 )     571                  
  Total change in cash   $ (4,264 )   $ 7,829                  
                                 
Balance Sheet data:                                
Cash and short term investment (CD)   $ 4,956     $ 9,208                  
Current assets     10,325       17,094                  
Current liabilities     2,123       5,127                  
Working capital     8,202       11,967                  
Total assets     23,970       28,429                  
Total liabilities     2,123       5,127                  
Stockholders' equity   $ 21,847     $ 23,302                  
Stockholders' equity per common share   $ 1.63     $ 1.57                  

 

 

 

 

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Additional Files
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0001683168-18-000792.txt   Complete submission text file   84271

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