Deep Down, Inc., an oilfield services company specializing in products and services for the deepwater and ultra-deepwater oil and gas industry, reported net income of $639 thousand for the second quarter of 2012, an improvement of $685 thousand over the same period in 2011.
For the second quarter of 2012, Deep Down reported net income of $639 thousand, or $0.06 income per diluted share, compared to a net loss of $46 thousand, or $0.00 loss per diluted share, in the second quarter of 2011.
Revenues for the second quarter of 2012 were $7.9 million. Revenues for the second quarter of 2011 were $7.1 million. The $0.8 million increase in revenues in the 2012 period compared to the 2011 period was due primarily to an increase of $2.3 million in our subsea solutions operating segment due to continued strong demand for our technologically innovative solutions, offset by a decrease of $1.5 million in our ROV and topside equipment rental services due to decreased demand.
Gross profit for the second quarter of 2012 was $2.9 million, or 36 percent of revenues. Gross profit for the second quarter of 2011 was $1.9 million, or 26 percent of revenues. The $1.0 million, or 10 percentage-point, increase in gross profit in the 2012 period compared to the same period in 2011, was due primarily to a $1.9 million increase related to our subsea solutions operating segment, due to strong demand for our services. This was offset by a $0.9 million decrease related to our ROV and topside equipment rental services due to weaker demand.
Selling, general and administrative expenses (“SG&A”) for the second quarter of 2012 were $2.0 million. SG&A for the second quarter of 2011 was $1.4 million. The $0.6 million increase in SG&A in the 2012 period compared to the 2011 period was due primarily to a $0.3 million increase in bad debt expense, and a $0.2 million increase in share-based compensation expense. We also had no reimbursements from CFT (our joint venture) for management services in the 2012 period, compared to $0.2 million in the 2011 period. Partially offsetting these increases was a $0.1 million decrease in professional services fees primarily as a result of a reduction in accounting and auditing fees.
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 was $1.4 million in the second quarter of 2012. Modified EBITDA was $0.8 million in the second quarter of 2011. The $0.6 million increase in Modified EBITDA in the 2012 period compared to the 2011 period was caused primarily by increased gross profit before depreciation expense of $1.0 million, partially offset by increased selling, general and administrative expense before share-based compensation of $0.4 million.
At June 30, 2012, we had working capital (excluding the current portion of long-term debt) of $6.0 million, including cash and cash equivalents of $4.1 million. Our total long-term debt at June 30, 2012 was $3.0 million. We believe our current cash balance, in addition to cash we expect to generate from operations, will ensure that we have adequate liquidity to meet our future operating requirements.
Ronald E. Smith, Chief Executive Officer stated, “This was the Company’s strongest second quarter performance since 2007. We are extremely satisfied with what our subsea solutions business was able to achieve in the second quarter of 2012. We added approximately $6.3 million to backlog bringing total current backlog to approximately $17.7 million. We continue to be disappointed with the performance of our ROV and topside equipment rental business, and as a result we are exploring various options for returning this portion of our business to profitability.”
Press Release, August 10, 2012