8-K
Koil Energy Solutions, Inc. (KLNG)
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 eventreported)
May 11, 2020
DEEP DOWN, INC.
(Exact name of registrant as specifiedin its charter)
| Nevada | 000-30351 | 75-2263732 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission File Number) | (I.R.S. Employer<br><br> <br>Identification No.) |
18511 Beaumont Highway, Houston, TX77049
(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) |
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| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| N/A | N/A | N/A |
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
ITEM2.02 Results of Operations and Financial Condition.
On May 11, 2020, Deep Down, Inc. issued a press release announcing its financial results for the three months ended March 31, 2020. 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 May 11, 2020
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SIGNATURES
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: May 11, 2020
| DEEP DOWN, INC. | |
|---|---|
| By: | /s/ Charles K. Njuguna |
| Charles K. Njuguna | |
| President, Chief Executive Officer and Chief Financial Officer |
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EXHIBIT 99.1
DeepDown Reports First Quarter 2020 Results
Houston,TX – May 11, 2020 – Deep Down, Inc. (OTCQB: DPDW) (“Deep Down” or the “Company”), a specialist in deepwater oil and gas production and distribution equipment and services, today reported results for its first quarter ended March 31, 2020 (“Q1 2020”). Deep Down will hold a conference call tomorrow, Tuesday, May 12, 2020 at 10:00 am ET to review its results and outlook (call details below).
Deep Downat a Glance:
| Share<br> Price†: | $0.44 | Cash*: | $3.0M |
|---|---|---|---|
| 52-Week<br> Range: | $0.35<br> - $0.95 | Book<br> Value*: | $13.3M |
| Shares<br> Out.†: | 12.4M | Price<br> / Book Value: | 0.4x |
| Market<br> Cap†: | $5.5M | TTM<br> Revenue: | $16.2M |
| *As<br> of 3/31/20; †As of 5/8/20 |
Charles Njuguna, Deep Down Inc.’s CEO, commented, “While our first quarter results were a departure from what we originally expected at the beginning of the year, they reflect the nature of the environment in which we currently operate. As such, we remain cautious but focused on continuing to execute our backlog to meet the needs of our customers. While we cannot yet predict with certainty how the abrupt decline in oil prices and the slowdown in global economic activity caused by COVID-19 will fully impact our business, we have adjusted our operations to manage the business in the event of a sustained lower oil price environment. These adjustments include accelerating our cost containment efforts in the second quarter of 2020 to position the Company to deliver improved bottom-line results and enhance our cash flows and financial position.
“Our business was particularly affected during the first quarter by the domestic and international travel restrictions, which prevented the deployment of our service teams to scheduled customer projects. As these restrictions are scaled back, we expect the service side of our business to be a principle driver of revenue for the balance of 2020 as customers focus on the maintenance of existing assets, rather than sanction new projects. We are confident Deep Down is well-positioned to capture such opportunities and more given our reputation and extensive track record for providing innovative and cost-effective solutions, particularly in an environment where larger service providers are substantially shrinking their staffing and capabilities.”
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OperatingResults
Q1 2020 revenues increased 22% to $3.6 million compared to the three months ended December 31, 2019 (“Q4 2019”) but declined compared to the three months ended March 31, 2019 (“Q1 2019”) revenue of $6.3 million. The year-over-year decrease reflected fewer projects in process during Q1 2020 as well as the delay of approximately $2.0 million in projects from FY 2018 into Q1 2019. Gross profit for Q1 2020 was $1.1 million, or 31 percent of revenue, compared to Q1 2019 gross profit of $2.3 million, or 36 percent of revenue. The decrease in gross profit on a year-over-year basis reflected a larger mix of higher margin services revenue in the prior year.
Q1 2020 selling, general and administrative expenses decreased 15% to $1.7 million compared to $2.0 million in Q1 2019, primarily driven by Deep Down’s ongoing efforts to reduce overhead expenses and its renewed focus on its core business.
Deep Down’s modified EBITDA declined to negative $279 thousand in Q1 2020 compared to a modified EBITDA of $644 thousand in Q1 2019, primarily due to lower revenue and gross profit.
Due to the factors discussed above, Deep Down reported a Q1 2020 net loss of $637 thousand, or $0.05 loss per basic share, compared with Q1 2019 net income of $212 thousand, or $0.02 per diluted share. Per share results are based on 12.7 million and 13.5 million weighted average shares outstanding in Q1 2020 and Q1 2019, respectively. The decrease in shares outstanding principally reflects the repurchase of approximately 750 thousand shares of common stock in December 2019 and January 2020.
FinancialStrength
At March 31, 2020, Deep Down had working capital of $4.0 million, which includes cash of $3.0 million and receivables of $4.6 million. Total shareholders’ equity was $13.3 million, or approximately $1.04 per common share. Given the Company’s disciplined capital structure, Deep Down remains well-positioned to navigate through this challenging business environment.
ConferenceCall Details:
| Call ID: | 4194047 |
|---|---|
| Call Dial-in: | (877) 303-6187 for domestic callers |
| (678) 894-3073 for international callers | |
| Webcast/Replay URL: | https://edge.media-server.com/mmc/p/yef8qr5b |
| Call Replay: | (855) 859-2056, Available through 5/19/20 |
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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.
Forward-LookingStatements 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.
Follow uson: Twitter:@DeepDownIR
InvestorRelations:
Catalyst IR
Chris Eddy or David Collins
212-924-9800
dpdw@catalyst-ir.com
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DEEP DOWN, INC.
SUMMARY FINANCIAL DATA
(UNAUDITED)
Comparative Condensed Consolidated Income Statement
| Three Months Ended March 31, | |||||
|---|---|---|---|---|---|
| 2020 | 2019 | ||||
| (In thousands, except share data) | |||||
| Revenues | $ | 3,605 | $ | 6,300 | |
| Cost of sales | 2,482 | 4,042 | |||
| Gross profit | 1,123 | 2,258 | |||
| Total operating expenses | 1,754 | 2,063 | |||
| Operating income (loss) | (631 | ) | 195 | ||
| Total other income (expense) | (1 | ) | 22 | ||
| Income (loss) before income taxes | (632 | ) | 217 | ||
| Income tax expense | 5 | 5 | |||
| Net income (loss) | $ | (637 | ) | $ | 212 |
| Net income (loss) per share, basic and diluted | $ | (0.05 | ) | $ | 0.02 |
| Weighted-average shares outstanding, basic and diluted | 12,710 | 13,511 |
Comparative Condensed Consolidated Balance Sheets
| March 31, | December 31, | |||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (In thousands) | ||||
| Assets: | ||||
| Cash and cash equivalents | $ | 3,033 | $ | 3,523 |
| Other current assets | 5,299 | 5,424 | ||
| PP&E, net | 7,734 | 7,964 | ||
| Other non-current assets | 4,428 | 4,640 | ||
| Total assets | $ | 20,494 | $ | 21,551 |
| Liabilities: | ||||
| Current liabilities | 4,367 | 4,008 | ||
| Other long-term liabilities | 2,875 | 3,180 | ||
| Total liabilities | 7,242 | 7,188 | ||
| Stockholders' equity | 13,252 | 14,363 | ||
| Total liabilities and stockholders' equity | $ | 20,494 | $ | 21,551 |
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DEEP DOWN, INC.
SUMMARY FINANCIAL DATA, CONTINUED
(UNAUDITED)
ModifiedEBITDA:
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| (In thousands) | ||||||
| Net income (loss) | $ | (637 | ) | $ | 212 | |
| Add: Interest expense (income), net | 1 | (7 | ) | |||
| Add: Income tax expense | 5 | 5 | ||||
| Add: Depreciation and amortization | 302 | 345 | ||||
| Add: Share-based compensation | 50 | 104 | ||||
| Deduct: Gain on sale of asset | – | (15 | ) | |||
| Modified EBITDA (loss) | $ | (279 | ) | $ | 644 |
FreeCash Flow:
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| (In thousands) | (In thousands) | |||||
| Cash provided by (used in) operating activities: | $ | 91 | $ | (583 | ) | |
| Less: Purchase of property, plant and equipment | (61 | ) | – | |||
| Free cash flow | $ | 30 | $ | (583 | ) |
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