HOUSTON, Aug. 16 /PRNewswire-FirstCall/ -- 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 results for the second quarter of 2010. For the second quarter of 2010, Deep Down reported a net loss of $452 thousand, or $0.00 loss per share on revenues of $9.6 million compared to a loss of $1.8 million, or $0.01 loss per share on revenues of $6.2 million during the same quarter last year.

OPERATING RESULTS

Revenues increased by $3.4 million, or 55 percent to $9.6 million for the second quarter 2010 from $6.2 million for the same quarter last year. The increase was due primarily to increased revenues from the production of products for deepwater projects and ROV and other related services. During the second quarter 2010, the Company's flotation plant ran at over 30 percentage points greater capacity for the production of buoyancy products compared to the same quarter last year. The higher demand for our ROV and other related services in the second quarter 2010 resulted primarily from customers commencing work that had previously been delayed, projects supporting relief efforts and work related to the increased emphasis on inspection and safety as a result of the oil spill in the U.S. Gulf of Mexico ("GOM").

Gross profit increased $1.7 million to $3.6 million for the second quarter 2010, an increase of 93 percent over the same period of the prior year, reflecting an overall increase in the gross profit margin from 30 percent to 37 percent. The increase in gross profit and gross profit margin was due to the increased revenues described above and to the revenue mix which included higher margin ROV services and engineered subsea projects than during the same period last year.

When comparing the second quarter of 2010 to the second quarter of 2009, the operating loss was reduced by $2.1 million to a loss of $339 thousand primarily as a result of improved gross margin and a decrease in selling, general and administrative expenses ("SG&A") of 9.8 percent as the Company continued to focus on more efficient operations.

EBITDA (please see definition in last paragraph below) for the second quarter of 2010 was $724 thousand compared to negative $1.6 million for the same period last year. This improvement was primarily driven by the increase in gross profit and lower SG&A.

"There will undoubtedly be greater regulatory scrutiny and higher costs associated with finding and developing hydrocarbon reserves in deep water, particularly in the GOM. Additionally, we believe that the international markets will be more important to our operations going forward as we continue our focus on Brazil and West Africa deepwater projects. The deepwater market remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates. We are well positioned to supply services and products required to support safe offshore and deepwater projects of our customers. Therefore, we anticipate demand for our deepwater services and products will continue to grow and we will continue to focus on this sector of the industry worldwide," stated Ronald E. Smith, Chief Executive Officer.

ACQUISITION

On May 3, 2010, the Company announced entry into a conditional purchase agreement ("Purchase Agreement") to acquire Cuming Corporation (or "Cuming"). Privately-held Cuming Corporation was founded in 1980 and is a leading manufacturer of buoyancy and insulation products with a wide range of deepwater oil and gas industry applications. Cuming's operations are highly complementary with those of Deep Down's Flotation Technologies subsidiary, which produces syntactic foam products for customers in the oil and gas, defense, scientific and industrial sectors. At the closing of the transaction, Deep Down expects to acquire 100% of the stock of Cuming for approximately $37 million in the form of a combination of cash and shares of Deep Down and assume approximately $13 million of net liabilities based upon Cuming's balance sheet as of December 31, 2009.

On July 13, 2010, Deep Down entered into an amendment to the Purchase Agreement, by and among Deep Down, Cuming and the selling stockholders (the "Amendment") dated effective as of June 30, 2010, to provide for an extension of the date on which Deep Down or the selling stockholders may terminate the Purchase Agreement. The Amendment extended the date for which either of Deep Down or the selling stockholders may terminate the Purchase Agreement if the acquisition is not completed to July 31, 2010, provided that the party wishing to terminate is not in breach of the Purchase Agreement. The acquisition has not been completed and the Company has not entered into another amendment to extend the closing date; however, neither party has terminated the agreement. The Company plans to finance the acquisition with a combination of debt and equity and is actively engaged in negotiating terms with several financial institutions and private equity firms. Nevertheless, consummation of the transaction remains subject to several conditions including Deep Down's obtaining adequate external financing to fund the approximately $34 million cash component of the purchase price.

WORKING CAPITAL

The Company's working capital declined by $3.9 million to a negative $2.8 million at June 30, 2010 from $1.1 million at December 31, 2009 primarily as a result of reclassifying $2.6 million of its long-term debt to current liabilities. All of the debt from one of the Company's lenders in the amount of $3.4 million is due April 15, 2011. The Company is currently in discussions with several lenders who have expressed interest in refinancing the Company's debt. The Company's cash balance was $1.1 million at June 30, 2010 compared to $0.9 million at December 31, 2009.

About Deep Down, Inc.

Deep Down, Inc. is an oilfield services company serving the worldwide offshore exploration and production industry. Deep Down's proven services and technological solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads, distributed and drill riser buoyancy, ROVs 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. The company's primary focus is on more complex deepwater and ultra-deepwater oil production distribution system support services and technologies, used between the platform and the wellhead. More information about Deep Down is available at www.deepdowncorp.com.

Forward-Looking Statements

Information set forth in this document contain "forward-looking statements" (as defined in Section 21E of the Securities Exchange Act of 1934, as amended), which reflect Deep Down's expectations regarding future events. The forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the benefits of the business combination transaction involving Deep Down and Cuming, including future financial and operating results, whether and when the transactions will be consummated, the new combined company's plans, market and other expectations, objectives, intentions and other statements that are not historical facts.

The following additional factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain financing and approvals for the transaction; the risk that any synergies from the transaction may not be realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; the ability to successfully integrate the businesses, unexpected costs or unexpected liabilities that may arise from the transaction, whether or not consummated; the inability to retain key personnel; continuation or deterioration of current market conditions; future regulatory or legislative actions that could adversely affect the companies; and the business plans of the customers of the respective parties. Additional factors that may affect future results are contained in Deep Down's filings with the Securities and Exchange Commission ("SEC"), which are available at the SEC's web site http://www.sec.gov. Deep Down disclaims any obligation to update and revise statements contained in these materials based on new information or otherwise.

                                       DEEP DOWN, INC.
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                                         (Unaudited)

                                                Three Months Ended
                                                     June 30,
                                                     --------
      (In thousands, except per
       share amounts)                            2010             2009
                                                 ----             ----
      Revenues                                 $9,592           $6,201
      Cost of sales:
        Cost of sales                           5,426            3,987
        Depreciation expense                      571              352
                                                  ---              ---
            Total cost of sales                 5,997            4,339
                                                -----            -----
      Gross profit                              3,595            1,862
      Operating expenses:
        Selling, general and
         administrative                         3,494            3,873
        Depreciation and
         amortization                             440              421
            Total operating expenses            3,934            4,294
                                                -----            -----
      Operating loss                             (339)          (2,432)
      Other income (expense):
        Interest expense, net                    (143)             (66)
        Other income, net                          52               15
            Total other expense                   (91)             (51)
                                                  ---              ---
      Loss before income taxes                   (430)          (2,483)
      Income tax (expense)
       benefit                                    (22)             722
                                                  ---              ---
      Net loss                                  $(452)         $(1,761)
                                                =====          =======

      Net loss per share, basic
       and diluted                             $(0.00)          $(0.01)
                                               ======           ======
      Weighted-average common
       shares
        outstanding, basic and
         diluted                              190,044          179,701
                                              =======          =======

                                                 Six Months Ended
                                                     June 30,
                                                     --------
      (In thousands, except per
       share amounts)                            2010             2009
                                                 ----             ----
      Revenues                                $16,236          $13,303
      Cost of sales:
        Cost of sales                           9,596            8,440
        Depreciation expense                    1,107              697
                                                -----              ---
            Total cost of sales                10,703            9,137
                                               ------            -----
      Gross profit                              5,533            4,166
      Operating expenses:
        Selling, general and
         administrative                         6,977            6,717
        Depreciation and
         amortization                             882              827
            Total operating expenses            7,859            7,544
                                                -----            -----
      Operating loss                           (2,326)          (3,378)
      Other income (expense):
        Interest expense, net                    (274)            (112)
        Other income, net                          51               11
            Total other expense                  (223)            (101)
                                                 ----             ----
      Loss before income taxes                 (2,549)          (3,479)
      Income tax (expense)
       benefit                                    (39)             988
                                                  ---              ---
      Net loss                                $(2,588)         $(2,491)
                                              =======          =======

      Net loss per share, basic
       and diluted                             $(0.01)          $(0.01)
                                               ======           ======
      Weighted-average common
       shares
        outstanding, basic and
         diluted                              185,274          178,649
                                              =======          =======

                                  DEEP DOWN, INC.
                            CONSOLIDATED BALANCE SHEETS
                                    (Unaudited)

     (In thousands, except par value
      amounts)                                  June 30,     December 31,
                                                --------     ------------
                                                       2010           2009
                                                       ----            ---
     ASSETS
     Current assets:
       Cash and cash equivalents                     $1,119           $912
       Accounts receivable, net of allowance
        of $344 and $304, respectively                6,011          7,662
       Inventory                                        709            896
       Costs and estimated earnings in excess
        of billings on uncompleted contracts            241            267
       Deposit                                          475              -
       Prepaid expenses and other current
        assets                                          195            225
            Total current assets                      8,750          9,962
     Property, plant and equipment, net              19,765         20,011
     Intangibles, net                                11,469         12,166
     Goodwill                                         9,429          9,429
     Other assets                                     1,905          1,136
            Total assets                            $51,318        $52,704
                                                    =======        =======

     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
       Accounts payable and accrued
        liabilities                                  $4,463         $2,865
       Billings in excess of costs and
        estimated earnings on uncompleted
        contracts                                     1,736          4,345
       Deferred revenues                              1,248             89
       Current portion of long-term debt              4,072          1,497
                                                      -----          -----
            Total current liabilities                11,519          8,796
     Long-term debt, net                              2,414          5,379
            Total liabilities                        13,933         14,175
                                                     ------         ------

     Commitments and contingencies

     Stockholders' equity:
       Common stock, $0.001 par value, 490,000
        shares authorized, 195,934                      196            180
            and 180,451 shares, respectively,
             issued and outstanding
       Additional paid-in capital                    62,589         61,161
       Accumulated deficit                          (25,400)       (22,812)
            Total stockholders' equity               37,385         38,529
                                                     ------         ------
            Total liabilities and stockholders'
             equity                                 $51,318        $52,704
                                                    =======        =======

                                  DEEP DOWN, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (Unaudited)

                                                         Six Months Ended
                                                             June 30,
                                                             --------
     (In thousands)                                    2010              2009
                                                       ----              ----
     Cash flows from operating activities:
     Net loss                                       $(2,588)          $(2,491)
     Adjustments to reconcile net loss to net
      cash provided by operating activities:
       Share-based compensation expense                 453               321
       Stock issued for services                         14                 -
       Bad debt expense                                  58                96
       Depreciation and amortization expense          1,989             1,524
       Loss (gain) on disposal of property,
        plant and equipment                               3               (16)
       Deferred income taxes, net                         -            (1,022)
       Changes in assets and liabilities:
         Accounts receivable                          1,594             3,498
         Inventory                                      187               216
         Costs and estimated earnings in excess
          of billings on uncompleted contracts           26               627
         Prepaid expenses and other current
          assets                                         26              (144)
         Other assets                                  (345)             (204)
         Accounts payable and accrued liabilities     1,599            (1,307)
         Deferred revenues                            1,158                 9
         Billings in excess of costs and
          estimated earnings on uncompleted
          contracts                                  (2,609)            1,627
                                                     ------             -----
            Net cash provided by operating
             activities                               1,565             2,734
                                                      -----             -----

     Cash flows from investing activities:
       Purchases of property, plant and
        equipment                                    (1,145)           (4,558)
       Proceeds from sale of property, plant
        and equipment                                     -                48
       Purchase of investment in joint venture          (25)             (100)
       Cash paid for capitalized software              (201)             (277)
       Note receivable                                  (99)              (24)
              Net cash used in investing activities  (1,470)           (4,911)
                                                     ------            ------

     Cash flows from financing activities:
       Proceeds from sale of common stock               501                 -
       Borrowings of long-term debt                       -             1,830
       Repayments of long-term debt                    (389)             (247)
                                                       ----              ----
              Net cash provided by financing
               activities                               112             1,583
                                                        ---             -----
     Change in cash and equivalents                     207              (594)
     Cash and cash equivalents, beginning of
      period                                            912             2,495
                                                        ---             -----
     Cash and cash equivalents, end of period        $1,119            $1,901
                                                     ======            ======

      DEEP DOWN, INC.
      NON-US GAAP FINANCIAL MEASURE - EBITDA
      (Unaudited)

                                                Three Months Ended
                                                    June 30,
                                                    --------
      (In thousands)                            2010            2009
                                                ----            ----
      Net loss                                 $(452)        $(1,761)
      Add back interest expense, net
       of interest income                        143              66
      Add back depreciation and
       amortization expense                    1,011             773
      Add back income tax expense
       (benefit)                                  22            (722)
      EBITDA                                    $724         $(1,644)
                                                ====         =======

                                                 Six Months Ended
                                                    June 30,
                                                    --------
      (In thousands)                            2010            2009
                                                ----            ----
      Net loss                               $(2,588)        $(2,491)
      Add back interest expense, net
       of interest income                        274             112
      Add back depreciation and
       amortization expense                    1,989           1,524
      Add back income tax expense
       (benefit)                                  39            (988)
      EBITDA                                   $(286)        $(1,843)
                                               =====         =======

EBITDA is a non-US GAAP financial measure. We use EBITDA as an unaudited supplemental financial measure to assess the financial measure of our assets without regard to financing methods, capital structures, taxes or historical cost basis; and to assess our liquidity and operating performance over time in relation to other companies that own similar assets and that we believe calculate EBITDA in a similar manner; and to assess the ability of our assets to generate cash sufficient for us to pay potential interest costs. We also understand that such data are used by investors to assess our performance. However, the term EBITDA is not defined under US GAAP and EBITDA is not a measure of operating income, operating performance or liquidity presented in accordance with US GAAP. When assessing our operating performance or liquidity, investors should not consider this data in isolation or as a substitute for net income, cash flow from operating activities, or other cash flow data calculated in accordance with US GAAP.

SOURCE Deep Down, Inc.