Smith-Midland Announces Second Quarter 2020 Results

  • Company reports 600 basis point improvement in Gross Margin over the first quarter 2020, or 43%
  • Earnings Per Share increases 50% compared to the prior year second quarter
  • Barrier Rental Revenue increases 56% over the prior year second quarter

MIDLAND, VA / ACCESSWIRE / August 11, 2020 / Smith-Midland Corporation (the Company) (OTCQX:SMID), which develops, manufactures, licenses, rents, and sells a broad array of precast concrete products for use primarily in the construction, transportation, and utilities industries, today announced results for the quarter ended June 30, 2020.

Second Quarter 2020 Results

The Company reported second quarter revenues of $10.5 million, a 4% decrease from the prior-year quarter. Gross margin for the quarter was 20%, an increase of 300 basis points from the second quarter of 2019. Pre-tax income for the second quarter of 2020 was $571,000 compared to pre-tax income of $374,000 in 2019, an increase of $197,000. Net income for the second quarter increased 53% to $441,000, as compared to net income of $288,000 in same quarter a year ago. Diluted earnings per share for the quarter were $0.09, compared to $0.06 in the second quarter of 2019.

Six Months 2020 Results

The Company reported six month revenues of $20.3 million for 2020, a 3% decrease from the same period in the prior year. Pre-tax income for the first half of 2020 was $522,000 compared to pre-tax income of $813,000 in same period of 2019, a decrease of $291,000. Net income for the first half of 2020 was $403,000, compared to net income of $628,000 in first half of 2019. Diluted earnings per share were $0.08 for the first half of 2020, compared to $0.12 for the first six months of 2019.

CEO Commentary

“We are pleased with our second quarter results, showing both an improvement to gross margin and net income despite the impact of the COVID-19 pandemic that we are facing,” said Ashley Smith, President and CEO of Smith-Midland. “The significant increase in rental revenue, which carries higher margins than product sales, helped improve gross margin by 600 basis points over the first quarter 2020 and contributed to our bottom-line. This improvement exemplifies the execution of our long-term strategy moving towards barrier rentals as compared to barrier sales.

“The Company was impacted during the second quarter due to the COVID-19 pandemic. Manufacturing experienced manpower challenges as associates were unable to work, therefore reducing production volumes. Currently, there is minimal workforce impact and production has resumed as scheduled. However, there is still significant uncertainty surrounding the impact of the COVID-19 pandemic with respect to funding projects, production volumes, and the overall economy. Smith-Midland is closely monitoring the current and potential future impacts of the pandemic on its operations, employees, customers, and supply chain. The Company continues to follow virus-prevention protocols consistent with the recommendations provided by the U.S. Centers for Disease Control and Prevention.”

“The increase to our rental fleet at the end of 2019 has proven extremely beneficial for the Company through the first six months of 2020,” Mr. Smith continued. “We delivered on the $1.1 million rental contract on I-81, and have also established the largest rental backlog in the Company’s history. Despite the current pandemic, we are optimistic for the remainder of the year, and into 2021, with the current backlog, sizeable project bids, and expected awards on various projects in our markets.”

Balance Sheet and Liquidity

As of June 30, 2020, the Company had cash and investments totaling $5.6 million, with accounts receivable of $10.8 million. Total outstanding debt on notes payable increased to $8.0 million at the recent quarter end, with the Company receiving a loan under the Paycheck Protection Plan in the amount of $2.7 million during the second quarter of 2020.

About Smith-Midland

Smith-Midland develops, manufactures, licenses, rents, and sells a broad array of precast concrete products for use primarily in the construction, transportation and utilities industries. Management and the Board own approximately 17.5% of SMID stock, aligning with shareholder values.

Forward-Looking Statements

This announcement contains forward-looking statements, which involve risks and uncertainties. The Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors which might cause such a difference include, but are not limited to, the risk that the COVID-19 outbreak may significantly adversely affect future operations, product demand, the impact of competitive products and pricing, capacity and supply constraints or difficulties, general business and economic conditions, our debt exposure, the effect of the Company’s accounting policies and other risks detailed in the Company’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission.

Condensed Consolidated Statements of Operations
(in thousands, except per share data)

 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
  2020     2019     2020     2019  
Revenue
                       
Product sales
  6,699     7,327     13,550     14,831  
Barrier rentals
    907       582       1,650       1,163  
Royalty income
    413       429       681       735  
Shipping and installation revenue
    2,431       2,514       4,394       4,312  
 
                               
Total revenue
    10,450       10,852       20,275       21,041  
 
                               
Cost of goods sold
    8,073       8,696       16,297       16,663  
 
                               
Gross profit
    2,377       2,156       3,978       4,378  
 
                               
Operating expenses
                               
General and administrative expenses
    1,230       1,143       2,282       2,350  
Selling expenses
    574       640       1,164       1,207  
 
                               
Total operating expenses
    1,804       1,783       3,446       3,557  
 
                               
Operating income (loss)
    573       373       532       821  
 
                               
Other income (expense)
                               
Interest expense
    (57 )     (40     (113 )     (85 )
Interest income
    9       11       17       21  
Gain on sale of assets
    30       10       66       12  
Other income
    16       20       20       44  
 
                               
Total other income (expense)
    (2)       1        (10)       (8)  
 
                               
Income (loss) before income tax expense (benefit)
    571       374       522       813  
 
                               
Income tax expense (benefit)
    130       86       119       185  
 
                               
Net income (loss)
  441     288     403     628  
 
                               
Basic and diluted earnings (loss) per common share
  0.09     0.06     0.08     0.12  
 
                               
Weighted average number of common shares outstanding:
                               
Basic
    5,184       5,134       5,184       5,134  
Diluted
    5,184       5,143       5,184       5,141  

Condensed Consolidated Balance Sheets
(in thousands)

ASSETS
 
June 30,
2020
(Unaudited)
   
December 31,
2019
 
Current assets
           
Cash
  4,404     1,364  
Investment securities, available-for-sale, at fair value
    1,189       1,176  
Accounts receivable, net
               
Trade – billed (less allowance for doubtful accounts of $401 and $333), including contract retentions
    10,757       12,723  
Trade – unbilled
    502       310  
Inventories, net
               
Raw materials
    642       488  
Finished goods
    1,466       1,754  
Prepaid expenses and other assets
    845       784  
Refundable income taxes
    296       432  
 
               
Total current assets
    20,101       19,031  
 
               
Property and equipment, net
    19,240       17,735  
 
               
Deferred buy-back lease asset, net
    4,655       5,042  
 
               
Other assets
    335       307  
 
               
Total assets
  44,331     42,115  

Condensed Consolidated Statements of Cash Flows
(in thousands)

 
  Six Months Ended June 30,  
 
  2020     2019  
Cash flows from operating activities:
           
Net income (loss)
  403     628  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
               
Depreciation and amortization
    1,180       873  
Gain on sale of assets
    (66 )     (12 )
Unrealized (gain) loss
    (3 )     (14 )
Allowance for doubtful accounts
    68       56  
Stock compensation
          154  
Deferred taxes
    3       (90 )
(Increase) decrease in
               
Accounts receivable – billed
    1,898       1,141  
Accounts receivable – unbilled
    (192 )     1,046  
Inventories
    134       557  
Prepaid expenses and other assets
    (101 )     (41 )
Refundable income taxes
    136       697  
Increase (decrease) in
               
Accounts payable – trade
    (62 )     (1,653 )
Accrued expenses and other liabilities
    186       (426 )
Deferred revenue
    (6 )     345  
Accrued compensation
    (190 )     (734 )
Deferred buy-back lease obligation
    (555 )     36  
Customer deposits
    (251 )     (417 )
Net cash provided by (used in) operating activities
    2,582       2,136  
Cash flows from investing activities:
               
Purchases of investment securities available-for-sale
    (15 )     (16 )
Purchases of property and equipment
    (2,326 )     (1,996 )
Deferred buy-back lease asset
          (361 )
Proceeds from sale of fixed assets
    71       7  
Net cash provided by (used in) investing activities
    (2,270 )     (2,366 )
Cash flows from financing activities:
               
Proceeds from the line-of-credit construction draw
          500  
Proceeds from long-term borrowings
    5,426       49  
Repayments of long-term borrowings
    (2,416 )     (343 )
Dividends paid on common stock
    (282 )     (281 )
Net cash provided by (used in) financing activities
    2,728       (75 )
Net increase (decrease) in cash
    3,040       (305 )
Cash
               
Beginning of period
    1,364       1,946  
End of period
  4,404     1,641  
 
               
Supplemental Cash Flow information:
               
Non-cash transaction – right of use asset and lease liability upon lease standard adoption
      414  
Cash payments for interest
  113     85  
Cash payments for income taxes
  1     35  

For more complete information on Smith-Midland Corporation, visit the Company’s website at SMITHMIDLAND.com. The “Investor Relations” area will include the Company’s Form

10-K.

Media Inquiries:

AJ Krick, CFO
540-439-3266
[email protected]

Sales Inquiries:
[email protected]

SOURCE: Smith-Midland Corporation

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