smid_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 1-13752

Smith-Midland Corporation

(Exact name of Registrant as specified in its charter)

Delaware		54-1727060
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5119 Catlett Road, P.O. Box 300

Midland, VA 22728

(Address, zip code of principal executive offices)

(540) 439-3266

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.01 par value per share		SMID		NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☒

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value per share, outstanding as of October 24, 2022: 5,230,658 shares, net of treasury shares

SMITH-MIDLAND CORPORATION

Form 10-Q Index

PART I. FINANCIAL INFORMATION		Page

Item 1. Financial Statements (Unaudited)		3

Condensed Consolidated Balance Sheets		3

Condensed Consolidated Statements of Income (Loss)		5

Condensed Consolidated Statements of Stockholders' Equity		6

Condensed Consolidated Statements of Cash Flows		7

Notes to Condensed Consolidated Financial Statements		8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		14

Item 3. Quantitative and Qualitative Disclosures About Market Risk		22

Item 4. Controls and Procedures		22

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		23

Item 1A. Risk Factors		23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		23

Item 3. Defaults Upon Senior Securities		23

Item 4. Mine Safety Disclosures		23

Item 5. Other Information		23

Item 6. Exhibits		23

Signatures		24

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

SMITH-MIDLAND CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

ASSETS	September 30, 2022 (Unaudited)		December 31, 2021
Current assets
Cash	$	10,808	$	13,492
Accounts receivable, net
Trade - billed (less allowance for doubtful accounts of approximately $438 and $437, respectively), including contract retentions		13,175		10,013
Trade - unbilled		278		439
Inventories, net
Raw materials		2,097		1,143
Finished goods		1,887		1,702
Prepaid expenses		622		551
Refundable income taxes		176		411

Total current assets		29,043		27,751

Property and equipment, net		24,165		21,926

Deferred buy-back lease asset, net		825		3,390

Other assets		244		258

Total assets	$	54,277	$	53,325

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

SMITH-MIDLAND CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(continued)

LIABILITIES AND STOCKHOLDERS' EQUITY	September 30, 2022 (Unaudited)			December 31, 2021
Current liabilities
Accounts payable - trade	$	4,577		$	2,071
Accrued expenses and other liabilities		427			657
Deferred revenue		2,006			2,454
Accrued compensation		592			1,036
Accrued income taxes		115			2,033
Deferred buy-back lease obligation		925			3,776
Operating lease liabilities		89			89
Current maturities of notes payable		619			468
Customer deposits		1,508			1,325

Total current liabilities		10,858			13,909

Deferred revenue		2,539			1,865
Operating lease liabilities		55			122
Notes payable - less current maturities		5,948			3,724
Deferred tax liability		1,953			1,955

Total liabilities		21,353			21,575

Stockholders’ equity
Preferred stock, $.01 par value; authorized 1,000,000 shares, none issued and outstanding		—			—
Common stock, $.01 par value; authorized 8,000,000 shares; 5,353,095 and 5,353,095 issued and 5,230,658 and 5,229,658 outstanding, respectively		53			53
Additional paid-in capital		7,313			6,935
Treasury stock, at cost, 40,920 shares		(102	)		(102	)
Retained earnings		25,660			24,864

Total stockholders' equity		32,924			31,750

Total liabilities and stockholders' equity	$	54,277		$	53,325

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

SMITH-MIDLAND CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue
Product sales	$	7,076		$	7,205		$	19,714		$	21,868
Barrier rentals		1,369			1,708			4,816			8,667
Royalty income		833			676			2,031			1,788
Shipping and installation revenue		2,678			3,511			9,083			8,302

Total revenue		11,956			13,100			35,644			40,625

Cost of goods sold		9,874			9,898			28,683			28,388

Gross profit		2,082			3,202			6,961			12,237

Operating expenses
General and administrative expenses		1,229			1,215			3,797			3,880
Selling expenses		849			719			2,236			2,010

Total operating expenses		2,078			1,934			6,033			5,890

Operating income (loss)		4			1,268			928			6,347

Other income (expense)
Interest expense		(69	)		(47	)		(187	)		(145	)
Interest income		3			10			9			29
Gain on sale of assets		29			205			94			293
Gain on forgiveness of PPP loan		—			2,692			—			2,692
Other income		26			8			208			41

Total other income (expense)		(11	)		2,868			124			2,910

Income (loss) before income tax expense (benefit)		(7	)		4,136			1,052			9,257

Income tax expense (benefit)		(12	)		442			256			1,711

Net income (loss)	$	5		$	3,694		$	796		$	7,546

Basic and diluted earnings (loss) per common share	$	0.00		$	0.71		$	0.15		$	1.45

Weighted average number of common shares outstanding:
Basic		5,231			5,202			5,230			5,202
Diluted		5,286			5,220			5,281			5,217

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

SMITH-MIDLAND CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(in thousands, except share data)

	Common Stock				Treasury Stock						Additional Paid-in		Retained
	Shares		Amount		Shares			Amount			Capital		Earnings			Total

Balance, December 31, 2021		5,353,095		53		(40,920	)		(102	)		6,935		24,864			31,750

Restricted stock issued		—		—		—			—			—		—			—

Vesting of restricted stock		—		—		—			—			126		—			126

Net income (loss)		—		—		—			—			—		(119	)		(119	)

Balance, March 31, 2022		5,353,095	$	53		(40,920	)	$	(102	)	$	7,061	$	24,745		$	31,757

Restricted stock issued		—		—		—			—			—		—			—

Vesting of restricted stock		—		—		—			—			126		—			126

Net income (loss)		—		—		—			—			—		910			910

Balance, June 30, 2022		5,353,095	$	53		(40,920	)	$	(102	)	$	7,187	$	25,655		$	32,793

Restricted stock issued		—		—		—			—			—		—			—

Vesting of restricted stock		—		—		—			—			126		—			126

Net income (loss)		—		—		—			—			—		5			5

Balance, September 30, 2022		5,353,095	$	53		(40,920	)	$	(102	)	$	7,313	$	25,660		$	32,924

Balance, December 31, 2020		5,279,411	$	52		(40,920	)	$	(102	)	$	6,405	$	17,294		$	23,649

Restricted stock issued		—		—		—			—			—		—			—

Vesting of restricted stock		—		—		—			—			41		—			41

Net income (loss)		—		—		—			—			—		2,867			2,867

Balance, March 31, 2021		5,279,411	$	52		(40,920	)	$	(102	)	$	6,446	$	20,161		$	26,557

Restricted stock issued		47,184		—		—			—			—		—			—

Vesting of restricted stock		—		1		—			—			130		—			131

Net income (loss)		—		—		—			—			—		985			985

Balance, June 30, 2021		5,326,595	$	53		(40,920	)	$	(102	)	$	6,576	$	21,146		$	27,673

Restricted stock issued		—		—		—			—			—		—			—

Vesting of restricted stock		—		—		—			—			87		—			87

Net income (loss)		—		—		—			—			—		3,694			3,694

Balance, September 30, 2021		5,326,595	$	53		(40,920	)	$	(102	)	$	6,663	$	24,840		$	31,454

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

SMITH-MIDLAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net income (loss)	$	796		$	7,546
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		2,127			1,976
Gain on forgiveness of PPP loan		—			(2,692	)
(Gain) loss on sale of property and equipment		(94	)		(293	)
Unrealized (gain) loss on investment securities available for sale		—			5
Allowance for doubtful accounts		—			25
Stock compensation		379			258
Deferred taxes		(5	)		(3	)
(Increase) decrease in
Accounts receivable - billed		(3,163	)		(2,799	)
Accounts receivable - unbilled		161			259
Inventories		(1,139	)		(1,002	)
Prepaid expenses and other assets		(104	)		10
Refundable income taxes		235			—
Increase (decrease) in
Accounts payable - trade		2,506			1,300
Accrued expenses and other liabilities		(230	)		(86	)
Deferred revenue		227			1,959
Accrued compensation		(444	)		(68	)
Accrued income taxes		(1,918	)		1,016
Deferred buy-back lease obligation		(2,851	)		(903	)
Customer deposits		184			1,054
Net cash provided by (used in) operating activities		(3,333	)		7,562
Cash flows from investing activities:
Purchases of investment securities available-for-sale		—			(20	)
Purchases of property and equipment		(3,739	)		(1,210	)
Deferred buy-back asset		1,909			—
Proceeds from the sale of property and equipment		103			466
Net cash provided by (used in) investing activities		(1,727	)		(764	)
Cash flows from financing activities:
Proceeds from long-term borrowings		2,805			50
Repayments of long-term borrowings		(429	)		(617	)
Net cash provided by (used in) financing activities		2,376			(567	)
Net increase (decrease) in cash		(2,684	)		6,231
Cash
Beginning of period		13,492			8,764
End of period	$	10,808		$	14,995

Supplemental Cash Flow Information:
Cash payments for interest	$	187		$	145
Cash payments for income taxes	$	2,179		$	713
Non-cash transaction – Gain on forgiveness of PPP loan

SEC Form 10-Q filed by Smith-Midland Corporation