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
investors@smithmidland.com

Sales Inquiries:
info@smithmidland.com

SOURCE: Smith-Midland Corporation

ReleaseID: 601112