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

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