Document Entity Information
Document Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 04, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | SMITH MIDLAND CORP | |
Entity Central Index Key | 924,719 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 5,080,395 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 1,006,000 | $ 3,390,000 |
Investment securities, available-for-sale, at fair value | 1,087,000 | 1,098,000 |
Accounts receivable, net | ||
Trade - billed (less allowance for doubtful accounts of $279 and $208) | 9,833,000 | 8,967,000 |
Trade - unbilled | 550,000 | 251,000 |
Inventories | ||
Raw materials | 747,000 | 819,000 |
Finished goods | 2,253,000 | 2,696,000 |
Prepaid expenses and other assets | 528,000 | 452,000 |
Refundable income taxes | 1,325,000 | 1,359,000 |
Total current assets | 17,329,000 | 19,032,000 |
Property and equipment, net | 10,481,000 | 9,867,000 |
Operating lease, net | 1,076,000 | 0 |
Other assets | 271,000 | 326,000 |
Total assets | 29,157,000 | 29,225,000 |
Current liabilities | ||
Accounts payable - trade | 2,731,000 | 3,059,000 |
Accrued expenses and other liabilities | 695,000 | 588,000 |
Deferred revenue | 1,245,000 | 1,144,000 |
Accrued compensation | 621,000 | 1,231,000 |
Dividend payable | 0 | 256,000 |
Current maturities of notes payable | 693,000 | 637,000 |
Customer deposits | 749,000 | 919,000 |
Total current liabilities | 6,734,000 | 7,834,000 |
Deferred buy-back lease | 1,344,000 | 0 |
Notes payable - less current maturities | 3,039,000 | 2,896,000 |
Deferred tax liability | 1,148,000 | 1,290,000 |
Total liabilities | 12,265,000 | 12,020,000 |
Stockholders’ equity | ||
Preferred stock, $.01 par value; authorized 1,000,000 shares, none issued and outstanding | 0 | 0 |
Common stock, $.01 par value; authorized 8,000,000 shares; 5,220,648 and 5,214,148 issued and 5,075,395 and 5,047,895 outstanding, respectively | 51,000 | 51,000 |
Additional paid-in capital | 5,842,000 | 5,719,000 |
Treasury stock, at cost, 40,920 shares | (102,000) | (102,000) |
Accumulated other comprehensive loss, net | (33,000) | (19,000) |
Retained earnings | 11,134,000 | 11,556,000 |
Total stockholders’ equity | 16,892,000 | 17,205,000 |
Total liabilities and stockholders' equity | $ 29,157,000 | $ 29,225,000 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Allowance for doubtful accounts | $ 279,000 | $ 194,000 |
Allowance for reserve | $ 66,567 | $ 66,567 |
Stockholders' equity | ||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 8,000,000 | 8,000,000 |
Common stock, shares issued | 5,192,148 | 5,085,348 |
Common stock, shares outstanding | 5,030,148 | 4,941,428 |
Treasury stock, at cost | 40,920 | 40,920 |
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Revenue | ||
Products sales and leasing | $ 7,453,000 | $ 4,947,000 |
Barrier rentals | 309,000 | 2,523,000 |
Shipping and installation revenue | 1,142,000 | 1,596,000 |
Royalties | 221,000 | 431,000 |
Total revenue | 9,125,000 | 9,497,000 |
Cost of goods sold | 7,534,000 | 6,181,000 |
Gross profit | 1,591,000 | 3,316,000 |
Operating expenses | ||
General and administrative expenses | 1,468,000 | 1,350,000 |
Selling expenses | 676,000 | 610,000 |
Total operating expenses | 2,144,000 | 1,960,000 |
Operating income (loss) | (553,000) | 1,356,000 |
Interest income (expense) | ||
Interest expense | (46,000) | (46,000) |
Interest income | 10,000 | 9,000 |
Gain on sale of assets | 24,000 | 13,000 |
Other income | 8,000 | 11,000 |
Total other expense | (4,000) | (13,000) |
Income (loss) before income tax expense | (557,000) | 1,343,000 |
Income tax expense (benefit) | (135,000) | 486,000 |
Net income (loss) | $ (422,000) | $ 857,000 |
Basic and diluted earnings per share (in dollars per share) | $ (0.08) | $ 0.17 |
Weighted average number of common shares outstanding: | ||
Basic (in shares) | 5,114,000 | 5,009,000 |
Diluted (in shares) | 5,114,000 | 5,052,000 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Comprehensive Income (Loss) (Unaudited) Statement - USD ($) | 3 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | ||
Statement of Comprehensive Income [Abstract] | |||
Net income (loss) | $ (422,000) | $ 857,000 | |
Other comprehensive income (loss), net of tax: | |||
Net unrealized holding gain | (15,000) | [1] | 1,000 |
Comprehensive income (loss) | $ (437,000) | $ 858,000 | |
[1] | Unrealized income (loss) on available-for-sale securities are shown net of income tax expense (benefit) of $(5) and $1 for March 31, 2018 and 2017, respectively. |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Comprehensive Income (Loss) (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
Unrealized gain (loss) on securities arising during period, tax | $ (5) | $ 1 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities | ||
Net income (loss) | $ (422,000) | $ 857,000 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 248,000 | 225,000 |
Gain on sale of assets | (24,000) | (13,000) |
Allowance for doubtful accounts | 71,000 | (153,000) |
Stock compensation | 117,000 | 151,000 |
Deferred taxes | (142,000) | 175,000 |
(Increase) decrease in | ||
Accounts receivable - billed | (937,000) | 1,547,000 |
Accounts receivable - unbilled | (300,000) | (92,000) |
Inventories | 515,000 | (1,216,000) |
Prepaid expenses and other assets | (31,000) | (98,000) |
Operating lease, net | (1,076,000) | 0 |
Refundable income taxes | 31,000 | 251,000 |
Accounts payable - trade | (325,000) | (352,000) |
Accrued expenses and other liabilities | 107,000 | (15,000) |
Deferred revenue | 101,000 | (28,000) |
Accrued income taxes payable | 0 | 60,000 |
Accrued compensation | (610,000) | (260,000) |
Deferred buy-back lease | 1,344,000 | 0 |
Customer deposits | (170,000) | 472,000 |
Net cash provided by (used in) operating activities | (1,503,000) | 1,511,000 |
Cash flows from investing activities: | ||
Purchases of investment securities available-for-sale | (8,000) | (9,000) |
Purchases of property and equipment | (860,000) | (674,000) |
Proceeds from sale of fixed assets | 38,000 | 18,000 |
Net cash used in investing activities | (830,000) | (665,000) |
Cash flows from financing activities: | ||
Proceeds from long-term borrowings | 350,000 | 183,000 |
Repayments of long-term borrowings | (151,000) | (141,000) |
Dividends paid on common stock | (256,000) | (49,000) |
Proceeds from options exercised | 6,000 | 62,000 |
Net cash provided by (used in) financing activities | (51,000) | 55,000 |
Net increase (decrease) in cash and cash equivalents | (2,384,000) | $ 901,000 |
Cash and cash equivalents | ||
Beginning of period | 3,390,000 | |
End of period | $ 1,006,000 |
Interim Financial Reporting
Interim Financial Reporting | 3 Months Ended |
Mar. 31, 2018 | |
INTERIM FINANCIAL REPORTING [Abstract] | |
Interim Financial Reporting | INTERIM FINANCIAL REPORTING Basis of Presentation The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, and with the instructions to Form 10-Q and Article 10 and Regulation S-X. Accordingly, we have condensed or omitted certain information and footnote disclosures that are included in our annual financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 . The condensed consolidated December 31, 2017 balance sheet was derived from audited financial statements included in the Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments (which consist of normal, recurring adjustments) necessary for a fair presentation of the financial position and results of operations and cash flows for the periods presented. The results disclosed in the condensed consolidated statements of operations are not necessarily indicative of the results to be expected in any future periods. Recent Accounting Pronouncements On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Adoption of this ASU requires lessees to recognize assets and liabilities for most leases. For public business entities the guidance is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods and early adoption is permitted. The Company is currently evaluating the impact of adoption on the Company’s financial position, results of operations and cash flows. Recently Adopted Accounting Pronouncements On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Adoption of this ASU requires that an entity recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in U.S. GAAP when it became effective. The standard allowed for application retrospectively to each prior period presented (full retrospective method) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective method). The Company adopted the new revenue guidance effective January 1, 2018 using the modified retrospective method to all contracts that were not substantially complete at the date of adoption. The adoption of Topic 606 did not have, and is not expected to have, a material impact on the timing or amount of revenue recognized as compared to the Company's previous revenue recognition policies. Accordingly, there was no adjustment recorded to beginning retained earnings for cumulative impact of adoption on January 1, 2018. Revenue Recognition Product Sales - Over Time Under Topic 606, the Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services provided. Revenue associated with contracts with customers is recognized overtime as the Company's performance creates or enhances customer controlled assets or creates or enhances an asset with no alternative use, which the Company has an enforceable right to receive compensation as defined under the contract for performance completed. To determine the amount of revenue to recognize overtime, the Company recognizes revenue over the contract terms based on the output method. The Company applied the "as-invoiced" practical expedient as the amount of consideration the Company has the right to invoice corresponds directly with the value of the Company's performance to date. As the output method is driven by units produced, the Company recognizes revenues based on the value transferred to the customer relative to the remaining value to be transferred. The Company also matches the costs associated with the units produced. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss updated in subsequent reporting periods. Revenue recognition also includes an amount related to a contract asset or contract liability. If the recognized revenue is greater than the amount billed to the customer, a contract asset is recorded in accounts receivable - unbilled. Conversely, if the amount billed to the customer is greater than the recognized revenue, a contract liability is recorded in customer deposits on uncompleted contracts. Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment of total contract value and therefore, profit and revenue recognition. A portion of the work the Company performs requires financial assurances in the form of performance and payment bonds or letters of credit at the time of execution of the contract. Some contracts include retention provisions of up to 10% which are generally withheld from each progress payment as retainage until the contract work has been completed and approved. Product Sales - Point in Time For certain product sales that do not meet the over-time criteria, under Topic 606 the Company recognizes revenue when the product has been shipped to the destination in accordance with the terms outlined in the contract where a present obligation to pay exists as they have gained physical possession of the product. Accounts Receivable and Contract Balances The timing of when we bill our customers is generally dependent upon advance billing terms, milestone billings based on the completion of certain phases of the work, or when services are provided or products are shipped. Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings, are reported on our Balance Sheets as accounts receivable - unbilled. Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimate earnings recognized to date, are reported on our Balance Sheets as customer deposits (i.e. contract liabilities). Any uncollected billed amounts for our performance obligations recognized over time, including contract retentions, are recorded within accounts receivable. At March 31, 2018 and December 31, 2017, accounts receivable included contract retentions (in thousands) of approximately $1,121 and $1,065 , respectively. Our billed and unbilled revenue may be exposed to potential credit risk if our customers should encounter financial difficulties, and we maintain reserves for specifically-identified potential uncollectible receivables. At March 31, 2018 and December 31, 2017, our allowances for doubtful accounts (in thousands) were $279 and $194 , respectively. Effect of Adopting ASC Topic 606 As discussed in Recently Adopted Accounting Pronouncements, no adjustment to beginning 2018 retained earnings was recorded as a result of our adoption of Topic 606 due to no changes in the methods and/or timing of our revenue recognition for our uncompleted contracts. Further, the difference in our results of the first quarter 2018 between application of the new standard on our contracts and what results would have been if such contracts had been reported using the accounting standards previously in effect, for such contracts, did not change. Sales to Customers with a Buy-Back Guarantee The Company entered into a buy-back agreement with one specific customer. Under this agreement, the Company guaranteed to buy-back product at a predetermined price at the end of the long-term project, subject to condition of the product. Although the Company receives payment in full as the product is produced, we are required to account for these transactions as operating leases. The amount of sale proceeds for the guaranteed buy-back is deferred until the buy-back is exercised. The remaining sale proceeds are deferred and recognized on a straight-line basis over the usage period, when delivered to the job-site. The Company capitalizes the cost of the product on the consolidated balance sheet as a deferred buy-back lease asset, net, and depreciates the value, less salvage value, to cost of leasing revenue over the estimated economic life of the asset. In the case the customer retains ownership of the product at the end of the usage period, the guarantee buy-back liability and any deferred revenue balances related to the product are settled to revenue, and the net book value of the asset is expensed to cost of leasing revenue. If the Company purchases the product back in the amount equal to the buy-back guarantee, we settle any remaining deferred balances, in excess of the buy-back payment, to leasing revenue, and we reclassify the net book value of the product on the consolidated balance sheet to property and equipment. The revenue is being recognized in accordance with Topic 840, Leases. Barrier Rentals - Leasing Fees Leasing fees are paid by customers at the beginning of the lease agreement and are recorded as deferred revenue. The deferred revenue is then recognized each month as lease income for the duration of the lease, in accordance with Topic 840, Leases. Topic 840 is applied, as Topic 606-10-15-2 provides a scope exception for lease contracts. Royalty Income The Company licenses certain products to other precast companies to produce the Company's products to engineering specifications under the licensing agreements. The agreements are typically for five year terms and require royalty payments from 4% to 6% of total sales of licensed products, which are paid on a monthly basis. The revenues from licensing agreements are recognized in the month earned, in accordance with Topic 606-10-55-65. Shipping and Installation Shipping and installation revenues are recognized as a distinct performance obligation in the period the shipping and installation services are provided to the customer, in accordance with Topic 606. Disaggregation of Revenue In the following table, revenue is disaggregated by primary sources of revenue (in thousands): Three Months Ended March 31, 2018 2017 Change % of Change Product Sales: Soundwall Sales $ 2,480 $ 1,226 $ 1,254 102% Architectural Panel Sales 213 18 195 1,083% Slenderwall Sales 1,143 — 1,143 100% Miscellaneous Wall Sales 493 663 (170 ) (26)% Barrier Sales 2,285 2,157 128 6% Easi-Set and Easi-Span Building Sales 502 336 166 49% Utility and Farm Product Sales 214 458 (244 ) (53)% Miscellaneous Product Sales 123 89 34 38% Total Product Sales 7,453 4,947 2,506 51% Barrier Rentals 309 2,523 (2,214 ) (88)% Royalty Income 221 431 (210 ) (49)% Shipping and Installation Revenue 1,142 1,596 (454 ) (28)% Total Service Revenue 1,672 4,550 (2,878 ) (63)% Total Revenue $ 9,125 $ 9,497 $ (372 ) (4)% Warranties Smith-Midland products are typically sold pursuant to an implicit warranty as to merchantability only. Warranty claims are reviewed and resolved on a case by case method. Although the Company does incur costs for these types of expense, historically the amount of expense is minimal. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Segment Reporting Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and assess performance. The Company currently operates in one operating and reportable business segment for financial reporting purposes. Reclassifications Certain minor reclassifications have been made to prior year amounts to conform to current year presentation. |
Net Loss Per Common Share
Net Loss Per Common Share | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Net Income Per Common Share | Basic earnings per common share exclude all common stock equivalents, primarily stock options and restricted stock awards, and is computed using the weighted average number of common shares outstanding during the period. The diluted earnings per common share calculation reflects the potential dilutive effect of securities that could share in earnings of the Company. Outstanding options are excluded from the diluted earnings per share calculation where they would have an anti-dilutive effect. Earnings per share are calculated as follows (in thousands, except earnings per share): Three Months Ended 2018 2017 Basic income (loss) per share Net income (loss) $ (422 ) $ 857 Weighted average shares outstanding 5,114 5,009 Basic income (loss) per share $ (0.08 ) $ 0.17 Diluted income (loss) per share Net income (loss) $ (422 ) $ 857 Weighted average shares outstanding 5,114 5,009 Dilutive effect of stock options and restricted stock — 43 Total weighted average shares outstanding 5,114 5,052 Diluted income (loss) per share $ (0.08 ) $ 0.17 Basic income per share Net income Weighted average shares outstanding Basic income per share Diluted income per share Net income Weighted average shares outstanding Dilutive effect of stock options and restricted stock Total weighted average shares outstanding Diluted income per share |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTES PAYABLE (dollar amounts in thousands) The Company has a mortgage note payable to Summit Community Bank (the “Bank”), with a balance of $1,004 as of March 31, 2018 . The note has a maturity date of September 20, 2021 and a fixed interest rate of 3.99% annually with monthly payments of $26 and is secured by principally all of the assets of the Company. Under the terms of the note, the Bank will permit chattel mortgages on purchased equipment not to exceed $250 for any one individual loan so long as the Company is not in default. The Company has a mortgage note payable to the Bank for the the purchase of the Columbia, South Carolina facility. Such loan is evidenced by a promissory note dated July 19, 2016. The note provides for a 15 year term, a fixed annual interest rate of 5.29% , monthly fixed payments of $11 and a security interest in favor of the Bank in respect of the land, building and fixtures purchased with the proceeds of the loan. The balance of the loan at March 31, 2018 was $1,219 . The Company additionally has 15 smaller installment loans with annual interest rates between 2.94% and 5.29% and varying balances totaling $1,509 . Under the loan agreement with the Bank, the Company is limited to annual capital expenditures of $1,500 . The Company is in compliance with all covenants pursuant to the loan agreement. The Company also has a $2,000 line of credit, secured by accounts receivable and inventory, of which none was outstanding at March 31, 2018 . The line is evidenced by a commercial revolving promissory note with the Bank, which carries a variable interest rate equal to the Wall Street Journal's prime rate. In addition, the Company has a commitment from the Bank in the amount of $1,500 for an equipment line of credit. Neither line of credit |
Stock Options
Stock Options | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | STOCK COMPENSATION In accordance with ASC 718, the Company had no stock option expense for the three months ended March 31, 2018 and March 31, 2017 . The Company uses the Black-Scholes option-pricing model to measure the fair value of stock options granted to employees. In 2016, the Company's Board of Directors replaced the 2008 Stock Option Plan with the 2016 Equity Incentive Plan, which does not provide for the issuance of options. Consequently, the Company cannot issue any additional options, if, and until, a new stock option plan is approved by the Board of Directors. The following table summarizes options outstanding at March 31, 2018 : Number of Shares Weighted Average Exercise Price Balance, December 31, 2017 10,333 $ 1.21 Granted — — Forfeited — — Exercised (5,333 ) (1.21 ) Outstanding options at March 31, 2018 5,000 $ 1.21 Outstanding exercisable options at March 31, 2018 5,000 $ 1.21 The intrinsic value of outstanding and exercisable options at March 31, 2018 was approximately $40,000 . The fair value of restricted stock awards is estimated to be the market price of the Company's common stock at the close of the date of grant. Restricted stock activity during the three months ended March 31, 2018 is as follows: Number of Shares Weighted Average Grant Date Fair Value per Share Balance, December 31, 2017 125,333 $ 5.13 Granted 2,500 7.00 Vested (22,167 ) (5.62 ) Forfeited (1,333 ) (4.95 ) Non-vested, end of period 104,333 $ 5.14 Awards are being amortized to expense ratably, on an annual basis, over a three year vesting term, except one grant in January 2018 for 2,500 shares of restricted stock, which vested upon grant. There was stock compensation expense of approximately $117,000 for the three months ended March 31, 2018 and $151,000 for the three months ended March 31, 2017 . The total unrecognized compensation cost as of March 31, 2018 related to the non-vested restricted stock is approximately $535,000 . |
Subsequent Events (Notes)
Subsequent Events (Notes) | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS On April 27, 2018 the Board of Directors unanimously voted to expand the North Carolina facility. The Company currently owns 46 acres on which it plans to build a 15,000 square foot manufacturing plant with additional space for future expansions. This expansion is estimated to cost $3.3 million and will increase production and storage capacity. Management expects completion of the new facility by the end of 2018. The current facility will remain operational during the construction of the new plant, and future use is not determined at this time. |
Interim Financial Reporting (Po
Interim Financial Reporting (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
INTERIM FINANCIAL REPORTING [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, and with the instructions to Form 10-Q and Article 10 and Regulation S-X. Accordingly, we have condensed or omitted certain information and footnote disclosures that are included in our annual financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 . The condensed consolidated December 31, 2017 balance sheet was derived from audited financial statements included in the Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments (which consist of normal, recurring adjustments) necessary for a fair presentation of the financial position and results of operations and cash flows for the periods presented. The results disclosed in the condensed consolidated statements of operations are not necessarily indicative of the results to be expected in any future periods. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements |
Revenue Recognition | Revenue Recognition Product Sales - Over Time Under Topic 606, the Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services provided. Revenue associated with contracts with customers is recognized overtime as the Company's performance creates or enhances customer controlled assets or creates or enhances an asset with no alternative use, which the Company has an enforceable right to receive compensation as defined under the contract for performance completed. To determine the amount of revenue to recognize overtime, the Company recognizes revenue over the contract terms based on the output method. The Company applied the "as-invoiced" practical expedient as the amount of consideration the Company has the right to invoice corresponds directly with the value of the Company's performance to date. As the output method is driven by units produced, the Company recognizes revenues based on the value transferred to the customer relative to the remaining value to be transferred. The Company also matches the costs associated with the units produced. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss updated in subsequent reporting periods. Revenue recognition also includes an amount related to a contract asset or contract liability. If the recognized revenue is greater than the amount billed to the customer, a contract asset is recorded in accounts receivable - unbilled. Conversely, if the amount billed to the customer is greater than the recognized revenue, a contract liability is recorded in customer deposits on uncompleted contracts. Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment of total contract value and therefore, profit and revenue recognition. A portion of the work the Company performs requires financial assurances in the form of performance and payment bonds or letters of credit at the time of execution of the contract. Some contracts include retention provisions of up to 10% which are generally withheld from each progress payment as retainage until the contract work has been completed and approved. Product Sales - Point in Time For certain product sales that do not meet the over-time criteria, under Topic 606 the Company recognizes revenue when the product has been shipped to the destination in accordance with the terms outlined in the contract where a present obligation to pay exists as they have gained physical possession of the product. Accounts Receivable and Contract Balances The timing of when we bill our customers is generally dependent upon advance billing terms, milestone billings based on the completion of certain phases of the work, or when services are provided or products are shipped. Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings, are reported on our Balance Sheets as accounts receivable - unbilled. Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimate earnings recognized to date, are reported on our Balance Sheets as customer deposits (i.e. contract liabilities). Any uncollected billed amounts for our performance obligations recognized over time, including contract retentions, are recorded within accounts receivable. At March 31, 2018 and December 31, 2017, accounts receivable included contract retentions (in thousands) of approximately $1,121 and $1,065 , respectively. Our billed and unbilled revenue may be exposed to potential credit risk if our customers should encounter financial difficulties, and we maintain reserves for specifically-identified potential uncollectible receivables. At March 31, 2018 and December 31, 2017, our allowances for doubtful accounts (in thousands) were $279 and $194 , respectively. Effect of Adopting ASC Topic 606 As discussed in Recently Adopted Accounting Pronouncements, no adjustment to beginning 2018 retained earnings was recorded as a result of our adoption of Topic 606 due to no changes in the methods and/or timing of our revenue recognition for our uncompleted contracts. Further, the difference in our results of the first quarter 2018 between application of the new standard on our contracts and what results would have been if such contracts had been reported using the accounting standards previously in effect, for such contracts, did not change. Sales to Customers with a Buy-Back Guarantee The Company entered into a buy-back agreement with one specific customer. Under this agreement, the Company guaranteed to buy-back product at a predetermined price at the end of the long-term project, subject to condition of the product. Although the Company receives payment in full as the product is produced, we are required to account for these transactions as operating leases. The amount of sale proceeds for the guaranteed buy-back is deferred until the buy-back is exercised. The remaining sale proceeds are deferred and recognized on a straight-line basis over the usage period, when delivered to the job-site. The Company capitalizes the cost of the product on the consolidated balance sheet as a deferred buy-back lease asset, net, and depreciates the value, less salvage value, to cost of leasing revenue over the estimated economic life of the asset. In the case the customer retains ownership of the product at the end of the usage period, the guarantee buy-back liability and any deferred revenue balances related to the product are settled to revenue, and the net book value of the asset is expensed to cost of leasing revenue. If the Company purchases the product back in the amount equal to the buy-back guarantee, we settle any remaining deferred balances, in excess of the buy-back payment, to leasing revenue, and we reclassify the net book value of the product on the consolidated balance sheet to property and equipment. The revenue is being recognized in accordance with Topic 840, Leases. Barrier Rentals - Leasing Fees Leasing fees are paid by customers at the beginning of the lease agreement and are recorded as deferred revenue. The deferred revenue is then recognized each month as lease income for the duration of the lease, in accordance with Topic 840, Leases. Topic 840 is applied, as Topic 606-10-15-2 provides a scope exception for lease contracts. Royalty Income The Company licenses certain products to other precast companies to produce the Company's products to engineering specifications under the licensing agreements. The agreements are typically for five year terms and require royalty payments from 4% to 6% of total sales of licensed products, which are paid on a monthly basis. The revenues from licensing agreements are recognized in the month earned, in accordance with Topic 606-10-55-65. Shipping and Installation Shipping and installation revenues are recognized as a distinct performance obligation in the period the shipping and installation services are provided to the customer, in accordance with Topic 606. Disaggregation of Revenue In the following table, revenue is disaggregated by primary sources of revenue (in thousands): Three Months Ended March 31, 2018 2017 Change % of Change Product Sales: Soundwall Sales $ 2,480 $ 1,226 $ 1,254 102% Architectural Panel Sales 213 18 195 1,083% Slenderwall Sales 1,143 — 1,143 100% Miscellaneous Wall Sales 493 663 (170 ) (26)% Barrier Sales 2,285 2,157 128 6% Easi-Set and Easi-Span Building Sales 502 336 166 49% Utility and Farm Product Sales 214 458 (244 ) (53)% Miscellaneous Product Sales 123 89 34 38% Total Product Sales 7,453 4,947 2,506 51% Barrier Rentals 309 2,523 (2,214 ) (88)% Royalty Income 221 431 (210 ) (49)% Shipping and Installation Revenue 1,142 1,596 (454 ) (28)% Total Service Revenue 1,672 4,550 (2,878 ) (63)% Total Revenue $ 9,125 $ 9,497 $ (372 ) (4)% Warranties Smith-Midland products are typically sold pursuant to an implicit warranty as to merchantability only. Warranty claims are reviewed and resolved on a case by case method. Although the Company does incur costs for these types of expense, historically the amount of expense is minimal. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Segment Reporting Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and assess performance. The Company currently operates in one operating and reportable business segment for financial reporting purposes. |
Net Loss Per Common Share (Tabl
Net Loss Per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Loss Per Share, Basic and Diluted | Three Months Ended 2018 2017 Basic income (loss) per share Net income (loss) $ (422 ) $ 857 Weighted average shares outstanding 5,114 5,009 Basic income (loss) per share $ (0.08 ) $ 0.17 Diluted income (loss) per share Net income (loss) $ (422 ) $ 857 Weighted average shares outstanding 5,114 5,009 Dilutive effect of stock options and restricted stock — 43 Total weighted average shares outstanding 5,114 5,052 Diluted income (loss) per share $ (0.08 ) $ 0.17 Basic income per share Net income Weighted average shares outstanding Basic income per share Diluted income per share Net income Weighted average shares outstanding Dilutive effect of stock options and restricted stock Total weighted average shares outstanding Diluted income per share |
Stock Options (Tables)
Stock Options (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock option activity | The following table summarizes options outstanding at March 31, 2018 : Number of Shares Weighted Average Exercise Price Balance, December 31, 2017 10,333 $ 1.21 Granted — — Forfeited — — Exercised (5,333 ) (1.21 ) Outstanding options at March 31, 2018 5,000 $ 1.21 Outstanding exercisable options at March 31, 2018 5,000 $ 1.21 |
Interim Financial Reporting (De
Interim Financial Reporting (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Deferred Revenue Arrangement [Line Items] | ||
Contract retentions | $ 1,121,000 | $ 1,065,000 |
Allowance for doubtful accounts | $ 279,000 | $ 194,000 |
Licensing contract term | 5 years | |
Minimum | ||
Deferred Revenue Arrangement [Line Items] | ||
Royalty percent earned on licensing agreement | 4.00% | |
Maximum | ||
Deferred Revenue Arrangement [Line Items] | ||
Royalty percent earned on licensing agreement | 6.00% |
Net Loss Per Common Share (Deta
Net Loss Per Common Share (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2018 | Sep. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | |
Basic income (loss) per share | ||||
Net income (loss) | $ (422,000) | $ (422,000) | $ 857,000 | $ 857,000 |
Weighted average shares outstanding (in shares) | 5,114,000 | 5,009,000 | ||
Diluted income (loss) per share | ||||
Dilutive effect of stock options (in shares) | 0 | 43,000 | ||
Total weighted average shares outstanding (in shares) | 5,114,000 | 5,052,000 | ||
Diluted income (loss) per share (in dollars per share) | $ (0.08) | $ 0.17 |
Notes Payable (Details)
Notes Payable (Details) | Jul. 19, 2016USD ($) | Sep. 30, 2017USD ($) | Mar. 31, 2017 | Mar. 31, 2018USD ($) |
Notes payable to banks | Purchase of Columbia, South Carolina facility | ||||
Debt Instrument [Line Items] | ||||
Notes payable to banks | $ 1,219 | |||
Fixed interest rate on debt (percentage) | 5.29% | |||
Debt instrument monthly payment | $ 11,000 | |||
Debt instrument, term (in years) | 15 years | |||
Notes payable to banks | Smaller installment loans | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, number of loans | 15 | |||
Long-term debt | $ 1,509,000 | |||
Notes payable to banks | Smaller installment loans | Minimum | ||||
Debt Instrument [Line Items] | ||||
Fixed interest rate on debt (percentage) | 2.94% | |||
Notes payable to banks | Smaller installment loans | Maximum | ||||
Debt Instrument [Line Items] | ||||
Fixed interest rate on debt (percentage) | 5.29% | |||
Summit Community Bank | Notes payable to banks | ||||
Debt Instrument [Line Items] | ||||
Notes payable to banks | $ 1,004,000 | |||
Fixed interest rate on debt (percentage) | 3.99% | |||
Debt instrument monthly payment | $ 26,000 | |||
Limit on chattel mortgages on purchased equipment | $ 250,000 | |||
Summit Community Bank | Line of credit | ||||
Debt Instrument [Line Items] | ||||
Line of credit / commitment from Bank | 2,000,000 | |||
Summit Community Bank | Letter of credit | ||||
Debt Instrument [Line Items] | ||||
Line of credit / commitment from Bank | $ 1,500,000 |
Stock Options (Details)
Stock Options (Details) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Jan. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | |
Number of Shares | ||||
Balance, Beginning of period (shares) | 10,333 | |||
Granted (shares) | 0 | |||
Forfeited (shares) | 0 | |||
Exercised (shares) | (5,333) | |||
Balance, End of period (shares) | 5,000 | |||
Outstanding exercisable options at end of quarter (shares) | 5,000 | |||
Weighted Average Exercise Price (in dollars per share) | ||||
Beginning balance (usd per share) | $ 1.21 | $ 1.21 | ||
Granted (usd per share) | 0 | |||
Forfeited (usd per share) | 0 | |||
Exercised (usd per share) | (1.21) | |||
Ending balance (usd per share) | 1.21 | |||
Outstanding exercisable options at end of quarter (usd per share) | $ 1.21 | |||
Intrinsic value of exercisable options | $ 40,000 | |||
Restricted Stock Units (RSUs) [Member] | ||||
Weighted Average Exercise Price (in dollars per share) | ||||
Granted (usd per share) | $ 7 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | ||||
Beginning Balance (in shares) | 125,333 | |||
Grants (in shares) | 2,500 | 2,500 | ||
Vested (in shares) | (22,167) | |||
Forfeited (in shares) | (1,333) | |||
Ending Balance (in shares) | 104,333 | |||
Weighted Average Grant Date Fair Value, Beginning Balance (in dollars per share) | $ 5.13 | |||
Weighted Average Grant Date Fair Value, vested (in dollars per share) | (5.62) | |||
Weighted Average Grant Date Fair Value, forfeited (in dollars per share) | (4.95) | |||
Weighted Average Grant Date Fair Value, Ending Balance (in dollars per share | $ 5.14 | |||
Vesting period | 3 years | |||
Stock option expense | $ 117,000 | $ 151,000 | ||
Compensation not yet recognized | $ 535,000 |
Subsequent Events (Details)
Subsequent Events (Details) ft² in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2018USD ($) | Apr. 27, 2018ft²a | |
Subsequent Event [Line Items] | ||||
Estimated cost for facility expansion | $ 860,000 | $ 674,000 | ||
NORTH CAROLINA | Subsequent event | ||||
Subsequent Event [Line Items] | ||||
Number of acres owned | a | 46 | |||
Area of manufacturing plant | ft² | 15 | |||
Forecast | NORTH CAROLINA | ||||
Subsequent Event [Line Items] | ||||
Estimated cost for facility expansion | $ 3,300,000 |