Delaware
|
54-1727060
|
(State or Other
Jurisdiction of Incorporation or
Organization)
|
(I.R.S. Employer
Identification
No.)
|
Large accelerated
filer
|
☐
|
|
Accelerated filer
|
☐
|
|
Non-accelerated
filer
|
☐
|
|
Smaller reporting
company
|
☒
|
|
Emerging growth
company
|
☐
|
|
|
|
|
Revenue by Type (Disaggregated
Revenue)
|
|
|
|
|
|
2018
|
2017
|
Change
|
% of
Change
|
Product Sales:
|
|
|
|
|
Soundwall
Sales
|
$9,867
|
$7,571
|
$2,296
|
30.3%
|
Architectural
Sales
|
876
|
829
|
47
|
5.7%
|
SlenderWall
Sales
|
5,572
|
2,048
|
3,524
|
172.1%
|
Miscellaneous
Sales
|
1,760
|
2,793
|
(1,033)
|
(37.0)%
|
Barrier
Sales
|
7,264
|
11,276
|
(4,012)
|
(35.6)%
|
Easi-Set and Easi-Span
Building Sales
|
2,114
|
2,484
|
(370)
|
(14.9)%
|
Utility and Farm Product
Sales
|
1,232
|
1,492
|
(260)
|
(17.4)%
|
Miscellaneous Product
Sales
|
474
|
562
|
(88)
|
(15.7)%
|
Total Product
Sales
|
29,159
|
29,055
|
104
|
0.4%
|
Barrier
Rentals
|
1,729
|
4,267
|
(2,538)
|
(59.5)%
|
Royalty
Revenue
|
1,675
|
1,885
|
(210)
|
(11.1)%
|
Shipping and
Installation
|
7,657
|
6,510
|
1,147
|
17.6%
|
Total Service
Revenue
|
11,061
|
12,662
|
(1,601)
|
(12.6)%
|
Total
Revenue
|
$40,220
|
$41,717
|
$(1,497)
|
(3.6)%
|
Name
|
|
Age
|
|
Director or
Executive
Officer Since
|
|
Position
|
Rodney I.
Smith
|
|
80
|
|
1970
|
|
Chairman of the Board of
Directors
|
|
|
|
|
|
|
|
Ashley B.
Smith
|
|
56
|
|
1994
|
|
Chief Executive Officer,
President, and Director
|
|
|
|
|
|
|
|
Wesley A.
Taylor
|
|
71
|
|
1994
|
|
Director
|
|
|
|
|
|
|
|
James Russell
Bruner
|
|
63
|
|
2018
|
|
Director
|
|
|
|
|
|
|
|
Richard
Gerhardt
|
|
52
|
|
2016
|
|
Director
|
|
|
|
|
|
|
|
Adam J.
Krick
|
|
33
|
|
2018
|
|
Chief Financial
Officer
|
Name and Principal
Position
|
Year
|
Salary
($)(1)
|
Bonus
($)(2)
|
Stock
Awards
($)
|
All Other
Compensation
($)
|
Total
($)
|
|
|
|
|
|
|
|
Rodney I.
Smith
|
2018
|
123,247
|
60,350
|
—
|
102,000
|
285,597
|
Chief Executive Officer
and Chairman of the Board (3)(4)
|
2017
|
116,774
|
64,230
|
228,900
|
102,000
|
511,904
|
|
|
|
|
|
|
|
Ashley B.
Smith
|
2018
|
188,823
|
119,006
|
—
|
3,000
|
310,829
|
Chief Executive Officer
and President (4)(5)
|
2017
|
201,994
|
59,808
|
—
|
3,000
|
264,802
|
|
|
|
|
|
|
|
Adam J.
Krick
|
2018
|
134,437
|
20,350
|
17,225
|
3,000
|
175,012
|
Chief Financial
Officer (6)
|
|
|
|
|
|
|
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Option
Exercise
Price
($/Sh)
|
Option
Expiration Date
|
Number of Shares or
Units of Stock that have not Vested (#)(1)
|
Market Value of Shares
or Units of Stock that have not Vested ($)
|
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights that have
not Vested (#)
|
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units or Other
Rights that have not Vested ($)
|
Rodney I.
Smith
|
—
|
—
|
—
|
—
|
28,000
|
152,600
|
—
|
—
|
Ashley B.
Smith
|
—
|
—
|
—
|
—
|
10,667
|
52,800
|
—
|
—
|
Adam J.
Krick
|
—
|
—
|
—
|
—
|
167
|
825
|
—
|
—
|
TOTAL
|
—
|
—
|
|
|
38,834
|
206,225
|
—
|
—
|
Name
|
Fees
Earned
or Paid in
Cash ($)
|
Stock
Awards
($)(2)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compen-
sation
|
Non-
Qualified
Deferred
Compen-
sation
Earnings
|
All Other
Compen-
sation
|
Total ($)
|
Rodney I.
Smith
|
3,000
|
—
|
—
|
—
|
—
|
—
|
3,000(1)
|
Ashley B.
Smith
|
3,000
|
—
|
—
|
—
|
—
|
—
|
3,000(1)
|
Wesley A.
Taylor
|
3,000
|
—
|
—
|
—
|
—
|
—
|
3,000
|
G. E. "Nick" Borst
(retired)
|
3,000
|
—
|
—
|
—
|
—
|
—
|
3,000
|
James Russell
Bruner
|
1,000
|
—
|
—
|
—
|
—
|
—
|
1,000
|
Richard
Gerhardt
|
2,000
|
—
|
—
|
—
|
—
|
—
|
2,000
|
Name and Address
of Beneficial Owner
|
Number of Shares
Beneficially
Owned (2)
|
Percentage
of Class
|
Rodney I. Smith
(1)(3)(4)(5)
|
684,798
|
13.3%
|
|
|
|
Ashley B. Smith
(1)(3)(4)(6)
|
173,042
|
3.4%
|
|
|
|
Wesley A. Taylor
(1)(7)
|
28,667
|
*
|
|
|
|
Richard Gerhardt
(8)(9)
|
2,000
|
*
|
|
|
|
James Russell
Bruner
|
—
|
—
|
|
|
|
Adam J. Krick
(1)(10)
|
3,390
|
*
|
|
|
|
ARS Investment Partners,
LLC (11)
|
391,206
|
7.6%
|
|
|
|
Thompson Davis &
Co., Inc. (12)
|
525,033
|
10.2%
|
|
|
|
Wax Asset Management,
LLC (13)
|
538,490
|
10.5%
|
|
|
|
All directors and
executive officers as a group (6 persons)(14)
|
891,897
|
17.4%
|
Plan Category
|
(a)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
|
(b)
Weighted
average exercise
price of
outstanding
options,
warrants and
rights
|
(c)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities reflected in column (a))(1)
|
Equity compensation
plans approved by security holders (1)
|
—
|
—
|
—
|
Equity compensation
plans not approved by security holders
|
—
|
—
|
226,500
|
Total
|
—
|
—
|
226,500
|
|
2018
|
2017
|
Audit Fees
|
$168
|
$186
|
Tax Fees
|
54
|
52
|
Audit-Related
Fees
|
10
|
10
|
|
|
|
Total Fees
|
$232
|
$248
|
|
|
(1)
|
The financial
statements of the Company are included following Part IV of this
Form 10-K.
|
|
|
(2)
|
Schedules have been
omitted since they are either not applicable, not required or the
information is included elsewhere herein.
|
|
|
(3)
|
The following
exhibits are filed herewith:
|
Exhibit
Number
|
|
Description
|
|
|
|
3.1
|
|
Certificate of
Incorporation, as amended (Incorporated by reference to the
Company’s Registration Statement on Form SB-2 (No. 33-89312)
declared effective by the Commission on December 13,
1995).
|
|
|
|
3.2
|
|
Bylaws
(Incorporated by reference to the Company's Current Report on Form
8-K filed with the Securities and Exchange Commission on August 16,
2018). |
|
|
|
4.1
|
|
Specimen Common Stock
Certificate (Incorporated by reference to the Company’s
Registration Statement on Form SB-2 (No. 33-89312) declared
effective by the Commission on December 13, 1995).
|
|
|
|
10.1
|
|
Lease Agreement, dated
January 1, 1995, between the Company and Rodney I. Smith
(Incorporated by reference to the Company’s Registration
Statement on Form SB-2 (No. 33-89312) declared effective by the
Commission on December 13, 1995).
|
|
|
|
10.2
|
|
Collateral Assignment of
Letters Patent, dated between the Company and Rodney I. Smith
(Incorporated by reference to the Company’s Registration Form
SB-2 (No. 33-89312) declared effective by the Commission on
December 13, 1995).
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
10.8
|
|
Contract for Purchase and Sale, dated February 16,
2016, between Nelson Cherry Properties, LLC and Smith-Columbia
Corporation (Incorporated by reference to the Company’s
Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 27, 2016).
|
|
|
|
10.9
|
|
Promissory Note, dated July 19, 2016, in the amount of
$1,317,500 issued by the Company to Summit Community Bank
(Incorporated by reference to the Company’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on July
27, 2016).
|
|
|
|
10.10
|
|
Commercial Security Agreement, dated July 19, 2016,
between the Company, as debtor, and Summit Community Bank, as
secured party, related to Company’s note payable in the
amount of $1,317,500 with Summit Community Bank (Incorporated by
reference to the Company’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on July 27,
2016).
|
|
|
|
10.11
|
|
Commitment Letter, dated September 18,2018, for a line of credit in
the of $4,000,000 with Summit Community Bank (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2018).
|
|
|
|
10.12
|
|
Commitment Letter, dated September 18,2018, for an equipment line
of credit in the amount of $1,500,000 with Summit Community Bank
(Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2018).
|
|
|
|
10.13
|
|
|
|
|
|
10.14
|
|
|
|
|
|
10.15
|
|
Promissory Note, dated October 6, 2017, for the
acquisition of six acres of land purchased in 2016 in the amount of
$239,232 with Summit Community Bank (Incorporated by reference to
the Company's Current Report on Form 8-K filed with the Securities
and Exchange Commission on December 8,
2017).
|
|
|
|
10.16
|
|
2016 Equity Incentive Plan (Incorporated by reference
to the Registration Statement on Form S-8 (No. 333-214788) filed on
November 23, 2016).
|
|
|
|
14.1
|
|
Code of Professional Conduct (Incorporated by reference
to the Company’s Annual Report on Form 10-KSB for the year
ended December 31, 2003).
|
|
|
|
21.1
|
|
List of Subsidiaries of
the Company (Incorporated by reference to the Company’s
Annual Report on Form 10-KSB for the year ended December 31,
1995).
|
|
|
|
23.1
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
101.INS
|
|
XBRL Instance
Document.
|
101.SCH
|
|
XBRL Taxonomy Extension
Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension
Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension
Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension
Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension
Presentation Linkbase Document.
|
|
SMITH-MIDLAND
CORPORATION
|
|
|
|
|
|
|
Date: March 26, 2019
|
By:
|
/s/ Ashley B. Smith
|
|
|
|
Ashley B. Smith
|
|
|
|
Chief Executive Officer and
President
|
|
|
|
(Principal Executive
Officer)
|
|
|
|
|
|
|
|
|
|
Date: March 26, 2019
|
By:
|
/s/ Adam J. Krick
|
|
|
|
Adam J. Krick
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
|
Name
|
|
Capacity
|
|
Date
|
|
|
|
|
|
/s/ Rodney I.
Smith
|
|
Director
|
|
March 26, 2019
|
Rodney I.
Smith
|
|
|
|
|
|
|
|
|
|
/s/ Ashley B.
Smith
|
|
Director
|
|
March 26,
2019
|
Ashley B.
Smith
|
|
|
|
|
|
|
|
|
|
/s/ Wesley A.
Taylor
|
|
Director
|
|
March 26,
2019
|
Wesley A.
Taylor
|
|
|
|
|
|
|
|
|
|
/s/ James Russell
Bruner
|
|
Director
|
|
March 26,
2019
|
James Russell
Bruner
|
|
|
|
|
|
|
|
|
|
/s/ Richard
Gerhardt
|
|
Director
|
|
March 26,
2019
|
Richard
Gerhardt
|
|
|
|
|
|
|
|
|
|
|
Report of Independent
Registered Public Accounting Firm
|
|
|
|
Consolidated Financial
Statements
|
|
|
|
Consolidated Balance
Sheets
|
|
|
|
Consolidated Statements
of Income
|
|
|
|
Consolidated Statements
of Comprehensive Income
|
|
|
|
Consolidated Statements
of Stockholders' Equity
|
|
|
|
Consolidated Statements
of Cash Flows
|
|
|
|
Summary of Significant
Accounting Policies
|
|
|
|
Notes to Consolidated
Financial Statements
|
|
December 31,
|
|
|
2018
|
2017
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash
|
$1,946
|
$3,390
|
Investment securities,
available-for-sale, at fair value
|
1,107
|
1,098
|
Accounts receivable,
net
|
|
|
Trade - billed (less
allowance for doubtful accounts of $214 and $208), including
contract retentions
|
12,281
|
8,967
|
Trade -
unbilled
|
1,313
|
251
|
Inventories,
net
|
|
|
Raw
materials
|
1,005
|
819
|
Finished
goods
|
2,555
|
2,696
|
Prepaid expenses and
other assets
|
480
|
452
|
Refundable income
taxes
|
909
|
1,359
|
|
|
|
Total current
assets
|
21,596
|
19,032
|
|
|
|
Property and equipment,
net
|
14,102
|
9,867
|
|
|
|
Deferred buy-back lease asset,
net
|
5,304
|
—
|
|
|
|
Other
assets
|
367
|
326
|
|
|
|
Total
assets
|
$41,369
|
$29,225
|
|
December
31,
|
|
|
2018
|
2017
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
Current
liabilities
|
|
|
Accounts payable -
trade
|
$4,212
|
$3,059
|
Accrued expenses and
other liabilities
|
610
|
588
|
Deferred
revenue
|
1,683
|
1,144
|
Accrued
compensation
|
1,556
|
1,231
|
Dividend
payable
|
281
|
256
|
Line-of-credit
construction draw
|
1,000
|
—
|
Current maturities of
notes payable
|
711
|
637
|
Customer
deposits
|
1,658
|
919
|
|
|
|
Total current
liabilities
|
11,711
|
7,834
|
|
|
|
Deferred buy-back lease
obligation
|
6,592
|
—
|
Notes payable - less
current maturities
|
2,792
|
2,896
|
Deferred tax
liability
|
1,427
|
1,290
|
|
|
|
Total
liabilities
|
22,522
|
12,020
|
|
|
|
Commitments and
contingencies
|
—
|
—
|
|
|
|
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; 5,223,245 and 5,214,148 issued
and 5,112,825 and 5,047,895 outstanding, respectively
|
51
|
51
|
Additional paid-in
capital
|
5,973
|
5,719
|
Treasury stock, at cost,
40,920 shares
|
(102)
|
(102)
|
Accumulated other
comprehensive loss
|
(37)
|
(19)
|
Retained
earnings
|
12,962
|
11,556
|
|
|
|
Total stockholders’
equity
|
18,847
|
17,205
|
|
|
|
Total liabilities and
stockholders' equity
|
$41,369
|
$29,225
|
|
Year Ended December
31,
|
|
|
2018
|
2017
|
Revenue
|
|
|
Product
sales
|
$29,159
|
$29,055
|
Barrier
rentals
|
1,729
|
4,267
|
Royalties
|
1,675
|
1,885
|
Shipping and
installation
|
7,657
|
6,510
|
|
|
|
Total
revenue
|
40,220
|
41,717
|
|
|
|
Cost of goods
sold
|
29,730
|
30,253
|
|
|
|
Gross
profit
|
10,490
|
11,464
|
|
|
|
General and
administrative expenses
|
5,675
|
5,253
|
Selling
expenses
|
2,599
|
2,496
|
|
|
|
Total operating
expenses
|
8,274
|
7,749
|
|
|
|
Operating
income
|
2,216
|
3,715
|
|
|
|
Other income
(expense)
|
|
|
Interest
expense
|
(176)
|
(184)
|
Interest
income
|
42
|
37
|
Gain on sale of
assets
|
126
|
51
|
Other
income
|
51
|
122
|
|
|
|
Total other income
(expense)
|
43
|
26
|
|
|
|
Income before income tax
expense
|
2,259
|
3,741
|
|
|
|
Income tax
expense
|
572
|
1,057
|
|
|
|
Net income
|
$1,687
|
$2,684
|
|
|
|
Basic and diluted earnings per
share
|
$0.33
|
$0.53
|
|
Year Ended December
31,
|
|
|
2018
|
2017
|
Net income
|
$1,687
|
$2,684
|
Other comprehensive
income (loss), net of tax: (1)
|
|
|
Net
unrealized holding income (loss)
|
(18)
|
6
|
Comprehensive
income
|
$1,669
|
$2,690
|
|
Common
Stock
|
Additional
Paid-in
Capital
|
Treasury
Stock |
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Total
|
|
|
|
|
|
|
|
Balance, January 1,
2017
|
$50
|
$5,192
|
$(102)
|
$(25)
|
$9,128
|
$14,243
|
|
|
|
|
|
|
|
Accrued dividends
payable
|
—
|
—
|
—
|
—
|
(256)
|
(256)
|
|
|
|
|
|
|
|
Net unrealized holding
gain
|
—
|
—
|
—
|
6
|
—
|
6
|
|
|
|
|
|
|
|
Proceeds from options
exercised
|
1
|
116
|
—
|
—
|
—
|
117
|
|
|
|
|
|
|
|
Vesting of restricted
stock
|
—
|
411
|
—
|
—
|
—
|
411
|
|
|
|
|
|
|
|
Net income
|
—
|
—
|
—
|
—
|
2,684
|
2,684
|
|
|
|
|
|
|
|
Balance, December 31,
2017
|
51
|
5,719
|
(102)
|
(19)
|
11,556
|
17,205
|
|
|
|
|
|
|
|
Accrued dividends
payable
|
—
|
—
|
—
|
—
|
(281)
|
(281)
|
|
|
|
|
|
|
|
Net unrealized holding
loss
|
—
|
—
|
—
|
(18)
|
—
|
(18)
|
|
|
|
|
|
|
|
Proceeds from options
exercised
|
—
|
12
|
—
|
—
|
—
|
12
|
|
|
|
|
|
|
|
Vesting of restricted
stock
|
—
|
242
|
—
|
—
|
—
|
242
|
|
|
|
|
|
|
|
Net income
|
—
|
—
|
—
|
—
|
1,687
|
1,687
|
|
|
|
|
|
|
|
Balance, December 31,
2018
|
$51
|
$5,973
|
$(102)
|
$(37)
|
$12,962
|
$18,847
|
|
Year
Ended
December
31,
|
|
|
2018
|
2017
|
Reconciliation of net income
to net cash provided by operating activities
|
|
|
|
|
|
Net income
|
$1,687
|
$2,684
|
Adjustments to reconcile
net income to net cash provided by operating
activities
|
|
|
Depreciation and
amortization
|
1,247
|
926
|
Allowance for doubtful
accounts
|
6
|
(139)
|
Gain on sale of fixed
assets
|
(126)
|
(51)
|
Stock
compensation
|
242
|
411
|
Deferred taxes
|
153
|
526
|
(Increase) decrease
in
|
|
|
Accounts receivable -
billed
|
(3,320)
|
(1,640)
|
Accounts receivable -
unbilled
|
(1,062)
|
20
|
Inventories
|
(45)
|
(937)
|
Refundable income
taxes
|
450
|
(1,107
) |
Prepaid expenses and other
assets
|
(130)
|
(285)
|
Increase (decrease)
in
|
|
|
Accounts payable -
trade
|
1,153
|
969
|
Accrued expenses and other
liabilities
|
22
|
294
|
Deferred revenue
|
539
|
420
|
Accrued
compensation
|
325
|
347
|
Deferred buy-back lease
obligation, net
|
6,592
|
—
|
Customer
deposits
|
739
|
488
|
|
|
|
Net cash provided by
operating activities
|
$8,472
|
$2,926
|
|
December
31,
|
|
|
2018
|
2017
|
Cash Flows From Investing
Activities
|
|
|
Purchases of investment
securities available-for-sale
|
$(33)
|
$(32)
|
Purchases of property and
equipment
|
(5,234)
|
(2,741)
|
Deferred buy-back lease
asset
|
(5,507)
|
—
|
Proceeds from sale of
fixed assets
|
132
|
46
|
|
|
|
Net cash absorbed by
investing activities
|
(10,642)
|
(2,727)
|
|
|
|
Cash Flows From Financing
Activities
|
|
|
Proceeds from the
line-of-credit construction draw
|
1,000
|
—
|
Proceeds from long-term
borrowings
|
630
|
184
|
Repayments of long-term
borrowings
|
(660)
|
(584)
|
Dividends paid on common
stock
|
(256)
|
(49)
|
Proceeds from options
exercised
|
12
|
117
|
|
|
|
Net cash provided by or
(absorbed by) financing activities
|
726
|
(332)
|
|
|
|
Net decrease in
cash
|
(1,444)
|
(133)
|
Cash, beginning of
year
|
3,390
|
3,523
|
|
|
|
Cash, end of
year
|
$1,946
|
$3,390
|
|
|
|
Cash payments for
interest
|
$176
|
$184
|
Cash payments for income
taxes
|
$—
|
$1,292
|
|
Years
|
Buildings
|
10-40
|
Trucks and automotive
equipment
|
3-10
|
Shop machinery and
equipment
|
3-10
|
Land
improvements
|
10-15
|
Rental
equipment
|
5-10
|
Office
equipment
|
3-10
|
Revenue by Type
|
|
|
|
|
|
2018
|
2017
|
Change
|
% of
Change
|
Product Sales:
|
|
|
|
|
Soundwall
Sales
|
$9,867
|
$7,571
|
$2,296
|
30.3%
|
Architectural
Sales
|
876
|
829
|
47
|
5.7%
|
Slenderwall
Sales
|
5,572
|
2,048
|
3,524
|
172.1%
|
Miscellaneous
Sales
|
1,760
|
2,793
|
(1,033)
|
(37.0)%
|
Barrier
Sales
|
7,264
|
11,276
|
(4,012)
|
(35.6)%
|
Easi-Set and Easi-Span
Building Sales
|
2,114
|
2,484
|
(370)
|
(14.9)%
|
Utility and Farm Product
Sales
|
1,232
|
1,492
|
(260)
|
(17.4)%
|
Miscellaneous Product
Sales
|
474
|
562
|
(88)
|
(15.7)%
|
Total Product
Sales
|
29,159
|
29,055
|
104
|
0.4%
|
Barrier
Rentals
|
1,729
|
4,267
|
(2,538)
|
(59.5)%
|
Royalty
Revenue
|
1,675
|
1,885
|
(210)
|
(11.1)%
|
Shipping and
Installation
|
7,657
|
6,510
|
1,147
|
17.6%
|
Total Service
Revenue
|
11,061
|
12,662
|
(1,601)
|
(12.6)%
|
Total
Revenue
|
$40,220
|
$41,717
|
$(1,497)
|
(3.6)%
|
Property and equipment consists of the following
(in thousands):
|
|
|
|
December 31,
|
|
|
2018
|
2017
|
Land and land
improvements
|
$2,452
|
$1,538
|
Buildings
|
6,949
|
5,394
|
Machinery and
equipment
|
12,709
|
10,913
|
Rental
equipment
|
3,659
|
2,763
|
|
|
|
|
25,769
|
20,608
|
Less: accumulated
depreciation and amortization
|
(11,667)
|
(10,741)
|
|
|
|
|
$14,102
|
$9,867
|
|
December 31,
|
|
|
2018
|
2017
|
Note payable to a Bank,
maturing September 2021; with monthly payments of approximately $26
of principal and interest fixed at 3.99%; collateralized by
principally all assets of the Company.
|
$799
|
$1,071
|
|
|
|
Note payable to a Bank,
maturing July 2031; with monthly payments of approximately $11 of
principal and interest fixed at 5.29%; collateralized by
principally all assets of Smith-Columbia Corporation and guaranteed
by Smith-Midland Corporation.
|
1,169
|
1,234
|
|
|
|
Note payable to a Bank,
maturing April 2021; with monthly payments of approximately $6.2 of
principal and interest at prime at variable rate (5.29% at December
31, 2018 and 2017); collateralized by certain property of the
Company.
|
163
|
227
|
|
|
|
Construction loan draw
on-line-of-credit for the North Carolina Expansion, which is part
of the $4,000 line-of-credit listed below
|
1,000
|
—
|
|
|
|
Installment notes,
collateralized by certain machinery and equipment maturing at
various dates, primarily through 2021; with monthly payments
varying from $0.3 to $4.1 with weighted average interest at 4.7%
and 4.2% at December 31, 2018 and 2017, respectively.
|
1,372
|
1,001
|
|
|
|
A revolving
line-of-credit evidenced by a note payable to a Bank, with the
maximum amount of $4,000, maturing October 1, 2019, with interest
only payments and an initial rate of 5.00% adjustable monthly
(5.50% at December 31, 2018). The line-of-credit is collateralized
by a first lien position on the Company's accounts receivable and
inventory and a second lien position on all other business
assets.
|
—
|
—
|
|
|
|
|
4,503
|
3,533
|
Less current
maturities
|
1,711
|
637
|
|
|
|
|
$2,792
|
$2,896
|
Year Ending December
31,
|
|
|
|
2019
|
$1,711
|
2020
|
737
|
2021
|
577
|
2022
|
271
|
2023
|
216
|
Thereafter
|
991
|
|
|
|
$4,503
|
|
December
31,
|
|
|
2018
|
2017
|
Federal:
|
|
|
Current
|
$334
|
$455
|
Deferred
|
119
|
421
|
|
453
|
876
|
State:
|
|
|
Current
|
85
|
76
|
Deferred
|
34
|
105
|
|
119
|
181
|
|
|
|
|
$572
|
$1,057
|
|
December 31,
|
|||
|
2018
|
2017
|
||
Income taxes at
statutory rate
|
$474
|
21.0%
|
$1,269
|
34.0%
|
Increase (decrease) in
taxes resulting from:
|
|
|
|
|
State income taxes, net
of federal benefit
|
89
|
4.0%
|
136
|
3.6%
|
Deferred
true-ups
|
58
|
2.6%
|
161
|
4.3%
|
Provision-to-return
|
(19)
|
(0.8)%
|
152
|
4.1%
|
Rate
reduction
|
—
|
—%
|
(664)
|
(17.8)%
|
Other
|
(30)
|
(1.5)%
|
3
|
0.1%
|
|
|
|
|
|
|
$572
|
25.3%
|
$1,057
|
28.3%
|
|
December 31,
|
|
|
2018
|
2017
|
Depreciation
|
$(1,667)
|
$(1,185)
|
Unrealized losses on
investments available for sale
|
(9)
|
5
|
Retainage
|
(425)
|
(264)
|
Allowance for doubtful
accounts
|
53
|
52
|
Prepaid
expenses
|
(78)
|
(98)
|
Vacation
accrued
|
78
|
67
|
Deferred
buy-back
|
321
|
—
|
State NOL
carryforward
|
26
|
48
|
Deferred
income
|
198
|
—
|
Other
|
76
|
85
|
|
|
|
Net deferred tax
liability
|
$(1,427)
|
$(1,290)
|
|
Weighted
Average
Exercise
Price
|
Options
Outstanding
|
Vested and
Exercisable
|
Balance, December 31,
2016
|
$1.96
|
68,133
|
68,133
|
Granted
|
—
|
—
|
—
|
Forfeited
|
(2.21)
|
(1,000)
|
(1,000)
|
Exercised
|
(1.89)
|
(56,800)
|
(56,800)
|
|
|
|
|
Balance, December 31,
2017
|
1.21
|
10,333
|
10,333
|
Granted
|
—
|
—
|
—
|
Forfeited
|
—
|
—
|
—
|
Exercised
|
(1.21)
|
(10,333)
|
(10,333)
|
|
|
|
|
Balance, December 31,
2018
|
$—
|
—
|
—
|
|
|
|
|
|
Number of
Shares
|
Weighted Average Grant
Date Fair Value per Share
|
Non-vested, December 31,
2016
|
103,000
|
$4.95
|
Granted
|
72,000
|
5.45
|
Vested
|
49,667
|
5.10
|
Forfeited
|
—
|
—
|
|
|
|
Non-vested, December 31,
2017
|
125,333
|
5.19
|
Granted
|
2,500
|
7.00
|
Vested
|
54,333
|
5.27
|
Forfeited
|
4,000
|
4.95
|
|
|
|
Non-vested, December 31,
2018
|
69,500
|
$5.19
|
Fair Value
Hierarchy
|
Inputs to Fair Value
Methodology
|
Level 1
|
Quoted prices in active
markets for identical assets or liabilities
|
Level 2
|
Quoted prices for
similar assets or liabilities; quoted markets that are not active;
or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the
financial instrument; inputs other than quoted prices that are
observable for the asset or liability; or inputs that are derived
principally from, or corroborated by, observable market
information
|
Level 3
|
Pricing models,
discounted cash flow methodologies or similar techniques and at
least one significant model assumption is unobservable or when the
estimation of fair value requires significant management
judgment
|
|
As of December 31,
2018
|
|||
|
Quoted Market Prices in Active Markets
(Level 1) |
Internal Models with Significant Observable
Market Parameters (Level 2) |
Internal Models
with Significant Unobservable Market Parameters (Level 3) |
Total Fair Value
Reported in Financial Statements |
|
|
|
|
|
Mutual Funds
|
$1,107
|
$—
|
$—
|
$1,107
|
|
As of December 31,
2017
|
|||
|
Quoted Market Prices in Active Markets
(Level 1) |
Internal Models with Significant Observable
Market Parameters (Level 2) |
Internal Models
with Significant Unobservable Market Parameters (Level 3) |
Total Fair Value
Reported in
Financial Statements
|
|
|
|
|
|
Mutual Funds
|
$1,098
|
$—
|
$—
|
$1,098
|
|
December 31,
|
|
|
2018
|
2017
|
Basic earnings per
share
|
|
|
|
|
|
Income available to
common shareholder
|
$1,687
|
$2,684
|
|
|
|
Weighted average shares
outstanding
|
5,080
|
5,042
|
|
|
|
Basic earnings per
share
|
$0.33
|
$0.53
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
Income available to
common shareholder
|
$1,687
|
$2,684
|
|
|
|
Weighted average shares
outstanding
|
5,080
|
5,042
|
Dilutive effect of stock
options and restricted stock
|
16
|
37
|
|
|
|
Total weighted average
shares outstanding
|
5,096
|
5,079
|
|
|
|
Diluted earnings per
share
|
$0.33
|
$0.53
|
|
|
1.
|
I have reviewed this
annual report on Form 10-K of Smith-Midland
Corporation;
|
|
|
2.
|
Based on my knowledge,
this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
|
|
|
3.
|
Based on my knowledge,
the financial statements, and other financial information included
in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The registrant’s
other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for registrant and have:
|
|
|
(a)
|
Designed such disclosure
controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report
is being prepared;
|
|
|
(b)
|
Designed such internal
control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
(c)
|
Evaluated the
effectiveness of registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
(d)
|
Disclosed in this report
any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
|
|
|
5.
|
The registrant’s
other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the
equivalent functions):
|
|
|
(a)
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
|
|
|
(b)
|
Any fraud, whether or
not material, that involves management or other employees who have
a significant role in the registrant’s internal control over
financial reporting.
|
|
|||
|
|
|
|
Date:
|
March 26,
2019
|
By:
|
/s/ Ashley B.
Smith
|
|
|
|
Ashley B.
Smith
|
|
|
|
Chief Executive Officer
and President
|
|
|
|
(principal executive
officer)
|
|
|
1.
|
I have reviewed this
annual report on Form 10-K of Smith-Midland
Corporation;
|
|
|
2.
|
Based on my knowledge,
this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
|
|
|
3.
|
Based on my knowledge,
the financial statements, and other financial information included
in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The registrant’s
other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for registrant and have:
|
|
|
(a)
|
Designed such disclosure
controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report
is being prepared;
|
|
|
(b)
|
Designed such internal
control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
(c)
|
Evaluated the
effectiveness of registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
(d)
|
Disclosed in this report
any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
|
|
|
5.
|
The registrant’s
other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the
equivalent functions):
|
|
|
(a)
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
|
|
|
(b)
|
Any fraud, whether or
not material, that involves management or other employees who have
a significant role in the registrant’s internal control over
financial reporting.
|
|
|||
|
|
|
|
Date:
|
March 26,
2019
|
By:
|
/s/ Adam J.
Krick
|
|
|
|
Adam J.
Krick
|
|
|
|
Chief Financial
Officer
|
|
|
|
(principal financial
officer)
|
|
|
(1)
|
The Report fully
complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
|
|
|
(2)
|
The information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Company.
|
|
||
|
|
|
|
/s/ Ashley B.
Smith
|
|
|
Ashley B.
Smith
|
|
|
Chief Executive
Officer
|
|
|
(principal executive
officer)
|
|
|
|
|
|
/s/ Adam J.
Krick
|
|
|
Adam J.
Krick
|
|
|
Chief Financial
Officer
|
|
|
(principal financial and
accounting officer)
|
|
|
|
|
|
Dated:
|
March 26,
2019
|
Document Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Mar. 05, 2019 |
Jun. 30, 2018 |
|
Document Entity Information | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | SMITH MIDLAND CORP | ||
Entity Central Index Key | 0000924719 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Common Stock, Shares Outstanding | 5,134,492 | ||
Entity Public Float | $ 22,936,322 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Current assets | ||
Allowance for doubtful accounts | $ 214 | $ 208 |
Stockholders' equity | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 8,000,000 | 8,000,000 |
Common stock, shares issued | 5,223,245 | 5,214,148 |
Common stock, shares outstanding | 5,112,825 | 5,047,895 |
Treasury shares | 40,920 | 40,920 |
Consolidated Statements of Income - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Revenue | ||
Total revenue | $ 40,220 | $ 41,717 |
Cost of goods sold | 29,730 | 30,253 |
Gross profit | 10,490 | 11,464 |
General and administrative expenses | 5,675 | 5,253 |
Selling expenses | 2,599 | 2,496 |
Total operating expenses | 8,274 | 7,749 |
Operating income | 2,216 | 3,715 |
Other income (expense) | ||
Interest expense | (176) | (184) |
Interest income | 42 | 37 |
Gain on sale of assets | 126 | 51 |
Other income | 51 | 122 |
Total other income (expense) | 43 | 26 |
Income before income tax expense | 2,259 | 3,741 |
Income tax expense | 572 | 1,057 |
Net income | $ 1,687 | $ 2,684 |
Basic earnings per share | $ 0.33 | $ 0.53 |
Diluted earnings per share | $ 0.33 | $ 0.53 |
Product sales | ||
Revenue | ||
Total revenue | $ 29,159 | $ 29,055 |
Barrier rentals | ||
Revenue | ||
Total revenue | 1,729 | 4,267 |
Royalties | ||
Revenue | ||
Total revenue | 1,675 | 1,885 |
Shipping and installation | ||
Revenue | ||
Total revenue | $ 7,657 | $ 6,510 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|||
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 1,687 | $ 2,684 | ||
Other comprehensive income (loss), net of tax: | ||||
Net unrealized holding income (loss) | [1] | (18) | 6 | |
Comprehensive income | $ 1,669 | $ 2,690 | ||
|
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Unrealized income (loss) on securities arising during period, tax | $ (6) | $ 10 |
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands |
Common Stock |
Additional Paid-in Capital |
Treasury Stock |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Total |
---|---|---|---|---|---|---|
Balance, beginning of period at Dec. 31, 2016 | $ 50 | $ 5,192 | $ (102) | $ (25) | $ 9,128 | $ 14,243 |
Accrued dividends payable | (256) | (256) | ||||
Net unrealized holding gain (loss) | 6 | 6 | ||||
Proceeds from options exercised | 1 | 116 | 117 | |||
Vesting of restricted stock | 411 | 411 | ||||
Net income | 2,684 | 2,684 | ||||
Balance, end of period at Dec. 31, 2017 | 51 | 5,719 | (102) | (19) | 11,556 | 17,205 |
Accrued dividends payable | (281) | (281) | ||||
Net unrealized holding gain (loss) | (18) | (18) | ||||
Proceeds from options exercised | 12 | 12 | ||||
Vesting of restricted stock | 242 | 242 | ||||
Net income | 1,687 | 1,687 | ||||
Balance, end of period at Dec. 31, 2018 | $ 51 | $ 5,973 | $ (102) | $ (37) | $ 12,962 | $ 18,847 |
Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Nature of Business
Smith-Midland Corporation and its wholly-owned subsidiaries (the “Company”) develop, manufacture, license, sell and install precast concrete products for the construction, transportation and utilities industries in the Mid-Atlantic, Northeastern, Midwestern and Southeastern regions of the United States.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Smith-Midland Corporation and its wholly-owned subsidiaries. The Company’s wholly-owned subsidiaries consist of Smith-Midland Corporation, a Virginia corporation, Smith-Carolina Corporation, a North Carolina corporation, Smith-Columbia Corporation, a South Carolina corporation, Easi-Set Industries, Inc., a Virginia corporation, Concrete Safety Systems, Inc., a Virginia corporation, and Midland Advertising and Design, Inc., doing business as Midland Advertising + Design, a Virginia corporation. All material intercompany accounts and transactions have been eliminated in consolidation.
Cash
The Company considers all unrestricted cash and money market accounts purchased with an original or remaining maturities of three months or less as cash.
Investments
Investments in marketable securities are classified as available-for-sale and are stated at market value with unrealized holding gains and losses excluded from earnings and reported as a separate component of stockholders' equity until realized.
Inventories
Inventories are stated at the lower of cost, using the first-in, first-out (FIFO) method, or net realizable value. Inventory reserves (in thousands) were approximately $65 and $39 at December 31, 2018 and 2017, respectively.
Property and Equipment
Property and equipment is stated at cost. Expenditures for ordinary maintenance and repairs are charged to income as incurred. Costs of betterments, renewals, and major replacements are capitalized. At the time properties are retired or otherwise disposed of, the related cost and allowance for depreciation are eliminated from the accounts and any gain or loss on disposition is reflected in income.
Depreciation is computed using the straight-line method over the following estimated useful lives:
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
As of December 31, 2018, the Company has not identified any uncertain tax positions. The Company files tax returns in the U.S. Federal and various state jurisdictions. The Company recognizes, when applicable, interest and penalties related to income taxes in other income (expense) in its consolidated statement of income. The Company is no longer subject to U.S. or state tax examinations for the years prior to 2015. The Company does not believe there will be any material changes in unrecognized tax positions over the next twelve months.
Stock Compensation
On October 13, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan which allows the Company to grant up to 400,000 shares of common stock of the Company to employees, officers, directors and consultants. The grants may be in the form of restricted or performance shares of common stock of the Company. The fair value of each restricted stock grant is estimated to be the sales price of the common stock at the close of business on the day of the grant.
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 over time 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 over time, 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 the customers 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 Condensed Consolidated Balance Sheets as "Accounts receivable trade - unbilled" (i.e. contract assets). 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 Condensed Consolidated 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 trade - billed. At December 31, 2018 and December 31, 2017, accounts receivable included contract retentions (in thousands) of approximately $1,704 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 December 31, 2018 and December 31, 2017, our allowances for doubtful accounts (in thousands) were $214 and $208, respectively.
Effect of Adopting ASC Topic 606
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 for 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.
Sale to Customer 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 the 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 equal to the buy-back obligation, included in "Deferred buy-back lease obligation" in the liabilities section of the consolidated balance sheet, is deferred until the buy-back is exercised or expired. The remaining sale proceeds are deferred in the same account and recognized on a straight-line basis over the usage period, such usage period commencing on delivery to the job-site and ending at the time the buy-back is exercised or expired. The Company capitalizes the cost of the product on the consolidated balance sheet shown in "Deferred buy-back lease asset, net", and depreciates the value, less residual value, to cost of leasing revenue in "Cost of goods sold" over the estimated useful life of the asset.
In the case the customer does not exercise the buy-back option and 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 customer exercises the buy-back guarantee option, 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 "Inventories" or "Property and equipment, net" depending on the intended use at the time. 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.
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):
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.
Sales and Use Taxes
Use taxes on construction materials are reported gross in cost of goods sold.
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 of Certain Items Included within Comparable Prior Year Periods
Certain minor reclassifications have been made to prior year amounts to conform to current year presentation. Use tax was reclassified to Cost of goods sold from General and administrative expenses on the Condensed Consolidated Statements of Operations for the year ending December 31, 2017 of $117. There was no impact to net income for the period.
Risks and Uncertainties
The Company sells products to highway contractors operating under government funded highway programs and other customers and extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Company monitors its exposure to credit losses and maintains allowances for anticipated losses. Management reviews accounts receivable on a weekly basis to determine the probability of collection. In performing this evaluation, the Company analyzes the payment history and its significant past due accounts, subsequent cash collections on these accounts and comparative accounts receivable aging statistics. Based on this information, along with other related factors, the Company develops what it considers to be a reasonable estimate of the uncollectible amounts included in accounts receivable. Management believes the allowance for doubtful accounts at December 31, 2018 is adequate. However, actual write-offs may exceed the recorded allowance. Due to inclement weather, the Company may experience reduced revenue from December through February and may realize the substantial part of its revenue during the other months of the year.
Fair Value of Financial Instruments
The carrying value for each of the Company’s financial instruments (consisting of cash and cash equivalents, accounts receivable, accounts payable and short-term line of credit) approximates fair value because of the short-term nature of those instruments. The estimated fair value of the long-term debt approximates carrying value based on current rates offered to the Company for debt of the similar maturities.
Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting (U.S. GAAP) principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Advertising Costs
The Company expenses all advertising costs as incurred. Advertising expense (in thousands) was approximately $384 and $404 in 2018 and 2017, respectively.
Earnings Per Share
Earnings per share are based on the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of the Company.
Long-Lived Assets
The Company reviews the carrying values of its long-lived and identifiable intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable based on undiscounted estimated future operating cash flows. When any such impairment exists, the related assets will be written down to fair value. No impairment losses have been recorded through December 31, 2018.
Recent Accounting Pronouncement
Leases. In 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” Topic 842 establishes a new lease accounting model for leases. The most significant changes include the clarification of the definition of a lease, the requirement for lessees to recognize for all leases a right-of-use asset and a lease liability in the consolidated balance sheet, and additional quantitative and qualitative disclosures which are designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. Expenses are recognized in the consolidated statement of income in a manner similar to current accounting guidance. Lessor accounting under the new standard is substantially unchanged. We adopted this standard, and all related amendments thereto, effective January 1, 2019, using a prospective transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. We are finalizing our evaluation of the impacts that the adoption of this accounting guidance will have on the consolidated financial statements and estimate approximately $400 of right-of-use assets and liabilities will be recognized in our consolidated balance sheet upon adoption.
|
Property and Equipment |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and equipment consists of the following (in thousands):
Depreciation expense and amortization (in thousands) was approximately $1,247 and $926 for the years ended December 31, 2018 and 2017, respectively.
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Notes Payable |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable | Notes payable consist of the following (in thousands):
The Company’s note payable, which matures in September 2021, with a balance (in thousands) of $799 at December 31, 2018, is secured by all of the assets of the Company. The commitment letter provided by the bank dated September 18, 2018 includes certain restrictive covenants, which require the Company to maintain minimum levels of tangible net worth, places limits on annual capital expenditures and the payment of cash dividends. At December 31, 2018, the Company was in compliance with all covenants pursuant to the loan agreement, with the increase in the annual capital expenditures limit from $1,500 to $3,500, excluding acquisitions and plant expansions, during the year ended December 31, 2017 and for subsequent years.
The aggregate amounts of notes payable maturing in each of the next five years and thereafter are as follows (in thousands):
The construction loan draw on the line-of-credit is expected to be refinanced to long term debt. Financing is expected to be secured in the second quarter of 2019, and at that time the $1,000 will be converted to a long-term note payable.
|
Related Party Transactions |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | The Company currently leases a portion of its Midland, Virginia property from its Chairman of the Board, on a month-to-month basis, as additional storage space for the Company's finished work product. The lease agreement calls for an annual rent of $24,000.
The Company has an employment agreement with its former CEO and current Chairman of the Board. The agreement provides for an annual base salary of $99,000 and an annual royalty fee of $99,000 payable as consideration for his assignment to the Company of all of his rights, title and interest in certain patents. Payment of the royalty continues for as long as the Company is using the inventions underlying the patents.
In the event the employment by the Company ceases as a result of the (i) death, his estate shall be entitled to a lump sum payment of one times the combined Base Salary and bonus, and certain other accrued and unpaid amounts, or (ii) disability, he shall be entitled to Base Salary and bonus for a period of one year commencing with the date of termination, and all other unpaid accrued amounts. Due to health issues and the former CEO's relinquishment of his executive officer position, and his continued employment on a part-time basis, the Company has determined to compensate the former CEO in the manner provided for in the case of disability until September 2019.
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Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income tax expense is comprised of the following (in thousands):
The provision for income taxes differs from the amount determined by applying the federal statutory tax rate to pre-tax income as a result of the following (in thousands):
Deferred tax assets (liabilities) are as follows (in thousands):
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Employee Benefit Plans |
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Dec. 31, 2018 | |
Defined Benefit Plan [Abstract] | |
Employee Benefit Plans | The Company has a savings plan that qualifies under Section 401(k) of the Internal Revenue Code ("IRC"). Participating employees may elect to contribute a percentage of their salary, subject to certain limitations. The Company contributes 50% of the participant's contribution, up to 4% of the participant's compensation, as a matching contribution. Total match contributions (in thousands) by the Company for the years ended December 31, 2018 and 2017 were approximately $148 and $140, respectively.
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Stock Compensation |
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Compensation Related Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation | On September 19, 2008, the Board of Directors and Stockholders of the Company adopted the 2008 Stock Option Plan (the "2008 Plan") in addition to the 2004 Stock Option Plan, which allowed the Company to grant up to 500,000 options to employees, officers, directors and consultants to purchase shares of the Company's Common Stock. Options granted under the 2008 Plan could have been either Incentive Stock Options or Non-Qualified Stock Options. There have not been any grants under the 2008 Stock Option Plan since its inception. The Board of Directors replaced the 2008 Stock Option Plan with the 2016 Equity Incentive Plan described below.
Options granted under granted under the 2004 Stock Option Plan, generally vested over a three year period. The Company recognizes stock option expense over the vesting period. The Company did not record any stock option expense for the years 2018 and 2017 as all of the options were fully vested.
There were 10,333 options exercised for the year ending December 31, 2018 and there were 56,800 options exercised in 2017. There were no options outstanding and exercisable at December 31, 2018.
The following tables summarize activity under the 2004 Stock Option Plan of the Company and the stock options outstanding at December 31, 2018:
On October 13, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan, which allows the Company to grant up to 400,000 shares of restricted common stock of the Company to employees, officers, directors and consultants. The grants may be in the form of restricted or performance shares of common stock of the Company. There were 2,500 and 72,000 shares of restricted stock issued during the years ended December 31, 2018 and December 31, 2017, respectively. The shares have a three year vesting period which vests ratably, on an annual basis, over a three year period. The total intrinsic value (in thousands) of the outstanding shares of restricted stock is $361.
The fair value of restricted stock awards is estimated to be the market price of the Company's common stock at the close of date of grant. Restricted stock activity during the years ended December 31, 2017 and 2018 is as follows:
Awards are being amortized to expense ratably, on an annual basis, over a three year vesting term, except one grant that vested immediately. Stock compensation (in thousands) for the year ended December 31, 2018 was approximately $242, based upon the value at the date of grant. Stock compensation for the year ended December 31, 2017 was approximately $411, based upon the value at the date of grant. The total unrecognized compensation cost related to the non-vested restricted stock is approximately $361 as of December 31, 2018.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | The Company applies the guidance that is codified under ASC 820-10 related to assets and liabilities recognized or disclosed in the financial statements at fair value on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The provisions of ASC 820-10 only apply to the Company’s investment securities, which are carried at fair value.
ASC 820-10 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820-10 requires valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:
The Company categorizes a financial instrument in the fair value hierarchy based on the lowest level of input that is significant to its fair value measurement.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | The Company has an employment agreement with its former CEO and current Chairman of the Board. The agreement provides for an annual base salary of $99,000 and an annual royalty fee of $99,000 payable as consideration for his assignment to the Company of all of his rights, title and interest in certain patents. Payment of the royalty continues only for as long as the Company is using the inventions underlying the patents.
In the event the employment by the Company ceases as a result of the (i) death, his estate shall be entitled to a lump sum payment of one times the combined Base Salary and bonus, and certain other accrued and unpaid amounts, or (ii) disability, he shall be entitled to Base Salary and bonus for a period of one year commencing with the date of termination, and all other unpaid accrued amounts. Due to health issues and the former CEO's relinquishment of his executive officer position, and his continued employment on a part-time basis, the Company has determined to compensate the former CEO in the manner provided for in the case of disability until September 2019.
The Company is party to legal proceedings and disputes which may arise in the ordinary course of business. In the opinion of the Company, it is unlikely that liabilities, if any, arising from legal disputes will have a material adverse effect on the consolidated financial position of the Company. |
Earnings Per Share |
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Earnings Per Share | Earnings per share are calculated as follows (in thousands, except earnings per share):
There were no options or restricted stock excluded from the diluted earnings per share calculation for the years ended December 31, 2018 and December 31, 2017. |
Summary of Significant Accounting Policies (Policies) |
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Nature of Business | Smith-Midland Corporation and its wholly-owned subsidiaries (the “Company”) develop, manufacture, license, sell and install precast concrete products for the construction, transportation and utilities industries in the Mid-Atlantic, Northeastern, Midwestern and Southeastern regions of the United States.
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Principles of Consolidation | The accompanying consolidated financial statements include the accounts of Smith-Midland Corporation and its wholly-owned subsidiaries. The Company’s wholly-owned subsidiaries consist of Smith-Midland Corporation, a Virginia corporation, Smith-Carolina Corporation, a North Carolina corporation, Smith-Columbia Corporation, a South Carolina corporation, Easi-Set Industries, Inc., a Virginia corporation, Concrete Safety Systems, Inc., a Virginia corporation, and Midland Advertising and Design, Inc., doing business as Midland Advertising + Design, a Virginia corporation. All material intercompany accounts and transactions have been eliminated in consolidation.
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Cash | The Company considers all unrestricted cash and money market accounts purchased with an original or remaining maturities of three months or less as cash.
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Investments | Investments in marketable securities are classified as available-for-sale and are stated at market value with unrealized holding gains and losses excluded from earnings and reported as a separate component of stockholders' equity until realized.
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Inventories | Inventories are stated at the lower of cost, using the first-in, first-out (FIFO) method, or net realizable value. Inventory reserves (in thousands) were approximately $65 and $39 at December 31, 2018 and 2017, respectively.
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Property and Equipment | Property and equipment is stated at cost. Expenditures for ordinary maintenance and repairs are charged to income as incurred. Costs of betterments, renewals, and major replacements are capitalized. At the time properties are retired or otherwise disposed of, the related cost and allowance for depreciation are eliminated from the accounts and any gain or loss on disposition is reflected in income.
Depreciation is computed using the straight-line method over the following estimated useful lives:
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Income Taxes | Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
As of December 31, 2018, the Company has not identified any uncertain tax positions. The Company files tax returns in the U.S. Federal and various state jurisdictions. The Company recognizes, when applicable, interest and penalties related to income taxes in other income (expense) in its consolidated statement of income. The Company is no longer subject to U.S. or state tax examinations for the years prior to 2015. The Company does not believe there will be any material changes in unrecognized tax positions over the next twelve months.
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Stock Compensation | On October 13, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan which allows the Company to grant up to 400,000 shares of common stock of the Company to employees, officers, directors and consultants. The grants may be in the form of restricted or performance shares of common stock of the Company. The fair value of each restricted stock grant is estimated to be the sales price of the common stock at the close of business on the day of the grant.
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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 over time 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 over time, 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 the customers 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 Condensed Consolidated Balance Sheets as "Accounts receivable trade - unbilled" (i.e. contract assets). 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 Condensed Consolidated 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 trade - billed. At December 31, 2018 and December 31, 2017, accounts receivable included contract retentions (in thousands) of approximately $1,704 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 December 31, 2018 and December 31, 2017, our allowances for doubtful accounts (in thousands) were $214 and $208, respectively.
Effect of Adopting ASC Topic 606
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 for 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.
Sale to Customer 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 the 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 equal to the buy-back obligation, included in "Deferred buy-back lease obligation" in the liabilities section of the consolidated balance sheet, is deferred until the buy-back is exercised or expired. The remaining sale proceeds are deferred in the same account and recognized on a straight-line basis over the usage period, such usage period commencing on delivery to the job-site and ending at the time the buy-back is exercised or expired. The Company capitalizes the cost of the product on the consolidated balance sheet shown in "Deferred buy-back lease asset, net", and depreciates the value, less residual value, to cost of leasing revenue in "Cost of goods sold" over the estimated useful life of the asset.
In the case the customer does not exercise the buy-back option and 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 customer exercises the buy-back guarantee option, 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 "Inventories" or "Property and equipment, net" depending on the intended use at the time. 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.
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):
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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.
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Sales and Use Taxes | Use taxes on construction materials are reported gross in cost of goods sold.
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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.
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Reclassifications of Certain Items Included within Comparable Prior Year Periods | Certain minor reclassifications have been made to prior year amounts to conform to current year presentation. Use tax was reclassified to Cost of goods sold from General and administrative expenses on the Condensed Consolidated Statements of Operations for the year ending December 31, 2017 of $117. There was no impact to net income for the period.
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Risks and Uncertainties | The Company sells products to highway contractors operating under government funded highway programs and other customers and extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Company monitors its exposure to credit losses and maintains allowances for anticipated losses. Management reviews accounts receivable on a weekly basis to determine the probability of collection. In performing this evaluation, the Company analyzes the payment history and its significant past due accounts, subsequent cash collections on these accounts and comparative accounts receivable aging statistics. Based on this information, along with other related factors, the Company develops what it considers to be a reasonable estimate of the uncollectible amounts included in accounts receivable. Management believes the allowance for doubtful accounts at December 31, 2018 is adequate. However, actual write-offs may exceed the recorded allowance. Due to inclement weather, the Company may experience reduced revenue from December through February and may realize the substantial part of its revenue during the other months of the year.
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Fair Value of Financial Instruments | The carrying value for each of the Company’s financial instruments (consisting of cash and cash equivalents, accounts receivable, accounts payable and short-term line of credit) approximates fair value because of the short-term nature of those instruments. The estimated fair value of the long-term debt approximates carrying value based on current rates offered to the Company for debt of the similar maturities.
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Estimates | The preparation of financial statements in conformity with U.S. generally accepted accounting (U.S. GAAP) principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
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Advertising Costs | The Company expenses all advertising costs as incurred. Advertising expense (in thousands) was approximately $384 and $404 in 2018 and 2017, respectively.
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Earnings Per Share | Earnings per share are based on the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of the Company.
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Long-Lived Assets | The Company reviews the carrying values of its long-lived and identifiable intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable based on undiscounted estimated future operating cash flows. When any such impairment exists, the related assets will be written down to fair value. No impairment losses have been recorded through December 31, 2018.
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Recent Accounting Pronouncements | Leases. In 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” Topic 842 establishes a new lease accounting model for leases. The most significant changes include the clarification of the definition of a lease, the requirement for lessees to recognize for all leases a right-of-use asset and a lease liability in the consolidated balance sheet, and additional quantitative and qualitative disclosures which are designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. Expenses are recognized in the consolidated statement of income in a manner similar to current accounting guidance. Lessor accounting under the new standard is substantially unchanged. We adopted this standard, and all related amendments thereto, effective January 1, 2019, using a prospective transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. We are finalizing our evaluation of the impacts that the adoption of this accounting guidance will have on the consolidated financial statements and estimate approximately $400 of right-of-use assets and liabilities will be recognized in our consolidated balance sheet upon adoption.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment estimated useful lives |
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Disaggregation of revenue |
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Property and Equipment (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment |
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Notes Payable (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of notes payable |
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Schedule of maturities of notes payable |
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of income tax expense (benefit) |
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Schedule of effective income tax rate reconciliation |
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Schedule of deferred tax assets (liabilities) |
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Stock Compensation (Tables) |
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Compensation Related Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock option activity |
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Schedule of restricted stock award activity |
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value measurements |
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share |
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Summary of Significant Accounting Policies (Details) |
12 Months Ended |
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Dec. 31, 2018 | |
Building | Minimum | |
Useful life | 10 years |
Building | Maximum | |
Useful life | 40 years |
Trucks and Automotive Equipment | Minimum | |
Useful life | 3 years |
Trucks and Automotive Equipment | Maximum | |
Useful life | 10 years |
Shop Machinery and Equipment | Minimum | |
Useful life | 3 years |
Shop Machinery and Equipment | Maximum | |
Useful life | 10 years |
Land Improvements | Minimum | |
Useful life | 10 years |
Land Improvements | Maximum | |
Useful life | 15 years |
Rental Equipment | Minimum | |
Useful life | 5 years |
Rental Equipment | Maximum | |
Useful life | 10 years |
Office Equipment | Minimum | |
Useful life | 3 years |
Office Equipment | Maximum | |
Useful life | 10 years |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Accounting Policies [Abstract] | ||
Inventory reserve | $ 65 | $ 39 |
Contract retentions | 1,704 | 1,065 |
Allowances for doubtful accounts | 214 | 208 |
Advertising costs | $ 384 | $ 404 |
Property and Equipment (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Property and equipment, gross | $ 25,769 | $ 20,608 |
Less: accumulated depreciation and amortization | (11,667) | (10,741) |
Property and equipment, net | 14,102 | 9,867 |
Land and Land Improvements | ||
Property and equipment, gross | 2,452 | 1,538 |
Building | ||
Property and equipment, gross | 6,949 | 10,913 |
Machinery and Equipment | ||
Property and equipment, gross | 12,709 | 5,394 |
Rental Equipment | ||
Property and equipment, gross | $ 3,659 | $ 2,763 |
Property and Equipment (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization | $ 1,247 | $ 926 |
Notes Payable (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Notes payable | $ 4,503 | $ 3,533 |
Less: current maturities | 711 | 637 |
Noncurrent notes payable | 2,792 | 2,896 |
Note Payable 1 | ||
Notes payable | 799 | 1,071 |
Note Payable 2 | ||
Notes payable | 1,169 | 1,234 |
Note Payable 3 | ||
Notes payable | 163 | 227 |
Note Payable 4 | ||
Notes payable | 1,000 | 0 |
Note Payable 5 | ||
Notes payable | 1,372 | 1,001 |
Note Payable 6 | ||
Notes payable | $ 0 | $ 0 |
Notes Payable (Details 1) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Notes Payable [Abstract] | ||
2018 | $ 1,711 | |
2019 | 737 | |
2020 | 577 | |
2021 | 271 | |
2022 | 216 | |
Thereafter | 991 | |
Notes payable | $ 4,503 | $ 3,533 |
Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Federal: | ||
Current | $ 230 | $ 455 |
Deferred | 223 | 421 |
Federal income taxes | 453 | 876 |
State: | ||
Current | 58 | 76 |
Deferred | 61 | 105 |
State income taxes | 119 | 181 |
Income tax expense | $ 572 | $ 1,057 |
Income Taxes (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||
Income taxes at statutory rate | $ 474 | $ 1,269 |
State income taxes, net of federal benefit | 89 | 136 |
Deferred true-ups | 58 | 161 |
Provision to return | (19) | 152 |
Rate reduction | 0 | (664) |
Other | (30) | 3 |
Income tax expense | $ 572 | $ 1,057 |
Income taxes at statutory rate | 21.00% | 34.00% |
State income taxes, net of federal benefit | 4.00% | 3.60% |
Deferred true-ups | 2.60% | 4.30% |
Provision to return | (0.80%) | 4.10% |
Rate reduction | 0.00% | (17.80%) |
Other | (1.50%) | 0.10% |
Effective income tax rate | 25.30% | 28.30% |
Income Taxes (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Depreciation | $ (1,667) | $ (1,185) |
Unrealized losses on investments available for sale | (9) | 5 |
Retainage | (425) | (264) |
Allowance for doubtful accounts | 53 | 52 |
Prepaid expenses | (78) | (98) |
Vacation accrued | 78 | 67 |
Deferred income | 321 | 0 |
State NOL carryforward | 26 | 48 |
UNICAP | 105 | 0 |
Other | 169 | 85 |
Net deferred tax liability | $ (1,427) | $ (1,290) |
Employee Benefit Plans (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Defined Benefit Plan [Abstract] | ||
Employer matching contribution, percent of match | 50.00% | |
Employer matching contribution, percent of employees' gross pay | 4.00% | |
Match contributions | $ 148 | $ 140 |
Stock Compensation (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Weighted Average Exercise Price | ||
Beginning balance | $ 1.21 | $ 1.96 |
Granted | .00 | .00 |
Forfeited | (.00) | (2.21) |
Exercised | (1.21) | (1.89) |
Ending balance | $ .00 | $ 1.21 |
Options Outstanding | ||
Beginning balance | 10,333 | 68,133 |
Granted | 0 | 0 |
Forfeited | 0 | (1,000) |
Exercised | (10,333) | (56,800) |
Ending balance | 0 | 10,333 |
Vested and Exercisable | ||
Beginning balance | 10,333 | 68,133 |
Granted | 0 | 0 |
Forfeited | 0 | (1,000) |
Exercised | (10,333) | (56,800) |
Ending balance | 0 | 10,333 |
Stock Compensation (Details 1) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Non-vested, Number of Shares | ||
Granted | 2,500 | 72,000 |
Non-vested, Weighted Average Grant Date Fair Value | ||
Granted | $ .00 | $ .00 |
Restricted Stock Awards | ||
Non-vested, Number of Shares | ||
Non-vested, beginning of period | 125,333 | 103,000 |
Vested | 54,333 | 49,667 |
Forfeited | 4,000 | 0 |
Non-vested, end of period | 69,500 | 125,333 |
Non-vested, Weighted Average Grant Date Fair Value | ||
Non-vested, beginning of period | $ 5.19 | $ 4.95 |
Granted | 7.00 | 5.45 |
Vested | 5.27 | 5.10 |
Forfeited | 4.95 | .00 |
Non-vested, ending of period | $ 5.19 | $ 5.19 |
Stock Compensation (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Compensation Related Costs [Abstract] | ||
Stock options exercised | 10,333 | 56,800 |
Restricted stock issued | 2,500 | 72,000 |
Intrinsic value of restricted stock outstanding | $ 361 | |
Stock compensation | 243 | $ 411 |
Unrecognized compensation cost related to non-vested restricted stock | $ 361 |
Fair Value Measurements (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Mutual funds | $ 1,107 | $ 1,098 |
Level 1 | ||
Mutual funds | 1,107 | 1,098 |
Level 2 | ||
Mutual funds | 0 | 0 |
Level 3 | ||
Mutual funds | $ 0 | $ 0 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Basic earnings per share | ||
Income available to common shareholder | $ 1,687 | $ 2,684 |
Weighted average shares outstanding (in thousands) | 5,080 | 5,042 |
Basic earnings per share | $ 0.33 | $ 0.53 |
Diluted earnings per share | ||
Income available to common shareholder | $ 1,687 | $ 2,684 |
Weighted average shares outstanding (in thousands) | 5,080 | 5,042 |
Dilutive effect of stock options and restricted stock (in thousands) | 16 | 37 |
Total weighted average shares outstanding (in thousands) | 5,096 | 5,079 |
Diluted earnings per share | $ 0.33 | $ 0.53 |
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