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What changed in SMITH MIDLAND CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SMITH MIDLAND CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+83 added−87 removedSource: 10-K (2024-05-23) vs 10-K (2023-04-17)

Top changes in SMITH MIDLAND CORP's 2023 10-K

83 paragraphs added · 87 removed · 63 edited across 3 sections

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−0 removed3 unchanged
Biggest changeThe previous North Carolina facility, on 10 acres of owned land, including an 8,000 square foot manufacturing plant with administrative offices, remains operational with future use not determined at this time. The Company's third manufacturing facility is located in Hopkins (Columbia), South Carolina.
Biggest changeThe Company is under contract to double the size of this facility and anticipates construction to be complete in the second half of 2024. The previous North Carolina facility, on 10 acres of owned land, including an 8,000 square foot manufacturing plant with administrative offices, remains operational with future use not determined at this time.
The Company owns an additional 19 acres in Midland, Virginia, approximately two miles from the operations facility, of which 3 acres is developed as a storage yard for the rental barrier division. The Company is currently developing additional acreage at this lot for additional storage for the rental barrier division and it is expected to be completed in 2023.
The Company owns an additional 19 acres in Midland, Virginia, approximately two miles from the operations facility, and is developed as a storage yard for the rental barrier division.
The facility is located on 39 acres of land owned by the Company and has approximately 40,000 square feet of production space and administrative offices. The South Carolina facility gives the Company sufficient capacity to cover additional territory from the Atlantic Coast region to the northern part of Florida. The Company's present facilities are adequate for its current needs. 10
The South Carolina facility gives the Company sufficient capacity to cover additional territory from the Atlantic Coast region to the northern part of Florida. The Company's present facilities are adequate for its current needs. 11
Added
The Company's third manufacturing facility is located in Hopkins (Columbia), South Carolina. The facility is located on 39 acres of land owned by the Company and has approximately 40,000 square feet of production space and administrative offices.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe declaration of dividends in the future will be at the election of the Board of Directors and will depend upon earnings, capital requirements and financial position of the Company, bank loan covenants, general economic conditions, potential coronavirus outbreak concerns, and other pertinent factors.
Biggest changeThe declaration of dividends in the future will be at the election of the Board of Directors and will depend upon earnings, capital requirements and financial position of the Company, bank loan covenants, general economic conditions, and other pertinent factors.
Dividends Although the Company has historically paid special dividends, the Company did not declare a dividend in 2022. The Company cannot guarantee payment of dividends due to the internal need for funds in the development and expansion of its business.
Dividends Although the Company has historically paid special dividends, the Company did not declare a dividend in 2023. The Company cannot guarantee payment of dividends due to the internal need for funds in the development and expansion of its business.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company's Common Stock trades on the NASDAQ Capital Market under the symbol "SMID". As of March 13, 2023, there were approximately 40 record holders of the Company's Common Stock. Management believes there are at least 1,000 beneficial owners of the Company's Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company's Common Stock trades on the NASDAQ Capital Market under the symbol “SMID”. As of April 29, 2024, there were approximately 40 record holders of the Company's Common Stock. Management believes there are at least 1,000 beneficial owners of the Company's Common Stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

57 edited+19 added−24 removed24 unchanged
Biggest changeThe following table summarizes the revenue by type and a comparison for the years ended December 31, 2022 and 2021 (in thousands): Revenue by Type (Disaggregated Revenue) 2022 2021 Change % Change Product Sales: Soundwall Sales $ 4,128 $ 8,025 $ (3,897 ) (49 )% Architectural Sales 4,269 4,932 (663 ) (13 )% SlenderWall Sales 1,489 1,795 (306 ) (17 )% Miscellaneous Wall Sales 3,475 2,352 1,123 48 % Barrier Sales 6,717 4,686 2,031 43 % Easi-Set and Easi-Span Building Sales 4,089 3,036 1,053 35 % Utility Sales 2,023 2,468 (445 ) (18 )% Miscellaneous Sales 1,631 1,206 425 35 % Total Product Sales 27,821 28,500 (679 ) (2 )% Barrier Rentals 6,545 9,925 (3,380 ) (34 )% Royalty Income 2,498 2,216 282 13 % Shipping and Installation Revenue 13,267 10,001 3,266 33 % Total Service Revenue 22,310 22,142 168 1 % Total Revenue $ 50,131 $ 50,642 $ (511 ) (1 )% The revenue items: soundwall sales, architectural panel sales, SlenderWall sales, miscellaneous wall sales, miscellaneous sales, barrier rentals, and royalty income are recognized as revenue over time.
Biggest changeThe following table summarizes the revenue by type and a comparison for the years ended December 31, 2023 and 2022 (in thousands): Revenue by Type (Disaggregated Revenue) 2023 2022 Change % Change Product Sales: Soundwall Sales $ 7,671 $ 4,128 $ 3,543 86 % Architectural Sales 1,131 4,269 (3,138 ) (74 )% SlenderWall Sales 5,312 1,489 3,823 257 % Miscellaneous Wall Sales 6,418 3,475 2,943 85 % Barrier Sales 7,827 6,717 1,110 17 % Easi-Set and Easi-Span Building Sales 4,712 4,089 623 15 % Utility Sales 2,857 2,023 834 41 % Miscellaneous Sales 2,820 1,631 1,189 73 % Total Product Sales 38,748 27,821 10,927 39 % Barrier Rentals 6,330 6,545 (215 ) (3 )% Royalty Income 2,633 2,498 135 5 % Shipping and Installation Revenue 11,869 13,267 (1,398 ) (11 )% Total Service Revenue 20,832 22,310 (1,478 ) (7 )% Total Revenue $ 59,580 $ 50,131 $ 9,449 19 % The revenue items: soundwall sales, architectural panel sales, SlenderWall sales, miscellaneous wall sales, miscellaneous sales, barrier rentals, and royalty income are recognized as revenue over time.
In addition, the Company produces utility vaults; farm products such as cattleguards; and custom order precast concrete products with various architectural surfaces. 12 As a part of the construction industry, the Company's sales and net income may vary greatly from quarter to quarter over a given year.
In addition, the Company produces utility vaults; farm products such as cattleguards; and custom order precast concrete products with various architectural surfaces. As a part of the construction industry, the Company's sales and net income may vary greatly from quarter to quarter over a given year.
The Company recognizes revenue on the sale of its standard precast concrete products, and the associated shipping and installation revenue, at shipment date, including revenue derived from any projects to be completed under short-term contracts. Leasing and royalties are recognized as revenue over time.
Over-Time Revenue Recognition- The Company recognizes revenue on the sale of its standard precast concrete products, and the associated shipping and installation revenue, at shipment date, including revenue derived from any projects to be completed under short-term contracts. Leasing and royalties are recognized as revenue over time.
Inflation Management believes that the Company's operations were affected by inflation in 2022 and 2021, particularly in the purchases of certain raw materials such as cement, aggregates, and steel, and with labor costs. The Company believes that raw material pricing and labor costs will increase in 2023, although no assurance can be given regarding future pricing or costs.
Inflation Management believes that the Company's operations were affected by inflation in 2023 and 2022, particularly in the purchases of certain raw materials such as cement, aggregates, and steel, and with labor costs. The Company believes that raw material pricing and labor costs will increase in 2024, although no assurance can be given regarding future pricing or costs.
The Company additionally has two smaller installment loans with annual interest rates of 2.90% and 3.99%, maturing in 2025, with balances totaling $51. Under the loan covenants with the Bank, the Company is limited to annual capital expenditures of $5,000 and must maintain tangible net worth of $10,000.
The Company additionally has two smaller installment loans with annual interest rates of 2.90% and 3.99%, maturing in 2025, with balances totaling $29. Under the loan covenants with the Bank, the Company is limited to annual capital expenditures of $5,000 and must maintain tangible net worth of $10,000.
The Company is continuing this strategy through the development, marketing and sales efforts for its new products. The Company continues to evaluate both production and administrative processes, and has streamlined many of these processes through lean activities. During 2022 and 2021, the Company, through lean activities, continued to see positive effects in production and office areas.
The Company is continuing this strategy through the development, marketing and sales efforts for its new products. The Company continues to evaluate both production and administrative processes, and has streamlined many of these processes through lean activities. During 2023 and 2022, the Company, through lean activities, continued to see positive effects in production and office areas.
The risk exists that recessionary economic conditions and the coronavirus outbreak may adversely affect the Company more than it has experienced to date. To mitigate these economic and other risks, the Company has a broader product offering than most competitors and has historically been a leader in innovation and new product development in the industry.
The risk exists that recessionary economic conditions may adversely affect the Company more than it has experienced to date. To mitigate these economic and other risks, the Company has a broader product offering than most competitors and has historically been a leader in innovation and new product development in the industry.
The lean business philosophy is a long-term, customer focused approach to continuous improvement by eliminating waste and providing value. It is management's intention to continue on the lean journey while implementing a lean culture throughout the Company to help reach our goals for 2023.
The lean business philosophy is a long-term, customer focused approach to continuous improvement by eliminating waste and providing value. It is management's intention to continue on the lean journey while implementing a lean culture throughout the Company to help reach our goals for 2024.
On October 1, 2022, the Company received a Commitment Letter from the Bank to provide a guidance line of credit specifically to purchase business equipment in an amount up to $1,500.
On October 1, 2023, the Company received a Commitment Letter from the Bank to provide a guidance line of credit specifically to purchase business equipment in an amount up to $1,500.
The note carries a ten year term at a fixed interest rate of 3.64% annually per the Promissory Note Rate Conversion Agreement, with monthly payments of $22, and is secured by all of the assets of Smith-Carolina and a guarantee by the Company. The balance of the note payable at December 31, 2022 was $1,609.
The note carries a ten-year term at a fixed interest rate of 3.64% annually per the Promissory Note Rate Conversion Agreement, with monthly payments of $22, and is secured by all of the assets of Smith-Carolina and a guarantee by the Company. The balance of the note payable at December 31, 2023 was $1,398.
This payment schedule could result in liquidity problems for the Company because it must bear the cost of production for its products before it receives payment. The Company's days sales outstanding (DSO) in 2022 and 2021 were 99 and 91 days, respectively.
This payment schedule could result in liquidity problems for the Company because it must bear the cost of production for its products before it receives payment. The Company's days sales outstanding (DSO) in 2023 and 2022 were 113 and 99 days, respectively.
Installation revenue results when attaching architectural wall panels to a building, installing an Easi-Set® building at a customers' site, setting highway barrier, or setting any of our other precast products at a site specific to the requirements of the owner. Shipping and installation revenues increased by 33% for 2022 when compared to 2021.
Installation revenue results when attaching architectural wall panels to a building, installing an Easi-Set® building at a customers' site, setting highway barrier, or setting any of our other precast products at a site specific to the requirements of the owner. Shipping and installation revenues decreased by 11% for 2023 when compared to 2022.
The Company continues to focus sales initiatives on SlenderWall, but no assurance can be given as to the success of this endeavor. Miscellaneous Wall Sales – Miscellaneous wall sales can be highly customized precast concrete products or retaining and lagging panels that do not fit other product categories.
The Company continues to focus sales initiatives on SlenderWall, but no assurance can be given as to the success of this endeavor. SlenderWall sales are expected to be lower during 2024, as compared to 2023. Miscellaneous Wall Sales – Miscellaneous wall sales are highly customized precast concrete products or retaining and lagging panels that do not fit other product categories.
The commitment for the guidance line of credit matures on October 1, 2023. As of December 31, 2022, the Company had not purchased any equipment pursuant to the $1,500 commitment. 17 At December 31, 2022, the Company had cash totaling $6,726 compared to cash totaling $13,492 at December 31, 2021.
The commitment for the guidance line of credit matures on October 1, 2024. As of December 31, 2023, the Company had not purchased any equipment pursuant to the $1,500 commitment. 17 At December 31, 2023, the Company had cash totaling $9,175 compared to cash totaling $6,726 at December 31, 2022.
Backlog As of March 13, 2023, the Company's sales backlog was approximately $52.4 million as compared to approximately $29.0 million at approximately the same time in 2022. It is estimated that most of the projects in the sales backlog will be produced within 12 months, but a few will be produced over multiple years.
Backlog As of March 12, 2024, the Company's sales backlog was approximately $60.8 million as compared to approximately $52.4 million at approximately the same time in 2023. It is estimated that most of the projects in the sales backlog will be produced within 12 months, but a few will be produced over multiple years.
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. This estimate involves significant judgment by the management of the Company. Actual uncollectible amounts may differ from the Company’s estimate.
Based on this information, along with other related factors, the Company develops an estimate of the uncollectible amounts included in accounts receivable. This estimate involves significant judgment by the management of the Company. Actual uncollectible amounts may differ from the Company’s estimate.
The Company expects selling expenses to increase in future periods with the plan for additional sales associates and increased advertising spending aligning with the strategy to increase SlenderWall sales and barrier rentals.
Selling expenses increased during 2023 due to additional salespersons hired, increased commissions related to the increased sales, and increased spending for advertising. The Company expects selling expenses to increase in future periods with the plan for additional sales associates and increased advertising spending aligning with the strategy to increase SlenderWall sales and barrier rentals.
Income Tax Expense – The Company had income tax expense of $145 for the year ended December 31, 2022 compared to income tax expense of $1,524 for the year ended December 31, 2021.
Income Tax Expense – The Company had income tax expense of $528 for the year ended December 31, 2023 compared to income tax expense of $145 for the year ended December 31, 2022.
Total cost of goods sold as a percentage of total revenue, not including royalties, increased to 85% for the year ended December 31, 2022 from 75% for the year ended December 31, 2021.
Total cost of sales as a percentage of total revenue, not including royalties, increased to 86% for the year ended December 31, 2023 from 85% for the year ended December 31, 2022.
The Company evaluates the adequacy of its allowance for doubtful accounts at the end of each quarter. In performing this evaluation, the Company analyzes the payment history of its significant past due accounts, subsequent cash collections on these accounts, comparative accounts receivable aging statistics, and other customer specific considerations existing and known as of the time of the analysis.
In performing this evaluation, the Company analyzes the payment history of its significant past due accounts, subsequent cash collections on these accounts, comparative accounts receivable aging statistics, macro-economic conditions, and other customer specific considerations existing and known as of the time of the analysis.
The loan is collateralized by a first lien position on the related real property. The interest rate is fixed at 4.09% per annum, with principal and interest payments payable monthly over 180 months for $21. The loan matures on February 10, 2037. The balance of the note payable on December 31, 2022 was $2,692.
The interest rate is fixed at 4.09% per annum, with principal and interest payments payable monthly over 180 months for $21. The loan matures on February 10, 2037. The balance of the note payable on December 31, 2023 was $2,547.
As a result of these factors, the Company is not always able to earn a profit for each period, therefore, please read Management's Discussion and Analysis of Financial Condition and Results of Operations and the accompanying financial statements with these factors in mind.
As a result of these factors, the Company is not always able to earn a profit for each period, therefore, please read Management's Discussion and Analysis of Financial Condition and Results of Operations and the accompanying financial statements with these factors in mind. 13 Overview Overall, the Company’s financial bottom line performance was essentially equal in 2023 when compared to 2022.
There were 5,233 basic and 5,253 diluted weighted average shares outstanding in 2022, and 5,205 basic and 5,232 diluted weighted average shares outstanding in 2021. 16 Liquidity and Capital Resources The Company financed its capital expenditures requirements for 2022 with cash balances on hand and notes payable to a bank.
There were 5,258 basic and 5,292 diluted weighted average shares outstanding in 2023, and 5,233 basic and 5,253 diluted weighted average shares outstanding in 2022. 16 Liquidity and Capital Resources The Company financed its capital expenditures for 2023 with cash balances on hand.
The revenue items: barrier sales, Easi-Set and Easi-Span building sales, utility sales, and shipping and installation revenue are recognized as revenue at a point in time. 14 Soundwall Sales – Soundwall panel sales decreased by 49% in 2022 compared to 2021 primarily due to decreased production during 2022 at all facilities.
The revenue items: barrier sales, Easi-Set and Easi-Span building sales, utility sales, and shipping and installation revenue are recognized as revenue at a point in time. 14 Soundwall Sales – Soundwall panel sales increased by 86% in 2023 compared to 2022.
Miscellaneous wall sales increased by 48% in 2022 when compared to 2021 due to the increased amount of retaining wall projects in production. Miscellaneous sales are expected to trend similar in 2023, as compared to 2022, although no assurance can be provided. Barrier Sales – Barrier sales increased by 43% in 2022 when compared to 2021.
Miscellaneous wall sales increased by 85% in 2023 when compared to 2022 due to the increased amount of wall panel projects in Virginia and increased retaining wall projects in South Carolina. Miscellaneous sales are expected to trend similar in 2024, as compared to 2023, although no assurance can be provided.
Barrier rental revenue, excluding revenue from special barrier projects, is expected to trend higher in 2023 as compared to barrier rental revenue, excluding revenue from special barrier projects, in 2022, although no assurance can be given. Royalty Income – Royalties increased by 13% in 2022 as compared to 2021.
Barrier rental revenue, excluding revenue from special barrier projects, is expected to trend higher in 2024 as compared to barrier rental revenue, excluding revenue from special barrier projects, in 2023, as funding increases related to the Infrastructure Investment and Jobs Act, although no assurance can be given. Royalty Income – Royalties increased by 5% in 2023 as compared to 2022.
The Company had an effective rate of 15.4% for the year ended December 31, 2022 compared to an effective rate of 16.8% for the same period in 2021. The decrease in the effective tax rate is attributed to current year tax credits and a decrease in the Company’s state tax liability.
The Company had an effective rate of 40.0% for the year ended December 31, 2023 compared to an effective rate of 15.4% for the same period in 2022. The increase in the effective tax rate is attributed to the increase in the Company’s state tax liability for a true-up of state tax expense.
While both 2022 and 2021 barrier rentals included short-term special projects, 2022 had less rental revenue from short-term special barrier projects. As indicated above, the Company is continuing to shift its focus to barrier rentals compared to barrier sales with the significant increase in the rental fleet that occurred during 2022.
As indicated above, the Company is continuing to shift its focus to barrier rentals compared to barrier sales with the significant increase in the rental fleet that occurred during 2022.
The Company anticipates greater sales volumes throughout 2023, although no assurance can be provided. The Company continues to increase marketing and sales efforts towards SlenderWall sales and barrier rentals, in line with long-term strategic objectives.
The Company continues to increase marketing and sales efforts towards SlenderWall sales and barrier rentals, in line with long-term strategic objectives.
The increase is mainly attributed to the increase in shipping and installation of SlenderWall and architectural panels. This is associated with the increased production of SlenderWall and architectural panels that occurred in the third and fourth quarters of 2021.
The decrease is mainly attributed to the decrease in shipping and installation of SlenderWall and architectural panels. This is associated with the decreased production of SlenderWall and architectural panels that occurred in the third and fourth quarters of 2022 that would typically be shipped and installed throughout 2023.
Miscellaneous Product Sales – Miscellaneous products are products that are produced or sold that do not meet the criteria defined for other revenue categories. Examples would include precast concrete slabs, blocks or small add-on items. For 2022, miscellaneous product sales increased by 35% when compared to 2021.
Utility sales are expected to trend similar during 2024 as compared to 2023, although no assurance can be provided. Miscellaneous Product Sales – Miscellaneous products are products that are produced or sold that do not meet the criteria defined for other revenue categories. Examples would include precast concrete slabs, blocks or small add-on items.
The increase in royalties is mainly due to the increase in barrier royalties during 2022 compared to 2021. Infrastructure spending continues to drive royalties, and the Company anticipates 2023 royalties to increase compared to 2022, although no assurance can be given.
The increase in royalties is mainly due to the increase in barrier royalties during 2023 compared to 2022. As funding increases related to the Infrastructure Investment and Jobs Act, the Company expects 2024 royalties to increase compared to 2023, although no assurance can be given.
The Company anticipates capital spending for 2023 to be approximately $5,000, which includes a new batch plant system, completion of yard development, completion of the barrier buy-back, and miscellaneous manufacturing equipment. Anticipated capital expenditures excludes acquisitions and plant expansions. The Company's notes payable are financed at fixed rates of interest. This leaves the Company almost impervious to fluctuating interest rates.
The Company anticipates capital spending for 2024 to be approximately $5,000, which includes expansion of the North Carolina manufacturing facility, soundwall forms for increased production capacity, and miscellaneous manufacturing equipment. Anticipated capital expenditures excludes acquisitions. The Company's notes payable are financed at fixed rates of interest. This leaves the Company almost impervious to fluctuating interest rates.
The loan matures on March 27, 2030. The balance of the note payable at December 31, 2022 was $2,064. On February 10, 2022, the Company completed the financing for its prior acquisition of certain real property in Midland, VA totaling approximately 29.8 acres with a note payable to the Bank in the amount of $2,805.
On February 10, 2022, the Company completed the financing for its acquisition of certain real property in Midland, VA from the fourth quarter of 2021, totaling approximately 29.8 acres, with a note payable to the Bank in the amount of $2,805. The loan is collateralized by a first lien position on the related real property.
The basic and diluted earnings per share was $0.15 for 2022 compared to basic and diluted earnings per share of $1.45 for the year ended December 31, 2021.
Net Income – The Company had net income of $795 for the year ended December 31, 2023, compared to net income of $800 for the same period in 2022. The basic and diluted earnings per share was $0.15 for 2023 compared to basic and diluted earnings per share of $0.15 for the year ended December 31, 2022.
Results of Operations Year ended December 31, 2022 compared to the year ended December 31, 2021 For the year ended December 31, 2022, the Company had total revenue of $50,131 compared to total revenue of $50,642 for the year ended December 31, 2021, a decrease of $511 or 1%.
Results of Operations Year ended December 31, 2023 compared to the year ended December 31, 2022 For the year ended December 31, 2023, the Company had total revenue of $59,580 compared to total revenue of $50,131 for the year ended December 31, 2022, an increase of $9,449 or 19%.
The annual inventory turns for 2022 and 2021 were 14.1 and 15.4, respectively. Finished goods inventory slightly increased for 2022 as compared to 2021. Critical Accounting Policies The Company’s significant accounting policies are more fully described in its Summary of Accounting Policies to the Company’s consolidated financial statements.
The Company’s inventory at December 31, 2023 was $5,150 and at December 31, 2022 was $3,818, an increase of $1,331. The annual inventory turns for 2023 and 2022 were 15.0 and 14.1, respectively. Critical Accounting Policies and Estimates The Company’s significant accounting policies are more fully described in its Summary of Accounting Policies to the Company’s consolidated financial statements.
Cost of Goods Sold – Total cost of goods sold for the year ended December 31, 2022 was $40,662, an increase of $4,440, or 12%, from $36,222 for the year ended December 31, 2021.
Cost of Sales – Total cost of sales for the year ended December 31, 2023 was $48,928, an increase of $8,266, or 20%, from $40,662 for the year ended December 31, 2022.
The change is mainly attributed to specialty products produced at the South Carolina plant throughout 2022. Miscellaneous product sales are expected to trend lower during 2023 as compared to 2022, although no assurance can be provided. 15 Barrier Rentals – Barrier rentals decreased by 34% in 2022 as compared to 2021.
Miscellaneous product sales are expected to trend lower during 2024 as compared to 2023, although no assurance can be provided. 15 Barrier Rentals – Barrier rentals decreased by 3% in 2023 as compared to 2022. Revenue from the Company’s core rental barrier fleet decreased by 43% in 2023 as compared to 2022.
The Company had $6,416 of debt obligations at December 31, 2022, of which $626 is scheduled to mature within twelve months.
The Company had $5,789 of debt obligations at December 31, 2023, of which $636 is scheduled to mature within twelve months. During the twelve months ended December 31, 2023, the Company made repayments of outstanding debt in the amount $627.
Architectural sales are expected to decrease during 2023, as compared to 2022, with an anticipated shift to more SlenderWall sales, although no assurance can be provided. SlenderWall Sales – SlenderWall panel sales decreased by 17% in 2022 compared to 2021.
Architectural Sales – Architectural panel sales decreased by 74% in 2023 compared to 2022. The decrease is from the completion of two architectural projects in the third quarter of 2022. Architectural sales are expected to be higher during 2024, as compared to 2023, although no assurance can be provided.
Building and restroom sales are expected to continue to trend similar during 2023 as compared to 2022, although no assurance can be provided. Utility Sales – Utility products are mainly comprised of underground utility vaults used in infrastructure construction. Utility product sales decreased by 18% in 2022 compared to 2021.
Building sales increased by 15% in 2023 as compared to 2022 due to increased sales at all locations, reflecting general product sale fluctuations. Building and restroom sales are expected to continue to trend similar during 2024 as compared to 2023, although no assurance can be provided.
The loan is collateralized by a first lien position on the Virginia property, building, and assets. The refinance also released the lien on the Smith-Columbia plant in Hopkins, South Carolina (Columbia). The interest rate per the Promissory Note is fixed at 3.99% per annum, with principal and interest payments payable monthly over 120 months in the amount of $27.
The Company also has a note payable to the Bank in the amount of $2,701. The loan is collateralized by a first lien position on the Midland, VA plant, building, and assets. The refinance also released the lien on the Smith-Columbia plant in Hopkins, South Carolina (Columbia).
In addition to the notes payable discussed above, the Company has a $5,000 line of credit with the Bank with no balance outstanding as of December 31, 2022. The line of credit is evidenced by a commercial revolving promissory note, which carries a variable interest rate of prime, with a floor of 3.50%, and matures on October 1, 2023.
The Company is in compliance with all covenants pursuant to the loan agreements as of December 31, 2023. In addition to the notes payable discussed above, the Company has a $5,000 line of credit with the Bank with no balance outstanding as of December 31, 2023.
Easi-Set® and Easi-Span® Building Sales – The Easi-Set® Buildings program includes Easi-Set®, plant assembled and Easi-Span®, site assembled, and an extensive line of pre-engineered restrooms. Building sales increased by 35% in 2022 as compared to 2021 due to increased sales at all locations.
Barrier sales are expected to trend lower in 2024 than previous years as the Company continues to shift from barrier sales to barrier rentals. Easi-Set® and Easi-Span® Building Sales – The Easi-Set® Buildings program includes Easi-Set®, plant assembled and Easi-Span®, site assembled, and an extensive line of pre-engineered restrooms.
The loan 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.
The line of credit is evidenced by a commercial revolving promissory note, which carries a variable interest rate of prime, with a floor of 3.50%, and matures on October 1, 2024. The loan 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.
The increase in revenue for the fourth quarter 2022 as compared to the fourth quarter 2021 was primarily due to an increase in barrier sales and an increase in shipping and installation. As of March 13, 2023, the Company’s sales backlog was approximately $52.4 million, as compared to approximately $29.0 million around the same time in the prior year.
The increase in revenue for the fourth quarter 2023 as compared to the fourth quarter 2022 was primarily due to an increase in barrier rental and an increase in soundwall sales.
The Company’s accounts receivable balances, net of allowance for doubtful accounts, at December 31, 2022 was $16,223, compared to $10,013 at December 31, 202. The increase is primarily the result of turnover of the accounts receivable position throughout the later part of 2022 until the first quarter of 2023.
The Company’s accounts receivable balance, net of allowance for credit losses, at December 31, 2023 was $17,209, compared to accounts receivable balance, net of allowance for doubtful accounts, of $16,223 at December 31, 2022.
General and Administrative Expenses – For the year ended December 31, 2022, the Company's general and administrative expenses increased by $135, or 2%, to $5,551 from $5,416 during the same period in 2021. The increase is mainly attributed to an increase in bad debt expense driven by the increase in accounts receivable.
Increased material and labor costs also affected margins for the year ended December 31, 2023 as compared to the same period in 2022. General and Administrative Expenses – For the year ended December 31, 2023, the Company's general and administrative expenses increased by $439, or 8%, to $5,990 from $5,551 during the same period in 2022.
The Company expects accounts receivable balances to trend downwards, beginning in the second quarter of 2023, with increased collection efforts as a result of the fulfillment of the accounts receivable position, although no assurance can be provided. The Company’s inventory at December 31, 2022 was $3,818 and at December 31, 2021 was $2,845, an increase of $974.
The increase is primarily the result of increased revenue and to a lesser extent, lagging effects of turnover of the accounts receivable position throughout the later part of 2022 and through the first quarter of 2023. The Company expects DSO to trend downwards, with increased collection efforts, although no assurance can be provided.
Operating Income – The Company had operating income for the year ended December 31, 2022 of $854 compared to operating income of $6,168 for the year ended December 31, 2021, a decrease of $5,314, or 86%.
Operating Income – The Company had operating income for the year ended December 31, 2023 of $1,118 compared to operating income of $854 for the year ended December 31, 2022, an increase of $264, or 31%. The increase in operating income was mainly due to the increase in gross profit and decrease in operating expenses as a percent of revenue.
Financing activities provided $2,199 in cash in 2022 mainly from the financing of real property purchased in the fourth quarter of 2021. Capital spending, including financed additions, decreased from $5,367 in 2021 to $5,264 in 2022. Capital expenditures in 2022 were primarily related to spending for the buy-back of barrier for the barrier rental fleet.
Capital spending, including financed additions, decreased from $5,264 in 2022 to $5,010 in 2023. Capital expenditures in 2023 were primarily related to spending for the yard development for a storage lot for the barrier rental fleet, a new batch plant system for the South Carolina manufacturing facility, and the completion of the barrier buy-back.
Selling Expenses – Selling expenses for the year ended December 31, 2022 increased by $228, or 8%, to $3,064 from $2,836 for the year ended December 31, 2021. Selling expenses increased during 2022 due to additional salespersons hired and increased advertising expenses.
General and administrative expenses for the year ended December 31, 2023 also increased over the prior year due to an increase in audit fees and an increase in salaries and wages. Selling Expenses – Selling expenses for the year ended December 31, 2023 increased by $480, or 16%, to $3,544 from $3,064 for the year ended December 31, 2022.
Operating expenses for 2022 increased over 2021 mainly due to increased selling costs associated with additional sales personnel and an increase in bad debt expense. Fourth quarter 2022 revenues were $14,487 compared to $10,017 in the fourth quarter 2021.
The increase is due to increased selling costs associated with additional sales personnel and increased general and administrative costs due to increased insurance costs for a specific project in New York. Total operating expense was $2,580 for both the fourth quarter 2023 and the fourth quarter 2022.
The Company had net income for 2022 of $800 compared to net income of $7,570 for 2021. Sales decreased by $511 to $50,131 in 2022 from $50,642 in 2021. The decrease in sales is mainly from a decrease in barrier rentals and, to a lesser extent, a decrease in soundwall sales.
The Company had net income for 2023 of $795 compared to net income of $800 for 2022. Total revenue increased by $9,449 to $59,580 in 2023 from $50,131 in 2022. The increase in sales is mainly from an increase in SlenderWall, soundwall, and miscellaneous wall sales. Fourth quarter 2023 revenues were $16,389 compared to $14,487 in the fourth quarter 2022.
Production for several projects concluded towards the end of 2021 at all facilities. Additionally, the Company experienced delays in customer drawing approvals throughout 2022 causing delays in production. The Company expects soundwall panel sales to be similar in 2023 as compared to 2022, although no assurance can be provided.
The increase is mainly due to higher production volumes at the North Carolina and South Carolina plants reflecting larger soundwall projects than in the prior period. The Company expects soundwall panel sales to be similar in 2024 as compared to 2023, although no assurance can be provided.
The decrease in barrier rentals is attributed to a decrease in barrier rentals from short-term special barrier rental projects. Despite the decrease in total barrier rentals, barrier rental revenue from the core rental fleet increased 11% for the year ended December 31, 2022 from the year ended December 31, 2021.
The decrease in barrier rental revenue from the core rental in the current year, was offset, in part, by an increase in barrier rental revenue from special barrier projects. Barrier rental revenue from special projects increased 157% in 2023 as compared to 2022.
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On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spread globally beyond its point of origin.
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Cost of sales as a percentage of revenue, not including royalties, increased to 86% in 2023 compared to 85% in 2022 due to additional costs, approximately $400, incurred for the remaking of panels for a specific project in the second quarter of 2023.
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In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report.
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Cost of sales as a percentage of revenue, not including royalties, remained flat at 85% for the fourth quarter 2023 as compared to the fourth quarter 2022. Operating income was $1,118 for 2023, as compared to $854 for 2022. Operating expenses for 2023 was $9,534 compared to $8,614 in 2022.
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As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations.
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Income tax expense for 2023 was $528, or an effective tax rate of 40.0%, as compared to $145, or an effective tax rate of 15.4% for 2022, adversely affecting net income in 2023. The increase was mainly due to an increase in state tax liability for a true-up of state tax expense.
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The Company had previously experienced an adverse impact to its business by a reduction in revenues in 2020 from that of 2019, a reduction in backlog during 2020 from that in 2019, lower production volumes, employee absences during 2020 and 2021, and bidding restrictions within certain key states such as Maryland and North Carolina.
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As of March 12, 2024, the Company’s sales backlog was approximately $60.8 million, as compared to approximately $52.4 million around the same time in the prior year. It is estimated that most of the projects in the current sales backlog will be produced within 12 months, but a few will be produced over multiple years.
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The Company is currently experiencing minor delays in receipt of materials through its supply chain.
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The Company anticipates greater sales volumes throughout 2024, although no assurance can be provided.
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The Company may be further negatively impacted in the following respects: a) by the potential inability of customers of the Company to pay amounts owed to the Company for products or services already provided should their businesses suffer setbacks; this risk is heightened by the relatively long lag time experienced by the Company in collecting accounts receivable (see "Liquidity and Capital Resources" below); b) by potential supply side issues should our vendors experience hardships, and have to reduce or terminate operations, due to the COVID-19 outbreak, impacting the Company's sourcing of materials; c) by increased adverse effects on our workforce due to contracting or taking care of a relative who has contracted COVID-19, or have been quarantined by a medical professional; in this respect, our workforce had been impacted at all locations in prior years, but this impact has substantially diminished in the current reporting year, but no assurance can be provided as to future impacts, particularly in view of potential new coronavirus outbreaks; d) in the event that any of the three states in which we have facilities provide for the quarantine of our manufacturing employees, our production manufacturing will be significantly affected; e) in the event that any of the states in which we sell our products and services may eliminate, cancel, or delay projects due to monetary limitations resulting from the COVID-19 outbreak; in this respect, the Company had previously seen a reduction in bidding activity; f) the reduction of state infrastructure budgets due to the reduction in funding through the gas tax, or other funding sources; g) the increase in the overall loan defaults, which in turn impacts the banking sector's ability to fund projects in which the Company's products may be utilized; and h) in the event that economic hardships force the Company to default on loan payments, our loans may be called and our ability to borrow under our bank line of credit could cease; Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.
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The Company also anticipates funding related to the Infrastructure Investment and Jobs Act to begin coming through the state and local governments in the latter half of 2024 and beyond to further promote growth in the revenue backlog related to the highway and transportation markets, although no assurance can be provided.
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Although the Company experienced a loss in the first quarter of 2020 and reduced revenues for the year 2020 as compared to 2019, as well as experiencing factors described above, given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to ultimately estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for future years.
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SlenderWall Sales – SlenderWall panel sales increased by 257% in 2023 compared to 2022. The increase is due to two projects being produced consecutively throughout 2023 in comparison to a single project in 2022, which production was completed in the first quarter of 2022.
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The discussions below, including without limitation with respect to liquidity, are subject to the future effects of the COVID-19 outbreak. In this respect, should the outbreak cause serious economic harm in our areas of operation, our revenue expectations are unlikely to be fulfilled. 13 Overview Overall, the Company’s financial bottom line performance was lower in 2022 when compared to 2021.
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Barrier Sales – Barrier sales increased by 17% in 2023 when compared to 2022. The increase is due to large barrier projects at all three manufacturing facilities that had significant production volumes in the first and third quarters of 2023.
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The decrease in soundwall sales was due to delays in approvals of customer drawings and therefore delays in production. Royalty income and shipping and installation revenue also increased in 2022 as compared to 2021.
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Utility Sales – Utility products are mainly comprised of underground utility vaults used in infrastructure construction. Utility product sales increased by 41% in 2023 compared to 2022. The increase is related to the increase in the market for dry utility vaults to support the growth in data centers.
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The increase in cost of goods sold as a percentage of revenue, not including royalties, for 2022 compared to 2021 is due to increased material and labor costs. Additionally, there were more short-term special barrier rental projects that occurred throughout 2021 than 2022, which carry higher margins than product sales.
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For 2023, miscellaneous product sales increased by 73% when compared to 2022. The change is mainly attributed to specialty products produced at the South Carolina plant throughout 2023.
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Architectural Sales – Architectural panel sales decreased by 13% in 2022 compared to 2021. The Company was awarded a large architectural project, which began production in the fourth quarter of 2020 and the majority of production occurred in 2021.
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The decrease in barrier rental revenue from the core rental barrier fleet was due to additional revenue recognized in the prior period related to the barrier buy-back agreement, which was fully recognized as of December 31, 2022.
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The decrease is mainly attributable to one large project, which started production in the second quarter of 2021 and concluded in the second quarter of 2022. Currently, the Company has the largest quantity of bids out for the SlenderWall product in history and expects to be awarded multiple projects in the near future.

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