U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended Commission File Number
June 30, 1998 1-13752
SMITH-MIDLAND CORPORATION
(Exact Name of Small Business
Issuer as Specified in Its Charter)
Delaware 54-1727060
(State of Incorporation) (I.R.S. Employer I.D. No.)
Route 28, P.O. Box 300, Midland, Virginia 22728
(Address of Principal Executive Offices)
(540) 439-3266
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
-------- ---------
As of November 19, 1998, the Company had outstanding 3,044,798 shares
of Common Stock, $.01 par value per share.
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SMITH-MIDLAND CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited); 3
June 30, 1998 and December 31, 1997
Consolidated Statements of Operations 4
(Unaudited); Three months ended
June 30, 1998 and 1997
Consolidated Statements of Operations 5
(Unaudited); Six months ended
June 30, 1998 and 1997
Consolidated Statements of Cash Flows 6
(Unaudited); Six months ended
June 30, 1998 and 1997
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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2
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PART I - Financial Information
Item 1. Financial Statements
SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
June 30, December 31,
Assets 1998 1997
----------- -----------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 181,679 $ 288,310
Accounts receivable:
Trade - billed, less allowances for doubtful accounts of
$297,878 and $231,304 3,352,736 3,254,993
Trade - unbilled 525,282 410,158
Inventories:
Raw materials 506,979 486,583
Finished goods 1,001,216 942,427
Prepaid expenses and other assets 158,616 69,801
Total current assets 5,726,508 5,452,272
----------- -----------
Property and equipment, net 1,604,295 1,531,062
----------- -----------
Other assets:
Cash - restricted 1,029,595 196,977
Note receivable, officer 648,446 632,472
Other 225,128 79,443
----------- -----------
Total other assets 1,903,169 908,892
Total Assets $ 9,233,972 $ 7,892,226
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of notes payable $ 50,280 $ 2,199,228
Accounts payable - trade 2,102,258 1,744,127
Accrued expenses and other liabilities 508,533 570,693
Customer deposits 384,836 450,474
----------- -----------
Total current liabilities 3,045,907 4,964,522
Notes payable - less current maturities 3,979,980 759,440
Notes payable - related parties 109,433 115,598
----------- -----------
Total Liabilities 7,135,320 5,839,560
----------- -----------
Stockholders' equity:
Preferred stock, $.01 par value; authorized 1,000,000 shares,
none outstanding -- --
Common stock, $.01 par value; authorized 8,000,000 shares,
issued and outstanding 3,044,798 and 3,044,798 30,857 30,857
Additional capital 3,450,085 3,450,085
Treasury Stock (102,300) (102,300)
Retained earnings (deficit) (1,279,990) (1,325,976)
Total Stockholders' Equity 2,098,652 2,052,666
----------- -----------
Total Liabilities and Stockholders' Equity $ 9,233,972 $ 7,892,226
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
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3
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SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1998 1997
----------- -----------
<S> <C> <C>
Revenue $ 3,557,951 $ 3,537,513
Cost of goods sold 2,833,239 2,596,299
----------- -----------
Gross profit 724,712 941,214
----------- -----------
Operating expenses:
General and administrative expenses 400,238 577,409
Selling expenses 171,868 116,306
----------- -----------
Total operating expenses 572,106 693,715
----------- -----------
Operating income 152,606 247,499
----------- -----------
Other income (expense):
Royalties 23,994 44,525
Interest expense (200,307) (93,219)
Interest income 15,825 24,811
Other (9,052) (19,306)
----------- -----------
Total other income (expense) (169,540) (43,189)
Income (loss) before income taxes (16,934) 204,310
Income tax expense (benefit) -- --
----------- -----------
Net income (loss) $ (16,934) $ 204,310
=========== ===========
Basic and diluted earnings per share $ (.01) $ .07
=========== ===========
Weighted average common shares outstanding 3,044,798 3,044,798
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
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4
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SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1998 1997
----------- -----------
<S> <C> <C>
Revenue $ 6,584,611 $ 5,618,303
Cost of goods sold 5,048,302 4,149,837
----------- -----------
Gross profit 1,536,309 1,468,466
----------- -----------
Operating expenses:
General and administrative expenses 968,049 1,054,087
Selling expenses 321,284 291,872
----------- -----------
Total operating expenses 1,289,333 1,345,959
----------- -----------
Operating income 246,976 122,507
----------- -----------
Other income (expense):
Royalties 62,445 80,164
Interest expense (294,364) (197,233)
Interest income 26,998 26,453
Other 3,931 11,144
----------- -----------
Total other income (expense) (200,990) (79,472)
Income before income taxes 45,986 43,035
Income tax expense (benefit) -- --
----------- -----------
Net income $ 45,986 $ 43,035
=========== ===========
Basic and diluted earnings per share $ .02 $ .01
=========== ===========
Weighted average common shares outstanding 3,044,798 3,044,798
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
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5
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SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1998 1997
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Cash received from customers $ 6,368,551 $ 4,929,504
Cash paid to suppliers and employees (6,195,590) (4,632,418)
Interest paid (294,364) (197,233)
Other 14,955 15,437
----------- -----------
Net cash provided (absorbed) by operating activities (106,448) 115,290
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (232,992) (275,620)
Decrease (increase) in officer note receivable -- 2,000
Decrease (increase) in related party receivables (6,165) --
Decrease (increase) in restricted cash (832,618) --
----------- -----------
Net cash absorbed by investing activities (1,071,775) (273,620)
----------- -----------
Cash flows from financing activities:
Proceeds from bank borrowings 4,000,000 166,700
Repayments of bank borrowings (2,928,408) (329,011)
----------- -----------
Net cash provided (absorbed) by financing activities 1,071,592 (162,311)
----------- -----------
Net increase (decrease) in cash and cash equivalents (106,631) (320,641)
Cash and cash equivalents at beginning of period 288,310 438,079
----------- -----------
Cash and cash equivalents at end of period $ 181,679 $ 117,438
=========== ===========
Reconciliation of net income (loss) to net cash provided
(absorbed) by operating activities:
Net income $ 45,986 $ 43,035
Adjustments to reconcile net income to net cash
provided (absorbed) by operating activities:
Depreciation and amortization 159,759 216,074
Decrease (increase) in other assets (161,659) (19,013)
Decrease (increase) in:
Accounts receivable - billed (97,743) (780,301)
Accounts receivable - unbilled (115,124) (326,995)
Inventories (79,185) 19,703
Prepaid expenses and other assets (88,815) 57,731
Increase (decrease) in:
Accounts payable - trade 358,131 378,001
Accrued expenses and other liabilities (62,160) 188,722
Customer deposits (65,638) 338,333
----------- -----------
Net cash provided (absorbed) by operating activities $ (106,448) $ 115,290
=========== ===========
The accompanying notes are an integral part of these consolidated financial statement
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6
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SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998
(Unaudited)
Basis of Presentation
As permitted by the rules of the Securities and Exchange Commission
applicable to quarterly reports on Form 10-QSB, these notes are condensed and do
not contain all disclosures required by generally accepted accounting
principles. Reference should be made to the consolidated financial statements
and related notes included in the Smith-Midland Corporation's Annual Report on
Form 10-KSB for the year ended December 31, 1997.
In the opinion of the management of Smith-Midland Corporation (the
"Company"), the accompanying financial statements reflect all adjustments of a
normal recurring nature which were necessary for a fair presentation of the
Company's results of operations for the three- and six-month periods ended June
30, 1998 and 1997.
The results disclosed in the consolidated statements of operations are not
necessarily indicative of the results to be expected for any future periods.
Principles of Consolidation
The Company's accompanying consolidated financial statements include the
accounts of Smith-Midland Corporation, a Delaware corporation, and its wholly
owned subsidiaries: Smith-Midland Corporation, a Virginia corporation; Easi-Set
Industries, Inc., a Virginia corporation; Smith-Carolina Corporation, a North
Carolina corporation; Concrete Safety Systems, Inc., a Virginia corporation; and
Midland Advertising & Design, Inc., a Virginia corporation. All significant
inter-company accounts and transactions have been eliminated in consolidation.
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the 1998 presentation.
Inventories
Inventories are stated at the lower of cost, using the first-in, first-out
(FIFO) method, or market.
7
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SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited
Property and Equipment
Property and equipment, net is stated at depreciated 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:
Years
-----
Buildings...................................................... 10-33
Trucks and automotive equipment................................ 3-10
Shop machinery and equipment................................... 3-10
Land improvements.............................................. 10-30
Office equipment............................................... 3-10
Income Taxes
The provision for income taxes is based on earnings reported in the
financial statements. A deferred income tax asset or liability is determined by
applying currently enacted tax laws and rates to the expected reversal of the
cumulative temporary differences between the carrying value of assets and
liabilities for financial statement and income tax purposes. Deferred income tax
expense is measured by the change in the deferred income tax asset or liability
during the year.
No provision for income taxes has been made for the three- and six-month
periods ended June 30, 1998 and 1997, as the Company does not expect to incur
income tax expense for 1998 and did not incur income tax expense during 1997.
Revenue Recognition
The Company primarily recognizes revenue on the sale of its standard precast
concrete products at shipment date, including revenue derived from any projects
to be completed under short-term contracts. Installation services for precast
concrete products, leasing and royalties are recognized as revenue as they are
earned on an accrual basis. Licensing fees are recognized under the accrual
method unless collectibility is in doubt, in which event revenue is recognized
as cash is received. Certain sales of soundwall and SlenderwallTM concrete
products are recognized upon completion of production and customer site
inspections. Provisions for estimated losses on contracts are made in the period
in which such losses are determined.
8
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SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Estimates
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilutive
effect of securities that could share in earnings of an entity. At June 30, 1998
there was no material dilutive effect on earnings (loss) per share.
9
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company generates revenues primarily from the sale, licensing, leasing,
shipping and installation of precast concrete products for the construction,
utility and farming industries. The Company's operating strategy has involved
producing innovative and proprietary products, including SlenderwallTM, a
patent-pending, lightweight, energy efficient concrete and steel exterior wall
panel for use in building construction; J-J HooksTM Highway Safety Barrier, a
patented, positive-connected highway safety barrier; Sierra Wall, a sound
barrier primarily for roadside use; and transportable concrete buildings. In
addition, the Company produces utility vaults, farm products such as
cattleguards, and water and feed troughs, and custom order precast concrete
products with various architectural surfaces.
This Form 10-QSB contains forward-looking statements which involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements and the results for the
three and six months ended June 30, 1998 are not necessarily indicative of the
results for the Company's operations for the year ending December 31, 1998.
Factors that might cause such a difference include, but are not limited to,
product demand, the impact of competitive products and pricing, capacity and
supply constraints or difficulties, general business and economic conditions,
the effect of the Company's accounting policies and other risks detailed in the
Company's Annual Report on Form 10-KSB and other filings with the Securities and
Exchange Commission.
Results of Operations
Three months ended June 30, 1998 compared to the three months ended June
30, 1997
For the three months ended June 30, 1998, the Company had total revenue of
$3,557,951 compared to total revenue of $3,537,513 for the three months ended
June 30, 1997, an increase of $20,438, or 0.6%. Total product sales were
$3,142,943 for the three months ended June 30, 1998 compared to $3,163,570 for
the same period in 1997, a decrease of $20,627, or 0.7%. Shipping and
installation revenue was $415,008 for the three months ended June 30, 1998 and
$373,943 for the same period in 1997, an increase of $41,065, or 11%. The
increase was attributable to higher shipping volume which was offset in part by
lower installation revenue earned during the three-month period in 1998,
compared to the same period in 1997.
Total cost of goods sold for the three months ended June 30, 1998 was
$2,833,239, an increase of $236,940, or 9% from $2,596,299 for the three months
ended June 30, 1997. The increase was primarily the result of an increase in
cost and usage of materials used in the manufacturing process and the learning
curve associated with manufacturing a higher level of Slenderwall(TM) products.
The production of this architectural precast panel product has placed new
demands on the production and engineering departments requiring tighter controls
and the development of innovative techniques and production processes. This is
10
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an ongoing investment in future capacity and management is working to meet these
challenges and control costs. Total cost of goods sold, as a percentage of total
revenue, increased to 80% for the three months ended June 30, 1998, from 73% for
the three months ended June 30, 1997 primarily due to the factors just stated.
Management anticipates that these increased costs will continue for the balance
of the year. The start-up of an additional manufacturing facility at the
Midland, Virginia plant, anticipated in early 1999 will contribute to these
costs. When this new facility fully operational, there should be new economies
and efficiencies that will help to offset the costs of this current learning
curve, although there can be no assurances in this regard.
For the three months ended June 30, 1998, the Company's general and
administrative expenses decreased $177,171 to $400,238 from $577,409 during the
same period in 1997. The 31% decrease is attributed in part to staff vacancies
resulting in reduced salary and related expenses and to reduced legal,
professional and consulting fees during the 1998 period when compared to the
1997 period.
Selling expenses for the three months ended June 30, 1998 increased $55,562
to $171,868 from $116,306 for the three months ended June 30, 1997, resulting
from increased cost of marketing and bidding on the Slenderwall(TM) product and
increases in salary and commission expense.
The Company's operating income for the three months ended June 30, 1998 was
$152,606, compared to operating income of $247,499 for the three months ended
June 30, 1997, a decrease of $94,893, or 38%. The reduced operating income
resulted primarily from the increased cost of goods sold offset, in part, by
lower general and administrative expenses as discussed above.
Royalty income totaled $23,994 for the three months ended June 30, 1998,
compared to $44,525 for the same three months in 1997. The decrease of $20,531,
or 46%, was primarily due to a credit given for a reduction in the scope of a
licensing contract and the resulting reversal of previously recognized royalty
income of approximately $15,500.
Interest expense was $200,307 for the three months ended June 30, 1998,
compared to $93,219 for the three months ended June 30, 1997. The increase of
$107,088, or 115%, was primarily due to interest, lease buyout amounts and
miscellaneous fees associated with the early retirement of approximately 27
notes and capital leases as a result of the Company's debt restructuring in June
1998 (see "Liquidity and Capital Resources").
The net loss was $16,934 for the three months ended June 30, 1998, compared
to net income of $204,310 for the same period in 1997. The basic and diluted net
loss per share for the current three month period was $.01 compared to basic and
diluted earnings per share of $.07 for the three months ended June 30, 1997.
11
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Six months ended June 30, 1998 compared to the six months ended June 30, 1997
For the six months ended June 30, 1998, the Company had total revenue of
$6,584,611 compared to total revenue of $5,618,303 for the six months ended June
30, 1997, an increase of $966,308, or 17%. Total product sales were $5,710,915
for the six months ended June 30, 1998, compared to $4,950,903 for the same
period in 1997, an increase of $760,012, or 15%. The increase resulted primarily
from increased Slenderwall(TM) revenue in the 1998 period. Shipping and
installation revenue was $873,696 for the six months ended June 30, 1998 and
$667,400 for the same period in 1997, an increase of $206,296, or 31%. The
increase is attributable to higher shipping activity and increased installation
revenue in the 1998 period, as compared to the 1997 period.
Total cost of goods sold for the six months ended June 30, 1998 was
$5,048,302, an increase of $898,465, or 22%, from $4,149,837 for the six months
ended June 30, 1997. The increase was primarily the result of both increased
revenue and increased cost of goods sold as a percentage of revenue. Total cost
of goods sold, as a percentage of total revenue, increased to 77% for the six
months ended June 30, 1998, from 74% for the six months ended June 30, 1997
primarily due to the increased costs experienced during the second quarter, as
explained above.
For the six months ended June 30, 1998, the Company's general and
administrative expenses decreased $86,038, or 8%, to $968,049, from $1,054,087
during the same period in 1997. The decrease was attributed to the decreased
second quarter expenses explained above, partially offset by increases in
general and administrative expenses in the first quarter of this year.
Selling expenses for the six months ended June 30, 1998 increased $29,412,
or 10%, to $321,284 from $291,872 for the six months ended June 30, 1997. This
increase was primarily the result of increased salary and commissions expense
and increases in marketing bidding expenses.
The Company's operating income for the six months ended June 30, 1998 was
$246,976, compared to operating income of $122,507 for the six months ended June
30, 1997, an increase of $124,469, or 102%. The improved operating income
resulted primarily from increased sales and decreased operating expense as
discussed above.
Royalty income totaled $62,445 for the six months ended June 30, 1998,
compared to $80,164 for the same six months in 1997. The decrease of $17,719 was
largely due to a credit given for a reduction in the scope of a licensing
contract and the resulting reversal of previously recognized royalty income of
approximately $15,500.
Interest expense was $294,364 for the six months ended June 30, 1998,
compared to $197,233 for the six months ended June 30, 1997. The increase of
$97,131, or 49%, was primarily due to interest, lease buyout amounts and
miscellaneous fees associated with the early retirement of approximately 27
notes and capital leases as part of the Company's debt restructuring in June
1998 (see "Liquidity and Capital Resources").
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Net income was $45,986 for the six months ended June 30, 1998, compared to
net income of $43,035 for the same period in 1997. The basic and diluted
earnings per share for the current six month period was $.02 compared to $.01
per share for the six months ended June 30, 1997.
Liquidity and Capital Resources
The Company has financed its capital expenditures, operating requirements
and growth to date primarily with proceeds from operations, its initial public
offering ("IPO") and bank and other borrowings.The Company had $4,139,693 of
indebtedness at June 30, 1998, of which approximately $50,000 is scheduled to
mature within twelve months.
In June 1998 the Company successfully restructured substantially all of its
debt into one $4,000,000 note with The First National Bank of New England
("FNB"), headquartered in Hartford, Connecticut. The Company closed on this loan
on June 25, 1998. The Company obtained a twenty three year term on this note at
1.5% above prime, secured by equipment and real estate. The term of the note
dramatically improved the Company's current debt ratio and debt service. Current
debt decreased from $2,330,091 at March 31, 1998 to $50,280 at June 30, 1998. In
addition to paying off existing debt of approximately $2.9 million, the Company
received approximately $832,000 in restricted funds, to be used only for plant
expansion and new equipment. The loan is guaranteed in part by the U.S.
Department of Agriculture Rural Business-Cooperative Service's loan guarantee.
Under the terms of the note, the Company's unfinanced fixed asset expenditures
are limited to $300,000 per year for a five year period. In addition, FNB will
permit chattel mortgages on purchased equipment not to exceed $200,000 on an
annual basis so long as the Company is not in default. The Company was also
granted a $500,000 operating line of credit by FNB. This commercial revolving
promissory note terminates on May 1, 1999 and carries a variable interest rate
of 1% above prime. This line, which had not yet been utilized at June 30, 1998,
will be used to meet day to day operating needs.
Other Comments
The Company has not completed its assessment of the effect of the year 2000
on the Company's data processing systems and operations, but the Company expects
that the costs incurred in the preparation for the year 2000 will not have a
significant impact on the Company's cash flow or results of operations. The
Company is currently planning to send questionnaires to its suppliers and
customers to ensure that they are taking steps to be year 2000 compliant.
However, if the Company and third parties upon which it relies are unable to
address this issue in a timely manner, it could result in a material financial
risk to the Company. In order to assure this does not occur, the Company plans
to devote all resources required to resolve any significant year 2000 issues in
a timely manner.
The Company performs a portion of its concrete pouring and curing processes
on uncovered, outdoor manufacturing areas. During the winter months, cold or
adverse weather causes a slowdown or cessation of these outdoor production
activities, thereby reducing the Company's production capacity. However, The
Company is in the process of building an additional manufacturing facility at
its Midland, Virginia location which will bring these operations inside and out
of the weather and significantly increase annual manufacturing capacity.
Completion of this facility is anticipated for early 1999, although there can be
no assurance of such timing. In addition, the Company services the construction
13
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industry primarily in areas of the United States where construction activity is
inhibited by adverse weather during the winter. As a result, the Company
traditionally experiences reduced revenues from December through March and
realizes the substantial part of its revenues during the other months of the
year. The Company typically experiences lower profits, or losses, during the
winter months, and must have sufficient working capital to fund its operations
at a reduced level until the spring construction season. However, as of the date
of this filing, the Company's backlog is approximately $5.3 million, of which
approximately $2.2 million represents firm contracts for Slenderwall(TM) and
architectural pre-cast concrete products.
Management believes that the Company's operations have not been materially
affected by inflation.
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PART II - Other Information
Item 1. Legal Proceedings.
In late 1995, the Company filed four separate informal claims totaling
approximately $502,000 for damages and costs incurred as a result of
specification, policy and operating changes to contracts primarily instituted by
the State of Maryland, including the then newly issued "Noise Barrier Acceptance
Criteria," all of which were undertaken after the award of contracts and after
unit production in accordance with the contracts was virtually complete. In
1996, the Company filed additional claims against the State of Maryland related
to the same contracts in the amount of $578,500 which brought the amount of the
total claims to $1,080,500. In early 1996, the Company received several
counterclaims from the State of Maryland. All amounts due each party are
currently in dispute. The Company has considered the counterclaims in estimating
the recoverability of its claims and certain trade accounts receivable at June
30, 1998.
Specifically, the State of Maryland adjusted its noise barrier
acceptance criteria over a period of several months during 1995 with the latest
version dated October 13, 1995. The Company believes that these provisions were
significantly different than contract provisions and historical acceptance
criteria upon which the jobs were bid, and for which the Company was contracted.
The Company incurred significant costs to rework panels and in certain instances
construct new panels to comply with the new standards. Additionally, the Company
lost production time and revenue on other contracts due to the time devoted to
address the criteria changes. The Company has continued to pursue collection on
the claims filed and has hired an attorney who specializes in this area.
According to the Company's attorney, there is substantial likelihood that the
State Highway Administration ("SHA") will compensate the prime contractors for
SHA's improper actions, and the Company will receive additional compensation.
Approximately $270,000 of the total contract claims is included in trade
accounts receivable at June 30, 1998.
Item 2. Changes in Securities and Use of Proceeds. None.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders.
On June 18, 1998 the Company held its annual meeting of Stockholders.
The Stockholders voted on and approved the following:
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1. The election of the following individuals to serve as directors
until the next annual annual meeting and until their successors
are duly elected and qualified:
Rodney I Smith
Ashley Smith
Wesley A. Taylor
Andrew Kavounis
Bernard Patriacca
2. The ratification of the selection by the Board of Directors of
BDO Seidman, LLP as independent auditors for the fiscal year
ending December 31, 1998. In this connection, 2,535,895 shares
were voted for ratification, 0 shares were voted against
ratification, and 10,000 shares abstained.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
A. The following Exhibit is filed herewith:
Exhibit No. Title
----------- -----
27 Financial Data Schedule
B. Report on Form 8-K. None.
16
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SMITH-MIDLAND CORPORATION
Date: November 19, 1998 By: /s/ Rodney I. Smith
----------------------------------
Rodney I. Smith
Chairman of the Board,
Chief Executive Officer and President
(principal executive officer)
Date: November 19, 1998 By: /s/ Theodore D. Pennington
----------------------------------
Theodore D. Pennington
Vice President, Finance and
Chief Financial Officer
(principal financial officer)
17
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