SMID 10-Q
Smith Midland Corp (SMID)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission File Number
(Exact name of Registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address, zip code of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
| | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | | ☒ | Smaller reporting company | | Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $0.01 par value per share, outstanding as of August 1, 2026:
SMITH-MIDLAND CORPORATION
Form 10-Q Index
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements
Smith-Midland Corporation
and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
ASSETS |
| June 30, 2026 |
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| December 31, 2025 |
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Current assets |
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Cash |
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Accounts receivable, net |
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Trade - billed (less allowances of approximately $ |
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Trade – unbilled |
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Inventories, net |
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Raw materials |
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Finished goods |
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Prepaid expenses |
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Income tax receivable |
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Total current assets |
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Property and equipment, net |
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Other assets |
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Total assets |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
| 3 |
| Table of Contents |
Smith-Midland Corporation
and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY |
| June 30, 2026 |
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| December 31, 2025 |
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Current liabilities |
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Accounts payable - trade |
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Accrued expenses and other liabilities |
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Deferred revenue |
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Accrued compensation |
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Accrued income taxes |
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Operating lease liabilities |
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Current maturities of notes payable |
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Customer deposits |
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Total current liabilities |
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Deferred revenue |
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Operating lease liabilities |
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Notes payable - less current maturities |
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Deferred tax liability |
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Total liabilities |
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Commitments and contingencies (Note 5) |
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Stockholders’ equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Treasury stock, at cost, 40,920 shares |
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Retained earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
| $ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
| 4 |
| Table of Contents |
Smith-Midland Corporation
and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share data)
|
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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| 2026 |
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| 2025 |
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Revenue |
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Product sales |
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Barrier rentals |
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Royalty income |
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Shipping and installation revenue |
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Total revenue |
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Cost of sales |
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Gross profit |
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Operating expenses |
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General and administrative expenses |
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Selling expenses |
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Total operating expenses |
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Operating income |
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Other income (expense) |
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Interest expense |
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Interest income |
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Other income (expense) |
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Total other income (expense) |
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Income before income tax expense |
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Income tax expense |
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Net income |
| $ |
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| $ |
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| $ |
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Basic and diluted earnings per common share |
| $ |
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Weighted average number of common shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
| 5 |
| Table of Contents |
Smith-Midland Corporation
and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share data)
|
| Common Stock |
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| Treasury Stock |
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| Additional Paid-in |
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| Retained |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Earnings |
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| Total |
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Balance, December 31, 2025 |
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| $ |
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| $ |
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Vesting of restricted stock |
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Net income |
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Balance, March 31, 2026 |
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| $ |
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Net income |
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Balance, June 30, 2026 |
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| $ |
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Balance, December 31, 2024 |
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Vesting of restricted stock |
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Net income |
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Balance, March 31, 2025 |
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Vesting of restricted stock |
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Net income |
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Balance, June 30, 2025 |
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| $ | ( | ) |
| $ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
| 6 |
| Table of Contents |
Smith-Midland Corporation
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
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|
| Six Months Ended June 30, |
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| 2026 |
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| 2025 |
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Cash flows from operating activities: |
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Net income |
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| $ |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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(Gain) loss on sale of property and equipment |
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Allowance for credit losses |
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Stock compensation |
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Deferred taxes |
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(Increase) decrease in |
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Accounts receivable - billed |
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Accounts receivable - unbilled |
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Inventories |
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Prepaid expenses and other assets |
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Income tax receivable |
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Increase (decrease) in |
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Accounts payable - trade |
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Accrued expenses and other liabilities |
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Deferred revenue |
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Accrued compensation |
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Accrued income taxes |
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Customer deposits |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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Repayments of long-term borrowings |
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Net cash provided by (used in) financing activities |
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Net increase in cash |
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Cash |
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Beginning of period |
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End of period |
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Supplemental Cash Flow Information: |
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Cash payments for interest |
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| $ |
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| $ |
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Cash payments for income taxes |
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| $ |
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| $ |
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Non-Cash Investing Activities |
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| |
Capital expenditures in accounts payable |
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| $ |
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| $ |
| |||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 7 |
| Table of Contents |
Smith-Midland Corporation
and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. INTERIM FINANCIAL REPORTING
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we have condensed or omitted certain information and footnote disclosures that are included in our annual consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The condensed consolidated December 31, 2025 balance sheet was derived from the audited financial statements included in the Form 10-K. Dollar amounts in the footnotes are stated in thousands, except for per share data.
In the opinion of management, these condensed consolidated financial statements reflect all adjustments (which consist of normal, recurring adjustments) necessary for a fair presentation of the financial position and results of operations and cash flows for the periods presented. The results disclosed in the condensed consolidated statements of income are not necessarily indicative of the results to be expected in any future periods.
Recent Accounting Pronouncements
Effective January 1, 2026, the Company adopted ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The Company elected the practical expedient permitting entities to assume that current conditions as of the balance sheet date remain unchanged for the remaining life of certain short-term financial assets when estimating expected credit losses under ASC 326. The amendments were adopted prospectively. Adoption of the standard did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, requiring enhanced disclosures about specified categories of expenses included in certain expense captions presented on the face of the income statement. This standard will be effective for the Company for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, and may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.
| 8 |
| Table of Contents |
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers for product sales, royalty income and shipping and installation revenue. Revenue from barrier rentals is accounted for under ASC 842, Leases. Revenue accounted for (in thousands) under ASC 606 amounted to $
Product Sales - Over Time
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 for customized products is recognized over time when the Company’s performance (i) creates or enhances an asset that the customer controls, or (ii) creates or enhances an asset that has no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date, as defined in the contract.
To determine the amount of revenue to recognize over time, the Company measures progress toward complete satisfaction of its performance obligations using an output method based on units produced, which depicts the value transferred to the customer relative to the remaining value to be transferred. Costs associated with the units produced are recognized as incurred.
If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss is first determined, and the amount of the loss is updated in subsequent reporting periods. Revenue recognition includes amounts related to contract assets and contract liabilities. If recognized revenue exceeds amounts billed, a contract asset is recorded in Accounts receivable, trade — unbilled. Conversely, if amounts billed exceed recognized revenue, a contract liability is recorded in Customer deposits. Changes in 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.
Revenue recognized for product sales – over time (in thousands) are recorded in product sales under revenue in the consolidated financial statements which amounted to $
Product Sales - Point in Time
For certain product sales that do not meet the criteria for recognition over time, the Company recognizes revenue at a point in time, generally upon shipment or delivery (as specified in the contract), when control of the product transfers to the customer and the Company has a present right to payment.
Revenue recognized for product sales – point in time (in thousands) are recorded in product sales under revenue in the consolidated financial statements which amounted to $
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.
Accounts receivable, net includes the following components on the consolidated balance sheets:
| · | Trade – billed represents amounts that have been invoiced to customers for which the Company has an unconditional right to payment. Trade – billed is presented net of an allowance for expected credit losses. |
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|
|
| · | Trade – unbilled represents amounts related to performance obligations satisfied over time for which revenue has been recognized, but amounts have not yet been invoiced. Trade – unbilled is a contract asset. |
The Company’s Accounts receivable trade – billed (in thousands), arising from Topic 606 is $
Certain contracts include retention provisions, generally up to
| 9 |
| Table of Contents |
At June 30, 2026 and December 31, 2025, accounts receivable included contract retentions (in thousands) of approximately $
For contracts recognized over time, contract assets arise when revenue recognized to date exceeds cumulative billings. Contract assets are presented as Trade – unbilled on our consolidated financial statements. When the Company subsequently invoices the customer, the related amounts are reclassified from Trade – unbilled to Trade – billed. The Company’s Accounts receivable trade – unbilled (i.e. contract assets) balances are as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
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| 2025 |
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| 2026 |
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| 2025 |
| ||||
Accounts receivable trade – unbilled, beginning of the period |
| $ |
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| $ |
|
| $ |
|
| $ |
| ||||
Accounts receivable trade – unbilled, end of the period |
|
|
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|
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|
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| 1,785 |
|
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| 1,240 |
| ||
Amounts invoiced in the period from amounts included at the beginning of the period |
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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 Consolidated Balance Sheets as "Customer deposits" (contract liabilities). The Company’s Customer deposits (i.e. contract liabilities) balances are as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
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| 2025 |
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| 2026 |
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| 2025 |
| ||||
Customer deposits, beginning of the period |
| $ |
|
| $ |
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| $ |
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| $ |
| ||||
Customer deposits, end of the period |
|
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| 757 |
|
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| 2,637 |
| ||
Revenue recognized in the period from amounts included at the beginning of the period |
|
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|
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| ||||
For contracts where the Company has billed or received consideration in advance of transferring goods or services to the customer, the Company records a contract liability, deferred revenue, within accrued liabilities or other liabilities, as applicable, and recognizes revenue when the Company satisfies its performance obligations under the terms of the contract, which generally occurs over time as services are rendered or at a point in time upon delivery of the promised goods or services. Deferred revenue includes the non-lease components of barrier rental arrangements.
The Company’s deferred revenue (i.e. contract liabilities) balances (in thousands) related to Topic 606 are as follows:
|
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
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| 2025 |
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| 2026 |
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| 2025 |
| ||||
Deferred revenue, beginning of the period |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Deferred revenue, end of the period |
|
|
|
|
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|
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| 7,222 |
|
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| 6,175 |
| ||
Revenue recognized in the period from amounts included at the beginning of the period |
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| ||||
Any uncollected billed amounts for our performance obligations recognized over time, including contract retentions, are the difference between the opening and closing balances of the Company’s contract assets and contract liabilities and primarily results from the timing difference between the Company’s performance and billings. The changes in the contract assets and contract liabilities balances during the quarters ended June 30, 2026 and 2025 were not materially affected by any other factors.
Our billed and unbilled revenue is subject to credit risk if our customers should encounter financial difficulties. The Company maintains an allowance for estimated expected credit losses on Trade-billed (and evaluates Trade-unbilled for expected credit losses, as applicable). A considerable amount of judgment is required when determining expected credit losses. Estimates of such expected losses are recorded based on historical losses experienced by the Company and current and future economic conditions. Management also considers when a specific customer may not be able to meet its financial obligations due to deterioration in financial condition or credit rating. Factors relevant to our assessment include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends or past events, and forecasts of future economic conditions.
| 10 |
| Table of Contents |
At June 30, 2026 and June 30, 2025, total allowances for credit losses were $
The rollforward of our allowance for credit losses (in thousands) for the quarters ended June 30, 2026 and 2025, was as follows:
|
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
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| 2025 |
|
| 2026 |
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| 2025 |
| ||||
Balance at beginning of period |
| $ |
|
| $ |
|
| $ |
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| $ |
| ||||
Provision for Expected Credit Losses |
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|
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|
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| ||||
Balance at end of period |
|
|
|
|
|
|
|
| 871 |
|
|
| 1,329 |
| ||
Barrier Rentals - Lease Income
Barrier Rental revenue historically comprises Standard Barrier Rental and Special Barrier Projects.
Standard Barrier Rental
The Company leases barriers to customers under operating leases in accordance with ASC 842, Leases. Customers are invoiced at lease commencement for the full lease term. The Company’s standard barrier rentals arrangements are generally for periods less than five years and may include provisions for additional charges if the barriers remain on rent beyond the contractual lease term. The Company evaluates the enforceable term in determining the lease term used for revenue recognition and in preparing its disclosure of future fixed lease payments. Amounts billed in advance of the related lease periods are recorded as deferred lease income within Deferred revenue on the balance sheet and recognized as lease income on a straight-line basis over the lease term. Lease income is presented in Barrier Rentals within Revenue in the consolidated financial statements. The Company recognizes operating lease income only to the extent collection is probable. If collectability is not probable, lease income is limited to amounts collected until collectability becomes probable.
Standard Barrier Rental arrangements also include non-lease components (accounted for under ASC 606, Revenue from Contracts with Customers), including delivery/shipping, installation, and removal/pickup services. These non-lease components are distinct from the lease component because: (i) the lease commences upon shipment from the Company’s facility, and delivery and installation occur after lease commencement; (ii) the components are separately priced with observable standalone selling prices; and (iii) the services can be performed by third parties. The Company allocates consideration between lease and non-lease components based on their relative stand-alone selling prices. Revenue allocated to delivery and installation services is recognized when the services are performed (generally upon delivery to the customer’s site, which occurs after lease commencement), and revenue allocated to removal/pickup services is recognized when performed (generally at the end of the lease term). Amounts billed in advance of performance related to the non-lease components are recorded as deferred revenue within Deferred revenue on the balance sheet and recognized as the related services are performed and is recognized within shipping and installation revenue on the consolidated statements of income.
| 11 |
| Table of Contents |
The Company’s deferred lease revenue balances (in thousands) related to Topic 842, Leases are as follows:
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| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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| 2026 |
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| 2025 |
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| 2026 |
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| 2025 |
| ||||
Deferred revenue, beginning of the period |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
Deferred revenue, end of the period |
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Revenue recognized in the period from amounts included at the beginning of the period |
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Special Barrier Projects
The Company provides barrier rentals as part of integrated Special Barrier Projects, which include deployment and 24/7 concierge-type services. These arrangements are evaluated under ASC 842, Leases. The Company contracts with a third-party event services firm, with the end-user also a party to the arrangement. Projects are delivered as a single bundled engagement, typically over a one- to two-week period.
The Company’s personnel manage and execute all barrier movements under direction of customer authorized staff and officials. Based on this structure, the customer is considered to direct the use of the identified asset, indicating that a lease exists. The non-lease components are not distinct from the lease component, as they are highly interdependent and interrelated and not separately identifiable. Accordingly, the lease and non-lease components are not separated and are accounted for as a single combined component under ASC 842. Revenue is recognized on a straight-line basis over the project term, which reflects the continuous transfer of benefit over the duration of the engagement.
Royalty Income
The Company licenses certain products to other precast companies to produce the Company's products in accordance with the Company’s engineering specifications. Licensing agreements are typically for five-year terms and require royalty payments of
Shipping and Installation
Shipping, installation and removal services are distinct performance obligations and are accounted for under ASC 606, Revenue from Contracts with Customers. Revenue is recognized in the period the shipping, installation, and removal services are provided to the customer. When shipping and installation services are billed in advance of performance, the Company records a contract liability and recognizes the revenue when the services are performed. Shipping, installation and removal revenue is presented as Shipping and Installation within Revenue in the consolidated financial statements.
Disaggregation of Revenue
In the following table, revenue is disaggregated by primary sources of revenue (in thousands):
Revenue by Type |
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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| 2026 |
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| 2025 |
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| 2026 |
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| 2025 |
| ||||
Soundwall Sales |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
Architectural Panel Sales |
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SlenderWall Sales |
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Miscellaneous Wall Sales |
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Barrier Sales |
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Easi-Set/Easi-Span Building Sales |
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Utility Sales |
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Miscellaneous Sales |
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Total Product Sales |
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Barrier Rentals |
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Royalty Income |
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Shipping and Installation Revenue |
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Total Service and Other Revenue |
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Total Revenue |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
| 12 |
| Table of Contents |
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. 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.
Warranties
Smith-Midland products are typically sold pursuant to an implicit warranty of merchantability only. Warranty claims are reviewed and resolved on a case-by-case method. Although the Company does incur costs for warranty claims, historically such amounts are minimal.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentration of Risk
Historically, various customers have comprised greater than 10% of revenue during a given quarter or year. These customers are typically not the same quarter to quarter or year to year. The Company views revenue details by jobs, and not by customers. In the event a customer were to go out of business during a project, it is likely that the owner of the project would assign a new contractor to the job, and the Company would complete its scope of work. Therefore, the Company believes that it does not have a short-term vulnerability of severe impact to operations. In cases where customers are less than 10% of revenue, the Company assesses if there is a near term severe impact. The Company has determined that no customer, if lost, would result in a near term severe impact to the Company’s operations.
For the three months ended June 30, 2026, the Company derived none of its revenue from any individual customer that exceeded
.
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 (“CODM”) in deciding how to allocate resources and assess performance. The Company currently operates in one operating and reportable business segment for financial reporting purposes (the “Precast Concrete Segment”). The Company’s CODM is the Chief Executive Officer (“CEO”) and President.
The Precast Concrete Segment derives revenues from customers by providing products and services to customers. The accounting policies of the precast concrete segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the Precast Concrete Segment based on consolidated net income as reported on the consolidated statements of income and measures segment assets as total consolidated assets as reported on the consolidated balance sheets. The CODM uses consolidated net income and consolidated assets to allocate resources and assess performance. Significant segment expenses provided to the CODM are based on the expense breakout shown on the consolidated statements of income. The Precast Concrete Segment’s results are the same as reported on the consolidated statements of income and there are no adjustments or reconciling items.
| 13 |
| Table of Contents |
2. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share are calculated as follows (in thousands, except earnings per share):
|
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
| ||||||||||
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| 2026 |
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| 2025 |
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| 2026 |
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| 2025 |
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Basic earnings per common share |
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Net income |
| $ |
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| $ |
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| $ |
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| $ |
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Weighted average shares outstanding |
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Basic earnings per common share |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
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Diluted earnings per common share |
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Net income |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
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Weighted average shares outstanding |
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Dilutive effect of restricted stock |
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Total weighted average shares outstanding |
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Diluted earnings per common share |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
There was no restricted stock excluded from the diluted earnings per share calculation for the three and six month periods ended June 30, 2026 and June 30, 2025.
3. NOTES PAYABLE
The Company has a mortgage note payable to Burke & Herbert Bank & Trust Company, formerly Summit Community Bank (the “Bank”) for the construction of its North Carolina facility. The note matures February 2037 and carries a ten-year term at a fixed interest rate of
The Company also has a note payable to the Bank in the amount of $
| 14 |
| Table of Contents |
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 with a note payable to the Bank. The loan is collateralized by a first lien position on the related real property. The interest rate is fixed at
Under the loan covenants with the Bank, the Company must maintain tangible net worth of $
In addition to the notes payable discussed above, the Company has a revolving line of credit evidenced by promissory note with the Bank, with the available amount of $
Key provisions of the notes payables and line of credit, collectively, require the Company to maintain a (i) Minimum Debt Service Coverage Ratio of 1.25x, tested annually, (ii) Minimum tangible net worth of $
4. STOCK COMPENSATION
The fair value of restricted stock awards is estimated to be the market price of the Company's common stock at the close of the date of grant. Restricted stock activity during the six months ended June 30, 2026, is as follows:
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| Performance-Based |
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| Service-Based |
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| Number of Shares |
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| Weighted Average Grant Date Fair Value per Share |
| ||||
Non-vested, December 31, 2025 |
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Granted |
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Vested |
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| ( | ) |
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| ( | ) |
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Forfeited |
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Non-vested, June 30, 2026 |
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During the six months ended June 30, 2026, the Company granted
5. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, we are, from time to time, subject to various legal proceedings, including matters involving wage and hour employee class actions, stockholder actions, and consumer class actions, violent acts, and other conflicts. We may enter into discussions regarding settlement of these and other types of lawsuits, and may enter into settlement agreements, if we believe settlement is in the best interest of our stockholders. We do not believe that any such existing legal proceedings or settlements, individually or in the aggregate, will have a material effect on our financial condition, results of operations or liquidity.
| 15 |
| Table of Contents |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report and related documents include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act 1934. Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the Company’s actual results, performance (financial or operating), or achievements expressed or implied by such forward looking statements not to occur or be realized. Such forward looking statements generally are based upon the Company’s best estimates of future results, performance or achievement, based upon current conditions and the most recent results of operations. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “continue,” or similar terms, variations of those terms or the negative of those terms. Potential risks and uncertainties include, among other things, such factors as:
● | while we have expended significant funds in recent years to increase manufacturing capacity and the barrier rental fleet, and plan to continue to increase manufacturing capacity and the barrier rental fleet, there is no assurance that we will achieve significantly greater revenues,
| |
● | while we have special barrier projects that can occur at any time that may have a significant positive effect on revenues and operating income, including the significant special barrier projects that occurred in both the first quarter and the second quarter of 2025, there can be no assurance of these projects recurring in any future periods; likewise the lack of a special barrier project in any quarter will negatively impact revenues and operating income of such quarter relative to comparison to a quarter that includes a special barrier project. The Company, in view of significant revenues from special barrier projects in 2025, experienced a decrease from this revenue source and a substantial decrease in operating income in the quarter and six months ended June 30, 2026 as compared to the quarter and six months ended June 30, 2025, which had significant special barrier projects.
| |
● | our cash decreased as of June 30, 2026 from December 31, 2025, reflecting investment in capital expenditures and inventory and there can be no assurance that the Company’s cash will not be further reduced in the future, | |
● | we have a significant amount of accounts receivables, as of June 30, 2026, and our ability to fully collect these balances cannot be assured, |
● | cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations; in this respect, we experienced a ransomware incident in the first quarter of 2025 for which no ransomware payment was made and which continues to be addressed with notifications to potentially impacted internal and external parties and relevant governmental offices as well as enacting network security improvements; while we have not experienced a material impact on our operations to date, this incident may expose us to regulatory action and/or stockholder litigation, |
● | we identified material weaknesses in internal controls over financial reports related to (i) design and maintenance of effective controls over the financial reporting process; and (ii) certain business processes and the information control environment. The Company is currently taking remedial actions with respect to these weaknesses, |
● | there are uncertainties arising from the policies of governmental entities, including without limitation, government spending cuts and tariffs, and there can be no assurance that infrastructure spending will not be adversely affected or that the Company will not otherwise be adversely affected,
|
● | There continues to be a significant need for additional staffing for financial reporting and internal controls. The Company had a gap in hiring a Chief Financial Officer from July 17, 2024 to April 16, 2025 and experienced the resignation of the Accounting Manager in February 2026 which, although both positions have been filled, negatively delayed the Company’s closing and reporting cycles in order to maintain reporting integrity and data accuracy,
|
● | our future revenue growth depends in part on future government spending on infrastructure, and there can be no assurance that such spending will occur or be in significant amounts,
|
● | the continued availability of financing in the amounts, at the times, and on the terms required, to support our future business and capital projects,
|
● | potential decreases in our contract backlog; |
|
|
● | the extent to which we are successful in developing, acquiring, licensing, or securing new patents for proprietary products as the Company experiences the expiration of certain patents, |
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● | changes in economic conditions specific to any one or more of our markets (including tariffs, the availability of public funds and grants for construction), |
● | the Company’s operations in the first and second quarters of 2026, and the years 2025 and 2024 were adversely impacted by inflation in the purchase of raw materials such as cement and aggregates, steel, and also with labor costs, |
● | changes in general economic conditions in our primary service areas, |
● | adverse weather, which inhibits the demand for our products, or the installation or completion of projects, |
● | our compliance with governmental regulations, |
● | the outcome of future litigation, if any; in this respect, during the third quarter of 2025, we received an arbitration settlement of $458 thousand related to a SlenderWall® sale that occurred in 2015. The settlement included the recovery of previously reserved receivables and is recognized in the third quarter of 2025. There can be no assurance we will achieve favorable outcomes in any future litigation, arbitration, or similar proceedings, |
● | our ability to produce and install product on material construction projects that conforms to contract specifications and in a time frame that meets the contract requirements, |
● | the cyclical nature of the construction industry, |
● | our exposure to increased interest expense payments should interest rates change, and |
● | the other factors and information disclosed and discussed in other sections of this report and other filings with the Securities and Exchange Commission. |
Investors and shareholders should carefully consider such risks, uncertainties and other information, disclosures and discussions that contain cautionary statements identifying important factors that could cause actual results to differ materially from those provided in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
The Company invents, develops, manufactures, markets, leases, licenses, sells, and installs a broad array of precast concrete products and systems for use primarily in the construction, highway, utilities, and farming industries. The Company's customers are primarily general contractors and federal, state, and local transportation authorities located in the Mid-Atlantic and Northeastern regions and in parts of the Midwestern and Southeastern regions of the United States. The Company's operating strategy has involved producing innovative and proprietary products, including SlenderWall™, a lightweight, energy-efficient concrete and steel exterior insulated wall panel for use in building construction; J-J Hooks® Highway Safety Barrier, a positive-connected highway safety barrier; and Easi-Set® and Easi-Span transportable concrete buildings. In addition, the Company produces custom order precast concrete products with various architectural surfaces, as well as generic highway sound barriers, utility vaults, and farm products such as cattleguards.
The Company was incorporated in Delaware on August 2, 1994. Prior to a corporate reorganization completed in October 1994, the Company conducted its business primarily through Smith-Midland Virginia, which was incorporated in 1960 as Smith Cattleguard Company, a Virginia corporation, and subsequently changed its name to Smith-Midland Corporation in 1985. The Company’s principal offices are located at 5119 Catlett Road, Midland, Virginia 22728 and its telephone number is (540) 439-3266. As used in this report, unless the context otherwise requires, the term the “Company” refers to Smith-Midland Corporation and its subsidiaries.
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. Because of the cyclical nature of the construction industry, many factors not under our control, such as weather and project delays, affect the Company's production schedule, possibly causing momentary slowdowns in sales and net income. In addition, revenues are affected by the number, size, and timing of significant projects to which the Company is contracted. 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.
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Results of Operations (dollar amounts in thousands, except per share data)
Overall, the Company’s financial top and bottom line performance was lower for the first six months of 2026 when compared to the first six months of 2025. The Company had net income for the three and six months ended June 30, 2026 of $1,381 and $2,720 compared to net income of $4,171 and $7,498 for the three and six month periods ended June 30, 2025, respectively. Total revenue decreased by $2,823 to $23,363 for the three months ended June 30, 2026 from $26,186 for the three months ended June 30, 2025. Total revenue decreased by $3,949 to $44,935 for the six months ended June 30, 2025 from $48,884 for the six months ended June 30, 2025. The decrease in total revenue is mainly from special barrier project sales that occurred in the first and second quarters of 2025 that did not recur in the first and second quarters of 2026. Product sales for the six months ended June 30, 2026 increased by $440 to $22,988 from $22,548 for the six months ended June 30, 2025 due to increases in architectural panel sales, Easi-Set building sales, barrier sales and utility sales. Shipping and installation revenue increased by $4,867 to $14,782 for the six months ended June 30, 2026 from $9,915 for the six months ended June 30, 2025.
Cost of sales as a percentage of revenue, not including royalties, increased to 80% for the three months ended June 30, 2026 compared to 74% for the three months ended June 30, 2025. Cost of sales as a percentage of revenue, not including royalties, increased to 82% for the six months ended June 30, 2026 compared to 73% for the six months ended June 30, 2025. The increase is primarily due to the decrease in revenue from the special barrier projects that were performed in the first and second quarters of 2025, and did not recur in the first and second quarters of 2026, which have a higher margin and lower cost of sales when compared to product margin and product cost of sales.
Operating income was $1,985 for the three month period ended June 30, 2026, as compared to an operating income of $5,518 for the three month period ended June 30, 2025. Operating income was $3,713 for the six month period ended June 30, 2026, as compared to $9,905 for the six month period ended June 30, 2025. Operating expenses for the second quarter of 2026 were $3,434 compared to $2,268 for the second quarter of 2025. Operating expenses for the first six months of 2026 were $6,009 compared to $4,856 for the first six months of 2025.
Income tax expense for the three month period ended June 30, 2026 was $434, or an effective tax rate of 24%, as compared to an income tax expense of $1,311, or an effective tax rate of 24% for the three month period ended June 30, 2025. Income tax expense for the six month period ended June 30, 2026 was $856, or an effective tax rate of 24%, as compared to an income tax expense of $2,331, or an effective tax rate of 24% for the six month period ended June 30, 2025.
As of August 1, 2026, the Company’s sales backlog was approximately $57.4 million, as compared to approximately $54 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. The Company anticipates funding related to the Infrastructure Investment and Jobs Act to continue coming through the state and local governments in the latter half of 2026 and beyond to further promote growth in the revenue related to the highway, transportation, and infrastructure markets, although no assurance can be provided. The Company continues to increase marketing and sales efforts towards SlenderWall sales, barrier rentals and utility products, in line with the Company’s long-term strategic objectives.
Three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025
Revenue includes product sales, barrier rentals, royalty income, and shipping and installation revenues. Product sales are further divided into soundwall, architectural and SlenderWall™ panels, miscellaneous wall panels, highway barrier, Easi-Set® and Easi-Span buildings, utility products, and miscellaneous precast products. The following table summarizes the sales by product type and comparison for the three and six month periods ended June 30, 2026 and 2025.
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| Table of Contents |
Revenue by Type |
| Three Months Ended March 31, |
| |||||||||||||
|
| 2026 |
|
| 2025 |
|
| Change |
|
| % Change |
| ||||
Soundwall Sales |
| $ | 2,456 |
|
| $ | 5,206 |
|
| $ | (2,750 | ) |
|
| (53 | )% |
Architectural Panel Sales |
|
| 462 |
|
|
| — |
|
|
| 462 |
|
|
| 100 | % |
SlenderWall Sales |
|
| 132 |
|
|
| 1,488 |
|
|
| (1,356 | ) |
|
| (91 | )% |
Miscellaneous Wall Sales |
|
| 995 |
|
|
| 863 |
|
|
| 132 |
|
|
| 15 | % |
Barrier Sales |
|
| 2,758 |
|
|
| 1,230 |
|
|
| 1,528 |
|
|
| 124 | % |
Easi-Set and Easi-Span Building Sales |
|
| 2,151 |
|
|
| 2,926 |
|
|
| (775 | ) |
|
| (26 | )% |
Utility Sales |
|
| 1,965 |
|
|
| 871 |
|
|
| 1,094 |
|
|
| 126 | % |
Miscellaneous Product Sales |
|
| 284 |
|
|
| 852 |
|
|
| (568 | ) |
|
| (67 | )% |
Total Product Sales |
|
| 11,202 |
|
|
| 13,436 |
|
|
| (2,234 | ) |
|
| (17 | )% |
Barrier Rentals |
|
| 3,212 |
|
|
| 5,781 |
|
|
| (2,569 | ) |
|
| (44 | )% |
Royalty Income |
|
| 929 |
|
|
| 1,326 |
|
|
| (397 | ) |
|
| (30 | )% |
Shipping and Installation Revenue |
|
| 8,020 |
|
|
| 5,643 |
|
|
| 2,377 |
|
|
| 42 | % |
Total Service Revenue |
|
| 12,161 |
|
|
| 12,750 |
|
|
| (589 | ) |
|
| (5 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
| $ | 23,363 |
|
| $ | 26,186 |
|
| $ | (2,823 | ) |
|
| (11 | )% |
Revenue by Type |
| Six Months Ended March 31, |
| |||||||||||||
|
| 2026 |
|
| 2025 |
|
| Change |
|
| % Change |
| ||||
Soundwall Sales |
| $ | 5,806 |
|
| $ | 8,985 |
|
| $ | (3,179 | ) |
|
| (35 | )% |
Architectural Panel Sales |
|
| 1,212 |
|
|
| — |
|
|
| 1,212 |
|
|
| 100 | % |
SlenderWall Sales |
|
| 878 |
|
|
| 1,488 |
|
|
| (610 | ) |
|
| (41 | )% |
Miscellaneous Wall Sales |
|
| 1,300 |
|
|
| 1,464 |
|
|
| (164 | ) |
|
| (11 | )% |
Barrier Sales |
|
| 4,690 |
|
|
| 2,535 |
|
|
| 2,155 |
|
|
| 85 | % |
Easi-Set and Easi-Span Building Sales |
|
| 5,087 |
|
|
| 4,985 |
|
|
| 102 |
|
|
| 2 | % |
Utility Sales |
|
| 3,403 |
|
|
| 1,885 |
|
|
| 1,518 |
|
|
| 81 | % |
Miscellaneous Product Sales |
|
| 612 |
|
|
| 1,205 |
|
|
| (593 | ) |
|
| (49 | )% |
Total Product Sales |
|
| 22,988 |
|
|
| 22,548 |
|
|
| 440 |
|
|
| 2 | % |
Barrier Rentals |
|
| 5,413 |
|
|
| 14,205 |
|
|
| (8,792 | ) |
|
| (62 | )% |
Royalty Income |
|
| 1,752 |
|
|
| 2,216 |
|
|
| (464 | ) |
|
| (21 | )% |
Shipping and Installation Revenue |
|
| 14,782 |
|
|
| 9,915 |
|
|
| 4,867 |
|
|
| 49 | % |
Total Service Revenue |
|
| 21,947 |
|
|
| 26,336 |
|
|
| (4,389 | ) |
|
| (17 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
| $ | 44,935 |
|
| $ | 48,884 |
|
| $ | (3,949 | ) |
|
| (8 | )% |
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. 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.
Soundwall Sales - Soundwall sales were lower for the three and six month periods ended June 30, 2026, compared to the same periods in 2025. The decrease was primarily due to timing of project production schedules and shipment activity. The Company continues to maintain a soundwall backlog and expects production activity to increase throughout the remainder of 2026, although no assurance can be given.
.
Architectural Panel Sales – There were no Architectural panel sales for the three and six months ended June 30, 2025. Architectural panel sales in the three and six month periods ended June 30, 2026 were due to the commencement of architectural panel production activity. The Company expects architectural panel activity to continue throughout 2026 and trend higher than the first half of 2026 production levels, although no assurance can be given.
SlenderWall Sales - SlenderWall sales were lower for the three and six months ended June 30, 2026, as compared to the same periods in 2025. Due to the commencement of production on certain SlenderWall® projects and sales expectations in 2026, the Company expects sales for the remainder of the year in this category to be higher than the first half of 2026. The Company continues to focus sales and marketing initiatives on SlenderWall®, although no assurance can be provided regarding future project awards or production timing.
Miscellaneous Wall Sales - Miscellaneous wall sales are highly customized precast concrete products or retaining and lagging panels that do not fit other product categories. Miscellaneous wall sales increased for the three month and decreased in the six month period ended June 30, 2026 compared to the three and six month periods ended June 30, 2025 primarily due to normal fluctuations in project timing and product mix. Based on the Company’s backlog for these products, miscellaneous wall sales are expected to trend even through the remainder of 2026 as compared to 2025.
Barrier Sales - Barrier sales increased significantly for the three and six month periods ended June 30, 2026, compared to the same periods in 2025. The increase is based on higher market demand as the MASH barrier standard is adopted in the markets we serve, which is expected to result in the replacement of older barriers with regulation conforming barrier. The Company has developed barriers that conform to the MASH barrier standard and has passed barrier testing or is seeking to pass barrier testing in relevant states. Barrier sales are expected to trend lower for the remainder of 2026 as compared to the first half of 2026 as several large orders have been completed. The Company continues to focus strategically on barrier rental opportunities in certain geographic regions while maintaining selective barrier sales activity.
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Easi-Set® and Easi-Span Building Sales - Building and restroom sales were lower in the three month period and higher in the six month period ended June 30, 2026, compared to the same periods in 2025. The three month decrease is due to production timing and the six month increase is due to increased building sales at all manufacturing plants. Building and restroom sales are expected to continue to trend similarly throughout the remainder of 2026 compared to the first half of 2026.
Utility Sales - Utility sales increased for the three and six month periods ended June 30, 2026 compared to the three and six month period ended June 30, 2025, reflecting increased demand in utility and infrastructure-related markets, including continued data center development activity in Northern Virginia. The Company expects utility sales activity to continue through the remainder of 2026 and trend higher than 2025 production levels, although no assurance can be given.
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, concrete blocks, or small add-on items. Miscellaneous product sales decreased for the three and six month periods ended June 30, 2026, compared to the same periods in 2025. Miscellaneous product sales are expected to trend lower through the remainder of 2026 as compared to 2025, although no assurance can be provided.
Barrier Rentals – Barrier rentals decreased significantly for the three and six month periods ended June 30, 2026 compared to the same periods in 2025. This decrease is mainly attributed to two special barrier projects, one in each of the first and second quarters of 2025, but no such special barrier projects in the first half of 2026. Barrier rental revenue, excluding revenue from special barrier projects, is expected to trend higher throughout 2026 as compared to barrier rental revenue, excluding revenue from special barrier projects, in the first half of 2026, although no assurance can be given.
Royalty Income – – Royalty income decreased for the three and six month periods ended June 30, 2026 compared to the three and six month periods ended June 30, 2025 due a large project which generated higher royalties from one licensee in the first half of 2025 that did not recur in the first half of 2026. The Company continues to expect long-term royalty opportunities associated with infrastructure spending, the state-level adoption of the MASH barrier standard prompting continued utilization of the J-J Hooks® barrier system. The Company expects royalties for 2026 to trend higher for the full year 2026, although no assurance can be given.
Shipping and Installation – Shipping revenue results from shipping our products to the customers' final destination and is recognized when the shipping services take place. Installation activities include installation of our products at the customers’ construction site. Installation revenue results when attaching architectural wall panels to a building, installing an Easi-Set® or Easi-Span 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 revenue increased by 42% and 49% for the three and six month periods ended June 30, 2026, respectively, compared to the same period in 2025, primarily due to several large multi-year jobs concluding their delivery cycles in the 2026 period, the most significant of which includes an architectural panel large project in Maryland that commenced in 2023, a miscellaneous wall panel large project in Tennessee that commenced in 2024 and a Slenderwall and architectural panel large project located in Virginia that commenced at the beginning of 2025.
Cost of Sales - Total cost of sales as a percent of revenue, excluding royalties, for the three months ended June 30, 2026, was 80%, as compared to 74% for the three months ended June 30, 2025. Total cost of sales as a percent of revenue, excluding royalties, for the six months ended June 30, 2026, was 82%, as compared to 73% for the six months ended June 30, 2025. The increase in cost of sales as a percentage of revenue, not including royalties, for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, is due primarily to the revenue from the large special barrier projects that were performed in the first and second quarters of 2025, which have a higher margin and lower cost of sales as a percent of revenue when compared to product margins and product cost of sales as a percent of revenue, that did not recur in the first and second quarters of 2026. The Company expects cost of sales to improve based on its plans of increasing backlog of higher margin projects, increasing utilization and labor productivity inputs at its Virginia, North Carolina and South Carolina plants, although no assurances can be given.
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General and Administrative Expenses - For the three months ended June 30, 2026, the Company's general and administrative expenses increased to $2,483 from $1,514 during the same period in 2025. For the six months ended June 30, 2026, the Company's general and administrative expenses increased to $4,236 from $3,098 during the same period in 2025. General and administrative expense as a percentage of total revenue was 11% and 6% for the three month periods ended June 30, 2026 and 2025, respectively. General and administrative expense as a percentage of total revenue was 9% and 6% for the six month periods ended June 30, 2026 and 2025, respectively. Such expenses increased due to an increase in filling administrative and managerial staffing roles in 2026 that were vacant in 2025.
Selling Expenses - Selling expenses for the three months ended June 30, 2026 increased to $951 from $754 for the same period in 2025. Selling expenses for the six months ended June 30, 2026 increased slightly to $1,773 from $1,758 in the same six month period in 2025. The increase in the three and six month periods compared to the same periods in 2025 is due to an increase in sales associate positions and selling expenses in 2026. 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 and utility product sales and barrier rentals.
Operating Income - The Company had operating income for the three month period ended June 30, 2026 of $1,985 compared to $5,518 for the same period in 2025. The Company had operating income for the six month period ended June 30, 2026 of $3,713 compared to $9,905 for the same period in 2025. The decrease is mainly due to special barrier projects that occurred in the three and six month periods ending June 30, 2025 that did not recur in the same periods of 2026.
Interest Expense - Interest expense was $66 and $62 for the three month periods ended June 30, 2026 and 2025, respectively. Interest expense was $113 and $117 for the six month periods ended June 30, 2026 and 2025, respectively. The Company expects interest expense for the full year of 2026 to be lower compared to the full year of 2025 due to the decrease in level of indebtedness.
Income Tax Expense - The Company had an income tax expense of $434, or an effective tax rate of 24%, for the three months ended June 30, 2026, compared to $1,311, or an effective tax rate of 24%, for the three months ended June 30, 2025. The Company had an income tax expense of $856, or an effective tax rate of 24%, for the six months ended June 30, 2026, compared to income tax expense of $2,331, or an effective tax rate of 24% for the same period in 2025.
Net Income - The Company had net income of $1,381 and $2,720 for the three and six months ended June 30, 2026, respectively, compared to $4,171 and $7,498 for the three and six months ended June 30, 2025, respectively. The basic and diluted earnings per share was $0.26 and $.51 respectively, for the three and six months ended June 30, 2026, and the basic and diluted earnings per share was $0.79 and $1.41, respectively, for the three and six months ended June 30, 2025, respectively.
Liquidity and Capital Resources (dollar amounts in thousands)
The Company has a mortgage note payable to Burke & Herbert Bank & Trust Company, formerly Summit Community Bank (the “Bank”) for the construction of its North Carolina facility. 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, a subsidiary of the Company, and a guarantee by the Company. The balance of the note payable at June 30, 2026 and December 31, 2025 was $826 and $942 respectively.
The Company also has a note payable to the Bank in the amount of $1,141 and $1,279 as of June 30, 2026 and December 31, 2025 respectively. The loan is collateralized by a first lien position on the Midland, VA plant, building, and assets. The interest rate per the Promissory Note is fixed at 3.99% per annum, with principal and interest payments payable monthly in the amount of $27. The loan matures on March 27, 2030.
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. 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 June 30, 2026 and December 31, 2025 was $2,146 and $2,226 respectively.
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Under the loan covenants with the Bank, the Company must maintain tangible net worth of $25,000. The previous covenant in which the Company was limited to annual capital expenditures of $5,000 has been discontinued effective January 1, 2026. The Company is in compliance with all covenants pursuant to the loan agreements as of June 30, 2026.
In addition to the notes payable discussed above, the Company has a revolving line of credit evidenced by promissory note with the Bank, with the available amount of $5,000 with no balance outstanding as of June 30, 2026 and December 31, 2025. The line of credit is evidenced by a commercial revolving promissory note, which carries a variable interest rate of prime, with a floor of 4.99%. The line of credit was renewed on January 1, 2026 and matures May 1, 2027. The line of credit renewal excluded the previous limitation on annual capital expenditures. The amount available is based on the lower of the maximum $5,000 or 50% of eligible cash, inventory, and accounts receivable balances at the financial statement date.
Key provisions of the notes payables and line of credit, collectively, require the Company to maintain a (i) Minimum Debt Service Coverage Ratio of 1.25x, tested annually, (ii) Minimum tangible net worth of $25 million and (iii) Debt-to-tangible net worth not greater than 3 to 1 tested annually and is collateralized by a first lien position on the Company's accounts receivable, inventory, and equipment. The Company is in compliance with all covenants as of June 30, 2026.
The Company's outstanding notes payable are financed at fixed rates of interest. This leaves the Company protected from fluctuating interest rates. Increases in such rates will only affect the interest paid by the Company if new debt is obtained, or the available line of credit is drawn upon, with a variable interest rate.
On June 30, 2026, the Company had cash totaling $10,663 compared to cash totaling $11,884 on December 31, 2025. The decrease in cash is primarily the result of investing in inventory growth, payment of estimated federal and state income taxes and investing activities through capital spending as described in further detail below.
Net cash provided by operating activities was approximately $2.6 million for the six months ended June 30, 2026, compared with approximately $2.4 million for the same period in 2025. Cash provided by operating activities during the 2026 period reflected net income of approximately $2.7 million, adjusted for non-cash items and changes in working capital. Working capital changes included a decrease in billed accounts receivable of approximately $4.1 million, partially offset by increases in inventory of approximately $1.6 million and income tax receivable of approximately $1.2 million, as well as decreases in accrued income taxes and customer deposits of approximately $1.6 million each.
Net cash used in investing activities was approximately $3.6 million for the six months ended June 30, 2026, compared with approximately $2.5 million for the same period in 2025. Investing cash flows in both periods primarily consisted of purchases of property and equipment.
Net cash used in financing activities was approximately $0.3 million for each of the six months ended June 30, 2026 and 2025, consisting of repayments of long-term borrowings.
The Company’s accounts receivable balances, net of allowance, at June 30, 2026 was $22,785, compared to $27,228 at December 31, 2025. This decrease is due primarily to increased collections efforts focused on past due accounts in the second quarter of 2026.
Capital spending for the six months ended June 30, 2026 totaled $3,555 as compared to $2,515 for the same period in 2025. The 2025 expenditures were primarily for a ramp up in barrier production to expand the barrier rental fleet, attenuators and plant expansion. The 2026 expenditures were primarily related to investments in manufacturing equipment, production capacity expansion, infrastructure improvements at the Company’s facilities and continued expansion of the barrier rental fleet including barrier production and attenuator procurement. The Company, which expects product sales to be higher in 2026 as compared to 2025, intends to invest up to $9,000 in 2026 for long-term strategic growth which includes continued barrier production, expansion of the Virginia and North Carolina manufacturing facilities, soundwall forms for increased production capacity, and miscellaneous manufacturing equipment. Anticipated capital expenditures exclude possible acquisitions.
The Company’s cash flow from operations is affected by production schedules set by contractors, which generally provide for payment 30 to 90 days after the products are produced, and with some architectural contracts, retainage may be held until the entire project is completed. This payment schedule may result in liquidity challenges for the Company because it must bear a portion of the cost of production before it receives payment from its customers. The Company’s average days sales outstanding, excluding the effect of unbilled revenue, was 105 days for the six months ended June 30, 2026, compared to 96 days for the six months ended June 30, 2025.
If actual results regarding the Company's production, sales, and subsequent collections on customer receivables are materially inconsistent with management's expectations, the Company may in the future encounter cash flow and liquidity issues. If the Company's operational performance deteriorates significantly, it may be unable to comply with existing financial covenants and could cause defaults and acceleration under its loan agreements and lose access to the credit facility. Although no assurances can be given, the Company believes that its current cash resources, anticipated cash flow from operations, and the availability under the line of credit will be sufficient to finance the Company’s operations for at least the next 12 months.
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The Company’s inventory totaled $8,534 at June 30, 2026 compared to $6,928 at December 31, 2025. The increase was primarily attributable to increased finished goods inventory and inventory maintained to support backlog production and anticipated barrier rental activity. Inventory turnover was 7.4, annualized for the six months ended June 30, 2026, compared to 10.8, annualized for the six month period ended June 30, 2025.
Critical Accounting Policies and Estimates
The Company’s critical accounting policies are more fully described in its Summary of Accounting Policies to the Company’s consolidated financial statements on Form 10-K for the year ended December 31, 2025.
Seasonality
The Company services the construction industry primarily in areas of the United States where construction activity may be inhibited by adverse weather during the winter. As a result, the Company may experience reduced revenues from December through February and realize a more significant part of its revenues during the other months of the year. The Company may experience lower profits, or losses, during the winter months, and as such, must have sufficient working capital to fund its operations at a reduced level until the spring construction season. The failure to generate or obtain sufficient working capital during the winter may have a material adverse effect on the Company.
Inflation
Raw material costs used in production have slightly increased for the first six months of 2026. The Company anticipates raw material prices to slightly increase for the remainder of 2026, although no assurance can be given regarding future pricing.
Sales Backlog
As of August 1, 2026, the Company’s sales backlog was approximately $57.4 million, as compared to approximately $54 million at the same time in 2025 and $48 million for the previous measurement period in the first quarter of 2026. It is estimated that the majority of the projects in the sales backlog will be produced within 12 months, with a portion extending several years.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including our principal executive officer and principal financial and accounting officer, conducted an evaluation of the effectiveness of our internal controls over financial reporting, and disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our principal executive officer and principal financial and accounting officer concluded that, due to the material weaknesses described below, our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2026. Notwithstanding the existence of these material weaknesses, management believes that the consolidated financial statements in this Form 10-Q present, in all material respects, the Company’s financial condition, results of operations, and cash flows for the periods disclosed in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
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Previously Reported Material Weaknesses in Internal Control Over Financial Reporting
As previously reported in our Annual Report on Form 10-K for the years ended December 31, 2024 and December 31, 2025 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, management identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that the following material weaknesses in the Company’s internal control over financial reporting have not been remediated as of June 30, 2026.
Control Environment, Risk Assessment and Monitoring
Management has determined that the Company did not maintain appropriately designed entity-level controls impacting the (1) control environment, (2) risk assessment procedures, (3) control activities, (4) information and communication, and (5) monitoring activities to prevent or detect material misstatements to the financial statements and assess whether the components of internal control were present and functioning properly. These deficiencies were primarily attributed to (i) turnover of the Chief Financial Officer, (ii) lack of structure and responsibility, insufficient number of qualified resources, and inadequate oversight and accountability over the performance of controls, (iii) ineffective identification and assessment of risks impacting internal control over financial reporting, and (iv) ineffective evaluation and determination as to whether the components of internal control were present and functioning.
Control Activities and Information and Communication
These material weaknesses contributed to the following additional material weaknesses within certain business processes and the information technology environment:
| · | Management did not design, implement, and retain appropriate documentation of formal accounting policies, procedures, and controls across substantially all of the Company’s business processes over: (i) the financial reporting process, including management review controls over key disclosures and financial statement support schedules, (ii) the monthly financial close process, including journal entries and account reconciliations and (iii) the completeness and accuracy of information used by control owners in the operation of certain controls, to achieve timely, complete, accurate financial accounting, reporting. |
| · | The Company did not design and maintain effective processes and controls to ensure all journal entries are properly reviewed and approved prior to posting to the general ledger. |
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| · | Management did not design and maintain appropriate information technology general controls in the areas of user access, vendor management controls, and segregation of duties related to certain information technology systems that support the Company’s financial reporting process. |
As a result of these material weaknesses, the Company’s management has concluded that, as of June 30, 2026, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework (2013) issued by the COSO.
However, after giving full consideration to these material weaknesses, and the additional analyses and other procedures that we performed to ensure that our consolidated financial statements included in this Quarterly Report on Form 10-Q were prepared in accordance with U.S. GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.
Management communicated the results of its assessment to the Audit Committee of the Board of Directors.
Remediation Efforts
Management, with oversight from the Audit Committee and Board of Directors, is committed to the remediation of the material weaknesses described above. The Company has continued to implement measures to improve the internal control structure. Specifically, the Company has taken steps to address the material weaknesses, including:
| · | hiring, and continuing to hire, additional accounting and information technology personnel, and engage outside consulting firms as needed, to establish effective processes and controls, including establishing appropriate segregation of duties, |
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| · | developed formal accounting policies, procedures and controls related to the period-end financial reporting process including designing and maintaining controls over account reconciliations, journal entries, and financial reporting and disclosures; and |
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| · | enhanced information technology governance processes, including our program change management, computer operations, program development, and user access controls, enhancing role-based access, and implementing more robust information technology policies and procedures |
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While the Company believes that these efforts improved the internal control over financial reporting once implemented, these measures will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles.
Changes in Internal Control over Financial Reporting
Other than as described above, there were no other changes in the Company’s internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act during the quarter ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not presently involved in any litigation of a material nature.
ITEM 1A. Risk Factors
Not required
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Mine Safety Disclosures
Not applicable
ITEM 5. Other Information
None.
ITEM 6. Exhibits
Exhibit No. |
| Exhibit Description |
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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. |
104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SMITH-MIDLAND CORPORATION (Registrant) |
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Date: August 14, 2026 | By: | /s/ Ashley B. Smith |
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| Ashley B. Smith, Chief Executive Officer |
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| (Principal Executive) |
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Date: August 14, 2026 | By: | /s/ Dominic L. Hunter | |
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| Dominic L. Hunter, Chief Financial Officer | |
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| (Principal Financial Officer) | |
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