SMITH MIDLAND CORP

Previous wording

Overall, the Company’s financial bottom line performance was higher for the first six months of 2024 when compared to the first six months of 2023. The Company had net income for the three and six months ended June 30, 2024 of $1,981 and $3,129, respectively, compared to a net loss of $782 and $701 for the three and six months ended June 30, 2023, respectively. Total revenue increased by $4,941 to $19,639 for the three months ended June 30, 2024 from $14,698 for the three months ended June 30, 2023. Total revenue increased by $8,845 to $36,394 for the six months ended June 30, 2024 from $27,540 for the six months ended June 30, 2023. The increase in revenue is mainly from an increase in soundwall sales, utility sales, miscellaneous product sales, and shipping and installation revenue.

Current wording

Overall, the Company’s financial bottom line performance was higher for the first nine months of 2024 when compared to the first nine months of 2023. The Company had net income for the three and nine months ended September 30, 2024 of $3,150 and $6,278, respectively, compared to net income of $1,266 and $565 for the three and nine months ended September 30, 2023, respectively. Total revenue increased by $7,931 to $23,582 for the three months ended September 30, 2024 from $15,651 for the three months ended September 30, 2023. Total revenue increased by $16,786 to $59,977 for the nine months ended September 30, 2024 from $43,191 for the nine months ended September 30, 2023. The increase in revenue is mainly from an increase in architectural sales, utility sales, miscellaneous product sales, barrier rentals, and shipping and installation revenue. In particular, revenue and net income significantly increased in the more recent periods due to special barrier rental projects occurring in the third quarter of 2024.

Previous wording

Cost of sales as a percentage of revenue, not including royalties, decreased to 77% for the three months ended June 30, 2024 compared to 92% for the three months ended June 30, 2023. Cost of sales as a percentage of revenue, not including royalties, decreased to 78% for the six months ended June 30, 2024 compared to 89% for the three months ended June 30, 2023. The decrease is primarily due to the increased production volumes which increased the absorption of overhead costs.

Current wording

Cost of sales as a percentage of revenue, not including royalties, decreased to 75% for the three months ended September 30, 2024 compared to 81% for the three months ended September 30, 2023. Cost of sales as a percentage of revenue, not including royalties, decreased to 77% for the nine months ended September 30, 2024 compared to 86% for the three months ended September 30, 2023. The decrease is primarily due to the increased production volumes which increased the absorption of overhead costs, as well as to a more favorable product mix.

Previous wording

Operating income was $2,673 for the three month period ended June 30, 2024, as compared to an operating loss of $981 for the three month period ended June 30, 2023. Operating income was $4,182 for the six month period ended June 30, 2024, as compared to an operating loss of $926 for the six month period ended June 30, 2023. Operating expenses for the second quarter of 2024 were $2,460 compared to $2,767 for the second quarter of 2023. Operating expenses for the first six months of 2024 were $4,863 compared to $4,878 for the first six months of 2023.

Current wording

Operating income was $3,848 for the three month period ended September 30, 2024, as compared to operating income of $1,502 for the three month period ended September 30, 2023. Operating income was $8,031 for the nine month period ended September 30, 2024, as compared to operating income of $576 for the nine month period ended September 30, 2023. Operating expenses for the third quarter of 2024 were $2,730 compared to $2,075 for the third quarter of 2023. Operating expenses for the first nine months of 2024 were $7,593 compared to $6,953 for the first nine months of 2023.

Previous wording

Income tax expense for the three month period ended June 30, 2024 was $632, or an effective tax rate of 24%, as compared to an income tax benefit of $110, or an effective tax rate of 12% for the three month period ended June 30, 2023. Income tax expense for the six month period ended June 30, 2024 was $988, or an effective tax rate of 24%, as compared to an income tax benefit of $87, or an effective tax rate of 11% for the six month period ended June 30, 2023.

Current wording

Income tax expense for the three month period ended September 30, 2024 was $694, or an effective tax rate of 18%, as compared to income tax expense of $247, or an effective tax rate of 16% for the three month period ended September 30, 2023. Income tax expense for the nine month period ended September 30, 2024 was $1,683, or an effective tax rate of 21%, as compared to income tax expense of $160, or an effective tax rate of 22% for the nine month period ended September 30, 2023.

Previous wording

As of August 2, 2024, the Company’s sales backlog was approximately $59.2 million, as compared to approximately $60.9 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 begin coming through the state and local governments in the latter half of 2024 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 and barrier rentals, in line with long-term strategic objectives.

Current wording

As of November 1, 2024, the Company’s sales backlog was approximately $62.8 million, as compared to approximately $60.2 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 begin coming through the state and local governments for the remainder of 2024 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 and barrier rentals, in line with long-term strategic objectives.

Previous wording

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® 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, 2024 and 2023.

Current wording

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® buildings, utility products, and miscellaneous precast products. The following table summarizes the sales by product type and comparison for the three and nine month periods ended September 30, 2024 and 2023.

Previous wording

Soundwall Sales - Soundwall sales were significantly higher for the three and six month periods ended June 30, 2024, compared to the same periods in 2023. The increase is due to higher production volumes at all three plants, as the Company increased production output to execute and deliver on the Company’s increased backlog. Soundwall sales are expected to trend similarly throughout the remainder 2024 as compared to the first half of 2024, although no assurance can be given.

Current wording

Soundwall Sales - Soundwall sales were lower for the three month period ended September 30, 2024, compared to the same period in 2023. The decrease is due to lower production at the North Carolina and South Carolina plants reflecting less soundwall projects than in the prior year period. Soundwall sales were significantly higher for the nine month period ended September 30, 2024, compared to the same period in 2023. The increase is due to higher production volumes at all three plants, as the Company increased production output to execute and deliver on the Company’s increased backlog. Soundwall sales are expected to trend similarly throughout the remainder 2024 as compared to the first three quarters of 2024, although no assurance can be given.

Previous wording

Architectural Panel Sales - Architectural panel sales increased for the three and six months ended June 30, 2024, compared to the same period in 2023. The increase is related to production of two architectural projects that started production at the end of the first quarter of 2024. Architectural sales are expected to trend higher throughout 2024 as compared to the first half of 2024, although no assurance can be given.

Current wording

Architectural Panel Sales - Architectural panel sales increased for the three and nine months ended September 30, 2024, compared to the same period in 2023. The increase is related to production of two architectural projects that started production at the end of the first quarter of 2024. Architectural sales are expected to trend higher throughout 2024 as compared to the full year 2023, although no assurance can be given.

Previous wording

SlenderWall Sales - SlenderWall sales decreased for the three and six months ended June 30, 2024, as compared to the same periods in 2023. A SlenderWall project was in production during the first half of 2023 and the Company did not have a SlenderWall project in production during the first half of 2024. The Company continues to focus sales initiatives on SlenderWall, but no assurance can be given as to the success of this endeavor.

Current wording

SlenderWall Sales - SlenderWall sales decreased for the three and nine months ended September 30, 2024, as compared to the same periods in 2023. A SlenderWall project was in production during the first half of 2023 and the Company did not have a SlenderWall project in production during the first nine months of 2024. The Company continues to focus sales initiatives on SlenderWall, but no assurance can be given as to the success of this endeavor.

Previous wording

Miscellaneous Wall Sales - Miscellaneous wall sales decreased for the three and six month periods ended June 30, 2024 compared to the same periods in 2023. Miscellaneous wall sales were slightly down due to lower production volumes in the second quarter of 2024 as compared to 2023. Miscellaneous wall sales are expected to trend similarly throughout 2024 as the first half of 2024, although no assurance can be provided.

Current wording

Miscellaneous Wall Sales - Miscellaneous wall sales decreased for the three and nine month periods ended September 30, 2024 compared to the same periods in 2023. Miscellaneous wall sales were slightly down due to lower production volumes in the second and third quarters of 2024 as compared to 2023. Miscellaneous wall sales are expected to trend similarly throughout 2024 as the first three quarters of 2024, although no assurance can be provided.

Previous wording

Barrier Sales - Barrier sales decreased for the three and six month periods ended June 30, 2024, compared to the same periods in 2023. The decrease is due to the completion of large barrier projects in North Carolina and South Carolina during 2023. Barrier sales are expected to trend similarly throughout 2024 as compared to the first half of 2024, although no assurance can be given. The Company continues to shift marketing efforts from barrier sales to barrier rentals in the Delaware to Virginia region.

Current wording

Barrier Sales - Barrier sales decreased for the three and nine month periods ended September 30, 2024, compared to the same periods in 2023. The decrease is due to the completion of large barrier projects in North Carolina and South Carolina during 2023. Barrier sales are expected to trend similarly for the last quarter of 2024 as compared to the first the quarters of 2024, although no assurance can be given. The Company continues to shift marketing efforts from barrier sales to barrier rentals in the Delaware to Virginia region.

Previous wording

Easi-Set® and Easi-Span Building Sales - Building and restroom sales increased slightly for the three and six month periods ended June 30, 2024, compared to the same periods in 2023, due to increased building sales at all manufacturing plants. Building and restroom sales are expected to continue to trend similarly throughout the remainder of 2024 compared to the first half of 2024.

Current wording

Easi-Set® and Easi-Span Building Sales - Building and restroom sales increased slightly for the three and nine month periods ended September 30, 2024, compared to the same periods in 2023, due to increased building sales at all manufacturing plants. Building and restroom sales are expected to continue to trend similarly throughout the remainder of 2024 compared to the first nine months of 2024.

Previous wording

Utility Sales - Utility sales increased significantly for the three and six month periods ended June 30, 2024, compared to the same periods in 2023. The Company has seen a surge in demand for utility vaults in the Northern Virginia market to support the data center growth. Utility sales are expected to trend similarly for the remainder of 2024 as compared to the first half of 2024, although no assurance can be provided.

Current wording

Utility Sales - Utility sales increased significantly for the three and nine month periods ended September 30, 2024, compared to the same periods in 2023. The Company has seen a surge in demand for utility vaults in the Northern Virginia market to support data center growth in this market. Utility sales are expected to trend similarly for the remainder of 2024 as compared to the first nine months of 2024, although no assurance can be provided.

Previous wording

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 increased for the three and six month periods ended June 30, 2024, compared to the same periods in 2023. The increase is mainly from the Virginia plant that started production on one large project for the production of precast beams and platforms. Miscellaneous product sales are expected to trend lower throughout 2024 as compared to the first half of 2024, although no assurance can be given.

Current wording

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 increased for the three and nine month periods ended September 30, 2024, compared to the same periods in 2023. The increase is mainly from the Virginia plant that started production on one large project for the production of precast beams and platforms. Miscellaneous product sales are expected to trend lower for the fourth quarter of 2024 as compared to the first three quarters of 2024, although no assurance can be given.

Previous wording

Barrier Rentals – Barrier rentals increased for the three and six month periods ended June 30, 2024 compared to the same periods in 2023. This increase is mainly attributed to an increase in utilization of rental barrier and the close-out of the buy-back agreement. Barrier rental revenue, excluding revenue from special barrier projects, is expected to trend higher throughout 2024 as compared to barrier rental revenue, excluding revenue from special barrier projects, in the first half of 2024, although no assurance can be given. In addition, barrier rental revenue is expected to increase from special barrier projects to be performed in the third quarter of 2024.

Current wording

Barrier Rentals – Barrier rentals increased significantly for the three and nine month periods ended September 30, 2024 compared to the same periods in 2023. This increase is attributed to an increase in utilization of rental barrier and the close-out of the buy-back agreement. Barrier rental revenue also increased due to multiple special barrier projects occurring and completed during the third quarter 2024. Barrier rental revenue, excluding revenue from special barrier projects, is expected to trend higher throughout 2024 as compared to the first three quarters of 2024, although no assurance can be given. Revenues from special barrier projects, if any, are expected to decrease due to the completion of projects in the third quarter of 2024.

Previous wording

Royalty Income – Royalties increased for the three and six month periods ended June 30, 2024, compared to the same periods in 2023. The increase is related to higher barrier production volumes experienced by the Company’s licensees. It is expected that infrastructure spending and the start of production by licensees of a new, low profile barrier that utilizes the J-J Hook system, will continue to drive royalties. The Company expects royalties for 2024 to exceed royalty income for the full year 2023, although no assurance can be given.

Current wording

Royalty Income – Royalties increased for the three and nine month periods ended September 30, 2024, compared to the same periods in 2023. The increase is related to higher barrier production volumes experienced by the Company’s licensees. It is expected that infrastructure spending and the start of production by licensees of a new, low profile barrier that utilizes the J-J Hook system, will continue to drive royalties. The Company expects royalties for 2024 to exceed royalty income for the full year 2023, although no assurance can be given.

Previous wording

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 revenues increased for the three and six month periods ended June 30, 2024 compared to the same periods in 2023. The increase is mainly attributed to the increase in shipping and installation of SlenderWall and architectural panels. This increase in shipping and installation revenue correlates with the increased production of SlenderWall panels that occurred, and for which revenue was previously recognized, throughout 2023.

Current wording

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 revenues increased for the three and nine month periods ended September 30, 2024 compared to the same periods in 2023. The increase is mainly attributed to the increase in shipping and installation of SlenderWall and architectural panels. This increase in shipping and installation revenue correlates with the increased production of SlenderWall panels that occurred, and for which revenue was previously recognized, throughout 2023.

Previous wording

Cost of Sales - Total cost of sales as a percent of revenue, excluding royalties, for the three months ended June 30, 2024, was 77%, as compared to 92% for the three months ended June 30, 2023. Total cost of sales as a percent of revenue, excluding royalties, for the six months ended June 30, 2024, was 78%, as compared to 89% for the six months ended June 30, 2023. The decrease in cost of sales as a percentage of revenue, not including royalties, for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, is due to the increase in overall production volumes, which increased the absorption of overhead costs. In addition, the decrease in cost of sales as a percentage of revenue, not including royalties, decreased due to production throughout the first half of 2024 related to contracts that factored in the rising inflationary costs experienced throughout 2022 and 2023, and a one-time expense related to panels the Company chose to remake for one specific customer related to defective steel from a supplier used in the initial product in 2023.

Current wording

Cost of Sales - Total cost of sales as a percent of revenue, excluding royalties, for the three months ended September 30, 2024, was 75%, as compared to 81% for the three months ended September 30, 2023. Total cost of sales as a percent of revenue, excluding royalties, for the nine months ended September 30, 2024, was 77%, as compared to 86% for the nine months ended September 30, 2023. The decrease in cost of sales as a percentage of revenue, not including royalties, for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, is due to the increase in overall production volumes, which increased the absorption of overhead costs. The Company also had multiple short-term special barrier rental projects occurring in the third quarter 2023, which historically carry slightly higher margins due to the nature of the projects. In addition, the decrease in cost of sales as a percentage of revenue, not including royalties, decreased due to production throughout the first half of 2024 related to contracts that factored in the rising inflationary costs experienced throughout 2022 and 2023, and a one-time expense related to panels the Company chose to remake for one specific customer related to defective steel from a supplier used in the initial product in 2023.

Previous wording

General and Administrative Expenses - For the three months ended June 30, 2024, the Company's general and administrative expenses decreased to $1,669 from $1,884 during the same period in 2023. For the six months ended June 30, 2024, the Company's general and administrative expenses decreased to $3,218 from $3,233 during the same period in 2023. General and administrative expense as a percentage of total revenue was 9% and 13% for the three month periods ended June 30, 2024 and 2023, respectively. General and administrative expense as a percentage of total revenue was 9% and 12% for the six month periods ended June 30, 2024 and 2023, respectively. Such expenses decreased due to lower salaries and wages. The salaries and wages are expected to slightly increase for the second half of 2024 as compared to the first six months of 2024.

Current wording

General and Administrative Expenses - For the three months ended September 30, 2024, the Company's general and administrative expenses increased to $1,720 from $1,187 during the same period in 2023. For the nine months ended September 30, 2024, the Company's general and administrative expenses increased to $4,938 from $4,420 during the same period in 2023. General and administrative expense as a percentage of total revenue was 7% and 8% for the three month periods ended September 30, 2024 and 2023, respectively. General and administrative expense as a percentage of total revenue was 8% and 10% for the nine month periods ended September 30, 2024 and 2023, respectively. Such expenses increased due to higher salary and wage rates, and the increase in the allowance for credit losses.

Previous wording

Selling Expenses* -* Selling expenses for the three months ended June 30, 2024 decreased to $791 from $883 for the same period in 2023. The slight decrease is due to a reduction in salaries and wages. Selling expenses for the six months ended June 30, 2024 and 2023 were both $1,645. The Company expects selling expenses to increase in future periods with the plan for additional sales associates and increased advertising spending aligning with the strategy to increase SlenderWall sales and barrier rentals.

Current wording

Selling Expenses* -* Selling expenses for the three months ended September 30, 2024 increased to $1,010 from $888 for the same period in 2023. The slight increase is due to additional salaries and wages during in 2024. Selling expenses for the nine months ended September 30, 2024 and 2023 were $2,655 and $2,533, respectively. The Company expects selling expenses to increase in future periods with the plan for additional sales associates and increased advertising spending aligning with the strategy to increase SlenderWall sales and barrier rentals.

Previous wording

Operating Income (Loss) - The Company had operating income for the three month period ended June 30, 2024 of $2,673 compared to an operating loss of $981 for the same period in 2023. The Company had operating income for the six month period ended June 30, 2024 of $4,182 compared to an operating loss of $926 for the same period in 2023. The increase is mainly due to the increase in revenue and decrease in cost of sales as a percent of revenue.

Current wording

Operating Income (Loss) - The Company had operating income for the three month period ended September 30, 2024 of $3,848 compared to operating income of $1,502 for the same period in 2023. The Company had operating income for the nine month period ended September 30, 2024 of $8,031 compared to operating income of $576 for the same period in 2023. The increase is mainly due to the increase in revenue and decrease in cost of sales as a percent of revenue.

Previous wording

Interest Expense - Interest expense was $59 and $64 for the three month periods ended June 30, 2024 and 2023, respectively. Interest expense was $119 and $128 for the six month periods ended June 30, 2024 and 2023, respectively. The Company expects interest expense for the full year of 2024 to be lower compared to the full year of 2023 due to the decrease in level of indebtedness.

Current wording

Interest Expense - Interest expense was $56 and $64 for the three month periods ended September 30, 2024 and 2023, respectively. Interest expense was $175 and $192 for the nine month periods ended September 30, 2024 and 2023, respectively. The Company expects interest expense for the full year of 2024 to be lower compared to the full year of 2023 due to the decrease in level of indebtedness.

Previous wording

Income Tax Expense (Benefit) - The Company had an income tax expense of $632, or an effective tax rate of 24%, for the three months ended June 30, 2024, compared to income tax benefit of $110, or an effective tax rate of 12% for the same period in 2023. The Company had an income tax expense of $988, or an effective tax rate of 24%, for the six months ended June 30, 2024, compared to income tax benefit of $87, or an effective tax rate of 11% for the same period in 2023.

Current wording

Income Tax Expense (Benefit) - The Company had an income tax expense of $694, or an effective tax rate of 18%, for the three months ended September 30, 2024, compared to income tax expense of $247, or an effective tax rate of 16% for the same period in 2023. The Company had an income tax expense of $1,683, or an effective tax rate of 21%, for the nine months ended September 30, 2024, compared to income tax expense of $160, or an effective tax rate of 22% for the same period in 2023.

Previous wording

Net Income (Loss) - The Company had net income of $1,981 and $3,129 for the three and six months ended June 30, 2024, respectively, compared to a net loss of $782 and $701 for the same periods in 2023, respectively. The basic and diluted earnings per share was $0.37 and $0.59, respectively, for the three and six months ended June 30, 2024, and the basic and diluted loss per share was $0.15 and $0.13 for the three and six months ended June 30, 2023, respectively.

Current wording

Net Income (Loss) - The Company had net income of $3,150 and $6,278 for the three and nine months ended September 30, 2024, respectively, compared to net income of $1,266 and $565 for the same periods in 2023, respectively. The basic and diluted earnings per share was $0.59 and $1.18, respectively, for the three and nine months ended September 30, 2024, and the basic and diluted earnings per share was $0.24 and $0.11 for the three and nine months ended September 30, 2023, respectively.

Previous wording

The Company has a mortgage note payable to Summit Community Bank (the “Bank”) for the construction of the 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 and a guarantee by the Company. The balance of the note payable at June 30, 2024 was $1,275.

Current wording

The Company has a mortgage note payable to Burke & Herbert Bank & Trust Company, formally Summit Community Bank (the “Bank”) for the construction of the 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 and a guarantee by the Company. The balance of the note payable at September 30, 2024 was $1,221. The balance of the note payable at December 31, 2023 was $1,382.

Previous wording

The Company also has a note payable to the Bank in the amount of $1,666 as of June 30, 2024. 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 over 120 months in the amount of $27. The loan matures on March 27, 2030.

Current wording

The Company also has a note payable to the Bank in the amount of $1,624 as of September 30, 2024 and $1,792 as of December 31, 2023. 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 over 120 months in the amount of $27. The loan matures on March 27, 2030.

Previous wording

On February 10, 2022, the Company completed the financing for its acquisition of certain real property in Midland, VA from the fourth quarter of 2021, totaling approximately 29.8 acres, with a note payable to the Bank in the original principal amount of $2,805. 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, 2024 was $2,453.

Current wording

On February 10, 2022, the Company completed the financing for its acquisition of certain real property in Midland, VA from the fourth quarter of 2021, totaling approximately 29.8 acres, with a note payable to the Bank in the original principal amount of $2,805. 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 September 30, 2024 was $2,420. The balance of the note payable at December 31, 2023 was $2,525.

Previous wording

The Company additionally has one smaller installment loan with an annual interest rate of 2.90%, maturing in 2025, with a balance of $18 as of June 30, 2024.

Current wording

The Company additionally has one smaller installment loan with an annual interest rate of 2.90%, maturing in 2025, with a balance of $16 as of September 30, 2024. The balance at December 31, 2023 was $29.

Previous wording

Under the loan covenants with the Bank, the Company is limited to annual capital expenditures of $5,000 and must maintain tangible net worth of $10,000. The Company is in compliance with all covenants pursuant to the loan agreements as of June 30, 2024.

Current wording

Under the loan covenants with the Bank, the Company is limited to annual capital expenditures of $5,000 and has received a waiver for 2024 from the Bank. Also under the loan covenants with the Bank, the Company must maintain tangible net worth of $10,000. The Company is in compliance with all covenants pursuant to the loan agreements as of September 30, 2024.

Previous wording

In addition to the notes payable discussed above, the Company has a $5,000 line of credit with the Bank with no balance outstanding as of June 30, 2024. The line of credit is evidenced by a commercial revolving promissory note, which carries a variable interest rate of prime, with a floor of 3.50%, and matures on October 1, 2024. The loan is collateralized by a first lien position on the Company's accounts receivable and inventory and a second lien position on all other business assets. Key provisions of the line of credit require the Company (i) to obtain bank approval for capital expenditures in excess of $5,000 during the term of the loan and (ii) to obtain bank approval prior to its funding of any acquisition. On October 1, 2023, the Company received a Commitment Letter from the Bank to provide a guidance line of credit specifically to purchase business equipment in an amount up to $1,500. The commitment provides for the purchase of equipment for which a note payable will be executed with a term not to exceed five years with an interest rate at the Wall Street Journal prime rate plus 0.50% with a floor of 3.50% per annum. The loan is collateralized by a first lien position on all equipment purchased under the line. The commitment for the guidance line of credit matures on October 1, 2024. As of June 30, 2024, the Company had not purchased any equipment pursuant to the $1,500 commitment.

Current wording

In addition to the notes payable discussed above, the Company has a $5,000 line of credit with the Bank with no balance outstanding as of September 30, 2024. The line of credit is evidenced by a commercial revolving promissory note, which carries a variable interest rate of prime, with a floor of 3.50%. The line of credit was scheduled to mature on October 1, 2024, but was extended to January 1, 2025. The loan is collateralized by a first lien position on the Company's accounts receivable and inventory and a second lien position on all other business assets. Key provisions of the line of credit required the Company (i) to obtain bank approval for capital expenditures in excess of $5,000 during the term of the loan and (ii) to obtain bank approval prior to its funding of any acquisition. On October 1, 2023, the Company received a Commitment Letter from the Bank to provide a guidance line of credit specifically to purchase business equipment in an amount up to $1,500. The commitment provided for the purchase of equipment for which a note payable will be executed with a term not to exceed five years with an interest rate at the Wall Street Journal prime rate plus 0.50% with a floor of 3.50% per annum. The loan is collateralized by a first lien position on all equipment purchased under the line. The commitment for the guidance line of credit matured on October 1, 2024. As of September 30, 2024, the Company had not purchased any equipment pursuant to the $1,500 commitment.

Previous wording

On June 30, 2024, the Company had cash totaling $7,288 compared to cash totaling $9,175 on December 31, 2023. The decrease in cash is primarily the result of cash absorbed by investing activities through capital spending as described in further detail below. The Company expects its cash position to be favorably affected to the extent that it is successful in collecting outstanding accounts receivable balances.

Current wording

On September 30, 2024, the Company had cash totaling $9,013 compared to cash totaling $9,175 on December 31, 2023. The decrease in cash is primarily the result of cash absorbed by investing activities through capital spending as described in further detail below. The Company expects its cash position to be favorably affected to the extent that it is successful in collecting outstanding accounts receivable balances.

Previous wording

The Company’s accounts receivable balances, net of allowance, at June 30, 2024 was $17,178, compared to $17,209 at December 31, 2023.

Current wording

The Company’s accounts receivable balances, net of allowance, at September 30, 2024 was $17,822, compared to $17,209 at December 31, 2023.

Previous wording

Capital spending for the six months ended June 30, 2024 totaled $3,504 as compared to $2,974 for the same period in 2023. The 2024 expenditures were primarily for a new batch plant system for the South Carolina manufacturing facility, utility vault forms for increased production capacity, and crash cushions to expand the Company’s rental product offering. The Company intends to invest approximately $5,000, for the full year 2024, which includes expansion of the North Carolina manufacturing facility, soundwall forms for increased production capacity, and miscellaneous manufacturing equipment. Anticipated capital expenditures excludes possible acquisitions.

Current wording

Capital spending for the nine months ended September 30, 2024 totaled $5,543 as compared to $4,131 for the same period in 2023. The 2024 expenditures were primarily for a new batch plant system for the South Carolina manufacturing facility, utility vault forms for increased production capacity, and crash cushions to expand the Company’s rental product offering. The Company intends to invest approximately $6,000 for the full year 2024, which includes expansion of the North Carolina manufacturing facility, soundwall forms for increased production capacity, and miscellaneous manufacturing equipment. Anticipated capital expenditures excludes possible acquisitions.

Previous wording

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 (DSO), excluding the effect of unbilled revenue, was 97 days for the six months ended June 30, 2024, compared to 131 days for the six months ended June 30, 2023.

Current wording

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 (DSO), excluding the effect of unbilled revenue, was 85 days for the nine months ended September 30, 2024, compared to 116 days for the nine months ended September 30, 2023.

Previous wording

The Company’s inventory was $6,667 on June 30, 2024, and $5,150 on December 31, 2023, or an increase of $1,517. The increase in inventory is mainly due to the increase of finished goods inventory compared to the prior year. The increase is related to inventory needed on-hand for the anticipated delivery schedules as it relates to utility vaults in 2024. Inventory turnover was 9.4, annualized for the six months ended June 30, 2024, compared to 15.1, annualized for the same period in 2023.

Current wording

The Company’s inventory was $6,242 on September 30, 2024, and $5,150 on December 31, 2023, or an increase of $1,092. The increase in inventory is mainly due to the increase of finished goods inventory compared to the prior year. The increase is related to inventory needed on-hand for the anticipated delivery schedules as it relates to utility vaults in 2024. Inventory turnover was 9.7, annualized for the nine months ended September 30, 2024, compared to 15.3, annualized for the same period in 2023.

Previous wording

Raw material costs used in production have slightly increased for the first six months of 2024. The Company anticipates raw material prices to slightly increase for the remainder of 2024, although no assurance can be given regarding future pricing.

Current wording

Raw material costs used in production have slightly increased for the first nine months of 2024. The Company anticipates raw material prices to slightly increase for the remainder of 2024, although no assurance can be given regarding future pricing.

Previous wording

As of August 2, 2024, the Company’s sales backlog was approximately $59.2 million, as compared to approximately $60.9 million at the same time in 2023. 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.

Current wording

As of November 1, 2024, the Company’s sales backlog was approximately $62.8 million, as compared to approximately $60.2 million at the same time in 2023. 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.