What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-05-27 compared with 2024-05-23 · 68 added, 72 removed, 151 unchanged (48% of the section changed)

1 unchanged sentence

The following discussion should be read in conjunction with the Consolidated Financial Statements of the Company (including the Notes thereto) included elsewhere in this report.

Dollar amounts are in thousands, except for per share amounts.

Dollar and share amounts are in thousands, except for per share amounts.

The Company generates revenues primarily from the sale, leasing, licensing, shipping and installation of precast concrete products and systems for the construction, utility and farming industries.

10 unchanged sentences

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.

Overall, the Company’s financial bottom line performance was essentially equal in 2023 when compared to 2022.

Overall, the Company’s financial bottom line performance was significantly greater in 2024 when compared to 2023.

The Company had net income for 2024 of $7,675 compared to net income of $795 for 2023.

Total revenue increased by $18,928 to $78,508 in 2024 from $59,580 in 2023.

The increase in sales is mainly from an increase in SlenderWall, soundwall, and miscellaneous wall sales.

The increase in sales is mainly from barrier rentals, shipping and installation, and utility product sales.

Fourth quarter 2024 revenues were $18,528 compared to $16,389 in the fourth quarter 2023.

The increase in revenue for the fourth quarter 2023 as compared to the fourth quarter 2022 was primarily due to an increase in barrier rental and an increase in soundwall sales.

Cost of sales as a percentage of revenue, not including royalties, increased to 86% in 2023 compared to 85% in 2022 due to additional costs, approximately $400, incurred for the remaking of panels for a specific project in the second quarter of 2023.

Cost of sales as a percentage of revenue, not including royalties, remained flat at 85% for the fourth quarter 2023 as compared to the fourth quarter 2022.

The increase in revenue for the fourth quarter 2024 as compared to the fourth quarter 2023 was primarily due to an increase in soundwall sales, architectural sales, utility sales, miscellaneous sales, Easi-Set building sales, and shipping and installation revenue.

Cost of sales as a percentage of revenue, not including royalties, decreased to 78% in 2024 compared to 86% in 2023.

Cost of sales as a percentage of revenue, not including royalties, decreased to 80% for the fourth quarter 2024 as compared to 85% for the fourth quarter 2023.

Operating income was $9,899 for 2024, as compared to $1,118 for 2023.

Operating expenses for 2024 was $10,111 compared to $9,534 in 2023.

The increase is due to increased selling costs associated with additional sales personnel and increased general and administrative costs due to increased insurance costs for a specific project in New York.

Total operating expense was $2,580 for both the fourth quarter 2023 and the fourth quarter 2022.

The increase is due to a minor increase in general and administrative expenses.

Total operating expense was $2,519 for the fourth quarter 2024 and $2,580 for the fourth quarter 2023.

Income tax expense for 2024 was $2,143, or an effective tax rate of 21.7%, as compared to $528, or an effective tax rate of 40.0% for 2023, adversely affecting net income in 2023.

The increase was mainly due to an increase in state tax liability for a true-up of state tax expense.

The greater percentage in 2023 was mainly due to an increase in state tax liability for a true-up of state tax expense.

As of March 3, 2025, the Company’s sales backlog was approximately $59.5 million, as compared to approximately $60.8 million around the same time in the prior year.

1 unchanged sentence

The Company anticipates greater sales volumes throughout 2025, although no assurance can be provided.

The Company also anticipates funding related to the Infrastructure Investment and Jobs Act to begin coming through the state and local governments in the latter half of 2024 and beyond to further promote growth in the revenue backlog related to the highway and transportation markets, although no assurance can be provided.

The Company also anticipates funding related to the Infrastructure Investment and Jobs Act to continue coming through the state and local governments in 2025 and beyond to further promote growth in the revenue backlog related to the highway and transportation markets, although no assurance can be provided.

State and local programs that support infrastructure spending, including gas tax increases, special tax districts, new funding mechanisms are increasing in number and size as these entities increase their role in infrastructure investment.

The Company continues to increase marketing and sales efforts towards SlenderWall sales and barrier rentals, in line with long-term strategic objectives.

In view of the policies of the new Administration and DOGE, including without limitation with respect to government spending cutbacks and tariffs, there can be no assurance of anticipated levels of infrastructure spending.

Results of Operations

25 unchanged sentences

Soundwall Sales – Soundwall panel sales increased by 54% in 2024 compared to 2023.

The increase is mainly due to higher production volumes at the North Carolina and South Carolina plants reflecting larger soundwall projects than in the prior period.

The 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.

The Company expects soundwall panel sales to be similar in 2025 as compared to 2024, although no assurance can be provided.

Architectural Sales – Architectural panel sales decreased by 74% in 2023 compared to 2022.

The decrease is from the completion of two architectural projects in the third quarter of 2022.

Architectural sales are expected to be higher during 2024, as compared to 2023, although no assurance can be provided.

SlenderWall Sales – SlenderWall panel sales increased by 257% in 2023 compared to 2022.

The increase is due to two projects being produced consecutively throughout 2023 in comparison to a single project in 2022, which production was completed in the first quarter of 2022.

Architectural Sales – Architectural panel sales increased by 272% in 2024 compared to 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 be similar in 2025, as compared to 2024, although no assurance can be provided.

SlenderWall Sales – SlenderWall panel sales decreased by 100% in 2024 compared to 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 2024.

The Company continues to focus sales initiatives on SlenderWall, but no assurance can be given as to the success of this endeavor.

SlenderWall sales are expected to be lower during 2024, as compared to 2023.

SlenderWall sales are expected to increase in 2025 compared to 2024, as several SlenderWall projects are anticipated to start in the first half of 2025.

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 by 85% in 2023 when compared to 2022 due to the increased amount of wall panel projects in Virginia and increased retaining wall projects in South Carolina.

Miscellaneous sales are expected to trend similar in 2024, as compared to 2023, although no assurance can be provided.

Barrier Sales – Barrier sales increased by 17% in 2023 when compared to 2022.

The increase is due to large barrier projects at all three manufacturing facilities that had significant production volumes in the first and third quarters of 2023.

Miscellaneous wall sales decreased by 20% in 2024 when compared to 2023 due lower production volumes in the second and third quarter 2024.

Miscellaneous sales are expected to be similar in 2025, as compared to 2024, although no assurance can be provided.

Barrier Sales – Barrier sales decreased by 50% in 2024 when compared to 2023.

The decrease is due to the completion of large barrier projects in North Carolina and South Carolina during 2023.

The decrease is consistent with the Company’s focus to shift from barrier sales to barrier rentals.

Barrier sales are expected to trend lower in 2025 than previous years as the Company continues to shift from barrier sales to barrier rentals.

1 unchanged sentence

Building sales increased by 41% in 2024 as compared to 2023 due to increased sales at all locations, reflecting general product sale fluctuations.

Building and restroom sales are expected to continue to trend similar during 2024 as compared to 2023, although no assurance can be provided.

Building and restroom sales are expected to trend higher during 2025 as compared to 2024 due to demand from increased sales and marketing, although no assurance can be provided.

Utility Sales – Utility products are mainly comprised of underground utility vaults used in infrastructure construction.

1 unchanged sentence

The increase is related to the increase in the market for dry utility vaults to support the growth in data centers.

Utility sales are expected to trend similar during 2024 as compared to 2023, although no assurance can be provided.

Utility sales are expected to be similar during 2025 as compared to 2024, although no assurance can be provided.

Miscellaneous Product Sales – Miscellaneous products are products that are produced or sold that do not meet the criteria defined for other revenue categories.

1 unchanged sentence

For 2024, miscellaneous product sales increased by 120% when compared to 2023.

The change is mainly attributed to specialty products produced at the South Carolina plant throughout 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 during 2025 as compared to 2024, although no assurance can be provided.

Barrier Rentals – Barrier rentals decreased by 3% in 2023 as compared to 2022.

Revenue from the Company’s core rental barrier fleet decreased by 43% in 2023 as compared to 2022.

The decrease in barrier rental revenue from the core rental barrier fleet was due to additional revenue recognized in the prior period related to the barrier buy-back agreement, which was fully recognized as of December 31, 2022.

Additionally, the decrease is related to a temporary slowdown in barrier rental projects during the first half of 2023, however the Company saw a significant increase in projects during the fourth quarter of 2023.

The decrease in barrier rental revenue from the core rental in the current year, was offset, in part, by an increase in barrier rental revenue from special barrier projects.

Barrier rental revenue from special projects increased 157% in 2023 as compared to 2022.

As indicated above, the Company is continuing to shift its focus to barrier rentals compared to barrier sales with the significant increase in the rental fleet that occurred during 2022.

Barrier rental revenue, excluding revenue from special barrier projects, is expected to trend higher in 2024 as compared to barrier rental revenue, excluding revenue from special barrier projects, in 2023, as funding increases related to the Infrastructure Investment and Jobs Act, although no assurance can be given.

Barrier Rentals – Barrier rentals increased by 90% in 2024 as compared to 2023.

Revenue from the Company’s core rental barrier fleet increased by 52% in 2024 as compared to 2023.

This increase is attributed to an increase in utilization of rental barrier.

Barrier rental revenue also increased due to multiple special barrier projects occurring and completed during the third quarter 2024.

As indicated above, the Company is continuing to shift its focus to barrier rentals compared to barrier sales with the significant increase in the rental fleet that occurred during prior years.

Barrier rental revenue, excluding revenue from special barrier projects, is expected to trend higher in 2025 as compared to barrier rental revenue, excluding revenue from special barrier projects, in 2024, as funding is expected to increase related to the Infrastructure Investment and Jobs Act, although no assurance can be given.

Royalty Income – Royalties increased by 24% in 2024 as compared to 2023.

The increase in royalties is mainly due to the increase in barrier royalties during 2024 compared to 2023.

As funding increases related to the Infrastructure Investment and Jobs Act, the Company expects 2024 royalties to increase compared to 2023, although no assurance can be given.

As funding increases related to the Infrastructure Investment and Jobs Act, as anticipated, the Company expects 2025 royalties to continue to increase compared to 2024, 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.

1 unchanged sentence

Installation revenue results when attaching architectural wall panels to a building, installing an Easi-Set ® building at a customers' site, setting highway barrier, or setting any of our other precast products at a site specific to the requirements of the owner.

Shipping and installation revenues decreased by 11% for 2023 when compared to 2022.

The decrease is mainly attributed to the decrease in shipping and installation of SlenderWall and architectural panels.

This is associated with the decreased production of SlenderWall and architectural panels that occurred in the third and fourth quarters of 2022 that would typically be shipped and installed throughout 2023.

Shipping and installation revenues increased by 48% for 2024 when compared to 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.

Cost of Sales – Total cost of sales for the year ended December 31, 2024 was $58,498, an increase of $9,570, or 20%, from $48,928 for the year ended December 31, 2023.

Total cost of sales as a percentage of total revenue, not including royalties, increased to 86% for the year ended December 31, 2023 from 85% for the year ended December 31, 2022.

The increase in cost of sales as a percentage of revenue, not including royalties, is mainly due to additional costs incurred, approximately $400, for the production of panels remade for one specific project in the second quarter of 2023.

To a lesser extent, the margins for the year ended December 31, 2023 were negatively impacted by the decrease in revenues derived from barrier rental revenue, which carry higher margins than product sales.

Higher revenue levels in 2023 than in 2022 had a favorable affect on margins reflecting the absorption of fixed overhead costs.

Increased material and labor costs also affected margins for the year ended December 31, 2023 as compared to the same period in 2022.

Total cost of sales as a percentage of total revenue, not including royalties, decreased to 78% for the year ended December 31, 2024 from 86% for the year ended December 31, 2023.

The decrease in cost of sales as a percentage of revenue, not including royalties, is mainly due to higher revenue levels in 2024 than in 2023 having a favorable effect on margins reflecting the absorption of fixed overhead costs.

In addition, the decrease in cost of sales as a percentage of revenue, not including royalties, was due to production throughout 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.

General and Administrative Expenses – For the year ended December 31, 2024, the Company's general and administrative expenses increased by $564, or 9%, to $6,554 from $5,990 during the same period in 2023.

The increase is mainly attributed to increased insurance costs for a specific project in New York.

The Company previously reported a loss due to a wire fraud incident in the second quarter of 2023.

The Company recovered additional funds in the fourth quarter of 2023 resulting in a net loss of $25 for the full year 2023.

General and administrative expenses for the year ended December 31, 2023 also increased over the prior year due to an increase in audit fees and an increase in salaries and wages.

General and administrative expenses for the year ended December 31, 2023 increased over the prior year due higher salary and wage rates, and an increase in the allowance for credit losses.

General and administrative expenses were 8% and 10% of revenues for the years ended December 31, 2024 and 2023, respectively.

Selling Expenses – Selling expenses for the year ended December 31, 2024 increased by $13, or 0%, to $3,557 from $3,544 for the year ended December 31, 2023.

Selling expenses increased during 2023 due to additional salespersons hired, increased commissions related to the increased sales, and increased spending for advertising.

The Company expects selling expenses to increase in future periods with the plan for additional sales associates and increased advertising spending aligning with the strategy to increase SlenderWall sales and barrier rentals.

Operating Income – The Company had operating income for the year ended December 31, 2024 of $9,899 compared to operating income of $1,118 for the year ended December 31, 2023, an increase of $8,781, or 785%.

The increase in operating income was mainly due to the increase in gross profit and decrease in operating expenses as a percent of revenue.

The increase in operating income was mainly due to the increase in revenues, decrease in cost of sales as a percentage of revenue, and a relatively flat operating expenses as a percent of revenue.

Income Tax Expense – The Company had income tax expense of $2,143 for the year ended December 31, 2024 compared to income tax expense of $528 for the year ended December 31, 2023.

The Company had an effective rate of 21.7% for the year ended December 31, 2024 compared to an effective rate of 40.0% for the same period in 2023.

The increase in the effective tax rate is attributed to the increase in the Company’s state tax liability for a true-up of state tax expense.

The decrease in the effective tax rate is attributed to the increase in the Company’s state tax liability for a true-up of state tax expense during 2023.

Net Income – The Company had net income of $7,675 for the year ended December 31, 2024, compared to net income of $795 for the same period in 2023.

5 unchanged sentences

During the twelve months ended December 31, 2024, the Company made repayments of outstanding debt in the amount $635.

The Company has a mortgage note payable to Summit Community Bank (the “Bank”) for the construction of its North Carolina facility.

The Company has a mortgage note payable to Burke & Herbert Bank & Trust Company, formally 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 and a guarantee by the Company.

The balance of the note payable at December 31, 2024 was $1,166.

The Company also has a note payable to the Bank in the amount of $2,701.

The Company also has a note payable to the Bank in the amount of $1,536 as of December 31, 2024.

The loan is collateralized by a first lien position on the Midland, VA plant, building, and assets.

The refinance also released the lien on the Smith-Columbia plant in Hopkins, South Carolina (Columbia).

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.

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 balance of the note payable at December 31, 2024 was $2,379.

The loan is collateralized by a first lien position on the related real property.

1 unchanged sentence

The loan matures on February 10, 2037.

The balance of the note payable on December 31, 2023 was $2,547.

The Company additionally has two smaller installment loans with annual interest rates of 2.90% and 3.99%, maturing in 2025, with balances totaling $29.

Under the loan covenants with the Bank, the Company is limited to annual capital expenditures of $5,000 and must maintain tangible net worth of $10,000.

The Company additionally has one smaller installment loan with an annual interest rate of 2.90%, maturing in 2025, with a balance totaling $13.

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 $25,000.

The Company is in compliance with all covenants pursuant to the loan agreements as of December 31, 2024.

In addition to the notes payable discussed above, the Company has a $5,000 line of credit with the Bank with no balance outstanding as of December 31, 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 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, 2025 and matures January 1, 2026.

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.

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 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 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 matures on October 1, 2024.

As of December 31, 2023, the Company had not purchased any equipment pursuant to the $1,500 commitment.

The commitment for the guidance line of credit matured on October 1, 2024.

As of October 31, 2024, the Company had not purchased any equipment pursuant to the $1,500 commitment.

At December 31, 2024, the Company had cash totaling $7,548 compared to cash totaling $9,175 at December 31, 2023.

The increase in cash is primarily the result of cash provided from operations, more specifically related to the cash flow from barrier rentals in addition to an increase in customer deposits.

Investing activities used $4,664 in cash primarily for the development of a storage lot for the barrier rental fleet and the purchase of a new batch plant system in South Carolina.

Financing activities used $619 in cash in 2023 related to the repayment of notes payable throughout 2023.

Capital spending, including financed additions, decreased from $5,264 in 2022 to $5,010 in 2023.

Capital expenditures in 2023 were primarily related to spending for the yard development for a storage lot for the barrier rental fleet, a new batch plant system for the South Carolina manufacturing facility, and the completion of the barrier buy-back.

The Company anticipates capital spending for 2024 to be approximately $5,000, which includes expansion of the North Carolina manufacturing facility, soundwall forms for increased production capacity, and miscellaneous manufacturing equipment.

Cash provided by operations was $5,584.

Cash disbursements from investing activity was $6,576.

Cash repayments on borrowings was $635.

The decrease in cash is primarily the result of cash used for capital expenditures, specifically the expansion of the manufacturing facility in North Carolina.

Capital spending, including financed additions, increased from $5,010 in 2023 to $6,629 in 2024.

Capital expenditures in 2024 were primarily related to spending for the expansion of the North Carolina production facility and new manufacturing equipment.

The Company anticipates capital spending for 2025 to be approximately $5,000, which includes forms for increased production capacity, and miscellaneous manufacturing equipment.

Anticipated capital expenditures excludes acquisitions.

1 unchanged sentence

This leaves the Company almost impervious to 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.

Increases in such rates will only affect the interest paid by the Company if new debt is obtained, or an available line of credit is drawn upon, with a variable interest rate.

The Company’s cash flow from operations is affected by production schedules set by contractors, which generally provide for payment 45 to 75 days after the products are produced and with some contracts, retainage may be held until the entire project is completed.

2 unchanged sentences

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.

The Company’s accounts receivable balance, net of allowance for credit losses, at December 31, 2023 was $17,209, compared to accounts receivable balance, net of allowance for doubtful accounts, of $16,223 at December 31, 2022.

The increase is primarily the result of increased revenue and to a lesser extent, lagging effects of turnover of the accounts receivable position throughout the later part of 2022 and through the first quarter of 2023.

The Company’s accounts receivable balance, net of allowance for credit losses, at December 31, 2024 was $19,420, compared to accounts receivable balance, net of allowance for credit losses, of $17,209 at December 31, 2023.

The increase is primarily the result of increased revenue.

The Company expects DSO to trend downwards, with increased collection efforts, although no assurance can be provided.

26 unchanged sentences

The failure to generate or obtain sufficient working capital during the winter may have a material adverse effect on the Company.

Management believes that the Company's operations were affected by inflation in 2023 and 2022, particularly in the purchases of certain raw materials such as cement, aggregates, and steel, and with labor costs.

The Company believes that raw material pricing and labor costs will increase in 2024, although no assurance can be given regarding future pricing or costs.

Management believes that the Company's operations were affected by inflation in 2024 and 2023, particularly in the purchases of labor costs will increase in 2025, although no assurance can be given regarding future pricing or costs.

As of March 3, 2025, the Company's sales backlog was approximately $59.5 million as compared to approximately $60.8 million at approximately the same time in 2024.

It is estimated that most of the projects in the sales backlog will be produced within 12 months, but a few will be produced over multiple years.

The increase in backlog was due to an increase in orders for products to be produced at all three manufacturing facilities, as well as an increase in the barrier rental backlog, as compared to the prior year.

The backlog remained consistent with the prior year level due to continued sales efforts for products to be produced at all three manufacturing facilities, as well as consistent sales efforts in barrier rentals.

The Company expects the backlog to increase with continued bidding on large infrastructure and SlenderWall/architectural projects, although no assurance can be given.

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis