To Our Smith-Midland Shareholders, Customers, Associates, and Business Partners:
Results of operations for 2017
The Company had another strong year in 2017, reporting both solid sales and net income. The following chart shows the key statistics for the years ended December 31, 2017 and 2016: (in thousands except for EPS and return on equity)
Total Revenues: 2017 $41,717, 2016 $40,050
Operating Income: 2017 $3,715, 2016 $4,336
Net Income: 2017 $2,684 , 2016 $2,835
Earnings per Share: 2017 $0.53, 2016 $0.56
Return on Equity: 2017 16%, 2016 20%
The Company operates three precast concrete production facilities located in Midland, Virginia; Reidsville, North Carolina and Columbia, South Carolina. During 2017 and into 2018 the Company has received several of the largest orders in its history for barrier, soundwall, and SlenderWall. The multi-year projects have significantly increased our backlog to the largest ever. Our continued focus on safety, quality, and creating value for our customers has demonstrated that we are a leader in our geographic areas for the precast concrete industry.
On April 27, 2018 the Board of Directors unanimously voted to expand the North Carolina facility. The current facility in Reidsville is extremely limited in both land and production space. In 2016 the Company purchased 46 acres on which it plans to build a 15,000 square foot manufacturing plant with additional space for future expansions. The expansion is part of the long-term strategy to capture a greater share of the growing market in the North Carolina region. With the continued increase in highway work in our territory, the Company plans to capitalize on one of the largest infrastructure markets in the United States.
Easi-Set Worldwide Precast Concrete Licensing - Royalty Revenues:
Revenues from royalties increased 5% between 2017 and 2016. The Company added two new licensees in 2017 and continues to search for strategic licensees to partner with in producing the best, most innovative precast concrete products in the world. During 2017 the Company successfully passed the MASH TL3 crash test to have the highest rated safety barrier to meet new highway safety standards. Infrastructure spending across the country continues to increase into 2018 and the Company expects licensing revenue to follow.
Concrete Safety Systems Highway Barrier Rental Revenues:
2017 proved to be another successful year for highway barrier rentals. As the Company plans to expand our highway barrier rental fleet further, we provided a guarantee buy-back on our largest barrier order ever to soon have the largest rental fleet of the new MASH TL3 concrete safety barrier in the United States. This will strategically place the Company as a leader in highway safety barrier rental to ensure future, long term success.
SMID Stock Price:
In the past two years, the Company’s stock price has seen significant gains growing from $2.00 to $8.50 per share. Operating results, matched with increased sales growth have had major impacts in the valuation. The Return on Equity was slightly down in 2017 compared to 2016 mainly due to non-cash stock compensation awarded to attract and retain key personnel. The Company continues to be focused on enhancing long-term shareholder value.
The safety of our associates, customers, neighbors, and our other stakeholders is our highest priority. We continue to improve our safety results, but we won’t be satisfied until we achieve zero accidents. Developing the skills of our associates is also a high priority and we are investing in more training, both on-site and at off-site seminars. Our goal is to create a place where our team is continuously improving which will keep us ahead of our competition.
The Company continues to invest capital into its operations to improve long-term success. We continue to win larger projects on which we must capitalize and execute. Our strategic decisions and focus are to enhance the long-term value of the Company.
Rodney I. Smith
Chairman of the Board