Smith-Midland Corporation
Address:
5119 Catlett Road
Midland, Virginia 22728
U.S.A.
Telephone: (540) 439-3266
Fax: (540) 439-1232
http://www.smithmid.com
Statistics:
Public Company
Incorporated: 1960 as Smith Cattleguard Company
Employees: 154
Sales: $26.9 million (2001)
Stock Exchanges: over the counter
Ticker Symbol: SMID
NAIC: 421320 Brick, Stone, and Related Construction Material Wholesalers
Company Perspectives:
Although the name has changed and the products we offer have increased ten-fold, we never have deviated from the standards on which our success was built--innovation, quality, and service.
Key Dates:
1960: Smith Cattleguard Company is founded.
1965: Rodney Smith succeeds his father as president of the company.
1978: Easi-Set Industries is established.
1985: The company's name is changed to Smith-Midland Corporation.
1994: The business is incorporated in Delaware as part of a restructuring initiative.
1995: Smith-Midland makes an initial public offering.
Company History:
Smith-Midland Corporation is a Midland, Virginia-based company that specializes in the development, manufacture, licensing, marketing, and installation of precast concrete products for use in the construction, transportation, farming, and utilities industries primarily located in the Mid-Atlantic and Northeastern states. The company operates two manufacturing facilities, one in Midland and a second in Reidsville, North Carolina. Subsidiary Easi-Set Industries licenses Smith-Midland proprietary products to precast concrete manufacturers throughout the United States and Puerto Rico, as well as Belgium, Canada, New Zealand, and Spain.
Unlike other pre-cast concrete manufacturers, which are dependent on being the low bidder on construction projects, Smith-Midland has developed a long line of proprietary products that allows it to negotiate a price with customers. Research and development efforts have resulted in a number of innovations, such as the J-J Hooks positive connection highway safety barrier system. These self-aligning panels automatically hook into place, allowing for quick installation, smaller installation crews, and lower installation costs. The company's Parkway Stone Wall is an aesthetically pleasing wall for highway and roadside applications. Although actually a precast concrete panel, it looks like a stone wall and is designed for such uses as terrace walls, property lines, and estate entrances. Another Smith-Midland development is Sound-Lok, a sound-absorbing concrete that the company uses in its Sierra Wall product, which has residential, industrial, commercial, and highway uses. The acoustical surface of Sound-Lok is comprised of a number of interlocking absorptive microcells that are similar to concrete in plasticity and hydration characteristics. Sound-Lok can be mixed and applied to an existing surface or mixed with regular concrete, as with the Sierra Wall system that relies on four-inch thick, steel reinforced concrete panels. They are joined together by a tongue and groove connection, which allows for easy and fast construction. With Sound-Lok, the Sierra Wall acts as a sound barrier, and because it comes in a variety of finishes it can be used to blend in with local architectural designs. In residential applications, the Sierra Wall can offer privacy between houses and apartments, screen a roadway, as well as serve as a windbreaker and security fence. In areas where residential and industrial uses conflict, or where shopping centers or other institutions are located close to residential areas, the Sierra Wall is used as an effective noise barrier that is able to blend in with the surrounding materials. Larger panels are used to construct sound barrier systems for highways. Smith-Midland's Easi-Set and Easi-Span precast, portable concrete buildings are able to serve a number of functions and have been erected as fiber optic regeneration huts, cellular phone facilities, switching stations, weather monitoring stations, rest rooms, sports dugouts, ticket booths, emergency generator shelters, and a multitude of storage facilities.
Smith-Midland is especially optimistic about the future of its Slenderwall architectural product, suitable for both new construction and recladding projects. This exterior wall system reduces thermal transfer while being isolated from the structural stresses of the building itself, including those that result from wind loading, steel frame movement, and siesmic shock. Because Slendwall is comprised of lightweight panels, customers save on shipping costs, and due to ease of construction they save on installation. Moreover, the finish of Slenderwall panels can be made to match the look of surrounding buildings, an important factor when working within a campus or similar environment. Finally, Smith-Midland continues to manufacture the product that established the business more than 40 years ago: the cattleguard.
Company Formed in 1960
Smith-Midland was founded in Midland, Virginia, in 1960 by David G. Smith, a farmer with an creative streak who was always looking to supplement his income with inventions, the most successful of which was his cattleguard. Like many cattle farmers, Smith was frustrated with having to stop and get out of his vehicle in order to open and close farm gates to prevent cattle from escaping a field. He was not the first to devise a cattleguard, but he was perhaps the first who tried to make a business out of selling his solution to others. In essence, the cattleguard was a shallow pit, about six inches in depth, covered by two inches of sand or crushed stone. For a 14-foot cattleguard, the pit would roughly measure 15 feet by 7 feet. The precast concrete fixture were slats that covered the pit, which vehicles could easily drive over but cattle were unable to step through. Side fencing prevented them from stepping around the pit. Makeshift versions relied on wood or pipe, which either wore out or became bent in the middle from use. The main selling point for the Smith Cattleguard was its longevity, which would save customers money in the long run, and the professional installation that relieved the farmer of a time-consuming task. Six months after starting his business, Smith was joined by his 22-year-old son, Rodney I. Smith, the current chairman, president, and chief executive officer of the company. With the passage of another six months, the two officially became partners, with Rodney Smith taking a lead in sales. He was responsible for creating the company's first advertisement, which attracted business from several states. For the first ten years or so, Smith Cattleguard used the family farm as the base for its operations, initially taking up a section of the farm machine shed. As business grew, the company increasingly usurped more space in the shed.
Smith Cattleguard traded on the success of its original idea and soon began to produce other pre-cast concrete farm products. The company introduced the fence line feed bunk for cattle feeding and the center line feed bunk, which allowed cattle to eat from both sides of a divided unit. In addition, Smith Cattleguard developed and sold an electrically heated automatic stock waterer and a concrete panel fence. After approximately five years in business, Smith Cattleguard expanded beyond farm products, supplying underground utility vaults and transformer pads for power companies. Later it introduced highway safety barriers, sound walls, and utility buildings into the product mix. Rodney Smith succeeded his father as president and chief executive officer of the company in 1965 and became chairman of the board in 1970. He also inherited his father's inventive talents, making significant improvements on the design of the original cattleguard as well as designing many of the company's later products. As the business expanded, Smith Cattleguard outgrew its facilities on the Smith farm. In the early 1970s, the company purchased a ten-acre site in Midland and built a factory, which ultimately became a 20-acre complex of office and production facilities. In the mid-1970s, due to the high cost of shipping pre-cast products, it purchased land and built a plant in Reidsville, North Carolina, in order to be competitive in the North Carolina market. In addition, a subsidiary, Smith Carolina, was formed to accommodate this business. Rodney Smith founded several other subsidiaries that would one day make up Smith-Midland. He created Concrete Safety System, the first company of its kind, dedicated to the leasing of precast concrete highway safety barriers to state highway departments and contractors. Smith also founded Easi-Set Industries, Inc., which was launched in 1978 to license the company's pre-cast products, the first full-service licensing operation in the industry. To promote both itself and the licensees, Smith Cattleguard became involved in cooperative advertising. To receive a discount, Midland Advertising & Design, Inc. was formed and proved to be instrumental in the success of the Smith-Midland companies.
Smith-Midland Corporation Name Adopted in 1985
After 25 years in business, and having diversified well beyond its original product, Smith Cattleguard changed its name to Smith-Midland Corporation in 1985. A third generation of the Smith family was now in line to become involved in the running of the business. Ashley Smith was named Vice-President of Sales and Marketing in 1990. During this period, the company began work on a light-weight wall cladding, its Slenderwall concept that was part of a devotion to research and development that had always been instrumental in the growth of Smith-Midland. The idea was to combine the properties of already accepted materials to create a functional highbred product. By early 1993, the company developed a prototype of the Slenderwall system, which joined precast concrete's durability with cold-form galvanized steel's light weight. The product was soon available for sale, enjoying strong growth, and because of its light weight was cheap enough to ship to job sites all along the East Coast, greatly enhancing Smith-Midland's marketing presence. Moreover, through Easi-Set Industries, Slenderwall started to be licensed to qualified manufacturers, further enhancing Smith-Midland's profile.
In October 1994, Smith-Midland completed a corporate restructuring in preparation for taking the company public. The business was now incorporated in Delaware, making the following entities wholly-owned subsidiaries: Smith-Midland Corp. (Virginia); Easi-Set Industries, Inc.; Smith-Carolina Corp.; Concrete Safety Systems, Inc.; and Midland Advertising & Design, Inc. The company's initial public offering was completed in December 1995, when 1 million common shares priced at $3.50 per share were sold, as were 1 million warrants priced at ten cents. The warrants permitted buyers the opportunity to purchase shares of common stock at $4 until December 13, 2000. The price of Smith-Midland quickly moved beyond that level. On its first day of trading on the NASDAQ Small Cap Market, Smith-Midland stock closed above $5. The company netted $2.8 million in the offering, using most of the proceeds to pay off debt and outstanding bills, with $600,000 earmarked for the expansion of its manufacturing capacity.
Although it was an innovative company with much promise Smith-Midland was hindered in its growth by the lack of enough cash flow to keep up with loans made by the Riggs Bank and Myers Trust. In 1998, the company arranged a $4 million term loan with First National Bank of New England, of which approximately $3 million was used to restructure current debt and the balance dedicated to further plant expansion and the purchase of new equipment. This funding arrangement was key to a five-year plan launched by the company to increase Smith-Midland's growth and profitability. Riggs and Myers were both repaid, while monthly payments for debt service was reduced by 40 percent, allowing for much better cash flow. In addition, First National Bank of New England provided a $500,000 revolving line of credit for additional operating funds.
Major Factory Renovation Completed in 1999
Smith-Midland completed a building renovation project in March 1999, gaining an additional 15,600 square feet of manufacturing space. Altogether, the company increased its indoor manufacturing capacity by 40 percent. Cost overruns, however, had an adverse impact on Smith-Midland's bottom line. Although a leader in its field, the company was still a relatively small company, and because it was unable to meet certain conditions it was delisted by the NASDAQ Small Cap and instead sold on the over-the-counter bulletin board. The investment in plant upgrades began to pay off in 2000 and 2001. Revenues topped $16 million in 2000 and approached $27 million in 2001, while net income improved from $593,373 to nearly $2 million during the same period.
In March 2003, Rodney Smith granted an interview to The Wall Street Transcipt in which he outlined his plans for Smith-Midland. He said he hoped that the licensing efforts of Easi-Set Industries would become "the big money maker," spearheaded by the licensing of Slenderwall, the product which held the most promise. "At this point there is no equivalent product to Slenderwall on the market anywhere in any country," Smith explained. "Somebody always has to be first with anything major that's starting to be recognized in any given industry and we are in that position with this product. ... When you look at all the individual components, every component is tried and proven for many years but we have assembled them in a new and a better way. Therefore, we don't have the resistance of people saying 'It looks great--come back in 20 years' because they know that all the components work." Slenderwall took a major step in gaining wider acceptance in the marketplace when in 2002 Smith-Midland secured an important $3.15 million contact to produce and install 68,000 square feet of Slenderwall panels to clad a 32-story New York City high rise hotel. The company's goal for Slenderwall according to Smith was to "sign up 20 pre-casters in North America with a goal of $14.5 million each in sales totaling $250 million a year from which our goal would be a 5 percent licensing fee. That by itself would be $12 million to $12.5 million a year of income." Because over the years Smith-Midland had arranged some 30 licenses, primarily for its J-J Hooks Concrete Safety Barrier and transportable buildings, it was well positioned to exploit the potential of Slenderwall. Nevertheless, Smith admitted that the company faced a challenge in convincing independent pre-casters that licensing a Smith-Midland product was a profitable idea, and it had to be vigilant about monitoring licensees to maintain quality control so that customers across the country would be assured of receiving a consistent and predictable product. In addition, Smith-Midland would assist licensees in selling the product, sending representatives with licensees to visit architects, as well as people to oversee installation. As a result, Rodney Smith asserted, customers "will want to come back to us over and over again. It's essential that we monitor and train our licensees properly and then monitor their efforts and assist them."
Although the economy was enduring a difficult stretch, Smith maintained that Smith-Midland was well suited to weather the storm. "The bottom line on all this is we are one of the most diversified companies of pre-cast concrete companies in the country and when our competitors are out looking for work we are busy." Smith maintained that in the future the company would pursue its ongoing effort to reduce the cost of manufacturing, which would allow it to better compete in terms of pricing. In addition, Smith-Midland would continue to distinguish itself from other concrete pre-casters through its research and development program. According to Smith, "We have about 12 projects in the R&D hopper. We like to bring out a major improvement on a new or existing product every 18 months or two years. This keeps us in a really different business model than other pre-cast manufacturers. Most pre-casters in America rely on being the low bidder for projects that somebody else creates. We have a whole line of products that other people do not have. Therefore, we get to negotiate for our work because we are good at R&D." While Smith-Midland appeared to be somewhat unappreciated by investors, there was good reason to believe that if the company was able to maintain its momentum in the coming years that situation would change.
Principal Subsidiaries: Smith-Midland Corporation (Virginia); Smith-Carolina Corporation; Concrete Safety Systems, Inc.; Midland Advertising & Design, Inc.; Easi-Set Industries, Inc.
Principal Competitors: Lafarge North America; Miller Building Systems; U.S. Concrete.
Further Reading:
- Hinden, Stan, "Software Firm Looks For Security in Public Offering," Washington Post, February 19, 1996, p. F23.
- "Smith-Midland Corporation (SMID)," The Wall Street Transcript, March 3, 2003.
- "Smith-Midland Ships Telecom Order," Concrete Products, September 1, 2002, PC8.
Source: International Directory of Company Histories, Vol. 56. St. James Press, 2004.
