frd20240630_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FROM THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-7521

FRIEDMAN INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

Texas

74-1504405

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

1121 Judson Road, Suite 124, Longview, Texas 75601

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (903)758-3431

Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $1 Par Value		FRD		NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (Check one): Yes ☐ No ☒

At August 8, 2024, the number of shares outstanding of the issuer’s only class of stock was 6,969,695 shares of Common Stock.

Part I — FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	19
Part II — OTHER INFORMATION	20
Item 5. Other Information	20
Item 6. Exhibits	20
SIGNATURES	21

	*JUNE 30, 2024*			*MARCH 31, 2024*
ASSETS
CURRENT ASSETS:
Cash	$	4,146		$	2,891
Accounts receivable, net of allowances for credit losses and cash discounts of $138 and $97 at June 30, and March 31, 2024, respectively		37,755			47,329
Inventories		119,802			115,804
Current portion of derivative assets		12			74
Other current assets		701			3,966
TOTAL CURRENT ASSETS		162,416			170,064
PROPERTY, PLANT AND EQUIPMENT:
Land		1,670			1,670
Buildings and yard improvements		30,906			30,900
Machinery and equipment		54,280			53,607
Construction in process		2,332			1,977
Less accumulated depreciation		(32,145	)		(31,396	)
		57,043			56,758
OTHER ASSETS:
Cash value of officers’ life insurance and other assets		333			356
Operating lease right-of-use asset		2,998			2,841
TOTAL ASSETS	$	222,790		$	230,019
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	34,403		$	43,886
Income taxes payable		2,823			2,213
Dividends payable		279			279
Employee compensation and related expenses		1,252			5,989
Current portion of financing lease		27			54
Current portion of derivative liability		16			1,686
TOTAL CURRENT LIABILITIES		38,800			54,107
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS		106			105
DEFERRED INCOME TAX LIABILITY		5,247			5,257
NON-CURRENT LEASE LIABILITIES		2,863			2,782
ASSET BASED LENDING FACILITY		46,087			40,293
TOTAL LIABILITIES		93,103			102,544
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, par value $1: Authorized shares — 10,000,000; Issued shares — 8,873,203 shares at June 30, and March 31, 2024		8,873			8,873
Additional paid-in capital		35,294			35,247
Treasury stock at cost (1,903,508 shares and 1,896,892 shares at June 30, and March 31, 2024, respectively)		(13,052	)		(12,929	)
Retained earnings		98,572			96,284
TOTAL STOCKHOLDERS’ EQUITY		129,687			127,475
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	222,790		$	230,019

	*THREE MONTHS ENDED*
	*JUNE 30,*
	*2024*			*2023*
Net Sales	$	114,551		$	137,298
Costs and expenses:
Cost of materials sold		96,414			108,203
Processing and warehousing expense		8,178			6,606
Delivery expense		6,051			5,446
Selling, general and administrative		4,511			5,937
Depreciation and amortization		795			749
		115,949			126,941
EARNINGS (LOSS) FROM OPERATIONS		(1,398	)		10,357
Gain on economic hedges of risk		5,375			430
Interest expense		(681	)		(540	)
Other income		3			6
EARNINGS BEFORE INCOME TAXES		3,299			10,253
Provision for (benefit from) income taxes:
Current		742			2,580
Deferred		(10	)		(17	)
		732			2,563
NET EARNINGS	$	2,567		$	7,690
Net earnings per share:
Basic	$	0.37		$	1.04
Diluted	$	0.37		$	1.04
Cash dividends declared per common share	$	0.04		$	0.02

	*THREE MONTHS ENDED JUNE 30,*
	*2024*			*2023*
OPERATING ACTIVITIES
Net earnings	$	2,567		$	7,690
Adjustments to reconcile net earnings to cash used in operating activities:
Depreciation and amortization		795			771
Deferred taxes		(10	)		(17	)
Compensation expense for restricted stock		47			78
Change in postretirement benefits		1			2
Gain recognized on open derivatives not designated for hedge accounting		(1,608	)		(956	)
Deferred realized gain on derivatives		—			418
Right-of-use asset		(27	)		—
Decrease (increase) in operating assets:
Accounts receivable		9,574			2,592
Inventories		(3,998	)		(14,900	)
Other current assets		260			553
Decrease (increase) in operating liabilities:
Accounts payable and accrued expenses		(9,533	)		(851	)
Income taxes payable		610			2,057
Contribution to retirement plan		—			(350	)
Employee compensation and related expenses		(4,737	)		(1,670	)
NET CASH USED IN OPERATING ACTIVITIES		(6,059	)		(4,583	)
INVESTING ACTIVITIES
Purchase of property, plant and equipment		(1,054	)		(450	)
Increase in cash surrender value of officers’ life insurance		(3	)		(2	)
NET CASH USED IN INVESTING ACTIVITIES		(1,057	)		(452	)
FINANCING ACTIVITIES
Cash dividends paid		(279	)		(148	)
Cash paid for principal portion of finance lease		(27	)		(26	)
Cash paid for share repurchases		(123	)		—
Borrowings on asset based lending facility		198,871			204,312
Repayments on asset based lending facility		(193,077	)		(198,131	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		5,365			6,007
INCREASE (DECREASE) IN CASH AND RESTRICED CASH		(1,751	)		972
CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD		5,897			5,386
CASH AND RESTRICTED CASH AT END OF PERIOD	$	4,146		$	6,358

	*June 30, 2024*		*March 31, 2024*
Flat-Roll raw material	$	89,847	$	85,483
Flat-Roll finished goods		17,717		17,030
Tubular raw material		5,447		4,185
Tubular finished goods		6,791		9,106
	$	119,802	$	115,804

	*June 30, 2024*		*March 31, 2024*		*Balance Sheet Classification*
Assets
Operating lease right-of-use asset	$	2,998	$	2,841	Operating lease right-of-use asset
Finance lease right-of-use asset		398		404	Property, plant & equipment
Total right-of-use assets	$	3,396	$	3,245
Liabilities
Operating lease liability, current	$	149	$	101	Accrued expenses
Finance lease liability, current		27		54	Current portion of finance lease
Operating lease liability, non-current		2,863		2,782	Non-current lease liabilities
Total lease liabilities	$	3,039	$	2,937

	*Operating Leases*			*Finance Leases*
Fiscal 2025 (remainder of fiscal year)		267			27
Fiscal 2026		363			—
Fiscal 2027		371			—
Fiscal 2028		324			—
Fiscal 2029 and beyond		5,043			—
Total undiscounted lease payments	$	6,368		$	27
Less: imputed interest		(3,356	)		—
Present value of lease liability	$	3,012		$	27

				*Weighted Average*
	*Number of Shares*			*Grant Date Fair Value Per Share*
Unvested at March 31, 2024		64,487		$	6.62
Cancelled or forfeited		—			—
Granted		—			—
Vested		(34,000	)		6.26
Unvested at June 30, 2024		30,487		$	7.03

	*Asset Derivatives*			*Liability Derivatives*
	*Balance Sheet*			*Balance Sheet*
Derivatives not designated as hedging instruments:	*Location*	*Fair Value*		*Location*	*Fair Value*
Hot-rolled coil steel contracts	Current portion of derivative assets	$	12	Current portion of derivative liability	$	16

	*Pre-Tax Gain (Loss) Recognized in OCI*		*Location of Loss Reclassified from AOCI into Net Earnings*	*Pre- Tax Loss Reclassified from AOCI into Net Earnings*
For the three months ended June 30, 2023:
Hot-rolled coil steel contracts	$	—	*Sales*	$	(418	)
Total	$	—		$	(418	)

	*Gain (Loss) on*
	*Derivatives*
Balance at March 31, 2023	$	(317	)
Other comprehensive income, net of loss, before reclassification		—
Total loss reclassified from AOCI (1)		317
Net current period other comprehensive income		317
Balance at June 30, 2023	$	—

	*Quoted Prices*
	*in Active*			*Significant*
	*Markets for*			*Other*		*Significant*
	*Identical*			*Observable*		*Unobservable*
	*Assets*			*Inputs*		*Inputs*
	*(Level 1)*			*(Level 2)*		*(Level 3)*		*Total*
Commodity futures – financial liabilities, net	$	(4	)	$	—	$	—	$	(4	)
Total	$	(4	)	$	—	$	—	$	(4	)

	*Quoted Prices*
	*in Active*			*Significant*
	*Markets for*			*Other*		*Significant*
	*Identical*			*Observable*		*Unobservable*
	*Assets*			*Inputs*		*Inputs*
	*(Level 1)*			*(Level 2)*		*(Level 3)*		*Total*
Commodity futures – financial liabilities, net	$	(1,612	)	$	—	$	—	$	(1,612	)
Total	$	(1,612	)	$	—	$	—	$	(1,612	)

	*Three Months Ended*
	*June 30,*
	*2024*		*2023*
Flat-Roll Segment:
Company Owned Flat-Roll Products		101,834		123,973
Processing or Storage of Customer Owned Coil		1,553		1,224
		103,387		125,197
Tubular Segment:
Manufactured Pipe		11,164		12,101
		11,164		12,101

		*Gain Recognized in Earnings*
	*Location of Gain*	*for the Three Months Ended*
	*Recognized in Earnings*	*June 30, 2024*
Hot-rolled coil steel contracts	Gain on economic hedges of risk	$	5,375

	*June 30, 2024*		*March 31, 2024*
IDENTIFIABLE ASSETS:
Flat-Roll	$	199,090	$	205,797
Tubular		18,027		19,589
		217,117		225,386
General corporate assets		5,673		4,633
	$	222,790	$	230,019

			*Accumulated*
			*Other*
			*Comprehensive*		*Additional*
	*Common*		*Income,*		*Paid-In*		*Treasury*			*Retained*
	*Stock*		*Net of Tax*		*Capital*		*Stock*			*Earnings*			*Total*
BALANCE AT MARCH 31, 2024	$	8,873		—	$	35,247	$	(12,929	)	$	96,284		$	127,475
Net earnings		—		—		—		—			2,567			2,567
Paid in capital – restricted stock units		—		—		47		—			—			47
Repurchase of shares		—		—		—		(123	)		—			(123	)
Cash dividends ($0.04 per share)		—		—		—		—			(279	)		(279	)
BALANCE AT JUNE 30, 2024	$	8,873	$	—	$	35,294	$	(13,052	)	$	98,572		$	129,687

	*Three Months Ended June 30, 2023*
	*Before-Tax*		*Tax*			*Net-of-Tax*

Cash flow hedges	$	418	$	(101	)	$	317
Other comprehensive income	$	418	$	(101	)	$	317

Exhibits

3.1	—	Articles of Incorporation of the Company, as amended (incorporated by reference from Exhibit 3.1 to the Company’s Form S-8 filed on December 21, 2016).

3.2	—	Articles of Amendment to the Articles of Incorporation of the Company, as filed with the Texas Secretary of State on September 22, 1987 (incorporated by reference from Exhibit 3.1 to the Company’s Form S-8 filed on December 21, 2016).

3.3	—	Amended and Restated Bylaws of the Company, as amended on November 8, 2021. (incorporated by reference from Exhibit 3.3 to the Company's Form 10-Q filed on November 19, 2021).

31.1	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Michael J. Taylor.

31.2	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Alex LaRue.

32.1	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Michael J. Taylor.

32.2	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Alex LaRue.

101.INS	—	Inline XBRL Instance Document.

101.SCH	—	Inline XBRL Taxonomy Schema Document.

101.CAL	—	Inline XBRL Calculation Linkbase Document.

101.DEF	—	Inline XBRL Definition Linkbase Document.

101.LAB	—	Inline XBRL Label Linkbase Document.

101.PRE	—	Inline XBRL Presentation Linkbase Document.

104	—	Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101)

	FRIEDMAN INDUSTRIES, INCORPORATED

Date: August 8, 2024	By	/s/ ALEX LARUE
		Alex LaRue, Chief Financial Officer – Secretary and Treasurer (Principal Financial Officer)

SEC Form 10-Q filed by Friedman Industries Inc.