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FRIEDMAN INDUSTRIES INC - Quarter Report: 2003 December (Form 10-Q)

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Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

     
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003
     
OR
     
[  ]   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
(State or other jurisdiction of
incorporation or organization)
  74-1504405
(I.R.S. Employer Identification
Number)

4001 HOMESTEAD ROAD, HOUSTON, TEXAS 77028-5585
(Address of principal executive office and zip code)
Registrant’s telephone number, including area code (713) 672-9433


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

     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, and (2) has been subject to such filing requirements for the past 90 days.

           
  Yes     X     No          

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

           
  Yes               No     X

     At December 31, 2003, the number of shares outstanding of the issuer’s only class of stock was 7,575,239 shares of Common Stock.



 


TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS — UNAUDITED
CONSOLIDATED STATEMENTS OF EARNINGS — UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
NOTES TO QUARTERLY REPORT — UNAUDITED
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II — OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in securities
Item 3. Defaults upon senior securities
Item 4. Submission of matters to a vote of security holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
Cert.of Jack Friedman Pursuant to Section 302
Cert.of Ben Harper Pursuant to Section 302
Cert.of Jack Friedman Pursuant to Section 906
Cert.of Ben Harper Pursuant to Section 906


Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

FRIEDMAN INDUSTRIES, INCORPORATED
CONSOLIDATED BALANCE SHEETS

ASSETS

                       
          DECEMBER 31, 2003   MARCH 31, 2003
         
UNAUDITED
 
CURRENT ASSETS:
               
 
Cash and cash equivalents
  $ 2,167,106     $ 673,127  
 
Accounts receivable, net of allowance of $7,276 in both periods
    9,017,912       9,966,061  
 
Inventories
    21,809,723       24,032,268  
 
Other
    285,539       98,044  
 
   
     
 
     
TOTAL CURRENT ASSETS
    33,280,280       34,769,500  
PROPERTY, PLANT AND EQUIPMENT:
               
 
Land
    437,793       437,793  
 
Buildings and improvements
    4,088,149       4,063,579  
 
Machinery and equipment
    17,540,414       17,216,823  
 
Less accumulated depreciation
    (15,627,527 )     (14,930,027 )
 
   
     
 
 
    6,438,829       6,788,168  
OTHER ASSETS:
               
 
Cash value of officers’ life insurance
    1,229,962       1,221,258  
 
   
     
 
     
TOTAL ASSETS
  $ 40,949,071     $ 42,778,926  
 
   
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
               
 
Accounts payable and accrued expenses
  $ 8,553,280     $ 9,870,888  
 
Current portion of long-term debt
    68,496       68,496  
 
Dividends payable
    151,500       151,460  
 
Income taxes payable
          406,620  
 
Contribution to profit sharing plan
    198,000       260,000  
 
Employee compensation and related expenses
    138,200       277,924  
 
   
     
 
     
TOTAL CURRENT LIABILITIES
    9,109,476       11,035,388  
LONG-TERM DEBT, less current portion
    11,380       57,329  
DEFERRED INCOME TAXES
    256,458       283,458  
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
    156,000       156,000  
STOCKHOLDERS’ EQUITY:
               
 
Common stock, par value $1:
               
   
Authorized shares — 10,000,000
               
   
Issued and outstanding shares — 7,575,239 at December 31, 2003 and 7,573,239 at March 31, 2003
    7,575,239       7,573,239  
 
Additional paid-in capital
    27,714,669       27,710,369  
 
Retained deficit
    (3,874,151 )     (4,036,857 )
 
   
     
 
     
TOTAL STOCKHOLDERS’ EQUITY
    31,415,757       31,246,751  
 
   
     
 
     
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 40,949,071     $ 42,778,926  
 
   
     
 

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Table of Contents

FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF EARNINGS — UNAUDITED

                                   
      Three Months Ended   Nine Months Ended
      December 31,   December 31,
     
 
      2003   2002   2003   2002
     
 
 
 
Net sales
  $ 24,977,857     $ 25,418,779     $ 75,592,716     $ 78,756,126  
Costs and expenses
                               
 
Costs of goods sold
    24,028,792       24,173,277       71,195,237       74,235,979  
 
General, selling and administrative costs
    973,717       946,498       3,253,761       3,088,254  
 
Interest
    8,532       4,470       31,638       47,018  
 
   
     
     
     
 
 
    25,011,041       25,124,245       74,480,636       77,371,251  
Interest and other income
    (48,511 )     (8,795 )     (52,532 )     (49,054 )
 
   
     
     
     
 
Earnings before federal income taxes
    15,327       303,329       1,164,612       1,433,929  
Provision (benefit) for federal income taxes:
                               
 
Current
    14,210       83,132       422,968       451,535  
 
Deferred
    (9,000     20,000       (27,000 )     36,000  
 
   
     
     
     
 
 
    5,210       103,132       395,968       487,535  
 
   
     
     
     
 
Net earnings
  $ 10,117     $ 200,197     $ 768,644     $ 946,394  
 
   
     
     
     
 
Average number of common shares outstanding:
                               
 
Basic
    7,575,239       7,573,239       7,575,239       7,573,239  
 
Diluted
    7,646,954       7,573,239       7,627,424       7,573,239  
Net earnings per share:
                               
 
Basic
  $ 0.00     $ 0.03     $ 0.10     $ 0.12  
 
Diluted
  $ 0.00     $ 0.03     $ 0.10     $ 0.12  
Cash dividends declared per common share
  $ 0.02     $ 0.03     $ 0.08     $ 0.07  

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FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

                       
          Nine Months Ended
          December 31,
         
          2003   2002
         
 
OPERATING ACTIVITIES
               
 
Net earnings
  $ 768,644     $ 946,394  
 
Adjustments to reconcile net earnings to cash provided by operating activities:
               
   
Depreciation
    697,499       723,565  
   
Provision for deferred taxes
    (27,000 )     36,000  
 
Decrease (increase) in operating assets:
               
   
Accounts receivable
    948,149       (547,875
   
Inventories
    2,222,545       (1,324,660 )
   
Other
    (187,495 )     (259,351 )
 
Increase (decrease) in operating liabilities:
               
   
Accounts payable and accrued expenses
    (1,317,608     (467,084 )
   
Contribution to profit-sharing plan
    (62,000 )     (62,000 )
   
Employee compensation and related expenses
    (139,724 )     (27,993 )
   
Federal income taxes
    (406,620 )     6,535  
 
   
     
 
     
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
    2,496,390       (976,469 )
INVESTING ACTIVITIES
               
 
Purchase of property, plant and equipment
    (348,162 )     (495,961 )
 
(Increase) decrease in cash value of officers’ life insurance
    (8,704 )     (132,227 )
 
   
     
 
     
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES
    (356,866 )     (628,188 )
FINANCING ACTIVITIES
               
 
Cash dividends paid
    (605,896 )     (378,592 )
 
Principal payments on notes payable and revolving credit facility
    (2,045,949 )     (2,648,473 )
 
Proceeds from notes payable and revolving credit facility
    2,000,000       104,239  
 
Stock awards
    6,300       5,060  
 
   
     
 
     
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES
    (645,545 )     (2,917,766 )
 
   
     
 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    1,493,979     (4,522,423
 
Cash and cash equivalents at beginning of period
    673,127       4,683,894  
 
   
     
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 2,167,106     $ 161,471  
 
   
     
 

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FRIEDMAN INDUSTRIES, INCORPORATED

NOTES TO QUARTERLY REPORT — UNAUDITED
THREE MONTHS ENDED DECEMBER 31, 2003

NOTE A — BASIS OF PRESENTATION

     The accompanying unaudited condensed, consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes included in the Company’s annual report on Form 10-K for the year ended March 31, 2003.

NOTE B — INVENTORIES

     Inventories consist of prime coil, non-standard coil and tubular materials. Prime coil inventory consists primarily of raw materials, non-standard coil inventory consists primarily of finished goods and tubular inventory consists of both raw materials and finished goods. Inventories are valued at the lower of cost or replacement market. Cost for prime coil inventory is determined under the last-in, first-out (“LIFO”) method. During the quarter ended December 31, 2003, earnings before federal income taxes include a benefit of approximately $49,000 from the liquidation of LIFO inventory. Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the weighted average method.

     A summary of inventory values follows:

                 
    December 31,   March 31,
    2003   2003
   
 
Prime Coil Inventory
  $ 6,512,033     $ 6,743,001  
Non-Standard Coil Inventory
    1,522,276       1,725,581  
Tubular Raw Material
    2,663,051       2,736,602  
Tubular Finished Goods
    11,112,363       12,827,084  
 
   
     
 
 
  $ 21,809,723     $ 24,032,268  
 
   
     
 

NOTE C — LONG-TERM DEBT

     The following summary reflects long-term debt including the current portion thereon:

                 
    December 31, 2003   March 31, 2003
   
 
Notes payable on equipment purchases
  $ 79,876     $ 125,825  

     The Company has a $6 million revolving credit facility which expires April 1, 2006. There were no amounts outstanding pursuant to the facility at December 31, 2003 and March 31, 2003.

NOTE D — NEW ACCOUNTING PRONOUNCEMENT

     In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”). FIN 46 requires that unconsolidated variable interest entities must be consolidated by their primary beneficiaries. A primary beneficiary is the party that absorbs a majority of the entity’s expected losses or residual benefits. FIN 46 applies immediately to variable interest entities created after January 31, 2003. The application of FIN 46 to variable interest entities existing prior to February 1, 2003 will be effective for the Company on December 15, 2004. No variable interest entities have been created after January 31, 2003. Management believes the effect of variable interest entities, if any, created prior to January 31, 2003 will not be material to the financial statements.

NOTE E — STOCK BASED COMPENSATION

     The Company follows Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), for its employee stock options. Under APB 25, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The fair value of options was estimated using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rates of 3.0%, a dividend yield of 3.4%, volatility factor of the expected market price of the Company’s common stock of 0.42, and a weighted average expected life of the option of four years.

     The following schedule reflects the impact on net income and earnings per common share if the Company had applied the fair value recognition provisions of Statements of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, to stock based employee compensation for the three and nine months ended December 31:

                                     
        Three Months Ended
December 31,
  Nine Months Ended
December 31,
       
 
        2003   2002   2003   2002
       
 
 
 
Reported net income
  $ 10,117     $ 200,197     $ 768,644     $ 946,394  
Less: compensation expenses per SFAS No. 123, net of tax
    .00       25,262       31,582       25,262  
 
   
     
     
     
 
Pro forma net income
  $ 10,117     $ 174,935     $ 737,062     $ 921,132  
 
   
     
     
     
 
BASIC EARNINGS PER COMMON SHARE:
                               
Reported net income
    .00       .03       .10       .12  
Less: compensation expense per SFAS No. 123, net of tax
    .00       .00       .00       .00  
 
   
     
     
     
 
Pro forma net income
    .00       .03       .10       .12  
 
   
     
     
     
 
DILUTED EARNINGS PER COMMON SHARE:
                               
Reported net income
    .00       .03       .10       .12  
Less: compensation expense per SFAS No. 123, net of tax
    .00       .00       .00       .00  
 
   
     
     
     
 
Pro forma net income
    .00       .03       .10       .12  
 
   
     
     
     
 

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Table of Contents

     NOTE F — SEGMENT INFORMATION — UNAUDITED

                                     
        Three Months Ended   Nine Months Ended
        December 31,   December 31,
       
 
        2003   2002   2003   2002
       
 
 
 
Net sales
                               
 
Coil
  $ 12,758     $ 15,068     $ 39,310     $ 45,473  
 
Tubular
    12,220       10,351       36,283       33,283  
 
   
     
     
     
 
   
Total net sales
  $ 24,978     $ 25,419     $ 75,593     $ 78,756  
 
   
     
     
     
 
Operating profit (loss)
                               
 
Coil
  $ (106 )   $ 85     $ 904     $ 1,025  
 
Tubular
    515       615       1,944       1,922  
 
   
     
     
     
 
   
Total operating profit
    409       700       2,848       2,947  
 
General corporate expenses
    434       402       1,704       1,515  
 
Interest expense
    9       4       32       47  
 
Interest & other income
    (49 )     (9 )     (53 )     (49 )
 
   
     
     
     
 
   
Total earnings before taxes
  $ 15     $ 303     $ 1,165     $ 1,434  
 
   
     
     
     
 
                     
        December 31,   March 31,
        2003   2003
       
 
Segment assets
               
 
Coil
  $ 17,052     $ 18,967  
 
Tubular
    20,390       21,849  
 
   
     
 
 
    37,442       40,816  
 
Corporate assets
    3,507       1,963  
 
   
     
 
   
Total assets
  $ 40,949     $ 42,779  
 
   
     
 

     Segment amounts reflected above are stated in thousands. General corporate expenses reflect general and administrative expenses not directly associated with segment operations and consist primarily of corporate executive and accounting salaries, professional fees and services, bad debts, accrued profit sharing expense, corporate insurance expenses and office supplies. Corporate assets consists primarily of cash and cash equivalents and the cash value of officers’ life insurance.

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Table of Contents

FRIEDMAN INDUSTRIES, INCORPORATED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

     Nine Months Ended December 31, 2003 Compared To Nine Months Ended December 31, 2002

      During the nine months ended December 31, 2003, sales, costs of goods sold and gross profit declined $3,163,410, $3,040,742 and $122,668, from the respective amounts recorded during the nine months ended December 31, 2002. The declines in sales and costs of goods were related primarily to a decrease in tons sold from approximately 247,000 tons in the 2002 period to 224,000 tons in the 2003 period. The decline in tons sold was partially offset by an increase of approximately 6% in the average per ton selling price. The increase in the average per ton selling price was largely offset by an increase in the average per ton material cost. Gross profits and costs of goods sold as a percentage of sales were approximately 5.8% and 94.2%, respectively, in the 2003 period compared to 5.7% and 94.3%, respectively, in the 2002 period.

      Coil product segment sales declined approximately $6,200,000 during the 2003 period. The decline in sales of coil products was related primarily to a decrease from approximately 143,000 tons shipped in the 2002 period to 121,000 tons shipped in the 2003 period. Coil segment operating profits as a percentage of segment sales were approximately 2.3% in both periods. In the 2003 period, the Company’s Lone Star coil facility continued to experience a lack of supply of coil products from this facility’s primary coil supplier, Lone Star Steel Company (“LSS”). In the near term, the Company expects this lack of supply to continue. The Company's Lone Star facility has from time to time purchased steel coils from other suppliers. However, the freight costs associated with these purchases increase the Company’s costs of goods and diminishes the Company’s competitiveness for the sale of such products in an extremely competitive market. Management confers with LSS regularly and continues to monitor this situation closely. Continued lack of supply of steel coils at this facility could have a material adverse effect on the Company’s coil operations.

      Tubular product segment sales increased approximately $3,000,000 during the 2003 period. This increase resulted primarily from an approximately 10% increase in the average per ton selling price. Tubular segment operating profits as a percentage of segment sales were approximately 5.4% and 5.8% in the 2003 and 2002 period, respectively. During the 2003 period, LSS, the Company’s principal supplier of coil steel raw materials for its tubular division, continued to supply raw materials in such amounts as are adequate for the Company’s purposes. The Company currently does not anticipate any significant change in such supply from LSS.

      General, selling and administrative costs increased $165,507 in the 2003 period from the amount recorded in the 2002 period. This increase resulted primarily from an increase in bad-debt expense of approximately $168,000 incurred in the quarter ended June 30, 2003, related to one of the Company’s large customers. The Company monitors closely its customer accounts receivables and believes that this expense was an isolated event that currently does not reflect a trend in this area.

      Federal income taxes decreased $91,567 from the comparable amount recorded during the 2002 period. This decrease was primarily related to the decrease in earnings before taxes as the effective tax rates were the same for both periods.

     Three Months Ended December 31, 2003 Compared To Three Months Ended December 31, 2002

      During the three months ended December 31, 2003, sales, costs of goods sold and gross profit declined $440,922, $144,485 and $296,437, from the respective amounts recorded during the three months ended December 31, 2002. The declines in sales and costs of goods were related primarily to a decrease in tons sold from approximately 77,000 tons in the 2002 quarter to 72,000 tons in the 2003 quarter. The decline in tons sold was offset by an increase of approximately 5% in the average per ton selling price. Both coil and pipe operations experienced decreases in gross profit which resulted in the overall decrease in gross profit. Gross profits and costs of goods sold as a percentage of sales were 3.8% and 96.2%, respectively, in the 2003 quarter compared to 4.9% and 95.1%, respectively, in the 2002 quarter. During the 2003 quarter, the Company experienced increases in material costs and could not immediately pass these costs on to its customers. In addition, tubular operations were adversely affected by a reduction in tons produced due primarily to changes in the size and type of pipe produced and related and certain other production delays during the 2003 quarter. Costs for steel products continue to increase due primarily to substantial increases in scrap steel costs incurred by the Company’s primary suppliers, LSS and Nucor Steel Company (“NSC”), which have been passed on to the Company.

       Coil product segment sales declined approximately $2,310,000 during the 2003 quarter. The decline in sales of coil products was related primarily to a decrease from approximately 46,000 tons shipped in the 2002 quarter to 38,000 tons shipped in the 2003 quarter. Coil operations reflected a $106,000 loss in the 2003 period compared to an $85,000 gain in the 2002 quarter. In the 2003 quarter, the Company’s Lone Star coil facility and its XSCP Division (“XSCP”) recorded less tons sold. The Company’s Lone Star coil facility continued to experience a lack of supply of coil products from LSS. In the near term, the Company expects this lack of supply to continue. The Company's Lone Star facility has from time to time purchased steel coils from other suppliers. However, the freight costs associated with these purchases increase the Company's costs of goods and diminishes the Company's competitiveness for the sale of such products in an extremely competitive market. Management confers with LSS regularly and continues to monitor this situation closely. Regarding XSCP, NSC supplies XSCP with non-standard steel coils. During the 2003 quarter, the supply of non-standard coils was reduced. Currently, NSC is supplying non-standard coils to XSCP at more normal levels and the Company expects this supply to continue. Results for the 2003 quarter were adversely affected by the lack of supply noted above and by increased material costs which could not be immediately passed on to customers.

       Tubular product segment sales increased approximately $1,869,000 during the 2003 quarter. This increase resulted primarily from an increase in tons shipped from approximately 31,000 tons in the 2002 quarter to 34,000 tons shipped in the 2003 quarter. Tubular segment operating profits as a percentage of segment sales were approximately 4.2% and 5.9% in the 2003 and 2002 period, respectively. Results in the 2003 quarter were adversely affected by a 15% decrease in tons of pipe manufactured. This decrease resulted primarily from changes in the size and type of pipe produced and related and certain other production delays.

       Interest and other income increased $39,716 from the amount recorded during the 2002 quarter. This increase was related primarily to a gain of approximately $45,000 during the 2003 quarter from the sale of capital stock of a customer received by the Company in the course of the customer's bankruptcy proceedings.

      Federal income taxes decreased $97,922 from the comparable amount recorded during the 2002 quarter. This decrease was primarily related to the decrease in earnings before taxes as the effective tax rates were the same for both quarters.

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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

      The Company remained in a strong, liquid position at December 31, 2003. Current ratios were 3.7 and 3.2 at December 31, 2003 and March 31, 2003, respectively. Working capital was $24,170,804 at December 31, 2003 and $23,734,112 at March 31, 2003. During the nine months ended December 31, 2003, the Company maintained assets and liabilities at levels it believed were commensurate with operations. Accordingly, the Company generated cash by reducing accounts receivable and inventories. A portion of this cash was used to pay down accounts payable and other liabilities. The Company expects to continue to monitor and evaluate these balance sheet components depending on changes in the market conditions and the Company’s operations.

      The Company has an arrangement with a bank which provides for a revolving line of credit facility (the “revolving facility”). Pursuant to the revolving facility, which expires April 1, 2006, the Company may borrow up to $6 million at the bank’s prime rate or 1.5% over Libor. The Company uses the revolving facility to support cash flow and will borrow and repay the note as working capital is required. During the quarter ended December 31, 2003, the Company repaid $2 million of borrowings outstanding at September 30, 2003. At December 31, 2003, the Company had no borrowings outstanding under the revolving facility.

      The Company has in the past and may in the future borrow funds on a term basis to build or improve facilities. The Company currently has no plans to borrow funds on a term basis.

      Notwithstanding the current market conditions, the Company believes its cash flows from operations and borrowing capability under its revolving facility are adequate to fund its expected cash requirements for the next twenty-four months.

CRITICAL ACCOUNTING POLICIES

      The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. One such accounting policy which requires significant estimates and judgments is the valuation of LIFO inventories in the Company’s quarterly reporting. The quarterly valuation of inventory requires estimates of the year end quantities which is inherently difficult. Historically, these estimates have been materially correct. On an ongoing basis, the Company evaluates estimates and judgements. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances.

FORWARD-LOOKING STATEMENTS

      From time to time, the Company may make certain statements that contain “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1996) and that involve risk and uncertainty. These forward-looking statements may include, but are not limited to, future results of operations, future production capacity and product quality. Forward-looking statements may be made by management orally or in writing including, but not limited to, this Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Company’s filings with the Securities and Exchange Commission under the Securities Act of 1933 and the Securities Exchange Act of 1934. Actual results and trends in the future may differ materially depending on a variety of factors including but not limited to changes in the demand and prices of the Company products, changes in the demand for steel and steel products in general and the Company’s success in executing its internal operating plans.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      Not material.

Item 4. Controls and Procedures

      The Company's management, with the participation of the Company's principal executive officer (CEO) and principal financial officer (CFO), evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the fiscal quarter ended December 31, 2003. Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of the end of the fiscal quarter ended December 31, 2003 to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.

      There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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FRIEDMAN INDUSTRIES, INCORPORATED

Nine Months Ended December 31, 2003

Part II — OTHER INFORMATION

Item 1. Legal Proceedings

      Not applicable

Item 2. Changes in securities

  a). Not applicable
 
  b). Not applicable
 
  c). Not applicable
 
  d). Not applicable

Item 3. Defaults upon senior securities

  a). Not applicable
 
  b). Not applicable

Item 4. Submission of matters to a vote of security holders

     None

Item 5. Other Information

      Not applicable

Item 6. Exhibits and Reports on Form 8-K

  a). Exhibits

  31.1 — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman
 
  31.2 — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper
 
  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 Jack Friedman
 
  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 Ben Harper

  b). Reports on Form 8-K

        None

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  FRIEDMAN INDUSTRIES, INCORPORATED
Date February 13, 2004      
  By   /s/  BEN HARPER
     
  Ben Harper, Senior Vice President-Finance
  (Principal Financial and Accounting Officer)
       

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EXHIBIT INDEX

     
Exhibit No. Description


 
Exhibit 31.1
  — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman
 
Exhibit 31.2
  — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper
 
Exhibit 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 Jack Friedman
 
Exhibit 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 Ben Harper