FRIEDMAN INDUSTRIES INC - Quarter Report: 2005 September (Form 10-Q)

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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 SEPTEMBER 30, 2005

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) (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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


	Yes				No X

At September 30, 2005, the number of shares outstanding of the issuer’s only class of stock was 7,139,747 shares of Common Stock.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS — UNAUDITED
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
		NOTES TO QUARTERLY REPORT — UNAUDITED
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
Part II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3. Defaults upon senior securities
	Item 4. Submission of matters to a vote of security holders
	Item 5. Other Information
	Item 6. Exhibits
SIGNATURES
EXHIBIT INDEX
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to 18 U.S.C. Section 1350
Certification Pursuant to 18 U.S.C. Section 1350

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements

FRIEDMAN INDUSTRIES, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS


				SEPTEMBER 30, 2005			MARCH 31, 2005
				Unaudited
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	4,533,433		$	205,375
	Accounts receivable, net of allowances for bad debts and cash discounts of $37,276 at September 30 and March 31, 2005				16,005,406			16,403,036
	Inventories				23,699,320			25,857,240
	Prepaid federal income taxes				—			892,104
	Other				249,708			141,004

			TOTAL CURRENT ASSETS		44,487,867			43,498,759
PROPERTY, PLANT AND EQUIPMENT:
	Land				485,823			478,618
	Buildings and yard improvements				4,088,149			4,088,149
	Machinery and equipment				19,333,275			18,896,907
	Less accumulated depreciation				(17,187,869	)		(16,725,869	)

					6,719,378			6,737,805
OTHER ASSETS:
	Cash value of officers’ life insurance				577,891			559,778

			TOTAL ASSETS	$	51,785,136		$	50,796,342

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable and accrued expenses			$	12,564,773		$	13,474,128
	Current portion of long-term debt				—			2,897
	Dividends payable				571,308			571,180
	Income taxes payable				446,096			—
	Contribution to profit sharing plan				144,000			274,000
	Employee compensation and related expenses				664,449			637,311

			TOTAL CURRENT LIABILITIES		14,390,626			14,959,516
DEFERRED INCOME TAXES					64,500			86,856
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS					418,072			395,420
STOCKHOLDERS’ EQUITY:
	Common stock, par value $1:
		Authorized shares — 10,000,000
		Issued shares — 7,764,215 at September 30, 2005 and March 31, 2005			7,764,215			7,764,215
	Additional paid-in capital				28,492,619			28,492,619
	Treasury stock at cost (624,468 shares at September 30, 2005 and March 31, 2005)				(2,768,785	)		(2,768,785	)
	Retained earnings				3,423,889			1,866,501

			TOTAL STOCKHOLDERS’ EQUITY		36,911,938			35,354,550

			TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	51,785,136		$	50,796,342

FRIEDMAN INDUSTRIES, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS — UNAUDITED


		Three Months Ended September 30,						Six Months Ended September 30,

		2005			2004			2005			2004

Net sales		$	42,730,045		$	49,020,241		$	88,787,630		$	93,935,945
Costs and expenses
	Costs of goods sold		38,990,994			43,994,292			81,935,166			84,709,449
	General, selling and administrative costs		1,249,705			1,506,856			2,594,685			3,159,337

			40,240,699			45,501,148			84,529,851			87,868,786
Interest and other income			(49,372	)		(51,120	)		(94,907	)		(61,083	)

Earnings before income taxes			2,538,718			3,570,213			4,352,686			6,128,242
Provision (benefit) for income taxes:
	Current		973,535			1,274,080			1,675,168			2,189,280
	Deferred		(3,924	)		35,000			(22,356	)		59,000

			969,611			1,309,080			1,652,812			2,248,280

Net earnings		$	1,569,107		$	2,261,133		$	2,699,874		$	3,879,962

Average number of common shares outstanding:
	Basic		7,139,747			7,581,906			7,139,747			7,578,572
	Diluted		7,276,483			7,785,196			7,277,526			7,756,424
Net earnings per share:
	Basic	$	0.22		$	0.30		$	0.38		$	0.51
	Diluted	$	0.22		$	0.29		$	0.37		$	0.50
Cash dividends declared per common share		$	0.08		$	0.08		$	0.16		$	0.13

FRIEDMAN INDUSTRIES, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED


				Six Months Ended September 30,

				2005			2004

OPERATING ACTIVITIES
	Net earnings			$	2,699,874		$	3,879,962
	Adjustments to reconcile net income to cash provided by operating activities:
		Depreciation			462,000			441,600
		Provision (benefit) for deferred taxes			(22,356	)		59,000
		Provision for postretirement benefits			22,652			33,148
	Decrease (increase) in operating assets:
		Accounts receivable			397,630			(1,128,701	)
		Prepaid federal income taxes			892,104			—
		Inventories			2,157,920			1,110,882
		Other			(108,704	)		(210,160	)
	Increase (decrease) in operating liabilities:
		Accounts payable and accrued expenses			(909,355	)		1,895,899
		Contribution to profit-sharing plan payable			(130,000	)		(146,000	)
		Employee compensation and related expenses			27,138			177,566
		Income taxes payable			446,096			(910,719	)
		Deferred credit for LIFO replacement			—			157,520

			NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES		5,934,999			5,359,997
INVESTING ACTIVITIES
	Purchase of property, plant and equipment				(443,572	)		(496,427	)
	(Increase) decrease in cash value of officers’ life insurance				(18,112	)		774,023
Proceeds from sale of asset					—			542

			NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES		(461,684	)		278,138
FINANCING ACTIVITIES
	Cash dividends paid				(1,142,360	)		(531,249	)
	Principal payments on notes payable				(2,897	)		(39,956	)
	Exercise of stock options				—			47,740

			NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES		(1,145,257	)		(523,465	)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					4,328,058			5,114,670
	Cash and cash equivalents at beginning of period				205,375			1,984,763

CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	4,533,433		$	7,099,433

FRIEDMAN INDUSTRIES, INCORPORATED

CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS — UNAUDITED
SIX MONTHS ENDED SEPTEMBER 30, 2005

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, 2005.

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. Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the weighted average method.

During the quarter ended September 30, 2004, LIFO inventories were reduced but were replaced by March 31, 2005. A deferred credit of $157,520 was recorded at September 30, 2004 to reflect the cost of replacement.

A summary of inventory values follows:


	September 30,		March 31,
	2005		2005

Prime Coil Inventory	$	8,359,869	$	7,497,674
Non-Standard Coil Inventory		1,207,677		530,084
Tubular Raw Material		2,673,501		4,341,204
Tubular Finished Goods		11,458,273		13,488,278

	$	23,699,320	$	25,857,240

NOTE C — LONG-TERM DEBT

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


	September 30, 2005		March 31, 2005

Notes payable on equipment purchases	$	—	$	2,897

The Company has a $6 million revolving credit facility which expires April 1, 2008. There were no amounts outstanding pursuant to the facility at September 30, 2005 and March 31, 2005.

NOTE D — 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 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 each period indicated:


	Six Months Ended September 30,

	2005		2004

Reported net income	$	2,699,874	$	3,879,962
Less: compensation expenses per SFAS No. 123, net of tax		.00		.00

Pro forma net income	$	2,699,874	$	3,879,962

BASIC EARNINGS PER COMMON SHARE:
Reported net income		.38		.51
Less: compensation expense per SFAS No. 123, net of tax		.00		.00

Pro forma net income		.38		.51

DILUTED EARNINGS PER COMMON SHARE:
Reported net income		.37		.50
Less: compensation expense per SFAS No. 123, net of tax		.00		.00

Pro forma net income		.37		.50

There were no options granted in the six months ended September 30, 2005 or September 30, 2004. During the six months ended September 30, 2004, options for 20,000 shares of Common Stock were exercised which resulted in proceeds of $47,740 to the Company.

NEW ACCOUNTING PRONOUNCEMENT: In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”). SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The SEC has deferred the implementation date and the Company is required to adopt SFAS 123(R) no later than April 1, 2006. SFAS 123(R) permits adoption using one of two methods, a modified prospective method (“Prospective Method”) or a modified retrospective method (“Retrospective Method”). With the Prospective Method, costs are recognized beginning with the effective date based on the requirements of SFAS 123(R) for (i) all share-based payments granted after the effective date of SFAS 123(R), and (ii) all awards granted to employees prior to the effective date of SFAS 123(R) that remain unvested on the effective date. The Retrospective Method applies the requirements of the Prospective Method but further permits entities to restate all prior periods presented based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures. The Company has currently not determined which method it will use and therefore, the impact of the adoption of SFAS 123(R) cannot be reasonably estimated at this time.

NOTE E — SEGMENT INFORMATION


			Three Months Ended September 30,						Six Months Ended September 30,
			2005			2004			2005			2004
Net sales
	Coil		$	21,548		$	28,157		$	44,599		$	54,693
	Tubular			21,182			20,863			44,189			39,243

		Total net sales	$	42,730		$	49,020		$	88,788		$	93,936

Operating profit
	Coil		$	1,509		$	1,849		$	2,387		$	3,224
	Tubular			1,650			2,564			3,384			4,874

		Total operating profit		3,159			4,413			5,771			8,098
	Corporate expenses			669			894			1,513			2,031
	Interest & other income			(49	)		(51	)		(95	)		(61	)

		Total earnings before taxes	$	2,539		$	3,570		$	4,353		$	6,128


		September 30, 2005		March 31, 2005

Segment assets
	Coil	$	22,119	$	20,724
	Tubular		24,434		28,301

			46,553		49,025
	Corporate assets		5,232		1,771

		$	51,785	$	50,796

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.

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

Results of Operations

Six Months Ended September 30, 2005 Compared to Six Months Ended September 30, 2004

During the six months ended September 30, 2005, sales, costs of goods sold and gross profit decreased $5,148,315, $2,774,283 and $2,374,032, respectively, from the comparable amounts recorded during the six months ended September 30, 2004. The decrease in sales was related primarily to a decrease in tons sold as tons shipped declined from approximately 157,000 tons in the 2004 period to 143,000 tons in the 2005 period. This decrease in tons sold was partially offset by an increase in the average per ton selling price which increased from approximately $600 per ton in the 2004 period to approximately $620 per ton in the 2005 period. Costs of goods sold decreased due to the decline in tons shipped but was partially offset by an increase in the average per ton cost. Average per ton costs of goods sold increased from approximately $541 in the 2004 period to $572 in the 2005 period. The decrease in gross profit resulted primarily from the reduction in tons shipped and a decrease in margins earned on sales as the increase in cost of material could not be passed along in total to customers in the short term. Gross profit as a percentage of sales declined from approximately 9.8% in the 2004 period to approximately 7.7% in the 2005 period. During the 2004 period, the Company experienced strong market conditions for its products whereas market conditions were somewhat softer in the 2005 period.

Coil product segment sales decreased approximately $10,094,000 during the 2005 period. This segment experienced decreases in both tons sold and average selling prices. Tons of coil products sold declined from approximately 78,000 tons in the 2004 period to 71,000 tons in the 2005 period while the average per ton selling price decreased from approximately $703 per ton to approximately $631 per ton. Coil operating profit was adversely affected by the decrease in tons sold and by reduced margins on sales. Coil operating profit as a percentage of coil segment sales decreased from approximately 5.9% in the 2004 period to 5.4% in the 2005 period. The Company experienced strong market conditions for coil products in the 2004 period and softer market conditions in the 2005 period.

In the 2005 period, the Company’s Lone Star coil facility (“LSCF”) in Lone Star, Texas, continued to experience a lack of supply of coil products from its primary coil supplier, Lone Star Steel Company (“LSS”). LSCF, which accounted for approximately 6% of total sales in the 2005 period, has from time to time purchased coils from other suppliers. However, freight costs associated with these purchases diminishes the Company’s competitiveness in a very competitive industry. LSCF produced a profit from operations in the 2005 period. A further reduction in supply could have an adverse effect on coil segment operations. Management confers regularly with LSS and continues to monitor this situation closely.

During the year ended March 31, 2005, XSCP, which markets non-standard coils received from Nucor Steel Company (“NSC”), agreed with NSC to suspend the purchase of non-standard coils. Subsequently, NSC began supplying limited amounts of non-standard coils to XSCP. XSCP accounted for approximately 3% of total sales during the 2005 period. The Company expects to continue XSCP operations. Currently, the Company is receiving limited shipments of non-standard coils from NSC and expects these limited shipments to continue. XSCP operating assets, when not used by XSCP, can be used at the Company’s Hickman coil facility (“Hickman”).

The Company is dependent on LSS and NSC for its supply of coil inventory. NSC continues to supply Hickman with steel coils in amounts that are adequate for the Company’s purposes. While current levels are adequate to sustain the Company’s operations at both Hickman and LSCF, a reduction in the supply of steel coils could have an adverse effect on the Company’s coil operations.

Tubular product segment sales increased approximately $4,946,000 during the 2005 period. This increase was primarily related to an increase in the average per ton selling price which increased from approximately $498 per ton in the 2004 period to approximately $609 per ton in the 2005 period. Tons shipped decreased from approximately 79,000 tons in the 2004 period to 73,000 tons in the 2005 period. Tubular product operating profit was affected adversely by both the reduction in tons sold and reduced margins earned on sales. Tubular product segment operating profits as a percentage of segment sales were approximately 7.7% and 12.4% in the 2005 and 2004 periods, respectively. The Company experienced softer market conditions for its pipe products in the 2005 period as compared to conditions in the 2004 period.

During the 2005 period, LSS, the Company’s primary supplier of tubular products and coil material used in pipe manufacturing, continued to supply such products in amounts that were adequate for the Company’s purposes. The Company does not currently anticipate any significant change in such supply from LSS.

During the 2005 period, general, selling and administrative costs decreased $564,652 from the amount recorded during the 2004 period. This decrease was related primarily to reduced commissions and bonuses associated with the decline in earnings and volume, a decrease in bad debt expense and a reduction in remuneration associated with a retired executive.

Interest and other income increased $33,824 from the comparable amount recorded in the 2004 period. This increase was associated primarily with an increase in the average invested cash positions during the 2005 period.

Income taxes decreased $595,468 from the comparable amount recorded during the 2004 period. This decrease was primarily related to the decrease in earnings before taxes. Effective tax rates were 38.0% and 36.7% in the 2005 and 2004 periods, respectively. The net effect of state income taxes was greater in the 2005 period than in the 2004 period.

Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004

During the three months ended September 30, 2005, sales, costs of goods sold and gross profit decreased $6,290,196, $5,003,298 and $1,286,898, respectively, from the comparable amounts recorded during the three months ended September 30, 2004. The decrease in sales was related primarily to a decrease in the average selling price per ton from approximately $652 per ton in the 2004 quarter to $579 per ton in the 2005 quarter. In the 2004 quarter the Company sold approximately 75,000 tons compared to approximately 74,000 tons in the 2005 quarter. The decrease in costs of goods sold was associated primarily with a decrease in average per ton cost from approximately $585 per ton in the 2004 quarter to $529 per ton in the 2005 quarter. The decrease in gross profit resulted primarily from a reduction in margins earned on sales as average selling prices declined at a greater rate than did the average cost of goods. Gross profit as a percentage of sales declined from approximately 10.3% in the 2004 quarter to approximately 8.8% in the 2005 quarter. During the 2004 quarter, the Company experienced strong market conditions for its products as compared to market conditions in the 2005 quarter which were characterized by somewhat softer market conditions.

Coil product segment sales decreased approximately $6,609,000 during the 2005 quarter. This decrease was related primarily to a decrease in the average selling price which declined from approximately $761 per ton in the 2004 quarter to $586 per ton in the 2005 quarter. The Company sold approximately 37,000 tons of coil products in both the 2004 and 2005 quarters. Coil operating profit decreased approximately $340,000 from the amount recorded in the 2004 quarter. Coil operating profits as a percentage of sales were approximately 6.6% and 7.0% in the 2004 and 2005 quarters, respectively.

Tubular product segment sales increased approximately $319,000 during the 2005 quarter. An increase in the average selling price from $547 per ton in the 2004 quarter to $572 per ton in the 2005 quarter was partially offset by a decline in tons sold from approximately 38,000 tons in the 2004 quarter to approximately 37,000 tons in the 2005 quarter. Tubular product segment operating profits as a percentage of segment sales were approximately 7.8% and 12.3% in the 2005 and 2004 quarters, respectively. The Company experienced strong market conditions for its pipe products in the 2004 quarter but softer conditions in the 2005 quarter.

During the 2005 quarter, general, selling and administrative costs decreased $257,151 from the amount recorded during the 2004 quarter. This decrease was related primarily to reduced bonuses and other variable expenses associated with earnings and volume and reduced remuneration related to the retirement of an executive.

Income taxes decreased $339,469 from the comparable amount recorded during the 2004 quarter. This decrease was primarily related to the decrease in earnings before taxes. Effective tax rates were 38.2% and 36.7% in the 2005 and 2004 quarters, respectively. The net effect of state income taxes was greater in the 2005 quarter than in the 2004 quarter.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

The Company remained in a strong, liquid position at September 30, 2005. Current ratios were 3.1 and 2.9 at September 30, 2005 and March 31, 2005, respectively. Working capital was $30,097,241 at September 30, 2005 and $28,539,243 at March 31, 2005.

During the six months ended September 30, 2005, the Company maintained assets and liabilities at levels it believed were commensurate with operations. Cash increased by $4,328,058 during the period as accounts receivable, prepaid federal income taxes and inventories declined. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

During the six months ended September 30, 2005, the Company purchased approximately $444,000 in fixed assets. In September 2005, the Company’s Board of Directors authorized $600,000 to upgrade the Company’s small pipe mill.

In June 2004 and July 2004, the Company surrendered for cash, certain split-dollar life insurance policies on the lives of Jack and Harold Friedman, respectively. The Company received the total cash surrender value proceeds of $812,432.

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, 2008, 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. At September 30, 2005 and March 31, 2005, 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. In addition, the Company maintains an allowance for doubtful accounts receivable by providing for specifically identified accounts where collectibility is doubtful. On an ongoing basis, the Company evaluates estimates and judgments. 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

In the normal course of business the Company is exposed to market risks primarily from changes in the cost of steel in inventory and in interest rates. The Company closely monitors exposure to market risks and develops appropriate strategies to manage risk. With respect to steel purchases, there is no recognized market to purchase derivative financial instruments to reduce the inventory exposure risk on changing commodity prices. The exposure to market risk associated with interest rates relates primarily to debt. Recent debt balances are minimal and, as a result, direct exposure to interest rates changes is not significant.

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 September 30, 2005. 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 September 30, 2005 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 September 30, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

FRIEDMAN INDUSTRIES, INCORPORATED

Three Months Ended September 30, 2005

Part II — OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


	a). Not applicable

	b). Not applicable

	c). 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

At the Annual Meeting of Shareholders held on September 8, 2005, the Company’s shareholders elected eight directors to the Company’s Board of Directors. The number of shares voted for and withheld with respect to the election of each director was as follows:


Name	Shares Voted For		Shares Withheld
Jack Friedman		6,266,690		392,486
Harold Friedman		6,245,636		413,540
William Crow		6,266,514		392,662
Charles W. Hall		6,236,024		423,152
Alan M. Ranch		6,449,695		209,481
Hershel M. Rich		6,479,119		180,057
Kirk K. Weaver		6,482,660		176,516
Joe L. Williams		6,261,040		398,136

Item 5. Other Information

Not applicable

Item 6. Exhibits


	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

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 November 14, 2005
	By	/s/ BEN HARPER

	Ben Harper, Senior Vice President-Finance
	(Principal Financial and Accounting Officer)

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

FRIEDMAN INDUSTRIES INC - Quarter Report: 2005 September (Form 10-Q)

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