<PAGE> 1
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, 1995
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commission file number 1-7521
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FRIEDMAN INDUSTRIES, INCORPORATED
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(Exact name of registrant as specified in its charter)
TEXAS 74-1504405
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
4001 Homestead Road, Houston, Texas 77028-5585
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(Address of principal executive office zip code)
Registrant's telephone number, including area code (713) 672-9433
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---------------------------------------------------------------------------
Former name, former address and former fiscal year, of 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
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At June 30, 1995, the number of shares outstanding of the issuer's only
class of stock was 5,832,195 shares of Common Stock.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS -- UNAUDITED
FRIEDMAN INDUSTRIES, INCORPORATED
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1995 MARCH 31, 1995
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,506,773 $ 664,527
Accounts receivable, less
allowance for doubtful
accounts ($5,970 at June 30,
1995 and March 31, 1995,
respectively) 9,149,605 8,670,636
Inventories -- Note B 16,516,545 16,558,774
Prepaid expenses and other
current assets 68,704 62,618
----------- -----------
TOTAL CURRENT ASSETS 27,241,627 25,956,555
PROPERTY, PLANT AND EQUIPMENT
Land 198,021 198,021
Buildings and improvements 2,678,333 2,595,826
Machinery and equipment 11,497,755 11,320,928
Less allowance for
depreciation (8,846,986) (8,699,581)
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5,527,123 5,415,194
OTHER ASSETS
Cash value of officers'
life insurance 707,696 703,113
----------- -----------
$33,476,446 $32,074,862
=========== ===========
</TABLE>
<PAGE> 3
CONSOLIDATED BALANCE SHEETS -- UNAUDITED
FRIEDMAN INDUSTRIES, INCORPORATED
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY JUNE 30, 1995 MARCH 31, 1995
------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable and accrued expenses $ 4,069,009 $ 4,270,809
Current portion of long-term debt 800,000 800,000
Dividends payable 291,609 277,742
Contribution to profit-sharing plan 50,000 200,000
Federal income taxes payable 430,635 14,658
Employee compensation and related expenses 299,233 253,125
----------- -----------
TOTAL CURRENT LIABILITIES 5,940,486 5,816,334
LONG-TERM DEBT, less current portion 7,800,000 7,000,000
PROVISION FOR NONPENSION RETIREMENT
BENEFITS 113,000 113,000
DEFERRED INCOME TAXES 410,247 422,747
STOCKHOLDERS' EQUITY
Common stock:
Par value $1 per share:
Authorized 10,000,000 shares
Issued and outstanding
shares -- 5,832,195
at June 30, 1995 and
5,554,858 at March 31, 1995 5,832,195 5,554,858
Additional paid-in capital 21,437,735 20,571,057
Retained earnings (8,057,217) (7,403,134)
----------- -----------
Total Stockholders' Equity 19,212,713 18,722,781
----------- -----------
$33,476,446 $32,074,862
=========== ===========
</TABLE>
<PAGE> 4
CONSOLIDATED STATEMENT OF EARNINGS -- UNAUDITED
FRIEDMAN INDUSTRIES, INCORPORATED
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
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1995 1994
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<S> <C> <C>
Net sales $28,752,665 $22,998,712
Costs and expenses
Costs of goods sold -- Note B 26,486,198 21,483,943
General, selling and
administrative costs 923,789 810,960
Interest 166,692 69,193
----------- -----------
27,576,679 22,364,096
Interest and other income (10,703) (7,230)
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Earnings before federal income
taxes 1,186,689 641,846
Provision (benefit) for federal
income taxes:
Current 415,975 224,228
Deferred (12,500) (6,000)
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403,475 218,228
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Net earnings $ 783,214 $ 423,618
=========== ===========
Net earnings per share -- Note C $ 0.13 $ 0.07
=========== ===========
Dividends
Common Stock -- per share dividend
declared during periods (shares
outstanding at record dates:
5,832,195 in 1995 and 5,553,642
in 1994) $ 0.05 $ 0.05
=========== ===========
</TABLE>
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
FRIEDMAN INDUSTRIES, INCORPORATED
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
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1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 783,214 $ 423,618
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation 147,405 147,870
Provision for deferred taxes (12,500) (6,000)
Provision for nonpension
retirement benefits 9,000
Decrease (increase) in operating
assets:
Accounts receivable (478,969) (455,732)
Inventories 42,229 908,548
Other current assets (6,086) 40,785
Increase (decrease) in operating
liabilities:
Accounts payable and accrued
expenses (201,800) (48,097)
Contribution to profit-sharing
plan payable (150,000) 45,000
Employee compensation and
related expenses 46,108 9,920
Federal income taxes payable 415,977 182,419
Deferred credit for LIFO
replacement -- Note B 508,162
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NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 585,578 1,765,493
INVESTING ACTIVITIES
Purchase of property, plant
and equipment (259,332) (72,125)
Increase in cash surrender value of
officers' life insurance (4,583) (21,007)
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NET CASH USED IN INVESTING ACTIVITIES (263,915) (93,132)
FINANCING ACTIVITIES
Cash dividends paid (279,417) (213,491)
Proceeds from borrowings
of long-term debt 1,000,000
Principal payments on
long-term debt (200,000)
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NET CASH PROVIDED (USED) IN
FINANCING ACTIVITIES 520,583 (213,491)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 842,246 1,458,870
Cash and cash equivalents at beginning
of period 664,527 330,289
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CASH AND CASH EQUIVALENTS AT END
OF PERIOD $1,506,773 $1,789,159
========== ==========
</TABLE>
<PAGE> 6
NOTES TO QUARTERLY REPORT -- UNAUDITED
FRIEDMAN INDUSTRIES, INCORPORATED
Three Months Ended June 30, 1995
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, 1995.
NOTE B -- INVENTORIES
Coil inventory consists primarily of raw materials. Tubular inventory is
comprised of both raw materials and finished goods. Cost for the Company's
coil inventory is determined under the last-in, first-out (LIFO) method.
During the quarter ended June 30, 1994, LIFO inventories were liquidated.
Cost of goods sold was charged and a deferred credit was recorded for the
difference ($508,162) between the estimated replacement cost and the LIFO
cost of these inventories.
NOTE C -- EARNINGS PER SHARE
Earnings per common and common equivalent share for the periods ended June
30, 1995 and June 30, 1994 are based on the weighted average number of
common and common equivalent (stock options) shares outstanding as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Common Stock:
Shares outstanding during
the entire period 5,554,858 5,289,598
Retroactive effect of stock
dividends declared 277,337 541,726
--------- ---------
Weighted average number of common
and common equivalent shares 5,832,195 5,831,324
========= =========
</TABLE>
Earnings per share assuming full dilution for the quarters ended June 30,
1995 and 1994, are not presented because they are not materially dilutive.
Stock options are not included in the above computations of common and common
equivalent shares outstanding since their effect is not significant.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FRIEDMAN INDUSTRIES, INCORPORATED
Three Months Ended June 30, 1995 Compared
To Three Months Ended June 30, 1994
During the quarter ended June 30, 1995, sales, costs of goods sold and
gross profit increased $5,753,953, $5,002,255 and $751,698, respectively from
the comparable amounts recorded during the quarter ended June 30, 1994. The
sales increase resulted primarily from additional volume and an increase in
average selling prices. The Company's tubular operations reflected a
substantial increase in sales during the June 1995 quarter. These operations
benefited from stronger market conditions for its products and services and
resulted in improved sales for each of its product lines. The increase in costs
of goods sold was related primarily to the sales increase noted above. Gross
profit increased as a result of the increase in sales combined with an improved
margin rate. Margin rates were 7.9% and 6.6% in June 1995 and June 1994,
respectively. This improvement was primarily related to tubular operations.
During the June 1995 quarter, the margin rate earned on the sales of tubular
products increased primarily as a result of the efficiencies associated with
increased production as well as the stronger market conditions noted above.
General, selling and administrative costs increased $112,829 from the
amount recorded during the June 1994 quarter. This increase was primarily
related to incentive remuneration based primarily on earnings and volume.
Interest expense increased $97,499 from the comparable amount recorded
during the June 1994 quarter. This increase was primarily related to interest
paid on borrowings under the Company's bank line of credit which were used to
support working capital.
Federal income taxes increased $185,247 as a result of an increase in
earnings before taxes. Tax rates were the same for both periods.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The Company remained in a strong, liquid position at June 30, 1995.
Current ratios were 4.6 and 4.5 at June 30, 1995 and March 31, 1995,
respectively. Working capital was $21,301,141 at June 30, 1995, and $20,140,221
at March 31, 1995. The Company has a line of credit arrangement with a bank
whereby it may borrow up to $8,000,000. At June 30, 1995, borrowings of
$5,000,000 had been made under this line of credit arrangement which expires
April 1, 1998.
<PAGE> 8
FRIEDMAN INDUSTRIES, INCORPORATED
QUARTER ENDED JUNE 30, 1995
Part II -- OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Legal Proceedings
None
Item 2. Changes in securities
a). Not applicable
b). Not applicable
Item 3. Defaults upon senior securities
a). None
b). Not applicable
Item 4. Submission of matters to a vote of security holders
Not applicable
Item 5. Other information
None
Item 6. Exhibits and reports on Form 8-K
a). None
b). None
</TABLE>
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 August 14, 1995 By /s/ BEN HARPER
------------------------------
Ben Harper, Treasurer
(Chief Accounting Officer)
Date August 14, 1995 By /S/ HAROLD FRIEDMEN
------------------------------
Harold Friedman, President
<PAGE> 9
[ERNST & YOUNG LLP LETTERHEAD]
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors
Friedman Industries, Incorporated
We have reviewed the accompanying condensed consolidated balance sheet of
Friedman Industries, Incorporated as of June 30, 1995, and the related
consolidated statements of earnings and cash flows for the three-month periods
ended June 30, 1995 and 1994. These financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Friedman Industries, Incorporated,
as of March 31, 1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the year then ended (not presented
herein) and in our report dated May 26, 1995, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of March 31, 1995 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
August 4, 1995
<PAGE> 10
INDEX TO EXHIBITS
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (A) Form
10-Q for the three months ended June 30, 1995.
</LEGEND>
<CIK> 0000039092
<NAME> FRIEDMAN INDUSTRIES, INCORPORATED
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-01-1995
<EXCHANGE-RATE> 1
<CASH> 1,506,773
<SECURITIES> 0
<RECEIVABLES> 9,149,605
<ALLOWANCES> 0
<INVENTORY> 16,516,545
<CURRENT-ASSETS> 27,241,627
<PP&E> 14,374,109
<DEPRECIATION> 8,846,986
<TOTAL-ASSETS> 33,476,446
<CURRENT-LIABILITIES> 5,940,486
<BONDS> 7,800,000
<COMMON> 5,832,195
0
0
<OTHER-SE> 13,380,518
<TOTAL-LIABILITY-AND-EQUITY> 33,476,446
<SALES> 28,752,665
<TOTAL-REVENUES> 28,752,665
<CGS> 26,486,198
<TOTAL-COSTS> 27,409,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,692
<INCOME-PRETAX> 1,186,689
<INCOME-TAX> 403,475
<INCOME-CONTINUING> 783,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 783,214
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
