-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FSPvplsqySOR+tArke3i+GBGSac7rXNx1lojwrD6NNK19O1GRTj74nAUGIDkOrSN gwYIFcoQQcwsbBbBlVtmWQ== /in/edgar/work/20000629/0000950129-00-003495/0000950129-00-003495.txt : 20000920 0000950129-00-003495.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950129-00-003495 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRIEDMAN INDUSTRIES INC CENTRAL INDEX KEY: 0000039092 STANDARD INDUSTRIAL CLASSIFICATION: [3310 ] IRS NUMBER: 741504405 STATE OF INCORPORATION: TX FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07521 FILM NUMBER: 664501 BUSINESS ADDRESS: STREET 1: 4001 HOMESTEAD RD CITY: HOUSTON STATE: TX ZIP: 77028 BUSINESS PHONE: 7136729433 MAIL ADDRESS: STREET 2: PO BOX 21147 CITY: HOUSTON STATE: TX ZIP: 77226 10-K 1 e10-k.txt FORM 10-K DATED 3-31-2000 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2000 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______ Commission File No. 1-7521 FRIEDMAN INDUSTRIES, INCORPORATED (Exact name of registrant as specified in its charter) TEXAS 74-1504405 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4001 HOMESTEAD ROAD, HOUSTON, TEXAS 77028 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 672-9433 Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, $1 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None 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 the filing requirements for the past 90 days. Yes X No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ____ The aggregate market value of the Common Stock held by non-affiliates of the registrant as of June 19, 2000 (computed by reference to the closing price on the American Stock Exchange on such date), was approximately $16,500,000. The number of shares of the registrant's Common Stock outstanding at June 19, 2000 was 7,547,292 shares. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders of Friedman Industries, Incorporated for the fiscal year ended March 31, 2000 -- Part II. Proxy Statement for the 2000 Annual Meeting of Shareholders -- Part III. PART I ITEM 1. BUSINESS Friedman Industries, Incorporated (the "Company"), a Texas corporation incorporated in 1965, is in the steel processing and distribution business. The Company has two product groups: coil processing and tubular products. Significant financial information relating to the Company's product and service groups for the last three years is contained in Note 6 of the Consolidated Financial Statements of the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2000, which is incorporated herein by reference. Coil Processing The Company purchases domestic and foreign hot-rolled steel coils, processes the coils into steel sheet and plate and sells these products on a wholesale, rapid-delivery basis in competition with steel mills, importers and steel service centers. The Company also processes customer-owned coils on a fee basis. The Company has coil processing plants located at Lone Star, Texas, Houston, Texas and Hickman, Arkansas. At each plant, the steel coils are processed through a cut-to-length line which levels the steel and cuts it to prescribed lengths. The Company's processing machinery is heavy, mill-type equipment capable of processing steel coils weighing up to 25 tons. Coils are processed to the specifications required for a particular order. Shipments are made via unaffiliated truckers or by rail and, in times of normal supply and market conditions, can generally be made within 48 hours of receipt of the customer's order. At its Lone Star facility, the Company purchases hot-rolled steel coils primarily from Lone Star Steel Company ("LSS"), which is located approximately four miles from the Company's plant. The Lone Star plant purchases its supply of steel from LSS and other suppliers at competitive prices determined at the time of purchase. Loss of LSS as a source of coil supply could have a material adverse effect on the Company's business. At its Houston facility, the Company warehouses and processes hot-rolled steel coils, which are generally purchased on the open market at competitive prices from importers, trading companies and domestic steel mills. At the Company's Hickman facility, the Company warehouses and processes steel coils which are purchased primarily from Nucor Steel Company ("NSC"). NSC is located approximately one-half mile from the Hickman facility. Loss of NSC as a source of coil supply could have a material adverse effect on the Company's business. At the Lone Star facility, the Company maintains three cut-to-length lines and a coil-to-coil 2-Hi temper pass mill. This equipment is capable of processing steel up to 84 inches wide and up to one-half inch thick. At the Houston facility, the Company has a cut-to-length line and a rolling mill that are capable of processing steel up to 90 inches wide and up to one-half inch thick. The Hickman facility operates a cut-to-length line which has 84 inch wide and one-half inch thick capability. The Company also operates a 2-Hi temper pass mill at the Hickman facility that is capable of processing steel up to 74 inches wide and one-half inch thick in a coil-to-coil mode or directly from coil to cut-to-length processing. Tubular Products Through its Texas Tubular Products ("TTP") operation in Lone Star, Texas, the Company purchases, markets, processes (e.g., sorting, end-beveling, threading, etc.) and manufactures tubular products. 2 3 TTP employs various pipe processing equipment including threading and beveling machines, pipe handling equipment and other related machinery. This machinery can process pipe up to 13 3/8 inches in outside diameter. The TTP operation includes a pipe mill that is capable of producing pipe from 2 3/8 inches to 8 5/8 inches in outside diameter. The pipe mill is API-licensed to manufacture line and oil country pipe and also manufactures pipe for structural and piling purposes that meets recognized industry standards. The Company currently manufactures and sells substantially all of its line and oil country pipe to LSS pursuant to orders received from LSS. In addition, LSS sells pipe to the Company for structural applications for some sizes of pipe that are beyond the capability of the pipe mill. The Company purchases a substantial portion of its annual supply of pipe and coil material used in pipe production from LSS. The Company can make no assurances as to the amounts of pipe and coil material that will be available from LSS in the future. Loss of LSS as a source of supply or as a customer could have a material adverse effect on the Company's business. Marketing The following table sets forth the approximate percentage of total sales contributed by each group of steel products during each of the Company's last three fiscal years:
PRODUCT GROUPS 2000 1999 1998 -------------- ---- ---- ---- Coil Processing............................................. 65% 69% 59% Tubular Products............................................ 35% 31% 41%
Coil Processing. The Company's coil processing products and services are sold to approximately 350 customers located primarily in the midwestern, southwestern and southeastern sections of the United States. The Company's principal customers for these products and services are steel distributors and customers fabricating steel products such as storage tanks, steel buildings, farm machinery and equipment, construction equipment, transportation equipment, conveyors and other similar products. During each of the fiscal years ended March 31, 2000, 1999 and 1998, six, six and nine customers, respectively, accounted for approximately 25% of the Company's sales of coil processing products. No coil processing customer accounted for as much as 10% of the Company's total sales during those years. The Company sells substantially all of its coil processing products through its own sales force. At March 31, 2000, the sales force was comprised of a manager and five professional sales personnel under the direction of the senior vice president of sales and marketing. Salesmen are paid on a salary and commission basis. Shipments of particular products are made from the facility offering the product desired. If the product is available at more than one facility, other factors such as location of the customer, productive capacity of the facility and activity of the facility enter into the decision regarding shipments. The Company regularly contracts on a quarterly basis with many of its larger customers to supply minimum quantities of steel. Tubular Products. Tubular products are sold nationally to approximately 330 customers. The Company's principal customers of these products are steel and pipe distributors, piling contractors and LSS. Sales of pipe to LSS accounted for approximately 9% of the Company's total sales in fiscal 2000. The Company sells its tubular products through its own sales force comprised of a manager and four professional sales personnel under the direction of the senior vice president of sales and marketing. Salesmen are paid on a salary and commission basis. Competition The Company is engaged in a non-seasonal, highly competitive business. The Company competes with steel mills, importers and steel service centers. The steel industry, in general, is characterized by a small number of extremely large companies dominating the bulk of the market and a large number of relatively small companies, such as the Company, competing for a limited share of such market. 3 4 The Company believes that in times of normal supply and market conditions its ability to compete is dependent upon its ability to offer steel products at prices competitive with or below those of other steel suppliers, as well as its ability to provide products meeting customer specifications on a rapid delivery basis. Employees At March 31, 2000, the Company had approximately 155 full-time employees. Executive Officers of the Company The following table sets forth the name, age, officer positions and family relationships, if any, of each executive officer of the Company and period during which each officer has served in such capacity:
POSITION, OFFICES WITH THE COMPANY NAME AGE AND FAMILY RELATIONSHIPS, IF ANY ---- --- ---------------------------------- Jack Friedman...... 79 Chairman of the Board of Directors and Chief Executive Officer since 1970, Director since 1965, brother of Harold Friedman Harold Friedman.... 70 Vice Chairman since 1995, formerly President and Chief Operating Officer since 1975, Executive Vice President from 1973 to 1975, Director since 1965, brother of Jack Friedman William E. Crow.... 53 President and Chief Operating Officer since 1995, formerly Vice President since 1981 and formerly President of Texas Tubular Products Division since August 1990 Benny Harper....... 54 Senior Vice President -- Finance since 1995 (formerly Vice President since 1990), Treasurer since 1980 and Secretary since May 1992 Thomas Thompson.... 49 Senior Vice President -- Sales and Marketing since 1995, formerly Vice President -- Sales since 1990 Ronald Burgerson... 61 Vice President since 1974 Dale Ray........... 54 Vice President since 1994
4 5 ITEM 2. PROPERTIES The principal properties of the Company are described in the following table:
APPROXIMATE TYPE OF LOCATION SIZE OWNERSHIP CONSTRUCTION -------- ----------- --------- ------------ Lone Star, Texas Plant -- Coil Processing...... 42,260 sq. feet Owned(1) Steel frame/siding Plant -- Texas Tubular Products................... 76,000 sq. feet Owned(1) Steel frame/siding Offices -- Coil Processing.... 1,200 sq. feet Owned(1) Steel building Offices -- Texas Tubular Products................... 5,000 sq. feet Owned(1) Cinder block Land -- Coil Processing....... 13.93 acres Owned(1) -- Land -- Texas Tubular Products................... 67.77 acres Leased(2) -- Longview, Texas Offices......... 2,600 sq. feet Leased(3) Office Building Houston, Texas Plant and Warehouse -- Coil Processing................. 70,000 sq. feet Owned(1) Rigid steel frame and steel siding Offices -- Coil Processing.... 4,000 sq. feet Owned(1) Brick veneer; steel building Land -- Coil Processing....... 12 acres Owned(1) -- Hickman, Arkansas Plant and Warehouse -- Coil Processing................. 42,600 sq. feet Owned(1) Steelframe/siding Offices -- Coil Processing.... 1,800 sq. feet Owned(1) Cinder block Land -- Coil Processing....... 26.19 acres Owned(1) --
- --------------- (1) All of the Company's owned real estate, plants and offices are held in fee and are not subject to any mortgage or deed of trust. (2) The real estate lease is with LSS and its affiliate, Texas & Northern Railway, Inc., and expires August 31, 2010. The lease provides for monthly payments of $1,667 adjusted each January 1 for changes in the Consumer Price Index. The Company has an exclusive option to purchase this property during a period beginning December 29, 1998 and ending December 31, 2002. (3) The office lease is with a nonaffiliated party, expires April 30, 2001, and provides for an annual rental of $24,672. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to, nor is its property the subject of, any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 5 6 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS The Company's Common Stock is traded principally on the American Stock Exchange (Symbol: FRD). Reference is hereby made to the sections of the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2000, entitled "Description of Business -- Range of High and Low Sales Prices of Common Stock" and "Description of Business -- Dividends Declared Per Share of Common Stock", which sections are hereby incorporated herein by reference. The approximate number of shareholders of record of Common Stock of the Company as of May 28, 2000 was 620. ITEM 6. SELECTED FINANCIAL DATA Information with respect to Item 6 is hereby incorporated herein by reference from the section of the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2000, entitled "Selected Financial Data". ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information with respect to Item 7 is hereby incorporated herein by reference from the section of the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2000, entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations". ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not material ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements and notes thereto of the Company included in the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2000, are hereby incorporated herein by reference: Consolidated Balance Sheets -- March 31, 2000 and 1999 Consolidated Statements of Earnings -- Years ended March 31, 2000, 1999 and 1998 Consolidated Statements of Stockholders' Equity -- Years ended March 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows -- Years ended March 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements -- March 31, 2000 Report of Independent Auditors Information with respect to supplementary financial information relating to the Company appears in Note 7 -- Summary of Quarterly Results of Operations (Unaudited) of the Notes to Consolidated Financial Statements incorporated herein by reference above in this Item 8 from the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2000. The following supplementary schedule for the Company for the year ended March 31, 2000, is included elsewhere in this report. Schedule II -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None 6 7 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Item 10 is hereby incorporated herein by reference from the Company's proxy statement in respect of the 2000 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the Securities and Exchange Commission on or before 120 days after the end of the Company's 2000 fiscal year. ITEM 11. EXECUTIVE COMPENSATION Information with respect to Item 11 is hereby incorporated herein by reference from the Company's proxy statement in respect of the 2000 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the Securities and Exchange Commission on or before 120 days after the end of the Company's 2000 fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to Item 12 is hereby incorporated herein by reference from the Company's proxy statement in respect of the 2000 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the Securities and Exchange Commission on or before 120 days after the end of the Company's 2000 fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to Item 13 is hereby incorporated herein by reference from the Company's proxy statement in respect of the 2000 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the Securities and Exchange Commission on or before 120 days after the end of the Company's 2000 fiscal year. 7 8 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents included in this report
EXHIBIT NO. DESCRIPTION ------- ----------- 1 and 2 -- The responses to this section of Item 14 appears in this report as a separate section of this report. 3 -- Exhibits 3.1 -- Articles of Incorporation of the Company, as amended, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1982, and incorporated herein by reference. 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, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1988, and incorporated herein by reference. 3.3 -- Bylaws of the Company, amended as of March 27, 1992, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1992, and incorporated herein by reference. 4.1 -- Promissory Note of the Company to Texas Commerce Bank National Association, dated December 1, 1993, in the amount of $4,000,000, filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1993, and incorporated herein by reference. 4.2 -- Letter Agreement dated March 22, 1993, as amended by the First Amendment dated December 31, 1993, by and between the Company and Texas Commerce Bank National Association regarding a $5,000,000 revolving credit line, filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1993, and incorporated herein by reference. 4.3 -- Amended and Restated Letter Agreement dated April 1, 1995, between the Company and Texas Commerce Bank National Association regarding an $8,000,000 revolving line of credit, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1995, and incorporated herein by reference. 10.1 -- Lease Agreement between NCNB Texas National Bank, as Trustee, and the Company dated September 10, 1990, and Addendum No. 1 thereto dated November 11, 1991, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1992, and incorporated herein by reference. 10.2 -- Lease, effective September 1, 1990, by and between Lone Star Steel Company, Texas & Northern Railway, Inc., a Texas corporation, and the Company, filed as an exhibit to the Company's Current Report on Form 8-K dated August 1, 1990, and incorporated herein by reference. *10.3 -- Friedman Industries, Incorporated 1989 Incentive Stock Option Plan, filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1991, and incorporated herein by reference. 10.4 -- Promissory Note of the Company to Texas Commerce Bank National Association, dated December 1, 1993, in the amount of $4,000,000 (included as Exhibit 4.1 hereto). 10.5 -- Letter Agreement dated March 22, 1993, as amended by the First Amendment dated December 31, 1993, by and between the Company and Texas Commerce Bank National Association regarding a $5,000,000 revolving credit line (included as Exhibit 4.2 hereto). 10.6 -- Amended and Restated Letter Agreement dated April 1, 1995, between the Company and Texas Commerce Bank National Association regarding an $8,000,000 revolving line of credit (included as Exhibit 4.3 hereto).
8 9
EXHIBIT NO. DESCRIPTION ------- ----------- 10.7 -- Lease Agreement between Judson Plaza, Inc. and the Company dated March 16, 1996, regarding the lease of office space (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1996). *10.8 -- Friedman Industries, Incorporated 1996 Stock Option Plan (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1997). 10.9 -- $8,000,000 Revolving Promissory Note dated April 1, 1997 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1997). 10.10 -- First Amendment to Amended and Restated Letter Agreement between the Company and Texas Commerce Bank National Association dated April 1, 1997 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1997). 10.11 -- ISDA Master Agreement between the Company and Texas Commerce Bank National Association ("TCB") dated July 21, 1997 (incorporated by reference to the Company's Report on Form 10-Q for the three months ended June 30, 1997). 10.12 -- Advancing Promissory Note of the Company to TCB dated July 21, 1997 (incorporated by reference to the Company's Report on Form 10-Q for the three months ended June 30, 1997). 10.13 -- Second Amendment to Amended and Restated Letter Agreement between the Company and TCB dated July 21, 1997 (incorporated by reference to the Company's Report on Form 10-Q for the three months ended June 30, 1997). *10.14 -- First Amendment to the Friedman Industries, Incorporated 1989 Incentive Stock Option Plan (incorporated by reference to the Company's Report on Form 10-Q for the three months ended September 30, 1997). *10.15 -- Friedman Industries, Incorporated 1995 Non-Employee Director Stock Plan and First Amendment thereto dated effective August 22, 1997, (incorporated by reference to the Company's Annual Report on Form 10K for the year ended March 31, 1998). 10.16 -- Third amendment to the Amended and Restated Letter Agreement dated April 1, 1999 between the Company and Chase Bank of Texas ("Chase") (incorporated by reference to the Company's report on Form 10-Q for the three months ended June 30, 1999). 10.17 -- Revolving Promissory Note dated April 1, 1999 between the Company and Chase (incorporated by reference to the Company's report on Form 10-Q for the three months ended June 30, 1999). 13.1 -- The Company's Annual Report to Shareholders for the fiscal year ended March 31, 2000. 21.1 -- List of Subsidiaries. 23.1 -- Consent of Independent Auditors. 27.1 -- Financial Data Schedule.
- --------------- * Management contract or compensation plan. Copies of exhibits filed as a part of this Annual Report on Form 10-K may be obtained by shareholders of record at a charge of $.10 per page. Direct inquiries to: Benny Harper, Senior Vice President -- Finance, Friedman Industries, Incorporated, P. O. Box 21147, Houston, Texas 77226. (b) Reports on Form 8-K filed in the fourth quarter of fiscal 2000: None 9 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Friedman Industries, Incorporated has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, and State of Texas, this 28th day of June, 2000. FRIEDMAN INDUSTRIES, INCORPORATED By: /s/ JACK FRIEDMAN ---------------------------------- Jack Friedman Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated on behalf of Friedman Industries, Incorporated in the City of Houston, and State of Texas.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JACK FRIEDMAN Chairman of the Board, Chief June 28, 2000 - ----------------------------------------------------- Executive Officer and Jack Friedman Director (Principal Executive Officer) /s/ HAROLD FRIEDMAN Vice Chairman of the Board and June 28, 2000 - ----------------------------------------------------- Director Harold Friedman /s/ WILLIAM E. CROW President, Chief Operating June 28, 2000 - ----------------------------------------------------- Officer and Director William E. Crow /s/ BENNY B. HARPER Senior Vice June 28, 2000 - ----------------------------------------------------- President -- Finance and Benny B. Harper Treasurer (Principal Financial and Accounting Officer) /s/ HENRY SPIRA Director June 28, 2000 - ----------------------------------------------------- Henry Spira /s/ CHARLES W. HALL Director June 28, 2000 - ----------------------------------------------------- Charles W. Hall /s/ KIRK K. WEAVER Director June 28, 2000 - ----------------------------------------------------- Kirk K. Weaver /s/ ALAN M. RAUCH Director June 28, 2000 - ----------------------------------------------------- Alan M. Rauch /s/ HERSHEL M. RICH Director June 28, 2000 - ----------------------------------------------------- Hershel M. Rich
10 11 FRIEDMAN INDUSTRIES, INCORPORATED HOUSTON, TEXAS ANNUAL REPORT ON FORM 10-K YEAR ENDED MARCH 31, 2000 ITEM 14(A)1 AND 2 LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES 11 12 FORM 10-K ITEM 14(A)1 AND 2 FRIEDMAN INDUSTRIES, INCORPORATED LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following financial statements of the Company are set forth herewith in response to Item 14(a)1 and 2 of this report. Consolidated Balance Sheets -- March 31, 2000 and 1999 Consolidated Statements of Earnings -- Years ended March 31, 2000, 1999 and 1998 Consolidated Statements of Stockholders' Equity -- Years end March 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows -- Years ended March 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements -- March 31, 2000 Report of Independent Auditors The following financial statement schedule of the Company is included in this report. S-1-Schedule II -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. 12 13 SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FRIEDMAN INDUSTRIES, INCORPORATED
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------- ---------- ------------------------------- ------------- ------------- ADDITIONS ------------------------------- BALANCE AT CHARGED TO CHARGED TO BEGINNING COSTS AND OTHER ACCOUNTS -- DEDUCTIONS -- BALANCE AT DESCRIPTION OF PERIOD EXPENSES(1) DESCRIBE DESCRIBE(A) END OF PERIOD ----------- ---------- ----------- ----------------- ------------- ------------- Year ended March 31, 2000 Allowance for doubtful accounts receivable (deducted from related asset account)......... $7,276 $7,276 ====== ======== ====== ======== ====== Year ended March 31, 1999 Allowance for doubtful accounts receivable (deducted from related asset account)......... $7,276 $ 15,365 $ 15,365 $7,276 ====== ======== ====== ======== ====== Year ended March 31, 1998 Allowance for doubtful accounts receivable (deducted from related asset account)......... $7,276 $200,000 $200,000 $7,276 ====== ======== ====== ======== ======
- --------------- (A) Accounts and notes receivable written off. S-1 14 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ------- ----------- 1 and 2 -- The responses to this section of Item 14 appears in this report as a separate section of this report. 3 -- Exhibits 3.1 -- Articles of Incorporation of the Company, as amended, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1982, and incorporated herein by reference. 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, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1988, and incorporated herein by reference. 3.3 -- Bylaws of the Company, amended as of March 27, 1992, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1992, and incorporated herein by reference. 4.1 -- Promissory Note of the Company to Texas Commerce Bank National Association, dated December 1, 1993, in the amount of $4,000,000, filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1993, and incorporated herein by reference. 4.2 -- Letter Agreement dated March 22, 1993, as amended by the First Amendment dated December 31, 1993, by and between the Company and Texas Commerce Bank National Association regarding a $5,000,000 revolving credit line, filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1993, and incorporated herein by reference. 4.3 -- Amended and Restated Letter Agreement dated April 1, 1995, between the Company and Texas Commerce Bank National Association regarding an $8,000,000 revolving line of credit, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1995, and incorporated herein by reference. 10.1 -- Lease Agreement between NCNB Texas National Bank, as Trustee, and the Company dated September 10, 1990, and Addendum No. 1 thereto dated November 11, 1991, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1992, and incorporated herein by reference. 10.2 -- Lease, effective September 1, 1990, by and between Lone Star Steel Company, Texas & Northern Railway, Inc., a Texas corporation, and the Company, filed as an exhibit to the Company's Current Report on Form 8-K dated August 1, 1990, and incorporated herein by reference. *10.3 -- Friedman Industries, Incorporated 1989 Incentive Stock Option Plan, filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1991, and incorporated herein by reference. 10.4 -- Promissory Note of the Company to Texas Commerce Bank National Association, dated December 1, 1993, in the amount of $4,000,000 (included as Exhibit 4.1 hereto). 10.5 -- Letter Agreement dated March 22, 1993, as amended by the First Amendment dated December 31, 1993, by and between the Company and Texas Commerce Bank National Association regarding a $5,000,000 revolving credit line (included as Exhibit 4.2 hereto). 10.6 -- Amended and Restated Letter Agreement dated April 1, 1995, between the Company and Texas Commerce Bank National Association regarding an $8,000,000 revolving line of credit (included as Exhibit 4.3 hereto).
15
EXHIBIT NO. DESCRIPTION ------- ----------- 10.7 -- Lease Agreement between Judson Plaza, Inc. and the Company dated March 16, 1996, regarding the lease of office space (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1996). *10.8 -- Friedman Industries, Incorporated 1996 Stock Option Plan (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1997). 10.9 -- $8,000,000 Revolving Promissory Note dated April 1, 1997 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1997). 10.10 -- First Amendment to Amended and Restated Letter Agreement between the Company and Texas Commerce Bank National Association dated April 1, 1997 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1997). 10.11 -- ISDA Master Agreement between the Company and Texas Commerce Bank National Association ("TCB") dated July 21, 1997 (incorporated by reference to the Company's Report on Form 10-Q for the three months ended June 30, 1997). 10.12 -- Advancing Promissory Note of the Company to TCB dated July 21, 1997 (incorporated by reference to the Company's Report on Form 10-Q for the three months ended June 30, 1997). 10.13 -- Second Amendment to Amended and Restated Letter Agreement between the Company and TCB dated July 21, 1997 (incorporated by reference to the Company's Report on Form 10-Q for the three months ended June 30, 1997). *10.14 -- First Amendment to the Friedman Industries, Incorporated 1989 Incentive Stock Option Plan (incorporated by reference to the Company's Report on Form 10-Q for the three months ended September 30, 1997). *10.15 -- Friedman Industries, Incorporated 1995 Non-Employee Director Stock Plan and First Amendment thereto dated effective August 22, 1997, (incorporated by reference to the Company's Annual Report on Form 10K for the year ended March 31, 1998). 10.16 -- Third amendment to the Amended and Restated Letter Agreement dated April 1, 1999 between the Company and Chase Bank of Texas ("Chase") (incorporated by reference to the Company's report on Form 10-Q for the three months ended June 30, 1999). 10.17 -- Revolving Promissory Note dated April 1, 1999 between the Company and Chase (incorporated by reference to the Company's report on Form 10-Q for the three months ended June 30, 1999). 13.1 -- The Company's Annual Report to Shareholders for the fiscal year ended March 31, 2000. 21.1 -- List of Subsidiaries. 23.1 -- Consent of Independent Auditors. 27.1 -- Financial Data Schedule.
- --------------- * Management contract or compensation plan.
EX-13.1 2 ex13-1.txt ANNUAL REPORT TO SHAREHOLDERS 1 FRIEDMAN INDUSTRIES, INCORPORATED 2000 ANNUAL REPORT 2 FRIEDMAN INDUSTRIES, INCORPORATED - -------------------------------------------------------------------------------- U W FINANCIAL HIGHLIGHTS
2000 1999 ------------ ------------ Net sales................................ $120,267,809 $124,719,640 Net earnings............................. $2,506,801 $3,540,811 Net earnings per share (Basic)*.......... $0.33 $0.47 Cash dividends per share*................ $0.18 $0.25 Stock dividend........................... 5% 5% Stockholders' equity..................... $28,622,951 $27,422,779 Stockholders' equity per share (Basic)*............................... $3.79 $3.64 Working capital.......................... $28,568,099 $25,776,002 * Adjusted for stock dividends.
V X - -------------------------------------------------------------------------------- TO OUR SHAREHOLDERS: Is there much difference in the "new economy" and the "old economy"? The workaday world is primarily about managing change. Management's attitude has always been and continues to be to embrace and adapt to any "economy" that evolves while remaining grounded in sound, basic business philosophies. The Company continually pursues and employs appropriate technologies and techniques to assure the continued progress and success of your Company. You are cordially invited to attend the Annual Meeting of Shareholders to be held on August 25, 2000. The meeting will be held at 11:00 a.m. in the offices of Fulbright & Jaworski L.L.P., 1301 McKinney, Houston, Texas. Sincerely, LOGO Jack Friedman Chairman of the Board and Chief Executive Officer 1 3 FRIEDMAN INDUSTRIES, INCORPORATED OFFICERS Jack Friedman Chairman of the Board and Chief Executive Officer Harold Friedman Vice Chairman of the Board William E. Crow President and Chief Operating Officer Benny B. Harper Senior Vice President -- Finance and Secretary/Treasurer Thomas N. Thompson Senior Vice President -- Sales and Marketing Ronald L. Burgerson Vice President Dale Ray Vice President Charles W. Hall Assistant Secretary COMPANY OFFICES AND WEB SITE MAIN OFFICE 4001 Homestead Road Houston, Texas 77028 713-672-9433 SALES OFFICE -- COIL PRODUCTS 1121 Judson Road Longview, Texas 75606 903-758-3431 SALES OFFICE -- TUBULAR PRODUCTS P.O. Box 0388 Lone Star, Texas 75668 903-639-2511 WEB SITE ADDRESS www.friedmanindustries.com COUNSEL Fulbright & Jaworski L.L.P. 1301 McKinney, 51st Floor Houston, Texas 77010 AUDITORS Ernst & Young LLP 1221 McKinney, Suite 2400 Houston, Texas 77010 TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 DIRECTORS Jack Friedman Chairman of the Board and Chief Executive Officer Harold Friedman Vice Chairman of the Board William E. Crow President and Chief Operating Officer Charles W. Hall Partner, Fulbright & Jaworski L.L.P. (law firm) Houston, Texas Alan M. Rauch President, Ener-Tex International, Inc. (oilfield equipment sales) Houston, Texas Hershel M. Rich Private investor and business consultant Houston, Texas Henry Spira Retired; Former Vice President, Friedman Industries, Incorporated Houston, Texas Kirk K. Weaver President, Parkans International, L.L.C. (recycling services), Houston, Texas; Chairman of the Board and Chief Executive Officer, LTI Technologies, Inc. (technical services) Houston, Texas STOCK EXCHANGE LISTING American Stock Exchange (Trading symbol: FRD) APPROXIMATE NUMBER OF SHAREHOLDERS OF RECORD 620 at May 26, 2000 ANNUAL REPORT ON FORM 10-K Shareholders may obtain without charge a copy of the Company's Annual Report on Form 10-K for the year ended March 31, 2000 as filed with the Securities and Exchange Commission. Written requests should be addressed to: Benny B. Harper, Senior Vice President, Friedman Industries, Incorporated, P.O. Box 21147, Houston, Texas 77226. 2 4 FRIEDMAN INDUSTRIES, INCORPORATED DESCRIPTION OF BUSINESS Friedman Industries, Incorporated is in the steel processing and distribution business. The Company has two product groups: coil processing and tubular products. At its facilities in Lone Star, Texas, Houston, Texas and Hickman, Arkansas, the Company processes semi-finished, hot-rolled steel coils into flat, finished sheet and plate, and sells these products on a wholesale, rapid-delivery basis in competition with steel mills, importers and steel service centers. The Company also processes customer-owned coils on a fee basis. The Company purchases a substantial amount of its annual coil tonnage from Lone Star Steel Company ("LSS") and Nucor Steel Company ("NSC"). Loss of LSS or NSC as a source of coil supply could have a material adverse effect on the Company's business. Steel sheet and plate and coil processing services are sold directly through the Company's own sales force to approximately 350 customers located primarily in the midwestern, southwestern and southeastern sections of the United States. These products and services are sold principally to steel distributors and to customers fabricating steel products such as storage tanks, steel buildings, farm machinery and equipment, construction equipment, transportation equipment, conveyors and other similar products. The Company, through its Texas Tubular Products operation located in Lone Star, Texas, purchases, processes, manufactures and markets tubular products ("pipe"). The Company sells pipe nationally to approximately 330 customers and sells a substantial amount of manufactured pipe to LSS. The Company purchases a substantial portion of its annual supply of pipe and coil material used in pipe production from LSS. Loss of LSS as a source of pipe and coil material supply or as a customer of manufactured pipe could have a material adverse effect on the Company's business. Significant financial information relating to the Company's product groups is contained in Note 6 of Notes to the Company's Consolidated Financial Statements appearing herein. ------------------ RANGE OF HIGH AND LOW SALES PRICES OF COMMON STOCK
FISCAL 2000 FISCAL 1999 ----------------- ----------------- HIGH LOW HIGH LOW ---- ----- ---- ----- First Quarter............................................... 4 5/8 3 13/16 8 3/8 6 3/8 Second Quarter.............................................. 4 7/16 3 5/16 7 3/8 4 3/8 Third Quarter............................................... 3 7/8 3 1/4 5 11/16 4 1/2 Fourth Quarter.............................................. 4 1/8 3 5/16 5 3/8 3 3/4
------------------ DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
FISCAL 2000 FISCAL 1999 ------------------ ------------------ CASH STOCK CASH STOCK ----- ----- ----- ----- First Quarter............................................... $ .05 $ .075 Second Quarter.............................................. $ .05 $ .07 Third Quarter............................................... $ .05 $ .07 Fourth Quarter.............................................. $ .04 5% $ .06 5% (Per share amounts above have not been adjusted to reflect stock dividends.)
3 5 FRIEDMAN INDUSTRIES, INCORPORATED CONSOLIDATED BALANCE SHEETS ASSETS
MARCH 31 ---------------------------- 2000 1999 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents.............................. $ 443,818 $ 3,798,935 Accounts receivable, less allowance for doubtful accounts of $7,276 in 2000 and 1999.................. 13,533,550 8,709,728 Inventories............................................ 22,910,509 19,906,170 Other.................................................. 57,501 119,207 ------------ ------------ TOTAL CURRENT ASSETS.............................. 36,945,378 32,534,040 PROPERTY, PLANT AND EQUIPMENT: Land................................................... 221,543 221,543 Buildings and yard improvements........................ 3,346,912 3,317,088 Machinery and equipment................................ 16,075,816 15,879,803 Less accumulated depreciation.......................... (12,170,191) (11,127,089) ------------ ------------ 7,474,080 8,291,345 OTHER ASSET: Cash value of officers' life insurance................. 687,332 197,992 ------------ ------------ TOTAL ASSETS...................................... $ 45,106,790 $ 41,023,377 ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31 ---------------------------- 2000 1999 ------------ ------------ CURRENT LIABILITIES: Accounts payable and accrued expenses.................. $ 6,447,538 $ 4,839,560 Current portion of long-term debt...................... 800,000 800,000 Dividends payable...................................... 287,522 410,563 Income taxes payable................................... 256,906 68,522 Contribution to profit sharing plan.................... 274,000 252,000 Employee compensation and related expenses............. 311,313 387,393 ------------ ------------ TOTAL CURRENT LIABILITIES......................... 8,377,279 6,758,038 LONG-TERM DEBT, less current portion........................ 7,600,000 6,400,000 DEFERRED INCOME TAXES....................................... 393,560 329,560 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS................. 113,000 113,000 STOCKHOLDERS' EQUITY: Common stock, par value $1: Authorized shares -- 10,000,000 Issued and outstanding shares -- 7,188,213 in 2000 and 6,828,387 in 1999............................. 7,188,213 6,828,387 Additional paid-in capital............................. 26,878,477 25,725,195 Retained deficit....................................... (5,443,739) (5,130,803) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY........................ 28,622,951 27,422,779 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 45,106,790 $ 41,023,377 ============ ============
See accompanying notes. 4 6 FRIEDMAN INDUSTRIES, INCORPORATED CONSOLIDATED STATEMENTS OF EARNINGS
YEAR ENDED MARCH 31 ------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ Sales.......................................... $120,267,809 $124,719,640 $148,840,724 Costs and expenses: Cost of products sold..................... 111,602,851 114,363,659 135,981,231 Selling, general, and administrative...... 4,479,215 4,694,933 5,193,206 Interest expense.......................... 546,160 443,686 431,498 ------------ ------------ ------------ 116,628,226 119,502,278 141,605,935 ------------ ------------ ------------ 3,639,583 5,217,362 7,234,789 Interest and other income...................... 158,602 147,506 53,080 ------------ ------------ ------------ EARNINGS BEFORE FEDERAL INCOME TAXES.............................. 3,798,185 5,364,868 7,287,869 Federal income taxes: Current................................... 1,227,384 1,884,057 2,537,877 Deferred.................................. 64,000 (60,000) (60,000) ------------ ------------ ------------ 1,291,384 1,824,057 2,477,877 ------------ ------------ ------------ NET EARNINGS......................... $ 2,506,801 3,540,811 $ 4,809,992 ============ ============ ============ Average number of common shares outstanding: Basic........................................ 7,547,624 7,528,702 7,512,901 Diluted...................................... 7,547,624 7,575,409 7,653,530 Net earnings per share: Basic........................................ $ .33 $ .47 $ .64 Diluted...................................... $ .33 $ .47 $ .63
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL RETAINED COMMON PAID-IN EARNINGS STOCK CAPITAL (DEFICIT) ---------- ----------- ----------- Balance at March 31, 1997......................... $6,161,994 $22,377,246 $(5,757,281) Net earnings...................................... -- -- 4,809,992 Exercise of stock options......................... 20,077 17,467 -- Issuance of Directors' shares..................... 2,000 16,500 -- Stock dividend (5%)............................... 307,737 1,269,415 (1,579,431) Cash dividends ($.25 per share)................... -- -- (1,912,759) ---------- ----------- ----------- BALANCE AT MARCH 31, 1998............... 6,491,808 23,680,628 (4,439,479) Net earnings...................................... -- -- 3,540,811 Exercise of stock options......................... 10,202 8,211 -- Issuance of Directors' shares..................... 2,000 9,000 -- Stock dividend (5%)............................... 324,377 2,027,356 (2,355,039) Cash dividends ($0.25 per share).................. -- -- (1,877,096) ---------- ----------- ----------- BALANCE AT MARCH 31, 1999............... 6,828,387 25,725,195 (5,130,803) Net earnings...................................... -- -- 2,506,801 Exercise of stock options......................... 16,021 36,666 -- Issuance of Directors' shares..................... 2,000 5,750 -- Stock dividend (5%)............................... 341,805 1,110,866 (1,454,108) Cash dividends ($0.18 per share).................. -- -- (1,365,629) ---------- ----------- ----------- BALANCE AT MARCH 31, 2000............... $7,188,213 $26,878,477 $(5,443,739) ========== =========== ===========
See accompanying notes. 5 7 FRIEDMAN INDUSTRIES, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31 --------------------------------------- 2000 1999 1998 ----------- ----------- ----------- OPERATING ACTIVITIES Net earnings....................... $ 2,506,801 $ 3,540,811 $ 4,809,992 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation.................. 1,043,103 671,735 665,908 Loss on disposal of property, plant, and equipment........ -- -- 26,008 Directors' shares issued...... 7,750 11,000 18,500 Provision from deferred taxes....................... 64,000 (60,000) (60,000) Decrease (increase) in operating assets: Accounts receivable........... (4,823,822) 4,495,385 (1,302,188) Inventories................... (3,004,339) 4,680,693 (3,383,198) Other......................... 61,706 74,672 (72,517) (Decrease) increase in operating liabilities: Accounts payable and accrued expenses.................... 1,607,978 (6,085,463) 2,812,809 Contribution to profit sharing plan........................ 22,000 (28,000) 38,000 Employee compensation and related expenses............ (76,080) (213,411) 208,377 Federal income taxes payable..................... 188,384 (275,943) 48,994 ----------- ----------- ----------- Net cash (used in) provided by operating activities........ (2,402,519) 6,811,479 3,810,685 INVESTING ACTIVITIES Purchase of property, plant, and equipment........................ (225,838) (2,352,122) (2,593,410) Cash value of officers' life insurance........................ (62,710) (117,138) (30,287) ----------- ----------- ----------- Net cash used in investing activities.................. (288,548) (2,469,260) (2,623,697) FINANCING ACTIVITIES Cash dividends paid................ (1,488,670) (1,954,156) (1,795,890) Proceeds from borrowings of long-term debt................... 5,000,000 833,334 2,566,666 Principal payments on long-term debt............................. (3,800,000) (800,000) (800,000) Payments on loans against life insurance........................ (426,630) -- -- Cash paid on fractional shares from stock dividend................... (1,437) (2,568) (1,859) Cash received from exercised stock options.......................... 52,687 18,413 37,543 ----------- ----------- ----------- Net cash (used in) provided by financing activities........ (664,050) (1,904,977) 6,460 ----------- ----------- ----------- Increase (decrease) in cash and cash equivalents........ (3,355,117) 2,437,242 1,193,448 Cash and cash equivalents at beginning of year................ 3,798,935 1,361,693 168,245 ----------- ----------- ----------- Cash and cash equivalents at end of year................. $ 443,818 $ 3,798,935 $ 1,361,693 =========== =========== ===========
See accompanying notes. 6 8 FRIEDMAN INDUSTRIES, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION: The consolidated financial statements include the accounts of Friedman Industries, Incorporated, and its subsidiary (collectively, the "Company"). All material intercompany amounts and transactions have been eliminated. REVENUE RECOGNITION: Revenues are recognized upon shipment of products. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. INVENTORIES: The following is a summary of inventory by product group:
YEAR ENDED MARCH 31 -------------------------- 2000 1999 ----------- ----------- Coil................................................... $11,705,839 $10,652,830 Tubular................................................ 11,204,670 9,253,340 ----------- ----------- $22,910,509 $19,906,170 =========== ===========
Coil inventory consists primarily of raw materials. Tubular inventory consists of both raw materials and finished goods. Inventories are valued at the lower of cost or replacement market. Cost for the Company's coil inventory is determined under the last-in, first-out ("LIFO") method. Cost for tubular inventories is determined using the first-in, first-out method. At March 31, 2000, the replacement cost of LIFO inventories exceeded their LIFO value by approximately $2,741,000 while, at March 31, 1999, replacement cost was approximately the same as the LIFO value. PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment are stated on the basis of cost. Depreciation is calculated primarily by the straight-line method over the estimated useful lives of the various classes of assets. Interest costs incurred during construction projects are capitalized as part of the cost of such assets. PER SHARE INFORMATION: All applicable per share amounts herein have been retroactively adjusted to give effect to a 5% stock dividend distributed May 26, 2000. SUPPLEMENTAL CASH FLOW INFORMATION: The Company paid interest of approximately $560,000 in 2000, $777,000 in 1999, and $513,000 in 1998. The Company paid income taxes, net of refunds, of $1,039,000 in 2000, $2,180,000 in 1999, and $2,455,000 in 1998. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. FINANCIAL INSTRUMENTS: The carrying value of the Company's financial instruments approximates fair value. ECONOMIC RELATIONSHIP: Lone Star Steel Company ("LSS") and Nucor Steel Company supply a significant amount of steel products to the Company. Loss of either of these mills as a source of supply could have a material adverse effect on the Company. Additionally, the Company derives revenue by selling a substantial amount of its manufactured pipe to LSS. Total sales to LSS were approximately $11.0 million, $8.0 million, and $21.7 million in 2000, 1999, and 1998, respectively. Loss of the LSS mill as a customer could have a material adverse effect on the Company's business. 7 9 FRIEDMAN INDUSTRIES, INCORPORATED 2. CAPITAL STOCK AND STOCK OPTIONS Under the Company's 1989 and 1996 Incentive Stock Option Plans, incentive options were granted to certain officers and key employees to purchase common stock of the Company. Pursuant to the terms of the plans, 27,959 additional options may be granted. All options have ten-year terms and become fully exercisable at the end of six months of continued employment. The following is a summary of activity relative to options outstanding during the years ended March 31 (adjusted for stock dividends):
2000 1999 1998 ------------------- ------------------- ------------------- WEIGHTED Weighted Weighted AVERAGE Average Average EXERCISE Exercise Exercise SHARES PRICE SHARES PRICE SHARES PRICE ------- -------- ------- -------- ------- -------- Outstanding at beginning of year.......... 437,174 $3.98 416,053 $3.85 440,923 $3.73 Granted................................... -- -- 32,524 $4.73 -- -- Exercised................................. (17,581) $2.99 (11,403) $1.62 (24,870) $1.62 ------- ------- ------- Outstanding at end of year................ 419,593 $4.02* 437,174 $3.98* 416,053 $3.85 ======= ======= ======= Exercisable at end of year................ 419,593 $4.02 404,650 $3.92 416,053 $3.85 Weighted average fair value of options granted during the year................. N/A $1.65 N/A
* Range of $1.62 to $4.73 per share and a weighted average remaining life of 7.2 years. 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. Had the Company followed the alternative fair value accounting provided for under FASB Statement No. 123, Accounting for Stock-Based Compensation, net earnings and earnings per share would have been reduced by .7%, .5% and 1.3% in 2000, 1999 and 1998, respectively. 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 6.5%, a dividend yield of 3.8%, volatility factor of the expected market price of the Company's common stock of .28, and a weighted average expected life of the option of four years. The Company has 1,000,000 authorized shares of Cumulative Preferred Stock with a par value of $1 per share. The stock may be issued in one or more series, and the Board of Directors is authorized to fix the designations, preferences, rights, qualifications, limitations, and restrictions of each series, except that any series must provide for cumulative dividends and must be convertible into common stock. 3. LONG-TERM DEBT The Company has a credit arrangement with a bank which provides for a revolving line of credit facility (the "revolving facility") and a term credit facility (the "term credit facility"). Pursuant to the revolving facility which expires April 1, 2002, the Company may borrow up to $8 million at an interest rate no greater than the bank's prime rate. At March 31, 2000, the Company had borrowings outstanding under the revolving facility of $6 million. The amount outstanding under the term credit facility bears interest at a stated rate of LIBOR plus 1.25% and requires quarterly principal payments of $200,000 plus accrued interest through March 1, 2003. In July 1997, the Company entered into a swap transaction with the bank pursuant to which it exchanged the term credit facility's LIBOR-based interest rate obligation for a fixed interest rate obligation of 8% to remain in effect for the entire term of the term credit facility. As of March 31, 2000, the principal amount of indebtedness outstanding under the term credit facility was $2.4 million. The annual principal payments required on long-term debt during the next five years are as follows: 8 10 FRIEDMAN INDUSTRIES, INCORPORATED 3. LONG-TERM DEBT (CONTINUED) 2001........................................................ $ 800,000 2002........................................................ 800,000 2003........................................................ 6,800,000 2004........................................................ -- 2005........................................................ -- ---------- Total.................................................. $8,400,000 ==========
In July 1995, the Company borrowed $708,168 against the cash surrender value of officers' life insurance policies (the "borrowings"). During the year ended March 31, 2000, the Company repaid $426,630 of the borrowings, leaving a balance owing of $281,538 at an average interest rate of approximately 6%. The borrowings do not require specific repayment terms except that in the case of death, the borrowings related to the life insurance policy will be deducted from the proceeds of such policy. 4. INCOME TAXES Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for tax purposes. Significant components of the Company's consolidated deferred tax assets and liabilities are as follows:
MARCH 31 --------------------- 2000 1999 --------- --------- DEFERRED TAX LIABILITIES: Depreciation..................................... $(513,757) $(470,625) Other............................................ (16,536) -- --------- --------- Total deferred tax liabilities..................... (530,293) (470,625) DEFERRED TAX ASSETS: Inventory capitalization......................... 74,155 85,908 Postretirement benefits other than pensions...... 38,420 38,420 Other............................................ 24,158 16,737 --------- --------- Total deferred tax assets.......................... 136,733 141,065 --------- --------- Net deferred tax liabilities....................... $(393,560) $(329,560) ========= =========
5. PROFIT SHARING PLAN AND OTHER POSTRETIREMENT BENEFITS The Company has a defined contribution plan (the "Plan") covering substantially all employees, including officers. Company contributions, which are made at the discretion of the Board of Directors in an amount not to exceed 15% of the total compensation paid during the year to all eligible employees, were $274,000 for the year ended March 31, 2000, $252,000 for the year ended March 31, 1999, and $280,000 for the year ended March 31, 1998. Contributions, Plan earnings, and forfeitures of terminated participants' nonvested accounts are allocated to the individual accounts of participating employees based on compensation received during the Plan year and years of active service with the Company. In addition, certain health care benefits are provided for retired employees. Employees with a minimum of 20 years of employment with the Company who retire at age 65 or older are eligible. The Company has not funded the cost of the postretirement health care plan. 9 11 FRIEDMAN INDUSTRIES, INCORPORATED 5. PROFIT-SHARING PLAN AND OTHER POSTRETIREMENT BENEFITS (CONTINUED) Employees of the Company may participate in a 401(k) retirement plan (the "401(k) plan"). Employees are eligible to participate in the 401(k) plan when the employee has completed one year of service. Under the 401(k) plan, participating employees may defer a portion of their pretax earnings up to certain limits prescribed by the Internal Revenue Service. The Company provides matching contributions under the provisions of the plan. Employees fully vest in the Company's matching contributions upon the completion of 7 years of service. Contribution expense related to the 401(k) plan was approximately $40,000, $50,000 and $60,000 for the years ended March 31, 2000, 1999 and 1998, respectively. 6. INDUSTRY SEGMENT DATA The Company is engaged in the steel processing and distribution business. Within the Company, there are two product groups: coil processing and tubular products. Coil processing converts steel coils into flat sheet and plate steel cut to customer specifications. Through its Texas Tubular Products operation, the Company purchases, processes, manufactures, and markets tubular products. The following is a summary of significant financial information relating to the product groups:
YEAR ENDED MARCH 31 ------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ NET SALES: Coil processing....................... $ 77,842,307 $ 86,409,139 $ 87,619,322 Tubular............................... 42,425,502 38,310,501 61,221,402 ------------ ------------ ------------ TOTAL NET SALES............... $120,267,809 $124,719,640 $148,840,724 ============ ============ ============ OPERATING PROFIT: Coil processing....................... $ 1,950,771 $ 4,773,761 $ 1,876,097 Tubular............................... 3,414,479 2,210,841 7,593,430 ------------ ------------ ------------ TOTAL OPERATING PROFIT........ 5,365,250 6,984,602 9,469,527 Corporate expenses.................... (1,179,507) (1,323,554) (1,803,240) Interest expense...................... (546,160) (443,686) (431,498) Interest and other income............. 158,602 147,506 53,080 ------------ ------------ ------------ TOTAL EARNINGS BEFORE TAXES... $ 3,798,185 $ 5,364,868 $ 7,287,869 ============ ============ ============ IDENTIFIABLE ASSETS: Coil processing....................... $ 25,728,057 $ 24,030,442 $ 25,404,991 Tubular............................... 18,183,058 12,913,517 19,054,950 ------------ ------------ ------------ 43,911,115 36,943,959 44,459,941 General corporate assets.............. 1,195,675 4,079,418 1,579,420 ------------ ------------ ------------ TOTAL ASSETS.................. $ 45,106,790 $ 41,023,377 $ 46,039,361 ============ ============ ============
10 12 FRIEDMAN INDUSTRIES, INCORPORATED 6. INDUSTRY SEGMENT DATA (CONTINUED)
YEAR ENDED MARCH 31 ------------------------------------ 2000 1999 1998 ---------- ---------- ---------- DEPRECIATION: Coil processing....................... $ 701,526 $ 326,577 $ 317,851 Tubular products...................... 327,206 335,794 337,485 Corporate and other................... 14,371 9,364 10,572 ---------- ---------- ---------- $1,043,103 $ 671,735 $ 665,908 ========== ========== ========== CAPITAL EXPENDITURES: Coil processing....................... $ 116,172 $2,316,306 $2,372,483 Tubular products...................... 49,248 33,216 200,635 Corporate assets...................... 60,418 2,600 20,292 ---------- ---------- ---------- $ 225,838 $2,352,122 $2,593,410 ========== ========== ==========
Operating profit is total revenue less operating expenses, excluding general corporate expenses, interest expense, and interest and other income. Corporate assets consist primarily of cash and cash equivalents and the cash value of officers' life insurance. There are no sales between product groups. 7. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of unaudited quarterly results of operations for the years ended March 31, 2000 and 1999 (per share amounts have been adjusted for subsequent stock dividends):
Quarter Ended ------------------------------------------------------ June 30 September 30 December 31 March 31 1999 1999 1999 2000 ----------- ------------ ----------- ----------- Net sales............................... $26,664,262 $29,397,118 $29,894,914 $34,311,515 Gross profit............................ 2,153,321 2,279,274 1,884,084 2,348,279 Net earnings............................ 600,151 739,308 500,221 667,121 Net earnings per share(1): Basic................................. 0.08 0.10 0.07 0.09 Diluted............................... 0.08 0.10 0.07 0.09
Quarter Ended ------------------------------------------------------ June 30 September 30 December 31 March 31 1998 1998 1998 1999 ----------- ------------ ----------- ----------- Net sales............................... $38,923,169 $32,178,289 $26,938,496 $26,679,686 Gross profit............................ 2,921,393 2,867,212 2,131,504 2,435,872 Net earnings............................ 1,022,748 1,015,084 681,700 821,279 Net earnings per share(1): Basic................................. 0.14 0.14 0.09 0.11 Diluted............................... 0.13 0.13 0.09 0.11
(1) The sum of the quarterly net income per share amounts does not equal the annual amount reported, as per share amounts are computed independently for each quarter and for the full year based on the respective weighted average common shares outstanding. 8. CONCENTRATION OF RECEIVABLES The Company's sales are concentrated primarily in the midwestern, southwestern, and southeastern sections of the United States, and are primarily to customers in the steel distributing and fabricating industries. The Company performs periodic credit evaluations of the financial conditions of its customers and generally does not require collateral. Generally, receivables are due within 30 days. 11 13 FRIEDMAN INDUSTRIES, INCORPORATED REPORT OF INDEPENDENT AUDITORS Board of Directors and Stockholders Friedman Industries, Incorporated We have audited the accompanying consolidated balance sheets of Friedman Industries, Incorporated as of March 31, 2000 and 1999, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Friedman Industries, Incorporated, at March 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2000, in conformity with auditing standards generally accepted in the United States. Ernst & Young LLP May 26, 2000 Houston, Texas ------------------------------------------ SELECTED FINANCIAL DATA
YEAR ENDED MARCH 31 --------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------- ------------- ------------- ------------- ------------- Net sales......................... $ 120,267,809 $ 124,719,640 $ 148,840,724 $ 119,920,966 $ 106,849,181 Net earnings...................... 2,506,801 3,540,811 4,809,992 3,630,071 2,836,768 Total assets...................... 45,106,790 41,023,377 46,039,361 38,117,191 32,812,986 Long-term debt.................... 7,600,000 6,400,000 6,366,666 4,600,000 5,400,000 Stockholders' equity.............. 28,622,951 27,422,779 25,732,957 22,781,959 20,428,936 Net earnings per share: Basic........................... 0.33 0.47 0.64 0.48 0.38 Diluted......................... 0.33 0.47 0.63 0.48 0.38 Cash dividends declared per share adjusted for stock dividends.... 0.18 0.25 0.25 0.18 0.15
See also Note 1 of Notes to the Company's Consolidated Financial Statements herein which describes the Company's relationship with its primary suppliers of steel products. 12 14 FRIEDMAN INDUSTRIES, INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Year ended March 31, 2000 compared to year ended March 31, 1999 During the year ended March 31, 2000, sales, cost of products sold and gross profit decreased $4,451,831, $2,760,808 and $1,691,023, respectively, from the comparable amounts recorded during the year ended March 31, 1999. During fiscal 2000, the Company's tubular operations generated an increase in sales that was more than offset by a decline in sales associated with coil operations. Tubular operations benefited from stronger demand for tubular products in fiscal 2000 and the Company recorded a 25% increase in tubular tons sold. Conversely, coil operations were adversely affected by softer demand for these products and a 6% decline in coil tons sold was recorded. In addition, coil operations incurred significant increases in the costs of coil products that could not be immediately passed along to customers. Gross profit as a percentage of sales decreased from 8.3% in fiscal 1999 to 7.2% in fiscal 2000. Improved margins earned on tubular sales were more than offset by a significant decline in margins earned on coil product sales. Interest expense increased $102,474 from the amount recorded during fiscal 1999. During fiscal 1999, certain interest costs were related to construction of fixed assets and were capitalized. Federal income taxes declined $532,673 from the amount recorded during fiscal 1999. This decrease resulted from the decline in earnings before taxes as the effective tax rates were the same for both years. Year ended March 31, 1999 compared to year ended March 31, 1998 During the year ended March 31, 1999, sales, cost of products sold and gross profit declined $24,121,084, $21,617,572 and $2,503,512, respectively, from the comparable amounts recorded during the year ended March 31, 1998. These declines were primarily attributable to the Company's tubular operations which were adversely affected by a significant downturn in the energy sector of the U.S. economy in fiscal 1999. This downturn had the effect of reducing demand for tubular products and generating intense competition for available sales. An increase in gross profit associated with coil operations was more than offset by a decrease in gross profit relative to tubular operations. Gross profit as a percentage of sales decreased from 8.6% in fiscal 1998 to 8.3% in fiscal 1999. Margins earned on tubular sales declined significantly in fiscal 1999 and offset improved margins earned on coil sales. Selling, general and administrative expenses declined $498,273 from the amount recorded in fiscal 1998. This decline was primarily related to a decrease in variable expenses attributable to reduced volume and/or earnings and to a decline in bad debt expense. Interest and other income during fiscal 1999 increased $94,426 from the amount recorded in fiscal 1998. This increase was primarily related to other income associated with an increase in the cash surrender value of officers' life insurance. Federal income taxes decreased $653,820 from the amount recorded during fiscal 1998 due to reduced earnings before taxes. The effective tax rate was the same for fiscal 1999 and 1998. FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL The Company remained in a strong, liquid position at March 31, 2000. Current ratios were 4.4 and 4.8 at March 31, 2000 and March 31, 1999, respectively. Working capital was $28,568,099 at March 31, 2000 and $25,776,002 at March 31, 1999. 13 15 FRIEDMAN INDUSTRIES, INCORPORATED FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL (CONTINUED) The Company has a credit arrangement with a bank which provides for a revolving line of credit facility (the "revolving facility") and a term credit facility (the "term facility"). Pursuant to the revolving facility which expires April 1, 2002, the Company may borrow up to $8 million at an interest rate no greater than the bank's prime rate. At March 31, 2000, the Company had borrowings outstanding under the revolving facility of $6 million. The term facility included borrowings of $1.2 million from the previous term note and also provided for additional advances up to $3.5 million, all of which converted to a term loan on December 31, 1998. The amount outstanding under the term facility bears interest at a stated rate of LIBOR plus 1.25% and requires quarterly principal payments of $200,000 plus accrued interest through March 1, 2003. In July 1997, the Company entered into a swap transaction with the bank pursuant to which it exchanged the term facility's LIBOR-based interest rate obligation for a fixed interest rate obligation of 8% to remain in effect for the entire term of the term facility. As of March 31, 2000, the principal amount of indebtedness outstanding under the term facility was $2.4 million. The Company believes that its cash flow from operations and borrowing capability under its line of credit and term debt facilities are adequate to fund its expected cash requirements for the year ended March 31, 2001. 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, the success of the Company's capital improvements at its Hickman, Arkansas facility, changes in the demand and prices for the Company's products and changes in the demand for steel and steel products in general, and the Company's success in executing its internal operating plans. EFFECT OF YEAR 2000 ISSUE The Year 2000 issue is the result of computer programming being written using two digits rather than four to define the applicable year. Any of the Company's systems, as well as those of key vendors, payors and customers, that have date sensitive logic may interpret a date using "00" as the year 1900 rather than 2000. This may cause inaccurate processing or possible system failure and may potentially disrupt operations. This disruption may result in, among other things, a temporary inability to process transactions, send bills for services or engage in similar normal business activities. To date, the Year 2000 issue has not resulted in significant operational or financial problems for the Company. The Company is not aware of any significant problems experienced by its suppliers, third-party payors or customers as a result of the Year 2000 issue, but the Company will continue to communicate with such parties regarding any possible problems. The foregoing statements are intended to be and hereby are designated "Year 2000 Readiness Disclosure Statements" within the meaning of the Year 2000 Information and Readiness Disclosure Act. 14 16 FRIEDMAN INDUSTRIES, INCORPORATED TEN YEAR FINANCIAL SUMMARY
YEAR ENDED MARCH 31 -------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ ----------- Net sales......................... $120,267,809 $124,719,640 $148,840,724 $119,920,966 $106,849,181 $97,968,805 Earnings.......................... $ 2,506,801 $ 3,540,811 $ 4,809,992 $ 3,630,071 $ 2,836,768 $ 2,458,132 Current assets.................... $ 36,945,378 $ 32,534,040 $ 39,347,548 $ 33,357,160 $ 27,524,670 $25,956,555 Current liabilities............... $ 8,377,279 $ 6,758,038 $ 13,437,178 $ 10,172,672 $ 6,410,527 $ 5,816,334 Net working capital............... $ 28,568,099 $ 25,776,002 $ 25,910,370 $ 23,184,488 $ 21,114,143 $20,140,221 Total assets...................... $ 45,106,790 $ 41,023,377 $ 46,039,361 $ 38,117,191 $ 32,812,986 $32,074,862 Stockholders' equity.............. $ 28,622,951 $ 27,422,779 $ 25,732,957 $ 22,781,959 $ 20,428,936 $18,722,781 Earnings as a percent of Net sales..................... 2.1 2.8 3.2 3.0 2.7 2.5 Stockholders' equity.......... 8.8 12.9 18.7 15.9 13.9 13.1 Average number of common shares outstanding: Basic(2)........... 7,547,624 7,528,702 7,512,901 7,489,943 7,446,076 7,444,041 Per share Net earnings per share: Basic(2)...................... $ 0.33 $ 0.47 $ 0.64 $ 0.48 $ 0.38 $ 0.33 Stockholders' equity(2)......... $ 3.79 $ 3.64 $ 3.43 $ 3.04 $ 2.74 $ 2.52 Cash dividends per common share(2)........................ $ 0.18 $ 0.25 $ 0.25 $ 0.18 $ 0.15 $ 0.16 Stock dividend declared........... 5% 5% 5% 5% 5% 5% YEAR ENDED MARCH 31 ------------------------------------------------------ 1994 1993 1992 1991 ----------- ----------- ----------- ----------- Net sales......................... $70,908,065 $56,230,967 $42,609,330 $50,264,851 Earnings.......................... $ 1,691,075(1) $ 806,272 $ 483,720 $ 866,259 Current assets.................... $21,014,281 $16,542,769 $15,537,203 $16,826,544 Current liabilities............... $ 5,534,143 $ 3,549,495 $ 2,849,637 $ 2,501,178 Net working capital............... $15,480,138 $12,993,274 $12,687,566 $14,325,366 Total assets...................... $27,184,421 $20,491,441 $19,619,875 $20,936,487 Stockholders' equity.............. $17,430,337 $16,528,543 $16,277,792 $16,274,914 Earnings as a percent of Net sales..................... 2.4 1.4 1.1 1.7 Stockholders' equity.......... 9.7 4.9 3.0 5.3 Average number of common shares outstanding: Basic(2)........... 7,440,888 7,440,328 7,440,328 7,440,328 Per share Net earnings per share: Basic(2)...................... $ 0.23(1) $ 0.11 $ 0.07 $ 0.12 Stockholders' equity(2)......... $ 2.34 $ 2.22 $ 2.19 $ 2.19 Cash dividends per common share(2)........................ $ 0.11 $ 0.07 $ 0.07 $ 0.10 Stock dividend declared........... 5% 5% 5% 5%
- ------------ (1) Includes the cumulative effect of accounting changes which increased net earnings $77,000 ($.01 per share). (2) Adjusted for stock dividends. 17 [FRIEDMAN INDUSTRIES, INCORPORATED LOGO]
EX-21.1 3 ex21-1.txt LIST OF SUBSIDIARIES 1 EXHIBIT 21.1 SUBSIDIARIES Royal Fasteners Corporation...................... Texas Corporation 100% owned
EX-23.1 4 ex23-1.txt CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Friedman Industries, Incorporated of our report dated May 26, 2000, included in the 2000 Annual Report to Shareholders of Friedman Industries, Incorporated. Our audits also included the financial statement schedule of Friedman Industries, Incorporated listed in the response to Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the 1996 Stock Option Plan, 1995 Non-Employee Director Plan, as amended, and the 1989 Incentive Stock Option Plan, as amended, of our report dated May 26, 2000, with respect to the financial statements and schedule of Friedman Industries, Incorporated included in the 2000 Annual Report to Shareholders of Friedman Industries, Incorporated. /s/ ERNST & YOUNG LLP - --------------------- Houston, Texas May 26, 2000 EX-27.1 5 ex27-1.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K YEAR ENDED MARCH 31, 2000 1 YEAR MAR-31-2000 APR-01-1999 MAR-31-2000 443,818 0 13,533,550 0 22,910,509 36,945,378 19,644,271 12,170,191 45,106,790 8,377,279 7,600,000 0 0 7,188,213 21,434,738 45,106,790 120,267,809 120,426,411 111,602,851 116,082,066 0 0 546,160 3,798,185 1,291,384 2,506,801 0 0 0 2,506,801 0.33 0.33
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