EX-13.1 2 ex13-1.htm EXHIBIT 13.1 ex13-1.htm

EXHIBIT 13.1

 

THE COMPANY’S ANNUAL

REPORT TO SHAREHOLDERS FOR

THE FISCAL YEAR ENDED MARCH 31, 2016

 

 

 
 

 

  

 

FRIEDMAN

INDUSTRIES,

INCORPORATED

 

 

 

 

 

 

 

 

 

 

2016

ANNUAL REPORT

 

 

 
 

 

 

FINANCIAL HIGHLIGHTS

 
   

2016

   

2015

 

Net sales

  $ 81,631,382     $ 108,322,780  

Net earnings

  $ 294,000     $ 382,330  

Net earnings per share (Basic)

  $ 0.04     $ 0.06  

Cash dividends per share

  $ 0.04     $ 0.07  

Stockholders’ equity

  $ 63,239,047     $ 63,217,025  

Working capital

  $ 46,835,906     $ 47,466,244  

 

 

TO OUR SHAREHOLDERS:

 

The Company continued to experience challenging market conditions during the year ended March 31, 2016. The Company earned $294,000 ($0.04 per share diluted) on sales of $81,631,382 in fiscal 2016 compared to earnings of $382,330 ($0.06 per share diluted) on sales of $108,322,780 in fiscal 2015.

 

Market conditions in fiscal 2016 were extremely volatile due primarily to a significant decline in steel prices and a prolonged recession in the U.S. energy industry. Despite the challenging market conditions, the Company remains in a strong financial position. Working capital at March 31, 2016 was $46,835,906 and the Company generated cash of approximately $3,000,000 from operating activities during fiscal 2016. Management is focused on balancing operational requirements with changing market conditions.

 

Construction continues on the pipe-finishing facility located in Lone Star, Texas as a component of the Company’s Texas Tubular Products division. The facility will focus primarily on threading and coupling oil country tubular goods. The construction remains on budget with approximately $8,784,000 capitalized toward the project as of March 31, 2016.

 

Robert Sparkman was promoted to Senior Vice President of Operations during fiscal 2016 and subsequent to year end was promoted to President and Chief Operating Officer. Mr. Sparkman previously served as Vice President of Sales for the Company’s coil division between 2002 and March 2015 and has been employed by the Company since 1979, providing him with over 36 years of experience. The Company is excited about Mr. Sparkman’s expanded role and leadership within the Company. During fiscal 2016, Ronald Burgerson, a Vice President of the Company, retired after 51 years of employment with the Company. The Company expresses its appreciation to Mr. Burgerson for his contributions during his many years of loyal service.

 

You are invited to attend the Annual Meeting of Shareholders scheduled to start at 11:00 a.m. (Central Time) on Thursday, September 1, 2016, in the offices of Norton Rose Fulbright US LLP, 1301 McKinney, 51st Floor, Houston, Texas 77010.

 

Sincerely,

 

 

 

William E. Crow

Chief Executive Officer

 

 
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OFFICERS

 

William E. Crow

Chief Executive Officer

 

Robert Sparkman

President and Chief Operating Officer

 

Thomas N. Thompson

Senior Vice President — Sales and Marketing

 

Howard Henderson

Vice President of Operations — Texas Tubular Division

 

Robert McCain

Vice President — Decatur Facility

 

Dale Ray

Vice President

 

Steve Teeter

Vice President — Hickman Facility

 

Alex LaRue

Vice President — Secretary and Treasurer

 

Charles W. Hall

Assistant Secretary

 

COMPANY OFFICES AND WEB SITE

 

    CORPORATE OFFICE

    P.O. Box 62388

    Houston, Texas 77205

    713-672-9433

 

    SALES OFFICE — COIL PRODUCTS

    1121 Judson Road, Suite 124

    Longview, Texas 75601

    903-758-3431

 

    SALES OFFICE — TUBULAR PRODUCTS

    P.O. Box 0388

    Lone Star, Texas 75668

    903-639-2511

 

    WEB SITE

    www.friedmanindustries.com

 

COUNSEL

Norton Rose Fulbright US LLP

1301 McKinney, Suite 5100

Houston, Texas 77010

 

AUDITORS

Hein & Associates LLP

500 Dallas Street, Suite 2500

Houston, TX 77002

 

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

 

 
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DIRECTORS

 

William E. Crow

Chief Executive Officer

Longview, Texas

 

Durga D. Agrawal

President, Piping Technology & Products, Inc. (pipe fabrication)

Houston, Texas

 

Charles W. Hall

Norton Rose Fulbright US LLP (law firm)

Houston, Texas

 

Alan M. Rauch

President, Ener-Tex International, Inc. (oilfield equipment sales)

Houston, Texas

 

Max Reichenthal

President, Texas Iron and Metal (steel product sales)

Houston, Texas

 

Joel Spira

Private investor; formerly, Partner, Weinstein Spira & Company (accounting firm)

Houston, Texas

 

Joe L. Williams

Partner, PozmantierWilliams Insurance Consultants, LLC (insurance and risk management consultants)

Houston, Texas

 

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, 2016 as filed with the U.S. Securities and Exchange Commission. Written requests should be addressed to: Alex LaRue, Vice President — Secretary and Treasurer, Friedman Industries, Incorporated, P.O. Box 62388, Houston, Texas 77205.

 

 
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DESCRIPTION OF BUSINESS

 

Friedman Industries, Incorporated (the “Company”) is engaged in steel processing, pipe manufacturing and processing and steel and pipe distribution.

 

At its coil processing facilities in Hickman, Arkansas (“Hickman”) and Decatur, Alabama (“Decatur”), the Company processes 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. Each facility operates a cut-to-length line and a steel temper mill. The Company’s XSCP Division (“XSCP”) purchases and markets non-standard hot-rolled coils. XSCP routinely processes non-standard coils into flat, finished sheet and plate. XSCP operates at both Hickman and Decatur, which provide personnel, warehousing, processing and distribution services to XSCP. The Company purchases a substantial amount of its annual coil tonnage from Nucor Steel Company (“NSC”). Loss of NSC as a source of coil supply could have a material adverse effect on the Company’s business. The Company also processes customer-owned coils on a fee basis. Revenues generated from processing customer-owned coils are not material to the Company’s results of operations and financial condition.

 

The Company sells its coil products and processing services directly through the Company’s own sales force to approximately 125 customers located primarily in the midwestern, southwestern and southeastern regions 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 Division (“TTP”) located in Lone Star, Texas, manufactures, purchases, processes and markets tubular products (“pipe”). TTP operates two pipe mills that are American Petroleum Institute-licensed to manufacture line and oil country pipe and also manufacture pipe for structural purposes that meets other recognized industry standards. TTP also maintains an extensive inventory of new mill reject pipe. The Company is currently constructing a pipe-finishing facility at TTP that will focus primarily on threading and coupling oil country tubular goods.

 

The Company sells pipe nationally to approximately 135 customers. The Company’s principal customers for these products are steel and pipe distributors, piling contractors and, historically, U.S. Steel Tubular Products, Inc. (“USS”), an affiliate of United States Steel Corporation. Historically, the Company has purchased steel coils from USS, converted these coils into line and oil country pipe, and sold this pipe to USS pursuant to orders received from USS. In recent years, orders from USS have declined due to the increased presence of low priced imported material. The Company has also purchased new mill reject pipe from USS and marketed it to other customers for structural and other miscellaneous applications. In March 2016, USS announced it was temporarily idling its Lone Star Tubular Operations facility due to weak market conditions. The Company is unable to provide an estimate of how long USS’s Lone Star facility will be idled. The Company expects orders from USS to remain low and supplies of new mill reject pipe from USS to be significantly reduced while USS’s Lone Star facility remains idled and the U.S. energy industry remains depressed. Loss of USS as a supplier or customer could have a material adverse effect on the Company’s business. The Company can make no assurances as to orders from USS or the amounts of pipe and coil material that will be available from USS in the future.

 

Significant financial information relating to the Company’s two product groups, coil and tubular products, is contained in Note 8 of the Notes to the Company’s Consolidated Financial Statements appearing herein.


 RANGE OF HIGH AND LOW SALES PRICES OF COMMON STOCK

 

   

Fiscal 2016

   

Fiscal 2015

 
   

High

   

Low

   

High

   

Low

 

First Quarter

  $ 6.95     $ 6.15     $ 8.79     $ 8.03  

Second Quarter

    6.73       5.62       8.80       7.91  

Third Quarter

    6.24       5.51       8.30       6.95  

Fourth Quarter

    5.88       4.35       7.24       6.05  


 CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK

 

   

Fiscal 2016

   

Fiscal 2015

 

First Quarter

  $ .01     $ .02  

Second Quarter

    .01       .02  

Third Quarter

    .01       .02  

Fourth Quarter

    .01       .01  


 

The Company’s Common Stock is traded principally on the NYSE MKT (trading symbol FRD).

 

The approximate number of shareholders of record of the Company as of May 27, 2016 was 235.

 

 
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CONSOLIDATED BALANCE SHEETS

 

ASSETS

   

March 31

 
   

2016

   

2015

 

CURRENT ASSETS:

               

Cash

  $ 2,796,762     $ 2,225,924  

Accounts receivable, net of allowances for bad debts and cash discounts of $22,276 and $27,276 at March 31, 2016 and 2015, respectively

    4,822,386       6,896,186  

Inventories

    41,939,128       40,850,666  

Other

    143,380       144,579  

TOTAL CURRENT ASSETS

    49,701,656       50,117,355  

PROPERTY, PLANT AND EQUIPMENT:

               

Land

    1,082,331       1,082,331  

Buildings and yard improvements

    7,111,735       7,026,980  

Machinery and equipment

    30,903,321       30,690,049  

Construction in progress

    9,200,799       7,374,177  

Less accumulated depreciation

    (32,329,947 )     (30,656,226 )
      15,968,239       15,517,311  

OTHER ASSETS:

               

Deferred income tax asset

    408,502       187,358  

Cash value of officers’ life insurance and other assets

    812,000       1,136,000  

TOTAL ASSETS

  $ 66,890,397     $ 66,958,024  

 

LIABILITIES AND STOCKHOLDERS’ EQUITY  

 

   

March 31

 
   

2016

   

2015

 

CURRENT LIABILITIES:

               

Accounts payable and accrued expenses

  $ 2,476,699     $ 2,148,555  

Dividends payable

    67,994       67,994  

Contribution to retirement plan

    43,500       51,000  

Employee compensation and related expenses

    277,557       383,562  

TOTAL CURRENT LIABILITIES

    2,865,750       2,651,111  

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

    785,600       1,089,888  

TOTAL LIABILITIES

    3,651,350       3,740,999  

COMMITMENTS AND CONTINGENCIES (SEE NOTE 4)

               

STOCKHOLDERS’ EQUITY:

               

Common stock, par value $1:

               

Authorized shares — 10,000,000

               

Issued shares — 7,975,160 at March 31, 2016 and 2015, respectively

    7,975,160       7,975,160  

Additional paid-in capital

    29,003,674       29,003,674  

Treasury stock at cost (1,175,716 shares at March 31, 2016 and 2015, respectively)

    (5,475,964 )     (5,475,964 )

Retained earnings

    31,736,177       31,714,155  

TOTAL STOCKHOLDERS’ EQUITY

    63,239,047       63,217,025  

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $ 66,890,397     $ 66,958,024  

 

See accompanying notes.

 

 
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CONSOLIDATED STATEMENTS OF EARNINGS

 

 

   

Year Ended March 31

 
   

2016

   

2015

 

Net sales

  $ 81,631,382     $ 108,322,780  

Costs and expenses:

               

Cost of products sold

    76,937,738       103,244,712  

Selling, general and administrative

    4,670,273       4,453,292  
      81,608,011       107,698,004  

EARNINGS FROM OPERATIONS

    23,371       624,776  

Interest and other income

    375,310       61,040  

EARNINGS BEFORE INCOME TAXES

    398,681       685,816  

Income taxes:

               

Current

    325,825       680,842  

Deferred

    (221,144 )     (377,356 )
      104,681       303,486  

NET EARNINGS

  $ 294,000     $ 382,330  

Weighted average number of common shares outstanding:

               

Basic

    6,799,444       6,799,444  

Diluted

    6,799,444       6,799,444  

Net earnings per share:

               

Basic

  $ 0.04     $ 0.06  

Diluted

  $ 0.04     $ 0.06  

 

CONSOLIDATED STATEMENTS OF

STOCKHOLDERS’ EQUITY

 

   

Common
Stock

   

Additional
Paid-In
Capital

   

Treasury
Stock

   

Retained
Earnings

 

BALANCE AT MARCH 31, 2014

  $ 7,975,160     $ 29,003,674     $ (5,475,964 )   $ 31,807,786  

Net earnings

                      382,330  

Cash dividends ($0.07 per share)

                      (475,961 )

BALANCE AT MARCH 31, 2015

    7,975,160       29,003,674       (5,475,964 )     31,714,155  

Net earnings

                      294,000  

Cash dividends ($0.04 per share)

                      (271,978 )

BALANCE AT MARCH 31, 2016

  $ 7,975,160     $ 29,003,674     $ (5,475,964 )   $ 31,736,177  

 

See accompanying notes.

 

 
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CONSOLIDATED STATEMENTS OF CASH FLOWS 

 

   

Year Ended March 31

 
   

2016

   

2015

 

OPERATING ACTIVITIES

               

Net earnings

  $ 294,000     $ 382,330  

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

               

Depreciation

    1,673,721       1,721,625  

Deferred taxes

    (221,144 )     (377,356 )

Change in post-retirement benefits other than pensions

    78,712       76,832  

Changes in operating assets and liabilities:

               

Accounts receivable, net

    2,073,800       2,451,103  

Inventories

    (1,088,462 )     (5,562,107 )

Other

    1,199       (14,783 )

Accounts payable and accrued expenses

    328,144       (5,057,785 )

Employee compensation and related expenses

    (106,005 )     7,702  

Contribution to retirement plan

    (7,500 )     (1,500 )

Net cash provided by (used in) operating activities

    3,026,465       (6,373,939 )

INVESTING ACTIVITIES

               

Purchase of property, plant and equipment

    (2,124,649 )     (5,876,205 )

Increase in cash value of officers’ life insurance

    (59,000 )     (61,000 )

Net cash used in investing activities

    (2,183,649 )     (5,937,205 )

FINANCING ACTIVITIES

               

Cash dividends paid

    (271,978 )     (543,956 )

Net cash used in financing activities

    (271,978 )     (543,956 )

Increase (decrease) in cash

    570,838       (12,855,100 )

Cash at beginning of year

    2,225,924       15,081,024  

Cash at end of year

  $ 2,796,762     $ 2,225,924  

 

See accompanying notes.

 

 
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NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

 

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:    Revenue from sales of products is recognized at the time that title and the risks and rewards of ownership pass, which is on the date of shipment. This date is when the terms of customers’ arrangements are met, the sales price is fixed or determinable and collection is reasonably assured.

 

TRADE RECEIVABLES:    The Company’s receivables are recorded when billed, advanced or accrued and represent claims against third parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts and cash discounts allowed, represents their estimated net realizable value. The Company estimates its allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables and existing economic conditions. Trade receivables are generally considered past due after 30 days from invoice date. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. The balance of the Company’s allowance for doubtful accounts was $7,276 at both March 31, 2016 and March 31, 2015.

 

INVENTORIES:    Inventories consist of prime coil, non-standard coil and tubular materials. Prime coil inventory consists primarily of raw materials, non-standard coil inventory consists primarily of raw materials and tubular inventory consists of both raw materials and finished goods. Cost for prime coil inventory is determined under the last-in, first-out (“LIFO”) method. At March 31, 2016 and March 31, 2015, replacement cost exceeded LIFO cost by approximately $1,731,000 and $4,139,000, respectively. Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the weighted average method. LIFO inventories are valued at the lower of cost or market. All other inventories are valued at the lower of cost or net realizable value. Obsolete or slow-moving inventories are not significant based on the Company’s review of inventories. Accordingly, no allowance has been provided for such items.

 

The following is a summary of inventory by product group:

 

   

March 31

 
   

2016

   

2015

 

Prime coil inventory

  $ 14,168,626     $ 8,419,340  

Non-standard coil inventory

    992,163       1,804,635  

Tubular raw material

    1,566,048       1,888,849  

Tubular finished goods

    25,212,291       28,737,842  
    $ 41,939,128     $ 40,850,666  

 

PROPERTY, PLANT AND EQUIPMENT:    Property, plant and equipment is stated at cost. Depreciation is calculated primarily by the straight-line method over the estimated useful lives of the various classes of assets as follows:

 

Buildings (years)

  20    

Machinery and equipment (years)

  10    

Yard improvements (years)

5 to 10  

Loaders and other rolling stock (years)

5 to 10  

 

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The Company assesses recoverability by comparing the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset’s carrying amount exceeds its fair value. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. At March 31, 2016, the Company determined impairment analysis of the pipe-finishing facility being constructed in Lone Star, Texas was necessary given the condition of the U.S. energy industry and the intentions of U.S. Steel Tubular Products, Inc. (“USS”) to idle its Lone Star Tubular Operations facility. The Company concluded that fair value of the finishing-facility exceeds the asset’s carrying amount plus the estimated cost to complete the facility. Accordingly, no impairment loss was recognized at March 31, 2016.

 

 
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Maintenance and repairs are expensed as incurred.

 

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:    The Company maintains life insurance policies on each officer. From time to time and in its discretion, the Board of Directors of the Company has approved the transfer of the applicable policy to an officer upon their retirement. The Company’s accrued liability for these potential future transfers was $785,600 and $1,089,888 at March 31, 2016 and March 31, 2015, respectively. The transfer of a life insurance policy to an officer is a noncash transaction.

 

SHIPPING COSTS:    Sales are credited for freight billed to customers and freight costs are charged to cost of products sold.

 

SUPPLEMENTAL CASH FLOW INFORMATION:    The Company paid no interest in fiscal 2016 or 2015. The Company paid income taxes of approximately $381,000 and $688,000 in fiscal 2016 and 2015, respectively. In both fiscal 2016 and 2015, noncash financing activity consisted of accrued dividends of $67,994. Fiscal 2016 included a $383,000 noncash transaction to transfer ownership of a life insurance policy from the Company to an officer upon retirement.

 

INCOME TAXES:    The Company accounts for income taxes under the liability method, whereby the Company recognizes deferred tax assets and liabilities, which represent differences between the financial and income tax reporting bases of its assets and liabilities. Deferred tax assets and liabilities are determined based on temporary differences between income and expenses reported for financial reporting and tax reporting. The Company has assessed, using all available positive and negative evidences, the likelihood that the deferred tax assets will be recovered from future taxable income.

 

The Company has also analyzed tax positions taken on tax returns filed and does not believe that any are more likely than not to be overturned by the respective tax jurisdiction. Therefore, no liability for uncertain tax positions has been recognized.

 

USE OF ESTIMATES:    The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates that are subject to the Company’s assumptions include the fair value conclusion of the pipe-finishing facility impairment analysis, valuation of LIFO inventories in the Company’s quarterly reporting and determination of the allowance for doubtful accounts. The pipe-finishing facility impairment analysis requires assumptions related to replacement cost of the facility and the impact of current and future market conditions. Valuation of LIFO inventories in the Company’s quarterly reporting requires estimates of the year end quantities, which is inherently difficult. The allowance for doubtful accounts requires the Company to draw conclusions on the future collectability of the Company’s accounts receivable. Actual results could differ from these estimates.

 

FINANCIAL INSTRUMENTS:    Since the Company’s financial instruments are considered short-term in nature, their carrying values approximate fair value.

 

EARNINGS PER SHARE:    Net income per basic common share is computed using the weighted average number of common shares outstanding during the period. Net income per diluted common share is computed using the weighted average number of common shares and potential common shares outstanding during the period.

 

ECONOMIC RELATIONSHIP:    Nucor Steel Company and USS 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. Historically, the Company has derived a significant amount of revenue by selling manufactured pipe to USS. In fiscal years 2016 and 2015, sales of manufactured pipe to USS declined and did not account for a significant portion of total Company sales. Total sales to USS in fiscal 2016 were less than 1% of total Company sales. Total sales to USS in fiscal 2015 were approximately 6% of total Company sales. In March 2016, USS announced it was temporarily idling its Lone Star Tubular Operations facility due to weak market conditions. The Company is unable to provide an estimate of how long USS’s Lone Star facility will be idled. The Company expects orders from USS to remain low and supplies of steel products from USS to be significantly reduced while USS’s Lone Star facility remains idled. Sales of coil products to Trinity Industries, Inc. accounted for approximately 35% and 21% of total Company sales in fiscal 2016 and 2015, respectively. No other customers accounted for 10% or more of total sales in the two years ended March 31, 2016. Loss of USS or Trinity as a customer could have a material adverse effect on the Company’s business.

 

The Company’s sales are concentrated primarily in the midwestern, southwestern, and southeastern regions 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.

 

 
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NEW ACCOUNTING PRONOUNCEMENTS:    Effective for the quarter ended September 30, 2015, the Company early adopted new accounting guidance issued by the Financial Accounting Standards Board (“FASB”) in Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires an entity to measure most inventory at the lower of cost or net realizable value, thereby simplifying the prior guidance requiring inventory measurement at the lower of cost or market. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. ASU 2015-11 does not apply to inventories that are measured using either the last-in, first-out (“LIFO”) method or the retail inventory method. Therefore, the lower of cost or market valuation will continue as the appropriate measurement for inventories valued using the LIFO method or the retail inventory method. The Company applied ASU 2015-11 prospectively beginning with the quarter ended September 30, 2015.

 

Effective for the quarter ended December 31, 2015, the Company early adopted new accounting guidance issued by the FASB in Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-17 requires an entity to classify deferred tax liabilities and assets as noncurrent items in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of an entity be offset and presented as a single amount is not affected by the amendments of ASU 2015-17. The Company applied ASU 2015-17 prospectively beginning with the quarter ended December 31, 2015.

 

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 establishes a new lease accounting standard that requires lessees to recognize a right of use asset and related lease liability for most leases having lease terms of more than 12 months.  Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases.  This new guidance is effective for annual and interim periods beginning after December 15, 2018, but can be early adopted.  The Company is evaluating the impact that adoption of the provisions of ASU 2016-02 will have on its consolidated financial statements but does not expect a material impact.

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 states that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The update supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016; early application is not permitted. In August 2015, the FASB issued Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period, and only permits entities to adopt the standard one year earlier as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact that adoption of the provisions of ASU 2014-09 will have on its consolidated financial statements but does not expect a material impact.

 

 

2.

EQUITY COMPENSATION PLANS AND CAPITAL STOCK

 

In fiscal 2016 and 2015, the Company maintained no equity compensation plans. Accordingly, no equity compensation was outstanding or granted in either fiscal year.

 

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. There were no shares of Cumulative Preferred Stock issued as of March 31, 2016 or March 31, 2015.

 

3.

DEBT

 

On May 8, 2015, the Company entered into a credit arrangement for a $5,000,000 revolving line of credit facility (the “Credit Facility”) with JPMorgan Chase Bank N.A. The Credit Facility expired on April 30, 2016. The Credit Facility contained financial covenants that required the Company to not permit: tangible net worth to be less than $57,000,000, ratio of total liabilities to tangible net worth to be greater than 1.00 to 1.00 and net income for any period of four consecutive fiscal quarters to be less than $1.00. At March 31, 2016, the Company did not have borrowings outstanding under the Credit Facility and was not in violation of any of the foregoing financial covenants.

 

 
10

 

 

4.

COMMITMENTS AND CONTINGENCIES

 

The Company is obligated under noncancelable operating leases for its Longview, Texas and Humble, Texas office buildings, which expire April 30, 2018 and December 31, 2016, respectively. The following is a schedule of future minimum annual rental payments for the next five years required under these operating leases as of March 31, 2016:

 

2017

  $ 61,106  

2018

    32,736  

2019

    2,728  

2020

     

2021

     

Total

  $ 96,570  

 

Rental expenses for leased properties were approximately $70,500 during both fiscal 2016 and 2015.

 

5.

EARNINGS PER SHARE

 

Basic and dilutive net earnings per share is computed based on the following information:

 

   

Year Ended March 31

 
   

2016

   

2015

 

Basic

               

Net earnings

  $ 294,000     $ 382,330  

Weighted average common shares

    6,799,444       6,799,444  

Dilutive

               

Net earnings

  $ 294,000     $ 382,330  

Weighted average common shares and common share equivalents

    6,799,444       6,799,444  

 

 

6.

INCOME TAXES

 

Components of tax expense (benefit) are as follows:

 

   

Year Ended March 31

 
   

2016

   

2015

 

Federal

               

Current

  $ 274,947     $ 519,271  

Deferred

    (221,144 )     (377,356 )
      53,803       141,915  

State

               

Current

    50,878       161,571  
      50,878       161,571  

Total

  $ 104,681     $ 303,486  

 

The U.S. federal statutory income tax rate is reconciled to the effective rate as follows:

 

   

Year Ended
March 31

 
   

2016

   

2015

 

Income tax expense at U.S. federal statutory rate

    34.0 %     34.0 %

Benefit of tax deduction allowed to manufacturing companies

    (6.6 )     (7.0 )

Current year state and local income taxes net of federal income tax benefit

    8.4       7.3  

Other

    (9.5 )     10.0  

Provision for income taxes

    26.3 %     44.3 %

 

 
11

 

 

The Company’s tax returns may be subject to examination by the Internal Revenue Service for the fiscal years ended March 31, 2013 through March 31, 2015. State and local returns may be subject to examination for fiscal years ended March 31, 2012 through March 31, 2015.

 

Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s consolidated deferred tax assets (liabilities) are as follows:

 

   

March 31

 
   

2016

   

2015

 

Deferred tax liabilities:

               

Depreciation

  $ (871,665 )   $ (1,231,047 )

Total deferred tax liabilities

    (871,665 )     (1,231,047 )

Deferred tax assets:

               

Inventory capitalization

    179,956       201,094  

LIFO Inventory

    783,645       783,645  

Postretirement benefits other than pensions

    267,104       370,562  

Other

    49,462       63,104  

Total deferred tax assets

    1,280,167       1,418,405  

Net deferred tax asset

  $ 408,502     $ 187,358  

 

7.

RETIREMENT PLAN

 

The Company maintains the Friedman Industries, Inc. Employees’ Retirement and 401(k) Plan (the “Plan”). Employees fully vest in the Plan upon six years of service.

 

The retirement portion of the Plan covers substantially all employees, including officers. The Company’s contribution expenses, which are determined 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 $180,000 for the year ended March 31, 2016, and $190,000 for the year ended March 31, 2015. Contributions, Plan earnings and forfeitures of nonvested accounts of terminated participants are allocated to the remaining individual accounts determined by a point schedule based on years of employment with the Company.

 

Employees may participate in the 401(k) portion of the Plan. Employees are eligible to participate in the Plan when the employee has completed one year of service. Under the 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. Contribution expense related to the 401(k) portion of the Plan was approximately $40,000 and $44,000 for the years ended March 31, 2016 and 2015, respectively.

 

 
12

 

 

8.

INDUSTRY SEGMENT DATA

 

The Company is engaged in the steel processing, pipe manufacturing and processing and steel and pipe distribution business. Within the Company, there are two product groups: coil and tubular. The Company’s coil operations involve converting steel coils into flat sheet and plate steel cut to customer specifications and reselling steel coils. Through its tubular operations, 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

 
   

2016

   

2015

 

NET SALES:

               

Coil

  $ 66,114,148     $ 72,913,058  

Tubular

    15,517,234       35,409,722  

TOTAL NET SALES

  $ 81,631,382     $ 108,322,780  

OPERATING PROFIT (LOSS):

               

Coil

  $ 5,098,322     $ (259,690 )

Tubular

    (3,097,409 )     2,602,210  

TOTAL OPERATING PROFIT

    2,000,913       2,342,520  

General corporate expenses

    (1,977,542 )     (1,717,744 )

Interest and other income

    375,310       61,040  

TOTAL EARNINGS BEFORE INCOME TAXES

  $ 398,681     $ 685,816  

IDENTIFIABLE ASSETS:

               

Coil

  $ 25,316,558     $ 21,248,710  

Tubular

    37,543,446       42,143,785  
      62,860,004       63,392,495  

General corporate assets

    4,030,393       3,565,529  

TOTAL ASSETS

  $ 66,890,397     $ 66,958,024  

DEPRECIATION:

               

Coil

  $ 1,153,519     $ 1,141,567  

Tubular

    510,427       571,086  

Corporate and other

    9,775       8,972  
    $ 1,673,721     $ 1,721,625  

CAPITAL EXPENDITURES:

               

Coil

  $ 422,481     $ 229,425  

Tubular

    1,695,512       5,646,780  

Corporate and other

    6,656        
    $ 2,124,649     $ 5,876,205  

 

Operating profit is total net sales less operating expenses, excluding general corporate expenses, interest expense and interest and other income. General corporate expenses reflect general and administrative expenses not directly associated with segment operations and consist primarily of corporate and accounting salaries, professional fees and services, bad debts, accrued profit sharing expense, accrued quarterly incentive bonuses, corporate insurance expenses and office supplies. Corporate assets consist primarily of cash and the cash value of officers’ life insurance. Although inventory is transferred at cost between product groups, there are no sales between product groups. Capital expenditures were related primarily to the construction of the Company’s pipe-finishing facility located in Lone Star, Texas. As of March 31, 2016, capitalized expenditures related to the construction of the facility totaled approximately $8,784,000.

 

 
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9.

SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (Unaudited)

 

The following is a summary of unaudited quarterly results of operations for the years ended March 31, 2016 and 2015:

 

   

Quarter Ended

 
   

June 30,
2015

   

September 30,
2015

   

December 31,
2015

   

March 31,
2016

 

Net sales

  $ 23,968,569     $ 23,165,705     $ 18,548,247     $ 15,948,861  

Gross profit

    2,141,893       907,703       1,467,289       176,759  

Net earnings (loss)

    525,949       (193,294 )     485,120       (523,775 )

Basic (1)

    .08       (.03 )     .07       (.08 )

Diluted (1)

    .08       (.03 )     .07       (.08 )

 

   

Quarter Ended

 
   

June 30,
2014

   

September 30,
2014

   

December 31,
2014

   

March 31,
2015

 

Net sales

  $ 27,904,521     $ 31,544,474     $ 23,552,636     $ 25,321,149  

Gross profit

    1,042,061       2,420,929       1,258,797       356,281  

Net earnings (loss)

    (118,250 )     765,655       187,643       (452,718 )

Basic (1)

    (.02 )     .11       .03       (.07 )

Diluted (1)

    (.02 )     .11       .03       (.07 )

                              

(1)

The sum of the quarterly earnings per share may not equal the annual amount reported due to per share amounts being calculated independently for each quarter.

 

 
14

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of Directors and Stockholders

Friedman Industries, Incorporated

 

We have audited the accompanying consolidated balance sheets of Friedman Industries, Incorporated and its subsidiary (collectively, the “Company”) as of March 31, 2016 and 2015, and the related consolidated statements of earnings, stockholders’ equity and cash flows for the years then ended. Our audits also included the financial statement schedule of Friedman Industries, Incorporated listed in Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Friedman Industries, Incorporated and its subsidiary as of March 31, 2016 and 2015, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

 

 

/S/ HEIN & ASSOCIATES LLP

 

Houston, Texas

June 29, 2016 

 

 
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

 

Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate.

 

Our management assessed the effectiveness of our internal control over financial reporting as of the end of our most recent fiscal year. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on such assessment, management concluded that, as of March 31, 2016, our internal control over financial reporting is effective based on that criteria.

 

This annual report does not include an attestation report of our registered, independent public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the U.S. Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

 
16

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

 

RESULTS OF OPERATIONS

 

Year ended March 31, 2016 compared to year ended March 31, 2015

 

During the year ended March 31, 2016, sales, costs of goods sold and gross profit decreased $26,691,398, $26,306,974 and $384,424, respectively, from the comparable amounts recorded during the year ended March 31, 2015. The decrease in sales was related to both a decline in tons sold and a decrease in the average per ton selling price. Tons sold decreased from approximately 156,000 tons in fiscal 2015 to approximately 148,500 tons in fiscal 2016. The average per ton selling price decreased from approximately $694 per ton in fiscal 2015 to approximately $550 per ton in fiscal 2016. The average per ton cost decreased from approximately $662 per ton in fiscal 2015 to approximately $518 per ton in fiscal 2016. Gross profit as a percentage of sales increased from approximately 4.7% in fiscal 2015 to approximately 5.7% in fiscal 2016.

 

Coil product segment sales decreased $6,798,910 during fiscal 2016. This decrease resulted from a decline in the average selling price partially offset by an increase in coil tons sold. The average per ton selling price decreased from approximately $742 per ton in fiscal 2015 to approximately $551 per ton in fiscal 2016. Coil tons sold increased from approximately 98,000 tons in fiscal 2015 to approximately 120,000 tons in fiscal 2016. The improvement in coil segment sales volume was primarily attributable to sales to customers manufacturing products used in the commercial freight industry. The coil product segment recorded an operating profit of $5,098,322 in fiscal 2016 and an operating loss of $259,690 in fiscal 2015. In fiscal 2016, the coil segment results benefitted from a decline in the cost of hot-rolled steel coils and an increase in tons sold. The coil product segment’s prime coil inventory is valued using the last-in, first-out (“LIFO”) method. It is characteristic of the LIFO method for costs of goods sold to be lower during periods of declining costs and for costs of goods sold to be higher during periods of rising costs. The price of hot-rolled steel coils declined significantly during the first nine months of fiscal 2016 before stabilizing and increasing slightly during the last three months of fiscal 2016. The Company continues to experience intense competition for sales due to the general availability of both domestic and foreign hot-rolled sheet and plate.

 

The Company is primarily dependent on Nucor Steel Company (“NSC”) for its supply of coil inventory. In fiscal 2016, NSC continued to supply the Company with steel coils in amounts that were adequate for the Company’s purposes. The Company does not currently anticipate any significant change in such supply from NSC. Loss of NSC as a supplier could have a material adverse effect on the Company’s business.

 

Tubular product segment sales decreased by $19,892,488 during fiscal 2016. This decrease resulted from a decline in tons sold and a decrease in the average selling price. Tubular tons sold decreased from approximately 58,000 tons in fiscal 2015 to approximately 28,500 tons in fiscal 2016. The average per ton selling price of tubular products decreased from approximately $613 per ton in fiscal 2015 to approximately $544 per ton in fiscal 2016. The tubular product segment recorded an operating loss of $3,097,409 in fiscal 2016 and an operating profit of $2,602,210 in fiscal 2015. Tubular segment results for fiscal 2016 were negatively impacted by low market prices driven by a decline in the U.S. energy business, reduced steel prices and intense competition for limited demand. The recession of the U.S. energy business directly reduced the demand for the segment’s products used in the oil and gas industry but also had a negative indirect impact on the segment’s other products as most pipe distributors, the segment’s primary customers, were reluctant to make purchases. In fiscal 2016, the Company experienced a reduction in tons produced, which had the effect of increasing the per ton cost of production and decreasing margins earned. Management believes the lower demand for its tubular products is related to soft market conditions created by oversupply, foreign competition and a decline in the U.S. energy business.

 

U. S. Steel Tubular Products, Inc. (“USS”) has been the primary supplier of new mill reject pipe to the Company and a significant customer of the Company’s manufactured tubular products used in the energy business. Historically, the Company’s manufactured tubular products sold to USS were produced from coil material purchased from USS. In recent years, sales of tubular products to USS have declined. Management believes the downward trend is a direct impact of the increased presence of low-priced imported material. In fiscal years 2016 and 2015, sales to USS were also negatively affected by a decline in the U.S. energy business. In March 2016, USS announced it was temporarily idling its Lone Star Tubular Operations facility due to weak market conditions. The Company is unable to provide an estimate of how long USS’s Lone Star facility will be idled. The Company expects orders from USS to remain low and supplies of new mill reject pipe from USS to be significantly reduced while USS’s Lone Star facility remains idled and the U.S. energy industry remains depressed. The Company continues to manufacture pipe for sale to customers other than USS and sources coil material for this pipe production from domestic steel mills other than USS. Accordingly, the Company does not believe the idling of any USS facility will impact the ability of the Company to receive adequate coil supply for pipe manufacturing demands. Loss of USS as a supplier or customer could have a material adverse effect on the Company’s business. The Company can make no assurances as to orders from USS or the amounts of pipe and coil material that will be available from USS in the future.

 

 
17

 

 

Other income for fiscal 2016 increased $314,270 from the amount recorded in fiscal 2015. This increase was related primarily to a $316,310 settlement received by the Company as a member of the settlement class related to steel antitrust litigation brought against certain steel manufacturers. The litigation continues against certain non-settling defendants but the Company is unable to estimate the amount of future proceeds, if any, to be received.

 

Income taxes for fiscal 2016 decreased $198,805 from the amount recorded in fiscal 2015. This decrease was related primarily to the decrease in earnings before taxes in fiscal 2016.

 

FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL

 

The Company remained in a strong, liquid position at March 31, 2016. Current ratios were 17.3 and 18.9 at March 31, 2016 and March 31, 2015, respectively. Working capital was $46,835,906 at March 31, 2016 and $47,466,244 at March 31, 2015.

 

During the year ended March 31, 2016, the Company maintained assets and liabilities at levels it believed were commensurate with operations. Changes in balance sheet amounts occurred in the ordinary course of business. Cash increased as a result of operating activities partially offset by purchases of property, plant and equipment and the payment of cash dividends. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

 

The Company is continuing construction of its pipe-finishing facility in Lone Star, Texas. The Company currently estimates the total construction costs for the facility will be approximately $9,200,000. As of March 31, 2016, capitalized expenditures related to the construction of the facility totaled approximately $8,784,000. The Company expects construction of the facility to be completed in the second quarter of fiscal 2017.

 

At March 31, 2016, the Company had a $5,000,000 revolving line of credit facility (the “Credit Facility”) in place with JPMorgan Chase Bank N.A. The Credit Facility expired on April 30, 2016. The Company did not borrow any amounts under the Credit Facility during fiscal 2016 or subsequent to year end.

 

The Company believes that its current cash position along with cash flows from operations and borrowing capability are adequate to fund its expected cash requirements for the next 24 months. 

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company has no off-balance sheet arrangements.

 

INFLATION

 

During fiscal 2016 and 2015, the Company believes that the general level of inflation had little effect on its operations.

 

CRITICAL ACCOUNTING POLICIES

 

The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Significant estimates that are subject to the Company’s assumptions include the fair value conclusion of the pipe-finishing facility impairment analysis, valuation of LIFO inventories in the Company’s quarterly reporting and determination of the allowance for doubtful accounts. The pipe-finishing facility impairment analysis requires assumptions related to replacement cost of the facility and the impact of current and future market conditions. Valuation of LIFO inventories in the Company’s quarterly reporting requires estimates of the year end quantities, which is inherently difficult. The allowance for doubtful accounts requires the Company to draw conclusions on the future collectability of the Company’s accounts receivable. Actual results could differ from these estimates.

 

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, as amended) and that involve risk and uncertainty. These forward-looking statements may include, but are not limited to, future results of operations, future production capacity, product quality and proposed expansion plans. 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 U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Actual results and trends in the future may differ materially depending on a variety of factors, including, but not limited to, changes in the demand and prices for the Company’s products, changes in the demand for steel and steel products in general and the Company’s success in executing its internal operating plans, including any proposed expansion plans.

 

 
18

 

 

 

TEN YEAR FINANCIAL SUMMARY

 

   

Year Ended March 31

 
   

2016

   

2015

   

2014

   

2013

   

2012

   

2011

   

2010

   

2009

   

2008

   

2007

 

Net sales

  $ 81,631,382     $ 108,322,780     $ 116,149,022     $ 136,448,786     $ 161,521,993     $ 131,709,492     $ 65,132,170     $ 208,779,750     $ 178,785,110     $ 199,726,619  

Net earnings

  $ 294,000     $ 382,330     $ 1,712,926     $ 6,135,812     $ 8,150,464     $ 8,155,637     $ 652,024     $ 13,673,406     $ 4,465,127     $ 7,018,318 (1)

Current assets

  $ 49,701,656     $ 50,117,355     $ 59,846,668     $ 64,283,557     $ 65,007,891     $ 54,562,344     $ 48,703,119     $ 42,673,377     $ 49,422,594     $ 51,731,369  

Current liabilities

  $ 2,865,750     $ 2,651,111     $ 7,770,689     $ 12,312,082     $ 13,853,388     $ 9,467,375     $ 7,576,278     $ 3,353,013     $ 14,784,366     $ 23,266,583  

Working capital

  $ 46,835,906     $ 47,466,244     $ 52,075,979     $ 51,971,475     $ 51,154,503     $ 45,094,969     $ 41,126,841     $ 39,320,364     $ 34,638,228     $ 28,464,786  

Total assets

  $ 66,890,397     $ 66,958,024     $ 72,284,399     $ 76,575,129     $ 78,570,393     $ 69,584,131     $ 65,031,722     $ 60,460,064     $ 66,958,392     $ 65,871,706  

Stockholders’ equity

  $ 63,239,047     $ 63,217,025     $ 63,310,656     $ 62,957,619     $ 63,417,268     $ 58,802,514     $ 56,358,410     $ 56,114,352     $ 44,956,741     $ 42,109,998  

Net earnings as a percent of Net sales

    0.4       0.4       1.5       4.5       5.0       6.2       1.0       6.5       2.5       3.5  

Stockholders’ equity

    0.5       0.6       2.7       9.7       12.9       13.9       1.2       24.4       9.9       16.7  

Weighted average number of common shares outstanding:

                                                                               

Basic

    6,799,444       6,799,444       6,799,444       6,799,444       6,799,444       6,799,444       6,799,444       6,799,444       6,733,942       6,685,577  

Per share

                                                                               

Net earnings per share:

                                                                               

Basic

  $ 0.04     $ 0.06     $ 0.25     $ 0.90     $ 1.20     $ 1.20     $ 0.10     $ 2.01     $ 0.66     $ 1.05 (1)

Stockholders’ equity

  $ 9.30     $ 9.30     $ 9.31     $ 9.26     $ 9.33     $ 8.65     $ 8.29     $ 8.25     $ 6.68     $ 6.30  

Cash dividends per common share

  $ 0.04     $ 0.07     $ 0.20     $ 0.97     $ 0.52     $ 0.84     $ 0.06     $ 0.37     $ 0.27     $ 0.34  

                         

(1) Includes an after tax gain of $866,474 ($.13 per share basic) related to a gain on the sale of assets.

 

 
19