UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 20189

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FROM THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-7521

FRIEDMAN INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

TEXAS

74-1504405

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

1121 JUDSON ROAD, SUITE 124, LONGVIEW,, TEXAS 75601

(Address of principal executive offices) (Zip Code)

(903) 758-3431

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1 Par Value	FRD	NYSE American

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

		��
Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At February 14, ~~2019,~~2020, the number of shares outstanding of the issuer’s only class of stock was ~~7,009,444~~6,999,444 shares of Common Stock.

	December 31, 2018			March 31, 2018 As Adjusted			December 31, 2019			March 31, 2019
ASSETS
CURRENT ASSETS:
Cash	$	2,575,269		$	4,052,582		$	22,333,323		$	11,667,161
Accounts receivable, net of allowances for bad debts and cash discounts of $21,052 December 31, 2018 and March 31, 2018		17,207,574			17,458,289
Accounts receivable, net of allowances for bad debts and cash discounts of $68,415 at December 31, 2019 and $29,178 at March 31, 2019								9,845,626			13,183,411
Inventories		59,415,035			45,329,434			35,543,889			49,062,086
Other		684,237			429,101			1,568,674			543,549
TOTAL CURRENT ASSETS		79,882,115			67,269,406			69,291,512			74,456,207
PROPERTY, PLANT AND EQUIPMENT:
Land		1,452,799			1,452,799			1,452,799			1,452,799
Buildings and yard improvements		8,816,631			8,710,958			8,879,692			8,821,253
Machinery and equipment		39,824,953			39,282,944			39,746,407			38,176,497
Construction in progress								2,114,123			—
Less accumulated depreciation		(36,353,488	)		(35,280,700	)		(37,464,557	)		(36,540,591	)
		13,740,895			14,166,001			14,728,464			11,909,958
OTHER ASSETS:
Cash value of officers’ life insurance and other assets		236,725			217,900			169,187			235,817
Income taxes recoverable								40,639			—
TOTAL ASSETS	$	93,859,735		$	81,653,307		$	84,229,802		$	86,601,982

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	16,727,511		$	10,233,431		$	12,175,584		$	11,577,664
Income taxes payable		175,845			—			—			159,694
Dividends payable		420,567			140,189			139,989			279,978
Contribution to retirement plan		200,000			45,000			200,000			50,250
Employee compensation and related expenses		334,082			612,015			254,699			297,316
Current portion of financing lease								100,244			—
TOTAL CURRENT LIABILITIES		17,858,005			11,030,635			12,870,516			12,364,902
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS		197,347			175,056			97,176			210,257
DEFERRED INCOME TAX LIABILITY		1,798,048			1,872,166			916,787			1,545,246
OTHER NON-CURRENT LIABILITIES								404,367			—
TOTAL LIABILITIES		19,853,400			13,077,857			14,288,846			14,120,405
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, par value $1:
Authorized shares — 10,000,000
Issued shares — 8,185,160 at December 31 and March 31, 2018		8,185,160			8,185,160
Issued shares — 8,225,160 shares and 8,205,160 shares at December 31 and March 31, 2019, respectively								8,225,160			8,205,160
Additional paid-in capital		29,371,594			29,154,874			29,552,180			29,322,472
Treasury stock at cost (1,175,716 shares at December 31 and March 31, 2018)		(5,475,964	)		(5,475,964	)
Treasury stock at cost (1,225,716 shares at December 31 and March 31, 2019)								(5,525,964	)		(5,525,964	)
Retained earnings		41,925,545			36,711,380			37,689,580			40,479,909
TOTAL STOCKHOLDERS’ EQUITY		74,006,335			68,575,450			69,940,956			72,481,577
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	93,859,735		$	81,653,307		$	84,229,802		$	86,601,982

NOTE B — ~~CHANGE IN ACCOUNTING PRINCIPLE~~

Effective April 1, 2018, the Company changed its method for valuing prime coil inventory of the coil segment from the last-in, first-out (“LIFO”) method to the average cost method. The effects of the change in accounting principle from LIFO to average cost have been retrospectively applied to all prior periods presented in all sections of this quarterly report on Form 10-Q. The Company believes the average cost method is preferable as it more closely resembles the physical flow of our inventory, it better matches revenues with expenses and it aligns with how we internally manage our business. As a result of the retrospective application of the change in accounting principle, certain financial statement line items in the Company’s consolidated balance sheet as of March 31, 2018, its consolidated statement of operations for the three and nine months ended December 31, 2017 and its consolidated statement of cash flows for the nine months ended December 31, 2017 were adjusted as presented in the table below. In addition, retained earnings as of April 1, 2017 increased $4,418,318 as a result of the change in accounting principle.

As Originally
Reported

Effect of
Change

As Adjusted

Consolidated Statement of Operations, Three Months Ended December 31, 2017
Cost of goods sold
26,364,387 (55,400 ) 26,308,987
Income tax provision
542,909 17,058 559,967
Net earnings
122,929 38,342 161,271

Net earnings per share:

Basic
0.02 - 0.02
Diluted
0.02 - 0.02

Consolidated Statement of Operations, Nine Months Ended December 31, 2017
Cost of goods sold
72,884,773 (458,528 ) 72,426,245
Income tax provision
748,674 141,181 889,855
Net earnings
603,588 317,347 920,935

Net earnings per share:

Basic
0.09 0.04 0.13
Diluted
0.09 0.04 0.13

Consolidated Statement of Cash Flows, Nine Months Ended December 31, 2017
Net earnings
603,588 317,347 920,935
Change in inventories
(11,480,885 ) (458,528 ) (11,939,413 )
Change in deferred income taxes
702,222 108,483 810,705
Change in income taxes payable
- 32,698 32,698

Consolidated Balance Sheet, as of March 31, 2018

Inventories
38,039,332 7,290,102 45,329,434
Deferred income tax liability
103,198 1,768,968 1,872,166
Retained earnings
31,190,246 5,521,134 36,711,380

~~The following table shows the effect of the change in accounting principle from LIFO to average cost on the three and nine months ended December 31, 2018:~~

As Computed
Under LIFO

As Computed
Under Average
Cost

Effect of
Change

Consolidated Statement of Operations, Three Months Ended December 31, 2018
Earnings before income taxes
2,233,044 880,867 (1,352,177 )
Income tax provision
545,478 216,094 (329,384 )
Net earnings
1,687,567 664,773 (1,022,794 )

Net earnings per share:

Basic
0.24 0.09 (0.15 )
Diluted
0.24 0.09 (0.15 )

Consolidated Statement of Operations, Nine Months Ended December 31, 2018
Earnings before income taxes
5,782,409 8,289,004 2,506,595
Income tax provision
1,412,796 2,023,422 610,626
Net earnings
4,369,614 6,265,582 1,895,968

Net earnings per share:

Basic
0.62 0.89 0.27
Diluted
0.62 0.89 0.27

~~NOTE C —~~ NEW ACCOUNTING STANDARDS

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (“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 prior revenue recognition guidance, including industry-specific guidance. Effective April 1, 2018, the Company adopted the new standard through the modified retrospective method applied to those contracts that were not completed as of April 1, 2018 and those contracts initiated on or after April 1, 2018. Results for reporting periods beginning on or after April 1, 2018 are presented under the new standard, while prior period amounts are unadjusted and reported in accordance with historic accounting under the prior guidance. The modified retrospective method requires that the cumulative effect of initially applying the new guidance be recorded as an adjustment to the opening balance of retained earnings in the condensed consolidated balance sheet. The adoption of this new accounting guidance did not have an impact on any prior period earnings and no adjustment was recorded to the opening retained earnings balance as of April 1, 2018. The adoption did not have a financial statement impact to the Company but did result in expanded disclosures which are provided in Note H.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows by adding or clarifying guidance on eight specific cash flow issues. The Company adopted this new guidance effective April 1, 2018. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

~~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~~prior guidance for operating leases. ~~This~~In July 2018, the FASB issued Accounting Standards Update No. 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new ~~guidance~~standard. In July 2018, the FASB also issued Accounting Standards Update No. 2018-11, Leases (Topic 842): Targeted Improvements, to give entities another option for transition and to provide practical expedients to reduce the cost and complexity of implementing the new standard. ASU 2016-02 and all subsequently issued amendments, collectively "ASC 842," is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Company adopted ASC 842 on April 1, 2019 using the optional transition method under which the new standard is applied only to the most current period presented and the cumulative effect of applying the new standard to existing lease agreements is recognized at the date of initial application. The adoption of ASC 842 resulted in the recording of right-of-use lease assets and lease liabilities of approximately $63,000. The Company implemented the appropriate changes to business processes and controls to support recognition and disclosure under the new standard, including the new qualitative and quantitative disclosures. The Company also elected the package of transition practical expedients related to lease identification, lease classification, and initial direct costs. In addition, the Company made the following accounting policy elections: (1) the Company will not separate lease and non-lease components by class of underlying asset and (2) the Company will apply the short-term lease exemption by class of underlying asset. The adoption of this standard did not have an impact on the Company’s consolidated statement of operations or cash flows and did not result in a cumulative adjustment to retained earnings. See Note E – Leases for additional information.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires, among other things, the use of a new current expected credit loss ("CECL") model in order to determine the allowance for doubtful accounts with respect to accounts receivable. The CECL model requires estimation of lifetime expected credit loss with respect to receivables and recognition of allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. Subsequently, in November 2018, the FASB issued Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (ASC 326), which clarifies that impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2016-13 called for an effective date for annual ~~and~~periods, including interim periods within those annual periods, beginning after December 15, ~~2018, but can~~2019. In November 2019, the FASB issued Accounting Standards Update 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). ASU 2019-10 defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, private companies, not-for-profit organizations and employee benefit plans to annual periods beginning after December 15, 2022, including interim periods within those annual periods. The Company qualifies as a smaller reporting company and does not expect to early ~~adopted.~~adopt ASU 2016-13. The Company is currently evaluating the impact ~~that adoption~~ of the ~~provisions of ASU 2016-02 will have~~new guidance on ~~its~~the consolidated financial ~~statements but does not expect a material impact.~~statements.

In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies accounting for income taxes by revising or clarifying existing guidance in ASC 740, as well as removing certain exceptions within ASC 740. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.

NOTE DC — 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. ~~Effective April 1, 2018, the Company changed the inventory valuation method of its~~Cost for prime coil inventory ~~from the LIFO method to~~is determined using the average cost method. ~~Prime coil inventory value for both periods presented in the table below are based on average cost valuation.~~ Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the average cost method. All inventories are valued at the lower of cost or net realizable value.

A summary of inventory values by product group follows:

	December 31, 2018		March 31, 2018 As Adjusted		December 31, 2019		March 31, 2019
Prime Coil Inventory	$	32,052,655	$	14,185,858	$	17,659,023	$	26,240,439
Non-Standard Coil Inventory		2,353,592		2,971,324		2,139,267		2,078,008
Tubular Raw Material		8,127,972		6,734,076		2,823,269		4,418,750
Tubular Finished Goods		16,880,816		21,438,176		12,922,330		16,324,889
	$	59,415,035	$	45,329,434	$	35,543,889	$	49,062,086

Tubular raw material inventory consists of hot-rolled steel coils that the Company will manufacture into pipe. Tubular finished goods inventory consists of pipe the Company has manufactured and new mill reject pipe that the Company purchases from U.S. Steel Tubular Products, Inc. At

NOTE E — ~~DEBT~~LEASES

~~On December 11,~~In February 2016, the FASB issued ASU 2016-02, Leases (“ASC 842”), to require lessees to recognize most leases on the balance sheet, while recognition on the statement of operations would be substantially unchanged. The new standard requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future lease payments, and a corresponding right-of-use (“ROU”) asset on the balance sheet. The guidance requires disclosure of key information about leasing arrangements that is intended to give financial statement users the ability to assess the amount, timing and potential uncertainty of cash flows related to leases. Leases with a term of 12 months or less will be accounted for similar to prior guidance for operating leases. In July 2018, the ~~Company’s $7,500,000 revolving line~~FASB issued Accounting Standards Update No. 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of ~~credit facility expired. On December 12,~~the new standard. In July 2018, the FASB also issued Accounting Standards Update No. 2018-11, Leases (Topic 842): Targeted Improvements, to give entities another option for transition and to provide practical expedients to reduce the cost and complexity of implementing the new standard. ASU 2016-02 and all subsequently issued amendments, collectively "ASC 842," is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Company ~~entered into~~adopted ASC 842 on April 1, 2019 using the optional transition method under which the new standard is applied only to the most current period presented and the cumulative effect of applying the new standard to existing lease agreements is recognized at the date of initial application. Under this adoption method, reporting periods beginning after April 1, 2019 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The adoption of ASC 842 resulted in the recording of initial ROU asset and lease liabilities of approximately $63,000 at April 1, 2019. The Company also elected the package of transition practical expedients related to lease identification, lease classification, and initial direct costs. In addition, the Company made the following accounting policy elections: (1) the Company will not separate lease and non-lease components by class of underlying asset and (2) the Company will apply the short-term lease exemption by class of underlying asset. The adoption of this standard did not have an impact on the Company’s consolidated statement of operations or cash flows and did not result in a ~~loan agreement~~cumulative adjustment to retained earnings.

The Company’s lease of its office space in Longview, Texas is the only operating lease included in the ROU asset and lease liability. The lease calls for ~~a $5,000,000 revolving line~~monthly rent payments of ~~credit facility (the “Credit Facility”) with Citizens National Bank, which changed names to VeraBank on January 14, 2019 (the “Bank”). The Credit Facility~~$2,728 and expires on April 30, 2021. The Company’s other operating leases for items such as IT equipment and storage space are either short-term in nature or immaterial.

In October 2019, the Company received a new heavy-duty forklift under a 5-year finance lease arrangement with a financed amount of $518,616 and a monthly payment of $9,074.

The components of lease expense were as follows for the three months and nine months ended December ~~12, 2019 and is collateralized by the Company’s tubular segment accounts receivable and inventory. Borrowings~~31, 2019:

Three Months Ended
December 31, 2019

Nine Months Ended
December 31, 2019

Finance lease – amortization of ROU asset
$ 8,644 $ 8,644
Finance lease – interest on lease liability
2,463 2,463
Operating lease expense
8,184 24,552
$ 19,291 $ 35,659

Rental expense for operating leases classified under the ~~credit facility bear interest at~~previous accounting standard, Accounting Standards Codification Topic 840, for the ~~Bank’s prime rate minus 0.55% resulting in an applicable interest rate of 4.95%~~three and nine months ended December 31, 2018 was $8,184 and $24,552, respectively.

The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of December 31, ~~2018. Interest payments on amounts advanced are due monthly~~2019:

December 31, 2019

Balance Sheet Classification
Assets

Operating lease right-of-use asset
$ 41,557
Other assets
Finance lease right-of-use asset
$ 509,972
Property, plant & equipment, net
Total right-of-use assets
$ 551,529

Liabilities

Operating lease liability, current
$ 30,802
Accrued expenses
Finance lease liability, current
100,244
Current portion of finance lease
Operating lease liability, non-current
10,755
Other non-current liabilities
Finance lease liability, non-current
393,612
Other non-current liabilities
Total lease liabilities
$ 535,413

As of December 31, 2019, the weighted-average remaining lease term was 1.3 years for operating leases and ~~principal payments may~~4.8 years for finance leases. The weighted average discount rate was 7% for operating leases and 1.9% for finance leases.

Maturities of lease liabilities as of December 31, 2019 were as follows:

Operating Leases

Finance Leases

Fiscal 2020 (remainder of fiscal year)
$ 8,184 $ 27,222
Fiscal 2021
32,736 108,888
Fiscal 2022
2,728 108,888
Fiscal 2023
— 108,888
Fiscal 2024
— 108,888
Fiscal 2025
— 54,444
Total undiscounted lease payments
$ 43,648 $ 517,218
Less: imputed interest
(2,091 ) (23,362 )
Present value of lease liabilities
$ 41,557 $ 493,856

NOTE F – PROPERTY, PLANT AND EQUIPMENT

The Company commenced two capital expenditure projects during the three months ended December 31, 2019.

The first project is a building expansion at the Company’s coil processing facility in Hickman, Arkansas. The project will add an additional 22,000 square feet of storage space to the facility. This project is estimated to be ~~made~~complete by April 2020 with an estimated cost of $1,100,000.

The second project involves the installation of a stretcher leveler coil processing line at ~~any time without penalty. All outstanding principal~~the Company’s coil processing facility in Decatur, Alabama. This equipment will replace the existing processing equipment that is currently present at the Decatur plant and ~~accrued interest~~will expand both the size range and grade of material that Decatur is ~~due upon expiration~~able to process. The equipment is being constructed, fabricated and installed by Delta Steel Technologies. The Company currently expects installation of the ~~Credit Facility. Access~~new equipment to ~~funds under~~begin in October 2020 and expects commercial use to begin in February 2021. The Company currently estimates the ~~Credit Facility is subject~~cost of this project to ~~a borrowing base requirement. The borrowing base is calculated as 80%~~be $5,800,000.

As of ~~eligible tubular segment accounts receivable plus 40% of eligible tubular segment inventory. The total amount contributed to the borrowing base by eligible inventory shall not exceed $3,000,000. At~~ December 31, ~~2018 and~~2019, expenditures related to these projects totaled $2,114,123 with this amount reported as ofConstruction in Progress on the filing date of this Form 10-Q, the borrowing base calculations would allow the Company access to the full $5,000,000 available under the Credit Facility. The Credit Facility contains financial covenants that require the Company to not permit: (1) total shareholders’ equity to be less than $50.0 million at any time, (2) total liabilities to exceed 50% of total shareholders’ equity at any time and (3) debt service coverage ratio, measured as of the end of each calendar quarter, to be less than 2.00 to 1.00. The debt service coverage ratio is calculated on a trailing twelve month period as the ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) to the sum of interest expense for such period, scheduled principal payments for such period on all indebtedness for money borrowed and capital leases, and the aggregate amount payable during such period under any operating leases. At December 31, 2018 and as of the filing date of this Form 10-Q, the Company had no borrowings outstanding under the Credit Facility.Company’s Condensed Consolidated Balance Sheet.

NOTE FG — STOCK BASED COMPENSATION

The Company maintains the Friedman Industries, Incorporated 2016 Restricted Stock Plan (the “Plan”). The Plan is administered by the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) and continues indefinitely until terminated by the Board or until all shares allowed by the Plan have been awarded and earned. The aggregate number of shares of the Company’s Common Stock eligible for award under the Plan is 500,000 shares. Subject to the terms and provisions of the Plan, the Committee may, from time to time, select the employees, directors or consultants to whom awards will be granted and shall determine the amount and applicable restrictions of each award. Forfeitures are accounted for upon their occurrence.

~~As of~~The following table summarizes the activity related to restricted stock awards for the nine months ended December 31, ~~2018,~~2019:

Number of Shares

Weighted Average
Grant Date Fair
Value Per Share

Unvested at March 31, 2019
180,000 $ 7.03
Cancelled or forfeited
— —
Granted
20,000 7.62
Vested
— —
Unvested at December 31, 2019
200,000 $ 7.09

Of the ~~total number of restricted~~200,000 unvested shares ~~awarded under the Plan was 210,000 shares. All of the awarded~~at December 31, 2019, 160,000 shares have five year cliff vesting restrictions with vesting occurring on January 4, ~~2022. No other~~2022, 20,000 shares have ~~been awarded under~~two year cliff vesting restrictions with vesting occurring on March 13, 2021 and 20,000 shares have five year cliff vesting restrictions with vesting occurring on April 1, 2024. Compensation expense is recognized over the ~~Plan.~~requisite service period applicable to each award. The ~~grant date fair value of the awarded shares is $1,444,800 and is being recognized as~~Company recorded compensation expense ~~over~~of $249,708 and $216,720 in nine months ended December 31, 2019 and 2018, respectively, relating to the ~~60 month requisite service period. Compensation expense related to~~ stock awards issued under the ~~plan was $72,240 in each of the quarters ended December 31, 2018 and December 31, 2017 and $216,720 in each of the nine month periods ended December 31, 2018 and December 31, 2017.~~Plan.

NOTE GH — SEGMENT INFORMATION (in thousands)

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended December 31,						Nine Months Ended December 31,
	2018			2017 As Adjusted			2018			2017 As Adjusted			2019			2018			2019			2018
Net sales
Coil	$	28,731		$	22,410		$	94,688		$	60,547		$	21,001		$	28,731		$	77,604		$	94,688
Tubular		14,595			5,624			50,263			16,648			7,150			14,595			31,518			50,263
Total net sales	$	43,326		$	28,034		$	144,951		$	77,195		$	28,151		$	43,326		$	109,122		$	144,951

Operating profit (loss)
Coil	$	744		$	1,233		$	5,847		$	2,942		$	(93	)	$	744		$	575		$	5,847
Tubular		650			(53	)		4,348			261			(468	)		650			(1,670	)		4,348
Total operating profit		1,394			1,180			10,195			3,203
Total operating profit (loss)														(561	)		1,394			(1,095	)		10,195
Corporate expenses		519			463			1,981			1,405			587			517			1,826			1,963
Interest expense														2			2			2			18
Interest & other income		(6	)		(4	)		(75	)		(13	)		(4	)		(6	)		(15	)		(75	)
Total earnings before taxes	$	881		$	721		$	8,289		$	1,811
Total earnings (loss) before taxes													$	(1,146	)	$	881		$	(2,908	)	$	8,289

Corporate expenses reflect general and administrative expenses not directly associated with segment operations and consist primarily of corporate executive and accounting salaries, professional fees and services, bad debts, retirement plan contribution expense, corporate insurance expenses and office supplies. Corporate assets consist primarily of cash, ~~and~~ the cash value of officers’ life ~~insurance.~~insurance and income taxes recoverable.

NOTE HI — REVENUE

Revenue is generated primarily from contracts to manufacture or process steel products. Most of the Company’s revenue is generated by sales of material out of the Company’s inventory but a portion of the Company’s revenue is derived from processing of customer owned material. Generally, the Company’s performance obligations are satisfied, control of our products is transferred, and revenue is recognized at a single point in time, when title transfers to our customer for product shipped or when services are provided. Revenues are recorded net of any sales incentives. Shipping and other transportation costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at the time control is transferred to the customer. Costs related to obtaining sales contracts are incidental and expensed when incurred. Because customers are invoiced at the time title transfers and the Company’s rights to consideration are unconditional at that time, the Company does not maintain contract asset balances. Additionally, the Company does not maintain contract liability balances, as performance obligations are satisfied prior to customer payment for product. The Company offers industry standard payment terms.

The Company has two reportable segments: Coil and Tubular. Coil primarily generates revenue from temper passing and cutting to length hot-rolled steel coils. Coil segment revenue consists of three main product types: Prime Coil, Non-Standard Coil and Customer Owned Coil. Tubular primarily generates revenue from the manufacture, distribution and processing of steel pipe. Tubular segment revenue consists of three main product or service types: Manufactured Pipe, Mill Reject Pipe and Pipe Finishing Services. The following table disaggregates our revenue by product for each of our reportable business segments for the three and nine month periods ended December 31, ~~2018~~2019 and ~~2017,~~2018, respectively:

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended December 31,				Nine Months Ended December 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Coil Segment:
Prime Coil		25,074,965		17,862,981		79,426,810		47,598,283		18,662,211		25,074,965		67,827,299		79,426,810
Non-standard Coil		3,350,738		4,189,947		14,355,617		12,001,311		2,153,277		3,350,738		9,197,245		14,355,617
Customer Owned Coil		305,289		356,643		906,209		947,651		185,870		305,289		578,891		906,209
		28,730,992		22,409,571		94,688,636		60,547,245		21,001,358		28,730,992		77,603,435		94,688,636
Tubular Segment:
Manufactured Pipe		10,767,166		4,144,506		35,936,762		10,467,228		5,748,647		10,767,166		26,225,323		35,936,762
Mill Reject Pipe		3,761,188		1,479,444		13,489,029		4,515,771		1,400,812		3,761,188		5,292,959		13,489,029
Pipe Finishing Services		66,734		-		837,000		1,664,256		-		66,734		-		837,000
		14,595,088		5,623,950		50,262,791		16,647,255		7,149,459		14,595,088		31,518,282		50,262,791

NOTE IJ — STOCKHOLDERS’ EQUITY

The following tables reflect the changes in stockholders’ equity for each quarterly period within the nine months ended December 31, 2019 and December 31, 2018:

Common
Stock

Additional
Paid-In
Capital

Treasury
Stock

Retained
Earnings

BALANCE AT MARCH 31, 2019
$ 8,205,160 $ 29,322,472 $ (5,525,964 ) $ 40,479,909
Net earnings
— — — 194,772
Issuance of restricted stock
20,000 — — —
Paid in capital – restricted stock awards
— 63,236 — —
Cash dividends ($0.04 per share)
— — — (279,978 )
BALANCE AT JUNE 30, 2019
$ 8,225,160 $ 29,385,708 $ (5,525,964 ) $ 40,394,703
Net loss
— — — (1,544,137 )
Paid in capital – restricted stock awards
— 83,236 — —
Cash dividends ($0.02 per share)
— — — (139,990 )
BALANCE AT SEPTEMBER 30, 2019
$ 8,225,160 $ 29,468,944 $ (5,525,964 ) $ 38,710,576
Net loss
— — — (881,003 )
Paid in capital – restricted stock awards
— 83,236 — —
Cash dividends ($0.02 per share)
— — — (139,993 )
BALANCE AT DECEMBER 31, 2019
$ 8,225,160 $ 29,552,180 $ (5,525,964 ) $ 37,689,580

Common
Stock

Additional
Paid-In
Capital

Treasury
Stock

Retained
Earnings

BALANCE AT MARCH 31, 2018
$ 8,185,160 $ 29,154,874 $ (5,475,964 ) $ 36,711,380
Net earnings
— — — 3,599,893
Paid in capital – restricted stock awards
— 72,240 — —
Cash dividends ($0.03 per share)
— — — (210,283 )
BALANCE AT JUNE 30, 2018
$ 8,185,160 $ 29,227,114 $ (5,475,964 ) $ 40,100,990
Net earnings
— — — 2,000,916
Paid in capital – restricted stock awards
— 72,240 — —
Cash dividends ($0.06 per share)
— — — (420,567 )
BALANCE AT SEPTEMBER 30, 2018
$ 8,185,160 $ 29,299,354 $ (5,475,964 ) $ 41,681,339
Net earnings
— — — 664,773
Paid in capital – restricted stock awards
— 72,240 — —
Cash dividends ($0.06 per share)
— — — (420,567 )
BALANCE AT DECEMBER 31, 2018
$ 8,185,160 $ 29,371,594 $ (5,475,964 ) $ 41,925,545

NOTE JL — INCOME TAXES

For the nine months ended December 31, ~~2018,~~2019, the Company recorded an income tax benefit of $678,043, or 23.3% of pre-tax loss, compared to an income tax provision of $2,023,422, or 24.4% of pre-tax income, ~~compared to $889,855, or 49.1% of pre-tax income,~~ for the nine months ended December 31, ~~2017. The provision for the nine months ended December 31, 2017 has been adjusted by the retroactive application of the change in accounting principle disclosed in Note B.~~

On December 22, 2017, the U.S. government signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act, among other things, lowered the U.S. corporate income tax rate applicable to the Company from 34% to 21% effective January 1, 2018. For ~~the~~both nine ~~months ended December 31, 2018,~~month periods, the ~~Company’s~~ effective tax rate differed from the ~~corporate~~federal statutory rate due primarily to the inclusion of state tax expenses or benefits in the Company’s income tax provision. For the nine months ended December 31, 2017, the Company’s effective tax rate differed from the corporate statutory rate due primarily to the re-measurement of deferred tax assets and liabilities according to the Tax Act.

Also on December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. SAB 118 allowed companies to record provisional estimates during a measurement period not extending beyond one year from the Tax Act enactment date. As of December 22, 2018, the Company has completed the accounting for all impacts of the Tax Act and there have been no changes to previously recorded amounts.calculation.

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

Friedman Industries, Incorporated is a manufacturer and processor of steel products and operates in two reportable ~~segments;~~segments: coil products and tubular products.

The coil product segment includes the operation of two hot-roll coil processing facilities; one in Hickman, Arkansas and the other in Decatur, Alabama. Each facility operates a temper mill and a cut-to-length line. The temper mill improves the flatness and surface qualities of the coils and the cut-to-length line levels the steel and cuts the coils into sheet and plate of prescribed lengths. Combined, the facilities are capable of cutting sheet and plate with thicknesses ranging from 14 gauge to ½” thick. The coil product segment sells its prime grade inventory under the Friedman Industries name but also maintains an inventory of non-standard coil products, consisting primarily of mill secondary and excess prime coils, which are sold through the Company’s XSCP division. The coil product segment also processes customer-owned coils on a fee basis. Effective April 1, 2018, the Company changed the inventory valuation method for the coil segment’s prime coil inventory from the LIFO method to the average cost method. The impact of this change in accounting principle to both the current fiscal year periods and, as applied retrospectively, to the comparable periods of the prior fiscal year are disclosed in Note B of the consolidated financial statements. Prior period information provided in this Management’s Discussion and Analysis has been updated to reflect the retrospective application of the change in accounting principle.

The tubular product segment consists of the Company’s Texas Tubular Products division (“TTP”) located in Lone Star, Texas. TTP operates two electric resistance welded pipe mills with a combined outside diameter (“OD”) size range of 2 3/8” OD to 8 5/8” OD. Both pipe mills are American Petroleum Institute (“API”) licensed to manufacture line pipe and oil country pipe and also manufacture pipe for structural purposes that meets other recognized industry standards. TTP has aan API licensed pipe finishing facility that threads and couples oil country tubular goods and performs other services that are customary in the pipe finishing process. ~~The pipe finishing facility is API licensed and focuses on threading semi-premium connections.~~ TTP’s inventory consists of raw materials and finished goods. Raw material inventory consists of hot-rolled steel coils that TTP will manufacture into pipe. Finished goods inventory consists of pipe TTP has manufactured and new mill reject pipe that TTP purchases from U.S. Steel Tubular Products, Inc. ~~(“USS”).~~

Nine Months Ended December 31, 20189 Compared to Nine Months Ended December 31, 20178

During the nine months ended December 31, ~~2018~~2019 (the ~~“2018~~“2019 period”), sales, costs of goods sold and gross profit ~~increased $67,756,927, $60,457,679~~decreased $35,829,710, $24,503,814 and ~~$7,299,248,~~$11,325,896, respectively, from the comparable amounts recorded during the nine months ended December 31, ~~2017~~2018 (the ~~“2017~~“2018 period”). The ~~increase~~decrease in sales was related to both ~~an increase~~a decrease in tons sold and ~~an increase~~a decrease in the average per ton selling price. Tons sold ~~increased~~decreased approximately ~~53%~~10% from ~~approximately 114,500 tons in the 2017 period to~~ approximately 175,500 tons in the 2018 period to approximately 157,500 tons in the 2019 period. Discussion of the sales ~~improvement~~decline is expanded upon at the segment level in the following paragraphs. Gross profit as a percentage of sales ~~increased~~decreased from ~~approximately 6.2% in the 2017 period to~~ approximately 8.3% in the 2018 period to approximately 0.7% in the 2019 period.

Our operating results are significantly impacted by the market price of hot-rolled steel coil. The Company experienced significant volatility in steel price during both the 2019 period and the 2018 period. In March 2018, the Administration of the U.S. government announced trade actions under Section 232 of the Trade Expansion Act related to imports of steel and aluminum products. In November 2017, steel prices began to rise on speculation of potential trade actions. The rising prices gained momentum in January 2018 when the Commerce Department’s recommendations were provided to the Administration. From January 2018, steel prices continued to rise approximately 40% until reaching a peak in July 2018. Prices held near a 10 year high until September 2018 when prices started to decline and continued that downward trend through October 2019, dropping approximately 50%. The steel price volatility translated into volatility in the Company’s operating results for the 2019 and 2018 periods. Results for the 2019 period were negatively impacted by sustained margin compression associated with declines in steel price while the 2018 period was positively impacted by stronger margins associated with increases in steel price.

Coil product segment sales for the ~~2018~~2019 period totaled ~~$94,688,636~~$77,603,435 compared to ~~$60,547,245~~$94,688,636 for the ~~2017~~2018 period, representing a sales ~~increase~~decrease of ~~$34,141,391~~$17,085,201 or approximately ~~56%~~18%. For a more complete understanding of the average selling prices of goods sold, it is helpful to isolate sales generated from processing of customer owned material and sales generated from coil segment inventory. Sales generated from processing of customer owned material totaled $578,891 for the 2019 period compared to $906,209 for the 2018 ~~period compared to $947,651 for the 2017~~ period. Sales generated from coil segment inventory totaled $77,024,544 for the 2019 period compared to $93,782,427 for the 2018 ~~period compared to $59,599,594 for the 2017~~ period. The ~~increase~~decrease in coil segment sales was driven by ~~an increase in tons shipped from inventory and an increase~~a decrease in the average selling price per ton ~~for these shipments. Inventory tons sold increased~~of material from ~~approximately 90,000 tons in the 2017 period to approximately 105,500 tons in the 2018 period.~~inventory. The average per ton selling price related to these shipments ~~increased~~decreased from ~~approximately $661 per ton in the 2017 period to~~ approximately $890 per ton in the 2018 period to approximately $667 per ton in the 2019 period. The ~~improved shipping~~average selling price decline was partially offset by an increase in the volume ~~for~~of shipments. Inventory tons sold increased from approximately 105,500 tons in the 2018 period ~~is attributable~~ to ~~increased demand among many of~~approximately 115,500 tons in the segment’s customers. Management believes the demand improvement was primarily related to the effects of the U.S. government’s Section 232 steel trade actions, sustained improvement of the U.S. energy industry and the steel industry and U.S. economic conditions in general.2019 period. Coil segment operations recorded operating profits of approximately ~~$5,847,000~~$575,000 and ~~$2,942,000~~$5,847,000 in the ~~2018~~2019 and ~~2017~~2018 periods, respectively.

~~The Company’s coil segment purchases its~~Margins for the 2019 period were negatively impacted by declining hot-rolled steel prices and the effect of inventory ~~from a limited number~~with higher average costs flowing through cost of ~~suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.~~

~~Tubular product segment sales~~goods sold. Margins for the 2018 period ~~totaled $50,262,791 compared to $16,647,255 for~~were positively impacted by increasing hot-rolled steel prices and the ~~2017 period, representing a sales increase~~effect of ~~$33,615,536 or approximately 202%. For a more complete understanding of the~~inventory with lower average ~~selling prices~~costs flowing through cost of goods ~~sold, it is helpful to isolate sales generated from the finishing of customer owned pipe and sales generated from tubular segment inventory.~~sold. Sales generated from finishing of customer owned pipe totaled $837,000 for the 2018 period compared to $1,664,256 for the 2017 period. Sales generated from tubular segment inventory totaled $49,425,791 for the 2018 period compared to $14,982,999 for the 2017 period. The increase in tubular segment sales was driven by an increase in tons shipped from inventory and an increase in the average selling price per ton for these shipments. Tons sold increased from approximately 24,500 tons in the 2017 period to approximately 70,000 tons in the 2018 period. The average per ton selling price related to these shipments increased from approximately $616 per ton in the 2017 period to approximately $704 per ton in the 2018 period. Tubular segment operations recorded operating profits of approximately $4,348,000 and $261,000 in the 2018 and 2017 periods, respectively.

~~Management believes the~~volume improved ~~tubular results are~~due primarily ~~related~~ to the ~~sustained recovery~~number of the U.S. energy industry and the segment’s new product offering of API line pipe. Late in the third quarter of fiscal 2018, TTP began actively producing, marketing and selling line pipe directly to distributors. Shipments of line pipe during the 2018 period totaled approximately 20,500 tons compared to approximately 2,000 tons in the 2017 period, accounting for approximately 41% of the 45,500 ton increase in total tubular sales volume. Management expects line pipe sales to be a significant component of total tubular segment sales moving forward.

Shipments of mill reject pipe during the 2018 period totaled approximately 38,000 tons compared to approximately 11,500 tons during the 2017 period, accounting for approximately 58% of the 45,500 ton increase in tubular sales volume. The increased shipping volume of mill reject pipe is due to improved demand and a concentrated effort to reduce the level of inventory.

~~Due to fluctuations in our customers’ needs, revenue related to the finishing of customer owned pipe decreased $827,256~~customers sold increasing from 144 in the 2018 period ~~compared~~ to ~~the 2017 period.~~

USS has been the primary supplier of new mill reject pipe to the Company. In March 2016, USS announced it was temporarily idling pipe production at its Lone Star Tubular Operations facility due to weak market conditions. In December 2016, USS announced plans to permanently idle its #1 pipe mill at the Lone Star facility. In May 2017, USS resumed production at its Lone Star facility’s #2 pipe mill. In February 2019, USS announced plans to restart its Lone Star facility’s #1 pipe mill early in their third quarter of 2019. The Company expects the volume and size range of new mill reject pipe supply from USS to be reduced while the Lone Star facility’s #1 pipe mill remains idle. USS is also a significant customer of the tubular segment’s pipe-finishing facility. Loss of USS as a supplier or customer could have a material adverse effect on the Company’s business. In general, the tubular segment purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.

During the 2018 period, general, selling and administrative costs increased $874,140 compared to the 2017 period. This increase was related primarily to increases in bonuses and commissions associated with the increased earnings and sales volume.

~~Income taxes~~163 in the ~~2018 period increased $1,133,567 from the amount recorded in the 2017~~2019 period. This increase was related primarily to the increase in earnings before taxes for the 2018 period compared to the 2017 period but partially offset due to effects of the Tax Cuts and Jobs Act (the “Tax Act”) that was enacted by the U.S. government on December 22, 2017. The Tax Act reduced the federal corporate tax rate applicable to the Company from 34% to 21% effective January 1, 2018.

~~Three Months Ended December 31, 201~~8 ~~Compared to Three Months Ended December 31, 201~~7

During the three months ended December 31, 2018 (the “2018 quarter”), sales, costs of goods sold and gross profit increased $15,292,559, $15,086,609 and $205,950, respectively, compared to the amounts recorded during the three months ended December 31, 2017 (the “2017 quarter”). The increase in sales was related to both an increase in tons sold and an increase in the average per ton selling price. Tons sold increased approximately 23% from approximately 42,000 tons in the 2017 quarter to approximately 51,500 tons in the 2018 quarter. Discussion of the sales improvement is expanded upon at the segment level in the following paragraphs. Gross profit as a percentage of sales decreased from approximately 6.2% in the 2017 quarter to approximately 4.5% in the 2018 quarter.

Coil product segment sales for the 2018 quarter totaled $28,730,992 compared to $22,409,571 for the 2017 quarter, representing a sales increase of $6,321,421 or approximately 28%. For a more complete understanding of the average selling prices of goods sold, it is helpful to isolate sales generated from processing of customer owned material and sales generated from coil segment inventory. Sales generated from processing of customer owned material totaled $305,289 for the 2018 quarter compared to $356,643 for the 2017 quarter. Sales generated from coil segment inventory totaled $28,425,703 for the 2018 quarter compared to $22,052,928 for the 2017 quarter. The increase in coil segment sales was driven by an increase in the average selling price per ton of material from inventory partially offset by a decrease in the volume of these shipments. The average per ton selling price related to these shipments increased from approximately $658 per ton in the 2017 quarter to approximately $905 per ton in the 2018 quarter. Inventory tons sold decreased from approximately 33,500 tons in the 2017 quarter to approximately 31,500 tons in the 2018 quarter. Coil segment operations recorded operating profits of approximately $744,000 and $1,233,000 in the 2018 and 2017 quarters, respectively.

The average selling price for the 2018 quarter was significantly higher than the 2017 quarter due to increased hot-rolled steel prices primarily associated with initial speculation and reaction to the U.S. government’s Section 232 steel trade actions and general steel industry and U.S. economic conditions. The price of hot-rolled steel increased steadily and significantly from the 2017 quarter and leading up to October 2018, the start of the 2018 quarter. During the 2018 quarter, hot-rolled steel prices decreased significantly and continued to decline into the Company’s fourth quarter. Management believes the decline in steel prices during the 2018 quarter was primarily associated with market participants managing inventory levels, temporary softness in the U.S. energy industry and uncertainty surrounding the volume and impact of foreign steel products at the start of 2019. As a result of the declining steel prices, the coil product segment experienced downward price pressure from its customers during the 2018 quarter. This downward price pressure combined with higher cost inventory making its way through cost of goods sold resulted in coil product segment margins contracting compared to the second quarter. Management expects further margin pressure in the fourth quarter due to steel prices continuing to decline during the first half of the fourth quarter. Around the start of February 2019, most domestic steel producers announced price increases for their products. Management believes the coil product segment’s margin compression will reverse if these price increases gain traction but the increases will take time to make their way through the supply chain to the consumers of the Company’s products. Management expects fourth quarter sales volume for the coil product segment to slightly exceed the third quarter volume.

The Company’s coil segment purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.

Tubular product segment sales for the ~~2018 quarter~~2019 period totaled ~~$14,595,088~~$31,518,282 compared to ~~$5,623,950~~$50,262,791 for the ~~2017 quarter,~~2018 period, representing a sales ~~increase~~decrease of ~~$8,971,138~~$18,744,509 or approximately ~~160%~~37%. For a more complete understanding of the average selling prices of goods sold, it is helpful to isolate sales generated from the finishing of customer owned pipe and sales generated from tubular segment inventory. ~~Sales generated~~The Company did not generate any sales from ~~finishing of customer owned pipe totaled $66,734 for~~ the ~~2018 quarter. There was no revenue generated from~~ finishing of customer owned pipe during the ~~2017 quarter.~~2019 period but generated sales of $837,000 for the 2018 period related to these services. Sales generated from tubular segment inventory totaled ~~$14,528,354~~$31,518,282 for the 2019 period compared to $49,425,791 for the 2018 quarter compared to $5,623,950 for the 2017 quarter. The increase in tubular segment sales was driven by an increase in tons shipped from inventory and an increase in the average selling price per ton for these shipments.period. Tons sold ~~increased~~decreased from approximately ~~8,500 tons in the 2017 quarter to approximately 20,000~~70,000 tons in the 2018 ~~quarter.~~period to approximately 42,000 tons in the 2019 period. The average per ton selling price related to these shipments increased from approximately ~~$648 per ton in the 2017 quarter to approximately $723~~$704 per ton in the 2018 ~~quarter.~~period to approximately $750 per ton in the 2019 period. Tubular segment operations recorded an operating loss of approximately $1,670,000 in the 2019 period and an operating profit of approximately ~~$650,000~~$4,348,000 in the 2018 ~~quarter and an operating loss of approximately $53,000 in the 2017 quarter.~~period.

~~Management believes~~Operating results for the ~~improved tubular results are primarily related to the sustained recovery of~~2019 period were negatively impacted by compressed margins associated with declining hot-rolled steel prices and softness in the U.S. energy ~~industry~~industry. In contrast, the 2018 period was positively impacted by strong margins associated with increasing steel prices and a stronger U.S. energy market. The average selling price for the tubular segment increased in the 2019 period due to a shift in the segment’s sales mix between mill reject pipe and the ~~segment’s new product offering of API line~~Company’s manufactured pipe. ~~Late in~~The average selling price associated with the ~~third quarter of fiscal 2018, TTP began actively producing, marketing and~~Company’s manufactured pipe is more than the average selling line pipe directly to distributors. Shipments of line pipe during the 2018 quarter totaled approximately 6,500 tons compared to approximately 2,000 tons in the 2017 quarter, accounting for approximately 39% of the 11,500 ton increase in total tubular sales volume. Management expects line pipe sales to be a significant component of total tubular segment sales moving forward.

price associated with mill reject pipe. Shipments of mill reject pipe ~~during~~decreased from approximately 38,000 tons in the 2018 ~~quarter totaled~~period to approximately ~~10,500~~13,500 tons ~~compared to 4,000 tons during~~in the ~~2017 quarter, accounting for approximately 57% of the 11,500 ton increase in total tubular sales volume.~~2019 period. The ~~increased~~higher shipping volume of mill reject pipe isin the 2018 period was due primarily to ~~improved demand and~~ a ~~concentrated~~strategic effort to reduce the level of ~~inventory.~~

Revenue related to the finishing of customer owned pipe was $66,734 for the 2018 quarter. No revenue was generated from the finishing of customer owned pipe during the 2017 quarter. For the fourth quarter, management expects a low level of activity similar to that of the third quarter. These revenues are generated at the Company’s pipe finishing facility that commenced operations in May 2017. The facility is designed to function optimally as a high volume processing facility with a small customer base. Operations at the facility have been sporadic as new customer relationships evolve and due to some fluctuation in the energy industry and the steel industry in general. In addition to cultivating existing customer relationships, management continues to seek additional customers that are a strategic fit for the facility. Management will continue to evaluate the long-term operating potential of the facility on a continual basis.

Compared to the second quarter, the tubular segment also experienced margin compression during the third quarter related to the decline in hot-rolled steel prices and higher cost inventory making its way through cost of goods sold. Management expects continued margin compression into the fourth quarter associated with these factors and additional pressure on selling prices due to an increased presence of foreign material associated with Section 232 quotas resetting at the start of 2019.

~~USS has been the primary supplier of new~~ mill reject pipe ~~to the Company. In March 2016, USS announced it was temporarily idling pipe production at its Lone Star Tubular Operations facility due to weak market conditions. In~~inventory. At December ~~2016, USS announced plans to permanently idle its #1 pipe mill at the Lone Star facility. In May 2017, USS resumed production at its Lone Star facility’s #2 pipe mill. In February~~31, 2019, ~~USS announced plans to restart its Lone Star facility’s #1 pipe mill early in their third quarter of 2019. The Company expects the volume and size range of new~~ mill reject pipe ~~supply~~inventory was at a desired level. Shipments of manufactured pipe decreased from ~~USS~~approximately 32,000 tons in the 2018 period to ~~be reduced while~~approximately 28,500 tons in the Lone Star facility’s #1 pipe mill remains idle. USS is also a significant customer of the tubular segment’s pipe-finishing facility. Loss of USS as a supplier or customer could have a material adverse effect on the2019 period.

The Company’s ~~business. In general, the~~ tubular segment purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.

During the 2019 period, general, selling and administrative costs decreased $173,649 compared to the 2018 period. This decrease was related primarily to decreases in bonuses and commissions associated with the decreased earnings.

Income taxes in the ~~2018 quarter~~2019 period decreased ~~$343,873~~$2,701,465 from the amount recorded in the ~~2017~~2018 period. This decrease was related primarily to the decrease in earnings before taxes for the 2019 period compared to the 2018 period.

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

During the three months ended December 31, 2019 (the “2019 quarter”), sales, costs of goods sold and gross profit decreased $15,175,263, $13,297,712 and $1,877,551, respectively, compared to the amounts recorded during the three months ended December 31, 2018 (the “2018 quarter”). The decrease in sales was related to both a decrease in tons sold and a decline in the average per ton selling price. Tons sold decreased approximately 12% from approximately 51,500 tons in the 2018 quarter to approximately 45,500 tons in the 2019 quarter. Discussion of the sales decline is expanded upon at the segment level in the following paragraphs. Gross profit as a percentage of sales decreased from approximately 4.5% in the 2018 quarter to approximately 0.2% in the 2019 quarter.

In the 2019 quarter, hot-rolled steel prices continued to decline until the end of October 2019 when domestic steel producers announced price increases and continued to increase prices throughout the remainder of the 2019 quarter. However, the Company continued to see downward sales price pressure and constrained margins throughout the 2019 quarter due to the time it takes for price changes to filter through the supply chain. In the 2018 quarter, hot-rolled steel prices started declining after a preceding period of approximately nine months where steel prices increased significantly. The 2018 quarter marked the start of a period of margin compression that would continue through the 2019 quarter.

Coil product segment sales for the 2019 quarter totaled $21,001,358 compared to $28,730,992 for the 2018 quarter, representing a sales decrease of $7,729,634 or approximately 27%. For a more complete understanding of the average selling prices of goods sold, it is helpful to isolate sales generated from processing of customer owned material and sales generated from coil segment inventory. Sales generated from processing of customer owned material totaled $185,870 for the 2019 quarter compared to $305,289 for the 2018 quarter. Sales generated from coil segment inventory totaled $20,815,488 for the 2019 quarter compared to $28,425,703 for the 2018 quarter. The decrease in coil segment sales was driven by a decrease in the average selling price per ton of material from inventory partially offset by an increase in the volume of these shipments. The average per ton selling price related to these shipments decreased from approximately $905 per ton in the 2018 quarter to approximately $600 per ton in the 2019 quarter. Inventory tons sold increased from approximately 31,500 tons in the 2018 quarter to approximately 34,500 tons in the 2019 quarter. Coil segment operations recorded an operating loss of approximately $93,000 in the 2019 quarter and an operating profit of approximately $744,000 in the 2018 quarter.

Operating results for the 2019 quarter were negatively impacted by the continued margin compression associated with the recent decline in hot-rolled steel prices. Operating results for the 2018 quarter were positively impacted by the lasting effect of a significant increase in hot-rolled steel prices leading up to the 2018 quarter. Sales volume improved due primarily to the number of customers sold increasing from 97 in the 2018 quarter to 114 in the 2019 quarter.

The Company’s coil segment purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.

Tubular product segment sales for the 2019 quarter totaled $7,149,459 compared to $14,595,088 for the 2018 quarter, representing a sales decrease of $7,445,629 or approximately 51%. For a more complete understanding of the average selling prices of goods sold, it is helpful to isolate sales generated from the finishing of customer owned pipe and sales generated from tubular segment inventory. The Company did not generate any sales from the finishing of customer owned pipe during the 2019 quarter but generated sales of $66,734 for the 2018 quarter related to these services. Sales generated from tubular segment inventory totaled $7,149,459 for the 2019 quarter compared to $14,528,354 for the 2018 quarter. The decrease in tubular segment sales was driven by a decrease in tons shipped from inventory and a decrease in the average selling price per ton for these shipments. Tons sold decreased from approximately 20,000 tons in the 2018 quarter to approximately 11,000 tons in the 2019 quarter. The average per ton selling price related to these shipments decreased from approximately $723 per ton in the 2018 quarter to approximately $646 per ton in the 2019 quarter. Tubular segment operations recorded an operating loss of approximately $468,000 in the 2019 quarter and an operating profit of approximately $650,000 in the 2018 quarter.

Operating results for the 2019 quarter were negatively impacted by compressed margins associated with the recent decline in hot-rolled steel prices and softness in the U.S. energy industry. In contrast, the 2018 quarter was positively impacted by stronger margins associated with the benefits of a significant increase in hot-rolled steel prices leading up to the 2018 quarter and a stronger U.S. energy industry. Shipments of mill reject pipe decreased from approximately 10,500 tons in the 2018 quarter to approximately 3,500 tons in the 2019 quarter. The higher shipping volume of mill reject pipe in the 2018 quarter was due primarily to a strategic effort to reduce the level of mill reject pipe inventory. At December 31, 2019, mill reject pipe inventory was at a desired level. Shipments of manufactured pipe declined from approximately 9,500 tons in the 2018 quarter to approximately 7,500 tons in the 2019 quarter due primarily to increased softness in the U.S. energy industry.

The Company’s tubular segment purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.

During the 2019 quarter, general, selling and administrative costs increased $146,293 compared to the 2018 quarter. This increase was related primarily to an increase in selling expenses primarily associated with the expansion of our sales force and an increase in corporate expenses primarily associated with the recognition of bad debt expense.

Income taxes in the 2019 quarter decreased $480,644 from the amount recorded in the 2018 quarter. This decrease was related primarily to the ~~2017 quarter containing the impact from re-measuring deferred tax assets and liabilities pursuant to the Tax Act enacted during the 2017 quarter. The~~ decrease is also associated with the Tax Act reducing the federal corporate tax rate applicable to the Company from 34% to 21% effective January 1, 2018. These circumstances contributing to decreased income taxes were partially offset by the increase in earnings before ~~tax~~taxes for the 2019 quarter compared to the 2018 quarter.

We believe the Company remained in a strong, liquid position at December 31, ~~2018.~~2019. The current ratio ~~of current assets to current liabilities~~ was ~~4.5 and 6.1~~5.4 at December 31, ~~2018~~2019 and 6.0 at March 31, ~~2018, respectively.~~2019. Working capital was ~~$62,024,110~~$56,420,996 at December 31, ~~2018~~2019 and ~~$56,238,771~~$62,091,305 at March 31, ~~2018.~~2019.

At December 31, ~~2018,~~2019, 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 ~~decreased~~increased primarily as a result of ~~the purchase of~~reductions in accounts receivable and inventory ~~the purchase of~~partially offset by expenditures for property, plant and equipment and the payment of cash dividends partially offset by net earnings and an increase in accounts payable. The balance of accounts payable and inventory rose considerably due to the volume and timing of inventory purchases for both the Company’s coil and tubular segments.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.

InThe Company commenced two capital expenditure projects during the December ~~2018,~~31, 2019 quarter. The first project is a building expansion at the Company’s ~~$7,500,000 revolving~~coil processing facility in Hickman, Arkansas. The project will add an additional 22,000 square feet of storage space to the facility. We expect that the additional space will facilitate efficiency and safety improvements and will provide necessary space for future growth. This project is estimated to be complete by April 2020 with an estimated cost of $1,100,000. The second project involves the installation of a stretcher leveler coil processing line at the Company’s coil processing facility in Decatur, Alabama. This equipment will replace the existing processing equipment that is currently present at the Decatur plant and will expand both the size range and grade of ~~credit facility expired~~material that Decatur is able to process. In relation to the current processing capabilities of the coil segment overall, the new equipment will increase the segment’s ability to process coils from up to 72” wide to up to 96” wide and will also allow for processing of higher strength grades than the segment’s current equipment is capable. The equipment is being constructed, fabricated and installed by Delta Steel Technologies. The Company ~~put into place a~~currently expects installation of the new equipment to begin in October 2020 and expects commercial use to begin in February 2021. The Company currently estimates the cost of this project to be $5,800,000. The expenditures related to both of these projects are reported as Construction in Progress on the Company’s Condensed Consolidated Balance Sheet.

On December 12, 2019, the Company’s $5,000,000 revolving line of credit facility (the “Credit Facility”) ~~that expires December 12, 2019. Access to~~expired and was not renewed. The Company did not have any borrowings outstanding under the Credit Facility at expiration and did not advance any funds under the Credit Facility is subject to a borrowing base requirement. The borrowing base is calculated as 80% of eligible tubular segment accounts receivable plus 40% of eligible tubular segment inventory. The total amount contributed toduring the ~~borrowing base by eligible inventory shall not exceed $3,000,000. At~~quarter ended December 31, 2018 and as of the filing date of this quarterly report on Form 10-Q, the borrowing base calculations would allow the Company access to the full $5,000,000 available under the Credit Facility. At December 31, 2018 and as of the filing date of this quarterly report on Form 10-Q, the Company had no borrowings outstanding under the Credit Facility. The Company was not in violation of any terms or covenants related to the Credit Facility as of the filing date of this quarterly report on Form 10-Q.2019.

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

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 determination of useful lives for fixed assets, ~~and the~~ determination of the allowance for doubtful ~~accounts.~~accounts and the determination of net realizable value relative to inventory. The determination of useful lives for depreciation of fixed assets requires the Company to make assumptions regarding the future productivity of the Company’s fixed assets. The allowance for doubtful accounts requires the Company to draw conclusions on the future collectability of the Company’s accounts receivable. The determination of net realizable value when reviewing inventory value requires the Company to makes assumptions concerning sales trends, customer demand and steel industry market conditions. Actual results could differ from these estimates.

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. Such statements may include those risks disclosed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this report. These forward-looking statements may include, but are not limited to, future changes in the Company’s financial condition or 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 (the “SEC”) under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including the Company’s Annual Report on Form 10-K and its other Quarterly Reports on Form 10-Q. ~~Forward-looking~~Forward looking statements include those preceded by, followed by or including the words “will,” “expect,” “intended,” “anticipated,” “believe,” “project,” “forecast,” “propose,” “plan,” “estimate,” “enable,” and similar expressions, including, for example, statements about our business strategy, our industry, our future profitability, growth in the industry sectors we serve, our expectations, beliefs, plans, strategies, objectives, prospects and assumptions, and estimates and projections of future activity and trends in the oil and natural gas industry. These forward-looking statements are not guarantees of future performance. These statements are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Although forward-looking statements reflect our current beliefs, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. 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 for and prices of the Company’s products, changes in government policy regarding steel, 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.~~changes in and availability of raw materials, our ability to satisfy our take or pay obligations under certain supply agreements, unplanned shutdowns of our production facilities due to equipment failures or other issues, increased competition from alternative materials and risks concerning innovation, new technologies, products and increasing customer requirements. Accordingly, undue reliance should not be placed on our ~~forward-looking~~forward looking statements. We undertake no obligation to publicly update or revise any ~~forward-looking~~forward looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except to the extent law requires.

The Company’s management, with the participation of the Company’s principal executive officer (“CEO”) and principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act), as of the end of the fiscal quarter ended December 31, ~~2018.~~2019. Based on this evaluation, the Company’s CEO and principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the fiscal quarter ended December 31, ~~2018~~2019 to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended December 31, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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


Part I — FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1011
Item 3. Quantitative and Qualitative Disclosures About Market Risk		1415
Item 4. Controls and Procedures		1415
Part II — OTHER INFORMATION		1516
Item 6. Exhibits		1516
SIGNATURES		1617

	Three months ended December 31,						Nine months ended December 31,						Three months ended December 31,						Nine months ended December 31,
	2018			2017 As Adjusted			2018			2017 As Adjusted			2019			2018			2019			2018
Net sales	$	43,326,080		$	28,033,521		$	144,951,427		$	77,194,500		$	28,150,817		$	43,326,080		$	109,121,717		$	144,951,427
Costs and expenses
Costs of goods sold		41,395,596			26,308,987			132,883,924			72,426,245			28,097,884			41,395,596			108,380,110			132,883,924
General, selling and administrative costs		1,054,100			999,220			3,836,279			2,962,139			1,200,393			1,054,100			3,662,630			3,836,279
Interest expense		1,792			8,451			17,545			8,451			2,463			1,792			2,463			17,545
		42,451,488			27,316,658			136,737,748			75,396,835			29,300,740			42,451,488			112,045,203			136,737,748
Interest and other income		(6,275	)		(4,375	)		(75,325	)		(13,125	)		(4,370	)		(6,275	)		(15,075	)		(75,325	)
Earnings before income taxes		880,867			721,238			8,289,004			1,810,790
Earnings (loss) before income taxes														(1,145,553	)		880,867			(2,908,411	)		8,289,004
Provision for (benefit from) income taxes:
Current		282,365			63,510			2,097,540			79,150			244,940			282,365			(49,584	)		2,097,540
Deferred		(66,271	)		496,457			(74,118	)		810,705			(509,490	)		(66,271	)		(628,459	)		(74,118	)
		216,094			559,967			2,023,422			889,855			(264,550	)		216,094			(678,043	)		2,023,422
Net earnings	$	664,773		$	161,271		$	6,265,582		$	920,935
Net earnings (loss)													$	(881,003	)	$	664,773		$	(2,230,368	)	$	6,265,582
Weighted average number of common shares outstanding:
Basic		7,009,444			7,009,444			7,009,444			7,009,444			6,999,444			7,009,444			6,999,444			7,009,444
Diluted		7,009,444			7,009,444			7,009,444			7,009,444			6,999,444			7,009,444			6,999,444			7,009,444
Net earnings per share:
Net earnings (loss) per share:
Basic	$	0.09		$	0.02		$	0.89		$	0.13		$	(0.13	)	$	0.09		$	(0.32	)	$	0.89
Diluted	$	0.09		$	0.02		$	0.89		$	0.13		$	(0.13	)	$	0.09		$	(0.32	)	$	0.89
Cash dividends declared per common share	$	0.06		$	0.01		$	0.15		$	0.03		$	0.02		$	0.06		$	0.08		$	0.15

	Nine Months Ended December 31						Nine Months Ended December 31
	2018			2017 As Adjusted			2019			2018
OPERATING ACTIVITIES
Net earnings	$	6,265,582		$	920,935
Adjustments to reconcile net earnings to cash used in operating activities:
Net earnings (loss)							$	(2,230,368	)	$	6,265,582
Adjustments to reconcile net earnings (loss) to cash provided by (used in) operating activities:
Depreciation		1,072,788			996,139			923,966			1,072,788
Deferred taxes		(74,118	)		810,705			(628,459	)		(74,118	)
Compensation expense for restricted stock		216,720			216,720			249,708			216,720
Provision for postretirement benefits		22,291			5,159
Change in postretirement benefits								8,215			22,291
Lower of cost or net realizable value inventory adjustment								955,605			—
Decrease (increase) in operating assets:
Accounts receivable, net		250,715			1,884,870			3,337,785			250,715
Inventories		(14,085,601	)		(11,939,413	)		12,562,592			(14,085,601	)
Federal income taxes recoverable		—			46,453
Other		(255,136	)		(267,036	)
Income taxes recoverable								(40,639	)		—
Other assets								(1,025,125	)		(255,136	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		6,494,080			4,571,796			567,114			6,494,080
Income taxes payable		175,845			32,698			(159,694	)		175,845
Contribution to retirement plan		155,000			120,000			149,750			155,000
Employee compensation and related expenses		(277,933	)		11,546			(42,617	)		(277,933	)
NET CASH USED IN OPERATING ACTIVITIES		(39,767	)		(2,589,428	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES								14,627,833			(39,767	)
INVESTING ACTIVITIES
Purchase of property, plant and equipment		(647,682	)		(275,056	)		(3,223,856	)		(647,682	)
Change in cash surrender value of officers’ life insurance		(18,825	)		(13,125	)		(13,110	)		(18,825	)
NET CASH USED IN INVESTING ACTIVITIES		(666,507	)		(288,181	)		(3,236,966	)		(666,507	)
FINANCING ACTIVITIES
Borrowings under revolving line of credit		—			3,750,000
Cash dividends paid		(771,039	)		(210,283	)		(699,945	)		(771,039	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(771,039	)		3,539,717
Cash paid for principal portion of finance lease								(24,760	)		—
NET CASH USED IN FINANCING ACTIVITIES								(724,705	)		(771,039	)
INCREASE (DECREASE) IN CASH		(1,477,313	)		662,108			10,666,162			(1,477,313	)
Cash at beginning of period		4,052,582			1,461,695			11,667,161			4,052,582
CASH AT END OF PERIOD	$	2,575,269		$	2,123,803		$	22,333,323		$	2,575,269

	December 31, 2018		March 31, 2018 As Adjusted		December 31, 2019		March 31, 2019
Segment assets
Coil	$	50,293	$	34,359	$	35,272	$	43,104
Tubular		40,708		43,010		26,354		31,520
		91,001		77,369		61,626		74,624
Corporate assets		2,859		4,284		22,604		11,978
	$	93,860	$	81,653	$	84,230	$	86,602

Exhibits

3.1	—	Articles of Incorporation of the Company, as amended (incorporated by reference from Exhibit 3.1 to the Company’s Form S-8 filed on December 21, 2016).

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 (incorporated by reference from Exhibit 3.1 to the Company’s Form S-8 filed on December 21, 2016).

3.3	—	Amended and Restated Bylaws of the Company (incorporated by reference from Exhibit 3.2 to the Company’s Form S-8 filed on December 21, 2016).

~~10.1~~	—	~~Revolving Line of Credit Loan Agreement, dated December 12, 2018 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 18, 2018).~~

~~10.2~~	—	~~Promissory Note, dated December 12, 2018 (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on December 18, 2018).~~

~~10.3~~	—	~~Commercial Security Agreement, dated December 12, 2018 (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on December 18, 2018).~~

31.1	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by ~~Robert Sparkman~~Michael J. Taylor

31.2	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Alex LaRue

32.1	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by ~~Robert Sparkman~~Michael J. Taylor

32.2	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Alex LaRue

101.INS	—	XBRL Instance Document

101.SCH	—	XBRL Taxonomy Schema Document

101.CAL	—	XBRL Calculation Linkbase Document

101.DEF	—	XBRL Definition Linkbase Document

101.LAB	—	XBRL Label Linkbase Document

101.PRE	—	XBRL Presentation Linkbase Document

	As Originally Reported			Effect of Change			As Adjusted
Consolidated Statement of Operations, Three Months Ended December 31, 2017
Cost of goods sold		26,364,387			(55,400	)		26,308,987
Income tax provision		542,909			17,058			559,967
Net earnings		122,929			38,342			161,271

Net earnings per share:
Basic		0.02			-			0.02
Diluted		0.02			-			0.02

Consolidated Statement of Operations, Nine Months Ended December 31, 2017
Cost of goods sold		72,884,773			(458,528	)		72,426,245
Income tax provision		748,674			141,181			889,855
Net earnings		603,588			317,347			920,935

Net earnings per share:
Basic		0.09			0.04			0.13
Diluted		0.09			0.04			0.13

Consolidated Statement of Cash Flows, Nine Months Ended December 31, 2017
Net earnings		603,588			317,347			920,935
Change in inventories		(11,480,885	)		(458,528	)		(11,939,413	)
Change in deferred income taxes		702,222			108,483			810,705
Change in income taxes payable		-			32,698			32,698

Consolidated Balance Sheet, as of March 31, 2018
Inventories		38,039,332			7,290,102			45,329,434
Deferred income tax liability		103,198			1,768,968			1,872,166
Retained earnings		31,190,246			5,521,134			36,711,380

	As Computed Under LIFO		As Computed Under Average Cost		Effect of Change
Consolidated Statement of Operations, Three Months Ended December 31, 2018
Earnings before income taxes		2,233,044		880,867		(1,352,177	)
Income tax provision		545,478		216,094		(329,384	)
Net earnings		1,687,567		664,773		(1,022,794	)

Net earnings per share:
Basic		0.24		0.09		(0.15	)
Diluted		0.24		0.09		(0.15	)

Consolidated Statement of Operations, Nine Months Ended December 31, 2018
Earnings before income taxes		5,782,409		8,289,004		2,506,595
Income tax provision		1,412,796		2,023,422		610,626
Net earnings		4,369,614		6,265,582		1,895,968

Net earnings per share:
Basic		0.62		0.89		0.27
Diluted		0.62		0.89		0.27

	Three Months Ended December 31, 2019		Nine Months Ended December 31, 2019
Finance lease – amortization of ROU asset	$	8,644	$	8,644
Finance lease – interest on lease liability		2,463		2,463
Operating lease expense		8,184		24,552
	$	19,291	$	35,659

	December 31, 2019		Balance Sheet Classification
Assets
Operating lease right-of-use asset	$	41,557	Other assets
Finance lease right-of-use asset	$	509,972	Property, plant & equipment, net
Total right-of-use assets	$	551,529

Liabilities
Operating lease liability, current	$	30,802	Accrued expenses
Finance lease liability, current		100,244	Current portion of finance lease
Operating lease liability, non-current		10,755	Other non-current liabilities
Finance lease liability, non-current		393,612	Other non-current liabilities
Total lease liabilities	$	535,413

	Operating Leases			Finance Leases
Fiscal 2020 (remainder of fiscal year)	$	8,184		$	27,222
Fiscal 2021		32,736			108,888
Fiscal 2022		2,728			108,888
Fiscal 2023		—			108,888
Fiscal 2024		—			108,888
Fiscal 2025		—			54,444
Total undiscounted lease payments	$	43,648		$	517,218
Less: imputed interest		(2,091	)		(23,362	)
Present value of lease liabilities	$	41,557		$	493,856

	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested at March 31, 2019		180,000	$	7.03
Cancelled or forfeited		—		—
Granted		20,000		7.62
Vested		—		—
Unvested at December 31, 2019		200,000	$	7.09

	Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings
BALANCE AT MARCH 31, 2019	$	8,205,160	$	29,322,472	$	(5,525,964	)	$	40,479,909
Net earnings		—		—		—			194,772
Issuance of restricted stock		20,000		—		—			—
Paid in capital – restricted stock awards		—		63,236		—			—
Cash dividends ($0.04 per share)		—		—		—			(279,978	)
BALANCE AT JUNE 30, 2019	$	8,225,160	$	29,385,708	$	(5,525,964	)	$	40,394,703
Net loss		—		—		—			(1,544,137	)
Paid in capital – restricted stock awards		—		83,236		—			—
Cash dividends ($0.02 per share)		—		—		—			(139,990	)
BALANCE AT SEPTEMBER 30, 2019	$	8,225,160	$	29,468,944	$	(5,525,964	)	$	38,710,576
Net loss		—		—		—			(881,003	)
Paid in capital – restricted stock awards		—		83,236		—			—
Cash dividends ($0.02 per share)		—		—		—			(139,993	)
BALANCE AT DECEMBER 31, 2019	$	8,225,160	$	29,552,180	$	(5,525,964	)	$	37,689,580


	FRIEDMAN INDUSTRIES, INCORPORATED

Date: February 14, ~~2019~~2020
	By	/s/ ALEX LARUE
		Alex LaRue, Chief Financial Officer – Secretary and Treasurer (Principal Financial Officer)