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SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2008 | |
OR | ||
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FROM THE TRANSITION PERIOD FROM TO |
COMMISSION FILE NUMBER 1-7521
FRIEDMAN INDUSTRIES, INCORPORATED
TEXAS (State or other jurisdiction of incorporation or organization) | 74-1504405 (I.R.S. Employer Identification Number) |
4001 HOMESTEAD ROAD, HOUSTON, TEXAS 77028-5585
(Address of principal executive office) (zip code)
Registrant’s telephone number, including area code (713) 672-9433
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yesþ | Noo |
Large accelerated filero | Accelerated filero | Non-accelerated filero | Smaller reporting companyþ | |||
(Do not check if a smaller reporting company) |
Yeso | Noþ |
At December 31, 2008, the number of shares outstanding of the issuer’s only class of stock was 6,799,444 shares of Common Stock.
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December 31, 2008 | March 31, 2008 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 9,489,475 | $ | 2,643,922 | ||||
Accounts receivable, net of allowances for bad debts and cash discounts of $37,276 at December 31 and March 31, 2008 | 14,514,867 | 16,742,000 | ||||||
Inventories | 28,091,915 | 29,900,327 | ||||||
Other | 479,701 | 136,345 | ||||||
TOTAL CURRENT ASSETS | 52,575,958 | 49,422,594 | ||||||
PROPERTY, PLANT AND EQUIPMENT: | ||||||||
Land | 1,082,331 | 1,082,331 | ||||||
Construction in progress | — | 8,706,172 | ||||||
Buildings and yard improvements | 7,000,838 | 3,494,294 | ||||||
Machinery and equipment | 29,082,540 | 21,879,259 | ||||||
Less accumulated depreciation | (19,574,683 | ) | (18,389,983 | ) | ||||
17,591,026 | 16,772,073 | |||||||
OTHER ASSETS: | ||||||||
Cash value of officers’ life insurance and other assets | 762,000 | 720,001 | ||||||
Deferred income taxes | — | 43,724 | ||||||
TOTAL ASSETS | $ | 70,928,984 | $ | 66,958,392 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 8,469,245 | $ | 13,499,314 | ||||
Current portion of long-term debt | 54,028 | 54,028 | ||||||
Dividends payable | 815,933 | 339,972 | ||||||
Income taxes payable | 2,424,769 | 70,069 | ||||||
Contribution to profit sharing plan | 275,500 | 259,500 | ||||||
Employee compensation and related expenses | 1,246,416 | 561,483 | ||||||
TOTAL CURRENT LIABILITIES | 13,285,891 | 14,784,366 | ||||||
LONG-TERM DEBT LESS CURRENT PORTION | 27,014 | 6,667,536 | ||||||
DEFERRED INCOME TAXES | 261,967 | — | ||||||
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS | 598,933 | 549,749 | ||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Common stock, par value $1: | ||||||||
Authorized shares — 10,000,000 | ||||||||
Issued shares — 7,975,160 at December 31 and March 31, 2008 | 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 December 31 and March 31, 2008) | (5,475,964 | ) | (5,475,964 | ) | ||||
Retained earnings | 25,252,309 | 13,453,871 | ||||||
TOTAL STOCKHOLDERS’ EQUITY | 56,755,179 | 44,956,741 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 70,928,984 | $ | 66,958,392 | ||||
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Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Net sales | $ | 56,182,665 | $ | 38,062,240 | $ | 186,855,501 | $ | 129,747,321 | ||||||||
Costs and expenses | ||||||||||||||||
Costs of goods sold | 47,775,322 | 36,092,428 | 160,237,068 | 121,575,529 | ||||||||||||
General, selling and administrative costs | 1,585,716 | 1,024,178 | 5,433,524 | 3,530,341 | ||||||||||||
Interest expense | — | — | 23,310 | 47,740 | ||||||||||||
49,361,038 | 37,116,606 | 165,693,902 | 125,153,610 | |||||||||||||
Interest and other income | (26,584 | ) | (65,875 | ) | (130,761 | ) | (163,175 | ) | ||||||||
Earnings before income taxes | 6,848,211 | 1,011,509 | 21,292,360 | 4,756,886 | ||||||||||||
Provision for income taxes: | ||||||||||||||||
Current | 2,192,149 | 317,913 | 7,012,409 | 1,523,175 | ||||||||||||
Deferred | 101,897 | 33,389 | 305,691 | 100,167 | ||||||||||||
2,294,046 | 351,302 | 7,318,100 | 1,623,342 | |||||||||||||
Net income | $ | 4,554,165 | $ | 660,207 | $ | 13,974,260 | $ | 3,133,544 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 6,799,444 | 6,712,108 | 6,799,444 | 6,712,108 | ||||||||||||
Diluted | 6,799,444 | 6,771,995 | 6,799,444 | 6,776,592 | ||||||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.67 | $ | 0.10 | $ | 2.06 | $ | 0.47 | ||||||||
Diluted | $ | 0.67 | $ | 0.10 | $ | 2.06 | $ | 0.46 | ||||||||
Cash dividends declared per common share | $ | 0.12 | $ | 0.06 | $ | 0.32 | $ | 0.22 |
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FRIEDMAN INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
Nine Months Ended | ||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 13,974,260 | $ | 3,133,544 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation | 1,184,701 | 847,200 | ||||||
Provision for deferred taxes | 305,691 | 100,167 | ||||||
Provision for postretirement benefits | 49,184 | 39,706 | ||||||
Decrease (increase) in operating assets: | ||||||||
Accounts receivable | 2,227,133 | 5,563,741 | ||||||
Inventories | 1,808,412 | 5,967,870 | ||||||
Prepaid federal income taxes | — | (424,739 | ) | |||||
Other | (343,356 | ) | (83,796 | ) | ||||
Increase (decrease) in operating liabilities: | ||||||||
Accounts payable and accrued expenses | (5,030,069 | ) | (9,049,723 | ) | ||||
Contribution to profit-sharing plan | 16,000 | (62,500 | ) | |||||
Employee compensation and related expenses | 684,933 | (168,507 | ) | |||||
Federal income taxes | 2,354,700 | (46,742 | ) | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 17,231,589 | 5,816,221 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchases of property, plant and equipment | (2,003,655 | ) | (3,921,132 | ) | ||||
Increase in cash value of officers’ life insurance and other assets | (41,999 | ) | (35,400 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (2,045,654 | ) | (3,956,532 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Cash dividends paid | (1,699,861 | ) | (1,610,907 | ) | ||||
Principal payments on notes payable and revolving credit facility | (6,640,521 | ) | (27,014 | ) | ||||
Long-term debt | — | 162,084 | ||||||
NET CASH USED IN FINANCING ACTIVITIES | (8,340,382 | ) | (1,475,837 | ) | ||||
INCREASE IN CASH AND CASH EQUIVALENTS | 6,845,553 | 383,852 | ||||||
Cash and cash equivalents at beginning of period | 2,643,922 | 1,039,030 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 9,489,475 | $ | 1,422,882 | ||||
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December 31, | March 31, | |||||||
2008 | 2008 | |||||||
Prime Coil Inventory | $ | 6,672,787 | $ | 8,121,728 | ||||
Non-Standard Coil Inventory | 228,802 | 918,334 | ||||||
Tubular Raw Material | 8,130,543 | 7,444,805 | ||||||
Tubular Finished Goods | 13,059,783 | 13,415,460 | ||||||
$ | 28,091,915 | $ | 29,900,327 | |||||
2008 | 2007 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Shares | Price | Shares | Price | |||||||||||||
Outstanding at beginning of quarter | — | — | 88,836 | $ | 2.33 | |||||||||||
Granted | — | — | — | — | ||||||||||||
Exercised | — | — | — | — | ||||||||||||
Canceled or expired | — | — | — | — | ||||||||||||
Outstanding at end of quarter | — | — | 88,836 | $ | 2.33 | |||||||||||
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2008 | 2007 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Shares | Price | Shares | Price | |||||||||||||
Exercisable at the end of the quarter | — | — | 88,836 | $ | 2.33 | |||||||||||
Weighted average fair value of options granted during the quarter | — | — | — | — |
Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||
Net Sales | ||||||||||||||||||
Coil | $ | 13,977 | $ | 19,204 | $ | 62,864 | $ | 59,854 | ||||||||||
Tubular | 42,206 | 18,858 | 123,992 | 69,893 | ||||||||||||||
Total net sales | $ | 56,183 | $ | 38,062 | $ | 186,856 | $ | 129,747 | ||||||||||
Operating profit (loss) | ||||||||||||||||||
Coil | $ | 1,188 | $ | 458 | $ | (559 | ) | $ | 1,938 | |||||||||
Tubular | 6,323 | 887 | 24,871 | 4,412 | ||||||||||||||
Total operating profit | 7,511 | 1,345 | 24,312 | 6,350 | ||||||||||||||
General corporate expenses | 690 | 399 | 3,128 | 1,708 | ||||||||||||||
Interest Expense | — | — | 23 | 48 | ||||||||||||||
Interest & other income | (27 | ) | (66 | ) | (131 | ) | (163 | ) | ||||||||||
Total earnings before taxes | $ | 6,848 | $ | 1,012 | $ | 21,292 | $ | 4,757 | ||||||||||
December 31, | March 31, | |||||||
2008 | 2008 | |||||||
(in thousands) | (in thousands) | |||||||
Segment assets | ||||||||
Coil | $ | 22,482 | $ | 29,469 | ||||
Tubular | 38,178 | 34,041 | ||||||
60,660 | 63,510 | |||||||
Corporate assets | 10,269 | 3,448 | ||||||
$ | 70,929 | $ | 66,958 | |||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Nine Months Ended December 31, 2008 Compared to Nine Months Ended December 31, 2007
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Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business the Company is exposed to market risks primarily from changes in the cost of steel in inventory and in interest rates. The Company closely monitors exposure to market risks and develops appropriate strategies to manage risk. With respect to steel purchases, there is no recognized market to purchase derivative financial instruments to reduce the inventory exposure risk on changing commodity prices. The exposure to market risk associated with interest rates relates primarily to debt. Recent debt balances are minimal and, as a result, direct exposure to interest rates changes is not significant.
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Date February 13, 2009 | FRIEDMAN INDUSTRIES, INCORPORATED | |||
By: | /s/ BEN HARPER | |||
Ben Harper. Senior Vice President-Finance | ||||
(Principal Financial and Accounting Officer) | ||||
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EXHIBIT INDEX
Exhibit No. | Description | |
Exhibit 10.1 | — Consulting agreement dated October 31, 2008, by and between Jack Friedman and Friedman Industries, Incorporated (incorporated by reference from Exhibit 10.1 to the Company’s current report on Form 8-K filed with the Commission on November 6, 2008). | |
Exhibit 31.1 | — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by William E. Crow | |
Exhibit 31.2 | — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper | |
Exhibit 32.1 | — Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by William E. Crow | |
Exhibit 32.2 | — Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by Ben Harper |