10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2018

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                     to                    

Commission File No. 1-7521

FRIEDMAN INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

Texas	74-1504405
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1121 Judson Road Suite 124, Longview, TX	75601
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (903) 758-3431

Securities registered pursuant to Section 12(b) of the Act:

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

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes           No     X    

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes           No     X    

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     X     No           

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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 and post such files).

Yes     X     No           

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

    X    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one):

Large accelerated filer  (  )	Accelerated filer  (  )	Non-accelerated filer  (  )	Smaller reporting company  (X)
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 Act).

Yes           No     X    

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of September 30, 2017 (computed by reference to the closing price on such date) was approximately $41,592,000.

The number of shares of the registrant’s Common Stock outstanding at June 28, 2018 was 7,009,444 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders of Friedman Industries, Incorporated for the fiscal year ended March 31, 2018 — Part II.

Proxy Statement for the 2018 Annual Meeting of Shareholders of Friedman Industries, Incorporated — Part III.

PART I

Item 1.   Business

Friedman Industries, Incorporated (the “Company”), a Texas corporation incorporated in 1965, is a manufacturer and processor of steel products and operates in two reportable segments; coil products and tubular products. Significant financial information relating to the Company’s business segments for the last two years is contained in Note 8 of the Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2018, which financial statements are incorporated herein by reference in Item 8 hereof.

Coil Products

The coil product segment consists of the operation of two hot-roll coil processing facilities; one in Hickman, Arkansas (“Hickman”) and the other in Decatur, Alabama (“Decatur”). 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.

The Hickman and Decatur facilities are substantially similar with respect to machinery, equipment and products produced. The Company makes shipments of coil products based on which facility offers the desired product or, if the product is available at both facilities, based on other factors, such as customer location, freight conditions and the ability of the facility to fulfill the order on a timely basis. Coil products are sold on a wholesale, rapid-delivery basis in competition with other processors of hot-rolled steel coils. Shipments are made via unaffiliated truckers or by rail.

The 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 Products

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 a 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.

TTP 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.

Marketing 

The following table sets forth the approximate percentage of total sales contributed by each group of products and services during each of the Company’s last two fiscal years:

Product and Service Groups	2018	2017
Coil Products	74%	83%
Tubular Products	26%	17%

Coil Products.  The Company sells coil products and processing services to approximately 165 customers located primarily in the midwestern, southwestern and southeastern regions of the United States. The Company’s principal customers for these products and services are steel distributors and customers manufacturing steel products such as steel buildings, railroad cars, barges, tanks and containers, trailers, component parts and other fabricated steel products. During the fiscal years ended March 31, 2018 and 2017, sales of coil products to Trinity Industries, Inc. accounted for approximately 16% and 28% of the Company’s total sales, respectively.

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The Company sells substantially all of its coil products through its own sales force. At March 31, 2018, the sales force was comprised of the Vice President – Coil Sales and three professional sales personnel. Sales personnel are paid on a salary and commission basis.

Tubular Products.  The Company sells its tubular products nationally to approximately 125 customers. The Company’s principal customers for these products are steel and pipe distributors. In fiscal years 2018 and 2017, no individual tubular customer accounted for 10% or more of the Company’s total sales.

The Company sells substantially all of its tubular products through its own sales force. At March 31, 2018, the sales force was comprised of the Vice President – Tubular Sales and two professional sales personnel. Sales personnel are paid on a salary and commission basis.

Competition

The Company is engaged in a non-seasonal, highly-competitive business. The Company competes with other processors of hot-rolled steel coils. The steel industry, in general, is characterized by a small number of extremely large companies dominating the bulk of the market and a large number of relatively small companies, such as the Company, competing for a limited share of such market.

The Company believes that, generally, its ability to compete is dependent upon its ability to offer products at prices competitive with or below those of other steel suppliers, as well as its ability to provide products meeting customer specifications on a rapid-delivery basis.

Employees

At March 31, 2018, the Company had 89 full-time employees and 2 part-time employees.

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Executive Officers of the Company

The following table sets forth as of March 31, 2018, for each executive officer of the Company, the name, age, officer positions and arrangements with other persons regarding his selection as an officer, if any, and the period during which such officer has served in such capacity:

Name	Age	Position, Offices with the Company and Other Arrangements, if any
Robert Sparkman	62	President and Chief Executive Officer since April 2017; formerly President and Chief Operating Officer since 2016; formerly Senior Vice President — Operations since 2015; formerly Vice President of Sales — Coil Division since 2002
Alex LaRue	32	Chief Financial Officer – Secretary and Treasurer since March 2018; formerly Vice President — Secretary and Treasurer since 2014; formerly Assistant Vice President — Secretary and Treasurer since 2013; formerly Controller — Texas Tubular Products since 2011

Item 1A.  Risk Factors

Not required.

Item 1B.  Unresolved Staff Comments

Not required.

Item 2.  Properties

The principal real properties of the Company are described in the following table:

Location	Approximate Size	Ownership
Lone Star, Texas
Plant — Texas Tubular Products	161,000 sq. feet	Owned(1)
Offices — Texas Tubular Products	12,200 sq. feet	Owned(1)
Land — Texas Tubular Products	122.4 acres	Owned(1)
Longview, Texas Offices	2,600 sq. feet	Leased(2)
Hickman, Arkansas
Plant and Warehouse — Coil Products	42,600 sq. feet	Owned(1)
Offices — Coil Products	2,500 sq. feet	Owned(1)
Land — Coil Products	26.2 acres	Owned(1)
Decatur, Alabama
Plant and Warehouse — Coil Products	48,000 sq. feet	Owned(1)
Offices — Coil Products	2,000 sq. feet	Owned(1)
Land — Coil Products	47.3 acres	Owned(1)

_______________

(1) All of the Company’s owned real properties, plants and offices are held in fee and are not subject to any mortgage or deed of trust.

(2) The office lease is with a non-affiliated party. The lease was scheduled to expire on April 30, 2018 but the Company executed a lease addendum to extend the term for an additional 36 months resulting in an amended expiration date of April 30, 2021. The lease requires a monthly rental payment by the Company of $2,728.

Item 3.  Legal Proceedings

The Company is a class member of steel antitrust class action litigation brought against certain steel manufacturers in the United States District Court for the Northern District of Illinois. The litigation was initiated by several complaints filed in September and October of 2008 alleging the defendants conspired, in violation of the U.S. antitrust laws, to restrict their output and therefore raise or fix the prices for steel products sold for delivery in the United States between April 1, 2005 and December 31, 2007. The plaintiffs sought monetary and other relief on behalf of themselves and the class. A portion of the defendants reached settlements in 2014 totaling $163,900,000 and the Company received settlement proceeds of $316,310 in fiscal 2016 related to this settlement. A settlement was reached with the remaining defendants in February 2017 totaling $30,000,000. Subsequent to March 31, 2018, the Company received settlement proceeds of $56,500. The Company does not expect to receive any additional proceeds from this legal matter.

The Company is not a party to, nor is its property the subject of, any other material pending legal proceedings.

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PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s Common Stock is traded principally on the NYSE – American (Symbol: FRD).

Reference is hereby made to the sections of the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2018, entitled “Description of Business — Range of High and Low Sales Prices of Common Stock” and “Description of Business — Cash Dividends Declared Per Share of Common Stock”, which sections are hereby incorporated herein by reference.

The approximate number of shareholders of record of Common Stock of the Company as of May 25, 2018 was 205. Because many of the Company’s common shares are held by brokers and other institutions on behalf of shareholders, the Company is unable to estimate the total number of individual shareholders represented by these record holders.

Item 6.  Selected Financial Data

Not required.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information with respect to Item 7 is hereby incorporated herein by reference from the section of the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2018, entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

Not required.

Item 8.  Financial Statements and Supplementary Data

The following financial statements and notes thereto of the Company included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2018, are hereby incorporated herein by reference:

Consolidated Balance Sheets — March 31, 2018 and 2017

Consolidated Statements of Operations — Years ended March 31, 2018 and 2017

Consolidated Statements of Stockholders’ Equity — Years ended March 31, 2018 and 2017

Consolidated Statements of Cash Flows — Years ended March 31, 2018 and 2017

Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms

Information with respect to supplementary financial information relating to the Company appears in Note 9 — Summary of Quarterly Results of Operations (Unaudited) of the Notes to Consolidated Financial Statements incorporated herein by reference above in this Item 8 from the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2018.

The following supplementary schedule for the Company for the year ended March 31, 2018, is included elsewhere in this report:

Schedule II — Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulation of the U.S. Securities and Exchange Commission (the “SEC”) are not required under the related instructions or are inapplicable and, therefore, have been omitted.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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Item 9A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and principal financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective 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.

Internal Control Over Financial Reporting

Management’s report on internal control over financial reporting appears on page 20 of the Company’s Annual Report to Shareholders for the year ended March 31, 2018, which is incorporated herein by reference. This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

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

Item 9B.  Other Information

None.

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PART III

Item 10.  Directors, Executive Officers and Corporate Governance

Except as otherwise set forth below, information with respect to Item 10 is hereby incorporated herein by reference from the Company’s proxy statement in respect of the 2018 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the SEC on or before 120 days after the end of the Company’s 2018 fiscal year.

Information with respect to Item 10 regarding executive officers is hereby incorporated by reference from the information set forth under the caption “Executive Officers of the Company” in Item 1 of this Annual Report on Form 10-K.

The Company has adopted the Friedman Industries, Incorporated Code of Conduct and Ethics (the “Code”), which applies to the Company’s employees, directors and officers, including its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. A copy of the Code is filed as an exhibit hereto.

Item 11.  Executive Compensation

Information with respect to Item 11 is hereby incorporated herein by reference from the Company’s proxy statement in respect of the 2018 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the SEC on or before 120 days after the end of the Company’s 2018 fiscal year.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

The disclosure required pursuant to Item 201(d) of Regulation S-K is hereby incorporated herein by reference from the Company’s proxy statement in respect of the 2018 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the SEC on or before 120 days after the end of the Company’s 2018 fiscal year.

Additional information with respect to Item 12 regarding equity compensation plan information relating to the Company is hereby incorporated herein by reference from Note 2 — Equity Compensation Plans and Capital Stock included in the Notes to Consolidated Financial Statements of the Company included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2018.

Security Ownership Information

The additional information with respect to Item 12 regarding the security ownership of certain beneficial owners and management, and related matters, is hereby incorporated herein by reference from the Company’s proxy statement in respect to the 2018 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the SEC on or before 120 days after the end of the Company’s 2018 fiscal year.

Item 13.  Certain Relationships, Related Transactions and Director Independence

Information with respect to Item 13 is hereby incorporated herein by reference from the Company’s proxy statement in respect of the 2018 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the SEC on or before 120 days after the end of the Company’s 2018 fiscal year.

Item 14.  Principal Accountant Fees and Services

Information with respect to Item 14 is hereby incorporated herein by reference from the Company’s proxy statement in respect of the 2018 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the SEC on or before 120 days after the end of the Company’s 2018 fiscal year.

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PART IV 

Item 15.  Exhibits and Financial Statement Schedules

(a) Documents included in this report

1. Financial Statements

The following financial statements and notes thereto of the Company are included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2018, which is incorporated herein by reference:

Consolidated Balance Sheets — March 31, 2018 and 2017

Consolidated Statements of Operations — Years ended March 31, 2018 and 2017

Consolidated Statements of Stockholders’ Equity — Years end March 31, 2018 and 2017

Consolidated Statements of Cash Flows — Years ended March 31, 2018 and 2017

Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms

2.  Financial Statement Schedules

The following financial statement schedule of the Company is included in this report at page S-1:

Schedule II — Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and, therefore, have been omitted.

3.  Exhibits

Exhibit No.		Description
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 11, 2017 (incorporated by reference    from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 15, 2017).
10.2	—	Promissory Note, dated December 11, 2017 (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on December 15, 2017).
10.3	—	Commercial Security Agreement, dated December 11, 2017 (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on December 15, 2017).
**13.1	—	The Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2018.
**14.1	—	Friedman Industries, Incorporated Code of Conduct and Ethics.
**21.1	—	List of Subsidiaries.
**23.1	—	Consent of Moss Adams LLP.
**23.2	—	Consent of Hein & Associates LLP.
**31.1	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Robert Sparkman.
**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.

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Exhibit No.		Description
**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.

_______________

** Filed herewith.

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SIGNATURES 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Friedman Industries, Incorporated has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRIEDMAN INDUSTRIES, INCORPORATED
By:	/S/    ROBERT SPARKMAN
	Robert Sparkman
	President and Chief Executive Officer
Dated: June 28, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Friedman Industries, Incorporated in the capacities and on the dates indicated.

Signature	Title	Date
/S/    ROBERT SPARKMAN	President and Chief Executive Officer and Director (Principal Executive Officer)	June 28, 2018
Robert Sparkman
/S/    ALEX LARUE	Chief Financial Officer — Secretary and Treasurer (Principal Financial Officer)	June 28, 2018
Alex LaRue
/S/    DURGA D. AGRAWAL	Director	June 28, 2018
Durga D. Agrawal
/S/    CHARLES W. HALL	Director	June 28, 2018
Charles W. Hall
/S/    MAX REICHENTHAL	Director	June 28, 2018
Max Reichenthal
/S/    JOEL SPIRA	Director	June 28, 2018
Joel Spira
/S/    MIKE TAYLOR	Director	June 28, 2018
Mike Taylor
/S/    JOE L. WILLIAMS	Director	June 28, 2018
Joe L. Williams

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SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

FRIEDMAN INDUSTRIES, INCORPORATED

Column A	Column B		Column C				Column D		Column E
			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts— Describe(A)		Deductions— Describe(B)		Balance at End of Period
Year ended March 31, 2018
Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account)	$	27,276	$	—	$	425,140	$	431,364	$	21,052
Year ended March 31, 2017
Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account)	$	22,276	$	—	$	307,932	$	302,932	$	27,276

________________

(A) Cash discounts allowed on sales and charged against revenue.

(B) Accounts receivable written off of $1,224 and $0 and cash discounts taken on sales of $430,140 and $302,932 during fiscal years 2018 and 2017, respectively.

S-1

EX-13.1

EXHIBIT 13.1

THE COMPANY’S ANNUAL

REPORT TO SHAREHOLDERS FOR

THE FISCAL YEAR ENDED MARCH 31, 2018

2018

ANNUAL REPORT

FINANCIAL HIGHLIGHTS
		2018		2017
	Net sales	$	121,157,278	$	77,756,055
	Net earnings (loss)	$	2,759,404	$	(2,678,684	)
	Net earnings (loss) per share (Basic)	$	0.39	$	(0.39	)
	Cash dividends per share	$	0.05	$	0.04
	Stockholders’ equity	$	63,054,315	$	60,356,425
	Working capital	$	48,948,669	$	43,076,246

TO OUR SHAREHOLDERS:

Having survived one of the most severe downturns in the energy markets in recent years, the Company emerged from a challenging year in fiscal 2017 and rebounded to produce earnings of $2,759,404 on sales of $121,157,278 for fiscal year 2018. This compares to fiscal year 2017 which produced sales of $77,756,055 and a net loss of $2,678,684.

The Company’s coil segment experienced increased demand for its products throughout fiscal 2018 with a more notable increase during the fourth quarter driven by reactions to the Section 232 steel trade actions. Coil segment sales volume increased 19% in fiscal 2018 compared to fiscal 2017 and the segment’s operating results improved from an operating loss of $770,091 for fiscal 2017 to an operating profit of $4,026,329 for fiscal 2018.

The Company’s tubular segment experienced significant demand improvements during fiscal 2018 driven by sustained recovery of the U.S. energy industry and reactions to the Section 232 steel trade actions. The tubular segment was able to participate in the improved energy market through the completion of our pipe-finishing facility and entry into the API line pipe business during fiscal 2018. Tubular segment sales volume increased 98% in fiscal 2018 compared to fiscal 2017 and the segment’s operating results improved from an operating loss of $1,438,088 for fiscal 2017 to an operating profit of $2,024,035 for fiscal 2018.

The Company’s strong working capital position along with management’s focus on managing operational requirements in changing market conditions should allow the Company to thrive if the market remains healthy.

You are invited to attend the Annual Meeting of Shareholders scheduled to start at 10:00 a.m. (Central Time) on Thursday, August 30, 2018, in the offices of Norton Rose Fulbright US LLP, 1301 McKinney, 51^st Floor, Houston, Texas 77010.

Sincerely,

Robert Sparkman

President and Chief Executive Officer

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OFFICERS

Robert Sparkman

President and Chief Executive Officer

Howard Henderson

Vice President of Operations — Texas Tubular Division

Jonathan Holcomb

Vice President of Sales — Coil Divisions

Alex LaRue

Chief Financial Officer — Secretary and Treasurer

Robert McCain

Vice President — Decatur Facility

Dale Ray

Vice President

Steve Teeter

Vice President — Hickman Facility

Michael Thompson 

Vice President of Sales — Tubular Division

Charles W. Hall

Assistant Secretary

COMPANY OFFICES AND WEB SITES

    CORPORATE OFFICE & COIL PRODUCTS SALES OFFICE

    1121 Judson Road, Suite 124

    Longview, Texas 75601

    903-758-3431

    TUBULAR PRODUCTS SALES OFFICE

    3681 FM 250

    Lone Star, Texas 75668

    903-639-2511

    WEB SITES

    www.friedmanindustries.com

    www.texastubular.com 

COUNSEL

Norton Rose Fulbright US LLP

1301 McKinney, Suite 5100

Houston, Texas 77010

AUDITORS

Moss Adams LLP

500 Dallas Street, Suite 2500

Houston, TX 77002

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

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DIRECTORS 

Durga D. Agrawal

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

Houston, Texas

Charles W. Hall

Norton Rose Fulbright US LLP (law firm)

Houston, Texas

Max Reichenthal

President, Texas Iron and Metal (steel product sales)

Houston, Texas

Robert Sparkman

President and Chief Executive Officer of the Company

Longview, Texas

Joel Spira

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

Houston, Texas

Mike Taylor, Chairman of the Board

Retired; formerly, President, Cargill Metals Supply Chain (steel processing and distribution)

Houston, Texas 

Joe L. Williams

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

Houston, Texas

ANNUAL REPORT ON FORM 10-K

Shareholders may obtain without charge a copy of the Company’s Annual Report on Form 10-K for the year ended March 31, 2018 as filed with the U.S. Securities and Exchange Commission. Written requests should be addressed to: Alex LaRue, Chief Financial Officer — Secretary and Treasurer, Friedman Industries, Incorporated, P.O. Box 2192, Longview, Texas 75606.

3

DESCRIPTION OF BUSINESS

Friedman Industries, Incorporated (the “Company”) is a manufacturer and processor of steel products and operates in two product segments: coil products and tubular products.

Coil Products

The coil product segment consists of the operation of two hot-roll coil processing facilities; one in Hickman, Arkansas (“Hickman”) and the other in Decatur, Alabama (“Decatur”). 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.

The Hickman and Decatur facilities are substantially similar with respect to machinery, equipment and products produced. The Company makes shipments of coil products based on which facility offers the desired product or, if the product is available at both facilities, based on other factors, such as customer location, freight conditions and the ability of the facility to fulfill the order on a timely basis. Coil products are sold on a wholesale, rapid-delivery basis in competition with other processors of hot-rolled steel coils. Shipments are made via unaffiliated truckers or by rail.

The coil product 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.

The Company sells coil products and processing services to approximately 165 customers located primarily in the midwestern, southwestern and southeastern regions of the United States. The Company’s principal customers for these products and services are steel distributors and customers manufacturing steel products such as steel buildings, railroad cars, barges, tanks and containers, trailers, component parts and other fabricated steel products.

Tubular Products

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 a 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.

The Company sells its tubular products nationally to approximately 125 customers. The Company’s principal customers for these products are steel and pipe distributors.

TTP 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.

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

RANGE OF HIGH AND LOW SALES PRICES OF COMMON STOCK

	Fiscal 2018				Fiscal 2017
	High		Low		High		Low
First Quarter	$	6.80	$	5.05	$	6.24	$	5.33
Second Quarter		6.15		5.18		5.93		5.22
Third Quarter		6.22		5.15		6.78		4.99
Fourth Quarter		6.79		5.24		7.27		6.11

4

CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK

	Fiscal 2018		Fiscal 2017
First Quarter	$	.01	$	.01
Second Quarter		.01		.01
Third Quarter		.01		.01
Fourth Quarter		.02		.01

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

The approximate number of shareholders of record of Common Stock of the Company as of May 25, 2018 was 205. Because many of the Company’s common shares are held by brokers and other institutions on behalf of shareholders, the Company is unable to estimate the total number of individual shareholders represented by these record holders. 

5

CONSOLIDATED BALANCE SHEETS

ASSETS

	March 31
	2018			2017
CURRENT ASSETS:
Cash	$	4,052,582		$	1,461,695
Accounts receivable, net of allowances for bad debts and cash discounts of $21,052 and $27,276 at March 31, 2018 and 2017, respectively		17,458,289			8,939,051
Inventories		38,039,332			34,918,550
Other		429,101			113,540
TOTAL CURRENT ASSETS		59,979,304			45,432,836
PROPERTY, PLANT AND EQUIPMENT:
Land		1,452,799			1,082,331
Buildings and yard improvements		8,710,958			7,111,735
Machinery and equipment		39,282,944			31,451,479
Construction in progress		—			9,451,972
Less accumulated depreciation		(35,280,700	)		(33,924,353	)
		14,166,001			15,173,164
OTHER ASSETS:
Deferred income tax asset		—			1,165,950
Federal income taxes recoverable		—			913,347
Cash value of officers’ life insurance and other assets		217,900			578,000
TOTAL ASSETS	$	74,363,205		$	63,263,297

LIABILITIES AND STOCKHOLDERS’ EQUITY  

	March 31
	2018			2017
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	10,233,431		$	2,003,661
Dividends payable		140,189			70,094
Contribution to retirement plan		45,000			42,000
Employee compensation and related expenses		612,015			240,835
TOTAL CURRENT LIABILITIES		11,030,635			2,356,590
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS		175,056			550,282
DEFERRED INCOME TAX LIABILITY		103,198			—
TOTAL LIABILITIES		11,308,889			2,906,872
COMMITMENTS AND CONTINGENCIES (SEE NOTE 4 AND NOTE 7)
STOCKHOLDERS’ EQUITY:
Common stock, par value $1:
Authorized shares — 10,000,000
Issued shares — 8,185,160 at March 31, 2018 and 2017		8,185,160			8,185,160
Additional paid-in capital		29,154,874			28,865,914
Treasury stock at cost (1,175,716 shares at March 31, 2018 and 2017)		(5,475,964	)		(5,475,964	)
Retained earnings		31,190,246			28,781,315
TOTAL STOCKHOLDERS’ EQUITY		63,054,316			60,356,425
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	74,363,205		$	63,263,297

See accompanying notes.

6

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended March 31
	2018		2017
Net sales	$	121,157,278	$	77,756,055
Costs and expenses:
Cost of products sold		112,905,381		77,947,677
Selling, general and administrative		4,181,657		4,018,199
Interest expense		27,846		—
		117,114,884		81,965,876
EARNINGS (LOSS) FROM OPERATIONS		4,042,394		(4,209,821	)
Interest and other income		24,900		59,005
EARNINGS (LOSS) BEFORE INCOME TAXES		4,067,294		(4,150,816	)
Provision for (benefit from) income taxes:
Current		38,742		(714,684	)
Deferred		1,269,148		(757,448	)
		1,307,890		(1,472,132	)
NET EARNINGS (LOSS)	$	2,759,404	$	(2,678,684	)
Weighted average number of common shares outstanding:
Basic		7,009,444		6,851,944
Diluted		7,009,444		6,851,944
Net earnings (loss) per share:
Basic	$	0.39	$	(0.39	)
Diluted	$	0.39	$	(0.39	)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings
BALANCE AT MARCH 31, 2016		7,975,160		29,003,674			(5,475,964	)		31,736,177
Net loss		—		—			—			(2,678,684	)
Issuance of restricted stock		210,000		(137,760	)		—			—
Cash dividends ($0.04 per share)		—		—			—			(276,178	)
BALANCE AT MARCH 31, 2017	$	8,185,160	$	28,865,914		$	(5,475,964	)	$	28,781,315
Net earnings		—		—			—			2,759,404
Paid in capital – restricted stock awards		—		288,960			—			—
Cash dividends ($0.05 per share)		—		—			—			(350,473	)
BALANCE AT MARCH 31, 2018	$	8,185,160	$	29,154,874		$	(5,475,964	)	$	31,190,246

See accompanying notes.

7

CONSOLIDATED STATEMENTS OF CASH FLOWS 

	Year Ended March 31
	2018			2017
OPERATING ACTIVITIES
Net earnings (loss)	$	2,759,404		$	(2,678,684	)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Depreciation		1,356,347			1,594,406
Deferred taxes		1,269,148			(757,448	)
Compensation expense for restricted stock		288,960			72,240
Change in post-retirement benefits other than pensions		9,774			57,682
Changes in operating assets and liabilities:
Accounts receivable, net		(8,519,238	)		(4,116,665	)
Inventories		(3,120,782	)		7,020,578
Federal income taxes recoverable		913,347			(913,347	)
Other		(315,561	)		29,840
Accounts payable and accrued expenses		8,229,770			(473,038	)
Employee compensation and related expenses		371,180			(36,722	)
Contribution to retirement plan		3,000			(1,500	)
Net cash provided by (used in) operating activities		3,245,349			(202,658	)
INVESTING ACTIVITIES
Purchase of property, plant and equipment		(349,184	)		(799,331	)
Increase in cash value of officers’ life insurance		(24,900	)		(59,000	)
Net cash used in investing activities		(374,084	)		(858,331	)
FINANCING ACTIVITIES
Cash dividends paid		(280,378	)		(274,078	)
Net cash used in financing activities		(280,378	)		(274,078	)
Increase (decrease) in cash		2,590,887			(1,335,067	)
Cash at beginning of year		1,461,695			2,796,762
Cash at end of year	$	4,052,582		$	1,461,695

See accompanying notes.

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION:    The consolidated financial statements include the accounts of Friedman Industries, Incorporated and its subsidiary (collectively, the “Company”). All material intercompany amounts and transactions have been eliminated.

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

TRADE RECEIVABLES:    The Company’s receivables are recorded when billed, advanced or accrued and represent claims against third parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts and cash discounts allowed, represents their estimated net realizable value. The Company estimates its allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables and existing economic conditions. Trade receivables are generally considered past due after 30 days from invoice date. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. The balance of the Company’s allowance for doubtful accounts was $6,052 and $7,276 at March 31, 2018 and March 31, 2017, respectively.

INVENTORIES:    Inventories consist of prime coil, non-standard coil and tubular materials. Prime coil and non-standard coil inventories consist primarily of raw materials and tubular inventory consists of both raw materials and finished goods. Cost for prime coil inventory is determined under the last-in, first-out (“LIFO”) method. The Company’s LIFO reserve was approximately $7,290,000 and $5,593,000 at March 31, 2018 and 2017, respectively. The LIFO reserve signifies the difference between LIFO value used for financial reporting and the value under weighted average cost used for the Company’s internal perpetual inventory records. During fiscal 2018 LIFO inventory was partially liquidated. The historical cost associated with the liquidated layers approximated the current fiscal 2018 costs resulting in an immaterial impact to fiscal 2018 results. Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the weighted average method. LIFO inventories are valued at the lower of cost or market. All other inventories are valued at the lower of cost or net realizable value. Obsolete or slow-moving inventories are not significant based on the Company’s review of inventories. Accordingly, no allowance has been provided for such items.

The following is a summary of inventory by product group:

	March 31
	2018		2017
Prime coil inventory	$	6,895,756	$	8,481,605
Non-standard coil inventory		2,971,324		1,119,170
Tubular raw material		6,734,076		1,480,730
Tubular finished goods		21,438,176		23,837,045
	$	38,039,332	$	34,918,550

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 March 31, 2018, the Company carried quantities of mill reject pipe on hand that exceeded the fiscal 2018 sales volume. Based on improved market conditions and overall economic conditions as well as recent sales trends, the Company reasonably expects the inventory to be either sold in its entirety or at least a substantial portion thereof during the ensuing fiscal year, hence current classification of this inventory on the Company’s balance sheet. The Company’s projections are subject to significant estimates which may be different from actual results.

Effective April 1, 2018, the Company will be changing from the LIFO method to the average cost method for valuation of prime coil inventory. The Company believes this change will result in financial reporting that more closely aligns with the substance of our business. The Company expects to report this change through retrospective application of the new accounting principle to all prior periods presented starting with the Form 10-Q to be filed for the quarter ended June 30, 2018. The Company has not yet fully quantified the impact of this accounting change but expects a material impact to the consolidated financial statements upon adoption and thereafter.

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

Buildings (in years)			20
Machinery and equipment (in years)	10	to	15
Yard improvements (in years)	5	to	15
Loaders and other rolling stock (in years)	5	to	10

9

During the quarter ended June 30, 2017, the Company determined that the economic useful lives of certain fixed assets at the Decatur, Alabama coil processing facility were greater than the useful lives used to calculate depreciation. As a result, effective April 1, 2017, the Company revised the useful lives of these assets resulting in a decrease in depreciation expense of approximately $640,000, an increase in net earnings of approximately $406,000 and an increase in diluted earnings per share of approximately $0.06 for fiscal 2018.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The Company assesses recoverability by comparing the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset’s carrying amount exceeds its fair value. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. No impairments were necessary at March 31, 2018 or 2017.

Maintenance and repairs are expensed as incurred.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:    The Company maintains life insurance policies on each officer. From time to time and in its discretion, the Board of Directors of the Company has approved the transfer of the applicable policy to an officer upon their retirement. The Company’s accrued liability for these potential future transfers was $175,056 and $550,282 at March 31, 2018 and March 31, 2017, respectively. The transfer of a life insurance policy to an officer is a noncash transaction.

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

SUPPLEMENTAL CASH FLOW INFORMATION:    The Company paid interest of approximately $27,900 in fiscal 2018 and paid no interest in fiscal 2017. Net of taxes paid, the Company received federal and state tax refunds totaling approximately $959,000 in fiscal 2018. The Company paid income taxes of approximately $13,500 in fiscal 2017. Noncash financing activity consisted of accrued dividends of $140,189 and $70,094 in fiscal 2018 and 2017, respectively. There were noncash transactions of $385,000 and $293,000 in fiscal 2018 and 2017, respectively, for the transfer of ownership of life insurance policies from the Company to officers upon their retirement.

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

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

USE OF ESTIMATES:    The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates that are subject to the Company’s assumptions include valuation of LIFO inventories in the Company’s quarterly reporting, determination of useful lives for fixed assets and determination of the allowance for doubtful accounts. Valuation of LIFO inventories in the Company’s quarterly reporting requires estimates of the year end quantities, which is inherently difficult. 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. Actual results could differ from these estimates.

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

EARNINGS PER SHARE:   The Company uses the two-class method of calculating earnings per share, which determines earnings per share for each class of common stock and participating security as if all earnings of the period had been distributed. As the holders of restricted stock are entitled to vote and receive dividends during the restriction period, unvested shares of restricted stock qualify as participating securities. Unvested restricted shares participate on an equal basis with common shares; therefore, there is no difference in undistributed earnings allocated to each participating security. Accordingly, unvested restricted shares are included in the basic computation of earnings per share. Net income per basic common share is computed using the weighted average number of common shares and participating securities outstanding during the period. Net income per diluted common share is computed using the weighted average number of common shares, participating securities and potential common shares outstanding during the period.

10

ECONOMIC RELATIONSHIP:    The Company purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company. Coil segment sales to Trinity Industries, Inc. accounted for approximately 16% and 28% of total Company sales in fiscal 2018 and 2017, respectively. No other customers accounted for 10% or more of total sales in the two years ended March 31, 2018. Loss of Trinity as a customer could have a material adverse effect on the Company’s business.

The Company’s sales are concentrated primarily in the midwestern, southwestern, and southeastern regions of the United States and are primarily to customers in the steel distributing and fabricating industries. The Company performs periodic credit evaluations of the financial conditions of its customers and generally does not require collateral. Generally, receivables are due within 30 days.

NEW ACCOUNTING PRONOUNCEMENTS:   There were no new accounting standards adopted by the Company during fiscal 2018.

In the fourth quarter of fiscal 2017, the Company adopted Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (“ASU 2016-09”). ASU 2016-09 provided new accounting guidance that amends the accounting for employee share-based payment transactions. This new standard requires income statement recognition of all tax effects, including all excess tax benefits and tax deficiencies, resulting from the settlement of share-based awards in the reporting period in which they occur. The standard also requires that all tax-related cash flows resulting from share-based payments, including the excess tax benefits and tax deficiencies related to the settlement of stock-based awards, be classified as cash flows from operating activities, and that cash paid by directly withholding shares for tax purposes be classified as a financing activity in the statement of cash flows. The standard also allows companies to make an accounting policy election to either estimate the number of awards that are expected to vest, consistent with current guidance, or account for forfeitures as they occur. The Company elected to account for forfeitures as they occur. All aspects of this guidance has been applied prospectively for the Company beginning on January 1, 2017 given that the Company had no outstanding equity based compensation as of January 1, 2017. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements for fiscal 2018 or fiscal 2017.

In August 2016, the Financial Accounting Standards Board (“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. This new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact that adoption of the provisions of ASU 2016-15 will have on its consolidated financial statements but does not expect a material impact.

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

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 states that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The update supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 was initially effective for interim and annual periods beginning after December 15, 2016 and early application was not permitted. In August 2015, the FASB issued Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period, and only permits entities to adopt the standard one year earlier as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. According to the deferred effective date, the new revenue standard will become effective for the Company’s fiscal year beginning April 1, 2018. The Company has reviewed its significant customer contracts according to the revenue recognition process prescribed by the new standard. The standard allows the choice of two adoption methods, full retrospective adoption or modified retrospective adoption. 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 will be presented under the new standard, while prior period amounts won’t be adjusted and will be reported in accordance with historic accounting under the prior guidance. The Company doesn’t expect adoption of the new standard to have a financial statement impact since the Company’s revenue recognition under the new standard is substantially the same as under the prior guidance. Adoption of the new standard will result in expanded revenue disclosures. Specifically, revenues will be disaggregated beyond the segment level to provide revenues by certain product classifications within the Company’s segments.

11

2.   EQUITY COMPENSATION PLANS AND CAPITAL STOCK

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 to whom awards will be granted and shall determine the amount and applicable restrictions of each award. Forfeitures are accounted for upon their occurrence.

The total number of restricted shares awarded and outstanding under the Plan was 210,000 shares at both March 31, 2018 and March 31, 2017. All of the awarded shares have five year cliff vesting restrictions with vesting occurring on January 4, 2022. No other shares have been awarded under the Plan. The grant date fair value of the awarded shares is $1,444,800 and is being recognized as compensation expense over the 60 month requisite service period. The Company recorded compensation expense of $288,960 and $72,240 in fiscal 2018 and 2017, respectively, relating to the stock awards issued under the Plan.

The Company has 1,000,000 authorized shares of Cumulative Preferred Stock with a par value of $1 per share. The stock may be issued in one or more series, and the Board of Directors is authorized to fix the designations, preferences, rights, qualifications, limitations and restrictions of each series, except that any series must provide for cumulative dividends and must be convertible into Common Stock. There were no shares of Cumulative Preferred Stock issued as of March 31, 2018 or March 31, 2017.

3.   DEBT

On December 11, 2017, the Company entered into a loan agreement for a $7,500,000 revolving line of credit facility (the “Credit Facility”) with Citizens National Bank (the “Bank”). The Credit Facility expires on December 11, 2018 and is collateralized by the Company’s accounts receivable and inventory. Borrowings under the credit facility bear interest at the Bank’s prime rate minus 0.55% resulting in an applicable interest rate of 4.2% as of March 31, 2018. Interest payments on amounts advanced are due monthly and principal payments may be made at any time without penalty. All outstanding principal and accrued interest is due upon expiration of the Credit Facility. The Credit Facility contains financial covenants that require the Company to not permit: (1) tangible common shareholders’ equity to be less than $50.0 million and (2) maximum debt to exceed 50% of tangible common shareholders’ equity. At March 31, 2018, the Company had no borrowings outstanding under the Credit Facility.

4.   COMMITMENTS AND CONTINGENCIES

The Company is obligated under a noncancelable operating lease for its Longview, Texas office space. The lease was scheduled to expire on April 30, 2018 but the Company executed a lease addendum to extend the term for an additional 36 months resulting in an amended expiration date of April 30, 2021. The lease requires a monthly rental payment by the Company of $2,728. The following is a schedule of future minimum annual rental payments for the next five years required under this operating lease as of March 31, 2018:

2019	$	32,736
2020		32,736
2021		32,736
2022		2,728
2023		—
Total	$	100,936

Rental expenses for leased properties were approximately $32,736 and $64,400 during fiscal 2018 and 2017, respectively. The Company leased office space in Humble, Texas for part of fiscal 2017 until the lease expired and was not renewed.

12

At March 31, 2018, the Company had supply agreements in place with certain suppliers that require the Company to purchase minimum quantities of steel on a monthly basis. All such agreements expire on December 31, 2018. The combined minimum monthly purchase requirements under these agreements fall well below the Company's anticipated monthly steel supply needs. Based on the market price of hot-rolled coil at March 31, 2018, the minimum purchase requirements remaining for April 2018 to December 2018 totaled approximately $33,660,000.

One of the Company’s purchase agreements provides an annual rebate payable to the Company if a certain volume of material is purchased during the term of the agreement. As of March 31, 2018, the Company had not accrued a receivable related to this rebate due to the uncertainty present at that time about whether the Company would purchase the specified volume. The Company will continue to evaluate the likelihood of meeting the purchase requirements related to the annual rebate. If the Company deems receipt of the rebate to be probable, the Company will recognize the rebate on a systematic and rational basis dictated by the underlying transactions that result in progress toward earning the rebate.

In fiscal 2017, the Company did not have any agreements in place requiring the purchase of certain quantities of steel.

5.   EARNINGS PER SHARE

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

	Year Ended March 31
	2018		2017
Basic
Net earnings (loss)	$	2,759,404	$	(2,678,684	)
Weighted average common shares		7,009,444		6,851,944
Dilutive
Net earnings (loss)	$	2,759,404	$	(2,678,684	)
Weighted average common shares and common share equivalents		7,009,444		6,851,944

6.   INCOME TAXES

Components of tax expense (benefit) are as follows:

	Year Ended March 31
	2018		2017
Federal
Current	$	—	$	(714,684	)
Deferred		1,178,073		(644,865	)
		1,178,073		(1,359,549	)
State
Current		38,742		—
Deferred		91,075		(112,583	)
		129,817		(112,583	)
Total	$	1,307,890	$	(1,472,132	)

The effective tax rate for fiscal 2018 was impacted by the Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017 by the U.S. government. The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate and repealing the deduction for domestic production activities.

The Tax Act reduced the federal corporate tax rate applicable to the Company from 34% to 21% effective January 1, 2018. In accordance with Section 15 of the Internal Revenue Code, the Company has utilized a blended rate of approximately 30.8% to compute federal tax expense for fiscal 2018. The blended rate is calculated by applying prorated percentages, based on the number of days prior to and subsequent to the January 1, 2018 effective date, to the tax rate applicable for the respective pre and post effective periods. The 21% federal corporate tax rate will apply to fiscal years ending March 31, 2019 and each year thereafter.

13

As a result of the change to the corporate tax rate, the Company was required to re-measure its net deferred tax assets and liabilities using the tax rate that will apply when those amounts are expected to reverse. The re-measurement of deferred tax assets and liabilities at the new tax rate resulted in a provisional noncash tax benefit of approximately $77,000 due to the reduction of the Company’s net deferred tax liability position. The Company previously provided an estimated provisional tax expense of approximately $240,500 in the Form 10-Q for the quarter ended December 31, 2017. The change in the provisional impact is primarily due to a change in the expected depreciation related timing differences for the pipe-finishing facility placed into service during fiscal 2018.

On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act. SAB 118 provides a measurement period, which should not extend beyond one year form the Tax Act enactment date, for companies to complete the accounting under Accounting Standards Codification 740 (“ASC 740”). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 according to the tax laws that were in effect immediately before the enactment of the Tax Act. While the Company is able to make reasonable estimates of the impact of the Tax Act, the final impact of the Tax Act may differ from these estimates, due to, among other things, changes in the Company’s interpretations and assumptions, additional guidance that may be issued and actions the Company may take. The accounting is expected to be complete by the time the Company’s 2017 U.S. corporate income tax return is filed in 2018. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustment become estimable and/or are finalized.

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

	Year Ended March 31
	2018			2017
Income tax expense (benefit) at U.S. federal statutory rate (1)		30.8	%		(34.0%	)
Benefit due to tax reform		(2.0	)		—
Current year state and local income taxes net of federal income tax benefit		3.4			(1.7	)
Other		—			0.2
Provision for (benefit from) income taxes		32.2	%		(35.5%	)

(1) The statutory rate for fiscal 2018 is a blended rate due to the Tax Cuts and Jobs Act enacted by the U.S. government on December 22, 2017.

The Company’s tax returns may be subject to examination by the Internal Revenue Service for the fiscal years ended March 31, 2015 through March 31, 2017. State and local returns may be subject to examination for fiscal years ended March 31, 2014 through March 31, 2017.

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

	March 31
	2018			2017
Deferred tax liabilities:
Depreciation	$	(1,053,139	)	$	(507,970	)
Total deferred tax liabilities		(1,053,139	)		(507,970	)
Deferred tax assets:
Inventory capitalization		114,428			166,979
LIFO Inventory		484,016			783,645
Postretirement benefits other than pensions		36,762			187,096
Net operating loss carryforward - Federal		184,668			343,729
Net operating loss carryforward - State		21,507			112,583
Other		108,560			79,888
Total deferred tax assets		949,941			1,673,920
Net deferred tax asset (liability)	$	(103,198	)	$	1,165,950

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7.   RETIREMENT PLAN

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

The retirement portion of the Plan covers substantially all employees, including officers. The Company’s contribution expenses, which are determined at the discretion of the Board of Directors in an amount not to exceed 15% of the total compensation paid during the year to all eligible employees, were $162,000 for the year ended March 31, 2018, and $170,000 for the year ended March 31, 2017. Contributions, Plan earnings and forfeitures of nonvested accounts of terminated participants are allocated to the remaining individual accounts determined by a point schedule based on years of employment with the Company.

Employees may participate in the 401(k) portion of the Plan. Employees are eligible to participate in the Plan when the employee has completed one year of service. Under the Plan, participating employees may defer a portion of their pretax earnings up to certain limits prescribed by the Internal Revenue Service. The Company provides matching contributions under the provisions of the Plan. Contribution expense related to the 401(k) portion of the Plan was approximately $37,500 and $32,000 for the years ended March 31, 2018 and 2017, respectively.

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8.   INDUSTRY SEGMENT DATA

The Company is engaged in the steel processing, pipe manufacturing and processing and steel and pipe distribution business. Within the Company, there are two product groups: coil and tubular. The Company’s coil operations involve converting steel coils into flat sheet and plate steel cut to customer specifications and reselling steel coils. Through its tubular operations, the Company purchases, processes, manufactures and markets tubular products. The following is a summary of significant financial information relating to the product groups:

	Year Ended March 31
	2018			2017
NET SALES:
Coil	$	90,132,804		$	64,641,805
Tubular		31,024,474			13,114,250
TOTAL NET SALES	$	121,157,278		$	77,756,055
OPERATING PROFIT (LOSS):
Coil	$	4,026,329		$	(770,091	)
Tubular		2,024,035			(1,438,088	)
TOTAL OPERATING PROFIT (LOSS)		6,050,364			(2,208,179	)
General corporate expenses		(1,980,124	)		(2,001,642	)
Interest expense		(27,846	)		—
Interest and other income		24,900			59,005
TOTAL EARNINGS (LOSS) BEFORE INCOME TAXES	$	4,067,294		$	(4,150,816	)
IDENTIFIABLE ASSETS:
Coil	$	27,068,602		$	21,832,790
Tubular		43,010,190			37,298,800
		70,078,792			59,131,590
General corporate assets		4,284,413			4,131,707
TOTAL ASSETS	$	74,363,205		$	63,263,297
DEPRECIATION:
Coil	$	570,819		$	1,208,446
Tubular		779,590			378,077
Corporate and other		5,938			7,883
	$	1,356,347		$	1,594,406
CAPITAL EXPENDITURES:
Coil	$	35,720		$	75,889
Tubular		306,310			715,973
Corporate and other		7,154			7,469
	$	349,184		$	799,331

Operating profit (loss) is total net sales less operating expenses, excluding general corporate expenses, interest expense and interest and other income. General corporate expenses reflect general and administrative expenses not directly associated with segment operations and consist primarily of corporate and accounting salaries, professional fees and services, bad debts, retirement plan contribution expense, corporate insurance expenses, restricted stock plan compensation expense and office supplies. At March 31, 2018, corporate assets consisted primarily of cash and the cash value of officers’ life insurance. At March 31, 2017, corporate assets consisted primarily of cash, the cash value of officers' life insurance, deferred taxes and federal income taxes recoverable. Although inventory is transferred at cost between product groups, there are no sales between product groups. Capital expenditures were related primarily to yard improvements at the Company’s tubular division and the construction of the Company’s pipe-finishing facility located in Lone Star, Texas which was placed into service in May 2017.

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9.   SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (Unaudited)

The following is a summary of unaudited quarterly results of operations for the years ended March 31, 2018 and 2017:

	Quarter Ended
	June 30, 2017		September 30, 2017		December 31, 2017		March 31, 2018
Net sales	$	23,083,269	$	26,077,710	$	28,033,521	$	43,962,778
Gross profit		1,263,423		1,377,170		1,669,134		3,942,170
Net earnings		170,620		310,039		122,929		2,155,816
Basic		.02		.04		.02		.31
Diluted		.02		.04		.02		.31

	Quarter Ended
	June 30, 2016			September 30, 2016			December 31, 2016			March 31, 2017
Net sales	$	22,393,764		$	18,317,506		$	15,988,745		$	21,056,040
Gross profit (loss)		(1,252,988	)		(45,711	)		571,571			535,506
Net earnings (loss)		(1,461,219	)		(603,882	)		(236,625	)		(376,958	)
Basic		(.21	)		(.09	)		(.03	)		(.06	)
Diluted		(.21	)		(.09	)		(.03	)		(.06	)

17

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Friedman Industries, Incorporated

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Friedman Industries, Incorporated and subsidiary (the “Company”) as of March 31, 2018, the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2018, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/S/ Moss Adams LLP

Houston, Texas

June 28, 2018

We have served as the Company’s auditor since November 2017.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Friedman Industries, Incorporated

We have audited the accompanying consolidated balance sheet of Friedman Industries, Incorporated and its subsidiary (collectively, the “Company”) as of March 31, 2017, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended. Our audit also included the financial statement schedule of Friedman Industries, Incorporated listed in Item 15(a) for the year ended March 31, 2017. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Friedman Industries, Incorporated and its subsidiary as of March 31, 2017, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule for the year ended March 31, 2017, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/S/ HEIN & ASSOCIATES LLP

Houston, Texas

June 29, 2017

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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

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

Our management assessed the effectiveness of our internal control over financial reporting as of the end of our most recent fiscal year. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on such assessment, management concluded that, as of March 31, 2018, our internal control over financial reporting is effective based on that criteria.

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

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

OVERVIEW

Friedman Industries, Incorporated is a manufacturer and processor of steel products and operates in two reportable 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.

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 a 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”).

RESULTS OF OPERATIONS

Year ended March 31, 2018 compared to year ended March 31, 2017

During the year ended March 31, 2018, sales, costs of goods sold and gross profit increased $43,401,223, $34,957,704 and $8,443,519, respectively, from the comparable amounts recorded during the year ended March 31, 2017. 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 32% from approximately 134,000 tons in fiscal 2017 to approximately 176,500 tons in fiscal 2018. Discussion of the sales improvement is expanded upon at the segment level in the following paragraphs. Gross margin as a percentage of sales increased from a gross loss of approximately 0.2% in fiscal 2017 to a gross profit of approximately 6.8% in fiscal 2018.

Coil product segment sales for fiscal 2018 totaled $90,132,804 compared to $64,641,805 for fiscal 2017, representing an increase during fiscal 2018 of $25,490,999 or approximately 39%. For average selling price disclosure, 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 $1,220,148 for fiscal 2018 compared to $1,113,987 for fiscal 2017. Sales generated from coil segment inventory totaled $88,912,656 for fiscal 2018 compared to $63,527,818 for fiscal 2017. The increase in coil 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. Inventory tons sold increased from approximately 111,000 tons in fiscal 2017 to approximately 132,000 tons in fiscal 2018. The average per ton selling price related to these shipments increased from approximately $572 per ton in fiscal 2017 to approximately $674 per ton in fiscal 2018. The improved shipping volume for fiscal 2018 is attributable to increased demand among many of the segment’s customers, rather than to any specific industry or customer, and is also attributable to an increase in the number of customers sold. The coil product segment recorded an operating profit of $4,026,329 in fiscal 2018 and an operating loss of $770,091 in fiscal 2017. The coil segment’s profit margins are significantly impacted by the application of the LIFO method of inventory valuation. LIFO charges or credits are driven by relative changes in the cost and quantities of hot-rolled coils purchased. In fiscal 2018 and fiscal 2017, the coil segment experienced rising costs for hot-rolled coils and recorded LIFO charges of approximately $1,697,000 and $3,592,500, respectively. The Company continues to experience intense competition for sales due to the general availability of hot-rolled sheet and plate.

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.

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Tubular product segment sales for fiscal 2018 totaled $31,024,474 compared to $13,114,250 for fiscal 2017, representing an increase during fiscal 2018 of $17,910,224 or approximately 137%. Historically, all of the tubular segment’s revenues have been generated by sales of segment inventory but in May 2017 the Company put into service a pipe-finishing facility that provides pipe threading services for customer owned material. In fiscal 2018, the pipe-finishing facility generated revenue of $2,075,794. Sales generated from tubular segment inventory totaled $28,948,680 for fiscal 2018 compared to $13,114,250 for fiscal 2017. 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. Inventory tons sold increased from approximately 22,500 tons in fiscal 2017 to approximately 44,500 tons in fiscal 2018. The average per ton selling price related to these shipments increased from approximately $582 per ton in fiscal 2017 to approximately $651 per ton in fiscal 2018. The tubular segment recorded an operating profit of $2,024,035 in fiscal 2018 and an operating loss of $1,438,088 in fiscal 2017. Management believes tubular segment results for much of fiscal 2018 and all of fiscal 2017 were negatively impacted by the effects of the most recent recession in the U.S. energy business. In the fourth quarter of fiscal 2018, the tubular segment experienced a significant improvement in the demand for its products. Management believes this improved demand is primarily related to the sustained recovery in the U.S. energy industry and the segment’s new product offering of API line pipe. Historically, the tubular segment has produced and sold API line pipe through an exclusive customer arrangement. Late in the third quarter of fiscal 2018, TTP began actively producing, marketing and selling line pipe directly to distributors. In total the tubular segment shipped approximately 20,000 tons in the fourth quarter compared to 8,500 tons in the third quarter. Line pipe shipments in the fourth quarter accounted for approximately 7,000 tons, or approximately 61%, of the approximately 11,500 ton increase from the prior quarter. Management expects line pipe sales to be a significant component of total tubular segment sales moving forward and expects segment operating results to be positively impacted by the increased sales and mill production related to line pipe. Increasing market acceptance of the Company’s tubular products among both line pipe distributors and midstream companies is a key component of management’s strategy for long-term success in the small diameter line pipe market.

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. The Company expects the volume and size range of new mill reject pipe supply from USS to be reduced given the permanent idling of the Lone Star facility’s #1 pipe mill. At March 31, 2018, the Company carried quantities of mill reject pipe on hand that exceeded the fiscal 2018 sales volume. Based on the improved current market and overall economic conditions as well as recent sales trends, the Company reasonably expects the inventory to be either sold in its entirety or at least a substantial portion thereof during the ensuing fiscal year, hence current classification of this inventory on the Company’s balance sheet. Management’s projections are subject to a significant estimate which may be different from actual results. 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. The Company can make no assurances as to orders from USS or the amount of supply that will be available from USS in the future. 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.

Income taxes for fiscal 2018 increased $2,780,022 from the amount recorded in fiscal 2017. This increase was related primarily to the increase in earnings before taxes in fiscal 2018 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. Pursuant to the Internal Revenue Code, the Company utilized a blended rate of approximately 30.8% to compute federal tax expense for fiscal 2018. In addition, the Company was required to re-measure its net deferred tax assets and liabilities using the tax rate that will apply when those amounts are expected to reverse. The re-measurement of deferred tax assets and liabilities at the new tax rate resulted in a provisional noncash tax benefit of approximately $77,000 in fiscal 2018.

FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL

The Company remained in a strong, liquid position at March 31, 2018. Current ratios were 5.4 and 19.3 at March 31, 2018 and March 31, 2017, respectively. Working capital was $48,948,669 at March 31, 2018 and $43,076,246 at March 31, 2017.

During the year ended March 31, 2018, the Company maintained assets and liabilities at levels it believed were commensurate with operations. Changes in balance sheet amounts occurred in the ordinary course of business. Cash increased primarily as a result of operating activities partially offset by purchases of property, plant and equipment and the payment of cash dividends. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

In December 2017, the Company put into place a $7,500,000 revolving line of credit facility (the “Credit Facility”) that expires December 11, 2018. The Company advanced $3,750,000 under the credit facility in December 2017 and repaid the advance during the fourth quarter resulting in no borrowings outstanding under the credit facility as of March 31, 2018. The Company was not in violation of any terms or covenants related to the Credit Facility as of March 31, 2018.

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

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

INFLATION

During fiscal 2018 and 2017, the Company believes that the general level of inflation had little effect on its operations.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Significant estimates that are subject to the Company’s assumptions include the valuation of LIFO inventories in the Company’s quarterly reporting, determination of useful lives for fixed assets and determination of the allowance for doubtful accounts. Valuation of LIFO inventories in the Company’s quarterly reporting requires estimates of the year end quantities, which is inherently difficult. 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 collectibility of the Company’s accounts receivable. Actual results could differ from these estimates.

Effective April 1, 2018, the Company will be changing from the LIFO method to the average cost method for valuation of prime coil inventory. The Company believes this change will result in financial reporting that more closely aligns with the substance of our business. The Company expects to report this change through retrospective application of the new accounting principle to all prior periods presented starting with the Form 10-Q to be filed for the quarter ended June 30, 2018. The Company has not yet fully quantified the impact of this accounting change but expects a material impact to the consolidated financial statements upon adoption and thereafter.

FORWARD-LOOKING STATEMENTS

From time to time, the Company may make certain statements that contain “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1996, as amended) and that involve risk and uncertainty. These forward-looking statements may include, but are not limited to, future results of operations, future production capacity, product quality and proposed expansion plans. Forward-looking statements may be made by management orally or in writing, including, but not limited to, this Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Company’s filings with the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Actual results and trends in the future may differ materially depending on a variety of factors, including, but not limited to, changes in the demand and prices for the Company’s products, changes in the demand for steel and steel products in general and the Company’s success in executing its internal operating plans, including any proposed expansion plans.

23

TEN YEAR FINANCIAL SUMMARY

	Year Ended March 31
	2018		2017			2016		2015		2014		2013		2012		2011		2010		2009
Net sales	$	121,157,278	$	77,756,055		$	81,631,382	$	108,322,780	$	116,149,022	$	136,448,786	$	161,521,993	$	131,709,492	$	65,132,170	$	208,779,750
Net earnings (loss)	$	2,759,404	$	(2,678,684	)	$	294,000	$	382,330	$	1,712,926	$	6,135,812	$	8,150,464	$	8,155,637	$	652,024	$	13,673,406
Current assets	$	59,979,304	$	45,432,836		$	49,701,656	$	50,117,355	$	59,846,668	$	64,283,557	$	65,007,891	$	54,562,344	$	48,703,119	$	42,673,377
Current liabilities	$	11,030,635	$	2,356,590		$	2,865,750	$	2,651,111	$	7,770,689	$	12,312,082	$	13,853,388	$	9,467,375	$	7,576,278	$	3,353,013
Working capital	$	48,948,669	$	43,076,246		$	46,835,906	$	47,466,244	$	52,075,979	$	51,971,475	$	51,154,503	$	45,094,969	$	41,126,841	$	39,320,364
Total assets	$	74,363,205	$	63,263,297		$	66,890,397	$	66,958,024	$	72,284,399	$	76,575,129	$	78,570,393	$	69,584,131	$	65,031,722	$	60,460,064
Stockholders’ equity	$	63,054,316	$	60,356,425		$	63,239,047	$	63,217,025	$	63,310,656	$	62,957,619	$	63,417,268	$	58,802,514	$	56,358,410	$	56,114,352
Net earnings (loss) as a percent of Net sales		2.3		(3.4	)		0.4		0.4		1.5		4.5		5.0		6.2		1.0		6.5
Stockholders’ equity		4.4		(4.4	)		0.5		0.6		2.7		9.7		12.9		13.9		1.2		24.4
Weighted average number of common shares outstanding:
Basic		7,009,444		6,851,944			6,799,444		6,799,444		6,799,444		6,799,444		6,799,444		6,799,444		6,799,444		6,799,444
Per share
Net earnings (loss) per share:
Basic	$	0.39	$	(0.39	)	$	0.04	$	0.06	$	0.25	$	0.90	$	1.20	$	1.20	$	0.10	$	2.01
Stockholders’ equity	$	9.00	$	8.81		$	9.30	$	9.30	$	9.31	$	9.26	$	9.33	$	8.65	$	8.29	$	8.25
Cash dividends per common share	$	0.05	$	0.04		$	0.04	$	0.07	$	0.20	$	0.97	$	0.52	$	0.84	$	0.06	$	0.37

24

EX-14.1

EXHIBIT 14.1

FRIEDMAN INDUSTRIES, INCORPORATED

CODE OF CONDUCT AND ETHICS

It is the policy of Friedman Industries, Incorporated (the “Company”) to endeavor to conduct business with the highest standards of honesty and integrity and in compliance with all applicable laws. In view thereof, the Company’s Board of Directors has adopted this Code of Conduct and Ethics (the “Code”).

In addition to other Company policies, all Company employees, directors and officers are expected to:

• Carry out their duties honestly and with the highest degree of integrity.

• Avoid actual or apparent conflicts of interest between personal and professional relationships.

• Report promptly any transaction or relationship that could compromise one’s ability to (i) adhere fully to the Code, other Company policies or applicable laws or (ii) make business decisions without regard to personal gain or benefit.

• Seek, at all times, to provide information to Company officials and its outside professionals (e.g. accountants, counsel, insurance providers, etc.) that is accurate, relevant, complete, objective, timely and understandable, and encourage others within the Company to do the same.

• Use reasonable efforts to assure full, fair, accurate, timely and understandable disclosure of information related to the Company’s business and financial operations in Company reports and documents filed with the U.S. Securities and Exchange Commission (the “SEC”) or the NYSE – American or in other public communications made by the Company.

• Use reasonable efforts to cause the Company to comply fully with the letter and spirit of all laws, rules and regulations applicable to the Company or its business.

• Promptly report to the Audit Committee of the Board of Directors (the “Audit Committee”) (i) any weakness or deficiency in the design or operation of the Company’s internal controls or (ii) any fraud involving Company management or other employees having significant roles in the Company’s operations, financial reporting, disclosures or internal controls.

The Board of Directors is responsible for applying and interpreting the Code. Any questions relating to how the Code should be interpreted or applied should be addressed to a supervisor, the Chief Executive Officer, the President or the Chief Financial Officer. Any employee, officer or director who becomes aware of any existing or potential violation of laws, rules, regulations or the Code should promptly notify the Chief Executive Officer, the President, the Chief Financial Officer or the Chairman of the Audit Committee. Reports may be made orally or in writing and may be made anonymously and will be kept confidential to the extent permitted. Written reports should be sent to the attention of the Chief Executive Officer, the President or the Chief Financial Officer, at P.O. Box 2192, Longview, Texas 75606. In addition, reports may be made to the Chairman of the Audit Committee by calling (713) 622-7000 or sent to Three Greenway Plaza, Suite 1700, Houston, Texas 77046.

Failure to notify the Chief Executive Officer, the President, the Chief Financial Officer or the Chairman of the Audit Committee of any violation or potential violation is in itself a violation of the Code. To encourage employees to report any violations, the Company will not allow retaliation for reports made hereunder in good faith. In addition, the Company may not retaliate against any employee for providing information or assisting in the investigation of any law enforcement agency, regulatory agency or other governmental body relating to the Company.

Observance of the provisions of the Code is of extreme importance to the Company. A violation of the Code will be regarded as a serious offense and may constitute grounds for disciplinary action, including, but not limited to, demotion, suspension (with or without pay), discharge, or, in the case of directors, removal from the Board of Directors and legal proceedings.

From time to time, the Company may waive some provisions of the Code. Any employee, officer or director who believes that a waiver may be called for should contact the Chief Financial Officer. Any waiver of the Code for directors and executive officers of the Company must be approved by the Company’s Board of Directors and will be promptly reported in such manner as may be required by the SEC or NYSE - American.

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES

FRIEDMAN/DECATUR, L.L.C. Alabama Limited Liability Company 100% owned

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-215223) of our report dated June 28, 2018, relating to the consolidated financial statements and schedule of Friedman Industries, Incorporated appearing in this Annual Report (Form 10-K) for the year ended March 31, 2018.

/S/ Moss Adams LLP

Houston, Texas

June 28, 2018

EX-23.2

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (No. 333-215223) on Form S-8 of Friedman Industries, Incorporated of our report dated June 29, 2017, relating to the consolidated financial statements and the financial statement schedule of Friedman Industries, Incorporated appearing in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K of Friedman Industries, Incorporated for the year ended March 31, 2018.

/S/ HEIN & ASSOCIATES LLP

Houston, Texas

June 28, 2018

EX-31.1

EXHIBIT 31.1

I, Robert Sparkman, certify that:

1.  I have reviewed this report on Form 10-K of Friedman Industries, Incorporated;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):

a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: June 28, 2018

/S/    ROBERT SPARKMAN

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, Alex LaRue, certify that:

1.  I have reviewed this report on Form 10-K of Friedman Industries, Incorporated;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):

a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: June 28, 2018

/S/    ALEX LARUE                                     

Chief Financial Officer — Secretary and Treasurer

EX-32.1

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

Not Filed Pursuant to the Securities Exchange Act of 1934

In connection with the Annual Report of Friedman Industries, Incorporated (the “Company”) on Form 10-K for the fiscal year ended March 31, 2018, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Sparkman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/S/    ROBERT SPARKMAN
	President and Chief Executive Officer

Dated: June 28, 2018

EX-32.2

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

Not Filed Pursuant to the Securities Exchange Act of 1934

In connection with the Annual Report of Friedman Industries, Incorporated (the “Company”) on Form 10-K for the fiscal year ended March 31, 2018, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Alex LaRue, Chief Financial Officer — Secretary & Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/S/    ALEX LARUE
	Chief Financial Officer — Secretary and Treasurer

Dated: June 28, 2018

XML

Document And Entity Information - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2018	Jun. 28, 2018	Sep. 30, 2017
Document Information [Line Items]
Entity Registrant Name	FRIEDMAN INDUSTRIES INC
Entity Central Index Key	0000039092
Trading Symbol	frd
Current Fiscal Year End Date	--03-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		7,009,444
Entity Public Float			$ 41,592
Document Type	10-K
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2018	Mar. 31, 2017
CURRENT ASSETS:
Cash	$ 4,052,582	$ 1,461,695
Accounts receivable, net of allowances for bad debts and cash discounts of $21,052 and $27,276 at March 31, 2018 and 2017, respectively	17,458,289	8,939,051
Inventories	38,039,332	34,918,550
Other	429,101	113,540
TOTAL CURRENT ASSETS	59,979,304	45,432,836
PROPERTY, PLANT AND EQUIPMENT:
Land	1,452,799	1,082,331
Buildings and yard improvements	8,710,958	7,111,735
Machinery and equipment	39,282,944	31,451,479
Construction in progress		9,451,972
Less accumulated depreciation	(35,280,700)	(33,924,353)
Property, plant, and equipment, net	14,166,001	15,173,164
OTHER ASSETS:
Deferred income tax asset		1,165,950
Federal income taxes recoverable		913,347
Cash value of officers’ life insurance and other assets	217,900	578,000
TOTAL ASSETS	74,363,205	63,263,297
CURRENT LIABILITIES:
Accounts payable and accrued expenses	10,233,431	2,003,661
Dividends payable	140,189	70,094
Contribution to retirement plan	45,000	42,000
Employee compensation and related expenses	612,015	240,835
TOTAL CURRENT LIABILITIES	11,030,635	2,356,590
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS	175,056	550,282
DEFERRED INCOME TAX LIABILITY	103,198
TOTAL LIABILITIES	11,308,889	2,906,872
COMMITMENTS AND CONTINGENCIES (SEE NOTE 4 AND NOTE 7)
STOCKHOLDERS’ EQUITY:
Common stock, par value $1: Authorized shares — 10,000,000 Issued shares — 8,185,160 at March 31, 2018 and 2017	8,185,160	8,185,160
Additional paid-in capital	29,154,874	28,865,914
Treasury stock at cost (1,175,716 shares at March 31, 2018 and 2017)	(5,475,964)	(5,475,964)
Retained earnings	31,190,246	28,781,315
TOTAL STOCKHOLDERS’ EQUITY	63,054,316	60,356,425
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 74,363,205	$ 63,263,297

XML

Consolidated Balance Sheets (Parentheticals) - USD ($)	Mar. 31, 2018	Mar. 31, 2017
Allowance for bad debt and cash discounts	$ 21,052	$ 27,276
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, authorized (in shares)	10,000,000	10,000,000
Common stock, issued (in shares)	8,185,160	8,185,160
Treasury stock, shares (in shares)	1,175,716	1,175,716

XML

Consolidated Statements of Operations - USD ($)	12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net sales	$ 121,157,278	$ 77,756,055
Costs and expenses:
Cost of products sold	112,905,381	77,947,677
Selling, general and administrative	4,181,657	4,018,199
Interest expense	27,846
Costs and expenses, total	117,114,884	81,965,876
EARNINGS (LOSS) FROM OPERATIONS	4,042,394	(4,209,821)
Interest and other income	(24,900)	(59,005)
EARNINGS (LOSS) BEFORE INCOME TAXES	4,067,294	(4,150,816)
Provision for (benefit from) income taxes:
Current	38,742	(714,684)
Deferred	1,269,148	(757,448)
Total	1,307,890	(1,472,132)
NET EARNINGS (LOSS)	$ 2,759,404	$ (2,678,684)
Weighted average number of common shares outstanding:
Basic (in shares)	7,009,444	6,851,944
Diluted (in shares)	7,009,444	6,851,944
Net earnings (loss) per share:
Basic (in dollars per share)	$ 0.39	$ (0.39)
Diluted (in dollars per share)	$ 0.39	$ (0.39)

XML

Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Total
BALANCE at Mar. 31, 2016	$ 7,975,160	$ 29,003,674	$ (5,475,964)	$ 31,736,177
Net earnings (loss)				(2,678,684)	$ (2,678,684)
Issuance of restricted stock	210,000	(137,760)
Cash dividends				(276,178)
BALANCE at Mar. 31, 2017	8,185,160	28,865,914	(5,475,964)	28,781,315	60,356,425
Net earnings (loss)				2,759,404	2,759,404
Cash dividends				(350,473)
BALANCE at Mar. 31, 2018	8,185,160	29,154,874	(5,475,964)	31,190,246	$ 63,054,316
Paid in capital – restricted stock awards		$ 288,960

XML

Consolidated Statements of Stockholders' Equity (Parentheticals) - $ / shares	12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Retained Earnings [Member]
Cash dividends, per share (in dollars per share)	$ 0.05	$ 0.04

XML

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
OPERATING ACTIVITIES
Net earnings (loss)	$ 2,759,404	$ (2,678,684)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Depreciation, Total	1,356,347	1,594,406
Deferred taxes	1,269,148	(757,448)
Compensation expense for restricted stock	288,960	72,240
Change in post-retirement benefits other than pensions	9,774	57,682
Changes in operating assets and liabilities:
Accounts receivable, net	(8,519,238)	(4,116,665)
Inventories	(3,120,782)	7,020,578
Federal income taxes recoverable	913,347	(913,347)
Other	(315,561)	29,840
Accounts payable and accrued expenses	8,229,770	(473,038)
Employee compensation and related expenses	371,180	(36,722)
Contribution to retirement plan	3,000	(1,500)
Net cash provided by (used in) operating activities	3,245,349	(202,658)
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(349,184)	(799,331)
Increase in cash value of officers’ life insurance	(24,900)	(59,000)
Net cash used in investing activities	(374,084)	(858,331)
FINANCING ACTIVITIES
Cash dividends paid	(280,378)	(274,078)
Net cash used in financing activities	(280,378)	(274,078)
Increase (decrease) in cash	2,590,887	(1,335,067)
Cash at beginning of year	1,461,695	2,796,762
Cash at end of year	$ 4,052,582	$ 1,461,695

XML

Note 1 - Summary of Significant Accounting Policies

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1.

   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION:    The consolidated financial statements include the accounts of Friedman Industries, Incorporated and its subsidiary (collectively, the “Company”). All material intercompany amounts and transactions have been eliminated.

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

TRADE RECEIVABLES:    The Company’s receivables are recorded when billed, advanced or accrued and represent claims against

third

parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts and cash discounts allowed, represents their estimated net realizable value. The Company estimates its allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables and existing economic conditions. Trade receivables are generally considered past due after

30

 days from invoice date. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. The balance of the Company’s allowance for doubtful accounts was

$6,052

and

$7,276

at

March 31, 2018

and

March 31, 2017,

respectively.

INVENTORIES:    Inventories consist of prime coil, non-standard coil and tubular materials. Prime coil and non-standard coil inventories consist primarily of raw materials and tubular inventory consists of both raw materials and finished goods. Cost for prime coil inventory is determined under the last-in,

first

-out (“LIFO”) method. The Company’s LIFO reserve was approximately

$7,290,000

and

$5,593,000

at

March 31, 2018

and

2017,

respectively. The LIFO reserve signifies the difference between LIFO value used for financial reporting and the value under weighted average cost used for the Company’s internal perpetual inventory records. During fiscal

2018

LIFO inventory was partially liquidated. The historical cost associated with the liquidated layers approximated the current fiscal

2018

costs resulting in an immaterial impact to fiscal

2018

results. Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the weighted average method. LIFO inventories are valued at the lower of cost or market. All other inventories are valued at the lower of cost or net realizable value. Obsolete or slow-moving inventories are

not

significant based on the Company’s review of inventories. Accordingly,

no

allowance has been provided for such items.

The following is a summary of inventory by product group:

	March 31
	201 8		2017
Prime coil inventory	$	6,895,756	$	8,481,605
Non-standard coil inventory		2,971,324		1,119,170
Tubular raw material		6,734,076		1,480,730
Tubular finished goods		21,438,176		23,837,045
	$	38,039,332	$	34,918,550

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

March 31, 2018,

the Company carried quantities of mill reject pipe on hand that exceeded the fiscal

2018

sales volume. Based on improved market conditions and overall economic conditions as well as recent sales trends, the Company reasonably expects the inventory to be either sold in its entirety or at least a substantial portion thereof during the ensuing fiscal year, hence current classification of this inventory on the Company’s balance sheet. The Company’s projections are subject to significant estimates which

may

be different from actual results.

Effective

April 1, 2018,

the Company will be changing from the LIFO method to the average cost method for valuation of prime coil inventory. The Company believes this change will result in financial reporting that more closely aligns with the substance of our business. The Company expects to report this change through retrospective application of the new accounting principle to all prior periods presented starting with the Form

10

-Q to be filed for the quarter ended

June 30, 2018.

The Company has

not

yet fully quantified the impact of this accounting change but expects a material impact to the consolidated financial statements upon adoption and thereafter.

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

Buildings (in years)			20
Machinery and equipment (in years)	10	to	15
Yard improvements (in years)	5	to	15
Loaders and other rolling stock (in years)	5	to	10

During the quarter ended

June 30, 2017,

the Company determined that the economic useful lives of certain fixed assets at the Decatur, Alabama coil processing facility were greater than the useful lives used to calculate depreciation. As a result, effective

April 1, 2017,

the Company revised the useful lives of these assets resulting in a decrease in depreciation expense of approximately

$640,000,

an increase in net earnings of approximately

$406,000

and an increase in diluted earnings per share of approximately

$0.06

for fiscal

2018.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amount

may

not

be recoverable. The Company assesses recoverability by comparing the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset’s carrying amount exceeds its fair value. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.

No

impairments were necessary at

March 31, 2018

or

2017.

Maintenance and repairs are expensed as incurred.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:    The Company maintains life insurance policies on each officer. From time to time and in its discretion, the Board of Directors of the Company has approved the transfer of the applicable policy to an officer upon their retirement. The Company’s accrued liability for these potential future transfers was

$175,056

and

$550,282

at

March 31, 2018

and

March 31, 2017,

respectively. The transfer of a life insurance policy to an officer is a noncash transaction.

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

SUPPLEMENTAL CASH FLOW INFORMATION:    The Company paid interest of approximately

$27,900

in fiscal

2018

and paid

no

interest in fiscal

2017.

Net of taxes paid, the Company received federal and state tax refunds totaling approximately

$959,000

in fiscal

2018.

The Company paid income taxes of approximately

$13,500

in fiscal

2017.

Noncash financing activity consisted of accrued dividends of

$140,189

and

$70,094

in fiscal

2018

and

2017,

respectively. There were noncash transactions of

$385,000

and

$293,000

in fiscal

2018

and

2017,

respectively, for the transfer of ownership of life insurance policies from the Company to officers upon their retirement.

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

The Company has also analyzed tax positions taken on tax returns filed and does

not

believe that any are more likely than

not

to be overturned by the respective tax jurisdiction. Therefore,

no

liability for uncertain tax positions has been recognized.

USE OF ESTIMATES:    The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates that are subject to the Company’s assumptions include valuation of LIFO inventories in the Company’s quarterly reporting, determination of useful lives for fixed assets and determination of the allowance for doubtful accounts. Valuation of LIFO inventories in the Company’s quarterly reporting requires estimates of the year end quantities, which is inherently difficult. 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. Actual results could differ from these estimates.

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

EARNINGS PER SHARE:   The Company uses the

two

-class method of calculating earnings per share, which determines earnings per share for each class of common stock and participating security as if all earnings of the period had been distributed. As the holders of restricted stock are entitled to vote and receive dividends during the restriction period, unvested shares of restricted stock qualify as participating securities. Unvested restricted shares participate on an equal basis with common shares; therefore, there is

no

difference in undistributed earnings allocated to each participating security. Accordingly, unvested restricted shares are included in the basic computation of earnings per share. Net income per basic common share is computed using the weighted average number of common shares and participating securities outstanding during the period. Net income per diluted common share is computed using the weighted average number of common shares, participating securities and potential common shares outstanding during the period.

ECONOMIC RELATIONSHIP:    The Company purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company. Coil segment sales to Trinity Industries, Inc. accounted for approximately

16%

and

28%

of total Company sales in fiscal

2018

and

2017,

respectively.

No

other customers accounted for

10%

or more of total sales in the

two

years ended

March 

31,

2018.

Loss of Trinity as a customer could have a material adverse effect on the Company’s business.

The Company’s sales are concentrated primarily in the midwestern, southwestern, and southeastern regions of the United States and are primarily to customers in the steel distributing and fabricating industries. The Company performs periodic credit evaluations of the financial conditions of its customers and generally does

not

require collateral. Generally, receivables are due within

30

 days.

NEW ACCOUNTING PRONOUNCEMENTS:   There were

no

new accounting standards adopted by the Company during fiscal

2018.

In the

fourth

quarter of fiscal

2017,

the Company adopted Accounting Standards Update

No.

2016

-

09,

Compensation – Stock Compensation (“ASU

2016

-

09”

). ASU

2016

-

09

provided new accounting guidance that amends the accounting for employee share-based payment transactions. This new standard requires income statement recognition of all tax effects, including all excess tax benefits and tax deficiencies, resulting from the settlement of share-based awards in the reporting period in which they occur. The standard also requires that all tax-related cash flows resulting from share-based payments, including the excess tax benefits and tax deficiencies related to the settlement of stock-based awards, be classified as cash flows from operating activities, and that cash paid by directly withholding shares for tax purposes be classified as a financing activity in the statement of cash flows. The standard also allows companies to make an accounting policy election to either estimate the number of awards that are expected to vest, consistent with current guidance, or account for forfeitures as they occur. The Company elected to account for forfeitures as they occur. All aspects of this guidance has been applied prospectively for the Company beginning on

January 

1,

2017

given that the Company had

no

outstanding equity based compensation as of

January 1, 2017.

The adoption of this guidance did

not

have a material effect on the Company’s consolidated financial statements for fiscal

2018

or fiscal

2017.

In

August 2016,

the Financial Accounting Standards Board (“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. This new guidance is effective for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact that adoption of the provisions of ASU

2016

-

15

will have on its consolidated financial statements but does

not

expect a material impact.

In

February 

2016,

the FASB issued Accounting Standards Update

No.

2016

-

02,

Leases (“ASU

2016

-

02”

). ASU

2016

-

02

establishes a new lease accounting standard that requires lessees to recognize a right of use asset and related lease liability for most leases having lease terms of more than

12

months.  Leases with a term of

12

months or less will be accounted for similar to existing guidance for operating leases.  This new guidance is effective for annual and interim periods beginning after

December 

15,

2018,

but can be early adopted.  The Company is evaluating the impact that adoption of the provisions of ASU

2016

-

02

will have on its consolidated financial statements but does

not

expect a material impact.

In

May 2014,

the FASB issued Accounting Standards Update

No.

2014

-

09,

Revenue from Contracts with Customers (“ASU

2014

-

09”

). ASU

2014

-

09

states that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The update supersedes most current revenue recognition guidance, including industry-specific guidance. ASU

2014

-

09

was initially effective for interim and annual periods beginning after

December 15, 2016

and early application was

not

permitted. In

August 2015,

the FASB issued Accounting Standards Update

No.

2015

-

14,

Revenue from Contracts with Customers - Deferral of the Effective Date (“ASU

2015

-

14”

). ASU

2015

-

14

defers the effective date of ASU

2014

-

09

to annual reporting periods beginning after

December 15, 2017,

including interim reporting periods within that reporting period, and only permits entities to adopt the standard

one

year earlier as of annual reporting periods beginning after

December 15, 2016,

including interim reporting periods within that reporting period. According to the deferred effective date, the new revenue standard will become effective for the Company’s fiscal year beginning

April 1, 2018.

The Company has reviewed its significant customer contracts according to the revenue recognition process prescribed by the new standard. The standard allows the choice of

two

adoption methods, full retrospective adoption or modified retrospective adoption. 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

will be presented under the new standard, while prior period amounts won’t be adjusted and will be reported in accordance with historic accounting under the prior guidance. The Company doesn’t expect adoption of the new standard to have a financial statement impact since the Company’s revenue recognition under the new standard is substantially the same as under the prior guidance. Adoption of the new standard will result in expanded revenue disclosures. Specifically, revenues will be disaggregated beyond the segment level to provide revenues by certain product classifications within the Company’s segments.

XML

Note 2 - Equity Compensation Plans and Capital Stock

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

2.

   

EQUITY COMPENSATION PLANS

AND CAPITAL STOCK

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 to whom awards will be granted and shall determine the amount and applicable restrictions of each award. Forfeitures are accounted for upon their occurrence.

The total number of restricted shares awarded and outstanding under the Plan was

210,000

shares at both

March 31, 2018

and

March 31, 2017.

All of the awarded shares have

five

year cliff vesting restrictions with vesting occurring on

January 4, 2022.

No

other shares have been awarded under the Plan. The grant date fair value of the awarded shares is

$1,444,800

and is being recognized as compensation expense over the

60

month requisite service period. The Company recorded compensation expense of

$288,960

and

$72,240

in fiscal

2018

and

2017,

respectively, relating to the stock awards issued under the Plan.

The Company has

1,000,000

authorized shares of Cumulative Preferred Stock with a par value of

$1

 per share. The stock

may

be issued in

one

or more series, and the Board of Directors is authorized to fix the designations, preferences, rights, qualifications, limitations and restrictions of each series, except that any series must provide for cumulative dividends and must be convertible into Common Stock. There were

no

shares of Cumulative Preferred Stock issued as of

March 

31,

2018

or

March 

31,

2017.

XML

Note 3 - Debt

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

3.

   DEBT

On

December 11, 2017,

the Company entered into a loan agreement for a

$7,500,000

revolving line of credit facility (the “Credit Facility”) with Citizens National Bank (the “Bank”). The Credit Facility expires on

December 11, 2018

and is collateralized by the Company’s accounts receivable and inventory. Borrowings under the credit facility bear interest at the Bank’s prime rate minus

0.55%

resulting in an applicable interest rate of

4.2%

as of

March 31, 2018.

Interest payments on amounts advanced are due monthly and principal payments

may

be made at any time without penalty. All outstanding principal and accrued interest is due upon expiration of the Credit Facility. The Credit Facility contains financial covenants that require the Company to

not

permit: (

1

) tangible common shareholders’ equity to be less than

$50.0

million and (

2

) maximum debt to exceed

50%

of tangible common shareholders’ equity. At

March 31, 2018,

the Company had

no

borrowings outstanding under the Credit Facility.

XML

Note 4 - Commitments and Contingencies

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

4

.   COMMITMENTS AND CONTINGENCIES

The Company is obligated under a noncancelable operating lease for its Longview, Texas office space. The lease was scheduled to expire on

April 

30,

2018

but the Company executed a lease addendum to extend the term for an additional

36

months resulting in an amended expiration date of

April 30, 2021.

The lease requires a monthly rental payment by the Company of

$2,728.

The following is a schedule of future minimum annual rental payments for the next

five

years required under this operating lease as of

March 

31,

2018:

2019	$	32,736
2020		32,736
2021		32,736
2022		2,728
2023		—
Total	$	100,936

Rental expenses for leased properties were approximately

$32,736

and

$64,400

during fiscal

2018

and

2017,

respectively. The Company leased office space in Humble, Texas for part of fiscal

2017

until the lease expired and was

not

renewed.

At

March 31, 2018,

the Company had supply agreements in place with certain suppliers that require the Company to purchase minimum quantities of steel on a monthly basis. All such agreements expire on

December 31, 2018.

The combined minimum monthly purchase requirements under these agreements fall well below the Company's anticipated monthly steel supply needs. Based on the market price of hot-rolled coil at

March 31, 2018,

the minimum purchase requirements remaining for

April 2018

to

December 2018

totaled approximately

$33,660,000.

One of the Company’s purchase agreements provides an annual rebate payable to the Company if a certain volume of material is purchased during the term of the agreement. As of

March 31, 2018,

the Company had

not

accrued a receivable related to this rebate due to the uncertainty present at that time about whether the Company would purchase the specified volume. The Company will continue to evaluate the likelihood of meeting the purchase requirements related to the annual rebate. If the Company deems receipt of the rebate to be probable, the Company will recognize the rebate on a systematic and rational basis dictated by the underlying transactions that result in progress toward earning the rebate.

In fiscal

2017,

the Company did

not

have any agreements in place requiring the purchase of certain quantities of steel.

XML

Note 5 - Earnings Per Share

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

5

.   EARNINGS PER SHARE

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

	Year Ended March 31
	2018		2017
Basic
Net earnings (loss)	$	2,759,404	$	(2,678,684	)
Weighted average common shares		7,009,444		6,851,944
Dilutive
Net earnings (loss)	$	2,759,404	$	(2,678,684	)
Weighted average common shares and common share equivalents		7,009,444		6,851,944

XML

Note 6 - Income Taxes

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6

.   INCOME TAXES

Components of tax expense (benefit) are as follows:

	Year Ended March 31
	201 8		2017
Federal
Current	$	—	$	(714,684	)
Deferred		1,178,073		(644,865	)
		1,178,073		(1,359,549	)
State
Current		38,742		—
Deferred		91,075		(112,583	)
		129,817		(112,583	)
Total	$	1,307,890	$	(1,472,132	)

The effective tax rate for fiscal

2018

was impacted by the Tax Cuts and Jobs Act (the “Tax Act”), enacted on

December 22, 2017

by the U.S. government. The Tax Act makes broad and complex changes to the U.S. tax code, including, but

not

limited to, reducing the U.S. federal corporate tax rate and repealing the deduction for domestic production activities.

The Tax Act reduced the federal corporate tax rate applicable to the Company from

34%

to

21%

effective

January 1, 2018.

In accordance with Section

15

of the Internal Revenue Code, the Company has utilized a blended rate of approximately

30.8%

to compute federal tax expense for fiscal

2018.

The blended rate is calculated by applying prorated percentages, based on the number of days prior to and subsequent to the

January 1, 2018

effective date, to the tax rate applicable for the respective pre and post effective periods. The

21%

federal corporate tax rate will apply to fiscal years ending

March 31, 2019

and each year thereafter.

As a result of the change to the corporate tax rate, the Company was required to re-measure its net deferred tax assets and liabilities using the tax rate that will apply when those amounts are expected to reverse. The re-measurement of deferred tax assets and liabilities at the new tax rate resulted in a provisional noncash tax benefit of approximately

$77,000

due to the reduction of the Company’s net deferred tax liability position. The Company previously provided an estimated provisional tax expense of approximately

$240,500

in the Form

10

-Q for the quarter ended

December 31, 2017.

The change in the provisional impact is primarily due to a change in the expected depreciation related timing differences for the pipe-finishing facility placed into service during fiscal

2018.

On

December 22, 2017,

the Securities and Exchange Commission issued Staff Accounting Bulletin

118

(“SAB

118”

), which provides guidance on accounting for tax effects of the Tax Act. SAB

118

provides a measurement period, which should

not

extend beyond

one

year form the Tax Act enactment date, for companies to complete the accounting under Accounting Standards Codification

740

(“ASC

740”

). In accordance with SAB

118,

a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC

740

is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC

740

according to the tax laws that were in effect immediately before the enactment of the Tax Act. While the Company is able to make reasonable estimates of the impact of the Tax Act, the final impact of the Tax Act

may

differ from these estimates, due to, among other things, changes in the Company’s interpretations and assumptions, additional guidance that

may

be issued and actions the Company

may

take. The accounting is expected to be complete by the time the Company’s

2017

U.S. corporate income tax return is filed in

2018.

Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustment become estimable and/or are finalized.

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

	Year Ended March 31
	201 8			2017
Income tax expense (benefit) at U.S. federal statutory rate (1)		30.8	%		(34.0%	)
Benefit due to tax reform		(2.0	)		—
Current year state and local income taxes net of federal income tax benefit		3.4			(1.7	)
Other		—			0.2
Provision for (benefit from) income taxes		32.2	%		(35.5%	)

( 1 ) The statutory rate for fiscal 2018 is a blended rate due to the Tax Cuts and Jobs Act enacted by the U.S. government on December 22, 2017.

The Company’s tax returns

may

be subject to examination by the Internal Revenue Service for the fiscal years ended

March 

31,

2015

through

March 

31,

2017.

State and local returns

may

be subject to examination for fiscal years ended

March 

31,

2014

through

March 

31,

2017.

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

	March 31
	201 8			2017
Deferred tax liabilities:
Depreciation	$	(1,053,139	)	$	(507,970	)
Total deferred tax liabilities		(1,053,139	)		(507,970	)
Deferred tax assets:
Inventory capitalization		114,428			166,979
LIFO Inventory		484,016			783,645
Postretirement benefits other than pensions		36,762			187,096
Net operating loss carryforward - Federal		184,668			343,729
Net operating loss carryforward - State		21,507			112,583
Other		108,560			79,888
Total deferred tax assets		949,941			1,673,920
Net deferred tax asset (liability)	$	(103,198	)	$	1,165,950

XML

Note 7 - Retirement Plan

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

7

.   

RETIREMENT

PLAN

The Company maintains the Friedman Industries, Inc. Employees’ Retirement and

401

(k) Plan (the “Plan”). Employees fully vest in the Plan upon

six

years of service.

The retirement portion of the Plan covers substantially all employees, including officers. The Company’s contribution expenses, which are determined at the discretion of the Board of Directors in an amount

not

to exceed

15%

of the total compensation paid during the year to all eligible employees, were

$162,000

for the year ended

March 

31,

2018,

and

$170,000

for the year ended

March 

31,

2017.

Contributions, Plan earnings and forfeitures of nonvested accounts of terminated participants are allocated to the remaining individual accounts determined by a point schedule based on years of employment with the Company.

Employees

may

participate in the

401

(k) portion of the Plan. Employees are eligible to participate in the Plan when the employee has completed

one

year of service. Under the Plan, participating employees

may

defer a portion of their pretax earnings up to certain limits prescribed by the Internal Revenue Service. The Company provides matching contributions under the provisions of the Plan. Contribution expense related to the

401

(k) portion of the Plan was approximately

$37,500

and

$32,000

for the years ended

March 

31,

2018

and

2017,

respectively.

XML

Note 8 - Industry Segment Data

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

8

.   INDUSTRY SEGMENT DATA

The Company is engaged in the steel processing, pipe manufacturing and processing and steel and pipe distribution business. Within the Company, there are

two

product groups: coil and tubular. The Company’s coil operations involve converting steel coils into flat sheet and plate steel cut to customer specifications and reselling steel coils. Through its tubular operations, the Company purchases, processes, manufactures and markets tubular products. The following is a summary of significant financial information relating to the product groups:

	Year Ended March 31
	2018			2017
NET SALES:
Coil	$	90,132,804		$	64,641,805
Tubular		31,024,474			13,114,250
TOTAL NET SALES	$	121,157,278		$	77,756,055
OPERATING PROFIT (LOSS):
Coil	$	4,026,329		$	(770,091	)
Tubular		2,024,035			(1,438,088	)
TOTAL OPERATING PROFIT (LOSS)		6,050,364			(2,208,179	)
General corporate expenses		(1,980,124	)		(2,001,642	)
Interest expense		(27,846	)		—
Interest and other income		24,900			59,005
TOTAL EARNINGS (LOSS) BEFORE INCOME TAXES	$	4,067,294		$	(4,150,816	)
IDENTIFIABLE ASSETS:
Coil	$	27,068,602		$	21,832,790
Tubular		43,010,190			37,298,800
		70,078,792			59,131,590
General corporate assets		4,284,413			4,131,707
TOTAL ASSETS	$	74,363,205		$	63,263,297
DEPRECIATION:
Coil	$	570,819		$	1,208,446
Tubular		779,590			378,077
Corporate and other		5,938			7,883
	$	1,356,347		$	1,594,406
CAPITAL EXPENDITURES:
Coil	$	35,720		$	75,889
Tubular		306,310			715,973
Corporate and other		7,154			7,469
	$	349,184		$	799,331

Operating profit (loss) is total net sales less operating expenses, excluding general corporate expenses, interest expense and interest and other income. General corporate expenses reflect general and administrative expenses

not

directly associated with segment operations and consist primarily of corporate and accounting salaries, professional fees and services, bad debts, retirement plan contribution expense, corporate insurance expenses, restricted stock plan compensation expense and office supplies. At March

31,

2018,

corporate assets consisted primarily of cash and the cash value of officers’ life insurance. At March

31,

2017,

corporate assets consisted primarily of cash, the cash value of officers' life insurance, deferred taxes and federal income taxes recoverable. Although inventory is transferred at cost between product groups, there are

no

sales between product groups. Capital expenditures were related primarily to yard improvements at the Company’s tubular division and the construction of the Company’s pipe-finishing facility located in Lone Star, Texas which was placed into service in

May 2017.

XML

Note 9 - Summary of Quarterly Results of Operations (Unaudited)

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Quarterly Financial Information [Text Block]

9

.   SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (Unaudited)

The following is a summary of unaudited quarterly results of operations for the years ended

March 

31,

2018

and

2017:

	Quarter Ended
	June 30, 2017		September 30, 2017		December 31, 2017		March 31, 2018
Net sales	$	23,083,269	$	26,077,710	$	28,033,521	$	43,962,778
Gross profit		1,263,423		1,377,170		1,669,134		3,942,170
Net earnings		170,620		310,039		122,929		2,155,816
Basic		.02		.04		.02		.31
Diluted		.02		.04		.02		.31

	Quarter Ended
	June 30, 2016			September 30, 2016			December 31, 2016			March 31, 2017
Net sales	$	22,393,764		$	18,317,506		$	15,988,745		$	21,056,040
Gross profit (loss)		(1,252,988	)		(45,711	)		571,571			535,506
Net earnings (loss)		(1,461,219	)		(603,882	)		(236,625	)		(376,958	)
Basic		(.21	)		(.09	)		(.03	)		(.06	)
Diluted		(.21	)		(.09	)		(.03	)		(.06	)

XML

Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Mar. 31, 2018

Notes to Financial Statements

SEC Schedule, 12-09, Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

FRIEDMAN INDUSTRIES, INCORPORATED

Column A	Column B		Column C				Column D		Column E
			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts— Describe(A)		Deductions— Describe(B)		Balance at End of Period
Year ended March 31, 2018
Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account)	$	27,276	$	—	$	425,140	$	431,364	$	21,052
Year ended March 31, 2017
Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account)	$	22,276	$	—	$	307,932	$	302,932	$	27,276

________________

(A) Cash discounts allowed on sales and charged against revenue.

(B) Accounts receivable written off of $1,224 and $0 and cash discounts taken on sales of $430,140 and $302,932 during fiscal years 2018 and 2017, respectively.

XML

Significant Accounting Policies (Policies)

12 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

BASIS OF CONSOLIDATION:    The consolidated financial statements include the accounts of Friedman Industries, Incorporated and its subsidiary (collectively, the “Company”). All material intercompany amounts and transactions have been eliminated.

Revenue Recognition, Policy [Policy Text Block]

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

Trade and Other Accounts Receivable, Policy [Policy Text Block]

TRADE RECEIVABLES:    The Company’s receivables are recorded when billed, advanced or accrued and represent claims against

third

parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts and cash discounts allowed, represents their estimated net realizable value. The Company estimates its allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables and existing economic conditions. Trade receivables are generally considered past due after

30

 days from invoice date. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. The balance of the Company’s allowance for doubtful accounts was

$6,052

and

$7,276

at

March 31, 2018

and

March 31, 2017,

respectively.

Inventory, Policy [Policy Text Block]

INVENTORIES:    Inventories consist of prime coil, non-standard coil and tubular materials. Prime coil and non-standard coil inventories consist primarily of raw materials and tubular inventory consists of both raw materials and finished goods. Cost for prime coil inventory is determined under the last-in,

first

-out (“LIFO”) method. The Company’s LIFO reserve was approximately

$7,290,000

and

$5,593,000

at

March 31, 2018

and

2017,

respectively. The LIFO reserve signifies the difference between LIFO value used for financial reporting and the value under weighted average cost used for the Company’s internal perpetual inventory records. During fiscal

2018

LIFO inventory was partially liquidated. The historical cost associated with the liquidated layers approximated the current fiscal

2018

costs resulting in an immaterial impact to fiscal

2018

results. Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the weighted average method. LIFO inventories are valued at the lower of cost or market. All other inventories are valued at the lower of cost or net realizable value. Obsolete or slow-moving inventories are

not

significant based on the Company’s review of inventories. Accordingly,

no

allowance has been provided for such items.

The following is a summary of inventory by product group:

	March 31
	201 8		2017
Prime coil inventory	$	6,895,756	$	8,481,605
Non-standard coil inventory		2,971,324		1,119,170
Tubular raw material		6,734,076		1,480,730
Tubular finished goods		21,438,176		23,837,045
	$	38,039,332	$	34,918,550

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

March 31, 2018,

the Company carried quantities of mill reject pipe on hand that exceeded the fiscal

2018

sales volume. Based on improved market conditions and overall economic conditions as well as recent sales trends, the Company reasonably expects the inventory to be either sold in its entirety or at least a substantial portion thereof during the ensuing fiscal year, hence current classification of this inventory on the Company’s balance sheet. The Company’s projections are subject to significant estimates which

may

be different from actual results.

Effective

April 1, 2018,

the Company will be changing from the LIFO method to the average cost method for valuation of prime coil inventory. The Company believes this change will result in financial reporting that more closely aligns with the substance of our business. The Company expects to report this change through retrospective application of the new accounting principle to all prior periods presented starting with the Form

10

-Q to be filed for the quarter ended

June 30, 2018.

The Company has

not

yet fully quantified the impact of this accounting change but expects a material impact to the consolidated financial statements upon adoption and thereafter.

Property, Plant and Equipment, Policy [Policy Text Block]

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

Buildings (in years)			20
Machinery and equipment (in years)	10	to	15
Yard improvements (in years)	5	to	15
Loaders and other rolling stock (in years)	5	to	10

During the quarter ended

June 30, 2017,

the Company determined that the economic useful lives of certain fixed assets at the Decatur, Alabama coil processing facility were greater than the useful lives used to calculate depreciation. As a result, effective

April 1, 2017,

the Company revised the useful lives of these assets resulting in a decrease in depreciation expense of approximately

$640,000,

an increase in net earnings of approximately

$406,000

and an increase in diluted earnings per share of approximately

$0.06

for fiscal

2018.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amount

may

not

be recoverable. The Company assesses recoverability by comparing the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset’s carrying amount exceeds its fair value. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.

No

impairments were necessary at

March 31, 2018

or

2017.

Maintenance and repairs are expensed as incurred.

Pension and Other Postretirement Plans, Nonpension Benefits, Policy [Policy Text Block]

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:    The Company maintains life insurance policies on each officer. From time to time and in its discretion, the Board of Directors of the Company has approved the transfer of the applicable policy to an officer upon their retirement. The Company’s accrued liability for these potential future transfers was

$175,056

and

$550,282

at

March 31, 2018

and

March 31, 2017,

respectively. The transfer of a life insurance policy to an officer is a noncash transaction.

Shipping and Handling Cost, Policy [Policy Text Block]

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

Supplemental Cash Flow Information [Policy Text Block]

SUPPLEMENTAL CASH FLOW INFORMATION:    The Company paid interest of approximately

$27,900

in fiscal

2018

and paid

no

interest in fiscal

2017.

Net of taxes paid, the Company received federal and state tax refunds totaling approximately

$959,000

in fiscal

2018.

The Company paid income taxes of approximately

$13,500

in fiscal

2017.

Noncash financing activity consisted of accrued dividends of

$140,189

and

$70,094

in fiscal

2018

and

2017,

respectively. There were noncash transactions of

$385,000

and

$293,000

in fiscal

2018

and

2017,

respectively, for the transfer of ownership of life insurance policies from the Company to officers upon their retirement.

Income Tax, Policy [Policy Text Block]

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

The Company has also analyzed tax positions taken on tax returns filed and does

not

believe that any are more likely than

not

to be overturned by the respective tax jurisdiction. Therefore,

no

liability for uncertain tax positions has been recognized.

Use of Estimates, Policy [Policy Text Block]

USE OF ESTIMATES:    The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates that are subject to the Company’s assumptions include valuation of LIFO inventories in the Company’s quarterly reporting, determination of useful lives for fixed assets and determination of the allowance for doubtful accounts. Valuation of LIFO inventories in the Company’s quarterly reporting requires estimates of the year end quantities, which is inherently difficult. 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. Actual results could differ from these estimates.

Fair Value of Financial Instruments, Policy [Policy Text Block]

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

Earnings Per Share, Policy [Policy Text Block]

EARNINGS PER SHARE:   The Company uses the

two

-class method of calculating earnings per share, which determines earnings per share for each class of common stock and participating security as if all earnings of the period had been distributed. As the holders of restricted stock are entitled to vote and receive dividends during the restriction period, unvested shares of restricted stock qualify as participating securities. Unvested restricted shares participate on an equal basis with common shares; therefore, there is

no

difference in undistributed earnings allocated to each participating security. Accordingly, unvested restricted shares are included in the basic computation of earnings per share. Net income per basic common share is computed using the weighted average number of common shares and participating securities outstanding during the period. Net income per diluted common share is computed using the weighted average number of common shares, participating securities and potential common shares outstanding during the period.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

ECONOMIC RELATIONSHIP:    The Company purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company. Coil segment sales to Trinity Industries, Inc. accounted for approximately

16%

and

28%

of total Company sales in fiscal

2018

and

2017,

respectively.

No

other customers accounted for

10%

or more of total sales in the

two

years ended

March 

31,

2018.

Loss of Trinity as a customer could have a material adverse effect on the Company’s business.

The Company’s sales are concentrated primarily in the midwestern, southwestern, and southeastern regions of the United States and are primarily to customers in the steel distributing and fabricating industries. The Company performs periodic credit evaluations of the financial conditions of its customers and generally does

not

require collateral. Generally, receivables are due within

30

 days.

New Accounting Pronouncements, Policy [Policy Text Block]

NEW ACCOUNTING PRONOUNCEMENTS:   There were

no

new accounting standards adopted by the Company during fiscal

2018.

In the

fourth

quarter of fiscal

2017,

the Company adopted Accounting Standards Update

No.

2016

-

09,

Compensation – Stock Compensation (“ASU

2016

-

09”

). ASU

2016

-

09

provided new accounting guidance that amends the accounting for employee share-based payment transactions. This new standard requires income statement recognition of all tax effects, including all excess tax benefits and tax deficiencies, resulting from the settlement of share-based awards in the reporting period in which they occur. The standard also requires that all tax-related cash flows resulting from share-based payments, including the excess tax benefits and tax deficiencies related to the settlement of stock-based awards, be classified as cash flows from operating activities, and that cash paid by directly withholding shares for tax purposes be classified as a financing activity in the statement of cash flows. The standard also allows companies to make an accounting policy election to either estimate the number of awards that are expected to vest, consistent with current guidance, or account for forfeitures as they occur. The Company elected to account for forfeitures as they occur. All aspects of this guidance has been applied prospectively for the Company beginning on

January 

1,

2017

given that the Company had

no

outstanding equity based compensation as of

January 1, 2017.

The adoption of this guidance did

not

have a material effect on the Company’s consolidated financial statements for fiscal

2018

or fiscal

2017.

In

August 2016,

the Financial Accounting Standards Board (“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. This new guidance is effective for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact that adoption of the provisions of ASU

2016

-

15

will have on its consolidated financial statements but does

not

expect a material impact.

In

February 

2016,

the FASB issued Accounting Standards Update

No.

2016

-

02,

Leases (“ASU

2016

-

02”

). ASU

2016

-

02

establishes a new lease accounting standard that requires lessees to recognize a right of use asset and related lease liability for most leases having lease terms of more than

12

months.  Leases with a term of

12

months or less will be accounted for similar to existing guidance for operating leases.  This new guidance is effective for annual and interim periods beginning after

December 

15,

2018,

but can be early adopted.  The Company is evaluating the impact that adoption of the provisions of ASU

2016

-

02

will have on its consolidated financial statements but does

not

expect a material impact.

In

May 2014,

the FASB issued Accounting Standards Update

No.

2014

-

09,

Revenue from Contracts with Customers (“ASU

2014

-

09”

). ASU

2014

-

09

states that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The update supersedes most current revenue recognition guidance, including industry-specific guidance. ASU

2014

-

09

was initially effective for interim and annual periods beginning after

December 15, 2016

and early application was

not

permitted. In

August 2015,

the FASB issued Accounting Standards Update

No.

2015

-

14,

Revenue from Contracts with Customers - Deferral of the Effective Date (“ASU

2015

-

14”

). ASU

2015

-

14

defers the effective date of ASU

2014

-

09

to annual reporting periods beginning after

December 15, 2017,

including interim reporting periods within that reporting period, and only permits entities to adopt the standard

one

year earlier as of annual reporting periods beginning after

December 15, 2016,

including interim reporting periods within that reporting period. According to the deferred effective date, the new revenue standard will become effective for the Company’s fiscal year beginning

April 1, 2018.

The Company has reviewed its significant customer contracts according to the revenue recognition process prescribed by the new standard. The standard allows the choice of

two

adoption methods, full retrospective adoption or modified retrospective adoption. 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

will be presented under the new standard, while prior period amounts won’t be adjusted and will be reported in accordance with historic accounting under the prior guidance. The Company doesn’t expect adoption of the new standard to have a financial statement impact since the Company’s revenue recognition under the new standard is substantially the same as under the prior guidance. Adoption of the new standard will result in expanded revenue disclosures. Specifically, revenues will be disaggregated beyond the segment level to provide revenues by certain product classifications within the Company’s segments.

XML

Note 1 - Summary of Significant Accounting Policies (Tables)

12 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31
	201 8		2017
Prime coil inventory	$	6,895,756	$	8,481,605
Non-standard coil inventory		2,971,324		1,119,170
Tubular raw material		6,734,076		1,480,730
Tubular finished goods		21,438,176		23,837,045
	$	38,039,332	$	34,918,550

Property, Plant and Equipment [Table Text Block]

Buildings (in years)			20
Machinery and equipment (in years)	10	to	15
Yard improvements (in years)	5	to	15
Loaders and other rolling stock (in years)	5	to	10

XML

Note 4 - Commitments and Contingencies (Tables)

12 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

2019	$	32,736
2020		32,736
2021		32,736
2022		2,728
2023		—
Total	$	100,936

XML

Note 5 - Earnings Per Share (Tables)

12 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Year Ended March 31
	2018		2017
Basic
Net earnings (loss)	$	2,759,404	$	(2,678,684	)
Weighted average common shares		7,009,444		6,851,944
Dilutive
Net earnings (loss)	$	2,759,404	$	(2,678,684	)
Weighted average common shares and common share equivalents		7,009,444		6,851,944

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Note 6 - Income Taxes (Tables)

12 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Year Ended March 31
	201 8		2017
Federal
Current	$	—	$	(714,684	)
Deferred		1,178,073		(644,865	)
		1,178,073		(1,359,549	)
State
Current		38,742		—
Deferred		91,075		(112,583	)
		129,817		(112,583	)
Total	$	1,307,890	$	(1,472,132	)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year Ended March 31
	201 8			2017
Income tax expense (benefit) at U.S. federal statutory rate (1)		30.8	%		(34.0%	)
Benefit due to tax reform		(2.0	)		—
Current year state and local income taxes net of federal income tax benefit		3.4			(1.7	)
Other		—			0.2
Provision for (benefit from) income taxes		32.2	%		(35.5%	)

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	March 31
	201 8			2017
Deferred tax liabilities:
Depreciation	$	(1,053,139	)	$	(507,970	)
Total deferred tax liabilities		(1,053,139	)		(507,970	)
Deferred tax assets:
Inventory capitalization		114,428			166,979
LIFO Inventory		484,016			783,645
Postretirement benefits other than pensions		36,762			187,096
Net operating loss carryforward - Federal		184,668			343,729
Net operating loss carryforward - State		21,507			112,583
Other		108,560			79,888
Total deferred tax assets		949,941			1,673,920
Net deferred tax asset (liability)	$	(103,198	)	$	1,165,950

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Note 8 - Industry Segment Data (Tables)

12 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Year Ended March 31
	2018			2017
NET SALES:
Coil	$	90,132,804		$	64,641,805
Tubular		31,024,474			13,114,250
TOTAL NET SALES	$	121,157,278		$	77,756,055
OPERATING PROFIT (LOSS):
Coil	$	4,026,329		$	(770,091	)
Tubular		2,024,035			(1,438,088	)
TOTAL OPERATING PROFIT (LOSS)		6,050,364			(2,208,179	)
General corporate expenses		(1,980,124	)		(2,001,642	)
Interest expense		(27,846	)		—
Interest and other income		24,900			59,005
TOTAL EARNINGS (LOSS) BEFORE INCOME TAXES	$	4,067,294		$	(4,150,816	)
IDENTIFIABLE ASSETS:
Coil	$	27,068,602		$	21,832,790
Tubular		43,010,190			37,298,800
		70,078,792			59,131,590
General corporate assets		4,284,413			4,131,707
TOTAL ASSETS	$	74,363,205		$	63,263,297
DEPRECIATION:
Coil	$	570,819		$	1,208,446
Tubular		779,590			378,077
Corporate and other		5,938			7,883
	$	1,356,347		$	1,594,406
CAPITAL EXPENDITURES:
Coil	$	35,720		$	75,889
Tubular		306,310			715,973
Corporate and other		7,154			7,469
	$	349,184		$	799,331

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Note 9 - Summary of Quarterly Results of Operations (Unaudited) (Tables)

12 Months Ended

Mar. 31, 2018

Notes Tables

Quarterly Financial Information [Table Text Block]

	Quarter Ended
	June 30, 2017		September 30, 2017		December 31, 2017		March 31, 2018
Net sales	$	23,083,269	$	26,077,710	$	28,033,521	$	43,962,778
Gross profit		1,263,423		1,377,170		1,669,134		3,942,170
Net earnings		170,620		310,039		122,929		2,155,816
Basic		.02		.04		.02		.31
Diluted		.02		.04		.02		.31

	Quarter Ended
	June 30, 2016			September 30, 2016			December 31, 2016			March 31, 2017
Net sales	$	22,393,764		$	18,317,506		$	15,988,745		$	21,056,040
Gross profit (loss)		(1,252,988	)		(45,711	)		571,571			535,506
Net earnings (loss)		(1,461,219	)		(603,882	)		(236,625	)		(376,958	)
Basic		(.21	)		(.09	)		(.03	)		(.06	)
Diluted		(.21	)		(.09	)		(.03	)		(.06	)

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Schedule II - Valuation and Qualifying Accounts (Tables)

12 Months Ended

Mar. 31, 2018

Notes Tables

Summary of Valuation Allowance [Table Text Block]

Column A	Column B		Column C				Column D		Column E
			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts— Describe(A)		Deductions— Describe(B)		Balance at End of Period
Year ended March 31, 2018
Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account)	$	27,276	$	—	$	425,140	$	431,364	$	21,052
Year ended March 31, 2017
Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account)	$	22,276	$	—	$	307,932	$	302,932	$	27,276

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Note 1 - Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended								12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2018	Mar. 31, 2017
Allowance for Doubtful Accounts Receivable, Ending Balance	$ 6,052				$ 7,276				$ 6,052	$ 7,276
Excess of Replacement or Current Costs over Stated LIFO Value	7,290,000				5,593,000				7,290,000	5,593,000
Depreciation, Total									1,356,347	1,594,406
Net Income (Loss) Attributable to Parent, Total	$ 2,155,816	$ 122,929	$ 310,039	$ 170,620	$ (376,958)	$ (236,625)	$ (603,882)	$ (1,461,219)	$ 2,759,404	$ (2,678,684)
Earnings Per Share, Diluted, Total	$ 0.31	$ 0.02	$ 0.04	$ 0.02	$ (0.06)	$ (0.03)	$ (0.09)	$ (0.21)	$ 0.39	$ (0.39)
Impairment of Long-Lived Assets Held-for-use									$ 0	$ 0
Interest Paid, Including Capitalized Interest, Operating and Investing Activities, Total									27,900	0
Income Taxes Paid, Net, Total									(959,000)
Income Taxes Paid										13,500
Dividends Payable, Current	$ 140,189				$ 70,094				140,189	$ 70,094
Unrecognized Tax Benefits, Ending Balance	0								$ 0
Trinity Industries, Inc. [Member] | Customer Concentration Risk [Member] | Sales Revenue, Product Line [Member]
Concentration Risk, Percentage									16.00%	28.00%
Transfer of Ownership of Life Insurance Policy to Retired Officer [Member]
Other Significant Noncash Transaction, Value of Consideration Given									$ 385,000	$ 293,000
Life Insurance Policies Transfer [Member]
Liability, Other Retirement Benefits	$ 175,056				$ 550,282				175,056	$ 550,282
Service Life [Member]
Depreciation, Total									(640,000)
Net Income (Loss) Attributable to Parent, Total									$ 406,000
Earnings Per Share, Diluted, Total									$ 0.06

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Note 1 - Summary of Significant Accounting Policies - Summary of Inventory by Product Group (Details) - USD ($)	Mar. 31, 2018	Mar. 31, 2017
Inventories	$ 38,039,332	$ 34,918,550
Prime Coil Inventory [Member]
Raw materials	6,895,756	8,481,605
Non-standard Coil Inventory [Member]
Raw materials	2,971,324	1,119,170
Tubular Inventory [Member]
Raw materials	6,734,076	1,480,730
Finished goods	$ 21,438,176	$ 23,837,045

XML

Note 1 - Summary of Significant Accounting Policies - Estimated Useful Lives of Various Classes of Assets (Details)	12 Months Ended
	Mar. 31, 2018
Building [Member]
Estimated useful lives (Year)	20 years
Machinery and Equipment [Member] | Minimum [Member]
Estimated useful lives (Year)	10 years
Machinery and Equipment [Member] | Maximum [Member]
Estimated useful lives (Year)	15 years
Yard Improvements [Member] | Minimum [Member]
Estimated useful lives (Year)	5 years
Yard Improvements [Member] | Maximum [Member]
Estimated useful lives (Year)	15 years
Loaders and Other Rolling Stock [Member] | Minimum [Member]
Estimated useful lives (Year)	5 years
Loaders and Other Rolling Stock [Member] | Maximum [Member]
Estimated useful lives (Year)	10 years

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Note 2 - Equity Compensation Plans and Capital Stock (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Sep. 01, 2016
Cumulative Preferred Stock [Member]
Preferred Stock, Shares Authorized		1,000,000
Preferred Stock, Par or Stated Value Per Share		$ 1
Preferred Stock, Shares Issued, Total	0	0	0
2016 Restricted Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				500,000
2016 Restricted Stock Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	0	210,000	210,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		5 years	5 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options		$ 1,444,800
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		5 years
Allocated Share-based Compensation Expense, Total		$ 288,960	$ 72,240
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance	210,000	210,000	210,000

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Note 3 - Debt (Details Textual) - Citizens National Bank [Member] - Revolving Credit Facility [Member] - USD ($)	12 Months Ended
	Mar. 31, 2018	Dec. 11, 2017
Line of Credit Facility, Maximum Borrowing Capacity		$ 7,500,000
Line of Credit Facility, Interest Rate at Period End	4.20%
Debt Instrument, Minimum Threshold of Shareholders' Equity	$ 50,000,000
Debt Instrument, Debt to Shareholders' Equity Maximum Threshold, Percent	50.00%
Long-term Line of Credit, Total	$ 0
Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	(0.55%)

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Note 4 - Commitments and Contingencies (Details Textual) - USD ($)	12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Lessee, Operating Lease, Renewal Term	3 years
Operating Lease, Monthly Payment	$ 2,728
Operating Leases, Rent Expense, Total	32,736	$ 64,400
Purchase Commitment, Remaining Minimum Amount Committed	$ 33,660,000

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Note 4 - Commitments and Contingencies - Future Minimum Annual Rental Payments Under Operating Leases (Details)	Mar. 31, 2018 USD ($)
2019	$ 32,736
2020	32,736
2021	32,736
2022	2,728
2023
Total	$ 100,936

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Note 5 - Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($)	3 Months Ended								12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2018	Mar. 31, 2017
Basic
Net Income (Loss) Attributable to Parent, Total	$ 2,155,816	$ 122,929	$ 310,039	$ 170,620	$ (376,958)	$ (236,625)	$ (603,882)	$ (1,461,219)	$ 2,759,404	$ (2,678,684)
Weighted average common shares (in shares)									7,009,444	6,851,944
Dilutive
Net earnings (loss)	$ 2,155,816	$ 122,929	$ 310,039	$ 170,620	$ (376,958)	$ (236,625)	$ (603,882)	$ (1,461,219)	$ 2,759,404	$ (2,678,684)
Weighted average common shares and common share equivalents (in shares)									7,009,444	6,851,944

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Note 6 - Income Taxes (Details Textual) - USD ($)		3 Months Ended	12 Months Ended
		Dec. 31, 2017	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2017
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	[1]			30.80%	34.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		$ 240,500		$ (77,000)
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%

[1] The statutory rate for fiscal 2018 is a blended rate due to the Tax Cuts and Jobs Act enacted by the U.S. government on December 22, 2017.

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Note 6 - Income Taxes - Components of Tax Expense (Benefit) (Details) - USD ($)	12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Federal
Current		$ (714,684)
Deferred	1,178,073	(644,865)
Total Federal Taxes	1,178,073	(1,359,549)
State
Current	38,742
Deferred	91,075	(112,583)
Total State Taxes	129,817	(112,583)
Total	$ 1,307,890	$ (1,472,132)

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Note 6 - Income Taxes - Reconciliation of Federal Statutory Income Tax Rate to Effective Tax Rate (Details)		12 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	[1]	30.80%	34.00%
Income tax expense (benefit) at U.S. federal statutory rate (1)	[1]	(30.80%)	(34.00%)
Benefit due to tax reform		(2.00%)
Current year state and local income taxes net of federal income tax benefit		3.40%	(1.70%)
Other			0.20%
Provision for (benefit from) income taxes		32.20%	(35.50%)

[1] The statutory rate for fiscal 2018 is a blended rate due to the Tax Cuts and Jobs Act enacted by the U.S. government on December 22, 2017.

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Note 6 - Income Taxes - Significant Components of Consolidated Deferred Tax Assets (Details) - USD ($)	Mar. 31, 2018	Mar. 31, 2017
Deferred tax liabilities:
Depreciation	$ (1,053,139)	$ (507,970)
Total deferred tax liabilities	(1,053,139)	(507,970)
Deferred tax assets:
Inventory capitalization	114,428	166,979
LIFO Inventory	484,016	783,645
Postretirement benefits other than pensions	36,762	187,096
Net operating loss carryforward - Federal	184,668	343,729
Net operating loss carryforward - State	21,507	112,583
Other	108,560	79,888
Total deferred tax assets	949,941	1,673,920
Net deferred tax liability	$ (103,198)
Net deferred tax asset		$ 1,165,950

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Note 7 - Retirement Plan (Details Textual) - Friedman Industries, Inc. Employee's Retirement and 401(k) Plan [Member] - UNITED STATES - USD ($)	12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Employee Service Vesting Period	6 years
Maximum Annual Contribution Percentage to Defined Contribution Plan for Eligible Employee Compensation	15.00%
Defined Contribution Plan, Cost	$ 162,000	$ 170,000
Deferred Compensation Arrangement with Individual, Requisite Service Period	1 year
Defined Benefit Plan, Plan Assets, Contributions by Employer	$ 37,500	$ 32,000

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Note 8 - Industry Segment Data - Segment Information (Details) - USD ($)	3 Months Ended								12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2018	Mar. 31, 2017
Net sales	$ 43,962,778	$ 28,033,521	$ 26,077,710	$ 23,083,269	$ 21,056,040	$ 15,988,745	$ 18,317,506	$ 22,393,764	$ 121,157,278	$ 77,756,055
Operating profit (loss)									4,042,394	(4,209,821)
Interest expense									(27,846)
Interest and other income									24,900	59,005
TOTAL EARNINGS (LOSS) BEFORE INCOME TAXES									4,067,294	(4,150,816)
Identifiable assets	74,363,205				63,263,297				74,363,205	63,263,297
Depreciation, Total									1,356,347	1,594,406
Capital expenditures									349,184	799,331
Operating Segments [Member]
Operating profit (loss)									6,050,364	(2,208,179)
Identifiable assets	70,078,792				59,131,590				70,078,792	59,131,590
Operating Segments [Member] | Coil [Member]
Net sales									90,132,804	64,641,805
Operating profit (loss)									4,026,329	(770,091)
Identifiable assets	27,068,602				21,832,790				27,068,602	21,832,790
Depreciation, Total									570,819	1,208,446
Capital expenditures									35,720	75,889
Operating Segments [Member] | Tubular [Member]
Net sales									31,024,474	13,114,250
Operating profit (loss)									2,024,035	(1,438,088)
Identifiable assets	43,010,190				37,298,800				43,010,190	37,298,800
Depreciation, Total									779,590	378,077
Capital expenditures									306,310	715,973
Corporate, Non-Segment [Member]
General corporate expenses									(1,980,124)	(2,001,642)
Identifiable assets	$ 4,284,413				$ 4,131,707				4,284,413	4,131,707
Depreciation, Total									5,938	7,883
Capital expenditures									$ 7,154	$ 7,469

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Note 9 - Summary of Quarterly Results of Operations (Unaudited) - Quarterly Information (Details) - USD ($)	3 Months Ended								12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2018	Mar. 31, 2017
Net sales	$ 43,962,778	$ 28,033,521	$ 26,077,710	$ 23,083,269	$ 21,056,040	$ 15,988,745	$ 18,317,506	$ 22,393,764	$ 121,157,278	$ 77,756,055
Gross profit	3,942,170	1,669,134	1,377,170	1,263,423	535,506	571,571	(45,711)	(1,252,988)
Net Income (Loss) Attributable to Parent, Total	$ 2,155,816	$ 122,929	$ 310,039	$ 170,620	$ (376,958)	$ (236,625)	$ (603,882)	$ (1,461,219)	$ 2,759,404	$ (2,678,684)
Basic (in dollars per share)	$ 0.31	$ 0.02	$ 0.04	$ 0.02	$ (0.06)	$ (0.03)	$ (0.09)	$ (0.21)	$ 0.39	$ (0.39)
Earnings Per Share, Diluted, Total	$ 0.31	$ 0.02	$ 0.04	$ 0.02	$ (0.06)	$ (0.03)	$ (0.09)	$ (0.21)	$ 0.39	$ (0.39)

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Schedule II - Valuation and Qualifying Accounts (Details Textual) - USD ($)	12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Allowance for Doubtful Accounts Receivable, Write-offs	$ 1,224	$ 0
Cash Discount on Sales	$ 430,140	$ 302,932

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Schedule II - Valuation and Qualifying Accounts - Valuation and Qualifying Accounts (Details) - USD ($)		12 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Beginning of Period		$ 27,276	$ 22,276
Additions Charged to Costs and Expenses
Additions Charged to Other Accounts	[1]	425,140	307,932
Deductions	[2]	431,364	302,932
End of Period		$ 21,052	$ 27,276

[1] Cash discounts allowed on sales and charged against revenue.

[2] Accounts receivable written off of $1,224 and $0 and cash discounts taken on sales of $430,140 and $302,932 during fiscal years 2018 and 2017, respectively.