FRIEDMAN INDUSTRIES INC
10-Ks and 10-Qs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
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
(Exact name of registrant as specified in its charter)
|
|
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
|
|
(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
|
Trading Symbol |
Name of each exchange
on which registered |
|
|
|
|
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
☒
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
☒
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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.
☐
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.
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
|
Emerging growth company
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes
☐
No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
☐
No ☒
The aggregate market value of the Common Stock held by non-affiliates of the registrant as of September 30, 2022 (based upon the closing price on the NYSE American on September 30, 2022) was approximately $
49.1
million.
The number of shares of the registrant’s Common Stock outstanding at July 14, 2023 was
7,375,588
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders of Friedman Industries, Incorporated for the fiscal year ended March 31, 2023 — Part II.
PART I
Item 1. Business
General
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 13of the Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2023, which financial statements are incorporated herein by reference in Item 8 hereof.
Coil
Products
The coil product segment consists of the operation of five hot-rolled coil processing facilities located in Hickman, Arkansas; Decatur, Alabama; East Chicago, Indiana; Granite City, Illinois and Sinton, Texas. The facilities in Granite City and East Chicago were acquired on April 30, 2022 from Plateplus, Inc ("Plateplus"). More information about the Plateplus transaction can be found in Note 2 of the Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2023. The facility in Sinton is a newly constructed facility that commenced operations during October 2022. The Hickman, Granite City and East Chicago facilities operate temper mills and cut-to-length lines. The Decatur and Sinton facilities operate stretcher leveler cut-to-length lines. The equipment at all locations improve the flatness and surface quality of the coils and cut the coils into sheet and plate of prescribed lengths. On a combined basis, the facilities are capable of cutting sheet and plate with thicknesses ranging from 16 gauge to 1” thick in widths ranging from 36” wide to 96” wide. The vast majority of the coil product segment's revenue is generated from sales of Company owned inventory but the segment also generates revenue from the processing or storage of customer owned coils on a fee basis.
The coil processing facilities are substantially similar with respect to products produced. The Company makes shipments of coil products based on which facility offers the desired product or, if the product is available at multiple 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 capable of applying threads and couplings to oil country tubular goods and performing other services that are customary in the pipe finishing process. The pipe finishing facility is currently idled. All of the tubular segment's revenue is generated from sales of Company owned inventory.
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.
2
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
|
Fiscal 2023 | Fiscal 2022 | ||||||
|
Coil Products
|
89 | % | 81 | % | ||||
|
Tubular Products
|
11 | % | 19 | % | ||||
Coil Products.
The Company sells coil products and processing or storage services to approximately 520 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. In fiscal years 2023 and 2022, sales of coil products to O'Neal Steel accounted for approximately 15% and 11% of the Company's total sales, respectively. No other individual coil products customer accounted for 10% or more of the Company's total sales for either of the two fiscal years.
The Company sells all of its coil products through its own sales force. At March 31, 2023, the sales force was comprised of the Vice President of Sales – Coil Divisions and 23 sales personnel.
Tubular Products.
The Company sells its tubular products nationally to approximately 95 customers. The Company’s principal customers for these products are steel and pipe distributors. In fiscal years 2023 and 2022, no individual tubular customer accounted for 10% or more of the Company’s total sales.
The Company sells all of its tubular products through its own sales force. At March 31, 2023, the sales force was comprised of the Vice President and General Manager – Tubular Division and two sales personnel.
Competition
The Company is engaged in a non-seasonal, highly-competitive business. The Company competes with other processors of hot-rolled steel coils, tubular manufacturers, steel distributors and brokers.
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.
Human Capital
Employee Base
At March 31, 2023, the Company had 234 full-time employees and 1 part-time employee, of which 59 were salaried and 176 were hourly wage earners. At March 31, 2022, the Company had 98 full-time employees and 1 part-time employee, of which 22 were salaried and 77 were hourly wage earners. All of the Company's employees are based in the United States.
Talent Management and Diversity
The Company's success and growth depend in large part on our ability to attract, develop, and retain a diverse population of talented employees at all levels of our organization. Our goal is to foster an inclusive and respectful work environment where employees are comfortable to express ideas and openly communicate throughout the organization with the goal of continuously improving our company. Our compensation programs are designed to ensure that we attract and retain the right talent and are focused on rewarding employees based on their individual performance as well as company performance that is made possible by their efforts. Our employee benefits programs are structured to provide competitive benefits that are effective in attracting and retaining talent and that address the needs of a diverse employee base.
Safety and Wellness
The health and safety of our workforce is fundamental to the success of our company. We have established policies and work procedures aimed at ensuring the safety of our employees. We seek to have our employees actively engaged in the safety process through initial trainings and ongoing regular meetings. We believe safety is a shared responsibility of everyone within our organization. The Company recognizes the importance of our employees' wellness and provides industry leading benefit programs and employee policies that help ensure employees' physical, mental and work-life balance needs are met.
Executive Officers of the Company
The following table sets forth as of March 31, 2023, 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
|
||
|
Michael J. Taylor
|
64
|
President and Chief Executive Officer since September 2019; formerly Interim President and Interim Chief Executive Officer since February 2019; Chairman of the Board of Directors since June 2017; member of the Board of Directors since December 2016
|
||
|
Alex LaRue
|
37
|
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
|
3
Item 1A. Risk Factors
Not required.
Item 1B. Unresolved Staff Comments
None.
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
|
5,100 sq. feet
|
Leased(2)
|
|||
|
Hickman, Arkansas
|
|
|
|||
|
Plant and Warehouse — Coil Products
|
64,600 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)
|
|
||
| Sinton, Texas | |||||
| Plant and Warehouse | 70,000 sq. feet | Leasehold Improvement (3) | |||
| Offices — Coil Products | 3,100 sq. feet | Leasehold Improvement (3) | |||
| Land — Coil Products | 26.5 acres | Leased (3) | |||
| East Chicago, Indiana | |||||
| Plant and Warehouse | 150,900 sq. feet | Owned (1) | |||
| Offices — Coil Products | 3,200 sq. feet | Owned (1) | |||
| Land — Coil Products | 5.0 acres | Owned (1) | |||
| Granite City, Illinois | |||||
| Plant and Warehouse | 321,000 sq. feet | Leasehold Improvement (4) | |||
| Offices — Coil Products | 4,400 sq. feet | Leasehold Improvement (4) | |||
| Land — Coil Products | 31.1 acres | Leased(4) |
|
(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, expires on April 30, 2024, and requires a monthly rental payment by the Company of approximately $5,000.
|
| (3) | The associated lease is a 99 year lease with Steel Dynamics Inc. that calls for an annual rental payment of $1 and has an expiration date of February 19, 2120. |
| (4) | The associated lease is with America's Central Port District and was assigned to the Company during the acquisition of this facility. The lease expires on August 31, 2023 and requires a quarterly rental payment of approximately $19,000. The Company is in the process of extending this lease . |
Item 3. Legal Proceedings
The Company is not, and during fiscal year 2023 was not, a party to, nor is its property the subject of, any material pending legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
4
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, 2023, 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 April 28, 2023 was 170. 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, 2023, 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, 2023, are hereby incorporated herein by reference:
Consolidated Balance Sheets — March 31, 2023 and 2022
Consolidated Statements of Operations — Years ended March 31, 2023 and 2022
Consolidated Statements of Comprehensive Income — Years ended March 31, 2023 and 2022
Consolidated Statements of Stockholders’ Equity — Years ended March 31, 2023 and 2022
Consolidated Statements of Cash Flows — Years ended March 31, 2023 and 2022
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
The following supplementary schedule for the Company for the years ended March 31, 2023 and 2022, is incorporated herein by reference above in this Item 8 from the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2023.
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.
Item 9A. Controls and Procedures
Information with respect to Item 9A is hereby incorporated herein by reference from the sections of the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2023, entitled “
Evaluation of Disclosure Controls and Procedures
” and “
Management's Report on Internal Control Over Financial Reporting
”.
Item 9B. Other Information
None.
5
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 2023 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 2023 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 2023 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 2023 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 2023 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 2023 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 3 — 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, 2023.
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 2023 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 2023 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 2023 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 2023 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 2023 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 2023 fiscal year.
6
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, 2023, which is incorporated herein by reference:
Consolidated Balance Sheets — March 31, 2023 and 2022
Consolidated Statements of Operations — Years ended March 31, 2023 and 2022
Consolidated Statements of Comprehensive Income — Years ended March 31, 2023 and 2022
Consolidated Statements of Stockholders’ Equity — Years ended March 31, 2023 and 2022
Consolidated Statements of Cash Flows — Years ended March 31, 2023 and 2022
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2. Financial Statement Schedules
The following financial statement schedule is included in the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2023, which is incorporated herein by reference:
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.
7
3. Exhibits
8
|
**101.INS
|
—
|
Inline XBRL Instance Document.
|
|
|
**101.SCH
|
—
|
Inline XBRL Taxonomy Schema Document.
|
|
|
**101.CAL
|
—
|
Inline XBRL Calculation Linkbase Document.
|
|
|
**101.DEF
|
—
|
Inline XBRL Definition Linkbase Document.
|
|
|
**101.LAB
|
—
|
Inline XBRL Label Linkbase Document.
|
|
|
**101.PRE
|
—
|
Inline XBRL Presentation Linkbase Document.
|
|
| **104 | — | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
|
**
|
Filed herewith.
|
9
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/ MICHAEL J. TAYLOR
|
||
|
|
Michael J. Taylor
|
||
|
|
President and
Chief Executive Officer
|
||
|
Dated:
July
14
, 2023
|
|||
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/ MICHAEL J. TAYLOR
|
President and Chief Executive Officer and
|
July 14 , 2023 | ||
| Michael J. Taylor | Director (Principal Executive Officer) | |||
|
/S/ ALEX LARUE
|
Chief Financial Officer — Secretary and
|
July 14 , 2023 | ||
| Alex LaRue | Treasurer (Principal Financial Officer | |||
| and Principal Accounting Officer) | ||||
|
/S/ DURGA D. AGRAWAL
|
Director
|
July 14 , 2023 | ||
| Durga D. Agrawal | ||||
|
/S/ MAX REICHENTHAL
|
Director
|
July 14 , 2023 | ||
| Max Reichenthal | ||||
| /S/ SANDY SCOTT | Director | July 14 , 2023 | ||
| Sandy Scott | ||||
|
/S/ JOEL SPIRA
|
Director
|
July 14 , 2023 | ||
| Joel Spira | ||||
|
/S/ TIM STEVENSON
|
Director
|
July 14 , 2023 | ||
| Tim Stevenson | ||||
| /S/ SHARON TAYLOR | Director | July 14 , 2023 | ||
| Sharon Taylor | ||||
|
/S/ JOE L. WILLIAMS
|
Director
|
July 14 , 2023 | ||
| Joe L. Williams |
10
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships, Related Transactions and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement Schedules