ITEM 1. BUSINESS
Friedman Industries, Incorporated (the "Company"), a Texas corporation incorporated in 1965, is in the pipe manufacturing and processing, steel processing and steel and pipe distribution business.
The Company has two product and service groups: coil and tubular products. Significant financial information relating to the Company's product and service groups for the last three years is contained in Note 7 of the Consolidated Financial Statements of the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2002, which financial statements are incorporated herein by reference in Item 8 hereof.
Coil Products
The Company purchases hot-rolled steel coils, processes the coils into steel sheet and plate and sells these products on a wholesale, rapid-delivery basis in competition with steel mills, importers and steel service centers. The Company also processes customer-owned coils on a fee basis. The Company has coil processing plants located at Lone Star, Texas and Hickman, Arkansas. At each plant, the steel coils are processed through a cut-to-length line which levels the steel and cuts it to prescribed lengths. The Company's processing machinery is heavy, mill-type equipment capable of processing steel coils weighing up to 25 tons. Coils are processed to the specifications required for a particular order. Shipments are made via unaffiliated truckers or by rail and, in times of normal supply and market conditions, can generally be made within 48 hours of receipt of the customer's order.
At its Lone Star facility, the Company purchases hot-rolled steel coils primarily from Lone Star Steel Company ("LSS"), which is located approximately four miles from the Company's Lone Star plant. The Lone Star plant purchases its supply of steel from LSS and other suppliers at competitive prices determined at the time of purchase. Loss of LSS as a source of coil supply could have a material adverse effect on the Company's business.
At the Company's Hickman facility, the Company warehouses and processes hot-rolled steel coils which are purchased primarily from Nucor Steel Company ("NSC"), which is located approximately one-half mile from the Hickman facility. In addition, since December 2001, the Company's newly-formed XSCP Division located in Hickman purchases and markets excess prime and secondary hot-rolled coils received from NSC. Loss of NSC as a source of coil supply could have a material adverse effect on the Company's business.
At the Lone Star facility, the Company maintains three cut-to-length lines and a coil-to-coil 2-Hi temper pass mill. This equipment is capable of processing steel up to 84 inches wide and up to one-half inch thick. The Hickman facility operates a cut-to-length line which has 84 inch wide and one-half inch thick capability. The Company also operates a 2-Hi temper pass mill at the Hickman facility that is capable of processing steel up to 74 inches wide and one-half inch thick in a coil-to-coil mode or directly from coil to cut-to-length processing.
In November 2001, the Company ceased operations at its coil processing facility in Houston, Texas.
Tubular Products
Through its Texas Tubular Products Division ("TTP") in Lone Star, Texas, the Company manufactures, purchases, processes and markets tubular products.
TTP operates a pipe mill that is capable of producing pipe from 2 3/8 inches to 8 5/8 inches in outside diameter. The pipe mill is API-licensed to manufacture line and oil country pipe and also manufactures pipe for structural and piling purposes that meets recognized industry standards. TTP employs various pipe processing equipment including threading and beveling machines, pipe handling equipment and other related machinery. This machinery can process pipe up to 13 3/8 inches in outside diameter.
The Company currently manufactures and sells substantially all of its line and oil country pipe to LSS pursuant to orders received from LSS. In addition, LSS sells pipe to the Company for structural applications for some sizes of pipe that exceed the capability of the pipe mill.
The Company also purchases a substantial portion of its annual supply of pipe and coil material used in pipe production from LSS. The Company can make no assurances as to the amounts of pipe and coil material that will be available from LSS in the future. Loss of LSS as a source of supply or as a customer 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 three fiscal years:
Coil Products. The Company's coil products are sold to approximately 360 customers located primarily in the midwestern, southwestern and southeastern sections of the United States. The Company's principal customers for these products and services are steel distributors and customers fabricating steel products such as storage tanks, steel buildings, farm machinery and equipment, construction equipment, transportation equipment, conveyors and other similar products. During each of the fiscal years ended March 31, 2002, 2001 and 2000, six, seven and six customers, respectively, accounted for approximately 25% of the Company's sales of coil products. No coil product customer accounted for as much as 10% of the Company's total sales during those years.
The Company sells substantially all of its coil products through its own sales force. At March 31, 2002, the sales force was comprised of a vice president and four professional sales personnel under the direction of the senior vice president of sales and marketing. Salesmen are paid on a salary and commission basis.
Shipments of particular products are made from the facility offering the product desired. If the product is available at more than one facility, other factors such as location of the customer, productive capacity of the facility and activity of the facility enter into the decision regarding shipments. The Company regularly contracts on a quarterly basis with many of its larger customers to supply minimum quantities of steel.
Tubular Products. Tubular products are sold nationally to approximately 340 customers. The Company's principal customers of these products are steel and pipe distributors, piling contractors and LSS. Sales of pipe to LSS accounted for approximately 13% of the Company's total sales in fiscal 2002.
The Company sells its tubular products through its own sales force comprised of a vice president and three professional sales personnel under the direction of the senior vice president of sales and marketing. Salesmen are paid on a salary and commission basis.
Competition
The Company is engaged in a non-seasonal, highly-competitive business. The Company competes with steel mills, importers and steel service centers. 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 in times of normal supply and market conditions 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, 2002, the Company had approximately 130 full-time employees.
Executive Officers of the Company
The following table sets forth the name, age, officer positions and family relationships, if any, of each executive officer of the Company and period during which each officer has served in such capacity:
ITEM 2.
ITEM 2. PROPERTIES
The principal properties of the Company are described in the following table:
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(1) All of the Company's owned real estate, plants and offices are held in fee and are not subject to any mortgage or deed of trust.
(2) The real estate lease is with LSS and its affiliate, Texas & Northern Railway, Inc., and expires August 31, 2010. The lease provides for monthly payments of $1,667 adjusted each January 1 for changes in the Consumer Price Index. The Company has an exclusive option to purchase this property through December 31, 2002.
(3) The office lease is with a nonaffiliated party, expires April 30, 2008, and provides for an annual rental of $27,264.
(4) In November 2001, the Company closed its coil products facility in Houston, Texas. The Company intends to sell these assets.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is its property the subject of, any material pending legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded principally on the American Stock Exchange (Symbol: FRD).
Reference is hereby made to the sections of the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2002, 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 information required by Item 201(d) of Regulation S-K is hereby incorporated herein by reference from Item 12 of this report.
The approximate number of shareholders of record of Common Stock of the Company as of April 26, 2002 was 530.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to Item 6 is hereby incorporated herein by reference from the section of the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2002, entitled "Selected Financial Data".
ITEM 7.
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, 2002, entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations".
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not material
ITEM 8.
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, 2002, are hereby incorporated herein by reference:
Consolidated Balance Sheets -- March 31, 2002 and 2001
Consolidated Statements of Earnings -- Years ended March 31, 2002, 2001 and 2000
Consolidated Statements of Stockholders' Equity -- Years ended March 31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows -- Years ended March 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements -- March 31, 2002
Report of Independent Auditors
Information with respect to supplementary financial information relating to the Company appears in Note 8 -- 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, 2002.
The following supplementary schedule for the Company for the year ended March 31, 2002, 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 Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Item 10 is hereby incorporated herein by reference from the Company's proxy statement in respect of the 2002 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the Securities and Exchange Commission on or before 120 days after the end of the Company's 2002 fiscal year.
ITEM 11.
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 2002 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the Securities and Exchange Commission on or before 120 days after the end of the Company's 2002 fiscal year.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Item 12 is hereby incorporated herein by reference from the Company's proxy statement in respect of the 2002 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the Securities and Exchange Commission on or before 120 days after the end of the Company's 2002 fiscal year.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Item 13 is hereby incorporated herein by reference from the Company's proxy statement in respect of the 2002 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the Securities and Exchange Commission on or before 120 days after the end of the Company's 2002 fiscal year.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents included in this report
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* Management contract or compensation plan.
** Filed herewith.
Copies of exhibits filed as a part of this Annual Report on Form 10-K may be obtained by shareholders of record at a charge of $.10 per page. Direct inquiries to: Benny Harper, Senior Vice President -- Finance, Friedman Industries, Incorporated, P. O. Box 21147, Houston, Texas 77226.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal 2002:
None
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, in the City of Houston, and State of Texas, this 28th day of June, 2002.
FRIEDMAN INDUSTRIES, INCORPORATED
By: /s/ JACK FRIEDMAN ---------------------------------- Jack Friedman Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated on behalf of Friedman Industries, Incorporated in the City of Houston, and State of Texas.
FRIEDMAN INDUSTRIES, INCORPORATED HOUSTON, TEXAS
ANNUAL REPORT ON FORM 10-K YEAR ENDED MARCH 31, 2002
ITEM 14(a)1 AND 2
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FORM 10-K
ITEM 14(a)1 AND 2
FRIEDMAN INDUSTRIES, INCORPORATED LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements of the Company are set forth herewith in response to Item 14(a)1 and 2 of this report.
Consolidated Balance Sheets -- March 31, 2002 and 2001
Consolidated Statements of Earnings -- Years ended March 31, 2002, 2001 and 2000
Consolidated Statements of Stockholders' Equity -- Years end March 31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows -- Years ended March 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements -- March 31, 2002
Report of Independent Auditors
The following financial statement schedule of the Company is included in this report.
S-1-Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FRIEDMAN INDUSTRIES, INCORPORATED
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(A) Accounts and notes receivable written off.
S-1
EXHIBIT INDEX
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* Management contract or compensation plan.
** Filed herewith.