EX-13.1 2 h16080exv13w1.txt ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13.1 THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED MARCH 31, 2004 FRIEDMAN INDUSTRIES INCORPORATED 2004 ANNUAL REPORT FRIEDMAN INDUSTRIES, INCORPORATED FINANCIAL HIGHLIGHTS
2004 2003 ------------ ------------ Net sales................................ $116,158,567 $106,082,738 Net earnings............................. $2,535,991 $1,432,017 Net earnings per share (Basic)........... $0.33 $0.19 Cash dividends per share................. $0.10 $0.09 Stockholders' equity..................... $33,031,604 $31,246,751 Stockholders' equity per share........... $4.36 $4.13 Working capital.......................... $25,189,938 $23,734,112
TO OUR SHAREHOLDERS: In the fourth quarter of fiscal 2004, the Company benefited from stronger market conditions for its products and from inventory reductions which resulted in substantially improved earnings. Steel costs in this quarter increased at a rate not experienced before but strong demand allowed the Company to pass along these increased costs. Currently, the costs for material remain high and demand appears to be holding. Since we do not know how long this market will last, the Company continues to closely monitor its inventory positions. You are cordially invited to attend the Annual Meeting of Shareholders to be held on September 9, 2004. The meeting will be held at 11:00 a.m. in the offices of Fulbright & Jaworski L.L.P., 1301 McKinney, Suite 5100, Houston, Texas. Sincerely, -s- JACK FRIEDMAN Jack Friedman Chairman of the Board and Chief Executive Officer 1 FRIEDMAN INDUSTRIES, INCORPORATED OFFICERS Jack Friedman Chairman of the Board and Chief Executive Officer Harold Friedman Vice Chairman of the Board William E. Crow President and Chief Operating Officer Benny B. Harper Senior Vice President -- Finance and Secretary/Treasurer Thomas N. Thompson Senior Vice President -- Sales and Marketing Ronald L. Burgerson Vice President Dale Ray Vice President Howard Henderson Vice President of Operations -- Texas Tubular Division Robert Sparkman Vice President of Sales -- Coil Divisions Dan Vivian Vice President of Operations -- Hickman Coil Facility Charles W. Hall Assistant Secretary COMPANY OFFICES AND WEB SITE CORPORATE OFFICE 4001 Homestead Road Houston, Texas 77028 713-672-9433 SALES OFFICE -- COIL PRODUCTS 1121 Judson Road Longview, Texas 75606 903-758-3431 SALES OFFICE -- TUBULAR PRODUCTS P.O. Box 0388 Lone Star, Texas 75668 903-639-2511 WEB SITE www.friedmanindustries.com COUNSEL Fulbright & Jaworski L.L.P. 1301 McKinney, Suite 5100 Houston, Texas 77010 AUDITORS Ernst & Young LLP 1401 McKinney, Suite 1200 Houston, Texas 77010 TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10007 DIRECTORS Jack Friedman Chairman of the Board and Chief Executive Officer Harold Friedman Vice Chairman of the Board William E. Crow President and Chief Operating Officer Charles W. Hall Fulbright & Jaworski L.L.P. (law firm) Houston, Texas Alan M. Rauch President, Ener-Tex International, Inc. (oilfield equipment sales) Houston, Texas Hershel M. Rich Private investor and business consultant Houston, Texas Kirk K. Weaver Business advisor Houston, Texas Joe L. Williams Managing Director, Acordia of Texas, Inc. (insurance and risk management) 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, 2004 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WRITTEN REQUESTS SHOULD BE ADDRESSED TO: BENNY B. HARPER, SENIOR VICE PRESIDENT, FRIEDMAN INDUSTRIES, INCORPORATED, P.O. BOX 21147, HOUSTON, TEXAS 77226. 2 FRIEDMAN INDUSTRIES, INCORPORATED DESCRIPTION OF BUSINESS Friedman Industries, Incorporated is engaged in pipe manufacturing and processing, steel processing and steel and pipe distribution. At its facilities in Lone Star, Texas, and Hickman, Arkansas, the Company processes hot-rolled steel coils into flat, finished 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. In addition, through its XSCP Division located in Hickman, Arkansas, the Company purchases and markets non-standard hot-rolled coils received from Nucor Steel Company ("NSC"). The Company purchases a substantial amount of its annual coil tonnage from Lone Star Steel Company ("LSS") and NSC. Loss of LSS or NSC as a source of coil supply could have a material adverse effect on the Company's business. The Company sells its coil products and processing services directly through the Company's own sales force to approximately 280 customers located primarily in the midwestern, southwestern and southeastern sections of the United States. These products and services are sold principally to steel distributors and to customers fabricating steel products such as storage tanks, steel buildings, farm machinery and equipment, construction equipment, transportation equipment, conveyors and other similar products. The Company, through its Texas Tubular Products Division located in Lone Star, Texas, manufactures, purchases, processes and markets tubular products ("pipe"). The Company sells pipe nationally to approximately 330 customers and sells a substantial amount of manufactured pipe to LSS. The Company purchases a substantial portion of its annual supply of pipe and coil material used in pipe production from LSS. Loss of LSS as a source of such pipe and coil material supply or as a customer of manufactured pipe 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 7 of Notes to the Company's Consolidated Financial Statements appearing herein. ------------------ RANGE OF HIGH AND LOW SALES PRICES OF COMMON STOCK
FISCAL 2004 FISCAL 2003 ---------------- ---------------- HIGH LOW HIGH LOW ---- ---- ---- ---- First Quarter............................................... 2.75 2.30 3.09 2.55 Second Quarter.............................................. 3.64 2.53 2.88 2.37 Third Quarter............................................... 3.50 2.88 2.53 2.30 Fourth Quarter.............................................. 4.45 3.15 2.55 2.34
------------------ CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
FISCAL 2004 FISCAL 2003 ----------- ----------- First Quarter............................................... $.03 $.02 Second Quarter.............................................. $.03 $.02 Third Quarter............................................... $.02 $.03 Fourth Quarter.............................................. $.02 $.02
------------------ The Company's Common Stock is traded principally on the American Stock Exchange (trading symbol FRD). The approximate number of shareholders of record of the Company as of April 30, 2004 was 460. 3 FRIEDMAN INDUSTRIES, INCORPORATED CONSOLIDATED BALANCE SHEETS ASSETS
MARCH 31 ---------------------------- 2004 2003 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents.............................. $ 1,984,763 $ 673,127 Accounts receivable, net of allowances for bad debts and cash discounts of $44,776 and $7,276 in 2004 and 2003, respectively................................... 14,688,702 9,966,061 Inventories............................................ 21,043,992 24,032,268 Other.................................................. 112,244 98,044 ------------ ------------ TOTAL CURRENT ASSETS.............................. 37,829,701 34,769,500 PROPERTY, PLANT, AND EQUIPMENT: Land................................................... 437,793 437,793 Buildings and yard improvements........................ 4,088,149 4,063,579 Machinery and equipment................................ 18,013,461 17,216,823 Less accumulated depreciation.......................... (15,846,288) (14,930,027) ------------ ------------ 6,693,115 6,788,168 OTHER ASSET: Cash value of officers' life insurance................. 1,302,613 1,221,258 Deferred income taxes.................................. 202,694 -- ------------ ------------ TOTAL ASSETS...................................... $ 46,028,123 $ 42,778,926 ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31 ---------------------------- 2004 2003 ------------ ------------ CURRENT LIABILITIES: Accounts payable and accrued expenses.................. $ 10,204,653 $ 9,870,888 Current portion of long-term debt...................... 63,037 68,496 Dividends payable...................................... 151,500 151,460 Income taxes payable................................... 1,134,433 406,620 Contribution to profit sharing plan.................... 280,000 260,000 Employee compensation and related expenses............. 806,140 277,924 ------------ ------------ TOTAL CURRENT LIABILITIES......................... 12,639,763 11,035,388 LONG-TERM DEBT, less current portion........................ -- 57,329 DEFERRED INCOME TAXES....................................... -- 283,458 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS................. 356,756 156,000 STOCKHOLDERS' EQUITY: Common stock, par value $1: Authorized shares -- 10,000,000 Issued and outstanding shares -- 7,575,239 in 2004 and 7,573,239 in 2003............................. 7,575,239 7,573,239 Additional paid-in capital............................. 27,714,669 27,710,369 Retained deficit....................................... (2,258,304) (4,036,857) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY........................ 33,031,604 31,246,751 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 46,028,123 $ 42,778,926 ============ ============
See accompanying notes. 4 FRIEDMAN INDUSTRIES, INCORPORATED CONSOLIDATED STATEMENTS OF EARNINGS
YEAR ENDED MARCH 31 ----------------------------------------- 2004 2003 2002 ------------ ------------ ----------- Sales........................................... $116,158,567 $106,082,738 $97,817,956 Costs and expenses: Cost of products sold...................... 107,316,507 99,667,017 91,890,596 Selling, general, and administrative....... 5,020,993 4,283,973 4,317,313 Interest expense........................... 35,253 71,700 278,719 ------------ ------------ ----------- 112,372,753 104,022,690 96,486,628 ------------ ------------ ----------- 3,785,814 2,060,048 1,331,328 Interest and other income....................... 56,595 109,674 92,974 ------------ ------------ ----------- EARNINGS BEFORE FEDERAL INCOME TAXES............................... 3,842,409 2,169,722 1,424,302 Federal income taxes: Current.................................... 1,792,570 935,807 450,263 Deferred................................... (486,152) (198,102) 34,000 ------------ ------------ ----------- 1,306,418 737,705 484,263 ------------ ------------ ----------- NET EARNINGS.......................... $ 2,535,991 $ 1,432,017 $ 940,039 ============ ============ =========== Average number of common shares outstanding: Basic......................................... 7,574,070 7,572,239 7,571,239 Diluted....................................... 7,640,546 7,589,900 7,571,239 Net earnings per share: Basic......................................... $ .33 $ .19 $ .12 Diluted....................................... $ .33 $ .19 $ .12
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL RETAINED COMMON PAID-IN EARNINGS STOCK CAPITAL (DEFICIT) ---------- ----------- ----------- BALANCE AT MARCH 31, 2001............... $7,568,839 $27,703,829 $(4,894,518) Net earnings...................................... -- -- 940,039 Issuance of Directors' shares..................... 2,400 3,480 -- Cash dividends ($0.11 per share).................. -- -- (832,718) ---------- ----------- ----------- BALANCE AT MARCH 31, 2002............... 7,571,239 27,707,309 (4,787,197) Net earnings...................................... -- -- 1,432,017 Issuance of Directors' shares..................... 2,000 3,060 -- Cash dividends ($0.09 per share).................. -- -- (681,677) ---------- ----------- ----------- BALANCE AT MARCH 31, 2003............... 7,573,239 27,710,369 (4,036,857) Net earnings...................................... -- -- 2,535,991 Issuance of Directors' shares..................... 2,000 4,300 -- Cash dividends ($0.10 per share).................. -- -- (757,438) ---------- ----------- ----------- BALANCE AT MARCH 31, 2004............... $7,575,239 $27,714,669 $(2,258,304) ========== =========== ===========
See accompanying notes. 5 FRIEDMAN INDUSTRIES, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31 --------------------------------------- 2004 2003 2002 ----------- ----------- ----------- OPERATING ACTIVITIES Net earnings....................... $ 2,535,991 $ 1,432,017 $ 940,039 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation.................. 916,260 967,003 903,050 Directors' shares issued...... 6,300 5,060 5,830 Deferred taxes................ (486,152) (198,102) 34,000 Change in post retirement benefits.................... 200,756 (7,000) -- Gain on disposal of property, plant, and equipment........ -- -- (24,660) Changes in operating assets and liabilities: Accounts receivable........... (4,722,641) (2,480,844) 3,099,518 Inventories................... 2,988,276 (530,067) 5,315,174 Other assets.................. (14,200) 37,632 24,467 Accounts payable and accrued expenses.................... 333,765 517,502 (1,090,462) Contribution to profit sharing plan........................ 20,000 -- (28,000) Employee compensation and related expenses............ 528,216 91,136 (73,211) Federal income taxes payable..................... 727,813 319,148 (39,737) ----------- ----------- ----------- Net cash provided by operating activities.................. 3,034,384 153,485 9,066,008 INVESTING ACTIVITIES Purchase of property, plant, and equipment........................ (821,209) (604,735) (1,245,180) Proceeds from sale of asset........ -- -- 42,118 Increase in cash value of officers' life insurance................... (81,354) (81,184) (75,612) ----------- ----------- ----------- Net cash used in investing activities.................. (902,563) (685,919) (1,278,674) FINANCING ACTIVITIES Cash dividends paid................ (757,398) (605,782) (1,059,704) Proceeds from borrowings of long-term debt................... 2,000,000 104,239 101,250 Principal payments on long-term debt............................. (2,062,787) (2,865,747) (2,814,062) Payments on loans against life insurance........................ -- (111,043) -- ----------- ----------- ----------- Net cash used in financing activities.................. (820,185) (3,478,333) (3,772,516) ----------- ----------- ----------- Increase (decrease) in cash and cash equivalents........ 1,311,636 (4,010,767) 4,014,818 Cash and cash equivalents at beginning of year................ 673,127 4,683,894 669,076 ----------- ----------- ----------- Cash and cash equivalents at end of year................. $ 1,984,763 $ 673,127 $ 4,683,894 =========== =========== ===========
See accompanying notes. 6 FRIEDMAN INDUSTRIES, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2004 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: Revenues are recognized upon shipment of products. The terms of shipments made by the Company are free on board shipping point. 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, 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. Past-due receivable balances are written-off when the Company's internal collection efforts have been unsuccessful in collecting the amount due. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. INVENTORIES: Inventories consist of prime coil, non-standard coil and tubular materials. Prime coil inventory consists primarily of raw materials, non-standard coil inventory consists primarily of finished goods and tubular inventory consists of both raw materials and finished goods. Inventories are valued at the lower of cost or replacement market. Cost for prime coil inventory is determined under the last-in, first-out ("LIFO") method. During the years ended March 31, 2004 and March 31, 2003, earnings before federal income taxes include a benefit of approximately $950,000 and $106,000, respectively, from the liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared to respective current costs of purchases. At March 31, 2004, March 31, 2003 and March 31, 2002, replacement cost exceeded LIFO cost by approximately $4,320,000, $990,000 and $0, respectively. Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the weighted average method. The following is a summary of inventory by product group:
MARCH 31 ------------------------- 2004 2003 ----------- ----------- Prime coil inventory.................................... $ 4,976,300 $ 6,743,001 Non-standard coil inventory............................. 4,181,815 1,725,581 Tubular raw material.................................... 3,515,060 2,736,602 Tubular finished goods.................................. 8,370,817 12,827,084 ----------- ----------- $21,043,992 $24,032,268 =========== ===========
PROPERTY, PLANT, AND EQUIPMENT: On April 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). That statement requires that assets held-for-sale be recorded at the lower of their carrying amount or their fair value less cost to sell. Held-for-sale assets are not depreciated. Assets are classified as held-for-sale only if (i) management commits to a plan to sell the asset, (ii) the asset is available for immediate sale, (iii) the asset is actively being marketed for sale at a price that is reasonable in relation to its current fair value and (iv) management believes the sale of the asset is probable and expects transfer within one year. No assets met the definition of held-for-sale at March 31, 2004. Property, plant, and equipment are stated at cost. Depreciation is 7 FRIEDMAN INDUSTRIES, INCORPORATED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) calculated primarily by the straight-line method over the estimated useful lives of the various classes of assets as follows:
Buildings................................................... 20 years Machinery and equipment..................................... 10 years Improvements................................................ 5 years Loaders and other rolling stock............................. 5 years
Interest costs incurred during construction projects are capitalized as part of the cost of such assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. No impairments were necessary at March 31, 2004 or 2003. SUPPLEMENTAL CASH FLOW INFORMATION: The Company paid interest of approximately $35,253 in 2004, $87,307 in 2003, and $278,700 in 2002. The Company paid income taxes, net of refunds, of $1,065,000 in 2004, $617,000 in 2003, and $408,900 in 2002. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. FINANCIAL INSTRUMENTS: The carrying value of the Company's financial instruments approximates fair value. STOCK BASED COMPENSATION: The Company follows Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), for its employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The following schedule reflects the impact on net income and earnings per common share if the Company had applied the fair value recognition provisions of Statements of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation to stock based employee compensation for the years ended March 31:
2004 2003 2002 ---------- ---------- -------- Reported net income.................................... $2,535,991 $1,432,017 $940,039 Less: compensation expenses per SFAS No. 123, net of tax.................................................. 31,582 113,685 10,716 ---------- ---------- -------- Pro forma net income................................... $2,504,409 $1,318,332 $929,323 ---------- ---------- -------- BASIC EARNINGS PER COMMON SHARE: Reported net income.................................... .33 .19 .12 Less: compensation expense per SFAS No. 123, net of tax.................................................. .00 .02 .00 ---------- ---------- -------- Pro forma net income................................... .33 .17 .12 ---------- ---------- -------- DILUTED EARNINGS PER COMMON SHARE: Reported net income.................................... .33 .19 .12 Less: compensation expense per SFAS No. 123, net of tax.................................................. .00 .02 .00 ---------- ---------- -------- Pro forma net income................................... .33 .17 .12 ---------- ---------- --------
The fair value of options was estimated using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rates of 3.0%, a dividend yield of 3.4%, volatility factor of the expected market price of the Company's common stock of 0.42, and a weighted average expected life of the option of four years. 8 FRIEDMAN INDUSTRIES, INCORPORATED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Company also grants stock awards to outside directors and records these grants as expense. ECONOMIC RELATIONSHIP: Lone Star Steel Company ("LSS") and Nucor Steel Company supply a significant amount of steel products to the Company. Loss of either of these mills as a source of supply could have a material adverse effect on the Company. Additionally, the Company derives revenue by selling a substantial amount of its manufactured pipe to LSS. Total sales to LSS were approximately $17 million, $12 million, and $13 million in 2004, 2003, and 2002, respectively. Loss of LSS 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 sections 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. 2. STOCK OPTIONS AND CAPITAL STOCK Under the Company's 1989 and 1996 Incentive Stock Option Plans, incentive options were granted to certain officers and key employees to purchase common stock of the Company. Pursuant to the terms of the plans, 16,314 additional options may be granted. All options have ten-year terms and become fully exercisable at the end of six months of continued employment. The following is a summary of activity relative to options outstanding during the years ended March 31:
2004 2003 2002 ------------------- ------------------- -------------------- WEIGHTED Weighted Weighted AVERAGE Average Average EXERCISE Exercise Exercise SHARES PRICE SHARES PRICE SHARES PRICE ------- -------- ------- -------- -------- -------- Outstanding at beginning of year......... 411,694 $2.58 154,293 $3.01 400,048 $4.14 Granted.................................. -- -- 265,000 $2.33 27,959 $2.45 Exercised................................ -- -- -- -- -- -- Canceled................................. -- -- (7,599) $2.78 (273,714) $4.59 ------- ----- ------- ----- -------- ----- Outstanding at end of year............... 411,694 $2.58 411,694 $2.58 154,293 $3.01 ======= ======= ======== Exercisable at end of year............... 411,694 $2.58 146,694 $3.03 154,293 $3.01 Weighted average fair value of options granted during the year................ -- $2.33 $2.45
Outstanding and exercisable stock options and warrants at March 31, 2004, were as follows:
OUTSTANDING EXERCISABLE ------------------------ ------------------------ RANGE OF WEIGHTED AVERAGE WEIGHT AVERAGE WEIGHT AVERAGE EXERCISE PRICE REMAINING YEARS SHARES EXERCISE PRICE SHARES EXERCISE PRICE -------------- ---------------- ------- -------------- ------- -------------- $2.33 - $2.94 8.2 299,222 $2.36 299,222 $2.36 $3.13 2.0 111,368 $3.13 111,368 $3.13 $4.73 4.8 1,104 $4.73 1,104 $4.73 --- ------- ------- 6.5 411,694 411,694
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. 3. LONG-TERM DEBT AND COMMITMENTS AND CONTINGENCIES The Company has a credit arrangement with a bank which provides for a revolving line of credit facility (the "revolving facility"). Pursuant to the revolving facility which expires April 1, 2006, the Company may borrow up to $6 million at bank's prime rate or at 1.5% over LIBOR. At March 31, 9 FRIEDMAN INDUSTRIES, INCORPORATED 3. LONG-TERM DEBT AND COMMITMENTS AND CONTINGENCIES (CONTINUED) 2004, the Company did not have borrowings outstanding under the revolving facility. The Company entered into certain notes payable related to the purchase of certain pipe loading equipment. The annual principal payments required on these notes payable including the current portion thereon during the next five years are as follows: 2005........................................................ $63,037 2006........................................................ -- 2007........................................................ -- 2008........................................................ -- 2009........................................................ -- ------- Total.................................................. $63,037 =======
The Company repaid $111,043 of loans borrowed against the cash surrender value of officers' life insurance policies during the year ended March 31, 2003. At March 31, 2003, all loans against the cash surrender value of officers' life insurance policies were paid in full. The Company is obligated under an operating lease for its Longview, Texas office building that expires on April 30, 2008. The following is a schedule of future minimum annual rental payments required under this operating lease as of March 31, 2004: 2005........................................................ $ 27,264 2006........................................................ 27,264 2007........................................................ 27,264 2008........................................................ 27,264 2009........................................................ 2,272 Thereafter.................................................. -- -------- Total.................................................. $111,328 ========
Rental expense for leased properties was $27,264, $131,629 and $27,264 during fiscal 2004, 2003 and 2002, respectively. The Company was obligated to purchase approximately $8,400,000 in steel coils at March 31, 2004. Effective September 2001, the Company entered into an arrangement to purchase non-standard coils from NSC. Either the Company or NSC can terminate this arrangement upon 90 days written notice. 10 FRIEDMAN INDUSTRIES, INCORPORATED 4. EARNINGS PER SHARE Basic and dilutive net income per share is computed based on the following information:
YEAR ENDED MARCH 31 ------------------------------------ 2004 2003 2002 ---------- ---------- ---------- BASIC Net income................................... $2,535,991 $1,432,017 $ 940,039 ========== ========== ========== Average common shares........................ 7,574,070 7,572,239 7,571,239 ========== ========== ========== DILUTIVE Net income................................... $2,535,991 $1,432,017 $ 940,039 ========== ========== ========== Average common shares........................ 7,574,070 7,572,239 7,571,239 Common share equivalents: Warrants................................... -- -- -- Options.................................... 66,476 17,661 -- ---------- ---------- ---------- Total common share equivalents............... 66,476 17,661 -- ---------- ---------- ---------- Average common shares and common equivalents................................ 7,640,546 7,589,900 7,571,239 ========== ========== ==========
5. INCOME TAXES Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for tax purposes. Significant components of the Company's consolidated deferred tax assets (liabilities) are as follows:
MARCH 31 --------------------- 2004 2003 --------- --------- DEFERRED TAX LIABILITIES: Depreciation...................................... $(650,000) $(699,092) Other............................................. -- -- --------- --------- Total deferred tax liabilities...................... (650,000) (699,092) DEFERRED TAX ASSETS: Inventory capitalization.......................... 90,047 90,047 Inventory reserve................................. 570,000 204,000 Postretirement benefits other than pensions....... 124,100 53,040 Other............................................. 68,547 68,547 --------- --------- Total deferred tax assets........................... 852,694 415,634 --------- --------- Net deferred tax asset (liability).................. $ 202,694 $(283,458) ========= =========
11 FRIEDMAN INDUSTRIES, INCORPORATED 6. PROFIT SHARING PLAN AND OTHER POSTRETIREMENT BENEFITS The Company has a defined contribution plan (the "Plan") covering substantially all employees, including officers. Company contributions, which are made 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 $280,000 for the year ended March 31, 2004, $260,000 for the year ended March 31, 2003, and $260,000 for the year ended March 31, 2002. The employees fully vest in the Plan upon completion of 7 years of service. Contributions, Plan earnings, and forfeitures of terminated participants' nonvested accounts are allocated to the individual accounts of participating employees based on compensation received during the plan year and years of active service with the Company. Employees of the Company may participate in a 401(k) retirement plan (the "401(k) plan"). Employees are eligible to participate in the 401(k) plan when the employee has completed one year of service. Under the 401(k) 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. Employees fully vest in the Company's matching contributions upon the completion of 7 years of service. Contribution expense related to the 401(k) plan was approximately $28,000, $27,000 and $30,000 for the years ended March 31, 2004, 2003 and 2002, respectively. 12 FRIEDMAN INDUSTRIES, INCORPORATED 7. INDUSTRY SEGMENT DATA The Company is engaged in pipe manufacturing and processing and steel and pipe distribution business. Within the Company, there are two product groups: coil and tubular. Coil product involves converting steel coils into flat sheet and plate steel cut to customer specifications and reselling steel coils. Through its Texas tubular operation, 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 ----------------------------------------- 2004 2003 2002 ------------ ------------ ----------- NET SALES: Coil.......................................... $ 62,372,496 $ 60,416,662 $51,880,290 Tubular....................................... 53,786,071 45,666,076 45,937,666 ------------ ------------ ----------- TOTAL NET SALES....................... $116,158,567 $106,082,738 $97,817,956 ============ ============ =========== OPERATING PROFIT: Coil.......................................... $ 3,026,372 $ 1,786,570 $ 954,741 Tubular....................................... 3,704,082 2,545,695 2,727,100 ------------ ------------ ----------- TOTAL OPERATING PROFIT................ 6,730,454 4,332,265 3,681,841 General corporate expenses.................... (2,909,387) (2,200,517) (2,071,794) Interest expense.............................. (35,253) (71,700) (278,719) Interest and other income..................... 56,595 109,674 92,974 ------------ ------------ ----------- TOTAL EARNINGS BEFORE TAXES........... $ 3,842,409 $ 2,169,722 $ 1,424,302 ============ ============ =========== IDENTIFIABLE ASSETS: Coil.......................................... $ 21,770,013 $ 18,967,495 $18,489,064 Tubular....................................... 20,623,515 21,848,558 19,703,080 ------------ ------------ ----------- 42,393,528 40,816,053 38,192,144 General corporate assets...................... 3,634,595 1,962,873 5,794,311 ------------ ------------ ----------- TOTAL ASSETS.......................... $ 46,028,123 $ 42,778,926 $43,986,455 ============ ============ =========== DEPRECIATION: Coil.......................................... $ 744,759 $ 804,463 $ 723,812 Tubular....................................... 151,250 141,384 154,504 Corporate and other........................... 20,251 21,156 24,733 ------------ ------------ ----------- $ 916,260 $ 967,003 $ 903,049 ============ ============ =========== CAPITAL EXPENDITURES: Coil.......................................... $ 30,457 $ 56,494 $ 1,106,403 Tubular....................................... 715,426 514,623 138,777 Corporate and other........................... 75,326 33,618 -- ------------ ------------ ----------- $ 821,209 $ 604,735 $ 1,245,180 ============ ============ ===========
Operating profit is total revenue 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, accrued profit sharing expense, accrued quarterly incentive bonuses, corporate insurance expenses and office supplies. Corporate assets consist primarily of cash and cash equivalents, deferred income taxes and the cash value of officers' life insurance. There are no sales between product groups. 13 FRIEDMAN INDUSTRIES, INCORPORATED 8. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of unaudited quarterly results of operations for the years ended March 31, 2004 and 2003:
Quarter Ended ------------------------------------------------------ June 30 September 30 December 31 March 31 2003 2003 2003 2004 ----------- ------------ ----------- ----------- Net sales........................ $25,204,170 $25,410,689 $24,977,857 $40,565,851 Gross profit..................... 1,948,657 1,499,757 949,065 4,444,581 Net earnings..................... 467,265 291,262 10,117 1,767,347(1) Net earnings per share: Basic.......................... .06 .04 .00 .23 Diluted........................ .06 .04 .00 .23
Quarter Ended ------------------------------------------------------ June 30 September 30 December 31 March 31 2002 2002 2002 2003 ----------- ------------ ----------- ----------- Net sales........................ $25,561,298 $27,776,049 $25,418,779 $27,326,612 Gross profit..................... 1,468,518 1,806,128 1,245,502 1,895,573 Net earnings..................... 277,155 469,042 200,197 485,623 Net earnings per share: Basic.......................... .04 .06 .03 .06 Diluted........................ .04 .06 .03 .06
--------------- (1) Includes the benefit of approximately $594,000 ($0.08 per share diluted) in net earnings from the liquidation of LIFO inventories. 14 FRIEDMAN INDUSTRIES, INCORPORATED REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Friedman Industries, Incorporated We have audited the accompanying consolidated balance sheets of Friedman Industries, Incorporated as of March 31, 2004 and 2003, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Friedman Industries, Incorporated at March 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2004, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Houston, Texas May 21, 2004 ------------------------------------------ SELECTED FINANCIAL DATA
YEAR ENDED MARCH 31 -------------------------------------------------------------------------------- 2004 2003 2002 2001 2000 ------------- ------------- ------------ ------------- ------------- Net sales.......................... $ 116,158,567 $ 106,082,738 $ 97,817,956 $ 120,395,583 $ 120,267,809 Net earnings....................... 2,535,991 1,432,017 940,039 2,927,582 2,506,801 Total assets....................... 46,028,123 42,778,926 43,986,455 48,010,512 45,106,790 Long-term debt..................... -- 57,329 2,053,438 4,800,000 7,600,000 Stockholders' equity............... 33,031,604 31,246,751 30,491,351 30,378,150 28,622,951 Net earnings per share: Basic............................ 0.33 0.19 0.12 0.39 0.33 Diluted.......................... 0.33 0.19 0.12 0.39 0.33 Cash dividends declared per share adjusted for stock dividends..... 0.10 0.09 0.11 0.16 0.18
See also Note 1 of Notes to the Company's Consolidated Financial Statements herein which describes the Company's relationship with its primary suppliers of steel products. 15 FRIEDMAN INDUSTRIES, INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Year ended March 31, 2004 compared to year ended March 31, 2003 During the year ended March 31, 2004, sales, costs of goods sold and gross profit increased $10,075,829, $7,649,490 and $2,426,339, from the respective amounts recorded during the year ended March 31, 2003. The increases in sales and costs of goods sold were related primarily to increases in the average per ton selling price and the per ton cost of products of approximately 13% and 11%, respectively. The increase in gross profit was related primarily to the increase in sales and improved margins. Gross profits and costs of goods sold as a percentage of sales were approximately 7.6% and 92.4%, respectively, in fiscal 2004 compared to 6.0% and 94.0%, respectively, in fiscal 2003. The increase in gross margin was related primarily to the last quarter of fiscal 2004 in which the Company's operations benefited from stronger demand for its products and services and from the liquidation of LIFO inventories which generated a one-time benefit of approximately $950,000 in gross profit. Coil product segment sales increased approximately $1,956,000 during fiscal 2004. The average per ton selling price increased approximately 14% as tonnage shipped declined from approximately 191,000 tons in fiscal 2003 to 173,000 tons in fiscal 2004. Coil segment operating profits as a percentage of segment sales were approximately 4.9% in fiscal 2004 and 3.0% in fiscal 2003. This segment benefited from stronger demand for its products and services and from the liquidation of LIFO inventories which contributed a one-time benefit to segment operations of approximately $950,000. In fiscal 2004, the Company's Lone Star coil facility experienced a lack of supply of coil products from its primary coil supplier, Lone Star Steel Company ("LSS"), which resulted in decreased sales. This facility's sales represented approximately 7% of the Company's total sales in fiscal 2004. This facility has from time to time purchased steel coils from other suppliers. However, the freight cost on such purchases diminishes the Company's competitiveness in an extremely competitive industry. While the supply of inventory in 2004 allowed this facility to operate at approximately a break-even point, a further reduction in supply could have an adverse effect on coil segment operations. Management confers with LSS regularly and continues to monitor this situation closely. Subsequent to March 31, 2004, the Company's XSCP division, which markets non-standard coils received from Nucor Steel Company ("NSC"), agreed with NSC to suspend the purchase of non-standard coils. XSCP represented approximately 6% of the Company's total sales in fiscal 2004. Due to the increased cost of this material, management did not believe that the material could be resold at a profit. XSCP operating assets can be used in the Hickman, Arkansas coil facility operation. Management continues to monitor this situation closely and to confer regularly with NSC regarding this suspension. In the near term, the Company expects this suspension in supply to continue. NSC continues to supply the Hickman coil facility with steel coils in amounts that are adequate for the Company's purposes. The company is dependent on LSS and NSC for the supply of inventory. While current supply levels are adequate to sustain the Company's coil operations at both the Hickman and Lone Star coil facilities, a reduction in the supply of steel coils could have an adverse effect on the Company's coil operations. Tubular product segment sales increased approximately $8,120,000 during fiscal 2004. This increase resulted primarily from both an increase in the average per ton selling price of approximately 11% and an increase in tons sold from approximately 140,000 tons in fiscal 2003 to 149,000 tons in fiscal 2004. Tubular segment operating profits as a percentage of segment sales were approximately 6.9% and 5.6% in fiscal 2004 and 2003, respectively. This improvement was associated primarily with stronger demand for this segment's products during the last quarter of 16 FRIEDMAN INDUSTRIES, INCORPORATED fiscal 2004. During fiscal 2004, LSS, the Company's principal supplier of tubular products and coil material used in pipe manufacturing, continued to supply such products in amounts as were adequate for the Company's purposes. The Company currently does not anticipate any significant change in such supply from LSS. General, selling and administrative costs increased $737,020 from the amount recorded in fiscal 2003. This increase resulted primarily from increases in incentive bonuses and other variable expenses related to increased earnings, in bad debt expense, in legal and professional expenses and in insurance expenses. During fiscal 2004, the Company experienced a bad debt related to one of its larger customers, which resulted in the Company incurring a bad debt expense of approximately $173,000. The Company monitors closely its customer accounts receivable and believes that this expense was an isolated event that does not represent a trend in this area. Interest expense decreased $36,447 from the amount recorded in fiscal 2003. This decrease was related primarily to reductions in short and long-term debt during fiscal 2004. Interest and other income declined $53,079 from the amount recorded during fiscal 2003. This decline was related primarily to a decrease in average invested cash positions and to lower interest rates paid on such positions. Federal income taxes increased $568,713 from the comparable amount recorded during fiscal 2003. This increase was primarily related to the increase in earnings before taxes as the effective tax rates were the same for both years. Year ended March 31, 2003 compared to year ended March 31, 2002 During the year ended March 31, 2003, sales, costs of goods sold and gross profit increased $8,264,782, $7,776,421 and $488,361, from the respective amounts recorded during the year ended March 31, 2002. These increases were related primarily to the Company's coil operations which experienced increases in both tons sold and in the average per ton selling price. Gross profits and costs of goods sold as a percentage of sales were approximately 6.0% and 94.0%, respectively, in both fiscal years. Coil product segment sales increased approximately $8,500,000 during fiscal 2003. The average per ton selling price increased approximately 12% and tonnage shipped increased from approximately 184,000 tons in fiscal 2002 to 191,000 tons in fiscal 2003. Coil segment operating profits as a percentage of segment sales were approximately 3.0% in fiscal 2003 and 1.8% in fiscal 2002. Demand for coil products was somewhat stronger in fiscal 2003. Tubular product segment sales were approximately the same for both fiscal 2003 and 2002. The average selling price per ton in both years was approximately the same as were tons shipped which reflected a small increase from approximately 139,000 tons in fiscal 2002 to 140,000 tons in fiscal 2003. Tubular segment operating profits as a percentage of segment sales were approximately 5.6% and 5.9% in fiscal 2003 and 2002, respectively. Interest expense decreased $207,019 from the amount recorded in fiscal 2002. This decrease was related primarily to reductions in short-term and long-term debt. Interest income and expense increased $16,700 from the amount recorded in fiscal 2002 primarily as the result of an increase in average invested cash positions during fiscal 2003. Federal income taxes increased $253,442 from the comparable amount recorded during fiscal 2002. This increase was primarily related to the increase in earnings before taxes as the effective tax rates were the same for both years. 17 FRIEDMAN INDUSTRIES, INCORPORATED FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL The Company remained in a strong, liquid position at March 31, 2004. Current ratios were 2.99 and 3.15 at March 31, 2004 and March 31, 2003, respectively. Working capital was $25,189,938 at March 31, 2004 and $23,734,112 at March 31, 2003. During the year ended March 31, 2004, the Company maintained assets and liabilities at levels it believed were commensurate with operations. At March 31, 2004, cash and accounts receivable increased as inventories declined. These changes were related primarily to increased sales activity in March 2004 and February 2004. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company's operations. The Company has a credit arrangement with a bank which provides for a revolving line of credit facility (the "revolving facility"). Pursuant to the revolving facility, which expires April 1, 2006, the Company may borrow up to $6 million at an interest rate of the bank's prime rate or 1.5% over LIBOR. The Company uses the revolving facility to support cash flow and borrows and repays funds as working capital is required. At March 31, 2004 and 2003, the Company had no borrowings outstanding under the revolving facility. The Company has in the past and may in the future borrow funds on a term basis to build or improve facilities. The Company currently has no plans to borrow funds on a term basis. During the quarter ended December 31, 2002, the Company exercised its right under a lease agreement to purchase approximately 68 acres of land on which its tubular operations are located for $214,338. This land was previously leased from LSS. In fiscal 2004, the Company purchased approximately $821,000 in fixed assets. The primary portion of this investment was related to the construction of a small diameter pipe mill. This mill began producing pipe in April 2004. Notwithstanding the current market conditions, the Company believes that its cash flow from operations and borrowing capability under its revolving line of credit facility 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. CONTRACTUAL OBLIGATIONS
PAYMENT DUE BY PERIOD ------------------------------------------------- LESS THAN 1-3 3-5 MORE THAN CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR YEARS YEARS 5 YEARS ----------------------- --------- --------- ------ ----- --------- Long-term debt obligations............... 63,037 63,037 -- -- -- Capital lease obligations................ -- -- -- -- -- Operating lease obligations.............. 111,328 27,264 81,792 2,272 -- Purchase obligations..................... 8,400,000 8,400,000 -- -- -- Other long-term liabilities reflected on the registrant's balance sheet under GAAP................................... -- -- -- -- -- --------- --------- ------ ----- -- Total.................................... 8,574,365 8,490,301 81,792 2,272 -- ========= ========= ====== ===== ==
INFLATION During fiscal 2004, the Company believes that the general level of inflation had little effect on its operations. 18 FRIEDMAN INDUSTRIES, INCORPORATED 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. One such accounting policy which requires significant estimates and judgments is the valuation of LIFO inventories in the Company's quarterly reporting. The Company's quarterly valuation of inventory requires estimates of the year end quantities which is inherently difficult. Historically, these estimates have been materially correct. In addition, the Company maintains an allowance for doubtful accounts receivable by providing for specifically identified accounts where collectibility is doubtful and a general allowance based on the aging of the receivables compared to past experience and current trends. On an on-going basis, the Company evaluates estimates and judgments. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. 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) and that involve risk and uncertainty. These forward-looking statements may include, but are not limited to, future results of operations, future production capacity and product quality. 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 Securities and Exchange Commission under the Securities Act of 1933 and the Securities Exchange Act of 1934. 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. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business the Company is exposed to market risks primarily from changes in the cost of steel in inventory and in interest rates. The Company closely monitors exposure to market risks and develops appropriate strategies to manage risk. With respect to steel purchases, there is no recognized market to purchase derivative financial instruments to reduce the inventory exposure risk on changing commodity prices. The exposure to market risk associated with interest rates relates primarily to debt. Recent debt balances are minimal and, as a result, direct exposure to interest rates changes is not significant. 19 FRIEDMAN INDUSTRIES, INCORPORATED TEN YEAR FINANCIAL SUMMARY
YEAR ENDED MARCH 31 -------------------------------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 ------------ ------------ ----------- ------------ ------------ ------------ Net sales....................... $116,158,567 $106,082,738 $97,817,956 $120,395,583 $120,267,809 $124,719,640 Earnings........................ $ 2,535,991 $ 1,432,017 $ 940,039 $ 2,927,582 $ 2,506,801 $ 3,540,811 Current assets.................. $ 37,829,701 $ 34,769,500 $35,806,988 $ 40,231,329 $ 36,945,378 $ 32,534,040 Current liabilities............. $ 12,639,763 $ 11,035,388 $10,797,106 $ 12,271,802 $ 8,377,279 $ 6,758,038 Net working capital............. $ 25,189,938 $ 23,734,112 $25,009,882 $ 27,959,527 $ 28,568,099 $ 25,776,002 Total assets.................... $ 46,028,123 $ 42,778,926 $43,986,455 $ 48,010,512 $ 45,106,790 $ 41,023,377 Stockholders' equity............ $ 33,031,604 $ 31,246,751 $30,491,351 $ 30,378,150 $ 28,622,951 $ 27,422,779 Earnings as a percent of Net sales................... 2.2 1.3 1.0 2.4 2.1 2.8 Stockholders' equity........ 7.7 4.6 3.1 9.6 8.8 12.9 Average number of common shares outstanding: Basic(1)......... 7,574,070 7,572,239 7,571,239 7,568,839 7,547,624 7,528,702 Per share Net earnings per share: Basic....................... $ 0.33 $ 0.19 $ 0.12 $ 0.39 $ 0.33 $ 0.47 Stockholders' equity(1)....... $ 4.36 $ 4.13 $ 4.03 $ 4.01 $ 3.79 $ 3.64 Cash dividends per common share......................... $ 0.10 $ 0.09 $ 0.11 $ 0.16 $ 0.18 $ 0.25 Stock dividend declared......... -- -- -- -- 5% 5% YEAR ENDED MARCH 31 -------------------------------------------------------- 1998 1997 1996 1995 ------------ ------------ ------------ ----------- Net sales....................... $148,840,724 $119,920,966 $106,849,181 $97,968,805 Earnings........................ $ 4,809,992 $ 3,630,071 $ 2,836,768 $ 2,458,132 Current assets.................. $ 39,347,548 $ 33,357,160 $ 27,524,670 $25,956,555 Current liabilities............. $ 13,437,178 $ 10,172,672 $ 6,410,527 $ 5,816,334 Net working capital............. $ 25,910,370 $ 23,184,488 $ 21,114,143 $20,140,221 Total assets.................... $ 46,039,361 $ 38,117,191 $ 32,812,986 $32,074,862 Stockholders' equity............ $ 25,732,957 $ 22,781,959 $ 20,428,936 $18,722,781 Earnings as a percent of Net sales................... 3.2 3.0 2.7 2.5 Stockholders' equity........ 18.7 15.9 13.9 13.1 Average number of common shares outstanding: Basic(1)......... 7,512,901 7,489,943 7,446,076 7,444,041 Per share Net earnings per share: Basic....................... $ 0.64 $ 0.48 $ 0.38 $ 0.33 Stockholders' equity(1)....... $ 3.43 $ 3.04 $ 2.74 $ 2.52 Cash dividends per common share......................... $ 0.25 $ 0.18 $ 0.15 $ 0.16 Stock dividend declared......... 5% 5% 5% 5%
------------ (1) Adjusted for stock dividends. [FRIEDMAN INDUSTRIES INCORPORATED LOGO]