10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2005

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

Commission File No. 1-7521

FRIEDMAN INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

Texas	74-1504405
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4001 Homestead Road, Houston, Texas	77028
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 672-9433

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

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

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

None

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to the filing requirements for the past 90 days.

Yes   X       No             

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

         X                   

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes                  No   X  

     The aggregate market value of the Common Stock held by non-affiliates of the registrant as of September 30, 2004 (computed by reference to the closing price on such date), was approximately $30,977,000.

     The number of shares of the registrant’s Common Stock outstanding at June 11, 2005 was 7,139,747 shares.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Annual Report to Shareholders of Friedman Industries, Incorporated for the fiscal year ended March 31, 2005 — Part II.

      Proxy Statement for the 2005 Annual Meeting of Shareholders — Part III.

PART I

Item 1. Business

      Friedman Industries, Incorporated (the “Company”), a Texas corporation incorporated in 1965, is engaged in pipe manufacturing and processing, steel processing and steel and pipe distribution.

      The Company has two product groups: coil and tubular products. Significant financial information relating to the Company’s product groups for the last three years is contained in Note 7 of the Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2005, 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 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. 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 an 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, the Company’s XSCP Division located in Hickman purchases and markets non-standard 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 72 inches wide and up to one-half inch thick. The Hickman facility operates a cut-to-length line which has 72 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 72 inches wide and one-half inch thick in a coil-to-coil mode or directly from coil to cut-to-length processing.

  Tubular Products

      Through its Texas Tubular Products Division (“TTP”) in Lone Star, Texas, the Company manufactures, purchases, processes and markets tubular products.

      TTP operates two pipe mills that are capable of producing pipe from 2³/8 inches to 8⁵/8 inches in outside diameter. One 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. The second pipe mill began operation in April 2004 and generally produces pipe ranging from 2³/8 inches

2

to 2⁷/8 inches in outside diameter. 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 13³/8 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, the Company purchases from LSS and markets to others pipe for structural applications for some sizes of pipe that exceed the capability of the TTP pipe mills.

      The Company 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:

Product and Service Groups	2005			2004			2003
Coil Products		55	%		54	%		57	%
Tubular Products		45	%		46	%		43	%

      Coil Products. The Company sells coil products to approximately 250 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, 2005, 2004 and 2003, seven, six and six customers, respectively, accounted for approximately 25% of the Company’s sales of coil products. Except for Trinity Industries, Inc., no coil product customer accounted for as much as 10% of the Company’s total sales during those years. Trinity Industries, Inc. accounted for approximately 11% of total sales in fiscal 2005.

      The Company sells substantially all of its coil products through its own sales force. At March 31, 2005, the sales force was comprised of a vice president and three professional sales personnel under the direction of the Senior Vice President — 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. The Company sells its tubular products nationally to approximately 260 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 16% of the Company’s total sales in fiscal 2005.

      The Company sells its tubular products through its own sales force comprised of five professional sales personnel under the direction of the Senior Vice President — 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.

3

      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, 2005, the Company had approximately 140 full-time employees.

  Executive Officers of the Company

      The following table sets forth as of March 31, 2005, 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:

				Position, Offices with the Company
Name		Age		and Family Relationships, if any
	Jack Friedman		83	Chairman of the Board of Directors and Chief Executive Officer since 1970, Director since 1965
	William E. Crow		57	President and Chief Operating Officer since 1995, formerly Vice President since 1981 and formerly President of Texas Tubular Products Division since August 1990
	Benny Harper		59	Senior Vice President — Finance since 1995 (formerly Vice President since 1990), Treasurer since 1980 and Secretary since May 1992
	Thomas Thompson		54	Senior Vice President — Sales and Marketing since 1995, formerly Vice President — Sales since 1990

4

Item 2. Properties

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

		Approximate				Type of
Location		Size		Ownership		Construction
Lone Star, Texas
	Plant — Coil Products		42,260 sq. feet		Owned(1)		Steel frame/siding
	Plant — Texas Tubular Products		76,000 sq. feet		Owned(1)		Steel frame/siding
	Offices — Coil Products		1,200 sq. feet		Owned(1)		Steel building
	Offices — Texas Tubular Products		8,000 sq. feet		Owned(1)	Cinder block; steel   building
	Land — Coil Products		13.93 acres		Owned(1)		—
	Land — Texas Tubular Products		67.77 acres		Owned(1)		—
Longview, Texas Offices			2,600 sq. feet		Leased(2)		Office Building
Houston, Texas
	Plant and Warehouse		70,000 sq. feet		Owned(1)(3)	Rigid steel frame   and steel siding
	Offices		4,000 sq. feet		Owned(1)(3)	Brick veneer; steel   building
	Land		12 acres		Owned(1)(3)		—
Hickman, Arkansas
	Plant and Warehouse — Coil Products		42,600 sq. feet		Owned(1)		Steelframe/siding
	Offices — Coil Products		2,500 sq. feet		Owned(1)		Cinder block/wood frame
	Land — Coil Products		26.19 acres		Owned(1)		—

(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 office lease is with a nonaffiliated party, expires April 30, 2008, and provides for an annual rental of $27,264.
(3)	In November 2001, the Company closed its coil products facility in Houston, Texas. Subsequently, the Company has been seeking to sell these assets.

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. Submission of Matters to a Vote of Security Holders

      None.

5

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 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, 2005, entitled “Description of Business — Range of High and Low Sales Prices of Common Stock” and “Description of Business — Cash Dividends Declared Per Share of Common Stock”, which sections are hereby incorporated herein by reference.

      The approximate number of shareholders of record of Common Stock of the Company as of May 27, 2005 was 450.

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, 2005, entitled “Selected Financial Data”.

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, 2005, entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

      In the normal course of business the Company is exposed to market risk 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.

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, 2005, are hereby incorporated herein by reference:

Consolidated Balance Sheets — March 31, 2005 and 2004

Consolidated Statements of Earnings — Years ended March 31, 2005, 2004 and 2003

Consolidated Statements of Stockholders’ Equity — Years ended March 31, 2005, 2004 and 2003

Consolidated Statements of Cash Flows — Years ended March 31, 2005, 2004 and 2003

Notes to Consolidated Financial Statements — March 31, 2005

Report of Independent Registered Public Accounting Firm

      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, 2005.

6

      The following supplementary schedule for the Company for the year ended March 31, 2005, 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.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

      None

Item 9A. Controls and Procedures

     Evaluation of Disclosure Controls and Procedures

      The Company’s management, with the participation of the Company’s principal executive officer (CEO) and principal financial officer (CFO), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended ( the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

     Changes in Internal Controls

      There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.  Other Information

      None

7

PART III

Item 10. Directors and Executive Officers of the Registrant

      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 2005 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 2005 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 report.

      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 2005 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 2005 fiscal year.

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

Equity Compensation Plan Information

      The following table sets forth certain equity compensation plan information for the Company as of March 31, 2005:

Equity Compensation Plan Information

					Number of Securities
					Remaining Available
					for Future Issuance
	Number of Securities		Weighted-Average		under Equity
	to be Issued upon		Exercise Price of		Compensation Plans
	Exercise of		Outstanding		(Excluding
	Outstanding Options,		Options, Warrants		Securities Reflected
Plan Category	Warrants and Rights		and Rights		in Column(a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		224,718	$	2.62		16,314
Equity compensation plans not approved by security holders(1)		N/A		N/A		1,200

(1)  The 2000 Non-Employee Director Stock Plan (the “Director Plan”) was approved by the Company’s Board of Directors in September 2000. The Director Plan provides that, on October 15th of each year in which the Director Plan is in effect and shares are available for the grant of awards under the Director Plan, each member of the Company’s Board of Directors who is not an employee of the Company (“Outside Directors”) and who has served as a director of the Company for at least the twelve immediately preceding calendar months shall automatically be granted 400 shares of Common Stock. Such Outside Directors are not required to pay any cash consideration when they receive an award. If an employee director retires from employment with the Company, he shall become eligible to participate in the Director Plan upon his re-election as an Outside Director. Under the Director Plan, the total number of shares of Common Stock with respect to which awards may be granted shall not exceed 11,600 shares. The Board of Directors may terminate, amend or modify the Director Plan at any time. If the Company merges or consolidates with another entity and is not the

8

surviving corporation or if the Company is liquidated or sells or otherwise disposes of substantially all of its assets, the Director Plan will terminate automatically on the effective date of such merger, consolidation, liquidation, sale or other disposition.

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 2005 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 2005 fiscal year.

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 2005 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 2005 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 2005 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 2005 fiscal year.

9

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

      (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, 2005, which is incorporated herein by reference.

Consolidated Balance Sheets — March 31, 2005 and 2004

Consolidated Statements of Earnings — Years ended March 31, 2005, 2004 and 2003

Consolidated Statements of Stockholders’ Equity — Years end March 31, 2005, 2004 and 2003

Consolidated Statements of Cash Flows — Years ended March 31, 2005, 2004 and 2003

Notes to Consolidated Financial Statements — March 31, 2005

Report of Independent Registered Public Accounting Firm

      2. Financial Statement Schedules

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

Schedule II — Valuation and Qualifying Accounts

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

      3. Exhibits

Exhibit
No.		Description
	3.1	— Articles of Incorporation of the Company, as amended, filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended March 31, 1982, and incorporated herein by reference.
	3.2	— Articles of Amendment to the Articles of Incorporation of the Company, as filed with the Texas Secretary of State on September 22, 1987, filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended March 31, 1988, and incorporated herein by reference.
	3.3	— Bylaws of the Company, amended as of March 27, 1992, filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended March 31, 1992, and incorporated herein by reference.
	4.1	— Reference is made to Exhibits 10.2, 10.5, 10.6, 10.9, 10.11 and 10.12 described in this Item 16(a).
	*10.1	— Friedman Industries, Incorporated 1989 Incentive Stock Option Plan, filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1991, and incorporated herein by reference.
	10.2	— Amended and Restated Letter Agreement dated April 1, 1995, between the Company and Texas Commerce Bank National Association (“TCB”) regarding an $8,000,000 revolving line of credit filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended March 31, 1995 and incorporated herein by reference.
	10.3	— Lease Agreement between Judson Plaza, Inc. and the Company dated March 16, 1996, regarding the lease of office space (filed as an exhibit to and incorporated by reference from the Company’s Annual Report on Form 10-K for the year ended March 31, 1996).

10

Exhibit
No.		Description
	*10.4	— Friedman Industries, Incorporated 1996 Stock Option Plan (filed as an exhibit to and incorporated by reference from the Company’s Annual Report on Form 10-K for the year ended March 31, 1997).
	10.5	— First Amendment to Amended and Restated Letter Agreement between the Company and TCB dated April 1, 1997 (filed as an exhibit to and incorporated by reference from the Company’s Annual Report on Form 10-K for the year ended March 31, 1997).
	10.6	— Second Amendment to Amended and Restated Letter Agreement between the Company and TCB dated July 21, 1997 (filed as an exhibit to and incorporated by reference from the Company’s Report on Form 10-Q for the three months ended June 30, 1997).
	*10.7	— First Amendment to the Friedman Industries, Incorporated 1989 Incentive Stock Option Plan (filed as an exhibit to and incorporated by reference from the Company’s Report on Form 10-Q for the three months ended September 30, 1997).
	*10.8	— Friedman Industries, Incorporated 2000 Non-Employee Director Stock Plan (filed as an exhibit to and incorporated by reference from the Company’s Registration Statement on Form S-8 (Registration No. 333-47262)).
	10.9	— Third Amendment to the Amended and Restated Letter Agreement dated April 1, 1999 between the Company and Chase Bank of Texas (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 1999).
	10.10	— Addendum to Lease Agreement between Judson Plaza, Inc. and the Company dated April 12, 2001 (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 2001).
	10.11	— Fourth Amendment to the Amended and Restated Letter Agreement dated June 1, 2001 between The Chase Manhattan Bank and the Company (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 2001).
	10.12	— Fifth Amendment to the Amended and Restated Letter Agreement dated effective as of April 1, 2003 (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 2003).
	10.13	— Revolving Promissory Note dated April 1, 2003 between the Company and J.P. Morgan Chase Bank (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 2003).
	10.14	— Stock Purchase Agreement dated December 13, 2004, by and between Harold Friedman and the Company (incorporated by reference from Exhibit 10.1 to the Company’s current report on Form 8-K filed on December 13, 2004).
	10.15	— Agreement dated December 13, 2004, by and between Harold Friedman and the Company (incorporated by reference from Exhibit 10.2 to the Company’s current report on Form 8-K filed on December 13, 2004).
	**13.1	— The Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2005.
	**14.1	— Friedman Industries, Incorporated Code of Conduct and Ethics.
	**21.1	— List of Subsidiaries.

11

Exhibit
No.		Description
	**23.1	— Consent of Independent Registered Public Accounting Firm.
	**31.1	— Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman.
	**31.2	— Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper.
	**32.1	— Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman.
	**32.2	— Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper.

*	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.

12

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, 2005.

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.

Signature	Title	Date
/s/ JACK FRIEDMAN Jack Friedman	Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)	June 28, 2005
/s/ WILLIAM E. CROW William E. Crow	President, Chief Operating Officer and Director	June 28, 2005
/s/ BENNY B. HARPER Benny B. Harper	Senior Vice President — Finance Secretary/Treasurer (Principal Financial and Accounting Officer)	June 28, 2005
/s/ HAROLD FRIEDMAN Harold Friedman	Director	June 28, 2005
/s/ CHARLES W. HALL Charles W. Hall	Director	June 28, 2005
/s/ ALAN M. RAUCH Alan M. Rauch	Director	June 28, 2005
/s/ HERSHEL M. RICH Hershel M. Rich	Director	June 28, 2005
/s/ KIRK K. WEAVER Kirk K. Weaver	Director	June 28, 2005
/s/ JOE L. WILLIAMS Joe L. Williams	Director	June 28, 2005

13

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

FRIEDMAN INDUSTRIES, INCORPORATED

Column A		Column B		Column C				Column D		Column E
				Additions
		Balance at		Charged to		Charged to
		Beginning		Costs and		Other Accounts —		Deductions —		Balance at
Description		of Period		Expenses		Describe(A)		Describe(B)		End of Period
Year ended March 31, 2005
	Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account)	$	44,776	$	166,201	$	808,775	$	982,476	$	37,276
Year ended March 31, 2004
	Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account)	$	7,276	$	188,508	$	537,205	$	688,213	$	44,776
Year ended March 31, 2003
	Allowance for doubtful accounts receivable (deducted from related asset account)	$	7,276	$	80,275		—	$	80,275	$	7,276

(A)	Cash discounts allowed on sales and charged against revenue.
(B)	Accounts receivable written off and cash discounts allowed on sales.

S-1

EXHIBIT INDEX

Exhibit
No.		Description
	3.1	— Articles of Incorporation of the Company, as amended, filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended March 31, 1982, and incorporated herein by reference.
	3.2	— Articles of Amendment to the Articles of Incorporation of the Company, as filed with the Texas Secretary of State on September 22, 1987, filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended March 31, 1988, and incorporated herein by reference.
	3.3	— Bylaws of the Company, amended as of March 27, 1992, filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended March 31, 1992, and incorporated herein by reference.
	4.1	— Reference is made to Exhibits 10.2, 10.5, 10.6, 10.9, 10.11 and 10.12 described in this Item 16(a).
	*10.1	— Friedman Industries, Incorporated 1989 Incentive Stock Option Plan, filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1991, and incorporated herein by reference.
	10.2	— Amended and Restated Letter Agreement dated April 1, 1995, between the Company and Texas Commerce Bank National Association (“TCB”) regarding an $8,000,000 revolving line of credit filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended March 31, 1995 and incorporated herein by reference.
	10.3	— Lease Agreement between Judson Plaza, Inc. and the Company dated March 16, 1996, regarding the lease of office space (filed as an exhibit to and incorporated by reference from the Company’s Annual Report on Form 10-K for the year ended March 31, 1996).
	*10.4	— Friedman Industries, Incorporated 1996 Stock Option Plan (filed as an exhibit to and incorporated by reference from the Company’s Annual Report on Form 10-K for the year ended March 31, 1997).
	10.5	— First Amendment to Amended and Restated Letter Agreement between the Company and TCB dated April 1, 1997 (filed as an exhibit to and incorporated by reference from the Company’s Annual Report on Form 10-K for the year ended March 31, 1997).
	10.6	— Second Amendment to Amended and Restated Letter Agreement between the Company and TCB dated July 21, 1997 (filed as an exhibit to and incorporated by reference from the Company’s Report on Form 10-Q for the three months ended June 30, 1997).
	*10.7	— First Amendment to the Friedman Industries, Incorporated 1989 Incentive Stock Option Plan (filed as an exhibit to and incorporated by reference from the Company’s Report on Form 10-Q for the three months ended September 30, 1997).
	*10.8	— Friedman Industries, Incorporated 2000 Non-Employee Director Stock Plan (filed as an exhibit to and incorporated by reference from the Company’s Registration Statement on Form S-8 (Registration No. 333-47262)).
	10.9	— Third Amendment to the Amended and Restated Letter Agreement dated April 1, 1999 between the Company and Chase Bank of Texas (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 1999).
	10.10	— Addendum to Lease Agreement between Judson Plaza, Inc. and the Company dated April 12, 2001 (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 2001).
	10.11	— Fourth Amendment to the Amended and Restated Letter Agreement dated June 1, 2001 between The Chase Manhattan Bank and the Company (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 2001).

Exhibit
No.		Description
	10.12	— Fifth Amendment to the Amended and Restated Letter Agreement dated effective as of April 1, 2003 (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 2003).
	10.13	— Revolving Promissory Note dated April 1, 2003 between the Company and J.P. Morgan Chase Bank (filed as an exhibit to and incorporated by reference from the Company’s report on Form 10-Q for the three months ended June 30, 2003).
	10.14	— Stock Purchase Agreement dated December 13, 2004, by and between Harold Friedman and the Company (incorporated by reference from Exhibit 10.1 to the Company’s current report on Form 8-K filed on December 13, 2004).
	10.15	— Agreement dated December 13, 2004, by and between Harold Friedman and the Company (incorporated by reference from Exhibit 10.2 to the Company’s current report on Form 8-K filed on December 13, 2004).
	**13.1	— The Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2005.
	**14.1	— Friedman Industries, Incorporated Code of Conduct and Ethics.
	**21.1	— List of Subsidiaries.
	**23.1	— Consent of Independent Registered Public Accounting Firm.
	**31.1	— Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman.
	**31.2	— Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper.
	**32.1	— Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman.
	**32.2	— Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper.

*	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.

EX-13.1

EXHIBIT 13.1

THE COMPANY’S ANNUAL

REPORT TO SHAREHOLDERS FOR

THE FISCAL YEAR ENDED MARCH 31, 2005

FRIEDMAN

INDUSTRIES

INCORPORATED

2005

ANNUAL REPORT

FINANCIAL HIGHLIGHTS

	2005		2004
Net sales		$188,022,253		$116,158,567
Net earnings		6,246,043		$2,535,991
Net earnings per share (Basic)		$0.84		$0.33
Cash dividends per share		$0.29		$0.10
Stockholders’ equity		$35,354,550		$33,031,604
Working capital		$28,539,243		$25,189,938

TO OUR SHAREHOLDERS:

          As can be seen in the above financial highlights, the Company experienced an outstanding year in fiscal 2005. Strong demand for the Company’s products and services throughout the year generated record sales and earnings.

      Currently, management is sensing some weakness in the market for steel products. As volume has remained generally stable, selling prices and cost of material have decreased since March 31, 2005. It is difficult to determine if this weakness is temporary. However, management is focused on the markets and continues its efforts to maintain assets and liabilities at levels commensurate with operations.

      You are cordially invited to attend the Annual Meeting of Shareholders to be held on September 8, 2005. 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

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

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.

Fulbright Tower

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

William E. Crow

President and Chief Operating Officer

Harold Friedman

Former Vice Chairman of the Board

Houston, Texas

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

President, FXI Corporation

(technology support services)

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, 2005 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 250 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 260 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 2005				Fiscal 2004
	High		Low		High		Low
First Quarter		4.65		3.05		2.75		2.30
Second Quarter		6.55		4.50		3.64		2.53
Third Quarter		12.00		5.50		3.50		2.88
Fourth Quarter		16.56		6.41		4.45		3.15

CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK

	Fiscal 2005		Fiscal 2004
First Quarter		$.05		$.03
Second Quarter		$.08		$.03
Third Quarter		$.08		$.02
Fourth Quarter		$.08		$.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 May 27, 2005 was 450.

3

FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED BALANCE SHEETS

ASSETS

			March 31
			2005			2004
CURRENT ASSETS:
	Cash and cash equivalents		$	205,375		$	1,984,763
	Accounts receivable, net of allowances for bad debts and cash discounts of $37,276 and $44,776 in 2005 and 2004, respectively			16,403,036			14,688,702
	Inventories			25,857,240			21,043,992
	Prepaid federal income taxes			892,104			—
	Other			141,004			112,244
		TOTAL CURRENT ASSETS		43,498,759			37,829,701
PROPERTY, PLANT, AND EQUIPMENT:
	Land			478,618			437,793
	Buildings and yard improvements			4,088,149			4,088,149
	Machinery and equipment			18,896,907			18,013,461
	Less accumulated depreciation			(16,725,869	)		(15,846,288	)
				6,737,805			6,693,115
OTHER ASSET:
	Cash value of officers’ life insurance			559,778			1,302,613
	Deferred income taxes			—			202,694
		TOTAL ASSETS	$	50,796,342		$	46,028,123

LIABILITIES AND STOCKHOLDERS’ EQUITY

				March 31
				2005			2004
CURRENT LIABILITIES:
	Accounts payable and accrued expenses			$	13,474,128		$	10,204,653
	Current portion of long-term debt				2,897			63,037
	Dividends payable				571,180			151,500
	Income taxes payable				—			1,134,433
	Contribution to profit sharing plan				274,000			280,000
	Employee compensation and related expenses				637,311			806,140
			TOTAL CURRENT LIABILITIES		14,959,516			12,639,763
DEFERRED INCOME TAXES					86,856			—
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS					395,420			356,756
STOCKHOLDERS’ EQUITY:
	Common stock, par value $1:
		Authorized shares — 10,000,000
		Issued shares — 7,764,215 in 2005 and 7,575,239 in 2004			7,764,215			7,575,239
	Additional paid-in capital				28,492,619			27,714,669
	Treasury stock at cost (624,468 shares at March 31, 2005 and 0 shares at March 31, 2004)				(2,768,785	)		—
	Retained earnings (deficit)				1,866,501			(2,258,304	)
			TOTAL STOCKHOLDERS’ EQUITY		35,354,550			33,031,604
			TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	50,796,342		$	46,028,123

See accompanying notes.

4

FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF EARNINGS

				Year Ended March 31
				2005		2004			2003
Sales				$	188,022,253	$	116,158,567		$	106,082,738
Costs and expenses:
		Cost of products sold			172,260,349		107,316,507			99,667,017
		Selling, general, and administrative			5,663,317		4,827,728			4,056,744
		Interest expense			15,638		35,253			71,700
					177,939,304		112,179,488			103,795,461
					10,082,949		3,979,079			2,287,277
Interest and other income					146,354		56,595			109,674
			EARNINGS BEFORE INCOME TAXES		10,229,303		4,035,674			2,396,951
Income taxes:
		Current			3,693,710		1,985,835			1,163,036
		Deferred			289,550		(486,152	)		(198,102	)
					3,983,260		1,499,683			964,934
			NET EARNINGS	$	6,246,043	$	2,535,991		$	1,432,017
Average number of common shares outstanding:
	Basic				7,418,410		7,574,070			7,572,239
	Diluted				7,552,131		7,640,546			7,589,900
Net earnings per share:
	Basic			$	.84	$	.33		$	.19
	Diluted			$	.83	$	.33		$	.19

CONSOLIDATED STATEMENTS OF

STOCKHOLDERS’ EQUITY

				Additional					Retained
		Common		Paid-In		Treasury			Earnings
		Stock		Capital		Stock			(Deficit)
	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	)
Net earnings			—		—		—			6,246,043
Issuance of Directors’ shares			2,000		9,800		—			—
Exercise of stock options			186,976		286,527		—			—
Tax benefit of stock options exercised			—		481,623		—			—
Cash dividends($0.29 per share)			—		—					(2,121,238	)
Treasury stock (624,468 shares)			—		—	$	(2,768,785	)		—
	BALANCE AT MARCH 31, 2005	$	7,764,215	$	28,492,619	$	(2,768,785	)	$	1,866,501

See accompanying notes.

5

FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Year Ended March 31
			2005			2004			2003
OPERATING ACTIVITIES
	Net earnings		$	6,246,043		$	2,535,991		$	1,432,017
	Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
		Depreciation		908,382			916,260			967,003
		Deferred taxes		289,550			(486,152	)		(198,102	)
		Change in post retirement benefits		38,664			200,756			(7,000	)
		Tax benefit of stock options exercised		481,623			—			—
	Changes in operating assets and liabilities:
		Accounts receivable		(1,714,334	)		(4,722,641	)		(2,480,844	)
		Inventories		(4,813,248	)		2,988,276			(530,067	)
		Prepaid federal income taxes		(892,104	)		—			—
		Other assets		(28,760	)		(14,200	)		37,632
		Accounts payable and accrued expenses		3,269,475			333,765			517,502
		Contribution to profit sharing plan		(6,000	)		20,000			—
		Employee compensation and related expenses		(168,829	)		528,216			91,136
		Federal income taxes payable		(1,134,433	)		727,813			319,148
		Net cash provided by operating activities		2,476,029			3,028,084			148,425
INVESTING ACTIVITIES
	Purchase of property, plant, and equipment			(953,613	)		(821,209	)		(604,735	)
	Proceeds from sale of asset			542			—			—
	(Increase) decrease in cash value of officers’ life insurance			742,835			(81,354	)		(81,184	)
		Net cash used in investing activities		(210,236	)		(902,563	)		(685,919	)
FINANCING ACTIVITIES
	Cash dividends paid			(1,702,610	)		(757,398	)		(605,782	)
	Proceeds from borrowings of long-term debt			5,000,000			2,000,000			104,239
	Principal payments on long-term debt			(5,060,140	)		(2,062,787	)		(2,865,747	)
	Payments on loans against life insurance			—			—			(111,043	)
	Purchase of treasury stock			(2,767,734	)		—			—
	Stock awards and options exercised			485,303			6,300			5,060
		Net cash used in financing activities		(4,045,181	)		(813,885	)		(3,473,273	)
		Increase (decrease) in cash and cash equivalents		(1,779,388	)		1,311,636			(4,010,767	)
	Cash and cash equivalents at beginning of year			1,984,763			673,127			4,683,894
		Cash and cash equivalents at end of year	$	205,375		$	1,984,763		$	673,127

See accompanying notes.

6

FRIEDMAN INDUSTRIES, INCORPORATED

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

March 31, 2005

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 year ended March 31, 2004 earnings before income taxes include a benefit of approximately $950,000 from the liquidation of LIFO inventory quantities carried at lower costs prevailing in prior year as compared to respective current costs of purchases. At March 31, 2005, March 31, 2004 and March 31, 2003, replacement cost exceeded LIFO cost by approximately $8,200,000, $4,320,000 and $990,000, 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
	2005		2004
Prime coil inventory	$	7,497,674	$	4,976,300
Non-standard coil inventory		530,084		4,181,815
Tubular raw material		4,341,204		3,515,060
Tubular finished goods		13,488,278		8,370,817
	$	25,857,240	$	21,043,992

      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, 2005 and 2004. Property, plant, and equipment are stated at cost.

7

FRIEDMAN INDUSTRIES, INCORPORATED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Depreciation is 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 to 10  years
Loaders and other rolling stock	5 years

      Interest costs incurred during construction projects are capitalized as part of the cost of such assets. No interest was capitalized for the years presented. 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, 2005 or 2004.

      Maintenance and repairs are expensed as incurred.

      SUPPLEMENTAL CASH FLOW INFORMATION:  The Company paid interest of approximately $15,700 in 2005, $35,300 in 2004, and $87,307 in 2003. The Company paid income taxes, net of refunds, of $4,891,061 in 2005, $1,065,000 in 2004, and $617,000 in 2003.

      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:  Since the Company’s financial instruments are short term in nature, the carrying value approximates fair value.

      RECLASSIFICATIONS:  Certain reclassifications have been made to prior period amounts to conform with the current year presentation.

      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:

	2005		2004		2003
Reported net income	$	6,246,043	$	2,535,991	$	1,432,017
Less: compensation expenses per SFAS No. 123, net of tax		-0-		31,582		113,685
Pro forma net income	$	6,246,043	$	2,504,409	$	1,318,332
BASIC EARNINGS PER COMMON SHARE:
Reported net income		.84		.33		.19
Less: compensation expense per SFAS No. 123, net of tax		.00		.00		.02
Pro forma net income		.84		.33		.17
DILUTED EARNINGS PER COMMON SHARE:
Reported net income		.83		.33		.19
Less: compensation expense per SFAS No. 123, net of tax		.00		.00		.02
Pro forma net income		.83		.33		.17

8

FRIEDMAN INDUSTRIES, INCORPORATED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      The fair value of options granted in fiscal 2003 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. There were no options granted in fiscal 2005 and 2004.

      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 16%, 15% and 11% of total company sales in 2005, 2004, and 2003, respectively. Loss of LSS as a customer could have a material adverse effect on the Company’s business. Other than LSS, no customer accounted for 10% of total sales in the three years ended March 31, 2005, except Trinity Industries, Inc. which accounted for approximately 11% of total sales in fiscal 2005.

      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.

      NEW ACCOUNTING PRONOUNCEMENT:  In December 2004, the Financial Accounting Standards Board (FASB) issued Statement Financial Accounting Standard No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)). Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The SEC has deferred the implementation date and the Company is now required to adopt SFAS 123(R) no later than April 1, 2006. SFAS 123(R) permits adoption using one of two methods, a modified prospective method (“Prospective Method”) or a modified retrospective method (“Retrospective Method”). With the Prospective Method, costs are recognized beginning with the effective date based on the requirements of SFAS 123(R) for (i) all share-based payments granted after the effective date of SFAS 123(R), and (ii) all awards granted to employees prior to the effective date of SFAS 123(R) that remain unvested on the effective date. The Retrospective Method applies the requirements of the Prospective Method but further permits entities to restate all prior periods presented based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures. The Company has currently not determined which method it will use and therefore, the impact of the adoption of SFAS 123(R) cannot be reasonably estimated at this time. The effect of expensing stock options using the Black-Scholes model is presented in the pro forma disclosure above.

2. STOCK OPTIONS AND CAPITAL STOCK

      Under the Company’s 1989 and 1996 Stock Option Plans, 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

9

FRIEDMAN INDUSTRIES, INCORPORATED

2. CAPITAL STOCK AND STOCK OPTIONS (Continued)

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:

	2005					2004				2003
				Weighted				Weighted					Weighted
				Average				Average					Average
				Exercise				Exercise					Exercise
	Shares			Price		Shares		Price		Shares			Price
Outstanding at beginning of year		411,694		$	2.58		411,694	$	2.58		154,293		$	3.01
Granted		—			—		—		—		265,000		$	2.33
Exercised		(186,976	)	$	2.53		—		—		—			—
Canceled		—			—		—		—		(7,599	)	$	2.78
Outstanding at end of year		224,718		$	2.62		411,694	$	2.58		411,694		$	2.58
Exercisable at end of year		224,718		$	2.62		411,694	$	2.58		146,694		$	3.03
Weighted average fair value of options granted during the year					—				—				$	2.33

      Outstanding and exercisable stock options at March 31, 2005, 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 - $2.45		7.5		145,297	$	2.33		145,297	$	2.33
$3.13		1.0		79,421	$	3.13		79,421	$	3.13
		5.2		224,718				224,718

      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 the bank’s prime rate or at 1.5% over LIBOR. At March 31, 2005 and 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:

2006		$	2,897
2007			—
2008			—
2009			—
2010			—
	Total	$	2,897

      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, 2005:

10

FRIEDMAN INDUSTRIES, INCORPORATED

3. LONG-TERM DEBT AND COMMITMENTS AND CONTINGENCIES (Continued)

2006		$	27,264
2007			27,264
2008			27,264
2009			2,272
2010			—
Thereafter			—
	Total	$	84,064

      Rental expense for leased properties was $27,264, $27,264 and $131,629 during fiscal 2005, 2004 and 2003, respectively.

4. EARNINGS PER SHARE

      Basic and dilutive net income per share is computed based on the following information:

		Year Ended March 31
		2005		2004		2003
Basic
Net income		$	6,246,043	$	2,535,991	$	1,432,017
Average common shares			7,418,410		7,574,070		7,572,239
Dilutive
Net income		$	6,246,043	$	2,535,991	$	1,432,017
Average common shares			7,418,410		7,574,070		7,572,239
Common share equivalents:
	Options		133,721		66,476		17,661
Total common share equivalents			133,721		66,476		17,661
Average common shares and common equivalents			7,552,131		7,640,546		7,589,900

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
		2005			2004
Deferred tax liabilities:
	Depreciation	$	(814,504	)	$	(650,000	)
Total deferred tax liabilities			(814,504	)		(650,000	)
Deferred tax assets:
	Inventory capitalization		71,423			90,047
	Inventory reserve		460,771			570,000
	Postretirement benefits other than pensions		134,443			124,100
	Other		61,011			68,547
Total deferred tax assets			727,648			852,694
Net deferred tax asset (liability)		$	(86,856	)	$	202,694

11

FRIEDMAN INDUSTRIES, INCORPORATED

5. INCOME TAXES (Continued)

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

	Year Ended March 31
	2005			2004			2003
Income Tax Expense at U.S. federal statutory rate		34.0	%		34.0	%		34.0	%
State and local income tax rates net of federal income tax benefit		4.9			3.2			6.3
Provision for income taxes		38.9	%		37.2	%		40.3	%

      Components of tax expense follows:

			Year Ended March 31
			2005		2004			2003
Federal
	Current		$	2,934,088	$	1,792,570		$	935,807
	Deferred			289,550		(486,152	)		(198,102	)
				3,223,638		1,306,418			737,705
State
	Current			759,622		193,265			227,229
				759,622		193,265			227,229
		Total	$	3,983,260	$	1,499,683		$	964,934

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 $276,000 for the year ended March 31, 2005, $280,000 for the year ended March 31, 2004, and $260,000 for the year ended March 31, 2003. 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 401(k) 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 $40,000, $28,000 and $27,000 for the years ended March 31, 2005, 2004 and 2003, 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 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
			2005			2004			2003
NET SALES:
	Coil		$	104,312,715		$	62,372,496		$	60,416,662
	Tubular			83,709,538			53,786,071			45,666,076
		TOTAL NET SALES	$	188,022,253		$	116,158,567		$	106,082,738
OPERATING PROFIT:
	Coil		$	4,283,911		$	3,026,372		$	1,786,570
	Tubular			9,021,863			3,704,082			2,545,695
		TOTAL OPERATING PROFIT		13,305,774			6,730,454			4,332,265
	General corporate expenses			(3,207,187	)		(2,716,122	)		(1,973,288	)
	Interest expense			(15,638	)		(35,253	)		(71,700	)
	Interest and other income			146,354			56,595			109,674
		TOTAL EARNINGS BEFORE TAXES	$	10,229,303		$	4,035,674		$	2,396,951
IDENTIFIABLE ASSETS:
	Coil		$	20,724,554		$	21,770,013		$	18,967,495
	Tubular			28,300,933			20,623,515			21,848,558
				49,025,487			42,393,528			40,816,053
	General corporate assets			1,770,855			3,634,595			1,962,873
		TOTAL ASSETS	$	50,796,342		$	46,028,123		$	42,778,926
DEPRECIATION:
	Coil		$	624,654		$	744,759		$	804,463
	Tubular			248,542			151,250			141,384
	Corporate and other			35,186			20,251			21,156
			$	908,382		$	916,260		$	967,003
CAPITAL EXPENDITURES:
	Coil		$	113,243		$	30,457		$	56,494
	Tubular			815,145			715,426			514,623
	Corporate and other			25,225			75,326			33,618
			$	953,613		$	821,209		$	604,735

      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, prepaid federal income taxes, deferred income taxes and the cash value of officers’ life insurance. Although inventory is transferred at cost between product groups, 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, 2005 and 2004:

		Quarter Ended
		June 30		September 30		December 31		March 31
		2004		2004		2004		2005
Net sales		$	44,915,704	$	49,020,241	$	43,434,081	$	50,652,227
Gross profit			4,200,547		5,025,949		3,156,238		3,379,170
Net earnings			1,618,829		2,261,133		1,220,609		1,145,472
	Basic(1)		.21		.30		.16		.16
	Diluted(1)		.21		.29		.16		.16

		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	(2)
	Basic		.06		.04		.00		.23
	Diluted		.06		.04		.00		.23

(1)	The sum of the quarterly earnings per share does not equal the annual amount reported as per share amounts are computed independently for each quarter.
(2)	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 and subsidiary as of March 31, 2005 and 2004, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, and 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 and subsidiary at March 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2005, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Houston, Texas

June 27, 2005

SELECTED FINANCIAL DATA

		Year Ended March 31
		2005		2004		2003		2002		2001
Net sales		$	188,022,253	$	116,158,567	$	106,082,738	$	97,817,956	$	120,395,583
Net earnings			6,246,043		2,535,991		1,432,017		940,039		2,927,582
Total assets			50,796,342		46,028,123		42,778,926		43,986,455		48,010,512
Long-term debt			—		—		57,329		2,053,438		4,800,000
Stockholders’ equity			35,354,550		33,031,604		31,246,751		30,491,351		30,378,150
Net earnings per share:
	Basic		0.84		0.33		0.19		0.12		0.39
	Diluted		0.83		0.33		0.19		0.12		0.39
Cash dividends declared per share			0.29		0.10		0.09		0.11		0.16

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, 2005 compared to year ended March 31, 2004

      During the year ended March 31, 2005, sales, costs of goods sold and gross profit increased $71,863,686, $64,943,842 and $6,919,844, from the respective amounts recorded during the year ended March 31, 2004. The increases in sales and costs of goods were related primarily to increases in the average per ton selling price and average per ton cost of goods sold of approximately 77% and 76%, respectively. Total tons shipped decreased from approximately 322,000 tons in fiscal 2004 to 294,000 tons in fiscal 2005. Gross profit benefited from improved margins. In fiscal 2005, gross profit and costs of goods as percentage of sales were approximately 8.4% and 91.6%, respectively, compared to 7.6% and 92.4%, respectively, in fiscal 2004. During fiscal 2005, the Company experienced a significant improvement in market conditions for its products as compared to market conditions during fiscal 2004.

      Coil product segment sales increased approximately $41,940,000 during fiscal 2005. This increase was related primarily to an increase in the average per ton selling price. Tons shipped declined from approximately 173,000 tons in fiscal 2004 to 144,000 tons in fiscal 2005. Each of the Company’s coil operations reflected a decrease in tons sold. However, approximately 59% of this overall decrease in tons sold was related to a reduction in tons sold by the Company’s XSCP Division (“XSCP”). During fiscal 2005, XSCP, which markets non-standard coils received from Nucor Steel Company (“NSC”), agreed with NSC to suspend the purchase of non-standard coils. XSCP accounted for approximately 3% of the Company’s total sales during fiscal 2005. The Company expects to continue XSCP operations. Currently, the Company is receiving limited shipments of non-standard coils from NSC. In the near term, management expects these limited shipments to continue. When not used by XSCP, XSCP operating assets can be used at the Company’s Hickman, Arkansas coil facility (“Hickman”). Total coil operating profit as a percentage of coil segment sales decreased from 4.9% in fiscal 2004 to 4.1% in fiscal 2005. In fiscal 2004, coil operations experienced a liquidation of LIFO inventory which generated a one-time benefit of approximately $950,000 in operating income.

      In fiscal 2005, the Company’s Lone Star coil facility (“LSCF”) continued to experience a lack of supply of coil products from its primary coil supplier, Lone Star Steel Company (“LSS”). LSCF, which accounted for approximately 7% of the Company’s total sales in fiscal 2005, has from time to time purchased coils from other suppliers. However, freight costs associated with these purchases diminishes the Company’s competitiveness in a very competitive industry. LSCF produced a profit from operations in fiscal 2005. A further reduction in supply could have an adverse effect on coil segment operations. Management confers regularly with LSS and continues to monitor this situation closely.

      The Company is dependent on LSS and NSC for its supply of inventory. NSC continues to supply Hickman with steel coils in amounts that are adequate for the Company’s purposes. While current levels are adequate to sustain the Company’s operations, 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 $29,923,000 during fiscal 2005. This increase resulted primarily from an approximate 54% increase in the average per ton selling price. Tons shipped in each fiscal year remained constant at approximately 150,000 tons. Tubular product segment operating profits as a percentage of segment sales were approximately 10.8% and 6.9% in

16

FRIEDMAN INDUSTRIES, INCORPORATED

fiscal 2005 and 2004, respectively. This segment benefited from significantly improved market conditions for tubular products during fiscal 2005 as compared to market conditions in fiscal 2004.

      During fiscal 2005, LSS, the Company’s primary supplier of tubular products and coil material used in pipe manufacturing, continued to supply such products in amounts that were adequate for the Company’s purposes. The Company does not currently anticipate any significant change in such supply from LSS.

      During fiscal 2005, general, selling and administrative costs increased $835,589 from the amount recorded during fiscal 2004. This increase was related primarily to bonuses associated with increased earnings and an increase in legal and professional expenses.

      Interest and other income increased $89,759 from the amount recorded during fiscal 2005. This increase was associated primarily with interest earned on improved invested cash positions during fiscal 2005.

      Income taxes increased $2,483,577 from the comparable amount recorded during fiscal 2004. This increase was primarily related to the increase in earnings before taxes. The effective tax rates were 39% and 37% in fiscal 2005 and 2004, respectively. In fiscal 2005, the Company recorded taxes related to the surrender of life insurance policies and an increase in the net effect of state income taxes.

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 LSCF experienced a lack of supply of coil products from its primary coil supplier, 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, XSCP, which markets non-standard coils received from 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.

      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

17

FRIEDMAN INDUSTRIES, INCORPORATED

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 fiscal 2004.

      General, selling and administrative costs increased $770,984 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.

      Income taxes increased $534,749 from the comparable amount recorded during fiscal 2003. This increase was primarily related to the increase in earnings before taxes. Effective rates were approximately 37% and 40% in fiscal 2004 and 2003, respectively. The net effect of state income taxes was greater in fiscal 2003 as compared to fiscal 2004.

FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL

      The Company remained in a strong, liquid position at March 31, 2005. Current ratios were 2.91 and 2.99 at March 31, 2005 and March 31, 2004, respectively. Working capital was $28,539,243 at March 31, 2005 and $25,189,938 at March 31, 2004.

      During the year ended March 31, 2005, the Company maintained assets and liabilities at levels it believed were commensurate with operations. Cash declined as accounts receivable, inventories and accounts payable increased. An increase in sales in March 2005 generated the increase in accounts receivable. The increases in inventory and accounts payable were related primarily to increased costs of material. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

      In December 2004, the Company purchased 624,207 shares of the common stock of the Company from Mr. Harold Friedman for approximately $4.434 per share or a total of $2,767,734. Effective as of December 31, 2004, Mr. Friedman resigned as Vice Chairman of the Board and retired as a full-time employee of the Company.

      During the year ended March 31, 2005, the Company purchased approximately $953,613 in fixed assets. This purchase was related primarily to a small diameter pipe mill which began operation in April 2004.

      In June 2004 and July 2004, the Company surrendered, for cash, certain split-dollar life insurance policies on the lives of Jack and Harold Friedman, respectively. The Company received the total cash surrender value of $812,432.

      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, 2005 and 2004, 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.

18

FRIEDMAN INDUSTRIES, INCORPORATED

FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL (continued)

      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	$	2,897	$	2,897		—		—		—
Capital lease obligations		—		—		—		—		—
Operating lease obligations		84,064		27,264	$	54,528	$	2,272		—
Total	$	86,961	$	30,161	$	54,528	$	2,272		—

INFLATION

      During fiscal 2005, the Company believes that the general level of inflation had little effect on its operations.

CRITICAL ACCOUNTING POLICIES

      The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. 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. 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.

19

FRIEDMAN INDUSTRIES, INCORPORATED

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.

20

FRIEDMAN INDUSTRIES, INCORPORATED

TEN YEAR FINANCIAL SUMMARY

			Year Ended March 31
			2005		2004		2003		2002		2001		2000		1999		1998		1997		1996
Net sales			$	188,022,253	$	116,158,567	$	106,082,738	$	97,817,956	$	120,395,583	$	120,267,809	$	124,719,640	$	148,840,724	$	119,920,966	$	106,849,181
Earnings			$	6,246,043	$	2,535,991	$	1,432,017	$	940,039	$	2,927,582	$	2,506,801	$	3,540,811	$	4,809,992	$	3,630,071	$	2,836,768
Current assets			$	43,498,759	$	37,829,701	$	34,769,500	$	35,806,988	$	40,231,329	$	36,945,378	$	32,534,040	$	39,347,548	$	33,357,160	$	27,524,670
Current liabilities			$	14,959,516	$	12,639,763	$	11,035,388	$	10,797,106	$	12,271,802	$	8,377,279	$	6,758,038	$	13,437,178	$	10,172,672	$	6,410,527
Net working capital			$	28,539,243	$	25,189,938	$	23,734,112	$	25,009,882	$	27,959,527	$	28,568,099	$	25,776,002	$	25,910,370	$	23,184,488	$	21,114,143
Total assets			$	50,796,342	$	46,028,123	$	42,778,926	$	43,986,455	$	48,010,512	$	45,106,790	$	41,023,377	$	46,039,361	$	38,117,191	$	32,812,986
Stockholders’ equity			$	35,354,550	$	33,031,604	$	31,246,751	$	30,491,351	$	30,378,150	$	28,622,951	$	27,422,779	$	25,732,957	$	22,781,959	$	20,428,936
Earnings as a percent of
		Net sales		3.3		2.2		1.3		1.0		2.4		2.1		2.8		3.2		3.0		2.7
		Stockholders’ equity		17.7		7.7		4.6		3.1		9.6		8.8		12.9		18.7		15.9		13.9
Average number of common shares outstanding: Basic(1)				7,418,410		7,574,070		7,572,239		7,571,239		7,568,839		7,547,624		7,528,702		7,512,901		7,489,943		7,446,076
Per share
	Net earnings per share:
		Basic		$ 0.84		$ 0.33		$ 0.19		$ 0.12		$ 0.39		$ 0.33		$ 0.47		$ 0.64		$ 0.48		$ 0.38
	Stockholders’ equity(1)			$ 4.77		$ 4.36		$ 4.13		$ 4.03		$ 4.01		$ 3.79		$ 3.64		$ 3.43		$ 3.04		$ 2.74
Cash dividends per common share				$ 0.29		$ 0.10		$ 0.09		$ 0.11		$ 0.16		$ 0.18		$ 0.25		$ 0.25		$ 0.18		$ 0.15
Stock dividend declared				—		—		—		—		—		5%		5%		5%		5%		5%

(1)  Adjusted for stock dividends.

[Friedman Industries Incorporated Logo]

EX-14.1

EXHIBIT 14.1

FRIEDMAN INDUSTRIES, INCORPORATED

CODE OF CONDUCT AND ETHICS

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

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

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

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

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

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

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

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

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

      The Board of Directors is responsible for applying and interpreting the Code. Any questions relating to how the Code should be interpreted or applied should be addressed to a supervisor, the Chief Executive Officer, the President or the Senior Vice President-Finance. Any employee, officer or director who becomes aware of any existing or potential violation of laws, rules, regulations or the Code should promptly notify the Chief Executive Officer, the President, the Senior Vice President-Finance or the Chairman of the Audit Committee. Reports may be made orally or in writing and may be made anonymously and will be kept confidential to the extent permitted. Written reports should be sent to the attention of the Chief Executive Officer, the President or the Senior Vice President-Finance, at P.O. Box 21147, Houston, Texas 77226. In addition, reports may be made to the Chairman of the Audit Committee by calling (713)957-4945 or sent to 16538 Air Center Blvd., Houston, Texas 77032.

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

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

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

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES

ROYAL FASTENERS CORPORATION Texas Corporation 100% owned

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

      We consent to the incorporation by reference in this Annual Report (Form 10-K) of Friedman Industries, Incorporated of our report dated June 27, 2005, with respect to the consolidated financial statements of Friedman Industries, Incorporated included in the 2005 Annual Report to Shareholders of Friedman Industries, Incorporated.

      Our audits also included the financial statement schedule of Friedman Industries, Incorporated listed in Item 15(a). This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion as to which the date is June 27, 2005, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

      We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-37887) pertaining to the 1996 Stock Option Plan, the 1995 Non-Employee Director Plan, as amended, the 1989 Incentive Stock Option Plan, as amended, and in the Registration Statement (Form S-8 No. 333-47262) pertaining to the 2000 Non-Employee Director Stock Plan of our report dated June 27, 2005, with respect to the consolidated financial statements of Friedman Industries, Incorporated incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule of Friedman Industries, Incorporated included in this Annual Report (Form 10-K) of Friedman Industries, Incorporated.

/s/ Ernst & Young LLP

Houston, Texas

June 27, 2005

EX-31.1

EXHIBIT 31.1

I, Jack Friedman, Chairman of the Board and Chief Executive Officer of Friedman Industries, Incorporated, a Texas corporation, certify that:

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

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

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

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

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

      b) [intentionally omitted per SEC release 33-8238]

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

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

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

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

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

Dated: June 28, 2005

/s/ Jack Friedman

Chairman of the Board and

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, Ben Harper, Senior Vice President — Finance and Secretary/Treasurer of Friedman Industries, Incorporated, a Texas corporation, certify that:

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

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

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

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

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

      b) [intentionally omitted per SEC release 33-8238]

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

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

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

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

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

Dated: June 28, 2005

/s/ Ben Harper

Senior Vice President — Finance and

Secretary/Treasurer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906

of The Sarbanes-Oxley Act of 2002

Not Filed Pursuant to the Securities Exchange Act of 1934

      In connection with the Annual Report of Friedman Industries, Incorporated (the “Company”) on Form 10-K for the fiscal year ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack Friedman, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

By:  /s/ Jack Friedman

Chairman of the Board and

Chief Executive Officer

Dated: June 28, 2005

EX-32.2

EXHIBIT 32.2

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906

of The Sarbanes-Oxley Act of 2002

Not Filed Pursuant to the Securities Exchange Act of 1934

      In connection with the Annual Report of Friedman Industries, Incorporated (the “Company”) on Form 10-K for the fiscal year ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ben Harper, Senior Vice President-Finance and Secretary/Treasurer for the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

By:  /s/ Ben Harper

Senior Vice President — Finance

and Secretary/Treasurer

Dated: June 28, 2005