8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K/A

(Amendment No.1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 26, 2022

FRIEDMAN INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

Texas	1-07521	74-1504405
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1121 Judson Road Suite 124, Longview, Texas 75601

(Address of principal executive offices, including zip code)

(903) 758-3431

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 Par Value	FRD	NYSE American

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company          ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.01 Completion of Acquisition or Disposition of Assets

In the Current Report on Form 8-K filed by Friedman Industries, Incorporated (the “Company”) on May 2, 2022 (the “Initial 8-K”), the Company reported that it entered into a definitive agreement with Plateplus, Inc. (“Plateplus”) on April 26, 2022, whereby the Company acquired the real estate, buildings, equipment, inventory, and other assets of Plateplus’ East Chicago, IN and Granite City, IL facilities and certain steel inventory and client relationships at Plateplus’ Loudon, TN and Houston, TX facilities (the “Acquisition”), and that the Acquisition closed effective at the end of business on April 30, 2022. As permitted by Item 9.01 of Form 8-K, the Company is filing this amendment (“Amendment No. 1”) in order to amend and supplement the Initial 8-K to include the historical and pro forma financial information required under Item 9.01 of Form 8-K with respect to the Acquisition.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business Acquired.

The audited and abbreviated financial statements of certain assets of Plateplus, which comprise all of the assets acquired and liabilities assumed by the Company pursuant to the Acquisition, as of March 31, 2022 and March 31, 2021 and the statements of revenues and direct operating expenses for the years then ended, and the related notes to such abbreviated financial statements are filed herewith as Exhibit 99.1 to this Amendment No. 1 and incorporated by reference into this Item 9.01(a).

(b) Pro Forma Financial Information.

The following unaudited pro forma condensed combined financial information of the Company and certain assets acquired and liabilities assumed by the Company pursuant to the Acquisition are filed herewith as Exhibit 99.2 to this Amendment No. 1 and incorporated by reference into this Item 9.01(b):

● Unaudited Pro Forma Condensed Combined Balance Sheets as of March 31, 2022.

● Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended March 31, 2022.

● Notes to Unaudited Pro Forma Condensed Combined Financial Statements

(d) Exhibits

23.1 Consent of Deloitte

99.1 Audited and abbreviated financial statements of certain assets acquired and liabilities assumed of Plateplus as of March 31, 2022 and 2021

99.2 Unaudited pro forma condensed combined financial information of the Company for the year ended March 31, 2022.

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:       August 5, 2022

FRIEDMAN INDUSTRIES, INCORPORATED
By:	/s/ Alex LaRue
	Alex LaRue
	Chief Financial Officer - Secretary and Treasurer

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the registration statement (No. 333-215223) on Form S-8 of Friedman Industries, Inc, of our report dated August 5, 2022, relating to the abbreviated financial statements of Certain Assets of Plateplus, Inc., appearing in this Current Report on Form 8-K/A dated August 5, 2022.

/s/ Deloitte & Touche LLP

Houston, Texas

August 5, 2022

EX-99.1

Exhibit 99.1

Certain Assets of Plateplus, Inc.

Abbreviated Financial Statements

For the years Ended March 31, 2022 and 2021, and

Independent Auditor’s Report　

CERTAIN ASSETS OF PLATEPLUS, INC.
(Abbreviated Financial Statements.)

TABLE OF CONTENTS

INDEPENDENT AUDITOR’S REPORT

ABBREVIATED FINANCIAL STATEMENTS:

Statement of Assets Acquired and Liabilities Assumed for the years ended March 31, 2022 and 2021

Statement of Revenues and Direct Operating Expenses for the years ended March 31, 2022 and 2021

Notes to the Abbreviated Financial Statements

2

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors

Plateplus, Inc.

Opinion

We have audited the abbreviated financial statements of Certain Assets of Plateplus, Inc., which comprise the statements of assets acquired and liabilities assumed as of March 31, 2022 and 2021 and the statements of revenues and direct operating expenses for the years then ended, and the related notes to the abbreviated financial statements (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the assets acquired and liabilities assumed of Certain Assets of Plateplus, Inc. as of March 31, 2022 and 2021, and its revenues and direct operating expenses for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Plateplus, Inc. and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis of Accounting

As discussed in Note 1 to the financial statements, the financial statements have been prepared for the purposes of complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the financial position or results of operations of Certain Assets of Plateplus, Inc. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

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Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

● Exercise professional judgment and maintain professional skepticism throughout the audit.

● Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control for Certain Assets of Plateplus, Inc. Accordingly, no such opinion is expressed.

● Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ Deloitte & Touche LLP

Houston, Texas
August 5, 2022

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CERTAIN ASSETS OF PLATEPLUS, INC. 

(Abbreviated Financial Statements)

STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
(In thousands)
	For the Year Ended March 31,
	2022		2021
ASSETS ACQUIRED
CURRENT ASSETS:
Inventories—net		68,609		51,807
Other current assets		47		63
Total current assets		68,656		51,870
PROPERTY, PLANT, AND EQUIPMENT—Net		17,961		24,132
TOTAL ASSETS	$	86,617	$	76,002
LIABILITIES ASSUMED AND NET ASSETS ACQUIRED
CURRENT LIABILITIES:
Payables		13,720		9,645
Total current liabilities		13,720		9,645
TOTAL NET ASSETS ACQUIRED	$	72,897	$	66,357

See Notes to Abbreviated Financial Statements.

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CERTAIN ASSETS OF PLATEPLUS, INC. 

(Abbreviated Financial Statements)

STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(In thousands)
	For the Year Ended March 31,
	2022			2021
REVENUES	$	248,887		$	117,835
COST OF REVENUES		(257,283	)		(110,577	)
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES		(2,251	)		(1,709	)
LOSS ON LONG-LIVED ASSET IMPAIRMENT AND RETIREMENTS		(4,037	)		(505	)
TOTAL DIRECT OPERATING EXPENSES		(263,571	)		(112,791	)
REVENUE (LOSS) LESS DIRECT OPERATING EXPENSES	$	(14,685	)	$	5,044

See Notes to Abbreviated Financial Statements.

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CERTAIN ASSETS OF PLATEPLUS, INC.
(Abbreviated Financial Statements)

NOTES TO ABBREVIATED FINANCIAL STATEMENTS

FOR YEARS ENDED MARCH 31, 2022 AND 2021

(Dollars in thousands)

1. DESCRIPTION OF BUSINESS

Organization—Plateplus, Inc. (the “Company”), a wholly owned subsidiary of Metal One Corporation (the “Parent Company” or "Parent"), was incorporated on August 3, 2017, under the laws of the state of Delaware. The Company supplies hot-rolled coil, sheet and plate from five steel service centers strategically located throughout the U.S.

On April 26, 2022, the Company and its Parent entered into an asset purchase agreement (the “Agreement) with Friedman Industries, Inc. to sell two steel service centers, East Chicago, Indiana and Granite City, Illinois as well as inventory from two other steel service centers located in Loudon, Tennesse and Houston, Texas (the “Assets”). The Company and its Parent closed the transactions contemplated by the Agreement with Friedman Industries, Inc on April 30, 2022. The Assets include property and equipment and inventory net of accounts payable. The accompanying abbreviated financial statements present the assets acquired and liabilities assumed as of March 31, 2022 and 2021 and the revenues and direct operating expenses of the East Chicago and Granite City steel service centers for the years ended March 31, 2022 and 2021, but exclude corporate overhead, interest and income tax expense.

The accompanying statement of assets acquired and liabilities assumed and the statement of revenues and direct operating expenses were prepared for the purpose of assisting Friedman Industries, Inc. (the “Buyer”) in complying with the rules and regulations of Rule 3-05 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”) and application of SEC Final Rule Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses, and are not intended to be a complete presentation of the assets, liabilities, equity, revenues, expenses, and cash flows associated with the Assets.

2. BASIS OF PRESENTATION

The Company has not maintained the separate accounts necessary to present complete financial statements of the Assets. The Assets were not a separate legal entity, subsidiary or operating segment of the Company and its Parent. The Assets were never operated as a stand-alone business or division and separate financial statements have not been prepared in the past. As a result of the foregoing, it is not practicable to provide complete financial statements.

The statement of assets acquired and liabilities assumed includes only the Assets acquired by the Buyer pursuant to the Agreement. Certain assets and liabilities related to the Assets will not be sold per the terms of the Agreement, and therefore, are not included in the statement of assets acquired and liabilities assumed. Outside of trade accounts payable and certain other liabilities specified in the Agreement, no other liabilities, contingent or otherwise, were assumed by the Buyer.

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The statement of revenues and direct operating expenses was derived from the historical accounting records of the Assets, which are maintained in accordance with U.S. generally accepted accounting principles (“GAAP”). The statement of revenues and direct operating expenses is not intended to be a complete presentation of the results of operations as if the Assets were operated independently during the period presented. Further, we do not represent that the results as presented are indicative of the results of operations that would have been achieved if the Assets had operated as a separate, stand-alone entity as of or for the period presented, nor are they indicative of the financial condition or results of operations to be expected in the future due to changes in the business and the omission of certain operating expenses as described below.

Certain expenses, such as corporate and administrative, are not tracked or monitored in a manner that would enable the development of a complete set of financial statements. Such costs include corporate overhead, such as accounting, human resources, treasury and legal support, or a provision for income taxes. As such, only costs directly related to the revenue-generating activities of the Assets are included in this abbreviated financial statement as permitted by Rule 3-05 of Regulation S-X. Such direct costs include costs of revenues including the cost of purchasing, processing, and transporting inventory to customers, steel service center operational expenses, real estate taxes, and depreciation. Selling, general and administrative expenses are expensed as incurred and include costs related to sales operations at the steel service centers, such as payroll, travel and entertainment, and depreciation. Impairments and retirement losses on plant, property and equipment are included in “Loss on Long-Lived Assets and Retirements”.

The financing needs of the Assets were supported by the Parent and cash generated by the Assets were transferred to the Parent. As the Assets have historically been managed as part of the operations of Plateplus and the Parent and have not operated as a stand-alone entity, it is impractical to prepare historical cash flow information regarding the operating, investing, and financing cash flows of the Assets. As such, information on cash flows is not presented herein.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates—The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition—Revenue is recognized when title and risk of loss passes to the customer. Depending on the terms, the title, and risk of loss passes to the customer either at the point of shipping or at the point of delivery to the customer. Freight costs are included in cost of goods sold.

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We perform an assessment of various factors in determining whether revenue should be reported gross or net, the primary factors being whether we are acting as the principal in offering services to the customer or whether we are acting as an agent in the transaction.

Inventories—Inventories, primarily consisting of hot rolled sheet and plate products, are stated at the lower of cost, on a specific identification basis, or net realizable value.

Property, Plant, and Equipment—Property, plant, and equipment is stated at cost. Depreciation and amortization have been provided in the financial statements using straight-line methods based on reasonable estimates of useful lives, which fall within the following ranges for major asset classifications:

Building and building improvements	2–40 years
Machinery and equipment	2–34 years
Furniture and fixtures and vehicles	3–11 years

Maintenance, repairs, and minor renewals are expensed as incurred. Additions, improvements, and major renewals are capitalized. Construction in progress includes costs for capital projects that are in process or being completed. These costs are depreciated upon completion of the projects.

4. REVENUE FROM CONTRACTS WITH CUSTOMERS

ASC 606 introduced that revenue is recognized at an amount that reflects the expected consideration receivable in exchange for transferring goods or services to a customer applying the following steps:

1. Identify the contract with a customer
2. Identify the performance obligation
3. Determine the transaction price
4. Allocate the transaction price to the performance obligation in the contract
5. Recognize revenue when (or as) the entity satisfies a performance obligation

The Company generates revenue from the processing and distribution of steel products. Revenue is recognized when the control of the goods/services is transferred to a customer, at the point of delivery based on Incoterms or at the completion of each contractual performance obligation. Sales of goods, consignment sales or purchase, and manufacturing are the major performance obligations for the Company. Performance obligation varies depending on the revenue stream as described below. Due date for each invoice varies depending on the nature of each transaction, industrial practices, and terms in the contract. Any difference in timing between satisfaction of performance obligation and payment under the contract will result in recognition of either a receivable or a contract liability.

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Revenue streams — The Company engages in the manufacturing and distribution of goods where the Company buys materials from vendors for resale, or produces finished goods from the raw materials, and sells them to customers. The performance obligation is satisfied when the material is delivered to customers, which is the time that the Company recognizes revenue. The Company also engages in the contract manufacturing where the customer provides materials to the Company for toll processing. The performance obligation is satisfied at the time toll processing is complete, which is the time that the Company recognizes revenue for the services performed.

Principal Versus Agent Considerations —The Company engages in manufacturing transactions taking the role of either a principal or an agent of a principal or both. ASC 606 requires an entity to determine whether it is a principal or an agent in a transaction based on whether the entity controls the goods/services before transferring the goods/services to a customer.

● Transactions Performed as a Principal —The Company enters into contracts to sell goods to customers. The goods may come from existing inventory on hand or they may come from purchase contracts that are executed at the same time as the sales contracts for purpose of limiting inventory risk. In either situation, the Company acts as the primary obligor for the acceptance of the goods and has the discretion in pricing of the goods. Therefore, the Company is the principal in these transactions.

● Transactions Performed as an Agent —The Company enters into contracts with customers to purchase or sell, on their behalf, goods, and charges a commission for this service. The Company also facilitates conclusion of the contracts between manufacturers and customers and deliveries of the products between suppliers and customers. The Company does not control the goods/services before they are transferred to customers. Hence, the Company is an agent in these transactions because it does not have the ability to direct the use of the goods/services or obtain benefits from the goods/services.

Gross and Net Presentation of Revenues — The Company presents revenue on a gross basis in the consolidated statements of profit for trading transactions or manufacturing in which the Company is the principal. The Company presents revenue on a net basis for trading transactions in which the Company is an agent of the principal.

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The following table provides a breakdown of gross to net revenue:

	For the Year Ended March 31,
	2022			2021
Gross Revenue	$	248,897		$	118,088
Toll Processing Revenue		572			323
Sales Discounts and Allowances		(582	)		(576	)
Net Revenue	$	248,887		$	117,835

5. INVENTORY

Inventories consisted of the following:

	For the Year Ended March 31,
	2022			2021
Raw material	$	52,887		$	45,405
Work in process		571			-
Finished goods		18,196			6,410
Less inventory reserves		(3,045	)		(8	)
Total Inventories, net	$	68,609		$	51,807

6. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consisted of the following:

	For the Year Ended March 31,
	2022			2021
Land	$	315		$	315
Building and improvements		10,172			9,675
Machinery and equipment		19,201			11,175
Furniture, fixtures, and vehicles		249			249
Construction in progress		-			8,179
Total property, plant, and equipment	$	29,937		$	29,593
Less accumulated depreciation		(11,976	)		(5,461	)
Property, plant, and equipment-net	$	17,961		$	24,132

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7. ASSET IMPAIRMENTS

The Company has experienced four consecutive fiscal years of operating losses through the year ended March 31, 2022. Additionally, as of the fiscal year end March 31, 2022 the Company expected to sell its business locations and assets within the next twelve months. However, appropriate approvals from the Parent Company for the sale of business locations had not been obtained as of March 31, 2022, so the related fixed assets did not qualify as assets held for sale. The Company identified asset impairment triggering events based on the history of losses and its plans to sell business locations and assets. For the year ended March 31, 2022, the company plans to sell the East Chicago and Granite City facilities to one buyer, the asset group was considered to be at the location level for the impairment analyses. Plateplus, Inc. estimated future cash flows based on the expected sales proceeds from the sale of the assets, which in some cases were confirmed before the issuance of the financial statements. The total fair value of both locations was estimated to be $18 million.

As a result of this impairment test, the book value of East Chicago and Granite City assets are not recoverable since the fair value of each asset group (which was the based on the expected sales prices and fair value provided by a valuation specialist assisting the Company), are less than the carrying amount of assets. The total fair value for these assets is $18 million. The Company recorded a non-cash pre-tax impairment charge for both locations for the year ended March 31, 2022 of $4 million.

For the year ended March 31, 2021, the Company evaluated the recoverability of property, plant, and equipment, intangible and other assets for the Company by comparing the fair value with its carrying value, with the fair values determined using a combination of a discounted cash flow analysis based upon historical and projected financial information (the Income Approach), the Market Approach, and the Cost Approach. As a result of this impairment test, the Company recorded a non-cash pre-tax impairment charge for the year ended March 31, 2021 of $506 thousand.

In terms of fair value methodologies for personal property, the fair values determined using only the Cost Approach due to the custom nature of the majority of the personal property assets. Economic obsolescence was also considered, and adjustments were made to the personal property based on a review of the comparative results of the Company’s discounted cash flow analysis.

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8. FAIR VALUES

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices for identical instruments in active markets.

Level 2 Quoted market prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Level 3 assets and liabilities generally include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation or for which there is a lack of transparency as to the inputs used.

Certain assets and liabilities are required to be measured at fair value on recurring basis in accordance with GAAP. In addition, certain assets and liabilities may be recorded at fair value on a nonrecurring basis. Generally, we record assets at fair value on a nonrecurring basis as a result of impairment charges.

In terms of fair value methodologies for real property, the fair values determined using a combination of the direct method of the Cost Approach, the indirect method of the Cost Approach, and Market Approach.

In terms of fair value methodologies for personal property, the fair values determined using only the Cost Approach due to the custom nature of the majority of the personal property assets.

The Company recorded impairment charges related to all fixed assets for East Chicago and Granite City, which were measured at fair value and have presented the loss in the Loss on Long-Lived Asset Impairment and Retirements section in the Statement of Revenues and Direct Operating Expenses.

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9. PAYABLES

Accounts payable consisted of the following:

	For the Year Ended March 31,
	2022		2021
Trade	$	13,720	$	9,645
Total	$	13,720	$	9,645

10. RELATED-PARTY TRANSACTIONS

The Company has transactions with affiliates in the normal course of business. Transactions with affiliates for the year ended March 31, 2022 and 2021 are as follows:

	For the Year Ended March 31,
	2022		2021
Sales	$	1,343	$	699
Purchases		29,293		3,846
Payables		274		2,027

11. SUBSEQUENT EVENTS

The Company has evaluated and concluded that there are no subsequent events through August 5, 2022, which is the date the financial statements were available to be issued.

****

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EX-99.2

Exhibit 99.2

FRIEDMAN INDUSTRIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction

The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of operations based upon the consolidated historical financial statements of Friedman Industries, Inc. (“Friedman”) and financial information related to certain assets acquired and liabilities assumed of Plateplus Inc. (“Plateplus”), after giving effect to the consummation of the transaction (the “Plateplus Acquisition”) and the related completion of the associated financing (the “April 2022 Financing”) (each as defined and described further below).

The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma adjustments reflecting the Plateplus Acquisition have been prepared in accordance with Accounting Standards Codification 805, Business Combinations ("ASC 805") and reflect the preliminary allocation of the estimated consideration to the assets acquired and liabilities assumed based upon their estimated fair values, using the assumptions set forth in the notes to the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information includes assumptions which are preliminary and may be revised, such as the valuation of certain assets as a result of the application of acquisition accounting in connection with the Plateplus Acquisition. There can be no assurance that such revisions will not result in material changes. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the results or financial position that actually would have occurred or that may occur in the future had the Plateplus Acquisition and April 2022 Financing been completed on the dates indicated, nor is it necessarily indicative of the future operating results or financial position of Friedman after the Plateplus Acquisition and April 2022 Financing. Future results may vary significantly from the results reflected because of various factors, including those discussed in previous filings made by Friedman with the Securities and Exchange Commission. The unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the Plateplus Acquisition or any integration costs. Furthermore, the unaudited pro forma condensed combined statements of operations do not include certain nonrecurring charges and the related tax effects that result directly from the Plateplus Acquisition.

The unaudited pro forma condensed combined financial information should be read in conjunction with (i) Friedman's audited historical condensed consolidated financial statements as of and for the year ended March 31, 2022, which have been filed with the Securities and Exchange Commission and (ii) the abbreviated financial statements of certain assets of Plateplus attached as Exhibit 99.1 of Friedman’s Form 8-K/A filed on August 5, 2022.

Plateplus Acquisition

On April 30, 2022, pursuant to an agreement dated April 26, 2022 (the "Asset Purchase Agreement") by and among Friedman and Plateplus, Friedman acquired the real estate, buildings, equipment, inventory, and other assets of Plateplus’ East Chicago, IN and Granite City, IL facilities and certain steel inventory at Plateplus’ Loudon, TN and Houston, TX facilities (the “Plateplus Acquisition”). Under the terms of the agreement, the Company acquired the assets and assumed certain trade payables for approximately $72.4 million in cash (inclusive of a proposed final net working capital adjustment) and 516,041 shares of the Company’s common stock. Fixed assets account for approximately $18.0 million of the purchase price with the remainder attributable primarily to steel inventory. The final purchase price is subject to the final agreed working capital adjustment consistent with the terms of the Asset Purchase Agreement. The shares issued to Plateplus in connection with the Plateplus Acquisition are subject to a six-month lock-up period during which period the shares will be subject to certain restrictions on transfer.

1

The Plateplus Acquisition will be accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805, with Friedman representing the accounting acquirer under this guidance. The pro forma adjustments related to the Plateplus Acquisition are reflected as "Transaction Accounting Adjustments" herein.

April 2022 Financing

Friedman financed the cash consideration at closing through an approximate $64.0 million borrowing made (the “April 2022 Financing”) under an expansion of its existing $75.0 million asset-based lending facility provided by JPMorgan Chase Bank to $150.0 million via the execution of a Second Amendment (the “Amendment”) to that certain Amended and Restated Credit Agreement by and among Friedman, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, dated as of May 19, 2021 (the “A&R Credit Agreement”). The Amendment amends the A&R Credit Agreement in order to increase the asset-based revolving loans available thereunder from an aggregate principal amount of up to $75.0 million to an aggregate principal amount of up to $150.0 million (the “ABL Facility”). Subject to the conditions set forth in the A&R Credit Agreement (as amended by the Amendment), the ABL Facility may be increased by up to an aggregate of $25.0 million, in minimum increments of $5.0 million. Among other things, the Amendment also amends the borrowing base definition to increase the borrowing base credit attributable to accounts receivable from 85% of eligible accounts to 90% of eligible accounts. After funding the transaction, Friedman’s borrowed balance under the facility was $72.5 million.

The pro forma adjustments related to the April 2022 Financing are reflected as "Financing Transaction Accounting Adjustments" herein. 

2

FRIEDMAN INDUSTRIES, INC.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2022

The unaudited pro forma condensed consolidated balance sheet combines (i) the historical consolidated balance sheet of Friedman and (ii) financial information related to certain assets acquired and liabilities assumed by Friedman pursuant to the Plateplus Acquisition, and has been prepared assuming the Plateplus Acquisition and related April 2022 Financing occurred on March 31, 2022, and includes preliminary adjustments to reflect the events that are directly attributable to the Plateplus Acquisition and related April 2022 Financing and are factually supportable.

	Historical Friedman			Historical Value of Certain Assets Acquired and Liabilities Assumed from Plateplus (1)			Transaction Accounting Adjustments				Financing Transaction Accounting Adjustments			Total Pro Forma
CURRENT ASSETS:
Cash	$	2,598,102		$	-		$	(63,778,427	)	(b)	$	63,802,485	(c)	$	2,622,160
Accounts receivable, net of allowances		35,670,657			-			-				-			35,670,657
Inventories		67,946,122			68,609,069			2,787,068		(b)		-			139,342,259
Current portion of derivative assets		4,240,740			-			-				-			4,240,740
Other current assets		14,906,194			46,848			-				-			14,953,042
TOTAL CURRENT ASSETS		125,361,815			68,655,917			(60,991,359	)			63,802,485			196,828,858
PROPERTY, PLANT AND EQUIPMENT:
Land		1,179,831			315,000			-				-			1,494,831
Buildings and yard improvements		8,581,676			10,171,810			(3,109,422	)	(b)		-			15,644,064
Machinery and equipment		30,422,066			19,449,812			(8,866,373	)	(b)		-			41,005,505
Construction in process		15,925,306			-			-				-			15,925,306
Less accumulated depreciation		(26,002,820	)		(11,975,795	)		11,975,795		(b)		-			(26,002,820	)
		30,106,059			17,960,827			-				-			48,066,886
OTHER ASSETS:
Cash value of officers’ life insurance and other assets		270,416			-			1,134,475		(h)		238,271	(c)		1,643,162
Goodwill		-			-			1,432,016		(b)		-			1,432,016
Deferred income tax asset		2,133,295			-			97,925		(e)		8,106	(e)		2,354,033
								114,707		(f)
Income taxes recoverable		1,403,485			-			861,820		(e)		353,725	(e)		5,350,812
								2,731,782		(f)
TOTAL ASSETS	$	159,275,070		$	86,616,744		$	(54,618,634	)		$	64,402,587		$	255,675,767
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	44,803,602		$	13,719,778		$	983,342		(a)	$	-		$	68,101,212
								8,553,923		(b)
								40,567		(h)
Dividends payable		137,120			-			-				-			137,120
Contribution to retirement plan		250,000			-			-				-			250,000
Employee compensation and related expenses		1,085,676			-			-				-			1,085,676
Current portion of financing lease		104,689			-			-				-			104,689
Current portion of derivative liability		14,429,520			-			-				-			14,429,520
TOTAL CURRENT LIABILITIES		60,810,607			13,719,778			9,577,832				-			84,108,217
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS		119,591			-			-				-			119,591
OTHER NON-CURRENT LIABILITIES		221,767			-			1,093,908		(h)		-			1,315,675
ASSET BASED LENDING FACILITY		18,436,457			-			-				64,040,756	(c)		82,477,213
TOTAL LIABILITIES		79,588,422			13,719,778			10,671,739				64,040,756			168,020,696
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock		8,344,975			-			516,041		(c)		-			8,861,016
Additional paid-in capital		30,442,361			-			4,267,659		(c)		-			34,710,020
Accumulated other comprehensive loss		(10,268,509	)		-			-				-			(10,268,509	)
Treasury stock at cost		(7,741,197	)		-			-				-			(7,741,197	)
Retained earnings		58,909,018			(14,684,840	)		(983,342	)	(a)		361,831	(e)		62,093,741
								14,684,840		(b)
								959,745		(e)
								2,846,489		(f)
Historical implied equity/net assets acquired		-			87,581,805			(87,581,805	)	(b)		-			-
TOTAL STOCKHOLDERS’ EQUITY		79,686,648			72,896,966			(65,290,374	)			361,831			87,655,071
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	159,275,070		$	86,616,744		$	(54,618,634	)		$	64,402,587		$	255,675,767

(1) Includes acquired assets and assumed liabilities related to the real estate, buildings, equipment, inventory, and other assets of Plateplus’ East Chicago, IN and Granite City, IL facilities and certain steel inventory at Plateplus’ Loudon, TN and Houston, TX facilities.

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FRIEDMAN INDUSTRIES, INC.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended March 31, 2022

The unaudited pro forma condensed consolidated statement of operations combines (i) the historical consolidated statement of operations of the Company and (ii) revenue and expenses related to certain assets acquired and liabilities assumed of Plateplus and has also been adjusted to give effect to pro forma events assuming the Plateplus Acquisition and related April 2022 Financing closed on April 1, 2021. 

	Historical Friedman Industries, Inc			Historical Revenue and Expenses of Assets Acquired and Liabilities Assumed from Plateplus (1)			Transaction Accounting Adjustments				Financing Transaction Accounting Adjustments				Total Pro Forma
Net sales	$	285,234,752		$	248,886,546		$	-			$	-			$	534,121,298
Costs and expenses:
Cost of products sold		244,247,474			257,283,474			2,787,068		(b)		-				504,318,016
Selling, general and administrative		12,467,366			2,251,246			745,071		(a)		-				15,463,683
Loss on long-lived asset impairments and retirements		-			4,036,666			-				-				4,036,666
Interest expense		255,320			-			-				1,659,742		(d)		1,915,062
		256,970,160			263,571,386			3,532,139				1,659,742				525,733,427
EARNINGS (LOSS) FROM OPERATIONS		28,264,592			(14,684,840	)		(3,532,139	)			(1,659,742	)			8,387,871
Other income (loss)		(9,934,034	)		-			-				-				(9,934,034	)
EARNINGS (LOSS) BEFORE INCOME TAXES		18,330,558			(14,684,840	)		(3,532,139	)			(1,659,742	)			(1,546,163	)
Provision for (benefit from) income taxes:
Current		4,825,975			-			(861,820	)	(e)		(353,725	)	(e)		585,780
								(3,024,650	)	(f)
Deferred		(561,739	)		-			(97,925	)	(e)		(8,106	)	(e)		(489,609	)
								178,161		(f)
		4,264,236			-			(3,806,234	)			(361,831	)			96,171
NET EARNINGS (LOSS)	$	14,066,322		$	(14,684,840	)	$	274,095			$	(1,297,911	)		$	(1,642,334	)
Weighted average number of common shares outstanding:
Basic and diluted		6,623,769			-			516,041		(g)		-				7,139,810
Net earnings (loss) per share:
Basic and diluted		2.04			-			-				-				(0.23	)

(1) Includes revenue and expenses related to the acquired assets and assumed liabilities of the real estate, buildings, equipment, inventory, and other assets of Plateplus’ East Chicago, IN and Granite City, IL facilities.

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FRIEDMAN INDUSTRIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

March 31, 2022

Pro Forma Adjustments

(a) Represents the accrual of additional transaction costs incurred by Friedman and Plateplus subsequent to March 31, 2022, including $238,271 of deferred financing costs that will be amortized over the term of the related debt on a straight-line basis. The remaining transaction costs of $141,041 are included in the historical income statement of the Company for the year ended March 31, 2022. These costs will not affect the Company’s income statement beyond 12 months after the acquisition date.

(b) Represents the application of acquisition accounting in connection with the Plateplus Acquisition. For purposes of these unaudited condensed proforma consolidated financial statements, it has been assumed that, with the exception of the preliminary fair value adjustments reflected in the table below and the accounting policy adjustments discussed at footnote (g), the historical cost bases of Plateplus’ existing assets and liabilities approximate their fair value. The details of the preliminary acquisition accounting are set forth below:

Initial cash consideration	$	63,778,427
Estimated net working capital adjustment (1)		8,553,923
Issuance of Friedman common stock (2)		4,783,700
Total purchase price	$	77,116,050
Net book value of net assets acquired (historical implied equity of Plateplus)		72,896,966
Preliminary fair value adjustments to existing Plateplus carrying values:
Inventory (3)		2,787,068
Total fair value adjustments		2,787,068
Estimated incremental increase to goodwill	$	1,432,016

(1) Represents the estimated final net working capital adjustment for the difference between the actual working capital as of April 30, 2022 and the Estimated Closing Working Capital as defined in the Asset Purchase Agreement. Working capital adjustments are subject to certain customary adjustments and finalization.

(2) Represents the fair value of 516,041 Friedman common shares issued to Plateplus at the April 29, 2022 closing price per share of $9.27.

(3) Represents the preliminary estimate of the fair value adjustment to Plateplus' finished goods and raw materials inventory. The fair value was determined based on the estimated selling price of the inventory, less the remaining manufacturing and selling costs, factoring in any potential obsolescence, and a normal profit margin on those manufacturing and selling efforts. The pro forma condensed consolidated statement of operations is also adjusted to increase cost of products sold by the same amount as the inventory that is expected to be sold within one year of the acquisition date.

The final allocation of the purchase price will be based upon appraisals and may differ from the preliminary allocation reflected herein. Finalization of the valuation process may lead to changes in property, plant and equipment, inventories, goodwill, incomes taxes and other valuation-related items such as out-of-market contracts, including contracts that impact Plateplus' operating expenses. To the extent that additional consideration is allocated to assets with finite lives, the final allocation of the purchase price could result in additional depreciation and or amortization expense that in turn would result in lower earnings from operations.

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In addition to the foregoing, as a result of the application of acquisition accounting, Plateplus’ (i) property, plant and equipment was adjusted to reflect each asset at its net value and (ii) historical equity was eliminated.

(c) Represents consideration used to effect the Plateplus Acquisition, comprising (i) proceeds from the borrowing made under the Company's amended revolving credit facility of $64,040,756 (and related deferred financing costs of $238,271), of which 63,778,427 was used to pay cash consideration to Plateplus, and (ii) the issuance of 516,041 shares of Friedman common stock to Plateplus worth $4,783,700.

(d) Represents the assumed net increase in interest expense resulting from the borrowing made under the ABL Facility in connection with the Plateplus Acquisition:

	Year Ended March 31, 2022
Increase in interest expense (1)	$	1,601,019
Increase associated with amortization of deferred financing costs incurred (2)		58,723
Total adjustment	$	1,659,742

(1) Interest expense on floating rate borrowings made under the ABL Facility accrues at the greater of the Prime Rate (as defined in the agreement) or 2.50% minus a 1.00% spread. The pro forma adjustment to reflect interest expense on the borrowing made under the ABL Facility is based on an interest rate of 2.50% at March 31, 2022 and assumes there are no changes in interest rate or additional amounts drawn. A 0.125% change to the annual interest rate would change interest expense by approximately $80,000 for the year ended March 31, 2022.

(2) Deferred financing costs are amortized over the term of the related debt on a straight-line basis, which approximates the effective interest method.

(e) Represents the income tax impacts of pro forma adjustments using the estimated deferred tax rate of the combined entity of 25.5%

(f) Represents the income tax impacts of the combined profits and losses of Friedman and Plateplus

(g) The pro forma basic and diluted weighted average share outstanding are a combination of the historic weighted average shares outstanding of Friedman and the issuance of 516,041 shares in connection with the Plateplus Acquisition, assuming the shares were outstanding since April 1, 2021 and remained outstanding for the entire period presented.

(h) Represents the adjustments to reflect the estimated right-of-use asset and lease liability resulting from the alignment of Plateplus’ accounting policy to that of Friedman. As of the date of the Plateplus Acquisition, Plateplus had not yet adopted ASU No. 2016-02, Leases (Topic 842) ("ASC 842"), whereas Friedman adopted ASC 842 during the Company’s fiscal year-ended April 1, 2019. For purposes of the unaudited condensed consolidated balance sheet as of March 31, 2022, the adjustments to (i) cash value of officers’ life insurance and other assets in the amount of $1,134,475 (ii) accounts payable and accrued expenses in the amount of $40,567 and (iii) other non-current liabilities in the amount of $1,093,908 reflect the estimated impact as if Plateplus adopted the standard as of March 31, 2022. The Company concluded that the impact to the unaudited pro forma condensed consolidated statement of operations was immaterial.

As of the date of this filing, the Company is unaware of any other differences in accounting policies that would have a material impact on the pro forma financial information. The Company is in the process of conducting a further review of Plateplus' accounting policies to determine if there are any additional material differences that may require adjustments to Plateplus' assets, liabilities, revenues or expenses to conform to Friedman’s accounting policies. As a result of that review, the Company may identify further differences between the accounting policies of Plateplus and Friedman that when conformed, could have a material impact on the pro forma financial information.

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XML

Document And Entity Information	Apr. 26, 2022
Document Information [Line Items]
Entity, Registrant Name	FRIEDMAN INDUSTRIES, INCORPORATED
Document, Type	8-K/A
Document, Period End Date	Apr. 26, 2022
Entity, Incorporation, State or Country Code	TX
Entity, File Number	1-07521
Entity, Tax Identification Number	74-1504405
Entity, Address, Address Line One	1121 Judson Road
Entity, Address, City or Town	Longview
Entity, Address, State or Province	TX
Entity, Address, Postal Zip Code	75601
City Area Code	903
Local Phone Number	758-3431
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $1 Par Value
Trading Symbol	FRD
Security Exchange Name	NYSE
Entity, Emerging Growth Company	false
Amendment Description	Form 8-K/A date of report 04-26-22
Amendment Flag	true
Entity, Central Index Key	0000039092