SECURITIES AND EXCHANGE COMMISSION
☒ | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2021 2022 |
--03-31 FY 2022
☐ | 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) | Identification No.) |
| | |
1121 Judson Road Suite 124 Longview, Longview, TX | 75601 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(903) 758-3431Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange
on which registered |
Common Stock, $1 Par Value | FRD | NYSE American |
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
☒
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ ☒ | Non-accelerated filer ☒ ☐ | Smaller reporting company ☒ |
Emerging growth company ☐ | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
The aggregate market value of the Common Stock held by non-affiliates of the registrant as of September 30,
20202021 (based upon the closing price on the NYSE American on September 30,
2020)2021) was approximately
$42,802,000.$76,143,000.
The number of shares of the registrant’s Common Stock outstanding at
July 7, 2021August 2, 2022 was
6,899,5377,368,613 shares.
DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders of Friedman Industries, Incorporated for the fiscal year ended
March 31, 20212022 — Part II.
Proxy Statement for the 2021 Annual Meeting of Shareholders of Friedman Industries, Incorporated — Part III.
PART I
Friedman Industries, Incorporated (the “Company”), a Texas corporation incorporated in 1965, is a manufacturer and processor of steel products and operates in two reportable segments: coil products and tubular products. Significant financial information relating to the Company’s business segments for the last two years is contained
in Note 13of the Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended
March 31, 2021,2022, which financial statements are incorporated herein by reference in Item 8 hereof.
The coil product segment consists of the operation of two hot-rolled coil processing facilities; one in Hickman, Arkansas (“Hickman”) and the other in Decatur, Alabama (“Decatur”). The Hickman facility operates a temper mill and a cut-to-length
line and the Decatur facility operates a stretcher leveler cut-to-length line. The
temper millequipment at both facilities improves the flatness and surface qualities of the coils
and the cut-to-length line levels the steel and cuts the coils into sheet and plate of prescribed lengths. The Hickman facility is capable of cutting sheet and plate with thicknesses ranging from 14 gauge to ½” thick in widths ranging from 36” wide to 72” wide. The Decatur facility
previously operated a temper millis capable of cutting sheet and
a cut-to-length line but during the quarter ended June 30, 2020, the equipment was removed to allow the foundation to be prepared for a new stretcher leveler line. In March 2021, the new stretcher leveler line was placed into service. The estimated total cost of this project is $7,200,000plate with
approximately $6,733,000 having been paid as of March 31, 2021. The new equipment expands the coil segment’s processing capabilities to include material up to 96” wide and material of higher grades and will allow the Decatur facility to cut material that is upthicknesses ranging from 14 gauge to ½” thick comparedin widths ranging from 36" wide to the previous equipment’s capability of 5/16” thick. In addition, sheet and plate that has been stretcher leveled is preferable to some customers and applications compared to material that has been leveled through the temper mill process. 96" wide. The coil product segment sells its prime grade inventory under the Friedman Industries name but also maintains an inventory of non-standard coil products, consisting primarily of mill secondary and excess prime coils, which are sold through the Company’s XSCP division. The coil product segment also processes customer-owned coils on a fee basis.
The Hickman and Decatur facilities are substantially similar with respect to products produced. The Company makes shipments of coil products based on which facility offers the desired product or, if the product is available at both facilities, based on other factors, such as customer location, freight conditions and the ability of the facility to fulfill the order on a timely basis. Coil products are sold on a wholesale, rapid-delivery basis in competition with other processors of hot-rolled steel coils. Shipments are made via unaffiliated truckers or by rail.
On May 25, 2021, the Company announced plans for a new facility in Sinton, Texas that will be part of the coil product segment. The new facility will beis on the campus of Steel Dynamics, Inc.'s ("SDI") new flat roll steel mill currently under construction in Sinton, Texas. The Company's new location will consistconsists of an approximately 70,000 square foot building located on approximately 26.5 acres leased from SDI under a 99-year agreement. The Company has selectedcontracted with Red Bud Industries to build one of the world’s largest stretcher leveler cut-to-length lines, capable of handling material up to 1” thick, widths up to 96” and yields exceeding 100,000 psi. The Company expects the locationequipment commissioning to commence operations in Apriloccur during August 2022 and estimates theSeptember 2022 and then expects expanded production levels beginning in October 2022. The total cost of the project is estimated to be $21$21 million.
The coil segment purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.
The tubular product segment consists of the Company’s Texas Tubular Products division (“TTP”) located in Lone Star, Texas. TTP operates two electric resistance welded pipe mills with a combined outside diameter (“OD”) size range of 2 3/8” OD to 8 5/8” OD. Both pipe mills are American Petroleum Institute (“API”) licensed to manufacture line pipe and oil country pipe and also manufacture pipe for structural purposes that meets other recognized industry standards.
TTP has an API licenseda pipe finishing facility thatcapable of applying threads and couplescouplings to oil country tubular goods and performsperforming other services that are customary in the pipe finishing process. The pipe finishing facility is currently idled due to market conditions.idled. TTP’s inventory consists of raw materials and finished goods. Raw material inventory consistsconsists of hot-rolled steel coils that TTP will manufacture into pipe. Finished goods inventory consists of pipe TTP has manufactured and mill reject pipe that TTP purchased from U.S. Steel Tubular Products, Inc.
TTP purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.
The following table sets forth the approximate percentage of total sales contributed by each group of products and services during each of the Company’s last two fiscal years:
Product and Service Groups | | | 2021 | | | 2020 |
Coil Products | | | 76 | % | | | 70 | % |
Tubular Products | | | 24 | % | | | 30 | % |
| Product and Service Groups | | | 2022 | | | 2021 |
| Coil Products | | | 81 | % | | | 76 | % |
| Tubular Products | | | 19 | % | | | 24 | % |
Coil Products. The Company sells coil products and processing services to approximately
200230 customers located primarily in the midwestern, southwestern and southeastern regions of the United States. The Company’s principal customers for these products and services are steel distributors and customers manufacturing steel products such as steel buildings, railroad cars, barges, tanks and containers, trailers, component parts and other fabricated steel products.
For the fiscal year ended March 31, 2022, sales of coil products to O'Neal Steel accounted for approximately 11% of the Company's total sales. No individual coil products customer accounted for 10% or more of the Company's total sales for the fiscal year ended
March 31, 2021. For the fiscal year ended March 31, 2020, sales of coil products to Trinity Industries, Inc. accounted for approximately 18% of the Company's total sales.2021.
The Company sells substantially all of its coil products through its own sales force. At
March 31, 2021,2022, the sales force was comprised of the Vice President of Sales – Coil Divisions and four professional sales personnel. Sales personnel are paid on a salary and commission basis.
Tubular Products. The Company sells its tubular products nationally to approximately
125110 customers. The Company’s principal customers for these products are steel and pipe distributors. In fiscal years
20212022 and
2020,2021, no individual tubular customer accounted for 10% or more of the Company’s total sales.
The Company sells substantially all of its tubular products through its own sales force. At
March 31, 2021,2022, the sales force was comprised of the Vice President of Sales – Tubular Division and
threetwo professional sales personnel. Sales personnel are paid on a salary and commission basis.
The Company is engaged in a non-seasonal, highly-competitive business. The Company competes with other processors of hot-rolled steel coils, tubular manufacturers, steel distributors and brokers.
The Company believes that, generally, its ability to compete is dependent upon its ability to offer products at prices competitive with or below those of other steel suppliers, as well as its ability to provide products meeting customer specifications on a rapid-delivery basis.
At
March 31, 2021,2022, the Company had
9398 full-time employees and 1 part-time employee.
Executive Officers of the Company The following table sets forth as of
March 31, 2021,2022, for each executive officer of the Company, the name, age, officer positions and arrangements with other persons regarding his selection as an officer, if any, and the period during which such officer has served in such capacity:
Name | | Age | | Position, Offices with the Company and Other Arrangements, if any |
Michael J. Taylor | | 62
63 | | President and Chief Executive Officer since September 2019; formerly Interim President and Interim Chief Executive Officer since February 2019; Chairman of the Board of Directors since June 2017; member of the Board of Directors since December 2016 |
Alex LaRue | | 35
36 | | Chief Financial Officer – Secretary and Treasurer since March 2018; formerly Vice President — Secretary and Treasurer since 2014; formerly Assistant Vice President — Secretary and Treasurer since 2013; formerly Controller — Texas Tubular Products since 2011 |
Not required.
Item 1B. Unresolved Staff CommentsNot required.
None.
The principal real properties of the Company are described in the following table:
Location | | Size | | Ownership | |
Lone Star, Texas | | | | | |
Plant — Texas Tubular Products | | 161,000 sq. feet | | Owned(1) | |
Offices — Texas Tubular Products | | 12,200 sq. feet | | Owned(1) | |
Land — Texas Tubular Products | | 122.4 acres | | Owned(1) | |
Longview, Texas | | | | | |
Offices | | 5,100 sq. feet | | Leased(2) | |
Hickman, Arkansas | | | | | |
Plant and Warehouse — Coil Products | | 64,600 sq. feet | | Owned(1) | |
Offices — Coil Products | | 2,500 sq. feet | | Owned(1) | |
Land — Coil Products | | 26.2 acres | | Owned(1) | |
Decatur, Alabama | | | | | |
Plant and Warehouse — Coil Products | | 48,000 sq. feet | | Owned(1) | |
Offices — Coil Products | | 2,000 sq. feet | | Owned(1) | |
Land — Coil Products | | 47.3 acres | | Owned(1) | |
| Sinton, Texas | | | | | |
LandPlant and Warehouse | | 70,000 sq. feet | | Leasehold Improvement (3) | |
| Offices — Coil Products | | 26.5 acres3,100 sq. feet | | Leased(3)Leasehold Improvement (3) | |
| Land — Coil Products | | 26.5 acres | | Leased(3) | |
(1) | All of the Company’s owned real properties, plants and offices are held in fee and are not subject to any mortgage or deed of trust. |
(2) | The office lease is with a non-affiliated party, expires on April 30, 2024, and requires a monthly rental payment by the Company of $4,878. |
| (3) | ThisThe associated lease is a 99 year lease with Steel Dynamics Inc. that calls for an annual rental payment of $1 and has an expiration date of February 19, 2120. |
Item 3. Legal Proceedings The Company is not, and during fiscal year
20212022 was not, a party to, nor is its property the subject of, any material pending legal proceedings.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s Common Stock is traded principally on the NYSE – American (Symbol: FRD).
Reference is hereby made to the sections of the Company’s Annual Report to Shareholders for the fiscal year ended
March 31, 2021,2022, entitled “Description of Business — Range of High and Low Sales Prices of Common Stock” and “Description of Business — Cash Dividends Declared Per Share of Common Stock”, which sections are hereby incorporated herein by reference.
The approximate number of shareholders of record of Common Stock of the Company as of April 23, 202129, 2022 was 175. Because many of the Company’s common shares are held by brokers and other institutions on behalf of shareholders, the Company is unable to estimate the total number of individual shareholders represented by these record holders.
Item 6. Selected Financial Data Not required.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Information with respect to Item 7 is hereby incorporated herein by reference from the section of the Company’s Annual Report to Shareholders for the fiscal year ended
March 31, 2021,2022, entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Not required.
Item 8. Financial Statements and Supplementary Data The following financial statements and notes thereto of the Company included in the Company’s Annual Report to Shareholders for the fiscal year ended
March 31, 2021,2022, are hereby incorporated herein by reference:
Notes to Consolidated Financial Statements
Report
Reports of Independent Registered Public Accounting Firm
Information with respect to
The following supplementary
financial information relating toschedule for the Company
appears in Note 15 — Summary of Quarterly Results of Operations (Unaudited) offor the
Notes to Consolidated Financial Statementsyears ended March 31, 2022 and 2021, is incorporated herein by reference above in this Item 8 from the
Company’sCompany's Annual Report to Shareholders for the fiscal year ended
March 31, 2021.The following supplementary schedule for the Company for the years ended March 31, 2021 and 2020, is included elsewhere in this report:
2022.
Schedule II — Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulation of the U.S. Securities and Exchange Commission (the “SEC”) are not required under the related instructions or are inapplicable and, therefore, have been omitted.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures Information with respect to Item 9A is hereby incorporated herein by reference from the sections of the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2022, entitled “Evaluation of Disclosure Controls and ProceduresIn accordance with Exchange Act Rules 13a-15” and 15d-15, we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2021. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2021.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, as amended). We have established disclosure controls and procedures designed to ensure that material information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission and that any material information relating to us is recorded, processed, summarized and reported to our management including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, our management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving desired control objectives. In reaching a reasonable level of assurance, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report and, during the audit process related to the fiscal year ended March 31, 2021, identified a material weakness in our internal control over financial reporting. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2021.
Notwithstanding the identified material weakness, the Company's management, including our Chief Executive Officer and Chief Financial Officer, have determined, based“Management's Report on the procedures we have performed, that the audited consolidated financial statements included in this report fairly present in all material respects our financial condition and results of operations as of and for the years ended March 31, 2021 and 2020 in accordance with U.S. Generally Accepted Accounting Principles.
Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
During the audit process related to our fiscal year ended March 31, 2021, management, in connection with our independent auditors, identified a material weakness in our controls related to the review of the annual income tax provision prepared by a third-party firm. Specifically, we did not maintain effective controls to sufficiently review the completeness and accuracy of the annual tax provision. Our review was not sufficiently detailed to identify a material misstatement in deferred income taxes. The Company recorded an audit adjustment of approximately $3.5 million impacting the balance sheet items of deferred tax assets and accumulated other comprehensive loss. The audit adjustment caused the Company to change from a net deferred income tax liability position to a net deferred income tax asset position. Additionally, the Company’s review of the annual income tax provision did not include a process to sufficiently evaluate deferred tax assets to determine if a valuation allowance was necessary. The Company has since performed an analysis to consider if a valuation allowance is necessary in relation to the Company’s deferred tax assets and concluded that no valuation allowance is necessary due to anticipated recoverability through future taxable income.
Plan for Remediation of Material Weakness
Our Company is relatively small. As disclosed in our Form 10-K, we had 93 full-time employees as of March 31, 2021. Our accounting and finance team consisted of two degreed accountants as of March 31, 2021. Leading up to, and during the financial statement audit period, considerable time was expended by our accounting and finance team to finalize the asset-based credit facility described in Note 3 and to select our general contractor and equipment manufacturer related to our planned new facility in Sinton, Texas disclosed in Note 5 and to finalize contracts with such parties. This resulted in the Company falling behind in the timeline necessary to complete the audit process and regulatory filings in a timely manner. In an effort to meet regulatory deadlines, the Company did not perform a sufficient review of third-party materials. The Company concludes that the best remediation of the material weakness is an investment in human capital that will allow it to meet its regulatory requirements and growth objectives. On May 24, 2021, the Company hired an additional degreed accountant. The timing of this hire in relation to the audit process made it difficult for the hire to have a beneficial impact on the process related to our fiscal year end March 31, 2021. However, the Company believes the investment in human capital will provide sufficient remediation in future periods and the Company will continue to evaluate the appropriate level of staffing to ensure the controls over financial reporting are adhered to and the Company can meet its regulatory requirements in a timely manner.
We will continue to monitor the design and effectiveness of these procedures and controls and make any further changes the Company determines appropriate. We believe the additional investment in human capital described above will remediate the material weakness the Company has identified. However, this material weakness will not be considered remediated until the applicable remedial actions operate effectively for a sufficient period of time
Attestation Report of the Registered Public Accounting Firm
Pursuant to Regulation S-K Item 308(b), this Annual Report on Form 10-K does not include an attestation report of our Company's independent registered public accounting firm regarding internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Except for the matter discussed above, there were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
”. Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate GovernanceExcept as otherwise set
Board of Directors
The following table sets forth
below, information with respect to Item 10 is hereby incorporated herein by reference from the
Company’s proxy statement in respectnames of the
2021 Annual Meetingnominees for election to the Board of
Shareholders, definitive copiesDirectors, the principal occupation or employment of
which are expected to be filed with the SEC on or before 120 days after the endeach of the
Company’s 2021 fiscal year.nominees, the period during which each nominee has served as a director of the Company and the age of each nominee:
Nominee | Principal Occupation and Business Experience for more than the Last Five Years |
Director Since
| Age |
| Mike Taylor | President and Chief Executive Officer of the Company since September 2019; formerly Interim President and Interim Chief Executive Officer since February 2019; formerly retired; formerly President, Cargill Metals Supply Chain (steel processing and distribution), The Woodlands, Texas | 2016 | 63 |
| Durga D. Agrawal | President, Piping Technology & Products, Inc. (pipe fabrication), Houston, Texas | 2006 | 77 |
| Max Reichenthal | President, Texas Iron and Metal (steel product sales), Houston, Texas | 2008 | 64 |
| Sandy Scott | Retired; Current director on the boards of Terra Nova Solutions, Rowland Inc., CEDA International, DWD International LLC and Goodwill of Houston; formerly Chief Executive Officer, Sprint Industrial Holdings (rental equipment and transportation company), Houston, Texas | 2022 | 58 |
| Joel Spira | Private investor, Houston, Texas; formerly Partner, Weinstein Spira & Company (accounting firm), Houston, Texas | 2007 | 84 |
| Tim Stevenson | Chief Executive Officer and Founder, Metal Edge Partners (metals price risk management and strategic advisory services), Plymouth, Minnesota; formerly Managing Director, Cargill Risk Management (price risk management services), Hopkins, Minnesota; formerly North American Lead of Derivatives and Analysis, Cargill, Inc. (steel processor), Hopkins, Minnesota | 2019 | 55 |
| Sharon Taylor | Vice President and Chief Financial Officer, Martin Midstream Partners LP and Martin Resource Management Corporation (terminalling, processing, transportation, storage and packaging services for petroleum products and by-products); formerly Director of Finance and Investor Relations, Martin Midstream Partners LP; formerly Business Analyst – Finance, Martin Midstream Partners LP, Kilgore, Texas | 2022 | 57 |
| Joe L. Williams | Partner, Pozmantier, Williams & Stone Insurance Consultants, LLC (insurance and risk management consultants), Houston, Texas | 2000 | 76 |
Executive Officers of the Company
Information with respect to Item 10 regarding executive officers is hereby incorporated by reference from the information set forth under the caption “Executive Officers of the Company” in Item 1 of this Annual Report on Form 10-K.
Delinquent Section 16(a) Reports
Under the Exchange Act, our directors, executive officers and 10% shareholders must report to the SEC certain transactions involving Common Stock. Based solely on a review of the copies of the reports required pursuant to Section 16(a) of the Exchange Act that have been furnished to us and written representations that no other reports were required, we believe that these filing requirements have been satisfied for the fiscal year ended March 31, 2022 except for: one Form-4 filed by Durga D. Agrawal on December 30, 2021 (filed 87 days late); one Form-4 filed by Max Reichenthal on December 30, 2021 (filed 87 days late); one Form-4 filed by Joel Spira on December 30, 2021 (filed 87 days late); one Form-4 filed by Tim Stevenson on December 30, 2021 (filed 87 days late); one Form-4 filed by Joe L. Williams on December 30, 2021 (filed 87 days late); and one Form-4 filed by Alex LaRue on August 1, 2022 (filed 209 days late).
Audit Committee
The Board of Directors has established an Audit Committee which currently consists of Messrs. Agrawal, Reichenthal and Spira (Chairman). The Audit Committee discusses with the independent accountants and management our financial statements and the scope of the audit examinations, reviews with the independent accountants the audit budget, receives and reviews the audit report submitted by the independent accountants, reviews with the independent accountants internal accounting and control procedures and engages our independent auditor. The Audit Committee’s responsibilities to the Board of Directors are further detailed in the Second Amended and Restated Charter of the Audit Committee, as amended, which is not available on our website but is attached as Appendix A to this proxy statement. The Audit Committee met four times in fiscal year 2022.
The Board of Directors has affirmatively determined that all members of the Audit Committee are independent in accordance with the applicable rules of the NYSE – American and Rule 10A-3(b)(1) of the Exchange Act. The Board also has determined that each of the members of the Audit Committee is able to read and understand fundamental financial statements. In addition, the Board has determined that Mr. Spira meets the financial sophistication requirements set forth in the applicable rules of the NYSE – American and qualifies as an “audit committee financial expert,” as that term is defined in the rules promulgated by the SEC pursuant to the Sarbanes-Oxley Act of 2002, as amended.
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 CompensationInformation
Summary Compensation Table
The following table sets forth certain information regarding compensation paid for services rendered during the fiscal years ended March 31, 2022 and March 31, 2021, to each of our executive officers, including our principal executive officer and our principal financial officer (collectively, the “Named Executive Officers”):
Summary Compensation Table for Fiscal Year 2022
Name and Principal Position | Year | Salary
($)(1) | Bonus
($)(2) | Stock Awards
($)(3) | All Other
Compensation
($)(4) | Total
($) |
| Michael J. Taylor | 2022 | 279,996 | 1,198,786 | — | 5,233 | 1,484,015 |
| President & Chief Executive Officer | 2021 | 279,996 | 94,083 | — | 6,078 | 380,157 |
| Alex LaRue | 2022 | 180,000 | 799,191 | — | 11,587 | 990,778 |
| Chief Financial Officer — Secretary & Treasurer | 2021 | 165,000 | 87,722 | — | 9,189 | 261,911 |
(1) Represents base salary.
(2) Includes quarterly bonuses based on a percentage of our quarterly net income and Christmas bonuses, each of which is paid at the discretion of the Board of Directors.
(3) Reflects the aggregate grant date fair value for stock awards computed in accordance with respectFASB ASC Topic 718.
(4) Reflects contributions by the Company to Item 11 is hereby incorporated herein by reference fromthe Friedman Industries, Inc. Employees’ Retirement and 401(k) Plan for the benefit of the Named Executive Officers and cash dividends received related to restricted shares awarded under the Company’s proxy statementrestricted stock plan.
Outstanding Equity Awards at Fiscal Year-End 2022
| Option Awards | Stock Awards |
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value Of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Michael J. Taylor | ____ | ____ | ____ | ____ | ____ | 40,000 (1) | $352,400 | ____ | ____ |
| Alex LaRue | ____ | ____ | ____ | ____ | ____ | 4,000 (2) | $35,240 | ____ | ____ |
(1) The unvested stock awards for Mr. Taylor will vest in respect10,000 share increments on April 1, 2022, April 1 2023, April 1, 2024 and April 1 2025.
(2) The unvested stock awards for Mr. LaRue will vest in 1,000 share increments on April 1, 2022, April 1 2023, April 1, 2024 and April 1 2025.
(3) Based on the closing price of our common stock on March 31, 2022 of $8.81.
Potential Payments upon Termination or Change-in-Control
The Named Executive Officers will receive the same benefits as our other employees upon termination of their employment. We maintain the Friedman Industries, Inc. Employees’ Retirement and 401(k) Plan (the “Plan”), a defined contribution and 401(k) plan. The Plan covers substantially all employees, including officers, and employees fully vest in the Plan upon six years of service. The Company maintains a life insurance policy on Mr. LaRue but does not currently have a policy in place on Mr. Taylor. From time to time and in its discretion, the Board has approved the transfer of the
2021 Annual Meetingapplicable policy to an officer upon their retirement. At March 31, 2022, the cash surrender value of
Shareholders, definitive copiesthe life insurance policy held by the Company on Mr. LaRue was approximately $6,500. None of
whichthe Named Executive Officers has a change-in-control agreement with us. Director Compensation
For the fiscal year ended March 31, 2022, directors were paid $9,000 per quarter. In addition, the Chairman and members of the Audit Committee received $3,000 and $2,250, respectively, per quarter. Mr. Taylor did not receive any compensation for serving as a director.
Except for Mr. Taylor, who is a Named Executive Officer (as defined in “Executive Compensation” below), the following table summarizes compensation paid to each director during the fiscal year ended March 31, 2022. Sandy Scott and Sharon Taylor are expectednot listed in the table below due to be filedthem being added to the Board of Directors subsequent to March 31, 2022.
Director Compensation Table for Fiscal Year 2022
Name |
Fees Earned or Paid in Cash ($)
|
All Other Compensation ($) (1)
|
Total ($)
|
| Durga Agrawal | 45,000 | 10,000 | 55,000 |
| Max Reichenthal | 45,000 | 10,000 | 55,000 |
| Joel Spira | 48,000 | 10,000 | 58,000 |
| Tim Stevenson | 36,000 | 10,000 | 46,000 |
| Joe L. Williams | 36,000 | 10,000 | 46,000 |
| (1) | All other compensation consists of restricted stock awards issued to directors during the fiscal year ended March 31, 2022. |
Procedures and Processes for Determining Executive and Director Compensation
The Compensation Committee of the Board of Directors is responsible for reviewing and recommending to the full Board of Directors the compensation of our Chief Executive Officer and our other Named Executive Officers. The Committee also reviews and discusses with the
SEC on or before 120 days afterChief Executive Officer, and recommends to the
endfull Board of Directors, the compensation for all other officers of the
Company’s 2021 fiscal year.Company. The Committee may retain compensation consultants or other advisers it deems appropriate. Based on the Committee’s analysis of relevant data, the Committee determines its recommendation regarding the compensation of our Chief Executive Officer during an executive session of the Committee at which the Chief Executive Officer is not present. Our Chief Executive Officer makes recommendations regarding the compensation of our other executive officers and other officers to the Committee. The Committee considers the recommendations, discusses the recommendations with our Chief Executive Officer, may discuss the matter in executive session and then makes recommendations to the full Board of Directors. The final determination as to the compensation of the Chief Executive Officer and all other officers of the Company is made by the full Board of Directors based on the recommendations of the Committee. The Board of Directors, or an authorized committee thereof, may from time to time review and determine the form and amount of director compensation, including cash, equity-based awards and other director compensation to maintain a transparent and readily understandable compensation program which ensures that the directors continue to receive fair and appropriate compensation for the time commitment required to discharge their duties as directors for a company of our size.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Equity Compensation Plan Information The
disclosure required pursuant to Item 201(d)table below sets forth the following information as of
Regulation S-K is hereby incorporated hereinMarch 31, 2022 for all equity compensation plans, including those previously approved by
reference from the Company’s proxy statement in respect of the 2021 Annual Meeting of Shareholders, definitive copies of which are expected to be filed with the SEC on or before 120 days after the end of the Company’s 2021 fiscal year.our shareholders.
| | Equity Compensation Plan Table | |
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | Weighted-average exercise price of outstanding options, warrants and rights | | | Number of securities remaining available for future issuance under equity compensation plans | |
| Equity Compensation Plans Approved By Security Holders | | - | | | - | | | 130,185 | |
| Equity Compensation Plans Not Approved By Security Holders | | - | | | - | | | - | |
| Total | | - | | | - | | | 130,185 | |
Additional information with respect to Item 12 regarding equity compensation plan information relating to the Company is hereby incorporated herein by reference fro
m Note 2 — Equity Compensation Plans and Capital Stock included in the Notes to Consolidated Financial Statements of the Company included in the Company’s Annual Report to Shareholders for the fiscal year ended
March 31, 2021.2022.
Security Ownership Information SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The additionalfollowing table sets forth certain information concerning the beneficial ownership of Common Stock by directors, nominees for director, Named Executive Officers, executive officers and directors as a group and persons who owned of record more than 5% of the outstanding Common Stock as of July 28, 2022:
Name | Amount and Nature of
Beneficial Ownership(a) | Percentage
of Shares
Outstanding |
| Dimensional Fund Advisors LP........................................................ | 544,919 (b) | 7.4 % |
| 6300 Bee Cave Road, Building One | | |
| Austin, Texas 78746 | | |
| Renaissance Technologies Holdings Corporation............................ | 488,018 (c) | 6.6 % |
| 800 Third Avenue | | |
| New York, New York 10022 | | |
| Plateplus, Inc....................................................................................... | 516,041 (d) | 7.0 % |
| 21 Waterway Ave. Suite 525 | | |
| The Woodlands, TX 77380 | | |
| Mike Taylor........................................................................................ | 122,144 | 1.7% |
| Durga D. Agrawal.............................................................................. | 11,763 | * |
| Max Reichenthal................................................................................. | 11,763 | * |
| Joel Spira............................................................................................. | 10,763 | * |
| Tim Stevenson.................................................................................... | 24,763 | * |
| Sharon Taylor..................................................................................... | 100 | * |
| Joe L. Williams................................................................................... | 20,333 | * |
| Alex LaRue......................................................................................... | 42,150 | * |
| Officers and directors as a group (8 persons)................................... | 243,779 | 3.3 % |
* Less than 1%.
(a) Based upon information obtained from the officers, directors, director nominees and beneficial owners. Includes all shares beneficially owned according to the definition of “beneficial ownership” in the rules promulgated under the Exchange Act. Except as otherwise indicated, the indicated person has sole voting and investment power 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 statementshares.
(b) Based upon information contained in
respect to the 2021 Annual Meeting of Shareholders, definitive copies of which are expected to bea Schedule 13G/A filed with the SEC on
or before 120 days after the endFebruary 8, 2022 by Dimensional Fund Advisors LP (“Dimensional”). Dimensional is deemed to have beneficial ownership of 544,919 shares of the
Company’s 2021 fiscal year.Common Stock as of December 31, 2021. (c) Based upon information contained in a Schedule 13G/A filed with the SEC on February 11, 2022 by Renaissance Technologies Holdings Corporation (“Renaissance”). Renaissance is deemed to have beneficial ownership of 488,018 shares of the Common Stock as of December 31, 2021.
(d) Based upon information contained in a Schedule 13G filed with the SEC on May 9, 2022 by Plateplus, Inc. (“Plateplus”). Plateplus is deemed to have beneficial ownership of 516,041 shares of the Common Stock as of April 29, 2022.
Item 13. Certain Relationships, Related Transactions and Director IndependenceInformation
Related Party Transactions
There were no transactions in fiscal year 2022 with related persons which required disclosure pursuant to Item 404(a) of Regulation S-K (17 CFR Part 229).
Policies and Procedures with Respect to Approval of Related Party Transactions
The Audit Committee of the Board of Directors has adopted a written policy with respect to
Item 13related party transactions to document procedures pursuant to which such transactions are reviewed, approved or ratified. The policy applies to any transaction between us and any related party other than transactions (i) available to all employees generally or (ii) involving less than $5,000 when aggregated with all similar transactions. The Audit Committee is
hereby incorporated herein by reference fromresponsible for reviewing, approving and ratifying any related party transaction. In general, the
Company’s proxy statementpolicy prohibits all related party transactions although the Audit Committee may approve related party transactions (A) in
respect ofexceptional circumstances where the
2021 Annual Meeting of Shareholders, definitive copies of which are expectedsituation is urgent and no reasonable alternatives exist, (B) when the benefit is unique and significant or (C) the economic value to
be filed with the SEC on or before 120 days after the end of the Company’s 2021 fiscal year.us is highly compelling over an extended period. Item 14. Principal Accountant Fees and ServicesInformation with respect
Audit Fees
In fiscal years 2022 and 2021, we retained Moss Adams LLP (Houston, Texas PCAOB ID: 659) to Item 14 is hereby incorporated hereinprovide services and incurred fees therefor as indicated in the following table:
| | 2022 Actual Fees | 2021 Actual Fees |
| Audit Fees (1) | $ 493,300 | $ 214,700 |
| Audit-Related Fees | — | — |
| Tax Fees | — | — |
| All Other Fees | — | — |
| | | |
| Total Fees | $ 493,300 | $ 214,700 |
(1) Includes fees and expenses incurred related to the fiscal year audit and interim reviews, notwithstanding when the fees and expenses were billed or when the services were rendered.
The Audit Committee has implemented pre-approval policies and procedures for all audit and non-audit services to be provided by
reference fromour independent public accountants to us. With regard to all permissible non-audit services, the
Company’s proxy statement in respectAudit Committee has designated the Chairman of the
2021 Annual MeetingAudit Committee to approve in advance the provision by the independent public accountants of
Shareholders, definitive copiessuch services. There were no services approved by the Audit Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of
which are expected to be filed with the SEC on or before 120 days after the endRule 2-01 of
the Company’s 2021Regulation S-X (17 CFR Part 210) during fiscal
year.year 2022. PART IV
Item 15. Exhibits and Financial Statement Schedules (a) Documents included in this report
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, 2021,2022, which is incorporated herein by reference:
Notes to Consolidated Financial Statements
Report
Reports 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:the Company's Annual Report to Shareholders for the fiscal year ended March 31, 2022, which is incorporated herein by reference:
Schedule II — Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and, therefore, have been omitted.
No. | | Description |
| | | | |
3.1 | | — | |
| | | | |
3.2 | | — | |
| | | | |
3.3 | | — | |
| | | | |
10.1 | | — | |
| | | | |
10.2 | | — | |
| | | | |
10.3 | | — | |
| | | | |
**10.4 | | — | Amended and Restated Credit Agreement dated May 19, 2021 (incorporated by reference from Exhibit 10.9 to the Company’s Form 10-K for the fiscal year ended March 4,31, 2021 (referenced in the Company's Current Report on Form 8-K filed on March 10,July 7, 2021). |
| | | | |
**10.5
| | — | Line of Credit NotePledge and Security Agreement dated May 19, 2021 (incorporated by reference from Exhibit 10.10 to the Company’s Form 10-K for the fiscal year ended March 4,31, 2021 (referenced in the Company's Current Report on Form 8-K filed on March 10,July 7, 2021). |
| | | | |
**10.6 | | — | SecurityFirst Amendment to Amended and Restated Credit Agreement dated March 4, 2021 (referenced in the Company's Current Report onof Form 8-K filed on March 10, 2021)15, 2022). |
| | | |
**10.7
| | —
| First Amendment to Credit Agreement dated April 12, 2021. |
| | | | |
**10.8 10.7 | | — | Note ModificationSecond Amendment to Amended and Restated Credit Agreement dated April 12, 2021.(referenced in the Company's Current Report of Form 8-K filed on May 2, 2022). |
| | | | |
**10.9 10.8 | | — | AmendedAsset Purchase Agreement by and Restated Credit Agreement dated May 19, 2021among Friedman Industries, Inc., Plateplus Inc. and the Stockholder of Plateplus Inc. (referenced in the Company's Current Report on Form 8-K filed on May 25, 2021)2, 2022). |
| | | | |
**10.10 10.9 | | — | PledgeLease Assignment and SecurityAssumption Agreement dated May 19, 2021for Parcel 1-A and Parcel 4 of Granite City, Illinois Property. |
| | | |
| **10.10 | | — | Lease Assignment and Assumption Agreement for Parcel 1-B of Granite City, Illinois Property. |
| | | |
| **10.11 | | — | Lease Assignment and Assumption Agreement for Parcel 5 of Granite City, Illinois Property. |
| | | |
| **10.12 | | — | Third Amendment to Amended and Restated Credit Agreement (referenced in the Company's Current Report on Form 8-K filed on May 25, 2021)July 13, 2022). |
| | | | |
**13.1 | | — | |
| | | | |
**14.1 | | — | |
| | | | |
**21.1 | | — | |
| | | | |
**23.1 | | — | |
| | | | |
**31.1 | | — | |
| | | | |
**31.2 | | — | |
| | | | |
**32.1 | | — | |
| | | | |
**32.2 | | — | |
| **101.INS | | — | |
**101.INS
| | —
| Inline XBRL Instance Document. |
| | | | |
**101.SCH | | — | Inline XBRL Taxonomy Schema Document. |
| | | | |
**101.CAL | | — | Inline XBRL Calculation Linkbase Document. |
| | | | |
**101.DEF | | — | Inline XBRL Definition Linkbase Document. |
| | | | |
**101.LAB | | — | Inline XBRL Label Linkbase Document. |
| | | | |
**101.PRE | | — | Inline XBRL Presentation Linkbase Document. |
| | | |
| **104 | | — | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Friedman Industries, Incorporated has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | FRIEDMAN INDUSTRIES, INCORPORATED | |
| | | | |
| | By: | /S/ MICHAEL J. TAYLOR | |
| | | Michael J. Taylor | |
| | | President and Chief Executive Officer | |
| | | |
| | Dated: July 7, 2021August 2, 2022 | | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Friedman Industries, Incorporated in the capacities and on the dates indicated.
Signature | | Title | | Date |
| | | | | |
/S/ MICHAEL J. TAYLOR | | President and Chief Executive Officer and | | July 7, 2021August 2, 2022 |
| Michael J. Taylor | | Director (Principal Executive Officer) | | |
| | | | | |
/S/ ALEX LARUE | | Chief Financial Officer — Secretary and | | July 7, 2021August 2, 2022 |
| Alex LaRue | | Treasurer (Principal Financial Officer | | |
| | | and Principal Accounting Officer) | | |
| | | | | |
/S/ DURGA D. AGRAWAL | | Director | | July 7, 2021August 2, 2022 |
| Durga D. Agrawal | | | | |
| | | | | |
/S/ MAX REICHENTHAL | | Director | | July 7, 2021August 2, 2022 |
| Max Reichenthal | | | | |
| | | | | |
/S/ SANDY SCOTT | | Director | | August 2, 2022 |
| Sandy Scott | | | | |
| | | | |
| /S/ JOEL SPIRA | | Director | | July 7, 2021August 2, 2022 |
| Joel Spira | | | | |
| | | | | |
/S/ TIM STEVENSON | | Director | | July 7, 2021August 2, 2022 |
| Tim Stevenson | | | | |
| | | | | |
/S/ JOE L. WILLIAMS SHARON TAYLOR | | Director | | July 7, 2021August 2, 2022 |
Joe L. WilliamsSharon Taylor | | | | |
| | | | |
| /S/ JOE L. WILLIAMS | | Director | | August 2, 2022 |
| Joe L. Williams | | | | |
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
FRIEDMAN INDUSTRIES, INCORPORATED
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | Additions | | | | | | | | | |
Description | | Balance at | | | Charged to | | | Charged to | | | | | | | | | |
| | | Beginning | | | Costs and | | | Other Accounts— | | | Deductions— | | | Balance at | |
| | | of Period | | | Expenses | | | Describe(A) | | | Describe(B) | | | End of Period | |
Year ended March 31, 2021 | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account) | | $ | 82,417 | | | $ | — | | | $ | 351,270 | | | $ | 400,853 | | | $ | 32,834 | |
Year ended March 31, 2020 | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts receivable and cash discounts (deducted from related asset account) | | $ | 29,178 | | | $ | — | | | $ | 677,652 | | | $ | 624,413 | | | $ | 82,417 | |
(A)
| Allowance for doubtful accounts charged to bad debt expense of $0 and $53,239 during fiscal years 2021 and 2020, respectively. Cash discounts allowed on sales and charged against revenue of $351,270 and $624,413 during fiscal years 2021 and 2020, respectively.
|
(B)
| Accounts receivable written off of $49,583 and $0 during fiscal years 2021 and 2020, respectively. Cash discounts taken on sales of $351,270 and $624,413 during fiscal years 2021 and 2020, respectively.
|