##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FROM THE TRANSITION PERIOD FROM
                    
TO
 COMMISSION FILE NUMBER 1-7521
 FRIEDMAN INDUSTRIES, INCORPORATED
  TEXAS
(State or other jurisdiction of 
incorporation or organization)
    
    74-1504405
(I.R.S. Employer Identification
Number)
 
 
  þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ  o þ




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TABLE OF CONTENTS  Part I  FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESEXHIBIT INDEXCertification of William E. Crow Pursuant to Section 302Certification of Ben Harper Pursuant to Section 302Certification of William E. Crow Pursuant to Section 906Certification of Ben Harper Pursuant to Section 906    Table of Contents  
 Part I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
  CONDENSED CONSOLIDATED BALANCE SHEETS
 JUNE 30, 2008
    
    
    MARCH 31, 2008(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    12,213,256
    
    
    $
    2,643,922Accounts receivable, net of allowances for bad debts and cash discounts of
$37,276 at June 30 and March 31, 2008
    
    
    15,825,152
    
    
    
    16,742,000Inventories
    
    
    19,316,064
    
    
    
    29,900,327Other
    
    
    240,075
    
    
    
    136,345TOTAL CURRENT ASSETS
    
    
    47,594,547
    
    
    
    49,422,594PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    1,082,331
    
    
    
    1,082,331Construction in progress
    
    
    9,546,244
    
    
    
    8,706,172Buildings and yard improvements
    
    
    3,494,293
    
    
    
    3,494,294Machinery and equipment
    
    
    22,186,113
    
    
    
    21,879,259Less accumulated depreciation
    
    
    (18,693,583
    )
    
    
    (18,389,983
    )17,615,398
    
    
    
    16,772,073OTHER ASSETS:Cash value of officers life insurance and other assets
    
    
    734,000
    
    
    
    720,001Deferred income taxes
    
    
    
    
    
    
    43,724TOTAL ASSETS
    
    $
    65,943,945
    
    
    $
    66,958,392LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    10,707,598
    
    
    $
    13,499,314Current portion of long-term debt
    
    
    54,028
    
    
    
    54,028Deferred credit for LIFO replacement
    
    
    2,456,108
    
    
    
    Dividends payable
    
    
    543,956
    
    
    
    339,972Income taxes payable
    
    
    1,750,585
    
    
    
    70,069Contribution to profit sharing plan
    
    
    149,500
    
    
    
    259,500Employee compensation and related expenses
    
    
    1,215,430
    
    
    
    561,483TOTAL CURRENT LIABILITIES
    
    
    16,877,205
    
    
    
    14,784,366LONG-TERM DEBT LESS CURRENT PORTION
    
    
    54,028
    
    
    
    6,667,536DEFERRED INCOME TAXES
    
    
    58,173
    
    
    
    POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
    
    
    566,093
    
    
    
    549,749STOCKHOLDERS EQUITY:Common stock, par value $1:Authorized shares  10,000,000Issued shares  7,975,160 at June 30 and March 31, 2008
    
    
    7,975,160
    
    
    
    7,975,160Additional paid-in capital
    
    
    29,003,674
    
    
    
    29,003,674Treasury stock at cost (1,175,716 shares at June 30 and March 31, 2008)
    
    
    (5,475,964
    )
    
    
    (5,475,964
    )Retained earnings
    
    
    16,885,576
    
    
    
    13,453,871TOTAL STOCKHOLDERS EQUITY
    
    
    48,388,446
    
    
    
    44,956,741TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    65,943,945
    
    
    $
    66,958,392
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  UNAUDITED
 THREE MONTHS ENDED JUNE 30,2008
    
    
    2007Net Sales
    
    $
    59,598,696
    
    
    $
    50,530,510Costs and expensesCosts of goods sold
    
    
    51,533,953
    
    
    
    46,760,892General, selling and administrative costs
    
    
    1,981,023
    
    
    
    1,419,493Interest expense
    
    
    23,310
    
    
    
    47,74053,538,286
    
    
    
    48,228,125Interest and other income
    
    
    (41,418
    )
    
    
    (41,770
    )Earnings before income taxes
    
    
    6,101,828
    
    
    
    2,344,155Provision for income taxes:Current
    
    
    2,024,271
    
    
    
    758,315Deferred
    
    
    101,897
    
    
    
    33,3892,126,168
    
    
    
    791,704Net earnings
    
    $
    3,975,660
    
    
    $
    1,552,451Average number of common shares outstanding:Basic
    
    
    6,799,444
    
    
    
    6,712,108Diluted
    
    
    6,799,444
    
    
    
    6,779,583Net earnings per share:Basic
    
    $
    0.58
    
    
    $
    0.23Diluted
    
    $
    0.58
    
    
    $
    0.23Cash dividends declared per common share
    
    $
    0.08
    
    
    $
    0.08
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
 THREE MONTHS ENDED JUNE 30,2008
    
    
    2007OPERATING ACTIVITIESNet earnings
    
    $
    3,975,660
    
    
    $
    1,552,451Adjustments to reconcile net earnings to cash provided by
operating activities:Depreciation
    
    
    303,600
    
    
    
    279,300Provision for deferred taxes
    
    
    101,897
    
    
    
    33,389Change in post retirement benefits
    
    
    16,344
    
    
    
    13,235Decrease (increase) in operating assets:Accounts receivable
    
    
    916,848
    
    
    
    356,414Inventories
    
    
    10,584,263
    
    
    
    7,558,581Other current assets
    
    
    (103,731
    )
    
    
    13,239Increase (decrease) in operating liabilities:Accounts payable and accrued expenses
    
    
    (2,791,716
    )
    
    
    (9,262,507
    )Contribution to profit-sharing plan
    
    
    (110,000
    )
    
    
    (191,500
    )Employee compensation and related expenses
    
    
    653,947
    
    
    
    109,112Income taxes payable
    
    
    1,680,516
    
    
    
    615,602Deferred credit for LIFO replacement
    
    
    2,456,108
    
    
    
    NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    17,683,736
    
    
    
    1,077,316INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (1,146,924
    )
    
    
    (1,259,545
    )(Increase) in cash surrender value of officers
life insurance
    
    
    (13,998
    )
    
    
    (11,800
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (1,160,922
    )
    
    
    (1,271,345
    )FINANCING ACTIVITIESCash dividends paid
    
    
    (339,972
    )
    
    
    (536,969
    )Long-term debt
    
    
    (6,613,508
    )
    
    
    162,084NET CASH (USED) IN FINANCING ACTIVITIES
    
    
    (6,953,480
    )
    
    
    (374,885
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    9,569,334
    
    
    
    (568,914
    )Cash and cash equivalents at beginning of period
    
    
    2,643,922
    
    
    
    1,039,030CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    12,213,256
    
    
    $
    470,116
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CONDENSED NOTES TO QUARTERLY REPORT  UNAUDITED
       June 30,
    
    
    March 31,2008
    
    
    2008Prime Coil Inventory
    
    $
    4,407,068
    
    
    $
    8,121,728Non-Standard Coil Inventory
    
    
    1,116,894
    
    
    
    918,334Tubular Raw Material
    
    
    2,979,335
    
    
    
    7,444,805Tubular
Finished Goods
    
    
    10,812,767
    
    
    
    13,415,460$
    19,316,064
    
    
    $
    29,900,327
      2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    

Shares
    
    
    PriceOutstanding at beginning of quarter
    
    
    
    
    
    
    
    
    
    
    88,836
    
    
    $
    2.33Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled or expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of quarter
    
    
    
    
    
    
    
    
    
    
    88,836
    
    
    $
    2.33
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2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    

Shares
    
    
    PriceExercisable at the end of the quarter
    
    
    
    
    
    
    
    
    
    
    88,836
    
    
    $
    2.33Weighted average fair value of options granted during the quarter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   THREE MONTHS ENDEDJUNE 30,2008
    
    
    2007(in thousands)Net salesCoil
    
    $
    26,007
    
    
    $
    21,076Tubular
    
    
    33,592
    
    
    
    29,455Total net sales
    
    $
    59,599
    
    
    $
    50,531Operating profitCoil
    
    $
    585
    
    
    $
    936Tubular
    
    
    6,884
    
    
    
    2,257Total operating profit
    
    
    7,469
    
    
    
    3,193Corporate expenses
    
    
    1,385
    
    
    
    843Interest expense
    
    
    23
    
    
    
    48Interest & other income
    
    
    (41
    )
    
    
    (42
    )Total earnings before taxes
    
    $
    6,102
    
    
    $
    2,344
 June 30,
    
    
    March 31,2008
    
    
    2008Segment assetsCoil
    
    $
    26,254
    
    
    $
    29,469Tubular
    
    
    26,709
    
    
    
    34,04152,963
    
    
    
    63,510Corporate assets
    
    
    12,981
    
    
    
    3,448$
    65,944
    
    
    $
    66,958
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Item 2. Managements Discussion and Analysis of  Financial Condition and Results of Operations
 Results of Operations
 Three Months Ended June 30, 2008
Compared to Three Months Ended June 30, 2007
        FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
       CRITICAL ACCOUNTING POLICIES
  FORWARD-LOOKING STATEMENTS
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  7




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Item 4. Controls and Procedures
   8




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FRIEDMAN INDUSTRIES, INCORPORATED
Three Months Ended June 30, 2008
 
 Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
 Item 3. Defaults Upon Senior Securities
   
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  31.1 
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by
William E. Crow31.2 
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by
Ben Harper32.1 
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, signed by William E. Crow32.2 
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, signed by Ben Harper
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SIGNATURES
  FRIEDMAN INDUSTRIES, INCORPORATEDDate August 12, 2008By
    /s/ BEN HARPERBen Harper, Senior Vice President-Finance(Principal Financial and Accounting Officer) 10




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EXHIBIT INDEX
 Exhibit No.
    
    DescriptionExhibit 31.1
    
     Certification Pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002, signed by William E. CrowExhibit 31.2
    
     Certification Pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Ben HarperExhibit 32.1
    
     Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of
2002, signed by William E. CrowExhibit 32.2
    
     Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of
2002, signed by Ben Harper