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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|     |  |                                                                                                                                                                           
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[X]  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006                                      
|     |  |                                                                                                                                                                           
|OR  
|     |  |                                                                                                                                                                           
|[  ] |  | 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

(Exact name of registrant as specified in its charter)


|                                                                     |  |                                                   
|-------------------------------------------------------------------- |  | --------------------------------------------------
|TEXAS
(State or other jurisdiction of
incorporation or organization) |  | 74-1504405
(I.R.S. Employer Identification
Number)

4001 HOMESTEAD ROAD, HOUSTON, TEXAS 77028-5585
(Address of principal executive office) (zip code)
Registrants telephone number, including area code (713) 672-9433



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

| |           |  |  |  |   
| | --------- |  |  |  | --
| | Yes     X |  |  |  | No







| |     |  |  |  |         
| | --- |  |  |  | --------
| | Yes |  |  |  | No     X

At June 30, 2006, the number of shares outstanding of the issuers only
class of stock was 6,666,626 shares of Common Stock.



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TABLE OF CONTENTS



|                                       |                                                                                               |                                                             |  |  |  |  |  | 
|-------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION        
|                                       | Item 1. Financial Statements                                                                 
|                                       |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                      
|                                       |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  UNAUDITED  
|                                       |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
|                                       |                                                                                               | CONDENSED NOTES TO QUARTERLY REPORT  UNAUDITED            
|                                       | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                       | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                       | Item 4. Controls and Procedures                                                              
|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                                                                             
|SIGNATURES                            
|EXHIBIT INDEX                         
|Certification Pursuant to Section 302 
|Certification Pursuant to Section 302 
|Certification Pursuant to Section 1350
|Certification Pursuant to Section 1350



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Part I  FINANCIAL
INFORMATION




Item 1. Financial Statements




FRIEDMAN INDUSTRIES,
INCORPORATEDCONDENSED CONSOLIDATED BALANCE SHEETS

|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |             |           |            | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------ | ----------- | ------------- | ---------- | -------------- | ----------- | --------- | ---------- | 
|                                            |                                                                                                                  |                                                               |                                            |             | JUNE 30,
2006 |            | MARCH 31,
2006
|                                            |                                                                                                                  |                                                               |                                            |             | Unaudited     |            |               
|ASSETS                                     
|CURRENT ASSETS:                             |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            | Cash and cash equivalents                                                                                        |                                                               | $                                          | 715,397     |               |            | $              | 1,982,526   |          
|                                            | Accounts receivable, net of allowances for bad debts and cash
discounts of $37,276 at June 30 and March 31, 2006 |                                                               |                                            | 19,176,123  |               |            |                | 17,494,313  |          
|                                            | Inventories                                                                                                      |                                                               |                                            | 25,234,081  |               |            |                | 27,956,921  |          
|                                            | Other                                                                                                            |                                                               |                                            | 25,360      |               |            |                | 117,243     |          
|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            |                                                                                                                  |                                                               | TOTAL CURRENT ASSETS                       |             |               | 45,150,961 |                |             |           | 47,551,003 | 
|PROPERTY, PLANT AND EQUIPMENT:              |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            | Land                                                                                                             |                                                               |                                            | 1,118,273   |               |            |                | 486,653     |          
|                                            | Buildings
and yard improvements                                                                                  |                                                               |                                            | 4,106,153   |               |            |                | 4,088,149   |          
|                                            | Machinery and equipment                                                                                          |                                                               |                                            | 21,653,269  |               |            |                | 20,852,126  |          
|                                            | Less accumulated depreciation                                                                                    |                                                               |                                            | (17,890,866 | )             |            |                | (17,653,265 | )        
|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            |                                                                                                                  |                                                               | 8,986,829                                  |             |               |            | 7,773,663      |            
|OTHER ASSETS:                               |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            | Cash value of officers life insurance                                                                           |                                                               |                                            | 618,617     |               |            |                | 606,223     |          
|                                            | Deferred tax asset                                                                                               |                                                               |                                            | 48,213      |               |            |                |            |          
|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            |                                                                                                                  |                                                               | TOTAL ASSETS                               |             | $             | 54,804,620 |                |             | $         | 55,930,889 | 
|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|LIABILITIES AND STOCKHOLDERS EQUITY       
|CURRENT LIABILITIES:                        |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            | Accounts payable and accrued expenses                                                                            |                                                               | $                                          | 13,040,448  |               |            | $              | 16,713,944  |          
|                                            | Income taxes payable                                                                                             |                                                               |                                            | 1,074,888   |               |            |                | 143,196     |          
|                                            | Deferred credit for LIFO replacement                                                                             |                                                               |                                            | 125,275     |               |            |                |            |          
|                                            | Dividends payable                                                                                                |                                                               |                                            | 533,330     |               |            |                | 533,330     |          
|                                            | Contribution to profit sharing plan                                                                              |                                                               |                                            | 67,500      |               |            |                | 256,000     |          
|                                            | Employee compensation and related expenses                                                                       |                                                               |                                            | 796,428     |               |            |                | 736,723     |          
|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            |                                                                                                                  |                                                               | TOTAL CURRENT LIABILITIES                  |             |               | 15,637,869 |                |             |           | 18,383,193 | 
|DEFERRED
INCOME TAXES                       |                                                                                                                  |                                                               |                                           |             |               |            | 4,618          |            
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                                                                                  |                                                               | 457,605                                    |             |               |            | 445,743        |            
|STOCKHOLDERS EQUITY:                       |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            | Common stock, par value $1:                                                                                      |                                                               |                                            |             |               |            |                |             |          
|                                            |                                                                                                                  | Authorized
shares  10,000,000                                |                                            |             |               |            |                |             |           |           
|                                            |                                                                                                                  | Issued
shares  7,842,342 at June 30, 2006 and March 31, 2006 |                                            |             | 7,842,342     |            |                |             | 7,842,342 |           
|                                            | Additional paid-in capital                                                                                       |                                                               |                                            | 28,663,814  |               |            |                | 28,663,814  |          
|                                            | Treasury
stock at cost (1,175,716 shares at June 30, 2006 and March 31, 2006)                                    |                                                               |                                            | (5,475,964  | )             |            |                | (5,475,964  | )        
|                                            | Retained
earnings                                                                                                |                                                               |                                            | 7,678,954   |               |            |                | 6,067,143   |          
|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            |                                                                                                                  |                                                               | TOTAL STOCKHOLDERS EQUITY                 |             |               | 38,709,146 |                |             |           | 37,097,335 | 
|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |            
|                                            |                                                                                                                  |                                                               | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |             | $             | 54,804,620 |                |             | $         | 55,930,889 | 
|                                            |                                                                                                                  |                                                               |                                            |             |               |            |                |            

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FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED CONSOLIDATED STATEMENTS
OF EARNINGS  UNAUDITED

|                                             |                                           |   |                             |            |      |   |            |            |  
|-------------------------------------------- | ----------------------------------------- | - | --------------------------- | ---------- | ---- | - | ---------- | ---------- | -
|                                             |                                           |   | THREE MONTHS ENDED JUNE 30,
|                                             |                                           |   |                            
|                                             |                                           |   | 2006                        |            | 2005
|                                             |                                           |   |                             |            |     
|Net sales                                    |                                           | $ | 52,623,730                  |            |      | $ | 46,057,585 |           
|Costs and expenses                           |                                           |   |                             |            |      |   |            |           
|                                             | Costs of goods sold                       |   |                             | 47,747,054 |      |   |            | 42,944,172 |  
|                                             | General, selling and administrative costs |   |                             | 1,574,457  |      |   |            | 1,344,980  |  
|
|                                             |                                           |   |                             |            |      |   |            |           
|                                             |                                           |   | 49,321,511                  |            |      |   | 44,289,152 |           
|Interest and other income                    |                                           |   | (57,448                     | )          |      |   | (45,535    | )         
|                                             |                                           |   |                             |            |      |   |            |           
|Earnings before income taxes                 |                                           |   | 3,359,667                   |            |      |   | 1,813,968  |           
|Provision (benefit) for income taxes:        |                                           |   |                             |            |      |   |            |           
|                                             | Current                                   |   |                             | 1,267,357  |      |   |            | 701,633    |  
|                                             | Deferred                                  |   |                             | (52,831    | )    |   |            | (18,432    | )
|                                             |                                           |   |                             |            |      |   |            |           
|                                             |                                           |   | 1,214,526                   |            |      |   | 683,201    |           
|                                             |                                           |   |                             |            |      |   |            |           
|Net earnings                                 |                                           | $ | 2,145,141                   |            |      | $ | 1,130,767  |           
|                                             |                                           |   |                             |            |      |   |            |           
|Average number of common shares outstanding: |                                           |   |                             |            |      |   |            |           
|                                             | Basic                                     |   |                             | 6,666,626  |      |   |            | 7,139,747  |  
|                                             | Diluted                                   |   |                             | 6,766,927  |      |   |            | 7,278,541  |  
|Net earnings per share:                      |                                           |   |                             |            |      |   |            |           
|                                             | Basic                                     |   | $                           | 0.32       |      |   | $          | 0.16       |  
|                                             | Diluted                                   |   | $                           | 0.32       |      |   | $          | 0.16       |  
|Cash dividends declared per common share     |                                           | $ | 0.08                        |            |      | $ | 0.08       |           

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FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS  UNAUDITED

|                                                 |                                                                               |                                             |                                                  |            |                             |            |           |           |            |           |  
|------------------------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------------ | ---------- | --------------------------- | ---------- | --------- | --------- | ---------- | --------- | -
|                                                 |                                                                               |                                             |                                                  |            | THREE MONTHS ENDED JUNE 30,
|                                                 |                                                                               |                                             |                                                  |            |                            
|                                                 |                                                                               |                                             |                                                  |            | 2006                        |            | 2005     
|                                                 |                                                                               |                                             |                                                  |            |                             |            |          
|OPERATING ACTIVITIES                             |                                                                               |                                             |                                                  |            |                             |            |           |          
|                                                 | Net earnings                                                                  |                                             | $                                                | 2,145,141  |                             |            | $         | 1,130,767 |           
|                                                 | Adjustments to reconcile net income to cash provided by
operating activities: |                                             |                                                  |            |                             |            |           |           |           
|                                                 |                                                                               | Depreciation                                |                                                  |            | 237,600                     |            |           |           | 231,000    |          
|                                                 |                                                                               | Provision (benefit) for deferred taxes      |                                                  |            | (52,831                     | )          |           |           | (18,432    | )        
|                                                 |                                                                               | Change
in post retirement benefits          |                                                  |            | 11,862                      |            |           |           | 11,325     |          
|                                                 | Decrease (increase) in operating assets:                                      |                                             |                                                  |            |                             |            |           |           |           
|                                                 |                                                                               | Accounts receivable                         |                                                  |            | (1,681,810                  | )          |           |           | 2,421,009  |          
|                                                 |                                                                               | Inventories                                 |                                                  |            | 2,722,840                   |            |           |           | 3,036,263  |          
|                                                 |                                                                               | Prepaid
federal income taxes                |                                                  |            |                            |            |           |           | 600,948    |          
|                                                 |                                                                               | Other current assets                        |                                                  |            | 91,883                      |            |           |           | 105,059    |          
|                                                 | Increase (decrease) in operating liabilities:                                 |                                             |                                                  |            |                             |            |           |           |           
|                                                 |                                                                               | Accounts payable and accrued expenses       |                                                  |            | (3,673,496                  | )          |           |           | (1,056,098 | )        
|                                                 |                                                                               | Contribution to profit-sharing plan payable |                                                  |            | (188,500                    | )          |           |           | (202,000   | )        
|                                                 |                                                                               | Employee compensation and related expenses  |                                                  |            | 59,705                      |            |           |           | (74,417    | )        
|                                                 |                                                                               | Federal income taxes payable                |                                                  |            | 931,692                     |            |           |           |           |          
|                                                 |                                                                               | Deferred credit for LIFO replacement        |                                                  |            | 125,275                     |            |           |           |           |          
|                                                 |                                                                               |                                             |                                                  |            |                             |            |           |          
|                                                 |                                                                               |                                             | NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES |            |                             | 729,361    |           |           |            | 6,185,424 |  
|INVESTING ACTIVITIES                             |                                                                               |                                             |                                                  |            |                             |            |           |          
|                                                 | Purchase of property, plant and equipment                                     |                                             |                                                  | (1,450,766 | )                           |            |           | (51,868   | )         
|                                                 | Decrease
(increase) in cash surrender value of officers life
insurance       |                                             |                                                  | (12,394    | )                           |            |           | (9,056    | )         
|                                                 |                                                                               |                                             |                                                  |            |                             |            |           |          
|                                                 |                                                                               |                                             | NET CASH USED IN INVESTING ACTIVITIES            |            |                             | (1,463,160 | )         |           |            | (60,924   | )
|FINANCING ACTIVITIES                             |                                                                               |                                             |                                                  |            |                             |            |           |          
|                                                 | Cash dividends paid                                                           |                                             |                                                  | (533,330   | )                           |            |           | (571,180  | )         
|                                                 | Principal payments on notes payable                                           |                                             |                                                  |           |                             |            |           | (2,897    | )         
|                                                 |                                                                               |                                             |                                                  |            |                             |            |           |          
|                                                 |                                                                               |                                             | NET CASH PROVIDED (USED) IN FINANCING
ACTIVITIES |            |                             | (533,330   | )         |           |            | (574,077  | )
|                                                 |                                                                               |                                             |                                                  |            |                             |            |           |          
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                               |                                             | (1,267,129                                       | )          |                             |            | 5,550,423 |          
|                                                 | Cash and cash equivalents at beginning of period                              |                                             |                                                  | 1,982,526  |                             |            |           | 205,375   |           
|                                                 |                                                                               |                                             |                                                  |            |                             |            |           |          
|CASH AND CASH EQUIVALENTS AT END OF PERIOD       |                                                                               | $                                           | 715,397                                          |            |                             | $          | 5,755,798 |          
|                                                 |                                                                               |                                             |                                                  |            |                             |            |           |          

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FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED NOTES TO QUARTERLY REPORT  UNAUDITED
THREE MONTHS ENDED JUNE 30, 2006

NOTE A  BASIS OF PRESENTATION

The accompanying unaudited condensed, consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further information,
refer to the financial statements and footnotes included in the Companys annual
report on Form 10-K for the year ended March 31, 2006.

NOTE B  INVENTORIES

Inventories consist
of prime coil, non-standard coil and tubular materials.
Prime coil inventory consists primarily of raw materials,
non-standard coil inventory consists primarily of finished goods and tubular
inventory consists of both raw materials and finished goods. Inventories are
valued at the lower of cost or replacement market. Cost for prime
coil inventory is
determined under the last-in, first-out (LIFO) method. Cost for
non-standard coil inventory is determined using the specific identification method. Cost for tubular
inventory is determined using the weighted average method.

During
the quarter ended June 30, 2006, LIFO inventories were reduced but
are expected to be replaced by March 31, 2007. A deferred credit of $125,275 was recorded at June 30, 2006 to reflect replacement costs in
excess of LIFO cost.

A summary of inventory values follows:

June 30,
    

March 31,2006
    
    2006Prime
Coil Inventory
    
    $
    9,333,379
    
    
    $
    10,525,848Non-Standard
Coil Inventory
    
    
    1,926,724
    
    
    
    788,266Tubular Raw Material
    
    
    4,318,916
    
    
    
    3,889,206Tubular Finished Goods
    
    
    9,655,062
    
    
    
    12,753,601$
    25,234,081
    
    
    $
    27,956,921


NOTE C  LONG-TERM DEBT

The Company has a $6 million
revolving credit facility which expires April 1, 2008. There
were no amounts outstanding pursuant to the facility at June 30,
2006 and March 31, 2006.

NOTE D  STOCK BASED COMPENSATION

The Company followed
Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25), for its
employee stock options through March 31, 2006. Under APB 25, because the exercise price
of the Companys employee stock options was equal to the market price
of the underlying stock on the date of grant, no compensation expense
was recognized.

If the Company had applied the fair value recognition
provisions of Statements of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation, to stock
based employee compensation for each of the quarters ended
June 30, 2006 and June 30, 2005, net income and earnings
per common share would be the same as reported income and earnings
per common share as no options were granted in the quarter ended June 30, 2006 or June 30, 2005.

In December 2004, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based Payment
(SFAS 123(R)). SFAS 123(R) requires all share-based
payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair values.
The Company adopted SFAS 123(R) effective April 1, 2006.
SFAS 123(R) permits adoption using one of two methods, a
modified prospective method (Prospective Method) or a
modified retrospective method (Retrospective Method).
With the Prospective Method, costs are recognized beginning with the
effective date based on the requirements of SFAS 123(R) for
(i) all share-based payments granted after the effective date of
SFAS 123(R), and (ii) all awards granted to employees prior
to the effective date of SFAS 123(R) that remain unvested on the
effective date. The Retrospective Method applies the requirements of
the Prospective Method but further permits entities to restate all
prior periods presented based on the amounts previously recognized
under SFAS 123 for purposes of pro forma disclosures. The
Company adopted the Prospective Method on April 1, 2006 and
there was no impact on the
financial statements as all of the options were vested as of April 1, 2006.






2006
    
    
    2005Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning of quarter
    
    
    137,212
    
    
    $
    2.35
    
    
    
    224,718
    
    
    $
    2.62Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled or expired
    
    
    (2,894
    )
    
    $
    3.13
    
    
    
    (10,979
    )
    
    $
    2.40Outstanding at end of quarter
    
    
    134,318
    
    
    $
    2.33
    
    
    
    213,739
    
    
    $
    2.63Exercisable at the end of the quarter
    
    
    134,318
    
    
    $
    2.33
    
    
    
    213,739
    
    
    $
    2.63Weighted average fair value of options
granted during the quarter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    




Outstanding
    
    
    ExercisableWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageRange of
    
    Remaining
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseExercise Price
    

Years
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    Price$2.33
    
    
    6.5
    
    
    
    134,318
    
    
    $
    2.33
    
    
    
    134,318
    
    
    $
    2.33


The aggregate intrinsic value of
exercisable and outstanding options at June
30, 2006 was $902,617.

NOTE E  NEW ACCOUNTING PRONOUNCEMENTS

FASB issued Statement
Financial Accounting Standards No. 151, Inventory
Costs, an Amendment of ARB No. 43, Chapter 4, (SFAS 151)
regarding current period expenses generated from abnormal inventory
costs associated with idle facility expense, freight, handling costs and
spoilage. Effective in fiscal 2007, SFAS 151 will be applicable  to the
Company. SFAS 151 did not have a material impact in the quarter ended
June 30, 2006 and the Company does not expect that the adoption of SFAS 151 will
have a material impact in future periods.
     See also note D regarding the adoption of SFAS 123(R).

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NOTE F  SEGMENT INFORMATION

|                 |                         |                             |   |                    |        |      |   |        |        | 
|---------------- | ----------------------- | --------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | 
|                 |                         |                             |   | THREE MONTHS ENDED
|                 |                         |                             |   | JUNE 30,          
|                 |                         |                             |   |                   
|                 |                         |                             |   | 2006               |        | 2005
|                 |                         |                             |   |                    |        |     
|Net sales        |                         |                             |   |                    |        |      |   |       
|                 | Coil                    |                             | $ | 27,885             |        |      | $ | 23,051 |       
|                 | Tubular                 |                             |   | 24,739             |        |      |   | 23,007 |       
|                 |                         |                             |   |                    |        |      |   |       
|                 |                         | Total net sales             |   | $                  | 52,624 |      |   | $      | 46,058 | 
|                 |                         |                             |   |                    |        |      |   |       
|Operating profit |                         |                             |   |                    |        |      |   |       
|                 | Coil                    |                             | $ | 1,552              |        |      | $ | 878    |       
|                 | Tubular                 |                             |   | 2,786              |        |      |   | 1,734  |       
|                 |                         |                             |   |                    |        |      |   |       
|                 |                         | Total operating profit      |   |                    | 4,338  |      |   |        | 2,612  | 
|                 | Corporate expenses      |                             |   | 1,035              |        |      |   | 844    |       
|                 | Interest & other income |                             |   | (57                | )      |      |   | (46    | )     
|                 |                         |                             |   |                    |        |      |   |       
|                 |                         | Total earnings before taxes |   | $                  | 3,360  |      |   | $      | 1,814  | 
|                 |                         |                             |   |                    |        |      |   |       

|               |                  |  |   |              |        |               |   |        |        | 
|-------------- | ---------------- |  | - | ------------ | ------ | ------------- | - | ------ | ------ | 
|               |                  |  |   | June
30,2006 |        | March
31,2006
|               |                  |  |   |              |        |              
|Segment assets |                  |  |   |              |        |               |   |       
|               | Coil             |  | $ | 25,746       |        |               | $ | 24,528 |       
|               | Tubular          |  |   | 27,578       |        |               |   | 28,684 |       
|               |                  |  |   |              |        |               |   |       
|               |                  |  |   | 53,324       |        |               |   | 53,212 |       
|               | Corporate assets |  |   | 1,481        |        |               |   | 2,719  |       
|               |                  |  |   |              |        |               |   |       
|               |                  |  |   | $            | 54,805 |               |   | $      | 55,931 | 
|               |                  |  |   |              |        |               |   |       

Segment amounts
reflected above are stated in thousands. General corporate expenses
reflect general and administrative expenses not directly associated
with segment operations and consist primarily of corporate executive
and accounting salaries, professional fees and services, bad debts,
accrued profit sharing expense, corporate insurance expenses and
office supplies. Corporate assets consists primarily of cash and cash
equivalents and the cash value of officers life insurance.

6



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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of OperationsThree
Months Ended June 30, 2006 Compared to Three Months Ended June 30,
2005 During the three months ended June 30, 2006, sales, costs of goods sold and gross profit increased $6,566,145, $4,802,882 and
$1,763,263, respectively, from the comparable amounts recorded during the three months ended June 30, 2005.  These increases
were related primarily to an increase in tons sold.  The Company recorded tons sold of approximately 70,000 tons in the 2005
quarter compared to approximately 81,000 tons in the 2006 quarter. Average per ton selling prices declined approximately $15
per ton and had the effect of partially offsetting the above increase
in sales relative to tons sold. Gross profit benefited from the increase in sales as well
as an increase in margins earned on sales. Gross profit as a percentage of sales increased from approximately 6.8% in the 2005
quarter to approximately 9.3% in the 2006 quarter. During the 2006 quarter, the Company continued to experience strong market
conditions for its products. Coil product segment sales increased approximately $4,834,000 during the 2006 quarter.  This increase resulted primarily from an
increase in tons sold as coil tonnage shipped increased from
approximately 34,000 tons in the 2005 quarter to approximately
41,000 tons in the 2006 quarter. The average per ton selling price was approximately the same for both quarters. Coil operating profit
as a percentage of coil segment sales increased from approximately 3.8% in the 2005 quarter to 5.6% in the 2006 quarter. The
Company experienced strong market conditions for coil products during
the 2006 quarter. In the 2006 quarter, the Companys Lone Star, Texas  coil facility
(LSCF) continued to experience a lack of supply of coil
products from its primary coil supplier, Lone Star Steel Company (LSS).
In fiscal 2006, the Company decided to phase out LSCF
in fiscal 2007 and redeploy certain LSCF assets to a
new coil operation to be located in close proximity to the Nucor Steel Company
steel mill in Decatur, Alabama. LSCF, which produced a marginal profit in the
2006 quarter, accounted for approximately 3% of total sales in the 2006 quarter. During the 2006 quarter, the Companys XSCP division located at Hickman, Arkansas, which markets non-standard coils received from Nucor Steel
Company (NSC), continued to receive limited shipments of non-standard coils from
NSC and the Company expects these limited shipments to continue.  XSCP operating assets,
when not used by XSCP, can be used at the Companys Hickman coil facility (Hickman). The Company is primarily dependent on NSC for its supply of coil
inventory.  NSC continues to supply Hickman and XSCP with steel coils
in amounts that are adequate for the Companys purposes.   While
current levels are adequate to sustain the Companys operations at Hickman and XSCP, a reduction in the supply of steel coils could have an adverse effect on the Companys coil operations. Tubular product segment sales increased approximately $1,732,000 during the 2006 quarter.  This increase resulted from an increase in tons sold from approximately 36,000 tons sold in the 2005 quarter compared to approximately 40,000 tons sold in the 2006 quarter.  The increase in sales related to tons sold was partially offset by a decline of approximately $25 in the average per ton selling price of pipe products.  Tubular product segment operating profits as a percentage of segment sales were approximately 7.5% and 11.3% in the 2005 and 2006 quarters, respectively.  The Company continued to experience strong market conditions for its pipe products in the 2006 quarter. During the 2006 quarter, LSS, the Companys primary supplier of
tubular products and coil material used in pipe manufacturing,
continued to supply such products in amounts that were adequate for
the Companys purposes.  The Company does not currently anticipate any significant change in such supply from LSS. During the 2006 quarter, general, selling and administrative costs increased $229,477 from the amount recorded during the 2005 quarter.  This increase was related primarily to increases in commissions and bonuses associated with the increase in earnings and volume. Income taxes increased $531,325 from the comparable amount recorded during the 2005 quarter.   This increase was primarily related to the increase in earnings before taxes.  Effective tax rates were 36.2% and 37.7% in the 2006 and 2005 quarters, respectively. 7




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##### Table of Contents



FINANCIAL POSITION, LIQUIDITY AND
CAPITAL RESOURCES

The
Company remained in a strong, liquid position at June 30, 2006.
Current ratios were 2.9 and 2.6 at June 30, 2006 and
March 31, 2006, respectively. Working
capital was $29,513,092 at June 30, 2006 and $29,167,810 at
March 31, 2006.

During
the three months ended June 30, 2006, the Company maintained
assets and liabilities at levels it believed were commensurate with
operations. Changes in current assets and liabilities during the 2006 quarter were related primarily to the ordinary course of business of the
Company. The Company expects to
continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Companys operations.

During the quarter ended June 30, 2006, the Company
purchased approximately $1,451,000 in fixed assets. These assets were
related primarily to improvements to the small diameter pipe mill
which began operation at Lone Star, Texas in April 2004 and land and
equipment associated with the new coil operation to be located in
Decatur, Alabama. In connection with this planned new operation,
 the Company intends to phase out its coil processing
operations at Lone Star, Texas in fiscal 2007. At the Decatur site, the Company
intends to construct a coil processing facility using, in part, assets
currently used at its Lone Star facility. The Company expects that
the Decatur processing facility will initially operate a hot roll steel temper mill and a hot roll steel cut-to-length and leveling line. The Company expects that the Decatur facility will commence operations in fiscal 2008. In
addition to the funds to be used to purchase the real property in
Alabama, the Companys Board of Directors has authorized up to
an additional $16 million to be used for capital expenditures and
working capital related to the acquisition improvement of the Decatur
facility.

The Company has entered into an
earnest money contract for the sale of the real property owned by the
Company in Houston, Texas. The closing is subject to standard
conditions, including inspections and feasibility studies. The
Company anticipates closing on the sale in August 2006. Following the
closing, the Company plans to lease the office building located on
the Houston property and to maintain its corporate office at such
location.

The Company has an arrangement with a bank which provides for a
revolving line of credit facility (the revolving facility).
Pursuant to the revolving facility, which expires April 1, 2008, the Company may borrow up to $6 million at the banks
prime rate or 1.5% over LIBOR. The Company uses
the revolving facility to support cash flow and will borrow and repay
the note as working capital is required. At June 30, 2006 and
March 31, 2006, the Company had no borrowings
outstanding under the revolving facility.

The Company has
in the past and may in the future borrow funds on a term basis to build or improve facilities. The Company
currently has no plans to borrow funds on a term basis.

Notwithstanding the current market conditions, the Company believes its
cash flows from operations and borrowing capability under its revolving facility
are adequate to fund its expected cash requirements for the next twenty-four
months.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements requires the Company
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. One such accounting policy which requires
significant estimates and judgments is the valuation of LIFO inventories in the
Companys quarterly reporting. The quarterly valuation of inventory
requires estimates of the year end quantities which is inherently difficult.
Historically, these estimates have been materially correct. In
addition, the Company maintains an allowance for doubtful accounts
receivable by providing for specifically identified accounts where
collectibility is doubtful. On an ongoing basis, the Company evaluates estimates and
judgments. The Company bases its estimates on historical experience and on
various other assumptions that it believes to be reasonable under the
circumstances.

FORWARD-LOOKING STATEMENTS

From time to time, the Company may make certain statements that contain
forward-looking information (as defined in the Private Securities Litigation
Reform Act of 1996) and that involve risk and uncertainty. These forward-looking
statements may include, but are not limited to, future results of operations,
future production capacity and product quality. Forward-looking statements may
be made by management orally or in writing including, but not limited to, this
Managements Discussion and Analysis of Financial Condition and Results of
Operations and other sections of the Companys filings with the Securities and
Exchange Commission under the Securities Act of 1933 and the Securities Exchange
Act of 1934. Actual results and trends in the future may differ materially
depending on a variety of factors including but not limited to changes in the
demand and prices of the Company products, changes in the demand for steel and
steel products in general and the Companys success in executing its internal
operating plans.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal
course of business the Company is exposed to market risks primarily
from changes in the cost of steel in inventory and in interest rates.
The Company closely monitors exposure to market risks and develops
appropriate strategies to manage risk. With respect to steel
purchases, there is no recognized market to purchase derivative
financial instruments to reduce the inventory exposure risk on
changing commodity prices. The exposure to market risk associated
with interest rates relates primarily to debt. Recent debt balances
are minimal and, as a result, direct exposure to interest rates
changes is not significant.




Item 4. Controls and Procedures

The
Companys management, with the participation of the Companys principal
executive officer (CEO) and principal financial officer (CFO), evaluated the effectiveness of the
Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act)) as
of the end of the fiscal quarter ended June 30, 2006. Based on this evaluation, the CEO and CFO
have concluded that the Companys disclosure controls and procedures were effective as of the
end of the fiscal quarter ended June 30, 2006 to ensure that information that is required to be
disclosed by the Company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SECs rules and
forms.

There were no changes in the Companys internal control over financial reporting that
occurred during the fiscal quarter ended June 30, 2006 that have
materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial reporting.

8



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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED

Three Months Ended June 30, 2006





Part II  OTHER INFORMATION




Item 1. Legal Proceedings

Not applicable




Item 1A. Risk Factors

Not applicable




Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



| |                   
| | ------------------
| | a). Not applicable
|
| | b). Not applicable
|
| | c). Not applicable




Item 3. Defaults Upon Senior Securities



| |                   
| | ------------------
| | a). Not applicable
|
| | b). Not applicable




Item 4. Submission of Matters to a Vote of Security
Holders

None




Item 5. Other Information

Not applicable




Item 6. Exhibits



| |         
| | --------
| | Exhibits



| |        |                                                                                                                                                          
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | 31.1  | Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by William E. Crow                                                       
|
| | 31.2  | Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Ben Harper                                                            
|
| | 32.1  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, signed by William E. Crow
|
| | 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     

9



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##### Table of Contents






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 thereunto duly authorized.



|                     |                                              |  |                
|-------------------- | -------------------------------------------- |  | ---------------
|                     | FRIEDMAN INDUSTRIES, INCORPORATED           
|Date August 14, 2006 |                                              |  |                
|                     | By                                           |  | /s/  BEN HARPER
|                     |                                              |  |                
|                     | Ben Harper, Senior Vice President-Finance   
|                     | (Principal Financial and Accounting Officer)
|                     |                                              |  |                

10



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##### Table of Contents






EXHIBIT INDEX

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