##### Table of Contents



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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 DECEMBER 31, 2007                                  
|     |  |                                                                                                                                                                           
|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 þ |  |  |  | No o





Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer
o
    
    Smaller reporting company
þ(Do not check if a smaller reporting company)




| |       |  |  |  |     
| | ----- |  |  |  | ----
| | Yes o |  |  |  | No þ

At December 31, 2007, the number of shares outstanding of the issuers only
class of stock was 6,712,108 shares of Common Stock.



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TABLE OF CONTENTS



|                                                         |                                                                                               |                                                             |  |  |  |  |  | 
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                          
|                                                         | Item 1. Financial Statements                                                                 
|                                                         |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS  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                                                              
|SIGNATURES                                              
|EXHIBIT INDEX                                           
|Certification Pursuant to Section 302 by William E. Crow
|Certification Pursuant to Section 302 by Ben Harper     
|Certification Pursuant to Section 906 by William E. Crow
|Certification Pursuant to Section 906 by Ben Harper     



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##### Table of Contents






Part I  FINANCIAL
INFORMATION




Item 1. Financial Statements




FRIEDMAN INDUSTRIES,
INCORPORATEDCONDENSED CONSOLIDATED BALANCE SHEETS

|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |             |           |            | 
|------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------------ | ----------- | ----------------- | ---------- | -------------- | ----------- | --------- | ---------- | 
|                                            |                                                                                                                      |                                                             |                                            |             | DECEMBER 31, 2007 |            | MARCH 31, 2007
|                                            |                                                                                                                      |                                                             |                                            |             | (Unaudited)       |            |               
|ASSETS                                     
|CURRENT ASSETS:                             |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            | Cash and cash equivalents                                                                                            |                                                             | $                                          | 1,422,882   |                   |            | $              | 1,039,030   |          
|                                            | Accounts receivable, net of allowances for bad debts and cash
discounts of $37,276 at December 31 and March 31, 2007 |                                                             |                                            | 11,697,812  |                   |            |                | 17,261,553  |          
|                                            | Inventories                                                                                                          |                                                             |                                            | 27,304,953  |                   |            |                | 33,272,823  |          
|                                            | Prepaid
federal income taxes                                                                                         |                                                             |                                            | 424,739     |                   |            |                |            |          
|                                            | Other                                                                                                                |                                                             |                                            | 241,759     |                   |            |                | 157,963     |          
|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            |                                                                                                                      |                                                             | TOTAL CURRENT ASSETS                       |             |                   | 41,092,145 |                |             |           | 51,731,369 | 
|PROPERTY, PLANT AND EQUIPMENT:              |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            | Land                                                                                                                 |                                                             |                                            | 1,082,331   |                   |            |                | 1,082,331   |          
|                                            | Construction
in progress                                                                                             |                                                             |                                            | 8,291,226   |                   |            |                | 5,004,550   |          
|                                            | Buildings
and yard improvements                                                                                      |                                                             |                                            | 3,494,294   |                   |            |                | 3,494,294   |          
|                                            | Machinery and equipment                                                                                              |                                                             |                                            | 21,777,383  |                   |            |                | 21,236,184  |          
|                                            | Less accumulated depreciation                                                                                        |                                                             |                                            | (18,098,764 | )                 |            |                | (17,344,822 | )        
|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            |                                                                                                                      |                                                             | 16,546,470                                 |             |                   |            | 13,472,537     |            
|OTHER ASSETS:                               |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            | Cash
value of officers life insurance and other assets                                                              |                                                             |                                            | 703,200     |                   |            |                | 667,800     |          
|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            |                                                                                                                      |                                                             | TOTAL ASSETS                               |             | $                 | 58,341,815 |                |             | $         | 65,871,706 | 
|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|LIABILITIES AND STOCKHOLDERS EQUITY       
|CURRENT LIABILITIES:                        |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            | Accounts payable and accrued expenses                                                                                |                                                             | $                                          | 12,825,793  |                   |            | $              | 21,875,516  |          
|                                            | Current
portion of long-term debt                                                                                    |                                                             |                                            | 54,028      |                   |            |                |            |          
|                                            | Dividends payable                                                                                                    |                                                             |                                            | 407,967     |                   |            |                | 536,969     |          
|                                            | Income taxes payable                                                                                                 |                                                             |                                            |            |                   |            |                | 46,742      |          
|                                            | Contribution to profit sharing plan                                                                                  |                                                             |                                            | 193,500     |                   |            |                | 256,000     |          
|                                            | Employee compensation and related expenses                                                                           |                                                             |                                            | 382,849     |                   |            |                | 551,356     |          
|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            |                                                                                                                      |                                                             | TOTAL CURRENT LIABILITIES                  |             |                   | 13,864,137 |                |             |           | 23,266,583 | 
|LONG-TERM
DEBT LESS CURRENT PORTION         |                                                                                                                      |                                                             | 81,042                                     |             |                   |            |               |            
|DEFERRED
INCOME TAXES                       |                                                                                                                      |                                                             | 102,101                                    |             |                   |            | 1,934          |            
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                                                                                      |                                                             | 532,897                                    |             |                   |            | 493,191        |            
|STOCKHOLDERS EQUITY:                       |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            | Common stock, par value $1:                                                                                          |                                                             |                                            |             |                   |            |                |             |          
|                                            |                                                                                                                      | Authorized
shares  10,000,000                              |                                            |             |                   |            |                |             |           |           
|                                            |                                                                                                                      | Issued
shares  7,887,824 at December 31 and March 31, 2007 |                                            |             | 7,887,824         |            |                |             | 7,887,824 |           
|                                            | Additional paid-in capital                                                                                           |                                                             |                                            | 28,887,517  |                   |            |                | 28,887,517  |          
|                                            | Treasury
stock at cost (1,175,716 shares at December 31 and March 31, 2007)                                          |                                                             |                                            | (5,475,964  | )                 |            |                | (5,475,964  | )        
|                                            | Retained
earnings                                                                                                    |                                                             |                                            | 12,462,261  |                   |            |                | 10,810,621  |          
|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            |                                                                                                                      |                                                             | TOTAL STOCKHOLDERS EQUITY                 |             |                   | 43,761,638 |                |             |           | 42,109,998 | 
|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |            
|                                            |                                                                                                                      |                                                             | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |             | $                 | 58,341,815 |                |             | $         | 65,871,706 | 
|                                            |                                                                                                                      |                                                             |                                            |             |                   |            |                |            

2



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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS-UNAUDITED
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    38,062,240
    
    
    $
    47,472,953
    
    
    $
    129,747,321
    
    
    $
    151,726,627Costs and expensesCosts of goods sold
    
    
    36,092,428
    
    
    
    44,209,344
    
    
    
    121,575,529
    
    
    
    140,180,101General, selling and
administrative costs
    
    
    1,024,178
    
    
    
    1,142,955
    
    
    
    3,530,341
    
    
    
    4,023,638Interest
expense
    
    
    
    
    
    
    
    
    
    
    47,740
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,312,839
    )37,116,606
    
    
    
    45,352,299
    
    
    
    125,153,610
    
    
    
    142,890,900Interest and other income
    
    
    (65,875
    )
    
    
    (57,334
    )
    
    
    (163,175
    )
    
    
    (181,117
    )Earnings before income taxes
    
    
    1,011,509
    
    
    
    2,177,988
    
    
    
    4,756,886
    
    
    
    9,016,844Provision for income taxes:Current
    
    
    317,913
    
    
    
    735,375
    
    
    
    1,523,175
    
    
    
    3,038,918Deferred
    
    
    33,389
    
    
    
    63,464
    
    
    
    100,167
    
    
    
    185,773351,302
    
    
    
    798,839
    
    
    
    1,623,342
    
    
    
    3,224,691Net income
    
    $
    660,207
    
    
    $
    1,379,149
    
    
    $
    3,133,544
    
    
    $
    5,792,153Weighted average number of common shares outstanding:Basic
    
    
    6,712,108
    
    
    
    6,696,947
    
    
    
    6,712,108
    
    
    
    6,676,733Diluted
    
    
    6,771,995
    
    
    
    6,765,628
    
    
    
    6,776,592
    
    
    
    6,743,240Net income per share:Basic
    
    $
    0.10
    
    
    $
    0.21
    
    
    $
    0.47
    
    
    $
    0.87Diluted
    
    $
    0.10
    
    
    $
    0.20
    
    
    $
    0.46
    
    
    $
    0.86Cash dividends declared per common share
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.22
    
    
    $
    0.26
 3




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FRIEDMAN INDUSTRIES, INCORPORATED 
 CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS  UNAUDITED Nine Months EndedDecember
31,2007
    
    

2006OPERATING ACTIVITIESNet income
    
    $
    3,133,544
    
    
    $
    5,792,153Adjustments to reconcile net income to cash provided by operating activities:Depreciation
    
    
    847,200
    
    
    
    761,700Provision  for deferred taxes
    
    
    100,167
    
    
    
    185,773Provision for postretirement benefits
    
    
    39,706
    
    
    
    35,586Gain on sale of assets
    
    
    
    
    
    
    (1,312,839
    )Tax benefits associated with equity-based compensation
    
    
    
    
    
    
    (163,212
    )Decrease (increase) in operating assets:Accounts receivable
    
    
    5,563,741
    
    
    
    79,214Inventories
    
    
    5,967,870
    
    
    
    (4,178,588
    )Prepaid federal income taxes
    
    
    (424,739
    )
    
    
    (250,528
    )Other
    
    
    (83,796
    )
    
    
    (173,992
    )Increase (decrease) in operating liabilities:Accounts payable and accrued expenses
    
    
    (9,049,723
    )
    
    
    2,481,466Deferred credit for LIFO replacement
    
    
    
    
    
    
    53,235Contribution to profit-sharing plan
    
    
    (62,500
    )
    
    
    (53,500
    )Employee compensation and related expenses
    
    
    (168,507
    )
    
    
    (209,111
    )Federal income taxes
    
    
    (46,742
    )
    
    
    (143,196
    )NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
    
    
    5,816,221
    
    
    
    2,904,161INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (3,921,132
    )
    
    
    (4,867,220
    )(Increase) decrease in cash value of officers life insurance and other assets
    
    
    (35,400
    )
    
    
    (49,182
    )Proceeds from sale of asset
    
    
    
    
    
    
    1,388,318NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES
    
    
    (3,956,532
    )
    
    
    (3,528,084
    )FINANCING ACTIVITIESCash dividends paid
    
    
    (1,610,907
    )
    
    
    (1,599,990
    )Principal payments on notes payable and revolving credit facility
    
    
    (27,014
    )
    
    
    Long-term debt
    
    
    162,084
    
    
    
    Options exercised
    
    
    
    
    
    
    105,973Tax benefits associated with equity-based compensation
    
    
    
    
    
    
    163,212NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES
    
    
    (1,475,837
    )
    
    
    (1,330,805
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    383,852
    
    
    
    (1,954,728
    )Cash and cash equivalents at beginning of period
    
    
    1,039,030
    
    
    
    1,982,526CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    1,422,882
    
    
    $
    27,798
 4




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FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED NOTES TO QUARTERLY REPORT  UNAUDITED

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 consolidated financial statements and footnotes included in the Companys annual
report on Form 10-K for the year ended March 31, 2007.

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 nine-months ended December 31, 2006 (the 2006 period), LIFO inventories were reduced but
were replaced by March 31, 2007. A deferred credit of $53,235 was recorded at
December 31, 2006 to reflect replacement costs in
excess of LIFO cost. LIFO  inventories were also reduced in the
nine-months ended December 31, 2007 (the 2007 period)  and are expected to be partially
replaced by March 31, 2008. Since this replacement is not expected to
have a significant impact on earnings, no deferred credit was recorded at December 31,
2007.

A summary of inventory values follows:

December 31,
    

March 31,2007
    
    2007Prime
Coil Inventory
    
    $
    9,785,967
    
    
    $
    11,034,422Non-Standard
Coil Inventory
    
    
    863,438
    
    
    
    665,234Tubular Raw Material
    
    
    2,491,614
    
    
    
    5,854,255Tubular Finished Goods
    
    
    14,163,934
    
    
    
    15,718,912$
    27,304,953
    
    
    $
    33,272,823


NOTE C  LONG-TERM DEBT

The Company has a $10 million
revolving credit facility which expires April 1, 2010. There
were no amounts outstanding pursuant to the facility at December 31,
2007 and March 31, 2007. In January 2008, the Company borrowed $5,000,000 pursuant to this facility to support working capital.

In June 2007, the Company incurred an interest free, long-term liability of $162,084
related to the purchase of pipe loading equipment which is payable in 36 equal monthly payments.

NOTE D  STOCK BASED COMPENSATION



2007
    
    
    2006Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning of quarter
    
    
    88,836
    
    
    $
    2.33
    
    
    
    137,212
    
    
    $
    2.35Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    (45,482
    )
    
    $
    2.33Canceled or expired
    
    
    
    
    
    
    
    
    
    
    (2,894
    )
    
    $
    3.13Outstanding at end of quarter
    
    
    88,836
    
    
    $
    2.33
    
    
    
    88,836
    
    
    $
    2.33Exercisable at the end of the quarter
    
    
    88,836
    
    
    $
    2.33
    
    
    
    88,836
    
    
    $
    2.33Weighted average fair value of options
granted during the quarter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


The aggregate intrinsic value of
exercisable and outstanding options at December 31, 2007 was $357,121.

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Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)
    
    (in thousands)Net SalesCoil
    
    $
    19,204
    
    
    $
    21,084
    
    
    $
    59,854
    
    
    $
    75,775Tubular
    
    
    18,858
    
    
    
    26,389
    
    
    
    69,893
    
    
    $
    75,952Total net sales
    
    $
    38,062
    
    
    $
    47,473
    
    
    $
    129,747
    
    
    $
    151,727Operating profitCoil
    
    $
    458
    
    
    $
    1,071
    
    
    $
    1,938
    
    
    $
    3,128Tubular
    
    
    887
    
    
    
    1,495
    
    
    
    4,412
    
    
    
    6,483Total operating profit
    
    
    1,345
    
    
    
    2,566
    
    
    
    6,350
    
    
    
    9,611General corporate expenses
    
    
    399
    
    
    
    445
    
    
    
    1,708
    
    
    
    2,088Interest Expense
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,313
    )Interest & other income
    
    
    (66
    )
    
    
    (57
    )
    
    
    (163
    )
    
    
    (181
    )Total earnings before taxes
    
    $
    1,012
    
    
    $
    2,178
    
    
    $
    4,757
    
    
    $
    9,017
 December 31, 2007
    
    March 31, 2007(in thousands)
    
    (in thousands)Segment assetsCoil
    
    $
    28,068
    
    
    $
    27,601Tubular
    
    
    27,675
    
    
    
    36,49155,743
    
    
    
    64,092Corporate assets
    
    
    2,599
    
    
    
    1,780$
    58,342
    
    
    $
    65,872
       $2,282,000
 6




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of OperationsNine Months Ended December 31, 2007
Compared to Nine Months Ended December 31, 2006            7




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Three Months Ended December 31, 2007 Compared to Three Months
Ended December 31, 2006













8



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FINANCIAL POSITION, LIQUIDITY AND
CAPITAL RESOURCES

The
Company remained in a strong, liquid position at December 31, 2007.
Current ratios were 3.0 and 2.2 at December 31, 2007 and
March 31, 2007, respectively. Working
capital was $27,228,008 at December 31, 2007 and $28,464,786 at
March 31, 2007.

During
the three months ended December 31, 2007, the Company maintained
assets and liabilities at levels it believed were commensurate with
operations. Changes in current assets and liabilities during the 2007
period  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 2007 period, the Company
purchased approximately $3,921,000 in fixed assets. These assets were
related primarily to equipment associated with the new coil operation to be located in
Decatur, Alabama. In connection with this planned new operation, the
Company phased out its coil processing facility in Lone Star, Texas
in the 2006 period and redeployed certain of these assets to
this new coil facility. At the Decatur site, the Company is
constructing a coil processing facility to include a steel temper
mill and a steel cut-to-length line including a leveling line. The
Company expects to commence operations at the Decatur site in March
2008. In addition to the funds used to purchase the real property in
Alabama, the Companys Board of Directors authorized up to an
additional $16 million to be used for capital expenditures and
operational cash requirements at this location. At December 31, 2007, the
Company had invested approximately $9,700,000 at this location.
The Company estimates that it will cost an additional $300,000 to complete this facility.

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, 2010,
the Company may borrow up to $10 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 December 31, 2007 and
March 31, 2007, the Company had no borrowings
outstanding under the revolving facility. Subsequently in January
2008, the Company borrowed $5,000,000 pursuant to the revolving
facility to
support working capital. Depending on cash requirements, the Company
expects to partially payoff these borrowings by March 31, 2008.

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 any significant amount of  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, product quality and proposed expansion plans. 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, including any proposed expansion plans.

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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 period ended December 31, 2007. 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 period December 31, 2007 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 (i) recorded,
processed, summarized and reported, within the time periods specified in the SECs rules and
forms and (ii) accumulated and communicated to the Companys management, including the CEO and CFO,
as appropriate, to allow timely decisions regarding required disclosure.

There were no
changes in the Companys internal control over financial reporting that
occurred during the period ended December 31, 2007 that have
materially affected, or are
reasonably likely to materially affect, the Companys internal control over
financial reporting.

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FRIEDMAN
INDUSTRIES, INCORPORATED
 Three
Months Ended December 31,2007
 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
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|                       |                                   |                                              |  | 
|---------------------- | --------------------------------- | -------------------------------------------- |  | 
|Date February 14, 2008 | FRIEDMAN INDUSTRIES, INCORPORATED |                                             
|                       | By:                               | /s/ BEN HARPER                               | 
|                       |                                   | Ben Harper. Senior Vice President-Finance    | 
|                       |                                   | (Principal Financial and Accounting Officer) | 
|                      

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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