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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, 2004                                  
|     |  |                                                                                                                                                                           
|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 and 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

Indicate by check
mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).

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

At December 31,
2004, the number of shares outstanding of the issuers only
class of stock was 6,975,771 shares of Common Stock.



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TABLE OF CONTENTS



|                                                       |                                                                                               |                                                   |  |  |  |  |  | 
|------------------------------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                        
|                                                       | Item 1. Financial Statements                                                                 
|                                                       |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS            
|                                                       |                                                                                               | CONSOLIDATED STATEMENTS OF EARNINGS  UNAUDITED  
|                                                       |                                                                                               | 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 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 of Jack Friedman Pursuant to Section 302
|Certification of Ben Harper Pursuant to Section 302   
|Certification of Jack Friedman Pursuant to Section 906
|Certification of Ben Harper Pursuant to Section 906   



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##### Table of Contents






PART I  FINANCIAL
INFORMATION




Item 1. Financial Statements




FRIEDMAN INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |             |           |            | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | ----------------- | ---------- | -------------- | ----------- | --------- | ---------- | 
|                                            |                                                                                                                                                      |                                                                                               |                                            |             | DECEMBER 31,
2004 |            | MARCH 31,
2004
|                                            |                                                                                                                                                      |                                                                                               |                                            |             | (Unaudited)       |            |               
|CURRENT ASSETS:                             |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            | Cash and cash equivalents                                                                                                                            |                                                                                               | $                                          | 5,251,015   |                   |            | $              | 1,984,763   |          
|                                            | Accounts receivable, net of allowances for bad debts and cash
discounts of $27,276 and $44,776 at December 31, 2004 and
March 31, 2004, respectively |                                                                                               |                                            | 11,743,491  |                   |            |                | 14,688,702  |          
|                                            | Inventories                                                                                                                                          |                                                                                               |                                            | 25,506,944  |                   |            |                | 21,043,992  |          
|                                            | Other                                                                                                                                                |                                                                                               |                                            | 248,893     |                   |            |                | 112,244     |          
|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            |                                                                                                                                                      |                                                                                               | TOTAL CURRENT ASSETS                       |             |                   | 42,750,343 |                |             |           | 37,829,701 | 
|PROPERTY, PLANT AND EQUIPMENT:              |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            | Land                                                                                                                                                 |                                                                                               |                                            | 437,793     |                   |            |                | 437,793     |          
|                                            | Buildings
and yard improvements                                                                                                                      |                                                                                               |                                            | 4,088,149   |                   |            |                | 4,088,149   |          
|                                            | Machinery and equipment                                                                                                                              |                                                                                               |                                            | 18,601,508  |                   |            |                | 18,013,461  |          
|                                            | Less accumulated depreciation                                                                                                                        |                                                                                               |                                            | (16,496,388 | )                 |            |                | (15,846,288 | )        
|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            |                                                                                                                                                      |                                                                                               | 6,631,062                                  |             |                   |            | 6,693,115      |            
|OTHER ASSETS:                               |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            | Cash value of officers life insurance                                                                                                               |                                                                                               |                                            | 547,590     |                   |            |                | 1,302,613   |          
|                                            | Deferred
income taxes                                                                                                                                |                                                                                               |                                            | 125,694     |                   |            |                | 202,694     |          
|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            |                                                                                                                                                      |                                                                                               | TOTAL ASSETS                               |             | $                 | 50,054,689 |                |             | $         | 46,028,123 | 
|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|LIABILITIES AND STOCKHOLDERS EQUITY       
|CURRENT LIABILITIES:                        |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            | Accounts payable and accrued expenses                                                                                                                |                                                                                               | $                                          | 14,332,626  |                   |            | $              | 10,204,653  |          
|                                            | Current portion of long-term debt                                                                                                                    |                                                                                               |                                            | 11,438      |                   |            |                | 63,037      |          
|                                            | Dividends payable                                                                                                                                    |                                                                                               |                                            | 563,603     |                   |            |                | 151,500     |          
|                                            | Income taxes payable                                                                                                                                 |                                                                                               |                                            | 100,771     |                   |            |                | 1,134,433   |          
|                                            | Contribution to profit sharing plan                                                                                                                  |                                                                                               |                                            | 206,000     |                   |            |                | 280,000     |          
|                                            | Employee compensation and related expenses                                                                                                           |                                                                                               |                                            | 562,986     |                   |            |                | 806,140     |          
|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            |                                                                                                                                                      |                                                                                               | TOTAL CURRENT LIABILITIES                  |             |                   | 15,777,424 |                |             |           | 12,639,763 | 
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                                                                                                                      |                                                                                               | 397,403                                    |             |                   |            | 356,756        |            
|STOCKHOLDERS EQUITY:                       |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            | Common stock, par value $1:                                                                                                                          |                                                                                               |                                            |             |                   |            |                |             |          
|                                            |                                                                                                                                                      | Authorized
shares  10,000,000                                                                |                                            |             |                   |            |                |             |           |           
|                                            |                                                                                                                                                      | Issued
shares  7,600,239 and 7,575,239 at December 31, 2004 and March 31, 2004, respectively |                                            |             | 7,600,239         |            |                |             | 7,575,239 |           
|                                            | Additional paid-in capital                                                                                                                           |                                                                                               |                                            | 27,756,199  |                   |            |                | 27,714,669  |          
|                                            | Treasury
stock, at cost (624,468 shares at December 31, 2004 and 0 shares
at March 31, 2004)                                                         |                                                                                               |                                            | (2,768,785  | )                 |            |                |            |          
|                                            | Retained earnings(deficit)                                                                                                                           |                                                                                               |                                            | 1,292,209   |                   |            |                | (2,258,304  | )        
|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            |                                                                                                                                                      |                                                                                               | TOTAL STOCKHOLDERS EQUITY                 |             |                   | 33,879,862 |                |             |           | 33,031,604 | 
|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            
|                                            |                                                                                                                                                      |                                                                                               | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |             | $                 | 50,054,689 |                |             | $         | 46,028,123 | 
|                                            |                                                                                                                                                      |                                                                                               |                                            |             |                   |            |                |            





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FRIEDMAN INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  UNAUDITED

Three Months Ended
    
    Nine Months EndedDecember 31,
    
    December 31,2004
    
    2003
    
    2004
    
    2003Net sales
    
    $
    43,434,081
    
    
    $
    24,977,857
    
    
    $
    137,370,026
    
    
    $
    75,592,716Costs and expensesCosts of goods sold
    
    
    40,277,843
    
    
    
    24,028,792
    
    
    
    124,987,291
    
    
    
    71,195,237General, selling and
administrative costs
    
    
    1,266,026
    
    
    
    973,717
    
    
    
    4,425,363
    
    
    
    3,253,761Interest
    
    
    
    
    
    
    8,532
    
    
    
    
    
    
    
    31,63841,543,869
    
    
    
    25,011,041
    
    
    
    129,412,654
    
    
    
    74,480,636Interest and other income
    
    
    (57,455
    )
    
    
    (48,511
    )
    
    
    (118,538
    )
    
    
    (52,532
    )Earnings
before income taxes
    
    
    1,947,667
    
    
    
    15,327
    
    
    
    8,075,910
    
    
    
    1,164,612Provision (benefit) for income taxes:Current
    
    
    709,058
    
    
    
    14,210
    
    
    
    2,898,339
    
    
    
    422,968Deferred
    
    
    18,000
    
    
    
    (9,000
    )
    
    
    77,000
    
    
    
    (27,000
    )727,058
    
    
    
    5,210
    
    
    
    2,975,339
    
    
    
    395,968Net
income
    
    $
    1,220,609
    
    
    $
    10,117
    
    
    $
    5,100,571
    
    
    $
    768,644Average number of common
shares outstanding:Basic
    
    
    7,480,467
    
    
    
    7,575,239
    
    
    
    7,548,704
    
    
    
    7,575,239Diluted
    
    
    7,736,885
    
    
    
    7,646,954
    
    
    
    7,759,235
    
    
    
    7,627,424Net
income per share:Basic
    
    $
    0.16
    
    
    $
    0.00
    
    
    $
    0.68
    
    
    $
    0.10Diluted
    
    $
    0.16
    
    
    $
    0.00
    
    
    $
    0.66
    
    
    $
    0.10Cash dividends declared
per common
share
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.21
    
    
    $
    0.08






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FRIEDMAN INDUSTRIES, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED

Nine Months EndedDecember
31,2004
    
    2003OPERATING ACTIVITIESNet
income
    
    $
    5,100,571
    
    
    $
    768,644Adjustments to reconcile net income to cash
provided by operating activities:Depreciation
    
    
    678,900
    
    
    
    697,499Provision for deferred taxes
    
    
    77,000
    
    
    
    (27,000
    )Provision
for postretirement benefits
    
    
    40,647
    
    
    
    Decrease (increase) in operating assets:Accounts receivable
    
    
    2,945,211
    
    
    
    948,149Inventories
    
    
    (4,462,952
    )
    
    
    2,222,545Other
    
    
    (136,649
    )
    
    
    (187,495
    )Increase (decrease) in operating liabilities:Accounts payable and accrued expenses
    
    
    4,127,973
    
    
    
    (1,317,608
    )Contribution to profit-sharing plan
    
    
    (74,000
    )
    
    
    (62,000
    )Employee compensation and related expenses
    
    
    (243,154
    )
    
    
    (139,724
    )Federal income taxes
    
    
    (1,033,662
    )
    
    
    (406,620
    )NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES
    
    
    7,019,885
    
    
    
    2,496,390INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (617,387
    )
    
    
    (348,162
    )(Increase) decrease in cash value of officers life
insurance
    
    
    755,023
    
    
    
    (8,704
    )Proceeds
from sale of asset
    
    
    542
    
    
    
    NET CASH PROVIDED (USED) IN INVESTING
ACTIVITIES
    
    
    138,178
    
    
    
    (356,866
    )FINANCING ACTIVITIESCash dividends paid
    
    
    (1,139,007
    )
    
    
    (605,896
    )Principal payments on notes payable and revolving credit facility
    
    
    (51,599
    )
    
    
    (2,045,949
    )Proceeds
from notes payable and revolving credit facility
    
    
    
    
    
    
    2,000,000Purchase
of treasury stock
    
    
    (2,767,734
    )
    
    
    Stock
awards and options exercised
    
    
    66,529
    
    
    
    6,300NET CASH PROVIDED (USED) IN FINANCING
ACTIVITIES
    
    
    (3,891,811
    )
    
    
    (645,545
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    3,266,252
    
    
    
    1,493,979Cash and cash equivalents at beginning of period
    
    
    1,984,763
    
    
    
    673,127CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    5,251,015
    
    
    $
    2,167,106






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FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED NOTES TO QUARTERLY REPORT  UNAUDITED
NINE MONTHS ENDED DECEMBER 31, 2004

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, 2004.

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 value. 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.

A summary of inventory values follows:

December 31,
    

March 31,2004
    
    2004Prime
Coil Inventory
    
    $
    12,797,190
    
    
    $
    4,976,300Non-Standard
Coil Inventory
    
    
    415,910
    
    
    
    4,181,815Tubular Raw Material
    
    
    3,937,511
    
    
    
    3,515,060Tubular Finished Goods
    
    
    8,356,333
    
    
    
    8,370,817$
    25,506,944
    
    
    $
    21,043,992


NOTE C  LONG-TERM DEBT

The following summary reflects long-term debt including the current portion thereon:

December 31,
2004
    

March 31,
2004Notes payable on equipment purchases
    
    $
    11,438
    
    
    $
    63,037


The Company has a $6 million
revolving credit facility which expires April 1, 2006. There
were no amounts outstanding pursuant to the facility at
December 31, 2004 or March 31, 2004.

NOTE D  STOCK BASED COMPENSATION

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

The following
schedule reflects the impact on net income and earnings per common
share 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 period indicated:

|                                                         |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         |  |  | 
|-------------------------------------------------------- |  | - | --------- | ------------------------------ |  | ----------------------------- | ------ | ---- |  | ---- | --------- |  |  | - | ------- |  |  | 
|                                                         |  |   |           | Three
Months EndedDecember 31, |  | Nine
Months EndedDecember 31,
|                                                         |  |   |           | 2004                           |  | 2003                          |        | 2004 |  | 2003
|Reported
net income                                      |  | $ | 1,220,609 |                                |  | $                             | 10,117 |      |  | $    | 5,100,571 |  |  | $ | 768,644 | 
|Less:
compensation expenses per SFAS No. 123, net of tax |  |   | .00       |                                |  |                               | .00    |      |  |      | .00       |  |  |   | 31,582  | 
|                                                         |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         | 
|Pro
forma net income                                     |  | $ | 1,220,609 |                                |  | $                             | 10,117 |      |  | $    | 5,100,571 |  |  | $ | 737,062 | 
|                                                         |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         | 
|BASIC
EARNINGS PER COMMON SHARE:                         |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         | 
|Reported
net income                                      |  |   | .16       |                                |  |                               | .00    |      |  |      | .68       |  |  |   | .10     | 
|Less:
compensation expense per SFAS No. 123, net of tax  |  |   | .00       |                                |  |                               | .00    |      |  |      | .00       |  |  |   | .00     | 
|                                                         |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         | 
|Pro
forma net income                                     |  |   | .16       |                                |  |                               | .00    |      |  |      | .68       |  |  |   | .10     | 
|                                                         |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         | 
|DILUTED
EARNINGS PER COMMON SHARE:                       |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         | 
|Reported
net income                                      |  |   | .16       |                                |  |                               | .00    |      |  |      | .66       |  |  |   | .10     | 
|Less:
compensation expense per SFAS No. 123, net of tax  |  |   | .00       |                                |  |                               | .00    |      |  |      | .00       |  |  |   | .00     | 
|                                                         |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         | 
|Pro
forma net income                                     |  |   | .16       |                                |  |                               | .00    |      |  |      | .66       |  |  |   | .10     | 
|                                                         |  |   |           |                                |  |                               |        |      |  |      |           |  |  |   |         | 

During the nine
months ended December 31,
2004, options for 23,000 shares of the Companys common stock were exercised which
resulted in proceeds of $54,730 to the Company. In the 2004 period, no options were granted.

The fair value of options was estimated using a
Black-Scholes option pricing model with the following weighted
average assumptions: risk-free interest rates of 3.0%, a dividend
yield of 3.4%, volatility factor of the expected market price of the
Companys common stock of 0.42, and a weighted average expected
life of the option of four years.





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NOTE E  SEGMENT INFORMATION  UNAUDITED

Three Months Ended
    
    Nine Months EndedDecember 31,
    
    December 31,2004
    
    2003
    
    2004
    
    2003Net salesCoil
    
    $
    21,617
    
    
    $
    12,758
    
    
    $
    76,310
    
    
    $
    39,310Tubular
    
    
    21,817
    
    
    
    12,220
    
    
    
    61,060
    
    
    
    36,283Total net sales
    
    $
    43,434
    
    
    $
    24,978
    
    
    $
    137,370
    
    
    $
    75,593Operating
profit (loss)Coil
    
    $
    576
    
    
    $
    (106
    )
    
    $
    3,800
    
    
    $
    904Tubular
    
    
    1,891
    
    
    
    515
    
    
    
    6,765
    
    
    
    1,944Total operating profit
    
    
    2,467
    
    
    
    409
    
    
    
    10,565
    
    
    
    2,848General
corporate expenses
    
    
    576
    
    
    
    434
    
    
    
    2,607
    
    
    
    1,704Interest expense
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    32Interest & other income
    
    
    (57
    )
    
    
    (49
    )
    
    
    (118
    )
    
    
    (53
    )Total earnings before taxes
    
    $
    1,948
    
    
    $
    15
    
    
    $
    8,076
    
    
    $
    1,165


December
31,
    
    March 31,2004
    
    2004Segment assetsCoil
    
    $
    23,861
    
    
    $
    21,770Tubular
    
    
    20,134
    
    
    
    20,62443,995
    
    
    
    42,394Corporate assets
    
    
    6,060
    
    
    
    3,634Total assets
    
    $
    50,055
    
    
    $
    46,028


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.

NOTE F-NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement Financial
Accounting Standard No. 123 (revised 2004), Share-Based Payment(SFAS 123(R)). Statement 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
effective date of SFAS 123(R)
is as of the beginning of the first interim or annual reporting period that begins after June 15,
2005. The Company is currently assessing the effect of SFAS 123(R) on its financial statements.

5



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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Nine Months Ended December
31, 2004 Compared to Nine Months Ended December 31, 2003 During the nine months ended December 31, 2004,

sales, costs of goods sold and gross profit
increased $61,777,310, $53,792,054 and $7,985,256 from the respective amounts recorded

during the
nine months ended December 31, 2003. The increases in sales and costs of goods were

related
primarily to increases in the average per ton selling price and average per ton cost of goods sold
of approximately 86% and 79%, respectively. Total tons shipped decreased from approximately
224,000 tons in the 2003 period to 219,000 tons in the 2004 period. Gross profit benefited from
improved margins. In the 2004 period, gross profit and costs of
goods as percentage of sales were approximately 9.0% and 91.0%, respectively, compared to

5.8% and
94.2%, respectively, in the 2003 period. During the 2004 period, the Company experienced a
significant improvement in market conditions for its products as compared to market conditions
during the 2003 period. Coil product segment sales increased approximately

$37,000,000 during the 2004 period. This
increase was related primarily to an increase in the average per ton selling price. Tons shipped
actually declined from approximately 121,000 tons in the 2003 period to 105,000 tons in the 2004
period. This decrease was related primarily to a decrease in tons sold by the Companys

XSCP
Division (XSCP). During the 2004 period, XSCP, which markets non-standard

coils received from
Nucor Steel Company (NSC), agreed with NSC to suspend the purchase of

non-standard coils. XSCP
accounted for approximately 3% of total sales during the 2004 period.
The Company expects to continue XSCP operations. Currently,
the Company is receiving limited shipments of non-standard coils from NSC. In the near term,
management expects these limited shipments to continue. When not used
by XSCP, XSCP operating assets can be used at

the
Companys Hickman, Arkansas coil facility (Hickman). Total coil operating

profit as a percentage
of coil segment sales increased from 2.3% in the 2003 period to 5.0% in the 2004 period.

Improved
market conditions for coil segment products produced increases in sales and margins during the

2004
period. In the 2004 period, the Companys Lone Star coil

facility (LSCF) continued to experience a lack
of supply of coil products from its primary coil supplier, Lone Star Steel Company

(LSS). LSCF,
which accounted for approximately 8% of total sales in the 2004 period, has from time to time
purchased coils from other suppliers. However, freight costs associated with these purchases
diminishes the Companys competitiveness in a very competitive industry. LSCF

produced a profit
from operations in the 2004 period. A further reduction in supply could have an adverse effect on
coil segment operations. Management confers regularly with LSS and continues to monitor this
situation closely. The Company is dependent on LSS and NSC for its

supply of inventory. NSC continues to supply
Hickman with steel coils in amounts that are adequate for the Companys purposes. While

current
levels are adequate to sustain the Companys operations, 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

$24,777,000 during the 2004 period. This
increase resulted from both an increase in tons shipped and from an approximate 51% increase in

the
average per ton selling price. Tons shipped increased from approximately 103,000 tons in the

2003
period to 114,000 tons in the 2004 period. Tubular product segment operating profits as a
percentage of segment sales were approximately 11.1 % and 5.4 % in the 2004 and 2003 periods,
respectively. This segment benefited from significantly improved market conditions for tubular
products during the 2004 period as compared to market conditions in the 2003 period. During the 2004 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 2004 period, general, selling and administrative

costs increased $1,171,602 from the
amount recorded during the 2003 period. This increase was related primarily to bonuses

associated
with increased earnings and an increase in legal and professional
expenses. Interest and other income increased $66,006 from the

amount recorded during the 2003 period. This
increase was associated primarily with interest earned on improved invested cash positions in the
2004 period. Income taxes increased
$2,579,371 from the comparable

amount recorded during the 2003 period.
This increase was primarily related to the increase in earnings before taxes. The effective tax
rates were 37% and 34% in the 2004 period and 2003 period, respectively. In the 2004 period, the
Company recorded additional taxes of $153,780 and $75,750 reflecting the net effect of state

income
taxes and taxes related to the surrender of life insurance policies, respectively. Three Months Ended December
31, 2004 Compared to Three Months Ended December 31, 2003 During the quarter ended December 31, 2004,

sales, costs of goods sold and gross profit increased
$18,456,224, $16,249,051 and $2,207,173, from the respective amounts recorded during the

quarter
ended December 31, 2003. The increases in sales and costs of goods were related

primarily to
increases in the average per ton selling price and average per ton cost of goods sold of
approximately 100% and 92%, respectively. Total tons shipped declined from approximately

72,000
tons in the 2003 quarter to approximately 63,000 tons in the 2004 quarter. Gross profit benefited
from improved margins. In the 2004 quarter, gross profit and
costs of goods as percentage of sales were approximately 7.3% and 92.7%, respectively,

compared to
3.8% and 96.2%, respectively, in the 2003 quarter. During the 2004 quarter, the Company
experienced a significant improvement in market conditions for its products as compared to

market
conditions during the 2003 quarter. Coil product segment sales increased approximately

$8,859,000 during the 2004 quarter. This
increase was related primarily to an increase in the average per ton selling price of approximately
136%. Tons shipped declined from approximately 38,000 tons in the 2003 quarter to 27,000 tons

in
the 2004 quarter. This decrease was related primarily to a decrease in tons sold by XSCP. In the
2003 quarter, coil operations reflected an operating loss of approximately 1% of coil sales
compared to an operating profit of approximately 3% of coil sales in the 2004 quarter.
Significantly improved market conditions for coil segment products produced increased sales and
margins during the 2004 quarter. Tubular product segment sales increased approximately

$9,597,000 during the 2004 quarter. This
increase primarily resulted from an approximate 72% increase in the average per ton selling price.
Tons shipped remained relatively constant during both quarters at approximately 35,000

tons.
Tubular product segment operating profits as a percentage of segment sales were approximately

8.7%
and 4.2% in the 2004 and 2003 quarters, respectively. This segment benefited from improved

market
conditions for tubular products during the 2004 quarter as compared to market conditions in the 2003
quarter. During the 2004 quarter, general, selling and administrative

costs increased $292,309 from the
amount recorded during the 2003 quarter. This increase was related primarily to bonuses

associated
with increased earnings and legal and professional expenses. Income taxes increased
$721,848 from the comparable

amount recorded during the 2003 quarter. This
increase was primarily related to the increase in earnings before taxes. The effective tax rates
were 37% and 34% in the 2004 quarter and 2003 quarter, respectively. In the 2004 quarter, the
Company recorded additional taxes of $39,600 and $25,250 reflecting the net effect of state

income
taxes and taxes related to the surrender of life insurance policies, respectively.






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##### Table of Contents



FINANCIAL POSITION, LIQUIDITY AND
CAPITAL RESOURCES

The
Company remained in a strong, liquid position at December 31, 2004.
Current ratios were 2.7 and 3.0 at December 31, 2004 and
March 31, 2004, respectively. Working
capital was $26,972,919 at December 31, 2004 and $25,189,938 at
March 31, 2004.

At December 31, 2004, the Company maintained
assets and liabilities at levels it believed were commensurate with
operations. Prime coil inventories increased due to increases in costs and tons.
The increase in tons was primarily related to early shipments by NSC. The Company expects to
continue to monitor, evaluate and manage balance sheet components depending on changes
in the market conditions and the Companys operations.

On
December 13, 2004, the Company purchased 624,207 shares of the common
stock of the Company from Mr. Harold Friedman for approximately $4.434 per share or
a total of $2,767,734. Effective as of December 31, 2004, Mr.
Friedman resigned as Vice Chairman of the Board and retired as a
full-time employee of the Company.

During
the nine months ended December 31, 2004, the Company purchased approximately $617,387 in fixed
assets. This purchase was related primarily to a small diameter pipe mill which began
operation in April 2004.

In
June 2004 and July 2004, the Company surrendered for cash, certain
split-dollar life insurance policies on the lives of Jack and Harold
Friedman, respectively. The Company received the total cash surrender value of
$812,432.

During
the nine months ended
December 31, 2004, cash and cash equivalents increased
$3,266,252 primarily as the result of earnings during the 2004 period.

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, 2006, 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 December 31, 2004 and
March 31, 2004, 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 and a general allowance based on the aging
of the receivables compared to past experience and current trends. On an ongoing basis, the Company evaluates estimates and
judgements. 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 December 31, 2004. Based on this evaluation, for the reasons described below, the CEO
and CFO concluded that its disclosure controls and procedures were not effective as of as of the
end of the fiscal quarter ended December 31, 2004 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.

During the financial reporting process associated with the Companys financial results for the
quarter ended December 31, 2004, the Company determined that certain errors had occurred with the
regard to the accuracy of the Companys accrual for accounts payable in the Companys financial
statements for the quarter ended September 30, 2004. As a
result, on February 14, 2005, the
Company restated its financial statements for the quarter ended September 30, 2004.

In conjunction with the Companys decision to restate its financial statements for the period
ended September 30, 2004, the Company identified a material weakness in its internal control over
financial reporting (as defined in Public Company Accounting Oversight Board, Auditing Standard
No.2, a material weakness is a significant deficiency, or a combination of significant
deficiencies, that results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected) and, as a result thereof,
reevaluated its disclosure controls and procedures over the accrual of accounts payable and
concluded that these controls were not effective. The Company has taken steps to identify, rectify
and prevent the recurrence of such circumstances. As part of this undertaking, the Company intends
to incorporate additional levels of review of the processes and supporting documentation related to
its accruals, including but not limited to those for accounts payable. The Company believes these
enhancements to its systems of internal control over financial reporting and disclosure controls
and procedures will be adequate to provide reasonable assurance that the control objectives will be
met.

8



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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED

Three Months Ended December 31, 2004





Part II  OTHER INFORMATION




Item 1. Legal Proceedings

Not applicable




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



| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a). Not applicable                                                                                                                                                                                              
|
| | b). Not applicable                                                                                                                                                                                              
|
| | c). The following table presents information
with respect to purchases of common stock of the Company made during
   the quarter ended December 31, 2004 as defined by Rule 10b-18(a)(3) under the Exchange Act:

(d)MaximumNumber (orApproximate(c)
    
    
    
    
    
    
    
    
    DollarTotal Number of
    
    
    
    
    
    
    
    
    Value) ofShares
    
    
    
    
    
    
    
    
    Shares thatPurchased as
    
    
    
    
    
    
    
    
    May be(a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Part of Publicly
    
    
    
    
    
    
    
    
    PurchasedTotal Number
    
    
    
    
    
    
    
    
    (b)
    
    
    
    
    
    
    
    
    Announced
    
    
    
    
    
    
    
    
    Under theof Shares
    
    
    
    
    
    
    
    
    Average Price
    
    
    
    
    
    
    
    
    Plans or
    
    
    
    
    
    
    
    
    Plans orPeriod
    
    
    
    
    
    
    
    Purchased
    
    
    
    
    
    
    
    
    Paid Per Share
    
    
    
    
    
    
    
    
    Programs
    
    
    
    
    
    
    
    
    ProgramsOctober 2004
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    N/ANovember 2004
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    N/ADecember 2004(1)
    
    
    
    
    
    
    
    
    624,207
    
    
    
    
    
    
    
    
    $
    4.434
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    N/A


|
|
|
|






| |                   
| | ------------------
| | 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

| | 
| | 

| | 
| | 



| |        |                                                                                                                                                                                                                                                        
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1  | Stock Purchase Agreement dated December 13, 2004, by and between Harold Friedman
and Friedman Industries, Incorporated (filed as an exhibit to and
incorporated by reference from the Companys
Current Report on Form 8-K filed on December 14, 2004).
|
| | 10.2  | Agreement dated  December 13, 2004, by and between Friedman Industries, Incorporated and
Harold Friedman (filed as an exhibit  to and incorporated by
reference from the Companies Current Report
on Form 8-K filed on December 14, 2004).             
|
| | 31.1  | Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Jack Friedman                                                                                                                                                       
|
| | 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 Jack Friedman                                                                                                
|
| | 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 February 14, 2005 |                                              |  |                
|                       | 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 10.1 |  | Stock Purchase Agreement dated December 13,
2004, by and between Harold Friedman
and Friedman Industries, Incorporated (filed as an exhibit to and
incorporated by reference from the Companys
Current Report on Form 8-K filed on December 14, 2004).
|            
|Exhibit 10.2 |  |  Agreement dated  December 13, 2004, by and between Friedman Industries, Incorporated and
Harold Friedman (filed as an exhibit  to and incorporated by
reference from the Companies Current Report
on Form 8-K filed on December 14, 2004).            
|            
|Exhibit 31.1 |  |  Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Jack Friedman                                                                                                                                                      
|            
|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 Jack Friedman                                                                                           
|            
|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