##### 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, 2002

or



|  |                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|o | Transition report pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934 from the Transition period
    from
                  to

Commission file number 1-7521

FRIEDMAN INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)


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



---

Former name, former address and former fiscal year, if changed
since last report


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
ü    No

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 126b-2 of the
Exchange Act).

Yes
    No
ü

At December 31, 2002, the number of shares outstanding of
the issuers only class of stock was 7,573,239 shares
of Common Stock.



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---

TABLE OF CONTENTS



|                                                |                                                                                                |  |  |  |  |  |  | 
|----------------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                 
|                                                | ITEM 1. FINANCIAL STATEMENTS                                                                  
|                                                | 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. Changes in securities                                                                 
|                                                | Item 3. Defaults upon senior securities                                                       
|                                                | Item 4. Submission of matters to a vote of security holders                                   
|                                                | Item 5. Other Information                                                                     
|                                                | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                                     
|EXHIBIT INDEX                                  
|Cert.from Jack Friedman Pursuant to Section 906
|Cert.from Ben Harper Pursuant to Section 906   



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##### Table of Contents






PART I  FINANCIAL INFORMATION




|        |                     
|------- | --------------------
|ITEM 1. | FINANCIAL STATEMENTS

FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED BALANCE SHEETS  UNAUDITED


ASSETS

|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |             |           |            | 
|-------------------------------------------- | ------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | -------------- | --------- | ---------- | ---------- | ----------- | --------- | ---------- | 
|                                             |                                             | December 31, 2002                                                                                                                                   |                            | March 31, 2002
|                                             |                                             |                                                                                                                                                     |                            |               
|
|CURRENT ASSETS                               |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                            
|                                            
|                                            
|                                            
|                                             | Cash and cash equivalents                   |                                                                                                                                                     | $                          | 161,471        |           |            | $          | 4,683,894   |          
|                                            
|                                            
|                                            
|                                            
|                                             | Accounts receivable                         |                                                                                                                                                     |                            | 8,033,092      |           |            |            | 7,485,217   |          
|                                            
|                                            
|                                            
|                                            
|                                             | Inventories  Note B                        |                                                                                                                                                     |                            | 24,826,861     |           |            |            | 23,502,201  |          
|                                            
|                                            
|                                            
|                                            
|                                             | Prepaid expenses and other current assets   |                                                                                                                                                     |                            | 395,027        |           |            |            | 135,676     |          
|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                             |                                             |                                                                                                                                                     | Total Current Assets       |                |           | 33,416,451 |            |             |           | 35,806,988 | 
|PROPERTY, PLANT AND EQUIPMENT                |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                            
|                                            
|                                            
|                                            
|                                             | Land                                        |                                                                                                                                                     |                            | 437,793        |           |            |            | 221,543     |          
|                                            
|                                            
|                                            
|                                            
|                                             | Buildings and improvements                  |                                                                                                                                                     |                            | 3,992,034      |           |            |            | 3,981,154   |          
|                                            
|                                            
|                                            
|                                            
|                                             | Machinery and equipment                     |                                                                                                                                                     |                            | 17,179,593     |           |            |            | 16,910,763  |          
|                                            
|                                            
|                                            
|                                            
|                                             | Less allowance for depreciation             |                                                                                                                                                     |                            | (14,686,589    | )         |            |            | (13,963,024 | )        
|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                             |                                             |                                                                                                                                                     | 6,922,831                  |                |           |            | 7,150,436  |            
|OTHER ASSETS                                 |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                            
|                                            
|                                            
|                                            
|                                             | Cash value of officers life insurance      |                                                                                                                                                     |                            | 1,161,258      |           |            |            | 1,029,031   |          
|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                             |                                             | $                                                                                                                                                   | 41,500,540                 |                |           | $          | 43,986,455 |            
|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|LIABILITIES AND STOCKHOLDERS EQUITY        
|CURRENT LIABILITIES                          |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                            
|                                            
|                                            
|                                            
|                                             | Trade accounts payable and accrued expenses |                                                                                                                                                     | $                          | 8,886,302      |           |            | $          | 9,353,386   |          
|                                            
|                                            
|                                            
|                                            
|                                             | Current portion of long-term debt           |                                                                                                                                                     |                            | 268,496        |           |            |            | 833,750     |          
|                                            
|                                            
|                                            
|                                            
|                                             | Dividends payable                           |                                                                                                                                                     |                            | 227,191        |           |            |            | 75,710      |          
|                                            
|                                            
|                                            
|                                            
|                                             | Contribution to profit-sharing plan         |                                                                                                                                                     |                            | 198,000        |           |            |            | 260,000     |          
|                                            
|                                            
|                                            
|                                            
|                                             | Income taxes payable                        |                                                                                                                                                     |                            | 94,007         |           |            |            | 87,472      |          
|                                            
|                                            
|                                            
|                                            
|                                             | Employee compensation and related expenses  |                                                                                                                                                     |                            | 158,798        |           |            |            | 186,788     |          
|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                             |                                             |                                                                                                                                                     | Total Current Liabilities  |                |           | 9,832,794  |            |             |           | 10,797,106 | 
|                                            
|                                            
|                                            
|                                            
|LONG-TERM DEBT, less current portion         |                                             |                                                                                                                                                     | 74,453                     |                |           |            | 2,053,438  |            
|                                            
|                                            
|                                            
|                                            
|PROVISION FOR NONPENSION RETIREMENT BENEFITS |                                             |                                                                                                                                                     | 163,000                    |                |           |            | 163,000    |            
|                                            
|                                            
|                                            
|                                            
|DEFERRED INCOME TAXES                        |                                             |                                                                                                                                                     | 517,560                    |                |           |            | 481,560    |            
|STOCKHOLDERS EQUITY                         |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                            
|                                            
|                                            
|                                            
|Common stock:                                |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                            
|                                            
|                                            
|                                            
|                                             | Par value $1 per share:                     |                                                                                                                                                     |                            |                |           |            |            |             |          
|                                            
|                                            
|                                            
|                                            
|                                             |                                             | Authorized 10,000,000 shares; Issued and
    outstanding shares  7,573,239 and 7,571,239 at
December 31,
    2002 and March 31, 2002, respectively |                            |                | 7,573,239 |            |            |             | 7,571,239 |           
|                                            
|                                            
|                                            
|                                            
|
|                                             | Additional paid-in capital                  |                                                                                                                                                     |                            | 27,710,369     |           |            |            | 27,707,309  |          
|                                            
|                                            
|                                            
|                                            
|                                             | Retained deficit                            |                                                                                                                                                     |                            | (4,370,875     | )         |            |            | (4,787,197  | )        
|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                             |                                             |                                                                                                                                                     | Total Stockholders Equity |                |           | 30,912,733 |            |             |           | 30,491,351 | 
|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |            
|                                             |                                             | $                                                                                                                                                   | 41,500,540                 |                |           | $          | 43,986,455 |            
|                                             |                                             |                                                                                                                                                     |                            |                |           |            |            |            

1



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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF EARNINGS 
UNAUDITED

|                                              |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |            | 
|--------------------------------------------- | ----------------------------------------- | ------------------ | ---------- | ----------------- |  | ---- | ---------- | ---------- | - | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                              |                                           |                    |            |                  
|                                              |                                           | Three Months Ended |            | Nine Months Ended
|                                              |                                           | December 31,       |            | December 31,     
|                                              |                                           |                    |            |                  
|                                              |                                           | 2002               |            | 2001              |  | 2002 |            | 2001      
|                                              |                                           |                    |            |                   |  |      |            |           
|Net sales                                     |                                           | $                  | 25,418,779 |                   |  | $    | 20,483,410 |            |   | $ | 78,756,126 |            |  | $ | 73,344,634 |           
|Costs and expenses                            |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|                                             
|                                             
|                                             
|                                             
|                                              | Costs of goods sold                       |                    |            | 24,173,277        |  |      |            | 19,701,739 |   |   |            | 74,235,979 |  |   |            | 68,992,763 | 
|                                             
|                                             
|                                             
|                                             
|                                              | General, selling and administrative costs |                    |            | 946,498           |  |      |            | 1,025,887  |   |   |            | 3,088,254  |  |   |            | 3,153,330  | 
|                                             
|                                             
|                                             
|                                             
|                                              | Interest                                  |                    |            | 4,470             |  |      |            | 54,309     |   |   |            | 47,018     |  |   |            | 243,258    | 
|                                              |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|                                              |                                           |                    | 25,124,245 |                   |  |      | 20,781,935 |            |   |   | 77,371,251 |            |  |   | 72,389,351 |           
|                                             
|                                             
|                                             
|                                             
|Interest and other income                     |                                           |                    | (8,795     | )                 |  |      | (4,302     | )          |   |   | (49,054    | )          |  |   | (19,304    | )         
|                                              |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|Earnings (loss) before federal income taxes   |                                           |                    | 303,329    |                   |  |      | (294,223   | )          |   |   | 1,433,929  |            |  |   | 974,587    |           
|                                             
|                                             
|                                             
|                                             
|Provision (benefit) for federal income taxes: |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|                                             
|                                             
|                                             
|                                             
|                                              | Current                                   |                    |            | 83,132            |  |      |            | (108,534   | ) |   |            | 451,535    |  |   |            | 305,860    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Deferred                                  |                    |            | 20,000            |  |      |            | 8,500      |   |   |            | 36,000     |  |   |            | 25,500     | 
|                                              |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|                                              |                                           |                    | 103,132    |                   |  |      | (100,034   | )          |   |   | 487,535    |            |  |   | 331,360    |           
|                                              |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|Net earnings (loss)                           |                                           | $                  | 200,197    |                   |  | $    | (194,189   | )          |   | $ | 946,394    |            |  | $ | 643,227    |           
|                                              |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|
|Average number of common shares outstanding:  |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|                                             
|                                             
|                                             
|                                             
|                                              | Basic                                     |                    |            | 7,573,239         |  |      |            | 7,571,239  |   |   |            | 7,573,239  |  |   |            | 7,571,239  | 
|                                             
|                                             
|                                             
|                                             
|                                              | Diluted                                   |                    |            | 7,573,239         |  |      |            | 7,571,239  |   |   |            | 7,573,239  |  |   |            | 7,571,239  | 
|                                             
|                                             
|                                             
|                                             
|Net earnings (loss) per share:                |                                           |                    |            |                   |  |      |            |            |   |   |            |            |  |   |            |           
|                                             
|                                             
|                                             
|                                             
|                                              | Basic                                     |                    | $          | 0.03              |  |      | $          | (0.03      | ) |   | $          | 0.12       |  |   | $          | 0.08       | 
|                                             
|                                             
|                                             
|                                             
|                                              | Diluted                                   |                    | $          | 0.03              |  |      | $          | (0.03      | ) |   | $          | 0.12       |  |   | $          | 0.08       | 
|                                             
|                                             
|                                             
|                                             
|                                             
|Cash dividends declared per common share      |                                           | $                  | 0.03       |                   |  | $    | 0.03       |            |   | $ | 0.07       |            |  | $ | 0.10       |           

2



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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS 
UNAUDITED

|                                                 |                                                                                     |                                            |                                                  |            |            |            |         |            |            |            |  
|------------------------------------------------ | ----------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------------ | ---------- | ---------- | ---------- | ------- | ---------- | ---------- | ---------- | -
|                                                 |                                                                                     |                                           
|                                                 |                                                                                     | Nine Months Ended                         
|                                                 |                                                                                     | December 31,                              
|                                                 |                                                                                     |                                           
|                                                 |                                                                                     | 2002                                       |                                                  | 2001      
|                                                 |                                                                                     |                                            |                                                  |           
|OPERATING ACTIVITIES                             |                                                                                     |                                            |                                                  |            |            |            |         |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Net earnings                                                                        |                                            | $                                                | 946,394    |            |            | $       | 643,227    |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net earnings to cash
    provided by operating activities: |                                            |                                                  |            |            |            |         |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Depreciation                               |                                                  |            | 723,565    |            |         |            | 672,601    |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Provision for deferred taxes               |                                                  |            | 36,000     |            |         |            | 25,500     |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Decrease (increase) in operating assets:                                            |                                            |                                                  |            |            |            |         |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Accounts receivable                        |                                                  |            | (547,875   | )          |         |            | 4,600,519  |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Inventories                                |                                                  |            | (1,324,660 | )          |         |            | 2,455,570  |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Other                                      |                                                  |            | (259,351   | )          |         |            | (36,998    | )         
|                                                
|                                                
|                                                
|                                                
|                                                 | Increase (decrease) in operating liabilities:                                       |                                            |                                                  |            |            |            |         |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Accounts payable and accrued expenses      |                                                  |            | (467,084   | )          |         |            | (3,925,198 | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Current portion of long term debt          |                                                  |            |           |            |         |            | 33,750     |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Contribution to profit-sharing plan        |                                                  |            | (62,000    | )          |         |            | (94,340    | )         
|                                                 |                                                                                     | Employee compensation and related expenses |                                                  |            | (27,993    | )          |         |            | (222,922   | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Deferred credit for LIFO replacement       |                                                  |            |           |            |         |            | 625,106    |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                     | Federal income taxes                       |                                                  |            | 6,535      |            |         |            | (127,209   | )         
|                                                 |                                                                                     |                                            |                                                  |            |            |            |         |           
|                                                 |                                                                                     |                                            | NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES |            |            | (976,469   | )       |            |            | 4,649,606  |  
|INVESTING ACTIVITIES                             |                                                                                     |                                            |                                                  |            |            |            |         |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of property, plant and equipment                                           |                                            |                                                  | (495,961   | )          |            |         | (1,004,364 | )         
|                                                
|                                                
|                                                
|                                                
|                                                 | (Increase) decrease in cash value of
    officers life insurance                   |                                            |                                                  | (132,227   | )          |            |         | (22,968    | )         
|                                                 |                                                                                     |                                            |                                                  |            |            |            |         |           
|                                                 |                                                                                     |                                            | NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES |            |            | (628,188   | )       |            |            | (1,027,332 | )
|FINANCING ACTIVITIES                             |                                                                                     |                                            |                                                  |            |            |            |         |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Cash dividends paid                                                                 |                                            |                                                  | (378,592   | )          |            |         | (832,622   | )         
|                                                
|                                                
|                                                
|                                                
|                                                 | Principal payments on notes payable                                                 |                                            |                                                  | (2,648,473 | )          |            |         | (2,605,625 | )         
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from notes payable                                                         |                                            |                                                  | 104,239    |            |            |         | 67,500     |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Exercise of stock options                                                           |                                            |                                                  | 5,060      |            |            |         | 5,878      |           
|                                                 |                                                                                     |                                            |                                                  |            |            |            |         |           
|                                                 |                                                                                     |                                            | NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES |            |            | (2,917,766 | )       |            |            | (3,364,869 | )
|                                                 |                                                                                     |                                            |                                                  |            |            |            |         |           
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                     |                                            | (4,522,423                                       | )          |            |            | 257,405 |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Cash and cash equivalents at beginning of period                                    |                                            |                                                  | 4,683,894  |            |            |         | 669,076    |           
|                                                 |                                                                                     |                                            |                                                  |            |            |            |         |           
|CASH AND CASH EQUIVALENTS AT END OF PERIOD       |                                                                                     | $                                          | 161,471                                          |            |            | $          | 926,481 |           
|                                                 |                                                                                     |                                            |                                                  |            |            |            |         |           

3



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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED

NOTES TO QUARTERLY REPORT  UNAUDITED

Nine Months Ended December 31, 2002


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 accounting principles
generally accepted in the United States 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, 2002.

NOTE B  INVENTORIES

Inventories consist of prime coil, non-standard coil and tubular
materials. Prime coil inventory (prime 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. Prime
inventory is valued using the last-in, first-out (LIFO) method
and non-standard coil and tubular inventories are valued using
the first-in, first-out method.

Beginning April 1, 2002, the Company combined two prime
inventory LIFO pools into one LIFO pool to consolidate
inventories of similar characteristics. There was no cumulative
effect and no material impact on income during each of the last
five fiscal years resulting from the combination. This
combination did not significantly affect earnings for the
quarter or the nine months ended December 31, 2002.

During the nine months ended December 31, 2001, a liquidation
of the base period LIFO inventories was experienced and a portion of this
liquidation was replaced by fiscal year end. Accordingly, costs of
goods sold was charged and a deferred credit was established for the
difference ($625,106) between the estimated replacement cost and the
liquidated LIFO base. LIFO inventories that were not
replaced resulted in a liquidation of LIFO inventories carried at
costs prevailing in preceding years as compared to current costs, the
effect of which increased costs of goods sold and decreased earnings
before taxes by approximately $230,000.

NOTE C  SEGMENT
INFORMATION  UNAUDITED

|                 |                         |                             |   |                   |        |      |   |        |        |   |   |        |        |  |   |        |        | 
|---------------- | ----------------------- | --------------------------- | - | ----------------- | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ |  | - | ------ | ------ | 
|                 |                         |                             |   |                  
|                 |                         | Three Months Ended          |   | Nine Months Ended
|                 |                         | December 31,                |   | December 31,     
|                 |                         |                             |   |                  
|                 |                         | 2002                        |   | 2001              |        | 2002 |   | 2001  
|                 |                         |                             |   |                   |        |      |   |       
|                 |                         |                             |   |                  
|                 |                         | in thousands                |   | in thousands     
|Net sales        |                         |                             |   |                   |        |      |   |        |        |   |   |        |        |  |   |       
|                
|                
|                
|                
|                 | Coil                    |                             | $ | 15,068            |        |      | $ | 10,854 |        |   | $ | 45,473 |        |  | $ | 37,116 |       
|                
|                
|                
|                
|                 | Tubular                 |                             |   | 10,351            |        |      |   | 9,629  |        |   |   | 33,283 |        |  |   | 36,229 |       
|                 |                         |                             |   |                   |        |      |   |        |        |   |   |        |        |  |   |       
|                 |                         | Total net sales             |   | $                 | 25,419 |      |   | $      | 20,483 |   |   | $      | 78,756 |  |   | $      | 73,345 | 
|                 |                         |                             |   |                   |        |      |   |        |        |   |   |        |        |  |   |       
|Operating profit |                         |                             |   |                   |        |      |   |        |        |   |   |        |        |  |   |       
|                
|                
|                
|                
|                 | Coil                    |                             | $ | 85                |        |      | $ | 130    |        |   | $ | 1,025  |        |  | $ | 326    |       
|                
|                
|                
|                
|                 | Tubular                 |                             |   | 615               |        |      |   | 32     |        |   |   | 1,922  |        |  |   | 2,319  |       
|                 |                         |                             |   |                   |        |      |   |        |        |   |   |        |        |  |   |       
|                 |                         | Total operating profit      |   |                   | 700    |      |   |        | 162    |   |   |        | 2,947  |  |   |        | 2,645  | 
|                
|                
|                
|                
|                 | Corporate expenses      |                             |   | 402               |        |      |   | 406    |        |   |   | 1,515  |        |  |   | 1,446  |       
|                
|                
|                
|                
|                 | Interest expense        |                             |   | 4                 |        |      |   | 54     |        |   |   | 47     |        |  |   | 243    |       
|                
|                
|                
|                
|                 | Interest & other income |                             |   | (9                | )      |      |   | (4     | )      |   |   | (49    | )      |  |   | (19    | )     
|                 |                         |                             |   |                   |        |      |   |        |        |   |   |        |        |  |   |       
|                 |                         | Total earnings before taxes |   | $                 | 303    |      |   | $      | (294   | ) |   | $      | 1,434  |  |   | $      | 975    | 
|                 |                         |                             |   |                   |        |      |   |        |        |   |   |        |        |  |   |       



|                 |         |              |       |        |        |  |       |        |        | 
|---------------- | ------- | ------------ | ----- | ------ | ------ |  | ----- | ------ | ------ | 
|                 |         | December 31,
|                 |         |             
|                 |         | 2002         |       | 2001  
|                 |         |              |       |       
|                 |         |              |       |       
|                 |         | in thousands
|Segment assets   |         |              |       |        |        |  |       |       
|                
|                
|                
|                
|                 | Coil    |              | $     | 20,343 |        |  | $     | 18,847 |       
|                
|                
|                
|                
|                 | Tubular |              |       | 19,585 |        |  |       | 20,582 |       
|                 |         |              |       |        |        |  |       |       
|                 |         |              |       | $      | 39,928 |  |       | $      | 39,429 | 
|Corporate assets |         |              | 1,573 |        |        |  | 2,175 |       
|                
|                
|                
|                
|                 |         |              |       |        |        |  |       |       
|                 |         | Total assets |       | $      | 41,501 |  |       | $      | 41,604 | 
|                 |         |              |       |        |        |  |       |       

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##### Table of Contents



NOTE D  ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL
OF LONG-LIVED ASSETS

Effective April 1, 2002, the Company adopted FAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.
This statement addresses financial accounting and reporting for
the impairment or disposal of long-lived assets and supercedes
FAS 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of, and the accounting
and reporting provisions of Accounting Principles Board Opinion
No. 30, Reporting the Results of Operations, for a disposal
of a segment or a business.

In November 2001, the Company ceased operations at its Houston
coil facility (the facility). To the extent
possible, sales and production were transferred to other Company
locations. Machinery and equipment associated with the facility
other than the overhead cranes attached to the buildings will be
deployed at other Company locations. Land and buildings and
improvements with carrying values of $35,942 and $69,969, respectively, are expected
to be sold in the next 12 months. Estimated proceeds are
expected to exceed the net book value.

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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Nine Months Ended December 31, 2002 Compared To Nine
Months Ended December 31, 2001

During the nine
months ended December 31, 2002, sales and costs of goods sold
increased $5,411,492 and $5,243,216, respectively, and related gross
profit increased $168,276 from the comparable amounts recorded during
the nine months ended December 31, 2001. During the 2002 period,
an increase of $8,357,201 in sales of coil products was offset by a
decrease of $2,945,709 in sales of tubular products. Tons of coil
products sold increased approximately 14% and the average per ton
selling price increased approximately 7% from the levels recorded
during the 2001 period. A decline in coil sales associated with the
closure of the Houston coil facility in November 2001 was more that
offset by an increase in sales attributable to the XSCP Division that
began operations in December 2001. During the 2002 period, tubular
tons sold and the average selling price per ton declined
approximately 3% and 5%, respectively. Coil operations benefited from
somewhat stronger market conditions while tubular operations were
adversely impacted by soft market conditions during the 2002 period.
Management believes that the soft market conditions for tubular
products were related to the overall weakness in the energy sector of
the United States economy. An increase in gross profit of $568,964
related to coil operations was offset by a decline in gross profit of
$400,688 associated with tubular operations. Gross profits as a
percentage of sales were approximately 5.7% and 5.9% during the 2002
and 2001 periods, respectively.

Interest expense
decreased $196,240 from the amount recorded during the 2001 period.
This decrease was primarily related to reductions in both short-term
and long-term debt and lower interest rates associated with such
borrowings.

Interest and other
income increased $29,750 from the 2001 period amount primarily as a
result of an increase in invested cash positions during the 2002
period.

Federal income taxes
increased $156,175 from the comparable amount recorded during the
2001 period. This increase was primarily related to the increase in
earnings before taxes as the effective tax rates were the same for
both periods.

Three Months Ended December 31, 2002 Compared To Three
Months Ended December 31, 2001

During the quarter
ended December 31, 2002, sales, costs of goods sold and gross
profit increased $4,935,369, $4,471,538 and $463,831, respectively,
from the comparable amounts recorded during the quarter ended
December 31, 2001. The increases in sales and costs of goods sold
were related primarily to coil operations. Sales of coil products and
related costs of goods sold increased $4,213,475 and $4,333,028,
respectively, the effect of which decreased gross profit by $119,553.
This decrease was related primarily to losses incurred on sales of
non-standard coils. Decreased gross profit earned on coil products
was offset by an increase of in gross profit earned on tubular
products of $583,384. During the 2002 quarter, the Companys
tubular operation benefited from somewhat stronger market conditions
as compared to market conditions in the 2001 quarter. Gross profits
as a percentage of sales were approximately 4.9% and 3.8% during the
2002 and 2001 quarters, respectively. This improvement was related
primarily to improved results associated with the tubular operation.

Interest expense
decreased $49,839 from the amount recorded during the 2001 quarter.
This decrease was related primarily to a decrease in both short and
long-term debt.

Federal income taxes
increased $203,166 from the comparable amount recorded during the
2001 quarter. This increase was primarily related to the increase in
earnings before taxes as the effective tax rates were the same for
both quarters.

6



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##### Table of Contents



FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

The Company remained in a strong, liquid position at
December 31, 2002. Current ratios were 3.4 and 3.3 at
December 31, 2002 and March 31, 2002, respectively.
Working capital was $23,583,657 at December 31, 2002 and
$25,009,882 at March 31, 2002. During the nine months ended
December 31, 2002, the Company primarily used its cash to pay
down both long-term
and short-term debt and to support operating activities. At
December 31, 2002, the Company maintained assets and
liabilities at levels it believed were commensurate with
operations. The Company expects to continue to monitor and
evaluate these balance sheet components depending on changes in
market conditions and the Companys operations.

The Company has a credit arrangement with a bank which provides
for a revolving line of credit facility (the revolving
facility) and a term credit facility (the term
facility). Pursuant to the revolving facility which
expires April 1, 2004, the Company may borrow up to
$10 million at an interest rate no greater than the
banks prime rate. At December 31, 2002, the Company
had no borrowings outstanding under the revolving facility. The
amount outstanding under the term facility bears interest at a
stated rate of LIBOR plus 1.25% and requires quarterly principal
payments of $200,000 plus accrued interest through March 1,
2003. In July 1997, the Company entered into a swap
transaction with the bank pursuant to which it exchanged the
term facilitys LIBOR-based interest rate obligation for a
fixed interest rate obligation of 8% to remain in effect for the
entire term of the term facility. As of December 31, 2002,
the principal amount of indebtedness outstanding under the term
facility was $200,000.

During
the quarter ended December 31, 2002, the Company exercised its right under a lease agreement
to purchase approximately 68 acres of land on which its
tubular operations are located for $214,338. This land was previously leased from
Lone Star Steel Company.

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. On an ongoing basis, the Company evaluates
estimates and judgments. The Company bases its estimates on
historical experience and on various other assumptions that it
believes to be reasonable under the circumstances.

FORWARD-LOOKING STATEMENTS

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




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

Not material.

7



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##### Table of Contents






ITEM 4. CONTROLS AND PROCEDURES

Based on an evaluation of the disclosure controls and procedures
conducted within 90 days prior to the filing date of this
report on Form 10-Q, the principal executive officer and
principal financial officer of the Company have concluded that
the disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) promulgated under the Securities
Exchange Act of 1934, as amended) are effective. There were no
significant changes in the internal controls or in other factors
that could significantly affect those controls subsequent to the
date of the evaluation thereof.

8



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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED

Nine Months Ended December 31, 2002





Part II  OTHER INFORMATION




Item 1. Legal Proceedings

Not applicable




Item 2. Changes in securities



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




Item 3. Defaults upon senior securities



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




Item 4. Submission of matters to a vote of security
holders

None




Item 5. Other Information

Not applicable




Item 6. Exhibits and Reports on Form 8-K



| |             
| | ------------
| | a). Exhibits



| |        |                                                                                                                                                        
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | 99.1  | 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
|
| | 99.2  | 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   



| |                        
| | -----------------------
| | b). Reports on Form 8-K



| |     
| | ----
| | None

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 13, 2003 |                                             |  |                     
|                       | By                                          |  | /s/  BEN HARPER     
|                       |                                             |  |                     
|                       | Ben Harper, Senior Vice President-Finance  
|                       | (Chief Accounting Officer)                 
|Date February 13, 2003 |                                             |  |                     
|                       | By                                          |  | /s/  HAROLD FRIEDMAN
|                       |                                             |  |                     
|                       | Harold Friedman, Vice Chairman of the Board

I, Jack Friedman, the Chairman of the Board and Chief Executive
    Officer of Friedman Industries, Incorporated, a Texas
    corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q
of Friedman Industries, Incorporated;

2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and

c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The registrants other certifying officers and I
have disclosed, based on our most recent evaluation, to the
registrants auditors and audit committee of
registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and
report financial data and have identified for the
registrants auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and

6. The registrants other certifying officers and I
have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.

Dated: February 13, 2003

| |                          
| | -------------------------
| | /s/  JACK FRIEDMAN       
| | Chairman of the Board and
| | Chief Executive Officer  

10



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##### Table of Contents



I, Ben Harper, Senior Vice President-Finance and
Secretary/Treasurer of Friedman Industries, Incorporated, a
Texas corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q
of Friedman Industries, Incorporated;

2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly report
(the Evaluation Date); and

c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The registrants other certifying officers and I
have disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of
registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and
report financial data and have identified for the
registrants auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and

6. The registrants other certifying officers and I
have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.

Dated: February 13, 2003

| |                                  
| | ---------------------------------
| | /s/  BEN HARPER                  
| | Senior Vice President-Finance and
| | Secretary/Treasurer              

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##### Table of Contents






EXHIBIT INDEX

|             |  |                                                                                                                                                              
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.  |  | Description                                                                                                                                                  
|             |  |                                                                                                                                                              
|Exhibit 99.1 |  |  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 99.2 |  |  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   

12