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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, 2003                                  
|     |  |                                                                                                                                                                           
|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, 2003, the number of shares outstanding of the issuers only
class of stock was 7,575,239 shares of Common Stock.



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TABLE OF CONTENTS



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

ASSETS

|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |             |           |            | 
|------------------------------------------- | --------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | ----------------- | ---------- | -------------- | ----------- | --------- | ---------- | 
|                                            |                                                                 |                                                                                                |                                            |             | DECEMBER
31, 2003 |            | MARCH 31, 2003
|                                            |                                                                 |                                                                                                |                                            |             | UNAUDITED         |            |               
|CURRENT ASSETS:                             |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            | Cash and cash equivalents                                       |                                                                                                | $                                          | 2,167,106   |                   |            | $              | 673,127     |          
|                                            | Accounts receivable, net of allowance of $7,276 in both periods |                                                                                                |                                            | 9,017,912   |                   |            |                | 9,966,061   |          
|                                            | Inventories                                                     |                                                                                                |                                            | 21,809,723  |                   |            |                | 24,032,268  |          
|                                            | Other                                                           |                                                                                                |                                            | 285,539     |                   |            |                | 98,044      |          
|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            |                                                                 |                                                                                                | TOTAL CURRENT ASSETS                       |             |                   | 33,280,280 |                |             |           | 34,769,500 | 
|PROPERTY, PLANT AND EQUIPMENT:              |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            | Land                                                            |                                                                                                |                                            | 437,793     |                   |            |                | 437,793     |          
|                                            | Buildings and improvements                                      |                                                                                                |                                            | 4,088,149   |                   |            |                | 4,063,579   |          
|                                            | Machinery and equipment                                         |                                                                                                |                                            | 17,540,414  |                   |            |                | 17,216,823  |          
|                                            | Less accumulated depreciation                                   |                                                                                                |                                            | (15,627,527 | )                 |            |                | (14,930,027 | )        
|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            |                                                                 |                                                                                                | 6,438,829                                  |             |                   |            | 6,788,168      |            
|OTHER ASSETS:                               |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            | Cash value of officers life insurance                          |                                                                                                |                                            | 1,229,962   |                   |            |                | 1,221,258   |          
|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            |                                                                 |                                                                                                | TOTAL ASSETS                               |             | $                 | 40,949,071 |                |             | $         | 42,778,926 | 
|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|LIABILITIES AND STOCKHOLDERS EQUITY       
|CURRENT LIABILITIES:                        |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            | Accounts payable and accrued expenses                           |                                                                                                | $                                          | 8,553,280   |                   |            | $              | 9,870,888   |          
|                                            | Current portion of long-term debt                               |                                                                                                |                                            | 68,496      |                   |            |                | 68,496      |          
|                                            | Dividends payable                                               |                                                                                                |                                            | 151,500     |                   |            |                | 151,460     |          
|                                            | Income taxes payable                                            |                                                                                                |                                            |            |                   |            |                | 406,620     |          
|                                            | Contribution to profit sharing plan                             |                                                                                                |                                            | 198,000     |                   |            |                | 260,000     |          
|                                            | Employee compensation and related expenses                      |                                                                                                |                                            | 138,200     |                   |            |                | 277,924     |          
|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            |                                                                 |                                                                                                | TOTAL CURRENT LIABILITIES                  |             |                   | 9,109,476  |                |             |           | 11,035,388 | 
|LONG-TERM DEBT, less current portion        |                                                                 |                                                                                                | 11,380                                     |             |                   |            | 57,329         |            
|DEFERRED INCOME TAXES                       |                                                                 |                                                                                                | 256,458                                    |             |                   |            | 283,458        |            
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                                 |                                                                                                | 156,000                                    |             |                   |            | 156,000        |            
|STOCKHOLDERS EQUITY:                       |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            | Common stock, par value $1:                                     |                                                                                                |                                            |             |                   |            |                |             |          
|                                            |                                                                 | Authorized
shares  10,000,000                                                                 |                                            |             |                   |            |                |             |           |           
|                                            |                                                                 | Issued and outstanding
shares  7,575,239 at December 31, 2003 and 7,573,239 at March 31, 2003 |                                            |             | 7,575,239         |            |                |             | 7,573,239 |           
|                                            | Additional paid-in capital                                      |                                                                                                |                                            | 27,714,669  |                   |            |                | 27,710,369  |          
|                                            | Retained deficit                                                |                                                                                                |                                            | (3,874,151  | )                 |            |                | (4,036,857  | )        
|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            |                                                                 |                                                                                                | TOTAL STOCKHOLDERS EQUITY                 |             |                   | 31,415,757 |                |             |           | 31,246,751 | 
|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |            
|                                            |                                                                 |                                                                                                | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |             | $                 | 40,949,071 |                |             | $         | 42,778,926 | 
|                                            |                                                                 |                                                                                                |                                            |             |                   |            |                |            

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FRIEDMAN INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS  UNAUDITED

Three Months Ended
    
    Nine Months EndedDecember 31,
    
    December 31,2003
    
    2002
    
    2003
    
    2002Net sales
    
    $
    24,977,857
    
    
    $
    25,418,779
    
    
    $
    75,592,716
    
    
    $
    78,756,126Costs and expensesCosts of goods sold
    
    
    24,028,792
    
    
    
    24,173,277
    
    
    
    71,195,237
    
    
    
    74,235,979General, selling and
administrative costs
    
    
    973,717
    
    
    
    946,498
    
    
    
    3,253,761
    
    
    
    3,088,254Interest
    
    
    8,532
    
    
    
    4,470
    
    
    
    31,638
    
    
    
    47,01825,011,041
    
    
    
    25,124,245
    
    
    
    74,480,636
    
    
    
    77,371,251Interest and other income
    
    
    (48,511
    )
    
    
    (8,795
    )
    
    
    (52,532
    )
    
    
    (49,054
    )Earnings
before federal
income taxes
    
    
    15,327
    
    
    
    303,329
    
    
    
    1,164,612
    
    
    
    1,433,929Provision (benefit) for federal
income taxes:Current
    
    
    14,210
    
    
    
    83,132
    
    
    
    422,968
    
    
    
    451,535Deferred
    
    
    (9,000
    )
    
    
    20,000
    
    
    
    (27,000
    )
    
    
    36,0005,210
    
    
    
    103,132
    
    
    
    395,968
    
    
    
    487,535Net
earnings
    
    $
    10,117
    
    
    $
    200,197
    
    
    $
    768,644
    
    
    $
    946,394Average number of common
shares outstanding:Basic
    
    
    7,575,239
    
    
    
    7,573,239
    
    
    
    7,575,239
    
    
    
    7,573,239Diluted
    
    
    7,646,954
    
    
    
    7,573,239
    
    
    
    7,627,424
    
    
    
    7,573,239Net
earnings per share:Basic
    
    $
    0.00
    
    
    $
    0.03
    
    
    $
    0.10
    
    
    $
    0.12Diluted
    
    $
    0.00
    
    
    $
    0.03
    
    
    $
    0.10
    
    
    $
    0.12Cash dividends declared
per common
share
    
    $
    0.02
    
    
    $
    0.03
    
    
    $
    0.08
    
    
    $
    0.07


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FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED

Nine Months EndedDecember
31,2003
    
    2002OPERATING ACTIVITIESNet earnings
    
    $
    768,644
    
    
    $
    946,394Adjustments to reconcile net earnings to cash
provided by operating activities:Depreciation
    
    
    697,499
    
    
    
    723,565Provision for deferred taxes
    
    
    (27,000
    )
    
    
    36,000Decrease (increase) in operating assets:Accounts receivable
    
    
    948,149
    
    
    
    (547,875
    )Inventories
    
    
    2,222,545
    
    
    
    (1,324,660
    )Other
    
    
    (187,495
    )
    
    
    (259,351
    )Increase (decrease) in operating liabilities:Accounts payable and accrued expenses
    
    
    (1,317,608
    )
    
    
    (467,084
    )Contribution to profit-sharing plan
    
    
    (62,000
    )
    
    
    (62,000
    )Employee compensation and related expenses
    
    
    (139,724
    )
    
    
    (27,993
    )Federal income taxes
    
    
    (406,620
    )
    
    
    6,535NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES
    
    
    2,496,390
    
    
    
    (976,469
    )INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (348,162
    )
    
    
    (495,961
    )(Increase) decrease in cash value of officers life
insurance
    
    
    (8,704
    )
    
    
    (132,227
    )NET CASH PROVIDED (USED) IN INVESTING
ACTIVITIES
    
    
    (356,866
    )
    
    
    (628,188
    )FINANCING ACTIVITIESCash dividends paid
    
    
    (605,896
    )
    
    
    (378,592
    )Principal payments on notes payable and revolving credit facility
    
    
    (2,045,949
    )
    
    
    (2,648,473
    )Proceeds
from notes payable and revolving credit facility
    
    
    2,000,000
    
    
    
    104,239Stock
awards
    
    
    6,300
    
    
    
    5,060NET CASH PROVIDED (USED) IN FINANCING
ACTIVITIES
    
    
    (645,545
    )
    
    
    (2,917,766
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    1,493,979
    
    
    
    (4,522,423
    )Cash and cash equivalents at beginning of period
    
    
    673,127
    
    
    
    4,683,894CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    2,167,106
    
    
    $
    161,471


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FRIEDMAN INDUSTRIES, INCORPORATED




NOTES TO QUARTERLY REPORT  UNAUDITED
THREE MONTHS ENDED DECEMBER 31, 2003

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, 2003.

NOTE B  INVENTORIES

Inventories consist
of prime coil, non-standard coil and tubular materials.
Prime coil inventory consists primarily of raw materials,
non-standard coil inventory consists primarily of finished goods and tubular
inventory consists of both raw materials and finished goods. Inventories are
valued at the lower of cost or replacement market. Cost for prime
coil inventory is
determined under the last-in, first-out (LIFO) method.
During the quarter ended December 31, 2003, earnings before federal income taxes include a benefit of approximately $49,000
from the liquidation of LIFO inventory.
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 31,2003
    
    2003Prime
Coil Inventory
    
    $
    6,512,033
    
    
    $
    6,743,001Non-Standard
Coil Inventory
    
    
    1,522,276
    
    
    
    1,725,581Tubular Raw Material
    
    
    2,663,051
    
    
    
    2,736,602Tubular Finished Goods
    
    
    11,112,363
    
    
    
    12,827,084$
    21,809,723
    
    
    $
    24,032,268


NOTE C  LONG-TERM DEBT

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

December 31, 2003
    
    March 31, 2003Notes payable on equipment purchases
    
    $
    79,876
    
    
    $
    125,825


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,
2003 and March 31, 2003.

NOTE D  NEW ACCOUNTING
PRONOUNCEMENT

In January 2003, the
FASB issued FASB Interpretation No. 46 (FIN 46). FIN 46
requires that unconsolidated variable interest entities must be
consolidated by their primary beneficiaries. A primary beneficiary is
the party that absorbs a majority of the entitys expected losses or
residual benefits. FIN 46 applies immediately to variable
interest entities created after January 31, 2003. The application
of FIN 46 to variable interest entities existing prior to
February 1, 2003 will be effective for the Company on
December 15, 2004. No variable interest entities have been created
after January 31, 2003. Management believes the
effect of variable interest entities, if any, created prior to
January 31, 2003 will not be material to the financial statements.

NOTE E  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 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.

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 the three and nine months ended
December 31:

|                                                         |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         |  |  | 
|-------------------------------------------------------- |  | - | ------ | ------------------------------ |  | ----------------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | 
|                                                         |  |   |        | Three Months EndedDecember 31, |  | Nine
Months EndedDecember 31,
|                                                         |  |   |        |                                |  |                              
|                                                         |  |   |        | 2003                           |  | 2002                          |         | 2003 |  | 2002
|                                                         |  |   |        |                                |  |                               |         |      |  |     
|Reported
net income                                      |  | $ | 10,117 |                                |  | $                             | 200,197 |      |  | $    | 768,644 |  |  | $ | 946,394 | 
|Less:
compensation expenses per SFAS No. 123, net of tax |  |   | .00    |                                |  |                               | 25,262  |      |  |      | 31,582  |  |  |   | 25,262  | 
|                                                         |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         | 
|Pro
forma net income                                     |  | $ | 10,117 |                                |  | $                             | 174,935 |      |  | $    | 737,062 |  |  | $ | 921,132 | 
|                                                         |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         | 
|BASIC
EARNINGS PER COMMON SHARE:                         |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         | 
|Reported
net income                                      |  |   | .00    |                                |  |                               | .03     |      |  |      | .10     |  |  |   | .12     | 
|Less:
compensation expense per SFAS No. 123, net of tax  |  |   | .00    |                                |  |                               | .00     |      |  |      | .00     |  |  |   | .00     | 
|                                                         |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         | 
|Pro
forma net income                                     |  |   | .00    |                                |  |                               | .03     |      |  |      | .10     |  |  |   | .12     | 
|                                                         |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         | 
|DILUTED
EARNINGS PER COMMON SHARE:                       |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         | 
|Reported
net income                                      |  |   | .00    |                                |  |                               | .03     |      |  |      | .10     |  |  |   | .12     | 
|Less:
compensation expense per SFAS No. 123, net of tax  |  |   | .00    |                                |  |                               | .00     |      |  |      | .00     |  |  |   | .00     | 
|                                                         |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         | 
|Pro
forma net income                                     |  |   | .00    |                                |  |                               | .03     |      |  |      | .10     |  |  |   | .12     | 
|                                                         |  |   |        |                                |  |                               |         |      |  |      |         |  |  |   |         | 

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NOTE F  SEGMENT INFORMATION  UNAUDITED

Three Months Ended
    
    Nine Months EndedDecember 31,
    
    December 31,2003
    
    2002
    
    2003
    
    2002Net salesCoil
    
    $
    12,758
    
    
    $
    15,068
    
    
    $
    39,310
    
    
    $
    45,473Tubular
    
    
    12,220
    
    
    
    10,351
    
    
    
    36,283
    
    
    
    33,283Total net sales
    
    $
    24,978
    
    
    $
    25,419
    
    
    $
    75,593
    
    
    $
    78,756Operating
profit (loss)Coil
    
    $
    (106
    )
    
    $
    85
    
    
    $
    904
    
    
    $
    1,025Tubular
    
    
    515
    
    
    
    615
    
    
    
    1,944
    
    
    
    1,922Total operating profit
    
    
    409
    
    
    
    700
    
    
    
    2,848
    
    
    
    2,947General
corporate expenses
    
    
    434
    
    
    
    402
    
    
    
    1,704
    
    
    
    1,515Interest expense
    
    
    9
    
    
    
    4
    
    
    
    32
    
    
    
    47Interest & other income
    
    
    (49
    )
    
    
    (9
    )
    
    
    (53
    )
    
    
    (49
    )Total earnings before taxes
    
    $
    15
    
    
    $
    303
    
    
    $
    1,165
    
    
    $
    1,434


December
31,
    
    March 31,2003
    
    2003Segment assetsCoil
    
    $
    17,052
    
    
    $
    18,967Tubular
    
    
    20,390
    
    
    
    21,84937,442
    
    
    
    40,816Corporate assets
    
    
    3,507
    
    
    
    1,963Total assets
    
    $
    40,949
    
    
    $
    42,779


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.

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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, 2003 Compared To Nine Months Ended
December 31,
2002

During the nine months ended December 31, 2003, sales, costs of goods sold and gross profit declined $3,163,410, $3,040,742 and $122,668, from the respective amounts
recorded during the nine months ended December 31, 2002. The
declines in sales and costs of goods were related primarily to a decrease in tons sold from approximately 247,000 tons in the 2002 period to 224,000
tons in the 2003 period. The decline in tons sold was partially
offset by an increase of approximately 6% in the average per ton selling price.
The increase in the average per ton selling price was largely offset
by an increase in the average per ton material cost. Gross profits and costs of goods sold as a percentage of sales were
approximately 5.8% and 94.2%, respectively, in the 2003 period
compared to 5.7% and 94.3%, respectively, in the 2002 period.

Coil product segment sales declined approximately $6,200,000 during the 2003 period. The decline in
sales of coil products was related primarily to a decrease from approximately 143,000 tons shipped in the 2002 period to 121,000 tons shipped in the 2003 period. Coil segment operating profits as a percentage of segment sales were approximately 2.3%
in both periods. In the 2003 period, the Companys Lone Star coil facility continued
to experience a lack of supply of coil products from this facilitys primary coil supplier,
Lone Star Steel Company (LSS). In the near term, the Company expects this lack of supply to continue.
The Company's Lone Star facility has from time to time purchased
steel coils from other suppliers. However, the freight costs
associated with these purchases increase the Companys costs of goods
and diminishes the Companys competitiveness for the sale of such
products in an extremely competitive market. Management confers with
LSS regularly and continues to monitor this situation closely. Continued lack of supply of steel coils at this facility
could have a material adverse effect on the Companys coil operations.

Tubular
product segment sales increased approximately $3,000,000 during the
2003 period. This increase resulted primarily from an approximately
10% increase in the average per ton selling price.
Tubular segment operating profits as a percentage of segment sales
were approximately 5.4% and 5.8% in the 2003 and 2002 period,
respectively. During the 2003 period, LSS, the Companys
principal supplier of coil steel raw materials for its tubular
division, continued to supply raw materials in such amounts as are
adequate for the Companys purposes. The Company currently does
not anticipate any significant change in such supply from LSS.

General,
selling and administrative costs increased $165,507 in the 2003
period from the amount recorded in the 2002 period.
This increase resulted primarily from an increase in bad-debt expense
of approximately $168,000 incurred in the
quarter ended June 30, 2003, related to one of the
Companys large customers. The Company monitors closely
its customer accounts receivables and believes that this expense
was an isolated event that currently does not reflect a trend in this
area.

Federal income taxes decreased $91,567 from the comparable amount recorded during the 2002 period. This decrease
was primarily related to the decrease in earnings before taxes as the effective tax rates were the same for both periods.

Three
Months Ended December 31, 2003 Compared To Three Months Ended
December 31, 2002

During the three months ended December 31, 2003, sales, costs of goods sold and gross profit
declined $440,922, $144,485 and $296,437, from the respective amounts
recorded during the three months ended December 31, 2002. The declines in sales
and costs of goods were related primarily to a decrease in tons sold from approximately
77,000 tons in the 2002 quarter to 72,000 tons in the 2003 quarter.
The decline in tons sold was offset by an increase of approximately 5% in the average per ton selling price. Both coil and pipe operations experienced decreases in gross
profit which resulted in the overall decrease in gross profit. Gross
profits and costs of goods sold as a percentage of sales were 3.8%
and 96.2%, respectively, in the 2003 quarter compared to 4.9% and
95.1%, respectively, in the 2002 quarter. During the 2003 quarter, the Company experienced increases in material costs and could not immediately pass these costs on to its customers. In addition,
tubular operations were adversely affected by a reduction in tons
produced due primarily to changes in the size and type of
pipe produced and related and certain other production delays
during the 2003 quarter. Costs for steel products continue to increase due primarily
to substantial increases in scrap steel costs incurred by the Companys primary suppliers,
LSS and Nucor Steel Company (NSC), which
have been passed on to the Company.

Coil product segment sales declined approximately $2,310,000 during the
2003 quarter. The decline in sales of coil products was related primarily to a decrease
from approximately 46,000 tons shipped in the 2002 quarter to 38,000
tons shipped in the 2003 quarter. Coil operations reflected a
$106,000 loss in the 2003 period compared to an $85,000 gain in the
2002 quarter. In the 2003 quarter, the Companys Lone Star coil facility and its XSCP Division (XSCP) recorded
less tons sold. The Companys Lone Star coil facility continued to experience a lack of supply of coil products from LSS.
In the near term, the Company expects this lack of supply to continue. The Company's
Lone Star facility has from time to time purchased steel coils from other
suppliers. However, the freight costs associated with these purchases increase the
Company's costs of goods and diminishes the Company's competitiveness
for the sale of such products in an extremely competitive market.
Management confers with LSS regularly and continues to monitor this
situation closely. Regarding XSCP, NSC supplies XSCP with
non-standard steel coils. During the 2003 quarter, the supply of non-standard coils was reduced. Currently,
NSC is supplying non-standard coils to XSCP at more normal levels and the
Company expects this supply to continue. Results for the 2003 quarter were adversely affected by the lack of supply noted above and by increased
material costs which could not be immediately passed on to customers.

Tubular product segment sales increased approximately $1,869,000 during the 2003 quarter. This increase resulted primarily from an increase
in tons shipped from approximately 31,000 tons in the 2002 quarter to 34,000 tons
shipped in the 2003 quarter. Tubular
segment operating profits as a percentage of segment sales were approximately 4.2% and 5.9% in the 2003 and 2002
period, respectively. Results in the 2003 quarter were adversely affected by a 15%
decrease in tons of pipe manufactured. This decrease resulted
primarily from changes in the size and type of
pipe produced and related and certain other production delays.

Interest and other income increased $39,716 from the amount recorded during the 2002 quarter. This increase
was related primarily to a gain of approximately $45,000 during the 2003 quarter from the sale of
capital stock of a customer received by the Company in the course of the
customer's bankruptcy proceedings.

Federal income taxes decreased $97,922 from the comparable amount recorded during the 2002 quarter. This decrease
was primarily related to the decrease in earnings before taxes as the effective tax rates were the same for both quarters.

6



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FINANCIAL POSITION, LIQUIDITY AND
CAPITAL RESOURCES

The Company remained in a strong, liquid position at December 31, 2003. Current ratios were 3.7 and 3.2
at December 31, 2003 and March 31, 2003, respectively. Working capital was $24,170,804 at December 31, 2003 and $23,734,112 at March 31, 2003.
During the nine months ended December 31, 2003, the Company maintained assets and liabilities at levels it believed were commensurate with operations.
Accordingly, the Company generated cash by reducing accounts
receivable and inventories. A portion of this cash was used to pay down accounts payable and other liabilities. The Company expects to continue to monitor and evaluate
these balance sheet components depending on changes in the market conditions and the Companys operations.

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. During the
quarter ended December 31, 2003, the Company repaid $2 million of borrowings outstanding at September 30, 2003. At December 31, 2003, 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. 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

Not material.




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, 2003. Based on this evaluation, the CEO and CFO
have concluded that the Companys disclosure controls and procedures were effective as of the
end of the fiscal quarter ended December 31, 2003 to ensure that information that is required to be
disclosed by the Company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SEC's rules and
forms.

There were no changes in the Companys internal control over financial reporting that
occurred during the fiscal quarter ended December 31, 2003 that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over financial reporting.

7



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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED

Nine Months Ended December 31, 2003





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



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



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



| |     
| | ----
| | None

8



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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, 2004 |                                              |  |                
|                       | By                                           |  | /s/  BEN HARPER
|                       |                                              |  |                
|                       | Ben Harper, Senior Vice President-Finance   
|                       | (Principal Financial and Accounting Officer)
|                       |                                              |  |                

9



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EXHIBIT INDEX

|             |  |                                                                                                                                                              
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.  |  | Description                                                                                                                                                  
|             |  |                                                                                                                                                              
|            
|Exhibit 31.1 |  |  Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by 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