##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008
 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
  TEXAS
(State or other jurisdiction of 
incorporation or organization)
    
    74-1504405
(I.R.S. Employer Identification
Number)
 
 
  þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ  o þ




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TABLE OF CONTENTS  Part I  FINANCIAL INFORMATIONItem 1. Financial StatementsCONDENSED CONSOLIDATED BALANCE SHEETSCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  UNAUDITEDCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITEDItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESEXHIBIT INDEXEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 Part I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
  
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30, 2008
    
    
    March 31, 2008(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    5,665,614
    
    
    $
    2,643,922Accounts receivable, net of allowances for bad debts and cash discounts of
$37,276 at September 30 and March 31, 2008
    
    
    22,024,581
    
    
    
    16,742,000Inventories
    
    
    35,415,932
    
    
    
    29,900,327Other
    
    
    266,867
    
    
    
    136,345TOTAL CURRENT ASSETS
    
    
    63,372,994
    
    
    
    49,422,594PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    1,082,331
    
    
    
    1,082,331Construction in progress
    
    
    
    
    
    
    8,706,172Buildings and yard improvements
    
    
    7,000,839
    
    
    
    3,494,294Machinery and equipment
    
    
    28,765,341
    
    
    
    21,879,259Less accumulated depreciation
    
    
    (18,997,183
    )
    
    
    (18,389,983
    )17,851,328
    
    
    
    16,772,073OTHER ASSETS:Cash value of officers life insurance and other assets
    
    
    748,000
    
    
    
    720,001Deferred income taxes
    
    
    
    
    
    
    43,724TOTAL ASSETS
    
    $
    81,972,322
    
    
    $
    66,958,392LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    25,182,113
    
    
    $
    13,499,314Current portion of long-term debt
    
    
    54,028
    
    
    
    54,028Dividends payable
    
    
    815,933
    
    
    
    339,972Income taxes payable
    
    
    382,891
    
    
    
    70,069Contribution to profit sharing plan
    
    
    212,500
    
    
    
    259,500Employee compensation and related expenses
    
    
    1,524,780
    
    
    
    561,483TOTAL CURRENT LIABILITIES
    
    
    28,172,245
    
    
    
    14,784,366LONG-TERM DEBT LESS CURRENT PORTION
    
    
    40,521
    
    
    
    6,667,536DEFERRED INCOME TAXES
    
    
    160,070
    
    
    
    POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
    
    
    582,538
    
    
    
    549,749STOCKHOLDERS EQUITY:Common stock, par value $1:Authorized shares  10,000,000Issued shares  7,975,160 at September 30 and March 31, 2008
    
    
    7,975,160
    
    
    
    7,975,160Additional paid-in capital
    
    
    29,003,674
    
    
    
    29,003,674Treasury stock at cost (1,175,716 shares at September 30 and March 31, 2008)
    
    
    (5,475,964
    )
    
    
    (5,475,964
    )Retained earnings
    
    
    21,514,078
    
    
    
    13,453,871TOTAL STOCKHOLDERS EQUITY
    
    
    53,016,948
    
    
    
    44,956,741TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    81,972,322
    
    
    $
    66,958,392
 2




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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED CONSOLIDATED STATEMENTS
OF EARNINGS  UNAUDITED

|                                                      |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             |  |   |            |            | 
|----------------------------------------------------- | ----------------------------------------- |  | - | ------------------------------- | ---------- |  | ----------------------------- | ---------- | ---------- | ---- | - | ----------- | ----------- |  | - | ---------- | ---------- | 
|                                                      |                                           |  |   | Three
months endedSeptember 30, |            |  | Six
months endedSeptember 30, |           
|                                                      |                                           |  |   |                                 |            |  |                               |           
|                                                      |                                           |  |   | 2008                            |            |  | 2007                          |            |            | 2008 |   |             | 2007        | 
|                                                      |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             | 
|Net sales                                             |                                           |  | $ | 71,074,140                      |            |  | $                             | 41,154,571 |            |      | $ | 130,672,836 |             |  | $ | 91,685,081 |           
|Costs and expenses                                    |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             |  |   |            |           
|                                                      | Costs of goods sold                       |  |   |                                 | 60,927,793 |  |                               |            | 38,722,209 |      |   |             | 112,461,746 |  |   |            | 85,483,101 | 
|                                                      | General, selling and administrative costs |  |   |                                 | 1,866,785  |  |                               |            | 1,086,670  |      |   |             | 3,847,808   |  |   |            | 2,506,163  | 
|                                                      | Interest
expense                          |  |   |                                 |           |  |                               |            |           |      |   |             | 23,310      |  |   |            | 47,740     | 
|                                                      |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             | 
|                                                      |                                           |  |   | 62,794,578                      |            |  |                               | 39,808,879 |            |      |   | 116,332,864 |             |  |   | 88,037,004 |           
|Interest and other income                             |                                           |  |   | (62,759                         | )          |  |                               | (55,530    | )          |      |   | (104,177    | )           |  |   | (97,300    | )         
|                                                      |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             | 
|Earnings before income taxes                          |                                           |  |   | 8,342,321                       |            |  |                               | 1,401,222  |            |      |   | 14,444,149  |             |  |   | 3,745,377  |           
|Provision for income taxes:                           |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             |  |   |            |           
|                                                      | Current                                   |  |   |                                 | 2,795,989  |  |                               |            | 446,947    |      |   |             | 4,820,260   |  |   |            | 1,205,262  | 
|                                                      | Deferred                                  |  |   |                                 | 101,897    |  |                               |            | 33,389     |      |   |             | 203,794     |  |   |            | 66,778     | 
|                                                      |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             | 
|                                                      |                                           |  |   | 2,897,886                       |            |  |                               | 480,336    |            |      |   | 5,024,054   |             |  |   | 1,272,040  |           
|                                                      |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             | 
|Net earnings                                          |                                           |  | $ | 5,444,435                       |            |  | $                             | 920,886    |            |      | $ | 9,420,095   |             |  | $ | 2,473,337  |           
|                                                      |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             | 
|                                                     
|Weighted average number of common shares outstanding: |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             |  |   |            |           
|                                                      | Basic                                     |  |   |                                 | 6,799,444  |  |                               |            | 6,712,108  |      |   |             | 6,799,444   |  |   |            | 6,712,108  | 
|                                                      | Diluted                                   |  |   |                                 | 6,799,444  |  |                               |            | 6,777,070  |      |   |             | 6,799,444   |  |   |            | 6,778,396  | 
|Net earnings per share:                               |                                           |  |   |                                 |            |  |                               |            |            |      |   |             |             |  |   |            |           
|                                                      | Basic                                     |  |   | $                               | 0.80       |  |                               | $          | 0.14       |      |   | $           | 1.39        |  |   | $          | 0.37       | 
|                                                      | Diluted                                   |  |   | $                               | 0.80       |  |                               | $          | 0.14       |      |   | $           | 1.39        |  |   | $          | 0.36       | 
|Cash dividends declared per common share              |                                           |  | $ | 0.12                            |            |  | $                             | 0.08       |            |      | $ | 0.20        |             |  | $ | 0.16       |           

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##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS  UNAUDITED

|                                           |                                                                                 |                                            |                                           |            |                               |            |           |            |             |            |  
|------------------------------------------ | ------------------------------------------------------------------------------- | ------------------------------------------ | ----------------------------------------- | ---------- | ----------------------------- | ---------- | --------- | ---------- | ----------- | ---------- | -
|                                           |                                                                                 |                                            |                                           |            | Six
Months Ended
September 30
|                                           |                                                                                 |                                            |                                           |            | 2008                          |            | 2007     
|OPERATING ACTIVITIES                       |                                                                                 |                                            |                                           |            |                               |            |           |           
|                                           | Net earnings                                                                    |                                            | $                                         | 9,420,095  |                               |            | $         | 2,473,337  |            
|                                           | Adjustments to reconcile net earnings to cash provided by
operating activities: |                                            |                                           |            |                               |            |           |            |            
|                                           |                                                                                 | Depreciation                               |                                           |            | 607,200                       |            |           |            | 558,601     |           
|                                           |                                                                                 | Provision for deferred taxes               |                                           |            | 203,794                       |            |           |            | 66,778      |           
|                                           |                                                                                 | Provision for postretirement benefits      |                                           |            | 32,789                        |            |           |            | 26,470      |           
|                                           | Decrease (increase) in operating assets:                                        |                                            |                                           |            |                               |            |           |            |            
|                                           |                                                                                 | Accounts receivable                        |                                           |            | (5,282,581                    | )          |           |            | 4,356,696   |           
|                                           |                                                                                 | Prepaid income taxes                       |                                           |            |                              |            |           |            | (477,628    | )         
|                                           |                                                                                 | Inventories                                |                                           |            | (5,515,605                    | )          |           |            | 11,113,087  |           
|                                           |                                                                                 | Other                                      |                                           |            | (130,522                      | )          |           |            | (159,062    | )         
|                                           | Increase (decrease) in operating liabilities:                                   |                                            |                                           |            |                               |            |           |            |            
|                                           |                                                                                 | Accounts payable and accrued expenses      |                                           |            | 11,682,799                    |            |           |            | (11,025,193 | )         
|                                           |                                                                                 | Contribution to profit-sharing plan        |                                           |            | (47,000                       | )          |           |            | (127,000    | )         
|                                           |                                                                                 | Employee compensation and related expenses |                                           |            | 963,297                       |            |           |            | (62,586     | )         
|                                           |                                                                                 | Income taxes payable                       |                                           |            | 312,822                       |            |           |            | (46,742     | )         
|                                           |                                                                                 |                                            |                                           |            |                               |           
|                                           |                                                                                 |                                            | NET CASH PROVIDED BY OPERATING
ACTIVITIES |            |                               | 12,247,088 |           |            |             | 6,696,758  |  
|INVESTING ACTIVITIES                       |                                                                                 |                                            |                                           |            |                               |            |           |           
|                                           | Purchase of property, plant and equipment                                       |                                            |                                           | (1,686,455 | )                             |            |           | (2,760,223 | )          
|                                           | Increase in cash surrender value of officers life
insurance                    |                                            |                                           | (27,999    | )                             |            |           | (23,600    | )          
|                                           |                                                                                 |                                            |                                           |            |                               |           
|                                           |                                                                                 |                                            | NET CASH USED IN INVESTING ACTIVITIES     |            |                               | (1,714,454 | )         |            |             | (2,783,823 | )
|FINANCING ACTIVITIES                       |                                                                                 |                                            |                                           |            |                               |            |           |           
|                                           | Cash dividends paid                                                             |                                            |                                           | (883,928   | )                             |            |           | (1,073,938 | )          
|                                           | Principal payments on notes payable                                             |                                            |                                           | (6,627,014 | )                             |            |           | (13,507    | )          
|                                           | Long-term debt                                                                  |                                            |                                           |           |                               |            |           | 162,084    |            
|                                           |                                                                                 |                                            |                                           |            |                               |           
|                                           |                                                                                 |                                            | NET CASH USED IN FINANCING
ACTIVITIES     |            |                               | (7,510,942 | )         |            |             | (925,361   | )
|                                           |                                                                                 |                                            |                                           |            |                               |           
|INCREASE IN CASH AND CASH EQUIVALENTS      |                                                                                 |                                            | 3,021,692                                 |            |                               |            | 2,987,574 |           
|                                           | Cash and cash equivalents at beginning of period                                |                                            |                                           | 2,643,922  |                               |            |           | 1,039,030  |            
|                                           |                                                                                 |                                            |                                           |            |                               |           
|CASH AND CASH EQUIVALENTS AT END OF PERIOD |                                                                                 | $                                          | 5,665,614                                 |            |                               | $          | 4,026,604 |           
|                                           |                                                                                 |                                            |                                           |            |                               |           

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CONDENSED NOTES TO QUARTERLY REPORT  UNAUDITED
       September 30,
    
    
    March 31,2008
    
    
    2008Prime Coil Inventory
    
    $
    6,467,857
    
    
    $
    8,121,728Non-Standard Coil Inventory
    
    
    526,075
    
    
    
    918,334Tubular Raw Material
    
    
    8,447,954
    
    
    
    7,444,805Tubular
Finished Goods
    
    
    19,974,046
    
    
    
    13,415,460$
    35,415,932
    
    
    $
    29,900,327
      2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    

Shares
    
    
    PriceOutstanding at beginning of quarter
    
    
    
    
    
    
    
    
    
    
    88,836
    
    
    $
    2.33Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled or expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of quarter
    
    
    
    
    
    
    
    
    
    
    88,836
    
    
    $
    2.33
 5




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##### Table of Contents



2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    

Shares
    
    
    PriceExercisable at the end of the quarter
    
    
    
    
    
    
    
    
    
    
    88,836
    
    
    $
    2.33Weighted average fair value of options granted during the quarter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   Three Months Ended 
September 30,
    
    Six Months Ended September 30,2008
    
    2007
    
    2008
    
    2007(in thousands)
    
    (in thousands)Net salesCoil
    
    $
    22,880
    
    
    $
    19,575
    
    
    $
    48,887
    
    
    $
    40,650Tubular
    
    
    48,194
    
    
    
    21,580
    
    
    
    81,786
    
    
    
    51,035Total net sales
    
    $
    71,074
    
    
    $
    41,155
    
    
    $
    130,673
    
    
    $
    91,685Operating profit (loss)Coil
    
    $
    (2,332
    )
    
    $
    544
    
    
    $
    (1,747
    )
    
    $
    1,480Tubular
    
    
    11,664
    
    
    
    1,268
    
    
    
    18,548
    
    
    
    3,525Total operating profit
    
    
    9,332
    
    
    
    1,812
    
    
    
    16,801
    
    
    
    5,005Corporate expenses
    
    
    1,053
    
    
    
    466
    
    
    
    2,438
    
    
    
    1,309Interest
expense
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    48Interest & other income
    
    
    (63
    )
    
    
    (55
    )
    
    
    (104
    )
    
    
    (97
    )Total earnings before taxes
    
    $
    8,342
    
    
    $
    1,401
    
    
    $
    14,444
    
    
    $
    3,745 September 30,
    
    
    March 31,2008
    
    
    2008(in thousands)Segment assetsCoil
    
    $
    25,664
    
    
    $
    29,469Tubular
    
    
    50,983
    
    
    
    34,04176,647
    
    
    
    63,510Corporate assets
    
    
    5,325
    
    
    
    3,448$
    81,972
    
    
    $
    66,958
      6




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of OperationsSix Months Ended September 30, 2008
Compared to Six Months Ended September 30, 2007 During the six months ended September 30, 2008, sales, costs of goods sold and gross
profit increased $38,987,755, $26,978,645 and $12,009,110, respectively, from the comparable amounts recorded during the six months
 ended September 30, 2007.  The increase in sales was related primarily to an increase in average selling prices.   The average per
ton selling price increased from approximately $632 per ton in the 2007 period to approximately $909 per ton in the 2008 period.  Total
 tons shipped remained approximately even, period to period.  The Company sold approximately 144,000 tons and 145,000 tons in the 2008
 and 2007 periods, respectively.   The increase in costs of goods sold was primarily related to an increase in the average per ton cost
of goods which increased from approximately $589 per ton in the 2007 period to $782 per ton in the 2008 period.   The increase in gross

 profit in the 2008 period was related to substantially improved margins earned on pipe sales.   Gross profit as a percentage of sales
 increased from approximately 6.8% in the 2007 period to 13.9% in the 2008 period.   The Company experienced strong demand for its pipe
 products in the 2008 period and margins improved significantly.  In addition, the Company benefited from lower cost inventory sold at
 substantially improved selling prices. Coil product segment sales increased approximately $8,237,000 during the 2008 period.
  This increase resulted primarily from an increase in the average
per ton selling price which increased from approximately $662 per
 ton in the 2007 period to $949 per ton in the 2008 period. In the 2008 period, the Company
experienced an operating loss of approximately $1,747,000
 related to the coil operations compared to a profit of $1,480,000 in the 2007 period.  Coil products are used primarily in durable goods
 and demand for such products was depressed in the 2008 period.  As a result, tons sold declined from approximately 61,000 tons during
 the 2007 period to approximately 51,000 tons in the 2008 period.   Also, the Company incurred a significant increase in cost of coil products
 during the 2008 period.  Average per ton cost increased from approximately $627 per ton in the 2007 period to $968 per ton in the 2008
 period. The Company was unable to pass all of this increased cost to its customers in the 2008 period.  The Company believes that market
 conditions for coil products will remain somewhat soft until the U. S. economy improves and generates improved demand for durable goods. In the 2008 period, LIFO
inventory of coil products was reduced. Since the Company maintains inventory levels based on sales requirements which decreased in the 2008
period, this reduction of LIFO inventory is not expected to be replaced
by March 31, 2009.  The Company expects that the
replacement cost and the liquidated cost of material will be
approximately equal at March 31, 2009 and that no significant
gain or loss will be experienced in the year ended March 31,
2009 as a result of this liquidation. Accordingly, no gain or loss
from this liquidation was recognized in the quarter ended
September 30, 2008. In August 2008, the Company began operations at its new coil facility located at Decatur, Alabama.
  This operation produced an operating loss of approximately $90,000 during the 2008 period.   The Company expects that this facility will continue
 to produce a loss during this ramp up period and until demand for coil products improves. The Company is primarily dependent on Nucor Steel Company (NSC) for its supply of coil inventory.
  NSC continues to supply the Company with steel coils in amounts that are adequate for the Companys purposes.  Loss of NSC as a supplier
 could have an adverse effect on the Companys business. Tubular product segment sales increased approximately $30,751,000 during the 2008 period.  This
 increase resulted from both an increase in average selling prices and an increase in tons sold.   The average selling price per ton increased
 from approximately $609 per ton in the 2007 period to $887 per ton in the 2008 period.  The Company sold approximately 84,000 tons of pipe
 in the 2007 period compared to approximately 92,000 tons in the 2008 period.   Tubular product segment operating profits as a percentage
 of segment sales improved from 6.9% in the 2007 period to 22.7% in the 2008 period.   The Company experienced strong market conditions
 for its pipe products in the 2008 period and margins improved significantly.   In addition, the Company benefited from lower cost inventory
 sold at substantially improved selling prices. U. S. Steel Tubular Products, Inc.  (USS), an affiliate of United States Steel Corporation
 that succeeded to the operations of Lone Star Steel Company, is the Companys primary supplier of tubular products and coil material used
 in pipe manufacturing and is a major customer of manufactured pipe.  In the 2008 period, USS continued to supply the Company with inventory in amounts that were adequate for the Companys
 purposes.  Loss of USS as a supplier or customer could have an adverse effect on the Companys business. During the 2008 period, general, selling and administrative costs increased $1,341,645 from the
amount recorded during the 2007 period.  This increase was related primarily to increases in commissions and bonuses associated with the
 increase in earnings.




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##### Table of Contents



Income taxes increased $3,752,014 from the comparable amount recorded during the 2007 period.
  This increase was primarily related to the increase in earnings before taxes.  Effective tax rates were 34.8% and 34.0% in the 2008 and
 2007 periods, respectively.   The Company incurred an increase in state income taxes in the 2008 period. Three Months Ended September 30, 2008 Compared to Three Months
Ended September 30, 2007 During the three months ended September 30, 2008, sales, costs of goods sold and gross profit
 increased $29,919,569, $22,205,584 and $7,713,985, respectively, from the comparable amounts recorded during the three months ended
 September 30, 2007.   The sales increase was primarily related to an increase in the average selling price which increased from
 approximately $619 per ton in the 2007 quarter to approximately $1,055 per ton in the 2008 quarter.  The Company
 sold approximately 67,000 tons in both the 2008 quarter and the 2007
quarter. The increase in costs of goods sold was
 primarily related to an increase in the average per ton cost of goods which increased from approximately $582 per ton in the 2007
quarter to $904 per ton in the 2008 quarter.   The increase in gross profit in the 2008 quarter was related to substantially improved
 margins earned on pipe sales.   Gross profit as a percentage of sales increased from approximately 5.9% in the 2007 quarter to 14.3% in
 the 2008 quarter.   The Company experienced strong demand for its pipe products in the 2008 quarter and margins improved significantly.
  In addition, the Company benefited from lower cost inventory sold at substantially improved selling prices. Coil product segment sales increased approximately $3,305,000 during the 2008 quarter.
 This increase resulted from an increase in the average per ton selling price that was partially offset by a decrease in tons sold.
 The average selling price per ton increased from approximately $648 per ton in the 2007 quarter to $1,112 per ton in the 2008 quarter.
   In the 2008 quarter, the Company experienced an operating loss of approximately $2,332,000 related to the coil operations compared to a profit of
$544,000 in the 2007 quarter.  Coil products are used primarily in durable goods and demand for such products was depressed in the 2008
 quarter.  As a result, tons sold declined from approximately 30,000 tons during the 2007 quarter to approximately 21,000 tons in the 2008
 quarter.   Also, the Company incurred a significant increase in cost of coil products during the 2008 quarter.  Average per ton cost
 increased from approximately $618 per ton in the 2007 quarter to $1,202 per ton in the 2008 quarter. The Company was unable to pass
 all of this increased cost to its customers in the 2008 quarter.  The Company believes that market conditions for coil products will
 remain somewhat soft until the U. S. economy improves and generates improved demand for durable goods. In the 2008 quarter, LIFO inventory of coil products was reduced. Since the Company
maintains inventory levels based on sales requirements which decreased in the 2008 quarter, this reduction of LIFO inventory is not expected to be replaced
by March 31, 2009.  The Company expects that the
replacement cost and the liquidated cost of material will be
approximately equal at March 31, 2009 and that no significant
gain or loss will be experienced in the year ended March 31,
2009 as a result of this liquidation. Accordingly, no gain or loss
from this liquidation was recognized in the quarter ended
September 30, 2008. In August 2008, the Company began operations at the new coil facility located at Decatur, Alabama.
  This operation produced a loss of approximately $90,000 during the 2008 quarter.   The Company expects that this facility will continue
 to produce a loss during this ramp up period and until demand for coil products improves. The Company is primarily dependent on Nucor Steel Company (NSC) for its supply of
 coil inventory.
  NSC continues to supply the Company with steel coils in amounts that are adequate for the Companys purposes.  Loss of NSC as a
 supplier
could have an adverse effect on the Companys business. Tubular product segment sales increased approximately $26,614,000 during the 2008 quarter.  This
 increase resulted from both an increase in average selling prices and an increase in tons sold.   The average selling price per ton
 increased from approximately $594 per ton in the 2007 quarter to $1,030 per ton in the 2008 quarter.  The Company sold approximately 36,000
 tons of pipe in the 2007 quarter compared to approximately 47,000 tons in the 2008 quarter.   Tubular product segment operating profits as a
 percentage of segment sales improved from 5.9% in the 2007 quarter to 24.2% in the 2008 quarter.   The Company experienced strong market
 conditions for its pipe products in the 2008 quarter and margins improved significantly.   In addition, the Company benefited from lower
 cost inventory sold at substantially improved selling prices. USS is the Companys primary supplier of tubular products and coil material used in
 pipe manufacturing and is a major customer of manufactured pipe.
In the 2008 quarter, USS continued to supply the Company with inventory in amounts that were adequate for the
 Companys
 purposes.  Loss of USS as a supplier or customer could have an adverse effect on the Companys business. During the 2008 quarter, general, selling and administrative costs increased $780,115 from the
 amount recorded during the 2007 quarter.  This increase was related primarily to increases in commissions and bonuses associated with the
 increase in earnings. Income taxes increased $2,417,550 from the comparable amount recorded during the 2007 quarter.
 This increase was primarily related to the increase in earnings before taxes.  Effective tax rates were 34.7% and 34.3% in the 2008 and
 2007 quarters, respectively.   The Company incurred an increase in state income taxes in the 2008 quarter.




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FINANCIAL POSITION, LIQUIDITY AND
CAPITAL RESOURCES The
Company remained in a strong, liquid position at September 30,
2008.
Current ratios were 2.2 and 3.3 at September 30, 2008 and
March 31, 2008, respectively. Working
capital was $35,200,749 at September 30, 2008 and $34,638,228 at
March 31, 2008. During
the three months ended September 30, 2008, the Company maintained
assets and liabilities at levels it believed were commensurate with
operations. Changes in current assets and liabilities during the 2008
period  were related primarily to the ordinary course of business of the
Company.
During the 2008 period, cash was used to pay off long-term debt. The increase
in receivables was related primarily to an increase in sales. The increase in inventory was primarily related  to pipe operations and was funded
principally with the increase in accounts payable.
The Company expects to
continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Companys operations. During
the six months ended September 30, 2008, the Company
purchased approximately $1,700,000 in fixed assets. These assets were
related primarily to equipment associated with the new coil operation located in
Decatur, Alabama which began operations in August 2008. At the
Decatur facility the Company operates a steel temper mill and a steel
cut-to-length line including a leveling  line.
At September 30, 2008, the
Company had invested approximately $10,000,000 at this location. The Company has an arrangement with a bank which provides for a
revolving line of credit facility (the revolver).
Pursuant to the revolver, which expires April 1, 2010,
the Company may borrow up to $10 million at the banks
prime rate or 1.5% over LIBOR. The Company uses
the revolver to support cash flow and will borrow and repay
the note as working capital is required. At September 30, 2008,
the Company had no borrowings
outstanding under the revolver.
At March 31, 2008, the Company owed $6,600,000 pursuant to the
revolver at an average interest rate of 4.4%. These loans
were paid off in April and May 2008. The Company has
in the past and may in the future borrow funds on a term basis to build or improve facilities. The Company
currently has no plans to borrow any significant amount of  funds on a term basis. Notwithstanding the current market conditions, the Company believes its
cash flows from operations and borrowing capability under its
revolver 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, product quality and proposed expansion plans. Forward-looking statements may
be made by management orally or in writing including, but not limited to, this
Managements Discussion and Analysis of Financial Condition and Results of
Operations and other sections of the Companys filings with the Securities and
Exchange Commission under the Securities Act of 1933 and the Securities Exchange
Act of 1934. Actual results and trends in the future may differ materially
depending on a variety of factors including but not limited to changes in the
demand and prices of the Company products, changes in the demand for steel and
steel products in general and the Companys success in executing its internal
operating plans, including any proposed expansion plans. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk In the normal
course of business the Company is exposed to market risks primarily
from changes in the cost of steel in inventory and in interest rates.
The Company closely monitors exposure to market risks and develops
appropriate strategies to manage risk. With respect to steel
purchases, there is no recognized market to purchase derivative
financial instruments to reduce the inventory exposure risk on
changing commodity prices. The exposure to market risk associated
with interest rates relates primarily to debt. Recent debt balances
are minimal and, as a result, direct exposure to interest rates
changes is not significant. 7




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##### Table of Contents



Item 4. Controls and Procedures
   8




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FRIEDMAN INDUSTRIES, INCORPORATED

Three Months Ended September 30, 2008





Part II  OTHER INFORMATION




Item 1. Legal Proceedings

Not applicable




Item 1A. Risk Factors

Not applicable




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



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




Item 3. Defaults Upon Senior Securities



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




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

At the Annual Meeting of
Shareholders held on September 4, 2008, the Companys
shareholders elected ten directors to the Companys Board of
Directors. The number of shares voted for and withheld with
respect to the election of each director was as follows:

|                |  |                  |  |                
|--------------- |  | ---------------- |  | ---------------
|Name            |  | Shares
Voted For |  | Shares
Withheld
|Jack Friedman   |  | 4,058,363        |  | 2,013,371      
|Harold Friedman |  | 4,167,356        |  | 1,904,378      
|William E. Crow |  | 4,249,142        |  | 1,822,592      
|Durga D. Arawal |  | 5,393,044        |  | 678,690        
|Charles W. Hall |  | 4,188,213        |  | 1,883,521      
|Alan M. Rauch   |  | 5,404,315        |  | 667,419        
|Hershel M. Rich |  | 5,413,772        |  | 657,962        
|Joel Spira      |  | 5,366,396        |  | 705,338        
|Joe L. Williams |  | 4,150,161        |  | 1,921,573      
|Max Reichenthal |  | 4,181,547        |  | 1,890,187      




Item 5. Other Information

Not applicable




Item 6. Exhibits



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



| |        |                                                                                                                                                          
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | 31.1  | Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by William E. Crow                                                       
|
| | 31.2  | Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Ben Harper                                                            
|
| | 32.1  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, signed by William E. Crow
|
| | 32.2  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, signed by Ben Harper     

9



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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 November 14, 2008 |                                              |  |                
|                       | By                                           |  | /s/  BEN HARPER
|                       |                                              |  |                
|                       | Ben Harper, Senior Vice President-Finance   
|                       | (Principal Financial and Accounting Officer)
|                       |                                              |  |                

10



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EXHIBIT INDEX
 Exhibit No.
    
    DescriptionExhibit 31.1
    
     Certification Pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002, signed by William E. CrowExhibit 31.2
    
     Certification Pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Ben HarperExhibit 32.1
    
     Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of
2002, signed by William E. CrowExhibit 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