##### Table of Contents



---

---

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 SEPTEMBER 30, 2004                                 
|     |  |                                                                                                                                                                           
|OR  
|     |  |                                                                                                                                                                           
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FROM THE TRANSITION PERIOD FROM                                                TO

COMMISSION FILE NUMBER 1-7521

FRIEDMAN INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)


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

4001 HOMESTEAD ROAD, HOUSTON, TEXAS 77028-5585
(Address of principal executive office) (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 September 30, 2004, the number of shares outstanding of the issuers only
class of stock was 7,595,239 shares of Common Stock.



---

---





---

TABLE OF CONTENTS



|                                                 |                                                                                               |                                                             |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                  
|                                                 | Item 1. Financial Statements                                                                 
|                                                 |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                      
|                                                 |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  UNAUDITED  
|                                                 |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
|                                                 |                                                                                               | CONDENSED NOTES TO QUARTERLY REPORT  UNAUDITED            
|                                                 | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                 | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                 | Item 4. Controls and Procedures                                                              
|Part II  OTHER INFORMATION                     
|                                                 | Item 1. Legal Proceedings                                                                    
|                                                 | Item 2. Changes in Securities, Use of Proceeds
and Issuer Purchases of Equity 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                                                                             
|SIGNATURES                                      
|EXHIBIT INDEX                                   
|Certification Pursuant to Section 302           
|Certification Pursuant to Section 302           
|Certification Pursuant to 18 U.S.C. Section 1350
|Certification Pursuant to 18 U.S.C. Section 1350



---



##### Table of Contents






PART I  FINANCIAL
INFORMATION




Item 1. Financial Statements




FRIEDMAN INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |             |           |            | 
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | ------------------ | ---------- | -------------- | ----------- | --------- | ---------- | 
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             | SEPTEMBER 30,
2004 |            | MARCH 31,
2004
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             | Unaudited          |            |               
|CURRENT ASSETS:                             |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            | Cash and cash equivalents                                                                                                                             |                                                                                                                | $                                          | 7,099,433   |                    |            | $              | 1,984,763   |          
|                                            | Accounts receivable, net of allowances for bad debts and cash
discounts of $37,276 and $44,776 at September 30, 2004 and
March 31, 2004, respectively |                                                                                                                |                                            | 15,817,403  |                    |            |                | 14,688,702  |          
|                                            | Inventories                                                                                                                                           |                                                                                                                |                                            | 19,933,110  |                    |            |                | 21,043,992  |          
|                                            | Other                                                                                                                                                 |                                                                                                                |                                            | 322,404     |                    |            |                | 112,244     |          
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            |                                                                                                                                                       |                                                                                                                | TOTAL CURRENT ASSETS                       |             |                    | 43,172,350 |                |             |           | 37,829,701 | 
|PROPERTY, PLANT AND EQUIPMENT:              |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            | Land                                                                                                                                                  |                                                                                                                |                                            | 437,793     |                    |            |                | 437,793     |          
|                                            | Buildings
and yard improvements                                                                                                                       |                                                                                                                |                                            | 4,088,149   |                    |            |                | 4,088,149   |          
|                                            | Machinery and equipment                                                                                                                               |                                                                                                                |                                            | 18,497,977  |                    |            |                | 18,013,461  |          
|                                            | Less accumulated depreciation                                                                                                                         |                                                                                                                |                                            | (16,276,518 | )                  |            |                | (15,846,288 | )        
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            |                                                                                                                                                       |                                                                                                                | 6,747,401                                  |             |                    |            | 6,693,115      |            
|OTHER ASSETS:                               |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            | Cash value of officers life insurance                                                                                                                |                                                                                                                |                                            | 528,590     |                    |            |                | 1,302,613   |          
|                                            | Deferred
income taxes                                                                                                                                 |                                                                                                                |                                            | 143,694     |                    |            |                | 202,694     |          
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            |                                                                                                                                                       |                                                                                                                | TOTAL ASSETS                               |             | $                  | 50,592,035 |                |             | $         | 46,028,123 | 
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|LIABILITIES AND STOCKHOLDERS EQUITY       
|CURRENT LIABILITIES:                        |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            | Accounts payable and accrued expenses                                                                                                                 |                                                                                                                | $                                          | 12,592,548  |                    |            | $              | 10,204,653  |          
|                                            | Current portion of long-term debt                                                                                                                     |                                                                                                                |                                            | 23,081      |                    |            |                | 63,037      |          
|                                            | Dividends payable                                                                                                                                     |                                                                                                                |                                            | 607,759     |                    |            |                | 151,500     |          
|                                            | Income taxes payable                                                                                                                                  |                                                                                                                |                                            | 78,685      |                    |            |                | 1,134,433   |          
|                                            | Contribution to profit sharing plan                                                                                                                   |                                                                                                                |                                            | 134,000     |                    |            |                | 280,000     |          
|                                            | Employee compensation and related expenses                                                                                                            |                                                                                                                |                                            | 918,270     |                    |            |                | 806,140     |          
|                                            | Deferred credit for LIFO replacement                                                                                                                  |                                                                                                                |                                            | 157,520     |                    |            |                |            |          
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            |                                                                                                                                                       |                                                                                                                | TOTAL CURRENT LIABILITIES                  |             |                    | 14,511,863 |                |             |           | 12,639,763 | 
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                                                                                                                       |                                                                                                                | 389,904                                    |             |                    |            | 356,756        |            
|STOCKHOLDERS EQUITY:                       |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            | Common stock, par value $1:                                                                                                                           |                                                                                                                |                                            |             |                    |            |                |             |          
|                                            |                                                                                                                                                       | Authorized
shares  10,000,000                                                                                 |                                            |             |                    |            |                |             |           |           
|                                            |                                                                                                                                                       | Issued and outstanding
shares  7,595,239 and 7,575,239 at September 30, 2004 and March 31, 2004, respectively |                                            |             | 7,595,239          |            |                |             | 7,575,239 |           
|                                            | Additional paid-in capital                                                                                                                            |                                                                                                                |                                            | 27,742,409  |                    |            |                | 27,714,669  |          
|                                            | Retained earnings(deficit)                                                                                                                            |                                                                                                                |                                            | 352,620     |                    |            |                | (2,258,304  | )        
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            |                                                                                                                                                       |                                                                                                                | TOTAL STOCKHOLDERS EQUITY                 |             |                    | 35,690,268 |                |             |           | 33,031,604 | 
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            
|                                            |                                                                                                                                                       |                                                                                                                | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |             | $                  | 50,592,035 |                |             | $         | 46,028,123 | 
|                                            |                                                                                                                                                       |                                                                                                                |                                            |             |                    |            |                |            

2



---



##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  UNAUDITED

|                                             |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |            |   | 
|-------------------------------------------- | ----------------------------------------- | - | --------------------------------- | ---------- | ------------------------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | - | 
|                                             |                                           |   | Three
Months Ended 
September 30, |            | Six
Months Ended 
September 30, |  
|                                             |                                           |   |                                   |            |                                 |  
|                                             |                                           |   | 2004                              |            | 2003                            |   | 2004       |            | 2003 |  
|                                             |                                           |   |                                   |            |                                 |   |            |            |      |  
|Net sales                                    |                                           | $ | 49,020,241                        |            |                                 | $ | 25,410,689 |            |      | $ | 93,935,945 |            |  | $ | 50,614,859 |            |  
|Costs and expenses                           |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |            |  
|                                             | Costs of goods sold                       |   |                                   | 44,486,288 |                                 |   |            | 23,910,932 |      |   |            | 85,201,445 |  |   |            | 47,166,445 |   | 
|                                             | General, selling and administrative costs |   |                                   | 1,441,420  |                                 |   |            | 1,045,949  |      |   |            | 3,093,901  |  |   |            | 2,280,044  |   | 
|                                             | Interest                                  |   |                                   |           |                                 |   |            | 14,374     |      |   |            |           |  |   |            | 23,106     |   | 
|                                             |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |            |  
|                                             |                                           |   | 45,927,708                        |            |                                 |   | 24,971,255 |            |      |   | 88,295,346 |            |  |   | 49,469,595 |            |  
|Interest and other income                    |                                           |   | (51,120                           | )          |                                 |   | (1,873     | )          |      |   | (61,083    | )          |  |   | (4,021     | )          |  
|                                             |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |            |  
|Earnings before income taxes                 |                                           |   | 3,143,653                         |            |                                 |   | 441,307    |            |      |   | 5,701,682  |            |  |   | 1,149,285  |            |  
|Provision (benefit) for income taxes:        |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |           
|                                             | Current                                   |   |                                   | 1,129,051  |                                 |   |            | 159,045    |      |   |            | 2,044,251  |  |   |            | 408,758    |   | 
|                                             | Deferred                                  |   |                                   | 35,000     |                                 |   |            | (9,000     | )    |   |            | 59,000     |  |   |            | (18,000    | ) | 
|                                             |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |            |  
|                                             |                                           |   | 1,164,051                         |            |                                 |   | 150,045    |            |      |   | 2,103,251  |            |  |   | 390,758    |            |  
|                                             |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |            |  
|Net earnings                                 |                                           | $ | 1,979,602                         |            |                                 | $ | 291,262    |            |      | $ | 3,598,431  |            |  | $ | 758,527    |            |  
|                                             |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |            |  
|Average number of common shares outstanding: |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |           
|                                             | Basic                                     |   |                                   | 7,581,906  |                                 |   |            | 7,573,239  |      |   |            | 7,578,572  |  |   |            | 7,573,239  |   | 
|                                             | Diluted                                   |   |                                   | 7,785,196  |                                 |   |            | 7,632,571  |      |   |            | 7,756,424  |  |   |            | 7,615,163  |   | 
|Net earnings per share:                      |                                           |   |                                   |            |                                 |   |            |            |      |   |            |            |  |   |            |           
|                                             | Basic                                     |   | $                                 | 0.26       |                                 |   | $          | 0.04       |      |   | $          | 0.47       |  |   | $          | 0.10       |   | 
|                                             | Diluted                                   |   | $                                 | 0.25       |                                 |   | $          | 0.04       |      |   | $          | 0.46       |  |   | $          | 0.10       |   | 
|Cash dividends declared per common share     |                                           | $ | 0.08                              |            |                                 | $ | 0.03       |            |      | $ | 0.13       |            |  | $ | 0.06       |            |  

3



---



##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED

|                                                 |                                                                               |                                             |                                                  |           |                                 |           |         |           |            |            |  
|------------------------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------------ | --------- | ------------------------------- | --------- | ------- | --------- | ---------- | ---------- | -
|                                                 |                                                                               |                                             |                                                  |           | Six
Months Ended 
September 30,
|                                                 |                                                                               |                                             |                                                  |           |                                
|                                                 |                                                                               |                                             |                                                  |           | 2004                            |           | 2003   
|                                                 |                                                                               |                                             |                                                  |           |                                 |           |        
|OPERATING ACTIVITIES                             |                                                                               |                                             |                                                  |           |                                 |           |         |          
|                                                 | Net earnings                                                                  |                                             | $                                                | 3,598,431 |                                 |           | $       | 758,527   |           
|                                                 | Adjustments to reconcile net income to cash provided by
operating activities: |                                             |                                                  |           |                                 |           |         |           |           
|                                                 |                                                                               | Depreciation                                |                                                  |           | 441,600                         |           |         |           | 465,000    |           
|                                                 |                                                                               | Provision for deferred taxes                |                                                  |           | 59,000                          |           |         |           | (18,000    | )         
|                                                 |                                                                               | Provision for postretirement benefits       |                                                  |           | 33,148                          |           |         |           |           |           
|                                                 | Decrease (increase) in operating assets:                                      |                                             |                                                  |           |                                 |           |         |           |           
|                                                 |                                                                               | Accounts receivable                         |                                                  |           | (1,128,701                      | )         |         |           | 690,350    |           
|                                                 |                                                                               | Inventories                                 |                                                  |           | 1,110,882                       |           |         |           | 1,650,910  |           
|                                                 |                                                                               | Other                                       |                                                  |           | (210,160                        | )         |         |           | (324,339   | )         
|                                                 | Increase (decrease) in operating liabilities:                                 |                                             |                                                  |           |                                 |           |         |           |           
|                                                 |                                                                               | Accounts payable and accrued expenses       |                                                  |           | 2,387,895                       |           |         |           | (4,075,317 | )         
|                                                 |                                                                               | Contribution to profit-sharing plan payable |                                                  |           | (146,000                        | )         |         |           | (128,000   | )         
|                                                 |                                                                               | Employee compensation and related expenses  |                                                  |           | 112,130                         |           |         |           | (6,534     | )         
|                                                 |                                                                               | Federal income taxes payable                |                                                  |           | (1,055,748                      | )         |         |           | (251,242   | )         
|                                                 |                                                                               | Deferred credit for LIFO replacement        |                                                  |           | 157,520                         |           |         |           |           |           
|                                                 |                                                                               |                                             |                                                  |           |                                 |           |         |          
|                                                 |                                                                               |                                             | NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES |           |                                 | 5,359,997 |         |           |            | (1,238,645 | )
|INVESTING ACTIVITIES                             |                                                                               |                                             |                                                  |           |                                 |           |         |          
|                                                 | Purchase of property, plant and equipment                                     |                                             |                                                  | (496,427  | )                               |           |         | (277,850  | )         
|                                                 | (Increase) decrease
in cash value of officers life insurance                 |                                             |                                                  | 774,023   |                                 |           |         | (6,919    | )         
|Proceeds from sale of asset                      |                                                                               |                                             | 542                                              |           |                                 |           |        |          
|                                                 |                                                                               |                                             |                                                  |           |                                 |           |         |          
|                                                 |                                                                               |                                             | NET
CASH PROVIDED (USED) IN INVESTING ACTIVITIES |           |                                 | 278,138   |         |           |            | (284,769   | )
|FINANCING ACTIVITIES                             |                                                                               |                                             |                                                  |           |                                 |           |         |          
|                                                 | Cash dividends paid                                                           |                                             |                                                  | (531,249  | )                               |           |         | (378,649  | )         
|                                                 | Principal payments on notes payable                                           |                                             |                                                  | (39,956   | )                               |           |         | (31,721   | )         
|                                                 | Increase in notes payable                                                     |                                             |                                                  |          |                                 |           |         | 2,000,000 |           
|                                                 | Exercise of stock options                                                     |                                             |                                                  | 47,740    |                                 |           |         |          |           
|                                                 |                                                                               |                                             |                                                  |           |                                 |           |         |          
|                                                 |                                                                               |                                             | NET CASH PROVIDED (USED) IN FINANCING
ACTIVITIES |           |                                 | (523,465  | )       |           |            | 1,589,630  |  
|                                                 |                                                                               |                                             |                                                  |           |                                 |           |         |          
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                               |                                             | 5,114,670                                        |           |                                 |           | 66,216  |          
|                                                 | Cash and cash equivalents at beginning of period                              |                                             |                                                  | 1,984,763 |                                 |           |         | 673,127   |           
|                                                 |                                                                               |                                             |                                                  |           |                                 |           |         |          
|CASH AND CASH EQUIVALENTS AT END OF PERIOD       |                                                                               | $                                           | 7,099,433                                        |           |                                 | $         | 739,343 |          
|                                                 |                                                                               |                                             |                                                  |           |                                 |           |         |          

4



---



##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED




CONDENSED NOTES TO QUARTERLY REPORT  UNAUDITED
SIX MONTHS ENDED SEPTEMBER 30, 2004

NOTE A  BASIS OF PRESENTATION

The accompanying unaudited condensed, consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further information,
refer to the financial statements and footnotes included in the Companys annual
report on Form 10-K for the year ended March 31, 2004.

NOTE B  INVENTORIES

Inventories consist
of prime coil, non-standard coil and tubular materials.
Prime coil inventory consists primarily of raw materials,
non-standard coil inventory consists primarily of finished goods and tubular
inventory consists of both raw materials and finished goods. Inventories are
valued at the lower of cost or replacement market value. Cost for prime
coil inventory is
determined under the last-in, first-out (LIFO) method. Cost for
non-standard coil inventory is determined using the specific identification method. Cost for tubular
inventory is determined using the weighted average method.

During
the quarter ended September 30,2004, LIFO inventories were
reduced but are expected to be replaced by March 31, 2005.
Accordingly, a deferred credit for LIFO replacement of $157,520 to
reflect the expected cost of such replacement was recorded at
September 30, 2004.

A summary of inventory values follows:

September 30,
    

March 31,2004
    
    2004Prime
Coil Inventory
    
    $
    7,661,637
    
    
    $
    4,976,300Non-Standard
Coil Inventory
    
    
    939,742
    
    
    
    4,181,815Tubular Raw Material
    
    
    3,557,822
    
    
    
    3,515,060Tubular Finished Goods
    
    
    7,773,909
    
    
    
    8,370,817$
    19,933,110
    
    
    $
    21,043,992


NOTE C  LONG-TERM DEBT

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

September 30,
2004
    

March 31,
2004Notes payable on equipment purchases
    
    $
    23,081
    
    
    $
    63,037


The Company has a $6 million
revolving credit facility which expires April 1, 2006. There
were no amounts outstanding pursuant to the facility at September 30,
2004 or March 31, 2004.

NOTE D  STOCK BASED COMPENSATION

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

The following
schedule reflects the impact on net income and earnings per common
share if the Company had applied the fair value recognition
provisions of Statements of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation, to stock
based employee compensation for each period indicated:

|                                                         |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         |  |  | 
|-------------------------------------------------------- |  | - | --------- | ------------------------------- |  | ----------------------------- | ------- | ---- |  | ---- | --------- |  |  | - | ------- |  |  | 
|                                                         |  |   |           | Three
Months EndedSeptember 30, |  | Six
Months EndedSeptember 30,
|                                                         |  |   |           | 2004                            |  | 2003                          |         | 2004 |  | 2003
|Reported
net income                                      |  | $ | 1,979,602 |                                 |  | $                             | 291,262 |      |  | $    | 3,598,431 |  |  | $ | 758,527 | 
|Less:
compensation expenses per SFAS No. 123, net of tax |  |   | .00       |                                 |  |                               | .00     |      |  |      | .00       |  |  |   | 31,582  | 
|                                                         |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         | 
|Pro
forma net income                                     |  | $ | 1,979,602 |                                 |  | $                             | 291,262 |      |  | $    | 3,598,431 |  |  | $ | 726,945 | 
|                                                         |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         | 
|BASIC
EARNINGS PER COMMON SHARE:                         |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         | 
|Reported
net income                                      |  |   | .26       |                                 |  |                               | .04     |      |  |      | .47       |  |  |   | .10     | 
|Less:
compensation expense per SFAS No. 123, net of tax  |  |   | .00       |                                 |  |                               | .00     |      |  |      | .00       |  |  |   | .00     | 
|                                                         |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         | 
|Pro
forma net income                                     |  |   | .26       |                                 |  |                               | .04     |      |  |      | .47       |  |  |   | .10     | 
|                                                         |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         | 
|DILUTED
EARNINGS PER COMMON SHARE:                       |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         | 
|Reported
net income                                      |  |   | .25       |                                 |  |                               | .04     |      |  |      | .46       |  |  |   | .10     | 
|Less:
compensation expense per SFAS No. 123, net of tax  |  |   | .00       |                                 |  |                               | .00     |      |  |      | .00       |  |  |   | .00     | 
|                                                         |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         | 
|Pro
forma net income                                     |  |   | .25       |                                 |  |                               | .04     |      |  |      | .46       |  |  |   | .10     | 
|                                                         |  |   |           |                                 |  |                               |         |      |  |      |           |  |  |   |         | 

During the six months ended September 30,
2004, options for 20,000 shares Common Stock were exercised which
resulted in proceeds of $47,740 to the Company. In the 2004 period, no options were granted.

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

5



---



##### Table of Contents



NOTE E  SEGMENT INFORMATION

|                 |                         |                             |   |                                  |        |                                |   |        |        |      |   |        |        |  |   |        |        | 
|---------------- | ----------------------- | --------------------------- | - | -------------------------------- | ------ | ------------------------------ | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                 |                         |                             |   | Three Months Ended 
September 30 |        | Six
Months Ended 
September 30
|                 |                         |                             |   | 2004                             |        | 2003                           |   | 2004   |        | 2003
|Net sales        |                         |                             |   |                                  |        |                                |   |        |        |      |   |        |        |  |   |       
|                 | Coil                    |                             | $ | 28,157                           |        |                                | $ | 13,157 |        |      | $ | 54,693 |        |  | $ | 26,552 |       
|                 | Tubular                 |                             |   | 20,863                           |        |                                |   | 12,254 |        |      |   | 39,243 |        |  |   | 24,063 |       
|                 |                         |                             |   |                                  |        |                                |   |        |        |      |   |        |        |  |   |       
|                 |                         | Total net sales             |   | $                                | 49,020 |                                |   | $      | 25,411 |      |   | $      | 93,936 |  |   | $      | 50,615 | 
|                 |                         |                             |   |                                  |        |                                |   |        |        |      |   |        |        |  |   |       
|Operating profit |                         |                             |   |                                  |        |                                |   |        |        |      |   |        |        |  |   |       
|                 | Coil                    |                             | $ | 1,849                            |        |                                | $ | 299    |        |      | $ | 3,224  |        |  | $ | 1,009  |       
|                 | Tubular                 |                             |   | 2,072                            |        |                                |   | 660    |        |      |   | 4,382  |        |  |   | 1,429  |       
|                 |                         |                             |   |                                  |        |                                |   |        |        |      |   |        |        |  |   |       
|                 |                         | Total operating profit      |   |                                  | 3,921  |                                |   |        | 959    |      |   |        | 7,606  |  |   |        | 2,438  | 
|                 | Corporate expenses      |                             |   | 828                              |        |                                |   | 506    |        |      |   | 1,965  |        |  |   | 1,270  |       
|                 | Interest expense        |                             |   |                                 |        |                                |   | 14     |        |      |   |       |        |  |   | 23     |       
|                 | Interest & other income |                             |   | (51                              | )      |                                |   | (2     | )      |      |   | (61    | )      |  |   | (4     | )     
|                 |                         |                             |   |                                  |        |                                |   |        |        |      |   |        |        |  |   |       
|                 |                         | Total earnings before taxes |   | $                                | 3,144  |                                |   | $      | 441    |      |   | $      | 5,702  |  |   | $      | 1,149  | 
|                 |                         |                             |   |                                  |        |                                |   |        |        |      |   |        |        |  |   |       

|               |                  |  |   |                   |        |               |   |        |        | 
|-------------- | ---------------- |  | - | ----------------- | ------ | ------------- | - | ------ | ------ | 
|               |                  |  |   | September
30,2004 |        | March
31,2004
|               |                  |  |   |                   |        |              
|Segment assets |                  |  |   |                   |        |               |   |       
|               | Coil             |  | $ | 20,572            |        |               | $ | 21,770 |       
|               | Tubular          |  |   | 22,112            |        |               |   | 20,624 |       
|               |                  |  |   |                   |        |               |   |       
|               |                  |  |   | 42,684            |        |               |   | 42,394 |       
|               | Corporate assets |  |   | 7,908             |        |               |   | 3,634  |       
|               |                  |  |   |                   |        |               |   |       
|               |                  |  |   |                   | 50,592 |               |   |        | 46,028 | 
|               |                  |  |   |                   |        |               |   |       

Segment amounts
reflected above are stated in thousands. General corporate expenses
reflect general and administrative expenses not directly associated
with segment operations and consist primarily of corporate executive
and accounting salaries, professional fees and services, bad debts,
accrued profit sharing expense, corporate insurance expenses and
office supplies. Corporate assets consists primarily of cash and cash
equivalents and the cash value of officers life insurance.

6



---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Six
Months Ended September 30, 2004 Compared to Six Months Ended September 30,
2003 During the six months ended September 30, 2004, sales, costs of goods sold and
gross profit increased $43,321,086, $38,035,000 and $5,286,086, from the
respective amounts recorded during the six months ended September 30, 2003.
The increases in sales and costs of goods were related primarily to increases
in the average per ton selling price and average per ton cost of goods sold of
approximately 80% and 75%, respectively. Total tons shipped increased from
approximately 152,000 tons in the 2003 period to 157,000 tons in the 2004
period. Gross profit benefited from the increase in sales as well as improved
margins. In the 2004 period, gross profit and costs of goods as a percentage of
sales were approximately 9.3% and 90.7%, respectively, compared to 6.8% and
93.2%, respectively, in the 2003 period. During the 2004 period, the Company
experienced a significant improvement in market conditions for its products as
compared to market conditions during the 2003 period. Coil product segment sales increased approximately $28,141,000 during the 2004
period. This increase was related primarily to an increase in the average per
ton selling price. Tons shipped actually declined from approximately 83,000
tons in the 2003 period to 78,000 tons in the 2004 period. This decrease was
related primarily to a decrease in tons sold by the Companys XSCP Division
(XSCP). During the 2004 period, XSCP, which markets non-standard coils
received from Nucor Steel Company (NSC), agreed with NSC to suspend the
purchase of non-standard coils. XSCP accounted for approximately 5% of total
sales during the 2004 period. Due to the increased cost of this material,
management did not believe that the material could be resold at a profit.
Management continues to monitor this situation closely and confers regularly
with NSC regarding this suspension. In the near term, management expects this
suspension to continue. In the event management decided to redeploy
XSCP assets, the XSCP operating assets could be used at the Companys
Hickman, Arkansas coil facility (Hickman). Total coil operating profit as a
percentage of coil segment sales increased from 3.8% in the 2003
period to 5.9%
in the 2004 period. Improved market conditions for coil segment products
produced increases in sales and margins during the 2004 period. In the 2004 period, the Companys Lone Star coil facility (LSCF) continued to
experience a lack of supply of coil products from its primary coil supplier,
Lone Star Steel Company (LSS). LSCF, which accounted for approximately 8% of
total sales in the 2004 period, has from time to time purchased coils from
other suppliers. However, freight costs associated with these purchases
diminishes the Companys competitiveness in a very competitive industry. LSCF
produced a profit from operations in the 2004 period. A further reduction in
supply could have an adverse effect on coil segment operations. Management
confers regularly with LSS and continues to monitor this situation closely. The
Company is dependent on LSS and NSC for its supply of coil inventory. NSC
continues to supply Hickman with steel coils in amounts that are adequate for
the Companys purposes. While current levels are adequate to sustain the
Companys operations, a reduction in the supply of steel coils could have an
adverse effect on the Companys coil operations. Tubular product segment sales increased approximately $15,180,000 during the
2004 period. This increase resulted from both an increase in tons shipped and
from an approximately 42% increase in the average per ton selling price. Tons
shipped increased from approximately 68,000 tons in the 2003 period to 79,000
tons in the 2004 period. Tubular product segment operating profits as a
percentage of segment sales were approximately 11.2 % and 5.9 % in the 2004 and
2003 periods, respectively. This segment benefited from significantly improved
market conditions for tubular products during the 2004 period as compared to market
conditions in the 2003 period. During the 2004 quarter, LSS, the Companys primary supplier of tubular
products and coil material used in pipe manufacturing, continued to supply such
products in amounts that were adequate for the Companys purposes. The Company
does not currently anticipate any significant change in such supply from LSS. During the 2004 period, general, selling and administrative costs increased
$813,857 from the amount recorded during the 2003 period. This increase was
related primarily to bonuses associated with increased earnings and an increase
in legal and professional expenses. Income taxes increased $1,712,493 from the comparable amount recorded during
the 2003 period. This increase was primarily related to the increase in
earnings before taxes. The effective tax rates were 36.9% and 34% in the 2004
period and 2003 period, respectively. In the 2004 period, the Company recorded
additional taxes of $114,180 and $50,500 reflecting the net effect of state
income taxes and taxes related to the surrender of life insurance policies,
respectively. Three
Months Ended September 30, 2004 Compared to Three Months Ended September 30,
2003 During the quarter ended September 30, 2004, sales, costs of goods sold and
gross profit increased $23,609,552, $20,575,356 and $3,034,196, from the
respective amounts recorded during the quarter ended September 30, 2003. The
increases in sales and costs of goods were related primarily to increases in
the average per ton selling price and average per ton cost of goods sold of
approximately 94% and 87%, respectively. Total tons shipped remained constant
at approximately 75,000 tons in both quarters. Gross profit benefited from the
increase in sales as well as improved margins. In the 2004 quarter, gross
profit and costs of goods as a percentage of sales were approximately 9.2% and
90.8%, respectively, compared to 5.9% and 94.1%, respectively, in the 2003
quarter. During the 2004 quarter, the Company experienced a significant
improvement in market conditions for its products as compared to market
conditions during the 2003 quarter. Coil product segment sales increased approximately $15,000,000 during the 2004
quarter. This increase was related primarily to an increase in the average per
ton selling price of approximately 135%. Tons shipped declined from
approximately 41,000 tons in the 2003 quarter to 37,000 tons in the 2004
quarter. This decrease was related primarily to a decrease in tons sold by
XSCP. Coil operating profit as a percentage of coil segment sales increased
from approximately 2.3% in the 2003 quarter to 6.6% in the 2004 quarter.
Significantly improved market conditions for coil segment products produced
increased sales and margins during the 2004 quarter. Tubular product segment sales increased approximately $8,609,000 during the
2004 quarter. This increase resulted from both an increase in tons shipped and
from an approximately 55% increase in the average per ton selling price. Tons
shipped increased from approximately 35,000 tons in the 2003 quarter to 38,000
tons in the 2004 quarter. Tubular product segment operating profits as a
percentage of segment sales were approximately 9.9% and 5.4% in the 2004 and
2003 quarters, respectively. This segment benefited from improved market
conditions for tubular products during the 2004 quarter as compared to market
conditions in the 2003 quarter. During the 2004 quarter, general, selling and administrative costs increased
$395,471 from the amount recorded during the 2003 quarter. This increase was
related primarily to bonuses associated with increased earnings. Income taxes increased $1,014,006 from the comparable amount recorded during
the 2003 quarter. This increase was primarily related to the increase in
earnings before taxes. The effective tax rates were 37% and 34% in the 2004
quarter and 2003 quarter, respectively. In the 2004 quarter, the Company
recorded additional taxes of $69,960 and $25,250 reflecting the net effect of
state income taxes and taxes related to the surrender of life insurance
policies, respectively.


7



---



##### Table of Contents



FINANCIAL POSITION, LIQUIDITY AND
CAPITAL RESOURCES

The
Company remained in a strong, liquid position at September 30, 2004.
Current ratios were 3.0 at both September 30, 2004 and March 31, 2004. Working
capital was $28,660,487 at September 30, 2004 and $25,189,938 at
March 31, 2004.

During
the three months ended September 30, 2004, the Company maintained
assets and liabilities at levels it believed were commensurate with
operations. The Company expects to
continue to monitor, evaluate and manage balance sheet components depending on changes in the market conditions and the Companys operations.

During
the six months ended September 30, 2004, the Company purchased approximately $496,000 in fixed
assets. This purchase was related primarily to a small diameter pipe mill which began
operation in April 2004.

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

During
the six months ended
September 30, 2004, cash and cash equivalents increased
$5,114,670 primarily as the result of earnings during the 2004 period.

The Company has an arrangement with a bank which provides for a
revolving line of credit facility (the revolving facility).
Pursuant to the revolving facility, which expires April 1, 2006, the Company may borrow up to $6 million at the banks
prime rate or 1.5% over LIBOR. The Company uses
the revolving facility to support cash flow and will borrow and repay
the note as working capital is required. At September 30, 2004 and
March 31, 2004, the Company had no borrowings
outstanding under the revolving facility.

The Company has
in the past and may in the future borrow funds on a term basis to build or improve facilities. The Company
currently has no plans to borrow funds on a term basis.

Notwithstanding the current market conditions, the Company believes its
cash flows from operations and borrowing capability under its revolving facility
are adequate to fund its expected cash requirements for the next twenty-four
months.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements requires the Company
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. One such accounting policy which requires
significant estimates and judgments is the valuation of LIFO inventories in the
Companys quarterly reporting. The quarterly valuation of inventory
requires estimates of the year end quantities which is inherently difficult.
Historically, these estimates have been materially correct. In
addition, the Company maintains an allowance for doubtful accounts
receivable by providing for specifically identified accounts where
collectibility is doubtful and a general allowance based on the aging
of the receivables compared to past experience and current trends. On an ongoing basis, the Company evaluates estimates and
judgements. The Company bases its estimates on historical experience and on
various other assumptions that it believes to be reasonable under the
circumstances.

FORWARD-LOOKING STATEMENTS

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




Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal
course of business the Company is exposed to market risks primarily
from changes in the cost of steel in inventory and in interest rates.
The Company closely monitors exposure to market risks and develops
appropriate strategies to manage risk. With respect to steel
purchases, there is no recognized market to purchase derivative
financial instruments to reduce the inventory exposure risk on
changing commodity prices. The exposure to market risk associated
with interest rates relates primarily to debt. Recent debt balances
are minimal and, as a result, direct exposure to interest rates
changes is not significant.




Item 4. Controls and Procedures

The Company's management, with the participation of the Company's principal
executive officer (CEO) and principal financial officer (CFO), evaluated the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as
of the end of the fiscal quarter ended September 30, 2004. 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 September 30, 2004 to ensure that information that is required to be
disclosed by the Company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SEC's rules and
forms.

There were no changes in the Companys internal control over financial reporting that
occurred during the fiscal quarter ended September 30, 2004 that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over financial reporting.

8



---



##### Table of Contents



FRIEDMAN INDUSTRIES, INCORPORATED

Three Months Ended June 30, 2004





Part II  OTHER INFORMATION




Item 1. Legal Proceedings

Not applicable




Item 2. Changes in Securities, Use of Proceeds
and Issuer Purchases of Equity 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

At
the Annual Meeting of Shareholders held on September 9, 2004, the Companys shareholders
elected eight 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 WithheldJack Friedman
    
    
    7,008,397
    
    
    
    62,010Harold Friedman
    
    
    7,008,905
    
    
    
    61,502William Crow
    
    
    7,013,611
    
    
    
    56,796Charles W. Hall
    
    
    6,963,524
    
    
    
    106,883Alan M. Rauch
    
    
    7,023,804
    
    
    
    46,603Hershel M. Rich
    
    
    6,981,245
    
    
    
    89,162Kirk K. Weaver
    
    
    7,024,851
    
    
    
    45,556Joe L. Williams
    
    
    6,976,087
    
    
    
    94,320





Item 5. Other Information

Not applicable




Item 6. 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   



| | 
| | 

9



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.



|                       |                                              |  |                
|---------------------- | -------------------------------------------- |  | ---------------
|                       | FRIEDMAN INDUSTRIES, INCORPORATED           
|Date November 15, 2004 |                                              |  |                
|                       | By                                           |  | /s/  BEN HARPER
|                       |                                              |  |                
|                       | Ben Harper, Senior Vice President-Finance   
|                       | (Principal Financial and Accounting Officer)
|                       |                                              |  |                

10



---



##### Table of Contents






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