##### 



EXHIBIT
    13.1
  THE
    COMPANYS ANNUAL
 REPORT TO SHAREHOLDERS FOR
 THE FISCAL YEAR ENDED MARCH 31, 2007




---



##### 



FRIEDMAN
 INDUSTRIES,
 INCORPORATED
  2007
 ANNUAL REPORT




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
    FINANCIAL HIGHLIGHTS
  2007


2006Net
    sales


$199,726,619



$181,900,351Net earnings


$7,018,318



$6,453,888Net earnings per share (Basic)


$1.05



$0.91Cash dividends per share


$0.34



$0.32Stockholders equity


$42,109,998



$37,097,335Working capital


$28,464,786



$29,167,810
   TO OUR SHAREHOLDERS:
    3 8 2 9 16 2
        -s- Harold Friedman

-s- William E. CrowHarold Friedman
    Chairman of the Board of Directors

William E. Crow
    Chief Executive Officer and President  1




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  OFFICERS
   Chief Executive Officer and
 President
   Senior Vice President  Finance
 and Secretary/Treasurer
   Senior Vice President  Sales and Marketing
   Vice President
   Vice President
   Vice President of Operations  Texas Tubular
    Division
   Vice President  Decatur Division
   Vice President of Sales  Coil Divisions
   Assistant Secretary
                                    DIRECTORS
   Chairman Emeritus; former
 Chairman of the Board and
 Chief Executive Officer
 Longview, Texas
   Chairman of the Board;
 former Vice Chairman of the Board
 Houston, Texas
   Chief Executive Officer and
 President
 Longview, Texas
   President, Piping Technology & Products, Inc. 
    (pipe fabrication)
 Houston, Texas
   Fulbright & Jaworski L.L.P. (law firm)
 Houston, Texas
   President, Ener-Tex
 International, Inc.
 (oilfield equipment sales)
 Houston, Texas
   Private investor and
 business consultant
 Houston, Texas
   Private investor; formerly, Partner, Weinstein,
    Spira & Company (accounting firm)
 Houston, Texas
   Business Development Manager
 Wells Fargo Insurance Services of Texas, Inc.
 (insurance and risk management)
 Houston, Texas
  ANNUAL REPORT ON FORM 10-K
  Shareholders may obtain without charge a copy of the
    Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2007 as filed with the
    Securities and Exchange Commission.  Written requests should be
    addressed to:  Benny B. Harper, Senior Vice President,
    Friedman Industries, Incorporated, P.O. Box 21147,
    Houston, Texas 77226.
 2




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  DESCRIPTION OF
    BUSINESS
                Fiscal
    2007

Fiscal
    2006High

Low

High

LowFirst Quarter

$
11
.52


$7
.17

$
8
.10

$
5
.80Second Quarter


9
.83


7
.82


7
.94


6
.00Third Quarter


12
.89


7
.81


6
.80


5
.52Fourth Quarter


12
.40


8
.00


9
.94


5
.80       Fiscal
    2007

Fiscal
    2006First Quarter


$
.08


$
.08Second Quarter



.08



.08Third Quarter



.10



.08Fourth Quarter



.08



.08        3




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  PERFORMANCE GRAPH
    Comparison of
    Five-Year Cumulative Return
  
   4




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  CONSOLIDATED BALANCE
    SHEETS
  ASSETS
  March 312007


2006CURRENT ASSETS:Cash and cash equivalents

$
1,039,030


$
1,982,526Accounts receivable, net of
    allowances for bad debts and cash discounts of $37,276 in 2007
    and 2006


17,261,553



17,494,313Inventories


33,272,823



27,956,921Other


157,963



117,243TOTAL CURRENT ASSETS


51,731,369



47,551,003PROPERTY, PLANT, AND EQUIPMENT:Land


1,082,331



486,653Construction in progress


5,004,550



Buildings and yard improvements


3,494,294



4,088,149Machinery and equipment


21,236,184



20,852,126Less accumulated depreciation


(17,344,822
)


(17,653,265
)13,472,537



7,773,663OTHER ASSETS:Cash value of officers life
    insurance and other assets


667,800



606,223TOTAL ASSETS

$
65,871,706


$
55,930,889   LIABILITIES AND
    STOCKHOLDERS EQUITY
  March 312007


2006CURRENT LIABILITIES:Accounts payable and accrued
    expenses

$
21,875,516


$
16,713,944Dividends payable


536,969



533,330Income taxes payable


46,742



143,196Contribution to profit sharing plan


256,000



256,000Employee compensation and related
    expenses


551,356



736,723TOTAL CURRENT LIABILITIES


23,266,583



18,383,193DEFERRED INCOME TAXES


1,934



4,618POSTRETIREMENT BENEFITS OTHER THAN
    PENSIONS


493,191



445,743STOCKHOLDERS EQUITY:Common stock, par value $1:Authorized shares 
    10,000,000Issued shares 
    7,887,824 in 2007 and 7,842,342 in 2006


7,887,824



7,842,342Additional paid-in capital


28,887,517



28,663,814Treasury stock at cost
    (1,175,716 shares at March 31, 2007 and March 31,
    2006, respectively)


(5,475,964
)


(5,475,964
)Retained earnings


10,810,621



6,067,143TOTAL STOCKHOLDERS EQUITY


42,109,998



37,097,335TOTAL LIABILITIES AND
    STOCKHOLDERS EQUITY

$
65,871,706


$
55,930,889    5




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  CONSOLIDATED STATEMENTS OF
    EARNINGS
  Year Ended March
    312007


2006


2005Sales

$
199,726,619


$
181,900,351


$
188,022,253Costs and expenses:Cost of products sold


185,110,805



166,785,924



172,260,349Selling, general and administrative


5,152,697



5,321,517



5,663,317Gain on sale of assets


(1,312,839
)






Interest expense


29,460







15,638188,980,123



172,107,441



177,939,30410,746,496



9,792,910



10,082,949Interest and other income


132,037



284,416



146,354EARNINGS BEFORE INCOME TAXES


10,878,533



10,077,326



10,229,303Income taxes:Current


3,862,899



3,705,676



3,693,710Deferred


(2,684
)


(82,238
)


289,5503,860,215



3,623,438



3,983,260NET EARNINGS

$
7,018,318


$
6,453,888


$
6,246,043Average number of common shares
    outstanding:Basic


6,685,577



7,072,637



7,418,410Diluted


6,752,275



7,163,912



7,552,131Net earnings per share:Basic

$
1.05


$
.91


$
.84Diluted

$
1.04


$
.90


$
.83   CONSOLIDATED STATEMENTS
    OF
 STOCKHOLDERS
    EQUITY
 Additional





RetainedCommon


Paid-In


Treasury


EarningsStock


Capital


Stock


(Deficit)BALANCE AT MARCH 31, 2004

$
7,575,239


$
27,714,669


$



$
(2,258,304
)Net earnings














6,246,043Issuance of Directors shares


2,000



9,800







Exercise of stock options


186,976



286,527







Tax benefit of stock options
    exercised






481,623







Cash dividends ($0.29 per share)














(2,121,238
)Treasury stock (624,468 shares)










(2,768,785
)


BALANCE AT MARCH 31, 2005


7,764,215



28,492,619



(2,768,785
)


1,866,501Net earnings














6,453,888Issuance of Directors shares


1,600



8,192







Exercise of stock options


76,527



163,003







Cash dividends ($0.32 per share)














(2,253,246
)Treasury stock (551,248 shares)










(2,707,179
)


BALANCE AT MARCH 31, 2006


7,842,342



28,663,814



(5,475,964
)


6,067,143Net earnings














7,018,318Exercise of stock options


45,482



60,491







Tax benefit of options exercised






163,212







Cash dividends ($0.34 per share)














(2,274,840
)BALANCE AT MARCH 31,
    2007

$
7,887,824


$
28,887,517


$
(5,475,964
)

$
10,810,621    6




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Year Ended March
    312007


2006


2005OPERATING ACTIVITIESNet earnings

$
7,018,318


$
6,453,888


$
6,246,043Adjustments to reconcile net
    earnings to net cash provided by (used in) operating activities:Depreciation


1,040,011



927,397



908,382Deferred taxes


(2,684
)


(82,238
)


289,550Change in post-retirement benefits


47,448



50,323



38,664Gain on sale of assets


(1,312,839
)






Disposal of fixed assets


95,374







Tax benefit of stock options
    exercised


163,212







481,623Changes in operating assets and
    liabilities:Accounts receivable


232,760



(1,091,277
)


(1,714,334
)Inventories


(5,315,902
)


(2,099,681
)


(4,813,248
)Prepaid federal income taxes






892,104



(892,104
)Other assets


(40,720
)


23,762



(28,760
)Accounts payable and accrued
    expenses


5,161,572



3,239,816



3,269,475Contribution to profit sharing plan






(18,000
)


(6,000
)Employee compensation and related
    expenses


(185,367
)


99,412



(168,829
)Federal income taxes payable


(96,454
)


143,196



(1,134,433
)Net cash provided by operating
    activities


6,804,729



8,538,702



2,476,029INVESTING ACTIVITIESPurchase of property, plant, and
    equipment


(6,909,738
)


(1,963,255
)


(953,613
)Proceeds from sale of assets


1,388,318







542(Increase) decrease in cash value
    of officers life insurance


(61,577
)


(46,445
)


742,835Net cash used in investing
    activities


(5,582,997
)


(2,009,700
)


(210,236
)FINANCING ACTIVITIESCash dividends paid


(2,271,201
)


(2,291,096
)


(1,702,610
)Proceeds from borrowings of
    long-term debt










5,000,000Principal payments on long-term
    debt






(2,897
)


(5,060,140
)Purchase of treasury stock






(2,707,179
)


(2,767,734
)Stock awards and options exercised


105,973



249,321



485,303Net cash used in financing
    activities


(2,165,228
)


(4,751,851
)


(4,045,181
)Increase (decrease) in cash and
    cash equivalents


(943,496
)


1,777,151



(1,779,388
)Cash and cash equivalents at
    beginning of year


1,982,526



205,375



1,984,763Cash and cash equivalents at end
    of year

$
1,039,030


$
1,982,526


$
205,375    7




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  NOTES TO CONSOLIDATED
 FINANCIAL STATEMENTS
  1.  SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES
           last-in, first-out
    March
    312007


2006Prime coil inventory

$
11,034,422


$
10,525,848Non-standard coil inventory


665,234



788,266Tubular raw material


5,854,255



3,889,206Tubular finished goods


15,718,912



12,753,601$
33,272,823


$
27,956,921     Buildings


20 yearsMachinery and equipment


10 yearsImprovements


5 to 10 yearsLoaders and other rolling stock


5 years  8




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    (Continued)
                  Share-Based
    Payment
         9




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    (Continued)
        2.  STOCK
    OPTIONS AND CAPITAL STOCK
     2007


2006


2005Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding at beginning of year


137,212


$
2.35



224,718


$
2.62



411,694


$
2.58Granted






















Exercised


(45,482
)

$
2.33



(76,527)



3.13



(186,976)


$
2.53Canceled


(2,894
)

$
3.13



(10,979)



2.40







Outstanding at end of year


88,836


$
2.33



137,212



2.35



224,718


$
2.62Exercisable at end of year


88,836


$
2.33



137,212



2.35



224,718


$
2.62Weighted average fair value of
    options granted during the year






















     Outstanding


ExercisableWeighted





Weight





WeightAverage





Average





AverageRange of

Remaining





Exercise





ExerciseExercise
    Price

Years


Shares


Price


Shares


Price$2.33


5



88,836


$
2.33



88,836


$
2.335



88,836







88,836    10




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  3.  LONG-TERM
    DEBT AND COMMITMENTS AND CONTINGENCIES
       2008

$
35,6642009


2,2722010


2011


2012


Thereafter


Total

$
37,936     4.  EARNINGS
    PER SHARE
     Year Ended March
    312007


2006


2005BasicNet income

$
7,018,318


$
6,453,888


$
6,246,043Average common shares


6,685,577



7,072,637



7,418,410DilutiveNet income

$
7,018,318


$
6,453,888


$
6,246,043Average common shares


6,685,577



7,072,637



7,418,410Common share equivalents:Options


66,698



91,275



133,721Total common share equivalents


66,698



91,275



133,721Average common shares and common
    equivalents


6,752,275



7,163,912



7,552,131   11




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  5.  INCOME
    TAXES
     Year Ended March
    312007


2006


2005FederalCurrent

$
3,486,758


$
3,260,300


$
2,934,088Deferred


(2,684
)


(82,238
)


289,5503,484,074



3,178,062



3,223,638StateCurrent


376,141



445,376



759,622376,141



445,376



759,622Total

$
3,860,215


$
3,623,438


$
3,983,260     Year Ended March
    312007


2006


2005Income Tax Expense at
    U.S. federal statutory rate


34.0
%


34.0
%


34.0
%Benefit of tax deduction allowed
    to manufacturing companies


(1.0
)


(1.0)



State and local income tax rates
    net of federal income tax benefit


2.5



3.0



4.9Provision for income taxes


35.5
%


36.0
%


38.9
%     March
    312007


2006Deferred tax
    liabilities:Depreciation

$
(1,181,316
)

$
(792,909
)Total deferred tax liabilities


(1,181,316
)


(792,909
)Deferred tax assets:Inventory capitalization


67,844



67,970LIFO Inventory


874,421



501,125Postretirement benefits other than
    pensions


167,685



151,553Other


69,432



67,643Total deferred tax assets


1,179,382



788,291Net deferred tax asset (liability)

$
(1,934
)

$
(4,618
)  12




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
    6.  PROFIT
    SHARING PLAN AND OTHER POSTRETIREMENT BENEFITS
       7.  INDUSTRY
    SEGMENT DATA
     Year Ended March
    312007


2006


2005NET SALES:Coil

$
96,794,728


$
93,870,412


$
104,312,715Tubular


102,931,891



88,029,939



83,709,538TOTAL NET SALES

$
199,726,619


$
181,900,351


$
188,022,253OPERATING PROFIT:Coil

$
4,202,251


$
3,949,444


$
4,283,911Tubular


7,864,313



8,747,667



9,021,863TOTAL OPERATING PROFIT


12,066,564



12,697,111



13,305,774General corporate expenses


(2,603,447
)


(2,904,201
)


(3,207,187
)Gain on sale of assets


1,312,839







Interest expense


(29,460
)






(15,638
)Interest and other income


132,037



284,416



146,354TOTAL EARNINGS BEFORE TAXES

$
10,878,533


$
10,077,326


$
10,229,303IDENTIFIABLE ASSETS:Coil

$
27,600,911


$
24,528,359


$
20,724,554Tubular


36,491,155



28,683,780



28,300,93364,092,066



53,212,139



49,025,487General corporate assets


1,779,640



2,718,750



1,770,855TOTAL ASSETS

$
65,871,706


$
55,930,889


$
50,796,342 13




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  7.  INDUSTRY SEGMENT DATA (Continued)
  Year Ended March
    312007


2006


2005DEPRECIATION:Coil


594,080


$
610,202


$
624,654Tubular


413,368



286,646



248,542Corporate and other


32,563



30,549



35,186$
1,040,011


$
927,397


$
908,382CAPITAL EXPENDITURES:Coil

$
5,646,911


$
826,642


$
113,243Tubular


1,259,152



1,119,633



815,145Corporate and other


3,675



16,980



25,225$
6,909,738


$
1,963,255


$
953,613     8.  SUMMARY
    OF QUARTERLY RESULTS OF OPERATIONS (Unaudited)
     Quarter EndedJune 30


September 30


December 31


March 312006


2006


2006


2007Net sales

$
52,623,730


$
51,629,944


$
47,472,953


$
47,999,992Gross profit


4,876,676



3,406,241



3,263,609



3,069,288Net earnings


2,145,141



2,267,863
(1)


1,379,149



1,226,165Basic


.32



.34



.21



.18Diluted


.32



.34



.20



.18   Quarter EndedJune 30


September 30


December 31


March 312005


2005


2005


2006Net sales

$
46,057,585


$
42,730,045


$
44,527,263


$
48,585,458Gross profit


3,113,413



3,739,051



3,834,454



4,427,509Net earnings


1,130,767



1,569,107



1,668,687



2,085,327Basic


.16



.22



.23



.30Diluted(2)


.16



.22



.23



.30      (1)
    Includes an after tax gain of $866,474 ($.13 per share basic and
    diluted, respectively) related to a gain on the sale of assets.(2)
    The sum of the quarterly earnings per share does not equal the
    annual amount reported as per share amounts are computed
    independently for each quarter. 14




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  REPORTS OF INDEPENDENT
    REGISTERED PUBLIC
 ACCOUNTING FIRMS
  
         Malone
    & Bailey, PC
      15




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  
        Ernst
    & Young LLP
        SELECTED FINANCIAL
    DATA
  Year Ended March
    312007


2006


2005


2004


2003Net sales

$
199,726,619


$
181,900,351


$
188,022,253


$
116,158,567


$
106,082,738Net earnings


7,018,318
(1)


6,453,888



6,246,043



2,535,991



1,432,017Total assets


65,871,706



55,930,889



50,796,342



46,028,123



42,778,926Long-term debt


















57,329Stockholders equity


42,109,998



37,097,335



35,354,550



33,031,604



31,246,751Net earnings per share:Basic


1.05
(1)


0.91



0.84



0.33



0.19Diluted


1.04
(1)


0.90



0.83



0.33



0.19Cash dividends declared per share


0.34



0.32



0.29



0.10



0.09    (1)
    Includes an after tax gain of $866,474 ($.13 per share basic and
    diluted, respectively) related to a gain on the sale of assets.   16




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  MANAGEMENTS DISCUSSION
    AND ANALYSIS
 OF FINANCIAL CONDITION AND
    RESULTS OF
 OPERATIONS
  RESULTS OF OPERATIONS
  Year ended
    March 31, 2007 compared to year end March 31,
    2006
               17




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
        Year ended
    March 31, 2006 compared to year ended March 31,
    2005
             18




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
      FINANCIAL
    CONDITION, LIQUIDITY AND SOURCES OF CAPITAL
                19




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  OFF-BALANCE SHEET
    ARRANGEMENTS
    CONTRACTUAL
    OBLIGATIONS
  Payment Due by
    PeriodLess Than


1-3


3-5


More ThanContractual
    Obligations

Total


1 Year


Years


Years


5 YearsLong-term debt obligations

$



$












Capital lease obligations


















Operating lease obligations


37,936



35,664


$
2,272







Total

$
37,936


$
35,664


$
2,272







   INFLATION
    CRITICAL
    ACCOUNTING POLICIES
    FORWARD-LOOKING
    STATEMENTS
    QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   20




---



##### 



FRIEDMAN INDUSTRIES, INCORPORATED
  TEN YEAR FINANCIAL
    SUMMARY
  Year Ended March
    312007


2006


2005


2004


2003


2002


2001


2000


1999


1998Net sales

$
199,726,619


$
181,900,351


$
188,022,253


$
116,158,567


$
106,082,738


$
97,817,956


$
120,395,583


$
120,267,809


$
124,719,640


$
148,840,724Earnings

$
7,018,318
(1)

$
6,453,888


$
6,246,043


$
2,535,991


$
1,432,017


$
940,039


$
2,927,582


$
2,506,801


$
3,540,811


$
4,809,992Current assets

$
51,731,369


$
47,551,003


$
43,498,759


$
37,829,701


$
34,769,500


$
35,806,988


$
40,231,329


$
36,945,378


$
32,534,040


$
39,347,548Current liabilities

$
23,266,583


$
18,383,193


$
14,959,516


$
12,639,763


$
11,035,388


$
10,797,106


$
12,271,802


$
8,377,279


$
6,758,038


$
13,437,178Net working capital

$
28,464,786


$
29,167,810


$
28,539,243


$
25,189,938


$
23,734,112


$
25,009,882


$
27,959,527


$
28,568,099


$
25,776,002


$
25,910,370Total assets

$
65,871,706


$
55,930,889


$
50,796,342


$
46,028,123


$
42,778,926


$
43,986,455


$
48,010,512


$
45,106,790


$
41,023,377


$
46,039,361Stockholders equity

$
42,109,998


$
37,097,335


$
35,354,550


$
33,031,604


$
31,246,751


$
30,491,351


$
30,378,150


$
28,622,951


$
27,422,779


$
25,732,957Earnings as a percent ofNet sales


3.5



3.5



3.3



2.2



1.3



1.0



2.4



2.1



2.8



3.2Stockholders equity


16.7



17.4



17.7



7.7



4.6



3.1



9.6



8.8



12.9



18.7Average number of common shares
    outstanding: Basic(2)


6,685,577



7,072,637



7,418,410



7,574,070



7,572,239



7,571,239



7,568,839



7,547,624



7,528,702



7,512,901Per shareNet earnings per share:Basic

$
1.05
(1)

$
0.91


$
0.84


$
0.33


$
0.19


$
0.12


$
0.39


$
0.33


$
0.47


$
0.64Stockholders equity(2)

$
6.30


$
5.25


$
4.77


$
4.36


$
4.13


$
4.03


$
4.01


$
3.79


$
3.64


$
3.43Cash dividends per common 
    share

$
0.34


$
0.32


$
0.29


$
0.10


$
0.09


$
0.11


$
0.16


$
0.18


$
0.25


$
0.25Stock dividend declared






























5%



5%



5%     (1)
    Includes an after tax gain of
    $866,474 ($.13 per share basic) related to a gain on the sale of
    assets.(2)
    Adjusted for stock dividends.