Friedman Industries, Incorporated (NYSE – American; trading
symbol: FRD) -
The Company announced today its results of
operations for the third quarter. For the quarter ended December
31, 2020 (the “2020 quarter”), the Company recorded net earnings of
$2,129,745 ($0.30 diluted earnings per share) on sales of
$28,502,049 compared to a net loss of $881,003 ($0.13 diluted loss
per share) on net sales of $28,150,817 for the quarter ended
December 31, 2019 (the “2019 quarter”).
The Company’s operating results are
significantly impacted by the market price of hot-rolled steel coil
and the 2020 quarter benefitted from a rapid and significant
increase in price. During August 2020 hot-rolled steel pricing
started to rise and as of the end of the 2020 quarter, pricing had
increased approximately 124%. Results for the 2020 quarter also
benefitted from gains on hot-rolled steel derivative contracts of
approximately $397,000. Operating results for the 2019 quarter were
negatively impacted by declining steel prices preceding the quarter
and during part of the quarter.
SUMMARY OF OPERATIONS (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
28,502,049 |
|
$ |
28,150,817 |
|
|
$ |
76,888,329 |
|
$ |
109,121,717 |
|
|
|
|
|
|
|
|
|
|
Total costs and |
|
|
|
|
|
|
|
other income |
|
25,733,152 |
|
|
29,296,370 |
|
|
|
75,568,783 |
|
|
112,030,128 |
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before |
|
|
|
|
|
|
|
income taxes |
|
2,768,897 |
|
|
(1,145,553 |
) |
|
|
1,319,546 |
|
|
(2,908,411 |
) |
|
|
|
|
|
|
|
|
|
Provision for (benefit from) |
|
|
|
|
|
|
income taxes |
|
639,152 |
|
|
(264,550 |
) |
|
|
298,668 |
|
|
(678,043 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ |
2,129,745 |
|
$ |
(881,003 |
) |
|
$ |
1,020,878 |
|
$ |
(2,230,368 |
) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
Basic |
|
|
7,039,736 |
|
|
6,999,444 |
|
|
|
7,062,628 |
|
|
6,999,444 |
|
Diluted |
|
|
7,039,736 |
|
|
6,999,444 |
|
|
|
7,062,628 |
|
|
6,999,444 |
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per share: |
|
|
|
|
|
|
Basic |
|
$ |
0.30 |
|
$ |
(0.13 |
) |
|
$ |
0.14 |
|
$ |
(0.32 |
) |
Diluted |
|
$ |
0.30 |
|
$ |
(0.13 |
) |
|
$ |
0.14 |
|
$ |
(0.32 |
) |
COIL SEGMENT OPERATIONS
Coil segment sales for the 2020 quarter totaled
$21,672,147 compared to $21,001,358 for the 2019 quarter. Total
coil segment sales increased due to increased average selling
prices partially offset by a slight decrease in tons sold. The
average selling price increased from approximately $600 per ton in
the 2019 quarter to approximately $665 per ton in the 2020 quarter.
Inventory tons sold decreased from approximately 34,500 tons in the
2019 quarter to approximately 32,000 tons in the 2020 quarter. Coil
segment operations recorded an operating profit of approximately
$3,238,000 for the 2020 quarter compared to an operating loss of
approximately $93,000 for the 2019 quarter. Typically, margins for
our coil segment respond relatively quick to changes in steel
pricing. With the rapid increase in pricing starting during August
2020, we experienced margin improvement throughout the 2020
quarter. Operating results for the 2019 quarter were negatively
impacted by low margins associated with declines in hot-rolled
steel prices.
TUBULAR SEGMENT OPERATIONS
Tubular segment sales for the 2020 quarter
totaled $6,829,902 compared to $7,149,459 for the 2019 quarter.
Total tubular segment sales declined due primarily to a lower
average selling price. Tons sold was approximately 11,000 tons in
both the 2020 quarter and the 2019 quarter. The average selling
price per ton decreased from approximately $646 per ton in the 2019
quarter to approximately $616 per ton in the 2020 quarter. The
decrease in the average selling price was primarily related to
sales of mill reject pipe accounting for a larger volume of sales
in the 2020 quarter compared to the 2019 quarter. Mill reject pipe
has a lower average selling price compared to our manufactured
pipe. The tubular segment operations recorded an operating profit
of approximately $269,000 for the 2020 quarter and an operating
loss of approximately $468,000 for the 2019 quarter. Even though
steel prices increased significantly throughout the 2020 quarter,
tubular segment margins did not see significant improvement until
December 2020. Typically, our tubular segment does not react as
quickly to changes in steel pricing when compared to the coil
segment due to a lower sales volume and a longer manufacturing lead
time associated with tubular products. Weak energy industry
conditions had an additional negative effect on the 2020 quarter.
Operating results for the 2019 quarter were negatively impacted by
compressed margins associated with declining steel prices and weak
energy industry conditions.
STRATEGIC INITIATIVES
The Company continued the previously
announced capital expenditure project at our Decatur,
Alabama facility during the 2020 quarter.
This project involves the purchase and installation of a
stretcher leveler coil processing line. This newly acquired
equipment will allow the Decatur location and our overall coil
segment to process material that is thicker, wider and higher
strength. In addition, material that has been leveled by the
stretcher leveling process is preferable to certain customers and
applications compared to material that has been leveled by the
temper mill process. Installation of the new equipment began in
December 2020 and we expect commercial use of the equipment to
begin in March 2021. The Company currently estimates the cost of
this project to be $7,200,000. As of December 31, 2020,
expenditures related to the Decatur project totaled $6,478,594 with
this amount reported as “Construction in process” on the Company’s
consolidated balance sheet.
We continue to implement price-risk management
practices into our business by trading hot-rolled coil futures. We
believe price-risk management is important to our business given
its commodity-based nature.
On June 25, 2020, our Board of Directors
authorized a share repurchase program under which the Company may
repurchase up to 1,062,067 shares of the Company’s outstanding
common stock through June 30, 2023, which equates to 15% of the
Company’s outstanding shares of common stock as of June 25,
2020. As of December 31, 2020, we have repurchased 180,200 shares
at a total cost of $1,143,356 under the program.
Repurchases under the program may be made from
time to time at the Company’s discretion and may be made in open
market transactions, through block trades, in privately negotiated
transactions and pursuant to any trading plan that may be adopted
by the Company’s management in accordance with Rule 10b5-1 of the
Securities Exchange Act of 1934, as amended, or otherwise. The
timing and actual number of shares repurchased pursuant to the
program will depend on a variety of factors including price,
corporate and regulatory requirements, market conditions and other
corporate liquidity requirements and priorities. The repurchase
program does not obligate the Company to acquire a specific dollar
amount or number of shares and may be modified, suspended or
discontinued at any time.
OUTLOOK / COVID-19
During August 2020 hot-rolled steel pricing
started to rise and has continued a significant increase of
approximately 165% as of the date of this press release. Our coil
segment margins experienced improvement throughout the third
quarter and we expect the fourth quarter to have strong margins.
Our tubular segment margins do not respond as quickly to the
fluctuations in steel price but we did see significant improvement
in December 2020 and we expect that margin strength to continue
during the fourth quarter. We expect both coil segment and tubular
segment sales volumes for the fourth quarter to be slightly higher
than the third quarter volumes.
In March 2020, the World Health Organization declared the novel
strain of coronavirus (“COVID-19”) a global pandemic. In addition
to the devastating effects on human life, this contagious virus has
adversely affected economies globally. It has also disrupted the
normal operations of many businesses, including ours and many of
our customers. Our facilities have continued to operate during this
crisis but we are operating with modifications to our facility
practices, employee travel, employee work locations and
virtualization or cancellation of company and customer events,
among other modifications. We may take further actions that alter
our business operations as the situation evolves. There are no
comparable events that provide guidance as to the effect the
COVID-19 pandemic may have, and, as a result, the ultimate effect
of the pandemic is highly uncertain and subject to change. We do
not yet know the full extent of the effects on the economy, the
markets we serve, our business or our operations. We have
experienced a small number of cases within our workforce but are
pleased to share that all employees have recovered well.
ABOUT FRIEDMAN INDUSTRIES
Friedman Industries, Incorporated, headquartered
in Longview, Texas, is a manufacturer and processor of steel
products with operating plants in Hickman, Arkansas; Decatur,
Alabama and Lone Star, Texas. The Company has two reportable
segments: coil products and tubular products. The coil product
segment consists of the operations in Hickman and Decatur where the
Company processes hot-rolled steel coils using temper mills and
cut-to-length lines. The Company is in the process of replacing its
temper mill and cut-to-length line at the Decatur plant with a
stretcher leveler line. The tubular product segment consists of the
operations in Lone Star where the Company manufactures electric
resistance welded pipe, provides pipe finishing services and
distributes pipe.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act, and such statements involve
risk and uncertainty. Forward-looking statements include those
preceded by, followed by or including the words “will,” “expect,”
“intended,” “anticipated,” “believe,” “project,” “forecast,”
“propose,” “plan,” “estimate,” “enable,” and similar expressions,
including, for example, statements about our business strategy, our
industry, our future profitability, growth in the industry sectors
we serve, our expectations, beliefs, plans, strategies, objectives,
prospects and assumptions, future production capacity, product
quality and estimates and projections of future activity and trends
in the oil and natural gas industry. These forward-looking
statements may include, but are not limited to, future changes in
the Company’s financial condition or results of operations, future
production capacity, product quality and proposed expansion plans.
Forward-looking statements may be made by management orally or in
writing including, but not limited to, this news release.
Forward-looking statements are not guarantees of
future performance. These statements are based on management’s
expectations that involve a number of business risks and
uncertainties, any of which could cause actual results to differ
materially from those expressed in or implied by the
forward-looking statements. Although forward-looking statements
reflect our current beliefs, reliance should not be placed on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which may cause our actual
results, performance or achievements to differ materially from
anticipated future results, performance or achievements expressed
or implied by such forward-looking statements.
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 for and prices of the
Company’s products, the continuing impact of the COVID-19 pandemic,
changes in government policy regarding steel, changes in the demand
for steel and steel products in general and the Company’s success
in executing its internal operating plans, including the
installation of our new stretcher leveler line, changes in and
availability of raw materials, our ability to satisfy our take or
pay obligations under certain supply agreements, unplanned
shutdowns of our production facilities due to equipment failures or
other issues, the continuing shifting of governmental policy
relating to PPP loans and forgiveness of such loans, increased
competition from alternative materials and risks concerning
innovation, new technologies, products and increasing customer
requirements. Accordingly, undue reliance should not be placed on
our forward-looking statements. Such risks and uncertainty are also
addressed in our Management’s Discussion and Analysis of Financial
Condition and Results of Operations and other sections of the
Company’s filings with the U.S. Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended (the “Exchange Act”),
including the Company’s Annual Report on Form 10-K and its other
Quarterly Reports on Form 10-Q. We undertake no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events, changed circumstances
or otherwise, except to the extent law requires.
For further information, please refer to the
Company's Form 10-Q as filed with the SEC on February 22, 2021 or
contact Alex LaRue, Chief Financial Officer – Secretary and
Treasurer, at (903)758-3431.
Friedman Industries (AMEX:FRD)
Historical Stock Chart
From Apr 2024 to May 2024
Friedman Industries (AMEX:FRD)
Historical Stock Chart
From May 2023 to May 2024