What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-16 compared with 2020-08-14 · 65 added, 63 removed, 277 unchanged (32% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED

JUNE 30, 20 20

SEPTEMBER 30, 2020

MARCH 31, 2020

CURRENT ASSETS:

Accounts receivable, net of allowances for bad debts and cash discounts of $82,417 at June 30 and March 31, 2020

Accounts receivable, net of allowances for bad debts and cash discounts of $82,417 at September 30, and March 31, 2020

Other current assets

25 unchanged sentences

Common stock, par value $1:

Authorized shares — 10,000,000 Issued shares — 8,306,160 shares and 8,295,160 shares at June 30 and March 31, 2020, respectively

Authorized shares — 10,000,000 Issued shares — 8,306,160 shares and 8,295,160 shares at September 30, and March 31, 2020, respectively

Additional paid-in capital

Treasury stock at cost (1,225,716 shares at June 30 and March 31, 2020)

Treasury stock at cost (1,292,997 shares and 1,225,716 shares at September 30, and March 31, 2020, respectively)

Retained earnings

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED

THREE MONTHS ENDED JUNE 30,

THREE MONTHS ENDED SEPTEMBER 30,

SIX MONTHS ENDED SEPTEMBER 30,

Costs and expenses

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

THREE MONTHS ENDED JUNE 30,

SIX MONTHS ENDED SEPTEMBER 30,

OPERATING ACTIVITIES

Net earnings (loss)

Adjustments to reconcile net earnings (loss) to cash provided by (used in) operating activities:

Adjustments to reconcile net loss to cash provided by operating activities:

Deferred taxes

12 unchanged sentences

Other non-current liabilities

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

NET CASH PROVIDED BY OPERATING ACTIVITIES

INVESTING ACTIVITIES

6 unchanged sentences

Cash paid for principal portion of finance lease

Cash paid for share repurchases

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

INCREASE (DECREASE) IN CASH

INCREASE IN CASH

CASH AT BEGINNING OF PERIOD

55 unchanged sentences

All inventories are valued at the lower of cost or net realizable value.

At June 30, 2020, tubular finished goods inventory was written down $274,093 to lower the carrying value to net realizable value.

A summary of inventory values by product group follows:

June 30, 2020

September 30, 2020

March 31, 2020

15 unchanged sentences

While the Company plans to apply for forgiveness of the PPP Loan in accordance with the requirements and limitations under the CARES Act, the PPP Flexibility Act and the Small Business Administration regulations and requirements, no assurance can be given that all or any portion of the PPP Loan will be forgiven.

Payments of principal and interest on the loan have been granted further deferment to provide ample time to file the loan forgiveness application.

NOTE E — LEASES

6 unchanged sentences

In October 2019, the Company received a new heavy-duty forklift under a 5-year finance lease arrangement with a financed amount of $518,616 and a monthly payment of $9,074.

The components of expense related to leases for the three months ended June 30, 2020 and 2019 are as follows:

Three Month Ended

June 30, 2020

Three Month Ended

June 30, 20 19

The components of expense related to leases for the three and six months ended September 30, 2020 are as follows:

THREE MONTHS ENDED SEPTEMBER 30,

SIX MONTHS ENDED SEPTEMBER 30,

Finance lease – amortization of ROU asset

1 unchanged sentence

Operating lease expense

The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of June 30, 2020:

June 30, 2020

The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of September 30, 2020 :

September 30, 2020

Balance Sheet Classification

10 unchanged sentences

Total lease liabilities

As of June 30, 2020, the weighted-average remaining lease term was 0.8 year for operating leases and 4.2 years for finance leases.

As of September 30, 2020 , the weighted-average remaining lease term was 0.6 year for operating leases and 4 years for finance leases.

The weighted average discount rate was 7% for operating leases and 1.9% for finance leases.

Maturities of lease liabilities as of June 30, 2020 were as follows:

Maturities of lease liabilities as of September 30, 2020 were as follows:

Operating Leases

5 unchanged sentences

NOTE F — PROPERTY, PLANT AND EQUIPMENT

The Company continued two previously announced capital expenditure projects during the first quarter of fiscal 2021.

The first project was a building expansion at the Company’s coil processing facility in Hickman, Arkansas that was put into service during May 2020.

The project added an additional 22,000 square feet of storage space to the facility.

This project was completed at an actual cost of approximately $1,083,000 compared to an original estimated cost of $1,100,000.

The second project involves the purchase and installation of a stretcher leveler coil processing line at the Company’s coil processing facility in Decatur, Alabama.

This newly acquired equipment will replace the existing processing equipment at the Decatur plant and will expand both the size range and grade of material that the Decatur plant is able to process.

The Company continued the previously announced capital expenditure project at our Decatur, Alabama facility during the second quarter of fiscal 2021.

This project involves the purchase and installation of a stretcher leveler coil processing line.

This newly acquired equipment replaces the prior processing equipment at the Decatur plant and will expand both the size range and grade of material that the Decatur plant is able to process.

The equipment was purchased from and is being constructed, fabricated and installed by Delta Steel Technologies.

In June 2020, the existing equipment at the Decatur facility was removed to allow the foundation to be prepared for the installation of the new equipment.

As part of the equipment removal, the cut-to-length line was sold for scrap resulting in anticipated proceeds of $30,957 and $2,688,381 of original cost being removed from machinery and equipment and accumulated depreciation of $2,657,424 being removed.

The temper mill was disassembled with the components being cleaned, cataloged and stored as the Company intends to sell the equipment.

The Company currently expects the installation of the new equipment to begin in October 2020 and expects commercial use of the equipment to begin in February 2021.

The Company currently expects the installation of the new equipment to begin in December 2020 and expects commercial use of the equipment to begin in February 2021.

The Company currently estimates the cost of this project to be $7,200,000.

As of June 30, 2020, expenditures related to the Decatur project totaled $3,874,444 with this amount reported as Construction in Process on the Company’s Consolidated Balance Sheet.

This estimated cost is greater than our previously disclosed cost of $5,800,000 due to additional components that have been added to the project to improve the efficiency and output of the equipment.

As of September 30, 2020 , expenditures related to the Decatur project totaled $5,427,263 with this amount reported as Construction in Process on the Company’s consolidated balance sheet.

NOTE G — STOCK BASED COMPENSATION

4 unchanged sentences

Forfeitures are accounted for upon their occurrence.

The following table summarizes the activity related to restricted stock awards for the three months ended June 30, 2020:

Number of Shares

The following table summarizes the activity related to restricted stock awards for the six months ended September 30, 2020 :

Weighted Average

Number of Shares

Grant Date Fair Value Per Share

1 unchanged sentence

Cancelled or forfeited

Unvested at June 30, 2020

Of the 281,000 unvested shares at June 30, 2020, 160,000 shares have five year cliff vesting restrictions with vesting occurring on January 4, 2022, 20,000 shares have five year cliff vesting restrictions with vesting occurring on April 1, 2024, 20,000 shares have two year cliff vesting restrictions with vesting occurring on March 13, 2021, 11,000 shares have one year cliff vesting restrictions with vesting occurring on April 1, 2021 and 70,000 shares will vest in equal amounts each year for five years commencing on April 1, 2020.

Unvested at September 30, 2020

Of the 281,000 unvested shares at September 30, 2020 , 160,000 shares have five year cliff vesting restrictions with vesting occurring on January 4, 2022, 20,000 shares have five year cliff vesting restrictions with vesting occurring on April 1, 2024, 20,000 shares have two year cliff vesting restrictions with vesting occurring on March 13, 2021, 11,000 shares have one year cliff vesting restrictions with vesting occurring on April 1, 2021 and 70,000 shares will vest in equal amounts each year for five years commencing on April 1, 2020.

Compensation expense is recognized over the requisite service period applicable to each award.

The Company recorded compensation expense of $110,813 and $83,236 in the three months ended June 30, 2020 and 2019, respectively, relating to the stock awards issued under the Plan.

As of June 30, 2020, unrecognized compensation expense related to stock awards was approximately $787,000, which is expected to be recognized over a weighted average period of approximately 3.0 years.

The Company recorded compensation expense of $221,627 and $166,472 in the six months ended September 30, 2020 and 2019 , respectively, relating to the stock awards issued under the Plan.

As of September 30, 2020 , unrecognized compensation expense related to stock awards was approximately $688,000, which is expected to be recognized over a weighted average period of approximately 2.9 years.

Subsequent to September 30, 2020 , restricted stock awards of 78,625 shares were granted with a grant date fair value of $5.80 per share.

These shares have a range of vesting restrictions from one to four years.

NOTE H — DERIVATIVE FINANCIAL INSTRUMENTS

9 unchanged sentences

We also assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows or fair value of hedged items.

During June 2020, we sold 4,000 tons of hot-rolled coil futures for August 2020 settlement at an average price of $514.50 per ton and sold 2,000 tons of hot-rolled coil futures for September 2020 settlement at an average price of $522 per ton.

These transactions have been designated as hedging instruments, classified as fair value hedges and accounted for based on the guidance and requirements of ASC 815.

On the Company’s consolidated balance sheet at June 30, 2020, “Other current assets” included $54,000 for the fair value of the asset derivatives and “Inventory” was reduced by $54,000 for the hedged item basis adjustment.

The Company’s consolidated statement of operation for the three months ended June 30, 2020, included offsetting $54,000 amounts within costs of goods sold for the mark to market adjustments related to the change in fair value of the hedging instrument and the hedged inventory.

The gain or loss on the hedging instruments will be realized during the period in which the instruments are settled and the hedged inventory is sold.

In relation to our open hedging positions, we were required to post a $180,000 cash margin to collateralize our transactions.

This margin requirement is included in “Other current assets” on the Company’s consolidated balance sheet at June 30, 2020.

During the three months ended September 30, 2020 , the Company recognized gains from hedging instruments of $4,000.

The Company’s consolidated statement of operations for the three and six months ended September 30, 2020 included the $4,000 gain within costs of goods sold for the hedging activity.

As of September 30, 2020 the Company did not have any open future positions.

We reported a margin requirement of $118,125 that is included in “Other current assets” on the consolidated balance sheet at September 30, 2020 .

NOTE I — FAIR VALUE MEASUREMENTS

5 unchanged sentences

Recurring Fair Value Measurements

At June 30, 2020, our financial assets measured at fair value on a recurring basis were as follows:

Quoted Prices

Commodity futures – financial assets

At March 31, 2020, the Company did not have any financial instruments that required fair value measurement on a recurring basis.

At September 30, 2020 and March 31, 2020 , the Company did not have any financial instruments that required fair value measurement on a recurring basis.

Non-Recurring Fair Value Measurements

3 unchanged sentences

At March 31, 2020 , the Company performed an impairment review of the tubular segment’s pipe finishing facility that resulted in the assets being written down to their estimated fair value of $1,771,450.

At June 30, 2020, the Company did not have any fair value measurements on a non-recurring basis.

At September 30, 2020 , the Company did not have any fair value measurements on a non-recurring basis.

NOTE J — SEGMENT INFORMATION (in thousands)

THREE MONTHS ENDED

SIX MONTHS ENDED

SEPTEMBER 30,

Total net sales

2 unchanged sentences

Corporate expenses

Interest expenses

Interest expense

Interest and other income

Total earnings (loss) before taxes

June 30, 2020

September 30, 2020

March 31, 2020

21 unchanged sentences

Manufactured Pipe, Mill Reject Pipe and Pipe Finishing Services.

The following table disaggregates our revenue by product for each of our reportable business segments for the three months ended June 30, 2020 and 2019, respectively:

Three Months Ended June 30,

The Company did not generate any revenue from pipe finishing services during any of the three month or six month periods ended September 30, 2020 or September 30, 2019.

The pipe finishing facility is currently idled due to market conditions.

The following table disaggregates our revenue by product for each of our reportable business segments for the three and six months ended September 30, 2020 and 2019 , respectively:

Three Months Ended September 30,

Six Months Ended September 30,

Coil Segment:

4 unchanged sentences

Mill Reject Pipe

Pipe Finishing Services

NOTE L — STOCKHOLDERS’ EQUITY

The following tables reflect the changes in stockholders’ equity for the three months ended June 30, 2020 and June 30, 2019:

The following tables reflect the changes in stockholders’ equity for the six months ended September 30, 2020 and September 30, 2019 :

BALANCE AT MARCH 31, 2020

3 unchanged sentences

BALANCE AT JUNE 30, 2020

Paid in capital – restricted stock awards

Repurchase of shares

Cash dividends ($0.02 per share)

BALANCE AT SEPTEMBER 30, 2020

BALANCE AT MARCH 31, 2019

3 unchanged sentences

BALANCE AT JUNE 30, 2019

Paid in capital – restricted stock awards

Cash dividends ($0.02 per share)

BALANCE AT SEPTEMBER 30, 2019

On June 25, 2020, the Board of Directors of the Company 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.

2 unchanged sentences

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.

The Company had not repurchased any shares under the program as of June 30, 2020.

The Company repurchased 67,281 shares at a cost of $410,221 under the program during the three months ended September 30, 2020 .

NOTE M — SUPPLEMENTAL CASH FLOW INFORMATION

The Company paid interest of approximately $6,000 during the three months ended June 30, 2020 and did not pay any interest during the three months ended June 30, 2019.

The Company did not pay any income taxes in the three months ended June 30, 2020 but did pay approximately $10,000 in three months ended June 30, 2019.

The Company paid interest of approximately $12,000 during the six months ended September 30, 2020 and did not pay any interest during the six months ended September 30, 2019 .

The Company paid income taxes of approximately $10,000 and $245,000 during the six month periods ended September 30, 2020 and September 30, 2019 , respectively.

In the six months ended September 30, 2019, there were noncash transactions totaling approximately $121,000 for the transfer of ownership of life insurance policies from the Company to officers upon their retirement.

NOTE N — INCOME TAXES

For the three months ended June 30, 2020, the Company recorded an income tax benefit of $277,768, or 24.4% of loss before income taxes, compared to a tax provision of $74,499, or 27.7% of earnings before income taxes, for the three months ended June 30, 2019.

For both three month periods, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision.

For the six months ended September 30, 2020 , the Company recorded an income tax benefit of $340,484, or 23.5% of loss before income taxes, compared to a tax benefit of $413,493, or 23.5% of loss before income taxes, for the six months ended September 30, 2019 .

For both six month periods, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax benefits in the provision.

NOTE O – RELATED PARTY TRANSACTIONS

1 unchanged sentence

Tim Stevenson serves as a member of our Board of Directors and serves as Chief Executive Officer of Metal Edge.

In the three months ended June 30, 2020, we paid Metal Edge $37,500 related to these services.

In the six months ended September 30, 2020 , we paid Metal Edge $87,500 related to these services.

Our agreement with Metal Edge may be terminated by either party, without cause, upon ninety days prior written notice.

The agreement calls for a minimum of $12,500 per month for these services.

We believe the services and expertise provided by Metal Edge provide an economic value that is highly compelling to our Company and our shareholders.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements