FRIEDMAN INDUSTRIES INC 10-Q

Item 1. Financial Statements FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED DECEMBER 31, 2020 MARCH 31, 2020 ASSETS CURRENT ASSETS: Cash $ 16,485,797 $ 17,057,751 Accounts receivable, net of allowances for bad debts and cash discounts of $82,417 at December 31, and March 31, 2020 12,133,375 11,705,344 Inventories 30,130,320 35,668,243 Other current assets 5,488,176 780,179 TOTAL CURRENT ASSETS 64,237,668 65,211,517 PROPERTY, PLANT AND EQUIPMENT: Land 1,179,831 1,179,831 Buildings and yard improvements 9,180,304 9,008,869 Machinery and equipment 28,027,039 29,339,893 Construction in process 6,478,594 3,797,364 Less accumulated depreciation (29,898,231 ) (31,825,401 ) 14,967,537 11,500,556 OTHER ASSETS: Cash value of officers’ life insurance and other assets 164,016 183,350 Income taxes recoverable — 448,665 TOTAL ASSETS $ 79,369,221 $ 77,344,088 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 6,081,444 $ 8,944,614 Dividends payable 139,485 139,989 Contribution to retirement plan 200,000 50,250 Employee compensation and related expenses 581,796 409,778 Income taxes payable 88,541 — Current portion of financing lease 102,196 100,728 Current portion of Paycheck Protection Program loan 1,338,114 — TOTAL CURRENT LIABILITIES 8,531,576 9,645,359 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 108,764 99,864 DEFERRED INCOME TAX LIABILITY 732,295 361,146 OTHER NON-CURRENT LIABILITIES 291,417 372,352 LONG TERM PORTION OF PAYCHECK PROTECTION PROGRAM LOAN 352,271 — TOTAL LIABILITIES 10,016,323 10,478,721 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY: Common stock, par value $1: Authorized shares — 10,000,000 Issued shares — 8,334,785 shares and 8,295,160 shares at December 31, and March 31, 2020, respectively 8,334,785 8,295,160 Additional paid-in capital 29,852,154 29,565,416 Accumulated other comprehensive income 2,657,923 — Treasury stock at cost (1,355,916 shares and 1,225,716 shares at December 31, and March 31, 2020, respectively) (6,619,320 ) (5,525,964 ) Retained earnings 35,127,356 34,530,755 TOTAL STOCKHOLDERS’ EQUITY 69,352,898 66,865,367 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 79,369,221 $ 77,344,088 3 FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS 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 Costs and expenses Costs of goods sold 24,006,200 28,097,884 71,044,629 108,380,110 General, selling and administrative costs 1,725,143 1,200,393 4,518,785 3,662,630 Interest expense 6,148 2,463 18,356 2,463 25,737,491 29,300,740 75,581,770 112,045,203 EARNINGS (LOSS) FROM OPERATIONS 2,764,558 (1,149,923 ) 1,306,559 (2,923,486 ) Interest and other income (4,339 ) (4,370 ) (12,987 ) (15,075 ) EARNINGS (LOSS) BEFORE INCOME TAXES 2,768,897 (1,145,553 ) 1,319,546 (2,908,411 ) Provision for (benefit from) income taxes: Current 757,097 244,940 634,056 (49,584 ) Deferred (117,945 ) (509,490 ) (335,388 ) (628,459 ) 639,152 (264,550 ) 298,668 (678,043 ) NET EARNINGS (LOSS) $ 2,129,745 $ (881,003 ) $ 1,020,878 $ (2,230,368 ) Weighted average number of common 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 ) Cash dividends declared per common share $ 0.02 $ 0.02 $ 0.06 $ 0.08 4 FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31, 2020 2019 2020 2019 Net earnings (loss) $ 2,129,745 $ (881,003 ) $ 1,020,878 $ (2,230,368 ) Other comprehensive income (loss): Cash flow hedges, net of tax 2,657,923 — 2,657,923 — Other comprehensive income: 2,657,923 — 2,657,923 — Comprehensive income (loss) $ 4,787,668 $ (881,003 ) $ 3,678,801 $ (2,230,368 ) 5 FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED NINE MONTHS ENDED DECEMBER 31, 2020 2019 OPERATING ACTIVITIES Net earnings (loss) $ 1,020,878 $ (2,230,368 ) Adjustments to reconcile net earnings (loss) to cash provided by operating activities: Depreciation 730,254 923,966 Deferred taxes (335,388 ) (628,459 ) Compensation expense for restricted stock 376,363 249,708 Change in postretirement benefits 8,900 8,215 Lower of cost or net realizable value inventory adjustment 274,093 955,605 Deferred gain on derivatives 696,400 — Decrease (increase) in operating assets: Accounts receivable (428,031 ) 3,337,785 Inventories 5,263,830 12,562,592 Federal income taxes recoverable 448,665 (40,639 ) Other current assets (793,679 ) (1,025,125 ) Increase (decrease) in operating liabilities: Accounts payable and accrued expenses (2,834,970 ) 567,114 Income taxes payable 88,541 (159,694 ) Contribution to retirement plan 149,750 149,750 Employee compensation and related expenses 172,018 (42,617 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 4,837,624 14,627,833 INVESTING ACTIVITIES Purchase of property, plant and equipment (4,228,193 ) (3,223,856 ) Increase in cash surrender value of officers’ life insurance (12,970 ) (13,110 ) NET CASH USED IN INVESTING ACTIVITIES (4,241,163 ) (3,236,966 ) FINANCING ACTIVITIES Paycheck Protection Program loan proceeds 1,690,385 — Cash dividends paid (424,780 ) (699,945 ) Cash paid for principal portion of finance lease (75,364 ) (24,760 ) Cash paid for share repurchases (1,143,356 ) — NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 46,885 (724,705 ) INCREASE IN CASH AND RESTRICTED CASH 643,346 10,666,162 CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD 17,057,751 11,667,161 CASH AND RESTRICTED CASH AT END OF PERIOD $ 17,701,097 $ 22,333,323 Cash and restricted cash at the end of the nine month period ended December 31, 2020 includes $1,215,300 of cash margin required to collateralize our open derivative positions. This amount is reported in "Other current assets" on the Company's consolidated balance sheet at December 31, 2020. All of the cash and restricted cash at the end of the nine month period ended December 31, 2019 was reported in "Cash" on the Company's consolidated balance sheet at December 31, 2019. 6 FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED NOTES TO QUARTERLY REPORT — UNAUDITED 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 U.S. 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 consolidated financial statements and footnotes of Friedman Industries, Incorporated (the “Company”) included in its annual report on Form 10-K for the year ended March 31, 2020 . NOTE B — NEW ACCOUNTING STANDARDS Recently Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 establishes a new lease accounting standard that requires lessees to recognize a right of use asset and related lease liability for most leases having lease terms of more than 12 months. Leases with a term of 12 months or less will be accounted for similar to prior guidance for operating leases. In July 2018, the FASB issued Accounting Standards Update No. 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new standard. In July 2018, the FASB also issued Accounting Standards Update No. 2018-11, Leases (Topic 842): Targeted Improvements, to give entities another option for transition and to provide practical expedients to reduce the cost and complexity of implementing the new standard. ASU 2016-02 and all subsequently issued amendments, collectively "ASC 842," is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASC 842 on April 1, 2019 using the optional transition method under which the new standard is applied only to the most current period presented and the cumulative effect of applying the new standard to existing lease agreements is recognized at the date of initial application. The adoption of ASC 842 resulted in the recording of initial right-of-use lease assets and lease liabilities of approximately $63,000. The Company elected the package of transition practical expedients related to lease identification, lease classification, and initial direct costs. In addition, the Company made the following accounting policy elections: (1) the Company will not separate lease and non-lease components by class of underlying asset and (2) the Company will apply the short-term lease exemption by class of underlying asset. The adoption of this standard did not have a material impact on the Company’s consolidated statement of operations or cash flows and did not result in a cumulative adjustment to retained earnings. See Note E – Leases for additional information. In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 is intended to simplify and clarify the accounting and disclosure requirements for hedging activities by more closely aligning the results of cash flow and fair value hedge accounting with the underlying risk management activities. We adopted ASU 2017-12 on June 18, 2020 when we entered into our first derivative financial instruments. See Note H – Derivative Financial Instruments for additional information. Accounting Standards Not Yet Adopted In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires, among other things, the use of a new current expected credit loss ("CECL") model to determine the allowance for doubtful accounts with respect to accounts receivable. The CECL model requires estimation of lifetime expected credit loss with respect to receivables and recognition of allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. Subsequently, in November 2018, the FASB issued Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (ASC 326), which clarifies that impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2016-13 called for an effective date for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. In November 2019, the FASB issued Accounting Standards Update 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). ASU 2019-10 defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, private companies, not-for-profit organizations and employee benefit plans to annual periods beginning after December 15, 2022, including interim periods within those annual periods. The Company qualifies as a smaller reporting company and does not expect to early adopt ASU 2016-13. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements. In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies accounting for income taxes by revising or clarifying existing guidance in ASC 740, as well as removing certain exceptions within ASC 740. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements. NOTE C — 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 raw materials and tubular inventory consists of both raw materials and finished goods. Cost for prime coil inventory is determined using the average cost method. Cost for non-standard coil inventory is determined using the specific identification method. Cost for tubular inventory is determined using the average cost method. All inventories are valued at the lower of cost or net realizable value. 7 A summary of inventory values by product group follows: December 31, 2020 March 31, 2020 Prime Coil Inventory $ 15,459,864 $ 17,190,435 Non-Standard Coil Inventory 2,178,029 1,550,734 Tubular Raw Material 2,671,140 4,888,542 Tubular Finished Goods 9,821,287 12,038,532 $ 30,130,320 $ 35,668,243 Tubular raw material inventory consists of hot-rolled steel coils that the Company will manufacture into pipe. Tubular finished goods inventory consists of pipe the Company has manufactured and new mill reject pipe the Company has purchased from U.S. Steel Tubular Products, Inc. NOTE D – DEBT In April 2020, the Company received a $1,690,385 loan (the “PPP Loan”) from JPMorgan Chase Bank, N.A. (the “Bank”), under the Paycheck Protection Program, which was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), as modified by the Paycheck Protection Flexibility Act of 2020 (the “PPP Flexibility Act”). The term of the PPP Loan is two years from the funding date of the PPP Loan. The interest rate on the PPP Loan is 0.98%. Under the terms of the PPP Loan, interest accrues from the funding date of the PPP Loan but payment of both principal and interest is deferred for six months. Pursuant to the terms of the CARES Act, the Company can apply for and may be granted forgiveness for all or a portion of the PPP Loan, if and to the extent that the Company satisfies certain requirements. Such forgiveness is subject to use of the PPP Loan proceeds for qualifying purposes and is also subject to maintenance or achievement of certain employee and compensation levels. 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 The Company adopted ASU 2016-02, Leases (“ASC 842”) on April 1, 2019 using the optional transition method under which the new standard is applied only to the most current period presented and the cumulative effect of applying the new standard to existing lease agreements is recognized at the date of initial application. Under this adoption method, reporting periods beginning after April 1, 2019 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The adoption of ASC 842 resulted in the recording of initial ROU asset and lease liabilities of approximately $63,000 at April 1, 2019. The Company’s lease of its office space in Longview, Texas is the only operating lease included in the ROU asset and lease liability. The lease calls for monthly rent payments of $4,878 and expires on April 30, 2021. The Company’s other operating leases for items such as IT equipment and storage space are either short-term in nature or immaterial. 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 and nine months ended December 31, 2020 and 2019 are as follows: Three Months Ended December 31, Nine Months Ended December 31, 2020 2019 2020 2019 Finance lease – amortization of ROU asset $ 25,243 $ 8,644 $ 75,364 $ 8,644 Finance lease – interest on lease liability 1,981 2,463 6,306 2,463 Operating lease expense 14,634 8,184 41,652 24,552 $ 41,858 $ 19,291 $ 123,322 $ 35,659 8 The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of December 31, 2020 : December 31, 2020 Balance Sheet Classification Assets Operating lease right-of-use asset $ 19,231 Other assets Finance lease right-of-use asset 488,363 Property, plant & equipment Total right-of-use assets $ 507,594 Liabilities Operating lease liability, current $ 19,231 Accrued expenses Finance lease liability, current 102,196 Current portion of finance lease Finance lease liability, non-current 291,417 Other non-current liabilities Total lease liabilities $ 412,844 As of December 31, 2020 , the weighted-average remaining lease term was 0.3 year for operating leases and 3.7 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 December 31, 2020 were as follows: Operating Leases Finance Leases Fiscal 2021 (remainder of fiscal year) 14,634 27,222 Fiscal 2022 4,878 108,888 Fiscal 2023 — 108,888 Fiscal 2024 — 108,888 Fiscal 2025 — 54,444 Total undiscounted lease payments $ 19,512 $ 408,330 Less: imputed interest (281 ) (14,717 ) Present value of lease liability $ 19,231 $ 393,613 NOTE F — PROPERTY, PLANT AND EQUIPMENT The Company continued the previously announced capital expenditure project at our Decatur, Alabama facility during the third 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. Installation of the equipment began in December 2020 and the Company expects 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. NOTE G — STOCK BASED COMPENSATION The Company maintains the Friedman Industries, Incorporated 2016 Restricted Stock Plan (the “Plan”). The Plan is administered by the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) and continues indefinitely until terminated by the Board or until all shares allowed by the Plan have been awarded and earned. The aggregate number of shares of the Company’s Common Stock eligible for award under the Plan is 500,000 shares. Subject to the terms and provisions of the Plan, the Committee may, from time to time, select the employees to whom awards will be granted and shall determine the amount and applicable restrictions of each award. Forfeitures are accounted for upon their occurrence. 9 The following table summarizes the activity related to restricted stock awards for the nine months ended December 31, 2020 : Weighted Average Number of Shares Grant Date Fair Value Per Share Unvested at March 31, 2020 270,000 $ 6.37 Cancelled or forfeited — — Granted 89,625 5.64 Vested — — Unvested at December 31, 2020 359,625 $ 6.19 Compensation expense is recognized over the requisite service period applicable to each award. The Company recorded compensation expense of $376,363 and $249,708 in the nine months ended December 31, 2020 and 2019 , respectively, relating to the stock awards issued under the Plan. As of December 31, 2020 , unrecognized compensation expense related to stock awards was approximately $1,014,541, which is expected to be recognized over a weighted average period of approximately 2.8 years. NOTE H — DERIVATIVE FINANCIAL INSTRUMENTS In June 2020, the Company implemented its first commodity price risk management activities by transacting hot-rolled coil futures. From time to time, we expect to use derivative financial instruments to minimize our exposure to commodity price risk that is inherent in our business. At the time derivative contracts are entered into, we assess whether the nature of the instrument qualifies for hedge accounting treatment according to the requirements of ASC 815 – Derivatives and Hedging (“ASC 815”). By using derivatives, the Company is exposed to credit and market risk. The Company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. The Company minimizes its credit risk by entering into transactions with high quality counterparties, and uses exchange-traded derivatives when available. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices. The Company manages market risk by continually monitoring exposure within its risk management strategy and portfolio. For those transactions designated as hedging instruments, we document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge transactions. 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 the three months ended December 31, 2020, the Company entered into hot-rolled coil futures contracts which were designated as hedging instruments and classified as cash flow hedges, either as hedges of variable purchase prices or as hedges of variable sales prices. Accordingly, realized and unrealized gains and losses associated with the instruments are reported as a component of other comprehensive income and reclassified into earnings during the period in which the hedged transaction affects earnings. At December 31, 2020, the Company had a $1,215,300 cash margin requirement to collateralize our open hedging positions. This margin requirement is included in "Other current assets" on the Company's consolidated balance sheet at December 31, 2020. The Company recorded a receivable of $1,227,940 related to closed positions whose cash settlement occurred subsequent to quarter end with this amount included in "Other current assets" on the Company's consolidated balance sheet at December 31, 2020. For the three months and nine months ended December 31, 2020, the Company did not have any derivative instruments not designated as cash flow or fair value hedges. The following table summarizes the fair value of the Company’s derivative financial instruments and the respective line in which they were recorded in the Consolidated Balance Sheet as of December 31, 2020 : Asset Derivatives Liability Derivatives Balance Sheet Balance Sheet Derivatives designated as cash flow hedges: Location Fair Value Location Fair Value Hot-rolled coil steel contracts hedging purchases Other current assets $ 2,862,580 Hot-rolled coil steel contracts hedging sales Other current assets $ 1,422,460 The notional amounts (quantities) of our cash flow hedges outstanding at December 31, 2020 consisted of 16,080 tons hedging purchases and 32,120 tons hedging sales. The following table summarizes the gain recognized in other comprehensive income and the gain reclassified from accumulated other comprehensive income into earnings for derivative financial instruments designated as cash flow hedges for both the three months and nine months ended December 31, 2020 : Gain Recognized Location of Gain Reclassified from Gain Reclassified from in OCI AOCI into Net Earnings AOCI into Net Earnings Hot-rolled coil steel contracts $ 3,364,460 Costs of goods sold $ 396,720 The estimated amount of gains recognized in AOCI at December 31, 2020 expected to be reclassified into net earnings (loss) within the succeeding twelve months is $3,533,120. This amount was computed using the fair value of the cash flow hedges as of December 31, 2020, and will change before actual reclassification from OCI to net earnings (loss). The maximum derivative contract duration for contracts hedging purchases is 2 months. The maximum derivative contract duration for contracts hedging sales is 17 months. Contracts with settlement dates beyond one year are not material. The Company did not have any derivative financial instruments for the three months or nine months ended December 31, 2019. NOTE I — FAIR VALUE MEASUREMENTS Accounting standards provide a comprehensive framework for measuring fair value and sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. Levels within the hierarchy are defined as follows: ● Level 1 – Quoted prices for identical assets and liabilities in active markets. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly. ● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. 10 Recurring Fair Value Measurements At December 31, 2020 , our financial assets measured at fair value on a recurring basis were as follows: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Commodity futures – financial assets $ 1,440,120 $ — $ — $ 1,440,120 Total $ 1,440,120 $ — $ — $ 1,440,120 At 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 At March 31, 2020 , our assets measured at fair value on a non-recurring basis were categorized as follows: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Long-lived assets held and used (1) $ — $ — $ 1,771,450 $ 1,771,450 Total $ — $ — $ 1,771,450 $ 1,771,450 (1) 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 December 31, 2020 , the Company did not have any fair value measurements on a non-recurring basis. NOTE J — SEGMENT INFORMATION (in thousands) Three Months Ended December 31, Nine Months Ended December 31, 2020 2019 2020 2019 Net sales Coil $ 21,672 $ 21,001 $ 55,561 $ 77,604 Tubular 6,830 7,150 21,327 31,518 Total net sales $ 28,502 $ 28,151 $ 76,888 $ 109,122 Operating profit (loss) Coil $ 3,238 $ (93 ) $ 3,529 $ 575 Tubular 269 (468 ) (16 ) (1,670 ) Total operating profit (loss) 3,507 (561 ) 3,513 (1,095 ) Corporate expenses 736 587 2,188 1,826 Interest expenses 6 2 18 2 Interest and other income (4 ) (4 ) (13 ) (15 ) Total earnings (loss) before taxes $ 2,769 $ (1,146 ) $ 1,320 $ (2,908 ) December 31, 2020 March 31, 2020 Segment assets Coil $ 43,880 $ 35,895 Tubular 17,563 23,659 61,443 59,554 Corporate assets 17,926 17,790 $ 79,369 $ 77,344 11 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, retirement plan contribution expense, corporate insurance expenses, restricted stock plan compensation expense and office supplies. Corporate assets consist primarily of cash and the cash value of officers’ life insurance. NOTE K — REVENUE Revenue is generated primarily from contracts to manufacture or process steel products. Most of the Company’s revenue is generated by sales of material out of the Company’s inventory, but a portion of the Company’s revenue is derived from processing of customer owned material. Generally, the Company’s performance obligations are satisfied, control of our products is transferred, and revenue is recognized at a single point in time, when title transfers to our customer for product shipped or when services are provided. Revenues are recorded net of any sales incentives. Shipping and other transportation costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at the time control is transferred to the customer. Costs related to obtaining sales contracts are incidental and expensed when incurred. Because customers are invoiced at the time title transfers and the Company’s rights to consideration are unconditional at that time, the Company does not maintain contract asset balances. Additionally, the Company does not maintain contract liability balances, as performance obligations are satisfied prior to customer payment for product. The Company offers industry standard payment terms. The Company has two reportable segments: Coil and Tubular. Coil primarily generates revenue from temper passing and cutting to length hot-rolled steel coils. Coil segment revenue consists of three main product types: Prime Coil, Non-Standard Coil and Customer Owned Coil. Tubular primarily generates revenue from the manufacture, distribution and processing of steel pipe. Tubular segment revenue consists of three main product or service types: Manufactured Pipe, Mill Reject Pipe and Pipe Finishing Services. The Company did not generate any revenue from pipe finishing services during any of the three month or nine month periods ended December 31, 2020 or December 31, 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 nine months ended December 31, 2020 and 2019 , respectively: Three Months Ended December 31, Nine Months Ended December 31, 2020 2019 2020 2019 Coil Segment: Prime Coil 19,541,188 18,662,211 49,897,886 67,827,299 Non-standard Coil 1,886,099 2,153,277 5,028,237 9,197,245 Customer Owned Coil 244,860 185,870 634,894 578,891 21,672,147 21,001,358 55,561,017 77,603,435 Tubular Segment: Manufactured Pipe 5,082,314 5,748,647 17,540,498 26,225,323 Mill Reject Pipe 1,747,588 1,400,812 3,786,814 5,292,959 6,829,902 7,149,459 21,327,312 31,518,282 NOTE L — STOCKHOLDERS’ EQUITY The following tables reflect the changes in stockholders’ equity for each of the quarters during the nine month periods ended December 31, 2020 and December 31, 2019 : Accumulated Other Comprehensive Additional Common Income, Paid-In Treasury Retained Stock Net of Tax Capital Stock Earnings BALANCE AT MARCH 31, 2020 $ 8,295,160 — $ 29,565,416 $ (5,525,964 ) $ 34,530,755 Net loss — — — — (858,862 ) Issuance of restricted stock 11,000 — — — — Paid in capital – restricted stock awards — — 99,814 — — Cash dividends ($0.02 per share) — — — — (143,229 ) BALANCE AT JUNE 30, 2020 $ 8,306,160 $ — $ 29,665,230 $ (5,525,964 ) $ 33,528,664 Net loss — — — — (250,005 ) Paid in capital – restricted stock awards — — 110,813 — — Repurchase of shares — — — (410,221 ) — Cash dividends ($0.02 per share) — — — — (143,181 ) BALANCE AT SEPTEMBER 30, 2020 $ 8,306,160 $ — $ 29,776,043 $ (5,936,185 ) $ 33,135,478 Net earnings — — — — 2,129,745 Other comprehensive income — 2,657,923 — — — Issuance of restricted stock 28,625 — — 50,000 — Paid in capital – restricted stock awards — — 76,111 — — Repurchase of shares — — — (733,135 ) — Cash dividends ($0.02 per share) — — — — (137,867 ) BALANCE AT DECEMBER 31, 2020 $ 8,334,785 $ 2,657,923 $ 29,852,154 $ (6,619,320 ) $ 35,127,356 12 Accumulated Other Additional Common Comprehensive Paid-In Treasury Retained Stock Income Capital Stock Earnings BALANCE AT MARCH 31, 2019 $ 8,205,160 — $ 29,322,472 $ (5,525,964 ) $ 40,479,909 Net earnings — — — — 194,772 Issuance of restricted stock 20,000 — — — — Paid in capital – restricted stock awards — — 63,236 — — Cash dividends ($0.04 per share) — — — — (279,978 ) BALANCE AT JUNE 30, 2019 $ 8,225,160 $ — $ 29,385,708 $ (5,525,964 ) $ 40,394,703 Net loss — — — — (1,544,137 ) Paid in capital – restricted stock awards — — 83,236 — — Cash dividends ($0.02 per share) — — — — (139,990 ) BALANCE AT SEPTEMBER 30, 2019 $ 8,225,160 $ — $ 29,468,944 $ (5,525,964 ) $ 38,710,576 Net loss — — — — (881,003) Paid in capital – restricted stock awards — — 83,236 — — Cash dividends ($0.02 per share) — — — — (139,993) BALANCE AT DECEMBER 31, 2019 $ 8,225,160 $ — $ 29,552,180 $ (5,525,964 ) $ 37,689,580 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. 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. The Company has repurchased 180,200 shares at a cost of $1,143,356 under the program as of December 31, 2020 . NOTE M — OTHER COMPREHENSIVE INCOME The following table summarizes the tax effects on each component of OCI for the periods presented: Three Months Ended December 31, 2020 Before-Tax Tax Net-of-Tax Cash flow hedges $ 3,364,460 $ (706,537 ) $ 2,657,923 Other comprehensive income $ 3,364,460 $ (706,537 ) $ 2,657,923 Nine Months Ended December 31, 2020 Before-Tax Tax Net-of-Tax Cash flow hedges $ 3,364,460 $ (706,537 ) $ 2,657,923 Other comprehensive income $ 3,364,460 $ (706,537 ) $ 2,657,923 For the three month and nine month periods ended December 31, 2019, the Company did not have transactions to report in comprehensive income. NOTE N — SUPPLEMENTAL CASH FLOW INFORMATION The Company paid interest of approximately $6,000 during the nine months ended December 31, 2020 and $2,500 during the nine months ended December 31, 2019 . The Company paid income taxes of approximately $10,000 and $259,000 during the nine months ended December 31, 2020 and nine months ended December 31, 2019 , respectively. In the nine months ended December 31, 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 O — INCOME TAXES For the nine months ended December 31, 2020 , the Company recorded an income tax provision of $298,668, or 22.6% of earnings before income taxes, compared to a tax benefit of $678,043, or 23.3% of loss before income taxes for the nine months ended December 31, 2019 . For both nine month periods, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses or benefits in the provision. NOTE P – RELATED PARTY TRANSACTIONS The Company has engaged Metal Edge Partners, LLC (“Metal Edge”) to provide services that include strategic advisory services, risk management services, procurement advisory services, steel market analytics and macro-economic analytics. Tim Stevenson serves as a member of our Board of Directors and serves as Chief Executive Officer of Metal Edge. In the nine months ended December 31, 2020 , we paid Metal Edge $136,000 related to these services. Our agreement with Metal Edge may be terminated by either party, without cause, upon ninety days prior written notice. There were no related party transactions to disclose for the nine months ended December 31, 2019. 13