Item 1. Business
Item 1. Business
General
Friedman Industries, Incorporated (the “Company”), a Texas corporation incorporated in 1965, is a manufacturer and processor of steel products and operates in two reportable segments: flat-roll products and tubular products. The flat-roll segment was previously referred to as the coil segment. The Company is now using flat-roll to describe the segment due to it being a more common term used in the Company's industry. Significant financial information relating to the Company’s business segments for the last two years is contained in Note 13of the Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2024, which financial statements are incorporated herein by reference in Item 8 hereof.
Flat-Roll Products
The flat-roll product segment consists of the operation of five hot-rolled coil processing facilities located in Hickman, Arkansas; Decatur, Alabama; East Chicago, Indiana; Granite City, Illinois and Sinton, Texas. The facilities in Granite City and East Chicago were acquired on April 30, 2022 from Plateplus, Inc ("Plateplus"). More information about the Plateplus transaction can be found in Note 2 of the Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended March 31, 2024. The facility in Sinton is a newly constructed facility that commenced operations during October 2022. The Hickman, Granite City and East Chicago facilities operate temper mills and cut-to-length lines. The Decatur and Sinton facilities operate stretcher leveler cut-to-length lines. The equipment at all locations improve the flatness and surface quality of the coils and cut the coils into sheet and plate of prescribed lengths. On a combined basis, the facilities are capable of cutting sheet and plate with thicknesses ranging from 16 gauge to 1” thick in widths ranging from 36” wide to 96” wide. The vast majority of flat-roll product segment revenue is generated from sales of Company owned inventory but the segment also generates revenue from the processing or storage of customer owned coils on a fee basis.
The coil processing facilities are substantially similar with respect to products produced. The Company makes shipments of products based on which facility offers the desired product or, if the product is available at multiple facilities, based on other factors, such as customer location, freight conditions and the ability of the facility to fulfill the order on a timely basis. Flat-roll products are sold on a wholesale, rapid-delivery basis in competition with other processors of hot-rolled steel coils. Shipments are made via unaffiliated truckers or by rail.
The flat-roll segment purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.
Tubular Products
The tubular product segment consists of the Company’s Texas Tubular Products division (“TTP”) located in Lone Star, Texas. TTP operates two electric resistance welded pipe mills with a combined outside diameter (“OD”) size range of 2 3/8” OD to 8 5/8” OD. Both pipe mills are American Petroleum Institute (“API”) licensed to manufacture line pipe and oil country pipe and also manufacture pipe for structural purposes that meets other recognized industry standards. TTP has a pipe finishing facility capable of applying threads and couplings to oil country tubular goods and performing other services that are customary in the pipe finishing process. The pipe finishing facility is currently idled. All of the tubular segment's revenue is generated from sales of Company owned inventory.
TTP purchases its inventory from a limited number of suppliers. Loss of any of these suppliers could have a material adverse effect on the Company’s business.
2
Marketing
The following table sets forth the approximate percentage of total sales contributed by each group of products and services during each of the Company’s last two fiscal years:
Product and Service Groups
Fiscal 2024
Fiscal 2023
Flat-Roll Products
92
%
89
%
Tubular Products
8
%
11
%
Flat-Roll Products. The Company sells flat-roll products and processing or storage services to approximately 480 customers located primarily in the midwestern, southwestern and southeastern regions of the United States. The Company’s principal customers for these products and services are steel distributors and customers manufacturing steel products such as steel buildings, railroad cars, barges, tanks and containers, trailers, component parts and other fabricated steel products. In fiscal years 2024 and 2023, sales of flat-roll products to O'Neal Steel accounted for approximately 16% and 15% of the Company's total sales, respectively. No other individual flat-roll products customer accounted for 10% or more of the Company's total sales for either of the two fiscal years.
The Company sells all of its flat-roll products through its own sales force. At March 31, 2024, the sales force was comprised of the Vice President of Sales – Flat Roll Division and 25 sales personnel.
Tubular Products. The Company sells its tubular products nationally to approximately 92 customers. The Company’s principal customers for these products are steel and pipe distributors. In fiscal years 2024 and 2023, no individual tubular customer accounted for 10% or more of the Company’s total sales.
The Company sells all of its tubular products through its own sales force. At March 31, 2024, the sales force was comprised of the Vice President and General Manager – Tubular Division and two sales personnel.
Competition
The Company is engaged in a non-seasonal, highly-competitive business. The Company competes with other processors of hot-rolled steel coils, tubular manufacturers, steel distributors and brokers.
The Company believes that, generally, its ability to compete is dependent upon its ability to offer products at prices competitive with or below those of other steel suppliers, as well as its ability to provide products meeting customer specifications on a rapid-delivery basis.
Human Capital
Employee Base
At March 31, 2024, the Company had 268 full-time employees, with all of them based in the United States.
Talent Management and Diversity
The Company's success and growth depend in large part on our ability to attract, develop, and retain a diverse population of talented employees at all levels of our organization. Our goal is to foster an inclusive and respectful work environment where employees are comfortable to express ideas and openly communicate throughout the organization with the goal of continuously improving our company. Our compensation programs are designed to ensure that we attract and retain the right talent and are focused on rewarding employees based on their individual performance as well as company performance that is made possible by their efforts. Our employee benefits programs are structured to provide competitive benefits that are effective in attracting and retaining talent and that address the needs of a diverse employee base.
Safety and Wellness
The health and safety of our workforce is fundamental to the success of our company. We have established policies and work procedures aimed at ensuring the safety of our employees. We seek to have our employees actively engaged in the safety process through initial trainings and ongoing regular meetings. We believe safety is a shared responsibility of everyone within our organization. The Company recognizes the importance of our employees' wellness and provides industry leading benefit programs and employee policies that help ensure employees' physical, mental and work-life balance needs are met.
Executive Officers of the Company
The following table sets forth as of March 31, 2024, for each executive officer of the Company, the name, age, officer positions and arrangements with other persons regarding his selection as an officer, if any, and the period during which such officer has served in such capacity:
Name
Age
Position, Offices with the Company
and Other Arrangements, if any
Michael J. Taylor
65
President and Chief Executive Officer since September 2019; formerly Interim President and Interim Chief Executive Officer since February 2019; Chairman of the Board of Directors since June 2017; member of the Board of Directors since December 2016
Alex LaRue
38
Chief Financial Officer – Secretary and Treasurer since March 2018; formerly Vice President — Secretary and Treasurer since 2014; formerly Assistant Vice President — Secretary and Treasurer since 2013; formerly Controller — Texas Tubular Products since 2011
3
Item 1A. Risk Factors
Not required.