What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-02-14 · 151 added, 280 removed, 325 unchanged (57% of the section changed)

3 unchanged sentences

(In thousands, except for share data)

DECEMBER 31, 2023

JUNE 30, 2024

MARCH 31, 2024

1 unchanged sentence

$ 4,146 $ 2,891

Accounts receivable, net of allowances for bad debts of $ 138 and $ 183 at December 31, and March 31, 2023, respectively

Accounts receivable, net of allowances for credit losses and cash discounts of $ 138 and $ 97 at June 30, and March 31, 2024, respectively

37,755 47,329

23 unchanged sentences

Dividends payable

Contribution to retirement plan

Employee compensation and related expenses

5 unchanged sentences

DEFERRED INCOME TAX LIABILITY

OTHER NON-CURRENT LIABILITIES

NON-CURRENT LEASE LIABILITIES

ASSET BASED LENDING FACILITY

6 unchanged sentences

Authorized shares — 10,000,000 ;

Issued shares — 8,868,716 shares at December 31, and March 31, 2023

Issued shares — 8,873,203 shares at June 30, and March 31, 2024

Additional paid-in capital

35,294 35,247

Accumulated other comprehensive loss

Treasury stock at cost ( 1,896,892 shares and 1,493,128 shares at December 31, and March 31, 2023, respectively)

Treasury stock at cost ( 1,903,508 shares and 1,896,892 shares at June 30, and March 31, 2024, respectively)

( 13,052 ) ( 12,929 )

10 unchanged sentences

THREE MONTHS ENDED

NINE MONTHS ENDED

$ 115,973 $ 111,860 $ 384,019 $ 423,356

Costs and expenses:

Costs of products sold

105,531 105,730 351,427 393,876

Cost of materials sold

Processing and warehousing expense

Delivery expense

Selling, general and administrative

4,269 4,701 15,007 15,662

109,800 110,431 366,434 409,538

EARNINGS FROM OPERATIONS

6,173 1,429 17,585 13,818

Gain (loss) on economic hedges of risk

( 4,126 ) 822 706 7,326

Depreciation and amortization

EARNINGS (LOSS) FROM OPERATIONS

Gain on economic hedges of risk

Interest expense

( 790 ) ( 448 ) ( 2,135 ) ( 1,498 )

EARNINGS BEFORE INCOME TAXES

1,258 1,807 16,173 19,670

Provision for (benefit from) income taxes:

82 448 3,827 4,686

( 8 ) ( 17 ) ( 41 ) ( 47 )

74 431 3,786 4,639

$ 1,184 $ 1,376 $ 12,387 $ 15,031

Net earnings per share:

$ 0.16 $ 0.19 $ 1.69 $ 2.06

Cash dividends declared per common share

$ 0.02 $ 0.02 $ 0.06 $ 0.06

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME — UNAUDITED

1 unchanged sentence

THREE MONTHS ENDED

NINE MONTHS ENDED

Other comprehensive income:

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(In thousands)

NINE MONTHS ENDED DECEMBER 31,

THREE MONTHS ENDED JUNE 30,

OPERATING ACTIVITIES

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

$ 2,567 $ 7,690

Adjustments to reconcile net earnings to cash used in operating activities:

Depreciation and amortization

Deferred taxes

( 10 ) ( 17 )

Compensation expense for restricted stock

1 unchanged sentence

Gain recognized on open derivatives not designated for hedge accounting

( 1,608 ) ( 956 )

Deferred realized gain on derivatives

Decrease (increase) in operating assets, net of amounts acquired in business combination:

Right-of-use asset

Decrease (increase) in operating assets:

Accounts receivable

Federal income taxes recoverable

( 3,998 ) ( 14,900 )

Other current assets

Increase (decrease) in operating liabilities, net of amounts assumed in business combination:

Decrease (increase) in operating liabilities:

Accounts payable and accrued expenses

( 9,533 ) ( 851 )

Income taxes payable

1 unchanged sentence

Employee compensation and related expenses

NET CASH PROVIDED BY OPERATING ACTIVITIES

( 4,737 ) ( 1,670 )

NET CASH USED IN OPERATING ACTIVITIES

( 6,059 ) ( 4,583 )

INVESTING ACTIVITIES

Plateplus business combination

Purchase of property, plant and equipment

( 1,054 ) ( 450 )

Increase in cash surrender value of officers’ life insurance

NET CASH USED IN INVESTING ACTIVITIES

( 1,057 ) ( 452 )

FINANCING ACTIVITIES

Debt issuance cost

Cash dividends paid

( 279 ) ( 148 )

Cash paid for principal portion of finance lease

( 27 ) ( 26 )

Cash paid for share repurchases

Asset based lending facility proceeds

Borrowings on asset based lending facility

198,871 204,312

Repayments on asset based lending facility

( 193,077 ) ( 198,131 )

NET CASH PROVIDED BY FINANCING ACTIVITIES

INCREASE (DECREASE) IN CASH AND RESTRICTED CASH

INCREASE (DECREASE) IN CASH AND RESTRICED CASH

( 1,751 ) 972

CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD

CASH AND RESTRICTED CASH AT END OF PERIOD

Cash and restricted cash at December 31, 2023 and March 31, 2023 included approximately $4.8 million and $2.4 million, respectively, of cash required to collateralize open derivative positions.

These amounts are reported in "Other current assets" on the Company's consolidated balance sheets at December 31, 2023 and March 31, 2023.

The Company had approximately $1.9 million in restricted cash at December 31, 2022 .

$ 4,146 $ 6,358

The Company did not have any restricted cash at June 30, 2024.

Cash and restricted cash at March 31, 2024 included approximately $3.0 million of cash required to collateralize open derivative positions with this amount reported in "Other current assets" on the Company's consolidated balance sheet at March 31, 2024.

The accompanying notes are an integral part of these financial statements.

6 unchanged sentences

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, 2024 .

Business Combinations

The results of a business acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition.

The Company allocates the purchase price to the identifiable assets and liabilities of the acquired business at their acquisition date fair values.

The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill.

Determining the fair value of assets acquired and liabilities assumed requires management to make significant judgments and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies.

Acquisition-related transaction costs are expensed in the period in which the costs are incurred.

Reclassifications

The unaudited condensed consolidated financial statements for the previous year may include certain reclassifications to conform to the current presentation.

To conform with the current year presentation, “ Interest expense ” on the unaudited condensed consolidated statements of operations was moved below the calculation of " Earnings From Operations ".

To conform with the current year presentation, gains of approximately $ 0.8 million and $ 7.3 million for the three and nine months ended December 31, 2022 periods, respectively, reported in the prior year as components of " Other income (loss), net " on the unaudited condensed consolidated statement of operations were moved to the line item " Gain (loss) on economic hedges of risk ".

The consolidated financial statements for the previous year may include certain reclassifications to conform to the current presentation.

To conform with the current year presentation, “Cost of products sold” on the consolidated statements of operations was broken down into four separate line items:

"Cost of materials sold", "Processing and warehousing expense", "Delivery expense" and "Depreciation and Amortization".

The Company believes this increased level of detail provides financial statement users with a better understanding of the Company's expenses.

"Cost of materials sold" represent the delivered cost of inventory sold.

"Processing and warehousing expense" represents the operating costs at our processing facilities.

"Delivery expense" represents the costs of delivering products to customers.

The amount the Company charged customers for delivery of products is reported within "Net sales" on the consolidated statements of operations.

These reclassifications had no impact on previously reported net earnings or stockholders' equity.

NOTE B — BUSINESS COMBINATIONS

On April 30, 2022, ( the “Acquisition Date”), the Company acquired certain assets and liabilities of Plateplus, Inc.

(“Plateplus”), a wholly owned subsidiary of Metal One, Inc.

(“Metal One” or “Seller”), whereby the Company acquired the real estate, buildings, equipment, inventory, and other assets of Plateplus’ East Chicago, IN and Granite City, IL facilities and certain steel inventory at Plateplus’ Loudon, TN and Houston, TX facilities (the “Transaction”).

The East Chicago and Granite City facilities are steel coil processing facilities that produce the same type of products as the Company's facilities in Hickman, AR;

Decatur, AL and Sinton, TX.

As a result of the Transaction, the Company expanded its footprint and distribution capabilities in the mid-western United States.

The Transaction resulted in the Company acquiring the assets noted above, for a total consideration of $ 76.5 million, of which $ 71.7 million was cash consideration and $ 4.8 million related to 516,041 shares of the Company's common stock issued to the Seller.

The fair value of the 516,041 shares issued was determined based on the closing market price of the Company’s common stock on April 29, 2022, the last trading day prior to the Acquisition Date.

The Transaction was funded with net borrowings of $ 71.9 million made under the Company's asset-based lending facility ("ABL Facility") provided by JPMorgan Chase Bank.

The Transaction was accounted for using the acquisition method of accounting, in accordance with Topic 805, Business Combinations , whereby the consideration transferred and the acquired identifiable assets and liabilities assumed are recorded at their respective fair values.

The excess of the consideration transferred over the fair values of these identifiable net assets is recorded as goodwill.

The Transaction resulted in no residual goodwill.

Fair value of assets acquired and liabilities assumed (in thousands)

Property, plant and equipment

Operating lease right of use asset

Accounts payable

Operating lease liability

The Company recorded one -time transaction specific costs of approximately $ 1.2 million in the nine months ended December 31, 2022, as a component of “Selling, general and administrative” expenses on the condensed consolidated statement of operations.

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.

NOTE B — INVENTORIES

The Company operates in two segments:

the flat-roll segment and the tubular segment.

Both flat-roll segment and tubular segment inventories consist of raw material and finished goods.

Cost for substantially all of the Company's inventory is determined using the average cost method.

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

Flat-roll raw material inventory consists of steel coils the Company will process into sheet and plate.

Flat-roll finished goods consists of processed sheet and plate inventory.

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.

A summary of inventory values by product group follows (in thousands):

December 31, 2023

June 30, 2024

March 31, 2024

Prime Coil Inventory

Flat-Roll raw material

$ 89,847 $ 85,483

Non-Standard Coil Inventory

Flat-Roll finished goods

17,717 17,030

Tubular raw material

1 unchanged sentence

$ 119,802 $ 115,804

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.

NOTE D – DEBT

NOTE C – DEBT

The Company has a $ 150 million asset-based lending facility ("ABL Facility") in place with JPMorgan Chase Bank, N.A.

2 unchanged sentences

The ABL Facility matures on May 19, 2026 and is secured by substantially all of the assets of the Company.

The Company can elect borrowings on a floating rate basis or a term basis.

Company can elect borrowings on a floating rate basis or a term basis.

Floating rate borrowings accrue interest at a rate equal to the prime rate minus 1 % per annum.

6 unchanged sentences

If certain conditions precedent are satisfied, the ABL facility may be increased by up to an aggregate of $ 25 million, in minimum increments of $ 5 million.

At December 31, 2023 , the Company had a balance of approximately $ 46.0 million under the ABL Facility with an applicable interest rate of 7.5 %.

At December 31, 2023 , the Company's applicable borrowing base calculation supported access to approximately $ 106.1 million of the ABL Facility.

At June 30, 2024 , the Company had a balance of approximately $ 46.1 million under the ABL Facility with an applicable interest rate of 7.5 %.

At June 30, 2024 , the Company's applicable borrowing base calculation supported access to approximately $ 112.4 million of the ABL Facility.

The Company incurred debt issuance costs of approximately $ 0.4 million in connection with the ABL Facility.

The Company recorded these debt issuance costs as non-current other assets and is amortizing these costs on an equal monthly basis over the remaining term of the ABL facility.

NOTE E — LEASES

The Company was assigned an operating lease associated with the real property and leasehold improvements for the Granite City, IL facility acquired from Plateplus pursuant to the transaction disclosed in Note B.

The lease called for quarterly rental payments of approximately $ 19,000 .

The Company recognized an initial right-of-use (“ROU”) asset and lease liability of approximately $ 1.2 million during the June 30, 2022 quarter related to this lease.

The Company renewed this lease in January 2024 through August 31, 2028, with extension provisions that include four additional five year terms.

The ROU asset and lease liability will be updated during the quarter ending March 31, 2024.

NOTE D — LEASES

The Company has an operating lease for the Granite City, IL facility with an expiration date of August 31, 2028 with optional renewal provisions for up to 4 renewal terms of five years each.

The lease calls for monthly rental payments that adjust on an annual basis.

The monthly rental payment in place at June 30, 2024 and remaining in place until adjustment in September 2024 is approximately $ 13,000 per month.

The anticipated execution of renewal options for this lease is included in the ROU asset and lease liability calculation.

The Company has an operating lease for administrative office space in The Woodlands, TX with an expiration date of February 28, 2029 and a renewal option for one additional 60 month term.

The lease calls for monthly rental payments that adjust on an annual basis.

The monthly rental payment in place at June 30, 2024 and remaining in place until adjustment in March 2025 is approximately $ 11,000 per month.

The Company’s lease of its office space in Longview, Texas is the only other operating lease included in the Company's ROU assets and lease liabilities.

The lease calls for monthly rent payments of approximately $ 5,000 and expires on April 30, 2024.

This lease was renewed in April 2024 for a 36 month term expiring on April 30, 2027 with monthly rental payments of approximately $ 5,000 .

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 acquired a new heavy-duty forklift under a 5 -year finance lease arrangement with a financed amount of approximately $ 0.5 million and a monthly payment of approximately $ 9,000 .

The components of expense related to leases for the three and nine months ended December 31, 2023 and 2022 are as follows (in thousands):

In October 2019, the Company acquired equipment under a 5 -year finance lease arrangement with a financed amount of approximately $ 0.5 million and a monthly payment of approximately $ 9,000 .

The components of expense related to leases for the three months ended June 30, 2024 and 2023 are as follows (in thousands):

Three Months Ended

Nine Months Ended

Finance lease – amortization of ROU asset

$ 26 $ 26 $ 78 $ 78

Finance lease – interest on lease liability

Operating lease expense

$ 61 $ 61 $ 183 $ 175

The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of December 31, 2023 and March 31, 2023 (in thousands):

December 31, 2023

The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of June 30, 2024 and March 31, 2024 (in thousands):

June 30, 2024

March 31, 2024

11 unchanged sentences

Operating lease liability, non-current

1,127 1,168 Other non-current liabilities

Finance lease liability, non-current

— 54 Other non-current liabilities

2,863 2,782 Non-current lease liabilities

Total lease liabilities

$ 3,039 $ 2,937

As of December 31, 2023 , the weighted-average remaining lease term was 19.4 years for operating leases and 0.8 years for finance leases.

The weighted average discount rate was 2.6 % for operating leases and 1.9 % for finance leases.

Maturities of lease liabilities as of December 31, 2023 were as follows (in thousands):

As of June 30, 2024 , the weighted-average remaining lease term was 19.5 years for operating leases and 0.2 years for finance leases.

The weighted average discount rate was 7.5 % for operating leases and 1.9 % fo r finance leases.

Maturities of lease liabilities as of June 30, 2024 were as follows (in thousands):

Operating Leases

4 unchanged sentences

imputed interest

( 308 ) ( 1 )

Present value of lease liability

NOTE F — PROPERTY, PLANT AND EQUIPMENT

In October 2022, the Company completed its new facility in Sinton, Texas, which is part of the flat-roll product segment (previously referred to as the coil product segment) at a total completed cost of approximately $ 22.2 million.

The new facility is on the campus of Steel Dynamics, Inc.'s (“SDI”) new flat roll steel mill in Sinton, Texas and consists of an approximately 70,000 square foot building located on approximately 26.5 acres leased from SDI under a 99 -year agreement with an annual rental payment of $ 1 .

The facility is equipped with a stretcher leveler cut-to-length line that is capable of handling material up to 1” thick, widths up to 96” and yields exceeding 100,000 psi.

At December 31, 2023 , the Company's construction in process balance of approximately $ 4.2 million consisted primarily of projects at the Decatur, AL facility which include approximately $ 1.5 million associated with a building expansion and $ 1.8 million associated with upgrading a component of the processing line.

The total estimated cost of these projects is $ 3.8 million with completion of the building expansion expected during the March 31, 2024 quarter and completion of the processing line upgrade expected during the June 30, 2024 quarter.

NOTE E — PROPERTY, PLANT AND EQUIPMENT

At June 30, 2024 , the Company's construction in process balance of approximately $ 2.3 million consisted primarily of approximately $ 1.9 million associated with a processing line upgrade at the Decatur, AL facility.

This upgrade is expected to be completed in August 2024.

The remaining construction in process balance is comprised of several smaller projects.

NOTE G — STOCK BASED COMPENSATION

NOTE F — STOCK BASED COMPENSATION

The Company maintains the Friedman Industries, Incorporated 2016 Restricted Stock Plan (the “Plan”).

6 unchanged sentences

Because the Company accounts for forfeitures as they occur, the non-forfeitable dividends are reclassified from retained earnings to additional stock compensation for the actual forfeitures that occurred.

The following table summarizes the activity related to restricted stock units (“RSUs”) for the nine months ended December 31, 2023 :

The following table summarizes the activity related to restricted stock units (“RSUs”) for the three months ended June 30, 2024 :

Weighted Average

3 unchanged sentences

64,487 $ 6.62

Cancelled or forfeited

( 34,000 ) 6.26

Unvested at December 31, 2023

Unvested at June 30, 2024

30,487 $ 7.03

1 unchanged sentence

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

The Company recorded compensation expen se of approximately $ 0.2 million and $ 0.2 million in the nine months ended December 31, 2023 and 2022 , respectively, relating to the RSUs issued under the Plan.

As of December 31, 2023 , unrecognized compensation expense related to unvested RSUs was appr oximately $ 0.1 million which is expected to be recognized over a weighted average period of approximately 1.0 ye ars.

As of December 31, 2023 , a total of 122,485 shares were still available to be issued under the Plan.

NOTE H — DERIVATIVE FINANCIAL INSTRUMENTS

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” ).

The Company recorded compensation expen se of approximately $ 0.1 million and $ 0.1 million in the three months ended June 30, 2024 and 2023 , respectively, relating to the RSUs issued under the Plan.

As of June 30, 2024 , unrecognized compensation expense related to unvested RSUs was appr oximat ely $ 0.1 mil lion which is expected to be recognized over a weighted average period of approximately 0.6 years.

As of June 30, 2024 , a total of 117,998 shares were still available to be issued under the Plan.

NOTE G — DERIVATIVE FINANCIAL INSTRUMENTS

From time to time, we expect to utilize hot-rolled coil futures or options to reduce our exposure to commodity price risk that is inherent in our business.

For the three months ended June 30, 2024, all of the Company's hedging activities were classified as economic hedges of risk with mark-to-market ("MTM") accounting treatment.

For the three months ended June 30, 2023, the Company had hedging activities classified as cash flow hedges with hedge accounting treatment according to the requirements of ASC 815– Derivatives and Hedging and hedging activities classified as economic hedges of risk with MTM accounting treatment.

By using derivatives, the Company is exposed to credit and market risk.

3 unchanged sentences

The Company manages market risk by continually monitoring exposure within its risk management strategy and portfolio.

For those transactions designated as hedging instruments for accounting purposes, 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.

For any transactions designated as hedging instruments for accounting purposes, 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.

From time to time, derivatives designated for hedge accounting may be closed prior to contract expiration.

The accounting treatment of closed positions depends on whether the closure occurred due to the hedged transaction occurring early or if the hedged transaction is still expected to occur as originally forecasted.

For hedged transactions that occur early, the closure results in the realized gain or loss from closure being recognized in the same period the accelerated hedged transaction affects earnings.

For hedged transactions that are still expected to occur as originally forecasted, the closure results in the realized gain or loss being deferred until the hedged transaction affects earnings.

If it is determined that hedged transactions associated with cash flow hedges are no longer probable of occurring, the gain or loss associated with the instrument is recognized immediately into earnings.

From time to time, we may have derivative financial instruments for which we do not elect hedge accounting.

The Company has forward physical purchase supply agreements in place with some of its suppliers for a portion of its monthly physical steel needs.

These supply agreements are not subject to mark-to-market accounting due to the Company electing the normal purchase normal sale exclusion provided in ASC 815.

At December 31, 2023 , the Company did not have any hot-rolled coil futures contracts designated as hedging instruments and classified as cash flow hedges.

At March 31, 2023 , the Company held hot-rolled coil futures contracts which were designated as hedging instruments and classified as cash flow hedges, as hedges of variable sales prices.

Accordingly, realized and unrealized gains and losses associated with the instruments were reported as a component of other comprehensive income and reclassified into earnings during the period in which the hedged transaction affects earnings.

During the nine months ended December 31, 2023 and 2022 , the Company entered into hot-rolled coil futures contracts that were not designated as hedging instruments for accounting purposes.

Accordingly, the change in fair value related to these instruments was immediately recognized in earnings for these periods.

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, 2023 (in thousands):

At June 30, 2024 and March 31, 2024 ,the Company did not have any hot-rolled coil futures contracts designated as hedging instruments and classified as cash flow or fair value hedges.

Asset Derivatives

16 unchanged sentences

All derivatives are presented on a gross basis on the Consolidated Balance Sheets.

At December 31, 2023 , the Company reported approximately $ 3.0 million in “Accounts payable and accrued expenses ” on its Consolidated Balance Sheet related to futures contracts which were closed but were pending cash settlement.

At March 31, 2023 , the Company reported approximately $ 1.6 million in “Other current assets ” on its Consolidated Balance Sheet related to futures contracts which were closed but were pending cash settlement.

The following table summarizes the pre-tax gain recognized in other comprehensive income and the loss reclassified from accumulated other comprehensive loss into earnings for derivative financial instruments designated as cash flow hedges for the periods presented (in thousands):

Pre-Tax Gain Recognized in OCI

During the three months ended June 30, 2024 and 2023 , the Company entered into hot-rolled coil futures contracts that were not designated as hedging instruments for accounting purposes.

Accordingly, the change in fair value related to these instruments was immediately recognized in earnings for these periods.

During the three months ended June 30, 2024 and 2023, the Company did not designate any transactions as hedging instruments for accounting purposes.

During the three months ended June 30, 2023, the Company reclassified the loss associated with previously designated cash flow hedges into earnings during the period.

The following table summarizes the pre-tax gain (loss) recognized in other comprehensive income and the loss reclassified from accumulated other comprehensive income into earnings for derivative financial instruments designated as cash flow hedges for the three months ended June 30, 2023 (in thousands):

Pre-Tax Gain (Loss) Recognized in OCI

Location of Loss Reclassified from AOCI into Net Earnings

Pre- Tax Loss Reclassified from AOCI into Net Earnings

For the three months ended December 31, 2023:

Hot-rolled coil steel contracts

For the three months ended December 31, 2022:

Hot-rolled coil steel contracts

$ 22 $ ( 861 )

For the nine months ended December 31, 2023:

Hot-rolled coil steel contracts

$ — $ ( 418 )

For the nine months ended December 31, 2022:

For the three months ended June 30, 2023:

Hot-rolled coil steel contracts

$ 9,446 Sales

$ — $ ( 418 )

The following table summarizes the gain (loss) recognized in earnings for derivative instruments not designated as hedging instruments during the three and nine months ended December 31, 2023 (in thousands):

Loss Recognized in Earnings

Location of Loss

for the Three Months Ended

Recognized in Earnings

December 31, 2023

Hot-rolled coil steel contracts

Gain (loss) on economic hedges of risk

Gain Recognized in Earnings

Location of Gain

for the Nine Months Ended

Recognized in Earnings

December 31, 2023

Hot-rolled coil steel contracts

Gain (loss) on economic hedges of risk

The following table summarizes the gains recognized in earnings for derivative instruments not designated as hedging instruments during the three and nine months ended December 31, 2022 (in thousands):

The following table summarizes the gain recognized in earnings for derivative instruments not designated as hedging instruments during the three months ended June 30, 2024 (in thousands):

Gain Recognized in Earnings

2 unchanged sentences

Recognized in Earnings

December 31, 2022

June 30, 2024

Hot-rolled coil steel contracts

Gain (loss) on economic hedges of risk

Gain on economic hedges of risk

The following table summarizes the gain recognized in earnings for derivative instruments not designated as hedging instruments during the three months ended June 30, 2023 (in thousands):

Gain Recognized in Earnings

Location of Gain

for the Nine Months Ended

for the Three Months Ended

Recognized in Earnings

December 31, 2022

June 30, 2023

Hot-rolled coil steel contracts

Gain (loss) on economic hedges of risk

The notional amount (quantity) of our derivative instruments not designated as hedging instruments at December 31, 2023 consisted of 21,140 tons of short positions with maturity dates ranging from January 2024 to June 2024.

The following tables reflect the change in accumulated other comprehensive income (loss), net of tax, for the periods presented (in thousands):

Gain (Loss) on

Balance at March 31, 2023

Other comprehensive income, net of loss, before reclassification

Total loss reclassified from AOCI (1)

Net current period other comprehensive income

Balance at December 31, 2023

( 1 ) The loss reclassified from AOCI is presented net of tax benefit s of approximately $ 0.1 million which are included in the provision for income taxes on the Company's Consolidated Statement of Operations for the nine months ended December 31, 2023 .

Gain on economic hedges of risk

The notional amount (quantity) of our derivative instruments not designated as hedging instruments at June 30, 2024 consisted of 280 tons of short positions with maturity dates ranging from July 2024 to December 2024 and 220 tons of long positions with a September 2024 maturity date.

The following tables reflect the change in accumulated other comprehensive income (loss), net of tax, for the three months ended June 30, 2023 (in thousands):

Gain (Loss) on

3 unchanged sentences

Net current period other comprehensive income

Balance at December 31, 2022

( 1 ) The loss reclassified from AOCI is presented net of tax benefits of approximately $ 0.7 million which are included in the provision for income taxes on the Company's Consolidated Statement of Operations for the nine months ended December 31, 2022 .

At December 31, 2023 and March 31, 2023 , cash of approximately $ 4.8 million and $ 2.4 million, respectively, was held by our clearing agent to collateralize our open derivative positions.

These cash requirements are included in "Other current assets" on the Company's Consolidated Balance Sheets at December 31, 2023 and March 31, 2023 .

NOTE I — FAIR VALUE MEASUREMENTS

Balance at June 30, 2023

( 1 ) The loss reclassified from AOCI is presented net of tax benefits of approximately $ 0.1 million which are included in the provision for (benefit from) income taxes on the Company's Consolidated Statement of Operations for the three months ended June 30, 2023 .

The Company did not have any restricted cash at June 30, 2024 associated with open derivative positions.

At March 31, 2024 , cash of approximately $ 3.0 million was held by our clearing agent to collateralize open derivative positions with this amount reported in "Other current assets" on the Company's consolidated balance sheet at March 31, 2024 .

NOTE H — 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.

4 unchanged sentences

Recurring Fair Value Measurements

At December 31, 2023 , our financial liabilities, net, measured at fair value on a recurring basis were as follows (in thousands):

At June 30, 2024 , our financial liabilities, net, measured at fair value on a recurring basis were as follows (in thousands):

Quoted Prices

7 unchanged sentences

$ ( 1,612 ) $ — $ — $ ( 1,612 )

At December 31, 2023 and March 31, 2023 , the Company did not have any fair value measurements on a non-recurring basis.

NOTE J — SEGMENT INFORMATION (in thousands)

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.

At June 30, 2024 and March 31, 2024 , the Company did not have any fair value measurements on a non-recurring basis.

NOTE I — SEGMENT INFORMATION (in thousands)

The Company is engaged in the steel processing, pipe manufacturing and processing and steel and pipe distribution business.

Within the Company, there are two product groups:

flat-roll and tubular.

The Company’s flat-roll operations consists primarily of converting steel coils into flat sheet and plate steel cut to customer specifications.

Through its tubular operations, the Company purchases, processes, manufactures and markets tubular products.

The following is a summary of significant financial information relating to the product groups (in thousands):

Three Months Ended

Nine Months Ended

$ 103,387 $ 125,197

6 unchanged sentences

TOTAL OPERATING PROFIT

8,578 3,951 25,814 21,820

General corporate expenses

( 2,879 ) ( 3,721 )

Gain (loss) on economic hedges of risk

( 4,126 ) 822 706 7,326

Gain on economic hedges of risk

Interest expense

2 unchanged sentences

$ 3,299 $ 10,253

December 31, 2023

June 30, 2024

March 31, 2024

Segment assets

IDENTIFIABLE ASSETS:

$ 199,090 $ 205,797

1 unchanged sentence

217,117 225,386

Corporate assets

General corporate assets

$ 222,790 $ 230,019

1 unchanged sentence

General corporate expenses reflect general and administrative expenses not directly associated with segment operations and consist primarily of corporate and accounting salaries, professional fees and services, bad debts, retirement plan contribution expense, corporate insurance expenses, restricted stock plan compensation expense and office supplies.

At December 31, 2023 and March 31, 2023 , Corporate assets consist primarily of cash, restricted cash, unamortized debt issuance costs and the cash value of officers’ life insurance.

At June 30, 2024 and March 31, 2024 , corporate assets consist primarily of cash, restricted cash, unamortized debt issuance costs and the cash value of officers’ life insurance.

Although inventory is transferred at cost between product groups, there are no sales between product groups.

NOTE K — REVENUE

NOTE J — REVENUE

Revenue is generated primarily from contracts to manufacture or process steel products.

10 unchanged sentences

Flat-roll primarily generates revenue from cutting to length hot-rolled steel coils.

Flat-roll segment revenue consists of three main product types:

Prime Coil, Non-Standard Coil and Customer Owned Coil.

Flat-roll segment revenue consists of two product types:

Company Owned Flat-Roll Products and Processing or Storage of Customer Owned Coil.

Tubular primarily generates revenue from selling steel pipe it has manufactured resulting in a single product type:

Manufactured Pipe.

The following table disaggregates our revenue by product for each of our reportable business segments for the three and nine months ended December 31, 2023 and 2022 , respectively (in thousands):

The following table disaggregates our revenue by product for each of our reportable business segments for the three months ended June 30, 2024 and 2023 , respectively (in thousands):

Three Months Ended

Nine Months Ended

Flat-Roll Segment:

$ 103,748 $ 99,100 $ 346,405 $ 368,583

Non-standard Coil

Company Owned Flat-Roll Products

101,834 123,973

1 unchanged sentence

103,387 125,197

$ 106,424 $ 100,231 $ 352,148 $ 372,830

Tubular Segment:

2 unchanged sentences

11,164 12,101

NOTE L — STOCKHOLDERS’ EQUITY

During the three months ended December 31, 2023, the Company repurchased 400,041 shares of the Company's common stock from Metal One Corporation for an aggregate purchase price of approximately $ 5.1 million.

In addition, the Board of Directors of the Company authorized a share repurchase program on December 13, 2023 under which the Company may repurchase up to 1,045,774 shares of the Company's outstanding common stock through December 13, 2026, which equates to 15 % of the Company's outstanding shares of common stock after the repurchase of shares from Metal One Corporation.

The Company did not make any repurchases under this authorization during the quarter ended December 31, 2023.

The following tables reflect the changes in stockholders’ equity for each of the nine months ended December 31, 2023 and December 31, 2022 (in thousands):

NOTE K — STOCKHOLDERS’ EQUITY

The following tables reflect the changes in stockholders’ equity for each of the three months ended June 30, 2024 and June 30, 2023 (in thousands):

Comprehensive

2 unchanged sentences

— — — — 2,567 2,567

Other comprehensive income

— 317 — — — 317

Paid in capital – restricted stock units

— — 47 — — 47

Cash dividends ($0.02 per share)

— — — — ( 148 ) ( 148 )

BALANCE AT JUNE 30, 2023

$ 8,869 $ — $ 35,083 $ ( 7,778 ) $ 87,195 $ 123,369

— — — — 3,513 3,513

Paid in capital – restricted stock units

— — 78 — — 78

Repurchase of shares

2 unchanged sentences

— — — — ( 279 ) ( 279 )

BALANCE AT SEPTEMBER 30, 2023

$ 8,869 $ — $ 35,161 $ ( 7,781 ) $ 90,560 $ 126,809

— — — — 1,184 1,184

Paid in capital – restricted stock units

— — 37 — — 37

Repurchase of shares

— — — ( 5,148 ) — ( 5,148 )

Cash dividends ($0.02 per share)

— — — — ( 139 ) ( 139 )

BALANCE AT DECEMBER 31, 2023

BALANCE AT JUNE 30, 2024

$ 8,873 $ — $ 35,294 $ ( 13,052 ) $ 98,572 $ 129,687

7 unchanged sentences

— — 78 — — 78

Shares issued - Plateplus business combination

516 — 4,268 — — 4,784

Repurchase of shares

— — — ( 29 ) — ( 29 )

Cash dividends ($0.02 per share)

2 unchanged sentences

$ 8,869 $ — $ 35,083 $ ( 7,778 ) $ 87,195 $ 123,369

— — — — 2,471 2,471

Other comprehensive income

— 1,578 — — — 1,578

Paid in capital – restricted stock units

— — 73 — — 73

Cash dividends ($0.02 per share)

— — — — ( 147 ) ( 147 )

BALANCE AT SEPTEMBER 30, 2022

$ 8,861 $ ( 1,516 ) $ 34,856 $ ( 7,770 ) $ 72,259 $ 106,690

— — — — 1,376 1,376

Other comprehensive income

— 669 — — — 669

Issuance of restricted stock

8 — ( 8 ) — — —

Paid in capital – restricted stock units

— — 78 — — 78

Repurchase of shares

— — — ( 7 ) — ( 7 )

Cash dividends ($0.02 per share)

— — — — ( 148 ) ( 148 )

BALANCE AT DECEMBER 31, 2022

$ 8,869 $ ( 847 ) $ 34,926 $ ( 7,777 ) $ 73,487 $ 108,658

NOTE M — OTHER COMPREHENSIVE INCOME

The following table summarizes the tax effects on each component of Other Comprehensive Income for the periods presented (in thousands):

Three Months Ended December 31, 2023

Cash flow hedges

Other comprehensive income

Three Months Ended December 31, 2022

Cash flow hedges

$ 883 $ ( 213 ) $ 670

Other comprehensive income

$ 883 $ ( 213 ) $ 670

Nine Months Ended December 31, 2023

Cash flow hedges

$ 418 $ ( 101 ) $ 317

Other comprehensive income

$ 418 $ ( 101 ) $ 317

Nine Months Ended December 31, 2022

NOTE L — OTHER COMPREHENSIVE INCOME

The following table summarizes the tax effects on each component of Other Comprehensive Income for the three months ended June 30, 2023 (in thousands):

Three Months Ended June 30, 2023

Cash flow hedges

2 unchanged sentences

$ 418 $ ( 101 ) $ 317

NOTE N — EARNINGS PER SHARE

NOTE M — EARNINGS PER SHARE

Basic and dilutive net earnings per share is computed based on the following information (in thousands, except for share data):

Three Months Ended

Nine Months Ended

Numerator (basic and diluted)

1 unchanged sentence

Allocation to unvested restricted stock units

10 19 131 240

Net earnings attributable to common shareholders

3 unchanged sentences

6,939,208 7,288,906

For the nine months ended December 31, 2023 and 2022 , the Company allocated dividends and undistributed earnings to the unvested restricted stock units.

For the three months ended June 30, 2024 and 2023 , the Company allocated dividends and undistributed earnings to the unvested restricted stock units.

As the restricted stock qualifies as participating securities, the following restricted stock units were not accounted in the computation of weighted average diluted common shares outstanding under the two -class method:

Three Months Ended

Nine Months Ended

Restricted Stock Units

24,218 60,524

NOTE O — SUPPLEMENTAL CASH FLOW INFORMATION

The Company paid interest o f approximately $ 2.1 million and $ 1.3 million during the nine months ended December 31, 2023 and 2022, respectively.

Additionally, the Company paid income taxes of approximately $ 2.8 million and $ 0.4 million during the nine months ended December 31, 2023 and 2022, respectively.

During the nine months ended December 31, 2022 , the Company issued 516,041 shares of common stock as part of the Plateplus business combination resulting in non-cash investing activity of approximately $ 4.8 million.

NOTE P — INCOME TAXES

For the nine months ended December 31, 2023 and 2022 , the Company recorded an income tax provision of approximately $ 3.8 million and $ 4.6 million, respectively.

For the nine months ended December 31, 2023 and 2022 , the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision.

NOTE N — SUPPLEMENTAL CASH FLOW INFORMATION

The Company paid interest o f approximately $ 0.7 million and $ 0.5 million during the three months ended June 30, 2024 and 2023, respectively.

Additionally, the Company paid income taxes of approximately $ 113,000 and $ 47,000 during the three months ended June 30, 2024 and 2023, respectively.

NOTE O — INCOME TAXES

For the three months ended June 30, 2024 and three months ended June 30, 2023 , the Company recorded an income tax provisions of approximately $ 0.7 million and $ 2.6 million, respectively.

For the three months ended June 30, 2024 , the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision with this impact partially reduced by the tax effect of restricted stock vesting during the quarter.

For the three months ended June 30, 2023 , the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision.

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